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)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements present the company's financial position and operational results, highlighting a decrease in Net Asset Value (NAV) per share driven by net unrealized losses despite an increase in net investment income [Statements of Assets and Liabilities](index=3&type=section&id=Statements%20of%20Assets%20and%20Liabilities) Total assets and liabilities rose due to increased investments and debt, while net assets and Net Asset Value (NAV) per share declined Statements of Assets and Liabilities (in thousands, except per share data) | Metric | December 31, 2019 (Unaudited) | March 31, 2019 | | :--- | :--- | :--- | | **Total Investments at fair value** | $2,967,197 | $2,408,132 | | **Total Assets** | $3,060,024 | $2,497,797 | | **Total Debt** | $1,785,637 | $1,128,686 | | **Total Liabilities** | $1,844,142 | $1,185,170 | | **Net Assets** | $1,215,882 | $1,312,627 | | **Net Asset Value Per Share** | $18.27 | $19.06 | [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) Total investment income and net investment income increased year-over-year, but significant net realized and unrealized losses reduced the net increase in net assets from operations Statements of Operations Highlights (in thousands) | Metric | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | **Total Investment Income** | $205,316 | $193,666 | | **Net Expenses** | $98,828 | $98,469 | | **Net Investment Income** | $106,488 | $95,197 | | **Net Realized and Change in Unrealized Losses** | $(75,305) | $(55,096) | | **Net Increase in Net Assets from Operations** | $31,183 | $40,101 | | **Earnings Per Share — Basic** | $0.46 | $0.56 | [Statements of Changes in Net Assets](index=7&type=section&id=Statements%20of%20Changes%20in%20Net%20Assets) Net assets decreased primarily due to distributions to stockholders and common stock repurchases, which outweighed the net increase from operations Changes in Net Assets (Nine Months Ended Dec 31, 2019, in thousands) | Category | Amount | | :--- | :--- | | Net Assets at beginning of period | $1,312,627 | | Net Increase from Operations | $31,183 | | Distributions to Stockholders | $(90,741) | | Repurchase of common stock | $(37,187) | | **Net decrease in net assets** | **$(96,745)** | | **Net Assets at End of Period** | **$1,215,882** | [Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) Net cash used in operating activities increased significantly due to higher investment purchases, while net cash from financing activities rose from higher debt issuances Cash Flow Summary (Nine Months Ended, in thousands) | Activity | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(510,507) | $(46,251) | | Net Cash Provided by Financing Activities | $511,413 | $55,821 | | **Net increase in cash and equivalents** | **$906** | **$9,570** | [Schedule of Investments](index=10&type=section&id=Schedule%20of%20Investments) The investment portfolio, valued at $2.97 billion, is primarily composed of first and second lien secured debt and is diversified across industries like Healthcare and Business Services Total Investments (December 31, 2019, in thousands) | Metric | Amount | | :--- | :--- | | Total Investments at Cost | $3,075,456 | | Total Investments at Fair Value | $2,967,197 | Portfolio Composition by Industry (at Fair Value, Dec 31, 2019) | Industry Classification | Percentage of Total Investments | | :--- | :--- | | Healthcare & Pharmaceuticals | 16.2% | | Business Services | 14.1% | | Aviation and Consumer Transport | 12.6% | | High Tech Industries | 10.3% | | Transportation – Cargo, Distribution | 5.7% | Portfolio Composition by Investment Type (at Fair Value, Dec 31, 2019) | Investment Type | Percentage of Net Assets | | :--- | :--- | | First Lien - Secured Debt | 191.0% | | Second Lien - Secured Debt | 34.3% | | Structured Products and Other | 1.0% | | Preferred Equity | 1.4% | | Common Equity/Interests | 16.5% | | Warrants | 0.0% | [Notes to Financial Statements](index=56&type=section&id=Notes%20to%20Financial%20Statements) The notes detail the company's BDC and RIC status, accounting policies, related party agreements, investment portfolio specifics, debt, and shareholder equity transactions - The company is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a **Business Development Company (BDC)** and a **Regulated Investment Company (RIC)**[196](index=196&type=chunk)[199](index=199&type=chunk) - For investments without readily available market quotes (Level 3), the company uses a multi-step valuation process involving the Investment Adviser, senior management, independent third-party firms, and the Board of Directors[215](index=215&type=chunk) - The Investment Adviser (AIM) receives a base management fee (**1.50% on gross assets**, reduced to 1.00% above 200% leverage) and a two-part performance-based incentive fee[245](index=245&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - As of December 31, 2019, the company had **$592.6 million in total unfunded commitments**, including revolver obligations, letters of credit, and delayed draw loans[346](index=346&type=chunk)[348](index=348&type=chunk) Debt Obligations (as of December 31, 2019, in thousands) | Debt Instrument | Principal Amount Outstanding | Final Maturity Date | | :--- | :--- | :--- | | Senior Secured Facility | $1,440,666 | 11/19/2023 | | 2025 Notes | $350,000 | 03/03/2025 | | **Total Debt** | **$1,790,666** | | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=86&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, highlighting increased investment income from a larger portfolio, higher interest expenses from increased leverage, and a portfolio shift towards first lien debt [Portfolio and Investment Activity](index=89&type=section&id=Portfolio%20and%20Investment%20Activity) Net investment activity increased substantially, with the portfolio's composition shifting towards safer first lien secured debt while the weighted average yield decreased Net Investment Activity (in millions) | Period | Investments Made | Investments Sold/Repaid | Net Investment Activity | | :--- | :--- | :--- | :--- | | **Nine Months Ended Dec 31, 2019** | $1,442.0 | $(849.1) | $593.0 | | **Nine Months Ended Dec 31, 2018** | $1,027.8 | $(934.6) | $93.2 | Portfolio Composition at Fair Value | Investment Type | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | First lien secured debt | 78% | 66% | | Second lien secured debt | 14% | 23% | | **Total secured debt** | **92%** | **89%** | | Other | 8% | 11% | [Results of Operations](index=94&type=section&id=Results%20of%20Operations) Investment income grew due to a larger portfolio, while higher interest costs increased expenses and unrealized depreciation in certain assets widened net losses - The increase in total investment income for the nine months ended Dec 31, 2019, was primarily due to a **higher income-bearing investment portfolio**, partially offset by a decrease in the average yield[406](index=406&type=chunk) - The increase in net expenses for the nine-month period was driven by a **$12.0 million rise in interest and other debt expenses**, attributed to an increase in average debt outstanding to $1.44 billion[408](index=408&type=chunk) - For the nine months ended Dec 31, 2019, the company recorded a net realized loss of $6.3 million and a net change in unrealized losses of $69.0 million, with significant unrealized losses in **Spotted Hawk ($23.8M)** and **Glacier Oil & Gas ($13.3M)**[410](index=410&type=chunk)[412](index=412&type=chunk) [Liquidity and Capital Resources](index=99&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is sourced from its Senior Secured Facility and debt offerings, with significant debt obligations and continued activity in its share repurchase program - As of December 31, 2019, the company had total debt obligations of **$1.79 billion**, with maturities primarily between 3 to 5 years for the Senior Secured Facility and beyond five years for the 2025 Notes[415](index=415&type=chunk) - The company maintains an 'opt out' dividend reinvestment plan and paid distributions totaling **$91.8 million**, or $1.35 per share, for the nine months ended December 31, 2019[417](index=417&type=chunk)[419](index=419&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=100&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk due to its floating-rate loans and debt, with a net positive sensitivity to rising interest rates Interest Rate Sensitivity Analysis (as of December 31, 2019) | Basis Point Change | Estimated Annual Impact on Net Investment Income | | :--- | :--- | | Up 200 basis points | $13.0 million | | Up 100 basis points | $6.3 million | | Down 100 basis points | $(4.4) million | | Down 200 basis points | $1.0 million | [Item 4. Controls and Procedures](index=101&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management concluded that as of December 31, 2019, the company's **disclosure controls and procedures were effective** at a reasonable assurance level[426](index=426&type=chunk) - **No changes in internal control over financial reporting** occurred during the third fiscal quarter of 2020 that materially affected, or are reasonably likely to materially affect, the company's internal controls[427](index=427&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=102&type=section&id=Item%201.%20Legal%20Proceedings) The company is a defendant in a 'fraudulent conveyance' lawsuit related to the DSI Renal Holdings bankruptcy, facing a potential liability of approximately $41 million - The company is involved in a legal proceeding related to the bankruptcy of DSI Renal Holdings, with the complaint alleging 'fraudulent conveyance' and seeking damages where the company's potential share is approximately **$41 million plus punitive damages**[431](index=431&type=chunk) [Item 1A. Risk Factors](index=102&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been made to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - The report refers to the Risk Factors section of the **Annual Report on Form 10-K** for the year ended March 31, 2019, indicating no material changes[432](index=432&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=102&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company had no unregistered equity sales and has $41.9 million remaining under its authorized share repurchase program Share Repurchase Plan Status (as of Dec 31, 2019, in millions) | Status | Amount | | :--- | :--- | | Maximum Authorized for Repurchase | $250.0 | | Cost of Shares Repurchased | $208.1 | | **Remaining for Repurchase** | **$41.9** | [Item 3. Defaults Upon Senior Securities](index=104&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the reporting period - None[437](index=437&type=chunk)

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 September 30, 2019 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. Employ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION APOLLO INVESTMENT CORPORATION (Exact name of Registrant as specified in its charter) Maryland 52-2439556 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 June 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 814-00646 (State or other jurisdiction of incorporation or organization) ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2019 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) Maryland 52-2439556 (State or other jurisdiction of incorporation or organization) (I.R.S ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Apollo Investment Corporation for the quarterly period ended December 31, 2018, including various statements and detailed schedules of investments [Statements of Assets and Liabilities](index=3&type=section&id=Statements%20of%20Assets%20and%20Liabilities) As of December 31, 2018, total assets increased to $2.38 billion, while total liabilities rose more significantly to $1.07 billion, leading to a decrease in net assets to $1.32 billion and a decline in Net Asset Value (NAV) per share to $19.03 Key Balance Sheet Data (in thousands) | Metric | Dec 31, 2018 (Unaudited) | Mar 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$2,383,667** | **$2,311,810** | | Investments at fair value | $2,307,966 | $2,248,047 | | **Total Liabilities** | **$1,067,062** | **$893,724** | | Debt | $994,487 | $789,846 | | **Net Assets** | **$1,316,605** | **$1,418,086** | | **Net Asset Value Per Share** | **$19.03** | **$19.67** | [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) For the three months ended December 31, 2018, the company reported a net decrease in net assets of $1.2 million, or ($0.02) per share, primarily due to a significant increase in net realized and unrealized losses Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Dec 31, 2018 | Three Months Ended Dec 31, 2017 | Nine Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2017 | | :--- | :--- | :--- | :--- | :--- | | Total Investment Income | $64,041 | $64,753 | $193,666 | $197,798 | | Net Expenses | $32,554 | $30,786 | $98,469 | $96,353 | | **Net Investment Income** | **$31,487** | **$33,967** | **$95,197** | **$101,445** | | Net Realized and Change in Unrealized Losses | ($32,665) | ($28,134) | ($55,096) | ($35,043) | | **Net Increase (Decrease) in Net Assets** | **($1,178)** | **$5,833** | **$40,101** | **$66,402** | | **Earnings (Loss) Per Share — Basic** | **($0.02)** | **$0.08** | **$0.56** | **$0.91** | [Statements of Changes in Net Assets](index=7&type=section&id=Statements%20of%20Changes%20in%20Net%20Assets) For the nine months ended December 31, 2018, net assets decreased by $101.5 million, primarily due to distributions to stockholders and common stock repurchases offsetting the increase from operations Changes in Net Assets (Nine Months Ended Dec 31, 2018, in thousands) | Description | Amount | | :--- | :--- | | Net Assets at beginning of period | $1,418,086 | | Net Increase from Operations | $40,101 | | Distributions to Stockholders | ($95,533) | | Repurchase of common stock | ($46,049) | | **Net decrease in net assets** | **($101,481)** | | **Net Assets at End of Period** | **$1,316,605** | [Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) For the nine months ended December 31, 2018, net cash used in operating activities was $46.3 million, a significant shift from the prior year, while net cash provided by financing activities was $55.8 million due to net debt issuances Cash Flow Summary (Nine Months Ended, in thousands) | Activity | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Net Cash Used in/Provided by Operating Activities | ($46,251) | $118,114 | | Net Cash Used in/Provided by Financing Activities | $55,821 | ($109,778) | | **Net increase in cash and equivalents** | **$9,570** | **$8,336** | [Schedule of Investments](index=10&type=section&id=Schedule%20of%20Investments) This section details the company's investment portfolio by industry, type, cost, and fair value as of December 31, 2018, showing a total fair value of approximately $2.31 billion with concentrations in Aviation, Business Services, and Healthcare Portfolio Composition by Industry (at Fair Value, Dec 31, 2018) | Industry Classification | Percentage of Total Investments | | :--- | :--- | | Aviation and Consumer Transport | 19.7% | | Business Services | 14.5% | | Healthcare & Pharmaceuticals | 13.3% | | High Tech Industries | 8.0% | | Transportation – Cargo, Distribution | 7.1% | | Energy - Oil & Gas | 7.0% | | Other | 30.4% | | **Total Investments** | **100.0%** | - The portfolio is categorized into Non-controlled/non-affiliated, Non-controlled/affiliated, and Controlled investments, with fair values of **$1.49 billion**, **$51.2 million**, and **$764.0 million**, respectively, as of December 31, 2018[81](index=81&type=chunk) [Notes to Financial Statements](index=72&type=section&id=Notes%20to%20Financial%20Statements) The notes provide detailed explanations of the company's significant accounting policies, including investment valuation, income recognition, fair value measurements, related party transactions, debt obligations, stockholders' equity, commitments, and financial highlights [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations for the quarter ended December 31, 2018, covering business overview, investment portfolio activity, revenue and expense drivers, and liquidity, noting a strategic shift towards first lien secured debt [Portfolio and Investment Activity](index=73&type=section&id=Portfolio%20and%20Investment%20Activity) For the nine months ended December 31, 2018, the company made $1.03 billion in new investments, resulting in net investment activity of $93.2 million, with the portfolio composition shifting significantly towards first lien secured debt (64%) while maintaining a stable weighted average yield of 9.6% Portfolio Composition Change (at Fair Value) | Portfolio Composition | Dec 31, 2018 | Mar 31, 2018 | | :--- | :--- | :--- | | First lien secured debt | 64% | 50% | | Second lien secured debt | 24% | 31% | | **Total secured debt** | **88%** | **82%** | | Unsecured debt | 0% | 5% | | Other | 12% | 13% | Investment Activity (in millions) | Period | Investments Made | Investments Sold/Repaid | Net Investment Activity | | :--- | :--- | :--- | :--- | | **Three Months Ended Dec 31, 2018** | $305.3 | ($290.7) | $14.6 | | **Nine Months Ended Dec 31, 2018** | $1,027.8 | ($934.6) | $93.2 | [Results of Operations](index=78&type=section&id=Results%20of%20Operations) For the nine months ended December 31, 2018, total investment income decreased to $193.7 million, while net expenses increased to $98.5 million, resulting in a net increase in net assets from operations of $40.1 million after significant net realized and unrealized losses - The decrease in investment income for the nine months ended Dec 31, 2018, was primarily driven by a **$4.3 million decrease** in dividend income and a **$1.7 million decrease** in total interest income (including PIK)[364](index=364&type=chunk) - The increase in net expenses for the nine-month period was mainly due to a **$2.2 million increase** in interest and other debt expenses and a **$2.2 million increase** in other general and administrative expenses, partially offset by a **$2.3 million decrease** in management and incentive fees[366](index=366&type=chunk) - For the nine months ended Dec 31, 2018, significant net realized losses included **$30.0 million** from WTI Crude Oil options and **$11.9 million** from the write-off of Elements Behavioral Health, Inc[370](index=370&type=chunk) [Liquidity and Capital Resources](index=83&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is sourced from its Senior Secured Facility, debt offerings, and cash from operations, with total debt obligations at $1.005 billion as of December 31, 2018, and an unused capacity of $1.07 billion on its Senior Secured Facility Contractual Maturities of Debt Obligations (as of Dec 31, 2018, in millions) | Obligation | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior Secured Facility | $505.0 | $— | $— | $505.0 | $— | | 2043 Notes | $150.0 | $— | $— | $— | $150.0 | | 2025 Notes | $350.0 | $— | $— | $— | $350.0 | | **Total Debt Obligations** | **$1,005.0** | **$—** | **$—** | **$505.0** | **$500.0** | - Distributions paid to stockholders during the nine months ended December 31, 2018, totaled **$96.7 million**, or **$1.35 per share**[382](index=382&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk due to floating interest rates on its loan portfolio and Senior Secured Facility, with a sensitivity analysis provided to show the estimated annual impact of interest rate changes on net investment income Interest Rate Sensitivity Analysis (as of Dec 31, 2018) | Basis Point Change | Estimated Annual Impact on Net Investment Income | | :--- | :--- | | Up 300 basis points | $20.1 million | | Up 100 basis points | $6.7 million | | Down 100 basis points | ($6.9 million) | [Item 4. Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2018[391](index=391&type=chunk) - No changes in internal control over financial reporting occurred during the third fiscal quarter of 2019 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[392](index=392&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) The company is a defendant in a complaint alleging "fraudulent conveyance" related to the bankruptcy of DSI Renal Holdings, with an alleged share of $41 million in damages, and intends to vigorously defend itself - The company is involved in a legal proceeding related to the bankruptcy of DSI Renal Holdings. The complaint seeks damages of approximately **$425 million**, of which the company's alleged share is **$41 million**, plus punitive damages[396](index=396&type=chunk) [Item 1A. Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors discussed in the company's Annual Report on Form 10-K for the year ended March 31, 2018, which could materially affect the business [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activity, showing $166.1 million of common stock repurchased under publicly announced plans as of December 31, 2018, with $33.9 million remaining under current authorization Share Repurchase Plan Summary (as of Dec 31, 2018) | Agreement Date | Maximum Authorized | Repurchased | Remaining | | :--- | :--- | :--- | :--- | | August 5, 2015 | $50.0 million | $50.0 million | $— | | December 14, 2015 | $50.0 million | $50.0 million | $— | | September 14, 2016 | $50.0 million | $50.0 million | $— | | October 30, 2018 | $50.0 million | $16.1 million | $33.9 million | | **Total** | **$200.0 million** | **$166.1 million** | **$33.9 million** | [Item 3. Defaults Upon Senior Securities](index=89&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period [Item 4. Mine Safety Disclosures](index=89&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company [Item 5. Other Information](index=89&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item [Item 6. Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and a Fee Offset Agreement