Allied Capital Corporation (Form: 8-K)

March 6, 2006 – Washington, DC – Allied Capital Corporation (NYSE: ALD) today announced 2005 financial results.

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The total of net investment income and net realized gains was $2.99 per share, or $410.7 million

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Regular quarterly dividends of $2.30 per share; an extra cash dividend of $0.03 per share was paid for 2005

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New investments totaled $1.68 billion for the year, including $347.5 million in the fourth quarter

Operating Results
For the year ended December 31, 2005, net investment income was $137.2 million or $1.00 per share, as compared to $201.0 million or $1.52 per share for the year ended December 31, 2004. Net realized gains were $273.5 million or $1.99 per share for the year ended December 31, 2005, as compared to $117.2 million or $0.88 per share for the year ended December 31, 2004. The sum of net investment income and net realized gains was $410.7 million or $2.99 per share for the year ended December 31, 2005, as compared to $318.2 million or $2.40 per share for the year ended December 31, 2004.

Net income for the year ended December 31, 2005, was $872.8 million or $6.36 per share, including net unrealized appreciation of $462.1 million or $3.37 per share. Net income for the year ended December 31, 2004, was $249.5 million or $1.88 per share, after net unrealized depreciation of $68.7 million or $0.52 per share. Net income can vary substantially from year to year primarily due to changes in unrealized appreciation or depreciation and the recognition of realized gains or losses, which vary from year to year.

For the three months ended December 31, 2005, net investment income was $37.1 million or $0.27 per share, as compared to $54.7 million or $0.40 per share for the three months ended December 31, 2004. Net realized losses were $15.0 million or $0.11 per share for the three months ended December 31, 2005, as compared to $58.5 million or $0.43 per share for the three months ended December 31, 2004. The sum of net investment income and net realized losses was $ 22.1 million or $0.16 per share for the three months ended December 31, 2005, as compared to a net loss of $3.8 million or $0.03 per share for the three months ended December 31, 2004.

Net income for the three months ended December 31, 2005, was $328.1 million or $2.36 per share, including net unrealized appreciation of $306.1 million or $2.20 per share. Net income for the three months ended December 31, 2004, was $47.8 million or $0.35 per share, including net unrealized appreciation of $51.7 million or $0.38 per share. Net income can vary substantially from quarter to quarter primarily due to changes in unrealized appreciation or depreciation and the recognition of realized gains or losses, which vary from quarter to quarter. As a result, quarterly comparisons of net income may not be meaningful.

For the year ended December 31, 2005, the Company invested a total of $1.68 billion. After total portfolio repayments and asset sales of $1.5 billion, including $718.1 million from the sale of the CMBS and CDO portfolio, and valuation and other changes during the year, the total portfolio was $3.6 billion at December 31, 2005. At December 31, 2005, the overall weighted average yield on the interest-bearing portfolio was 12.8%, as compared to 14.0% at December 31, 2004.
Shareholders’ equity was $2.6 billion at December 31, 2005, with a net asset value per share of $19.17 as compared to $2.0 billion or $14.87 per share at December 31, 2004.

Private Finance
The private finance portfolio totaled $3.5 billion at December 31, 2005. Loans and debt securities, which totaled $2.1 billion at December 31, 2005, had a weighted average yield of 13.0% as compared to 13.9% at December 31, 2004. Private finance investments funded totaled $330.3 million for the quarter. Significant new private finance investments during the fourth quarter of 2005 included:

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$51.1 million in financing to support a minority recapitalization of Network Hardware Resale, Inc., a provider of pre-owned networking equipment;

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$45.9 million to Callidus Capital Corporation pursuant to its existing credit facility;

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$31.9 million of financing to support the buyout of Promo Works, L.L.C., an in-store product sampling company;

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$20.4 million of financing to support the leveraged recapitalization of Universal Air Filter Company, a designer and manufacturer of custom electronics cooling air filters;

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$18.3 million in senior financing to Event Rentals, Inc., a party and special event rental company;

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$16.6 million to Mercury Air Centers, Inc., an operator of fixed base operations, to finance several acquisitions;

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$14.9 million in financing to Triview Investments, Inc. — $7.5 million to finance a recapitalization of Triax Holdings, LLC and $7.4 million in acquisition financing to Longview Cable & Data, LLC;

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$14.8 million in acquisition financing to Red Hawk Industries, a provider of electronic and physical security products, systems and services to financial institutions;

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$10.9 million to support the buyout of Transamerican Auto Parts, LLC, a retailer, wholesaler and manufacturer/supplier of parts and accessories for light trucks, Jeep vehicles and SUVs;

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$10.0 million to Business Loan Express, LLC, under a short-term revolving credit facility;

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$8.5 million in growth financing to S.B. Restaurant, Inc., an owner and operator of casual dining, full-service restaurants; and

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$7.2 million in financing to support a recapitalization of Geotrace Technologies, Inc., a provider of subsurface imaging solutions and sophisticated reservoir analysis to the oil and gas industry.

Portfolio Quality
Allied Capital employs a grading system to monitor the quality of its portfolio. Grade 1 is for those investments from which a capital gain is expected. Grade 2 is for investments performing in accordance with plan. Grade 3 is for investments that require closer monitoring; however, no loss of investment return or principal is expected. Grade 4 is for investments that are in workout and for which some loss of current investment return is expected, but no loss of principal is expected. Grade 5 is for investments that are in workout and for which some loss of principal is expected.

At December 31, 2005, Grade 1 investments totaled $1.6 billion, or 45.6% of the total portfolio at value; Grade 2 investments totaled $1.7 billion, or 48.0% of the total portfolio; Grade 3 investments totaled $149.1 million, or 4.1% of the total portfolio; Grade 4 investments totaled $26.5 million, or 0.7% of the total portfolio; and Grade 5 investments totaled $57.0 million, or 1.6% of the total portfolio.

Loans and debt securities over 90 days delinquent totaled $80.7 million at December 31, 2005, as compared to $132.6 million at December 31, 2004. Loans and debt securities not accruing interest totaled $155.8 million at December 31, 2005, as compared to $114.9 million at December 31, 2004. In general, the company does not accrue interest on loans or debt securities where there is doubt about interest collection or where the enterprise value of the portfolio company may not support further accrual. As a result loans or debt securities on non-accrual may be different than loans or debt securities that are over 90 days delinquent.

Liquidity and Capital Resources
At December 31, 2005, the company had cash and investments in money market securities of $53.3 million, a newly established liquidity portfolio totaling $200.3 million, outstanding long-term debt of $1.2 billion, and outstanding borrowings of $91.8 million on a revolving line of credit. At December 31, 2005, the company had a weighted average cost of debt of 6.5% and its regulatory asset coverage was 309%. The company is required to maintain regulatory asset coverage of at least 200%.

On January 31, 2006, the Company sold 3.0 million shares of its common stock for proceeds totaling $83.0 million, net of underwriting discounts and estimated offering expenses. The Company primarily used the net proceeds of the offering to reduce borrowings under its revolving line of credit and for general corporate purposes.

Quarterly Dividend of $0.59 Per Share Declared
As previously released on January 23, 2006, the Company declared its170th regular quarterly dividend of $0.59 per share for the first quarter of 2006. The dividend is payable as follows:

The Company’s dividend is paid from taxable income. The Board determines the dividend based on annual estimates of taxable income, which differ from book income due to changes in unrealized appreciation and depreciation and due to temporary and permanent differences in income and expense recognition.

Webcast/ Conference Call at 10:15 a.m. ET on March 6, 2006
The company will host a webcast/ conference call at 10:15 a.m. (Eastern Time) to discuss the results for the year. PLEASE VISIT THE PRESENTATIONS & REPORTS SECTION OF THE INVESTOR RESOURCES PORTION OF THE COMPANY’S WEBSITE FOR A SLIDE PRESENTATION THAT COMPLEMENTS TODAY’S CONFERENCE CALL.

All interested parties are welcome to attend the live webcast, which will be hosted through our web site at www.alliedcapital.com. Please visit the web site to test your connection before the call. You can also access the conference call by dialing (888) 689-4612 approximately 15 minutes prior to the call. International callers should dial (706) 645-0106. All callers should reference the passcode “Allied Capital”.

An archived replay of the event will be available through March 20, 2006 by calling (800) 642-1687 (international callers please dial (706) 645-9291). Please reference passcode “5023608”. An archived replay will also be available on our website. For complete information about the webcast / conference call and the replay, please visit our web site or call Allied Capital Investor Relations at (888) 818-5298.

About Allied Capital
Allied Capital Corporation, a leading business development company with total assets of more than $4 billion, has paid regular, quarterly cash dividends to shareholders since 1963. Allied Capital invests in the American entrepreneurial economy by providing capital to companies seeking a long-term financial partner and access to managerial resources often unavailable to smaller companies. Since its IPO in 1960, the Company has provided long-term debt and equity financing to thousands of middle market companies. In serving its shareholders, Allied Capital helps build middle market businesses and support American jobs. The Company’s private finance portfolio includes investments in over 100 companies that generate aggregate revenues of more than $10 billion and employ more than 85,000 people.

Headquartered in Washington, DC, Allied Capital offers shareholders the opportunity to participate in the private equity industry through an investment in the Company’s New York Stock Exchange-listed stock, which is traded under the symbol ALD. For more information, please visit www.alliedcapital.com, call Allied Capital investor relations toll-free at (888) 818-5298, or e-mail us at ir@alliedcapital.com. All media inquiries should be directed to Stan Collender of Financial Dynamics at (202) 434-0601.

Forward-Looking Statements
The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, and these factors are enumerated in Allied Capital’s filings with the Securities and Exchange Commission.


CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
	December 31,			December 31,
	2005			2004
	*(unaudited)*
ASSETS
Portfolio at value:
Private finance	$	3,479,290		$	2,302,086
Commercial real estate finance		127,065			711,325

Total portfolio at value		3,606,355			3,013,411
Liquidity portfolio		200,305			—
Investments in money market securities		21,967			-
Deposits of proceeds from sales of borrowed Treasury securities		17,666			38,226
Accrued interest and dividends receivable		60,366			79,489
Other assets		87,858			72,712
Cash		31,363			57,160
Total assets	$	4,025,880		$	3,260,998

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes payable and debentures	$	1,193,040		$	1,064,568
Revolving line of credit		91,750			112,000
Obligations to replenish borrowed Treasury securities		17,666			38,226
Accounts payable and other liabilities		102,878			66,426

Total liabilities		1,405,334			1,281,220
Shareholders’ equity:
Common stock		14			13
Additional paid-in capital		2,177,283			2,094,421
Common stock held in deferred compensation trust		(19,460	)		(13,503	)
Notes receivable from sale of common stock		(3,868	)		(5,470	)
Net unrealized appreciation (depreciation) on portfolio		354,325			(107,767	)
Undistributed (distributions in excess of) earnings		112,252			12,084

Total shareholders' equity		2,620,546			1,979,778

Total liabilities and shareholders' equity	$	4,025,880		$	3,260,998

Net asset value per common share	$	19.17		$	14.87
Common shares outstanding		136,697			133,099


CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)	Three Months Ended						Year Ended
	December 31,						December 31,
	2005			2004			2005		2004
	*(unaudited)*			*(unaudited)*			*(unaudited)*
Interest and related portfolio income
Interest and dividends	$	84,525		$	86,102		$	317,153	$	319,642
Loan prepayment premiums		1,615			1,292			6,250		5,502
Fees and other income		12,029			13,568			50,749		41,946

Total interest and related portfolio		98,169			100,962			374,152		367,090
income		—			—			—		—
Expenses
Interest		19,684			18,301			76,798		75,650
Employee		25,998			15,568			78,300		53,739
Administrative		11,335			9,614			70,267		34,686

Total operating expenses		57,017			43,483			225,365		164,075

Net investment income before income taxes		41,152			57,479			148,787		203,015
Income tax expense, including excise tax		4,079			2,801			11,561		2,057
Net investment income		37,073			54,678			137,226		200,958

Net realized and unrealized gains (losses)
Net realized gains (losses)		(14,999	)		(58,513	)		273,496		117,240
Net change in unrealized appreciation or		306,066			51,672			462,092		(68,712	)
depreciation		—			—			—		—
Total net gains (losses)		291,067			(6,841	)		735,588		48,528

Net increase in net assets resulting from operations	$	328,140		$	47,837		$	872,814	$	249,486

Diluted net investment income per common share	$	0.27		$	0.40		$	1.00	$	1.52
Diluted earnings per common share	$	2.36		$	0.35		$	6.36	$	1.88
Weighted average common shares outstanding — diluted		139,172			135,349			137,274		132,458

Allied Capital to Sell a Majority Equity Interest in Advantage Sales & Marketing to
J.W. Childs Associates and Merrill Lynch Global Private Equity

March 2, 2006 –– Washington, DC –– Allied Capital Corporation (NYSE:ALD) and Advantage Sales & Marketing, Inc. (“Advantage”) announced today that a definitive agreement has been signed to sell a majority equity interest in Advantage to an affiliate of J.W. Childs Associates, L.P. and Merrill Lynch Global Private Equity. Allied Capital, along with Advantage management, will retain equity investments in the business as minority shareholders.

Based on the definitive agreement, Advantage will sell for an enterprise value of approximately $1.05 billion, subject to pre- and post-closing adjustments. Allied Capital expects to realize a gain on the equity being sold of approximately $415 million, subject to pre- and post-closing adjustments. As consideration for the common stock it is selling in the transaction, Allied Capital expects to receive a $180 million subordinated note, with the balance of the consideration to be paid in cash. Approximately $35 million of Allied Capital’s proceeds will be subject to certain holdback provisions. In addition, Allied Capital will be repaid its $184 million in subordinated debt currently outstanding.

“The consolidation of the former Advantage member businesses over the last 18 months has led to significant value creation for all of Advantage’s shareholders and has resulted in a more efficient business that is better able to service its clients and customers,” said John Shulman, Managing Director of Allied Capital. “Allied Capital is thrilled to have the opportunity to continue to partner with this outstanding management team, and with J.W. Childs and Merrill Lynch Global Private Equity, who bring significant financial resources and experience in the consumer packaged goods industry.”

“This transaction brings us to the next chapter in the evolution of our business,” said Sonny King, Chairman and Chief Executive Officer of Advantage. “We are excited to have J.W. Childs and Merrill Lynch Global Private Equity on board to support us in our efforts as we continue to pursue our growth strategy. We are also very pleased that Allied Capital will remain our financial partner and that John Shulman will continue to hold a seat on our Board of Directors.”

The transaction is expected to close by the end of the first quarter of 2006, subject to certain closing conditions.

Sawaya Segalas & Co., LLC served as the exclusive financial advisor to Advantage on the transaction.

About Allied Capital
Allied Capital Corporation, a leading business development company with total assets of more than $3 billion, has paid regular, quarterly cash dividends to shareholders since 1963. Allied Capital invests in the American entrepreneurial economy by providing capital to companies seeking a long-term financial partner and access to managerial resources often unavailable to smaller companies. Since its IPO in 1960, the Company has provided long-term debt and equity financing to thousands of middle market companies. In serving its shareholders, Allied Capital helps build middle market businesses and support American jobs. The Company’s private finance portfolio includes investments in over 100 companies that generate aggregate revenues of more than $10 billion and employ more than 85,000 people.

About Advantage Sales & Marketing
Advantage Sales & Marketing is a leading sales and marketing agency in the U.S., providing outsourced sales, merchandising, and marketing services to manufacturers, suppliers, and producers of consumer packaged goods. The company manages thousands of food and non-food products on behalf of a client base comprised of more than 1,200 manufacturers. Advantage has operations throughout the United States and Canada. For more information, please visit the company’s website at www.asmnet.com.

About J.W. Childs Associates, L.P.
J.W. Childs Associates, L.P. is a private equity firm based in Boston, Massachusetts specializing in leveraged buyouts and recapitalizations of middle-market growth companies. Since 1995, JWC has completed investments with a total transaction value in excess of $8.0 billion. JWC currently invests through J.W. Childs Equity Partners III, L.P., an investment fund with total committed capital of $1.75 billion. For more information, please visit J.W. Childs Associates, L.P.’s website at www.jwchilds.com.

About Merrill Lynch Global Private Equity
Merrill Lynch Global Private Equity is the private equity arm of Merrill Lynch & Co., Inc. Merrill Lynch is one of the world’s leading wealth management, capital markets and advisory companies, with offices in 36 countries and territories and total client assets of approximately $1.8 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world’s largest managers of financial assets. Firmwide, assets under management total $544 billion. For more information on Merrill Lynch, please visit www.ml.com.


Maryland	0-22832	52-1081052
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1919 Pennsylvania Avenue, N.W., Washington, District of Columbia		20006
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Allied Capital Corporation

March 6, 2006	By:	Penni F. Roll

		Name: Penni F. Roll
		Title: Chief Financial Officer


Exhibit No.		Description

99.1		Press release dated March 6, 2006.
99.2		Press release dated March 2, 2006.


Date of Report (Date of Earliest Event Reported):		March 6, 2006


Registrant’s telephone number, including area code:		202 331-1112


Record date: Payable date:		March 17, 2006 March 31, 2006