NEWS

BETHESDA, Md., May 4 /PRNewswire/ -- American Capital Strategies, Ltd. (Nasdaq:ACAS) today announced the results of its first quarter ended March 31, 1999. Net operating income for the quarter was $4,727,000 or $0.43 per share, an increase of 60% compared to $2,949,000 or $0.27 per share for the first quarter ended March 31, 1998. Net increase in shareholders' equity resulting from operations for the first quarter of 1999 was $7,024,000 or $0.63 per share compared to $2,977,000 or $0.27 per share for the first quarter of 1998. American Capital also declared and paid a $0.41 per share regular dividend for the first quarter of 1999, a 64% increase compared to $0.25 per share for the first quarter of 1998.

In the first quarter, American Capital completed five financing transactions totaling $26.2 million, composed of purchases of $4.5 million of senior debt, $18.0 million of subordinated debt and $3.7 million of warrants. These amounts include $1.5 million of additional financing for a current ACAS portfolio company that was issued and repaid during the quarter. In addition, American Capital received $8.4 million in principal repayments during the quarter, primarily due to the sale of Four-S Baking Company and the repayment of a $5 million senior subordinated term loan by Decorative Surfaces International, Inc.

The weighted average interest rate on the total capital invested during the quarter was 14.1%; the weighted average interest rate on American Capital's total investment portfolio as of March 31, 1999 was 13.1%. At March 31, 1999, the weighted average grade of American Capital's loan portfolio was 3.0, with 4 the highest grade. There are no loans past due.

American Capital Chairman and CEO Malon Wilkus commented, "We had an excellent quarter in every respect. We sold one of our portfolio companies, realizing a $1.3 million gain and resulting in a 35% compounded rate of return on our investment. We arranged a major acquisition for another portfolio company and received a $5 million repayment of a senior subordinated investment from a third portfolio company. These transactions are evidence of the quality of our portfolio companies and we believe they will become routine as the portfolio continues to mature. During the quarter, we invested $26.2 million, paid a $0.41 dividend and met analyst expectations by reporting net operating income of $0.43 per share. American Capital is delivering strong results and is poised to continue its excellent performance in the months and years ahead."

John Erickson, Chief Financial Officer, stated, "This was a great quarter. In addition to the strong operational performance, we closed a $100 million credit facility that strengthens our balance sheet. We were also pleased to have Ferris Baker Watts and BancBoston Robertson Stephens initiate research coverage on American Capital, further increasing the number of market makers for our stock."

Financial highlights for the quarter are as follows:


                      AMERICAN CAPITAL STRATEGIES, LTD.
                        Unaudited Financial Highlights
                     (In Thousands Except Per Share Data)

                                                   Three      Three
                                                  Months     Months
                                                   Ended      Ended
                                                 3/31/99    3/31/98

    Total operating income                        $6,520       $3,292
    Total operating expenses                         604          444
    Interest Expense                                 794           --
    Operating income before equity in earnings     5,122        2,848
      of unconsolidated operating subsidiary
    Equity in earnings of unconsolidated
      operating subsidiary                          (395)         101
    Net operating income                           4,727        2,949

    Realized gain on investments                     316           --
    Change in unrealized appreciation
      of investments                               1,981           28
    Net increase in shareholders' equity
      resulting from operations                   $7,024       $2,977

    Basic Weighted Average Shares Outstanding     11,070       11,069
    Diluted Weighted Average Shares Outstanding   11,279       11,480
    Net operating income per share - Basic         $0.43        $0.27
    Net increase in shareholders' equity resulting
      from operations per share - Basic            $0.63        $0.27
     Dividends declared per share                  $0.41        $0.25

    Total assets                                $263,448     $151,031
    Total shareholders' equity                  $155,443     $150,862

    Net asset value per share                     $13.98       $13.63

    Portfolio Statistics:
    Interest Coverage:                    2.5
    Debt Service Coverage:                2.0
    Debt to EBITDA:                       4.9
    Weighted Average Loan Grade:          3.0 on a scale of 4 high to 1 low
    Weighted Average Age of
      Portfolio Companies:                37 years
    Weighted Average Sales of
      Portfolio Companies:               $55 million
    Average American Capital Ownership
      Percentage of Portfolio Companies:  26.7%

For more information about American Capital's portfolio click here.

American Capital invites its shareholders and analysts to attend the American Capital "Analyst Meeting" by phone on Wednesday, May 5, 1999 at 11:00 a.m. EDT. The dial in number is 800-863-3256. Please advise the operator that you are dialing in for the "American Capital Analyst Meeting."

During the Analyst Call, we would like to invite you to turn to our shareholder website www.ACAS1.com/Slide/slideshow.html and click on the First Quarter 1999 Shareholder Presentation to view slides displaying information concerning some of the issues that will be covered during the conference call. This slide show will not be available prior to the Analyst Call.

For the convenience of our shareholders, a recording will be available from May 5-May 12, 1999. If you are interested in hearing the recording of the presentation, please dial 800-611-0653 and enter access code 1634. Or, visit our shareholder website at www.ACAS1.com/Slide/slideshow.html to listen to the presentation and view the slides reviewed during the Analyst Call.

American Capital is a buyout and specialty finance company with capital resources exceeding $250 million. American Capital invests $3 to $20 million in the form of senior debt, subordinated debt and equity to middle market companies in need of capital for growth, acquisitions, ESOP buyouts, management buyouts, liquidity and restructurings. Companies interested in learning more about American Capital and its unique and flexible financing should contact John Hoffmire, Vice President of Sales and Marketing, at 781-862-4447 or visit our at www.American-Capital.com or our shareholder site at www.ACAS1.com .