FOR IMMEDIATE RELEASE:
January 23, 2006

Contact
Tom McHale, Senior Vice President, Finance and Investor Relations, (301) 951-6122
Amanda Ladd, Manager, Investor Relations, (301) 951-6122

American Capital Announces Characterization of 2005 Dividends

Bethesda, MD - January 23, 2006 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that its 2005 dividends of $3.08 per share were a distribution of ordinary income. American Capital also announced that of its 2005 ordinary dividends, $3.0682 per share were non-qualifying dividends and $0.0118 per share were qualified dividends. The $0.0118 per share of qualified dividends reflect qualified dividend income received by American Capital in 2005. Qualified dividend income is dividend income received from domestic corporations and qualified foreign corporations. Qualified dividend income is taxed to stockholders at the rates that apply to net capital gains.

American Capital stockholders should receive IRS Form 1099-DIV containing this information from their brokers, transfer agents or other institutions.

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 the Company's most recent report on SEC Form 10-K for more information about its tax status. American Capital reports the estimated tax characteristics of each dividend when announced, while the actual tax characteristics of each year's dividends are reported annually to stockholders on Form 1099-DIV.

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 interested in the DRIP should review a DRIP prospectus, which is available from American Capital and accessible on the American Capital website or call the Investor Relations Department at (301) 951-6122.

A summary of American Capital's dividend history follows.

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 and commercial loan obligations. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions, recapitalizations and securitizations.

As of December 31, 2005, American Capital shareholders have enjoyed a total return of 412% 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 paid$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.

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.