Edgar Filing: Apollo Global Management LLC

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-35107

APOLLO GLOBAL MANAGEMENT, LLC

(Exact name of Registrant as specified in its charter)

Delaware

20-8880053

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9 West 57th Street, 43rd Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 515-3200

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 7, 2013 there were 132,295,332 Class A shares and 1 Class B share outstanding.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS

	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Financial Condition (Unaudited) as of March 31, 2013 and December 31, 2012		6

	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2013 and 2012		7

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2013 and 2012		8

	Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the Three Months Ended March 31, 2013 and 2012		9

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2013 and 2012		10

	Notes to Condensed Consolidated Financial Statements (Unaudited)		12

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		66

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		130

ITEM 4.	CONTROLS AND PROCEDURES		133

PART II	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		134

ITEM 1A.	RISK FACTORS		136

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		136

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		136

ITEM 4.	MINE SAFETY DISCLOSURES		136

ITEM 5.	OTHER INFORMATION		137

ITEM 6.	EXHIBITS		138

SIGNATURES			142

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Forward-Looking Statements

This quarterly report may contain forward looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, discussions related to Apollo’s expectations regarding the performance of its business, its liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this quarterly report, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new private equity, credit or real estate funds, market conditions generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our businesses and investments by our funds and litigation risks, among others. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 1, 2013, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this quarterly report and in other filings. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Terms Used in This Report

In this quarterly report, references to “Apollo,” “we,” “us,” “our” and the “Company” refer collectively to Apollo Global Management, LLC, a Delaware limited liability company, and its subsidiaries, including the Apollo Operating Group and all of its subsidiaries.

“AMH” refers to Apollo Management Holdings, L.P., a Delaware limited partnership owned by APO Corp. and Holdings;

“Apollo funds” and “our funds” refer to the funds, alternative asset companies and other entities that are managed by the Apollo Operating Group.

“Apollo Operating Group” refers to (i) the limited partnerships through which our Managing Partners currently operate our businesses and (ii) one or more limited partnerships formed for the purpose of, among other activities, holding certain of our gains or losses on our principal investments in the funds, which we refer to as our “principal investments”;

“Assets Under Management,” or “AUM,” refers to the investments we manage or with respect to which we have control, including capital we have the right to call from our investors pursuant to their capital commitments to various funds. Our AUM equals the sum of:

(i)

the fair value of our private equity investments plus the capital that we are entitled to call from our investors pursuant to the terms of their capital commitments to the extent a fund is within the commitment period in which management fees are calculated based on total commitments to the fund;

(ii)

the net asset value, or “NAV,” of our credit funds, other than certain collateralized loan obligations (“CLOs”), which we measure by using the mark-to-market value of the aggregate principal amount of the underlying CLO and collateralized debt obligation (“CDO”) credit funds that have a fee generating basis other than mark-to-market assets or liabilities, plus used or available leverage and/or capital commitments;

(iii)

the gross asset value or net asset value of our real estate entities and the structured portfolio company investments included within the funds we manage, which includes the leverage used by such structured portfolio companies;

-3-

(iv)

the incremental value associated with the reinsurance investments of the portfolio company assets that we manage; and

(v)

the fair value of any other investments that we manage plus unused credit facilities, including capital commitments for investments that may require pre-qualification before investment plus any other capital commitments available for investment that are not otherwise included in the clauses above.

Our AUM measure includes Assets Under Management for which we charge either no or nominal fees. Our definition of AUM is not based on any definition of Assets Under Management contained in our operating agreement or in any of our Apollo fund management agreements. We consider multiple factors for determining what should be included in our definition of AUM. Such factors include but are not limited to (1) our ability to influence the investment decisions for existing and available assets; (2) our ability to generate income from the underlying assets in our funds; and (3) the AUM measures that we use internally or believe are used by other investment managers. Given the differences in the investment strategies and structures among other alternative investment managers, our calculation of AUM may differ from the calculations employed by other investment managers and, as a result, this measure may not be directly comparable to similar measures presented by other investment managers.

Fee-generating AUM consists of assets that we manage and on which we earn management fees or monitoring fees pursuant to management agreements on a basis that varies among the Apollo funds. Management fees are normally based on “net asset value,” “gross assets,” “adjusted par asset value,” “adjusted cost of all unrealized portfolio investments,” “capital commitments,” “adjusted assets,” “stockholders’ equity,” “invested capital” or “capital contributions,” each as defined in the applicable management agreement. Monitoring fees, also referred to as advisory fees, generally are based on the total value of certain structured portfolio company investments, which normally includes leverage, less any portion of such total value that is already considered in fee-generating AUM.

Non-fee generating AUM consists of assets that do not produce management fees or monitoring fees. These assets generally consist of the following:

(i)

fair value above invested capital for those funds that earn management fees based on invested capital;

(ii)

net asset values related to general partner and co-investment ownership;

(iii)

unused credit facilities;

(iv)

available commitments on those funds that generate management fees on invested capital;

(v)

structured portfolio company investments that do not generate monitoring fees; and

(vi)

the difference between gross asset and net asset value for those funds that earn management fees based on net asset value.

We use non-fee generating AUM combined with fee-generating AUM as a performance measurement of our investment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs. Non-fee generating AUM includes assets on which we could earn carried interest income;

“carried interest,” “carried interest income,” and “incentive income” refer to interests granted to Apollo by an Apollo fund that entitle Apollo to receive allocations, distributions or fees which are based on the performance of such fund or its underlying investments;

“Contributing Partners” refer to those of our partners (and their related parties) who indirectly own (through Holdings) Apollo Operating Group units;

-4-

“feeder funds” refer to funds that operate by placing substantially all of their assets in, and conducting substantially all of their investment and trading activities through, a master fund, which is designed to facilitate collective investment by the participating feeder funds. With respect to certain of our funds that are organized in a master-feeder structure, the feeder funds are permitted to make investments outside the master fund when deemed appropriate by the fund’s investment manager;

“gross IRR” of a private equity fund represents the cumulative investment-related cash flows for all of the investors in the fund on the basis of the actual timing of investment inflows and outflows (for unrealized investments assuming disposition on March 31, 2013 or other date specified) aggregated on a gross basis quarterly, and the return is annualized and compounded before management fees, carried interest and certain other fund expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all of the returns would, if distributed, be payable to the fund’s investors;

“Holdings” means AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership through which our Managing Partners and Contributing Partners hold their Apollo Operating Group units;

“Managing Partners” refer to Messrs. Leon Black, Joshua Harris and Marc Rowan collectively and, when used in reference to holdings of interests in Apollo or Holdings, includes certain related parties of such individuals;

“net IRR” of a private equity fund means the gross IRR applicable to all investors, including related parties which may not pay fees, net of management fees, organizational expenses, transaction costs, and certain other fund expenses (including interest incurred by the fund itself). The realized and the estimated unrealized value is adjusted such that a percentage of up to 20.0% of the unrealized gain is allocated to the general partner, thereby reducing the balance attributable to fund investors’ carried interest all offset to the extent of interest income, and measures returns based on amounts that, if distributed, would be paid to investors of the fund, to the extent that an private equity fund exceeds all requirements detailed within the applicable fund agreement;

“net return” represents the calculated return that is based on month-to-month changes in net assets and is calculated using the returns that have been geometrically linked based on capital contributions, distributions and dividend reinvestments, as applicable;

“our manager” means AGM Management, LLC, a Delaware limited liability company that is controlled by our Managing Partners;

“permanent capital” means capital of publicly traded vehicles that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, such as AP Alternative Assets, L.P., Apollo Investment Corporation, Apollo Commercial Real Estate Finance, Inc., Apollo Residential Mortgage, Inc., Apollo Tactical Income Fund, Inc., and Apollo Senior Floating Rate Fund Inc.; such publicly traded vehicles may be required, or elect, to return all or a portion of capital gains and investment income;

“private equity investments” refer to (i) direct or indirect investments in existing and future private equity funds managed or sponsored by Apollo, (ii) direct or indirect co-investments with existing and future private equity funds managed or sponsored by Apollo, (iii) direct or indirect investments in securities which are not immediately capable of resale in a public market that Apollo identifies but does not pursue through its private equity funds, and (iv) investments of the type described in (i) through (iii) above made by Apollo funds; and

“Strategic Investors” refers to the California Public Employees’ Retirement System, or “CalPERS,” and an affiliate of the Abu Dhabi Investment Authority, or “ADIA.”

-5-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION (UNAUDITED)

(dollars in thousands, except share data)


	March 31, 2013			December 31, 2012
Assets:
Cash and cash equivalents	$	899,272		$	946,225
Cash and cash equivalents held at Consolidated Funds		—			1,226
Restricted cash		8,409			8,359
Investments		2,155,995			2,138,096
Assets of consolidated variable interest entities:
Cash and cash equivalents		1,720,327			1,682,696
Investments, at fair value		12,684,131			12,689,535
Other assets		264,111			299,978
Carried interest receivable		2,551,153			1,878,256
Due from affiliates		189,981			173,312
Fixed assets, net		51,933			53,452
Deferred tax assets		539,464			542,208
Other assets		49,555			36,765
Goodwill		48,894			48,894
Intangible assets, net		126,112			137,856

Total Assets	$	21,289,337		$	20,636,858

Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	35,215		$	38,337
Accrued compensation and benefits		54,518			56,125
Deferred revenue		309,048			252,157
Due to affiliates		476,390			477,451
Profit sharing payable		1,116,829			857,724
Debt		737,711			737,818
Liabilities of consolidated variable interest entities:
Debt, at fair value		11,347,332			11,834,955
Other liabilities		969,996			634,053
Other liabilities		66,597			44,855

Total Liabilities		15,113,636			14,933,475

Commitments and Contingencies (see note 12)

Shareholders’ Equity:
Apollo Global Management, LLC shareholders’ equity:
Class A shares, no par value, unlimited shares authorized, 132,145,332 shares and 130,053,993 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively		—			—
Class B shares, no par value, unlimited shares authorized, 1 share issued and outstanding at March 31, 2013 and December 31, 2012		—			—
Additional paid in capital		2,913,814			3,043,334
Accumulated deficit		(1,915,855	)		(2,142,020	)
Appropriated partners’ capital		1,760,270			1,765,360
Accumulated other comprehensive income		142			144

Total Apollo Global Management, LLC shareholders’ equity		2,758,371			2,666,818
Non-Controlling Interests in consolidated entities		2,031,029			1,893,212
Non-Controlling Interests in Apollo Operating Group		1,386,301			1,143,353

Total Shareholders’ Equity		6,175,701			5,703,383

Total Liabilities and Shareholders’ Equity	$	21,289,337		$	20,636,858

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS (UNAUDITED)

(dollars in thousands, except share data)


	Three Months Ended March 31,
	2013			2012
Revenues:
Advisory and transaction fees from affiliates	$	47,419		$	27,236
Management fees from affiliates		150,447			127,178
Carried interest income from affiliates		1,111,207			622,329

Total Revenues		1,309,073			776,743

Expenses:
Compensation and benefits:
Equity-based compensation		45,286			148,866
Salary, bonus and benefits		73,396			65,071
Profit sharing expense		423,620			249,024
Incentive fee compensation		—			35

Total Compensation and Benefits		542,302			462,996
Interest expense		7,518			11,380
Professional fees		16,060			11,527
General, administrative and other		22,941			19,207
Placement fees		9,358			921
Occupancy		9,805			8,726
Depreciation and amortization		14,618			8,473

Total Expenses		622,602			523,230

Other Income:
Net gains from investment activities		52,133			157,708
Net gains (losses) from investment activities of consolidated variable interest entities		47,861			(16,201	)
Income from equity method investments		27,790			43,251
Interest income		3,091			1,614
Other income, net		1,298			5,816

Total Other Income		132,173			192,188

Income before income tax provision		818,644			445,701
Income tax provision		(18,579	)		(14,560	)

Net Income		800,065			431,141
Net income attributable to Non-Controlling Interests		(551,087	)		(333,098	)

Net Income Attributable to Apollo Global Management, LLC	$	248,978		$	98,043

Distributions Declared per Class A Share	$	1.05		$	0.46

Net Income Per Class A Share:
Net Income Per Class A Share – Basic	$	1.60		$	0.66

Net Income Per Class A Share – Diluted	$	1.59		$	0.66

Weighted Average Number of Class A Shares – Basic		131,249,034			125,269,253

Weighted Average Number of Class A Shares – Diluted		136,019,801			127,515,663

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (UNAUDITED)

(dollars in thousands, except share data)


	Three Months Ended March 31,
	2013			2012
Net Income	$	800,065		$	431,141
Other Comprehensive Income, net of tax:
Net unrealized gain on interest rate swaps (net of taxes of $0 and $237 for Apollo Global Management, LLC for the three months ended March 31, 2013 and 2012, respectively) and $0 for Non-Controlling Interests in Apollo Operating Group for both the three months ended March 31, 2013 and 2012)		—			1,602
Net income (loss) on available-for-sale securities (from equity method investment)		(2	)		2

Total Other Comprehensive Income (loss), net of tax		(2	)		1,604

Comprehensive Income		800,063			432,745
Comprehensive Income attributable to Non-Controlling Interests		(512,845	)		(364,601	)

Comprehensive Income Attributable to Apollo Global Management, LLC	$	287,218		$	68,144

See accompanying notes to condensed consolidated financial statements.

-8-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN SHAREHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013 AND 2012

(dollars in thousands, except share data)


	Apollo Global Management, LLC Shareholders
	Class A Shares		Class B Shares		Additional Paid in Capital			Accumulated Deficit			Appropriated Partners’ Capital			Accumulated Other Comprehensive (Loss) Income			Total Apollo Global Management, LLC Total Shareholders’ Equity			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Apollo Operating Group			Total Shareholders’ Equity
Balance at January 1, 2012		123,923,042		1	$	2,939,492		$	(2,426,197	)	$	213,594		$	(488	)	$	726,401		$	1,444,767		$	477,153		$	2,648,321
Capital increase related to equity-based compensation		—		—		72,003			—			—			—			72,003						76,330			148,333
Capital contributions		—		—		—			—			—			—			—			7,351			—			7,351
Cash distributions		—		—		—			—			—			—			—			(2,030	)		—			(2,030	)
Distributions		—		—		(68,386	)		—			—			—			(68,386	)		—			(110,400	)		(178,786	)
Distributions related to deliveries of Class A shares for RSUs		2,387,698		—		13			(19,478	)		—			—			(19,465	)		—			—			(19,465	)
Purchase of AAA shares		—		—		—			—			—			—			—			(50,321	)		—			(50,321	)
Non-cash distributions		—		—		—			(822	)		—			—			(822	)		(1,249	)		—			(2,071	)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities		—		—		(2,301	)		—			—			—			(2,301	)		2,301			—			—
Satisfaction of liability related to AAA RDUs		—		—		997			—			—			—			997			—			—			997
Net income (loss)		—		—		—			98,043			(30,294	)		—			67,749			149,996			213,396			431,141
Net gain on available-for-sale securities (from equity method investment)		—		—		—			—			—			2			2			—			—			2
Net unrealized gain on interest rate swaps (net of taxes of $237 and $0 for Apollo Global Management, LLC and Non-Controlling Interests in Apollo Operating Group, respectively)		—		—		—			—			—			393			393			—			1,209			1,602

Balance at March 31, 2012		126,310,740		1	$	2,941,818		$	(2,348,454	)	$	183,300		$	(93	)	$	776,571		$	1,550,815		$	657,688		$	2,985,074

Balance at January 1, 2013		130,053,993		1	$	3,043,334		$	(2,142,020	)	$	1,765,360		$	144		$	2,666,818		$	1,893,212		$	1,143,353		$	5,703,383
Dilution impact of issuance of Class A shares		—		—		825			—			—			—			825			—			—			825
Capital increase related to equity-based compensation		—		—		34,290			—			—			—			34,290			—			9,702			43,992
Capital contributions		—		—		—			—			—			—			—			191,045			—			191,045
Distributions		—		—		(163,738	)		—			(43,332	)		—			(207,070	)		(20,431	)		(252,000	)		(479,501	)
Distributions related to deliveries of Class A shares for RSUs		2,091,339		—		(3	)		(22,813	)		—			—			(22,816	)		—			—			(22,816	)
Purchase of AAA shares		—		—		—			—			—			—			—			(62,326	)		—			(62,326	)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities		—		—		(1,930	)		—			—			—			(1,930	)		1,930			—			—
Satisfaction of liability related to AAA RDUs		—		—		1,036			—			—			—			1,036			—			—			1,036
Net income		—		—		—			248,978			38,242			—			287,220			27,599			485,246			800,065
Net loss on available-for-sale securities (from equity method investment)		—		—		—			—			—			(2	)		(2	)		—			—			(2	)

Balance at March 31, 2013		132,145,332		1	$	2,913,814		$	(1,915,855	)	$	1,760,270		$	142		$	2,758,371		$	2,031,029		$	1,386,301		$	6,175,701

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013 and 2012

(dollars in thousands, except share data)


	2013			2012
Cash Flows from Operating Activities:
Net income	$	800,065		$	431,141
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity-based compensation		45,286			148,866
Depreciation and amortization		2,874			2,417
Amortization of intangible assets		11,744			6,055
Amortization of debt issuance costs		128			128
Unrealized gains from investment in HFA and other investments		(3,660	)		(3,664	)
Non-cash interest income		(824	)		(893	)
Income from equity awards received for directors’ fees		(612	)		(373	)
Income from equity method investment		(27,790	)		(43,251	)
Waived management fees		—			(6,791	)
Non-cash compensation expense related to waived management fees		—			6,791
Change in fair value of contingent obligations		13,431			—
Deferred taxes, net		15,877			11,424
Changes in assets and liabilities:
Carried interest receivable		(672,897	)		(501,238	)
Due from affiliates		(16,812	)		(22,579	)
Other assets		(12,925	)		517
Accounts payable and accrued expenses		(3,122	)		3,097
Accrued compensation and benefits		(2,126	)		2,942
Deferred revenue		56,891			37,312
Due to affiliates		(20,538	)		(68,875	)
Profit sharing payable		245,674			215,943
Other liabilities		9,430			4,555
Apollo Funds related:
Net realized gains from investment activities		(51,172	)		(2,376	)
Net unrealized gains from investment activities		(72,982	)		(224,217	)
Net realized losses on debt		7,603			—
Net unrealized losses on debt		88,236			88,578
Distributions from investment activities		62,189			50,000
Change in cash held at consolidated variable interest entities		(37,631	)		(99,906	)
Purchases of investments		(2,464,952	)		(884,940	)
Proceeds from sale of investments and liquidating distributions		2,541,951			499,512
Change in other assets		35,867			(2,456	)
Change in other liabilities		335,922			62,097

Net Cash Provided by (Used in) Operating Activities		885,125			(290,184	)

Cash Flows from Investing Activities:
Purchases of fixed assets		(1,352	)		(831	)
Cash contributions to equity method investments		(39,318	)		(12,017	)
Cash distributions from equity method investments		41,182			13,593
Change in restricted cash		(50	)		915

Net Cash Provided by Investing Activities	$	462		$	1,660

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONT’D)

THREE MONTHS ENDED MARCH 31, 2013 and 2012

(dollars in thousands, except share data)


	2013			2012
Cash Flows from Financing Activities:
Principal repayments on debt and repurchase of debt	$	(107	)	$	(225	)
Distributions related to deliveries of Class A shares for RSUs		(22,813	)		(17,020	)
Distributions to Non-Controlling Interests in consolidated entities		(3,616	)		(2,030	)
Contributions from Non-Controlling Interests in consolidated entities		232			2,458
Distributions paid		(144,277	)		(61,219	)
Distributions paid to Non-Controlling Interests in Apollo Operating Group		(252,000	)		(110,400	)
Apollo Funds related:
Issuance of debt		332,250			425,684
Principal repayment on senior secured notes		(911,775	)		(2,791	)
Purchase of AAA shares		(62,326	)		(50,321	)
Distributions paid		(43,332	)		—
Distributions paid to Non-Controlling Interests in consolidated variable interest entities		(16,815	)		—
Contributions from Non-Controlling Interests in consolidated entities		190,813			4,893

Net Cash (Used in) Provided by Financing Activities		(933,766	)		189,029

Net Decrease in Cash and Cash Equivalents		(48,179	)		(99,495	)
Cash and Cash Equivalents, Beginning of Period		947,451			744,731

Cash and Cash Equivalents, End of Period	$	899,272		$	645,236

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	10,421		$	13,859
Interest paid by consolidated variable interest entities		31,618			14,176
Income taxes paid		1,432			158
Supplemental Disclosure of Non-Cash Investing Activities:
Non-cash contributions on equity method investments	$	816		$	86
Non-cash distributions from equity method investments		(412	)		(468	)
Non-cash distributions from investing activities		—			2,071
Change in accrual for purchase of fixed assets		1			286
Supplemental Disclosure of Non-Cash Financing Activities:
Non-cash distributions	$	—		$	(822	)
Declared and unpaid distributions		(19,461	)		(7,167	)
Non-cash distributions to Non-Controlling Interests in consolidated entities		—			(1,249	)
Non-cash contributions from Non-Controlling Interests in Apollo Operating Group related to equity-based compensation		9,702			76,330
Unrealized gain on interest rate swaps to Non-Controlling Interests in Apollo Operating Group, net of taxes		—			1,209
Satisfaction of liability related to AAA RDUs		1,036			997
Net transfers of AAA ownership interest to Non-Controlling Interests in consolidated entities		1,930			2,301
Net transfer of AAA ownership interest from Apollo Global Management, LLC		(1,930	)		(2,301	)
Unrealized gain on interest rate swaps		—			630
Unrealized (loss) gain on available for sale securities (from equity method investment)		(2	)		2
Capital increases related to equity-based compensation		34,290			72,003
Dilution impact of issuance of Class A shares		825			—
Deferred tax asset related to interest rate swaps		—			(237	)
Tax benefits related to deliveries of Class A shares for RSUs		3			(13	)

See accompanying notes to condensed consolidated financial statements.

-11-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

1. ORGANIZATION AND BASIS OF PRESENTATION

Apollo Global Management, LLC and its consolidated subsidiaries (the “Company” or “Apollo”), is a global alternative investment manager whose predecessor was founded in 1990. Its primary business is to raise, invest and manage private equity, credit and real estate funds as well as strategic investment accounts, on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors. For these investment management services, Apollo receives management fees generally related to the amount of assets managed, transaction and advisory fees for the investments made and carried interest income related to the performance of the respective funds that it manages. Apollo has three primary business segments:

•

Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debt investments;

•

Credit—primarily invests in non-control corporate and structured debt instruments; and

•

Real estate—primarily invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanine investments and other commercial real estate-related debt investments. Additionally, the Company sponsors real estate funds that focus on opportunistic investments in distressed debt and equity recapitalization transactions.

During the third quarter of 2012, the Company changed the name of its capital markets business segment to the credit segment. The Company believes this new name provides a more accurate description of the types of assets which are managed within this segment. In addition, this segment name change is consistent with the Company’s management reporting and organizational structure as well as the manner in which resource deployment and compensation decisions are made.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements and these notes are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities (“VIEs”) and for which the Company is considered the primary beneficiary, and certain entities which are not considered variable interest entities but which the Company controls through a majority voting interest. Intercompany accounts and transactions have been eliminated upon consolidation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the SEC.

Reorganization of the Company

The Company was formed as a Delaware limited liability company on July 3, 2007 and completed a reorganization of its predecessor businesses on July 13, 2007 (the “2007 Reorganization”). The Company is managed and operated by its manager, AGM Management, LLC, which in turn is indirectly wholly-owned and controlled by Leon Black, Joshua Harris and Marc Rowan (the “Managing Partners”).

-12-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

As of March 31, 2013, the Company owned, through three intermediate holding companies that include APO Corp., a Delaware corporation that is a domestic corporation for U.S. Federal income tax purposes, APO Asset Co., LLC, a Delaware limited liability company that is a disregarded entity for U.S. Federal income tax purposes, and APO (FC), LLC, an Anguilla limited liability company that is treated as a corporation for U.S Federal income tax purposes (collectively, the “Intermediate Holding Companies”), 35.5% of the economic interests of, and operated and controlled all of the businesses and affairs of, the Apollo Operating Group through its wholly-owned subsidiaries.

AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partners and certain of the Company’s other partners (the “Contributing Partners”) indirectly beneficially own, including in certain cases estate planning vehicles (through Holdings), Apollo Operating Group units (“AOG Units”) that represent 64.5% of the economic interests in the Apollo Operating Group as of March 31, 2013. The Company consolidates the financial results of the Apollo Operating Group and its consolidated subsidiaries. Holdings’ ownership interest in the Apollo Operating Group is reflected as a Non-Controlling Interest in the accompanying condensed consolidated financial statements.

Apollo also entered into an exchange agreement with Holdings that allows the partners in Holdings, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Apollo Operating Group, to exchange their AOG Units for the Company’s Class A shares on a one-for-one basis up to four times each year, upon notice, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. A limited partner in Holdings must exchange one partnership unit in each of the ten Apollo Operating Group partnerships to effectuate an exchange for one Class A share.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—Apollo consolidates those entities it controls through a majority voting interest or through other means, including those funds in which the general partner is presumed to have control (e.g., AP Alternative Assets, L.P., (“AAA”) and the Apollo Credit Senior Loan Fund, L.P. (“Apollo Senior Loan Fund”)). Apollo also consolidates entities that are VIEs for which Apollo is the primary beneficiary. Under the amended consolidation rules, an enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s business and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

Certain of the Company’s subsidiaries hold equity interests in and/or receive fees qualifying as variable interests from the funds that the Company manages. The amended consolidation rules require an analysis to determine whether (a) an entity in which Apollo holds a variable interest is a VIE and (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., carried interest and management fees), would give it a controlling financial interest. When the VIE has qualified for the deferral of the amended consolidation rules in accordance with U.S. GAAP, the analysis is based on previous consolidation rules, which require an analysis to determine whether (a) an entity in which Apollo holds a variable interest is a VIE and (b) Apollo’s involvement,

-13-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., carried interest and management fees), would be expected to absorb a majority of the variability of the entity.

Under both the previous and amended consolidation rules, the determination of whether an entity in which Apollo holds a variable interest is a VIE requires judgments which include determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, determining whether two or more parties’ equity interests should be aggregated, and determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity. Under both the previous and amended consolidation rules, Apollo determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion continuously. The consolidation analysis can generally be performed qualitatively. However, if it is not readily apparent whether Apollo is the primary beneficiary, a quantitative expected losses and expected residual returns calculation will be performed. Investments and redemptions (either by Apollo, affiliates of Apollo or third parties) or amendments to the governing documents of the respective Apollo fund may affect an entity’s status as a VIE or the determination of the primary beneficiary.

Apollo assesses whether it is the primary beneficiary and will consolidate or deconsolidate the entity accordingly. Performance of that assessment requires the exercise of judgment. Where the variable interests have qualified for the deferral, judgments are made in estimating cash flows in evaluating which member within the equity group absorbs a majority of the expected profits or losses of the VIE. Where the variable interests have not qualified for the deferral, judgments are made in determining whether a member in the equity group has a controlling financial interest, including power to direct activities that most significantly impact the VIE’s economic performance and rights to receive benefits or obligations to absorb losses that are potentially significant to the VIE. Under both guidelines, judgment is made in evaluating the nature of the relationships and activities of the parties involved in determining if there is a related-party group, and if so, which party within the related-party group is most closely associated with the VIE. The use of these judgments has a material impact to certain components of Apollo’s condensed consolidated financial statements.

Certain of the consolidated VIEs were formed to issue collateralized notes in the legal form of debt backed by financial assets. The difference between the fair value of the assets and liabilities of these VIEs is presented within appropriated partners’ capital in the condensed consolidated statements of financial condition as these VIEs are funded solely with debt. Changes in the fair value of the assets and liabilities of these VIEs and the related interest and other income is presented within net gains from investment activities of consolidated variable interest entities and net (income) loss attributable to Non-Controlling Interests in the condensed consolidated statements of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIE’s note holders, not Apollo, will ultimately receive the benefits or absorb the losses associated with the VIE’s assets and liabilities.

Assets and liability amounts of the consolidated VIEs are shown in separate sections within the condensed consolidated statements of financial condition as of March 31, 2013 and December 31, 2012.

Refer to additional disclosures regarding VIEs in note 4. Intercompany transactions and balances, if any, have been eliminated in the consolidation.

Equity Method Investments—For investments in entities over which the Company exercises significant influence but which do not meet the requirements for consolidation, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or loss of such entities. Income (loss) from equity method investments is recognized as part of other income (loss) in the condensed consolidated statements of operations. The carrying amounts of equity method investments are reflected in investments in the condensed consolidated statements of financial condition. As the underlying entities that the Company manages and invests in are, for U.S. GAAP purposes, primarily investment companies which reflect their investments at estimated fair value, the carrying value of the Company’s equity method investments in such entities are at fair value.

-14-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Non-Controlling Interests—For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than Apollo. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in Non-Controlling Interests in the condensed consolidated financial statements. As of March 31, 2013, the Non-Controlling Interests relating to Apollo Global Management, LLC primarily includes the 64.5% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings and other ownership interests in consolidated entities, which primarily consist of the approximately 97% ownership interest held by limited partners in AAA as of March 31, 2013. Non-Controlling Interests also include limited partner interests of Apollo managed funds in certain consolidated VIEs.

Non-Controlling Interests are presented as a separate component of shareholders’ equity on the Company’s condensed consolidated statements of financial condition. The primary components of Non-Controlling Interests are separately presented in the Company’s condensed consolidated statements of changes in shareholders’ equity to clearly distinguish the interest in the Apollo Operating Group and other ownership interests in the consolidated entities. Net income (loss) includes the net income (loss) attributable to the holders of Non-Controlling Interests on the Company’s condensed consolidated statements of operations. Profits and losses are allocated to Non-Controlling Interests in proportion to their relative ownership interests regardless of their basis.

Revenues—Revenues are reported in three separate categories that include (i) advisory and transaction fees from affiliates, which relate to the investments of the funds and may include individual monitoring agreements the Company has with the portfolio companies and debt investment vehicles of the private equity funds and credit funds; (ii) management fees from affiliates, which are based on committed capital, invested capital, net asset value, gross assets or as otherwise defined in the respective agreements; and (iii) carried interest income (loss) from affiliates, which is normally based on the performance of the funds subject to preferred return.

Advisory and Transaction Fees from Affiliates—Advisory and transaction fees, including directors’ fees, are recognized when the underlying services rendered are substantially completed in accordance with the terms of the transaction and advisory agreements. Additionally, during the normal course of business, the Company incurs certain costs related to certain transactions that are not consummated (“broken deal costs”). These costs (e.g. research costs, due diligence costs, professional fees, legal fees and other related items) are determined to be broken deal costs upon management’s decision to no longer pursue the transaction. In accordance with the related fund agreement, in the event the deal is deemed broken, all of the costs are reimbursed by the funds and then included in the calculation of the Management Fee Offset described below. If a deal is successfully completed, Apollo is reimbursed by the fund or fund’s portfolio company of all costs incurred and no offset is generated.

Advisory and transaction fees from affiliates also include underwriting fees. Underwriting fees include gains, losses and fees, net of syndicate expenses, arising from securities offerings in which one of the Company’s subsidiaries participates in the underwriter syndicate. Underwriting fees are recognized at the time the underwriting is completed and the income is reasonably assured and are included in the condensed consolidated statements of operations. Underwriting fees recognized but not received are included in other assets on the condensed consolidated statements of financial condition.

As a result of providing advisory services to certain private equity and credit portfolio companies, Apollo is generally entitled to receive fees for transactions related to the acquisition, in certain cases, and disposition of portfolio companies as well as ongoing monitoring of portfolio company operations and directors’ fees. The amounts due from portfolio companies are included in “—Due from Affiliates,” which is discussed further in note 11. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such

-15-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Such amounts are presented as a reduction to Advisory and Transaction Fees from Affiliates in the condensed consolidated statements of operations.

Management Fees from Affiliates—Management fees for private equity, real estate and credit funds are recognized in the period during which the related services are performed in accordance with the contractual terms of the related agreement, and are generally based upon (1) a percentage of the capital committed during the commitment period, and thereafter based on the remaining invested capital of unrealized investments, or (2) net asset value, gross assets or as otherwise defined in the respective agreements.

Carried Interest Income from Affiliates—Apollo is entitled to an incentive return that can normally amount to as much as 20% of the total returns on funds’ capital, depending upon performance. Performance-based fees are assessed as a percentage of the investment performance of the funds. The carried interest income from affiliates for any period is based upon an assumed liquidation of the fund’s net assets on the reporting date, and distribution of the net proceeds in accordance with the fund’s income allocation provisions. Carried interest receivable is presented separately in the condensed consolidated statements of financial condition. The carried interest income from affiliates may be subject to reversal to the extent that the carried interest income recorded exceeds the amount due to the general partner based on a fund’s cumulative investment returns. When applicable, the accrual for potential repayment of previously received carried interest income, which is a component of due to affiliates, represents all amounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner obligation, however, would not become payable or realized until the end of a fund’s life.

Investments, at Fair Value—The Company follows U.S. GAAP attributable to fair value measurements which, among other things, requires enhanced disclosures about investments that are measured and reported at fair value. Investments, at fair value, represent investments of the consolidated funds, investments of the consolidated VIEs and certain financial instruments for which the fair value option was elected. The unrealized gains and losses resulting from changes in the fair value are reflected as net gains (losses) from investment activities and net gains (losses) from investment activities of the consolidated variable interest entities, respectively, in the condensed consolidated statements of operations. In accordance with U.S. GAAP, investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.

Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observable inputs. These investments exhibit higher levels of liquid market observability as compared to Level III investments. The Company subjects broker quotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II investment. These criteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services.

-16-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Level III—Pricing inputs are unobservable for the investment and includes situations where there is little observable market activity for the investment. The inputs into the determination of fair value may require significant management judgment or estimation. Investments that are included in this category generally include general and limited partnership interests in corporate private equity and real estate funds, opportunistic credit funds, distressed debt and non-investment grade residual interests in securitizations and CDOs and CLOs where the fair value is based on observable inputs as well as unobservable inputs. When a security is valued based on broker quotes, the Company subjects those quotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment. Some of the factors we consider include the number of broker quotes we obtain, the quality of the broker quotes, the standard deviations of the observed broker quotes and the corroboration of the broker quotes to independent pricing services.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment when the fair value is based on unobservable inputs.

In cases where an investment or financial instrument that is measured and reported at fair value is transferred into or out of Level III of the fair value hierarchy, the Company accounts for the transfer as of the end of the reporting period.

Private Equity Investments

The value of liquid investments, where the primary market is an exchange (whether foreign or domestic) is determined using period end market prices. Such prices are generally based on the close price on the date of determination.

Valuation approaches used to estimate the fair value of investments that are less liquid include the market approach and the income approach. The market approach provides an indication of fair value based on a comparison of the subject company to comparable publicly traded companies and transactions in the industry. The market approach is driven more by current market conditions, including actual trading levels of similar companies and, to the extent available, actual transaction data of similar companies. Judgment is required by management when assessing which companies are similar to the subject company being valued. Consideration may also be given to such factors as the Company’s historical and projected financial data, valuations given to comparable companies, the size and scope of the Company’s operations, the Company’s strengths, weaknesses, expectations relating to the market’s receptivity to an offering of the Company’s securities, applicable restrictions on transfer, industry and market information and assumptions, general economic and market conditions and other factors deemed relevant. The income approach provides an indication of fair value based on the present value of cash flows that a business or security is expected to generate in the future. The most widely used methodology used in the income approach is a discounted cash flow method. Inherent in the discounted cash flow method are assumptions of expected results and a calculated discount rate.

On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuation results related to our private equity investments. The Company also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analyses. However, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

-17-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Credit Investments

The majority of the investments in Apollo’s credit funds are valued based on quoted market prices and valuation models. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing recognized pricing services, market participants or other sources. The credit funds also enter into foreign currency exchange contracts, total return swap contracts credit default swap contracts, and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. If securities are held at the end of this period, the changes in value are recorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Total return swap contracts and credit default swap contracts are recorded at fair value as an asset or liability with changes in fair value recorded as unrealized appreciation or depreciation. Realized gains or losses are recognized at the termination of the contract based on the difference between the close-out price of the total return or credit default swap contract and the original contract price.

Forward contracts are valued based on market rates obtained from counterparties or prices obtained from recognized financial data service providers. When determining fair value pricing when no market value exists, the value attributed to an investment is based on the enterprise value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation approaches used to estimate the fair value of illiquid investments included in Apollo’s credit funds also may use the income approach or market approach. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.

On a quarterly basis, Apollo utilizes a valuation committee consisting of members from senior management, to review and approve the valuation results related to our credit investments. The Company also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analyses.

Real Estate Investments

For the commercial mortgage-backed security (“CMBS”) portfolio of Apollo’s funds, the estimated fair value is determined by reference to market prices provided by certain dealers who make a market in these financial instruments. Broker quotes are only indicative of fair value and may not necessarily represent what the funds would receive in an actual trade for the applicable instrument. Additionally, the loans held-for-investment are stated at the principal amount outstanding, net of deferred loan fees and costs for certain investments. For Apollo’s opportunistic and value added real estate funds, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable analysis prepared internally, (ii) third party appraisals or valuations by qualified real estate appraisers, and (iii) contractual sales value of investments/properties subject to bona fide purchase contracts. Methods (i) and (ii) also incorporate consideration of the use of the income, cost, or sales comparison approaches of estimating property values.

On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuation results related to our real estate investments. The Company also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analyses.

-18-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Except for the Company’s debt obligation related to the AMH Credit Agreement (as defined in note 8), Apollo’s financial instruments are recorded at fair value or at amounts whose carrying value approximates fair value. See “Investments, at Fair Value” above. While Apollo’s valuations of portfolio investments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Other financial instruments’ carrying values generally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings. As disclosed in note 8, the Company’s long term debt obligation related to the AMH Credit Agreement is believed to have an estimated fair value of approximately $793.9 million based on a yield analysis using available market data of comparable securities with similar terms and remaining maturities as of March 31, 2013. However, the carrying value that is recorded on the condensed consolidated statements of financial condition is the amount for which we expect to settle the long term debt obligation. The Company has determined that the long term debt obligation related to the AMH Credit Agreement would be categorized as a Level III liability in the fair-value hierarchy.

Fair Value Option—Apollo has elected the fair value option for the convertible notes issued by HFA Holdings Limited (“HFA”) and for the assets and liabilities of the consolidated VIEs. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. Apollo has applied the fair value option for certain corporate loans, other investments and debt obligations held by the consolidated VIEs that otherwise would not have been carried at fair value. For the convertible notes issued by HFA, Apollo has elected to separately present interest income from other changes in the fair value of the convertible notes in the condensed consolidated statements of operations. Refer to notes 3 and 4 for further disclosure on the investment in HFA and financial instruments of the consolidated VIEs for which the fair value option has been elected.

Financial Instruments held by Consolidated VIEs

The consolidated VIEs hold investments that are traded over-the-counter. Investments in securities that are traded on a securities exchange or comparable over-the-counter quotation systems are valued based on the last reported sale price at that date. If no sales of such investments are reported on such date, and in the case of over-the-counter securities or other investments for which the last sale date is not available, valuations are based on independent market quotations obtained from market participants, recognized pricing services or other sources deemed relevant, and the prices are based on the average of the “bid” and “ask” prices, or at ascertainable prices at the close of business on such day. Market quotations are generally based on valuation pricing models or market transactions of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among other factors. When market quotations are not available, a model based approach is used to determine fair value.

The consolidated VIEs also have debt obligations that are recorded at fair value. The primary valuation methodology used to determine fair value for debt obligation is market quotation. Prices are based on the average of the “bid” and “ask” prices. In the event that market quotations are not available, a model based approach is used. The valuation approach used to estimate the fair values of debt obligations for which market quotations are not available is the discounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interest payments and quarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and credit rating. Management uses its discretion and judgment in considering and appraising relevant factors for determining the valuations of its debt obligations.

-19-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Compensation and Benefits

Equity-Based Compensation—Equity-based compensation is measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are expensed over the relevant service period. The Company estimates forfeitures for equity-based awards that are not expected to vest. Equity-based awards granted to non-employees for services provided to affiliates are remeasured to fair value at the end of each reporting period and expensed over the relevant service period.

Salaries, Bonus and Benefits—Salaries, bonus and benefits include base salaries, discretionary and non-discretionary bonuses, severance and employee benefits. Bonuses are generally accrued over the related service period.

From time to time, the Company may assign profits interests received in lieu of management fees to certain investment professionals. Such assignments of profits interests are treated as compensation and benefits when assigned.

The Company sponsors a 401(k) Savings Plan whereby U.S. based employees are entitled to participate in the plan based upon satisfying certain eligibility requirements. The Company may provide discretionary contributions from time to time. No contributions relating to this plan were made by the Company for the three months ended March 31, 2013 and 2012.

Profit Sharing Expense—Profit sharing expense primarily consists of a portion of carried interest recognized in one or more funds allocated to employees and former employees. Profit sharing expense is recognized on an accrued basis as the related carried interest income is earned. Profit sharing expense can be reversed during periods when there is a decline in carried interest income that was previously recognized. Additionally, profit sharing expenses previously distributed may be subject to clawback from employees, former employees and Contributing Partners.

Changes in the fair value of the contingent obligations that were recognized in connection with certain Apollo acquisitions are reflected in the Company’s condensed consolidated statements of operations as profit sharing expense.

Profit sharing expense is also the result of profits interests issued to certain employees whereby they are entitled to a share in earnings of and any appreciation of the value in a subsidiary of the Company during their term of employment. Profit sharing expense related to these profits interests is recognized ratably over the requisite service period and thereafter will be recognized at the time the distributions are determined.

The Company has a performance based incentive arrangement for certain Apollo partners and employees designed to more closely align compensation on an annual basis with the overall realized performance of the Company. This arrangement enables certain partners and employees to earn discretionary compensation based on carried interest realizations earned by the Company in a given year, which amounts are reflected in profit sharing expense in the accompanying condensed consolidated financial statements.

Incentive Fee Compensation—Certain employees are entitled to receive a discretionary portion of incentive fee income from certain of our credit funds, based on performance for the year. Incentive fee compensation expense is recognized on an accrual basis as the related carried interest income is earned. Incentive fee compensation expense may be subject to reversal until the carried interest income crystallizes.

Other Income (Loss)

Net Gains (Losses) from Investment Activities—Net gains (losses) from investment activities include both realized gains and losses and the change in unrealized gains and losses in the Company’s

-20-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

investment portfolio between the opening balance sheet date and the closing balance sheet date. The condensed consolidated financial statements include the net realized and unrealized gains (losses) of investments, at fair value.

Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities—Changes in the fair value of the consolidated VIEs’ assets and liabilities and related interest, dividend and other income and expenses subsequent to consolidation are presented within net gains (losses) from investment activities of consolidated variable interest entities and are attributable to Non-Controlling Interests in the condensed consolidated statements of operations.

Other Income (Loss), Net—Other income (loss), net includes the recognition of bargain purchase gains as a result of Apollo acquisitions, gains (losses) arising from the remeasurement of foreign currency denominated assets and liabilities of foreign subsidiaries, gains (losses) arising from the remeasurement of derivative instruments associated with fees from certain of the Company’s affiliates and other miscellaneous non-operating income and expenses.

Net Income (Loss) Per Class A Share—U.S. GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for distributions declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to Class A shares and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding common shares and all potential common shares assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from a hypothetical conversion of these potential common shares.

Use of Estimates—The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimates include goodwill, intangible assets, income taxes, carried interest income from affiliates, contingent consideration obligations related to acquisitions, non-cash compensation and fair value of investments and debt in the consolidated and unconsolidated funds and VIEs. Actual results could differ materially from those estimates.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued guidance to enhance disclosures about financial instruments and derivative instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset. Under the guidance, an entity is required to disclose quantitative information relating to recognized assets and liabilities that are offset or subject to an enforceable master netting arrangement or similar agreement, including the gross amounts of those recognized assets and liabilities, the amounts offset to determine the net amount presented in the statement of financial position, and the net amount presented in the statement of financial position. With respect to amounts subject to an enforceable master netting arrangement or similar agreement which are not offset, disclosure is required of the amounts related to recognized financial instruments and other derivative instruments, the amount related to financial collateral (including cash collateral), and the overall net amount after considering amounts that have not been offset. The guidance is effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods and retrospective application is required. As the amendments are limited to disclosure only, the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

-21-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

In January 2013, the FASB issued guidance to clarify the scope of disclosures about offsetting assets and liabilities. The amendments clarify that the scope of guidance issued in December 2011 to enhance disclosures around financial instruments and derivative instruments that are either (1) offset, or (2) subject to a master netting arrangement or similar agreement, irrespective of whether they are offset, applies to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset or subject to an enforceable master netting arrangement or similar agreement. The amendments are effective for interim and annual periods beginning on or after January 1, 2013. As the amendments are limited to disclosure only, the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In July 2012, the FASB issued amended guidance related to testing indefinite-lived intangible assets, other than goodwill, for impairment. Under the revised guidance, entities have the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If an entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is more likely than not to be less than the carrying amount, then the entity must perform the quantitative impairment test; otherwise, further testing would not be required. The amendments are effective for all entities for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this guidance is not expected to have an impact on the Company’s condensed consolidated financial statements when the Company performs its annual impairment test in June 2013.

In February 2013, the FASB issued guidance on the reporting of amounts reclassified out of accumulated other comprehensive income. The guidance does not change the requirement for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The guidance is effective prospectively for periods beginning after December 15, 2012. As the amendments are limited to presentation and disclosure only, the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

3. INVESTMENTS

The following table represents Apollo’s investments:


	March 31, 2013		December 31, 2012
Investments, at fair value	$	1,735,976	$	1,744,412
Other investments		420,019		393,684

Total Investments	$	2,155,995	$	2,138,096

-22-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Investments, at Fair Value

Investments, at fair value, consist of financial instruments held by AAA, investments held by the Apollo Senior Loan Fund, the Company’s investment in HFA and other investments held by the Company at fair value. As of March 31, 2013 and December 31, 2012, the net assets of the consolidated funds (excluding VIEs) were $1,676.7 million and $1,691.3 million, respectively. The following investments, except the investment in HFA and Other Investments, are presented as a percentage of net assets of the consolidated funds:


	March 31, 2013											December 31, 2012
	Fair Value						Cost		% of Net Assets of Consolidated Funds			Fair Value						Cost		% of Net Assets of Consolidated Funds
Investments, at Fair Value – Affiliates	Private Equity		Credit		Total		Cost		% of Net Assets of Consolidated Funds			Private Equity		Credit		Total		Cost		% of Net Assets of Consolidated Funds
Investments held by:
AAA	$	1,652,029	$	—	$	1,652,029	$	1,498,965		98.5	%	$	1,666,448	$	—	$	1,666,448	$	1,561,154		98.5	%
Apollo Senior Loan Fund		—		28,540		28,540		28,091		1.7			—		27,653		27,653		27,296		1.5
HFA		—		53,577		53,577		58,639		N/A			—		48,723		48,723		57,815		N/A
Other Investments		1,830		—		1,830		3,272		N/A			1,588		—		1,588		3,563		N/A

Total	$	1,653,859	$	82,117	$	1,735,976	$	1,588,967		100.2	%	$	1,668,036	$	76,376	$	1,744,412	$	1,649,828		100.0	%

Securities

At March 31, 2013 and December 31, 2012, the sole investment held by AAA was its investment in AAA Investments, L.P. (“AAA Investments”), which is measured based on AAA’s share of net asset value of AAA investments. The following tables represent each investment of AAA Investments constituting more than five percent of the net assets of the funds that the Company consolidates (excluding VIEs) as of the aforementioned dates:


	March 31, 2013									December 31, 2012
	Instrument Type		Cost		Fair Value		% of Net Assets of Consolidated Funds			Instrument Type		Cost		Fair Value		% of Net Assets of Consolidated Funds
Athene Holding Ltd.⁽¹⁾		Equity	$	1,276,366	$	1,601,066		95.5	%		Equity	$	1,276,366	$	1,578,954		93.4	%

(1)	Two subsidiaries of AAA Investments, AAA Guarantor-Athene, L.P. and Apollo Life Re Ltd., own the majority of the equity of Athene Holding Ltd.

AAA Investments owns through its subsidiaries the majority of the equity of Athene Holding Ltd. (together with its subsidiaries, “Athene”), the direct or indirect parent of the following principal operating subsidiaries: Athene Life Re Ltd., a Bermuda-based reinsurance company focused on the fixed annuity reinsurance sector, Athene Annuity & Life Assurance Company (formerly Liberty Life Insurance Company), a Delaware-domiciled (formerly South Carolina-domiciled) stock life insurance company focused on retail sales and reinsurance in the retirement services market, Athene Life Insurance Company, a Delaware-domiciled (formerly Indiana-domiciled) stock life insurance company focused on the institutional funding agreement backed note and funding agreement markets, and Presidential Life Insurance Company, a New-York-domiciled stock life insurance company focused on retail sales of fixed annuity products principally in New York.

During the fourth quarter of 2012, AAA and AAA Investments consummated a transaction whereby a wholly-owned subsidiary of AAA Investments contributed substantially all of its investments to Athene Holding Ltd. in exchange for common shares of Athene Holding Ltd., cash and a short term promissory note (the “AAA Transaction”). After the AAA Transaction, Athene Holding Ltd. was AAA’s only material investment and as of March 31, 2013 and December 31, 2012, AAA through its investment in AAA Investments was the largest shareholder of Athene Holding Ltd. with an approximate 72% and 77%, respectively, ownership stake (without giving to effect to restricted common shares issued under Athene’s management equity plan).

-23-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Apollo Senior Loan Fund

On December 31, 2011, the Company invested $26.0 million in the Apollo Senior Loan Fund. As a result, the Company became the sole investor in the fund and therefore consolidated the assets and liabilities of the fund. The fund invests in U.S. denominated senior secured loans, senior secured bonds and other income generating fixed-income investments. At least 90% of the Apollo Senior Loan Fund’s portfolio of investments must consist of senior secured, floating rate loans or cash or cash equivalents. Up to 10% of the Apollo Senior Loan Fund’s portfolio may consist of non-first lien fixed income investments and other income generating fixed income investments, including but not limited to senior secured bonds. The Apollo Senior Loan Fund may not purchase assets rated (tranche rating) at B3 or lower by Moody’s, or equivalent rating by another nationally recognized rating agency.

The Company has classified the instruments associated with the Apollo Senior Loan Fund investment as Level II and Level III investments. All Level II and Level III investments of the Apollo Senior Loan Fund were valued using broker quotes.

HFA

On March 7, 2011, the Company invested $52.1 million (including expenses related to the purchase) in a convertible note with an aggregate principal amount of $50.0 million and received 20,833,333 stock options issued by HFA, an Australian based specialist global funds management company.

The terms of the convertible note allow the Company to convert the note, in whole or in part, into common shares of HFA at an exchange rate equal to the principal plus accrued payment-in-kind interest (or “PIK” interest) divided by US$0.98 at any time, and convey participation rights, on an as-converted basis, in any dividends declared in excess of $6.0 million per annum, as well as seniority rights over HFA common equity holders. Unless previously converted, repurchased or cancelled, the note will be converted on the eighth anniversary of its issuance on March 11, 2019. Additionally, the note has a percentage coupon interest of 6% per annum, paid via principal capitalization (PIK interest) for the first four years, and thereafter either in cash or via principal capitalization at HFA’s discretion. The PIK interest provides for the Company to receive additional common shares of HFA if the note is converted. The Company has elected the fair value option for the convertible note. The convertible note is valued using an “if-converted basis,” which is based on a hypothetical exit through conversion to common equity (for which quoted price exists) as of the valuation date. The Company separately presents interest income in the condensed consolidated statements of operations from other changes in the fair value of the convertible note. For the three months ended March 31, 2013 and 2012, the Company recorded $0.8 million in PIK interest income included in interest income in the condensed consolidated statements of operations. The terms of the stock options allow for the Company to acquire 20,833,333 fully paid ordinary shares of HFA at an exercise price in Australian Dollars (“A$”) of A$8.00 (exchange rate of A$1.00 to $1.04 and A$1.00 to $1.03 as of March 31, 2013 and 2012, respectively) per stock option. The stock options became exercisable upon issuance and expire on the eighth anniversary of the issuance date. The stock options are accounted for as a derivative and are valued at their fair value under U.S. GAAP at each balance sheet date. As a result, for the three months ended March 31, 2013 and 2012, the Company recorded an unrealized gain of approximately $4.0 million and $3.4 million, respectively, related to the convertible note and stock options within net gains from investment activities in the condensed consolidated statements of operations.

The Company has classified the instruments associated with the HFA investment as Level III investments.

-24-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Net Gains from Investment Activities

Net gains from investment activities in the condensed consolidated statements of operations include net realized gains from sales of investments, and the change in net unrealized gains resulting from changes in fair value of the consolidated funds’ investments and realization of previously unrealized gains. Additionally net gains from investment activities include changes in the fair value of the investment in HFA and other investments held at fair value. The following tables present Apollo’s net gains from investment activities for the three months ended March 31, 2013 and 2012:


	For the Three Months Ended March 31, 2013
	Private Equity		Credit		Total
Realized gains on sales of investments	$	—	$	242	$	242
Change in net unrealized gains due to changes in fair values		47,770		4,121		51,891

Net Gains from Investment Activities	$	47,770	$	4,363	$	52,133


	For the Three Months Ended March 31, 2012
	Private Equity		Credit		Total
Realized gains on sales of investments	$	—	$	91	$	91
Change in net unrealized gains due to changes in fair values		153,692		3,925		157,617

Net Gains from Investment Activities	$	153,692	$	4,016	$	157,708

-25-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Other Investments

Other Investments primarily consist of equity method investments. Apollo’s share of operating income (loss) generated by these investments is recorded within income from equity method investments in the condensed consolidated statements of operations.

The following table presents income from equity method investments for the three months ended March 31, 2013 and 2012:


	For the Three Months Ended March 31,
	2013			2012
Investments:
Private Equity Funds:
AAA Investments	$	27		$	84
Apollo Investment Fund V, L.P. (“Fund V”)		7			5
Apollo Investment Fund VI, L.P. (“Fund VI”)		1,078			2,612
Apollo Investment Fund VII, L.P. (“Fund VII”)		20,413			24,081
Apollo Natural Resources Partners, L.P. (“ANRP”)		11			37
AION Capital Partners Limited (“AION”)		184			—
Apollo Asia Private Credit Fund, L.P. (“APC”)		1			—
Credit Funds:
Apollo Special Opportunities Managed Account, L.P. (“SOMA”)		384			696
Apollo Value Investment Fund, L.P. (“VIF”)		7			19
Apollo Strategic Value Fund, L.P. (“SVF”)		3			15
Apollo Credit Liquidity Fund, L.P. (“ACLF”)		704			1,888
Apollo/Artus Investors 2007-I, L.P. (“Artus”)		—			395
Apollo Credit Opportunity Fund I, L.P. (“COF I”)		3,574			9,019
Apollo Credit Opportunity Fund II, L.P. (“COF II”)		888			2,433
Apollo European Principal Finance Fund, L.P. (“EPF I”)		(331	)		644
Apollo Investment Europe II, L.P. (“AIE II”)		57			903
Apollo Palmetto Strategic Partnership, L.P. (“Palmetto”)		583			511
Apollo Senior Floating Rate Fund Inc. (“AFT”)		8			10
Apollo Residential Mortgage, Inc. (“AMTG”)		486	⁽¹⁾		152	⁽²⁾
Apollo European Credit, L.P. (“AEC”)		76			35
Apollo European Strategic Investments, L.P. (“AESI”)		152			193
Apollo Centre Street Partnership, L.P. (“ACSP”)		181			—
Apollo Investment Corporation (“AINV”)		(627	)		—
Apollo European Principal Finance Fund II, L.P. (“EPF II”)		63			—
Apollo SK Strategic Investments, L.P.		26			—
Apollo SPN Investments I, L.P.		(413	)		—
Apollo Tactical Income Fund Inc. (“AIF”)		5			—
Real Estate:
Apollo Commercial Real Estate Finance, Inc. (“ARI”)		223	⁽¹⁾		248	⁽²⁾
AGRE U.S. Real Estate Fund, L.P.		14			(53	)
CPI Capital Partners North America LP		58			(21	)
CPI Capital Partners Asia Pacific, L.P.		2			5
Apollo GSS Holding (Cayman), L.P.		(4	)		—
Other Equity Method Investments:
VC Holdings, L.P. Series A (“Vantium A/B”)		13			(305	)
VC Holdings, L.P. Series C (“Vantium C”)		(8	)		(150	)
VC Holdings, L.P. Series D (“Vantium D”)		(47	)		242
Other		(8	)		(447	)

Total Income from Equity Method Investments	$	27,790		$	43,251

(1)	Amounts are as of December 31, 2012.

(2)	Amounts are as of December 31, 2011.

-26-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Other investments as of March 31, 2013 and December 31, 2012 consisted of the following:


	Equity Held as of
	March 31, 2013			% of Ownership			December 31, 2012			% of Ownership
Investments:
Private Equity Funds:
AAA Investments	$	992			0.058	%	$	998			0.057	%
Fund IV		9			0.014			9			0.015
Fund V		179			0.014			173			0.014
Fund VI		10,529			0.090			9,814			0.094
Fund VII		179,797			1.304			164,773			1.316
ANRP		2,429			0.823			2,355			0.903
AION		809			10.000			625			10.000
APC		18			0.059			17			0.058
Credit Funds:
SOMA		6,269			0.732			5,887			0.643
VIF		148			0.091			141			0.093
SVF		46			0.077			137			0.076
ACLF		9,759			2.573			9,281			2.579
Artus		667			6.156			667			6.156
COF I		35,585			1.914			39,416			1.924
COF II		16,710			1.416			19,654			1.429
EPF I		19,210			1.363			18,329			1.363
AIE II		7,221			2.234			7,207			2.205
Palmetto		14,231			1.186			13,614			1.186
AFT		106			0.034			98			0.034
AMTG⁽³⁾		4,753	⁽¹⁾		0.817	⁽¹⁾		4,380	⁽²⁾		0.811	⁽²⁾
AEC		1,867			1.064			1,604			1.079
AESI		3,070			1.021			3,076			0.991
ACSP		5,752			2.457			5,327			2.457
AINV⁽⁴⁾		51,135	⁽¹⁾		3.027	⁽¹⁾		51,761	⁽²⁾		2.955	⁽²⁾
EPF II		15,126			2.257			5,337			1.316
Apollo SK Strategic Investments, L.P.		1,276			0.990			1,002			0.988
Apollo SPN Investments I, L.P.		1,834			0.686			90			0.083
CION Investment Corporation		1,000			6.500			1,000			22.207
AIF		105			0.037			—			—
Real Estate:
ARI⁽³⁾		12,260	⁽¹⁾		2.002	⁽¹⁾		11,469	⁽²⁾		2.729	⁽²⁾
AGRE U.S. Real Estate Fund, L.P.		6,764			1.845			5,210			1.845
CPI Capital Partners North America		410			0.414			455			0.413
CPI Capital Partners Europe		5			0.001			5			0.001
CPI Capital Partners Asia Pacific		177			0.039			186			0.039
Apollo GSS Holding (Cayman), L.P.		2,904			4.950			2,428			4.621
Other Equity Method Investments:
Vantium A/B		67			6.450			54			6.450
Vantium C		4,914			2.070			5,172			2.071
Vantium D		1,886			6.340			1,933			6.345

Total Other Investments	$	420,019					$	393,684

(1)	Amounts are as of December 31, 2012.

(2)	Amounts are as of September 30, 2012.

(3)	Investment value includes the fair value of RSUs granted to the Company as of the grant date. These amounts are not considered in the percentage of ownership until the RSUs are vested, at which point the RSUs are converted to common stock and delivered to the Company.

(4)	The value of the Company’s investment in AINV was $51,351 based on the quoted market price as of March 31, 2013 and December 31, 2012.

-27-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

As of March 31, 2013 and December 31, 2012 and for the three months ended March 31, 2013 and 2012, no single equity method investee held by Apollo exceeded 20% of its total consolidated assets or income. As such, Apollo is not required to present summarized income statement information for any of its equity method investees.

Fair Value Measurements

The following table summarizes the valuation of Apollo’s investments in fair value hierarchy levels as of March 31, 2013 and December 31, 2012:


	Level I				Level II				Level III				Totals
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Assets, at fair value:
Investment in AAA Investments	$	—	$	—	$	—	$	—	$	1,652,029	$	1,666,448	$	1,652,029	$	1,666,448
Investments held by Apollo Senior Loan Fund		—		—		28,540		27,063		—		590		28,540		27,653
Investments in HFA and Other		—		—		—		—		55,407		50,311		55,407		50,311

Total	$	—	$	—	$	28,540	$	27,063	$	1,707,436	$	1,717,349	$	1,735,976	$	1,744,412

There was a transfer of investments from Level III into Level II relating to investments held by the Apollo Senior Loan Fund during the three months ended March 31, 2013 and a transfer from Level II into Level III for the three months ended March 31, 2012 as a result of subjecting the broker quotes on these investments to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services. For the three months ended March 31, 2013 and 2012, there were no transfers between Level I and Level II investments.

The following table summarizes the changes in AAA Investments, which is measured at fair value and characterized as a Level III investment:


	For the Three Months Ended March 31,
	2013			2012
Balance, Beginning of Period	$	1,666,448		$	1,480,152
Distributions		(62,189	)		(52,071	)
Change in unrealized gains, net		47,770			153,692

Balance, End of Period	$	1,652,029		$	1,581,773

The following table summarizes the changes in the investment in HFA and Other Investments, which are measured at fair value and characterized as Level III investments:


	For the Three Months Ended March 31,
	2013			2012
Balance, Beginning of Period	$	50,311		$	47,757
Purchases		1,435			1,150
Director Fees		(902	)		—
Change in unrealized gains, net		4,563			3,664

Balance, End of Period	$	55,407		$	52,571

The change in unrealized gains, net has been recorded within the caption “Net gains from investment activities” in the condensed consolidated statements of operations.

-28-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The following table summarizes the changes in the Apollo Senior Loan Fund, which is measured at fair value and characterized as a Level III, investment for the three months ended March 31, 2013 and 2012:


	For the Three Months Ended March 31,			For the Three Months Ended March 31,
	2013			2012
Balance, Beginning of Period	$	590		$	456
Purchases of investments		22			—
Sale of investments		—			(460	)
Realized gains		—			9
Change in unrealized gains (losses)		9			(5	)
Transfers into Level III		—			484
Transfers out of Level III		(621	)		—

Balance, End of Period	$	—		$	484

The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held by AAA Investments:


	Private Equity
	March 31, 2013						December 31, 2012
				% of Investment of AAA					% of Investment of AAA
Approximate values based on net asset value of the underlying funds, which are based on the funds underlying investments that are valued using the following:
Discounted cash flow models	$	1,601,066			96.7	%	$	1,581,975		98.6	%
Listed quotes		54,320			3.3			22,029		1.4

Total Investments		1,655,386			100.0	%		1,604,004		100.0	%

Other net (liabilities) assets⁽¹⁾		(3,357	)					62,444

Total Net Assets	$	1,652,029					$	1,666,448

(1)

Balances include other assets, liabilities and general partner interests of AAA Investments. Balance at March 31, 2013 and December 31, 2012 is primarily comprised of $51.2 million and $113.3 million in notes receivable from an affiliate, respectively, less the obligation to the general partner. Carrying values approximate fair value for other assets and liabilities and, accordingly, extended valuation procedures are not required.

-29-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

4. VARIABLE INTEREST ENTITIES

The Company consolidates entities that are VIEs for which the Company has been designated as the primary beneficiary. The purpose of such VIEs is to provide strategy-specific investment opportunities for investors in exchange for management and performance based fees. The investment strategies of the entities that the Company manages may vary by entity; however, the fundamental risks of such entities have similar characteristics, including loss of invested capital and the return of carried interest income previously distributed to the Company by certain private equity and credit entities. The nature of the Company’s involvement with VIEs includes direct and indirect investments and fee arrangements. The Company does not provide performance guarantees and has no other financial obligations to provide funding to VIEs other than its own capital commitments. There is no recourse to the Company for the consolidated VIEs’ liabilities.

The assets and liabilities of the consolidated VIEs are comprised primarily of investments and debt, at fair value, and are included within assets and liabilities of consolidated variable interest entities, respectively, in the condensed consolidated statements of financial condition.

Consolidated Variable Interest Entities

Apollo has consolidated VIEs in accordance with the methodology described in note 2. The majority of the consolidated VIEs were formed for the sole purpose of issuing collateralized notes to investors. The assets of these VIEs are primarily comprised of senior secured loans and the liabilities are primarily comprised of debt. Through its role as collateral manager of these VIEs, it was determined that Apollo had the power to direct the activities that most significantly impact the economic performance of these VIEs. Additionally, Apollo determined that the potential fees that it could receive directly and indirectly from these VIEs represent rights to returns that could potentially be significant to such VIEs. As a result, Apollo determined that it is the primary beneficiary and therefore should consolidate the VIEs.

The assets of these consolidated VIEs are not available to creditors of the Company. In addition, the investors in these consolidated VIEs have no recourse against the assets of the Company. The Company has elected the fair value option for financial instruments held by its consolidated VIEs, which includes investments in loans and corporate bonds, as well as debt obligations held by such consolidated VIEs. Other assets include amounts due from brokers and interest receivables. Other liabilities include payables for securities purchased, which represent open trades within the consolidated VIEs and primarily relate to corporate loans that are expected to settle within the next sixty days.

Fair Value Measurements

The following table summarizes the valuation of Apollo’s consolidated VIEs in fair value hierarchy levels as of March 31, 2013 and December 31, 2012:


	Level I				Level II				Level III				Totals
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Investments, at fair value	$	345	$	168	$	10,917,798	$	11,045,902	$	1,765,988	$	1,643,465	$	12,684,131	$	12,689,535

	Level I				Level II				Level III				Totals
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Liabilities, at fair value	$	—	$	—	$	—	$	—	$	11,347,332	$	11,834,955	$	11,347,332	$	11,834,955

Level III investments include corporate loan and corporate bond investments held by the consolidated VIEs. Level III liabilities consist of notes and loans, the valuations of which are discussed further in note 2. All Level II investments were valued using broker quotes. Transfers of investments out of Level III and into Level II or Level I, if any, are accounted for as of the end of the reporting period in which the transfer occurred. For the three months ended March 31, 2013 and 2012, there were no transfers between Level I and Level II investments.

-30-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

There were no fair value transfers between Level I and Level II during the three months ended March 31, 2013 and 2012.

The following table summarizes the quantitative inputs and assumptions used for investments, at fair value, categorized as Level III in the fair value hierarchy as of March 31, 2013. The disclosure below excludes Level III investments, at fair value, as of March 31, 2013, for which the determination of fair value is based on broker quotes:

Fair Value at
March 31, 2013

Valuation Techniques

Unobservable
Inputs

Ranges

Weighted
Average

Financial Assets:

Bank Debt Term Loans

58,567

Discounted Cash Flow – Comparable Yields

Discount Rates

10.6%–22.4%

14.75

Stocks

1,440

Market Comparable Companies

Comparable Multiples

6.0x

Total

60,007

The significant unobservable inputs used in the fair value measurement of the bank debt term loans and stocks include the discount rate applied and the multiples applied in the valuation models. These unobservable inputs in isolation can cause significant increases (decreases) in fair value. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment; conversely, decreases in the discount rate can significantly increase the fair value of an investment. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks. When a comparable multiple model is used to determine fair value, the comparable multiples are generally multiplied by the underlying companies’ earnings before interest, taxes, depreciation and amortization (“EBITDA”) to establish the total enterprise value of the company. The comparable multiple is determined based on the implied trading multiple of public industry peers.

-31-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The following table summarizes the changes in investments of consolidated VIEs, which are measured at fair value and characterized as Level III investments:


	For the Three Months Ended March 31,
	2013			2012
Balance, Beginning of Period	$	1,643,465		$	246,609
Elimination of investments attributable to consolidation of VIEs		(3,902	)		—
Purchases		384,161			226,945
Sale of investments		(186,861	)		(39,274	)
Net realized losses		(4,442	)		(4,658	)
Changes in net unrealized (losses) gains		(1,353	)		11,592
Transfers out of Level III		(337,673	)		(290,517	)
Transfers into Level III		272,593			64,549

Balance, End of Period	$	1,765,988		$	215,246

Changes in net unrealized (losses) gains included in Net Gains (Losses) from Investment Activities of consolidated VIEs related to investments still held at reporting date	$	(8,655	)	$	6,236

Investments were transferred out of Level III into Level II and into Level III out of Level II, respectively, as a result of subjecting the broker quotes on these investments to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services.

The following table summarizes the changes in liabilities of consolidated VIEs, which are measured at fair value and characterized as Level III liabilities:


	For the Three Months Ended March 31,
	2013			2012
Balance, Beginning of Period	$	11,834,955		$	3,189,837
Borrowings		332,250			425,684
Repayments		(911,775	)		(2,791	)
Net realized losses on debt		7,603			—
Changes in net unrealized losses from debt		88,236			88,578
Elimination of debt attributable to consolidated VIEs		(3,937	)		(772	)

Balance, End of Period	$	11,347,332		$	3,700,536

Changes in net unrealized losses included in Net Gains (Losses) from Investment Activities of consolidated VIEs related to liabilities still held at reporting date	$	87,186		$	88,699

Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities

The following table presents net gains (losses) from investment activities of the consolidated VIEs for the three months ended March 31, 2013 and 2012, respectively:


	For the Three Months Ended March 31,
	2013			2012
Net unrealized gains from investment activities	$	25,120		$	70,019
Net realized gains from investment activities		50,930			2,285

Net gains from investment activities		76,050			72,304

Net unrealized losses from debt		(88,236	)		(88,578	)
Net realized losses from debt		(7,603	)		—

Net losses from debt		(95,839	)		(88,578	)

Interest and other income		177,125			45,631
Other expenses		(109,475	)		(45,558	)

Net Gains (Losses) from Investment Activities of Consolidated VIEs	$	47,861		$	(16,201	)

-32-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Senior Secured Notes and Subordinated Notes—Included within debt are amounts due to third-party institutions of the consolidated VIEs. The following table summarizes the principal provisions of the debt of the consolidated VIEs as of March 31, 2013 and December 31, 2012:


	March 31, 2013							December 31, 2012
	Principal Outstanding		Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years		Principal Outstanding		Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years
Senior Secured Notes⁽²⁾⁽³⁾	$	10,887,222		1.13	%		7.1	$	11,409,825		1.30	%		7.3
Subordinated Notes⁽²⁾⁽³⁾		1,006,544		N/A	⁽¹⁾		7.5		1,074,904		N/A	⁽¹⁾		7.7

	$	11,893,766						$	12,484,729

(1)	The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the VIEs.

(2)	The fair value of Senior Secured and Subordinated Notes as of March 31, 2013 and December 31, 2012 was $11,347 million and $11,835 million, respectively.

(3)

The debt at fair value of the consolidated VIEs is collateralized by assets of the consolidated VIEs and assets of one vehicle may not be used to satisfy the liabilities of another. As of March 31, 2013 and December 31, 2012, the fair value of the consolidated VIE assets was $14,669 million and $14,672 million, respectively. This collateral consisted of cash and cash equivalents, investments, at fair value, and other assets.

The following table provides a summary of the quantitative inputs and assumptions used for liabilities, at fair value, categorized as Level III in the fair value hierarchy as of March 31, 2013. The disclosure below excludes Level III liabilities, at fair value, as of March 31, 2013 for which the determination of fair value is based on broker quotes:


	As of March 31, 2013
	Fair Value		Valuation Technique	Unobservable Input	Ranges
Subordinated Notes	$	122,393	Discounted Cash	Discount Rate	17.0%
			Flow	Default Rate	1.5%
				Recovery Rate	80.0%

Senior Secured Notes	$	2,095,613	Discounted Cash	Discount Rate	1.3%–1.6%
			Flow	Default Rate	2.0%
				Recovery Rate	30.0%–65.0%

The significant unobservable inputs used in the fair value measurement of the subordinated and senior secured notes include the discount rate applied in the valuation models, default and recovery rates applied in the valuation models. These inputs in isolation can cause significant increases (decreases) in fair value. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of subordinated and senior secured notes; conversely, decreases in the discount rate can significantly increase the fair value of subordinated and senior secured notes. The discount rate is determined based on the market rates an investor would expect for similar subordinated and senior secured notes with similar risks.

The consolidated VIEs have elected the fair value option to value the notes payable. The general partner uses its discretion and judgment in considering and appraising relevant factors in determining valuation of these loans. As of March 31, 2013, the debt, at fair value, is classified as Level III liabilities. Because of the inherent uncertainty in the valuation of the notes payable, which are not publicly traded, estimated values may differ significantly from the values that would have been reported had a ready market for such investments existed.

-33-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The consolidated VIEs’ debt obligations contain various customary loan covenants as described above. As of March 31, 2013, the Company was not aware of any instances of noncompliance with any of these covenants.

Variable Interest Entities Which are Not Consolidated

The Company holds variable interests in certain VIEs which are not consolidated, as it has been determined that Apollo is not the primary beneficiary.

The following tables present the carrying amounts of the assets and liabilities of the VIEs for which Apollo has concluded that it holds a significant variable interest, but that it is not the primary beneficiary. In addition, the tables present the maximum exposure to loss relating to those VIEs.


	March 31, 2013
	Total Assets			Total Liabilities			Apollo Exposure
Private Equity	$	13,141,800		$	(44,134	)	$	6,800
Credit		3,214,196			(256,250	)		13,311
Real Estate		1,651,957			(1,198,351	)		—

Total	$	18,007,953	⁽¹⁾	$	(1,498,735	)⁽²⁾	$	20,111	⁽³⁾

(1)	Consists of $535,570 in cash, $16,847,831 in investments and $624,552 in receivables.

(2)	Represents $1,449,553 in debt and other payables, $43,146 in securities sold, not purchased, and $6,036 in capital withdrawals payable.

(3)	Apollo’s exposure is limited to its direct and indirect investments in those entities in which Apollo holds a significant variable interest.


	December 31, 2012
	Total Assets			Total Liabilities			Apollo Exposure
Private Equity	$	13,498,100		$	(34,438	)	$	7,105
Credit		3,276,198			(545,547	)		12,605
Real Estate		1,685,793			(1,237,462	)		—

Total	$	18,460,091	⁽¹⁾	$	(1,817,447	)⁽²⁾	$	19,710	⁽³⁾

(1)	Consists of $452,116 in cash, $17,092,814 in investments and $915,161 in receivables.

(2)	Represents $1,752,294 in debt and other payables, $32,702 in securities sold, not purchased, and $32,451 in capital withdrawals payable.

(3)	Apollo’s exposure is limited to its direct and indirect investments in those entities in which Apollo holds a significant variable interest.

5. CARRIED INTEREST RECEIVABLE

Carried interest receivable from private equity, credit and real estate funds consists of the following:


	March 31, 2013		December 31, 2012
Private equity	$	2,110,920	$	1,413,306
Credit		429,271		454,155
Real Estate		10,962		10,795

Total Carried Interest Receivable	$	2,551,153	$	1,878,256

-34-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The table below provides a roll-forward of the carried interest receivable balance for the three months ended March 31, 2013:


	Private Equity			Credit			Real Estate			Total
Carried interest receivable, January 1, 2013	$	1,413,306		$	454,155		$	10,795		$	1,878,256
Change in fair value of funds ⁽¹⁾		990,993			99,958			952			1,091,903
Fund cash distributions to the Company		(293,379	)		(124,842	)		(785	)		(419,006	)

Carried Interest Receivable, March 31, 2013	$	2,110,920		$	429,271		$	10,962		$	2,551,153

(1)

Included in change in fair value of funds for the three months ended March 31, 2013 was a reversal of $19.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to SOMA. The general partner obligation is recognized based upon a hypothetical liquidation of the fund’s net assets as of the balance sheet date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund.

6. OTHER LIABILITIES

Other liabilities consist of the following:


	March 31, 2013		December 31, 2012
Deferred taxes	$	26,028	$	13,717
Deferred rent		14,786		14,829
Unsettled trades and redemption payable		7,586		3,986
Other		18,197		12,323

Total Other Liabilities	$	66,597	$	44,855

7. INCOME TAXES

The Company is treated as a partnership for income tax purposes and is therefore not subject to U.S. Federal and State income taxes; however, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. Federal, State and Local corporate income taxes. In addition, certain subsidiaries of the Company are subject to New York City Unincorporated Business Tax (“NYC UBT”) attributable to the Company’s operations apportioned to New York City. Certain non-U.S. subsidiaries of the Company are subject to income taxes in their local jurisdictions. APO Corp. is required to file a standalone Federal corporate income tax return, as well as file standalone corporate state and local income tax returns in California, New York State and New York City. The Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.

The Company’s provision for income taxes totaled $18.6 million and $14.6 million for the three months ended March 31, 2013 and 2012, respectively. The Company’s effective tax rate was approximately 2.27% and 3.27% for the three months ended March 31, 2013 and 2012, respectively.

Under U.S. GAAP, a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Based upon the Company’s review of its federal, state, local and foreign income tax returns and tax filing positions, the Company determined that no unrecognized tax benefits for uncertain tax positions were required to be recorded. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record significant amounts of unrecognized tax benefits within the next twelve months.

-35-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax authorities. With a few exceptions, as of March 31, 2013, Apollo and its predecessor entities’ U.S. Federal, state, local and foreign income tax returns for the years 2008 through 2012 are open under the general statute of limitations provisions and therefore subject to examination. In addition, the State of New York is examining APO Corp.’s tax returns for tax years 2008 to 2010 and the Internal Revenue Service is examining APO Corp.’s tax returns for tax years 2010 and 2011 in connection with the NOL carryback claim from tax year 2011 to tax year 2010.

8. DEBT

Debt consists of the following:


	March 31, 2013					December 31, 2012
	Outstanding Balance		Annualized Weighted Average Interest Rate			Outstanding Balance		Annualized Weighted Average Interest Rate
AMH Credit Agreement	$	728,273		4.02	%	$	728,273		4.95	%⁽¹⁾
CIT secured loan agreements		9,438		3.50	%		9,545		3.47	%

Total Debt	$	737,711		4.01	%	$	737,818		4.93	%

(1)	Includes the effect of interest rate swaps.

AMH Credit Agreement—On April 20, 2007, Apollo Management Holdings, L.P. (“AMH”), a subsidiary of the Company which is a Delaware limited partnership owned by APO Corp. and Holdings, entered into a $1.0 billion seven year credit agreement (the “AMH Credit Agreement”). Interest payable under the AMH Credit Agreement may from time to time be based on Eurodollar London Interbank Offered Rate (“LIBOR”) or Alternate Base Rate (“ABR”) as determined by the borrower. Through the use of interest rate swaps, AMH irrevocably elected three-month LIBOR for $167 million of the debt for five years from the closing date of the AMH Credit Agreement, which expired in May 2012. The interest rate of the Eurodollar loan, which was amended as discussed below, is the daily Eurodollar rate plus the applicable margin rate (3.75% for $995 million of the loan, as discussed below, and 1.25% for $5 million of the loan as of March 31, 2013 and 3.75% for $995 million of the loan and 1.00% for $5 million of the loan as of December 31, 2012). The interest rate on the ABR term loan, which was amended as discussed below, for any day, will be the greatest of (a) the prime rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.5% and (c) the one-month Eurodollar Rate plus 1.00%, in each case plus the applicable margin. The AMH Credit Agreement originally had a maturity date of April 2014.

On December 20, 2010, Apollo amended the AMH Credit Agreement to extend the maturity date of $995.0 million (including the $90.9 million of fair value debt repurchased by the Company) of the term loan from April 20, 2014 to January 3, 2017 and modified certain other terms of the AMH Credit Agreement. Pursuant to this amendment, AMH or an affiliate was required to purchase from each lender that elected to extend the maturity date of its term loan a portion of such extended term loan equal to 20% thereof. In addition, AMH or an affiliate is required to repurchase at least $50.0 million aggregate principal amount of the term loan by December 31, 2014 and at least $100.0 million aggregate principal amount of the term loan (inclusive of the previously purchased $50.0 million) by December 31, 2015 at a price equal to par plus accrued interest. The sweep leverage ratio was also extended to end at the new loan term maturity date. The interest rate for the highest applicable margin for the loan portion extended changed to LIBOR plus 4.25% and ABR plus 3.25%. On December 20, 2010, an affiliate of AMH that is a guarantor under the AMH Credit Agreement repurchased approximately $180.8 million of the term loan in connection with the extension of the maturity date of such loan and thus the AMH Credit Agreement (excluding the portions held by AMH affiliates) had a remaining balance of $728.3 million. The Company determined that the amendments to the AMH Credit Agreement resulted in a debt extinguishment which did not result in any gain or loss.

-36-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The interest rate on the $723.3 million, net ($995.0 million portion less amount repurchased by the Company) of the loan at March 31, 2013 was 4.00% and the interest rate on the remaining $5.0 million portion of the loan at March 31, 2013 was 1.25%. The estimated fair value of the Company’s long-term debt obligation related to the AMH Credit Agreement is believed to be approximately $793.9 million based on a yield analysis using available market data of comparable securities with similar terms and remaining maturities. The $728.3 million carrying value of debt that is recorded on the condensed consolidated statements of financial condition at March 31, 2013 is the amount for which the Company expects to settle the AMH Credit Agreement.

As of March 31, 2013 and December 31, 2012, the AMH Credit Agreement was guaranteed by, and collateralized by, substantially all of the assets of Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings IX, L.P. and AMH, as well as cash proceeds from the sale of assets or similar recovery events and any cash deposited pursuant to the excess cash flow covenant, which will be deposited as cash collateral to the extent necessary as set forth in the AMH Credit Agreement. As of March 31, 2013, the consolidated net assets (deficit) of Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings IX, L.P. and AMH and its consolidated subsidiaries were $152.2 million, $92.0 million, $45.3 million, $196.2 million and $(829.4) million, respectively. As of December 31, 2012, the consolidated net assets (deficit) of Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings IX, L.P. and AMH and its consolidated subsidiaries were $94.9 million, $91.1 million, $62.3 million, $217.5 million and $(858.9) million, respectively.

In accordance with the AMH Credit Agreement as of March 31, 2013, Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings IX, L.P. and AMH and their respective subsidiaries were subject to certain negative and affirmative covenants. Among other things, the AMH Credit Agreement includes an excess cash flow covenant and an asset sales covenant. The AMH Credit Agreement does not contain any financial maintenance covenants.

If AMH’s debt to EBITDA ratio (the “Leverage Ratio”) as of the end of any fiscal year exceeds the level set forth in the next sentence (the “Excess Sweep Leverage Ratio”), AMH must deposit in the cash collateral account the lesser of (a) 100% of its Excess Cash Flow (as defined in the AMH Credit Agreement) and (b) the amount necessary to reduce the Leverage Ratio on a pro forma basis as of the end of such fiscal year to 0.25 to 1.00 below the Excess Sweep Leverage Ratio. The Excess Sweep Leverage Ratio is: for 2013, 4.00 to 1.00; for 2014, 3.75 to 1.00; for 2015, 3.50 to 1.00; and thereafter, 3.50 to 1.00.

In addition, AMH must deposit the lesser of (a) 50% of any remaining Excess Cash Flow and (b) the amount required to reduce the Leverage Ratio on a pro forma basis at the end of each fiscal year to a level 0.25 to 1.00 below the Sweep Leverage Ratio (as defined in the next paragraph) for such fiscal year.

If AMH receives net cash proceeds from certain non-ordinary course asset sales, then such net cash proceeds shall be deposited in the cash collateral account as necessary to reduce its Leverage Ratio on a pro forma basis as of the last day of the most recently completed fiscal quarter (after giving effect to such non-ordinary course asset sale and such deposit) to (the following specified levels for the specified years, the “Sweep Leverage Ratio”) (i) for 2013, a Leverage Ratio of 3.50 to 1.00, (ii) for 2014, a Leverage Ratio of 3.25 to 1.00 and (iii) for 2015 and for all years thereafter, a Leverage Ratio of 3.00 to 1.00.

The AMH Credit Agreement contains customary events of default, including events of default arising from non-payment, material misrepresentations, breaches of covenants, cross default to material indebtedness, bankruptcy and changes in control of AMH. As of March 31, 2013, the Company was not aware of any instances of non-compliance with the AMH Credit Agreement.

CIT Secured Loan Agreements—During the second quarter of 2008, the Company entered into four secured loan agreements totaling $26.9 million with CIT Group/Equipment Financing Inc. (“CIT”) to finance the purchase of certain fixed assets. The loans bear interest at LIBOR plus 318 basis points per

-37-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

annum with interest and principal to be repaid monthly and a balloon payment of the remaining principal totaling $9.4 million due at the end of the terms in April 2013. At March 31, 2013, the interest rate was 3.38%. On April 28, 2011, the Company sold its ownership interest in certain assets which served as collateral to the CIT secured loan agreements for $11.3 million with $11.1 million of the proceeds going to CIT directly. As a result of the sale and an additional payment made by the Company of $1.1 million, the Company satisfied the loan associated with the related asset of $12.2 million on April 28, 2011. As of March 31, 2013, the carrying value of the remaining CIT secured loan was $9.4 million.

Apollo has determined that the carrying value of this debt approximates fair value as the loans are primarily variable rate in nature and would be categorized as a Level III liability in the fair value hierarchy.

9. NET INCOME (LOSS) PER CLASS A SHARE

U.S. GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for distributions declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to Class A Shares and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding common shares and all potential common shares assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential common shares.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The table below presents basic and diluted net income (loss) per Class A share using the two-class method for the three months ended March 31, 2013 and 2012:


	Basic and Diluted
	For the Three Months Ended March 31,
	2013			2012
Numerator:
Net income attributable to Apollo Global Management, LLC	$	248,978		$	98,043
Distributions declared on Class A shares		(138,746	)⁽¹⁾		(58,080	)⁽²⁾
Distributions on participating securities		(24,992	)		(10,306	)
Earnings allocable to participating securities		(13,718	)		(4,749	)

Undistributed income attributable to class A shareholders: Basic		71,522			24,908
Dilution effect on undistributed income attributable to Class A shareholders		5,600			1,220

Undistributed income attributable to class A shareholders: diluted	$	77,122		$	26,128

Denominator:
Weighted average number of Class A shares outstanding: Basic		131,249,034			125,269,253
Dilution effect of share options and unvested RSUs		4,770,767			2,246,410

Weighted average number of Class A shares outstanding: Diluted		136,019,801			127,515,663

Net income per Class A share: Basic
Distributed Income	$	1.06		$	0.46
Undistributed Income		0.54			0.20

Net Income per Class A Share: Basic	$	1.60		$	0.66

Net Income per Class A Share: Diluted⁽³⁾
Distributed Income	$	1.02		$	0.46
Undistributed Income		0.57			0.20

Net Income per Class A Share: Diluted	$	1.59		$	0.66

(1)	The Company declared a $1.05 distribution on Class A shares on February 8, 2013.

(2)	The Company declared a $0.46 distribution on Class A shares on February 12, 2012.

(3)

For the three months ended March 31, 2013, share options and unvested RSUs were determined to be dilutive, and were accordingly included in the diluted earnings per share calculation. The AOG Units and participating securities were determined to be anti-dilutive for the three months ended March 31, 2013. For the three months ended March 31, 2012, share options and unvested RSUs were determined to be dilutive, and were accordingly included in the diluted earnings per share calculation. The resulting diluted earnings per share amount was not significantly different from basic earnings per share and therefore was presented as the same amount. The AOG Units and participating securities were determined to be anti-dilutive for the three months ended March 31, 2012.

On October 24, 2007, the Company commenced the granting of restricted share units (“RSUs”) that provide the right to receive, upon vesting, Class A shares of Apollo Global Management, LLC, pursuant to the Company’s 2007 Omnibus Equity Incentive Plan. Certain RSU grants to employees during 2012 and 2013 provide the right to receive distribution equivalents on vested RSUs on an equal basis any time a distribution is declared. The Company refers to these RSU grants as “Plan Grants.” For certain Plan Grants made before 2010, distribution equivalents are paid in January of the calendar year next following the calendar year in which a distribution on Class A shares was declared. In addition, certain RSU grants to employees in 2012 and 2013 (the Company refers to these as “Bonus Grants”) provide that both vested and unvested RSUs participate in distribution equivalents on an equal basis with the Class A shareholders any time a distribution is declared. As of March 31, 2013, approximately 21.1 million vested RSUs and 4.2 million unvested RSUs were eligible for participation in distribution equivalents.

Any distribution equivalent paid to an employee will not be returned to the Company upon forfeiture of the award by the employee. Vested and unvested RSUs that are entitled to non-forfeitable distribution equivalents qualify as participating securities and are included in the Company’s basic and

-39-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

diluted earnings per share computations using the two-class method. The holder of an RSU participating security would have a contractual obligation to share in the losses of the entity if the holder is obligated to fund the losses of the issuing entity or if the contractual principal or mandatory redemption amount of the participating security is reduced as a result of losses incurred by the issuing entity. Because the RSU participating securities do not have a mandatory redemption amount and the holders of the participating securities are not obligated to fund losses, neither the vested RSUs nor the unvested RSUs are subject to any contractual obligation to share in losses of the Company.

Holders of AOG Units are subject to the vesting requirements and transfer restrictions set forth in the agreements with the respective holders, and may up to four times each year, upon notice (subject to the terms of the exchange agreement), exchange their AOG Units for Class A shares on a one-for-one basis. A limited partner must exchange one partnership unit in each of the ten Apollo Operating Group partnerships to effectuate an exchange for one Class A share. If fully converted, the result would be an additional 240,000,000 Class A shares added to the diluted earnings per share calculation.

Apollo has one Class B share outstanding, which is held by BRH Holdings GP, Ltd. The voting power of the Class B share is reduced on a one vote per one AOG Unit basis in the event of an exchange of AOG Units for Class A shares, as discussed above. The Class B share has no net income (loss) per share as it does not participate in Apollo’s earnings (losses) or distributions. The Class B share has no distribution or liquidation rights. The Class B share has voting rights on a pari passu basis with the Class A shares. The Class B share currently has a super voting power of 240,000,000 votes.

The table below presents transactions in Class A shares during the three months ended March 31, 2013 and the year ended December 31, 2012, and the resulting impact on the Company’s and Holdings’ ownership interests in the Apollo Operating Group:


Date	Type of AGM Class A Shares Transaction		Number of Shares Issued in AGM Class A Shares Transaction (in thousands)		AGM ownership% in AOG before AGM Class A Shares Transaction			AGM ownership% in AOG after AGM Class A Shares Transaction			Holdings ownership% in AOG before AGM Class A Shares Transaction			Holdings ownership% in AOG after AGM Class A Shares Transaction
January 18, 2012		Issuance		394		34.1	%		34.1	%		65.9	%		65.9	%
February 13, 2012		Issuance		1,994		34.1	%		34.5	%		65.9	%		65.5	%
March 5, 2012		Issuance		50		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾
April 3, 2012		Issuance		150		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾
July 9, 2012		Issuance		1,452		34.5	%		34.7	%		65.5	%		65.3	%
August 6, 2012		Issuance		1,962		34.7	%		35.1	%		65.3	%		64.9	%
October 9, 2012		Issuance		150		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾
November 12, 2012		Issuance		25		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾
November 19, 2012		Issuance		5		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾
January 9, 2013		Issuance		150		35.1	%		35.2	%		64.9	%		64.8	%
January 25, 2013		Issuance		23		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾
February 11, 2013		Issuance		1,913		35.2	%		35.5	%		64.8	%		64.5	%
March 19, 2013		Issuance		5		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾		N/A	⁽¹⁾

(1)	Transaction did not have a material impact on ownership.

10. EQUITY-BASED COMPENSATION

AOG Units

The fair value of the AOG Units of approximately $5.6 billion is charged to compensation expense on a straight-line basis over the five or six year service period, as applicable. For the three months ended March 31, 2013 and 2012, $15.0 million and $116.2 million of compensation expense was recognized, respectively. The estimated forfeiture rate was 0% for Contributing Partners and 0% for Managing Partners based on actual forfeitures as well as the Company’s future forfeiture expectations. As of March 31, 2013, there was $15.0 million of total unrecognized compensation cost related to unvested AOG Units that are expected to vest over the next three months.

-40-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The following table summarizes the activity of the AOG Units for the three months ended March 31, 2013:


	Apollo Operating Group Units			Weighted Average Grant Date Fair Value
Balance at January 1, 2013		1,500,366		$	20.00
Granted		—			—
Forfeited		—			—
Vested at March 31, 2013		(750,180	)		20.00

Balance at March 31, 2013		750,186		$	20.00

Units Expected to Vest—As of March 31, 2013, approximately 750,186 AOG Units were expected to vest over the next three months.

RSUs

On October 24, 2007, the Company commenced the granting of RSUs under the Company’s 2007 Omnibus Equity Incentive Plan. These grants are accounted for as a grant of equity awards in accordance with U.S. GAAP. All grants after March 29, 2011 consider the public share price of the Company. For Plan Grants, the fair value is based on grant date fair value, and is discounted for transfer restrictions and lack of distributions until vested. For Bonus Grants, the valuation methods consider transfer restrictions and timing of distributions. The total fair value is charged to compensation expense on a straight-line basis over the vesting period, which is generally up to 24 quarters (for Plan Grants) or annual vesting over three years (for Bonus Grants). During the three months ended March 31, 2013, 204,570 RSUs were granted with a weighted average grant date fair value of $19.93 per RSU. The actual forfeiture rate was 0.9% and 1.3% for the three months ended March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013 and 2012, $27.5 million and $31.0 million of compensation expense were recognized, respectively.

Delivery of Class A Shares

During the first quarter of 2013 and 2012, the Company delivered Class A shares for vested RSUs. The Company generally allows RSU participants to settle their tax liabilities with a reduction of their Class A share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a tax liability and a corresponding accumulated deficit adjustment. The adjustment was $22.8 million and $17.0 million in the first quarter in 2013 and 2012, respectively, and is disclosed in the condensed consolidated statements of changes in shareholders’ equity.

The delivery of RSUs does not cause a transfer of amounts in the condensed consolidated statements of changes in shareholders’ equity to the Class A Shareholders. The delivery of Class A shares for vested RSUs causes the income allocated to the Non-Controlling Interests to shift to the Class A shareholders from the date of delivery forward. During the three months ended March 31, 2013, the Company delivered 2,091,339 Class A shares in settlement of vested RSUs, which caused the Company’s ownership interest in the Apollo Operating Group to increase to 35.5% from 35.1%.

-41-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The following table summarizes RSU activity for the three months ended March 31, 2013:


	Unvested			Weighted Average Grant Date Fair Value		Vested			Total Number of RSUs Outstanding
Balance at January 1, 2013		14,724,474		$	11.62		22,512,930			37,237,404
Granted		204,570			19.93		—			204,570
Forfeited		(130,960	)		12.53		—			(130,960	)
Delivered		—			13.12		(3,114,564	)		(3,114,564	)
Vested		(1,719,592	)		11.16		1,719,592			—

Balance at March 31, 2013		13,078,492		$	11.80		21,117,958			34,196,450	⁽¹⁾

(1)	Amount excludes RSUs which have vested and have been issued in the form of Class A shares.

Units Expected to Vest—As of March 31, 2013, approximately 12,300,000 RSUs were expected to vest.

Share Options

Under the Company’s 2007 Omnibus Equity Incentive Plan, the following options were granted. Below is a summary of their respective vesting terms:


Date of Grant	Options Granted	Vesting Terms
December 2, 2010	5,000,000	Vested and became exercisable with respect to 4/24 of the option shares on December 31, 2011 and the remainder vest in equal installments over each of the remaining 20 quarters with full vesting on December 31, 2016.

January 22, 2011	555,556	Half of such options that vested and became exercisable on December 31, 2011 were exercised on March 5, 2012 and the other half that were due to become exercisable on December 31, 2012 were forfeited during the quarter ended March 31, 2012.

April 9, 2011	25,000	Vested and became exercisable with respect to half of the options shares on December 31, 2011 and the other half vested in four equal quarterly installments starting on March 31, 2012 and ending on December 31, 2012.

July 9, 2012	50,000	Will vest and become exercisable with respect to 4/24 of the option shares on June 30, 2013 and the remainder will vest in equal installments over each of the remaining 20 quarters with full vesting on June 30, 2018.
December 28, 2012	200,000

For the three months ended March 31, 2013 and 2012, $1.2 million and $1.2 million of compensation expense were recognized as a result of option grants, respectively.

Apollo measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for options awarded during 2012:


Assumptions:	2012⁽²⁾
Risk-free interest rate		1.11	%
Weighted average expected dividend yield		8.13	%
Expected volatility factor⁽¹⁾		45.00	%
Expected life in years		6.66
Fair value of options per share	$	3.01

(1)	The Company determined its expected volatility based on comparable companies using daily stock prices and the Company’s volatility.

(2)	Represents weighted average of 2012 grants.

-42-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

The following table summarizes the share option activity for the three months ended March 31, 2013:


	Options Outstanding		Weighted Average Exercise Price		Aggregate Fair Value		Weighted Average Remaining Contractual Term
Balance at January 1, 2013		5,275,000	$	8.44	$	29,020		8.01
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—		—		—		—

Balance at March 31, 2013		5,275,000		8.44	$	29,020		7.76

Exercisable at March 31, 2013		1,899,998	$	8.13	$	10,706		7.67

Options Expected to Vest—As of March 31, 2013, approximately 3,170,000 options were expected to vest.

The expected life of the options granted represents the period of time that options are expected to be outstanding and is based on the contractual term of the option. Unamortized compensation cost related to unvested share options at March 31, 2013 was $17.2 million and is expected to be recognized over a weighted average period of 3.8 years. No options were exercised during the three months ended March 31, 2013.

AAA RDUs

Incentive units that provide the right to receive AAA restricted depository units (“RDUs”) following vesting are granted periodically to employees of Apollo. These grants are accounted for as equity awards in accordance with U.S. GAAP. The incentive units granted to employees generally vest over three years. In contrast, the Company’s Managing Partners and Contributing Partners have received distributions of fully-vested AAA RDUs. The fair value at the date of the grants is recognized on a straight-line basis over the vesting period (or upon grant in the case of fully vested AAA RDUs). The grant date fair value is based on the public share price of AAA. Vested AAA RDUs can be converted into ordinary common units of AAA subject to applicable securities law restrictions. During the three months ended March 31, 2013 and 2012, the actual forfeiture rate was 0%. For the three months ended March 31, 2013 and 2012, $0.3 million and $0.1 million of compensation expense was recognized, respectively.

During the three months ended March 31, 2013 and 2012, the Company delivered 114,896 and 60,702 RDUs, respectively, to individuals who had vested in these units. The deliveries in 2013 resulted in a satisfaction of liability of $1.0 million and the recognition of a net decrease of additional paid in capital of $1.4 million. These amounts are presented in the condensed consolidated statements of changes in shareholders’ equity. There was $0.3 million and $1.0 million of liability for undelivered RDUs included in accrued compensation and benefits in the condensed consolidated statements of financial condition as of March 31, 2013 and December 31, 2012, respectively. The following table summarizes RDU activity for the three months ended March 31, 2013:


	Unvested		Weighted Average Grant Date Fair Value		Vested			Total Number of RDUs Outstanding
Balance at January 1, 2013		338,430	$	8.85		114,896			453,326
Granted		—		—		—			—
Forfeited		—		—		—			—
Delivered		—		9.02		(114,896	)		(114,896	)
Vested		—		—		—			—

Balance at March 31, 2013		338,430	$	8.85		—			338,430

-43-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Units Expected to Vest—As of March 31, 2013, approximately 318,000 RDUs were expected to vest over the next three years.

The following table summarizes the activity of RDUs available for future grants:


	RDUs Available For Future Grants
Balance at January 1, 2013		1,685,345
Purchases		6,236
Granted		—
Forfeited		—

Balance at March 31, 2013		1,691,581

Restricted Stock and Restricted Stock Unit Awards— Apollo Commercial Real Estate Finance, Inc. (“ARI”)

ARI restricted stock and restricted stock unit awards granted to the Company and certain of the Company’s employees generally vest over three years, either quarterly or annually. The awards granted to the Company are accounted for as investments and deferred revenue in the condensed consolidated statements of financial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method of accounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense will be recognized on a straight line-basis over the vesting period for the awards granted to the employees. The Company recorded an asset and a liability upon receiving the awards on behalf of the Company’s employees. The fair value of the awards to employees is based on the grant date fair value, which utilizes the public share price of ARI, less discounts for transfer restrictions. The awards granted to the Company’s employees are remeasured each period to reflect the fair value of the asset and other liabilities and any changes in these values are recorded in the condensed consolidated statements of operations. For the three months ended March 31, 2013 and 2012, $1.4 million and $0.5 million of management fees and $1.0 million and $0.4 million of compensation expense were recognized in the condensed consolidated statements of operations, respectively. The actual forfeiture rate for unvested ARI restricted stock awards and ARI RSUs was 0% and 1% for the three months ended March 31, 2013 and 2012, respectively.

The following table summarizes activity for the ARI restricted stock awards and ARI RSUs that were granted to both the Company and certain of its employees for the three months ended March 31, 2013:


	ARI Restricted Stock Unvested		ARI RSUs Unvested			Weighted Average Grant Date Fair Value		ARI RSUs Vested		Total Number of RSUs Outstanding
Balance at January 1, 2013		—		237,542		$	14.62		225,232		462,774
Granted to employees of the Company		—		180,000			16.66		—		180,000
Granted to the Company		—		40,000			17.59		—		40,000
Forfeited by employees of the Company		—		—			—		—		—
Vested awards of the employees of the Company		—		(48,417	)		14.91		48,417		—
Vested awards of the Company		—		(52,000	)		14.85		52,000		—

Balance at March 31, 2013		—		357,125		$	15.91		325,649		682,774

Units Expected to Vest—As of March 31, 2013, approximately 341,000 shares of ARI RSUs were expected to vest over the next three years.

-44-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Restricted Stock Unit Awards—Apollo Residential Mortgage, Inc. (“AMTG”)

AMTG restricted stock units (“AMTG RSUs”) granted to the Company and certain of the Company’s employees generally vest over three years, either quarterly or annually. The awards granted to the Company are accounted for as investments and deferred revenue in the condensed consolidated statements of financial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method of accounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense will be recognized on a straight line-basis over the vesting period for the awards granted to the employees. The Company recorded an asset and a liability upon receiving the awards on behalf of the Company’s employees. The awards granted to the Company’s employees are remeasured each period to reflect the fair value of the asset and other liabilities and any changes in these values are recorded in the condensed consolidated statements of operations.

The fair value of the awards to employees is based on the grant date fair value, which utilizes the public share price of AMTG less discounts for transfer restrictions and timing of distributions. For the three months ended March 31, 2013, $0.3 million of management fees and $0.3 million of compensation expense were recognized in the condensed consolidated statements of operations, respectively. For the three months ended March 31, 2012, $0.0 million management fees and $0.0 million compensation expense were recognized in the condensed consolidated statements of operations, respectively. The actual forfeiture rate for AMTG RSUs was 0% for the three months ended March 31, 2013 and, 2012.

The following table summarizes activity for the AMTG RSUs that were granted to both the Company and certain of its employees for the three months ended March 31, 2013:


	AMTG RSUs Unvested			Weighted Average Grant Date Fair Value		Vested		Total Number of RSUs Outstanding
Balance at January 1, 2013		161,257		$	20.28		12,862		174,119
Vested awards of the employees of the Company		(1,012	)		16.57		1,012		—
Vested awards of the Company		(1,563	)		18.20		1,563		—

Balance at March 31, 2013		158,682		$	20.32		15,437		174,119

Units Expected to Vest—As of March 31, 2013, approximately 150,000 AMTG RSUs were expected to vest over three years.

Equity-Based Compensation Allocation

Equity-based compensation is allocated based on ownership interests. Therefore, the amortization of the AOG Units is allocated to shareholders’ equity attributable to Apollo Global Management, LLC and the Non-Controlling Interests, which results in a difference in the amounts charged to equity-based compensation expense and the amounts credited to shareholders’ equity attributable to Apollo Global Management, LLC in the Company’s condensed consolidated financial statements.

-45-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands except share data)

Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the three months ended March 31, 2013:


	Total Amount		Non- Controlling Interest % in Apollo Operating Group			Allocated to Non- Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, LLC
AOG Units	$	15,004		64.5	%	$	9,702		$	5,302
RSUs and Share Options		28,727		—			—			28,727
ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs		1,296		64.5			836			460
AAA RDUs		259		64.5			167			92

Total Equity-Based Compensation	$	45,286					10,705			34,581

Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs							(1,003	)		(291	)

Capital Increase Related to Equity-Based Compensation						$	9,702		$	34,290

(1)	Calculated based on average ownership percentage for the period considering Class A share issuances during the period.