Apollo Tactical Income Fund Inc.
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number             811-22591                                 

Apollo Tactical Income Fund Inc.

 

(Exact name of registrant as specified in charter)

9 West 57th Street

New York, New York 10019

 

(Address of principal executive offices) (Zip code)

Joseph Moroney, President

9 West 57th Street

New York, New York 10019

 

(Name and address of agent for service)

Registrant’s telephone number, including area code: (212) 515-3200

Date of fiscal year end: December 31

Date of reporting period: December 31, 2013


Table of Contents

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.


Table of Contents

 

LOGO

 

    Apollo Senior Floating Rate Fund Inc. (NYSE: AFT)

    Apollo Tactical Income Fund Inc. (NYSE: AIF)

 

 

 

Annual Report

 

December 31, 2013


Table of Contents

 

TABLE OF CONTENTS

 

Manager Commentary

   3

Financial Data

  

Apollo Senior Floating Rate Fund Inc.

   5

Apollo Tactical Income Fund Inc.

   6

Schedule of Investments

  

Apollo Senior Floating Rate Fund Inc.

   7

Apollo Tactical Income Fund Inc.

   13

Statements of Assets and Liabilities

   18

Statements of Operations

   19

Statements of Changes in Net Assets

  

Apollo Senior Floating Rate Fund Inc.

   20

Apollo Tactical Income Fund Inc.

   21

Statements of Cash Flows

  

Apollo Senior Floating Rate Fund Inc.

   22

Apollo Tactical Income Fund Inc.

   23

Financial Highlights

  

Apollo Senior Floating Rate Fund Inc.

   24

Apollo Tactical Income Fund Inc.

   25

Notes to Financial Statements

   26

Report of Independent Registered Public Accounting Firm

   40

Additional Information

   41

Directors and Officers

   42

Important Information About This Report

   44

Economic and market conditions change frequently.

There is no assurance that the trends described in this report will continue or commence.

 

 

 

This report, including the financial information herein, is transmitted to shareholders of the Funds for their information. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. Statements and other information herein are as dated and are subject to change.


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Manager Commentary (unaudited)

As of December 31, 2013

Dear Shareholders,

We would like to start by saying thank you for your interest in the Apollo Senior Floating Rate Fund Inc. and the Apollo Tactical Income Fund Inc. (the “Funds”). We appreciate the trust and confidence you have placed with us through your investment in the Funds.

In 2013, we saw several records broken and witnessed several improbabilities become realities. In terms of the records broken, total leveraged loan issuance hit $605.0 billion and institutional issuance hit $454.9 billion for the year, exceeding prior records of $535.2 billion and $386.6 billion, respectively, in 2007. The driver for the significant issuance was primarily refinancings, which were 47% of issuance for the year. Issuers took advantage of robust capital markets and low rates to address upcoming maturities or opportunistically remove covenants and reprice their loans. The next record broken was retail inflows, which were $70 billion for the year. Demand for floating rate income-oriented investments by retail investors grew as the possibility of a higher rate environment became evident amid talks of a less accommodative central bank. The demand from retail investors was met with a nominal increase in new supply into the market during the first half of 2013, but became more balanced in the second half of the year. The supply, primarily in the second half of 2013, resulted in the loan market growing from $551.8 billion to $680.9 billion during the year. The other notable development was the resurgence in the collateralized loan obligation (“CLO”) market where issuance hit $81.8 billion for the year, the most since $97.0 billion in 2006. The CLO market was wide open for most of the year as issuers executed a total of 172 deals, which helped absorb new issue supply and drove spreads tighter.

Fundamentally, we saw a benign environment during 2013. Default rates for the year ended at 2.11% by principal amount and 1.61% by number of loans. This compares to a long-term average of 3.24% and 3.07% over the last 15 years. While use of leverage increased during the year, fixed charge coverage, which represents a company’s ability to service their interest expense and capital expenditures, remained strong, largely due to low interest expense. Structures were weaker during the year with a majority of loan issuers executing covenant-lite financings, although history suggests covenant-lite issuers do not exhibit worse default characteristics than loans with covenants.

Based on historical trends, we did not anticipate that 2013 would be a coupon-clipping year. However, it appears that 2013 was an exception where the market earned 5.29% versus a beginning-of-2013 yield of 5.59%. This is the first time in 7 years that this has happened. As we break down the year, we did see significant spread compression during the first quarter of 2013 as supply was insufficient to meet demand, resulting in a wave of repricings. As the year progressed, we saw more stability in supply and demand dynamics, and spreads stabilized. We ended 2013 with spreads on the leveraged loan index of 4.66%, compared to the beginning of the year at 5.29%.

As we head into 2014, market strategists generally are forecasting, in classic fashion, more of the same. Default rates are expected to remain muted, loan issuance is expected to be robust, and new issue CLO and retail demand are expected to be strong. Loans are expected to have another “coupon” year. While we could offer a “safe” outlook with many of the same thoughts as the strategists, a tenet of Apollo is to always look for a contrarian view. Some of our views are as follows:

Our key contrarian prediction is that loans have the potential to see much more technical volatility in 2014 than 2013, creating opportunities for investors that are patient and capital-rich. The open-ended mutual fund investor was primarily responsible for driving demand for loans and causing spreads to tighten significantly in 2013, as noted above. We believe that retail demand will be more erratic in 2014 as the debate over quantitative easing continues. Loans have seen 81 consecutive weeks of positive inflows, and we believe that we are due for a pause or a temporary reversal that could cause a rise in spreads (and a reduction in prices). We look at 2011 to see the impact of a reversal in loan retail flows on prices. During a 5-week period in the summer of 2011, the loan market declined by 5.02% as retail outflows hit $5.5 billion. At that time, retail investors were $80.7 billion, or 15.6%, of the market. Today, retail investors are $161.0 billion, or 23.7%, of the market. Our view is that a reversal in loan mutual fund flows, even a modest one, could result in a relatively large decline in prices. Notably, we believe this decline in prices will be temporary but may result in loans underachieving their coupons for the year.

 

Annual Report  |  3


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Manager Commentary (unaudited)  (continued)

As of December 31, 2013

 

While we expect that defaults in 2014 should remain low, we also believe defaults may rise to a level closer to long-term averages over the next few years. We saw an increase in the amount of weak third quarter earnings reports compared to previous quarters, resulting in price declines for underperformers. While there were few themes across earnings, it is clearly becoming a credit picker’s market, as companies across a variety of sectors missed numbers due to poor execution and a lack of cost-cutting opportunities. We do not currently foresee any significant catalysts to cause a broad pick-up in defaults in 2014, given lack of maturities, lack of covenants and low rates, but we do think the shadow interest rate will pick-up in 2014 and result in more defaults in 2015 and 2016.

We appreciate your interest and support in the Funds and hope you have a happy and prosperous new year. If you have any questions about the Funds, please call 1-888-301-3838, or go to our website at www.agmfunds.com.

Sincerely,

Apollo Credit Management, LLC

 

4  |  Annual Report


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Financial Data

As of December 31, 2013 (unaudited)

 

  Portfolio Composition (as % of Current Market

  Value of Investment Securities)

 

First Lien Senior Secured Loans

     83.5%     

Senior Secured Bonds

     1.1%     

Second Lien Secured Loans

     9.0%     

Second Lien Secured Bonds

     0.4%     

Senior Unsecured Bonds

     5.5%     

Equity/Other

     0.5%     

 

  Portfolio Characteristics (a)  

Weighted Average Floating-Rate Spread

     4.95%     

Weighted Average Fixed-Rate Coupon

     9.56%     

Weighted Average Days to Reset (floating assets)

     57     

Weighted Average Modified Duration in years (fixed assets)

     3.59     

Average Position Size

   $ 2,155,151     

Number of Positions

     199     

Weighted Average Rating

     B     

 

  Credit Quality (b)  

BBB- or Higher

     0.3%     

BB

     6.3%     

B

     84.1%     

CCC+ or Lower

     7.0%     

Not Rated

     2.3%     

 

  Top 5 Industries (as % of Current Market Value of

  Investment Securities) (c)

 

Banking, Finance, Insurance and Real Estate

     15.5%     

Services: Business

     11.1%     

Healthcare & Pharmaceuticals

     7.9%     

Telecommunications

     7.4%     

Media: Broadcasting & Subscription

     7.0%     

Total

     48.9%     

  Top 10 Issuers (as % of Current Market Value of

  Investment Securities) (d)

 

First Data Corp.

     2.7%     

Intelsat Jackson Holdings, S.A.

     1.4%     

Tervita Corp.

     1.3%     

Drillships Financing Holding Inc.

     1.3%     

Hyperion Insurance Group

     1.2%     

Onex Carestream Finance L.P.

     1.2%     

WideOpenWest Finance, LLC

     1.2%     

National Financial Partners Corp.

     1.2%     

HGIM Corp.

     1.2%     

Bats Global Markets, Inc.

     1.2%     

Total

     13.9%     

 

  Performance Comparison
     Year Ended
December 31,
2013
  Since  
Inception  
on February 23,  
2011 to  
December 31,  
2013  

AFT - Stock Price

  3.14%(e)          3.41%(e)(f)  

AFT - NAV

  9.19%(e)          7.13%(e)(f)  

S&P/LSTA Leveraged Loan Index

  5.29%          4.81%(f)  
 

 

(a)

Averages based on par value of investment securities, except for the weighted average modified duration, which is based on market value.

(b)

Credit quality is calculated as a percentage of fair value of investment securities at December 31, 2013. The quality ratings reflected were issued by Standard & Poor’s Ratings Group (“Standard & Poor’s”), a nationally recognized statistical rating organization. Credit quality ratings reflect the rating agency’s opinion of the credit quality of the underlying positions in the Fund’s portfolio and not that of the Fund itself. Credit quality ratings are subject to change.

(c)

The industry classifications reported are from widely recognized market indexes or rating group indexes, and/or as defined by Fund management, with the primary source being Moody’s Investors Service (“Moody’s”), a nationally recognized statistical rating organization.

(d)

Holdings are subject to change and are provided for informational purposes only.

(e)

Performance reflects total return assuming all distributions were reinvested at the dividend reinvestment rate. Past performance does not necessarily indicate how the Fund will perform in the future. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund.

(f)

Annualized.

 

Annual Report  |  5


Table of Contents

Apollo Tactical Income Fund Inc.

Financial Data

As of December 31, 2013 (unaudited)

 

  Portfolio Composition (as % of Current Market

  Value of Investment Securities)

 

First Lien Senior Secured Loans

     46.0%     

Senior Secured Bonds

     11.5%     

Second Lien Secured Loans

     11.2%     

Second Lien Secured Bonds

     2.7%     

Senior Unsecured Bonds

     18.0%     

Junior Subordinated Bonds

     1.6%     

Asset-Backed Securities

     9.0%     

 

  Portfolio Characteristics (a)  

Weighted Average Floating-Rate Spread

     5.72%     

Weighted Average Fixed-Rate Coupon

     8.87%     

Weighted Average Days to Reset (floating assets)

     54     

Weighted Average Modified Duration in years (fixed assets)

     3.93     

Average Position Size

   $ 2,817,015     

Number of Positions

     143     

Weighted Average Rating

     B     

 

  Credit Quality (b)  

BB

     12.3%     

B

     71.8%     

CCC+ or Lower

     14.6%     

Not Rated

     1.3%     

 

  Top 5 Industries (as % of Current Market Value of

  Investment Securities) (c)

 

Banking, Finance, Insurance and Real Estate

     17.2%     

Structured Finance

     9.0%     

Healthcare & Pharmaceuticals

     8.4%     

Energy: Oil & Gas

     7.3%     

Services: Business

     7.0%     

Total

     48.9%     

  Top 10 Issuers (as % of Current Market Value of

  Investment Securities) (d)

 

First Data Corp.

     2.8%     

Tervita Corp.

     2.6%     

Avaya, Inc.

     2.5%     

Stonemor Partners L.P.

     2.0%     

Molycorp, Inc.

     2.0%     

InVentiv Health, Inc.

     1.9%     

Sidewinder Drilling, Inc.

     1.8%     

Atlas Senior Loan Fund Ltd.

     1.7%     

Land O’Lakes Capital Trust I

     1.6%     

TPC Group, LLC

     1.6%     

Total

     20.5%     

 

  Performance Comparison
     Since  
Inception  
on February 25,  
2013
to December 31, 2013  

AIF - Stock Price

       (4.90)%(e)(f)  

AIF - NAV

        7.94%(e)(f)  

S&P/LSTA Leveraged Loan Index

        4.00%(f)      
 

 

(a)

Averages based on par value of investment securities, except for the weighted average modified duration, which is based on market value.

(b)

Credit quality is calculated as a percentage of fair value of investment securities at December 31, 2013. The quality ratings reflected were issued by Standard & Poor’s, a nationally recognized statistical rating organization. Credit quality ratings reflect the rating agency’s opinion of the credit quality of the underlying positions in the Fund’s portfolio and not that of the Fund itself. Credit quality ratings are subject to change.

(c)

The industry classifications reported are from widely recognized market indexes or rating group indexes, and/or as defined by Fund management, with the primary source being Moody’s, a nationally recognized statistical rating organization.

(d)

Holdings are subject to change and are provided for informational purposes only.

(e)

Performance reflects total return assuming all distributions were reinvested at the dividend reinvestment rate. Past performance does not necessarily indicate how the Fund will perform in the future. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund.

(f)

Not annualized.

 

6  |  Annual Report


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Schedule of Investments

December 31, 2013

 

   

Principal
Amount ($)

   

 Value ($) 

 

Senior Loans (a) - 135.1%

   

AEROSPACE & DEFENSE - 7.5%

   

Camp International Holding Co.

   

2013 First Lien Replacement Term Loan, 4.75%, 05/31/19

    1,306,800            1,322,044   

2013 Second Lien Replacement Term Loan, 8.25%, 11/29/19

    1,000,000            1,021,875   

Deltek, Inc.

   

First Lien Term Loan, 5.00%, 10/10/18

    2,297,624            2,310,065   

Second Lien Term Loan, 10.00%, 10/10/19

    1,091,000            1,112,820   

ILC Industries, LLC

   

First Lien Term Loan, 8.00%, 07/11/18

    4,625,861            4,637,426   

Photonis USA Pennsylvania, Inc.

   

Term Loan, 8.50%, 09/18/19

    3,930,000            3,910,350   

Scitor Corp.

   

Term Loan, 5.00%, 02/15/17 (b)

    1,925,710            1,901,638   

Sequa Corp.

   

Initial Term Loan, 5.25%, 06/19/17

    960,300            940,575   

SI Organization, Inc., The

   

New Tranche B Term Loan, 5.50%, 11/22/16

    244,375            240,404   

SRA International, Inc.

   

Term Loan, 6.50%, 07/20/18

    3,785,551            3,790,283   

WP CPP Holdings, LLC

   

First Lien Term Loan, 4.75%, 12/28/19

    1,169,547            1,181,242   
   

 

 

 
          22,368,722   
   

 

 

 

AUTOMOTIVE - 1.2%

   

Fram Group Holdings Inc./Prestone Holdings, Inc.

   

Second Lien Term Loan, 10.50%, 01/29/18

    2,000,000            1,906,670   

Metaldyne, LLC

   

USD Term Loan, 5.00%, 12/18/18

    1,530,353            1,549,964   

Transtar Holding Co.

   

First Lien Term Loan, 5.50%, 10/09/18 (b)

    189,600            186,756   
   

 

 

 
      3,643,390   
   

 

 

 

BANKING, FINANCE, INSURANCE AND REAL ESTATE - 18.1%

  

Alliant Holdings I, LLC

   

Initial Term Loan, 4.25%, 12/20/19

    1,414,710            1,422,229   

Amwins Group

   

First Lien New Term Loan, 5.00%, 09/06/19

    1,738,931            1,752,338   

Asurion, LLC

   

Incremental Tranche B-1 Term Loan, 4.50%, 05/24/19

    4,557,743            4,565,035   

Bats Global Markets, Inc.

   

Term Loan, 7.00%, 12/19/18 (b)

    5,100,000            5,131,875   

Compass Investors, Inc.

   

Initial Term Loan, 5.00%, 12/27/19

    4,325,392            4,352,426   
   

Principal
Amount ($)

   

 Value ($) 

 

BANKING, FINANCE, INSURANCE AND REAL ESTATE (continued)

  

EZE Software Group, LLC

   

First Lien Initial Term Loan, 4.50%, 04/06/20

    671,625                677,082   

Second Lien Initial Term Loan, 8.50%, 04/05/21

    500,000                509,582   

Hamilton Lane Advisors, LLC

   

Term Loan, 5.25%, 02/28/18 (b)

    862,907                869,379   

HUB International Ltd.

   

Term Loan B, 4.75%, 10/02/20

    4,788,000                4,853,835   

Hyperion Finance S.A.R.L. (United Kingdom)

   

Term Loan, 5.75%, 10/17/19 (c)

    5,400,000                5,389,875   

ION Trading Technologies S.A.R.L. (Luxembourg)

   

First Lien Term Loan, 4.50%, 05/22/20 (c)

    1,086,540                1,096,216   

KCG Holdings, Inc. (Knight Capital)

   

Term Loan B, 5.75%, 12/05/17

    323,729                325,348   

Medical Card System, Inc.

   

Term Loan, 11.72%, 09/17/15 (b)

    4,928,256                4,878,973   

MMM Holdings, Inc.

   

MMM Term Loan, 9.75%, 12/12/17

    793,045                799,322   

MSO of Puerto Rico, Inc.

   

MSO Term Loan, 9.75%, 12/12/17

    576,760                581,325   

National Financial Partners Corp.

   

Term Loan B, 5.25%, 07/01/20

    5,164,050                5,226,458   

Sedgwick Claims Management Services, Inc.

   

Second Lien Additional Term Loan B, 8.00%, 12/12/18

    389,000                396,294   

SG Acquisition, Inc.

   

First Lien Initial Term Loan, 7.25%, 12/21/18 (b)

    2,621,464                2,631,295   

VFH Parent, LLC

   

Term Loan, 5.75%, 11/08/19

    3,931,167                3,967,196   

Walter Investment Management Corp.

   

Tranche B Term Loan, 12/18/20 (d)

    4,331,458                4,348,784   
   

 

 

 
          53,774,867   
   

 

 

 

BEVERAGE, FOOD & TOBACCO - 3.6%

  

AdvancePierre Foods, Inc.

   

First Lien Term Loan, 5.75%, 07/10/17

    705,696                698,639   

Second Lien Term Loan, 9.50%, 10/10/17 (b)

    1,013,158                982,763   

ARG IH Corp.

   

Term Loan, 5.00%, 11/15/20

    1,920,000                1,933,805   

Arysta LifeScience SPC, LLC

   

First Lien Initial Term Loan, 4.50%, 05/29/20

    1,200,965                1,210,164   

Second Lien Term Loan, 8.25%, 11/30/20

    1,028,000                1,046,941   

Del Monte Foods Co.

   

Term Loan B, 01/26/21 (d)

    1,020,000                1,027,012   
 

 

See accompanying Notes to Financial Statements.  |  7


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Senior Loans (a)  (continued)

  

BEVERAGE, FOOD & TOBACCO (continued)

  

Dole Food Co., Inc.

     

Tranche B Term Loan, 4.50%, 11/01/18

     2,353,333             2,366,571   

Performance Food Group, Inc.

     

Initial Term Loan, 6.25%, 11/14/19

     1,544,240             1,555,822   
     

 

 

 
        10,821,717   
     

 

 

 

CAPITAL EQUIPMENT - 1.6%

  

Air Distribution Technologies, Inc.

     

Second Lien Initial Term Loan, 9.25%, 05/11/20

     1,600,000             1,634,000   

Tank Holding Corp. (Roto Acquisition Corp.)

     

Term Loan 1, 4.25%, 07/09/19 (b)

     3,264,839             3,260,757   
     

 

 

 
        4,894,757   
     

 

 

 

CHEMICALS, PLASTICS, & RUBBER - 4.9%

  

Al Chem & Cy S.C.A. (Luxembourg)

     

Tranche B-1 Term Loan, 4.50%, 10/04/19 (c)

     429,091             433,652   

Tranche B-2 Term Loan, 4.50%, 10/04/19 (c)

     222,634             225,001   

Arizona Chemicals Holdings Corp.

     

Term Loan, 5.25%, 12/22/17

     865,571             872,712   

Cyanco Intermediate Corp.

     

Term Loan, 5.50%, 05/01/20 (d)

     4,681,134             4,704,540   

Flash Dutch 2 B.V. & U.S. Coatings Acquisition, Inc.

     

Initial Term Loan B, 4.75%, 02/01/20

     4,037,490             4,072,616   

OCI Beaumont LLC

     

Term Loan B-2, 08/20/19 (b) (d)

     1,643,932             1,666,536   

Tronox Pigments B. V. (Netherlands)

     

New Term Loan, 4.50%, 03/19/20 (c)

     740,280             751,199   

Univar, Inc.

     

Term Loan B, 5.00%, 06/30/17

     1,873,064             1,861,489   
     

 

 

 
            14,587,745   
     

 

 

 

CONSUMER GOODS: DURABLE - 1.7%

  

Bluestem Brands

     

Term Loan B, 12/06/18 (b) (d)

     1,245,857             1,233,399   

Britax U.S. Holdings, Inc.

     

First Lien Term Loan B, 4.50%, 10/15/20

     988,523             994,286   

FGI Operating Company, LLC

     

Term Loan B, 5.50%, 04/19/19

     2,816,479             2,837,603   
     

 

 

 
        5,065,288   
     

 

 

 

CONSUMER GOODS: NON-DURABLE - 5.0%

  

Allflex Holdings III, Inc.

     

Second Lien Initial Term Loan, 8.00%, 07/19/21

     2,400,000             2,436,600   
    

Principal
Amount ($)

    

 Value ($) 

 

CONSUMER GOODS: NON-DURABLE (continued)

  

Fender Musical Instruments Corp.

     

Initial Term Loan, 5.75%, 04/03/19

     447,500                 455,193   

Herff Jones, Inc.

     

Term Loan B, 5.50%, 06/25/19

     3,791,569                 3,838,963   

Insight Pharmaceuticals, LLC

     

First Lien Term Loan, 6.25%, 08/25/16 (b)

     3,227,429                 3,223,395   

Polyconcept Investments B.V.

     

Term Loan, 6.00%, 06/28/19

     2,521,407                 2,530,862   

Topps Co., Inc., The

     

Term Loan, 7.25%, 10/02/18

     2,530,000                 2,536,325   
     

 

 

 
        15,021,338   
     

 

 

 

CONTAINERS, PACKAGING AND GLASS - 2.7%

  

Berlin Packaging LLC

     

Term Loan B, 4.75%, 04/02/19

     497,500                 502,167   

Pelican Products, Inc.

     

First Lien Repriced Term Loan, 6.25%, 07/11/18

     4,770,613                 4,797,448   

Reynolds Group Holdings, Inc.

     

Incremental U.S. Term Loan, 4.00%, 12/01/18

     2,613,083                 2,640,691   
     

 

 

 
        7,940,306   
     

 

 

 

ENERGY: OIL & GAS - 8.3%

  

Atlas Energy, L.P.

     

Term Loan, 6.50%, 07/31/19

     1,256,850                 1,291,413   

Azure Midstream Energy, LLC

     

Term Loan, 6.50%, 11/15/18

     898,618                 905,357   

BBTS Borrower LP

     

Term Loan, 7.75%, 06/04/19

     3,737,265                 3,772,302   

Bennu Oil & Gas, LLC

     

Term Loan, 10.25%, 11/01/18 (b)

     915,129                 924,280   

Drillships Financing Holding, Inc.

     

Tranche B-2 Term Loan, 5.50%, 07/15/16

     5,586,000                 5,674,454   

EMG Utica, LLC

     

Term Loan, 4.75%, 03/27/20 (b)

     1,553,000                 1,562,706   

HGIM Corp.

     

Term Loan A, 5.00%, 06/18/18 (b)

     5,158,577                 5,190,818   

Pacific Drilling S.A.

     

Term Loan, 4.50%, 06/03/18

     1,275,590                 1,290,744   

Power Buyer, LLC

     

First Lien Delayed Draw Term Loan, 1.85%, 05/06/20 (e)

     50,209                 49,665   

First Lien Initial Term Loan, 4.25%, 05/06/20

     918,724                 908,770   

Sprint Industrial Holdings, Inc.

     

First Lien Term Loan, 7.00%, 05/14/19 (b)

     1,791,000                 1,813,388   

W3 Co.

     

First Lien Term Loan, 5.75%, 03/13/20

     1,256,505                 1,262,002   
     

 

 

 
            24,645,899   
     

 

 

 
 

 

8  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Senior Loans (a)  (continued)

  

ENVIRONMENTAL INDUSTRIES - 1.8%

  

EnergySolutions, LLC (aka

     

Envirocare of Utah, LLC) Term Loan, 7.25%, 08/15/16

     3,138,879             3,178,115   

Tervita Corp. (Canada)

     

Term Loan, 6.25%, 05/15/18 (c)

     2,197,395             2,210,788   
     

 

 

 
        5,388,903   
     

 

 

 

FOREST PRODUCTS & PAPER - 0.6%

  

Caraustar Industries, Inc.

     

Term Loan, 7.50%, 05/01/19

     1,796,963                 1,853,119   
     

 

 

 

HEALTHCARE & PHARMACEUTICALS - 10.4%

  

ABB/Con-Cise Optical Group, LLC

     

Term Loan B-1, 4.50%, 02/06/19.

     1,529,443             1,532,318   

Amneal Pharmaceuticals, LLC

     

Term Loan B, 5.75%, 11/01/19

     2,254,350             2,271,258   

Ardent Medical Services, Inc.

     

First Lien Term Loan, 6.75%, 07/02/18

     2,513,610             2,530,376   

ATI Holdings, Inc.

     

Term Loan, 5.00%, 12/20/19

     1,090,980             1,097,122   

ConvaTec, Inc.

     

New Term Loan B, 4.00%, 12/22/16

     558,172             562,529   

DJO Finance, LLC (ReAble

     

Therapeutics Finance, LLC)

     

Tranche B Term Loan, 4.75%, 09/15/17

     673,200             681,548   

Healogics, Inc.

     

First Lien Term Loan B, 5.25%, 02/05/19

     1,028,230             1,038,188   

InVentiv Health, Inc.

     

Consolidated Term Loan, 7.50%, 08/04/16

     2,387,546             2,365,163   

Term Loan B-3, 7.75%, 05/15/18.

     685,221             679,437   

Medpace Intermediateco, Inc.

     

Term Loan B, 5.25%, 06/19/17 (b)

     3,509,105             3,509,105   

Opal Acquisition, Inc.

     

First Lien Term Loan, 11/27/20 (d)

     4,110,000             4,120,296   

Sheridan Holdings, Inc.

     

Term Loan, 4.50%, 06/29/18

     327,419             329,056   

Term Loan B, 06/29/18 (d)

     2,001,131             2,011,767   

Smile Brands Group, Inc.

     

Term Loan, 7.50%, 08/16/19

     3,990,000             3,945,112   

Steward Health Care System, LLC

     

Term Loan, 6.75%, 04/10/20 (b)

     1,520,360             1,520,816   

U.S. Renal Care, Inc.

     

Second Lien Term Loan, 10.25%, 01/03/20

     818,000             836,916   

Tranche B-2 First Lien Term

     

Loan, 4.25%, 07/03/19

     1,769,565             1,778,413   
     

 

 

 
            30,809,420   
     

 

 

 
    

Principal
Amount ($)

    

 Value ($) 

 

HIGH TECH INDUSTRIES - 9.6%

  

Active Network, Inc., The (Lanyon, Inc.)

     

First Lien Term Loan, 5.50%, 11/13/20

     2,447,000                 2,465,352   

Digital Insight Corp.

     

First Lien Term Loan, 4.75%, 10/16/19

     1,299,000                 1,301,845   

Freescale Semiconductor, Inc.

     

Tranche B5 Term Loan, 5.00%, 01/15/21

     1,945,125                 1,969,955   

Infor (US), Inc.

     

Tranche B-2 Term Loan, 5.25%, 04/05/18

     2,470,139                 2,482,231   

Kronos, Inc.

     

First Lien Incremental Term Loan, 4.50%, 10/30/19

     4,715,506                 4,765,631   

Landslide Holdings, Inc. (Crimson Acquisition Corp.)

     

Initial Term Loan, 5.25%, 08/09/19

     2,945,200                 2,969,130   

Open Link Financial, Inc.

     

Initial Term Loan, 7.75%, 10/30/17

     2,122,680                 2,135,066   

Shield Finance Co. S.à r.l. (Luxemburg)

     

Term Loan B, 6.50%, 05/10/19 (c)

     1,885,290                 1,894,716   

Sophia, L.P.

     

Term Loan B, 4.50%, 07/19/18

     1,587,238                 1,598,650   

Vision Solutions, Inc.

     

First Lien Term Loan, 6.00%, 07/23/16 (b)

     4,220,355                 4,236,181   

Wall Street Systems Delaware, Inc.

     

First Lien Term Loan, 5.75%, 10/25/19

     1,293,930                 1,302,444   

Second Lien Term Loan, 9.25%, 10/25/20

     1,400,000                 1,413,545   
     

 

 

 
            28,534,746   
     

 

 

 

HOTEL, GAMING & LEISURE - 1.6%

  

Centaur Acquisition, LLC

     

First Lien Term Loan, 5.25%, 02/20/19

     600,463                 608,968   

Second Lien Term Loan, 8.75%, 02/20/20

     826,000                 850,780   

Mohegan Tribal Gaming Authority

     

Term Loan B, 5.50%, 11/19/19

     1,105,200                 1,124,773   

Peppermill Casinos, Inc.

     

Term Loan B, 7.25%, 11/09/18 (b)

     1,980,000                 2,029,500   
     

 

 

 
        4,614,021   
     

 

 

 

MEDIA: ADVERTISING, PRINTING & PUBLISHING - 6.2%

  

Cenveo Corp.

     

Term Loan B, 6.25%, 02/13/17

     249,141                 251,218   

F & W Media, Inc.

     

Term Loan, 7.75%, 06/30/19

     3,184,000                 3,072,560   

Information Resources, Inc.

     

Term Loan, 4.75%, 09/30/20

     2,916,289                 2,936,951   
 

 

See accompanying Notes to Financial Statements.  |  9


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Senior Loans (a)  (continued)

  

MEDIA: ADVERTISING, PRINTING & PUBLISHING (continued)

  

Merrill Communications, LLC

     

Term Loan, 03/08/18 (d)

     4,040,746             4,129,966   

Reader’s Digest Association, Inc., The

     

Term Loan, 12.50%, 09/30/15 (b)

     3,004,805             2,929,685   

Springer SBM Two GMBH (Germany)

     

Initial Term Loan B2, 5.00%, 08/14/20 (c)

     5,035,380             5,065,265   
     

 

 

 
        18,385,645   
     

 

 

 

MEDIA: BROADCASTING & SUBSCRIPTION - 8.3%

  

Granite Broadcasting Corp.

     

First Lien Tranche B Term Loan, 6.75%, 05/23/18

     2,554,020             2,573,175   

Gray Television, Inc.

     

Initial Term Loan, 4.75%, 10/11/19

     463,249             466,723   

Hargray Communications Group, Inc. (HCP Acquisition, LLC)

     

Term Loan B, 4.75%, 06/26/19

     2,287,505             2,307,521   

Hemisphere Media Holdings, LLC (Intermedia Espanol, Inc.)

     

Term Loan B, 6.25%, 07/30/20 (b)

     2,338,250             2,355,787   

Hubbard Radio, LLC

     

Tranche 1 Term Loan, 4.50%, 04/29/19

     670,951             675,705   

Learfield Communications, Inc.

     

First Lien Initial Term Loan, 5.00%, 10/09/20 (b)

     1,250,000             1,265,625   

SESAC Holdco II, LLC

     

First Lien Term Loan, 5.00%, 02/07/19

     553,410             557,215   

Telecommunications Management, LLC

     

Term Loan 1, 5.00%, 04/30/20 (b)

     964,145             965,355   

Term Loan 2, 9.00%, 10/30/20 (b)

     573,483             584,952   

TWCC Holding Corp.

     

Second Lien Term Loan, 7.00%, 06/26/20

     4,120,000             4,243,621   

Univision Communications Inc. 2013 Converted Extended First

     

Lien Term Loan, 4.50%, 03/01/20

     3,459,488             3,481,386   

WideOpenWest Finance, LLC

     

Term Loan B, 4.75%, 04/01/19

     5,196,938             5,232,017   
     

 

 

 
            24,709,082   
     

 

 

 

MEDIA: DIVERSIFIED & PRODUCTION - 1.2%

  

Tech Finance & Co. S.C.A. (France)

     

New Term Loan B, 7.25%, 07/11/20 (c)

     3,652,763             3,692,559   
     

 

 

 
    

Principal
Amount ($)

    

 Value ($) 

 

METALS & MINING - 1.1%

  

FMG Resources (August 2006) Pty Ltd. (FMG America Finance, Inc.) (Australia)

     

Term Loan, 4.25%, 06/30/19 (c)

     698,250                 708,287   

Oxbow Carbon, LLC (Oxbow Calcining, LLC)

     

Term Loan B, 8.00%, 01/19/20

     2,000,000                 2,041,260   

Waupaca Foundry, Inc.

     

Term Loan, 4.50%, 06/29/17

     477,666                 478,860   
     

 

 

 
        3,228,407   
     

 

 

 

RETAIL - 6.9%

  

99¢ Only Stores

     

Tranche B-2 Term Loan, 4.50%, 01/11/19

     3,816,885                 3,851,713   

Charming Charlie, Inc.

     

Term Loan B, 12/18/19 (b) (d)

     1,161,000                 1,161,000   

Evergreen Acqco 1 LP

     

New Term Loan, 5.00%, 07/09/19

     3,841,477                 3,861,280   

Gymboree Corp., The

     

Term Loan 2011, 5.00%, 02/23/18

     1,945,591                 1,823,991   

HMK Intermediate Holdings, LLC

     

Term Loan, 5.75%, 03/30/19 (b)

     1,129,875                 1,136,937   

Neiman Marcus Group Inc., The

     

Term Loan, 5.00%, 10/25/20

     1,520,000                 1,541,219   

Sears Roebuck Acceptance Corp. (KMART Corp.)

     

Term Loan, 5.50%, 06/30/18

     3,020,000                 3,044,900   

Smart & Final, Inc.

     

First Lien Term Loan, 4.75%, 11/15/19

     3,183,229                 3,182,433   

Vince, LLC (Vince Intermediate Holding, LLC)

     

Term Loan B, 6.00%, 11/27/19

     1,060,000                 1,071,925   
     

 

 

 
            20,675,398   
     

 

 

 

SERVICES: BUSINESS - 16.2%

  

ARC Document Solutions, Inc.

     

Term Loan B, 12/19/18 (d)

     2,490,000                 2,483,775   

Brock Holdings III, Inc.

     

First Lien Term Loan, 6.00%, 03/16/17

     1,608,202                 1,616,493   

Second Lien Initial Term Loan, 10.00%, 03/16/18

     3,000,000                 3,056,250   

EIG Investors Corp.

     

Term Loan, 5.00%, 11/09/19

     3,322,744                 3,346,119   

GCA Services Group, Inc.

     

Initial Term Loan, 5.25%, 11/01/19

     939,819                 943,343   

Second Lien Initial Term Loan, 9.25%, 11/01/20

     834,400                 848,873   

Global Cash Access, Inc.

     

Term Loan, 4.00%, 03/01/16

     1,471,429                 1,480,014   

Infogroup, Inc.

     

Term Loan B, 05/26/18 (b) (d)

     3,189,447                 2,607,373   

Lineage Logistics, LLC

     

Term Loan, 4.50%, 04/26/19

     3,536,230                 3,540,650   
 

 

10  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Senior Loans (a) (continued)

  

SERVICES: BUSINESS (continued)

     

Mirror Bidco Corp.

     

Term Loan, 5.25%, 12/28/19

     931,590             938,582   

Onex Carestream Finance LP

     

First Lien 2013 Term Loan, 5.00%, 06/07/19

     4,218,825             4,278,416   

Second Lien Term Loan, 9.50%, 12/07/19

     1,000,000             1,021,250   

Patheon, Inc. (Canada)

     

Initial Term Loan, 7.25%, 12/14/18 (c)

     2,309,670             2,336,624   

SGS Cayman, L.P. (Cayman Islands)

     

Term Loan, 7.25%, 03/06/19 (b) (c)

     1,483,448             1,487,157   

SMG

     

First Lien Term Loan, 5.50%, 06/07/18 (b)

     1,474,887             1,478,574   

Second Lien Term Loan, 10.75%, 12/07/18 (b)

     1,000,000             1,005,000   

SNL Financial LC

     

Term Loan, 5.50%, 10/23/18

     979,040             983,935   

Stafford Logistics, Inc. (dba Custom Ecology, Inc.)

     

Term Loan, 6.75%, 06/26/19 (b)

     2,532,275             2,544,936   

Sutherland Global Services, Inc.

     

U.S. Tranche Term Loan, 7.25%, 03/06/19 (b)

     3,284,777             3,292,989   

TransFirst Holdings, Inc.

     

First Lien Term Loan B-1, 4.75%, 12/27/17

     1,331,575             1,335,903   

Second Lien Initial Term Loan, 11.00%, 06/27/18

     2,500,000             2,536,462   

TriNet HR Corp.

     

Term Loan B-2, 5.00%, 08/20/20.

     3,999,975             4,039,975   

Washington Inventory Service

     

First Lien U.S. Term Loan, 5.75%, 12/20/18 (b)

     903,870             909,524   
     

 

 

 
            48,112,217   
     

 

 

 

SERVICES: CONSUMER - 0.7%

     

Laureate Education, Inc.

     

New Series 2018 Extended Term Loan, 06/15/18 (d)

     2,069,682             2,084,346   
     

 

 

 

TELECOMMUNICATIONS - 9.6%

     

Avaya, Inc.

     

Term Loan B-3, 4.74%, 10/26/17.

     2,403,349             2,357,685   

Fibertech Networks, LLC

     

Term Loan, 4.50%, 12/18/19

     3,126,420             3,153,792   

Global Tel*Link Corp.

     

First Lien Term Loan, 5.00%, 05/23/20

     4,301,381             4,214,020   

Grande Communications Networks, LLC

     

Term Loan B, 4.50%, 05/29/20

     5,021,249             5,028,580   

Integra Telecom Holdings, Inc.

     

Replacement Term Loan, 5.25%, 02/22/19

     1,067,930             1,083,949   
    

Principal
Amount ($)

    

 Value ($) 

 

TELECOMMUNICATIONS (continued)

  

LTS Buyer LLC (Sidera Networks, Inc.)

     

Second Lien Term Loan, 8.00%, 04/12/21

     722,000                 730,426   

Securus Technologies Holdings, Inc.

     

First Lien Initial Term Loan, 4.75%, 04/30/20

     1,580,040                 1,566,704   

Second Lien New Term Loan 2, 9.00%, 04/30/21 (d)

     2,800,000                 2,785,132   

U.S. TelePacific Corp.

     

Term Loan, 5.75%, 02/23/17

     4,876,675                 4,896,182   

Zayo Group LLC (Zayo Capital, Inc.)

     

Term Loan, 4.00%, 07/02/19

     2,885,248                 2,891,971   
     

 

 

 
        28,708,441   
     

 

 

 

TRANSPORTATION: CARGO - 1.8%

  

American Petroleum Tankers Parent, LLC

     

Term Loan, 4.75%, 10/02/19

     490,650                 492,490   

Commercial Barge Line Co.

     

First Lien Initial Term Loan, 7.50%, 09/22/19

     1,126,488                 1,127,896   

YRC Worldwide, Inc.

     

Term Loan B, 11.75%, 09/30/14

     3,665,625                 3,700,009   
     

 

 

 
        5,320,395   
     

 

 

 

TRANSPORTATION: CONSUMER - 3.5%

  

Landmark Aviation FBO Canada, Inc. (Canada)

     

Canadian Term Loan, 4.75%, 10/25/19 (c)

     188,568                 190,101   

First Lien Initial Term Loan, 4.75%, 10/25/19

     2,795,092                 2,817,816   

Sabre, Inc.

     

Term Loan B, 5.25%, 02/19/19

     1,686,838                 1,702,129   

Travel Leaders Group, LLC

     

Term Loan B, 7.00%, 12/05/18

     1,221,429                 1,206,161   

Travelport, LLC

     

New Term Loan B, 6.25%, 06/26/19

     3,202,905                 3,290,985   

U.S. Airways Group, Inc.

     

Tranche B-1 Term Loan, 4.00%, 05/23/19

     1,234,000                 1,243,872   
     

 

 

 
        10,451,064   
     

 

 

 

UTILITIES: ELECTRIC - 1.0%

  

La Frontera Generation, LLC

     

Term Loan, 4.50%, 09/30/20

     1,594,561                 1,613,998   

Panda Sherman Power, LLC

     

Construction Term Loan Advances, 9.00%, 09/14/18 (b)

     1,200,000                 1,236,000   
     

 

 

 
        2,849,998   
     

 

 

 

Total Senior Loans

     

(Cost $396,107,475)

            402,181,790   
     

 

 

 
 

 

See accompanying Notes to Financial Statements.  |  11


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Corporate Notes and Bonds - 10.1%

  

BANKING, FINANCE, INSURANCE AND REAL ESTATE - 4.5%

  

First Data Corp.

     

12.63%, 01/15/21

     10,000,000             11,787,500   

KCG Holdings, Inc. (Knight Capital)

     

8.25%, 06/15/18 (b) (f)

     1,667,000             1,762,852   
     

 

 

 
            13,550,352   
     

 

 

 

ENVIRONMENTAL INDUSTRIES - 1.2%

  

Tervita Corp. (Canada)

     

8.00%, 11/15/18 (c) (f)

     1,000,000             1,037,500   

9.75%, 11/01/19 (c) (f)

     2,604,000             2,564,940   
     

 

 

 
        3,602,440   
     

 

 

 

HEALTHCARE & PHARMACEUTICALS - 1.2%

  

Valeant Pharmaceuticals

     

International, Inc. (Canada)

7.50%, 07/15/21 (c) (f)

     3,200,000             3,528,000   
     

 

 

 

MEDIA: BROADCASTING & SUBSCRIPTION - 2.0%

  

Intelsat Jackson Holdings S.A. (Luxembourg)

     

5.50%, 08/01/23 (c) (f)

     5,000,000             4,775,000   

7.75%, 06/01/21 (c) (f)

     1,000,000             1,076,250   
     

 

 

 
        5,851,250   
     

 

 

 

METALS & MINING - 0.1%

  

Murray Energy Corp.

     

8.63%, 06/15/21 (f)

     300,000             312,000   
     

 

 

 

TELECOMMUNICATIONS - 1.1%

  

Avanti Communications Group PLC (United Kingdom)

     

10.00%, 10/01/19 (c) (f)

     3,333,000             3,366,330   
     

 

 

 

Total Corporate Notes and Bonds

     

(Cost $28,650,756)

        30,210,372   
     

 

 

 
    

Shares
Amount

    

 Value ($) 

 

Common Stocks - 0.7%

  

MEDIA: ADVERTISING, PRINTING & PUBLISHING - 0.7%

  

Reader’s Digest Association, Inc., The (b)

     50,210                 2,058,610   
     

 

 

 

Total Common Stocks

     

(Cost $5,212,858)

        2,058,610   
     

 

 

 

Warrants - 0.0%

  

BANKING, FINANCE, INSURANCE AND REAL ESTATE - 0.0%

  

Medical Card System, Inc.

     

07/26/18 (b)

     54,913                 8,237   
     

 

 

 

Total Warrants

     

(Cost $ — )

        8,237   
     

 

 

 

Total Investments-145.9%

        434,459,009   

(Cost of $429,971,089)

     

Other Assets & Liabilities,

     

Net-5.6%

        16,656,479   

Loan Outstanding-(41.2)%

        (122,704,615

Series A Preferred Shares-(10.3)%

        (30,680,000
     

 

 

 

Net Assets (Applicable to Common Shares)-100.0%

            297,730,873   
     

 

 

 
 

 

(a) “Senior Loans” are senior, secured loans made to companies whose debt is rated below investment grade and investments with similar characteristics. Senior Loans typically hold a first lien priority and pay interest at rates that are determined periodically on the basis of a floating base lending rate plus a spread. Unless otherwise identified, all Senior Loans carry a variable rate of interest. These base lending rates are primarily the London Interbank Offered Rate (“LIBOR”) and secondarily the prime rate offered by one or more major U.S. banks and the certificate of deposit rate used by commercial lenders. The rates shown represent the weighted average rate at December 31, 2013. Senior Loans are generally not registered under the Securities Act of 1933 (the “1933 Act”) and often contain certain restrictions on resale and cannot be sold publicly. Senior Loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturity shown.
(b) Fair Value Level 3 security. All remaining securities are categorized as Level 2.
(c) Foreign issuer traded in U.S. dollars.
(d) All or a portion of this position has not settled. Full contract rates do not take effect until settlement date.
(e) Senior Loan assets have additional unfunded loan commitments. As of December 31, 2013, the Fund had unfunded loan commitments, which could be extended at the option of the borrower, pursuant to the following loan agreements:

 

Borrower

   Unfunded
Loan
Commitment
 

Power Buyer, LLC

   $ 64,505   
  

 

 

 

 

(f) Securities exempt from registration pursuant to Rule 144A under the 1933 Act. These securities may only be resold in transactions exempt from registration to qualified institutional buyers. At December 31, 2013, these securities amounted to $18,422,872, or 6.2% of net assets.

 

12  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Tactical Income Fund Inc.

Schedule of Investments

December 31, 2013

 

    

Principal
Amount ($)

       Value ($)   

Senior Loans (a) - 82.2%

     

AEROSPACE & DEFENSE - 4.9%

  

Camp International Holding Co.

     

2013 Second Lien Replacement Term Loan, 11/29/19 (b)

     1,350,000             1,379,531   

ILC Industries, LLC

     

11.50%, 07/11/19 (c)

     4,000,000             3,840,000   

Photonis USA Pennsylvania, Inc.

     

Term Loan, 8.50%, 09/18/19

     3,930,000             3,910,350   

SRA International, Inc.

     

Term Loan, 6.50%, 07/20/18

     3,099,163             3,103,037   

WP CPP Holdings, LLC

     

Second Lien Term Loan B-1, 8.75%, 04/30/21

     1,435,000             1,463,700   
     

 

 

 
            13,696,618   
     

 

 

 

BANKING, FINANCE, INSURANCE AND REAL ESTATE - 14.9%

  

Bats Global Markets, Inc.

     

Term Loan, 7.00%, 12/19/18 (c)

     2,550,000             2,565,938   

EZE Software Group, LLC

     

Second Lien Initial Term Loan, 8.50%, 04/05/21

     736,000             750,105   

First Data Corp.

     

2018 Dollar Term Loan, 4.17%, 03/23/18

     4,000,000             4,013,040   

HUB International Ltd.

     

Term Loan B, 4.75%, 10/02/20

     4,788,000             4,853,835   

Hyperion Finance S.A.R.L. (United Kingdom)

     

Term Loan, 5.75%, 10/17/19 (d)

     5,400,000             5,389,875   

ION Trading Technologies S.A.R.L. (Luxemburg)

     

Second Lien Term Loan, 8.25%, 05/22/21 (d)

     1,487,000             1,519,536   

KCG Holdings, Inc. (Knight Capital)

     

Term Loan B, 5.75%, 12/05/17

     323,729             325,348   

Medical Card System, Inc.

     

Term Loan, 11.72%, 09/17/15 (c)

     4,549,159             4,503,668   

MMM Holdings, Inc.

     

MMM Term Loan, 9.75%, 12/12/17

     1,367,024             1,377,844   

MSO of Puerto Rico, Inc.

     

MSO Term Loan, 9.75%, 12/12/17

     994,200             1,002,069   

National Financial Partners Corp.

     

Term Loan B, 5.25%, 07/01/20

     5,164,050             5,226,458   

Nuveen Investments, Inc.

     

Tranche B First Lien Term Loan, 4.17%, 05/13/17

     2,286,000             2,280,285   

Sedgwick Claims Management Services, Inc.

     

Second Lien Additional Term Loan B, 8.00%, 12/12/18

     1,169,000             1,190,919   

VFH Parent, LLC

     

Term Loan, 5.75%, 11/08/19

     4,405,377             4,445,752   
    

Principal
Amount ($)

       Value ($)   

BANKING, FINANCE, INSURANCE AND REAL ESTATE (continued)

  

Walter Investment Management Corp.

     

Tranche B Term Loan, 12/18/20 (b)

     2,557,697                 2,567,928   
     

 

 

 
            42,012,600   
     

 

 

 

BEVERAGE, FOOD & TOBACCO - 1.9%

  

ARG IH Corp.

     

Term Loan, 5.00%, 11/15/20

     1,920,000                 1,933,805   

Arysta LifeScience SPC, LLC

     

Second Lien Term Loan, 8.25%, 11/30/20

     1,028,000                 1,046,941   

Del Monte Foods Co.

     

Term Loan, 07/26/21 (b)

     1,520,000                 1,539,000   

Dole Food Co., Inc.

     

Tranche B Term Loan, 4.50%, 11/01/18

     853,333                 858,133   
     

 

 

 
        5,377,879   
     

 

 

 

CHEMICALS, PLASTICS, & RUBBER - 1.7%

  

Cyanco Intermediate Corp.

     

Term Loan, 05/01/20 (b)

     3,187,362                 3,203,299   

OCI Beaumont LLC

     

Term Loan B-2, 08/20/19 (b) (c)

     1,643,932                 1,666,536   
     

 

 

 
        4,869,835   
     

 

 

 

CONSUMER GOODS: DURABLE - 0.6%

  

Bluestem Brands

     

Term Loan B, 12/06/18 (b) (c)

     1,245,857                 1,233,399   

FGI Operating Company, LLC

     

Term Loan B, 5.50%, 04/19/19

     498,739                 502,480   
     

 

 

 
        1,735,879   
     

 

 

 

CONSUMER GOODS: NON-DURABLE - 4.7%

  

Allflex Holdings III, Inc.

     

Second Lien Initial Term Loan, 8.00%, 07/19/21

     2,400,000                 2,436,600   

Fender Musical Instruments Corp.

     

Initial Term Loan, 5.75%, 04/03/19

     447,500                 455,193   

Herff Jones, Inc.

     

Term Loan B, 5.50%, 06/25/19

     3,791,569                 3,838,963   

Insight Pharmaceuticals, LLC

     

First Lien Term Loan, 6.25%, 08/25/16 (c)

     500,000                 499,375   

Polyconcept Investments B.V.

     

Term Loan, 6.00%, 06/28/19

     3,361,876                 3,374,483   

Topps Co., Inc., The

     

Term Loan, 7.25%, 10/02/18

     2,530,000                 2,536,325   
     

 

 

 
        13,140,939   
     

 

 

 

ENERGY: OIL & GAS - 6.1%

  

Atlas Energy, L.P.

     

Term Loan, 6.50%, 07/31/19

     1,256,850                 1,291,413   

Azure Midstream Energy, LLC

     

Term Loan, 6.50%, 11/15/18

     898,618                 905,357   

BBTS Borrower LP

     

Term Loan, 7.75%, 06/04/19

     2,742,278                 2,767,986   
 

 

See accompanying Notes to Financial Statements.  |  13


Table of Contents

Apollo Tactical Income Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Senior Loans (a)  (continued)

  

ENERGY: OIL & GAS (continued)

  

Bennu Oil & Gas, LLC

     

Term Loan, 10.25%,

11/01/18 (c)

     915,129             924,280   

Drillships Financing Holding, Inc.

     

Tranche B-2 Term Loan, 5.50%,

07/15/16

     5,586,000             5,674,454   

EMG Utica, LLC

     

Term Loan, 4.75%, 03/27/20 (c)

     1,553,000             1,562,706   

HGIM Corp.

     

Term Loan A, 5.00%,

06/18/18 (c)

     768,275             773,077   

Sprint Industrial Holdings, Inc.

     

First Lien Term Loan, 7.00%,

05/14/19 (c)

     1,791,000             1,813,388   

W3 Co.

     

First Lien Term Loan, 5.75%,

03/13/20

     1,507,608             1,514,203   
     

 

 

 
        17,226,864   
     

 

 

 

ENVIRONMENTAL INDUSTRIES - 1.1%

  

Tervita Corp. (Canada)

     

Term Loan, 6.25%, 05/15/18 (d)

     2,977,500             2,995,648   
     

 

 

 

FOREST PRODUCTS & PAPER - 0.8%

  

Caraustar Industries, Inc.

     

Term Loan, 7.50%, 05/01/19

     2,155,975             2,223,350   
     

 

 

 

HEALTHCARE & PHARMACEUTICALS - 6.7%

  

Amneal Pharmaceuticals, LLC

     

Term Loan B, 5.75%, 11/01/19

     2,254,350             2,271,258   

InVentiv Health, Inc.

     

Consolidated Term Loan, 7.50%,

08/04/16

     446,030             441,848   

Medpace Intermediateco, Inc.

     

Term Loan B, 5.25%,

06/19/17 (c)

     1,541,768             1,541,768   

Opal Acquisition, Inc.

     

First Lien Term Loan,

11/27/20 (b)

     4,110,000             4,120,296   

Sheridan Holdings, Inc.

     

Second Lien Term Loan,

12/20/21 (b)

     1,365,000             1,377,804   

Smile Brands Group, Inc.

     

Term Loan, 7.50%, 08/16/19

     3,990,000             3,945,112   

Steward Health Care System, LLC

     

Term Loan, 6.75%, 04/10/20 (c)

     1,520,360             1,520,816   

U.S. Renal Care, Inc.

     

New Term Loan 2, 8.50%,

07/03/20

     1,010,000             1,025,150   

Tranche B-2 First Lien

Term Loan,

4.25%, 07/03/19

     2,660,022             2,673,322   
     

 

 

 
            18,917,374   
     

 

 

 

HIGH TECH INDUSTRIES - 2.9%

  

Active Network, Inc., The (Lanyon, Inc.)

     

First Lien Term Loan, 5.50%,

11/13/20

     978,000             985,335   
    

Principal
Amount ($)

    

 Value ($) 

 

HIGH TECH INDUSTRIES (continued)

  

Second Lien Term Loan,

9.50%, 11/15/21

     2,820,000                 2,876,400   

Digital Insight Corp.

     

First Lien Term Loan, 4.75%,

10/16/19

     1,299,000                 1,301,845   

Landslide Holdings, Inc. (Crimson Acquisition Corp.)

     

Initial Term Loan, 5.25%,

08/09/19

     2,945,200                 2,969,130   
     

 

 

 
        8,132,710   
     

 

 

 

HOTEL, GAMING & LEISURE - 2.6%

  

Centaur Acquisition, LLC

     

First Lien Term Loan, 5.25%,

02/20/19

     992,500                 1,006,559   

Second Lien Term Loan, 8.75%,

02/20/20

     3,000,000                 3,090,000   

Mohegan Tribal Gaming Authority

     

Term Loan B, 5.50%, 11/19/19

     1,105,200                 1,124,773   

Peppermill Casinos, Inc.

     

Term Loan B, 7.25%,

11/09/18 (c)

     1,984,962                 2,034,586   
     

 

 

 
        7,255,918   
     

 

 

 

MEDIA: ADVERTISING, PRINTING & PUBLISHING - 4.7%

  

Cenveo Corp.

     

Term Loan B, 6.25%, 02/13/17

     299,194                 301,688   

F & W Media, Inc.

     

Term Loan, 7.75%, 06/30/19

     3,184,000                 3,072,560   

Information Resources, Inc.

     

Term Loan, 4.75%, 09/30/20

     1,075,213                 1,082,831   

Merrill Communications, LLC

     

Term Loan, 03/08/18 (b)

     4,720,622                 4,824,854   

Springer SBM Two GMBH (Germany)

     

Initial Term Loan B2, 5.00%,

08/14/20 (d)

     4,037,880                 4,061,845   
     

 

 

 
        13,343,778   
     

 

 

 

MEDIA: BROADCASTING & SUBSCRIPTION - 3.8%

  

Hargray Communications Group,

     

Inc. (HCP Acquisition, LLC)

     

Term Loan B, 4.75%, 06/26/19

     2,287,505                 2,307,521   

Hemisphere Media Holdings, LLC (Intermedia Espanol, Inc.)

     

Term Loan B, 6.25%,

07/30/20 (c)

     2,338,250                 2,355,787   

Learfield Communications, Inc.

     

First Lien Initial Term Loan,

5.00%, 10/09/20 (c)

     1,250,000                 1,265,625   

Telecommunications Management, LLC

     

Term Loan 1, 5.00%,

04/30/20 (c)

     964,145                 965,355   

Term Loan 2, 9.00%,

10/30/20 (c)

     860,224                 877,429   

TWCC Holding Corp.

     

Second Lien Term Loan, 7.00%, 06/26/20

     2,870,000                 2,956,114   
     

 

 

 
            10,727,831   
     

 

 

 
 

 

14  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Tactical Income Fund Inc.

Schedule of Investments  (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Senior Loans (a)  (continued)

  

MEDIA: DIVERSIFIED & PRODUCTION - 1.3%

  

Tech Finance & Co. S.C.A. (France)

     

New Term Loan B, 7.25%,

07/11/20 (d)

     3,652,763             3,692,559   
     

 

 

 

METALS & MINING - 1.1%

  

Oxbow Carbon, LLC (Oxbow Calcining, LLC)

     

Term Loan B, 8.00%, 01/19/20

     3,000,000             3,061,890   
     

 

 

 

RETAIL - 2.4%

  

Charming Charlie, Inc.

     

Term Loan B, 12/18/19 (b) (c)

     1,161,000             1,161,000   

Neiman Marcus Group Inc., The

     

Term Loan, 5.00%, 10/25/20

     1,520,000             1,541,219   

Sears Roebuck Acceptance Corp. (KMART Corp.)

     

Term Loan, 5.50%, 06/30/18

     3,020,000             3,044,900   

Vince, LLC (Vince Intermediate Holding, LLC)

     

Term Loan B, 6.00%, 11/27/19

     1,060,000             1,071,925   
     

 

 

 
        6,819,044   
     

 

 

 

SERVICES: BUSINESS - 10.0%

  

Applied Systems, Inc.

     

Second Lien Term Loan, 8.25%, 06/08/17

     3,000,000             3,018,750   

ARC Document Solutions, Inc.

     

Term Loan B, 12/19/18 (b)

     2,490,000             2,483,775   

EIG Investors Corp.

     

Term Loan, 5.00%, 11/09/19

     2,122,860             2,137,795   

Infogroup, Inc.

     

Term Loan B, 05/26/18 (b) (c)

     3,078,071             2,516,323   

Onex Carestream Finance LP

     

Second Lien Term Loan, 9.50%,

12/07/19

     5,639,588             5,759,429   

SGS Cayman, L.P. (Cayman Islands)

     

Term Loan, 7.25%, 03/06/19 (c) (d)

     1,791,776             1,796,255   

Stafford Logistics, Inc. (dba Custom Ecology, Inc.)

     

Term Loan, 6.75%, 06/26/19 (c)

     2,532,275             2,544,936   

Sutherland Global Services, Inc.

     

U.S. Tranche Term Loan, 7.25%,

03/06/19 (c)

     3,967,503             3,977,422   

TriNet HR Corp.

     

Term Loan B2, 5.00%, 08/20/20

     3,999,975             4,039,975   
     

 

 

 
            28,274,660   
     

 

 

 

SERVICES: CONSUMER - 1.2%

  

Laureate Education, Inc.

     

New Series 2018 Extended Term

Loan, 5.00%, 06/15/18

     3,435,771             3,460,113   
     

 

 

 

TELECOMMUNICATIONS - 5.5%

  

Avaya, Inc.

     

Term Loan B-5, 8.00%, 03/31/18.

     3,953,850             4,019,089   
    

Principal
Amount ($)

    

 Value ($) 

 

TELECOMMUNICATIONS (continued)

  

Global Tel*Link Corp.

     

First Lien Term Loan, 5.00%,

05/23/20

     2,718,771                 2,663,553   

LTS Buyer LLC (Sidera Networks, Inc.)

     

Second Lien Term Loan,

8.00%, 04/12/21

     1,444,000                 1,460,852   

Securus Technologies Holdings, Inc.

     

Second Lien New

Term Loan 2, 04/30/21 (b)

     5,000,000                 4,973,450   

U.S. TelePacific Corp.

     

Term Loan, 5.75%, 02/23/17

     2,517,594                 2,527,664   
     

 

 

 
        15,644,608   
     

 

 

 

TRANSPORTATION: CARGO - 0.6%

  

Commercial Barge Line Co.

     

First Lien Initial Term Loan,

7.50%, 09/22/19

     1,689,235                 1,691,347   
     

 

 

 

TRANSPORTATION: CONSUMER - 2.7%

  

Sabre, Inc.

     

Term Loan B, 5.25%, 02/19/19

     1,493,437                 1,506,975   

Travel Leaders Group, LLC

     

Term Loan B, 7.00%, 12/05/18

     1,221,429                 1,206,161   

Travelport, LLC

     

New Term Loan B, 6.25%,

06/26/19

     4,716,300                 4,845,998   
     

 

 

 
        7,559,134   
     

 

 

 

Total Senior Loans

     

(Cost $228,304,366)

            231,860,578   
     

 

 

 

Corporate Notes and Bonds - 48.6%

  

AEROSPACE & DEFENSE - 0.3%

  

DynCorp International, Inc.

     

10.38%, 07/01/17

     750,000                 770,625   
     

 

 

 

BANKING, FINANCE, INSURANCE AND REAL ESTATE - 9.9%

  

First Data Corp.

     

10.63%, 06/15/21 (e)

     5,000,000                 5,443,750   

11.25%, 01/15/21 (e)

     1,800,000                 1,995,750   

Jefferies Finance LLC / JFIN Co-Issuer Corp.

     

7.38%, 04/01/20 (c) (e)

     5,500,000                 5,747,500   

KCG Holdings, Inc. (Knight Capital)

     

8.25%, 06/15/18 (c) (e)

     5,667,000                 5,992,852   

Nationstar Mortgage, LLC

     

6.50%, 07/01/21

     3,860,000                 3,695,950   

SquareTwo Financial Corp

     

11.63%, 04/01/17

     4,782,000                 4,967,302   
     

 

 

 
        27,843,104   
     

 

 

 

BEVERAGE, FOOD & TOBACCO - 4.4%

  

Chiquita Brands International, Inc., LLC

     

7.88%, 02/01/21 (e)

     5,400,000                 5,859,000   

Land O’Lakes Capital Trust I

     

7.45%, 03/15/28 (e)

     6,719,000                 6,517,430   
     

 

 

 
        12,376,430   
     

 

 

 
 

 

See accompanying Notes to Financial Statements.  |  15


Table of Contents

Apollo Tactical Income Fund Inc.

Schedule of Investments (continued)

December 31, 2013

 

    

Principal
Amount ($)

       Value ($)   

Corporate Notes and Bonds (continued)

  

CHEMICALS, PLASTICS, & RUBBER - 5.4%

  

Magnetation, LLC / Mag Finance Corp.

     

11.00%, 05/15/18 (e)

     3,600,000             3,942,000   

Rentech Nitrogen Partners LP / Rentech Nitrogen Finance Corp.

     

6.50%, 04/15/21 (e)

     5,000,000             4,850,000   

TPC Group, LLC

     

8.75%, 12/15/20 (e)

     6,000,000             6,405,000   
     

 

 

 
            15,197,000   
     

 

 

 

CONSUMER GOODS: NON-DURABLE - 1.8%

  

American Greetings Corp.

     

7.38%, 12/01/21 (c)

     5,000,000             5,037,500   
     

 

 

 

ENERGY: OIL & GAS - 4.4%

     

Sidewinder Drilling, Inc.

     

9.75%, 11/15/19 (c) (e)

     8,000,000             7,120,000   

Summit Midstream Holdings LLC / Summit Midstream Finance Corp.

     

7.50%, 07/01/21 (c) (e)

     5,000,000             5,250,000   
     

 

 

 
        12,370,000   
     

 

 

 

ENVIRONMENTAL INDUSTRIES - 2.6%

  

Tervita Corp. (Canada)

     

8.00%, 11/15/18 (d) (e)

     2,000,000             2,075,000   

9.75%, 11/01/19 (d) (e)

     3,800,000             3,743,000   

10.88%, 02/15/18 (d) (e)

     1,585,000             1,618,681   
     

 

 

 
        7,436,681   
     

 

 

 

HEALTHCARE & PHARMACEUTICALS - 5.3%

  

CRC Health Corp.

     

10.75%, 02/01/16

     4,000,000             4,017,500   

InVentiv Health, Inc.

     

11.00%, 08/15/18 (e)

     7,000,000             6,230,000   

11.00%, 08/15/18 (c) (e)

     1,255,000             1,113,812   

Valeant Pharmaceuticals International, Inc. (Canada)

     

7.50%, 07/15/21 (d) (e)

     3,200,000             3,528,000   
     

 

 

 
        14,889,312   
     

 

 

 

HOTEL, GAMING & LEISURE - 1.8%

     

Diamond Resorts Corp.

     

12.00%, 08/15/18

     2,622,000             2,910,420   

DreamWorks Animation SKG, Inc.

     

6.88%, 08/15/20 (e)

     2,000,000             2,125,000   
     

 

 

 
        5,035,420   
     

 

 

 

MEDIA: BROADCASTING & SUBSCRIPTION - 3.4%

  

Intelsat Jackson Holdings S.A. (Luxembourg)

     

5.50%, 08/01/23 (d) (e)

     5,000,000             4,775,000   

Nara Cable Funding Ltd. (Ireland)

     

8.88%, 12/01/18 (d) (e)

     2,625,000             2,835,000   

Ono Finance II PLC (Ireland)

     

10.88%, 07/15/19 (d) (e)

     1,800,000             1,980,000   
     

 

 

 
        9,590,000   
     

 

 

 
    

Principal
Amount ($)

       Value ($)   

METALS & MINING - 3.0%

     

Molycorp, Inc.

     

10.00%, 06/01/20

     8,000,000                 7,980,000   

SunCoke Energy Partners, L.P.

     

7.38%, 02/01/20 (c) (e)

     606,000                 636,299   
     

 

 

 
        8,616,299   
     

 

 

 

SERVICES: CONSUMER - 2.9%

     

StoneMor Partners LP / Cornerstone Family Services of WV

     

7.88%, 06/01/21 (e)

     7,921,000                 8,277,445   
     

 

 

 

TELECOMMUNICATIONS - 3.4%

     

Avanti Communications Group PLC (United Kingdom)

     

10.00%, 10/01/19 (d) (e)

     3,333,000                 3,366,330   

Avaya, Inc.

     

9.00%, 04/01/19 (e)

     6,000,000                 6,300,000   
     

 

 

 
        9,666,330   
     

 

 

 

Total Corporate Notes and Bonds

     

(Cost $135,959,301)

            137,106,146   
     

 

 

 

Asset-Backed Securities (f) - 13.0%

  

Ares CLO Ltd. (Cayman Islands)

     

Series 2012-2X, Class E, 5.97%, 10/12/23 (d) (g)

     5,000,000                 4,894,750   

Atlas Senior Loan Fund Ltd. (Cayman Islands)

     

Series 2012-1A, Class B2L, 6.49%, 08/15/24 (d) (e) (g)

     2,000,000                 1,994,900   

Series 2012-1A, Class B3L, 7.74%, 08/15/24 (c) (d) (e) (g) .

     5,000,000                 5,000,000   

Avalon IV Capital, Ltd. (Cayman Islands)

     

Series 2012-1A, Class E, 6.34%, 04/17/23 (d) (e) (g)

     4,500,000                 4,478,175   

Battalion CLO III Ltd. (Cayman Islands)

     

Series 2012-3A, Class D, 5.55%, 01/18/25 (d) (e) (g)

     1,650,000                 1,576,822   

Cent CLO 17 (Cayman Islands)

     

Series 2013-17A, Class D, 6.24%, 01/30/25 (c) (d) (e) (g) .

     4,000,000                 3,942,000   

Cent CLO LP (Cayman Islands)

     

Series 2012-16X, Class D, 6.24%, 08/01/24 (d) (g)

     2,000,000                 1,977,867   

CIFC Funding Ltd. (Cayman Islands)

     

Series 2012-1X, Class B2L, 7.24%, 08/14/24 (c) (d) (g)

     2,000,000                 2,005,000   

Series 2012-2X, Class B2L, 6.24%, 12/05/24 (c) (d) (g)

     3,000,000                 2,964,000   

Dryden XXIV Senior Loan Fund (Cayman Islands)

     

Series 2012-24A, Class E, Collateralized Loan Obligation, 6.14%, 11/15/23 (d) (e) (g)

     1,000,000                 984,750   
 

 

16  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Tactical Income Fund Inc.

Schedule of Investments (continued)

December 31, 2013

 

    

Principal
Amount ($)

    

 Value ($) 

 

Asset-Backed Securities (f) (continued)

  

JFIN CLO 2012 Ltd. (Cayman Islands)

  

Series 2012-1A, Class D, 5.74%,

07/20/23 (d) (e) (g)

     3,000,000             2,874,150   

Marea CLO Ltd. (Cayman Islands)

  

Series 2012-1A, Class E, 6.34%,

10/16/23 (c) (d) (e) (g)

     4,000,000             4,002,800   
     

 

 

 

Total Asset-Backed Securities

     

(Cost $36,386,373)

        36,695,214   
     

 

 

 

Warrants - 0.0%

  

BANKING, FINANCE, INSURANCE AND REAL ESTATE - 0.0%

  

Medical Card System, Inc.

  

07/26/18 (c)

     50,689             7,603   
     

 

 

 

Total Warrants

     

(Cost $ — )

        7,603   
     

 

 

 

Total Investments-143.8%

        405,669,541   

(Cost of $400,650,040)

     

Other Assets & Liabilities,

     

Net-5.1%

        14,507,388   

Loan Outstanding-(48.9)%

        (138,000,000
     

 

 

 

Net Assets -100.0%

            282,176,929   
     

 

 

 
 

 

(a) “Senior Loans” are senior, secured loans made to companies whose debt is rated below investment grade and investments with similar characteristics. Senior Loans typically hold a first lien priority and pay interest at rates that are determined periodically on the basis of a floating base lending rate plus a spread. Unless otherwise identified, all Senior Loans carry a variable rate of interest. These base lending rates are primarily the London Interbank Offered Rate (“LIBOR”) and secondarily the prime rate offered by one or more major U.S. banks and the certificate of deposit rate used by commercial lenders. The rates shown represent the weighted average rate at December 31, 2013. Senior Loans are generally not registered under the Securities Act of 1933 (the “1933 Act”) and often contain certain restrictions on resale and cannot be sold publicly. Senior Loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturity shown.
(b) All or a portion of this position has not settled. Full contract rates do not take effect until settlement date.
(c) Fair Value Level 3 security. All remaining securities are categorized as Level 2.
(d) Foreign issuer traded in U.S. dollars.
(e) Securities exempt from registration pursuant to Rule 144A under the 1933 Act. These securities may only be resold in transactions exempt from registration to qualified institutional buyers. At December 31, 2013, these securities amounted to $132,580,446, or 47.0% of net assets.
(f) Asset-backed securities include collateralized loan obligations (“CLOs”). A CLO typically takes the form of a financing company (generally called a special purpose vehicle or “SPV”), created to reapportion the risk and return characteristics of a pool of assets. While the assets underlying CLOs are often Senior Loans or corporate notes and bonds, the assets may also include (i) subordinated loans; (ii) debt tranches of other CLOs; and (iii) equity securities incidental to investments in Senior Loans. The Fund may invest in lower tranches of CLOs, which typically experience a lower recovery, greater risk of loss or deferral or non-payment of interest than more senior tranches of the CLO. A key feature of the CLO structure is the prioritization of the cash flows from a pool of debt securities among the several classes of the CLO. The SPV is a company founded for the purpose of securitizing payment claims arising out of this asset pool. On this basis, marketable securities are issued by the SPV which, due to the diversification of the underlying risk, generally represent a lower level of risk than the original assets. The redemption of the securities issued by the SPV typically takes place at maturity out of the cash flow generated by the collected claims.
(g) Floating rate asset. The interest rate shown reflects the rate in effect at December 31, 2013.

 

See accompanying Notes to Financial Statements.  |  17


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Statements of Assets and Liabilities

December 31, 2013

 

     

Apollo

Senior
Floating Rate
Fund Inc.

    Apollo
Tactical
Income
Fund Inc.
 

Assets:

    

Investment securities at fair value (cost $429,971,089 and $400,650,040, respectively)

   $ 434,459,009      $ 405,669,541   

Cash and cash equivalents

     21,698,530        19,484,678   

Interest receivable

     2,879,408        4,711,831   

Receivable for investment securities sold

     7,416,647        7,723,116   

Deferred financing costs

     433,556        141,959   

Prepaid expenses

     55,055        55,055   
  

 

 

   

 

 

 

Total Assets

   $ 466,942,205      $ 437,786,180   
  

 

 

   

 

 

 

Liabilities:

    

Borrowings under credit facility (Note 8)

   $ 122,704,615      $ 138,000,000   

Payable for investment securities purchased

     14,024,801        16,006,339   

Interest payable

     516,887        220,841   

Unrealized depreciation on unfunded transactions (Note 9)

     381          

Distributions payable to common shareholders

     114,242        140,754   

Investment advisory fee payable

     383,179        356,509   

Accumulated distribution payable to preferred shareholders

     168,440          

Other payables and accrued expenses due to affiliates

     273,185        578,231   

Other payables and accrued expenses (Note 9)

     345,602        306,577   
  

 

 

   

 

 

 

Total Liabilities

     138,531,332        155,609,251   
  

 

 

   

 

 

 

Net Assets including Series A Preferred Shares

   $ 328,410,873      $ 282,176,929   
  

 

 

   

 

 

 

Series A Preferred Shares

    

($0.001 par value, 1,534 authorized and issued with liquidation preference of $20,000 per share)

   $   30,680,000      $   
  

 

 

   

 

 

 

Net Assets (Applicable to Common Shareholders)

   $ 297,730,873      $ 282,176,929   
  

 

 

   

 

 

 

Net Assets Consist of:

    

Par value of common shares ($0.001 par value, 999,998,466 and 1,000,000,000 shares authorized, respectively, and 15,573,061 and 14,464,026 issued and outstanding, respectively) (Note 6)

   $          15,573      $ 14,464   

Paid-in capital in excess of par value of common shares

     296,698,465        275,641,114   

Undistributed net investment income

     1,543,192        1,106,712   

Accumulated net realized (loss)/gain from investments

     (5,013,896     395,138   

Net unrealized appreciation on investments and unfunded transactions

     4,487,539        5,019,501   
  

 

 

   

 

 

 

Net Assets (Applicable to Common Shareholders)

   $ 297,730,873      $ 282,176,929   
  

 

 

   

 

 

 

Number of Common Shares outstanding

     15,573,061        14,464,026   

Net Asset Value, per Common Share

   $            19.12      $ 19.51   

 

18  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Statements of Operations

For the Year or Period Ended December 31, 2013

 

    

Apollo

Senior
Floating Rate
Fund Inc.

     Apollo
Tactical
Income
Fund Inc.*
 

Investment Income:

           

Interest

     $ 29,687,494           $ 20,821,740   
 

 

  

 

 

   

 

    

 

 

 

Total Investment Income

       29,687,494             20,821,740   
 

 

  

 

 

   

 

    

 

 

 

Expenses:

           

Investment advisory fee (Note 3)

       4,493,778             3,178,782   

Interest and commitment fee expense (Note 8)

       2,087,659             1,273,485   

Audit and legal fees

       470,371             337,420   

Administrative services of the Adviser (Note 3)

       560,969             407,768   

Insurance expense

       386,906             303,784   

Amortization of deferred financing costs (Note 8)

       349,561             73,937   

Board of Directors fees (Note 3)

       90,604             103,736   

Other operating expenses (Note 3)

       451,058             326,722   
 

 

  

 

 

   

 

    

 

 

 

Total Expenses

       8,890,906             6,005,634   

Expense reimbursement waived by Adviser (Note 3)

                   (59,351
 

 

  

 

 

   

 

    

 

 

 

Net Expenses

       8,890,906             5,946,283   
 

 

  

 

 

   

 

    

 

 

 

Net Investment Income

       20,796,588             14,875,457   
 

 

  

 

 

   

 

    

 

 

 

Net Realized and Unrealized Gain/(Loss) on Investments

           

Net realized (loss)/gain on investments

       (3,951,563          569,675   

Net change in unrealized appreciation/(depreciation) on investments and on unfunded transactions (Note 9)

       9,536,604             5,019,501   
 

 

  

 

 

   

 

    

 

 

 

Net realized and unrealized gain on investments

       5,585,041             5,589,176   
 

 

  

 

 

   

 

    

 

 

 

Distributions to Preferred Shareholders:

           

From net investment income

       (677,510            
 

 

  

 

 

   

 

    

 

 

 

Net increase in net assets, available to common shareholders, resulting from operations

     $ 25,704,119           $ 20,464,633   
 

 

  

 

 

   

 

    

 

 

 

 

 

*

For the period from February 25, 2013 (commencement of operations) to December 31, 2013.

 

See accompanying Notes to Financial Statements.  |  19


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Statements of Changes in Net Assets

 

     

Year

Ended
December 31,
2013

 

Year

Ended
December 31,
2012

Increase in Net Assets:

            
            

From Operations

            

Net investment income

     $ 20,796,588            $21,470,829     

Net realized loss on investments

       (3,951,563         (1,019,683  

Net change in unrealized appreciation/(depreciation) on investments and unfundedtransactions

       9,536,604            17,887,503     

Distributions to preferred shareholders

       (677,510         (738,358  
    

 

 

       

 

 

   

Net increase in net assets from operations

       25,704,119            37,600,291     
    

 

 

       

 

 

   

Distributions to Common Shareholders

            

From net investment income

       (19,606,326         (21,312,205  

From realized gain on investments

                  (137,220 )*   
    

 

 

       

 

 

   

Total distributions to common shareholders

       (19,606,326         (21,449,425  
    

 

 

       

 

 

   

Capital Transactions from Common Shares

            

Reinvestment of dividends

       811,136            1,021,185     
    

 

 

       

 

 

   

Net increase in net assets from share transactions

       811,136            1,021,185     
    

 

 

       

 

 

   

Total increase in net assets

     $ 6,908,929            $17,172,051     

Net Assets Applicable to Common Shares

            

Beginning of year

       290,821,944            273,649,893     
    

 

 

       

 

 

   

End of year

     $ 297,730,873            $290,821,944     
    

 

 

       

 

 

   

Undistributed net investment income

     $ 1,543,192            $999,427     
    

 

 

       

 

 

   

 

 

*

Amount stated reflects the nature of the underlying short-term investment transactions.

 

20  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Tactical Income Fund Inc.

Statement of Changes in Net Assets

 

           

Period

Ended
December 31,
2013*

 

Increase in Net Assets:

     

From Operations

     

Net investment income

      $ 14,875,457   

Net realized gain on investments

        569,675   

Net change in unrealized appreciation/(depreciation) on investments

        5,019,501   
     

 

 

 

Net increase in net assets from operations

        20,464,633   
     

 

 

 

Distributions to Common Shareholders

     

From net investment income

        (13,797,712

From realized gain on investments

        (174,537
     

 

 

 

Total distributions to common shareholders

        (13,972,249
     

 

 

 

Capital Transactions from Common Shares

     

Proceeds from sale of common shares

        276,162,889   

Offering costs (Note 6)

        (578,352
     

 

 

 

Net increase in net assets from share transactions

        275,584,537   
     

 

 

 

Total increase in net assets

      $ 282,076,921   

Net Assets Applicable to Common Shares

     

Beginning of period**

        100,008   
     

 

 

 

End of period

      $ 282,176,929   
     

 

 

 

Undistributed net investment income

      $ 1,106,712   
     

 

 

 

 

*

For the period from February 25, 2013 (commencement of operations) to December 31, 2013.

**

Represents initial seed capital invested by Apollo Credit Management, LLC.

 

See accompanying Notes to Financial Statements.  |  21


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Statement of Cash Flows

For the Year Ended December 31, 2013

 

 

 

Cash Flows From Operating Activities

  

Net increase in net assets from operations excluding distributions to preferred shareholders

   $ 26,381,629   

Adjustments to Reconcile Net Increase in Net Assets from Operations Excluding Distributions to Preferred Shareholders to Net Cash Flows Provided by Operating Activities

  

Net realized loss on investments

     3,951,563   

Net change in unrealized (appreciation)/depreciation on investments and on unfunded transactions

     (9,536,604

Net amortization/(accretion) of premium/(discount)

     (849,056

Purchase of investment securities

     (334,865,170

Proceeds from disposition of investment securities

     326,291,753   

Amortization of deferred financing costs

     349,561   

Changes in operating assets and liabilities

  

Decrease in interest receivable

     242,909   

Increase in prepaid expenses

     (15,794

Decrease in interest payable

     (35,089

Increase in investment advisory fee payable

     7,132   

Decrease in other payables and accrued expenses due to affiliates

     (74,445

Decrease in directors fees payable

     (22,750

Increase in other payables and accrued expenses

     81,608   
  

 

 

 

Net cash flows provided by operating activities

     11,907,247   
  

 

 

 

Cash Flows From Financing Activities

  

Distributions paid to common shareholders

     (18,680,948

Distributions paid to preferred shareholders

     (686,284
  

 

 

 

Net cash flows used in financing activities

     (19,367,232
  

 

 

 

Net decrease in cash and cash equivalents

     (7,459,985

Cash and cash equivalents, beginning of year

     29,158,515   
  

 

 

 

Cash and cash equivalents, end of year

   $ 21,698,530   
  

 

 

 

Supplemental Disclosure of Cash Flow Information

  

Cash paid during the period for interest

   $ 2,122,748   
  

 

 

 

Supplemental Disclosure of Non-Cash Financing Activity

  

Value of common shares issued as reinvestment of dividends to common shareholders

   $ 811,136   
  

 

 

 

 

22  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Tactical Income Fund Inc.

Statement of Cash Flows

For the Period from February 25, 2013 (commencement of operations) to December 31, 2013

 

 

 

Cash Flows From Operating Activities

  

Net increase in net assets from operations

   $ 20,464,633   

Adjustments to Reconcile Net Increase in Net Assets from Operations to Net Cash Flows Used in Operating Activities

  

Net realized gain on investments

     (569,675

Net change in unrealized (appreciation)/depreciation on investments

     (5,019,501

Net amortization/(accretion) of premium/(discount)

     (191,885

Purchase of investment securities

     (653,484,085

Proceeds from disposition of investment securities

     261,878,828   

Amortization of deferred financing costs

     73,937   

Changes in operating assets and liabilities

  

Increase in interest receivable

     (4,711,831

Increase in prepaid expenses

     (55,055

Increase in interest payable

     220,841   

Increase in investment advisory fee payable

     356,509   

Increase in other payables and accrued expenses due to affiliates

     578,231   

Increase in other payables and accrued expenses

     306,577   
  

 

 

 

Net cash flows used in operating activities

     (380,152,476
  

 

 

 

Cash Flows From Financing Activities

  

Proceeds from borrowings under the credit facility

     138,000,000   

Deferred financing costs

     (215,896

Proceeds from capital stock issued

     276,262,897   

Offering costs

     (578,352

Distributions paid to common shareholders

     (13,831,495
  

 

 

 

Net cash flows provided by financing activities

     399,637,154   
  

 

 

 

Net increase in cash and cash equivalents

     19,484,678   

Cash and cash equivalents, beginning of period

       
  

 

 

 

Cash and cash equivalents, end of period

   $ 19,484,678   
  

 

 

 

Supplemental Disclosure of Cash Flow Information

  

Cash paid during the period for interest

   $ 1,052,645   
  

 

 

 

 

See accompanying Notes to Financial Statements.  |  23


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Financial Highlights

For a Common Share outstanding throughout the period

 

Common Shares Per Share Operating Performance:   

For the

Year

Ended
December 31,
2013

   

For the

Year

Ended
December 31,
2012

   

For the
Period

Ended
December 31,
2011(a)

 

Net Asset Value, Beginning of Period

   $ 18.73      $ 17.68      $ 19.10 (b) 

Income from Investment Operations:

      

Net investment income

     1.34        1.39        1.00   

Net realized and unrealized gain/(loss) on investments

     0.35        1.10        (1.46

Distributions from net investment income to Series A Preferred Shareholders

     (0.04     (0.05     (0.02
  

 

 

   

 

 

   

 

 

 

Total from investment operations

     1.65        2.44        (0.48

Less Distributions Paid to Common Shareholders from:

      

Net investment income

     (1.26     (1.38     (0.88

Net realized gain on investments

            (0.01     (0.02
  

 

 

   

 

 

   

 

 

 

Total distributions paid to Common Shareholders

     (1.26     (1.39     (0.90

Common Share offering charges to paid-in capital

                   (0.04

Net Asset Value, End of Period

   $ 19.12      $ 18.73      $ 17.68   

Market Value, End of Period

   $ 18.10      $ 18.77      $ 16.01   

Total return based on net asset value(c)

     9.19     14.23     (2.43 )%(d) 

Total return based on market value(c)

     3.14     26.41     (15.62 )%(d) 

Ratios to Average Net Assets available to Common Shareholders:

      

Ratio of total expenses to average net assets

     3.00     3.21     2.99 %(e) 

Ratio of net expenses to average net assets

     3.00     3.18     2.88 %(e) 

Ratio of net investment income to average net assets(f)

     7.03     7.51     6.49 %(e) 

Ratio of net investment income to average net assets net of distributions to Series A Preferred Shareholders

     6.80     7.25     6.33 %(e) 

Supplemental Data:

      

Portfolio turnover rate

     72.0     66.6     41.5 %(d) 

Net assets at end of period (000’s)

   $ 297,731      $ 290,822      $ 273,650   

Senior Securities:

      

Total Series A Preferred Shares outstanding

     1,534        1,534        1,534   

Liquidation and market value per Series A Preferred Shares

   $ 20,000      $ 20,000      $ 20,000   

Asset coverage per share(g)

   $ 294,078      $ 289,574      $ 278,380   

Loan outstanding (in 000’s)

   $ 122,705      $ 122,705      $ 122,705   

Asset coverage per $1,000 of loan outstanding(h)

   $ 3,676      $ 3,620      $ 3,480   

 

 

(a)

From February 23, 2011 (commencement of operations) to December 31, 2011.

(b)

Net of sales load of $0.90 per share of initial offering.

(c)

Total return based on net asset value and total return based on market value assuming all distributions reinvested at reinvestment rate.

(d)

Not annualized.

(e)

Annualized.

(f)

Net investment income ratio does not reflect payment to preferred shareholders.

(g)

Calculated by subtracting the Fund’s total liabilities (not including the Series A Preferred Shares and borrowings outstanding) from the Fund’s total assets, and dividing this by the number of Series A Preferred Shares outstanding.

(h)

Calculated by subtracting the Fund’s total liabilities (not including the Series A Preferred Shares and borrowings outstanding) from the Fund’s total assets, and dividing this by the amount of borrowings outstanding.

 

24  |  See accompanying Notes to Financial Statements.


Table of Contents

Apollo Tactical Income Fund Inc.

Financial Highlights

For a Common Share outstanding throughout the period

 

Common Shares Per Share Operating Performance:  

For the

Period

Ended
December 31, 2013(a)

Net Asset Value, Beginning of Period

    $19.10(b)      

Income from Investment Operations:

     

Net investment income

    1.03      

Net realized and unrealized gain on investments

    0.39      
   

 

 

Total from investment operations

    1.42      

Less Distributions Paid to Common Shareholders from:

     

Net investment income

    (0.96)      

Net realized gain on investments

    (0.01)      
   

 

 

Total distributions paid to Common Shareholders

    (0.97)      
   

 

 

Common share offering charges to paid-in capital

    (0.04)      
   

 

 

Net Asset Value, End of Period

    $19.51      

Market Value, End of Period

    $18.00      

Total return based on net asset value(c)

    7.94%(d)      

Total return based on market value(c)

      (4.90)%(d)       

Ratios to Average Net Assets available to Common Shareholders:

     

Ratio of total expenses to average net assets

    2.58%(e)      

Ratio of net expenses to average net assets

    2.55%(e)      

Ratio of net investment income to average net assets

    6.38%(e)      

Supplemental Data:

     

Portfolio turnover rate

    72.4%(d)      

Net assets at end of period (000’s)

      $282,177      

Senior Securities:

     

Loan outstanding (in 000’s)

    $138,000      

Asset coverage per $1,000 of loan outstanding(f)

    $3,045      

 

 

(a)

From February 25, 2013 (commencement of operations) to December 31, 2013.

(b)

Net of sales load of $0.90 per share of initial offering.

(c)

Total return based on net asset value and total return based on market value assuming all distributions reinvested at reinvestment rate.

(d)

Not annualized.

(e)

Annualized.

(f)

Calculated by subtracting the Fund’s total liabilities (not including the borrowings outstanding) from the Fund’s total assets, and dividing this by the amount of borrowings outstanding.

 

See accompanying Notes to Financial Statements.  |  25


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Notes to Financial Statements

December 31, 2013

Note 1. Organization and Operations

Apollo Senior Floating Rate Fund Inc. (“AFT”) and Apollo Tactical Income Fund Inc. (“AIF”) (individually, a “Fund” or, collectively, the “Funds”) are corporations organized under the laws of the State of Maryland and registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940 (the “Investment Company Act”) as non-diversified, closed-end management investment companies. AFT and AIF commenced operations on Febru-ary 23, 2011 and February 25, 2013, respectively. Prior to that, the Funds had no operations other than matters relating to the organization and the sale and issuance of 5,236 shares of common stock in each Fund to Apollo Credit Management, LLC (the “Adviser”) at a price of $19.10 per share. The Adviser serves as the Funds’ investment adviser and is an affiliate of Apollo Global Management, LLC (“AGM”). The Funds’ common shares are listed on the New York Stock Exchange (“NYSE”) and trade under the symbols “AFT” and “AIF”, respectively.

Investment Objective

AFT’s investment objective is to seek current income and preservation of capital. AFT will seek to achieve its investment objective by investing primarily in senior, secured loans made to companies whose debt is rated below investment grade (“Senior Loans”) and investments with similar characteristics. Senior Loans typically hold a first lien priority and pay interest at rates that are determined periodically on the basis of a floating base lending rate plus a spread. These base lending rates are primarily the London Interbank Offered Rate (“LIBOR”), and secondarily the prime rate offered by one or more major United States banks and the certificate of deposit rate used by commercial lenders. Senior Loans are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities (“Borrower(s)”) that operate in various industries and geographical regions. AFT seeks to generate current income and preservation of capital through a disciplined approach to credit selection and under normal market conditions will invest at least 80% of its managed assets in floating rate Senior Loans and investments with similar economic characteristics. This policy and AFT’s investment objective are not fundamental and may be changed by the board of directors of AFT with at least 60 days’ prior written notice provided to shareholders. Part of AFT’s investment objective is to seek preservation of capital. AFT’s ability to achieve capital preservation may be limited by its investment in credit instruments that have speculative characteristics. There can be no assurance that AFT will achieve its investment objective.

AIF’s primary investment objective is to seek current income with a secondary objective of preservation of capital. AIF will seek to achieve its investment objectives primarily by allocating its assets among different types of credit instruments based on absolute and relative value considerations and its analysis of the credit markets. This ability to dynamically allocate AIF’s assets may result in AIF’s portfolio becoming concentrated in a particular type of credit instrument (such as Senior Loans or high-yield corporate bonds) and substantially less invested in other types of credit instruments. Under normal market conditions, at least 80% of AIF’s managed assets will be invested in credit instruments and investments with similar economic characteristics. For purposes of this policy, “credit instruments” will include Senior Loans, subordinated loans, high yield corporate bonds, notes, bills, debentures, distressed securities, mezzanine securities, structured products (including, without limitation, collateralized debt obligations, collateralized loan obligations and asset-backed securities), bank loans, corporate loans, convertible and preferred securities, government and municipal obligations, mortgage-backed securities, repurchase agreements, and other fixed-income instruments of a similar nature that may be represented by derivatives such as options, forwards, futures contracts or swap agreements. This policy and AIF’s investment objectives are not fundamental and may be changed by the board of directors of AIF (together with the board of directors of AFT, the “Board of Directors” or “Board”) with at least 60 days’ prior written notice provided to shareholders. AIF will seek to preserve capital to the extent consistent with its primary investment objective. AIF’s ability to achieve capital preservation may be limited by its investment in credit instruments that have speculative characteristics. There can be no assurance that AIF will achieve its investment objectives.

The Funds are classified as “non-diversified” under the Investment Company Act. As a result, each Fund can invest a greater portion of its assets in obligations of a single issuer than a “diversified” fund. Each Fund may therefore be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence.

Note 2. Significant Accounting Policies

The Funds’ financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates and these differences could be material.

 

26  |  Annual Report


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Notes to Financial Statements (continued)

December 31, 2013

 

Fund Valuation

The Funds’ net asset value (“NAV”) per share will be determined daily generally as of 4:00 pm on each day that the NYSE is open for trading, or at other times as determined by the Board. The NAV of each Fund’s common shares is total assets of the Fund (including all securities, cash and other assets) minus the sum of the Fund’s total liabilities (including accrued expenses, dividends payable, borrowings and the liquidation value of any preferred stock) divided by the total number of common shares of the Fund outstanding.

Security Valuation

The Funds value their investments primarily using the mean price provided by a nationally recognized security pricing service or broker. Senior Loans, corporate notes and bonds and collateralized loan obligations are priced based on valuations provided by an approved independent third-party pricing service or broker, if available. If market or broker quotations are not available or a price is not available from an independent third-party pricing service or broker, or if the price provided by the independent third-party pricing service or broker is believed to be unreliable, the security will be fair valued pursuant to procedures adopted by the Board. In general, the fair value of a security is the amount that the Funds might reasonably expect to receive upon the sale of an asset or pay to transfer a liability in an orderly transaction between willing market participants at the reporting date. Fair value procedures can, but are not obligated to, take into account any factors deemed relevant, which may include, among others, (i) the nature and pricing history of the security, (ii) the liquidity or illiquidity of the market for the particular security, (iii) recent purchases or sales transactions for the particular security or similar securities, (iv) whether any dealer quotations for the security are available and considered reliable and (v) press releases and other information published about the issuer. In these cases, a Fund’s NAV will reflect the affected portfolio securities’ fair value as determined in the judgment of the Board or its designee instead of being determined by the market. Using a fair value pricing methodology to value securities may result in a value that is different from a security’s most recent sale price and from the prices used by other investment companies to calculate their NAV. Determination of fair value is uncertain because it involves subjective judgments and estimates. There can be no assurance that a Fund’s valuation of a security will not differ from the amount that it realizes upon the sale of such security.

Fair Value Measurements

Each Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination. The levels of fair value inputs used to measure the Funds’ investments are characterized into a fair value hierarchy. The three levels of the fair value hierarchy are described below:

Level 1  —  Quoted unadjusted prices for identical instruments in active markets to which the Funds have access at the date of measurement;

Level 2  —  Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, but are valued based on executed trades, broker quotations that constitute an executable price, and alternative pricing sources supported by observable inputs which, in each case, are either directly or indirectly observable for the asset in connection with market data at the measurement date; and

Level 3  —  Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. In certain cases, investments classified within Level 3 may include securities for which the Funds have obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on, as such quotes can be subject to material management judgment. Unobservable inputs are those inputs that reflect the Funds’ own assumptions that market participants would use to price the asset or liability based on the best available information.

At the end of each reporting period, management evaluates the Level 2 and Level 3 assets, if any, for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market.

The valuation techniques used by the Funds to measure fair value at December 31, 2013 maximized the use of observable inputs and minimized the use of unobservable inputs. All investments at December 31, 2013 were valued using prices provided by an approved third party pricing service and/or broker quotations or model derived valuations. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Transfers in and out of the levels are recognized at the value at the end of the period. Summaries of the Funds’ investments categorized in the fair value hierarchy as of December 31, 2013 are as follows:

 

Annual Report  |  27


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Notes to Financial Statements (continued)

December 31, 2013

 

Apollo Senior Floating Rate Fund Inc.                                            
Assets in Fair Value Hierarchy:    Total Value
at
December 31,
2013
     Level 1
Quoted
Price
     Level 2
Significant
Observable
Inputs
    

Level 3
Significant
Unobservable
inputs

Cash and Cash Equivalents

   $ 21,698,530       $ 21,698,530       $          $      

Senior Loans

     402,181,790                 330,467,336            71,714,454      

Corporate Notes and Bonds

     30,210,372                 28,447,520            1,762,852      

Common Stocks

     2,058,610                            2,058,610      

Warrants

     8,237                            8,237      
  

 

 

    

 

 

    

 

 

       

 

 

    

Total Assets

   $ 456,157,539       $ 21,698,530       $ 358,914,856          $ 75,544,153      
  

 

 

    

 

 

    

 

 

       

 

 

    

AFT did not have any liabilities that were measured at fair value at December 31, 2013. The following is a reconciliation of Level 3 holdings for which significant unobservable inputs were used in determining fair value as of December 31, 2013:

 

Apollo Senior Floating Rate Fund Inc.                                  
    
 
Total
Fair Value
 
  
       Senior Loans          
 
 
Corporate
Notes and
Bonds
  
  
  
      
 
Common
Stocks
  
  
       Warrants   

Fair Value, beginning of period

   $ 56,173,954         $ 50,723,074           $5,450,880         $         $   

Purchases

     44,666,401           37,786,543           1,667,000           5,212,858             

Sales

     (23,251,233        (20,791,233        (2,460,000                    

Accrued discounts/(premiums)

     149,495           146,206           3,289                       

Total net realized (loss)/gain

     (344,987        195,013           (540,000                    

Change in net unrealized appreciation/(depreciation)

     (2,835,956        103,431           206,624           (3,154,248        8,237   

Transfers into Level 3

     19,104,783           19,104,783                                 

Transfers out of Level 3

     (18,118,304        (15,553,363        (2,564,941                    
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Fair Value, end of period

   $ 75,544,153         $ 71,714,454           $1,762,852         $ 2,058,610         $ 8,237   
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Investments were transferred in and out of Level 3 and in and out of Level 2 during the year ended December 31, 2013 due to changes in the quantity and quality of information obtained to support the fair value of each investment as assessed by the Adviser. The net change in unrealized appreciation/(depreciation) attributable to Level 3 investments still held at Decem-ber 31, 2013 was $(2,686,675) for AFT.

The following table provides quantitative measures used to determine the fair values of the Level 3 investments as of December 31, 2013:

 

Apollo Senior Floating Rate Fund Inc.
Assets    Total Value at
December 31,
2013
     Valuation Technique(s)    Unobservable Input(s)    Multiple    Weighted
Average or
Range

Senior Loans

   $ 71,714,454       Third party pricing and / or    Vendor / or broker    N/A    N/A
          broker quotations    quotations      

Corporate Notes & Bonds

   $ 1,762,852       Third party pricing and / or    Vendor / or broker    N/A    N/A
          broker quotations    quotations      

Common Stocks

   $ 2,058,610       Third party pricing and / or    Vendor / or broker    N/A    N/A
          broker quotations    quotations      

Warrants

   $ 8,237       Third party pricing and / or    Vendor / or broker    N/A    N/A
          broker quotations    quotations      

 

28  |  Annual Report


Table of Contents

Apollo Senior Floating Rate Fund Inc.

Apollo Tactical Income Fund Inc.

Notes to Financial Statements (continued)

December 31, 2013

 

Apollo Tactical Income Fund Inc.                                
Assets in Fair Value Hierarchy:    Total Value
at
December 31,
2013
     Level 1
Quoted
Price
     Level 2
Significant
Observable
Inputs
     Level 3
Significant
Unobservable
inputs
 

Cash and Cash Equivalents

   $ 19,484,678       $ 19,484,678       $       $   

Senior Loans

     231,860,578                 189,920,909         41,939,669   

Corporate Notes and Bonds

     137,106,146                 106,208,183         30,897,963   

Asset-Backed Securities

     36,695,214                 18,781,414         17,913,800   

Warrants

     7,603                         7,603   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ 425,154,219       $ 19,484,678       $ 314,910,506       $ 90,759,035   
  

 

 

    

 

 

    

 

 

    

 

 

 

AIF did not have any liabilities that were measured at fair value at December 31, 2013. The following is a reconciliation of Level 3 holdings for which significant unobservable inputs were used in determining fair value as of December 31, 2013:

 

Apollo Tactical Income Fund Inc.                                   
    
 
Total
Fair Value
 
  
       Senior Loans          
 

 

Corporate
Notes

and Bonds

  
  

  

      
 
Asset-Backed
Securities
  
  
        Warrants   

Fair Value, beginning of period

   $         $           $—         $          $   

Purchases

     92,167,198           43,071,456           31,326,992           17,768,750              

Sales

     (1,205,968        (1,205,968                               

Accrued discounts/(premiums)

     82,040           49,759           17,705           14,576              

Total net realized loss

     (70,117        (70,117                               

Change in net unrealized appreciation/(depreciation)

     (214,118        94,539           (446,734        130,474            7,603   
  

 

 

      

 

 

      

 

 

      

 

 

       

 

 

 

Fair Value, end of period

   $ 90,759,035         $ 41,939,669           $30,897,963         $ 17,913,800