American Capital Declares $1.05 Q3 2008 Dividend Reports $0.71 NOI and $0.95 Realized...

American Capital Declares $1.05 Q3 2008 Dividend Reports $0.71 NOI and $0.95
Realized Earnings in Q2 2008

BETHESDA, Md., Aug. 5 /PRNewswire-FirstCall/ -- American Capital, Ltd.
(Nasdaq: ACAS) ("American Capital" or the "Company") announced today its third
quarter 2008 dividend and its results for the second quarter of 2008.
THIRD QUARTER 2008 DIVIDEND DECLARATION
American Capital's Board of Directors has declared a third quarter 2008
regular dividend of $1.05 per share to record holders as of October 6, 2008,
payable on October 14, 2008. This is a 14% increase over the third quarter
2007 dividend of $0.92 per share. American Capital has paid a total of $2.5
billion in dividends and paid or declared dividends of $29.25 per share since
its August 1997 IPO at $15.00 per share.
2008 DIVIDEND FORECAST
American Capital reiterates its 2008 dividend forecast of $4.19 per share,
a 13% growth over total 2007 dividends of $3.72 per share. The fourth quarter
of 2008 dividend per share is forecast to be $1.10 per share, a 10% increase
over the fourth quarter of 2007 dividend.
2008 FORECASTS
American Capital is forecasting $0.68 to $0.75 in Net Operating Income
(earnings less appreciation, depreciation, gains and loss ("NOI")) per diluted
share for the third quarter of 2008.
American Capital is forecasting that its Earnings less appreciation and
depreciation ("Realized Earnings") per diluted share for the third quarter of
2008 will exceed $1.05 per diluted share.
American Capital is revising downward its assets under management forecast
to have between $17 billion and $20 billion as of year end, of which between
$7 billion and $10 billion is expected be in external funds managed by
American Capital, LLC, a wholly-owned portfolio company of American Capital,
and the balance is expected to be approximately $10 billion on American
Capital's balance sheet.
American Capital reiterates its forecast that it will roll over more than
$500 million of ordinary taxable income and net long term capital gains from
2008 to pay 2009 dividends.
The preceding dividend forecast and other forecasts above assume that for
2008 there will be a recession in the U.S., no new capital will be raised at
American Capital, and that American Capital will produce sufficient liquidity
from debt repayments and exits for new investments.
SECOND QUARTER 2008 RESULTS
Net Operating Income ("NOI")
American Capital also announced today its results for the second quarter
of 2008. NOI for the second quarter of 2008 decreased 22% to $0.71 per
diluted share, compared to $0.91 per diluted share for the second quarter of
2007. The second quarter of 2008 forecast for NOI was $0.68 to $0.75 per
diluted share.
Realized Earnings
Realized Earnings decreased 33% to $0.95 per diluted share for the second
quarter of 2008, compared to $1.42 per diluted share for the second quarter of
2007. Realized Earnings return on equity at cost for the twelve months
through the second quarter of 2008 was 13%. The second quarter of 2008
Realized Earnings per basic share covered 92% of the second quarter 2008
dividend of $1.03 per share. The second quarter of 2008 forecast for Realized
Earnings was to exceed $1.10 per diluted share.
Earnings
American Capital's Earnings for the second quarter of 2008 was a loss of
$(0.34) per diluted share, a decrease of $5.02 per diluted share from the
second quarter of 2007 earnings of $4.68 per diluted share. This loss was
driven by $264 million of net unrealized depreciation, offset by $49 million
of net realized gains. Earnings return on equity for the twelve months
through the second quarter of 2008 was (18)%.
American Capital's net asset value ("NAV") per share as of June 30, 2008
was $27.01, a decrease of $1.15 or 4% lower than the March 31, 2008 NAV per
share of $28.16. The June 30, 2008 NAV was $5.87 per share less than the
December 31, 2007 NAV per share of $32.88.
"Though it looks like we are in a recession, we continue to have good
realized earnings of $0.95 per diluted share, which is slightly behind our
previous guidance, due to several exits shifting from the second quarter to
the third quarter of 2008," said Malon Wilkus, Chairman and Chief Executive
Officer. "With our visibility into additional exits of portfolio companies
during the third quarter of 2008, we expect to realize earnings that cover our
dividend. This is evidenced by our forecast to exceed $1.05 per diluted share
in realized earnings for the third quarter of 2008, despite the troubles in
the economy. In the second quarter we had exits and prepayments totaling $479
million. Our exits are accretive to NOI when we redeploy the capital into
wider yielding debt investments."
For the second quarter of 2008, net appreciation, depreciation, gains and
losses totaled $(215) million, consisting of $49 million of net realized gains
less $(264) million of net depreciation, compared to $635 million of net
appreciation, depreciation, gains and losses for the second quarter of 2007.
The primary components of the $(264) million of net depreciation for the
quarter were as follows:
-- $(67) million of reversals of prior net appreciation associated with
net realized gains;
-- $(286) million of net depreciation of American Capital's private
finance investments due primarily to a decline of the trading multiples of
comparable public companies and to a decline of cash flows of certain of its
portfolio companies;
-- $(12) million of net depreciation of American Capital's investments in
managed funds;
-- $(17) million of depreciation of American Capital, LLC, an alternative
asset fund manager;
-- $46 million of net appreciation from structured products, due to modest
tightening of investment spreads, primarily from commercial mortgage
structured products; and
-- $72 million of net appreciation of interest rate swaps due to changes
in the forward yield curve.
"We are pleased with the credit quality of our portfolio given the current
environment," stated John Erickson, Chief Financial Officer. "Our non-accrual
loans were 2% of total loans at fair value as of June 30, 2008. The overall
portfolio has experienced EBITDA declines on average, signaling that we are in
a recession. However, it is interesting to note that when the results are
weighted by the fair value of our investments, EBITDA is growing year over
year, indicating that our largest investments (which are primarily our
buyouts) are performing the best. This reflects the investment discipline we
had over the last five years and leads us to believe that our credit quality
will remain better than during the last recession. We continue to sell
companies at attractive multiples, generating good liquidity. Despite the
economy, we are well positioned to maintain our dividend level in our steady
state operating mode."
In the second quarter of 2008, American Capital invested $0.9 billion in
new committed investments and received $0.5 billion of proceeds from
realizations of portfolio investments. In addition, American Capital funds
under management invested an additional $2.7 billion, for a total of $3.6
billion of new investments during the second quarter of 2008.
As of June 30, 2008, loans with a fair value of $116 million were on non-
accrual. The $116 million fair value of non-accruing loans represented 2% of
total loans at fair value as of June 30, 2008, compared to the $56 million
fair value of non-accrual loans representing 1% of total loans at fair value
as of June 30, 2007.
"We exited eleven companies year-to-date through July 2008, receiving
proceeds of $1 billion," said Steve Burge, President, North American Private
Finance. "The median multiples for these companies at the time of their 2008
exits were one turn higher than the median multiples when we entered into the
investments, and their average EBITDA was 55% higher. We currently have 22
companies in various stages of the sales process, which is typical for the
size of our portfolio. We are seeing robust interest from prospective buyers,
so we continue to expect strong liquidity from our portfolio. Our ability to
offer a staple financing package to buyers is a strong competitive advantage
and advances our strategic initiative of increasing our investment spreads and
moving up the balance sheet in this environment."
Since its August 1997 IPO through the second quarter of 2008, American
Capital has earned a 17% compounded annual return, including interest,
dividends, fees and net gains, on 239 realizations of senior debt,
subordinated debt and equity investments, totaling $11 billion of original
committed capital. These realizations represent 46% of all amounts invested
by American Capital since its August 1997 IPO. Proceeds from these
realizations on average exceeded the total associated prior quarter valuation
of the investments by less than 1%. American Capital earned a 30% compounded
annual return on the exit of its equity investments, including dividends, fees
and net gains.
AMERICAN CAPITAL AGENCY CORP.
American Capital increased its funds under management with the successful
completion of American Capital Agency Corp.'s ("AGNC") initial public offering
("IPO") on May 20, 2008 of 10 million shares of common stock, at a price of
$20.00 per share, for net proceeds of $186 million. The shares are traded on
The NASDAQ Global Market under the symbol "AGNC." In a private placement
concurrent with the AGNC IPO, American Capital purchased 5 million shares of
AGNC common stock at the IPO price of $20.00 per share, for $100 million.
AGNC's total net proceeds from the IPO and the concurrent private placement
were $286 million. AGNC is externally managed and advised by an affiliate of
American Capital.
THIRD PARTY VALUATION OF PORTFOLIO INVESTMENTS
American Capital's Board of Directors is ultimately responsible for
determining the fair value of American Capital's portfolio investments on a
quarterly basis in good faith. In that regard, the Board of Directors retains
independent third party valuation firms to assist it by having the third party
valuation firms regularly perform certain procedures that the Board identifies
and requests the respective third party firms to perform on a predetermined
selection of the Board's fair value determinations ("Procedures"). The Board
of Directors may also obtain valuation assistance from such firms on other
portfolio investments. Representatives from the valuation firms also attend
American Capital's quarterly valuation meetings and provide their respective
quarterly reports to the Audit and Compliance Committee of the Board of
Directors. Each quarter, the third party valuation firms will perform
Procedures on American Capital's determination of the aggregate fair value of
approximately one fourth of its investments in companies that have both been
portfolio companies for at least one year and that have a fair value in excess
of $25 million, in accordance with American Capital's valuation procedures.
American Capital's Board of Directors engaged two valuation firms,
Houlihan Lokey Howard & Zukin Financial Advisors Inc. ("Houlihan Lokey") and
Duff & Phelps, LLC ("Duff & Phelps") to perform Procedures on American
Capital's fair value determinations for the second quarter of 2008. Houlihan
Lokey and Duff & Phelps are both leading international valuation firms. For
the quarter ended June 30, 2008, Houlihan Lokey performed its Procedures on
valuations of a total of 13 portfolio investments, with a value of $1.0
billion. This value is approximately 10% of the fair value of American
Capital's total investments as of June 30, 2008. Duff & Phelps also performed
its Procedures on valuations of an additional ten portfolio investments, with
a fair value of $0.3 billion as of the period end. This value is
approximately 3% of the fair value of American Capital's total investments as
of June 30, 2008. For the last four quarters, third party valuation firms
performed Procedures on an aggregate of 85 portfolio companies totaling $6.9
billion in fair value as of their respective valuation dates, in accordance
with American Capital's valuation procedures. For those portfolio investments
on which each valuation firm has performed Procedures during each applicable
period, using the scope of review set forth by American Capital's Board of
Directors and in accordance with American Capital's valuation procedures, the
Board of Directors has made a fair value determination for such investments
that is within each valuation firm's aggregate range of fair value for the
investments. Additionally, in connection with its review, Duff & Phelps also
concluded that the aggregate range of fair value determined by the Board of
Directors for the investments that it performed Procedures, was not
unreasonable.
Financial highlights for the quarter are as follows:

AMERICAN CAPITAL, LTD.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2008, December 31, 2007 and June 30, 2007
(in millions)

Q2 2008 Versus
Q2 Q4 Q4 2007
2008 2007 $ %
(unaudited)

Assets
Investments at fair value (cost of
$10,680, $10,667 and $10,674
respectively) $9,687 $10,928 $(1,241) -11%
Cash and cash equivalents 262 143 119 83%
Restricted cash and cash equivalents 229 401 (172) -43%
Interest receivable 42 56 (14) -25%
Other 236 204 32 16%
Total assets $10,456 $11,732 $(1,276) -11%

Liabilities and Shareholders' Equity
Debt $4,475 $4,824 $(349) -7%
Derivative agreements 76 77 (1) -1%
Accrued dividends payable 209 195 14 7%
Other 100 195 (95) -49%
Total liabilities 4,860 5,291 (431) -8%

Commitments and contingencies

Shareholders' equity:
Undesignated preferred stock,
$0.01 par value, 5.0 shares
authorized, 0.0 issued and
outstanding - - - 0%
Common stock, $0.01 par value,
1,000.0 shares authorized,
214.0, 201.4 and 185.6 issued
and 207.2, 195.9 and 182.2
outstanding, respectively 2 2 - 0%
Capital in excess of par value 6,457 6,013 444 7%
Undistributed net realized earnings 226 254 (28) -11%
Net unrealized (depreciation)
appreciation of investments (1,089) 172 (1,261) NM
Total shareholders' equity 5,596 6,441 (845) -13%
Total liabilities and
shareholders' equity $10,456 $11,732 $(1,276) -11%

Q2 Q2 2008 Versus Q2 2007
2007 $ %
(unaudited)

Assets
Investments at fair value (cost of
$10,680, $10,667 and $10,674
respectively) $11,516 $(1,829) -16%
Cash and cash equivalents 172 90 52%
Restricted cash and cash equivalents 202 27 13%
Interest receivable 57 (15) -26%
Other 204 32 16%
Total assets $12,151 $(1,695) -14%

Liabilities and Shareholders' Equity
Debt $5,371 $(896) -17%
Derivative agreements 3 73 2433%
Accrued dividends payable 151 58 38%
Other 151 (51) -34%
Total liabilities 5,676 (816) -14%

Commitments and contingencies

Shareholders' equity:
Undesignated preferred stock,
$0.01 par value, 5.0 shares
authorized, 0.0 issued and
outstanding - - 0%
Common stock, $0.01 par value,
1,000.0 shares authorized,
214.0, 201.4 and 185.6 issued
and 207.2, 195.9 and 182.2
outstanding, respectively 2 - 0%
Capital in excess of par value 5,470 987 18%
Undistributed net realized earnings 167 59 35%
Net unrealized (depreciation)
appreciation of investments 836 (1,925) NM
Total shareholders' equity 6,475 (879) -14%
Total liabilities and
shareholders' equity $12,151 $(1,695) -14%

NM = Not meaningful

AMERICAN CAPITAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2008 and 2007
(in millions, except per share data)
(unaudited)

Three Months Three Months Ended
Ended June 30, 2008
June 30, Versus 2007
2008 2007 $ %
OPERATING INCOME:
Investing operating income (1) $231 $226 $5 2%
Asset management and advisory
operating income (2) 32 100 (68) -68%

Total operating income 263 326 (63) -19%

OPERATING EXPENSES:
Interest 48 73 (25) -34%
Salaries, benefits and stock-based
compensation 57 67 (10) -15%
General and administrative 20 22 (2) -9%
Total operating expenses 125 162 (37) -23%

OPERATING INCOME BEFORE INCOME TAXES 138 164 (26) -16%

Benefit (provision) for income taxes 7 (11) 18 NM

NET OPERATING INCOME 145 153 (8) -5%

Net realized gain on investments
Portfolio company investments 63 77 (14) -18%
Taxes on realized gains (3) - (3) 100%
Foreign Currency 1 - 1 100%
Derivative agreements (12) 9 (21) NM
Total net realized gain 49 86 (37) -43%

REALIZED EARNINGS 194 239 (45) -19%

Net unrealized (depreciation)
appreciation of investments
Portfolio company investments (336) 507 (843) NM
Foreign currency translation - 4 (4) -100%
Derivative agreements 72 38 34 89%
Total net unrealized (depreciation)
appreciation (264) 549 (813) NM

NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
("EARNINGS") $(70) $788 $(858) NM

NET OPERATING INCOME PER COMMON SHARE*:
Basic $0.71 $0.93 $(0.22) -24%
Diluted $0.71 $0.91 $(0.20) -22%

REALIZED EARNINGS PER COMMON SHARE*:
Basic $0.95 $1.45 $(0.50) -34%
Diluted $0.95 $1.42 $(0.47) -33%

EARNINGS PER COMMON SHARE*:
Basic $(0.34) $4.77 $(5.11) NM
Diluted $(0.34) $4.68 $(5.02) NM

WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic 204.4 165.1 39.3 24%
Diluted 204.4 168.5 35.9 21%

DIVIDENDS DECLARED PER COMMON SHARE $1.03 $0.91 $0.12 13%

Six Months Ended
Six Months Ended June 30, 2008
June 30, Versus 2007
2008 2007 $ %
OPERATING INCOME:
Investing operating income (1) $486 $431 $55 13%
Asset management and advisory
operating income (2) 69 145 (76) -52%

Total operating income 555 576 (21) -4%

OPERATING EXPENSES:
Interest 111 135 (24) -18%
Salaries, benefits and stock-based
compensation 113 118 (5) -4%
General and administrative 43 47 (4) -9%
Total operating expenses 267 300 (33) -11%

OPERATING INCOME BEFORE INCOME TAXES 288 276 12 4%

Benefit (provision) for income taxes 8 (9) 17 189%

NET OPERATING INCOME 296 267 29 11%

Net realized gain on investments
Portfolio company investments 91 87 4 5%
Taxes on realized gains (4) - (4) 100%
Foreign Currency 6 - 6 100%
Derivative agreements (11) 12 (23) NM
Total net realized gain 82 99 (17) -17%

REALIZED EARNINGS 378 366 12 3%

Net unrealized (depreciation)
appreciation of investments
Portfolio company investments (1,333) 514 (1,847) NM
Foreign currency translation 73 11 62 564%
Derivative agreements (1) 31 (32) NM
Total net unrealized
(depreciation) appreciation (1,261) 556 (1,817) NM

NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
("EARNINGS") $(883) $922 $(1,805) NM

NET OPERATING INCOME PER COMMON SHARE*:
Basic $1.48 $1.68 $(0.20) -12%
Diluted $1.48 $1.64 $(0.16) -10%

REALIZED EARNINGS PER COMMON SHARE*:
Basic $1.89 $2.30 $(0.41) -18%
Diluted $1.89 $2.25 $(0.36) -16%

EARNINGS PER COMMON SHARE*:
Basic $(4.42) $5.80 $(10.22) NM
Diluted $(4.42) $5.68 $(10.10) NM

WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Basic 199.8 158.9 40.9 26%
Diluted 199.8 162.4 37.4 23%

DIVIDENDS DECLARED PER COMMON SHARE $2.04 $1.80 $0.24 13%

NM = Not meaningful.

* May not recalculate due to rounding.

(1) The investing operating income consists of interest, dividends,
prepayment fees and other fee income.
(2) The asset management and advisory operating income consists primarily
of asset management fees and reimbursements, dividends from portfolio company
fund managers, transaction structuring fees, equity and loan financing fees,
portfolio company management and administrative fees and other fee income.

AMERICAN CAPITAL, LTD.
OTHER FINANCIAL INFORMATION
Three Months Ended June 30, 2008, March 31, 2008 and June 30, 2007
(in millions, except per share data)
(unaudited)

Q2 2008 Versus
Q2 Q1 Q1 2008
2008 2008 $ %

Assets Under Management:
American Capital Assets at Fair
Value(1) $10,456 $10,219 $237 2%
Externally Managed Assets at Fair
Value(2) 7,491 4,814 2,677 56%
Total $17,947 $15,033 $2,914 19%

Capital Resources Under Management:
American Capital Assets at Fair
Value plus Available Capital
Resources(1) $12,045 $12,412 $(367) -3%
Externally Managed Assets at Fair
Value plus Available Capital
Resources(2) 7,934 5,804 2,130 37%
Total $19,979 $18,216 $1,763 10%

New Investments:
Senior Debt $111 $510 $(399) -78%
Subordinated Debt 475 113 362 320%
Preferred Equity 82 115 (33) -29%
Common Equity 150 123 27 22%
Structured Products 100 48 52 108%
Total $918 $909 $9 1%

Investments in Managed Funds $125 $400 $(275) -69%
Financing for Private Equity
Buyouts 109 - 109 100%
Direct Investments 50 113 (63) -56%
American Capital Sponsored
Buyouts - 303 (303) -100%
CMBS Investments 89 48 41 85%
CLO/CDO Investments 11 - 11 100%
Add-on Financing for Growth 343 13 330 NM
Add-on Financing for
Recapitalizations 99 2 97 NM
Add-on Financing for Acquisitions 66 - 66 100%
Add-on Financing for Working
Capital in Distressed Situations 26 30 (4) -13%
Total $918 $909 $9 1%

Realizations:
Scheduled Principal Amortization $28 $17 $11 65%
Senior Loan Syndications 21 274 (253) -92%
Principal Prepayments 265 240 25 10%
Payment of Accrued Payment-in-
kind Interest and Dividends and
Original Issue Discount 16 20 (4) -20%
Sale of Equity Investments 149 380 (231) -61%
Total $479 $931 $(452) -49%

Appreciation, Depreciation, Gains
and Losses:
Gross Realized Gains $102 $51 $51 100%
Gross Realized Losses (39) (23) (16) -70%
Portfolio Net Realized Gains 63 28 35 125%
Taxes on Realized Gains (3) (1) (2) -200%
Foreign Currency 1 5 (4) -80%
Interest Rate Derivatives (12) 1 (13) NM
Net Realized Gains 49 33 16 48%

Gross Unrealized Appreciation at
55, 30 and 50 Portfolio Companies 228 137 91 66%
Gross Unrealized Depreciation at
81, 113 and 41 Portfolio Companies (497) (1,088) 591 -54%
Current Portfolio Net Unrealized
(Depreciation) Appreciation (269) (951) 682 -72%
Net Depreciation From the
Recognition of Net Realized Gains (67) (46) (21) 46%
Net Unrealized Appreciation for
Foreign Currency Translation - 73 (73) -100%
Interest Rate Derivatives, net 72 (73) 145 NM
Net Unrealized (Depreciation)
Appreciation (264) (997) 733 -74%

Net Gains, Losses, Appreciation
and Depreciation $(215) $(964) $749 -78%

Other Financial Data:
Net Asset Value per Share $27.01 $28.16 $(1.15) -4%
Financial Liabilities at Cost $4,475 $4,050 $425 10%
Financial Liabilities at Fair
Value $4,153 $3,875 $278 7%
Market Capitalization $4,925 $6,937 $(2,012) -29%
Total Enterprise Value $9,137 $10,978 $(1,841) -17%
Credit Quality:
Weighted Average Effective
Interest Rate on Debt
Investments at Period End(3) 11.2% 11.3%
Loans on Non-Accrual at Face $481 $375 $106 28%
Loans on Non-Accrual at Fair Value $116 $80 $36 45%
Past Due Loans at Face $42 $106 $(64) -60%
Past Due and Non-Accrual Loans at
Face as a Percentage of Total Loans 8.6% 8.2%
Non-Accrual Loans at Fair Value
as a Percentage of Total Loans 2.1% 1.5%
Number of Portfolio Companies on
Non-Accrual and Past Due 24 24
Debt to Equity Conversions at Cost $30 $40 $(10) -25%
Return on Equity:
LTM Net Operating Income Return
on Average Equity at Cost 10.0% 10.9%
LTM Realized Earnings Return on
Average Equity at Cost 13.2% 15.0%
LTM Earnings Return on Average
Equity -17.9% -4.1%
Current Quarter Net Operating
Income Return on Average Equity
at Cost Annualized 8.8% 9.4%
Current Quarter Realized Earnings
Return on Average Equity at Cost
Annualized 11.8% 11.5%
Current Quarter Earnings Return
on Average Equity Annualized -4.9% -53.5%
Dividends:
Dividend Coverage (Realized
Earnings per Basic
Share/Dividend per Share) 0.92x 0.93x
Dividend Payout Ratio (Dividend
per Share/Realized Earnings per
Basic Share) 1.08x 1.07x
LTM Dividend Coverage (Realized
Earnings per Basic
Share/Dividend per Share) 1.07x 1.23x
LTM Dividend Payout Ratio
(Dividend per Share/Realized
Earnings per Basic Share) 0.94x 0.81x
Dividends Declared $209 $196 $13 7%

Q2 Q2 2008 Versus Q2 2007
2007 $ %

Assets Under Management:
American Capital Assets at Fair
Value(1) $12,151 (1,695) -14%
Externally Managed Assets at Fair
Value(2) 3,891 3,600 93%
Total $16,042 $1,905 12%

Capital Resources Under Management:
American Capital Assets at Fair
Value plus Available Capital
Resources(1) $12,653 (608) -5%
Externally Managed Assets at Fair
Value plus Available Capital
Resources(2) 4,137 3,797 92%
Total $16,790 $3,189 19%

New Investments:
Senior Debt $1,989 $(1,878) -94%
Subordinated Debt 451 24 5%
Preferred Equity 493 (411) -83%
Common Equity 381 (231) -61%
Structured Products 181 (81) -45%
Total $3,495 $(2,577) -74%

Investments in Managed Funds $242 $(117) -48%
Financing for Private Equity
Buyouts 804 (695) -86%
Direct Investments 378 (328) -87%
American Capital Sponsored
Buyouts 1,458 (1,458) -100%
CMBS Investments 126 (37) -29%
CLO/CDO Investments 55 (44) -80%
Add-on Financing for Growth 10 333 NM
Add-on Financing for
Recapitalizations 202 (103) -51%
Add-on Financing for Acquisitions 205 (139) -68%
Add-on Financing for Working
Capital in Distressed Situations 15 11 73%
Total $3,495 $(2,577) -74%

Realizations:
Scheduled Principal Amortization $18 $10 56%
Senior Loan Syndications 226 (205) -91%
Principal Prepayments 524 (259) -49%
Payment of Accrued Payment-in-
kind Interest and Dividends and
Original Issue Discount 31 (15) -48%
Sale of Equity Investments 185 (36) -19%
Total $984 $(505) -51%

Appreciation, Depreciation, Gains
and Losses:
Gross Realized Gains $108 $(6) -6%
Gross Realized Losses (31) (8) -26%
Portfolio Net Realized Gains 77 (14) -18%
Taxes on Realized Gains - (3) 100%
Foreign Currency - 1 100%
Interest Rate Derivatives 9 (21) NM
Net Realized Gains 86 (37) -43%

Gross Unrealized Appreciation at
55, 30 and 50 Portfolio Companies 698 (470) -67%
Gross Unrealized Depreciation at
81, 113 and 41 Portfolio Companies (170) (327) -192%
Current Portfolio Net
Unrealized (Depreciation)
Appreciation 528 (797) NM
Net Depreciation From the
Recognition of Net Realized Gains (21) (46) -219%
Net Unrealized Appreciation for
Foreign Currency Translation 4 (4) -100%
Interest Rate Derivatives, net 38 34 89%
Net Unrealized (Depreciation)
Appreciation 549 (813) NM

Net Gains, Losses,
Appreciation and Depreciation $635 $(850) NM

Other Financial Data:
Net Asset Value per Share $35.54 $(8.53) -24%
Financial Liabilities at Cost $5,371 $(896) -17%
Financial Liabilities at Fair Value NA NA NA
Market Capitalization $7,747 $(2,822) -36%
Total Enterprise Value $12,946 $(3,809) -29%
Credit Quality:
Weighted Average Effective
Interest Rate on Debt
Investments at Period End(3) 11.7%
Loans on Non-Accrual at Face $232 $249 107%
Loans on Non-Accrual at Fair Value $56 $60 107%
Past Due Loans at Face $27 $15 56%
Past Due and Non-Accrual Loans at
Face as a Percentage of Total Loans 4.1%
Non-Accrual Loans at Fair Value
as a Percentage of Total Loans 0.9%
Number of Portfolio Companies on
Non-Accrual and Past Due 19
Debt to Equity Conversions at Cost $-
Return on Equity:
LTM Net Operating Income Return
on Average Equity at Cost 11.3%
LTM Realized Earnings Return on
Average Equity at Cost 16.0%
LTM Earnings Return on Average
Equity 29.1%
Current Quarter Net Operating
Income Return on Average Equity
at Cost Annualized 12.1%
Current Quarter Realized Earnings
Return on Average Equity at Cost
Annualized 18.8%
Current Quarter Earnings Return
on Average Equity Annualized 56.0%
Dividends:
Dividend Coverage (Realized
Earnings per Basic
Share/Dividend per Share) 1.59x
Dividend Payout Ratio (Dividend
per Share/Realized Earnings per
Basic Share) 0.63x
LTM Dividend Coverage (Realized
Earnings per Basic
Share/Dividend per Share) 1.30x
LTM Dividend Payout Ratio
(Dividend per Share/Realized
Earnings per Basic Share) 0.77x
Dividends Declared $151 $58 38%

NM = Not meaningful
NA = Not available

(1) Includes American Capital's investment in its externally managed
funds.
(2) Includes European Capital, American Capital Agency Corp., American
Capital Equity I, American Capital Equity II, ACAS CLO-1 and ACAS CRE CDO
2007-1. (3) Includes private finance and CMBS portfolio.

AMERICAN CAPITAL, LTD.
OTHER FINANCIAL INFORMATION
As of June 30, 2008
(in millions)
(unaudited)

The following table summarizes the current GAAP cost basis and fair value
of our investments as of June 30, 2008 compared to the realizable value, which
is amount that we currently anticipate realizing on settlement or maturity of
these investments, or realizable value:
Difference
Between
Realizable
Value
GAAP Fair Realizable and GAAP
Asset Class GAAP Cost Basis Value Value Fair Value

Private Finance $8,195 $7,588 $7,755 $167
Structured Products 962 463 939 476
Managed Funds 1,454 1,312 1,312 -
American Capital, LLC 69 323 323 -
Derivatives, net 1 (75) (79) (4)
Total $10,681 $9,611 $10,250 $639

USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP, this press
release includes realizable value, a non-GAAP financial measure which
management uses in its internal analysis of results, and believes may be
informative to investors gauging the quality of the Company's assets and
financial performance from a long-term perspective, identifying trends in its
results and providing meaningful period-to-period comparisons. Realizable
value is defined as the future value that American Capital currently
anticipates realizing on the settlement or maturity of its investments. It
does not represent current fair value or net present value. American Capital
believes that this non-GAAP financial measure provides information useful to
investors because the Company generally intends to hold its assets to
settlement or maturity, and there may be material differences between the GAAP
fair values of its investments and the amounts the Company expects to realize
on settlement or maturity. This is primarily because the current lack of
liquidity in the financial markets has caused investment spreads between the
cost of funds and investment income to widen significantly on investments,
resulting in current fair values under Statement of Financial Accounting
Standards No. 157 that are materially lower than what the Company currently
anticipates realizing on settlement or maturity. American Capital believes
that providing investors with realizable value in addition to the related GAAP
fair value gives investors greater transparency to the information used by
management in its financial operational decision-making. Although American
Capital believes that this non-GAAP financial measure enhances investors'
understanding of its business and performance, realizable value should not be
considered as an alternative to GAAP basis financial measures. A
reconciliation of non-GAAP realizable value to GAAP fair value is set forth
above.

Static Pool
Portfolio Statistics(1)
($ in millions, unaudited)

Pre-1999 1999 2000 2001 2002 2003 2004
Internal Rate of
Return-All
Investments(2) 7.2% 9.2% 8.0% 18.7% 8.9% 21.9% 16.1%
Internal Rate of
Return-All
Investments(3) 7.2% 9.2% 8.0% 18.7% 8.9% 21.8% 15.6%
Internal Rate of
Return-Equity
Investments
Only(3)(4)(5) 21.3% -18.1% 12.1% 46.8% 15.3% 31.1% 28.5%
Original Investments
and Commitments $400 $380 $285 $375 $958 $1,432 $2,265
Total Exits and
Prepayments of
Original Investments $330 $297 $285 $286 $701 $1,083 $1,593
Total Interest,
Dividends and Fees
Collected $155 $145 $105 $147 $299 $357 $512
Total Net Realized
(Loss) Gain on
Investments $(67) $(48) $(39) $25 $(68) $141 $158
Current Cost of
Investments $69 $29 $- $58 $237 $306 $661
Current Fair Value of
Investments $55 $18 $- $17 $188 $371 $534
Current Fair Value of
Investments as a % of
Total Investments at
Fair Value 0.6% 0.2% 0% 0.2% 1.9% 3.8% 5.5%

Net Unrealized
Appreciation/
(Depreciation) $(14) $(11) $- $(41) $(49) $65 $(127)
Non-Accruing Loans at
Face $14 $6 $- $25 $51 $14 $63
Non-Accruing Loans at
Fair Value $5 $2 $- $7 $10 $- $17
Equity Interest at
Fair Value(4) $36 $10 $- $3 $41 $154 $102
Debt to EBITDA
(6)(7)(8) NM 2.2 - 10.0 5.8 4.9 6.1
Interest Coverage
(6)(8) NM 4.4 - 1.6 1.4 1.6 1.6
Debt Service Coverage
(6)(8) NM 3.7 - 1.6 1.1 1.5 1.2
Average Age of
Companies(8) 67 yrs 59 yrs - 20 yrs 43 yrs 39 yrs 38 yrs
Diluted Ownership
Percentage(4) 54% 54% 0% 50% 36% 52% 31%
Average Sales(8)(9) $199 $25 $- $91 $67 $179 $109
Average EBITDA(8)(10) $12 $4 $- $1 $13 $33 $22
Average EBITDA Margin 6.0% 16.0% 0% 1.1% 19.4% 18.4% 20.2%
Total Sales(8)(9) $318 $33 $- $330 $359 $1,350 $1,768
Total EBITDA(8)(10) $15 $5 $- $8 $47 $189 $287
% of Senior Loans
(8)(11) 96% 0% 0% 32% 66% 61% 59%
% of Loans with
Lien(8)(11) 100% 100% 0% 100% 100% 100% 92%

Static Pool
Pre-1999
- 2008 2003 - 2008
2005 2006 2007 2008 Aggregate Aggregate
Internal Rate of
Return-All
Investments(2) 16.8% 15.4% 5.5% -21.7% 13.4% 15.1%
Internal Rate of
Return-All
Investments(3) 16.8% 13.8% -7.4% -28.2% 11.6% 12.4%
Internal Rate of
Return-Equity
Investments
Only(3)(4)(5) 20.5% 21.7% 4.5% -67.5% 18.9% 20.1%
Original Investments
and Commitments $4,272 $5,084 $7,189 $653 $23,293 $20,895
Total Exits and
Prepayments of
Original
Investments $1,911 $2,436 $1,810 $- $10,732 $8,833
Total Interest,
Dividends and Fees
Collected $765 $651 $446 $27 $3,609 $2,758
Total Net Realized
(Loss) Gain on
Investments $315 $87 $- $- $504 $701
Current Cost of
Investments $2,298 $2,313 $4,131 $578 $10,680 $10,287
Current Fair Value
of Investments $2,435 $2,241 $3,325 $502 $9,686 $9,408
Current Fair Value
of Investments
as a % of Total
Investments at
Fair Value 25.2% 23.1% 34.3% 5.2% 100.0% 97.1%
Net Unrealized
Appreciation/
(Depreciation) $137 $(72) $(806) $(76) $(994) $(879)
Non-Accruing Loans
at Face $72 $54 $182 $- $481 $385
Non-Accruing Loans at
Fair Value $15 $35 $25 $- $116 $92
Equity Interest at
Fair Value(4) $1,429 $741 $1,084 $190 $3,790 $3,700
Debt to EBITDA
(6)(7)(8) 4.6 5.6 6.9 5.7 6.0 6.0
Interest Coverage
(6)(8) 2.2 1.9 1.7 1.7 1.8 1.8
Debt Service
Coverage(6)(8) 1.6 1.6 1.7 1.6 1.6 1.6
Average Age of
Companies(8) 29 yrs 28 yrs 27 yrs 19 yrs 29 yrs 29 yrs
Diluted Ownership
Percentage(4) 56% 33% 47% 59% 46% 46%
Average Sales(8)(9) $111 $138 $202 $97 $155 $157
Average EBITDA(8)(10) $24 $31 $37 $25 $31 $32
Average EBITDA
Margin 21.6% 22.5% 18.3% 25.8% 20.0% 20.4%
Total Sales(8)(9) $2,859 $4,872 $9,257 $726 $21,872 $20,832
Total EBITDA(8)(10) $420 $911 $1,626 $176 $3,684 $3,609
% of Senior Loans
(8)(11) 64% 39% 66% 39% 56% 56%
% of Loans with
Lien(8)(11) 91% 82% 95% 76% 90% 90%

(1) Static pool classification is based on the year the initial
investment was made. Subsequent add-on investments are included in the static
pool year of the original investment. Investments in government securities and
interest rate derivative agreements are excluded.
(2) Assumes investments are exited at realizable based on anticipated
proceeds to be received upon settlement or maturity.
(3) Assumes investments are exited at current GAAP fair value.
(4) Excludes investments in commercial mortgage backed securities and
collateralized debt obligations.
(5) Excludes equity investments that are the result of conversions of
debt and warrants received with the issuance of debt.
(6) These amounts do not include investments in which the Company owns
only equity.
(7) For portfolio companies with a nominal EBITDA amount, the portfolio
company's maximum debt leverage is limited to 15 times EBITDA.
(8) Excludes investments in commercial mortgage backed securities,
collateralized debt obligations, ACAS CRE CDO 2007-1, Ltd., European Capital
Limited and American Capital Agency Corp.
(9) Sales of the most recent twelve months, or when appropriate, the
forecasted twelve months.
(10) EBITDA of the most recent twelve months, or when appropriate, the
forecasted twelve months.
(11) As a percentage of our total debt investments.

(12) Excludes investments in American Capital, LLC and our managed funds.

Additional Dividend Information
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 American Capital's most recent report on Form 10-K for more
information about its tax status. Taxable income differs from GAAP income
because of both temporary and permanent differences in income and expense
recognition. For example, changes in appreciation and depreciation of
portfolio investments have no impact on American Capital's taxable income.
American Capital reports the anticipated tax characteristics of each dividend
when announced, while the actual tax characteristics of each year's dividends
are reported annually to shareholders on Form 1099DIV. The net long term
capital gains in the 2007 tax year totaling $142 million were distributed to
shareholders as a part of the second quarter 2008 dividend. The Company
anticipates the 2008 year-to-date declared dividends of $3.09 per share to be
comprised of $0.68 per share of long-term capital gains and $2.41 per share of
ordinary taxable income. Dividends of long-term capital gains qualify for the
15% capital gains tax rate.
DIVIDEND REINVESTMENT PLAN ("DRIP")
In appreciation of the loyal support of our shareholders, American
Capital's Dividend Reinvestment Plan grants a 2% discount to the market price
for reinvested dividends when the market price per share equals or exceeds the
NAV per share by at least 110%. Please see the prospectus for additional
information. Brokerages that have confirmed participation in the DRIP
include, but are not limited to:
A.G. Edwards
Citigroup-Smith Barney
Fidelity
Merrill Lynch
Morgan Keegan
RBC Dain Rauscher
UBS Financial
Wachovia Securities
Wedbush Morgan

For more information regarding the DRIP, please visit our website or call
our Investor Relations Department at (301) 951-5917.

American Capital has declared $29.25 of dividends since its August 1997
IPO at $15.00 per share. A summary of American Capital's dividend history and
forecast follows.

% Change of Cumulative
Dividend Over Dividends
Year/Quarter Dividend Prior Year Declared

2008 Forecast $4.19 13%
Q4 Forecast $1.10 10%
Q3 Declared $1.05 14% $29.25
Q2 Paid $1.03 13% $28.20
Q1 Paid $1.01 13% $27.17

2007 $3.72 12% $26.16
2006 $3.33 9% $22.44
2005 $3.08 6% $19.11
2004 $2.91 4% $16.03
2003 $2.79 9% $13.12
2002 $2.57 12% $10.33
2001 $2.30 6% $7.76
2000 $2.17 25% $5.46
1999 $1.74 30% $3.29
1998 $1.34 N/A $1.55
Q4 1997 $0.21 $0.21

SHAREHOLDER CALL
American Capital invites shareholders, prospective shareholders and
analysts to attend the American Capital Shareholder Call on Wednesday, August
6, 2008 at 11:00 am ET. The dial in number will be (888) 428-4480.
International callers should dial +1 (651) 291-5254. Please advise the
operator you are dialing in for the American Capital Shareholder Call.
Shareholder presentations, webcasts and audio recordings can be found in the
Investor Relations section of our website at www.ACAS.com.
BEFORE THE CALL:
REVIEW THE SLIDE PRESENTATION IN ADVANCE OF THE SHAREHOLDER CALL
The quarterly shareholder presentation includes a slide presentation to
accompany the call that participants may download and print prior to the call.
You may wish to take the time to review the slides in advance of the
Shareholder Call.
DURING THE CALL:
VIEW STREAMING SLIDE PRESENTATION DURING THE SHAREHOLDER CALL
During the Shareholder Call you may watch and listen to the webcast or
listen to the Shareholder Call by phone and step through the slides at your
own pace.
AFTER THE CALL:
LISTEN AND VIEW AUDIO SLIDE PRESENTATION AFTER THE CALL
The audio of the Shareholder Call combined with the slide presentation
will be made available on our website after the call on August 6, 2008. An
archive of our audio and slide presentations of our quarterly shareholder
calls can be found in the Investor Relations section of our website at
www.ACAS.com.
AUDIO ONLY PRESENTATION AVAILABLE AFTER THE SHAREHOLDER CALL:
There will be a phone recording available from 3:00 pm ET Wednesday,
August 6, 2008 until 11:59 pm ET Wednesday, August 20, 2008. If you are
interested in hearing the recording of the presentation, please dial (800)
475-6701. International callers may dial +1 (320) 365-3844. The access code
for both domestic and international callers is 952932.
For further information or questions, please do not hesitate to call our
Investor Relations Department at (301) 951-5917.
ABOUT AMERICAN CAPITAL
American Capital, with $20 billion in capital resources under management,
is the only private equity fund and the largest alternative asset management
company in the S&P 500. American Capital, both directly and through its
global asset management business, originates, underwrites and manages
investments in private equity, leveraged finance, real estate and structured
products. American Capital and its affiliates invest from $5 million to $800
million per company in North America and 5 million euros to 500 million euros
per company in Europe. American Capital was founded in 1986 and currently has
12 offices in the U.S. and Europe.
As of June 30, 2008, American Capital shareholders have enjoyed a total
return of 328% since the Company's IPO -- an annualized return of 14%,
assuming reinvestment of dividends. American Capital has paid a total of $2.5
billion in dividends and paid or declared $29.25 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 www.AmericanCapital.com or
www.EuropeanCapital.com.
Persons considering an investment in American Capital should consider the
investment objectives, risks and charges and expenses of the Company carefully
before investing. Such information and other information about the Company is
available in the Company's annual report on Form 10-K, quarterly reports on
Form 10-Q and in the prospectuses the Company issues from time to time in
connection with its offering of securities. Such materials are filed with the
Securities and Exchange Commission ("SEC") and copies are available on the
SEC's website, www.sec.gov. Prospective investors should read such materials
carefully before investing.
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.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements. Forward-looking
statements are based on estimates, projections, beliefs and assumptions of
management of the Company at the time of such statements and are not
guarantees of future performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions. Actual results
could differ materially from those projected in these forward-looking
statements due to a variety of factors, including, without limitation, 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. Certain factors
that could cause actual results to differ materially from those contained in
the forward-looking statements are included in the "Risk Factors" section of
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2007 and the Company's subsequent periodic filings. Copies are available
on the SEC's website at www.sec.gov. Forward-looking statements are made as
of the date of this press release, and are subject to change without notice.
We disclaim any obligation to update or revise any forward-looking statements
based on the occurrence of future events, the receipt of new information, or
otherwise.
SOURCE American Capital, Ltd.

John Erickson, Chief Financial Officer, +1-301-951-6122, or Amanda
Cuthbertson, Director, Investor Relations, +1-301-951-6122, or Pete Deoudes,
Director, Equity Capital Markets, +1-301-951-6122, all of American Capital,
Ltd.