ACAS American Capital, Ltd.

BETHESDA, Md., Aug. 1 /PRNewswire-FirstCall/ -- American Capital Strategies Ltd. (NASDAQ:ACAS) announced today the sale of its portfolio company KAC Holdings Inc., parent to Kester Inc., to Illinois Tool Works Inc. (NYSE:ITW) in the third quarter 2006. American Capital realized a gain of $47 million from the sale of KAC Holdings and recognized total proceeds of $89 million upon the exit, earning a 53% compounded annual rate of return on its investment, including interest, dividends and fees earned over the life of American Capital's investment. The proceeds received by American Capital were greater than the first quarter 2006 valuation of the investment by $1.3 million, or 2%. KAC Holdings is a global supplier of solder and other assembly materials to the electronic assembly, component, electrical and industrial marketplace. "This has been an active year for American Capital, not only in new investment activity, but also in exiting previous investments. In 2006 alone, American Capital has announced $106 million in net realized portfolio gains from 15 exits and prepayments," said American Capital Regional Managing Director Darin Winn. "In addition, we're happy to have had the opportunity to partner with KAC Holdings' management team over the last two and a half years. We believe the strategic vision and value creation plan we developed together positions the Company well for future success." In February 2004, American Capital invested $70.5 million in KAC Holdings for the buyout of Kester, a division of Northrup Grumman Corporation's Component Technologies sector. American Capital's investment took the form of a revolving credit facility, senior term loans, senior and junior subordinated debt and preferred and common equity. In December 2004, KAC Holdings refinanced its senior debt and repaid American Capital's senior debt investments. "We are extremely delighted with the results of our investment in KAC Holdings, which produced one of American Capital's largest gains," said American Capital Vice President John Neis. "Since our 2004 buyout of Kester, the Company has far exceeded our original projections, having achieved many key objectives. We believe the Company is well positioned to reap the benefits of its accomplishments." For more information about the KAC Holdings investment, go to http://www.acas.com/our_portfolio/companies/company.cfm?p_comp=270. From its IPO through the first quarter of 2006, American Capital has earned an 18% compounded annual return on 124 exits and prepayments of senior debt, subordinated debt and equity investments, totaling $2.9 billion of invested capital, including interest, dividends, fees and net gains on these investments. These exits and prepayments represent 31% of all amounts invested by American Capital since its August 1997 IPO. For a chart showing American Capital's realized gains as of the end of Q1 2006, go to http://www.acas.com/investor_relations/realized_gains.cfm. For a chart showing American Capital's exited portfolio companies, go to http://www.acas.com/our_portfolio/exited_companies.cfm. ABOUT AMERICAN CAPITAL American Capital is a publicly traded buyout and mezzanine fund with capital resources of $8.9 billion. American Capital invests in and sponsors management and employee buyouts, invests in private equity buyouts, provides capital directly to early stage and mature 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, recapitalizations and securitizations. American Capital invests up to $350 million per company. As of July 31, 2006, American Capital shareholders have enjoyed a total return of 420% since the Company's IPO -- an annualized return of 20%, assuming reinvestment of dividends. American Capital has paid a total of approximately $1.2 billion in dividends and paid $20.73 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 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: Tom McHale, Senior Vice President, Finance, +1-301-951-6122, Darin Winn, Regional Managing Director, +1-214-273-6630, John Neis, Vice President, +1-312-681-7400, or Brian Maney, Director, Corporate Communications, +1-301-951-6122, all of American Capital Strategies Ltd. Web site: http://www.americancapital.com/

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