The Allied Defense Group CEO Provides Updated 2005 Outlook in Special Letter to Shareholders

VIENNA, Va., Aug. 2 /PRNewswire-FirstCall/ -- The Allied Defense Group, Inc. announces it issued a Special Letter to Shareholders in an effort to update existing Allied Defense investors on the current status of the Company. Text of the letter, dated July 27, follows:

"Dear Fellow Shareholders,

I am honored to have this opportunity to work for you and to be a part of this extraordinary team. As your new CEO and President, I will do what is right for our Company and its shareholders and I will continue the same emphasis on ethics and integrity established by my predecessors. I am enthused about the opportunities available to us and look forward to the challenges ahead.

As you know, I have served the last few years at MECAR S.A. in Belgium, first as Chief Operating Officer and then as Managing Director (i.e., President). Running Allied's largest operating unit has been especially rewarding and I feel it has helped prepare me to lead our Company to even higher levels. My military service, which included tours in Germany, Korea, Saudi Arabia, and the United States, has also helped prepare me for this new responsibility. In particular, my last assignment as Commanding General of the U.S. Army's Test and Evaluation Command, where I managed a very large organization and tested and evaluated everything from ammunition to the National Missile Defense System, provided practical experience in the Department of Defense's acquisition system which will be invaluable as Allied Defense competes for more defense contracts.

The corporate goals, as reported to you by my predecessor, remain unchanged:

* Enhance the profitability of our U.S. subsidiaries * Acquire one or more mid-sized ($25-50M) companies to provide increased growth and stability. Additionally, in accordance with the latest guidance from our board of directors, we will extend our acquisition search to include smaller, strong strategic matches to supplement our current offerings. * Pursue opportunities in conjunction with major U.S. defense & security contractors * Facilitate the establishment and integration of our newest U.S. subsidiary, MECAR USA, as well as the VSK Group's newest subsidiary, Control Monitor Systems * Expand our worldwide customer base In support of these goals, I will immediately focus on: * Selecting a replacement Chief Financial Officer * Selecting a replacement Managing Director for MECAR * Emphasizing business development at the corporate headquarters in support of our subsidiary companies * Building on the recent successes of MECAR USA, Titan, and NS Microwave * Stressing ethics and integrity in all our endeavors

The outlook for our company in 2005 remains positive and we continue to estimate we will earn $1.48 a share, fully diluted. As previously announced, we anticipate a very weak first half, with business accelerating in the latter part of the year. The timing of orders at MECAR historically results in the majority of its revenues being earned in the second half, which is what we are seeing this year. Based on our current information, we are comfortable that we will meet our target. We will update this status appropriately in our earnings releases.

All of us on your management team are excited about Allied's potential and I am very proud to be a part of it at this time in our Company's evolution. Please feel free to contact me with any questions or concerns via telephone [phone]) or email ([e-mail]). We have a very bright future and I am looking forward to reporting our ongoing successes to you.

Sincerely, John J. Marcello Chief Executive Officer and President"

About The Allied Defense Group, Inc. (formerly Allied Research Corporation)

The Allied Defense Group, Inc. is a diversified international defense and security firm which: develops and produces conventional medium caliber ammunition marketed to defense departments worldwide; designs, produces and markets sophisticated electronic and microwave security systems principally for European and North American markets; manufactures battlefield effects simulators and other training devices for the military; and designs and produces state-of-the-art weather and navigation software, data, and systems for commercial and military customers.

For more Information, please visit the Company web site: http://www.allieddefensegroup.com/

Certain statements contained herein are "forward looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995. Because statements include risks and uncertainties, actual results may differ materially from those expressed or implied and include, but are not limited to, those discussed in filings by the Company with the Securities and Exchange Commission.

CONTACT: Crystal B. Leiderman, Director, Investor Relations, [phone], or Jim Drewitz, Investor Relations, [phone], both of The Allied Defense Group, Inc.