FOR IMMEDIATE RELEASE:
January 27, 2005

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

AMERICAN CAPITAL ANNOUNCES CHARACTERIZATION OF 2004 DIVIDENDS

Bethesda, MD - January 27, 2005 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that its 2004 dividends of $2.91 per share were a distribution of ordinary income. American Capital also announced that of its 2004 ordinary dividends, $2.6361 were non-qualifying dividends and $0.2739 were qualified dividends. The $0.2739 of qualified dividends reflect qualified dividend income received by American Capital in 2004. 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.

A summary of American Capital's dividend history follows. American Capital offers a Dividend Reinvestment Plan (DRIP). American Capital has recently instituted a 5% discount on shares purchased through the reinvestment of dividends, effective for dividends paid starting in December 2004 and thereafter and subject to the terms of the DRIP. For more information regarding this Plan, please visit our website or call American Capital's Shareholder Relations Department at (301) 951-6122.

AMERICAN CAPITAL'S DIVIDEND HISTORY
$16.03 DECLARED SINCE AUGUST 1997 IPO AT $15.00 PER SHARE

American Capital is a publicly traded buyout and mezzanine fund with capital resources of more than $4.8 billion. American Capital is an investor in and sponsor of management and employee buyouts, invests in private equity buyouts, and provides capital directly to private and small public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions and recapitalizations.

As of December 31, 2004, American Capital shareholders have enjoyed a total return of 326% since the Company's IPO - an annualized return of 22%, assuming reinvestment of dividends. American Capital has paid a total of $651 million in dividends and paid or declared $16.03 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.

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.