AINV-2014.12.31-10Q
Table of Contents

 
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 December 31, 2014
¨    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 February 5, 2015 was 236,741,351.
 
 
 
 



Table of Contents

APOLLO INVESTMENT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2014
TABLE OF CONTENTS
 

 
 
PAGE  
 
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
FINANCIAL STATEMENTS
 
 
 
 
Statements of Assets and Liabilities as of December 31, 2014 and March 31, 2014
 

 
 
Statements of Operations for the three and nine months ended December 31, 2014 and December 31, 2013
 

 
 
Statements of Changes in Net Assets for the nine months ended December 31, 2014 and the year ended March 31, 2014
 

 
 
Statements of Cash Flows for the nine months ended December 31, 2014 and December 31, 2013
 

 
 
Schedule of Investments as of December 31, 2014
 
 
 
 
Schedule of Investments as of March 31, 2014
 
 
 
 
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


Table of Contents

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 (unaudited)
(in thousands, except per share amounts)
 
 
December 31, 2014

March 31, 2014
Assets
 
 
 
Non-controlled/non-affiliated investments, at fair value (cost — $2,683,906 and $2,714,971, respectively)
$
2,568,832


$
2,751,896

Non-controlled/affiliated investments, at fair value (cost — $189,673 and $153,721, respectively)
198,739


144,628

Controlled investments, at fair value (cost — $715,993 and $590,060, respectively)
746,444


582,147

Total investments (cost — $3,589,572 and $3,458,752, respectively)
3,514,015


3,478,671

Cash
11,661


13,413

Foreign currency (cost — $16,151 and $1,305, respectively)
16,009


1,323

Receivable for investments sold
94,965


72,918

Interest receivable
30,013


40,106

Dividends receivable
3,667


3,627

Deferred financing costs
27,066


31,601

Prepaid expenses and other assets
3,778


292

Total assets
$
3,701,174


$
3,641,951

Liabilities
 
 
 
Debt (see note 6 & 9)
$
1,588,653


$
1,372,261

Payable for investments purchased
8,212


119,577

Dividends payable
47,348


47,348

Management and performance-based incentive fees payable (see note 3)
37,525


31,108

Interest payable
15,937


14,318

Accrued administrative expenses
2,232


1,915

Other liabilities and accrued expenses
4,576


3,813

Total liabilities
$
1,704,483


$
1,590,340

Net Assets
 
 
 
Common stock, par value $.001 per share, 400,000,000 and 400,000,000 common shares authorized, respectively, 236,741,351 and 236,741,351 issued and outstanding, respectively
$
237


$
237

Paid-in capital in excess of par (see note 2)
3,221,803


3,221,829

Over-distributed net investment income (see note 2)
(20,137
)

(53,995
)
Accumulated net realized loss (see note 2)
(1,136,574
)

(1,133,405
)
Net unrealized gain (loss)
(68,638
)

16,945

Net assets
$
1,996,691


$
2,051,611

Total liabilities and net assets
$
3,701,174


$
3,641,951

Net asset value per share
$
8.43


$
8.67


See notes to financial statements.
3

Table of Contents

APOLLO INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
 
Three Months Ended
 
Nine Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
INVESTMENT INCOME:
 
 
 
 
 
 
 
From non-controlled/non-affiliated investments:
 
 
 
 
 
 
 
Interest
$
87,606

 
$
76,347

 
$
266,300

 
$
231,136

Dividends
991

 
1,172

 
3,106

 
5,866

Other income
4,533

 
2,983

 
10,827

 
9,675

From non-controlled/affiliated investments:
 
 
 
 

 
 
Interest
283

 
1,001

 
3,210

 
2,730

Dividends
4,236

 
5,964

 
12,310

 
15,528

From controlled investments:
 
 
 
 

 
 
Interest
10,199

 
5,767

 
29,423

 
16,345

Dividends
2,115

 
914

 
5,815

 
3,174

Other income
63

 
413

 
525

 
487

Total investment income
$
110,026

 
$
94,561

 
$
331,516

 
$
284,941

EXPENSES:
 
 
 
 

 
 
Management fees (see note 3)
$
18,755

 
$
15,932

 
$
55,744

 
$
46,044

Performance-based incentive fees (see note 3)
13,215

 
11,469

 
41,075

 
35,464

Interest and other debt expenses
20,315

 
17,366

 
58,163

 
50,682

Administrative services expense
1,863

 
1,410

 
4,821

 
3,616

Other general and administrative expenses
3,014

 
2,097

 
7,919

 
6,203

Total expenses
$
57,162

 
$
48,274

 
$
167,722

 
$
142,009

Management and performance-based incentive fees waived (see note 3)
$
(3,740
)
 
$
(3,375
)
 
$
(11,934
)
 
$
(8,675
)
Expense reimbursements (see note 3)
(58
)
 
(21
)
 
(174
)
 
(29
)
Net expenses
$
53,364

 
$
44,878

 
$
155,614

 
$
133,305

Net investment income
$
56,662

 
$
49,683

 
$
175,902

 
$
151,636

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS, FOREIGN CURRENCIES AND DERIVATIVES:
 
 
 
 
 
 
 
Net realized gain (loss):
 
 
 
 
 
 
 
Investments and cash equivalents
 
 
 
 
 
 
 
Non-controlled/non-affiliated investments
$
(2,355
)
 
$
2,516

 
$
(14,244
)
 
$
(119,902
)
Non-controlled/affiliated investments
(169
)
 
321

 
11,357

 
321

Controlled investments
(57
)
 
1,368

 
(57
)
 
(970
)
Net realized gain (loss) from investments and cash equivalents
$
(2,581
)
 
$
4,205

 
$
(2,944
)
 
$
(120,551
)
Foreign currencies
 
 
 
 

 
 
Non-controlled/non-affiliated investments
$
(13
)
 
$
13

 
$
374

 
$
(87
)
Non-controlled/affiliated investments

 

 

 

Controlled investments
134

 
6

 
134

 
42

Foreign debt
1,030

 
(557
)
 
(733
)
 
2,514

Net realized gain (loss) from foreign currencies
$
1,151

 
$
(538
)
 
$
(225
)
 
$
2,469

Derivatives

 

 

 
8,541

Net realized gain (loss)
$
(1,430
)
 
$
3,667

 
$
(3,169
)
 
$
(109,541
)
 
 
 
 
 
 
 
 

See notes to financial statements.
4

Table of Contents

APOLLO INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS (unaudited) (continued)
(in thousands, except per share amounts)
 
Three Months Ended
 
Nine Months Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
Net change in unrealized gain (loss):
 
 
 
 
 
 
 
Investments and cash equivalents
 
 
 
 
 
 
 
Non-controlled/non-affiliated investments
$
(100,749
)
 
$
50,084

 
$
(149,322
)
 
$
150,228

Non-controlled/affiliated investments
4,939

 
3,424

 
15,592

 
(1,897
)
Controlled investments
18,068

 
887

 
38,364

 
23,669

Net change in unrealized gain (loss) from investments and cash equivalents
$
(77,742
)
 
$
54,395

 
$
(95,366
)
 
$
172,000

Foreign currencies
 
 
 
 


 
 
Non-controlled/non-affiliated investments
$
(234
)
 
$
58

 
$
(747
)
 
$
593

Non-controlled/affiliated investments

 

 

 

Controlled investments

 
(12
)
 

 
9

Foreign debt
3,292

 
(2,053
)
 
10,532

 
(13,730
)
Net change in unrealized gain (loss) from foreign currencies
$
3,058

 
$
(2,007
)
 
$
9,785

 
$
(13,128
)
Net change in unrealized gain (loss)
$
(74,684
)
 
$
52,388

 
$
(85,581
)
 
$
158,872

Net realized and unrealized gain (loss) from investments, cash equivalents, foreign currencies and derivatives
(76,114
)
 
56,055

 
(88,750
)
 
49,331

NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$
(19,452
)
 
$
105,738

 
$
87,152

 
$
200,967

EARNINGS (Loss) PER SHARE — BASIC (see note 4)
$
(0.09
)
 
$
0.47

 
$
0.36

 
$
0.90

EARNINGS (Loss) PER SHARE — DILUTED (see note 4)
$
(0.09
)
 
$
0.45

 
$
0.36

 
$
0.88


See notes to financial statements.
5

Table of Contents

APOLLO INVESTMENT CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
(in thousands, except shares)
 
 
Nine Months Ended 
 December 31, 2014
 
Year ended March 31, 2014
Increase (decrease) in net assets from operations:
 
 
 
Net investment income
$
175,902

 
$
201,248

Net realized loss
(3,169
)
 
(106,507
)
Net change in unrealized gain (loss)
(85,581
)
 
176,131

Net increase in net assets resulting from operations
87,152

 
270,872

 
 
 
 
Dividends and distributions to stockholders (see note 2):
 
 
 
Distribution of income
(142,045
)
 
(182,193
)
Return of capital

 

Total dividends and distributions to stockholders
(142,045
)
 
(182,193
)
 
 
 
 
Capital share transactions:
 
 
 
Net proceeds from shares sold

 
286,553

Less offering costs
(27
)
 
(1,010
)
Reinvestment of dividends

 

Net increase (decrease) in net assets from capital share transactions
(27
)
 
285,543

 
 
 
 
Total increase (decrease) in net assets:
(54,920
)
 
374,222

Net assets at beginning of period
2,051,611

 
1,677,389

Net assets at end of period
$
1,996,691

 
$
2,051,611

 
 
 
 
Capital share activity
 
 
 
Shares sold

 
33,850,000

Shares issued from reinvestment of dividends

 

Net capital share activity

 
33,850,000


See notes to financial statements.
6

Table of Contents

APOLLO INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS (unaudited)
(in thousands) 
 
Nine months ended December 31,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net increase in net assets resulting from operations
$
87,152

 
$
200,967

Adjustments to reconcile net increase (decrease):
 
 
 
PIK interest and dividends capitalized (see note 5)
(24,155
)
 
(21,008
)
Net amortization on investments
(7,860
)
 
(5,833
)
Accretion of original issue discount on 2024 Note
1

 

Amortization of deferred financing costs
4,966

 
5,497

(Increase) decrease from foreign currency transactions
(1,035
)
 
2,975

Net change in unrealized (gain) loss on investments, cash equivalents, foreign currencies and derivatives
85,581

 
(158,872
)
Net realized loss on investments, cash equivalents, and foreign currencies
3,169

 
109,541

Changes in operating assets and liabilities:
 
 
 
Purchase of investments
(1,839,380
)
 
(1,830,368
)
Proceeds from derivatives

 
4,156

Proceeds from the disposition of derivatives

 
4,385

Proceeds from disposition of investments
1,737,803

 
1,575,542

Increase in receivables for investments sold
(22,047
)
 
(93,887
)
Decrease in interest receivable
10,093

 
11,364

Increase in dividends receivable
(40
)
 
(4,145
)
Increase in prepaid expenses and other assets
(3,486
)
 
(677
)
Increase (decrease) in payable for investments purchased
(111,365
)
 
73,113

Increase in management and performance-based incentive fees payable
6,417

 
2,835

Increase in interest payable
1,619

 
2,138

Increase (decrease) in accrued administrative expenses
317

 
(904
)
Increase in other liabilities and accrued expenses
763

 
661

Net cash (used in) provided by operating activities
$
(71,487
)
 
$
(122,520
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net proceeds from the issuance of common stock
$

 
$
182,273

Offering costs for the issuance of common stock
(27
)
 
(445
)
Dividends paid in cash
(142,045
)
 
(130,475
)
Proceeds from debt
2,423,577

 
1,609,313

Repayments of debt
(2,196,492
)
 
(1,517,840
)
Deferred financing costs paid
(432
)
 
(11,678
)
Net cash provided by (used in) financing activities
$
84,581

 
$
131,148

NET INCREASE IN CASH AND CASH EQUIVALENTS
$
13,094

 
$
8,628

Effect of exchange rates on cash balances
(160
)
 
22

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
$
14,736

 
$
6,197

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
27,670

 
$
14,847

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
Cash interest paid during the period
$
50,064

 
$
41,006

PIK income (see note 5)
$
24,889

 
$
21,447


See notes to financial statements.
7

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited)
December 31, 2014
(in thousands)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—116.3%
SECURED DEBT—90.0%
1st Lien Secured Debt—40.4%
 Alion Science & Technology Corporation
 
 11.00% (L+1000, 1.00% Floor)
 
8/16/19
 
 Aerospace and Defense
 
$
32,083

 
$
31,074

 
$
31,442

 Archroma (17)
 
 9.50% (L+825, 1.25% Floor)
 
10/1/18
 
 Chemicals
 
45,230

 
44,796

 
44,891

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

 
18,244

 
15,663

 Aveta, Inc.
 
 9.75% (L+825, 1.50% Floor)
 
12/12/17
 
 Healthcare
 
54,959

 
53,886

 
53,311

 Caza Petroleum, Inc.
 
 12.00% (L+1000, 2.00% Floor)
 
5/23/17
 
 Oil and Gas
 
45,000

 
43,892

 
43,762

 Compuware Holdings, LLC (16)
 
 6.25% (L+525, 1.00% Floor)
 
12/15/21
 
 Business Services
 
2,903

 
2,758

 
2,756

 Compuware Holdings, LLC (16)
 
 6.25% (L+525, 1.00% Floor)
 
12/15/19
 
 Business Services
 
1,398

 
1,370

 
1,369

 Deep Gulf Energy II, LLC
 
 11.50% (11.50% or L+1000, 1.50% Floor)
 
3/31/17
 
 Oil and Gas
 
25,000

 
25,000

 
24,437

 Delta Educational Systems, Inc.
 
 16.00% (8.00% Cash / 8.00% PIK)
 
12/11/16
 
 Education
 
5,774

 
5,774

 
5,774

 Dodge Data & Analytics LLC
 
 9.75% (L+875, 1.00% Floor)
 
10/31/19
 
 Printing and Publishing
 
60,500

 
59,322

 
58,836

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

 
51,899

 
51,843

 GenCorp, Inc. (17)
 
 9.50% (L+850, 1.00% Floor)
 
4/18/22
 
 Aerospace and Defense
 
44,500

 
44,500

 
44,500

 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
 
41,008

 
40,542

 
41,828

 M&G Chemicals, S.A. (17)
 
 9.139% (L+900, 0.139% Floor)
 
3/28/16
 
 Chemicals
 
5,000

 
5,000

 
5,000

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

 
39,976

 
26,629

 Maxus Capital Carbon SPE I, LLC (Skyonic Corp.)
 
13.000%
 
9/18/19
 
 Chemicals
 
76,123

 
76,123

 
76,123

 Molycorp, Inc. (17)
 
10.000%
 
6/1/20
 
 Diversified Natural Resources, Precious Metals and Minerals
 
50,424

 
50,017

 
28,363

 My Alarm Center, LLC (16)
 
 8.50% (L+750, 1.00% Floor)
 
1/9/18
 
 Business Services
 
42,614

 
42,614

 
42,614

 My Alarm Center, LLC (16)
 
 8.50% (L+750, 1.00% Floor)
 
1/9/18
 
 Business Services
 
11,000

 
11,000

 
11,000

 Osage Exploration & Development, Inc. (11)(17)
 
 13.00% (L+1100, 2.00% Floor)
 
4/27/16
 
 Oil and Gas
 
25,000

 
24,688

 
24,063

 Panda Temple Power, LLC
 
 11.50% (L+1000, 1.50% Floor)
 
7/17/18
 
 Energy
 
25,500

 
25,155

 
25,755

 Pelican Energy, LLC (17)
 
 10.00% (7.00% Cash /3.00% PIK)
 
12/31/18
 
 Oil and Gas
 
26,541

 
25,607

 
26,541

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

 
27,125

 
25,642

 Spotted Hawk Development, LLC
 
13.00% (12.00% Cash / 1.00% PIK)
 
9/12/16
 
 Oil and Gas
 
80,698

 
79,558

 
78,681

 Sunrun Solar Owner IX, LLC
 
9.079%
 
12/31/24
 
 Energy
 
3,476

 
3,332

 
3,330

 UniTek Global Services Inc.
 
9.50% (L+850, 1.00% Floor) Funded, 0.50% Unfunded
 
1/21/15
 
Telecommunications
 
8,256

 
8,256

 
8,256

Total 1st Lien Secured Debt excluding Revolvers and Letters of Credit
 
$
846,572

 
$
807,473


See notes to financial statements.
8

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
 
Funded and Unfunded Revolver Obligations--3.9%
 Avaya, Inc., (Revolver) (16)
 
5.00% (L+175 Funded) /
2.910% (L+275 Funded)
 
10/26/16
 
Telecommunications
 
$
18,392

 
$
18,392

 
$
16,828

 Avaya, Inc., (Unfunded Revolver) (8)(16)
 
0.500% Unfunded
 
10/26/16
 
Telecommunications
 
18,392

 
(3,680
)
 
(1,563
)
 BMC Software, Inc., (Unfunded Revolver) (8)
 
L+400 Funded, 0.50% Unfunded
 
9/10/18
 
 Business Services
 
20,760

 
(1,994
)
 
(1,868
)
 CIT Group, Inc., (Unfunded Revolver) (8)(17)
 
0.625% Unfunded
 
1/27/17
 
 Financial Services
 
25,000

 
(336
)
 
(1,000
)
 Confie Seguros Holding II Co., (Revolver) (16)
 
6.75% (P+350, 3.25% Floor) Funded
 
12/10/18
 
 Insurance
 
1,050

 
1,050

 
955

 Confie Seguros Holding II Co., (Unfunded Revolver) (8)(16)
 
0.500% Unfunded
 
12/10/18
 
 Insurance
 
2,784

 
(363
)
 
(251
)
 Laureate Education Inc., (Revolver) (16)(17)
 
5.00% (L+375, 1.25% Floor) Funded
 
6/16/16
 
 Education
 
28,764

 
28,764

 
26,175

 Laureate Education, Inc., (Unfunded Revolver) (8)(16)(17)
 
0.625% Unfunded
 
6/16/16
 
 Education
 
23

 
(2,494
)
 
(2
)
 Salix Pharmaceuticals, Ltd., (Unfunded Revolver) (8)(16)(17)
 
L+300 Funded, 0.50% Unfunded
 
1/2/19
 
 Healthcare
 
24,867

 
(1,618
)
 
(497
)
 Tibco Software Inc., (Unfunded Revolver) (8)
 
 L+400 / L+300 Funded, 0.50% Unfunded
 
12/5/19
 
 Business Services
 
6,000

 
(59
)
 
(30
)
 Transfirst Holdings, Inc., (Unfunded Revolver) (8)(16)
 
 L+450 Funded, 0.50% Unfunded
 
11/12/19
 
 Financial Services
 
2,940

 
(15
)
 
(29
)
 UniTek Global Services, Inc., (Unfunded Revolver)
 
L+850 Funded, 0.50% Unfunded
 
1/21/15
 
Telecommunications
 
5,000

 

 

 UniTek Global Services, Inc., (Revolver)
 
10.25% (L+925, 1.00% Floor) Funded
 
4/15/16
 
Telecommunications
 
38,731

 
38,731

 
38,731

 Walter Energy, Inc., (Unfunded Revolver) (8)(16)(17)
 
L+550 Funded, 0.625% Unfunded
 
10/1/17
 
 Mining
 
275

 
(169
)
 
(48
)
Total Funded and Unfunded Revolver Obligations
 
$
76,209

 
$
77,401

 
Letters of Credit— (0.0)%
 Confie Seguros Holding II Co., Letter of Credit (8)(16)
 
4.500%
 
10/27/14
 
 Insurance
 
$
600

 
$

 
$
(54
)
 Confie Seguros Holding II Co., Letter of Credit (8)(16)
 
4.500%
 
1/13/15
 
 Insurance
 
66

 

 
(6
)
 Laureate Education Inc., Letter of Credit (8)(17)
 
3.750%
 
6/16/16
 
 Education
 
93

 

 
(8
)
 Salix Pharmaceuticals, Ltd., Letter of Credit (16)(17)
 
3.000%
 
2/10/15
 
 Healthcare
 
8

 

 

 Salix Pharmaceuticals, Ltd., Letter of Credit (8)(16)(17)
 
3.000%
 
2/10/15
 
 Healthcare
 
125

 

 
(3
)
 Transfirst Holdings, Inc., Letter of Credit (8)(16)
 
L+450
 
11/12/19
 
 Financial Services
 
60

 

 
(1
)
 UniTek Global Services Inc., Letter of Credit
 
9.000%
 
1/21/15
 
Telecommunications
 
17,946

 

 

 UniTek Global Services Inc., Letter of Credit
 
9.000%
 
1/21/15
 
Telecommunications
 
1,850

 

 

 Walter Energy, Inc., Letter of Credit (8)(9)(16)(17)
 
5.500%
 
9/18/14- 7/4/15
 
 Mining
 
86

 

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

 

 
(29
)
Total Letters of Credit
 
$

 
$
(116
)
 
Total 1st Lien Secured Debt
 
$
922,781

 
$
884,758

 

See notes to financial statements.
9

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—45.7%
Access Information
 
 9.75% (L+875, 1.00% Floor)
 
10/17/22
 
 Business Services
 
$
25,600

 
$
24,070

 
$
24,192

 Active Network, Inc.
 
 9.50% (L+850, 1.00% Floor)
 
11/15/21
 
 Business Services
 
19,672

 
19,584

 
19,181

 American Energy - Utica, LLC (10)
 
 11.00% (L+950, 1.50% Floor)
 
9/30/18
 
 Oil and Gas
 
6,828

 
6,770

 
6,247

 Appriss Holdings, Inc.
 
 9.25% (L+825, 1.00% Floor)
 
5/21/21
 
 Business Services
 
25,000

 
24,630

 
25,000

 Aptean, Inc.
 
 8.50% (L+750, 1.00% Floor)
 
2/26/21
 
 Business Services
 
10,322

 
10,181

 
9,883

 Armor Holdings, Inc. (American Stock Transfer and Trust Company)
 
 10.25% (L+900, 1.25% Floor)
 
12/26/20
 
 Financial Services
 
8,000

 
7,863

 
7,880

 Asurion Corporation
 
 8.50% (L+750, 1.00% Floor)
 
3/3/21
 
 Insurance
 
62,400

 
61,529

 
62,166

 Confie Seguros Holding II Co.
 
 10.25% (L+900, 1.25% Floor)
 
5/8/19
 
 Insurance
 
33,844

 
33,610

 
33,760

 Consolidated Precision Products Corp.
 
 8.75% (L+775, 1.00% Floor)
 
4/30/21
 
 Aerospace and Defense
 
1,940

 
1,931

 
1,853

 Deltek, Inc.
 
 10.00% (L+875, 1.25% Floor)
 
10/10/19
 
 Business Services
 
17,273

 
17,118

 
17,403

 Elements Behavioral Health, Inc.
 
 9.25% (L+825, 1.00% Floor)
 
2/11/20
 
 Healthcare
 
9,500

 
9,416

 
9,441

 Garden Fresh Restaurant Corp. (16)
 
 14.50% (L+1300 PIK, 1.50% Floor)
 
1/1/19
 
 Restaurants
 
38,448

 
36,504

 
34,219

 Garden Fresh Restaurant Corp. (16)
 
 7.25% (L+575 PIK, 1.50% Floor)
 
1/1/19
 
 Restaurants
 
8,090

 
6,279

 
5,501

 GCA Services Group, Inc.
 
 9.25% (L+800, 1.25% Floor)
 
11/1/20
 
 Diversified Service
 
22,838

 
22,930

 
22,609

 Grocery Outlet, Inc.
 
 9.25% (L+825, 1.00% Floor)
 
10/21/22
 
 Grocery
 
30,000

 
29,555

 
29,663

 GTCR Valor Companies, Inc.
 
 9.50% (L+850, 1.00% Floor)
 
11/30/21
 
 Business Services
 
35,000

 
34,657

 
33,950

 Institutional Shareholder Services, Inc.
 
 8.50% (L+750, 1.00% Floor)
 
4/30/22
 
 Financial Services
 
6,640

 
6,577

 
6,540

 Kronos, Inc.
 
 9.75% (L+850, 1.25% Floor)
 
4/30/20
 
 Business Services
 
51,123

 
50,727

 
52,082

 Miller Energy Resources, Inc. (17)
 
 12.75% (L+975, 3.00% Floor)
 
2/3/18
 
 Oil and Gas
 
87,500

 
86,076

 
85,750

 MSC Software Corp. (17)
 
 8.50% (L+750, 1.00% Floor)
 
5/28/21
 
 Business Services
 
18,448

 
18,275

 
18,079

 Novolex Holdings, Inc.
 
 9.75% (L+875, 1.00% Floor)
 
6/5/22
 
 Packing
 
40,000

 
39,005

 
39,200

 Pabst Brewing Company
 
 10.50 (P+725, 3.25% Floor) / 9.25 (L+825, 1.00% Floor)
 
11/14/22
 
 Consumer Products
 
32,000

 
31,601

 
31,600

 Premier Trailer Leasing, Inc.
 
 10.00% (L+900, 1.00% Floor)
 
9/24/20
 
 Financial Services
 
52,000

 
50,996

 
50,960


See notes to financial statements.
10

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—45.7% (continued)
 RegionalCare Hospital Partners, Inc.
 
 10.50% (L+950, 1.00% Floor)
 
10/23/19
 
 Healthcare
 
$
4,000

 
$
3,796

 
$
3,990

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

 
31,111

 
30,307

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

 
2,219

 
2,065

 Sprint Industrial Holdings, LLC
 
 11.25% (L+1000, 1.25% Floor)
 
11/14/19
 
 Containers, Packaging, and Glass
 
14,163

 
13,951

 
13,880

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

 
64,219

 
64,012

 Stadium Management Corp.
 
 9.25% (L+825, 1.00% Floor)
 
2/27/21
 
 Business Services
 
19,900

 
19,900

 
19,999

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

 
21,011

 
22,306

 TMK Hawk Parent Corp.
 
 8.50% (L+750, 1.00% Floor)
 
10/1/22
 
 Distribution
 
34,000

 
33,667

 
33,830

 Transfirst Holdings, Inc.
 
 9.00% (L+800, 1.00% Floor)
 
11/11/22
 
 Financial Services
 
21,740

 
21,525

 
21,532

 U.S. Renal Care, Inc.
 
 10.25% (L+900, 1.25% Floor)
 
1/3/20
 
 Healthcare
 
11,927

 
11,975

 
11,957

 Velocity Technology Solutions, Inc.
 
 9.00% (L+775, 1.25% Floor)
 
9/28/20
 
 Business Services
 
16,500

 
16,199

 
16,170

 Vertafore, Inc.
 
 9.75% (L+825, 1.50% Floor)
 
10/27/17
 
 Business Services
 
36,436

 
36,263

 
36,618

 Walter Energy, Inc. (11)(17)
 
11.000%
 
4/1/20
 
 Mining
 
22,554

 
21,227

 
7,499

Total 2nd Lien Secured Debt
 
$
926,947

 
$
911,324

TOTAL SECURED DEBT
 
$
1,849,728

 
$
1,796,082

UNSECURED DEBT—26.3%
 American Energy - Woodford LLC/AEW Finance Corp. (11)
 
9.000%
 
9/15/22
 
 Oil and Gas
 
$
5,000

 
$
4,800

 
$
3,275

 American Tire Distributors, Inc. (11)(16)
 
11.500%
 
6/1/18
 
 Distribution
 
25,000

 
25,000

 
25,500

 American Tire Distributors, Inc. (11)(16)
 
11.500%
 
6/1/18
 
 Distribution
 
40,000

 
39,420

 
40,800

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

 
20,962

 
18,839

 BCA Osprey II Limited (British Car Auctions) (16)(17)
 
 12.500% PIK
 
8/17/17
 
 Transportation
 
£
23,566

 
37,671

 
37,848

 BCA Osprey II Limited (British Car Auctions) (16)(17)
 
 12.500% PIK
 
8/17/17
 
 Transportation
 
14,333

 
19,764

 
17,864

 Canacol Energy Ltd. (17)
 
9.50% (L+850, 1.00% Floor)
 
12/31/19
 
 Oil and Gas
 
$
50,000

 
48,539

 
48,500

 Ceridian Corp. (11)
 
11.000%
 
3/15/21
 
 Diversified Service
 
31,760

 
31,760

 
34,896

 Delta Educational Systems, Inc.
 
16.00% PIK or 10.00% Cash / 6.00% PIK
 
5/12/17
 
 Education
 
23,235

 
22,969

 
22,224

 Denver Parent Corp. (Venoco)
 
12.25% (13.00% PIK Toggle)
 
8/15/18
 
 Oil and Gas
 
8,988

 
8,821

 
3,707

 My Alarm Center, LLC
 
 16.25% (12.00% Cash / 4.25% PIK)
 
7/9/18
 
 Business Services
 
4,145

 
4,145

 
4,145

 Niacet Corporation
 
13.000%
 
8/28/18
 
 Chemicals
 
12,500

 
12,500

 
12,625

 PetroBakken Energy Ltd. (11)(17)
 
8.625%
 
2/1/20
 
 Oil and Gas
 
39,300

 
40,455

 
27,903

 Radio One, Inc. (11)(17)
 
9.250%
 
2/15/20
 
 Broadcasting & Entertainment
 
14,804

 
14,804

 
12,954

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

 
46

 
68


See notes to financial statements.
11

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
UNSECURED DEBT—26.3% (continued)
 Tibco Software Inc. (11)
 
11.375%
 
12/1/21
 
 Business Services
 
$
26,924

 
$
26,149

 
$
26,217

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

 
135,000

 
137,700

 Univar, Inc.
 
10.500%
 
6/30/18
 
 Distribution
 
20,000

 
20,000

 
19,780

 Venoco, Inc.
 
8.875%
 
2/15/19
 
 Oil and Gas
 
54,996

 
55,026

 
30,523

TOTAL UNSECURED DEBT
 
$
567,831

 
$
525,368

TOTAL CORPORATE DEBT
 
$
2,417,559

 
$
2,321,450

STRUCTURED PRODUCTS AND OTHER—8.6%
 Asset Repackaging Trust Six B.V., Credit-Linked Note (11)(17)
 
N/A
 
5/15/27
 
 Utilities
 
$
58,411

 
$
24,925

 
$
32,785

 Craft 2013-1, Credit-Linked Note (11)(16)(17)
 
9.483% (L+925)
 
4/17/22
 
 Diversified Investment Vehicle
 
25,000

 
25,092

 
24,503

 Craft 2013-1, Credit-Linked Note (16)(17)
 
9.483% (L+925)
 
4/17/22
 
 Diversified Investment Vehicle
 
7,625

 
7,753

 
7,476

 Craft 2014-1A, Credit-Linked Note (11)(17)
 
9.884% (L+965)
 
5/15/21
 
 Diversified Investment Vehicle
 
42,500

 
42,497

 
41,995

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

 
1,190

 
2,748

 JP Morgan Chase & Co., Credit-Linked Note (17)
 
12.483% (L+1225)
 
12/20/21
 
 Diversified Investment Vehicle
 
43,250

 
42,318

 
43,560

 NXT Capital CLO 2014-1, LLC (11)(17)
 
5.731% (L+550)
 
4/23/26
 
 Diversified Investment Vehicle
 
5,000

 
4,665

 
4,250

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

 
13,014

 
14,003

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
161,454

 
$
171,320

PREFERRED EQUITY—2.0%
 
Shares
 

 

 CA Holding, Inc. (Collect America, Ltd.), Series A Preferred Stock (13)(17)
 
N/A
 
N/A
 
 Financial Services
 
7,961

 
$
788

 
$
1,113

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

 
22,964

 
23,518

 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
 
5/12/18
 
 Education
 
12,360

 
27,685

 
9,954

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

 
5,613

 
5,613

TOTAL PREFERRED EQUITY
 
$
63,913

 
$
40,198


See notes to financial statements.
12

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount(12)
 
Cost
 
Fair
Value (1)
EQUITY—1.8%
Common Equity/Interests—1.5%
 
 
 
 
 
 
 
Shares
 
 
 
 
 ATD Corporation (Accelerate Parent Corp.), Common Stock (11)(13)
 
N/A
 
N/A
 
 Distribution
 
3,225,514

 
3,276

 
5,130

 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

 
1,036

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

 
339

 
349

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

 
6,000

 
669

 Explorer Coinvest, LLC (Booz Allen), Common Stock (13)(17)
 
N/A
 
N/A
 
 Business Services
 
246

 
1,881

 
6,063

 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
 
1,048,811

 
1,049

 
332

 Skyline Data, News and Analytics LLC, Class A Common Unit (13)
 
N/A
 
N/A
 
 Printing and Publishing
 
5,000

 
5,000

 
5,000

 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

 
10,710

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

 
28

 
125

Total Common Equity/Interests
 
$
35,964

 
$
29,495


See notes to financial statements.
13

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except warrants)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—128.7% (18)
 
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
 
7,961

 
$
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

 
4,450

 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

 

 
365

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

 
852

 
1,496

Total Warrants
 
$
5,016

 
$
6,369

TOTAL EQUITY
 
$
40,980

 
$
35,864

Total Investments in Non-Controlled/ Non-Affiliated Investments
 
$
2,683,906

 
$
2,568,832


See notes to financial statements.
14

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/AFFILIATED
INVESTMENTS—9.9%(4)(18)
 
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—9.2%
 Golden Bear Warehouse, LLC, Equity (3)(4)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicle
 
$
1,226

 
$
1,226

 
$
951

 Golden Hill CLO I, LLC, Equity (3)(4)(17)
 
N/A
 
N/A
 
 Diversified Investment Vehicle
 
61,285

 
61,818

 
62,689

 Highbridge Loan Management 3-2014, Ltd., Class E Notes (3)(4)(11)(16)(17)
 
6.234% (L+600)
 
1/18/25
 
 Diversified Investment Vehicle
 
2,485

 
2,274

 
2,145

 Highbridge Loan Management 3-2014, Ltd., Subordinated Notes (3)(4)(11)(16)(17)
 
N/A
 
1/18/25
 
 Diversified Investment Vehicle
 
8,163

 
6,809

 
6,759

 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

 
3,475

 
3,948

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

 
35,546

 
38,700

 MCF CLO III, LLC, Class E Notes (3)(4)(11)(17)
 
4.684% (L+445)
 
1/20/24
 
 Diversified Investment Vehicle
 
12,750

 
11,429

 
11,220

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

 
37,780

 
39,684

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

 
5,859

 
7,404

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
177,591

 
$
184,875

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—0.5%
 
 
 
 
 
 
 
Shares
 
 
 
 
 Renewable Funding Group, Inc., Series B Preferred Stock (4)(13)
 
N/A
 
N/A
 
Finance
 
1,505,868

 
$
7,582

 
$
9,364

TOTAL PREFERRED EQUITY
 
$
7,582

 
$
9,364

 
 
 
 
 
EQUITY—0.2%
 
 
 
 
 
 
 
 
 
 
 
 
Common Equity/Interests—0.2%
 
 
 
 
 
 
 
Shares
 
 
 
 
 AMP Solar Group, Inc., Class A Common Shares (4)(17)
 
N/A
 
N/A
 
Energy
 
81,493

 
$
3,500

 
$
3,500

Total Common Equity/Interests
 
$
3,500

 
$
3,500

TOTAL EQUITY
 
$
3,500

 
$
3,500

 
 
 
 
 
Total Investments in Non-Controlled/Affiliated Investments
 
$
189,673

 
$
198,739


See notes to financial statements.
15

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands, except shares)
INVESTMENTS IN CONTROLLED INVESTMENTS—37.4%(5)(18)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par
Amount (12)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—16.7%
SECURED DEBT—16.7%
1st Lien Secured Debt—16.7%
 Merx Aviation Finance, LLC, (Revolver) (5)(16)
 
12.00% Funded
 
10/31/18
 
Aviation
 
$
334,084

 
$
334,084

 
$
334,084

Total 1st Lien Secured Debt
 
$
334,084

 
$
334,084

 
 
 
 
 
 
 
 
 
 
 
 
 
Unfunded Revolver Obligation—0.0%
 Merx Aviation Finance, LLC, (Unfunded Revolver) (5)(16)
 
12.00% Funded, 0.00% Unfunded
 
10/31/18
 
Aviation
 
$
65,916

 
$

 
$

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
 
$
334,084

 
$
334,084

TOTAL CORPORATE DEBT
 
$
334,084

 
$
334,084

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—4.4%
 
Shares
 
 
 
 
 AMP Solar (UK) Limited, Class A Preference Shares (2)(5)(11)(17)
 
8.500%
 
10/31/49
 
 Utilities
 
19,811,333

 
$
30,632

 
$
30,439

 Playpower Holdings, Inc., Series A Preferred (5)
 
14.00% PIK
 
11/15/20
 
Leisure
 
49,178

 
57,428

 
57,428

TOTAL PREFERRED EQUITY
 
$
88,060

 
$
87,867

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—16.3%
Common Equity/Interests—16.3%
 
Shares
 
 
 
 
 Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock (5)(13)
 
N/A
 
N/A
 
 Home and Office Furnishings and Durable Consumer Products
 
9,007

 
$

 
$
5,531

 Generation Brands Holdings, Inc. (Quality Home Brands), Series 2L Common Stock (5)(13)
 
N/A
 
N/A
 
 Home and Office Furnishings and Durable Consumer Products
 
36,700

 
11,242

 
22,537

 Generation Brands Holdings, Inc. (Quality Home Brands), Series H Common Stock (5)(13)
 
N/A
 
N/A
 
 Home and Office Furnishings and Durable Consumer Products
 
7,500

 
2,298

 
4,605

 LVI Group Investments, LLC, Common Units (5)(13)
 
N/A
 
N/A
 
 Environmental Services
 
212,460

 
17,505

 
19,274

 Merx Aviation Finance, LLC, Partnership Interest (5)(13)
 
N/A
 
N/A
 
 Aviation
 

 
152,082

 
165,072

 MSEA Tankers LLC (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

 
74,474

Total Common Equity/Interests
 
$
293,849

 
$
324,493

TOTAL EQUITY
 
$
293,849

 
$
324,493

Total Investments in Controlled Investments
 
$
715,993

 
$
746,444

Total Investments—176.0% (6)(7)
 
$
3,589,572

 
$
3,514,015

Liabilities in Excess of Other Assets—(76.0)%
 
 
 
$
(1,517,324
)
Net Assets—100.0%
 
 
 
$
1,996,691


See notes to financial statements.
16

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands)
______________________
(1)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see 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, 2014 and December 31, 2014 along with transactions during the nine months ended December 31, 2014 in these Affiliated 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 December 31, 2014
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
AMP Solar Group, Inc., Class A Common Shares
$

$
3,500

$

$

$
3,500

$

$

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



1,503

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


Golden Bear Warehouse LLC, Equity

1,226


(275
)
951



Golden Hill CLO I, LLC, Equity
1,097

60,189


1,403

62,689


193

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

10


(179
)
2,145


129

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


(718
)
199

6,759


492

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

11,375



11,375



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


(77
)
197

3,948


419

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

14

(12,344
)
(27
)

(107
)
215

MCF CLO I LLC, Membership Interests
40,391


(2,013
)
322

38,700


5,440

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

80


(185
)
11,220


541

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


(1,404
)
2,822

39,684


4,691

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

1,000



1,000



Renewable Funding Group, Inc., Series B Preferred Stock

8,750

(1,169
)
1,783

9,364



Slater Mill Loan Fund LP, LP Certificates
7,361


(363
)
406

7,404


1,075

 
$
144,628

$
87,905

$
(49,386
)
$
15,592

$
198,739

$
11,357

$
15,520

______________
● 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.
As of December 31, 2014, the Company has a 100%, 100%, 26%, 32%, 97%, 98% and 26% equity ownership interest in Golden Bear Warehouse LLC, Golden Hill CLO I, LLC, Highbridge Loan Management, Ltd., Ivy Hill Middle Market Credit Fund IX, Ltd, 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.


See notes to financial statements.
17

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands)
(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, 2014 and December 31, 2014 along with transactions during the nine months ended December 31, 2014 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 December 31, 2014
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
AMP Solar (UK) Limited, Class A Preference Shares
$

$
30,632

$

$
(193
)
$
30,439

$

$
157

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

3,619

(3,619
)


(57
)
53

Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock
1,615



3,916

5,531



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



3,260

4,605



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



15,955

22,537



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

1,409


(16,155
)
19,274


88

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

187

(10,200
)
(187
)


269

Merx Aviation Finance, LLC (formerly known as Merx Aviation Finance Holdings II, LLC), (Revolver) 12.00% Funded, 0.00% Unfunded, 10/31/18
282,334

51,750



334,084


29,310

Merx Aviation Finance, LLC (formerly known as Merx Aviation Finance Holdings II, LLC), (Unfunded Revolver) 12.00% Funded, 0.00% Unfunded, 10/31/18







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






21

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






21

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

13,500


11,107

165,072



MSEA Tankers LLC

33,000



33,000



Playpower Holdings, Inc., Common Stock
53,813



20,661

74,474


187

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

5,655



57,428


5,657

 
$
582,147

$
139,752

$
(13,819
)
$
38,364

$
746,444

$
(57
)
$
35,763

______________
● 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 December 31, 2014, the Company has a 100%, 28%, 36%, 100%, 100% and 100% equity ownership interest in AMP Solar (UK) Limited, Generation Brands Holdings, Inc., LVI Group Investments, LLC, Merx Aviation Finance, LLC, MSEA Tankers LLC and Playpower Holdings, Inc., respectively.

See notes to financial statements.
18

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
December 31, 2014
(in thousands)

(6)
Aggregate gross unrealized gain for federal income tax purposes is $133,152; aggregate gross unrealized loss for federal income tax purposes is $170,087. Net unrealized loss is $36,935 based on a tax cost of $3,550,950.
(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)
Provided that no default has occurred, this investment may elect to pay up to 50% of the interest due on its interest payment date in PIK.
(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 (see 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 are subject to change. The Company monitors the status of these assets on an ongoing basis.
(18)
The percentage is calculated over net assets.

N/A
Not applicable.


See notes to financial statements.
19

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (unaudited) (continued)
 December 31, 2014

Industry Classification
Percentage of Total Investments (at fair value) as of December 31, 2014
 Business Services
15.0%
 Aviation
14.2%
 Oil and Gas
13.6%
 Diversified Investment Vehicle
8.7%
 Chemicals
4.4%
 Financial Services
4.3%
 Distribution
4.0%
 Leisure
3.8%
 Aerospace and Defense
2.9%
 Insurance
2.8%
 Healthcare
2.2%
 Transportation
2.1%
 Education
1.8%
 Printing and Publishing
1.8%
 Utilities
1.8%
 Telecommunications
1.8%
 Diversified Service
1.6%
 Cargo Transport
1.6%
 Buildings and Real Estate
1.2%
 Restaurants
1.1%
 Packing
1.1%
 Mining
1.0%
 Home and Office Furnishings and Durable Consumer Products
0.9%
 Energy
0.9%
 Consumer Products
0.9%
 Hotels, Motels, Inns and Gaming
0.9%
 Grocery
0.8%
 Diversified Natural Resources, Precious Metals and Minerals
0.8%
 Environmental Services
0.6%
 Containers, Packaging, and Glass
0.4%
 Broadcasting & Entertainment
0.4%
 Finance
0.3%
 Electronics
0.1%
 Media
0.1%
 Cable Television
0.1%
Total Investments
100.0%







See notes to financial statements.
20

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS
March 31, 2014
(in thousands)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—134.1% (17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount (10)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—125.9%
SECURED DEBT—80.0%
1st Lien Secured Debt—32.5%
Archroma (15)
 
9.50% (L+825, 1.25% Floor)
 
10/1/18
 
Chemicals
 
$
35,422

 
$
34,762

 
$
35,511

Avanti Communication Group PLC(9)(15)
 
10.000%
 
10/1/19
 
Telecommunications
 
9,000

 
9,000

 
9,608

Aveta, Inc.
 
9.75% (L+825, 1.50% Floor)
 
12/12/17
 
Healthcare
 
59,951

 
58,535

 
60,325

Caza Petroleum, Inc.
 
12.00% (L+1000, 2.00% Floor)
 
5/23/17
 
Oil and Gas
 
35,000

 
33,988

 
33,845

Charming Charlie LLC
 
9.00% (L+800, 1.00% Floor)
 
12/24/19
 
Retail
 
5,305

 
5,241

 
5,315

Confie Seguros Holding II Co., (Revolver) (14)
 
6.75% (P+350) Funded, 0.50% Unfunded
 
12/10/18
 
Insurance
 
240

 
240

 
218

Delta Educational Systems, Inc.
 
16.00% (8.00% Cash/8.00% PIK)
 
12/11/16
 
Education
 
5,437

 
5,437

 
5,437

Endeavour International Corp. (14)(15)
 
12.000%
 
3/1/18
 
Oil and Gas
 
18,262

 
17,960

 
17,760

Endeavour International Corp. (14)(15)
 
8.25% (L+700, 1.25% Floor)
 
11/30/17
 
Oil and Gas
 
3,157

 
3,105

 
3,126

Endeavour International Corp. (14)(15)
 
8.25% (L+700, 1.25% Floor)
 
11/30/17
 
Oil and Gas
 
4,412

 
4,338

 
4,368

Evergreen Tank Solutions, Inc.
 
9.50% (L+800, 1.50% Floor)
 
9/28/18
 
Containers, Packaging, and Glass
 
41,771

 
41,260

 
41,980

Great Bear Petroleum Operating, LLC
 
12.000%
 
10/1/17
 
Oil and Gas
 
4,464

 
4,464

 
4,464

Hunt Companies, Inc.(9)
 
9.625%
 
3/1/21
 
Buildings and Real Estate
 
41,210

 
40,701

 
42,807

Lee Enterprises, Inc(9)(15)
 
9.500%
 
3/15/22
 
Media
 
25,000

 
25,000

 
25,844

Magnetation, LLC (9)
 
11.000%
 
5/15/18
 
Mining
 
16,400

 
16,458

 
18,450

Maxus Capital Carbon SPE I, LLC (Skyonic Corp.)
 
13.000%
 
9/18/19
 
Chemicals
 
60,000

 
60,000

 
60,000

Molycorp, Inc. (15)
 
10.000%
 
6/1/20
 
Diversified Natural Resources, Precious Metals and Minerals
 
35,849

 
35,532

 
35,547

My Alarm Center, LLC (14)
 
8.50% (L+750, 1.00% Floor)
 
1/9/18
 
Business Services
 
42,614

 
42,614

 
42,614

My Alarm Center, LLC (14)
 
8.50% (L+750, 1.00% Floor)
 
1/9/18
 
Business Services
 
2,930

 
2,930

 
2,930

Osage Exploration & Development, Inc. (15)
 
17.00% (L+1500, 2.00% Floor)
 
4/27/15
 
Oil and Gas
 
20,000

 
19,752

 
20,040

Panda Sherman Power, LLC
 
9.00% (L+750, 1.50% Floor)
 
9/14/18
 
Energy
 
15,000

 
14,821

 
15,450

Panda Temple Power, LLC
 
11.50% (L+1000, 1.50% Floor)
 
7/17/18
 
Energy
 
25,500

 
25,099

 
26,169

Pelican Energy, LLC (15)
 
10.00% (7.00% Cash / 3.00% PIK)
 
12/31/18
 
Oil and Gas
 
19,330

 
18,634

 
19,717

Reichhold Holdings International B.V. (15)
 
10.75% (L+975, 1.00% Floor)
 
12/19/16
 
Chemicals
 
22,500

 
22,500

 
22,500

Sand Waves, S.A. (Endeavour Energy UK Limited) (15)
 
9.750%
 
12/31/15
 
Oil and Gas
 
12,500

 
12,500

 
12,500

Southern Pacific Resource Corp. (15)
 
11.00% (L+1000, 1.00% Floor)
 
3/29/19
 
Oil and Gas
 
9,080

 
8,808

 
9,216

Spotted Hawk Development, LLC (15)
 
14.00% (13.00% Cash/1.00% PIK)
 
6/30/16
 
Oil and Gas
 
24,308

 
23,712

 
23,615

Sunrun Solar Owner IX, LLC
 
9.079%
 
12/31/24
 
Energy
 
3,622

 
3,466

 
3,467


See notes to financial statements.
21

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—134.1% (17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount (10)
 
Cost
 
Fair
Value (1)
1st Lien Secured Debt—32.5% (continued)
Travel Leaders Group, LLC
 
7.00% (L+600, 1.00% Floor)
 
12/5/18
 
Business Services
 
$
2,568

 
$
2,414

 
$
2,548

UniTek Global Services, Inc., (Revolver)(14)
 
10.25% (L+925, 1.00% Floor)
Funded, 2.00% Unfunded
 
4/15/16
 
Telecommunications
 
44,802

 
44,802

 
44,802

Walter Energy, Inc.(9)(15)
 
9.500%
 
10/15/19
 
Mining
 
17,000

 
17,307

 
17,345

Total 1st Lien Secured Debt
 
$
655,380

 
$
667,518

Unfunded Revolver Obligations—(0.4)%
Avaya, Inc. (8)
 
L+275 Funded, 0.50% Unfunded
 
10/26/16
 
Telecommunications
 
$
36,785

 
$
(5,203
)
 
$
(3,035
)
BMC Software Inc. (8)
 
L+400 Funded, 0.50% Unfunded
 
9/10/18
 
Business Services
 
30,760

 
(3,243
)
 
(2,307
)
Confie Seguros Holding II Co. (8)(14)
 
P+350 Funded, 0.50% Unfunded
 
12/10/18
 
Insurance
 
3,627

 
(450
)
 
(326
)
Laureate Education, Inc. (8)(15)
 
L+375 Funded, 0.625% Unfunded
 
6/16/16
 
Education
 
28,880

 
(2,888
)
 
(2,599
)
Reichhold Holdings International B.V. (15)
 
L+600 Funded, 1.50% Unfunded
 
12/19/16
 
Chemicals
 
12,500

 

 

Salix Pharmaceuticals, Ltd. (8)(15)
 
L+300 Funded, 0.50% Unfunded
 
1/2/19
 
Healthcare
 
25,000

 
(1,923
)
 
(125
)
UniTek Global Services Inc., (14)
 
L+925 Funded, 2.00% Unfunded
 
4/15/16
 
Telecommunications
 
18,052

 

 

Total Unfunded Revolver Obligations
 
$
(13,707
)
 
$
(8,392
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Letters of Credit— (0.0)%
 
 
 
 
 
 
 
 
 
 
 
 
Confie Seguros Holding II Co., Letter of Credit (8)(14)
 
4.500%
 
10/27/14
 
Insurance
 
$
600

 
$

 
$
(54
)
Confie Seguros Holding II Co., Letter of Credit (8)(14)
 
4.500%
 
1/13/15
 
Insurance
 
33

 

 
(3
)
UniTek Global Services Inc., Letter of Credit (14)
 
9.250%
 
3/26/15
 
Telecommunications
 
3,000

 

 

UniTek Global Services Inc., Letter of Credit (14)
 
9.250%
 
3/18/15
 
Telecommunications
 
1,000

 

 

UniTek Global Services Inc., Letter of Credit (14)
 
9.250%
 
3/18/15
 
Telecommunications
 
2,700

 

 

UniTek Global Services Inc., Letter of Credit (14)
 
9.250%
 
12/15/14
 
Telecommunications
 
5,446

 

 

Total Letters of Credit
 
$

 
$
(57
)
 
 
 
 
 
 
 
 
 
 
 
 
 

See notes to financial statements.
22

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—134.1% (17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount (10)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—47.9%
 
 
 
 
 
 
 
 
 
 
 
 
Active Network, Inc.
 
9.50% (L+850, 1.00% Floor)
 
11/15/21
 
Business Services
 
$
25,000

 
$
24,879

 
$
25,344

Applied Systems, Inc.
 
7.50% (L+650, 1.00% Floor)
 
1/24/22
 
Business Services
 
9,110

 
9,043

 
9,281

Aptean, Inc.
 
8.50% (L+750, 1.00% Floor)
 
2/26/21
 
Business Services
 
11,322

 
11,153

 
11,478

Armor Holdings, Inc. (American Stock Transfer and Trust Company)
 
10.25% (L+900, 1.25% Floor)
 
12/26/20
 
Financial Services
 
8,000

 
7,851

 
8,000

Asurion Corporation
 
8.50% (L+750, 1.00% Floor)
 
3/3/21
 
Insurance
 
90,400

 
89,050

 
93,413

Bennu Oil & Gas, LLC
 
10.25% (L+900, 1.25% Floor)
 
11/1/18
 
Oil and Gas
 
8,999

 
8,927

 
9,123

BJ's Wholesale Club, Inc
 
8.50% (L+750, 1.00% Floor)
 
3/26/20
 
Retail
 
20,000

 
19,904

 
20,537

Brock Holdings III, Inc.
 
10.00% (L+825, 1.75% Floor)
 
3/16/18
 
Environmental Services
 
19,500

 
19,245

 
19,805

Confie Seguros Holding II Co.
 
10.25% (L+900, 1.25% Floor)
 
5/8/19
 
Insurance
 
27,344

 
27,096

 
27,566

Consolidated Precision Products Corp.
 
8.75% (L+775, 1.00% Floor)
 
4/30/21
 
Aerospace and Defense
 
8,940

 
8,897

 
9,096

Del Monte Foods Co
 
8.25% (L+725, 1.00% Floor)
 
8/18/21
 
Beverage, Food, and Tobacco
 
12,140

 
12,019

 
12,110

Deltek, Inc.
 
10.00% (L+875, 1.25% Floor)
 
10/10/19
 
Business Services
 
27,273

 
27,023

 
27,887

Elements Behavioral Health, Inc.
 
9.25% (L+825, 1.00% Floor)
 
2/11/20
 
Healthcare
 
9,500

 
9,407

 
9,500

Flexera Software LLC
 
8.00% (L+700, 1.00% Floor)
 
4/2/21
 
Business Services
 
7,000

 
6,965

 
7,053

Garden Fresh Restaurant Corp. (14)
 
7.25% (L+575 PIK, 1.50% Floor)
 
1/1/19
 
Restaurants
 
7,661

 
5,618

 
5,210

Garden Fresh Restaurant Corp. (14)
 
14.50% (L+1300 PIK, 1.50% Floor)
 
1/1/19
 
Restaurants
 
34,513

 
32,326

 
30,716

GCA Services Group, Inc.
 
9.25% (L+800, 1.25% Floor)
 
11/1/20
 
Diversified Service
 
22,838

 
22,940

 
23,194

Grocery Outlet, Inc.
 
10.50% (L+925, 1.25% Floor)
 
6/17/19
 
Grocery
 
8,674

 
8,526

 
8,847

HD Vest Inc. (15)
 
9.25% (L+800, 1.25% Floor)
 
6/18/19
 
Financial Services
 
9,396

 
9,290

 
9,302

Healogics, Inc.
 
9.25% (L+800, 1.25% Floor)
 
2/5/20
 
Healthcare
 
10,000

 
10,109

 
10,242

IMG Worldwide, Inc.
 
8.25% (L+725, 1.00% Floor)
 
3/21/22
 
Leisure
 
2,167

 
2,145

 
2,199

Insight Pharmaceuticals, LLC
 
13.25% (L+1175, 1.50% Floor)
 
8/25/17
 
Consumer Products
 
15,448

 
15,243

 
15,139

Kronos, Inc.
 
9.75% (L+850, 1.25% Floor)
 
4/30/20
 
Business Services
 
92,516

 
91,531

 
96,332

Landslide Holdings, Inc.
 
8.25% (L+725, 1.00% Floor)
 
2/25/21
 
Business Services
 
5,630

 
5,588

 
5,672

Learfield Communications, Inc.
 
8.75% (L+775, 1.00% Floor)
 
10/8/21
 
Media
 
15,000

 
14,856

 
15,375

Miller Energy Resources, Inc. (15)
 
11.75% (L+975, 2.00% Floor)
 
2/3/18
 
Oil and Gas
 
87,500

 
85,804

 
85,750


See notes to financial statements.
23

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—134.1% (17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount (10)
 
Cost
 
Fair
Value (1)
2nd Lien Secured Debt—47.9% (continued)
Ranpak Corp.
 
8.50% (L+725, 1.25% Floor)
 
4/23/20
 
Packaging
 
$
22,000

 
$
21,802

 
$
22,522

River Cree Enterprises LP (9)(15)
 
11.000%
 
1/20/21
 
Hotels, Motels, Inns and Gaming
 
CAD
33,000

 
31,110

 
31,767

SESAC Holdco II LLC
 
10.00% (L+875, 1.25% Floor)
 
4/9/14
 
Broadcasting & Entertainment
 
$
10,750

 
10,758

 
10,978

Sprint Industrial Holdings, LLC
 
11.25% (L+1000, 1.25% Floor)
 
11/14/19
 
Containers, Packaging, and Glass
 
14,163

 
13,928

 
14,305

SquareTwo Financial Corp. (Collect America, Ltd.) (15)
 
11.625%
 
4/1/17
 
Financial Services
 
61,079

 
59,929

 
61,690

Stadium Management Corp
 
9.25% (L+825, 1.00% Floor)
 
2/27/21
 
Business Services
 
19,900

 
19,900

 
20,348

Tectum Holdings, Inc.
 
10.25% (P+700, 3.25% Floor)
 
3/12/19
 
Auto Sector
 
17,670

 
17,582

 
17,626

Transfirst Holdings, Inc.
 
7.50% (L+650, 1.00% Floor)
 
6/27/18
 
Financial Services
 
59,750

 
59,601

 
60,422

TriMark USA, LLC
 
10.00% (L+900, 1.00% Floor)
 
8/12/19
 
Distribution
 
27,000

 
26,470

 
27,338

U.S. Renal Care, Inc. (14)
 
10.25% (L+900, 1.25% Floor)
 
1/3/20
 
Healthcare
 
11,927

 
11,980

 
12,195

U.S. Renal Care, Inc. (14)
 
8.50% (L+750, 1.00% Floor)
 
7/3/20
 
Healthcare
 
12,120

 
11,930

 
12,325

Velocity Technology Solutions, Inc.
 
9.00% (L+775, 1.25% Floor)
 
9/28/20
 
Business Services
 
16,500

 
16,170

 
16,170

Vertafore, Inc.
 
9.75% (L+825, 1.50% Floor)
 
10/27/17
 
Business Services
 
50,436

 
50,167

 
51,397

Walter Energy, Inc. (9)(15)
 
11.000%
 
4/1/20
 
Mining
 
27,798

 
26,308

 
25,192

Total 2nd Lien Secured Debt
 
$
963,070

 
$
982,446

TOTAL SECURED DEBT
 
$
1,604,743

 
$
1,641,515

 
UNSECURED DEBT—45.9%
Altegrity, Inc. (14)
 
0.000% (12.5% effective)
 
8/2/16
 
Diversified Service
 
$
3,545

 
$
2,664

 
$
957

Altegrity, Inc. (9)(14)
 
12.000%
 
11/1/15
 
Diversified Service
 
14,667

 
14,667

 
13,567

American Energy - Utica, LLC (9)
 
3.500%
 
3/1/21
 
Oil and Gas
 
10,868

 
10,868

 
11,031

American Tire Distributors, Inc. (9)(14)
 
11.500%
 
6/1/18
 
Distribution
 
25,000

 
25,000

 
25,700

American Tire Distributors, Inc. (14)
 
11.500%
 
6/1/18
 
Distribution
 
40,000

 
39,321

 
41,120

Artsonig Pty Ltd (9)(15)
 
11.500%
 
4/1/19
 
Transportation
 
20,000

 
19,701

 
20,025

BCA Osprey II Limited (British Car Auctions) (14)(15)
 
12.50% PIK
 
8/17/17
 
Transportation
 
12,721

 
17,489

 
18,102

BCA Osprey II Limited (British Car Auctions) (14)(15)
 
12.50% PIK
 
8/17/17
 
Transportation
 
£
20,948

 
33,173

 
36,058

Ceridian Corp. (9)(14)
 
11.000%
 
3/15/21
 
Diversified Service
 
$
34,000

 
34,000

 
39,335

Ceridian Corp. (14)
 
11.250%
 
11/15/15
 
Diversified Service
 
35,800

 
35,800

 
36,154

Ceridian Corp. (14)
 
12.25% Cash (12.25% Cash or 13.00% PIK)
 
11/15/15
 
Diversified Service
 
14,420

 
14,420

 
14,562

CRC Health Corp.
 
10.750%
 
2/1/16
 
Healthcare
 
13,000

 
13,079

 
13,077

Delta Educational Systems, Inc.
 
16.00% (10.00% Cash/6.00% PIK)
 
5/12/17
 
Education
 
21,684

 
21,353

 
20,708

Denver Parent Corp. (Venoco) (9)
 
12.250%
 
8/15/18
 
Oil and Gas
 
15,000

 
14,633

 
15,150

Energy & Exploration Partners, Inc. (14)
 
15.000%
 
4/8/18
 
Oil and Gas
 
25,000

 
22,410

 
23,750


See notes to financial statements.
24

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—134.1% (17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par Amount (10)
 
Cost
 
Fair
Value (1)
UNSECURED DEBT—45.9% (continued)
Energy & Exploration Partners, Inc. (14)
 
15.000%
 
12/12/18
 
Oil and Gas
 
$
4,464

 
$
4,263

 
$
4,241

Energy & Exploration Partners, Inc. (14)
 
15.000%
 
12/12/18
 
Oil and Gas
 
2,679

 
2,469

 
2,545

Energy & Exploration Partners, Inc. (14)
 
15.000%
 
3/27/19
 
Oil and Gas
 
8,036

 
7,650

 
7,634

Exova Limited (14)(15)
 
10.50%
 
5/20/14
 
Business Services
 
£
4,655

 
6,606

 
8,537

Exova Limited (9)(14)(15)
 
10.50%
 
5/20/14
 
Business Services
 
18,000

 
28,165

 
33,010

First Data Corp. (14)
 
10.625%
 
6/15/21
 
Financial Services
 
$
10,000

 
10,000

 
11,288

First Data Corp. (14)
 
11.250%
 
1/15/21
 
Financial Services
 
67,000

 
66,977

 
76,548

First Data Corp. (14)
 
12.625%
 
1/15/21
 
Financial Services
 
5,000

 
5,641

 
5,963

inVentiv Health, Inc. (9)
 
11.000%
 
8/15/18
 
Healthcare
 
106,500

 
106,500

 
98,646

My Alarm Center, LLC
 
16.25% (12.00% Cash/4.25%PIK)
 
7/9/18
 
Business Services
 
4,101

 
4,101

 
4,101

Niacet Corporation
 
13.000%
 
8/28/18
 
Chemicals
 
12,500

 
12,500

 
12,625

PetroBakken Energy Ltd. (9)(15)
 
8.625%
 
2/1/20
 
Oil and Gas
 
44,082

 
44,390

 
44,206

Prospect Holding Company LLC (9)
 
10.250%
 
10/1/18
 
Financial Services
 
20,000

 
19,106

 
19,450

Radio One, Inc. (9)(15)
 
9.250%
 
2/15/20
 
Broadcasting & Entertainment
 
14,804

 
14,804

 
15,778

Symbion, Inc.
 
11.000%
 
8/23/15
 
Healthcare
 
8,488

 
8,501

 
8,538

Tervita Corporation (9)(15)
 
10.875%
 
2/15/18
 
Environmental Services
 
22,438

 
21,739

 
22,662

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

 
135,000

 
139,590

Univar, Inc.
 
10.500%
 
6/30/18
 
Distribution
 
20,000

 
20,000

 
19,960

Varietal Distribution (9)(14)
 
10.750%
 
6/30/17
 
Distribution
 
22,204

 
21,908

 
22,426

Varietal Distribution (9)(14)
 
10.750%
 
6/30/17
 
Distribution
 
11,574

 
15,092

 
16,111

Venoco, Inc.
 
8.875%
 
2/15/19
 
Oil and Gas
 
$
38,050

 
38,463

 
38,573

TOTAL UNSECURED DEBT
 
$
912,453

 
$
941,728

TOTAL CORPORATE DEBT
 
$
2,517,196

 
$
2,583,243

 
STRUCTURED PRODUCTS AND OTHER—3.9%
Craft 2013-1, Credit Linked Note (15)
 
9.49% (L+925)
 
4/17/22
 
Diversified Investment Vehicle
 
$
20,000

 
$
20,000

 
$
19,802

Dark Castle Holdings, LLC
 
N/A
 
N/A
 
Media
 
25,302

 
2,094

 
3,077

JP Morgan Chase & Co., Credit-Linked Note (15)
 
12.50% (L+1225)
 
12/20/21
 
Diversified Investment Vehicle
 
43,250

 
43,010

 
42,935

Renaissance Umiat, LLC, ACES (13)(14)(15)
 
N/A
 
N/A
 
Oil and Gas
 

 
7,153

 
7,799

Renaissance Umiat, LLC, ACES (13)(14)(15)
 
N/A
 
N/A
 
Oil and Gas
 

 
6,351

 
6,391

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
78,608

 
$
80,004

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—2.0%

Shares




CA Holding, Inc. (Collect America, Ltd.), Series A Preferred Stock (11)(15)
 
N/A
 
N/A
 
Financial Services
 
7,961

 
$
788

 
$
1,592

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

 
22,623

 
22,620

Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock (12)
 
13.50% PIK
 
N/A
 
Education
 
12,360

 
27,685

 
13,802

Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock (12)
 
12.50% PIK
 
N/A
 
Education
 
332,500

 
6,863

 

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

 
5,288

 
3,275

TOTAL PREFERRED EQUITY

$
63,247


$
41,289


See notes to financial statements.
25

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares and warrants)
INVESTMENTS IN NON-CONTROLLED/NON-AFFILIATED INVESTMENTS—134.1% (17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Shares
 
Cost
 
Fair
Value (1)
EQUITY—2.3%
Common Equity/Interests—1.8%
Accelerate Parent Corp. (American Tire Distributors), Common Stock (11)
 
N/A
 
N/A
 
Distribution
 
3,225,514

 
$
3,276

 
$
4,710

AHC Mezzanine, LLC (Advanstar), Common Stock (11)
 
N/A
 
N/A
 
Media
 
25,016

 
1,063

 
350

Altegrity Holding Corp., Common Stock (11)
 
N/A
 
N/A
 
Diversified Service
 
353,399

 
13,797

 

CA Holding, Inc. (Collect America, Ltd.), Series A Common Stock (11)(15)
 
N/A
 
N/A
 
Financial Services
 
25,000

 
2,500

 
1,380

CA Holding, Inc. (Collect America, Ltd.), Series AA Common Stock (11)(15)
 
N/A
 
N/A
 
Financial Services
 
4,294

 
430

 
859

Caza Petroleum, Inc., Net Profits Interest (11)
 
N/A
 
N/A
 
Oil and Gas
 

 
940

 
946

Caza Petroleum, Inc., Overriding Royalty Interest (11)
 
N/A
 
N/A
 
Oil and Gas
 

 
265

 
228

Clothesline Holdings, Inc. (Angelica Corporation), Common Stock (11)
 
N/A
 
N/A
 
Healthcare
 
6,000

 
6,000

 
3,282

Explorer Coinvest, LLC (Booz Allen), Common Stock (11)(15)
 
N/A
 
N/A
 
Business Services
 
340,090

 
2,603

 
6,958

Garden Fresh Restaurant Holdings, LLC., Common Stock (11)
 
N/A
 
N/A
 
Restaurants
 
50,000

 
5,000

 
138

Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Common Stock (11)
 
N/A
 
N/A
 
Education
 
17,500

 
175

 

GS Prysmian Co-Invest L.P. (Prysmian Cables & Systems), Limited Partnership (2)(3)(11)(15)
 
N/A
 
N/A
 
Manufacturing
 

 

 
17

JV Note Holdco, LLC (DSI Renal Inc.), Common Equity / Interest (11)
 
N/A
 
N/A
 
Healthcare
 
9,303

 
85

 

Pelican Energy, LLC, Net Profit Interest (11)(15)
 
N/A
 
N/A
 
Oil and Gas
 
696,656

 
697

 
477

RC Coinvestment, LLC (Ranpak Corp.), Common Stock (11)
 
N/A
 
N/A
 
Packaging
 
50,000

 
5,000

 
7,674

Sorenson Communications Holdings, LLC, Class A, Common Stock (11)
 
N/A
 
N/A
 
Consumer Products
 
454,828

 
45

 
61

Univar Inc., Common Stock (11)
 
N/A
 
N/A
 
Distribution
 
900,000

 
9,000

 
9,680

Varietal Distribution Holdings, LLC, Class A Common Unit (11)
 
N/A
 
N/A
 
Distribution
 
28,028

 
28

 

Total Common Equity/Interests
 
$
50,904

 
$
36,760

 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants—0.5%
 
 
 
 
 
 
 
Warrants
 
 
 
 
CA Holding, Inc. (Collect America, Ltd.), Common Stock Warrants (11)(15)
 
N/A
 
N/A
 
Financial Services
 
7,961

 
$
8

 
$

Energy & Exploration Partners, Inc., Common Stock Warrants (11)
 
N/A
 
N/A
 
Oil and Gas
 
60,778

 
2,374

 
1,829

Fidji Luxco (BC) S.C.A., Common Stock Warrants (2)(11)(15)
 
N/A
 
N/A
 
Electronics
 
18,113

 
182

 
5,069

Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Common Stock (11)
 
N/A
 
N/A
 
Education
 
9,820

 
98

 

Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Class A-1 Preferred Stock Warrants (11)
 
N/A
 
N/A
 
Education
 
45,947

 
459

 

Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Class B-1 Preferred Stock Warrants (11)
 
N/A
 
N/A
 
Education
 
104,314

 
1,043

 

Osage Exploration & Development, Inc., Common Stock Warrants (11)(15)
 
N/A
 
N/A
 
Oil and Gas
 
1,496,843

 

 
1,398

Spotted Hawk Development, LLC, Common Stock Warrants (11)(15)
 
N/A
 
N/A
 
Oil and Gas
 
54,545

 
852

 
2,304

Total Warrants
 
$
5,016

 
$
10,600

TOTAL EQUITY
 
$
55,920

 
$
47,360

Total Investments in Non-Controlled/ Non-Affiliated Investments
 
$
2,714,971

 
$
2,751,896


See notes to financial statements.
26

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares and warrants)
INVESTMENTS IN NON-CONTROLLED/AFFILIATED
INVESTMENTS—7.0%(4)(17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par
Amount (10)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—0.7%
SECURED DEBT—0.7%
1st Lien Secured Debt—0.7%
Aventine Renewable Energy Holdings, Inc. (4)(14)
 
15.00% (12.00% Cash/3.00% PIK)
 
9/23/16
 
Chemicals
 
$
2,737

 
$
2,621

 
$
2,405

Aventine Renewable Energy Holdings, Inc. (4)(14)
 
15.00% PIK or 10.50% Cash
 
9/22/17
 
Chemicals
 
14,068

 
16,391

 
8,884

Aventine Renewable Energy Holdings, Inc. (4)(14)
 
25.00% PIK
 
9/24/16
 
Chemicals
 
3,769

 
3,769

 
3,769

Total 1st Lien Secured Debt
 
$
22,781

 
$
15,058

TOTAL SECURED DEBT
 
$
22,781

 
$
15,058

TOTAL CORPORATE DEBT
 
$
22,781

 
$
15,058

 
 
 
 
 
 
 
 
 
 
 
 
 
STRUCTURED PRODUCTS AND OTHER—6.3%
Golden Hill CLO I, LLC, Equity (4)(15)(16)
 
N/A
 
N/A
 
Diversified Investment Vehicle
 
$
1,097

 
$
1,631

 
$
1,097

Highbridge Loan Management 3-2014, Ltd., Class D Notes (4)(14)(15)(16)
 
5.22% (L+500)
 
1/18/25
 
Diversified Investment Vehicle
 
5,000

 
4,638

 
4,680

Highbridge Loan Management 3-2014, Ltd., Class E Notes (4)(14)(15)(16)
 
6.22% (L+600)
 
1/18/25
 
Diversified Investment Vehicle
 
2,485

 
2,263

 
2,314

Highbridge Loan Management 3-2014, Ltd., Subordinated Notes (4)(14)(15)(16)
 
N/A
 
1/18/25
 
Diversified Investment Vehicle
 
8,163

 
7,527

 
7,278

Jamestown CLO I LTD, Subordinated Notes (4)(15)(16)
 
N/A
 
11/5/24
 
Diversified Investment Vehicle
 
4,325

 
3,553

 
3,828

MCF CLO I LLC, Class E Notes (4)(15)(16)
 
5.99% (L+575)
 
4/20/23
 
Diversified Investment Vehicle
 
13,000

 
12,330

 
12,357

MCF CLO I LLC, Membership Interests (4)(15)(16)
 
N/A
 
N/A
 
Diversified Investment Vehicle
 
38,918

 
37,560

 
40,391

MCF CLO III LLC, Class E Notes (4)(15)(16)
 
4.81% (L+445)
 
1/20/24
 
Diversified Investment Vehicle
 
12,750

 
11,349

 
11,325

MCF CLO III LLC, Membership Interests (4)(15)(16)
 
N/A
 
1/20/24
 
Diversified Investment Vehicle
 
41,900

 
39,183

 
38,266

Slater Mill Loan Fund LP, LP Certificates (4)(15)(16)
 
N/A
 
N/A
 
Diversified Investment Vehicle
 
8,375

 
6,222

 
7,361

TOTAL STRUCTURED PRODUCTS AND OTHER
 
$
126,256

 
$
128,897

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—0.0%
Common Equity/Interests—0.0%
 
Shares
 
 
 
 
Aventine Renewable Energy Holdings, Inc., Common Stock (4)(11)
 
N/A
 
N/A
 
Chemicals
 
262,036

 
$
688

 
$
99

Total Common Equity/Interests
 
$
688

 
$
99

 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants—0.0%
 
 
 
 
 
 
 
Warrants
 
 
 
 
Aventine Renewable Energy Holdings, Inc., Common Stock Warrants (4)(11)
 
N/A
 
N/A
 
Chemicals
 
1,521,193

 
$
3,996

 
$
574

Total Warrants
 
$
3,996

 
$
574

TOTAL EQUITY
 
$
4,684

 
$
673

Total Investments in Non-Controlled/Affiliated Investments
 
$
153,721

 
$
144,628


See notes to financial statements.
27

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands, except shares)
INVESTMENTS IN CONTROLLED
INVESTMENTS—28.4%(5)(17)
 
Interest Rate
 
Maturity Date
 
Industry
 
Par
Amount (10)
 
Cost
 
Fair
Value (1)
CORPORATE DEBT—14.3%
SECURED DEBT—14.3%
1st Lien Secured Debt—13.8%
Merx Aviation Finance Holdings II, LLC (Revolver) (5)
 
12.00% Funded, 0.00% Unfunded
 
10/31/18
 
Aviation
 
$
282,334

 
$
282,334

 
$
282,334

Total 1st Lien Secured Debt
 
$
282,334

 
$
282,334

 
 
 
 
 
 
 
 
 
 
 
 
 
Unfunded Revolver Obligation—0.0%
Merx Aviation Finance Holdings II, LLC (5)
 
12.00% Funded, 0.00% Unfunded
 
10/31/18
 
Aviation
 
$
117,666

 
$

 
$

Total Unfunded Revolver Obligation
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Letters of Credit—0.0%
Merx Aviation Finance Assets Ireland Limited, LLC, Letter of Credit (5)
 
2.250%
 
9/30/14
 
Aviation
 
$
1,800

 
$

 
$

Merx Aviation Finance Assets Ireland Limited, LLC, Letter of Credit (5)
 
2.250%
 
9/30/14
 
Aviation
 
1,800

 

 

Total Letters of Credit
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
2nd Lien Secured Debt—0.5%
LVI Parent Corp. (LVI Services, Inc.) (5)
 
12.500%
 
4/20/14
 
Environmental Services
 
$
10,000

 
$
10,013

 
$
10,200

Total 2nd Lien Secured Debt
 
$
10,013

 
$
10,200

TOTAL SECURED DEBT
 
$
292,347

 
$
292,534

TOTAL CORPORATE DEBT
 
$
292,347

 
$
292,534

 
 
 
 
 
 
 
 
 
 
 
 
 
PREFERRED EQUITY—2.5%
 
Shares
 
 
 
 
Playpower Holdings, Inc., Series A Preferred (5)
 
14.00% PIK
 
11/15/20
 
Leisure
 
49,178

 
$
51,773

 
$
51,773

TOTAL PREFERRED EQUITY
 
$
51,773

 
$
51,773

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY—11.6%
Common Equity/Interests—11.6%
 
Shares
 
 
 
 
 Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock (5)(11)
 
N/A
 
N/A
 
Home and Office Furnishings and Durable Consumer Products
 
9,007

 
$

 
$
1,615

 Generation Brands Holdings, Inc. (Quality Home Brands), Series H Common Stock (5)(11)
 
N/A
 
N/A
 
Home and Office Furnishings and Durable Consumer Products
 
7,500

 
2,297

 
1,345

 Generation Brands Holdings, Inc. (Quality Home Brands), Series 2L Common Stock (5)(11)
 
N/A
 
N/A
 
Home and Office Furnishings and Durable Consumer Products
 
36,700

 
11,242

 
6,582

LVI Parent Corp., Common Stock (5)(11)
 
N/A
 
N/A
 
Environmental Services
 
14,981

 
16,097

 
34,020

Merx Aviation Finance Holdings II, LLC, Partnership Interest (5)(11)
 
N/A
 
N/A
 
Aviation
 

 
138,582

 
140,465

Playpower Holdings, Inc., Common Stock (5)(11)
 
N/A
 
N/A
 
Leisure
 
1,000

 
77,722

 
53,813

Total Common Equity/Interests
 
$
245,940

 
$
237,840

TOTAL EQUITY
 
$
245,940

 
$
237,840

Total Investments in Controlled Investments
 
$
590,060

 
$
582,147

Total Investments—169.5%(6)(7)
 
$
3,458,752

 
$
3,478,671

Liabilities in Excess of Other Assets—(69.5)%
 
$
(1,427,061
)
Net Assets—100.0%
 
$
2,051,611


See notes to financial statements.
28

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands)
______________________
(1)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see note 2).
(2)
GS Prysmian Co-Invest L.P. and Fidji Luxco (BC) S.C.A. are EUR denominated investments.
(3)
The Company is the sole Limited Partner in GS Prysmian Co-Invest L.P.
(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, 2013 and March 31, 2014 along with transactions during the fiscal year ended March 31, 2014 in these Affiliated investments are as follows:

Name of Issue
Fair Value at March 31, 2013
Gross
Additions (Cost) ●
Gross
Reductions (Cost) ■
Change in Unrealized Gain (Loss)
Fair Value at March 31, 2014
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
Aventine Renewable Energy Holdings, Inc., 15.00% (12.00% Cash/3.00% PIK), 9/23/16
$
3,866

$
85

$
(1,314
)
$
(232
)
$
2,405

$

$
607

Aventine Renewable Energy Holdings, Inc., 10.50% Cash or 15.00% PIK, 9/22/17
9,682

1,965

(1,581
)
(1,182
)
8,884


370

Aventine Renewable Energy Holdings, Inc., 25.00% PIK, 9/24/16
N/A

5,347

(1,578
)

3,769


1,044

Aventine Renewable Energy Holdings, Inc., Common Stock
2,347


(3,996
)
1,748

99



Aventine Renewable Energy Holdings, Inc., Common Stock Warrants
N/A

3,996


(3,422
)
574



Golden Hill CLO I, LLC, Equity
N/A

1,631


(534
)
1,097



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

4,638


42

4,680


49

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

2,264


50

2,314


29

Highbridge Loan Management 3-2014, Ltd., Subordinated Notes, 1/18/25
N/A

7,527


(249
)
7,278


96

Highbridge Loan, Ltd., Preference Shares
6,174

6,655

(12,829
)



1,876

Jamestown CLO I LTD, Class C L+400, 11/5/24
1,109

3

(1,027
)
(85
)

71

30

Jamestown CLO I LTD, Class D L+550, 11/5/24
3,537

13

(3,386
)
(164
)

250

139

Jamestown CLO I LTD, Subordinated
Notes, 11/5/24
13,568


(10,501
)
761

3,828

1,757

1,473

Kirkwood Fund II LLC, Common Interest
43,144


(41,067
)
(2,077
)


5,923

MCF CLO I LLC, Class E Notes, L+575, 4/20/23
12,273

52


32

12,357


854

MCF CLO I LLC, Membership Interests
38,918


(1,359
)
2,832

40,391


8,108

MCF CLO III LLC, Class E Notes L+445, 1/20/24
N/A

11,349


(24
)
11,325


165

MCF CLO III LLC, Membership Interests, 1/20/24
N/A

39,183


(917
)
38,266


1,166

Slater Mill Loan Fund LP, LP Certificates
6,951


(896
)
1,306

7,361


1,088

 
$
141,569

$
84,708

$
(79,534
)
$
(2,115
)
$
144,628

$
2,078

$
23,017

______________
● 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.
As of March 31, 2014, the Company has a 13%, 26%, 100%, 9%, 97%, 98%, and 26% equity ownership interest in Aventine Renewable Energy Holdings, Inc., Highbridge Loan Management, Ltd, Golden Hill CLO I, LLC, Jamestown CLO I LTD, 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.



See notes to financial statements.
29

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands)
(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, 2013 and March 31, 2014 along with transactions during the fiscal year ended March 31, 2014 in these Controlled investments are as follows:
Name of Issue
Fair Value at March 31, 2013
Gross
Additions (Cost) ●
Gross
Reductions (Cost) ■
Change in Unrealized Gain (Loss)
Fair Value at March 31, 2014
Net Realized Gain (Loss)
Interest/Dividend/
Other Income
AIC Credit Opportunity Fund, LLC Common Equity
$
50,696

$
20,387

$
(68,489
)
$
(2,594
)
$

$
(2,338
)
$
2,306

 Generation Brands Holdings, Inc. (Quality Home Brands), Basic Common Stock
432



1,183

1,615



 Generation Brands Holdings, Inc. (Quality Home Brands), Series H Common Stock
360



985

1,345



 Generation Brands Holdings, Inc. (Quality Home Brands), Series 2L Common Stock
1,760



4,822

6,582



Grand Prix Holdings, LLC, Series A Preferred Interests, 12.00% PIK
 N/A

 N/A

 N/A

 N/A

 N/A

99


LVI Parent Corp. (LVI Services, Inc.), 12.50%, 4/20/14
10,000

198


2

10,200


1,448

LVI Services, Inc., Common Stock
30,575



3,445

34,020


153

Merx Aviation Finance Holdings, LLC, 12.00%, 1/9/21
92,000


(92,000
)



6,761

Merx Aviation Finance Holdings, LLC, 12.00%, 2/1/21
5,303


(5,303
)



392

Merx Aviation Finance Holdings, LLC, 12.00%, 3/28/21
4,684


(4,684
)



347

Merx Aviation Finance Holdings, LLC, 12.00%, 6/25/21
 N/A

13,500

(13,500
)



621

Merx Aviation Finance Holdings, LLC, 12.00%, 7/25/21
 N/A

14,600

(14,600
)



286

Merx Aviation Finance Holdings, LLC, 12.00%, 8/19/21
 N/A

4,000

(4,000
)



124

Merx Aviation Finance Holdings, LLC, 12.00%, 9/12/21
 N/A

4,600

(4,600
)



80

Merx Aviation Finance Holdings, LLC, 12.00%, 10/28/21
 N/A

31,150

(31,150
)



154

Merx Aviation Finance Holdings II, LLC, (Revolver) 12.00% Funded, 0.00% Unfunded, 10/31/18
N/A

282,334



282,334


9,205

Merx Aviation Finance Holdings II, LLC, Partnership Interest
33,820

107,120

(2,358
)
1,883

140,465



Merx Aviation Finance Assets Ireland Limited, Letter of Credit, 2.25%, 9/30/14







Merx Aviation Finance Assets Ireland Limited, Letter of Credit, 2.25%, 9/30/14







Playpower Holdings, Inc., 14.00% PIK, 12/15/15
24,173

2,293

(27,577
)
1,111


442

2,271

Playpower, Inc., 12.50% PIK, 12/31/15
18,458

1,713

(20,550
)
379


870

1,686

Playpower Holdings, Inc., Series A Preferred, 14.00% PIK, 11/15/20
N/A

51,773



51,773


3,303

Playpower Holdings, Inc., Common Stock
38,157



15,656

53,813



 
$
310,418

$
533,668

$
(288,811
)
$
26,872

$
582,147

$
(927
)
$
29,137

______________
● 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.

See notes to financial statements.
30

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
March 31, 2014
(in thousands)
■ 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, 2014, the Company has a 28%, 33%, 100%, and 100% equity ownership interest in Generation Brands Holdings, Inc., LVI Parent Corp., Merx Aviation Finance Holdings II, LLC, and Playpower Holdings, Inc., respectively.

(6)
Aggregate gross unrealized gain for federal income tax purposes is $124,819; aggregate gross unrealized loss for federal income tax purposes is $154,176. Net unrealized loss is $29,357 based on a tax cost of $3,508,028.
(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/letter of credit being valued below par.
(9)
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.
(10)
Denominated in USD unless otherwise noted, Euro (“€”), British Pound (“£”), and Canadian Dollar (“CAD”).
(11)
Non-income producing security.
(12)
Non-accrual status (see note 2).
(13)
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.
(14)
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.
(15)
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 are subject to change. The Company monitors the status of these assets on an ongoing basis.
(16)
Denotes investments where the governing documents of the entity preclude the Company from controlling management of the entity and accordingly the Company has determined that the entity is not a controlled affiliate.
(17)
The percentage is calculated over net assets.

N/A
Not applicable.




See notes to financial statements.
31

Table of Contents

APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTMENTS (continued)
 March 31, 2014

Industry Classification
Percentage of Total Investments (at fair value) as of March 31, 2014
Business Services
14.6%
Aviation
12.2%
Oil and Gas
11.8%
Financial Services
7.4%
Healthcare
6.6%
Diversified Investment Vehicle
5.5%
Distribution
4.9%
Chemicals
4.2%
Diversified Service
3.7%
Insurance
3.5%
Leisure
3.1%
Environmental Services
2.5%
Transportation
2.1%
Mining
1.8%
Containers, Packaging, and Glass
1.6%
Telecommunications
1.5%
Energy
1.3%
Media
1.3%
Buildings and Real Estate
1.2%
Education
1.1%
Restaurants
1.0%
Diversified Natural Resources, Precious Metals and Minerals
1.0%
Hotels, Motels, Inns and Gaming
0.9%
Packaging
0.9%
Broadcasting & Entertainment
0.8%
Retail
0.7%
Cargo Transport
0.6%
Auto Sector
0.5%
Consumer Products
0.4%
Beverage, Food and Tobacco
0.3%
Home and Office Furnishings and Durable Consumer Products
0.3%
Aerospace and Defense
0.3%
Grocery
0.2%
Electronics
0.2%
Manufacturing
—%
Total Investments
100.0%



See notes to financial statements.
32

Table of Contents


APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited)
(in thousands except share and per share amounts)
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. 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 when it received 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 December 31, 2014, we have raised approximately $2,210,099 in net proceeds from additional offerings of common stock.
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 and Use of Estimates
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The Company is an investment company following accounting and reporting guidance in Accounting Standards Codification (“ASC”) 946. In accordance with Regulation S-X, the Company generally will not consolidate its interest in any company other than in investment company subsidiaries and controlled operating companies substantially all of whose business consists of providing services to the Company. Consequently, the Company has not consolidated special purpose entities through which the special purpose entity acquires and holds investments subject to financing with third parties. As of December 31, 2014, the Company did not have any subsidiaries or controlled operating companies that were consolidated (see additional information within note 5).
The preparation of financial statements in conformity 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 and expenses during the reported periods. Changes in the economic environment, financial markets, and any other parameters used in determining these estimates could cause actual results to differ materially.
Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 6 or 10 of Regulation S-X, as appropriate. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair statement of financial statements for the interim period, have been included. 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, 2014. Certain amounts have been reclassified on the Statement of Operations. Included in $2,730 of interest income from non-controlled/affiliated investments for the nine months ended December 31, 2013 is $263 previously classified as interest income from controlled investments. Included in $15,528 of dividend income from non-controlled/affiliated investments for the nine months ended December 31, 2013 is $4,825 previously classified as dividend income from controlled investments.
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.

33

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

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. 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. 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, 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, 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 who 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

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

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. As of December 31, 2014, there has been no change to the Company’s valuation techniques and related inputs considered in the valuation process.
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 value that would be received upon an actual sale of such investments.
Realized Gains and Losses
Security transactions are accounted for on the trade date. 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.
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, and market discounts are capitalized and amortized into income using the interest method or straight-line, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Other income generally includes amendment fees, bridge fees, and structuring fees, which are recorded when earned.
The Company records as interest or 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

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

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 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, and other general and administrative expenses. Expenses are recognized on an accrual basis.
Dividends to Common Stockholders
Dividends and distributions to common stockholders are recorded as of the record date. The amount to be paid out as a dividend is determined by the board of directors each quarter. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.
Income Taxes
The Company complies with the applicable provisions of the Code pertaining to regulated investment companies that make distributions of taxable income sufficient to relieve it of substantially all Federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. The Company will accrue excise tax on estimated excess taxable income, if any, as required.
Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified among the Company’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.
Foreign Currency
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. 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.
Equity Offering Expenses
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.
Debt Issuance Costs
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 using the straight-line method over the stated life of the obligation, which approximates the effective yield method.
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 interest settlements is recorded in net 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 fair valued 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.

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

Recent Accounting Pronouncements
In June 2013, the FASB issued guidance to change the assessment of whether an entity is an investment company by developing a new two-tiered approach that requires an entity to possess certain fundamental characteristics while allowing judgment in assessing certain typical characteristics. The fundamental characteristics that an investment company is required to have include the following: (1) it obtains funds from one or more investors and provides the investor(s) with investment management services; (2) it commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income or both; and (3) it does not obtain returns or benefits from an investee or its affiliates that are not
normally attributable to ownership interests. The typical characteristics of an investment company that an entity should consider before concluding whether it is an investment company include the following: (1) it has more than one investment; (2) it has more than one investor; (3) it has investors that are not related parties of the parent or the investment manager; (4) it has ownership interests in the form of equity or partnership interests; and (5) it manages substantially all of its investments on a fair value basis. The new approach requires an entity to assess all of the characteristics of an investment company and consider its purpose and design to determine whether it is an investment company. The guidance includes disclosure requirements about an entity’s status as an investment company and financial support provided or contractually required to be provided by an investment company to its investees. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2013. This guidance did not have a material impact on the Company's financial statements.
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. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early application is not permitted. The Company is in the process of evaluating the impact that this guidance will have on its financial statements.
Note 3. Agreements
The Company has an Investment Advisory and Management Agreement (the “Investment Advisory Agreement”) with Apollo Investment Management, L.P. (the “Investment Adviser” or “AIM”), under which 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. For providing these services, 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 cash equivalents 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 Apollo Investment Administration, LLC (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, 2015, AIM has agreed to voluntarily waive the management and incentive fees on the common shares issued on April 2, 2012 and May 20, 2013.

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

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, 2015, 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.
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 the nine months ended December 31, 2014 and 2013. 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.
For the time period between April 1, 2013 and March 31, 2015, 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 nine months ended December 31, 2014, the Company recognized $18,755 and $55,744, respectively, of base management fees and $13,215 and $41,075, respectively, of performance-based incentive fees. For the three and nine months ended December 31, 2013, the Company recognized $15,932 and $46,044, respectively, of base management fees and $11,469 and $35,464, respectively, of performance-based incentive fees. For the three and nine months ended December 31, 2014, total management fees waived were $2,194 and $7,143, respectively. For the three and nine months ended December 31, 2013, total management fees waived were $1,963 and $4,930, respectively. For the three and nine months ended December 31, 2014, total incentive fees waived were $1,546 and $4,791, respectively. For the three and nine months ended December 31, 2013, total incentive fees waived were $1,412 and $3,745, respectively.

The amount of the deferred incentive fees for the three and nine months ended December 31, 2014 is $1,796 and $4,266, respectively. The amount of the deferred incentive fees for the three and nine months ended December 31, 2013 is $1,469 and $3,098, 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 at December 31, 2014 and March 31, 2014 is $11,074 and $6,936, respectively.
The Company has also entered into an Administration Agreement with the Administrator under which the Administrator 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 and requested to be reimbursed by the Administrator in performing its obligations under the Administration Agreement. These expenses include rent and the Company’s allocable

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

portion of its chief financial officer, chief compliance officer, and their respective staffs. The Administrator will also provide, on our behalf, managerial assistance to those portfolio companies to which the Company is required to provide such assistance. For the three and nine months ended December 31, 2014, the Company recognized expenses under the Administration Agreement of $1,863 and $4,821, respectively. For the three and nine months ended December 31, 2013, the Company recognized expenses under the Administration Agreement of $1,410 and $3,616, 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 nine months ended December 31, 2014, the Company recognized expense reimbursements of $37 and $112, respectively, under the Merx Administration Agreement. For the three and nine months ended December 31, 2013, the Company did not recognize any expense reimbursements under the Merx Administration Agreement.

The Company has also entered into an expense reimbursement agreement with Merx Aviation Finance Assets Ireland Limited, a subsidiary 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 nine months ended December 31, 2014, the Company recognized expenses that were reimbursed under the expense reimbursement agreement of $21 and $62 respectively. For the three and nine months ended December 31, 2013, the Company recognized expenses that were reimbursed under the expense reimbursement agreement of $21 and $29 respectively.
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 nine months ended December 31, 2014 and December 31, 2013, respectively:
 
Three Months Ended 
 December 31,
 
Nine Months Ended 
 December 31,
 
2014
 
2013
 
2014
 
2013
Earnings (loss) per share — basic
Numerator for increase (decrease) in net assets per share:
$
(19,452
)
 
$
105,738

 
$
87,152

 
$
200,967

Denominator for basic weighted average shares:
236,741,351

 
224,741,351

 
236,741,351

 
220,848,078

Basic earnings (loss) per share:
$
(0.09
)
 
$
0.47

 
$
0.36

 
$
0.90

Earnings (loss) per share — diluted (1)
Numerator for increase (decrease) in net assets per share:
$
(19,452
)
 
$
105,738

 
$
87,152

 
$
200,967

Adjustment for interest on convertible notes and for incentive fees, net:
2,539

 
2,548

 
7,608

 
7,651

Numerator for increase (decrease) in net assets per share, as adjusted:
$
(16,913
)
 
$
108,286

 
$
94,760

 
$
208,618

Denominator for weighted average shares, as adjusted for dilutive effect of convertible notes:
251,289,451

 
239,289,451

 
251,289,451

 
235,396,178

Diluted earnings (loss) per share (1)(2):
$
(0.09
)
 
$
0.45

 
$
0.36

 
$
0.88

(1)
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 nine months ended December 31, 2014, anti-dilution would total $0.01 and $0.01, respectively. For the three and nine months ended December 31, 2013, there was no anti-dilution.
(2)
Represents rounded numbers.
Note 5. Investments
AIC Credit Opportunity Fund LLC
We owned all of the common member interests in AIC Credit Opportunity Fund LLC (“AIC Holdco”). AIC Holdco was formed for the purpose of holding various financed investments. AIC Holdco wholly owned three special purpose entities, each of which in 2008 acquired directly or indirectly an investment in a particular security from an unaffiliated entity that provided leverage for

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

the investment as part of the sale. As of March 31, 2014, the three special purpose entities along with AIC Holdco were dissolved. Each of these transactions is described in more detail below together with summary financial statements.
In June 2008 we invested through AIC Holdco $39,500 in AIC (FDC) Holdings LLC (“Apollo FDC”). Apollo FDC used the proceeds to purchase a Junior Profit-Participating Note due 2013 in principal amount of $39,500 (the “Junior Note”) issued by Apollo I Trust (the “Trust”). The Trust also issued a Senior Floating Rate Note due 2013 (the “Senior Note”) to an unaffiliated third party in principal amount of $39,500 paying interest at the London Interbank Offered Rate (“LIBOR”) plus 1.50%, increasing over time to LIBOR plus 2.0%. The Trust used the aggregate $79,000 proceeds to acquire $100,000 face value of a senior subordinated loan of First Data Corporation (the “FDC Loan”) due 2016. The FDC Loan pays interest at 11.25% per year. The Junior Note of the Trust owned by Apollo FDC pays to Apollo FDC all of the interest and other proceeds received by the Trust on the FDC Loan after satisfying the Trust’s obligations on the Senior Note. The holder of the Senior Note has no recourse to Apollo FDC, AIC Holdco or us with respect to any interest on, or principal of, the Senior Note. However, if the value of the FDC Loan held by the Trust declines sufficiently, the investment would be unwound unless Apollo FDC posts additional collateral for the benefit of the Senior Note. During the quarter ended June 30, 2013, we unwound the transaction by investing $20,386 into the Trust which then repaid the Senior Note. Subsequent to the repayment of the Senior Note, $10,993 of face value of the FDC Loan was prepaid by First Data Corporation resulting in a distribution of $11,556 to the Company. The remaining FDC Loan, which consisted of $41,862 of face value, was transferred to the Company at an accreted cost of $38,728 with a fair value of $40,397 on the transfer date and the Trust was closed.
In the second of these investments, in June 2008 we invested through AIC Holdco $11,375 in AIC (TXU) Holdings LLC (“Apollo TXU”). Apollo TXU acquired exposure to $50,000 notional amount of a LIBOR plus 3.5% senior secured delayed draw term loan of Texas Competitive Electric Holdings (“TXU”) due 2014 through a non-recourse total return swap (the “TRS”) with an unaffiliated third party expiring on October 10, 2013. Pursuant to such delayed draw term loan, Apollo TXU pays an unaffiliated third-party interest at LIBOR plus 1.5% and generally receives all proceeds due under the delayed draw term loan of TXU (the “TXU Term Loan”). Like Apollo FDC, Apollo TXU is entitled to 100% of any realized appreciation in the TXU Term Loan and, since the TRS is a non-recourse arrangement, Apollo TXU is exposed only up to the amount of its investment in the TRS, plus any additional margin we decide to post, if any, during the term of the financing. The TRS does not constitute a senior security or a borrowing of Apollo TXU. In connection with the amendment and extension of the TXU Term Loan in April 2011, for which Apollo TXU received a consent fee along with an increase in the rate of the TXU Term Loan to LIBOR plus 4.5%, Apollo TXU extended its TRS to 2016 at a rate of LIBOR plus 2.0%. During the year ended March 31, 2014, Apollo TXU terminated the entire TRS resulting in a realized loss of $10,314. The excess collateral posted was returned to Apollo TXU.
In the third of these investments, in September 2008 we invested through AIC Holdco $10,022 in AIC (Boots) Holdings, LLC (“Apollo Boots”). Apollo Boots acquired €23,383 and £12,465 principal amount of senior term loans of AB Acquisitions Topco 2 Limited, a holding company for the Alliance Boots group of companies (the “Boots Term Loans”), out of the proceeds of our investment and a multicurrency $40,876 equivalent non-recourse loan to Apollo Boots (the “Acquisition Loan”) by an unaffiliated third party that was scheduled to mature in September 2013 and paid interest at LIBOR plus 1.25% or, in certain cases, the higher of the Federal Funds Rate plus 0.50% or the lender’s prime-rate. The Boots Term Loans paid interest at the rate of LIBOR plus 3% per year and are scheduled to mature in June 2015. During the fiscal year ended March 31, 2013, Apollo Boots sold the entire position of the Boots Term Loans in the amount of €23,383 and £12,465 of principal.
We do not consolidate AIC Holdco or its wholly owned subsidiaries. Our investment in AIC Holdco was valued in accordance with our normal valuation procedures and was based on the values of the underlying assets held by each special purpose entities net of associated liabilities.
As of December 31, 2014 and March 31, 2014, the consolidated AIC Holdco had no outstanding assets and liabilities. Below is summarized financial information for AIC Holdco for the nine months ended December 31, 2013. There was no operating activity during the nine months ended December 31, 2014.
 

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

 
Nine Months Ended December 31, 2013
Net Operating Income
 
Apollo FDC(1)
$
1,559

Apollo TXU(1)
692

Apollo Boots(1)
8

Other
4

Total Operating Income
$
2,263

Net Realized Gain (Loss)
 
Apollo FDC
$
9,634

Apollo TXU
(10,314
)
Total Net Realized Loss
$
(680
)
Net Change in Unrealized Loss
 
Apollo FDC
$
(11,509
)
Apollo TXU
8,936

Total Net Change in Unrealized Loss
$
(2,573
)
Net Income (Loss)(2)
 
Apollo FDC
$
(316
)
Apollo TXU
(686
)
Apollo Boots
8

Other
4

Net Loss
$
(990
)
____________________
(1)
In the case of Apollo FDC, net operating income consists of interest income on the Junior Note less interest paid on the senior note together with immaterial administrative expenses. In the case of Apollo TXU, net operating income consists of net payments from the swap counterparty of Apollo TXU’s obligation to pay interest and its right to receive the proceeds in respect of the reference asset, together with immaterial administrative expenses. In the case of AIC Boots, net operating income consists of interest income on the Boots Term Loans, less interest payments on the Acquisition Loan together with immaterial administrative expenses. There are no management or incentive fees.
(2)
Net income is the sum of operating income, realized gain (loss) and net change in unrealized gain (loss).

41

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)


Merx Aviation Finance, LLC (formerly Merx Aviation Finance Holdings II, LLC)
Merx Aviation Finance, LLC. 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 through securitized, non-recourse debt or individual aircraft. Merx Aviation is not intended to compete with the numerous large lessors but rather to be complementary to them, providing them capital for various transactions. Merx Aviation also may outsource its aircraft servicing requirements to the large lessors that have the global staff necessary to complete such tasks.

Merx Aviation is considered a significant majority owned subsidiary under SEC Regulation S-X Rule 10-01(b)(1) for the nine months ended December 31, 2014 and under Regulation S-X Rule 4-08(g) for the fiscal year ended March 31, 2014. Based on the S-X 10-01(b)(1) requirements, the summarized consolidated financial information of Merx Aviation is shown below:

 
Nine Months Ended December 31, 2014 (unaudited)
 
Nine Months Ended December 31, 2013 (unaudited)
Net revenue
$
42,759

 
$
19,002

Gross profit
$
37,708

 
$
15,282

Earnings before taxes
$
3,555

 
$
(184
)
Net profit (loss)
$
3,553

 
$
(188
)

Playpower Holdings Inc.

Playpower Holdings, Inc. and subsidiaries (“Playpower”) are principally engaged in manufacturing a wide range of recreational products including traditional playground equipment, contained playground equipment, polyethylene docks and park amenities.

Playpower is considered a significant majority owned subsidiary under SEC Regulation S-X Rule 10-01(b)(1) for the nine months ended December 31, 2014. Based on the S-X Rule 10-01(b) (1) requirements, the summarized consolidated income statement information of Playpower is shown below:

 
Nine Months Ended December 31, 2014 (unaudited)
 
Nine Months Ended December 31, 2013 (unaudited)
Net sales
$
239,364

 
$
186,673

Gross profit
$
80,743

 
$
63,658

Earnings before taxes
$
9,264

 
$
2,287

Net profit (loss)
$
5,363

 
$
99



42

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

Fair Value Measurement and Disclosures
At December 31, 2014, our investments, measured at fair value, 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)
Secured Debt
$
2,184,812

 
$
2,131,166

 
$

 
$
526,310

 
$
1,604,856

Unsecured Debt
567,831

 
525,368

 

 
135,768

 
389,600

Structured Products and Other
339,045

 
356,195

 

 

 
356,195

Preferred Equity
159,555

 
137,429

 

 

 
137,429

Common Equity/Interests
333,313

 
357,488

 

 
81

 
357,407

Warrants
5,016

 
6,369

 

 

 
6,369

Total Investments
$
3,589,572


$
3,514,015

 
$

 
$
662,159

 
$
2,851,856


At March 31, 2014, our investments that were measured at fair value 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)
Secured Debt
$
1,919,871

 
$
1,949,107

 
$

 
$
1,013,424

 
$
935,683

Unsecured Debt
912,453

 
941,728

 

 
526,649

 
415,079

Structured Products and Other
204,864

 
208,901

 

 

 
208,901

Preferred Equity
115,020

 
93,062

 

 

 
93,062

Common Equity/Interests
297,532

 
274,699

 

 

 
274,699

Warrants
9,012

 
11,174

 

 

 
11,174

Total Investments
$
3,458,752

 
$
3,478,671

 
$

 
$
1,540,073

 
$
1,938,598

 

43

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

The following chart shows the components of change in our investments categorized as Level 3, for the three months ended December 31, 2014:
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
Secured Debt (2)

Unsecured
Debt

Structured
Products and Other

Preferred
Equity

Common
Equity/Interests

Warrants

Total
Beginning Balance, September 30, 2014
$
1,364,528


$
377,621


$
317,378


$
108,678


$
307,300


$
10,771


$
2,486,276

Total realized gains (losses) included in earnings
126


(367
)

(168
)



5,349




4,940

Total change in unrealized gain (loss) included in earnings
(13,052
)

(5,554
)

5,495


(2,895
)

13,639


(4,402
)

(6,769
)
Net amortization on investments
2,238


159


125








2,522

Purchases, including capitalized PIK (3)
316,556


54,246


41,573


32,815


42,909




488,099

Sales (3)
(260,960
)

(40,281
)

(8,208
)

(1,169
)

(11,790
)



(322,408
)
Transfers out of Level 3 (1)
(7,499
)











(7,499
)
Transfers into Level 3 (1)
202,919


3,776










206,695

Ending Balance, December 31, 2014
$
1,604,856


$
389,600


$
356,195


$
137,429


$
357,407


$
6,369


$
2,851,856

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 and reported within the net change in unrealized gain (loss) on investments in our Statement of Operations.
$
(13,050
)

$
(10,306
)

$
5,425


$
(2,895
)

$
18,643


$
(4,402
)

$
(6,585
)
____________________
(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 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 $(5,404).
(3)
Includes reorganizations and restructurings.
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.


44

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

The following chart shows the components of change in our investments categorized as Level 3, for the nine months ended December 31, 2014:
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
Secured Debt (2)
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, March 31, 2014
$
935,683

 
$
415,079

 
$
208,901

 
$
93,062

 
$
274,699

 
$
11,174

 
$
1,938,598

Total realized gains (losses) included in earnings
622

 
(2,119
)
 
(276
)
 

 
(5,819
)
 
9,713

 
2,121

Total change in unrealized gain (loss) included in earnings
(8,670
)
 
(9,580
)
 
13,113

 
(167
)
 
46,926

 
(809
)
 
40,813

Net amortization on investments
3,862

 
663

 
239

 

 

 

 
4,764

Purchases, including capitalized PIK (3)
855,185

 
65,049

 
168,265

 
45,703

 
57,097

 

 
1,191,299

Sales (3)
(366,133
)
 
(102,038
)
 
(34,047
)
 
(1,169
)
 
(15,496
)
 
(13,709
)
 
(532,592
)
Transfers out of Level 3 (1)

 

 

 

 

 

 

Transfers into Level 3 (1)
184,307

 
22,546

 

 

 

 

 
206,853

Ending Balance, December 31, 2014
$
1,604,856

 
$
389,600

 
$
356,195

 
$
137,429

 
$
357,407

 
$
6,369

 
$
2,851,856

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 and reported within the net change in unrealized gain (loss) on investments in our Statement of Operations.
$
(10,698
)
 
$
(15,589
)
 
$
14,810

 
$
(167
)
 
$
53,662

 
$
(4,231
)
 
$
37,787

____________________
(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 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 $(5,404).
(3)
Includes reorganizations and restructurings.
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.

45

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)


The following chart shows the components of change in our investments categorized as Level 3, for the three months ended December 31, 2013:
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
Secured Debt (2)
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, September 30, 2013
$
619,374

 
$
377,020

 
$
180,453

 
$
13,151

 
$
212,755

 
$
13,723

 
$
1,416,476

Total realized gains (losses) included in earnings
(5,414
)
 
1,279

 
321

 
99

 
10,542

 

 
6,827

Total change in unrealized gain (loss) included in earnings
8,191

 
2,881

 
5,437

 
4,506

 
(10,033
)
 
101

 
11,083

Net amortization on investments
316

 
295

 
90

 

 

 

 
701

Purchases, including capitalized PIK
195,478

 
12,514

 
71,887

 
71,780

 
511

 
76

 
352,246

Sales
(112,014
)
 
(49,407
)
 
(26,928
)
 
(98
)
 
(15,928
)
 

 
(204,375
)
Transfers out of Level 3 (1)
(161,833
)
 

 

 

 

 

 
(161,833
)
Transfers into Level 3 (1)
170,186

 

 

 

 

 

 
170,186

Ending Balance, December 31, 2013
$
714,284

 
$
344,582

 
$
231,260

 
$
89,438

 
$
197,847

 
$
13,900

 
$
1,591,311

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 and reported within the net change in unrealized gain (loss) on investments in our Statement of Operations
$
2,504

 
$
4,454

 
$
4,821

 
$
4,505

 
$
604

 
$
101

 
$
16,989

____________________
(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 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 $(8,096).
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.


46

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

The following chart shows the components of change in our investments categorized as Level 3, for the nine months ended December 31, 2013:
 
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
 
Secured Debt (2)
 
Unsecured
Debt
 
Structured
Products and Other
 
Preferred
Equity
 
Common
Equity/Interests
 
Warrants
 
Total
Beginning Balance, March 31, 2013
$
640,809

 
$
631,047

 
$
185,995

 
$
11,550

 
$
162,580

 
$
9,273

 
$
1,641,254

Total realized gains (losses) included in earnings
(27,698
)
 
(41,941
)
 
(4,461
)
 
98

 
10,542

 

 
(63,460
)
Total change in unrealized gain (loss) included in earnings
34,002

 
40,818

 
2,166

 
5,910

 
10,299

 
(1,677
)
 
91,518

Net amortization on investments
486

 
1,338

 
238

 

 

 

 
2,062

Purchases, including capitalized PIK
543,419

 
93,077

 
171,169

 
71,978

 
36,738

 
6,304

 
922,685

Sales
(377,466
)
 
(241,418
)
 
(95,611
)
 
(98
)
 
(22,312
)
 

 
(736,905
)
Transfers out of Level 3 (1)
(337,985
)
 
(138,339
)
 
(38,728
)
 

 

 

 
(515,052
)
Transfers into Level 3 (1)
238,717

 

 
10,492

 

 

 

 
249,209

Ending Balance, December 31, 2013
$
714,284

 
$
344,582

 
$
231,260

 
$
89,438

 
$
197,847

 
$
13,900

 
$
1,591,311

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 and reported within the net change in unrealized gain (loss) on investments in our Statement of Operations
$
2,810

 
$
5,958

 
$
6,750

 
$
5,909

 
$
19,055

 
$
(1,677
)
 
$
38,805

____________________
(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 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 $(8,096).
*
Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.














47

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

The following tables summarize the significant unobservable inputs the Company used to value the majority of its investments categorized within Level 3 as of December 31, 2014 and March 31, 2014. 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 December 31, 2014
 
Valuation Techniques/
Methodologies
 
Unobservable
Input
 
Range
Weighted Average
Secured Debt
761,154

 
Yield Analysis
 
Discount Rate
 
9.4%
19.4%
12.6%
 
334,084

 
Discounted Cash Flow
 
Discount Rate
 
12.0%
12.0%
12.0%
 
1,000

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
 
508,618

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Unsecured Debt
366,986

 
Yield Analysis
 
Discount Rate
 
10.1%
18.0%
10.7%
 
22,614

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Structured Products and Other
35,533

 
Yield Analysis
 
Discount Rate
 
11.2%
15.0%
11.5%
 
303,047

 
Discounted Cash Flow
 
Discount Rate
 
4.0%
14.0%
12.2%
 
17,615

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Preferred Equity
23,518

 
Yield Analysis
 
Discount Rate
 
11.0%
11.0%
11.0%
 
74,108

 
Market Comparable Approach
 
Comparable Multiple
 
2.2x
12.1x
7.7x
 
9,364

 
Discounted Cash Flow
 
Discount Rate
 
19.0%
19.0%
19.0%
 
30,439

 
Option Pricing Model
 
Expected Volatility
 
71.6%
71.6%
71.6%
Common Equity/Interests 
170,289

 
Discounted Cash Flow
 
Discount Rate
 
12.8%
30.0%
12.9%
 
6,063

 
Other
 
Illiquidity/Restrictive discount
 
7.0%
7.0%
7.0%
 
148,056

 
Market Comparable Approach
 
Comparable Multiple
 
2.2x
12.1x
8.3x
 
33,000

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
Warrants
4,450

 
Recent Transaction
 
Recent Transaction
 
N/A
N/A
N/A
 
365

 
Other
 
Illiquidity/Restrictive discount
 
20.0%
20.0%
20.0%
 
1,553

 
Market Comparable Approach
 
Comparable Multiple
 
5.3x
14.1x
13.8x
Total
$
2,851,856

 
 
 
 
 
 
 
 
N/A – Not applicable


48

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)


 
 
 
Quantitative Information about Level 3 Fair Value  Measurements
 
Fair Value as of March 31, 2014
 
Valuation Techniques/
Methodologies
 
Unobservable
Input
 
Range
Weighted Average
Secured Debt
$
714,999

 
Yield Analysis
 
Discount Rate
 
8.2%
27.3%
13.2%
 
26,370

 
Recent Transactions
 
Recent Transactions
 
N/A
N/A
N/A
 
194,313

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Unsecured Debt
395,630

 
Yield Analysis
 
Discount Rate
 
9.3%
45.0%
11.7%
 
19,450

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Structured Products and Other
30,158

 
Yield Analysis
 
Discount Rate
 
11.6%
15.0%
12.3%
 
146,970

 
Discounted Cash Flow
 
Discount Rate
 
10.0%
15.5%
13.9%
 
1,097

 
Recent Transactions
 
Recent Transactions
 
N/A
N/A
N/A
 
30,675

 
Broker Quoted
 
Broker Quote
 
N/A
N/A
N/A
Preferred Equity
70,442

 
Market Comparable Approach
 
Comparable Multiple
 
2.0x
10.0x
7.1x
 
22,620

 
Yield Analysis
 
Discount Rate
 
12.3%
12.3%
12.3%
Common Equity/Interests
125,608

 
Market Comparable Approach
 
Comparable Multiple
 
2.0x
12.0x
8.1x
 
17

 
Net Asset Value
 
Underlying Assets/Liabilities
 
N/A
N/A
N/A
 
142,117

 
Yield Analysis
 
Discount Rate
 
13.1%
30.0%
13.2%
 
6,958

 
Other
 
Illiquidity/Restrictive discount
 
7.0%
7.0%
7.0%
Warrants
4,707

 
Market Comparable Approach
 
Comparable Multiple
 
5.3x
6.0x
6.0x
 
1,398

 
Other
 
Illiquidity/ Restrictive discount
 
20.0%
20.0%
20.0%
 
5,069

 
Recent Transactions
 
Recent Transactions
 
N/A
N/A
N/A
Total
$
1,938,598

 
 
 
 
 
 
 
 
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 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.

49

Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)


PIK Interest and Dividends
The Company holds loans and investments, including certain preferred equity investments that may have contractual 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 income for the three and nine months ended December 31, 2014 and December 31, 2013 is summarized below.
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2014
 
2013
 
2014
 
2013
PIK income for the period
$
8,619

 
$
8,417

 
$
24,889

 
$
21,447

Capitalized PIK income for the three and nine months ended December 31, 2014 and December 31, 2013 is summarized below:

Three Months Ended December 31,

Nine Months Ended December 31,

2014
 
2013

2014
 
2013
PIK balance at beginning of period
$
73,608

 
$
54,991


$
58,185

 
$
45,658

Gross PIK income capitalized
7,097

 
4,119


24,155

 
21,008

Adjustments due to investment exits

 



 
(25
)
Proceeds from capitalized PIK investments
(448
)
 
(7,211
)

(2,083
)
 
(14,742
)
PIK balance at end of period
$
80,257

 
$
51,899


$
80,257

 
$
51,899


Derivatives

During the three months ended June 30, 2013, we entered into interest rate swap and interest rate cap agreements to manage interest rate risk associated with one of our structured product investments. During the three months ended September 30, 2013, we exited the investment and unwound the derivatives. We do not hold or issue derivative contracts for speculative purposes. We recorded the accrual of periodic interest settlements in net unrealized gain/loss and subsequently recorded the cash payments as a net realized gain or loss on the interest settlement date, activities which are classified under operating activities in our Statement of Cash Flows.

As of December 31, 2014, we did not hold any derivative investments and during the three and nine months ended December 31, 2014, we did not enter into any derivative transactions. For the three months ended December 31, 2013, there was no profit and loss activity for derivative instruments. The table below summarizes the effect of derivative instruments on our Statement of Operations for the nine months ended December 31, 2013:

For the nine months ended December 31, 2013:
Derivative Instruments 
 
Unrealized
Gain/(Loss)
 
Realized
Gain/(Loss)
 
Total Gain (Loss)
Interest rate swaps
 
$

 
$
13,162

 
$
13,162

Interest rate caps
 

 
(4,621
)
 
(4,621
)
Total
 
$

 
$
8,541

 
$
8,541


The interest income and interest expense on derivatives is shown in the Statement of Operations within net realized and unrealized gain/loss from investments, cash equivalents, foreign currencies and derivatives. For purposes of the performance-based incentive fee, interest income and interest expense derived from the derivative instruments are included in the calculation of pre-incentive fee net investment income. The interest income and interest expense on derivatives is excluded from the cumulative realized capital gains and cumulative realized capital losses for purposes of the capital gains incentive fee calculation.


50

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


Credit Risk-Related Contingent Features

The use of derivatives creates exposure to counterparty credit risk that may result in potential losses in the event that the counterparties to these instruments fail to perform their obligations under the agreements governing such derivatives. The Company seeks to minimize this risk by limiting the Company’s counterparties to major financial institutions with acceptable credit ratings and monitoring positions with individual counterparties. In addition, the Company may be required under the terms of its derivatives agreements to pledge assets as collateral to secure its obligations under the derivatives. The amount of collateral varies over time based on the fair value, notional amount, and remaining term of the derivatives and may exceed the amount owed by the Company on a fair value basis. In the event of a default by a counterparty, the Company would be an unsecured creditor to the extent of any such overcollateralization. At December 31, 2014, there is no cash pledged as collateral.

The International Swaps and Derivatives Association (“ISDA”) Master Agreement that the Company has in place contains customary default provisions including a cross default provision relating to third-party indebtedness in excess of a specified threshold. Following an event of default, the Company could be required to settle its obligations under the ISDA Master Agreement at their termination values. Additionally, under the Company’s ISDA Master Agreement, the Company could be required to settle its obligations under the ISDA Master Agreement at their termination values if the Company fails to maintain certain minimum stockholders’ equity thresholds or if the Company fails to comply with certain specified financial covenants.
Note 6. Foreign Currency Transactions and Translations
The Company had the following outstanding non-US borrowings on its Senior Secured Facility (as defined in note 9) at December 31, 2014 and March 31, 2014.

As of December 31, 2014
Foreign Currency
Local
Currency

Original
Borrowed
Value

Current
Value

Reset Date

Unrealized
Gain/(Loss)
British Pounds
£
20,000


$
31,555


$
31,185


1/12/2015

$
370

British Pounds
£
23,000

 
35,984

 
35,863

 
1/20/2015
 
121

British Pounds
£
6,600


10,622


10,291


1/30/2015

331

Euros
19,200


25,803


23,233


1/30/2015

2,570

Canadian Dollars
CAD 65,100


60,245


56,205


1/30/2015

4,040




$
164,209


$
156,777




$
7,432

 
As of March 31, 2014
Foreign Currency
Local
Currency
 
Original
Borrowed
Value
 
Current
Value
 
Reset Date
 
Unrealized
Gain/(Loss)
British Pounds
£
45,100

 
$
72,078

 
$
75,188

 
4/30/2014
 
$
(3,110
)
Euros
18,200

 
24,474

 
25,084

 
4/30/2014
 
(610
)
Euros
9,500

 
12,680

 
13,093

 
4/24/2014
 
(413
)
Canadian Dollars
CAD 34,100

 
31,766

 
30,895

 
4/24/2014
 
871

 
 
 
$
140,998

 
$
144,260

 
 
 
$
(3,262
)
Note 7. Cash Equivalents
There were no cash equivalents held as of December 31, 2014 and March 31, 2014.

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

Note 8. Financial Highlights
The following is a schedule of financial highlights for the nine months ended December 31, 2014 and the fiscal year ended March 31, 2014:
 
 
Nine Months Ended December 31, 2014 (unaudited)
 
Fiscal Year Ended March 31, 2014
Per Share Data:
 
 
 
Net asset value, beginning of period
$
8.67

 
$
8.27

Net investment income (1)
0.75

 
0.91

Net realized and unrealized gain (loss)
(0.39
)
 
0.30

Net increase in net assets resulting from operations (2)
0.36

 
1.20

Dividends to stockholders from income (3)
(0.60
)
 
(0.80
)
Dividends to stockholders from return of capital (3)

 

Effect of dilution

 

Offering costs (4)

 

Net asset value at end of period
$
8.43

 
$
8.67

Per share market value at end of period
$
7.42

 
$
8.31

Total return (5)
(4.0
)%
 
9.4
%
Shares outstanding at end of period
236,741,351

 
236,741,351

Ratio/Supplemental Data:
 
 
 
Net assets at end of period (in millions)
$
1,996.7

 
$
2,051.6

Ratio of net investment income to average net assets (7)
11.42
 %
 
10.85
%
Ratio of operating expenses to average net assets (6) (7)
6.33
 %
 
6.01
%
Ratio of interest and other debt expenses to average net assets (7)
3.77
 %
 
3.70
%
Ratio of net expenses to average net assets (6) (7)
10.10
 %
 
9.71
%
Average debt outstanding
$
1,576,257

 
$
1,238,940

Average debt per share
$
6.66

 
$
5.56

Portfolio turnover ratio (7)
64.3
 %
 
75.9
%
 
(1)
Per share net investment income is based on the average shares outstanding
(2)
For fiscal year ended March 31, 2014, the net increase in net assets resulting from operations represents rounded numbers.
(3)
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 reflect total dividends paid divided by average shares for the respective periods.
(4)
Offering costs per share represent less than one cent per average share for the nine months ended December 31, 2014 and fiscal year ended March 31, 2014.
(5)
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.
(6)
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 (see note 3). For the nine months ended December 31, 2014, the ratio of operating expenses to average net assets and the ratio of total expenses to average net assets would be 7.11% and 10.88%, respectively, without the voluntary fee waivers. For the fiscal year ended March 31, 2014, the ratio of operating expenses to average net assets and the ratio of total expenses to average net assets would be 6.66% and 10.36%, respectively, without the voluntary fee waivers.
(7)
Annualized



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

 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)
 
Estimated
Market Value
Senior Secured Facility
 
 
 
 
 
 
 
 
Fiscal 2015 (through December 31, 2014)
$
669,777

 
$
951

 

 
$
665,599

(4)
Fiscal 2014
602,261


1,095




602,983

(4)
Fiscal 2013
536,067

 
1,137

 

 
551,097

 
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

 
Fiscal 2005

 

 

 
N/A

 
Senior Secured Notes
 
 
 
 
 
 
 
 
Fiscal 2015 (through December 31, 2014)
$
270,000

 
$
384

 

 
$
274,777

(4)
Fiscal 2014
270,000

 
491

 

 
280,067

(4)
Fiscal 2013
270,000

 
572

 

 
282,173

 
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

 
Fiscal 2005

 

 

 
N/A

 
2042 Notes
 
 
 
 
 
 
 
 
Fiscal 2015 (through December 31, 2014)
$
150,000

 
$
213

 

 
$
151,140

(5)
Fiscal 2014
150,000

 
273

 

 
145,680

(5)
Fiscal 2013
150,000

 
318

 

 
148,920

 
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

 
Fiscal 2005

 

 

 
N/A

 
2043 Notes
 
 
 
 
 
 
 
 
Fiscal 2015 (through December 31, 2014)
$
150,000

 
$
213

 

 
$
150,240

(5)
Fiscal 2014
150,000

 
273

 

 
142,500

(5)(6)
Fiscal 2013

 

 

 
N/A

 

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

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

 
Fiscal 2005

 

 

 
N/A

 
2024 Note
 
 
 
 
 
 
 
 
Fiscal 2015 (through December 31, 2014)
$
148,876

 
$
213

 

 
$
151,470

(4)
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

 
Fiscal 2005

 

 

 
N/A

 
Convertible Notes











 
Fiscal 2015 (through December 31, 2014)
$
200,000


$
284




$
207,910

(5)
Fiscal 2014
200,000


364




212,734

(5)
Fiscal 2013
200,000


424




212,000

 
Fiscal 2012
200,000


529




N/A

 
Fiscal 2011
200,000


544




N/A

 
Fiscal 2010






N/A

 
Fiscal 2009






N/A

 
Fiscal 2008






N/A

 
Fiscal 2007






N/A

 
Fiscal 2006






N/A

 
Fiscal 2005






N/A

 
Total Debt Securities
 
 
 
 
 
 
 
 
Fiscal 2015 (through December 31, 2014)
$
1,588,653

 
$
2,258

 
$

 
$
1,601,136

 
Fiscal 2014
1,372,261

 
2,496

 

 
1,383,964

 
Fiscal 2013
1,156,067

 
2,451

 

 
1,194,190

 
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

 
Fiscal 2005

 

 

 
N/A

 

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

 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 a class of senior securities representing indebtedness is calculated as our total assets, less all liabilities and indebtedness not represented by senior securities, divided by 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 specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each.
(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)
The fair value of these debt obligations are categorized as Level 3 under ASC 820 as of December 31, 2014 and March 31, 2014. The valuation is based on a yield analysis and discount rate commensurate with the market yields for similar types of debt.
(5)
The fair value of these debt obligations are categorized as Level 1 under ASC 820 as of December 31, 2014 and March 31, 2014. The valuation is based on quoted prices of identical liabilities in active markets.
(6)
The amount was updated to $142,500 from $128,250 to reflect the correct fair value.

Note 9. Debt
The Company’s outstanding debt obligations as of December 31, 2014 were as follows:
 
 
December 31, 2014
 
Date Issued /
Amended
 
Total Aggregate
Principal
Amount
Committed
 
Principal Amount
Outstanding
 
Final
Maturity
Date
Senior Secured Facility
2013
 
$
1,270,000

 
$
669,777

 
8/31/2018
Senior Secured Notes
2010
 
225,000

 
225,000

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

 
29,000

 
9/26/2016
Senior Secured Notes (Series B)
2011
 
16,000

 
16,000

 
9/29/2018
2042 Notes
2012
 
150,000

 
150,000

 
10/15/2042
2043 Notes
2013
 
150,000

 
150,000

 
7/15/2043
2024 Note
2014
 
150,000

 
148,876

 
10/30/2024
Convertible Notes
2011
 
200,000

 
200,000

 
1/15/2016
Total Debt Obligations
 
 
$
2,190,000

 
$
1,588,653

 
 
Senior Secured Facility
On September 13, 2013, the Company amended and restated its senior secured, multi-currency, revolving credit facility (the “Senior Secured Facility”). The amendment increased the lenders’ commitments total to approximately $1,250,000, extended the final maturity date to through August 31, 2018, and allowed the Company to seek additional commitments from new and existing lenders in the future, up to an aggregate facility size not to exceed $1,710,000. On April 16, 2014, the Company obtained an additional commitment from a new lender, increasing the size of the Senior Secured Facility to $1,270,000. The Senior Secured Facility is secured by substantially all of the assets in Apollo Investment’s portfolio, including cash and cash equivalents. Commencing September 30, 2017, the Company is required to repay, in twelve consecutive monthly installments of equal size, the outstanding amount under the Senior Secured Facility as of August 31, 2017. Pricing for Alternate Base Rate (ABR) borrowings is 100 basis points over the applicable Prime Rate and pricing for Eurocurrency borrowings is 200 basis points over the LIBOR Rate. 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 stockholders’ 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) $845,000 plus (B) 25% of the net proceeds

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

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 $125,000. As of December 31, 2014 and March 31, 2014, the Company had $25,246 and $15,746, 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, not liabilities, since no funding has been made. These letters of credit are not considered senior securities because they are not in the 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 $574,976 at December 31, 2014. 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 “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 Senior Secured Notes is due semi-annually on March 29 and September 29, commencing on March 29, 2012.
2042 Notes
On October 9, 2012, the Company issued $150,000 in aggregate principal amount of 6.625% senior unsecured notes due 2042 for net proceeds of $145,275 (the “2042 Notes”). 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 2042 Notes will mature on October 15, 2042. 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 6.875% senior unsecured notes due 2043 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”). 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 2043 Notes will mature on July 15, 2043. 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.”

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Table of Contents
APOLLO INVESTMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(in thousands except share and per share amounts)

2024 Note
On October 30, 2014, the Company entered into a note purchase agreement with an institutional accredited investor providing a private placement issuance of $150,000 in aggregate principal amount of a ten-year note with an annual fixed rate of 5.25% and a maturity of October 30, 2024 (the "2024 Note"). On October 30, 2014, the Company issued the 2024 Note for net proceeds of $148,875. Interest on the 2024 Note is due quarterly on January 15, April 15, July 15 and October 15, commencing on January 15, 2015. The 2024 Note is a general, unsecured obligation and ranks 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.
The following chart summarizes the components of average outstanding debt, maximum amount of debt outstanding, and the annualized interest cost, including commitment fees, for the three and nine months ended December 31, 2014 and 2013:
 
Three Months Ended December 31, 2014
 
Three Months Ended December 31, 2013
 
Nine Months Ended December 31, 2014
 
Nine Months Ended December 31, 2013
Average outstanding debt balance
$
1,638,249

 
$
1,247,045

 
$
1,576,257

 
$
1,193,913

Maximum amount of debt outstanding
1,760,782

 
1,350,738

 
1,760,782

 
1,353,063

 
 
 
 
 
 
 
 
Weighted average annualized interest cost, including commitment fees, but excluding debt issuance costs (1)
4.50
%
 
4.97
%
 
4.46
%
 
5.01
%
Annualized amortized debt issuance cost
0.40
%
 
0.53
%
 
0.42
%
 
0.61
%
Total annualized interest cost
4.90
%
 
5.50
%
 
4.88
%
 
5.62
%
_________________
(1)
Commitment fees for the three and nine months ended December 31, 2014 were $457 and $1,355, respectively. Commitment fees for the three and nine months ended December 31, 2013 were $737 and $2,066, respectively.
As of December 31, 2014, the Company is in compliance with all debt covenants.


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

Note 10. Public Offerings
There were no offerings for the nine months ended December 31, 2014. The following table summarizes the total shares issued and proceeds received in public offerings of the Company's common stock net of underwriting discounts and offering costs for the fiscal year ended March 31, 2014:
2014
 
Shares Issued
 
Offering Price per Share
 
Proceeds net of underwriting discounts and offering costs
May 2013 public offering
 
21,850,000

 
$
8.60

 
$
181,819

February 2014 public offering
 
12,000,000

 
8.69

 
103,724

Total for the fiscal year ended March 31, 2014
 
33,850,000

 
 
 
$
285,543

The Company used the net proceeds from the public offerings during fiscal year ended March 31, 2014 to repay outstanding debt.
AIM has agreed to waive the base management and incentive fees associated with the incremental shares issued on the May 20, 2013 offering through March 31, 2015.
On August 11, 2011, the Company adopted a plan for the purpose of repurchasing up to $200 million of its common stock in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. The Company’s plan was designed to allow it to repurchase its shares both during its open window periods and at times when it otherwise might be prevented from doing so under 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 the plan to repurchase shares on the Company’s behalf in accordance with the terms of the plan. Repurchases are subject to SEC regulations as well as certain price, market volume and timing constraints specified in the plan. While the portion of the plan reliant on Rule 10b-18 remains in effect, the portion reliant on Rule 10b5-1 is subject to periodic renewal and is not currently in effect. As of December 31, 2014, no shares have been repurchased.

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 December 31, 2014, no shares had been sold through the Company’s ATM program.

Note 11. Commitments and Contingencies
As of December 31, 2014 and March 31, 2014, the Company’s unfunded commitments and contingencies were as follows:
 
As of December 31, 2014
 
As of March 31, 2014
Unfunded revolver obligations and loans commitments (1) (2)
$
296,958

 
$
408,554

Unfunded delayed draw commitments on senior loans to portfolio companies
134,626

 
138,680

Unfunded delayed draw commitments on senior loans to portfolio companies (performance thresholds not met) (3)
25,753

 
48,923

Standby letters of credit issued for certain portfolio companies for which the Company and portfolio companies are liable
24,608

 
16,379

_________________
(1)
Included in this amount is $65,916 and $114,066 of the unfunded revolver commitment for Merx Aviation Finance, LLC (formerly Merx Aviation Finance Holdings II, LLC) as of December 31, 2014 and March 31, 2014, respectively.
(2)
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 December 31, 2014, subject to the terms of each loan’s respective credit agreements.
(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 December 31, 2014.

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

AIC’s commitments are subject to the consummation of the underlying corporate transactions and conditional upon receipt of all necessary stockholder, regulatory and other applicable approvals.
Note 12. Subsequent Events
On February 4, 2015, the Board of Directors declared a dividend of $0.20 per share for the second quarter of 2015, payable on April 6, 2015 to stockholders of record as of March 20, 2015.



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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders 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 December 31, 2014, and the related statement of operations for the three and nine month periods ended December 31, 2014 and December 31, 2013, the statement of cash flows for the nine month periods ended December 31, 2014 and December 31, 2013 and the statement of changes in net assets for the nine month period ended December 31, 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, 2014, and the related statements of operations, of changes in net assets and of cash flows for the year then ended (not presented herein), and in our report dated May 20, 2014, 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, 2014, 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 statement of assets and liabilities from which it has been derived.

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

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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 was incorporated under the Maryland General Corporation Law in February 2004. We have elected to be treated as a BDC under 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 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 stockholders. 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 December 31, 2014, we have raised approximately $2.21 billion in net proceeds from additional offerings of common stock.
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 business development company, 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

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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 the investment adviser 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 stockholders, 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;
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.

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Portfolio and Investment Activity
Our portfolio and investment activity during the three months ended December 31, 2014 and 2013 is as follows:
(amounts in millions)
 
Three Months Ended December 31, 2014
 
Three Months Ended December 31, 2013
Investment made in portfolio companies (1)
 
$
609

 
$
630

Investments sold
 
(444
)
 
(293
)
Net activity before repaid investments
 
165

 
337

Investments repaid
 
(255
)
 
(251
)
Net investment activity    
 
$
(90
)
 
$
86

 
 
 
 
 
Portfolio companies, at beginning of period
 
113

 
93

Number of new portfolio companies
 
13

 
21

Number of exited companies
 
(17
)
 
(13
)
Portfolio companies, at end of period
 
109

 
101

 
 
 
 
 
Number of investments in existing portfolio companies
 
13

 
22

_________________
(1)
Investments were primarily made through a combination of primary and secondary debt investments.
Our portfolio composition and weighted average yields at December 31, 2014 and at March 31, 2014 are as follows:
 
 
December 31, 2014
 
March 31, 2014
Portfolio composition, measured at fair value:
 
 
 
 
Secured debt
 
61%

 
56%

Unsecured debt
 
15%

 
27%

Structured products and other (1)
 
10%

 
6%

Common equity, preferred equity and warrants
 
14%

 
11%

Weighted average yields, at current cost basis, exclusive of securities on non-accrual status (2):
 
 
 
 
Secured debt portfolio
 
11.0%

 
10.8%

Unsecured debt portfolio
 
11.1%

 
11.5%

Total debt portfolio
 
11.1%

 
11.1%

Income-bearing investment portfolio composition, measured at fair value:
 
 
 
 
Fixed rate amount
 
$
1.4
 billion
 
$
1.7
 billion
Floating rate amount
 
$
1.5
 billion
 
$
1.3
 billion
Fixed rate %
 
48%

 
58%

Floating rate %
 
52%

 
42%

Income-bearing investment portfolio composition, measured at cost:
 
 
 
 
Fixed rate amount
 
$
1.5
 billion
 
$
1.7
 billion
Floating rate amount
 
$
1.5
 billion
 
$
1.2
 billion
Fixed rate %
 
50%

 
58%

Floating rate %
 
50%

 
42%

_________________
(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 from 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.

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Since the initial public offering of Apollo Investment in April 2004 and through December 31, 2014, invested capital totaled $15.0 billion in 342 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, or GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, 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 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. 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. 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, 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, 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 who 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.

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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. As of December 31, 2014, there was no change to the Company’s valuation techniques and related inputs considered in the valuation process.
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 December 31, 2014, $2.9 billion or 81% 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. 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 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.


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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, and market discounts are capitalized and amortized into income using the interest method or straight-line, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Other income generally includes administrative fee, 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.
Expenses
Expenses include management fees, performance-based incentive fees, insurance expenses, administrative service fees, legal fees, directors' fees, audit and tax service expenses, and other general and administrative expenses. Expenses are recognized on an accrual basis.
Net Realized Gains or Losses and Net Change in Unrealized Gain (Loss)
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 appreciation or depreciation 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.



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RESULTS OF OPERATIONS
Operating results for the three and nine months ended December 31, 2014 and 2013 were as follows:

Three Months Ended

Nine Months Ended
(in thousands)
December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013
Investment income











Interest
$
98,088


$
83,115


$
298,933


$
250,211

Dividends
7,342


8,050


21,231


24,568

Other
4,596


3,396


11,352


10,162

Total investment income
$
110,026


$
94,561


$
331,516


$
284,941

Expenses







Base management fees and performance-based incentive fees, net of amounts waived
$
(28,230
)

$
(24,026
)

$
(84,885
)

$
(72,833
)
Interest and other debt expenses, net of expense reimbursements
(20,294
)

(17,345
)

(58,101
)

(50,653
)
Administrative services expenses, net of expense reimbursements
(1,826
)

(1,410
)

(4,709
)

(3,616
)
Other general and administrative expenses
(3,014
)

(2,097
)

(7,919
)

(6,203
)
Net expenses
(53,364
)

(44,878
)

(155,614
)

(133,305
)
Net investment income
$
56,662


$
49,683


$
175,902


$
151,636

Realized and unrealized gain (loss) on investments, cash equivalents, derivatives and foreign currencies








Net realized gain (loss)
$
(1,430
)

$
3,667


$
(3,169
)

$
(109,541
)
Net change in unrealized gain (loss)
(74,684
)

52,388


(85,581
)

158,872

Net realized and unrealized gain (loss) from investments, cash equivalents, derivatives and foreign currencies
(76,114
)

56,055


(88,750
)

49,331

Net increase (decrease) in net assets resulting from operations
$
(19,452
)

$
105,738


$
87,152


$
200,967









Net investment income per share on per average share basis
$
0.24


$
0.22


$
0.75


$
0.69

Earnings (Loss) per share - basic
$
(0.09
)

$
0.47


$
0.36


$
0.90

Earnings (Loss) per share - diluted
$
(0.09
)

$
0.45


$
0.36


$
0.88


Total Investment Income
For the three months ended December 31, 2014 as compared to the three months ended December 31, 2013
The increase in total investment income for the three months ended December 31, 2014 compared to the three months ended December 31, 2013 was primarily due to the increase in interest income. Interest income increased due to an increase in the investment portfolio size, which increased to an average cost of $3.63 billion for the three months ended December 31, 2014 from an average cost of $3.13 billion for the three months ended December 31, 2013. The increase in total investment income was also due to an increase in prepayment fees and an acceleration of original issue discount on repaid investments, which totaled approximately $9.3 million for the three months ended December 31, 2014 as compared to $2.5 million three months ended December 31, 2013. The increase was partially offset by a decrease in yield on debt investments (11.1% as of December 31, 2014 and 11.4% as of December 31, 2013) during the period. Dividend income decreased slightly as there was a special dividend payment from Explorer Coinvest, LLC (Booz Allen) during the three months ended December 31, 2013. Other income, which primarily includes structuring fees, during the three months ended December 31, 2014 was higher due to increased investment activity.
For the nine months ended December 31, 2014 as compared to the nine months ended December 31, 2013
The increase in total investment income for the nine months ended December 31, 2014 compared to the nine months ended December 31, 2013 was primarily due to the increase in interest income. Interest income increased due to an increase in the investment portfolio size, which increased to an average cost of $3.52 billion for the nine months ended December 31, 2014 from an average cost of $3.10 billion for the nine months ended December 31, 2013. The increase in investment income was also due

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to an increase in prepayment fees and an acceleration of original issue discount on repaid investments, which totaled approximately $37.3 million for the nine months ended December 31, 2014 as compared to $19.4 million three months ended December 31, 2013. The increase in interest income was partially offset by a decrease in yield on debt investments (11.1% as of December 31, 2014 and 11.4% as of December 31, 2013) during the period. Dividend income decreased as there was a special dividend payment from RC Coinvestment, LLC during the nine months ended December 31, 2013. Other income during the nine months ended December 31, 2014 was higher due to increased structuring fees on investments.

Net Expenses
For the three months ended December 31, 2014 as compared to three months ended December 31, 2013
The increase in expenses for the three months ended December 31, 2014 compared to the three months ended December 31, 2013 was primarily driven by an increase of $2.9 million in interest and other debt related expenses and an increase of $4.2 million in management and performance-based incentive fees (net of amounts waived). Management and performance-based incentive fees increased primarily due to the increase in the size and net investment income earned on the portfolio. Interest and other debt related costs were higher due to a higher average debt balance, which increased to $1.64 billion during the three months ended December 31, 2014 from $1.25 billion during the three months ended December 31, 2013. The total annualized cost of debt for the period declined to 4.90% from 5.50% for the three months ended December 31, 2013 as a result of the utilization of our Senior Secured Credit Facility.
For the nine months ended December 31, 2014 as compared to the nine months ended December 31, 2013
The increase in expenses for the nine months ended December 31, 2014 compared to the nine months ended December 31, 2013 was primarily driven by an increase of $7.4 million in interest and other debt related expenses and an increase of $12.1 million in management and performance-based incentive fees (net of amounts waived). Management and performance-based incentive fees increased due to the increase in the size and net investment income earned on the portfolio. Interest and other debt related costs were higher due to a higher average debt balance, which increased to $1.58 billion during the nine months ended December 31, 2014 from $1.19 billion during the nine months ended December 31, 2013. The total annualized cost of debt for the period declined to 4.88% from 5.62% for the nine months ended December 31, 2013 primarily as a result of the utilization of our Senior Secured Credit Facility and the September 2013 credit facility amendment which resulted in a decrease in pricing by 25 basis points.

Net Realized Gain (Loss)
For the three months ended December 31, 2014 as compared to three months ended December 31, 2013
Net realized losses for the three months ended December 31, 2014 were $1.4 million and comprised of $17.3 million of gross realized losses and $15.9 million of gross realized gains. Significant realized gains (losses) for the three months ended December 31, 2014 are summarized below:
(in millions)

Net Realized Gain (Loss)

First Data Corp.

$
5.6


RC Coinvestment, LLC
 
5.0

 
Walter Energy, Inc.
 
(7.8
)
 
inVentiv Health, Inc.
 
(5.6
)
 
Other (net)
 
1.4

 
Total, net

$
(1.4
)

Net realized gains for the three months ended December 31, 2013 were $3.7 million and comprised of $20.0 million of gross realized gains and $16.3 million of gross realized losses. Significant realized gains (losses) for the three months ended December 31, 2013 are summarized below:
(in millions)

Net Realized Gain (Loss)

Penton Business Media Holdings, LLC

$
10.1

 
Garden Fresh Restaurant Corp.
 
(5.4
)
 
IPC Systems, Inc.
 
(5.3
)
 
Altegrity, Inc.
 
(2.3
)
 
Other (net)

6.6


Total, net

$
3.7



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For the nine months ended December 31, 2014 as compared to the nine months ended December 31, 2013
Net realized losses for the nine months ended December 31, 2014 were $3.2 million and comprised of $41.0 million of gross realized losses and $37.8 million of gross realized gains. Significant realized gains (losses) for the nine months ended December 31, 2014 are summarized below:
(in millions)

Net Realized Gain (Loss)

Aventine Renewable Energy Holdings, Inc.
 
$
11.6

 
First Data Corp.
 
7.5

 
Altegrity, Inc.
 
(17.7
)
 
inVentiv Health, Inc.

(9.4
)

Walter Energy, Inc.
 
(8.6
)
 
Other (net)

13.4


Total, net

$
(3.2
)


Net realized losses for the nine months ended December 31, 2013 were $109.5 million and comprised of $155.5 million of gross realized losses and $46.0 million of gross realized gains. Significant realized gains (losses) for the nine months ended December 31, 2013 are summarized below:
(in millions)

Net Realized Gain (Loss)

Penton Business Media Holdings, LLC
 
$
11.5


Ceridian Corp.
 
4.9

 
ATI Acquisition Company

(54.4
)

Cengage Learning Acquisitions

(44.6
)

Texas Competitive Electric Holdings ("TXU")

(13.5
)

Altegrity, Inc.

(7.2
)

Other (net)

(6.2
)

Total, net

$
(109.5
)


The realized losses incurred upon the exit of these investments reversed out previously reported unrealized losses.


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Net Change in Unrealized Gain (Loss)
For the three months ended December 31, 2014 as compared to three months ended December 31, 2013
For the three months ended December 31, 2014, the net change in unrealized losses were $74.7 million and comprised of $125.8 million of gross unrealized losses and $51.1 million of gross unrealized gains. Significant change in unrealized gains (losses) for the three months ended December 31, 2014 are summarized below:
(in millions)
 
Net Change in Unrealized Gain/(Loss)
 
Generation Brands Holdings, Inc. (Quality Homes)
 
$
10.9

 
Playpower Holdings, Inc.
 
7.0

 
inVentiv Health, Inc.
 
5.7

 
Venoco, Inc. (Denver Parent)
 
(24.6
)
 
Magnetation, LLC
 
(12.4
)
 
PetroBakken Energy Ltd.
 
(10.7
)
 
Molycorp, Inc.
 
(6.8
)
 
First Data Corp.
 
(6.2
)
 
Delta Educational Systems, Inc. (Gryphon Colleges Corp.)
 
(6.1
)
 
Ranpak Corp.
 
(5.2
)
 
Other (net)
 
(26.3
)
 
Total, net
 
$
(74.7
)
 

For the three months ended December 31, 2013 the net change in unrealized gains were $52.4 million and comprised of $88.6 million of gross unrealized gains and $36.2 million of gross unrealized losses. Significant change in unrealized gains (losses) for the three months ended December 31, 2013 are summarized below:
(in millions)

Net Change in Unrealized Gain/(Loss)

inVentiv Health, Inc.

$
14.1


Avaya, Inc.
 
6.4

 
First Data Corp.

4.7


IPC Systems, Inc.
 
4.6

 
Gryphon Colleges Corp. (Delta Educational Systems, Inc.)
 
4.5

 
Garden Fresh Restaurant Corp.
 
4.1

 
Magnetation, LLC
 
3.9

 
Generation Brands Holdings, Inc.
 
2.7

 
PetroBakken Energy Ltd.
 
2.7

 
Wind Acquisition Holdings
 
2.4

 
BCA Osprey II Limited (British Car Auctions)
 
2.0

 
Penton Business Media Holdings, LLC

(10.1
)

Other (net)

10.4


Total, net

$
52.4




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For the nine months ended December 31, 2014 as compared to the nine months ended December 31, 2013
For the nine months ended December 31, 2014, the net change in unrealized losses were $85.6 million and comprised of $214.1 million of gross unrealized losses and $128.5 million of gross unrealized gains. Significant change in unrealized gains (losses) for the nine months ended December 31, 2014 are summarized below:
(in millions)
 
Net Change in Unrealized Gain/(Loss)
 
Generation Brands Holdings, Inc. (Quality Homes)
 
$
23.1

 
Playpower Holdings, Inc.
 
20.7

 
Venoco, Inc. (Denver Parent)
 
(30.2
)
 
Molycorp, Inc.
 
(21.7
)
 
LVI Group Investments, LLC
 
(16.3
)
 
Magnetation LLC
 
(15.3
)
 
Walter Energy Inc.
 
(12.6
)
 
PetroBakken Energy Ltd.
 
(12.4
)
 
First Data Corp.
 
(11.2
)
 
Other (net)
 
(9.7
)
 
Total, net
 
$
(85.6
)
 

For the nine months ended December 31, 2013, the net change in unrealized gains were $158.9 million and comprised of $251.1 million of gross unrealized gains and $92.2 million of gross unrealized losses. Significant change in unrealized gains (losses) for the nine months ended December 31, 2013 are summarized below:
(in millions)
 
Net Change in Unrealized Gain/(Loss)
 
ATI Acquisition Company
 
$
53.9

 
Cengage Learning Acquisitions Inc.
 
44.3

 
Garden Fresh Restaurant Corp.
 
13.1

 
Texas Competitive Electric Holdings ("TXU")
 
12.0

 
Playpower Holdings, Inc.
 
9.3

 
BCA Osprey II Limited (British Car Auctions)
 
8.9

 
Generation Brands Holdings, Inc. (Quality Homes)
 
8.6

 
Altegrity, Inc.
 
7.3

 
Penton Business Media Holdings, LLC
 
(12.3
)
 
Allied Nevada Gold Corp.
 
(5.1
)
 
Other (net)
 
18.9

 
Total, net
 
$
158.9

 

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 9 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.

Debt
At December 31, 2014, the Company had $669.8 million in borrowings outstanding on its Senior Secured Facility and $575.0 million of unused capacity. As of December 31, 2014, aggregate lender commitments under the Senior Secured Facility totaled $1.27 billion. The Senior Secured Facility allows the Company to seek additional commitments in the future up to an aggregate

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facility size not to exceed $1.71 billion. See note 9 and note 10 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 December 31, 2014 (in millions)
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
Senior Secured Facility (1)
$
670

 
$

 
$

 
$
670

 
$

Senior Secured Notes
$
225

 
$
225

 
$

 
$

 
$

Senior Secured Notes (Series A)
$
29

 
$

 
$
29

 
$

 
$

Senior Secured Notes (Series B)
$
16

 
$

 
$

 
$
16

 
$

2042 Notes
$
150

 
$

 
$

 
$

 
$
150

2043 Notes
$
150

 
$

 
$

 
$

 
$
150

2024 Note
$
149

 
$

 
$

 
$

 
$
149

Convertible Notes
$
200

 
$

 
$
200

 
$

 
$

_________________________
(1)
At December 31, 2014, there was $25.2 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, and the Company had $575.0 million of unused capacity under its Senior Secured Facility.

PIK Interest and Dividends
The Company also has investments in its portfolio that contain PIK provisions. 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. In order to maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders annually in the form of dividends, even though the Company has not yet collected the cash. For the three and nine months ended December 31, 2014, PIK income totaled $8.6 million and $24.9 million, on total investment income of $110.0 million and $331.5 million. See note 5 within the Notes to the Financial Statements for more information on the Company’s PIK interest and dividends.
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 accompanying 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 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 December 31, 2014.
Related Party Transactions
See note 3 within the Notes to the Financial Statements for information on the Company’s related party transactions.
Commitments and Contingencies
See note 11 within the Notes to the Financial Statements for information on the Company’s commitments and contingencies.
Dividends
Dividends paid to stockholders for the three and nine months ended December 31, 2014 totaled $47.3 million or $0.20 per share and $142.0 million or $0.60 per share, respectively. Dividends paid to stockholders for the three and nine months ended December 31, 2013 totaled $44.9 million or $0.20 per share and $134.8 million or $0.60 per share, respectively. Tax characteristics of all dividends will be reported to stockholders on Form 1099 after the end of the calendar year. Our quarterly dividends, if any, will be determined by our Board of Directors.

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We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders’ cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash dividends.
We may not be able to achieve operating results that will allow us to make 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 business development company, we may in the future be limited in our ability to make distributions. Also, our Senior Secured 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 regulated investment company. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, 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 regulated investment company.
With respect to the dividends to stockholders, 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 stockholders.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
We are subject to financial market risks, including changes in interest rates. During the nine months ended December 31, 2014, 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 six 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 floors for variable rate instruments) to our loan portfolio and outstanding debt as of December 31, 2014, assuming no changes in our investment and borrowing structure:
(in thousands except per share data)
Basis Point Change
Net Investment Income
 
Net Investment Income per Share
Up 400 basis points
$
14,493

 
$
0.061

Up 300 basis points
$
8,072

 
$
0.034

Up 200 basis points
$
2,045

 
$
0.009

Up 100 basis points
$
(2,701
)
 
$
(0.011
)
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.


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Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 2014 (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 third fiscal quarter of 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
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 20, 2014, 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
None.
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
Third Amended and Restated Bylaws (2)
 
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 8-K, filed on November 6, 2009.

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 February 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


75