ACAS American Capital, Ltd.

BETHESDA, Md., Feb. 14 /PRNewswire-FirstCall/ -- American Capital Strategies Ltd. (NASDAQ:ACAS) announced today its first quarter 2006 dividend, 2006 dividend guidance and its results for the fourth quarter and full year of 2005. 2006 Q1 DIVIDEND DECLARATION American Capital's Board of Directors has declared a first quarter 2006 regular dividend of $0.80 per share to record holders as of February 28, 2006, payable on April 3, 2006. This dividend is a 10% increase over the first quarter 2005 regular dividend of $0.73 per share. American Capital has paid a total of $961 million in dividends and paid or declared dividends of $19.91 per share since its August 1997 IPO at $15.00 per share. American Capital paid $3.08 in dividends per share for 2005 from ordinary taxable income. In addition, it retained approximately $48 million of its taxable income and accrued a 4% excise tax totaling $1.6 million. 2006 DIVIDEND GUIDANCE American Capital is forecasting paying total 2006 dividends of $3.29 per share from ordinary taxable income earned in 2006. This would represent a 7% growth over the total 2005 dividends of $3.08 per share. American Capital anticipates that its 2006 ordinary taxable income will exceed its dividend and it will elect to pay a 4% excise tax and retain its excess ordinary taxable income. The 2006 dividends per share are estimated to be in the following quarterly amounts: $0.82 Q2, $0.83 Q3, $0.84 Q4. 2005 RESULTS In addition, American Capital announced today its results for the quarter and year ended December 31, 2005. Total 2005 dividends were $3.08 per share, a 6% growth over 2004 total dividends of $2.91 per share. American Capital's net asset value per share at December 31, 2005 was $24.37, a $3.26 or 15% growth over the December 31, 2004 net asset value per share of $21.11. Net operating income (NOI) for the year increased 43% to $314 million compared to $220 million for 2004. On a basic per share basis, NOI increased 10% to $3.16 per share compared to $2.88 per share in 2004. On a diluted per share basis, NOI increased 10% to $3.10 per share compared to $2.83 per share for 2004. NOI for the quarter increased 40% to $91 million compared to $65 million for the fourth quarter 2004. NOI increased 8% to $0.82 per basic share compared to $0.76 per basic share for the fourth quarter 2004. NOI increased 8% to $0.80 per diluted share compared to $0.74 per diluted share for the fourth quarter 2004. For the year, the net increase in net assets resulting from operations (NOI plus net appreciation and depreciation and net gains and losses on investments) was $365 million, or $3.68 per basic share and $3.60 per diluted share, compared to $281 million, or $3.69 per basic share and $3.63 per diluted share, in 2004. For the fourth quarter of 2005, the net increase in net assets resulting from operations was $80 million, or $0.72 per basic share and $0.71 per diluted share, compared to $97 million, or $1.14 per basic share and $1.11 per diluted share, in the fourth quarter 2004. "We had an outstanding year in 2005," said Malon Wilkus, American Capital Chairman, President and CEO. "We grew our net operating income by $94 million, dividend by 6%, return on average equity per share by 16%, net asset value by 15%, harvested $45 million in net realized gains from our portfolio and initiated an asset management business with a goal of increasing highly predictable and growing asset management fee income to build long-term shareholder value. In this vein, we are estimating $37 million of revenue in 2006 from our European Capital asset management agreement, including expense reimbursements. American Capital shareholders enjoyed a 19% annualized return for 2005 versus a 5% return for the S&P 500. We believe 2006 is shaping up to be another banner year in which we will grow our dividend by 7% while continuing the development of our asset management strategy." In 2005, American Capital invested $3.714 billion, composed of $1,396 million of senior debt, $859 million of subordinated debt, $487 million of preferred stock, $759 million of common stock, $113 million of common stock warrants and $100 million of commercial mortgage backed securities and collateralized debt obligations. Seventeen investments, totaling $1,480 million, were in American Capital-sponsored buyouts of new portfolio companies. Twenty-one investments, totaling $701 million, were in buyouts of new portfolio companies led by other private equity firms. Seven investments, totaling $218 million, were in direct investments of new portfolio companies. Three investments, totaling $100 million, were in commercial mortgaged backed securities and collateralized debt obligations. One investment, totaling $617 million, was an equity commitment in European Capital Limited (of which $465 million was unfunded at year end). Eight investments, totaling $157 million, were in existing portfolio companies to finance strategic acquisitions. One investment, totaling $108 million, was in an American Capital sponsored buyout of an existing portfolio company. Fifteen investments, totaling $271 million, were in existing portfolio companies for growth or recapitalizations. Investments totaling $62 million were in 15 existing portfolio companies for working capital, including $15 million to eight existing portfolio companies for distressed related working capital. Total invested assets at fair value increased 58% to $5.1 billion at December 31, 2005 as compared to $3.2 billion at December 31, 2004. In fourth quarter 2005, American Capital invested $978 million, composed of $383 million of senior debt, $193 million of subordinated debt, $170 million of preferred stock, $64 million of common stock, $87 million of common stock warrants and $81 million of commercial mortgage backed securities. Four investments, totaling $565 million, were in American Capital-sponsored buyouts of new portfolio companies. Two investments, totaling $122 million, were in buyouts led by other private equity firms. One investment, totaling $81 million, was in commercial mortgaged backed securities. One investment, totaling $20 million, was in an existing portfolio company to finance a strategic acquisition. Six investments, totaling $183 million, were in existing portfolio companies for growth or recapitalizations. Five investments, totaling $7 million, were for working capital for existing portfolio companies, including four investments totaling $3 million for distressed related working capital. In 2005, American Capital received $1.5 billion of proceeds from exits of portfolio investments, composed of $340 million of senior loan sales, $687 million of principal prepayments, $57 million of scheduled principal amortization, $34 million of accrued payment-in-kind (PIK) interest and dividends and accreted original issue discount (OID), $142 million of repayments of bridge notes to European Capital Limited and $195 million from the sale of equity investments. In fourth quarter 2005, American Capital received $687 million of proceeds from exits of portfolio investments, composed of $174 million of senior loan sales, $259 million of principal prepayments, $17 million of scheduled principal amortization, $14 million of accrued PIK interest and dividends and accreted OID, $142 million of repayments of bridge notes to European Capital Limited and $81 million from the sale of equity investments. "It was an outstanding year for our middle market investment platform," said Ira Wagner, Chief Operating Officer. "We continued to be the most active mezzanine and equity investor in the U.S. middle market, participating in approximately 5% of the transactions in our target markets. Our volume of investment opportunities as measured in dollars grew approximately 100% for both American Capital buyout opportunities and financing opportunities combined. We have now invested with 82 different private equity firms over the past 8 years and our ability to provide one-stop financing combined with our senior loan syndication capabilities has been an important component in that success. Additionally, we launched European Capital during 2005 and have become an accepted investor in the European markets with our $212 million of investments during 2005 exceeding our initial projections. We continue to believe that our OneStop Buyout(TM) capability will prove as attractive in Europe as it is in the U.S. Lastly, we continue to see a large pipeline of both buyout and financing opportunities in both North America and Europe leading us to believe that 2006 will be another very active year." The weighted average effective interest rate on American Capital's total investments in debt securities as of December 31, 2005 was 12.8%. At December 31, 2005, the weighted average loan grade of American Capital's loan portfolio was 3.1 on a scale of 1 to 4, with 4 being the highest quality, compared to 3.1 as of December 31, 2004. As of December 31, 2005, loans to 14 portfolio companies totaling $132 million, with a fair value of $48 million, were on non-accrual. Delinquent and non-accruing loans totaled $186 million, or 5% of total loans, at December 31, 2005, compared to $163 million, or 7% of total loans, at December 31, 2004. In 2005, American Capital recorded $45 million in portfolio net realized gains, excluding $9 million in losses attributable to periodic interest settlements of interest rate swap agreements. This is comprised of $147 million of gross gains and $102 million of gross losses on portfolio investments. In the fourth quarter of 2005, American Capital recorded $6 million in portfolio net realized gains, excluding $1 million in losses attributable to periodic interest settlements of interest rate swap agreements. This is comprised of $70 million of gross gains and $64 million of gross losses on portfolio investments. "We raised approximately $2.3 billion in capital during 2005," said Chief Financial Officer John Erickson. "Our balance sheet continues to gain flexibility as we successfully utilized our equity forward program to maintain our leverage ratio at about 0.9:1. We grew our unsecured debt by nearly $460 million and issued our seventh and largest term securitization, raising $830 million at a weighted average interest rate of LIBOR plus .36%, our best pricing ever. Additionally, we enhanced the structure of this securitization by adding a three year revolving period. We also raised approximately $275 million of third party equity capital commitments for European Capital. Additionally, we received six upgrades from Fitch Ratings and three from Moody's Investor Services for prior securitization tranches and American Capital's unsecured credit rating from Fitch was increased to BBB- with a positive outlook. Along with $902 million of equity raised in 2005 at an average of 1.6 premium to book, our capitalization is broader and more flexible than ever and we are maintaining our competitive advantage by raising the lowest cost capital in our industry to help fuel our growth." From its 1997 IPO through the fourth quarter of 2005, American Capital's average annual rate of net depreciation and gains on portfolio company investments (excluding interest rate derivative agreements) was a positive 0.6% of average equity. American Capital outperformed FDIC insured commercial banks, which experienced charge offs net of securities gains of negative 4.4% of average annual equity (based on FDIC Quarterly Banking Profile data for Commercial Banks from American Capital's IPO through the third quarter of 2005). American Capital had a positive 2.9% annual rate of gain on average equity over the past nine quarters versus an annual rate of charge offs net of securities gains of negative 3.3% of average annual equity over the past eight quarters for FDIC insured commercial banks. In 2005, net appreciation totaled $15 million, consisting of net appreciation of $21 million from current portfolio companies ($243 million of appreciation at 43 portfolio companies and $222 million of depreciation at 34 portfolio companies), $38 million of net depreciation resulting from the recognition of net gains and $32 million of net appreciation on interest rate derivative agreements. Interest rate derivative agreements are required by American Capital's loan agreements and asset securitizations to lock in interest rate spreads on the securitized investments and reduce interest rate risk. Their fair values appreciate or depreciate based on relative market interest rates and their remaining term to maturity. Since the Company's August 1997 IPO, cumulative net appreciation and gains on portfolio company investments totals $7 million through December 31, 2005. When including interest rate derivative agreements, cumulative depreciation net of gains totals $4 million. In fourth quarter 2005, net depreciation totaled $16 million, consisting of net depreciation of $24 million from current portfolio companies ($55 million of appreciation at 24 portfolio companies and $79 million of depreciation at 23 portfolio companies), $3 million of net depreciation resulting from the recognition of net gains and $11 million of net appreciation on interest rate derivative agreements. Since its August 1997 IPO through fourth quarter 2005, American Capital has earned a 17% compounded annual return on 118 exits and prepayments of senior debt, subordinated debt and equity investments, totaling $2.6 billion of invested capital, including interest, dividends, fees and net gains on these investments. These exits and prepayments represent 30% of all amounts invested by American Capital since its August 1997 IPO. Proceeds from these exits and prepayments exceeded the associated prior quarter valuation of the investments by $45 million in aggregate, or 2%. Twenty percent of these exits and prepayments were from portfolio companies that had at one time been either a loan grade 1 or 2 in American Capital's four point loan grading system, with 1 being the lowest loan grade. Since its IPO through the fourth quarter of 2005, $75 million of American Capital's PIK interest and dividends and accreted OID have been repaid, representing 29% of all PIK and OID recorded. SHAREHOLDER PRESENTATION Q&A Starting with the February 15th Shareholder Presentation, American Capital intends to address in a special Q&A section of its quarterly shareholder presentation, questions, comments and misunderstandings about American Capital that arise during the quarter from shareholders, analyst reports, the Yahoo ACAS Bulletin Board and the BDCs.ValueForum.com bulletin board. American Capital invites shareholders and prospective shareholders to review these presentations. THIRD PARTY VALUATION OF PORTFOLIO INVESTMENTS Houlihan Lokey Howard & Zukin Financial Advisors Inc. ("Houlihan Lokey") reviews the determination of fair value of American Capital's portfolio company investments on a regular basis. Houlihan Lokey is the premier valuation firm in the U.S., engaged in approximately 1,000 valuation assignments per year for clients worldwide. In the past year, Houlihan Lokey has reviewed 100% of American Capital's portfolio investments that have been portfolio companies for at least one year and that have a fair value in excess of $10 million. 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 with respect to valuation models, policies and procedures. For the fourth quarter of 2005, Houlihan Lokey reviewed the Company's valuations of 26 portfolio company investments having $1.1 billion in fair value as reflected in the December 31, 2005 financial statements. Using methods and techniques that are customary for the industry and that Houlihan Lokey considers appropriate under the circumstances, Houlihan Lokey determined that the aggregate fair value assigned to the portfolio company investments by American Capital was within their reasonable range of aggregate value for such companies. Over the last four quarters, Houlihan Lokey has reviewed 99 portfolio companies totaling $3.1 billion in fair value as of their respective valuation dates. Financial highlights for the quarter are as follows: AMERICAN CAPITAL STRATEGIES, LTD. CONSOLIDATED BALANCE SHEETS AND FINANCIAL INFORMATION (In thousands, except per share amounts) December 31, December 31, 2005 2004 (unaudited) Assets Investments at fair value (cost of $5,134,398 and $3,236,249, respectively) Non-Control/Non-Affiliate investments $2,135,795 $1,157,406 Affiliate investments 449,026 408,529 Control investments 2,516,282 1,654,075 Interest rate derivative agreements 18,132 1,678 Total investments at fair value 5,119,235 3,221,688 Cash and cash equivalents 97,134 58,367 Restricted cash 121,772 141,895 Interest receivable 32,668 22,053 Other 78,300 47,424 Total assets $5,449,109 $3,491,427 Liabilities and Shareholders' Equity Debt $2,466,860 $1,560,978 Interest rate derivative agreements 2,140 17,396 Accrued dividends payable 3,574 5,322 Other 78,898 35,305 Total liabilities 2,551,472 1,619,001 Commitments and contingencies Shareholders' equity: Undesignated preferred stock, $0.01 par value, 5,000 shares authorized, 0 issued and outstanding - - Common stock, $0.01 par value, 200,000 shares authorized, 119,123 and 88,705 issued and 118,913 and 88,705 outstanding, respectively 1,189 887 Capital in excess of par value 3,001,791 2,010,063 Unearned compensation (58,977) (36,690) Notes receivable from sale of common stock (6,655) (6,845) Distributions in excess of net realized earnings (22,408) (63,032) Net unrealized depreciation of investments (17,303) (31,957) Total shareholders' equity 2,897,637 1,872,426 Total liabilities and shareholders' equity $5,449,109 $3,491,427 Net asset value per share $24.37 $21.11 OTHER FINANCIAL INFORMATION: LTM net operating income return on average equity at cost (unaudited) 13.6% 14.1% AMERICAN CAPITAL STRATEGIES, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended Fiscal Year Ended December 31, December 31, 2005 2004 2005 2004 (unaudited) (unaudited) OPERATING INCOME: Interest and dividend income Non-Control/Non-Affiliate investments $57,766 $34,423 $184,671 $113,668 Affiliate investments 15,533 10,671 57,979 36,326 Control investments 53,823 42,542 183,205 121,239 Total interest and dividend income 127,122 87,636 425,855 271,233 Fee and Other Income Non-Control/Non-Affiliate investments 8,939 2,936 38,101 21,688 Affiliate investments 1,597 2,562 10,518 5,663 Control investments 35,503 18,574 80,026 37,498 Total fee and other income 46,039 24,072 128,645 64,849 Total operating income 173,161 111,708 554,500 336,082 OPERATING EXPENSES: Interest 33,490 13,935 100,715 36,851 Salaries, benefits and stock- based compensation 29,830 24,899 85,680 50,513 General and administrative 14,444 7,223 41,753 26,487 Total operating expenses 77,764 46,057 228,148 113,851 OPERATING INCOME BEFORE INCOME TAXES 95,397 65,651 326,352 222,231 Provision for income taxes (4,836) (761) (12,504) (2,130) NET OPERATING INCOME 90,561 64,890 313,848 220,101 Net realized gain (loss) on investments Non-Control/Non-Affiliate investments 14,627 18,829 36,265 13,978 Affiliate investments (797) 3,094 6,654 3,411 Control investments (8,145) 12,054 2,475 (37,365) Interest rate derivative periodic payments (825) (4,381) (8,987) (17,894) Total net realized gain (loss) on investments 4,860 29,596 36,407 (37,870) Net unrealized (depreciation) appreciation of investments Portfolio company investments (27,166) (3,309) (17,056) 91,456 Interest rate derivative periodic payment accrual 1,167 16 1,694 (3,167) Interest rate derivative agreements 10,401 6,151 30,016 10,925 Total net unrealized (depreciation) appreciation of investments (15,598) 2,858 14,654 99,214 Total net gain (loss) on investments (10,738) 32,454 51,061 61,344 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $79,823 $97,344 $364,909 $281,445 NET OPERATING INCOME PER COMMON SHARE: Basic $0.82 $0.76 $3.16 $2.88 Diluted $0.80 $0.74 $3.10 $2.83 NET EARNINGS PER COMMON SHARE: Basic $0.72 $1.14 $3.68 $3.69 Diluted $0.71 $1.11 $3.60 $3.63 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 110,995 85,485 99,270 76,362 Diluted 112,603 87,799 101,376 77,638 DIVIDENDS DECLARED PER COMMON SHARE $0.82 $0.79 $3.08 $2.91 Portfolio Statistics (1) Static Pool ($ in millions, unaudited): Pre-1999 1999 2000 2001 2002 Original Investments and Commitments $375 $378 $389 $368 $932 Total Exits and Prepayments of Original Investments $140 $191 $226 $258 $316 Total Interest, Dividends and Fees Collected $127 $128 $86 $141 $208 Total Net Realized (Loss) Gain on Investments $(19) $(22) $(74) $48 $(19) Internal Rate of Return(2) 9.2% 4.9% 3.6% 23.7% 12.5% Current Cost of Investments $204 $172 $177 $92 $583 Current Fair Value of Investments $176 $92 $179 $87 $568 Net Unrealized Appreciation/(Depreciation) $(28) $(80) $2 $(5) $(15) Non-Accruing Loans at Face $11 $26 $- $5 $64 Equity Interest at Fair Value $18 $5 $39 $37 $177 Debt to EBITDA(3)(4) 9.2 8.9 5.2 6.2 5.7 Interest Coverage(3) 1.2 1.4 2.6 1.6 2.2 Debt Service Coverage(3) 1.0 1.2 2.0 1.2 1.6 Loan Grade(3) 2.5 1.7 3.0 3.2 2.9 Average Age of Companies 41 yrs 55yrs 28 yrs 43 yrs 33 yrs Ownership Percentage 89% 72% 22% 70% 60% Average Sales(5) $97 $70 $113 $161 $78 Average EBITDA(6) $5 $5 $31 $16 $11 Total Sales(5) $434 $394 $345 $1,773 $1,299 Total EBITDA(6) $32 $26 $75 $163 $146 % of Senior Loans(7) 55% 32% 59% 18% 45% % of Loans with Lien(7) 68% 50% 86% 100% 99% Portfolio Statistics (1) Static Pool ($ in millions, unaudited): 2003 2004 2005 Aggregate Original Investments and Commitments $1,315 $1,513 $3,133 $8,403 Total Exits and Prepayments of Original Investments $668 $442 $309 $2,550 Total Interest, Dividends and Fees Collected $248 $221 $154 $1,313 Total Net Realized (Loss) Gain on Investments $118 $9 $(1) $40 Internal Rate of Return(2) 24.4% 20.8% 25.3% 15.1% Current Cost of Investments $648 $1,019 $2,239 $5,134 Current Fair Value of Investments $669 $1,080 $2,250 $5,101 Net Unrealized Appreciation/(Depreciation) $21 $61 $11 $(33) Non-Accruing Loans at Face $10 $16 $- $132 Equity Interest at Fair Value $267 $344 $835 $1,722 Debt to EBITDA(3)(4) 4.7 4.4 4.3 4.9 Interest Coverage(3) 2.5 2.4 2.1 2.2 Debt Service Coverage(3) 1.8 1.6 1.6 1.6 Loan Grade(3) 3.3 3.3 3.1 3.1 Average Age of Companies 16 yrs 41 yrs 29 yrs 31 yrs Ownership Percentage 67% 46% 52% 54% Average Sales(5) $97 $80 $107 $97 Average EBITDA(6) $19 $15 $22 $18 Total Sales(5) $1,428 $2,928 $5,297 $13,898 Total EBITDA(6) $254 $544 $816 $2,056 % of Senior Loans(7) 48% 39% 45% 44% % of Loans with Lien(7) 97% 77% 83% 84% (1) Static pool classification is based on the year the initial investment was made. Subsequent add-on investments are included in the static pool year of the original investment. Investments in government securities and interest rate derivative agreements are excluded. (2) Assumes investments are exited at current fair value. (3) These amounts do not include investments in which the Company owns only equity. (4) For portfolio companies with a nominal EBITDA amount, the portfolio company's maximum debt leverage is limited to 15 times EBITDA. (5) Sales of the most recent twelve months, or when appropriate, the forecasted twelve months. (6) EBITDA of the most recent twelve months, or when appropriate, the forecasted twelve months. (7) As a percentage of our total debt investments. Additional Dividend Information American Capital must make certain distributions of its taxable income in order to maintain its tax status as a regulated investment company. Investors can refer to American Capital's most recent report on Form 10-K for more information about its tax status. American Capital intends to retain net long-term capital gains and treat them as deemed distributions for tax purposes. Therefore, the taxable income that is distributed as dividends would be expected to be treated as ordinary income for tax purposes. Taxable income differs from GAAP income because of both temporary and permanent differences in income and expense recognition. For example, changes in appreciation and depreciation of portfolio investments have no impact on American Capital's taxable income. American Capital reports the anticipated tax characteristics of each dividend when announced, while the actual tax characteristics of each year's dividends are reported annually to stockholders on Form 1099DIV. The 2005 dividends of $3.08 per share were a distribution of ordinary income for tax purposes. The 2006 declared dividend to-date, totaling $0.80 per share, is anticipated to be a distribution of ordinary income for tax purposes. DIVIDEND REINVESTMENT PLAN (DRIP) In appreciation of the loyal support of our shareholders, American Capital's Dividend Reinvestment Plan grants a 5% discount to the market price for reinvested dividends. Brokerages that have confirmed participation in the DRIP include: Ameritrade A.G. Edwards Citigroup-Smith Barney Fidelity J.J.B. Hilliard, W.L. Lyons, Inc. Legg Mason Merrill Lynch Morgan Keegan Raymond James RBC Dain Rauscher UBS Financial Wachovia Securities Wedbush Morgan A summary of American Capital's dividend history and forecast follows. For further dividend history, please visit our website at http://www.acas.com/. For more information regarding the DRIP, please visit our website or call our Investor Relations Department at (301) 951-6122. AMERICAN CAPITAL'S DIVIDEND HISTORY $19.91 Declared Since August 1997 IPO at $15.00 Per Share % Change % Change of Total of Regular Dividend Dividend Over Regular Over Prior Additional Prior Year/Quarter Dividend Year Dividend Total Year Total 1997 to Q1 2006 Declared $19.91 2006 $3.29 8 % Not Planned $3.29 7 % Q4 Forecast $0.84 6 % Q3 Forecast $0.83 6 % Q2 Forecast $0.82 9 % Q1 Declared $0.80 10 % 2005 $3.05 7 % $0.03 $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 $19.91 Declared SHAREHOLDER AND ANALYSTS CALL: American Capital invites shareholders, prospective shareholders and analysts to attend the American Capital Shareholder Call on Wednesday, February 15, 2006 at 11:00 am ET. The dial in number will be (888) 428-4480. International callers should dial +1(612) 288-0318. Please advise the operator you are dialing in for the American Capital Shareholder Call. BEFORE THE CALL: SLIDE PRESENTATION AVAILABLE IN ADVANCE OF THE SHAREHOLDER CALL: The quarterly shareholder presentation includes a slide show to accompany the call that participants may download from the American Capital website at http://www.acas.com/ and print prior to the call. You may wish to take the time to review the slides in advance of the Shareholder Call. It is generally posted several hours in advance of the call. DURING THE CALL: STREAMING SLIDE PRESENTATION DURING THE SHAREHOLDER CALL: During the Shareholder Call, we invite you to turn to our shareholder website, http://www.acas.com/, and click on the February 15 Shareholder Call Slide Show button. Participants will be able to view the complete streaming slide presentation on our website while listening to the shareholder call by phone as it occurs. AFTER THE CALL: AUDIO AND SLIDE PRESENTATION AVAILABLE AFTER THE CALL: The audio of the shareholder call combined with the slide presentation will be made available after the call on February 15 on our website. An archive of our audio and slide presentations of our quarterly shareholder calls can be found in the Investor Relations section of our website at http://www.acas.com/. AUDIO ONLY PRESENTATION AVAILABLE AFTER THE SHAREHOLDER CALL: There will be a phone recording available from 9:30 pm Wednesday, February 15 until 11:59 pm Wednesday, March 1. If you are interested in hearing the recording of the presentation, please dial (800) 475-6701. International callers may dial +1(320) 365-3844. The access code for both domestic and international callers is 813354. For further information or questions, please do not hesitate to call our Shareholder Relations Department at (301) 951-6122. ABOUT AMERICAN CAPITAL Since its August 1997 IPO through the fourth quarter of 2005, American Capital has invested $8.4 billion in 201 portfolio companies. As of January 31, 2006, American Capital shareholders have enjoyed a total return of 403% since the Company's IPO -- an annualized return of 21%, assuming reinvestment of dividends. American Capital has paid a total of $961 million in dividends and paid or declared $19.91 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/. 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. Persons considering an investment in American Capital should consider the investment objectives, risks and charges and expenses of the Company carefully before investing. Such information and other information about the Company is available in the Company's annual report on Form 10-K, quarterly report on Form 10-Q and in the prospectuses the Company issues from time to time in connection with its offering of securities. Such materials are filed with the Securities and Exchange Commission and copies are available on the SEC's website, http://www.sec.gov/. Prospective investors should read such materials carefully before investing. 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. First Call Analyst: FCMN Contact: Brian.Maney@AmericanCapital.com DATASOURCE: American Capital Strategies Ltd. CONTACT: John Erickson, Chief Financial Officer, or Tom McHale, Senior Vice President, Finance, both of American Capital Strategies, Ltd., +1-301-951-6122 Web site: http://www.americancapital.com/ http://www.acas.com/

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