American Capital Declares $1.03 Q2 2008 Dividend

Reports $0.77 NOI and $0.94 Realized Earnings in Q1 2008

BETHESDA, Md., May 6 /PRNewswire-FirstCall/ -- American Capital Strategies Ltd. (NASDAQ:ACAS) announced today its second quarter 2008 dividend, its results for the first quarter of 2008 and forecasts for 2008.

SECOND QUARTER 2008 DIVIDEND DECLARATION

American Capital's Board of Directors has declared a second quarter 2008 regular dividend of $1.03 per share to record holders as of June 13, 2008, payable on July 1, 2008. This is a 13% increase over the second quarter 2007 dividend of $0.91 per share. American Capital has paid a total of $2.3 billion in dividends and paid or declared dividends of $28.20 per share since its August 1997 IPO at $15.00 per share.

2008 DIVIDEND FORECAST

American Capital reiterates its 2008 dividend forecast of $4.19 per share, a 13% growth over total 2007 dividends of $3.72 per share. The remaining 2008 dividends per share are forecast to be in the following quarterly amounts.

$1.05 for Q3 2008, 14% increase over Q3 2007; and
$1.10 for Q4 2008, 10% increase over Q4 2007.

2008 FORECASTS

American Capital is forecasting $0.68 to $0.75 in net operating income (earnings less appreciation, depreciation, gains and loss ("NOI")) per diluted share for the second quarter of 2008.

American Capital is forecasting its Earnings less appreciation and depreciation ("Realized Earnings") for the second quarter of 2008 will exceed $1.10 per diluted share.

American Capital reiterates its forecast that it will have between $19 billion and $26 billion of alternative assets under management by year end, of which between $7 billion and $14 billion will be in external funds managed by American Capital, LLC; the balance will be approximately $12 billion on American Capital's balance sheet.

American Capital reiterates its forecast that its 2008 ordinary taxable income will exceed its 2007 ordinary taxable income. American Capital forecasts that almost half of its 2008 ordinary taxable income will be rolled over into 2009 to pay 2009 dividends.

American Capital reiterates its forecast that its 2008 taxable net long term capital gains will exceed its 2007 taxable net long term capital gains. American Capital forecasts that all of its 2008 taxable net long term capital gains will be rolled over into 2009 to pay 2009 dividends.

American Capital reiterates its forecast that it will roll over more than $500 million of ordinary taxable income and net long term capital gains from 2008 into 2009.

The preceding dividend forecast and other forecasts above assume that for 2008 there will be a recession in the U.S., no new capital will be raised at American Capital, American Capital will produce significant internally generated liquidity available for new investments and American Capital buyout investment volume will increasingly be funded by funds under management.

FIRST QUARTER 2008 RESULTS
Net Operating Income (NOI)

American Capital also announced today its results for the first quarter of 2008. NOI for the quarter increased 5% to $0.77 per diluted share, compared to $0.73 per diluted share for the first quarter of 2007.

Realized Earnings

Realized Earnings increased 16% to $0.94 per diluted share for the first quarter of 2008, compared to $0.81 per diluted share for the first quarter of 2007. Realized Earnings return on equity at cost for the twelve months through the first quarter of 2008 was 15%. The first quarter 2008 Realized Earnings per basic share covered 93% of the first quarter 2008 dividend per share of $1.01 per share.

Earnings

American Capital's Earnings for the first quarter of 2008 was a loss of $(4.16) per diluted share, a decrease of $5.02 per diluted share from the first quarter of 2007 Earnings of $0.86 per diluted share. Earnings return on equity for the twelve months through the first quarter of 2008 was (4)%. This loss was due to $997 million of unrealized depreciation, offset by $33 million of realized gains. During the first quarter, American Capital implemented Statement of Financial Accounting Standard No. 157, Fair Value Measurements, (SFAS 157), new principals based guidance to generally accepted accounting practices (GAAP), which caused certain changes to the methodologies used in valuing the Company's investments.

American Capital's net asset value ("NAV") per share at March 31, 2008 was $28.16, a decrease of $2.20 or 7% lower than the March 31, 2007 NAV per share of $30.36. The March 31, 2008 NAV was $4.72 per share less than the NAV at the end of 2007.

"We delivered NOI and Realized Earnings for the quarter in line with our expectations which allows us to reconfirm our guidance," said Malon Wilkus, Chairman, President and CEO. "The substantial decline in our Earnings is due to $997 million of unrealized depreciation, which we believe will have little impact on our future revenues, NOI and Realized Earnings. This depreciation was driven by declining trading prices, the continued widening of investment spreads and our adoption of SFAS 157. We expect assets that have experienced $656 million of depreciation in this or a prior quarter to appreciate and reverse this depreciation, as we hold the assets to settlement or maturity. The underlying credit quality of these assets remains in line with our forecasts, made at the time the investments were underwritten, which include a recession. We believe that with the adoption of SFAS 157, investors will need to focus on both reported GAAP fair values as well as values that we anticipate realizing on settlement or maturity of our investments, or Realizable Value. Our history bears this out. Under our previous valuation policies, the proceeds American Capital realized on $10 billion of investments exceeded the prior quarter valuations on average by less than 1%. In the future, we intend to report the anticipated realizable values on settlement or maturity of our investments as well as GAAP values so investors can consider both."

For the first quarter of 2008, net appreciation, depreciation, gains and losses totaled $(964) million consisting of $33 million of net realized gains less $(997) million of net depreciation, compared to $20 million of net appreciation, depreciation, gains and losses for the first quarter of 2007. The primary components of the $(997) million of net depreciation for the quarter were as follows:

-- $(327) million of net depreciation of American Capital's private
finance investments (excluding European Capital and American Capital,
LLC, discussed below), which includes $180 million of depreciation due
to the adoption of SFAS 157, with the balance due to a decline of cash
flows and the trading multiples of comparable public companies of
certain of our portfolio companies;
-- $(361) million of depreciation from its Structured Products, due to the
continued widening of investment spreads;
-- $(123) million of depreciation of American Capital's investment in
European Capital, due to a decline of its quoted market price. The
valuation is based on the quoted market price plus a control premium.
(During the first quarter, the company consulted with the SEC staff on
its continued use of a control premium);
-- $73 million of net appreciation from foreign currency translation,
primarily related to its investment in European Capital;
-- $(140) million of depreciation of American Capital, LLC, an alternative
asset fund manager, due largely to declines in the trading multiples of
comparable public companies and reduction of its projected management
fees;
-- $(46) million of reversals of prior appreciation associated with
realized gains; and
-- $(73) million of net depreciation of interest rate swaps due to changes
in the forward yield curve.

"Credit quality remains good in light of the economic environment," stated John Erickson, Chief Financial Officer. "Most of the depreciation this quarter was not as a result of weakening credit as non-accruing loans at fair value remained within a reasonable level of 1.5% of total loans at fair value. While we believe the economy is in the early stages of a recession, our investment strategy during the past several years of buying non-cyclical companies appears to be paying off as those investments are generally performing very well. We think we are very well positioned to perform better through this cycle than in the recession in 2001, and we are in a much better position to take advantage of great investment opportunities. Additionally, while the economy may be in the early stages of a recession, we believe we are in the later stages of the liquidity crisis. We are seeing bids for some assets starting to tighten in the second quarter and today it looks like March may have been the low point for wide spreads and asset depreciation though we will need to see the trend continue in order to know for certain."

In the first quarter of 2008, American Capital invested $0.9 billion and received $0.9 billion of proceeds from realizations of portfolio investments. In addition, American Capital funds under management invested an additional $0.3 billion, for a total of $1.2 billion of new investments during the first quarter of 2008.

As of March 31, 2008, loans with a fair value of $80 million, were on non- accrual. The $80 million fair value of non-accruing loans represented 1.5% of total loans at fair value as of March 31, 2008, compared to the $55 million fair value of non-accrual loans representing 1.2% of total loans at fair value as of March 31, 2007 and the $122 million fair value of non-accrual loans representing 2.1% of total loans at fair value as of December 31, 2007.

"M&A volumes declined in the first quarter but high quality companies continue to come to market even in this somewhat tighter lending environment," said Ira Wagner, Chief Operating Officer. "However, debt capital continues to be available for middle market transactions and we continue to sell companies at attractive valuations. In addition, our Sponsor Finance Team continues to build new relationships with private equity firms looking to complete large transactions and who are seeking mezzanine investors since they can no longer turn to the syndicated 2nd lien market from Wall Street firms to finance their buyouts. We are seeing some very attractive investment opportunities as a result."

Since its August 1997 IPO through the first quarter of 2008, American Capital has earned a 16% compounded annual return, including interest, dividends, fees and net gains, on 230 realizations of senior debt, subordinated debt and equity investments, totaling $10 billion of committed capital. These realizations represent 45% of all amounts invested by American Capital since its August 1997 IPO. Proceeds from these realizations on average exceeded the total associated prior quarter valuation of the investments by 1%. American Capital earned a 29% compounded annual return on the exit of its equity investments, including dividends, fees and net gains.

"Over the past several months, numerous firms have been forced to issue dilutive equity in order to fix their balance sheets," stated Tom McHale, Senior Vice President of Finance. "We are one of the few financial institutions that raised significant capital last year ahead of the liquidity crisis. In the first quarter alone, we issued accretive equity, continuing to expand our capital resources."

During the first quarter, American Capital was also required to adopt Statement of Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which gave the Company the option to fair value its financial liabilities in its financial statements. American Capital did not elect the fair value option for any of its eligible financial liabilities. However, American Capital will begin providing its shareholders with supplemental information on the fair value of its financial liabilities. The cost basis and fair value of the Company's financial liabilities as of March 31, 2008, were $4,079 million and $3,875 million, respectively, or a positive difference of $204 million.

MATERIAL DIFFERENCES BETWEEN FAIR VALUE AND REALIZABLE VALUE

American Capital believes that approximately $656 million of the depreciation reflected in the results of this and prior quarters will ultimately be reversed when it exits the investments. American Capital invests primarily in illiquid assets, which are referred to in SFAS 157 as level 3 assets, with the intention to hold the assets to settlement or maturity. This is in contrast to the premise under GAAP that assets generally should be valued on the basis of their current market value and, if no market exists, on a hypothetical market value. American Capital has not historically sold most types of its investment assets on a market. For instance, it has typically settled its private finance investments at the time of a change of control transaction, such as through a sale or recapitalization of the portfolio company. Similarly, it expects to hold most of its Structured Products investments until settlement or maturity.

The current lack of liquidity in the financial markets has caused investment spreads between the cost of funds and investment income to widen dramatically on investments, which in most cases results in current fair values that are materially lower than the Company anticipates realizing on settlement or maturity. The Company's valuation practices have historically proved to be quite accurate, with the proceeds it has realized on $10 billion of investments to have exceeded the prior quarter valuations on average by less than 1%.

The Company notes that in March 2008, the SEC staff published a letter to a number of public companies regarding the disclosures in their periodic reports of the impact of SFAS 157. In the letter, companies are asked to consider disclosing for level 3 assets " ... whether you believe the fair values diverge materially from the amounts you currently anticipate realizing on settlement or maturity. If so, disclose why and provide the basis for your views." Because American Capital believes its GAAP fair values diverge materially from the amounts it anticipates to realize on settlement or maturity, the Company will begin to provide pro forma information on the realizable value of its assets in comparison to the fair value determined under GAAP.

As an example of this divergence, at the end of the first quarter of 2008, the Company held an investment in a commercial real estate collateralized debt obligation (CRE CDO), which had been depreciated $209 million from inception to date, including $160 million in the first quarter of 2008. The investment is currently producing approximately $8 million per quarter of cash flow but its current fair value determined in accordance with GAAP is $11 million due to a lack of liquidity in the financial markets for CDO investments which has caused investment spreads to widen. However, the Company anticipates realizing its $220 million investment on settlement or maturity based on its assumptions of future credit losses, which include a recession over the life of the investment.

The following table summarizes the current cost basis and fair value of our investments as of March 31, 2008 and the amount we currently anticipate realizing on settlement or maturity (in millions):

Difference
Between
GAAP Realizable Realizable
Asset Class Cost Basis Fair Value Value(1) Value and FV
Private Finance $8,439 $8,184 $8,316 $132
Structured Products 866 322 852 530
European Capital Limited 918 790 790 - American Capital, LLC 69 340 340 - Derivative Agreements, net 1 (147) (153) (6)
Totals $10,293 $9,489 $10,145 $656

(1) Realizable Value is a non-GAAP financial measure that does not
represent current fair value or net present value. Realizable Value
is the future value that we anticipate realizing on the settlement or
maturity of our investments.

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 over 1,000 valuation assignments per year for clients worldwide. Each quarter, Houlihan Lokey reviews approximately one quarter of 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 accordance with American Capital's valuation procedures. In the first quarter of 2008, Houlihan Lokey reviewed valuations of 16 portfolio company investments having an aggregate $1.2 billion in fair value as of the period end. Over the last four quarters, Houlihan Lokey reviewed 82 portfolio companies totaling $6.8 billion in fair value as of their respective valuation dates, in accordance with American Capital's valuation procedures. In addition, Houlihan Lokey representatives attend American Capital's quarterly valuation meetings and provide quarterly 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 and in accordance with American Capital's valuation procedures, 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.

Financial highlights for the quarter are as follows:

AMERICAN CAPITAL STRATEGIES, LTD.
CONSOLIDATED BALANCE SHEETS
As of March 31, 2008, December 31, 2007 and March 31, 2007
(in millions)

Q1 2008 Versus Q4
Q1 Q4 2007
2008 2007 $ %
(unaudited)

Assets
Investments at fair value (cost of
$10,292, $10,667 and $8,350
respectively) $9,639 $10,928 $(1,289) -12%
Cash and cash equivalents 37 143 (106) -74%
Restricted cash 280 401 (121) -30%
Interest receivable 55 56 (1) -2%
Other 208 204 4 2%
Total assets $10,219 $11,732 $(1,513) -13%

Liabilities and Shareholders' Equity
Debt $4,079 $4,824 $(745) -15%
Derivative agreements 150 77 73 95%
Accrued dividends payable 196 195 1 1%
Other 75 195 (120) -62%
Total liabilities 4,500 5,291 (791) -15%

Commitments and contingencies
Shareholders' equity:
Undesignated preferred stock,
$0.01 par value, 5.0 shares
authorized, 0.0 issued and
outstanding - - - 0%
Common stock, $0.01 par value,
1,000.0, 1,000.0 and 200.0
shares authorized, 210.0, 201.4
and 161.7 issued and 203.1,
195.9 and 157.5 outstanding,
respectively 2 2 - 0%
Capital in excess of par value 6,301 6,013 288 5%
Undistributed net realized earnings 241 254 (13) -5%
Net unrealized (depreciation)
appreciation of investments (825) 172 (997) NM
Total shareholders' equity 5,719 6,441 (722) -11%
Total liabilities and
shareholders' equity $10,219 $11,732 $(1,513) -13%

NM Not meaningful

Q1 Q1 2008 Versus Q1 2007
2007 $ %
(unaudited)

Assets
Investments at fair value (cost of
$10,292, $10,667 and $8,350
respectively) $8,653 $986 11%
Cash and cash equivalents 153 (116) -76%
Restricted cash 88 192 218%
Interest receivable 62 (7) -11%
Other 171 37 22%
Total assets $9,127 $1,092 12%

Liabilities and Shareholders' Equity
Debt $4,006 $73 2%
Derivative agreements 15 135 900%
Accrued dividends payable 137 59 43%
Other 188 (113) -60%
Total liabilities 4,346 154 4%

Commitments and contingencies
Shareholders' equity:
Undesignated preferred stock,
$0.01 par value, 5.0 shares
authorized, 0.0 issued and
outstanding - - 0%
Common stock, $0.01 par value,
1,000.0, 1,000.0 and 200.0
shares authorized, 210.0, 201.4
and 161.7 issued and 203.1, 195.9
and 157.5 outstanding,
respectively 2 - 0%
Capital in excess of par value 4,413 1,888 43%
Undistributed net realized earnings 79 162 205%
Net unrealized (depreciation)
appreciation of investments 287 (1,112) NM
Total shareholders' equity 4,781 938 20%
Total liabilities and
shareholders' equity $9,127 $1,092 12%

NM Not meaningful

AMERICAN CAPITAL STRATEGIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2008 and 2007
(in millions, except per share data)
(unaudited)

Q1 2008 Versus Q1
Q1 Q1 2007
2008 2007 $ %
OPERATING INCOME:
Investing operating income (1) $255 $205 $50 24%
Asset management and advisory
operating income (2) 37 45 (8) -18%

Total operating income 292 250 42 17%

OPERATING EXPENSES:
Interest 63 62 1 2%
Salaries, benefits and stock-based
compensation 56 51 5 10%
General and administrative 23 25 (2) -8%
Total operating expenses 142 138 4 3%

OPERATING INCOME BEFORE INCOME TAXES 150 112 38 34%

Benefit for income taxes 1 2 (1) -50%

NET OPERATING INCOME 151 114 37 32%

Net realized gain on investments
Portfolio company investments 28 10 18 180%
Taxes on realized gains (1) - (1) 100%
Foreign Currency 5 - 5 100%
Derivative agreements 1 3 (2) -67%
Total net realized gain 33 13 20 154%

REALIZED EARNINGS 184 127 57 45%

Net unrealized (depreciation)
appreciation of investments
Portfolio company investments (997) 6 (1,003) NM
Foreign currency translation 73 8 65 813%
Derivative agreements (73) (7) (66) -943%
Total net unrealized (depreciation)
appreciation (997) 7 (1,004) NM

NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
("EARNINGS") $(813) $134 $(947) NM

NET OPERATING INCOME PER COMMON
SHARE*:
Basic $0.77 $0.75 $0.02 3%
Diluted $0.77 $0.73 $0.04 5%

REALIZED EARNINGS PER COMMON SHARE*:
Basic $0.94 $0.83 $0.11 13%
Diluted $0.94 $0.81 $0.13 16%

EARNINGS PER COMMON SHARE*:
Basic $(4.16) $0.88 $(5.04) NM
Diluted $(4.16) $0.86 $(5.02) NM

WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic 195.2 152.7 42.5 28%
Diluted 195.2 156.1 39.1 25%

DIVIDENDS DECLARED PER COMMON SHARE $1.01 $0.89 $0.12 13%

NM Not meaningful.

* May not recalculate due to rounding.

(1) The investing operating income consists of interest, dividends,
prepayment fees and other 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 March 31, 2008, December 31, 2007 and March 31, 2007
(in millions, except per share data)
(unaudited)

Q1 2008 Versus
Q1 Q4 Q4 2007
2008 2007 $ %

Assets Under Management:
American Capital Assets at Fair
Value(1) $10,219 $11,732 $(1,513) -13%
Externally Managed Assets at Fair
Value(2) 4,874 5,372 (498) -9%
Total $15,093 $17,104 $(2,011) -12%

Capital Resources Under Management:
American Capital Assets at Fair
Value plus Available Capital
Resources(1) $12,412 $13,285 $(873) -7%
Externally Managed Assets at Fair
Value plus Available Capital
Resources(2) 6,268 5,896 372 6%
Total $18,680 $19,181 $(501) -3%

New Investments:
Senior Debt $510 $1,059 $(549) -52%
Subordinated Debt 113 400 (287) -72%
Preferred Equity 115 277 (162) -58%
Common Equity 123 123 - 0%
Common Equity warrants - 1 (1) -100%
CMBS Investments 48 75 (27) -36%
CLO Investments - 2 (2) -100%
Total $909 $1,937 $(1,028) -53%

American Capital Sponsored Buyouts $303 $770 $(467) -61%
Financing for Private Equity
Buyouts - 568 (568) -100%
Investments in Managed Funds 400 9 391 4344%
Direct Investments 113 204 (91) -45%
CMBS Investments 48 75 (27) -36%
CDO/CLO Investments - 2 (2) -100%
Add-on Financing for Acquisitions - 112 (112) -100%
Add-on Financing for
Recapitalizations 2 191 (189) -99%
Add-on Financing for Growth 1 2 (1) -50%
Add-on Financing for Working
Capital in Distressed Situations 30 4 26 650%
Add-on Financing for Working
Capital 12 - 12 100%
Total $909 $1,937 $(1,028) -53%

Realizations:
Scheduled Principal Amortization $17 $21 $(4) -19%
Senior Loan Syndications 274 300 (26) -9%
Principal Prepayments 240 475 (235) -49%
Payment of Accrued Payment-in- kind Interest and Dividends and
Original Issue Discount 20 30 (10) -33%
Sale of Equity Investments 380 660 (280) -42%
Total $931 $1,486 $(555) -37%

Appreciation, Depreciation, Gains
and Losses:
Gross Realized Gains $51 $140 $(89) -64%
Gross Realized Losses (23) (99) 76 77%
Portfolio Net Realized Gains 28 41 (13) -32%
Taxes on Realized Gains (1) (2) 1 50%
Foreign Currency 5 5 - 0%
Interest Rate Derivatives 1 - 1 100%
Net Realized Gains 33 44 (11) -25%

Gross Unrealized Appreciation at
30, 38 and 40 Portfolio
Companies 137 247 (110) -45%
Gross Unrealized Depreciation at
113, 56 and 30 Portfolio
Companies (1,088) (631) (457) 72%
Current Portfolio Net
Unrealized (Depreciation)
Appreciation (951) (384) (567) 148%
Net Depreciation From the
Recognition of Net Realized
Gains (46) (59) 13 -22%
Net Unrealized Appreciation for
Foreign Currency Translation 73 37 36 97%
Interest Rate Derivatives, net (73) (55) (18) 33%
Net Unrealized (Depreciation)
Appreciation (997) (461) (536) 116%

Net Gains, Losses, Appreciation
and Depreciation $(964) $(417) $(547) 131%

Other Financial Data:
Net Asset Value per Share $28.16 $32.88 $(4.72) -14%
Market Capitalization $6,937 $6,456 $481 7%
Total Enterprise Value $10,978 $11,137 $(159) -1%
Credit Quality:
Weighted Average Effective
Interest Rate on Debt
Investments at Period End 11.2% 12.0%
Loans on Non-Accrual at Face $375 $338 $37 11%
Loans on Non-Accrual at Fair
Value $80 $122 $(42) -34%
Past Due Loans at Face $106 $150 $(44) -29%
Past Due and Non-Accrual Loans at
Face as a Percentage of Total
Loans 8.2% 7.9%
Non-Accrual Loans at Fair Value
as a Percentage of Total Loans 1.5% 2.1%
Number of Portfolio Companies on
Non-Accrual and Past Due 24 22
Debt to Equity Conversions at
Face Value $40 $- $40 100%
Return on Equity:
LTM Net Operating Income Return
on Average Equity at Cost 10.9% 11.3%
LTM Realized Earnings Return on
Average Equity at Cost 15.0% 15.3%
LTM Earnings Return on Average
Equity -4.1% 12.2%
Current Quarter Net Operating
Income Return on Average Equity
at Cost Annualized 9.4% 11.4%
Current Quarter Realized Earnings
Return on Average Equity at Cost 11.5% 14.3%
Current Quarter Earnings Return
on Average Equity Annualized -53.5% -14.9%
Dividends:
Dividend Coverage (Realized
Earnings per Basic Share/
Dividend per Share) 0.93x 1.14x
Dividend Payout Ratio (Dividend
per Share/Realized Earnings per
Basic Share) 1.07x 0.88x
LTM Dividend Coverage (Realized
Earnings per Basic Share/
Dividend per Share) 1.23x 1.25x
LTM Dividend Payout Ratio
(Dividend per Share/Realized
Earnings per Basic Share) 0.81x 0.80x

Q1 Q1 2008 Versus Q1 2007
2007 $ %

Assets Under Management:
American Capital Assets at Fair
Value(1) $9,127 1,092 12%
Externally Managed Assets at Fair
Value(2) 3,003 1,871 62%
Total $12,130 $2,963 24%

Capital Resources Under Management:
American Capital Assets at Fair
Value plus Available Capital
Resources(1) $9,780 2,632 27%
Externally Managed Assets at Fair
Value plus Available Capital
Resources(2) 3,323 2,945 89%
Total $13,103 $5,577 43%

New Investments:
Senior Debt $460 $50 11%
Subordinated Debt 230 (117) -51%
Preferred Equity 215 (100) -47%
Common Equity 25 98 392%
Common Equity warrants 4 (4) -100%
CMBS Investments 129 (81) -63%
CLO Investments 32 (32) -100%
Total $1,095 $(186) -17%

American Capital Sponsored Buyouts $459 $(156) -34%
Financing for Private Equity
Buyouts 153 (153) -100%
Investments in Managed Funds - 400 100%
Direct Investments 181 (68) -38%
CMBS Investments 129 (81) -63%
CDO/CLO Investments 32 (32) -100%
Add-on Financing for Acquisitions 57 (57) -100%
Add-on Financing for
Recapitalizations 70 (68) -97%
Add-on Financing for Growth 4 (3) -75%
Add-on Financing for Working
Capital in Distressed Situations 2 28 1400%
Add-on Financing for Working
Capital 8 4 50%
Total $1,095 $(186) -17%

Realizations:
Scheduled Principal Amortization $18 $(1) -6%
Senior Loan Syndications 424 (150) -35%
Principal Prepayments 105 135 129%
Payment of Accrued Payment-in- kind Interest and Dividends and
Original Issue Discount 3 17 567%
Sale of Equity Investments 20 360 1800%
Total $570 $361 63%

Appreciation, Depreciation, Gains
and Losses:
Gross Realized Gains $17 $34 200%
Gross Realized Losses (7) (16) -229%
Portfolio Net Realized Gains 10 18 180%
Taxes on Realized Gains - (1) 100%
Foreign Currency - 5 100%
Interest Rate Derivatives 3 (2) -67%
Net Realized Gains 13 20 154%

Gross Unrealized Appreciation at
30, 38 and 40 Portfolio
Companies 171 (34) -20%
Gross Unrealized Depreciation at
113, 56 and 30 Portfolio
Companies (162) (926) -572%
Current Portfolio Net
Unrealized (Depreciation)
Appreciation 9 (960) NM
Net Depreciation From the
Recognition of Net Realized
Gains (3) (43) -1433%
Net Unrealized Appreciation for
Foreign Currency Translation 8 65 813%
Interest Rate Derivatives, net (7) (66) NM
Net Unrealized (Depreciation)
Appreciation 7 (1,004) NM

Net Gains, Losses,
Appreciation and Depreciation $20 $(984) NM

Other Financial Data:
Net Asset Value per Share $30.36 $(2.20) -7%
Market Capitalization $6,977 $(40) -1%
Total Enterprise Value $10,830 $148 1%
Credit Quality:
Weighted Average Effective
Interest Rate on Debt
Investments at Period End 12.2%
Loans on Non-Accrual at Face $208 $167 80%
Loans on Non-Accrual at Fair
Value $55 $25 45%
Past Due Loans at Face $11 $95 864%
Past Due and Non-Accrual Loans at
Face as a Percentage of Total
Loans 4.4%
Non-Accrual Loans at Fair Value
as a Percentage of Total Loans 1.2%
Number of Portfolio Companies on
Non-Accrual and Past Due 16
Debt to Equity Conversions at
Face Value $- Return on Equity:
LTM Net Operating Income Return
on Average Equity at Cost 11.6%
LTM Realized Earnings Return on
Average Equity at Cost 15.3%
LTM Earnings Return on Average
Equity 21.6%
Current Quarter Net Operating
Income Return on Average Equity
at Cost Annualized 10.6%
Current Quarter Realized Earnings
Return on Average Equity at Cost 11.9%
Current Quarter Earnings Return
on Average Equity Annualized 11.8%
Dividends:
Dividend Coverage (Realized
Earnings per Basic Share/
Dividend per Share) 0.93x
Dividend Payout Ratio
(Dividend per Share/Realized
Earnings per Basic Share) 1.07x
LTM Dividend Coverage (Realized
Earnings per Basic Share/
Dividend per Share) 1.20x
LTM Dividend Payout Ratio
(Dividend per Share/Realized
Earnings per Basic Share) 0.83x

NM Not meaningful

(1) Includes American Capital's investment in its externally managed
funds.
(2) Includes European Capital, American Capital Equity I, American
Capital Equity II, ACAS CLO-1 and ACAS CRE CDO 2007-1.

Static Pool

Portfolio Statistics (1)
($ in millions, unaudited) Pre-1999 1999 2000 2001
Internal Rate of Return-All
Investments (2) 6.7% 9.2% 8.0% 19.0%
Internal Rate of Return-All
Investments (3) 6.7% 9.2% 8.0% 19.0%
Internal Rate of Return-Equity
Investments Only (2)(4)(5) 19.3% -18.7% 11.8% 46.8%
Original Investments and Commitments $400 $380 $285 $375
Total Exits and Prepayments of
Original Investments $329 $297 $285 $286
Total Interest, Dividends and Fees
Collected $154 $145 $105 $150
Total Net Realized (Loss) Gain on
Investments $(67) $(47) $(39) $25
Current Cost of Investments $73 $30 $- $58
Current Fair Value of Investments $50 $19 $- $22
Current Fair Value of Investments as
a % of Total Investments at Fair
Value 0.5% 0.2% 0% 0.2%
Net Unrealized
Appreciation/(Depreciation) $(23) $(11) $- $(36)
Non-Accruing Loans at Face $14 $7 $- $25
Non-Accruing Loans at Fair Value $5 $3 $- $11
Equity Interest at Fair Value (4) $28 $10 $- $3
Debt to EBITDA (6)(7)(8) NM 2.5 - 10.6
Interest Coverage (6)(8) NM 3.9 - 1.6
Debt Service Coverage (6)(8) NM 3.3 - 1.6
Average Age of Companies (8) 67 yrs 58 yrs - 23 yrs
Diluted Ownership Percentage (4) 55% 52% 0% 53%
Average Sales (8)(9) $185 $23 $- $88
Average EBITDA (8)(10) $10 $4 $- $2
Average EBITDA Margin 5.4% 17.4% 0% 2.3%
Total Sales (8)(9) $304 $31 $- $385
Total EBITDA (8)(10) $14 $5 $- $11
% of Senior Loans (8)(11) 97% 0% 0% 25%
% of Loans with Lien (8)(11) 100% 100% 0% 100%

Portfolio Statistics (1)
($ in millions, unaudited) 2002 2003 2004 2005
Internal Rate of Return-All
Investments (2) 9.2% 22.1% 16.8% 17.6%
Internal Rate of Return-All
Investments (3) 9.2% 22.1% 16.2% 17.7%
Internal Rate of Return-Equity
Investments Only (2)(4)(5) 16.0% 31.9% 28.4% 22.5%
Original Investments and Commitments $958 $1,432 $2,265 $4,272
Total Exits and Prepayments of
Original Investments $675 $1,073 $1,546 $1,846
Total Interest, Dividends and Fees
Collected $291 $352 $517 $715
Total Net Realized (Loss) Gain on
Investments $(58) $134 $169 $252
Current Cost of Investments $259 $314 $709 $2,051
Current Fair Value of Investments $209 $386 $592 $2,274
Current Fair Value of Investments as
a % of Total Investments at Fair
Value 2.2% 4.0% 6.1% 23.6%
Net Unrealized
Appreciation/(Depreciation) $(50) $72 $(117) $223
Non-Accruing Loans at Face $38 $24 $55 $78
Non-Accruing Loans at Fair Value $3 $6 $10 $19
Equity Interest at Fair Value (4) $47 $164 $96 $1,539
Debt to EBITDA (6)(7)(8) 5.1 4.9 6.0 4.4
Interest Coverage (6)(8) 1.6 1.6 1.6 2.6
Debt Service Coverage (6)(8) 1.2 1.5 1.3 2.0
Average Age of Companies (8) 43 yrs 38 yrs 39 yrs 28 yrs
Diluted Ownership Percentage (4) 39% 49% 31% 53%
Average Sales (8)(9) $65 $169 $104 $111
Average EBITDA (8)(10) $13 $32 $22 $25
Average EBITDA Margin 20.0% 18.9% 21.2% 22.5%
Total Sales (8)(9) $387 $1,545 $1,787 $3,030
Total EBITDA (8)(10) $55 $228 $299 $474
% of Senior Loans (8)(11) 70% 60% 64% 48%
% of Loans with Lien (8)(11) 100% 100% 93% 92%

Portfolio Statistics (1)
($ in millions, unaudited) 2006 2007 2008
Internal Rate of Return-All
Investments (2) 16.2% 9.6% 23.1%
Internal Rate of Return-All
Investments (3) 14.5% -8.0% -7.9%
Internal Rate of Return-Equity
Investments Only (2)(4)(5) 24.8% 17.5% 4.3%
Original Investments and Commitments $5,049 $6,594 $365
Total Exits and Prepayments of
Original Investments $2,341 $1,462 $- Total Interest, Dividends and Fees
Collected $584 $366 $16
Total Net Realized (Loss) Gain on
Investments $71 $1 $- Current Cost of Investments $2,376 $4,091 $331
Current Fair Value of Investments $2,340 $3,434 $309
Current Fair Value of Investments as
a % of Total Investments at Fair
Value 24.4% 35.6% 3.2%
Net Unrealized
Appreciation/(Depreciation) $(36) $(657) $(22)
Non-Accruing Loans at Face $20 $114 $- Non-Accruing Loans at Fair Value $7 $16 $- Equity Interest at Fair Value (4) $780 $1,167 $141
Debt to EBITDA (6)(7)(8) 5.6 7.0 5.8
Interest Coverage (6)(8) 1.9 1.9 1.5
Debt Service Coverage (6)(8) 1.6 1.6 1.4
Average Age of Companies (8) 28 yrs 29 yrs 19 yrs
Diluted Ownership Percentage (4) 33% 45% 89%
Average Sales (8)(9) $127 $195 $56
Average EBITDA (8)(10) $28 $35 $17
Average EBITDA Margin 22.0% 17.9% 30.4%
Total Sales (8)(9) $4,764 $9,109 $176
Total EBITDA (8)(10) $907 $1,651 $46
% of Senior Loans (8)(11) 42% 70% 59%
% of Loans with Lien (8)(11) 84% 96% 100%

Portfolio Statistics (1) Pre-1999 - 2008 2003 - 2008
($ in millions, unaudited) Aggregate Aggregate
Internal Rate of Return-All
Investments (2) 14.5% 16.8%
Internal Rate of Return-All
Investments (3) 12.5% 13.8%
Internal Rate of Return-Equity
Investments Only (2)(4)(5) 22.3% 24.6%
Original Investments and Commitments $22,375 $19,977
Total Exits and Prepayments of
Original Investments $10,140 $8,268
Total Interest, Dividends and Fees
Collected $3,395 $2,550
Total Net Realized (Loss) Gain on
Investments $441 $627
Current Cost of Investments $10,292 $9,872
Current Fair Value of Investments $9,635 $9,335
Current Fair Value of Investments as
a % of Total Investments at Fair
Value 100.0% 96.9%
Net Unrealized
Appreciation/(Depreciation) $(657) $(537)
Non-Accruing Loans at Face $375 $291
Non-Accruing Loans at Fair Value $80 $58
Equity Interest at Fair Value (4) $3,975 $3,887
Debt to EBITDA (6)(7)(8) 5.9 6.0
Interest Coverage (6)(8) 1.9 2.0
Debt Service Coverage (6)(8) 1.6 1.6
Average Age of Companies (8) 30 yrs 29 yrs
Diluted Ownership Percentage (4) 45% 45%
Average Sales (8)(9) $147 $149
Average EBITDA (8)(10) $29 $29
Average EBITDA Margin 19.7% 19.5%
Total Sales (8)(9) $21,518 $20,411
Total EBITDA (8)(10) $3,690 $3,605
% of Senior Loans (8)(11) 57% 57%
% of Loans with Lien (8)(11) 92% 92%

(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 the anticipated proceeds to be
received upon settlement or maturity.
(3) Assumes investments are exited at current fair value.
(4) Excludes investments in commercial mortgage backed securities,
commercial loan obligations and collateralized debt obligations.
(5) Excludes equity investments that are the result of conversions of
debt and warrants received with the issuance of debt.
(6) These amounts do not include investments in which the Company owns
only equity.
(7) For portfolio companies with a nominal EBITDA amount, the portfolio
company's maximum debt leverage is limited to 15 times EBITDA.
(8) Excludes investments in commercial mortgage backed securities,
collateralized debt obligations, ACAS CRE CDO and European Capital
Limited.
(9) Sales of the most recent twelve months, or when appropriate, the
forecasted twelve months.
(10) EBITDA of the most recent twelve months, or when appropriate, the
forecasted twelve months.
(11) 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. 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 shareholders on Form 1099DIV. The net long term capital gains in the 2007 tax year totaling $142 million will be distributed to shareholders as a part of the second quarter 2008 dividend. The Company anticipates the 2008 year-to-date declared dividends of $2.04 per share to be comprised of $0.70 per share of long-term capital gains and $1.34 per share of ordinary taxable income. Dividends of long-term capital gains qualify for the 15% capital gains tax rate.

DIVIDEND REINVESTMENT PLAN (DRIP)

In appreciation of the loyal support of our shareholders, American Capital's Dividend Reinvestment Plan grants a 2% discount to the market price for reinvested dividends when the market price per share equals or exceeds the NAV per share by at least 110%. Please see the prospectus for additional information. Brokerages that have confirmed participation in the DRIP include, but are not limited to:

A.G. Edwards
Citigroup-Smith Barney
Fidelity
Merrill Lynch
Morgan Keegan
RBC Dain Rauscher
UBS Financial
Wachovia Securities
Wedbush Morgan

For more information regarding the DRIP, please visit our website or call our Investor Relations Department at (301) 951-5917.

A summary of American Capital's dividend history and forecast follows.

AMERICAN CAPITAL'S DIVIDEND HISTORY
$28.20 DECLARED SINCE AUGUST 1997 IPO AT $15.00 PER SHARE

% Change
% Change of of Total
Regular Dividend
Regular Dividend Over Additional Over Prior
Year/Quarter Dividend Prior Year Dividend Total Year
Total
1997 to
Q2 2008
Declared $28.20

2008 $4.19 13% Not Planned $4.19 13%
Q4 Forecast $1.10 10%
Q3 Forecast $1.05 14%
Q2 Declared $1.03 13%
Q1 $1.01 13%

2007 $3.72 12% $0.00 $3.72 12%
Q4 $1.00 14%
Q3 $0.92 11%
Q2 $0.91 11%
Q1 $0.89 11%

2006 $3.33 9% $0.00 $3.33 8%
Q4 $0.88 11%
Q3 $0.83 6%
Q2 $0.82 9%
Q1 $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
Declared $28.20

SHAREHOLDER CALL

American Capital invites shareholders, prospective shareholders and analysts to attend the American Capital Shareholder Call on Wednesday, May 7, 2008 at 11:00 am ET. The dial in number will be (800) 230-1092. International callers should dial +1 (612) 288-0329. Please advise the operator you are dialing in for the American Capital Shareholder Call. Shareholder presentations, webcasts and audio recordings can be found in the Investor Relations section of our website at www.ACAS.com.

BEFORE THE CALL:
REVIEW THE SLIDE PRESENTATION IN ADVANCE OF THE SHAREHOLDER CALL

The quarterly shareholder presentation includes a slide presentation to accompany the call that participants may download and print prior to the call. You may wish to take the time to review the slides in advance of the Shareholder Call.

DURING THE CALL:
VIEW STREAMING SLIDE PRESENTATION DURING THE SHAREHOLDER CALL

During the Shareholder Call you may watch and listen to the webcast or listen to the Shareholder Call by phone and step through the slides at your own pace.

AFTER THE CALL:
LISTEN AND VIEW AUDIO SLIDE PRESENTATION AFTER THE CALL

The audio of the Shareholder Call combined with the slide presentation will be made available on our website after the call on May 7. 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 www.ACAS.com.

AUDIO ONLY PRESENTATION AVAILABLE AFTER THE SHAREHOLDER CALL:

There will be a phone recording available from 3:00 pm ET Wednesday, May 7 until 11:59 pm ET Wednesday, May 21. 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 918891.

For further information or questions, please do not hesitate to call our Investor Relations Department at (301) 951-5917.

ABOUT AMERICAN CAPITAL

American Capital is the only private equity fund and alternative asset management company that is a member of the S&P 500. With $19 billion in capital resources under management, American Capital is the largest U.S. publicly traded alternative asset manager. American Capital, both directly and through its global asset management business, is an investor in management and employee buyouts, private equity buyouts and early stage and mature private and public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions, recapitalizations and securitizations. American Capital and its affiliates invest from $5 million to $800 million per company in North America and euro 5 million to euro 500 million per company in Europe.

As of March 31, 2008, American Capital shareholders have enjoyed a total return of 490% since the Company's IPO -- an annualized return of 18%, assuming reinvestment of dividends. American Capital has paid a total of $2.3 billion in dividends and paid or declared $28.20 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 www.AmericanCapital.com or
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, 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: Agnieszka.Opalka@AmericanCapital.com

Source: American Capital Strategies Ltd.

CONTACT: John Erickson, Chief Financial Officer, Tom McHale, Senior Vice
President, Finance, Amanda Cuthbertson, Director, Investor Relations, or Pete
Deoudes, Director, Equity Capital Markets , all of American Capital Strategies
Ltd., +1-301-951-6122

Web site: http://www.americancapital.com/
http://www.europeancapital.com/
http://www.acas.com/

2008-05-06 18:38:51 0354610 PRNEWSWIRE