Apollo Investment Corporation Announces June 30, 2008 Quarterly Financial Results and September 2008 Quarterly Dividend of $0.52 per Share

NEW YORK, NY, Aug 06, 2008 (MARKET WIRE via COMTEX) -- AINV | Quote | Chart | News | PowerRating -- Apollo Investment Corporation (NASDAQ: AINV | Quote | Chart | News | PowerRating) today announces financial results for its fiscal quarter ended June 30, 2008. Additionally, Apollo Investment Corporation announces that its Board of Directors has declared its second fiscal quarter September 2008 dividend of $0.52 per share, payable on September 29, 2008 to stockholders of record as of September 18, 2008. The dividend will be paid from taxable earnings whose specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year.

HIGHLIGHTS:

At June 30, 2008: Total Assets: $4.3 billion Investment Portfolio: $3.3 billion Net Assets: $2.3 billion Net Asset Value per share: $15.93 Portfolio Activity for the Quarter Ended June 30, 2008: Total investments made during the quarter: $185 million Sales and prepayments during the quarter: $89 million Number of new portfolio companies invested: 6 Number of portfolio company exits: 3 Operating Results for the Quarter Ended June 30, 2008 (in thousands, except per share amounts): Net investment income: $46,313 Net realized gains (losses): ($29,818) Net change in unrealized appreciation (depreciation): $55,345 Net increase (decrease) in net assets from operations: $71,840 Net investment income per share: $0.35 Net realized gains (losses) per share: ($0.22) Net change in unrealized appreciation (depreciation) per share: $0.42 Earnings Per Share: $0.55

Conference Call/Webcast at 11:00 a.m. ET on August 7, 2008

The Company will host a conference call and webcast at 11:00 a.m. (Eastern Time) on Thursday, August 7, 2008 to discuss its quarterly results. All interested parties are welcome to participate. You can access the conference call by dialing (888) 802-8579 approximately 5-10 minutes prior to the call. International callers should dial (973) 633-6740. All callers should reference Apollo Investment Corporation or "conference ID #55482823". An archived replay of the call will be available through August 21, 2008 by calling (800) 642-1687. International callers please dial (706) 645-9291. For all replays, please reference pin #55482823. In addition, you can access our audio webcast within the Investor Relations section of our website at www.apolloic.com. An archived replay of the webcast will also be available on our website later that same day.

Portfolio and Investment Activity

During the three months ended June 30, 2008, we invested $184.7 million, across 6 new and 8 existing portfolio companies. This compares to investing $738.6 million in 13 new and 5 existing portfolio companies for the three months ended June 30, 2007. Investments sold or prepaid during the three months ended June 30, 2008 totaled $89.1 million versus $346.9 million for the three months ended June 30, 2007.

At June 30, 2008, our net portfolio consisted of 74 portfolio companies and was invested 23% in senior secured loans, 54% in subordinated debt, 7% in preferred equity and 16% in common equity and warrants versus 64 portfolio companies invested 22% in senior secured loans, 56% in subordinated debt, 6% in preferred equity and 16% in common equity and warrants at June 30, 2007.

The weighted average yields on our senior secured loan portfolio, subordinated debt portfolio and total debt portfolio at our current cost basis were 9.7%, 12.9% and 12.0%, respectively, at June 30, 2008. At June 30, 2007, the yields were 13.1%, 11.9%, and 12.8%, respectively.

Since the initial public offering of Apollo Investment Corporation in April 2004 and through June 30, 2008, total invested capital exceeds $5.3 billion in 118 portfolio companies. Over the same period, Apollo Investment has also completed transactions with 81 different financial sponsors.

Senior secured loans and European mezzanine loans typically accrue interest at variable rates determined on the basis of a benchmark: LIBOR, EURIBOR, GBP LIBOR, or the prime rate, with stated maturities at origination that typically range from 5 to 10 years. While subordinated debt issued within the United States will typically accrue interest at fixed rates, some of these investments may include zero-coupon, PIK and/or step bonds that accrue income on a constant yield to call or maturity basis. At June 30, 2008, 60% or $1.7 billion of our interest-bearing investment portfolio is fixed rate debt and 40% or $1.1 billion is floating rate debt. At June 30, 2007, 66% or $1.6 billion of our interest-bearing investment portfolio was fixed rate debt and 34% or $830.7 million was floating rate debt.

RESULTS OF OPERATIONS

Results comparisons are for the three months ended June 30, 2008 and June 30, 2007.

Investment Income

For the three months ended June 30, 2008 and June 30, 2007, gross investment income totaled $91.0 million and $88.9 million, respectively. The increase in gross investment income for the three months ended June 30, 2008 was primarily due to the growth of our investment portfolio as compared to the previous period. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans.

Expenses

Net expenses totaled $44.6 million and $34.2 million, respectively, for the three months ended June 30, 2008 and June 30, 2007, of which $11.6 million and $10.8 million, respectively, were performance-based incentive fees and $13.9 million and $7.6 million, respectively, were interest and other credit facility expenses. Net expenses exclusive of performance-based incentive fees and interest and other credit facility expenses for the three months ended June 30, 2008 and June 30, 2007 were $19.2 million and $15.7 million, respectively. Of these expenses, general and administrative expenses totaled $3.1 million and $2.8 million, respectively, for the three months ended June 30, 2008 and 2007. Expenses consist of base investment advisory and management fees, insurance expenses, administrative services fees, professional fees, directors' fees, audit and tax services expenses, and other general and administrative expenses. The increases in net expenses from the three month period ended June 30, 2007 to the three month period ended June 30, 2008 were primarily related to increases in base management fees and other general and administrative expenses from the growth of our investment portfolio as compared to the previous periods.

Net Investment Income

The Company's net investment income totaled $46.3 million and $54.8 million or $0.35 per share and $0.53 per share, respectively, for the three months ended June 30, 2008 and June 30, 2007.

Net Realized Gains (Losses)

The Company had investment sales and prepayments totaling $89.1 million and $346.9 million, respectively, for the three months ended June 30, 2008 and 2007. Net realized losses for the three months ended June 30, 2008 and June 30, 2007 were $29.8 million and $20.7 million, respectively. During the three months ended June 30, 2008, losses were derived primarily from the sale of American Asphalt which realized a loss of $26.0 million, reversing an unrealized loss of $25.4 million as of March 31, 2008.

Net Unrealized Appreciation (Depreciation) on Investments, Cash Equivalents and Foreign Currencies

For the three months ended June 30, 2008 the Company recognized net unrealized appreciation on its investments, cash equivalents, foreign currencies and other assets and liabilities totaling $55.3 million. For the three months ended June 30, 2007, net unrealized appreciation on the Company's investments, cash equivalents, foreign currencies and other assets and liabilities increased $143.7 million. At June 30, 2008, net unrealized depreciation totaled $141.8 million versus net unrealized appreciation of $235.9 million at June 30, 2007.

Net Increase (Decrease) in Net Assets From Operations

For the three months ended June 30, 2008, the Company had a net increase in net assets resulting from operations of $71.8 million. For the three months ended June 30, 2007 the Company had a net increase in net assets resulting from operations of $177.7 million. The net increase in net assets from operations per share was $0.55 for the three months ended June 30, 2008. For the three months ended June 30, 2007, the net increase in net assets from operations per share was $1.72.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity and capital resources are generated and available through periodic follow-on equity offerings, through its senior secured, multi-currency $1.7 billion, five-year, revolving credit facility maturing in April 2011, through investments in special purpose entities in which we hold and finance particular investments on a non-recourse basis, as well as from cash flows from operations, investment sales and prepayments of senior and subordinated loans and income earned from investments and cash equivalents. At June 30, 2008, the Company has $0.97 billion in borrowings outstanding and $0.73 billion remaining unused. In the future, the Company may raise additional equity or debt capital off its shelf registration or may securitize a portion of its investments among other considerations. The primary use of funds will be investments in portfolio companies, cash distributions to our stockholders and for other general corporate purposes. On May 16, 2008, the Company closed on its most recent follow-on public equity offering of 22.3 million shares of common stock at $17.11 per share raising approximately $369.6 million in net proceeds.

Dividends

Dividends paid to stockholders for the three months ended June 30, 2008 and June 30, 2007 totaled $74.0 million or $0.52 per share versus $52.8 million or $0.51 per share, respectively. Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year.

We intend to continue to distribute quarterly dividends to our stockholders. Our quarterly dividends, if any, will be determined by our Board of Directors.

We have elected to be taxed as a RIC under Subchapter M of the Internal Revenue Code of 1986. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

We maintain an "opt out" dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders' cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically "opt out" of the dividend reinvestment plan so as to receive cash dividends.

We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings when applicable to us as a business development company under the 1940 Act and due to provisions in future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our RIC status. We cannot assure stockholders that they will receive any dividends and distributions or dividends and distributions at a particular level.

APOLLO INVESTMENT CORPORATION STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except per share amounts) June 30, March 31, 2008 2008 (unaudited) ----------- ----------- Assets Non-controlled/non-affiliated investments, at value (cost--$3,108,743 and $3,139,047, respectively) $ 3,027,822 $ 2,986,556 Controlled investments, at value (cost--$298,275 and $247,400, respectively) 281,042 246,992 Cash equivalents, at value (cost--$896,445 and $404,063, respectively) 896,425 403,898 Cash 4,149 8,954 Foreign currency (cost--$3,555 and $2,140, respectively) 3,553 2,130 Interest receivable 38,755 46,643 Dividends receivable 27,912 23,024 Prepaid expenses and other assets 4,938 5,896 Receivable from investment adviser 4 231 ----------- ----------- Total assets $ 4,284,600 $ 3,724,324 ----------- ----------- Liabilities Payable for investments and cash equivalents purchased $ 1,018,472 $ 142,339 Credit facility payable 965,689 1,639,122 Management and performance-based incentive fees payable 27,600 26,969 Dividends payable -- 9,368 Interest payable 6,261 6,178 Accrued administrative expenses 90 288 Other liabilities and accrued expenses 1,585 2,152 ----------- ----------- Total liabilities $ 2,019,697 $ 1,826,416 ----------- ----------- Net Assets Common stock, par value $.001 per share, 400,000 and 400,000 common shares authorized, respectively, and 142,221 and 119,894 issued and outstanding, respectively $ 142 $ 120 Paid-in capital in excess of par 2,352,883 1,983,795 Undistributed net investment income -- 24,959 Distributions in excess of net investment income (2,683) -- Accumulated net realized gain 56,318 86,136 Net unrealized depreciation (141,757) (197,102) ----------- ----------- Total Net Assets $ 2,264,903 $ 1,897,908 ----------- ----------- Total liabilities and net assets $ 4,284,600 $ 3,724,324 ----------- ----------- Net Asset Value Per Share $ 15.93 $ 15.83 ----------- ----------- APOLLO INVESTMENT CORPORATION STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) -------------------- Three months ended -------------------- June 30, June 30, 2008 2007 --------- --------- INVESTMENT INCOME: From non-controlled/non-affiliated investments: Interest $ 84,975 $ 74,550 Dividends 3,335 4,026 Other income 197 320 From controlled investments: Dividends 2,452 50 Other income -- 10,000 --------- --------- Total Investment Income 90,959 88,946 --------- --------- EXPENSES: Management fees $ 16,022 $ 12,996 Performance-based incentive fees 11,578 10,835 Interest and other credit facility expenses 13,917 7,607 Administrative services expense 1,868 1,461 Other general and administrative expenses 1,347 1,350 --------- --------- Total expenses 44,732 34,249 Expense offset arrangement (86) (61) --------- --------- Net expenses 44,646 34,188 --------- --------- Net investment income $ 46,313 $ 54,758 --------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS AND FOREIGN CURRENCIES: Net realized gain (loss): Investments and cash equivalents (29,230) (17,000) Foreign currencies (588) (3,743) --------- --------- Net realized loss (29,818) (20,743) --------- --------- Net change in unrealized gain (loss): Investments and cash equivalents 54,889 149,922 Foreign currencies 456 (6,215) --------- --------- Net change in unrealized gain 55,345 143,707 --------- --------- Net realized and unrealized gain from investments, cash equivalents and foreign currencies 25,527 122,964 --------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 71,840 $ 177,722 --------- --------- EARNINGS PER SHARE $ 0.55 $ 1.72 --------- ---------

About Apollo Investment Corporation

Apollo Investment Corporation is a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. The Company's investment portfolio is principally in middle-market private companies. From time to time, the Company may also invest in public companies. The Company invests primarily in senior secured loans and mezzanine loans and equity in furtherance of its business plan. Apollo Investment Corporation is managed by Apollo Investment Management, L.P., an affiliate of Apollo Management, L.P., a leading private equity investor.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.

We may use words such as "anticipates," "believes," "expects," "intends," "will," "should," "may" and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. We do not undertake to update our forward-looking statements unless required by law.

CONTACT: Richard L. Peteka Apollo Investment Corporation (212) 515-3488

SOURCE: Apollo Investment Corporation

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