1997 Merger

Today's Allied Capital was formed from the merger on December 31, 1997, of Allied Capital Corporation, Allied Capital Corporation II, Allied Capital Commercial Corporation, and Allied Capital Advisers, Inc. with and into Allied Capital Lending Corporation in a tax-free stock-for-stock exchange. Immediately following the merger, Allied Capital Lending changed its name to "Allied Capital Corporation." Allied Capital Advisers was a registered investment adviser and managed the assets of the four other Allied Capital companies, all of which were structured as investment funds engaged in financing growing businesses.

Exchange Ratios of the Merger
Each Share of	Exchange Ratio
Allied Capital Corporation (old)	1.07
Allied Capital Corporation II	1.40
Allied Capital Commercial Corporation	1.60
Allied Capital Advisers, Inc.	0.31
Allied Capital Lending Corporation	1.00 (did not exchange)

Share Exchange Process
If you have not exchanged your shares, our transfer agent is holding all of your cash dividends and distributions paid by Allied Capital since the merger in escrow in a non-interest bearing account. Please contact our transfer agent, which is the exchange agent for this transaction. Once you have exchanged your shares, these cash dividends will be distributed to you. If you have further questions, please call Investor Relations at 888.818.5298.

Failure to Exchange Shares
Depending on where you live, unclaimed dividends and unexchanged shares deemed to be "abandoned property" will be escheated to the state in which you reside. In addition, you will be unable to sell your shares of Allied Capital until they are exchanged. You are strongly urged to exchange your shares as soon as possible.