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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the Quarter Ended June 30, 2005



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



Commission File Number: 333-112591



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APOLLO INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 52-2439556                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|9 West 57thStreet, 41st floor, New York, N.Y.                  |  | 10019                               
|(Address of principal executive office)                        |  | (Zip Code)                          



(212) 515-3200

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days.    Yes   x    No ̈



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



The number of shares of the registrants Common Stock, $.001 par value, outstanding as of June 30, 2005 was 62,768,013.



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##### Table of Contents

APOLLO INVESTMENT CORPORATION

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2005

TABLE OF CONTENTS



|        |  |                                                                                                                          |  |   
|------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --
|        |  | PAGE                                                                                                                    
|PART I  |  | FINANCIAL INFORMATION                                                                                                    |  |   
|        |  |                                                                                                                         
|Item 1. |  | FINANCIAL STATEMENTS (unaudited)                                                                                         |  | 3 
|        |  |                                                                                                                         
|        |  | Statement of Assets and Liabilities as of June 30, 2005 and March 31, 2005                                               |  | 3 
|        |  |                                                                                                                         
|        |  | Statement of Operations for the three months ended June 30, 2005 and 2004                                                |  | 4 
|        |  |                                                                                                                         
|        |  | Statement of Changes in Net Assets for the three months ended June 30, 2005 and for the fiscal year ended March 31, 2005 |  | 5 
|        |  |                                                                                                                         
|        |  | Statement of Cash Flows for the three months ended June 30, 2005 and 2004                                                |  | 6 
|        |  |                                                                                                                         
|        |  | Schedule of Investments as of June 30, 2005                                                                              |  | 7 
|        |  |                                                                                                                         
|        |  | Notes to Financial Statements                                                                                            |  | 10
|        |  |                                                                                                                         
|        |  | Report of Independent Registered Public Accounting Firm                                                                  |  | 16
|        |  |                                                                                                                         
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 17
|        |  |                                                                                                                         
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                               |  | 20
|        |  |                                                                                                                         
|Item 4. |  | Controls and Procedures                                                                                                  |  | 21
|        |  |                                                                                                                         
|PART II |  | OTHER INFORMATION                                                                                                        |  |   
|        |  |                                                                                                                         
|Item 1. |  | Legal Proceedings                                                                                                        |  | 21
|        |  |                                                                                                                         
|Item 2. |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                         |  | 21
|        |  |                                                                                                                         
|Item 3. |  | Defaults upon Senior Securities                                                                                          |  | 21
|        |  |                                                                                                                         
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                                      |  | 21
|        |  |                                                                                                                         
|Item 5. |  | Other Information                                                                                                        |  | 21
|        |  |                                                                                                                         
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                         |  | 22
|        |  |                                                                                                                         
|        |  | Signatures                                                                                                               |  | 23



2



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PART I. FINANCIAL INFORMATION



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



Item 1. Financial Statements



APOLLO INVESTMENT CORPORATION

STATEMENT OF ASSETS AND LIABILITIES

(in thousands, except per share amounts)



|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | -------------- | - | --------- | -
|                                                                                                                                                                            |  | June 30,2005 |           |   | March 31,2005# |  
|                                                                                                                                                                            |  | (unaudited)  |           |   |                |  
|Assets                                                                                                                                                                      |  |              |           |   |                |   |           |  
|Cash                                                                                                                                                                        |  | $            | 464       |   |                | $ | 5,208     |  
|Investments, at fair value (cost of $964,676 and $821,232, respectively) (1)                                                                                                |  |              | 963,876   |   |                |   | 838,482   |  
|Cash equivalents, at fair value (cost of $742,649 and $873,061, respectively)                                                                                               |  |              | 742,649   |   |                |   | 873,056   |  
|Receivable for investments sold                                                                                                                                             |  |              | 34,949    |   |                |   |          |  
|Interest receivable, at value                                                                                                                                               |  |              | 12,133    | * |                |   | 14,805    |  
|Other income receivable                                                                                                                                                     |  |              | 7,476     |   |                |   |          |  
|Dividend receivable                                                                                                                                                         |  |              | 3,484     |   |                |   |          |  
|Unrealized appreciation on forward foreign currency contract (see note 7)                                                                                                   |  |              | 623       |   |                |   | 978       |  
|Prepaid expenses and other assets                                                                                                                                           |  |              | 4,193     |   |                |   | 855       |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|Total assets                                                                                                                                                                |  | $            | 1,769,847 |   |                | $ | 1,733,384 |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|                                                                                                                                                                            |  |             
|Liabilities                                                                                                                                                                 |  |              |           |   |                |   |           |  
|Payable for investments and cash equivalents purchased                                                                                                                      |  | $            | 867,103   | * |                | $ | 834,891   |  
|Management and performance-based incentive fees payable (see note 3)                                                                                                        |  |              | 10,802    |   |                |   | 4,492     |  
|Directors fees payable                                                                                                                                                     |  |              | 137       |   |                |   | 125       |  
|Accrued administrative expenses                                                                                                                                             |  |              | 101       |   |                |   | 42        |  
|Other accrued expenses                                                                                                                                                      |  |              | 722       |   |                |   | 948       |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|Total liabilities                                                                                                                                                           |  | $            | 878,865   |   |                | $ | 840,498   |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|                                                                                                                                                                            |  |             
|Net Assets                                                                                                                                                                  |  |              |           |   |                |   |           |  
|Common stock, par value $.001 per share, 400,000,000 and 100,000,000 common shares authorized, respectively, 62,768,013 and 62,554,976 issued
and outstanding, respectively |  | $            | 63        |   |                | $ | 63        |  
|Paid-in capital in excess of par                                                                                                                                            |  |              | 882,766   |   |                |   | 878,838   |  
|Accumulated under (over) distributed net investment income                                                                                                                  |  |              | 1,785     |   |                |   | (4,067    | )
|Accumulated under (over) distributed net realized gains (losses)                                                                                                            |  |              | 6,645     |   |                |   | (145      | )
|Net unrealized appreciation (depreciation)                                                                                                                                  |  |              | (277      | ) |                |   | 18,197    |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|Total Net Assets                                                                                                                                                            |  | $            | 890,982   |   |                | $ | 892,886   |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|Total liabilities and net assets                                                                                                                                            |  | $            | 1,769,847 |   |                | $ | 1,733,384 |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  
|Net Asset Value Per Share                                                                                                                                                   |  | $            | 14.19     |   |                | $ | 14.27     |  
|                                                                                                                                                                            |  |              |           |   |                |   |           |  

---

|(1) | None of our portfolio companies is controlled or affiliated as defined by the Investment Company Act of 1940.
|--- | -------------------------------------------------------------------------------------------------------------

|* | Values reflect unrealized depreciation totaling $100 (in 000s) at June 30, 2005.
|- | ---------------------------------------------------------------------------------

|# | Certain amounts have been reclassified to conform to the current periods presentation.
|- | ---------------------------------------------------------------------------------------



See notes to financial statements.



3



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##### Table of Contents

APOLLO INVESTMENT CORPORATION

STATEMENT OF OPERATIONS (unaudited)

(in thousands, except per share amounts)



|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------------- | - | ------ | -
|                                                                                                                           |  | Three MonthsEnded June 30, 2005 |         |   | April 8, 2004* through June 30, 2004# |  
|INVESTMENT INCOME:                                                                                                         |  |                                 |         |   |                                       |   |        |  
|Interest                                                                                                                   |  | $                               | 26,734  |   |                                       | $ | 3,805  |  
|Dividends                                                                                                                  |  |                                 | 3,484   |   |                                       |   |       |  
|Other Income                                                                                                               |  |                                 | 7,575   |   |                                       |   | 2      |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Total Investment Income                                                                                                    |  |                                 | 37,793  |   |                                       |   | 3,807  |  
|                                                                                                                           |  |                                
|EXPENSES:                                                                                                                  |  |                                 |         |   |                                       |   |        |  
|Management fees                                                                                                            |  | $                               | 4,490   |   |                                       | $ | 4,013  |  
|Performance-based incentive fees                                                                                           |  |                                 | 6,311   |   |                                       |   |       |  
|Administrative services expense                                                                                            |  |                                 | 312     |   |                                       |   | 175    |  
|Insurance expense                                                                                                          |  |                                 | 203     |   |                                       |   | 369    |  
|General and administrative expenses                                                                                        |  |                                 | 1,233   |   |                                       |   | 727    |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Total expenses                                                                                                             |  |                                 | 12,549  |   |                                       |   | 5,284  |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Net investment income (loss)                                                                                               |  | $                               | 25,244  |   |                                       | $ | (1,477 | )
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS AND FOREIGN CURRENCIES:                               |  |                                 |         |   |                                       |   |        |  
|Net realized gain (loss):                                                                                                  |  |                                 |         |   |                                       |   |        |  
|Investments                                                                                                                |  |                                 | 3,349   |   |                                       |   |       |  
|Forward foreign currency contract                                                                                          |  |                                 | 3,439   |   |                                       |   |       |  
|Cash equivalents                                                                                                           |  |                                 | 2       |   |                                       |   |       |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Net realized gains                                                                                                         |  |                                 | 6,790   |   |                                       |   |       |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Net change in unrealized gain (loss):                                                                                      |  |                                 |         |   |                                       |   |        |  
|Investments                                                                                                                |  |                                 | (18,050 | ) |                                       |   | 2,615  |  
|Cash equivalents                                                                                                           |  |                                 | 5       |   |                                       |   | (275   | )
|Forward foreign currency contract                                                                                          |  |                                 | (355    | ) |                                       |   |       |  
|Other assets                                                                                                               |  |                                 | (74     | ) |                                       |   |       |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Net unrealized gain (loss)                                                                                                 |  |                                 | (18,474 | ) |                                       |   | 2,340  |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|Net realized and unrealized gain (loss) from investments, cash equivalents and foreign currency contracts and other assets |  |                                 | (11,684 | ) |                                       |   | 2,340  |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                                                       |  | $                               | 13,560  |   |                                       | $ | 863    |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  
|EARNINGS PER COMMON SHARE (see note 5)                                                                                     |  | $                               | 0.217   |   |                                       | $ | 0.014  |  
|                                                                                                                           |  |                                 |         |   |                                       |   |        |  

---

|* | Commencement of operations
|- | --------------------------

|# | Certain amounts have been reclassified to conform to the current periods presentation.
|- | ---------------------------------------------------------------------------------------



See notes to financial statements.



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APOLLO INVESTMENT CORPORATION

STATEMENT OF CHANGES IN NET ASSETS

(unaudited)

(in thousands, except
shares)



|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------------- | - | ---------- | -
|                                                                                                                           |  | Three MonthsEnded June 30, 2005 |         |   | April 8, 2004* through March 31, 2005 |  
|Increase in net assets from operations:                                                                                    |  |                                 |         |   |                                       |   |            |  
|Net investment income                                                                                                      |  | $                               | 25,244  |   |                                       | $ | 25,453     |  
|Net realized gains                                                                                                         |  |                                 | 6,790   |   |                                       |   | 495        |  
|Net change in unrealized gain (loss)                                                                                       |  |                                 | (18,474 | ) |                                       |   | 18,197     |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Net increase in net assets resulting from operations                                                                       |  |                                 | 13,560  |   |                                       |   | 44,145     |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Distributions to shareholders from:                                                                                        |  |                                 |         |   |                                       |   |            |  
|Net investment income                                                                                                      |  |                                 | (19,392 | ) |                                       |   | (30,160    | )
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Capital share transactions:                                                                                                |  |                                 |         |   |                                       |   |            |  
|Proceeds from shares sold                                                                                                  |  |                                 |        |   |                                       |   | 871,875    |  
|Less offering costs of initial public offering                                                                             |  |                                 |        |   |                                       |   | (1,722     | )
|Reinvestment of distributions                                                                                              |  |                                 | 3,928   |   |                                       |   | 8,747      |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Net increase in net assets from capital share transactions                                                                 |  |                                 | 3,928   |   |                                       |   | 878,900    |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Total increase (decrease) in net assets:                                                                                   |  |                                 | (1,904  | ) |                                       |   | 892,885    |  
|Net assets at beginning of period                                                                                          |  | $                               | 892,886 |   |                                       | $ | 1          |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Net assets at end of period (includes under (over) distributed net investment income of $1,785 and ($4,067), respectively) |  | $                               | 890,982 |   |                                       | $ | 892,886    |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Capital share activity                                                                                                     |  |                                 |         |   |                                       |   |            |  
|Shares sold                                                                                                                |  |                                 |        |   |                                       |   | 62,000,100 |  
|Shares issued in reinvestment of distributions                                                                             |  |                                 | 213,037 |   |                                       |   | 554,876    |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  
|Net increase in capital share activity                                                                                     |  |                                 | 213,037 |   |                                       |   | 62,554,976 |  
|                                                                                                                           |  |                                 |         |   |                                       |   |            |  

---

|* | Commencement of operations
|- | --------------------------



See notes to financial statements.



5



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APOLLO INVESTMENT CORPORATION

STATEMENT OF CASH FLOWS

(unaudited) (in thousands)



|                                                                                                                            |  |                                 |          |   |                                     |   |          |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | -------- | - | ----------------------------------- | - | -------- | -
|                                                                                                                            |  | Three monthsended June 30, 2005 |          |   | April 8, 2004*through June 30, 2004 |  
|Cash Flows from Operating Activities:                                                                                       |  |                                 |          |   |                                     |   |          |  
|Net Increase in Net Assets Resulting from Operations                                                                        |  | $                               | 13,560   |   |                                     | $ | 863      |  
|Adjustments to reconcile net increase:                                                                                      |  |                                 |          |   |                                     |   |          |  
|Purchase of investment securities                                                                                           |  |                                 | (264,509 | ) |                                     |   | (218,081 | )
|Proceeds from disposition of investment securities                                                                          |  |                                 | 124,415  |   |                                     |   |         |  
|Proceeds from the settlement of a forward foreign currency contract                                                         |  |                                 | 3,439    |   |                                     |   |         |  
|Sale of short-term securities, net                                                                                          |  |                                 | (100,020 | ) |                                     |   |         |  
|Increase in interest and dividends receivable                                                                               |  |                                 | (8,363   | ) |                                     |   | (1,953   | )
|Increase in prepaid expenses and other assets                                                                               |  |                                 | (3,338   | ) |                                     |   | (1,377   | )
|Increase in management fee payable                                                                                          |  |                                 | 6,309    |   |                                     |   | 1,446    |  
|Increase in accrued expenses                                                                                                |  |                                 | (154     | ) |                                     |   | 420      |  
|Increase in payables for investments purchased                                                                              |  |                                 | 132,233  |   |                                     |   |         |  
|Increase in receivables for investments sold                                                                                |  |                                 | (34,949  | ) |                                     |   |         |  
|Net change in unrealized appreciation on investments, cash equivalents, forward foreign currency contracts and other assets |  |                                 | 18,480   |   |                                     |   | (2,340   | )
|Net realized gain on investments and cash equivalents                                                                       |  |                                 | (6,790   | ) |                                     |   |         |  
|                                                                                                                            |  |                                 |          |   |                                     |   |          |  
|Net Cash Used by Operating Activities                                                                                       |  |                                 | (119,687 | ) |                                     |   | (221,022 | )
|                                                                                                                            |  |                                
|Cash Flows from Financing Activities:                                                                                       |  |                                 |          |   |                                     |   |          |  
|Net proceeds from the issuance of common stock                                                                              |  |                                 |         |   |                                     |   | 871,875  |  
|Offering costs from the issuance of common stock                                                                            |  |                                 |         |   |                                     |   | (1,722   | )
|Dividends paid in cash                                                                                                      |  |                                 | (15,464  | ) |                                     |   |         |  
|                                                                                                                            |  |                                 |          |   |                                     |   |          |  
|Net Cash (Used) Provided by Financing Activities                                                                            |  |                                 | (15,464  | ) |                                     |   | 870,153  |  
|                                                                                                                            |  |                                
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                        |  |                                 | (135,151 | ) |                                     |   | 649,131  |  
|                                                                                                                            |  |                                
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                              |  |                                 | 878,264  |   |                                     |   | 1        |  
|                                                                                                                            |  |                                 |          |   |                                     |   |          |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                                    |  | $                               | 743,113  |   |                                     | $ | 649,132  |  
|                                                                                                                            |  |                                 |          |   |                                     |   |          |  



Non-cash financing activities consist
of the reinvestment of dividends totaling $3,928 and $0, respectively (in thousands).

---

|* | Commencement of operations
|- | --------------------------



See notes to financial statements.



6



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##### Table of Contents

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited)

June 30, 2005

(in thousands, except
warrants/shares)



|                                                                     |  |                   |  |            |           |      |   |                |  |   |        
|-------------------------------------------------------------------- |  | ----------------- |  | ---------- | --------- | ---- | - | -------------- |  | - | -------
|Portfolio Company (1)                                                |  | Industry          |  | Par Amount |           | Cost |   | Fair Value (2)
|Subordinated Debt/Corporate Notes  53.5%                            |  |                   |  |            |           |      |   |                |  |   |        
|ALM Media Holdings, Inc., 13.00%, 3/15/13  ̈                          |  | Publishing        |  | $          | 16,572    |      | $ | 16,416         |  | $ | 16,572 
|AMH Holdings II, Inc., 13.625%, 12/01/14  ̈                           |  | Building Products |  |            | 45,000    |      |   | 44,015         |  |   | 45,000 
|Anthony, Inc., 13.50%, 9/01/12  ̈                                     |  | Manufacturing     |  |            | 9,597     |      |   | 9,466          |  |   | 9,597  
|API Heat Transfer, Inc., 13.75%, 12/31/12                            |  | Manufacturing     |  |            | 19,000    |      |   | 18,668         |  |   | 19,000 
|Invista, 9.25%, 5/01/12  ̈                                            |  | Chemicals         |  |            | 35,000    |      |   | 35,000         |  |   | 38,150 
|Language Line Holdings, Inc., 0% / 14.125%, 6/15/13                  |  | Business Services |  |            | 27,678    |      |   | 16,526         |  |   | 14,116 
|Language Line Inc., 11.125%, 6/15/12                                 |  | Business Services |  |            | 27,081    |      |   | 26,745         |  |   | 24,643 
|Latham Manufacturing Corp., 14.00%, 6/30/11                          |  | Leisure Equipment |  |            | 31,257    |      |   | 30,665         |  |   | 31,257 
|Lexicon Marketing (USA), Inc., 13.75%, 1/02/12                       |  | Direct Marketing  |  |            | 27,287    |      |   | 26,772         |  |   | 27,287 
|National Waterworks Holdings, Inc., 12.50%, 1/01/14  ̈                |  | Distribution      |  |            | 37,000    |      |   | 36,296         |  |   | 37,000 
|N.E.W. Customer Service Companies Inc., 14.00%, Convertible, 8/17/13 |  | Consumer Services |  |            | 8,320     |      |   | 8,320          |  |   | 8,320  
|Playpower Holdings Inc., 15.50%, 11/30/12  ̈                          |  | Leisure Equipment |  |            | 65,485    |      |   | 65,485         |  |   | 65,485 
|Pro Mach Merger Sub, Inc., 13.75%, 6/15/12                           |  | Machinery         |  |            | 19,099    |      |   | 18,736         |  |   | 19,099 
|Sirona Dental Systems GmbH, L+950, 7/01/12*                          |  | Healthcare        |  |           | 25,000    |      |   | 30,199         |  |   | 30,266 
|Source Media Holdings Inc., 13.00%, 11/30/12  ̈                       |  | Publishing        |  |            | 18,240    |      |   | 17,878         |  |   | 18,240 
|T/Y Merger Corp., 14.75%, 2/26/10                                    |  | Logistics         |  |            | 18,129    |      |   | 17,859         |  |   | 18,129 
|Tumi Holdings, Inc., L+1100, 12/31/14                                |  | Consumer Products |  |            | 12,686    |      |   | 12,686         |  |   | 12,686 
|WDAC Intermediate Corp., 13.75%, 6/01/15*                            |  | Publishing        |  |           | 35,193    |      |   | 47,158         |  |   | 41,479 
|                                                                     |  |                   |  |            |           |      |   |                |  |   |        
|Total Subordinated Debt/Corporate Notes                              |  |                   |  |            |           |      | $ | 478,890        |  | $ | 476,326
|                                                                     |  |                   |  |            |           |      |   |                |  |   |        
|                                                                     |  |                   |  |           
|                                                                     |  |                   |  | Shares     |           |      |   |               
|Common Stock - 2.5%                                                  |  |                   |  |            |           |      |   |                |  |   |        
|DTPI Holdings, Inc.                                                  |  | Infrastructure    |  |            | 200,000   |      | $ | 2,000          |  | $ | 2,000  
|Latham Acquisition Corp.                                             |  | Leisure Equipment |  |            | 30,000    |      |   | 3,000          |  |   | 3,000  
|LM Acquisition Ltd.                                                  |  | Direct Marketing  |  |            | 10,000    |      |   | 10,000         |  |   | 11,493 
|N.E.W. Customer Service Companies, Inc.                              |  | Consumer Services |  |            | 1,105,961 |      |   | 3,415          |  |   | 3,401  
|Pro Mach Coinvestment, LLC                                           |  | Machinery         |  |            | 150,000   |      |   | 1,500          |  |   | 1,500  
|T/Y Merger Corp.                                                     |  | Logistics         |  |            | 250,000   |      |   | 2,500          |  |   | 550    
|                                                                     |  |                   |  |            |           |      |   |                |  |   |        
|Total Common Stock                                                   |  |                   |  |            |           |      | $ | 22,415         |  | $ | 21,944 
|                                                                     |  |                   |  |            |           |      |   |                |  |   |        



See notes to financial
statements.



7



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##### Table of Contents

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2005

(in thousands)



|                                                |  |                       |  |            |        |      |   |                |  |   |        
|----------------------------------------------- |  | --------------------- |  | ---------- | ------ | ---- | - | -------------- |  | - | -------
|                                                |  | Industry              |  | Par Amount |        | Cost |   | Fair Value (2)
|Bank Debt/Senior Secured Loans (3)  52.2%      |  |                       |  |            |        |      |   |                |  |   |        
|1stLien Bank
Debt/Senior Secured Loans  13.0%  |  |                       |  |            |        |      |   |                |  |   |        
|Alliance Mortgage Investments, Inc., 6/01/10    |  | Consumer Finance      |  | $          | 37,188 |      | $ | 37,188         |  | $ | 37,374 
|American Safety Razor, 3/21/12                  |  | Consumer Products     |  |            | 1,995  |      |   | 1,995          |  |   | 2,020  
|Charter Communications, 4/21/11                 |  | Cable TV              |  |            | 24,750 |      |   | 24,750         |  |   | 24,607 
|Cygnus Business Media, Inc., 7/13/09            |  | Media                 |  |            | 14,925 |      |   | 14,864         |  |   | 14,925 
|Diam International, 7/01/11                     |  | Consumer Products     |  |            | 2,000  |      |   | 2,000          |  |   | 2,000  
|Directed Electronics, 6/17/10                   |  | Electronics           |  |            | 4,859  |      |   | 4,859          |  |   | 4,914  
|Healthy Directions, LLC, 8/31/10                |  | Vitamins, Supplements |  |            | 11,471 |      |   | 11,419         |  |   | 11,385 
|Ranpak Corp., 5/26/10                           |  | Packaging             |  |            | 5,125  |      |   | 5,125          |  |   | 5,176  
|Survey Sampling International, LLC, 5/06/11     |  | Market Research       |  |            | 10,000 |      |   | 9,988          |  |   | 10,056 
|Tumi Holdings, Inc., 12/31/13                   |  | Consumer Products     |  |            | 3,500  |      |   | 3,500          |  |   | 3,526  
|                                                |  |                       |  |            |        |      |   |                |  |   |        
|Total 1st Lien Bank Debt/Senior Secured Loans   |  |                       |  |            |        |      | $ | 115,688        |  | $ | 115,983
|                                                |  |                       |  |            |        |      |   |                |  |   |        
|2nd Lien Bank Debt/Senior Secured Loans  39.2% |  |                       |  |            |        |      |   |                |  |   |        
|ALM Media Holdings, Inc., 3/07/11               |  | Publishing            |  | $          | 27,750 |      | $ | 27,750         |  | $ | 27,750 
|American Asphalt & Grading Co., 7/01/11         |  | Infrastructure        |  |            | 26,500 |      |   | 26,500         |  |   | 26,500 
|American Safety Razor, 9/21/12                  |  | Consumer Products     |  |            | 13,500 |      |   | 13,500         |  |   | 13,635 
|Anthony International, 9/01/11                  |  | Manufacturing         |  |            | 13,000 |      |   | 12,883         |  |   | 13,000 
|C.H.I. Overhead Doors, Inc., 10/22/11           |  | Building Products     |  |            | 10,000 |      |   | 9,954          |  |   | 10,050 
|Cygnus Business Media, Inc., 1/13/10            |  | Media                 |  |            | 10,000 |      |   | 9,916          |  |   | 10,000 
|Diam International, 7/01/12                     |  | Consumer Products     |  |            | 20,000 |      |   | 20,000         |  |   | 20,000 
|Dr. Leonards Healthcare Corp.., 7/31/12        |  | Direct Marketing      |  |            | 22,000 |      |   | 22,000         |  |   | 22,055 
|EuroFresh, 5/14/10                              |  | Agriculture           |  |            | 25,000 |      |   | 24,704         |  |   | 25,687 
|Grand Vehicle Works Holding Corp., 7/23/11      |  | Manufacturing         |  |            | 10,000 |      |   | 10,000         |  |   | 8,500  
|Mueller Group Inc., 11/01/11                    |  | Industrial            |  |            | 17,000 |      |   | 17,000         |  |   | 17,425 
|NES Rentals Holdings Inc., 8/17/10              |  | Equipment Rental      |  |            | 24,813 |      |   | 24,813         |  |   | 25,402 
|N.E.W. Customer Service Companies, 7/01/12      |  | Consumer Services     |  |            | 50,000 |      |   | 50,000         |  |   | 50,000 
|Healthy Directions, LLC, 8/31/11                |  | Vitamins, Supplements |  |            | 14,925 |      |   | 14,787         |  |   | 15,000 
|Ranpak Corp., 3/17/11                           |  | Packaging             |  |            | 10,000 |      |   | 10,000         |  |   | 10,100 
|Source Media Inc., 11/30/12                     |  | Publishing            |  |            | 10,000 |      |   | 10,000         |  |   | 10,131 
|Survey Sampling International, LLC, 5/07/12     |  | Market Research       |  |            | 15,000 |      |   | 14,963         |  |   | 15,178 
|Trout Coal Holdings, Inc., 3/23/12              |  | Mining                |  |            | 6,000  |      |   | 6,005          |  |   | 6,030  
|Tumi Holdings, Inc., 6/30/14                    |  | Consumer Products     |  |            | 3,000  |      |   | 3,000          |  |   | 3,030  
|United Site Services, Inc., 6/30/10             |  | Environmental         |  |            | 10,000 |      |   | 9,908          |  |   | 10,000 
|Wyle Laboratories, Inc., 7/28/11                |  | Aerospace             |  |            | 10,000 |      |   | 10,000         |  |   | 10,150 
|                                                |  |                       |  |            |        |      |   |                |  |   |        
|Total 2nd Lien Bank Debt/Senior Secured Loans   |  |                       |  |            |        |      | $ | 347,683        |  | $ | 349,623
|                                                |  |                       |  |            |        |      |   |                |  |   |        



See notes to financial
statements.





8



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##### Table of Contents

APOLLO INVESTMENT CORPORATION

SCHEDULE OF INVESTMENTS (unaudited) (continued)

June 30, 2005

(in thousands)



|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- |  | ---------- | ------- | ---- | - | -------------- |  | - | --------- | -
|                                                                                                                                                                                                             |  | Industry   |  | Par Amount |         | Cost |   | Fair Value (2) | 
|Bank Debt/Senior Secured Loans (3)  (continued)                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|Total Bank Debt/Senior Secured Loans                                                                                                                                                                         |  |            |  |            |         |      | $ | 463,371        |  | $ | 465,606   |  
|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|Total Investments                                                                                                                                                                                            |  |            |  |            |         |      | $ | 964,676        |  | $ | 963,876   |  
|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|Cash Equivalents 83.3%                                                                                                                                                                                      |  |            |  |            |         |      |   |                |  |   |           |  
|U.S. Cash Management Bill, 3.17%, 7/15/05                                                                                                                                                                    |  | Government |  | $          | 700,000 |      | $ | 699,149        |  | $ | 699,149   |  
|U.S. Treasury Bill Repurchase Agreement, 2.70% (counterparty JPMorgan Chase, N.A., executed 6/30/05, due 7/01/05, repurchase amount $43,500,
collateralized by US Treasury Note 912828DN7 par value $44,040) |  | Government |  |            | 43,500  |      |   | 43,500         |  |   | 43,500    |  
|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|Total Cash Equivalents                                                                                                                                                                                       |  |            |  |            |         |      | $ | 742,649        |  | $ | 742,649   |  
|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|Total Investments & Cash Equivalents - 191.5% **                                                                                                                                                             |  |            |  |            |         |      | $ | 1,707,325      |  | $ | 1,706,525 |  
|Liabilities in excess of other assets  (91.5%)                                                                                                                                                              |  |            |  |            |         |      |   |                |  |   | (815,543  | )
|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  
|Net Assets  100.0%                                                                                                                                                                                          |  |            |  |            |         |      |   |                |  | $ | 890,982   |  
|                                                                                                                                                                                                             |  |            |  |            |         |      |   |                |  |   |           |  

---

|(1) | None of our portfolio companies is controlled or affiliated as defined by the Investment Company Act of 1940.
|--- | -------------------------------------------------------------------------------------------------------------

|(2) | Fair value is determined by or under the direction of the Board of Directors of the Company (see Note 2).
|--- | ---------------------------------------------------------------------------------------------------------

|(3) | Represent floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the LIBOR (London Inter-bank Offer Rate), EURIBOR (Euro Inter-bank
Offered Rate) or the Prime Rate.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| ̈ | These securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions that are exempt from registration,
normally to qualified institutional buyers.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* | Denominated in Euros ()
|- | --------------------------

|** | Aggregate gross unrealized appreciation for federal income tax purposes totals $8,720 aggregate gross unrealized depreciation for federal income tax purposes totals $13,884. Net
unrealized depreciation for federal income tax purposes totals $5,164 based on a tax cost of $1,711,689 (all in thousands).
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See notes to financial statements.



9



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##### Table of Contents

Apollo Investment Corporation

Notes To Financial Statements (unaudited)

(in thousands except share and per share amounts)



Note 1. Organization and Interim Financial Statements



Apollo Investment Corporation (Apollo Investment or the Company), a Maryland corporation organized on February 2, 2004, is a closed-end,
non-diversified management investment company that has filed an election to be treated as a business development company (BDC) under the Investment Company Act of 1940. In addition, for tax purposes we have elected to be treated as a
regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in middle-market
companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.



On April 8, 2004, Apollo Investment closed its initial public offering and sold 62,000,000 shares of its common stock at a price of $15.00
per share, less an underwriting discount and commissions totaling $0.9375 per share. We commenced operations on April 8, 2004 as we received $870.15 million in total net proceeds from the offering.



Note 2. Significant Accounting Policies



The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income
and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.



Interim financial statements are prepared in accordance with GAAP for interim financial
information and pursuant to the requirements for reporting on Form 10-Q and Article 6 or 10 of Regulation S-X, as appropriate. Accordingly, certain disclosures accompanying financial statements prepared in accordance with GAAP are omitted. In
accordance with Article 6-09 of Regulation S-X under the Exchange Act, we are providing a Statement of Changes in Net Assets in lieu of a Statement of Changes in Stockholders Equity. In addition, certain prior period amounts have been
reclassified to conform with the current period presentation. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim
period, have been included.



The significant accounting policies consistently
followed by Apollo Investment are:



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



|(b) | Investments for which market quotations are readily available are valued at such market quotations; debt and equity securities that are not publicly traded or whose market prices
are not readily available are valued at fair value as determined in good faith by or under the direction of our Board of Directors. Subordinated debt, senior secured debt and other debt securities with maturities greater than 60 days are valued by
an independent pricing service or at the mean between the bid and ask prices from at least two brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). With respect to certain private equity securities,
each investment is valued using comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public. The value is then discounted to reflect the illiquid nature of the investment.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we will use the pricing indicated by the external event to corroborate our private equity valuation. Because we expect that there will not be a
readily available market value for most of the investments in our portfolio, we expect to value substantially all of our portfolio investments at fair value as determined in good faith by or under the direction of our Board of Directors using a
documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ
significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10



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##### Table of Contents

Apollo Investment Corporation

Notes to Financial Statements (unaudited) (continued)

(in thousands except
share and per share amounts)



With respect to our
investments for which market quotations are not readily available, our Board of Directors undertakes a multi-step valuation process each quarter, as described below:



| | (1) | Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Preliminary valuation conclusions are then documented and discussed with our senior management;
| | --- | -----------------------------------------------------------------------------------------------



| | (3) | Independent valuation firms engaged by our board of directors conduct independent appraisals and review managements preliminary valuations and their own independent
assessment;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | The audit committee of our board of directors reviews the preliminary valuation of our investment adviser and that of the independent valuation firms and responds and supplements
the valuation recommendation of the independent valuation firm to reflect any comments; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | The board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of our investment adviser, the
respective independent valuation firms and the audit committee.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The types of factors that we may take into account in fair value pricing our investments include, as relevant, the nature and realizable value of any collateral, the portfolio companys ability to make payments
and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors.



Determination of fair values involves subjective judgments and estimates. Accordingly, these notes to our financial
statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.



|(c) | Investments purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates value;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Gains or losses on the sale of investments are calculated by using the specific identification method;
|--- | ------------------------------------------------------------------------------------------------------



|(e) | Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with
investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment
fees are recorded as interest income;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | The Company intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies to make distributions of
taxable income sufficient to relieve it from substantially all Federal income and excise taxes;
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | In accordance with Statement of Position 93-2 Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies, book and tax basis differences relating to stockholder distributions and other permanent book and tax differences are reclassified to paid-in capital. In addition, the character of income and gains to be distributed is
determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | Dividends and distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Board of Directors each quarter and
is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(i) | Origination, facility, commitment, and other fees received by the Company on loan agreements or other investments are typically accreted over the term of the loan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(j) | The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate
of exchange of such currencies against U.S. dollars on the date of valuation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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##### Table of Contents

Apollo Investment Corporation

Notes to Financial Statements (unaudited) (continued)

(in thousands except
share and per share amounts)



Note 3. Agreements



Apollo Investment has entered into an Investment Advisory and Management Agreement with the
Investment Adviser, Apollo Investment Management, L.P., under which the Investment Adviser, subject to the overall supervision of Apollo Investments Board of Directors, will manage the day-to-day operations of, and provide investment advisory
services to, Apollo Investment. For providing these services, the Investment Adviser receives a fee from Apollo Investment, consisting of two componentsa base management fee and an incentive fee. The base management fee is calculated at an
annual rate of 2.00% of Apollo Investments gross assets. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Apollo Investments pre-incentive fee net investment income for the
immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as
commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Apollo Investments operating expenses for the quarter (including the base
management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not
include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Apollo Investments net assets at the end
of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to
calculate the 2% base management fee. Apollo Investment pays the Investment Adviser an incentive fee with respect to Apollo Investments pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any
calendar quarter in which Apollo Investments pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Apollo Investments pre-incentive fee net investment income with respect to that portion of such
pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Apollo Investments pre-incentive fee net investment income, if any, that exceeds
2.1875% in any calendar quarter. These calculations are appropriately pro rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. The second part of the incentive fee will be
determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), commencing on December 31, 2004, and will equal 20.0% of Apollo
Investments realized capital gains for the calendar year, computed net of all realized capital losses and unrealized capital depreciation at the end of such year.



For the period April 1, 2005 through June 30, 2005, the Investment Adviser received $4,490,383 in base investment advisory and management
fees and $6,311,023 in net investment income based incentive fees from Apollo Investment.



Apollo Investment has also entered into an Administration Agreement with Apollo Investment Administration, LLC (the Administrator) under which the Administrator provides administrative services for Apollo
Investment. For providing these services, facilities and personnel, Apollo Investment reimburses the Administrator for Apollo Investments allocable portion of overhead and other expenses incurred by Apollo Administration in performing its
obligations under the Administration Agreement, including rent and Apollo Investments allocable portion of its chief compliance officer and chief financial officer and their respective staffs. The Administrator will also provide on Apollo
Investments behalf managerial assistance to these portfolio companies to which Apollo Investment is required to provide such assistance.



For the three months ended June 30, 2005, the Administrator was reimbursed $517,658 from Apollo Investment on the $618,437 of expenses accrued under the Administration
Agreement.



On April 14, 2005, Apollo Investment entered into a Senior Secured
Revolving Credit Agreement (the Credit Agreement), among Apollo Investment, the lenders party thereto and JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent for the lenders.



12



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##### Table of Contents

Apollo Investment Corporation

Notes To Financial Statements (unaudited) (continued)

(in thousands except
share and per share amounts)



Under the Credit Agreement, the lenders have
agreed to extend credit to Apollo Investment in an initial aggregate principal or face amount not exceeding $800 million at any one time outstanding. The Credit Agreement is a five-year revolving facility (with a stated maturity date of April 14,
2010) and is secured by substantially all of the assets in Apollo Investments portfolio, including cash and cash equivalents. Pricing is set at 100 basis points over LIBOR. The Credit Agreement contains affirmative and restrictive covenants,
including: (a) periodic financial reporting requirements, (b) maintaining minimum shareholders equity of the greater of (i) 40% of the total assets of Apollo Investment and its subsidiaries as at the last day of any fiscal quarter and (ii) the
sum of (A) $300 million plus (B) 25% of the net proceeds from the sale of equity interests in Apollo Investment after the closing date of the Credit Agreement, (c) maintaining a ratio of total assets (less total liabilities) to total indebtedness,
in each case of Apollo Investment and its subsidiaries, of not less than 2.0:1.0, (d) maintaining minimum liquidity, (e) limitations on the incurrence of additional indebtedness, (f) limitations on liens, (g) limitations on investments (other than
in the ordinary course of Apollo Investments business), (h) limitations on mergers and disposition of assets (other than in the normal course of Apollo Investments business activities) and (i) limitations on the creation or existence of
agreements that prohibit liens on properties of Apollo Investments subsidiaries. In addition to the asset coverage ratio described in clause (c) of the preceding sentence, borrowings under the Credit Agreement (and the incurrence of certain
other permitted debt) are subject to compliance with a borrowing base that applies different advance rates to different types of assets in Apollo Investments portfolio. The Credit Agreement provides for the ability of Apollo Investment to seek
additional commitments from lenders thereunder in an aggregate amount of up to $400 million. Apollo Investment has not yet borrowed any amounts under the Credit Agreement.



The Credit Agreement will be used to supplement Apollo Investments equity capital to make additional portfolio investments. Apollo
Investment has employed a significant portion of its equity capital and expects to begin using the Credit Agreement in the coming months to support additions to the portfolio.



From time to time, certain of the lenders provide customary commercial and investment banking services to affiliates of Apollo Investment.
JPMorgan also serves as custodian and fund accounting agent for Apollo Investment.



Note 4. Net Asset Value Per Share



At June 30, 2005, the
Companys total net assets and net asset value per share were $890,982,461 and $14.19, respectively.



Note 5. Earnings Per Share



The
following information sets forth the computation of basic and diluted net increase in stockholders equity per share resulting from operations for the three month periods ended June 30, 2005 and 2004, respectively:



|                                                                                            |  |                                  |            |                                  |   |            |  
|------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | -------------------------------- | - | ---------- | -
|                                                                                            |  | Three months ended June 30, 2005 |            | Three months ended June 30, 2004 |  
|Numerator for net investment income (loss) per share:                                       |  | $                                | 25,244,095 |                                  | $ | (1,476,889 | )
|Numerator for increase in stockholders equity per share:                                   |  | $                                | 13,560,419 |                                  | $ | 862,839    |  
|Denominator for basic and diluted weighted average shares:                                  |  |                                  | 62,557,317 |                                  |   | 62,000,100 |  
|                                                                                            |  |                                 
|Basic and diluted net investment income per share:                                          |  | $                                | 0.404      |                                  | $ | (0.024     | )
|Basic and diluted net increase in stockholders equity per share resulting from operations: |  | $                                | 0.217      |                                  | $ | 0.014      |  



13



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##### Table of Contents

Apollo Investment Corporation

Notes To Financial Statements (unaudited) (continued)

(in thousands except
share and per share amounts)



Note 6. Investments



As of June 30, 2005, investments and cash equivalents consisted of the following:



|                                  |  |                              |           |            |   |          
|--------------------------------- |  | ---------------------------- | --------- | ---------- | - | ---------
|                                  |  | June 30, 2005 (in thousands)
|                                  |  | Cost                         |           | Fair Value
|Subordinated Debt/Corporate Notes |  | $                            | 478,890   |            | $ | 476,326  
|Common Stock                      |  |                              | 22,415    |            |   | 21,944   
|Bank Debt/Senior Secured Debt     |  |                              | 463,371   |            |   | 465,606  
|Cash Equivalents                  |  |                              | 742,649   |            |   | 742,649  
|                                  |  |                              |           |            |   |          
|Totals                            |  | $                            | 1,707,325 |            | $ | 1,706,525



Note 7. Forward Foreign Currency
Contract



At June 30, 2005, the Company had an open foreign currency
contract to sell euro forward and bears the market risk that arises from changes in foreign currency exchange rates. Unrealized depreciation on the contract is reflected in the accompanying financial statements as follows:



|                 |  |                |            |      |   |              |  |                 |            |                         |          |  |   |        
|---------------- |  | -------------- | ---------- | ---- | - | ------------ |  | --------------- | ---------- | ----------------------- | -------- |  | - | -------
|Foreign Currency |  | Local Currency |            | Cost |   | Market Value |  | Settlement Date |            | Unrealized Depreciation
|To Sell: Euro    |  |               | 35,300,000 |      | $ | 43,373,110   |  | $               | 43,995,743 |                         | 09/08/05 |  | $ | 622,633



Note 8. Cash Equivalents



Pending investment in longer-term portfolio holdings, Apollo Investment
makes temporary investments in U.S. Treasury bills (of varying maturities) and repurchase agreements as outlined in our prospectus. These temporary investments are deemed cash equivalents by us and are included in our Schedule of Investments. U.S.
Treasury bills with maturities of greater than 60 days from the time of purchase are marked-to-market as per our valuation policy.



Note 9. Repurchase Agreements



The Company enters into repurchase agreements as part of its investment program. The Companys custodian takes possession of collateral pledged by the counterparty.
The collateral is marked-to-market daily to ensure that the value, plus accrued interest, is at least equal to the repurchase price. In the event of default of the obligor to repurchase, the Company has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal
proceedings.



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##### Table of Contents

Apollo Investment Corporation

Notes To Financial Statements (unaudited) (continued)

(in thousands except
share and per share amounts)



Note 10. Financial Highlights



The following is a schedule of financial highlights for the three months
ended June 30, 2005 and the period April 8, 2004 (commencement of operations) through March 31, 2005:



|                                                                      |  |                                  |            |   |                                       |   |            |     
|--------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------------- | - | ---------- | ----
|                                                                      |  | Three Months Ended June 30, 2005 |            |   | April 8, 2004* through March 31, 2005 |  
|Per Share Data:                                                       |  |                                  |            |   |                                       |   |            |     
|Net asset value, beginning of period                                  |  | $                                | 14.27      |   |                                       | $ | 14.06      |     
|                                                                      |  |                                  |            |   |                                       |   |            |     
|Net investment income                                                 |  |                                  | 0.40       |   |                                       |   | 0.41       |     
|Net realized and unrealized gain (loss) on investments                |  |                                  | (0.17      | ) |                                       |   | 0.31       |     
|                                                                      |  |                                  |            |   |                                       |   |            |     
|Net increase in stockholders equity resulting from operations        |  |                                  | 0.23       |   |                                       |   | 0.72       |     
|Dividends to shareholders (1)                                         |  |                                  | (0.31      | ) |                                       |   | (0.48      | )   
|Costs related to the initial public offering                          |  |                                  |           |   |                                       |   | (0.03      | )   
|                                                                      |  |                                  |            |   |                                       |   |            |     
|Net asset value at end of period                                      |  | $                                | 14.19      |   |                                       | $ | 14.27      |     
|                                                                      |  |                                  |            |   |                                       |   |            |     
|Per share market value at end of period                               |  | $                                | 18.44      |   |                                       | $ | 16.78      |     
|Total return (2)                                                      |  |                                  | 11.74      | % |                                       |   | 15.32      | %   
|Shares outstanding at end of period                                   |  |                                  | 62,768,013 |   |                                       |   | 62,554,976 |     
|                                                                      |  |                                 
|Ratio/Supplemental Data:                                              |  |                                  |            |   |                                       |   |            |     
|Net assets at end of period (in millions)                             |  | $                                | 891.0      |   |                                       | $ | 892.9      |     
|Ratio of net investment income to average net assets                  |  |                                  | 2.83       | % |                                       |   | 2.96       | %(3)
|Ratio of operating expenses to average net assets                     |  |                                  | 1.35       | % |                                       |   | 2.60       | %(3)
|Ratio of credit facility related expenses to average net assets       |  |                                  | 0.06       | % |                                       |   |           |     
|                                                                      |  |                                  |            |   |                                       |   |            |     
|Ratio of operating and credit facility expenses to average net assets |  |                                  | 1.41       | % |                                       |   | 2.60       | %(3)
|                                                                      |  |                                 
|Portfolio Turnover Ratio                                              |  |                                  | 14.0       | % |                                       |   | 14.7       | %   

---

|(1) | Dividends and distributions are determined in accordance with income tax regulations which may differ from amounts determined under accounting principles generally accepted in the
United States of America.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Total return is based on the change in market price per share during the respective periods. It also takes into account dividends and distributions, if any, reinvested in accordance
with the Companys dividend reinvestment plan. Total return is not annualized.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Annualized
|--- | ----------

|* | Commencement of operations
|- | --------------------------



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders of

Apollo Investment Corporation



We have reviewed the accompanying statement of assets and liabilities of Apollo Investment Corporation (the Company) as of June
30, 2005, including the schedule of investments, the related statements of operations and of cash flows for the three-month period then ended and for the period April 8, 2004 through June 30, 2004 and the statement of changes in net assets for the
three-month period ended June 30, 2005. These interim financial statements are the responsibility of the Companys management.



We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information
consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company
Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for
them to be in conformity with accounting principles generally accepted in the United States of America.



We previously audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statement of assets and liabilities of the Company as of March 31, 2005, including the
schedule of investments and the related statements of operations, of cash flows and of changes in net assets for the period from April 8, 2004 through March 31, 2005 and in our report dated June 14, 2005, we expressed an unqualified opinion on those
financial statements.



/s/ PricewaterhouseCoopers LLP

New York, New York

August 3, 2005



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##### Table of Contents

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



Certain statements in this report that relate to estimates or expectations of our future performance or financial condition may constitute forward-looking
statements as defined under the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to:



| |  | our future operating results;
|- |  | -----------------------------



| |  | our business prospects and the prospects of our portfolio companies;
|- |  | --------------------------------------------------------------------



| |  | the impact of investments that we expect to make;
|- |  | -------------------------------------------------



| |  | the dependence of our future success on the general economy and its impact on the industries in which we invest;
|- |  | ----------------------------------------------------------------------------------------------------------------



| |  | the ability of our portfolio companies to achieve their objectives;
|- |  | -------------------------------------------------------------------



| |  | our expected financings and investments;
|- |  | ----------------------------------------



| |  | the adequacy of our cash resources and working capital; and
|- |  | -----------------------------------------------------------



| |  | the timing of cash flows, if any, from the operations of our portfolio companies.
|- |  | ---------------------------------------------------------------------------------



We may use words such as anticipates, believes, expects, intends, will,
should, may and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties
that could cause actual results to differ materially from our historical experience and our present expectations. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are
made. Additional information regarding these and other risks and uncertainties is contained in our periodic filings with the Securities and Exchange Commission.



Overview



Apollo Investment was incorporated under the Maryland General Corporation Law in February 2004. We have elected to be treated as a business development company under the 1940 Act. As such, we are required to comply
with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in qualifying assets, including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S.
government securities and high-quality debt investments that mature in one year or less.



On April 5, 2004, we completed our initial public offering and became an externally managed, non-diversified, closed-end investment company that elected to be treated as a business development company under the
Investment Company Act of 1940. In addition, for tax purposes we have elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended. Pursuant to these elections, we generally will not have to
pay corporate-level taxes on any income we distribute to our stockholders.



Portfolio and Investment Activity



During the quarter ended
June 30, 2005, market conditions remained highly competitive. Despite this competition, our strong pipeline produced quality lending opportunities with high free cash flow companies. In total, we invested $250.3 million across seven new portfolio
companies while adding to four existing positions. We generally invested higher in the capital structures of these companies on average, investing $193.4 million in mostly second lien, senior secured loans while subordinated opportunities totaled
$56.9 million. The weighted average yield on the senior secured and subordinated loans made during the quarter was 11.3% and 12.8%, respectively.



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##### Table of Contents

Throughout the quarter we remained selective but carefully positioned our portfolio to hold a core group of attractively
priced second lien and mezzanine loans with strong credit characteristics. In advance of drawing on our substantial credit facility and as we had planned at the time of our IPO, we began rationalizing the composition of our portfolio by selectively
exiting certain of our first lien and lower yielding senior secured loans. These loans were generally sold at par or better reducing these holdings by $94.5 million during the quarter.



As the first fiscal quarter of 2006 closed, the Company realized significant earnings from its investment in N.E.W. Customer Services
Companies (N.E.W.), a portfolio company in which AIC invested in August 2004. The successful and strong financial results of N.E.W.s business led management of the company to refinance its subordinated debt and simultaneously,
structure a dividend recapitalization plan.



At June 30, 2005, our net
portfolio of $1.0 billion was invested 48% in subordinated debt/corporate notes, 2% in common stock, 46% in senior secured loans and 4% in cash equivalents. Our remaining first lien senior loan holdings were 11% of our portfolio at June 30, 2005. A
year earlier at June 30, 2004, our net portfolio was invested 6% in subordinated debt/corporate notes, 21% in 1stand 2ndlien senior secured loans and 73% in cash equivalents.



At June 30, 2005, the weighted average yield on our debt portfolio was 11.8% versus 11.2% at
March 31, 2005 and 7.4% at June 30, 2004. The weighted average yield on our entire portfolio, including cash equivalents, was 11.2% at June 30, 2005 versus 10.2% at March 31, 2005 and 2.7% at June 30, 2004. The weighted average yield on our
subordinated debt/corporate notes was 13.6% at June 30, 2005 versus 13.7% at March 31, 2005 and 10.6% at June 30, 2004. Our total bank debt/senior secured loan portfolio yielded 10.0% at June 30, 2005 versus 8.2% at March 31, 2005 and 6.3% at June
30, 2004. Of the bank debt, the weighted average yield attributable to first lien notes was 8.1% at June 30, 2005 versus 6.3% at March 31, 2005 and 5.0% at June 30, 2004. Our second lien bank debt yielded 10.6% at June 30, 2005 versus 9.4% at March
31, 2005 and 8.4% at June 30, 2004. Yields are computed using interest rates as of the balance sheet date and include amortization of loan origination fees, original issue discount and market premium or discount, weighted by their respective costs
when averaged.



Bank debt/senior secured debt typically accrues interest at
variable rates determined on the basis of a benchmark LIBOR, EURIBOR or prime rate with stated maturities at origination that range from 5 to 10 years. While subordinated debt/corporate notes will typically accrue interest at fixed rates, some of
these investments may include zero coupon, PIK and/or step bonds that accrue income on a constant yield to call or maturity basis.



As a business development company, we must not acquire any assets other than qualifying assets specified in the 1940 Act unless, at the time the acquisition
is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). If we invest in an issuer that, at the time we make the investment, has outstanding securities as to which a broker or dealer may extend or maintain
margin credit or marginable securities, these acquired assets cannot normally be treated as qualifying assets. This results from the definition of eligible portfolio company under the 1940 Act, which in part looks to whether
a company has outstanding securities that are eligible for margin credit. Amendments promulgated in 1998 by the Board of Governors of the Federal Reserve System to Regulation T under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, expanded the definition of marginable security to include any non-equity security. These amendments have raised questions as to whether a private company that has outstanding debt securities would qualify as an eligible portfolio company. We
note that under applicable self-regulatory organization rules that govern the ability of brokers and dealers to extend margin credit, many non-equity securities issued by private companies may not be effectively marginable. While we understand the
SEC is considering these issues, we do not believe the SEC or the Staff has made any determinations with respect to the above.



We continue to monitor this issue closely and intend to adjust our investment focus as needed to comply with and/or take advantage of any future administrative position,
judicial decision or legislative action.



In August 2004, our board of
directors approved an amendment to our investment policy to eliminate the 5% limitation on investments on foreign securities. As such, these investments are included in our 30% non-qualifying assets bucket.



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##### Table of Contents

Results of Operations



Results comparisons to the quarter ended June 2004 may not necessarily be meaningful as our portfolio was largely in cash equivalents from our initial IPO in April 2004.
Accordingly, references and comparisons are made against our previous quarter ended March 31, 2005 in addition to the quarter ended June 2004.



Investment Income



Gross investment income totaled $37.8 million for the quarter ended June 30, 2005 compared to $21.3 million for the quarter ended March 31, 2005 and $3.8 million for the quarter ended June 30, 2004. The increase
included both dividend income and consent fee income from N.E.W. which totaled $3.5 million and $7.5 million, respectively.



Operating Expenses



Operating expenses totaled $12.5 million for the quarter ended June 30, 2005 of which $6.3 million was performance-based incentive fees and $0.5 million were origination and commitment expenses related to our credit
facility. Operating expenses net of incentive fees and interest expense was $5.7 million versus the $5.8 million for the quarter ended March 31, 2005 and $5.3 million for the quarter ended June 30, 2004. Operating expenses consist of investment
advisory and management fees, insurance expenses, administrative services fees, professional fees, directors fees, audit and tax services expenses, and other general and administrative expenses.



Net Investment Income



The Companys net investment income totaled $25.2 million or $0.40 per share for the quarter ended June 30, 2005 versus $15.6 million
or $0.25 per share for the quarter ended March 31, 2005 and a net investment loss of $1.5 million or $0.024 per share for the quarter ended June 30, 2004. The increase in net investment income was primarily driven by both portfolio growth and income
earned from our investment in N.E.W. described above.



Net Realized
Gains/Losses



The Company had exits and repayments totaling $124.5 million
for the quarter ended June 30, 2005 versus $47.3 million for the quarter ended March 31, 2005 and $125,000 for the quarter ended June 30, 2004. The net realized gains on investments for the quarter totaled $3.4 million versus $0 for the quarters
ended March 31, 2005 and June 30, 2004. The Company also realized a gain on its forward foreign currency contract of $3.4 million during the quarter versus a gain of $0.64 million during the quarter ended March 31, 2005. Total net realized gains for
the quarter ended June 30, 2005 were $6.8 million versus $0.6 million for the quarter ended March 31, 2005 and $0 for the quarter ended June 30, 2004.



Net Unrealized Appreciation on Investments and Forward Foreign Currency Contracts



For the quarter ended June 30, 2005, the Companys investments and other assets had a decrease in net unrealized appreciation of $18.5
million of which $9.6 million was due to the realization of profits from the N.E.W. Customer Service Companies transaction. This compared to a decrease in unrealized appreciation of $3.9 million on the portfolio for the quarter ended March 31,
2005 and an increase of $2.3 million for the quarter ended June 30, 2004. At June 30, 2005, net unrealized depreciation totaled $0.2 million of which $2.2 million was attributable to net unrealized appreciation on our bank debt/senior secured debt,
$3.0 million was attributable to net unrealized depreciation on our subordinated debt/corporate notes/equity and $0.6 million in unrealized appreciation on our forward foreign currency contract.



Net Increase in Net Assets From Operations



For the quarter ended June 30, 2005, the Company had a net increase in net assets resulting
from operations of $13.6 million versus $12.3 million for the quarter ended March 31, 2005 and $0.9 million for the quarter ended June 30, 2004. The net change in net assets from operations per share was $0.22 for the quarter ended June 30, 2005
versus $0.20 for the quarter ended March 31, 2005 and $0.014 for the quarter ended June 30, 2004.



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##### Table of Contents

Financial Condition, Liquidity and Capital Resources



The Companys liquidity and capital resources was generated primarily from the
remaining net proceeds of its initial offering as well as from cash flows from operations, including exits and prepayments of senior and subordinated loans and income earned from investments and cash equivalents (which normally comprise of U.S.
government securities and other high-quality debt investments that mature in one year or less). The Company may also fund its investments and operations through draw-downs of its senior secured, multi-currency, $800 million, five-year credit
facility. In the future, the Company may raise additional equity capital through the filing of its shelf registration or may securitize a portion of its investments in mezzanine or senior secured loans or other assets. The primary use of funds will
be investments in portfolio companies and cash distributions to holders of common stock.



Dividends



Dividends paid to
stockholders for the quarter totaled $19.4 million or $0.31 per share versus $16.2 million or $0.26 per share for the quarter ended March 31, 2005. For the period April 8, 2004 (commencement of operations) through March 31, 2005, dividends paid to
stockholders totaled $30.2 million or $0.485 per share. Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year.



We have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986. In order to maintain
our status as a regulated investment company, we are required to (1) distribute at least 90% of our investment company taxable income and (2) distribute at least 98% of our income (both ordinary income and net capital gains) to avoid an excise tax.
We intend to make distributions to our stockholders on a quarterly basis of substantially all of our net operating income. We also intend to make distributions of net realized capital gains, if any, at least annually.



We may not be able to achieve operating results that will allow us to make distributions at a
specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings when applicable to us as a business development
company under the Investment Company Act of 1940 and due to provisions in our credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a
regulated investment company. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.



With respect to the dividends paid to shareholders, income from origination, structuring, closing, commitment, pre-payment and other upfront fees associated with
investments in portfolio companies was treated as taxable income and accordingly, distributed to shareholders.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



We are subject to financial market risks, including changes in interest rates. We expect that many of the loans in our portfolio will have floating rates. We also expect to have a significant portion of our loans with
fixed rates. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse
changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments. During the period April 1, 2005 through June 30, 2005, we did not engage in interest rate
hedging activities.



On June 6, 2005, we entered into a forward foreign
currency contract to hedge our exposure to the currency risk associated with our investment in WDAC Intermediate Corp. Accordingly, we sold 35,300,000 euro forward at a rate of 1.2262 dollars per euro for settlement on September 8, 2005. Unrealized
appreciation on this contract is represented on our balance sheet as of June 30, 2005 and described further in footnote 8 to the financial statements.



20



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##### Table of Contents

Item 4. Controls and Procedures



As of the end of
the period covered by this report, Apollo Investment carried out an evaluation, under the supervision and with the participation of AICs management, including AICs Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of AICs disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded
that AICs current disclosure controls and procedures are effective in timely alerting them of material information relating to AIC that is required to be disclosed by AIC in the reports it files or submits under the Securities Exchange Act of
1934. There have been no changes in AICs internal control over financial reporting that occurred during the period April 1, 2005 through June 30, 2005 that have materially affected, or are reasonably likely to materially affect, AICs
internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



We are not a defendant
in any material pending legal proceeding, and no such material proceedings are known to be contemplated.



Item 2. Changes in Securities and Use of Proceeds



We intend to use the net proceeds from selling securities pursuant to our registration statement filed on Form N-2 effective June 24, 2005 for general corporate purposes, which includes investing in portfolio companies in accordance with
our investment objective and strategies and, pending such investments, investing in cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the date of investment and other general
corporate purposes. Supplements to the registration statement that relate to an offering will more fully identify the use of the proceeds from such offering.



We anticipate that substantially all of the net proceeds of an offering of securities will be used for the above purposes within two years, depending on the availability
of appropriate investment opportunities consistent with our investment objective and market conditions. Our portfolio currently consists primarily of senior loans and mezzanine loans and related equity securities. Pending our investments, we plan to
invest a portion of net proceeds in cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the date of investment and other general corporate purposes.



We did not repurchase any shares of our common stock during the quarter ended June 30, 2005.



Item 3. Defaults Upon Senior Securities



Not
Applicable



Item 4. Submission of Matters to a Vote of Security Holders



Not Applicable



Item 5. Other Information



Not Applicable



21



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##### Table of Contents

Item 6. Exhibits and Reports on Form 8-K



(a) Exhibits



Listed below are the exhibits that are filed as part of
this report (according to the number assigned to them in Item 601 of Regulation S-K):



|               |  |                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                               
|31.1*          |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.        
|               | 
|31.2*          |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.        
|               | 
|32.1*          |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C. 1350).
|               | 
|32.2*          |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S. C. 1350).

---

|* | Submitted herewith
|- | ------------------



(b) Reports on Form 8-K



On April 14, 2005, we filed a current report on Form 8-K, pursuant to Item 1.01 and 9.01 reporting the entry into a senior secured revolving credit
agreement in the amount of $800,000,000.



On May 13, 2005, we
filed a current report on Form 8-K, pursuant to Item 8.01 reporting the issuance of a press release announcing the scheduling of fourth quarter and fiscal year 2005 results.



On May 24, 2005, we filed a current report on Form 8-K, pursuant to Item 9.01 reporting the issuance of a press release
announcing fiscal year ended March 31, 2005 financial results.



On June 16, 2005, we filed a current report on Form 8-K, pursuant to Item 7.01 reporting the issuance of a press release announcing a first fiscal quarter dividend of $0.31 per share.



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 3, 2005.



APOLLO INVESTMENT CORPORATIONBy:

/s/ Michael S. GrossMichael S. GrossPresident, Chief Executive Officerand Chairman of the BoardBy:

/s/ Richard L. PetekaRichard L. PetekaChief Financial Officer and Treasurer




23