Allied Capital Corp. II announces 1997 first quarter results.

WASHINGTON--(BUSINESS WIRE)--May 12, 1997--Allied Capital Corp. II (Nasdaq: ALII) announced first quarter results Monday.

For the three months ended March 31, 1997, net income was $3.0 million, or 40 cents per share, as compared to $5.9 million, or 83 cents per share, for the first quarter of 1996.

Net investment income combined with net realized gains increased in the first quarter of 1997 to $5 million from $4.8 million for the first quarter of 1996, and although realized earnings increased, the effect of valuation changes in the portfolio resulted in a decline in quarterly earnings.

During the quarter certain investments in the portfolio with publicly traded securities experienced a softening in their public market prices, and as a result, the company decreased its valuation of these securities.

This combined with depreciation resulting from the realization of gains in the portfolio caused net unrealized depreciation of approximately $2 million. Net income per share for the first quarter of 1997 also reflects a 7% increase in the weighted average shares outstanding as compared to the prior comparative period.

Tom Westbrook, the company's newly appointed portfolio manager, commented, "The valuation of certain investments in public companies in the portfolio were significantly impacted by a tumultuous stock market in the first quarter of 1997.

"We're not concerned about these temporary swings in market value, as we will look for an appropriate exit time in order to make a reasonable return on the investments. The real story for the quarter is the strong performance in realized earnings, which will drive our dividend performance for the year."

Allied Capital Corp. II invested a total of $2.8 million during the first quarter. The company had total investments in small businesses of $82 million as of March 31, 1997.

The company continues to see increased competition for quality investments in the market place, and is cautiously approaching new investment activity to assure that the portfolio is receiving adequate compensation for new investments, and is accepting appropriate levels of risk.

The board of directors of Allied Capital Corp. II increased the company's quarterly dividend by 5% to 45 cents per share from the first quarter dividend of 43 cents per share, which was paid on March 31, 1997. This is the ninth consecutive quarterly dividend increase the company has announced. The second quarter dividend is payable June 30, 1997 to shareholders of record as of June 20, 1997. -0-

(in thousands, except per share amounts)

                           3/31/97  Per Share    12/31/96  Per Share
                           -------  ---------    --------  ---------

Financial Position
 Information
------------------
Total investments         $ 82,161         --    $ 86,266         --
Total assets               108,677         --     106,908         --
Shareholders' equity (NAV) 105,257   $  13.84     102,838   $  13.62


                              3 mos. ended           3 mos. ended
                          03/31/97   Per Share    3/31/96   Per Share
                          --------   ---------    -------   ---------
Operating Information
---------------------
Net investment income     $  2,026   $   0.26    $  2,298   $   0.32
Net realized gains           3,035       0.40       2,568       0.36
                          --------   --------    --------   --------
Net realized income          5,061       0.66       4,866       0.68
Net unrealized
 apprec/(deprec)            (2,028)     (0.26)      1,083       0.15
                          --------   --------    --------   --------
Net income                $  3,033   $   0.40    $  5,949   $   0.83
                          ========   ========    ========   ========

Actual shares outstanding    7,604         --       7,198         --
Weighted avg. shares
 outstanding                 7,674         --       7,143         --

Distributions to Shareholders
-----------------------------
Regular dividends                    $   0.43               $   0.33


Statements in this release concerning the company's future prospects
are "forward looking statements" under the Federal securities laws.
There can be no assurance that future results will be achieved and
actual results could differ materially from forecasts and estimates.
Important factors that could cause actual results to differ materially
are included but are not limited to those listed in the company's
quarterly reports as filed on Form 10-Q and annual report as filed
on Form 10-K.
-0-
    Allied Capital Corp. II is a business development company traded
on the Nasdaq National Market, symbol ALII.  The company makes
long-term investments ranging in size from $1 million to $7 million
in small, growing businesses throughout the United States.  There are
7,604,016 total shares outstanding.
    Allied Capital II pays a regular quarterly dividend of 45 cents
per share and has paid an extra distribution each year since inception.
For 1996, Allied Capital II distributed a total of $1.92 per share
to shareholders.  For 1995, Allied Capital II distributed a total
of $1.60 per share.  Allied Capital II's stock is marginable.
    For further information or a copy of the company's annual report,
please contact Allied Capital's Investor Relations Department
directly at 202/973-6326, via fax at 202/659-2053, receive press
releases and other information through our News-On-Demand fax service
at 888/329-5519, or visit our world wide web site at
www.alliedcapital.com .

CONTACT: Allied Capital, Washington 

Suzanne Sparrow, 202/973-6326