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 quarterly period ended December 31, 2020 OR ¨ 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) (State or other jurisdiction of incorporation or organization) (I.R.S. Employe ...

APOLLO APOLLO INVESTMENT CORPORATION Second Quarter Fiscal Year 2021 Earnings Three Months Ended September 30, 2020 November 5, 2020 Disclaimers, Definitions, and Important Notes Forward-Looking Statements We make forward-looking statements in this presentation and other filings we make with the Securities and Exchange Commission ("SEC") within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements ...

Apollo Investment Corp (AINV) Q2 2021 Earnings Conference Call November 5, 2020 5:00 PM ET Company Participants Elizabeth Besen - IR Manager Howard Widra - CEO & Director Tanner Powell - President Gregory Hunt - CFO & Treasurer Conference Call Participants Kenneth Lee - RBC Capital Markets Kyle Joseph - Jefferies Matthew Tjaden - Raymond James & Associates Finian O'Shea - Wells Fargo Securities Operator Good afternoon, and welcome to the Apollo Investment Corporation's Earnings Conference Call for the perio ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the quarterly period ended September 30, 2020 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 814-00646 APOLLO INVESTMENT CORPORATION FORM 10-Q Washington, D.C. 20549 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smal ...

Company Overview - Apollo Investment Corporation (AINV) has invested $214 billion since its IPO in 2004 through June 30, 2020[9] - As of June 30, 2020, AINV's investment portfolio totaled $267 billion across 149 companies[9] - Apollo Global Management's AUM is approximately $414 billion[9, 11] - AINV's distribution yield at market price is 140% based on the base distribution and 163% based on the base plus supplemental distribution[10] Portfolio Composition & Strategy - As of June 30, 2020, core assets represented 91% of AINV's investment portfolio, while non-core and legacy assets accounted for 9%[26] - First lien debt exposure was 85% of the corporate lending portfolio as of June 30, 2020[26] - Floating rate debt exposure was 100% of the corporate lending portfolio as of June 30, 2020[26] - Investments made pursuant to the co-investment order represented 77% of the corporate lending portfolio as of June 30, 2020[26] Credit Quality - As of June 30, 2020, investments on non-accrual status were 61% of total investments at amortized cost and 17% at fair value[44, 45]

Financial Data and Key Metrics Changes - Net investment income for the quarter was $0.43 per share, reflecting a smaller portfolio and lower contribution from Merx [16][49] - The portfolio had a net loss of $25.2 million or $0.39 per share, driven by non-core and legacy assets, partially offset by a net gain on corporate lending [17][51] - Net asset value per share at the end of June was $15.29, a 2.6% decline quarter-over-quarter [18][52] - Total investment income was $56.7 million for the quarter, with a decline in interest income due to reduced income from Merx and non-accrual investments [46] Business Line Data and Key Metrics Changes - The corporate lending portfolio, representing 79% of the total portfolio, had a net gain of $4.7 million or $0.07 per share during the quarter [11][51] - Non-core and legacy assets had a net loss of $25.6 million or $0.39 per share due to carbon-free legacy positions in shipping and oil investments [51] - New corporate lending commitments for the quarter were only $17 million across two companies, with total exits of $233 million [29] Market Data and Key Metrics Changes - Leveraged loan prices have recovered since the March lows, and loan spreads have tightened significantly, positively impacting the fair value of the corporate lending portfolio [25] - Mid-cap leveraged loan revolvers were 23% utilized before the pandemic, peaking at 70% in mid-April and declining to 48% [15] Company Strategy and Development Direction - The company plans to further reduce leverage to within a target range of 1.4 to 1.6 times over the coming quarters [13] - The Board expects to declare a base distribution of $0.31 per share and a supplemental distribution of $0.05 per share, reflecting the long-term earning power of the core portfolio [23][21] - The company is focused on preserving liquidity and has not made any stock repurchases during the quarter [59] Management's Comments on Operating Environment and Future Outlook - Management believes the corporate lending portfolio demonstrates resiliency and quality despite significant economic headwinds from the COVID-19 pandemic [10] - There is visibility into meaningful additional repayments in the upcoming quarters, which will allow for new commitments as market activity resumes [30] - The company anticipates continued need for covenant relief in the portfolio over the next few quarters [44] Other Important Information - The company has made considerable progress in deleveraging the balance sheet, exiting approximately $233 million of assets [12] - At the end of June, the investment portfolio had a fair value of $2.67 billion across 149 companies in 29 different industries [58] Q&A Session Summary Question: Visibility into investment repayments - Management indicated that there are several companies in strategic transactions that are either pending or committed, providing comfort around visibility for repayments [63] Question: Supplemental dividend guidance - Management explained that the base dividend was set based on expected earnings from the corporate portfolio and Merx, with potential for supplemental dividends based on various income sources [66][70] Question: Capital allocation and new investment opportunities - Management stated that new investments would focus on both existing portfolio companies and new opportunities, depending on market conditions [74] Question: Corporate lending portfolio performance - Management noted that the corporate lending portfolio did not recover as much as competitors due to a more conservative approach to valuations based on fundamentals [108] Question: Merx's ability to cover interest expenses - Management expressed optimism about Merx's cash flow recovery, noting that early experiences with lessees have exceeded expectations [113]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the quarter ended June 30, 2020, show a decrease in net assets to $998 million from $1.024 billion at March 31, 2020, with Net Asset Value (NAV) per share declining from $15.70 to $15.29. For the quarter, the company generated a net increase in net assets of $3.0 million, a significant drop from $23.8 million in the prior year's quarter, primarily due to lower investment income and net realized/unrealized losses. The investment portfolio's fair value stood at $2.67 billion, concentrated in first-lien secured debt. [Statements of Assets and Liabilities](index=3&type=section&id=Statements%20of%20Assets%20and%20Liabilities) Comparison of Assets and Liabilities (June 30, 2020 vs. March 31, 2020) | Financial Metric | June 30, 2020 (Unaudited) (in thousands) | March 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Total Investments at Fair Value** | $2,671,040 | $2,785,433 | | **Total Assets** | $2,808,975 | $2,871,058 | | **Total Debt** | $1,755,104 | $1,794,617 | | **Total Liabilities** | $1,811,032 | $1,846,743 | | **Net Assets** | $997,943 | $1,024,315 | | **Net Asset Value (NAV) Per Share** | $15.29 | $15.70 | - Net assets decreased by **$26.4 million**, or **2.6%**, from March 31, 2020 to June 30, 2020[11](index=11&type=chunk) [Statements of Operations](index=4&type=section&id=Statements%20of%20Operations) Comparison of Operations (Three Months Ended June 30) | Metric | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | **Total Investment Income** | $56,669 | $66,516 | | **Net Expenses** | $28,440 | $31,982 | | **Net Investment Income** | $28,229 | $34,534 | | **Net Realized and Change in Unrealized Gains (Losses)** | ($25,234) | ($10,705) | | **Net Increase (Decrease) in Net Assets from Operations** | $2,995 | $23,829 | | **Earnings (Loss) Per Share — Basic** | $0.05 | $0.35 | - Net investment income decreased by **18.3%** year-over-year, primarily due to a **$9.8 million** reduction in total investment income, which was driven by lower interest income[13](index=13&type=chunk) - The company experienced a significant increase in net realized and unrealized losses, moving from a loss of **$10.7 million** in Q2 2019 to a loss of **$25.2 million** in Q2 2020[13](index=13&type=chunk) [Statements of Changes in Net Assets](index=6&type=section&id=Statements%20of%20Changes%20in%20Net%20Assets) - Net assets decreased by **$26.4 million** during the three months ended June 30, 2020, resulting from a **$3.0 million** net increase from operations, offset by **$29.4 million** in distributions to stockholders[16](index=16&type=chunk) - In the prior-year period (three months ended June 30, 2019), the company repurchased **$15.1 million** of its common stock. No stock was repurchased in the current period[16](index=16&type=chunk) [Statements of Cash Flows](index=7&type=section&id=Statements%20of%20Cash%20Flows) Summary of Cash Flows (Three Months Ended June 30) | Activity | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | **Net Cash Provided by (Used in) Operating Activities** | $71,032 | ($185,729) | | **Net Cash Provided by (Used in) Financing Activities** | ($70,310) | $175,049 | | **Net Increase (Decrease) in Cash** | $722 | ($10,680) | - The significant shift in operating cash flow from a use of **$185.7 million** in 2019 to a source of **$71.0 million** in 2020 was primarily driven by lower purchases of investments and higher proceeds from sales and repayments[18](index=18&type=chunk) [Schedule of Investments](index=8&type=section&id=Schedule%20of%20Investments) - As of June 30, 2020, total investments at fair value were **$2.67 billion**, down from **$2.79 billion** at March 31, 2020[58](index=58&type=chunk)[94](index=94&type=chunk) Portfolio Composition by Investment Type (at Fair Value, June 30, 2020) | Investment Type | Fair Value (in thousands) | % of Net Assets | | :--- | :--- | :--- | | First Lien Secured Debt | $2,093,720 | 209.8% | | Second Lien Secured Debt | $309,111 | 31.0% | | Common Equity/Interests | $249,457 | 25.1% | | Structured Products and Other | $9,815 | 1.0% | | Preferred Equity | $8,720 | 0.8% | | **Total** | **$2,671,040** | **267.7%** | Top 5 Industry Concentrations (at Fair Value, June 30, 2020) | Industry Classification | Percentage of Total Investments | | :--- | :--- | | Healthcare & Pharmaceuticals | 16.9% | | Business Services | 13.0% | | Aviation and Consumer Transport | 12.9% | | High Tech Industries | 12.4% | | Transportation – Cargo, Distribution | 5.9% | [Notes to Financial Statements](index=80&type=section&id=Notes%20to%20Financial%20Statements) - The company has elected to be treated as a Business Development Company (BDC) under the 1940 Act and a Regulated Investment Company (RIC) for tax purposes[174](index=174&type=chunk) - The company warns that the COVID-19 pandemic has created significant uncertainty, which could materially affect estimates and assumptions used in the financial statements[181](index=181&type=chunk)[183](index=183&type=chunk) - As of June 30, 2020, the company had total unfunded commitments of **$475.9 million**, including revolver obligations, letters of credit, and delayed draw loans[305](index=305&type=chunk)[306](index=306&type=chunk) - On August 6, 2020, the Board declared a quarterly distribution of **$0.31 per share** and a supplemental distribution of **$0.05 per share**, both payable on October 7, 2020[316](index=316&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=108&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the decrease in Q2 2020 investment income primarily to a lower average yield on the debt portfolio and reduced prepayment fees. The COVID-19 pandemic has adversely impacted investment valuations, leading to increased unrealized losses. Net expenses decreased due to lower interest costs following the repayment of senior notes and a decline in LIBOR. The company maintains adequate liquidity through its credit facility and cash from operations but acknowledges the ongoing economic uncertainty from the pandemic poses significant risks to its portfolio companies and future performance. [COVID-19 Developments](index=109&type=section&id=COVID-19%20Developments) - Management states that the COVID-19 pandemic has created significant disruption and could continue to adversely impact economic and market conditions, potentially leading to a global recession[330](index=330&type=chunk) - The company expects certain portfolio companies to experience financial distress, potentially defaulting on obligations, which could result in a decrease in the value of those investments[331](index=331&type=chunk) - The fair value of the investment portfolio has been adversely impacted by the pandemic, and management notes that valuations are inherently less certain and may differ materially from what is ultimately realized[332](index=332&type=chunk) [Portfolio and Investment Activity](index=112&type=section&id=Portfolio%20and%20Investment%20Activity) Investment Activity (Three Months Ended June 30) | Activity (in millions) | 2020 | 2019 | | :--- | :--- | :--- | | Investments made | $137.9 | $435.3 | | Investments sold | ($69.1) | ($9.6) | | Investments repaid | ($163.8) | ($210.7) | | **Net investment activity** | **($95.0)** | **$215.0** | - The portfolio's composition at fair value as of June 30, 2020 was **90%** secured debt (**78%** first lien, **12%** second lien) and **10%** common equity/interests and warrants[341](index=341&type=chunk) - The weighted average yield on the total debt portfolio at amortized cost decreased from **8.7%** at March 31, 2020, to **8.1%** at June 30, 2020[341](index=341&type=chunk) [Results of Operations](index=117&type=section&id=Results%20of%20Operations) - Total investment income decreased by **$9.8 million** year-over-year, primarily due to a **$10.1 million** drop in interest income (including PIK). This was caused by a lower average portfolio yield (**8.4%** vs. **10.0%** in the prior year) and a significant reduction in prepayment fees[363](index=363&type=chunk)[364](index=364&type=chunk) - Net expenses decreased by **$3.6 million** year-over-year, mainly from a **$2.1 million** reduction in interest and debt expenses due to a lower total cost of debt (**3.4%** vs. **5.6%**) after repaying the 2043 Senior Unsecured Notes[363](index=363&type=chunk)[367](index=367&type=chunk) - Net realized losses for the quarter were **$8.4 million**, primarily driven by a **$6.1 million** realized loss on ZPower, LLC, which was previously recorded as an unrealized loss[369](index=369&type=chunk) - Net change in unrealized losses was **$16.8 million** for the quarter, with significant unrealized depreciation in Carbonfree Chemicals (**$10.0M**), Dynamic Product Tankers (**$9.2M**), and Merx Aviation Finance (**$4.3M**)[371](index=371&type=chunk) [Liquidity and Capital Resources](index=120&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's primary sources of liquidity are its Senior Secured Facility, debt offerings, and cash flows from operations and investment repayments[372](index=372&type=chunk) Debt Obligations as of June 30, 2020 | Obligation | Principal Outstanding | Final Maturity Date | | :--- | :--- | :--- | | Senior Secured Facility | $1,409.6 million | Nov 19, 2023 | | 2025 Notes | $350.0 million | Mar 3, 2025 | | **Total Debt** | **$1,759.6 million** | | - As of June 30, 2020, the company had **$394.1 million** of unused capacity under its Senior Secured Facility[375](index=375&type=chunk) - On March 19, 2020, the company suspended its stock repurchase program due to market conditions[304](index=304&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=121&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies its primary market risks as investment valuation risk and interest rate risk. A significant portion of the portfolio is comprised of Level 3 assets, whose fair value is determined in good faith by the board due to the lack of active markets. As of June 30, 2020, 100% of the debt portfolio had variable interest rates, making net investment income sensitive to changes in benchmark rates like LIBOR. The company notes that the planned phase-out of LIBOR by the end of 2021 introduces uncertainty. - The company's main financial market risks are changes in interest rates and the valuation of its investment portfolio, with the COVID-19 outbreak introducing significant volatility[384](index=384&type=chunk) - As of June 30, 2020, **100%** of the company's debt portfolio investments bore interest at variable rates, generally tied to LIBOR, making net investment income sensitive to interest rate changes[388](index=388&type=chunk) Estimated Annual Impact of Interest Rate Changes on Net Investment Income | Basis Point Change | Impact on Net Investment Income | | :--- | :--- | | Up 200 bps | $1.9 million | | Up 100 bps | ($4.1) million | | Up 50 bps | ($4.0) million | | Down 25 bps | $1.5 million | [Item 4. Controls and Procedures](index=123&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2020, and concluded they were effective. No material changes to internal control over financial reporting were identified during the quarter. - As of June 30, 2020, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at providing reasonable assurance that required information is properly recorded, processed, and reported[390](index=390&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[391](index=391&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=124&type=section&id=Item%201.%20Legal%20Proceedings) The company is a defendant in a lawsuit filed by the bankruptcy trustee of DSI Renal Holdings, alleging participation in a "fraudulent conveyance." The complaint seeks damages of approximately $425 million, of which the company's share would be about $41 million plus interest. The company intends to vigorously defend itself and has not determined if the action will be material. - The company is a defendant in a complaint by the bankruptcy trustee of DSI Renal Holdings, alleging participation in a "fraudulent conveyance" related to a 2010-2011 restructuring and sale[395](index=395&type=chunk) - The complaint seeks damages of approximately **$425 million**, with the company's potential share being around **$41 million** plus interest and punitive damages. The company intends to vigorously defend the action[395](index=395&type=chunk)[398](index=398&type=chunk) [Item 1A. Risk Factors](index=124&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the company's Annual Report on Form 10-K for the year ended March 31, 2020, indicating no material changes or additions to those previously disclosed risks. - The report directs readers to the Risk Factors section of the Annual Report on Form 10-K for the fiscal year ended March 31, 2020, for a comprehensive discussion of risks[399](index=399&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=124&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not have any unregistered sales of equity securities. Under its publicly announced repurchase plans totaling $250 million, the company has repurchased $223.1 million of its common stock to date, with $26.9 million remaining available. No shares were repurchased during the quarter ended June 30, 2020. Status of Share Repurchase Plans as of June 30, 2020 | Plan Date | Maximum Authorized (in millions) | Cost of Shares Repurchased (in millions) | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | | August 6, 2015 | $50.0 million | $50.0 million | $0 | | December 14, 2015 | $50.0 million | $50.0 million | $0 | | September 14, 2016 | $50.0 million | $50.0 million | $0 | | October 30, 2018 | $50.0 million | $50.0 million | $0 | | February 6, 2019 | $50.0 million | $23.1 million | $26.9 million | | **Total** | **$250.0 million** | **$223.1 million** | **$26.9 million** | - No shares were repurchased during the three months ended June 30, 2020[298](index=298&type=chunk)[299](index=299&type=chunk)

Apollo Investment Corporation (AINV) Q4 2020 Earnings Conference Call May 21, 2020 10:00 AM ET Company Participants Elizabeth Besen - IR Howard Widra - CEO Tanner Powell - President and CIO Greg Hunt - CFO Conference Call Participants Finian O'Shea - Wells Fargo Securities Kenneth Lee - RBC Capital Markets Casey Alexander - Compass Point Kyle Joseph - Jefferies Arren Cyganovich - Citi Rick Shane - JPMorgan Robert Dodd - Raymond James Ryan Lynch - KBW Operator Good morning and welcome to Apollo Investment Co ...

Financial Performance - Net investment income for the quarter ended March 31, 2020, was $38.8 million, or $0.59 per share, compared to $36.2 million, or $0.54 per share for the quarter ended December 31, 2019[5] - Net realized and change in unrealized losses on investments for the quarter ended March 31, 2020, were ($186.0) million, or ($2.81) per share[5] - Net asset value per share as of March 31, 2020, was $15.70 compared to $18.27 as of December 31, 2019, a decrease of -14.1%[5] - The company repurchased 1,286,565 shares of common stock at a weighted average price per share of $11.62, for an aggregate cost of $15.0 million during the quarter[5] Portfolio Composition - As of March 31, 2020, the total investment portfolio was $2.79 billion with a weighted average yield of 8.9%[7] - Corporate lending constituted $2.185 billion or 78.4% of the portfolio, with a weighted average yield of 8.5%[7] - Merx Aviation represented $334 million or 12.0% of the portfolio, with a weighted average yield of 12.0%[6] - Non-core and legacy assets totaled $267 million or 9.6% of the portfolio, with a weighted average yield of 7.7%[6] Investment Activity - New investment commitments made during the quarter totaled $153 million across 14 companies, averaging $11.0 million per commitment[5] - Gross fundings during the quarter totaled $210 million, excluding revolver activity and Merx Aviation[5] - Investments sold and repaid during the quarter totaled $123 million and $127 million respectively, excluding revolver activity and Merx Aviation[5] Credit Quality - As of March 31, 2020, 5.1% of total investments at amortized cost, or 1.7% of total investments at fair value, were on non-accrual status[14]

PART I [Business](index=3&type=section&id=Item%201.%20Business) Apollo Investment Corporation is an externally managed BDC and RIC, investing primarily in secured debt of private middle-market companies for income and capital appreciation - The company's investment objective is to generate **current income and capital appreciation**, primarily through debt and equity investments in private middle-market companies[13](index=13&type=chunk) Portfolio Composition by Fair Value (as of March 31) | Investment Type | 2020 | 2019 | | :--- | :--- | :--- | | Secured Debt | 94% | 89% | | Unsecured Debt | 0% | 0% | | Structured Products & Other | 0% | 2% | | Preferred Equity | 0% | 1% | | Common Equity/Interests & Warrants | 6% | 8% | Investment Activity (Year Ended March 31) | Activity (in billions) | 2020 | 2019 | | :--- | :--- | :--- | | Investments Made | $1.9 | $1.3 | | Investments Sold or Repaid | $1.3 | $1.1 | Portfolio Yields at Cost (as of March 31) | Portfolio | 2020 | 2019 | | :--- | :--- | :--- | | Secured Debt Portfolio | 8.7% | 10.2% | | Total Debt Portfolio | 8.7% | 10.2% | | Total Portfolio | 8.0% | 9.6% | Top Ten Industries by Fair Value (as of March 31, 2020) | Industry | % of Portfolio | | :--- | :--- | | Healthcare & Pharmaceuticals | 16.7% | | Business Services | 12.9% | | Aviation and Consumer Transport | 12.5% | | High Tech Industries | 12.3% | | Transportation – Cargo, Distribution | 6.1% | | Consumer Services | 4.4% | | Beverage, Food & Tobacco | 3.5% | | Consumer Goods – Non-durable | 3.2% | | Consumer Goods – Durable | 2.7% | | Diversified Investment Vehicles, Banking, Finance, Real Estate | 2.6% | - The company is externally managed by Apollo Investment Management, L.P. (AIM), which determines portfolio composition and monitors investments, with administrative services from Apollo Investment Administration, LLC (AIA)[19](index=19&type=chunk)[21](index=21&type=chunk)[51](index=51&type=chunk) Advisory Fees (Year Ended March 31) | Fee Type (in millions) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Base Management Fees | $40.36 | $35.73 | $47.94 | | Performance-based Incentive Fees | $1.98 | $21.19 | $28.71 | [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces multiple risks in its operations, investments, and structure, including COVID-19 impacts, interest rate fluctuations, and increased leverage [Risks Relating to the Current Environment](index=17&type=section&id=Risks%20Relating%20to%20the%20Current%20Environment) This section details macroeconomic and external risks, including COVID-19 impacts on portfolio valuations, interest rate fluctuations, and LIBOR phase-out uncertainty - The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on the company's business, financial condition, and portfolio valuations, including increased credit risk and potential impairments[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk) - Changes in interest rates may adversely affect the value of portfolio investments and net interest income, with increases decreasing fixed-rate asset values and raising borrowing costs[91](index=91&type=chunk)[92](index=92&type=chunk) - The planned phase-out of LIBOR by the end of 2021 creates uncertainty, potentially requiring renegotiation of credit agreements and adversely affecting financial results[117](index=117&type=chunk) - Global market volatility from events like the Eurozone crisis, Chinese market turbulence, and Brexit could negatively impact the U.S economy and the company's investments[99](index=99&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) [Risks Relating to our Business and Structure](index=24&type=section&id=Risks%20Relating%20to%20our%20Business%20and%20Structure) This section details risks from dependence on the Investment Adviser, BDC/RIC regulatory requirements, increased leverage, conflicts of interest, and illiquid investment valuation uncertainty - The company is dependent on the diligence, skill, and network of AIM's key personnel, and their access to AGM's broader resources, with senior management departures posing a material harm risk[123](index=123&type=chunk) - Failure to maintain RIC status would subject the company to corporate-level income tax, substantially reducing net assets and income available for distribution[130](index=130&type=chunk) - Effective April 4, 2019, the asset coverage requirement was reduced from 200% to 150%, permitting increased debt and magnifying the potential for both gains and losses, thereby increasing investment risk[135](index=135&type=chunk)[144](index=144&type=chunk)[151](index=151&type=chunk) - Significant potential conflicts of interest exist due to the relationship with AIM and its affiliates, particularly in investment opportunity allocation and management of overlapping objectives[165](index=165&type=chunk)[169](index=169&type=chunk) - A large percentage of the portfolio consists of illiquid, non-publicly traded investments, whose fair value is determined by the Board, creating uncertainty and risk of material differences from realized values[160](index=160&type=chunk) - The company and its portfolio companies are subject to cybersecurity risks, including hacking and data breaches, which could result in operational disruptions, financial losses, and reputational damage[186](index=186&type=chunk)[188](index=188&type=chunk) [Risks Relating to our Investments](index=38&type=section&id=Risks%20Relating%20to%20our%20Investments) This section outlines risks from speculative middle-market investments, high credit loss risk, sector concentrations, subordinated debt, and illiquidity of private holdings - Investments in middle-market companies are speculative and involve a **high degree of credit loss risk**, as these companies often have limited financial resources and are vulnerable to economic downturns[195](index=195&type=chunk) - The company has investments in the energy sector, which are subject to risks from volatile crude oil and natural gas prices, potentially affecting credit quality and performance[196](index=196&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk) - The portfolio contains a limited number of companies, subjecting it to a greater risk of significant loss if one or more key investments perform poorly[207](index=207&type=chunk) - The company's debt investments may be subordinated to claims of other creditors, meaning senior debt holders would be paid in full before the company receives any distribution in an insolvency event[213](index=213&type=chunk) - The incentive fee structure may induce the Investment Adviser to make riskier or more speculative investments, including those with deferred interest (PIK), to increase its compensation[215](index=215&type=chunk)[216](index=216&type=chunk) [Risks Relating to our Debt Instruments](index=46&type=section&id=Risks%20Relating%20to%20our%20Debt%20Instruments) This section details risks from the company's debt obligations, including refinancing challenges for its credit facility and unsecured notes, and market value fluctuations - The company's senior secured credit facility matures in November 2023, and an inability to renew, extend, or replace it on favorable terms could adversely impact liquidity, new investments, and stockholder distributions[237](index=237&type=chunk)[238](index=238&type=chunk) - The company's **$350 million** of 5.250% senior unsecured notes mature in March 2025, and failure to replace or repay them at maturity could materially harm liquidity and operations[239](index=239&type=chunk)[240](index=240&type=chunk) - The market value of the company's debt securities may fluctuate due to various factors, including interest rate changes, economic conditions, and the company's creditworthiness, with potentially limited buyers[242](index=242&type=chunk) [Risks Relating to an Investment in our Common Stock](index=48&type=section&id=Risks%20Relating%20to%20an%20Investment%20in%20our%20Common%20Stock) This section outlines risks for common stockholders, including shares trading at a discount to NAV, uncertainty of distributions, and market price volatility - Shares of BDCs may trade at a market price that is less than the **net asset value (NAV) per share**, a risk separate from the risk of NAV decline[250](index=250&type=chunk) - There is no assurance that the company will achieve investment results allowing for specified levels or increases in cash distributions, which are also limited by the BDC asset coverage test and credit facility covenants[248](index=248&type=chunk) - The market price of the company's securities can fluctuate significantly due to numerous factors, including market volatility, regulatory changes, loss of RIC status, and changes in investment portfolio value[251](index=251&type=chunk) [Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported that it has no unresolved comments from the staff of the Securities and Exchange Commission - None[261](index=261&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) The company does not own any material real estate or other physical properties; its principal executive offices are leased - The company does not own any real estate or other physical properties material to its operations, with its principal executive offices located at 9 West 57th Street, New York, NY 10019[262](index=262&type=chunk) [Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings) The company is a defendant in a legal proceeding alleging "fraudulent conveyance" related to DSI Renal Holdings, with a potential $41 million liability - The company is a defendant in a complaint filed by the bankruptcy trustee of DSI Renal Holdings, alleging "fraudulent conveyance," seeking approximately **$425 million** in damages, with the company's potential share being approximately **$41 million**, which it intends to vigorously defend against[264](index=264&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business operations - Not applicable[265](index=265&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details common stock market data, including historical prices, NAV, distributions, and the status of the company's stock repurchase program Quarterly Stock Price and NAV Per Share | Quarter Ended | NAV Per Share | High Sales Price | Low Sales Price | | :--- | :--- | :--- | :--- | | **FY 2020** | | | | | Mar 31, 2020 | $15.70 | $17.74 | $5.20 | | Dec 31, 2019 | $18.27 | $18.33 | $15.18 | | Sep 30, 2019 | $18.69 | $17.00 | $15.61 | | Jun 30, 2019 | $19.00 | $16.52 | $15.12 | | **FY 2019** | | | | | Mar 31, 2019 | $19.06 | $15.98 | $12.26 | Quarterly Distributions Declared Per Share | Fiscal Year | Quarter | Distribution | | :--- | :--- | :--- | | 2020 | Q1-Q4 | $0.45 | | 2019 | Q1-Q4 | $0.45 | Stock Repurchase Program Summary (as of March 31, 2020) | Metric | Amount (in millions) | | :--- | :--- | | Total Authorized | $250.0 | | Total Repurchased | $223.1 | | Remaining Authorization | $26.9 | [Selected Financial Data](index=57&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data, including investment income, net assets, and NAV per share, noting the FY2020 NAV decline Selected Financial Data (Year Ended March 31, in thousands except per share data) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total investment income | $276,916 | $255,076 | $259,287 | | Net investment income | $145,274 | $127,749 | $133,387 | | Net increase (decrease) in net assets | $(116,064) | $71,946 | $87,029 | | Net asset value per share | $15.70 | $19.06 | $19.67 | | Total assets | $2,871,058 | $2,497,797 | $2,311,810 | | Total debt outstanding | $1,794,617 | $1,128,686 | $789,846 | | Distributions declared per share | $1.80 | $1.80 | $1.80 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses FY2020 financial performance, highlighting COVID-19's impact on portfolio valuations, increased unrealized losses, higher expenses, and a shift towards secured debt [COVID-19 Developments](index=60&type=section&id=COVID-19%20Developments) Management addresses the COVID-19 pandemic's significant adverse impact on portfolio company operations and valuations, leading to increased unrealized depreciation and potential defaults - The COVID-19 pandemic has caused financial distress for portfolio companies, which may lead to defaults, restructurings, and permanent impairments on the company's investments[299](index=299&type=chunk) - The company recorded a significant increase in **unrealized depreciation** as of March 31, 2020, primarily due to the adverse economic effects of the pandemic and the re-pricing of credit risk in the market[301](index=301&type=chunk) [Portfolio and Investment Activity](index=63&type=section&id=Portfolio%20and%20Investment%20Activity) Net investment activity significantly increased in FY2020, with portfolio growth, a shift to 94% secured debt, and a decrease in weighted average yield Portfolio and Investment Activity (Year Ended March 31, in millions) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Investments made | $1,866.3 | $1,278.1 | | Investments sold/repaid | $(1,265.6) | $(1,086.8) | | **Net investment activity** | **$600.6** | **$191.3** | | Portfolio companies at end of period | 152 | 113 | Portfolio Composition and Yields (as of March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Composition (Fair Value)** | | | | First lien secured debt | 81% | 66% | | Second lien secured debt | 13% | 23% | | **Total secured debt** | **94%** | **89%** | | **Yields (Amortized Cost)** | | | | Total debt portfolio | 8.7% | 10.2% | | Total portfolio | 8.0% | 9.6% | [Results of Operations](index=68&type=section&id=Results%20of%20Operations) FY2020 saw a net decrease in net assets due to increased unrealized losses from COVID-19, despite higher investment income, while net expenses rose from increased interest costs Operating Results (Year Ended March 31, in millions) | Line Item | 2020 | 2019 | | :--- | :--- | :--- | | Total investment income | $276.9 | $255.1 | | Net Expenses | $131.6 | $127.3 | | **Net Investment Income** | **$145.3** | **$127.8** | | Net Realized and Change in Unrealized Gains (Losses) | $(261.3) | $(55.8) | | **Net Increase (Decrease) in Net Assets** | **$(116.0)** | **$72.0** | - The net change in unrealized losses was **$255.0 million** for FY2020, a significant increase from **$5.8 million** in FY2019, primarily due to the adverse economic effects of the COVID-19 pandemic and re-pricing of credit risk[338](index=338&type=chunk) - Net expenses increased by **$4.3 million** year-over-year, driven by a **$15.2 million** increase in interest and debt expenses due to higher average debt outstanding (**$1.53 billion** in FY2020 vs **$0.99 billion** in FY2019)[334](index=334&type=chunk) [Liquidity and Capital Resources](index=72&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity sources include its Senior Secured Facility and debt offerings, with $1.8 billion total debt and $354.4 million unused capacity, deemed adequate for the next twelve months Contractual Debt Maturities (as of March 31, 2020, in millions) | Obligation | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior Secured Facility | $1,449.4 | $— | $— | $1,449.4 | $— | | 2025 Notes | $350.0 | $— | $— | $350.0 | $— | | **Total Debt** | **$1,799.4** | **$—** | **$—** | **$1,799.4** | **$—** | - As of March 31, 2020, the company had **$354.4 million** of unused capacity under its Senior Secured Facility[343](index=343&type=chunk) - Distributions paid to stockholders totaled **$121.8 million** (**$1.80 per share**) for the year ended March 31, 2020, consistent with the prior year[345](index=345&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk due to floating-rate loans and its Senior Secured Facility, with a sensitivity analysis detailing the impact on net investment income Interest Rate Sensitivity Analysis (as of March 31, 2020) | Basis Point Change | Estimated Annual Impact on Net Investment Income (in millions) | Estimated Annual Impact on NII Per Share | | :--- | :--- | :--- | | Up 200 bps | $12.4 | $0.190 | | Up 100 bps | $6.0 | $0.092 | | Down 100 bps | $2.7 | $0.042 | | Down 200 bps | $1.9 | $0.030 | [Financial Statements and Supplementary Data](index=74&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited financial statements and the unqualified auditor's report, highlighting Level 3 investment valuation as a critical audit matter, with a portfolio fair value of **$2.79 billion** - The independent registered public accounting firm, PricewaterhouseCoopers LLP, issued an **unqualified opinion** on the Company's financial statements and its internal control over financial reporting as of March 31, 2020[363](index=363&type=chunk) - The auditor identified the valuation of **Level 3 investments** as a critical audit matter due to the significant management judgment and use of unobservable inputs required to determine their fair value[370](index=370&type=chunk)[371](index=371&type=chunk) Summary of Assets and Liabilities (as of March 31, 2020, in thousands) | Account | Amount | | :--- | :--- | | Total Investments at Fair Value | $2,785,433 | | Total Assets | $2,871,058 | | Total Debt | $1,794,617 | | Total Liabilities | $1,846,743 | | **Net Assets** | **$1,024,315** | | **Net Asset Value Per Share** | **$15.70** | Summary of Operations (Year Ended March 31, 2020, in thousands) | Account | Amount | | :--- | :--- | | Total Investment Income | $276,916 | | Net Expenses | $131,642 | | **Net Investment Income** | **$145,274** | | Net Realized and Change in Unrealized Gains (Losses) | $(261,338) | | **Net (Decrease) in Net Assets from Operations** | **$(116,064)** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=165&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants on accounting and financial disclosure - Not applicable[694](index=694&type=chunk) [Controls and Procedures](index=165&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2020[695](index=695&type=chunk) - No changes in internal control over financial reporting occurred during the fourth fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[698](index=698&type=chunk) [Other Information](index=165&type=section&id=Item%209B.%20Other%20Information) The company reported no other information for this item - None[699](index=699&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=166&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2020 Proxy Statement - Information required by this item will be contained in the Company's definitive Proxy Statement for its 2020 Annual Stockholder Meeting and is incorporated by reference[702](index=702&type=chunk) [Executive Compensation](index=166&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2020 Proxy Statement - Information required by this item will be contained in the Company's definitive Proxy Statement for its 2020 Annual Stockholder Meeting and is incorporated by reference[703](index=703&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=166&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from the 2020 Proxy Statement - Information required by this item will be contained in the Company's definitive Proxy Statement for its 2020 Annual Stockholder Meeting and is incorporated by reference[704](index=704&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=166&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2020 Proxy Statement - Information required by this item will be contained in the Company's definitive Proxy Statement for its 2020 Annual Stockholder Meeting and is incorporated by reference[705](index=705&type=chunk) [Principal Accounting Fees and Services](index=166&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the 2020 Proxy Statement - Information required by this item will be contained in the Company's definitive Proxy Statement for its 2020 Annual Stockholder Meeting and is incorporated by reference[706](index=706&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=167&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed as part of the report, including governance documents, material contracts, and required certifications - This section lists all exhibits filed as part of the report, including the Articles of Amendment, Bylaws, Investment Advisory Management Agreement, Administration Agreement, Senior Secured Revolving Credit Agreement, and CEO/CFO certifications[710](index=710&type=chunk)