ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
APOLLO INVESTMENT
CORPORATION
(Exact name of registrant as specified in its charter)
| Maryland |
52-2439556 | |
|---|---|---|
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 9 West 57th Street, 41st floor, New York, N.Y. |
10019 | |
|---|---|---|
| (Address of principal executive office) | (Zip Code) |
(212) 515-3200
(Registrant's
telephone number, include area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The number of shares of the registrant’s Common Stock, $.001 par value, outstanding as of December 31, 2004 was 62,289,586.
| PART I |
FINANCIAL INFORMATION |
PAGE |
|---|---|---|
| Item 1 |
FINANCIAL STATEMENTS (unaudited) |
3 |
| Balance Sheet as of December 31, 2004 |
3 | |
| Statement of Operatings for the quarter ended December 31, 2004 and for the period April 8, 2004* through December 31, 2004 |
4 | |
| Statement of Stockholders' Equity for the period April 8, 2004* through December 31, 2004 |
5 | |
| Statement of Cash Flows for the period April 8, 2004* through December 31, 2004 |
6 | |
| Schedule of Investments as of December 31, 2004 |
7 | |
| Notes to Financial Statements |
9 | |
| Report of Independent Registered Public Accounting Firm |
14 | |
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
15 |
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
18 |
| Item 4. |
Controls and Procedures |
18 |
| PART II |
OTHER INFORMATION |
|
| Item 1. |
Legal Proceedings |
19 |
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
19 |
| Item 3. |
Defaults upon Senior Securities |
19 |
| Item 4. |
Submission of Matters to a Vote of Secuirty Holders |
19 |
| Item 5. |
Other Information |
19 |
| Item 6. |
Exhibits and Reports on Form 8-K |
20 |
| Signatures |
21 |
* Commencement of operations
2
In this Quarterly Report, “Company”, “AIC”, “Fund”, “we”, “us” and “our” refer to Apollo Investment Corporation unless the context otherwise states.
| December 31, 2004 (unaudited) | ||
|---|---|---|
| Assets | ||
| Cash | $ | 3,825 |
| Investments, at fair value (cost - $703,503) | 725,943 | |
| Cash equivalents, at fair value (cost - $810,757) | 810,744 | |
| Interest receivable, at value* | 6,594 | |
| Other assets | 381 | |
| Total assets | $ | 1,547,487 |
| Liabilities | ||
| Payable for cash equivalents | $ | 649,438 |
| Management fee payable | 4,475 | |
| Unrealized depreciation on forward foreign currency contract (see note 8) | 388 | |
| Accrued expenses | 910 | |
| Total liabilities | $ | 655,211 |
| Stockholders' Equity | ||
| Common stock, par value $.001 per share, 100,000,000 common shares authorized, 62,289,586 issued and outstanding | $ | 62 |
| Paid-in capital in excess of par | 874,358 | |
| Accumulated net investment income | 9,894 | |
| Dividends paid to stockholders | (13,964) | |
| Accumulated net realized losses | (121) | |
| Net unrealized appreciation | 22,047 | |
| Total stockholders' equity | $ | 892,276 |
| Total liabilities and stockholders' equity | $ | 1,547,487 |
| * Value reflects unrealized appreciation of $8,319 dollars. |
See notes to financial statements.
3
| Quarter Ended December 31, 2004 |
April 8, 2004* through December 31, 2004 | |
|---|---|---|
| Operating Income | ||
| Interest Income | $14,816 | $26,512 |
| |
| |
| Operating Expenses | ||
| Management Fees | $4,475 | $12,886 |
| General and administrative expenses | 1,233 | 3,732 |
| |
| |
| Total operating expenses | 5,708 | 16,618 |
| |
| |
| Net operating income before investment gains and losses | $9,108 | $9,894 |
| Net realized loss on investments and cash equivalents | (120) | (121) |
| Net change in unrealized appreciation | 16,183 | 22,047 |
| |
| |
| Net increase in stockholders' equity resulting from operations | $25,171 | $31,820 |
| Earnings per common share (see note 6) | $0.406 | $0.513 |
* Commencement of operations
See notes to financial statements.
4
| Common Stock | |||||||
|---|---|---|---|---|---|---|---|
| Shares | Amount | Paid-in Capital in Excess of Par |
Accumulate Earnings |
Total Stockholders' Equity | |||
| Balance at April 8, 2004* | 100 | $0 | $1 | $0 | $1 | ||
| Issuance of common stock from public offering (net of underwriting costs) | 62,000,000 | 62 | 871,813 | 871,875 | |||
| Offering costs | (1,722) | (1,722) | |||||
| Net increase in stockholders' equity resulting from operations | 31,820 | 31,820 | |||||
| Shares issued in connection with dividend reinvestment plan | 289,486 | 0 | 4,266 | 4,266 | |||
| Dividends declared | (13,964) | (13,964) | |||||
| |
|
|
|
| |||
| Balance at December 31, 2004 | $62,289,586 | $62 | $874,358 | $17,856 | $892,276 | ||
* Commencement of operations
See notes to financial statements.
5
| Cash Flows from Operating Activities: | |
| Net Increase in Stockholders' Equity Resulting from Operations | $31,820 |
| Adjustments to reconcile net increase: | |
| Purchase of investment securities | (728,725) |
| Proceeds from disposition of investment securities | 25,222 |
| Sale of short-term securities, net | (134) |
| Increase in interest receivable | (6,586) |
| Increase in other assets | (381) |
| Increase in management fee payable | 4,475 |
| Increase in accrued expenses | 910 |
| Payable for cash equivalents purchased | 649,438 |
| Net unrealized appreciation on investments, cash equivalents and forward foreign currency contracts | (22,047) |
| Net realized loss on investments and cash equivalents | 121 |
| | |
| Net Cash Used by Operating Activities | $(45,887) |
| Cash Flows from Financing Activities: | |
| Net proceeds from the issuance of common stock | $871,875 |
| Offering costs from the issuance of common stock | (1,722) |
| Dividends paid in cash | (9,698) |
| | |
| Net Cash Provided by Financing Activities | $860,455 |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | $814,568 |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 1 |
| | |
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $814,569 |
Non-cash financing activities consist of the reinvestment of dividends totaling $4,266,613.
* Commencement of operations
See notes to financial statements.
6
| Portfolio Company (1) | Industry | Par Amount | Cost | Fair Value (2) | |||||
| Subordinated Debt/Corporate Notes - 46.6% | |||||||||
| Anthony International, 13.50%, due 09/01/12 | Manufacturing | $9,524 | $9,388 | $9,524 | |||||
| AMH Holdings II, Inc., 13.625%, due 12/01/14 | Building Products | 45,000 | 43,990 | 45,000 | |||||
| Invista Corporation, 9.25%, due 05/01/12• | Chemicals | 35,000 | 35,000 | 39,025 | |||||
| Language Line Holdings, Inc., 0% / 14.125%, due 06/15/13 | Business Services | 21,567 | 12,014 | 12,293 | |||||
| Language Line Inc., 11.125%, due 06/15/12 | Business Services | 14,500 | 14,194 | 15,370 | |||||
| Latham Manufacturing Corp., 14.00%, 06/30/11 | Leisure Equipment | 31,100 | 30,478 | 31,100 | |||||
| Lexicon Marketing (USA), Inc., 13.75%, 01/02/12 * | Direct Marketing | 27,000 | 26,461 | 27,000 | |||||
| National Waterworks Holdings, Inc., 12.50%, 01/01/14• | Distribution | 37,000 | 36,274 | 37,000 | |||||
| N.E.W. Customer Service Companies Inc., 12.50%, due 08/17/11 | Consumer Services | 26,680 | 23,381 | 26,680 | |||||
| N.E.W. Customer Service Companies Inc., 14.00% Convertible, due 08/17/13 | Consumer Services | 8,320 | 8,320 | 10,717 | |||||
| Playpower Holdings Inc. 15.50%, 11/30/12 | Leisure Equipment | 60,775 | 60,775 | 60,775 | |||||
| Pro Mach Merger Sub Inc., 13.75%, 06/15/12 | Machinery | 19,000 | 18,622 | 19,000 | |||||
| Source Media Holdings Inc., 13.00%, 11/30/12 | Publishing | 17,000 | 16,625 | 17,000 | |||||
| TDS Logistics, Inc., 14.75%, due 02/26/10 | Logistics | 17,500 | 17,420 | 17,709 | |||||
| WDAC Intermediate Corp., 13.75%, 06/01/15 ** | Advertising | €33,000 | 44,326 | 47,636 | |||||
| Total Subordinated Debt/Corporate Notes | $397,268 | $415,829 | |||||||
| Common Stock/Warrants - 2.3% | Shares/Warrants | ||||||||
| Latham Acquisition Corp. | Leisure Equipment | 30,000 shs. | $3,000 | $3,000 | |||||
| LM Acquisition Ltd. * | Direct Marketing | 10,000 shs. | 10,000 | 10,000 | |||||
| N.E.W. Customer Service Companies Inc. | Consumer Services | 1,105,961 wts. | 3,404 | 4,995 | |||||
| Pro Mach Merger Sub Inc. | Machinery | 150,000 shs. | 1,500 | 1,500 | |||||
| TDS Logistics Inc. | Logistics | 250,000 shs. | 2,500 | 1,200 | |||||
| $20,404 | $20,695 | ||||||||
| Par Amount | |||||||||
| Bank Debt/Senior Secured Debt (3) - 32.4% | |||||||||
| Amerco Corp., due 02/27/09 | Transportation | $14,888 | $15,107 | $15,185 | |||||
| Anthony International, due 09/01/11 | Manufacturing | 13,000 | 12,876 | 13,000 | |||||
| C.H.I. Overhead Doors, Inc., due 10/22/11 | Building Products | 10,000 | 9,951 | 10,175 | |||||
| Charter Communications, due 04/21/11 | Cable TV | 24,875 | 24,875 | 24,918 | |||||
| Cygnus Business Media, Inc., due 07/12/09 | Media | 15,000 | 14,932 | 14,962 | |||||
| Cygnus Business Media, Inc., due 01/12/10 | Media | 10,000 | 9,909 | 9,975 | |||||
| Directed Electronics, due 06/17/10 | Electronics | 4,859 | 4,859 | 4,896 | |||||
| EuroFresh, due 05/14/10 | Agriculture | 25,000 | 24,681 | 25,437 | |||||
| Grand Vehicle Works Holding Corp., due 07/23/11 | Manufacturing | 10,000 | 10,000 | 9,500 | |||||
| Language Line Inc., due 06/11/11 | Business Services | 6,816 | 6,799 | 6,910 | |||||
See notes to financial statements.
7
| Portfolio Company (1) | Industry | Par Amount | Cost | Fair Value (2) | ||||||
Bank Debt/Senior Secured Debt (3) – (continued) Mueller Group Inc., due 11/01/11 | Industrial | $17,000 | $17,000 | $17,595 | ||||||
| NES Rentals Holdings Inc., due 08/17/10 | Equipment Rental | 24,937 | 24,937 | 25,187 | ||||||
| Phillips Health, LLC, due 08/23/10 | Vitamins, Supplements | 13,412 | 13,347 | 13,345 | ||||||
| Phillips Health, LLC, due 08/20/11 | Vitamins, Supplements | 15,000 | 14,854 | 14,925 | ||||||
| Prestige Brands Inc., due 10/06/11 | Consumer Products | 20,000 | 20,000 | 20,569 | ||||||
| Sealy Mattress Co., due 04/06/13 | Consumer Products | 10,000 | 10,000 | 10,319 | ||||||
| Source Media Inc., due 11/30/12 | Publishing | 10,000 | 10,000 | 10,212 | ||||||
| Supresta Holdings, Inc., due 07/20/11 | Chemicals | 6,965 | 6,965 | 7,052 | ||||||
| United Industries Corporation, due 04/30/11 | Consumer Products | 14,888 | 14,888 | 15,139 | ||||||
| United Industries Corporation, due 10/31/11 | Consumer Products | 9,950 | 9,950 | 10,118 | ||||||
| United Site Services, Inc. due 06/30/10 | Environmental Services | 10,000 | 9,901 | 10,000 | ||||||
| Total Bank Debt/Senior Secured Debt | $285,831 | $289,419 | ||||||||
| Total Investments | $703,503 | $725,943 | ||||||||
| Cash Equivalents -90.9% | ||||||||||
| U.S. Cash Management Bill, 2.11%, due 01/18/05 | Government | $650,000 | $649,438 | $649,438 | ||||||
| U.S. Treasury Bill, 1.97%, due 02/03/05 | Government | 35,000 | 34,939 | 34,938 | ||||||
| U.S. Treasury Bill, 2.21%, due 03/24/05 | Government | 127,000 | 126,380 | 126,368 | ||||||
Total Cash Equivalents |
$810,757 | $810,744 | ||||||||
Total Investments & Cash Equivalents - 172.2% |
$1,514,260 | $1,536,687 | ||||||||
Liabilities in excess of other assets - (72.2%) |
(644,411) | |||||||||
Net Assets - 100.0% |
$892,276 | |||||||||
(1)
None of our portfolio companies are controlled or affiliated as defined by the
Investment Company Act of 1940.
(2) Fair value is determined by or under the
direction of the Board of Directors of the Company (see Note 2).
(3) Represent
floating rate instruments that accrue interest at a predetermined spread
relative to an index, typically the LIBOR (London Interbank Offer Rate) or the
Prime Rate.
• These
securities are exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions that are exempt from registration, normally
to qualified institutional buyers.
* At December 31, 2004 and under the terms of our
investment, BNY Capital Partners had the option to call $2mm in subordinated notes and
$2mm in equity at their respective costs. The option expired unused in January 2005.
** Denominated
in Euros (“€”)
See notes to financial statements.
8
Apollo Investment Corporation (“Apollo Investment” or the “Company”), a Maryland corporation organized on February 2, 2004, is a newly organized closed-end, non-diversified management investment company that has filed an election to be treated as a business development company (“BDC”) under the Investment Company Act of 1940. In addition, for tax purposes we have elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We intend to invest primarily in middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
On April 5, 2004, Apollo Investment closed its initial public offering and sold 62,000,000 shares of its common stock at a price of $15.00 per share, less an underwriting discount and commissions totaling $0.9375 per share. We commenced operations on April 8, 2004 as we received $870.2 million in total net proceeds from the offering.
Interim financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending March 31, 2005.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.
The significant accounting policies consistently followed by Apollo Investment are:
| (a) | Security transactions are accounted for on the trade date; |
| (b) | Investments for which market quotations are readily available are valued at such market quotations; debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by or under the direction of our Board of Directors. Subordinated debt, senior secured debt and other debt securities with maturities greater than 60 days are valued by an independent pricing service or at the mean between the bid and ask prices from at least two brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). With respect to certain private equity securities, each investment is valued using comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public. The value is then discounted to reflect the illiquid nature of the investment. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we will use the pricing indicated by the external event to corroborate our private equity valuation. Because we expect that there will not be a readily available market value for most of the investments in our portfolio, we expect to value substantially all of our portfolio investments at fair value as determined in good faith by or under the direction of our Board using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. |
9
With respect to our investments for which market quotations are not readily available, our Board of Directors undertakes a multi-step valuation process each quarter, as described below:
| (1) | Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment. |
| (2) | Preliminary valuation conclusions are then documented and discussed with our senior management. |
| (3) | An independent valuation firm engaged by our Board of Directors reviews these preliminary valuations. |
| (4) | The audit committee of our Board of Directors comments on the preliminary valuation and our investment adviser and independent valuation firm responds and supplements the preliminary valuation based upon those comments. |
| (5) | The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of our investment adviser, independent valuation firm and audit committee. |
| The types of factors that we may take into account in fair value pricing our investments include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. |
| Determination of fair values involves subjective judgments and estimates. Accordingly, these notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements. |
| (c) | Investments purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates value; |
| (d) | Gains or losses on the sale of investments are calculated by using the specific identification method; |
| (e) | Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. 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. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as interest income; |
| (f) | The Company intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; |
| (g) | In accordance with Statement of Position 93-2 Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies, book and tax basis differences relating to stockholder distributions and other permanent book and tax differences are reclassified to paid-in capital. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America; |
| (h) | Dividends and distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually. |
| (i) | Origination, facility, commitment, consent and other fees received by the Company on loan agreements or other investments are typically accreted over the remaining term of the loan. |
| (j) | The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. |
| (k) | The Company may enter into forward exchange contracts in order to hedge against foreign currency risk. These contracts are marked to market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when contracts are settled. |
10
| Note 3. | Agreements |
Apollo Investment has entered into an Investment Advisory and Management Agreement with the Investment Adviser, Apollo Investment Management, L.P., under which the Investment Adviser, subject to the overall supervision of Apollo Investment’s Board of Directors, will manage the day-to-day operations of, and provide investment advisory services to, Apollo Investment. For providing these services, the Investment Adviser receives a fee from Apollo Investment, consisting of two components—a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.00% of Apollo Investment’s gross assets. For services rendered under the Investment Advisory and Management Agreement during the period commencing from the closing of Apollo Investment’s initial offering through and including the first six months of operations, the base management fee is payable monthly in arrears. For services rendered under the Investment Advisory and Management Agreement after that time, the base management fee is payable quarterly in arrears. For the first quarter of our operations, the base management fee is calculated based on the initial value of Apollo Investment’s gross assets. Subsequently, the base management fee will be calculated based on the average value of Apollo Investment’s gross assets at the end of the two most recently completed calendar quarters (we consider the date we commenced operations as a quarter end), and will be appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter are appropriately pro rated.
The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Apollo Investment’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Apollo Investment’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Apollo Investment’s net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. Apollo Investment pays the Investment Adviser an incentive fee with respect to the Apollo Investment’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Apollo Investment’s pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Apollo Investment’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Apollo Investment’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter.
The second part of the incentive fee will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), commencing on December 31, 2004, and will equal 20.0% of Apollo Investment’s realized capital gains for the calendar year computed net of all realized capital losses and unrealized capital depreciation at the end of such year. The incentive fee determined as of December 31, 2004 will be calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses and unrealized capital depreciation for the period ending December 31, 2004.
For the period April 8, 2004 (commencement of operations) through December 31, 2004, the Investment Adviser received $12,886,154 in base investment advisory and management fees from Apollo Investment.
11
Apollo Investment has also entered into an Administration Agreement with Apollo Investment Administration, LLC (the “Administrator”) under which the Administrator provides administrative services for Apollo Investment. For providing these services, facilities and personnel, Apollo Investment reimburses the Administrator for Apollo Investment’s allocable portion of overhead and other expenses incurred by Apollo Administration in performing its obligations under the Administration Agreement, including rent and Apollo Investment’s allocable portion of its chief compliance officer and chief financial officer and their respective staffs. The Administrator will also provide on Apollo Investment’s behalf managerial assistance to these portfolio companies to which Apollo Investment is required to provide such assistance.
For the period April 8, 2004 (commencement of operations) through December 31, 2004, the Administrator was reimbursed $414,463 in administrative services fees from Apollo Investment.
A portion of the net proceeds of our initial public offering of 62,000,000 shares of common stock was used for organizational and offering expenses of $252,311 and $1,722,565, respectively. Organizational expenses were expensed as incurred. Offering expenses have been charged against paid-in capital in excess of par. All organizational and offering expenses were borne by Apollo Investment.
At December 31, 2004, the Company’s total net assets and net asset value per share were $892,275,811 and $14.32, respectively.
The following information sets forth the computation of basic and diluted net increase (decrease) in stockholders’ equity per share resulting from operations for the period April 8, 2004 (commencement of operations) through December 31, 2004:
Numerator for basic and diluted gain per share: $31,819,624
Denominator for basic and diluted weighted average shares:
62,028,229
Basic and diluted net increase in stockholders' equity per share resulting from operations: $0.513
As of December 31, 2004, investments and cash equivalents consisted of the following:
| December 31, 2004 (in thousands) |
||||||||
| Cost | Fair Value | |||||||
| Subordinated Debt/Corporate Notes | $397,268 | $415,829 | ||||||
| Common Stock/Warrants | 20,404 | 20,695 | ||||||
| Bank Debt/Senior Secured Debt | 285,831 | 289,419 | ||||||
| Cash Equivalents | 810,757 | 810,744 | ||||||
| Totals | $1,514,260 | $1,536,687 | ||||||
12
| Note 8. | Forward Foreign Currency Contract |
At December 31, 2004, the Company had an open foreign currency contract to sell euro forward and bears the market risk that arises from changes in foreign currency exchange rates. Unrealized depreciation on the contract is reflected in the accompanying financial statements as follows:
| Foreign Currency | Local Currency |
Cost | Market Value |
Settlement Date |
Unrealized Depreciation |
|---|---|---|---|---|---|
| To Sell: Euro | €33,000,000 | $44,348,700 | $44,736,407 | 03/08/05 | $387,707 |
| Note 9. | Cash Equivalents |
Pending investment in longer-term portfolio holdings, Apollo Investment will make temporary investments in U.S. Treasury bills (of varying maturities) and repurchase agreements as outlined in our prospectus. These temporary investments will be deemed cash equivalents by us and are included in our Schedule of Investments. U.S. Treasury bills with maturities of greater than 60 days from the time of purchase will be marked-to-market as per our valuation policy.
The following is a schedule of financial highlights for the period April 8, 2004 (commencement of operations) through December 31, 2004:
| Per Share Data | ||
| Net asset value, begi |