Bethesda, MD - December 17, 2004 - American Capital Strategies Ltd. (Nasdaq:ACAS)announced today that its Board of Directors has declared an additional dividend on its common stock of $0.06 per share payable on January 18, 2005 to shareholders of record as of December 31, 2004. Total dividends declared for 2004 are $2.91 per share, an increase of 4% over 2003.

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 Form 10-K for more information about its tax status. The Company intends to retain long-term capital gains and treat them as deemed distributions for tax purposes. Therefore, the taxable income that is distributed as dividends would be expected to be treated as ordinary income for tax purposes. Taxable income differs from GAAP income because of both temporary and permanent differences in income and expense recognition. For example, changes in unrealized appreciation and depreciation have no impact on the Company's taxable income. American Capital reports the estimated tax characteristics of each dividend when declared, while the actual tax characteristics of dividends are reported annually to each stockholder on Form 1099DIV. This additional dividend is expected to be a distribution of ordinary income.

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. Shareholders who are not now enrolled in the DRIP but enroll in advance of the record date for American Capital's forthcoming extra dividend and in conformity with Nominee or Equiserve rules may also benefit from the 5% discount.

A summary of American Capital's dividend history follows. American Capital offers a Dividend Reinvestment Plan (DRIP). Stockholders interested in the DRIP should review a DRIP prospectus, which is available from American Capital or accessible on theAmerican Capital website, or call its Shareholder Relations Department at (301) 841-1359.

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 November 30, 2004, American Capital shareholders have enjoyed a total return of 299% since the Company's IPO - an annualized return of 21%, assuming reinvestment of dividends. American Capital has paid a total of $583 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.

Contact:
John Erickson, Chief Financial Officer (301) 951-6122
Tom McHale, Vice President, Investor Relations and Finance (301) 951-6122

SOURCE: American Capital Ltd.