FOR IMMEDIATE RELEASE:

July 26, 2006

Contact
Tom McHale, Senior Vice President, Finance (301) 951-61222
Brian Maney, Director, Corporate Communications (301) 951-6122

American Capital Recognizes $15 Million of Total Net Realized Gain from Four Exits

Bethesda, MD – July 26, 2006 – American Capital Strategies Ltd. (American Capital announced today that it has received total proceeds of $77 million from exits and prepayments of four portfolio companies, realizing a total net gain of $15 million.

ASC Industries Inc.
In the second quarter of 2006, American Capital realized a gain of $25 million from the sale of its portfolio company ASC Industries Inc. to United Components Inc.  ASC is a manufacturer of aftermarket water pumps for automotive and light truck vehicles.  American Capital recognized total proceeds of $56 million upon the exit, earning a 33% 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 $6 million, or 12%.

In October 2002, American Capital invested $36 million in a senior term loan, senior and junior subordinated debt and preferred equity to recapitalize ASC.  

“We are very pleased with the excellent outcome of our investment in ASC Industries,” said American Capital Managing Director Robert Klein.  “American Capital is dedicated to developing long term relationships and supporting our portfolio companies in their growth plans.  We worked closely with ASC’s strong management team for nearly four years as they’ve capitalized on the Company’s competitive advantages.”   

For more information about the ASC Industries transaction, click here.

PaR Nuclear Holding Company
In the second quarter of 2006, American Capital realized an additional gain of $5 million from the sale of its remaining investment in PaR Nuclear Holding Company.  PaR Nuclear is a provider of complete new fuel handling systems, control systems and upgrades for refueling machines, transfer systems, spent fuel handling machines and cranes in the nuclear power industry. The proceeds received by American Capital were greater than the first quarter 2006 valuation of the investment by $1.3 million, or 24%.
 
In March 2002, American Capital invested $36 million in the buyout of PaR (formerly known as ACAS Acquisitions (PaR Systems) Inc.).  In May 2004, American Capital partially exited its investment in PaR and its wholly owned subsidiary, PaR Systems Inc., from the sale of an 81% interest in PaR’s nuclear equipment and services business, realizing a gain of $10 million.  As part of that sale, the PaR shareholder group had the ability to sell the remaining 19% interest in PaR Nuclear to the buyer after a specified period of time for the greater of a formula based on earnings or a set minimum value.  American Capital continues to retain its investment in PaR Systems, which is focused on developing robotic and other material handling systems for aerospace, navy, environmental and food and beverage processing markets.

“This transaction represents the completion of a successful transaction for American Capital and the other investors in PaR,” said American Capital Senior Vice President, Corporate Development David Ehrenfest Steinglass.      

Selig Sealing Products Inc.
In the second quarter of 2006, American Capital received proceeds of $15 million from the repayment of its senior debt investment in Selig Sealing Products Inc., earning a 14% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment.  Selig is a leading North American manufacturer of heat induction foil seals for plastic containers.

In April 2005, American Capital invested $15 million in a senior term loan in Selig, supporting Behrman Capital's acquisition.

“Our senior debt investment in Selig gave us the opportunity to work again with Behrman Capital in a winning investment,” said American Capital Managing Director Jon Isaacson.   “Selig's product superiority, which ensure the security and freshness of many common household items and pharmaceuticals, and its outstanding customer service will enable it to continue to pursue its growth opportunities in the coming years.”

For more information about the Selig transaction, click here.

 UAV Corporation
In the second quarter of 2006, American Capital realized a loss of $15 million from the sale of its senior subordinated debt investment in UAV Corporation.  UAV is a national distributor of pre-recorded video VHS tapes, audio CDs, DVDs, music audiocassettes and software.  The proceeds received by American Capital were less than the first quarter 2006 valuation of the investment by $3 million, or 100%.

In May 2002, American Capital invested $13 million in senior subordinated debt in UAV, supporting Morgenthaler’s acquisition.  In June 2005, American Capital invested an additional $9 million of junior subordinated debt in UAV, which was repaid in full in July 2006 after the end of the second quarter.     

*            *            *

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, click here.

For a chart showing American Capital’s exited portfolio companies, click here.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded buyout and mezzanine fund with capital resources of approximately $8.4 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 June 30, 2006, American Capital shareholders have enjoyed a total return of 398% 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 Dividends 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.

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.