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EX-32.2 - EXHIBIT 32.2 - APOLLO INVESTMENT CORPainv-2015930x10qxexh322.htm
EX-31.2 - EXHIBIT 31.2 - APOLLO INVESTMENT CORPainv-2015930x10qxexh312.htm
EX-31.1 - EXHIBIT 31.1 - APOLLO INVESTMENT CORPainv-2015930x10qxexh311.htm
EX-32.1 - EXHIBIT 32.1 - APOLLO INVESTMENT CORPainv-2015930x10qxexh321.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 2015
¨    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 814-00646
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
37th Floor
New York, N.Y.
10019
(Address of principal executive office)
(Zip Code)
(212) 515-3450
(Registrant’s telephone number, including 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 x  No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ¨  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer  
¨
Smaller Reporting Company  
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨  No x
The number of shares of the registrant’s Common Stock, $.001 par value, outstanding as of November 5, 2015 was 233,400,951.
 
 
 
 




APOLLO INVESTMENT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2015
TABLE OF CONTENTS
 

 
 
PAGE  
 
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
Statements of Assets and Liabilities as of September 30, 2015 and March 31, 2015
 

 
 
Statements of Operations for the three and six months ended September 30, 2015 and September 30, 2014
 

 
 
Statements of Changes in Net Assets for the six months ended September 30, 2015 and the year ended March 31, 2015
 

 
 
Statements of Cash Flows for the six months ended September 30, 2015 and September 30, 2014
 

 
 
Schedule of Investments as of September 30, 2015
 
 
 
 
Schedule of Investments as of March 31, 2015
 
 
 
 
Notes to Financial Statements
 
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
 
Signatures



PART I. FINANCIAL INFORMATION

In this Quarterly Report, “Apollo Investment”, the “Company”, “AIC”, “we”, “us” and “our” refer to Apollo Investment Corporation unless the context otherwise states.

Item 1. Financial Statements

APOLLO INVESTMENT CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data) 
 
September 30, 2015

March 31, 2015
 
(unaudited)
 
 
Assets
 
 
 
Non-controlled/non-affiliated investments (cost — $2,399,503 and $2,514,328, respectively)
$
2,198,354


$
2,357,042

Non-controlled/affiliated investments (cost — $372,477 and $297,948, respectively)
430,480


327,218

Controlled investments (cost — $539,194 and $674,299, respectively)
565,215


665,567

Total investments, at fair value (cost — $3,311,174 and $3,486,575, respectively) (Note 5)
3,194,049


3,349,827

Cash
11,418


3,766

Foreign currencies (cost — $1,099 and $4,856, respectively)
1,098


4,651

Receivable for investments sold
19,045


114,884

Interest receivable
29,131


43,312

Dividends receivable
12,640


5,425

Deferred financing costs
31,531


29,743

Prepaid expenses and other assets
3,943


9,283

Total Assets
$
3,302,855


$
3,560,891

 
 
 
 
Liabilities
 
 
 
Debt (Note 6)
$
1,370,163


$
1,498,759

Payable for investments purchased
396


10,736

Dividends payable
46,851


47,348

Management and performance-based incentive fees payable (Note 3)
29,557


37,361

Interest payable
15,745


15,851

Accrued administrative services expense
1,631


2,000

Other liabilities and accrued expenses
11,652


11,228

Total Liabilities
$
1,475,995


$
1,623,283

 
 
 
 
Net Assets
 
 
 
Common stock, par value $.001 per share, 400,000,000 common shares authorized, 233,400,951 and 236,741,351 issued and outstanding, respectively
$
233


$
237

Paid-in capital in excess of par
3,176,526


3,197,715

Over-distributed net investment income
(29,240
)

(35,589
)
Accumulated net realized loss
(1,213,600
)

(1,102,517
)
Net unrealized loss
(107,059
)

(122,238
)
Total Net Assets
$
1,826,860


$
1,937,608

Total Liabilities and Net Assets
$
3,302,855


$
3,560,891

 
 
 
 
Net asset value per share (Note 9)
$
7.83


$
8.18


See notes to financial statements.
3


APOLLO INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Investment Income
 
 
 
 
 
 
 
From non-controlled/non-affiliated investments:
 
 
 
 
 
 
 
Interest
$
70,255

 
$
96,146

 
$
143,829

 
$
178,693

Dividends
911

 
1,275

 
1,787

 
2,116

Other income
2,828

 
4,038

 
6,145

 
6,294

From non-controlled/affiliated investments:

 
 
 
 
 
 
Interest
224

 
971

 
451

 
3,196

Dividends
9,503

 
4,128

 
18,670

 
8,074

Other income
70

 
44

 
227

 
87

From controlled investments:

 
 
 
 
 
 
Interest
10,629

 
10,104

 
21,183

 
18,955

Dividends
4,000

 
1,891

 
7,731

 
3,699

Other income

 
313

 
63

 
376

Total Investment Income
$
98,420

 
$
118,910

 
$
200,086

 
$
221,490

 
 
 
 
 
 
 
 
Expenses

 
 
 
 
 
 
Management fees (Note 3)
$
16,727

 
$
18,878

 
$
34,079

 
$
36,989

Performance-based incentive fees (Note 3)
10,774

 
15,393

 
22,641

 
27,860

Interest and other debt expenses
21,764

 
18,946

 
44,200

 
37,848

Administrative services expense
1,650

 
1,525

 
3,083

 
2,958

Other general and administrative expenses
2,725

 
2,617

 
4,889

 
4,904

Total Expenses
$
53,640

 
$
57,359

 
$
108,892

 
$
110,559

Management and performance-based incentive fees waived (Note 3)
(4,722
)
 
(4,041
)
 
(9,237
)
 
(8,193
)
Expense reimbursements (Note 3)
(59
)
 
(96
)
 
(117
)
 
(116
)
Net Expenses
$
48,859

 
$
53,222

 
$
99,538

 
$
102,250

Net Investment Income
$
49,561

 
$
65,688

 
$
100,548

 
$
119,240

 
 
 
 
 
 
 
 
Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies
 
 
 
 
 
 
 
Net realized gain (loss):
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
Non-controlled/non-affiliated investments
$
(34,124
)
 
$
(173
)
 
$
(76,785
)
 
$
(11,889
)
Non-controlled/affiliated investments

 
11,633

 
(67
)
 
11,526

Controlled investments
3,148

 

 
(39,714
)
 

Foreign currencies
819

 
134

 
5,483

 
(1,376
)
Net realized gain (loss) on investments and foreign currencies
$
(30,157
)
 
$
11,594

 
$
(111,083
)
 
$
(1,739
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See notes to financial statements.
4


APOLLO INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS (unaudited) (continued)
(in thousands, except per share amounts)
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net change in unrealized gain (loss):
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
Non-controlled/non-affiliated investments
$
(48,094
)
 
$
(51,169
)
 
$
(43,863
)
 
$
(48,574
)
Non-controlled/affiliated investments
12,916

 
(1,961
)
 
28,733

 
8,869

Controlled investments
7,980

 
10,700

 
34,753

 
22,080

Foreign currencies
6,047

 
7,115

 
(4,444
)
 
6,727

Net change in unrealized gain (loss) on investments and foreign currencies
$
(21,151
)
 
$
(35,315
)
 
$
15,179

 
$
(10,898
)
Net realized and net change in unrealized loss on investments and foreign currencies
(51,308
)
 
(23,721
)
 
(95,904
)
 
(12,637
)
Net Increase (Decrease) In Net Assets Resulting From Operations
$
(1,747
)
 
$
41,967

 
$
4,644

 
$
106,603

 
 
 
 
 
 
 
 
Earnings (Loss) Per Share — Basic (Note 4)
$
(0.01
)
 
$
0.18

 
$
0.02

 
$
0.45

Earnings (Loss) Per Share — Diluted (Note 4)
$
(0.01
)
 
$
0.18

 
$
0.02

 
$
0.44


See notes to financial statements.
5


APOLLO INVESTMENT CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except shares)
 
 
Six Months Ended September 30, 2015
 
Year ended March 31, 2015
 
(unaudited)
 
 
Net Increase in Net Assets Resulting From Operations
 
 
 
Net investment income
$
100,548

 
$
227,973

Net realized loss on investments and foreign currencies
(111,083
)
 
(13,368
)
Net change in unrealized gain (loss) on investments and foreign currencies
15,179

 
(139,183
)
Net Increase In Net Assets Resulting From Operations
$
4,644

 
$
75,422

 
 
 
 
Distributions To Shareholders
 
 
 
Distribution of net investment income
$
(94,199
)
 
$
(165,626
)
Distribution of return of capital

 
(23,767
)
Net Decrease In Net Assets Resulting From Distributions To Shareholders
$
(94,199
)
 
$
(189,393
)
 
 
 
 
Capital Share Transactions
 
 
 
Offering costs from issuance of common stock
$

 
$
(32
)
Repurchase of common stock
(21,193
)
 

Net Decrease In Net Assets From Capital Share Transactions
$
(21,193
)
 
$
(32
)
 
 
 
 
Total Decrease in Net Assets
$
(110,748
)
 
$
(114,003
)
Net Assets at Beginning of Period
1,937,608

 
2,051,611

Net Assets at End of Period
$
1,826,860

 
$
1,937,608

 
 
 
 
Capital Share Activity
 
 
 
Shares Repurchased
3,340,400

 


See notes to financial statements.
6


APOLLO INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS (unaudited)
(in thousands) 
 
Six months ended September 30,
 
2015
 
2014
Cash Flows from Operating Activities
 
 
 
Net increase in net assets resulting from operations
$
4,644

 
$
106,603

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
 
 
 
Paid-in-kind (“PIK”) interest and dividends (Note 5)
(21,732
)
 
(17,058
)
Net amortization on investments
(3,521
)
 
(4,742
)
Accretion of discount on notes
300

 

Amortization of deferred financing costs
3,788

 
3,315

Increase (decrease) from foreign currency transactions
6,129

 
(1,953
)
Net change in unrealized (gain) loss on investments and foreign currencies
(15,179
)
 
10,898

Net realized loss on investments and foreign currencies
111,083

 
1,739

Changes in operating assets and liabilities:
 
 
 
Purchase of investments
(726,206
)
 
(1,264,949
)
Proceeds from disposition of investments
895,793

 
1,033,304

Decrease in interest receivable
14,181

 
4,821

Decrease (increase) in dividends receivable
(7,215
)
 
123

Increase in deferred financing costs

 
(225
)
Decrease (increase) in prepaid expenses and other assets
5,340

 
(736
)
Increase (decrease) in management and performance-based incentive fees payable
(7,804
)
 
7,263

Increase (decrease) in interest payable
(106
)
 
386

Decrease in accrued administrative services expense
(369
)
 
(217
)
Increase in other liabilities and accrued expenses
424

 
1,034

Net Cash (Used in) Provided by Operating Activities
$
259,550

 
$
(120,394
)
Cash Flows From Financing Activities
 
 
 
Offering costs for the issuance of common stock
$

 
$
(26
)
Repurchase of common stock
(21,193
)
 

Dividends paid in cash
(94,697
)
 
(94,697
)
Proceeds from debt
1,011,973

 
1,759,696

Payments on debt
(1,146,162
)
 
(1,547,163
)
Deferred financing costs paid
(5,576
)
 
(391
)
Net Cash (Used In) Provided by Financing Activities
$
(255,655
)
 
$
117,419

Net Increase (Decrease) In Cash
$
3,895

 
$
(2,975
)
Effect of exchange rates on cash balances
204

 
(79
)
Cash at the Beginning of Period
8,417

 
14,736

Cash at the End of Period
$
12,516

 
$
11,682

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Cash interest paid
$
38,480

 
$
33,091

 
 
 
 
Non-Cash Financing Activities
 
 
 
PIK income (Note 5)
$
16,328

 
$
14,625

Non-cash re-organizations/restructuring of investments
$
134,089

 
$
16,141



See notes to financial statements.
7


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited)
September 30, 2015
(in thousands except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—106.8%
SECURED DEBT—90.6%
1ST LIEN SECURED DEBT—39.0%
1st Lien Secured Debt (excluding Revolvers and Letters of Credit)—38.9%
Aventine Renewable Energy Holdings, Inc.
 
 10.500% Cash (15.000% PIK Toggle)
 
9/22/17
 
 Chemicals, Plastics & Rubber
 
$
16,339

 
$
18,192

 
$
16,252

 Aveta, Inc.
 
 9.750%
(3M L+825, 1.50% Floor)
 
12/12/17
 
 Healthcare & Pharmaceuticals
 
51,315

 
50,538

 
38,144

 Caza Petroleum Inc.
 
 12.000%
(12M L+1000, 2.00% Floor)
 
5/23/17
 
 Energy – Oil & Gas
 
45,000

 
44,202

 
42,666

 ChyronHego Corporation (18)
 
 6.625%
(3M L+563, 1.00% Floor)
 
3/9/20
 
 High Tech Industries
 
32,638

 
32,032

 
31,985

 CITGO Holding, Inc. (11)
 
 9.500%
(3M L+850, 1.00% Floor)
 
5/12/18
 
 Utilities - Oil and Gas
 
16,737

 
15,899

 
16,497

 Deep Gulf Energy II, LLC (23)
 
 14.500% (14.500% or 6M L+1300, 1.50% Floor)
 
9/30/18
 
 Energy – Oil & Gas
 
50,000

 
50,000

 
48,000

 Delta Educational Systems, Inc.
 
 16.000% PIK
 
12/11/16
 
 Education
 
6,008

 
6,008

 
6,008

 Dodge Data & Analytics LLC
 
 9.750%
(3M L+875, 1.00% Floor)
 
10/31/19
 
 Business Services
 
53,902

 
52,986

 
52,419

Emergency Communications Network, LLC (18)
 
 8.000%
(3M L+700, 1.00% Floor)
 
6/12/21
 
 High Tech Industries
 
22,444

 
22,121

 
22,107

 Hunt Companies, Inc. (11)
 
9.625%
 
3/1/21
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
19,008

 
18,812

 
17,677

 Magnetation, LLC (16)
 
 12.000% PIK
 
12/7/15
 
 Metals & Mining
 
12,673

 
12,673

 
12,267

 Magnetation, LLC (11)(13)(14)(16)
 
11.000%
 
5/15/18
 
 Metals & Mining
 
32,632

 
33,927

 
6,119

 Maxus Capital Carbon SPE I, LLC (Skyonic Corp.)
 
13.000%
 
9/18/19
 
 Chemicals, Plastics & Rubber
 
66,765

 
66,765

 
66,765

 My Alarm Center, LLC (16)
 
 9.000%
(12M L+800, 1.00% Floor)
 
1/9/18
 
 Business Services
 
42,614

 
42,614

 
42,614

 My Alarm Center, LLC (16)(23)
 
 9.000%
(12M L+800 Funded, 0.350% Unfunded, 1.00% Floor)
 
1/9/18
 
 Business Services
 
12,789

 
12,789

 
12,789

 My Alarm Center, LLC (16)(23)
 
 9.000%
(3M L+800 Funded, 0.350% Unfunded, 1.00% Floor)
 
1/9/18
 
 Business Services
 
3,868

 
3,868

 
3,868

 Osage Exploration & Development, Inc. (11)(17)
 
 13.000%
(12M L+1100, 2.00% Floor)
 
4/27/16
 
 Energy – Oil & Gas
 
25,000

 
24,856

 
14,465

 Pelican Energy, LLC (17)
 
 10.000% (7.000% Cash / 3.000% PIK)
 
12/31/18
 
 Energy – Oil & Gas
 
28,098

 
27,256

 
24,782


See notes to financial statements.
8


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
1st Lien Secured Debt (excluding Revolvers and Letters of Credit)—38.9% (continued)
 Saba Software, Inc. (18)
 
 9.750%
(12M L+875, 1.00% Floor)
 
3/30/21
 
 High Tech Industries
 
$
9,975

 
$
9,975

 
$
9,825

 SCM Insurance Services, Inc. (17)
 
9.250%
 
8/22/19
 
 Business Services
 
C$
33,000

 
29,603

 
24,368

 Spotted Hawk Development, LLC
 
 19.000% (13.000% Cash / 6.000% PIK)
 
9/12/16
 
 Energy – Oil & Gas
 
83,106

 
83,106

 
79,574

 Telestream Holdings Corporation (18)
 
 7.430%
(3M L+643, 1.00% Floor)
 
1/15/20
 
 High Tech Industries
 
32,094

 
32,094

 
31,372

 UniTek Global Services Inc. (16)
 
 9.500%
(3M L+750, 1.000% PIK, 1.00% Floor)
 
1/13/19
 
Telecommunications
 
19,501

 
19,501

 
19,501

 UniTek Global Services Inc. (16)
 
 8.500%
(3M L+750, 1.00% Floor)
 
1/13/19
 
Telecommunications
 
32,367

 
32,367

 
30,748

 Venoco, Inc.
 
12.000%
 
2/28/19
 
 Energy – Oil & Gas
 
40,517

 
40,517

 
39,301

Total 1st Lien Secured Debt (excluding Revolvers and Letters of Credit)
 
$
782,701

 
$
710,113

 
Funded and Unfunded Revolver Obligations—0.1%
Alliant Holdings, (Unfunded Revolver) (8)(21)(23)
 
 0.500% Unfunded
 
8/14/20
 
 Insurance
 
$
15,000

 
$
(1,575
)
 
$
(1,575
)
Avaya Inc., (Revolver) (23)
 
 2.933%
(12M L+275, 0.190% Floor)
 
10/26/16
 
Telecommunications
 
3,303

 
3,106

 
3,138

 CIT Group, Inc., (Unfunded Revolver) (8)(17)(21)(23)
 
0.625% Unfunded
 
1/27/17
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
25,000

 
(11
)
 
(750
)
 Confie Seguros Holding II Co., (Revolver) (16)(23)
 
 4.672%
(3M L+450, 0.17% Floor) / 6.750%
(3M P+350, 3.25% Floor) Funded
 
12/10/18
 
 Insurance
 
1,800

 
1,800

 
1,611

 Confie Seguros Holding II Co., (Unfunded Revolver) (8)(16)(21)
 
0.500% Unfunded
 
12/10/18
 
 Insurance
 
1,864

 
(294
)
 
(196
)
 My Alarm Center, LLC, (Revolver) (16)(23)
 
 9.000%
(3M L+800, 1.00% Floor)
 
1/9/18
 
 Business Services
 
833

 
833

 
833

 My Alarm Center, LLC, (Unfunded Revolver) (16)(21)(23)
 
0.350% Unfunded
 
1/9/18
 
 Business Services
 
5,417

 

 

 Tibco Software Inc., (Unfunded Revolver) (8)(21)(23)
 
0.500% Unfunded
 
12/5/19
 
 High Tech Industries
 
6,000

 
(50
)
 
(450
)
 Transfirst Holdings, Inc., (Unfunded Revolver) (8)(16)(21)
 
0.500% Unfunded
 
11/12/19
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
2,943

 
(12
)
 
(88
)
 UniTek Global Services Inc., (Unfunded Revolver) (16)(21)
 
0.500% Unfunded
 
1/13/19
 
Telecommunications
 
5,000

 

 

Total Funded and Unfunded Revolver Obligations
 
$
3,797

 
$
2,523


See notes to financial statements.
9


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
 
Letters of Credit—-0.0%
 Confie Seguros Holding II Co., Letter of Credit (8)(16)(23)
 
4.500%
 
6/29/16
 
 Insurance
 
$
500

 
$

 
$
(53
)
 Confie Seguros Holding II Co., Letter of Credit (8)(16)(23)
 
4.500%
 
1/13/16
 
 Insurance
 
336

 

 
(35
)
 Transfirst Holdings, Inc., Letter of Credit (8)(16)(23)
 
3.750%
 
11/12/19
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
57

 

 
(2
)
 UniTek Global Services Inc., Letter of Credit (16)(23)
 
7.500%
 
1/13/19
 
Telecommunications
 
15,711

 

 

 UniTek Global Services Inc., Letter of Credit (16)(23)
 
7.500%
 
1/13/19
 
Telecommunications
 
1,850

 

 

Total Letters of Credit
 
$

 
$
(90
)
TOTAL 1ST LEIN SECURED DEBT
 
$
786,498

 
$
712,546

 
2nd Lien Secured Debt—51.6%
 Access CIG, LLC
 
 9.750%
(3M L+875, 1.00% Floor)
 
10/17/22
 
 Business Services
 
$
35,755

 
$
34,096

 
$
34,861

 Active Network, Inc.
 
 9.500%
(3M L+850, 1.00% Floor)
 
11/15/21
 
 Business Services
 
19,672

 
19,591

 
18,615

 American Energy - Woodford LLC/AEW Finance Corp (11)
 
12.000%
 
12/30/20
 
 Energy – Oil & Gas
 
3,500

 
2,409

 
1,199

 Appriss Holdings, Inc.
 
 9.250%
(3M L+825, 1.00% Floor)
 
5/21/21
 
 Business Services
 
32,750

 
32,299

 
32,750

 Armor Holdings, Inc. (American Stock Transfer and Trust Company)
 
 10.250%
(3M L+900, 1.25% Floor)
 
12/26/20
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
8,000

 
7,876

 
7,930

 Asurion Corporation
 
 8.500%
(3M L+750, 1.00% Floor)
 
3/3/21
 
 Insurance
 
67,590

 
67,301

 
61,507

1A Smart Start, LLC
 
 9.500%
(3M L+850, 1.00% Floor)
 
8/19/22
 
 Consumer Services
 
35,000

 
34,308

 
34,300

 Confie Seguros Holding II Co.
 
 10.250%
(3M L+900, 1.25% Floor)
 
5/8/19
 
 Insurance
 
22,344

 
22,236

 
22,288

 Delta Educational Systems, Inc.
 
 35.000% PIK
 
6/10/18
 
 Education
 
1,083

 
1,083

 
1,603

 Deltek, Inc.
 
 9.500%
(3M L+850, 1.00% Floor)
 
6/26/23
 
 Business Services
 
33,736

 
33,243

 
33,841

 Elements Behavioral Health, Inc.
 
11.750%
(3M L+875 Cash / 2.000% PIK, 1.00% Floor)
 
2/11/20
 
 Healthcare & Pharmaceuticals
 
9,500

 
9,426

 
9,443

 Extraction Oil & Gas Holdings, LLC
 
 11.000% & 10.000%
 
5/29/19
 
 Energy – Oil & Gas
 
52,633

 
52,000

 
52,264

 Garden Fresh Restaurant Corp. (16)
 
 7.750%
(3M L+625 PIK, 1.50% Floor)
 
1/1/19
 
 Hotel, Gaming, Leisure, Restaurants
 
8,585

 
7,034

 
6,267

 Garden Fresh Restaurant Corp. (16)
 
 15.000%
(12M L+1350 PIK, 1.50% Floor)
 
1/1/19
 
 Hotel, Gaming, Leisure, Restaurants
 
43,037

 
41,367

 
38,303


See notes to financial statements.
10


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—51.6% (continued)
 GCA Services Group, Inc.
 
 9.250%
(3M L+800, 1.25% Floor)
 
11/2/20
 
 Business Services
 
$
19,333

 
$
19,464

 
$
19,333

 Grocery Outlet, Inc.
 
 9.250%
(3M L+825, 1.00% Floor)
 
10/21/22
 
 Food & Grocery
 
28,000

 
27,614

 
27,930

 GTCR Valor Companies, Inc.
 
 9.500%
(3M L+850, 1.00% Floor)
 
11/30/21
 
 Business Services
 
35,000

 
34,685

 
34,475

 Infiltrator Systems Integrated, LLC
 
 9.750%
(3M L+875, 1.00% Floor)
 
5/26/23
 
 Manufacturing, Capital Equipment
 
13,889

 
13,619

 
13,819

 Institutional Shareholder Services, Inc.
 
 8.500%
(3M L+750, 1.00% Floor)
 
4/30/22
 
 Business Services
 
6,640

 
6,582

 
6,408

 Kronos, Inc.
 
 9.750%
(3M L+850, 1.25% Floor)
 
4/30/20
 
 Business Services
 
4,525

 
4,502

 
4,621

MediaOcean, LLC
 
 9.500%
(3M L+850, 1.00% Floor)
 
8/15/23
 
 Business Services
 
18,000

 
17,468

 
18,000

 Miller Energy Resources, Inc. (17)(14)
 
 14.750% (3M L+1075 Cash / 2.000% PIK, 2.000% Floor)
 
2/3/18
 
 Energy – Oil & Gas
 
88,568

 
88,568

 
62,978

 MSC Software Corp. (17)
 
 8.500%
(3M L+750, 1.00% Floor)
 
5/31/21
 
 High Tech Industries
 
13,448

 
13,333

 
13,078

 Novolex Holdings, Inc.
 
 9.750%
(3M L+875, 1.00% Floor)
 
6/5/22
 
 Containers, Packaging & Glass
 
42,045

 
41,065

 
41,782

 Pabst Brewing Company
 
 9.250%
(3M L+825, 1.00% Floor)
 
11/14/22
 
 Consumer Goods – Durable
 
27,000

 
26,687

 
26,663

 Premier Trailer Leasing, Inc.
 
 10.000%
(3M L+900, 1.00% Floor)
 
9/24/20
 
 Transportation – Cargo, Distribution
 
52,000

 
51,098

 
53,040

 River Cree Enterprises LP (11)(17)
 
11.000%
 
1/20/21
 
 Hotel, Gaming, Leisure, Restaurants
 
C$
23,000

 
21,683

 
17,198

 SiTV, Inc. (11)
 
10.375%
 
7/1/19
 
 Broadcasting & Subscription
 
2,219

 
2,219

 
1,642

 SMG
 
 9.250%
(3M L+825, 1.00% Floor)
 
2/27/21
 
 Hotel, Gaming, Leisure, Restaurants
 
19,900

 
19,900

 
20,000

 Sprint Industrial Holdings, LLC
 
 11.250%
(3M L+1000, 1.25% Floor)
 
11/14/19
 
 Containers, Packaging & Glass
 
16,163

 
15,431

 
12,688

 SquareTwo Financial Corp. (Collect America, Ltd.) (17)
 
11.625%
 
4/1/17
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
65,152

 
64,516

 
40,720

 STG-Fairway Acquisitions, Inc.
 
 10.250%
(3M L+925, 1.00% Floor)
 
6/26/23
 
 Business Services
 
15,000

 
14,633

 
14,700

 TASC, Inc.
 
12.000%
 
5/21/21
 
 Aerospace & Defense
 
21,815

 
21,072

 
22,197

 TMK Hawk Parent, Corp.
 
 8.500%
(3M L+750, 1.00% Floor)
 
10/1/22
 
 Transportation – Cargo, Distribution
 
34,000

 
33,692

 
34,170


See notes to financial statements.
11


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—51.6% (continued)
 Transfirst Holdings, Inc.
 
 9.000%
(3M L+800, 1.00% Floor)
 
11/11/22
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
$
21,840

 
$
21,674

 
$
21,663

 Velocity Technology Solutions, Inc.
 
 9.000%
(3M L+775, 1.25% Floor)
 
9/28/20
 
 Business Services
 
16,500

 
16,230

 
16,005

 Venoco, Inc.
 
 8.875% Cash (12.000% PIK Toggle)
 
2/28/19
 
 Energy – Oil & Gas
 
35,843

 
46,020

 
28,029

 Vertafore, Inc.
 
 9.750%
(3M L+825, 1.50% Floor)
 
10/27/17
 
 Business Services
 
36,436

 
36,320

 
36,755

Total 2nd Lien Secured Debt
 
$
1,022,344

 
$
943,065

TOTAL SECURED DEBT
 
$
1,808,842

 
$
1,655,611

 
UNSECURED DEBT—16.2%
 Aerojet Rocketdyne Holdings, Inc. (formerly GenCorp, Inc.) (17)
 
 9.500%
(3M L+850, 1.00% Floor)
 
4/18/22
 
 Aerospace & Defense
 
$
10,500

 
$
10,500

 
$
10,500

 American Tire Distributors, Inc. (11)
 
10.250%
 
3/1/22
 
 Transportation – Cargo, Distribution
 
24,281

 
24,281

 
24,888

 Canacol Energy Ltd. (17)(23)
 
 9.500%
(3M L+850, 1.00% Floor)
 
12/31/19
 
 Energy – Oil & Gas
 
75,000

 
73,256

 
71,813

 Delta Educational Systems, Inc.
 
 16.000% PIK
 
5/12/17
 
 Education
 
26,128

 
25,935

 
20,314

 My Alarm Center, LLC
 
 16.250% (13.000% Cash / 3.250% PIK)
 
7/9/18
 
 Business Services
 
4,320

 
4,320

 
4,320

 Radio One, Inc. (11)
 
 9.250%
 
2/15/20
 
 Broadcasting & Subscription
 
15,804

 
15,717

 
13,611

Sorenson Holdings, LLC (11)
 
 13.000% Cash (13.000% PIK Toggle)
 
10/31/21
 
 Consumer Goods – Durable
 
68

 
45

 
68

 Tibco Software Inc. (11)
 
11.375%
 
12/1/21
 
 High Tech Industries
 
6,984

 
6,798

 
7,001

 U.S. Security Associates Holdings, Inc.
 
11.000%
 
7/28/18
 
 Business Services
 
135,000

 
135,000

 
136,350

 UniTek Global Services Inc.
 
 15.000% PIK
 
7/13/19
 
Telecommunications
 
6,814

 
6,814

 
6,814

TOTAL UNSECURED DEBT
 
$
302,666

 
$
295,679

TOTAL CORPORATE DEBT
 
$
2,111,508

 
$
1,951,290

 
STRUCTURED PRODUCTS AND OTHER—10.7%
 Asset Repackaging Trust Six B.V. (11)(17)(19)
 
13.945%
 
5/18/27
 
 Utilities – Electric
 
$
58,411

 
$
25,139

 
$
33,294

 Craft 2013-1, Credit-Linked Note (11)(16)(17)
 
 9.524%
(3M L+925)
 
4/17/22
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
25,000

 
25,071

 
24,259

 Craft 2013-1, Credit-Linked Note (16)(17)
 
 9.524%
(3M L+925)
 
4/17/22
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
7,625

 
7,736

 
7,402

 Craft 2014-1A, Credit-Linked Note (11)(17)
 
 9.924%
(3M L+965)
 
5/15/21
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
42,500

 
42,443

 
41,516


See notes to financial statements.
12


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
STRUCTURED PRODUCTS AND OTHER—10.7% (continued)
 Craft 2015-2, Credit-Linked Note (11)(17)
 
 9.589%
(3M L+925)
 
1/16/24
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
$
26,000

 
$
26,000

 
$
24,797

 Dark Castle Holdings, LLC
 
35.400%
 
N/A
 
 Media – Diversified & Production
 
24,395

 
1,189

 
2,270

 JP Morgan Chase & Co., Credit-Linked Note (17)
 
 12.531%
(12M L+1225)
 
12/20/21
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
43,250

 
41,727

 
42,506

 NXT Capital CLO 2014-1, LLC, Class E Notes (11)(17)
 
 5.777%
(3M L+550)
 
4/23/26
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
5,000

 
4,680

 
4,462

 Renaissance Umiat, LLC, ACES Tax Receivable (15)(17)

11.240%- 12.370%

N/A

 Energy – Oil & Gas



15,296


15,236

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
189,281

 
$
195,742

 
 
 
 
 
 
 
PREFERRED EQUITY—1.6%
 
Shares
 
 
 
 
 CA Holding, Inc. (Collect America, Ltd.), Series A Preferred Stock (13)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
32,961

 
$
788

 
$

 Crowley Holdings, Series A Preferred Stock (11)
 
12.000% (10.000% Cash / 2.000% PIK)
 
N/A
 
 Transportation – Cargo, Distribution
 
22,500

 
23,310

 
23,712

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock (Convertible) (13)(14)
 
12.500% PIK
 
N/A
 
 Education
 
332,500

 
6,863

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock (13)(14)
 
13.500% PIK
 
5/12/18
 
 Education
 
12,360

 
27,685

 
138

 Varietal Distribution Holdings, LLC, Class A Preferred Unit
 
8.000% PIK
 
N/A
 
 Transportation – Cargo, Distribution
 
3,097

 
4,842

 
4,842

TOTAL PREFERRED EQUITY
 
$
63,488

 
$
28,692


See notes to financial statements.
13


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
EQUITY—1.2%
Common Equity/Interests—1.0%
 
 
 
 
 
 
 
Shares
 
 
 
 
 ATD Corporation (Accelerate Parent Corp), Common Stock
 
N/A
 
N/A
 
 Transportation – Cargo, Distribution
 
1,664,046

 
$
1,714

 
$
2,640

 CA Holding, Inc. (Collect America, Ltd.), Series A Common Stock (13)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
25,000

 
2,500

 

 CA Holding, Inc. (Collect America, Ltd.), Series AA Common Stock (13)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
4,294

 
429

 

 Caza Petroleum Inc., Net Profits Interest (13)
 
N/A
 
N/A
 
 Energy – Oil & Gas
 

 
1,202

 

 Caza Petroleum Inc., Overriding Royalty Interest
 
N/A
 
N/A
 
 Energy – Oil & Gas
 

 
339

 
34

 Clothesline Holdings, Inc. (Angelica Corporation), Common Stock (13)
 
N/A
 
N/A
 
 Healthcare & Pharmaceuticals
 
6,000

 
6,000

 
1,014

 Explorer Coinvest, LLC (Booz Allen), Common Stock (17)
 
N/A
 
N/A
 
 Business Services
 
192

 
1,468

 
4,675

 Garden Fresh Restaurant Holdings, LLC., Common Stock (13)
 
N/A
 
N/A
 
 Hotel, Gaming, Leisure, Restaurants
 
50,000

 
5,000

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Common Stock (13)
 
N/A
 
N/A
 
 Education
 
17,500

 
175

 

 Pelican Energy, LLC, Net Profits Interest (13)(17)
 
N/A
 
N/A
 
 Energy – Oil & Gas
 
1,098,572

 
1,099

 

 Skyline Data, News and Analytics LLC, Class A Common Unit (13)
 
N/A
 
N/A
 
 Business Services
 
4,500

 
4,500

 
4,500

 Sorenson Holdings, LLC, Membership Interests (13)
 
N/A
 
N/A
 
 Consumer Goods – Durable
 
587

 

 
103

 Univar, Inc., Common Stock (13)
 
N/A
 
N/A
 
 Wholesale
 
290,015

 
5,755

 
5,264

 Varietal Distribution Holdings, LLC, Class A Common Unit (13)
 
N/A
 
N/A
 
 Transportation – Cargo, Distribution
 
28,028

 
28

 
73

Total Common Equity/Interests
 
$
30,209

 
$
18,303


See notes to financial statements.
14


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except warrants)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—120.3%(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Warrants
 
Cost
 
Fair
Value (1)
Warrants—0.2%
 CA Holding, Inc. (Collect America, Ltd.), Common Stock Warrants (13)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
12,255

 
$
8

 
$

 Energy & Exploration Partners, Inc., Common Stock Warrants (13)
 
N/A
 
N/A
 
 Energy – Oil & Gas
 
60,778

 
2,374

 

 Fidji Luxco (BC) S.C.A., Common Stock Warrants (2)(13)(17)
 
N/A
 
N/A
 
 High Tech Industries
 
18,113

 
182

 
4,105

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Class A-1 Preferred Stock Warrants (13)
 
N/A
 
N/A
 
 Education
 
45,947

 
459

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Class B-1 Preferred Stock Warrants (13)
 
N/A
 
N/A
 
 Education
 
104,314

 
1,043

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Common Stock Warrants (13)
 
N/A
 
N/A
 
 Education
 
9,820

 
98

 

 Osage Exploration & Development, Inc., Common Stock Warrants (13)(17)
 
N/A
 
N/A
 
 Energy – Oil & Gas
 
1,496,843

 

 

 Spotted Hawk Development, LLC, Common Stock Warrants (13)
 
N/A
 
N/A
 
 Energy – Oil & Gas
 
54,545

 
852

 
222

Total Warrants
 
$
5,016

 
$
4,327

TOTAL EQUITY
 
$
35,225

 
$
22,630

Total Investments in Non-Controlled/ Non-Affiliated Investments
 
$
2,399,503

 
$
2,198,354


See notes to financial statements.
15


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/AFFILIATED
INVESTMENTS—23.6%(4)(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par
Amount(12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—0.1%
SECURED DEBT—0.1%
1st Lien Secured Debt—0.1%
 Renewable Funding Group, Inc. (16)
 
8.000%
 
6/3/16
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
$
2,014,941

 
$
2,015

 
$
2,383

Total 1st Lien Secured Debt
 
$
2,015

 
$
2,383

TOTAL SECURED DEBT
 
$
2,015

 
$
2,383

TOTAL CORPORATE DEBT
 
$
2,015

 
$
2,383

 
STRUCTURED PRODUCTS AND OTHER—11.9%
 Golden Bear Warehouse LLC, Equity (3)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
$
20,741

 
$
20,741

 
$
23,268

 Golden Hill CLO I, LLC, Equity (3)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
70,944

 
70,752

 
73,072

 Highbridge Loan Management 3-2014, Ltd, Subordinated Notes (3)(11)(17)(22)
 
14.510%
 
1/18/25
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
8,163

 
5,974

 
5,922

 Ivy Hill Middle Market Credit Fund IX, Ltd, Subordinated Notes (3)(11)(17)(22)
 
16.410%
 
10/18/25
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
12,500

 
10,790

 
10,448

 Ivy Hill Middle Market Credit Fund X, Ltd, Subordinated Notes (3)(11)(17)(22)
 
13.780%
 
7/18/27
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
14,000

 
12,457

 
12,154

 Jamestown CLO I LTD, Subordinated Notes (3)(11)(17)(22)
 
 
11/5/24
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
4,325

 
3,261

 
2,803

 MCF CLO I, LLC, Membership Interests (3)(4)(11)(17)(22)
 
23.740%
 
4/20/23
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
38,918

 
34,035

 
36,548

 MCF CLO III, LLC, Class E Notes (3)(11)(17)
 
 4.725%
(3M L+445)
 
1/20/24
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
12,750

 
11,512

 
10,959

 MCF CLO III, LLC, Membership Interests (3)(11)(17)(22)
 
19.840%
 
1/20/24
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
41,900

 
35,676

 
37,020

 Slater Mill Loan Fund LP, LP Certificates (3)(17)(22)
 
8.200%
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
8,375

 
5,569

 
5,529

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
210,767

 
$
217,723

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—7.2%
 
 
 
 
 
 
 
Shares
 
 
 
 
 AMP Solar (UK) Limited, Class A Preference Shares (2)(17)
 
16.430%
 
10/31/49
 
 Energy - Electricity
 
74,429,212

 
$
114,307

 
$
112,302


See notes to financial statements.
16


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN NON-CONTROLLED/AFFILIATED
INVESTMENTS—23.6%(4)(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par
Amount(12)
 
Cost
 
Fair
Value (1)
PREFERRED EQUITY—7.2% (continued)
 
 
 
 
 
Shares
 
 
 
 
 Renewable Funding Group, Inc., Series B Preferred Stock (13)
 
N/A
 
N/A
 
 Diversified Investment Vehicles, Banking, Finance, Real Estate
 
1,505,868

 
$
8,343

 
$
19,114

TOTAL PREFERRED EQUITY
 
$
122,650

 
$
131,416

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—4.3%
 
 
 
 
 
 
 
 
 
 
Common Equity/Interests—4.3%
 
 
 
 
 
 
 AMP Solar Group, Inc., Class A Common Unit (3)(13)(17)
 
N/A
 
N/A
 
 Energy - Electricity
 
140,688

 
$
6,000

 
$
6,000

 Generation Brands Holdings, Inc., Basic Common Stock (3)(13)
 
N/A
 
N/A
 
 Consumer Goods – Durable
 
9,007

 

 
8,264

 Generation Brands Holdings, Inc., Series 2L Common Stock (3)(13)
 
N/A
 
N/A
 
 Consumer Goods – Durable
 
36,700

 
11,242

 
33,674

 Generation Brands Holdings, Inc., Series H Common Stock (3)(13)
 
N/A
 
N/A
 
 Consumer Goods – Durable
 
7,500

 
2,298

 
6,881

 LVI Group Investments, LLC, Common Units (3)(13)
 
N/A
 
N/A
 
 Environmental Industries
 
212,460

 
17,505

 
24,139

Total Common Equity/Interests
 
$
37,045

 
$
78,958

TOTAL EQUITY
 
$
37,045

 
$
78,958

Total Investments in Non-Controlled/Affiliated Investments
 
$
372,477

 
$
430,480


See notes to financial statements.
17


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands, except share data)
INVESTMENTS IN CONTROLLED INVESTMENTS—30.9%(5)(10)
 
Interest Rate (20)
 
Maturity Date
 
Industry (9)
 
Par
Amount(12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—19.3%
SECURED DEBT—19.3%
Funded and Unfunded Revolver Obligations—19.3%
 Merx Aviation Finance, LLC, (Revolver) (5)(16)
 
12.000% Funded
 
10/31/18
 
 Aviation and Consumer Transport
 
$
352,084

 
$
352,084

 
$
352,084

 Merx Aviation Finance, LLC, (Unfunded Revolver) (5)(13)(16)
 
0.000% Unfunded
 
10/31/18
 
 Aviation and Consumer Transport
 
47,916

 

 

Total Funded and Unfunded Revolver Obligations
 
$
352,084

 
$
352,084

Letters of Credit—0.0%
 
 
 
 
 
 
 
 
 
 
 
 
 Merx Aviation Finance Assets Ireland Limited, Letter of Credit (5)(16)(23)
 
2.250%
 
9/30/16
 
 Aviation and Consumer Transport
 
$
1,800

 
$

 
$

 Merx Aviation Finance Assets Ireland Limited, Letter of Credit (5)(16)(23)
 
2.250%
 
9/30/16
 
 Aviation and Consumer Transport
 
1,800

 

 

 Merx Aviation Finance, LLC, Letter of Credit (5)(16)(23)
 
2.250%
 
7/13/16
 
 Aviation and Consumer Transport
 
177

 

 

Total Letters of Credit
 
$

 
$

TOTAL SECURED DEBT
 
$
352,084

 
$
352,084

TOTAL CORPORATE DEBT
 
$
352,084

 
$
352,084

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—11.7%
Common Equity/Interests—11.7%
 Dynamic Product Tankers (Prime), LLC, Class A Units (5)(17)(24)
 
N/A
 
N/A
 
 Transportation – Cargo, Distribution
 

 
$
38,756

 
$
38,756

 Merx Aviation Finance, LLC, Membership Interests (5)(13)
 
N/A
 
N/A
 
 Aviation and Consumer Transport
 

 
82,354

 
108,375

 MSEA Tankers LLC, Class A Units (5)(17)(25)
 
N/A
 
N/A
 
 Transportation – Cargo, Distribution
 

 
66,000

 
66,000

Total Common Equity/Interests
 
$
187,110

 
$
213,131

TOTAL EQUITY
 
$
187,110

 
$
213,131

Total Investments in Controlled Investments
 
$
539,194

 
$
565,215

Total Investments—174.8% (6)(7)
 
$
3,311,174

 
$
3,194,049

Liabilities in Excess of Other Assets—(74.8)%
 
 
 
$
(1,367,189
)
Net Assets—100.0%
 
 
 
$
1,826,860


See notes to financial statements.
18


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands)
______________________
(1)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (Note 2).
(2)
Fidji Luxco (BC) S.C.A. is a EUR denominated investment and AMP Solar (UK) Limited is a GBP denominated investment.
(3)
Denotes investments where the governing documents of the entity preclude the Company from controlling management of the entity and therefore the Company has determined that the entity is not a controlled affiliate.
(4)
Denotes investments in which we are an “Affiliated Person”, as defined in the 1940 Act, due to holding the power to vote or owning 5% or more of the outstanding voting securities of the investment but not controlling the company. Fair value as of March 31, 2015 and September 30, 2015 along with transactions during the six months ended September 30, 2015 in these Affiliated investments are as follows:
Name of Issue
Fair Value at March 31, 2015
Gross
Additions (Cost) ●
Gross
Reductions (Cost) ■
Change in Unrealized Gain (Loss)
Fair Value at September 30, 2015
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
 AMP Solar Group, Inc., Class A Common Unit
$
3,500

$
2,500

$

$

$
6,000

$

$

 AMP Solar (UK) Limited, Class A Preference Shares
65,171

47,952


(821
)
112,302


5,020

 Generation Brands Holdings, Inc. (Quality Homes), Basic Common Stock
6,699



1,565

8,264



 Generation Brands Holdings, Inc. (Quality Homes), Series 2L Common Stock
27,294



6,380

33,674



 Generation Brands Holdings, Inc. (Quality Homes), Series H Common Stock
5,578



1,303

6,881



 Golden Bear Warehouse LLC, Equity
6,833

25,096

(8,589
)
(72
)
23,268


473

 Golden Hill CLO I, LLC, Equity
73,587


(726
)
211

73,072


3,991

Highbridge Loan Management 3-2014, Ltd., Class E Notes, L+600, 1/18/25
2,121

3

(2,280
)
156


(67
)
34

 Highbridge Loan Management 3-2014, Ltd., Subordinated Notes, 1/18/25
6,722


(563
)
(237
)
5,922


431

 Ivy Hill Middle Market Credit Fund IX, Ltd., Subordinated Notes, 10/18/25
11,375


(585
)
(342
)
10,448


875

 Ivy Hill Middle Market Credit Fund X, Ltd., Subordinated Notes, 7/18/27

12,457


(303
)
12,154


303

 Jamestown CLO I LTD, Subordinated Notes, 11/5/24
3,698


(172
)
(723
)
2,803


175

 LVI Group Investments, LLC, Common Units
8,669



15,470

24,139


175

 MCF CLO I, LLC, Membership Interests, 4/20/23
38,490


(1,052
)
(890
)
36,548


3,625

 MCF CLO III, LLC, Class E Notes L+445, 1/20/24
11,220

56


(317
)
10,959


363

 MCF CLO III, LLC, Membership Interests, 1/20/24
38,984


(1,280
)
(684
)
37,020


3,263

 Renewable Funding Group, Inc., 0.000%, 9/30/15
1,000


(1,000
)




 Renewable Funding Group, Inc., 8.000%, 6/3/16

2,015


368

2,383


54

 Renewable Funding Group, Inc., Series B Preferred Stock
9,309

1,000

(118
)
8,923

19,114



 Slater Mill Loan Fund LP, LP Certificates
6,968


(185
)
(1,254
)
5,529


566

 
$
327,218

$
91,079

$
(16,550
)
$
28,733

$
430,480

$
(67
)
$
19,348

______________
● Gross additions includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the accretion of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
■ Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the amortization of premiums, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.





See notes to financial statements.
19


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands)

As of September 30, 2015, the Company has a 28%, 26%, 33%, 32%, 100%, 100%, 97%, 98%, and 26% equity ownership interest in Generation Brands Holdings, Inc. (Quality Homes), Highbridge Loan Management, Ltd., Ivy Hill Middle Market Credit Fund IX, Ltd., Ivy Hill Middle Market Credit Fund X, Ltd., Golden Hill CLO I, LLC, Golden Bear Warehouse, LLC, MCF CLO I, LLC, MCF CLO III, LLC, and Slater Mill Loan Fund LP, respectively. With respect to these portfolio companies, shown under “Non-Controlled/Affiliated”, the Company does not have the right to elect or appoint more than 25% of the directors or another party has the right to elect or appoint more directors than the Company and has the right to appoint certain members of senior management. Therefore, the Company has determined that these entities are not controlled affiliates.
(5)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Fair value as of March 31, 2015 and September 30, 2015 along with transactions during the six months ended September 30, 2015 in these Controlled investments are as follows:
Name of Issue
Fair Value at March 31, 2015
Gross
Additions (Cost) ●
Gross
Reductions (Cost) ■
Change in Unrealized Gain (Loss)
Fair Value at September 30, 2015
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
 Dynamic Product Tankers (Prime), LLC, Class A Units
$

$
38,800

$
(44
)
$

$
38,756

$

$
2,000

 Merx Aviation Finance, LLC, (Revolver), 12.000% Funded
352,084




352,084


21,183

 Merx Aviation Finance, LLC, (Unfunded Revolver), 0.000% Unfunded







 Merx Aviation Finance Assets Ireland Limited, Letters of Credit, 2.250%, 9/30/15







 Merx Aviation Finance Assets Ireland Limited, Letters of Credit, 2.250%, 9/30/15







 Merx Aviation Finance, LLC, Letters of Credit, 2.250%, 9/30/15







Merx Aviation Finance, LLC, Membership Interests
165,172


(69,729
)
12,932

108,375



 MSEA Tankers LLC, Class A Units
33,000

33,000



66,000


3,863

PlayPower Holdings, Inc., Common Stock
55,900


(77,721
)
21,821


(39,714
)

PlayPower Holdings, Inc., Series A Preferred, 14.000% PIK, 11/15/20
59,411

1,891

(61,302
)



1,931


$
665,567

$
73,691

$
(208,796
)
$
34,753

$
565,215

$
(39,714
)
$
28,977

______________
● Gross additions includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the accretions of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
■ Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the amortization of premiums, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
As of September 30, 2015, the Company has a 85%, 100%, and 98% equity ownership interest in Dynamic Product Tankers (Prime), LLC, Merx Aviation Finance, LLC, and MSEA Tankers, LLC, respectively.

(6)
Aggregate gross unrealized gain and loss for federal income tax purposes is $156,142 and $293,905, respectively. Net unrealized loss is $137,763 based on a tax cost of $3,331,813.
(7)
Substantially all securities are pledged as collateral to our multicurrency revolving credit facility. As such these securities are not available as collateral to our general creditors.
(8)
The negative fair value is the result of the unfunded commitment or letter of credit being valued below par.
(9)
As a result of the amendment of our Senior Secured Facility on April 24, 2015, the industry classifications were updated in the Schedule of Investments as of September 30, 2015.
(10)
The percentage is calculated over net assets.
(11)
These securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions that are exempt from registration, normally to qualified institutional buyers.
(12)
Denominated in USD unless otherwise noted, Euro (“€”), British Pound (“£”), and Canadian Dollar (“C$”).
(13)
Non-income producing security.
(14)
Non-accrual status (Note 2).
(15)
The investment has a put option attached to it and the combined instrument has been recorded in its entirety at fair value as a hybrid instrument in accordance with ASC 815-15-25-4 with subsequent changes in fair value charged or credited to investment gains/losses for each period.



See notes to financial statements.
20


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
September 30, 2015
(in thousands)

(16)
Denotes debt securities where the Company owns multiple tranches of the same broad asset type but whose security characteristics differ. Such differences may include level of subordination, call protection and pricing, and differing interest rate characteristics, among other factors. Such factors are usually considered in the determination of fair values.
(17)
Investments that the Company has determined are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. The status of these assets under the 1940 Act is subject to change. The Company monitors the status of these assets on an ongoing basis.
(18)
In addition to the interest earned based on the stated rate of this loan, the Company may be entitled to receive additional interest as a result of its arrangement with other lenders in a syndication.
(19)
This investment represents a leveraged subordinated interest in a trust that holds one foreign currency denominated bond and a derivative instrument.
(20)
Generally, the interest rate on variable interest rate investments is at benchmark rate plus spread. The borrower has an option to choose the benchmark rate which can be LIBOR , ABR, prime or any other similarly defined rate. The spread may change based on the type of rate used. The terms in the schedule of investments disclose the actual interest rate in effect which is at LIBOR plus spread or ABR plus spread as of reporting period. LIBOR loans are typically indexed to 30-day, 90-day,180-day or 360-day LIBOR rates (1M L, 3M L, 6M L or 12M L, respectively), at the borrower’s option, and ABR rates are typically indexed to the current prime rate or federal funds rate. Both LIBOR and ABR rates are subject to interest floors. As of September 30, 2015, rates for 1M L, 3M L, 6M L or 12M L are 0.193%, 0.325%, 0.534% and 0.851%, respectively.
(21)
The rates associated with these undrawn committed revolvers and delayed draw term loans represent rates for commitment and unused fees.
(22)
The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.
(23)
As of September 30, 2015, the Company had the following commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments to issue letters of credit through a financial intermediary on behalf of certain portfolio companies. Such commitments are subject to the satisfaction of certain conditions set forth in the documents governing these loans and letters of credit and there can be no assurance that such conditions will be satisfied. See Note 8 to the financial statements for further information on revolving and delayed draw loan commitments, including commitments to issue letters of credit, related to certain portfolio companies.
 
Name of Issue
Total Revolving and Delayed Draw Loan Commitments
Drawn Commitments
Letters of Credit
Total Undrawn Commitments
Alliant Holdings
$
15,000

$

$

$
15,000

Avaya, Inc.
3,303

3,303



Canacol Energy Ltd.
100,000

75,000


25,000

CIT Group, Inc.
25,000



25,000

Confie Seguros Holding II Co.
4,500

1,800

836

1,864

Deep Gulf Energy II, LLC
50,000

50,000



Merx Aviation Finance Assets Ireland Limited
3,600


3,600


Merx Aviation Finance, LLC
177


177


My Alarm Center, LLC
25,817

17,490


8,327

Tibco Software Inc.
6,000



6,000

Transfirst Holdings, Inc.
3,000


57

2,943

UniTek Global Services Inc.
22,561


17,561

5,000

Total
$
258,958

$
147,593

$
22,231

$
89,134


(24)
As of September 30, 2015, Dynamic Product Tankers (Prime), LLC has various classes of limited liability interests outstanding of which Company holds Class A-1 and Class A-3 units which are identical except that Class A-1 unit is voting and Class A-3 unit is non-voting. The units entitle the Company to appoint three out of five managers to the board of managers.

(25)
As of September 30, 2015, MSEA Tankers, LLC has various classes of limited liability interests outstanding of which the Company holds Class A-1 and Class A-2 units which are identical except that Class A-1 unit is voting and Class A-2 unit is non-voting. The units entitle the Company to appoint two out of three managers to the board of managers.
 
N/A
Not applicable.




See notes to financial statements.
21


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
 September 30, 2015

Industry Classification
Percentage of Total Investments (at fair value) as of September 30, 2015
 Business Services
17.4%
 Energy – Oil & Gas
15.0%
 Diversified Investment Vehicles, Banking, Finance, Real Estate
14.8%
 Aviation and Consumer Transport
14.4%
 Transportation – Cargo, Distribution
7.8%
 High Tech Industries
3.7%
 Energy – Electricity
3.7%
 Insurance
2.6%
 Chemicals, Plastics & Rubber
2.6%
 Hotel, Gaming, Leisure, Restaurants
2.5%
 Consumer Goods – Durable
2.4%
 Telecommunications
1.9%
 Containers, Packaging & Glass
1.7%
 Healthcare & Pharmaceuticals
1.5%
 Consumer Services
1.1%
 Utilities – Electric
1.0%
 Aerospace & Defense
1.0%
 Education
0.9%
 Food & Grocery
0.9%
 Environmental Industries
0.8%
 Metals & Mining
0.6%
 Utilities - Oil and Gas
0.5%
 Broadcasting & Subscription
0.5%
 Manufacturing, Capital Equipment
0.4%
 Wholesale
0.2%
 Media – Diversified & Production
0.1%
Total Investments
100.0%







See notes to financial statements.
22


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS
March 31, 2015
(in thousands)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—109.5%
SECURED DEBT—85.0%
1st Lien Secured Debt—41.7%
 Alion Science & Technology Corporation
 
 11.000% (L+1000, 1.00% Floor)
 
8/16/19
 
 Aerospace and Defense
 
$
32,003

 
$
31,038

 
$
31,843

 Archroma (17)
 
 9.500% (L+825, 1.25% Floor)
 
10/1/18
 
 Chemicals
 
40,128

 
39,795

 
40,354

 Aventine Renewable Energy Holdings, Inc.
 
15.00% PIK or 10.50% Cash
 
9/22/17
 
 Chemicals
 
15,742

 
18,031

 
14,601

 Aveta, Inc.
 
 9.750% (L+825, 1.50% Floor)
 
12/12/17
 
 Healthcare
 
53,296

 
52,331

 
43,169

 Caza Petroleum, Inc.
 
 12.000% (L+1000, 2.00% Floor)
 
5/23/17
 
 Oil and Gas
 
45,000

 
43,992

 
42,660

ChyronHego Corp.
 
 9.000% (L+800, 1.00% Floor)
 
3/9/20
 
 Business Services
 
25,000

 
24,505

 
24,500

CITGO Holding, Inc. (11)
 
10.750%
 
2/15/20
 
 Energy
 
25,000

 
23,792

 
25,781

CITGO Holding, Inc.
 
 9.50% (L+850, 1.00% Floor)
 
5/12/18
 
 Energy
 
19,435

 
18,306

 
19,344

 Deep Gulf Energy II, LLC
 
 14.000% (14.00% or L+1250, 1.50% Floor)
 
3/31/17
 
 Oil and Gas
 
35,000

 
35,000

 
33,530

 Delta Educational Systems, Inc.
 
16.00% (8.00% Cash / 8.00% PIK)
 
12/11/16
 
 Education
 
5,892

 
5,892

 
5,892

 Dodge Data & Analytics LLC
 
 9.750% (L+875, 1.00% Floor)
 
10/31/19
 
 Printing and Publishing
 
60,349

 
59,223

 
58,689

 Extraction Oil & Gas Holdings, LLC
 
10.00% & 11.00%
 
5/29/19
 
 Oil and Gas
 
52,633

 
51,932

 
51,843

 Great Bear Petroleum Operating, LLC
 
12.000%
 
10/1/17
 
 Oil and Gas
 
5,064

 
5,064

 
5,064

 Hunt Companies, Inc. (11)
 
9.625%
 
3/1/21
 
 Buildings and Real Estate
 
21,008

 
20,776

 
21,586

 Magnetation, LLC (11)
 
11.000%
 
5/15/18
 
 Mining
 
38,454

 
39,878

 
19,804

 Maxus Capital Carbon SPE I, LLC (Skyonic Corp.)
 
13.000%
 
9/18/19
 
 Chemicals
 
73,104

 
73,104

 
73,104

 Molycorp, Inc. (17)
 
10.000%
 
6/1/20
 
 Diversified Natural Resources, Precious Metals and Minerals
 
42,977

 
42,699

 
22,276

 My Alarm Center, LLC (16)
 
 8.500% (L+750, 1.00% Floor)
 
1/9/18
 
 Business Services
 
42,614

 
42,614

 
42,613

 My Alarm Center, LLC (16)
 
 8.500% (L+750, 1.00% Floor)
 
1/9/18
 
 Business Services
 
12,731

 
12,731

 
12,731

 Osage Exploration & Development, Inc. (11)(17)
 
 13.000% (L+1100, 2.00% Floor)
 
4/27/16
 
 Oil and Gas
 
25,000

 
24,741

 
23,600

 Pelican Energy, LLC (17)
 
10.00% (7.00% Cash / 3.00% PIK)
 
12/31/18
 
 Oil and Gas
 
26,957

 
26,057

 
25,340

Saba Software, Inc.
 
 12.417% (L+1142, 1.00% Floor)
 
3/26/21
 
 Business Services
 
10,000

 
10,000

 
9,850

 SCM Insurance Services, Inc. (17)
 
9.250%
 
8/22/19
 
 Business Services
 
CAD 30,000
 
27,135

 
23,569

 Spotted Hawk Development, LLC
 
13.00% (12.00% Cash / 1.00% PIK)
 
9/12/16
 
 Oil and Gas
 
80,900

 
79,911

 
78,878

 Sunrun Solar Owner IX, LLC
 
9.079%
 
12/31/24
 
 Energy
 
3,424

 
3,284

 
3,527

Telestream Holdings Corporation
 
 10.254% (L+925, 1.00% Floor)
 
1/15/20
 
 Business Services
 
32,500

 
32,500

 
31,769

UniTek Global Services Inc. (16)
 
 9.500% (L+750, 1.00% PIK, 1.00% Floor)
 
1/13/19
 
Telecommunications
 
21,442

 
21,442

 
21,442

Total 1st Lien Secured Debt excluding Revolvers and Letters of Credit
 
$
865,773

 
$
807,359


See notes to financial statements.
23


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
 
Funded and Unfunded Revolver Obligations—-1.7%
 Avaya, Inc., (Revolver) (16)
 
 2.92% (L+275, 0.17% Floor) / 5.00% (P+175, 3.25% Floor) Funded
 
10/26/16
 
Telecommunications
 
$
16,553

 
$
16,553

 
$
15,436

 Avaya, Inc., (Unfunded Revolver) (8)(16)
 
0.50% Unfunded
 
10/26/16
 
Telecommunications
 
10,431

 
(3,181
)
 
(704
)
 BMC Software, Inc., (Unfunded Revolver) (8)
 
0.50% Unfunded
 
9/10/18
 
 Business Services
 
20,760

 
(1,857
)
 
(1,868
)
 CIT Group, Inc., (Unfunded Revolver) (8)(17)
 
 L+275
 
1/27/17
 
 Financial Services
 
25,000

 
(107
)
 
(1,250
)
 Confie Seguros Holding II Co., (Revolver) (16)
 
4.67% (L+450, 0.17% Floor) / 6.75% (P+350, 3.25% Floor) Funded
 
12/10/18
 
 Insurance
 
2,190

 
2,190

 
1,949

 Confie Seguros Holding II Co., (Unfunded Revolver) (8)(16)
 
0.50% Unfunded
 
12/10/18
 
 Insurance
 
1,625

 
(340
)
 
(179
)
 Laureate Education Inc., (Revolver) (16)(17)
 
 5.000% (L+375, 1.25% Floor) Funded
 
6/16/16
 
 Education
 
23,566

 
23,566

 
21,445

 Laureate Education, Inc., (Unfunded Revolver) (8)(16)(17)
 
0.625% Unfunded
 
6/16/16
 
 Education
 
5,212

 
(1,833
)
 
(469
)
 Salix Pharmaceuticals, Ltd., (Unfunded Revolver) (16)(17)
 
0.50% Unfunded
 
1/2/19
 
 Healthcare
 
24,867

 
(1,519
)
 

 Tibco Software Inc., (Unfunded Revolver) (8)
 
0.50% Unfunded
 
12/5/19
 
 Business Services
 
6,000

 
(56
)
 
(30
)
 Transfirst Holdings, Inc., (Unfunded Revolver) (8)(16)
 
0.50% Unfunded
 
11/12/19
 
 Financial Services
 
2,943

 
(14
)
 
(88
)
 UniTek Global Services, Inc., (Unfunded Revolver) (16)
 
0.50% Unfunded
 
1/13/19
 
Telecommunications
 
5,000

 
241

 

 Walter Energy, Inc., (Unfunded Revolver) (8)(16)(17)
 
 0.625% Unfunded
 
10/1/17
 
 Mining
 
275

 
(176
)
 
(48
)
Total Funded and Unfunded Revolver Obligations
 
$
33,467

 
$
34,194

 
Letters of Credit—(0.0)%
 Avaya, Inc., Letter of Credit (8)(9)(16)
 
2.750%
 
10/30/15- 4/6/16
 
Telecommunications
 
$
9,800

 
$

 
$
(662
)
 Confie Seguros Holding II Co., Letter of Credit (8)(16)
 
4.500%
 
10/27/15
 
 Insurance
 
600

 

 
(66
)
 Confie Seguros Holding II Co., Letter of Credit (8)(16)
 
4.500%
 
1/13/16
 
 Insurance
 
85

 

 
(9
)
 Laureate Education Inc., Letter of Credit (8)(16)(17)
 
3.750%
 
6/16/16
 
 Education
 
101

 

 
(9
)
 Salix Pharmaceuticals, Ltd., Letter of Credit (16)(17)
 
3.000%
 
2/10/16
 
 Healthcare
 
8

 

 

 Salix Pharmaceuticals, Ltd., Letter of Credit (16)(17)
 
3.000%
 
2/10/16
 
 Healthcare
 
125

 

 

 Transfirst Holdings, Inc., Letter of Credit (8)(16)
 
4.500%
 
11/12/19
 
 Financial Services
 
57

 

 
(2
)
 UniTek Global Services Inc., Letter of Credit (16)
 
7.500%
 
1/13/19
 
Telecommunications
 
17,946

 

 

 UniTek Global Services Inc., Letter of Credit (16)
 
7.500%
 
1/13/19
 
Telecommunications
 
1,850

 

 

 Walter Energy, Inc., Letter of Credit (8)(9)(16)(17)
 
5.500%
 
9/18/15- 7/4/16
 
 Mining
 
86

 

 
(15
)
 Walter Energy, Inc., Letter of Credit (8)(9)(16)(17)
 
5.500%
 
8/31/15- 11/28/15
 
 Mining
 
CAD 192

 

 
(27
)
Total Letters of Credit
 
$

 
$
(790
)
 
Total 1st Lien Secured Debt
 
$
899,240

 
$
840,763


See notes to financial statements.
24


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
 
2nd Lien Secured Debt—41.6%
Access CIG, LLC
 
 9.750% (L+875, 1.00% Floor)
 
10/17/22
 
 Business Services
 
$
25,600

 
$
24,103

 
$
24,192

 Active Network, Inc.
 
 9.500% (L+850, 1.00% Floor)
 
11/15/21
 
 Business Services
 
19,672

 
19,586

 
19,082

 Appriss Holdings, Inc.
 
 9.250% (L+825, 1.00% Floor)
 
5/21/21
 
 Business Services
 
25,000

 
24,641

 
25,000

 Armor Holdings, Inc. (American Stock Transfer and Trust Company)
 
 10.250% (L+900, 1.25% Floor)
 
12/26/20
 
 Financial Services
 
8,000

 
7,867

 
7,760

 Asurion Corporation
 
 8.500% (L+750, 1.00% Floor)
 
3/3/21
 
 Insurance
 
40,622

 
40,163

 
40,876

 Confie Seguros Holding II Co.
 
 10.250% (L+900, 1.25% Floor)
 
5/8/19
 
 Insurance
 
28,844

 
28,691

 
28,844

 Consolidated Precision Products Corp.
 
 8.750% (L+775, 1.00% Floor)
 
4/30/21
 
 Aerospace and Defense
 
1,940

 
1,932

 
1,930

 Deltek, Inc.
 
 10.000% (L+875, 1.25% Floor)
 
10/10/19
 
 Business Services
 
17,273

 
17,137

 
17,424

 Elements Behavioral Health, Inc.
 
 9.750% (L+875, 1.00% Floor)
 
2/11/20
 
 Healthcare
 
9,500

 
9,420

 
9,434

 Garden Fresh Restaurant Corp. (16)
 
 7.750% (L+625 PIK, 1.50% Floor)
 
1/1/19
 
 Restaurants
 
8,250

 
6,522

 
5,775

 Garden Fresh Restaurant Corp. (16)
 
15.000% (L+1350 PIK, 1.50% Floor)
 
1/1/19
 
 Restaurants
 
39,921

 
38,064

 
35,529

 GCA Services Group, Inc.
 
 9.250% (L+800, 1.25% Floor)
 
11/1/20
 
 Diversified Service
 
17,838

 
17,961

 
17,882

 Grocery Outlet, Inc.
 
 9.250% (L+825, 1.00% Floor)
 
10/21/22
 
 Grocery
 
28,000

 
27,592

 
27,580

 GTCR Valor Companies, Inc.
 
 9.500% (L+850, 1.00% Floor)
 
11/30/21
 
 Business Services
 
35,000

 
34,666

 
33,775

 Institutional Shareholder Services, Inc.
 
 8.500% (L+750, 1.00% Floor)
 
4/30/22
 
 Financial Services
 
6,640

 
6,579

 
6,540

 Kronos, Inc.
 
 9.750% (L+850, 1.25% Floor)
 
4/30/20
 
 Business Services
 
13,525

 
13,466

 
13,931

 Miller Energy Resources, Inc. (17)
 
 14.750% (9.750% Cash / 2.000% PIK, 3.00% Floor)
 
2/3/18
 
 Oil and Gas
 
88,123

 
88,123

 
82,527

 MSC Software Corp. (17)
 
 8.500% (L+750, 1.00% Floor)
 
5/28/21
 
 Business Services
 
13,448

 
13,320

 
13,246

 Novolex Holdings, Inc.
 
 9.750% (L+875, 1.00% Floor)
 
6/5/22
 
Packaging
 
42,045

 
41,013

 
42,150

 Pabst Brewing Company
 
9.25% (L+825, 1.00% Floor)
 
11/14/22
 
 Consumer Products
 
27,000

 
26,665

 
27,203

 Premier Trailer Leasing, Inc.
 
 10.000% (L+900, 1.00% Floor)
 
9/24/20
 
 Financial Services
 
52,000

 
51,029

 
52,000

 River Cree Enterprises LP (11)(17)
 
11.000%
 
1/20/21
 
 Hotels, Motels, Inns and Gaming
 
CAD 33,000

 
31,111

 
26,952

SiTV, Inc. (11)
 
10.375%
 
7/1/19
 
 Cable Television
 
2,219

 
2,219

 
2,003

SMG

 
 9.250% (L+825, 1.00% Floor)
 
2/27/21
 
 Business Services
 
19,900

 
19,900

 
20,000


See notes to financial statements.
25


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—41.6% (continued)
 Sprint Industrial Holdings, LLC
 
 11.250% (L+1000, 1.25% Floor)
 
11/14/19
 
 Containers, Packaging, and Glass
 
14,163

 
13,959

 
13,526

 SquareTwo Financial Corp. (Collect America, Ltd.) (17)
 
11.625%
 
4/1/17
 
 Financial Services
 
65,152

 
64,316

 
58,420

 TASC, Inc.
 
12.000%
 
5/21/21
 
 Aerospace and Defense
 
21,815

 
21,028

 
23,178

 TMK Hawk Parent Corp.
 
 8.500% (L+750, 1.00% Floor)
 
10/1/22
 
 Distribution
 
34,000

 
33,675

 
34,000

 Transfirst Holdings, Inc.
 
 9.000% (L+800, 1.00% Floor)
 
11/11/22
 
 Financial Services
 
11,340

 
11,221

 
11,404

UniTek Global Services Inc. (16)
 
 8.500% (L+750, 1.00% Floor)
 
1/13/19
 
Telecommunications
 
32,367

 
32,367

 
30,748

 Velocity Technology Solutions, Inc.
 
 9.000% (L+775, 1.25% Floor)
 
9/28/20
 
 Business Services
 
16,500

 
16,209

 
16,005

 Vertafore, Inc.
 
 9.750% (L+825, 1.50% Floor)
 
10/27/17
 
 Business Services
 
36,436

 
36,295

 
36,709

Total 2nd Lien Secured Debt
 
$
820,840

 
$
805,625

TOTAL SECURED DEBT
 
$
1,720,080

 
$
1,646,388

UNSECURED DEBT—24.5%
 American Energy - Woodford LLC/AEW Finance Corp. (11)
 
9.000%
 
9/15/22
 
 Oil and Gas
 
$
5,000

 
$
4,805

 
$
2,850

 American Tire Distributors, Inc. (11)
 
10.250%
 
3/1/22
 
 Distribution
 
24,281

 
24,281

 
25,252

 Artsonig Pty Ltd. (11)(17)
 
 11.50% (12.00% PIK Toggle)
 
4/1/19
 
 Transportation
 
21,227

 
20,974

 
17,830

 BCA Osprey II Limited (British Car Auctions) (16)(17)
 
 12.50% PIK
 
8/17/17
 
 Transportation
 
£
23,566

 
37,704

 
36,033

 BCA Osprey II Limited (British Car Auctions) (16)(17)
 
 12.50% PIK
 
8/17/17
 
 Transportation
 
14,333

 
19,779

 
15,855

 Canacol Energy Ltd. (17)
 
 9.500% (L+850, 1.00% Floor)
 
12/31/19
 
 Oil and Gas
 
50,000

 
48,595

 
47,625

 Ceridian Corp. (11)
 
11.000%
 
3/15/21
 
 Diversified Service
 
16,760

 
16,760

 
17,430

 Delta Educational Systems, Inc.
 
 16.00% PIK or 10.00% Cash / 6.00% PIK
 
5/12/17
 
 Education
 
24,172

 
23,929

 
21,416

 Denver Parent Corp. (Venoco) (13)(14)(16)
 
 12.25% (13.00% PIK Toggle)
 
8/15/18
 
 Oil and Gas
 
9,572

 
9,411

 
1,460

 GenCorp, Inc. (17)
 
 9.500% (L+850, 1.00% Floor)
 
4/18/22
 
 Aerospace and Defense
 
40,500

 
40,500

 
40,500

 My Alarm Center, LLC
 
 16.25% (12.00% Cash / 4.25 %PIK)
 
7/9/18
 
 Business Services
 
4,236

 
4,236

 
4,236

 PetroBakken Energy Ltd. (11)(17)
 
8.625%
 
2/1/20
 
 Oil and Gas
 
34,980

 
35,972

 
25,361

 Radio One, Inc. (11)(17)
 
9.250%
 
2/15/20
 
 Broadcasting & Entertainment
 
15,804

 
15,709

 
15,160

 Sorenson Holdings, LLC (11)
 
 13.00% PIK
 
10/31/21
 
 Consumer Products
 
68

 
45

 
68

 Tibco Software Inc. (11)
 
11.375%
 
12/1/21
 
 Business Services
 
11,389

 
11,069

 
11,595

 U.S. Security Associates Holdings, Inc.
 
11.000%
 
7/28/18
 
 Business Services
 
135,000

 
135,000

 
137,700

UniTek Global Services Inc.
 
15.000%
 
7/13/2019
 
Telecommunications
 
6,565

 
6,565

 
6,565

 Univar, Inc.
 
10.500%
 
6/30/2018
 
 Distribution
 
20,000

 
20,000

 
19,900

 Venoco, Inc. (16)
 
8.875%
 
2/15/2019
 
 Oil and Gas
 
54,996

 
55,032

 
28,598

TOTAL UNSECURED DEBT
 
 
 
 
 
 
 
 
 
$
530,366

 
$
475,434

TOTAL CORPORATE DEBT
 
$
2,250,446

 
$
2,121,822


See notes to financial statements.
26


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
STRUCTURED PRODUCTS AND OTHER—9.0%
 Asset Repackaging Trust Six B.V., Credit-Linked Note (11)(17)(20)
 
N/A
 
5/18/2027
 
 Utilities
 
$
58,411

 
$
24,994

 
$
36,731

 Craft 2013-1, Credit-Linked Note (11)(16)(17)
 
 9.503% (L+925)
 
4/17/2022
 
 Diversified Investment Vehicle
 
25,000

 
25,092

 
24,282

 Craft 2013-1, Credit-Linked Note (16)(17)
 
 9.503% (L+925)
 
4/17/2022
 
 Diversified Investment Vehicle
 
7,625

 
7,753

 
7,412

 Craft 2014-1A, Credit-Linked Note (11)(17)
 
 9.882% (L+965)
 
5/15/2021
 
 Diversified Investment Vehicle
 
42,500

 
42,460

 
41,898

 Dark Castle Holdings, LLC
 
N/A
 
N/A
 
 Media
 
24,395

 
1,189

 
2,565

 JP Morgan Chase & Co., Credit-Linked Note (17)
 
 12.520% (L+1225)
 
12/20/2021
 
 Diversified Investment Vehicle
 
43,250

 
42,053

 
42,700

 NXT Capital CLO 2014-1, LLC, Class E Notes (11)(17)
 
 5.731% (L+550)
 
4/23/2026
 
 Diversified Investment Vehicle
 
5,000

 
4,670

 
4,350

 Renaissance Umiat, LLC, ACES Tax Receivable (15)(17)
 
N/A
 
N/A
 
 Oil and Gas
 

 
13,014

 
14,432

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
161,225

 
$
174,370

PREFERRED EQUITY—1.6%
 
Shares
 
 
 
 
 CA Holding, Inc. (Collect America, Ltd.), Series A Preferred Stock (13)(17)
 
N/A
 
N/A
 
 Financial Services
 
32,961

 
$
788

 
$
297

 Crowley Holdings, Series A Preferred Stock (11)
 
 12.00% (10.00% Cash / 2.00% PIK)
 
N/A
 
 Cargo Transport
 
22,500

 
23,079

 
23,645

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock (Convertible) (13)(14)
 
 12.50% PIK
 
N/A
 
 Education
 
332,500

 
6,863

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock (13)(14)
 
 13.50% PIK
 
5/12/2018
 
 Education
 
12,360

 
27,685

 
1,613

 Varietal Distribution Holdings, LLC, Class A Preferred Unit
 
 8.00% PIK
 
N/A
 
 Distribution
 
3,097

 
5,724

 
5,655

TOTAL PREFERRED EQUITY
 
$
64,139

 
$
31,210


See notes to financial statements.
27


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
EQUITY—1.5%
Common Equity/Interests—1.2%
 
Shares
 
 
 
 
 ATD Corporation (Accelerate Parent Corp.), Common Stock (11)
 
N/A
 
N/A
 
 Distribution
 
1,664,046

 
$
1,714

 
$
2,690

 CA Holding, Inc. (Collect America, Ltd.), Series A Common Stock (13)(17)
 
N/A
 
N/A
 
 Financial Services
 
25,000

 
2,500

 

 CA Holding, Inc. (Collect America, Ltd.), Series AA Common Stock (13)(17)
 
N/A
 
N/A
 
 Financial Services
 
4,294

 
429

 

 Caza Petroleum, Inc., Net Profits Interest (13)
 
N/A
 
N/A
 
 Oil and Gas
 

 
1,202

 
1,290

 Caza Petroleum, Inc., Overriding Royalty Interest
 
N/A
 
N/A
 
 Oil and Gas
 

 
340

 
235

 Clothesline Holdings, Inc. (Angelica Corporation), Common Stock (13)
 
N/A
 
N/A
 
 Healthcare
 
6,000

 
6,000

 
519

 Explorer Coinvest, LLC (Booz Allen), Common Stock (17)
 
N/A
 
N/A
 
 Business Services
 
192

 
1,468

 
5,162

 Garden Fresh Restaurant Holdings, LLC., Common Stock (13)
 
N/A
 
N/A
 
 Restaurants
 
50,000

 
5,000

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Common Stock (13)
 
N/A
 
N/A
 
 Education
 
17,500

 
175

 

 JV Note Holdco, LLC (DSI Renal, Inc.), Common Equity / Interest (13)
 
N/A
 
N/A
 
 Healthcare
 
9,303

 
85

 

 Pelican Energy, LLC, Net Profits Interest (13)(17)
 
N/A
 
N/A
 
 Oil and Gas
 

 
1,061

 
272

 Skyline Data, News and Analytics LLC, Class A Common Unit (13)
 
N/A
 
N/A
 
 Printing and Publishing
 
4,500

 
4,500

 
4,500

 Sorenson Holdings, LLC, Membership Interests (13)
 
N/A
 
N/A
 
 Consumer Products
 
587

 

 
81

 Univar, Inc., Common Stock (13)
 
N/A
 
N/A
 
 Distribution
 
900,000

 
9,000

 
9,320

 Varietal Distribution Holdings, LLC, Class A Common Unit (13)
 
N/A
 
N/A
 
 Distribution
 
28,028

 
28

 

Total Common Equity/Interests
 
$
33,502

 
$
24,069


See notes to financial statements.
28


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except warrants)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—121.6% (10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Warrants
 
Cost
 
Fair
Value (1)
Warrants—0.3%
 CA Holding, Inc. (Collect America, Ltd.), Common Stock Warrants (13)(17)
 
N/A
 
N/A
 
 Financial Services
 
12,255

 
$
8

 
$

 Energy & Exploration Partners, Inc., Common Stock Warrants (13)
 
N/A
 
N/A
 
 Oil and Gas
 
60,778

 
2,374

 
58

 Fidji Luxco (BC) S.C.A., Common Stock Warrants (2)(13)(17)
 
N/A
 
N/A
 
 Electronics
 
18,113

 
182

 
3,950

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Class A-1 Preferred Stock Warrants (13)
 
N/A
 
N/A
 
 Education
 
45,947

 
459

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Class B-1 Preferred Stock Warrants (13)
 
N/A
 
N/A
 
 Education
 
104,314

 
1,043

 

 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Common Stock Warrants (13)
 
N/A
 
N/A
 
 Education
 
9,820

 
98

 

 Osage Exploration & Development, Inc., Common Stock Warrants (13)(17)
 
N/A
 
N/A
 
 Oil and Gas
 
1,496,843

 

 
222

 Spotted Hawk Development, LLC, Common Stock Warrants (13)
 
N/A
 
N/A
 
 Oil and Gas
 
54,545

 
852

 
1,341

Total Warrants
 
$
5,016

 
$
5,571

TOTAL EQUITY
 
$
38,518

 
$
29,640

Total Non-Controlled/ Non-Affiliated Investments
 
$
2,514,328

 
$
2,357,042


See notes to financial statements.
29


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/AFFILIATED INVESTMENTS—16.9%(4)(10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par
Amount (12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—0.0%
SECURED DEBT—0.0%
1st Lien Secured Debt—0.0%
 Renewable Funding Group, Inc., (4)(13)
 
0.00%
 
9/30/15
 
Finance
 
$
1,000

 
$
1,000

 
$
1,000

Total 1st Lien Secured Debt
 
$
1,000

 
$
1,000

TOTAL SECURED DEBT
 
$
1,000

 
$
1,000

TOTAL CORPORATE DEBT
 
$
1,000

 
$
1,000

 
 
 
 
 
 
 
 
 
 
 
 
 
STRUCTURED PRODUCTS AND OTHER—10.3%
 Golden Bear Warehouse, LLC, Equity (3)(4)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicle
 
$
4,234

 
$
4,234

 
$
6,833

 Golden Hill CLO I, LLC, Equity (3)(4)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicle
 
70,944

 
71,478

 
73,587

 Highbridge Loan Management 3-2014, Ltd., Class E Notes (3)(4)(11)(17)
 
 6.257% (L+600)
 
1/18/25
 
 Diversified Investment Vehicle
 
2,485

 
2,277

 
2,121

 Highbridge Loan Management 3-2014, Ltd., Subordinated Notes (3)(4)(11)(17)
 
N/A
 
1/18/25
 
 Diversified Investment Vehicle
 
8,163

 
6,537

 
6,722

 Ivy Hill Middle Market Credit Fund IX, Ltd, Subordinated Notes (3)(4)(11)(17)
 
N/A
 
10/18/25
 
 Diversified Investment Vehicle
 
12,500

 
11,375

 
11,375

 Jamestown CLO I LTD, Subordinated Notes (3)(4)(11)(17)
 
N/A
 
11/5/24
 
 Diversified Investment Vehicle
 
4,325

 
3,432

 
3,698

 MCF CLO I, LLC, Membership Interests (3)(4)(11)(17)
 
N/A
 
4/20/23
 
 Diversified Investment Vehicle
 
38,918

 
35,087

 
38,490

 MCF CLO III, LLC, Class E Notes (3)(4)(11)(17)
 
 4.681% (L+445)
 
1/20/24
 
 Diversified Investment Vehicle
 
12,750

 
11,456

 
11,220

 MCF CLO III, LLC, Membership Interests (3)(4)(11)(17)
 
N/A
 
1/20/24
 
 Diversified Investment Vehicle
 
41,900

 
36,957

 
38,984

 Slater Mill Loan Fund LP, LP Certificates (3)(4)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicle
 
8,375

 
5,755

 
6,968

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
188,588

 
$
199,998

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—3.9%
 
Shares
 
 
 
 
 AMP Solar (UK) Limited, Class A Preference Shares (2)(5)(17)(21)
 
8.500%
 
10/31/49
 
 Utilities
 
43,277,916

 
$
66,354

 
$
65,171

 Renewable Funding Group, Inc., Series B Preferred Stock (4)(13)
 
N/A
 
N/A
 
Finance
 
1,505,868

 
7,461

 
9,309

TOTAL PREFERRED EQUITY
 
$
73,815

 
$
74,480

 
 
 
 
 
EQUITY—2.7%
Common Equity/Interests—2.7%
 
 
 
 
 
 
 AMP Solar Group, Inc., Class A Common Shares (3)(4)(17)
 
N/A
 
N/A
 
Energy
 
81,493

 
$
3,500

 
$
3,500

 Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock (3)(4)(13)(18)
 
N/A
 
N/A
 
 Home and Office Furnishings and Durable Consumer Products
 
9,007

 

 
6,699

 Generation Brands Holdings, Inc. (Quality Home Brands), Series 2L Common Stock (3)(4)(13)(18)
 
N/A
 
N/A
 
 Home and Office Furnishings and Durable Consumer Products
 
36,700

 
11,242

 
27,294


See notes to financial statements.
30


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/AFFILIATED INVESTMENTS—16.9%(4)(10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Shares
 
Cost
 
Fair
Value (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—2.7%
Common Equity/Interests—2.7%
 
 
 
 
 
 
 Generation Brands Holdings, Inc. (Quality Home Brands), Series H Common Stock (3)(4)(13)(18)
 
N/A
 
N/A
 
 Home and Office Furnishings and Durable Consumer Products
 
7,500

 
$
2,298

 
$
5,578

LVI Group Investments, LLC, Common Units (3)(4)(13)(19)
 
N/A
 
N/A
 
 Environmental Services
 
212,460

 
17,505

 
8,669

Total Common Equity/Interests
 
$
34,545

 
$
51,740

TOTAL EQUITY
 
$
34,545

 
$
51,740

 
 
 
 
 
Total Non-Controlled/Affiliated Investments
 
$
297,948

 
$
327,218


See notes to financial statements.
31


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands, except shares)
INVESTMENTS IN CONTROLLED INVESTMENTS—34.4%(5)(10)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par
Amount (12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—18.2%
SECURED DEBT—18.2%
1st Lien Secured Debt—18.2%
 Merx Aviation Finance, LLC, (Revolver) (5)(16)
 
12.00% Funded
 
10/31/18
 
Aviation
 
$
352,084

 
$
352,084

 
$
352,084

Total 1st Lien Secured Debt
 
$
352,084

 
$
352,084

 
 
 
 
 
 
 
 
 
 
 
 
 
Unfunded Revolver Obligation—0.0%
 Merx Aviation Finance, LLC, (Unfunded Revolver) (5)(16)
 
12.00% Funded, 0.00% Unfunded
 
10/31/18
 
Aviation
 
$
47,916

 
$

 
$

Total Unfunded Revolver Obligation
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Letters of Credit—0.0%
 Merx Aviation Finance Assets Ireland Limited, Letter of Credit (5)
 
2.250%
 
9/30/15
 
Aviation
 
$
1,800

 
$

 
$

 Merx Aviation Finance Assets Ireland Limited, Letter of Credit (5)
 
2.250%
 
9/30/15
 
Aviation
 
1,800

 

 

Total Letters of Credit
 
$

 
$

TOTAL SECURED DEBT
 
$
352,084

 
$
352,084

TOTAL CORPORATE DEBT
 
$
352,084

 
$
352,084

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—3.1%
 
Shares
 
 
 
 
 PlayPower Holdings, Inc., Series A Preferred (5)
 
14.00% PIK
 
11/15/20
 
Leisure
 
49,178

 
$
59,411

 
$
59,411

TOTAL PREFERRED EQUITY
 
$
59,411

 
$
59,411

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—13.1%
Common Equity/Interests—13.1%
 
Shares
 
 
 
 
 Merx Aviation Finance, LLC, Membership Interest (5)(13)
 
N/A
 
N/A
 
 Aviation
 

 
$
152,082

 
$
165,172

 MSEA Tankers LLC, Membership Interest (5)(17)
 
N/A
 
N/A
 
Cargo Transport
 

 
33,000

 
33,000

 PlayPower Holdings, Inc., Common Stock (5)(13)
 
N/A
 
N/A
 
 Leisure
 
1,000

 
77,722

 
55,900

Total Common Equity/Interests
 
$
262,804

 
$
254,072

TOTAL EQUITY
 
$
262,804

 
$
254,072

Total Controlled Investments
 
$
674,299

 
$
665,567

Total Investments—172.9% (6)(7)
 
$
3,486,575

 
$
3,349,827

Liabilities in Excess of Other Assets—(72.9)%
 
 
 
$
(1,412,219
)
Net Assets—100.0%
 
 
 
$
1,937,608

______________________
(1)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (Note 2).
(2)
Fidji Luxco (BC) S.C.A. is a EUR denominated investment and AMP Solar (UK) Limited is a GBP denominated investment.
(3)
Denotes investments where the governing documents of the entity preclude the Company from controlling management of the entity and therefore the Company has determined that the entity is not a controlled affiliate.
(4)
Denotes investments in which we are an “Affiliated Person”, as defined in the 1940 Act, due to owning or holding the power to vote 5% or more of the outstanding voting securities of the investment but not controlling the company. Fair value as of March 31, 2015 and March 31, 2014 along with transactions during the fiscal year ended March 31, 2015 in these Affiliated investments are as follows:


See notes to financial statements.
32


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands)

Name of Issue
Fair Value at March 31, 2014
Gross
Additions (Cost) ●
Gross
Reductions (Cost) ■
Change in Unrealized Gain (Loss)
Fair Value at March 31, 2015
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
AMP Solar Group, Inc., Class A Common Shares
$

$
3,500

$

$

$
3,500

$

$

AMP Solar Group, Inc., 15.000%, 7/7/15

3,619

(3,619
)


(57
)
53

AMP Solar (UK) Limited, Class A Preference Shares (21)

66,355


(1,184
)
65,171


1,580

Aventine Renewable Energy Holdings, Inc., 15.00% (12.00% Cash / 3.00% PIK), 9/23/16
2,405

21

(2,642
)
216


116

184

Aventine Renewable Energy Holdings, Inc., 10.50% Cash or 15.00% PIK, 9/22/17
8,884

1,481

(15,306
)
4,941



1,496

Aventine Renewable Energy Holdings, Inc., 25.00% PIK, 9/24/16
3,769

238

(4,007
)



433

Aventine Renewable Energy Holdings, Inc., Common Stock
99


(688
)
589


1,804


Aventine Renewable Energy Holdings, Inc., Common Stock Warrants
574


(3,996
)
3,422


9,713


Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock (18)

1,615


5,084

6,699



Generation Brands Holdings, Inc. (Quality Homes Brands), Series H Common Stock (18)

1,345


4,233

5,578



Generation Brands Holdings, Inc. (Quality Homes Brands), Series 2L Common Stock (18)

6,582


20,712

27,294



Golden Bear Warehouse LLC, Equity

4,233


2,600

6,833



Golden Hill CLO I, LLC, Equity
1,097

69,847


2,643

73,587


1,515

Highbridge Loan Management 3-2014, Ltd., Class D Notes, L+500, 1/18/25
4,680

21

(4,659
)
(42
)

(169
)
205

Highbridge Loan Management 3-2014, Ltd., Class E Notes, L+600, 1/18/25
2,314

14


(207
)
2,121


171

Highbridge Loan Management 3-2014, Ltd., Subordinated Notes, 1/18/25
7,278


(989
)
433

6,722


652

Ivy Hill Middle Market Credit Fund IX, Ltd, Subordinated Notes, 10/18/25

11,375



11,375


414

Jamestown CLO I LTD, Subordinated Notes, 11/5/24
3,828


(121
)
(9
)
3,698


559

 LVI Parent Corp. (LVI Services, Inc.), 12.50%, 4/20/14 (19)

10,387

(10,200
)
(187
)


269

LVI Group Investments, LLC, Common Units (formerly known as LVI Services, Inc.) (19)

35,429


(26,760
)
8,669


87

MCF CLO I LLC, Class E Notes, L+575, 4/20/23
12,357

13

(12,344
)
(26
)

(107
)
215

MCF CLO I LLC, Membership Interests
40,391


(2,471
)
570

38,490


7,176

MCF CLO III LLC, Class E Notes L+445, 1/20/24
11,325

107


(212
)
11,220


718

MCF CLO III LLC, Membership Interests, 1/20/24
38,266


(2,227
)
2,945

38,984


6,271

Renewable Funding Group, Inc. 0.00%, 9/30/15

1,000



1,000



Renewable Funding Group, Inc., Series B Preferred Stock

8,750

(1,289
)
1,848

9,309



Slater Mill Loan Fund LP, LP Certificates
7,361


(467
)
74

6,968


1,427

 
$
144,628

$
225,932

$
(65,025
)
$
21,683

$
327,218

$
11,300

$
23,425

______________
● Gross additions includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the accretion of discounts, the exchange of one or more existing securities for one or more new securities, the movement of an existing portfolio company into this category from a different category, and the transfers of one or more securities into non-controlled/affiliated. Transfers are assumed to have occurred at the end of the period.
■ Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the amortization of premiums, the exchange of one or more existing securities for one or more new securities, the movement of an existing portfolio company out of this category into a different category, and the transfers of one or more securities out of non-controlled/affiliated. Transfers are assumed to have occurred at the end of the period.


See notes to financial statements.
33


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands)

As of March 31, 2015, the Company has a 28%, 100%, 100%, 26%, 32%, 36%, 97%, 98% and 26% equity ownership interest in Generation Brands Holdings, Inc., Golden Bear Warehouse LLC, Golden Hill CLO I, LLC, Highbridge Loan Management, Ltd., Ivy Hill Middle Market Credit Fund IX, Ltd, LVI Group Investments, LLC, MCF CLO I LLC, MCF CLO III LLC, and Slater Mill Loan Fund LP, respectively. Investments that the Company owns greater than 25% of the equity and are shown in “Non-Controlled/Affiliated” have governing documents that preclude the Company from controlling management of the entity and therefore the Company has determined that the entity is not a controlled affiliate.
(5)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Fair value as of March 31, 2015 and March 31, 2014 along with transactions during the fiscal year ended March 31, 2015 in these Controlled investments are as follows:
Name of Issue
Fair Value at March 31, 2014
Gross
Additions (Cost) ●
Gross
Reductions (Cost) ■
Change in Unrealized Gain (Loss)
Fair Value at March 31, 2015
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock (18)
$
1,615

$

$
(1,615
)
$

$

$

$

Generation Brands Holdings, Inc. (Quality Homes Brands), Series H Common Stock( 18)
1,345


(1,345
)




Generation Brands Holdings, Inc. (Quality Homes Brands), Series 2L Common Stock(18)
6,582


(6,582
)




 LVI Parent Corp. (LVI Services, Inc.), 12.50%, 4/20/14 (19)
10,200


(10,200
)




LVI Group Investments, LLC, Common Units (formerly known as LVI Services, Inc.) (19)
34,020


(34,020
)




Merx Aviation Finance, LLC (formerly known as Merx Aviation Finance Holdings II, LLC), (Revolver) 12.00% Funded, 10/31/18
282,334

69,750



352,084


39,231

Merx Aviation Finance, LLC (formerly known as Merx Aviation Finance Holdings II, LLC), (Unfunded Revolver) 0.00% Unfunded, 10/31/18







Merx Aviation Finance Assets Ireland Limited, Letter of Credit, 2.25%, 9/30/15







Merx Aviation Finance Assets Ireland Limited, Letter of Credit, 2.25%, 9/30/15







Merx Aviation Finance, LLC (formerly known as Merx Aviation Finance Holdings II, LLC), Membership Interest
140,465

13,499


11,208

165,172



MSEA Tankers LLC, Membership Interest

33,000



33,000



PlayPower Holdings, Inc., Common Stock
53,813



2,087

55,900



PlayPower Holdings, Inc., Series A Preferred, 14.00% PIK, 11/15/20
51,773

7,638



59,411


7,891

 
$
582,147

$
123,887

$
(53,762
)
$
13,295

$
665,567

$

$
47,122

______________
● Gross additions includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the accretions of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
■ Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the amortization of premiums, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
As of March 31, 2015, the Company has a 100% equity ownership interest in Merx Aviation Finance, LLC, MSEA Tankers LLC and PlayPower Holdings, Inc.




See notes to financial statements.
34


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2015
(in thousands)

(6)
Aggregate gross unrealized gain for federal income tax purposes is $143,557; aggregate gross unrealized loss for federal income tax purposes is $302,058. Net unrealized loss is $158,501 based on a tax cost of $3,508,328.
(7)
Substantially all securities are pledged as collateral to our multicurrency revolving credit facility (the “Facility”). As such these securities are not available as collateral to our general creditors.
(8)
The negative fair value is the result of the unfunded commitment or letter of credit being valued below par.
(9)
These letters of credit represent multiple commitments made on various dates. As a result, maturity dates may vary and a maturity range has been provided.
(10)
The percentage is calculated over net assets.
(11)
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.
(12)
Denominated in USD unless otherwise noted, Euro (“€”), British Pound (“£”), and Canadian Dollar (“CAD”).
(13)
Non-income producing security.
(14)
Non-accrual status (Note 2).
(15)
The investment has a put option attached to it and the combined instrument has been recorded in its entirety at fair value as a hybrid instrument in accordance with ASC 815-15-25-4 with subsequent changes in fair value charged or credited to investment gains/losses for each period.
(16)
Denotes debt securities where the Company owns multiple tranches of the same broad asset type but whose security characteristics differ. Such differences may include level of subordination, call protection and pricing, and differing interest rate characteristics, among other factors. Such factors are usually considered in the determination of fair values.
(17)
Investments that the Company has determined are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. The status of these assets under the 1940 Act is subject to change. The Company monitors the status of these assets on an ongoing basis.
(18)
Generation Brands Holdings, Inc. was previously incorrectly reported as a controlled investment in the financial statements for the year ended March 31, 2014. After further assessment, the Company does not control more than 25% of the voting power and has no power to direct or cause the direction of the policies and management of the company. As such, $9,542 of the fair value of Generation Brands Holdings, Inc., Common Stock was transferred from "Controlled" to "Non-Controlled/Affiliated" in 2015 to correctly reflect Generation Brands Holdings, Inc. as a non-controlling/ affiliated investment. Management evaluated the impact of the error to the financial statements and determined that this adjustment was not material to any prior annual or interim periods, and the resulting correction is not material to the current financial statements.
(19)
As a result of a restructuring in April 2014, the Company ‘s investment was moved to LVI Group Investments, LLC from LVI Services Inc. LVI Group Investments, LLC further invested in NorthStar Group Holdings. The Company no longer controls more than 25% of the voting power and has no power to direct or cause the direction of the policies and management of NorthStar Group Holdings. As such, $44,220 of the fair value of LVI Services, Inc., Common Stock, was transferred from “Controlled” to “Non-Controlled/Affiliated” in LVI Group Investments, LLC prior to the fiscal year ended March 31, 2015.
(20)
This investment represents a leveraged subordinated interest in a trust that holds one foreign currency denominated bond and a derivative instrument.
(21)
AMP Solar (UK) Limited was previously incorrectly reported as a controlled investment in the financial statements for the year ended March 31, 2015. After further assessment, it was determined that the Company does not control more than 25% of the voting power and has no power to direct or cause the direction of the policies and management of the company. As such, $65,171 of the ending fair value as of March 31, 2015 of AMP Solar (UK) Limited, Class A Preference Shares was reclassified from "Controlled" to "Non-Controlled/Affiliated" to correctly reflect AMP Solar (UK) Limited as a non-controlling/ affiliated investment. Management evaluated the impact of the error to the financial statements and determined that this adjustment was not material to any prior annual or interim periods, and the resulting correction is not material to the current financial statements.


N/A
Not applicable.


See notes to financial statements.
35


APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
 March 31, 2015

Industry Classification
Percentage of Total Investments (at fair value) as of March 31, 2015
 Business Services
15.6%
 Aviation
15.4%
 Oil and Gas
13.9%
 Diversified Investment Vehicle
9.6%
 Financial Services
4.0%
 Chemicals
3.8%
 Leisure
3.4%
 Utilities
3.0%
 Aerospace and Defense
2.9%
 Distribution
2.9%
 Telecommunications
2.2%
 Insurance
2.1%
 Transportation
2.1%
 Printing and Publishing
1.9%
 Cargo Transport
1.7%
 Healthcare
1.6%
 Energy
1.6%
 Education
1.5%
 Packaging
1.3%
 Restaurants
1.2%
 Home and Office Furnishings and Durable Consumer Products
1.2%
 Diversified Service
1.1%
 Grocery
0.8%
 Consumer Products
0.8%
 Hotels, Motels, Inns and Gaming
0.8%
 Diversified Natural Resources, Precious Metals and Minerals
0.7%
 Buildings and Real Estate
0.6%
 Mining
0.6%
 Broadcasting & Entertainment
0.4%
 Containers, Packaging, and Glass
0.4%
 Finance
0.3%
 Environmental Services
0.3%
 Electronics
0.1%
 Media
0.1%
 Cable Television
0.1%
Total Investments
100.0%



See notes to financial statements.
36

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited)
(in thousands except share and per share data)


Note 1. Organization
Apollo Investment Corporation (“Apollo Investment”, the “Company”, “AIC”, “we”, “us”, or “our”), a Maryland corporation incorporated on February 2, 2004, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). In addition, for tax purposes we have elected to be treated as a regulated investment company (“RIC”), under the Internal Revenue Code of 1986, as amended (“the Code”). Our investment objective is to generate current income and capital appreciation.
Apollo Investment Management, L.P. ( the "Investment Adviser" or “AIM”) is our investment adviser and an affiliate of Apollo Global Management, LLC and its consolidated subsidiaries (“AGM”). The Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of, and provides investment advisory services to the Company.
Apollo Investment Administration, LLC (“AIA” or “Administrator”), an affiliate of AGM, provides, among other things, administrative services and facilities for the Company. Furthermore, AIA provides on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance.
We invest primarily in various forms of debt investments, including secured and unsecured debt, loan investments, and/or equity in private middle-market companies. We may also invest in the securities of public companies and in structured products and other investments such as collateralized loan obligations and credit-linked notes (“CLOs” and “CLNs”, respectively). Our portfolio is comprised primarily of investments in debt, including secured and unsecured debt of private middle-market companies that, in the case of senior secured loans, generally are not broadly syndicated and whose aggregate tranche size is typically less than $250 million. Our portfolio also includes equity interests such as common stock, preferred stock, warrants or options.
Apollo Investment commenced operations on April 8, 2004 receiving net proceeds of $870,000 from its initial public offering by selling 62 million shares of common stock at a price of $15.00 per share. Since then, and through September 30, 2015, we have raised approximately $2,210,099 in net proceeds from additional offerings of common stock and repurchased common stock for $21,193.
Note 2. Significant Accounting Policies
The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the requirements on Form 10-Q, ASC 946, Financial Services — Investment Companies (“ASC 946”), and Articles 6, 10, and 12 of Regulation S-X. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of the financial statements for the interim period, have been included.
Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Consequently, as of September 30, 2015, the Company did not consolidate any subsidiary or controlled entity or any special purpose entities through which the special purpose entity acquires and holds investments subject to financing with third parties.
These financial statements should be read in conjunction with the audited financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended March 31, 2015.
Certain amounts have been reclassified on the Statement of Assets and Liabilities and Statement of Operations. For the year ended March 31, 2015, $65,171 of fair value and $66,354 of cost previously classified as controlled investments was reclassified to non-controlled/affiliated investments. For the three and six months ended September 30, 2014, $4,905 and $1,784 of net change on unrealized gain (loss) previously classified as net change on unrealized gain (loss) from controlled investments was reclassified to net change on unrealized gain (loss) from non-controlled/affiliated investments. For the three and six months ended September 30, 2014, $44 and $356, respectively, of investment income previously classified as investment income from controlled investments was reclassified to investment income from non-controlled/affiliated investments.

37

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Use of Estimates
The preparation of financial statements in accordance with GAAP 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, expenses, gains and losses during the reported periods. Changes in the economic environment, financial markets, credit worthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ materially.
Cash and Cash Equivalents
The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less from the date of purchase would qualify, with limited exceptions. The Company deems that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.
Cash and cash equivalents are carried at cost which approximates fair value. There were no cash equivalents held as of September 30, 2015 and March 31, 2015.
Investment Transactions
Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains and losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments sold and payables for investments purchased, respectively, in the Statements of Assets and Liabilities.
Fair Value Measurements
The Company follows guidance in ASC 820, Fair Value Measurement, where fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The level assigned to the investment valuations may not be indicative of the risk or liquidity associated with investing in such investments. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may differ materially from the values that would be received upon an actual disposition of such investments.

38

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Investment Valuation Process
Under procedures established by our board of directors, we value investments, including certain secured debt, unsecured debt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unless they are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). We utilize mid-market pricing as a practical expedient for fair value unless a different point within the range is more representative. If and when market quotations are unavailable or are deemed not to represent fair value, we typically utilize independent third party valuation firms to assist us in determining fair value. Accordingly, such investments go through our multi-step valuation process as described below. In each case, our independent third party valuation firms consider observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations for such investments. Investments purchased within 15 days before the valuation date and debt investments with remaining maturities of 60 days or less may each be valued at cost with interest accrued or discount amortized to the date of maturity (although they are typically valued at available market quotations), unless such valuation, in the judgment of our investment adviser, does not represent fair value. In this case such investments shall be valued at fair value as determined in good faith by or under the direction of our board of directors including using market quotations where available. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our board of directors. Such determination of fair values may involve subjective judgments and estimates.
With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our board of directors has approved 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 of our investment adviser responsible for the portfolio investment which is responsible for the portfolio investment;
(2) preliminary valuation conclusions are then documented and discussed with senior management of our investment adviser;
(3) independent valuation firms are engaged by our board of directors to conduct independent appraisals by reviewing our investment adviser’s preliminary valuations and then making their own independent assessment;
(4) the audit committee of the board of directors reviews the preliminary valuation of our investment adviser and the valuation prepared by the independent valuation firm and responds to the valuation recommendation of the independent valuation firm to reflect any comments; and
(5) the board of directors discusses valuations and determines in good faith the fair value of each investment in our portfolio based on the input of our investment adviser, the applicable independent valuation firm, third party pricing services and the audit committee.
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, seniority of investment in the investee company’s capital structure, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When readily available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the six months ended September 30, 2015, there has been no change to the Company’s valuation techniques and related inputs considered in the valuation process.

39

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Valuation of Other Financial Assets and Financial Liabilities
ASC 825, Financial Instruments, permits an entity to choose, at specified election dates, to measure certain assets and liabilities at fair value (the “Fair Value Option”). We have not elected the Fair Value Option to report selected financial assets and financial liabilities. The carrying value of all other financial assets and liabilities approximates fair value due to their short maturities or their close proximity of the originations to the measurement date. Debt issued by the Company is reported at amortized cost (see Note 6).
Realized Gains or Losses
Security transactions are accounted for on a trade date basis. Realized gains or losses on investments are calculated by using the specific identification method. Securities that have been called by the issuer are recorded at the call price on the call effective date at the call price.
Investment Income Recognition
The Company records interest and dividend income, adjusted for amortization of premium and accretion of discount, on an accrual basis. Some of our loans and other investments, including certain preferred equity investments, may have contractual payment-in-kind (“PIK”) interest or dividends. PIK interest and dividends computed at the contractual rate are accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not fully expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company believes that PIK is expected to be realized.
Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on non-accrual designated investments may be recognized as income or applied to principal depending upon management’s judgment.
Loan origination fees, original issue discount (“OID”), and market discounts are capitalized and accreted into interest income over the respective terms of the applicable loans using the effective interest method or straight-line, as applicable. Upon the prepayment of a loan, prepayment premiums, any unamortized loan origination fees, OID, or market discounts are recorded as interest income. Other income generally includes amendment fees, bridge fees, and structuring fees which are recorded when earned.
The Company records as dividend income the accretable yield from its beneficial interests in structured products such as CLOs based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest receipts (which may be subject to prepayments and defaults) of the underlying pool of assets. These assumptions are updated on at least a quarterly basis to reflect changes related to a particular security, actual historical data, and market changes. A structured product investment typically has an underlying pool of assets. Payments on structured product investments are and will be payable solely from the cash flows from such assets. As such, any unforeseen event in these underlying pools of assets might impact the expected recovery of principal and future accrual of income.
Expenses
Expenses include management fees, performance-based incentive fees, insurance expenses, administrative service fees, legal fees, directors’ fees, audit and tax service expenses, third-party valuation fees and other general and administrative expenses. Expenses are recognized on an accrual basis.

40

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Financing Costs
The Company records expenses related to shelf filings and applicable offering costs as deferred financing costs in the Statement of Assets and Liabilities. To the extent such expenses relate to equity offerings, these expenses are charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25 or charged to expense if no offering is completed.
The Company records origination and other expenses related to its debt obligations as deferred financing costs in the Statement of Assets and Liabilities. These expenses are deferred and amortized as part of interest expense using the straight-line method over the stated life of the obligation which approximates the effective yield method.
Foreign Currency Translations
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 foreign exchange rate on the date of valuation. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Dividends and Distributions
Dividends and distributions to common shareholders are recorded as of the ex-dividend date. The amount to be paid out as dividends is determined by the board of directors each quarter. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.
Share Repurchase
In connection with the Company’s share repurchase program, the cost of shares repurchased is charged to net assets on the settlement date.
Federal and State Income Taxes
We have elected to be treated as a RIC under the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must (among other requirements) meet certain source-of-income and asset diversification requirements and timely distribute to its shareholders at least 90% of its investment company taxable income and net capital gain, as defined by the Code, for each year. The Company (among other requirements) has made and intends to continue to make the requisite distributions to its shareholders, which will generally relieve the Company from corporate-level income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to shareholder dividend and distributions and other permanent book and tax difference are reclassified to paid-in capital.
If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains in the calendar year earned, we will general be required to pay excise tax equal to 4% of the amount by which 98% of our annual ordinary income and 98.2% of our capital gains exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated undistributed taxable income.
If we fail to satisfy the annual distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate rates. Distribution would generally be taxable to our individual and other non-corporate taxable shareholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of our current and accumulated earnings and profits provided certain holding period and other requirements are met. Subject to certain limitation under the Code, corporate distributions would be eligible for the dividend-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits payable by us as an additional tax. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have

41

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.
We follow ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. As of September 30, 2015, and for the three and six months ended, there were no uncertain tax positions. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although we file both federal and state income tax returns, our major tax jurisdiction is federal. Our tax returns for each of our federal tax years since 2012 remain subject to examination by the Internal Revenue Service.
Derivative Instruments
The Company may make investments in derivative instruments. The derivative instruments are fair valued with changes to the fair value reflected in net unrealized gain/loss during the reporting period and recorded within realized gain/loss upon exit and settlement of the contract. The accrual of periodic payment settlements is recorded in net change in unrealized gain/loss and subsequently recorded as net realized gain or loss on the interest settlement date.
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 gain or loss. Realized gains or losses are recognized when contracts are settled.
Recent Accounting Pronouncements
In May 2014, the FASB issued guidance to establish a comprehensive and converged standard on revenue recognition to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions, and geographies. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also specifies the accounting for certain costs to obtain or fulfill a contract with a customer. The new guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Qualitative and quantitative information is required to be disclosed about: (1) contracts with customers, (2) significant judgments and changes in judgments, and (3) assets recognized from costs to obtain or fulfill a contract. The new guidance will apply to all entities. In August 2015, the FASB approved a one-year deferral of the effective date of the new revenue guidance. The amended guidance permits public business entities to apply the new revenue guidance to interim reporting periods within annual reporting periods beginning after December 15, 2017 (i.e., beginning in the first interim period within the year of adoption). Public business entities would be permitted to apply the new revenue guidance early, but not before the original public business entity effective date (i.e., annual periods beginning after December 15, 2016). Public business entities choosing this option will apply the new revenue guidance to all interim reporting periods within the year of adoption. This guidance is not expected to have an impact on the financial statements of the Company.
In August 2014, the FASB issued guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires that management evaluate each annual and interim reporting period whether conditions exist that give rise to substantial doubt about the entity’s ability to continue as a going concern within one year from the financial statement issuance date, and if so, provide related disclosures. Disclosures are only required if conditions give rise to substantial doubt, whether or not the substantial doubt is alleviated by management’s plans. No disclosures are required specific to going concern uncertainties if an assessment of the conditions does not give rise to substantial doubt. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. If substantial doubt is alleviated as a result of the consideration of management’s plans, a company should disclose information that enables users of financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes): 1) principal conditions that initially give rise to substantial doubt, 2)

42

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


management’s evaluation of the significance of those conditions in relation to the company’s ability to meet its obligations, and 3) management’s plans that alleviated substantial doubt. If substantial doubt is not alleviated after considering management’s plans, disclosures should enable investors to understand the underlying conditions, and include the following: 1) a statement indicating that there is substantial doubt about the company’s ability to continue as a going concern within one year after the issuance date, 2) the principal conditions that give rise to substantial doubt, 3) management’s evaluation of the significance of those conditions in relation to the company’s ability to meet its obligations, and 4) management plans that are intended to mitigate the adverse conditions. The new guidance applies to all companies. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. This guidance is not expected to have an impact on the financial statements of the Company.
In February 2015, the FASB issued new guidance which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Existing guidance includes different requirements for performing a consolidation analysis if, among other factors, the entity under evaluation is any one of the following: (1) a legal entity that qualifies for the indefinite deferral under the amended consolidation rules, (2) a legal entity that is within the scope of the amended consolidation rules, or (3) a limited partnership or similar entity that is considered a voting interest entity. Under the new guidance, all reporting entities are within the scope of the new standard, including limited partnerships and similar legal entities, unless a scope exception applies. The presumption that a general partner controls a limited partnership has been eliminated. In addition, fees paid to decision makers that meet certain conditions (e.g., are both customary and commensurate with the level of effort required for the services provided) no longer cause decision makers to consolidate variable interest entities (each a “VIE”) in certain instances. The new guidance places more emphasis in the consolidation evaluation on variable interests other than the fee arrangements such as principal investment risk (for example, debt or equity interests), guarantees of the value of the assets or liabilities of the VIE, written put options on the assets of the VIE, or similar obligations, including some liquidity commitments or agreements (explicit or implicit). Additionally, the new guidance reduces the extent to which related party arrangements cause an entity to be considered a primary beneficiary. The indefinite deferral of the amended consolidation rules for certain investment funds has been eliminated and a scope exception from the new consolidation standard has been added for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the 1940 Act for registered money market funds. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period, and adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the new guidance using either a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or by applying the amendments retrospectively. The Company is in the process of evaluating the impact that this new guidance will have on its financial statements.
In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability (i.e., versus being capitalized as an asset and amortized as required under existing guidance), consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the new guidance (i.e., debt issuance costs will continue to be amortized as an increase to interest expense). The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. An entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The Company is in the process of evaluating the impact that this new guidance will have on its financial statements.
In May 2015, the FASB issued guidance to eliminate diversity in practice related to how certain investments measured at net asset value are categorized within the fair value hierarchy. The guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. A reporting entity should continue to disclose information on investments for which fair value is measured at net asset value (or its equivalent) as a practical expedient to help users understand the nature and risks of the investments and whether the investments, if sold, are probable of being sold at amounts different from net asset value. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. A reporting entity should apply the amendments retrospectively to all periods presented. The retrospective approach requires that an investment for which fair value is measured using the net asset value per share practical expedient be removed from the fair value hierarchy in all periods presented in an entity’s financial statements. Earlier application is permitted. This guidance is not expected to have an impact on the financial statements of the Company.

43

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Note 3. Related Party Agreements and Transactions
The Company has an Investment Advisory and Management Agreement (the “Investment Advisory Agreement”) with the Investment Adviser, under which the Investment Adviser receives a fee from the Company, consisting of two components — a base management fee and a performance-based incentive fee. The base management fee is determined by taking the average value of our gross assets, net of the average of any payable for investments at the end of the two most recently completed calendar quarters calculated at an annual rate of 2.00%. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on our 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 our operating expenses for the quarter (including the base management fee, any expenses payable under an administration agreement (the “Administration Agreement”) between the Company and the Administrator, 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 our net assets at the end of the immediately preceding calendar quarter, is compared to the rate of 1.75% per quarter (7% annualized). For the period between April 2, 2012 and March 31, 2016, AIM has agreed to voluntarily waive the management and incentive fees on the common shares issued on April 2, 2012 and May 20, 2013.
The Investment Adviser has also entered into an investment sub-advisory agreement with CION Investment Corporation (“CION”) (the “Sub-Advisory Agreement”) under which AIM receives management and incentive fees from CION in connection with the investment advisory services provided. For the period between April 1, 2014 and March 31, 2016, the Investment Adviser has agreed to waive all base management fees receivable under the Investment Advisory Agreement with the Company in the amount equal to the amount actually received by AIM from CION less the fully allocated incremental expenses accrued by AIM. AIM’s arrangement with CION is subject to the  annual renewal of an investment sub-advisory agreement with CION which has a renewal date of  December 2015.
The Company pays the Investment Adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed 1.75%, which we commonly refer to as the performance threshold; (2) 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds 1.75% but does not exceed 2.1875% in any calendar quarter; and (3) 20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately prorated for any period of less than three months. The effect of the fee calculation described above is that if pre-incentive fee net investment income is equal to or exceeds 2.1875%, the Investment Adviser will receive a fee of 20% of our pre-incentive fee net investment income for the quarter.
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of our cumulative realized capital gains less cumulative realized capital losses, unrealized capital loss (unrealized loss on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For accounting purposes only, we are required under GAAP to accrue a theoretical capital gains incentive fee based upon net realized capital gains and unrealized capital gain and loss on investments held at the end of each period.
The accrual of this theoretical capital gains incentive fee assumes all unrealized capital gain and loss is realized in order to reflect a theoretical capital gains incentive fee that would be payable to the Investment Adviser at each measurement date. There was no accrual for theoretical capital gains incentive fee for the three and six months ended September 30, 2015 and 2014. It should be noted that a fee so calculated and accrued would not be payable under the Investment Advisers Act of 1940 (“Advisers Act”) or the Investment Advisory Agreement, and would not be paid based upon such computation of capital gains incentive fees in subsequent periods. Amounts actually paid to the Investment Adviser will be consistent with the Advisers Act and formula reflected in the Investment Advisory Agreement which specifically excludes consideration of unrealized capital gain.

44

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


For the period between April 1, 2013 and March 31, 2016, AIM has agreed to be paid the portion of the performance-based incentive fee that is attributable to deferred interest, such as PIK, when the Company receives such interest in cash. The accrual of incentive fees shall be reversed if such interest is reversed in connection with any write off or similar treatment of the investment. Upon payment of the deferred incentive fee, AIM will also receive interest on the deferred interest at an annual rate of 3.25% for the period between the date in which the incentive fee is earned and the date of payment.
For the three and six months ended September 30, 2015, the Company recognized $16,727 and $34,079, respectively, of base management fees and $10,774 and $22,641, respectively, of performance-based incentive fees before impact of waived fees. For the three and six months ended September 30, 2014, the Company recognized $18,878 and $36,989, respectively, of base management fees and $15,393 and $27,860, respectively, of performance-based incentive fees. For the three and six months ended September 30, 2015, management fees waived were $3,425 and $6,578, respectively. For the three and six months ended September 30, 2014, management fees waived were $2,241 and $4,948, respectively. For the three and six months ended September 30, 2015, incentive fees waived were $1,297 and $2,659, respectively. For the three and six months ended September 30, 2014, incentive fees waived were $1,800 and $3,245, respectively.
At September 30, 2015 and March 31, 2015, management and performance-based incentive fees payable were $29,557 and $37,361, respectively.
The amount of the incentive fees on PIK income for which payments have been deferred for the three and six months ended September 30, 2015 were $1,457 and $2,484, respectively. The amount of the incentive fees on PIK income for which payments have been deferred for the three and six months ended September 30, 2014 were $1,328 and $2,487, respectively. The cumulative incentive fee on PIK income included in management and performance-based incentive fee payable line of the Statement of Assets and Liabilities as of September 30, 2015 and March 31, 2015 were $7,565 and $5,863, respectively.
The Company has also entered into an Administration Agreement with AIA under which AIA provides administrative services for the Company. For providing these services, facilities and personnel, the Company reimburses the Administrator for the allocable portion of overhead and other expenses incurred by the Administrator and requested to be reimbursed by the Administrator in performing its obligations under the Administration Agreement. The expenses include rent and the Company’s allocable portion of its chief financial officer and chief compliance officer and their respective staffs. For the three and six months ended September 30, 2015, the Company recognized expenses under the Administration Agreement of $1,650 and $3,083, respectively. For the three and six months ended September 30, 2014, the Company recognized expenses under the Administration Agreement of $1,525 and $2,958, respectively.
Merx Aviation Finance, LLC (“Merx”), a wholly-owned portfolio company of the Company, has also entered into an administration agreement (“Merx Administration Agreement”) with the Administrator under which the Administrator provides administrative services to Merx for an annual fee of $150. The fee received from Merx by the Company is included in expense reimbursements in the Statement of Operations. For the three and six months ended September 30, 2015, the Company recognized expense reimbursements of $38 and $75 respectively, under the Merx Administration Agreement. For the three and six months ended September 30, 2014, the Company recognized expense reimbursements of $38 and $75 respectively, under the Merx Administration Agreement.
The Company has also entered into an expense reimbursement agreement with Merx Aviation Finance Assets Ireland, Limited, an affiliate of Merx that will reimburse the Company for reasonable out-of-pocket expenses incurred, including any interest, fees or other amounts incurred by the Company in connection with letters of credit issued on its behalf. For the three and six months ended September 30, 2015, the Company recognized expenses that were reimbursed under the expense reimbursement agreement of $21 and $42 respectively. For the three and six months ended September 30, 2014, the Company recognized expenses that were reimbursed under the expense reimbursement agreement of $21 and $41 respectively.

45

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Note 4. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share, pursuant to ASC 260-10, for the three and six months ended September 30, 2015 and September 30, 2014, respectively:
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Basic Earnings per Share
 
 
 
 
 
 
 
Net increase (decrease) in net assets resulting from operations
$
(1,747
)
 
$
41,967

 
$
4,644

 
$
106,603

Weighted average shares outstanding
235,873,005

 
236,741,351

 
236,304,806

 
236,741,351

Basic earnings per share
$
(0.01
)
 
$
0.18

 
$
0.02

 
$
0.45

 
 
 
 
 
 
 
 
Diluted Earnings per Share*
 
 
 
 
 
 
 
Net increase (decrease) in net assets resulting from operations
$
(1,747
)
 
$
41,967

 
$
4,644

 
$
106,603

Adjustment for interest on convertible notes net of incentive fees

 
2,524

 

 
5,068

Net increase (decrease) in net assets resulting from operations, as adjusted
$
(1,747
)
 
$
44,491

 
$
4,644

 
$
111,671

Weighted average shares outstanding, as adjusted for dilutive effect of convertible notes
235,873,005

 
251,289,451

 
236,304,806

 
251,289,451

Diluted earnings per share:
$
(0.01
)
 
$
0.18

 
$
0.02

 
$
0.44

_________________
* In applying the if-converted method, conversion is not assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. For the three and six months ended September 30, 2015, anti-dilution would total $0.01 and $0.02, respectively.
Note 5. Investments
Fair Value Measurement and Disclosures
At September 30, 2015, our investments were categorized as follows in the fair value hierarchy for ASC 820 purposes.
 
 
 
 
 
Fair Value Measurement at Reporting Date Using:
Description
Cost

Fair Value
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
1st Lien Secured Debt
$
1,140,597

 
$
1,067,013

 

 
$
34,174

 
$
1,032,839

2nd Lien Secured Debt
1,022,344

 
943,065

 

 
411,749

 
531,316

Unsecured Debt
302,666

 
295,679

 

 
45,500

 
250,179

Structured Products and Other
400,048

 
413,465

 

 

 
413,465

Preferred Equity
186,138

 
160,108

 

 

 
160,108

Common Equity/Interests
254,365

 
310,392

 
5,264

 

 
305,128

Warrants
5,016

 
4,327

 

 

 
4,327

Total Investments
$
3,311,174


$
3,194,049

 
$
5,264

 
$
491,423

 
$
2,697,362


46

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


At March 31, 2015, our investments were categorized as follows in the fair value hierarchy for ASC 820 purposes.
 
 
 
 
 
Fair Value Measurement at Reporting Date Using:
Description
Cost
 
Fair Value
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
1st Lien Secured Debt
$
1,252,324

 
$
1,193,847

 
$

 
$
177,817

 
$
1,016,030

2nd Lien Secured Debt
820,840

 
805,625

 

 
293,515

 
512,110

Unsecured Debt
530,366

 
475,434

 

 
123,463

 
351,971

Structured Products and Other
349,813

 
374,368

 

 

 
374,368

Preferred Equity
197,365

 
165,101

 

 

 
165,101

Common Equity/Interests
330,851

 
329,881

 

 
81

 
329,800

Warrants
5,016

 
5,571

 

 

 
5,571

Total Investments
$
3,486,575

 
$
3,349,827

 
$

 
$
594,876

 
$
2,754,951

 The following chart shows the components of change in our investments categorized as Level 3, for the three months ended September 30, 2015.
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
1st Lien Secured Debt
 (2)
 
2nd Lien Secured Debt
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, June 30, 2015
$
1,095,901

 
$
490,136

 
$
268,852

 
$
412,564

 
$
128,302

 
$
322,941

 
$
5,573

 
$
2,724,269

Total realized gains (losses)
(1,923
)
 
(5
)
 
(21,657
)
 

 

 
(85
)
 

 
(23,670
)
Total change in unrealized gain (loss)
(20,579
)
 
(17,458
)
 
10,899

 
(6,386
)
 
3,454

 
19,000

 
(1,246
)
 
(12,316
)
Net amortization on investments
1,076

 
1,164

 
121

 
107

 

 

 

 
2,468

Purchases, including capitalized PIK (3)
24,330

 
81,845

 
1,013

 
18,466

 
28,352

 
33,000

 

 
187,006

Sales (3)
(82,218
)
 
(19,600
)
 
(9,117
)
 
(11,286
)
 

 
(69,728
)
 

 
(191,949
)
Transfers out of Level 3 (1)

 
(6,408
)
 

 

 

 

 

 
(6,408
)
Transfers into Level 3 (1)
16,252

 
1,642

 
68

 

 

 

 

 
17,962

Ending Balance, September 30, 2015
$
1,032,839

 
$
531,316

 
$
250,179

 
$
413,465

 
$
160,108

 
$
305,128

 
$
4,327

 
$
2,697,362

The amount of total gains or losses for the period attributable to the change in unrealized gain (loss) relating to our Level 3 assets still held at the reporting date
$
(24,239
)
 
$
(32,227
)
 
$
(2,196
)
 
$
(6,689
)
 
$
3,454

 
$
18,915

 
$
(1,246
)
 
$
(44,228
)
____________________


47

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


(1)
Transfers out of Level 3 are due to an increase in the quantity and reliability of broker quotes obtained and transfers into Level 3 are due to a decrease in the the quantity and reliability of broker quotes obtained as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the period shown.
(2)
Includes unfunded revolver obligations and letters of credit measured at fair value of $(3,149).
(3)
Includes reorganizations and restructurings.
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.
The following chart shows the components of change in our investments categorized as Level 3, for the six months ended September 30, 2015.
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
1st Lien Secured Debt
 (2)
 
2nd Lien Secured Debt
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, March 31, 2015
$
1,016,030

 
$
512,110

 
$
351,971

 
$
374,368

 
$
165,101

 
$
329,800

 
$
5,571

 
$
2,754,951

Total realized gains (losses)
(2,048
)
 
14

 
(40,602
)
 
(67
)
 

 
(39,662
)
 

 
(82,365
)
Total change in unrealized gain (loss)
(22,156
)
 
(40,050
)
 
13,812

 
(11,138
)
 
6,233

 
56,975

 
(1,244
)
 
2,432

Net amortization on investments
1,635

 
885

 
241

 
214

 

 

 

 
2,975

Purchases, including capitalized PIK (3)
233,772

 
211,679

 
31,784

 
65,835

 
51,281

 
74,338

 

 
668,689

Sales (3)
(219,903
)
 
(52,299
)
 
(107,095
)
 
(15,747
)
 
(62,507
)
 
(111,162
)
 

 
(568,713
)
Transfers out of Level 3 (1)

 
(102,665
)
 

 

 

 
(5,264
)
 

 
(107,929
)
Transfers into Level 3 (1)
25,509

 
1,642

 
68

 

 

 
103

 

 
27,322

Ending Balance, September 30, 2015
$
1,032,839

 
$
531,316

 
$
250,179

 
$
413,465

 
$
160,108

 
$
305,128

 
$
4,327

 
$
2,697,362

The amount of total gains or losses for the period attributable to the change in unrealized gain (loss) relating to our Level 3 assets still held at the reporting date
$
85,208

 
$
55,028

 
$
6,453

 
$
(35,527
)
 
$
58,295

 
$
(77,137
)
 
$
133

 
$
92,453

_________________
(1) Transfers out of Level 3 are due to an increase in the quantity and reliability of broker quotes obtained and transfers into Level 3 are due to a decrease in the the quantity and reliability of broker quotes obtained as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the period shown.

(2) Includes unfunded revolver obligations and letters of credit measured at fair value of $(3,149).
(3) Includes reorganizations and restructurings.
* Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.

48

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)



The following chart shows the components of change in our investments categorized as Level 3, for the three months ended September 30, 2014.
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
1st Lien Secured Debt
 (2)
 
2nd Lien Secured Debt
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, June 30, 2014
$
776,858

 
$
417,658

 
$
420,044

 
$
275,604

 
$
103,624

 
$
301,805

 
$
13,879

 
$
2,309,472

Total realized gains (losses)
185

 

 

 

 

 
1,936

 
9,713

 
11,834

Total change in unrealized gain (loss)
3,377

 
(2,833
)
 
(5,957
)
 
5,353

 
2,941

 
6,076

 
888

 
9,845

Net amortization on investments
340

 
350

 
164

 
60

 

 

 

 
914

Purchases, including capitalized PIK (3)
188,714

 
103,145

 
333

 
47,969

 
2,113

 
107

 

 
342,381

Sales (3)
(48,355
)
 
(59,352
)
 
(36,963
)
 
(11,608
)
 

 
(2,624
)
 
(13,709
)
 
(172,611
)
Transfers out of Level 3 (1)
(15,306
)
 
(56,990
)
 

 

 

 

 

 
(72,296
)
Transfers into Level 3 (1)
(2,634
)
 
59,371

 

 

 

 

 

 
56,737

Ending Balance, September 30, 2014
$
903,179

 
$
461,349

 
$
377,621

 
$
317,378

 
$
108,678

 
$
307,300

 
$
10,771

 
$
2,486,276

The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gain (loss) relating to our Level 3 assets still held at the reporting date
$
(649
)
 
$
(9,490
)
 
$
(4,718
)
 
$
6,284

 
$
2,941

 
$
6,265

 
$
1,317

 
$
1,950

____________________
(1)
Transfers out of Level 3 are due to an increase in the availability of qualified observable inputs and transfers into Level 3 are due to a decrease in the availability of qualified observable inputs as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the period shown.
(2)
Includes unfunded revolver obligations and letters of credit measured at fair value of $(5,607).
(3)
Includes reorganizations and restructurings.
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.

49

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


The following chart shows the components of change in our investments categorized as Level 3, for the six months ended September 30, 2014.
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
1st Lien Secured Debt
 (2)
 
2nd Lien Secured Debt
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, March 31, 2014
612,794

 
322,889

 
415,079

 
208,901

 
93,062

 
274,699

 
11,174

 
$
1,938,598

Total realized gains (losses)
367

 
336

 
(1,752
)
 
(107
)
 

 
(11,169
)
 
9,713

 
(2,612
)
Total change in unrealized gain (loss)
4,312

 
(2,051
)
 
(6,799
)
 
7,617

 
2,727

 
33,288

 
3,593

 
42,687

Net amortization on investments
2,464

 
6,911

 
13,120

 
114

 

 

 

 
22,609

Purchases, including capitalized PIK (3)
387,059

 
214,310

 
11,983

 
126,692

 
12,889

 
14,188

 

 
767,121

Sales (3)
(88,511
)
 
(96,200
)
 
(74,360
)
 
(25,839
)
 

 
(3,661
)
 
(13,709
)
 
(302,280
)
Transfers out of Level 3 (1)
(15,306
)
 
(22,165
)
 

 

 

 
(45
)
 

 
(37,516
)
Transfers into Level 3 (1)

 
37,319

 
20,350

 

 

 

 

 
57,669

Ending Balance, September 30, 2014
$
903,179

 
$
461,349

 
$
377,621

 
$
317,378

 
$
108,678

 
$
307,300

 
$
10,771

 
$
2,486,276

The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gain (loss) relating to our Level 3 assets still held at the reporting date
$
(6
)
 
$
(10,246
)
 
$
(6,481
)
 
$
9,273

 
$
2,727

 
$
37,429

 
$
171

 
$
32,867

____________________
(1)
Transfers out of Level 3 are due to an increase in the availability of qualified observable inputs and transfers into Level 3 are due to a decrease in the availability of qualified observable inputs as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the period shown.
(2)
Includes unfunded revolver obligations and letters of credit measured at fair value of $(5,607).
(3)
Includes reorganizations and restructurings.
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.


50

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


The following tables summarize the significant unobservable inputs the Company used to value the majority of its investments categorized within Level 3 as of September 30, 2015 and March 31, 2015. In addition to the techniques and inputs noted in the table below, according to our valuation policy we may also use other valuation techniques and methodologies when determining our fair value measurements. The below table is not intended to be all-inclusive, but rather provides information on the significant unobservable inputs as they relate to the Company’s determination of fair values.
 
 
 
 
Quantitative Information about Level 3 Fair Value  Measurements
 
Fair Value as of September 30, 2015
 
Valuation Techniques/
Methodologies
 
Unobservable
Input
 
Range
Weighted Average
1st Lien
$
577,424

 
Yield Analysis
 
Discount Rate
 
7.9%
20.0%
13.8%
 
352,084

 
Discounted Cash Flow
 
Discount Rate
 
12.0%
12.0%
12.0%
 
808

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
 
14,465

 
Recovery Analysis
 
N/A
 
N/A
N/A
N/A
 
88,058

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
2nd Lien
280,561

 
Yield Analysis
 
Discount Rate
 
9.6%
19.9%
12.8%
 
62,978

 
Recovery Analysis
 
N/A
 
N/A
N/A
N/A
 
187,777

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Unsecured Debt
250,110

 
Yield Analysis
 
Discount Rate
 
10.1%
32.5%
12.5%
 
69

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Structured Products and Other
2,269

 
Yield Analysis
 
Discount Rate
 
11.8%
11.8%
11.8%
 
383,621

 
Discounted Cash Flow
 
Discount Rate
 
6.3%
16.0%
11.8%
 
12,154

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
 
15,421

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Preferred Equity
4,980

 
Market Comparable Approach
 
Comparable Multiple
 
2.1x
11.9x
11.7x
 
23,712

 
Yield Analysis
 
Discount Rate
 
10.8%
10.8%
10.8%
 
112,302

 
Options Pricing Model
 
Expected Volatility
 
70.0%
70.0%
70.0%
 
19,114

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
Common Equity/Interests
81,185

 
Market Comparable Approach
 
Comparable Multiple
 
2.1x
12.3x
8.5x
 
219,165

 
Discounted Cash Flow
 
Discount Rate
 
10.0%
30.0%
12.7%
 
4,675

 
Other
 
Illiquidity/ Restrictive discount
 
7.0%
7.0%
7.0%
 
103

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Warrants
222

 
Market Comparable Approach
 
Comparable Multiple
 
5.0x
9.4x
9.4x
 
4,105

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
 

 
Recovery Analysis
 
N/A
 
N/A
N/A
N/A
Total
$
2,697,362

 
 
 
 
 
 
 
 
N/A – Not applicable


51

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)



 
 
 
Quantitative Information about Level 3 Fair Value  Measurements
 
Fair Value as of March 31, 2015
 
Valuation Techniques/
Methodologies
 
Unobservable
Input
 
Range
Weighted Average
1st Lien Secured Debt
$
531,654

 
Yield Analysis
 
Discount Rate
 
7.9%
20.9%
13.0%
 
352,084

 
Discounted Cash Flow
 
Discount Rate
 
12.0%
12.0%
12.0%
 
14,377

 
Recent Transactions
 
Recent Transactions
 
N/A
N/A
N/A
 
117,915

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
2nd Lien Secured Debt
247,585

 
Yield Analysis
 
Discount Rate
 
9.7%
19.7%
14.5%
 
264,525

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Unsecured Debt
329,831

 
Yield Analysis
 
Discount Rate
 
9.7%
22.0%
11.4%
 
22,140

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Structured Products and Other
39,296

 
Yield Analysis
 
Discount Rate
 
8.4%
15.0%
8.8%
 
317,381

 
Discounted Cash Flow
 
Discount Rate
 
3.8%
15.0%
12.4%
 
17,691

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Preferred Equity
66,976

 
Market Comparable Approach
 
Comparable Multiple
 
2.2x
11.7x
7.3x
 
23,645

 
Yield Analysis
 
Discount Rate
 
10.8%
10.8%
10.8%
 
9,309

 
Discounted Cash Flow
 
Discount Rate
 
15.9%
15.9%
15.9%
 
65,171

 
Options Pricing Model
 
Expected Volatility
 
70.0%
70.0%
70.0%
Common Equity/Interests
 
121,169

 
Market Comparable Approach
 
Comparable Multiple
 
2.2x
10.8x
8.3x
 
203,469

 
Discounted Cash Flow
 
Discount Rate
 
11.4%
30.0%
13.0%
 
5,162

 
Other
 
Illiquidity/Restrictive discount
 
7.0%
7.0%
7.0%
Warrants
1,399

 
Market Comparable Approach
 
Comparable Multiple
 
4.8x
11.4x
11.2x
 
222

 
Other
 
Illiquidity/ Restrictive discount
 
20.0%
20.0%
20.0%
 
3,950

 
Recent Transactions
 
Recent Transactions
 
N/A
N/A
N/A
Total
$
2,754,951

 
 
 
 
 
 
 
 
N/A – Not applicable
____________________
The significant unobservable inputs used in the fair value measurement of the Company’s debt and equity securities are primarily earnings before interest, taxes, depreciation and amortization (“EBITDA”) comparable multiples and market discount rates. The Company typically uses EBITDA comparable multiples on its equity securities to determine the fair value of investments. The Company uses market discount rates for debt securities to determine if the effective yield on a debt security is commensurate with the market yields for that type of debt security. If a debt security’s effective yield is significantly less than the market yield for a similar debt security with a similar credit profile, then the resulting fair value of the debt security may be lower. Significant increases or decreases in either of these inputs in isolation would result in a significantly lower or higher fair value measurement. The significant unobservable inputs used in the fair value measurement of the structured products include the discount rate applied in the valuation models in addition to default and recovery rates applied to projected cash flows in the valuation models. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an

52

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


investment; conversely decreases in the discount rate can significantly increase the fair value of an investment. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks.
Investment Transactions
For the three months ended September 30, 2015 and September 30, 2014, purchases of investments on a trade date basis were $204,237 and $581,092, respectively. For the six months ended September 30, 2015 and September 30, 2014, purchases of investments on a trade date basis were $713,585 and $1,230,604, respectively.
For the three months ended September 30, 2015 and September 30, 2014 sales and repayments of investments on a trade date basis were $279,678 and $559,121, respectively. For the six months ended September 30, 2015 and September 30, 2014, sales and repayments of investments on a trade date basis were $812,463 and $1,075,947, respectively.
PIK Interest and Dividends
PIK income for the three and six months ended September 30, 2015 and September 30, 2014 is summarized below:
 
Three Months Ended
 
Six Months Ended
 
September 30, 2015
September 30, 2014
 
September 30, 2015
September 30, 2014
PIK income for the period
$
6,832

$
7,798

 
$
16,328

$
14,625

Capitalized PIK income for the three and six months ended September 30, 2015 and September 30, 2014 is summarized below:
 
Three Months Ended,
 
Six Months Ended,
 
September 30, 2015
September 30, 2014
 
September 30, 2015
September 30, 2014
PIK balance at beginning of period
$
54,155

$
69,730

 
$
86,903

$
58,185

Gross PIK income capitalized
6,136

5,513

 
21,732

17,058

Adjustments due to investment exits
(3,396
)

 
(3,396
)

PIK income received in cash
(104
)
(1,635
)
 
(48,448
)
(1,635
)
PIK balance at end of period
$
56,791

$
73,608

 
$
56,791

$
73,608

Investments on Non-Accrual Status
As of September 30, 2015, 4.7% of total investments at amortized cost, or 2.2% of total investments at fair value, were on non-accrual status. As of March 31, 2015, 1.3% of total investments at amortized cost, or 0.1% of total investments at fair value, were on non-accrual status.

53

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Significant Unconsolidated Subsidiaries
The following unconsolidated subsidiaries are considered significant subsidiaries under SEC Regulation S-X Rule 10-01(b)(1) and Regulation S-X Rule 4-08(g) as of September 30, 2015. Accordingly, summarized, comparative financial information, in aggregate, is presented below for these significant subsidiaries.
Merx Aviation Finance, LLC
Merx and its subsidiaries (“Merx Aviation”) are principally engaged in acquiring and leasing commercial aircraft to airlines. Its focus is on current generation aircraft, held either domestically or internationally. Merx Aviation may acquire fleets of aircraft primarily through securitized, non-recourse debt or individual aircraft. Merx Aviation may outsource its aircraft servicing requirements to third parties that have the global staff and expertise necessary to complete such tasks.
 
For the six months ended
 
September 30, 2015 (unaudited)
 
September 30, 2014 (unaudited)
Net revenue
$
61,258

 
$
37,704

Net operating income
37,125

 
23,864

Earnings before taxes
5,540

 
931

Net profit (loss)
3,370

 
929

Dynamic Product Tankers, LLC
Dynamic Product Tankers and its subsidiaries (“DPT”) are principally engaged in acquiring and operating LR1 Product Tankers. Its focus is on long-range product tankers transporting refined products for various customers. Vessels owned by DPT are operated primarily in the spot markets but also on opportunistic long-term time charters.
 
For period from April 7, 2015 (commencement of operations) to September 30, 2015 (unaudited)
Net revenue
$
16,995

Net operating income
5,158

Earnings before taxes
3,620

Net profit
3,620

MSEA Tankers LLC
MSEA Tankers and its subsidiaries (“MSEA”) are engaged in acquiring and leasing tanker vessels to oil majors, commodity traders and shipping companies. Its focus is on tankers transporting refined products for its charterers through long-term charters. MSEA engages in a variety of income-generating structured equity transactions, ranging from bridge loans to sale-leaseback structures either on individual vessels or vessel packages sourced from bank balance sheets and other sources. MSEA may also outsource its technical management requirements through engaging in bareboat charters.
 
For the six months ended September 30, 2015 (unaudited) *
Net revenue
$
5,520

Net operating income
3,624

Earnings before taxes
3,163

Net profit
3,163

* MSEA commenced operations on December 16, 2014, therefore, comparable prior period data is not available.

54

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Note 6. Debt and Foreign Currency Transactions and Translations
The Company’s outstanding debt obligations as of September 30, 2015 were as follows:
 
 
As of September 30, 2015
 
Date Issued /
Amended
 
Total Aggregate
Principal
Amount
Committed
 
Principal Amount
Outstanding
 
Fair Value
 
Final
Maturity
Date
Senior Secured Facility
2015
 
$
1,310,000

 
$
255,755
*
 
$
255,499

(1)
4/24/2020
Senior Secured Notes
2010
 
225,000

 
225,000

 
225,045

(1)
10/4/2015
Senior Secured Notes (Series A)
2011
 
29,000

 
29,000

 
29,534

(1)
9/29/2016
Senior Secured Notes (Series B)
2011
 
16,000

 
16,000

 
16,933

(1)
9/29/2018
2042 Notes
2012
 
150,000

 
150,000

 
149,460

(2)
10/15/2042
2043 Notes
2013
 
150,000

 
150,000

 
151,320

(2)
7/15/2043
2025 Notes
2015
 
350,000

 
344,408

 
358,015

(1)
3/3/2025
Convertible Notes
2011
 
200,000

 
200,000

 
198,500

(2)
1/15/2016
Total Debt Obligations
 
 
$
2,430,000

 
$
1,370,163

 
$
1,384,306

 
 
*
Included in this amount is foreign currency debt obligations as outlined under foreign currency transactions and translations within this note.
(1)
The fair value of these debt obligations are categorized as Level 3 under ASC 820 as of September 30, 2015. The valuation is based on a yield analysis and discount rate commensurate with the market yields for similar types of debt.
(2)
The fair value of these debt obligations are categorized as Level 1 under ASC 820 as of September 30, 2015. The valuation is based on quoted prices of identical liabilities in active markets.

The Company’s outstanding debt obligations as of March 31, 2015 were as follows:
 
As of March 31, 2015
 
Date Issued /
Amended
 
Total Aggregate
Principal
Amount
Committed
 
Principal Amount
Outstanding
 

Fair Value
 
Final
Maturity
Date
Senior Secured Facility
2013
 
$
1,270,000

 
$
384,648
*
 
$
384,253

(1)
8/31/2018
Senior Secured Notes
2010
 
225,000

 
225,000

 
227,363

(1)
10/4/2015
Senior Secured Notes (Series A)
2011
 
29,000

 
29,000

 
29,684

(1)
9/29/2016
Senior Secured Notes (Series B)
2011
 
16,000

 
16,000

 
16,952

(1)
9/29/2018
2042 Notes
2012
 
150,000

 
150,000

 
152,646

(2)
10/15/2042
2043 Notes
2013
 
150,000

 
150,000

 
153,438

(2)
7/15/2043
2025 Note
2015
 
350,000

 
344,111

 
352,100

(1)
3/3/2025
Convertible Notes
2011
 
200,000

 
200,000

 
206,250

(2)
1/15/2016
Total Debt Obligations
 
 
$
2,390,000

 
$
1,498,759

 
$
1,522,686

 
 
*
Included in this amount is foreign currency debt obligations as outlined under foreign currency transactions and translations within this note.
(1)
The fair value of these debt obligations are categorized as Level 3 under ASC 820 as of March 31, 2015. The valuation is based on a yield analysis and discount rate commensurate with the market yields for similar types of debt.
(2)
The fair value of these debt obligations are categorized as Level 1 under ASC 820 as of March 31, 2015. The valuation is based on quoted prices of identical liabilities in active markets.



55

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Senior Secured Facility
On April 24, 2015, the Company amended and restated its senior secured, multi-currency, revolving credit facility (the “Senior Secured Facility”). The facility increased the lenders’ commitments to $1,310,000 and extended the final maturity date through April 24, 2020, and allows the Company to seek additional commitments from new and existing lenders in the future, up to an aggregate facility size not to exceed $1,965,000. The Senior Secured Facility is secured by substantially all of the assets in Apollo Investment’s portfolio, including cash and cash equivalents. Commencing April 24, 2019, the Company is required to repay, in twelve consecutive monthly installments of equal size, the outstanding amount under the Senior Secured Facility as of April 24, 2020. In addition, the stated interest rate on the facility was changed from LIBOR plus 2.00% to a formula-based calculation, based on a minimum borrowing base, resulting in a stated interest rate of either LIBOR plus 1.75%, or LIBOR plus 2.00%. As of September 30, 2015, the stated interest rate on the facility is LIBOR plus 2.00%. The Company is required to pay a commitment fee of 0.375% per annum on any unused portion of the Senior Secured Facility and a letter of credit participation fee of 2.00% per annum plus a letter of credit fronting fee of 0.25% per annum on the letters of credit issued. The Senior Secured Facility contains affirmative and restrictive covenants, including: (a) periodic financial reporting requirements, (b) maintaining minimum shareholders’ equity of the greater of (i) 40% of the total assets of Apollo Investment and its consolidated subsidiaries as at the last day of any fiscal quarter and (ii) the sum of (A) $870,000 plus (B) 25% of the net proceeds from the sale of equity interests in Apollo Investment after the closing date of the Senior Secured Facility, (c) maintaining a ratio of total assets, less total liabilities (other than indebtedness) to total indebtedness, in each case of Apollo Investment and its consolidated subsidiaries, of not less than 2.0:1.0, (d) limitations on the incurrence of additional indebtedness, including a requirement to meet a certain minimum liquidity threshold before Apollo Investment can incur such additional debt, (e) limitations on liens, (f) limitations on investments (other than in the ordinary course of Apollo Investment’s business), (g) limitations on mergers and disposition of assets (other than in the normal course of Apollo Investment’s business activities), (h) limitations on the creation or existence of agreements that permit liens on properties of Apollo Investment’s consolidated subsidiaries and (i) limitations on the repurchase or redemption of certain unsecured debt and debt securities. In addition to the asset coverage ratio described in clause (c) of the preceding sentence, borrowings under the Senior Secured Facility (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that applies different advance rates to different types of assets in Apollo Investment’s portfolio. The Senior Secured Facility also provides for the issuance of letters of credit for up to an aggregate amount of $150,000. As of September 30, 2015 and March 31, 2015, the Company had $23,188 and $25,246, respectively, in standby letters of credit issued through the Senior Secured Facility. The amount available for borrowing under the Senior Secured Facility is reduced by any standby letters of credit issued. Under GAAP, these letters of credit are considered commitments because no funding has been made and as such are not considered a liability. These letters of credit are not senior securities because they are not in form of a typical financial guarantee and the portfolio companies are obligated to refund any drawn amounts. The available remaining capacity under the Senior Secured Facility was $1,031,057 and $860,106 at September 30, 2015 and March 31, 2015, respectively. Terms used in this paragraph have the meanings set forth in the Senior Secured Facility.
Senior Secured Notes
On September 30, 2010, the Company entered into a note purchase agreement with certain institutional accredited investors providing for a private placement issuance of $225,000 in aggregate principal amount of five-year, senior secured notes with an annual fixed interest rate of 6.25% and a maturity date of October 4, 2015 (the “Senior Secured Notes”). On October 4, 2010, the Senior Secured Notes issued by Apollo Investment were sold to certain institutional accredited investors pursuant to an exemption from registration under the Securities Act of 1933, as amended. Interest on the Senior Secured Notes is due semi-annually on April 4 and October 4, commencing on April 4, 2011.
On September 29, 2011, the Company closed a private offering of $45,000 aggregate principal amount of senior secured notes (the “Series A and B Notes”) consisting of two series: (1) 5.875% Senior Secured Notes, Series A, of the Company due September 29, 2016 in the aggregate principal amount of $29,000; and (2) 6.250% Senior Secured Notes, Series B, of the Company due September 29, 2018, in the aggregate principal amount of $16,000. The Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Interest on the Series A and B Notes is due semi-annually on March 29 and September 29, commencing on March 29, 2012.
On October 4, 2015, the Company’s Senior Secured Notes, which had an outstanding principal amount of $225,000, matured and were repaid.


56

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


2042 Notes
On October 9, 2012, the Company issued $150,000 in aggregate principal amount of senior unsecured notes for net proceeds of $145,275 (the “2042 Notes”). The 2042 Notes will mature on October 15, 2042. Interest on the 2042 Notes is paid quarterly on January 15, April 15, July 15 and October 15, at an annual rate of 6.625%, commencing on January 15, 2013. The Company may redeem the 2042 Notes in whole or in part at any time or from time to time on or after October 15, 2017. The 2042 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior, unsecured indebtedness. The 2042 Notes are listed on The New York Stock Exchange under the ticker symbol “AIB.”
2043 Notes
On June 17, 2013, the Company issued $135,000 in aggregate principal amount of senior unsecured notes and on June 24, 2013 an additional $15,000 in aggregate principal amount of such notes was issued pursuant to the underwriters’ over-allotment option exercise. In total, $150,000 of aggregate principal was issued for net proceeds of $145,275 (the “2043 Notes”). The 2043 Notes will mature on July 15, 2043. Interest on the 2043 Notes is paid quarterly on January 15, April 15, July 15 and October 15, at an annual rate of 6.875%, commencing on October 15, 2013. The Company may redeem the 2043 Notes in whole or in part at any time or from time to time on or after July 15, 2018. The 2043 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior, unsecured indebtedness. The 2043 Notes are listed on The New York Stock Exchange under the ticker symbol “AIY.”
2025 Notes
On March 3, 2015, the issued $350,000 in the aggregate principal amount of unsecured notes for net proceeds of $343,650 (the “2025 Notes”). The 2025 Notes will mature on March 3, 2025. Interest on the 2025 Notes is due semi-annually on March 3 and September 3, at an annual rate of 5.25%, commencing on September 3, 2015. The 2025 Notes are a general, unsecured obligation and rank equal in right of payment with all of our existing unsecured indebtedness.
Convertible Notes
On January 25, 2011, the Company closed a private offering of $200,000 aggregate principal amount of senior unsecured convertible notes (the “Convertible Notes”). The Convertible Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes bear interest at an annual rate of 5.75%, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2011. The Convertible Notes will mature on January 15, 2016 unless earlier converted or repurchased at the holder’s option. Prior to December 15, 2015, the Convertible Notes will be convertible only upon certain corporate reorganizations, dilutive recapitalizations or dividends, or if, during specified periods our shares trade at more than 130% of the then applicable conversion price or the Convertible Notes trade at less than 97% of their conversion value and, thereafter, at any time. The Convertible Notes will be convertible by the holders into shares of common stock, initially at a conversion rate of 72.7405 shares of the Company’s common stock per $1 principal amount of Convertible Notes (14,548,100 common shares) corresponding to an initial conversion price per share of approximately $13.75, which represents a premium of 17.5% to the $11.70 per share closing price of the Company’s common stock on The NASDAQ Global Select Market on January 19, 2011. The conversion rate will be subject to adjustment upon certain events, such as stock splits and combinations, mergers, spin-offs, increases in dividends in excess of $0.28 per share per quarter and certain changes in control. Certain of these adjustments, including adjustments for increases in dividends, are subject to a conversion price floor of $11.70 per share. The Convertible Notes are senior unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities. As more fully reflected in note 4, the issuance is to be considered as part of the if-converted method for calculation of diluted EPS.




57

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


The following table summarizes the components of average outstanding debt, maximum amount of debt outstanding, and the annualized interest cost, including commitment fees, for the three and six months ended September 30, 2015 and 2014:
 
Three Months Ended
 
 Six Months Ended
 
September 30, 2015
September 30, 2014
 
September 30, 2015
September 30, 2014
Average outstanding debt balance
$
1,430,439

$
1,537,993

 
$
1,482,412

$
1,545,092

Maximum amount of debt outstanding
1,501,528

1,686,196

 
1,657,288

1,686,196

 
 
 
 
 
 
Weighted average annualized interest cost, including commitment fees, but excluding debt issuance costs (1)
5.54
%
4.49
%
 
5.38
%
4.43
%
Annualized amortized debt issuance cost
0.55
%
0.43
%
 
0.55
%
0.43
%
Total annualized interest cost
6.09
%
4.92
%
 
5.93
%
4.86
%
_________________
(1)
Commitment fees for the three and six months ended September 30, 2015 were $929 and $1,741, respectively. commitment fees for the three and six months ended September 30, 2014 were $456 and $897, respectively.
Foreign Currency Transactions and Translations
The Company had the following outstanding non-US borrowings on its Senior Secured Facility at September 30, 2015 and March 31, 2015 as summarized below.
 
As of September 30, 2015
Foreign Currency
Local
Currency
 
Original
Borrowed
Value
 
Current
Value
 
Reset Date
 
Unrealized Gain
(Loss)
Canadian Dollar
C$
54,100

 
$
50,066

 
$
40,352

 
10/28/2015
 
$
9,714

Euro
3,700

 
4,972

 
4,130

 
10/28/2015
 
842

British Pound
£
14,500

 
22,209

 
21,964

 
10/13/2015
 
245

British Pound
£
14,000

 
21,582

 
21,207

 
10/19/2015
 
375

British Pound
£
27,000

 
39,956

 
40,898

 
10/26/2015
 
(942
)
British Pound
£
20,600

 
31,105

 
31,204

 
10/28/2015
 
(99
)
 
 
 
$
169,890

 
$
159,755

 
 
 
$
10,135

 
As of March 31, 2015
Foreign Currency
Local
Currency
 
Original
Borrowed
Value
 
Current
Value
 
Reset Date
 
Unrealized Gain
(Loss)
British Pound
£
6,500

 
$
9,926

 
$
9,649

 
4/7/2015
 
$
277

British Pound
£
25,000

 
37,525

 
37,112

 
4/13/2015
 
413

British Pound
£
27,000

 
39,956

 
40,082

 
4/20/2015
 
(126
)
British Pound
£
7,600

 
12,124

 
11,282

 
4/30/2015
 
842

Euro
19,200

 
25,803

 
20,621

 
4/30/2015
 
5,182

Canadian Dollar
C$
65,100

 
60,245

 
51,402

 
4/30/2015
 
8,843

 
 
 
$
185,579

 
$
170,148

 
 
 
$
15,431

As of September 30, 2015 and March 31, 2015, the Company is in compliance with all debt covenants.

58

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Note 7. Shareholders’ Equity
There were no equity offerings of common stock during the six months ended September 30, 2015 and fiscal year ended March 31, 2015.
On August 6, 2015, the Company adopted a plan for the purpose of repurchasing up to $50 million of its common stock in accordance with applicable rules specified in the Securities Exchange Act of 1934 (the “2015 Repurchase Plan”). This plan replaces the plan which was previously authorized and approved on August 11, 2011. The 2015 Repurchase Plan is designed to allow the Company to repurchase its shares both during its open window periods and at times when it otherwise might be prevented from doing so under applicable insider trading laws or because of self-imposed trading blackout periods. A broker selected by the Company will have the authority under the terms and limitations specified in an agreement with the Company to repurchase shares on the Company’s behalf in accordance with the terms of the 2015 Repurchase Plan. Repurchases are subject to SEC regulations as well as certain price, market volume and timing constraints specified in the 2015 Repurchase Plan. Pursuant to the 2015 Repurchase Plan, the Company may from time to time repurchase a portion of its shares of common stock and the Company is hereby notifying shareholders of its intention as required by applicable securities law.

On September 15, 2015, the Company allocated $5million to be repurchased under the 2015 Repurchase Plan in accordance with SEC Rule 10b5-1 (the “10b5-1 Repurchase Plan”). The 10b5-1 Repurchase Plan terminated on November 4, 2015.
Under the 2015 Repurchase Plan and 10b5-1 Repurchase Plan (the “Plans”), the Company repurchased 3,340,400 shares with a weighted average price per share of $6.34, inclusive of commissions. This represents a discount of approximately 19.89% of the average net asset value per share for the quarter ended September 30, 2015. Since the inception of the Plans, the total dollar amount of shares repurchased is $21,193, leaving a maximum of $28,807 available for future purchases under the Plans.
On September 12, 2014, the Company announced an At the Market (“ATM”) program through which the Company can sell up to 16 million shares of its common stock from time to time. As of September 30, 2015, no shares had been sold through the Company’s ATM program.
Note 8. Commitments and Contingencies
As of September 30, 2015 and March 31, 2015, the Company’s unfunded commitments and contingencies were as follows:
 
September 30, 2015
 
March 31, 2015
Unfunded revolver obligations and bridge loans commitments (1)
$
61,224

 
$
206,294

Unfunded delayed draw commitments on senior loans to portfolio companies (2)
27,910

 
102,092

Unfunded delayed draw commitments on senior loans to portfolio companies (performance thresholds not met) (3)

 
23,436

Standby letters of credit issued for certain portfolio companies for which the Company and portfolio companies are liable (4)
22,231

 
34,433

_________________
(1)
The unfunded revolver obligations may or may not be funded to the borrowing party in the future. The amounts relate to loans with various maturity dates, but the entire amount was eligible for funding to the borrowers as of September 30, 2015, subject to the terms of each loan’s respective credit agreements which includes borrowing covenants that needs to be met prior to funding.
(2)
The Company’s commitment to fund delayed draw loans is triggered upon the satisfaction of certain pre-negotiated terms and conditions which can include covenants to maintain specified leverage levels and other related borrowing base covenants.
(3)
The borrowers are required to meet certain performance thresholds before the Company is obligated to fulfill the commitments and those performance thresholds were not met as of September 30, 2015.
(4)
For all these letters of credit issued and outstanding, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. None of the letters of credit issued and outstanding are recorded as a liability on the Company’s balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company.

59

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)



As of November 5, 2015, there were no changes to the outstanding commitments to purchase secured term loans and unsecured bridge loans which existed as of September 30, 2015.
Note 9. Financial Highlights
The following is a schedule of financial highlights for the six months ended September 30, 2015 and the fiscal year ended March 31, 2015:  
 
Six Months Ended September 30, 2015(unaudited)
 
Fiscal Year Ended March 31, 2015
Per Share Data
 
 
 
Net asset value, beginning of period
$
8.18

 
$
8.67

Net investment income (1)
0.43

 
0.96

Net realized and net change in unrealized loss (1)
(0.41
)
 
(0.64
)
Net increase in net assets resulting from operation
0.02

 
0.32

Distributions to shareholders from net investment income (2)
(0.40
)
 
(0.70
)
Distributions to shareholders from return of capital (2)

 
(0.10
)
Effect of share repurchases
0.03

 

Offering costs (6)

 

Net asset value, end of period
$
7.83

 

$ 8.18 *

Per share market value at end of period
$
5.48

 
$
7.68

Total return (3)
(24.1
)%
 
1.9
%
Shares outstanding at end of period
233,400,951

 
236,741,351

 
 
 
 
Ratio/Supplemental Data
 
 
 
Net assets at end of period (in millions)
$
1,826.9

 
$
1,937.6

Ratio of net investment income to average net assets (5)
10.66
 %
 
11.27
%
Ratio of operating expenses to average net assets (4) (5)
5.87
 %
 
6.25
%
Ratio of interest and other debt expenses to average net assets (5)
4.68
 %
 
3.91
%
Ratio of net expenses to average net assets (4) (5)
10.55
 %
 
10.16
%
Average debt outstanding (in millions)
$
1,482

 
$
1,586

Average debt per share (1)
$
6.27

 
$
6.70

Portfolio turnover ratio (5)
43.1
 %
 
62.1
%
 
(1)
Financial highlights are based on the weighted average number of shares outstanding for the period presented.
(2)
Dividends and distributions are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under GAAP. Per share amounts is based on actual rate per share.
(3)
Total return is based on the change in market price per share during the respective periods. Total return also takes into account dividends and distributions, if any, reinvested in accordance with the Company’s dividend reinvestment plan.


60

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


(4)
The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets are shown inclusive of all voluntary management and incentive fee waivers (Note 3). For the six months ended September 30, 2015, the ratio of operating expenses to average net assets and the ratio of total expenses to average net assets would be 6.86% and 11.54%, respectively, without the voluntary fee waivers. For the fiscal year ended March 31, 2015, the ratio of operating expenses to average net assets and the ratio of total expenses to average net assets would be 7.03% and 10.95%, respectively, without the voluntary fee waivers.
(5)
Annualized for the six months ended September 30, 2015.
(6)
Offering costs per share represent less than one cent per average share for the fiscal year ended March 31, 2015.
*     Numbers may not sum due to rounding.
Information about our senior securities is shown in the following table as of each year ended March 31 since the Company commenced operations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.
Class and Year
Total Amount
Outstanding(1)
 
Asset
Coverage
Per Unit (2)
 
Involuntary
Liquidating
Preference
Per Unit (3)
 
Average Market Value Per Unit (4)
 
Senior Secured Facility
 
 
 
 
 
 
 
 
Fiscal 2016 (through September 30, 2015)
$
255,755

(5)
$
436

 
$

 
N/A

 
Fiscal 2015
384,648

 
588

 

 
N/A

 
Fiscal 2014
602,261


1,095




N/A

 
Fiscal 2013
536,067

 
1,137

 

 
N/A

 
Fiscal 2012
539,337

 
1,427

 

 
N/A

 
Fiscal 2011
628,443

 
1,707

 

 
N/A

 
Fiscal 2010
1,060,616

 
2,671

 

 
N/A

 
Fiscal 2009
1,057,601

 
2,320

 

 
N/A

 
Fiscal 2008
1,639,122

 
2,158

 

 
N/A

 
Fiscal 2007
492,312

 
4,757

 

 
N/A

 
Fiscal 2006
323,852

 
4,798

 

 
N/A

 
Senior Secured Notes
 
 
 
 
 
 
 
 
Fiscal 2016 (through September 30, 2015)
$
270,000

 
$
460

 
$

 
N/A

 
Fiscal 2015
270,000

 
413

 

 
N/A

 
Fiscal 2014
270,000

 
491

 

 
N/A

 
Fiscal 2013
270,000

 
572

 

 
N/A

 
Fiscal 2012
270,000

 
714

 

 
N/A

 
Fiscal 2011
225,000

 
611

 

 
N/A

 
Fiscal 2010

 

 

 
N/A

 
Fiscal 2009

 

 

 
N/A

 
Fiscal 2008

 

 

 
N/A

 
Fiscal 2007

 

 

 
N/A

 
Fiscal 2006

 

 

 
N/A

 
2042 Notes
 
 
 
 
 
 
 
 
Fiscal 2016 (through September 30, 2015)
$
150,000

 
$
255

 
$

 
$
99.64

 
Fiscal 2015
150,000

 
230

 

 
99.59

 
Fiscal 2014
150,000

 
273

 

 
92.11

 
Fiscal 2013
150,000

 
318

 

 
97.43

 
Fiscal 2012

 

 

 
N/A

 
Fiscal 2011

 

 

 
N/A

 

61

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Class and Year
Total Amount
Outstanding(1)
 
Asset
Coverage
Per Unit (2)
 
Involuntary
Liquidating
Preference
Per Unit (3)
 
Average Market Value Per Unit (4)
 
Fiscal 2010

 

 

 
N/A

 
Fiscal 2009

 

 

 
N/A

 
Fiscal 2008

 

 

 
N/A

 
Fiscal 2007

 

 

 
N/A

 
Fiscal 2006

 

 

 
N/A

 
2043 Notes
 
 
 
 
 
 
 
 
Fiscal 2016 (through September 30, 2015)
$
150,000

 
$
255

 
$

 
$
100.88

 
Fiscal 2015
150,000

 
230

 

 
99.74

 
Fiscal 2014
150,000

 
273

 

 
89.88

 
Fiscal 2013

 

 

 
N/A

 
Fiscal 2012

 

 

 
N/A

 
Fiscal 2011

 

 

 
N/A

 
Fiscal 2010

 

 

 
N/A

 
Fiscal 2009

 

 

 
N/A

 
Fiscal 2008

 

 

 
N/A

 
Fiscal 2007

 

 

 
N/A

 
Fiscal 2006

 

 

 
N/A

 
2025 Notes

 

 

 
N/A

 
Fiscal 2016 (through September 30, 2015)
$
344,408

 
$
586

 
$

 
N/A

 
Fiscal 2015
344,111

 
526

 

 
N/A

 
Fiscal 2014

 

 

 
N/A

 
Fiscal 2013

 

 

 
N/A

 
Fiscal 2012

 

 

 
N/A

 
Fiscal 2011

 

 

 
N/A

 
Fiscal 2010

 

 

 
N/A

 
Fiscal 2009

 

 

 
N/A

 
Fiscal 2008

 

 

 
N/A

 
Fiscal 2007

 

 

 
N/A

 
Fiscal 2006

 

 

 
N/A

 
Convertible Notes











 
Fiscal 2016 (through September 30, 2015)
$
200,000


$
341


$


$
99.25

 
Fiscal 2015
200,000

 
306

 

 
104.43

 
Fiscal 2014
200,000


364




106.60

 
Fiscal 2013
200,000


424




102.84

 
Fiscal 2012
200,000


529




97.81

 
Fiscal 2011
200,000


544




N/A

(6)
Fiscal 2010






N/A

 
Fiscal 2009






N/A

 
Fiscal 2008






N/A

 
Fiscal 2007






N/A

 
Fiscal 2006






N/A

 
Total Debt Securities
 
 
 
 
 
 
 
 
Fiscal 2016 (through September 30, 2015)
$
1,370,163

 
$
2,333

 
$

 
N/A

 
Fiscal 2015
1,498,759

 
2,293

 

 
N/A

 

62

APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share data)


Class and Year
Total Amount
Outstanding(1)
 
Asset
Coverage
Per Unit (2)
 
Involuntary
Liquidating
Preference
Per Unit (3)
 
Average Market Value Per Unit (4)
 
Fiscal 2014
1,372,261

 
2,496

 

 
N/A

 
Fiscal 2013
1,156,067

 
2,451

 

 
N/A

 
Fiscal 2012
1,009,337

 
2,670

 

 
N/A

 
Fiscal 2011
1,053,443

 
2,862

 

 
N/A

 
Fiscal 2010
1,060,616

 
2,671

 

 
N/A

 
Fiscal 2009
1,057,601

 
2,320

 

 
N/A

 
Fiscal 2008
1,639,122

 
2,158

 

 
N/A

 
Fiscal 2007
492,312

 
4,757

 

 
N/A

 
Fiscal 2006
323,852

 
4,798

 

 
N/A

 
____________________

 N/A     Not applicable
(1)
Total amount of each class of senior securities outstanding at the end of the period presented.
(2)
The asset coverage ratio for the total senior securities representing indebtedness is calculated as our total assets, less all liabilities and indebtedness not represented by senior securities, divided by the total senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the Asset Coverage Per Unit for each class of debt, the Asset Coverage Per Unit was allocated based on the amount of indebtedness outstanding at the end of the period for each class of debt.
(3)
The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.
(4)
Not applicable, except for with respect to the 2042 Notes, the 2043 Notes, and the Convertible Notes, as other senior securities do not have sufficient trading for an average market value per unit to be determined. The average market value per unit for each of the 2042 Notes, the 2043 Notes, and the Convertible Notes is based on the closing daily prices of such notes and is expressed per $100 of indebtedness (including for the 2042 Notes and the 2043 Notes, which were issued in $25 increments).
(5)
Included in this amount are foreign currency debt obligations as outlined in the table in note 6.
(6)
Restrictive legends were removed in 2012.
Note 10. Subsequent Events
On October 4, 2015, the Company’s Senior Secured Notes, which had an outstanding principal amount of $225,000, matured and were repaid.
On November 2, 2015 , the Board of Directors declared a dividend of $0.20 per share for the second quarter of 2016, payable on January 5, 2016 to shareholders of record as of December 21, 2015.





63


Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Apollo Investment Corporation:

We have reviewed the accompanying statement of assets and liabilities of Apollo Investment Corporation (the “Company”), including the schedule of investments, as of September 30, 2015, the related statements of operations for the three and six month periods ended September 30, 2015 and September 30, 2014, the statement of changes in net assets for the six month period ended September 30, 2015, and the statements of cash flows for the six month periods ended September 30, 2015 and September 30, 2014. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statement of assets and liabilities, including the schedule of investments, as of March 31, 2015, and the related statements of operations (not presented herein), of changes in net assets and of cash flows (not presented herein) for the year then ended, and in our report dated May 19, 2015, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying statement of assets and liabilities, including the schedule of investments, as of March 31, 2015, and the related statement of changes in net assets for the year then ended, is fairly stated in all material respects in relation to the statements of assets and liabilities, including the schedule of investments, and of changes in net assets from which it has been derived.



/s/ PricewaterhouseCoopers LLP
New York, New York
November 5, 2015

64


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this report.
Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including 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;
our contractual arrangements and relationships with third parties;
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 generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report.
We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
OVERVIEW
Apollo Investment Corporation (“Apollo Investment”, the “Company”, “AIC”, “we”, “us”, or “our”) was incorporated under the Maryland General Corporation Law in February 2004. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for federal income tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Code. Pursuant to this election and assuming we qualify as a RIC, we generally do not have to pay corporate-level federal income taxes on any income we distribute to our shareholders. Apollo Investment commenced operations on April 8, 2004 upon completion of its initial public offering that raised $870 million in net proceeds from selling 62 million shares of its common stock at a price of $15.00 per share. Since then, and through September 30, 2015, we have raised approximately $2.21 billion in net proceeds from additional offerings of common stock and we have repurchased common stock for $21.2 million.
Apollo Investment Management, L.P. (“AIM”) is our investment adviser and an affiliate of Apollo Global Management, LLC and its consolidated subsidiaries (“AGM”). AGM and other affiliates manage other funds that may have investment mandates that are similar, in whole or in part, with ours. AIM and its affiliates may determine that an investment is appropriate both for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, AIM may determine that we should invest on a side-by-side basis with one or more other funds. We make all such investments subject to compliance with applicable regulations and interpretations, and our allocation procedures. In certain circumstances negotiated co-investments may be made only if we receive an order from the SEC permitting us to do so. There can be no assurance that any such order will be obtained.
In addition to furnishing us with office facilities, equipment, and clerical, bookkeeping and record keeping services, Apollo Investment Administration, LLC (“AIA” or “Administrator”), an affiliate of AGM, also oversees our financial records as well as prepares our reports to shareholders and reports filed with the SEC. AIA also performs the calculation and publication of our net asset value, the payment of our expenses and oversees the performance of various third-party service providers and the preparation

65


and filing of our tax returns. Furthermore, AIA provides on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance.
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions).
Revenue
We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of mezzanine or senior secured loans, generally have a stated term of five to ten years and bear interest at a fixed rate or a floating rate usually determined on the basis of a benchmark: LIBOR, Euro Interbank Offered Rate (EURIBOR), British pound sterling LIBOR (GBP LIBOR), or the prime rate. Interest on debt securities is generally payable quarterly or semiannually and while U.S. subordinated debt and corporate notes typically accrue interest at fixed rates, some of our investments may include zero coupon and/or step-up bonds that accrue income on a constant yield to call or maturity basis. In addition, some of our investments provide for PIK interest or dividends. Such amounts of accrued PIK interest or dividends are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees for providing managerial assistance and, if applicable, consulting fees, etc.
Expenses
For all investment professionals of AIM and their staff, when and to the extent engaged in providing investment advisory and management services to us, the compensation and routine overhead expenses of that personnel which is allocable to those services are provided and paid for by AIM. We bear all other costs and expenses of our operations and transactions, including those relating to:
investment advisory and management fees;
expenses incurred by AIM payable to third parties, including agents, consultants or other advisors, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;
calculation of our net asset value (including the cost and expenses of any independent valuation firm);
direct costs and expenses of administration, including independent registered public accounting and legal costs;
costs of preparing and filing reports or other documents with the SEC;
interest payable on debt, if any, incurred to finance our investments;
offerings of our common stock and other securities;
registration and listing fees;
fees payable to third parties, including agents, consultants or other advisors, relating to, or associated with, evaluating and making investments;
transfer agent and custodial fees;
taxes;
independent directors’ fees and expenses;
marketing and distribution-related expenses;
the costs of any reports, proxy statements or other notices to shareholders, including printing and postage costs;
our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;

66


organizational costs; and
all other expenses incurred by us or the Administrator in connection with administering our business, such as our allocable portion of overhead under the administration agreement, including rent and our allocable portion of the cost of our chief financial officer, chief compliance officer and their respective staffs.
We expect our general and administrative operating expenses related to our ongoing operations to increase moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors.
Portfolio and Investment Activity
Our portfolio and investment activity during the three and six months ended September 30, 2015 and 2014 is as follows:


 
Three Months Ended September 30,
 
Six Months Ended September 30,
( in millions)

 
2015
 
2014
 
2015
 
2014
Investment made in portfolio companies (1)
 
$
204.2

 
$
581.1

 
$
713.6

 
$
1,230.6

Investments sold
 
(80.1
)
 
(229.0
)
 
(414.8
)
 
(279.7
)
Net activity before repaid investments
 
124.1

 
352.1

 
298.8

 
950.9

Investments repaid
 
(199.5
)
 
(330.1
)
 
(397.6
)
 
(812.5
)
Net investment activity    
 
$
(75.4
)
 
$
22.0

 
$
(98.8
)
 
$
138.4

 
 
 
 
 
 
 
 
 
Portfolio companies, at beginning of period
 
102

 
117

 
105

 
111

Number of new portfolio companies
 
4

 
15

 
14

 
40

Number of exited companies
 
(8
)
 
(19
)
 
(21
)
 
(38
)
Portfolio companies, at end of period
 
98

 
113

 
98

 
113

 
 
 
 
 
 
 
 
 
Number of investments in existing portfolio companies
 
9

 
18

 
29

 
42

(1)
Investments were primarily made through a combination of primary and secondary debt investments.

67


Our portfolio composition and weighted average yields at September 30, 2015 and at March 31, 2015 are as follows:
 
 
September 30, 2015
 
March 31, 2015
Portfolio composition, at fair value:
 
 
 
 
Secured debt
 
63%

 
60%

Unsecured debt
 
9%

 
14%

Structured products and other (1)
 
13%

 
11%

Preferred equity
 
5%

 
5%

Common equity and warrants
 
10%

 
10%

Weighted average yields, at amortized cost basis, exclusive of securities on non-accrual status (2):
 
 
 
 
Secured debt portfolio
 
11.3%

 
11.2%

Unsecured debt portfolio
 
11.3%

 
10.9%

Total debt portfolio
 
11.6%

 
11.2%

Income-bearing investment portfolio composition, at fair value:
 
 
 
 
Fixed rate amount
 
$
1.0
 billion
 
$
1.3
 billion
Floating rate amount
 
$
1.5
 billion
 
$
1.4
 billion
Fixed rate %
 
42%

 
48%

Floating rate %
 
58%

 
52%

Income-bearing investment portfolio composition, at amortized cost:
 
 
 
 
Fixed rate amount
 
$
1.1
 billion
 
$
1.4
 billion
Floating rate amount
 
$
1.5
 billion
 
$
1.4
 billion
Fixed rate %
 
42%

 
50%

Floating rate %
 
58%

 
50%

_________________
(1)
Structured products and other such as collateralized loan obligations (“CLOs”) and credit-linked notes (“CLNs”) are typically a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of debt and residual interest in order of seniority.
(2)
An investor’s yield may be lower than the portfolio yield due to sales loads and other expenses.
Since the initial public offering of Apollo Investment in April 2004 and through September 30, 2015, invested capital totaled $16.1 billion in 364 portfolio companies. Over the same period, Apollo Investment completed transactions with more than 100 different financial sponsors.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, gains and losses. Changes in the economic environment, financial markets, credit worthiness of portfolio companies and any other parameters used in determining such estimates could cause actual results to differ materially. In addition to the discussion below, our critical accounting policies are further described in the Notes to the Financial Statements.
Fair Value Measurements
The Company follows guidance in ASC 820, Fair Value Measurement, where fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data

68


obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. Of the Company’s investments at September 30, 2015, $2.70 billion or 84% of the Company’s investments were classified as Level 3.
The high proportion of Level 3 investments relative to our total investments is directly related to our investment philosophy and target portfolio, which consists primarily of long-term secured debt, as well as unsecured and mezzanine positions of private middle-market companies.  A fundamental difference exists between our investments and those of comparable publicly traded fixed income investments, namely high yield bonds, and this difference affects the valuation of our private investments relative to comparable publicly traded instruments.
Senior secured loans, or senior loans, are higher in the capital structure than high yield bonds, and are typically secured by assets of the borrowing company. This improves their recovery prospects in the event of default and affords senior loans a structural advantage over high yield bonds. Many of the Company’s investments are also privately negotiated and contain covenant protections that limit the issuer to take actions that could harm us as a creditor.  High yield bonds typically do not contain such covenants.
Given the structural advantages of capital seniority and covenant protection, the valuation of our private debt portfolio is driven more by investment specific credit factors than movements in the broader debt capital markets. Each security is evaluated individually and as indicated above, we value our private investments based upon a multi-step valuation process, including valuation recommendations from independent valuation firms.
Investment Valuation Process
Under procedures established by our board of directors, we value investments, including certain secured debt, unsecured debt, and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unless they are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). We utilize mid-market pricing as a practical expedient for fair value unless a different point within the range is more representative. If and when market quotations are deemed not to represent fair value, we typically utilize independent third party valuation firms to assist us in determining fair value. Accordingly, such investments go through our multi-step valuation process as described below. In each case, our independent valuation firms consider observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations for such investments. Investments purchased within 15 days before the valuation date and debt investments with remaining maturities of 60 days or less may each be valued at cost with interest accrued or discount amortized to the date of maturity (although they are typically valued at available market quotations), unless such valuation, in the judgment of our Investment Adviser, does not represent fair value. In this case, such investments shall be valued at fair value as determined in good faith by or under the direction of our board of directors, including using market quotations where available. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our board of directors. Such determination of fair values may involve subjective judgments and estimates.
With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our board of directors has approved 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 of our Investment Adviser which is responsible for the portfolio investment;
(2) preliminary valuation conclusions are then documented and discussed with senior management of our Investment Adviser;

69


(3) independent valuation firms are engaged by our board of directors to conduct independent appraisals by reviewing our Investment Adviser’s preliminary valuations and then making their own independent assessment;
(4) the audit committee of the board of directors reviews the preliminary valuation of our Investment Adviser and the valuation prepared by the independent valuation firm and responds to the valuation recommendation of the independent valuation firm to reflect any comments; and
(5) the board of directors discusses valuations and determines in good faith the fair value of each investment in our portfolio based on the input of our Investment Adviser, the applicable independent valuation firm, third party pricing services and the audit committee.
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, seniority of investment in the investee company’s capital structure, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When readily available, broker quotations and/or quotations provided by pricing services are considered in the valuation process of independent valuation firms. For the three and six months ended September 30, 2015, there was no change to the Company’s valuation techniques and related inputs considered in the valuation process.
Investment Income Recognition
The Company records interest and dividend income, adjusted for amortization of premium and accretion of discount, on an accrual basis. Some of our loans and other investments, including certain preferred equity investments, may have contractual payment-in-kind (“PIK”) interest or dividends. PIK interest and dividends computed at the contractual rate are accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company believes that PIK is expected to be realized.
Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on non-accrual designated investments may be recognized as income or applied to principal depending upon management’s judgment.
Loan origination fees, original issue discount (“OID”), and market discounts are capitalized and accreted into interest income over the respective terms of the applicable loans using the effective interest method or straight-line, as applicable. Upon the prepayment of a loan, prepayment premiums, any unamortized loan origination fees, OID, or market discounts are recorded as interest income. Other income generally includes amendment fees, bridge fees, and structuring fees which are recorded when earned.
The Company records as dividend income the accretable yield from its beneficial interests in structured products such as CLOs based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest receipts (which may be subject to prepayments and defaults) of the underlying pools of assets. These assumptions are updated on at least a quarterly basis to reflect changes related to a particular security, actual historical data, and market changes. A structured product investment typically has an underlying pool of assets. Payments on structured product investments are payable solely from the cash flows from such assets. As such any unforeseen event in these underlying pools of assets might impact the expected recovery and future accrual of income.

70


Expenses
Expenses include management fees, performance-based incentive fees, insurance expenses, administrative service fees, legal fees, directors’ fees, audit and tax service expenses, third-party valuation fees and other general and administrative expenses. Expenses are recognized on an accrual basis.
Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized gains or losses previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized gain (loss) reflects the net change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gains or losses.
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
Recent Accounting Pronouncements
See Note 2 within the Notes to the Financial Statements.
RESULTS OF OPERATIONS
Operating results for the three and six months ended September 30, 2015 and September 30, 2014 were as follows:
 
Three Months Ended
 
Six Months Ended
(in millions) *
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Investment income
 
 
 
 
 
 
 
Interest
$
81.1

 
$
107.2

 
$
165.5

 
$
200.8

Dividends
14.4

 
7.3

 
28.2

 
13.9

Other income
2.9

 
4.4

 
6.4

 
6.8

Total investment income
$
98.4

 
$
118.9

 
$
200.1

 
$
221.5

Expenses
 
 
 
 
 
 
 
Management fees and performance-based incentive fees, net of amounts waived
$
(22.8
)
 
$
(30.2
)
 
$
(47.5
)
 
$
(56.7
)
Interest and other debt expenses, net of expense reimbursements
(21.8
)
 
(18.9
)
 
(44.2
)
 
(37.8
)
Administrative services expenses, net of expense reimbursements
(1.6
)
 
(1.5
)
 
(3.0
)
 
(2.9
)
Other general and administrative expenses
(2.7
)
 
(2.6
)
 
(4.9
)
 
(4.9
)
Net expenses
$
(48.9
)
 
$
(53.2
)
 
$
(99.6
)
 
$
(102.3
)
Net investment income
$
49.6

 
$
65.7

 
$
100.5

 
$
119.2

Net realized and net change in unrealized gain (loss) on investments and foreign currencies
 
 
 
 
 
 
 
Net realized gain (loss)
$
(30.2
)
 
$
11.6

 
$
(111.1
)
 
$
(1.7
)
Net change in unrealized gain (loss)
(21.2
)
 
(35.3
)
 
15.2

 
(10.9
)
Net realized and net change in unrealized gain (loss) on investments and foreign currencies
(51.4
)
 
(23.7
)
 
(95.9
)
 
(12.6
)
Net increase (decrease) in net assets resulting from operations
$
(1.7
)
 
$
42.0

 
$
4.6

 
$
106.6

 
 
 
 
 
 
 
 
Net investment income on per average share basis
$
0.21

 
$
0.28

 
$
0.43

 
$
0.50

Earnings (Loss) per share - basic
$
(0.01
)
 
$
0.18

 
$
0.02

 
$
0.45

Earnings (Loss) per share - diluted
$
(0.01
)
 
$
0.18

 
$
0.02

 
$
0.44

* Totals may not foot due to rounding.

71


Total Investment Income
For the three months ended September 30, 2015 as compared to the three months ended September 30, 2014
The decrease in total investment income for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was due to a decrease in interest income of $26.1 million primarily due to a lower income-bearing investment portfolio, an increase in investments on non-accrual and a decrease in prepayment fees and acceleration of original issue discount on repaid investments which totaled $4.5 million and $21.9 million for the three months ended September 30, 2015 and September 30, 2014, respectively. This decrease in interest income was offset by an increase in dividend income by $7.1 million, primarily due to investments in AMP Solar (UK) Limited, Dynamic Product Tankers (Prime), LLC, Golden Hill CLO I, Ivy Hill Middle Market Fund IX, Ltd, and MSEA Tankers LLC.
For the six months ended September 30, 2015 as compared to the six months ended September 30, 2014
The decrease in total investment income for the six months ended September 30, 2015 compared to the six months ended September 30, 2014 was due to a decrease in interest income of $35.4 million primarily due to a lower income-bearing investment portfolio, an increase in investments on non-accrual and a decrease in prepayment fees and acceleration of original issue discount on repaid investments which totaled $12.5 million and $28.0 million for the six months ended September 30, 2015 and September 30, 2014, respectively. This decrease in interest income was offset by an increase in dividend income by $14.3 million, primarily due to investments in AMP Solar (UK) Limited, Dynamic Product Tankers (Prime), LLC, Golden Hill CLO I, Ivy Hill Middle Market Fund IX, Ltd, and MSEA Tankers LLC.
Net Expenses
For the three months ended September 30, 2015 as compared to the three months ended September 30, 2014
The decrease in expenses for the three months ended September 30, 2015 compared to three months ended September 30, 2014 was primarily driven by a decrease of $7.5 million in management and performance-based incentive fees (net of amounts waived) due to lower gross assets, more fee offset from CION, lower pre-incentive fee net investment income (mostly resulting from investments being placed on non-accrual status) and reversal of prior quarter incentive fee due to lower than par realization on certain PIK investments. The decrease was offset by an increase in interest and other debt costs which were higher due to the issuance of the 2025 Notes issued in March 2015, increasing total annualized cost of debt to 6.09% for the three months ended September 30, 2015 from 4.92% for the three months ended September 30, 2014. This increase was partially offset by a decrease in the average debt outstanding balance, which decreased to $1.43 billion during the three months ended September 30, 2015 from $1.54 billion during the three months ended September 30, 2014.
For the six months ended September 30, 2015 as compared to the six months ended September 30, 2014
The decrease in expenses for the six months ended September 30, 2015 compared to six months ended September 30, 2014 was primarily driven by a decrease of $9.3 million in management and performance-based incentive fees (net of amounts waived) due to lower gross assets, more fee offset from CION, lower pre-incentive fee net investment income (mostly, resulting from investments being placed on non-accrual status) and reversal of prior quarter incentive fee due to lower than par realization on certain PIK investments. The decrease was offset by an increase in interest and other debt costs which were higher due to the issuance of the 2025 Notes issued in March 2015, increasing total annualized cost of debt to 5.93% for the six months ended September 30, 2015 from 4.86% for the six months ended September 30, 2014. This increase was partially offset by a decrease in the average debt outstanding balance, which decreased to $1.48 billion during the six months ended September 30, 2014 from $1.55 billion during the six months ended September 30, 2014.
Net Realized Loss
For the three months ended September 30, 2015 as compared to the three months ended September 30, 2014
Net realized losses for the three months ended September 30, 2015 were $30.2 million and comprised of $5.5 million of realized gains and $35.7 million of realized losses. Significant realized gains (losses) for the three months ended September 30, 2015 are summarized below:

72


(in millions)
 
Net Realized Gain (Loss)
 
Artsonig Pty Ltd.*
 
$
(21.7
)
 
Venoco, Inc. (Denver Parent)*
 
(12.0
)
 
BMC Software Inc.*
 
(1.1
)
 
PlayPower Holdings Inc.*
 
3.1

 
Other (net)
 
1.5

 
 
 
$
(30.2
)
 
Net realized gains for the three months ended September 30, 2014 were $11.6 million and comprised of $13.7 million of realized gains and $2.1 million of realized losses. Significant realized gains (losses) for the three months ended September 30, 2014 are summarized below:
(in millions)
 
Net Realized Gain (Loss)
 
Aventine Renewable Energy Holdings, Inc.*
 
$
11.6

 
inVentiv Health, Inc.*
 
(1.4
)
 
Other (net)
 
1.4

 
 
 
$
11.6

 
For the six months ended September 30, 2015 as compared to the six months ended September 30, 2014
Net realized losses for the six months ended September 30, 2015 were $111.1 million and comprised of $10.7 million of realized gains and $121.8 million of realized losses. Significant realized gains (losses) for the six months ended September 30, 2015 are summarized below:
(in millions)
 
Net Realized Gain (Loss)
 
PlayPower Holdings Inc.*
 
$
(39.7
)
 
Molycorp, Inc.*
 
(22.1
)
 
Artsonig Pty Ltd.*
 
(21.7
)
 
Venoco, Inc. (Denver Parent)*
 
(16.2
)
 
PetroBakken Energy Ltd.*
 
(9.0
)
 
BCA Osprey II Limited*
 
(7.4
)
 
Other (net)
 
5.0

 
 
 
$
(111.1
)
 
Net realized losses for the six months ended September 30, 2014 were $1.7 million and comprised of $23.2 million of realized gains and $24.9 million of realized losses. Significant realized gains (losses) for the six months ended September 30, 2014 are summarized below:
(in millions)
 
Net Realized Gain (Loss)
 
Aventine Renewable Energy Holdings, Inc.*
 
$
11.6

 
Altegrity Inc.*
 
(17.7
)
 
Other (net)
 
4.4

 
 
 
$
(1.7
)
 
* For these investments with realized losses and realized gains, we had recorded unrealized losses and unrealized gains in prior quarters, respectively.


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Net Change in Unrealized Gains (Losses)
For the three months ended September 30, 2015 as compared to the three months ended September 30, 2014
Net change in unrealized losses for the three months ended September 30, 2015 was $21.2 million and was comprised of $64.7 million of gross unrealized gains and $85.9 million of gross unrealized losses. Significant unrealized gains (losses) for the three months ended September 30, 2015 are summarized below:
(in millions)
 
Net Change in Unrealized Gain (Loss)
 
LVI Group Investments, LLC
 
$
13.4

 
Miller Energy Resources, Inc.
 
(12.2
)
 
Osage Exploration & Development, Inc.
 
(7.9
)
 
SquareTwo (CA Holdings, Collect America, Ltd.)
 
(7.5
)
 
Lonestar Intermediate Super Holdings, LLC. (Asurion)
 
(6.6
)
 
Other (net)
 
(0.4
)
 
 
 
(21.2
)
 
Net change in unrealized losses for the three months ended September 30, 2014 was $35.3 million and was comprised of $43.6 million of gross unrealized gains and $78.9 million of gross unrealized losses. Significant unrealized gains (losses) for the three months ended September 30, 2014 are summarized below:
(in millions)
 
Net Change in Unrealized Gain (Loss)
 
Generation Brands Holdings, Inc.
 
$
6.9

 
Playpower Holdings, Inc.
 
6.8

 
Asset Repackaging Trust Six B.V.
 
5.5

 
LVI Group Investments, LLC
 
(11.8
)
 
Walter Energy, Inc.
 
(11.8
)
 
Molycorp, Inc.
 
(11.3
)
 
First Data Corp.
 
(5.2
)
 
PetroBakken Energy Ltd.
 
(4.0
)
 
Other (net)
 
(10.4
)
 
 
 
$
(35.3
)
 

74


For the six months ended September 30, 2015 as compared to the six months ended September 30, 2014
Net change in unrealized gains for the six months ended September 30, 2015 was $15.2 million and was comprised of $137.7 million of gross unrealized gains and $122.5 million of gross unrealized losses. Significant unrealized gains (losses) for the six months ended September 30, 2015 are summarized below:
(in millions)
 
Net Change in Unrealized Gain (Loss)
 
PlayPower Holdings Inc.*
 
$
21.8

 
Molycorp, Inc.*
 
20.4

 
LVI Group Investments, LLC
 
15.5

 
Venoco, Inc. (Denver Parent)*
 
15.2

 
Miller Energy Resources, Inc.
 
(20.0
)
 
SquareTwo (CA Holdings, Collect America, Ltd.)
 
(18.2
)
 
Osage Exploration & Development, Inc.
 
(9.5
)
 
Magnetation, LLC
 
(8.1
)
 
Other (net)
 
(1.9
)
 
 
 
$
15.2

 
Net change in unrealized losses for the six months ended September 30, 2014 was $10.9 million and was comprised of $99.3 million of gross unrealized gains and $110.2 million of gross unrealized losses. Significant unrealized gains (losses) for the six months ended September 30, 2014 are summarized below:
(in millions)
 
Net Change in Unrealized Gain (Loss)
 
Altegrity Inc.
 
$
16.6

 
Playpower Holding Inc.
 
13.7

 
Generation Brands Holdings, Inc.
 
12.3

 
Molycorp, Inc
 
(14.9
)
 
LVI Group Investments, LLC
 
(14.1
)
 
Walter Energy, Inc.
 
(12.9
)
 
Other (net)
 
(11.6
)
 
 
 
$
(10.9
)
 
* These investments had unrealized losses and unrealized gain as of prior quarter, which were reversed in the current quarter upon the exit of the investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s liquidity and capital resources are generated and generally available through periodic follow-on equity and debt offerings, our senior secured, multi-currency Senior Secured Facility (as defined in Note 6 within the Notes to Financial Statements), our senior secured notes, our senior unsecured notes, 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 of liquid assets and repayments of senior and subordinated loans and income earned from investments.
Cash Equivalents
We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. (See Note 2 within the Notes to Financial Statements.) At the end of each fiscal quarter, we consider taking proactive steps utilizing cash equivalents with the objective of enhancing our investment flexibility during the following quarter, pursuant to Section 55 of the 1940 Act. More specifically, we may purchase U.S. Treasury bills from time-to-time on the last business day of the quarter and typically close out that position on the following business day, settling the sale transaction on a net cash basis with the purchase, subsequent to quarter end. Apollo Investment may also utilize repurchase agreements or other balance sheet transactions, including

75


drawing down on our Senior Secured Facility, as we deem appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. There were no cash equivalents held as of September 30, 2015.
Debt
See Note 6 and note 7 within the Notes to Financial Statements for information on the Company’s debt and public offerings.
The Company’s debt maturities by period are summarized below:
 
Payments due by Period as of September 30, 2015 (in millions)
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
Senior Secured Facility (1)
$
255.8

 
$

 
$

 
$
255.8

 
$

Senior Secured Notes
225.0

 
225.0

 

 

 

Senior Secured Notes (Series A)
29.0

 
29.0

 

 

 

Senior Secured Notes (Series B)
16.0

 

 
16.0

 

 

2042 Notes
150.0

 

 

 

 
150.0

2043 Notes
150.0

 

 

 

 
150.0

2025 Notes
344.4

 

 

 

 
344.4

Convertible Notes
200.0

 
200.0

 

 

 

Total
$
1,370.2

 
$
454.0

 
$
16.0

 
$
255.8

 
$
644.4

_________________________
(1)
As of September 30, 2015, aggregate lender commitments under the Senior Secured Facility totaled $1.31 billion and $1.03 billion of unused capacity. As of September 30, 2015, there was $23.2 million of letters of credit issued under the Senior Secured Facility that are not recorded as liabilities on the Company’s Statement of Assets and Liabilities
On April 24, 2015, the Company amended and restated the Senior Secured Facility. The amendment increased the lenders’ commitments to $1.31 billion, extended the final maturity date to April 24, 2020, and allows the Company to seek additional commitments from new and existing lenders in the future, up to an aggregate facility size not to exceed $1.97 billion. In addition, the stated interest rate on the facility was changed from LIBOR plus 2.00% to a formula-based calculation, based on a minimum borrowing base, resulting in a stated interest rate of either LIBOR plus 1.75%, or LIBOR plus 2.00%. As of September 30, 2015, the stated interest rate on the facility is LIBOR plus 2.00%. Commencing April 30, 2019, the Company is required to repay, in twelve consecutive monthly installments of equal size, the outstanding amount under the Senior Secured Facility as of April 24, 2019.
PIK Interest and Dividends
For the three and six months ended September 30, 2015, PIK income totaled $6.8 million and $16.3 million, respectively, on total investment income of $98.4 million and $200.1 million, respectively. In order to maintain the Company’s status as a RIC, this non-cash source of income must be paid out to shareholders annually in the form of dividends, even though the Company has not yet collected the cash. See Note 5 within the Notes to the Financial Statements for more information on the Company’s PIK interest and dividends.
Related Party Transactions
See Note 3 within the Notes to the Financial Statements for information on the Company’s related party transactions.
Shareholder’s Equity
On August 6, 2015, the Company adopted a plan for the purpose of repurchasing up to $50 million of its common stock in accordance with applicable rules specified in the Securities Exchange Act of 1934 (the “2015 Repurchase Plan”). On September 15, 2015, the Company allocated $5million to be repurchased under the 2015 Repurchase Plan in accordance with SEC Rule 10b5-1 (the “10b5-1 Repurchase Plan”). The 10b5-1 Repurchase Plan terminated on November 4, 2015. See Note 7 within the Notes to the Financial Statements for details.

76


Under the 2015 Repurchase Plan and 10b5-1 Repurchase Plan (the “Plans”), the Company repurchased 3,340,400 shares with a weighted average price per share of $6.34, inclusive of commissions. This represents a discount of approximately 19.89% of the average net asset value per share for the quarter ended September 30, 2015. Since the inception of the Plans, the total dollar amount of shares repurchased is $21.2 million, leaving a maximum of $28.8 million available for future purchases under the Plans.
Distributions
Distributions paid to shareholders for the three and six months ended September 30, 2015 totaled $47.3 million or $0.20 per share and $94.7 million or $0.40 per share, respectively. Distributions paid to shareholders for the three and six months ended September 30, 2014 totaled $47.3 million or $0.20 per share and $94.7 million or $0.40 per share, respectively. Tax characteristics of all distributions will be reported to shareholders on Form 1099 after the end of the calendar year. Our quarterly distributions, if any, will be determined by our board of directors.
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 shareholders. As a result, if we declare a dividend, then shareholders’ 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 distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a BDC, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare dividends if we default under certain provisions or fail to satisfy certain other conditions. If we do not distribute a certain percentage of our income annually, we may suffer adverse tax consequences, including possible loss of the tax benefits available to us as a RIC. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual PIK, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may not be able to meet the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a RIC.
With respect to the distributions to shareholders, income from origination, structuring, closing, commitment and other upfront fees associated with investments in portfolio companies is treated as taxable income and accordingly, distributed to shareholders.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates. During the three and six months ended September 30, 2015, many of the loans in our portfolio had floating interest rates. These loans are usually based on floating LIBOR and typically have durations of one to twelve months after which they reset to current market interest rates. The Company also has a Senior Secured Facility that is based on floating LIBOR rates.  
The following table shows the approximate annual impact on net investment income of base rate changes in interest rates (considering interest rate flows for variable rate instruments) to our loan portfolio and outstanding debt as of September 30, 2015, assuming no changes in our investment and borrowing structure:
(in millions except per share data)
Basis Point Change
Net Investment Income
 
Net Investment Income per Share
Up 400 basis points
$
28.14

 
$
0.121

Up 300 basis points
$
18.59

 
$
0.080

Up 200 basis points
$
9.07

 
$
0.039

Up 100 basis points
$
0.52

 
$
0.002

We may hedge against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments.

77


Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of September 30, 2015 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
(b) Changes in Internal Controls Over Financial Reporting
Management has not identified any change in the Company’s internal control over financing reporting that occurred during the second fiscal quarter of 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While we do not expect that the resolution of these matters if they arise would materially affect our business, financial condition or results of operations, resolution will be subject to various uncertainties and could result in the expenditure of significant financial and managerial resources.
On May 20, 2013, the Company was named as a defendant in a complaint by the bankruptcy trustee of DSI Renal Holdings and related companies (“DSI”). The complaint alleges, among other things, that the Company participated in a “fraudulent conveyance” involving a restructuring and subsequent sale of DSI in 2010 and 2011. The complaint seeks, jointly and severally from all defendants, (1) damages of approximately $425 million, of which the Company’s share would be approximately $41 million, and the return of 9,000 shares of common stock of DSI obtained by the Company in the restructuring and sale and (2) punitive damages. At this point in time, the Company is unable to assess whether it may have any liability in this action. The Company has not made any determination that this action is or may be material to the Company and intends to vigorously defend itself. The Company has filed a motion to dismiss this litigation.

Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section of our Form 10-K filed on May 19, 2015, which could materially affect our business, financial condition and/or operating results. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
On August 6, 2015, the Company adopted a plan for the purpose of repurchasing up to $50 million of its common stock in accordance with applicable rules specified in the Securities Exchange Act of 1934 (the “2015 Repurchase Plan”). This plan replaces the plan which was previously authorized and approved on August 11, 2011. The 2015 Repurchase Plan is designed to allow the Company to repurchase its shares both during its open window periods and at times when it otherwise might be prevented from

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doing so under applicable insider trading laws or because of self-imposed trading blackout periods. A broker selected by the Company will have the authority under the terms and limitations specified in an agreement with the Company to repurchase shares on the Company’s behalf in accordance with the terms of the 2015 Repurchase Plan. Repurchases are subject to SEC regulations as well as certain price, market volume and timing constraints specified in the 2015 Repurchase Plan. Pursuant to the 2015 Repurchase Plan, the Company may from time to time repurchase a portion of its shares of common stock and the Company is hereby notifying shareholders of its intention as required by applicable securities law.
On September 15, 2015, the Company allocated $5million to be repurchased under the 2015 Repurchase Plan in accordance with SEC Rule 10b5-1 (the “10b5-1 Repurchase Plan”). The 10b5-1 Repurchase Plan terminated on November 4, 2015.
Under the 2015 Repurchase Plan and 10b5-1 Repurchase Plan (the “Plans”), the Company repurchased 3,340,400 shares with a weighted average price per share of $6.34, inclusive of commissions. This represents a discount of approximately 19.89% of the average net asset value per share for the quarter ended September 30, 2015. Since the inception of the Plans, the total dollar amount of shares repurchased is $21.2 million, leaving a maximum of $28.8 million available for future purchases under the Plans.
The following table discloses on a monthly basis for the quarter ended September 30, 2015, the total number of shares repurchased (including the total number of shares repurchased under the Plans), the weighted average price paid per share, and the approximate dollar value that may yet be repurchased under the Plans.
Period *

Total Number of Shares
Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced
Plans

Approximate Dollar Amount that May Yet Be Purchased Under the Plans at the end of Period
August 12, 2015 to August 31, 2015
1,530,000

$
6.57

1,530,000

$ 40.0 million
September 1, 2015 to September 25, 2015
1,810,400

$
6.15

1,810,400

$ 28.8 million
Total
3,340,400

 
3,340,400

 
* Represents actual transaction dates within the month.


Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.

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Item 5. Other Information
None.

Item 6. Exhibits
(a)
Exhibits
 
3.1
Articles of Amendment and Restatement, as amended (1)
 
3.2
Fourth Amended and Restated Bylaws (2)
 
10.1
Amended and Restated Senior Secured Revolving Credit Agreement, dated as of April 24, 2015, between Apollo Investment Corporation, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (3)
 
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934*
 
31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934*
 
32.1
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*
 
32.2
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*
_________________
*
Filed herewith.
(1)
Incorporated by reference from the Registrant’s post-effective Amendment No. 1 to the Registration Statement under the Securities Act of 1933, as amended, on Form N-2, filed on August 14, 2006.
(2)
Incorporated by reference from the Registrant’s Form 10-K, filed on May 19, 2015.
(3)
Incorporated by reference from the Registrant’s Form 8-K, filed on April 30, 2015.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 5, 2015.
 
 
APOLLO INVESTMENT CORPORATION
 
 
 
 
By:
/s/ JAMES C. ZELTER
 
James C. Zelter
 
Chief Executive Officer
 
 
 
 
By:
/s/ GREGORY W. HUNT
 
Gregory W. Hunt
 
Chief Financial Officer and Treasurer


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