---

# UNITED STATES SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-Q

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

# For the Quarter Ended
December 31, 2004

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

# Commission File
Number: 333-112591

APOLLO INVESTMENT
CORPORATION(Exact name of registrant as specified in its charter)

|Maryland                                                      |  | 52-2439556                          
|------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. Employer Identification No.)

|9 West 57th Street,41st floor,New York, N.Y. |  | 10019     
|-------------------------------------------- |  | ----------
|(Address of principal executive office)      |  | (Zip Code)

(212) 515-3200 (Registrant's
telephone number, include area code)

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

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

The
number of shares of the registrants Common Stock, $.001 par value, outstanding as of
December 31, 2004 was 62,289,586.

---

# APOLLO INVESTMENT
CORPORATION  FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2004  TABLE OF
CONTENTS

|PART I  | FINANCIAL INFORMATION                                                                                                          | PAGE
|------- | ------------------------------------------------------------------------------------------------------------------------------ | ----
|Item 1  | FINANCIAL STATEMENTS (unaudited)                                                                                               | 3   
|        | Balance Sheet as of December 31, 2004                                                                                          | 3   
|        | Statement of Operatings for the quarter ended December 31, 2004 and for the period April 8, 2004* through    December 31, 2004 | 4   
|        | Statement of Stockholders' Equity for the period April 8, 2004* through December 31, 2004                                      | 5   
|        | Statement of Cash Flows for the period April 8, 2004* through December 31, 2004                                                | 6   
|        | Schedule of Investments as of December 31, 2004                                                                                | 7   
|        | Notes to Financial Statements                                                                                                  | 9   
|        | Report of Independent Registered Public Accounting Firm                                                                        | 14  
|Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations                                          | 15  
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                                     | 18  
|Item 4. | Controls and Procedures                                                                                                        | 18  
|PART II | OTHER INFORMATION                                                                                                              |     
|Item 1. | Legal Proceedings                                                                                                              | 19  
|Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                               | 19  
|Item 3. | Defaults upon Senior Securities                                                                                                | 19  
|Item 4. | Submission of Matters to a Vote of Secuirty Holders                                                                            | 19  
|Item 5. | Other Information                                                                                                              | 19  
|Item 6. | Exhibits and Reports on Form 8-K                                                                                               | 20  
|        | Signatures                                                                                                                     | 21  

* Commencement of
operations

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 (unaudited)

# Apollo Investment
CorporationBalance Sheet (unaudited)(in thousands, except per share amounts)

|                                                                                                                 |   | December 31,2004(unaudited)
|---------------------------------------------------------------------------------------------------------------- | - | ---------------------------
|Assets                                                                                                           |   |                            
|Cash                                                                                                             | $ | 3,825                      
|Investments, at fair value (cost - $703,503)                                                                     |   | 725,943                    
|Cash equivalents, at fair value (cost - $810,757)                                                                |   | 810,744                    
|Interest receivable, at value*                                                                                   |   | 6,594                      
|Other assets                                                                                                     |   | 381                        
|Total assets                                                                                                     | $ | 1,547,487                  
|                                                                                                                 |   |                            
|Liabilities                                                                                                      |   |                            
|Payable for cash equivalents                                                                                     | $ | 649,438                    
|Management fee payable                                                                                           |   | 4,475                      
|Unrealized depreciation on forward foreign currency contract (see note 8)                                        |   | 388                        
|Accrued expenses                                                                                                 |   | 910                        
|Total liabilities                                                                                                | $ | 655,211                    
|                                                                                                                 |   |                            
|Stockholders' Equity                                                                                             |   |                            
|Common stock, par value $.001 per share, 100,000,000 common shares authorized, 62,289,586 issued and outstanding | $ | 62                         
|Paid-in capital in excess of par                                                                                 |   | 874,358                    
|Accumulated net investment income                                                                                |   | 9,894                      
|Dividends paid to stockholders                                                                                   |   | (13,964)                   
|Accumulated net realized losses                                                                                  |   | (121)                      
|Net unrealized appreciation                                                                                      |   | 22,047                     
|Total stockholders' equity                                                                                       | $ | 892,276                    
|Total liabilities and stockholders' equity                                                                       | $ | 1,547,487                  
|* Value reflects unrealized appreciation of $8,319 dollars.                                                      |   |                            

See notes to financial
statements.

3

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# Apollo Investment
CorporationStatement of Operations (unaudited)(in thousands, except per share amounts)

|                                                               | QuarterEndedDecember 31, 2004 | April 8, 2004*throughDecember 31, 2004
|-------------------------------------------------------------- | ----------------------------- | --------------------------------------
|Operating Income                                               |                               |                                       
|Interest Income                                                | $14,816                       | $26,512                               
|                                                               |                               |                                       
|                                                               |                               |                                       
|Operating Expenses                                             |                               |                                       
|Management Fees                                                | $4,475                        | $12,886                               
|General and administrative expenses                            | 1,233                         | 3,732                                 
|                                                               |                               |                                       
|Total operating expenses                                       | 5,708                         | 16,618                                
|                                                               |                               |                                       
|                                                               |                               |                                       
|Net operating income before investment gains and losses        | $9,108                        | $9,894                                
|                                                               |                               |                                       
|Net realized loss on investments and cash equivalents          | (120)                         | (121)                                 
|                                                               |                               |                                       
|Net change in unrealized appreciation                          | 16,183                        | 22,047                                
|                                                               |                               |                                       
|Net increase in stockholders' equity resulting from operations | $25,171                       | $31,820                               
|                                                               |                               |                                       
|Earnings per common share (see note 6)                         | $0.406                        | $0.513                                

* Commencement of operations

See notes to financial statements.

4

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# Apollo Investment CorporationStatement of Stockholders' Equity (unaudited)
For the period April 8, 2004* through December 31, 2004
(in thousands, except shares)

|                                                                          | Common Stock |        |                                |                    |                         
|------------------------------------------------------------------------- | ------------ | ------ | ------------------------------ | ------------------ | ------------------------
|                                                                          | Shares       | Amount | Paid-in Capitalin Excessof Par | AccumulateEarnings | TotalStockholders'Equity
|                                                                          |              |        |                                |                    |                         
|Balance at April 8, 2004*                                                 | 100          | $0     | $1                             | $0                 | $1                      
|Issuance of common stock from public offering (net of underwriting costs) | 62,000,000   | 62     | 871,813                        |                    | 871,875                 
|Offering costs                                                            |              |        | (1,722)                        |                    | (1,722)                 
|Net increase in stockholders' equity resulting from operations            |              |        |                                | 31,820             | 31,820                  
|Shares issued in connection with dividend reinvestment plan               | 289,486      | 0      | 4,266                          |                    | 4,266                   
|Dividends declared                                                        |              |        |                                | (13,964)           | (13,964)                
|                                                                          |              |        |                                |                    |                         
|Balance at December 31, 2004                                              | $62,289,586  | $62    | $874,358                       | $17,856            | $892,276                

* Commencement of operations

See notes to financial statements.

5

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# Apollo Investment CorporationStatement of Cash Flows (unaudited)
For the period April 8, 2004* through December 31, 2004
(in thousands)

|                                                                                                    |          
|--------------------------------------------------------------------------------------------------- | ---------
|Cash Flows from Operating Activities:                                                               |          
|Net Increase in Stockholders' Equity Resulting from Operations                                      | $31,820  
|Adjustments to reconcile net increase:                                                              |          
|Purchase of investment securities                                                                   | (728,725)
|Proceeds from disposition of investment securities                                                  | 25,222   
|Sale of short-term securities, net                                                                  | (134)    
|Increase in interest receivable                                                                     | (6,586)  
|Increase in other assets                                                                            | (381)    
|Increase in management fee payable                                                                  | 4,475    
|Increase in accrued expenses                                                                        | 910      
|Payable for cash equivalents purchased                                                              | 649,438  
|Net unrealized appreciation on investments, cash equivalents and forward foreign currency contracts | (22,047) 
|Net realized loss on investments and cash equivalents                                               | 121      
|                                                                                                    |          
|Net Cash Used by Operating Activities                                                               | $(45,887)
|                                                                                                    |          
|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                                                                              | (9,698)  
|                                                                                                    |          
|Net Cash Provided by Financing Activities                                                           | $860,455 
|                                                                                                    |          
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                           | $814,568 
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                      | 1        
|                                                                                                    |          
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                            | $814,569 

Non-cash financing
activities consist of the reinvestment of dividends totaling $4,266,613.

* Commencement of operations

See notes to financial statements.

6

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# Apollo Investment CorporationSchedule of Investments (unaudited)
December 31, 2004
(in thousands, except warrants/shares)

|                                                                                  |  |                   |  |               
|--------------------------------------------------------------------------------- |  | ----------------- |  | --------------
|Portfolio Company (1)                                                             |  | Industry          |  | Par Amount    
|Subordinated Debt/Corporate Notes - 46.6%                                        
|Anthony International, 13.50%, due 09/01/12                                       |  | Manufacturing     |  | $9,524        
|AMH Holdings II, Inc., 13.625%, due 12/01/14                                      |  | Building Products |  | 45,000        
|Invista Corporation, 9.25%, due 05/01/12                                         |  | Chemicals         |  | 35,000        
|Language Line Holdings, Inc., 0% / 14.125%,
         due 06/15/13                 |  | Business Services |  | 21,567        
|Language Line Inc., 11.125%, due 06/15/12                                         |  | Business Services |  | 14,500        
|Latham Manufacturing Corp., 14.00%, 06/30/11                                      |  | Leisure Equipment |  | 31,100        
|Lexicon Marketing (USA), Inc., 13.75%, 01/02/12 *                                 |  | Direct Marketing  |  | 27,000        
|National Waterworks Holdings, Inc., 12.50%, 01/01/14                             |  | Distribution      |  | 37,000        
|N.E.W. Customer Service Companies Inc., 12.50%,
         due 08/17/11             |  | Consumer Services |  | 26,680        
|N.E.W. Customer Service Companies Inc., 14.00%
         Convertible, due 08/17/13 |  | Consumer Services |  | 8,320         
|Playpower Holdings Inc. 15.50%, 11/30/12                                          |  | Leisure Equipment |  | 60,775        
|Pro Mach Merger Sub Inc., 13.75%, 06/15/12                                        |  | Machinery         |  | 19,000        
|Source Media Holdings Inc., 13.00%, 11/30/12                                      |  | Publishing        |  | 17,000        
|TDS Logistics, Inc., 14.75%, due 02/26/10                                         |  | Logistics         |  | 17,500        
|WDAC Intermediate Corp., 13.75%, 06/01/15 **                                      |  | Advertising       |  | 33,000       
|                                                                                  |  |                   |  |               
|Total Subordinated Debt/Corporate Notes                                           |  |                   |  | $397,268      
|                                                                                  |  |                   |  |               
|                                                                                 
|Common Stock/Warrants - 2.3%                                                      |  | Shares/Warrants   |  |               
|Latham Acquisition Corp.                                                          |  | Leisure Equipment |  | 30,000 shs.   
|LM Acquisition Ltd. *                                                             |  | Direct Marketing  |  | 10,000 shs.   
|N.E.W. Customer Service Companies Inc.                                            |  | Consumer Services |  | 1,105,961 wts.
|Pro Mach Merger Sub Inc.                                                          |  | Machinery         |  | 150,000 shs.  
|TDS Logistics Inc.                                                                |  | Logistics         |  | 250,000 shs.  
|                                                                                  |  |                   |  |               
|                                                                                  |  |                   |  |               
|                                                                                  |  |                   |  |               
|                                                                                  |  |                   |  | Par Amount    
|Bank Debt/Senior Secured Debt (3) - 32.4%                                        
|Amerco Corp., due 02/27/09                                                        |  | Transportation    |  | $14,888       
|Anthony International, due 09/01/11                                               |  | Manufacturing     |  | 13,000        
|C.H.I. Overhead Doors, Inc., due 10/22/11                                         |  | Building Products |  | 10,000        
|Charter Communications, due 04/21/11                                              |  | Cable TV          |  | 24,875        
|Cygnus Business Media, Inc., due 07/12/09                                         |  | Media             |  | 15,000        
|Cygnus Business Media, Inc., due 01/12/10                                         |  | Media             |  | 10,000        
|Directed Electronics, due 06/17/10                                                |  | Electronics       |  | 4,859         
|EuroFresh, due 05/14/10                                                           |  | Agriculture       |  | 25,000        
|Grand Vehicle Works Holding Corp., due 07/23/11                                   |  | Manufacturing     |  | 10,000        
|Language Line Inc., due 06/11/11                                                  |  | Business Services |  | 6,816         

See notes to financial statements.

7

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# Apollo Investment CorporationSchedule of Investments (unaudited) (continued)
December 31, 2004
(in thousands)

|                                                                                |            |                        |            |           
|------------------------------------------------------------------------------- | ---------- | ---------------------- | ---------- | ----------
|Portfolio Company (1)                                                           |            | Industry               |            | Par Amount
|Bank Debt/Senior Secured Debt (3)  (continued)Mueller Group Inc., due 11/01/11 |            | Industrial             |            | $17,000   
|NES Rentals Holdings Inc., due 08/17/10                                         |            | Equipment Rental       |            | 24,937    
|Phillips Health, LLC, due 08/23/10                                              |            | Vitamins, Supplements  |            | 13,412    
|Phillips Health, LLC, due 08/20/11                                              |            | Vitamins, Supplements  |            | 15,000    
|Prestige Brands Inc., due 10/06/11                                              |            | Consumer Products      |            | 20,000    
|Sealy Mattress Co., due 04/06/13                                                |            | Consumer Products      |            | 10,000    
|Source Media Inc., due 11/30/12                                                 |            | Publishing             |            | 10,000    
|Supresta Holdings, Inc., due 07/20/11                                           |            | Chemicals              |            | 6,965     
|United Industries Corporation, due 04/30/11                                     |            | Consumer Products      |            | 14,888    
|United Industries Corporation, due 10/31/11                                     |            | Consumer Products      |            | 9,950     
|United Site Services, Inc. due 06/30/10                                         |            | Environmental Services |            | 10,000    
|                                                                                |            |                        |            |           
|Total Bank Debt/Senior Secured Debt                                             | $285,831   |                        | $289,419  
|                                                                                |            |                        |            |           
|Total Investments                                                               | $703,503   |                        | $725,943  
|                                                                                |            |                        |            |           
|                                                                                |           
|Cash Equivalents -90.9%                                                         |           
|U.S. Cash Management Bill, 2.11%, due 01/18/05                                  |            | Government             |            | $650,000  
|U.S. Treasury Bill, 1.97%, due 02/03/05                                         |            | Government             |            | 35,000    
|U.S. Treasury Bill, 2.21%, due 03/24/05                                         |            | Government             |            | 127,000   
|                                                                                |            |                        |            |           
|Total Cash Equivalents                                                          | $810,757   |                        | $810,744  
|                                                                                |            |                        |            |           
|Total Investments & Cash Equivalents - 172.2%                                   | $1,514,260 |                        | $1,536,687 |           
|                                                                                |            |                        |            |           
|Liabilities in excess of other assets - (72.2%)                                 | (644,411) 
|                                                                                |            |                       
|Net Assets - 100.0%                                                             | $892,276  
|                                                                                |           

(1)
          None of our portfolio companies are 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 Interbank Offer 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. * At December 31, 2004 and under the terms of our
investment, BNY Capital Partners had the option to call $2mm in subordinated notes and
$2mm in equity at their respective costs. The option expired unused in January 2005. ** Denominated
in Euros ()

See
notes to financial statements.

8

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# 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 newly organized 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 intend to 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 5, 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 $870.2 million in total
net proceeds from the offering.

Interim financial statements are
prepared in accordance with generally accepted accounting principles (GAAP)
for interim financial information and pursuant to the requirements for reporting on Form
10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying
financial statements prepared in accordance with GAAP are omitted. 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 current periods results of operations will not necessarily be
indicative of results that ultimately may be achieved for the fiscal year ending March 31,
2005.

# Note 2.  Significant
Accounting Policies

The preparation of financial
statements in conformity with accounting principles generally accepted in the United
States of America 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.

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
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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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# 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) |  | An independent valuation firm engaged by our Board of
               Directors reviews these preliminary valuations.
|--- |  | --------------------------------------------------------------------------------------------------------------------

|(4) |  | The audit committee of our
               Board of Directors comments on the preliminary valuation and our investment
               adviser and independent valuation firm responds and supplements the preliminary
               valuation based upon those comments.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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, independent valuation firm and 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, consent and other fees received by the
Company on loan agreements or other investments are typically accreted over the
remaining 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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# 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. For services rendered under the Investment Advisory and Management Agreement
during the period commencing from the closing of Apollo Investments initial offering
through and including the first six months of operations, the base management fee is
payable monthly in arrears. For services rendered under the Investment Advisory and
Management Agreement after that time, the base management fee is payable quarterly in
arrears. For the first quarter of our operations, the base management fee is calculated
based on the initial value of Apollo Investments gross assets. Subsequently, the
base management fee will be calculated based on the average value of Apollo
Investments gross assets at the end of the two most recently completed calendar
quarters (we consider the date we commenced operations as a quarter end), and will be
appropriately adjusted for any share issuances or repurchases during the current calendar
quarter. Base management fees for any partial month or quarter are appropriately pro
rated.

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 the 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.
The incentive fee determined as of December 31, 2004 will be calculated for a period
of shorter than twelve calendar months to take into account any realized capital
gains computed net of all realized capital losses and unrealized capital depreciation for
the period ending December 31, 2004.

For the period April 8, 2004
(commencement of operations) through December 31, 2004, the Investment Adviser received
$12,886,154 in base investment advisory and management fees from Apollo Investment.

11

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# Apollo Investment
Corporation Notes To Financial Statements (unaudited) (continued)(in thousands except
share and per share amounts)

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 period April 8, 2004
(commencement of operations) through December 31, 2004, the Administrator was reimbursed
$414,463 in administrative services fees from Apollo Investment.

# Note 4.    Organizational and Offering Expenses

A portion of the net proceeds of our
initial public offering of 62,000,000 shares of common stock was used for organizational
and offering expenses of $252,311 and $1,722,565, respectively. Organizational expenses
were expensed as incurred. Offering expenses have been charged against paid-in capital in
excess of par. All organizational and offering expenses were borne by Apollo Investment.

# Note 5.    Net Asset Value Per Share

At December 31, 2004, the
Companys total net assets and net asset value per share were $892,275,811 and
$14.32, respectively.

# Note 6.    Earnings Per Share

The following information sets forth
the computation of basic and diluted net increase (decrease) in stockholders equity
per share resulting from operations for the period April 8, 2004 (commencement of
operations) through December 31, 2004:

Numerator for basic and diluted gain per share: $31,819,624 
Denominator for basic and diluted weighted average shares:
62,028,229

Basic and diluted net increase in
stockholders' equity per share resulting from operations:  $0.513

# Note 7.    Investments

As of December 31, 2004, investments
and cash equivalents consisted of the following:

|                                  |  |                                
|--------------------------------- |  | -------------------------------
|                                  |  |                                
|                                  |  | December 31, 2004(in thousands)
|                                  |  |                                
|                                  |  | Cost                           
|Subordinated Debt/Corporate Notes |  | $397,268                       
|Common Stock/Warrants             |  | 20,404                         
|Bank Debt/Senior Secured Debt     |  | 285,831                        
|Cash Equivalents                  |  | 810,757                        
|                                  |  |                                
|Totals                            |  | $1,514,260                     

12

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# Apollo Investment
CorporationNotes To Financial Statements
 (unaudited) (concluded)(in thousands except share
and per share amounts)

|Note 8. | Forward
Foreign Currency Contract
|------- | ---------------------------------

At
December 31, 2004, 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:

|              |            
|------------- | -----------
|
|              |            
|To Sell: Euro | 33,000,000

|Note 9. | Cash
Equivalents
|------- | ----------------

Pending investment in longer-term
portfolio holdings, Apollo Investment will make temporary investments in U.S. Treasury
bills (of varying maturities) and repurchase agreements as outlined in our prospectus.
These temporary investments will be 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 will be marked-to-market as per our valuation policy.

# Note
10.    Financial Highlights

The following is a schedule of
financial highlights for the period April 8, 2004 (commencement of operations) through
December 31, 2004:

|                                                               |   |           
|-------------------------------------------------------------- | - | ----------
|Per Share Data                                                 |   |           
|Net asset value, beginning of period                           | $ | 14.06     
|                                                               |   |           
|Net investment income                                          |   | 0.16      
|Net realized and unrealized gain on investments                |   | 0.35      
|                                                               |   |           
|Net increase in stockholders' equity resulting from operations |   | 0.51      
|                                                               |   |           
|Dividends to shareholders (1)                                  |   | (0.22)    
|Costs related to the initial public offering                   |   | (0.03)    
|                                                               |   |           
|Net asset value at end of period                               | $ | 14.32     
|                                                               |   |           
|Per share market value at end of period                        | $ | 15.10     
|Total return (2)                                               |   | 2.20%     
|Shares outstanding at end of period                            |   | 62,289,586
|                                                               |   |           
|Ratio/Supplemental Data:                                       |   |           
|Net assets at end of period (in millions)                      | $ | 892.3     
|Ratio of operating expenses to average net assets (3)          |   | 2.59%     
|Ratio of net operating income to average net assets (3)        |   | 1.54%     
|                                                               |   |           

(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 assuming an
investment at the initial offering price of $15.00 per share. Total return also
takes into account dividends and distributions, if any, reinvested in accordance with the
Companys dividend reinvestment plan. Interim periods are not annualized.
3) Annualized

13

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# Report of Independent
Registered Public Accounting Firm

To the Board of Directors and
Stockholders ofApollo Investment Corporation:

We have reviewed the accompanying
balance sheet of Apollo Investment Corporation (the Company) as of December
31, 2004, including the schedule of investments, and the related statements of operations
for the three-month period ended December 31, 2004, and for the period April 8, 2004
(commencement of operations) through December 31, 2004, and of stockholders equity,
and the statement of cash flows for the period April 8, 2004 (commencement of operations)
through December 31, 2004. These interim financial statements are the responsibility of
the Companys management.

We conducted our reviews 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.

/s/  PricewaterhouseCoopers
LLP

New York, New York
February 7, 2005

14

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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

Our third fiscal quarter was quite
productive as we took advantage of a strong backlog and added ten new portfolio companies.
During the three months ended December 31, 2004, we invested a total of $327 million in
the aggregate which included closing eight mezzanine loans (three of which included an
equity co-investment) and three senior secured loans (one of which we invested alongside a
mezzanine loan). In November 2004, we exited our remaining, $4.875 million 1st
lien investment in Ranpak Corp. as the borrower pre-paid us in full (at 102%) on our $18.0
million senior secured, 2nd lien investment. Both purchases were made during
our first fiscal quarter and generated positive returns.

15

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More specifically, we invested $295
million in the aggregate in the subordinated debt of AMH Holdings II, Inc., National
Waterworks Holdings, Inc., Playpower Holdings Inc., Source Media Holdings, Inc., WDAC
Intermediate Corp. and the subordinated debt and equity of Latham Manufacturing Corp.,
Inc., Lexicon Marketing (USA), Inc. and Pro Mach Merger Sub Inc. We also funded three
investments in the senior secured debt of C.H.I. Overhead Doors, Inc., Source Media
Holdings, Inc. and United Site Services, Inc. totaling $30 million in aggregate.

Through December 31,
2004, weve invested $731 million of the $870 million net proceeds
from our initial public offering.  At December 31, 2004, the net portfolio was
invested 47% in subordinated debt/corporate notes, 2% in common stock/warrants, 33%
in bank debt/senior secured debt and 18% in cash equivalents.

The weighted average yield on the
subordinated debt purchased during the quarter ended December 31, 2004 was 14.2%. The
weighted average yield on the senior secured debt purchased during the quarter ended
December 31, 2004 was 10.3%. At December 31, 2004, the weighted average yield on our
invested capital was 10.9% versus 8.8% at September 30, 2004. The weighted average yield
on our entire portfolio, including cash equivalents, was 9.3% at December 31, 2004 versus
4.5% at September 30, 2004. The weighted average yield on our subordinated debt/corporate
notes yielded 13.8% at December 31, 2004 versus 12.8% at September 30, 2004. Our bank
debt/senior secured debt yielded 7.6% at December 31, 2004 versus 6.9% at September 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
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.

# Results of Operations

# Operating Income

Interest income totaled $14.8 million
for the quarter versus $7.9 million for the quarter ended September 30, 2004. The increase
was attributable to our investment progress through December 31, 2004. For the period
April 8, 2004 (commencement of operations) through December 31, 2004, gross investment
income totaled $26.5 million.

16

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# Operating Expenses

Operating expenses totaled $5.7
million for the quarter ended December 31, 2004 versus $5.6 million for the quarter ended
September 30, 2004. For the period April 8, 2004 (commencement of operations) through
December 31, 2004, operating expenses totaled $16.6 million. This amount consisted of
investment advisory and management fees, insurance expenses, administrative services fees,
professional fees, directors fees and other general and administrative expenses. It
also included a non-recurring charge of $252,311 in expenses related to the organization
of the Company.

# Net Operating Income

The Companys net operating
income was $9.1 million for the quarter ended December 31, 2004 versus $2.3 million for
the quarter ended September 30, 2004. For the period April 8, 2004 (commencement of
operations) through December 31, 2004, net operating income was $9.9 million.

# Net Unrealized
Appreciation on Investments and Cash Equivalents

For the quarter ended December 31,
2004, the Companys investments had an increase in net unrealized appreciation of
$16.2 million versus $3.5 million for the quarter ended September 30, 2004. At December
31, 2004, net unrealized appreciation totaled $22.0 million of which $3.6 million was
attributable to net unrealized appreciation on our bank debt/senior secured debt, $18.8
million was attributable to our subordinated debt/corporate notes/equity and $0.4 million
in unrealized depreciation on our forward foreign currency contract used to hedge our
foreign exchange rate risk on WDAC Intermediate Corp. The Companys cash equivalents
had net unrealized depreciation of approximately $13,000.

# Net Realized Gains/Losses

The Company had exits and repayments
totaling $25.3 million for the quarter ended December 31, 2004 versus $347,011 for the
quarter ended September 30, 2004. The net realized loss on our investments for the quarter
totaled $322 versus a loss of $322 for the quarter ended September 30, 2004. For the
period April 8, 2004 (commencement of operations) through December 31, 2004, the Company
had total principal repayments and exits of $25.8 million and total net realized losses of
$1,012. The Company also incurred net realized losses on the sale of its U.S. Treasury
Bills. Net realized losses were $60,350 for the quarter ended December 31, 2004 versus
$60,086 for the quarter ended September 30, 2004. For the period April 8, 2004
(commencement of operations) through December 31, 2004, net realized losses on the sale of
U.S. Treasury Bills totaled $120,551.

# Net Increase in
Stockholders Equity From Operations

For the quarter ended December 31,
2004, the Company had a net increase in stockholders equity resulting from
operations of $25.2 million versus $5.8 million for the quarter ended September 30, 2004.
For the period April 8, 2004 (commencement of operations) through December 31, 2004, the
Company had a total net increase in stockholders equity resulting from operations of
$31.8 million.

Based on the weighted-average shares
outstanding of 62,028,229, our net change in stockholders equity from operations per
share was $0.406 for the quarter ended December 31, 2004 versus $0.093 for the quarter
ended September 30, 2004. Our net change in stockholders equity from operations was
$0.513 per share for the period April 8, 2004 (commencement of operations) through
December 31, 2004.

# Financial Condition,
Liquidity and Capital Resources

We generated cash primarily from the
net proceeds of our initial offering as well as cash flows from operations, including
income earned from the temporary investment of cash in U.S. government securities and
other high-quality debt investments that mature in one year or less. We may also fund a
portion of our investments through borrowings from banks and issuances of senior
securities. In the future, we may also securitize a portion of our investments in
mezzanine or senior secured loans or other assets. Our primary use of funds will be
investments in portfolio companies and cash distributions to holders of our common stock.

17

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# Dividends

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 and other upfront
fees associated with investments in portfolio companies was treated as taxable income and
accordingly, distributed to shareholders. For the period April 8, 2004 (commencement of
operations) through December 31, 2004, these fees totaled $4.4 million.

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 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 8, 2004 (commencement of operations) through December 31, 2004, we did not
engage in interest rate hedging activities.

On December 3, 2004, 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 33,000,000 euro
forward at a rate of 1.3439 dollars per euro for settlement March 8, 2005. Unrealized
depreciation on this contract is represented on our balance sheet as of December 31, 2004
and described further in footnote 8 to the financial statements.

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 8, 2004 (commencement of
operations) through December 31, 2004 that have materially affected, or are reasonably
likely to materially affect, AICs internal control over financial reporting.

18

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# 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

On April 5, 2004, our registration
statement on Form N-2 (SEC File No. 333-112591), for the initial public offering of
62,000,000 shares of our common stock became effective. All 62,000,000 shares were sold
upon completion of the initial public offering at an aggregate offering price of $930.0
million, reflecting an initial offering price of $15.00 per share. UBS Investment Bank,
Citigroup and JPMorgan acted as Joint Book-Running Managers. Wachovia Securities, Banc of
America Securities LLC, Legg Mason Wood Walker and RBC Capital Markets also acted as
underwriters for the initial public offering. In connection with the initial public
offering, we registered and offered the underwriters an option to purchase an additional
9.3 million shares of common stock at the $15 per share offering price. The underwriters
did not exercise this option.

Underwriting discounts and
commissions for the shares sold in the initial public offering totaled $58.1 million. In
connection with the initial public offering, we incurred expenses of approximately $1.7
million. None of these expenses were paid directly or indirectly to our directors,
officers or associates, or to persons owning 10% or more of our common stock or that of
other affiliates. After deducting underwriting discounts and commissions and other
expenses, we received net proceeds of $870.2 million from the initial public offering.

The primary purpose of the initial
public offering was to obtain capital with which to invest primarily in the senior secured
debt and mezzanine loans and related equity of U.S. middle-market companies. (These
companies typically have annual revenues between $50 million and $1 billion.) We had
invested the net proceeds from the initial public offering primarily in short-term U.S.
Treasury securities while we execute the investment strategy as outlined in our
Registration Statement on Form N-2. As of December 31 2004, we invested approximately $731
million of our initial net proceeds in senior secured debt, subordinated debt/corporate
notes and equity and warrants as disclosed within our Schedule of Investments included in
this report under Item 1 of Part 1 and our Notes to Financial Statements.

We did not repurchase any shares of
our common stock during the period April 8, 2004 (commencement of operations) through
December 31, 2004.

# 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

19

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# 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):

|ExhibitNumber |  | 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.C.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
October 25, 2004, we filed a current report on Form 8-K, pursuant to Item 7.01 reporting
the issuance of a press release, announcing a scheduled earnings release on November 8,
2004.

On
November 8, 2004, we filed a current report on Form 8-K, pursuant to Item 9.01 reporting
financial results for the period ended September 30, 2004.

On
December 14, 2004, we filed a current report on Form 8-K, pursuant to Item 7.01 reporting
the issuance of a press release announcing the declaration of a stockholder dividend of
$0.18 per share.

20

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# 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 February 7, 2005.

| | APOLLO INVESTMENT
CORPORATION                                                    
| | ---------------------------------------------------------------------------------
| |                                                                                  
| | By:  /s/ MICHAEL S. GROSS                                                        
| | _________________________________________                                        
| |                                                                                  
| | Michael S. Gross
     President, Chief Executive Officerand Chairman of the Board
| |                                                                                  
| |                                                                                  
| |                                                                                  
| | By:  /s/ RICHARD L. PETEKA                                                       
| | _________________________________________                                        
| |                                                                                  
| | Richard L. Peteka
     Chief Financial Officer and Treasurer                     

21

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