Edgar Filing: APOLLO INVESTMENT CORP

Form 10-Q

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 June 30, 2011

¨	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 57^th 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 August 3, 2011 was 196,392,758.

APOLLO INVESTMENT CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2011

TABLE OF CONTENTS


		PAGE
	PART I. FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS	3

	Statements of Assets and Liabilities as of June 30, 2011 and March 31, 2011	3

	Statements of Operations for the three months ended June 30, 2011 and June 30, 2010	4

	Statements of Changes in Net Assets for the three months ended June 30, 2011 and the year ended March 31, 2011	5

	Statements of Cash Flows for the three months ended June 30, 2011 and June 30, 2010	6

	Schedule of Investments as of June 30, 2011	7

	Schedule of Investments as of March 31, 2011	17

	Notes to Financial Statements	27

	Report of Independent Registered Public Accounting Firm	43

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 4.	Controls and Procedures	56

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults upon Senior Securities	58

Item 5.	Other Information	58

Item 6.	Exhibits	59

	Signatures	60

PART I. FINANCIAL INFORMATION

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

Item 1. Financial Statements

APOLLO INVESTMENT CORPORATION

STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except per share amounts)


	June 30, 2011 (unaudited)			March 31, 2011
Assets
Non-controlled/non-affiliated investments, at value (cost—$2,863,683 and $2,900,378, respectively)	$	2,868,973		$	2,901,295
Non-controlled/affiliated investments, at value (cost—$22,406 and $22,407, respectively)		37,909			37,295
Controlled investments, at value (cost—$488,472 and $376,051, respectively)		216,378			111,568
Cash		8,024			5,471
Foreign currency (cost—$1,170 and $881, respectively)		1,181			883
Receivable for investments sold		55,505			13,461
Interest receivable		46,482			45,686
Dividends receivable		12			5,131
Miscellaneous income receivable		40			—
Receivable from investment adviser		—			576
Prepaid expenses and other assets		24,798			27,447

Total assets	$	3,259,302		$	3,148,813

Liabilities
Debt (see note 7 & 12)	$	1,249,203		$	1,053,443
Payable for investments and cash equivalents purchased		3,835			37,382
Dividends payable		54,856			54,740
Management and performance-based incentive fees payable (see note 3)		27,094			27,553
Interest payable		9,860			9,703
Accrued administrative expenses		890			1,738
Other liabilities and accrued expenses		2,332			3,223

Total liabilities	$	1,348,070		$	1,187,782

Net Assets
Common stock, par value $.001 per share, 400,000 and 400,000 common shares authorized, respectively, and 195,914 and 195,502 issued and outstanding, respectively	$	196		$	196
Paid-in capital in excess of par (see note 2f)		2,876,560			2,871,559
Undistributed net investment income (see note 2f)		49,363			56,557
Accumulated net realized loss (see note 2f)		(759,821	)		(713,873	)
Net unrealized depreciation		(255,066	)		(253,408	)

Total net assets	$	1,911,232		$	1,961,031

Total liabilities and net assets	$	3,259,302		$	3,148,813

Net Asset Value Per Share	$	9.76		$	10.03

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share amounts)


	Three months ended
	June 30, 2011			June 30, 2010
INVESTMENT INCOME:
From non-controlled/non-affiliated investments:
Interest	$	81,619		$	72,505
Dividends		3,195			920
Other income		7,275			1,669
From non-controlled/affiliated investments:
Interest		405			3,154
From controlled investments:
Interest		14			—
Dividends		2,084			—

Total Investment Income		94,592			78,248

EXPENSES:
Management fees (see note 3)	$	15,929		$	14,554
Performance-based incentive fees (see note 3)		8,381			10,207
Interest and other debt expenses		15,951			9,894
Administrative services expense		887			1,396
Other general and administrative expenses		5,782			1,370

Total expenses		46,930			37,421

Net investment income	$	47,662		$	40,827

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS AND FOREIGN CURRENCIES:
Net realized gain (loss):
Investments and cash equivalents	$	(44,197	)	$	780
Foreign currencies		(1,751	)		3,087

Net realized gain (loss)		(45,948	)		3,867

Net change in unrealized gain (loss):
Investments and cash equivalents		(2,544	)		(137,959	)
Foreign currencies		886			8,955

Net change in unrealized loss		(1,658	)		(129,004	)

Net realized and unrealized loss from investments, cash equivalents and foreign currencies		(47,606	)		(125,137	)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	56		$	(84,310	)

EARNINGS (LOSS) PER SHARE — BASIC AND DILUTED (see note 5)	$	0.00		$	(0.45	)

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

STATEMENTS OF CHANGES IN NET ASSETS

(in thousands, except shares)


	Three months ended June 30, 2011 (unaudited)			Year ended March 31, 2011
Increase in net assets from operations:
Net investment income	$	47,662		$	191,172
Net realized loss		(45,948	)		(152,017	)
Net change in unrealized gain (loss)		(1,658	)		141,257

Net increase in net assets resulting from operations		56			180,412

Dividends and distributions to stockholders:		(54,856	)		(218,079	)

Capital share transactions:
Net proceeds from shares sold		—			204,275
Less offering costs		(7	)		(233	)
Reinvestment of dividends		5,008			21,850

Net increase in net assets from capital share transactions		5,001			225,892

Total increase (decrease) in net assets:		(49,799	)		188,225
Net assets at beginning of period		1,961,031			1,772,806

Net assets at end of period	$	1,911,232		$	1,961,031

Capital share activity:
Shares sold		—			17,250,000
Shares issued from reinvestment of dividends		412,511			2,037,631

Net increase in capital share activity		412,511			19,287,631

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Three months ended June 30,
	2011			2010
Cash Flows from Operating Activities:
Net Increase (Decrease) in Net Assets Resulting from Operations	$	56		$	(84,310	)
Adjustments to reconcile net increase:
PIK interest and dividends		(5,117	)		(16,133	)
Net amortization on investments		(4,205	)		(7,366	)
Increase (decrease) from foreign currency transactions		(1,861	)		3,040
Net change in unrealized loss on investments, cash equivalents and foreign currencies		1,658			129,004
Net realized (gain) loss on investments, cash equivalents and foreign currencies		45,948			(3,867	)
Changes in operating assets and liabilities:
Purchase of investments		(835,810	)		(221,032	)
Proceeds from disposition of investments and cash equivalents		725,376			112,637
Decrease in interest and dividends receivable		4,323			4,787
Decrease in prepaid expenses and other assets		3,213			3,677
Decrease in management and performance-based incentive fees payable		(459	)		(1,602	)
Increase in interest payable		157			304
Decrease in accrued expenses and other liabilities		(1,739	)		(787	)
Decrease in payable for investments and cash equivalents purchased		(33,547	)		(335,458	)
Decrease (increase) in receivable for investments sold		(42,044	)		47,708

Net Cash Used by Operating Activities	$	(144,051	)	$	(369,398	)

Cash Flows from Financing Activities:
Net proceeds from the issuance of common stock	$	—		$	204,275
Offering costs from the issuance of common stock		(7	)		(427	)
Dividends paid in cash		(49,733	)		(44,505	)
Proceeds from debt		1,150,480			465,211
Payments on debt*		(953,846	)		(523,723	)

Net Cash Provided by Financing Activities	$	146,894		$	100,831

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	$	2,843		$	(268,567	)
Effect of exchange rates on cash balances		8			(70	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	6,354		$	487,585

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	9,205		$	218,948

Non-cash financing activities consist of the reinvestment of dividends totaling $5,008 and $4,835, respectively.

*	Includes deferred financing costs of $27 and $0, respectively.

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited)

June 30, 2011

(in thousands)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 150.1%	Industry	Par Amount*		Cost		Fair Value(1)
CORPORATE DEBT — 141.0%
BANK DEBT/SENIOR SECURED LOANS —52.6%
1st Lien Bank Debt/Senior Secured Loans — 4.1%
ATI Acquisition Company, L+600, 12/30/14	Education	$	13,273	$	12,876	$	13,671
Brickman Group Holdings, Inc., L+550, 10/14/16	Environmental & Facilities Services		9,938		9,847		10,089
Educate, Inc., L+700, 6/14/14	Education		2,897		2,897		2,873
Insight Pharmaceuticals, LLC, L+500, 2/24/17	Consumer Products		7,313		7,207		7,276
Penton Media, Inc., L+400, 8/1/14	Media		34,915		28,634		27,902
RBS Holding Company, LLC, L+500, 3/23/17	Business Services		15,960		15,806		15,721

Total 1st Lien Bank Debt/Senior Secured Loans				$	77,267	$	77,532

2nd Lien Bank Debt/Senior Secured Loans — 48.5%
Advantage Sales & Marketing, Inc., L+775, 6/18/18	Grocery	$	60,000	$	59,506	$	61,162
Allied Security Holdings, LLC, L+700, 2/2/18	Business Services		50,000		49,549		51,000
Applied Systems, Inc., L+775, 6/8/17	Software		26,500		26,252		26,931
Asurion Corporation, L+750, 5/24/19	Insurance		100,000		99,504		100,833
Brock Holdings III, Inc., L+825, 3/16/18	Environmental & Facilities Services		45,000		44,124		46,350
Clean Earth, Inc., 13.00%, 8/1/14	Environmental & Facilities Services		25,000		25,000		24,875
Datatel, Inc., L+725, 2/19/18	Education		21,000		20,899		21,394
Garden Fresh Restaurant Corp., L+975, 12/11/13	Retail		46,600		46,836		47,951
IPC Systems, Inc., L+525, 6/1/15	Telecommunications		44,250		41,760		41,152
Kronos, Inc., L+575 Cash or L+650 PIK, 6/11/15	Electronics		50,000		50,000		49,458
Ozburn-Hessey Holding Company LLC, L+850, 10/8/16	Logistics		38,000		37,967		38,285
Ranpak Corp., L+750, 10/20/17 †	Packaging		85,000		85,000		85,000
Ranpak Corp., E+775, 10/20/17 †	Packaging	€	40,000		58,042		57,994
Sedgwick Holdings, Inc., L+750, 5/26/17	Business Services	$	25,000		24,668		25,094
Sensus USA Inc., L+725, 5/9/18	Industrial		25,000		24,754		25,375
Sheridan Holdings, Inc., L+575 Cash or L+650 PIK, 6/15/15	Healthcare		47,847		47,128		47,321
TransFirst Holdings, Inc., L+600 Cash or L+675 PIK, 6/15/15	Financial Services		37,512		36,752		35,937
Valerus Compression Services, LP, 11.50%, 3/26/18	Industrial		40,000		40,000		40,000

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 150.1%	Industry	Par Amount*		Cost		Fair Value(1)
2nd Lien Bank Debt/Senior Secured Loans — (continued)
Vertafore, Inc., L+825, 10/29/17	Software	$	75,000	$	74,301	$	76,312
Wall Street Systems Holdings, Inc., L+750, 6/20/18	Software		25,000		24,751		25,312

Total 2nd Lien Bank Debt/Senior Secured Loans				$	916,793	$	927,736

TOTAL BANK DEBT/SENIOR SECURED LOANS				$	994,060	$	1,005,268

Subordinated Debt/Corporate Notes — 88.4%
AB Acquisitions UK Topco 2 Limited (Alliance Boots), GBP L+650 (GBP L+300 Cash / 3.50% PIK), 7/9/17	Retail	£	50,132	$	93,905	$	75,253
Altegrity Inc., 0.00%, 8/2/16 ¨ †	Diversified Service	$	3,545		1,904		1,904
Altegrity Inc., 11.75%, 5/1/16 ¨ †	Diversified Service		14,639		10,565		15,481
Altegrity Inc., 12.00%, 11/1/15 ¨ †	Diversified Service		100,000		100,000		106,300
Altegrity Inc., 10.50%, 11/1/15 ¨ †	Diversified Service		13,475		12,181		14,014
American Tire Distributors, Inc., 11.50%, 6/1/18 ¨ †	Distribution		25,000		25,000		26,580
American Tire Distributors, Inc., 9.75%, 6/1/17 †	Distribution		10,000		9,890		10,650
Angelica Corporation, 15.00% (12.00% Cash / 3.00% PIK), 2/4/14	Healthcare		60,000		60,000		64,500
ATI Acquisition Company, L+1100, 12/30/15	Education		38,500		37,867		39,270
Avaya Inc., 10.125% Cash or 10.875% PIK, 11/1/15	Telecommunications		15,352		15,513		15,745
BCA Osprey II Limited, 12.50% PIK, 8/17/17	Transportation	£	22,750		35,852		35,246
BCA Osprey II Limited, 12.50% PIK, 8/17/17	Transportation	€	13,773		19,083		19,269
Burlington Coat Factory, 10.00%, 2/15/19	Retail	$	3,750		3,586		3,759
Catalina Marketing Corporation, 11.625%, 10/1/17 ¨ †	Grocery		42,175		42,765		45,760
Ceridian Corp., 12.25% Cash or 13.00% PIK, 11/15/15 †	Diversified Service		55,950		55,804		56,789
Ceridian Corp., 11.25%, 11/15/15 †	Diversified Service		34,300		33,914		34,300
Clearwire Communications, 12.00%, 12/1/15	Telecommunications		2,500		2,625		2,688
Delta Educational Systems, Inc., 14.20% (13.00% Cash / 1.20% PIK), 5/12/13	Education		19,811		19,552		20,301
Exova Limited, 10.50%, 10/15/18 ¨	Market Research	£	18,000		28,823		29,476
Exova Limited, 10.50%, 10/15/18	Market Research		2,500		4,114		4,094
First Data Corporation, 12.625%, 1/15/21 †	Financial Services	$	9,219		7,985		9,872
First Data Corporation, 9.875%, 9/24/15 †	Financial Services		2,061		1,852		2,119
First Data Corporation, 8.25%, 1/15/21 †	Financial Services		9,219		8,038		9,046

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 150.1%	Industry	Par Amount*		Cost		Fair Value(1)
Subordinated Debt/Corporate Notes —(continued)
FleetPride Corporation, 11.50%, 10/1/14 ¨ †	Transportation	$	47,500	$	47,500	$	47,738
Fox Acquisition Sub LLC, 13.375%, 7/15/16 ¨	Broadcasting & Entertainment		26,125		26,430		28,999
FPC Holdings, Inc. (FleetPride Corporation), 14.00%, 6/30/15 ¨ †	Transportation		37,846		37,692		38,981
Hub International Holdings, 10.25%, 6/15/15 ¨	Insurance		36,232		35,046		36,957
Intelsat Bermuda Ltd., 11.25%, 2/4/17	Broadcasting & Entertainment		95,000		97,282		102,066
Intelsat Bermuda Ltd., 11.50% Cash or 12.50% PIK, 2/4/17	Broadcasting & Entertainment		5,000		5,212		5,375
inVentiv Health, Inc., 10.00%, 8/15/18	Market Research		160,000		160,000		157,300
Laureate Education, Inc., 12.00%, 8/15/17 ¨	Education		53,540		52,551		58,492
N.E.W. Holdings I, LLC, L+750, 3/23/17	Consumer Services		45,111		45,223		47,028
Renal Advantage Holdings, Inc., 12.00%, 6/17/17	Healthcare		32,103		31,724		32,745
SeaCube Container Leasing Ltd., 11.00%, 4/28/16	Shipping		50,000		50,000		50,000
Sorenson Communications, Inc., 10.50%, 2/1/15 ¨	Consumer Services		32,500		32,027		22,425
SquareTwo Financial Corp. (Collect America, Ltd.), 11.625%, 4/1/17 ¨	Consumer Finance		40,000		39,391		41,500
Texas Competitive Electric Holdings Company LLC, 11.50%, 10/1/20	Utilities		50,000		49,652		49,562
The ServiceMaster Company, 10.75% Cash or 11.50% PIK, 7/15/15 ¨	Diversified Service		52,173		53,431		55,010
TL Acquisitions, Inc. (Thomson Learning), 13.25%, 7/15/15¨†	Education		97,500		97,731		88,481
TL Acquisitions, Inc. (Thomson Learning), 10.50%, 1/15/15¨†	Education		23,000		22,018		20,892
Univar Inc., 12.00%, 6/30/18	Distribution		78,750		78,750		80,720
US Foodservice, 8.50%, 6/30/19 ¨	Beverage, Food & Tobacco		6,050		5,869		5,959
U.S. Renal Care, Inc., 13.25% (11.25% Cash / 2.00% PIK), 5/24/17	Healthcare		50,058		50,058		52,561
Varietal Distribution, 10.75%, 6/30/17	Distribution	€	1,127		1,396		1,634
Varietal Distribution, 10.75%, 6/30/17	Distribution	$	22,204		21,729		22,204

Total Subordinated Debt/Corporate Notes				$	1,671,530	$	1,689,045

TOTAL CORPORATE DEBT				$	2,665,590	$	2,694,313

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands, except shares)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 150.1%	Industry	Par Amount*		Cost		Fair Value(1)
COLLATERALIZED LOAN OBLIGATIONS — 1.5%
Babson CLO Ltd., Series 2008-2A Class E, L+975, 7/15/18 ¨	Asset Management	$	11,000	$	10,174	$	11,000
Babson CLO Ltd., Series 2008-1A Class E, L+550, 7/20/18 ¨	Asset Management		10,150		7,748		10,150
Westbrook CLO Ltd., Series 2006-1A, L+370, 12/20/20 ¨	Asset Management		11,000		6,936		7,844

TOTAL COLLATERALIZED LOAN OBLIGATIONS				$	24,858	$	28,994


		Shares
PREFERRED EQUITY — 1.8%
AHC Mezzanine LLC (Advanstar) **	Media		—	$	1,063	$	166
CA Holding, Inc. (Collect America, Ltd.) Series A **	Consumer Finance		7,961		788		1,592
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), 13.50% PIK, 5/12/14	Education		12,360		23,150		23,715
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), 12.50% PIK (Convertible)	Education		332,500		6,256		6,256
Varietal Distribution Holdings, LLC, 8.00% PIK	Distribution		3,097		4,252		2,300

TOTAL PREFERRED EQUITY				$	35,509	$	34,029

EQUITY — 5.8%
Common Equity/Interests — 5.4%
AB Capital Holdings LLC (Allied Security)	Business Services		2,000,000	$	2,000	$	2,820
Accelerate Parent Corp. (American Tire) **	Distribution		3,125,000		3,125		3,910
A-D Conduit Holdings, LLC (Duraline)	Telecommunications		2,778		2,778		2,847
Altegrity Holding Corp.	Diversified Service		353,399		13,797		15,045
CA Holding, Inc. (Collect America, Ltd.) Series A **	Consumer Finance		25,000		2,500		401
CA Holding, Inc. (Collect America, Ltd.) Series AA **	Consumer Finance		4,294		429		859
Clothesline Holdings, Inc. (Angelica) **	Healthcare		6,000		6,000		3,524
Explorer Coinvest LLC (Booz Allen) **	Consulting Services		430		4,300		7,642
FSC Holdings Inc. (Hanley Wood LLC) **	Media		10,000		10,000		—
Garden Fresh Restaurant Holding, LLC **	Retail		50,000		5,000		9,347
Gryphon Colleges Corporation (Delta Educational Systems, Inc.)**	Education		17,500		175		760
GS Prysmian Co-Invest L.P. (Prysmian Cables & Systems) (2,3) **	Industrial		—		—		266

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands, except shares and warrants)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 150.1%	Industry	Shares		Cost		Fair Value(1)
Common Equity/Interests — (continued)
New Omaha Holdings Co-Invest LP (First Data) **	Financial Services		13,000,000	$	65,000	$	21,315
Penton Business Media Holdings, LLC **	Media		124		4,950		8,505
Pro Mach Co-Investment, LLC **	Machinery		150,000		1,500		6,603
RC Coinvestment, LLC (Ranpak Corp.) **	Packaging		50,000		5,000		6,411
Sorenson Communications Holdings, LLC Class A **	Consumer Services		454,828		45		2,120
Univar Inc.	Distribution		900,000		9,000		10,760
Varietal Distribution Holdings, LLC Class A **	Distribution		28,028		28		—

Total Common Equity/Interests				$	135,627	$	103,135


		Warrants
Warrants – 0.4%
CA Holding, Inc. (Collect America, Ltd.), Common **	Consumer Finance		7,961	$	8		—
Fidji Luxco (BC) S.C.A., Common (FCI) (2) **	Electronics		48,769		491	$	5,252
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), Common **	Education		9,820		98		427
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), Class A-1 Preferred **	Education		45,947		459		863
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), Class B-1 Preferred **	Education		104,314		1,043		1,960

Total Warrants				$	2,099	$	8,502

TOTAL EQUITY				$	137,726	$	111,637

Total Investments in Non-Controlled/ Non-Affiliated Portfolio Companies				$	2,863,683	$	2,868,973

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands, except shares and warrants)

	00Industry 00		00Industry 00		00Industry 00		00Industry 00
INVESTMENTS IN NON-CONTROLLED/AFFILIATED PORTFOLIO COMPANIES — 2.0% (4)	Industry	Par Amount*		Cost		Fair Value (1)
CORPORATE DEBT — 0.6%
Subordinated Debt/Corporate Notes — 0.6%
DSI Renal Inc., 16.00% (10.00% Cash / 6.00% PIK), 4/7/14	Healthcare	$	10,686	$	10,686	$	10,899

TOTAL CORPORATE DEBT				$	10,686	$	10,899


		Shares
EQUITY — 1.4%
Common Equity/Interests – 1.0%
CDSI I Holding Company, Inc. (DSI Renal Inc.) **	Healthcare		9,303	$	9,300	$	19,158

Total Common Equity/Interests				$	9,300	$	19,158


		Warrants
Warrants — 0.4%
CDSI I Holding Company, Inc. Series A (DSI Renal Inc.) **	Healthcare		2,031	$	773	$	2,220
CDSI I Holding Company, Inc. Series B (DSI Renal Inc.) **	Healthcare		2,031		645		1,880
CDSI I Holding Company, Inc. (DSI Renal Inc.) ** §	Healthcare		6,093,750		1,002		3,752

Total Warrants				$	2,420	$	7,852

TOTAL EQUITY				$	11,720	$	27,010

Total Investments in Non-Controlled/Affiliated Portfolio Companies				$	22,406	$	37,909

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands, except shares)


INVESTMENTS IN CONTROLLED PORTFOLIO COMPANIES — 11.3% (5)	Industry	Shares		Cost		Fair Value (1)
CORPORATE DEBT — 1.8%
Subordinated Debt/Corporate Notes — 1.8%
Playpower Holdings Inc., 14.00% PIK, 12/15/15	Leisure Equipment	$	20,000	$	20,000	$	19,600
Playpower, Inc., 12.50% PIK, 12/31/15	Leisure Equipment		15,890		14,699		15,572

Total Subordinated Debt/Corporate Notes				$	34,699	$	35,172

TOTAL CORPORATE DEBT				$	34,699	$	35,172



Preferred Equity — 0.0%
Grand Prix Holdings, LLC Series A, 12.00% PIK (Innkeepers USA)(6)***	Hotels, Motels, Inns & Gaming		2,989,431	$	102,012		—

EQUITY — 9.5%
Common Equity/Interests — 9.5%
AIC Credit Opportunity Fund LLC (7)	Asset Management		—	$	71,740	$	91,280
Generation Brands Holdings, Inc. (Quality Home Brands) **	Consumer Products		750		—		25
Generation Brands Holdings, Inc. Series H (Quality Home Brands) **	Consumer Products		7,500		2,297		245
Generation Brands Holdings, Inc. Series 2L (Quality Home Brands) **	Consumer Products		36,700		11,242		1,201
Grand Prix Holdings, LLC (Innkeepers USA) (6) **	Hotels, Motels, Inns & Gaming		17,335,834		172,664		—
LVI Parent Corp. (LVI Services, Inc.)	Environmental & Facilities Services		14,981		16,096		15,733
Playpower Holdings Inc.	Leisure Equipment		1,000		77,722		72,722

Total Common Equity/Interests				$	351,761	$	181,206

TOTAL EQUITY				$	351,761	$	181,206

Total Investments in Controlled Portfolio Companies				$	488,472	$	216,378

Total Investments — 163.4% (8)				$	3,374,561	$	3,123,260
Liabilities in Excess of Other Assets — (63.4%)							(1,212,028	)

Net Assets — 100.0%						$	1,911,232

(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)	Denominated in Euro (€).

(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, controlling, or holding the power to vote, 5% or more of the outstanding voting securities of the investment. Transactions during the three months ended June 30, 2011 in these Affiliated investments are as follows:

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands)


Name of Issuer	Fair Value at March 31, 2011		Gross Additions		Gross Reductions		Interest/Dividend Income		Fair Value at June 30, 2011
DSI Renal, Inc., 16.00% (10.00% Cash / 6.00% PIK)	$	10,899	$	—	$	—	$	405	$	10,899
CDSI I Holding Company, Inc. (DSI Renal) Common Equity		18,723		—		—		—		19,158
CDSI I Holding Company, Inc. (DSI Renal) Series A Warrant		2,169		—		—		—		2,220
CDSI I Holding Company, Inc. (DSI Renal) Series B Warrant		1,837		—		—		—		1,880
CDSI I Holding Company, Inc. (DSI Renal) Contingent Payment Agreement		3,667		—		—		—		3,752

	$	37,295	$	—	$	—	$	405	$	37,909

(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. Transactions during the three months ended June 30, 2011 in these Controlled investments are as follows:
Name of Issuer	Fair Value at March 31, 2011		Gross Additions		Gross Reductions		Interest/Dividend/ Other Income		Fair Value at June 30, 2011
Playpower Holdings, Inc., 14.00% PIK	$	—	$	20,000	$	—	$	8	$	19,600
Playpower, Inc., 12.50% PIK		—		15,890		—		6		15,572
Grand Prix Holdings, LLC (Innkeepers USA) Series A Preferred(8)		—		—		—		—		—
AIC Credit Opportunity Fund LLC Common Equity(9)		95,212		—		—		2,084		91,280
Generation Brands Holdings, Inc. (Quality Home Brands)Common Equity		8		—		—		—		25
Generation Brands Holdings, Inc. (Quality Home Brands) Series H Common Equity		77		—		—		—		245
Generation Brands Holdings, Inc. (Quality Home Brands) Series 2L Common Equity		379		—		—		—		1,201
Grand Prix Holdings, LLC (Innkeepers USA) Common Equity(8)		—		—		—		—		—
LVI Parent Corp. Common Equity		15,892		—		—		—		15,733
Playpower Holdings Inc. Common Equity		—		77,722		—		—		72,722

	$	111,568	$	113,612	$	—	$	2,098	$	216,378

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2011

(in thousands)

The Company has a 99%, 100%, 27%, 34% and 100% equity ownership interest in Grand Prix Holdings LLC, AIC Credit Opportunity Fund LLC, Generation Brands Holdings, Inc., LVI Parent Corp. and Playpower Holdings Inc., respectively.

(6)	See Note 14.

(7)	See Note 6.

(8)	Aggregate gross unrealized appreciation for federal income tax purposes is $164,347; aggregate gross unrealized depreciation for federal income tax purposes is $478,744. Net unrealized depreciation is $314,397 based on a tax cost of $3,437,657.

¨	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.

*	Denominated in USD unless otherwise noted.

**	Non-income producing security

***	Non-accrual status (see Note 2d)

†

Denote 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, differing interest rate characteristics, among other factors. Such factors are usually considered in the determination of fair values.

§	Position reflects a contingent payment agreement.

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)


Industry Classification	Percentage of Total Investments (at fair value) as of June 30, 2011
Education		9.6%
Diversified Service		9.6%
Healthcare		7.6%
Market Research		6.1%
Distribution		5.1%
Packaging		4.8%
Transportation		4.5%
Insurance		4.4%
Broadcasting & Entertainment		4.4%
Retail		4.4%
Software		4.1%
Asset Management		3.9%
Leisure Equipment		3.4%
Grocery		3.4%
Environmental & Facilities Services		3.1%
Business Services		3.0%
Financial Services		2.5%
Consumer Services		2.3%
Industrial		2.1%
Telecommunications		2.0%
Electronics		1.8%
Shipping		1.6%
Utilities		1.6%
Consumer Finance		1.4%
Logistics		1.2%
Media		1.2%
Consumer Products		0.3%
Consulting Services		0.2%
Machinery		0.2%
Beverages, Food & Tobacco		0.2%
Hotels, Motels, Inns & Gaming		0.0%

Total Investments		100.0%

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS

March 31, 2011

(in thousands)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 147.9%	Industry	Par Amount*		Cost		Fair Value(1)
CORPORATE DEBT — 139.4%
BANK DEBT/SENIOR SECURED LOANS — 51.7%
1st Lien Bank Debt/Senior Secured Loans — 6.9%
Altegrity, Inc., L+600, 2/21/15	Diversified Service	$	12,406	$	12,187	$	12,499
Armored Autogroup Inc., L+425, 11/5/16	Consumer Products		3,491		3,491		3,491
ATI Acquisition Company, L+600, 12/30/14	Education		13,306		12,884		13,839
Brickman Group Holdings, Inc., L+550, 10/14/16	Environmental & Facilities Services		14,963		14,822		15,294
Brock Holdings III, Inc., L+450, 3/16/17	Environmental & Facilities Services		5,000		4,963		5,031
Educate, Inc., L+700, 6/14/14	Education		7,908		7,908		7,868
Insight Pharmaceuticals, LLC, L+500, 2/24/17	Consumer Products		7,500		7,388		7,462
Leslie’s Poolmart, Inc., L+300, 11/21/16	Retail		5,985		5,985		6,034
Multiplan, Inc., L+325, 8/26/17	Business Services		4,808		4,808		4,826
Penton Media, Inc., L+400, 8/1/14	Media		34,917		28,590		28,486
Playpower, Inc., L+950, 6/30/12	Leisure Equipment		15,890		14,433		14,380
RBS Holding Company, LLC, L+500, 3/23/17	Business Services		16,000		15,840		15,860

Total 1st Lien Bank Debt/Senior Secured Loans				$	133,299	$	135,070

2nd Lien Bank Debt/Senior Secured Loans — 44.8%
AB Acquisitions UK Topco 2 Limited (Alliance Boots), GBP L+425, 7/9/16 †	Retail	£	11,400	$	20,193	$	17,725
AB Acquisitions UK Topco 2 Limited (Alliance Boots), E+425, 7/9/16 †	Retail	€	3,961		5,563		5,537
Advantage Sales & Marketing, Inc., L+775, 6/18/18	Grocery	$	60,000		59,494		61,200
Allied Security Holdings, LLC, L+700, 2/2/18	Business Services		51,000		50,527		52,020
Applied Systems, Inc., L+775, 6/8/17	Software		26,500		26,244		26,853
Asurion Corporation, L+650, 7/3/15	Insurance		115,026		114,181		114,307
Brock Holdings III, Inc., L+825, 3/16/18	Environmental & Facilities Services		45,000		44,102		46,350
Clean Earth, Inc., 13.00%, 8/1/14	Environmental & Facilities Services		25,000		25,000		24,875
Datatel, Inc., L+725, 2/19/18	Education		21,000		20,896		21,341
Garden Fresh Restaurant Corp., L+975, 12/11/13	Retail		46,600		46,600		48,091
IPC Systems, Inc., L+525, 6/1/15	Telecommunications		44,250		41,635		42,038
Kronos, Inc., L+575 Cash or L+650 PIK, 6/11/15	Electronics		60,000		60,000		59,600

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 147.9%	Industry	Par Amount*		Cost		Fair Value(1)
2nd Lien Bank Debt/Senior Secured Loans — (continued)
Ozburn-Hessey Holding Company LLC, L+850, 10/8/16	Logistics	$	38,000	$	37,966	$	38,570
Ranpak Corp., 12/27/14 (2) †	Packaging		43,550		38,532		43,550
Ranpak Corp., 12/27/14 (3) †	Packaging	€	21,970		27,767		31,178
Sedgwick Holdings, Inc., L+750, 5/26/17	Business Services	$	25,000		24,657		25,250
Sheridan Holdings, Inc., L+575 Cash of L+650 PIK, 6/15/15	Healthcare		67,847		67,090		67,847
TransFirst Holdings, Inc., L+600 Cash or L+675 PIK, 6/15/15	Financial Services		37,512		36,714		35,749
Valerus Compression Services, LP, 11.50%, 3/26/18	Industrial		40,000		40,000		40,000
Vertafore, Inc., L+825, 10/29/17	Software		75,000		74,282		76,594

Total 2nd Lien Bank Debt/Senior Secured Loans				$	861,443	$	878,675

TOTAL BANK DEBT/SENIOR SECURED LOANS				$	994,742	$	1,013,745

Subordinated Debt/Corporate Notes — 87.7%
AB Acquisitions UK Topco 2 Limited (Alliance Boots), GBP L+650 (GBP L+300 Cash / 3.50% PIK), 7/9/17	Retail	£	49,664	$	93,048	$	77,618
Altegrity Inc., 0.00%, 8/2/16 ¨ †	Diversified Service	$	3,545		1,846		1,846
Altegrity Inc., 11.75%, 5/1/16 ¨ †	Diversified Service		14,639		10,390		15,737
Altegrity Inc., 12.00%, 11/1/15 ¨ †	Diversified Service		100,000		100,000		107,900
Altegrity Inc., 10.50%, 11/1/15 ¨ †	Diversified Service		13,475		12,114		14,385
American Tire Distributors, Inc., 11.50%, 6/1/18 ¨ †	Distribution		25,000		25,000		27,375
American Tire Distributors, Inc., 9.75%, 6/1/17 †	Distribution		10,000		9,887		11,000
Angelica Corporation, 15.00% (12.00% Cash / 3.00% PIK), 2/4/14	Healthcare		60,000		60,000		62,940
ATI Acquisition Company, L+1100, 12/30/15	Education		38,500		37,843		39,559
Avaya Inc., 10.125% Cash or 10.875% PIK, 11/1/15	Telecommunications		7,140		7,176		7,289
Catalina Marketing Corporation, 11.625%, 10/1/17 ¨ †	Grocery		42,175		42,404		47,974
Catalina Marketing Corporation, 10.50%, 10/1/15 ¨ †	Grocery		5,000		5,108		5,425
Ceridian Corp., 12.25% Cash or 13.00% PIK, 11/15/15 †	Diversified Service		55,950		55,792		58,608
Ceridian Corp., 11.25%, 11/15/15 †	Diversified Service		34,300		33,874		35,801
Checkout Holding Corp. (Catalina Marketing), 0.00%, 11/15/15	Grocery		40,000		24,655		26,200
Delta Educational Systems, Inc., 14.20% (13.00% Cash / 1.20% PIK), 5/12/13	Education		19,753		19,464		20,286
Dura-Line Merger Sub, Inc., 14.25%(11.25% Cash / 3.00% PIK), 9/22/14	Telecommunications		42,654		42,179		42,654
Exova Limited, 10.50%, 10/15/18	Market Research	£	18,000		28,823		30,296
First Data Corporation, 12.625%, 1/15/21 †	Financial Services	$	9,219		7,971		10,053
First Data Corporation, 9.875%, 9/24/15 †	Financial Services		2,061		1,843		2,112

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 147.9%	Industry	Par Amount*		Cost		Fair Value(1)
Subordinated Debt/Corporate Notes — (continued)
First Data Corporation, 8.25%, 1/15/21 †	Financial Services	$	9,219	$	8,020	$	9,192
FleetPride Corporation, 11.50%, 10/1/14 ¨ †	Transportation		47,500		47,500		47,737
Fox Acquisition Sub LLC, 13.375%, 7/15/16 ¨	Broadcasting & Entertainment		26,125		25,927		28,999
FPC Holdings, Inc. (FleetPride Corporation), 14.00%, 6/30/15 ¨ †	Transportation		37,846		38,670		39,170
General Nutrition Centers, Inc., 10.75%, 3/15/15 †	Retail		24,500		24,674		24,500
General Nutrition Centers, Inc., L+450 Cash or L+525 PIK, 3/15/14 †	Retail		12,275		12,270		12,275
Hub International Holdings, 10.25%, 6/15/15 ¨	Insurance		36,232		34,990		37,772
Intelsat Bermuda Ltd., 11.25%, 2/4/17	Broadcasting & Entertainment		90,000		92,060		98,415
Laureate Education, Inc., 12.00%, 8/15/17 ¨	Education		53,540		52,244		58,760
MW Industries, Inc., 14.50%(13.00% Cash / 1.50% PIK), 5/1/14	Manufacturing		62,341		61,686		62,341
N.E.W. Holdings I, LLC, L+750, 3/23/17	Consumer Services		45,111		45,227		46,464
Playpower Holdings Inc., 15.50% PIK, 12/31/12 ¨ ***	Leisure Equipment		112,831		112,831		54,176
Ranpak Holdings, Inc., 15.00% PIK, 12/27/15	Packaging		78,501		78,501		80,071
Renal Advantage Holdings, Inc., 12.00%, 6/17/17	Healthcare		32,103		31,713		32,424
Sorenson Communications, Inc., 10.50%, 2/1/15 ¨	Consumer Services		32,500		32,000		24,375
SquareTwo Financial Corp. (Collect America, Ltd.), 11.625%, 4/1/17 ¨	Consumer Finance		40,000		39,373		40,900
The ServiceMaster Company, 10.75% Cash or 11.50% PIK, 7/15/15 ¨	Diversified Service		52,173		52,751		55,640
TL Acquisitions, Inc. (Thomson Learning), 13.25%, 7/15/15¨†	Education		82,500		82,845		86,178
TL Acquisitions, Inc. (Thomson Learning), 10.50%, 1/15/15¨†	Education		22,000		20,943		22,477
Univar Inc., 12.00%, 6/30/18	Distribution		78,750		78,750		81,506
US Foodservice, 10.25%, 6/30/15 ¨	Beverage, Food & Tobacco		81,543		72,918		86,027
U.S. Renal Care, Inc., 13.25%(11.25% Cash / 2.00% PIK), 5/24/17	Healthcare		20,336		20,336		21,353
Varietal Distribution, 10.75%, 6/30/17	Distribution	€	1,127		1,392		1,609
Varietal Distribution, 10.75%, 6/30/17	Distribution	$	22,204		21,715		22,338

Total Subordinated Debt/Corporate Notes				$	1,708,753	$	1,719,757

TOTAL CORPORATE DEBT				$	2,703,495	$	2,733,502

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands, except shares)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 147.9%	Industry	Par Amount*		Cost		Fair Value(1)
COLLATERALIZED LOAN OBLIGATIONS — 1.4%
Babson CLO Ltd., Series 2008-2A Class E, L+975, 7/15/18 ¨	Asset Management	$	11,000	$	10,158	$	11,592
Babson CLO Ltd., Series 2008-1A Class E, L+550, 7/20/18 ¨	Asset Management		10,150		7,698		8,788
Westbrook CLO Ltd., Series 2006-1A, L+370, 12/20/20 ¨	Asset Management		11,000		6,883		8,390

TOTAL COLLATERALIZED LOAN OBLIGATIONS				$	24,739	$	28,770


		Shares
PREFERRED EQUITY — 1.7%
AHC Mezzanine LLC (Advanstar) **	Media		—	$	1,063	$	220
CA Holding, Inc. (Collect America, Ltd.) Series A **	Consumer Finance		7,961		788		1,592
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), 13.50% PIK, 5/12/14	Education		12,360		22,330		22,943
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), 12.50% PIK (Convertible)	Education		332,500		6,067		6,067
Varietal Distribution Holdings, LLC, 8.00% PIK	Distribution		3,097		4,169		2,310

TOTAL PREFERRED EQUITY				$	34,417	$	33,132

EQUITY — 5.4%
Common Equity/Interests — 5.0%
AB Capital Holdings LLC (Allied Security)	Business Services		2,000,000	$	2,000	$	2,650
Accelerate Parent Corp. (American Tire)	Distribution		3,125,000		3,125		4,110
A-D Conduit Holdings, LLC (Duraline) **	Telecommunications		2,778		2,778		5,007
Altegrity Holding Corp.	Diversified Service		353,399		13,797		14,749
CA Holding, Inc. (Collect America, Ltd.) Series A **	Consumer Finance		25,000		2,500		149
CA Holding, Inc. (Collect America, Ltd.) Series AA **	Consumer Finance		4,294		429		859
Clothesline Holdings, Inc. (Angelica) **	Healthcare		6,000		6,000		5,131
Explorer Coinvest LLC (Booz Allen) **	Consulting Services		430		4,300		7,202
FSC Holdings Inc. (Hanley Wood LLC) **	Media		10,000		10,000		—
Garden Fresh Restaurant Holding, LLC **	Retail		50,000		5,000		8,734
Gryphon Colleges Corporation (Delta Educational Systems, Inc.)**	Education		17,500		175		573
GS Prysmian Co-Invest L.P. (Prysmian Cables & Systems) (4,5) **	Industrial		—		—		247

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands, except shares and warrants)


INVESTMENTS IN NON-CONTROLLED/NON AFFILIATED PORTFOLIO COMPANIES — 147.9%	Industry	Shares		Cost		Fair Value(1)
Common Equity/Interests — (continued)
New Omaha Holdings Co-Invest LP (First Data) **	Financial Services		13,000,000	$	65,000	$	20,024
Penton Business Media Holdings, LLC **	Media		124		4,950		6,049
Pro Mach Co-Investment, LLC **	Machinery		150,000		1,500		4,558
RC Coinvestment, LLC (Ranpak Corp.) **	Packaging		50,000		5,000		6,008
Sorenson Communications Holdings, LLC Class A **	Consumer Services		454,828		46		2,030
Univar Inc.	Distribution		900,000		9,000		9,400
Varietal Distribution Holdings, LLC Class A **	Distribution		28,028		28		—

Total Common Equity/Interests				$	135,628	$	97,480


		Warrants
Warrants — 0.4%
CA Holding, Inc. (Collect America, Ltd.), Common **	Consumer Finance		7,961	$	8	$	—
Fidji Luxco (BC) S.C.A., Common (FCI) (4) **	Electronics		48,769		491		5,351
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), Common **	Education		9,820		98		322
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), Class A-1 Preferred **	Education		45,947		459		837
Gryphon Colleges Corporation (Delta Educational Systems, Inc.), Class B-1 Preferred **	Education		104,314		1,043		1,901

Total Warrants				$	2,099	$	8,411

TOTAL EQUITY				$	137,727	$	105,891

Total Investments in Non-Controlled/ Non-Affiliated Portfolio Companies				$	2,900,378	$	2,901,295

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands, except shares and warrants)


INVESTMENTS IN NON-CONTROLLED/AFFILIATED PORTFOLIO COMPANIES — 1.9%(6)	Industry	Par Amount*		Cost		Fair Value(1)
CORPORATE DEBT — 0.6%
Subordinated Debt/Corporate Notes — 0.6%
DSI Renal Inc., 17.00% (10.00% Cash / 7.00% PIK), 4/7/14	Healthcare	$	10,686	$	10,686	$	10,899

TOTAL CORPORATE DEBT				$	10,686	$	10,899


		Shares
EQUITY — 1.3%
Common Equity/Interests — 0.9%
CDSI I Holding Company, Inc. (DSI Renal Inc.) **	Healthcare		9,303	$	9,300	$	18,723

Total Common Equity/Interests				$	9,300	$	18,723


		Warrants
Warrants — 0.4%
CDSI I Holding Company, Inc. Series A (DSI Renal Inc.) **	Healthcare		2,031	$	773	$	2,169
CDSI I Holding Company, Inc. Series B (DSI Renal Inc.) **	Healthcare		2,031		645		1,837
CDSI I Holding Company, Inc. (DSI Renal Inc.) ** §	Healthcare		6,093,750		1,003		3,667

Total Warrants				$	2,421	$	7,673

TOTAL EQUITY				$	11,721	$	26,396

Total Investments in Non-Controlled/Affiliated Portfolio Companies				$	22,407	$	37,295

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands, except shares)


INVESTMENTS IN CONTROLLED PORTFOLIO COMPANIES — 5.7%(7)	Industry	Shares		Cost		Fair Value(1)
Preferred Equity — 0.0%
Grand Prix Holdings, LLC Series A, 12.00% PIK (Innkeepers USA)(8)***	Hotels, Motels, Inns & Gaming		2,989,431	$	102,012	$	—

EQUITY
Common Equity/Interests — 5.7%
AIC Credit Opportunity Fund LLC (9)	Asset Management		—	$	71,740	$	95,212
Generation Brands Holdings, Inc. (Quality Home Brands) **	Consumer Products		750		—		8
Generation Brands Holdings, Inc. Series H (Quality Home Brands) **	Consumer Products		7,500		2,297		77
Generation Brands Holdings, Inc. Series 2L (Quality Home Brands) **	Consumer Products		36,700		11,242		379
Grand Prix Holdings, LLC (Innkeepers USA) (8) **	Hotels, Motels, Inns & Gaming		17,335,834		172,664		—
LVI Parent Corp. (LVI Services, Inc.)	Environmental & Facilities Services		14,981		16,096		15,892

Total Common Equity/Interests				$	274,039	$	111,568

TOTAL EQUITY				$	274,039	$	111,568

Total Investments in Controlled Portfolio Companies				$	376,051	$	111,568

Total Investments — 155.5%(10)				$	3,298,836	$	3,050,158
Liabilities in Excess of Other Assets — (55.5%)							(1,089,127	)

Net Assets — 100.0%						$	1,961,031

(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)	Position is held across five US Dollar-denominated tranches with stated coupons between L+650 and L+850.

(3)	Position is held across three Euro-denominated tranches with stated coupons between E+700 and E+800.

(4)	Denominated in Euro (€).

(5)	The Company is the sole Limited Partner in GS Prysmian Co-Invest L.P.

(6)

Denotes investments in which we are an “Affiliated Person”, as defined in the Investment Company Act of 1940 (“1940 Act’), due to owning, controlling, or holding the power to vote, 5% or more of the outstanding voting securities of the investment. Transactions during the fiscal year ended March 31, 2011 in these Affiliated investments are as follows:

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands)


Name of Issuer	Fair Value at March 31, 2010		Gross Additions		Gross Reductions		Interest/Dividend Income		Fair Value at March 31, 2011
Gray Wireline Service, Inc. 1^st Out	$	1,000	$	—	$	1,000	$	57	$	—
Gray Wireline Service, Inc. 2^nd Out		59,251		485		78,820		8,494		—
DSI Renal, Inc., 17.00%		10,057		825		—		1,745		10,899
CDSI I Holding Company, Inc. (DSI Renal) Common Equity		10,206		—		—		—		18,723
Gray Energy Services, LLC Class H Common Equity		—		—		806		—		—
CDSI I Holding Company, Inc. (DSI Renal) Series A Warrant		854		—		—		—		2,169
CDSI I Holding Company, Inc. (DSI Renal) Series B Warrant		693		—		—		—		1,837
CDSI I Holding Company, Inc. (DSI Renal) Contingent Payment Agreement		1,075		—		—		—		3,667
Gray Holdco, Inc. Warrant		—		—		2,654		—		—

	$	83,136	$	1,310	$	83,280	$	10,296	$	37,295


(7) 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. Transactions during the fiscal year ended March 31, 2011 in these Controlled investments are as follows:

Name of Issuer	Fair Value at March 31, 2010		Gross Additions		Gross Reductions		Interest/ Dividend/ Other Income		Fair Value at March 31, 2011
Grand Prix Holdings, LLC (Innkeepers USA) Series A Preferred(8)	$	5,268	$	—	$	—	$	—	$	—
AIC Credit Opportunity Fund LLC Common Equity(9)		73,514		1,700		—		12,334		95,212
Generation Brands Holdings, Inc. (Quality Home Brands)Common Equity		230		—		—		—		8
Generation Brands Holdings, Inc. (Quality Home Brands) Series H Common Equity		2,297		—		—		—		77
Generation Brands Holdings, Inc. (Quality Home Brands) Series 2L Common Equity		11,242		—		—		—		379
Grand Prix Holdings, LLC (Innkeepers USA) Common Equity(8)		—		—		—		—		—
LVI Parent Corp. Common Equity		—		16,096		—		110		15,892

	$	92,551	$	17,796	$	—	$	12,444	$	111,568

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)

March 31, 2011

(in thousands)

The Company has a 99%, 100%, 27% and 34% equity ownership interest in Grand Prix Holdings LLC, AIC Credit Opportunity Fund LLC, Generation Brands Holdings, Inc. and LVI Parent Corp., respectively.

(8)	See note 14.

(9)	See note 6.

(10)	Aggregate gross unrealized appreciation for federal income tax purposes is $202,082; aggregate gross unrealized depreciation for federal income tax purposes is $454,897. Net unrealized depreciation is $252,815 based on a tax cost of $3,302,973.

¨	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.

*	Denominated in USD unless otherwise noted.

**	Non-income producing security

***	Non-accrual status (see note 2d)

†

Denote 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, differing interest rate characteristics, among other factors. Such factors are usually considered in the determination of fair values.

§	Position reflects a contingent payment agreement.

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (continued)


Industry Classification		Percentage of Total Investments (at fair value) as of March 31, 2011
Diversified Service		10.4%
Education		9.9%
Healthcare		7.5%
Retail		6.6%
Packaging		5.3%
Distribution		5.2%
Insurance		5.0%
Grocery		4.6%
Broadcasting & Entertainment		4.2%
Asset Management		4.1%
Environmental & Facilities Services		3.5%
Software		3.4%
Business Services		3.3%
Telecommunications		3.2%
Transportation		2.8%
Beverage, Food & Tobacco		2.8%
Financial Services		2.5%
Consumer Services		2.4%
Leisure Equipment		2.3%
Electronics		2.1%
Manufacturing		2.0%
Consumer Finance		1.4%
Industrial		1.3%
Logistics		1.3%
Media		1.1%
Market Research		1.0%
Consumer Products		0.4%
Consulting Services		0.2%
Machinery		0.2%
Hotels, Motels, Inns & Gaming		0.0%

Total Investments		100.0%

See notes to financial statements.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited)

(in thousands except share and per share amounts)

Note 1. Organization

Apollo Investment Corporation, a Maryland corporation organized on February 2, 2004, is a closed-end, 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 primary investment objective is to generate current income and capital appreciation. We invest primarily in the form of subordinated debt, as well as by making investments in certain senior secured loans and/or equity in private middle-market companies. From time to time, we may also invest in the securities of public companies.

Apollo Investment commenced operations on April 8, 2004 receiving net proceeds of $870,000 from its initial public offering selling 62 million shares of common stock at a price of $15.00 per share.

Note 2. Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 presentation of financial statements for the interim period, have been included.

The significant accounting policies consistently followed by Apollo Investment are:

(a) Security transactions are accounted for on the trade date;

(b) Under procedures established by our board of directors, we value investments, including certain senior secured debt, subordinated 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 Level 3 categorized assets. Investments maturing in 60 days or less are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value. 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.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our board of directors has approved a multi-step valuation process each quarter, as described below:

(1) our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our investment adviser responsible for the portfolio investment;

(2) preliminary valuation conclusions are then documented and discussed with senior management of our investment adviser;

(3) independent valuation firms engaged by our board of directors conduct independent appraisals and review our investment adviser’s preliminary valuations and make their own independent assessment;

(4) the audit committee of the board of directors reviews the preliminary valuation of our investment adviser and that of 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 the fair value of each investment in our portfolio in good faith based on the input of our investment adviser, the respective independent valuation firm 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, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When readily available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the quarter ended June 30, 2011, there has been no change to the Company’s valuation techniques and related inputs considered in the valuation process.

Accounting Standards Codification (“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.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

Accounting Standards Update No. 2010-06, Improving Disclosure about Fair Value Measurements was released in January 2010 and is effective for periods beginning after December 15, 2009, except for separate disclosures for purchases, sales, issuances, and settlements, as applicable, in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. This update improves financial statement disclosure around transfers in and out of level 1 and 2 fair value measurements, around valuation techniques and inputs and around other related disclosures. Transfers between levels, if any, are recognized at the end of the reporting period. See certain additional disclosures in note 6, as well as in “Valuation of Portfolio Investments” within our Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” (“ASU 2011-04”) which results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. The Company is currently assessing the potential impact that the adoption of ASU 2011-04 may have on the Company’s financial position and results of operations.

(d) 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 is 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 again believes that PIK is expected to be realized. For the three months ended June 30, 2011, accrued PIK totaled $3.5 million, on total investment income of $94.6 million. 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. Structuring fees are recorded as other income when earned. 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.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

(e) The Company intends to comply with the applicable provisions of the Code pertaining to regulated investment companies to 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 as required.

(f) 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 accounting principles generally accepted in the United States of America.

(g) 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.

(h) In accordance with Regulation S-X and ASC 810—Consolidation, 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 generally will not consolidate special purpose entities through which the special purpose entity acquires and holds investments subject to financing with third parties. At June 30, 2011, the Company did not have any subsidiaries or controlled operating companies that were consolidated. See note 6.

(i) 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. Such fluctuations are included with the net realized and unrealized gain or loss from investments. 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.

(j) The Company may enter into forward exchange contracts in order to hedge against foreign currency risk. These contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when contracts are settled.

(k) The Company records origination and other expenses related to its debt obligations as prepaid assets. These expenses are deferred and amortized using the straight-line method over the stated life of the obligation which closely approximates the effective yield method.

(l) The Company records expenses related to shelf filings and applicable offering costs as prepaid assets. These expenses are charged as a reduction of capital upon utilization, in accordance with the ASC 946-20-25.

(m) 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.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

Note 3. Agreements

Apollo Investment 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 Apollo Investment’s board of directors, will manage the day-to-day operations of, and provide investment advisory services to, Apollo Investment. For providing these services, the Investment Adviser receives a fee from Apollo Investment, consisting of two components—a base management fee and a performance-based incentive fee. The base management fee is determined by taking the average value of Apollo Investment’s gross assets 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 Apollo Investment’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies accrued during the calendar quarter, minus Apollo Investment’s operating expenses for the quarter (including the base management fee, any expenses payable under an administration agreement (the “Administration Agreement”) between Apollo Investment 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 Apollo Investment’s net assets at the end of the immediately preceding calendar quarter, is compared to the rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee.

Apollo Investment pays the Investment Adviser an incentive fee with respect to Apollo Investment’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Apollo Investment’s pre-incentive fee net investment income does not exceed 1.75%, which we commonly refer to as the performance threshold; (2) 100% of Apollo Investment’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds 1.75% but does not exceed 2.1875% in any calendar quarter; and (3) 20% of the amount of Apollo Investment’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro rated for any period of less than three months. 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 Apollo Investment’s 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 Apollo Investment’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation 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 hypothetical capital gains incentive fee based upon net realized capital gains and unrealized capital appreciation and depreciation on investments held at the end of each period. The accrual of this hypothetical capital gains incentive fee assumes all unrealized capital appreciation and depreciation is realized in order to reflect a hypothetical capital gains incentive fee that would be payable to the Investment Adviser at each measurement date. There was no such required accrual under GAAP for the fiscal quarters ended June 30, 2011 and 2010. It should be noted that a fee so calculated and accrued is not payable under the Investment Advisers Act of 1940 (“Advisers Act”) or Investment Advisory Agreement, and would not be paid based upon such

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

computation of capital gains incentive fees in subsequent periods. Amounts actually paid to the Investment Adviser are consistent with the Advisers Act and formula reflected in the Investment Advisory Agreement which specifically excludes consideration of unrealized capital appreciation.

For the three months ended June 30, 2011 and 2010, the Company recognized $15,929 and $14,554, respectively, in base management fees and $8,381 and $10,207, respectively, in performance-based incentive fees. The fees for the three months ended June 30, 2011 reflect a reduction due to a prior payment of an unearned portion of the fees to the Investment Adviser of $2,783.

Apollo Investment has also entered into an Administration Agreement with the Administrator under which the Administrator provides administrative services for Apollo Investment. For providing these services, facilities and personnel, Apollo Investment reimburses the Administrator for Apollo Investment’s allocable portion of overhead and other expenses incurred by the Administrator and requested to be reimbursed in performing its obligations under the Administration Agreement, including rent and Apollo Investment’s allocable portion of its chief financial officer and chief compliance officer and their respective staffs that are requested to be reimbursed. The Administrator will also provide, on Apollo Investment’s behalf, managerial assistance to those portfolio companies to which Apollo Investment is required to provide such assistance. For the fiscal quarters ended June 30, 2011 and 2010, the Company recognized expenses under the Administration Agreement of $887 and $1,396, respectively.

Note 4. Net Asset Value Per Share

At June 30, 2011, the Company’s total net assets and net asset value per share were $1,911,232 and $9.76, respectively. This compares to total net assets and net asset value per share at March 31, 2011 of $1,961,031 and $10.03, respectively.

Note 5. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share, pursuant to ASC 260-10, for the three months ended June 30, 2011 and June 30, 2010, respectively:


	Three months ended June 30,
	2011			2010
Earnings per share — basic
Numerator for increase (decrease) in net assets per share:	$	56		$	(84,310	)
Denominator for basic weighted average shares:		195,900,461			187,774,509
Basic earnings (loss) per share:		0.00			(0.45	)

Earnings per share — diluted
Numerator for increase (decrease) in net assets per share:	$	56		$	(84,310	)
Adjustment for interest on convertible notes and for incentive fees, net		2,575			—

Numerator for increase (decrease) in net assets per share, as adjusted	$	2,631		$	(84,310	)
Denominator for weighted average shares, as adjusted for dilutive effect of convertible notes:		210,448,561			187,774,509
Diluted earnings (loss) per share:		0.00	*		(0.45	)

*	In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. For the three months ended June 30, 2011, anti-dilution would total $0.01.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

Note 6. Investments

AIC Credit Opportunity Fund LLC—We own 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 owns the special purpose entity AIC (FDC) Holdings LLC (“Apollo FDC”). Through AIC Holdco, effective in June 2008 we invested $39,500 in Apollo FDC. Apollo FDC purchased a Junior Profit-Participating Note due 2013 in principal amount of $39,500 (the “Junior Note”) from Apollo I Trust (the “Trust”). The Trust also issued a Senior Floating Rate Note due 2013 (the “Senior Note”) to an unaffiliated third party (“FDC Counterparty”) in principal amount of $39,500 paying interest at 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 Reference Obligation”) due 2016 and paying interest at 11.25% per year. Under its Junior Note, Apollo FDC is generally entitled to the net interest and other proceeds due under the FDC Reference Obligation after payment of interest due under the Senior Notes, as described above. In addition, Apollo FDC is entitled to 100% of any realized appreciation in the FDC Reference Obligation and, since the Senior Note is a non-recourse obligation, Apollo FDC is exposed up to the amount of its investment in the Junior Note plus any additional margin we decide to post, if any, during the term of the financing.

AIC (TXU) Holdings LLC (“Apollo TXU”) is a special purpose entity wholly owned by AIC Holdco. Through AIC Holdco, effective in June 2008, we invested $11,375 in Apollo TXU, which 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 with an unaffiliated third party expiring on October 10, 2013. Pursuant to such delayed drawn term loan, Apollo TXU pays interest at Libor plus 1.5% and generally receives all proceeds due under the delayed draw term loan of TXU (the “TXU Reference Obligation”). Like Apollo FDC, Apollo TXU is entitled to 100% of any realized appreciation in the TXU Reference Obligation and, since the total return swap is a non-recourse obligation, Apollo TXU is exposed up to the amount of its investment in the total return swap, plus any additional margin we decide to post, if any, during the term of the financing.

AIC (Boots) Holdings, LLC (“Apollo Boots”) is a special purpose entity wholly owned by AIC Holdco. Through AIC Holdco, effective in September 2008, we invested $10,022 equivalent, in 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 Reference Obligations”), 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 matures in September 2013 and pays 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 Reference Obligations pay interest at the rate of LIBOR plus 3% per year and mature in June 2015.

We do not consolidate AIC Holdco or its wholly owned subsidiaries and accordingly only the value of our investment in AIC Holdco is included on our statements of assets and liabilities. The Senior Note, total return swap and Acquisition Loan are non-recourse to AIC Holdco, its subsidiaries and us and have standard events of default including failure to pay contractual amounts when due and failure by each of the underlying Apollo special purpose entities to provide additional credit support, sell assets or prepay a portion of its obligations if the value of the FDC Reference Obligation, the TXU Reference Obligation or the Boots Reference Obligation, as applicable, declines below specified levels. We may unwind any of these transactions at any time without penalty. From time to time we may provide additional capital to AIC Holdco for purposes of funding margin calls under one or more of the transactions described above among other reasons. During the fiscal year ended March 31, 2009, we provided $18,480 in additional capital to AIC Holdco. During the fiscal year ended

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

March 31, 2010, $9,336 of net capital was returned to us from AIC Holdco. During the fiscal year ended March 31, 2011, $1,700 of net capital was provided to AIC Holdco. During the three months ended June 30, 2011, no additional capital was provided to or returned from AIC Holdco.

Investments and cash equivalents consisted of the following as of June 30, 2011 and March 31, 2011.


	June 30, 2011				March 31, 2011
	Cost		Fair Value		Cost		Fair Value
Bank Debt/Senior Secured Loans	$	994,060	$	1,005,268	$	994,742	$	1,013,745
Subordinated Debt/Corporate Notes		1,716,915		1,735,116		1,719,439		1,730,656
Collateralized Loan Obligations		24,858		28,994		24,739		28,770
Preferred Equity		137,521		34,029		136,429		33,132
Common Equity/Interests		496,688		303,499		418,967		227,771
Warrants		4,519		16,354		4,520		16,084

Total Investments	$	3,374,561	$	3,123,260	$	3,298,836	$	3,050,158
Cash Equivalents		—		—		—		—

Total Investments and Cash Equivalents	$	3,374,561	$	3,123,260	$	3,298,836	$	3,050,158

At June 30, 2011, our investments and cash equivalents were categorized as follows in the fair value hierarchy for ASC 820 purposes:


			Fair Value Measurement at Reporting Date Using:
Description	June 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Bank Debt/Senior Secured Loans	$	1,005,268	$	—	$	—	$	1,005,268
Subordinated Debt/Corporate Notes		1,735,116		—		—		1,735,116
Collateralized Loan Obligations		28,994		—		—		28,994
Preferred Equity		34,029		—		—		34,029
Common Equity/Interests		303,499		—		—		303,499
Warrants		16,354		—		—		16,354

Total Investments	$	3,123,260	$	—	$	—	$	3,123,260
Cash Equivalents		—		—		—		—

Total Investments and Cash Equivalents	$	3,123,260	$	—	$	—	$	3,123,260

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

At March 31, 2011, our investments and cash equivalents were categorized as follows in the fair value hierarchy for ASC 820 purposes:


			Fair Value Measurement at Reporting Date Using:
Description	March 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Bank Debt/Senior Secured Loans	$	1,013,745	$	—	$	—	$	1,013,745
Subordinated Debt/Corporate Notes		1,730,656		—		—		1,730,656
Collateralized Loan Obligations		28,770		—		—		28,770
Preferred Equity		33,132		—		—		33,132
Common Equity/Interests		227,771		—		—		227,771
Warrants		16,084		—		—		16,084

Total Investments	$	3,050,158	$	—	$	—	$	3,050,158
Cash Equivalents		—		—		—		—

Total Investments and Cash Equivalents	$	3,050,158	$	—	$	—	$	3,050,158

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 June 30, 2011.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
	Bank Debt / Senior Secured Loans			Subordinated Debt/Corporate Notes			Collateralized Loan Obligations		Preferred Equity			Common Equity/ Interests			Warrants		Total
Beginning Balance, March 31, 2011	$	1,013,745		$	1,730,656		$	28,770	$	33,132		$	227,771		$	16,084	$	3,050,158
Total realized gains or losses included in earnings		6,556			(50,884	)		—		—			217			—		(44,111	)
Total unrealized gains or losses included in earnings		(7,779	)		7,051			104		(195	)		(1,994	)		270		(2,543	)
Purchases, including capitalized PIK(1)		316,089			450,109			120		1,092			77,722			—		845,132
Sales		(323,343	)		(401,816	)		—		—			(217	)		—		(725,376	)
Transfer out of Level 3(2)		—			—			—		—			—			—		—

Ending Balance, June 30, 2011	$	1,005,268		$	1,735,116		$	28,994	$	34,029		$	303,499		$	16,354	$	3,123,260

The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations.	$	(1,014	)	$	(34,065	)	$	104	$	(195	)	$	(1,994	)	$	270	$	(36,894	)

(1)	Includes accretion of discount and amortization of premiums of approximately $1,161, $2,876, $120, $48, $0, $0, and $4,205, respectively.

(2)	There were also no transfers into or out of Level 1 or Level 2 fair value measurements during the period shown.

*	Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)


Accumulated PIK interest activity for the three months ended June 30, 2011:
	Three Months Ended
	June 30, 2011
PIK balance at beginning of period	$	165,651,145
Gross PIK interest capitalized		5,117,571
Adjustments due to loan exits		(60,109,351	)
PIK interest received in cash		(49,337,353	)

PIK balance at end of period	$	61,322,012

The following chart shows the components of change in our investments categorized as Level 3, for the three months ended June 30, 2010.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)*
	Bank Debt / Senior Secured Loans			Subordinated Debt/Corporate Notes			Collateralized Loan Obligations			Preferred Equity			Common Equity/ Interests			Warrants		Total
Beginning Balance, March 31, 2010	$	843,098		$	1,659,504		$	25,866		$	33,868		$	281,009		$	10,235	$	2,853,580
Total realized gains or losses included in earnings		760			10			56			—			—			—		826
Total unrealized gains or losses included in earnings		(11,205	)		(96,463	)		(964	)		(4,415	)		(25,643	)		714		(137,976	)
Purchases, including capitalized PIK(1)		145,450			93,202			105			967			4,825			—		244,549
Sales		(60,598	)		(51,869	)		(216	)		—			—			—		(112,683	)
Transfer in and/or out of Level 3(2)		—			—			—			—			—			—		—

Ending Balance, June 30, 2010	$	917,505		$	1,604,384		$	24,847		$	30,420		$	260,191		$	10,949	$	2,848,296

The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to our Level 3 assets still held at the reporting date and reported within the net change in unrealized gains or losses on investments in our Statement of Operations.	$	(10,943	)	$	(95,323	)	$	(949	)	$	(4,415	)	$	(25,643	)	$	714	$	(136,559	)

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

(1)	Includes accretion of discount and amortization of premiums of approximately $980, $6,233, $105, $47, $0, $0, and $7,365, respectively.

(2)	There were also no transfers into or out of Level 1 or Level 2 fair value measurements during the period shown.

*	Pursuant to fair value measurement and disclosure guidance, the Company currently categorizes investments by class as shown above.

Note 7. Foreign Currency Transactions and Translations

At June 30, 2011, the Company had outstanding non-US borrowings on its multicurrency revolving credit facility (the “Facility”) denominated in Euros and British Pounds. Unrealized appreciation or depreciation on these outstanding borrowings is indicated in the table below:


Foreign Currency	Local Currency		Original Borrowing Cost		Current Value		Reset Date		Unrealized Appreciation (Depreciation)
British Pound	£	18,239	$	29,709	$	29,282		07/13/2011	$	427
Euro	€	9,098		13,195		13,191		07/13/2011		4
British Pound	£	22,000		35,870		35,320		07/20/2011		550
Euro	€	13,000		18,743		18,848		07/20/2011		(105	)
British Pound	£	30,218		48,037		48,514		07/27/2011		(477	)
Euro	€	47,218		64,338		68,458		07/29/2011		(4,120	)
British Pound	£	36,258		58,093		58,211		07/29/2011		(118	)

			$	267,985	$	271,824			$	(3,839	)

At March 31, 2011, the Company had outstanding non-US borrowings on its multicurrency revolving credit facility denominated in Euros and British Pounds. Unrealized appreciation or depreciation on these outstanding borrowings is indicated in the table below:


Foreign Currency	Local Currency		Original Borrowing Cost		Current Value		Reset Date		Unrealized Appreciation (Depreciation)
British Pound	£	2,202	$	3,631	$	3,530		04/13/2011	$	101
British Pound	£	6,047		9,476		9,694		04/13/2011		(218	)
British Pound	£	10,989		17,607		17,615		04/13/2011		(8	)
Euro	€	9,098		11,936		12,913		04/13/2011		(977	)
British Pound	£	7,266		11,978		11,647		04/26/2011		331
British Pound	£	19,953		31,265		31,983		04/26/2011		(718	)
British Pound	£	36,258		58,093		58,120		04/28/2011		(27	)
Euro	€	30,018		39,380		42,604		04/28/2011		(3,224	)

			$	183,366	$	188,106			$	(4,740	)

Note 8. Expense Offset Arrangement

The Company benefits from an expense offset arrangement with JPMorgan Chase Bank, N.A. (“custodian bank”) whereby the Company earns credits on any uninvested US dollar cash balances held by the custodian bank.

These credits are applied by the custodian bank as a reduction of the monthly custody fees charged to the Company. The total amount of credits earned during the three months ended June 30, 2011 and June 30, 2010, were $0 and $0, respectively.

APOLLO INVESTMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)

(in thousands except share and per share amounts)

Note 9. Cash Equivalents

There were $0 and $0 of cash equivalents held at June 30, 2011 and March 31, 2011, respectively.

Note 10. Repurchase Agreements

The Company may enter into repurchase agreements as part of its investment program. The Company’s custodian takes possession of collateral pledged by the counterparty. The collateral is marked-to-market daily to ensure that the value, plus accrued interest, is at least equal to the repurchase price. In the event of default of the obligor to repurchase, the Company has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. There were no repurchase agreements outstanding at June 30, 2011 or March 31, 2011.

Note 11. Financial Highlights

The following is a schedule of financial highlights for the three months ended June 30, 2011 and the year ended March 31, 2011:


	Three months ended June 30, 2011 (unaudited)			Year ended March 31, 2011
Per Share Data:
Net asset value, beginning of period	$	10.03		$	10.06

Net investment income		0.24			0.99
Net realized and unrealized gain (loss)		(0.23	)		(0.05	)

Net increase in net assets resulting from operations		0.01			0.94
Dividends to stockholders (1)		(0.28	)		(1.13	)
Effect of anti-dilution (dilution)		—	*		0.16
Offering costs*		—		<

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