FOR IMMEDIATE RELEASE:
May 1, 2007

Contact
John Erickson, Chief Financial Officer (301) 951-6122
Tom McHale, Senior Vice President, Finance (301) 951-6122

AMERICAN CAPITAL INCREASES Q2 DIVIDEND 11% TO $0.91
REPORTS $0.75 NOI AND $0.88 EARNINGS PER BASIC SHARE IN Q1 2007

Bethesda, MD – May 1, 2007 – American Capital Strategies Ltd. (NASDAQ: ACAS) announced today its second quarter 2007 dividend and its results for the first quarter of 2007.

SECOND QUARTER 2007 DIVIDEND DECLARATION
American Capital’s Board of Directors has declared a second quarter 2007 regular dividend of $0.91 per share to record holders as of June 11, 2007, payable on July 2, 2007.  This is an 11% increase over the second quarter 2006 dividend of $0.82 per share.  American Capital has paid a total of $1.6 billion in dividends and paid or declared dividends of $24.24 per share since its August 1997 IPO at $15.00 per share.

2007 DIVIDEND GUIDANCE
American Capital is forecasting total 2007 dividends of $3.68 per share to be paid from ordinary taxable income earned in 2007.  This would represent an 11% growth over the total 2006 dividends of $3.33 per share.  American Capital anticipates that its 2007 ordinary taxable income will exceed its dividends paid and it will elect to pay a 4% excise tax and retain its excess ordinary taxable income.  The estimated remaining 2007 dividends per share are $0.92 and $0.96 per share for the third and fourth quarters of 2007, respectively.

2007 OTHER GUIDANCE
The following guidance assumes the economic and capital market environment throughout 2007 remains substantially the same as in 2006.

American Capital is forecasting 12% to 22% growth in net asset value per share ("NAV") over its December 31, 2006 NAV per share of $29.42, to a value in the range of $32.90 to $35.90 per share by December 31, 2007 (a reduction from previous guidance). American Capital is forecasting that it will have between $15 billion and $21 billion of alternative assets under management by year end ($2 billion lower than previous guidance), of which $6 billion to $8 billion will be in funds managed by American Capital; the balance will be on American Capital's balance sheet. In addition, American Capital is forecasting $0.76 to $0.80 in net operating income (earnings less appreciation, depreciation, gains and loss ("NOI")) per basic share in the second quarter of 2007.

FIRST QUARTER 2007 RESULTS
American Capital announced today its results for the first quarter of 2007.  Earnings for the quarter decreased 17% to $134 million, compared to $162 million for the first quarter of 2006. On a basic per share basis for the quarter, earnings decreased 35% to $0.88 per basic share compared to $1.35 per basic share for the first quarter of 2006.  Earnings were also $0.42 per basic share below American Capital's forecasted range.  For the quarter, net portfolio appreciation and realized gains totaled $16 million compared to $46 million for the first quarter of 2006.

Earnings less unrealized appreciation and depreciation ("Realized Earnings") decreased 27% to $0.83 per basic share for the quarter compared to $1.14 per basic share for the first quarter of 2006.  NOI decreased 3% to $0.75 per basic share from $0.77 per basic share for the first quarter of 2006.  NOI was $0.03 per basic share below American Capital's forecasted range.

In the first quarter of 2007, American Capital received $17 million of revenue related to its and its wholly-owned portfolio companies' management of $2.9 billion of assets at European Capital, American Capital Equity I and American Capital CLO 2007-1.  This is a 131% increase in revenues over the first quarter of 2006.

"The quarter was solid with portfolio companies continuing to perform well," said Malon Wilkus, American Capital Chairman, President and CEO, "but several factors caused us to miss our NOI and earnings guidance.  Our stock compensation expense increased from $0.08 per basic share in Q4 2006 to $0.12 per basic share in Q1 2007, which had not been in our forecast.  This $0.04 per basic share increase was not due to the issuance of new grants but rather was driven by an increase in our estimated number of shares that will vest in 2007 pursuant to FAS 123R.  In addition to the impact from the stock compensation expense, several forecasted buyouts were lost and other transactions shifted to Q2 representing approximately $0.03 per basic share.  Finally, our unrealized appreciation came in below plan, which was primarily due to the reduction of $47 million of previously recognized appreciation on our investment in ASABiofuels, an ethanol company.  Our $76 million investment in ASABiofuels continues to be an excellent investment and is currently valued at $128 million, $52 million over its cost.  The main driver of our dividend and performance is our portfolio companies and they continue to perform extremely well."

First quarter 2007 dividends were $0.89 per share, an 11% growth over the first quarter 2006 dividends of $0.80 per share.  For the quarter, American Capital's dividend payout ratio was 107% of Realized Earnings of $0.83 per basic share.  Over the past year, the dividend payout ratio was 83% of Realized Earnings.  American Capital's NAV per share at March 31, 2007 was $30.36, a $5.06 or 20% growth over the March 31, 2006 NAV per share of $25.30.

"The market remains robust with plentiful opportunities," said Ira Wagner, Chief Operating Officer.  "We are currently reviewing nearly $40 billion of investment opportunities and we have $2.7 billion of investment opportunities under signed term-sheets or letters of intent. We continue to adhere to our investment discipline and as a result we are losing a higher percentage of our bids for buyouts which leads us to investing a higher percentage in debt investments.  Our discipline is reflected in our static pool data that shows our investments are maturing very nicely.  Our 32% returns generated on the equity investments made over the past five year's static pools (28% return over the past ten years) place us in the top ranks of private equity investors while our total returns were far less volatile than the private equity industry over the past ten years.  You can see the detail of our equity returns in the static pool charts below."

In the first quarter of 2007, American Capital invested $1.1 billion of capital and received $0.6 billion of proceeds from realizations of portfolio investments.  In addition, American Capital funds under management invested an additional $0.6 billion, for a total of $1.7 billion of investments in the first quarter of 2007.  In the first quarter of 2007, American Capital had $20 million of net appreciation, depreciation, realized gains and losses comprised of net realized gains of $13 million and net appreciation of $7 million.

"Credit quality remains excellent," said Chief Financial Officer John Erickson.  "Defaults and non-performing loans remain at very low levels in our portfolio as well as in the overall commercial finance industry. During our first quarter valuation meetings we continued to see good performance in our portfolio companies and saw no signs that the residential mortgage market or foreclosures in the housing market was having an impact outside of the housing sector.  We are also pleased to have rolled out our first managed CLO totaling $400 million.  This is our third fund under management, an expansion of our alternative asset management strategy, which produced 7% of our revenue in the first quarter.  We expect funds under management will total $6 to $8 billion by year end. Finally, it's worth noting the consistency of the performance of our investments.  We delivered a 22% earnings return on equity over the past twelve months and an 18% earnings return on equity over the past five years."

The weighted average effective interest rate on American Capital's total investments in debt securities as of March 31, 2007 was 12.2%.  At March 31, 2007, loans totaling $208 million, with a fair value of $55 million, were on non-accrual.  Delinquent and non-accruing loans to 16 portfolio companies totaled $219 million, or 4% of total loans at March 31, 2007, compared to $245 million, or 7% of total loans at March 31, 2006.  The $55 million fair value of non-accrual loans represented 1% of total loans at fair value at March 31, 2007, compared to $55 million fair value of non-accrual loans representing 2% of total loans at fair value at March 31, 2006.

Since inception in September of 2005 through March 31, 2007, European Capital, managed by a wholly-owned consolidated subsidiary of American Capital, has invested in 45 portfolio companies totaling $2.1 billion.  European Capital declared a dividend for the first quarter of 2007, of which American Capital received dividend income totaling $15 million from its $654 million equity investment at cost in European Capital, a 9% annualized dividend yield.

Since its August 1997 IPO through the first quarter of 2007, American Capital has earned a 16% compounded annual return, including interest, dividends, fees and net gains, on 186 realizations of senior debt, subordinated debt and equity investments, totaling $5.3 billion of invested capital.  These realizations represent 36% of all amounts invested by American Capital since its August 1997 IPO.  Proceeds from these realizations exceeded the total associated prior quarter valuation of the investments by 2%.

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 retained 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 approximately 1,000 valuation assignments per year for clients worldwide. Each quarter, Houlihan Lokey reviews 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 the first quarter of 2007, Houlihan Lokey reviewed valuations of 11 portfolio company investments having an aggregate $680 million in fair value as of the period end. Over the last four quarters, Houlihan Lokey has reviewed 86 portfolio companies totaling $4.9 billion in fair value as of their respective valuation dates. In addition, Houlihan Lokey representatives attend American Capital's quarterly valuation meetings and provide periodic 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, 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, 2007, December 31, 2006 and March 31, 2006

(in millions)

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2007 and 2006

(in millions, except per share data)

(unaudited)