Apollo Global Management
Annual Report 2011

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 Form 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934FOR 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 ofincorporation or organization) (I.R.S. EmployerIdentification No.)9 West 57th Street, 43rd FloorNew York, New York 10019(Address of principal executive offices) (Zip Code)(212) 515-3200(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredClass A shares representing limited liability company interests New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities. Yes ¨ No xIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 periodthat 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 ofRegulation 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of the Registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨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. Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xAs of June 30, 2011 the aggregate market value of 47,969,316 Class A shares held by non-affiliates was approximately $825 million.As of March 7, 2012 there were 126,309,787 Class A shares and 1 Class B share outstanding. DOCUMENTS INCORPORATED BY REFERENCENone Table of ContentsTABLE OF CONTENTS Page PART I ITEM 1. BUSINESS 7 ITEM 1A. RISK FACTORS 29 ITEM 1B. UNRESOLVED STAFF COMMENTS 68 ITEM 2. PROPERTIES 69 ITEM 3. LEGAL PROCEEDINGS 69 ITEM 4. MINE SAFETY DISCLOSURES 70 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES 71 ITEM 6. SELECTED FINANCIAL DATA 73 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 76 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 155 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 160 ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 254 ITEM 9A. CONTROLS AND PROCEDURES 254 ITEM 9B. OTHER INFORMATION 254 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 255 ITEM 11. EXECUTIVE COMPENSATION 262 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS 274 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 277 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 287 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 288 SIGNATURES 292 2Table of ContentsForward-Looking StatementsThis report may contain forward looking statements that are within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934. These statements include, but are not limited to, discussions related to Apollo’s expectations regarding the performance of itsbusiness, its liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements arebased on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this report, the words“believe,” “anticipate,” “estimate,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. Although managementbelieves that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to havebeen 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, capital markets 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 businessesand investments by our funds and litigation risks, among others. We believe these factors include but are not limited to those described under the sectionentitled “Risk Factors” in this report, as such factors may be updated from time to time in our periodic filings with the United States Securities and ExchangeCommission (“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 inconjunction with the other cautionary statements that are included in this release and in other filings. We undertake no obligation to publicly update or reviewany forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.Terms Used in This ReportIn this report, references to “Apollo,” “we,” “us,” “our” and the “Company” refer collectively to Apollo Global Management, LLC 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 principalinvestments in the funds, which we refer to as our “principal investments.”“Apollo Operating Group” refers to (i) the limited partnerships through which our managing partners currently operate our businesses and (ii) one ormore 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 theright 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 capitalcommitments plus non-recallable capital to the extent a fund is within the commitment period in which management fees are calculated based ontotal commitments to the fund; 3Table of Contents (ii)the net asset value, or “NAV,” of our capital markets funds, other than certain senior credit funds, which are structured as collateralized loanobligations (such as Artus, which we measure by using the mark-to-market value of the aggregate principal amount of the underlying collateralizedloan obligations) or certain collateralized loan obligation and collateralized debt obligation credit funds that have a fee generating basis other thanmark-to-market asset values, plus used or available leverage and/or capital commitments; (iii)the gross asset values or net asset values of our real estate entities and the structured portfolio vehicle investments included within the funds wemanage, which includes the leverage used by such structured portfolio vehicles; (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 mayrequire pre-qualification before investment plus any other capital commitments available for investment that are not otherwise included in theclauses 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 anydefinition of Assets Under Management contained in our operating agreement or in any of our Apollo fund management agreements. We consider multiplefactors for determining what should be included in our definition of AUM. Such factors include but are not limited to (1) our ability to influence theinvestment decisions for existing and available assets; (2) our ability to generate income from the underlying assets in our funds; and (3) the AUM measuresthat we use internally or believe are used by other investment managers. Given the differences in the investment strategies and structures among otheralternative investment managers, our calculation of AUM may differ from the calculations employed by other investment managers and, as a result, thismeasure 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 agreementson a basis that varies among the Apollo funds. Management fees are normally based on “net asset value,” “gross assets,” “adjusted par asset value,” “adjustedcost 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 for AUM purposes are based on the total value of certain structured portfolio vehicleinvestments, which normally include 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:(a) fair value above invested capital for those funds that earn management fees based on invested capital, (b) net asset values related to general partner and co-investment ownership, (c) unused credit facilities, (d) available commitments on those funds that generate management fees on invested capital, (e) structuredportfolio vehicle investments that do not generate monitoring fees and (f) the difference between gross assets and net asset value for those funds that earnmanagement fees based on net asset value. We use non-fee generating AUM combined with fee-generating AUM as a performance measurement of ourinvestment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs. Non-fee generating AUM includes assets onwhich we could earn carried interest income.“carried interest,” “incentive income” and “carried interest income” refer to interests granted to Apollo by an Apollo fund that entitle Apollo to receiveallocations, distributions or fees calculated by reference to the performance of such fund or its underlying investments;“co-founded” means the individual joined Apollo in 1990, the year in which the company commenced business operations; 4Table of Contents“contributing partners” refers to those of our partners (and their related parties) who indirectly own (through Holdings) Apollo Operating Group units;“distressed and event-driven hedge funds” refers to certain of our capital markets funds, including SVF, VIF, SOMA, AAOF and certain of ourstrategic investment accounts;“feeder funds” refer to funds that operate by placing substantially all of their assets in, and conducting substantially all of their investment and tradingactivities through, a master fund, which is designed to facilitate collective investment by the participating feeder funds. With respect to certain of our fundsthat are organized in a master-feeder structure, the feeder funds are permitted to make investments outside the master fund when deemed appropriate by thefund’s investment manager;“gross IRR” of a fund represents the cumulative investment-related cash flows for all of the investors in the fund on the basis of the actual timing ofinvestment inflows and outflows (for unrealized investments assuming disposition on December 31, 2011 or other date specified) aggregated on a gross basisquarterly, and the return is annualized and compounded before management fees, carried interest and certain other fund expenses (including interest incurredby 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 payableto the fund’s investors;“Holdings” means AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership through which our managing partners andcontributing partners hold their Apollo Operating Group units;“IRS” refers to the Internal Revenue Service;“managing partners” refers to Messrs. Leon Black, Joshua Harris and Marc Rowan collectively and, when used in reference to holdings of interests inApollo or Holdings, includes certain related parties of such individuals;“net IRR” of a 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) and realized carried interest all offsetto 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 Apolloprivate equity fund exceeds all requirements detailed within the applicable fund agreement, the estimated unrealized value is adjusted such that a percentage ofup to 20.0% of the unrealized gain is allocated to the general partner, thereby reducing the balance attributable to fund investors;“net return” for Value Funds, SOMA and AAOF represents the calculated return that is based on month-to-month changes in net assets and is calculatedusing 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 funds that do not have redemption provisions or a requirement to return capital to investors upon exiting theinvestments made with such capital, except as required by applicable law, which currently consist of AAA, Apollo Investment Corporation and ApolloCommercial Real Estate Finance, Inc.; such funds may be required, or elect, to return all or a portion of capital gains and investment income;“private equity investments” refers 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 insecurities which are not 5Table of Contentsimmediately capable of resale in a public market that Apollo identifies but does not pursue through its private equity funds, and (iv) investments of the typedescribed 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 InvestmentAuthority, or “ADIA.” 6Table of ContentsPART I. ITEM 1.BUSINESSOverviewFounded in 1990, Apollo is a leading global alternative investment manager. We are contrarian, value-oriented investors in private equity, credit-orientedcapital markets and real estate, with significant distressed investment expertise. We have a flexible mandate in the majority of the funds we manage thatenables the funds to invest opportunistically across a company’s capital structure. We raise, invest and manage funds on behalf of some of the world’s mostprominent pension and endowment funds, as well as other institutional and individual investors. As of December 31, 2011, we had total AUM of $75.2billion across all of our businesses. Our latest private equity buyout fund, Fund VII, held a final closing in December 2008, raising a total of $14.7 billion,and as of December 31, 2011 Fund VII had $6.2 billion of uncalled commitments, or “dry powder”, remaining. We have consistently produced attractivelong-term investment returns in our private equity funds, generating a 39% gross IRR and a 25% net IRR on a compound annual basis from inception throughDecember 31, 2011. A number of our capital markets funds have also performed well since their inception through December 31, 2011.Apollo is led by our managing partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 20 years and lead ateam of 548 employees, including 201 investment professionals, as of December 31, 2011. This team possesses a broad range of transaction, financial,managerial and investment skills. We have offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Hong Kong, andMumbai. We operate our private equity, capital markets and real estate businesses in a highly integrated manner, which we believe distinguishes us from otheralternative asset managers. Our investment professionals frequently collaborate across disciplines. We believe that this collaboration, including market insight,management, banking and consultant contacts, and investment opportunities, enables us to more successfully invest across a company’s capital structure.This platform and the depth and experience of our investment team have enabled us to deliver strong long-term investment performance in our private equityfunds throughout a range of economic cycles.Our objective is to achieve superior long-term risk-adjusted returns for our fund investors. The majority of our investment funds are designed to investcapital over periods of seven or more years from inception, thereby allowing us to generate attractive long-term returns throughout economic cycles. Ourinvestment approach is value-oriented, focusing on nine core industries in which we have considerable knowledge and experience, and emphasizing downsideprotection and the preservation of capital. We are frequently contrarian in our investment approach, which is reflected in a number of ways, including: • our willingness to invest in industries that our competitors typically avoid; • the often complex structures we employ in some of our investments, including our willingness to pursue difficult corporate carve-out transactions; • our experience investing during periods of uncertainty or distress in the economy or financial markets when many of our competitors simplyreduce their investment activity; • our orientation towards sole sponsored transactions when other firms have opted to partner with others; and • our willingness to undertake transactions that have substantial business, regulatory or legal complexity.We have applied this investment philosophy to identify what we believe are attractive investment opportunities, deploy capital across the balance sheet ofindustry leading, or “franchise,” businesses and create value throughout economic cycles.We rely on our deep industry, credit and financial structuring experience, coupled with our strengths as value-oriented, distressed investors, to deploysignificant amounts of new capital within challenging economic 7Table of Contentsenvironments. As in prior market downturns and periods of significant volatility, in the current environment we have been purchasing distressed securitiesand continue to opportunistically build positions in high quality companies with stressed balance sheets in industries where we have deep expertise. From thefourth quarter of 2007 through December 31, 2011, Apollo’s private equity and capital markets funds have acquired approximately $15.6 billion of par valueof distressed debt and approximately $37.4 billion of par value of leveraged loans, both at significant discounts to par. Our approach towards investing indistressed situations often requires us to purchase particular debt securities as prices are declining, since this allows us both to reduce our average cost andaccumulate sizable positions which may enhance our ability to influence any restructuring plans and maximize the value of our distressed investments. As aresult, our investment approach may produce negative short-term unrealized returns in certain of the funds we manage. However, we concentrate on generatingattractive, long-term, risk-adjusted realized returns for our fund investors, and we therefore do not overly depend on short-term results and quarterlyfluctuations in the unrealized fair value of the holdings in our funds.In addition to deploying capital in new investments, we seek to enhance value in the investment portfolios of the funds we manage. We have relied on ourtransaction, restructuring and capital markets experience to work proactively with our private equity funds’ portfolio company management teams to identifyand execute strategic acquisitions, joint ventures, and other transactions, generate cost and working capital savings, reduce capital expenditures, and optimizecapital structures through several means such as debt exchange offers and the purchase of portfolio company debt at discounts to par value.We had total AUM of $75.2 billion as of December 31, 2011, consisting of $35.4 billion in our private equity business, $31.9 billion in our capitalmarkets business and $8.0 billion in our real estate business. We have grown our total AUM at a 31.1% compound annual growth rate, or “CAGR,” fromDecember 31, 2004 to December 31, 2011. In addition, we benefit from mandates with long-term capital commitments in our private equity, capital marketsand real estate businesses. Our long-lived capital base allows us to invest assets with a long-term focus, which is an important component in generatingattractive returns for our investors. We believe our long-term capital also leaves us well-positioned during economic downturns, when the fundraisingenvironment for alternative assets has historically been more challenging than during periods of economic expansion. As of December 31, 2011, approximately92% of our AUM was in funds with a contractual life at inception of seven years or more, and 10% of our AUM was in permanent capital vehicles withunlimited duration.We expect our growth in AUM to continue over time by seeking to create value in our funds’ existing private equity, capital markets and real estateinvestments, continuing to deploy our available capital in what we believe are attractive investment opportunities, and raising new funds and investmentvehicles as market opportunities present themselves. See “Item 1A. Risk Factors—Risks Related to Our Businesses—We may not be successful in raisingnew funds or in raising more capital for certain of our funds and may face pressure on fee arrangements of our future funds.” 8Table of ContentsOur BusinessesWe have three business segments: private equity, capital markets and real estate. We also manage (i) AAA, a publicly listed permanent capital vehicle,which invests substantially all of its capital in or alongside Apollo-sponsored entities, funds and other investments, and (ii) several strategic investmentaccounts established to facilitate investments by third-party investors directly in Apollo-sponsored funds and other transactions. We have also raised adedicated natural resources fund, which we include within our private equity segment, that targets global private equity opportunities in energy, metals andmining and select other natural resources sub-sectors. The diagram below summarizes our current businesses: (1)All data is as of December 31, 2011. The chart does not reflect legal entities or assets managed by former affiliates.(2)Includes funds that are denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.30 as of December 31, 2011.Our financial results are highly variable, since carried interest (which generally constitutes a large portion of the income from the funds we manage), andthe transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. We manage our business and monitor ourperformance with a focus on long-term performance, an approach that mirrors the investment horizons of the funds we manage and is driven by theinvestment returns of our funds.Private EquityPrivate Equity FundsAs a result of our long history of private equity investing across market cycles, we believe we have developed a unique set of skills which we rely on tomake new investments and to maximize the value of our 9Table of Contentsexisting investments. As an example, through our experience with traditional private equity buyouts, we apply a highly disciplined approach towardsstructuring and executing transactions, the key tenets of which include acquiring companies at below industry average purchase price multiples, andestablishing flexible capital structures with long-term debt maturities and few, if any, financial maintenance covenants.We believe we have a demonstrated ability to adapt quickly to changing market environments and capitalize on market dislocations through ourtraditional, distressed and corporate buyout approach. In prior periods of strained financial liquidity and economic recession, our private equity funds havemade attractive investments by buying the debt of quality businesses (which we refer to as “classic” distressed debt), converting that debt to equity, seeking tocreate value through active participation with management and ultimately monetizing the investment. This combination of traditional and corporate buyoutinvesting with a “distressed option” has been deployed through prior economic cycles and has allowed our funds to achieve attractive long-term rates of returnin different economic and market environments. In addition, during prior economic downturns we have relied on our restructuring experience and workedclosely with our funds’ portfolio companies to maximize the value of our funds’ investments.Traditional BuyoutsTraditional buyouts have historically comprised the majority of our investments. We generally target investments in companies where an entrepreneurialmanagement team is comfortable operating in a leveraged environment. We also pursue acquisitions where we believe a non-core business owned by a largecorporation will function more effectively if structured as an independent entity managed by a focused, stand-alone management team. Our leveraged buyoutshave generally been in situations that involved consolidation through merger or follow-on acquisitions; carveouts from larger organizations looking to shednon-core assets; situations requiring structured ownership to meet a seller’s financial goals; or situations in which the business plan involved substantialdepartures from past practice to maximize the value of its assets.Distressed Buyouts and Debt InvestmentsOver our history, approximately 46% of our private equity investments have involved distressed buyouts and debt investments. We target assets withhigh-quality operating businesses but low-quality balance sheets, consistent with our traditional buyout strategies. The distressed securities we purchaseinclude bank debt, public high-yield debt and privately held instruments, often with significant downside protection in the form of a senior position in thecapital structure, and in certain situations we also provide debtor-in-possession (“DIP”) financing to companies in bankruptcy. Our investment professionalsgenerate these distressed buyout and debt investment opportunities based on their many years of experience in the debt markets, and as such they are generallyproprietary in nature.We believe distressed buyouts and debt investments represent a highly attractive risk/reward profile. Our investments in debt securities have generallyresulted in two outcomes. The first has been when we succeed in taking control of a company through its distressed debt. By working proactively through therestructuring process, we are able to equitize our debt position, resulting in a well-financed buyout. Once we control the company, the investment team worksclosely with management toward an eventual exit, typically over a three- to five-year period as with a traditional buyout. The second outcome for debtinvestments has been when we do not gain control of the company. This is typically driven by an increase in the price of the debt beyond what is consideredan attractive acquisition valuation. The run-up in bond prices is usually a result of market interest or a strategic investor’s interest in the company at a highervaluation than we are willing to pay. In these cases, we typically sell our securities for cash and seek to realize a high short-term internal rate of return.Corporate Partner BuyoutsCorporate partner buyouts or carve-out situations offer another way to capitalize on investment opportunities during environments in which purchaseprices for control of companies are at high multiplies of 10Table of Contentsearnings, making them less attractive for traditional buyout investors. Corporate partner buyouts focus on companies in need of a financial partner in order toconsummate acquisitions, expand product lines, buy back stock or pay down debt. In these investments, we do not seek control but instead make significantinvestments that typically allow us to demand control rights similar to those that we would require in a traditional buyout, such as control over the direction ofthe business and our ultimate exit. Although corporate partner buyouts historically have not represented a large portion of our overall investment activity, we doengage in them selectively when we believe circumstances make them an attractive strategy.Corporate partner buyouts typically have lower purchase multiples and a significant amount of downside protection, when compared with traditionalbuyouts. Downside protection can come in the form of seniority in the capital structure, a guaranteed minimum return from a creditworthy partner, orextensive governance provisions. Importantly, Apollo has often been able to use its position as a preferred security holder in several buyouts to weather difficulttimes in a portfolio company’s lifecycle and to create significant value in investments that otherwise would have been impaired.Other InvestmentsIn addition to our traditional, distressed and corporate partner buyout activities, we also maintain the flexibility to deploy capital of our private equityfunds in other types of investments such as the creation of new companies, which allows us to leverage our deep industry and distressed expertise andcollaborate with experienced management teams to seek to capitalize on market opportunities that we have identified, particularly in asset-intensive industriesthat are in distress. In these types of situations, we have the ability to establish new entities that can acquire distressed assets at what we believe are attractivevaluations without the burden of managing an existing portfolio of legacy assets. Similar to our corporate partner buyout activities, other investments, such asthe creation of new companies, historically have not represented a large portion of our overall investment activities, although we do make these types ofinvestments selectively.Natural ResourcesApollo recently established Apollo Natural Resources Partners, L.P. (together with any parallel fund or alternative investment vehicle, “ANRP”), and hasassembled a team of dedicated investment professionals to capitalize on private equity investment opportunities in the natural resources industry, principallyin the metals and mining, energy and select other natural resources sectors. As of December 31, 2011, ANRP had raised nearly $600 million of capitalcommitments.Building Value in Portfolio CompaniesWe are a “hands-on” investor organized around nine core industries where we believe we have significant knowledge and expertise, and we remainactively involved with the operations of our buyout investments for the duration of the investment. In connection with this strategy, we have establishedrelationships with operating executives that assist in the diligence review of new opportunities and provide strategic and operational oversight for portfolioinvestments. In addition, we have established a group purchasing program to leverage the combined corporate spending among Apollo and portfolio companiesof the funds it manages in order to seek to reduce costs, optimize payment terms and improve service levels for all program participants.Exiting InvestmentsWe realize the value of the investments that we have made on behalf of our funds typically through either an initial public offering, or “IPO”, of commonstock on a nationally recognized exchange or through the private sale of the companies in which we have invested. We believe the advantage of having long-lived funds and complete investment discretion is that we are able to time our exit when we believe we may most appropriately maximize value. 11Table of ContentsOur Portfolio Company HoldingsThe following table presents the current list of portfolio companies included in our private equity funds as of December 31, 2011. Company Year of InitialInvestment Fund(s) Buyout Type Industry Region SoleFinancialSponsorAscometal 2011 Fund VII & ANRP Corporate Partner Materials Western Europe YesBrit Insurance 2011 Fund VII Traditional Insurance Western Europe NoCKx 2011 Fund VII Traditional Media, Entertainment &Cable North America YesSprouts Farmers Markets 2011 Fund VI Traditional Food Retail North America YesWelspun 2011 Fund VII & ANRP Other Materials India NoAleris International 2010 Fund VII & VI Distressed Building Products Global NoAthlon 2010 Fund VII Other Oil & Gas North America YesCKE Restaurants Inc. 2010 Fund VII Traditional Food Retail North America YesConstellium (formerly Alcan) 2010 Fund VII Corporate Partner Materials Western Europe NoEvertec 2010 Fund VII Traditional Financial Services Puerto Rico NoGala Coral Group 2010 Fund VII & VI Distressed Gaming & Leisure Western Europe NoLyondellBasell 2010 Fund VII & VI Distressed Chemicals Global NoMonier 2010 Fund VII Distressed Building Products Western Europe NoTwin River 2010 Fund VII Distressed Gaming & Leisure North America NoVeritable Maritime 2010 Fund VII Other Shipping North America YesCharter Communications 2009 Fund VII & VI Distressed Media, Entertainment &Cable North America NoDish TV 2009 Fund VII Other Media, Entertainment &Cable India NoCaesars Entertainment 2008 Fund VI Traditional Gaming & Leisure North America NoNorwegian Cruise Line 2008 Fund VI Corporate Partner Cruise North America YesSkylink 2008 Fund VII Traditional Logistics North America NoClaire’s 2007 Fund VI Traditional Specialty Retail Global YesCountrywide 2007 Fund VI Traditional Real Estate Services Western Europe YesJacuzzi Brands 2007 Fund VI Traditional Building Products Global YesNoranda Aluminum 2007 Fund VI Traditional Materials North America YesPrestige Cruise Holdings 2007 Fund VII & VI Corporate Partner Cruise North America YesRealogy 2007 Fund VI Traditional Real Estate Services North America YesSmart & Final 2007 Fund VI Traditional Food Retail North America YesVantium 2007 Fund VII Other Business Services North America YesBerry Plastics 2006 Fund VI & V Traditional Packaging & Materials North America YesCEVA Logistics 2006 Fund VI Traditional Logistics Western Europe YesHughes Telematics 2006 Fund V Traditional Satellite & Wireless North America YesRexnord 2006 Fund VI Traditional Diversified Industrial North America YesSourceHOV 2006 Fund V Traditional Financial Services North America YesVerso Paper 2006 Fund VI Traditional Paper Products North America YesAffinion Group 2005 Fund V Traditional Financial Services North America YesMetals USA 2005 Fund V Traditional Distribution &Transportation North America YesAMC Entertainment 2004 Fund V Traditional Media, Entertainment &Cable North America NoPLASE Capital 2003 Fund V Traditional Financial Services North America YesCore-Mark 2002 Fund V Distressed Distribution &Transportation North America NoMomentive Performance Materials 2000/2004/2006 Fund IV, V & VI Traditional Chemicals North America YesSirius XM Radio, Inc. 1998 Fund IV Traditional Broadcasting North America YesQuality Distribution 1998 Fund III Traditional Distribution &Transportation North America YesDebt Investment Vehicles—Fund VII Various Fund VII Various Various Various VariousDebt Investment Vehicles—Fund VI Various Fund VI Various Various Various VariousDebt Investment Vehicles—Fund V Various Fund V Various Various Various Various 12(1)(2)(3)(4)Table of Contents(1)Prior to merger with Covalence.(2)Includes add-on investment in EGL, Inc.(3)Includes add-on investment in Zurn.(4)Subsequent to merger with SOURCECORP.Capital MarketsWe believe our capital markets expertise has served as an integral component of our company’s growth and success. Our credit-oriented capital marketsoperations commenced in 1990 with the management of a $3.5 billion high-yield bond and leveraged loan portfolio. Since that time, our capital marketsactivities have grown significantly, and leverage Apollo’s integrated platform and utilize the same disciplined, value-oriented investment philosophy that weemploy with respect to our private equity funds. Our capital markets operations, which include 95 investment professionals as of December 31, 2011, are ledby James Zelter, who has served as the managing director of the capital markets business since April 2006. Our capital markets business had total and fee-generating AUM of $31.9 billion and $26.6 billion, respectively, as of December 31, 2011 and grew its total and fee-generating AUM by a 53.9% and 50.2%CAGR, respectively, from December 31, 2004 through December 31, 2011.Our credit-oriented capital markets funds have been established to capitalize upon our investment experience and deep industry expertise. We seek toparticipate in capital markets businesses where we believe our industry expertise and experience can be used to generate attractive investment returns. Asdepicted in the chart below, our capital markets activities span a broad range of the credit spectrum, including non-performing loans, distressed debt,mezzanine debt, senior bank loans and “value-oriented” fixed income. The value-oriented fixed income segment of the capital markets spectrum is the mostrecent investment area for Apollo, and it is characterized by its ability to generate attractive risk-adjusted returns relative to traditional fixed incomeinvestments. As of December 31, 2011, our capital markets funds included distressed and event-driven hedge funds with total AUM of $1.9 billion, mezzaninefunds with total AUM of $3.9 billion, senior credit funds with total AUM of $15.4 billion, and a European non-performing loan fund with total AUM of$1.9 billion. Our capital markets segment also includes a number of strategic investment accounts, a fund focused on opportunities in the life settlementsindustry, and permanent capital vehicles including Apollo Senior Floating Rate Fund Inc. (“AFT”), Apollo Residential Mortgage, Inc. (“AMTG”) and AtheneAsset Management LLC, which provides asset management services to certain annuity and life insurance providers. 13Table of ContentsDistressed and Event-Driven Hedge FundsWe currently manage distressed and event-driven hedge funds that invest primarily in North America, Europe and Asia. These funds had a total of$1.9 billion in AUM as of December 31, 2011. Investors can invest in several of our distressed and event-driven hedge funds as frequently as monthly. Ourdistressed and event-driven hedge funds utilize similar value-oriented investment philosophies as our private equity business and are focused on capitalizingon our substantial industry and credit knowledge.Value Funds. We are the investment managers for our flagship distressed Value Funds, which utilize similar investment strategies. The Value Fundsseek to identify and capitalize on absolute-value driven investment opportunities. Apollo Value Investment Master Fund, L.P., together with its feeder funds(“VIF”) began investing capital in October 2003 and is currently closed to new investors. Apollo Strategic Value Master Fund, L.P., together with its feederfunds (“SVF”) began investing capital in June 2006 and is currently open to new investors. The Value Funds had a combined net asset value of approximately$765.6 million as of December 31, 2011, and had a net return of 50.0% since inception and (9.6)% for the year ended December 31, 2011.The Value Funds’ flexible investment strategy primarily focuses on investments in distressed companies before, during, or after a restructuring, as wellas undervalued securities. Investments are executed primarily through the purchase or sale of senior secured bank debt, second lien debt, high yield debt, tradeclaims, credit derivatives, preferred stock and equity. As of December 31, 2011, the Value Funds’ investments were primarily located in North America, andcomprised approximately 68% of the portfolio, with the remaining 32% of the total portfolio being investments made internationally.SOMA. SOMA is a private investment fund we formed to manage for one of our Strategic Investors. SOMA seeks to generate attractive risk-adjustedreturns through investment in distressed opportunities, primarily in North America and Europe. This fund’s primary mandate is a very similar investmentstrategy to our Value Funds and is currently managed by the same investment professionals. SOMA began investing capital in March 2007 and represents acommitment by one of our Strategic Investors of $800.0 million. The fund had a net asset value of approximately $963.0 million as of December 31, 2011,including $748.0 million in the primary mandate, which had a net return of 25.9% since inception and (10.5)% for the year ended December 31, 2011.Apollo Asia Opportunity Fund. Apollo Asia Opportunity Fund (“AAOF”) is an investment vehicle that seeks to generate attractive risk-adjustedreturns throughout economic cycles by capitalizing on investment opportunities in the Asian markets, excluding Japan, and targeting event-driven volatilityacross capital structures, as well as opportunities to develop proprietary platforms. AAOF began investing capital in February 2007. The fund had a net assetvalue of approximately $230.6 million as of December 31, 2011, and had a net return of 7.4% since inception and (7.3)% for the year ended December 31,2011Mezzanine FundsWe manage U.S. and European-based mezzanine funds and related investment vehicles with total AUM of $3.9 billion as of December 31, 2011,including: (i) Apollo Investment Corporation (“AINV”), a U.S.-based permanent capital vehicle, which is a publicly traded, closed-end, non-diversifiedmanagement investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended(“Investment Company Act”) and to be treated for tax purposes as a regulated investment company under the Internal Revenue Code; (ii) Apollo InvestmentEurope I, L.P. (“AIE I”), which is an unregistered private closed-end investment fund formed in June 2006; and (iii) Apollo Investment Europe II, L.P. (“AIEII”), which is an unregistered private closed-end investment fund formed in April 2008. AIE I and AIE II seek to capitalize upon mezzanine and subordinateddebt opportunities with a focus on Western Europe. 14Table of ContentsApollo Investment Corporation. Apollo Investment Corporation’s common stock is quoted on the NASDAQ Global Select Market under the symbol“AINV” and is currently a component of the S&P MidCap 400 index. AINV raised over $870 million of net permanent investment capital through its initialpublic offering on the NASDAQ in April 2004. Since that time, AINV has successfully completed several secondary offerings and raised approximately $1.9billion of net incremental permanent investment capital. Since inception in April 2004 through December 31, 2011, the annualized return on AINV’s net assetvalue was 3.9%, and as of December 31, 2011, AINV’s net asset value was approximately $1.6 billion. AINV has the ability to incur indebtedness byissuing senior securities in amounts such that its asset coverage equals at least 200% after each issuance.European Mezzanine Funds. AIE I and AIE II, our European mezzanine funds, are unregistered private closed-end investment funds formed in June2006 and April 2008, respectively, that seek to more fully capitalize upon mezzanine and subordinated debt opportunities with a primary focus on WesternEurope. As of December 31, 2011, AIE I and AIE II had an investment portfolio of approximately 87% in secured and unsecured subordinated loans (alsoreferred to as mezzanine loans), senior secured loans and high-yield debt.As of December 31, 2011, AIE I had an investment portfolio of approximately $30.7 million at market value, based on an exchange rate of €1.00 to$1.30 as of such date. Due to market conditions in 2008 and early 2009, AIE I’s investment performance was adversely impacted, and on July 10, 2009, itsshareholders approved a monetization plan, the primary objective of which is to maximize shareholder recovery value by (i) opportunistically selling AIE I’sassets over a three-year period from July 2009 to July 2012 (subject to a one-year extension with the consent of a majority of AIE I’s shareholders) and(ii) reducing the overall costs of the fund. Subject to compliance with applicable law and maintaining adequate liquidity, available cash received from the saleof assets will be returned to shareholders on a quarterly basis once all leverage in the fund is repaid.The investment objective of AIE II is to generate both capital appreciation and current income through debt and equity investments. AIE II utilizes adisciplined investment approach that seeks to evaluate the appropriate part of the capital structure in which to invest based on the risk/reward profile of theinvestment opportunity. AIE II invests primarily in European mezzanine investments, with a primary focus in Western Europe. AIE II participates in both theprimary and secondary credit markets based on the relative attractiveness of each at any given time.As of December 31, 2011, AIE II had an investment portfolio of approximately $237.9 million at market value based on an exchange rate of €1.00 to$1.30 as of such date, and had a net IRR of 14.2% since inception until December 31, 2011. See “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations—The Historical Investment Performance of Our Funds” for reasons why AIE II’s returns might decrease from itshistorical performance and the historical performances of our other funds.Senior Credit FundsWe believe we are a leading manager of senior credit. We manage senior credit funds with total AUM of $15.4 billion as of December 31, 2011. Webegan to establish these funds, which are primarily oriented towards the acquisition of leveraged loans and other performing senior debt, in late 2007 and2008, in order to capitalize upon the supply-demand imbalances in the leveraged finance market. Since that time, we have been actively investing these fundsand have established new senior credit funds. Our senior credit funds together with our private equity funds and certain other capital markets funds, as ofDecember 31, 2011, have deployed approximately $34.0 billion, including leverage, in senior credit investments. We believe these funds benefit from the broadrange of investment opportunities that arise as a result of our deep industry and credit expertise. The following funds comprise the majority of our senior creditfunds’ AUM. 15Table of ContentsApollo Credit Opportunity Fund I, L.P. Apollo Credit Opportunity Fund I, L.P. (“COF I”) began investing in April 2008 and, as of December 31,2011, had aggregate capital commitments of approximately $1.5 billion, primarily from one of our Strategic Investors. COF I principally invests, throughprivately negotiated transactions, in senior secured debt instruments, including bank loans and bonds, as well as opportunistically investing in a variety ofother public and private debt instruments such as DIP financings, rescue or “bridge” financings, and other debt instruments. COF I may use leverage tofinance portfolio investments, including as incurred by the fund’s subsidiaries or special-purpose vehicles, and may enter into credit facilities or other debttransactions to leverage its investments.Our capital commitment to COF I is equal to 2.0% of the aggregate capital commitments of COF I’s limited partners (without regard to any co-investmentcommitments). COF I is closed to additional investors. As of December 31, 2011, COF I had a net asset value of approximately $1.9 billion.Apollo Credit Opportunity Fund II, L.P. Apollo Credit Opportunity Fund II, L.P (“COF II”) began investing in June 2008 and has aggregate capitalcommitments of approximately $1.6 billion as of December 31, 2011. COF II principally invests, through privately negotiated transactions, in senior secureddebt instruments, including bank loans and bonds, as well as opportunistically investing in a variety of other public and private debt instruments such asDIP financings, rescue or “bridge” financings, and other debt instruments. COF II may use leverage to finance portfolio investments, including as incurred bythe fund’s subsidiaries or special-purpose vehicles, and may enter into credit facilities or other debt transactions to leverage its investments.Our capital commitment to COF II is equal to 1.5% of the aggregate capital commitments of COF II’s limited partners (without regard to any co-investment commitments). COF II is closed to additional investors. As of December 31, 2011, COF II had a net asset value of approximately $1.6 billion.Apollo Credit Liquidity Fund, L.P. Apollo Credit Liquidity Fund, L.P. (“ACLF”) began investing capital in October 2007 and held its final closing onNovember 13, 2007 with initial aggregate capital commitments of $681.6 million. Subsequent to the final closing, ACLF accepted additional commitments of$302.4 million, raising the aggregate capital commitments to $984.0 million by December 10, 2008. ACLF invests principally in senior secured bank debt anddebt related securities in the United States and Western Europe. Additionally, up to 20% of ACLF’s capital commitments may be invested in other types ofdebt and debt related securities, including non-senior bank debt, publicly traded debt securities, “bridge” financings and the equity tranche of anycollateralized debt obligation fund sponsored by Apollo or others. Investments may be effected using a wide variety of investment types and transactionstructures, including the use of derivatives or other credit instruments, such as credit default swaps, total return swaps and any other credit securities or othercredit instruments.Our capital commitment to ACLF is equal to 2.4% of the aggregate capital commitments of ACLF’s limited partners (without regard to any co-investmentcommitments). ACLF is closed to additional investors. As part of the initial closing of ACLF, Apollo closed on a co-investment vehicle that has the capacity toinvest alongside ACLF on a pre-determined proportionate basis in senior debt investments, which we refer to as ACLF Co-Invest. As of December 31, 2011,ACLF had net assets of $586.1 million and was primarily invested in debt-related securities and various derivative instruments.Apollo/Artus Investors 2007 I, L.P. Apollo/Artus Investors 2007 I, L.P (“Artus”) closed on October 19, 2007 with aggregate capital commitments of$106.6 million, including a commitment from one of our Strategic Investors. In November 2007, Artus purchased certain collateralized loan obligations. Thecollateralized loan obligations are secured by a diversified pool of approximately $0.5 billion in aggregate principal amount of commercial loans and cash as ofDecember 31, 2011.Apollo Senior Floating Rate Fund. During 2010, we formed AFT, a non-diversified, closed-end management investment company. The investmentobjective of the fund is to seek current income and preservation of capital primarily through investments in senior secured loans made to companies whosedebt is 16Table of Contentsrated below investment grade and investments with similar economic characteristics. During the first quarter of 2011, the fund issued $309 million ofcommon shares ($295 million net of offering costs) in its initial public offering and trades on the New York Stock Exchange under the symbol “AFT.”Apollo European Credit Fund. During 2011 we established Apollo European Credit, L.P. (“AEC”), which seeks to generate total returns via bothcapital gains and current income, with a secondary objective of capital preservation, by investing in a variety of fixed income investment opportunities inEurope. We generally expect that at least 70% of AEC’s investments will be made in securities issued by, or loans made to, companies established or operatingin Europe, with a focus on Western Europe. As of December 31, 2011, AEC had total AUM of $234 million.Gulf Stream Asset Management. In addition to the funds listed above, on October 24, 2011, we completed the acquisition of Gulf Stream AssetManagement, LLC (“Gulf Stream”), a leading asset manager of ten collateralized loan obligations, or “CLOs”, primarily focused on the U.S. corporate creditmarkets. The Gulf Stream acquisition increased Apollo’s AUM by $3 billion. We believe Gulf Stream is highly complementary to our existing CLOmanagement activities, and brings our total number of CLOs under management to 14 as of December 31, 2011.Non-Performing Loan FundsApollo European Principal Finance Fund. Apollo European Principal Finance Fund L.P. (“EPF”) is an investment fund launched in May 2007 thatinvests primarily in European commercial and residential mortgage performing and non-performing loans (NPLs) and unsecured consumer loans. NPLs areloans held by financial institutions that are in default of principal or interest payments for 90 days or more. We estimate that the size of the European NPL andnon-core asset market is approximately €1.7 trillion. Investment banks have traditionally been the biggest buyers of NPLs, but almost all of these firms eitherno longer exist or have exited the business during the past few years. In addition, despite the market size and decrease in natural competition, high barriers toentry have limited, and we believe will continue to limit, the number of credible competitors. We believe EPF is uniquely positioned to capitalize on thisopportunity through its 17 professionals based in London, Frankfurt and Dublin, combined with its captive pan-European loan servicing and propertymanagement platform, The Lapithus Group, or “Lapithus.” Lapithus operates in six European countries and is directly servicing approximately 54,000 loanssecured by more than 19,000 commercial and residential properties. As of December 31, 2011, EPF had portfolio investments throughout Europe with itslargest concentration in the United Kingdom, Germany and Spain.EPF has approximately €1.3 billion ($1.7 billion using an exchange rate of €1.00 to $1.30 as of December 31, 2011) in total capital commitments. EPFis structured with many characteristics typically associated with private equity funds, including multi-year capital commitments from the fund’s investors.Through December 31, 2011, the fund had invested approximately €1.1 billion ($1.4 billion using an exchange rate of €1.00 to $1.30 as of December 31,2011) in 17 NPL investments in loan portfolios and three ancillary investments and had received net proceeds of approximately 60% of invested capital. EPFhad a net asset value of approximately $1.1 billion as of December 31, 2011 based on an exchange rate of €1.00 to $1.30 as of such date.During the second half of 2011, Apollo also began raising a second European non-performing loan fund (EPF II) that will have an investment strategysimilar to EPF. As of December 31, 2011, EPF II had raised approximately $200 million of capital commitments.Other Capital Markets FundsAthene. During 2009, Apollo formed Athene Asset Management LLC, an investment manager that provides asset management services to AtheneHolding Ltd (together with its subsidiaries, “Athene”), a Bermuda holding 17Table of Contentscompany founded in 2009 to capitalize on favorable market conditions in the dislocated life insurance sector, and others. In addition, certain Apollo affiliatesmanage assets for Athene Asset Management and earn sub-advisory fees for these services.Athene is the parent of: Athene Life Re Ltd., a Bermuda-based reinsurance company focused on the life reinsurance sector; Liberty Life InsuranceCompany, a recently acquired Delaware-domiciled (formerly South Carolina domiciled) stock life insurance company focused on retail sales and reinsurancein the retirement services market; Investors Insurance Corporation, a Delaware-domiciled stock life insurance company focused on the retirement servicesmarket; and Athene Life Insurance Company, an Indiana-domiciled stock life insurance company focused on the institutional guaranteed investment contract(“GIC”) backed note and funding agreement markets.As of December 31, 2011, Athene represented approximately $8.5 billion of Apollo’s total AUM, $2.1 billion of which was managed by other Apollofunds and investment vehicles.Apollo Residential Mortgage, Inc. In 2011, we launched AMTG, a residential real estate finance company that is focused primarily on investing in,financing, and managing residential mortgage-backed securities, residential mortgage loans, and other residential mortgage assets in the United States. ApolloResidential Mortgage, Inc. began trading on the New York Stock Exchange in July 2011 under the ticker “AMTG”, raising approximately $200 million ofgross proceeds in its initial public offering.The principal objective of Apollo Residential Mortgage is to provide attractive risk-adjusted returns to its stockholders over the long term, primarilythrough dividend distributions and secondarily through capital appreciation. Apollo Residential Mortgage aims to achieve this objective by selectivelyconstructing a portfolio of assets that will consist of Agency MBS, non-Agency MBS, residential mortgage loans and other residential mortgage assets.Financial Credit Investment I, L.P. In 2010, we established Financial Credit Investment I, L.P. (“FCI”). FCI seeks to capitalize on dislocations in thelife insurance market by acquiring large portfolios of life insurance policies, typically at discounts to face value. As of December 31, 2011, FCI had totalAUM of $521 million.Real EstateWe have assembled a dedicated global investment management team to pursue real estate investment opportunities, which we refer to as Apollo GlobalReal Estate Management, L.P. (“AGRE”) and which we believe benefits from Apollo’s long-standing history of investing in real estate-related sectors such ashotels and lodging, leisure, and logistics. AGRE, which includes 27 investment professionals as of December 31, 2011, is led by Joseph Azrack, who joinedApollo in 2008 with 30 years of real estate investment management experience, having previously served as President and CEO of Citi Property Investors.We believe our dedicated real estate platform benefits from, and contributes to, Apollo’s integrated platform, and further expands Apollo’s deep real estateindustry knowledge and relationships. As of December 31, 2011, our real estate business had total and fee-generating AUM of approximately $8.0 billion and$3.5 billion, respectively.In addition to the funds described below, we may seek to serve as the manager of, or sponsor, additional real estate funds that focus on commercial realestate-related debt investments and opportunistic investments in distressed debt and equity recapitalization transactions, including corporate real estate,distress for control situations and the acquisition and recapitalization of real estate portfolios, platforms and operating companies, including non-performingand deeply discounted loans.CPI Business. On November 12, 2010, Apollo completed the acquisition of the CPI business, which was the real estate investment managementbusiness of Citigroup Inc. The CPI business had AUM of approximately $3.5 billion as of December 31, 2011. CPI is an integrated real estate investmentplatform with investment 18Table of Contentsprofessionals located in Asia, Europe and North America. As part of the acquisition, Apollo acquired general partner interests in, and advisory agreementswith, various real estate investment funds and co-invest vehicles and added to its team of real estate professionals.Apollo Commercial Real Estate Finance, Inc. In 2009, we launched Apollo Commercial Real Estate Finance, Inc. (“ARI”), a real estate investmenttrust managed by Apollo that acquires, originates, invests in and manages performing commercial first mortgage loans, CMBS, mezzanine investments andother commercial real estate-related investments in the United States. The company trades on the New York Stock Exchange under the symbol “ARI.” As ofDecember 31, 2011, ARI had raised gross proceeds of $354.3 million through equity offerings and subsequent private placements.AGRE CMBS Accounts. In December 2009, we launched the AGRE CMBS Fund L.P. (“AGRE CMBS Account”), a real estate strategic investmentaccount formed to invest principally in CMBS and leverage those investments by borrowing from the TALF program and repurchase facilities. We collectivelyrefer to this account, together with the 2011 A4 Fund, L.P. described below, as the “AGRE CMBS Accounts.” As of December 31, 2011, the AGRE CMBSAccount had total and fee-generating AUM of approximately $1.3 billion and $0.2 billion, respectively.In November 2010, we launched the 2011 A4 Fund, L.P., a real estate strategic investment account formed to invest principally in CMBS and leveragethose investments through repurchase facilities. As of December 31, 2011, the 2011 A4 Fund had total and fee generating AUM of approximately $1.0 billionand $0.1 billion, respectively.AGRE U.S. Real Estate Fund, L.P. AGRE is sponsoring the AGRE U.S. Real Estate Fund, L.P. (“AGRE U.S. Real Estate Fund”), which will pursueinvestment opportunities to recapitalize, restructure and acquire real estate assets, portfolios and companies primarily in the United States. The AGRE U.S.Real Estate Fund’s investment strategy will focus on opportunities created by the significant re-pricing and restructuring of the U.S. real estate industry thathave resulted from the financial market crisis and the ensuing deterioration of real estate fundamentals. As of December 31, 2011, the AGRE U.S. Real EstateFund had $385 million of committed capital.Strategic Investment VehiclesIn addition to the funds described above, we manage other investment vehicles, including AAA and Apollo Palmetto Strategic Partnership, L.P.(“Palmetto”), which have been established to invest either directly in or alongside certain of our funds and certain other transactions that we sponsor andmanage.AP Alternative Assets, L.P.AP Alternative Assets, L.P. (“AAA”) issued approximately $1.9 billion of equity capital in its initial offering in June 2006. AAA is designed to giveinvestors in its common units exposure as a limited partner to certain of the strategies that we employ and allows us to manage the asset allocations to thosestrategies by investing alongside our private equity funds and directly in our capital markets funds and certain other transactions that we sponsor andmanage. The common units of AAA, which represent limited partner interests, are listed on NYSE Euronext Amsterdam. AAA is the sole limited partner inAAA Investments, the vehicle through which AAA’s investments are made, and the Apollo Operating Group holds the economic general partnership interestsin AAA Investments.Since its formation, AAA has allowed us to quickly target investment opportunities by capitalizing new investment vehicles formed by Apollo inadvance of a lengthier third-party fundraising process. AAA Investments was the initial investor in one of our mezzanine funds, two of our distressed andevent-driven hedge 19Table of Contentsfunds, our non-performing loan fund, one of our senior credit funds, and Athene. AAA Investments’ current portfolio also includes private equity co-investments in Fund VI and Fund VII portfolio companies, certain opportunistic investments and temporary cash investments. AAA Investments may alsoinvest in additional funds and other opportunistic investments identified by Apollo Alternative Assets, L.P., the investment manager of AAA.AAA Investments generates management fees for us through the Apollo funds in which it invests. In addition, AAA Investments generates managementfees and incentive income on the portion of its assets that is not invested directly in Apollo funds or temporary investments. AAA Investments paysmanagement fees to Apollo Alternative Assets, L.P., its investment manager, which is 100% owned by the Apollo Operating Group, and pays incentive incometo AAA Associates, L.P.The following chart illustrates AAA Investments’ $1.7 billion in investments as of December 31, 2011:AAA Investments As is common with investments in private equity funds, AAA Investments may follow an over-commitment approach when making investments inorder to maximize the amount of capital that is invested at any given time. When an over-commitment approach is followed, the aggregate amount of capitalcommitted by AAA Investments to, or to co-investment programs with, private equity funds and capital markets funds at a given time may exceed theaggregate amount of cash and available credit lines that AAA Investments has available for immediate investment. As of December 31, 2011, AAAInvestments was not overcommitted.We are contractually committed to reinvest a certain amount of our carried interest income from AAA into common units or other equity interests ofAAA, as described in more detail below under “—General Partner and Professionals Investments and Co-Investments—General Partner Investments.”Strategic Investment Accounts (“SIAs”)Institutional investors are expressing increasing levels of interest in SIAs since these accounts can provide investors with greater levels of transparency,liquidity and control over their investments as compared to more traditional investment funds. Based on the trends we are currently witnessing among a selectgroup of large institutional investors, we expect our AUM that is managed through SIAs to continue to grow over time. As of December 31, 2011,approximately $8.0 billion of our total AUM and $7.8 billion of our fee-generating AUM was managed through SIAs. 20Table of ContentsAn example of a SIA managed by Apollo is Palmetto, which we manage on behalf of a single investor. As of December 31, 2011, the total capitalcommitments to Palmetto were $1.5 billion from a large state pension fund and $18.0 million of current commitments from Apollo. Palmetto was establishedto facilitate investments by such third-party investor directly in our private equity and capital markets funds and certain other transactions that we sponsorand manage. As of December 31, 2011, Palmetto had committed approximately $1.3 billion, net of non-recallable distributions received from investmentswhich have the ability to be recycled under the Palmetto limited partnership agreement for investments primarily in certain of our capital markets and privateequity funds.Recent DevelopmentsDuring December 2011, Apollo announced an agreement to merge Stone Tower Capital LLC and its related management companies (“Stone Tower”), aleading alternative credit manager, into Apollo’s capital markets business. The transaction is expected to close in April, subject to the satisfaction of closingconditions. Apollo believes the Stone Tower transaction will bolster Apollo’s position as one of the world’s largest and most diverse credit managers by addingsignificant scale and several new credit product capabilities. Stone Tower manages approximately $18 billion of AUM that was not included in Apollo’s AUMas of December 31, 2011.On January 31, 2012, Apollo entered into definitive documentation for a long-term strategic partnership with Teacher Retirement System of Texas(“TRS”). The elements of the strategic partnership include $3 billion of long-term committed capital for new funds and investment strategies; significantrecycle provisions for the commitments; discretionary deployment of the capital within agreed upon product baskets; customized fee and priority returnprovisions to recognize that the capital will be deployed across numerous product categories over an extended period; considerable risk mitigation for TRS asinvestments across multiple product categories will be made through a single partnership; and significant collaboration between Apollo’s investment teams andthe Private Markets staff at TRS.Fundraising and Investor RelationsWe believe our performance track record across our funds has resulted in strong relationships with our fund investors. Our fund investors includemany of the world’s most prominent pension funds, university endowments and financial institutions, as well as individuals. We maintain an internal teamdedicated to investor relations across our private equity, credit-oriented capital markets and real estate businesses.In our private equity business, fundraising activities for new funds begin once the investor capital commitments for the current fund are largely investedor committed to be invested. The investor base of our private equity funds includes both investors from prior funds and new investors. In many instances,investors in our private equity funds have increased their commitments to subsequent funds as our private equity funds have increased in size. During ourFund VI fundraising effort, investors representing over 88% of Fund V’s capital committed to the new fund. During our Fund VII fundraising effort, investorsrepresenting over 84% of Fund VI’s capital committed to Fund VII. The single largest unaffiliated investor represents only 6% of Fund VI’s commitments and7% of Fund VII’s commitments. In addition, our investment professionals commit their own capital to each private equity fund.During the management of a fund, we maintain an active dialogue with our fund investors. We host quarterly webcasts for our fund investors led bymembers of our senior management team and we provide quarterly reports to our fund investors detailing recent performance by investment. We also organizean annual meeting for our private equity investors that consists of detailed presentations by the senior management teams of many of our current investments.From time to time, we also hold meetings for the advisory board members of our private equity funds.AAA is an important component of our business strategy, as it has allowed us to quickly target attractive investment opportunities by capitalizing newinvestment vehicles formed by Apollo in advance of a lengthier 21Table of Contentsthird-party fundraising process. In particular, we have used AAA capital to make initial investments in AIE I, SVF, AAOF, a senior credit fund, EPF andAthene. The common units of AAA are listed on Euronext Amsterdam by NYSE Euronext and AAA complies with the reporting requirements of thatexchange. AAA provides monthly information and quarterly reports to, and hosts quarterly conference calls with, our AAA investors.In our capital markets business, we have raised capital from prominent institutional investors, similar to our private equity and real estate businesses,and have also raised capital from public market investors, as in the case of AINV, AFT and AMTG. AINV provides quarterly reports to, and hosts conferencecalls with, investors that highlight investment activities. AINV is listed on the NASDAQ Global Select Market and complies with the reporting requirementsof that exchange. AFT and AMTG are listed on the New York Stock Exchange and comply with the reporting requirements of that exchange.Similar to our private equity and capital markets businesses, in our real estate business we have raised capital from an institutional investor for theAGRE CMBS Accounts, and we have also raised capital from public market investors with respect to ARI. ARI provides quarterly reports to, and hostsconference calls with, investors that highlight investment activities. ARI is listed on the New York Stock Exchange and complies with the reportingrequirements of that exchange.Investment ProcessWe maintain a rigorous investment process and a comprehensive due diligence approach across all of our funds. We have developed policies andprocedures, the adequacy of which are reviewed annually, that govern the investment practices of our funds. Moreover, each fund is subject to certaininvestment criteria set forth in its governing documents that generally contain requirements and limitations for investments, such as limitations relating to theamount that will be invested in any one company and the geographic regions in which the fund will invest. Our investment professionals are thoroughlyfamiliar with our investment policies and procedures and the investment criteria applicable to the funds that they manage, and these limitations have generallynot impacted our ability to invest our funds.Our investment professionals interact frequently across our businesses on a formal and informal basis. In addition, members of the private equityinvestment committee currently serve on the investment committees of each of our capital markets funds. We believe this structure is uncommon and providesus with a competitive advantage.We have in place certain procedures to allocate investment opportunities among our funds. These procedures are meant to ensure that each fund is treatedfairly and that transactions are allocated in a way that is equitable, fair and in the best interests of each fund, subject to the terms of the governing agreementsof such funds. Each of our funds has a primary investment mandate, which is carefully considered in the allocation process.Private EquityOur private equity investment professionals are responsible for selecting, evaluating, structuring, diligencing, negotiating, executing, monitoring andexiting investments for our traditional private equity funds, as well as pursuing operational improvements in our funds’ portfolio companies. Theseinvestment professionals perform significant research into each prospective investment, including a review of the company’s financial statements,comparisons with other public and private companies and relevant industry data. The due diligence effort will also typically include: • on-site visits; • interviews with management, employees, customers and vendors of the potential portfolio company; 22Table of Contents • research relating to the company’s management, industry, markets, products and services, and competitors; and • background checks.After an initial selection, evaluation and diligence process, the relevant team of investment professionals will prepare a detailed analysis of theinvestment opportunity for our private equity investment committee. Our private equity investment committee generally meets weekly to review the investmentactivity and performance of our private equity funds.After discussing the proposed transaction with the deal team, the investment committee will decide whether to give its preliminary approval to the dealteam to continue the selection, evaluation, diligence and negotiation process. The investment committee will typically conduct several lengthy meetings toconsider a particular investment before finally approving that investment and its terms. Both at such meetings and in other discussions with the deal team, ourmanaging partners and partners will provide guidance to the deal team on strategy, process and other pertinent considerations. Every private equity investmentrequires the approval of our three managing partners.Our private equity investment professionals are responsible for monitoring an investment once it is made and for making recommendations with respectto exiting an investment. Disposition decisions made on behalf of our private equity funds are subject to careful review and approval by the private equityinvestment committee, including all three of our managing partners.AAA. Investment decisions on behalf of AAA are subject to investment policies and procedures that have been adopted by the board of directors of themanaging general partner of AAA. Those policies and procedures provide that all AAA investments (except for temporary investments) must be reviewed andapproved by the AAA investment committee. In addition, they provide that over time AAA will invest approximately 90% or more of its capital in Apollofunds and Apollo sponsored private equity transactions and, subject to market conditions, target approximately 50% or more in private equity transactions.Pending those uses, AAA capital is invested in temporary liquid investments. AAA’s investments do not need to be exited within fixed periods of time or in anyspecified manner. AAA is, however, generally required to exit any traditional private equity co-investments it makes with an Apollo fund at the same time andon the same terms as the Apollo fund in question exits its investment. The AAA investment policies and procedures provide that the AAA investmentcommittee should review the policies and procedures on a regular basis and, if necessary, propose changes to the board of directors of the managing generalpartner of AAA when the committee believes that those changes would further assist AAA in achieving its objective of building a strong investment base andcreating long-term value for its unitholders.Capital Markets and Real EstateEach of our capital markets funds and real estate funds maintains an investment process similar to that described above under “—Private Equity.” Ourcapital markets and real estate investment professionals are responsible for selecting, evaluating, structuring, diligencing, negotiating, executing, monitoringand exiting investments for our capital markets funds and real estate funds, respectively. The investment professionals perform significant research into anddue diligence of each prospective investment, and prepare analyses of recommended investments for the investment committee of the relevant fund.Investment decisions are carefully scrutinized by the investment committees where applicable, who review potential transactions, provide inputregarding the scope of due diligence and approve recommended investments and dispositions. Close attention is given to how well a proposed investment isaligned with the distinct investment objectives of the fund in question, which in many cases have specific geographic or other focuses. At least one of ourmanaging partners approves every significant capital markets and real estate fund investment decision. The investment committee of each of our capitalmarkets funds and real estate funds generally is provided with a summary of the investment activity and performance of the relevant funds on at least amonthly basis. 23Table of ContentsOverview of Fund OperationsInvestors in our private equity funds and our real estate equity funds make commitments to provide capital at the outset of a fund and deliver capitalwhen called by us as investment opportunities become available. We determine the amount of initial capital commitments for any given private equity fund bytaking into account current market opportunities and conditions, as well as investor expectations. The general partner’s capital commitment is determinedthrough negotiation with the fund’s investor base. The commitments are generally available for six years during what we call the investment period. We havetypically invested the capital committed to our funds over a three to four year period. Generally, as each investment is realized, our private equity funds firstreturn the capital and expenses related to that investment and any previously realized investments to fund investors and then distribute any profits. Theseprofits are typically shared 80% to the investors in our private equity funds and 20% to us so long as the investors receive at least an 8% compounded annualreturn on their investment, which we refer to as a “preferred return” or “hurdle.” Our private equity funds typically terminate ten years after the final closing,subject to the potential for two one-year extensions. After the amendments we sought in order to deconsolidate most of our funds, dissolution of those funds canbe accelerated upon a majority vote of investors not affiliated with us and, in any case, all of our funds also may be terminated upon the occurrence of certainother events. Ownership interests in our private equity funds and certain of our capital markets and real estate funds, are not, however, subject to redemptionprior to termination of the funds.The processes by which our capital markets funds and our fixed income real estate funds receive and invest capital vary by type of fund. AINV, forinstance, raises capital by selling shares in the public markets and it can also issue debt. Our distressed and event-driven hedge funds sell shares or limitedpartner interests, subscriptions for which are payable in full upon a fund’s acceptance of an investor’s subscription, via private placements. The investors inSOMA, EPF, AIE II, COF I and COF II made a commitment to provide capital at the formation of such funds and deliver capital when called by us asinvestment opportunities become available. As with our private equity funds, the amount of initial capital commitments for our capital markets funds isdetermined by taking into account current market opportunities and conditions, as well as investor expectations. The general partner commitments for ourcapital markets funds that are structured as limited partnerships are determined through negotiation with the funds’ investor base. The fees and incentiveincome we earn for management of our capital markets funds and the performance of these funds and the terms of such funds governing withdrawal of capitaland fund termination vary across our capital markets funds and are described in detail below.We conduct the management of our private equity, capital markets and real estate funds primarily through a partnership structure, in which limitedpartnerships organized by us accept commitments and/or funds for investment from investors. Funds are generally organized as limited partnerships withrespect to private equity funds and other U.S. domiciled vehicles and limited partnership and limited liability (and other similar) companies with respect tonon-U.S. domiciled vehicles. Typically, each fund has an investment advisor affiliated with an advisor registered under the Advisers Act. Responsibility forthe day-to-day operations of the funds is typically delegated to the funds’ respective investment advisors pursuant to an investment advisory (or similar)agreement. Generally, the material terms of our investment advisory agreements relate to the scope of services to be rendered by the investment advisor to theapplicable funds, certain rights of termination in respect of our investment advisory agreements and, generally, with respect to our capital markets funds (asthese matters are covered in the limited partnership agreements of the private equity funds), the calculation of management fees to be borne by investors insuch funds, as well as the calculation of the manner and extent to which other fees received by the investment advisor from fund portfolio companies serve tooffset or reduce the management fees payable by investors in our funds. The funds themselves generally do not register as investment companies under theInvestment Company Act, in reliance on Section 3(c)(7) or Section 7(d) thereof or, typically in the case of funds formed prior to 1997, Section 3(c)(1) thereof.Section 3(c)(7) of the Investment Company Act excepts from its registration requirements funds privately placed in the United States whose securities areowned exclusively by persons who, at the time of acquisition of such securities, are “qualified purchasers” or “knowledgeable employees” for purposes of theInvestment Company Act. Section 3(c)(1) of the Investment Company Act excepts from its registration requirements privately placed funds whose securitiesare beneficially owned by not 24Table of Contentsmore than 100 persons. In addition, under current interpretations of the SEC, Section 7(d) of the Investment Company Act exempts from registration any non-U.S. fund all of whose outstanding securities are beneficially owned either by non-U.S. residents or by U.S. residents that are qualified purchasers.In addition to having an investment advisor, each fund that is a limited partnership, or “partnership” fund, also has a general partner that makes allpolicy and investment decisions relating to the conduct of the fund’s business. The general partner is responsible for all decisions concerning the making,monitoring and disposing of investments, but such responsibilities are typically delegated to the fund’s investment advisor pursuant to an investmentadvisory (or similar) agreement. The limited partners of the partnership funds take no part in the conduct or control of the business of the funds, have no rightor authority to act for or bind the funds and have no influence over the voting or disposition of the securities or other assets held by the funds. These decisionsare made by the fund’s general partner in its sole discretion, subject to the investment limitations set forth in the agreements governing each fund. The limitedpartners often have the right to remove the general partner or investment advisor for cause or cause an early dissolution by a majority vote. In connection withthe private offering transactions that occurred in 2007 pursuant to which the Company sold shares to certain initial purchasers and accredited investors intransactions exempt from the registration requirements of the Securities Act of 1933, as amended (the “Private Offering Transactions”), we amended thegoverning agreements of certain of our consolidated private equity funds (with the exception of AAA) and capital markets funds to provide that a simplemajority of a fund’s investors have the right to accelerate the dissolution date of the fund.In addition, the governing agreements of our private equity funds and certain of our capital markets funds enable the limited partners holding a specifiedpercentage of the interests entitled to vote not to elect to continue the limited partners’ capital commitments for new portfolio investments in the event certain ofour managing partners do not devote the requisite time to managing the fund or in connection with certain Triggering Events (as defined below). In addition tohaving a significant, immeasurable negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of ourfunds would likely result in significant reputational damage to us. Further, the loss of one or more our of managing partners may result in the acceleration ofour debt. The loss of the services of any of our managing partners would have a material adverse effect on us, including our ability to retain and attractinvestors and raise new funds, and the performance of our funds. We do not carry any “key man” insurance that would provide us with proceeds in the eventof the death or disability of any of our managing partners.General Partner and Professionals Investments and Co-InvestmentsGeneral Partner InvestmentsCertain of our management companies and general partners are committed to contribute to the funds and affiliates. As a limited partner, general partnerand manager of the Apollo funds, Apollo had unfunded capital commitments of $137.9 million and $140.6 million at December 31, 2011 and 2010,respectively.Apollo has an ongoing obligation to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cash distributions, ifany, that are made to its affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAA Investments.Managing Partners and Other Professionals InvestmentsTo further align our interests with those of investors in our funds, our managing partners and other professionals have invested their own capital in ourfunds. Our managing partners and other professionals will either re-invest their carried interest to fund these investments or use cash on hand or fundsborrowed from third parties. On occasion, we have provided guarantees to lenders in respect of funds borrowed by some of our professionals to fund theircapital commitments. We do not provide guarantees for our managing partners or other senior executives. We generally have not historically chargedmanagement fees or carried interest on capital invested by our managing partners and other professionals directly in our private equity and capital marketsfunds. 25Table of ContentsCo-InvestmentsInvestors in many of our funds, as well as other investors, may have the opportunity to make co-investments with the funds. Co-investments areinvestments in portfolio companies or other assets generally on the same terms and conditions as those to which the applicable fund is subject.Regulatory and Compliance MattersOur businesses, as well as the financial services industry generally, are subject to extensive regulation in the United States and elsewhere.All of the investment advisors of our funds are affiliates of certain of our subsidiaries that are registered as investment advisors with the SEC.Registered investment advisors are subject to the requirements and regulations of the Investment Advisers Act of 1940, as amended (“Investment AdvisersAct”). Such requirements relate to, among other things, fiduciary duties to clients, maintaining an effective compliance program, solicitation agreements,conflicts of interest, recordkeeping and reporting requirements, disclosure requirements, limitations on agency cross and principal transactions between anadvisor and advisory clients and general anti-fraud prohibitions.AFT is a registered investment company under the Investment Company Act, as amended and is subject to the requirements and regulations of theInvestment Company Act and the rules thereunder.AINV elected to be treated as a business development company under the Investment Company Act.In order to maintain its status as a regulated investment company under Subchapter M of the Internal Revenue Code, AINV is required to distribute atleast 90% of its ordinary income and realized, net short-term capital gains in excess of realized net long-term capital losses, if any, to its shareholders. Inaddition, in order to avoid excise tax, it needs to distribute at least 98% of its income (such income to include both ordinary income and net capital gains),which would take into account short-term and long-term capital gains and losses. AIC, at its discretion, may carry forward taxable income in excess ofcalendar year distributions and pay an excise tax on this income. In addition, as a business development company, AINV must not acquire any assets otherthan “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of AINV’s total assets arequalifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” In late 2006, the SEC adopted rulesunder the Investment Company Act to expand the definition of “eligible portfolio company” to include all private companies and companies whose securitiesare not listed on a national securities exchange. The rules also permit AINV to include as qualifying assets certain follow-on investments in companies thatwere eligible portfolio companies at the time of initial investment but that no longer meet the definition.ARI elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code commencing with its taxable year ended December 31,2009. To maintain its status as a REIT, ARI must distribute at least 90% of its taxable income to its shareholders and meet, on a continuing basis, certainother complex requirements under the Internal Revenue Code. AMTG also intends to elect to be taxed as a REIT under the Internal Revenue Code, commencingwith its fiscal year ending December 31, 2011.During 2011, the Company formed Apollo Global Securities, LLC (“AGS”), which is a registered broker dealer with the SEC and is a member of theFinancial Industry Regulatory Authority, or “FINRA”. From time to time, this entity is involved in transactions with affiliates of Apollo, including portfoliocompanies of the funds we manage, whereby AGS will earn underwriting and transaction fees for its services.Broker-dealers are subject to regulations that cover all aspects of the securities business, including sales methods, trade practices among broker-dealers,capital structure, record keeping, the financing of customers’ 26Table of Contentspurchases and the conduct and qualifications of directors, officers and employees. In particular, as a registered broker-dealer and member of a self regulatoryorganization, we are subject to the SEC’s uniform net capital rule, Rule 15c3-1. Rule 15c3-1 specifies the minimum level of net capital a broker-dealer mustmaintain and also requires that a significant part of a broker-dealer’s assets be kept in relatively liquid form. The SEC and various self-regulatoryorganizations impose rules that require notification when net capital falls below certain predefined criteria, limit the ratio of subordinated debt to equity in theregulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. Additionally,the SEC’s uniform net capital rule imposes certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawingcapital and requiring prior notice to the SEC for certain withdrawals of capital.Apollo Management International LLP is regulated by the U.K. Financial Services Authority.The SEC and various self-regulatory organizations have in recent years increased their regulatory activities in respect of asset management firms.Certain of our businesses are subject to compliance with laws and regulations of U.S. Federal and state governments, non-U.S. governments, theirrespective agencies and/or various self-regulatory organizations or exchanges relating to, among other things, the privacy of client information, and any failureto comply with these regulations could expose us to liability and/or reputational damage. Our businesses have operated for many years within a legalframework that requires our being able to monitor and comply with a broad range of legal and regulatory developments that affect our activities.However, additional legislation, changes in rules promulgated by self-regulatory organizations or changes in the interpretation or enforcement of existinglaws and rules, either in the United States or elsewhere, may directly affect our mode of operation and profitability.Rigorous legal and compliance analysis of our businesses and investments is important to our culture. We strive to maintain a culture of compliancethrough the use of policies and procedures such as oversight compliance, codes of ethics, compliance systems, communication of compliance guidance andemployee education and training. We have a compliance group that monitors our compliance with all of the regulatory requirements to which we are subject andmanages our compliance policies and procedures. Our Chief Legal Officer serves as the Chief Compliance Officer and supervises our compliance group,which is responsible for addressing all regulatory and compliance matters that affect our activities. Our compliance policies and procedures address a varietyof regulatory and compliance risks such as the handling of material non-public information, position reporting, personal securities trading, valuation ofinvestments on a fund-specific basis, document retention, potential conflicts of interest and the allocation of investment opportunities.We generally operate without information barriers between our businesses. In an effort to manage possible risks resulting from our decision not toimplement these barriers, our compliance personnel maintain a list of issuers for which we have access to material, non-public information and for whosesecurities our funds and investment professionals are not permitted to trade. We could in the future decide that it is advisable to establish information barriers,particularly as our business expands and diversifies. In such event our ability to operate as an integrated platform will be restricted.CompetitionThe asset management industry is intensely competitive, and we expect it to remain so. We compete both globally and on a regional, industry and nichebasis. 27Table of ContentsWe face competition both in the pursuit of outside investors for our funds and in acquiring investments in attractive portfolio companies and makingother investments. We compete for outside investors based on a variety of factors, including: • investment performance; • investor perception of investment managers’ drive, focus and alignment of interest; • quality of service provided to and duration of relationship with investors; • business reputation; and • the level of fees and expenses charged for services.Over the past several years, the size and number of private equity funds, capital markets and real estate funds has continued to increase, heightening thelevel of competition for investor capital.In addition, fund managers have increasingly adopted investment strategies traditionally associated with the other. Capital markets funds have becomeactive in taking control positions in companies, while private equity funds have acquired minority and/or debt positions in publicly listed companies. Thisconvergence could heighten our competitive risk by expanding the range of asset managers seeking private equity investments and making it more difficult forus to differentiate ourselves from managers of capital markets funds.Depending on the investment, we expect to face competition in acquisitions primarily from other private equity funds, specialized funds, hedge fundsponsors, other financial institutions, corporate buyers and other parties. Many of these competitors in some of our businesses are substantially larger andhave considerably greater financial, technical and marketing resources than are available to us. Several of these competitors have recently raised, or areexpected to raise, significant amounts of capital and many of them have similar investment objectives to us, which may create additional competition forinvestment opportunities. Some of these competitors may also have a lower cost of capital and access to funding sources that are not available to us, whichmay create competitive disadvantages for us with respect to investment opportunities. In addition, some of these competitors may have higher risk tolerances,different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively than usfor investments that we want to make. Corporate buyers may be able to achieve synergistic cost savings with regard to an investment that may provide themwith a competitive advantage in bidding for an investment. Lastly, the allocation of increasing amounts of capital to alternative investment strategies byinstitutional and individual investors could well lead to a reduction in the size and duration of pricing inefficiencies that many of our funds seek to exploit.Competition is also intense for the attraction and retention of qualified employees. Our ability to continue to compete effectively in our businesses willdepend upon our ability to attract new employees and retain and motivate our existing employees.For additional information concerning the competitive risks that we face, see “Item 1A. Risk Factors—Risks Related to Our Businesses—The investmentmanagement business is intensely competitive, which could materially adversely impact us.” 28Table of ContentsITEM 1A.RISK FACTORSRisks Related to Our BusinessesPoor performance of our funds would cause a decline in our revenue and results of operations, may obligate us to repay incentive incomepreviously paid to us and would adversely affect our ability to raise capital for future funds.We derive revenues in part from: • management fees, which are based generally on the amount of capital invested in our funds; • transaction and advisory fees relating to the investments our funds make; • incentive income, based on the performance of our funds; and • investment income from our investments as general partner.If a fund performs poorly, we will receive little or no incentive income with regard to the fund and little income or possibly losses from any principalinvestment in the fund. Furthermore, if, as a result of poor performance of later investments in a private equity fund’s or a certain capital markets fund’s life,the fund does not achieve total investment returns that exceed a specified investment return threshold for the life of the fund, we will be obligated to repay theamount by which incentive income that was previously distributed to us exceeds amounts to which we are ultimately entitled. Our fund investors and potentialfund investors continually assess our funds’ performance and our ability to raise capital. Accordingly, poor fund performance may deter future investment inour funds and thereby decrease the capital invested in our funds and ultimately, our management fee income.We depend on Leon Black, Joshua Harris and Marc Rowan, and the loss of any of their services would have a material adverse effect on us.The success of our businesses depends on the efforts, judgment and personal reputations of our managing partners, Leon Black, Joshua Harris andMarc Rowan. Their reputations, expertise in investing, relationships with our fund investors and relationships with members of the business community onwhom our funds depend for investment opportunities and financing are each critical elements in operating and expanding our businesses. We believe ourperformance is strongly correlated to the performance of these individuals. Accordingly, our retention of our managing partners is crucial to our success.Retaining our managing partners could require us to incur significant compensation expense after the expiration of their current employment agreements in2012. Our managing partners may resign, join our competitors or form a competing firm at any time. If any of our managing partners were to join or form acompetitor, some of our investors could choose to invest with that competitor rather than in our funds. The loss of the services of any of our managingpartners would have a material adverse effect on us, including our ability to retain and attract investors and raise new funds, and the performance of ourfunds. We do not carry any “key man” insurance that would provide us with proceeds in the event of the death or disability of any of our managing partners.In addition, the loss of one or more of our managing partners may result in the termination of our role as general partner of one or more of our funds and theacceleration of our debt.Although in connection with the Strategic Investors Transaction, our managing partners entered into employment, non-competition and non-solicitationagreements, which impose certain restrictions on competition and solicitation of our employees by our managing partners if they terminate their employment, acourt may not enforce these provisions. See “Item 11. Executive Compensation—Narrative Disclosure to the Summary Compensation Table and Grants ofPlan-Based Awards Table—Employment, Non-Competition and Non-Solicitation Agreement with Chief Executive Officer” for a more detailed description ofthe terms of the agreement for one of our managing partners. In addition, although the Agreement Among Managing Partners imposes vesting and forfeiturerequirements on the managing partners in the event any of them terminates their employment, we, our shareholders (other than the Strategic Investors, asdescribed under “Item 13. Certain 29Table of ContentsRelationships and Related Party Transactions—Lenders Rights Agreement—Amendments to Managing Partner Transfer Restrictions” and the ApolloOperating Group have no ability to enforce any provision of this agreement or to prevent the managing partners from amending the agreement or waiving any ofits provisions, including the forfeiture provisions. See “Item 13. Certain Relationships and Related Party Transactions—Agreement Among ManagingPartners” for a more detailed description of the terms of this agreement.Changes in the debt financing markets have negatively impacted the ability of our funds and their portfolio companies to obtain attractivefinancing for their investments and have increased the cost of such financing if it is obtained, which could lead to lower-yielding investments andpotentially decreasing our net income.Since the latter half of 2007, the markets for debt financing have contracted significantly, particularly in the area of acquisition financings for privateequity and leveraged buyout transactions. Large commercial and investment banks, which have traditionally provided such financing, have demanded higherrates, higher equity requirements as part of private equity investments, more restrictive covenants and generally more onerous terms in order to provide suchfinancing, and in some cases are refusing to provide financing for acquisitions, the type of which would have been readily financed in earlier years.In the event that our funds are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an increased interest rate oron unfavorable terms, our funds may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than would otherwisebe the case, either of which could lead to a decrease in the investment income earned by us. Any failure by lenders to provide previously committed financingcan also expose us to potential claims by sellers of businesses which we may have contracted to purchase. Similarly, the portfolio companies owned by ourprivate equity funds regularly utilize the corporate debt markets in order to obtain financing for their operations. To the extent that the current credit marketshave rendered such financing difficult to obtain or more expensive, this may negatively impact the operating performance of those portfolio companies and,therefore, the investment returns on our funds. In addition, to the extent that the current markets make it difficult or impossible to refinance debt that ismaturing in the near term, the relevant portfolio company may face substantial doubt as to its status as a going concern (which may result in an event ofdefault under various agreements) or be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcyprotection.Difficult market conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance ofthe investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce ourrevenue, net income and cash flow and adversely affect our financial prospects and condition.Our businesses are materially affected by conditions in the global financial markets and economic conditions throughout the world, such as interestrates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices,currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations). Thesefactors are outside our control and may affect the level and volatility of securities prices and the liquidity and the value of investments, and we may not be ableto or may choose not to manage our exposure to these conditions. Global financial markets have experienced considerable volatility in the valuations of equityand debt securities, a contraction in the availability of credit and an increase in the cost of financing. The lack of credit has materially hindered the initiationof new, large-sized transactions for our private equity segment and, together with volatility in valuations of equity and debt securities, adversely impacted ouroperating results in recent periods reflected in the financial statements included in this report. If market conditions further deteriorate, our business could beaffected in different ways. These events and general economic trends are likely to impact the performance of portfolio companies in many industries,particularly industries that are more impacted by changes in consumer demand, such as travel and leisure, gaming and real estate. The performance of ourprivate equity funds and our performance may be adversely affected to the extent our fund portfolio companies in these industries experience adverseperformance or additional pressure due to downward trends. 30Table of ContentsOur profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs, within a time framesufficient to match any further decreases in net income or increases in net losses relating to changes in market and economic conditions.The financial downturn that began in 2007 adversely affected our operating results in a number of ways, and if the economy were to re-enter a period ofrecession, it may cause our revenue and results of operations to decline by causing: • our AUM to decrease, lowering management fees from our funds; • increases in costs of financial instruments; • adverse conditions for our portfolio companies (e.g., decreased revenues, liquidity pressures, increased difficulty in obtaining access to financingand complying with the terms of existing financings as well as increased financing costs); • lower investment returns, reducing incentive income; • higher interest rates, which could increase the cost of the debt capital we use to acquire companies in our private equity business; and • material reductions in the value of our private equity fund investments in portfolio companies, affecting our ability to realize carried interest fromthese investments.Lower investment returns and such material reductions in value may result, among other reasons, because during periods of difficult market conditionsor slowdowns (which may be across one or more industries, sectors or geographies), companies in which we invest may experience decreased revenues,financial losses, difficulty in obtaining access to financing and increased funding costs. During such periods, these companies may also have difficulty inexpanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, including expensespayable to us. In addition, during periods of adverse economic conditions, we may have difficulty accessing financial markets, which could make it moredifficult or impossible for us to obtain funding for additional investments and harm our AUM and operating results. Furthermore, such conditions would alsoincrease the risk of default with respect to investments held by our funds that have significant debt investments, such as our mezzanine funds, distressed andevent-driven hedge funds and senior credit funds. Our funds may be affected by reduced opportunities to exit and realize value from their investments, bylower than expected returns on investments made prior to the deterioration of the credit markets, and by the fact that we may not be able to find suitableinvestments for the funds to effectively deploy capital, which could adversely affect our ability to raise new funds and thus adversely impact our prospectsfor future growth.A decline in the pace of investment in our private equity funds would result in our receiving less revenue from transaction and advisory fees.The transaction and advisory fees that we earn are driven in part by the pace at which our private equity funds make investments. Any decline in thatpace would reduce our transaction and advisory fees and could make it more difficult for us to raise capital. Many factors could cause such a decline in thepace of investment, including the inability of our investment professionals to identify attractive investment opportunities, competition for such opportunitiesamong other potential acquirers, decreased availability of capital on attractive terms and our failure to consummate identified investment opportunities becauseof business, regulatory or legal complexities and adverse developments in the U.S. or global economy or financial markets. In particular, the lack of financingoptions for new leveraged buyouts resulting from the recent credit market dislocation, significantly reduced the pace of traditional buyout investments by ourprivate equity funds. 31Table of ContentsIf one or more of our managing partners or other investment professionals leave our company, the commitment periods of certain private equityfunds may be terminated, and we may be in default under our credit agreement.The governing agreements of our private equity funds provide that in the event certain “key persons” (such as one or more of Messrs. Black, Harris andRowan and/or certain other of our investment professionals) fail to devote the requisite time to managing the fund, the commitment period will terminate if acertain percentage in interest of the investors do not vote to continue the commitment period. This is true of Fund VI and Fund VII, on which our near-tomedium-term performance will heavily depend. EPF has a similar provision. In addition to having a significant negative impact on our revenue, net incomeand cash flow, the occurrence of such an event with respect to any of our funds would likely result in significant reputational damage to us.In addition, it will be an event of default under the April 20, 2007 credit facility that AMH, one of the entities in the Apollo Operating Group, entered into(“the AMH credit facility”), under which AMH borrowed a $1.0 billion variable-rate term loan if either (i) Mr. Black, together with related persons or trusts,shall cease as a group to participate to a material extent in the beneficial ownership of AMH or (ii) two of the group constituting Messrs. Black, Harris andRowan shall cease to be actively engaged in the management of the AMH loan parties. If such an event of default occurs and the lenders exercise their right toaccelerate repayment of the $1.0 billion loan, we are unlikely to have the funds to make such repayment and the lenders may take control of us, which islikely to materially adversely impact our results of operations. Even if we were able to refinance our debt, our financial condition and results of operationswould be materially adversely affected.Messrs. Black, Harris and Rowan may terminate their employment with us at any time.We may not be successful in raising new funds or in raising more capital for certain of our funds and may face pressure on fee arrangements ofour future funds.Our funds may not be successful in consummating their current capital-raising efforts or others that they may undertake, or they may consummatethem at investment levels far lower than those currently anticipated. Any capital raising that our funds do consummate may be on terms that are unfavorable tous or that are otherwise different from the terms that we have been able to obtain in the past. These risks could occur for reasons beyond our control, includinggeneral economic or market conditions, regulatory changes or increased competition.Over the last few years, a large number of institutional investors that invest in alternative assets and have historically invested in our funds experiencednegative pressure across their investment portfolios, which may affect our ability to raise capital from them. As a result of the global economic downtownduring 2008 and 2009, these institutional investors experienced, among other things, a significant decline in the value of their public equity and debt holdingsand a lack of realizations from their existing private equity portfolios. Consequently, many of these investors were left with disproportionately outsizedremaining commitments to a number of private equity funds, and were restricted from making new commitments to third-party managed private equity fundssuch as those managed by us. To the extent economic conditions remain volatile and these issues persist, we may be unable to raise sufficient amounts ofcapital to support the investment activities of our future funds.In addition, certain institutional investors have publicly criticized certain fund fee and expense structures, including management fees and transactionand advisory fees. In September 2009, the Institutional Limited Partners Association, or “ILPA,” published a set of Private Equity Principles, or the“Principles,” which were revised in January 2011. The Principles were developed in order to encourage discussion between limited partners and generalpartners regarding private equity fund partnership terms. Certain of the Principles call for enhanced “alignment of interests” between general partners andlimited partners through modifications of some of the terms of fund arrangements, including proposed guidelines for fees and carried interest structures.We provided ILPA our endorsement of the Principles, representing an indication of our general support for the efforts of ILPA. Although we have noobligation to modify any of our fees with respect to our existing funds, 32Table of Contentswe may experience pressure to do so. For example, on April 20, 2010, we announced a new strategic relationship agreement with CalPERS, whereby we agreedto reduce management and other fees charged to CalPERS on funds we manage, or in the future will manage, solely for CalPERS by $125 million over a five-year period or as close a period as required to provide CalPERS with that benefit.The failure of our funds to raise capital in sufficient amounts and on satisfactory terms could result in a decrease in AUM and management fee andtransaction fee revenue or us being unable to achieve an increase in AUM and management fee and transaction fee revenue, and could have a material adverseeffect on our financial condition and results of operations. Similarly, any modification of our existing fee arrangements or the fee structures for new fundscould adversely affect our results of operations.Third-party investors in our funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls whenrequested by us, which could adversely affect a fund’s operations and performance.Investors in all of our private equity and certain of our capital markets and real estate funds make capital commitments to those funds that we areentitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from themin order for those funds to consummate investments and otherwise pay their obligations when due. Any investor that did not fund a capital call would besubject to several possible penalties, including having a significant amount of its existing investment forfeited in that fund. However, the impact of the penaltyis directly correlated to the amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instanceearly in the life of the fund, then the forfeiture penalty may not be as meaningful. If investors were to fail to satisfy a significant amount of capital calls for anyparticular fund or funds, the operation and performance of those funds could be materially and adversely affected.The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future resultsor of any returns expected on an investment in our Class A shares.We have presented in this report the returns relating to the historical performance of our private equity funds and capital markets funds. The returns arerelevant to us primarily insofar as they are indicative of incentive income we have earned in the past and may earn in the future, our reputation and our abilityto raise new funds. The returns of the funds we manage are not, however, directly linked to returns on our Class A shares. Therefore, you should notconclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in Class A shares. However,poor performance of the funds we manage will cause a decline in our revenue from such funds, and would therefore have a negative effect on our performanceand the value of our Class A shares. An investment in our Class A shares is not an investment in any of the Apollo funds. Moreover, most of our funds havenot been consolidated in our financial statements for periods since either August 1, 2007 or November 30, 2007 as a result of the deconsolidation of most ofour funds as of August 1, 2007 and November 30, 2007.Moreover, the historical returns of our funds should not be considered indicative of the future returns of these or from any future funds we may raise, inpart because: • market conditions during previous periods were significantly more favorable for generating positive performance, particularly in our privateequity business, than the market conditions we have experienced for the last few years and may experience in the future; • our funds’ returns have benefited from investment opportunities and general market conditions that currently do not exist and may not repeatthemselves, and there can be no assurance that our current or future funds will be able to avail themselves of profitable investment opportunities; • our private equity funds’ rates of returns, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains,which may never be realized; 33Table of Contents • our funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, including theavailability of debt capital on attractive terms and the availability of distressed debt opportunities, and we may not be able to achieve the samereturns or profitable investment opportunities or deploy capital as quickly; • the historical returns that we present in this report derive largely from the performance of our earlier private equity funds, whereas future fundreturns will depend increasingly on the performance of our newer funds, which may have little or no realized investment track record; • Fund VI and Fund VII are several times larger than our previous private equity funds, and this additional capital may not be deployed asprofitably as our prior funds; • the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has not occurred with respect to all ofour funds and we believe is less likely to occur in the future; • our track record with respect to our capital markets funds and real estate funds is relatively short as compared to our private equity funds; • in recent years, there has been increased competition for private equity investment opportunities resulting from the increased amount of capitalinvested in private equity funds and high liquidity in debt markets; and • our newly established funds may generate lower returns during the period that they take to deploy their capital.Finally, our private equity IRRs have historically varied greatly from fund to fund. Accordingly, you should realize that the IRR going forward for anycurrent or future fund may vary considerably from the historical IRR generated by any particular fund, or for our private equity funds as a whole. Futurereturns will also be affected by the risks described elsewhere in this report, including risks of the industries and businesses in which a particular fundinvests. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—The Historical Investment Performance ofOur Funds.”Our reported net asset values, rates of return and incentive income from affiliates are based in large part upon estimates of the fair value of ourinvestments, which are based on subjective standards and may prove to be incorrect.A large number of investments in our funds are illiquid and thus have no readily ascertainable market prices. We value these investments based on ourestimate of their fair value as of the date of determination. We estimate the fair value of our investments based on third-party models, or models developed byus, which include discounted cash flow analyses and other techniques and may be based, at least in part, on independently sourced market parameters. Thematerial estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness of discount rates used,and, in some cases, the ability to execute, the timing of and the estimated proceeds from expected financings. The actual results related to any particularinvestment often vary materially as a result of the inaccuracy of these estimates and assumptions. In addition, because many of the illiquid investments heldby our funds are in industries or sectors which are unstable, in distress, or undergoing some uncertainty, such investments are subject to rapid changes invalue caused by sudden company-specific or industry-wide developments.We include the fair value of illiquid assets in the calculations of net asset values, returns of our funds and our AUM. Furthermore, we recognizeincentive income from affiliates based in part on these estimated fair values. Because these valuations are inherently uncertain, they may fluctuate greatly fromperiod to period. Also, they may vary greatly from the prices that would be obtained if the assets were to be liquidated on the date of the valuation and often dovary greatly from the prices we eventually realize. 34Table of ContentsIn addition, the values of our investments in publicly traded assets are subject to significant volatility, including due to a number of factors beyond ourcontrol. These include actual or anticipated fluctuations in the quarterly and annual results of these companies or other companies in their industries, marketperceptions concerning the availability of additional securities for sale, general economic, social or political developments, changes in industry conditions orgovernment regulations, changes in management or capital structure and significant acquisitions and dispositions. Because the market prices of thesesecurities can be volatile, the valuation of these assets will change from period to period, and the valuation for any particular period may not be realized at thetime of disposition. In addition, because our private equity funds often hold very large amounts of the securities of their portfolio companies, the disposition ofthese securities often takes place over a long period of time, which can further expose us to volatility risk. Even if we hold a quantity of public securities thatmay be difficult to sell in a single transaction, we do not discount the market price of the security for purposes of our valuations.If we realize value on an investment that is significantly lower than the value at which it was reflected in a fund’s net asset values, we would sufferlosses in the applicable fund. This could in turn lead to a decline in asset management fees and a loss equal to the portion of the incentive income fromaffiliates reported in prior periods that was not realized upon disposition. These effects could become applicable to a large number of our investments if ourestimates and assumptions used in estimating their fair values differ from future valuations due to market developments. See “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Segment Analysis” for information related to fund activity that is no longerconsolidated. If asset values turn out to be materially different than values reflected in fund net asset values, fund investors could lose confidence whichcould, in turn, result in redemptions from our funds that permit redemptions or difficulties in raising additional investments.We have experienced rapid growth, which may be difficult to sustain and which may place significant demands on our administrative, operationaland financial resources.Our AUM has grown significantly in the past, despite recent fluctuations, and we are pursuing further growth in the near future. Our rapid growth hascaused, and planned growth, if successful, will continue to cause, significant demands on our legal, accounting and operational infrastructure, and increasedexpenses. The complexity of these demands, and the expense required to address them, is a function not simply of the amount by which our AUM has grown,but of the growth in the variety, including the differences in strategy between, and complexity of, our different funds. In addition, we are required tocontinuously develop our systems and infrastructure in response to the increasing sophistication of the investment management market and legal, accounting,regulatory and tax developments.Our future growth will depend in part, on our ability to maintain an operating platform and management system sufficient to address our growth andwill require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we face significantchallenges: • in maintaining adequate financial, regulatory and business controls; • implementing new or updated information and financial systems and procedures; and • in training, managing and appropriately sizing our work force and other components of our businesses on a timely and cost-effective basis.We may not be able to manage our expanding operations effectively or be able to continue to grow, and any failure to do so could adversely affect ourability to generate revenue and control our expenses. 35Table of ContentsExtensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility ofincreased regulatory focus could result in additional burdens on our businesses. Changes in tax or law and other legislative or regulatorychanges could adversely affect us.Overview of Our Regulatory Environment. We are subject to extensive regulation, including periodic examinations, by governmental and self-regulatory organizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. and foreign government agenciesand self-regulatory organizations, as well as state securities commissions in the United States, are empowered to conduct investigations and administrativeproceedings that can result in fines, suspensions of personnel or other sanctions, including censure, the issuance of cease-and-desist orders or the suspensionor expulsion of an investment advisor from registration or memberships. Even if an investigation or proceeding did not result in a sanction or the sanctionimposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity relating to the investigation, proceeding or impositionof these sanctions could harm our reputation and cause us to lose existing investors or fail to gain new investors. The requirements imposed by our regulatorsare designed primarily to ensure the integrity of the financial markets and to protect investors in our funds and are not designed to protect our shareholders.Consequently, these regulations often serve to limit our activities.As a result of highly publicized financial scandals, investors have exhibited concerns over the integrity of the U.S. financial markets and the regulatoryenvironment in which we operate both in the United States and outside the United States is particularly likely to be subject to further regulation. There hasbeen an active debate both nationally and internationally over the appropriate extent of regulation and oversight of private investment funds and their managers.Any changes in the regulatory framework applicable to our businesses may impose additional expenses on us, require the attention of senior management orresult in limitations in the manner in which our business is conducted. On July 21, 2010, President Obama signed into law the Dodd-Frank Wall StreetReform and Consumer Protection Act, or the “Dodd-Frank Act,” which imposes significant new regulations on almost every aspect of the U.S. financialservices industry, including aspects of our business and the markets in which we operate. Among other things, the Dodd-Frank Act requires private equityand hedge fund advisers to register with the SEC, under the Investment Advisers Act, to maintain extensive records and to file reports if deemed necessary forpurposes of systemic risk assessment by certain governmental bodies. Importantly, many of the provisions of the Dodd-Frank Act are subject to furtherrulemaking and to the discretion of regulatory bodies, such as the Financial Stability Oversight Council. As a result, we do not know exactly what the finalregulations under the Dodd-Frank Act will require or how significantly the Dodd-Frank Act will affect us.Exceptions from Certain Laws. We regularly rely on exemptions from various requirements of the Securities Act of 1933 (“the Securities Act”), theExchange Act, the Investment Company Act and the Employment Retirement Income Security Act, or “ERISA,” in conducting our activities. These exemptionsare sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reason theseexemptions were to become unavailable to us, we could become subject to regulatory action or third-party claims and our businesses could be materially andadversely affected. See, for example, “—Risks Related to Our Organization and Structure—If we were deemed an investment company under the InvestmentCompany Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated and could have a material adverse effect onour businesses and the price of our Class A shares.”Fund Regulatory Environment. The regulatory environment in which our funds operate may affect our businesses. For example, changes in antitrustlaws or the enforcement of antitrust laws could affect the level of mergers and acquisitions activity, and changes in state laws may limit investment activitiesof state pension plans. See “Item 1. Business—Regulatory and Compliance Matters” for a further discussion of the regulatory environment in which weconduct our businesses.Future Regulation. We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non-U.S.governmental regulatory authorities or self-regulatory organizations 36Table of Contentsthat supervise the financial markets. As calls for additional regulation have increased, there may be a related increase in regulatory investigations of the tradingand other investment activities of alternative asset management funds, including our funds. Such investigations may impose additional expenses on us, mayrequire the attention of senior management and may result in fines if any of our funds are deemed to have violated any regulations.We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. New laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.Apollo provides investment management services through registered investment advisers. Investment advisers are subject to extensive regulation in theUnited States and in the other countries in which our investment activities occur. The SEC oversees our activities as a registered investment adviser under theInvestment Advisers Act. In the United Kingdom, we are subject to regulation by the U.K. Financial Services Authority. Our other European operations, andour investment activities around the globe, are subject to a variety of regulatory regimes that vary country by country. A failure to comply with the obligationsimposed by regulatory regimes to which we are subject, including the Investment Advisers Act could result in investigations, sanctions and reputationaldamage.In June 2010, the SEC adopted a new “pay-to-play” rule that restricts politically active investment advisors from managing state pension funds. Therule prohibits, among other things, a covered investment advisor from receiving compensation for advisory services provided to a government entity (such as astate pension fund) for a two-year period after the advisor, certain covered employees of the advisor or any covered political action committee controlled by theadvisor or its employees makes a political contribution to certain government officials. In addition, a covered investment advisor is prohibited from engagingin political fundraising activities for certain elected officials or candidates in jurisdictions where such advisor is providing or seeking governmental business.This new rule complicates and increases the compliance burden for our investment advisors. It will be imperative for a covered investment advisor to adopt aneffective compliance program in light of the substantial penalties associated with the rule.In November 2010, the European Parliament adopted the Directive on Alternative Investment Fund Managers, or the “AIFM.” The AIFM was entered intoforce in early 2011 and EU member states are required to implement the AIFM into their national laws within two years (by early 2013). The AIFM imposessignificant new regulatory requirements on investment managers operating within the EU, including with respect to conduct of business, regulatory capital,valuations, disclosures and marketing. Alternative investment funds organized outside of the EU in which interests are marketed within the EU would besubject to significant conditions on their operations, including satisfying the competent authority of the robustness of internal arrangements with respect torisk management, in particular liquidity risks and additional operational and counterparty risks associated with short selling; the management and disclosureof conflicts of interest; the fair valuation of assets; and the security of depository/custodial arrangements. Such rules could potentially impose significantadditional costs on the operation of our business in the EU and could limit our operating flexibility within that jurisdiction.In Denmark and Germany, legislative amendments have been adopted which may limit deductibility of interest and other financing expenses incompanies in which our funds have invested or may invest in the future. In brief, the Danish legislative amendments generally entail that annual net financingexpenses in excess of a certain threshold amount (approximately €2.9 million in 2011) will be limited on the basis of earnings before interest and taxes and/orasset tax values. According to the German legislative amendments, under the German interest barrier rule, the tax deduction available to a company in respectof net interest expense (interest expense less interest income) is limited to 30% of its tax EBITDA (interest expense that does not exceed the threshold of €3m canbe deducted without any limitations for income tax purposes). Interest expense in excess of the interest deduction limitation may be carried forward indefinitely(subject to change in ownership restrictions) and used in future periods against all profits and gains. In respect of a tax group, interest paid by the German taxgroup 37Table of Contentsentities to non-tax group parties (e.g. interest on bank debt, capex facility and working capital facility debt) will be restricted to 30% of the tax group’s taxEBITDA. However, the interest barrier rule may not apply where German company’s gearing under IFRS accounting principles is at maximum of 2% higherthan the overall group’s leverage ratio at the level of the very top level entity which would be subject to IFRS consolidation (the “escape clause test”). This test isfailed where any worldwide company of the entire group pays more than 10% of its net interest expense on debt to substantial (i.e. greater than 25%)shareholders, related parties of such shareholders (that are not members of the group) or secured third parties (although security granted by group membersshould not be harmful). If the group does not apply IFRS accounting principles, EU member countries’ GAAP or US GAAP may also be accepted for thepurpose of the escape clause test. It should be noted that for trade tax purposes, there is principally a 25% add back on all deductible interest paid or accruedby any German entity. These amendments may in turn impact the profitability of companies affected by the rules. Our businesses are subject to the risk thatsimilar measures might be introduced in other countries in which they currently have investments or plan to invest in the future, or that other legislative orregulatory measures might be promulgated in any of the countries in which we operate that adversely affect our businesses. In particular, the U.S. Federalincome tax law that determines the tax consequences of an investment in Class A shares is under review and is potentially subject to adverse legislative,judicial or administrative change, possibly on a retroactive basis, including possible changes that would result in the treatment of a portion of our carriedinterest income as ordinary income, that would cause us to become taxable as a corporation and/or would have other adverse effects. See “—Risks Related toOur Organization and Structure.” Although not enacted, the U.S. Congress has considered legislation that would have: (i) in some cases after a ten-yeartransition period, precluded us from qualifying as a partnership or required us to hold carried interest through taxable corporations; and (ii) taxed certainincome and gains at increased rates. If similar legislation were to be enacted and apply to us, the value of the Class A Shares could be adversely affected. Inaddition, U.S. and foreign labor unions have recently been agitating for greater legislative and regulatory oversight of private equity firms and transactions.Labor unions have also threatened to use their influence to prevent pension funds from investing in private equity funds.Antitrust Regulation. It has been reported in the press that a few of our competitors in the private equity industry have received information requestsrelating to private equity transactions from the Antitrust Division of the U.S. Department of Justice. In addition, the U.K. Financial Services Authorityrecently published a discussion paper on the impact that the growth in the private equity market has had on the markets in the United Kingdom and thesuitability of its regulatory approach in addressing risks posed by the private equity market.Use of Placement Agents. We sometimes use placement agents to assist in marketing certain of the investment funds that we manage. Various stateattorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents in connection with the solicitation ofinvestments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have received subpoenas and other requests forinformation from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding the use of placement agents. Apollo iscooperating with all such investigations and other reviews. Any unanticipated developments from these or future investigations or changes in industry practicemay adversely affect our business. Even if these investigations or changes in industry practice do not directly affect our business, adverse publicity couldharm our reputation, may cause us to lose existing investors or fail to gain new investors, may depress the price of our Class A shares or may have othernegative consequences.Our revenue, net income and cash flow are all highly variable, which may make it difficult for us to achieve steady earnings growth on a quarterlybasis and may cause the price of our Class A shares to decline.Our revenue, net income and cash flow are all highly variable, primarily due to the fact that carried interest from our private equity funds, whichconstitutes the largest portion of income from our combined businesses, and the transaction and advisory fees that we receive can vary significantly fromquarter to quarter and year to year. In addition, the investment returns of most of our funds are volatile. We may also experience fluctuations in our resultsfrom quarter to quarter and year to year due to a number of other factors, including changes in the values 38Table of Contentsof our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, thedegree to which we encounter competition and general economic and market conditions. In addition, carried interest income from our private equity funds andcertain of our capital markets and real estate funds is subject to contingent repayment by the general partner if, upon the final distribution, the relevant fund’sgeneral partner has received cumulative carried interest on individual portfolio investments in excess of the amount of carried interest it would be entitled tofrom the profits calculated for all portfolio investments in the aggregate. Such variability may lead to volatility in the trading price of our Class A shares andcause our results for a particular period not to be indicative of our performance in a future period. It may be difficult for us to achieve steady growth in netincome and cash flow on a quarterly basis, which could in turn lead to large adverse movements in the price of our Class A shares or increased volatility inour Class A share price generally.The timing of carried interest generated by our private equity funds is uncertain and will contribute to the volatility of our results. Carried interestdepends on our private equity funds’ performance. It takes a substantial period of time to identify attractive investment opportunities, to raise all the fundsneeded to make an investment and then to realize the cash value or other proceeds of an investment through a sale, public offering, recapitalization or other exit.Even if an investment proves to be profitable, it may be several years before any profits can be realized in cash or other proceeds. We cannot predict when, orif, any realization of investments will occur. Although we recognize carried interest income on an accrual basis, we receive private equity carried interestpayments only upon disposition of an investment by the relevant fund, which contributes to the volatility of our cash flow. If we were to have a realizationevent in a particular quarter or year, it may have a significant impact on our results for that particular quarter or year that may not be replicated in subsequentperiods. We recognize revenue on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds,and a decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue, which could further increasethe volatility of our results.With respect to a number of our capital markets funds, our incentive income is paid annually, semi-annually or quarterly, and the varying frequency ofthese payments will contribute to the volatility of our revenues and cash flow. Furthermore, we earn this incentive income only if the net asset value of a fundhas increased or, in the case of certain funds, increased beyond a particular threshold. Our distressed and event-driven hedge funds also have “high watermarks” with respect to the investors in these funds. If the high water mark for a particular investor is not surpassed, we would not earn incentive income withrespect to such investor during a particular period even though such investor had positive returns in such period as a result of losses in prior periods. If suchan investor experiences losses, we will not be able to earn incentive income from such investor until it surpasses the previous high water mark. The incentiveincome we earn is therefore dependent on the net asset value of investors’ investments in the fund, which could lead to significant volatility in our results.Because our revenue, net income and cash flow can be highly variable from quarter to quarter and year to year, we plan not to provide any guidanceregarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could causeincreased volatility in our Class A share price.The investment management business is intensely competitive, which could materially adversely impact us.Over the past several years, the size and number of private equity funds and capital markets funds has continued to increase. If this trend continues, itis possible that it will become increasingly difficult for our funds to raise capital as funds compete for investments from a limited number of qualifiedinvestors. As the size and number of private equity and capital markets funds increase, it could become more difficult to win attractive investmentopportunities at favorable prices. Due to the global economic downturn and generally poor returns in alternative asset investment businesses during the crisis,institutional investors have suffered from decreasing returns, liquidity pressure, increased volatility and difficulty maintaining targeted asset allocations, anda significant number of investors have materially decreased or temporarily stopped making new fund investments during this period. As the economy beginsto recover, such investors may elect to reduce their overall portfolio 39Table of Contentsallocations to alternative investments such as private equity and hedge funds, resulting in a smaller overall pool of available capital in our industry. Even ifsuch investors continue to invest at historic levels, they may seek to negotiate reduced fee structures or other modifications to fund structures as a condition toinvesting.In the event all or part of this analysis proves true, when trying to raise new capital we will be competing for fewer total available assets in anincreasingly competitive environment which could lead to fee reductions and redemptions as well as difficulty in raising new capital. Such changes wouldadversely affect our revenues and profitability.Competition among funds is based on a variety of factors, including: • investment performance; • investor liquidity and willingness to invest; • investor perception of investment managers’ drive, focus and alignment of interest; • quality of service provided to and duration of relationship with investors; • business reputation; and • the level of fees and expenses charged for services.We compete in all aspects of our businesses with a large number of investment management firms, private equity fund sponsors, capital markets fundsponsors and other financial institutions. A number of factors serve to increase our competitive risks: • fund investors may develop concerns that we will allow a business to grow to the detriment of its performance; • investors may reduce their investments in our funds or not make additional investments in our funds based upon current market conditions, theiravailable capital or their perception of the health of our businesses; • some of our competitors have greater capital, lower targeted returns or greater sector or investment strategy-specific expertise than we do, whichcreates competitive disadvantages with respect to investment opportunities; • some of our competitors may also have a lower cost of capital and access to funding sources that are not available to us, which may createcompetitive disadvantages for us with respect to investment opportunities; • some of our competitors may perceive risk differently than we do, which could allow them either to outbid us for investments in particular sectorsor, generally, to consider a wider variety of investments; • some of our funds may not perform as well as competitors’ funds or other available investment products; • our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide themwith a competitive advantage in bidding for an investment; • some fund investors may prefer to invest with an investment manager that is not publicly traded; • there are relatively few barriers to entry impeding new private equity and capital markets fund management firms, and the successful efforts ofnew entrants into our various businesses, including former “star” portfolio managers at large diversified financial institutions as well as suchinstitutions themselves, will continue to result in increased competition; • there are no barriers to entry to our businesses, implementing an integrated platform similar to ours or the strategies that we deploy at our funds,such as distressed investing, which we believe are our competitive strengths, except that our competitors would need to hire professionals with theinvestment expertise or grow it internally; and • other industry participants continuously seek to recruit our investment professionals away from us. 40Table of ContentsIn addition, fund managers have increasingly adopted investment strategies traditionally associated with the other. Capital markets funds have becomeactive in taking control positions in companies, while private equity funds have assumed minority positions in publicly listed companies. This convergencecould heighten our competitive risk by expanding the range of asset managers seeking private equity investments and making it more difficult for us todifferentiate ourselves from managers of capital markets funds.These and other factors could reduce our earnings and revenues and materially adversely affect our businesses. In addition, if we are forced to competewith other alternative asset managers on the basis of price, we may not be able to maintain our current management fee and incentive income structures. Wehave historically competed primarily on the performance of our funds, and not on the level of our fees or incentive income relative to those of our competitors.However, there is a risk that fees and incentive income in the alternative investment management industry will decline, without regard to the historicalperformance of a manager. Fee or incentive income reductions on existing or future funds, without corresponding decreases in our cost structure, wouldadversely affect our revenues and profitability.Our ability to retain our investment professionals is critical to our success and our ability to grow depends on our ability to attract additional keypersonnel.Our success depends on our ability to retain our investment professionals and recruit additional qualified personnel. We anticipate that it will benecessary for us to add investment professionals as we pursue our growth strategy. However, we may not succeed in recruiting additional personnel orretaining current personnel, as the market for qualified investment professionals is extremely competitive. Our investment professionals possess substantialexperience and expertise in investing, are responsible for locating and executing our funds’ investments, have significant relationships with the institutions thatare the source of many of our funds’ investment opportunities, and in certain cases have key relationships with our fund investors. Therefore, if ourinvestment professionals join competitors or form competing companies it could result in the loss of significant investment opportunities and certain existingfund investors. Legislation has been proposed in the U.S. Congress to treat portions of carried interest as ordinary income rather than as capital gain for U.S.Federal income tax purposes. Because we compensate our investment professionals in large part by giving them an equity interest in our business or a right toreceive carried interest, such legislation could adversely affect our ability to recruit, retain and motivate our current and future investment professionals. See “—Risks Related to Taxation—Our structure involves complex provisions of U.S. Federal income tax law for which no clear precedent or authority may beavailable. Our structure is also subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.The loss of even a small number of our investment professionals could jeopardize the performance of our funds, which would have a material adverse effecton our results of operations. Efforts to retain or attract investment professionals may result in significant additional expenses, which could adversely affect ourprofitability.We may not be successful in expanding into new investment strategies, markets and businesses.We actively consider the opportunistic expansion of our businesses, both geographically and into complementary new investment strategies. We may notbe successful in any such attempted expansion. Attempts to expand our businesses involve a number of special risks, including some or all of the following: • the diversion of management’s attention from our core businesses; • the disruption of our ongoing businesses; • entry into markets or businesses in which we may have limited or no experience; • increasing demands on our operational systems; • potential increase in investor concentration; and • the broadening of our geographic footprint, increasing the risks associated with conducting operations in foreign jurisdictions. 41Table of ContentsAdditionally, any expansion of our businesses could result in significant increases in our outstanding indebtedness and debt service requirements,which would increase the risks in investing in our Class A shares and may adversely impact our results of operations and financial condition.We also may not be successful in identifying new investment strategies or geographic markets that increase our profitability, or in identifying andacquiring new businesses that increase our profitability. Because we have not yet identified these potential new investment strategies, geographic markets orbusinesses, we cannot identify for you all the risks we may face and the potential adverse consequences on us and your investment that may result from ourattempted expansion. We also do not know how long it may take for us to expand, if we do so at all. We have total discretion, at the direction of our manager,without needing to seek approval from our board of directors or shareholders, to enter into new investment strategies, geographic markets and businesses,other than expansions involving transactions with affiliates which may require limited board approval.Many of our funds invest in relatively high-risk, illiquid assets and we may fail to realize any profits from these activities for a considerable periodof time or lose some or all of the principal amount we invest in these activities.Many of our funds invest in securities that are not publicly traded. In many cases, our funds may be prohibited by contract or by applicable securitieslaws from selling such securities for a period of time. Our funds will generally not be able to sell these securities publicly unless their sale is registered underapplicable securities laws, or unless an exemption from such registration requirements is available. Accordingly, our funds may be forced, under certainconditions, to sell securities at a loss. The ability of many of our funds, particularly our private equity funds, to dispose of investments is heavily dependenton the public equity markets, inasmuch as the ability to realize value from an investment may depend upon the ability to complete an initial public offering ofthe portfolio company in which such investment is held. Furthermore, large holdings even of publicly traded equity securities can often be disposed of onlyover a substantial period of time, exposing the investment returns to risks of downward movement in market prices during the disposition period.Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on thoseinvestments.Because many of our private equity funds’ investments rely heavily on the use of leverage, our ability to achieve attractive rates of return on investmentswill depend on our continued ability to access sufficient sources of indebtedness at attractive rates. For example, in many private equity investments,indebtedness may constitute 70% or more of a portfolio company’s total debt and equity capitalization, including debt that may be incurred in connection withthe investment, and a portfolio company’s leverage will often increase in recapitalization transactions subsequent to the company’s acquisition by a privateequity fund. The absence of available sources of senior debt financing for extended periods of time could therefore materially and adversely affect our privateequity funds. An increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensiveto finance those investments. Increases in interest rates could also make it more difficult to locate and consummate private equity investments because otherpotential buyers, including operating companies acting as strategic buyers, may be able to bid for an asset at a higher price due to a lower overall cost ofcapital. In addition, a portion of the indebtedness used to finance private equity investments often includes high-yield debt securities issued in the capitalmarkets. Availability of capital from the high-yield debt markets is subject to significant volatility, and there may be times when we might not be able to accessthose markets at attractive rates, or at all. For example, the dislocation in the credit markets which we believe began in July 2007 and the record backlog ofsupply in the debt markets resulting from such dislocation has materially affected the ability and willingness of banks to underwrite new high-yield debtsecurities. 42Table of ContentsInvestments in highly leveraged entities are inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverseeconomic, market and industry developments. The incurrence of a significant amount of indebtedness by an entity could, among other things: • give rise to an obligation to make mandatory prepayments of debt using excess cash flow, which might limit the entity’s ability to respond tochanging industry conditions to the extent additional cash is needed for the response, to make unplanned but necessary capital expenditures or totake advantage of growth opportunities; • allow even moderate reductions in operating cash flow to render it unable to service its indebtedness, leading to a bankruptcy or otherreorganization of the entity and a loss of part or all of the equity investment in it; • limit the entity’s ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared to its competitors whohave relatively less debt; • limit the entity’s ability to engage in strategic acquisitions that might be necessary to generate attractive returns or further growth; and • limit the entity’s ability to obtain additional financing or increase the cost of obtaining such financing, including for capital expenditures, workingcapital or general corporate purposes.As a result, the risk of loss associated with a leveraged entity is generally greater than for companies with comparatively less debt. For example, manyinvestments consummated by private equity sponsors during the past three years which utilized significant amounts of leverage are experiencing severeeconomic stress and may default on their debt obligations due to a decrease in revenues and cash flow precipitated by the recent economic downturn.When our private equity funds’ existing portfolio investments reach the point when debt incurred to finance those investments matures in significantamounts and must be either repaid or refinanced, those investments may materially suffer if they have generated insufficient cash flow to repay maturing debtand there is insufficient capacity and availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or at all. If thecurrent unusually limited availability of financing for such purposes were to persist for several years, when significant amounts of the debt incurred tofinance our private equity funds’ existing portfolio investments start to come due, these funds could be materially and adversely affected.Our capital markets funds may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount of theircapital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. Thefund may borrow money from time to time to purchase or carry securities. The interest expense and other costs incurred in connection with such borrowingmay not be recovered by appreciation in the securities purchased or carried, and will be lost—and the timing and magnitude of such losses may be acceleratedor exacerbated—in the event of a decline in the market value of such securities. Gains realized with borrowed funds may cause the fund’s net asset value toincrease at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund’s net assetvalue could also decrease faster than if there had been no borrowings. In addition, as a business development company under the Investment Company Act,AIC is permitted to issue senior securities in amounts such that its asset coverage ratio equals at least 200% after each issuance of senior securities. AIC’sability to pay dividends will be restricted if its asset coverage ratio falls below at least 200% and any amounts that it uses to service its indebtedness are notavailable for dividends to its common stockholders. An increase in interest rates could also decrease the value of fixed-rate debt investments that our fundsmake. Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow. 43Table of ContentsOur internal control over financial reporting does not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act,and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Actcould have a material adverse effect on our businesses and stock price.We have not previously been required to comply with the requirements of the Sarbanes-Oxley Act, including the internal control evaluation andcertification requirement of Section 404 of that statute, and we will not be required to comply with all those requirements until after we have been subject to therequirements of the Exchange Act for a specified period. We are in the process of addressing our internal control over, and policies and processes related to,financial reporting and the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas andactivities within our organization.We have begun the process of documenting and evaluating our internal control procedures pursuant to the requirements of Section 404, which requiresannual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered publicaccounting firm addressing these assessments. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance,our independent registered public accounting firm may not be able to certify as to the effectiveness of our internal control over financial reporting. Mattersimpacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatoryconsequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, and result in a breach of the covenants under the AMHcredit facility. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financialstatements. Confidence in the reliability of our financial statements is also likely to suffer if our independent registered public accounting firm reports amaterial weakness in our internal control over financial reporting. This could materially adversely affect us and lead to a decline in our share price. Inaddition, we will incur incremental costs in order to improve our internal control over financial reporting and comply with Section 404, including increasedauditing and legal fees and costs associated with hiring additional accounting and administrative staff.The potential requirement to convert our financial statements from being prepared in conformity with accounting principles generally accepted inthe United States of America to International Financial Reporting Standards may strain our resources and increase our annual expenses.As a public entity, the SEC may require in the future that we report our financial results under International Financial Reporting Standards, or “IFRS,”instead of under generally accepted accounting principles in the United States of America, or “U.S. GAAP.” IFRS is a set of accounting principles that hasbeen gaining acceptance on a worldwide basis. These standards are published by the London-based International Accounting Standards Board, or “IASB,”and are more focused on objectives and principles and less reliant on detailed rules than U.S. GAAP. Today, there remain significant and material differencesin several key areas between U.S. GAAP and IFRS which would affect Apollo. Additionally, U.S. GAAP provides specific guidance in classes of accountingtransactions for which equivalent guidance in IFRS does not exist. The adoption of IFRS is highly complex and would have an impact on many aspects andoperations of Apollo, including but not limited to financial accounting and reporting systems, internal controls, taxes, borrowing covenants and cashmanagement. It is expected that a significant amount of time, internal and external resources and expenses over a multi-year period would be required for thisconversion.Operational risks relating to the execution, confirmation or settlement of transactions, our dependence on our headquarters in New York City andthird-party providers may disrupt our businesses, result in losses or limit our growth.We face operational risk from errors made in the execution, confirmation or settlement of transactions. We also face operational risk from transactionsnot being properly recorded, evaluated or accounted for in our funds. In particular, our credit-oriented capital markets business is highly dependent on ourability to process and 44Table of Contentsevaluate, on a daily basis, transactions across markets and geographies in a time-sensitive, efficient and accurate manner. Consequently, we rely heavily onour financial, accounting and other data processing systems. New investment products we may introduce could create a significant risk that our existingsystems may not be adequate to identify or control the relevant risks in the investment strategies employed by such new investment products. In addition, ourinformation systems and technology might not be able to accommodate our growth, and the cost of maintaining such systems might increase from its currentlevel. These risks could cause us to suffer financial loss, a disruption of our businesses, liability to our funds, regulatory intervention and reputationaldamage.Furthermore, we depend on our headquarters, which is located in New York City, for the operation of many of our businesses. A disaster or adisruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or thirdparties with whom we conduct business, or directly affecting our headquarters, may have an adverse impact on our ability to continue to operate ourbusinesses without interruption which could have a material adverse effect on us. Although we have disaster recovery programs in place, these may not besufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburseus for our losses.Finally, we rely on third-party service providers for certain aspects of our businesses, including for certain information systems, technology andadministration of our funds and compliance matters. Any interruption or deterioration in the performance of these third parties could impair the quality of thefunds’ operations and could impact our reputation and adversely affect our businesses and limit our ability to grow.We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affectour business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our businesscould be harmed.The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to securitybreaches by computer hackers and cyber terrorists. We rely on industry accepted security measures and technology to securely maintain confidential andproprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. Inaddition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business andcould result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption orfailure of our information systems or any significant breach of security could adversely affect our business and results of operations.We derive a substantial portion of our revenues from funds managed pursuant to management agreements that may be terminated or fundpartnership agreements that permit fund investors to request liquidation of investments in our funds on short notice.The terms of our funds generally give either the general partner of the fund or the fund’s board of directors the right to terminate our investmentmanagement agreement with the fund. However, insofar as we control the general partner of our funds that are limited partnerships, the risk of termination ofinvestment management agreement for such funds is limited, subject to our fiduciary or contractual duties as general partner. This risk is more significant forcertain of our funds, which have independent boards of directors.With respect to our funds that are subject to the Investment Company Act, each fund’s investment management agreement must be approved annuallyby such funds’ board of directors or by the vote of a majority of the shareholders and the majority of the independent members of such fund’s board ofdirectors and, as required by law. The funds’ investment management agreement can also be terminated by the majority of the shareholders. Termination ofthese agreements would reduce the fees we earn from the relevant funds, which 45Table of Contentscould have a material adverse effect on our results of operations. Currently, AIC is the only Apollo fund that is subject to these provisions of the InvestmentCompany Act, as it has elected to be treated as a business development company under the Investment Company Act.In addition, in connection with the deconsolidation of certain of our private equity and capital markets funds, the governing documents of those fundswere amended to provide that a simple majority of a fund’s unaffiliated investors have the right to liquidate that fund, which would cause management feesand incentive income to terminate. Our ability to realize incentive income from such funds also would be adversely affected if we are required to liquidate fundinvestments at a time when market conditions result in our obtaining less for investments than could be obtained at later times. Because this right is a new one,we do not know whether, and under what circumstances, the investors in our funds are likely to exercise such right.In addition, the management agreements of our funds would terminate if we were to experience a change of control without obtaining investor consent.Such a change of control could be deemed to occur in the event our managing partners exchange enough of their interests in the Apollo Operating Group into ourClass A shares such that our managing partners no longer own a controlling interest in us. We cannot be certain that consents required for the assignment ofour management agreements will be obtained if such a deemed change of control occurs. Termination of these agreements would affect the fees we earn from therelevant funds and the transaction and advisory fees we earn from the underlying portfolio companies, which could have a material adverse effect on ourresults of operations.Our use of leverage to finance our businesses will expose us to substantial risks, which are exacerbated by our funds’ use of leverage to financeinvestments.We have a term loan outstanding under the AMH credit facility. We may choose to finance our business operations through further borrowings. Ourexisting and future indebtedness exposes us to the typical risks associated with the use of leverage, including those discussed below under “—Dependence onsignificant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.” These risks areexacerbated by certain of our funds’ use of leverage to finance investments and, if they were to occur, could cause us to suffer a decline in the credit ratingsassigned to our debt by rating agencies, which might result in an increase in our borrowing costs or result in other material adverse effects on our businesses.Borrowings under the AMH credit facility mature on either April 20, 2014 or January 3, 2017. As these borrowings and other indebtedness matures, wewill be required to either refinance them by entering into new facilities, which could result in higher borrowing costs, or issuing equity, which would diluteexisting shareholders. We could also repay them by using cash on hand or cash from the sale of our assets. We could have difficulty entering into newfacilities or issuing equity in the future on attractive terms, or at all.Borrowings under the AMH credit facility are either LIBOR or ABR-based floating-rate obligations. As a result, an increase in short-term interest rateswill increase our interest costs to the extent such borrowings have not been hedged into fixed rates.We are subject to third-party litigation that could result in significant liabilities and reputational harm, which could materially adversely affect ourresults of operations, financial condition and liquidity.In general, we will be exposed to risk of litigation by our investors if our management of any fund is alleged to constitute bad faith, gross negligence,willful misconduct, fraud, willful or reckless disregard for our duties to the fund or other forms of misconduct. Investors could sue us to recover amounts lostby our funds due to our alleged misconduct, up to the entire amount of loss. Further, we may be subject to litigation arising from investor dissatisfaction withthe performance of our funds or from allegations that we improperly exercised control or influence over companies in which our funds have large investments.By way of example, we, our funds and certain of our employees are each exposed to the risks of litigation relating to investment activities in our funds 46Table of Contentsand actions taken by the officers and directors (some of whom may be Apollo employees) of portfolio companies, such as the risk of shareholder litigation byother shareholders of public companies in which our funds have large investments. We are also exposed to risks of litigation or investigation relating totransactions that presented conflicts of interest that were not properly addressed. In addition, our rights to indemnification by the funds we manage may not beupheld if challenged, and our indemnification rights generally do not cover bad faith, gross negligence, willful misconduct, fraud, willful or recklessdisregard for our duties to the fund or other forms of misconduct. If we are required to incur all or a portion of the costs arising out of litigation orinvestigations as a result of inadequate insurance proceeds or failure to obtain indemnification from our funds, our results of operations, financial conditionand liquidity would be materially adversely affected.In addition, with a workforce that includes many very highly paid investment professionals, we face the risk of lawsuits relating to claims forcompensation, which may individually or in the aggregate be significant in amount. Such claims are more likely to occur in the current environment whereindividual employees may experience significant volatility in their year-to-year compensation due to trading performance or other issues and in situations wherepreviously highly compensated employees were terminated for performance or efficiency reasons. The cost of settling such claims could adversely affect ourresults of operations.If any lawsuits brought against us were to result in a finding of substantial legal liability, the lawsuit could, in addition to any financial damage, causesignificant reputational harm to us, which could seriously harm our business. We depend to a large extent on our business relationships and our reputation forintegrity and high- caliber professional services to attract and retain investors and to pursue investment opportunities for our funds. As a result, allegations ofimproper conduct by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and pressspeculation about us, our investment activities or the private equity industry in general, whether or not valid, may harm our reputation, which may be moredamaging to our business than to other types of businesses.Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our businesses.As we have expanded and as we continue to expand the number and scope of our businesses, we increasingly confront potential conflicts of interestrelating to our funds’ investment activities. Certain of our funds may have overlapping investment objectives, including funds that have different feestructures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. For example,a decision to acquire material non-public information about a company while pursuing an investment opportunity for a particular fund gives rise to a potentialconflict of interest when it results in our having to restrict the ability of other funds to take any action. In addition, fund investors (or holders of Class Ashares) may perceive conflicts of interest regarding investment decisions for funds in which our managing partners, who have and may continue to makesignificant personal investments in a variety of Apollo funds, are personally invested. Similarly, conflicts of interest may exist in the valuation of ourinvestments and regarding decisions about the allocation of specific investment opportunities among us and our funds and the allocation of fees and costsamong us, our funds and their portfolio companies.Pursuant to the terms of our operating agreement, whenever a potential conflict of interest exists or arises between any of the managing partners, one ormore directors or their respective affiliates, on the one hand, and us, any of our subsidiaries or any shareholder other than a managing partner, on the other,any resolution or course of action by our board of directors shall be permitted and deemed approved by all shareholders if the resolution or course of action(i) has been specifically approved by a majority of the voting power of our outstanding voting shares (excluding voting shares owned by our manager or itsaffiliates) or by a conflicts committee of the board of directors composed entirely of one or more independent directors, (ii) is on terms no less favorable to usor our shareholders (other than a managing partner) than those generally being provided to or available from unrelated third parties or (iii) it is fair andreasonable to us and our shareholders taking into account the totality of the relationships between the parties involved. All conflicts of interest described in this 47Table of Contentsreport will be deemed to have been specifically approved by all shareholders. Notwithstanding the foregoing, it is possible that potential or perceived conflictscould give rise to investor dissatisfaction or litigation or regulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficultand our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatoryscrutiny of, or litigation in connection with, conflicts of interest would have a material adverse effect on our reputation which would materially adversely affectour businesses in a number of ways, including as a result of redemptions by our investors from our funds, an inability to raise additional funds and areluctance of counterparties to do business with us.Our organizational documents do not limit our ability to enter into new lines of businesses, and we may expand into new investment strategies,geographic markets and businesses, each of which may result in additional risks and uncertainties in our businesses.We intend, to the extent that market conditions warrant, to grow our businesses by increasing AUM in existing businesses and expanding into newinvestment strategies, geographic markets and businesses. Our organizational documents, however, do not limit us to the investment management business.Accordingly, we may pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners or otherstrategic initiatives, which may include entering into new lines of business, such as the insurance, broker-dealer or financial advisory industries. In addition,we expect opportunities will arise to acquire other alternative or traditional asset managers. To the extent we make strategic investments or acquisitions,undertake other strategic initiatives or enter into a new line of business, we will face numerous risks and uncertainties, including risks associated with (i) therequired investment of capital and other resources, (ii) the possibility that we have insufficient expertise to engage in such activities profitably or withoutincurring inappropriate amounts of risk, (iii) combining or integrating operational and management systems and controls and (iv) the broadening of ourgeographic footprint, including the risks associated with conducting operations in foreign jurisdictions. Entry into certain lines of business may subject us tonew laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If anew business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adverselyaffected. Our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we may bedependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control.Employee misconduct could harm us by impairing our ability to attract and retain investors and by subjecting us to significant legal liability,regulatory scrutiny and reputational harm.Our reputation is critical to maintaining and developing relationships with the investors in our funds, potential fund investors and third parties withwhom we do business. In recent years, there have been a number of highly publicized cases involving fraud, conflicts of interest or other misconduct byindividuals in the financial services industry. There is a risk that our employees could engage in misconduct that adversely affects our businesses. Forexample, if an employee were to engage in illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation,financial position, investor relationships and ability to attract future investors. It is not always possible to deter employee misconduct, and the precautions wetake to detect and prevent this activity may not be effective in all cases. Misconduct by our employees, or even unsubstantiated allegations, could result in amaterial adverse effect on our reputation and our businesses.The due diligence process that we undertake in connection with investments by our funds may not reveal all facts that may be relevant inconnection with an investment.Before making investments in private equity and other investments, we conduct due diligence that we deem reasonable and appropriate based on thefacts and circumstances applicable to each investment. When conducting due diligence, we may be required to evaluate important and complex business,financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be 48Table of Contentsinvolved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making anassessment regarding an investment, we rely on the resources available to us, including information provided by the target of the investment and, in somecircumstances, third-party investigations. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal orhighlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarilyresult in the investment being successful.Certain of our funds utilize special situation and distressed debt investment strategies that involve significant risks.Our funds often invest in obligors and issuers with weak financial conditions, poor operating results, substantial financial needs, negative net worthand/or special competitive problems. These funds also invest in obligors and issuers that are involved in bankruptcy or reorganization proceedings. In suchsituations, it may be difficult to obtain full information as to the exact financial and operating conditions of these obligors and issuers. Additionally, the fairvalues of such investments are subject to abrupt and erratic market movements and significant price volatility if they are publicly traded securities, and aresubject to significant uncertainty in general if they are not publicly traded securities. Furthermore, some of our funds’ distressed investments may not bewidely traded or may have no recognized market. A fund’s exposure to such investments may be substantial in relation to the market for those investments,and the assets are likely to be illiquid and difficult to sell or transfer. As a result, it may take a number of years for the market value of such investments toultimately reflect their intrinsic value as perceived by us.A central feature of our distressed investment strategy is our ability to successfully predict the occurrence of certain corporate events, such as debtand/or equity offerings, restructurings, reorganizations, mergers, takeover offers and other transactions, that we believe will improve the condition of thebusiness. If the corporate event we predict is delayed, changed or never completed, the market price and value of the applicable fund’s investment coulddecline sharply.In addition, these investments could subject us to certain potential additional liabilities that may exceed the value of our original investment. Undercertain circumstances, payments or distributions on certain investments may be reclaimed if any such payment or distribution is later determined to have beena fraudulent conveyance, a preferential payment or similar transaction under applicable bankruptcy and insolvency laws. In addition, under certaincircumstances, a lender that has inappropriately exercised control of the management and policies of a debtor may have its claims subordinated or disallowed,or may be found liable for damages suffered by parties as a result of such actions. In the case where the investment in securities of troubled companies is madein connection with an attempt to influence a restructuring proposal or plan of reorganization in bankruptcy, our funds may become involved in substantiallitigation.We often pursue investment opportunities that involve business, regulatory, legal or other complexities.As an element of our investment style, we often pursue unusually complex investment opportunities. This can often take the form of substantialbusiness, regulatory or legal complexity that would deter other investment managers. Our tolerance for complexity presents risks, as such transactions can bemore difficult, expensive and time-consuming to finance and execute; it can be more difficult to manage or realize value from the assets acquired in suchtransactions; and such transactions sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities. Any of these risks couldharm the performance of our funds.Our funds make investments in companies that we do not control.Investments by our capital markets funds (and, in certain instances, our private equity funds) will include debt instruments and equity securities ofcompanies that we do not control. Such instruments and securities may be acquired by our funds through trading activities or through purchases of securitiesfrom the issuer. In the 49Table of Contentsfuture, our private equity funds may seek to acquire minority equity interests more frequently and may also dispose of a portion of their majority equityinvestments in portfolio companies over time in a manner that results in the funds retaining a minority investment. Those investments will be subject to therisk that the company in which the investment is made may make business, financial or management decisions with which we do not agree or that themajority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our interests. If any of the foregoingwere to occur, the values of investments by our funds could decrease and our financial condition, results of operations and cash flow could suffer as a result.Our funds may face risks relating to undiversified investments.While diversification is generally an objective of our funds, we cannot give assurance as to the degree of diversification that will actually be achieved inany fund investments. Because a significant portion of a fund’s capital may be invested in a single investment or portfolio company, a loss with respect tosuch investment or portfolio company could have a significant adverse impact on such fund’s capital. Accordingly, a lack of diversification on the part of afund could adversely affect a fund’s performance and therefore, our financial condition and results of operations.Some of our funds invest in foreign countries and securities of issuers located outside of the United States, which may involve foreign exchange,political, social and economic uncertainties and risks.Some of our funds invest all or a portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States,including, Germany, China and Singapore. In addition to business uncertainties, such investments may be affected by changes in exchange values as well aspolitical, social and economic uncertainty affecting a country or region. Many financial markets are not as developed or as efficient as those in the UnitedStates, and as a result, liquidity may be reduced and price volatility may be higher. The legal and regulatory environment may also be different, particularlywith respect to bankruptcy and reorganization. Financial accounting standards and practices may differ, and there may be less publicly available informationin respect of such companies.Restrictions imposed or actions taken by foreign governments may adversely impact the value of our fund investments. Such restrictions or actionscould include exchange controls, seizure or nationalization of foreign deposits or other assets and adoption of other governmental restrictions that adverselyaffect the prices of securities or the ability to repatriate profits on investments or the capital invested itself. Income received by our funds from sources in somecountries may be reduced by withholding and other taxes. Any such taxes paid by a fund will reduce the net income or return from such investments. Whileour funds will take these factors into consideration in making investment decisions, including when hedging positions, our funds may not be able to fullyavoid these risks or generate sufficient risk-adjusted returns.Third-party investors in our funds will have the right under certain circumstances to terminate commitment periods or to dissolve the funds, andinvestors in our hedge funds may redeem their investments in our hedge funds at any time after an initial holding period of 12 to 36 months.These events would lead to a decrease in our revenues, which could be substantial.The governing agreements of certain of our funds allow the limited partners of those funds to (i) terminate the commitment period of the fund in the eventthat certain “key persons” (for example, one or more of our managing partners and/or certain other investment professionals) fail to devote the requisite time tomanaging the fund, (ii) (depending on the fund) terminate the commitment period, dissolve the fund or remove the general partner if we, as general partner ormanager, or certain key persons engage in certain forms of misconduct, or (iii) dissolve the fund or terminate the commitment period upon the affirmative voteof a specified percentage of limited partner interests entitled to vote. Both Fund VI and Fund VII, on which our near- to medium-term performance will heavilydepend, include a number of such provisions. Also, in order to deconsolidate most of 50Table of Contentsour funds for financial reporting purposes, we amended the governing documents of those funds to provide that a simple majority of a fund’s unaffiliatedinvestors have the right to liquidate that fund. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence ofsuch an event with respect to any of our funds would likely result in significant reputational damage to us.Investors in our hedge funds may also generally redeem their investments on an annual, semiannual or quarterly basis following the expiration of aspecified period of time when capital may not be redeemed (typically between one and five years). Fund investors may decide to move their capital away fromus to other investments for any number of reasons in addition to poor investment performance. Factors which could result in investors leaving our fundsinclude changes in interest rates that make other investments more attractive, changes in investor perception regarding our focus or alignment of interest,unhappiness with changes in or broadening of a fund’s investment strategy, changes in our reputation and departures or changes in responsibilities of keyinvestment professionals. In a declining market, the pace of redemptions and consequent reduction in our Assets Under Management could accelerate. Thedecrease in revenues that would result from significant redemptions in these funds could have a material adverse effect on our businesses, revenues, netincome and cash flows.In addition, the management agreements of all of our funds would be terminated upon an “assignment,” without the requisite consent, of theseagreements, which may be deemed to occur in the event the investment advisers of our funds were to experience a change of control. We cannot be certain thatconsents required to assignments of our investment management agreements will be obtained if a change of control occurs. In addition, with respect to ourpublicly traded closed-end mezzanine funds, each fund’s investment management agreement must be approved annually by the independent members of suchfund’s board of directors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the fees weearn from such funds.Our financial projections for portfolio companies could prove inaccurate.Our funds generally establish the capital structure of portfolio companies on the basis of financial projections for such portfolio companies. Theseprojected operating results will normally be based primarily on management judgments. In all cases, projections are only estimates of future results that arebased upon assumptions made at the time that the projections are developed. General economic conditions, which are not predictable, along with other factorsmay cause actual performance to fall short of the financial projections we used to establish a given portfolio company’s capital structure. Because of theleverage we typically employ in our investments, this could cause a substantial decrease in the value of our equity holdings in the portfolio company. Theinaccuracy of financial projections could thus cause our funds’ performance to fall short of our expectations.Our private equity funds’ performance, and our performance, may be adversely affected by the financial performance of our portfolio companiesand the industries in which our funds invest.Our performance and the performance of our private equity funds is significantly impacted by the value of the companies in which our funds haveinvested. Our funds invest in companies in many different industries, each of which is subject to volatility based upon economic and market factors. Over thelast few years, the credit crisis has caused significant fluctuations in the value of securities held by our funds and the global economic recession had asignificant impact in overall performance activity and the demands for many of the goods and services provided by portfolio companies of the funds wemanage. Although the U.S. economy has improved, there remain many obstacles to continued growth in the economy such as high unemployment, globalgeopolitical events, risks of inflation and high deficit levels for governmental agencies in the U.S. and abroad. These factors and other general economic trendsare likely to impact the performance of portfolio companies in many industries and in particular, industries that are more impacted by changes in consumerdemand, such as travel and leisure, gaming and real estate. The performance of our private equity funds, and our performance, may be adversely affected tothe extent our fund portfolio companies in these industries experience adverse 51Table of Contentsperformance or additional pressure due to downward trends. For example, performance of theatre exhibition companies could be adversely affected by poor boxoffice performance, increased competition from other forms of out-of-home entertainment, as well as the continued increase in use of alternative film deliverymethods. Similarly, the gaming industry is highly competitive, and in recent periods, supply has typically grown at a faster pace than demand in somemarkets. The expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies (includingpricing pressure) of gaming companies have increased competition in many markets, and such competitive pressures have and are expected to continue toadversely affect financial performance of gaming companies in such markets. Cruise ship operations are also susceptible to adverse changes in the economicclimate, such as higher fuel prices, as increases in the cost of fuel globally would increase the cost of cruise ship operations. Economic and political conditionsin certain parts of the world make it difficult to predict the price of fuel in the future. In addition, cruise ship operators could experience increases in otheroperating costs, such as crew, insurance and security costs, due to market forces and economic or political instability beyond their control. In respect of realestate, even though the U.S. residential real estate market has recently shown some signs of stabilizing from a lengthy and deep downturn, various factorscould halt or limit a recovery in the housing market and have an adverse effect on the companies’ performance, including, but not limited to, continued highunemployment, a low level of consumer confidence in the economy and/or the residential real estate market and rising mortgage interest rates.The performance of certain of our portfolio companies in the chemical and refining industries is subject to the cyclical and volatile nature of the supply-demand balance in these industries. These industries historically have experienced alternating periods of capacity shortages leading to tight supply conditions,causing prices and profit margins to increase, followed by periods when substantial capacity is added, resulting in oversupply, declining capacity utilizationrates and declining prices and profit margins. In addition to changes in the supply and demand for products, the volatility these industries experience occursas a result of changes in energy prices, costs of raw materials and changes in various other economic conditions around the world. The performance ofinvestments we may make in the commodities markets is also subject to a high degree of business and market risk, as it is substantially dependent uponprevailing prices of oil and natural gas. Prices for oil and natural gas are subject to wide fluctuation in response to relatively minor changes in the supply anddemand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond our control, such as level of consumer product demand,the refining capacity of oil purchasers, weather conditions, government regulations, the price and availability of alternative fuels, political conditions, foreignsupply of such commodities and overall economic conditions. It is common in making investments in the commodities markets to deploy hedging strategies toprotect against pricing fluctuations (but that may or may not protect our investments).Our funds’ investments in commercial mortgage loans and other commercial real-estate related loans are subject to risks of delinquency and foreclosure,and risks of loss that are greater than similar risks associated with mortgage loans made on the security of residential properties. If the net operating income ofthe commercial property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of a commercial property can be affectedby various factors, such as success of tenant businesses, property management decisions, competition from comparable types of properties and declines inregional or local real estate values and rental or occupancy rates.Fraud and other deceptive practices could harm fund performance.Instances of fraud and other deceptive practices committed by senior management of portfolio companies in which an Apollo fund invests mayundermine our due diligence efforts with respect to such companies, and if such fraud is discovered, negatively affect the valuation of a fund’s investments.In addition, when discovered, financial fraud may contribute to overall market volatility that can negatively impact an Apollo fund’s investment program. Asa result, instances of fraud could result in fund performance that is poorer than expected. 52Table of ContentsContingent liabilities could harm fund performance.We may cause our funds to acquire an investment that is subject to contingent liabilities. Such contingent liabilities could be unknown to us at the timeof acquisition or, if they are known to us, we may not accurately assess or protect against the risks that they present. Acquired contingent liabilities could thusresult in unforeseen losses for our funds. In addition, in connection with the disposition of an investment in a portfolio company, a fund may be required tomake representations about the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. Afund may also be required to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. These arrangements mayresult in the incurrence of contingent liabilities by a fund, even after the disposition of an investment. Accordingly, the inaccuracy of representations andwarranties made by a fund could harm such fund’s performance.Our funds may be forced to dispose of investments at a disadvantageous time.Our funds may make investments that they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration ofsuch fund’s term or otherwise. Although we generally expect that investments will be disposed of prior to dissolution or be suitable for in-kind distribution atdissolution, and the general partners of the funds have a limited ability to extend the term of the fund with the consent of fund investors or the advisory boardof the fund, as applicable, our funds may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution.This would result in a lower than expected return on the investments and, perhaps, on the fund itself.Possession of material, non-public information could prevent Apollo funds from undertaking advantageous transactions; our internal controlscould fail; we could determine to establish information barriers.Our managing partners, investment professionals or other employees may acquire confidential or material non-public information and, as a result, berestricted from initiating transactions in certain securities. This risk affects us more than it does many other investment managers, as we generally do not useinformation barriers that many firms implement to separate persons who make investment decisions from others who might possess material, non-publicinformation that could influence such decisions. Our decision not to implement these barriers could prevent our investment professionals from undertakingadvantageous investments or dispositions that would be permissible for them otherwise.In order to manage possible risks resulting from our decision not to implement information barriers, our compliance personnel maintain a list ofrestricted securities as to which we have access to material, non-public information and in which our funds and investment professionals are not permitted totrade. This internal control relating to the management of material non-public information could fail and with the result that we, or one of our investmentprofessionals, might trade when at least constructively in possession of material non-public information. Inadvertent trading on material non-publicinformation could have adverse effects on our reputation, result in the imposition of regulatory or financial sanctions and as a consequence, negatively impactour financial condition. In addition, we could in the future decide that it is advisable to establish information barriers, particularly as our business expandsand diversifies. In such event, our ability to operate as an integrated platform will be restricted. The establishment of such information barriers may also leadto operational disruptions and result in restructuring costs, including costs related to hiring additional personnel as existing investment professionals areallocated to either side of such barriers, which may adversely affect our business.Regulations governing AINV’s operation as a business development company affect its ability to raise, and the way in which it raises, additionalcapital.As a business development company under the Investment Company Act, AINV may issue debt securities or preferred stock and borrow money frombanks or other financial institutions, which we refer to collectively as 53Table of Contents“senior securities,” up to the maximum amount permitted by the Investment Company Act. Under the provisions of the Investment Company Act, AINV ispermitted to issue senior securities only in amounts such that its asset coverage, as defined in the Investment Company Act, equals at least 200% after eachissuance of senior securities. If the value of its assets declines, it may be unable to satisfy this test. If that happens, it may be required to sell a portion of itsinvestments and, depending on the nature of its leverage, repay a portion of its indebtedness at a time when such sales may be disadvantageous.Business development companies may issue and sell common stock at a price below net asset value per share only in limited circumstances, one ofwhich is during the one-year period after stockholder approval. AINV’s stockholders have, in the past, approved a plan so that during the subsequent 12-month period, AINV may, in one or more public or private offerings of its common stock, sell or otherwise issue shares of its common stock at a price belowthe then current net asset value per share, subject to certain conditions including parameters on the level of permissible dilution, approval of the sale by amajority of its independent directors and a requirement that the sale price be not less than approximately the market price of the shares of its common stock atspecified times, less the expenses of the sale. AINV may ask its stockholders for additional approvals from year to year. There is no assurance such approvalswill be obtained.Our hedge funds are subject to numerous additional risks.Our hedge funds are subject to numerous additional risks, including the risks set forth below. • Generally, there are few limitations on the execution of these funds’ investment strategies, which are subject to the sole discretion of themanagement company or the general partner of such funds. • These funds may engage in short-selling, which is subject to a theoretically unlimited risk of loss. • These funds are exposed to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of adispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the fund to suffer a loss. • Credit risk may arise through a default by one of several large institutions that are dependent on one another to meet their liquidity or operationalneeds, so that a default by one institution causes a series of defaults by the other institutions. • The efficacy of investment and trading strategies depend largely on the ability to establish and maintain an overall market position in acombination of financial instruments, which can be difficult to execute. • These funds may make investments or hold trading positions in markets that are volatile and which may become illiquid. • These funds’ investments are subject to risks relating to investments in commodities, futures, options and other derivatives, the prices of whichare highly volatile and may be subject to a theoretically unlimited risk of loss in certain circumstances.Risks Related to Our Class A SharesThe market price and trading volume of our Class A shares may be volatile, which could result in rapid and substantial losses for ourshareholders.The market price of our Class A shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our Class Ashares may fluctuate and cause significant price variations to occur. If the market price of our Class A shares declines significantly, you may be unable toresell your Class A shares at or above your purchase price, if at all. The market price of our Class A shares may fluctuate or decline significantly in thefuture. Some of the factors that could negatively affect the price of our Class A shares or result in fluctuations in the price or trading volume of our Class Ashares include: • variations in our quarterly operating results or distributions, which variations we expect will be substantial; 54Table of Contents • our policy of taking a long-term perspective on making investment, operational and strategic decisions, which is expected to result in significantand unpredictable variations in our quarterly returns; • failure to meet analysts’ earnings estimates; • publication of research reports about us or the investment management industry or the failure of securities analysts to cover our Class A shares; • additions or departures of our managing partners and other key management personnel; • adverse market reaction to any indebtedness we may incur or securities we may issue in the future; • actions by shareholders; • changes in market valuations of similar companies; • speculation in the press or investment community; • changes or proposed changes in laws or regulations or differing interpretations thereof affecting our businesses or enforcement of these laws andregulations, or announcements relating to these matters; • a lack of liquidity in the trading of our Class A shares; • adverse publicity about the asset management industry generally or individual scandals, specifically; and • general market and economic conditions.In addition, from time to time, management may also declare special quarterly distributions based on investment realizations. Volatility in the marketprice of our Class A shares may be heightened at or around times of investment realizations as well as following such realization, as a result of speculation asto whether such a distribution may be declared.An investment in Class A shares is not an investment in any of our funds, and the assets and revenues of our funds are not directly available tous.Class A shares are securities of Apollo Global Management, LLC only. While our historical consolidated and combined financial information includesfinancial information, including assets and revenues, of certain Apollo funds on a consolidated basis, and our future financial information will continue toconsolidate certain of these funds, such assets and revenues are available to the fund and not to us except through management fees, incentive income,distributions and other proceeds arising from agreements with funds, as discussed in more detail in this report.Our Class A share price may decline due to the large number of shares eligible for future sale and for exchange into Class A shares.The market price of our Class A shares could decline as a result of sales of a large number of our Class A shares or the perception that such sales couldoccur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time andprice that we deem appropriate. As of December 31, 2011, we had 123,923,042 Class A shares outstanding. The Class A shares reserved under the EquityPlan are increased on the first day of each fiscal year by (i) the amount (if any) by which (a) 15% of the number of outstanding Class A shares and ApolloOperating Group units exchangeable for Class A shares on a fully converted and diluted basis on the last day of the immediately preceding fiscal year exceeds(b) the number of shares then reserved and available for issuance under the Equity Plan, or (ii) such lesser amount by which the administrator may decide toincrease the number of Class A shares. Taking into account grants of RSUs and options made through December 31, 2011, 41,900,162 Class A sharesremained available for future grant under our equity incentive plan. In addition, Holdings may at any time exchange its 55Table of ContentsApollo Operating Group units for up to 240,000,000 Class A shares on behalf of our managing partners and contributing partners. We may also elect to selladditional Class A shares in one or more future primary offerings.Our managing partners and contributing partners, through their partnership interests in Holdings, owned an aggregate of 65.9% of the Apollo OperatingGroup units as of December 31, 2011. Subject to certain procedures and restrictions (including the vesting schedules applicable to our managing partners andcontributing partners and any applicable transfer restrictions and lock-up agreements) each managing partner and contributing partner has the right, upon 60days’ notice prior to a designated quarterly date, to exchange the Apollo Operating Group units for Class A shares. These Class A shares are eligible for resalefrom time to time, subject to certain contractual restrictions and Securities Act limitations.Our managing partners and contributing partners (through Holdings) have the ability to cause us to register the Class A shares they acquire uponexchange of their Apollo Operating Group units. Such rights will be exercisable beginning two years after the initial public offering of our Class A shares.The Strategic Investors have the ability to cause us to register any of their non-voting Class A shares beginning two years after the initial public offeringof our Class A shares, and, generally, may only transfer their non-voting Class A shares prior to such time to its controlled affiliates.We have on file with the SEC a registration statement on Form S-8 covering the shares issuable under our equity incentive plan. Subject to vesting andcontractual lock-up arrangements, such shares will be freely tradable.We cannot assure you that our intended quarterly distributions will be paid each quarter or at all.Our intention is to distribute to our Class A shareholders on a quarterly basis substantially all of our net after-tax cash flow from operations in excess ofamounts determined by our manager to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments in ourbusinesses and our funds, to comply with applicable laws and regulations, to service our indebtedness or to provide for future distributions to our Class Ashareholders for any ensuing quarter. The declaration, payment and determination of the amount of our quarterly dividend, if any, will be at the sole discretionof our manager, who may change our dividend policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, will or can bepaid. In making decisions regarding our quarterly dividend, our manager considers general economic and business conditions, our strategic plans andprospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cashneeds, contractual restrictions and obligations, legal, tax, regulatory and other restrictions that may have implications on the payment of distributions by us toour common shareholders or by our subsidiaries to us, and such other factors as our manager may deem relevant.Our managing partners beneficial ownership of interests in the Class B share that we have issued to BRH, the control exercised by our managerand anti-takeover provisions in our charter documents and Delaware law could delay or prevent a change in control.Our managing partners, through their ownership of BRH, beneficially own the Class B share that we have issued to BRH. The managing partnersinterests in such Class B share represented 79.0% of the total combined voting power of our shares entitled to vote as of December 31, 2011. As a result, theyare able to exercise control over all matters requiring the approval of shareholders and are able to prevent a change in control of our company. In addition, ouroperating agreement provides that so long as the Apollo control condition is satisfied, our manager, which is owned and controlled by our managing partners,manages all of our operations and activities. The control of our manager will make it more difficult for a potential acquirer to assume control of us. Otherprovisions in our operating agreement may also make it more difficult and expensive for a third party to 56Table of Contentsacquire control of us even if a change of control would be beneficial to the interests of our shareholders. For example, our operating agreement requires advancenotice for proposals by shareholders and nominations, places limitations on convening shareholder meetings, and authorizes the issuance of preferred sharesthat could be issued by our board of directors to thwart a takeover attempt. In addition, certain provisions of Delaware law may delay or prevent a transactionthat could cause a change in our control. The market price of our Class A shares could be adversely affected to the extent that our managing partners’ controlover us, the control exercised by our manager as well as provisions of our operating agreement discourage potential takeover attempts that our shareholdersmay favor.We are a Delaware limited liability company, and there are certain provisions in our operating agreement regarding exculpation andindemnification of our officers and directors that differ from the Delaware General Corporation Law (DGCL) in a manner that may be lessprotective of the interests of our Class A shareholders.Our operating agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. However, underthe DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders, (ii) intentional misconduct or knowingviolations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividend, or (iv) a transaction from which the directorderived an improper personal benefit. In addition, our operating agreement provides that we indemnify our directors and officers for acts or omissions to thefullest extent provided by law. However, under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director orofficer acted in good faith, in a manner he reasonably believed to be in the best interests of the corporation, and, in criminal action, if the officer or director hadno reasonable cause to believe his conduct was unlawful. Accordingly, our operating agreement may be less protective of the interests of our Class Ashareholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors.Risks Related to Our Organization and StructureAlthough not enacted, the U.S. Congress has considered legislation that would have: (i) in some cases after a ten-year transition period,precluded us from qualifying as a partnership or required us to hold carried interest through taxable corporations; and (ii) taxed certain incomeand gains at increased rates. If similar legislation were to be enacted and apply to us, the value of our Class A shares could be adversely affected.The U.S. Congress, the IRS and the U.S. Treasury Department have recently examined the U.S. Federal income tax treatment of private equity funds,hedge funds and other kinds of investment partnerships. The present U.S. Federal income tax treatment of a holder of Class A shares and/or our own taxationmay be adversely affected by any new legislation, new regulations or revised interpretations of existing tax law that arise as a result of such examinations. InMay 2010, the U.S. House of Representatives passed legislation (the “May 2010 House Bill”) that would have, in general, treated income and gains, includinggain on sale, attributable to an interest in an investment services partnership interest (“ISPI”) as income subject to a new blended tax rate that is higher thanunder current law, except to the extent such ISPI would have been considered under the legislation to be a qualified capital interest. The interests of Class Ashareholders and our interests in the Apollo Operating Group that are entitled to receive carried interest may be classified as ISPIs for purposes of thislegislation. The United States Senate considered, but did not pass, similar legislation. On February 14, 2012, Representative Levin introduced similarlegislation (the “2012 Levin Bill”) that would tax carried interest at ordinary income rates (which would be higher than the proposed blended rate in the May2010 House Bill). It is unclear when or whether the U.S. Congress will pass such legislation or what provisions would be included in any legislation, ifenacted.Both the May 2010 House Bill and the 2012 Levin Bill provide that, for taxable years beginning ten years after the date of enactment, income derivedwith respect to an ISPI that is not a qualified capital interest and that is treated as ordinary income under the rules discussed above would not meet thequalifying income requirements 57Table of Contentsunder the publicly traded partnership rules. Therefore, if similar legislation were to be enacted, following such ten-year period, we would be precluded fromqualifying as a partnership for U.S. Federal income tax purposes or be required to hold all such ISPIs through corporations, possibly U.S. corporations. If wewere taxed as a U.S. corporation or required to hold all ISPIs through corporations, our effective tax rate would increase significantly. The federal statutory ratefor corporations is currently 35%. In addition, we could be subject to increased state and local taxes. Furthermore, holders of Class A shares could be subjectto tax on our conversion into a corporation or any restructuring required in order for us to hold our ISPIs through a corporation.On September 12, 2011, the Obama administration submitted similar legislation to Congress in the American Jobs Act that would tax income and gain,now treated as capital gains, including gain on disposition of interests attributable to an ISPI, at rates higher than the capital gains rate applicable to suchincome under current law, with an exception for certain qualified capital interests. The proposed legislation would also characterize certain income and gain inrespect of ISPIs as non-qualifying income under the publicly traded partnership rules after a ten-year transition period from the effective date, with anexception for certain qualified capital interests. This proposed legislation follows several prior statements by the Obama administration in support of changingthe taxation of carried interest. Furthermore, in the proposed American Jobs Act, the Obama administration proposed that current law regarding the treatment ofcarried interest be changed for taxable years ending after December 31, 2012 to subject such income to ordinary income tax. In its published revenue proposalfor 2013, the Obama administration proposed that the current law regarding treatment of carried interest be changed to subject such income to ordinary incometax. The Obama administration’s published revenue proposals for 2010, 2011 and 2012 contained similar proposals.States and other jurisdictions have also considered legislation to increase taxes with respect to carried interest. For example, New York has periodicallyconsidered legislation under which you could be subject to New York state income tax on income in respect of our common units as a result of certain activitiesof our affiliates in New York, although it is unclear when or whether such legislation would be enacted.On February 22, 2012, the Obama administration announced its framework of key elements to change the U.S. federal income tax rules for businesses.Few specifics were included, and it is unclear what any actual legislation could provide, when it would be proposed, or its prospects for enactment. Severalparts of the framework, if enacted, could adversely affect us. First, the framework could reduce the deductibility of interest for corporations in some mannernot specified. A reduction in interest deductions could increase our tax rate and thereby reduce cash available for distribution to investors or for other uses byus. Such a reduction could also limit our ability to finance new transactions and increase the effective cost of financing by companies in which we invest,which could reduce the value of our carried interest in respect of such companies. The framework also suggests that some entities currently treated aspartnerships for tax purposes could be subject to an entity-level income tax similar to the corporate income tax. If such a proposal caused us to be subject toadditional entity-level taxes, it could reduce cash available for distribution to investors or for other uses by us. The framework reiterates the President’ssupport for treatment of carried interest as ordinary income, as provided in the President’s revenue proposal for 2013 described above. However, whether thePresident’s framework will actually be enacted by the government is unknown, and the ultimate consequences of tax reform legislation, if any, are alsopresently not known.Our shareholders do not elect our manager or vote and have limited ability to influence decisions regarding our businesses.So long as the Apollo control condition is satisfied, our manager, AGM Management, LLC, which is owned by our managing partners, will manage allof our operations and activities. AGM Management, LLC is managed by BRH, a Cayman entity owned by our managing partners and managed by anexecutive committee composed of our managing partners. Our shareholders do not elect our manager, its manager or its manager’s executive committee and,unlike the holders of common stock in a corporation, have only limited voting rights on matters affecting our businesses and therefore limited ability toinfluence decisions regarding our businesses. Furthermore, if our shareholders are dissatisfied with the performance of our manager, they will have littleability 58Table of Contentsto remove our manager. As discussed below, the managing partners collectively had 79.0% of the voting power of Apollo Global Management, LLC as ofDecember 31, 2011. Therefore, they have the ability to control any shareholder vote that occurs, including any vote regarding the removal of our manager.Control by our managing partners of the combined voting power of our shares and holding their economic interests through the ApolloOperating Group may give rise to conflicts of interests.Our managing partners controlled 79.0% of the combined voting power of our shares entitled to vote as of December 31, 2011. Accordingly, ourmanaging partners have the ability to control our management and affairs to the extent not controlled by our manager. In addition, they are able to determine theoutcome of all matters requiring shareholder approval (such as a proposed sale of all or substantially of our assets, the approval of a merger or consolidationinvolving the company, and an election by our manager to dissolve the company) and are able to cause or prevent a change of control of our company andcould preclude any unsolicited acquisition of our company. The control of voting power by our managing partners could deprive Class A shareholders of anopportunity to receive a premium for their Class A shares as part of a sale of our company, and might ultimately affect the market price of the Class A shares.In addition, our managing partners and contributing partners, through their partnership interests in Holdings, are entitled to 65.9% of Apollo OperatingGroup’s economic returns through the Apollo Operating Group units owned by Holdings as of December 31, 2011. Because they hold their economic interestin our businesses directly through the Apollo Operating Group, rather than through the issuer of the Class A shares, our managing partners and contributingpartners may have conflicting interests with holders of Class A shares. For example, our managing partners and contributing partners may have different taxpositions from us, which could influence their decisions regarding whether and when to dispose of assets, and whether and when to incur new or refinanceexisting indebtedness, especially in light of the existence of the tax receivable agreement. In addition, the structuring of future transactions may take intoconsideration the managing partners’ and contributing partners’ tax considerations even where no similar benefit would accrue to us.We qualify for, and rely on, exceptions from certain corporate governance and other requirements under the rules of the NYSE.We qualify for exceptions from certain corporate governance and other requirements under the rules of the NYSE. Pursuant to these exceptions, we haveelected not to comply with certain corporate governance requirements of the NYSE, including the requirements (i) that a majority of our board of directorsconsist of independent directors, (ii) that we have a nominating/corporate governance committee that is composed entirely of independent directors and (iii) thatwe have a compensation committee that is composed entirely of independent directors. In addition, we are not required to hold annual meetings of ourshareholders. Accordingly, you will not have the same protections afforded to equityholders of entities that are subject to all of the corporate governancerequirements of the NYSE.Potential conflicts of interest may arise among our manager, on the one hand, and us and our shareholders on the other hand. Our managerand its affiliates have limited fiduciary duties to us and our shareholders, which may permit them to favor their own interests to the detriment ofus and our shareholders.Conflicts of interest may arise among our manager, on the one hand, and us and our shareholders, on the other hand. As a result of these conflicts, ourmanager may favor its own interests and the interests of its affiliates over the interests of us and our shareholders. These conflicts include, among others, theconflicts described below. • Our manager determines the amount and timing of our investments and dispositions, indebtedness, issuances of additional stock and amounts ofreserves, each of which can affect the amount of cash that is available for distribution to you. 59Table of Contents • Our manager is allowed to take into account the interests of parties other than us in resolving conflicts of interest, which has the effect of limitingits duties (including fiduciary duties) to our shareholders; for example, our affiliates that serve as general partners of our funds have fiduciaryand contractual obligations to our fund investors, and such obligations may cause such affiliates to regularly take actions that might adverselyaffect our near-term results of operations or cash flow; our manager has no obligation to intervene in, or to notify our shareholders of, such actionsby such affiliates. • Because our managing partners and contributing partners hold their Apollo Operating Group units through entities that are not subject to corporateincome taxation and Apollo Global Management, LLC holds the Apollo Operating Group units in part through a wholly-owned subsidiary that issubject to corporate income taxation, conflicts may arise between our managing partners and contributing partners, on the one hand, and ApolloGlobal Management, LLC, on the other hand, relating to the selection and structuring of investments. • Other than as set forth in the non-competition, non-solicitation and confidentiality agreements to which our managing partners and otherprofessionals are subject, which may not be enforceable, affiliates of our manager and existing and former personnel employed by our manager arenot prohibited from engaging in other businesses or activities, including those that might be in direct competition with us. • Our manager has limited its liability and reduced or eliminated its duties (including fiduciary duties) under our operating agreement, while alsorestricting the remedies available to our shareholders for actions that, without these limitations, might constitute breaches of duty (includingfiduciary duty). In addition, we have agreed to indemnify our manager and its affiliates to the fullest extent permitted by law, except with respect toconduct involving bad faith, fraud or willful misconduct. By purchasing our Class A shares, you will have agreed and consented to theprovisions set forth in our operating agreement, including the provisions regarding conflicts of interest situations that, in the absence of suchprovisions, might constitute a breach of fiduciary or other duties under applicable state law. • Our operating agreement does not restrict our manager from causing us to pay it or its affiliates for any services rendered, or from entering intoadditional contractual arrangements with any of these entities on our behalf, so long as the terms of any such additional contractual arrangementsare fair and reasonable to us as determined under the operating agreement. • Our manager determines how much debt we incur and that decision may adversely affect our credit ratings. • Our manager determines which costs incurred by it and its affiliates are reimbursable by us. • Our manager controls the enforcement of obligations owed to us by it and its affiliates.Our manager decides whether to retain separate counsel, accountants or others to perform services for us. See “Item 13. Certain Relationships andRelated Party Transactions” for a more detailed discussion of these conflicts.Our operating agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our manager and limit remediesavailable to shareholders for actions that might otherwise constitute a breach of duty. It will be difficult for a shareholder to challenge aresolution of a conflict of interest by our manager or by its conflicts committee.Our operating agreement contains provisions that waive or consent to conduct by our manager and its affiliates that might otherwise raise issues aboutcompliance with fiduciary duties or applicable law. For example, our operating agreement provides that when our manager is acting in its individual capacity,as opposed to in its capacity as our manager, it may act without any fiduciary obligations to us or our shareholders whatsoever. When our manager, in itscapacity as our manager, is permitted to or required to make a decision in its “sole discretion” or “discretion” or that it deems “necessary or appropriate” or“necessary or advisable,” then our manager will be entitled to consider only such interests and factors as it desires, including its own interests, 60Table of Contentsand will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us or any of our shareholders andwill not be subject to any different standards imposed by our operating agreement, the Delaware Limited Liability Company Act or under any other law, rule orregulation or in equity.Whenever a potential conflict of interest exists between us and our manager, our manager may resolve such conflict of interest. If our manager determinesthat its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or available from unrelated third parties oris fair and reasonable to us, taking into account the totality of the relationships between us and our manager, then it will be presumed that in making thisdetermination, our manager acted in good faith. A shareholder seeking to challenge this resolution of the conflict of interest would bear the burden ofovercoming such presumption. This is different from the situation with Delaware corporations, where a conflict resolution by an interested party would bepresumed to be unfair and the interested party would have the burden of demonstrating that the resolution was fair.The above modifications of fiduciary duties are expressly permitted by Delaware law. Hence, we and our shareholders will only have recourse and beable to seek remedies against our manager if our manager breaches its obligations pursuant to our operating agreement. Unless our manager breaches itsobligations pursuant to our operating agreement, we and our unitholders will not have any recourse against our manager even if our manager were to act in amanner that was inconsistent with traditional fiduciary duties. Furthermore, even if there has been a breach of the obligations set forth in our operatingagreement, our operating agreement provides that our manager and its officers and directors will not be liable to us or our shareholders for errors of judgment orfor any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the manager or itsofficers and directors acted in bad faith or engaged in fraud or willful misconduct. These provisions are detrimental to the shareholders because they restrictthe remedies available to them for actions that without those limitations might constitute breaches of duty, including fiduciary duties.Also, if our manager obtains the approval of its conflicts committee, the resolution will be conclusively deemed to be fair and reasonable to us and not abreach by our manager of any duties it may owe to us or our shareholders. This is different from the situation with Delaware corporations, where a conflictresolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstrating unfairness to theplaintiff. If you purchase a Class A share, you will be treated as having consented to the provisions set forth in the operating agreement, including provisionsregarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicablestate law. As a result, shareholders will, as a practical matter, not be able to successfully challenge an informed decision by the conflicts committee.The control of our manager may be transferred to a third party without shareholder consent.Our manager may transfer its manager interest to a third party in a merger or consolidation or in a transfer of all or substantially all of its assets withoutthe consent of our shareholders. Furthermore, at any time, the partners of our manager may sell or transfer all or part of their partnership interests in ourmanager without the approval of the shareholders, subject to certain restrictions as described elsewhere in this report. A new manager may not be willing orable to form new funds and could form funds that have investment objectives and governing terms that differ materially from those of our current funds. Anew owner could also have a different investment philosophy, employ investment professionals who are less experienced, be unsuccessful in identifyinginvestment opportunities or have a track record that is not as successful as Apollo’s track record. If any of the foregoing were to occur, we could experiencedifficulty in making new investments, and the value of our existing investments, our businesses, our results of operations and our financial condition couldmaterially suffer. 61Table of ContentsOur ability to pay regular distributions may be limited by our holding company structure. We are dependent on distributions from the ApolloOperating Group to pay distributions, taxes and other expenses.As a holding company, our ability to pay distributions will be subject to the ability of our subsidiaries to provide cash to us. We intend to distributequarterly distributions to our Class A shareholders. Accordingly, we expect to cause the Apollo Operating Group to make distributions to its unitholders (inother words, Holdings, which is 100% owned, directly and indirectly, by our managing partners and our contributing partners, and the three intermediateholding companies, which are 100% owned by us), pro rata in an amount sufficient to enable us to pay such distributions to our Class A shareholders;however, such distributions may not be made. In addition, our manager can reduce or eliminate our dividend at any time, in its discretion. The ApolloOperating Group intends to make periodic distributions to its unitholders in amounts sufficient to cover hypothetical income tax obligations attributable toallocations of taxable income resulting from their ownership interest in the various limited partnerships making up the Apollo Operating Group, subject tocompliance with any financial covenants or other obligations. Tax distributions will be calculated assuming each shareholder was subject to the maximum(corporate or individual, whichever is higher) combined U.S. Federal, New York State and New York City tax rates, without regard to whether anyshareholder was subject to income tax liability at those rates. If the Apollo Operating Group has insufficient funds, we may have to borrow additional funds orsell assets, which could materially adversely affect our liquidity and financial condition. Furthermore, by paying that cash distribution rather than investingthat cash in our business, we might risk slowing the pace of our growth or not having a sufficient amount of cash to fund our operations, new investments orunanticipated capital expenditures, should the need arise. Because tax distributions to unitholders are made without regard to their particular tax situation, taxdistributions to all unitholders, including our intermediate holding companies, were increased to reflect the disproportionate income allocation to our managingpartners and contributing partners with respect to “built-in gain” assets at the time of the Private Offering Transactions.There may be circumstances under which we are restricted from paying distributions under applicable law or regulation (for example, due to Delawarelimited partnership or limited liability company act limitations on making distributions if liabilities of the entity after the distribution would exceed the value ofthe entity’s assets). In addition, under the AMH credit facility, Apollo Management Holdings is restricted in its ability to make cash distributions to us andmay be forced to use cash to collateralize the AMH credit facility, which would reduce the cash it has available to make distributions.Tax consequences to our managing partners and contributing partners may give rise to conflicts of interests.As a result of unrealized built-in gain attributable to the value of our assets held by the Apollo Operating Group entities at the time of the Private OfferingTransactions, upon the sale, refinancing or disposition of the assets owned by the Apollo Operating Group entities, our managing partners and contributingpartners will incur different and significantly greater tax liabilities as a result of the disproportionately greater allocations of items of taxable income and gain tothe managing partners and contributing partners upon a realization event. As the managing partners and contributing partners will not receive a correspondinggreater distribution of cash proceeds, they may, subject to applicable fiduciary or contractual duties, have different objectives regarding the appropriatepricing, timing and other material terms of any sale, refinancing, or disposition, or whether to sell such assets at all. Decisions made with respect to anacceleration or deferral of income or the sale or disposition of assets with unrealized built-in gains may also influence the timing and amount of payments thatare received by an exchanging or selling founder or partner under the tax receivable agreement. All other factors being equal, earlier disposition of assets withunrealized built-in gains following such exchange will tend to accelerate such payments and increase the present value of the tax receivable agreement, anddisposition of assets with unrealized built-in gains before an exchange will increase a managing partner’s or contributing partner’s tax liability without givingrise to any rights to receive payments under the tax receivable agreement. Decisions made regarding a change of control also could have a material influence onthe timing and amount of payments received by our managing partners and contributing partners pursuant to the tax receivable agreement. 62Table of ContentsWe are required to pay Holdings for most of the actual tax benefits we realize as a result of the tax basis step-up we receive in connection withtaxable exchanges by our units held in the Apollo Operating Group entities or our acquisitions of units from our managing partners andcontributing partners.On a quarterly basis, each managing partner and contributing partner has the right to exchange the Apollo Operating Group units that he holds throughhis partnership interest in Holdings for our Class A shares in a partially taxable transaction. These exchanges, as well as our acquisitions of units from ourmanaging partners or contributing partners, may result in increases in the tax basis of the intangible assets of the Apollo Operating Group that otherwise wouldnot have been available. Any such increases may reduce the amount of tax that APO Corp. would otherwise be required to pay in the future. The IRS maychallenge all or part of these increased deductions and tax basis increases and a court could sustain such a challenge.We have entered into a tax receivable agreement with Holdings that provides for the payment by APO Corp. to our managing partners and contributingpartners of 85% of the amount of actual tax savings, if any, that APO Corp. realizes (or is deemed to realize in the case of an early termination payment byAPO Corp. or a change of control, as discussed below) as a result of these increases in tax deductions and tax basis of the Apollo Operating Group. In April2011 and April 2010, the Apollo Operating Group made a distribution of $39.8 million and $15.0 million, respectively, to APO Corp., and APO Corp. madepayment to satisfy the liability under the tax receivable agreement to the managing partners and contributing partners from a realized tax benefit for the 2010and 2009 tax year. In April 2009, APO Corp. made payment of $9.1 million pursuant to the tax receivable agreement. Prior to 2010, the distribution percentagewas governed by a special allocation as discussed in footnote 15 of our consolidated financial statements and as a result, the Apollo Operating Group made atotal distribution of $27.0 million in 2009 to APO Corp. and Holdings, respectively, in accordance with their pro rata interests, to satisfy the liability underthe tax receivable agreement. Of the distribution, $17.9 million was distributed to the managing partners and contributing partners in 2009 from a realized taxbenefit for the 2008 tax year. Future payments that APO Corp. may make to our managing partners and contributing partners could be material in amount. Inthe event that other of our current or future subsidiaries become taxable as corporations and acquire Apollo Operating Group units in the future, or if webecome taxable as a corporation for U.S. Federal income tax purposes, we expect, and have agreed that, each will become subject to a tax receivable agreementwith substantially similar terms.The IRS could challenge our claim to any increase in the tax basis of the assets owned by the Apollo Operating Group that results from the exchangesentered into by the managing partners or contributing partners. The IRS could also challenge any additional tax depreciation and amortization deductions orother tax benefits (including deductions for imputed interest expense associated with payments made under the tax receivable agreement) we claim as a resultof, or in connection with, such increases in the tax basis of such assets. If the IRS were to successfully challenge a tax basis increase or tax benefits wepreviously claimed from a tax basis increase, Holdings would not be obligated under the tax receivable agreement to reimburse APO Corp. for any paymentspreviously made to them (although any future payments would be adjusted to reflect the result of such challenge). As a result, in certain circumstances,payments could be made to our managing partners and contributing partners under the tax receivable agreement in excess of 85% of the actual aggregate cashtax savings of APO Corp. APO Corp.’s ability to achieve benefits from any tax basis increase and the payments to be made under this agreement will dependupon a number of factors, including the timing and amount of its future income.In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes ofcontrol, APO Corp.’s (or its successor’s) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change ofcontrol) would be based on certain assumptions, including that APO Corp. would have sufficient taxable income to fully utilize the deductions arising fromthe increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. See “Item 13. Certain Relationships andRelated Party Transactions—Tax Receivable Agreement.” 63Table of ContentsIf we were deemed an investment company under the Investment Company Act, applicable restrictions could make it impractical for us to continueour businesses as contemplated and could have a material adverse effect on our businesses and the price of our Class A shares.We do not believe that we are an “investment company” under the Investment Company Act because the nature of our assets and the income derivedfrom those assets allow us to rely on the exception provided by Rule 3a-1 issued under the Investment Company Act. In addition, we believe we are not aninvestment company under Section 3(b)(1) of the Investment Company Act because we are primarily engaged in non-investment company businesses. Weintend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, we wouldbe taxed as a corporation and other restrictions imposed by the Investment Company Act, including limitations on our capital structure and our ability totransact with affiliates that apply to us, could make it impractical for us to continue our businesses as contemplated and would have a material adverse effecton our businesses and the price of our Class A shares.Risks Related to TaxationYou may be subject to U.S. Federal income tax on your share of our taxable income, regardless of whether you receive any cash distributionsfrom us.Under current law, so long as we are not required to register as an investment company under the Investment Company Act and 90% of our grossincome for each taxable year constitutes “qualifying income” within the meaning of the Internal Revenue Code on a continuing basis, we will be treated, forU.S. Federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. You will be subject toU.S. Federal, state, local and possibly, in some cases, foreign income taxation on your allocable share of our items of income, gain, loss, deduction and creditfor each of our taxable years ending with or within your taxable year, regardless of whether or not you receive cash distributions from us. Accordingly, youmay be required to make tax payments in connection with your ownership of Class A shares that significantly exceed your cash distributions in any specificyear.If we are treated as a corporation for U.S. Federal income tax purposes, the value of the Class A shares would be adversely affected.The value of your investment will depend in part on our company being treated as a partnership for U.S. Federal income tax purposes, which requiresthat 90% or more of our gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Internal Revenue Code, and that weare not required to register as an investment company under the Investment Company Act and related rules. Although we intend to manage our affairs so thatour partnership will meet the 90% test described above in each taxable year, we may not meet these requirements or, as discussed below, current law maychange so as to cause, in either event, our partnership to be treated as a corporation for U.S. Federal income tax purposes. If we were treated as a corporationfor U.S. Federal income tax purposes, (i) we would become subject to corporate income tax and (ii) distributions to shareholders would be taxable as dividendsfor U.S. Federal income tax purposes to the extent of our earnings and profits.Current law may change, causing us to be treated as a corporation for U.S. federal or state income tax purposes or otherwise subjecting us to entity leveltaxation. See “—Risks Related to Our Organization and Structure—The U.S. Congress has considered legislation that would have (i) in some cases after a ten-year period, precluded us from qualifying as a partnership or required us to hold carried interest through taxable subsidiary corporations and (ii) taxed certainincome and gains at increased rates. If any similar legislation were to be enacted and apply to us, the after tax income and gain related to our business, as wellas the market price of our units, could be reduced.” Because of widespread state budget deficits, several states are evaluating ways to subject partnerships toentity level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us as an entity, ourdistributions to you would be reduced. 64Table of ContentsOur structure involves complex provisions of U.S. Federal income tax law for which no clear precedent or authority may be available. Ourstructure is also subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.The U.S. Federal income tax treatment of holders of Class A shares depends in some instances on determinations of fact and interpretations of complexprovisions of U.S. Federal income tax law for which no clear precedent or authority may be available. You should be aware that the U.S. Federal income taxrules are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting in revisedinterpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. The IRS pays close attention tothe proper application of tax laws to partnerships and entities taxed as partnerships. The present U.S. Federal income tax treatment of an investment in ourClass A shares may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments andcommitments previously made. Changes to the U.S. federal income tax laws and interpretations thereof could make it more difficult or impossible to meet theexception for us to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or cause us to change ourinvestments and commitments, affect the tax considerations of an investment in us, change the character or treatment of portions of our income (including, forinstance, the treatment of carried interest as ordinary income rather than capital gain) and adversely affect an investment in our Class A shares. For example,as discussed above under “— Risks Related to Our Organization and Structure— Although not enacted, the U.S. Congress has considered legislation thatwould have: (i) in some cases after a ten-year transition period, precluded us from qualifying as a partnership or required us to hold carried interest throughtaxable corporations; and (ii) taxed certain income and gains at increased rates. If similar legislation were to be enacted and apply to us, the value of ourClass A shares could be adversely affected,” the U.S. Congress has considered various legislative proposals to treat all or part of the capital gain and dividendincome that is recognized by an investment partnership and allocable to a partner affiliated with the sponsor of the partnership (i.e., a portion of the carriedinterest) as ordinary income to such partner for U.S. federal income tax purposes.Our operating agreement permits our manager to modify our operating agreement from time to time, without the consent of the holders of Class A shares,to address certain changes in U.S. Federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a materialadverse impact on some or all holders of Class A shares. For instance, our manager could elect at some point to treat us as an association taxable as acorporation for U.S. Federal (and applicable state) income tax purposes. If our manager were to do this, the U.S. Federal income tax consequences of owningour Class A shares would be materially different. Moreover, we will apply certain assumptions and conventions in an attempt to comply with applicable rulesand to report income, gain, deduction, loss and credit to holders of Class A shares in a manner that reflects such beneficial ownership of items by holders ofClass A shares, taking into account variation in ownership interests during each taxable year because of trading activity. However, those assumptions andconventions may not be in compliance with all aspects of applicable tax requirements. It is possible that the IRS will assert successfully that the conventionsand assumptions used by us do not satisfy the technical requirements of the Internal Revenue Code and/or Treasury regulations and could require that items ofincome, gain, deductions, loss or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects holders ofClass A shares.Our interests in certain of our businesses are held through entities that are treated as corporations for U.S. Federal income tax purposes; suchcorporations may be liable for significant taxes and may create other adverse tax consequences, which could potentially, adversely affect the valueof your investment.In light of the publicly traded partnership rules under U.S. Federal income tax law and other requirements, we hold our interests in certain of ourbusinesses through entities that are treated as corporations for U.S. Federal income tax purposes. Each such corporation could be liable for significant U.S.Federal income taxes and applicable state, local and other taxes that would not otherwise be incurred, which could adversely affect the value of yourinvestment. Furthermore, it is possible that the IRS could challenge the manner in which such corporation’s taxable income is computed by us. 65Table of ContentsChanges in U.S. tax law could adversely affect our ability to raise funds from certain foreign investors.Under the U.S. Foreign Account Tax Compliance Act, or FATCA, all entities in a broadly defined class of foreign financial institutions, or FFIs, arerequired to comply with a complicated and expansive reporting regime or, beginning in 2014, be subject to a 30% United States withholding tax on certain U.S.payments (and beginning in 2015, a 30% withholding tax on gross proceeds from the sale of U.S. stocks and securities) and non-U.S. entities which are notFFIs are required to either certify they have no substantial U.S. beneficial ownership or to report certain information with respect to their substantial U.S.beneficial ownership or, beginning in 2014, be subject to a 30% U.S. withholding tax on certain U.S. payments (and beginning in 2015, a 30% withholdingtax on gross proceeds from the sale of U.S. stocks and securities). The reporting obligations imposed under FATCA require FFIs to enter into agreements withthe IRS to obtain and disclose information about certain investors to the IRS. Regulations implementing FATCA have not yet been finalized. Recently issuedproposed regulations if finalized would delay the implementation of certain reporting requirements under FATCA but no assurance can be given that theproposed regulations will be finalized or that any final regulations will include any delay. Accordingly, some foreign investors may hesitate to invest in U.S.funds until there is more certainty around FATCA implementation. In addition, the administrative and economic costs of compliance with FATCA maydiscourage some foreign investors from investing in U.S. funds, which could adversely affect our ability to raise funds from these investors.We may hold or acquire certain investments through an entity classified as a PFIC or CFC for U.S. Federal income tax purposes.Certain of our investments may be in foreign corporations or may be acquired through a foreign subsidiary that would be classified as a corporation forU.S. Federal income tax purposes. Such an entity may be a passive foreign investment company, or a “PFIC,” or a controlled foreign corporation, or a “CFC,”for U.S. Federal income tax purposes. For example, APO (FC), LLC is considered to be a CFC for U.S. Federal income tax purposes. Class A shareholdersindirectly owning an interest in a PFIC or a CFC may experience adverse U.S. tax consequences, including the recognition of taxable income prior to the receiptof cash relating to such income. In addition, gain on the sale of a PFIC or CFC may be taxable at ordinary income tax rates.Complying with certain tax-related requirements may cause us to forego otherwise attractive business or investment opportunities or enter intoacquisitions, borrowings, financings or arrangements we may not have otherwise entered into.In order for us to be treated as a partnership for U.S. Federal income tax purposes, and not as an association or publicly traded partnership taxable as acorporation, we must meet the qualifying income exception discussed above on a continuing basis and we must not be required to register as an investmentcompany under the Investment Company Act. In order to effect such treatment we (or our subsidiaries) may be required to invest through foreign or domesticcorporations, forego attractive business or investment opportunities or enter into borrowings or financings we may not have otherwise entered into. This maycause us to incur additional tax liability and/or adversely affect our ability to operate solely to maximize our cash flow. Our structure also may impede ourability to engage in certain corporate acquisitive transactions because we generally intend to hold all of our assets through the Apollo Operating Group. Inaddition, we may be unable to participate in certain corporate reorganization transactions that would be tax free to our holders if we were a corporation. To theextent we hold assets other than through the Apollo Operating Group, we will make appropriate adjustments to the Apollo Operating Group agreements so thatdistributions to Holdings and us would be the same as if such assets were held at that level. Moreover, we are precluded by a contract with one of the StrategicInvestors from acquiring assets in a manner that would cause that Strategic Investor to be engaged in a commercial activity within the meaning of Section 892of the Internal Revenue Code.Tax gain or loss on disposition of our Class A shares could be more or less than expected.If you sell your Class A shares, you will recognize a gain or loss equal to the difference between the amount realized and your adjusted tax basisallocated to those Class A shares. Prior distributions to you in excess of the 66Table of Contentstotal net taxable income allocated to you will have decreased the tax basis in your Class A shares. Therefore, such excess distributions will increase yourtaxable gain, or decrease your taxable loss, when the Class A shares are sold and may result in a taxable gain even if the sale price is less than the original cost.A portion of the amount realized, whether or not representing gain, may be ordinary income to you.We cannot match transferors and transferees of Class A shares, and we have therefore adopted certain income tax accounting conventions thatmay not conform with all aspects of applicable tax requirements. The IRS may challenge this treatment, which could adversely affect the value ofour Class A shares.Because we cannot match transferors and transferees of Class A shares, we have adopted depreciation, amortization and other tax accounting positionsthat may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of taxbenefits available to holders of Class A shares. It also could affect the timing of these tax benefits or the amount of gain on the sale of Class A shares and couldhave a negative impact on the value of Class A shares or result in audits of and adjustments to the tax returns of holders of Class A shares.The sale or exchange of 50% or more of our capital and profit interests will result in the termination of our partnership for U.S. federal income taxpurposes. We will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of the total interestsin our capital and profits within a twelve-month period. Our termination would, among other things, result in the closing of our taxable year for all holders ofClass A shares and could result in a deferral of depreciation deductions allowable in computing our taxable income.Non-U.S. persons face unique U.S. tax issues from owning Class A shares that may result in adverse tax consequences to them.In light of our investment activities, we may be, or may become, engaged in a U.S. trade or business for U.S. federal income tax purposes, in whichcase some portion of our income would be treated as effectively connected income with respect to non-U.S. holders of our Class A shares, or “ECI.” Moreover,dividends paid by an investment that we make in a real estate investment trust, or “REIT,” that are attributable to gains from the sale of U.S. real propertyinterests and sales of certain investments in interests in U.S. real property, including stock of certain U.S. corporations owning significant U.S. real property,may be treated as ECI with respect to non-U.S. holders of our Class A shares. In addition, certain income of non-U.S. holders from U.S. sources notconnected to any U.S. trade or business conducted by us could be treated as ECI. To the extent our income is treated as ECI, each non-U.S. holder generallywould be subject to withholding tax on its allocable share of such income, would be required to file a U.S. federal income tax return for such year reporting itsallocable share of income effectively connected with such trade or business and any other income treated as ECI, and would be subject to U.S. federal incometax at regular U.S. tax rates on any such income (state and local income taxes and filings may also apply in that event). Non-U.S. holders that are corporationsmay also be subject to a 30% branch profits tax on their allocable share of such income. In addition, certain income from U.S. sources that is not ECI allocableto non-U.S. holders may be reduced by withholding taxes imposed at the highest effective applicable tax rate.An investment in Class A shares will give rise to UBTI to certain tax-exempt holders.We will not make investments through taxable U.S. corporations solely for the purpose of limiting UBTI from “debt-financed” property and, thus, aninvestment in Class A shares will give rise to UBTI to tax-exempt holders of Class A shares. APO Asset Co., LLC may borrow funds from APO Corp. orthird parties from time to time to make investments. These investments will give rise to UBTI from “debt-financed” property. Moreover, if the IRSsuccessfully asserts that we are engaged in a trade or business, then additional amounts of income could be treated as UBTI. 67Table of ContentsWe do not intend to make, or cause to be made, an election under Section 754 of the Internal Revenue Code to adjust our asset basis or the assetbasis of certain of the Group Partnerships. Thus, a holder of Class A shares could be allocated more taxable income in respect of those Class Ashares prior to disposition than if such an election were made.We did not make and currently do not intend to make, or cause to be made, an election to adjust asset basis under Section 754 of the Internal RevenueCode with respect to us, Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P. Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV,L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P. andApollo Principal Holdings IX, L.P. If no such election is made, there will generally be no adjustment for a transferee of Class A shares even if the purchaseprice of those Class A shares is higher than the Class A shares’ share of the aggregate tax basis of our assets immediately prior to the transfer. In that case, ona sale of an asset, gain allocable to a transferee could include built-in gain allocable to the transferor at the time of the transfer, which built-in gain wouldotherwise generally be eliminated if a Section 754 election had been made.Class A shareholders may be subject to state and local taxes and return filing requirements as a result of investing in our Class A shares.In addition to U.S. federal income taxes, our Class A shareholders may be subject to other taxes, including state and local taxes, unincorporatedbusiness taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in thefuture, even if our Class A shareholders do not reside in any of those jurisdictions. Our Class A shareholders may also be required to file state and localincome tax returns and pay state and local income taxes in some or all of these jurisdictions. Further, Class A shareholders may be subject to penalties forfailure to comply with those requirements. It is the responsibility of each Class A shareholder to file all U.S. federal, state and local tax returns that may berequired of such Class A shareholder.We may not be able to furnish to each Class A shareholder specific tax information within 90 days after the close of each calendar year, whichmeans that holders of Class A shares who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due dateof their income tax return. In addition, it is possible that Class A shareholders may be required to file amended income tax returns.As a publicly traded partnership, our operating results, including distributions of income, dividends, gains, losses or deductions and adjustments tocarrying basis, will be reported on Schedule K-1 and distributed to each Class A shareholder annually. It may require longer than 90 days after the end of ourfiscal year to obtain the requisite information from all lower-tier entities so that K-1s may be prepared for us. For this reason, Class A shareholders who areU.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicabledue date of their income tax return for the taxable year.In addition, it is possible that a Class A shareholder will be required to file amended income tax returns as a result of adjustments to items on thecorresponding income tax returns of the partnership. Any obligation for a Class A shareholder to file amended income tax returns for that or any other reason,including any costs incurred in the preparation or filing of such returns, are the responsibility of each Class A shareholder. ITEM 1B.UNRESOLVED STAFF COMMENTSNone. 68Table of ContentsITEM 2.PROPERTIESOur principal executive offices are located in leased office space at 9 West 57th Street, New York, New York. We also lease the space for our offices inPurchase, NY, California, Houston, London, Singapore, Frankfurt, Mumbai, Hong Kong and Luxembourg. We do not own any real property. We considerthese facilities to be suitable and adequate for the management and operation of our businesses. ITEM 3.LEGAL PROCEEDINGSWe are, from time to time, party to various legal actions arising in the ordinary course of business, including claims and litigation, reviews,investigations and proceedings by governmental and self-regulatory agencies regarding our business.On July 16, 2008, Apollo was joined as a defendant in a pre-existing purported class action pending in Massachusetts federal court against, amongother defendants, numerous private equity firms. The suit alleges that beginning in mid-2003, Apollo and the other private equity firm defendants violated theU.S. antitrust laws by forming “bidding clubs” or “consortia” that, among other things, rigged the bidding for control of various public corporations,restricted the supply of private equity financing, fixed the prices for target companies at artificially low levels, and allocated amongst themselves an allegedmarket for private equity services in leveraged buyouts. The suit seeks class action certification, declaratory and injunctive relief, unspecified damages, andattorneys’ fees. On August 27, 2008, Apollo and its co-defendants moved to dismiss plaintiffs’ complaint and on November 20, 2008, the Court grantedApollo’s motion. The Court also dismissed two other defendants, Permira and Merrill Lynch. In an order dated August 18, 2010, the Court granted in partand denied in part plaintiffs’ motion to expand the complaint and to obtain additional discovery. The Court ruled that plaintiffs could amend the complaintand obtain discovery in a second discovery phase limited to eight additional transactions. The Court gave the plaintiffs until September 17, 2010 to amend thecomplaint to include the additional eight transactions. On September 17, 2010, the plaintiffs filed a motion to amend the complaint by adding the additionaleight transactions and adding Apollo as a defendant. On October 6, 2010, the Court granted plaintiffs’ motion to file the fourth amended complaint. Plaintiffs’fourth amended complaint, filed on October 7, 2010, adds Apollo Global Management, LLC, as a defendant. On November 4, 2010, Apollo moved todismiss, arguing that the claims against Apollo are time-barred and that the allegations against Apollo are insufficient to state an antitrust conspiracy claim. OnFebruary 17, 2011, the Court denied Apollo’s motion to dismiss, ruling that Apollo should raise the statute of limitations issues on summary judgment afterdiscovery is completed. Apollo filed its answer to the fourth amended complaint on March 21, 2011. On July 11, 2011, the plaintiffs filed a motion for leaveto file a fifth amended complaint that adds ten additional transactions and expands the scope of the class seeking relief. On September 7, 2011, the Courtdenied the motion for leave to amend without prejudice and gave plaintiffs permission to take limited discovery on the ten additional transactions. The Courtset April 17, 2012, as the deadline for completing all fact discovery. Currently, Apollo does not believe that a loss from liability in this case is either probableor reasonably estimable. The Court granted Apollo’s motion to dismiss plaintiffs’ initial complaint in 2008, ruling that Apollo was released from the onlytransaction in which it allegedly was involved. While plaintiffs have survived Apollo’s motion to dismiss the fourth amended complaint, the Court stated indenying the motion that it will consider the statute of limitations (one of the bases for Apollo’s motion to dismiss) at the summary judgment stage. Based on theapplicable statute of limitations, among other reasons, Apollo believes that plaintiffs’ claims lack factual and legal merit. For these reasons, no estimate ofpossible loss, if any, can be made at this time.Various state attorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents in connectionwith the solicitation of investments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have received subpoenas andother requests for information from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding the use ofplacement agents. CalPERS, one of our Strategic Investors, announced on October 14, 2009, that it had initiated a special review of placement agents andrelated issues. The report of the CalPERS Special 69Table of ContentsReview was issued on March 14, 2011. That report does not allege any wrongdoing on the part of Apollo or its affiliates. Apollo is continuing to cooperate withall such investigations and other reviews. In addition, on May 6, 2010, the California Attorney General filed a civil complaint against Alfred Villalobos andhis company, Arvco Capital Research, LLC (“Arvco”) (a placement agent that Apollo has used) and Federico Buenrostro Jr., the former CEO of CalPERS,alleging conduct in violation of certain California laws in connection with CalPERS’s purchase of securities in various funds managed by Apollo and anotherasset manager. Apollo is not a party to the civil lawsuit and the lawsuit does not allege any misconduct on the part of Apollo. Apollo believes that it has handledits use of placement agents in an appropriate manner. Finally, on December 29, 2011, the United States Bankruptcy Court for the District of Nevadaapproved an application made by Mr. Villalobos, Arvco and related entities (the “Arvco Debtors”) in their consolidated bankruptcy proceedings to hire speciallitigation counsel to pursue certain claims on behalf of the bankruptcy estates of the Arvco Debtors, including potential claims against Apollo (a) for fees thatApollo purportedly owes the Arvco Debtors for placement agent services and (b) for indemnification of legal fees and expenses arising out of the ArvcoDebtors’ defense of the California Attorney General action described above. To date, no such claims have been brought. Apollo denies the merit of any suchclaims and will vigorously contest them, if they are brought.Although the ultimate outcome of these matters cannot be ascertained at this time, we are of the opinion, after consultation with counsel, that theresolution of any such matters to which we are a party at this time will not have a material adverse effect on our consolidated financial statements. Legalactions material to us could, however, arise in the future. ITEM 4.MINE SAFETY DISCLOSURESNot Applicable 70Table of ContentsPART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIESOur Class A shares are traded on the New York Stock Exchange (“NYSE”) under the symbol “APO.” Our Class A shares began trading on the NYSEon March 30, 2011.The number of holders of record of our Class A shares as of March 7, 2012 was 6. This does not include the number of shareholders that hold sharesin “street name” through banks or broker-dealers.Cash Distribution PolicyWith respect to fiscal year 2011, we have paid four cash distributions of $0.17, $0.22, $0.24 and $0.20 per Class A share onJanuary 14, June 1, August 29 and December 2, 2011 (aggregating $0.83 per Class A share) to record holders of Class A shares and we have declared anadditional cash distribution of $0.46 per Class A shares to shareholders in respect of the fourth quarter of 2011 payable on February 29, 2012 to holders ofrecord of Class A shares at the close of business on February 23, 2012. These distributions related to fiscal year 2011 represented our net after-tax cash flowfrom operations in excess of amounts determined by our manager to be necessary or appropriate to provide for the conduct of our business, to makeappropriate investments in our business and our funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide forfuture distributions to our shareholders for any ensuing quarter.The following table sets forth the high and low intra-day sales prices per unit of our Class A shares, for the periods indicated, as reported by the NYSE: Sales Price 2011 High Low First Quarter $19.00 $17.91 Second Quarter 18.91 15.27 Third Quarter 17.94 9.83 Fourth Quarter 14.21 8.85 Our current intention is to distribute to our Class A shareholders on a quarterly basis substantially all of our net after-tax cash flow from operations inexcess of amounts determined by our manager to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments inour businesses and our funds, to comply with applicable law, to service our indebtedness or to provide for future distributions to our Class A shareholders forany ensuing quarter. Because we will not know what our actual available cash flow from operations will be for any year until sometime after the end of suchyear, we expect that a fourth quarter distribution may be adjusted to take into account actual net after-tax cash flow from operations for that year.The declaration, payment and determination of the amount of our quarterly distribution will be at the sole discretion of our manager, which may changeour cash distribution policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, will or can be paid. In making decisionsregarding our quarterly distribution, our manager will take into account general economic and business conditions, our strategic plans and prospects, ourbusinesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractualrestrictions and obligations, legal, tax and regulatory restrictions, restrictions and other implications on the payment of distributions by us to our commonshareholders or by our subsidiaries to us and such other factors as our manager may deem relevant. 71Table of ContentsBecause we are a holding company that owns intermediate holding companies, the funding of each distribution, if declared, will occur in three steps, asfollows. • First, we will cause one or more entities in the Apollo Operating Group to make a distribution to all of its partners, including our wholly-ownedsubsidiaries APO Corp., APO Asset Co., LLC and APO (FC), LLC (as applicable), and Holdings, on a pro rata basis; • Second, we will cause our intermediate holding companies, APO Corp., APO Asset Co., LLC and APO (FC), LLC (as applicable), to distributeto us, from their net after-tax proceeds, amounts equal to the aggregate distribution we have declared; and • Third, we will distribute the proceeds received by us to our Class A shareholders on a pro rata basis.Payments that any of our intermediate holding companies make under the tax receivable agreement will reduce amounts that would otherwise be availablefor distribution by us on Class A shares.The Apollo Operating Group intends to make periodic distributions to its partners (that is, Holdings and our intermediate holding companies) inamounts sufficient to cover hypothetical income tax obligations attributable to allocations of taxable income resulting from their ownership interest in thevarious limited partnerships making up the Apollo Operating Group, subject to compliance with any financial covenants or other obligations. Taxdistributions will be calculated assuming each shareholder was subject to the maximum (corporate or individual, whichever is higher) combined U.S. Federal,New York State and New York City tax rates, without regard to whether any shareholder was subject to income tax liability at those rates. Because taxdistributions to partners are made without regard to their particular tax situation, tax distributions to all partners, including our intermediate holdingcompanies, will be increased to reflect the disproportionate income allocation to our managing partners and contributing partners with respect to “built-in gain”assets at the time of the Private Offering Transactions. Tax distributions will be made only to the extent all distributions from the Apollo Operating Group forsuch year are insufficient to cover such tax liabilities and all such distributions will be made to all partners on a pro rata basis based upon their respectiveinterests in the applicable partnership. There can be no assurance that we will pay cash distributions on the Class A shares in an amount sufficient to coverany tax liability arising from the ownership of Class A shares.Under Delaware law we are prohibited from making a distribution to the extent that our liabilities, after such distribution, exceed the fair value of ourassets. Our operating agreement does not contain any restrictions on our ability to make distributions, except that we may only distribute Class A shares toholders of Class A shares. The AMH credit facility, however, restricts the ability of AMH to make cash distributions to us by requiring mandatorycollateralization and restricting payments under certain circumstances. AMH will generally be restricted from paying distributions, repurchasing stock andmaking distributions and similar types of payments if any default or event of default occurs, if it has failed to deposit the requisite cash collateralization ordoes not expect to be able to maintain the requisite cash collateralization or if, after giving effect to the incurrence of debt to finance such distribution, its debt toEBITDA ratio would exceed specified levels. Instruments governing indebtedness that we or our subsidiaries incur in the future may contain furtherrestrictions on our or our subsidiaries’ ability to pay distributions or make other cash distributions to equityholders.In addition, the Apollo Operating Group’s cash flow from operations may be insufficient to enable it to make required minimum tax distributions to itspartners, in which case the Apollo Operating Group may have to borrow funds or sell assets, and thus our liquidity and financial condition could bematerially adversely affected. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we might risk slowing the pace ofour growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.Our cash distribution policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay distributions accordingto our cash distribution policy, we may not pay distributions according to our policy, or at all, if, among other things, we do not have the cash necessary topay the intended distributions. 72Table of ContentsAs of December 31, 2011, approximately 25.8 million RSUs granted to Apollo employees (net of forfeited awards) were entitled to distributionequivalents, to be paid in the form of cash compensation.Class A Shares Repurchases in the Fourth Quarter of 2011No purchases of our Class A shares were made by us or on our behalf in the fourth quarter of the year ended December 31, 2011.Unregistered Sale of Equity SecuritiesOn October 10, 2011 and November 10, 2011, we issued 51,663 and 1,011,248 Class A shares, net of taxes, to Apollo Management Holdings, L.P.,respectively, for an aggregate purchase price of $543,494 and $13,409,148, respectively. The issuances were exempt from registration under the Securities Actin accordance with Section 4(2) and Rule 506 thereof, as transactions by the issuer not involving a public offering. We determined that the purchaser ofClass A shares in the transactions, Apollo Management Holdings, L.P., was an accredited investor.Use of Proceeds from Initial Public OfferingThe effective date of Apollo Global Management, LLC’s registration statement filed on Form S-1 under the Securities Act (File No. 333-150141) relatingthe initial public offering of Class A shares, representing Class A limited liability company interests of Apollo Global Management, LLC, was March 29,2011. A total of 21,500,000 Class A shares were offered for sale by us and 8,257,559 Class A shares were offered for resale by certain selling shareholders.Goldman, Sachs & Co., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as representatives of the underwriter and,together with Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., UBS Securities LLC, Barclays CapitalInc., Morgan Stanley & Co. Incorporated and Wells Fargo Securities, LLC, acted as joint book-running managers of the offering. The initial public offeringwas completed on April 4, 2011.The aggregate offering price for the Class A shares offered by selling shareholders was approximately $156.9 million and the related underwritingdiscounts where approximately $9.4 million. We did not receive any of the proceeds from the sale of Class A shares offered by selling shareholdersparticipating in the initial public offering.The aggregate offering price for the Class A shares offered by us was approximately $408.5 million and the related underwriting discounts wereapproximately $24.5 million, none of which was paid to affiliates of Apollo Global Management, LLC. We incurred approximately $1.5 million of otherexpenses in connection with the initial public offering. The net proceeds from the sale of 21,500,000 Class A shares offered by us totaled approximately$382.5 million. We have used the proceeds from the initial public offering for general corporate purposes and to fund growth initiatives. ITEM 6.SELECTED FINANCIAL DATAThe following selected historical consolidated and combined financial and other data of Apollo Global Management, LLC should be read together with“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notesincluded in “Item 8. Financial Statements and Supplementary Data.”The selected historical consolidated statements of operations data of Apollo Global Management, LLC for each of the years ended December 31, 2011,2010 and 2009 and the selected historical consolidated statements of financial condition data as of December 31, 2011 and 2010 have been derived from ourconsolidated financial statements which are included in Item 8. Financial Statements and Supplementary Data.We derived the selected historical consolidated and combined statements of operations data of Apollo Global Management, LLC for the years endedDecember 31, 2008 and 2007 and the selected consolidated and combined statements of financial condition data as of December 31, 2009, 2008 and 2007from our audited consolidated and combined financial statements which are not included in this document. 73Table of ContentsThe selected historical financial data are not indicative of our expected future operating results. In particular, after undergoing the Reorganization onJuly 13, 2007 (“2007 Reorganization”) and providing liquidation rights to limited partners of certain of the funds we manage on either August 1, 2007 orNovember 30, 2007, Apollo Global Management, LLC no longer consolidated in its financial statements certain of the funds that have historically beenconsolidated in our financial statements. Year EndedDecember 31, 2011 2010 2009 2008 2007 (in thousands, except per share amounts) Statement of Operations Data Revenues: Advisory and transaction fees from affiliates $81,953 $79,782 $56,075 $145,181 $150,191 Management fees from affiliates 487,559 431,096 406,257 384,247 192,934 Carried interest (loss) income from affiliates (397,880) 1,599,020 504,396 (796,133) 294,725 Total Revenues 171,632 2,109,898 966,728 (266,705) 637,850 Expenses: Compensation and benefits: Equity-based compensation 1,149,753 1,118,412 1,100,106 1,125,184 989,849 Salary, bonus and benefits 251,095 249,571 227,356 201,098 149,553 Profit sharing expense (63,453) 555,225 161,935 (482,682) 307,739 Incentive fee compensation 3,383 20,142 5,613 — 3,189 Total Compensation and Benefits 1,340,778 1,943,350 1,495,010 843,600 1,450,330 Interest expense 40,850 35,436 50,252 62,622 105,968 Interest expense—beneficial conversion feature — — — — 240,000 Professional fees 59,277 61,919 33,889 76,450 81,824 Litigation settlement — — — 200,000 — General, administrative and other 75,558 65,107 61,066 71,789 36,618 Placement fees 3,911 4,258 12,364 51,379 27,253 Occupancy 35,816 23,067 29,625 20,830 12,865 Depreciation and amortization 26,260 24,249 24,299 22,099 7,869 Total Expenses 1,582,450 2,157,386 1,706,505 1,348,769 1,962,727 Other Income (Loss): Net (loss) income from investment activities (129,827) 367,871 510,935 (1,269,100) 2,279,263 Net gains from investment activities of consolidated variable interest entities 24,201 48,206 — — — Income (loss) from equity method investments 13,923 69,812 83,113 (57,353) 1,722 Interest income 4,731 1,528 1,450 19,368 52,500 Gain from repurchase of debt — — 36,193 — — Dividend income from affiliates — — — — 238,609 Other income (loss), net 205,520 195,032 41,410 (4,609) (36) Total Other Income (Loss) 118,548 682,449 673,101 (1,311,694) 2,572,058 (Loss) Income Before Income Tax (Provision) Benefit (1,292,270) 634,961 (66,676) (2,927,168) 1,247,181 Income tax (provision) benefit (11,929) (91,737) (28,714) 36,995 (6,726) Net (Loss) Income (1,304,199) 543,224 (95,390) (2,890,173) 1,240,455 Net loss (income) attributable to Non-Controlling Interests 835,373 (448,607) (59,786) 1,977,915 (1,810,106) Net (Loss) Income Attributable to Apollo Global Management, LLC $(468,826) $94,617 $(155,176) $(912,258) $(569,651) Distributions Declared per Class A share $0.83 $0.21 $0.05 $0.56 $— Net (Loss) Income Per Class A Share—Basic and Diluted $(4.18) $0.83 $(1.62) $(9.37) $(11.71) Statement of Financial Condition Data Total assets $7,975,873 $6,552,372 $3,385,197 $2,474,532 $5,115,642 Debt (excluding obligations of consolidated variable interest entities) 738,516 751,525 933,834 1,026,005 1,057,761 Debt obligations of consolidated variable interest entities 3,189,837 1,127,180 — — — Total shareholders’ equity 2,648,321 3,081,419 1,299,110 325,785 2,408,329 Total Non-Controlling Interests 1,921,920 2,930,517 1,603,146 822,843 2,312,286 74(5)(1)(2)(3)(4)(6)Table of Contents(1)Litigation settlement charge was incurred in connection with an agreement with Huntsman to settle certain claims related to Hexion’s now terminated merger agreement with Huntsman. Insurance proceeds of$162.5 million and $37.5 million are included in other income during the years ended December 31, 2010 and 2009, respectively.(2)During April and May 2009, the Company repurchased a combined total of $90.9 million of face value of debt for $54.7 million and recognized a net gain of $36.2 million which is included in other (loss) incomein the consolidated and combined statements of operations for the year ended December 31, 2009.(3)Reflects Non-Controlling Interests attributable to AAA, consolidated variable interest entities and the remaining interests held by certain individuals who receive an allocation of income from certain of our capitalmarkets management companies.(4)Reflects the Non-Controlling Interests in the net (loss) income of the Apollo Operating Group relating to the units held by our managing partners and contributing partners post-Reorganization which is calculated byapplying the ownership percentage of Holding in the Apollo Operating Group.The ownership interest was impacted by a share repurchase in February 2009, the Company’s IPO in April 2011, and issuances of Class A shares in settlement of vested RSUs in 2010 and 2011. Refer to Item 8.Financial Statements and Supplementary Data, Note 13 to our consolidated financial statements for details of the ownership percentage for each period presented. (5)Significant changes in the consolidated and combined statement of operations for 2007 compared to their respective comparative period are due to (i) the Reorganization, (ii) the deconsolidation of certain funds, and(iii) the Strategic Investors Transaction.Some of the significant impacts of the above items are as follows: • Revenue from affiliates increased due to the deconsolidation of certain funds. • Compensation and benefits, including non-cash charges related to equity-based compensation increased due to amortization of Apollo Operating Group units, AAA RDUs and RSUs. • Interest expense increased as a result of conversion of debt on which the Strategic Investors had a beneficial conversion feature. Additionally, interest expense increased related to the AMH credit facilityobtained in April 2007. • Professional fees increased due to Apollo Global Management, LLC’s formation and ongoing requirements. • Net gain from investment activities increased due to increased activity in our consolidated funds through the date of deconsolidation. • Non-Controlling Interests changed significantly due to the formation of Holdings and reflects net losses attributable to Holdings post-Reorganization. (6)This per share (loss) income is for the period July 13, 2007 through December 31, 2007, from the date of reorganization to year end. 75Table of ContentsITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion should be read in conjunction with Apollo Global Management, LLC’s consolidated financial statements and therelated notes as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantlyfrom those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section of thisreport entitled “Item 1A. Risk Factors.” The highlights listed below have had significant effects on many items within our consolidated financialstatements and affect the comparison of the current period’s activity with those of prior periods.GeneralOur BusinessesFounded in 1990, Apollo is a leading global alternative investment manager. We are contrarian, value-oriented investors in private equity, credit-orientedcapital markets and real estate with significant distressed expertise and a flexible mandate in the majority of our funds that enables our funds to investopportunistically across a company’s capital structure. We raise and invest funds and managed accounts on behalf of some of the world’s most prominentpension and endowment funds as well as other institutional and individual investors.Apollo conducts its management and incentive businesses primarily in the United States and substantially all of its revenues are generated domestically.These businesses are conducted through the following three reportable segments: (i)Private equity—invests in control equity and related debt instruments, convertible securities and distressed debt instruments; (ii)Capital markets—primarily invests in non-control debt and non-control equity instruments, including distressed debt instruments; and (iii)Real estate—invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanine investments and othercommercial real estate-related debt investments. Additionally, the Company sponsors real estate funds that focus on opportunistic investments indistressed debt and equity recapitalization transactions.These business segments are differentiated based on the varying investment strategies. The performance is measured by management on anunconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financialand operating metrics and data that exclude the effects of consolidation of any of the affiliated funds.Our financial results vary since carried interest, which generally constitutes a large portion of the income we receive from the funds that we manage, aswell as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-termfinancial growth and profitability to manage our business.Business EnvironmentGlobal equity markets remained volatile during 2011. The debate over the United States debt ceiling and continued concerns over European sovereigndebt resulted in considerable volatility and declines in financial markets around the world. The S&P 500 and Dow Jones Industrial Average were upapproximately 2% and 8%, respectively, during 2011, while the VIX (a measure of market volatility) surged approximately 32% during the same period. Thecredit markets in which Apollo is most active also suffered losses, and financing activity in 76Table of Contentsthose markets slowed. During the volatile economic environment, which we believe began in the third quarter of 2007, we have been relying on our deepindustry, credit and financial structuring experience, coupled with our strengths as value-oriented, distressed investors, to deploy a significant amount of newcapital. As examples of this, from the beginning of the third quarter of 2007 and through December 31, 2011, we have deployed approximately $28.5 billionof gross invested capital across our private equity and certain capital markets funds, focused on control, distressed and buyout investments, leveraged loanportfolios and mezzanine, non-control distressed and non-performing loans. In addition, from the beginning of the fourth quarter of 2007 throughDecember 31, 2011, the funds managed by Apollo have acquired approximately $15.6 billion in face value of distressed debt at discounts to par value andpurchased approximately $37.4 billion in face value of leveraged senior loans at discounts to par value from financial institutions. Since we purchased theseleveraged loan portfolios from highly motivated sellers, we were able to secure, in certain cases, attractive long-term, low cost financing.In addition to deploying capital in new investments, we have been depending on our over 20 years of experience to enhance value in the currentinvestment portfolio of the funds to which we serve as an investment manager. We have been relying on our restructuring and capital markets experience towork proactively with our funds’ portfolio company management teams to generate cost and working capital savings, reduce capital expenditures, andoptimize capital structures through several means such as debt exchange offers and the purchase of portfolio company debt at discounts to par value. Forexample, as of December 31, 2011, Fund VI and its underlying portfolio companies purchased or retired approximately $19.4 billion in face value of debt andcaptured approximately $9.6 billion of discount to par value of debt in portfolio companies such as CEVA Logistics, Caesars Entertainment, Realogy andMomentive Performance Materials. In certain situations, such as CEVA Logistics, funds managed by Apollo are the largest owner of the total outstanding debtof the portfolio company. In addition to the attractive return profile associated with these portfolio company debt purchases, we believe that building positionsas senior creditors within the existing portfolio companies is strategic to the existing equity ownership positions. Additionally, the portfolio companies of FundVI have implemented approximately $3.1 billion of cost savings programs on an aggregate basis from the date Fund VI invested in them through December 31,2011, which we believe will positively impact their operating profitability.Regardless of the market or economic environment at any given time, we rely on our contrarian, value-oriented approach to consistently invest capital onbehalf of our investors throughout economic cycles by focusing on opportunities that we believe are often overlooked by other investors. We believe that ourexpertise in capital markets, focus on nine core industry sectors and investment experience allow us to respond quickly to changing environments. Forexample, in our private equity business, our private equity funds have had success investing in buyouts and credit opportunities during both expansionaryand recessionary economic periods.Market ConsiderationsOur revenues consist of the following: • Management fees, which are calculated based upon any of “net asset value,” “gross assets,” “adjusted costs of all unrealized portfolioinvestments,” “capital commitments,” “adjusted assets,” “invested capital” or “stockholders’ equity,” each as defined in the applicablemanagement agreement of the unconsolidated funds; • Advisory and transaction fees relating to the investments our funds make, or individual monitoring agreements with individual portfoliocompanies of the private equity funds and capital markets funds as well as advisory services provided to a capital markets fund; and • Carried interest with respect to our private equity funds and our capital markets funds.Our ability to grow our revenues depends in part on our ability to attract new capital and investors, which in turn depends on our ability toappropriately invest our funds’ capital, and on the conditions in the financial 77Table of Contentsmarkets, including the availability and cost of leverage, and economic conditions in the United States, Western Europe, Asia, and to some extent, elsewhere inthe world. The market factors that impact this include the following: • The strength of the alternative investment management industry, including the amount of capital invested and withdrawn fromalternative investments. Allocations of capital to the alternative investment sector are dependent, in part, on the strength of the economy and thereturns available from other investments relative to returns from alternative investments. Our share of this capital is dependent on the strength ofour performance relative to the performance of our competitors. The capital we attract and our returns are drivers of our Assets UnderManagement, which, in turn, drive the fees we earn. In light of the current volatile conditions in the financial markets, our funds’ returns may belower than they have been historically and fundraising efforts may be more challenging. • The strength and liquidity of the U.S. and relevant global equity markets generally, and the initial public offering market specifically.The strength of these markets affects the value of, and our ability to successfully exit, our equity positions in our private equity portfoliocompanies in a timely manner. • The strength and liquidity of the U.S. and relevant global debt markets. Our funds and our portfolio companies borrow money to makeacquisitions and our funds utilize leverage in order to increase investment returns that ultimately drive the performance of our funds. Furthermore,we utilize debt to finance the principal investments in our funds and for working capital purposes. To the extent our ability to borrow fundsbecomes more expensive or difficult to obtain, the net returns we can earn on those investments may be reduced. • Stability in interest rate and foreign currency exchange rate markets. We generally benefit from stable interest rate and foreign currencyexchange rate markets. The direction and impact of changes in interest rates or foreign currency exchange rates on certain of our funds isdependent on the funds’ expectations and the related composition of their investments at such time.For the most part, we believe the trends in these factors have historically created a favorable investment environment for our funds. However, adversemarket conditions may affect our businesses in many ways, including reducing the value or hampering the performance of the investments made by ourfunds, and/or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, net income and cash flow, andaffect our financial condition and prospects. As a result of our value-oriented, contrarian investment style which is inherently long-term in nature, there may besignificant fluctuations in our financial results from quarter to quarter and year to year.The financial markets encountered a series of negative events in 2007 and 2008 which led to a global liquidity and broad economic crisis and impactedthe performance of many of our funds’ portfolio companies and capital markets funds. The impact of such events on our private equity and capital marketsfunds resulted in volatility in our revenue. If this market volatility continues, we and the funds we manage may experience further tightening of liquidity,reduced earnings and cash flow, impairment charges, as well as challenges in raising additional capital, obtaining investment financing and makinginvestments on attractive terms. These market conditions can also have an impact on our ability to liquidate positions in a timely and efficient manner.For a more detailed description of how economic and global financial market conditions can materially affect our financial performance and condition,see “Item 1A. Risk Factors—Risks Related to Our Businesses—Difficult market conditions may adversely affect our businesses in many ways, including byreducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each ofwhich could materially reduce our revenue, net income and cash flow and adversely affect our financial prospects and condition.”Uncertainty remains regarding Apollo’s future taxation levels. On May 28, 2010, the House of Representatives passed legislation that would, if enactedin its present form, preclude us from qualifying for treatment as a partnership for U.S. Federal income tax purposes under the publicly traded partnershiprules. 78Table of ContentsSee “Item 1A. Risk Factors—Risks Related to Taxation—The U.S. Federal income tax law that determines the tax consequences of an investment in Class Ashares is under review and is potentially subject to adverse legislative, judicial or administrative change, possibly on a retroactive basis, including possiblechanges that would result in the treatment of our long-term capital gains as ordinary income, that would cause us to become taxable as a corporation and/orhave other adverse effects,” “Item 1A. Risk Factors—Risks Related to Our Organization and Structure—Members of the U.S. Congress have introduced andthe House of Representatives has passed legislation that would, if enacted, preclude us from qualifying for treatment as a partnership for U.S. Federal incometax purposes under the publicly traded partnership rules. If this or any similar legislation or regulation were to be enacted and apply to us, we would incur asubstantial increase in our tax liability and it could well result in a reduction in the value of our Class A shares.”Managing Business PerformanceWe believe that the presentation of Economic Net Income (Loss) supplements a reader’s understanding of the economic operating performance of eachsegment.Economic Net Income (Loss)ENI is a measure of profitability and does not take into account certain items included under U.S. GAAP. ENI represents segment income (loss)attributable to Apollo Global Management, LLC, which excludes the impact of non-cash charges related to RSUs granted in connection with the 2007 privateplacement and amortization of Apollo Operating Group units (“AOG Units”), income tax expense, amortization of intangibles associated with the 2007Reorganization as well as acquisitions and Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation ofincome from certain of our capital markets management companies. In addition, segment data excludes the assets, liabilities and operating results of the fundsand VIEs that are included in the consolidated financial statements. Adjustments relating to income tax expense, intangible asset amortization and Non-Controlling Interests are common in the calculation of supplemental measures of performance in our industry. We believe the exclusion of the non-cash chargesrelated to our reorganization for equity-based compensation provides investors with a meaningful indication of our performance because these charges relate tothe equity portion of our capital structure and not our core operating performance.During the fourth quarter of 2011, the Company modified the measurement of ENI to better evaluate the performance of Apollo’s private equity, capitalmarkets and real estate segments in making key operating decisions. These modifications include a reduction to ENI for equity-based compensation for RSUs(excluding RSUs granted in connection with the 2007 private placement) and share options, reduction for non-controlling interests related to the remaininginterest held by certain individuals who receive an allocation of income from certain of our capital markets management companies and an add-back foramortization of intangibles associated with the 2007 Reorganization and acquisitions. These modifications to ENI have been reflected in the prior periodpresentation of our segment results. The impact of this modification on ENI is reflected in the table below for the years ended December 31, 2011, 2010 and2009, respectively. Impact of Modification on ENI PrivateEquitySegment CapitalMarketsSegment RealEstateSegment TotalReportableSegments For the year ended December 31, 2011 $(22,756) $(32,711) $(9,723) $(65,190) For the year ended December 31, 2010 (6,525) (23,449) (3,975) (33,949) For the year ended December 31, 2009 7,226 (8,009) (1,652) (2,435) ENI is a key performance measure used for understanding the performance of our operations from period to period and although not every company inour industry defines these metrics in precisely the same way that we 79Table of Contentsdo, we believe that this metric, as we use it, facilitates comparisons with other companies in our industry. We use ENI to evaluate the performance of ourprivate equity, capital markets and real estate segments. Management also believes the components of ENI such as the amount of management fees, advisoryand transaction fees and carried interest income are indicative of the Company’s performance. Management also uses ENI in making key operating decisionssuch as the following: • Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires. As theamount of fees, investment income, and ENI is indicative of the performance of the management companies and advisors within each segment,management can assess the need for additional resources and the location for deployment of the new hires based on the results of this measure. Forexample, a positive ENI could indicate the need for additional staff to manage the respective segment whereas a negative ENI could indicate theneed to reduce staff assigned to manage the respective segment. • Decisions related to capital deployment such as providing capital to facilitate growth for our business and/or to facilitate expansion into newbusinesses. As the amount of fees, investment income, and ENI is indicative of the performance of the management companies and advisorswithin each segment, management can assess the availability and need to provide capital to facilitate growth or expansion into new businessesbased on the results of this measure. For example, a negative ENI may indicate the lack of performance of a segment and thus indicate a need foradditional capital to be deployed into the respective segment. • Decisions related to expense, such as determining annual discretionary bonuses and equity-based compensation awards to our employees. As theamount of fees, investment income, and ENI is indicative of the performance of the management companies and advisors within each segment,management can better identify higher performing businesses and employees to allocate discretionary bonuses based on the results of this measure.As it relates to compensation, our philosophy has been and remains to better align the interests of certain professionals and selected otherindividuals who have a profit sharing interest in the carried interest income earned in relation to the funds we manage, with our own interests andwith those of the investors in the funds. To achieve that objective, a significant amount of compensation paid is based on our performance andgrowth for the year. For example, a positive ENI could indicate a higher discretionary bonus for a team of investment professionals whereas anegative ENI could indicate the need to reduce bonuses based on poor performance.The calculation of ENI has certain limitations and as such, we do not rely solely on ENI as a performance measure and also consider our U.S. GAAPresults. These limitations include omission of the following:(i) non-cash charges related to RSUs granted in connection with the 2007 private placement and amortization of AOG Units, although these costs areexpected to be recurring components of our costs we may be able to incur lower cash compensation costs with the granting of equity-basedcompensation;(ii) income tax, which represents a necessary and recurring element of our operating costs and our ability to generate revenue because ongoing revenuegeneration is expected to result in future income tax expense;(iii) amortization of intangible assets associated with the 2007 Reorganization and acquisitions, which is a recurring item until all intangibles have beenfully amortized; and(iv) Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our capitalmarkets management companies, which is expected to be a recurring item and represents the aggregate of the income or loss that is not owned by theCompany.We believe that ENI is helpful for an understanding of our business and that investors should review the same supplemental financial measure thatmanagement uses to analyze our segment performance. This measure supplements and should be considered in addition to and not in lieu of the results ofoperations discussed below in “—Overview of Results of Operations” that have been prepared in accordance with U.S. GAAP. 80Table of ContentsThe following summarizes the adjustments to ENI that reconcile ENI to the net income (loss) attributable to Apollo Global Management, LLC determinedin accordance with U.S. GAAP: • Inclusion of the impact of RSUs granted in connection with the 2007 private placement and non-cash equity-based compensation expensecomprising amortization of AOG Units. Management assesses our performance based on management fees, advisory and transaction fees, andcarried interest income generated by the business and excludes the impact of non-cash charges related to RSUs granted in connection with the 2007private placement and amortization of AOG Units because these non-cash charges are not viewed as part of our core operations. • Inclusion of the impact of income taxes as we do not take income taxes into consideration when evaluating the performance of our segments orwhen determining compensation for our employees. Additionally, income taxes at the segment level (which exclude APO Corp.’s corporate taxes)are not meaningful, as the majority of the entities included in our segments operate as partnerships and therefore are only subject to New YorkCity unincorporated business taxes and foreign taxes when applicable. • Inclusion of amortization of intangible assets associated with the 2007 Reorganization and subsequent acquisitions as these non-cash charges arenot viewed as part of our core operations. • Carried interest income, management fees and other revenues from Apollo funds are reflected on an unconsolidated basis. As such, ENI excludesthe Non-Controlling Interests in consolidated funds, which remain consolidated in our consolidated financial statements. Management views thebusiness as an alternative investment management firm and therefore assesses performance using the combined total of carried interest income andmanagement fees from each of our funds. One exception is the non-controlling interest related to certain individuals who receive an allocation ofincome from certain of our capital markets management companies which is deducted from ENI to better reflect the performance attributable toshareholders.ENI may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordance withU.S. GAAP. We use ENI as a measure of operating performance, not as a measure of liquidity. ENI should not be considered in isolation or as a substitute foroperating income, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordancewith U.S. GAAP. The use of ENI without consideration of related U.S. GAAP measures is not adequate due to the adjustments described above. Managementcompensates for these limitations by using ENI as a supplemental measure to U.S. GAAP results, to provide a more complete understanding of ourperformance as management measures it. A reconciliation of ENI to our U.S. GAAP net income (loss) attributable to Apollo Global Management, LLC can befound in the notes to our consolidated financial statements.Operating MetricsWe monitor certain operating metrics that are common to the alternative investment management industry. These operating metrics include Assets UnderManagement, private equity dollars invested and uncalled private equity commitments.Assets Under ManagementAssets Under Management, or AUM, refers to the investments we manage or with respect to which we have control. 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 capitalcommitments plus non-recallable capital to the extent a fund is within the commitment period in which management fees are calculated based ontotal commitments to the fund; 81Table of Contents (ii)the net asset value, or “NAV,” of our capital markets funds, other than certain senior credit funds, which are structured as collateralized loanobligations (such as Artus, which we measure by using the mark-to-market value of the aggregate principal amount of the underlying collateralizedloan obligations) or certain collateralized loan obligation and collateralized debt obligation credit funds that have a fee generating basis other thanmark-to-market asset values, plus used or available leverage and/or capital commitments; (iii)the gross asset values or net asset value of our real estate entities and the structured portfolio vehicle investments included within the funds wemanage, which includes the leverage used by such structured portfolio vehicles; (iv)the incremental value associated with the reinsurance investments of the funds we manage; and (v)the fair value of any other investments that we manage plus unused credit facilities, including capital commitments for investments that mayrequire pre-qualification before investment plus any other capital commitments available for investment that are not otherwise included in theclauses 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 anydefinition of Assets Under Management contained in our operating agreement or in any of our Apollo fund management agreements. We consider multiplefactors for determining what should be included in our definition of AUM. Such factors include but are not limited to (1) our ability to influence theinvestment decisions for existing and available assets; (2) our ability to generate income from the underlying assets in our funds; and (3) the AUM measuresthat we believe are used by other investment managers. Given the differences in the investment strategies and structures among other alternative investmentmanagers, our calculation of AUM may differ from the calculations employed by other investment managers and, as a result, this measure may not bedirectly comparable to similar measures presented by other investment managers.Assets Under Management—Fee-Generating/Non-Fee GeneratingFee-generating AUM consists of assets that we manage and on which we earn management fees or monitoring fees pursuant to management agreementson a basis that varies among the Apollo funds. Management fees are normally based on “net asset value,” “gross assets,” “adjusted par asset value,” “adjustedcost 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 for AUM purposes are based on the total value of certain structured portfolio vehicleinvestments, which normally include 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:(a) fair value above invested capital for those funds that earn management fees based on invested capital, (b) net asset values related to general partner and co-investment ownership, (c) unused credit facilities, (d) available commitments on those funds that generate management fees on invested capital, (e) structuredportfolio vehicle investments that do not generate monitoring fees and (f) the difference between gross assets and net asset value for those funds that earnmanagement fees based on net asset value. We use non-fee generating AUM combined with fee-generating AUM as a performance measurement of ourinvestment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs. Non-fee generating AUM includes assets onwhich we could earn carried interest income. 82Table of ContentsThe table below displays fee-generating and non-fee generating AUM by segment as of December 31, 2011, 2010 and 2009. The changes in marketconditions, additional funds raised and acquisitions have had significant impacts to our AUM: As ofDecember 31, 2011 2010 2009 (in millions) Private Equity $35,384 $38,799 $34,002 Fee-generating 28,031 27,874 28,092 Non-fee generating 7,353 10,925 5,910 Capital Markets 31,867 22,283 19,112 Fee-generating 26,553 16,484 14,854 Non-fee generating 5,314 5,799 4,258 Real Estate 7,971 6,469 495 Fee-generating 3,537 2,679 279 Non-fee generating 4,434 3,790 216 Total Assets Under Management 75,222 67,551 53,609 Fee-generating 58,121 47,037 43,225 Non-fee generating 17,101 20,514 10,384 During the year ended December 31, 2011, our total fee-generating AUM increased primarily due to acquisitions in our capital markets segment, as wellas increases in subscriptions across our three segments. The fee-generating AUM of our capital markets funds increased primarily due to acquisitions in 2011by Athene and AGM’s Gulf Stream acquisition, as well as increased subscriptions. The fee-generating AUM of our real estate segment increased due to netsegment transfers from other segments, subscriptions and increases in leverage, partially offset by losses and distributions. The fee-generating AUM of ourprivate equity funds increased due to subscriptions, partially offset by distributions.When the fair value of an investment exceeds invested capital, we are normally entitled to carried interest income on the difference between the fair valueonce realized and invested capital after also considering certain expenses and preferred return amounts, as specified in the respective partnership agreements;however, we do not earn management fees on such excess. As a result of the growth in both the size and number of funds that we manage, we have experiencedan increase in our management fees and advisory and transaction fees. To support this growth, we have also experienced an increase in operating expenses,resulting from hiring additional personnel, opening new offices to expand our geographical reach and incurring additional professional fees.With respect to our private equity funds and certain of our capital markets and real estate funds, we charge management fees on the amount ofcommitted or invested capital and we generally are entitled to realized carried interest on the realized gains on the dispositions investments. Certain funds mayhave current fair values below invested capital, however, the management fee would still be computed on the invested capital for such funds. With respect toARI and AMTG, we receive management fees on stockholders equity as defined in its management agreement. In addition, our fee-generating AUM reflectsleverage vehicles that generate monitoring fees on value in excess of fund commitments. As of December 31, 2011, our total fee-generating AUM is comprisedof approximately 88% of assets that earn management fees and the remaining balance of assets earn monitoring fees. 83Table of ContentsThe Company’s entire fee-generating AUM is subject to management or monitoring fees. The components of fee-generating AUM by segment as ofDecember 31, 2011 and 2010 are presented below: As ofDecember 31, 2011 PrivateEquity CapitalMarkets RealEstate Total (in millions) Fee-generating AUM based on capital commitments $14,848 $2,747 $279 $17,874 Fee-generating AUM based on invested capital 8,635 2,909 1,820 13,364 Fee-generating AUM based on gross/adjusted assets 948 15,862 1,213 18,023 Fee-generating AUM based on leverage 3,600 3,213 — 6,813 Fee-generating AUM based on NAV — 1,822 225 2,047 Total Fee-Generating AUM $28,031 $26,553 $3,537 $58,121 (1)Monitoring fees are normally based on the total value of certain special purpose vehicle investments, which includes leverage, less any portion of suchtotal value that is already considered for fee-generating AUM. Monitoring fees are typically calculated using a 0.5% annual rate.(2)The weighted average remaining life of the private equity funds excluding permanent capital vehicles at December 31, 2011 is 65 months.(3)The fee-generating AUM for the capital markets funds has no concentration across the investment strategies.(4)The fee-generating AUM for our real estate entities is based on an adjusted equity amount as specified by the respective management agreements. As ofDecember 31, 2010 PrivateEquity CapitalMarkets RealEstate Total (in millions) Fee-generating AUM based on capital commitments $14,289 $1,689 $154 $16,132 Fee-generating AUM based on invested capital 8,742 3,093 1,750 13,585 Fee-generating AUM based on gross/adjusted assets 1,177 5,556 — 6,733 Fee-generating AUM based on leverage 3,666 3,577 — 7,243 Fee-generating AUM based on NAV — 2,569 775 3,344 Total Fee-Generating AUM $27,874 $16,484 $2,679 $47,037 (1)Monitoring fees are normally based on the total value of certain special purpose vehicle investments, which includes leverage, less any portion of suchtotal value that is already considered for fee-generating AUM. Monitoring fees are typically calculated using a 0.5% annual rate.(2)The weighted average remaining life of the private equity funds excluding permanent capital vehicles at December 31, 2010 is 76 months.(3)The fee-generating AUM for the capital markets funds has no concentration across the investment strategies. 84(4)(1)(2)(3)(1)(2)(3)Table of ContentsAUM as of December 31, 2011, 2010 and 2009 was as follows: Total Assets Under Management As ofDecember 31, 2011 2010 2009 (in millions) AUM: Private equity $35,384 $38,799 $34,002 Capital markets 31,867 22,283 19,112 Real estate 7,971 6,469 495 Total $75,222 $67,551 $53,609 The following table presents total Assets Under Management and Fee Generating Assets Under Management amounts for our private equity segment bystrategy: Total AUM Fee Generating AUM As ofDecember 31, As ofDecember 31, 2011 2010 2009 2011 2010 2009 (in millions) Traditional Private Equity Funds $34,232 $37,341 $32,822 $26,984 $26,592 $27,096 AAA 1,152 1,458 1,180 1,047 1,282 996 Total $35,384 $38,799 $34,002 $28,031 $27,874 $28,092 The following table presents total Assets Under Management and Fee Generating Assets Under Management amounts for our capital markets segment bystrategy: Total AUM Fee Generating AUM As ofDecember 31, As ofDecember 31, 2011 2010 2009 2011 2010 2009 (in millions) Distressed and Event-Driven Hedge Funds $1,867 $2,759 $2,428 $1,783 $2,423 $2,021 Mezzanine Funds 3,904 4,503 4,306 3,229 3,483 3,435 Senior Credit Funds 15,405 11,210 9,272 11,931 7,422 6,896 Non-Performing Loan Fund 1,935 1,908 1,868 1,636 1,689 1,807 Other 8,756 1,903 1,238 7,974 1,467 695 Total $31,867 $22,283 $19,112 $26,553 $16,484 $14,854 (1)Includes strategic investment accounts and investments held through Athene. 85(1)Table of ContentsThe following table presents total Assets Under Management and Fee Generating Assets Under Management amounts for our real estate segment bystrategy: Total AUM Fee Generating AUM As ofDecember 31, As ofDecember 31, 2011 2010 2009 2011 2010 2009 (in millions) Fixed Income $4,042 $2,827 $495 $1,411 $549 $279 Equity 3,929 3,642 — 2,126 2,130 — Total $7,971 $6,469 $495 $3,537 $2,679 $279 The following tables summarize changes in total AUM and total AUM for each of our segments for the years ended December 31, 2011, 2010 and 2009: For the Year EndedDecember 31, 2011 2010 2009 (in millions) Change in Total AUM: Beginning of Period $67,551 $53,609 $44,202 (Loss) income (1,477) 8,623 9,465 Subscriptions/capital raised 3,797 617 1,828 Other inflows/acquisitions 9,355 3,713 — Distributions (5,153) (2,518) (1,372) Redemptions (532) (338) (261) Leverage 1,681 3,845 (253) End of Period $75,222 $67,551 $53,609 Change in Private Equity Total AUM: Beginning of Period $38,799 $34,002 $29,094 (Loss) income (1,612) 6,387 6,215 Subscriptions/capital raised 417 — — Distributions (3,464) (1,568) (827) Net segment transfers 167 (68) 216 Leverage 1,077 46 (696) End of Period $35,384 $38,799 $34,002 Change in Capital Markets Total AUM: Beginning of Period $22,283 $19,112 $15,108 (Loss) income (110) 2,207 3,253 Subscriptions/capital raised 3,094 512 1,617 Other inflows/acquisitions 9,355 — — Distributions (1,237) (698) (545) Redemptions (532) (338) (261) Net segment transfers (1,353) (291) (322) Leverage 367 1,779 262 End of Period $31,867 $22,283 $19,112 Change in Real Estate Total AUM: Beginning of Period $6,469 $495 $— Income (loss) 245 29 (3) Subscriptions/capital raised 286 105 211 Other inflows/acquisitions — 3,713 — Distributions (452) (252) — Net segment transfers 1,186 359 106 Leverage 237 2,020 181 End of Period $7,971 $6,469 $495 (1)Reclassified to conform to current period’s presentation. 86(1)(1)Table of ContentsThe following tables summarize changes in total fee-generating AUM and fee-generating AUM for each of our segments for the years ended December 31,2011 and 2010: For the Year EndedDecember 31, 2011 2010 (in millions) Change in Total Fee-Generating AUM: Beginning of Period $47,037 $43,224 (Loss) income (393) 1,244 Subscriptions/capital raised 2,547 1,234 Other inflows/acquisitions 9,355 2,130 Distributions (734) (1,327) Redemptions (481) (291) Net movements between Fee Generating/Non Fee Generating 761 (197) Leverage 29 1,020 End of Period $58,121 $47,037 Change in Private Equity Fee-Generating AUM: Beginning of Period $27,874 $28,092 (Loss) income (112) 391 Subscriptions/capital raised 410 — Distributions (272) (432) Net segment transfers (88) (59) Net movements between Fee Generating/Non Fee Generating 285 (218) Leverage (66) 100 End of Period $28,031 $27,874 Change in Capital Markets Fee-Generating AUM: Beginning of Period $16,484 $14,854 Income 301 842 Subscriptions/capital raised 1,795 1,234 Other inflows/acquisitions 9,355 — Distributions (283) (696) Redemptions (481) (291) Net segment transfers (638) (300) Net movements between Fee Generating/Non Fee Generating 356 21 Leverage (336) 820 End of Period $26,553 $16,484 Change in Real Estate Fee-Generating AUM: Beginning of Period $2,679 $278 (Loss) income (582) 11 Subscriptions/capital raised 342 — Other inflows/acquisitions — 2,130 Distributions (179) (199) Net segment transfers 726 359 Net movements between Fee Generating/Non Fee Generating 120 — Leverage 431 100 End of Period $3,537 $2,679 87Table of ContentsPrivate EquityDuring the year ended December 31, 2011, the total AUM in our private equity segment decreased by $3.4 billion, or 8.8%. This decrease was primarilya result of distributions of $3.5 billion, including $1.5 billion from Fund VII and $0.9 billion from Fund IV and $0.8 billion from Fund VI. In addition,$1.6 billion of unrealized losses were incurred that were primarily attributable to Fund VI. Offsetting these decreases was a $1.1 billion increase in leverage,primarily from Fund VII and capital raised of $0.4 billion, primarily in ANRP.During the year ended December 31, 2010, the total AUM in our private equity segment increased by $4.8 billion, or 14.1%. This increase wasprimarily impacted by improved investment valuations of $6.4 billion. This increase was partially offset primarily by $1.6 billion of distributions fromFund V.During the year ended December 31, 2009, the total AUM in our private equity segment increased by $4.9 billion, or 16.9%. This increase wasimpacted by $6.2 billion of income that was primarily attributable to improved investment valuations in our private equity funds, including $4.2 billion inFund VI. Offsetting this increase was $0.3 billion of distributions from Fund IV, $0.3 billion of distributions from Fund VI and $0.2 billion of distributionsfrom Fund VII.Capital MarketsDuring the year ended December 31, 2011, total AUM in our capital markets segment increased by $9.6 billion, or 43.0%. This increase was primarilyattributable to inflows of $9.4 billion related to $6.4 billion from Athene and $3.0 billion from Gulf Stream. Also contributing to this increase was $3.1 billionof capital raised driven by $0.8 billion in Palmetto, $0.4 billion in FCI, $0.3 billion in AFT, $0.5 billion in Apollo European Strategic Investments L.P. and$0.2 billion in EPF II. Partially offsetting these increases were distributions of $1.2 billion and redemptions of $0.5 billion, as well as $1.4 billion in nettransfers between segments.During the year ended December 31, 2010, total AUM in our capital markets segment increased by $3.2 billion, or 16.6%. This increase wasattributable to $2.2 billion in improved valuations, primarily in Athene of $0.4 billion and COF I and COF II of $0.7 billion and $0.2 billion, respectively,$1.8 billion of increased leverage primarily in COF II and Athene of $1.1 billion and $0.5 billion, respectively, and $0.5 billion of additional subscriptions.These increases were partially offset by $0.7 billion of distributions and $0.3 billion in redemptions.During the year ended December 31, 2009, total AUM in our capital markets segment increased by $4.0 billion, or 26.5%. This increase was primarilyattributable to improved investment valuations in COF I and COF II of $0.8 billion and $0.6 billion, respectively, and $0.7 billion and $0.4 billion ofimproved investment valuations in ACLF and the Value Funds, respectively. The overall AUM gain in our capital markets segment was also positivelyimpacted by additional capital raised of $1.6 billion, which was primarily comprised of EPF, Palmetto and AIC of approximately $0.6 billion, $0.6 billionand $0.3 billion, respectively.Real EstateDuring the year ended December 31, 2011, total AUM in our real estate segment increased by $1.5 billion, or 23.2%. This increase was primarilyattributable to $1.2 billion from other net segments. Also impacting this change was an increase in leverage of $0.2 billion, primarily for the AGRE CMBSAccounts. In addition, there was $0.2 billion of income that was primarily attributable to improved unrealized gains in our real estate funds. These increaseswere offset by $0.5 billion of distributions.During the year ended December 31, 2010, total AUM in our real estate segment increased by approximately $6.0 billion. The overall AUM increase inour real estate segment was primarily driven by the acquisition of CPI during the fourth quarter of 2010, which had approximately $3.6 billion of AUM at 88Table of ContentsDecember 31, 2010. Additionally, $2.0 billion of incremental leverage was added during the year ended December 31, 2010 to our real estate segment, whichwas primarily attributable to the AGRE CMBS Accounts and ARI.During the year ended December 31, 2009, total AUM in our real estate segment increased by $0.5 billion. This increase was comprised of $0.2 billionof capital raised that resulted from the initial public offering and concurrent private placement by ARI as well as the formation of the AGRE CMBS Accounts,which raised $0.1 billion in equity capital.Private Equity Dollars Invested and Uncalled Private Equity CommitmentsPrivate equity dollars invested represents the aggregate amount of capital invested by our private equity funds during a reporting period. Uncalled privateequity commitments, by contrast, represent unfunded commitments by investors in our private equity funds to contribute capital to fund future investmentsor expenses incurred by the funds, fees and applicable expenses as of the reporting date. Private equity dollars invested and uncalled private equitycommitments are indicative of the pace and magnitude of fund capital that is deployed or will be deployed, and which therefore could result in future revenuesthat include transaction fees and incentive income. Private equity dollars invested and uncalled private equity commitments can also give rise to future coststhat are related to the hiring of additional resources to manage and account for the additional capital that is deployed or will be deployed. Management usesprivate equity dollars invested and uncalled private equity commitments as key operating metrics since we believe the results measure our investmentactivities.The following table summarizes the private equity dollars invested during the specified reporting periods: For the Year EndedDecember 31, 2011 2010 2009 (in millions) Private equity dollars invested $3,350 $3,863 $3,476 The following table summarizes the uncalled private equity commitments as of December 31, 2011, 2010 and 2009: As ofDecember 31, 2011 2010 2009 (in millions) Uncalled private equity commitments $8,204 $10,345 $13,027 The Historical Investment Performance of Our FundsBelow we present information relating to the historical performance of our funds, including certain legacy Apollo funds that do not have a meaningfulamount of unrealized investments, and in respect of which the general partner interest has not been contributed to us.When considering the data presented below, you should note that the historical results of our funds are not indicative of the future resultsthat you should expect from such funds, from any future funds we may raise or from your investment in our Class A shares. An investment in ourClass A shares is not an investment in any of the Apollo funds, and the assets and revenues of our funds are not directly available to us. As a result of thedeconsolidation of most of our funds, we will not be consolidating those funds in our financial statements for periods after either August 1, 2007 orNovember 30, 2007. The historical and potential future returns of the funds we manage are not directly linked to returns on our Class A shares. Therefore,you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an 89Table of Contentsinvestment in our Class A shares. However, poor performance of the funds that we manage would cause a decline in our revenue from such funds, and wouldtherefore have a negative effect on our performance and in all likelihood the value in our Class A shares. There can be no assurance that any Apollo fund willcontinue to achieve the same results in the future.Moreover, the historical returns of our funds should not be considered indicative of the future results you should expect from such funds or from anyfuture funds we may raise, in part because: • market conditions during previous periods were significantly more favorable for generating positive performance, particularly in our privateequity business, than the market conditions we have experienced for the last few years and may experience in the future; • our funds’ returns have benefited from investment opportunities and general market conditions that currently do not exist and may not repeatthemselves, and there can be no assurance that our current or future funds will be able to avail themselves of profitable investment opportunities; • our private equity funds’ rates of return, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains,which may never be realized; • our funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, including theavailability of debt capital on attractive terms and the availability of distressed debt opportunities, and we may not be able to achieve the samereturns or profitable investment opportunities or deploy capital as quickly; • the historical returns that we present are derived largely from the performance of our earlier private equity funds, whereas future fund returns willdepend increasingly on the performance of our newer funds, which may have little or no realized investment track record; • Fund VI and Fund VII are several times larger than our previous private equity funds, and this additional capital may not be deployed asprofitably as our prior funds; • the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has not occurred with respect to all ofour funds and we believe is less likely to occur in the future; • our track record with respect to our capital markets and real estate funds is relatively short as compared to our private equity funds; • in recent years, there has been increased competition for private equity investment opportunities resulting from the increased amount of capitalinvested in private equity funds and periods of high liquidity in debt markets, which may result in lower returns for the funds; and • our newly established funds may generate lower returns during the period that they take to deploy their capital; consequently, we do not providereturn information for any funds which have not been actively investing capital for at least 24 months prior to the valuation date as we believe thisinformation is not meaningful.Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund IV has generated a 12% gross IRR and a 9% netIRR since its inception through December 31, 2011, while Fund V has generated a 61% gross IRR and a 44% net IRR since its inception through December 31,2011. Accordingly, the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by any particular fund, orfor our private equity funds as a whole. Future returns will also be affected by the applicable risks, including risks of the industries and businesses in whicha particular fund invests. See “Item 1A. Risk Factors—Risks Related to Our Businesses—The historical returns attributable to our funds should not beconsidered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares”. 90Table of ContentsInvestment RecordPrivate EquityThe following table summarizes the investment record of certain of our private equity funds portfolios. All amounts are as of December 31, 2011, unlessotherwise noted: VintageYear CommittedCapital TotalInvestedCapital Realized Unrealized TotalValue As ofDecember 31, 2011 As ofDecember 31, 2010 As ofDecember 31, 2009 GrossIRR NetIRR GrossIRR NetIRR GrossIRR NetIRR (in millions) Fund VII 2008 $14,676 $10,623 $5,607 $9,769 $15,376 31% 22% 46% 32% NM NM Fund VI 2006 10,136 11,766 4,572 9,268 13,840 6 5 13 10 5% 4% Fund V 2001 3,742 5,192 11,155 1,446 12,601 61 44 62 45 62 46 Fund IV 1998 3,600 3,481 6,693 140 6,833 12 9 11 9 11 8 Fund III 1995 1,500 1,499 2,615 87 2,702 18 12 18 12 18 11 Fund I, II & MIA 1990/92 2,220 3,773 7,924 — 7,924 47 37 47 37 47 37 Total $35,874 $36,334 $38,566 $20,710 $59,276 39% 25% 39% 26% 39% 26% (1)Figures include the market values, estimated fair value of certain unrealized investments and capital committed to investments. See “Risk Factors—Risks Related to Our Businesses—Many of our funds invest inrelatively high-risk, illiquid assets and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amount we invest in these activities” and “—Ourfunds may be forced to dispose of investments at a disadvantageous time,” in this Report for a discussion of why our unrealized investments may ultimately be realized at valuations different than those providedhere.(2)Fund VII only commenced investing capital within 24 months prior to the period indicated. Given the limited investment period and overall longer investment period for private equity funds, the return informationwas deemed not yet meaningful.(3)Fund I and Fund II were structured such that investments were made from either fund depending on which fund had available capital. We do not differentiate between Fund I and Fund II investments forpurposes of performance figures because they are not meaningful on a separate basis and do not demonstrate the progression of returns over time.(4)Total IRR is calculated based on total cash flows for all funds presented.Capital MarketsThe following table summarizes the investment record for certain funds with a defined maturity date, and internal rate of return since inception, or“IRR”, which is computed based on the actual dates of capital contributions, distributions and ending limited partners’ capital as of the specified date. Allamounts are as of December 31, 2011, unless otherwise noted: As ofDecember 31, 2011 As ofDecember 31, 2010 As ofDecember 31, 2009 Year ofInception CommittedCapital TotalInvestedCapital Realized Unrealized TotalValue GrossIRR NetIRR GrossIRR NetIRR GrossIRR NetIRR (in millions) AIE II 2008 $267.7 $614.4 $549.2 $237.9 $787.1 18.2% 14.2% 27.5% 21.8% NM NM COF I 2008 1,484.9 1,613.2 1,028.0 1,910.2 2,938.2 25.0 22.4 32.5 29.0 NM NM COF II 2008 1,583.0 2,194.7 1,074.7 1,465.4 2,540.1 10.3 8.5 17.4 14.9 NM NM ACLF 2007 984.0 1,448.5 837.9 709.3 1,547.2 10.1 9.2 12.1 11.2 NM NM Artus 2007 106.6 190.1 30.7 171.4 202.1 3.6 3.4 3.0 2.8 NM NM EPF 2007 1,678.8 1,410.7 843.2 966.7 1,809.9 16.6 8.8 14.8 7.9 NM NM Totals $6,105.0 $7,471.6 $4,363.7 $5,460.9 $9,824.6 (1)Figures include the market values, estimated fair value of certain unrealized investments and capital committed to investments. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Many of ourfunds invest in relatively high-risk, illiquid assets and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amount we invest in these activities”and “—Our funds may be forced to dispose of investments at a disadvantageous time,” in this Report for a discussion of why our unrealized investments may ultimately be realized at valuations different thanthose provided here. 91(1)(2)(2)(3)(4)(4)(4)(4)(4)(4)(1)(2)(3)(3)(3)(3)(3)(3)(3)(3)(3)(3)(2)(3)(3)Table of Contents(2)Fund is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.30 as of December 31, 2011.(3)Returns have not been presented as the fund only commenced investing capital within the 24 months prior to the period indicated and therefore such return information was deemed not yet meaningful.The following table summarizes the investment record for certain funds with no maturity date, except AIE I which is winding down. All amounts are asof December 31, 2011, unless otherwise noted: Net Return Year ofInception Net AssetValue as ofDecember 31,2011 SinceInception toDecember 31,2011 For theYear EndedDecember 31,2011 For theYear EndedDecember 31,2010 For theYear EndedDecember 31,2009 (in millions) AMTG 2011 $204.6 NM NM N/A N/A AFT 2011 273.6 NM NM N/A N/A AAOF 2007 230.6 7.4% (7.3)% 12.5% 16.2% SOMA 2007 963.0 25.9 (10.5) 16.9 87.1 AIE I 2006 38.2 (50.0) (4.4) 32.4 77.9 AINV 2004 1,607.4 34.1 (5.1) 4.8 17.0 Value Funds 2003/2006 765.6 50.0 (9.6) 12.2 57.7 (1)Returns have not been presented as the fund only commenced investing capital within 24 months prior to the period indicated and therefore such returninformation was deemed not yet meaningful.(2)In July 2011, Apollo Residential Mortgage, Inc. (“AMTG”) completed its initial public offering raising approximately $203.0 million in net proceeds.(3)The Apollo Senior Floating Rate Fund Inc. (“AFT”) completed its initial public offering during the first quarter of 2011.(4)SOMA returns for primary mandate, which follows similar strategies as the Value Funds and excludes SOMA’s investments in other Apollo funds.(5)Fund is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.30 as of December 31, 2011.(6)Net return from AINV represents NAV return including reinvested dividends.(7)Value Funds consist of Apollo Strategic Value Master Fund, L.P., together with its feeder funds (“SVF”) and Apollo Value Investment Master Fund,L.P., together with its feeder funds (“VIF”).The Company also manages Palmetto, which has committed capital and current invested capital of $1,518.0 million and $796.5 million, respectively,as of December 31, 2011. 92(1)(2)(2)(1)(1)(2)(2)(1)(3)(1)(1)(3)(3)(4)(5)(6)(7)Table of ContentsReal EstateThe following table summarizes the investment record for certain funds with a defined maturity date, and internal rate of return since inception, or“IRR”, which is computed based on the actual dates of capital contributions, distributions and ending limited partners’ capital as of the specified date. Allamounts are as of December 31, 2011, unless otherwise noted: As ofDecember 31,2011 As ofDecember 31,2010 As ofDecember 31,2009 Year ofInception CommittedCapital TotalInvestedCapital Realized Unrealized TotalValue GrossIRR NetIRR GrossIRR NetIRR GrossIRR NetIRR (in millions) AGRE U.S. Real Estate Fund, L.P 2011 $384.9 $37.1 $— $37.0 $37.0 NM NM N/A N/A N/A N/A CPI Capital Partners North America 2006 600.0 451.8 218.3 125.7 344.0 N/A N/A N/A N/A N/A N/A CPI Capital Partners Asia Pacific 2006 1,291.6 1,075.4 731.9 570.4 1,302.3 N/A N/A N/A N/A N/A N/A CPI Capital Partners Europe 2006 1,506.4 924.5 52.8 418.6 471.4 N/A N/A N/A N/A N/A N/A CPI Other Various 4,791.6 — — — — N/A N/A N/A N/A N/A N/A Totals $8,574.5 $2,488.8 $1,003.0 $1,151.7 $2,154.7 (1)Figures include the market values, estimated fair value of certain unrealized investments and capital committed to investments. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Many of ourfunds invest in relatively high-risk, illiquid assets and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amount we invest in these activities”and “—Our funds may be forced to dispose of investments at a disadvantageous time.”(2)Returns have not been presented as the fund only commenced investing capital within 24 months prior to the period indicated and therefore such return information was deemed not yet meaningful.(3)AGRE U.S. Real Estate Fund, L.P., a newly formed closed-end private investment fund that intends to make real estate-related investments principally located in the United States, held closings in January 2011and June 2011 for a total of $134.9 million in base capital commitments and $250 million in additional commitments.(4)As part of the CPI acquisition, the Company acquired general partner interests in fully invested funds. The net IRRs from the inception of the respective fund to December 31, 2011 were (11.0)%, 3.5% and (17.2)%for CPI Capital Partners North America, CPI Capital Partners Asia Pacific and CPI Capital Partners Europe, respectively. These net IRRs were primarily achieved during a period in which Apollo did not make theinitial investment decisions and Apollo has only become the general partner or manager of these funds since completing the acquisition on November 12, 2010.(5)CPI Capital Partners Asia Pacific is a U.S. dollar denominated fund.(6)Fund is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.30 as of December 31, 2011.(7)Other consists of funds or individual investments of which we are not the general partner or manager and only receive fees pursuant to either a sub-advisory agreement or an investment management andadministrative agreement. CPI Other fund performance is a result of invested capital prior to Apollo’s management of these funds. Gross assets and return data is therefore not considered meaningful as we performprimarily an administrative role. 93(1)(2)(3)(2)(2)(3)(3)(3)(3)(4)(4)(4)(4)(4)(4)(4)(4)(5)(4)(4)(4)(4)(4)(4)(4)(6)(4)(4)(4)(4)(4)(4)(7)(7)(7)(7)(7)(7)(7)Table of ContentsThe following table summarizes the investment record for other certain real estate funds with no maturity date. All amounts are as of December 31,2011, unless otherwise noted: Year ofInception RaisedCapital GrossAssets Current NetAsset Value (in millions) ARI 2009 $354.3 $890.8 $337.0 AGRE CMBS Accounts Various 653.5 2,216.9 465.6 AGRE Debt Fund I, L.P. 2011 155.5 156.1 155.7 (1)Reflects initial gross raised capital and does not include distributions subsequent to capital raise.(2)Returns have not been presented as the funds only commenced investing capital within 24 months prior to the period indicated, and therefore such returninformation was deemed not yet meaningful.For a description of each fund’s investments and overall investment strategy, please refer to “Item 1. Business—Our Businesses.”Performance information for our funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations forthe periods presented. An investment in our Class A shares is not an investment in any of our funds. The performance information reflected in this discussionand analysis is not indicative of the possible performance of our Class A shares and is also not necessarily indicative of the future results of any particularfund. There can be no assurance that our funds will continue to achieve, or that our future funds will achieve, comparable results.The following table provides a summary of the cost and fair value of our funds’ investments by segment. The cost and fair values of our private equityinvestments represent the current invested capital and unrealized values, respectively, in Fund VII, Fund VI, Fund V and Fund IV: As ofDecember 31,2011 As ofDecember 31,2010 As ofDecember 31,2009 (in millions) Private Equity: Cost $15,956 $14,322 $12,788 Fair Value 20,700 22,485 15,971 Capital Markets: Cost 10,917 10,226 8,569 Fair Value 11,696 11,476 8,811 Real Estate: Cost 4,791 4,028 271 Fair Value 4,344 3,368 270 (1)The cost and fair value of the real estate investments represent the cost and fair value, respectively, of the current unrealized invested capital for ARI, theAGRE CMBS Accounts, AGRE U.S. Real Estate Fund L.P., CPI Capital Partners North America, AGRE Debt Fund I L.P., CPI Capital Partners AsiaPacific, and CPI Capital Partners Europe.(2)Includes CPI Funds with investment cost and fair value of $1.5 billion and $1.1 billion, respectively, as of December 31, 2011. Additionally, ARIamounts include loans at amortized cost.(3)All amounts are as of September 30, 2010 and include CPI Funds with investment cost of $1.8 billion and fair value of $1.1 billion. Additionally, ARIamounts include loans at amortized cost. 94(1)(2)(2)(1)(2)(3)(2)(3)Table of ContentsOverview of Results of OperationsRevenuesAdvisory and Transaction Fees from Affiliates. As a result of providing advisory services with respect to actual and potential private equity andcapital markets investments, we are entitled to receive fees for transactions related to the acquisition and, in certain instances, disposition of portfoliocompanies as well as fees for ongoing monitoring of portfolio company operations and directors’ fees. We also receive an advisory fee for advisory servicesprovided to certain capital markets fund. In addition, monitoring fees are generated on certain special purpose vehicle investments. Under the terms of thelimited partnership agreements for certain of our private equity and capital markets funds, the advisory and transaction fees earned are subject to a reductionof a percentage of such advisory and transaction fees (the “Management Fee Offsets”).The Management Fee Offsets are calculated for each fund as follows: • 65%-68% for private equity funds gross advisory, transaction and other special fees; • 65%-80% for certain capital markets funds gross advisory, transaction and other special fees; and • 100% for certain other capital markets funds gross advisory, transaction and other special fees.These offsets are reflected as a decrease in advisory and transaction fees from affiliates on our consolidated statements of operations.Additionally, in the normal course of business, the management companies incur certain costs related to private equity funds (and certain capitalmarkets funds) transactions that are not consummated, or “broken deal costs.” A portion of broken deal costs related to certain of our private equity funds,up to the total amount of advisory and transaction fees, are reimbursed by the unconsolidated funds (through reductions of the Management Fee Offsetsdescribed above), except for Fund VII and certain of our capital markets funds which initially bear all broken deal costs and these costs are factored into theManagement Fee Offsets.Management Fees from Affiliates. The significant growth of the assets we manage has had a positive effect on our revenues. Management fees arecalculated based upon any of “net asset value,” “gross assets,” “adjusted costs of all unrealized portfolio investments,” “capital commitments,” “investedcapital,” “adjusted assets,” “capital contributions,” or “stockholders’ equity,” each as defined in the applicable management agreement of the unconsolidatedfunds.Carried Interest Income from Affiliates. The general partners of our funds, in general, are entitled to an incentive return that can amount to as muchas 20% of the total returns on fund capital, depending upon performance of the underlying funds and subject to preferred returns and high water marks, asapplicable. The carried interest income from affiliates is recognized in accordance with U.S. GAAP guidance applicable to accounting for arrangement feesbased on a formula. In applying the U.S. GAAP guidance, the carried interest from affiliates for any period is based upon an assumed liquidation of thefunds’ assets at the reporting date, and distribution of the net proceeds in accordance with the funds’ allocation provisions.At December 31, 2011, approximately 66% of the fair value of our fund investments was determined using market-based valuation methods (i.e.,reliance on broker or listed exchange quotes) and the remaining 34% was determined primarily by comparable company and industry multiples or discountedcash flow models. For our private equity, capital markets and real estate segments, the percentage determined using market-based valuation methods as ofDecember 31, 2011 was 59%, 79% and 48%, respectively. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Our private equity funds’performance, and our performance, may be adversely affected by the financial performance of our portfolio companies and the industries in which our fundsinvest” for discussion regarding certain industry-specific risks that could affect the fair value of our private equity funds’ portfolio company investments. 95Table of ContentsCarried interest income fee rates can be as much as 20% for our private equity funds. In our private equity funds, the Company does not earn carriedinterest income until the investors in the fund have achieved cumulative investment returns on invested capital (including management fees and expenses) inexcess of an 8% hurdle rate. Additionally, certain of our capital markets funds have various carried interest rates and hurdle rates. Certain capital marketsfunds allocate carried interest to the general partner in a similar manner as the private equity funds. In our private equity, certain capital markets and certainreal estate funds, so long as the investors achieve their priority returns, there is a catch-up formula whereby the Company earns a priority return for a portionof the return until the Company’s carried interest income equates to its incentive fee rate for that fund; thereafter, the Company participates in returns from thefund at the carried interest income rate. Carried interest income is subject to reversal to the extent that the carried interest income distributed exceeds the amountdue to the general partner based on a fund’s cumulative investment returns. The accrual for potential repayment of previously received carried interest incomerepresents 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 basedon the current fair value of the underlying funds’ investments as of the reporting date. This actual general partner obligation, however, would not becomepayable or realized until the end of a fund’s life. 96Table of ContentsThe table below presents an analysis of our (i) carried interest receivable and (ii) realized and unrealized carried interest (loss) income as of December 31,2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009: As ofDecember 31,2011 As ofDecember 31,2010 For the Year EndedDecember 31, 2011 For the Year EndedDecember 31, 2010 For the Year EndedDecember 31, 2009 CarriedInterestReceivable CarriedInterestReceivable UnrealizedCarriedInterest (Loss)Income RealizedCarriedInterestIncome TotalCarriedInterestIncome (Loss) UnrealizedCarriedInterestIncome RealizedCarriedInterestIncome TotalCarriedInterestIncome UnrealizedCarriedInterestIncome RealizedCarriedInterestIncome TotalCarriedInterestIncome (in millions) Private Equity Funds: Fund VII $508.0 $604.7 $(135.9) $260.2 $124.3 $427.1 $38.7 $465.8 $177.2 $25.7 $202.9 Fund VI — 648.3 (723.6) 80.7 (642.9) 647.6 13.1 660.7 — 20.7 20.7 Fund V 125.0 176.5 (51.6) 24.9 (26.7) 29.4 17.8 47.2 85.5 — 85.5 Fund IV 17.9 136.0 (118.1) 204.7 86.6 136.0 — 136.0 — 1.6 1.6 AAA 22.1 12.6 9.5 — 9.5 11.4 — 11.4 0.3 — 0.3 Total Private Equity Funds $673.0 $1,578.1 $(1,019.7) $570.5 $(449.2) $1,251.5 $69.6 $1,321.1 $263.0 $48.0 $311.0 Capital Markets Funds: Distressed and Event-Driven Hedge Funds(Value Funds, SOMA, AAOF) $12.6 $67.5 $(22.0) $1.7 $(20.3) $6.3 $57.2 $63.5 $11.9 $23.0 $34.9 Mezzanine Funds (AIE II, AINV) 17.4 27.3 (18.7) 54.9 36.2 11.7 60.1 71.8 — 50.4 50.4 Non-Performing Loan Fund (EPF) 51.5 — 53.2 — 53.2 — — — — — — Senior Credit Funds (ACLF, COFI/COF II, Gulf Stream) 114.1 194.2 (79.4) 62.0 (17.4) 85.9 56.7 142.6 108.2 — 108.2 Total Capital Markets Funds $195.6 $289.0 $(66.9) $118.6 $51.7 $103.9 $174.0 $277.9 $120.1 $73.4 $193.5 Total $868.6 $1,867.1 $(1,086.6) $689.1 $(397.5) $1,355.4 $243.6 $1,599.0 $383.1 $121.4 $504.5 (1)There was a corresponding profit sharing payable of $352.9 million and $678.1 million as of December 31, 2011 and 2010, respectively, that results in a net carried interest receivable amount of $515.7 millionand $1,189.0 million as of December 31, 2011 and 2010, respectively.(2)See the following table summarizing the fair value gains on investments and income needed to generate carried interest for funds and the related general partner obligation to return previously distributed carriedinterest income.(3)$602.6 million and $136.0 million for Fund VI and IV, respectively, related to the catch-up formula whereby the Company earns a disproportionate return (typically 80%) for a portion of the return until theCompany’s carried interest equates to its 20% incentive fee rate.As of December 31, 2011, the general partners of Fund IV, Fund V, Fund VII, AAA, the Value Funds, AIE II, COF I, COF II, AAOF, Gulf Stream andEPF were accruing carried interest income because the fair value of the investments of certain investors in these funds is in excess of the investors’ cost basisand allocable share of expenses. The investment manager of AINV accrues carried interest as it is realized. Additionally, COF I, AIE II and EPF were eachabove their hurdle rates of 8.0%, 7.5% and 8.0%, respectively, and generating carried interest income. 97(2)(3)(3)(2)(1)(1)Table of ContentsThe general partners of certain of our distressed and event-driven hedge funds accrue carried interest when the fair value of investments exceeds the costbasis of the individual investors’ investments in the fund, including any allocable share of expenses incurred in connection with such investments. Thesehigh water marks are applied on an individual investor basis. All of our distressed and event-driven hedge funds have investors with various high watermarks and are subject to market conditions and investment performance. As of December 31, 2011, approximately 27% of the limited partners’ capital in theValue Funds was generating carried interest income.Carried interest income from our private equity funds and certain capital markets and real estate funds is subject to contingent repayment by the generalpartner in the event of future losses to the extent that the cumulative carried interest distributed from inception to date exceeds the amount computed as due tothe general partner at the final distribution. These general partner obligations, if applicable, are disclosed by fund in the table below and are included in due toaffiliates on the consolidated statements of financial condition. As of December 31, 2011, there were no such general partner obligations related to certain of ourreal estate funds. Carried interest receivables are reported on a separate line item within the consolidated statements of financial condition.The following table summarizes our carried interest income since inception through December 31, 2011: Carried Interest Income Since Inception Undistributedby Fund andRecognized Distributedby FundandRecognized TotalUndistributedandDistributedby Fund andRecognized GeneralPartnerObligation asofDecember 31,2011 MaximumCarriedInterestIncomeSubject toPotentialReversal (in millions) Private Equity Funds: Fund VII $508.0 $285.0 $793.0 $— $651.5 Fund VI — 124.7 124.7 75.3 — Fund V 125.0 1,277.6 1,402.6 — 246.7 Fund IV 17.9 592.5 610.4 — 57.1 AAA 22.1 6.2 28.3 — 22.1 Total Private Equity Funds $673.0 $2,286.0 $2,959.0 $75.3 $977.4 Capital Markets Funds: Distressed and Event-Driven Hedge Funds (ValueFunds, SOMA, AAOF) $12.6 $139.3 $151.9 $18.1 $12.6 Mezzanine Funds (AIE II) 8.0 12.5 20.5 — 20.5 Non-Performing Loan Fund (EPF) 51.5 — 51.5 — 51.5 Senior Credit Funds (ACLF, COF I/COF II, GulfStream) 114.1 118.6 232.7 — 233.0 Total Capital Markets Funds $186.2 $270.4 $456.6 $18.1 $317.6 Total $859.2 $2,556.4 $3,415.6 $93.4 $1,295.0 (1)Amounts were computed based on the fair value of fund investments on December 31, 2011. As a result, carried interest income has been allocated toand recognized by the general partner. Based on the amount of carried interest income allocated, a portion is subject to potential reversal or has beenreduced by the general partner obligation to return previously distributed carried interest income or fees at December 31, 2011. The actual determinationand any required payment of any such general partner obligation would not take place until the final disposition of the fund’s investments based oncontractual termination of the fund. 98(1)(1)(2)(3)Table of Contents(2)Represents the amount of carried interest income that would be reversed if remaining fund investments became worthless on December 31, 2011.Amounts subject to potential reversal of carried interest income include amounts undistributed by a fund (i.e., the carried interest receivable), as well asa portion of the amounts that have been distributed by a fund, net of taxes not subject to a general partner obligation to return previously distributedcarried interest income, except for Fund IV which is gross of taxes.(3)Mezzanine Funds amounts exclude (i) AINV, as carried interest income from this fund is not subject to contingent repayment by the general partner, and(ii) AIE I as this fund is winding down.The following table summarizes the fair value gains on investments and the income needed to generate carried interest income for funds that are currentlynot generating carried interest income and have a general partner obligation to return previously distributed carried interest income based on the current fairvalue of the underlying funds’ investments as of December 31, 2011: Fund General PartnerObligation Fair Value ofInvestments/NetAsset Value as ofDecember 31, 2011 Fair Value Gain onInvestments andIncome to CrossCarried InterestIncome Threshold (in millions) Fund VI $75.3 $9,267.5 $1,553.2 SOMA 18.1 963.0 111.8 Total $93.4 $10,230.5 $1,665.0 (1)Based upon a hypothetical liquidation of Fund VI and SOMA as of December 31, 2011, Apollo has recorded a general partner obligation to returnpreviously distributed carried interest income, which represents amounts due to these funds. The actual determination and any required payment of ageneral partner obligation would not take place until the final disposition of the fund’s investments based on contractual termination of the fund.(2)Represents fair value of investments.(3)Represents net asset value.ExpensesCompensation and Benefits. Our most significant expense is compensation and benefits expense. This consists of fixed salary, discretionary and non-discretionary bonuses, incentive fee compensation and profit sharing expense associated with the carried interest income earned from private equity funds andcapital markets funds and compensation expense associated with the vesting of non-cash equity-based awards.Our compensation arrangements with certain partners and employees contain a significant performance-based incentive component. Therefore, as our netrevenues increase, our compensation costs also rise or can be lower when net revenues decrease. In addition, our compensation costs reflect the increasedinvestment in people as we expand geographically and create new funds. All payments for services rendered by our Managing Partners prior to theReorganization have been accounted for as partnership distributions rather than compensation and benefits expense. Refer to note 1 of the consolidatedfinancial statements for further discussion of the Reorganization. As a result, the consolidated financial statements have not reflected compensation expense forservices rendered by these individuals. Subsequent to the Reorganization, our Managing Partners are considered employees of Apollo. As such, payments forservices made to these individuals, including the expense associated with Apollo Operating Group unit described below, have been recorded as compensationexpense. The AOG Units were granted to the Managing Partners and Contributing Partners at the time of the Reorganization, as discussed in note 1 to ourconsolidated financial statements.In addition, certain professionals and selected other individuals have a profit sharing interest in the carried interest income earned in relation to ourprivate equity and certain capital markets funds in order to better align 99(1)(2)(3)Table of Contentstheir interests with our own and with those of the investors in these funds. Profit sharing expense is part of our compensation and benefits expense and isgenerally based upon a fixed percentage of private equity and capital markets carried interest income on a pre-tax and a pre-consolidated basis. Profit sharingexpense can reverse during periods when there is a decline in carried interest income that was previously recognized. Profit sharing amounts are normallydistributed to employees after the corresponding investment gains have been realized and generally before preferred returns achieved for the investors.Therefore, changes in our unrealized gains (losses) for investments have the same effect on our profit sharing expense. Profit sharing expense increases whenunrealized gains increase. Realizations only impact profit sharing expense to the extent that the effects on investments have not been recognized previously. Iflosses on other investments within a fund are subsequently realized, the profit sharing amounts previously distributed are normally subject to a general partnerobligation to return carried interest income previously distributed back to the funds. This general partner obligation due to the funds would be realized onlywhen the fund is liquidated, which generally occurs at the end of the fund’s term. However, indemnification clauses also exist for pre-reorganization realizedgains, which, although our Managing Partners and Contributing Partners would remain personally liable, may indemnify our Managing Partners andContributing Partners for 17.5% to 100% of the previously distributed profits regardless of the fund’s future performance. Refer to note 15 to our consolidatedfinancial statements for further discussion of indemnification.Salary expense for services rendered by our Managing Partners is limited to $100,000 per year for a five-year period that commenced in July 2007 andmay likely increase subsequent to September 2012. Additionally, our Managing Partners can receive other forms of compensation. In connection with theReorganization, the Managing Partners and Contributing Partners received AOG Units with a vesting period of five to six years and certain employees weregranted RSUs that typically have a vesting period of six years. Managing Partners, Contributing Partners and certain employees have also been granted AAARDUs, or incentive units that provide the right to receive AAA RDUs, which both represent common units of AAA and generally vest over three years foremployees and are fully-vested for Managing Partners and Contributing Partners on the grant date. In addition, ARI RSUs, ARI restricted stock and AMTGRSUs have been granted to the Company and certain employees in the real estate and capital markets segments and generally vest over three years. In addition,the Company granted share options to certain employees that generally vest and become exercisable in quarterly installments or annual installments dependingon the contract terms over the next two to six years. Refer to note 14 to our consolidated financial statements for further discussion of AOG Units and otherequity-based compensation.Other Expenses. The balance of our other expenses includes interest, litigation settlement, professional fees, placement fees, occupancy, depreciationand amortization and other general operating expenses. Interest expense consists primarily of interest related to the AMH Credit Agreement which has a variableinterest amount based on LIBOR and ABR interest rates as discussed in note 12 to our consolidated financial statements. Placement fees are incurred inconnection with our capital raising activities. Occupancy expense represents charges related to office leases and associated expenses, such as utilities andmaintenance fees. Depreciation and amortization of fixed assets is normally calculated using the straight-line method over their estimated useful lives, rangingfrom two to sixteen years, taking into consideration any residual value. Leasehold improvements are amortized over the shorter of the useful life of the asset orthe expected term of the lease. Intangible assets are amortized based on the future cash flows over the expected useful lives of the assets. Other general operatingexpenses normally include costs related to travel, information technology and administration.Other Income (Loss)Net Gains (Losses) from Investment Activities. The performance of the consolidated Apollo funds has impacted our net gains (losses) frominvestment activities. Net gains (losses) from investment activities include both realized gains and losses and the change in unrealized gains and losses in ourinvestment portfolio between the opening balance sheet date and the closing balance sheet date. Net unrealized gains (losses) are a result of changes in the fairvalue of unrealized investments and reversal of unrealized gains (losses) due to dispositions of investments during the reporting period. Significant judgmentand estimation goes into the assumptions that drive 100Table of Contentsthese models and the actual values realized with respect to investments could be materially different from values obtained based on the use of those models.The valuation methodologies applied impact the reported value of investment company holdings and their underlying portfolios in our consolidated financialstatements.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) frominvestment activities of consolidated variable interest entities and are attributable to Non-Controlling Interests in the consolidated statements of operations.Interest Income. The Company recognizes security transactions on the trade date. Interest income is recognized as earned on an accrual basis.Discounts and premiums on securities purchased are accreted or amortized over the life of the respective securities using the effective interest method.Other Income (Loss), Net. Other income, net includes gains (losses) arising from the remeasurement of foreign currency denominated assets andliabilities of foreign subsidiaries and other miscellaneous income and expenses.Income Taxes. The Apollo Operating Group and its subsidiaries continue to generally operate in the U.S. as partnerships for U.S. Federal income taxpurposes and generally as corporate entities in non-U.S. jurisdictions. Accordingly, these entities in some cases are subject to New York City unincorporatedbusiness tax, or in the case of non-U.S. entities, to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of the Company, issubject to U.S. Federal, state and local corporate income tax, and the Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.As significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties, we recognize the taxbenefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The tax benefit ismeasured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not consideredmore likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluated quarterly todetermine whether or not we have uncertain tax positions that require financial statement recognition.Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in theconsolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.Non-Controlling InterestsFor 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 Interest in the consolidatedfinancial statements. The Non-Controlling Interests relating to Apollo Global Management, LLC primarily include the 65.9%, 71.0% and 71.5% ownershipinterest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings as ofDecember 31, 2011, 2010 and 2009, respectively, and other ownership interests in consolidated entities, which primarily consist of the approximate 98%,97% and 97% ownership interest held by limited partners in AAA for the years ended December 31, 2011, 2010 and 2009, respectively. Non-ControllingInterests also include limited partner interests of Apollo managed funds in certain consolidated VIEs.The authoritative guidance for Non-Controlling Interests in the consolidated financial statements requires reporting entities to present Non-ControllingInterest as equity and provides guidance on the accounting for 101Table of Contentstransactions between an entity and Non-Controlling Interests. According to the guidance, (1) Non-Controlling Interests are presented as a separate component ofshareholders’ equity on the Company’s consolidated statements of financial condition, (2) net income (loss) includes the net income (loss) attributed to theNon-Controlling Interest holders on the Company’s consolidated statements of operations, (3) the primary components of Non-Controlling Interest areseparately presented in the Company’s consolidated statements of changes in shareholders’ equity to clearly distinguish the interests in the Apollo OperatingGroup and other ownership interests in the consolidated entities and (4) profits and losses are allocated to Non-Controlling Interests in proportion to theirownership interests regardless of their basis.On January 1, 2010, the Company adopted amended consolidation guidance issued by FASB on issues related to VIEs. The amended guidancesignificantly affects the overall consolidation analysis, changing the approach taken by companies in identifying which entities are VIEs and in determiningwhich party is the primary beneficiary. The amended guidance requires continuous assessment of the reporting entity’s involvement with such VIEs. Theamended guidance also enhances the disclosure requirements for a reporting entity’s involvement with VIEs, including presentation on the consolidatedstatements of financial condition of assets and liabilities of consolidated VIEs that meet the separate presentation criteria and disclosure of assets and liabilitiesrecognized in the consolidated statements of financial condition and the maximum exposure to loss for those VIEs in which a reporting entity is determined tonot be the primary beneficiary but in which it has a variable interest. The guidance provides a limited scope deferral for a reporting entity’s interest in an entitythat meets all of the following conditions: (a) the entity has all the attributes of an investment company as defined under the AICPA Audit and AccountingGuide, Investment Companies, or does not have all the attributes of an investment company but is an entity for which it is acceptable based on industrypractice to apply measurement principles that are consistent with the AICPA Audit and Accounting Guide, Investment Companies, (b) the reporting entitydoes not have explicit or implicit obligations to fund any losses of the entity that could potentially be significant to the entity and (c) the entity is not asecuritization entity, asset-backed financing entity or an entity that was formerly considered a qualifying special-purpose entity. The reporting entity isrequired to perform a consolidation analysis for entities that qualify for the deferral in accordance with previously issued guidance on variable interest entities.Apollo’s involvement with the funds it manages is such that all three of the above conditions are met with the exception of certain vehicles which fail condition(c) above. As previously discussed, the incremental impact of adopting the amended consolidation guidance has resulted in the consolidation of certain VIEsmanaged by the Company. Additional disclosures related to Apollo’s involvement with VIEs are presented in note 5 to our consolidated financial statements. 102Table of ContentsResults of OperationsBelow is a discussion of our consolidated results of operations for the years ended December 31, 2011, 2010 and 2009, respectively. For additionalanalysis of the factors that affected our results at the segment level, refer to “—Segment Analysis” below: Year EndedDecember 31, AmountChange PercentageChange Year EndedDecember 31, AmountChange PercentageChange 2011 2010 2010 2009 (in thousands) (in thousands) Revenues: Advisory and transaction fees from affiliates $81,953 $79,782 $2,171 2.7% $79,782 $56,075 $23,707 42.3% Management fees from affiliates 487,559 431,096 56,463 13.1 431,096 406,257 24,839 6.1 Carried interest (loss) income from affiliates (397,880) 1,599,020 (1,996,900) NM 1,599,020 504,396 1,094,624 217.0 Total Revenues 171,632 2,109,898 (1,938,266) (91.9) 2,109,898 966,728 1,143,170 118.3 Expenses: Compensation and benefits: Equity-based compensation 1,149,753 1,118,412 31,341 2.8 1,118,412 1,100,106 18,306 1.7 Salary, bonus and benefits 251,095 249,571 1,524 0.6 249,571 227,356 22,215 9.8 Profit sharing expense (63,453) 555,225 (618,678) NM 555,225 161,935 393,290 242.9 Incentive fee compensation 3,383 20,142 (16,759) (83.2) 20,142 5,613 14,529 258.8 Total Compensation and Benefits 1,340,778 1,943,350 (602,572) (31.0) 1,943,350 1,495,010 448,340 30.0 Interest expense 40,850 35,436 5,414 15.3 35,436 50,252 (14,816) (29.5) Professional fees 59,277 61,919 (2,642) (4.3) 61,919 33,889 28,030 82.7 General, administrative and other 75,558 65,107 10,451 16.1 65,107 61,066 4,041 6.6 Placement fees 3,911 4,258 (347) (8.1) 4,258 12,364 (8,106) (65.6) Occupancy 35,816 23,067 12,749 55.3 23,067 29,625 (6,558) (22.1) Depreciation and amortization 26,260 24,249 2,011 8.3 24,249 24,299 (50) (0.2) Total Expenses 1,582,450 2,157,386 (574,936) (26.6) 2,157,386 1,706,505 450,881 26.4 Other Income: Net (losses) gains from investment activities (129,827) 367,871 (497,698) NM 367,871 510,935 (143,064) (28.0) Net gains from investment activities of consolidated variable interest entities 24,201 48,206 (24,005) (49.8) 48,206 — 48,206 NM Gain from repurchase of debt — — — NM — 36,193 (36,193) (100.0) Income from equity method investments 13,923 69,812 (55,889) (80.1) 69,812 83,113 (13,301) (16.0) Interest income 4,731 1,528 3,203 209.6 1,528 1,450 78 5.4 Other income, net 205,520 195,032 10,488 5.4 195,032 41,410 153,622 371.0 Total Other Income 118,548 682,449 (563,901) (82.6) 682,449 673,101 9,348 1.4 (Loss) income before income tax benefit (provision) (1,292,270) 634,961 (1,927,231) NM 634,961 (66,676) 701,637 NM Income tax provision (11,929) (91,737) 79,808 (87.0) (91,737) (28,714) (63,023) 219.5 Net (Loss) Income (1,304,199) 543,224 (1,847,423) NM 543,224 (95,390) 638,614 NM Net loss (income) attributable to Non-Controlling Interests 835,373 (448,607) 1,283,980 NM (448,607) (59,786) (388,821) NM Net (Loss) Income Attributable to Apollo Global Management, LLC $(468,826) $94,617 $(563,443) NM $94,617 $(155,176) $249,793 NM “NM” denotes not meaningful. Changes from negative to positive amounts and positive to negative amounts are not considered meaningful. Increases or decreases from zero and changes greater than 500% are also notconsidered meaningful. 103Table of ContentsRevenuesOur revenues and other income include fixed components that result from measures of capital and asset valuations and variable components that resultfrom realized and unrealized investment performance, as well as the value of successfully completed transactions.Year Ended December 31, 2011 Compared to Year Ended December 31, 2010Advisory and transaction fees from affiliates, including directors’ fees and reimbursed broken deal costs, increased by $2.2 million for the year endedDecember 31, 2011 as compared to the year ended December 31, 2010. This increase was primarily attributable to an increase of advisory fees in the privateequity segment during the period of $6.5 million, partially offset by a decline in transaction fees in the capital markets segment of $4.6 million. During theyear ended December 31, 2011, gross and net advisory fees, including directors’ fees, were $143.1 million and $56.1 million, respectively, and gross and nettransaction fees were $62.9 million and $30.7 million, respectively. During the year ended December 31, 2010, gross and net advisory fees, includingdirectors’ fees, were $120.7 million and $43.4 million, respectively, and gross and net transaction fees were $102.0 million and $38.2 million, respectively.The net transaction and advisory fees were further offset by $4.8 million and $1.8 million in broken deal costs during the years ended December 31, 2011and 2010, respectively, primarily relating to Fund VII. Advisory and transaction fees are reported net of Management Fee Offsets as calculated under the termsof the respective limited partnership agreements. See “—Overview of Results of Operations—Revenues—Advisory and Transaction Fees from Affiliates” for asummary that addresses how the Management Fee Offsets are calculated for each fund.Management fees from affiliates increased by $56.5 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010.This change was primarily attributable to an increase in management fees earned by our real estate, capital markets and private equity segments by $28.9million, $26.4 million and $3.8 million respectively, as a result of corresponding increases in the net assets managed and fee-generating invested capital withrespect to these segments during the period. The remaining change was attributable to $2.6 million of fees earned from VIEs eliminated in consolidation duringthe year ended December 31, 2011.Carried interest (loss) income from affiliates changed by $(1,996.9) million for the year ended December 31, 2011 as compared to the year endedDecember 31, 2010. Carried interest income from affiliates is driven by investment gains and losses of unconsolidated funds. During the year endedDecember 31, 2011, there was $(1,087.0) million and $689.1 million of unrealized carried interest loss and realized carried interest income, respectively,which resulted in total carried interest loss from affiliates of $(397.9) million. During the year ended December 31, 2010, there was $1,355.4 million and$243.6 million of unrealized and realized carried interest income, respectively, which resulted in total carried interest income from affiliates of $1,599.0million. The $2,442.4 million decrease in unrealized carried interest income was driven by significant declines in the fair value of portfolio investments heldby certain of our private equity and capital markets funds, which resulted in reversals of previously recognized carried interest income, primarily by FundVI, Fund VII, Fund IV, Fund V, COF II, COF I, ACLF, AIE II and SOMA, which had decreased carried interest income of $1,371.2 million, $563.0 million,$254.1 million, $81.0 million, $59.5 million, $57.9 million, $49.9 million, $30.4 million and $27.8 million, respectively. Included in the above was areversal of previously recognized carried interest income due to general partner obligations to return carried interest income that was previously distributed onFund VI and SOMA of $75.3 million and $18.1 million, respectively, during the year ended December 31, 2011. The $445.5 million increase in realizedcarried interest income was attributable to increased dispositions along with higher interest and dividend income distributions from portfolio investments heldby certain of our private equity and capital markets funds, primarily by Fund VII, Fund IV and Fund VI of $221.5 million, $204.7 million and $67.6million respectively, during the year ended December 31, 2011 as compared to the same period during 2010. 104Table of ContentsYear Ended December 31, 2010 Compared to Year Ended December 31, 2009Advisory and transaction fees from affiliates, including directors’ fees and reimbursed broken deal costs, increased by $23.7 million for the year endedDecember 31, 2010 as compared to the year ended December 31, 2009. This increase was primarily attributable to an increase in the number of acquisitionsand divestitures during the period. Net advisory and transaction fees earned for the capital markets and private equity segments increased by $11.9 millionand $11.8 million, respectively. During the year ended December 31, 2010, gross and net advisory fees, including directors’ fees, were $120.7 million and$43.4 million, respectively, and gross and net transaction fees were $102.0 million and $38.2 million, respectively. During the year ended December 31, 2009,gross and net advisory fees, including directors’ fees, were $108.5 million and $39.1 million, respectively, and gross and net transaction fees were $68.1million and $22.9 million, respectively. The net transaction and net advisory fees were further offset by $1.8 million and $5.9 million in broken deal coststhat the Company was obligated to repay during the year ended December 31, 2010 and 2009, respectively, primarily relating to Fund VII.Management fees from affiliates increased by $24.8 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009.This change was primarily attributable to an increase in management fees earned by our capital markets and real estate segments by $15.7 million and $10.2million, respectively, as a result of corresponding increases in the net assets managed during the period. These increases were partially offset by a decrease of$1.1 million in management fees earned from our private equity funds as a result of a decrease in the amount of fee-generating invested capital due todispositions of investments subsequent to December 31, 2009.Carried interest income from affiliates changed by $1,094.6 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. Carried interest income from affiliates is driven by investment gains and losses of unconsolidated funds. During the year ended December 31, 2010,there was $1,355.4 million and $243.6 million of unrealized and realized carried interest income, respectively, which resulted in total carried interest incomefrom affiliates of $1,599.0 million. During the year ended December 31, 2009, there was $383.0 million and $121.4 million of unrealized and realized carriedinterest income, respectively, which resulted in total carried interest income from affiliates of $504.4 million. The $972.4 million increase in unrealized carriedinterest income was driven by significant improvements in the fair value of portfolio investments held by certain of our private equity funds, primarily byFund VI, Fund VII and Fund IV, which had increased carried interest income of $647.6 million, $249.6 million and $136.0 million, respectively, during theperiod. Based on the increase in fair value of the underlying portfolio investments, profits of Fund VI were such that the priority return to the fund investorswas met and thereafter its general partner was allocated (i) 80% of the fund’s profits, or $602.6 million, pursuant to the catch up formula in the fundpartnership agreement whereby the general partner earns a disproportionate return until the general partner’s carried interest income equates to 20% of thecumulative profits of the fund, and (ii) $45.0 million, which was allocated to the general partner once its carried interest income equated to 20% of thecumulative profits of the fund. Similarly, Fund IV profits were such that the priority return to fund investors was met and thereafter its general partner wasallocated 80% of the fund’s profits, or $136.0 million, but did not have carried interest income that equated to 20% of the cumulative profits of the fund. The$122.2 million increase in realized carried interest income was attributable to increased dispositions of portfolio investments held by certain of our privateequity and capital markets funds during the year ended December 31, 2010 as compared to the same period during 2009.ExpensesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Compensation and benefits decreased by $602.6 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. Thischange was primarily attributable to a reduction of profit sharing expense of $618.7 million driven by the change in carried interest income earned fromcertain of our private equity and capital markets funds due to the significant decline in the fair value of the underlying investments in 105Table of Contentsthese funds during the period. In addition, incentive fee compensation decreased by $16.8 million as a result of the unfavorable performance of certain of ourcapital markets funds during the period. Management business compensation and benefits expense increased by $39.2 million for the year endedDecember 31, 2011 as compared to the year ended December 31, 2010. This change was primarily the result of increased headcount, partially offset by adecrease related to the performance based incentive arrangement discussed below.The Company currently intends to, over time, seek to more directly tie compensation of its professionals to realized performance of the Company’sbusiness, which will likely result in greater variability in compensation. As previously disclosed, in June 2011, the Company adopted a performance basedincentive arrangement (the “Incentive Pool”) whereby certain partners and employees earned discretionary compensation based on carried interest realizationsearned by the Company during the year, which amounts are reflected as profit sharing expense in the Company’s consolidated financial statements. TheCompany adopted the Incentive Pool to attract and retain, and provide incentive to, partners and employees of the Company and to more closely align theoverall compensation of partners and employees with the overall realized performance of the Company. Allocations to the Incentive Pool and to its participantscontain both a fixed and a discretionary component and may vary year-to-year depending on the overall realized performance of the Company and thecontributions and performance of each participant. There is no assurance that the Company will continue to compensate individuals through performance-based incentive arrangements in the future and there may be periods when the Executive Committee of the Company’s manager determines that allocations ofrealized carried interest income are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits expense.Interest expense increased by $5.4 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This change wasprimarily attributable to higher interest expense incurred during 2011 on the AMH credit facility due to the margin rate increase once the maturity date wasextended in December 2010.Professional fees decreased by $2.6 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This change wasattributable to lower external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31, 2011, as compared to the sameperiod during 2010.General, administrative and other expenses increased by $10.5 million for the year ended December 31, 2011 as compared to the year endedDecember 31, 2010. This change was primarily attributable to increased travel, information technology, recruiting and other expenses incurred associated withthe launch of our new funds and continued expansion of our global investment platform during the year ended December 31, 2011 as compared to the sameperiod during 2010.Occupancy expense increased by $12.7 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This changewas primarily attributable to additional expense incurred from the extension of existing leases along with additional office space leased as a result of theincrease in our headcount to support the expansion of our global investment platform during the year ended December 31, 2011 as compared to the same periodduring 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Compensation and benefits increased by $448.3 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. Thischange was primarily attributable to an increase in profit sharing expense of $393.3 million, which was driven by the change in carried interest income earnedfrom our private equity and capital markets funds during the period due to improved performance of their underlying portfolio investments. In addition,salary, bonus and benefits expense increased by $22.2 million, which was driven by an increase in headcount and bonus accruals during the period and non-cash equity-based compensation expense increased by $18.3 million, primarily related to additional grants of RSUs subsequent to December 31, 2009. 106Table of ContentsFurthermore, incentive fee compensation increased by $14.5 million as a result of the favorable performance of certain of our capital markets funds during theyear ended December 31, 2010 as compared to the same period during 2009.Interest expense decreased by $14.8 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This change wasprimarily attributable to lower interest expense incurred in respect of the AMH Credit Agreement due to the $90.9 million debt repurchase during April andMay 2009 along with the expiration of interest rate swap agreements during May and November 2010. In addition, there were lower LIBOR and ABR interestrates during the year ended December 31, 2010 as compared to the same period during 2009 which resulted in lower interest expense incurred.Professional fees increased by $28.0 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This change wasprimarily attributable to higher external accounting, tax, audit, legal and consulting fees incurred during the period which was primarily associated withincremental costs incurred to register the Company’s Class A shares and the implementation of new information technology systems during the year endedDecember 31, 2010 as compared to the same period during 2009.General, administrative and other expenses increased by $4.0 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. This change was primarily attributable to increased travel, information technology, recruiting and other expenses incurred associated with the launch ofour new real estate funds and continued expansion of our global investment platform during the year ended December 31, 2010 as compared to the same periodduring 2009.Placement fees decreased by $8.1 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. Placement fees areincurred in connection with the raising of capital for new and existing funds. The fees are normally payable to placement agents, who are third parties thatassist in identifying potential investors, securing commitments to invest from such potential investors, preparing or revising offering marketing materials,developing strategies for attempting to secure investments by potential investors and/or providing feedback and insight regarding issues and concerns ofpotential investors. This change was primarily attributable to decreased fundraising efforts during 2010 in connection with our capital markets and privateequity funds resulting in lower placement fees incurred of $6.6 million and $1.5 million, respectively, during the year ended December 31, 2010 as comparedto the same period during 2009.Occupancy expense decreased by $6.6 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This changewas primarily attributable to cost savings resulting from negotiating new office leases and lower maintenance fees incurred on existing leased space during theyear ended December 31, 2010 as compared to the same period during 2009. In addition, there was a loss incurred on subleases totaling $3.2 million duringthe year ended December 31, 2009.Other (Loss) IncomeYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Net gains from investment activities decreased by $497.7 million for the year ended December 31, 2011 as compared to the year ended December 31,2010. This change was primarily attributable to a $494.1 million decrease in net unrealized gains related to changes in the fair value of AAA Investments’portfolio investments during the period. In addition, there was a $5.9 million unrealized loss related to the change in the fair value of the investment in HFAduring the year ended December 31, 2011, partially offset by $2.3 million of net unrealized and realized gains related to changes in the fair value of the MetalsTrading Fund’s portfolio investments during the year ended December 31, 2010.Net gains from investment activities of consolidated VIEs decreased by $24.0 million during the year ended December 31, 2011 as compared to the yearended December 31, 2010. This change was primarily attributable to 107Table of Contentsa decrease in net realized and unrealized gains (losses) relating to the decrease in the fair value of investments held by the consolidated VIEs of $54.1 million,along with higher expenses of $37.9 million during the period primarily due to the acquisition of Gulf Stream in October 2011. These decreases were partiallyoffset by higher net unrealized and realized gains relating to the debt held by the consolidated VIEs of $55.7 million and higher interest income of $12.3million during the year ended December 31, 2011 as compared to the same period during 2010.Income from equity method investments decreased by $55.9 million for the year ended December 31, 2011 as compared to the year ended December 31,2010. This change was primarily driven by changes in the fair values of certain Apollo funds in which the Company has a direct interest. Fund VII, COF I,Artus, COF II and ACLF had the most significant impact and together generated $11.9 million of income from equity method investments during the yearended December 31, 2011 as compared to $62.1 million of income from equity method investments during the year ended December 31, 2010 resulting in anet decrease of income from equity method investments totaling $50.2 million. Refer to note 4 to our consolidated financial statements for a complete summaryof income (loss) from equity method investments by fund for the years ended December 31, 2011 and 2010.Other income, net increased by $10.5 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This changewas primarily attributable to an increase in gains on acquisitions of $166.5 million driven by the $195.5 million bargain purchase gain recorded on the GulfStream acquisition during October 2011, partially offset by the bargain purchase gain on the CPI acquisition of $24.1 million during November 2010. Thiswas offset by $162.5 million of insurance reimbursement received during the year ended December 31, 2010 relating to a $200.0 million litigation settlementincurred during 2008, along with $7.8 million of other income attributable to the change in the estimated tax receivable agreement liability as discussed in note10 to our consolidated financial statements. During the year ended December 31, 2011, approximately $8.0 million of offering costs were reimbursed that wereincurred during 2009 related to the launch of ARI, offset by approximately $8.0 million of offering costs incurred during the third quarter of 2011 related tothe launch of AMTG. The remaining change was primarily attributable to gains resulting from fluctuations in exchange rates of foreign denominated assetsand liabilities of subsidiaries during the year ended December 31, 2011 as compared to the same period in 2010. Refer to note 10 of our consolidated financialstatements for a complete summary of other income for the years ended December 31, 2011 and 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Net gains from investment activities decreased by $143.1 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. This change was primarily attributable to a $101.7 million change in net unrealized gains (losses) related to changes in the fair value of AAA’s portfolioinvestments during the period. This decrease was also a result of a change in net unrealized gains (losses) of $38.4 million related to the change in the fairvalue of Artus during 2009, where we, as the general partner, were allocated any negative equity of the fund. During the year ended December 31, 2009, thefair value of Artus increased, which resulted in the reversal of the previously recognized obligation. In addition, there was a $2.3 million change in netunrealized and realized gains (losses) related to changes in the fair value of the Metals Trading Fund’s portfolio investments during the year endedDecember 31, 2010 as compared to the same period during 2009.Net gains from investment activities of consolidated VIEs were $48.2 million during the year ended December 31, 2010. This amount was attributable tointerest and other income earned of $62.7 million along with net realized and unrealized gains relating to the changes in the fair values of investments held bythe consolidated VIEs of $53.6 million, partially offset by other expenses of $34.3 million and net losses relating to the changes in the fair values of debt heldby the consolidated VIEs of $33.8 million during the year ended December 31, 2010.Gain from repurchase of debt was $36.2 million for the year ended December 31, 2009 and was attributable to the purchase of $90.9 million face valueof AMH debt related to the AMH Credit Agreement for $54.7 million 108Table of Contentsin cash. As discussed in note 12 to our consolidated financial statements, the debt purchase was accounted for as if the debt was extinguished and thedifference between the carrying amount and the re-acquisition price resulted in a gain on extinguishment of debt of $36.2 million.Income from equity method investments changed by $13.3 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. This decrease was driven by changes in the fair values of certain Apollo funds or investments in which the Company has a direct interest. ACLF,Vantium C, COF II, COF I and AIE II had the most significant impact and together generated $22.5 million of income from equity method investments duringthe year ended December 31, 2010 compared to $49.5 million of income from equity method investments during the year ended December 31, 2009 resultingin a net decrease of income from equity method investments totaling $27.0 million. This decrease was partially offset by an increase of income from equitymethod investments in Fund VII, Vantium A, Artus and EPF which together generated $44.0 million of income from equity method investments during theyear ended December 31, 2010 compared to $30.3 million of income from equity method investments during the year ended December 31, 2009 resulting in anet increase of income from equity method investments totaling $13.7 million. Refer to note 4 to our consolidated financial statements for a complete summaryof income (loss) from equity method investments by fund for the years ended December 31, 2010 and 2009.Other income, net increased by $153.6 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This changewas primarily attributable to an additional $125.0 million of insurance reimbursement received during the year ended December 31, 2010 totaling $162.5million relating to the $200.0 million litigation settlement incurred during 2008, as compared to $37.5 million received during the year ended December 31,2009. In addition, there was a net gain on acquisitions and dispositions of $29.7 million during 2010 and $14.2 million of the increase was attributable to thechange in the estimated tax receivable agreement liability as discussed in note 10 to our consolidated financial statements. These increases were partially offsetby impairment on fixed assets of $3.1 million and loss on assets held for sale of $2.8 million during 2010. The remaining change was primarily attributableto gains (losses) resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries, partially driven by the Euroweakening against the U.S. dollar during the year ended December 31, 2010 as compared to the same period in 2009. Refer to note 10 of our consolidatedfinancial statements for a complete summary of other income for the years ended December 31, 2010 and 2009.Income Tax ProvisionYear Ended December 31, 2011 Compared to Year Ended December 31, 2010The income tax provision decreased by $79.8 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. Asdiscussed in note 11 to our consolidated financial statements, the Company’s income tax provision primarily relates to the earnings generated by APO Corp., awholly-owned subsidiary of Apollo Global Management, LLC that is subject to U.S. federal, state and local taxes. APO Corp. had income before taxes of $1.7million and $211.0 million for the years ended December 31, 2011 and 2010, respectively, after adjusting for permanent tax differences. The $209.3 millionchange in income before taxes resulted in decreased federal, state and local taxes of $77.2 million utilizing a marginal corporate tax rate. The remainingdecrease in the income tax provision of $2.6 million in 2011 as compared to 2010 was primarily affected by decreases in the New York City UnincorporatedBusiness Tax (“NYC UBT”), as well as taxes on foreign subsidiaries.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009The income tax provision increased by $63.0 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. Asdiscussed in note 11 to our consolidated financial statements, the Company’s income tax provision primarily relates to the earnings generated by APO Corp., awholly-owned subsidiary of Apollo Global Management, LLC that is subject to U.S. federal, state and local taxes. APO Corp. 109Table of Contentshad income before taxes of $211.0 million and $66.3 million for the years ended December 31, 2010 and 2009, respectively, after adjusting for permanent taxdifferences and the special allocation of AMH income as discussed in note 15 to our consolidated financial statements. The $144.7 million change in incomebefore taxes resulted in increased federal taxes of $50.6 million utilizing a 35% tax rate and state and local taxes of $8.7 million utilizing a combined 6% taxrate. The remaining change of $3.7 million in the income tax provision in 2010 compared to 2009 was primarily affected by decreases in the NYC UBT, aswell as, taxes on foreign subsidiaries.Non-Controlling InterestsNet loss (income) attributable to Non-Controlling Interests consisted of the following: Year EndedDecember 31, 2011 2010 2009 (in thousands) AAA $123,400 $(356,251) $(452,408) Consolidated VIEs (216,193) (48,206) — Interest in management companies (12,146) (16,258) (7,818) Net income attributable to Non-Controlling Interests in consolidated entities (104,939) (420,715) (460,226) Net loss (income) attributable to Non-Controlling Interests in Apollo OperatingGroup 940,312 (27,892) 400,440 Net loss (income) attributable to Non-Controlling Interests $835,373 $(448,607) $(59,786) (1)Reflects the Non-Controlling Interests in the net loss (income) of AAA and is calculated based on the Non-Controlling Interests ownership percentage inAAA, which was approximately 98% during the year ended December 31, 2011 and approximately 97% during the years ended December 31, 2010and 2009, respectively.(2)Reflects the Non-Controlling Interests in the net loss (income) of the consolidated VIEs and includes $202.2 million and $11.4 million of gains recordedwithin appropriated partners’ capital related to consolidated VIEs during the years ended December 31, 2011 and 2010, respectively.(3)Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of our capital markets managementcompanies.Initial Public Offering—On April 4, 2011, the Company completed the initial public offering (“IPO”) of its Class A shares, representing limitedliability company interests of the Company. Apollo Global Management, LLC received net proceeds from the IPO of approximately $382.5 million, whichwere used to acquire additional AOG Units. As a result, Holdings’ ownership interest in the Apollo Operating Group decreased from 70.7% to 66.5% and theCompany’s ownership interest increased from 29.3% to 33.5%. As such, the difference between the fair value of the consideration paid for the ApolloOperating Group level ownership interest and the book value on the date of the IPO is reflected in Additional Paid in Capital. 110(1)(2)(3)Table of ContentsNet loss attributable to Non-Controlling Interests in the Apollo Operating Group consisted of the following: Year EndedDecember 31, 2011 2010 2009 (in thousands) Net (loss) income $(1,304,199) $543,224 $(95,390) Net loss (income) attributable to Non-Controlling Interests in consolidatedentities (104,939) (420,715) (460,226) Net (loss) income after Non-Controlling Interests in consolidated entities (1,409,138) 122,509 (555,616) Adjustments: Income tax provision 11,929 91,737 28,714 NYC UBT and foreign tax provision (8,647) (11,255) (11,638) Capital increase related to equity-based compensation (22,797) — — Net loss in non-Apollo Operating Group entities 1,345 4,197 9,336 Total adjustments (18,170) 84,679 26,412 Net (loss) income after adjustments (1,427,308) 207,188 (529,204) Approximate ownership percentage of Apollo Operating Group 65.9% 71.0% 71.5% Net (loss) income attributable to Apollo Operating Group before otheradjustments (940,312) 145,379 (378,381) AMH special allocation — (117,487) (22,059) Net (loss) income attributable to Non-Controlling Interests in Apollo OperatingGroup $(940,312) $27,892 $(400,440) (1)Reflects all taxes recorded in our consolidated statements of operations. Of this amount, U.S. Federal, state, and local corporate income taxes attributableto APO Corp. are added back to income (loss) of the Apollo Operating Group before calculating Non-Controlling Interests as the income (loss) allocableto the Apollo Operating Group is not subject to such taxes.(2)Reflects NYC UBT and foreign taxes that are attributable to the Apollo Operating Group and its subsidiaries related to its operations in the U.S. aspartnerships and in non-U.S. jurisdictions as corporations. As such, these amounts are considered in the income (loss) attributable to the ApolloOperating Group.(3)This amount is calculated by applying the weighted average ownership percentage range of approximately 67.4%, 71.0% and 71.5% during the yearsended December 31, 2011, 2010 and 2009, respectively, to the consolidated net income (loss) of the Apollo Operating Group before a corporate incometax provision and after allocations to the Non-Controlling Interests in consolidated entities.(4)These amounts represent special allocation of income to APO Corp. and reduction of income allocated to Holdings due to the amendment to the AMHpartnership agreement as discussed in note 15 to our consolidated financial statements. There was no extension of the special allocation afterDecember 31, 2010. Therefore as a result, the Company did not allocate any additional income from AMH to APO Corp. related to the special allocation.However, the Company will continue to allocate income to APO Corp. based on the current economic sharing percentage. 111(1)(2)(3)(4)Table of ContentsSegment AnalysisDiscussed below are our results of operations for each of our reportable segments. They represent the segment information available and utilized by ourexecutive management, which consists of our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and toallocate resources. Management divides its operations into three reportable segments: private equity, capital markets and real estate. These segments wereestablished based on the nature of investment activities in each fund, including the specific type of investment made, the frequency of trading, and the level ofcontrol over the investment. Segment results do not consider consolidation of funds, equity-based compensation expense comprising of AOG Units, incometaxes, amortization of intangibles associated with 2007 Reorganization and acquisitions and Non-Controlling Interests with the exception of allocations ofincome to certain individuals.In addition to providing the financial results of our three reportable business segments, we further evaluate our individual reportable segments based onwhat we refer to as our Management and Incentive businesses. Our Management Business is generally characterized by the predictability of its financialmetrics, including revenues and expenses. The Management Business includes management fee revenues, advisory and transaction revenues, carried interestincome from certain of our mezzanine funds and expenses, each of which we believe are more stable in nature. The financial performance of our IncentiveBusiness is partially dependent upon quarterly mark-to-market unrealized valuations in accordance with U.S. GAAP guidance applicable to fair valuemeasurements. The Incentive Business includes carried interest income, income from equity method investments and profit sharing expense that are associatedwith our general partner interests in the Apollo funds, which is generally less predictable and more volatile in nature.Our financial results vary, since carried interest, which generally constitutes a large portion of the income from the funds that we manage, as well as thetransaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financialgrowth and profitability to manage our business. 112Table of ContentsPrivate EquityThe following tables set forth our segment statement of operations information and our supplemental performance measure, ENI, for our private equitysegment for the years ended December 31, 2011, 2010 and 2009, respectively. ENI represents segment income (loss), excluding the impact of non-cash chargesrelated to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprising amortization of AOG Units, incometaxes, amortization of intangibles associated with the 2007 Reorganization and acquisitions and Non-Controlling Interest with the exception of allocations ofincome to certain individuals. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds and consolidated VIEs that areincluded in the consolidated financial statements. ENI is not a U.S. GAAP measure. For the Year EndedDecember 31, 2011 For the Year EndedDecember 31, 2010 For the Year EndedDecember 31, 2009 Management Incentive Total Management Incentive Total Management Incentive Total (in thousands) Private Equity: Revenues: Advisory and transaction fees from affiliates $66,913 $— $66,913 $60,444 $— $60,444 $48,642 $— $48,642 Management fees from affiliates 263,212 — 263,212 259,395 — 259,395 260,478 — 260,478 Carried interest income (loss) from affiliates: Unrealized (loss) gain — (1,019,748) (1,019,748) — 1,251,526 1,251,526 — 262,890 262,890 Realized gains — 570,540 570,540 — 69,587 69,587 — 47,981 47,981 Total Revenues 330,125 (449,208) (119,083) 319,839 1,321,113 1,640,952 309,120 310,871 619,991 Expenses: Compensation and Benefits: Equity compensation 31,778 — 31,778 16,182 — 16,182 2,721 — 2,721 Salary, bonus and benefits 125,145 — 125,145 133,999 — 133,999 127,751 — 127,751 Profit sharing expense — (100,267) (100,267) — 519,669 519,669 — 124,048 124,048 Total compensation and benefits 156,923 (100,267) 56,656 150,181 519,669 669,850 130,472 124,048 254,520 Other expenses 99,338 — 99,338 97,750 — 97,750 99,581 — 99,581 Total Expenses 256,261 (100,267) 155,994 247,931 519,669 767,600 230,053 124,048 354,101 Other Income: Income from equity method investments — 7,960 7,960 — 50,632 50,632 — 54,639 54,639 Other income, net 7,081 — 7,081 162,213 — 162,213 58,701 584 59,285 Total Other Income 7,081 7,960 15,041 162,213 50,632 212,845 58,701 55,223 113,924 Economic Net Income (Loss) $80,945 $(340,981) $(260,036) $234,121 $852,076 $1,086,197 $137,768 $242,046 $379,814 (1)Included in unrealized carried interest (loss) income from affiliates is reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest incomeof $(75.3) million for Fund VI for the year ended December 31, 2011. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of December 31, 2011. Theactual determination and any required payment of a general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund. 113(1)Table of Contents For the Year EndedDecember 31, For the Year EndedDecember 31, 2011 2010 AmountChange PercentageChange 2010 2009 AmountChange PercentageChange (in thousands) (in thousands) Private Equity: Revenues: Advisory and transaction fees from affiliates $66,913 $60,444 $6,469 10.7% $60,444 $48,642 $11,802 24.3% Management fees from affiliates 263,212 259,395 3,817 1.5 259,395 260,478 (1,083) (0.4) Carried interest (loss) income from affiliates: Unrealized (losses) gains (1,019,748) 1,251,526 (2,271,274) NM 1,251,526 262,890 988,636 376.1 Realized gains 570,540 69,587 500,953 NM 69,587 47,981 21,606 45.0 Total carried interest (losses) income from affiliates (449,208) 1,321,113 (1,770,321) NM 1,321,113 310,871 1,010,242 325.0 Total Revenues (119,083) 1,640,952 (1,760,035) NM 1,640,952 619,991 1,020,961 164.7 Expenses: Compensation and benefits: Equity-based compensation 31,778 16,182 15,596 96.4 16,182 2,721 13,461 494.7 Salary, bonus and benefits 125,145 133,999 (8,854) (6.6) 133,999 127,751 6,248 4.9 Profit sharing expense (100,267) 519,669 (619,936) NM 519,669 124,048 395,621 318.9 Total compensation and benefits expense 56,656 669,850 (613,194) (91.5) 669,850 254,520 415,330 163.2 Other expenses 99,338 97,750 1,588 1.6 97,750 99,581 (1,831) (1.8) Total Expenses 155,994 767,600 (611,606) (79.7) 767,600 354,101 413,499 116.8 Other Income: Income from equity method investments 7,960 50,632 (42,672) (84.3) 50,632 54,639 (4,007) (7.3) Other income, net 7,081 162,213 (155,132) (95.6) 162,213 59,285 102,928 173.6 Total Other Income 15,041 212,845 (197,804) (92.9)% 212,845 113,924 98,921 86.8 Economic Net (Loss) Income $(260,036) $1,086,197 $(1,346,233) NM $1,086,197 $379,814 $706,383 186.0% (1)Included in unrealized carried interest (loss) income from affiliates is reversal of previously realized carried interest income due to the general partnerobligation to return previously distributed carried interest income of $(75.3) million for Fund VI for the year ended December 31, 2011, respectively.The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of December 31, 2011. The actualdetermination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investmentsbased on the contractual termination of the fund.RevenuesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Advisory and transaction fees from affiliates, including directors’ fees and reimbursed broken deal costs, increased by $6.5 million for the year endedDecember 31, 2011 as compared to the year ended December 31, 2010. This change was primarily attributable to an increase in advisory services renderedduring the period, primarily with respect to AAA and managed accounts. Gross advisory and transaction fees, including directors’ fees, were $164.5 millionand $162.9 million for the year ended December 31, 2011 and 2010, respectively, an increase of $1.6 million or 1.0%. The transaction fees earned during2011 primarily related to five portfolio investment transactions, specifically Alcan Engineered Products, Ascometal SA, Athene Holding Ltd. and associates,Brit Insurance and CKX Inc., which together generated $35.5 million and $18.4 million of the gross and net transaction fees, respectively, as compared totransaction fees primarily earned during 2010 from four portfolio investment transactions, specifically LyondellBasell Industries, Noranda Aluminum Inc.,CKE Restaurants Inc. and Evertec Inc., which together generated $58.4 million and $20.1 million of the gross and net transaction fees. The advisory feesearned during 2011 were primarily generated by advisory and monitoring 114(1)Table of Contentsarrangements with six portfolio investments including Athene Holding Ltd. and associates, Berry Plastics Group, Caesars Entertainment, CEVA Group plc,LeverageSource and Realogy Corporation, which generated gross and net fees of $78.1 million and $34.9 million, respectively. The advisory fees earnedduring 2010 were primarily generated by advisory and monitoring arrangements with several portfolio investments including Caesars Entertainment,LeverageSource and Realogy Corporation which generated gross and net fees of $55.7 million and $20.9 million, respectively. Advisory and transaction fees,including directors’ fees, are reported net of Management Fee Offsets totaling $92.8 million and $100.6 million for the year ended December 31, 2011 and2010, respectively, a decrease of $7.8 million or 7.8%. The net transaction and advisory fees were further offset by $4.8 million and $1.8 million in brokendeal costs during the years ended December 31, 2011 and 2010, respectively, relating to Fund VII.Management fees from affiliates increased by $3.8 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010.This change was primarily attributable to increased management fees earned from AAA Investments of $3.2 million as a result of increased adjusted grossassets managed during the period. In addition, management fees of $2.9 million were earned from ANRP which began earning fees during the third quarter of2011 based on committed capital. These increases were partially offset by decreased management fees earned by Fund V of $1.8 million as a result ofdecreases in fee-generating invested capital. In addition, during the third quarter of 2010, Fund IV started its winding down and no longer earns managementfees which resulted in a decrease in management fees of $0.7 million during the year ended December 31, 2011 as compared to the same period during 2010.Carried interest (loss) income from affiliates changed by $(1,770.3) million for the year ended December 31, 2011 as compared to the year endedDecember 31, 2010. This change was primarily attributed to a decrease in net unrealized carried interest income of $2,271.2 million driven by significantdeclines in the fair values of the underlying portfolio investments held during the period which resulted in the reversal of previously recognized carried interestincome, primarily by Fund VI, Fund VII, Fund IV and Fund V of $1,371.2 million, $563.0 million, $254.1 million and $81.0 million, respectively.Included in the above was a reversal of previously recognized carried interest income due to general partner obligations to return previously distributed carriedinterest income on Fund VI of $75.3 million during the year ended December 31, 2011. The remaining change relates to an increase in realized carried interestincome of $500.9 million resulting from increased dispositions along with higher interest and dividend income distributions from portfolio investments heldby certain of our private equity funds, primarily by Fund VII, Fund IV and Fund VI and Fund V of $221.5 million, $204.7 million, $67.6 million and$7.1 million, respectively, during the year ended December 31, 2011 as compared to the same period during 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Advisory and transaction fees from affiliates, including directors’ fees and reimbursed broken deal costs, increased by $11.8 million for the year endedDecember 31, 2010 as compared to the year ended December 31, 2009. This change was attributable to an increase in the number of acquisitions anddivestitures during the period, primarily by AAA, Fund VII, Fund V and Fund VI of $3.7 million, $3.5 million, $1.9 million and $1.9 million, respectively.Gross advisory and transaction fees, including directors’ fees, were $162.9 million and $148.1 million for the year ended December 31, 2010 and 2009,respectively, an increase of $14.8 million or 10.0%. The transaction fees earned during the year ended December 31, 2010 primarily related to four portfolioinvestment transactions, specifically LyondellBasell Industries, Noranda Aluminum Inc., CKE Restaurants Inc. and Evertec Inc., which together generated$58.4 million and $20.1 million of the gross and net transaction fees, respectively. The transaction fees earned during the year ended December 31, 2009primarily related to two portfolio investment transactions, specifically Infineon Technologies AG and Charter Communications Inc., which generated $51.0million and $16.3 million of the gross and net transaction fees, respectively. The advisory fees earned during both periods were primarily generated byadvisory and monitoring arrangements with several portfolio investments including LeverageSource, Caesars Entertainment and Realogy, which generatedgross and net fees of $55.7 million and $20.9 million, respectively, during the year ended December 31, 2010 gross and net 115Table of Contentsfees of $53.7 million and $20.3 million, respectively, during the year ended December 31, 2009. Advisory and transaction fees, including directors’ fees, arereported net of Management Fee Offsets totaling $100.6 million and $93.8 million for the year ended December 31, 2010 and 2009, respectively, an increase of$6.8 million or 7.2%.Management fees from affiliates decreased by $1.1 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009.This change was primarily attributable to decreased management fees earned as a result of decreased values of fee-generating invested capital due todispositions of investments, primarily by Fund VI and Fund V, resulting in decreased management fees of $2.4 million and $1.4 million, respectively. Inaddition, during the third quarter of 2010, Fund IV started its winding down and no longer earns management fees which resulted in a decrease in managementfees of $2.0 million during the period. These decreases were partially offset by increased management fees earned from AAA Investments of $5.1 million as aresult of increased adjusted gross assets managed during the year ended December 31, 2010 as compared to the same period during 2009.Carried interest income from affiliates changed by $1,010.2 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. This change was primarily attributable to an increase in net unrealized gains of $988.6 million driven by improvements in the fair value of theunderlying portfolio investments held, primarily by Fund VI, Fund VII and Fund IV of $647.6 million, $249.6 million and $136.0 million, respectively.Based on the increase in fair value of the underlying portfolio investments, profits of Fund VI were such that the priority return to the fund investors was metand thereafter its general partner was allocated (i) 80% of the fund’s profits, or $602.6 million, pursuant to the catch up formula in the fund partnershipagreement whereby the general partner earns a disproportionate return until the general partner’s carried interest income equates to 20% of the cumulative profitsof the fund, and (ii) $45.0 million, which was allocated to the general partner once its carried interest income equated to 20% of the cumulative profits of thefund. Similarly, Fund IV profits were such that the priority return to fund investors was met and thereafter its general partner was allocated 80% of the fund’sprofits, or $136.0 million, but did not have carried interest income that equated to 20% of the cumulative profits of the fund. These increases were partiallyoffset by a decrease of unrealized carried interest income in Fund V of $56.0 million primarily due to dispositions of portfolio investments along with a lowernet change in the fair value of investments held by this fund during the period. The remaining change relates to an increase in net realized gains of $21.6million resulting from dispositions of portfolio investments held during the period, primarily by Fund V and Fund VII totaling $31.2 million, partially offsetby a decrease in net realized gains of $7.6 million in Fund VI during the year ended December 31, 2010 as compared to the same period during 2009. In 2010,the improved market conditions impacted the valuation across all Apollo investment classes, which is further discussed in “Item 1. Business.”ExpensesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Compensation and benefits expense decreased by $613.2 million for the year ended December 31, 2011 as compared to the year ended December 31,2010. This change was primarily a result of a $619.9 million decrease in profit sharing expense primarily attributable to a change in carried interest incomeearned by our funds during the period and a $8.9 million decrease in salary, bonus and benefits expense. The performance-based incentive arrangement theCompany adopted in June 2011 for certain Apollo partners and employees also contributed to the decrease in salary, bonus and benefits expense during theperiod. These decreases were partially offset by increased non-cash equity-based compensation expense of $15.6 million primarily related to additional grantsof RSUs subsequent to December 31, 2010.Other expenses increased by $1.6 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This change wasprimarily attributable to increased occupancy expense of $4.0 million due to additional office space leased as a result of an increase in our headcount tosupport the 116Table of Contentsexpansion of our investment platform during the period, along with increased interest expense incurred of $3.7 million in connection with the margin rateincrease under the AMH Credit Agreement once the maturity date was extended in December 2010. These increases were partially offset by decreasedprofessional fees of $6.7 million due to lower external accounting, tax, audit, legal and consulting fees incurred during the period.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Compensation and benefits increased by $415.3 million for year ended December 31, 2010 as compared to the year ended December 31, 2009. Thischange was primarily attributable to a $395.6 million increase in profit sharing expense, driven by the change in carried interest income earned from ourprivate equity funds due to improved performance of their underlying portfolio investments during the period. In addition, salary, bonus and benefits expenseincreased by $6.2 million, driven by an increase in headcount and bonus amounts during the year ended December 31, 2010 as compared to the same periodduring 2009. Additionally, there was increased non-cash equity-based compensation expense of $13.5 million primarily related to additional grants of RSUssubsequent to December 31, 2009.Other expenses decreased by $1.8 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This change wasprimarily attributable to lower interest expense incurred of $9.7 million primarily in respect of the AMH Credit Agreement due to the $90.9 million debtrepurchase during April and May 2009, the expiration of interest rate swap agreements during May and November 2010 and lower LIBOR and ABR interestrates incurred during the period. Additionally, there were decreases in occupancy of $2.1 million, primarily attributable to cost savings resulting fromnegotiating new office leases and lower maintenance fees incurred on existing leased space during the period, a $1.5 million decrease in placement fees and a$1.2 million decrease in depreciation and amortization expense from the prior year. These decreases were partially offset by increased professional fees of $8.0million driven by higher external accounting, tax, audit, legal and consulting fees incurred during the period. In addition, general, administrative and otherexpenses increased by $4.6 million primarily attributable to increases in expenses incurred such as travel, information technology, recruiting and other generalexpenses.Other (Loss) IncomeYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Income from equity method investments decreased by $42.7 million for the year ended December 31, 2011 as compared to the year ended December 31,2010. This change was driven by decreases in the fair values of our private equity investments held, primarily relating to Apollo’s ownership interest in FundVII and AAA units which resulted in decreased income from equity method investments of $27.3 million and $14.2 million, respectively, during the yearended December 31, 2011 as compared to the same period during 2010.Other income net, decreased by $155.1 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This changewas primarily attributable to $162.5 million of insurance reimbursement received during the year ended December 31, 2010 relating to the $200.0 millionlitigation settlement incurred during 2008. The remaining change was primarily attributable to gains (losses) resulting from fluctuations in exchange rates offoreign denominated assets and liabilities of subsidiaries during the year ended December 31, 2011 as compared to the same period during 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Income from equity method investments decreased by $4.0 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. This change was driven by lower net changes in the fair values of our private equity investments held, primarily relating to Apollo’s ownership interestin Vantium C and AAA units, which resulted in a decrease of income from equity method investments of $6.7 million and $6.1 million, 117Table of Contentsrespectively, during the year ended December 31, 2010 as compared to the same period during 2009. These decreases were partially offset by an increase ofincome from equity method investments relating to Fund VII and Vantium A of $6.0 million and $2.8 million, respectively, during the year endedDecember 31, 2010 as compared to the same period during 2009.Other income, net increased by $102.9 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This changewas primarily attributable to an additional $125.0 million of insurance reimbursement received during the year ended December 31, 2010 totaling $162.5million relating to the $200.0 million litigation settlement incurred during 2008, as compared to $37.5 million received during the year ended December 31,2009. This increase was partially offset by the gain from repurchase of debt of $20.5 million during the year ended December 31, 2009, which wasattributable to the purchase of AMH debt related to the AMH Credit Agreement. As discussed in note 12 to our consolidated financial statements, the debtpurchase was accounted for as if the debt was extinguished and the difference between the carrying amount and the reacquisition price resulted in a gain onextinguishment of debt, of which $20.5 million was allocated to the private equity segment. The remaining decrease was primarily attributable to gains (losses)resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries in part due to the Euro weakening against the U.S.dollar during the year ended December 31, 2010 as compared to the same period during 2009. 118Table of ContentsCapital MarketsThe following tables set forth segment statement of operations information and ENI, for our capital markets segment for the years ended December 31,2011, 2010 and 2009, respectively. ENI represents segment income (loss), excluding the impact of non-cash charges related to RSUs granted in connectionwith the 2007 private placement and equity-based compensation expense comprising amortization of AOG Units, income taxes, amortization of intangiblesassociated with the 2007 Reorganization and acquisitions and Non-Controlling Interest with the exception of allocations of income to certain individuals. Inaddition, segment data excludes the assets, liabilities and operating results of the Apollo funds and consolidated VIEs that are included in the consolidatedfinancial statements. ENI is not a U.S. GAAP measure. Year EndedDecember 31, 2011 Year EndedDecember 31, 2010 Year EndedDecember 31, 2009 Management Incentive Total Management Incentive Total Management Incentive Total (in thousands) Capital Markets Revenues: Advisory and transaction fees from affiliates $14,699 $— $14,699 $19,338 $— $19,338 $7,433 $— $7,433 Management fees from affiliates 186,700 — 186,700 160,318 — 160,318 144,578 — 144,578 Carried interest income (loss) from affiliates: Unrealized (losses) gains — (66,852) (66,852) — 103,918 103,918 — 120,126 120,126 Realized gains 44,540 74,113 118,653 47,385 126,604 173,989 50,404 22,995 73,399 Total Revenues 245,939 7,261 253,200 227,041 230,522 457,563 202,415 143,121 345,536 Expenses: Compensation and Benefits: Equity-based compensation 23,283 — 23,283 9,879 — 9,879 2,921 — 2,921 Salary, bonus and benefits 92,898 — 92,898 93,884 — 93,884 88,686 — 88,686 Profit sharing expense — 35,461 35,461 — 35,556 35,556 — 37,887 37,887 Incentive fee compensation — 3,383 3,383 — 20,142 20,142 — 5,613 5,613 Total compensation and benefits 116,181 38,844 155,025 103,763 55,698 159,461 91,607 43,500 135,107 Other expenses 94,995 — 94,995 80,880 — 80,880 83,318 — 83,318 Total Expenses 211,176 38,844 250,020 184,643 55,698 240,341 174,925 43,500 218,425 Other (Loss) Income: Net loss from investment activities — (5,881) (5,881) — — — — — — Income from equity method investments — 2,143 2,143 — 30,678 30,678 — 46,384 46,384 Other (loss) income, net (1,978) — (1,978) 10,928 — 10,928 19,309 38,478 57,787 Total Other (Loss) Income (1,978) (3,738) (5,716) 10,928 30,678 41,606 19,309 84,862 104,171 Non-Controlling Interests (12,146) — (12,146) (16,258) — (16,258) (7,818) — (7,818) Economic Net Income (Loss) $20,639 $(35,321) $(14,682) $37,068 $205,502 $242,570 $38,981 $184,483 $223,464 (1)Included in unrealized carried interest income from affiliates is reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income orfees of $(18.1) million for SOMA for the year ended December 31, 2011. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of December 31, 2011. Theactual 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. 119(1)Table of Contents For the Year Ended.December 31, For the Year Ended.December 31, 2011 2010 AmountChange PercentageChange 2010 2009 AmountChange PercentageChange (in thousands) (in thousands) Capital Markets Revenues: Advisory and transaction fees from affiliates $14,699 $19,338 $(4,639) (24.0)% $19,338 $7,433 $11,905 160.2% Management fees from affiliates 186,700 160,318 26,382 16.5 160,318 144,578 15,740 10.9 Carried interest income from affiliates: Unrealized (loss) gain (66,852) 103,918 (170,770) NM 103,918 120,126 (16,208) (13.5) Realized gains 118,653 173,989 (55,336) (31.8) 173,989 73,399 100,590 137.0 Total carried interest income from affiliates 51,801 277,907 (226,106) (81.4) 277,907 193,525 84,382 43.6 Total Revenues 253,200 457,563 (204,363) (44.7) 457,563 345,536 112,027 32.4 Expenses: Compensation and benefits Equity-based compensation 23,283 9,879 13,404 135.7 9,879 2,921 6,958 238.2 Salary, bonus and benefits 92,898 93,884 (986) (1.1) 93,884 88,686 5,198 5.9 Profit sharing expense 35,461 35,556 (95) (0.3) 35,556 37,887 (2,331) (6.2) Incentive fee compensation 3,383 20,142 (16,759) (83.2) 20,142 5,613 14,529 258.8 Total compensation and benefits 155,025 159,461 (4,436) (2.8) 159,461 135,107 24,354 18.0 Other expenses 94,995 80,880 14,115 17.5 80,880 83,318 (2,438) (2.9) Total Expenses 250,020 240,341 9,679 4.0 240,341 218,425 21,916 10.0 Other (Loss) Income: Net loss from investment activities (5,881) — (5,881) NM — — — NM Income from equity method investments 2,143 30,678 (28,535) (93.0) 30,678 46,384 (15,706) (33.9) Other (loss) income, net (1,978) 10,928 (12,906) NM 10,928 57,787 (46,859) (81.1) Total Other (Loss) Income (5,716) 41,606 (47,322) NM 41,606 104,171 (62,565) (60.1) Non-Controlling Interests (12,146) (16,258) 4,112 (25.3) (16,258) (7,818) (8,440) 108.0 Economic Net (Loss) Income $(14,682) $242,570 $(257,252) NM $242,570 $223,464 $19,106 8.5% (1)Included in unrealized carried interest income from affiliates is reversal of previously realized carried interest income due to the general partner obligation to return previously distributed interest income or fees of$(18.1) million for SOMA for the year ended December 31, 2011. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of December 31, 2011. The actualdetermination and any required payment of a general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund.RevenuesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Advisory and transaction fees from affiliates decreased by $4.6 million for the year ended December 31, 2011 as compared to the year endedDecember 31, 2010. Gross advisory and transaction fees, including directors’ fees, were $41.2 million and $59.8 million for the year ended December 31,2011 and 2010, respectively, a decrease of $18.6 million or 31.1%. The transaction fees earned during 2011 were primarily related to two portfolio investmenttransactions of FCI and EPF which together generated gross and net fees of $9.6 million and $5.7 million, respectively. The transaction fees earning during2010 were primarily related to certain portfolio investment transactions of EPF which together generated gross and net fees of $11.0 million and $3.9 million,respectively. In addition, a termination fee was earned from KBC Life Settlements of $7.1 million during the year ended December 31, 2010. The advisoryfees earned during both periods were primarily generated by deal activity related to investments in LeverageSource, which resulted in gross and net advisoryfees of $25.9 million and $3.3 million, respectively, during 2011 and gross and net fees of $25.3 million and $3.4 million, respectively, during 2010.Advisory and transaction fees, including directors’ fees, are reported net of Management Fee Offsets totaling $26.5 million and $40.5 million for the yearended December 31, 2011 and 2010, respectively, a decrease of $14.0 million or 34.6%. 120(1)Table of ContentsManagement fees from affiliates increased by $26.4 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010.This change was primarily attributable to increased asset allocation fees earned from Athene of $9.4 million during the year. These fees are partially offset by acorresponding expense categorized as sub-advisory fees and included within professional fees expense. In addition, management fees of $3.4 million wereearned from AFT, $1.7 million from FCI and $1.4 million from AMTG, which all began earning management fees during the first quarter of 2011. GulfStream CLOs generated $2.5 million of fees and two new Senior Credit Funds, Apollo European Strategic Investment L.P. (“AESI”) and Palmetto Loan,generated fees of $1.2 million and $1.0 million, respectively, during the year ended December 31, 2011. Furthermore an increase in fee-generating investedcapital in COF II, gross adjusted assets managed by AINV and increased value of commitments in EPF resulted in increased management fees earned of $2.6million, $2.0 million and $1.4 million, respectively, during the period. These increases were partially offset by decreased management fees earned by ACLF of$1.8 million as a result of a decrease in fee-generating invested capital and by AIE I of $1.4 million as a result of sales of investments and resulting decrease innet assets managed during the period. The remaining change was attributable to overall increased assets managed by the remaining capital markets funds,which collectively contributed to the increase of management fees by $3.0 million during the period.Carried interest income from affiliates changed by $(226.1) million for the year ended December 31, 2011 as compared to the year ended December 31,2010. This change was primarily attributable to a decrease in net unrealized carried interest income of $170.8 million driven by decreased net asset values,primarily with respect to COF II, COF I, ACLF, AIE II and SOMA which collectively resulted in decreased net unrealized carried interest income of $225.4million, partially offset by increased unrealized carried interest income earned in 2011 by EPF of $53.2 million due to increased valuation of investments.During the year ended December 31, 2011, there was a reversal of previously recognized carried interest income from SOMA due to general partner obligationsto return carried interest income that was previously distributed of $18.1 million. The remaining change was attributable to a decrease in net realized gains of$55.3 million resulting primarily from a decrease in dividend and interest income on portfolio investments held by certain of our capital markets, primarilyby SOMA, during the year ended December 31, 2011 as compared to the same period during 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Advisory and transaction fees from affiliates increased by $11.9 million for the year ended December 31, 2010 as compared to the year endedDecember 31, 2009. This increase was primarily attributable to a termination fee earned from KBC Life Settlements of $7.1 million during the year endedDecember 31, 2010. Gross advisory and transaction fees, including directors’ fees, were $59.8 million and $28.4 million for the year ended December 31,2010 and 2009, respectively, an increase of $31.4 million or 110.6%. The transaction fees earned during both periods were primarily related to certainportfolio investment transactions of EPF which together generated gross and net fees of $11.0 million and $3.9 million, respectively, during the year endedDecember 31, 2010 and gross and net fees of $5.6 million and $1.9 million, respectively, during the year ended December 31, 2009. The advisory feesearned during both periods were primarily generated by deal activity related to investments in LeverageSource, which generated gross and net fees of $25.3million and $3.4 million, respectively, during the year ended December 31, 2010 and gross and net fees of $19.2 million and $4.7 million, respectively,during the year ended December 31, 2009. Advisory and transaction fees, including directors’ fees, are reported net of Management Fee Offsets totaling $40.5million and $21.0 million for the years ended December 31, 2010 and 2009, respectively, an increase of $19.5 million or 92.9%. Management Fee Offsetsincreased in 2010 primarily due to COF I Management Fee Offsets increasing to 100% from 80% of advisory fees between 2010 and 2009.Management fees from affiliates increased by $15.7 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009.This change was primarily attributable to increased net assets managed by certain capital markets funds including SVF, AIC and AIE II, which collectivelyresulted in increased management fees of $15.9 million during the period along with an increase in fee-generating invested 121Table of Contentscapital in COF II, which resulted in increased management fees earned of $5.8 million during the period. In addition, asset allocation fees earned from Atheneincreased by $6.8 million as it began earning fees during the third quarter of 2009. This increase is offset by a corresponding expense for subadvisory fees,presented in professional fees expense. These increases were partially offset by a decrease in management fees from EPF of $10.9 million which wasattributable to additional fees earned during 2009 from limited partners that committed to the fund late and as such, owed management fees retroactively frominception. In addition, there was a decrease in net assets managed by AAOF due to redemptions resulting in decreased management fees of $2.0 million duringthe year ended December 31, 2010 as compared to the same period during 2009.Carried interest income from affiliates changed by $84.4 million for the year ended December 31, 2010 compared to the year ended December 31, 2009.This change was attributable to an increase in net realized gains of $100.6 million driven by an increase in net asset value, primarily by COF I, SOMA, COFII, AIE II and SVF resulting in an increase of carried interest income of $34.0 million, $25.2 million, $22.7 million, $12.7 million and $11.2 million,respectively, during the period. This increase was partially offset by a decrease in net unrealized gains of $16.2 million due to the reversal of unrealized gainsdue to dispositions of investments held by certain of our capital markets funds during the period, primarily COF I, COF II, SVF, and VIF, of $25.1 million,$22.2 million, $5.6 million and $4.8 million, respectively. These decreases were partially offset by an increase of net unrealized gains by ACLF, AIE II andSOMA of $25.0 million, $11.7 million and $4.8 million, respectively, during the year ended December 31, 2010 as compared to the same period during2009.ExpensesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Compensation and benefits expense decreased by $4.4 million for the ended December 31, 2011 as compared to the year ended December 31, 2010. Thischange was primarily a result of a $16.8 million decrease in incentive fee compensation due to unfavorable performance of certain of our capital market fundsduring the period and a $1.0 million decrease in salary, bonus and benefits. The performance-based incentive arrangement the Company adopted in June 2011for certain Apollo partners and employees also contributed to the decrease in salary, bonus and benefits expense during the period. These decreases werepartially offset by increased non-cash equity-based compensation expense of $13.4 million primarily related to additional grants of RSUs subsequent toDecember 31, 2010.Other expenses increased by $14.1 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This change wasprimarily attributable to increased professional fees of $5.3 million primarily driven by structuring fees associated with AFT totaling $3.6 million incurredduring 2011. In addition, general, administrative and other expenses increased by $6.3 million due to higher travel, information technology, recruiting andother expenses incurred, along with increased occupancy expense of $3.5 million due to additional office spaced leased as a result of an increase in ourheadcount to support the expansion of our investment platform during the period. These increases were partially offset by decreased placement fees of $1.0million due to decreased fundraising efforts related to one of our funds during the year ended December 31, 2011 as compared to the same period during 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Compensation and benefits expense increased by $24.4 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009.This change was primarily attributable to increased incentive fee compensation expense of $14.5 million due to the favorable performance of certain of ourcapital markets funds during the period. Additionally, there was increased non-cash equity-based compensation expense of $7.0 million primarily related toadditional grants of RSUs subsequent to December 31, 2009 along with increased salary bonus and benefits expense of $5.2 million which was driven by anincrease in headcount and bonuses during the period. These increases were partially offset by decreased profit sharing expense of $2.3 million 122Table of Contentsdriven by the change in carried interest income of COF I and COF II due to a decline in the performance of their underlying portfolio investments during theyear ended December 31, 2010 as compared to the same period during 2009.Other expenses decreased by $2.4 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This change waspartially attributable to lower interest expense incurred of $7.0 million primarily in respect of the AMH Credit Agreement due to the $90.9 million debtrepurchase during April and May 2009, the expiration of interest rate swap agreements during May and November 2010 and lower LIBOR and ABR interestrates during the period, resulting in lower interest expense incurred. In addition, placement fees decreased by $6.6 million primarily attributable to decreasedfundraising efforts during 2010. Furthermore, occupancy expense decreased by $5.6 million primarily attributable to cost savings resulting from negotiatingnew office leases and lower maintenance fees incurred on existing leased space during the period. These decreases were partially offset by increasedprofessional fees of $14.5 million driven by higher external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31,2010 as compared to the same period during 2009.Other Income (Loss)Year Ended December 31, 2011 Compared to Year Ended December 31, 2010Net losses from investment activities were $5.9 million for the year ended December 31, 2011. This amount was related to an unrealized loss on thechange in the fair value of the investment in HFA during the year ended December 31, 2011.Income from equity method investments decreased by $28.5 million for the year ended December 31, 2011 as compared to the year ended December 31,2010. This change was driven by decreases in the fair values of investments held by certain of our capital markets funds, primarily COF I, Artus, COF II,and ACLF, which resulted in a decrease in income from equity method investments of $10.2 million, $4.5 million $4.3 million and $3.7 million, respectively,during the year ended December 31, 2011 as compared to the same period during 2010.Other (loss) income, net decreased by $12.9 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. Duringthe year ended December 31, 2011, approximately $8.0 million of offering costs were incurred related to the launch of AMTG. The remaining change wasprimarily attributable to gains (losses) resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries during the yearended December 31, 2011 as compared to the same period in 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Income from equity method investments changed by $15.7 million for the year ended December 31, 2010 as compared to the year ended December 31,2009. This decrease was driven by changes in the fair values of our capital markets investments held, primarily by ACLF, COF II, COF I and AIE II, whichcollectively resulted in a decrease of income from equity method investments of $20.3 million during the year ended December 31, 2010 as compared to thesame period during 2009. These decreases were partially offset by an increase in income from equity method investments relating to Artus and EPF of $2.6million and $2.2 million, respectively, during the year ended December 31, 2010 as compared to the same period during 2009.Other income, net decreased by $46.9 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This changewas primarily attributable to net gains from investment activities of $38.4 million during the year ended December 31, 2009 related to an unrealized loss fromArtus, where we, as the general partner, were allocated the negative equity of the fund. During the year ended December 31, 2009, the fair value of Artusincreased which resulted in the reversal of the previously recognized obligation. In 123Table of Contentsaddition, gain from repurchase of debt was $14.7 million during the year ended December 31, 2009 and was attributable to the purchase of AMH debt relatedto the AMH Credit Agreement. As discussed in note 12 to our consolidated financial statements, the debt purchase was accounted for as if the debt wasextinguished and the difference between the carrying amount and the re-acquisition price resulted in a gain on extinguishment of debt, of which $14.7 millionwas allocated to the capital markets segment. The remaining change was primarily attributable to lower gains resulting from fluctuations in exchange rates offoreign denominated assets and liabilities of subsidiaries partially driven by the Euro weakening against the U.S. dollar during the year ended December 31,2010 as compared to the same period during 2009.Real EstateThe following tables set forth our segment statement of operations information and our supplemental performance measure, ENI, for our real estatesegment for the years ended December 31, 2011, 2010 and 2009, respectively. ENI represents segment income (loss), excluding the impact of non-cash chargesrelated to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprising amortization of AOG Units, incometaxes and Non-Controlling Interests. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds and consolidated VIEsthat are included in the consolidated financial statements. ENI is not a U.S. GAAP measure. For the Year EndedDecember 31, 2011 For the Year EndedDecember 31, 2010 For the Year EndedDecember 31, 2009 Management Incentive Total Management Incentive Total Management Incentive Total (in thousands) Real Estate: Revenues: Advisory and transaction fees from affiliates $698 $— $698 $— $— $— $— $— $— Management fees from affiliates 40,279 — 40,279 11,383 — 11,383 1,201 — 1,201 Carried interest income from affiliates — — — — — — — — — Total Revenues 40,977 — 40,977 11,383 — 11,383 1,201 — 1,201 Expenses: Compensation and Benefits: Equity-based compensation 13,111 — 13,111 4,408 4,408 1,652 1,652 Salary, bonus and benefits 33,052 — 33,052 21,688 — 21,688 10,919 — 10,919 Profit sharing expense — 1,353 1,353 — — — — — Total compensation and benefits 46,163 1,353 47,516 26,096 — 26,096 12,571 — 12,571 Other expenses 29,663 — 29,663 19,938 — 19,938 13,621 — 13,621 Total Expenses 75,826 1,353 77,179 46,034 — 46,034 26,192 — 26,192 Other Income: Income (loss) from equity method investments — 726 726 — (391) (391) — (743) (743) Other income, net 9,694 — 9,694 23,622 — 23,622 1,043 — 1,043 Total Other Income (Loss) 9,694 726 10,420 23,622 (391) 23,231 1,043 (743) 300 Economic Net Loss $(25,155) $(627) $(25,782) $(11,029) $(391) $(11,420) $(23,948) $(743) $(24,691) 124Table of Contents For the Year EndedDecember 31, For the Year EndedDecember 31, 2011 2010 AmountChange PercentageChange 2010 2009 AmountChange PercentageChange (in thousands) Real Estate: Revenues: Advisory and transaction fees from affiliates $698 $— $698 NM $— $— $— — Management fees from affiliates 40,279 11,383 28,896 253.9% 11,383 1,201 10,182 NM Carried interest income from affiliates — — — — — — — — Total Revenues 40,977 11,383 29,594 260.0 11,383 1,201 10,182 NM Expenses: Compensation and Benefits Equity-based compensation 13,111 4,408 8,703 197.4 4,408 1,652 2,756 166.8% Salary, bonus and benefits 33,052 21,688 11,364 52.4 21,688 10,919 10,769 98.6 Profit sharing expense 1,353 — 1,353 NM — — — — Total compensation and benefits 47,516 26,096 21,420 82.1 26,096 12,571 13,525 107.6 Other expenses 29,663 19,938 9,725 48.8 19,938 13,621 6,317 46.4 Total Expenses 77,179 46,034 31,145 67.7 46,034 26,192 19,842 75.8 Other Income (Loss): Income (loss) from equity method investments 726 (391) 1,117 NM (391) (743) 352 (47.4) Other income, net 9,694 23,622 (13,928) (59.0) 23,622 1,043 22,579 NM Total Other Income 10,420 23,231 (12,811) (55.1) 23,231 300 22,931 NM Economic Net Loss $(25,782) $(11,420) $(14,362) 125.8% $(11,420) $(24,691) $13,271 (53.7)% RevenuesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Advisory and transaction fees from affiliates were $0.7 million for the year ended December 31, 2011 which were earned from a new fund, AGRE DebtFund I, L.P.Management fees increased by $28.9 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This change wasprimarily attributable to an increase of $22.8 million of fees earned from CPI Funds that were acquired during November 2010, therefore, 2011 included a fullyear of management fees earned in comparison to 2010. CPI Capital Partners Europe, CPI Capital Partners Asia Pacific and CPI Capital Partners NorthAmerica earned increased fees of $8.1 million, $7.4 million and $7.3 million, respectively, during the year ended December 31, 2011 as compared to 2010. Inaddition, increased net assets managed by ARI, AGRE CMBS Accounts, AGRE U.S. Real Estate Fund and AGRE Debt Fund I, L.P. account resulted inincreased management fees earned of $2.7 million, $1.8 million, $1.5 million and $0.2 million, respectively, during the year ended December 31, 2011 ascompared to the same period during 2010.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Management fees increased by $10.2 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009. This change wasprimarily attributable to $4.3 million of fees earned from CPI during the fourth quarter of 2010. In addition, increased net assets managed by ARI and theAGRE CMBS Accounts resulted in increased management fees earned of $3.7 million and $2.2 million, respectively, during the year ended December 31,2010 as compared to the same period during 2009. 125Table of ContentsExpensesYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Compensation and benefits increased by $21.4 million during the year ended December 31, 2011 as compared to the year ended December 31, 2010.This change was primarily attributable to a $11.4 million increase in salary, bonus and benefits expense primarily driven by an increase in headcount as aresult of the CPI Funds that were acquired during November 2010 and expansion of our real estate funds during the year ended December 31, 2011 ascompared to the same period during 2010. Additionally, non-cash equity-based compensation expense increased by $8.7 million primarily related to additionalgrants of RSUs subsequent to December 31, 2010, along with an increase in profit sharing expense of $1.4 million primarily due to the performance basedincentive arrangement the Company adopted in June 2011 for certain Apollo partners and employees.Other expenses increased by $9.7 million during the year ended December 31, 2011 as compared to the year ended December 31, 2010. This changewas primarily attributable to increased occupancy expense of $5.3 million due to additional office space leased as a result of an increase in our headcount tosupport the expansion of our real estate funds during the year ended December 31, 2011 as compared to the same period during 2010 and an increase ingeneral, administrative and other expenses of $3.7 million driven by increased travel, information technology, recruiting and other expenses incurredassociated with the launch of our new real estate funds during the period. These increases were partially offset by decreased professional fees of $1.2 milliondue to lower external accounting, tax, audit, legal and consulting fees incurred during the period.Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Compensation and benefits increased by $13.5 million during the year ended December 31, 2010 as compared to the year ended December 31, 2009.This change was attributable to an increase in salary, bonus and benefits expense of $10.8 primarily driven by an increase in headcount during the period as aresult of the CPI acquisition. Additionally, there was increased non-cash equity-based compensation expense of $2.7 million primarily related to additionalgrants of RSUs subsequent to December 31, 2009.Other expenses increased by $6.3 million during the year ended December 31, 2010 as compared to the year ended December 31, 2009. The majority ofthese expenses were incurred to establish our investment platform that will target real estate investment opportunities. Professional fees increased by $5.1million primarily due to higher external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31, 2010 as compared to thesame period during 2009. This increase was partially offset by decreased general, administrative and other expenses of $2.7 million which was primarilycomprised of $8.0 million of offering costs that were expensed during the year ended December 31, 2009 related to the launch of ARI during the third quarter of2009.Other Income (Loss)Year Ended December 31, 2011 Compared to Year Ended December 31, 2010Total other income decreased by $12.8 million during the year ended December 31, 2011 as compared to the year ended December 31, 2010. Thischange was primarily attributable to a gain of $24.1 million that was recognized on the acquisition of CPI during November 2010, partially offset by thereimbursement during 2011 of approximately $8.0 million of offering costs incurred during 2009 related to the launch of ARI. The remaining change wasprimarily attributable to gains (losses) resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries during the yearended December 31, 2011 as compared to the same period during 2010. 126Table of ContentsYear Ended December 31, 2010 Compared to Year Ended December 31, 2009Total other income increased by $22.9 million during the year ended December 31, 2010 as compared to the year ended December 31, 2009. Thischange was primarily due to a gain of $24.1 million that was recognized on the acquisition of CPI during November 2010.Summary Combined Segment Results for Management Business and Incentive BusinessThe following tables combine our reportable segments’ statements of operations information and supplemental performance measure, ENI, for ourManagement and Incentive businesses for the years ended December 31, 2011, 2010 and 2009, respectively. ENI represents segment income (loss), excludingthe impact of non-cash charges related to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprisingamortization of AOG Units, income taxes, amortization of intangibles associated with the 2007 Reorganization and acquisitions and Non-Controlling with theexception of allocations of income to certain individuals. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds andconsolidated VIEs that are included in the consolidated financial statements. ENI is not a U.S. GAAP measure.In addition to providing the financial results of our three reportable business segments, we evaluate our reportable segments based on what we refer to asour Management and Incentive Businesses. Our Management Business is generally characterized by the predictability of its financial metrics, includingrevenues and expenses. This business includes management fee revenues, advisory and transaction fee revenues, carried interest income from certain of ourmezzanine funds and expenses, each of which we believe are more stable in nature. Year EndedDecember 31, 2011 2010 2009 (in thousands) Management Business Revenues: Advisory and transaction fees from affiliates $82,310 $79,782 $56,075 Management fees from affiliates 490,191 431,096 406,257 Carried interest income from affiliates 44,540 47,385 50,404 Total Revenues 617,041 558,263 512,736 Expenses: Equity-based compensation 68,172 30,469 7,294 Salary, bonus and benefits 251,095 249,571 227,356 Interest expense 40,850 35,436 50,252 Professional fees 58,315 60,870 33,220 General, administrative and other 73,972 63,466 59,437 Placement fees 3,911 4,258 12,364 Occupancy 35,816 23,067 29,625 Depreciation 11,132 11,471 11,622 Total Expenses 543,263 478,608 431,170 Other Income: Gain from debt repurchase — — 36,193 Interest income 4,731 1,508 1,450 Other income, net 10,066 195,255 41,410 Total Other Income 14,797 196,763 79,053 Non-Controlling Interests (12,146) (16,258) (7,818) Economic Net Income $76,429 $260,160 $152,801 (1)Excludes professional fees related to the consolidated funds. 127(1)(2)(3)Table of Contents(2)Excludes general and administrative expenses related to the consolidated funds.(3)Includes $162.5 million and $37.5 million of insurance proceeds related to a litigation settlement included in other income during the years endedDecember 31, 2010 and 2009, respectively.The financial performance of our Incentive Business, which is dependent upon quarterly mark-to-market unrealized valuations in accordance with U.S.GAAP guidance applicable to fair value measurements, includes carried interest income, income from equity method investments, profit sharing expenses andincentive fee compensation that are associated with our general partner interests in the Apollo funds, which are generally less predictable and more volatile innature. Year EndedDecember 31, 2011 2010 2009 (in thousands) Incentive Business Revenues: Carried interest (loss) income from affiliates: Unrealized (losses) gains $(1,086,600) $1,355,444 $383,016 Realized gains 644,653 196,191 70,976 Total Revenues (441,947) 1,551,635 453,992 Expenses: Compensation and benefits: Profit sharing expense: Unrealized profit sharing expense (370,485) 504,537 143,475 Realized profit sharing expense 307,032 50,688 18,460 Total Profit Sharing Expense (63,453) 555,225 161,935 Incentive fee compensation 3,383 20,142 5,613 Total Compensation and Benefits (60,070) 575,367 167,548 Other Income: Net (loss) gains from investment activities (5,881) — 39,062 Income from equity method investments 10,829 80,919 100,280 Total Other Income 4,948 80,919 139,342 Economic Net (Loss) Income $(376,929) $1,057,187 $425,786 (1)Included in unrealized carried interest (loss) income from affiliates is reversal of previously realized carried interest income due to the general partnerobligation to return previously distributed carried interest income or fees of $(75.3) million and $(18.1) million for Fund VI and SOMA, respectively,for the year ended December 31, 2011. Included in unrealized profit sharing expense is reversal of previously realized profit sharing expense for theamounts receivable from Contributing Partners and certain employees due to the general partner obligation to return previously distributed carried interestincome of $(22.1) million for Fund VI for the year ended December 31, 2011. The general partner obligation is recognized based upon a hypotheticalliquidation of the funds’ net assets as of December 31, 2011. The actual determination and any required payment of any such general partner obligationwould not take place until the final disposition of a fund’s investments based on the contractual termination of the fund.(2)Excludes investment income and net gains (losses) from investment activities related to consolidated funds and the consolidated VIEs. 128(1)(1)(2)Table of ContentsSummaryBelow is the summary of our total reportable segments including management and incentive businesses and a reconciliation of ENI to Net Lossattributable to Apollo Global Management, LLC reported in our consolidated statements of operations: Year EndedDecember 31, 2011 2010 2009 (in thousands) Revenues $175,094 $2,109,898 $966,728 Expenses 483,193 1,053,975 598,718 Other income 19,745 277,682 218,395 Non-Controlling Interests (12,146) (16,258) (7,818) Economic Net (Loss) Income (300,500) 1,317,347 578,587 Non-cash charges related to equity-based compensation (1,081,581) (1,087,943) (1,092,812) Income tax provision (11,929) (91,737) (28,714) Net loss (income) attributable to Non-Controlling Interests in ApolloOperating Group 940,312 (27,892) 400,440 Net loss of Metals Trading Fund — (2,380) — Amortization of intangible assets (15,128) (12,778) (12,677) Net (Loss) Income Attributable to Apollo Global Management, LLC $(468,826) $94,617 $(155,176) Liquidity and Capital ResourcesHistoricalAlthough we have managed our historical liquidity needs by looking at deconsolidated cash flows, our historical consolidated statement of cash flowsreflects the cash flows of Apollo, as well as those of our consolidated Apollo funds.The primary cash flow activities of Apollo are: • Generating cash flow from operations; • Making investments in Apollo funds; • Meeting financing needs through credit agreements; and • Distributing cash flow to equity holders and Non-Controlling Interests.Primary cash flow activities of the consolidated Apollo funds are: • Raising capital from their investors, which have been reflected historically as Non-Controlling Interests of the consolidated subsidiaries in ourfinancial statements; • Using capital to make investments; • Generating cash flow from operations through distributions, interest and the realization of investments; and • Distributing cash flow to investors. 129Table of ContentsWhile primarily met by cash flows generated through fee income and carried interest income received, working capital needs have also been met (to alimited extent) through borrowings as follows: December 31, 2011 December 31, 2010 OutstandingBalance AnnualizedWeightedAverageInterest Rate OutstandingBalance AnnualizedWeightedAverageInterest Rate (in thousands) AMH Credit Agreement $728,273 5.39% $728,273 3.78% CIT secured loan agreement 10,243 3.39 23,252 3.50 Total Debt $738,516 5.35% $751,525 3.77% (1)Includes the effect of interest rate swaps.We determine whether to make capital commitments to our private equity funds in excess of our minimum required amounts based on a variety offactors, including estimates regarding our liquidity resources over the estimated time period during which commitments will have to be funded, estimatesregarding the amounts of capital that may be appropriate for other funds that we are in the process of raising or are considering raising, and our generalworking capital requirements.We have made one or more distributions to our managing partners and contributing partners, representing all of the undistributed earnings generated bythe businesses contributed to the Apollo Operating Group prior to the Private Offering Transactions. For this purpose, income attributable to carried interest onprivate equity funds related to either carry-generating transactions that closed prior to the Private Offering Transactions which closed in July 2007 or carry-generating transactions to which a definitive agreement was executed, but that did not close, prior to the Private Offering Transactions are treated as havingbeen earned prior to the Private Offering Transactions.On December 20, 2010, the Company repurchased approximately $180.8 million of AMH debt in connection with the extension of the maturity date ofsuch loans and had a remaining outstanding balance of $728.3 million. The Company determined that debt modification resulted in debt extinguishment,which did not result in any gain or loss recognized in the consolidated financial statements.Cash FlowsSignificant amounts from our consolidated statements of cash flows for the years ended December 31, 2011, 2010 and 2009 are summarized anddiscussed within the table and corresponding commentary below:Year Ended December 31, 2011 Compared to the Years Ended December 31, 2010 and 2009 Year EndedDecember 31, 2011 2010 2009 (in thousands) Operating Activities $743,821 $(218,051) $107,993 Investing Activities (129,536) (9,667) (16,870) Financing Activities (251,823) 243,761 (106,264) Net Increase (Decrease) in Cash and Cash Equivalents $362,462 $16,043 $(15,141) 130 (1) (1)Table of ContentsOperating ActivitiesNet cash provided by operating activities was $743.8 million during the year ended December 31, 2011. During this period, there was $1,304.2 millionin net losses, to which $1,149.8 million of equity-based compensation and $196.2 million gain on business acquisitions, non-cash expenses were added toreconcile net loss to net cash provided by operating activities. Additional adjustments to reconcile cash provided by operating activities during the year endedDecember 31, 2011 included $1,530.2 million in proceeds from sales of investments held by the consolidated VIEs, $113.1 million in net unrealized lossesfrom investments held by the consolidated funds and VIEs, a $43.8 million increase in due to affiliates and $998.5 million decrease in carried interestreceivable. The decrease in our carried interest receivable balance during the year ended December 31, 2011 was driven primarily by $304.5 million of carriedinterest losses from the change in fair value of funds for which we act as general partner, along with fund cash distributions of $692.6 million. Thesefavorable cash adjustments were offset by $1,294.5 million of purchases of investments held by the consolidated VIEs, $325.2 million decrease in profitsharing payable and $41.8 million of realized gains on debt of the consolidated VIEs.Net cash used in operating activities was $218.1 million during the year ended December 31, 2010. During this period, there was $543.2 million in netincome, to which $87.6 million of cash held by the consolidated VIEs, $1,240.8 million in net purchases of investments primarily by the consolidated VIEsand $416.6 million of net unrealized gains from investment activities of consolidated funds and consolidated VIEs were each added to reconcile net income tonet cash used in operating activities. Additional adjustments to reconcile cash used in operating activities during the year ended December 31, 2010 included a$1,383.2 million increase in our carried interest receivables. The increase in our carried interest receivable balance during the year ended December 31, 2010was driven by a $1,585.9 million increase in the fair value of the funds for which we act as general partner, offset by fund cash distributions of $204.4million. These adjustments were offset by $1,118.4 million of equity-based compensation, a non-cash expense, as well as $503.6 million increase in ourprofit sharing payable, which was also primarily driven by increases in the fair value of the funds for which we act as general partner. Additional offsetsinclude $627.3 million of sales of investments held by the consolidated VIEs, and a $107.9 million increase in other liabilities of the consolidated VIEs,which is primarily due to the refinancing of a portfolio investment.Net cash provided by operating activities was $108.0 million during the year ended December 31, 2009. During this period there was a $95.4 millionnet loss, to which $1.1 billion of equity-based compensation, a non-cash expense, was added to reconcile net loss to net cash provided by operating activities.Additional adjustments to reconcile cash provided by operating activities during the year ended December 31, 2009 included $471.9 million of unrealizedgains on investments held by AAA, a $406.8 million increase in our carried interest receivable and $83.1 million of income from equity method investments.The increase in our carried interest receivable balance during the year ended December 31, 2009 was driven by a $504.4 million increase in the fair value ofthe funds for which we act as general partner, offset by fund cash distributions of $97.6 million. There was also a $45.3 million change in deferred revenueand a $40.0 million change in net purchases of investments. These unfavorable cash adjustments were offset by a $144.5 million increase in our profitsharing payable, which was also primarily driven by increases in the fair value of the funds for which we act as general partner.The operating cash flow amounts from the Apollo funds and consolidated VIEs represent the significant variances between net income (loss) and cashflow from operations and were classified as operating activities pursuant to the American Institute of Certified Public Accountants, or “AICPA,” Audit andAccounting Guide, Investment Companies, or “Investment Company Guide.” The increasing capital needs reflect the growth of our business while the fund-related requirements vary based upon the specific investment activities being conducted at a point in time. These movements do not adversely affect ourliquidity or earnings trends because we currently have sufficient cash reserves compared to planned expenditures. 131Table of ContentsInvesting ActivitiesNet cash used in investing activities was $129.5 million for the year ended December 31, 2011, which was primarily comprised of $21.3 million inpurchases of fixed assets, $64.2 million of cash contributions to equity method investments, a $52.1 million investment in HFA, the $29.6 million for theacquisition of Gulf Stream and $26.0 million for the acquisition of investments in the Senior Loan Fund, partially offset by $64.8 million of cashdistributions from equity method investments. Cash contributions to equity method investments were primarily related to EPF, Fund VII and AGRE U.S. RealEstate Fund. Cash distributions from equity method investments were primarily related to Fund VII, ACLF, COF I, COF II, Artus, EPF and Vantium C.Net cash used in investing activities was $9.7 million for the year ended December 31, 2010, which was primarily comprised of $63.5 million of cashcontributions to equity method investments and $5.6 million of fixed asset purchases, offset by $21.6 million in cash received from business acquisitionsand dispositions and $38.9 million of cash distributions from equity method investments. Cash contributions to equity method investments were primarilyrelated to Fund VII, COF I, COF II, Palmetto and EPF. Cash distributions from equity method investments were primarily related to Fund VII, ACLF, COF I,COF II and Vantium C.Net cash used in investing activities was $16.9 million for the year ended December 31, 2009, which was primarily comprised of $42.5 million ofcash contributions to equity method investments and $15.8 million of fixed asset purchases, offset by $42.5 million of cash distributions from equitymethod investments. Cash contributions to equity method investments were primarily related to Fund VII, ARI, COF II and EPF. Cash distributions fromequity method investments were primarily related to COF I, Fund VII, EPF and ACLF.Financing ActivitiesNet cash used in financing activities was $251.8 million for the year ended December 31, 2011, which was primarily comprised of $415.9 million inrepayment of term loans by consolidated VIEs, $308.8 million in distributions by consolidated VIEs, $199.2 million of distributions paid to Non-Controlling Interests in the Apollo Operating Group, $27.3 million of distributions paid to Non-Controlling Interests in consolidated funds, $102.6 million indistributions and $17.1 million related to employee tax withholding payments in connection with deliveries of Class A shares in settlement of RSUs. Thesecash outflows were offset by $384.0 million in proceeds from the issuance of Class A shares and $454.4 million of debt issued by consolidated VIEs.Net cash provided by financing activities was $243.8 million for the year ended December 31, 2010, which was primarily comprised of $1,050.4million related to the issuance of debt by consolidated VIEs. This amount was offset by $331.1 million in repayment of term loans by consolidated VIEs,$146.7 million in distributions by consolidated VIEs, $182.3 million in repayments and repurchases of debt primarily with respect to the AMH CreditAgreement and $48.8 million in purchases of AAA units. In addition, there were $13.6 million of distributions to Non-Controlling Interests in the consolidatedentities and $21.3 million and $50.4 million of distributions paid to Class A shareholders and Non-Controlling Interests in the Apollo Operating Group,respectively.Net cash used in financing activities was $106.3 million for the year ended December 31, 2009, which was primarily comprised of $55.8 million inrepurchases of debt related to the AMH Credit Agreement and principal repayments on debt, $18.0 million of distributions to Non-Controlling Interests in theApollo Operating Group, $12.4 million of distributions to Non-Controlling Interests in consolidated entities and $4.9 million and $12.0 million ofdistributions paid to Class A shareholders and Non-Controlling Interests in the Apollo Operating Group, respectively. 132Table of ContentsDistributionsThe table below presents the declaration, payment and determination of the amount of quarterly distributions which are at the sole discretion of theCompany (in millions, except per share amounts): DistributionsDeclarationDate Distributions perClass A ShareAmount DistributionsPayment Date Distributions toAGM Class AShareholders Distributions toNon-ControllingInterest Holdersin the ApolloOperating Group TotalDistributions fromApollo OperatingGroup DistributionEquivalents onParticipatingSecurities January 8, 2009 $0.05 January 15, 2009 $4.9 $12.0 $16.9 $0.3 May 27, 2010 $0.07 June 15, 2010 $6.7 $16.8 $23.5 $1.0 August 2, 2010 $0.07 August 25, 2010 $6.9 $16.8 $23.7 $1.4 November 1, 2010 $0.07 November 23, 2010 $6.9 $16.8 $23.7 $1.3 January 4, 2011 $0.17 January 14, 2011 $16.6 $40.8 $57.4 $3.3 May 12, 2011 $0.22 June 1, 2011 $26.8 $52.8 $79.6 $4.7 August 9, 2011 $0.24 August 29, 2011 $29.5 $57.6 $87.1 $5.1 November 3, 2011 $0.20 December 2, 2011 $24.8 $48.0 $72.8 $4.3 Future Cash FlowsOur ability to execute our business strategy, particularly our ability to increase our AUM, depends on our ability to establish new funds and to raiseadditional investor capital within such funds. Our liquidity will depend on a number of factors, such as our ability to project our financial performance,which is highly dependent on our funds and our ability to manage our projected costs, fund performance, having access to credit facilities, being incompliance with existing credit agreements, as well as industry and market trends. Also during economic downturns the funds we manage might experiencecash flow issues or liquidate entirely. In these situations we might be asked to reduce or eliminate the management fee and incentive fees we charge. As was thesituation with AIE I, this could adversely impact our cash flow in the future.For example, the investment performance of AIE I was adversely impacted due to market conditions in 2008 and early 2009, and on July 10, 2009, itsshareholders subsequently approved a monetization plan. The primary objective of the monetization plan is to maximize shareholder recovery value by(i) opportunistically selling AIE I’s assets over a three-year period from July 2009 to July 2012 and (ii) reducing the overall costs of the fund. The Companywaived management fees of $12.6 million for the year ended December 31, 2008 and an additional $2.0 million for the year ended December 31, 2009 to limitthe adverse impact that deteriorating market conditions were having on AIE I’s performance. As a result of the monetization plan, we expect AIE I to haveadequate cash flow to satisfy its obligations as they come due, therefore, we do not anticipate any additional fee waivers for AIE I in the future. The Companycontinues to charge AIE I management fees at a reduced rate of 1.5% of the net assets of AIE I. Prior to the monetization plan, the management fees were basedon 2.0% of the gross assets of AIE I. The Company has no future plans to waive additional management fees charged to AIE I or to lower the currentmanagement fee arrangement. Management currently intends to proceed with the plan for the orderly wind down of AIE I as approved by the shareholders.However, these plans are subject to revision in the event future facts and circumstances present a more favorable solution for AIE I and its shareholders, asdetermined in good faith by management.In addition, in April 2010 we announced a strategic relationship agreement with CalPERS, whereby we agreed to reduce management fees and other feescharged to CalPERS on funds we manage, or in the future will manage, solely for CalPERS by $125.0 million over a five-year period or as close a period asrequired to provide CalPERS with that benefit.An increase in the fair value of our funds’ investments, by contrast, could favorably impact our liquidity through higher management fees where themanagement fees are calculated based on the net asset value, gross assets and adjusted assets. Additionally, higher carried interest income would generallyresult when investments appreciate over their cost basis which would not have an impact on the Company’s cash flow. 133Table of ContentsThe Company granted approximately 8.1 million RSUs to its employees during the year ended December 31, 2011. The average estimated fair value pershare on the grant date was $14.45 with a total fair value of the grants of $116.6 million. This will impact the Company’s compensation expense as thesegrants are amortized over their vesting term of three to six years. The Company expects to incur annual compensation expenses on all grants, net of forfeitures,of approximately $102.2 million, $73.2 million, $25.2 million, $9.4 million, $7.2 million and $1.1 million during the years ended December 31, 2012,2013, 2014, 2015, 2016 and 2017, respectively.Although Apollo Global Management, LLC expects to pay distributions according to our distribution policy, we may not pay distributions according toour policy, or at all, if, among other things, we do not have the cash necessary to pay the intended distributions. To the extent we do not have cash on handsufficient to pay distributions, we may have to borrow funds to pay distributions, or we may determine not to pay distributions. The declaration, paymentand determination of the amount of our quarterly distributions is at the sole discretion of our manager.Carried interest income from our funds can be distributed to us on a current basis, but is subject to repayment by the subsidiary of the Apollo OperatingGroup that acts as general partner of the fund in the event that certain specified return thresholds are not ultimately achieved. The Managing Partners,Contributing Partners and certain other investment professionals have personally guaranteed, to the extent of their ownership interest, subject to certainlimitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to aparticular Managing Partner’s or Contributing Partner’s distributions. Pursuant to the shareholders agreement dated July 13, 2007, we agreed to indemnifyeach of our Managing Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor ofFund IV, Fund V and Fund VI (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees)for all interests that our Managing Partners and Contributing Partners have contributed or sold to the Apollo Operating Group.Accordingly, in the event that our Managing Partners, Contributing Partners and certain investment professionals are required to pay amounts inconnection with a general partner obligation for the return of previously distributed carried interest income with respect to Fund IV, Fund V and Fund VI, wewill be obligated to reimburse our Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required topay even though we did not receive the distribution to which that general partner obligation related.Distributions to Managing Partners and Contributing PartnersThe three Managing Partners who became employees of Apollo Global Management, LLC on July 13, 2007, are each entitled to a $100,000 base salary.Additionally, our Managing Partners can receive other forms of compensation. Any additional consideration will be paid to them in their proportionalownership interest in Holdings. Additionally, 85% of any tax savings APO Corp. recognizes as a result of the tax receivable agreement will be paid to anyexchanging or selling Managing Partners.It should be noted that subsequent to the Reorganization, the Contributing Partners retained ownership interests in subsidiaries of the Apollo OperatingGroup. Therefore, any distributions that flow up to management or general partner entities in which the Contributing Partners retained ownership interests areshared pro rata with the Contributing Partners who have a direct interest in such entities prior to flowing up to the Apollo Operating Group. These distributionsare considered compensation expense post-Reorganization.The Contributing Partners are entitled to receive the following: • Profit Sharing—private equity carried interest income, from direct ownership of advisory entities. Any changes in fair value of the underlyingfund investments would result in changes to Apollo Global Management, LLC’s profit sharing payable. 134Table of Contents • Net Management Fee Income—distributable cash determined by the general partner of each management company, from direct ownership ofthe management company entity. The Contributing Partners will continue to receive net management fee income payments based on the intereststhey retained in management companies directly. Such payments are treated as compensation expense post-Reorganization as described above. • Any additional consideration will be paid to them based on their proportional ownership interest in Holdings. • No base compensation is paid to the Contributing Partners from the Company, but they are entitled to a monthly draw. • Additionally, 85% of any tax savings APO Corp. recognizes as a result of the tax receivable agreement will be paid to any exchanging or sellingContributing Partner.Potential Future CostsWe may make grants of RSUs or other equity-based awards to employees and independent directors that we appoint in the future.Critical Accounting PoliciesThis Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the consolidated financial statements,which have been prepared in accordance with U.S. GAAP. We also report segment information from our consolidated statements of operations and include asupplemental performance measure, ENI, for our private equity, capital markets and real estate segments. ENI represents segment income (loss) excluding theimpact of non-cash charges related to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprisingamortization of AOG Units, income taxes, amortization of intangibles associated with the 2007 Reorganization as well as acquisitions and Non-ControllingInterests excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our capital markets managementcompanies. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds and consolidated VIEs that are included in theconsolidated financial statements. ENI is not a U.S. GAAP measure.The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that could affect the reportedamounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results coulddiffer from these estimates. A summary of our significant accounting policies is presented in our consolidated financial statements. The following is asummary of our accounting policies that are affected most by judgments, estimates and assumptions.ConsolidationApollo consolidates those entities it controls through a majority voting interest or through other means, including those funds for which the generalpartner is presumed to have control (AAA, Senior Credit Loan Fund). Apollo also consolidates entities that are VIEs for which Apollo is the primarybeneficiary. 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) theobligation 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 our subsidiaries hold equity interests in and/or receive fees qualifying as variable interests from the funds that the Company manages. Theamended consolidation rules require an analysis to determine whether 135Table of Contents(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 orcontractually through other variable interests (e.g., carried interest and management fees), would give it a controlling financial interest. When the VIE hasqualified for the deferral of the amended consolidation rules in accordance with U.S. GAAP, the analysis is based on previous consolidation rules, whichrequire 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 interestsdirectly or indirectly in the entity or contractually through other variable interests (e.g., carried interest and management fees), would be expected to absorb amajority of the variability of the entity.Under both guidelines, the determination of whether an entity in which Apollo holds a variable interest is a VIE requires judgments which includedetermining 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 ormore parties’ equity interests should be aggregated, and determining whether the equity investors have proportionate voting rights to their obligations to absorblosses or rights to receive returns from an entity. Under both guidelines, Apollo determines whether it is the primary beneficiary of a VIE at the time it becomesinvolved with a VIE and reconsiders that conclusion continuously. The consolidation analysis can generally be performed qualitatively. However, if it is notreadily 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 fundmay 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 assessmentrequires the exercise of judgment. Where the variable interests have qualified for the deferral, judgments are made in estimating cash flows in evaluating whichmember 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 mostsignificantly 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 which party within arelated-party group is most closely associated with a VIE. The use of these judgments has a material impact to certain components of Apollo’s consolidatedfinancial statements.The only VIE formed prior to 2010, the adoption date of amended consolidation guidance, was consolidated as of the date of transition resulting inrecognition of the assets and liabilities of the consolidated VIE at fair value and recognition of a cumulative effect transition adjustment presented as acomponent of Non-Controlling Interests in Consolidated Entities in the consolidated statement of changes in shareholders’ equity for the year endedDecember 31, 2010. The transition adjustment is classified as a component of Non-Controlling Interest rather than an adjustment to appropriated partners’capital because the VIE is funded with equity and 100% of the equity ownership of the VIE is held by unconsolidated Apollo funds and one unaffiliated thirdparty. Changes in the fair value of assets and liabilities and the related interest, dividend and other income for this VIE are recorded within Non-ControllingInterests in consolidated entities in the consolidated statement of financial condition and within net gains from investment activities of consolidated VIEs andnet (income) loss attributable to Non-Controlling Interests in the consolidated statement of operations.Certain of the consolidated VIEs were formed to issue collateralized notes in the legal form of debt backed by financial assets. Changes in the fair valueof the assets and liabilities of these VIEs and the related interest and other income are presented within appropriated partners’ capital in the consolidatedstatements of financial condition as these VIEs are funded solely with debt and within net gains from investment activities of consolidated variable interestentities and net (income) loss attributable to Non- Controlling Interests in the 136Table of Contentsconsolidated statement of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIE’s note holders, not Apollo, willultimately 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 consolidated statement of financial condition as ofDecember 31, 2011.Additional disclosures regarding VIEs are set forth in note 5 to our consolidated financial statements. Inter-company transactions and balances, if any,have been eliminated in the consolidation.Revenue RecognitionCarried Interest Income from Affiliates. We earn carried interest income from our funds as a result of such funds achieving specified performancecriteria. Such carried interest income generally is earned based upon a fixed percentage of realized and unrealized gains of various funds after meeting anyapplicable hurdle rate or threshold minimum. Carried interest income from certain of the funds that we manage is subject to contingent repayment and isgenerally paid to us as particular investments made by the funds are realized. If, however, upon liquidation of a fund, the aggregate amount paid to us ascarried interest exceeds the amount actually due to us based upon the aggregate performance of the fund, the excess (in certain cases net of taxes) is required tobe returned by us to that fund. For a majority of our capital markets funds, once the annual carried interest income has been determined, there generally is nolook-back to prior periods for a potential contingent repayment, however, carried interest income on certain other capital markets funds can be subject tocontingent repayment at the end of the life of the fund. We have elected to adopt Method 2 from U.S. GAAP guidance applicable to accounting for managementfees based on a formula, and under this method, we accrue carried interest income quarterly based on fair value of the underlying investments and separatelyassess if contingent repayment is necessary. The determination of carried interest income and contingent repayment considers both the terms of the respectivepartnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining thefair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. Refer to note 18 to ourconsolidated financial statements for disclosure of the amounts of carried interest income (loss) income from affiliates that was generated from realized versusunrealized losses. See “Valuation of Investments” below for further discussion related to significant estimates and assumptions used for determining fair valueof the underlying investments in our capital markets, private equity and real estate funds.Management Fees from Affiliates. The management fees related to our private equity funds are generally based on a fixed percentage of the committedcapital or invested capital. The corresponding fee calculations that consider committed capital or invested capital are both objective in nature and therefore donot require the use of significant estimates or assumptions. Management fees related to our capital markets funds, by contrast, can be based on net assetvalue, gross assets, adjusted cost of all unrealized portfolio investments, capital commitments, adjusted assets, or capital contributions, all as defined in therespective partnership agreements. The capital markets management fee calculations that consider net asset value, gross assets, adjusted cost of all unrealizedportfolio investments and adjusted assets, are normally based on the terms of the respective partnership agreements and the current fair value of the underlyinginvestments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and couldvary depending on the valuation methodology that is used. The management fees related to our real estate funds are generally based on a specific percentage ofthe funds’ stockholders’ equity or committed or net invested capital or the capital accounts of the limited partners. See the Valuation of Investments sectionbelow for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our capitalmarkets and private equity funds. 137Table of ContentsInvestments, at Fair ValueThe Company follows U.S. GAAP attributable to fair value measurements, which among other things, requires enhanced disclosures about investmentsthat are measured and reported at fair value. Investments, at fair value, represent investments of the consolidated funds, investments of the consolidated VIEsand certain financial instruments for which fair value option was elected and the unrealized gains and losses resulting from changes in the fair value arereflected as net gains (losses) from investment activities and net gains (losses) from investment activities of the consolidated variable interest entities,respectively, in the consolidated statements of operations. In accordance with U.S. GAAP, investments measured and reported at fair value are classified anddisclosed 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 Iinclude listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments, even insituations 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, andfair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category includecorporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observableinputs. These investments exhibit higher levels of liquid market observability as compared to Level III investments. The Company subjects brokerquotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II investment. Thesecriteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentagedeviation from independent pricing services.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 thiscategory generally include general and limited partnership interests in corporate private equity and real estate funds, mezzanine funds, funds of hedgefunds, distressed debt and non-investment grade residual interests in securitizations and collateralized debt obligations where the fair value is based onobservable inputs as well as unobservable inputs. When a security is valued based on broker quotes, the Company subjects those quotes to variouscriteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment. Some of thefactors we consider include the number of broker quotes we obtain, the quality of the broker quotes, the standard deviations of the observed brokerquotes 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 levelwithin 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 thesignificance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment where the fairvalue is based on unobservable inputs.In cases where an investment or financial instrument 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.Equity Method Investments. For investments in entities over which the Company exercises significant influence but which do not meet therequirements for consolidation, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or lossof such entities. Income (loss) from equity method investments is recognized as part of other income (loss) in the consolidated statements of operations andincome (loss) on available-for-sale securities (from equity method investments) is recognized 138Table of Contentsas part of other comprehensive income (loss), net of tax in the consolidated statements of comprehensive income (loss). The carrying amounts of equity methodinvestments are reflected in investments in the consolidated statements of financial condition. As the underlying entities that the Company manages and investsin are, for U.S. GAAP purposes, primarily investment companies which reflect their investments at estimated fair value, the carrying value of the Company’sequity method investments in such entities are at fair value.Private Equity Investments. The majority of the investments within our private equity funds are valued using the market approach, which providesan indication of fair value based on a comparison of the subject Company to comparable publicly traded companies and transactions in the industry.Market Approach. The market approach is driven by current market conditions, including actual trading levels of similar companies and, to the extentavailable, actual transaction data of similar companies. Judgment is required by management when assessing which companies are similar to the subjectcompany being valued. Consideration may also be given to any of the following factors: (1) the subject company’s historical and projected financial data;(2) valuations given to comparable companies; (3) the size and scope of the subject company’s operations; (4) the subject company’s individual strengths andweaknesses; (5) expectations relating to the market’s receptivity to an offering of the subject company’s securities; (6) applicable restrictions on transfer;(7) industry and market information; (8) general economic conditions; and (9) other factors deemed relevant. Market approach valuation models typicallyemploy a multiple that is based on one or more of the factors described above. Sources for gaining additional knowledge related to comparable companiesinclude public filings, annual reports, analyst research reports, and press releases. Once a comparable company set is determined, we review certain aspectsof the subject company’s performance and determine how its performance compares to the group and to certain individuals in the group. We compare certainmeasurements such as EBITDA margins, revenue growth over certain time periods, leverage ratios, and growth opportunities. In addition, we compare ourentry multiple and its relation to the comparable set at the time of acquisition to understand its relation to the comparable set on each measurement date.Income Approach. For investments where the market approach does not provide adequate fair value information, we rely on the income approach. Theincome approach is also used to value investments or validate the market approach within our private equity funds. The income approach provides anindication 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 usedmethodology used in the income approach is a discounted cash flow method. Inherent in the discounted cash flow method are significant assumptions relatedto the subject company’s expected results and a calculated discount rate, which is normally based on the subject company’s weighted average cost of capital,or “WACC.” The WACC represents the required rate of return on total capitalization, which is comprised of a required rate of return on equity, plus thecurrent tax-effected rate of return on debt, weighted by the relative percentages of equity and debt that are typical in the industry. The most critical step indetermining the appropriate WACC for each subject company is to select companies that are comparable in nature to the subject company. Sources for gainingadditional knowledge about the comparable companies include public filings, annual reports, analyst research reports, and press releases. The general formulathen used for calculating the WACC considers the after-tax rate of return on debt capital and the rate of return on common equity capital, which furtherconsiders the risk-free rate of return, market beta, market risk premium and small stock premium, if applicable. The variables used in the WACC formulaare inferred from the comparable market data obtained. The Company evaluates the comparable companies selected and concludes on WACC inputs based onthe most comparable company or analyzes the range of data for the investment.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.Apollo utilizes a valuation committee consisting of members from senior management that reviews and approves the valuation results related to ourprivate equity investments. Management also retains independent 139Table of Contentsvaluation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies andrequests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results ordetermine fair value. However, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that wouldhave been used had a ready market for the investments existed, and the differences could be material.Capital Markets Investments. The majority of investments in Apollo’s capital markets funds are valued based on valuation models and quoted marketprices. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing recognizedpricing services, market participants or other sources. The capital markets funds also enter into foreign currency exchange contracts, credit default swapcontracts, and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market byrecognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. If securities are held at theend of this period, the changes in value are recorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Credit defaultswap contracts are recorded at fair value as an asset or liability with changes in fair value recorded as unrealized appreciation or depreciation. Realized gains orlosses are recognized at the termination of the contract based on the difference between the close-out price of the credit default contract and the original contractprice.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 observable market value exists, the value attributed to an investment is based on the enterprise value at the pricethat would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuationapproaches used to estimate the fair value of illiquid investments included in Apollo’s capital markets investments also may include the market approach andthe income approach, as previously described above.Apollo also utilizes a valuation committee that reviews and approves the valuation results related to our capital markets investments. Managementperforms various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecastevaluations and variance analysis.Real Estate Investments. For the CMBS portfolio of Apollo’s Funds, the estimated fair value of the AAA-rated CMBS portfolio is determined byreference to market prices provided by certain dealers who make a market in these financial instruments. Broker quotes are only indicative of fair value andmay not necessarily represent what the funds would receive in an actual trade for the applicable instrument. Additionally, the loans held-for-investment arestated at the principal amount outstanding, net of deferred loan fees and costs. For AGRE’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 analysisprepared internally, (ii) third party appraisals or valuations by qualified real estate appraisers, and (iii) contractual sales value of investments/propertiessubject to bona fide purchase contracts. Methods (i) and (ii) also incorporate consideration of the use of the income, cost, or sales comparison approaches ofestimating property values.Apollo also utilizes a valuation committee that reviews and approves the valuation results related to our real estate investments. Management performsvarious back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluationsand variance analysis.The fair values of the investments in our private equity, capital markets and real estate funds can be impacted by changes to the assumptions used inthe underlying valuation models. For further discussion on the 140Table of Contentsimpact of changes to valuation assumptions refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Sensitivity”. There have beenno material changes to the underlying valuation models during the periods that our financial results are presented.Fair Value of Financial InstrumentsU.S. GAAP guidance requires the disclosure of the estimated fair value of financial instruments. The fair value of a financial instrument is the amountat 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 12 to the consolidated financial statements), Apollo’sfinancial instruments are recorded at fair value or at amounts whose carrying value approximates fair value. See “—Investments, at Fair Value” above. WhileApollo’s valuations of portfolio investments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains orlosses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any relatedtransaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations werebased. Other financial instruments’ carrying values generally approximate fair value because of the short-term nature of those instruments or variable interestrates related to the borrowings. As disclosed in note 12, the Company’s long term debt obligation related to the AMH Credit Agreement is believed to have anestimated fair value of approximately $752.2 million based on a yield analysis using available market data of comparable securities with similar terms andremaining maturities as of December 31, 2011. However, the carrying value that is recorded on the consolidated statement of financial condition is the amountfor which we expect to settle the long term debt obligation.Valuation of Financial Instruments held by Consolidated VIEsThe consolidated VIEs hold investments that are traded over-the-counter. Investments in securities that are traded on a securities exchange or comparableover-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 inthe case of over-the-counter securities or other investments for which the last sale date is not available, valuations are based on independent market quotationsobtained 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 markettransactions of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among otherfactors.The consolidated VIEs also have debt obligations that are recorded at fair value. The valuation approach used to estimate the fair values of debtobligations is the discounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interestpayments and quarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and creditrating. Management uses its discretion and judgment in considering and appraising relevant factors for determining the valuations of its debt obligations.Fair Value Option. Apollo has elected the fair value option for the assets and liabilities of the consolidated VIEs. Such election is irrevocable and isapplied to financial instruments on an individual basis at initial recognition. Apollo has elected to separately present interest income in the ConsolidatedStatement of Operations from other changes in the fair value of the convertible notes issued by HFA. Apollo has elected to separately present interest income inthe consolidated statements of operations from other changes in the fair value of the convertible notes issued by HFA. Apollo has applied the fair value optionfor certain corporate loans, other investments and debt obligations held by these entities that otherwise would not have been carried at fair value. Refer to note 5to our consolidated financial statements for further disclosure on financial instruments of the consolidated VIEs for which the fair value option has beenelected. 141Table of ContentsGoodwill and Intangible Assets—Goodwill and indefinite-life intangible assets must be reviewed annually for impairment or more frequently ifcircumstances indicate impairment may have occurred. Identifiable finite-life intangible assets, by contrast, are amortized over their estimated useful lives,which are periodically re-evaluated for impairment or when circumstances indicate an impairment may have occurred. Apollo amortizes its identifiable finite-life intangible assets using a method of amortization reflecting the pattern in which the economic benefits of the finite-life intangible asset are consumed orotherwise used up. If that pattern cannot be reliably determined, Apollo uses the straight-line method of amortization. At June 30, 2011, the Companyperformed its annual impairment testing and determined there was no impairment of goodwill or indefinite life intangible assets at such time.Compensation and BenefitsCompensation and benefits include salaries, bonuses, profit sharing plans and the amortization of equity-based compensation. Bonuses are accruedover the service period. From time to time, the Company may distribute profits interests as a result of waived management fees to its investment professionals,which are considered compensation. Additionally, certain employees have arrangements whereby they are entitled to receive a percentage of carried interestincome based on the fund’s performance. To the extent that individuals are entitled to a percentage of the carried interest income and such entitlement is subjectto potential forfeiture at inception, such arrangements are accounted for as profit sharing plans, and compensation expense is recognized as the related carriedinterest income is recognized.Profit Sharing Expense. Compensation expense related to our profit sharing payable is a result of agreements with our Contributing Partners andemployees to compensate them based on the ownership interest they have in the general partners of the Apollo funds. Therefore, any movements in the fairvalue of the underlying investments in the funds we manage and advise affect the profit sharing expense. As of December 31, 2011, our total private equityinvestments were approximately $20.7 billion. The Contributing Partners and employees are allocated approximately 30% to 50% of the total carried interestincome which is driven primarily by changes in fair value of the underlying fund’s investments and is treated as compensation expense. Additionally, profitsharing expenses paid may be subject to clawback from employees, former employees and Contributing Partners.In June 2011, the Company adopted a performance based incentive arrangement for certain Apollo partners and employees designed to more closely aligncompensation on an annual basis with the overall realized performance of the Company. This arrangement enables certain partners and employees to earndiscretionary compensation based on carried interest realizations earned by the Company in a given year, which amounts are reflected in profit sharing expensein the accompanying consolidated financial statements.Incentive Fee Compensation. Certain employees are entitled to receive a discretionary portion of incentive fee income from certain of our capitalmarkets funds, based on performance for the year. Incentive fee compensation expense is recognized on accrual basis as the related carried interest income isearned.Equity-Based Compensation. Equity-based compensation is accounted for in accordance with U.S. GAAP, which requires that the cost of employeeservices received in exchange for an award of equity instruments is generally measured based on the grant date fair value of the award. Equity-based awardsthat do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are recognized overthe relevant service period. Further, as required under U.S. GAAP, the Company estimates forfeitures using industry comparables or historical trends forequity-based awards that are not expected to vest. Apollo’s equity-based compensation awards consist of, or provide rights with respect to AOG Units, RSUs,Share Options, AAA RDUs, ARI Restricted Stock Awards, ARI RSUs Awards and AMTG RSUs. The Company’s assumptions made to determine the fairvalue on grant date and the estimated forfeiture rate are embodied in the calculations of compensation expense. 142Table of ContentsAnother significant part of our compensation expense is derived from amortization of the AOG Units subject to forfeiture by our Managing Partners andContributing Partners. The estimated fair value was determined and recognized over the forfeiture period on a straight-line basis. We have estimated a 0% and3% forfeiture rate for our Managing Partners and Contributing Partners, respectively, based on the Company’s historical attrition rate for this level of staff aswell as industry comparable rates. If either the Managing Partners or Contributing Partners are no longer associated with Apollo or if there is no turnover, wewill revise our estimated compensation expense to the actual amount of expense based on the units vested at the balance sheet date in accordance with U.S.GAAP.Additionally, the value of the AOG Units have been reduced to reflect the transfer restrictions imposed on units issued to the Managing Partners andContributing Partners as well as the lack of rights to participate in future Apollo Global Management, LLC equity offerings. These awards have the followingcharacteristics: • Awards granted to the Managing Partners (i) are not permitted to be sold to any parties outside of the Apollo Global Management, LLC controlgroup and transfer restrictions lapse pro rata during the forfeiture period over 60 or 72 months, and (ii) allow the Managing Partners to initiate achange in control. • Awards granted to the Contributing Partners (i) are not permitted to be sold or transferred to any parties except to the Apollo Global Management,LLC control group and (ii) the transfer restriction period lapses over six years (which is longer than the forfeiture period which lapses ratably over60 months).As noted above, the AOG Units issued to the Managing Partners and Contributing Partners have different restrictions which affect the liquidity of andthe discounts applied to each grant.We utilized the Finnerty Model to calculate a discount on the AOG Units granted to the Contributing Partners. The Finnerty Model provides for avaluation discount reflecting the holding period restriction embedded in a restricted stock preventing its sale over a certain period of time. Along with theFinnerty Model we applied adjustments to account for the existence of liquidity clauses specific to contributing partner units and a minority interestconsideration as compared to units sold through the strategic investor transaction in 2007. The combination of these adjustments yielded a fair value estimateof the AOG Units granted to the Contributing Partners.The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. This modelhas gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and the length ofrestriction. The concept underpinning the Finnerty Model is that restricted stock cannot be sold over a certain period of time. Further simplified, a restrictedshare of equity in a company can be viewed as having forfeited a put on the average price of the marketable equity over the restriction period (also known as an“Asian Put Option”). If we price an Asian Put Option and compare this value to that of the assumed fully marketable underlying stock, we can effectivelyestimate the marketability discount.The assumptions utilized in the model were (i) length of holding period, (ii) volatility, (iii) dividend yield and (iv) risk free rate. Our assumptions wereas follows: (i)We assumed a maximum two year holding period. (ii)We concluded based on industry peers, that our volatility annualized would be approximately 40%. (iii)We assumed no distributions. (iv)We assumed a 4.88% risk free rate based on U.S. Treasuries with a two year maturity.For the Contributing Partners’ grants, the Finnerty Model calculation, as detailed above, yielded a marketability discount of 25%. This marketabilitydiscount, along with adjustments to account for the existence 143Table of Contentsof liquidity clauses and consideration of non-controlling interests as compared to units sold through the strategic investors transaction in 2007, resulted in anoverall discount for these grants of 29%.We determined a 14% discount for the grants to the Managing Partners based on the equity value per share of $24. We determined that the value of thegrants to the Managing Partners was supported by the 2007 sale of an identical security to Credit Suisse Management, LLC at $24 per share. Based on anequity value per share of $24, the implied discount for the grants to the Managing Partners was 14%. The Contributing Partners yielded a larger overalldiscount of 29%, as they are unable to cause a change in control of Apollo. This results in a lower fair value estimate, as their units have fewer beneficialfeatures than those of the Managing Partners.Income TaxesApollo has historically generally operated in the U.S. as partnerships for U.S. Federal income tax purposes and generally as corporate entities in non-U.S. jurisdictions. As a result, income has not been subject to U.S. Federal and state income taxes. Taxes related to income earned by these entities representobligations of the individual partners and members and have not been reflected in the consolidated financial statements. Income taxes presented on theconsolidated statements of operations are attributable to the New York City unincorporated business tax and income taxes on certain entities located in non-U.S. jurisdictions.Following the Reorganization, the Apollo Operating Group and its subsidiaries continue to generally operate in the U.S. as partnerships for U.S. Federalincome tax purposes and generally as corporate entities in non-U.S. jurisdictions. Accordingly, these entities in some cases are subject to NYC UBT, or in thecase of non-U.S. entities, to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. Federal,state and local corporate income tax, and the Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.As significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties, we recognize the taxbenefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The tax benefit ismeasured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not consideredmore likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluated quarterly todetermine whether or not we have uncertain tax positions that require financial statement recognition.Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in theconsolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets andliabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized inincome in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion orall of the deferred tax assets will not be realized. 144Table of ContentsFair Value MeasurementsThe Company follows U.S. GAAP attributable to fair value measurements, which among other things, requires enhanced disclosures about investmentsthat are measured and reported at fair value. Investments, at fair value, represent investments of the consolidated funds, investments of the consolidated VIEsand certain financial instruments for which fair value option was elected and the unrealized gains and losses resulting from changes in the fair value arereflected as net gains (losses) from investment activities and net gains (losses) from investment activities of the consolidated variable interest entities,respectively, in the consolidated statements of operations. In accordance with U.S. GAAP, investments measured and reported at fair value are classified anddisclosed 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 Iinclude listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments, even insituations 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, andfair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category includecorporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observableinputs. These investments exhibit higher levels of liquid market observability as compared to Level III investments. The Company subjects brokerquotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II investment. Thesecriteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentagedeviation from independent pricing services.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 thiscategory generally include general and limited partnership interests in corporate private equity and real estate funds, mezzanine funds, funds of hedgefunds, distressed debt and non-investment grade residual interests in securitizations and collateralized debt obligations where the fair value is based onobservable inputs as well as unobservable inputs. When a security is valued based on broker quotes, the Company subjects those quotes to variouscriteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment. Some of thefactors we consider include the number of broker quotes we obtain, the quality of the broker quotes, the standard deviations of the observed brokerquotes 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 levelwithin 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 thesignificance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment where the fairvalue is based on unobservable inputs. 145Table of ContentsFair Value MeasurementsThe following table summarizes the valuation of Apollo’s investments in fair value hierarchy levels as of December 31, 2011 and 2010: Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Assets, at fair value: Investment in AAA Investments, L.P. $— $— $— $— $1,480,152 $1,637,091 $1,480,152 $1,637,091 Investments held by Senior Loan Fund — — 23,757 — 456 — 24,213 — Investments in HFA and Other — — — — 47,757 — 47,757 — Total $— $— $23,757 $— $1,528,365 $1,637,091 $1,552,122 $1,637,091 Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Liabilities, at fair value: Interest rate swap agreements $— $— $3,843 $11,531 $— $— $3,843 $11,531 Total — $— 3,843 $11,531 — $— 3,843 $11,531 There were no transfers between Level I, II or III during the year ended December 31, 2011 and 2010 relating to assets and liabilities, at fair value, notedin the tables above, respectively.The following table summarizes the changes in AAA Investments, which is measured at fair value and characterized as a Level III investment: For the Year EndedDecember 31, 2011 2010 2009 Balance, Beginning of Period $1,637,091 $1,324,939 $854,442 Purchases 432 375 4,121 Distributions (33,425) (58,368) (5,497) Change in unrealized (losses) gains, net (123,946) 370,145 471,873 Balance, End of Period $1,480,152 $1,637,091 $1,324,939 146Table of ContentsThe following table summarizes the changes in the investment in HFA and Other Investments, which are measured at fair value and characterized asLevel III investments: For the YearEndedDecember 31, 2011 Balance, Beginning of Period $— Purchases 57,509 Change in unrealized losses, net (5,881) Director Fees (1,802) Expenses incurred (2,069) Balance, End of Period $47,757 The change in unrealized losses, net has been recorded within the caption “Net (losses) gains from investment activities” in the consolidated statementsof operations.The following table summarizes the changes in the Senior Loan Fund, which is measured at fair value and characterized as a Level III investment: For the YearEndedDecember 31, 2011 Balance, Beginning of Period $— Acquisition 456 Purchases — Distributions — Realized losses (gains) — Change in unrealized (losses) gains — Balance, End of Period $456 The following table summarizes the changes in the Metals Trading Fund investment, which is measured at fair value and characterized as a Level IIIinvestment: For the YearEndedDecember 31, 2010 Balance, Beginning of Period $40,034 Purchases — Distributions (37,760) Realized losses (2,240) Change in unrealized losses (34) Balance, End of Period $— (1)Refer to note 1 for a discussion regarding consolidation of the Metals Trading Fund.The change in unrealized gains (losses) and realized losses have been recorded within the caption “Net gains (losses) from investment activities” in theconsolidated statements of operations. 147(1)Table of ContentsThe following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held byAAA Investments: Private Equity December 31, 2011 December 31, 2010 % ofInvestmentof AAA % ofInvestmentof AAA Approximate values based on net asset value of the underlyingfunds, which are based on the funds underlying investmentsthat are valued using the following: Comparable company and industry multiples $749,374 44.6% $782,775 42.6% Discounted cash flow models 643,031 38.4 490,024 26.6 Listed quotes 139,833 8.3 24,232 1.3 Broker quotes 179,621 10.7 504,917 27.5 Other net (liabilities) assets (33,330) (2.0) 37,351 2.0 Total Investments 1,678,529 100.0% 1,839,299 100.0% Other net liabilities (198,377) (202,208) Total Net Assets $1,480,152 $1,637,091 (1)Balances include other assets and liabilities of certain funds in which AAA Investments has invested. Other assets and liabilities at the fund levelprimarily include cash and cash equivalents, broker receivables and payables and amounts due to and from affiliates. Carrying values approximate fairvalue for other assets and liabilities, and accordingly, extended valuation procedures are not required.(2)Balances include other assets, liabilities and general partner interests of AAA Investments and are primarily comprised of $402.5 million and $537.5million in long-term debt offset by cash and cash equivalents at the December 31, 2011 and 2010 balance sheet dates, respectively. Carrying valuesapproximate fair value for other assets and liabilities (except for debt), and, accordingly, extended valuation procedures are not required.Fair Value MeasurementsThe following table summarizes the valuation of Apollo’s consolidated VIEs in fair value hierarchy levels as of December 31, 2011 and 2010: Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Investments, at fair value $— $— $3,055,357 $1,172,242 $246,609 $170,369 $3,301,966 $1,342,611 Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Liabilities, at fair value $— $— $— $— $3,189,837 $1,127,180 $3,189,837 $1,127,180 (1)During the first quarter of 2011, one of the consolidated VIEs sold all of its investments. At December 31, 2010, the cost and fair value of theinvestments of this VIE were $719.5 million and $684.1 million, 148(1)(2)(1)Table of Contents respectively. The consolidated VIE had a net investment gain of $16.0 million relating to the sale for the year ended December 31, 2011, which isreflected in the net (losses) gains from investment activities of consolidated variable interest entities on the consolidated statement of operations.Level III investments include corporate loan and corporate bond investments held by the consolidated VIEs, while the Level III liabilities consist of notesand loans, the valuations of which are discussed further in note 2. All Level II and III investments were valued using broker quotes. Transfers of investmentsout of Level III and into Level II or Level I, if any, are recorded as of the quarterly period in which the transfer occurred.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 levelwithin 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 aparticular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.The following table summarizes the changes in investments of consolidated VIEs, which are measured at fair value and characterized as Level IIIinvestments: For the Year EndedDecember 31, 2011 2010 Balance, Beginning of Period $170,369 $— Acquisition of VIE 335,353 — Transition adjustment relating to consolidation of VIE — 1,102,114 Purchases 663,438 840,926 Sale of investments (273,719) (125,638) Net realized gains 980 131 Changes in net unrealized (losses) gains (7,669) 29,981 Deconsolidation of VIE — (20,751) Transfers out of Level III (802,533) (1,663,755) Transfers into Level III 160,390 7,361 Balance, End of Period $246,609 $170,369 Changes in net unrealized (losses) gains included in Net (Losses) Gains fromInvestment Activities of consolidated VIEs related to investments still held atreporting date $(7,253) $(3,638) 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 onthese investments to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes, and thepercentage deviation from independent pricing services. 149Table of ContentsThe following table summarizes the changes in liabilities of consolidated VIEs, which are measured at fair value and characterized as Level III liabilities: For the Year EndedDecember 31, 2011 2010 Balance, Beginning of Period $1,127,180 $— Acquisition of VIE 2,046,157 — Transition adjustment relating to consolidation of VIE — 706,027 Borrowings 454,356 1,050,377 Repayments (415,869) (331,120) Net realized gains on debt (41,819) (21,231) Changes in net unrealized losses from debt 19,880 55,040 Deconsolidation of VIE — (329,836) Elimination of debt attributable to consolidated VIEs (48) (2,077) Balance, End of Period $3,189,837 $1,127,180 Changes in net unrealized (gains) losses included in Net (Losses) Gains fromInvestment Activities of consolidated VIEs related to liabilities still held at reportingdate $(25,347) $16,916 Recent Accounting PronouncementsA list of recent accounting pronouncements that are relevant to Apollo and its industry is included in note 2 to our consolidated financial statements.Off-Balance Sheet ArrangementsIn the normal course of business, we engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, commitments,indemnifications and potential contingent repayment obligations. See note 16 to our consolidated financial statements for a discussion of guarantees andcontingent obligations.Contractual Obligations, Commitments and ContingenciesAs of December 31, 2011, the Company’s material contractual obligations consist of lease obligations, contractual commitments as part of the ongoingoperations of the funds and debt obligations. Fixed and determinable payments due in connection with these obligations are as follows: 2012 2013 2014 2015 2016 Thereafter Total (in thousands) Operating lease obligations $31,175 $30,657 $30,242 $28,921 $28,871 $92,426 $242,292 Other long-term obligations 10,221 630 — — — — 10,851 AMH Credit Agreement 31,284 30,668 85,617 78,479 26,364 623,486 875,898 CIT secured loan agreement 1,032 9,626 — — — — 10,658 Total Obligations as of December 31, 2011 $73,712 $71,581 $115,859 $107,400 $55,235 $715,912 $1,139,699 (1)Includes (i) payments on management service agreements related to certain assets and (ii) payments with respect to certain consulting agreementsentered into by the Company. Note that a significant portion of these costs are reimbursable by funds. 150(1)(2)Table of Contents(2)$723.3 million, net ($995.0 million portion less amount repurchased) of the AMH debt matures in January 2017 and $5.0 million matures in April2014. Amounts represent estimated interest payments until the loan matures using an estimated weighted average annual interest rate of 4.24%, whichincludes the effects of the interest rate swap through its expiration in May 2012 and certain required repurchases of at least $50.0 million byDecember 31, 2014 and at least $100.0 million (inclusive of the previously purchased $50.0 million) by December 31, 2015 as described in note 12 toour consolidated financial statements.Note:Due to the fact that the timing of certain amounts to be paid cannot be determined or for other reasons discussed below, the following contractualcommitments have not been presented in the table above.(i)Amounts do not include the senior secured term loan entered into by AAA Investments of which $402.5 million was utilized as of December 31, 2011.The term loan matures on June 30, 2015. AAA is consolidated by the Company in accordance with U.S. GAAP. The Company does not guaranteeand has no legal obligation to repay amounts outstanding under the term loan. Accordingly, the $402.5 million outstanding balance was excluded fromthe table above.(ii)As noted previously, we have entered into a tax receivable agreement with our Managing Partners and Contributing Partners which requires us to pay toour Managing Partners and Contributing Partners 85% of any tax savings received by APO Corp. from our step-up in tax basis. The tax savingsachieved may not ensure that we have sufficient cash available to pay this liability and we might be required to incur additional debt to satisfy thisliability.(iii)Debt amounts related to the consolidated VIEs are not presented in the table above as the Company is not a guarantor of these non-recourse liabilities. 151Table of ContentsCommitmentsOur management companies and general partners have committed that we, or our affiliates, will invest a certain percentage of capital into the funds wemanage. While a small percentage of these amounts are funded by us, the majority of these amounts have historically been funded by our affiliates, includingcertain of our employees and certain Apollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its affiliates,the percentage of total fund commitments of Apollo and its affiliates, the commitment and remaining commitment amounts of Apollo only (excludingaffiliates), and the percentage of total fund commitments of Apollo only (excluding affiliates) for each private equity fund, each capital markets fund and eachreal estate fund as of December 31, 2011 as follows ($ in millions): Fund Apollo andAffiliatesCommitments % of TotalFundCommitments Apollo Only(ExcludingAffiliates)Commitments Apollo Only(ExcludingAffiliates)% of TotalFundCommitments Apollo andAffiliatesRemainingCommitments Apollo Only(ExcludingAffiliates)RemainingCommitments Private Equity: Fund VII $467.2 3.18% $190.3 1.30% $201.9 $82.7 Fund VI 246.3 2.43 6.1 0.06 24.3 0.6 Fund V 100.0 2.67 0.5 0.01 6.5 — Fund IV 100.0 2.78 0.2 0.01 0.5 — Fund III 100.6 6.71 — — 15.5 — ANRP 164.0 28.61 9.0 1.57 138.2 7.6 Capital Markets: EPF 377.4 22.48 22.9 1.36 156.2 10.8 EPF II 4.7 2.35 4.7 2.35 4.7 4.7 SOMA — — — — — — ACLF Co-Invest — — — — — — COF I 477.6 32.16 29.7 2.00 242.2 4.2 COF II 70.5 4.45 23.4 1.48 1.8 0.6 ACLF 23.9 2.43 23.9 2.43 10.7 10.7 Palmetto 18.0 1.19 18.0 1.19 8.3 8.3 AIE II 8.4 3.15 5.2 1.94 0.8 0.5 A-A European Senior Debt Fund, L.P. 50.0 100.00 — — 15.0 — FCI 107.1 26.85 — — 48.7 — Apollo/JH Loan Portfolio 50.1 100.00 0.1 0.20 — — Apollo/Palmetto Loan Portfolio, L.P. 300.0 100.00 — — 120.0 — Apollo/Palmetto Short-Maturity LoanPortfolio, L.P. 200.0 100.00 — — 25.0 — AESI 4.5 0.98 4.5 0.98 3.0 3.0 Apollo European Credit, L.P. 5.3 2.50 2.2 1.04 4.0 1.7 Real Estate: AGRE U.S. Real Estate Fund 308.0 80.02 7.9 2.05 274.5 2.0 CPI Capital Partners North America 7.5 1.25 2.0 0.33 1.8 0.5 CPI Capital Partners Europe 7.1 0.47 — — 1.7 — CPI Capital Partners Asia Pacific 6.9 0.53 0.5 0.04 0.9 — Total $3,205.1 $351.1 $1,306.2 $137.9 (1)As of December 31, 2011, Palmetto had commitments and remaining commitment amounts in Fund VII of $110.0 million and $46.5 million,respectively, ANRP of $150.0 million and $126.3 million, respectively, 152(1)(1)(2)(2)(1)(1)(7)(3)(4)(8)(5)(6)(6)(7)(1)(1)(1)(1)(7)(1)(1)Table of Contents Apollo/Palmetto Loan Portfolio, L.P. of $300.0 million and $120.0 million, respectively, Apollo/Palmetto Short-Maturity Loan Portfolio, L.P. of $200.0million and $25.0 million, respectively, and AGRE U.S. Real Estate Fund, L.P. of $300 million and $272.5 million, respectively.(2)As of December 31, 2011, Apollo had an immaterial amount of remaining commitments in Fund IV and Fund V. Accordingly, presentation of suchremaining commitments was not deemed meaningful for inclusion in the table above.(3)Of the total commitment amount in EPF, AAA, SOMA and Palmetto have approximately €77.0 million, €75.0 million and €106.0 million, respectively.(4)Of the total remaining commitment amount in EPF, AAA, SOMA and Palmetto have approximately €31.1 million, €30.9 million and €42.9 million,respectively.(5)As of December 31, 2011, the general partner of ACLF Co-Invest, a co-investment vehicle that invests alongside ACLF, had committed an immaterialamount to ACLF Co-Invest. Accordingly, presentation of such commitment was not deemed meaningful for inclusion in the table above.(6)As of December 31, 2011, SOMA had commitments and remaining commitment amounts in COF I of $250.0 million and $202.0 million, respectively.(7)Apollo’s commitment in these funds is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.30 as of December 31,2011.(8)Apollo and affiliated investors must maintain an aggregate capital balance in an amount not less than 1% of total capital account balances of thepartnership. As of December 31, 2011, Apollo and affiliates’ capital balances exceeded the 1% requirement and are not required to fund a capitalcommitment.As a limited partner, the general partner and manager of the Apollo private equity, capital markets and real estate funds, Apollo has unfunded capitalcommitments at December 31, 2011 and December 31, 2010 of $137.9 million and $140.6 million, respectively.Apollo has an ongoing obligation to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cash distributions, ifany, that are made to its affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAA Investments.The AMH Credit Agreement, which provides for a variable-rate term loan, will have future impacts on our cash uses. Borrowings under the AMH CreditAgreement originally accrued interest at a rate of (i) LIBOR loans (LIBOR plus 1.25%), or (ii) base rate loans (base rate plus 0.50%). The Company hashedged $167 million of the variable-rate loan with fixed rate swaps to minimize our interest rate risk as of December 31, 2011. The loan originally matured inApril 2014. On December 20, 2010, Apollo amended the AMH Credit Agreement to extend the maturity date of $995 million of the term loans from April 20,2014 to January 3, 2017 and modified certain other terms of the Credit Agreement. Pursuant to this amendment, AMH or an affiliate was required to purchasefrom 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 anaffiliate is required to repurchase at least $50 million aggregate principal amount of term loans by December 31, 2014 and at least $100 million aggregateprincipal amount of term loans (inclusive of the previously purchased $50.0 million) by December 31, 2015 at a price equal to par plus accrued interest. Thesweep leverage ratio (which is a figure that varies over time that is used to determine the applicable level of certain carve-outs to the negative covenants as wellas to determine the level of AMH’s cash collateralization requirements) was extended to end at the new extended maturity date. The interest rate for the highestapplicable margin for the loan portion extended changed to LIBOR plus 4.25% and base rate plus 3.25%. On December 20, 2010, an affiliate of AMH that is aguarantor under the AMH Credit Agreement repurchased approximately $180.8 million of term loans in connection with the extension of the maturity date ofsuch loans and thus the AMH loans (excluding the portions held by AMH affiliates) had a remaining outstanding balance of $728.3 million. The Companydetermined that the amendments to the AMH Credit Agreement resulted in debt extinguishment which did not result in any gain or loss.The interest rate on the $723.3 million, net ($995.0 million portion less amount repurchased) of the loan at December 31, 2011 was 4.23% and theinterest rate on the remaining $5.0 million portion of the loan at December 31, 2011 was 1.48%. The estimated fair value of the Company’s long-term debtobligation related to 153Table of Contentsthe AMH Credit Agreement is believed to be approximately $752.2 million based on a yield analysis using available market data of comparable securities withsimilar terms and remaining maturities. The $728.3 million carrying value of debt that is recorded on the consolidated statement of financial condition atDecember 31, 2011 is the amount for which the Company expects to settle the AMH Credit Agreement.On June 30, 2008, the Company entered into a credit agreement with Fund VI, pursuant to which Fund VI advanced $18.9 million of carried interestincome to the limited partners of Apollo Advisors VI, L.P., who are also employees of the Company. The loan obligation accrues interest at an annual fixed rateof 3.45% and terminates on the earlier of June 30, 2017 or the termination of Fund VI. At December 31, 2010, the total outstanding loan aggregated $20.5million, including accrued interest of $1.6 million, which approximated fair value, of which approximately $6.5 million was not subject to the indemnitydiscussed above and is a receivable from the Contributing Partners and certain employees. In March 2011, a right of offset for the indemnified portion of theloan obligation was established between the Company and Fund VI, therefore the loan was reduced in the amount of $10.9 million, which is offset in carriedinterest receivable on the consolidated statement of financial condition. During the year ended December 31, 2011, there was $0.9 million interest paid and$0.3 million accrued interest on the outstanding loan obligation. As of December 31, 2011, the total outstanding loan aggregated $9.0 million, includingaccrued interest of $1.0 million which approximated fair value, of which approximately $6.5 million was not subject to the indemnity discussed above and isa receivable from the Contributing Partners and certain employees.In accordance with the Managing Partners Shareholders Agreement dated July 13, 2007, as amended, and the above credit agreement, we haveindemnified the Managing Partners and certain Contributing Partners (at varying percentages) for any carried interest income distributed from Fund IV, FundV and Fund VI that is subject to contingent repayment by the general partner. As of December 31, 2011, the Company had not recorded an obligation for anypreviously made distributions.Contingent Obligations—Carried interest income in both private equity funds and certain capital markets funds is subject to reversal in the event offuture losses to the extent of the cumulative carried interest recognized in income to date. If all of the existing investments became worthless, the amount ofcumulative revenues that had been recognized by Apollo through December 31, 2011 and that would be reversed approximates $1.3 billion. Management viewsthe possibility of all of the investments becoming worthless as remote. Carried interest income is affected by changes in the fair values of the underlyinginvestments in the funds that Apollo manages. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, butnot limited to, bond yields and industry trading multiples. Movements in these items can affect valuations quarter to quarter even if the underlying businessfundamentals remain stable. The table below indicates the potential future reversal of carried interest income: December 31,2011 Private Equity Funds: Fund VII $651,491 Fund V 246,656 Fund IV 57,104 AAA 22,090 Total Private Equity Funds $977,341 Capital Markets Funds: Distressed and Event-Driven Hedge Funds (Value Funds, SOMA, AAOF) 12,625 Mezzanine Funds (AIE II) 20,459 Non-Performing Loan Fund (EPF) 51,463 Senior Credit Funds (COF I/COF II, Gulf Stream, CLOs) 233,139 Total Capital Market Funds $317,686 Total $1,295,027 154Table of ContentsAdditionally, at the end of the life of certain funds that the Company manages, there could be a payment due to a fund by the Company if the Companyas general partner has received more carried interest income than was ultimately earned. This general partner obligation amount, if any, will depend on finalrealized values of investments at the end of the life of each fund. As discussed in note 15 to the consolidated financial statements, the Company has recorded ageneral partner obligation to return previously distributed carried interest income or fees of $75.3 million and $18.1 million relating to Fund VI and SOMA asof December 31, 2011, respectively.Certain funds may not generate carried interest income as a result of unrealized and realized losses that are recognized in the current and prior reportingperiod. In certain cases, carried interest income will not be generated until additional unrealized and realized gains occur. Any appreciation would first cover thedeductions for invested capital, unreturned organizational expenses, operating expenses, management fees and priority returns based on the terms of therespective fund agreements.One of the Company’s subsidiaries, Apollo Global Securities, provides underwriting commitments in connection with security offerings to the portfoliocompanies of the funds we manage. As of December 31, 2011, there were no underwriting commitments outstanding related to such offerings.In connection with the Gulf Stream acquisition, as discussed in Note 3 to the accompanying consolidated financial statements in this report, theCompany will also make payments to the former owners of Gulf Stream under a contingent consideration obligation which requires the Company to transfercash to the former owners of Gulf Stream based on a specified percentage of incentive fee revenue. The contingent consideration liability has an AcquisitionDate fair value of approximately $4.7 million, which was determined based on the present value of the estimated range of undiscounted incentive fee payablecash flows between $0 and approximately $8.7 million using a discount rate of 13.7%.In connection with the CPI acquisition, as discussed in Note 3 to the accompanying consolidated financial statements, Apollo received cash of $15.5million and acquired general partner interests in, and advisory agreements with, various real estate investment funds and co-investment vehicles and added toits team of real estate professionals. The consideration transferred in the acquisition is a contingent consideration in the form of a liability incurred by Apollo toCPI. The liability is an obligation of Apollo to transfer cash to CPI based on a specified percentage of future earnings. The estimated fair value of the contingentliability is $1.2 million as of December 31, 2011. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur predominant exposure to market risk is related to our role as investment manager and general partner for our funds and the sensitivity to movementsin the fair value of their investments and resulting impact on carried interest income and management fee revenues. Our direct investments in the funds alsoexpose us to market risk whereby movements in the fair values of the underlying investments will increase or decrease both net gains (losses) from investmentactivities and income (loss) from equity method investments. For a discussion of the impact of market risk factors on our financial instruments refer to “Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Consolidation—Valuation ofInvestments.”The fair value of our financial assets and liabilities of our funds may fluctuate in response to changes in the value of investments, foreign exchange,commodities and interest rates. The net effect of these fair value changes impacts the gains and losses from investments in our consolidated statements ofoperations. However, the majority of these fair value changes are absorbed by the Non-Controlling Interests.The Company is subject to a concentration risk related to the investors in its funds. Although there are more than approximately 1,000 limited partnerinvestors in Apollo’s active private equity, capital markets and real estate funds, no individual investor accounts for more than 10% of the total committedcapital to Apollo’s active funds. 155Table of ContentsRisks are analyzed across funds from the “bottom up” and from the “top down” with a particular focus on asymmetric risk. We gather and analyzedata, monitor investments and markets in detail, and constantly strive to better quantify, qualify and circumscribe relevant risks.Each segment runs its own investment and risk management process subject to our overall risk tolerance and philosophy: • The investment process of our private equity funds involves a detailed analysis of potential acquisitions, and investment management teamsassigned to monitor the strategic development, financing and capital deployment decisions of each portfolio investment. • Our capital markets funds continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditional andcustomized risk management metrics to analyze risk related to specific assets or portfolios, as well as, fund-wide risks.Impact on Management Fees—Our management fees are based on one of the following: • capital commitments to an Apollo fund; • capital invested in an Apollo fund; or • the gross, net or adjusted asset value of an Apollo fund, as defined. • otherwise defined in the respective agreements.Management fees could be impacted by changes in market risk factors and management could consider an investment permanently impaired as a resultof (i) such market risk factors cause changes in invested capital or in market values to below cost, in the case of our private equity funds and certain capitalmarkets funds, or (ii) such market risk factors causing changes in gross or net asset value, for the capital markets funds. The proportion of our managementfees that are based on NAV is dependent on the number and types of our funds in existence and the current stage of each fund’s life cycle.Impact on Advisory and Transaction Fees—We earn transaction fees relating to the negotiation of private equity, capital markets and real estatetransactions and may obtain reimbursement for certain out-of-pocket expenses incurred. Subsequently, on a quarterly or annual basis, ongoing advisory fees,and additional transaction fees in connection with additional purchases or follow-on transactions, may be earned. Management Fee Offsets and any brokendeal costs are reflected as a reduction to advisory and transaction fees from affiliates. Advisory and transaction fees will be impacted by changes in marketrisk factors to the extent that they limit our opportunities to engage in private equity, capital markets and real estate transactions or impair our ability toconsummate such transactions. The impact of changes in market risk factors on advisory and transaction fees is not readily predicted or estimated.Impact on Carried Interest Income—We earn carried interest income from our funds as a result of such funds achieving specified performancecriteria. Our carried interest income will be impacted by changes in market risk factors. However, several major factors will influence the degree of impact: • the performance criteria for each individual fund in relation to how that fund’s results of operations are impacted by changes in market riskfactors; • whether such performance criteria are annual or over the life of the fund; • to the extent applicable, the previous performance of each fund in relation to its performance criteria; and • whether each funds’ carried interest income is subject to contingent repayment.As a result, the impact of changes in market risk factors on carried interest income will vary widely from fund to fund. The impact is heavilydependent on the prior and future performance of each fund, and therefore is not readily predicted or estimated. 156Table of ContentsMarket Risk—We are directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values of assetsand liabilities or revenues and expenses will be adversely affected by changes in market conditions. Market risk is inherent in each of our investments andactivities, including equity investments, loans, short-term borrowings, long-term debt, hedging instruments, credit default swaps, and derivatives. Just a fewof the market conditions that may shift from time to time, thereby exposing us to market risk, include fluctuations in interest and currency exchange rates,equity prices, changes in the implied volatility of interest rates and price deterioration. For example, subsequent to the second quarter of 2007, debt capitalmarkets around the world began to experience significant dislocation, severely limiting the availability of new credit to facilitate new traditional buyouts, andthe markets remain volatile. Volatility in debt and equity markets can impact our pace of capital deployment, the timing of receipt of transaction fee revenues,and the timing of realizations. These market conditions could have an impact on the value of investments and our rates of return. Accordingly, depending onthe instruments or activities impacted, market risks can have wide ranging, complex adverse affects on our results from operations and our overall financialcondition. We monitor our market risk using certain strategies and methodologies which management evaluates periodically for appropriateness. We intend tocontinue to monitor this risk going forward and continue to monitor our exposure to all market factors.Interest Rate Risk—Interest rate risk represents exposure we have to instruments whose values vary with the change in interest rates. Theseinstruments include, but are not limited to, loans, borrowings and derivative instruments. We may seek to mitigate risks associated with the exposures bytaking offsetting positions in derivative contracts. Hedging instruments allow us to seek to mitigate risks by reducing the effect of movements in the level ofinterest rates, changes in the shape of the yield curve, as well as, changes in interest rate volatility. Hedging instruments used to mitigate these risks mayinclude related derivatives such as options, futures and swaps.Credit Risk—Certain of our funds are subject to certain inherent risks through their investments.Certain of our entities invest substantially all of their excess cash in open-end money market funds and money market demand accounts, which areincluded in cash and cash equivalents. The money market funds invest primarily in government securities and other short-term, highly liquid instrumentswith a low risk of loss. We continually monitor the funds’ performance in order to manage any risk associated with these investments.Certain of our entities hold derivatives instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms ofsuch agreements. We seek to minimize our risk exposure by limiting the counterparties with which we enter into contracts to banks and investment banks whomeet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss dueto counterparty default.Foreign Exchange Risk—Foreign exchange risk represents exposures we have to changes in the values of current holdings and future cash flowsdenominated in other currencies and investments in non-U.S. companies. The types of investments exposed to this risk include investments in foreignsubsidiaries, foreign currency-denominated loans, foreign currency-denominated transactions, and various foreign exchange derivative instruments whosevalues fluctuate with changes in currency exchange rates or foreign interest rates. Instruments used to mitigate this risk are foreign exchange options, currencyswaps, futures and forwards. These instruments may be used to help insulate us against losses that may arise due to volatile movements in foreign exchangerates and/or interest rates.Non-U.S. Operations—We conduct business throughout the world and are continuing to expand into foreign markets. We currently have officesoutside the U.S. in London, Frankfurt, Luxembourg, Mumbai, Hong Kong and Singapore, and have been strategically growing our international presence.Our investments and revenues are primarily derived from our U.S. operations. With respect to our non-U.S. operations, we are subject to risk of loss fromcurrency fluctuations, social instability, changes in governmental policies or policies of 157Table of Contentscentral banks, expropriation, nationalization, unfavorable political and diplomatic developments and changes in legislation relating to non-U.S. ownership. Wealso invest in the securities of corporations which are located in non-U.S. jurisdictions. As we continue to expand globally, we will continue to focus onmonitoring and managing these risk factors as they relate to specific non-U.S. investments.SensitivityOur assets and unrealized gains, and our related equity and net income are sensitive to changes in the valuations of our funds’ underlying investmentsand could vary materially as a result of changes in our valuation assumptions and estimates. See “Item 7. Management’s Discussion and Analysis ofFinancial Conditions and Results of Operations—Critical Accounting Policies—Valuation of Investments” for details related to the valuation methods that areused and the key assumptions and estimates employed by such methods. We also quantify the Level III investments that are included on our consolidatedstatements of financial condition by valuation methodology in “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results ofOperations—Fair Value Measurements.” We employ a variety of valuation methods. Furthermore, the investments that we manage but are not on ourconsolidated statements of financial condition, and therefore impact carried interest, also employ a variety of valuation methods of which no singlemethodology is used more than any other. A 10% change in any single key assumption or estimate that is employed by any of the valuation methodologies thatwe use will generally not have a material impact on our financial results. Changes in fair value will have the following impacts before a reduction of profitsharing expense and Non-Controlling Interests in the Apollo Operating Group and on a pre-tax basis on our results of operations for the years endedDecember 31, 2011 and 2010: • Management fees from the funds in our capital markets segment are based on the net asset value of the relevant fund, gross assets, capitalcommitments or invested capital, each as defined in the respective management agreements. Changes in the fair values of the investments incapital markets funds that earn management fees based on net asset value or gross assets will have a direct impact on the amount of managementfees that are earned. Management fees earned from our capital markets segment that were dependent upon estimated fair value during the yearsended December 31, 2011 and 2010 would decrease by approximately $11.1 million and $9.3 million, respectively, if the fair values of theinvestments held by such funds were 10% lower during the same respective periods. By contrast, a 10% increase in fair value would increasemanagement fees for the years ended December 31, 2011 and 2010 by approximately $10.8 million and $9.3 million, respectively. • Management fees for our private equity funds range from 0.65% to 1.50% and are charged on either (a) a fixed percentage of committed capitalover a stated investment period or (b) a fixed percentage of invested capital of unrealized portfolio investments. Changes in values of investmentscould indirectly affect future management fees from private equity funds by, among other things, reducing the funds’ access to capital or liquidityand their ability to currently pay the management fees or if such change resulted in a write-down of investments below their associated investedcapital. • Management fees earned from AAA and its affiliates range between 1.0% and 1.25% of AAA adjusted assets, defined as invested capital plusproceeds of any borrowings of AAA Investments, plus its cumulative distributable earnings at the end of each quarterly period (taking intoaccount actual distributions but excluding the management fees relating to the period or any non-cash equity compensation expense), net of anyamount AAA pays for the repurchase of limited partner interests, as well as capital invested in Apollo funds and temporary investments and anydistributable earnings attributable thereto. Management fees earned from AAA Investments during the years ended December 31, 2011 and 2010would increase or decrease by approximately $1.7 million and $1.4 million, respectively, if the fair values of the investments held by AAAInvestments were 10% higher or lower during the same respective periods. • Carried interest income from most of our capital markets funds, which are quantified in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Segment 158Table of Contents Analysis”, are impacted directly by changes in the fair value of their investments. Carried interest income from most of our capital markets fundsgenerally is earned based on achieving specified performance criteria. We anticipate that a 10% decline in the fair values of investments held by allof the capital markets funds at December 31, 2011 and 2010 would decrease consolidated carried interest income for the years endedDecember 31, 2011 and 2010 by approximately $121.4 million and $131.9 million, respectively. Additionally, the changes to carried interestincome from most of our capital markets funds assume there is no loss in the fund for the relevant period. If the fund had a loss for the period, nocarried interest income would be earned by us. By contrast, a 10% increase in fair value would increase consolidated carried interest income forthe years ended December 31, 2011 and 2010 by approximately $115.2 million and $163.4 million, respectively. • Carried interest income from private equity funds generally is earned based on achieving specified performance criteria and is impacted bychanges in the fair value of their fund investments. We anticipate that a 10% decline in the fair values of investments held by all of the privateequity funds at December 31, 2011 and 2010 would decrease consolidated carried interest income for the years ended December 31, 2011 and2010 by $230.6 million and $934.7 million, respectively. The effects on private equity fees and income assume that a decrease in value does notcause a permanent write-down of investments below their associated invested capital. By contrast, a 10% increase in fair value would increaseconsolidated carried interest income for the year ended December 31, 2011 and 2010 by $231.5 million and $484.4 million, respectively. • For select Apollo funds, our share of investment income as a limited partner in such funds is derived from unrealized gains or losses oninvestments in funds included in the consolidated financial statements. For funds in which we have an interest, but are not included in ourconsolidated financial statements, our share of investment income is limited to our accrued compensation units and direct investments in thefunds, which ranges from 0.001% to 6.450%. A 10% decline in the fair value of investments at December 31, 2011 and 2010 would result in anapproximately $31.1 million and $28.3 million decrease in investment income at the consolidated level, respectively. 159Table of ContentsITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAIndex to Consolidated Financial Statements Page Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 161 Consolidated Statements of Financial Condition as of December 31, 2011 and 2010 162 Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009 163 Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2011, 2010 and 2009 164 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2011, 2010 and 2009 165 Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009 167 Notes to Consolidated Financial Statements 170 160Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders ofApollo Global Management, LLCNew York, New YorkWe have audited the accompanying consolidated statements of financial condition of Apollo Global Management, LLC and subsidiaries (the“Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive (loss) income, changes inshareholders’ equity and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on the financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration ofinternal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Apollo Global Management, LLCand subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2011, in conformity with accounting principles generally accepted in the United States of America./s/ Deloitte & Touche LLPNew York, New YorkMarch 8, 2012 161Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONDECEMBER 31, 2011 AND DECEMBER 31, 2010(dollars in thousands, except share data) December 31,2011 December 31,2010 Assets: Cash and cash equivalents $738,679 $382,269 Cash and cash equivalents held at Consolidated Funds 6,052 — Restricted cash 8,289 6,563 Investments 1,857,465 1,920,553 Assets of consolidated variable interest entities: Cash and cash equivalents 173,542 87,556 Investments, at fair value 3,301,966 1,342,611 Other assets 57,855 36,754 Carried interest receivable 868,582 1,867,073 Due from affiliates 176,740 144,363 Fixed assets, net 52,683 44,696 Deferred tax assets 576,304 571,325 Other assets 26,976 35,141 Goodwill 48,894 48,894 Intangible assets, net 81,846 64,574 Total Assets $7,975,873 $6,552,372 Liabilities and Shareholders’ Equity Liabilities: Accounts payable and accrued expenses $33,545 $31,706 Accrued compensation and benefits 45,933 54,057 Deferred revenue 232,747 251,475 Due to affiliates 578,764 517,645 Profit sharing payable 352,896 678,125 Debt 738,516 751,525 Liabilities of consolidated variable interest entities: Debt, at fair value 3,189,837 1,127,180 Other liabilities 122,264 33,545 Other liabilities 33,050 25,695 Total Liabilities 5,327,552 3,470,953 Commitments and Contingencies (see note 16) Shareholders’ Equity: Apollo Global Management, LLC shareholders’ equity: Class A shares, no par value, unlimited shares authorized, 123,923,042 shares and 97,921,232shares issued and outstanding at December 31, 2011, and 2010, respectively — — Class B shares, no par value, unlimited shares authorized, 1 share issued and outstanding atDecember 31, 2011, and 2010 — — Additional paid in capital 2,939,492 2,078,890 Accumulated deficit (2,426,197) (1,937,818) Appropriated partners’ capital 213,594 11,359 Accumulated other comprehensive loss (488) (1,529) Total Apollo Global Management, LLC shareholders’ equity 726,401 150,902 Non-Controlling Interests in consolidated entities 1,444,767 1,888,224 Non-Controlling Interests in Apollo Operating Group 477,153 1,042,293 Total Shareholders’ Equity 2,648,321 3,081,419 Total Liabilities and Shareholders’ Equity $7,975,873 $6,552,372 See accompanying notes to consolidated financial statements. 162Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF OPERATIONSYEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) 2011 2010 2009 Revenues: Advisory and transaction fees from affiliates $81,953 $79,782 $56,075 Management fees from affiliates 487,559 431,096 406,257 Carried interest (loss) income from affiliates (397,880) 1,599,020 504,396 Total Revenues 171,632 2,109,898 966,728 Expenses: Compensation and benefits: Equity-based compensation 1,149,753 1,118,412 1,100,106 Salary, bonus and benefits 251,095 249,571 227,356 Profit sharing expense (63,453) 555,225 161,935 Incentive fee compensation 3,383 20,142 5,613 Total Compensation and Benefits 1,340,778 1,943,350 1,495,010 Interest expense 40,850 35,436 50,252 Professional fees 59,277 61,919 33,889 General, administrative and other 75,558 65,107 61,066 Placement fees 3,911 4,258 12,364 Occupancy 35,816 23,067 29,625 Depreciation and amortization 26,260 24,249 24,299 Total Expenses 1,582,450 2,157,386 1,706,505 Other Income: Net (losses) gains from investment activities (129,827) 367,871 510,935 Net gains from investment activities of consolidated variable interest entities 24,201 48,206 — Gains from repurchase of debt — — 36,193 Income from equity method investments 13,923 69,812 83,113 Interest income 4,731 1,528 1,450 Other income, net 205,520 195,032 41,410 Total Other Income 118,548 682,449 673,101 (Loss) income before income tax provision (1,292,270) 634,961 (66,676) Income tax provision (11,929) (91,737) (28,714) Net (Loss) Income (1,304,199) 543,224 (95,390) Net loss (income) attributable to Non-Controlling Interests 835,373 (448,607) (59,786) Net (Loss) Income Attributable to Apollo Global Management, LLC $(468,826) $94,617 (155,176) Distributions Declared per Class A Share $0.83 $0.21 $0.05 Net (Loss) Income Per Class A Share: Net (Loss) Income Available to Class A Shareholders $(468,826) $94,617 $(155,176) Net (Loss) Income Per Class A Share—Basic and Diluted $(4.18) $0.83 $(1.62) Weighted Average Number of Class A Shares—Basic and Diluted 116,364,110 96,964,769 95,815,500 See accompanying notes to consolidated financial statements. 163Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OFCOMPREHENSIVE (LOSS) INCOMEYEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) 2011 2010 2009 Net (Loss) Income $(1,304,199) $543,224 $(95,390) Other Comprehensive Income, net of tax: Net unrealized gain on interest rate swaps (net of taxes of $855, $1,499 and $1,992 forApollo Global Management, LLC and $0 for Non-Controlling Interests in Apollo OperatingGroup for all three years ended December 31, 2011, 2010 and 2009, respectively) 6,728 11,435 14,591 Net (loss) income on available-for-sale securities (from equity method investment) (225) 343 — Total Other Comprehensive Income, net of tax 6,503 11,778 14,591 Comprehensive (Loss) Income (1,297,696) 555,002 (80,799) Comprehensive Loss (Income) attributable to Non-Controlling Interests 1,032,502 (446,467) (71,629) Comprehensive (Loss) Income Attributable to Apollo Global Management, LLC $(265,194) $108,535 $(152,428) See accompanying notes to consolidated financial statements. 164Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS’ EQUITYYEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) Apollo Global Management, LLC Shareholders Class AShares Class BShares AdditionalPaid inCapital AccumulatedDeficit AppropriatedPartners’Capital AccumulatedOtherComprehensive(Loss) Income Total ApolloGlobalManagement,LLC TotalShareholders’(Deficit)Equity Non-ControllingInterests inConsolidatedEntities Non-ControllingInterests inApolloOperatingGroup TotalShareholders’Equity Balance at January 1, 2009 97,324,541 1 $ 1,384,143 $(1,874,365) $— $(6,836) $(497,058) $822,843 $— $325,785 Capital contributions — — — — — — — 207 — 207 Non-cash contributions — — (105) — — — (105) 4,301 — 4,196 Capital increase related to equity-basedcompensation — — 355,659 — — — 355,659 — 738,431 1,094,090 Distributions — — (4,866) — — — (4,866) — (12,000) (16,866) Cash distributions — — — — — — — (12,387) (17,950) (30,337) Non-cash distributions — — (4,572) — — — (4,572) 4,273 — (299) Net transfers of AAA ownership interest to (from)Non-Controlling Interests in consolidatedentities — — (3,799) — — — (3,799) 3,799 — — Satisfaction of liability related to AAA RDUs — — 6,618 — — — 6,618 — — 6,618 Repurchase of Class A shares (1,700,000) — (3,485) — — — (3,485) — — (3,485) Net (loss) income — — — (155,176) — — (155,176) 460,226 (400,440) (95,390) Net unrealized gain on interest rate swaps (net oftaxes of $1,992 and $0 for Apollo GlobalManagement, LLC and Non-ControllingInterests in Apollo Operating Group,respectively) — — — — — 2,748 2,748 — 11,843 14,591 Balance at December 31, 2009 95,624,541 1 $1,729,593 $(2,029,541) $— $(4,088) $(304,036) $1,283,262 $319,884 $1,299,110 Transition adjustment relating to consolidation ofvariable interest entity — — — — — — — 411,885 — 411,885 Capital increase related to equity-basedcompensation — — 376,380 — — — 376,380 — 735,698 1,112,078 Reclassification of equity-based compensation — — (3,505) — — — (3,505) — — (3,505) Repurchase of Class A shares (7,135) — (43) — — — (43) — — (43) Purchase of Class A shares — — — — — — — (48,768) — (48,768) Capital contributions — — — — — — — 187 — 187 Cash distributions — — — — — — — (160,316) — (160,316) Distributions — — (24,115) — — — (24,115) (6,602) (50,400) (81,117) Distributions related to deliveries of Class A sharesfor RSUs 2,303,826 — — (2,876) — — (2,876) — — (2,876) Non-cash distributions — — — (18) — — (18) (590) — (608) Deconsolidation of fund — — — — — — — (7,204) — (7,204) Net transfers of AAA ownership interest to (from)Non-Controlling Interests in consolidatedentities — — (7,014) — — — (7,014) 7,014 — — Satisfaction of liability related to AAA RDUs — — 7,594 — — — 7,594 — — 7,594 See accompanying notes to consolidated financial statements. 165Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CHANGES (CONT’D)IN SHAREHOLDERS’ EQUITYYEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) Apollo Global Management, LLC Shareholders Class AShares Class BShares AdditionalPaid inCapital AccumulatedDeficit AppropriatedPartners’Capital AccumulatedOtherComprehensive(Loss) Income Total ApolloGlobalManagement,LLC TotalShareholders’(Deficit)Equity Non-ControllingInterests inConsolidatedEntities Non-ControllingInterests inApolloOperatingGroup TotalShareholders’Equity Net income — — — 94,617 11,359 — 105,976 409,356 27,892 543,224 Net income on available-for-sale securities (fromequity method investment) — — — — — 343 343 — — 343 Net unrealized gain on interest rate swaps (net oftaxes of $1,499 and $0 for Apollo GlobalManagement, LLC and Non-ControllingInterests in Apollo Operating Group,respectively) — — — — — 2,216 2,216 — 9,219 11,435 Balance at December 31, 2010 97,921,232 1 $2,078,890 $(1,937,818) $11,359 $(1,529) $150,902 $1,888,224 $1,042,293 $3,081,419 Balance at January 1, 2011 97,921,232 1 $ 2,078,890 $(1,937,818) $11,359 $(1,529) $150,902 $ 1,888,224 $ 1,042,293 $3,081,419 Issuance of Class A shares 21,500,000 — 382,488 — — — 382,488 — — 382,488 Dilution impact of issuance of Class A shares — — 132,709 — — (356) 132,353 — (127,096) 5,257 Capital increase related to equity-basedcompensation — — 451,543 — — — 451,543 — 696,361 1,147,904 Capital contributions — — — — — — — — — — Cash distributions — — — — — — — (322,225) — (322,225) Distributions — — (115,139) — — — (115,139) (27,284) (199,199) (341,622) Distributions related to deliveries of Class Ashares for RSUs 4,631,906 — 11,680 (17,081) — — (5,401) — — (5,401) Repurchase for net settlement of Class A shares (130,096) — — (2,472) — — (2,472) — — (2,472) Non-cash distributions — — — — — — — (3,176) — (3,176) Net transfers of AAA ownership interest to (from)Non-Controlling Interests in consolidatedentities — — (6,524) — — — (6,524) 6,524 — — Satisfaction of liability related to AAA RDUs — — 3,845 — — — 3,845 — — 3,845 Net (loss) income — — — (468,826) 202,235 — (266,591) (97,296) (940,312) (1,304,199) Net loss on available-for-sale securities (fromequity method investment) — — — — — (225) (225) — — (225) Net unrealized gain on interest rate swaps (net oftaxes of $855 and $0 for Apollo GlobalManagement, LLC and Non-ControllingInterests in Apollo Operating Group,respectively) — — — — — 1,622 1,622 — 5,106 6,728 Balance at December 31, 2011 123,923,042 1 $2,939,492 $(2,426,197) $213,594 $(488) $726,401 $1,444,767 $477,153 $2,648,321 See accompanying notes to consolidated financial statements. 166Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) 2011 2010 2009 Cash Flows from Operating Activities: Net (loss) income $(1,304,199) $543,224 $(95,390) Adjustments to reconcile net loss to net cash provided by operating activities: Equity-based compensation 1,149,753 1,118,412 1,100,106 Depreciation and amortization 11,132 11,472 11,622 Amortization of intangible assets 15,128 12,777 12,677 Amortization of debt issuance costs 511 44 28 Losses from investment in HFA 5,881 — — Non-cash interest income (2,486) — — Income from equity awards received for directors’ fees (19) — — Income from equity method investment (13,923) (69,812) (83,113) Waived management fees (23,549) (24,826) (19,738) Non-cash compensation expense related to waived management fees 23,549 24,826 19,738 Deferred taxes, net 10,580 71,241 19,059 Gain on business acquisitions and dispositions (196,193) (29,741) — Impairment of fixed assets — 3,101 — Loss related to general partner commitment — — (38,444) Loss on assets held for sale — 2,768 — Loss on disposal of fixed assets 570 831 847 Gain from repurchase of debt — — (36,193) Other — — (584) Changes in assets and liabilities: Carried interest receivable 998,491 (1,383,219) (406,769) Due from affiliates (30,241) (11,066) 11,681 Other assets (7,019) (7,880) 28,928 Accounts payable and accrued expenses 3,079 (5,052) (8,189) Accrued compensation and benefits (6,128) 24,931 (4,027) Deferred revenue (21,934) (69,949) (45,279) Due to affiliates 43,767 (33,529) (4,284) Profit sharing payable (325,229) 503,589 144,460 Other liabilities 5,778 (7,573) 7,267 Apollo Funds related: Net realized losses (gains) from investment activities 11,313 (4,931) — Net unrealized losses (gains) from investment activities 113,114 (416,584) (471,907) Net realized gains on debt (41,819) (21,231) — Net unrealized losses on debt 19,880 55,040 — Distributions from investment activities 30,248 58,368 — Cash transferred in from consolidated funds 6,052 38,033 — Change in cash held at consolidated variable interest entities (17,400) (87,556) — Purchases of investments (1,294,477) (1,240,842) (40,000) Proceeds from sale of investments and liquidating distributions 1,530,194 627,278 5,497 Change in other assets (7,109) (8,086) — Change in other liabilities 56,526 107,891 — Net Cash Provided by (Used in) Operating Activities 743,821 (218,051) 107,993 See accompanying notes to consolidated financial statements. 167Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) 2011 2010 2009 Cash Flows from Investing Activities: Purchases of fixed assets (21,285) (5,601) (15,849) Proceeds from disposals of fixed assets 631 — — Cash received from business acquisition and disposition — 21,624 — Cash paid for acquisition — (1,354) — Purchase of investments in HFA (see note 4) (52,142) — — Investment in Senior Loan Fund (see note 4) (26,000) — — Acquisition of Gulf Stream (see note 3) (29,632) — — Cash contributions to equity method investments (64,226) (63,459) (42,522) Cash distributions from equity method investments 64,844 38,868 42,475 Change in restricted cash (1,726) 255 (974) Net Cash Used in Investing Activities $(129,536) $(9,667) $(16,870) Cash Flows from Financing Activities: Issuance of Class A shares $383,990 $— $— Repurchase of Class A shares (2,472) (43) (3,485) Principal repayments on debt and repurchase of debt (1,939) (182,309) (55,783) Debt issuance costs — (3,085) — Issuance costs (1,502) — — Distributions related to deliveries of Class A shares for RSUs (17,081) (2,876) — Distributions to Non-Controlling Interests in consolidated entities (13,440) (13,628) (12,387) Contributions from Non-Controlling Interests in consolidated entities — 187 207 Distributions paid (102,598) (21,284) (4,866) Distributions paid to Non-Controlling Interests in Apollo Operating Group (199,199) (50,400) (12,000) Distributions to Non-Controlling Interests in Apollo Operating Group — — (17,950) Apollo Funds related: Issuance of debt 454,356 1,050,377 — Principal repayment on term loans (415,869) (331,120) — Purchase of AAA shares — (48,768) — Distributions paid to Non-Controlling Interests in consolidated variable interest entities (308,785) (146,688) — Distributions paid to Non-Controlling Interests in consolidated entities (27,284) (6,602) — Net Cash (Used in) Provided by Financing Activities (251,823) 243,761 (106,264) Net Increase (Decrease) in Cash and Cash Equivalents 362,462 16,043 (15,141) Cash and Cash Equivalents, Beginning of Period 382,269 366,226 381,367 Cash and Cash Equivalents, End of Period $744,731 $382,269 $366,226 Supplemental Disclosure of Cash Flow Information: Interest paid $49,296 $38,317 $51,850 Interest paid by consolidated variable interest entities 20,892 12,522 — Income taxes paid 10,732 13,468 6,652 Supplemental Disclosure of Non-Cash Investing Activities: Non-cash contributions on equity method investments 9,847 — 1,802 Non-cash distributions from equity method investments (703) — — Non-cash sale of assets held-for-sale for repayment of CIT loan (11,069) — — Non-cash distributions from investing activities 3,176 — — Profit interests received in Fund VII — — 1,510 Change in accrual for purchase of fixed assets 967 (814) 3,649 See accompanying notes to consolidated financial statements. 168Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009(dollars in thousands, except share data) 2011 2010 2009 Supplemental Disclosure of Non-Cash Financing Activities: Non-cash distributions $— $(18) $(4,572) Declared and unpaid distributions (12,541) (2,831) — Non-cash distributions to Non-Controlling Interests in consolidated entities (3,176) (590) (4,273) Non-cash contributions from Non-Controlling Interests in Apollo OperatingGroup related to equity-based compensation 696,361 735,698 738,431 Non-cash contributions from Non-Controlling Interests in consolidated entities — — 4,301 Unrealized gain on interest rate swaps to Non-Controlling Interests in ApolloOperating Group, net of taxes 5,106 9,219 11,843 Satisfaction of liability related to AAA RDUs 3,845 (7,594) (6,618) Net transfers of AAA ownership interest to Non-Controlling Interests inconsolidated entities 6,524 7,014 3,799 Net transfer of AAA ownership interest from AGM (6,524) (7,014) (3,799) Unrealized gain on interest rate swaps 2,477 3,715 4,741 Unrealized (loss) gain on available for sale securities (from equity methodinvestment) (225) 343 — Capital increases related to equity-based compensation 451,543 376,380 355,659 Dilution impact of issuance of Class A shares 132,353 — — Dilution impact of issuance of Class A shares on Non-Controlling Interests inApollo Operating Group (127,096) — — Non-cash contributions — — 105 Deferred tax asset related to interest rate swaps (855) (1,499) (1,993) Reclassification of equity-based compensation — (3,505) — Reclass of fixed assets to assets held for sale — 11,331 — Tax benefits related to deliveries of Class A shares for RSUs (11,680) — — Satisfaction of liability related to repayment on CIT loan 11,069 — — Net Assets Transferred from Consolidated Funds: Cash 6,052 38,033 — Investments 24,213 — — Other assets 609 443 — Other liabilities (4,874) — — Net Assets Transferred from Consolidated Variable Interest Entities: Cash 68,586 — — Investments 2,195,986 1,102,114 — Other assets 14,039 28,789 — Debt (2,046,157) (706,027) — Other liabilities (31,959) (12,991) — Net Assets of Deconsolidated Variable Interest Entities: Investments — 419,198 — Other assets — 5,180 — Debt — (329,836) — Other liabilities — (87,338) — See accompanying notes to consolidated financial statements. 169Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data)1. ORGANIZATION AND BASIS OF PRESENTATIONApollo Global Management, LLC and its consolidated subsidiaries (the “Company” or “Apollo”), is a global alternative investment manager whosepredecessor was founded in 1990. Its primary business is to raise and invest private equity, capital markets and real estate funds as well as managedaccounts, on behalf of pension and endowment funds, as well as other institutional and high net worth individual investors. For these investment managementservices, Apollo receives management fees generally related to the amount of assets managed, transaction and advisory fees for the investments made andcarried interest income related to the performance of the respective funds that it manages. Apollo has three primary business segments: • Private equity—invests in control equity and related debt instruments, convertible securities and distressed debt investments; • Capital markets—primarily invests in non-control debt and non-control equity investments, including distressed debt securities; and • Real estate—invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanine investments and othercommercial real estate-related debt investments. Additionally, the Company sponsors real estate funds that focus on opportunistic investments indistressed debt and equity recapitalization transactions.Basis of PresentationThe accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ofAmerica (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries, theconsolidated entities which are considered to be variable interest entities and for which the Company is considered the primary beneficiary, and certain entitieswhich are not considered variable interest entities but in which the Company has a controlling financial interest. Intercompany accounts and transactions havebeen eliminated upon consolidation.Reorganization of the CompanyThe Company was formed as a Delaware limited liability company on July 3, 2007 and completed a reorganization of its predecessor businesses onJuly 13, 2007 (the “Reorganization”). The Company is managed and operated by its manager, AGM Management, LLC, which in turn is wholly-owned andcontrolled by Leon Black, Joshua Harris and Marc Rowan (the “Managing Partners”).As of December 31, 2011, the Company owned, through three intermediate holding companies that include APO Corp., a Delaware corporation that is adomestic corporation for U.S. Federal income tax purposes, APO Asset Co., LLC (“APO Asset”), a Delaware limited liability company that is a disregardedentity for U.S. Federal income tax purposes, and APO (FC), LLC (“APO (FC)”), an Anguilla limited liability company that is treated as a corporation for U.SFederal income tax purposes (collectively, the “Intermediate Holding Companies”), 34.1% of the economic interests of, and operated and controlled all of thebusinesses and affairs of, the Apollo Operating Group through its wholly-owned general partners.AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partners andthe Company’s other partners (the “Contributing Partners”) indirectly own (through Holdings) Apollo Operating Group units (“AOG Units”) that represent65.9% of the economic interests in the Apollo Operating Group as of December 31, 2011. The Company consolidates the financial 170Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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 consolidated financial statements.Apollo also entered into an exchange agreement with Holdings that allows the partners in Holdings, subject to the vesting and minimum retainedownership requirements and transfer restrictions set forth in the partnership agreements of the Apollo Operating Group, to exchange their AOG Units for theCompany’s Class A shares on a one-for-one basis up to four times each year, subject to customary conversion rate adjustments for splits, unit distributionsand reclassifications. A limited partner must exchange one partnership unit in each of the ten Apollo Operating Group partnerships to effect an exchange for oneClass A share.The Company has historically consolidated Apollo Commodities Trading Fund, L.P. In April 2010, the Company became the sole investor in the masterand feeder fund structure of Apollo Metals Trading Fund, L.P. (the “Metals Trading Fund”) and Apollo Commodities Trading Fund, L.P., respectively, andbegan to consolidate the Metals Trading Fund. The Metals Trading Fund and Apollo Commodities Trading Fund were liquidated prior to December 31, 2010.Initial Public Offering—On April 4, 2011, the Company completed the initial public offering (“IPO”) of its Class A shares, representing limitedliability company interests of the Company. AGM received net proceeds from the initial public offering of approximately $382.5 million, which was used toacquire additional AOG Units. As a result, Holdings ownership interest in the Apollo Operating Group decreased from 70.7% to 66.5% and the Company’sownership interest increased from 29.3% to 33.5%. As such, the difference between the fair value of the consideration paid for the Apollo Operating Grouplevel ownership interest and the book value on the date of the IPO is reflected in additional paid in capital.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of Consolidation—Apollo consolidates those entities it controls through a majority voting interest or through other means, including thosefunds in which the general partner is presumed to have control (e.g., AP Alternative Assets, L.P., a Guernsey limited partnership that, through AAAInvestments L.P., its investment partnership, generally invests alongside certain of the Company’s private equity funds and directly in certain of its capitalmarkets funds and in other transactions that the Company sponsors and manages (“AAA”) and Apollo Credit Senior Loan Fund, L.P. (“Apollo Senior LoanFund”)). Apollo also consolidates entities that are VIEs for which Apollo is the primary beneficiary. Under the amended consolidation rules, an enterprise isdetermined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct theactivities 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 fromthe 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 Companymanages. 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 andmanagement fees), would give it a controlling financial interest. When the VIE has qualified for the deferral of the amended consolidation rules in accordancewith 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 171Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) a variable interest is a VIE and (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually through other variableinterests (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 VIErequires judgments which include determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additionalsubordinated financial support, evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of theentity, determining whether two or more parties’ equity interests should be aggregated, and determining whether the equity investors have proportionate votingrights to their obligations to absorb losses or rights to receive returns from an entity. Under both the previous and amended consolidation rules, Apollodetermines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion continuously. Theconsolidation analysis can generally be performed qualitatively. However, if it is not readily apparent whether Apollo is the primary beneficiary, a quantitativeexpected 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 assessmentrequires the exercise of judgment. Where the variable interests have qualified for the deferral, judgments are made in estimating cash flows in evaluating whichmember 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 mostsignificantly 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 which party within arelated-party group is most closely associated with a VIE. The use of these judgments has a material impact to certain components of Apollo’s consolidatedfinancial statements.The only VIE formed prior to 2010, the adoption date of amended consolidation guidance, was consolidated as of the date of transition resulting inrecognition of the assets and liabilities of the consolidated VIE at fair value and recognition of a cumulative effect transition adjustment presented as acomponent of Non-Controlling Interests in Consolidated Entities in the consolidated statement of changes in shareholders’ equity for the year endedDecember 31, 2010. The transition adjustment is classified as a component of Non-Controlling Interest rather than an adjustment to appropriated partners’capital because the VIE is funded with equity and 100% of the equity ownership of the VIE is held by unconsolidated Apollo funds and one unaffiliated thirdparty. Changes in the fair value of assets and liabilities and the related interest, dividend and other income for this VIE are recorded within Non-ControllingInterests in consolidated entities in the consolidated statement of financial condition and within net gains from investment activities of consolidated VIEs andnet (income) loss attributable to Non-Controlling Interests in the consolidated statement of operations.Certain of the consolidated VIEs were formed to issue collateralized notes in the legal form of debt backed by financial assets. Changes in the fair valueof the assets and liabilities of these VIEs and the related interest and other income are presented within appropriated partners’ capital in the consolidatedstatement of financial condition as these VIEs are funded solely with debt and within net gains from investment activities of consolidated variable interestentities and net (income) loss attributable to Non-Controlling Interests in the 172Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) consolidated statement of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIE’s note holders, not Apollo, willultimately 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 consolidated statement of financial condition as ofDecember 31, 2011 and 2010.Refer to additional disclosures regarding VIEs in note 5. 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 therequirements for consolidation, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or lossof such entities. Income (loss) from equity method investments is recognized as part of other income (loss) in the consolidated statements of operations. Thecarrying amounts of equity method investments are reflected in investments in the consolidated statements of financial condition. As the underlying entitiesthat the Company manages and invests in are, for U.S. GAAP purposes, primarily investment companies which reflect their investments at estimated fairvalue, the carrying value of the Company’s equity method investments in such entities are at fair value.Non-Controlling Interest—For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity isallocated 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 Interest in the consolidated financial statements. The Non-Controlling Interest relating to Apollo Global Management, LLC primarily includes the65.9% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests inHoldings and other ownership interests in consolidated entities, which primarily consist of the approximate 98% ownership interest held by limited partners inAAA as of December 31, 2011. 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 consolidated statements of financialcondition; net income (loss) includes the net income (loss) attributed to the Non-Controlling Interest holders on the Company’s consolidated statements ofoperations; the primary components of Non-Controlling Interest are separately presented in the Company’s consolidated statements of changes in shareholders’equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities; and profits and losses areallocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis.Cash and Cash Equivalents—Apollo considers all highly liquid short-term investments with original maturities of 90 days or less when purchased tobe cash equivalents. Substantially all amounts on deposit in interest-bearing accounts with major financial institutions exceed insured limits.Restricted Cash—Restricted cash represents cash deposited at a bank, which is pledged as collateral in connection with leased premises.Revenues—Revenues are reported in three separate categories that include (i) advisory and transaction fees from affiliates, which relate to theinvestments of the funds and may include individual monitoring agreements with the portfolio companies and debt investment vehicles of the private equityfunds and capital markets funds; 173Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (ii) management fees from affiliates, which are based on committed capital, invested capital, net asset value, gross assets or as otherwise defined in therespective agreements; and (iii) carried interest income (loss) from affiliates, which is normally based on the performance of the funds subject to preferredreturn.Advisory and Transaction Fees from Affiliates—Advisory and transaction fees, including directors’ fees are recognized when the underlyingservices rendered are substantially completed in accordance with the terms of their transaction and advisory agreements. Additionally, during the normalcourse of business, the Company incurs certain costs related to private equity fund transactions that are not consummated (“Broken Deal Costs”). Refer to the“Pending Deal Costs” policy below for information regarding how and when the Company accounts for Broken Deal Costs.As a result of providing advisory services to certain private equity and capital markets portfolio companies, Apollo is generally entitled to receive fees fortransactions related to the acquisition and disposition of portfolio companies as well as ongoing monitoring of portfolio company operations. The amounts duefrom portfolio companies are included in “Due from Affiliates,” which is discussed further in note 15. Under the terms of the limited partnership agreementsfor certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such 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 inthe consolidated statements of operations.Management Fees from Affiliates—Management fees for private equity funds, real estate funds and certain capital markets funds are recognized inthe period during which the related services are performed in accordance with the contractual terms of the related agreement, and are based upon (1) apercentage of the capital committed during the commitment period, and thereafter based on the remaining invested capital of unrealized investments, or (2) netasset 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 onfunds’ capital, depending upon performance. Performance-based fees are assessed as a percentage of the investment performance of the funds. The carriedinterest 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 netproceeds in accordance with the fund’s income allocation provisions. Carried interest receivable is presented separately in the consolidated statements offinancial condition. The carried interest income may be subject to reversal to the extent that the carried interest income recorded exceeds the amount due to thegeneral partner based on a fund’s cumulative investment returns. When applicable, the accrual for potential repayment of previously received carried interestincome, 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 Apollofunds 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 generalpartner obligation, however, would not become payable or realized until the end of a fund’s life.Management Fee Waiver and Notional Investment Program—Under the terms of certain investment fund partnership agreements, Apollo mayfrom time to time elect to forgo a portion of the management fee revenue that is due from the funds and instead receive a right to a proportionate interest in futuredistributions of profits of those funds. Waived fees recognized during the period are included in management fees from affiliates in the consolidated statementsof operations. This election allows certain employees of Apollo to waive a portion of their respective share of future income from Apollo and receive, in lieu of acash distribution, title and ownership of the profits interests in the respective fund. Apollo immediately assigns the profits interests received to its employees.Such assignments of profits interests are treated as compensation and benefits when assigned. 174Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Deferred Revenue—Apollo earns management fees subject to the Management Fee Offset. When advisory and transaction fees are earned by themanagement company, the Management Fee Offset reduces the management fee obligation of the fund. When the management company receives cash foradvisory and transaction fees, a certain percentage is allocated as a credit to reduce future management fees, otherwise payable by such fund. Such credit isclassified as deferred revenue in the consolidated statements of financial condition. As the management fees earned by the management company are presentedon a gross basis, any Management Fee Offsets calculated are presented as a reduction to advisory and transaction fees in the consolidated statements ofoperations.Additionally, Apollo earns advisory fees pursuant to the terms of the advisory agreements with certain of the portfolio companies that are owned by thefunds. When Apollo receives a payment from a portfolio company that exceeds the advisory fees earned at that point in time, the excess payment is classifiedas deferred revenue in the consolidated statements of financial condition. The advisory agreements with the portfolio companies vary in duration and theassociated fees are received monthly, quarterly or annually. Deferred revenue is reversed and recognized as revenue over the period that the agreed upon servicesare performed.Under the terms of the funds’ partnership agreements, Apollo is normally required to bear organizational expenses over a set dollar amount andplacement costs in connection with the offering and sale of interests in the funds to investors. The placement fees are payable to placement agents, who areindependent third parties that assist in identifying potential investors, securing commitments to invest from such potential investors, preparing or revisingoffering and marketing materials, developing strategies for attempting to secure investments by potential investors and/or providing feedback and insightregarding issues and concerns of potential investors, when a limited partner either commits or funds a commitment to a fund. In certain instances theplacement fees are paid over a period of time. Based on the management agreements with the funds, Apollo considers placement fees and organizational costspaid in determining if cash has been received in excess of the management fees earned. Placement fees and organizational costs are normally the obligation ofApollo but can be paid for by the funds. When these costs are paid by the fund, the resulting obligations are included within deferred revenue. The deferredrevenue balance will also be reduced during future periods when management fees are earned but not paid.Interest and Other Income—Apollo recognizes security transactions on the trade date. Interest income is recognized as earned on an accrual basis.Discounts and premiums on securities purchased are accreted or amortized over the life of the respective securities using the effective interest method. Realizedgains and losses are recorded based on the specific identification method.Due from/to Affiliates—Apollo considers its existing partners, employees, certain former employees, portfolio companies of the funds and non-consolidated private equity, capital markets and real estate funds to be affiliates or related parties. 175Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Investments, at Fair Value—The Company follows U.S. GAAP attributable to fair value measurements, which among other things, requiresenhanced disclosures about investments that are measured and reported at fair value. Investments, at fair value, represent investments of the consolidatedfunds, investments of the consolidated VIEs and certain financial instruments for which the fair value option was elected and the unrealized gains and lossesresulting from changes in the fair value are reflected as net gains (losses) from investment activities and net gains (losses) from investment activities of theconsolidated variable interest entities, respectively, in the consolidated statements of operations. In accordance with U.S. GAAP, investments measured andreported 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 Iinclude listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments, even insituations 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, andfair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category includecorporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observableinputs. These investments exhibit higher levels of liquid market observability as compared to Level III investments. The Company subjects brokerquotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II investment. Thesecriteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentagedeviation from independent pricing services.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 thiscategory generally include general and limited partnership interests in corporate private equity and real estate funds, mezzanine funds, funds of hedgefunds, distressed debt and non-investment grade residual interests in securitizations and collateralized debt obligations where the fair value is based onobservable inputs as well as unobservable inputs. When a security is valued based on broker quotes, the Company subjects those quotes to variouscriteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment. Some of thefactors we consider include the number of broker quotes we obtain, the quality of the broker quotes, the standard deviations of the observed brokerquotes 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 levelwithin 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 thesignificance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment when the fairvalue 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 valuehierarchy, the Company accounts for the transfer as of the end of the reporting period. 176Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Private Equity InvestmentsThe 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 last sales price on the date of determination.Valuation approaches used to estimate the fair value of investments that are less liquid include the income approach and the market approach. Theincome 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 areassumptions of expected results and a calculated discount rate. The market approach provides an indication of fair value based on a comparison of the subjectcompany to comparable publicly traded companies and transactions in the industry. The market approach is driven more by current market conditions ofactual trading levels of similar companies and actual transaction data of similar companies. Consideration may also be given to such factors as theCompany’s historical and projected financial data, valuations given to comparable companies, the size and scope of the Company’s operations, theCompany’s strengths, weaknesses, expectations relating to the market’s receptivity to an offering of the Company’s securities, applicable restrictions ontransfer, industry information and assumptions, general economic and market conditions and other factors deemed relevant. As part of management’sprocess, the Company utilizes a valuation committee to review and approve the valuations. However, because of the inherent uncertainty of valuation, thoseestimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences couldbe material.Capital Markets InvestmentsThe majority of the investments in Apollo’s capital markets funds are valued using quoted market prices. Debt and equity securities that are notpublicly traded or whose market prices are not readily available are valued at fair value utilizing recognized pricing services, market participants or othersources. The capital markets funds also enter into foreign currency exchange contracts, credit default swap contracts, and other derivative contracts, whichmay include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by recognizing the difference between the contractexchange 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 arerecorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Credit default swap contracts are recorded at fair value asan asset or liability with changes in fair value recorded as unrealized appreciation or depreciation. Realized gains or losses are recognized at the termination ofthe contract based on the difference between the close-out price of the credit default 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 wouldbe received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation approachesused to estimate the fair value of illiquid investments included in Apollo’s capital markets funds also may use the income approach or market approach. Thevaluation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.Real Estate Investments—For the CMBS portfolio of Apollo’s funds, the estimated fair value is determined by reference to market prices provided bycertain dealers who make a market in these financial instruments. 177Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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.Loans that the funds plan to sell or liquidate in the near term will be treated as loans held-for-sale and will be held at the lower of cost or fair value. For theilliquid investments, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discountedcash flow estimates or comparable analysis prepared internally, (ii) third party appraisals or valuations by qualified real estate appraisers, and (iii) contractualsales 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.Fair Value of Financial InstrumentsThe fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, otherthan in a forced or liquidation sale.Except for the Company’s debt obligation related to the AMH Credit Agreement (as defined in note 12), Apollo’s financial instruments are recorded at fairvalue or at amounts whose carrying value approximates fair value. See “Investments, at Fair Value” above. While Apollo’s valuations of portfolio investmentsare 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 ofsale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Other financial instruments carrying valuesgenerally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings. As disclosed in note12, the Company’s long term debt obligation related to the AMH Credit Agreement is believed to have an estimated fair value of approximately $752.2 millionbased on a yield analysis using available market data of comparable securities with similar terms and remaining maturities. However, the carrying value thatis recorded on the consolidated statement of financial condition is the amount for which we expect to settle the long term debt obligation.Fair Value Option—Apollo has elected the fair value option for the convertible notes issued by HFA and for the assets and liabilities of theconsolidated VIEs. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. Apollo has elected toseparately present interest income in the consolidated statement of operations from other changes in the fair value of the convertible notes issued by HFA.Apollo has applied the fair value option for certain corporate loans, other investments and debt obligations held by these entities that otherwise would not havebeen carried at fair value. Refer to note 5 for further disclosure on financial instruments of the consolidated VIEs for which the fair value option has beenelected.Interest Rate Swap Agreements—Apollo recognizes derivatives as either an asset or liability measured at fair value. In order to reduce interest raterisk, Apollo entered into interest rate swap agreements which were formally designated as cash flow hedges. To qualify for cash flow hedge accounting, interestrate swaps must meet certain criteria, including (a) the items to be hedged expose Apollo to interest rate risk and (b) the interest rate swaps are highly effectivein reducing Apollo’s exposure to interest rate risk. Apollo formally documents at inception its hedge relationships, including identification of the hedginginstruments and the hedged items, its risk management objectives, its strategy for undertaking the hedge transaction and Apollo’s evaluation of effectiveness.Effectiveness is periodically assessed based upon a comparison of the relative changes in the cash flows of the interest rate swaps and the items being hedged.For derivatives that have been formally designated as cash flow hedges, the effective portion of changes in the fair value of the derivatives are recorded inaccumulated other comprehensive (loss) income (“OCI”). 178Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Amounts in OCI are reclassified into earnings when interest expense on the underlying borrowings is recognized. If, at any time, the swaps are determined to beineffective, in whole or in part, due to changes in the interest rate swap or underlying debt agreements, the fair value of the portion of the interest rate swapdetermined to be ineffective will be recognized as a gain or loss in the consolidated statements of operations.Financial Instruments held by Consolidated VIEsThe consolidated VIEs hold investments that are traded over-the-counter. Investments in securities that are traded on a securities exchange or comparableover-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 inthe case of over-the-counter securities or other investments for which the last sale date is not available, valuations are based on independent market quotationsobtained 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 markettransactions of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among otherfactors.The consolidated VIEs also have debt obligations that are recorded at fair value. The valuation approach used to estimate the fair values of debtobligations is the discounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interestpayments and quarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and creditrating. Management uses its discretion and judgment in considering and appraising relevant factors for determining the valuations of its debt obligations.Pending Deal CostsPending deal costs consist of certain costs incurred (e.g. research costs, due diligence costs, professional fees, legal fees and other related items) related toprivate equity and capital markets fund transactions that we are pursuing but which have not yet been consummated. These costs are deferred until suchtransactions are broken or successfully completed. A transaction is determined to be broken upon management’s decision to no longer pursue the transaction.In accordance with the related fund agreements, in the event the deal is broken, all of the costs are reimbursed by the funds and considered in the calculation ofthe Management Fee Offset. These offsets are included in Advisory and Transaction Fees from Affiliates in the Company’s consolidated statements ofoperations. If a deal is successfully completed, Apollo is reimbursed by the fund or a fund’s portfolio company for all costs incurred.Fixed AssetsFixed Assets consist primarily of ownership interests in aircraft, leasehold improvements, furniture, fixtures and equipment, computer hardware andsoftware and are recorded at cost, net of accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line methodover the assets’ estimated useful lives and in the case of leasehold improvements the lesser of the useful life or the term of the lease. Aircraft engine overhaulsare capitalized and depreciated until the next expected overhaul. Expenditures for repairs and maintenance are charged to expense when incurred. The Companyevaluates long-lived assets for impairment periodically and whenever events or changes in circumstances indicate the carrying amounts of the assets may beimpaired. 179Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Business Combinations—The Company accounts for acquisitions using the purchase method of accounting in accordance with U.S. GAAP. Thepurchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of theacquisition date.Goodwill and Intangible Assets—Goodwill and indefinite-life intangible assets must be reviewed annually for impairment or more frequently ifcircumstances indicate impairment may have occurred. Identifiable finite-life intangible assets, by contrast, are amortized over their estimated useful lives,which are periodically re-evaluated for impairment or when circumstances indicate an impairment may have occurred. Apollo amortizes its identifiable finite-life intangible assets using a method of amortization reflecting the pattern in which the economic benefits of the finite-life intangible asset are consumed orotherwise used up. If that pattern cannot be reliably determined, Apollo uses the straight-line method amortization. At June 30, 2011, the Company performedits annual impairment testing and determined there was no impairment of goodwill or indefinite life intangible assets at such time.Profit Sharing Payable—Profit sharing payable represents the amounts payable to employees and former employees who are entitled to a proportionateshare of carried interest income in one or more funds. The liability is calculated based upon the changes to realized and unrealized carried interest and istherefore not payable until the carried interest itself is realized.Debt Issuance Costs—Debt issuance costs consist of costs incurred in obtaining financing and are amortized over the term of the financing using theeffective interest method. These costs are included in Other Assets on the consolidated statements of financial condition.Foreign Currency—The Company may, from time to time, hold foreign currency denominated assets and liabilities. Such assets and liabilities aretranslated using the exchange rates prevailing at the end of each reporting period. The functional currency of the Company’s international subsidiaries is theU.S. Dollar, as their operations are considered an extension of U.S. parent operations. Non-monetary assets and liabilities of the Company’s internationalsubsidiaries are remeasured into the functional currency using historical exchange rates specific to each asset and liability. The results of the Company’sforeign operations are normally remeasured using an average exchange rate for the respective reporting period. All currency remeasurement adjustments areincluded within other income (loss), net in the consolidated statements of operations. Gains and losses on the settlement of foreign currency transactions arealso included within other income (loss), net in the consolidated statements of operations.Compensation and BenefitsThe components of compensation and benefits have been expanded in the consolidated statements of operations in 2009 and 2010 to conform with the2011 presentation.Equity-Based Compensation—Equity-based compensation is measured based on the grant date fair value of the award. Equity-based awards that donot require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are expensed over therelevant 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 the 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 includes base salaries, discretionary and non-discretionary bonuses, severance andemployee benefits. Bonuses are accrued over the service period. 180Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) From time to time, the Company may assign profits interests received in lieu of management fees to certain investment professionals. Such assignmentsof 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 certaineligibility requirements. The Company may provide discretionary contributions from time to time. No contributions relating to this plan were made by theCompany for the years ended December 31, 2011, 2010 and 2009, respectively.Profit Sharing Expense—Profit sharing expense consists of a portion of carried interest earned in one or more funds allocated to employees and formeremployees. Profit sharing expense is recognized as the related carried interest income is recognized. Profit sharing expense can be reversed during periods whenthere is a decline in carried interest income that was previously recognized. Additionally, profit sharing expenses paid may be subject to clawback fromemployees, former employees and Contributing Partners.In June 2011, the Company adopted a performance based incentive arrangement for certain Apollo partners and employees designed to more closely aligncompensation on an annual basis with the overall realized performance of the Company. This arrangement enables certain partners and employees to earndiscretionary compensation based on carried interest realizations earned by the Company in a given year, which amounts are reflected in profit sharing expensein the accompanying consolidated financial statements.Incentive Fee Compensation—Certain employees are entitled to receive a discretionary portion of incentive fee income from certain of our capitalmarkets funds, based on performance for the year. Incentive fee compensation expense is recognized on accrual basis as the related carried interest income isearned. 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 changein unrealized gains and losses in the Company’s investment portfolio between the opening balance sheet date and the closing balance sheet date. Theconsolidated financial statements include the net realized and unrealized gains (losses) of AAA and the investment in HFA discussed in note 4.Net Gains from Investment Activities of Consolidated Variable Interest Entities—Changes in the fair value of the consolidated VIEs’ assets andliabilities and related interest, dividend and other income and expenses subsequent to consolidation are presented within net gains (losses) from investmentactivities of consolidated variable interest entities and are attributable to Non-Controlling Interests in the consolidated statements of operations.Comprehensive (Loss) Income—U.S. GAAP guidance establishes standards for reporting comprehensive income and its components in a financialstatement that is displayed with the same prominence as other financial statements. U.S. GAAP requires that the Company classify items of OCI by theirnature in the financial statements and display the accumulated balance of OCI separately in the shareholders’ equity section of the Company’s consolidatedstatements of financial condition. Comprehensive income (loss) consists of net income (loss) and OCI. Apollo’s OCI is primarily comprised of the effectiveportion of changes in the fair value of the interest rate swap agreements discussed previously. If, at any time, any of the Company’s subsidiaries’ functionalcurrency becomes non-U.S. dollar denominated, the Company will record foreign currency cumulative translation adjustments in OCI. 181Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Income Taxes—The Apollo Operating Group and its subsidiaries continue to generally operate in the U.S. as partnerships for U.S. Federal income taxpurposes and generally as corporate entities in non-U.S. jurisdictions. Accordingly, these entities in some cases are subject to New York City unincorporatedbusiness tax, or in the case of non-U.S. entities, to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of the Company, issubject to U.S. Federal, state and local corporate income tax, and the Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.As significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties, we recognize the taxbenefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The tax benefit ismeasured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. If a tax position is notconsidered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluatedquarterly and determine whether or not we have uncertain tax positions that require financial statement recognition.Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in theconsolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.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 presentedfor 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 ofnet income, the net income is first reduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods of netlosses, 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 entityand an objectively determinable contractual obligation to share in net losses of the entity.The remaining earnings are allocated to common Class A Shares and participating securities to the extent that each security shares in earnings as if all ofthe 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 thediluted earnings, the denominator includes all outstanding common shares and all potential common shares assumed issued if they are dilutive. Thenumerator 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 consolidated financial statements requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities at the date of the consolidated financial statements, the disclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimates includegoodwill, intangible assets, income taxes, carried interest income from affiliates, non-cash compensation and fair value of investments and debt in theconsolidated and unconsolidated funds and VIEs. Actual results could differ materially from those estimates.Recent Accounting PronouncementsIn April 2011, the FASB amended existing guidance for agreements to transfer financial assets that both entitle and obligate the transferor to repurchaseor redeem the financial assets before their maturity. The amendments remove from the assessment of effective control the criterion requiring the transferor tohave the 182Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee and the collateralmaintenance implementation guidance related to that criterion. The guidance is effective for the first interim or annual period beginning on or afterDecember 15, 2011 and is to be applied prospectively. The adoption of this guidance is not expected to have a material impact on the Company’s consolidatedfinancial statements.In May 2011, the FASB issued an update which includes amendments that result in common fair value measurement and disclosure requirements inU.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fairvalue and for disclosing information about fair value measurements. Certain of the amendments could change how the fair value measurement guidance isapplied including provisions related to highest and best use and valuation premise for nonfinancial assets, application to financial assets and financialliabilities with offsetting positions in market risks or counterparty credit risk, premiums or discounts in fair value measurement, fair value of an instrumentclassified in a reporting entity’s shareholders’ equity, and additional disclosure requirements about fair value measurements. The update is effective forinterim and annual periods beginning after December 15, 2011 for public entities and is to be applied prospectively. The adoption of this guidance is notexpected to have a material impact on the Company’s consolidated financial statements.In June 2011, the FASB issued an update which includes amendments that eliminate the option to present components of other comprehensive income(OCI) as part of the statement of changes in stockholders’ equity and requires entities to report components of other comprehensive income in either (1) a singlecontinuous statement of comprehensive income or (2) two separate but consecutive statements. In a single continuous statement, entities must include thecomponents of net income, a total for net income, the components of OCI, a total for OCI, and a total for comprehensive income. Under the two separate butcontinuous statements approach, the first statement would include components of net income, consistent with the income statement format used today, and thesecond statement would include components of OCI. For public entities, the amendments are effective for fiscal years, and interim periods within those years,beginning after December 15, 2011. In December 2011, the FASB issued an amendment to this update deferring changes related to the presentation ofreclassification adjustments out of accumulated other comprehensive income. The adoption of this guidance will not have an impact on the Company’sconsolidated financial statements as the Company presents a separate statement of comprehensive income.In September 2011, the FASB issued an update which amends the guidance related to testing goodwill for impairment. Under the revised guidance,entities testing goodwill for impairment have the option to perform a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 ofthe goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not to be lessthan the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. The update does not amend therequirement to test goodwill for impairment between annual tests if events or circumstances warrant. The amendments are effective for all entities for annualand interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this guidance is not expected to have animpact on the Company’s consolidated financial statements.In December 2011, the FASB issued amended guidance which will enhance disclosures required by U.S. GAAP by requiring improved informationabout financial instruments and derivative instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similaragreement, irrespective of whether they are offset. This information will enable users of an entity’s financial statements to evaluate the 183Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certainfinancial instruments and derivative instruments. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1,2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for allcomparative periods presented. The Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements.3. ACQUISITIONS AND BUSINESS COMBINATIONSBusiness CombinationsGulf StreamOn October 24, 2011 (the “Acquisition Date”), the Company completed its previously announced acquisition (the “Acquisition”) of 100% of themembership interests of Gulf Stream Asset Management, LLC (“Gulf Stream”), a manager of collateralized loan obligations. The Acquisition wasconsummated by the Company for total consideration at fair value of approximately $38.3 million.The transaction broadens Apollo’s existing senior credit business by expanding our credit coverage as well as investor relationships and increases theAssets Under Management of Apollo’s capital markets.Consideration exchanged at closing consisted of payment of approximately $29.6 million, of which $6.7 million was used to repay subordinated notesand debt due to the existing shareholder on behalf of Gulf Stream. The Company funded the consideration exchanged at closing from its existing cashresources. Additional consideration of $4.0 million having an acquisition date fair value of $3.9 million will be paid to the former owners of Gulf Stream onthe fourteen-month anniversary of the closing date. The Company will also make payments to the former owners of Gulf Stream under a contingentconsideration obligation which requires the Company to transfer cash to the former owners of Gulf Stream based on a specified percentage of incentive feerevenue. The contingent consideration liability has an Acquisition Date fair value of approximately $4.7 million, which was determined based on the presentvalue of the estimated range of undiscounted incentive fee payable cash flows between $0 and approximately $8.7 million using a discount rate of 13.7%.Tangible assets acquired in the Acquisition consisted of a management fee receivable. Intangible assets acquired consisted primarily of certainmanagement contracts providing economic rights to senior fees, subordinate fees, and incentive fees from existing CLOs managed by Gulf Stream.Additionally, as part of the Acquisition, the Company acquired the assets and liabilities of six consolidated CLOs. 184Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The Company has performed an analysis and an evaluation of the net assets acquired and liabilities assumed. The estimated fair value of the assetsacquired exceeded the estimated fair value of the liabilities assumed as of the Acquisition Date resulting in a bargain purchase gain of approximately $195.5million. The bargain purchase gain is reflected in other income, net within the consolidated statements of operations with a corresponding amount reflected inappropriated partners’ capital within the consolidated statements of changes in shareholders’ equity. The estimated fair values for the net assets acquired andliabilities assumed are summarized in the following table: Tangible Assets: Receivable, management fees $1,720 Total assets of consolidated CLOs 2,278,612 Intangible Assets: Management Contracts 32,400 Fair Value of Assets Acquired 2,312,732 Liabilities assumed: Deferred Tax Liability 871 Total liabilities of consolidated CLOs 2,078,117 Fair Value of Liabilities Assumed 2,078,988 Fair Value of Net Assets Acquired 233,744 Less: Fair Value of Consideration Transferred 38,290 Gain on Acquisition $195,454 The Company’s rights under all management contracts acquired will be amortized over six years. The management contract valuation and relatedamortization are as follows: Weighted AverageUseful Life in Years December 31, 2011 Management contracts 3.7 $32,400 Less: Accumulated amortization (284) Net intangible assets $32,116 The results of operations of the acquired business since the Acquisition Date included in the Company’s consolidated statements of operations for theperiod from October 24, 2011 to December 31, 2011 were as follows: For the Period fromOctober 24, 2011 toDecember 31, 2011 Total Revenues $2,107 Net Income Attributable to Non-Controlling Interest $194,852 Net Income Attributable to Apollo Global Management, LLC $473 185Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Unaudited Supplemental Pro Forma InformationUnaudited supplemental pro forma results of operations of the combined entity for the years ended December 31, 2011 and 2010, assuming the GulfStream acquisition had occurred as of January 1, 2010 are presented below. This pro forma information has been prepared for comparative purposes only andis not intended to be indicative of what the Company’s results would have been had the Acquisition been completed on January 1, 2010, nor does it purport tobe indicative of any future results. For the Year EndedDecember 31, 2011 2010 (in million, except for share data) Total Revenues $174.9 $2,115.7 Net (Income) Loss Attributable to Non-Controlling Interest $(1,097.1) $652.1 Net (Loss) Income Attributable to Apollo Global Management,LLC $(468.7) $95.9 Net (Loss) Income per Class A Share: Net (Loss) Income per Class A Share—Basic and Diluted $(4.18) $0.84 Weighted Average Number of Class A Shares—Basic andDiluted 116,364,110 96,964,769 The 2011 and 2010 supplemental pro forma earnings include an adjustment to exclude $4.9 million and $9.7 million, respectively of compensationexpense not expected to recur due to termination of certain contractual arrangements as part of the closing of the Acquisition.Other AcquisitionsOn February 1, 2010, the Company acquired substantially all of the assets of a limited company incorporated under the laws of Hong Kong and relatedentities thereto. The Company paid cash consideration of $1.4 million for identifiable assets with a combined fair value of $0.4 million, which resulted in$1.0 million of additional goodwill.CPIOn November 12, 2010, Apollo completed the acquisition of substantially all of the assets of Citi Property Investors (“CPI”), the real estate investmentmanagement group of Citigroup Inc. CPI had AUM of approximately $3.6 billion as of December 31, 2010. CPI is an integrated real estate investment platformwith investment professionals located in Asia, Europe and North America. As part of the acquisition, Apollo received cash of $15.5 million and acquiredgeneral partner interests in, and advisory agreements with, various real estate investment funds and co-invest vehicles and added to its team of real estateprofessionals. The consideration transferred in the acquisition is a contingent consideration in the form of a liability incurred by Apollo to CPI. The liability isan obligation of Apollo to transfer cash to CPI based on a specified percentage of future earnings. The estimated fair value of the contingent liability is $1.2million as of November 12, 2010. The acquisition was accounted for as a business combination and the Company recorded a $24.1 million gain onacquisition which is included in Other Income (Loss), Net in the accompanying consolidated statements of operations for the year ended December 31, 2010. 186Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The finite-life intangible assets relate to management contracts associated with the CPI funds. The fair value of the management contracts was estimatedto be $8.3 million. The Company also received $15.5 million of cash and recorded a receivable valued at $1.5 million as of December 31, 2010.The Company has performed an analysis and an evaluation of the net assets acquired and liabilities assumed. The Company has determined thefollowing estimated fair values for the acquired assets and liabilities assumed: Tangible Assets: Cash $15,468 Receivables, at fair value 1,500 Intangible Assets: Management Contracts 8,300 Total Assets 25,268 Less: Contingent consideration, at fair value (1,200) Gain on Acquisition $24,068 The estimated useful life of the management contracts is 2.5 years. The Company is amortizing the management contracts over their estimated usefullife using the straight-line method. Useful Lifein Years December31,2011 December 31,2010 Management contracts 2.5 $8,300 $8,300 Less: Accumulated amortization of intangibles (3,761) (433) Net identified intangible assets, at fair value $4,539 $7,867 Stone TowerOn December 16, 2011, Apollo announced that it has agreed to merge Stone Tower Capital LLC and its related management companies, a leadingalternative credit manager with approximately $18 billion of assets under management, into Apollo’s capital markets business. The transaction is subject tothe satisfaction of certain conditions and is expected to close in April 2012, subject to satisfaction of closing conditions.Intangible AssetsIntangible assets, net consists of the following: As ofDecember 31, 2011 2010 Finite-lived intangible assets/management contracts $141,000 $108,600 Accumulated amortization (59,154) (44,026) Intangible assets, net $81,846 $64,574 187Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The changes in intangible assets, net consist of the following: For the Year EndedDecember 31, 2011 2010 2009 Balance, beginning of year $64,574 $69,051 $81,728 Amortization expense (15,128) (12,777) (12,677) Acquisitions 32,400 8,300 — Balance, end of year $81,846 $64,574 $69,051 Amortization expense related to intangible assets, including the intangible assets related to acquisitions and the intangible assets as part of theacquisitions of Non-Controlling Interests in the Apollo Operating Group was $15.1 million, $12.8 million and $12.7 million for the years endedDecember 31, 2011, 2010, and 2009, respectively.Expected amortization of these intangible assets for each of the next 5 years and thereafter is as follows: 2012 2013 2014 2015 2016 There-After Total Amortization of intangible assets $21,987 $14,842 $9,598 $9,864 $7,120 $18,053 $81,464 4. INVESTMENTSThe following table represents Apollo’s investments: December 31,2011 December 31,2010 Investments, at fair value $1,552,122 $1,637,091 Other investments 305,343 283,462 Total Investments $1,857,465 $1,920,553 188Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Investments at Fair ValueInvestments at fair value consist of financial instruments held by AAA, the investment in HFA, Senior Loan Fund, other investments held at fair valueand investments of consolidated VIEs as discussed further in note 5. As of December 31, 2011 and 2010, the net assets of the consolidated funds and VIEswere $1,724.2 million and $1,951.6 million, respectively. The following investments, except the investment in HFA and other investments, are presented as apercentage of net assets of the consolidated funds and VIEs: December 31, 2011 December 31, 2010 Investments, atFair Value—Affiliates Fair Value Cost % of NetAssets ofConsolidatedFunds andVIEs Fair Value Cost % of NetAssets ofConsolidatedFunds andVIEs PrivateEquity CapitalMarkets Total PrivateEquity CapitalMarkets Total Investments, at fair value: AAA $1,480,152 $— $1,480,152 $1,662,999 85.9% $1,637,091 $— $1,637,091 $1,695,992 83.9% Investments held by Senior Loan Fund — 24,213 24,213 24,569 1.4 — — — — — HFA — 46,678 46,678 54,628 N/A — — — — — Other 1,079 — 1,079 2,881 N/A — — — — — Total $1,481,231 $70,891 $1,552,122 $1,745,077 87.3% $1,637,091 $— $1,637,091 $1,695,992 83.9% SecuritiesAt December 31, 2011 and 2010, the sole investment of AAA was its investment in AAA Investments, L.P. (“AAA Investments”). The following tablesrepresent each investment of AAA Investments constituting more than five percent of the net assets of the consolidated funds and VIEs as of theaforementioned dates: December 31, 2011 Instrument Type Cost Fair Value % of NetAssets ofConsolidatedFunds andVIEs Apollo Life Re Ltd. Equity $358,241 $430,800 25.0% Apollo Strategic Value Offshore Fund, Ltd. Investment Fund 105,889 164,811 9.6 Rexnord Corporation Equity 37,461 139,100 8.1 Apollo Asia Opportunity Offshore Fund, Ltd. Investment Fund 88,166 86,329 5.0 LeverageSource, L.P. Equity 139,913 102,834 6.0 189Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) December 31, 2010 Instrument Type Cost Fair Value % of NetAssets ofConsolidatedFunds andVIEs Apollo Life Re Ltd. Equity $201,098 $249,900 12.8% Apollo Strategic Value Offshore Fund, Ltd. Investment Fund 113,772 160,262 8.2 Momentive Performance Materials Holdings Inc. Equity 76,007 137,992 7.1 Rexnord Corporation Equity 37,461 133,700 6.9 LeverageSource, L.P. Equity 140,743 115,677 5.9 Apollo Asia Opportunity Offshore Fund, Ltd. Investment Fund 102,530 110,029 5.6 Caesars Entertainment Corporation Equity 176,729 99,000 5.1 AAA Investments owns equity as a private equity co-investment in Caesars Entertainment Corporation (formerly known as Harrah’s Entertainment,Inc.) and AAA Investments has an ownership interest in LeverageSource, L.P., which owns debt of Caesars Entertainment Corporation. At December 31,2010, AAA Investments’ combined share of these debt and equity investments was greater than 5% of the net assets of the consolidated funds and VIEs andwas valued at $102.8 million. In addition to AAA Investments’ private equity co-investment in Momentive Performance Materials Holdings Inc.(“Momentive”) noted above, AAA Investments has an ownership interest in the debt of Momentive. AAA Investments’ combined share of these debt and equityinvestments is valued at $85.9 million and $138.8 million at December 31, 2011 and December 31, 2010, respectively. At December 31, 2010, AAAInvestments’ combined share of these debt and equity investments was greater than 5% of the net assets of the consolidated funds and VIEs. Furthermore,AAA Investments owns equity, as a private equity co-investment, and debt, through its investment in Autumnleaf, L.P. and Apollo Fund VI BC, L.P., inCEVA Logistics. AAA Investments’ combined share of these debt and equity investments was valued at $75.2 million and $124.6 million as ofDecember 31, 2011 and 2010, respectively. At December 31, 2010, AAA Investments’ combined share of these debt and equity investments was greater than5% of the net assets of the consolidated funds and VIEs. Apollo Strategic Value Offshore Fund, Ltd. (the “Apollo Strategic Value Fund”) has an ownershipinterest in a special purpose vehicle, Apollo VIF/SVF Bradco LLC, which owns interests in Bradco Supply Corporation. AAA Investments’ share of thisinvestment is valued at $80.9 million at December 31, 2011.Apollo Strategic Value Fund primarily invests in the securities of leveraged companies in North America and Europe through three core strategies:distressed investments, value-driven investments and special opportunities. In connection with the redemptions requested by AAA Investments of itsinvestment in Apollo Strategic Value Fund, the remainder of AAA Investments’ investment in the Apollo Strategic Value Fund was converted into liquidatingshares issued by the Apollo Strategic Value Fund. The liquidating shares were initially allocated a pro rata portion of each of the Apollo Strategic Value Fund’sexisting investments and liabilities, and as those investments are sold, AAA Investments is allocated the proceeds from such disposition less its proportionateshare of any current expenses incurred by the Apollo Strategic Value Fund.Apollo Asia Opportunity Offshore Fund, Ltd. (“Asia Opportunity Fund”) is an investment vehicle that seeks to generate attractive risk-adjusted returnsacross market cycles by capitalizing on investment opportunities created by the increasing demand for capital in the rapidly expanding Asian markets. Inconnection with a 190Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) redemption requested by AAA Investments of its investment in Asia Opportunity Fund, a portion of AAA Investments’ investment was converted intoliquidating shares issued by the Asia Opportunity Fund. The liquidating shares were initially allocated a pro rata portion of each of the Asia OpportunityFund’s existing investments and liabilities, and as those investments are sold, AAA Investments is allocated the proceeds from such disposition less itsproportionate share of any current expenses incurred or reserves set by the Asia Opportunity Fund. At December 31, 2011 and 2010, the liquidating shares ofAsia Opportunity Fund had a fair value of $26.1 million and $45.0 million, respectively.Apollo Life Re Ltd. is an Apollo-sponsored vehicle that owns the majority of the equity of Athene Holding Ltd., (“Athene”), the parent of Athene Life ReLtd., a Bermuda-based reinsurance company focused on the life reinsurance sector, Athene Annuity & Life Assurance Company, a recently acquiredDelaware-domiciled (formerly South Carolina domiciled) stock life insurance company focused on retail sales and reinsurance in the retirement servicesmarket, Investors Insurance Corporation, a recently acquired Delaware-domiciled stock life insurance company focused on the retirement services market andAthene Life Insurance Company, a recently organized Indiana-domiciled stock life insurance company focused on the institutional guaranteed investmentcontract (“GIC”) backed note and funding agreement markets.Senior Loan FundOn December 31, 2011, the Company invested $26.0 million in the Apollo Credit Senior Loan Fund, L.P. (“Senior Loan Fund”). As a result, theCompany became the sole investor in the fund and therefore consolidated the assets and liabilities of the fund. The fund invests in U.S. denominated seniorsecured loans, senior secured bonds and other income generating fixed-income investments. At least 90% of the Senior Loan Fund’s portfolio of investmentsmust consist of senior secured, floating rate loans or cash or cash equivalents. Up to 10% of the Senior Loan Fund’s portfolio may consist of non-first lienfixed income investments and other income generating fixed income investments, including but not limited to senior secured bonds. The Senior Loan Fundmay 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 Senior Loan Fund investment as Level II and Level III investments.HFAOn March 7, 2011, the Company invested $52.1 million (including expenses related to the purchase) in a convertible note with an aggregate principalamount 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 theprincipal plus accrued payment-in-kind interest (or “PIK” interest) divided by US$0.98 at any time, and convey participation rights, on an as-convertedbasis, in any dividends declared in excess of $6.0 million per annum, as well as seniority rights over HFA common equity holders. Unless previouslyconverted, repurchased or cancelled, the note will be converted on the eighth anniversary of its issuance on March 11, 2019. Additionally, the note has apercentage coupon interest of 6% per annum, paid via principal capitalization (PIK interest) for the first four years, and thereafter either in cash or viaprincipal 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 191Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) convertible note. The convertible note is valued using an as “if-converted basis.” The Company separately presents interest income in the consolidatedstatement of operations from other changes in the fair value of the convertible note. For the year ended December 31, 2011 the Company has recorded $2.5million in PIK interest income included in interest income in the consolidated statements of operations. The terms of the stock options allow for the Companyto acquire 20,833,333 fully paid ordinary shares of HFA at an exercise price in Australian Dollars (“A$”) of A$8.00 (exchange rate of A$1.00 to $0.84 as ofDecember 31, 2011) per stock option. The stock options became exercisable upon issuance and expire on the eighth anniversary of the issuance date. Thestock 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 year endedDecember 31, 2011, the Company recorded an unrealized loss of approximately $5.9 million, related to the convertible note and stock options within net(losses) gains from investment activities in the consolidated statements of operations.The Company has classified the instruments associated with the HFA investment as Level III investments.Net (Losses) Gains from Investment ActivitiesNet (losses) gains from investment activities in the consolidated statements of operations include net realized gains from sales of investments, and thechange in net unrealized (losses) gains resulting from changes in fair value of the consolidated funds’ investments and realization of previously unrealized(losses) gains. Additionally net (losses) gains from investment activities include changes in the fair value of the investment in HFA and other investments heldat fair value. The following tables present Apollo’s net (losses) gains from investment activities for the years ended December 31, 2011, 2010 and 2009: For the Year EndedDecember 31, 2011 Private Equity Capital Markets Total Change in net unrealized (losses) gains due to changes in fairvalues $(123,946) $(5,881) $(129,827) Net (Losses) Gains from Investment Activities $(123,946) $(5,881) $(129,827) For the Year EndedDecember 31, 2010 Private Equity Capital Markets Total Realized (losses) gains on sales of investments $— $(2,240) $(2,240) Change in net unrealized gains (losses) due to changes in fairvalues 370,145 (34) 370,111 Net Gains (Losses) from Investment Activities $370,145 $(2,274) $367,871 For the Year EndedDecember 31, 2009 Private Equity Capital Markets Total Realized gains on sales of investments $584 $— $584 Change in net unrealized gains due to changes in fair values 471,873 38,478 510,351 Net Gains from Investment Activities $472,457 $38,478 $510,935 192Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Other InvestmentsOther Investments primarily consist of equity method investments. Apollo’s share of operating income (loss) generated by these investments is recordedwithin income from equity method investments in the consolidated statements of operations.The following table presents income from equity method investments for the years ended December 31, 2011, 2010 and 2009: For the Years EndedDecember 31, 2011 2010 2009 Investments: Private Equity Funds: AAA Investments $(55) $215 $261 Apollo Investment Fund IV, L.P. (“Fund IV”) 8 24 17 Apollo Investment Fund V, L.P. (“Fund V”) (9) 39 44 Apollo Investment Fund VI, L.P. (“Fund VI”) 2,090 599 1,335 Apollo Investment Fund VII, L.P. (“Fund VII”) 10,156 37,499 31,527 Apollo Natural Resources Partners, L.P. (“ANRP”) (141) — — Capital Markets Funds: Apollo Special Opportunities Managed Account, L.P. (“SOMA”) (793) 1,106 1,961 Apollo Value Investment Fund, L.P. (“VIF”) (25) 29 57 Apollo Strategic Value Fund, L.P. (“SVF”) (21) 21 57 Apollo Credit Liquidity Fund, L.P. (“ACLF”) (295) 3,431 13,768 Apollo/Artus Investors 2007-I, L.P. (“Artus”) 368 4,895 2,249 Apollo Credit Opportunity Fund I, L.P. (“COF I”) 2,410 12,618 16,473 Apollo Credit Opportunity Fund II, L.P. (“COF II”) (737) 3,610 8,294 Apollo European Principal Finance Fund, L.P. (“EPF”) 1,729 2,568 330 Apollo Investment Europe II, L.P. (“AIE II”) (308) 1,496 2,937 Apollo Palmetto Strategic Partnership, L.P. (“Palmetto”) (100) 903 258 Apollo Senior Floating Rate Fund (“AFT”) (16) — — Apollo Residential Mortgage, Inc. (“AMTG”) (80) — — Apollo European Credit, L.P. (“AEC”) (10) — — Apollo European Strategic Investment L.P. (“AESI”) 21 — — Real Estate: Apollo Commercial Real Estate Finance, Inc. (“ARI”) 636 (390) (743) AGRE US Real Estate Fund, L.P. (79) — — CPI Capital Partners NA Fund 98 — — CPI Capital Partners Asia Pacific Fund 71 — — Other Equity Method Investments: VC Holdings, L.P. Series A (“Vantium A”) (1,860) (951) (3,770) VC Holdings, L.P. Series C (“Vantium C”) 580 1,370 8,072 VC Holdings, L.P. Series D (“Vantium D”) 285 730 (14) Total Income from Equity Method Investments $13,923 $69,812 $83,113 (1)Amounts are as of September 30, 2011.(2)Amounts are as of September 30, 2010. 193(1)(1)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Other investments as of December 31, 2011 and 2010 consisted of the following: Equity Held as of December 31,2011 % ofOwnership December 31,2010 % ofOwnership Investments: Private Equity Funds: AAA Investments $859 0.057% $929 0.056% Fund IV 15 0.010 48 0.005 Fund V 202 0.014 231 0.013 Fund VI 7,752 0.082 5,860 0.051 Fund VII 139,765 1.318 122,384 1.345 Apollo Natural Resources Partners, L.P. 1,982 2.544 — — Capital Markets Funds: Apollo Special Opportunities Managed Account, L.P. 5,051 0.525 5,863 0.537 Apollo Value Investment Fund, L.P. 122 0.081 152 0.085 Apollo Strategic Value Fund, L.P. 123 0.059 144 0.055 Apollo Credit Liquidity Fund, L.P. 14,449 2.465 18,736 2.450 Apollo/Artus Investors 2007-I, L.P. 6,009 6.156 7,143 6.156 Apollo Credit Opportunity Fund I, L.P. 37,806 1.977 41,793 1.949 Apollo Credit Opportunity Fund II, L.P 22,979 1.472 27,415 1.441 Apollo European Principal Finance Fund, L.P. 14,423 1.363 15,352 1.363 Apollo Investment Europe II, L.P. 7,845 2.076 8,154 2.045 Apollo Palmetto Strategic Partnership, L.P. 10,739 1.186 6,403 1.186 Apollo Senior Floating Rate Fund 84 0.034 — — Apollo/JH Loan Portfolio, L.P. 100 0.189 — — Apollo Residential Mortgage, Inc. 4,000 1.850 — — Apollo European Credit, L.P. 542 1.053 — — Apollo European Strategic Investments L.P. 1,704 1.035 — — Real Estate: Apollo Commercial Real Estate Finance, Inc. 11,288 2.730 9,440 3.198 AGRE U.S. Real Estate Fund 5,884 2.065 — — CPI Capital Partners NA Fund 564 0.344 — — CPI Capital Partners Europe Fund 5 0.001 — — CPI Capital Partners Asia Pacific Fund 256 0.039 — — Other Equity Method Investments: Vantium A /B 359 6.450 2,219 12.240 Vantium C 6,944 2.300 10,135 2.166 Vantium D 1,345 6.300 1,061 6.345 Portfolio Company Holdings 2,147 N/A — — Total Other Investments $305,343 $283,462 (1)Amounts are as of September 30, 2011.(2)Amounts are as of September 30, 2010.(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 ofownership until the RSUs are vested, at which point the RSUs are converted to common stock and delivered to the Company. 194(3)(1)(1)(3)(1)(1)(2)(2)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (4)Ownership percentages are not presented for these equity method investments in our portfolio companies as we only present for the funds in which weare the general partner.As of December 31, 2011 and 2010, no single equity method investment held by Apollo exceeded 10% of Apollo’s total consolidated assets or income,respectively.The most recently issued summarized aggregated financial information of the funds and other equity method investments in which Apollo has equitymethod investments is as follows: Private Equity Capital Markets Real Estate As ofDecember 31, As ofDecember 31, As ofDecember 31, Balance Sheet Information 2011 2010 2011 2010 2011 2010 Investments $22,759,853 $24,779,759 $10,004,744 $9,024,982 $1,980,613 $550,564 Assets 24,219,637 26,133,909 11,335,170 9,910,587 2,196,460 785,497 Liabilities 686,558 594,954 2,773,163 1,414,244 587,576 483,393 Equity 23,533,079 25,538,955 8,562,007 8,496,343 1,608,884 302,104 (1)Certain real estate amounts are as of September 30, 2011 and 2010.(2)Amounts include Vantium A, C and D.(3)Certain equity investment amounts are as of September 30, 2011.(4)Financial information of certain equity method investments is not available as of December 31, 2011. Aggregate Totalsas ofDecember 31, Balance Sheet Information 2011 2010 Investments $34,745,210 $34,355,305 Assets 37,751,267 36,829,993 Liabilities 4,047,297 2,492,591 Equity 33,703,970 34,337,402 Private Equity Capital Markets Real Estate Income StatementInformation For the Years EndedDecember 31, For the Years EndedDecember 31, For the Years EndedDecember 31, 2011 2010 2009 2011 2010 2009 2011 2010 2009 Revenues/Investment Income $1,522,831 $610,899 $734,480 $852,282 $304,332 $427,030 $46,654 $14,468 $660 Expenses 377,985 286,719 233,257 290,843 145,138 114,991 30,350 6,377 2,834 Net Investment Income (Loss) 1,144,846 324,180 501,223 561,439 159,194 312,039 16,304 8,091 (2,174) Net Realized and Unrealized Gain(Loss) 2,239,373 5,918,694 6,824,737 (537,017) 1,531,056 2,452,273 172,018 (1,058) — Net Income (Loss) $3,384,219 $6,242,874 $7,325,960 $24,422 $1,690,250 $2,764,312 $188,322 $7,033 $(2,174) (1)Certain real estate amounts are as of September 30, 2011 and 2010. 195(2)(3)(4)(1)(1)(2)(3)(4)(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (2)Amounts include Vantium A, C and D.(3)Certain equity investment amounts are as of September 30, 2011.(4)Financial information of certain equity method investments is not available as of December 31, 2011. Aggregate Totalsfor the Years EndedDecember 31, Income Statement Information 2011 2010 2009 Revenues/Investment Income $2,421,767 $929,699 $1,162,170 Expenses 699,178 438,234 351,082 Net Investment Income 1,722,589 491,465 811,088 Net Realized and Unrealized Gain 1,874,374 7,448,692 9,277,010 Net Income $3,596,963 $7,940,157 $10,088,098 Fair Value MeasurementsThe following table summarizes the valuation of Apollo’s investments in fair value hierarchy levels as of December 31, 2011 and 2010: Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Assets, at fair value: Investment in AAAInvestments, L.P. $— $— $— $— $1,480,152 $1,637,091 $1,480,152 $1,637,091 Investments held bySenior Loan Fund — — 23,757 — 456 — 24,213 — Investments in HFA andOther — — — — 47,757 — 47,757 — Total $— $— $23,757 $— $1,528,365 $1,637,091 $1,552,122 $1,637,091 Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Liabilities, at fair value: Interest rate swapagreements $— $— $3,843 $11,531 $— $— $3,843 $11,531 Total — $— 3,843 $11,531 — $— 3,843 $11,531 There were no transfers between Level I, II or III during the year ended December 31, 2011 and 2010 relating to assets and liabilities, at fair value, notedin the tables above, respectively. 196Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes the changes in AAA Investments, which is measured at fair value and characterized as a Level III investment: For the Year EndedDecember 31, 2011 2010 2009 Balance, Beginning of Period $1,637,091 $1,324,939 $854,442 Purchases 432 375 4,121 Distributions (33,425) (58,368) (5,497) Change in unrealized (losses) gains, net (123,946) 370,145 471,873 Balance, End of Period $1,480,152 $1,637,091 $1,324,939 The following table summarizes the changes in the investment in HFA and Other Investments, which are measured at fair value and characterized asLevel III investments: For the Year EndedDecember 31, 2011 Balance, Beginning of Period $— Purchases 57,509 Change in unrealized losses, net (5,881) Director fees (1,802) Expenses incurred (2,069) Balance, End of Period $47,757 The change in unrealized losses, net has been recorded within the caption “Net (losses) gains from investment activities” in the consolidated statementsof operations.The following table summarizes the changes in the Senior Loan Fund, which is measured at fair value and characterized as a Level III investment: For the Year EndedDecember 31, 2011 Balance, Beginning of Period $— Acquisition 456 Purchases — Distributions — Realized losses (gains) — Change in unrealized (losses) gains — Balance, End of Period $456 197Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes the changes in the Metals Trading Fund investment, which was measured at fair value and characterized as a Level IIIinvestment: For the Year EndedDecember 31, 2010 Balance, Beginning of Period $40,034 Purchases — Distributions (37,760) Realized losses (2,240) Change in unrealized losses (34) Balance, End of Period $— (1)Refer to note 1 for a discussion regarding consolidation of Metals Trading Fund.The change in unrealized gains (losses) and realized losses have been recorded within the caption “Net gains (losses) from investment activities” in theconsolidated statements of operations.The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held byAAA Investments: Private Equity December 31, 2011 December 31, 2010 % ofInvestmentof AAA % ofInvestmentof AAA Approximate values based on net asset value of the underlyingfunds, which are based on the funds underlying investmentsthat are valued using the following: Comparable company and industry multiples $749,374 44.6% $782,775 42.6% Discounted cash flow models 643,031 38.4 490,024 26.6 Listed quotes 139,833 8.3 24,232 1.3 Broker quotes 179,621 10.7 504,917 27.5 Other net (liabilities) assets (33,330) (2.0) 37,351 2.0 Total Investments 1,678,529 100.0% 1,839,299 100.0% Other net liabilities (198,377) (202,208) Total Net Assets $1,480,152 $1,637,091 (1)Balances include other assets and liabilities of certain funds in which AAA Investments has invested. Other assets and liabilities at the fund levelprimarily include cash and cash equivalents, broker receivables and payables and amounts due to and from affiliates. Carrying values approximate fairvalue for other assets and liabilities, and accordingly, extended valuation procedures are not required.(2)Balances include other assets, liabilities and general partner interests of AAA Investments and are primarily comprised of $402.5 million and $537.5million in long-term debt offset by cash and cash equivalents at the 198(1)(1)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) December 31, 2011 and 2010 balance sheet dates, respectively. Carrying values approximate fair value for other assets and liabilities (except for debt),and, accordingly, extended valuation procedures are not required.5. VARIABLE INTEREST ENTITIESThe Company consolidates entities that are VIEs for which the Company has been designated as the primary beneficiary. The purpose of such VIEs isto provide strategy-specific investment opportunities for investors in exchange for management and performance based fees. The investment strategies of theentities that the Company manages may vary by entity, however, the fundamental risks of such entities have similar characteristics, including loss ofinvested capital and the return of carried interest income previously distributed to the Company by certain private equity and capital markets entities. Thenature of the Company’s involvement with VIEs includes direct and indirect investments and fee arrangements. The Company does not provide performanceguarantees and has no other financial obligations to provide funding to VIEs other than its own capital commitments.Consolidated Variable Interest EntitiesIn accordance with the methodology described in note 2, Apollo consolidated four VIEs under the amended consolidation guidance during 2010, anadditional VIE during the second quarter of 2011, and six additional VIEs during the fourth quarter of 2011 in connection with its acquisition of Gulf Stream.One of the consolidated VIEs was formed to purchase loans and bonds in a leveraged structure for the benefit of its limited partners, which includedcertain Apollo funds that contributed equity to the consolidated VIE. Through its role as general partner of this VIE, it was determined that Apollo had thecharacteristics of the power to direct the activities that most significantly impact the VIE’s economic performance. Additionally, the Apollo funds haveinvolvement with the VIE that have the characteristics of the right to receive benefits from the VIE that could potentially be significant to the VIE. As a group,the Company and its related parties have the characteristics of a controlling financial interest. Apollo determined that it is the party within the related partygroup that is most closely associated with the VIE and therefore should consolidate it.The remaining consolidated VIEs including the VIE formed during the second quarter 2011 and the six VIEs consolidated in connection with theacquisition of Gulf Steam were formed for the sole purpose of issuing collateralized notes to investors. The assets of these VIEs are primarily comprised ofsenior secured loans and the liabilities are primarily comprised of debt. Through its role as collateral manager of these VIEs, it was determined that Apollo hadthe power to direct the activities that most significantly impact the economic performance of these VIEs. Additionally, Apollo determined that the potential feesthat it could receive directly and indirectly from these VIEs represent rights to returns that could potentially be significant to such VIEs. As a result, Apollodetermined that it is the primary beneficiary and therefore should consolidate the VIEs.One of the consolidated VIEs, which qualified as an asset-backed financing entity, was formed during the fourth quarter of 2010 and the Companydetermined that it was the primary beneficiary of such VIE. Based on a restructuring of this VIE which occurred later in the fourth quarter of 2010, theCompany no longer possessed the power to direct the activities of such VIE resulting in deconsolidation of such VIE in the fourth quarter of 2010.Apollo holds no equity interest in any of the consolidated VIEs described above. The assets of these consolidated VIEs are not available to creditors ofthe Company. In addition, the investors in these consolidated 199Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) VIEs have no recourse to 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 frombrokers and interest receivables. Other liabilities include payables for securities purchased, which represent open trades within the consolidated VIEs andprimarily relate to corporate loans that are expected to settle within the next sixty days.Fair Value MeasurementsThe following table summarizes the valuation of Apollo’s consolidated VIEs in fair value hierarchy levels as of December 31, 2011 and 2010: Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Investments, at fair value $— $— $3,055,357 $1,172,242 $246,609 $170,369 $3,301,966 $1,342,611 Level I Level II Level III Totals December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 December 31,2011 December 31,2010 Liabilities, at fair value $— $— $— $— $3,189,837 $1,127,180 $3,189,837 $1,127,180 (1)During the first quarter of 2011, one of the consolidated VIEs sold all of its investments. At December 31, 2010, the cost and fair value of theinvestments of this VIE were $719.5 million and $684.1 million, respectively. The consolidated VIE had a net investment gain of $16.0 millionrelating to the sale for the year ended December 31, 2011, which is reflected in the net (losses) gains from investment activities of consolidated variableinterest entities on the consolidated statement of operations.Level III investments include corporate loan and corporate bond investments held by the consolidated VIEs, while the Level III liabilities consist of notesand loans, the valuations of which are discussed further in note 2. All Level II and III investments were valued using broker quotes. Transfers of investmentsout of Level III and into Level II or Level I, if any, are recorded as of the quarterly period in which the transfer occurred.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 levelwithin 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 aparticular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. 200(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL 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 IIIinvestments: For the Year EndedDecember 31, 2011 2010 Balance, Beginning of Period $170,369 $— Acquisition of VIE 335,353 — Transition adjustment relating to consolidation of VIE — 1,102,114 Purchases 663,438 840,926 Sale of investments (273,719) (125,638) Net realized gains 980 131 Changes in net unrealized (losses) gains (7,669) 29,981 Deconsolidation of VIE — (20,751) Transfers out of Level III (802,533) (1,663,755) Transfers into Level III 160,390 7,361 Balance, End of Period $246,609 $170,369 Changes in net unrealized (losses) gains included in Net (Losses) Gains fromInvestment Activities of consolidated VIEs related to investments still held atreporting date $(7,253) $(3,638) 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 onthese investments to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes, and thepercentage deviation from independent pricing services. 201Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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 Year EndedDecember 31, 2011 2010 Balance, Beginning of Period $1,127,180 $— Acquisition of VIE 2,046,157 — Transition adjustment relating to consolidation of VIE — 706,027 Borrowings 454,356 1,050,377 Repayments (415,869) (331,120) Net realized gains on debt (41,819) (21,231) Changes in net unrealized losses from debt 19,880 55,040 Deconsolidation of VIE — (329,836) Elimination of debt attributable to consolidated VIEs (48) (2,077) Balance, End of Period $3,189,837 $1,127,180 Changes in net unrealized (gains) losses included in Net (Losses) Gains fromInvestment Activities of consolidated VIEs related to liabilities still held atreporting date $(25,347) $16,916 Net (Losses) Gains from Investment Activities of Consolidated Variable Interest EntitiesThe following table presents net (losses) gains from investment activities of the consolidated VIEs for the years ended December 31, 2011 and 2010,respectively: For the Year EndedDecember 31, 2011 2010 Net unrealized gains from investment activities $10,832 $46,406 Net realized (losses) gains from investment activities (11,313) 7,239 Net (losses) gains from investment activities (481) 53,645 Net unrealized losses from debt (19,880) (55,040) Net realized gains from debt 41,819 21,231 Net gains (losses) from debt 21,939 (33,809) Interest and other income 75,004 62,696 Other expenses (72,261) (34,326) Net Gains from Investment Activities of Consolidated VIEs $24,201 $48,206 202Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Investments of Consolidated VIEsThe following table presents a condensed summary of investments of the consolidated VIEs that are included in the consolidated statements of financialcondition as of December 31, 2011 and 2010: Fair Valueas ofDecember 31,2011 % of NetAssets ofConsolidatedFundsand VIEs Fair Valueas ofDecember 31,2010 % of NetAssets ofConsolidatedFundsand VIEs Corporate Loans: North America Chemicals $88,135 5.1% $13,950 0.7% Communications Intelsat Jackson term loan due February 1, 2014 — — 105,659 5.4 Other 182,127 10.6 221,383 11.3 Total Communications 182,127 10.6 327,042 16.7 Consumer & Retail 413,683 24.0 114,931 5.9 Distribution & Transportation 64,552 3.7 7,794 0.4 Energy 108,300 6.3 25,026 1.3 Financial and Business Services 604,852 35.1 85,713 4.4 Healthcare 476,487 27.6 144,343 7.4 Manufacturing & Industrial 231,746 13.4 200,290 10.3 Media, Cable & Leisure 543,696 31.6 93,798 4.8 Metals & Mining 56,890 3.3 14,025 0.7 Oil & Gas 34,864 2.0 — — Packaging & Materials 59,530 3.5 21,066 1.1 Printing and Publishing 45,055 2.6 — — Real Estate 42,256 2.4 — — Technology 92,027 5.3 34,862 1.8 Other 42,420 2.5 9,539 0.5 Total Corporate Loans—North America (amortized cost $3,151,576 and $1,075,287 as of December 31, 2011and 2010, respectively) 3,086,620 179.0 1,092,379 56.0 Europe Chemicals 24,974 1.4 9,909 0.5 Consumer & Retail — — 75,007 3.8 Distribution & Transportation 3,640 0.2 — — Financial and Business Services 18,392 1.1 — — Healthcare Alliance Boots seniors facility B1 due July 5, 2015 — — 143,105 7.3 Other 10,418 0.6 — — Total Healthcare 10,418 0.6 143,105 7.3 Manufacturing & Industrial — — 7,696 0.4 Media, Cable & Leisure 21,106 1.2 10,787 0.6 Oil & Gas 13,439 0.8 — — Technology 7,659 0.4 — — Total Corporate Loans—Europe (amortized cost $ 102,609 and $284,760 as of December 31, 2011 and 2010,respectively) 99,628 5.7 246,504 12.6 Total Corporate Loans (amortized cost $3,254,185 and $1,360,047 as of December 31, 2011 and 2010,respectively) 3,186,248 184.7 1,338,883 68.6 Corporate Bonds: North America Chemicals 14,473 0.8 — — Communications 2,026 0.1 1,564 0.1 Consumer & Retail 6,214 0.4 — — Distribution & Transportation 10,373 0.6 4,160 0.2 Energy 5,000 0.3 3,640 0.2 Healthcare 5,028 0.3 — — Manufacturing & Industrial 9,977 0.6 — — Media, Cable & Leisure 19,010 1.1 3,550 0.2 Oil and Gas 3,143 0.2 — — Total Corporate Bonds—North America (amortized cost $ 74,989 and $12,406 as of December 31, 2011 and 2010,respectively) 75,244 4.4 12,914 0.7 203Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Fair Valueas ofDecember 31,2011 % of NetAssets ofConsolidatedFundsand VIEs Fair Valueas ofDecember 31,2010 % of NetAssets ofConsolidatedFundsand VIEs Europe Distribution & Transportation 2,767 0.2 — — Financial and Business Services 6,965 0.4 1,599 0.1 Total Corporate Bonds—Europe (amortized cost $9,555 and $1,519 as of December 31, 2011 and 2010, respectively) 9,732 0.6 1,599 0.1 Total Corporate Bonds (amortized cost $84,544 and $13,925 as of December 31, 2011 and 2010, respectively) 84,976 5.0 14,513 0.8 Common Stock: North America Financial and Business Services 226 0.0 — — Manufacturing & Industrial 1,648 0.1 — — Printing and Publishing 341 0.0 — — Real Estate 170 0.0 — — Total Common Stock—North America (amortized cost $3,962 and $0 as of December 31, 2011 and 2010, respectively) 2,385 0.1 — — Warrants: North America Media, Cable & Leisure 21 0.0 — — Total Warrants—North America (amortized cost $0 and $0 as of December 31, 2011 and 2010, respectively) 21 0.0 — — Asset Backed Securities: North America Financial and Business Services 30,513 1.8 — — Total Asset Backed Securities—North America (amortized cost $37,382 and $0 as of December 31, 2011 and 2010,respectively) 30,513 1.8 — — Elimination of equity investments attributable to consolidated VIEs (2,177) (0.1) (10,785) (0.6) Total Investments, at fair value, of Consolidated VIEs (amortized cost $3,380,073 and $1,373,972 as of December 31, 2011 and 2010, respectively) $3,301,966 191.5% $1,342,611 68.8% 204Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Senior Secured Notes, Subordinated Note, Term Loans—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 December 31, 2011 and 2010: As ofDecember 31,2011 As ofDecember 31,2010 Description OutstandingPrincipalBalance FairValue WeightedAverageInterestRate OutstandingPrincipalBalance FairValue WeightedAverageInterestRate MaturityDate Interest Rate RequiredInterestCoverageRatio Over-CollateralizationRatio Apollo Credit Co-Invest II Loans: Term A Loan $— $— — % $146,502 $142,601 0.91% October 29, 2012 BBA 3 mo. LIBOR(USD) plus 0.50% — — Term B Loan — — — 145,390 111,655 0.91% June 13, 2013 BBA 3 mo. LIBOR(GBP) plus 0.50% — — Term C Loan — — — 161,984 154,394 0.91% October 29, 2013 BBA 3 mo. LIBOR(USD) plus 0.50% — — — — 453,876 408,650 ALM Loan Funding 2010-1 Notes Senior SecuredClass A1 Notes 215,400 215,441 2.04% 215,400 215,400 2.02% May 20, 2020 BBA 3 mo LIBOR(USD) plus 1.70% 110.0% 137.5% Senior SecuredClass A2 Notes 11,100 10,620 2.60% 11,100 10,767 2.48% May 20, 2020 BBA 3 mo LIBOR(USD) plus 2.25% 110.0% 137.5% Senior SecuredClass B Notes 24,700 22,272 2.65% 24,700 22,971 2.52% May 20, 2020 BBA 3 mo LIBOR(USD) plus 2.30% 105.0% 126.4% Subordinated Notes 70,946 68,385 N/A 70,946 70,376 N/A May 20, 2020 N/A N/A N/A 322,146 316,718 322,146 319,514 ALM Loan Funding 2010-3 Notes Senior SecuredClass A1 Notes 262,000 258,463 2.09% 262,000 261,371 2.22% November 20,2020 BBA 3 mo LIBOR(USD) plus 1.70% 110.0% 135.6% Senior SecuredClass A2 Notes 20,500 19,967 2.90% 20,500 19,959 3.05% November 20,2020 BBA 3 mo LIBOR(USD) plus 2.5% 110.0% 135.6% Senior SecuredClass B Notes 25,750 24,784 3.40% 25,750 24,426 3.58% November 20,2020 BBA 3 mo LIBOR(USD) plus 3.0% 105.0% 124.8% Senior SecuredClass C Notes 14,000 12,547 4.42% 14,000 12,604 4.62% November 20,2020 BBA 3 mo LIBOR(USD) plus 4.0% N/A 120.1% SecuredClass D Notes 10,000 8,714 6.45% 10,000 9,398 6.71% November 20,2020 BBA 3 mo LIBOR(USD) plus 6.0% N/A 117.4% Subordinated Notes 71,258 68,465 N/A 71,258 71,258 N/A November 20,2020 N/A N/A N/A 403,508 392,940 403,508 399,016 205(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(2)(3)(4)(4)(4)(2)(3)(4)(4)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) As ofDecember 31,2011 As ofDecember 31,2010 Description OutstandingPrincipalBalance FairValue WeightedAverageInterestRate OutstandingPrincipalBalance FairValue WeightedAverageInterestRate MaturityDate Interest Rate RequiredInterestCoverageRatio Over-CollateralizationRatio ALM Loan Funding 2010-4 Notes Senior Secured Notes—A 274,500 270,383 1.67% — — — July 18, 2022 BBA 3 mo LIBOR(USD) plus 1.24% 125.1% Senior Secured Notes—B 58,500 53,528 2.33% — — — July 18, 2022 BBA 3 mo LIBOR(USD) plus 1.90% 125.1% Mezzanine Secured Notes—C 29,812 26,533 3.18% — — — July 18, 2022 BBA 3 mo LIBOR(USD) plus 2.75% 110.0% 118.0% Mezzanine Secured Notes—D 20,250 16,605 3.63% — — — July 18, 2022 BBA 3 mo LIBOR(USD) plus 3.20% 105.0% 113.5% Junior Secured Note—E 23,625 17,364 4.63% — — — July 18, 2022 BBA 3 mo LIBOR(USD) plus 4.20% N/A 107.7% Junior Secured Notes—F 11,270 8,002 5.93% — — — July 18, 2022 BBA 3 mo LIBOR(USD) plus 5.50% N/A N/A Subordinated Notes 43,350 38,582 N/A — — N/A July 18, 2022 N/A N/A N/A 461,307 430,997 — — Gulf Stream—Sextant CLO 2006-1 Notes Class A-1-R Notes 24,613 23,998 0.68% — — — August 21, 2020 BBA 3 mo LIBOR(USD) plus 0.28% 120.0% 110.6% Class A-1-A Notes 196,906 188,045 0.63% — — — August 21, 2020 BBA 3 mo LIBOR(USD) plus 0.23% 120.0% 110.6% Class A-1-B Notes 56,250 50,063 0.75% — — — August 21, 2020 BBA 3 mo LIBOR(USD) plus 0.34% 120.0% 110.6% Class A-2 Notes 26,419 25,098 0.65% — — — August 21, 2020 BBA 3 mo LIBOR(USD) plus 0.25% 120.0% 110.6% Class B Notes 12,000 9,960 0.81% — — — August 21, 2020 BBA 3 mo LIBOR(USD) plus 0.40% 120.0% 110.6% 206(2)(5)(5)(4)(4)(4)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) As ofDecember 31,2011 As ofDecember 31,2010 Description OutstandingPrincipalBalance FairValue WeightedAverageInterestRate OutstandingPrincipalBalance FairValue WeightedAverageInterestRate MaturityDate Interest Rate RequiredInterestCoverageRatio Over-CollateralizationRatio Class C Notes 24,000 18,120 1.11% — — — August 21,2020 BBA 3 mo LIBOR(USD) plus 0.70% N/A N/A Class D Notes 28,000 17,640 2.01% — — — August 21,2020 BBA 3 mo LIBOR(USD) plus 1.60% N/A N/A Subordinated Notes 28,000 16,240 N/A — — — August 21,2020 N/A N/A N/A 396,188 349,164 — — — Gulf Stream—Sextant CLO 2007-1 Notes Class A-1-R Notes 24,990 23,503 0.66% June 17, 2021 BBA 3 mo LIBOR(USD) plus 0.28% 120.0% 110.5% Class A-1-A Notes 280,884 258,413 0.61% — — — June 17, 2021 BBA 3 mo LIBOR(USD) plus 0.23% 120.0% 110.5% Class A-1-B Notes 76,500 63,572 0.72% — — — June 17, 2021 BBA 3 mo LIBOR(USD) plus 0.33% 120.0% 110.5% Class B Notes 17,500 14,175 0.84% — — — June 17, 2021 BBA 3 mo LIBOR(USD) plus 0.45% 120.0% 110.5% Class C Notes 33,750 24,300 1.24% — — — June 17, 2021 BBA 3 mo LIBOR(USD) plus 0.85% N/A N/A Class D Notes 31,250 19,688 2.79% — — — June 17, 2021 BBA 3 mo LIBOR(USD) plus 2.40% N/A N/A Subordinated Notes 35,000 21,000 N/A — — — June 17, 2021 N/A N/A N/A 499,874 424,651 — — — Gulf Stream—Rashinban CLO 2006-1 Notes Senior Secured Class A-1 Notes 18,992 17,387 0.68% — — — November 26,2020 BBA 3 mo LIBOR(USD) plus 0.27% 120.0% 112.0% Senior Secured Class A-2 Notes 283,890 252,378 0.65% — — — November 26,2020 BBA 3 mo LIBOR(USD) plus 0.24% 120.0% 112.0% 207(4)(4)(2)(4)(4)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) As ofDecember 31,2011 As ofDecember 31,2010 Description OutstandingPrincipalBalance FairValue WeightedAverageInterestRate OutstandingPrincipalBalance FairValue WeightedAverageInterestRate MaturityDate Interest Rate RequiredInterestCoverageRatio Over-CollateralizationRatio Senior Secured Class B Notes 12,000 9,816 0.76% — — — November26, 2020 BBA 3 mo LIBOR(USD) plus 0.35% 120.0% 112.0% Senior Secured Class C Notes 26,000 18,663 1.09% — — — November26, 2020 BBA 3 mo LIBOR(USD) plus 0.68% 115.0% 106.3% Secured Class D Notes 12,000 7,498 1.79% — — — November26, 2020 BBA 3 mo LIBOR(USD) plus 1.38% 110.0% 105.5% Subordinated Notes 46,000 34,500 N/A — — — November26, 2020 N/A N/A N/A 398,882 340,242 — — — Gulf Stream—Compass CLO 2005-2 Notes Senior Secured Class A-1 Notes 34,566 31,836 0.69% — — — January24, 2020 BBA 3 mo LIBOR(USD) plus 0.27% 120.0% 110.9% Senior Secured Class A-2 Notes 345,663 318,280 0.68% — — — January24, 2020 BBA 3 mo LIBOR(USD) plus 0.26% 120.0% 110.9% Senior Secured Class B Notes 15,000 13,103 0.87% — — — January24, 2020 BBA 3 mo LIBOR(USD) plus 0.45% 120.0% 110.9% Senior Secured Class C Notes 35,000 26,705 1.22% — — — January24, 2020 BBA 3 mo LIBOR(USD) plus 0.80% 112.0% 103.0% Secured Class D Notes 25,000 17,110 2.62% — — — January24, 2020 BBA 3 mo LIBOR(USD) plus 2.20% 110.0% 101.5% Subordinated Notes 40,000 27,200 N/A — — — January24, 2020 N/A 495,229 434,234 — — 208(4)(4)(2)(4)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) As ofDecember 31,2011 As ofDecember 31,2010 Description OutstandingPrincipalBalance FairValue WeightedAverageInterestRate OutstandingPrincipalBalance FairValue WeightedAverageInterestRate MaturityDate Interest Rate RequiredInterestCoverageRatio Over-CollateralizationRatio Gulf Stream—Compass CLO 2007 Notes Class A-1-A Notes 178,080 165,615 0.79% — — — October28,2019 BBA 3 mo LIBOR(USD) plus 0.38% 120.0% 114.3% Class A-1-B Notes 45,000 37,908 0.91% — — — October28,2019 BBA 3 mo LIBOR(USD) plus 0.50% 120.0% 114.3% Class B Notes 12,000 10,066 1.31% — — — October28,2019 BBA 3 mo LIBOR(USD) plus 0.90% 120.0% 114.3% Class C Notes 13,125 10,238 2.41% — — — October28,2019 BBA 3 mo LIBOR(USD) plus 2.00% 114.0% 110.7% Class D Notes 15,000 11,643 3.86% — — — October28,2019 BBA 3 mo LIBOR(USD) plus 3.45% 110.0% 106.0% Class E Notes 10,462 7,114 6.41% — — — October28,2019 BBA 3 mo LIBOR(USD) plus 6.0% N/A 103.8% Subordinated Notes 23,250 16,508 N/A — — — October28,2019 N/A N/A N/A 296,917 259,092 — — — Gulf Stream—Neptune Finance Notes Class A Notes 194,879 182,699 1.02% — — — April20,2020 BBA 3 mo LIBOR(USD) plus 0.62% 120.0% 117.1% Class B Notes 10,000 9,400 3.66% — — — April20,2020 BBA 3 mo LIBOR(USD) plus 3.25% 120.0% 117.1% Subordinated Notes 58,471 49,700 N/A — — — April20,2020 N/A N/A N/A 263,350 241,799 — — — Total notes and loans $3,537,401 $3,189,837 $1,179,530 $1,127,180 209(2)(4)(4)(2)(4)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (1)At December 31, 2010, the cost and fair value of the term loans were $453.9 million and $408.7 million, respectively. The term loans were paid downin the first quarter of 2011, with payments totaling $412.1 million, resulting in a gain of $41.8 million. This realized gain was offset by a reversal ofunrealized gains of $45.2 million, which result in a net loss on term loans of $3.4 million for the year ended December 31, 2011, which is reflected inthe net (losses) gains from investment activities of consolidated variable interest entities on the consolidated statements of operations.(2)Each class of notes will mature at par on the stated maturity, unless previously redeemed or repaid. Principal will not be payable on the notes except incertain limited circumstances. Interest on the notes is payable quarterly in arrears on the outstanding amount of the notes on scheduled payment dates.The subordinated note will be fully redeemed on the stated maturity unless previously redeemed. The subordinated note may be redeemed, in whole butnot in part, on or after the redemption or repayment in full of principal and interest on the secured notes. No interest accrues or is payable on thesubordinated note.(3)The subordinated notes were issued to an affiliate of the Company. Amount is reduced by approximately $2.1 million due to elimination of equityinvestment attributable to consolidated VIEs as of December 31, 2011 and 2010, respectively.(4)The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the VIEs.(5)The required interest coverage ratio is 100.0% through January 2012 and 120.0% thereafter.The consolidated VIEs have elected the fair value option to value the term loans and notes payable. The general partner uses its discretion and judgmentin considering and appraising relevant factors in determining valuation of these loans. As of December 31, 2011, the notes payable are classified as Level IIIliabilities. Because of the inherent uncertainty in the valuation of the term loans and notes payable, which are not publicly traded, estimated values may differsignificantly from the values that would have been reported had a ready market for such investments existed.The consolidated VIEs’ debt obligations contain various customary loan covenants as described above. As of the balance sheet date, the Company wasnot aware of any instances of noncompliance with any of these covenants.As of December 31, 2011, the table below presents the maturities for the consolidated debt of the VIEs: 2012 2013 2014 2015 2016 Thereafter Total Secured notes $— $— $— $— $— $3,121,126 $3,121,126 Subordinated notes — — — — — 416,275 416,275 Total Obligations as of December 31, 2011 $— $— $— $— $— $3,537,401 $3,537,401 Note: All of the CLOs are past their call date and therefore the collateral manager can call the CLO and liquidate (with the consent of each of the majority of thesubordinated notes).Variable Interest Entities Which are Not ConsolidatedThe Company holds variable interests in certain VIEs which are not consolidated, as it has been determined that Apollo is not the primary beneficiary. 210Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following tables present the carrying amounts of the assets and liabilities of the VIEs for which Apollo has concluded that it holds a significantvariable interest, but that it is not the primary beneficiary. In addition, the tables present the maximum exposure to loss relating to those VIEs. December 31, 2011 Total Assets Total Liabilities Apollo Exposure Private Equity $11,879,948 $(146,374) $8,753 Capital Markets 3,274,288 (1,095,266) 11,305 Real Estate 2,216,870 (1,751,280) — Total $17,371,106 $(2,992,920) $20,058 (1)Consists of $383,017 in cash, $16,507,142 in investments and $480,947 in receivables.(2)Represents $2,874,394 in debt and other payables, $86,102 in securities sold, not purchased, and $32,424 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, 2010 Total Assets Total Liabilities Apollo Exposure Private Equity $11,593,805 $(39,625) $13,415 Capital Markets 3,117,013 (824,957) 13,302 Real Estate 1,569,147 (1,263,354) — Total $16,279,965 $(2,127,936) $26,717 (1)Consists of $207,168 in cash, $15,672,604 in investments and $400,193 in receivables.(2)Represents $2,011,194 in debt and other payables, $21,369 in securities sold, not purchased, and $95,373 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.At December 31, 2011, AAA Investments, the sole investment of AAA, invested in certain of the Company’s unconsolidated VIEs, includingLeverageSource, L.P. and AutumnLeaf, L.P. At December 31, 2011, the aggregate amount of such investments was $131.8 million. The Company’sownership interest in AAA was 2.45% at December 31, 2011.At December 31, 2010, AAA Investments, the sole investment of AAA, invested in certain of the Company’s unconsolidated VIEs, includingLeverageSource, L.P., AutumnLeaf, L.P., Apollo ALS Holdings, L.P., and A.P. Charter Holdings, L.P. At December 31, 2010, the aggregate amount of suchinvestments was $251.5 million. The Company’s ownership interest in AAA was 2.81% at December 31, 2010. 211(1)(2)(3)(1)(2)(3)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 6. CARRIED INTEREST RECEIVABLECarried interest receivable from private equity and capital markets funds consists of the following: For the Year EndedDecember 31, 2011 2010 Private equity $672,952 $1,578,135 Capital markets 195,630 288,938 Total Carried Interest Receivable $868,582 $1,867,073 The table below provides a roll-forward of the carried interest receivable balance for the years ended December 31, 2011 and 2010: Private Equity Capital Markets Total Carried Interest Receivable, January 1, 2010 $328,246 $155,608 $483,854 Change in fair value of funds 1,308,030 277,907 1,585,937 Foreign exchange gain — 1,728 1,728 Fund cash distributions to the Company (58,141) (146,305) (204,446) Carried interest receivable, December 31, 2010 1,578,135 288,938 1,867,073 Change in fair value of funds (373,906) 69,424 (304,482) Foreign exchange loss — (1,453) (1,453) Fund cash distributions to the Company (531,277) (161,279) (692,556) Carried Interest Receivable, December 31, 2011 $672,952 $195,630 $868,582 (1)The change in fair value of funds in 2010 includes the carried interest income of $13.1 million associated with recognized realized gains, which waspreviously reversed due to the estimated general partner obligation attributable to Fund VI.(2)As of December 31, 2011, the Company recorded a general partner obligation to return previously distributed carried interest income of $75.3 millionand $18.1 million relating to Fund VI and SOMA, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of thefunds as of December 31, 2011. The actual determination and any required payment of a general partner obligation would not take place until the finaldisposition of a fund’s investments based on the contractual termination of the fund.The timing of the payment of carried interest due to the general partner or investment manager varies depending on the terms of the applicable fundagreements. Generally, carried interest with respect to the private equity funds is payable and is distributed to the fund’s general partner upon realization of aninvestment if the fund’s cumulative returns are in excess of the preferred return. For most capital markets funds, carried interest is payable based onrealizations after the end of the relevant fund’s fiscal year or fiscal quarter, subject to high watermark provisions. There is currently no carried interestreceivable associated with the Company’s real estate segment. 212(1)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 7. FIXED ASSETSFixed assets consist of the following: Useful Life inYears December 31, 2011 2010 Ownership interests in aircraft 15 $10,184 $10,029 Leasehold improvements 8-10 44,433 31,625 Furniture, fixtures and other equipment 4-10 14,455 11,296 Computer software and hardware 2-4 22,789 21,515 Other 4 506 489 Total fixed assets 92,367 74,954 Less—accumulated depreciation and amortization (39,684) (30,258) Fixed Assets, net $52,683 $44,696 In December 2010, the Company committed to a plan to sell its ownership interests in certain aircraft, which occurred in the first half of 2011.Accordingly, in 2010, the Company reclassified the assets to assets held for sale and measured the assets at the lower of cost or fair value less costs to sell. Asof December 31, 2010, these assets held for sale had a fair value of $11.3 million and are included in Other Assets in the accompanying consolidatedstatements of financial condition. As a result of reclassifying the assets to assets held for sale, the Company recognized a loss of $2.8 million during the yearended December 31, 2010 on the assets held for sale, which is included in other income (loss), net in the accompanying consolidated statements of operations.As part of the plan to liquidate its ownership interest in aircraft, the Company determined that the remaining interests in aircraft were higher than itscurrent fair value. In 2010, the Company recognized an impairment loss of $3.1 million related to its remaining ownership in aircraft. This loss is included inother income (loss), net in the accompanying consolidated statements of operations.Depreciation expense for the years ended December 31, 2011, 2010 and 2009 was $11.1 million, $11.5 million and $11.6 million, respectively.8. OTHER ASSETSOther assets consist of the following: For the Year EndedDecember 31, 2011 2010 Tax receivables $10,465 $5,479 Prepaid expenses 5,137 7,559 Debt issuance costs 2,624 3,135 Rent deposits 1,482 990 Prepaid rent 1,134 931 Assets held for sale — 11,331 Other 6,134 5,716 Total Other Assets $26,976 $35,141 213Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 9. OTHER LIABILITIESOther liabilities consist of the following: December 31,2011 December 31,2010 Deferred rent $14,798 $10,318 Deferred payment related to acquisition (note 3) 3,858 — Interest rate swap agreements 3,843 11,531 Unsettled trades and redemption payable 2,902 — Deferred taxes 2,774 2,424 Other 4,875 1,422 Total Other Liabilities $33,050 $25,695 Interest Rate Swap Agreements—The principal financial instruments used for cash flow hedging purposes are interest rate swaps. Apollo enters intointerest rate swap agreements to manage its exposure to interest rate changes. The swaps effectively converted a portion of the Company’s variable rate debtunder the AMH Credit Agreement (discussed in note 12) to a fixed rate, without exchanging the notional principal amounts. Apollo entered into interest rateswap agreements whereby Apollo receives floating rate payments in exchange for fixed rate payments of 5.068% (weighted average) and 5.175%, on thenotional amounts of $433.0 million and $167.0 million, respectively, effectively converting a portion of its floating rate borrowings to a fixed rate. The interestrate swap agreements related to the $433.0 million notional amount are comprised of two components: a $333.0 million portion and a $100.0 million portion.The interest rate swap agreement related to the $333.0 million portion expired in May 2010. The interest rate swap agreement related to the $100.0 millionportion expired in November 2010. The interest rate swap agreement related to the $167.0 million notional amount expires in May 2012. Apollo has hedgedonly the risk related to changes in the benchmark interest rate (three month LIBOR). As of December 31, 2011 and 2010, the Company has recorded a liabilityof $3.8 million and $11.5 million, respectively, to recognize the fair value of these derivatives.The Company has determined that the valuation of the interest rate swaps fall within Level II of the fair value hierarchy. The Company estimates the fairvalue of its interest rate swaps using discounted cash flow models, which project future cash flows based on the instruments’ contractual terms using market-based expectations for interest rates. The Company also includes a credit risk adjustment to the cash flow discount rate to incorporate the impact of non-performance risk in the recognized measure of the fair value of the swaps. This adjustment is based on the counterparty’s credit risk when the swaps are in anet asset position and on the Company’s own credit risk when the swaps are in a net liability position. 214Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 10. OTHER INCOME, NETOther income, net consists of the following: For the Year EndedDecember 31, 2011 2010 2009 Insurance proceeds $— $162,500 $37,500 Tax receivable agreement adjustment (137) 7,614 (6,615) Gain on acquisitions and dispositions 196,193 29,741 — Loss on assets held for sale — (2,768) — Impairment of fixed assets — (3,101) — AMTG offering costs (8,000) — — ARI reimbursed offering costs 8,000 — — Foreign exchange translation 6,169 (3,025) 1,317 Other 3,295 4,071 9,208 Total Other Income, Net $205,520 $195,032 $41,410 11. INCOME TAXESThe Company is treated as a partnership for tax purposes and is therefore not subject to U.S. Federal income taxes; however, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. Federal corporate income taxes. In addition, certain subsidiaries of the Company are subject to NewYork City Unincorporated Business Tax (“NYC UBT”) attributable to the Company’s operations apportioned to New York City and 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 tax return, aswell as filing standalone corporate state and local tax returns in California, New York and New York City. The Company’s provision for income taxes isaccounted for under the provisions of U.S. GAAP.The Company’s effective tax rate was approximately (0.92)%, 14.45% and (43.18)% for the years ended December 31, 2011, 2010 and 2009,respectively. 215Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The provision for income taxes is presented in the following table: For the Year EndedDecember 31, 2011 2010 2009 Current: Federal income tax $(856) $(8,051) $— NYC UBT (6,669) (7,106) (5,661) Foreign income tax (3,705) (3,726) (3,993) State and local income tax (274) (1,542) — Subtotal (11,504) (20,425) (9,654) Deferred: Federal income tax 248 (64,633) (2,666) Foreign income tax 301 260 (1,045) State and local income tax provision (2,457) (6,282) (14,398) NYC and UBT 1,483 (657) (951) Subtotal (425) (71,312) (19,060) Total Income Tax Provision $(11,929) $(91,737) $(28,714) For the years ended 2011, 2010 and 2009, the amount of federal income tax provision netted in the deferred state and local income tax amounts was $1.4million, $4.2 million and $7.9 million, respectively.Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in theconsolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.The Company’s deferred tax assets and liabilities on the consolidated statements of financial condition consist of the following: For the Year EndedDecember 31, 2011 2010 Deferred Tax Assets: Depreciation and amortization $476,812 $505,485 Revenue recognition 36,732 35,403 Net operating loss carry forward 17,238 265 Equity-based compensation—RSUs and AAA RDUs 37,336 26,689 Other 8,186 3,483 Total Deferred Tax Assets $576,304 $571,325 Deferred Tax Liabilities: Other $2,774 $2,424 Total Deferred Tax Liabilities $2,774 $2,424 216Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The Company had a U.S. federal taxable loss of $55.9 million at the end of 2011 of which $19.2 million will be carried back and used against prioryear taxable income and $36.7 million will be carried forward and will expire in 2031. The Company has cumulative state tax losses of $60.5 million thatwill begin to expire in 2027. In addition, the Company has foreign tax credit carryforwards of $5.5 million that will begin to expire in 2020.The Company has recorded a significant deferred tax asset for the future amortization of tax basis intangibles as a result of the Reorganization. Theamortization period for these tax basis intangibles is 15 years and accordingly, the related deferred tax assets will reverse over the same period.The Company considered the 15-year amortization period of the tax basis intangibles in evaluating whether it should establish a valuation allowance.The Company also considered large recurring book expenses that do not provide a corresponding reduction in taxable income. The Company’s short-term andlong-term projections anticipate positive book income. In addition, the Company’s projection of future taxable income includes the effects of originating andreversing temporary differences including those for the tax basis intangibles, indicates that deferred tax liabilities will reverse substantially in the same periodand jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax asset. Based upon this positive evidence, theCompany has concluded it is more likely than not that the deferred tax asset will be realized and that no valuation allowance is needed at December 31, 2011.The following table reconciles the provision for taxes to the U.S. federal statutory tax rate: For the Year EndedDecember 31, 2011 2010 2009 Reconciliation of the Statutory Income Tax Rate: U.S. Statutory Federal income tax rate 35.00% 35.00% 35.00% Income passed through to Non-Controlling Interests (24.67) (24.54) 38.15 Income passed through to Class A holders (1.28) (15.93) 46.04 Equity-based compensation—AOG Units (9.12) 16.49 (146.43) Foreign income taxes (0.17) 0.54 (6.98) State and local income taxes (0.56) 2.32 (30.74) Amortization and other accrual adjustments (0.12) 0.44 22.18 Other 0.00 0.13 (0.40) Effective Income Tax Rate (0.92)% 14.45% (43.18)% 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 sustainedupon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.We recognize tax liabilities in accordance with U.S. GAAP and we adjust these liabilities when our judgment changes as a result of the evaluation of newinformation not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materiallydifferent from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in whichthey are determined.Based upon the Company’s review of its federal, state, local and foreign income tax returns and tax filing positions, the Company determined nounrecognized tax benefits for uncertain tax positions were required to be 217Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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 significantamounts of unrecognized tax benefits within the next twelve months.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 Companyis subject to examination by federal and certain state, local and foreign tax authorities. With few exceptions, as of December 31, 2011, Apollo and itspredecessor entities’ U.S. federal, state, local and foreign income tax returns for the years 2008 through 2010 are open under the normal statute of limitationsand therefore subject to examination. The City of New York is examining certain other subsidiary tax returns for the years 2006 and 2007.12. DEBTDebt consists of the following: December 31, 2011 December 31, 2010 OutstandingBalance AnnualizedWeightedAverageInterest Rate OutstandingBalance AnnualizedWeightedAverageInterest Rate AMH Credit Agreement $728,273 5.39% $728,273 3.78% CIT secured loan agreement 10,243 3.39% 23,252 3.50% Total Debt $738,516 5.35% $751,525 3.77% (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 Delawarelimited partnership owned by APO Corp. and Holdings, entered into a $1.0 billion seven year credit agreement (the “AMH Credit Agreement”). Interest payableunder the AMH Credit Agreement may from time to time be based on Eurodollar (“LIBOR”) or Alternate Base Rate (“ABR”) as determined by the borrower.Through the use of interest rate swaps, AMH has irrevocably elected three-month LIBOR for $433 million of the debt for three years from the closing date ofthe AMH Credit Agreement and $167 million of the debt for five years from the closing date of the AMH Credit Agreement. The interest rate swap agreementsrelated to the $433 million notional amount were comprised of two components: a $333 million portion and a $100 million portion. The interest rate swapagreement related to the $333 million portion expired in May 2010. The interest rate swap agreement related to the $100 million portion expired in November2010. The interest rate swap agreement related to the $167 million notional amount expires in May 2012. The remaining amount of the debt is computedcurrently based on three-month LIBOR. The interest rate of the Eurodollar loan, which was amended as discussed below, is the daily Eurodollar rate plus theapplicable margin rate (3.75% for loans with extended maturity, as discussed below, and 1.00% for loans without the extended maturity as of December 31,2011 and 4.25% for loans with extended maturity and 1.50% for loans without the extended maturity as of December 31, 2010). The interest rate on the ABRterm 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 ineffect 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 Agreementoriginally 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 fairvalue debt repurchased by the Company) of the term loans from 218(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) April 20, 2014 to January 3, 2017 and modified certain other terms of the credit facility. Pursuant to this amendment, AMH or an affiliate was required topurchase 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, AMHor an affiliate is required to repurchase at least $50.0 million aggregate principal amount of term loans by December 31, 2014 and at least $100.0 millionaggregate principal amount of term loans (inclusive of the previously purchased $50.0 million) by December 31, 2015 at a price equal to par plus accruedinterest. 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 loanportion 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 CreditAgreement repurchased approximately $180.8 million of term loans in connection with the extension of the maturity date of such loans and thus the AMHloans (excluding the portions held by AMH affiliates) had a remaining balance of $728.3 million. The Company determined that the amendments to the AMHCredit Agreement resulted in a debt extinguishment which did not result in any gain or loss.The interest rate on the $723.3 million, net ($995.0 million portion less amount repurchased by the Company) of the loan at December 31, 2011 was4.23% and the interest rate on the remaining $5.0 million portion of the loan at December 31, 2011 was 1.48%. The estimated fair value of the Company’slong-term debt obligation related to the AMH Credit Agreement is believed to be approximately $752.2 million based on a yield analysis using available marketdata of comparable securities with similar terms and remaining maturities. The $728.3 million carrying value of debt that is recorded on the consolidatedstatement of financial condition at December 31, 2011 is the amount for which the Company expects to settle the AMH Credit Agreement.As of December 31, 2011 and 2010, the AMH Credit Agreement was guaranteed by, and collateralized by, substantially all of the assets of ApolloPrincipal 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 ascash 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 ascash collateral to the extent necessary as set forth in the AMH Credit Agreement. As of December 31, 2011, the consolidated net assets (deficit) of ApolloPrincipal 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 itsconsolidated subsidiaries were $56.6 million, $46.2 million, $50.1 million, $131.9 million and $(1,014.3) million, respectively. As of December 31, 2010,the consolidated net assets (deficit) of Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., ApolloPrincipal Holdings IX, L.P. and AMH were $123.1 million, $24.0 million, $39.0 million, $136.0 million and $(1,126.6) million, respectively.In accordance with the AMH Credit Agreement as of December 31, 2011, Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., ApolloPrincipal Holdings V, L.P., Apollo Principal Holdings IX, L.P. and AMH and their respective subsidiaries were subject to certain negative and affirmativecovenants. Among other things, the AMH Credit Agreement includes an excess cash flow covenant and an asset sales covenant. The AMH Credit Agreementdoes 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 SweepLeverage 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 SweepLeverage Ratio. The Excess Sweep Leverage Ratio is: for 2011, 4.00 to 1.00; for 2012, 4.00 to 1.00; for 2013, 4.00 to 1.00; for 2014, 3.75 to 1.00; and for 2015and thereafter, 3.50 to 1.00. 219Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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 apro 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 collateralaccount 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 tosuch non-ordinary course asset sale and such deposit) to (the following specified levels for the specified years, the “Sweep Leverage Ratio”) (i) for 2011, 2012and 2013, a Leverage Ratio of 3.50 to 1.00, (ii) for 2014, a Leverage Ratio of 3.25 to 1.00, (iii) for 2015, a Leverage Ratio of 3.00 to 1.00 and (iv) for all otheryears, 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 December 31, 2011, the Company was notaware of any instances of non-compliance with the AMH Credit Agreement.CIT Secured Loan Agreement—During the second quarter of 2008, the Company entered into four secured loan agreements totaling $26.9 millionwith CIT Group/Equipment Financing Inc. (“CIT”) to finance the purchase of certain fixed assets. The loans bear interest at LIBOR plus 318 basis points perannum 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 inApril 2013. At December 31, 2011, the interest rate was 3.45%. On April 28, 2011, the Company sold its ownership interest in certain assets which served ascollateral to the CIT secured loan agreement for $11.3 million with $11.1 million of the proceeds going to CIT directly. As a result of the sale and an additionalpayment 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 ofDecember 31, 2011, the carrying value of the remaining CIT secured loan is $10.2 million.Apollo has determined that the carrying value of this debt approximates fair value as the loans are primarily variable rate in nature.As of December 31, 2011, the table below presents the contractual maturities for the AMH Credit Agreement and CIT secured loan agreement: 2012 2013 2014 2015 2016 Thereafter Total AMH Credit Agreement $— $— $55,000 $50,000 $— $623,273 $728,273 CIT secured loan agreement 698 9,545 — — — — 10,243 Total Obligations as of December 31, 2011 $698 $9,545 $55,000 $50,000 $— $623,273 $738,516 13. NET (LOSS) INCOME PER CLASS A SHAREU.S. GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock andparticipating 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 firstreduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced fordistributions declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinablecontractual obligation to share in net losses of the entity. 220Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The remaining earnings are allocated to common Class A Shares and participating securities to the extent that each security shares in earnings as if all ofthe 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 thediluted earnings, the denominator includes all outstanding common shares and all potential common shares assumed issued if they are dilutive. Thenumerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential common shares.The table below presents basic and diluted net loss (income) per Class A share using the two-class method for the years ended December 31, 2011, 2010and 2009: Basic and Diluted For the Year Ended December 31, 2011 2010 2009 Numerator: Net (loss) income attributable to Apollo Global Management, LLC $(468,826) $94,617 $(155,176) Distributions declared on Class A shares (97,758) (20,453) (4,866) Distributions on participating securities (17,381) (3,662) (299) Earnings allocable to participating securities — (10,357) — Net (Loss) Income Attributable to Class A Shareholders $(583,965) $60,145 $(160,341) Denominator: Weighted average number of Class A shares outstanding 116,364,110 96,964,769 95,815,500 Net (loss) income per Class A share: Basic and Diluted Distributable Earnings $0.84 $0.21 $0.05 Undistributed (loss) income (5.02) 0.62 (1.67) Net (Loss) Income per Class A Share $(4.18) $0.83 $(1.62) (1)The Company declared a $0.17 distribution on Class A shares on January 4, 2011, a $0.22 distribution on Class A shares on May 12, 2011, a $0.24distribution on Class A shares on August 9, 2011, and a $0.20 distribution on Class A shares on November 3, 2011. As a result, there is an increase innet loss attributable to Class A shareholders presented during the year ended December 31, 2011.(2)The Company declared a $0.07 distribution on Class A shares on May 27, 2010, August 2, 2010 and November 1, 2010. As a result, there is anincrease in net loss attributable to Class A shareholders presented during the year ended December 31, 2010.(3)The Company declared a $0.05 distribution on Class A shares in January 2009. As a result, there is an increase in net loss attributable to Class Ashareholders presented for the year ended December 31, 2009.(4)No allocation of losses was made to the participating securities as the holders do not have a contractual obligation to share in losses of the Company withthe Class A shareholders.(5)For the year ended December 31, 2010, unvested RSUs were determined to be dilutive, and were accordingly included in the diluted earnings per sharecalculation. The resulting diluted earnings per share amount was not significantly different from basic earnings per share and therefore, was presentedas the same amount. The AOG Units and the share options were determined to be anti-dilutive for the years ended December 31, 2011, 2010 and 2009.On October 24, 2007, the Company commenced the granting of restricted share units (“RSUs”) that provide the right to receive, upon vesting, Class Ashares of Apollo Global Management, LLC, pursuant to the Company’s 221(1)(2)(3)(4)(4)(5)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 2007 Omnibus Equity Incentive Plan. Certain RSU grants to employees during 2010 and 2011 provide the right to receive distribution equivalents on vestedRSUs 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 before2010, distribution equivalents are paid in January of the calendar year next following the calendar year in which a distribution on Class A shares wasdeclared. In addition, certain RSU grants to employees in 2010 and 2011 (the Company refers to these as “Bonus Grants”) provide that both vested andunvested RSUs participate in distribution equivalents on an equal basis with the Class A shareholders any time a distribution is declared. As of December 31,2011, approximately 20.2 million vested RSUs and 5.6 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 unvestedRSUs that are entitled to non-forfeitable distribution equivalents qualify as participating securities and are included in the Company’s basic and dilutedearnings per share computations using the two-class method. The holder of an RSU participating security would have a contractual obligation to share in thelosses 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 theparticipating security is reduced as a result of losses incurred by the issuing entity. Because the RSU participating securities do not have a mandatoryredemption amount and the holders of the participating securities are not obligated to fund losses, neither the vested RSUs nor the unvested RSUs are subjectto 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 mayup to four times each year (subject to the terms of the exchange agreement) exchange their AOG Units for Class A shares on a one-for-one basis. A limitedpartner must exchange one partnership unit in each of the eight Apollo Operating Group partnerships to effect an exchange for one Class A share. If fullyconverted, 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 Holdings. The voting power of the Class B share is reduced on a one vote per one AOGUnit 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 doesnot participate in Apollo’s earnings (losses) or distributions. The Class B share has no distribution or liquidation rights. The Class B share has voting rightson a pari passu basis with the Class A shares. The Class B share currently has a super voting power of 240,000,000 votes. 222Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The table below presents transactions in Class A shares during the years ended December 31, 2011, 2010, and 2009 and the resulting impact on theCompany’s and Holdings’ ownership interests in the Apollo Operating Group: Date Type of AGMClass A SharesTransaction Numberof SharesIssued(Repurchased/Cancelled) inAGM ClassASharesTransaction(in thousands) AGMownership%in AOGbefore AGMClass ASharesTransaction AGMownership%in AOGafter AGMClass ASharesTransaction Holdingsownership%in AOGbefore AGMClass ASharesTransaction Holdingsownership%in AOGafter AGMClass ASharesTransaction February 11, 2009 Repurchase (1,700) 28.9% 28.5% 71.1% 71.5% March 12, 2010 Issuance 721 28.5% 28.6% 71.5% 71.4% July 9, 2010 Issuance 1,540 28.6% 29.0% 71.4% 71.0% July 23, 2010 Issuance 31 N/A N/A N/A N/A September 16, 2010 Net Settlement (7) N/A N/A N/A N/A September 30, 2010 Issuance 11 N/A N/A N/A N/A January 8, 2011 Issuance 2 N/A N/A N/A N/A March 15, 2011 Issuance 1,548 29.0% 29.3% 71.0% 70.7% April 4, 2011 Issuance 21,500 29.3% 33.5% 70.7% 66.5% April 7, 2011 Issuance 750 33.5% 33.7% 66.5% 66.3% July 11, 2011 Issuance 77 N/A N/A N/A N/A August 15, 2011 Issuance 1,191 33.7% 33.9% 66.3% 66.1% October 10, 2011 Issuance 52 N/A N/A N/A N/A November 10, 2011 Issuance 1,011 33.9% 34.1% 66.1% 65.9% November 22, 2011 Net Settlement (130) N/A N/A N/A N/A (1)Transaction did not have a material impact on ownership.14. EQUITY-BASED COMPENSATIONAOG UnitsThe 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 yearservice period, as applicable. For the years ended December 2011, 2010 and 2009, $1,032.8 million, $1,032.9 million and $1,033.3 million of compensationexpense was recognized, respectively. The estimated forfeiture rate was 3% for Contributing Partners and 0% for Managing Partners based on actual forfeituresas well as the Company’s future forfeiture expectations. As of December 31, 2011, there was $507.2 million of total unrecognized compensation cost related tounvested AOG Units that are expected to vest over the next 18 months. 223(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes the activity of the AOG Units for the years ended December 31, 2011, 2010 and 2009: Apollo OperatingGroup Units Weighted AverageGrant DateFair Value Balance at January 1, 2009 154,739,756 $23.41 Granted — — Forfeited — — Vested (43,907,662) 23.53 Balance at December 31, 2009 110,832,094 23.35 Granted 1,404,650 11.96 Forfeited (1,404,650) 20.00 Vested (44,089,188) 23.43 Balance at December 31, 2010 66,742,906 $23.13 Granted — — Forfeited — — Vested at December 31, 2011 (44,149,696) 23.39 Balance at December 31, 2011 22,593,210 $22.64 Units Expected to Vest—As of December 31, 2011, approximately 22,400,000 AOG Units are expected to vest over the next 12 months.RSUsOn October 24, 2007, the Company commenced the granting of RSUs under the Company’s 2007 Omnibus Equity Incentive Plan. These grants areaccounted 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.The fair value of grants was approximately $116.6 million, $120.2 million and $10.0 million in 2011, 2010 and 2009, respectively. For Plan Grants the fairvalue is based on grant date fair value, and are discounted for transfer restrictions and lack of distributions until vested. For Bonus Grants, the valuationmethods consider transfer restrictions and timing of distributions. The total fair value is charged to compensation expense on a straight-line basis over thevesting period, which is generally up to 24 quarters (for Plan Grants) or annual vesting over three years (for Bonus Grants). The actual forfeiture rate was2.3%, 7.9% and 6.6% for the years ended December 31, 2011, 2010 and 2009, respectively. For the years ended December 31, 2011, 2010 and 2009, $108.2million $78.9 million and $60.7 million of compensation expense was recognized, respectively.Delivery of Class A SharesIn 2011 and 2010, the Company delivered Class A Shares for vested RSUs. The Company allows RSU participants to settle their tax liabilities with areduction 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 liabilityand a corresponding accumulated deficit adjustment. The adjustment was $19.6 million and $2.9 million in 2011 and 2010, respectively, and is disclosed inthe consolidated statement of changes in shareholders’ equity.The delivery of RSUs does not cause a transfer of amounts in the Consolidated Statement of Changes in Shareholders’ Equity to the Class AShareholders. The delivery of Class A shares for vested RSUs causes the 224Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) income allocated to the Non-Controlling Interests to shift to the Class A shareholders from the date of delivery forward. During the year ended December 31,2011, the Company delivered 4.5 million Class A shares in settlement of vested RSUs, which caused the Company’s ownership interest in the ApolloOperating Group to increase to 34.1% from 29.0%.The following table summarizes RSU activity for the years ended December 31, 2011, 2010 and 2009: Unvested Weighted AverageGrant Date FairValue Vested Total Number ofRSUsOutstanding Balance at January 1, 2009 24,671,463 $11.70 5,986,867 30,658,330 Granted 3,221,335 3.09 — 3,221,335 Forfeited (1,849,650) 10.08 — (1,849,650) Vested (6,105,152) 10.37 6,105,152 — Balance at December 31, 2009 19,937,996 10.87 12,092,019 32,030,015 Granted 12,861,969 9.34 — 12,861,969 Forfeited (2,578,992) 10.07 — (2,578,992) Delivered — 6.74 (3,227,155) (3,227,155) Vested (6,778,057) 10.40 6,778,057 — Balance at December 31, 2010 23,442,916 10.25 15,642,921 39,085,837 Granted 8,068,735 14.45 — 8,068,735 Forfeited (737,372) 12.59 — (737,372) Delivered — 10.12 (5,696,419) (5,696,419) Vested (10,293,506) 11.13 10,293,506 — Balance at December 31, 2011 20,480,773 $11.38 20,240,008 40,720,781 (1)Amount excludes RSUs which have vested and have been issued in the form of Class A shares.Units Expected to Vest—As of December 31, 2011, approximately 19,300,000 RSUs are expected to vest during the next six years.Share OptionsUnder the Company’s 2007 Omnibus Equity Incentive Plan, 5,000,000 options were granted on December 2, 2010. These options vested and becameexercisable 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 quarterswith full vesting on December 31, 2016. In addition, 555,556 options were granted on January 22, 2011 and 25,000 options were granted on April 9, 2011.The options granted on January 22, 2011 vested and became exercisable with respect to half of the option shares on December 31, 2011 and the other half weredue to become exercisable on December 31, 2012. The options granted on April 9, 2011 vested and became exercisable with respect to half of the optionsshares on December 31, 2011 and the other half vests in four equal quarterly installments starting on March 31, 2012 and ending on December 31, 2012. Forthe years ended December 31, 2011 and 2010, $6.9 million and $0.3 million of compensation expense were recognized as a result of option grants,respectively. 225(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Apollo measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model with the following weightedaverage assumptions used for options awarded during 2011 and 2010: Assumptions: 2011 2010 Risk-free interest rate 2.79% 2.34% Weighted average expected dividend yield 2.25% 2.79% Expected volatility factor 40.22% 40.00% Expected life in years 5.72 6.79 Fair value of options per share $8.44 $5.62 (1)The Company determined its expected volatility based on comparable companies using daily stock prices.(2)Represents weighted average of 2011 grants.The following table summarizes the share option activity for the year ended December 31, 2011 and 2010: OptionsOutstanding WeightedAverageExercisePrice AggregateFair Value WeightedAverageRemainingContractualTerm Balance at January 1, 2010 — $— $— — Granted 5,000,000 8.00 28,100 9.92 Exercised — — — — Forfeited — — — — Balance at December 31, 2010 5,000,000 8.00 $28,100 9.92 Granted 580,556 9.39 4,896 9.09 Exercised — — — — Forfeited — — — — Balance at December 31, 2011 5,580,556 8.14 $32,996 8.93 Exercisable at December 31, 2011 1,123,611 $8.36 $7,131 8.96 Units Expected to Vest—As of December 31, 2011, approximately 4,200,000 options are 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 ofthe option. Unamortized compensation cost related to unvested share options at December 31, 2011 was $25.8 million and is expected to be recognized over aweighted average period of 4.5 years.AAA RDUsIncentive units that provide the right to receive AAA restricted depositary units (“RDUs”) following vesting are granted periodically to employees ofApollo. These grants are accounted for as equity awards in accordance with U.S. GAAP. The incentive units granted to employees generally vest over threeyears. In contrast, the Company’s Managing Partners and Contributing Partners have received distributions of fully-vested AAA RDUs. The fair value at thedate 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 valueconsiders the public share price of AAA. Vested AAA RDUs can be converted into ordinary common units of AAA subject to applicable securities 226(2)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) law restrictions. During the years ended December 31, 2011, 2010 and 2009, the actual forfeiture rate was 0%, 1.5% and 11.0%, respectively. For the yearsended December 31, 2011, 2010 and 2009, $0.5 million, $5.5 million and $5.8 million of compensation expense was recognized, respectively.During the years ended December 31, 2011, 2010 and 2009, the Company delivered 389,785, 596,375 and 435,954 RDUs, respectively, toindividuals who had vested in these units. The deliveries in 2011, 2010 and 2009 resulted in a reduction of the accrued compensation liability of $3.8 million,$7.6 million and $6.6 million, respectively, and the recognition of a net decrease of additional paid in capital in 2011 of $2.7 million and a net increase in2010 and 2009 of $0.6 million and $2.8 million, respectively. These amounts are presented in the consolidated statement of changes in shareholders’ equity.There was $0.5 million and $4.1 million of liability for undelivered RDUs included in accrued compensation and benefits in the consolidated statements offinancial condition as of December 31, 2011 and 2010, respectively. The following table summarizes RDU activity for the years ended December 31, 2011,2010 and 2009: Unvested WeightedAverageGrant DateFair Value Vested Total Numberof RDUsOutstanding Balance at January 1, 2009 678,649 $14.57 446,177 1,124,826 Granted 2,667 1.07 — 2,667 Forfeited (74,870) 14.23 — (74,870) Delivered — 15.51 (435,954) (435,954) Vested (385,225) 15.65 385,225 — Balance at December 31, 2009 221,221 12.95 395,448 616,669 Granted 547,974 7.34 — 547,974 Forfeited (11,816) 13.00 — (11,816) Delivered — 12.73 (596,375) (596,375) Vested (590,712) 9.36 590,712 — Balance at December 31, 2010 166,667 7.20 389,785 556,452 Granted 90,688 10.30 — 90,688 Forfeited — — — — Delivered — 10.54 (389,785) (389,785) Vested (60,702) 8.69 60,702 — Balance at December 31, 2011 196,653 $8.17 60,702 257,355 Units Expected to Vest—As of December 31, 2011, approximately 185,000 RDUs are expected to vest over the next four years. 227Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes the activity of RDUs available for future grants: RDUs AvailableFor FutureGrants Balance at January 1, 2009 2,302,913 Purchases 43,412 Granted (2,667) Forfeited 74,870 Balance at December 31, 2009 2,418,528 Purchases 96,661 Granted (547,974) Forfeited 11,816 Balance at December 31, 2010 1,979,031 Purchases 59,494 Granted (90,688) Forfeited — Balance at December 31, 2011 1,947,837 Restricted Stock and Restricted Stock Unit Awards—Apollo Commercial Real Estate Finance, Inc. (“ARI”)On September 29, 2009, 97,500 and 145,000 shares of ARI restricted stock were granted to the Company and certain of the Company’s employees,respectively. Additionally, on December 31, 2009, 5,000 shares of ARI restricted stock were granted to a company employee. The fair value of the Companyand employee awards granted was $1.8 million and $2.7 million, respectively. These awards generally vest over three years or twelve quarters, with the firstquarter vesting on January 1, 2010. On March 23, 2010, July 1, 2010 and July 21, 2010, 102,084, 5,000 and 16,875 shares of ARI restricted stock units(“ARI RSUs”), respectively, were granted to certain of the Company’s employees. Pursuant to the March 23, 2010 and July 21, 2010 issuances, 102,084 and16,875 shares of ARI restricted stock, respectively, were forfeited by the Company’s employees. As the fair value of ARI RSUs was not greater than theforfeiture of the restricted stock, no additional value will be amortized. On April 1, 2011 and August 4, 2011, 5,000 and 152,750 ARI RSUs, respectively,were granted to certain of the Company’s employees. On August 4, 2011, 156,000 ARI RSUs were granted to the Company. On December 28, 2011, theCompany issued 45,587 ARI RSUs to certain of the Company’s employees. The awards granted to the Company are accounted for as investments anddeferred revenue in the consolidated statement of financial condition. As these awards vest, the deferred revenue is recognized as management fees. Theinvestment is accounted for using the equity method of accounting for awards granted to the Company and as a deferred compensation asset for the awardsgranted to employees. Compensation expense will be recognized on a straight line-basis over the vesting period for the awards granted to the employees. TheCompany 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 isbased on the grant date fair value, which utilizes the public share price of ARI, less discounts for certain restrictions. The awards granted to the Company’semployees are remeasured each period to reflect the fair value of the asset and liability and any changes in these values are recorded in the consolidatedstatements of operations. For the years ended December 31, 2011, 2010 and 2009, $2.9 million, $1.5 million and $0.4 million of management fees and $1.3million, $0.8 million and $0.2 million of compensation expense were recognized in the consolidated statements of operations, respectively. The actual forfeiturerate for unvested ARI restricted stock awards and ARI RSUs was 7%, 2% and 0% for the years ended December 31, 2011, 2010 and 2009, respectively. 228Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes activity for the ARI restricted stock awards and ARI RSUs that were granted to both the Company and certain of itsemployees for the years ended December 31, 2011, 2010 and 2009: ARIRestrictedStockUnvested ARI RSUsUnvested WeightedAverageGrant DateFair Value ARI RSUsVested TotalNumber ofRSUsOutstanding Balance at January 1, 2009 — — $— — — Granted to employees of the Company 145,000 — 18.46 — — Granted to the Company 97,500 — 18.48 — — Vested awards for employees of the Company — — — — — Balance at December 31, 2009 242,500 — 18.47 — — Granted to employees of the Company — 123,959 16.97 — 123,959 Forfeited by employees of the Company (118,959) (5,000) 18.41 — (5,000) Vested awards for employees of the Company (26,039) (22,709) 17.77 22,709 — Vested awards for the Company (32,500) — 18.48 — — Balance at December 31, 2010 65,002 96,250 17.57 22,709 118,959 Granted to employees of the Company — 203,337 14.34 — 203,337 Granted to the Company — 156,000 14.85 — 156,000 Forfeited by employees of the Company — (30,000) 14.85 — (30,000) Vested awards for employees of the Company — (50,833) 16.95 50,833 — Vested awards of the Company (32,500) — 18.48 — — Balance at December 31, 2011 32,502 374,754 $15.12 73,542 448,296 Units Expected to Vest—As of December 31, 2011, approximately 362,000 and 32,502 shares of ARI RSUs and ARI restricted stock, respectively,are expected to vest.Restricted Stock Unit Awards—Apollo Residential Mortgage, Inc. (“AMTG”)On July 27, 2011, 18,750 and 11,250 AMTG restricted stock units (“AMTG RSUs”) were granted to the Company and certain of the Company’semployees, respectively. On September 26, 2011, 875 AMTG RSUs were granted to certain employees of the Company. The fair value of the Company andemployee awards granted was $0.3 million and $0.2 million, respectively. These awards generally vest over three years or twelve calendar quarters, with thefirst quarter vesting on October 1, 2011. The awards granted to the Company are accounted for as investments and deferred revenue in the consolidatedstatement of financial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equitymethod of accounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expensewill 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 uponreceiving the awards on behalf of the Company’s employees. The awards granted to the Company’s employees are remeasured each period to reflect the fairvalue of the asset and liability and any changes in these values are recorded in the 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 certainrestrictions. For the year ended December 31, 2011, $0.1 million 229Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) of management fees and $0.0 million of compensation expense were recognized in the consolidated statements of operations. The actual forfeiture rate forAMTG RSUs was 0% for the year ended December 31, 2011.The following table summarizes activity for the AMTG RSUs that were granted to both the Company and certain of its employees for the year endedDecember 31, 2011: AMTG RSUsUnvested WeightedAverageGrant DateFair Value Vested TotalNumber ofRSUsOutstanding Balance at January 1, 2011 — $— — — Granted to employees of the Company 12,125 16.57 — 12,125 Granted to the Company 18,750 18.20 — 18,750 Forfeited by employees of the Company — — — — Vested awards of the employees of the Company (1,008) 16.57 1,008 — Vested awards of the Company (1,562) 18.20 1,562 — Balance at December 31, 2011 28,305 $17.56 2,570 30,875 Units Expected to Vest—As of December 31, 2011, approximately 28,000 AMTG RSUs are expected to vest.Equity-Based Compensation AllocationEquity-based compensation is allocated based on ownership interests. Therefore, the amortization of the AOG Units is allocated to Shareholders’ Equityattributable to Apollo Global Management, LLC and the Non-Controlling Interests, which results in a difference in the amounts charged to equity-basedcompensation expense and the amounts credited to Shareholders’ Equity attributable to Apollo Global Management, LLC in the Company’s consolidatedfinancial statements. 230Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2011: TotalAmount Non-ControllingInterest % inApolloOperatingGroup Allocated toNon-ControllingInterest inApolloOperatingGroup Allocated toApolloGlobalManagement,LLC AOG Units $1,032,762 65.9% $696,361 $336,401 RSUs and Share Options 115,142 — — 115,142 ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs 1,320 65.9 870 450 AAA RDUs 529 65.9 349 180 Total Equity-Based Compensation $1,149,753 $697,580 $452,173 Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs (1,219) (630) Capital Increase Related to Equity-Based Compensation $696,361 $451,543 (1)Calculated based on average ownership percentage for the period considering Class A share issuances during the period.Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2010: TotalAmount Non-ControllingInterest % inApolloOperatingGroup Allocated toNon-ControllingInterest inApolloOperatingGroup Allocated toApolloGlobalManagement,LLC AOG Units $1,032,909 71.0% $735,698 $297,211 RSUs and Share Options 79,169 — — 79,169 ARI Restricted Stock Awards and ARI RSUs 801 71.0 569 232 AAA RDUs 5,533 71.0 3,930 1,603 Total Equity-Based Compensation $1,118,412 740,197 378,215 Less AAA RDUs, ARI Restricted Stock Awards and ARI RSUs (4,499) (1,835) Capital Increase Related to Equity-Based Compensation $735,698 $376,380 (1)Calculated based on average ownership percentage for the period considering Class A share issuance during the period. 231(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2009: TotalAmount Non-ControllingInterest % inApolloOperatingGroup Allocated toNon-ControllingInterest inApolloOperatingGroup Allocated toApolloGlobalManagement,LLC AOG Units $1,033,343 71.5% $738,431 $294,912 RSUs 60,747 — — 60,747 ARI Restricted Stock Awards 217 71.5 155 62 AAA RDUs 5,799 71.5 4,146 1,653 Total Equity-Based Compensation $1,100,106 742,732 357,374 Less AAA RDUs and ARI Restricted Stock Awards (4,301) (1,715) Capital Increase Related to Equity-Based Compensation $738,431 $355,659 (1)Calculation based on average ownership percentage for the period considering Class A share repurchase during the period.15. RELATED PARTY TRANSACTIONS AND INTERESTS IN CONSOLIDATED ENTITIESThe Company typically facilitates the initial payment of certain operating costs incurred by the funds that it manages as well as their affiliates. Thesecosts are normally reimbursed by such funds and are included in due from affiliates. 232(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Due from affiliates and due to affiliates are comprised of the following: As ofDecember 31, 2011 2010 Due from Affiliates: Due from private equity funds $28,465 $52,128 Due from portfolio companies 61,867 42,933 Management and advisory fees receivable from capital markets funds 23,545 19,095 Due from capital markets funds 15,822 13,612 Due from Contributing Partners, employees and former employees 30,353 8,496 Due from real estate funds 13,453 5,887 Other 3,235 2,212 Total Due from Affiliates $176,740 $144,363 Due to Affiliates: Due to Managing Partners and Contributing Partners in connection with the taxreceivable agreement $451,743 $491,402 Due to private equity funds 86,500 20,890 Due to capital markets funds 18,817 — Due to real estate funds 1,200 1,200 Dividends payable to employees 12,532 2,832 Other 7,972 1,321 Total Due to Affiliates $578,764 $517,645 (1)Includes a $4.7 million contingent consideration liability due to former owners of Gulf Stream as discussed in note 3 to the consolidated financialstatements.Tax Receivable AgreementSubject to certain restrictions, each of the Managing Partners and Contributing Partners has the right to exchange their vested AOG Units for theCompany’s Class A shares. Certain Apollo Operating Group entities have made an election under Section 754 of the U.S. Internal Revenue Code, as amended,which will result in an adjustment to the tax basis of the assets owned by Apollo Operating Group at the time of the exchange. These exchanges will result inincreases in tax deductions that will reduce the amount of tax that APO Corp. will otherwise be required to pay in the future. Additionally, the furtheracquisition of AOG Units from the Managing Partners and Contributing Partners also may result in increases in tax deductions and tax basis of assets thatwill further reduce the amount of tax that APO Corp. will otherwise be required to pay in the future.APO Corp. entered into a tax receivable agreement (“TRA”) with the Managing Partners and Contributing Partners that provides for the payment to theManaging Partners and Contributing Partners of 85% of the amount of cash savings, if any, in U.S. Federal, state, local and foreign income taxes that APOCorp. would realize as a result of the increases in tax basis of assets that resulted from the Reorganization. If the Company does not make the required annualpayment on a timely basis as outlined in the TRA, interest is accrued on the balance until the payment date. These payments are expected to occurapproximately over the next 20 years. 233(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) In April 2011 and 2010, Apollo made cash payments of $39.8 million and $15.0 million, respectively, in connection with the TRA to the ManagingPartners and Contributing Partners resulting from realized tax benefits for the 2010 and 2009 tax years. Included in the 2011 payment was $29.0 thousandand $3.0 thousand of interest paid to the Managing Partners and Contributing Partners, respectively. In connection with the amendment of the AMHpartnership agreement in April of 2010, the tax receivable agreement was revised to reflect the Managing Partners’ agreement to defer 25% or $12.1 million ofthe required payments pursuant to the tax receivable agreement that is attributable to the 2010 fiscal year for a period of four years until April 5, 2014. Inaddition, Apollo adjusted the remaining liability by $(0.1) million and $7.6 million and recorded a corresponding gain (loss) in other income (loss), net in theconsolidated statement of operations during the years ended December 31, 2011 and 2010, respectively, due to changes in projected income estimates andfluctuations in the tax rates.Special AllocationIn December 2009, the AMH partnership agreement was amended to provide for special allocations of income to APO Corp. and a reduction of incomeallocated to Holdings for the 2009 and 2010 calendar years. The amendment allowed for a maximum allocation of income from Holdings of $22.1 million in2009 and $117.5 million in 2010. There was no extension of the special allocation after December 31, 2010. Therefore as a result, the Company did notallocate any additional income from AMH to APO Corp. related to the special allocation beyond such date. The Company will continue to allocate income toAPO Corp. based on the current economic sharing percentage.Due from Contributing Partners, Employees and Former EmployeesThe Company has accrued $22.1 million in receivables at December 31, 2011 from the Contributing Partners and certain employees and formeremployees of Fund VI for the potential return of carried interest income that would be due if the private equity fund were liquidated at the balance sheet date. Inaddition, there was a $6.5 million receivable at December 31, 2011 and 2010 from the Contributing Partners and certain employees associated with a creditagreement with Fund VI as described below in Due to Private Equity Funds.Management Fee Waiver and Notional Investment ProgramApollo has forgone a portion of management fee revenue that it would have been entitled to receive in cash and instead received profits interests andassigned these profits interests to employees and partners. The amount of management fees waived and related compensation expense amounted to $23.5million, $24.8 million and $19.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. 234Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) DistributionsThe table below presents the determination, declaration, and payment of the amount of quarterly distributions which were made at the sole discretion ofthe Company (in millions, except per share amounts): DistributionsDeclaration Date Distributions perClass A ShareAmount DistributionsPayment Date Distributions toAGM Class AShareholders Distributions toNon-ControllingInterest Holdersin the ApolloOperating Group TotalDistributions fromApollo OperatingGroup DistributionEquivalents onParticipatingSecurities January 8, 2009 $0.05 January 15, 2009 $4.9 $12.0 $16.9 $0.3 May 27, 2010 0.07 June 15, 2010 6.7 16.8 23.5 1.0 August 2, 2010 0.07 August 25, 2010 6.9 16.8 23.7 1.4 November 1, 2010 0.07 November 23, 2010 6.9 16.8 23.7 1.3 January 4, 2011 0.17 January 14, 2011 16.6 40.8 57.4 3.3 May 12, 2011 0.22 June 1, 2011 26.8 52.8 79.6 4.7 August 9, 2011 0.24 August 29, 2011 29.5 57.6 87.1 5.1 November 3, 2011 0.20 December 2, 2011 24.8 48.0 72.8 4.3 IndemnityCarried interest income from certain funds that the Company manages can be distributed to us on a current basis, but is subject to repayment by thesubsidiary of the Apollo Operating Group that acts as general partner of the fund in the event that certain specified return thresholds are not ultimatelyachieved. The Managing Partners, Contributing Partners and certain other investment professionals have personally guaranteed, subject to certain limitations,the obligation of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to a particularManaging Partner’s or Contributing Partner’s distributions. An existing shareholders agreement includes clauses that indemnify each of the Company’sManaging Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of certain fundsthat the Company manages (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees) forall interests that the Company’s Managing Partners and Contributing Partners have contributed or sold to the Apollo Operating Group.Accordingly, in the event that the Company’s Managing Partners, Contributing Partners and certain investment professionals are required to payamounts in connection with a general partner obligation for the return of previously made distributions, we will be obligated to reimburse the Company’sManaging Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to pay even though we did not receivethe certain distribution to which that general partner obligation related. As of December 31, 2011, the Company recorded an indemnification liability of $0.8million.Due to Private Equity FundsOn June 30, 2008, the Company entered into a credit agreement with Fund VI, pursuant to which Fund VI advanced $18.9 million of carried interestincome to the limited partners of Apollo Advisors VI, L.P., who are also employees of the Company. The loan obligation accrues interest at an annual fixed rateof 3.45% and terminates on the earlier of June 30, 2017 or the termination of Fund VI. At December 31, 2010, the total outstanding loan aggregated $20.5million, including accrued interest of $1.6 million, which approximated fair value, of which approximately $6.5 million was not subject to the indemnitydiscussed above and is a receivable from the Contributing Partners and certain employees. In March 2011, a right of offset for the indemnified portion of theloan 235Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) obligation was established between the Company and Fund VI, therefore the loan was reduced in the amount of $10.9 million, which is offset in carriedinterest receivable on the consolidated statement of financial condition. During the year ended December 31, 2011, there was $0.9 million interest paid and$0.3 million accrued interest on the outstanding loan obligation. As of December 31, 2011, the total outstanding loan aggregated $9.0 million, includingaccrued interest of $1.0 million which approximated fair value, of which approximately $6.5 million was not subject to the indemnity discussed above and isa receivable from the Contributing Partners and certain employees.In addition, assuming Fund VI is liquidated on the balance sheet date, the Company has also accrued a liability to Fund VI of $75.3 million, inconnection with the potential general partner obligation to return carried interest income that was previously distributed from Fund VI. Of this amount,approximately $22.1 million is receivable from Contributing Partners, employees and former employees.Due to Capital Markets FundsSimilar to the private equity funds, certain capital markets funds allocate carried interest income to the Company. Assuming SOMA liquidated on thebalance sheet date, the Company has accrued a liability to SOMA of $18.1 million, in connection with the potential general partner obligation for carriedinterest income that was previously distributed from SOMA.Due from Real Estate FundsIn connection with the acquisition of CPI during November 2010, Apollo is contingently obligated to Citigroup Inc. based on a specified percentage offuture earnings from the date of acquisition through December 31, 2012. The estimated fair value of the contingent liability was $1.2 million as ofDecember 31, 2011 and 2010, which was determined based on discounted cash flows from the date of acquisition through December 31, 2012 using adiscount rate of 7%.Regulated EntitiesDuring 2011, the Company formed Apollo Global Securities, LLC (“AGS”), which is a registered broker dealer with the United States Securities andExchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority, or “FINRA”, subject to the minimum net capitalrequirements of the SEC. AGS has continuously operated in excess of these requirements. From time to time, this entity is involved in transactions withaffiliates of Apollo, including portfolio companies of the funds we manage, whereby AGS will earn underwriting and transaction fees for its services. TheCompany also has one entity based in London which is subject to the capital requirements of the U.K. Financial Services Authority. This entity hascontinuously operated in excess of these regulatory capital requirements.Due to Strategic Investor/Strategic Relationship AgreementOn April 20, 2010, the Company announced that it entered into a strategic relationship agreement with the California Public Employees’ RetirementSystem (“CalPERS”). The strategic relationship agreement provides that Apollo will reduce management and other fees charged to CalPERS on funds itmanages, or in the future will manage, solely for CalPERS by $125 million over a five-year period or as close a period as required to provide CalPERS withthat benefit. The agreement further provides that Apollo will not use a placement agent in connection with securing any future capital commitments fromCalPERS. 236Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Underwriting Fee Paid for ARIDuring 2009, the Company incurred $8.0 million in underwriting expenses for the benefit of ARI, which may be repaid to the Company if during anyperiod of four consecutive calendar quarters during the sixteen full calendar quarters after the consummation of ARI’s initial public offering on September 29,2009, ARI’s core earnings, as defined in the corresponding management agreement, for any such four-quarter period exceeds an 8% performance hurdle rate.During the second quarter of 2011, the core earnings had exceeded the hurdle rate and the Company recorded $8.0 million of other income in the consolidatedstatement of operations.Interests in Consolidated EntitiesThe table below presents equity interests in Apollo’s consolidated, but not wholly-owned, subsidiaries and funds.Net loss (income) attributable to Non-Controlling Interests consists of the following: For the Year EndedDecember 31, 2011 2010 2009 (in thousands) AAA $123,400 $(356,251) $(452,408) Consolidated VIEs (216,193) (48,206) — Interests in management companies (12,146) (16,258) (7,818) Net income attributable to Non-Controlling Interests in consolidated entities (104,939) (420,715) (460,226) Net loss (income) attributable to Non-Controlling Interests in Apollo OperatingGroup 940,312 (27,892) 400,440 Net loss (income) attributable to Non-Controlling Interests $835,373 $(448,607) $(59,786) (1)Reflects the Non-Controlling Interests in the net loss (income) of AAA and is calculated based on the Non-Controlling Interests ownership percentage inAAA, which was approximately 98% during the year ended December 31, 2011 and approximately 97% during the years ended December 31, 2010and 2009, respectively.(2)Reflects the Non-Controlling Interests in the net loss (income) of the consolidated VIEs and includes $202.2 million and $11.4 million of gains recordedwithin appropriated partners’ capital related to consolidated VIEs during the years ended December 31, 2011 and 2010, respectively.(3)Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of our capital markets managementcompanies.16. COMMITMENTS AND CONTINGENCIESFinancial Guarantees—Apollo has provided financial guarantees on behalf of certain employees for the benefit of unrelated third-party lenders, inconnection with their capital commitment to certain funds managed by the Company. As of December 31, 2011, the maximum exposure relating to thesefinancial guarantees approximated $4.0 million. Apollo has historically not incurred any liabilities as a result of these agreements and does not expect to in thefuture. Accordingly, no liability has been recorded in the accompanying consolidated financial statements. 237(1)(2)(3)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) As the general partner of Apollo/Artus Investor 2007-I, L.P. (“Artus”), the Company may be obligated for certain losses in excess of those allocable to thelimited partners to the extent that there is negative equity in that fund. As of December 31, 2011, the Company has no current obligations to Artus.Investment Commitments—As a limited partner, general partner and manager of the Apollo private equity funds, capital markets and real estatefunds, Apollo has unfunded capital commitments as of December 31, 2011 and 2010 of $137.9 million and $140.6 million, respectively.Apollo has an ongoing obligation to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cash distributions, ifany, that are made to its affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAA Investments.Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of the balance sheet date, the Company was not aware ofany instances of noncompliance with any of these covenants.Litigation and Contingencies—We are, from time to time, party to various legal actions arising in the ordinary course of business, including claimsand litigation, reviews, investigations and proceedings by governmental and self-regulatory agencies regarding our business.On July 16, 2008, Apollo was joined as a defendant in a pre-existing purported class action pending in Massachusetts federal court against, amongother defendants, numerous private equity firms. The suit alleges that beginning in mid-2003, Apollo and the other private equity firm defendants violated theU.S. antitrust laws by forming “bidding clubs” or “consortia” that, among other things, rigged the bidding for control of various public corporations,restricted the supply of private equity financing, fixed the prices for target companies at artificially low levels, and allocated amongst themselves an allegedmarket for private equity services in leveraged buyouts. The suit seeks class action certification, declaratory and injunctive relief, unspecified damages, andattorneys’ fees. On August 27, 2008, Apollo and its co-defendants moved to dismiss plaintiffs’ complaint and on November 20, 2008, the Court grantedApollo’s motion. The Court also dismissed two other defendants, Permira and Merrill Lynch. In an order dated August 18, 2010, the Court granted in partand denied in part plaintiffs’ motion to expand the complaint and to obtain additional discovery. The Court ruled that plaintiffs could amend the complaintand obtain discovery in a second discovery phase limited to eight additional transactions. The Court gave the plaintiffs until September 17, 2010 to amend thecomplaint to include the additional eight transactions. On September 17, 2010, the plaintiffs filed a motion to amend the complaint by adding the additionaleight transactions and adding Apollo as a defendant. On October 6, 2010, the Court granted plaintiffs’ motion to file the fourth amended complaint. Plaintiffs’fourth amended complaint, filed on October 7, 2010, adds Apollo Global Management, LLC, as a defendant. On November 4, 2010, Apollo moved todismiss, arguing that the claims against Apollo are time-barred and that the allegations against Apollo are insufficient to state an antitrust conspiracy claim. OnFebruary 17, 2011, the Court denied Apollo’s motion to dismiss, ruling that Apollo should raise the statute of limitations issues on summary judgment afterdiscovery is completed. Apollo filed its answer to the fourth amended complaint on March 21, 2011. On July 11, 2011, the plaintiffs filed a motion for leaveto file a fifth amended complaint that adds ten additional transactions and expands the scope of the class seeking relief. On September 7, 2011, the Courtdenied the motion for leave to amend without prejudice and gave plaintiffs permission to take limited discovery on the ten additional transactions. The Courtset April 17, 2012, as the deadline for completing all fact discovery. Currently, Apollo does not believe that a loss from liability in this case is either probableor reasonably estimable. The Court granted Apollo’s motion to dismiss plaintiffs’ initial complaint in 2008, ruling that Apollo was released from the onlytransaction in which it allegedly was involved. While plaintiffs have survived Apollo’s motion to dismiss the fourth amended complaint, 238Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) the Court stated in denying the motion that it will consider the statute of limitations (one of the bases for Apollo’s motion to dismiss) at the summary judgmentstage. Based on the applicable statute of limitations, among other reasons, Apollo believes that plaintiffs’ claims lack factual and legal merit. For thesereasons, no estimate of possible loss, if any, can be made at this time.Various state attorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents in connectionwith the solicitation of investments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have received subpoenas andother requests for information from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding the use ofplacement agents. CalPERS, one of our Strategic Investors, announced on October 14, 2009, that it had initiated a special review of placement agents andrelated issues. The report of the CalPERS Special Review was issued on March 14, 2011. That report does not allege any wrongdoing on the part of Apollo orits affiliates. Apollo is continuing to cooperate with all such investigations and other reviews. In addition, on May 6, 2010, the California Attorney Generalfiled a civil complaint against Alfred Villalobos and his company, Arvco Capital Research, LLC (“Arvco”) (a placement agent that Apollo has used) andFederico Buenrostro Jr., the former CEO of CalPERS, alleging conduct in violation of certain California laws in connection with CalPERS’s purchase ofsecurities in various funds managed by Apollo and another asset manager. Apollo is not a party to the civil lawsuit and the lawsuit does not allege anymisconduct on the part of Apollo. Apollo believes that it has handled its use of placement agents in an appropriate manner. Finally, on December 29, 2011, theUnited States Bankruptcy Court for the District of Nevada approved an application made by Mr. Villalobos, Arvco and related entities (the “Arvco Debtors”)in their consolidated bankruptcy proceedings to hire special litigation counsel to pursue certain claims on behalf of the bankruptcy estates of the ArvcoDebtors, including potential claims against Apollo (a) for fees that Apollo purportedly owes the Arvco Debtors for placement agent services and (b) forindemnification of legal fees and expenses arising out of the Arvco Debtors’ defense of the California Attorney General action described above. To date, no suchclaims have been brought. Apollo denies the merit of any such claims and will vigorously contest them, if they are brought.Although the ultimate outcome of these matters cannot be ascertained at this time, we are of the opinion, after consultation with counsel, that theresolution of any such matters to which we are a party at this time will not have a material effect on our financial statements. Legal actions material to uscould, however, arise in the future.Commitments—Apollo leases office space and certain office equipment under various lease and sublease arrangements, which expire on various datesthrough 2022. As these leases expire, it can be expected that in the normal course of business, they will be renewed or replaced. Certain lease agreementscontain renewal options, rent escalation provisions based on certain costs incurred by the landlord or other inducements provided by the landlord. Rentexpense is accrued to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease term andrenewal periods where applicable. Apollo has entered into various operating lease service agreements in respect of certain assets.As of December 31, 2011, the approximate aggregate minimum future payments required for operating leases were as follows: 2012 2013 2014 2015 2016 Thereafter Total Aggregate minimum future payments $31,175 $30,657 $30,242 $28,921 $28,871 $92,426 $242,292 239Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Expenses related to non-cancellable contractual obligations for premises, equipment, auto and other assets were $38.3 million, $28.8 million and $35.1million for the years ended December 31, 2011, 2010 and 2009, respectively.Other Long-term Obligations—These obligations relate to payments on management service agreements related to certain assets and payments withrespect to certain consulting agreements entered into by Apollo Investment Consulting, LLC. A significant portion of these costs are reimbursable by funds orportfolio companies. As of December 31, 2011, fixed and determinable payments due in connection with these obligations are as follows: 2012 2013 2014 2015 2016 Thereafter Total Other long-term obligations $10,221 $630 $— $— $— $— $10,851 Contingent Obligations—Carried interest income in both private equity funds and certain capital markets funds is subject to reversal in the event offuture losses to the extent of the cumulative carried interest recognized in income to date. If all of the existing investments became worthless, the amount ofcumulative revenues that has been recognized by Apollo through December 31, 2011 and that would be reversed approximates $1.3 billion. Management viewsthe possibility of all of the investments becoming worthless as remote. Carried interest income is affected by changes in the fair values of the underlyinginvestments in the funds that Apollo manages. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, butnot limited to, bond yields and industry trading multiples. Movements in these items can affect valuations quarter to quarter even if the underlying businessfundamentals remain stable. The table below indicates the potential future reversal of carried interest income: December 31, 2011 Private Equity Funds: Fund VII $651,491 Fund V 246,656 Fund IV 57,104 AAA 22,090 Total Private Equity Funds $977,341 Capital Markets Funds: Distressed and Event-Driven Hedge Funds (Value Funds, SOMA,AAOF) 12,625 Mezzanine Funds (AIE II) 20,459 Non-Performing Loan Fund (EPF) 51,463 Senior Credit Funds (COF I/COF II, Gulf Stream) 233,139 Total Capital Market Funds $317,686 Total $1,295,027 Additionally, at the end of the life of certain funds that the Company manages, there could be a payment due to a fund by the Company if the Companyas general partner has received more carried interest income than was ultimately earned. The general partner obligation amount, if any, will depend on finalrealized values of investments at the end of the life of each fund. As discussed in note 15, the Company has recorded a general 240Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) partner obligation to return previously distributed carried interest income of fees of $75.3 million and $18.1 million relating to Fund VI and SOMA as ofDecember 31, 2011, respectively.Certain private equity and capital markets funds may not generate carried interest income as a result of unrealized and realized losses that are recognizedin the current and prior reporting period. In certain cases, carried interest income will not be generated until additional unrealized and realized gains occur. Anyappreciation would first cover the deductions for invested capital, unreturned organizational expenses, operating expenses, management fees and priorityreturns based on the terms of the respective fund agreements.One of the Company’s subsidiaries, Apollo Global Securities, LLC (“AGS”), provides underwriting commitments in connection with security offeringsto the portfolio companies of the funds we manage. As of December 31, 2011, there were no underwriting commitments outstanding related to such offerings.In connection with the Gulf Stream acquisition, as discussed in note 3, the Company will also make payments to the former owners of Gulf Streamunder a contingent consideration obligation which requires the Company to transfer cash to the former owners of Gulf Stream based on a specified percentageof incentive fee revenue.In connection with the CPI acquisition, as discussed in note 3, the consideration transferred in the acquisition is a contingent consideration in the formof a liability incurred by Apollo to CPI. The liability is an obligation of Apollo to transfer cash to CPI based on a specified percentage of future earnings. Theestimated fair value of the contingent liability is $1.2 million as of December 31, 2011.17. MARKET AND CREDIT RISKIn the normal course of business, Apollo encounters market and credit risk concentrations. Market risk reflects changes in the value of investments dueto changes in interest rates, credit spreads or other market factors. Credit risk includes the risk of default on Apollo’s investments, where the counterparty isunable or unwilling to make required or expected payments.The Company is subject to a concentration risk related to the investors in its funds. As of December 31, 2011, there were more than approximately1,000 limited partner investors in Apollo’s active private equity, capital markets and real estate funds, and no individual investor accounted for more than10% of the total committed capital to Apollo’s active funds.Apollo’s derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. Apolloseeks to minimize this risk by limiting its counterparties to highly rated major financial institutions with good credit ratings. Management does not expect anymaterial losses as a result of default by other parties.Substantially all amounts on deposit with major financial institutions that exceed insured limits are invested in interest-bearing accounts with U.S.money center banks.Apollo is exposed to economic risk concentrations insofar as Apollo is dependent on the ability of the funds that it manages to compensate it for theservices the management companies provide to these funds. Further, the incentive income component of this compensation is based on the ability of suchfunds to generate returns above certain specified thresholds. 241Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Additionally, Apollo is exposed to interest rate risk. Apollo has debt obligations that have variable rates. Interest rate changes may therefore affect theamount of interest payments, future earnings and cash flows. At December 31, 2011 and 2010, $738.5 million and $751.5 million of Apollo’s debt balance(excluding debt of the consolidated VIEs) had a variable interest rate, respectively. However, as of December 31, 2011 and 2010, $167.0 million of the debthad been effectively converted to a fixed rate using interest rate swaps as discussed in note 9.18. SEGMENT REPORTINGApollo conducts its management and incentive businesses primarily in the United States and substantially all of its revenues are generated domestically.These businesses are conducted through the following three reportable segments: • Private Equity—invests in control equity and related debt instruments, convertible securities and distressed debt investments; • Capital Markets—primarily invests in non-control debt and non-control equity investments, including distressed debt instruments; and • Real Estate—primarily invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanine investments andother commercial real estate-related debt investments. Additionally, the Company sponsors real estate funds that focus on opportunisticinvestments in distressed debt and equity recapitalization transactions.These business segments are differentiated based on the varying investment strategies. The performance is measured by management on anunconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financialand operating metrics and data that exclude the effects of consolidation of any of the affiliated funds.The Company’s financial results vary, since carried interest, which generally constitutes a large portion of the income from the funds that Apollomanages, as well as the transaction and advisory fees that the Company receives, can vary significantly from quarter to quarter and year to year. As a result,the Company emphasizes long-term financial growth and profitability to manage its business.The following tables present the financial data for Apollo’s reportable segments further separated between the management and incentive business as ofDecember 31, 2011, 2010 and 2009 and for the years ended December 31, 2011, 2010 and 2009, respectively, which management believes is useful to thereader. The Company’s management business has fairly stable revenues and expenses except for transaction fees, while its incentive business is more volatileand can have significant fluctuations as it is affected by changes in the fair value of investments due to market performance of the Company’s business. Thefinancial results of the management entities, as reflected in the “management” business section of the segment tables that follow, generally include managementfee revenues, advisory and transaction fees and expenses exclusive of profit sharing expense. The financial results of the advisory entities, as reflected in the“incentive” business sections of the segment tables that follow, generally include carried interest income, investment income, profit sharing expense andincentive fee based compensation.Economic Net Income (Loss)Economic Net Income (“ENI”) is a key performance measure used by management in evaluating the performance of Apollo’s private equity, capitalmarkets and real estate segments. Management also believes the 242Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) components of ENI such as the amount of management fees, advisory and transaction fees and carried interest income are indicative of the Company’sperformance. Management also uses ENI in making key operating decisions such as the following: • Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires; • Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansion into newbusinesses; and • Decisions related to expense, such as determining annual discretionary bonuses and stock-based compensation awards to its employees. As itrelates to compensation, management seeks to align the interests of certain professionals and selected other individuals who have a profit sharinginterest in the carried interest income earned in relation to the funds, with those of the investors in such funds and those of the Company’sshareholders. To achieve that objective, a certain amount of compensation is based on the Company’s performance and growth for the year.ENI is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. ENIrepresents segment income (loss) attributable to Apollo Global Management, LLC, which excludes the impact of non-cash charges related to RSUs granted inconnection with the 2007 private placement and amortization of AOG Units, income tax expense, amortization of intangibles associated with the 2007Reorganization as well as acquisitions and Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation ofincome from certain of our capital markets management companies. In addition, segment data excludes the assets, liabilities and operating results of the fundsand VIEs that are included in the consolidated financial statements.During the fourth quarter 2011, the Company modified the measurement of ENI to better evaluate the performance of Apollo’s private equity, capitalmarkets and real estate segments in making key operating decisions. These modifications include a reduction to ENI for equity-based compensation expensefor RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options, reduction for non-controlling interests related to theremaining interest held by certain individuals who receive an allocation of income from certain of our capital markets management companies and an add-back for amortization of intangibles associated with the 2007 Reorganization and acquisitions. These modifications to ENI have been reflected in the priorperiod presentation of our segment results. The impact of this modification on ENI is reflected in the table below for the years ended December 31, 2011, 2010and 2009: Impact of Modification on ENI PrivateEquitySegment CapitalMarketsSegment RealEstateSegment TotalReportableSegments For the year ended December 31, 2011 $(22,756) $(32,711) $(9,723) $(65,190) For the year ended December 31, 2010 (6,525) (23,449) (3,975) (33,949) For the year ended December 31, 2009 7,226 (8,009) (1,652) (2,435) 243Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table presents the financial data for Apollo’s reportable segments as of and for the year ended December 31, 2011: As of and for the Year EndedDecember 31, 2011 PrivateEquitySegment CapitalMarketsSegment RealEstateSegment TotalReportableSegments Revenues: Advisory and transaction fees from affiliates $66,913 $14,699 $698 $82,310 Management fees from affiliates 263,212 186,700 40,279 490,191 Carried interest (loss) income from affiliates (449,208) 51,801 — (397,407) Total Revenues (119,083) 253,200 40,977 175,094 Expenses 155,994 250,020 77,179 483,193 Other Income (Loss) 15,041 (5,716) 10,420 19,745 Non-Controlling Interests — (12,146) — (12,146) Economic Net Loss $(260,036) $(14,682) $(25,782) $(300,500) Total Assets $1,764,166 $1,123,654 $61,970 $2,949,790 The following table reconciles the total segments to Apollo Global Management, LLC’s consolidated financial statements for the year ended December 31,2011: As of and for the Year EndedDecember 31, 2011 TotalReportableSegments ConsolidationAdjustmentsand Other Consolidated Revenues $175,094 $(3,462) $171,632 Expenses 483,193 1,099,257 1,582,450 Other income 19,745 98,803 118,548 Non-Controlling Interests (12,146) 847,519 835,373 Economic Net Loss $(300,500) N/A N/A Total Assets $2,949,790 $5,026,083 $7,975,873 (1)Represents advisory and management fees earned from consolidated VIEs which are eliminated in consolidation.(2)Represents the addition of expenses of consolidated funds and the consolidated VIEs and expenses related to RSUs granted in connection with the 2007private placement and equity-based compensation expense comprising amortization of AOG Units and amortization of intangible assets. 244(1)(2)(3)(4)(5)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (3)Results from the following: For theYear EndedDecember 31,2011 Net losses from investment activities $(123,946) Net gains from investment activities of consolidated variable interest entities 24,201 Gain from equity method investments 3,094 Gain on acquisition 195,454 Total Consolidation Adjustments $98,803 (4)The reconciliation of Economic Net Loss to Net Loss attributable to Apollo Global Management, LLC reported in the consolidated statements ofoperations consists of the following: For theYear EndedDecember 31,2011 Economic Net Loss $(300,500) Income tax provision (11,929) Net loss attributable to Non-Controlling Interests in Apollo Operating Group 940,312 Non-cash charges related to equity-based compensation (1,081,581) Amortization of intangible assets (15,128) Net Loss Attributable to Apollo Global Management, LLC $(468,826) (5)Represents the addition of assets of consolidated funds and the consolidated VIEs.(6)Includes impact of non-cash charges related to amortization of AOG Units and RSU Plan Grants made in connection with the 2007 private placement asdiscussed in note 14 to our consolidated financial statements. 245(6)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2011: For the Year EndedDecember 31, 2011 Private Equity Capital Markets Management Incentive Total Management Incentive Total Revenues: Advisory and transaction fees from affiliates $66,913 $— $66,913 $14,699 $— $14,699 Management fees from affiliates 263,212 — 263,212 186,700 — 186,700 Carried interest (loss) income from affiliates: Unrealized losses — (1,019,748) (1,019,748) — (66,852) (66,852) Realized gains — 570,540 570,540 44,540 74,113 118,653 Total Revenues 330,125 (449,208) (119,083) 245,939 7,261 253,200 Compensation and benefits 156,923 (100,267) 56,656 116,181 38,844 155,025 Other expenses 99,338 — 99,338 94,995 — 94,995 Total Expenses 256,261 (100,267) 155,994 211,176 38,844 250,020 Other Income (Loss) 7,081 7,960 15,041 (1,978) (3,738) (5,716) Non-Controlling Interests — — — (12,146) — (12,146) Economic Net Income (Loss) $80,945 $(340,981) $(260,036) $20,639 $(35,321) $(14,682) (1)Included in unrealized carried interest (loss) income from affiliates is reversal of previously realized carried interest income due to the general partnerobligation to return previously distributed carried interest income or fees of $75.3 million and $18.1 million with respect to Fund VI and SOMA,respectively, for the year ended December 31, 2011. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ netassets as of December 31, 2011. The actual determination and any required payment of a general partner obligation would not take place until the finaldisposition of a fund’s investments based on the contractual termination of the fund.(2)Pursuant to the modification in the ENI measurement as discussed above, compensation and benefits includes equity-based compensation expenserelated to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options. In addition,other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions. 246(1)(2)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) For the Year EndedDecember 31, 2011 Real Estate Management Incentive Total Revenues: Advisory and transaction fees from affiliates $698 $— $698 Management fees from affiliates 40,279 — 40,279 Carried interest income from affiliates — — — Total Revenues 40,977 — 40,977 Compensation and benefits 46,163 1,353 47,516 Other expenses 29,663 — 29,663 Total Expenses 75,826 1,353 77,179 Other Income 9,694 726 10,420 Economic Net Loss $(25,155) $(627) $(25,782) (1)Pursuant to the modification in the ENI measurement as discussed above, compensation and benefits includes equity-based compensation expenserelated to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options. In addition,other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions. As of and for the Year EndedDecember 31, 2010 PrivateEquitySegment CapitalMarketsSegment RealEstateSegment TotalReportableSegments Revenues: Advisory and transaction fees from affiliates $60,444 $19,338 $— $79,782 Management fees from affiliates 259,395 160,318 11,383 431,096 Carried interest loss from affiliates 1,321,113 277,907 — 1,599,020 Total Revenues 1,640,952 457,563 11,383 2,109,898 Expenses 767,600 240,341 46,034 1,053,975 Other Income 212,845 41,606 23,231 277,682 Non-Controlling Interests — (16,258) — (16,258) Economic Net Income (Loss) $1,086,197 $242,570 $(11,420) $1,317,347 Total Assets $2,271,564 $1,152,389 $46,415 $3,470,368 247(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table reconciles the total reportable segments to Apollo Global Management, LLC’s financial statements for the year ended December 31,2010: For the Year EndedDecember 31, 2010 TotalReportableSegments ConsolidationAdjustmentsand Other Consolidated Revenues $2,109,898 $— $2,109,898 Expenses 1,053,975 1,103,411 2,157,386 Other income 277,682 404,767 682,449 Non-Controlling Interests (16,258) (432,349) (448,607) Economic Net Income $1,317,347 N/A N/A Total Assets $3,470,368 $3,082,004 $6,552,372 (1)Represents the addition of expenses of consolidated funds and the consolidated VIEs and expenses related to RSUs granted in connection with the 2007private placement, equity-based compensation expense comprising amortization of AOG Units, and amortization of intangible assets.(2)Results from the following: For theYear EndedDecember 31,2010 Net gains from investment activities $367,871 Net gains from investment activities of consolidated variable interest entities 48,206 Loss from equity method investments (11,107) Interest income 20 Other loss (223) Total Consolidation Adjustments $404,767 (3)The reconciliation of Economic Net Income to Net Loss Attributable to Apollo Global Management, LLC reported in the consolidated statements ofoperations consists of the following: For theYear EndedDecember 31,2010 Economic Net Income $1,317,347 Income tax provision (91,737) Net income attributable to Non-Controlling Interests in Apollo Operating Group (27,892) Non-cash charges related to equity-based compensation (1,087,943) Net loss of Metals Trading Fund (2,380) Amortization of intangible assets (12,778) Net Income Attributable to Apollo Global Management, LLC $94,617 248(1)(2)(3)(4)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (4)Includes impact of non-cash charges related to amortization of AOG Units and RSU Plan Grants made in connection with the 2007 private placement asdiscussed in note 14 to the consolidated financial statements.The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2010: For the Year EndedDecember 31, 2010 Private Equity Capital Markets Management Incentive Total Management Incentive Total Revenues: Advisory and transaction fees from affiliates $60,444 $— $60,444 $19,338 $— $19,338 Management fees from affiliates 259,395 — 259,395 160,318 — 160,318 Carried interest income from affiliates: Unrealized gains — 1,251,526 1,251,526 — 103,918 103,918 Realized gains — 69,587 69,587 47,385 126,604 173,989 Total Revenues 319,839 1,321,113 1,640,952 227,041 230,522 457,563 Compensation and benefits 150,181 519,669 669,850 103,763 55,698 159,461 Other expenses 97,750 — 97,750 80,880 — 80,880 Total Expenses 247,931 519,669 767,600 184,643 55,698 240,341 Other Income 162,213 50,632 212,845 10,928 30,678 41,606 Non-Controlling Interests — — — (16,258) — (16,258) Economic Net Income $234,121 $852,076 $1,086,197 $37,068 $205,502 $242,570 (1)Pursuant to the modification in the ENI measurement as discussed above, compensation and benefits includes equity-based compensation expenserelated to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options. In addition,other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions. 249(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) For the Year EndedDecember 31, 2010 Real Estate Management Incentive Total Revenues: Advisory and transaction fees from affiliates $— $— $— Management fees from affiliates 11,383 — 11,383 Carried interest income from affiliates — — — Total Revenues 11,383 — 11,383 Compensation and benefits 26,096 — 26,096 Other expenses 19,938 — 19,938 Total Expenses 46,034 — 46,034 Other Income (Loss) 23,622 (391) 23,231 Economic Net Loss $(11,029) $(391) $(11,420) (1)Pursuant to the modification in the ENI measurement as discussed above, compensation and benefits includes equity-based compensation expenserelated to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options. In addition,other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions. For the Year EndedDecember 31, 2009 PrivateEquitySegment CapitalMarketsSegment RealEstateSegment TotalReportableSegments Revenues: Advisory and transaction fees from affiliates $48,642 $7,433 $— $56,075 Management fees from affiliates 260,478 144,578 1,201 406,257 Carried interest loss from affiliates 310,871 193,525 — 504,396 Total Revenues 619,991 345,536 1,201 966,728 Expenses 354,101 218,425 26,192 598,718 Other Income 113,924 104,171 300 218,395 Non-Controlling Interests — (7,818) — (7,818) Economic Net Income (Loss) $379,814 $223,464 $(24,691) $578,587 Assets $1,062,043 $981,390 $13,852 $2,057,285 250(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table reconciles the total reportable segments to Apollo Global Management, LLC’s financial statements for the year ended December 31,2009: For the Year EndedDecember 31, 2009 TotalReportableSegments ConsolidationAdjustmentsand Other Consolidated Revenues $966,728 $— $966,728 Expenses 598,718 1,107,787 1,706,505 Other income 218,395 454,706 673,101 Non-Controlling Interests (7,818) (51,968) (59,786) Economic Net Income $578,587 N/A N/A (1)Represents the addition of expenses of AAA and expenses related to RSUs granted in connection with the 2007 private placement, equity-basedcompensation expense comprising amortization of AOG Units, and amortization of intangible assets.(2)Results from the following: For theYear EndedDecember 31,2009 Net gains from investment activities $471,873 Loss from equity method investments (17,167) Total Consolidation Adjustments $454,706 (3)The reconciliation of Economic Net Income to Net Loss attributable to Apollo Global Management, LLC reported in the consolidated statements ofoperations consists of the following: For theYear EndedDecember 31,2009 Economic Net Loss $578,587 Income tax benefit (28,714) Net loss attributable to Non-Controlling Interests in Apollo Operating Group 400,440 Non-cash charges related to equity-based compensation (1,092,812) Amortization of intangible assets (12,677) Net Loss Attributable to Apollo Global Management, LLC $(155,176) (4)Includes impact of non-cash charges related to amortization of AOG Units and RSU Plan Grants made in connection with the 2007 private placement asdiscussed in note 14 to the consolidated financial statements. 251(1)(2)(3)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2009: For the Year EndedDecember 31, 2009 Private Equity Capital Markets Management Incentive Total Management Incentive Total Revenues: Advisory and transaction fees from affiliates $48,642 $— $48,642 $7,433 $— $7,433 Management fees from affiliates 260,478 — 260,478 144,578 — 144,578 Carried interest (loss) income from affiliates: Unrealized gains — 262,890 262,890 — 120,126 120,126 Realized gains — 47,981 47,981 50,404 22,995 73,399 Total Revenues 309,120 310,871 619,991 202,415 143,121 345,536 Compensation and benefits 130,472 124,048 254,520 91,607 43,500 135,107 Other expenses 99,581 — 99,581 83,318 — 83,318 Total Expenses 230,053 124,048 354,101 174,925 43,500 218,425 Other Income 58,701 55,223 113,924 19,309 84,862 104,171 Non-Controlling Interests — — — (7,818) — (7,818) Economic Net Income $137,768 $242,046 $379,814 $38,981 $184,483 $223,464 (1)Pursuant to the modification in the ENI measurement as discussed above, compensation and benefits includes equity-based compensation expenserelated to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options. In addition,other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions. For the Year EndedDecember 31, 2009 Real Estate Management Incentive Total Revenues: Advisory and transaction fees from affiliates $— $— $— Management fees from affiliates 1,201 — 1,201 Carried interest income from affiliates — — — Total Revenues 1,201 — 1,201 Compensation and benefits 12,571 — 12,571 Other expenses 13,621 — 13,621 Total Expenses 26,192 — 26,192 Other Income (Loss) 1,043 (743) 300 Economic Net Loss $(23,948) $(743) $(24,691) (1)Pursuant to the modification in the ENI measurement as discussed above, compensation and benefits includes equity-based compensation expenserelated to the management business for RSUs (excluding 252(1)(1)(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) RSUs granted in connection with the 2007 private placement) and share options. In addition, other expenses excludes amortization of intangiblesassociated with the 2007 Reorganization as well as acquisitions.19. SUBSEQUENT EVENTSOn January 18, 2012, the Company issued 0.3 million Class A shares in exchange for vested RSUs. This issuance did not cause a material change to theCompany’s ownership interest in the Apollo Operating Group.On February 10, 2012, the Company declared a cash distribution of $0.46 per Class A share, which will be paid on February 29, 2012 to holders of recordon February 23, 2012.20. QUARTERLY FINANCIAL DATA (UNAUDITED) Three Months Ended March 31,2011 June 30,2011 September 30,2011 December 31,2011 Revenues $696,342 $308,876 $(1,479,580) $645,994 Expenses 641,581 480,006 (158,100) 618,963 Other Income (Loss) 205,164 70,035 (442,310) 285,659 Income (Loss) Before Provision for Taxes $259,925 $(101,095) $(1,763,790) $312,690 Net Income (Loss) $251,105 $(104,645) $(1,743,943) $293,284 Income (Loss) attributable to Apollo Global Management, LLC. $38,156 $(50,989) $(466,926) $10,933 Net Income (Loss) per Class A Share—Basic 0.33 (0.46) (3.86) 0.05 Net Income (Loss) per Class A Share—Diluted 0.33 (0.46) (3.86) 0.05 Three Months Ended March 31,2010 June 30,2010 September 30,2010 December 31,2010 Revenues $223,594 $79,280 $458,651 $1,348,373 Expenses 428,490 362,110 506,003 860,783 Other Income (Loss) 135,772 (6,585) 210,540 342,722 Income (Loss) Before Provision for Taxes $(69,124) $(289,415) $163,188 $830,312 Net (Loss) Income $(73,179) $(302,142) $132,332 $786,213 (Loss) Income Apollo Global Management, LLC. $(60,682) $(75,124) $24,140 $206,283 Net (Loss) Income per Class A Share—Basic (0.63) (0.79) 0.23 1.78 Net (Loss) Income per Class A Share—Diluted (0.63) (0.79) 0.23 1.77 253Table of ContentsITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURESNone. ITEM 9A.CONTROLS AND PROCEDURESWe maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934(the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that suchinformation is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, toallow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply itsjudgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures alsois based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving itsstated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonableassurance of achieving the desired objectives.Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls andprocedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief ExecutiveOfficer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as definedin Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we arerequired to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including ourChief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report ofApollo’s independent registered public accounting firm due to a transition period established by the rules of the Securities and Exchange Commission fornewly public companies.No changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Securities ExchangeAct) occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financialreporting. ITEM 9B.OTHER INFORMATIONNone. 254Table of ContentsPART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDirectors and Executive OfficersThe following table presents certain information concerning our board of directors and executive officers: Name Age Position(s)Leon Black 60 Chairman, Chief Executive Officer and DirectorJoshua Harris 47 Senior Managing Director and DirectorMarc Rowan 49 Senior Managing Director and DirectorHenry Silverman 71 Vice Chairman and DirectorMarc Spilker 47 PresidentGene Donnelly 54 Chief Financial OfficerBarry Giarraputo 48 Chief Accounting Officer and ControllerJohn Suydam 52 Chief Legal Officer and Chief Compliance OfficerJoseph Azrack 64 Managing Director—Real EstateJames Zelter 49 Managing Director—Capital MarketsMichael Ducey 63 DirectorPaul Fribourg 58 DirectorA.B. Krongard 75 DirectorPauline Richards 63 Director (1)On February 24, 2012, Henry Silverman resigned from all of his positions with the Company effective March 15, 2012.Leon Black. Mr. Black is the Chairman of the board of directors and Chief Executive Officer of Apollo and a Managing Partner of Apollo Management,L.P. In 1990, Mr. Black founded Apollo Management, L.P. and Lion Advisors, L.P. to manage investment capital on behalf of a group of institutionalinvestors, focusing on corporate restructuring, leveraged buyouts, and taking minority positions in growth-oriented companies. From 1977 to 1990,Mr. Black worked at Drexel Burnham Lambert Incorporated, where he served as Managing Director, head of the Mergers & Acquisitions Group and co-headof the Corporate Finance Department. Mr. Black also serves on the boards of directors of Sirius XM Radio Inc. and the general partner of AAA. Mr. Black is atrustee of The Museum of Modern Art, The Mount Sinai Medical Center, The Metropolitan Museum of Art, and The Asia Society. He is also a member ofThe Council on Foreign Relations and The Partnership for New York City. He is also a member of the boards of directors of FasterCures and the PortAuthority Task Force. Mr. Black graduated summa cum laude from Dartmouth College in 1973 with a major in Philosophy and History and received anMBA from Harvard Business School in 1975. Mr. Black has significant experience making and managing private equity investments on behalf of Apolloand has over 33 years experience financing, analyzing and investing in public and private companies. In his prior position with Drexel and in his position atApollo, Mr. Black is responsible for leading and overseeing teams of professionals. His extensive experience allows Mr. Black to provide insight into variousaspects of Apollo’s business and is of significant value to the board of directors.Joshua Harris. Mr. Harris is a Senior Managing Director and a member of the board of directors of Apollo and Managing Partner of ApolloManagement, L.P., which he co-founded in 1990. Prior to 1990, Mr. Harris was a member of the Mergers and Acquisitions Group of Drexel BurnhamLambert Incorporated. Mr. Harris currently serves on the boards of directors of Berry Plastics Group Inc., LyondellBasell Industries B.V., CEVA Group plc,Momentive Performance Materials Holdings LLC and the holding company for Alcan Engineered Products. Mr. Harris has previously served on the boards ofdirectors of Verso Paper Corp., Metals USA, Inc., Nalco 255(1)Table of ContentsCorporation, Allied Waste Industries, Inc., Pacer International, Inc., General Nutrition Centers, Inc., Furniture Brands International Inc., Compass MineralsInternational, Inc., Alliance Imaging, Inc., NRT Inc., Covalence Specialty Materials Corp., United Agri Products, Inc., Quality Distribution, Inc., WhitmireDistribution Corp. and Noranda Aluminum Holding Corporation. Mr. Harris is actively involved in charitable and political organizations. He also serves onthe Corporate Affairs Committee of the Council on Foreign Relations. Mr. Harris serves as Chairman of the Department of Medicine Advisory Board for TheMount Sinai Medical Center and is on the Board of Trustees of the Mount Sinai Medical Center. He is also a member of The Federal Reserve Bank of NewYork Investors Advisory Committee on Financial Markets and a member of The University of Pennsylvania’s Wharton Undergraduate Executive Board andis on the Board of Trustees for The Allen-Stevenson School and the Harvard Business School. Mr. Harris graduated summa cum laude and Beta GammaSigma from the University of Pennsylvania’s Wharton School of Business with a BS in Economics and received his MBA from the Harvard BusinessSchool, where he graduated as a Baker and Loeb Scholar. Mr. Harris has significant experience in making and managing private equity investments on behalfof Apollo and has over 24 years experience in financing, analyzing and investing in public and private companies. Mr. Harris’s extensive knowledge ofApollo’s business and experience in a variety of senior leadership roles enhance the breadth of experience of the board of directors.Marc Rowan. Mr. Rowan is a Senior Managing Director and member of the board of directors of Apollo and Managing Partner of Apollo Management,L.P., which he co-founded in 1990. Prior to 1990, Mr. Rowan was a member of the Mergers & Acquisitions Group of Drexel Burnham Lambert Incorporated,with responsibilities in high yield financing, transaction idea generation and merger structure negotiation. Mr. Rowan currently serves on the boards ofdirectors of the general partner of AAA, Athene Holding Ltd, Caesars Entertainment Corporation and Norwegian Cruise Lines. He has previously served onthe boards of directors of AMC Entertainment, Inc., Cablecom GmbH, Culligan Water Technologies, Inc., Countrywide Holdings Limited, Furniture BrandsInternational Inc., Mobile Satellite Ventures, LLC, National Cinemedia, Inc., National Financial Partners, Inc., New World Communications, Inc., QualityDistribution, Inc., Samsonite Corporation, SkyTerra Communications Inc., Unity Media SCA, Vail Resorts, Inc. and Wyndham International, Inc.Mr. Rowan is also active in charitable activities. He is a founding member and serves on the executive committee of the Youth Renewal Fund and is a memberof the boards of directors of the National Jewish Outreach Program, Inc. and the Undergraduate Executive Board of the University of Pennsylvania’s WhartonSchool of Business. Mr. Rowan graduated summa cum laude from the University of Pennsylvania’s Wharton School of Business with a BS and an MBA inFinance. Mr. Rowan has significant experience making and managing private equity investments on behalf of Apollo and has over 26 years experiencefinancing, analyzing and investing in public and private companies. Mr. Rowan’s extensive financial background and expertise in private equity investmentsenhance the breadth of experience of the board of directors.Henry Silverman. Mr. Silverman joined Apollo in 2009 as Chief Operating Officer and currently serves as a director and Vice Chairman of the boardof directors of Apollo and a member of the executive committee of our manager. On February 24, 2012, Henry Silverman resigned as a Director of the Board ofDirectors of the Company effective March 15, 2012. Mr. Silverman also resigned from his employment at the Company and its subsidiaries, from hismembership on the executive committee of the Company’s manager and from all other positions he holds at the Company and its subsidiaries, affiliates andportfolio companies, all effective March 15, 2012. From November 2007 through January 2009, Mr. Silverman served as senior advisor to Apollo. Prior tojoining Apollo, from July 2006 until November 2007, Mr. Silverman served as Chairman of the Board and the Chief Executive Officer of RealogyCorporation, formerly Cendant Corporation’s (“Cendant”) real estate division. Mr. Silverman was Chief Executive Officer of Cendant from December 1997until the completion of Cendant’s separation plan in August 2006, as well as chairman of Cendant’s board of directors from July 1998 until August 2006.Mr. Silverman served as President of Cendant from December 1997 until October 2004. He was also Chairman of the board of directors, Chairman of theexecutive committee, and Chief Executive Officer of HFS Incorporated (Cendant’s predecessor) from May 1990 until December 1997. Cendant was a“Fortune 100” company and the largest global provider of consumer and business services within the travel and residential real estate sectors prior to itsseparation into several new companies in late 2006. Mr. Silverman continues to 256Table of Contentsserve as a director and Chairman of the Board of Realogy Corporation, is a director and Chairman of the Board of Apollo Commercial Real Estate Finance,Inc. and serves as a director of the managing general partner of AAA. Mr. Silverman has been involved for many years in numerous philanthropic, publicservice and social policy initiatives. He is currently on the Board of Commissioners of the Port Authority of New York and New Jersey and is a trustee of theNYU Langone Medical Center. Mr. Silverman is a former trustee of NYU, the University of Pennsylvania, Penn Medicine, the Dance Theatre of Harlem andthe Whitney Museum of American Art. Mr. Silverman’s philanthropy includes Silverman Hall, the Silverman-Rodin scholars and the Silverman Professor ofLaw at Penn Law School, and the Silverman Professor of Obstetrics and Gynecology at NYU School of Medicine. Mr. Silverman was awarded the AmericanHeritage Award from the Anti-Defamation League for lifetime achievement in fighting discrimination and was honored for his efforts to promote diversity in theworkplace by the Jackie Robinson Foundation and the U.S. Hispanic Chamber of Commerce. Mr. Silverman graduated from Williams College in 1961, andthe University of Pennsylvania Law School in 1964, and served as a legal officer in the U.S. Navy Reserve from 1965 to 1972. Mr. Silverman brings to theboard of directors expertise as a strategist, management and operations experience, and a perspective on business operations and corporate governance in thepublic company context. In his prior experience as chief executive officer of Cendant, he gained extensive experience working with complex organizations andanalyzing investment opportunities, all of which the company believes enhances the resources available to the board of directors.Marc Spilker. Mr. Spilker joined Apollo as President in 2010. Mr. Spilker retired from Goldman Sachs in May 2010 following a 20-year career with thefirm, where he served most recently as the co-head of Goldman Sachs’ Investment Management Division (“IMD”) and also as a member of the firm-wideManagement Committee. Mr. Spilker joined IMD in 2006 as head of Global Alternative Asset Management and became chief operating officer in 2007. Prior tothat, Mr. Spilker was responsible for Goldman Sachs’ U.S. Equities Trading and Global Equity Derivatives and was head of Fixed Income, Currency andCommodities in Japan from 1997 to 2000. Mr. Spilker joined Goldman Sachs in 1990 and was named partner in 1996. Mr. Spilker is a member of theUniversity of Pennsylvania’s Wharton Undergraduate Executive Board, the Board of Directors of The New 42nd Street, Inc. and co-chairs the RFKLeadership Council at the Robert F. Kennedy Center for Justice & Human Rights. Mr. Spilker graduated with a B.S. in Economics from the Wharton Schoolof the University of Pennsylvania.Gene Donnelly. Mr. Donnelly joined Apollo in 2010, following a 30-year career with PricewaterhouseCoopers (“PwC”), most recently as PwC’s leadclient relationship partner for several leading private equity firms. Prior to that role, Mr. Donnelly served as the Global Managing Partner for PwC’s advisoryand tax practices from 2006 through 2008. During 2000 through 2005, Mr. Donnelly served as Vice Chairman and Chief Financial Officer for PwC’s U.S.firm. Previously, Mr. Donnelly served in PwC’s global transaction services practice from 1996 through 2000, and he was the leader of that practice from1997 through 2000. Before joining PwC’s transaction services practice, Mr. Donnelly was with PwC’s audit practice from 1979 through 1995, and he wasappointed as a partner in 1989. Mr. Donnelly graduated summa cum laude with a BS in Accounting from St. Francis College.Barry Giarraputo. Mr. Giarraputo joined Apollo in 2006. Prior to that time, Mr. Giarraputo was a Senior Managing Director at Bear Stearns & Co.where he served in a variety of finance roles over nine years. Previous to that, Mr. Giarraputo was with the accounting and auditing firm ofPricewaterhouseCoopers LLP for 12 years where he was a member of the firm’s Audit and Business Services Group and was responsible for a number ofcapital markets clients including broker-dealers, money-center banks, domestic investment companies and offshore hedge funds and related service providers.Mr. Giarraputo is on the Board of Directors for the Association for Children with Down Syndrome where he also serves as the Treasurer and Chairman of theaudit committee. Mr. Giarraputo has also served as an Adjunct Professor of Accounting at Baruch College where he graduated cum laude in 1985 with a BBAin Accountancy.John Suydam. Mr. Suydam joined Apollo in 2006. From 2002 through 2006, Mr. Suydam was a partner at O’Melveny & Myers LLP, where heserved as head of Mergers & Acquisitions and co-head of the Corporate 257Table of ContentsDepartment. Prior to that time, Mr. Suydam served as chairman of the law firm O’Sullivan, LLP, which specialized in representing private equity investors.Mr. Suydam serves on the board of directors of the Big Apple Circus and Environmental Solutions Worldwide Inc., and he is also a member of theDepartment of Medicine Advisory Board of The Mount Sinai Medical Center. Mr. Suydam received his JD from New York University and graduated magnacum laude with a BA in History from the State University of New York at Albany.Joseph Azrack. Mr. Azrack joined Apollo in 2008. Mr. Azrack is the Managing Director—Real Estate of Apollo and the managing partner of ApolloGlobal Real Estate Management, L.P. He also currently serves as the President and Chief Executive Officer of ARI and has been a director of ARI since June2009. Prior to joining Apollo, from 2004 to 2008, Mr. Azrack was President and CEO of CPI where he chaired the firm’s Management Committee andInvestment Committees, and provided strategic guidance for investment policy and strategy. Mr. Azrack was also a member of the Citigroup AlternativeInvestments Management Committee and Investment Committee from May 2004 to July 2008, and a member of Citi Infrastructure Investments’ InvestmentCommittee from September 2006 to July 2008. Prior to joining CPI, he was Chief Executive and Chairman of AEW Capital Management, L.P. from 1996 to2003, Founder and President of the AEW Partners Funds from 1988 to 2003, a Director of Curzon Global Partners from 1998 to 2003 and Founder andChairman of IXIS AEW Europe from 2001 to 2003. Mr. Azrack served with AEW from 1983 to 2003. He was an adjunct professor at Columbia University’sGraduate School of Business where he is a member of and from 1993 to 2003 chaired the Real Estate Program Advisory Board. He is also a member of theboard of directors and the board of trustees of the Urban Land Institute, as well as a board member of Atrium European Real Estate, Ltd. Mr. Azrack holds anM.B.A. from Columbia University and a B.S. from Villanova University.James Zelter. Mr. Zelter joined Apollo in 2006. Mr. Zelter is the Managing Director of Apollo’s capital markets business, Chief Executive Officer anddirector of AINV. He also serves as a board member of HFA Holdings Limited, a company publicly traded on the Australian Securities Exchange. Prior tojoining Apollo, Mr. Zelter was with Citigroup Inc. and its predecessor companies from 1994 to 2006. From 2003 to 2005, Mr. Zelter was Chief InvestmentOfficer of Citigroup Alternative Investments, and prior to that he was responsible for the firm’s Global High Yield franchise. Prior to joining Citigroup in1994, Mr. Zelter was a High Yield Trader at Goldman, Sachs & Co. Mr. Zelter has significant experience in global credit markets and has overseen the broadexpansion in the Apollo capital markets platform. Mr. Zelter is a board member of DUMAC, the investment management company that oversees the DukeEndowment and Duke Foundation. Mr. Zelter has a degree in Economics from Duke University.Paul Fribourg. Mr. Fribourg has served as an independent director of Apollo and as a member of the conflicts committee of our board of directorssince 2011. From 1997 to the present, Mr. Fribourg has served as Chairman and Chief Executive Officer of Continental Grain Company. Prior to 1997,Mr. Fribourg served in a variety of other roles at Continental Grain Company, including Merchandiser, Product Line Manager, Group President and ChiefOperating Officer. Mr. Fribourg serves on the boards of directors of Burger King Holdings, Inc., Loews Corporation and The Estee Lauder Companies, Inc.He also serves as a board member of the JPMorgan National Advisory Board, the Rabobank International North American Agribusiness Advisory Board, theHarvard Business School Board of Dean’s Advisors, the New York University Mitchell Jacobson Leadership Program in Law and Business AdvisoryBoard, the America-China Society, Endeavor Global Inc. and Teach For America–New York. Mr. Fribourg is also a member of the Council on ForeignRelations, the Brown University Advisory Council on China, the International Business Leaders Advisory Council for The Mayor of Shanghai. Mr. Fribourggraduated magna cum laude from Amherst College and completed the Advanced Management Program at Harvard Business School. Mr. Fribourg’s extensivecorporate experience enhances the breadth of experience and independence of the board of directors.A.B. Krongard. Mr. Krongard has served as an independent director of Apollo and as a member of the audit committee of our board of directors since2011. From 2001 to 2004, Mr. Krongard served as Executive Director of the Central Intelligence Agency. From 1998 to 2001, Mr. Krongard served asCounselor to the Director of Central Intelligence. Prior to 1998, Mr. Krongard served in various capacities at Alex Brown, Incorporated, including serving asChief Executive Officer beginning in 1991 and assuming additional duties as Chairman of 258Table of Contentsthe Board of Directors in 1994. Upon the merger of Alex Brown, Incorporated with Bankers Trust Corporation in 1997, Mr. Krongard served as Vice-Chairman of the Board of Bankers Trust Corporation and served in such capacity until joining the Central Intelligence Agency. Mr. Krongard serves as theLead Director and audit committee Chairman of Under Armour, Inc. and also serves as a board member of Iridium Communications Inc. Mr. Krongardgraduated with honors from Princeton University and received a J.D. from the University of Maryland School of Law, where he also graduated with honors.Mr. Krongard also serves as the Vice-Chair of the Johns Hopkins Health System. Mr. Krongard’s comprehensive corporate background contributes to therange of experience of the board of directors.Pauline Richards. Ms. Richards has served as an independent director of Apollo and as Chairman of the audit committee of our board of directorssince 2011. From 2008 to the present, Ms. Richards served as Chief Operating Officer of Armour Reinsurance Group Limited. Prior to 2008, Ms. Richardsserved as Director of Development of Saltus Grammar School from 2003 to 2008, as Chief Financial Officer of Lombard Odier Darier Hentsch (Bermuda)Limited from 2001 to 2003, and as Treasurer of Gulf Stream Financial Limited from 1999 to 2000. Ms. Richards also serves as a member of the Audit andCorporate Governance committees of the board of directors of Butterfield Bank and as a member of the Audit and Compensation committees of the board ofdirectors of Wyndham Worldwide. Ms. Richards also serves as the Chairman of the board of directors of PRIDE (Bermuda), a drug prevention organization.Ms. Richards graduated from Queen’s University, Ontario, Canada, with a BA in psychology and has obtained certification as a Certified ManagementAccountant. Ms. Richards’ extensive finance experience and her service on the boards of other public companies adds significant value to the board ofdirectors.Michael Ducey. Mr. Ducey has served as an independent director of Apollo and a member of the audit committee and as Chairman of the conflictscommittee of our board of directors since 2011. Most recently, Mr. Ducey was with Compass Minerals International, Inc., from March 2002 to May 2006,where he served in a variety of roles, including as President, Chief Executive Officer and Director prior to his retirement in May 2006. Prior to joiningCompass Minerals International, Inc., Mr. Ducey worked for nearly 30 years at Borden Chemical, Inc., in various management, sales, marketing, planningand commercial development positions, and ultimately as President, Chief Executive Officer and Director. Mr. Ducey is currently a director of and serves asthe chairman of the audit committee of Verso Paper Holdings, Inc., and is also the non-executive chairman of the board of directors of TPC Group, Inc and amember of its audit committee. He is also the chairman of the compliance and governance committee and the nominations committee of the board of directors ofHaloSource, Inc. From June 2006 to May 2008, Mr. Ducey served on the board of directors of and as a member of the governance and compensationcommittee of the board of directors of UAP Holdings Corporation. Also, from July 2010 to May 2011, Mr. Ducey was a member of the board of directors andserved on the audit committee of Smurfit-Stone Container Corporation. Mr. Ducey graduated from Otterbein University with a degree in Economics and anM.B.A. in finance from the University of Dayton. Mr. Ducey’s comprehensive corporate background and his experience serving on various boards andcommittees add significant value to the board of directors.Our ManagerOur operating agreement provides that so long as the Apollo control condition is satisfied, our manager will manage all of our operations and activitiesand will have discretion over significant corporate actions, such as the issuance of securities, payment of distributions, sales of assets, making certainamendments to our operating agreement and other matters, and our board of directors will have no authority other than that which our manager chooses todelegate to it.Decisions by our manager are made by its executive committee, which is composed of our three managing partners, our Vice Chairman and ourPresident, the latter two of which serve as non-voting members. Each managing partner will remain on the executive committee for so long as he is employed byus, provided that Mr. Black, upon his retirement, may at his option remain on the executive committee until his death or disability or any commission of anact that would constitute cause if Mr. Black had still been employed by us. Actions by 259Table of Contentsthe executive committee are determined by majority vote of its members, except as to the following matters, as to which Mr. Black will have the right of veto:(i) the designations of directors to our board, or (ii) a sale or other disposition of the Apollo Operating Group and/or its subsidiaries or any portion thereof,through a merger, recapitalization, stock sale, asset sale or otherwise, to an unaffiliated third party (other than through an exchange of Apollo Operating Groupunits and interests in our Class B share for Class A shares, transfers by a founder or a permitted transferee to another permitted transferee, or the issuance ofbona fide equity incentives to any of our non-founder employees) that constitutes (x) a direct or indirect sale of a ratable interest (or substantially ratableinterest) in each entity that constitutes the Apollo Operating Group or (y) a sale of all or substantially all of the assets of Apollo. Exchanges of Apollo OperatingGroup units for Class A shares that are not pro rata among our managing partners or in which each managing partner has the option not to participate are notsubject to Mr. Black’s right of veto.Subject to limited exceptions described in our operating agreement, our manager may not sell, exchange or otherwise dispose of all or substantially all ofour assets and those of our subsidiaries, taken as a whole, in a single transaction or a series of related transactions without the approval of holders of amajority of the aggregate number of voting shares outstanding; provided, however, that this does not preclude or limit our manager’s ability, in its solediscretion, to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets and those of our subsidiaries (including for thebenefit of persons other than us or our subsidiaries, including affiliates of our manager).We will reimburse our manager and its affiliates for all costs incurred in managing and operating us, and our operating agreement provides that ourmanager will determine the expenses that are allocable to us. The agreement does not limit the amount of expenses for which we will reimburse our manager andits affiliates.Board Composition and Limited Powers of Our Board of DirectorsFor so long as the Apollo control condition is satisfied, our manager shall (i) nominate and elect all directors to our board of directors, (ii) set the numberof directors of our board of directors and (iii) fill any vacancies on our board of directors. After the Apollo control condition is no longer satisfied, each of ourdirectors will be elected by the vote of a plurality of our shares entitled to vote, voting as a single class, to serve until his or her successor is duly elected orappointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal. Our board currently consists of four members.For so long as the Apollo control condition is satisfied, our manager may remove any director, with or without cause, at anytime. After such condition is nolonger satisfied, a director or the entire board of directors may be removed by the affirmative vote of holders of 50% or more of the total voting power of ourshares.As noted, so long as the Apollo control condition is satisfied, our manager will manage all of our operations and activities, and our board of directorswill have no authority other than that which our manager chooses to delegate to it. In the event that the Apollo control condition is not satisfied, our board ofdirectors will manage all of our operations and activities.Pursuant to a delegation of authority from our manager, which may be revoked, our board of directors has established and at all times will maintainaudit and conflicts committees of the board of directors that have the responsibilities described below under “—Committees of the Board of Directors—AuditCommittee” and “—Committees of the Board of Directors—Conflicts Committee.”Where action is required or permitted to be taken by our board of directors or a committee thereof, a majority of the directors or committee memberspresent at any meeting of our board of directors or any committee thereof at which there is a quorum shall be the act of our board or such committee, as thecase may be. Our board of directors or any committee thereof may also act by unanimous written consent.Under the Agreement Among Managing Partners, the vote of a majority of the independent members of our board of directors will decide the following:(i) in the event that a vacancy exists on the executive committee of 260Table of Contentsour managers and the remaining members of the executive committee cannot agree on a replacement, the independent members of our board of directors shallselect one of the two nominees to the executive committee of our manager presented to them by the remaining members of such executive committee to fill thevacancy on such executive committee and (ii) in the event that at any time after December 31, 2009, Mr. Black wishes to exercise his ability to cause (x) thedirect or indirect sale of a ratable interest (or substantially ratable interest) in each Apollo Operating Group entity, or (y) a sale of all or substantially all of ourassets, through a merger, recapitalization, stock sale, asset sale or otherwise, to an unaffiliated third party, the affirmative vote of the majority of theindependent members of our board of directors shall be required to approve such a transaction. We are not a party to the Agreement Among Managing Partners,and neither we nor our shareholders (other than our Strategic Investors, as described under “Item 13. Certain Relationships and Related Transactions—Lenders Rights Agreement—Amendments to Managing Partner Transfer Restrictions”) have any right to enforce the provisions described above. Suchprovisions can be amended or waived upon agreement of our managing partners at any time.Committees of the Board of DirectorsWe have established an audit committee as well as a conflicts committee. Our audit committee has adopted a charter that complies with current federaland NYSE rules relating to corporate governance matters. Our board of directors may from time to time establish other committees of our board of directors.Audit CommitteeThe primary purpose of our audit committee is to assist our manager in overseeing and monitoring (i) the quality and integrity of our financialstatements, (ii) our compliance with legal and regulatory requirements, (iii) our independent registered public accounting firm’s qualifications andindependence and (iv) the performance of our independent registered public accounting firm.The current members of our audit committee are Messrs. Ducey, Krongard, Silverman and Ms. Richards, although Mr. Silverman resigned from theaudit committee and all of his other positions with Apollo and its affiliates effective March 15, 2012. Ms. Richards currently serves as Chairman of thecommittee. Each of the members of our audit committee meets the independence standards and financial literacy requirements for service on an audit committeeof a board of directors pursuant to the Exchange Act and NYSE rules applicable to audit committees and corporate governance. Furthermore, our manager hasdetermined that Ms. Richards is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K. Our audit committee has acharter which is available at the Investor Relations section of our Internet website at www.agm.com.Conflicts CommitteeThe current members of our conflicts committee are Messrs. Ducey and Fribourg. Mr. Ducey currently serves as Chairman of the committee. Thepurpose of the conflicts committee is to review specific matters that our manager believes may involve conflicts of interest. The conflicts committee willdetermine whether the resolution of any conflict of interest submitted to it is fair and reasonable to us. Any matters approved by the conflicts committee will beconclusively deemed to be fair and reasonable to us and not a breach by us of any duties that we may owe to our shareholders. In addition, the conflictscommittee may review and approve any related person transactions, other than those that are approved pursuant to our related person policy, as describedunder “Item 13. Certain Relationships and Related Party Transactions—Statement of Policy Regarding Transactions with Related Persons,” and may establishguidelines or rules to cover specific categories of transactions.Code of Business Conduct and EthicsWe have a Code of Business Conduct and Ethics, which applies to, among others, our principal executive officer, principal financial officer andprincipal accounting officer. A copy of our Code of Business Conduct and 261Table of ContentsEthics is available on our Internet website at www.agm.com under the “Investor Relations” section. We intend to disclose any amendment to or waiver of theCode of Business Conduct and Ethics on behalf of an executive officer or director either on our Internet website or in an 8-K filing.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who own more than tenpercent of a registered class of the Company’s equity securities to file initial reports of ownership and reports of changes in ownership with the SEC andfurnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us orwritten representations from such persons that they were not required to file a Form 5 to report previously unreported ownership or changes in ownership, webelieve that, with respect to the fiscal year ended December 31, 2011, such persons complied with all such filing requirements, with the exception of latefilings, due to administrative oversight, of Form 4 reports filed on January 13, 2012, by Messrs. Donnelley, Giarraputo and Suydam, each of whom reportedgrants of restricted share units that were granted under our 2007 Omnibus Equity Incentive Plan on December 28, 2011. ITEM 11.EXECUTIVE COMPENSATIONCompensation Discussion and AnalysisOverview of Compensation PhilosophyAlignment of Interests with Investors and Shareholders. Our principal compensation philosophy is to align the interests of our managing partners,contributing partners, and other senior professionals with those of our Class A shareholders and fund investors. This alignment, which we believe is a keydriver of our success, has been achieved principally by our managing partners’ and contributing partners’ direct ownership of equity in our business in theform of Apollo Operating Group units, our contributing partners’ ownership of rights to receive a portion of the management fees and incentive income earnedfor management of our funds, the direct investment by both our managing partners and our contributing partners in our funds, and our practice of payingannual incentive compensation partly in the form of equity-based grants that are subject to vesting. As a result of this alignment, the compensation of ourprofessionals is closely tied to the performance of our businesses.Significant Personal Investment. Like our fund investors and Class A shareholders, our managing partners and contributing partners makesignificant personal investments in our funds (as more fully described under “Item 13. Certain Relationships and Related Party Transactions”), directly orindirectly, and our professionals who receive carried interests in our funds are generally required to invest their own capital in the funds they manage inamounts that are generally proportionate to the size of their participation in incentive income. We believe that this ownership helps to ensure that ourprofessionals have capital at risk and reinforces the linkage between the success of the funds we manage, the success of the company and the compensationpaid to our professionals.Long-Term Performance and Commitment. Most of our professionals have been issued RSUs, which provide rights to receive Class A shares anddistributions on those shares. The managing partners’ and contributing partners’ pecuniary interests in Apollo Operating Group units, like the RSUs, aresubject to a multi-year vesting schedule. A small number of our professionals, including our vice chairman, also received options to acquire Class A sharesthat are also subject to vesting. In addition, AAA incentive units held by certain of our professionals are subject to vesting. The vesting requirements for theseawards contribute to our professionals’ focus on long-term performance while enhancing retention of these professionals.Discouragement of Excessive Risk-Taking. Although investments in alternative assets can pose risks, we believe that our compensation programincludes significant elements that discourage excessive risk-taking while aligning the compensation of our professionals with our long-term performance. Forexample, notwithstanding 262Table of Contentsthat we accrue compensation for our carried interest programs (described below) as increases in the value of the portfolio investments are recorded in the relatedfunds, we generally make cash payments of carried interest to our employees only after profitable investments have actually been realized. This helps to ensurethat our professionals take a long-term view that is consistent with the company’s and our shareholders’ interests. Moreover, if a fund fails to achievespecified investment returns due to diminished performance of later investments, our carried interest program relating to that fund generally permits, for thebenefit of the limited partner investors in that fund, the return of carried interest payments previously made to us, our contributing partners or our otheremployees. These provisions discourage excessive risk-taking and promote a long-term view that is consistent with the interests of our investors andshareholders. Our general requirement that our professionals invest in the funds we manage further aligns the interests of our professionals, fund investorsand Class A shareholders. Finally, the vesting provisions of our RSUs, options, Apollo Operating Group units and AAA incentive units noted abovediscourage excessive risk-taking because the value of these units is tied directly to the long-term performance of our Class A shares.Compensation Elements for Named Executive OfficersConsistent with our emphasis on alignment of interests with our fund investors and Class A shareholders, compensation elements tied to theprofitability of our different businesses and that of the funds that we manage are the primary means of compensating our five executive officers listed in thetables below, or the “named executive officers.” The key elements of the compensation of our named executive officers during fiscal year 2011 are describedbelow. We distinguish among the compensation components applicable to our five named executive officers as appropriate in the below summary. Mr. Black isa member of the group referred to elsewhere in this report as the “managing partners.”Annual Salary. Each of our named executive officers receives an annual salary. After the expiration of the current terms of Mr. Black’s employmentagreement in July 2012, his compensation will be determined by our manager if the Apollo control condition is then satisfied, or otherwise by our board ofdirectors. The base salaries of our named executive officers are set forth in the Summary Compensation Table below, and those base salaries were set by ourmanaging partners in their judgment after considering the historic compensation levels of the officer, competitive market dynamics, and each officer’s level ofresponsibility and anticipated contributions to our overall success. We did not increase the base salary of any of our named executive officers in 2011.RSUs; Option Grant. Most of our professionals, including our named executive officers other than Messrs. Black and Silverman, received a PlanGrant (as defined below) of RSUs, either at the time of the Reorganization or in connection with their subsequent commencement of employment. In 2011, aportion of our professionals’ compensation (other than for Messrs. Black and Silverman) was also paid in the form of RSUs. We refer to these discretionaryannual grants of RSUs as Bonus Grants. Mr. Azrack also received a special grant of RSUs in 2011 consistent with the terms of his employment agreement,and Mr. Donnelly received a special grant of RSUs in 2011. Although he was not granted any RSUs, in 2011 Mr. Silverman received a grant of options topurchase our Class A shares that provided for vesting in two equal annual installments. The RSUs are subject to multi-year vesting and the Class A sharesunderlying the Plan Grant RSUs are subject to phased issuance over a period that generally extends beyond the vesting schedule. The Plan Grants and BonusGrants are described below under “—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Awards ofRestricted Share Units Under the Equity Plan.”Carried Interest. Carried interests with respect to our funds confer rights to receive distributions if a distribution is made to investors following therealization of an investment or receipt of operating profit from an investment by the fund. These rights provide their holders with substantial incentives toattain strong returns in a manner that does not subject their capital investment in the company to excessive risk. Distributions of carried interest generally aresubject to contingent repayment if the fund fails to achieve specified investment returns due to diminished performance of later investments. The actual grossamount of carried interest allocations available 263Table of Contentsis a function of the performance of the applicable fund. For these reasons, we believe that carried interest participation aligns the interests of our professionalswith those of our Class A shareholders and fund investors.We currently have two principal types of carried interest programs, dedicated and incentive pool. Messrs. Black, Azrack and Suydam have beenawarded rights to participate in a dedicated percentage of the carried interest income earned by the general partners of certain of our funds. Our financialstatements characterize the carried interest income allocated to participating professionals in respect of their dedicated interests as compensation, and accrualsof this compensation expense (rather than actual distributions paid) are therefore included in the “All Other Compensation” column of the summarycompensation table. Participation in dedicated carried interest is subject to vesting, which rewards long-term commitment to the firm and thereby enhances thealignment of participants’ interests with the company.We adopted the performance based incentive arrangement referred to as the incentive pool in 2011 to further align the overall compensation of ourprofessionals to the realized performance of our business. The incentive pool provides for discretionary compensation based on carried interest realizationsearned by us during the year and enhances our capacity to offer competitive compensation opportunities to our professionals. Under this arrangement,Mr. Donnelly, among other of our professionals, was awarded incentive pool compensation based on carried interest realizations we earned during 2011.Allocations to participants in the incentive pool contain both a fixed component ($5,000 in 2011) and a discretionary component, both of which may varyyear-to-year, including as a result of our overall realized performance and the contributions and performance of each participant. Our financial statementscharacterize the carried interest income allocated to participating professionals in respect of incentive pool interests as compensation, and because aparticipant’s level of participation in the incentive pool is variable from year to year, the “All Other Compensation” column of the summary compensationtable includes actual distributions paid from the incentive pool.Determination of Compensation of Named Executive OfficersOur managing partners make all final determinations regarding named executive officer compensation. Decisions about the variable elements of a namedexecutive officer’s compensation, including participation in our carried interest programs and grants of equity-based awards, are based primarily on ourmanaging partners’ assessment of such named executive officer’s individual performance, operational performance for the department or division in which theofficer (other than a managing partner) serves, and the officer’s impact on our overall operating performance and potential to contribute to long-termshareholder value. In evaluating these factors, our managing partners do not utilize quantitative performance targets but rather rely upon their judgment abouteach named executive officer’s performance to determine an appropriate reward for the current year’s performance. The determinations by our managingpartners are ultimately subjective, are not tied to specified annual, qualitative or individual objectives or performance factors, and reflect discussions amongthe managing partners. Key factors that our managing partners consider in making such determinations include the officer’s type, scope and level ofresponsibilities and the officer’s overall contributions to our success. Our managing partners also consider each named executive officer’s prior-yearcompensation, the appropriate balance between incentives for long-term and short-term performance, competitive market dynamics and the compensation paidto the named executive officer’s peers within the company.Note on Distributions on Apollo Operating Group UnitsWe note that all of our managing partners and contributing partners, including Mr. Black, beneficially own Apollo Operating Group units. In particular,as of December 31, 2011, the managing partners owned, through their interest in BRH and Holdings, approximately 58% of the total limited partner interestsin the Apollo Operating Group. When made, distributions on these units (which are made on both vested and unvested units) are generally in the same amountper unit as distributions made to us in respect of the Apollo Operating Group units we hold. Accordingly, although distributions on Apollo Operating Groupunits are distributions on equity rather than compensation, they play a central role in aligning our managing partners’ and contributing partners’ interests withthose of our Class A shareholders, which is consistent with our compensation philosophy. 264Table of ContentsSummary Compensation TableThe following summary compensation table sets forth information concerning the compensation earned by, awarded to or paid to our principal executiveofficer, our principal financial officer, and our three other most highly compensated executive officers for the fiscal year ended December 31, 2011. Managingpartners Messrs. Harris and Rowan are not included in the table because their compensation, as tabulated in accordance with applicable rules, does not resultin either of them being among the three most highly compensated executive officers after our principal executive and principal financial officers. Our managingpartners’ earnings derive predominantly from distributions they receive as a result of their indirect ownership of Apollo Operating Group units and their rightsunder the tax receivable agreement (described elsewhere in this report, including above under “Item 5. Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy”), rather than from compensation, and accordingly are notincluded in the below tables. The officers named in the table are referred to as the named executive officers. Name and Principal Position Year Salary($) Bonus($) StockAwards($) OptionAwards($) All OtherCompensation($) Total($) Leon Black, 2011 100,000 — — — 273,229 373,229 Chairman, Chief 2010 100,000 — 7,391,825 — 1,412,181 8,904,006 Executive Officer and Director 2009 100,000 — — — 757,391 857,391 Gene Donnelly, 2011 1,000,000 — 2,049,194 — 1,360,000 4,409,194 Chief Financial Officerand Vice President 2010 500,000 1,360,000 3,630,000 — — 5,490,000 Joseph Azrack,Managing Director, Real Estate 2011 500,000 — 11,149,657 — 519,750 12,169,407 Henry Silverman, 2011 7,000,000 — — 4,727,782 46,384 11,774,166 Vice Chairman and 2010 7,000,000 — — — 39,075 7,039,075 Director 2009 6,416,667 — — — 583,333 7,000,000 John Suydam, 2011 3,000,000 — 1,555,133 — (947,921) 3,607,212 Chief Legal Officer and 2010 3,000,000 1,487,500 945,566 — 3,953,300 9,386,366 Chief Compliance Officer 2009 3,000,000 737,500 228,000 — 974,520 4,940,020 (1)Represents cash bonuses earned and/or profits interests received in respect of amounts waived for investment pursuant to the terms of a management feewaiver program.(2)Represents the aggregate grant date fair value of stock awards granted, as applicable, computed in accordance with FASB ASC Topic 718. See note 14to our consolidated financial statements included elsewhere in this report for further information concerning the assumptions made in valuing our RSUawards. The amounts shown do not reflect compensation actually received by the named executive officers, but instead represent the aggregate grant datefair value of the awards. Mr. Black’s 2010 amount represents an allocation of Apollo Operating Group units to him in accordance with the AgreementAmong Managing Partners upon the forfeiture of such Apollo Operating Group units by a retiring contributing partner.(3)Represents the aggregate grant date fair value of option awards (specifically, Mr. Silverman’s options to purchase our Class A shares) granted in 2011,computed in accordance with FASB ASC Topic 718. See note 14 to our consolidated financial statements included elsewhere in this prospectus forfurther information concerning the assumptions made in valuing our share options. The amount shown does not reflect compensation actually receivedby Mr. Silverman, but instead represents the aggregate grant date fair value of the award.(4)Amounts represent, in part, compensation expense recorded by us in the year shown in respect of accrued or realized (without duplication) dedicatedcarried interest allocations to Messrs. Black and Suydam. For 265(1)(2)(3)(4)Table of Contents GAAP reporting purposes, accrued carried interest related to investments is classified as compensation expense for the relevant period, whether or notrealized. Accordingly, the amounts include both actual cash distributions and unrealized amounts accrued in respect of the dedicated carried interests ofthese named executive officers. Compensation expense may also be negative in the event of a reversal of previously allocated carried interest due tonegative adjustments in the fair value or amount actually realized on certain portfolio investments. For unrealized investments, the ultimate amount ofactual dedicated carried interest distributions that may be generated in connection with fund investments and subsequently distributed to our namedexecutive officers may be more or less than the amounts indicated. Additionally, such amounts are generally subject to vesting conditions and toclawback in certain instances.For 2011, amounts also represent incentive pool distributions and/or profits interests received in respect of amounts waived for investment pursuant tothe terms of a management fee waiver program ($1,360,000 for Mr. Donnelly and $505,000 for Mr. Suydam).The All Other Compensation column also includes the following amounts for 2011: (a)Sirius XM Radio stock options having a grant date fair value, computed in accordance with FASB ASC Topic 718, of $70,000, which weregranted to Mr. Black by Sirius XM Radio, a portfolio company of one of our funds, for his service as a member of its Board of Directors. Alsorepresents restricted share units having a fair value, computed in accordance with FASB ASC Topic 718, of $519,750, which were granted toMr. Azrack by ARI, a publicly traded real estate investment trust managed by one of our subsidiaries, in respect of Mr. Azrack’s service to ARI. (b)Costs relating to company-provided cars and drivers for the business and personal use of Messrs. Black, Silverman and Suydam. We providethis benefit because we believe that its cost is outweighed by the convenience, increased efficiency and added security that it offers. The personaluse cost was approximately $163,536 for Mr. Black, $39,884 for Mr. Silverman and $19,316 for Mr. Suydam. For Messrs. Black andSilverman, this amount includes both fixed and variable costs, including lease costs, driver compensation, driver meals, fuel, parking, tolls,repairs, maintenance and insurance. For Mr. Suydam, this amount includes the costs to the company associated with his use of a car service. (c)Tickets to sporting events for Mr. Black’s personal use having an aggregate incremental cost (based on the full price of the tickets used) of$31,444.Except as discussed above in paragraphs (b) and (c) of this footnote 4, no 2011 perquisites or personal benefits individually exceeded the greater of$25,000 or 10% of the total amount of all perquisites and other personal benefits reported for the named executive officer. The cost of excess liabilityinsurance provided to our named executive officers falls below this threshold. None of Messrs. Donnelly or Azrack received perquisites or personalbenefits in 2011, except for incidental benefits having an aggregate value of less than $10,000 per individual. Our named executive officers alsoreceive occasional secretarial support with respect to personal matters. We incur no incremental cost for the provision of such additional benefits.Finally, Mr. Black makes business and personal use of various aircraft in which we have fractional interests, and he bears the aggregate incrementalcost of his personal usage. Accordingly, no such amount is included in the Summary Compensation Table.Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards TableEmployment, Non-Competition and Non-Solicitation Agreement with Chief Executive OfficerIn connection with the Reorganization, we entered into an employment, non-competition and non-solicitation agreement with Mr. Black, our chiefexecutive officer and a member of our executive committee. The term of his agreement is the five years concluding July 13, 2012. He has the right to terminatehis employment voluntarily at any time, but we may terminate his employment only for cause or by reason of disability. 266Table of ContentsMr. Black is entitled during his employment to an annual salary of $100,000 and to participate in our employee benefit plans, as in effect from time totime. He currently participates only in the company’s group health plans.The employment agreement requires Mr. Black to protect the confidential information of Apollo both during and after employment. In addition, until oneyear after his employment terminates, Mr. Black is required to refrain from soliciting employees under specified circumstances or interfering with ourrelationships with investors and to refrain from competing with us in a business that involves primarily (i.e., more than 50%) third-party capital, whether ornot the termination occurs during the term of the agreement or thereafter. These post-termination covenants survive any termination or expiration of theAgreement Among Managing Partners.We may terminate Mr. Black’s employment during the term of the employment agreement solely for cause or by reason of his disability (as such termsare defined in his employment agreement). If Mr. Black becomes subject to a potential termination for cause or by reason of disability, our manager mayappoint an investment professional to perform his functional responsibilities and duties until cause or disability definitively results in his termination or isdetermined not to have occurred, but the manager may so appoint an investment professional only if Mr. Black is unable to perform his responsibilities andduties or, as a matter of fiduciary duty, should be prohibited from doing so. During any such period, Mr. Black shall continue to serve on the executivecommittee of our manager unless otherwise prohibited from doing so pursuant to the Agreement Among Managing Partners.Under his employment agreement, if we terminate Mr. Black’s employment for cause or his employment is terminated by reason of death or disability,or if he terminates his employment voluntarily, he will be paid only his accrued but unpaid salary through the date of termination.Employment, Non-Competition and Non-Solicitation Agreement with Chief Financial OfficerOn May 13, 2010, we entered into an employment, non-competition and non-solicitation agreement with Gene Donnelly, our chief financial officer.Under his employment agreement, Mr. Donnelly is entitled to an annual salary of $1,000,000 and to an annual bonus determined by the managing partners intheir discretion. Mr. Donnelly’s annual target bonus is 170% of his base salary. During his employment, Mr. Donnelly is eligible to participate in our employeebenefit plans as in effect from time to time. If his employment is terminated without cause or by Mr. Donnelly for good reason (as defined in the employmentagreement), he shall be entitled to cash severance of six months’ base salary paid in monthly installments.The employment agreement requires Mr. Donnelly to protect the confidential information of Apollo both during and after employment. In addition, theagreement provides that during the term and for 12 months after employment, Mr. Donnelly will refrain from soliciting our employees, interfering with ourrelationships with investors and other business relations, or competing with us in a business that manages or invests in assets substantially similar to Apolloor its affiliates, whether or not the termination occurs during the term of the agreement or thereafter. Mr. Donnelly is required to give us 90 days’ notice prior tohis resignation for any reason.Employment, Non-Competition and Non-Solicitation Agreement with Vice ChairmanWe entered into an employment, non-competition and non-solicitation agreement with Henry Silverman, effective February 1, 2009. On February 24,2012, Mr. Silverman resigned from all of his positions with us, effective March 15, 2012. The employment agreement’s term would otherwise have ended onDecember 31, 2012. Under his employment agreement, Mr. Silverman was entitled to an annual salary of $7,000,000. The employment agreement providedthat if Apollo terminated Mr. Silverman’s employment prior to the last day of the term, he would have been entitled to receive, in a lump sum in cash, theremaining compensation due to him with respect to his services through the end of the term. In connection with Mr. Silverman’s resignation, he entered into aseparation agreement entitling him to a lesser cash amount as described below under “—Potential Payments upon Termination or Change in Control.” 267Table of ContentsThe employment agreement requires Mr. Silverman to protect the confidential information of Apollo both during and after employment. Mr. Silverman isalso party to a share option agreement that provides, both during and for a 12-month period after employment, that he will refrain from soliciting ouremployees or interfering with our relationships with investors and will refrain from competing with us. In connection with Mr. Silverman’s resignation weagreed that his noncompetition obligations during such 12-month period will apply only to a specified list of entities. Mr. Silverman’s obligations regardingconfidentiality, solicitation and competition survive his resignation.Employment, Non-Competition and Non-Solicitation Agreement with Managing Director—Real EstateOn June 2, 2008, we entered into an employment, non-competition and non-solicitation agreement with Mr. Azrack, our Managing Director—Real Estate.Under his agreement, Mr. Azrack is entitled to participate in management and incentive fees earned (other than carried interest from private equity-type funds)by us from the investment management activities we conduct for pooled investment vehicles that have a primary investment objective to invest in real estateand companies that are primarily engaged in the management, ownership or development of real estate (we refer to these as “real estate funds”), on assets undermanagement less all related expenses. His annual base pay of $500,000 constitutes a draw against these net profits. Mr. Azrack is also entitled to carriedinterests in private equity-type real estate funds that we manage, which carried interest rights are subject to vesting over a five-year period. During hisemployment, Mr. Azrack is eligible to participate in our employee benefit plans as in effect from time to time. A portion of Mr. Azrack’s annual compensationis subject to payment in the form of RSUs that vest over time.If Mr. Azrack’s employment is terminated without cause or he resigns for good reason, he is entitled to a cash lump sum based on unpaid net profitsearned by us from the investment management activities conducted by us for real estate funds (other than private equity-type real estate funds) for suchquarterly period up to, and including, his termination date, and he becomes immediately vested in 75% of the aggregate carried interest previously awarded tohim in any private equity-type real estate fund that commenced investing prior to such termination.The agreement entitles Mr. Azrack to additional RSU grants on the last day of any calendar quarter in which the aggregate assets under management ofreal estate funds, as determined in good faith by our executive committee, reach dollar thresholds set forth in the agreement. Any such additional RSUs shallvest in equal installments over the 12 quarters following the grant date.Mr. Azrack’s agreement requires him to protect our confidential information at all times. It also provides that during Mr. Azrack’s service with us, andfor six months after his termination without cause or resignation for good reason (12 months after his termination for any other reason), Mr. Azrack willrefrain from soliciting our employees, interfering with our relationships with investors or other business relations, and competing with us in a business thatmanages or invests in assets substantially similar to Apollo or its affiliates. On 90 days’ notice, Mr. Azrack may resign without good reason and we mayterminate his employment without cause.Awards of Restricted Share Units Under the Equity PlanOn October 23, 2007, we adopted our 2007 Omnibus Equity Incentive Plan. Grants of RSUs under the plan have been made to certain of our namedexecutive officers primarily pursuant to two programs, which we call the “Plan Grants” and the “Bonus Grants.” Following the Reorganization, Plan Grantswere made to Mr. Suydam and a broad range of our other employees. Plan Grants have also been made to subsequent hires, including Messrs. Azrack andDonnelly. The Plan Grants generally vest over six years (although Mr. Azrack’s Plan Grant vests over three and one-half years), with the first installmentbecoming vested approximately one year after grant and the balance vesting thereafter in equal quarterly installments. As we pay ordinary distributions on ouroutstanding Class A shares, Plan Grants pay distribution equivalents on vested RSUs. Once vested, the Class A shares underlying Plan Grants generally areissued on fixed dates, with 7.5% of the shares generally issued once 268Table of Contentseach year over a four-year period and the remaining 70% issued in seven equal quarterly installments commencing in the fifth year. The administrator of the2007 Omnibus Equity Incentive Plan determines when shares issued pursuant to the Plan Grants may be disposed of, except that a participant will generallybe permitted to sell shares if necessary to cover taxes. Pursuant to the RSU award agreement provided in connection with his Plan Grant, Mr. Suydam issubject to non-competition restrictions during employment and for up to 21 months after employment termination.During the restricted period set forth in a participant’s award agreement evidencing his Plan Grant (or, for Mr. Donnelly, his employment agreement), theparticipant will not (i) engage in any business activity in which the company operates, (ii) render any services to any competitive business or (iii) acquire afinancial interest in, or become actively involved with, any competitive business (other than as a passive holding of less than a specified percentage of publiclytraded companies). In addition, the grant recipient will be subject to non-solicitation, non-hire and non-interference covenants during employment and for up totwo years thereafter. Each grant recipient is generally also bound to a non-disparagement covenant with respect to us and the managing partners and toconfidentiality restrictions. Any resignation by a grant recipient shall generally require at least 90 days’ notice. Any restricted period applicable to the grantrecipient will commence after the notice of termination period.The RSUs advance several goals of our compensation program. The Plan Grants align employee interests with those of our shareholders by making ouremployees, upon delivery of the underlying Class A shares, shareholders themselves. Because they vest over time, the Plan Grants reward employees forsustained contributions to the company and foster retention. The size of the Plan Grants is determined by the Plan administrator based on the grantee’s level ofresponsibility and contributions to the company. The restrictive covenants contained in the RSU agreements reinforce our culture of fiduciary protection of ourinvestors by requiring RSU holders to abide by the provisions regarding non-competition, confidentiality and other limitations on behavior described in theimmediately preceding paragraph.In 2011 we also awarded special RSU grants to each of Messrs. Donnelly and Azrack. Mr. Azrack’s grant was awarded in accordance with the terms ofhis employment agreement.The Bonus Grants are also grants of RSUs under the 2007 Omnibus Equity Incentive Plan. However, the Bonus Grants constitute payment of a portionof the annual compensation earned by certain of our professionals, including Messrs. Donnelly and Suydam, subject to the employee’s continued servicethrough the vesting dates. Our named executive officers’ Bonus Grants differ from their Plan Grants in the following principal ways: • The RSU Shares underlying Bonus Grants are scheduled to vest in three equal annual installments. • The RSU Shares underlying Bonus Grants are issued not later than March 15 of the year after the year after in which they vest. • Distribution equivalents accrue on Bonus Grant RSUs from the grant date, rather than from the vesting date. • Bonus Grants do not contain restrictive covenants (however, an individual who has received both a Plan Grant and a Bonus Grant remainssubject to the restrictive covenants contained in his or her Plan Grant).Award of Options Under the Equity PlanMr. Silverman is the sole 2011 named executive officer to whom we have granted options to acquire our Class A shares. The options, which were 50%vested on December 31, 2011, were granted to him on January 21, 2011 and were scheduled to be fully vested on December 31, 2012 had his employmentcontinued until such date. The options aligned Mr. Silverman’s interests with those of our shareholders by providing him with an interest in respect of ourClass A shares and their vesting schedule provided him with an incentive to remain in our employment. 269thTable of ContentsGrants of Plan-Based AwardsThe following table presents information regarding the awards granted to the named executive officers under a plan in 2011. All such awards weregranted under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan. Name Award Grant Date StockAwards:Number ofShares ofStock orUnits OptionAwards:Number ofShares ofStockUnderlyingOptions Exercise orBasePrice ofOptionAwards($/Share) Grant DateFair Value ofStock andOptionAwards($) Leon Black — — — — — — Gene Donnelly Bonus Grant RSUs December 28, 2011 27,575 — — 301,119 Special RSU Grant October 14, 2011 110,000 — — 1,017,500 Bonus Grant RSUs March 15, 2011 42,500 730,575 Joseph Azrack Bonus Grant RSUs March 15, 2011 140,156 — — 2,409,282 Special RSU Grant February 15, 2011 612,500 — — 8,740,375 Henry Silverman Options to acquire Class Ashares January 21, 2011 — 555,556 $9.00 4,727,782 John Suydam Bonus Grant RSUs December 28, 2011 41,565 — — 453,890 Bonus Grant RSUs March 15, 2011 64,063 — — 1,101,243 (1)Represents the aggregate number of RSUs covering our Class A shares (for March 15, 2011 Bonus Grants, one third vested at December 31, 2011; forDecember 28, 2011 Bonus Grants, none vested in 2011). For a discussion of these grants, please see the discussion above under “—NarrativeDisclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Awards of Restricted Share Units Under the Equity Plan.”While we historically awarded Bonus Grants in March of the year following the year in which the services were primarily performed (as we did inMarch 2011 for the Bonus Grants relating primarily to service in 2010), in December 2011 we awarded Bonus Grants in respect of services performedprimarily in 2011. For this reason the Bonus Grant values shown above reflect compensation for both 2010 and 2011. We note that the vesting scheduleapplicable to the December 2011 Bonus Grants is identical (vesting in three equal annual installments on December 31st of 2012, 2013 and 2014) towhat it would have been had the grants not been made until March 2012. One third of Mr. Donnelly’s special RSU grant vests on September 30, 2012and the balance vests in eight equal quarterly installments thereafter. Mr. Azrack’s special RSU grant vests in equal quarterly installments over the 12quarters that began March 31, 2011.(2)Represents the aggregate number of options to purchase our Class A shares (50% of which vested on December 31, 2011). For a discussion of thisgrant, please see the discussion above under “—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Award of Options Under the Equity Plan.”(3)Represents the aggregate grant date fair value of the RSUs (and, where applicable, options) granted in 2011, computed in accordance with ASC Topic718. The amount shown does not reflect compensation actually received, but instead represents the aggregate grant date fair value of the award. 270(1)(2)(3)Table of ContentsOutstanding Equity Awards at Fiscal Year-EndThe following table presents information regarding the outstanding unvested equity awards made by us to each of our named executive officers on orprior to December 31, 2011. Option Awards Stock Awards Name Source of Award Number ofSharesUnderlyingUnexercisedOptions (#Exercisable) Number ofSharesUnderlyingUnexercisedOptions (#Unexercisable) OptionExercisePrice ($/Share) OptionExpirationDate Number ofUnearnedShares,Units orOther RightsThat HaveNot Vested Market or PayoutValue of UnearnedShares,Units or OtherRights ThatHave Not Vested($) Leon Black Apollo Operating Group Units 15,576,264 193,301,436 Gene Donnelly 2007 Omnibus 360,000 4,467,600 Equity Incentive 110,000 1,365,100 Plan 28,334 351,625 27,575 342,206 Joseph Azrack 2007 Omnibus 77,861 966,255 Equity Incentive 408,333 5,067,413 Plan 62,500 775,625 93,438 1,159,566 Henry Silverman 2007 Omnibus Equity Incentive Plan 277,778 277,778 9.00 January 21,2021 — — John Suydam 2007 Omnibus 286,459 3,554,956 Equity Incentive 28,473 353,350 Plan 42,709 530,019 41,565 515,822 (1)Vest in equal monthly installments over the 12 months beginning January 1, 2012.(2)Plan Grant RSUs that vest in 18 equal quarterly installments beginning March 31, 2012.(3)RSUs of which one third (36,666) vest on September 30, 2012, with the balance vesting in eight equal quarterly installments beginning December 31,2012.(4)RSUs that vest in equal annual installments on December 31 of each of 2012 and 2013.(5)RSUs that vest in equal annual installments on December 31 of each of 2012, 2013 and 2014.(6)Plan Grant RSUs that vest on March 31, 2012.(7)RSUs that vest in eight equal quarterly installments beginning March 31, 2012.(8)RSUs that vest on December 31, 2012.(9)Plan Grant RSUs that vest in six equal quarterly installments beginning March 31, 2012.(10)Amounts calculated by multiplying the number of unvested Apollo Operating Group units held by the named executive officer by the closing price of$12.41 per Class A share on December 31, 2011.(11)Amounts calculated by multiplying the number of unvested RSUs held by the named executive officer by the closing price of $12.41 per Class A shareon December 31, 2011. The amounts shown for the unvested Plan Grant RSUs, and Mr. Azrack’s footnote (7) grant, do not reflect the discount thatwould be applied to such RSUs in light of the fact that the holders thereof are not entitled to receive distribution equivalents.(12)In connection with his March 2012 resignation from employment, Mr. Silverman exercised his 277,778 options that had vested on December 31, 2011and forfeited his 277,778 unvested options. 271(1)(10)(2)(11)(3)(11)(4)(11)(5)(11)(6)(11)(7)(11)(8)(11)(4)(11)(12)(9)(11)(8)(11)(4)(11)(5)(11)Table of ContentsOption Exercises and Stock VestedThe following table presents information regarding the number of outstanding initially unvested RSUs made to our named executive officers that vestedduring 2011. No vested options were exercised in 2011. The amounts shown below do not reflect compensation actually received by the named executiveofficers, but instead are calculations of the number of RSUs or Apollo Operating Group units that vested during 2011 based on the closing price of ourClass A shares on the date of vesting. Stock Awards Name Type of Award Number of SharesAcquired on Vesting Value Realized on Vesting($) Leon Black Apollo Operating Group Units 15,576,264 215,471,652 Gene Donnelly RSUs 154,166 1,652,800 Joseph Azrack RSUs 624,827 8,812,394 Henry Silverman Options to Acquire Class A Shares — — John Suydam RSUs 274,132 3,793,948 (1)Amounts calculated by multiplying the number of Apollo Operating Group units beneficially held by the named executive officer that vested on eachmonth-end vesting date in 2011 by the closing price per Class A share on that date.(2)Amounts calculated by multiplying the number of RSUs held by the named executive officer that vested on each applicable quarter-end or year-endvesting date in 2011 by the closing price per Class A share on that date. Class A shares underlying these vested RSUs are issued to the named executiveofficer in accordance with the schedules described above under “—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Awards of Restricted Share Units Under the Equity Plan.”(3)No options to purchase Class A shares were exercised by any named executive officer in 2011.Potential Payments upon Termination or Change in ControlNone of the named executive officers is entitled to payment or other benefits in connection with a change in control.Mr. Black’s employment agreement does not provide for severance or other payments or benefits in connection with an employment termination.Pursuant to the Agreement Among Managing Partners, Mr. Black vests in his interest in Apollo Operating Group units in 72 equal monthly installments. Forpurposes of these vesting provisions, Mr. Black is credited for his employment with us since January 1, 2007. Upon a termination for cause, 50% of histhen-unvested Pecuniary Interest in Apollo Operating Group units will vest. Upon a termination as a result of his death or disability, 100% of his interest shallvest. We may not terminate Mr. Black except for cause or by reason of disability (as such terms are defined in his employment agreement).Upon Mr. Donnelly’s termination of employment without cause or by Mr. Donnelly for good reason (as such terms are defined in his employmentagreement), his employment agreement entitles him to cash severance of six months’ base salary, paid in monthly installments.If Mr. Azrack’s employment is terminated without cause or he resigns for good reason, he is entitled to a cash lump sum based on unpaid net profitsearned by us from the real estate business for such quarterly period up to, and including, his termination date, and he becomes immediately vested in 75% ofthe aggregate carried interest previously awarded to him in any private equity-type pooled investment vehicle that has a primary investment objective to investin real estate and companies that are primarily engaged in the management, ownership or development of real estate, if it commenced investing prior to suchtermination.Had Mr. Silverman’s employment been terminated by us, under his employment agreement he would have been entitled to payment of his salary throughDecember 31, 2013, and if such termination had been without 272(3)(1)(2)(2)(2)Table of Contentscause, to accelerated vesting of all of his unvested options. However, on February 24, 2012, Mr. Silverman resigned his employment with us effectiveMarch 15, 2012 and in connection with that resignation entered into a separation agreement entitling him to a payment of $916,667 on March 5, 2012, apayment of $1,500,000 one year later, and no additional option vesting.Our named executive officers’ post-employment obligations, and their entitlements upon employment termination, are described above in the discussionof employment, non-competition and non-solicitation agreements and the discussion titled, “Awards of Restricted Share Units Under the Equity Plan,” in eachcase in the section, “—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table.” The named executive officers’obligations during and after employment were considered by the managing partners in determining appropriate post-employment payments and benefits for thenamed executive officers.The following table lists the estimated amounts that would have been payable to each of our named executive officers in connection with a terminationthat occurred on the last day of our last completed fiscal year and the value of any additional equity that would vest upon such termination (where indicated,this table also shows the actual amount that became payable to Mr. Silverman in connection with his resignation from employment effective March 15, 2012).When listing the potential payments to named executive officers under the plans and agreements described above, we have assumed that the applicabletriggering event occurred on December 31, 2011 and that the price per share of our common stock was $12.41, which is equal to the closing price on suchdate. For purposes of this table, RSU and option acceleration values are based on the $12.41 closing price. Name Reason for Employment Termination Estimated Valueof CashPayments (BaseSalary andAnnual BonusAmounts)($) Estimated Valueof EquityAcceleration($) Leon Black Cause; executive’s resignation — 96,650,718 Death, disability — 193,301,436 Gene Donnelly Without cause; by executive for good reason 500,000 3,087,453 Death, disability — 3,087,453 Joseph Azrack Without cause; by executive for good reason — 6,033,668 Death, disability — 3,016,834 Henry Silverman By the Company 7,000,000 3,447,225 Disability 7,000,000 1,723,613 Death — 1,723,613 Actual resignation effective March 15, 2012 2,416,667 — John Suydam Without cause; by executive for good reason; death, disability — 2,035,389 (1)This amount would have been payable to Mr. Donnelly had his employment been terminated by the company without cause (and other than by reason ofdeath or disability) or for good reason on December 31, 2011.(2)This amount would have been payable to Mr. Silverman had his employment been terminated by the company on December 31, 2011.(3)This amount became payable to Mr. Silverman in connection with his actual resignation from employment effective March 15, 2012.(4)This amount represents the additional equity vesting that Mr. Black would have received had his employment terminated in the circumstances describedin the column, “Reason for Employment 273(4)(4)(1)(5)(5)(5)(5)(2)(5)(2)(5)(5)(3)(5)Table of Contents Termination,” on December 31, 2011, based on the closing price of a Class A share on such date. In the event of Mr. Black’s termination by reason ofdeath or disability, his pecuniary interest in Apollo Operating Group units would vest in full. Pursuant to his employment agreement, Mr. Black’semployment is not subject to termination by the company without cause.(5)This amount represents the additional equity vesting that the named executive officer would have received had his employment terminated in thecircumstances described in the column, “Reason for Employment Termination,” on December 31, 2011, based on the closing price of a Class A shareon such date. Please see our Outstanding Equity Awards at Fiscal Year-End table for information regarding the named executive officer’s unvested equityholdings as of December 31, 2011.Director CompensationWe do not pay additional remuneration to our employees, including Messrs. Black and Silverman, for their service on our board of directors. The 2011compensation of Messrs. Black and Silverman is set forth above on the Summary Compensation Table. Mr. Silverman has resigned from our board ofdirectors effective March 15, 2012.Each independent director receives (1) an annual director fee of $100,000, (2) an additional annual director fee of $25,000 if he or she a member of theaudit committee, (3) an additional annual director fee of $10,000 if he or she is a member of the conflicts committee, (4) an additional annual director fee of$25,000 if he or she serves as the chairperson of the audit committee, and (5) an additional annual director fee of $15,000 if he or she serves as thechairperson of the conflicts committee. In addition, each independent director was granted 18,543 RSUs on June 30, 2011 pursuant to our 2007 OmnibusEquity Incentive Plan. These RSUs vest in equal annual installments over three years, subject to the director’s continued service.The following table provides the compensation for our independent directors during the year ended December 31, 2011: Name Fees Earned or Paid inCash Stock Awards Total Michael Ducey $108,065 $291,681 $399,746 Paul Fribourg $83,091 $291,681 $374,772 A. B. Krongard $94,422 $291,681 $386,103 Pauline Richards $113,306 $291,681 $404,987 (1)Includes $24,247 paid to Mr. Ducey for observing our board meetings from the date he was identified for appointment as a director until the date hisappointment became effective.(2)Represents the aggregate grant date fair value of the 18,543 RSUs granted to each of the independent directors during the year ended December 31, 2011,calculated in accordance with ASC Topic 718. All 18,543 RSUs granted to each independent director remained outstanding on December 31, 2011. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe following table sets forth information regarding the beneficial ownership of our Class A shares as of March 7, 2012 by (i) each person known to usto beneficially own more than 5% of voting Class A shares of Apollo Global Management, LLC, (ii) each of our directors, (iii) each of our named executiveofficers and (iv) all directors and executive officers as a group.Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, each person named in the table below has sole votingand investment power with respect to all of the Class A shares and interests in our Class B share shown as beneficially owned by such person, except asotherwise set forth in the 274(2)(1)Table of Contentsnotes to the table and pursuant to applicable community property laws. Unless otherwise indicated, the address of each person named in the table is c/o ApolloGlobal Management, LLC, 9 West 57th Street, New York, NY 10019.In respect of our Class A shares, the table set forth below assumes the exchange by Holdings of all Apollo Operating Group units for our Class A shareswith respect to which the person listed below has the right to direct such exchange pursuant to the exchange agreement described under “Item 13. CertainRelationships and Related Party Transactions—Exchange Agreement,” and the distribution of such shares to such person as a limited partner of Holdings. Class A Shares Beneficially Owned Class B Share Beneficially Owned Number ofShares Percent TotalPercentageof VotingPower Number ofShares Percent TotalPercentageof VotingPower Leon Black 92,727,166 42.3% 78.4% 1 100% 78.4% Joshua Harris 59,008,262 31.8% 78.4% 1 100 78.4% Marc Rowan 59,008,262 31.8% 78.4% 1 100 78.4% Henry Silverman 313,002 * * — — — Pauline Richards — — — — — — Alvin Bernard Krongard 250,000 * * — — — Michael Ducey — — — — — — Paul Fribourg 19,000 * * — — — Gene Donnelly 338,060 * * — — — Joseph Azrack 1,183,154 * * — — — John Suydam 1,050,269 * * — — — All directors and executive officers as a group (fourteenpersons) 218,795,948 63.8% 70.7% 1 100 78.4% BRH — — — 1 100 78.4% AP Professional Holdings, L.P. 240,000,000 65.5% 78.4% — — — 5% Stockholders: Ivy Investment Management 13,470,850 10.7% 4.4% — — — Fidelity Management Research Company 7,887,871 6.2% 2.6% *Represents less than 1%.(1)The percentage of beneficial ownership of our Class A shares is based on voting and non-voting Class A shares outstanding.(2)The total percentage of voting power is based on voting Class A shares and the Class B share, in each case immediately after this offering.(3)Does not include any Class A shares owned by Holdings with respect to which this individual, as one of the three owners of all of the interests in BRH,the general partner of Holdings, or as a party to the Agreement Among Managing Partners described under “Item 13. Certain Relationships and RelatedParty Transactions—Agreement Among Managing Partners” or the Managing Partner Shareholders Agreement described under “Item 13. CertainRelationships and Related Party Transactions—Managing Partner Shareholders Agreement,” may be deemed to have shared voting or dispositive power.Each of these individuals disclaim any beneficial ownership of these shares, except to the extent of their pecuniary interest therein.(4)BRH, the holder of the Class B share, is one third owned by Mr. Black, one third owned by Mr. Harris and one third owned by Mr. Rowan. Pursuantto the Agreement Among Managing Partners, the Class B share is to be voted and disposed by BRH based on the determination of at least two of the threemanaging partners; as such, they share voting and dispositive power with respect to the Class B share. 275(1)(2)(2)(3)(4)(3)(4)(3)(4)(5)(6)(7)(8)(4)(9)(10)(11)Table of Contents(5)On February 24, 2012, Henry Silverman resigned as a Director of the Board of Directors of the Company effective March 15, 2012. Mr. Silvermanalso resigned from his employment at the Company and its subsidiaries, from him membership on the executive committee of the Company’s managerand from all other positions he holds at the Company and its subsidiaries, affiliates and portfolio companies, all effective March 15, 2012.(6)Includes 122,500 restricted share units covering Class A shares which have vested or with respect to which Mr. Donnelly has the right to acquirebeneficial ownership within 60 days of March 7, 2012.(7)Includes 970,833 restricted share units covering Class A shares which have vested or with respect to which Mr. Azrack has the right to acquirebeneficial ownership within 60 days of March 7, 2012.(8)Includes 735,423 restricted share units covering Class A shares which have vested or with respect to which Mr. Suydam has the right to acquirebeneficial ownership within 60 days of March 7, 2012.(9)Assumes that no Class A shares are distributed to the limited partners of Holdings. The general partner of AP Professional Holdings, L.P. is BRH,which is one third owned by Mr. Black, one third owned by Mr. Harris and one third owned by Mr. Rowan. BRH is also the general partner of BRHHoldings, L.P., the limited partnership through which Messrs. Black, Harris and Rowan hold their limited partnership interests in AP ProfessionalHoldings, L.P. Each of these individuals disclaim any beneficial ownership of these Class A shares, except to the extent of their pecuniary interesttherein.(10)Reflects units beneficially owned by Waddell & Reed Financial, Inc. and its subsidiary Ivy Investment Management Company based on the Schedule13G filed by such entities as joint reporting persons on February 14, 2012. The address of Waddell & Reed Financial, Inc. is 6300 Lamar Avenue,Overland Park, KS 66202.(11)Reflects units beneficially owned by Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR LLC, based on theSchedule 13G filed by FMR LLC and Edward C. Johnson 3d as joint reporting persons on February 14, 2012. Edward C. Johnson 3d and FMR LLC,through its control of Fidelity and its funds, each has sole power to dispose of the 7,887,871 shares owned by the Fidelity funds. Neither FMR LLCnor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds,which power resides with the funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the funds’Boards of Trustees.Securities Authorized for Issuance under Equity Incentive PlansThe following table sets forth information concerning the awards that may be issued under the Company’s Omnibus Equity Incentive Plan as ofDecember 31, 2011. Plan Category Number of Securities tobe Issued UponExercise ofOutstanding Options,Warrants and Rights(1) Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plans(excluding securitiesreflected in column(a))(2) (a) (b) (c) Equity Compensation Plans Approved by Security Holders 46,301,337 $8.14 41,900,162 Equity Compensation Plans Not Approved by SecurityHolders — — — Total 46,301,337 $8.14 41,900,162 (1)Reflects the aggregate number of options and RSUs granted under the Company’s 2007 Omnibus Equity Incentive Plan and outstanding as ofDecember 31, 2011.(2)The Class A shares reserved under the Equity Plan are increased on the first day of each fiscal year by (i) the amount (if any) by which (a) 15% of thenumber of outstanding Class A shares and Apollo Operating Group 276Table of Contents units exchangeable for Class A shares on a fully converted and diluted basis on the last day of the immediately preceding fiscal year exceeds (b) thenumber of shares then reserved and available for issuance under the Equity Plan, or (ii) such lesser amount by which the administrator may decide toincrease the number of Class A shares. The number of shares reserved under the Equity Plan is also subject to adjustment in the event of a share split,share dividend, or other change in our capitalization. Generally, employee shares that are forfeited, canceled, surrendered or exchanged from awardsunder the Equity Plan will be available for future awards. We have filed a registration statement and intend to file additional registration statements onForm S-8 under the Securities Act to register Class A shares under the Company’s 2007 Omnibus Equity Incentive Plan (including pursuant toautomatic annual increases). Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, Class A sharesregistered under such registration statement will be available for sale in the open market. ITEM 13.CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSAgreement Among Managing PartnersOur managing partners have entered into the Agreement Among Managing Partners, which provides that each managing partner’s Pecuniary Interest (asdefined below) in the Apollo Operating Group units that he holds indirectly through Holdings shall be subject to vesting. The managing partners own Holdingsin accordance with their respective sharing percentages, or “Sharing Percentages,” as set forth in the Agreement Among Managing Partners. For the purposes ofthe Agreement Among Managing Partners, “Pecuniary Interest” means, with respect to each managing partner, the number of Apollo Operating Group unitsthat would be distributable to such managing partner assuming that Holdings was liquidated and its assets distributed in accordance with its governingagreements.Pursuant to the Agreement Among Managing Partners, each of Messrs. Harris and Rowan will vest in their interest in the Apollo Operating Group unitsin 60 equal monthly installments, and Mr. Black will vest in his interest in the Apollo Operating Group units in 72 equal monthly installments. Although theAgreement Among Managing Partners was entered into on July 13, 2007, for purposes of its vesting provisions, our managing partners are credited for theiremployment with us since January 1, 2007. Upon a termination for cause, 50% of such managing partner’s unvested Pecuniary Interest in Apollo OperatingGroup units shall vest. Upon a termination as a result of death or disability (as defined in the Agreement Among Managing Partners) of Messrs. Rowan orHarris, vesting will be calculated using a 60-month vesting schedule and 50% of such managing partner’s unvested interest shall also vest. Upon atermination as a result of death or disability of Mr. Black, 100% of his interest shall vest. Upon a termination as a result of resignation or retirement, a fractionof such managing partner’s unvested interest shall vest, the numerator of which is the number of months that have elapsed since January 1, 2007 and thedenominator of which is 60 (in the case of Messrs. Harris and Rowan) or 72 (in the case of Mr. Black). We may not terminate a managing partner except forcause or by reason of disability.Upon a managing partner’s resignation or termination for any reason, the Pecuniary Interest held by such managing partner that has not vested shall beforfeited as of the applicable Forfeiture Date (as defined below) and the remaining Pecuniary Interest held by such managing partner shall no longer be subjectto vesting. None of such interests, or the “Forfeited Interests,” shall return to or benefit us or the Apollo Operating Group. Forfeited Interests will be allocatedwithin Holdings for the benefit of the managing partners, or the “continuing managing partners,” who continue to be employed as of the applicable ForfeitureDate, pro rata based upon their relative Sharing Percentages.For the purposes of the Agreement Among Managing Partners, “Forfeiture Date” means, as to the Forfeited Interests to be forfeited within Holdings for thebenefit of the continuing managing partners, the date which is the earlier of (i) the date that is six months after the applicable date of termination of employmentand (ii) the date on or after such termination date that is six months after the date of the latest publicly reported disposition (or 277Table of Contentsdeemed disposition subject to Section 16 of the Exchange Act) of equity securities of Apollo by any of the continuing managing partners.The transfer by a managing partner of any portion of his Pecuniary Interest to a permitted transferee will in no way affect any of his obligations underthe Agreement Among Managing Partners (nor will such transfer in any way affect the vesting of such Pecuniary Interest in Apollo Operating Group units);provided, that all permitted transferees are required to sign a joinder to the Agreement Among Managing Partners in order to bind such permitted transferee tothe forfeiture provisions in the Agreement Among Managing Partners.The managing partners’ respective Pecuniary Interests in certain funds, or the “Heritage Funds,” within the Apollo Operating Group are not held inaccordance with the managing partners’ respective Sharing Percentages. Instead, each managing partner’s Pecuniary Interest in such Heritage Funds is held inaccordance with the historic ownership arrangements among the managing partners, and the managing partners continue to share the operating income in suchHeritage Funds in accordance with their historic ownership arrangement with respect to such Heritage Funds.The Agreement Among Managing Partners may be amended and the terms and conditions of the Agreement Among Managing Partners may be changedor modified upon the unanimous approval of the managing partners. We, our shareholders (other than the Strategic Investors, as set forth under “—LendersRights Agreement—Amendments to Managing Partner Transfer Restrictions”) and the Apollo Operating Group have no ability to enforce any provision thereofor to prevent the managing partners from amending the Agreement Among Managing Partners or waiving any forfeiture obligation.Managing Partner Shareholders AgreementWe have entered into the Managing Partner Shareholders Agreement with our managing partners. The Managing Partner Shareholders Agreementprovides the managing partners with certain rights with respect to the approval of certain matters and the designation of nominees to serve on our board ofdirectors, as well as registration rights for our securities that they own.Board RepresentationThe Managing Partner Shareholders Agreement requires our board of directors, so long as the Apollo control condition is satisfied, to nominateindividuals designated by our manager such that our manager will have a majority of the designees on our board.Transfer RestrictionsNo managing partner may, nor shall any of such managing partner’s permitted transferees, directly or indirectly, voluntarily effect cumulative transfersof Equity Interests, representing more than: (i) 0.0% of his Equity Interests at any time prior to the second anniversary of our IPO (the “registrationeffectiveness date”), (ii) 7.5% of his Equity Interests at any time on or after the second anniversary and prior to the third anniversary of the registrationeffectiveness date; (iii) 15% of his Equity Interests at any time on or after the third anniversary and prior to the fourth anniversary of the registrationeffectiveness date; (iv) 22.5% of his Equity Interests at any time on or after the fourth anniversary and prior to the fifth anniversary of the registrationeffectiveness date; (v) 30% of his Equity Interests at any time on or after the fifth anniversary and prior to the sixth anniversary of the registration effectivenessdate; and (vi) 100% of his Equity Interests at any time on or after the sixth anniversary of the registration effectiveness date, other than, in each case, withrespect to transfers (a) from one founder to another founder, (b) to a permitted transferee of such managing partner, or (c) in connection with a sale by one ormore of our managing partners in one or a related series of transactions resulting in the managing partners owning or controlling, directly or indirectly, lessthan 50.1% of the economic or voting interests in us or 278Table of Contentsthe Apollo Operating Group, or any other person exercising control over us or the Apollo Operating Group by contract, which would include a transfer ofcontrol of our manager.The percentages referenced in the preceding paragraph will apply to the aggregate amount of Equity Interests held by each managing partner (and hispermitted transferees) as of July 13, 2007 and adjusted for any additional Equity Interests received by such managing partner upon the forfeiture of EquityInterests by another managing partner. Any Equity Interests received by a managing partner pursuant to the forfeiture provisions of the Agreement AmongManaging Partners (described above) will remain subject to the foregoing restrictions in the receiving managing partner’s hands; provided, that each managingpartner shall be permitted to sell without regard to the foregoing restrictions such number of forfeitable interests received by him as are required to pay taxespayable as a result of the receipt of such interests, calculated based on the maximum combined U.S. Federal, New York State and New York City tax rateapplicable to individuals; and, provided further, that each managing partner who is not required to pay taxes in the applicable fiscal quarter in which hereceives Equity Interests as a result of being in the U.S. Federal income tax “safe harbor” will not effect any such sales prior to the six-month anniversary ofthe applicable termination date which gave rise to the receipt of such Equity Interests. After six years, each managing partner and his permitted transferees maytransfer all of the Equity Interests of such managing partner to any person or entity in accordance with Rule 144, in a registered public offering or in atransaction exempt from the registration requirements of the Securities Act. The above transfer restrictions will lapse with respect to a managing partner if suchmanaging partner dies or becomes disabled.A “permitted transferee” means, with respect to each managing partner and his permitted transferees, (i) such managing partner’s spouse, (ii) a linealdescendant of such managing partner’s parents (or any such descendant’s spouse), (iii) a charitable institution controlled by such managing partner, (iv) atrustee of a trust (whether inter vivos or testamentary), the current beneficiaries and presumptive remaindermen of which are one or more of such managingpartner and persons described in clauses (i) through (iii) above, (v) a corporation, limited liability company or partnership, of which all of the outstandingshares of capital stock or interests therein are owned by one or more of such managing partner and persons described in clauses (i) through (iv) above, (vi) anindividual mandated under a qualified domestic relations order, (vii) a legal or personal representative of such managing partner in the event of his death ordisability, (viii) any other managing partner with respect to transactions contemplated by the Managing Partner Shareholder Agreement, and (ix) any othermanaging partner who is then employed by Apollo or any of its affiliates or any permitted transferee of such managing partner in respect of any transaction notcontemplated by the Managing Partner Shareholders Agreement, in each case that agrees in writing to be bound by these transfer restrictions.Any waiver of the above transfer restrictions may only occur with our consent. As our managing partners control the management of our company,however, they have discretion to cause us to grant one or more such waivers. Accordingly, the above transfer restrictions might not be effective in preventingour managing partners from selling or transferring their Equity Interests.IndemnityCarried interest income from our funds can be distributed to us on a current basis, but is subject to repayment by the subsidiary of the Apollo OperatingGroup that acts as general partner of the fund in the event that certain specified return thresholds are not ultimately achieved. The managing partners,contributing partners and certain other investment professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiariesin respect of this general partner obligation. Such guarantees are several and not joint and are limited to a particular managing partner’s or contributingpartner’s distributions. Pursuant to the Managing Partner Shareholders Agreement, we agreed to indemnify each of our managing partners and certaincontributing partners against all amounts that they pay pursuant to any of these personal guarantees in favor of Fund IV, Fund V and Fund VI (includingcosts and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees) for all interests that our managing partnersand contributing partners have contributed or sold to the Apollo Operating Group. 279Table of ContentsAccordingly, in the event that our managing partners, contributing partners and certain other investment professionals are required to pay amounts inconnection with a general partner obligation for the return of previously made distributions with respect to Fund IV, Fund V and Fund VI, we will be obligatedto reimburse our managing partners and certain contributing partners for the indemnifiable percentage of amounts that they are required to pay even though wedid not receive the distribution to which that general partner obligation related.Registration RightsPursuant to the Managing Partner Shareholders Agreement, we have granted Holdings, an entity through which our managing partners and contributingpartners own their Apollo Operating Group units, and its permitted transferees the right, under certain circumstances and subject to certain restrictions, torequire us to register under the Securities Act our Class A shares held or acquired by them. Under the Managing Partner Shareholders Agreement, theregistration rights holders (i) will have “demand” registration rights, exercisable two years after the registration effectiveness date, but unlimited in numberthereafter, which require us to register under the Securities Act the Class A shares that they hold or acquire, (ii) may require us to make available registrationstatements permitting sales of Class A shares they hold or acquire into the market from time to time over an extended period and (iii) have the ability to exercisecertain piggyback registration rights in connection with registered offerings requested by other registration rights holders or initiated by us. We have agreed toindemnify each registration rights holders and certain related parties against any losses or damages resulting from any untrue statement or omission of materialfact in any registration statement or prospectus pursuant to which they sell our shares, unless such liability arose from such holder’s misstatement oromission, and each registration rights holder has agreed to indemnify us against all losses caused by his misstatements or omissions.Roll-Up AgreementsPursuant to the Roll-Up Agreements, the contributing partners received interests in Holdings, which we refer to as “Holdings Units,” in exchange fortheir contribution of assets to the Apollo Operating Group. The Holdings Units received by our contributing partners and any units into which they areexchanged will generally vest over six years in equal monthly installments with additional vesting (i) on death, disability, a termination without cause or aresignation by the contributing partner for good reason, (ii) with consent of BRH, which is controlled by our managing partners, and (iii) in connection withcertain other transactions involving sales of interests in us and with transfers by our managing partners in connection with their registration rights to the extentthat our contributing partners do not have sufficient vested securities to otherwise allow them to participate pro rata. Holdings Units are subject to a lock-upuntil two years after the registration effectiveness date. Thereafter, 7.5% of the Holding Units will become tradable on each of the second, third, fourth andfifth anniversaries of the registration effectiveness date, with the remaining Holding Units becoming tradable on the sixth anniversary of the registrationeffectiveness date or upon subsequent vesting. A Holdings Unit that is forfeited will revert to the managing partners. Our contributing partners have the abilityto direct Holdings to exercise Holdings’ registration rights described above under “—Managing Partner Shareholders Agreement—Registration Rights.”Our contributing partners are subject to a noncompetition provision for the applicable period of time as follows: (i) if the contributing partner is stillproviding services as a partner to us on the fifth anniversary of the date of his Roll-Up Agreement, the first anniversary of the date of termination of his serviceas a partner to us, or (ii) if the contributing partner is terminated for any reason such that he is no longer providing services to us prior to the fifth anniversaryof the date of his Roll-Up Agreement, the earlier to occur of (A) the second anniversary of such date of termination and (B) the sixth anniversary of the date ofhis Roll-Up Agreement. During that period, our contributing partners will be prohibited from (i) engaging in any business activity that we operate in,(ii) rendering any services to any alternative asset management business (other than that of us or our affiliates) that involves primarily (i.e., more than 50%)third-party capital or (iii) acquiring a financial interest in, or becoming actively involved with, any competitive business (other than as a passive holding of aspecified percentage of publicly traded companies). In addition, our contributing partners are subject to nonsolicitation, 280Table of Contentsnonhire and noninterference covenants during employment and for two years thereafter. Our contributing partners are also bound to a nondisparagementcovenant with respect to us and our contributing partners and to confidentiality restrictions. Any resignation by any of our contributing partners shall requireninety days’ notice. Any restricted period applicable to a contributing partner will commence after the ninety day notice of termination period.Exchange AgreementWe have entered into an exchange agreement with Holdings under which, subject to certain procedures and restrictions (including the vesting schedulesapplicable to our managing partners and any applicable transfer restrictions and lock-up agreements described above) upon 60 days’ written notice prior to adesignated quarterly date, each managing partner and contributing partner (or certain transferees thereof) has the right to cause Holdings to exchange the ApolloOperating Group units that he owns through Holdings for our Class A shares and to sell such Class A shares at the prevailing market price (or at a lower pricethat such managing partner or contributing partner is willing to accept) and distribute the net proceeds of such sale to such managing partner or contributingpartner. Under the exchange agreement, to effect the exchange, a managing partner or contributing partner, through Holdings, must then simultaneouslyexchange one Apollo Operating Group unit (being an equal limited partner interest in each Apollo Operating Group entity) for each Class A share received fromour intermediate holding companies. As a managing partner or contributing partner exchanges his Apollo Operating Group units, our interest in the ApolloOperating Group units will be correspondingly increased and the voting power of the Class B share will be correspondingly decreased.We may, from time to time, at the discretion of our manager, provide the opportunity for Holdings and any other holders of Apollo Operating Groupunits at such time to sell Apollo Operating Group units to us, provided that the aggregate amount of designated quarterly dates for exchanges and suchopportunities for the sale of such units may not exceed four. We will use an independent, third-party valuation expert for purposes of determining the purchaseprice of any such purchases of Apollo Operating Group units.Tax Receivable AgreementWith respect to any exchange by a managing partner or contributing partner of Apollo Operating Group units (together with the corresponding interest inour Class B share) that he owns through Holdings for our Class A shares in a taxable transaction, each of Apollo Management Holdings, L.P. and the ApolloOperating Group entities controlled by Apollo Management Holdings, L.P. has made an election under Section 754 of the Internal Revenue Code, which mayresult in an adjustment to the tax basis of a portion of the assets owned by the Apollo Operating Group at the time of the exchange. The taxable exchanges mayresult in increases in the tax depreciation and amortization deductions from depreciable and amortizable assets, as well as an increase in the tax basis of otherassets, of the Apollo Operating Group that otherwise would not have been available. A portion of these increases in tax depreciation and amortizationdeductions, as well as the increase in the tax basis of such other assets, will reduce the amount of tax that APO Corp. would otherwise be required to pay in thefuture. Additionally, our acquisition of Apollo Operating Group units from the managing partners or contributing partners, such as our acquisition of ApolloOperating Group units from the managing partners in the Strategic Investors Transaction, may result in increases in tax deductions and tax basis that reducesthe amount of tax that APO Corp. would otherwise be required to pay in the future.APO Corp. has entered into a tax receivable agreement with our managing partners and contributing partners that provides for the payment by APOCorp. to an exchanging or selling managing partner or contributing partner of 85% of the amount of actual cash savings, if any, in U.S. Federal, state, localand foreign income tax that APO Corp. realizes (or is deemed to realize in the case of an early termination payment by APO Corp. or a change of control, asdiscussed below) as a result of these increases in tax deductions and tax basis, and certain other tax benefits, including imputed interest expense, related toentering into the tax receivable agreement. APO Corp. expects to benefit from the remaining 15% of actual cash savings, if any, in income tax 281Table of Contentsthat it realizes. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing our actual income tax liability to theamount of such taxes that APO Corp. would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of theapplicable Apollo Operating Group entity as a result of the transaction and had APO Corp. not entered into the tax receivable agreement. The tax savingsachieved may not ensure that we have sufficient cash available to pay our tax liability or generate additional distributions to our investors. Also, we may needto incur additional debt to repay the tax receivable agreement if our cash flows are not met. The term of the tax receivable agreement will continue until all suchtax benefits have been utilized or expired, unless APO Corp. exercises the right to terminate the tax receivable agreement by paying an amount based on thepresent value of payments remaining to be made under the agreement with respect to units that have been exchanged or sold and units which have not yet beenexchanged or sold. Such present value will be determined based on certain assumptions, including that APO Corp. would have sufficient taxable income tofully utilize the deductions that would have arisen from the increased tax deductions and tax basis and other benefits related to entering into the tax receivableagreement. No payments will be made if a managing partner or contributing partner elects to exchange his or her Apollo Operating Group units in a tax-freetransaction. In the event that other of our current or future subsidiaries become taxable as corporations and acquire Apollo Operating Group units in the future,or if we become taxable as a corporation for U.S. Federal income tax purposes, each will become subject to a tax receivable agreement with substantially similarterms. In connection with the amendment of the AMH partnership agreement in April 2010, the tax receivable agreement was revised to reflect the managingpartners’ agreement to defer 25% of required payments pursuant to the tax receivable agreement that are attributable to the 2010 fiscal year for a period of fouryears. For more information about the amendment to the AMH partnership agreement and tax receivable agreement, see “—Special Allocation of AMH Income”below.The IRS could challenge our claim to any increase in the tax basis of the assets owned by the Apollo Operating Group that results from the exchangesentered into by the managing partners or contributing partners. The IRS could also challenge any additional tax depreciation and amortization deductions orother tax benefits we claim as a result of such increase in the tax basis of such assets. If the IRS were to successfully challenge a tax basis increase or taxbenefits we previously claimed from a tax basis increase, our managing partners and contributing partners would not be obligated under the tax receivableagreement to reimburse APO Corp. for any payments previously made to it (although future payments would be adjusted to reflect the result of such challenge).As a result, in certain circumstances, payments could be made to our managing partners and contributing partners under the tax receivable agreement in excessof 85% of APO Corp.’s actual cash tax savings. In general, estimating the amount of payments that may be made to our managing partners and contributingpartners under the tax receivable agreement is by its nature, imprecise, in the absence of an actual transaction, insofar as the calculation of amounts payabledepends on a variety of factors. The actual increase in tax basis and the amount and timing of any payments under the tax receivable agreement will varydepending upon a number of factors, including: • the timing of the transactions—for instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuateover time, of the depreciable or amortizable assets of the Apollo Operating Group entities at the time of the transaction; • the price of our Class A shares at the time of the transaction—the increase in any tax deductions, as well as tax basis increase in other assets, ofthe Apollo Operating Group entities, is directly proportional to the price of the Class A shares at the time of the transaction; • the taxability of exchanges—if an exchange is not taxable for any reason, increased deductions will not be available; and • the amount and timing of our income—APO Corp. will be required to pay 85% of the tax savings as and when realized, if any. If APO Corp. doesnot have taxable income, it is not required to make payments under the tax receivable agreement for that taxable year because no tax savings wereactually realized. 282Table of ContentsIn addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes ofcontrol, APO Corp.’s (or its successor’s) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change ofcontrol) would be based on certain assumptions, including that APO Corp. would have sufficient taxable income to fully utilize the deductions arising fromthe increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As noted above, no payments will be made if amanaging partner or contributing partner elects to exchange his or her Apollo Operating Group units in a tax-free transaction.Strategic Investors TransactionOn July 13, 2007, we sold securities to the Strategic Investors in return for a total investment of $1.2 billion. Through our intermediate holdingcompanies, we used all of the proceeds from the issuance of such securities to the Strategic Investors to purchase from our managing partners 17.4% of theirApollo Operating Group units for an aggregate purchase price of $1,068 million, and to purchase from our contributing partners a portion of their points foran aggregate purchase price of $156 million. The Strategic Investors hold non-voting Class A shares, which represented 48.4% of our issued and outstandingClass A shares and 16.5% of the economic interest in the Apollo Operating Group, in each case as of December 31, 2011.As all of their holdings in us are non-voting, neither of the Strategic Investors has any means for exerting control over our company.Strategic Relationship AgreementOn April 20, 2010, we announced a new strategic relationship agreement with CalPERS, whereby we agreed to reduce management fees and other feescharged to CalPERS on funds we manage, or in the future will manage, solely for CalPERS by $125 million over a five-year period or as close a period asrequired to provide CalPERS with that benefit. The agreement further provides that we will not use a placement agent in connection with securing any futurecapital commitments from CalPERS.Lenders Rights AgreementIn connection with the Strategic Investors Transaction, we entered into a shareholders agreement, or the “Lenders Rights Agreement,” with the StrategicInvestors.Transfer RestrictionsExcept in connection with the drag-along covenants provided for in the Lenders Rights Agreement, prior to the second anniversary of the registrationeffectiveness date, each Strategic Investor may not transfer its rights, other than to an “Investor Permitted Transferee,” as defined below, without the priorwritten consent of our managing partners.Following the registration effectiveness date, each Strategic Investor may transfer its non-voting Class A shares up to the percentages set forth belowduring the relevant periods identified: Period MaximumCumulativeAmount Registration Effectiveness Date—2nd anniversary of the RegistrationEffectiveness Date 0% 2nd—3rd anniversary of Registration Effectiveness Date 25% 3rd—4th anniversary of Registration Effectiveness Date 50% 4th—5th anniversary of Registration Effectiveness Date 75% 6th anniversary of Registration Effectiveness Date (and thereafter) 100% 283Table of ContentsNotwithstanding the foregoing, at no time following the registration effectiveness date may a Strategic Investor make a transfer representing 2% or moreof our total Class A shares to any one person or group of related persons.An “Investor Permitted Transferee” shall include any entity controlled by, controlling or under common control with a Strategic Investor, or certain of itsaffiliates so long as such entity continues to be an affiliate of the Strategic Investor at all times following such transfer.Registration RightsPursuant to the Lenders Rights Agreement, following the second anniversary of the registration effectiveness date, each Strategic Investor shall beafforded four demand registrations with respect to non-voting Class A shares, covering offerings of at least 2.5% of our total equity ownership and customarypiggyback registration rights. All cut-backs between the Strategic Investors, and Holdings (or its members) in any such demand registration shall be pro ratabased upon the number of shares available for sale at such time (regardless of which party exercises a demand).Amendments to Managing Partner Transfer RestrictionsEach Strategic Investor has a consent right with respect to any amendment or waiver of any transfer restrictions that apply to our managing partners.Our Operating Agreement and Apollo Operating Group Limited Partnership AgreementsPlease see the section entitled “Description of Shares—Operating Agreement” for a description of our Operating Agreement.Pursuant to the partnership agreements of the Apollo Operating Group partnerships, the wholly-owned subsidiaries of Apollo Global Management, LLCthat are the general partners of those partnerships have the right to determine when distributions will be made to the partners of the Apollo Operating Group andthe amount of any such distributions. If a distribution is authorized, such distribution will be made to the partners of Apollo Operating Group pro rata inaccordance with their respective partnership interests.The partnership agreements of the Apollo Operating Group partnerships also provide that substantially all of our expenses, including substantially allexpenses solely incurred by or attributable to Apollo Global Management, LLC (such as expenses incurred in connection with the Private OfferingTransactions), will be borne by the Apollo Operating Group; provided that obligations incurred under the tax receivable agreement by Apollo GlobalManagement, LLC and its wholly-owned subsidiaries (which currently consist of our three intermediate holding companies, APO Corp., APO (FC), LLC andAPO Asset Co., LLC), income tax expenses of Apollo Global Management, LLC and its wholly-owned subsidiaries and indebtedness incurred by ApolloGlobal Management, LLC and its wholly-owned subsidiaries shall be borne solely by Apollo Global Management, LLC and its wholly-owned subsidiaries.Special Allocation of AMH IncomeAMH’s partnership agreement was amended to provide that 100% of AMH’s 2009 taxable income in excess of the amount of its distribution to Holdingsin September 2009 and 100% of AMH’s 2010 taxable income will be specially allocated to APO Corp. (the “Special Allocation”). The amendments to AMH’spartnership agreement also provided that APO Corp. will be entitled to receive a priority distribution equal to the total amount of income specially allocated toAPO Corp. pursuant to the Special Allocation (the “Special Distribution”). The initial payments of the Special Distribution were sufficient to allow APO Corp.to make TRA Payments (as defined below) with respect to the 2009 and 2010 fiscal years, including deferred payments. The 284Table of Contentsbalance of the Special Distribution will be payable only upon a liquidation or deemed liquidation of AMH. The AMH partnership agreement was also amendedto provide that the Special Allocation and Special Distribution may be effectively reversed, in whole or in part, upon a “book-up event,” as described below.As a result of the Special Allocation, a portion of APO Corp.’s required payments to each of the managing partners and contributing partners pursuantto the tax receivable agreement (the “TRA Payments”) that were generated by amortization deductions accrued by APO Corp. through the period covered by theSpecial Allocation will be accelerated. The number of future periods from which these TRA Payments will be accelerated depends on the amount of taxableincome generated by APO Corp. in those future periods. In addition, each of the managing partners agreed to defer 25% of the TRA Payments payable to himthat are attributable to the 2010 fiscal year for a period of four years. The cash that would otherwise be paid to the managing partners will be retained by AMHfor use in the Apollo business. For more information about the tax receivable agreement, see “Tax Receivable Agreement” above.The entire amount of the Special Allocation was effectively reversed in 2011 as a result of a “book-up event” in AMH for tax purposes. As a result ofthis book-up event, Holdings was specially allocated a larger portion of AMH’s book income appreciation (and, will ultimately, be specially allocated AMHtaxable income) in an amount equal to the amount of the reduced income allocation it received under the 2009 and 2010 Special Allocation.Fee Waiver ProgramUnder the terms of certain investment fund partnership agreements, Apollo may from time to time elect to forgo a portion of the management fee revenuethat is due from the funds and instead receive a right to a proportionate interest in future distributions of profits of those funds. This election allows certainexecutive officers and other professionals of Apollo to waive a portion of their respective share of future income from Apollo and receive, in lieu of a cashdistribution, title and ownership of the profits interests in the respective fund. Apollo immediately assigns the profits interests received to the participatingindividuals.Employment AgreementsPlease see the section entitled “Item 11. Executive Compensation—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-BasedAwards Table” for a description of the employment agreements of our named executive officers who have employment agreements.AircraftIn the normal course of business, our personnel have made use of aircraft owned as personal assets by Messrs. Black and Rowan. Messrs. Black andRowan paid for their purchases of the aircraft and bear all operating, personnel and maintenance costs associated with their operation for personal use.Payment by us for the business use of these aircraft by Messrs. Black and Rowan and other of our personnel is made at market rates, which totaled$1,016,400 and $2,695,095 for 2011 for Mr. Black and Mr. Rowan, respectively. In addition, Mr. Harris makes business and personal use of variousaircraft in which we have fractional interests, and pays the aggregate incremental cost of his personal usage. The total amount paid by Mr. Harris for thispersonal usage was $439,477 for 2011. The transactions described herein are not material to the consolidated financial statements.Investments In Apollo FundsOur directors and executive officers are generally permitted to invest their own capital (or capital of estate planning vehicles that they control) directly inour funds, and in general, such investments are not subject to management fees, and in certain instances, may not be subject to carried interest. Theopportunity to invest in ourfunds is available to all of the senior Apollo professionals and to certain of our employees whom we have 285Table of Contentsdetermined to have a status that reasonably permits us to offer them these types of investments in compliance with applicable laws. From our inceptionthrough December 31, 2011, our professionals have committed or invested approximately $1.0 billion of their own capital to our funds.The amount invested in our investment funds by our directors and executive officers (and their estate planning vehicles) during 2011 was$15,607,681, $18,168,188, $4,242,055, $4,073,240, $1,255,585, $1,171,603, and $686,503, for Messrs Black, Rowan, Harris, Zelter, Suydam,Silverman and Giarraputo, respectively. The amount of distributions, including profits and return of capital to our directors and executive officers (and theirestate planning vehicles) during 2011 was $42,879,349, $35,118,160, $10,479,355, $11,723,481, $4,924,397, $1,512,040 and $795,788, for MessrsBlack, Rowan, Harris, Silverman, Zelter, Suydam and Giarraputo, respectively.Sub-Advisory Arrangements and Separately Managed AccountsFrom time to time, we may enter into sub-advisory arrangements with, or establish separately managed accounts for, our directors and executive officersor vehicles they manage. Such arrangements would be approved in advance in accordance with our policy regarding transactions with related persons. Inaddition, any such sub-advisory arrangement or separately managed account would be entered into with, or advised by, an Apollo entity serving as investmentadviser registered under the Investment Advisers Act of 1940, and any fee arrangements, if applicable would be on an arms-length basis.Indemnification of Directors, Officers and OthersUnder our operating agreement, in most circumstances we will indemnify the following persons, to the fullest extent permitted by law, from and againstall losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or otheramounts: our manager; any departing manager; any person who is or was an affiliate of our manager or any departing manager; any person who is or was amember, partner, tax matters partner, officer, director, employee, agent, fiduciary or trustee of us or our subsidiaries, our manager or any departing manageror any affiliate of us or our subsidiaries, our manager or any departing manager; any person who is or was serving at the request of our manager or anydeparting manager or any affiliate of our manager or any departing manager as an officer, director, employee, member, partner, agent, fiduciary or trustee ofanother person; or any person designated by our manager. We have agreed to provide this indemnification unless there has been a final and non-appealablejudgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We have also agreedto provide this indemnification for criminal proceedings. Any indemnification under these provisions will only be out of our assets. We may purchaseinsurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnifythe person against liabilities under our operating agreement.We have entered into indemnification agreements with each of our directors, executive officers and certain of our employees which set forth theobligations described above.We have also agreed to indemnify each of our managing partners and certain contributing partners against certain amounts that they are required to payin connection with a general partner obligation for the return of previously made carried interest distributions in respect of Fund IV, Fund V and Fund VI. Seethe above description of the Indemnity provisions of the Managing Partners Shareholders Agreement.Statement of Policy Regarding Transactions with Related PersonsOur board of directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our “related personpolicy.” Our related person policy requires that a “related person” (as defined as in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to ourChief Legal Officer any “related person transaction” (defined as any transaction that is reportable by us under Item 404(a) of 286Table of ContentsRegulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have adirect or indirect material interest) and all material facts with respect thereto. Our Chief Legal Officer will then promptly communicate that information to ourmanager. No related person transaction will be consummated without the approval or ratification of the executive committee of our manager or any committee ofour board of directors consisting exclusively of disinterested directors. It is our policy that persons interested in a related person transaction will recusethemselves from any vote of a related person transaction in which they have an interest.Director IndependenceBecause more than fifty percent of our voting power is controlled by Holdings, we are considered a “controlled company” as defined in the listingstandards of the NYSE. Accordingly, we have decided to avail ourselves of the controlled company exception from certain of the NYSE governance rules.This exception exempts us from the requirements that we have a majority of independent directors on our board of directors and that we have a compensationcommittee and a nominating and corporate governance committee composed entirely of independent directors.At such time that we are no longer deemed a controlled company, the board of directors will become comprised of a majority of independent directors inaccordance with the applicable standards set forth by the SEC and the NYSE for determining director independence. Presently, in applying such standards,the board of directors has determined that four of its members, namely Messrs. Fribourg, Krongard, Ducey and Ms. Richards, are each independent. ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table summarizes the aggregate fees for professional services provided by Deloitte & Touche LLP, the member firms of Deloitte ToucheTohmatsu, and their respective affiliates (collectively, the “Deloitte Entities”) for the years ended December 31, 2011 and 2010: Year EndedDecember 31, 2011 Year EndedDecember 31, 2010 Audit fees $6,692 $4,660 Audit fees for Apollo fund entities 13,612 10,028 Audit-related fees 896 2,249 Tax fees 1,505 1,527 Tax fees for Apollo fund entities 5,205 3,206 Other fees 140 336 (1)Audit Fees consisted of fees for (a) the audits of our consolidated financial statements in our Annual Report on Form 10-K and services attendant to, orrequired by, statute or regulation; (b) reviews of the interim consolidated financial statements included in our quarterly reports on Form 10-Q.(2)Audit and Tax Fees for Apollo fund entities consisted of services to investment funds managed by Apollo in its capacity as the general partner.(3)Audit-Related Fees consisted of comfort letters, consents and other services related to SEC and other regulatory filings.(4)Includes audit-related fees for Apollo fund entities of $0.1 million for the year ended December 31, 2011.(5)Tax Fees consisted of fees for services rendered for tax compliance and tax planning and advisory services.(6)Consisted of certain agreed upon procedures.(7)Includes other fees of $0.3 million for the year ended December 31, 2010.Our audit committee charter requires the audit committee to approve in advance all audit and non-audit related services to be provided by ourindependent registered public accounting firm in accordance with the audit and non-audit related services pre-approval policy. All services reported in theAudit, Audit-Related, Tax and Other categories above were approved by the audit committee. 287(1)(1)(2)(2)(3)(4)(3)(5)(5)(2)(2)(6)(6)(7)Table of ContentsPART IV ITEM 15.EXHIBITS ExhibitNumber Exhibit Description 3.1 Certificate of Formation of Apollo Global Management, LLC (incorporated by reference to Exhibit 3.1 to the Registrant’s RegistrationStatement on Form S-1 (File No. 333-150141)). 3.2 Amended and Restated Limited Liability Company Agreement of Apollo Global Management, LLC (incorporated by reference to Exhibit 3.2to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 4.1 Specimen Certificate evidencing the Registrant’s Class A shares (incorporated by reference to Exhibit 4.1 to the Registrant’s RegistrationStatement on Form S-1 (File No. 333-150141)). 10.1 Amended and Restated Limited Liability Company Operating Agreement of AGM Management, LLC dated as of July 10, 2007 (incorporatedby reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.2 Third Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings I, L.P. dated as of April 14, 2010 (incorporated byreference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.3 Third Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings II, L.P. dated as of April 14, 2010 (incorporated byreference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.4 Third Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings III, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.5 Third Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings IV, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.6 Registration Rights Agreement, dated as of August 8, 2007, by and among Apollo Global Management, LLC, Goldman Sachs & Co., J.P.Morgan Securities Inc. and Credit Suisse Securities (USA) LLC (incorporated by reference to Exhibit 10.6 to the Registrant’s RegistrationStatement on Form S-1 (File No. 333-150141)). 10.7 Investor Rights Agreement, dated as of August 8, 2007, by and among Apollo Global Management, LLC, AGM Management, LLC andCredit Suisse Securities (USA) LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 (FileNo. 333-150141)). 10.8 Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.8to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.9 Agreement Among Principals, dated as of July 13, 2007, by and among Leon D. Black, Marc J. Rowan, Joshua J. Harris, Black FamilyPartners, L.P., MJR Foundation LLC, AP Professional Holdings, L.P. and BRH Holdings, L.P. (incorporated by reference to Exhibit 10.9 tothe Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.10 Shareholders Agreement, dated as of July 13, 2007, by and among Apollo Global Management, LLC, AP Professional Holdings, L.P., BRHHoldings, L.P., Black Family Partners, L.P., MJR Foundation LLC, Leon D. Black, Marc J. Rowan and Joshua J. Harris (incorporated byreference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 288Table of ContentsExhibitNumber Exhibit Description 10.11 Exchange Agreement, dated as of July 13, 2007, by and among Apollo Global Management, LLC, Apollo Principal Holdings I, L.P.,Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Management Holdings,L.P. and the Apollo Principal Holders (as defined therein), from time to time party thereto (incorporated by reference to Exhibit 10.11 to theRegistrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.12 Tax Receivable Agreement, dated as of July 13, 2007, by and among APO Corp., Apollo Principal Holdings II, L.P., Apollo PrincipalHoldings IV, L.P., Apollo Management Holdings, L.P. and each Holder defined therein (incorporated by reference to Exhibit 10.12 to theRegistrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.13 Credit Agreement dated as of April 20, 2007 among Apollo Management Holdings, L.P., as borrower, Apollo Management, L.P., ApolloCapital Management, L.P., Apollo International Management, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P.and AAA Holdings, L.P., as guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto(incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.14 Employment Agreement with Leon D. Black (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.15 Employment Agreement with Marc J. Rowan (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.16 Employment Agreement with Joshua J. Harris (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement onForm S-1 (File No. 333-150141)). 10.17 Employment Agreement with Barry Giarraputo (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement onForm S-1 (File No. 333-150141)). *10.18 Employment Agreement with Joseph F. Azrack. 10.19 Employment Agreement with Henry Silverman (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration Statement onForm S-1 (File No. 333-150141)). 10.20 Second Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings V, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.21 Second Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings VI, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.22 Second Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings VII, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.22 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.23 Second Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings VIII, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.24 Second Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings IX, L.P. dated as of April 14, 2010(incorporated by reference to Exhibit 10.24 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 289Table of ContentsExhibitNumber Exhibit Description 10.25 Third Amended and Restated Limited Partnership Agreement of Apollo Management Holdings, L.P. dated as of April 14, 2010 (incorporatedby reference to Exhibit 10.25 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.26 Settlement Agreement, dated December 14, 2008, by and among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, HexionSpecialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo GlobalManagement, LLC and certain of its affiliates (incorporated by reference to Exhibit 10.26 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.27 First Amendment and Joinder, dated as of August 18, 2009, to the Shareholders Agreement, dated as of July 13, 2007, by and among ApolloGlobal Management, LLC, AP Professional Holdings, L.P., BRH Holdings, L.P., Black Family Partners, L.P., MJR Foundation LLC, LeonD. Black, Marc J. Rowan and Joshua J. Harris (incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.28 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration Statement on Form S-1 (FileNo. 333-150141)). 10.29 Employment Agreement with James Zelter (incorporated by reference to Exhibit 10.29 to the Registrant’s Registration Statement on Form S-1(File No. 333-150141)). 10.30 Roll-Up Agreement with James Zelter (incorporated by reference to Exhibit 10.30 to the Registrant’s Registration Statement on Form S-1 (FileNo. 333-150141)). 10.31 Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (for PlanGrants) (incorporated by reference to Exhibit 10.31 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.32 Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (forBonus Grants) (incorporated by reference to Exhibit 10.32 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.33 Form of Lock-up Agreement (incorporated by reference to Exhibit 10.33 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.34 Apollo Management Companies AAA Unit Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.35 Employment Agreement with Marc Spilker (incorporated by reference to Exhibit 10.35 to the Registrant’s Registration Statement on Form S-1(File No. 333-150141)). 10.36 First Amendment and Joinder, dated as of April 14, 2010, to the Tax Receivable Agreement (incorporated by reference to Exhibit 10.36 to theRegistrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.37 Employment Agreement with Gene Donnelly (incorporated by reference to Exhibit 10.37 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.38 First Amendment, dated as of May 16, 2007, to the Credit Agreement, dated as of April 20, 2007, among Apollo Management Holdings,L.P., as borrower, the lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as administrative agent, and the other partiesparty thereto (incorporated by reference to Exhibit 10.38 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 290Table of ContentsExhibitNumber Exhibit Description 10.39 Second Amendment, dated as of December 20, 2010, to the Credit Agreement, dated as of April 20, 2007, as amended by the FirstAmendment thereto dated as of May 16, 2007, among Apollo Management Holdings, L.P., as borrower, the lenders party thereto fromtime to time JPMorgan Chase Bank as administrative agent and the other parties party thereto (incorporated by reference to Exhibit10.39 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.40 Non-Qualified Share Option Agreement pursuant to the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan withMarc Spilker dated December 2, 2010 (incorporated by reference to Exhibit 10.40 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.41 Non-Qualified Share Option Agreement pursuant to the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan withHenry Silverman dated January 21, 2011 (incorporated by reference to Exhibit 10.41 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.42 Form of Independent Director Engagement Letter (incorporated by reference to Exhibit 10.42 to the Registrant’s Form 10-Q for thequarter period ended March 31, 2011 (File No. 001-35107)). *10.43 Separation Agreement with Henry Silverman. *21.1 Subsidiaries of Apollo Global Management, LLC. *23.1 Consent of Deloitte & Touche LLP. *31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a). *31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a). *32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). *32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).†*101.INS XBRL Instance Document†*101.SCH XBRL Taxonomy Extension Scheme Document†*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document†*101.DEF XBRL Taxonomy Extension Definition Linkbase Document†*101.LAB XBRL Taxonomy Extension Label Linkbase Document†*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *Filed herewith.†XBRL (Extensible Business Reporting Language) information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933and Section 18 of the Securities Exchange Act of 1934.The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than withrespect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations andwarranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may notdescribe the actual state of affairs as of the date they were made or at any other time. 291Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized. Apollo Global Management, LLC (Registrant)March 9, 2012 By: /s/ Gene Donnelly Name: Gene Donnelly Title: Chief Financial Officer(principal financial officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated: Name Title Date/s/ Leon Black Leon Black Chairman and Chief ExecutiveOfficer and Director(principal executive officer) March 9, 2012/s/ Gene Donnelly Chief Financial Officer March 9, 2012Gene Donnelly (principal financial officer) /s/ Barry Giarraputo Chief Accounting Officer March 9, 2012Barry Giarraputo (principal accounting officer) /s/ Joshua Harris Senior Managing Director March 9, 2012Joshua Harris and Director /s/ Marc Rowan Senior Managing Director March 9, 2012Marc Rowan and Director /s/ Michael Ducey Director March 9, 2012Michael Ducey /s/ Paul Fribourg Director March 9, 2012Paul Fribourg /s/ AB Krongard Director March 9, 2012AB Krongard /s/ Pauline Richards Director March 9, 2012Pauline Richards 292Exhibit 10.18EXECUTIONCONFIDENTIALAPOLLO GLOBAL REAL ESTATE MANAGEMENT, L.P.9 West 57th StreetNew York, NV 10019June 2, 2008Mr. Joseph F. Azrack19 Bedford RoadLincoln, MA 01773Dear Joe:We are pleased to confirm and agree to the following terms in connection with your service as a partner of Apollo Global Real Estate Management,LP. (the “Company”). As used herein, “Affiliate” shall have the same meaning applied to it in paragraph (d) of Exhibit B to the attached Annex A. • Position. You will serve as Managing Partner of the Real Estate Business (as defined below) of Apollo Management Holdings, L.P. and its Affiliatedinvestment management companies (collectively, “Apollo”). Your period of service to the Company shall begin on a date to be mutually agreed but notlater than July 8, 2008 (the actual date that your service with the Company commences, the “Start Date”). You will report to the Executive Committeeof Apollo (the members of which are currently Leon D. Black, Marc J. Rowan and Joshua J. Harris). The parties acknowledge that, as of the datehereof, there is no precise definition of the Real Estate Business of Apollo and that you are being hired to organize, develop and oversee that business andits integration with Apollo’s private equity and capital markets businesses. However, the parties agree that the “Real Estate Business” will refer to theinvestment management activities to be conducted by Apollo and its Affiliates for newly formed or acquired pooled investment vehicles (whetherstructured as private equity, hedge or other types of funds) that have a primary investment objective to invest in real estate and companies that areprimarily engaged in the management, ownership or development of real estate (each, a “Real Estate Fund”) (it being acknowledged that no suchpooled investment vehicles are managed by Apollo today). As the Managing Partner of the Real Estate Business, you will be a member of the seniormanagement team of Apollo Global Management, LLC (“AGM”) (sometimes informally referred to as the management group of AGM) and theChairman of the Investment Committee for the Real Estate Business. AGM has received and accepted in principle (with the understanding that suchdiscussion outline is non-binding and that flexibility will be needed in developing and operating the Real Estate Business) a discussion outline preparedby you that describes the time, staffing, working capital and seed investment capital you believe to be necessary to build the Real Estate Business, withan initial focus on the United States and Europe but with a long term view to expand the business into Asia. We both understand the challenges andopportunities in this business plan and will work together to access our internal assets (including internal funding where appropriate and relationshipswith Apollo limited partners) as appropriate to provide for the success of this endeavor. • Compensation. You will be entitled to base pay (“Base Pay”) at the annual rate of $500,000 during your period of service as a partner, which BasePay shall accrue day to day and be paid in accordance with the Company’s normal payroll practices applicable to similarly situated executives (which,for purposes of this letter agreement, will mean the most senior managing partners of Apollo and its Affiliates other than the partners who serve on theExecutive Committee), as a draw against the Net Profit to which you are entitled pursuant to the next section. For services provided during each of 2008and 2009, you will receive total cash compensation (including Base Pay, management and incentive fee and carry distributions and all other cashpayments) equal to the greater of (i) $4,500,000 per year (the “Guaranteed Compensation”), provided your service is not terminated before theconclusion of either such period by you without “Good Reason” (as defined in the award agreement evidencing the Plan Grant described below andattached hereto as Annex A), by reason of your death or “Disability,” or by the Company for “Cause” (as such terms are defined in the Plan (asdefined below)), and (ii) the amount determined under the section entitled “Net Profit” below for such period; provided, however, that for servicesprovided in 2008 the Guaranteed Compensation shall be reduced by the compensation you receive from your existing employer for services provided in2008. To the extent that by mutual agreement you undertake investment management responsibilities outside the Real Estate Business, you and theCompany will discuss in good faith your appropriate remuneration for such activities.• Net Profit. • From and after the Start Date, you will be entitled to 12.5% of the management and incentive fees earned (other than from carry fromprivate equity-type funds, which is provided for in the next paragraph) by Apollo and its Affiliates from the Real Estate Business onassets under management less all expenses attributable or allocated in good faith to the Real Estate Business, such as office expenses,compensation expenses, allocable overhead and returns of previous operating deficits (the “Net Profit”). Your right to participate in NetProfits will terminate as provided below in the section entitled, “Notice Entitlement.” Operating deficits arise when revenues from the RealEstate Business in any fiscal year are less than the total expenses. An operating deficit for any fiscal year (other than fiscal years 2008 and2009) will be allocated as an expense equally over the next three fiscal years, along with a rate of interest payable to Apollo based onApollo’s cost of capital. For hedge funds or other “evergreen” funds, you shall receive distributions at the same time as distributions aremade to the other participants in such income (generally within 45 days after each quarterly period) except that the installment for thefourth quarter and annual period will be paid to you no later than April 15th of the year after the applicable fiscal year. • In the case of the carried interest allocable to a private equity-type Real Estate Fund, you will receive 12.5% of the points of carry in eachsuch fund and your rights to such carry shall be subject to monthly vesting at the rate of l/60th per month over five years from the timesuch points are allocated (which allocations shall occur as of the closing of the applicable Real Estate Fund’s first capital call for aninvestment). Upon your termination of employment without Cause or for Good Reason you shall be immediately vested in 75% of theaggregate carry previously awarded to you in any private equity-type Real Estate Fund that has commenced investing prior to suchtermination. Notwithstanding anything to the contrary contained herein or otherwise, you shall retain any such carry rights that havevested as of your service termination date and you shall receive distributions thereon, including in connection with dispositions or otherliquidity events applicable to the investments made by such funds with respect to your vested carried interest. Generally, an additional27.5% of the points of carry in each fund will be allocated to the balance of the Real Estate Business team, and such carry will be subjectto the same additional vesting as your carry upon a team member’s termination without Cause. In addition, the balance of the Real EstateBusiness team will receive allocations of equity interests in AGM in a manner consistent with the culture and economics of AGM. Suchallocations of carry, and the allocations of equity rights in AGM, to the balance of the Real Estate Business team, shall be made by theExecutive Committee in light of your recommendations as Managing Partner and in consultation with you. Apollo anticipates that theabove-stated carry points, when combined with grants under the Plan currently anticipated to be made, consistent with Apollo’s cultureand practices, to the Real Estate Business team, shall provide the Real Estate Business team with interests that would reasonably beexpected to have an aggregate economic value equivalent to approximately 50% or more of the total carry points. • If Apollo acquires an existing investment management business that provides investment management services to funds with a primaryinvestment objective in the real estate area during your service with the Company, the applicable percentage (12.5%) of the Net Profit youare entitled to receive with respect to such business shall be determined based on 12.5% of the Net Profit generated for Apollo by suchbusiness on any net increase, and after an appropriate return on investment to Apollo based on Apollo’s cost of capital, (a) for hedge fundsand other evergreen funds, in such acquired business’s assets under management from and after the acquisition date (with all Net Profitbeing deemed to be generated evenly across all assets under management), and (b) for private equity-type funds, in committed butundeployed capital. • Plan Grant. On the last day of the calendar quarter that includes the Start Date, you shall be granted, subject to the approval of the committee thatadministers the Plan, restricted share units (“RSUs”) covering 950,000 Class A shares of AGM (the “Plan Grant”) under the Apollo GlobalManagement, LLC 2007 Omnibus Equity Incentive Plan (the “Plan”). The committee that administers the Plan shall permit you to transfer the PlanGrant to a family trust within the meaning of Rule 701(c)(3) of the Securities Act. Each RSU shall be granted pursuant to the Plan and shall be subjectto the terms and conditions of the RSU award agreement in the form of Annex A attached hereto, which terms and conditions are no less favorable,taken as a whole, than the terms and conditions applicable to those set forth in the RSU agreements of similarly situated executives, except that vestingof these units shall occur over a period of three and one half (3 1/2) years, with the first installment to vest on the anniversary of the grant date and thebalance vesting in 10 equal quarterly installments thereafter. In addition to the Plan Grant, subject to the approval of the committee that administers thePlan, you shall be granted the additional RSUs (the “Additional RSUs”) shown below on the last day of the calendar quarter in which thecorresponding level of assets under management of the Real Estate Funds, as determined in good faith by the Executive Committee, is first attained: Number of Additional RSUs Aggregate assets under management of the Real Estate Funds 612,500 $2,500,000,000 204,166 $3,333,333,333 204,167 $4,166,666,667 204,167 $5,000,000,000 The Additional RSUs will be granted pursuant to the Plan and shall be subject to the terms and conditions of the RSU award agreement in the form ofAnnex A attached hereto, except that vesting shall be in equal quarterly installments over the 12 quarters following the date of grant. Assets undermanagement will be measured based on capital (whether committed or funded) on which management fees are paid. • Incentive Program. A portion of your total cash compensation each calendar year or portion thereof (beginning January 1, 2009) will be deferred andpayable pursuant to an incentive compensation program adopted by the Executive Committee prior to the beginning of such calendar year (the “IncentiveProgram”). Any amounts payable under the Incentive Program will be subject to three year vesting in equal annual installments, commencing on thelast day of the year following the year in which the services were performed, which vesting shall be contingent on your continued service as a partner oremployee on each vesting date. For services performed in 2009, the amount of compensation to be subject to the Incentive Program shall be as follows: • No part of the first $250,000 of your compensation; • 10% of compensation from $250,000 to $500,000; • 20% of compensation from $500,000 to $1,000,000 • 25% of compensation from $1,000,000 to $2,000,000; and • 30% of compensation in excess of $2,000,000;provided, however, that (x) the Guaranteed Compensation (or an amount of Net Profit distributions received in lieu thereof) shall not be subject to theIncentive Program, and (y) all amounts in excess of the amount specified in clause (x) shall be subject to the Incentive Program until your compensationreaches a level that all amounts that would have been subject to the Incentive Program had clause (x) not applied to you have become subject to theIncentive Program, and thereafter the bulleted formula shall apply without modification by this proviso. • Notice Entitlement. On written notice to you, the Company may terminate your service as a partner (which, in any case, will also terminate youremployment, if you are then an employee) with or without Cause, it being understood that such a termination shall not be a breach by the Company orany of its Affiliates of their agreements hereunder or otherwise. The period of notice that we will give you to terminate your service as a partner withoutCause is 90 days. The Company may terminate your service as a partner for Cause without notice. The minimum period of notice that you are requiredto give us to terminate your service as a partner without Good Reason is 90 days. We reserve the right to require you to not be in Apollo’s offices and/ornot to undertake all or any of your duties and/or not to contact Apollo clients, colleagues or advisors during all or part of any period of notice of yourtermination of service. Should we exercise this right, your terms and conditions of service and duties of fidelity and confidentiality to us remain in fullforce and effect. During any such period, you remain a service provider to the Company with a duty of fidelity to the Company and should not beemployed or engaged in any other business. Notwithstanding anything to the contrary contained herein or in any plan, agreement or arrangement betweenyou and Apollo, in the event that your service as a partner or employee with the Company or any of its Affiliates is terminated by the Company or anyof its Affiliates without Cause or by you for Good Reason at any time after the Start Date and before January 1,2010, the Company will pay you, incash in quarterly installments through December 31, 2009 and subject to the effectiveness and irrevocability of a general release of claims executed byyou (in the form of Annex B hereto), the balance of the unpaid Guaranteed Compensation (if any). In addition, notwithstanding anything to the contrarycontained herein or in any plan, agreement or arrangement between you and Apollo, if at any time after the Start Date your service as a partner oremployee with the Company or any of its Affiliates is terminated by the Company or any of its Affiliates without Cause or by you for Good Reason, onthe next quarterly distribution date following the termination date, to the extent not duplicative of any payment of Guaranteed Compensation, you will bepaid an amount in cash in a lump sum equal to 12.5% of the unpaid Net Profit earned by Apollo from the Real Estate Business (if any) for suchquarterly period up to and including your termination date (Net Profit (i.e., carry) distributions on private equity-type vehicles will continue to be madeon your vested points in the ordinary course after your termination of service). • Payment in lieu of notice. Subject to the “Compliance” section below, we reserve the right to pay you in lieu of notice on a termination without Cause. • Benefit Plans. You will be entitled to participate in the various group health, disability and life insurance plans and other benefit programs as maygenerally be offered to similarly situated executives from time to time, provided that your available paid vacation will not be less than four (4) weeks ineach calendar year (subject to the Company’s vacation policy as in effect from time to time regarding any limits on the ability to carry forward to asubsequent year accrued but unused vacation). In addition, you will be entitled to prompt reimbursement of (i) your legal fees reasonably incurred in connection with the preparation and negotiation ofthis letter agreement, and (ii) all business expenses reasonably incurred by you in the course of your service with the Company in accordance with theCompany’s policies in respect of such matters (including that any amount so incurred shall be reimbursed by not later than the end of the calendar yearfollowing the year incurred; expenses eligible for reimbursement in any calendar year will not effect the expenses that are eligible for reimbursement inany other calendar year and will not be subject to liquidation or exchange for any other benefit). • Office Location. Your primary office location shall be in New York. You may maintain a personal office for yourself in Boston but shall not spendmore than six (6) days per month working out of such office. The Company will reimburse you for reasonable out-of-pocket expenses incurred inconnection with the maintenance of such office in an amount not to exceed $10,000 per month, consistent with Apollo’s policies regarding expensereimbursements as in effect from time to time. • Coinvestments. You will be offered coinvestment opportunities in Apollo funds generally offered to similarly situated executives. During your servicewith the Company, following the first closing of a substantial investment by a third party in a Real Estate Fund, you will be obligated to invest your prorata portion (12.5%) of the capital required of the general partner and its Affiliates for such Real Estate Fund (but shall not be obligated to invest morethan $2,000,000 in all Real Estate Funds in any twelve month period). You will be entitled to participate in any management fee waiver programestablished with respect to any Real Estate Fund. You will also be provided opportunities to invest in private equity and capital markets funds managedby Apollo and its Affiliates on terms offered to similarly situated executives generally. • Compliance. The Company is subject to and has various compliance procedures in place. You understand that your continued service will be subjectto, among other things, your adherence to the Company’s policies and procedures and other applicable compliance manuals, copies of which will beseparately made available to you. • Restrictive Covenants. You acknowledge and agree that you shall be bound by the confidentiality and restrictive covenant provisions contained in theaward agreement evidencing the Plan Grant described above and attached hereto as Annex A and that your engagement by the Company is conditionedon your agreement to be bound thereby. • Confidentiality. You will maintain the confidentiality of this letter agreement (and any related understandings, including your compensationarrangements and amounts) at all times and will not discuss such matters with any person other than your spouse, accountant, financial and taxadvisors or attorney, except that you may make such disclosure (i) to the extent necessary with respect to any litigation, arbitration or mediationinvolving this letter agreement, or (ii) when disclosure is required by law or by any court or arbitrator with apparent jurisdiction to order you to discloseor make accessible any information. • Indemnification. During the term of your service with the Company and its Affiliates and thereafter, the Company agrees to, and agrees to cause ApolloManagement Holdings, L.P. to, indemnify and hold you and your heirs and representatives harmless, to the same extent applicable to similarly situatedexecutives, against any and all damages, claims, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim orproceeding, or threatened claim or proceeding, against you that arises out of or relates to your service as an officer, director, partner or employee, as thecase may be, of the Company, any of its Affiliates or other entity at the request of the Company or any of its Affiliates. During the term of your serviceand thereafter, the Company also shall provide, and shall cause Apollo Management Holdings, L.P. to provide, you with coverage under its directors’and officers’ liability policy(s) to the same extent as similarly situated executives.• Choice of Law; Forum; Waiver of Jury Trial. This letter agreement shall be governed by and construed in accordance with the laws of the State ofDelaware (without regard to any conflicts of laws principles thereof that would give effect to the laws of another jurisdiction), and the parties submit tothe exclusive jurisdiction of the federal and state courts of New York, New York (Borough of Manhattan) in relation to any dispute arising in connectionherewith. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, YOU AND WE HEREBYWAIVE, AND COVENANT THAT YOU AND WE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OROTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTIONWITH THIS LETTER AGREEMENT OR ANY MATTERS CONTEMPLATED HEREBY, WHETHER NOW OR HEREAFTERARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND AGREE THAT ANY OF THE COMPANYOR ANY OF ITS AFFILIATES OR YOU MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCEOF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE COMPANY AND ITS AFFILIATES, ONTHE ONE HAND, AND YOU, ON THE OTHER HAND, IRREVOCABLY TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANYPROCEEDING WHATSOEVER BETWEEN SUCH PARTIES RELATING TO THIS LETTER AGREEMENT, THE PLAN OR ANYAWARD AGREEMENT, AND THAT ANY SUCH PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF COMPETENTJURISDICTION BY A JUDGE SITTING WITHOUT A JURY. • Assurances. You represent that the written limitations furnished by you to the Company with respect to your prior employer constitute all limitations onyour post-employment activities imposed by your prior employer and, to your knowledge, will not preclude you, after the Start Date, from joining theCompany and satisfactorily and effectively performing the services contemplated thereby. You represent to the Company and its Affiliates that, to yourknowledge, as of the Start Date there shall be no other obligations or restrictions that would keep you from joining the Company and performing theservices contemplated hereby. You represent to the Company that you possess any licenses or certifications necessary for you to perform such services.You represent that you will honor all obligations concerning confidentiality and nonsolicitation that you have to your prior employer, and that you willnot take to the Company any confidential information or trade secrets of your prior employer, nor use or disclose any confidential information or tradesecrets of your prior employer while employed at the Company. • Section 409A. The payments to you in connection with your termination of employment or service pursuant to this letter agreement are intended to beexempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), to the maximum extent possible, under either theseparation pay exemption pursuant to Treasury Regulation § 1.409A-1(b)(9)(iii) or as a short-term deferral pursuant to Treasury Regulation § 1.409A-1(b)(4), and for purposes of the separation pay exemption, any post-employment installment paid to you shall be considered a separate payment.Notwithstanding any other provision in this Agreement, if on the date of your separation from service, within the meaning of Section 409A (the“Separation Date”), you are a “specified employee,” as defined in Section 409A, then to the extent any amount payable under this letter agreementconstitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A, that under the terms of this letter agreement wouldbe payable prior to the six-month anniversary of the Separation Date, such payment shall be delayed until the earlier to occur of (A) the six-monthanniversary of the Separation Date or (B) the date of your death. For purposes of determining the timing of payments to you following termination ofemployment or service, all references to such termination shall mean the Separation Date.• Miscellaneous. This letter agreement may not be modified, amended or waived unless in a writing signed by the undersigned parties. Any noticerequired hereunder shall be made in writing, as applicable, to the Company in care of its general counsel at his principal office location or to you at yourprincipal office location or home address most recently on file with the Company, such notice to be deemed effective on the earlier of receipt or two daysafter it is issued. This letter agreement may not be assigned by the parties other than as expressly provided herein. This letter agreement may be executedthrough the use of separate signature pages or in any number of counterparts, including via facsimile or pdf, with the same effect as if the partiesexecuting such counterparts had executed one counterpart.[Continues on next page]The effectiveness of these terms is subject to your execution and return of this letter agreement on or before June 2, 2008. This letter agreement(including Annex A attached hereto) constitutes the entire agreement between the parties in relation to its subject matter and supersedes any previous agreementor understanding between the parties relating thereto, all of which are hereby cancelled, and you confirm that in signing this letter agreement you have not reliedon any warranty, representation, assurance or promise of any kind whatsoever other than as are expressly set out in this letter agreement or in the plans anddocuments referenced herein. Sincerely,/s/ John J. SuydamJohn J. SuydamVice President Agreed and Accepted:/s/ Joseph F. AzrackJoseph F. AzrackDate: June 2, 2008Exhibit 10.43SEPARATION AGREEMENTTHIS SEPARATION AGREEMENT (the “Separation Agreement”) is made as of February 24, 2012 (the “Execution Date”) by and among APOLLOMANAGEMENT, L.P., a Delaware limited partnership, APOLLO MANAGEMENT HOLDINGS, L.P., a Delaware limited partnership (together with ApolloGlobal Management, LLC and each of their respective subsidiaries and affiliates, “Apollo”), and HENRY R. SILVERMAN (“Silverman”) (individually eacha “Party” and collectively the “Parties”).1. Silverman hereby resigns, effective March 15, 2012 (the “Separation Date”), from the Board of Directors of Apollo Global Management, LLC (“AGM”) and from any and all positions he holds at Apollo, including, without limitation, those listed in Exhibit A. As of the Separation Date he will not beemployed by or affiliated with Apollo in any capacity. Silverman will execute promptly upon request by Apollo any additional documents necessary toeffectuate the provisions of this Paragraph 1.2. Provided that no ADEA Revocation has occurred during the ADEA Revocation Period (as both terms are defined below), Apollo shall pay Silverman$2,416,667, subject to tax withholding at minimum applicable rates, in the following manner: a.$916,667 in a single payment within two business days following the expiration of the ADEA Revocation Period (the “Payment Date”);and b.$1,500,000 in a single payment on the first anniversary of the Payment Date, not subject to counterclaim or offset.3. Provided that no ADEA Revocation has occurred during the ADEA Revocation Period (as both terms are defined below), within five business daysfollowing expiration of the ADEA Revocation Period, Silverman shall exercise an option (the “Option”) to purchase up to 277,778 shares of AGM subject tothe terms of the Non-Qualified Share Option Agreement by and between AGM and Silverman dated January 21, 2011 (the “Share Option Agreement”), whichwas made pursuant to and incorporates the terms of the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (the “Equity Incentive Plan,”and together with the Share Option Agreement, the “Incentive Compensation Plans”). Further, (i) the Administrator (as defined in the Incentive CompensationPlans) shall permit Silverman to utilize, and Silverman shall utilize, the exercise method provided for in Paragraph 8 of the Share Option Agreement andSection 7(e)(i) of the Equity Incentive Plan, pursuant to which the number of shares issuable upon exercise is reduced by an amount closest to but withoutexceeding the aggregate exercise price; and (ii) the Administrator shall reduce the number of shares to be issued upon exercise of the Option to satisfy applicablewithholding obligations with respect to the Option at the minimum applicable rate, as provided for in Paragraph 14 of the Share Option Agreement. An exampleof the calculation of such reduction in shares is attached as Exhibit B solely for the purpose of illustration. Following Silverman’s exercise of the Option, AGMshall deliver the resulting number of shares as directed by Silverman. Any and all other rights Silverman has or may have had under the IncentiveCompensation Plans, including, without limitation, any rights to purchase Option Shares that would have become vested on December 31, 2012 ifSilverman’s employment had ended after such date, are hereby extinguished.4. The Parties agree that Silverman’s employment agreement with Apollo, dated February 1, 2009 (the “Employment Agreement”), shall be terminated asof the Execution Date, provided, however, that such termination shall not limit, alter, modify or otherwise affect Silverman’s obligations pursuant to therestrictive covenants contained in Annex A to the Employment Agreement.5. For the avoidance of doubt, Silverman acknowledges that nothing in this Agreement (except for the provisions of Paragraph 6 below), nor the fact of(i) Silverman’s resignations from his positions with Apollo, or (ii) the termination of the Employment Agreement, shall limit, alter, modify or otherwise affect: a.Silverman’s obligations not to disclose confidential information concerning any Apollo entities, including, without limitation, theobligations set forth in the restrictive covenants contained or incorporated in the Employment Agreement or the Share Option Agreement; b.Silverman’s obligations of non-competition and non-solicitation in respect of Apollo, including, without limitation, the obligations set forthin the restrictive covenants contained or incorporated in the Employment Agreement or the Share Option Agreement, as modified by theprovisions of Paragraph 6 of this Agreement; c.Silverman’s obligations of non-disparagement in respect of Apollo, including, without limitation, the obligations set forth in the restrictivecovenants contained or incorporated in the Share Option Agreement; and d.Silverman’s obligations under Apollo’s Code of Ethics and any other Apollo policies or procedures;provided, however, that nothing in this Paragraph 5 is intended to or shall prevent Silverman from making truthful statements regarding the Releasees (asdefined below) in connection with legal or regulatory proceedings or otherwise as required by law, including in connection with any proceeding before the U.S.Securities and Exchange Commission.6. The Parties agree that the definitions of Competitive Business and Investment Fund in paragraph 2 of the Restrictive Covenants contained in Annex Ato the Employment Agreement and the definition of Competing Business in paragraph (g)(i) of the Restrictive Covenants contained in Exhibit A to the ShareOption Agreement shall be limited to the list of entities set out in a letter dated February 24, 2012 from Apollo Management, L.P. and Apollo ManagementHoldings, L.P. to Silverman (the “Side Letter”), and all subsidiaries and affiliates of those entities. This Paragraph 6 shall not affect any obligations ofSilverman other than the obligations not to compete with Apollo. 27. In consideration of the benefits provided for in this Agreement, Silverman voluntarily, knowingly and willingly releases and forever discharges eachof the entities that compose Apollo and each such entity’s respective subsidiaries, divisions, affiliates, portfolio companies, parents, managers, successorsand assigns (including, without limitation, any fund or investment vehicle affiliated in any way with Apollo) (collectively, the “Apollo Entities”), together withthe officers, directors, partners, investors, shareholders, members, employees, agents, attorneys, fiduciaries and administrators of any Apollo Entity(collectively, the “Releasees”) from any and all actions, causes of action, suits, claims, demands, obligations, complaints or rights of any nature whatsoever(collectively “Claims”) that Silverman now has or ever had against the Releasees, whether or not now known to Silverman, other than any cause of action toenforce the terms or remedy a breach of this Agreement. This release includes, but is not limited to, any Claim relating in any way to Silverman’s employmentor contractual relationships with Apollo or any of the other Releasees or the termination thereof, the Employment Agreement, the Share Option Agreement, andthe Equity Incentive Plan; any Claim relating in any way to any contract (express or implied, written or oral) or the commission of any tort or breach of duty;and any Claims under any federal, state or local statute or regulation, including, without limitation, the Rehabilitation Act of 1973 (including Section 504thereof), the Age Discrimination in Employment Act of 1967 (“ADEA”), the National Labor Relations Act, the Americans With Disabilities Act of 1990,Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, the Securities Act of 1933, and the Securities Exchange Act of 1934, the CivilRights Act of 1866 (42 U.S.C. § 1981), the Civil Rights Act of 1991, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the NewYork State Human Rights Law, the New York City Human Rights Law, and the Employee Retirement Income Security Act of 1974, all as amended. Thisrelease also includes, but is not limited to, any Claims based upon the right to the payment of wages, bonuses, vacation, pension benefits, 401(k) planbenefits, stock or options benefits or any other employee benefits, or any other rights arising under federal, state or local laws prohibiting discriminationand/or harassment on the basis of race, color, age, religion, sexual orientation, religious creed, sex, national origin, ancestry, alienage, citizenship, nationality,mental or physical disability, denial of family and medical care leave, medical condition (including cancer and genetic characteristics), marital status, militarystatus, gender identity, harassment or any other basis prohibited by law. Notwithstanding any of the foregoing, nothing in this Paragraph 7 is intended to orshall release any Claims Silverman now has against the Releasees that arise solely from investments in Apollo Entities made by Silverman or by a trust orother entity whose investment decisions Silverman controls.8. Except for the portion of the release contained in Paragraph 7 that concerns Claims under the ADEA (the “ADEA Release”), the terms of Paragraph 7shall automatically become immediately effective upon Silverman’s execution of this Agreement. Upon the expiration of the ADEA Revocation Period (definedbelow), the terms of the ADEA Release shall automatically become effective as of the date Silverman executes this Agreement. The ADEA Revocation Periodbegins upon Silverman’s execution of this Agreement. Silverman acknowledges that, solely with respect to the ADEA Release but not with respect to any otherportion of the release contained in Paragraph 7, Silverman has been offered but declined a period of time of at least 21 days to consider whether to sign thisAgreement, which he has waived, and Apollo agrees that he may cancel the ADEA Release but not any other portion of the release contained in Paragraph 7 atany time during the seven days following the date on which this 3Agreement has been signed by each Party (the “ADEA Revocation Period”). In order to cancel or revoke the ADEA Release, Silverman must deliver to the ChiefLegal Officer of AGM written notice stating that he is canceling or revoking the ADEA Release prior to the end of the ADEA Revocation Period (an “ADEARevocation”).9. In the event of an ADEA Revocation, this Separation Agreement shall be immediately terminated and cancelled in its entirety and all of its provisionswill be void.10. Silverman covenants, warrants and agrees that (a) he has full authority to resolve and forever release all Claims released pursuant to Paragraph 7,and (b) he has not assigned or otherwise transferred any such Claims.11. In consideration of the benefits set forth in this Agreement, Apollo voluntarily, knowingly and willingly releases and forever discharges Silvermanfrom any and all Claims of any nature whatsoever that Apollo now has against Silverman, whether or not now known to Apollo, other than any Claim toenforce the terms or remedy a breach of this Agreement. This release includes, but is not limited to, any Claims relating in any way to Silverman’semployment relationship with Apollo. Notwithstanding any of the foregoing, nothing in this Paragraph 11 is intended to or shall release any Claimswhatsoever that Apollo now has or may have in the future against Silverman that arise solely from investments in Apollo Entities made by Silverman or by atrust or other entity whose investment decisions Silverman controls.12. The Parties agree and acknowledge that nothing in this Agreement or the Side Letter shall limit, alter, modify or otherwise affect the rights andobligations of indemnification or contribution of Silverman or Apollo, existing as of the Execution Date, in respect of any Claim or other dispute, controversy,litigation, action, arbitration, investigation or other proceeding related to Silverman’s employment with and service to Apollo, brought or initiated by anyperson, regulatory body or other entity other than Silverman or Apollo, including, without limitation, any such rights under AGM’s Amended and RestatedLimited Liability Company Agreement.13. Silverman agrees to cooperate in good faith and comply with and respond to requests from or inquiries by Apollo for assistance and information inconnection with any matters or issues relating to or encompassed within (i) the duties and responsibilities encompassed in Silverman’s positions at Apollo,and (ii) any lawsuit, arbitration, investigation or other proceeding or dispute in which Apollo is or may become involved that may relate to Silverman or hisduties with Apollo or as to which Silverman has relevant knowledge or information. Such cooperation and assistance shall include, without limitation,consulting with Apollo’s officers, directors, employees, legal counsel, accountants and other agents, advisors or representatives, appearing as a witness,submitting to depositions, providing documents, testimony and interviews, and otherwise cooperating and assisting Apollo in its defense or prosecution of anyClaim or other dispute, controversy, litigation, action, arbitration, investigation or other proceeding, or otherwise defending its position with respect to anymatter. Silverman further agrees that if he is subpoenaed to appear in any civil or criminal litigation, or by any governmental authority, to testify on any matterrelating in whole or in part to Apollo or his employment or affiliation with Apollo or any of its affiliates, Silverman will deliver a copy of 4the subpoena to the Chief Legal Officer of AGM, by e-mail, within two business days of receiving such subpoena. Apollo shall bear or reimburse Silvermanfor all reasonable expenses incurred in connection with Silverman’s compliance with his obligations under this Paragraph 13.14. Silverman and the Apollo Entities shall not make any disparaging statements about each other, provided, however, that nothing in this Agreementshall prohibit (i) any of the Apollo Entities from responding to a request for a reference or other information concerning Silverman’s employment solely byproviding Silverman’s dates of employment and titles at Apollo and its affiliates; and (ii) either Silverman or any of the Apollo Entities from making truthfulstatements regarding any of the Apollo Entities or Silverman, respectively, in communications with the U.S. Securities and Exchange Commission (the“SEC”) or other governmental or regulatory bodies or in connection with legal or regulatory proceedings or otherwise as required by law, including inconnection with any proceeding before the SEC or other governmental or regulatory body. The provisions of this Paragraph 14 apply in addition toSilverman’s continuing obligations of non-disparagement in respect of Apollo set forth in the Restrictive Covenants contained in the Share Option Agreement.15. On the Execution Date, AGM shall file a Form 8-K with the SEC in the form attached as Exhibit C, and shall distribute to all AGM employees acommunication in the form attached as Exhibit D.16. The Parties each deny and in no way admit any liability to each other, except as described herein. This Agreement shall not be considered anadmission of any fact, issue of law or liability by any Party for any purpose, nor shall anything in this Agreement constitute or be construed to be anadmission, suggestion, or implication that any Party acted in any way improperly, or bears any liability to any Party.17. Each Party shall bear its own legal and other costs incurred in connection with this Agreement.18. This Agreement and the Side Letter constitute the entire agreement and understanding of the Parties with respect to the subject matter hereof andsupersede any prior or contemporaneous oral or written agreements, proposed agreements, negotiations, or discussions with respect to the subject matter hereof.19. This Agreement may not be altered, modified, amended, or terminated, unless by writing executed by all the Parties, nor any of its provisionswaived, unless in writing by the Party granting such waiver.20. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to any choice of law orconflict of law provision or rules. Any action related to or arising from this Agreement shall be brought exclusively in the federal or state courts located in NewYork County, New York. The Parties irrevocably submit to the jurisdiction of such courts for the purpose of any such action, proceeding or judgment andwaive any defense based on the location, venue or jurisdiction of such courts. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT 5CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER ASPLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION IN WHOLE OR IN PART ARISING OUTOF OR RELATED TO THIS AGREEMENT OR ANY MATTERS CONTEMPLATED HEREBY (INCLUDING, BUT NOT LIMITED TO, ANYACTION ARISING OUT OF OR RELATED TO THE EMPLOYMENT AGREEMENT, THE EQUITY INCENTIVE PLAN OR THE SHAREOPTION AGREEMENT), WHETHER NOW OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OROTHERWISE, AND AGREE THAT SILVERMAN OR ANY OF THE APOLLO ENTITIES MAY FILE A COPY OF THIS PARAGRAPHWITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONGSILVERMAN, ON THE ONE HAND, AND APOLLO, ON THE OTHER HAND, IRREVOCABLY TO WAIVE THE RIGHT TO TRIAL BYJURY, AND THAT ANY SUCH PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGESITTING WITHOUT A JURY.21. If any provision, term or clause of this Agreement is declared illegal, unenforceable or ineffective in a legal forum, that provision, term or clauseshall be deemed severable, such that all other provisions, terms and clauses of this Agreement shall remain valid and binding upon all of the Parties.22. Silverman acknowledges that he has consulted counsel and that this Agreement is freely and voluntarily entered into without any degree of duress orcompulsion whatsoever. This Agreement has been reviewed and negotiated by the Parties’ respective counsel, and its construction shall not be subject to anypresumptions against its drafter.23. This Agreement may be executed in counterparts, each of which when taken together shall be deemed one and the same document.(Remainder of page intentionally left blank.) 6IN WITNESS WHEREOF, the Parties hereto affix their signatures. HENRY SILVERMANDated 2/24/12By: /s/ Henry Silverman Henry SilvermanAPOLLO MANAGEMENT, L.P.Dated 2/24/12By: Apollo Management GP, LLC,its general partnerBy: /s/ John J. Suydam John J. Suydam Vice PresidentAPOLLO MANAGEMENT HOLDINGS, L.P.Dated 2/24/12By: Apollo Management Holdings GP, LLC,its general partnerBy: /s/ John J. Suydam John J. Suydam Vice President 7Exhibit 21.1LIST OF SUBSIDIARIESThe following are subsidiaries of Apollo Global Management, LLC as of March 6, 2012 and the jurisdictions in which they are organized. Entity Name Jurisdiction of OrganizationApollo Capital Management IV, Inc. DelawareApollo Advisors IV, L.P. DelawareApollo Capital Management V, Inc. DelawareApollo Advisors V, L.P. DelawareApollo Principal Holdings I, L.P. DelawareApollo Capital Management VI, LLC DelawareApollo Advisors VI, L.P. DelawareAPO Asset Co., LLC DelawareApollo Principal Holdings I GP, LLC DelawareApollo Principal Holdings III GP, Ltd. Cayman IslandsApollo Advisors V (EH), LLC AnguillaApollo Advisors V (EH Cayman), L.P. Cayman IslandsApollo Principal Holdings III, L.P. Cayman IslandsApollo Advisors VI (EH-GP), Ltd. Cayman IslandsApollo Advisors VI (EH), L.P. Cayman IslandsAAA Guernsey Limited GuernseyApollo Alternative Assets, L.P. Cayman IslandsAAA MIP Limited GuernseyAAA Associates, L.P. GuernseyAPO Corp. DelawareApollo SVF Capital Management, LLC DelawareApollo SVF Advisors, L.P. DelawareApollo SVF Administration, LLC DelawareApollo SOMA Capital Management, LLC DelawareApollo SOMA Advisors, L.P. DelawareApollo Principal Holdings II GP, LLC DelawareApollo Asia Capital Management, LLC DelawareApollo Asia Advisors, L.P. DelawareApollo Asia Administration, LLC DelawareApollo Value Capital Management, LLC DelawareEntity Name Jurisdiction of OrganizationApollo Value Advisors, L.P. DelawareApollo Value Administration, LLC DelawareApollo Principal Holdings II, L.P. DelawareApollo Principal Holdings IV, L.P. Cayman IslandsApollo EPF Capital Management, Limited Cayman IslandsApollo EPF Advisors, L.P. Cayman IslandsApollo EPF Administration, Limited Cayman IslandsApollo Management Holdings, L.P. DelawareApollo Management, L.P. DelawareAIF III Management, LLC DelawareApollo Management III, L.P. DelawareAIF V Management, LLC DelawareApollo Management V, L.P. DelawareAIF VI Management, LLC DelawareApollo Management VI, L.P. DelawareApollo Management IV, L.P. DelawareApollo International Management, L.P. DelawareApollo Alternative Assets GP Limited Cayman IslandsApollo Management International LLP UKApollo Management Advisors GmbH GermanyAMI (Holdings), LLC DelawareAAA Holdings GP Limited GuernseyAAA Holdings, L.P. GuernseyApollo International Management GP, LLC DelawareApollo Capital Management GP, LLC DelawareAEM GP, LLC DelawareApollo Europe Management, L.P. DelawareACC Management, LLC DelawareApollo Investment Management, L.P. DelawareApollo SVF Management GP, LLC DelawareApollo SVF Management, L.P. DelawareApollo Value Management GP, LLC DelawareApollo Value Management, L.P. DelawareApollo Asia Management GP, LLC DelawareApollo Asia Management, L.P. DelawareEntity Name Jurisdiction of OrganizationApollo Management Singapore Pte Ltd SingaporeApollo EPF Management GP, LLC DelawareApollo EPF Management, L.P. DelawareApollo Capital Management, L.P. DelawareApollo Principal Holdings IV GP, Ltd. Cayman IslandsApollo Management Holdings GP, LLC DelawareApollo Management VII, L.P. DelawareAIF VII Management, LLC DelawareApollo Advisors VII, L.P. DelawareApollo Capital Management VII, LLC DelawareApollo Credit Liquidity Management, L.P. DelawareApollo Credit Liquidity Management GP, LLC DelawareApollo Credit Liquidity Capital Management, LLC DelawareApollo Credit Liquidity Investor, LLC DelawareApollo Credit Liquidity Advisors, L.P. DelawareApollo Investment Consulting LLC DelawareApollo Life Asset Ltd Cayman IslandsApollo Management GP, LLC DelawareAP Transport DelawareAP Alternative Assets, L.P. GuernseyApollo Management (UK), L.L.C. DelawareApollo Investment Administration, LLC MarylandA/A Capital Management, LLC DelawareA/A Investor I, LLC DelawareApollo/Artus Management, LLC DelawareApollo Fund Administration VII, LLC DelawareApollo Management (UK) VI, LLC DelawareApollo COF Investor, LLC DelawareApollo Credit Opportunity Management, LLC DelawareApollo Co-Investors VII (D), L.P. DelawareApollo EPF Co-Investors (B), L.P. Cayman IslandsApollo Management (AOP) VII, LLC DelawareApollo Co-Investors Manager, LLC DelawareApollo Commodities Management GP, LLC DelawareApollo Commodities Management, L.P. DelawareEntity Name Jurisdiction of OrganizationApollo Commodities Partners Fund Administration, LLC DelawareApollo Fund Administration IV, L.L.C. DelawareApollo Fund Administration V, L.L.C. DelawareApollo Fund Administration VI, LLC DelawareVC GP, LLC DelawareApollo Management (Germany) VI, LLC DelawareApollo Advisors VII (EH-GP), Ltd. Cayman IslandsApollo Advisors VII (EH), L.P. Cayman IslandsApollo Co-Investors VII (EH-D), LP AnguillaApollo Verwaltungs V GmbH GermanyApollo AIE II Co-Investors (B), L.P. Cayman IslandsApollo Credit Co-Invest II GP, LLC DelawareApollo Europe Advisors, L.P. Cayman IslandsApollo Europe Capital Management, Ltd Cayman IslandsLeverageSource Management, LLC DelawareAMI (Luxembourg) S.a.r.l. LuxembourgApollo Principal Holdings V, L.P. DelawareApollo Principal Holdings VI, L.P. DelawareApollo Principal Holdings VII, L.P. Cayman IslandsApollo Principal Holdings V GP, LLC DelawareApollo Principal Holdings VI GP, LLC DelawareACC Advisors D, LLC DelawareApollo Principal Holdings VII GP, Ltd. Cayman IslandsACC Advisors C, LLC DelawareAPO (FC), LLC AnguillaACC Advisors A/B, LLC DelawareApollo Master Fund Feeder Management, LLC DelawareApollo Palmetto Management, LLC DelawareApollo Master Fund Feeder Advisors, L.P. DelawareApollo Palmetto Advisors, L.P. DelawareApollo Master Fund Administration, LLC DelawareApollo Global Real Estate Management GP, LLC DelawareApollo Global Real Estate Management, L.P. DelawareApollo Advisors VI (APO FC-GP), LLC AnguillaApollo Advisors VII (APO FC-GP), LLC AnguillaEntity Name Jurisdiction of OrganizationApollo Advisors VI (APO DC-GP), LLC DelawareApollo Advisors VII (APO DC-GP), LLC DelawareApollo Anguilla B LLC AnguillaApollo Advisors VI (APO DC), L.P. DelawareApollo Advisors VII (APO DC), L.P. DelawareApollo Advisors VI (APO FC), L.P. Cayman IslandsApollo Advisors VII (APO FC), L.P. Cayman IslandsVC GP C, LLC DelawareAPH I (SUB I), Ltd Cayman IslandsAPH III (SUB I), Ltd Cayman IslandsApollo Strategic Advisors, L.P. Cayman IslandsApollo SOMA II Advisors, L.P. Cayman IslandsApollo Strategic Management GP, LLC DelawareApollo Strategic Management, L.P. DelawareApollo Strategic Capital Management, LLC DelawareOhio Haverly Finance Company GP, LLC DelawareOhio Haverly Finance Company, L.P. DelawareAGM India Advisors Private Limited IndiaApollo Principal Holdings VIII GP, Ltd. Cayman IslandsApollo Principal Holdings VIII, L.P. Cayman IslandsApollo Principal Holdings IX GP, Ltd. Cayman IslandsApollo Principal Holdings IX, L.P. Cayman IslandsBlue Bird GP, Ltd. Cayman IslandsGreen Bird GP, Ltd. Cayman IslandsRed Bird GP, Ltd. Cayman IslandsAugust Global Management, LLC FloridaACREFI Management, LLC DelawareNew York Haverly Finance Company GP, LLC DelawareApollo COF I Capital Management, LLC DelawareApollo Credit Opportunity Advisors I, L.P. DelawareApollo COF II Capital Management, LLC DelawareApollo Credit Opportunity Advisors II, L.P. DelawareApollo Co-Investors VI (D), L.P. DelawareApollo Co-Investors VI (DC-D), L.P. DelawareApollo Co-Investors VI (EH-D), LP AnguillaEntity Name Jurisdiction of OrganizationApollo Co-Investors VI (FC-D), LP AnguillaAthene Asset Management, LLC DelawareApollo Credit Opportunity CM Executive Carry I, L.P. DelawareApollo Credit Opportunity CM Executive Carry II, L.P. DelawareApollo Credit Liquidity CM Executive Carry, L.P. DelawareApollo Laminates Agent, LLC DelawareApollo Management Asia Pacific Limited Hong KongApollo ALS Holdings II GP, LLC DelawareApollo Resolution Servicing GP, LLC DelawareApollo Resolution Servicing, L.P. DelawareAGRE CMBS Management LLC DelawareAGRE CMBS GP LLC DelawareApollo Co-Investors VII (FC-D), L.P. AnguillaApollo Co-Investors VII (DC-D), L.P. DelawareApollo Credit Management (CLO), LLC DelawareApollo Global Securities, LLC DelawareApollo Advisors (Mauritius) Ltd. MauritiusAAA Life Re Carry, L.P. Cayman IslandsAGRE Asia Pacific Management, LLC DelawareAGRE NA Management, LLC DelawareAGRE Europe Management, LLC DelawareAGRE -DCB, LLC DelawareApollo Parallel Partners Administration, LLC DelawareApollo Credit Capital Management, LLC DelawareApollo Credit Advisors I, LLC DelawareApollo Credit Management (Senior Loans), LLC DelawareApollo Asian Infrastructure Management, LLC DelawareApollo CKE GP, LLC DelawareALM Loan Funding 2010-1, LLC DelawareAGRE NA Legacy Management, LLC DelawareAGRE Europe Legacy Management, LLC DelawareAGRE Asia Pacific Legacy Management, LLC DelawareAGRE GP Holdings, LLC DelawareApollo Gaucho GenPar, Ltd Cayman IslandsApollo Credit Advisors II, LLC DelawareEntity Name Jurisdiction of OrganizationAP TSL Funding, LLC DelawareAGRE -E Legacy Management, LLC DelawareFinancial Credit I Capital Management, LLC DelawareFinancial Credit Investment I Manager, LLC DelawareAGRE CMBS GP II LLC DelawareAGRE CMBS Management II LLC DelawareFinancial Credit Investment Advisors I, L.P. Cayman IslandsAPH HFA Holdings, L.P. Cayman IslandsAPH HFA Holdings GP, Ltd Cayman IslandsAGRE -E2 Legacy Management, LLC DelawareAP AOP VII Transfer Holdco, LLC DelawareALM Loan Funding 2010-3, Ltd. Cayman IslandsApollo Credit Management, LLC DelawareApollo Credit Capital Management, LLC DelawareApollo India Credit Opportunity Management, LLC DelawareAGRE U.S. Real Estate Advisors, L.P. DelawareAGRE U.S. Real Estate Advisors GP, LLC DelawareApollo AGRE USREF Co-Investors (B), LLC DelawareCPI Capital Partners Asia Pacific GP Ltd. Cayman IslandsCPI Asia G-Fdr General Partner GmbH GermanyCPI Capital Partners Asia Pacific MLP II Ltd. Cayman IslandsCPI Capital Partners Europe GP Ltd. Cayman IslandsCPI European Fund GP LLC DelawareCPI European Carried Interest, L.P. DelawareCPI CCP EU-T Scots GP Ltd. ScotlandCPI NA GP LLC DelawareCPI NA Fund GP LP DelawareCPI NA Cayman Fund GP, L.P. Cayman IslandsCPI NA WT Fund GP LP DelawareApollo Administration GP Ltd. Cayman IslandsApollo Achilles Co-Invest GP, LLC AnguillaApollo Palmetto HFA Advisors, L.P. DelawareApollo Credit Co-Invest II, L.P. DelawareARM Manager, LLC DelawareStanhope Life Advisors, L.P. Cayman IslandsEntity Name Jurisdiction of OrganizationAION Capital Management Limited MauritiusGreenhouse Holdings, Ltd. Cayman IslandsApollo ALST GenPar, Ltd. Cayman IslandsApollo Palmetto Athene Advisors, L.P. DelawareApollo ANRP Co-Investors (D), L.P. DelawareApollo Co-Investors VII (NR DC-D), L.P. DelawareApollo Co-Investors VII (NR D), L.P. DelawareApollo Co-Investors VII (NR FC-D), LP AnguillaApollo Co-Investors (NR EH-D), LP AnguillaALM IV, Ltd. Cayman IslandsAPH Holdings, L.P. Cayman IslandsAPH Holdings (DC), L.P. Cayman IslandsAPH Holdings (FC), L.P. Cayman IslandsApollo Longevity, LLC DelawareApollo ANRP Capital Management, LLC DelawareApollo ANRP Advisors, L.P. DelawareApollo ALST Voteco, LLC DelawareAGRE CRE Debt Manager, LLC DelawareApollo GSS GP Limited Channel IslandsApollo ANRP Advisors (IH-GP), LLC AnguillaApollo ANRP Advisors (IH), L.P. Cayman IslandsApollo ANRP Co-Investors (IH-D), LP AnguillaAGRE Debt Fund I GP, Ltd. Cayman IslandsApollo APC Capital Management, LLC AnguillaApollo APC Advisors, L.P. Cayman IslandsApollo European Senior Debt Advisors, LLC DelawareApollo European Strategic Advisors, LLC DelawareApollo European Strategic Advisors, L.P. Cayman IslandsApollo European Strategic Management, LLC DelawareApollo European Strategic Management, L.P. DelawareApollo Credit Management (European Senior Debt), LLC DelawareApollo European Senior Debt Management, LLC DelawareApollo Credit Advisors III, LLC DelawareApollo EPF Advisors II, L.P. Cayman IslandsApollo EPF Management II GP, LLC DelawareEntity Name Jurisdiction of OrganizationApollo EPF Management II, L.P. DelawareApollo VII TXU Administration, LLC DelawareApollo APC Management, L.P. DelawareApollo APC Management GP, LLC DelawareApollo EPF Co-Investors (D), L.P. Cayman IslandsApollo Executive Carry VII (NR), L.P. DelawareApollo Executive Carry VII (NR APO DC), L.P. Cayman IslandsApollo Executive Carry VII (NR APO FC), L.P. DelawareApollo Executive Carry VII (NR EH), L.P. Cayman IslandsApollo European Credit Advisors, L.P. Cayman IslandsApollo European Credit Advisors, LLC DelawareApollo European Credit Management, L.P. DelawareApollo European Credit Management, LLC DelawareGSAM Apollo Holdings, LLC DelawareGulf Stream - Compass CLO 2007, Ltd. Cayman IslandsGulf Stream - Compass CLO 2005-II, Ltd. Cayman IslandsGulf Stream - Sextant CLO 2007-I, Ltd. Cayman IslandsGulf Stream - Sextant CLO 2006-I, Ltd. Cayman IslandsGulf Stream - Rashinban CLO 2006-I, Ltd. Cayman IslandsNeptune Finance CCS, Ltd. Cayman IslandsApollo Senior Loan Fund Co-Investors (D), L.P. DelawareApollo European Strategic Co-Investors, LLC DelawareST Holdings GP, LLC DelawareST Management Holdings, LLC DelawareST Merger Subsidiary, LLC DelawareApollo Credit Senior Loan Fund, L.P. DelawareApollo Athlon GenPar, Ltd. Cayman Islands2012 CMBS GP LLC Delaware2012 CMBS Management LLC DelawareApollo SPN Capital Management, LLC AnguillaApollo SPN Advisors, L.P. Cayman IslandsApollo SPN Management, LLC DelawareApollo SPN Co-Investors (D), L.P. AnguillaApollo SPN Capital Management (APO FC-GP), LLC AnguillaApollo SPN Advisors (APO FC), L.P. Cayman IslandsEntity Name Jurisdiction of OrganizationApollo SPN Co-Investors (FC-D), L.P. AnguillaApollo SPN Capital Management (APO DC-GP), LLC AnguillaApollo SPN Advisors (APO DC), L.P. Cayman IslandsApollo SPN Co-Investors (DC-D), L.P. AnguillaApollo AGRE Prime Co-Investors (D), LLC AnguillaApollo European Credit Co-Investors, LLC DelawareGulf Stream Asset Management, LLC North CarolinaApollo Centre Street Management, LLC DelawareApollo Centre Street Advisors (APO DC-GP), LLC DelawareApollo Centre Street Advisors (APO DC), LLC DelawareApollo Centre Street Co-Investors (DC-D), L.P. DelawareExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statement (No. 333-173161) on Form S-8 of our report dated March 8, 2012 relating to theconsolidated financial statements of Apollo Global Management, LLC and subsidiaries appearing in this Annual Report on Form 10-K of Apollo GlobalManagement, LLC for the year ended December 31, 2011./s/ Deloitte & ToucheNew York, New YorkMarch 8, 2012Exhibit 31.1CHIEF EXECUTIVE OFFICER CERTIFICATIONI, Leon Black, certify that: 1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of Apollo Global Management, LLC; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recentfiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the Registrant’s internal control over financial reporting; and 5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controlover financial reporting.Date: March 9, 2012 /s/ Leon BlackLeon BlackChief Executive OfficerExhibit 31.2CHIEF FINANCIAL OFFICER CERTIFICATIONI, Gene Donnelly, certify that: 1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of Apollo Global Management, LLC 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recentfiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the Registrant’s internal control over financial reporting; and 5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controlover financial reporting.Date: March 9, 2012 /s/ Gene DonnellyGene DonnellyChief Financial OfficerExhibit 32.1Certification of the Chief Executive OfficerPursuant to 18 U.S.C. Section 1350,As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of Apollo Global Management, LLC (the “Company”) on Form 10-K for the year ended December 31, 2011 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leon Black, Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 9, 2012 /s/ Leon BlackLeon BlackChief Executive Officer *The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separatedisclosure document.Exhibit 32.2Certification of the Chief Financial OfficerPursuant to 18 U.S.C. Section 1350,As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of Apollo Global Management, LLC (the “Company”) on Form 10-K for the year ended December 31, 2011 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gene Donnelly, Chief Financial Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 9, 2012 /s/ Gene DonnellyGene DonnellyChief Financial Officer *The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separatedisclosure document.

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