EX-99.1

Allied Capital Announces Second Quarter 2006 Financial Results
Quarterly Dividend of $0.61 Per Share Declared

August 2, 2006 – Washington, DC – Allied Capital Corporation (NYSE: ALD) today announced second quarter 2006 financial results.

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The total of net investment income and net realized gains was $1.05 per share, or $150.4 million

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Second regular quarterly dividend of $0.60 per share was paid; third quarter dividend of $0.61 per share was declared

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New investments totaled $453.4 million for the second quarter and $1.3 billion for the first half of 2006

For the three months ended June 30, 2006, net investment income was $50.2 million or $0.35 per share, which included stock options expense of $4.6 million or $0.03 per share and excise tax expense of $3.2 million or $0.02 per share. For the three months ended June 30, 2005, net investment income was $15.3 million or $0.11 per share, which included excise tax expense of $4.0 million or $0.03 per share. Net realized gains were $100.2 million or $0.70 per share for the quarter ended June 30, 2006, and were $207.5 million or $1.52 per share for the quarter ended June 30, 2005. The sum of net investment income and net realized gains was $150.4 million or $1.05 per share for the three months ended June 30, 2006, as compared to $222.8 million or $1.63 per share for the three months ended June 30, 2005.

Net income for the quarter ended June 30, 2006, was $33.7 million or $0.24 per share, after net unrealized depreciation of $116.7 million or $0.81 per share. Net income for the quarter ended June 30, 2005, was $311.9 million or $2.29 per share, after net unrealized appreciation of $89.1 million or $0.65 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 six months ended June 30, 2006, net investment income was $91.5 million or $0.64 per share, which included stock options expense of $8.2 million or $0.06 per share and excise tax expense of $11.6 million or $0.08 per share. For the six months ended June 30, 2005, net investment income was $54.0 million or $0.40 per share, which included excise tax expense of $4.0 million or $0.03 per share. Net realized gains were $533.1 million or $3.74 per share for the six months ended June 30, 2006, and were $217.8 million or $1.60 per share for the six months ended June 30, 2005. The sum of net investment income and net realized gains was $624.6 million or $4.38 per share for the six months ended June 30, 2006, as compared to $271.8 million or $2.00 per share for the six months ended June 30, 2005. Net income for the six months ended June 30, 2006, was $133.3 million or $0.94 per share, including net unrealized depreciation of $491.3 million or $3.45 per share. Net income for the six months ended June 30, 2005, was $431.5 million or $3.17 per share, including net unrealized appreciation of $159.7 million or $1.17 per share.

During the second quarter, the company invested a total of $453.4 million. After principal collections related to investment repayments or sales of $429.2 million, portfolio exits and valuation and other changes during the quarter, the total portfolio at value was $3.6 billion at June 30, 2006. At June 30, 2006, the overall weighted average yield on the interest-bearing portfolio was 12.6%, as compared to 12.8% at December 31, 2005.

Shareholders’ equity was $2.7 billion at June 30, 2006, with a net asset value per share of $19.17 as compared to $2.6 billion or $19.17 per share at December 31, 2005.

The private finance portfolio totaled $3.5 billion at value at June 30, 2006. Loans and debt securities, which totaled $2.5 billion at value at June 30, 2006, had a weighted average yield of 12.7%, as compared to 13.0% at December 31, 2005. New private finance investments totaled $441.5 million during the second quarter of 2006, which was composed of $68.3 million of senior loans, $180.9 million of unitranche debt, $139.1 million of subordinated debt and $53.2 million of equity. These investments included:

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$82.5 million to support the buyout of The Step2 Company, LLC, a designer, manufacturer and marketer of large-format, branded children’s and home products;

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$77.0 million to support the buyout of Cook Inlet Alternative Risk, LLC, a provider of management services to small businesses enrolled in workers’ compensation self-insured groups;

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$65.1 million to support the management-led buyout of MHF Logistical Solutions, Inc., a third-party environmental logistics company;

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$37.1 million to Air Medical Group Holdings LLC, a provider of air medical transportation and urgent care services to rural communities, to support a recapitalization and an acquisition;

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$33.7 million to support the buyout of York Insurance Services Group, Inc., a third-party claims administrator providing outsourced processing, adjusting and settlement claims services to insureds on behalf of their customers;

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$30.0 million in connection with the company’s sale of its equity interest in STS Operating, Inc., a distributor of fluid power components, and provider of services including engineering, design, assembly, repair and technical training;

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$22.5 million to Regency Healthcare Group, LLC, a Medicare-certified provider of home-based hospice services, to support an acquisition;

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$20.0 million in the recapitalization of TransTechnology Corporation, a global designer, manufacturer and servicer of sophisticated, performance-critical lifting devices for specialty aerospace and defense applications;

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$14.4 million to support the acquisition of Carlisle Wide Plank Floors, Inc., a manufacturer of wide plank softwood and hardwood flooring;

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$12.5 million in the preferred shares of Callidus Debt Partners CLO Fund IV, Ltd.; and

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$12.0 million in the recapitalization of Passport Health Communications, Inc., a healthcare technology company that offers products designed to enhance the revenue cycle management process of healthcare service providers.

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 June 30, 2006, Grade 1 investments totaled $1.2 billion, or 34.5% of the total portfolio at value; Grade 2 investments totaled $2.2 billion, or 60.6% of the total portfolio; Grade 3 investments totaled $93.1 million, or 2.6% of the total portfolio; Grade 4 investments totaled $27.4 million, or 0.8% of the total portfolio; and Grade 5 investments totaled $54.0 million, or 1.5% of the total portfolio.

Loans and debt securities over 90 days delinquent totaled $50.9 million at June 30, 2006, as compared to $80.7 million at December 31, 2005. Loans and debt securities not accruing interest totaled $112.6 million at June 30, 2006, as compared to $155.8 million at December 31, 2005. 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.

At June 30, 2006, the company had cash and investments in money market securities of $25.6 million, a liquidity portfolio totaling $201.2 million which included U.S. Treasury bills and money market and other securities, outstanding long-term debt of $1.2 billion, and outstanding borrowings of $1.8 million on its revolving line of credit. At June 30, 2006, the company had a weighted average cost of debt of 6.6% and its regulatory asset coverage was 326%. The company is required to maintain regulatory asset coverage of at least 200%.

On July 24, 2006, the company completed the sale of 4.5 million shares of common stock for net proceeds, after the underwriting discount and estimated offering expenses, of $118.1 million. On August 1, 2006, the company completed the sale of 675 thousand shares of common stock pursuant to the underwriter’s over-allotment option for net proceeds, after the underwriting discount and estimated offering expenses, of $17.8 million.

On July 25, 2006, the company closed on the public issuance of $400 million of unsecured five-year notes. The notes will mature on July 15, 2011, and have a fixed interest rate of 6.625%.

After closing on these debt and equity issuances in the third quarter of 2006, there were no outstanding borrowings on the company’s revolving line of credit.

As previously released on July 24, 2006, the company declared its 172nd regular quarterly dividend of $0.61 per share for the third 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 estimates of annual 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, and the amount of taxable income carried over from the prior year for distribution in the current year.

The company will host a webcast/conference call at 10:15 a.m. (Eastern Time) on Wednesday, August 2, 2006, to discuss the results for the second quarter. 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 August 16, 2006, by calling (800) 642-1687 (international callers please dial (706) 645-9291). Please reference passcode “3481188”. An archived replay will also be available on our website. For information about the webcast/conference call and the replay, please visit our web site or call Allied Capital Investor Relations at (888) 818-5298.

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 approximately $12 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 Qorvis Communications at (202) 448-3131.

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)
	At June 30,			At December 31,
	2006			2005
	*(unaudited)*
ASSETS
Portfolio at value:
Private finance	$	3,460,426		$	3,479,290
Commercial real estate finance		133,051			127,065

Total portfolio at value		3,593,477			3,606,355
Liquidity portfolio		201,232			200,305
Investments in money market and other securities		22,518			21,967
Deposits of proceeds from sales of borrowed Treasury securities		17,156			17,666
Accrued interest and dividends receivable		49,270			60,366
Other assets		124,448			87,858
Cash		3,106			31,363
Total assets	$	4,011,207		$	4,025,880

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes payable and debentures	$	1,207,137		$	1,193,040
Revolving line of credit		1,750			91,750
Obligations to replenish borrowed Treasury securities		17,156			17,666
Accounts payable and other liabilities		95,145			102,878

Total liabilities		1,321,188			1,405,334
Shareholders’ equity:
Common stock		14			14
Additional paid-in capital		2,284,117			2,177,283
Common stock held in deferred compensation trust		(24,003	)		(19,460	)
Notes receivable from sale of common stock		(3,370	)		(3,868	)
Net unrealized appreciation (depreciation)		(136,929	)		354,325
Undistributed earnings		570,190			112,252

Total shareholders' equity		2,690,019			2,620,546

Total liabilities and shareholders' equity	$	4,011,207		$	4,025,880

Net asset value per common share	$	19.17		$	19.17
Common shares outstanding		140,312			136,697


CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)	Three Months Ended					Six Months Ended
	June 30,			June 30,		June 30,			June 30,
	2006			2005		2006			2005
	*(unaudited)*			*(unaudited)*		*(unaudited)*			*(unaudited)*
Interest and related portfolio income
Interest and dividends	$	95,433		$	71,330	$	184,314		$	156,275
Loan prepayment premiums		1,745			853		7,031			2,530
Fees and other income		13,278			14,024		30,122			22,321

Total interest and related
portfolio income		110,456			86,207		221,467			181,126

Expenses
Interest		21,607			19,154		45,907			39,379
Employee		20,398			22,877		41,826			38,333
Stock options		4,597			—		8,203			—
Administrative		9,861			23,048		21,380			43,802

Total operating expenses		56,463			65,079		117,316			121,514

Net investment income before income taxes		53,993			21,128		104,151			59,612
Income tax expense, including excise tax		3,798			5,861		12,656			5,593
Net investment income		50,195			15,267		91,495			54,019

Net realized and unrealized gains (losses)
Net realized gains		100,240			207,496		533,075			217,781
Net change in unrealized
appreciation or
depreciation		(116,706	)		89,122		(491,254	)		159,706

Total net gains (losses)		(16,466	)		296,618		41,821			377,487

Net increase in net assets resulting from operations	$	33,729		$	311,885	$	133,316		$	431,506

Diluted net investment income per common share	$	0.35		$	0.11	$	0.64		$	0.40
Diluted earnings per common share	$	0.24		$	2.29	$	0.94		$	3.17
Weighted average common shares outstanding — diluted		143,213			136,381		142,466			135,982


Record date: Payable date:		September 15, 2006 September 29, 2006