Apollo Investment Corporation Announces December 31, 2005 Quarterly Financial Results

Apollo Investment Corporation (NASDAQ: AINV) todayannounced financial results for its third fiscal quarter endedDecember 31, 2005.
HIGHLIGHTS:

December 31, 2005
------------------
Investment portfolio, at fair value $1.35 billion
Total net assets: $915.5 million
Net asset value per share: $14.41
Dividend yield: 9.8%
Number of portfolio companies at end of
period: 42

Nine Months
Quarter Ended Ended
12/31/2005 12/31/2005
-------------- ---------------
Operating Results (in thousands, except
per share amounts):
Net investment income: $20,554 $66,491
Net investment income per share: $0.33 $1.06

Net realized gain on investments and
cash equivalents: $2,023 $5,531
Net realized gain on foreign currency
transactions: $2,638 $5,361
Net change in unrealized appreciation
(depreciation): $8,331 $733

Net increase in net assets from
operations: $33,546 $78,116
Earnings per share: $0.53 $1.25

Dividends to shareholders per share: $0.44 $1.18


Portfolio Activity:
Cost of investments during period: $257 million $841 million
Sales, prepayments and other exits
during period: $103 million $361 million

Number of new portfolio companies
invested: 5 20
Number of portfolio company exits: 2 13

Portfolio and Investment Activity

After two active investment quarters, we entered our third fiscalquarter well positioned with a high quality portfolio and significantdebt capital available for investment. Due to our robust deal sourcingnetwork and our consistent and credible capital, we are pleased toreport that we found significant opportunities to invest in largermiddle market companies with strong management teams generating highfree cash flow. Accordingly, and during the quarter ended December 31,2005, we invested $257 million across five new and two existingportfolio companies. All investments were in our targeted assetclasses with $161 million invested in subordinated debt, $87 millioninvested in second lien bank debt and $9 million invested in privateequity. For the fiscal year-to-date period April 1, 2005 throughDecember 31, 2005, we invested $841 million across 20 new and 9existing portfolio companies.

Also during the quarter we were able to further rationalize ourportfolio by selectively exiting $27 million of our positions inlower-yielding senior bank debt and corporate notes. We also sawwell-performing portfolio companies pre-pay $76 million of their debt.For the quarter and nine months ended December 31, 2005, we hadproceeds from exits and prepayments totaling $103 million and $361million, respectively. Of the $361 million of total fiscal year exitsand prepayments, $217 million were planned exits of senior loans andlower yielding corporate notes. The remaining $145 million werepre-payments by eight successful companies.

We continued utilizing our $900 million credit facility thisquarter and had $413 million drawn and outstanding at December 31 with$487 million available. Our net portfolio reached $1.35 billion andwas invested 59.9% in subordinated debt, 6.3% in private equity and33.8% in senior secured loans. A year earlier at December 31, 2004,our net portfolio of $887 million was invested 46.9% in subordinateddebt, 32.6% senior secured loans, 2.3% in private equity and 18.2% incash equivalents.

At December 31, 2005, the weighted average yield on our debtportfolio was up to 12.6% versus 12.2% at September 30, 2005 and 10.9%at December 31, 2004. The weighted average yield on our subordinateddebt was 13.4% at December 31, 2005 versus 13.4% at September 30, 2005and 13.8% at December 31, 2004. Our total bank debt/senior securedloan portfolio yielded 11.3% at December 31, 2005 versus 10.4% atSeptember 30, 2005 and 7.6% at December 31, 2004. Yields are computedusing interest rates as of the balance sheet date and includeamortization of loan origination and commitment fees, original issuediscount and market premium or discount, weighted by their respectivecosts when averaged.

"Our reputable client service franchise continues to attract newclients and repeat business", said Chairman and CEO, Michael S. Gross."These relationships are strategic and are with well-respected firms.During the quarter, we selectively and opportunistically addedliquidity by successfully expanding our credit facility to $900million in total commitments. This increase will give us theflexibility of added capital as we progress into 2006. We alsocontinue to be pleased with the performance and quality of our overallinvestment portfolio. Through December 31, all debt investmentscontinue to perform. Furthermore, and with greater than 45% of all ourdebt investments in senior bank debt, we have generated an IRR inexcess of 15% on our debt portfolio since the IPO. When combined withthe performance of our equity investments which represented less than5% of our $1.7 billion of invested capital, our portfolio's IRRexceeded 20%. These strong returns to date have allowed us todistribute a steady and growing dividend stream and give us confidencein our future dividend stream to shareholders."

Conference Call at 10:00 a.m. ET on February 8, 2006

The company will also host a conference call at 10:00 a.m.(Eastern Time) on Wednesday, February 8, 2006 to discuss its thirdfiscal quarter financial results. All interested parties are welcometo participate. You can access the conference call by dialing (888)802-8577 approximately 5-10 minutes prior to the call. Internationalcallers should dial (973) 935-2981. All callers should reference"Apollo Investment Corporation". An archived replay of the call willbe available through February 22, 2006 by calling (877) 519-4471.International callers please dial (973) 341-3080. For all replays,please reference pin # 6977969.

Results of Operations

Results comparisons are for the three and nine months endedDecember 2005 and 2004.

Investment Income

Gross investment income totaled $37.6 million and $110.4 million,respectively, for the three and nine months ended December 31, 2005compared to $14.8 million and $26.5 million, respectively, for thethree and nine months ended December 31, 2004. The increases in grossinvestment income were primarily due to the growth of our investmentportfolio compared to the December 2004 comparative periods.

Expenses

Expenses totaled $17.0 million and $43.9 million, respectively,for the three and nine months ended December 31, 2005 of which $5.1million and $16.6 million, respectively, were performance-basedincentive fees and $4.2 million and $7.0 million, respectively, wereinterest and other credit facility expenses. Expenses net ofperformance-based incentive fees and interest and other creditfacility expenses for the three and nine months ended December 31,2005 were $7.7 million and $20.3 million, respectively, versus the$5.7 million and $16.6 million, respectively, for the three and ninemonths ended December 31, 2004. Expenses consist of base investmentadvisory and management fees, insurance expenses, administrativeservices fees, professional fees, directors' fees, audit and taxservices expenses, and other general and administrative expenses. Theincrease in expenses was primarily due to the increase in basemanagement fees related to the growth of our investment portfolio ascompared to the December 2004 comparative periods.

Net Investment Income

The Company's net investment income totaled $20.6 million and$66.5 million or $0.33 per share and $1.06 per share, respectively,for the three and nine months ended December 31, 2005 versus $9.1million and $9.9 million or $0.15 per share and $0.16 per share,respectively, for the three and nine months ended December 31, 2004.

Net Realized Gains/Losses

The Company had exits and prepayments totaling $102.6 million and$361.3 million, respectively, for the three and nine months endedDecember 31, 2005 versus $25.3 million and $25.8 million,respectively, for the three and nine months ended December 31, 2004.Net realized gains on investments totaled $2.1 million and $5.6million, respectively, for the three and nine months ended December31, 2005, versus $0.0 million for the three and nine months endedDecember 31, 2004. The Company also had net realized gains on itsforeign currency transactions of $2.6 million and $5.4 million,respectively, during the three and nine months ended December 31, 2005versus $0.0 million for both the three and nine month periods endedDecember 31, 2004. Total net realized gains for the three and ninemonths ended December 31, 2005 were $4.7 million and $10.9 million,respectively, versus a loss of $0.1 million for both the three andnine months ended December 31, 2004.

Net Unrealized Appreciation on Investments and Foreign CurrencyContracts and Translations

For the three and nine months ended December 31, 2005, theCompany's investments, foreign currencies and other assets andliabilities had a net increase in appreciation of $8.3 million and$0.7 million, respectively. This compared to an increase in netappreciation of $16.2 million and $22.0 million, respectively, on theportfolio for the three and nine months ended December 31, 2004. AtDecember 31, 2005, net unrealized appreciation totaled $18.9 millionof which $2.0 million was attributable to net unrealized appreciationon our bank debt/senior secured debt and $16.9 million wasattributable to net unrealized appreciation on our subordinated debtand private equity (after considering the effects of foreign currencyhedging for our non-U.S. investments).

Net Increase in Net Assets From Operations

For the three and nine months ended December 31, 2005, the Companyhad a net increase in net assets resulting from operations of $33.5million and $78.1 million, respectively, versus $25.2 million and$31.8 million, respectively, for the three and nine months endedDecember 31, 2004. The net change in net assets from operations pershare was $0.53 and $1.25, respectively, for the three and nine monthsended December 31, 2005 versus $0.41 and $0.51 per share for the threeand nine months ended December 31, 2004.

Financial Condition, Liquidity and Capital Resources

The Company's liquidity and capital resources are generatedprimarily through its senior secured, multi-currency, $900 million,five-year credit facility as well as from cash flows from operations,including exits and prepayments of senior and subordinated loans andincome earned from investments and cash equivalents (which normallycomprise of U.S. government securities and other high-quality debtinvestments that mature in one year or less). At December 31, 2005,the Company has $413 million in borrowings outstanding and $487million available for its use. In the future, the Company may raiseadditional equity capital through the filing of its shelf registrationor may securitize a portion of its investments. It may also furtheraccess $300 million of additional credit commitments available underthe terms of its credit facility as the Company's equity capital basegrows. The primary use of funds will be investments in portfoliocompanies and cash distributions to holders of common stock.

Dividends

Dividends paid to stockholders for the quarter totaled $27.8million or $0.44 per share versus $11.2 million or $0.18 per share forthe quarter ended December 31, 2004. For the period April 1, 2005through December 31, 2005, dividends paid to stockholders totaled$74.1 million or $1.18 per share. Tax characteristics of all dividendswill be reported to shareholders on Form 1099 after the end of thecalendar year.

APOLLO INVESTMENT CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
(in thousands, except per share amounts)

December
31, 2005 March 31,
(unaudited) 2005#
----------- -----------
Assets
Investments, at fair value (cost - $1,336,073
and $821,232, respectively) (1) $1,350,229 $838,482
Cash equivalents, at fair value (cost -
$449,298 and $873,061, respectively) 449,298 873,056
Cash 4,897 5,208
Foreign currency, at value* 240 -
Interest receivable, at value* 21,670 14,805
Dividends receivable 58 -
Unrealized appreciation on forward foreign
currency contract - 978
Receivable from investments 387 -
Prepaid expenses and other assets 3,920 855
----------- -----------
Total assets $1,830,699 $1,733,384

Liabilities
Payable for investments and cash equivalents
purchased $487,110 $834,891
Credit facility payable, at value* 413,237 -
Unrealized depreciation on forward foreign
currency contract 117 -
Management and performance-based incentive
fees payable 11,559 4,492
Interest payable 1,791 -
Directors' fees payable - 125
Accrued administrative expenses 316 42
Other accrued expenses 1,105 948
----------- -----------
Total liabilities $915,235 $840,498

Net Assets
Common stock, par value $.001 per share,
400,000 and 100,000 common shares authorized,
respectively, and 63,548 and 62,555 issued
and outstanding, respectively $64 $63
Paid-in capital in excess of par 897,438 878,838
Accumulated under (over) distributed net
investment income (11,715) (4,067)
Accumulated net realized gains (losses) 10,747 (145)
Net unrealized appreciation 18,930 18,197
----------- -----------
Total Net Assets $915,464 $892,886
----------- -----------
Total liabilities and net assets $1,830,699 $1,733,384
----------- -----------

Net Asset Value Per Share $14.41 $14.27
----------- -----------


(1) None of our portfolio companies are controlled by or affiliated to
Apollo Investment Corporation as defined by the Investment Company
Act of 1940.

* Foreign currency at value includes net unrealized depreciation at
December 31, 2005 and March 31, 2005 totaling $1 and $0 (in
000's), respectively. Interest receivable at value includes net
unrealized depreciation at December 31, 2005 and March 31, 2005
totaling $34 and $26 (in 000's), respectively. Credit facility
payable at value includes net unrealized appreciation at December
31, 2005 and March 31, 2005 totaling $4,972 and $0 (in 000's),
respectively.

# Certain amounts have been reclassified to conform to the current
period's presentation.


APOLLO INVESTMENT CORPORATION
STATEMENT OF OPERATIONS (unaudited)
(in thousands, except per share amounts)


For the Three For the Nine
Months Ended Months Ended
December 31, December 31,
----------------- -----------------
2005 2004# 2005 2004*#
-------- -------- -------- --------

INVESTMENT INCOME:
Interest $37,425 $14,816 $97,753 $26,512
Dividends 58 - 3,542 -
Other Income 84 - 9,079 -
-------- -------- -------- --------
Total Investment
Income 37,567 14,816 110,374 26,512

EXPENSES:
Management fees $6,421 $4,475 $16,222 $12,886
Performance-based incentive
fees 5,138 - 16,622 -
Interest and other credit
facility expenses 4,205 - 6,980 -
Administrative services
expense 359 112 1,074 560
Insurance expense 213 404 636 1,178
General and administrative
expenses 707 717 2,379 1,994
-------- -------- -------- --------
Total expenses 17,043 5,708 43,913 16,618
-------- -------- -------- --------
Expense offset
arrangement (30) 0 (30) 0
-------- -------- -------- --------
Net expenses 17,013 5,708 43,883 16,618
-------- -------- -------- --------
Net investment
income $20,554 $9,108 $66,491 $9,894
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS, CASH
EQUIVALENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss):
Investments $2,058 - $5,568 ($1)
Foreign currency
transactions 2,638 - 5,361 -
Cash equivalents (35) (120) (37) (120)
-------- -------- -------- --------
Net realized
gains (losses) 4,661 (120) 10,892 (121)
-------- -------- -------- --------
Net change in unrealized gain
(loss):
Investments 7,500 16,499 (3,093) 22,440
Cash equivalents - 64 5 (13)
Foreign currency
translations 831 (380) 3,821 (380)
-------- -------- -------- --------
Net change in
unrealized gain
(loss) 8,331 16,183 733 22,047
-------- -------- -------- --------
Net realized and unrealized
gain (loss) on investments,
cash equivalents and foreign
currencies 12,992 16,063 11,625 21,926
-------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $33,546 $25,171 $78,116 $31,820
-------- -------- -------- --------
EARNINGS PER COMMON SHARE $0.53 $0.41 $1.25 $0.51
-------- -------- -------- --------


* Commencement of operations on April 8, 2004

# Certain amounts have been reclassified to conform to the current
period's presentation.

About Apollo Investment Corporation

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

This press release contains forward-looking statements within themeaning 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; ourbusiness prospects and the prospects of our portfolio companies; theimpact of investments that we expect to make; the dependence of ourfuture success on the general economy and its impact on the industriesin which we invest; the ability of our portfolio companies to achievetheir objectives; our expected financings and investments; theadequacy of our cash resources and working capital; and the timing ofcash 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 identifyforward-looking statements. Such statements are based on currentlyavailable operating, financial and competitive information and aresubject to various risks and uncertainties that could cause actualresults to differ materially from our historical experience and ourpresent expectations. Undue reliance should not be placed on suchforward-looking statements as such statements speak only as of thedate on which they are made. We do not undertake to update ourforward-looking statements unless required by law.