NEWS

First Floor, Dorey Court
Admiral Park
St. Peter Port, Guernsey
GY1 6HJ
Info@EuropeanCapital.com
www.EuropeanCapital.com

FOR IMMEDIATE RELEASE:
31 August 2011

Contact:
European Capital Financial Services Limited      Tel: + 44 20 7539 7000
Ira Wagner, President
Juan Carlos Morales Cortes, Director
Richard Smith, Finance Director

INTERIM MANAGEMENT STATEMENT: EUROPEAN CAPITAL LIMITED REPORTS FIRST HALF 2011 NET OPERATING INCOME OF EURO 39 MILLION AND NET EARNINGS OF EURO 86 MILLION

ST. PETER PORT, Guernsey, Aug. 31, 2011 /PRNewswire/ -- European Capital Limited ("European Capital" or the "Company") today issues an Interim Management Statement announcing net operating income ("NOI") for the first half ended 30 June 2011 of € 39 million. Net earnings for the half year were € 86 million. As at 30 June 2011, net asset value ("NAV") was € 715 million, a 14% or € 86 million increase from the 31 December 2010 NAV of € 629 million.

H11 2011 FINANCIAL SUMMARY

• € 39 million
  •  NOI Includes euro 17 million of non-recurring income relating to the removal of investments from non-accrual status
• € 98 million net unrealised appreciation on investments
  • € 102 million increase over the first half of 2010
• € 86 million net earnings
  • € 26 million improvement over the first half of 2010
  • 25% annualised return on average equity ("ROE")
• € 114 million of cash proceeds from realisations
• € 288 million new senior notes issued
  • Existing debt refinanced with no required amortisation until 2022
• € 715 million NAV
  • € 86 million, or 14% increase over Q4 2010
    

“Our book value grew by euro 86 million for the first half to euro 715 million, delivering a 25% annualised return on equity for the half year," said Malon Wilkus, Chairman and Chief Executive Officer.  "We have now experienced seven quarters out of the last eight of unrealised appreciation on our investments.  We believe the performance of the portfolio will continue to improve if the European economy continues to expand.  We remain focused on improving our balance sheet, growing portfolio companies and originating high quality investment opportunities.”

PORTFOLIO VALUATION

For the half year ended 30 June 2011, net unrealised appreciation of investments totalled euro 98 million.  The primary components of the net unrealised appreciation were:

• € 69 million net appreciation from European Capital's private finance portfolio primarily as a result of improved portfolio company performance
• € 18 million of reversals of prior unrealised depreciation associated with realisation on portfolio investments.

“During the half year, we followed up on our success in 2010 and continued to strengthen our balance sheet," said Ira Wagner, President.  "We have improved our asset coverage to 267%.  We continued to see liquidity in the portfolio during the half year and are focused on maximising the value of our investments to generate shareholder value."

PORTFOLIO LIQUIDITY AND PERFORMANCE

In the first half of 2011, euro 114 million of cash proceeds were received from realisations of portfolio investments.  The Company made euro 16 million in new committed investments in the first half of the year to support the current portfolio.  The weighted average effective interest rate on the Company's debt investments was 8.9% for the half year.

As of 30 June 2011, loans with a cost of euro 200 million were on non-accrual compared to euro 301 million as of 31 December 2011.  These loans as of 30 June 2011 had a fair value of euro 65 million and represent 7.8% of total loans at fair value.

"The credit quality of our portfolio continues to improve this half year," noted Juan Carlos Morales Cortes, Director.  "In June 2011, we completed the issue of our latest securitisation which is a testament to the credit worthiness of our assets and provides us flexibility for originating new transactions.  This was a landmark transaction as it is the first European securitisation that is compliant with new regulatory requirements."

DEBT REFINANCING

In the second quarter of 2011, European Capital's consolidated subsidiary ECAS 2011-1 Loan B.V. ("ECAS 2011-1") sold and issued euro 288 million of AAA-rated secured floating rate notes, backed by assets with a par value of euro 865 million originated by other European Capital consolidated subsidiaries.  The notes were rated by Standard & Poor's and comply with recent regulations affecting securitisations.  The notes have a coupon payment of Euribor plus 320 basis points, payable semi-annually, and are due in 2024.  The proceeds of the sale were used to refinance two existing debt obligations of European Capital consolidated subsidiaries, including a secured senior multicurrency term loan facility and an issuance of secured senior notes, as well as to make new investments.

"This refinancing provides European Capital with certainty in its borrowings," said Nathalie Faure Beaulieu, Managing Director.  "It also provides us with liquidity to invest in new opportunities.  European Capital and its affiliates will consider senior and mezzanine debt investment opportunities from 10 million to 40 million in either euros or sterling and up to 100 million for One Stop Buyouts®."

"With offices in Paris, London, five offices in the US and one in Hong Kong, we are able to consider companies with financial needs spanning the globe," added Tristan Parisot, Managing Director.  "We understand the need for speed and so we have one of the largest underwriting capabilities in the industry, and we can fund senior debt, mezzanine debt and equity."

      
IMPORTANT DISCLOSURES

NAV

Any valuation information relating to the portfolio companies of European Capital stated or referred to in this release has been determined by the Board of European Capital in good faith, on a basis consistent with past practice and for the purposes of complying with its reporting obligations under applicable laws.

Forward-looking statements

This document may contain "forward-looking statements."  By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.  Many of these risks and uncertainties relate to factors beyond European Capital's control or which cannot be estimated precisely.  These factors include, but are not limited to, uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, and changes in the conditions of the industries in which European Capital has made investments.  Actual outcomes and results may therefore differ materially from any outcomes or results expressed or implied by any such forward-looking statements.

Performance data quoted above represents past performance of European Capital.  Past performance does not guarantee future results and the investment return and principal value of an investment in European Capital will likely fluctuate.  Additionally, European Capital's current performance may be lower or higher than the performance data quoted above.

Basis of preparation

This interim management statement has been prepared to provide further transparent information about European Capital and should not be relied on by any person for any other purpose.  Certain financial information in this interim management statement is based on unaudited management accounts.  Nothing in this document is intended to be, or should be construed as, a profit forecast.

ABOUT EUROPEAN CAPITAL
European Capital is an investment company for pan-European equity, mezzanine and senior debt investments with euro 1.1 billion in assets under management.  European Capital is wholly-owned affiliate of American Capital, Ltd (“American Capital”).  It is managed by European Capital Financial Services (Guernsey) Limited (“ECFSG” or the “Investment Manager”), a wholly-owned affiliate of American Capital.  The Investment Manager has offices in London and Paris.  As of 31 December 2010 the Investment Manager had 5 investment teams with 18 investment professionals and employed 28 support staff.  European Capital and its affiliates will consider mezzanine debt investment opportunities from 10 million to 40 million in either euros or sterling and up to 100 million for One-Stop Buyouts®.  For further information, please refer to http://www.EuropeanCapital.com/.

ABOUT AMERICAN CAPITAL
American Capital is a publicly traded private equity firm and global asset manager.  American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products.  Founded in 1986, American Capital has $23 billion in assets under management and eight offices in the U.S., Europe and Asia.  American Capital and its affiliates will consider investment opportunities from $10 million to $300 million.  For further information, please refer to http://www.AmericanCapital.com/.