AINV Data Gathering Report

102 Weatherby Court Savannah, GA 31405

912-777-6007 or 954-554-5370

Description of Company and Products or Services:

Apollo Investment Corporation (NASDAQ: AINV) is a closed-end investment company

that has elected to be treated as a business development company under the Investment Company

Act of 1940. The Company invests primarily in various forms of debt investments, including

secured and unsecured debt, loan investments, and/or equity in private middle-market

companies. The Company may also invest in the securities of public companies and structured

products and other investments such as collateralized loan obligations and credit-linked notes.

The Company seeks to provide private financing solutions for private companies that do not have

access to the more traditional providers of credit. Apollo Investment Corporation is managed by

Apollo Investment Management, L.P., an affiliate of Apollo Global Management, LLC, a leading

global alternative investment manager. Their portfolios are also made up of equity interests such as

common stock, preferred stock, warrants or options. They may also be comprised of other investment

instruments that include foreign securities and structured products. As of March 31, 2016 the investments

consisted of 89 portfolio companies with 65% invested in secured debt, 9% in unsecured debt, 11% in

structured products, 3% in preferred equity, and 12% in common equity/interests and warrants measured

at fair value. Since AINV’s initial public offering the company has total invested capital of $16.4 billion

in 371 portfolio companies. AINV has also completed transactions with more than 100 different financial

sponsors since the company’s IPO in 2004. All investment decisions are overseen by Apollo Investment

Management and supervised by AINV’s board of directors. The board is comprised of individuals who

are independent of Apollo Global Management and their affiliates.

Culture:

AINV’s principal focus is to provide capital to middle-market companies in a variety of

industries seeking to target companies that generate free cash flows or that may support debt

investments with strong asset coverage. AINV may also provide debtor-in –possession or reserve

financing to companies. Additionally, they acquire investments in the secondary market if they

believe the risk-adjusted returns are attractive. AINV’s investment professionals should seek to

provide investors with attractive returns while minimizing the risk of capital loss throughout

economic cycles. Apollo Investment Management L.P., an affiliate of Apollo Global

Management, is AINV’s investment advisor that oversees board of directors’ decision making on

day to day bases.

Apollo Investment Corporation

(NASDAQ: AINV)

9 West 57th Street

New York, NY 10019

Prepared by Ryan Emmons

May 19, 2016


912-777-6007 or 954-554-5370

Management Team

Manager Position/Background Start Date

James C. Zelter

(CEO)

Mr. Zelter joined Apollo in 2006. He became the Chief Executive Officer and a

Director of Apollo Investment Corporation in November 2008. He is the Managing

Partner of Apollo Capital Management (“ACM”). The funds in the ACM platform

include: Apollo Strategic Value Fund, Apollo Credit Opportunity Fund I and II,

Apollo Asia Opportunity Fund and Apollo European Principal Finance Fund.

ACM also includes Apollo Investment Management, L.P. the investment manager

to Apollo Investment Corporation. Prior to joining Apollo, Mr. Zelter was with

Citigroup and its predecessor companies from 1994 to 2006. From 2003 to 2005,

Mr. Zelter was Chief Investment Officer of Citigroup Alternative Investments, and

prior to that he was responsible for the firm’s Global High Yield franchise.

2006

Howard Widra

Appointed

President

6/6/2016

Mr. Widra has been with Apollo Global Management, LLC and/or its

affiliates since 2013, most recently serving as Co-Head of Direct

Origination. Mr. Widra is a co-founder of MidCap Financial, a $6 billion

specialty finance business, and was formerly its Chief Executive Officer.

Prior to MidCap, Mr. Widra was the founder and President of Merrill Lynch

Capital Healthcare Finance. Prior to Merrill Lynch, Mr. Widra was

President of GE Capital Healthcare Commercial Finance and held senior

roles in its predecessor entities including President of Heller Healthcare

Finance, and COO of Healthcare Financial Partners. Mr. Widra holds a J.D.,

Cum Laude, from the Harvard Law School and a B.A. in Economics from

the University of Michigan.

2016

Gregory W. Hunt

(Chief Financial

Officer and

Treasurer)

Mr. Hunt began his term as Chief Financial Officer and Treasurer of Apollo

Investment Corporation in May 2012. Previously, Mr. Hunt was Executive Vice

President and Chief Financial Officer for Yankee Candle which he joined in April

2010. Prior to joining Yankee Candle, Mr. Hunt served as the Executive Vice

President of Strategic and Commercial Development for Norwegian Cruise Lines

from 2007 to 2009. Prior to joining Norwegian Cruise Lines, Mr. Hunt served as

Chief Financial Officer and Chief Restructuring Officer of Tweeter Home

Entertainment Group, Inc. from 2006 to 2007 and Chief Financial Officer and Co-

Chief Executive of Syratech Corporation from 2001 to 2006. Prior to Syratech, Mr.

Hunt held several senior financial leadership positions including Chief Financial

Officer of NRT Inc., Culligan Water Technologies, Inc. and Samsonite

Corporation. Mr. Hunt also serves as a Director of LogicSource, Inc. and as a

member of the Board of Advisors for the University of Vermont School of

Business. Mr. Hunt earned a bachelor's degree in accounting and finance from the

University of Vermont and is a Certified Public Accountant.

2012


912-777-6007 or 954-554-5370

Cindy Z. Michel

(Vice President

and Chief

Compliance

officer)

Ms. Michel was appointed Chief Compliance Officer and Vice President of Apollo

Investment Corporation in 2010. Ms. Michel joined Apollo Global Management,

LLC in 2007 as its Director of Compliance was named Chief Compliance Officer

in 2014. Prior to joining Apollo, Ms. Michel served as the Director of Compliance

of the Private Equity Division at Lehman Brothers. Prior to that, she was

associated with the investment bank Credit-Suisse Securities as a member of its

Compliance Department supporting the Private Equity and Investment Banking

businesses. Before joining Credit-Suisse, Ms. Michel was associated with the law

firm of DLA Piper.

2007

Joseph d. Glatt

(Chief Legal

Officer, Secretary

and Vice

President)

Mr. Glatt was appointed Chief Legal Officer of the Company in 2014, Secretary

in 2010 and Vice President in 2009. Mr. Glatt is also currently General Counsel

of ACM, a position he has held since 2007. Since 2011 he has served as the Chief

Legal Officer of Apollo Senior Floating Rate Fund Inc., and since 2013 he has

served as the Chief Legal Officer of Apollo Tactical Income Fund Inc.

Previously, Mr. Glatt was associated with the law firms of Simpson Thacher &

Bartlett LLP from 1998 to 2003 and Schulte Roth & Zabel LLP from 2003 to

2007, in each case, primarily focusing on mergers and acquisitions, leveraged

buyouts and capital markets activities.

2007

Fund Managers

Managers

Name

Fund(s) They Currently Manage

James C. Zelter

He is the Managing Partner of Apollo Capital Management (“ACM”). The funds in the ACM

platform include: Apollo Strategic Value Fund, Apollo Credit Opportunity Fund I and II, Apollo

Asia Opportunity Fund and Apollo European Principal Finance Fund. ACM also includes Apollo

Investment Management, L.P. the investment manager to Apollo Investment Corporation.

Who is the typical shareholder? Both Retail and Institutional

Institutional Holdings: 40.83%

Total Number of Holders: 228

Total Shares Held: 92,328,607

Total Value of Holdings: 481,032,042

Net Activity (5,997,063)

Market capitalization of company:

$1.16 Billion


912-777-6007 or 954-554-5370

Historical Financials

Selected Financial Data


912-777-6007 or 954-554-5370

Portfolio Break Down


912-777-6007 or 954-554-5370

Cash Flows

In Millions of USD (except for per

share items)

12 months ending

2016-03-31

12 months ending

2015-03-31

12 months ending 2014-

03-31

12 months ending

2013-03-31

Net Income/Revenues -44.53 75.42 270.87 104.47

Non-Cash Items 201.46 118.66 -122.47 29.08

Changes in Working Capital 279.26 -152.06 -441.18 -153.48

Cash from Operating Activities 436.19 42.02 -292.78 -19.93

Financing Cash Flow Items -5.88 -3.83 -12.79 -18.57

Total Cash Dividends Paid -187.18 -189.39 -175.42 -161.14

Issuance (Retirement) of Stock, Net -62.44 0.00 286.55 50.00

Issuance (Retirement) of Debt, Net -170.45 145.11 202.96 153.16

Cash from Financing Activities -425.94 -48.12 301.30 23.45

Foreign Exchange Effects 0.23 -0.22 0.02 0.00

Net Change in Cash 10.49 -6.32 8.54 3.52

Cash Interest Paid, Supplemental 79.76 69.10 56.58 44.76

Dividend History

Annual Dividend Dividend Yield

2011 $ 1.12 17.02%

2012 $ 0.80 9.66%

2013 $ 0.80 9.40%

2014 $ 0.80 10.68%

2015 $ 0.80 15.33%


912-777-6007 or 954-554-5370

How much personal investment does management have in the company?

Insider Relation Owner Type Shares Held As Of Date

Hunt Gregory W. Officer Direct 26,268 12/16/2015

Goldthorpe Edward J. Officer Direct 50,000 8/11/2015

Stein Elliot Jr. Director Direct 22,265 8/7/2015

Puleo Frank C Director Direct 25,000 8/7/2015

Reinfrank Rudolph Director Direct 25,000 8/7/2015

Zetler James C Officer Direct 259,538 8/7/2015

Spielvogel Carl Director Indirect 500 6/10/2014

Top 5 Institutional Holdings

Company Name Shares Held

Thornburg Investments Management Inc. 25,055,339

FMR LLC 14,460,258

Fuller & Thaler Asset Management, Inc. 6,532,113

Bank Of Montreal 3,888,829

Invesco LTD 2,580,103


912-777-6007 or 954-554-5370

Valuation: As Of 5/26/2016

(Data from Google Finance)

AINV’s Valuation Summary

AINV currently has a negative EPS of 0.19.

AINV’s Dividend yield is higher than the selected group of competition stocks in the

Investment sector. The yield is high which means that the cash flow received on an

annual dividend is roughly 15% on every dollar invested.

Dividend is paying out about 15% of the stock price. As long as the company continues

to pay its dividend we are compensated for holding the stock.

Company

Ticker Company Name Mkt Cap P/E EPS Dividend

Div

Yield

APO Apollo Global Management 3.09B 49.84 0.33 1.96 7.81%

PSEC Prospect Capital Corporation 2.69B 26.18 0.29 1.19 13.17%

AINV

Apollo Investment

Corporation 1.23B N/A -0.19 .80 15.07%

SAR Saratoga Investment Corp. 93.89M 7.71 2.12 1.36 10.14%

GBDC Golub Capital BDC Inc. 887.02M 12.1 1.42 1.28 7.43%

HTGC Hercules Capital Inc. 917.89M 25.9 0.48 1.19 13.17%

NMFC New Mountain Finance Corp. 796.60M 47.96 0.26 1.36 10.96%

SLRC Solar Capital Ltd. 774.06M 24.93 0.74 1.60 8.71%

TCPC TCP Capital Corporation 709.47M 13.65 1.06 1.44 9.89%

TCAP Triangle Capital 621.22M 11.72 1.56 2.16 11.81%

BKCC Blackrock Capital Investment 558.29M N/A -0.31 .84 11.32%


912-777-6007 or 954-554-5370

Which analysts follow the stock?

ZACKS Research

Columbine Capital Research

Thomson Reuters Stock Reports

Ford Equity Research

What are the analyst recommendations?

Financial ratios:

Profitability 2013 2014 2015

Revenue Growth 14.86% 13.71% -12.42%

ROE 13.20% 3.89% -2.71%

Net Margin 71.03% 17.39% -11.73%

Gross Margin 100 % 100% 100%

Debt

Liquidity Ratio 60.70% 147.46% 122.09%

Debt-to-Capital 40.08% 43.61% 44.65%

Interest Coverage 4.947 1.95 0.45

Interest Funding - - 26.8%

Research Company Name Research Date Recommendation

ZACKS Report 5/17/2016 3-Hold

Industry Rank: 186/265

Columbine Capital Research 5/14/2016 Current Columbine Rating- Sell

Projecting that AINV will under

Perform the Market over the next

12 months and recommends that

investors sell it now.

Thomson Reuters 5/18/2016 Hold

9 out of 16 analyst are saying

hold.

Ford Equity Research 5/13/2016 Buy

Earnings strength is neutral

Relative value is very positive

Price Movement is Negative.


912-777-6007 or 954-554-5370

Competition

Profitability Industry Avg.

Revenue Growth 9.60%

ROE 2.90%

Net Margin 0.07%

Gross Margin -

Debt

Liquidity Ratio 2.50%

Debt-to-Capital 39.20%

Interest Coverage 2.70

Interest Funding 0.0%

Financial Ratio Analysis

AINV has seen a decrease in revenue growth in the past three years.

ROE has decreased significantly over the past few years for AINV and was negative in

2015.

Interest funding for AINV is substantially above that of other close end funds.

Net margins for AINV are much higher than that of the industry average.

NAV of the AINV fund has decreased from $8.18 to $7.28 over the past year (-11%

decline). The current NAV is $7.28.

Stock is trading approximately 26% below the NAV of the portfolio.


912-777-6007 or 954-554-5370

Concerns and challenges the company faces.

Over the past year, financial service companies have seen an increase in their stock price

relative to other sectors. The current economy is stable but slowing down. This could lead to a

downturn in the US equity market over the next year. Financials typically do not outperform the

market during these slowdowns and the sector could take a hit. If an economic downturn occurs

in the United States then there is a threat to this stocks price being that their portfolios are

comprised of roughly 83% of North American holdings. With Goldthorpe stepping down as

president of AINV and CIO of AIM , investment decisions in the future quarters regarding

Apollo Investment Management, L.P., could be different from the vision the past. This could

result in a positive or negative way making this resignation carry some uncertainty with the

future of AINV. The yield performance of the secured debt portfolio, the unsecured debt

portfolio, and total debt portfolio are down over the past year around .2 basis points off of 2015

annual yields of these portfolios.

Positive developments in the company: growth prospects for the stock and

the company.

The company repurchased 2.01 million shares of common stock in the fourth quarter of

their fiscal year. The total shares bought back as of March 31, 2016 were 10.58 million. This

buyback implied that the company values its stock higher than what it is trading at market price.

There is also a program that a subsidiary of Apollo Global Management LLC will embark on to

acquire $50 million worth of AINV’s common stock. If the energy sector comes back with the

increase in oil prices this summer, AINV’s 11.9% portion of their portfolios in energy holdings

could improve and the remaining core positions Canacol, Deep Gulf and Extraction are

performing in line. Extraction continues to raise junior capital and raised $93 million of equity in

April. AINV recently received co-investment exempted relief from the SEC. This relief provides

AINV the ability to participate in negotiated joint transactions with other funds that are managed

by Apollo. This has the potential to provide BDC shareholders with access to a broader array of

investment opportunities. Apollo Investment Management, along with the board members of

AINV, consulted on getting management fees reduced for the 2017 fiscal year. The new

management fee is 1.5%. AINV is currently investing in more secured debt, and the portion of

the portfolio consisting of secured debt is increasing. The higher the percentage of secured debt

that AINV takes on the less risky the portfolio becomes based off of the capital structure of the

portfolio companies AINV invests in. The company in the first quarter of 2016 is currently

invested in 76% secured debt


912-777-6007 or 954-554-5370

Industry concerns

The Financials sector has come under pressure in many political debates regarding

current regulations and practices of the financial sector as well as the threat of higher interest

rates. The industry as a whole has performed fairly well YTD but there is more uncertainty in the

United States enters in the upcoming Presidential Election. Some of the challenges facing the

new Administration may include further regulation in the financial services industry. This could

result in higher costs and more disclosure for private equity and other investment management

organizations. Business development companies typically are subject to the risk associated with

the portfolio companies falling short of their recovery plans. The payout structure for the

portfolio companies could take a long time to process before AINV, as well as other BDC’s like

AINV, get compensated for investing in a company’s debt. The process of debt repayment could

take a long period of time due to the legal work associated with appropriating funds of the

portfolio companies.

Contingent Liabilities (eg. Outstanding lawsuits)

On May 20, 2013, the Company was named as a defendant in a complaint by the

bankruptcy trustee of DSI Renal Holdings and related companies (“DSI”). The complaint

alleges, among other things, that the Company participated in a “fraudulent conveyance”

involving a restructuring and subsequent sale of DSI in 2010 and 2011. The complaint seeks,

jointly and severally from all defendants, (1) damages of approximately $425 million, of which

the Company’s share would be approximately $41 million, and the return of 9,000 shares of

common stock of DSI obtained by the Company in the restructuring and sale and (2) punitive

damages. At this point in time, the Company is unable to assess whether it may have any liability

in this action. The Company has not made any determination that this action is or may be

material to the Company and intends to vigorously defend itself. The Company has filed a

motion to dismiss this litigation. The motion is pending.


912-777-6007 or 954-554-5370

Performance Analysis of the stock

Performance history (as of 5/19/2016)

Stock Performance (%) 1M 3M 6M YTD 1YR 5YR 10Yr

Price change (AINV) -8.15% 6.45% -14.74% 0.96% -32.00% 52.72% -72.2%

Price change (S&P

500) -2.89% 6.37% -1.99% -0.20% -3.89% 52.49% 116.92%

Price change (Nasdaq) -4.62% 4.59% -7.12% -5.90% -6.67% 66.57% 116.92%

Price Change

(Financial SPCTR

S&P 500 Sector

Index)

-.05% 11.59% -2.27% -0.22% -2.66% 73.09% 73.09%

Price Change (Russel

3000 Index) -0.18% 8.02% -0.47% 2.27% -2.75% 54.72% 69.06%

*Data From Google finance

Performance vs benchmark

On days when the market is up, AINV shares tend to lag the S&P 500 index. However,

on days when the market is down, the shares generally decrease less than the index.

YTD AINV is outperforming the S&P 500 slightly more than 1%.

Performance vs universe

AINV is outperforming the NASDAQ universe YTD.

The Stock has gained 52.72% in price change in the past 5 years and is slightly off the

NASDAQ’s 5 year price change of 66.57%

Performance vs industry and Cratus Capital benchmark

Compared to the rest of the Financials portion of the S&P 500, NAIV is underperforming

and has been for the past 5 years.

The Russell 3000 index compared to AINV, show price changes that are generally

smaller than that of AINV. AINV is underperforming it’s small Cap peer index.

Documents

AINV Data Gathering Report