Apollo Global Management
Annual Report 2012

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, 2012OR ¨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 x No ¨Indicate 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 1934during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filingrequirements 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 Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod 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 andwill not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form 10-K. xIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seethe definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨Non-accelerated filer ¨ (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, 2012, the aggregate market value of 43,086,687 Class A shares held by non-affiliates was approximately $741 million.As of March 1, 2013, there were 132,139,856 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 26 ITEM 1B. UNRESOLVED STAFF COMMENTS 64 ITEM 2. PROPERTIES 64 ITEM 3. LEGAL PROCEEDINGS 64 ITEM 4. MINE SAFETY DISCLOSURES 66 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES 67 ITEM 6. SELECTED FINANCIAL DATA 70 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 73 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 149 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 154 ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 240 ITEM 9A. CONTROLS AND PROCEDURES 240 ITEM 9B. OTHER INFORMATION 241 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 242 ITEM 11. EXECUTIVE COMPENSATION 248 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS 261 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 263 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 273 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 274 SIGNATURES 278 -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, as amended (the “SecuritiesAct”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to,discussions related to Apollo’s expectations regarding the performance of its business, its liquidity and capital resources and the other non-historical statementsin the discussion and analysis. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and informationcurrently available to, management. When used in this report, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” and similar expressions areintended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements arereasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties andassumptions, including risks relating to our dependence on certain key personnel, our ability to raise new private equity, credit or real estate funds, marketconditions generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of ourrevenues, net income and cash flow, our use of leverage to finance our businesses and investments by our funds and litigation risks, among others. We believethese factors include but are not limited to those described under the section entitled “Risk Factors” in this report; as such factors may be updated from time totime in our periodic filings with the United States Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov.These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this releaseand in other filings. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, futuredevelopments 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, a Delaware limited liabilitycompany, 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 morelimited partnerships formed for the purpose of, among other activities, holding certain of our gains or losses on our principal investments in the funds, whichwe refer to as our “principal investments”;“Assets Under Management,” or “AUM,” refers to the investments we manage or with respect to which we have control, including capital we have the right tocall 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 theterms of their capital commitments plus non-recallable capital to the extent a fund is within the commitment period in whichmanagement fees are calculated based on total commitments to the fund; (ii)the net asset value, or “NAV,” of our credit funds, other than certain collateralized loan obligations (“CLOs”) (such as ApolloArtus Investors 2007-I, L.P.), which we measure by using the mark-to-market value of the aggregate principal amount of theunderlying CLO and collateralized debt obligation (“CDO”) credit funds that have a -3-Table of Contents fee generating basis other than mark-to-market asset, plus used or available leverage and/or capital commitments; (iii)the gross asset value or net asset value of our real estate entities and the structured portfolio company investments includedwithin the funds we manage, which includes the leverage used by such structured portfolio companies; (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 forinvestments that may require pre-qualification before investment plus any other capital commitments available for investmentthat are not otherwise included in the clauses above.Our AUM measure includes Assets Under Management for which we charge either no or nominal fees. Our definition of AUM is not based on any definitionof Assets Under Management contained in our operating agreement or in any of our Apollo fund management agreements. We consider multiple factors fordetermining what should be included in our definition of AUM. Such factors include but are not limited to (1) our ability to influence the investment decisionsfor existing and available assets; (2) our ability to generate income from the underlying assets in our funds; and (3) the AUM measures that we use internallyor 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.Fee-generating AUM consists of assets that we manage and on which we earn management fees or monitoring fees pursuant to management agreements on abasis that varies among the Apollo funds. Management fees are normally based on “net asset value,” “gross assets,” “adjusted par asset value,” “adjusted costof all unrealized portfolio investments,” “capital commitments,” “adjusted assets,” “stockholders’ equity,” “invested capital” or “capital contributions,” eachas defined in the applicable management agreement. Monitoring fees, also referred to as advisory fees, generally are based on the total value of certainstructured portfolio company investments, which normally includes leverage, less any portion of such total value that is already considered in fee-generatingAUM.Non-fee generating AUM consists of assets that do not produce management fees or monitoring fees. These assets generally consist of the following: (i)fair value above invested capital for those funds that earn management fees based on invested capital; (ii)net asset values related to general partner and co-investment ownership; (iii)unused credit facilities; (iv)available commitments on those funds that generate management fees on invested capital; (v)structured portfolio company investments that do not generate monitoring fees; and (vi)the difference between gross assets and net asset value for those funds that earn management fees based on net asset value.We use non-fee generating AUM combined with fee-generating AUM as a performance measurement of our investment activities, as well as to monitor fundsize in relation to professional resource and -4-Table of Contentsinfrastructure needs. Non-fee generating AUM includes assets on which we could earn carried interest income;“carried interest,” “carried interest income,” and “incentive income” refer to interests granted to Apollo by an Apollo fund that entitle Apollo to receiveallocations, distributions or fees which are based on 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;“Contributing Partners” refer to those of our partners (and their related parties) who indirectly own (through Holdings) Apollo Operating Group units;“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, 2012 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 and ContributingPartners hold their Apollo Operating Group units;“IRS” refers to the Internal Revenue Service;“Managing Partners” refer to Messrs. Leon Black, Joshua Harris and Marc Rowan collectively and, when used in reference to holdings of interests in Apolloor 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, organizationalexpenses, transaction costs, and certain other fund expenses (including interest incurred by the fund itself) and realized and the estimated unrealized value isadjusted such that a percentage of up to 20.0% of the unrealized gain is allocated to the general partner, thereby reducing the balance attributable to fundinvestors carried interest all offset to the extent of interest income, and measures returns based on amounts that, if distributed, would be paid to investors ofthe fund; to the extent that an Apollo private equity fund exceeds all requirements detailed within the applicable fund agreement;“net return” represents the calculated return that is based on month-to-month changes in net assets and is calculated using the returns that have beengeometrically 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 the investmentsmade with such capital, except as required by applicable law, such as AP Alternative Assets, L.P., Apollo Investment Corporation, Apollo Commercial -5-Table of ContentsReal Estate Finance, Inc., Apollo Residential Mortgage, Inc. and Apollo Senior Floating Rate Fund Inc.; such funds may be required, or elect, to return all or aportion 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) director indirect co-investments with existing and future private equity funds managed or sponsored by Apollo, (iii) direct or indirect investments in securities whichare not immediately capable of resale in a public market that Apollo identifies but does not pursue through its private equity funds, and (iv) investments of thetype described in (i) through (iii) above made by Apollo funds; and“Strategic Investors” refers to the California Public Employees’ Retirement System, or “CalPERS,” and an affiliate of the Abu Dhabi Investment Authority, or“ADIA.” -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, creditand real estate, with significant distressed investment expertise. We have a flexible mandate in the majority of the funds we manage that enables the funds toinvest opportunistically across a company’s capital structure. We raise, invest and manage funds on behalf of some of the world’s most prominent pension,endowment and sovereign wealth funds, as well as other institutional and individual investors. As of December 31, 2012, we had total AUM of $113 billion,including approximately $38 billion in private equity, $64 billion in credit and $9 billion in real estate. We have consistently produced attractive long-terminvestment 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, 2012.Apollo is led by our Managing Partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 22 years and leada team of 634 employees, including 253 investment professionals, as of December 31, 2012. 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, credit and real estate businesses in a highly integrated manner, which we believe distinguishes us from otheralternative investment managers. Our investment professionals frequently collaborate across disciplines. We believe that this collaboration, including marketinsight, management, banking and consultant contacts, and investment opportunities, enables the funds we manage to more successfully invest across acompany’s capital structure. This platform and the depth and experience of our investment team have enabled us to deliver strong long-term investmentperformance for our funds 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 toinvest capital 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. Our core industry sectors cover chemicals, commodities, consumer and retail, distribution and transportation,financial and business services, manufacturing and industrial, media and cable and leisure, packaging and materials and the satellite and wireless industries.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-outtransactions; • our experience investing during periods of uncertainty or distress in the economy or financial markets when many of our competitorssimply reduce 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 balancesheet of industry leading, or “franchise,” businesses and create value throughout economic cycles. -7-Table of ContentsWe rely on our deep industry, credit and financial structuring experience, coupled with our strengths as value-oriented, distressed investors, todeploy significant amounts of new capital within challenging economic environments. As in prior market downturns and periods of significant volatility, inthe recent environment our funds have purchased distressed securities and continue to opportunistically build positions in high quality companies withstressed balance sheets in industries where we have deep expertise. Our approach towards investing in distressed situations often requires our funds topurchase particular debt securities as prices are declining, since this allows us both to reduce our funds’ average cost and accumulate sizable positions whichmay enhance our ability to influence any restructuring plans and maximize the value of our funds’ distressed investments. As a result, our investmentapproach may produce negative short-term unrealized returns in certain of the funds we manage. However, we concentrate on generating attractive, long-term,risk-adjusted realized returns for our fund investors, and we therefore do not overly depend on short-term results and quarterly fluctuations in the unrealizedfair 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 reliedon our transaction, restructuring and credit experience to work proactively with our private equity funds’ portfolio company management teams to identify andexecute 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 $113.4 billion as of December 31, 2012, consisting of $37.8 billion in our private equity business, $64.4 billion in ourcredit business and $8.8 billion in our real estate business. We have grown our total AUM at a 39% compound annual growth rate from December 31, 2004 toDecember 31, 2012. In addition, we benefit from mandates with long-term capital commitments in our private equity, credit and real estate businesses. Ourlong-lived capital base allows us to invest assets with a long-term focus, which is an important component in generating attractive returns for our investors. Webelieve our long-term capital also leaves us well-positioned during economic downturns, when the fundraising environment for alternative assets hashistorically been more challenging than during periods of economic expansion. As of December 31, 2012, approximately 93% of our AUM was in funds witha contractual life at inception of seven years or more, and 10% of our AUM was in permanent capital vehicles with unlimited duration.We expect our growth in AUM to continue over time by seeking to create value in our funds’ existing private equity, credit and real estateinvestments, continuing to deploy our funds’ available capital in what we believe are attractive investment opportunities, and raising new funds andinvestment vehicles as market opportunities present themselves. See “Item 1A. Risk Factors—Risks Related to Our Businesses—We may not be successful inraising new funds or in raising more capital for certain of our funds and may face pressure on fee arrangements of our future funds.”Our financial results are highly variable, since carried interest (which generally constitutes a large portion of the income that we receive from thefunds we manage), and the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. We manage ourbusiness and monitor our performance with a focus on long-term performance, an approach that is generally consistent with the investment horizons of thefunds we manage and is driven by the investment returns of our funds.Available InformationOur Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant toSections 13(a) and 15(d) of the Exchange Act are made available free of charge on or through our website at www.agm.com as soon as reasonably practicableafter such reports are filed with, or furnished to, the SEC. The information on our website is not, and shall not be deemed to be, part of this report orincorporated into any other filings we make with the SEC. -8-Table of ContentsOur BusinessesWe have three business segments: private equity, credit and real estate. As part of our private equity segment, we also manage AP AlternativeAssets, L.P. (“AAA”), a publicly listed permanent capital vehicle. The sole investment held by AAA is its interest in AAA Investments, L.P. (“AAAInvestments”), which currently has substantially all of its capital invested through various subsidiaries in Athene Holding Ltd., a Bermuda holding companythat was founded in 2009 to capitalize on favorable market conditions in the dislocated life insurance sector.In addition to AAA, we manage several strategic investment accounts (“SIAs”) established to facilitate investments by third-party investorsdirectly in Apollo-sponsored funds and other transactions. We have also raised a dedicated natural resources fund, which we include within our private equitysegment that targets global private equity opportunities in energy, metals and mining and select other natural resources sub-sectors. The diagram belowsummarizes our current businesses: (1)All data is as of December 31, 2012, except for certain publicly traded vehicles managed by Apollo for which data is presented as of September 30,2012.(2)Includes funds that are denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.32 as of December 31, 2012.Private EquityAs 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 relyon to make new investments and to maximize the value of our existing investments. As an example, through our experience with traditional private equitybuyouts, which we refer to herein also as buyout equity, we apply a highly disciplined approach towards structuring and executing transactions, the keytenets of which include acquiring companies at below industry average purchase price multiples, and establishing flexible capital structures with long-termdebt 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 -9-Table of Contentsattractive investments by buying the debt of quality businesses (which we refer to as “classic” distressed debt), converting that debt to equity, seeking to createvalue through active participation with management and ultimately monetizing the investment. This combination of traditional and corporate buyout investingwith a “distressed option” has been deployed through prior economic cycles and has allowed our funds to achieve attractive long-term rates of return indifferent economic and market environments. In addition, during prior economic downturns we have relied on our restructuring experience and worked closelywith our funds’ portfolio companies to maximize the value of our funds’ investments.We seek to focus on investment opportunities where competition is limited or non-existent. We believe we are often sought out early in theinvestment process because of our industry expertise, willingness to pursue investments in complicated situations and ability to provide value-added advice toportfolio companies regarding operational improvements, acquisitions and strategic direction. We generally prefer sole sponsored transactions and sinceinception approximately 80% of the investments made by our private equity funds have been proprietary in nature. We believe that by emphasizing ourproprietary sources of deal flow, our private equity funds will be able to acquire businesses at more compelling valuations which will ultimately create a moreattractive risk/reward proposition.Distressed Buyouts and Debt InvestmentsDuring periods of market dislocation and volatility, we rely on our credit and capital markets expertise to build positions in distressed debt. Wetarget assets with high-quality operating businesses but low-quality balance sheets, consistent with our traditional buyout strategies. The distressed securitiesour funds purchase include bank debt, public high-yield debt and privately held instruments, often with significant downside protection in the form of asenior position in the capital structure, and in certain situations our funds also provide debtor-in-possession financing to companies in bankruptcy. Ourinvestment professionals generate these distressed buyout and debt investment opportunities based on their many years of experience in the debt markets, andas such they are generally proprietary in nature.We believe distressed buyouts and debt investments represent a highly attractive risk/reward profile. Our funds’ investments in debt securitieshave generally resulted in two outcomes. The first and preferred potential outcome, which we refer to as a distressed for control investment, is when our fundsare successful in taking control of a company through its investment in the distressed debt. By working proactively through the restructuring process, we areoften able to equitize the debt position of our funds to create a well-financed buyout which would then typically be held for a three-to-five year period, similar toother traditional leveraged buyout transactions. The second potential outcome, which we refer to as a non-control distressed investment is when our funds donot gain control of the company. This typically occurs as a result of an increase in the price of the debt investments to levels which are higher than what weconsider to be an attractive acquisition valuation. In these instances, we may forgo seeking control, and instead our funds may seek to sell the debtinvestments over time, typically generating a higher short-term IRR with a lower multiple of invested capital than in the case of a typical distressed for controltransaction. We believe that we are a market leader in distressed investing and that this is one of the key areas that differentiates us from our peers.During the depths of the most recent financial crisis, we believe we were one of the most active market participants, with our funds acquiring over$39 billion of face value of debt investments from inception through December 31, 2012 in an array of distressed strategies whereby our funds purchasedlevered senior loans, effectuated distressed for control investments and bought back debt of the funds’ portfolio companies at significant discounts to par.Corporate Carve-outsCorporate partner buyouts or carve-out situations offer another way to capitalize on investment opportunities during environments in whichpurchase prices for control of companies are at high multiplies of earnings, making them less attractive for traditional buyout investors. Corporate partnerbuyouts focus on companies in need of a financial partner in order to consummate acquisitions, expand product lines, buy back stock or pay down debt. Inthese investments, our funds do not seek control but instead make significant investments that typically allow our funds to demand control rights similar tothose that would be required in a traditional buyout, such as control over the direction of the business and ultimate exit. -10-Table of ContentsAlthough corporate partner buyouts historically have not represented a large portion of our overall investment activity, we do engage in them selectively whenwe believe circumstances make them an attractive strategy.Corporate partner buyouts typically have lower purchase multiples and a significant amount of downside protection, when compared withtraditional buyouts. Downside protection can come in the form of seniority in the capital structure, a guaranteed minimum return from a creditworthy partner,or extensive governance provisions. We have often been able to use our position as a preferred security holder in several buyouts to weather difficult times in aportfolio company’s lifecycle and to create significant value in investments that otherwise would have been impaired.Opportunistic BuyoutsWe have extensive experience completing leveraged buyouts across various market cycles. We take an opportunistic and disciplined approach tothese transactions, generally avoiding highly competitive situations in favor of proprietary transactions where there may be opportunities to purchase acompany at a discount to prevailing market averages. Oftentimes, we will focus on complex situations such as out-of-favor industries or “broken” (ordiscontinued) sales processes where the inherent value may be less obvious to potential acquirers. To further alter the risk/reward profile in our funds’ favor,we often focus on certain types of buyouts such as physical asset acquisitions and investments in non-correlated assets where underlying values tend tochange in a manner that is independent of broader market movements.In the case of physical asset acquisitions, our private equity funds seek to acquire physical assets at discounts to where those assets trade in thefinancial markets, and to lock in that value arbitrage through comprehensive hedging and structural enhancements.We believe buyouts of non-correlated assets or businesses also represent attractive investments since they are generally less correlated to thebroader economy and provide an element of diversification to our overall portfolio of private equity investments.In the case of more conventional buyouts, we seek investment opportunities where we believe our focus on complexity and sector expertise willprovide us with a significant competitive advantage, whereby we can leverage our knowledge and experience from the nine core industries in which ourinvestment professionals have historically invested private equity capital. We believe such knowledge and experience can result in our ability to find attractiveopportunities for our funds to acquire portfolio company investments at lower purchase price multiples.Other InvestmentsIn addition to our opportunistic, distressed and corporate partner buyout activities, we also maintain the flexibility to deploy capital of our privateequity funds 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 ResourcesIn 2011, Apollo established Apollo Natural Resources Partners, L.P. (together with its parallel funds and alternative investment vehicles,“ANRP”), and has assembled a team of dedicated investment professionals to capitalize on private equity investment opportunities in the natural resourcesindustry, principally in the metals and mining, energy and select other natural resources sectors. ANRP completed its -11-Table of Contentsfundraising period during the fourth quarter of 2012, and had over $1.3 billion of committed capital as of December 31, 2012.AP Alternative Assets, L.P.AAA is a Guernsey limited partnership whose partners are comprised of (i) AAA Guernsey Limited (“AAA Guernsey” or “Managing General Partner”),which holds 100% of the general partner interests in AAA, and (ii) the holders of common units representing limited partner interests in AAA. The commonunits are non-voting and are listed on NYSE Euronext in Amsterdam under the symbol “AAA”. AAA Guernsey is a Guernsey limited company and is owned55% by an individual who is not an affiliate of Apollo and 45% by Apollo Principal Holdings III, L.P., an indirect subsidiary of Apollo. AAA Guernsey isresponsible for managing the business and affairs of AAA. AAA generally makes all of these investments through AAA Investments, of which AAA is thesole limited partner.AAA issued approximately $1.9 billion of equity capital in its initial public offering (“IPO”) in June 2006. AAA was originally designed to giveinvestors in its common units exposure as a limited partner to certain of the strategies that we employ and allowed us to manage the asset allocations to thosestrategies by investing alongside our private equity funds and directly in our credit funds and certain other opportunistic investments that we sponsor andmanage.On October 31, 2012, AAA and AAA Investments consummated a transaction whereby a wholly-owned subsidiary of AAA Investments contributedsubstantially all of its investments to Athene Holding Ltd. (together with its subsidiaries, “Athene”) in exchange for common shares of Athene Holding Ltd.,cash and a short term promissory note (the “AAA Transaction”) payable at the option of AAA Investments in cash or common shares of Athene Holding Ltd.After the AAA Transaction, Athene was AAA’s only material investment and as of December 31, 2012, AAA, through its investment in AAA Investments,was the largest shareholder of Athene Holding Ltd. with an approximate 77% ownership stake (without giving effect to restricted common shares issued underAthene’s management equity plan). Subsequent to December 31, 2012, Athene called additional capital from other investors, and as a result AAA’s ownershipof Athene Holding Ltd. was reduced to approximately 72% (without giving effect to restricted common shares issued under Athene’s management equity plan).Additional information related to AAA can be found on its website at www.apolloalternativeassets.com. The information contained in AAA’s website is not partof this report.In connection with the consummation of the AAA Transaction, on October 31, 2012, AAA and Apollo Alternative Assets, L.P. (“Apollo AlternativeAssets”), a subsidiary of Apollo, entered into an amendment to the services agreement pursuant to which Apollo Alternative Assets manages AAA’s assets inexchange for a quarterly management fee. Pursuant to the amendment, the parties agreed that there will be no management fees payable by AAA with respect tothe shares of Athene Holding Ltd. that were newly acquired by AAA in the AAA Transaction (the “Excluded Athene Shares”). Likewise, affiliates of ApolloAlternative Assets will not be entitled to receive any carried interest in respect of the Excluded Athene Shares. AAA will continue to pay Apollo AlternativeAssets the same management fee on AAA’s investment in Athene (other than the Excluded Athene Shares), except that Apollo Alternative Assets agreed thatAAA’s obligation to pay the existing management fee shall terminate on December 31, 2014. The amendment provides for Apollo Alternative Assets to receive aformulaic unwind of its management fee in the event that AAA makes a tender offer for all or substantially all of its outstanding units where the considerationis to be paid in shares of Athene Holding Ltd (or if AAA accomplishes a similar transaction using an alternative structure): up to a cap of $30.0 million if therealization event commences in 2013, $25.0 million if the realization event commences in 2014, $20.0 million if the realization event commences in 2015 andzero if the realization event commences in 2016 or thereafter. Apollo Alternative Assets has further agreed that AAA has the option to settle all such managementfees payable either in cash or shares of Athene Holding Ltd. valued at the then fair market value (or an equivalent derivative). Carried interest payable to anaffiliate of Apollo Alternative Assets will be paid in shares of Athene Holding Ltd. (valued at the then fair market value) if there is a distribution in kind orpaid in cash if AAA sells the shares of Athene Holding Ltd.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 engaged with the management teams of the portfolio companies of our private equity funds. We have established relationships with operatingexecutives that assist in the diligence review of new opportunities and provide strategic and operational -12-Table of Contentsoversight for portfolio investments. We actively work with the management of each of the portfolio companies of the funds we manage to maximize theunderlying value of the business. To achieve this, we take a holistic approach to value-creation, concentrating on both the asset side and liability side of thebalance sheet of a company. On the asset side of the balance sheet, Apollo works with management of the portfolio companies to enhance the operations of suchcompanies. Our investment professionals assist portfolio companies in rationalizing non-core and underperforming assets, generating cost and working capitalsavings, and maximizing liquidity. On the liability side of the balance sheet, Apollo relies on its deep credit structuring experience and works with managementof the portfolio companies to help optimize the capital structure of such companies through proactive restructuring of the balance sheet to address near-termdebt maturities. We also seek to capture discounts on publicly traded debt securities through exchange offers and potential debt buybacks. In addition, wehave established a group purchasing program to help portfolio companies 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 InvestmentsThe value of the investments that have been made by our funds are typically realized through either an IPO of common stock on a nationallyrecognized exchange or through the private sale of the companies in which our funds have invested. We believe the advantage of having long-lived funds andinvestment discretion is that we are able to time our funds’ exit to maximize value.Portfolio Company HoldingsThe following table presents the current list of portfolio companies of our private equity funds as of December 31, 2012. Company Year of InitialInvestment Fund(s) Buyout Type Industry Region SoleFinancialSponsor atTime ofInitialInvestmentEP Energy LLC 2012 Fund VII & ANRP Corporate Carve-outs Oil & Gas North America NoGreat Wolf Resorts 2012 Fund VII Opportunistic Buyouts Media,Entertainment& Cable North America YesPinnacle - Jimmy Sanders 2012 Fund VII & ANRP Opportunistic Buyouts Agriculture North America YesTalos 2012 Fund VII & ANRP Opportunistic Buyouts Oil & Gas North America NoTaminco 2012 Fund VII Opportunistic Buyouts Chemicals Western Europe NoAscometal 2011 Fund VII & ANRP Corporate Carve-outs Materials Western Europe YesBrit Insurance 2011 Fund VII Opportunistic Buyouts Insurance Western Europe NoCORE Media Group (formerly CKx) 2011 Fund VII Opportunistic Buyouts Media,Entertainment& Cable North America YesSprouts Farmers Markets 2011 Fund VI Corporate Carve-outs Food Retail North America YesWelspun 2011 Fund VII & ANRP Opportunistic Buyouts Materials India NoAleris International 2010 Fund VII & VI Distressed Buyouts BuildingProducts Global NoAthlon 2010 Fund VII Opportunistic Buyouts Oil & Gas North America YesCKE Restaurants Inc. 2010 Fund VII Opportunistic Buyouts Food Retail North America YesConstellium (formerly Alcan) 2010 Fund VII Corporate Carve-outs Materials Western Europe NoEVERTEC 2010 Fund VII Corporate Carve-outs FinancialServices Puerto Rico NoGala Coral Group 2010 Fund VII & VI Distressed Buyouts Gaming &Leisure Western Europe NoLyondellBasell 2010 Fund VII & VI Distressed Buyouts Chemicals Global NoMonier 2010 Fund VII Distressed Buyouts BuildingProducts Western Europe NoVeritable Maritime 2010 Fund VII Opportunistic Buyouts Shipping North America YesCharter Communications 2009 Fund VII & VI Distressed Buyouts Media,Entertainment& Cable North America NoDish TV 2009 Fund VII Opportunistic Buyouts Media,Entertainment& Cable India NoCaesars Entertainment 2008 Fund VI Opportunistic Buyouts Gaming &Leisure North America NoNorwegian Cruise Line 2008 Fund VI Opportunistic Buyouts Cruise North America YesClaire’s 2007 Fund VI Opportunistic Buyouts SpecialtyRetail Global YesCountrywide 2007 Fund VI Opportunistic Buyouts Real EstateServices Western Europe YesJacuzzi Brands2007Fund VIOpportunistic BuyoutsBuildingProductsGlobalYes 2007 Fund VI Opportunistic Buyouts Products Global YesNoranda Aluminum 2007 Fund VI Corporate Carve-outs Materials North America YesPrestige Cruise Holdings 2007 Fund VII & VI Opportunistic Buyouts Cruise North America YesRealogy 2007 Fund VI Opportunistic Buyouts Real EstateServices North America YesVantium 2007 Fund VII Other Investments BusinessServices North America YesBerry Plastics 2006 Fund VI & V Corporate Carve-outs Packaging &Materials North America YesCEVA Logistics 2006 Fund VI Corporate Carve-outs Logistics Western Europe YesRexnord 2006 Fund VI Opportunistic Buyouts DiversifiedIndustrial North America YesSourceHOV 2006 Fund V Opportunistic Buyouts FinancialServices North America YesVerso Paper 2006 Fund VI Corporate Carve-outs PaperProducts North America YesAffinion Group 2005 Fund V Corporate Carve-outs FinancialServices North America YesMetals USA 2005 Fund V Opportunistic Buyouts Distribution &Transportation North America YesPLASE Capital 2003 Fund V Opportunistic Buyouts FinancialServices North America YesMomentive Performance Materials 2000/2004/2006 Fund IV, V & VI Corporate Carve-outs Chemicals North America YesQuality Distribution 1998 Fund III Opportunistic Buyouts Distribution &Transportation North America YesDebt Investment Vehicles - Fund VII Various Fund VII Debt Investments Various Various VariousDebt Investment Vehicles - Fund VI Various Fund VI Debt Investments Various Various VariousDebt Investment Vehicles - Fund V Various Fund V Debt Investments Various Various Various (1)Prior to merger with Covalence Specialty Material Holdings Corp.(2)Includes add-on investment in EGL, Inc. -13-(1)(2)(3)(4)Table of Contents(3)Includes add-on investment in Zurn Industries Inc.(4)Subsequent to merger with SOURCECORP.CreditSince Apollo’s founding in 1990, we believe our expertise in credit has served as an integral component of our company’s growth and success.Our credit-oriented approach to investing commenced in 1990 with the management of a $3.5 billion high-yield bond and leveraged loan portfolio. Since thattime, our credit activities have grown significantly, through both organic growth and strategic acquisitions. As of December 31, 2012, Apollo’s credit segmenthad total AUM and fee-generating AUM of $64.4 billion and $49.5 billion, respectively, across a diverse range of credit-oriented investments that utilize thesame disciplined, value-oriented investment philosophy that we employ with respect to our private equity funds.Apollo’s broad credit platform, which we believe is adaptable to evolving market conditions and different risk tolerances, has been organized bythe following six functional groups:Credit AUM(in billions) U.S. Performing CreditThe U.S. performing credit group provides investment management services to funds, including SIAs, that primarily focus on income-oriented,senior loan and bond investment strategies. The U.S. performing credit group also includes CLOs that we raise and manage internally. As of December 31,2012, our U.S. performing credit group had total AUM and fee-generating AUM of $27.5 billion and $20.6 billion, respectively.Structured CreditThe structured credit group provides investment management services to funds, including SIAs, that primarily focus on structured creditinvestment strategies that target multiple tranches of structured securities with favorable and protective lending terms, predictable payment schedules, strongfinancials, and low historical levels of default by underlying borrowers, among other characteristics. These strategies include investments in externallymanaged CLOs, residential mortgage-backed securities, asset-backed securities and other structured instruments, including insurance-linked securities andlongevity-based products. The structured credit group also serves as substitute investment manager for a number of asset- -14-Table of Contentsbacked CDOs and other structured vehicles. As of December 31, 2012, our structured credit group had total AUM and fee-generating AUM of $11.4 billionand $7.6 billion, respectively.Opportunistic CreditThe opportunistic credit group provides investment management services to funds, including SIAs, that primarily focus on credit investmentstrategies that are often less liquid in nature and that utilize a similar value-oriented investment philosophy as our private equity business. The opportunisticcredit funds and SIAs invest in a broad array of primary and secondary opportunities encompassing performing, stressed and distressed public and privatesecurities primarily within corporate credit, including senior loans, high yield, mezzanine, debtor in possession financings, rescue or bridge financings, andother debt investments. Additionally, certain opportunistic credit funds will selectively invest in aircraft, energy and structured credit investment opportunities.In certain cases, leverage can be employed in connection with these strategies by having fund subsidiaries or special-purpose vehicles incur debt or by enteringinto credit facilities or other debt transactions to finance the acquisition of various credit investments. As of December 31, 2012, our opportunistic credit grouphad total AUM and fee-generating AUM of $6.2 billion and $4.7 billion, respectively.Non-performing LoansThe non-performing loan group provides investment management services to funds, including SIAs, that primarily invest in Europeancommercial and residential real estate performing and non-performing loans (“NPLs”) and unsecured consumer loans. The non-performing loan group alsocontrols captive pan-European loan servicing and property management platforms within certain of the NPL investment vehicles that we manage. These loanservicing and property management platforms currently operate in six European countries and directly service approximately 56,000 loans secured byapproximately 19,000 commercial and residential properties. The post-investment loan servicing and real estate asset management requirements, combinedwith the illiquid nature of NPLs, limit participation by traditional long only investors, hedge funds, and private equity funds, resulting in what we believe tobe a unique opportunity for our credit business. As of December 31, 2012, our non-performing loans group had total AUM and fee-generating AUM of $6.4billion and $4.5 billion, respectively.European CreditThe European credit group provides investment management services to funds, including SIAs, that focus on investment strategies in a variety ofcredit opportunities in Europe across a company’s capital structure. The European credit group invests in senior secured loans and notes, mezzanine loans,subordinated notes, distressed and stressed credit and other idiosyncratic credit investments of companies established or operating in Europe, with a focus onWestern Europe. As of December 31, 2012, our European credit group had total AUM and fee-generating AUM of $1.9 billion and $1.3 billion, respectively.AtheneDuring 2009, Athene Holding Ltd. was founded to capitalize on favorable market conditions in the dislocated life insurance sector. Athene HoldingLtd. is the direct or indirect parent of the following principal operating subsidiaries: Athene Life Re Ltd., a Bermuda-based reinsurance company formed in2009 that is focused on the fixed annuity reinsurance sector; Athene Annuity & Life Assurance Company (formerly known as Liberty Life InsuranceCompany), a Delaware-domiciled (formerly South Carolina domiciled) stock life insurance company acquired by Athene Holding Ltd. in 2011 that is focusedon retail sales and reinsurance in the retirement services market; Athene Life Insurance Company, a Delaware-domiciled (formerly Indiana domiciled) stocklife insurance company formed in 2010 that is focused on the institutional funding agreement backed note and funding agreement markets; and PresidentialLife Corporation, a Delaware corporation headquartered in Nyack, New York, which markets and sells a variety of fixed annuity products principally inNew York through its wholly owned subsidiary, Presidential Life Insurance Company, a New York-domiciled stock life insurance company.On December 28, 2012, Athene Annuity & Life Assurance Company completed the acquisition of Presidential Life Corporation. -15-Table of ContentsOn December 21, 2012, Athene Holding Ltd. entered into an agreement with Aviva plc to acquire Aviva USA Corporation, an Iowa corporation,which markets and sells a variety of fixed annuity and life insurance products in the U.S. through its wholly owned subsidiaries Aviva Life and AnnuityCompany, an Iowa-domiciled stock life insurance company, and Aviva Life & Annuity Company of New York, a New York-domiciled stock life insurancecompany. The acquisition is subject to customary closing conditions, including the approval of the acquisition of control of Aviva Life and Annuity Companyby the Iowa Insurance Division and the approval of the acquisition of control of Aviva Life & Annuity Company of New York by the New York StateDepartment of Financial Services.Apollo also formed Athene Asset Management LLC (“Athene Asset Management”) during 2009, an investment manager that receives fees for assetmanagement services provided to Athene and other insurance clients, including asset allocation and portfolio management strategies. As of December 31, 2012,Athene Asset Management had $15.8 billion of total AUM, of which approximately $5 billion was either sub-advised by Apollo or invested in Apollo fundsand investment vehicles.Real EstateWe have assembled a dedicated global investment management team to pursue real estate investment opportunities which we believe benefits fromApollo’s long-standing history of investing in both credit and real estate-related sectors such as hotels and lodging, leisure, and logistics.We believe our dedicated real estate platform benefits from, and contributes to, Apollo’s integrated platform, and further expands Apollo’s deepreal estate industry knowledge and relationships. As of December 31, 2012, our real estate business had total and fee-generating AUM of approximately $8.8billion and $4.5 billion, respectively.Citi Property Investors (“CPI”) BusinessOn November 12, 2010, Apollo completed the acquisition of the CPI business, which was the real estate investment management business ofCitigroup Inc. The CPI business had total AUM of approximately $2.9 billion as of December 31, 2012. CPI is an integrated real estate investment platformwith investment professionals located in Asia, Europe and North America. As part of the acquisition, Apollo acquired general partner interests in, andadvisory agreements with, 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 September 2009, we launched Apollo Commercial Real Estate Finance, Inc. (“ARI”), a publicly traded real estate investment trust managed byApollo that acquires, originates, invests in and manages performing commercial first mortgage loans, commercial mortgage backed securities (“CMBS”),mezzanine investments and other commercial real estate-related investments in the United States. The company trades on the New York Stock Exchange (the“NYSE”) under the symbol “ARI.” As of September 30, 2012, ARI had total and fee-generating AUM of approximately $0.8 billion and $0.4 billion,respectively.CMBS FundsSince December 2009, we have launched four real estate accounts formed to invest principally in CMBS. We collectively refer to these fouraccounts (AGRE CMBS Fund, L.P., 2011 A4 Fund, L.P., 2012 CMBS-I Fund, L.P., and the 2012 CMBS-II Fund, L.P.) as the “CMBS Funds”. As ofDecember 31, 2012, -16-Table of Contentsthe CMBS Funds had total and fee-generating AUM of approximately $2.4 billion and $0.3 billion, respectively.AGRE U.S. Real Estate Fund, L.P.Apollo Global Real Estate Management, L.P. (“AGRE”), an indirect subsidiary of Apollo, is the sponsor of the AGRE U.S. Real Estate Fund, L.P.(“AGRE U.S. Real Estate Fund”), which pursues investment opportunities to recapitalize, restructure and acquire real estate assets, portfolios and companiesprimarily in the United States. As of December 31, 2012, the AGRE U.S. Real Estate Fund had $785.2 million of committed capital, including committedcapital from co-investors.Strategic Investment AccountsInstitutional investors are expressing increasing levels of interest in SIAs since these accounts can provide investors with greater levels oftransparency, liquidity and control over their investments as compared to more traditional investment funds. Based on the trends we are currently witnessingamong a select group of large institutional investors, we expect our AUM that is managed through SIAs to continue to grow over time. As of December 31,2012, approximately $2.4 billion of our total AUM was managed through one of our SIAs.Fundraising and Investor RelationsWe believe our performance track record across our funds has resulted in strong relationships with our fund investors. Our fund investorsinclude many of the world’s most prominent pension and sovereign wealth funds, university endowments and financial institutions, as well as individuals.We maintain an internal team dedicated to investor relations across our private equity, credit 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 largelyinvested or committed to be invested. The investor base of our private equity funds includes both investors from prior funds and new investors. In manyinstances, investors in our private equity funds have increased their commitments to subsequent funds as our private equity funds have increased in size.During our Fund VI fundraising effort, investors representing over 88% of Fund V’s capital committed to the new fund. During our Fund VII fundraisingeffort, investors representing over 84% of Fund VI’s capital committed to Fund VII. The single largest unaffiliated investor represents 6% of Fund VI’scommitments and 7% of Fund VII’s commitments. In addition, many of our investment professionals commit their own capital to each private equity fund.During the management of a private equity fund, we maintain an active dialogue with our limited partner investors. We host quarterly webcaststhat are led by members of our senior management team and we provide quarterly reports to the limited partner investors detailing recent performance byinvestment. We also organize an annual meeting for our private equity investors that consists of detailed presentations by the senior management teams ofmany of our current investments. From time to time, we also hold meetings for the advisory board members of our private equity funds.In our credit business, we have raised private capital from prominent institutional investors and have also raised capital from public marketinvestors, as in the case of Apollo Investment Corporation (“AINV”), Apollo Senior Floating Rate Fund Inc. (“AFT”) and Apollo Residential Mortgage Inc.(“AMTG”). AINV is listed on the NASDAQ Global Select Market and complies with the reporting requirements of that exchange. AFT and AMTG are listedon the NYSE and comply with the reporting requirements of that exchange.In our real estate business, we have raised capital from prominent institutional investors and we have also raised capital from public marketinvestors, as in the case of ARI. ARI is listed on the NYSE and complies with the reporting requirements of that exchange. -17-Table of ContentsInvestment 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 familiar with ourinvestment policies and procedures and the investment criteria applicable to the funds that they manage. Our investment professionals interact frequentlyacross our businesses on a formal and informal basis.We have in place certain procedures to allocate investment opportunities among our funds. These procedures are meant to ensure that each fund istreated fairly 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 governingagreements of such funds.Private Equity Investment ProcessOur private equity investment professionals are responsible for selecting, evaluating, structuring, diligence, 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; • 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 thedeal team 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 Managing Partners.Our private equity investment professionals are responsible for monitoring an investment once it is made and for making recommendations withrespect to exiting an investment. Disposition decisions made on behalf of our private equity funds are subject to careful review and approval by the privateequity investment committee, including our Managing Partners. -18-Table of ContentsCredit and Real Estate Investment ProcessOur credit and real estate investment professionals are responsible for selecting, evaluating, structuring, diligence, negotiating, executing,monitoring and exiting investments for our credit 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 scrutinized by the investment committees where applicable, who review potential transactions, provide input regardingthe scope of due diligence and approve recommended investments and dispositions. Close attention is given to how well a proposed investment is aligned withthe distinct investment objectives of the fund in question, which in many cases have specific geographic or other focuses. The investment committee of each ofour credit 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.Overview 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 delivercapital when called by us as investment opportunities become available. We determine the amount of initial capital commitments for any given private equityfund by taking into account current market opportunities and conditions, as well as investor expectations. The general partner’s capital commitment isdetermined through negotiation with the fund’s investor base. The commitments are generally available for six years during what we call the investment period.We have typically invested the capital committed to our funds over a three to four year period. Generally, as each investment is realized, our private equityfunds first return the capital and expenses related to that investment and any previously realized investments to fund investors and then distribute any profits.These profits 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% compoundedannual return on their investment, which we refer to as a “preferred return” or “hurdle.” Our private equity funds typically terminate ten years after the finalclosing, subject to the potential for two one-year extensions. Dissolution of those funds can be accelerated upon a majority vote of investors not affiliated withus and, in any case, all of our funds also may be terminated upon the occurrence of certain other events. Ownership interests in our private equity funds andcertain of our credit and real estate funds are not, however, subject to redemption prior to termination of the funds.The processes by which our credit and real estate funds receive and invest capital vary by type of fund. AINV, AMTG, AFT and ARI, forinstance, raise capital by selling shares in the public markets and these vehicles can also issue debt. Many of our opportunistic credit funds sell shares orlimited partner interests, subscriptions which are payable in full upon a fund’s acceptance of an investor’s subscription, via private placements. Other fundshave drawdown structures, such as Apollo European Principal Finance Fund, L.P. (“EPF I”), Apollo European Principal Finance Fund II, L.P. (“EPF II”),Apollo Investment Europe II, L.P. (“AIE II”), Apollo Credit Opportunity Fund I, L.P (“COF I”), and Apollo Credit Opportunity Fund II, L.P. (“COF II”),where investors made a commitment to provide capital at the formation of such funds and deliver capital when called by us as investment opportunitiesbecome available. As with our private equity funds, the amount of initial capital commitments for our credit funds is determined by taking into accountcurrent market opportunities and conditions, as well as investor expectations. The general partner commitments for our credit funds that are structured aslimited partnerships are determined through negotiation with the funds’ investor base. The fees and incentive income we earn for management of our creditfunds and the performance of these funds and the terms of such funds governing withdrawal of capital and fund termination vary across our credit funds andare described in detail below.We conduct the management of our private equity, credit 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 registered under the Investment Advisers Act of 1940, as amended (the“Investment Advisers -19-Table of ContentsAct”). Responsibility for the day-to-day operations of the funds is typically delegated to the funds’ respective investment advisors pursuant to an investmentadvisory (or similar) agreement. Generally, the material terms of our investment advisory agreements relate to the scope of services to be rendered by theinvestment advisor to the applicable funds, certain rights of termination in respect of our investment advisory agreements and, generally, with respect to ourcredit funds (as these matters are covered in the limited partnership agreements of the private equity funds), the calculation of management fees to be borne byinvestors in such funds, as well as the calculation of the manner and extent to which other fees received by the investment advisor from fund portfoliocompanies serve to offset or reduce the management fees payable by investors in our funds. The funds themselves generally do not register as investmentcompanies under the Investment Company Act of 1940, as amended (the “Investment 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 registrationrequirements funds privately placed in the United States whose securities are owned exclusively by persons who, at the time of acquisition of such securities,are “qualified purchasers” or “knowledgeable employees” for purposes of the Investment Company Act. Section 3(c)(1) of the Investment Company Actexempts from its registration requirements privately placed funds whose securities are beneficially owned by not more than 100 persons. In addition, undercurrent interpretations of the SEC, Section 7(d) of the Investment Company Act exempts from registration any non-U.S. fund all of whose outstandingsecurities 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 makesall policy 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 funds take no part in the conduct or control of the business of the funds, have no right orauthority 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 simple majority vote. Inconnection with the private offering transactions that occurred in 2007 pursuant to which we sold shares of Apollo Global Management, LLC to certain initialpurchasers and accredited investors in transactions exempt from the registration requirements of the Securities Act (“Private Offering Transactions”) and thereorganization of the Company’s predecessor business (the “2007 Reorganization”), we deconsolidated certain of our private equity and credit funds that havehistorically been consolidated in our financial statements and amended the governing agreements of those funds to provide that a simple majority of a fund’sinvestors 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 credit and real estate funds enable the limited partners holdinga specified percentage of the interests entitled to vote not to elect to continue the limited partners’ capital commitments for new portfolio investments in the eventcertain of our Managing Partners do not devote the requisite time to managing the fund or in connection with certain triggering events (as defined in theapplicable governing agreements). In addition to having a significant, immeasurable negative impact on our revenue, net income and cash flow, the occurrenceof such an event with respect to any of our funds would likely result in significant reputational damage to us. Further, the loss of one or more of our ManagingPartners may result in the acceleration of our 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 attract investors and raise new funds, and the performance of our funds. We do not carry any “key man” insurance thatwould provide us with proceeds in the event of 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 our funds and affiliates. As a limited partner, generalpartner and manager of the Apollo funds, Apollo had -20-Table of Contentsunfunded capital commitments of $258.3 million and $137.9 million at December 31, 2012 and 2011, respectively.Apollo has an ongoing obligation to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cashdistributions, if any, that are made to its affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAAInvestments.As the general partner of Apollo/Artus Investor 2007-I, L.P. (“Artus”), Apollo 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, 2012, Apollo had no current obligations to Artus.On December 21, 2012, Apollo agreed to provide up to $100 million of capital support to Athene to the extent such support is necessary inconnection with Athene’s pending acquisition of Aviva plc’s annuity and life insurance operations in the United States.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 capitalin our funds. 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. We generally have not historically charged management fees or carried interest on capital invested by our Managing Partners andother professionals directly in our private equity and credit funds.Co-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 registered as investment advisors with the SEC. Registered investment advisors are subject to therequirements and regulations of the Investment Advisers Act. Such requirements relate to, among other things, fiduciary duties to clients, maintaining aneffective compliance program, managing conflicts of interest and general anti-fraud prohibitions.Each of AFT and Apollo Tactical Income Fund Inc. (“AIF”) is a registered investment company under the Investment Company Act. AINV is aregistered investment company that has elected to be treated as a business development company under the Investment Company Act. Each of AFT and AINVhas elected, and AIF intends to elect, for U.S. Federal tax purposes to be treated as a regulated investment company under Subchapter M of the InternalRevenue Code of 1986, as amended (the “Internal Revenue Code”). As such, each of AFT, AIF and AINV is required to distribute at least 90% of its ordinaryincome and realized, net short-term capital gains in excess of realized net long-term capital losses, if any, to its shareholders. In addition, in order to avoidexcise 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 accountshort-term and long-term capital gains and losses. Each of AFT, AIF and AINV, at its discretion, may carry forward taxable income in excess of calendar yeardistributions and pay an excise tax on this income. In addition, as a business development company, AINV must not acquire any assets other than“qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of AINV’s total assets are qualifyingassets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” In late 2006, the SEC adopted rules under theInvestment Company Act to expand the definition of “eligible portfolio company” to include all private companies and companies whose securities are notlisted on a national securities exchange. The rules also permit AINV to -21-Table of Contentsinclude as qualifying assets certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longermeet 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 endedDecember 31, 2009. AMTG also elected to be taxed as a REIT under the Internal Revenue Code, commencing with its fiscal year ending December 31, 2011.To maintain their qualification as REITs, ARI and AMTG must distribute at least 90% of their taxable income to their shareholders and meet, on a continuingbasis, certain other complex requirements under the Internal Revenue Code.During 2011, we formed Apollo Global Securities, LLC (“AGS”), which is a registered broker dealer with the SEC and is a member of theFinancial Industry Regulatory Authority, Inc. From time to time, this entity is involved in transactions with affiliates of Apollo, including portfolio companiesof 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. In particular, as a registered broker-dealer and member ofa self regulatory organization, we are subject to the SEC’s uniform net capital rule, Rule 15c3-1. Rule 15c3-1 specifies the minimum level of net capital abroker-dealer must maintain and also requires that a significant part of a broker-dealer’s assets be kept in relatively liquid form. The SEC and various self-regulatory organizations impose rules that require notification when net capital falls below certain predefined criteria, limit the ratio of subordinated debt toequity in the regulatory 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 orwithdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital.In December 2012, the Delaware Department of Insurance approved our application to acquire control (as the ultimate parent of the general partneror manager of certain shareholders of Athene) of the U.S. insurance company subsidiaries of Athene Holding Ltd. in connection with the restructuring ofAthene and the New York State Department of Financial Services approved our application to acquire control (as the ultimate parent of the general partner ormanager of certain shareholders of Athene) of Presidential Life Insurance Company. As a result, we became subject to insurance holding company system lawsand regulations in Delaware and New York, which are the states in which the current insurance company subsidiaries of Athene Holding Ltd. are domiciled.In addition, following the completion of Athene’s acquisition of Aviva USA Corporation, we will become subject to insurance holding company system lawsand regulations in Iowa. These regulations generally require each of such insurance company subsidiaries to register with the insurance department in its stateof domicile and to furnish financial and other information about the operations of companies within its holding company system. These regulations alsoimpose restrictions and limitations on the ability of such insurance company subsidiaries to pay dividends and make other distributions to their parentcompanies. In addition, transactions between an insurance company and other companies within its holding company system, including sales, loans,reinsurance agreements, management agreements and service agreements, must be on terms that are fair and reasonable and, if material or of a specifiedcategory, require prior notice and approval or non-disapproval by the applicable domiciliary insurance department.The insurance laws of Delaware prohibit any person from acquiring control of an insurance company or its parent company unless that personhas filed a notification with specified information with the Delaware Commissioner of Insurance (the “Commissioner”) and has obtained the Commissioner’sprior approval. The insurance laws of New York prohibit any person from acquiring control of an insurance company or its parent company unless thatperson has filed a notification with specified information with the New York Superintendent of Financial Services (the “Superintendent”) and has obtained theSuperintendent’s prior approval. Under both Delaware and New York statutes, acquiring 10% or more of the voting securities of an insurance company or itsparent company is presumptively considered an acquisition of control of the insurance company, although such presumption may be rebutted. Accordingly,any person or entity that acquires, directly or indirectly, 10% or more of the voting securities of Apollo without the requisite prior approvals will be in violationof these laws and may be subject to injunctive action requiring the disposition or seizure of those securities or prohibiting the voting of those securities, or toother actions that may be taken by the applicable state insurance regulators. -22-Table of ContentsIn addition, many U.S. state insurance laws require prior notification to state insurance departments of an acquisition of control of a non-domiciliary insurance company doing business in that state if the acquisition would result in specified levels of market concentration. While these pre-notification statutes do not authorize the state insurance departments to disapprove the acquisition of control, they authorize regulatory action in the affectedstate, including requiring the insurance company to cease and desist from doing certain types of business in the affected state or denying a license to dobusiness in the affected state, if particular conditions exist, such as substantially lessening competition in any line of business in such state. Any transactionsthat would constitute an acquisition of control of Apollo may require prior notification in those states that have adopted pre-acquisition notification laws. Theselaws may discourage potential acquisition proposals and may delay, deter or prevent an acquisition of control of Apollo (in particular through an unsolicitedtransaction), even if Apollo might consider such transaction to be desirable for its shareholders.Currently, there are proposals to increase the scope of regulation of insurance holding companies in both the United States and internationally. Inthe United States, the National Association of Insurance Commissioners has promulgated a model law for consideration by the various states that wouldprovide for more extensive informational reporting by parents and affiliates of insurance companies. Internationally, the International Association of InsuranceSupervisors is in the process of adopting a framework for the “group wide” supervision of internationally active insurance groups. Changes to existing laws orregulations must be adopted by individual states or foreign jurisdictions before they will become effective. We cannot predict with any degree of certainty theadditional capital requirements, compliance costs or other burdens these requirements may impose on us and our subsidiaries.In addition, state insurance departments also have broad administrative powers over the insurance business of our insurance company affiliates,including insurance company licensing and examination, agent licensing, establishment of reserve requirements and solvency standards, premium rateregulation, admissibility of assets, policy form approval, unfair trade and claims practices and other matters.Apollo Management International LLP is authorized and regulated by the U.K. Financial Services Authority. As of April 11, 2013, the FinancialServices Authority will be replaced by the Financial Conduct Authority.AAA is regulated under the Authorized Closed-ended Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission(“GFSC”) with effect from December 15, 2008 under The Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended (the “New Rules”). AAA isdeemed to be an authorized closed-ended investment scheme under the New Rules.Apollo Advisors (Mauritius) Ltd (“Apollo Mauritius”), one of our subsidiaries, and AION Capital Management Limited (“AION Manager”), oneof our joint venture investments, are licensed providers of investment management services in the Republic of Mauritius and are subject to applicableMauritian securities laws and the oversight of the Financial Services Commission (Mauritius) (the “FSC”). Each of Apollo Mauritius and AION Manager issubject to limited regulatory requirements under the Mauritian Securities Act 2005, Mauritian Financial Services Act 2007 and relevant ancillary regulations,including, ongoing reporting and record keeping requirements, anti-money laundering obligations, obligations to ensure that it and its directors, key officersand representatives are fit and proper and requirements to maintain positive shareholders’ equity. The FSC is responsible for administering these requirementsand ensuring the compliance of Apollo Mauritius and AION Manager with them. If Apollo Mauritius or AION Manager contravenes any such requirements,such entities and/or their officers or representatives may be subject to a fine, reprimand, prohibition order or other regulatory sanctions.AGM India Advisors Private Limited is regulated by the Company Law Board (also known as the Ministry of Company Affairs) through theCompanies Act of 1956 in India. Additionally since there are foreign investments in the company, AGM India Advisors Private Limited is also subject to therules and regulations applicable under the Foreign Exchange Management Act of 1999 which falls within the purview of Reserve Bank of India.The SEC and various self-regulatory organizations have in recent years increased their regulatory activities in respect of investment managementfirms. -23-Table of ContentsCertain of our businesses are subject to compliance with laws and regulations of U.S. Federal and state governments, non-U.S. governments,their respective agencies and/or various self-regulatory organizations or exchanges relating to, among other things, the privacy of client information, and anyfailure to 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 ofexisting laws 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 ofcompliance through the use of policies and procedures such as oversight compliance, codes of ethics, compliance systems, communication of complianceguidance and employee education and training. We have a compliance group that monitors our compliance with the regulatory requirements to which we aresubject and manages our compliance policies and procedures. Our Chief Legal Officer serves as the Chief Compliance Officer and supervises our compliancegroup, which is responsible for addressing all regulatory and compliance matters that affect our activities. Our compliance policies and procedures address avariety of regulatory and compliance risks such as the handling of material non-public information, personal securities trading, valuation of investments on afund-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 investment management industry is intensely competitive, and we expect it to remain so. We compete both globally and on a regional,industry and niche basis.We face competition both in the pursuit of outside investors for our funds and in acquiring investments in attractive portfolio companies andmaking other 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.Depending on the investment, we expect to face competition in acquisitions primarily from other private equity, credit and real estate funds,specialized funds, hedge fund sponsors, other financial institutions, corporate buyers and other parties. Many of these competitors in some of our businessesare substantially larger and have considerably greater financial, technical and marketing resources than are available to us. Many of these competitors havesimilar investment objectives to us, which may create additional competition for investment opportunities. Some of these competitors may also have a lowercost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investmentopportunities. In addition, some of these competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which couldallow them to consider a wider variety of investments and to bid more aggressively than us for investments that we -24-Table of Contentswant to make. Corporate buyers may be able to achieve synergistic cost savings with regard to an investment that may provide them with a competitiveadvantage in bidding for an investment. Lastly, the allocation of increasing amounts of capital to alternative investment strategies by institutional andindividual 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 businesseswill depend 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—Theinvestment management business is intensely competitive, which could materially adversely impact us.” -25-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 anyprincipal investment in the fund. Furthermore, if, as a result of poor performance of later investments in a fund’s life, the fund does not achieve totalinvestment returns that exceed a specified investment return threshold for the life of the fund, we may be obligated to repay the amount by which incentiveincome that was previously distributed to us exceeds amounts to which we are ultimately entitled. Our fund investors and potential fund investors continuallyassess our funds’ performance and our ability to raise capital. Accordingly, poor fund performance may deter future investment in our funds and therebydecrease 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 Harrisand Marc Rowan. Their reputations, expertise in investing, relationships with our fund investors and relationships with members of the business communityon whom 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.Subject to the terms of their employment, non-competition and non-solicitation agreements, our Managing Partners may resign, join our competitors or form acompeting firm at any time. If any of our Managing Partners were to join or form a competitor, some of our investors could choose to invest with thatcompetitor rather than in our funds. The loss of the services of any of our Managing Partners may have a material adverse effect on us, including our abilityto retain and attract investors and raise new funds, and the performance of our funds. We do not carry any “key man” insurance that would provide us withproceeds 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 thetermination of our role as general partner of one or more of our funds and the acceleration of our debt. Although our Managing Partners have entered intoemployment, non-competition and non-solicitation agreements, which impose certain restrictions on competition and solicitation of our employees by ourManaging Partners if they terminate their employment, a court may not enforce these provisions. See “Item 11. Executive Compensation—Narrative Disclosureto the Summary Compensation Table and Grants of Plan-Based Awards Table—Employment, Non-Competition and Non-Solicitation Agreement withChairman and Chief Executive Officer” for a more detailed description of the terms of the agreement for one of our Managing Partners.Changes in the debt financing markets may negatively impact the ability of our funds and their portfolio companies to obtain attractive financingfor their investments and may increase the cost of such financing if it is obtained, which could lead to lower-yielding investments and potentiallydecreasing our net income. -26-Table of ContentsIn the event that our funds are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an increased interestrate or on unfavorable terms, our funds may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than wouldotherwise be the case, either of which could lead to a decrease in the investment income earned by us. Any failure by lenders to provide previously committedfinancing can also expose us to potential claims by sellers of businesses which we may have contracted to purchase. Similarly, the portfolio companies ownedby our private equity funds regularly utilize the corporate debt markets in order to obtain financing for their operations. To the extent that the current creditmarkets have rendered such financing difficult to obtain or more expensive, this may negatively impact the operating performance of those portfolio companiesand, 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 asinterest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodityprices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations).These factors 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 notbe able to or may choose not to manage our exposure to these conditions. Global financial markets have experienced considerable volatility in the valuations ofequity and debt securities, a contraction in the availability of credit and an increase in the cost of financing. Volatility in the financial markets can materiallyhinder the initiation of new, large-sized transactions for our private equity segment and, together with volatility in valuations of equity and debt securities, mayadversely impact our operating results. If market conditions deteriorate, our business could be affected in different ways. In addition, these events and generaleconomic trends are likely to impact the performance of portfolio companies in many industries, particularly industries that are more impacted by changes inconsumer demand, such as travel and leisure, gaming and real estate. The performance of our funds and our performance may be adversely affected to theextent our fund portfolio companies in these industries experience adverse performance or additional pressure due to downward trends. Our profitability mayalso be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs, within a time frame sufficient to match anyfurther 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 aperiod of recession, 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 inobtaining access to financing and complying with the terms of existing financings as well as increased financingcosts); • 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 privateequity business; and -27-Table of Contents • material reductions in the value of our fund investments, affecting our ability to realize carried interest from theseinvestments.Lower investment returns and such material reductions in value may result, among other reasons, because during periods of difficult marketconditions or slowdowns (which may be across one or more industries, sectors or geographies), companies in which we invest may experience decreasedrevenues, financial losses, difficulty in obtaining access to financing and increased funding costs. During such periods, these companies may also havedifficulty in expanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, includingexpenses payable to us. In addition, during periods of adverse economic conditions, we may have difficulty accessing financial markets, which could make itmore difficult or impossible for us to obtain funding for additional investments and harm our AUM and operating results. Furthermore, such conditionswould also increase the risk of default with respect to investments held by our funds that have significant debt investments, such as our opportunistic andEuropean credit funds and our U.S. performing credit funds. Our funds may be affected by reduced opportunities to exit and realize value from theirinvestments, by lower than expected returns on investments made prior to the deterioration of the credit markets, and by the fact that we may not be able tofind suitable investments for the funds to effectively deploy capital, which could adversely affect our ability to raise new funds and thus adversely impact ourprospects for future growth.A decline in the pace of investment in our 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 funds make investments. Many factors could cause adecline in the pace of investment, including the inability of our investment professionals to identify attractive investment opportunities, competition for suchopportunities among other potential acquirers, decreased availability of capital on attractive terms and our failure to consummate identified investmentopportunities because of business, regulatory or legal complexities and adverse developments in the U.S. or global economy or financial markets. Any declinein the pace at which our funds make investments would reduce our transaction and advisory fees and could make it more difficult for us to raise capital.If one or more of our Managing Partners or other investment professionals leave our company, the commitment periods of certain of our fundsmay be terminated, and we may be in default under our credit agreement.The governing agreements of certain of our funds provide that in the event certain “key persons” (such as one or more of Messrs. Black, Harrisand Rowan and/or certain other of our investment professionals) fail to devote the requisite time to our business, 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 I and II have a similar provision. In addition to having a significant negative impact on our revenue, netincome and 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 agreement that AMH, one of the entities in the Apollo Operating Group,entered into (the “AMH Credit Agreement”), under which AMH borrowed a $1.0 billion variable-rate term loan (of which approximately $728.3 million wasoutstanding as of December 31, 2012) if either (i) Mr. Black, together with related persons or trusts, shall cease as a group to participate to a material extent inthe beneficial ownership of AMH or (ii) two of the group constituting Messrs. Black, Harris and Rowan shall cease to be actively engaged in the managementof the AMH loan parties. If such an event of default occurs and the lenders exercise their right to accelerate repayment of the loan, we are unlikely to have thefunds to make such repayment and the lenders may take control of us, which is likely to materially adversely impact our results of operations. Even if wewere able to refinance our debt, our financial condition and results of operations would be materially adversely affected.Messrs. Black, Harris and Rowan may terminate their employment with us at any time. -28-Table of ContentsWe 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 mayconsummate them at investment levels far lower than those currently anticipated. Any capital raising that our funds do consummate may be on terms that areunfavorable to us 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 ourcontrol, including general 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 fundsexperienced negative pressure across their investment portfolios, which may affect our ability to raise capital from them. As a result of the global economicdownturn during 2008 and 2009, these institutional investors experienced, among other things, a significant decline in the value of their public equity and debtholdings and a lack of realizations from their existing private equity portfolios. Consequently, many of these investors were left with disproportionatelyoutsized remaining commitments to a number of private equity funds, and were restricted from making new commitments to third-party managed privateequity funds such as those managed by us. To the extent economic conditions remain volatile and these issues persist, we may be unable to raise sufficientamounts of capital 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 andtransaction and advisory fees. In September 2009, the Institutional Limited Partners Association, or “ILPA,” published a set of Private Equity Principles, orthe “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. Weprovided ILPA our endorsement of the Principles, representing an indication of our general support for the efforts of ILPA. Although we have no obligation tomodify any of our fees with respect to our existing funds, we may experience pressure to do so.The failure of our funds to raise capital in sufficient amounts and on satisfactory terms could result in a decrease in AUM and management feeand transaction fee revenue or us being unable to achieve an increase in AUM and management fee and transaction fee revenue, and could have a materialadverse effect on our financial condition and results of operations. Similarly, any modification of our existing fee arrangements or the fee structures for newfunds could 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 credit and real estate funds make capital commitments to those funds that we are entitled tocall from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in orderfor those funds to consummate investments and otherwise pay their obligations when due. Any investor that did not fund a capital call would be subject toseveral possible penalties, including having a significant amount of its existing investment forfeited in that fund. However, the impact of the penalty is directlycorrelated to the amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instance early in thelife 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 any particularfund 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. -29-Table of ContentsWe have presented in this report the returns relating to the historical performance of our private equity, credit and real estate 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 mayraise, in part because: • market conditions during previous periods may have been significantly more favorable for generating positiveperformance, particularly in our private equity business, than the market conditions we may experience in the future; • our funds’ returns have benefited from investment opportunities and general market conditions that may not repeatthemselves, and there can be no assurance that our current or future funds will be able to avail themselves ofprofitable 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; • our funds’ returns have benefited from investment opportunities and general market conditions that may not repeatthemselves, including the availability of debt capital on attractive terms and the availability of distressed debtopportunities, and we may not be able to achieve the same returns or profitable investment opportunities or deploycapital as quickly; • the historical returns that we present in this report derive largely from the performance of our current private equityfunds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yetformed, 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 capitalmay not be deployed as profitably as our prior funds; • the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has notoccurred with respect to all of our funds and we believe is less likely to occur in the future; • our track record with respect to our credit funds and real estate funds is relatively short as compared to our privateequity funds; • in recent years, there has been increased competition for private equity investment opportunities resulting from theincreased amount of capital invested 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. -30-Table of ContentsFinally, our private equity IRRs have historically varied greatly from fund to fund. Accordingly, you should realize that the IRR going forward forany current 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 basedon our estimate of their fair value as of the date of determination. We estimate the fair value of our investments based on third-party models, or modelsdeveloped by us, which include discounted cash flow analyses and other techniques and may be based, at least in part, on independently sourced marketparameters. The material estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness ofdiscount rates used, and, in some cases, the ability to execute, the timing of and the estimated proceeds from expected financings. The actual results related toany particular investment often vary materially as a result of the inaccuracy of these estimates and assumptions. In addition, because many of the illiquidinvestments held by our funds are in industries or sectors which are unstable, in distress, or undergoing some uncertainty, such investments are subject torapid changes in value 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.In addition, the values of our investments in publicly traded assets are subject to significant volatility, including due to a number of factorsbeyond our control. These include actual or anticipated fluctuations in the quarterly and annual results of these companies or other companies in theirindustries, market perceptions concerning the availability of additional securities for sale, general economic, social or political developments, changes inindustry conditions or government regulations, changes in management or capital structure and significant acquisitions and dispositions. Because the marketprices of these securities can be volatile, the valuation of these assets will change from period to period, and the valuation for any particular period may not berealized at the time of disposition. In addition, because our private equity funds often hold very large amounts of the securities of their portfolio companies, thedisposition of these 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 publicsecurities that may 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 wouldsuffer losses 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. -31-Table of ContentsOur AUM has grown significantly in the past and we are pursuing further growth in the near future. Our rapid growth has caused, and plannedgrowth, if successful, will continue to cause, significant demands on our legal, accounting and operational infrastructure, and increased expenses. Thecomplexity 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 thegrowth in the variety, including the differences in strategy between, and complexity of, our different funds. In addition, we are required to continuouslydevelop our systems and infrastructure in response to the increasing sophistication of the investment management market and legal, accounting, regulatoryand tax developments.Our future growth will depend in part, on our ability to maintain an operating platform and management system sufficient to address our growthand will require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we facesignificant challenges: • 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 timelyand 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 affectour ability to generate revenue and control our expenses.Extensive 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 theregulatory environment in which we operate both in the United States and outside the United States is particularly likely to be subject to further regulation.There has been an active debate both nationally and internationally over the appropriate extent of regulation and oversight of private investment funds and theirmanagers. Any changes in the regulatory framework applicable to our businesses may impose additional expenses on us, require the attention of seniormanagement or result in limitations in the manner in which our business is conducted. On July 21, 2010, President Obama signed into law the Dodd-FrankWall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act,” which imposes significant new regulations on almost every aspect of the U.S.financial services industry, including aspects of our business and the markets in which we operate. Among other things, the Dodd-Frank Act requires privateequity and hedge fund advisers to register with the SEC, under the Investment Advisers Act, to maintain extensive records and to file reports if deemednecessary for purposes of systemic risk assessment by certain governmental bodies. Importantly, many of the provisions of the Dodd- -32-Table of ContentsFrank Act are subject to further rulemaking and to the discretion of regulatory bodies, such as the Financial Stability Oversight Council. As a result, we donot know exactly what the final regulations under the Dodd-Frank Act will require or how significantly the Dodd-Frank Act will affect us.Exemptions from Certain Laws. We regularly rely on exemptions from various requirements of the Securities Act, the Exchange Act, theInvestment Company Act, the Commodity Futures Trading Commission, the Commodity Exchange Act of 1936, as amended, and the EmploymentRetirement Income Security Act of 1974, as amended, in conducting our activities. These exemptions are sometimes highly complex and may in certaincircumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we couldbecome subject to regulatory action or third-party claims and our businesses could be materially and adversely affected. See, for example, “—Risks Related toOur Organization and Structure—If we were deemed an investment company under the Investment Company Act, applicable restrictions could make itimpractical for us to continue our businesses as contemplated and could have a material adverse effect on our 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 inantitrust laws or the enforcement of antitrust laws could affect the level of mergers and acquisitions activity, and changes in state laws may limit investmentactivities of state pension plans. See “Item 1. Business—Regulatory and Compliance Matters” for a further discussion of the regulatory environment in whichwe conduct 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 that supervise the financial markets. As calls for additional regulation have increased,there may be a related increase in regulatory investigations of the trading and other investment activities of alternative asset management funds, including ourfunds. Such investigations may impose additional expenses on us, may require the attention of senior management and may result in fines if any of our fundsare 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 andself-regulatory organizations. New laws or regulations could make compliance more difficult and expensive and affect the manner in which we conductbusiness.Apollo provides investment management services through registered investment advisors. Investment advisors are subject to extensive regulation inthe United States and in the other countries in which our investment activities occur. The SEC oversees our activities as a registered investment advisor underthe Investment Advisers Act. In the United Kingdom, we are subject to regulation by the U.K. Financial Services Authority, which will be replaced by theFinancial Conduct Authority as of April 11, 2013. Our other European operations, and our investment activities around the globe, are subject to a variety ofregulatory regimes that vary country by country. A failure to comply with the obligations imposed by regulatory regimes to which we are subject, including theInvestment Advisers Act could result in investigations, sanctions and reputational damage.In June 2010, the SEC adopted a new “pay-to-play” rule that restricts politically active investment advisors from managing state pension funds.The rule prohibits, among other things, a covered investment advisor from receiving compensation for advisory services provided to a government entity (suchas a state pension fund) for a two-year period after the advisor, certain covered employees of the advisor or any covered political action committee controlled bythe advisor or its employees makes a political contribution to certain government officials. In addition, a covered investment advisor is prohibited fromengaging in political fundraising activities for certain elected officials or candidates in jurisdictions where such advisor is providing or seeking governmentalbusiness. This new rule complicates and increases the compliance burden for our investment advisors. It will be imperative for a covered investment advisorto adopt an effective 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,” which is required tobe implemented in the national laws of the European -33-Table of ContentsUnion (“EU”) member states by July 22, 2013. The AIFM imposes significant 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 theEU in which interests are marketed within the EU would be subject to significant conditions on their operations, including, restrictions on marketing interestsin relevant funds to EU and European Economic Area investors; 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. Additional requirements and restrictions apply wheresuch funds invest in an EU portfolio company, including restrictions that may impose limits on certain investment and realization strategies, such asdividend recapitalizations and reorganizations. Such rules could potentially impose significant additional costs on the operation of our business in the EU andcould limit our operating flexibility within the relevant jurisdictions.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 2012) will be limited on the basis of earnings before interest and taxes and/orasset tax values.According to the German interest barrier rule, the tax deduction available to a company in respect of a net interest expense (interest expense lessinterest income) is limited to 30% of its tax earnings before interest, taxes, depreciation and amortization (“EBITDA”). Interest expense that does not exceed thethreshold of €3m can be deducted without any limitations for income tax purposes. Interest expense in excess of the interest deduction limitation may be carriedforward indefinitely (subject to change in ownership restrictions) and used in future periods against all profits and gains. In respect of a tax group, interestpaid by the German tax group entities to non-tax group parties (e.g. interest on bank debt, capex facility and working capital facility debt) will be restricted to30% of the tax group’s tax EBITDA. However, the interest barrier rule may not apply where German company’s gearing under International FinancialReporting Standards (“IFRS”) accounting principles is at maximum of 2% higher than the overall group’s leverage ratio at the level of the very top level entitywhich would be subject to IFRS consolidation (the “escape clause test”). This test is failed where any worldwide company of the entire group pays more than10% 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 thegroup) or secured third parties (although security granted by group members should not be harmful). If the group does not apply IFRS accounting principles,EU member countries’ generally accepted accounting principles or generally accepted accounting principles in the United States of America (“U.S. GAAP”)may also be accepted for the purpose of the escape clause test. It should be noted that for trade tax purposes, there is principally a 25% add back on alldeductible interest paid or accrued by any German entity after the consideration of a tax exempt amount kEUR 100 which is applied to the sum of all add backamounts. For trade tax purposes interest payments within a German tax group will not be considered. Our businesses are subject to the risk that similarmeasures might be introduced in other countries in which they currently have investments or plan to invest in the future, or that other legislative or regulatorymeasures might be promulgated in any of the countries in which we operate that adversely affect our businesses. In particular, the U.S. Federal income tax lawthat determines the tax consequences of an investment in Class A shares is under review and is potentially subject to adverse legislative, judicial oradministrative change, possibly on a retroactive basis, including possible changes that would result in the treatment of a portion of our carried interest incomeas ordinary income, that would cause us to become taxable as a corporation and/or would have other adverse effects. See “—Risks Related to Our Organizationand Structure—Although 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 income and gains atincreased rates. If similar legislation were to be enacted and apply to us, the value of the Class A Shares could be adversely affected.” In addition, U.S. andforeign labor unions have recently been agitating for greater legislative and regulatory oversight of private equity firms and transactions. Labor unions havealso threatened to use their influence to prevent pension funds from investing in private equity funds. -34-Table of ContentsInsurance Regulation. State insurance departments have broad administrative powers over the insurance business of our insurance companyaffiliates, including insurance company licensing and examination, agent licensing, establishment of reserve requirements and solvency standards, premiumrate regulation, admissibility of assets, policy form approval, unfair trade and claims practices and other matters. State regulators regularly review and updatethese and other requirements. The National Association of Insurance Commissioners (“NAIC”) continues to move forward with its implementation ofprinciples-based reserving for life insurers, which may change the methodology used by our insurance company affiliates to calculate their reserves.Currently, there are proposals to increase the scope of regulation of insurance holding companies in both the United States and internationally. Inthe United States, the NAIC has promulgated a model law for consideration by the various states that would provide for more extensive informational reportingby parents and affiliates of insurance companies. Internationally, the International Association of Insurance Supervisors is in the process of adopting aframework for the “group wide” supervision of internationally active insurance groups. Changes to existing laws or regulations must be adopted by individualstates or foreign jurisdictions before they will become effective. We cannot predict with any degree of certainty the additional capital requirements, compliancecosts or other burdens these requirements may impose on us and our insurance company affiliates.The Dodd-Frank Act created the Federal Insurance Office (the “FIO”) within the Department of Treasury headed by a Director appointed by theTreasury Secretary. The FIO is designed principally to exercise a monitoring and information gathering role, rather than a regulatory role. In that capacity, theFIO has been charged with providing reports to the U.S. Congress on (i) modernization of U.S. insurance regulation and (ii) the U.S. and global reinsurancemarket. Neither report has been issued to date. Such reports could lead to changes in the regulation of insurers and reinsurers in the U.S.Additionally, certain state regulations impose restrictions and limitations on the ability of our insurance company affiliates to pay dividends andmake other distributions to their parent companies. To the extent we depend on dividends from our insurance company affiliates, these regulations could havean adverse impact on our financial condition and results of operations.Our revenue, net income and cash flow are all highly variable, which may make it difficult for us to achieve steady earnings growth ona quarterly basis 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 andcertain of our credit and real estate funds, which constitutes the largest portion of income from our combined businesses, and the transaction and advisoryfees that we receive can vary significantly from quarter to quarter and year to year. In addition, the investment returns of most of our funds are volatile. Wemay also experience fluctuations in our results from quarter to quarter and year to year due to a number of other factors, including changes in the values of ourfunds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degreeto which we encounter competition and general economic and market conditions. In addition, carried interest income from our private equity funds and certainof our credit and real estate funds is subject to contingent repayment by the general partner if, upon the final distribution, the relevant fund’s general partnerhas received cumulative carried interest on individual portfolio investments in excess of the amount of carried interest it would be entitled to from the profitscalculated for all portfolio investments in the aggregate. Such variability may lead to volatility in the trading price of our Class A shares and cause our resultsfor 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 net income and cashflow on a quarterly basis, which could in turn lead to large adverse movements in the price of our Class A shares or increased volatility in our Class A shareprice generally.The timing of carried interest generated by our funds is uncertain and will contribute to the volatility of our results. Carried interest depends onour funds’ performance. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investmentand 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 provesto be profitable, it may be several years before -35-Table of Contentsany profits can be realized in cash or other proceeds. We cannot predict when, or if, any realization of investments will occur. Generally, with respect to ourprivate equity funds, although we recognize carried interest income on an accrual basis, we receive private equity carried interest payments only upondisposition of an investment by the relevant fund, which contributes to the volatility of our cash flow. If we were to have a realization event in a particularquarter or year, it may have a significant impact on our results for that particular quarter or year that may not be replicated in subsequent periods. Werecognize revenue on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds, and a declinein realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue, which could further increase the volatility ofour results. With respect to a number of our credit funds, our incentive income is generally paid annually, semi-annually or quarterly, and the varyingfrequency of these payments will contribute to the volatility of our revenues and cash flow. Furthermore, we earn this incentive income only if the net assetvalue of a fund has increased or, in the case of certain funds, increased beyond a particular threshold. Certain of our credit 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 anyguidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and couldcause increased volatility in our Class A share price.The investment management business is intensely competitive, which could materially adversely impact us.The investment management business is intensely competitive. We face competition both in the pursuit of outside investors for our funds and inacquiring investments in attractive portfolio companies and making other investments. It is possible that it will become increasingly difficult for our funds toraise capital as funds compete for investments from a limited number of qualified investors. Due to the global economic downturn and generally poor returnsin alternative asset investment businesses during the crisis, institutional investors have suffered from decreasing returns, liquidity pressure, increasedvolatility and difficulty maintaining targeted asset allocations, and a significant number of investors have materially decreased or temporarily stopped makingnew fund investments during this period. As the economy begins to recover, such investors may elect to reduce their overall portfolio allocations to alternativeinvestments such as private equity and hedge funds, resulting in a smaller overall pool of available capital in our industry. Even if such investors continue toinvest at historic levels, they may seek to negotiate reduced fee structures or other modifications to fund structures as a condition to investing.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; -36-Table of Contents • 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, credit and real estate 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 uponcurrent market conditions, their available 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-specificexpertise than we do, which creates 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 tous, which may create competitive 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 forinvestments in particular sectors or, 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 them with 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 of new entrants into our various businesses, including former “star” portfolio managers atlarge diversified financial institutions as well as such institutions themselves, will continue to result in increasedcompetition; • there are no barriers to entry to our businesses, implementing an integrated platform similar to ours or the strategiesthat we deploy at our funds, such as distressed investing, which we believe are our competitive strengths, except thatour competitors would need to hire professionals with the investment expertise or grow it internally; and • other industry participants continuously seek to recruit our investment professionals away from us.These and other factors could reduce our earnings and revenues and materially adversely affect our businesses. In addition, if we are forced tocompete with other alternative investment managers on the basis of price, we may not be able to maintain our current management fee and incentive incomestructures. We have historically competed primarily on the performance of our funds, and not on the level of our fees or incentive income relative to those ofour competitors. However, there is a risk that fees and incentive -37-Table of Contentsincome in the alternative investment management industry will decline, without regard to the historical performance of a manager. Fee or incentive incomereductions on existing or future funds, without corresponding decreases in our cost structure, would adversely 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. Wemay not be successful in any such attempted expansion. Attempts to expand our businesses involve a number of special risks, including some or all of thefollowing: • 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 foreignjurisdictions.Additionally, any expansion of our businesses could result in significant increases in our outstanding indebtedness and debt servicerequirements, 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, -38-Table of Contentswithout 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 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 applicablesecurities laws from selling such securities for a period of time. Our funds will generally not be able to sell these securities publicly unless their sale isregistered under applicable securities laws, or unless an exemption from such registration requirements is available. Accordingly, our funds may be forced,under certain conditions, to sell securities at a loss. The ability of many of our funds, particularly our private equity funds, to dispose of investments isheavily dependent on the public equity markets, inasmuch as the ability to realize value from an investment may depend upon the ability to complete an IPOof the 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 certain of our funds’ investments rely heavily on the use of leverage, our ability to achieve attractive rates of return on investments willdepend on our continued ability to access sufficient sources of indebtedness at attractive rates. For example, in many of our 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 may increase as a result of recapitalization transactions subsequent to the company’s acquisition by aprivate equity fund. The absence of available sources of senior debt financing for extended periods of time could therefore materially and adversely affect ourprivate equity funds. An increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it moreexpensive to finance those investments. Increases in interest rates could also make it more difficult to locate and consummate private equity investmentsbecause other potential buyers, including operating companies acting as strategic buyers, may be able to bid for an asset at a higher price due to a lower overallcost of capital. In addition, a portion of the indebtedness used to finance private equity investments often includes high-yield debt securities issued in creditfunds. 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 materially affected the ability and willingness of banks to underwrite new high-yield debt securitiesuntil relatively recently.Investments 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’sability to respond to changing industry conditions to the extent additional cash is needed for the response, to make unplannedbut necessary capital expenditures or to take advantage of growth opportunities; • allow even moderate reductions in operating cash flow to render it unable to service its indebtedness, leading to a bankruptcyor other reorganization of the entity and a loss of part or all of the equity investment in it; -39-Table of Contents • limit the entity’s ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared toits competitors who have relatively less debt; • limit the entity’s ability to engage in strategic acquisitions that might be necessary to generate attractive returns or furthergrowth; and • limit the entity’s ability to obtain additional financing or increase the cost of obtaining such financing, including for capitalexpenditures, working capital 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,many investments 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 insignificant amounts and must be either repaid or refinanced, those investments may materially suffer if they have generated insufficient cash flow to repaymaturing debt and there is insufficient capacity and availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or atall. If the current unusually limited availability of financing for such purposes were to persist for several years, when significant amounts of the debt incurredto finance our private equity funds’ existing portfolio investments start to come due, these funds could be materially and adversely affected.Our credit 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,AINV is permitted to issue senior securities in amounts such that its asset coverage ratio equals at least 200% after each issuance of senior securities. AINV’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.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 principlesthat has been 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 materialdifferences in several key areas between U.S. GAAP and IFRS which would affect Apollo. Additionally, U.S. GAAP provides specific guidance in classes ofaccounting transactions for which equivalent guidance in IFRS does not exist. The adoption of IFRS is highly complex and would have an impact on manyaspects and operations of Apollo, including but not limited to financial accounting and reporting systems, internal -40-Table of Contentscontrols, taxes, borrowing covenants and cash management. It is expected that a significant amount of time, internal and external resources and expenses over amulti-year period would be required for this conversion.We face operational risk from errors made in the execution, confirmation or settlement of transactions and our dependence on our headquartersin New York City and third-party providers may have an adverse impact on our ability to continue to operate our businesses without interruptionwhich could result in losses to us or limit our growth.We face operational risk from errors made in the execution, confirmation or settlement of transactions. We also face operational risk fromtransactions not being properly recorded, evaluated or accounted for in our funds. In particular, our capital markets oriented credit business is highlydependent on our ability to process and evaluate, on a daily basis, transactions across markets and geographies in a time-sensitive, efficient and accuratemanner. Consequently, we rely heavily on our financial, accounting and other data processing systems. New investment products we may introduce couldcreate a significant risk that our existing systems may not be adequate to identify or control the relevant risks in the investment strategies employed by suchnew investment products. In addition, our information systems and technology might not be able to accommodate our growth, and the cost of maintainingsuch systems might increase from its current level. These risks could cause us to suffer financial loss, a disruption of our businesses, liability to our funds,regulatory intervention and reputational damage.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 -41-Table of Contentsas general partner. This risk is more significant for certain 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 approvedannually by such fund’s board of directors or by the vote of a majority of the shareholders and the majority of the independent members of such fund’s boardof directors 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 could have a material adverse effect on our results of operations. Currently,AFT and AIF, registered investment companies under the Investment Company Act, and AINV, a registered investment company that has elected to be treatedas a business development company under the Investment Company Act, are subject to these provisions of the Investment Company Act.In addition, after undergoing the 2007 Reorganization, we no longer consolidate in our financial statements certain of the funds that havehistorically been consolidated in our financial statements. In connection with such deconsolidation, we amended the governing documents of those funds toprovide that a simple majority of a fund’s unaffiliated investors have the right to liquidate that fund, which would cause management fees and incentiveincome to terminate. Our ability to realize incentive income from such funds also would be adversely affected if we are required to liquidate fund investmentsat a time when market conditions result in our obtaining less for investments than could be obtained at later times. We do not know whether, and under whatcircumstances, 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 investorconsent. Such a change of control could be deemed to occur in the event our Managing Partners exchange enough of their interests in the Apollo OperatingGroup into our Class A shares such that our Managing Partners no longer own a controlling interest in us. We cannot be certain that consents required for theassignment of our management agreements will be obtained if such a deemed change of control occurs. Termination of these agreements would affect the feeswe earn from the relevant funds and the transaction and advisory fees we earn from the underlying portfolio companies, which could have a material adverseeffect on our results 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 loans outstanding under the AMH Credit Agreement and the CIT loan agreements described in note 12 to our consolidated financialstatements. We may choose to finance our business operations through further borrowings. Our existing and future indebtedness exposes us to the typical risksassociated with the use of leverage, including those discussed above under “—Dependence on significant leverage in investments by our funds could adverselyaffect our ability to achieve attractive rates of return on those investments.” These risks are exacerbated by certain of our funds’ use of leverage to financeinvestments and, if they were to occur, could cause us to suffer a decline in the credit ratings assigned to our debt by rating agencies, if any, which mightresult in an increase in our borrowing costs or result in other material adverse effects on our businesses.Borrowings under the AMH Credit Agreement are scheduled to mature either on April 20, 2014 or January 3, 2017 and borrowings under the CITloan agreements are scheduled to mature in April 2013. As these borrowings and other indebtedness mature (or are otherwise repaid prior to their scheduledmaturities), we may be required to either refinance them by entering into new facilities, which could result in higher borrowing costs, or issuing equity, whichwould dilute existing shareholders. We could also repay them by using cash on hand or cash from the sale of our assets. We could have difficulty entering intonew facilities or issuing equity in the future on attractive terms, or at all.Borrowings under the AMH Credit Agreement are floating-rate obligations based on either the London Interbank Offered Rate (“LIBOR”) or theAlternate Base Rate (“ABR”). As a result, an increase in short-term interest rates will increase our interest costs to the extent such borrowings have not beenhedged into fixed rates. -42-Table of ContentsWe 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, grossnegligence, willful misconduct, fraud, willful or reckless disregard for our duties to the fund or other forms of misconduct. Investors could sue us to recoveramounts lost by our funds due to our alleged misconduct, up to the entire amount of loss. Further, we may be subject to litigation arising from investordissatisfaction with the performance of our funds or from allegations that we improperly exercised control or influence over companies in which our fundshave large investments. By way of example, we, our funds and certain of our employees are each exposed to the risks of litigation relating to investmentactivities in our funds and actions taken by the officers and directors (some of whom may be Apollo employees) of portfolio companies, such as the risk ofshareholder litigation by other shareholders of public companies in which our funds have large investments. We are also exposed to risks of litigation orinvestigation relating to transactions that presented conflicts of interest that were not properly addressed. In addition, our rights to indemnification by the fundswe manage may not be upheld if challenged, and our indemnification rights generally do not cover bad faith, gross negligence, willful misconduct, fraud,willful or reckless disregard 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 oflitigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification from our funds, our results of operations, financialcondition and 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,cause significant reputational harm to us, which could seriously harm our business. We depend to a large extent on our business relationships and ourreputation for integrity and high-caliber professional services to attract and retain investors and to pursue investment opportunities for our funds. As a result,allegations of improper conduct by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicityand press speculation about us, our investment activities or the private equity industry in general, whether or not valid, may harm our reputation, which maybe more damaging to our business than to other types of businesses. See “Item 3. Legal Proceedings.”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 ofinterest relating 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 or more directors or their respective affiliates, on the one -43-Table of Contentshand, 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 ofdirectors shall be permitted and deemed approved by all shareholders if the resolution or course of action (i) has been specifically approved by a majority ofthe voting power of our outstanding voting shares (excluding voting shares owned by our manager or its affiliates) or by a conflicts committee of the board ofdirectors composed entirely of one or more independent directors, (ii) is on terms no less favorable to us or our shareholders (other than a Managing Partner)than those generally being provided to or available from unrelated third parties or (iii) it is fair and reasonable to us and our shareholders taking into accountthe totality of the relationships between the parties involved. All conflicts of interest described in this report will be deemed to have been specifically approvedby all shareholders. Notwithstanding the foregoing, it is possible that potential or perceived conflicts could give rise to investor dissatisfaction or litigation orregulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, orappear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts ofinterest would have a material adverse effect on our reputation which would materially adversely affect our businesses in a number of ways, including as aresult of redemptions by our investors from our funds, an inability to raise additional funds and a reluctance 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 intonew investment strategies, geographic markets and businesses. Our organizational documents, however, do not limit us to the investment managementbusiness. Accordingly, we may pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners orother strategic initiatives, which may include entering into new lines of business, such as the insurance, broker-dealer or financial advisory industries. Inaddition, we expect opportunities will arise to acquire other alternative or traditional asset managers. To the extent we make strategic investments oracquisitions, undertake other strategic initiatives or enter into a new line of business, we will face numerous risks and uncertainties, including risksassociated with (i) the required investment of capital and other resources, (ii) the possibility that we have insufficient expertise to engage in such activitiesprofitably or without incurring inappropriate amounts of risk, (iii) combining or integrating operational and management systems and controls and (iv) thebroadening of our geographic footprint, including the risks associated with conducting operations in foreign jurisdictions. Entry into certain lines of businessmay subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation andregulatory risk. If a new business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operationswill be adversely affected. Our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that wemay be dependent 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 partieswith whom 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. -44-Table of ContentsThe 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 onthe facts 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 involved in the duediligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regardingan investment, we rely on the resources available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevantfacts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investmentbeing 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 networth and/or special competitive problems. These funds also invest in obligors and issuers that are involved in bankruptcy or reorganization proceedings. Insuch situations, it may be difficult to obtain full information as to the exact financial and operating conditions of these obligors and issuers. Additionally, thefair values of such investments are subject to abrupt and erratic market movements and significant price volatility if they are publicly traded securities, andare subject 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. -45-Table of ContentsInvestments by some of our funds will include debt instruments and equity securities of companies that we do not control. Such instruments andsecurities may be acquired by our funds through trading activities or through purchases of securities from the issuer. In addition, in the future, our funds mayseek to acquire minority equity interests more frequently and may also dispose of a portion of their majority equity investments in portfolio companies overtime in a manner that results in the funds retaining a minority investment. Those investments will be subject to the risk that the company in which theinvestment is made may make business, financial or management decisions with which we do not agree or that the majority stakeholders or the management ofthe company may take risks or otherwise act in a manner that does not serve our interests. If any of the foregoing were to occur, the values of investments byour 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 beachieved in any fund investments. Because a significant portion of a fund’s capital may be invested in a single investment or portfolio company, a loss withrespect to such investment or portfolio company could have a significant adverse impact on such fund’s capital. Accordingly, a lack of diversification on thepart of a fund 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 oractions could include exchange controls, seizure or nationalization of foreign deposits or other assets and adoption of other governmental restrictions thatadversely affect the prices of securities or the ability to repatriate profits on investments or the capital invested itself. Income received by our funds fromsources in some countries may be reduced by withholding and other taxes. Any such taxes paid by a fund will reduce the net income or return from suchinvestments. While our funds will take these factors into consideration in making investment decisions, including when hedging positions, our funds may notbe able to fully avoid 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 credit funds may redeem their investments in our credit funds at any time after an initial holding period of 12 to 36 months. Theseevents 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 inthe event that certain “key persons” (for example, one or more of our Managing Partners and/or certain other investment professionals) fail to devote therequisite time to managing the fund, (ii) (depending on the fund) terminate the commitment period, dissolve the fund or remove the general partner if we, asgeneral partner or manager, or certain key persons engage in certain forms of misconduct, or (iii) dissolve the fund or terminate the commitment period uponthe affirmative vote of a specified percentage of limited partner interests entitled to vote. Both Fund VI and Fund VII, on which our near- to medium-termperformance will heavily depend, include a number of such provisions. Also, after undergoing the 2007 Reorganization, subsequent to which wedeconsolidated certain funds that have historically been consolidated in our financial statements, we amended the governing documents of those funds toprovide that a simple majority of a fund’s unaffiliated investors have the right to liquidate -46-Table of Contentsthat fund. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any ofour funds would likely result in significant reputational damage to us.Investors in our credit funds may also generally redeem their investments on an annual, semiannual or quarterly basis following the expiration ofa specified 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 advisors of our funds were to experience a change of control. We cannot be certain thatconsents required to assign our investment management agreements will be obtained if a change of control occurs. In addition, with respect to our publiclytraded closed-end funds, each fund’s investment management agreement must be approved annually by the independent members of such fund’s board ofdirectors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the fees we earn from suchfunds.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 fundshave invested. Our funds invest in companies in many different industries, each of which is subject to volatility based upon economic and market factors.Over the last few years, the credit crisis has caused significant fluctuations in the value of securities held by our funds and the global economic recession hada significant 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 the packaging, manufacturing, chemical and refining industries, as well as travel and real estate industries. The performance of our privateequity funds, and our performance, may be adversely affected to the extent our fund portfolio companies in these industries experience adverse performance oradditional pressure due to downward trends. For example, the performance of certain of our portfolio companies in the packaging, manufacturing, chemicaland refining industries is subject to the cyclical and volatile nature of the supply-demand balance in these industries. These industries historically haveexperienced alternating periods of capacity shortages leading to tight supply conditions, causing prices and profit margins to increase, followed by periodswhen substantial -47-Table of Contentscapacity is added, resulting in oversupply, declining capacity utilization rates and declining prices and profit margins. In addition to changes in the supplyand demand for products, the volatility these industries experience occurs as a result of changes in energy prices, costs of raw materials and changes invarious other economic conditions around the world. The performance of our investments in the commodities markets is also subject to a high degree ofbusiness and market risk, as it is substantially dependent upon prevailing prices of oil and natural gas. Prices for oil and natural gas are subject to widefluctuation in response to relatively minor changes in the supply and demand for oil and natural gas, market uncertainty and a variety of additional factorsthat 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, foreign supply of such commodities and overall economic conditions. It is common inmaking investments in the commodities markets to deploy hedging strategies to protect against pricing fluctuations (but that may or may not protect ourinvestments). Similarly, the performance of cruise ship operations is also susceptible to adverse changes in the economic climate, such as higher fuel prices,as increases in the cost of fuel globally would increase the cost of cruise ship operations. Economic and political conditions in certain parts of the world makeit difficult to predict the price of fuel in the future. In addition, cruise ship operators could experience increases in other operating costs, such as crew,insurance and security costs, due to market forces and economic or political instability beyond their control.In respect of real estate, even though the U.S. residential real estate market has recently shown some signs of stabilizing from a lengthy and deepdownturn, various factors could halt or limit a recovery in the housing market and have an adverse effect on the companies’ performance, including, but notlimited to, continued high unemployment, a low level of consumer confidence in the economy and/or the residential real estate market and rising mortgageinterest rates.In addition, our funds’ investments in commercial mortgage loans and other commercial real-estate related loans are subject to risks ofdelinquency 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 of the commercial property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of acommercial property can be affected by various factors, such as success of tenant businesses, property management decisions, competition from comparabletypes of properties and declines in regional 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.Contingent 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 thetime of acquisition or, if they are known to us, we may not accurately assess or protect against the risks that they present. Acquired contingent liabilities couldthus result in unforeseen losses for our funds. In addition, in connection with the disposition of an investment in a portfolio company, a fund may be requiredto make 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. -48-Table of ContentsOur 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 byexpiration of such fund’s term or otherwise. Although we generally expect that investments will be disposed of prior to dissolution or be suitable for in-kinddistribution at dissolution, 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 theadvisory board of the fund, as applicable, our funds may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result ofdissolution. 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 aresult, be restricted from initiating transactions in certain securities. This risk affects us more than it does many other investment managers, as we generallydo not use information barriers that many firms implement to separate persons who make investment decisions from others who might possess material, non-public information that could influence such decisions. Our decision not to implement these barriers could prevent our investment professionals fromundertaking advantageous 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 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 moneyfrom banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the InvestmentCompany Act. Under the provisions of the Investment Company Act, AINV is permitted to issue senior securities only in amounts such that its assetcoverage, as defined in the Investment Company Act, equals at least 200% after each issuance of senior securities. If the value of its assets declines, it may beunable to satisfy this test. If that happens, it may be required to sell a portion of its investments and, depending on the nature of its leverage, repay a portion ofits 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, oneof which 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. -49-Table of ContentsOur credit funds are subject to numerous additional risks.Our credit 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 solediscretion of the management 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 andconditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidityproblem, 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 theirliquidity or operational needs, 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 marketposition in a combination 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 which are 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 ourClass A shares may fluctuate and cause significant price variations to occur. If the market price of our Class A shares declines significantly, you may beunable to resell 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 inthe future. 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; • our policy of taking a long-term perspective on making investment, operational and strategic decisions, which is expected toresult in significant and 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 coverour Class A shares; -50-Table of Contents • 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 enforcementof these laws and regulations, 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 themarket price of our Class A shares may be heightened at or around times of investment realizations as well as following such realization, as a result ofspeculation as to 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 informationincludes financial information, including assets and revenues of certain Apollo funds on a consolidated basis, and our future financial information willcontinue to consolidate certain of these funds, such assets and revenues are available to the fund and not to us except through management fees, incentiveincome, 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 salescould occur. 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 timeand price that we deem appropriate. As of December 31, 2012, we had 130,053,993 Class A shares outstanding. The Class A shares reserved under ourequity incentive plan 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 Ashares and Apollo Operating Group units (“AOG Units”) exchangeable for Class A shares on a fully converted and diluted basis on the last day of theimmediately preceding fiscal year exceeds (b) the number of shares then reserved and available for issuance under the Equity Plan, or (ii) such lesser amountby which the administrator may decide to increase the number of Class A shares. Taking into account grants of restricted share units (“RSUs”) and optionsmade through December 31, 2012, 39,558,144 Class A shares remained available for future grant under our equity incentive plan. In addition, Holdings mayat any time exchange its AOG Units for up to 240,000,000 Class A shares on behalf of our Managing Partners and Contributing Partners. We may also elect tosell additional Class A shares in one or more future primary offerings. -51-Table of ContentsOur Managing Partners and Contributing Partners, through their partnership interests in Holdings, owned an aggregate of 64.9% of the AOGUnits as of December 31, 2012. Subject to certain procedures and restrictions (including any transfer restrictions and lock-up agreements applicable to ourManaging Partners and Contributing Partners), each Managing Partner and Contributing Partner has the right, upon 60 days’ notice prior to a designatedquarterly date, to exchange the AOG Units for Class A shares. These Class A shares are eligible for resale from time to time, subject to certain contractualrestrictions 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 AOG Units. Such rights will be exercisable beginning two years after the initial public offering of our Class A shares. See “Item 13. CertainRelationships and Related Party Transactions—Managing Partner Shareholders Agreement—Registration Rights.”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 publicoffering of our Class A shares, and, generally, may only transfer their non-voting Class A shares prior to such time to its controlled affiliates. See “Item 13.Certain Relationships and Related Party Transactions—Lenders Rights Agreement.”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 vestingand contractual 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 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 laws and regulations, to service our indebtedness or to provide for future distributions to ourClass A shareholders for any ensuing quarter. The declaration, payment and determination of the amount of our quarterly dividend, if any, will be at the solediscretion of our manager, who may change our dividend policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, willor can be paid. In making decisions regarding our quarterly dividend, our manager considers general economic and business conditions, our strategic plansand prospects, 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 Holdings GP, Ltd. (“BRH”), thecontrol exercised by our manager and anti-takeover provisions in our charter documents and Delaware law could delay or prevent a change incontrol.Our Managing Partners, through their ownership of BRH, beneficially own the Class B share that we have issued to BRH. The ManagingPartners interests in such Class B share represented 77.4% of the total combined voting power of our shares entitled to vote as of December 31, 2012. As aresult, they are able to exercise control over all matters requiring the approval of shareholders and are able to prevent a change in control of our company. Inaddition, our operating agreement provides that so long as the Apollo control condition (as described in “Item 10—Directors, Executive Officers and CorporateGovernance—Our Manager”) is satisfied, our manager, which is owned and controlled by our Managing Partners, manages all of our operations andactivities. The control of our manager will make it more difficult for a potential acquirer to assume control of our Company. Other provisions in our operatingagreement may also make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interestsof our shareholders. For example, our operating agreement requires advance notice for proposals by shareholders and nominations, places limitations onconvening shareholder meetings, and authorizes the issuance of preferred shares that could be issued by our board of directors to -52-Table of Contentsthwart a takeover attempt. In addition, certain provisions of Delaware law may delay or prevent a transaction that could cause a change in our control. Themarket price of our Class A shares could be adversely affected to the extent that our Managing Partners’ control over our Company, the control exercised byour manager as well as provisions of our operating agreement discourage potential takeover attempts that our shareholders may 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,under the 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 equityfunds, 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 owntaxation may be adversely affected by any new legislation, new regulations or revised interpretations of existing tax law that arise as a result of suchexaminations. In May 2010, the U.S. House of Representatives passed legislation (the “May 2010 House Bill”) that would have, in general, treated income andgains, including gain on sale, attributable to an interest in an investment services partnership interest (“ISPI”) as income subject to a new blended tax rate thatis higher than under current law, except to the extent such ISPI would have been considered under the legislation to be a qualified capital interest. The interestsof Class A shareholders and our interests in the Apollo Operating Group that are entitled to receive carried interest may be classified as ISPIs for purposes ofthis legislation. 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, incomederived with 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 under the publicly traded partnership rules. Therefore, if similar legislation were to be enacted, following such ten-year period,we would be precluded from qualifying 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 we were taxed as a U.S. corporation or required to hold all ISPIs through corporations, our effective tax rate would increasesignificantly. The federal statutory rate for corporations is currently 35%. In addition, we could be subject to increased state and local taxes. Furthermore,holders of Class A -53-Table of Contentsshares could be subject to 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 andgain, 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 hasperiodically considered legislation under which you could be subject to New York state income tax on income in respect of our Class A shares as a result ofcertain activities of 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 forbusinesses. Few specifics were included, and it is unclear what any actual legislation could provide, when it would be proposed, or its prospects forenactment. Several parts of the framework, if enacted, could adversely affect us. First, the framework could reduce the deductibility of interest forcorporations in some manner not specified. A reduction in interest deductions could increase our tax rate and thereby reduce cash available for distribution toinvestors or for other uses by us. Such a reduction could also limit our ability to finance new transactions and increase the effective cost of financing bycompanies in which we invest, which could reduce the value of our carried interest in respect of such companies. The framework also suggests that someentities currently treated as partnerships for tax purposes could be subject to an entity-level income tax similar to the corporate income tax. If such a proposalcaused us to be subject to additional entity-level taxes, it could reduce cash available for distribution to investors or for other uses by us. The frameworkreiterates the President’s support for treatment of carried interest as ordinary income, as provided in the President’s revenue proposal for 2013 described above.However, whether the President’s framework will actually be enacted by the government is unknown, and the ultimate consequences of tax reform legislation,if any, are also presently 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 and controlled by our ManagingPartners, will manage all of our operations and activities. AGM Management, LLC is managed by BRH, a Cayman entity owned by our Managing Partnersand managed by an executive committee composed of our Managing Partners. Our shareholders do not elect our manager, its manager or its manager’sexecutive committee and, unlike the holders of common stock in a corporation, have only limited voting rights on matters affecting our businesses andtherefore limited ability to influence decisions regarding our businesses. Furthermore, if our shareholders are dissatisfied with the performance of our manager,they will have little ability to remove our manager. As discussed below, the Managing Partners collectively had 77.4% of the voting power of Apollo GlobalManagement, LLC as of December 31, 2012. Therefore, they have the ability to control any shareholder vote that occurs, including any vote regarding theremoval of our manager. -54-Table of ContentsControl 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 77.4% of the combined voting power of our shares entitled to vote as of December 31, 2012. 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 64.9% of ApolloOperating Group’s economic returns through the AOG Units owned by Holdings as of December 31, 2012. Because they hold their economic interest in ourbusinesses 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. For a description of the tax receivable agreement, see “Item 13. CertainRelationships and Related Party Transactions—Tax Receivable Agreement.” In addition, the structuring of future transactions may take into consideration theManaging 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, wemay elect 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. Although we currently have a board of directors comprised of a majority of independent directors, we plan to continue to avail ourselves of theseexceptions. Accordingly, you will not have the same protections afforded to equity holders 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 theseconflicts, our manager may favor its own interests and the interests of its affiliates over the interests of us and our shareholders. These conflicts include,among others, the conflicts described below. • Our manager determines the amount and timing of our investments and dispositions, indebtedness, issuances of additionalstock and amounts of reserves, each of which can affect the amount of cash that is available for distribution to you. • Our manager is allowed to take into account the interests of parties other than us in resolving conflicts of interest, which hasthe effect of limiting its duties (including fiduciary duties) to our shareholders; for example, our affiliates that serve as generalpartners of our funds have fiduciary and contractual obligations to our fund -55-Table of Contents investors, and such obligations may cause such affiliates to regularly take actions that might adversely affect our near-termresults of operations or cash flow; our manager has no obligation to intervene in, or to notify our shareholders of, suchactions by such affiliates. • Because our Managing Partners and Contributing Partners hold their AOG Units through entities that are not subject tocorporate income taxation and Apollo Global Management, LLC holds the AOG Units in part through a wholly-ownedsubsidiary that is subject to corporate income taxation, conflicts may arise between our Managing Partners and ContributingPartners, on the one hand, and Apollo Global Management, LLC, on the other hand, relating to the selection and structuringof investments. • Other than as set forth in the non-competition, non-solicitation and confidentiality agreements to which our Managing Partnersand other professionals are subject, which may not be enforceable, affiliates of our manager and existing and formerpersonnel employed by our manager are not prohibited from engaging in other businesses or activities, including those thatmight be in direct competition with us. • Our manager has limited its liability and reduced or eliminated its duties (including fiduciary duties) under our operatingagreement, while also restricting the remedies available to our shareholders for actions that, without these limitations, mightconstitute breaches of duty (including fiduciary duty). In addition, we have agreed to indemnify our manager and its affiliatesto the fullest extent permitted by law, except with respect to conduct involving bad faith, fraud or willful misconduct. Bypurchasing our Class A shares, you will have agreed and consented to the provisions set forth in our operating agreement,including the provisions regarding conflicts of interest situations that, in the absence of such provisions, might constitute abreach 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, orfrom entering into additional contractual arrangements with any of these entities on our behalf, so long as the terms of anysuch additional contractual arrangements are 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 issuesabout compliance with fiduciary duties or applicable law. For example, our operating agreement provides that when our manager is acting in its individualcapacity, as opposed to in its capacity as our manager, it may act without any fiduciary obligations to us or our -56-Table of Contentsshareholders whatsoever. When our manager, in its capacity 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 andfactors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of orfactors affecting us or any of our shareholders and will not be subject to any different standards imposed by our operating agreement, the Delaware LimitedLiability Company Act or under any other law, rule or regulation 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 managerdetermines that its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or available from unrelatedthird parties or is fair and reasonable to us, taking into account the totality of the relationships between us and our manager, then it will be presumed that inmaking this determination, our manager acted in good faith. A shareholder seeking to challenge this resolution of the conflict of interest would bear the burdenof overcoming 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 andbe able 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 andnot a breach by our manager of any duties it may owe to us or our shareholders. This is different from the situation with Delaware corporations, where aconflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstratingunfairness to the plaintiff. If you purchase a Class A share, you will be treated as having consented to the provisions set forth in the operating agreement,including provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other dutiesunder applicable state law. As a result, shareholders will, as a practical matter, not be able to successfully challenge an informed decision by the conflictscommittee.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 assetswithout the consent of our shareholders. Furthermore, at any time, the partners of our manager may sell or transfer all or part of their partnership interests inour manager 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. -57-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 todistribute quarterly distributions to our Class A shareholders. Accordingly, we expect to cause the Apollo Operating Group to make distributions to itsunitholders (in other words, Holdings, which is 100% owned, directly and indirectly, by our Managing Partners and our Contributing Partners, and the threeintermediate holding companies, which are 100% owned by us), pro rata in an amount sufficient to enable us to pay such distributions to our Class Ashareholders; however, such distributions may not be made. In addition, our manager can reduce or eliminate our dividend at any time, in its discretion. TheApollo Operating Group intends to make periodic distributions to its unitholders in amounts sufficient to cover hypothetical income tax obligations attributableto allocations 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 toDelaware limited partnership or limited liability company act limitations on making distributions if liabilities of the entity after the distribution would exceedthe value of the entity’s assets). In addition, under the AMH Credit Agreement, Apollo Management Holdings is restricted in its ability to make cashdistributions to us and may be forced to use cash to collateralize the AMH Credit Agreement, which would reduce the cash it has available to makedistributions.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 PrivateOffering Transactions, upon the sale, refinancing or disposition of the assets owned by the Apollo Operating Group entities, our Managing Partners andContributing Partners will incur different and significantly greater tax liabilities as a result of the disproportionately greater allocations of items of taxableincome and gain to the Managing Partners and Contributing Partners upon a realization event. As the Managing Partners and Contributing Partners will notreceive a corresponding greater distribution of cash proceeds, they may, subject to applicable fiduciary or contractual duties, have different objectivesregarding the appropriate pricing, timing and other material terms of any sale, refinancing, or disposition, or whether to sell such assets at all. Decisions madewith respect to an acceleration or deferral of income or the sale or disposition of assets with unrealized built-in gains may also influence the timing and amountof payments that are received by an exchanging or selling founder or partner under the tax receivable agreement. All other factors being equal, earlier dispositionof assets with unrealized built-in gains following such exchange will tend to accelerate such payments and increase the present value of the tax receivableagreement, and disposition of assets with unrealized built-in gains before an exchange will increase a Managing Partner’s or Contributing Partner’s tax liabilitywithout giving rise to any rights to receive payments under the tax receivable agreement. Decisions made regarding a change of control also could have amaterial influence on the timing and amount of payments received by our Managing Partners and Contributing Partners pursuant to the tax receivableagreement. -58-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.Subject to certain restrictions, each Managing Partner and Contributing Partner has the right to exchange the AOG Units that he holds through hispartnership 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 otherwisewould not have been available. Any such increases may reduce the amount of tax that APO Corp., a wholly owned subsidiary of Apollo Global Management,LLC (“APO Corp.”), would otherwise be required to pay in the future. The IRS may challenge all or part of these increased deductions and tax basis increasesand 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 andContributing Partners 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 terminationpayment by APO Corp. or a change of control, as discussed below) as a result of these increases in tax deductions and tax basis of the Apollo OperatingGroup. In April 2012, April 2011 and April 2010, the Apollo Operating Group made a distribution of $5.8 million, $39.8 million and $15.0 million,respectively, to APO Corp., and APO Corp. made payment to satisfy the liability under the tax receivable agreement to the Managing Partners and ContributingPartners from a realized tax benefit for the 2011, 2010 and 2009 tax year. In April 2009, APO Corp. made payment of $9.1 million pursuant to the taxreceivable agreement. Prior to 2010, the distribution percentage was governed by a special allocation as discussed in note 15 to our consolidated financialstatements. Future payments that APO Corp. may make to our Managing Partners and Contributing Partners could be material in amount. In the event thatother of our current or future subsidiaries become taxable as corporations and acquire AOG Units in the future, or if we become taxable as a corporation forU.S. Federal income tax purposes, we expect, and have agreed that, each will become subject to a tax receivable agreement with 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 theexchanges entered into by the Managing Partners or Contributing Partners. The IRS could also challenge any additional tax depreciation and amortizationdeductions or other tax benefits (including deductions for imputed interest expense associated with payments made under the tax receivable agreement) we claimas a result of, 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 benefitswe previously claimed from a tax basis increase, Holdings would not be obligated under the tax receivable agreement to reimburse APO Corp. for anypayments previously made to them (although any future payments would be adjusted to reflect the result of such challenge). As a result, in certaincircumstances, payments could be made to our Managing Partners and Contributing Partners under the tax receivable agreement in excess of 85% of the actualaggregate cash tax savings of APO Corp. APO Corp.’s ability to achieve benefits from any tax basis increase and the payments to be made under thisagreement will depend upon 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.”If 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 incomederived from 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 notan investment 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 -59-Table of Contentsdeemed an investment company. However, if we were to be deemed an investment company, we would be taxed as a corporation and other restrictions imposedby the Investment Company Act, including limitations on our capital structure and our ability to transact with affiliates that apply to us, could make itimpractical for us to continue our businesses as contemplated and would have a material adverse effect on our businesses and the price of our Class A shares.Risks Related to TaxationYou will be subject to U.S. Federal income tax on your share of our taxable income, regardless of whether you receive any cash distributions fromus.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, whichrequires that 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 we are not required to register as an investment company under the Investment Company Act and related rules. Although we intend to manage ouraffairs so that our partnership will meet the 90% test described above in each taxable year, we may not meet these requirements or, as discussed below, currentlaw may change 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 acorporation for U.S. Federal income tax purposes, (i) we would become subject to corporate income tax and (ii) distributions to shareholders would be taxableas dividends for 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 toentity level taxation. See “—Risks Related to Our Organization and Structure—Although not enacted, the U.S. Congress has considered legislation that wouldhave: (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 taxablecorporations and (ii) taxed certain income and gains at increased rates. If similar legislation were to be enacted and apply to us, the value of our Class A sharescould be adversely affected.” Because of widespread state budget deficits, several states are evaluating ways to subject partnerships to entity level taxationthrough the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us as an entity, our distributions to youwould be reduced.Our 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 ofcomplex provisions 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. Federalincome tax rules are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting inrevised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. The IRS pays closeattention to the proper application of tax laws to partnerships and entities taxed as partnerships. The present U.S. Federal income tax treatment of aninvestment in our Class A shares may be modified by administrative, -60-Table of Contentslegislative or judicial interpretation at any time, and any such action may affect investments and commitments previously made. Changes to the U.S. Federalincome tax laws and interpretations thereof could make it more difficult or impossible to meet the exception 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 our investments and commitments, affect the tax considerationsof an investment in us, change the character or treatment of portions of our income (including, for instance, the treatment of carried interest as ordinary incomerather than capital gain) and adversely affect an investment in our Class A shares. For example, as discussed above under “—Risks Related to OurOrganization and Structure—Although not enacted, the U.S. Congress has considered legislation that would have: (i) in some cases after a ten-year transitionperiod, precluded us from qualifying as a partnership or required us to hold carried interest through taxable corporations; and (ii) taxed certain income andgains 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 has considered various legislative proposals to treat all or part of the capital gain and dividend income that is recognized by an investmentpartnership and allocable to a partner affiliated with the sponsor of the partnership (i.e., a portion of the carried interest) as ordinary income to such partner forU.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 Ashares, to address certain changes in U.S. Federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have amaterial adverse 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.Changes 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 entities including foreignfinancial institutions, or FFIs, are required to comply with a complicated and expansive reporting regime or, beginning in 2014, be subject to a 30% UnitedStates withholding tax on certain U.S. payments (and beginning in 2017, a 30% withholding tax on gross proceeds from the sale of U.S. stocks and securities)and non-U.S. entities which are not FFIs are required to either certify they have no substantial U.S. beneficial ownership or to report certain information withrespect 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 (andbeginning in 2017, a 30% withholding tax on gross proceeds from the sale of U.S. stocks and securities). The reporting obligations imposed under FATCArequire FFIs to comply with agreements with the IRS to obtain and disclose information about certain investors to the IRS. Accordingly, -61-Table of Contentsthe administrative and economic costs of compliance with FATCA may discourage some foreign investors from investing in U.S. funds, which couldadversely 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 acorporation for U.S. Federal income tax purposes. Such an entity may be a passive foreign investment company, or a “PFIC,” or a controlled foreigncorporation, 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 taxpurposes. Class A shareholders indirectly owning an interest in a PFIC or a CFC may experience adverse U.S. tax consequences, including the recognition oftaxable income prior to the receipt of 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 partnershiptaxable as a corporation, we must meet the qualifying income exception discussed above on a continuing basis and we must not be required to register as aninvestment company under the Investment Company Act. In order to effect such treatment we (or our subsidiaries) may be required to invest through foreign ordomestic corporations, forego attractive business or investment opportunities or enter into borrowings or financings we may not have otherwise entered into.This may cause us to incur additional tax liability and/or adversely affect our ability to operate solely to maximize our cash flow. Our structure also mayimpede our ability to engage in certain corporate acquisitive transactions because we generally intend to hold all of our assets through the Apollo OperatingGroup. In addition, we may be unable to participate in certain corporate reorganization transactions that would be tax free to our holders if we were acorporation. To the extent we hold assets other than through the Apollo Operating Group, we will make appropriate adjustments to the Apollo Operating Groupagreements so that distributions to Holdings and us would be the same as if such assets were held at that level. Moreover, we are precluded by a contract withone of the Strategic Investors from acquiring assets in a manner that would cause that Strategic Investor to be engaged in a commercial activity within themeaning of Section 892 of 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 total net taxable income allocated to you will have decreased the tax basis in yourClass A shares. Therefore, such excess distributions will increase your taxable gain, or decrease your taxable loss, when the Class A shares are sold and mayresult 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 ordinaryincome 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 accountingpositions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect theamount of tax benefits 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 Ashares and could have 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. -62-Table of ContentsThe 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, inwhich case 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. realproperty interests and sales of certain investments in interests in U.S. real property, including stock of certain U.S. corporations owning significant U.S. realproperty, 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, an investment 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 APOCorp. or third 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.We 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 Apollo Operating Group Partnerships. Thus, a holder of Class A shares could be allocated more taxable income in respectof those Class A shares 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 InternalRevenue Code with respect to Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo PrincipalHoldings 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. and Apollo 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 thepurchase price 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 thatcase, on a 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 gainwould otherwise 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, -63-Table of Contentseven 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 local income taxreturns and pay state and local income taxes in some or all of these jurisdictions. Further, Class A shareholders may be subject to penalties for failure tocomply 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 be required ofsuch 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 andadjustments to carrying basis, will be reported on Schedule K-1 and distributed to each Class A shareholder annually. It may require longer than 90 days afterthe end of our fiscal year to obtain the requisite information from all lower-tier entities so that K-1s may be prepared for us. For this reason, Class Ashareholders who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or theotherwise applicable due 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.You may be subject to an additional U.S. Federal income tax on net investment income allocated to you by us and on gain on the sale of theClass A shares.As of 2013, individuals, estates and trusts are subject to an additional 3.8% tax on “net investment income” (or undistributed “net investmentincome,” in the case of estates and trusts) for each taxable year, with such tax applying to the lesser of such income or the excess of such person’s adjustedgross income (with certain adjustments) over a specified amount. Net investment income includes net income from interest, dividends, annuities, royalties andrents and net gain attributable to the disposition of investment property. It is anticipated that net income and gain attributable to an investment in us will beincluded in a holder of the Class A share’s “net investment income” subject to this additional tax.ITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESOur principal executive offices are located in leased office space at 9 West 57th Street, New York, New York 10019. We also lease the space forour offices in Purchase, NY, California, Houston, London, Singapore, Frankfurt, Mumbai, Hong Kong and Luxembourg. We do not own any real property.We consider these 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,among other defendants, numerous private equity firms. The suit alleges that beginning in mid-2003, Apollo and the other private equity firm defendantsviolated the U.S. antitrust laws by forming “bidding clubs” or “consortia” that, among other things, rigged the bidding for control of various publiccorporations, restricted the supply of private equity financing, fixed the prices for target companies at artificially low levels, and allocated amongst themselvesan alleged market for private equity services in leveraged buyouts. The suit seeks class action certification, declaratory and injunctive relief, unspecifieddamages, and attorneys’ fees. On August 27, 2008, Apollo and its co-defendants -64-Table of Contentsmoved to dismiss plaintiffs’ complaint and on November 20, 2008, the Court granted Apollo’s motion. The court also dismissed two other defendants,Permira and Merrill Lynch. On September 17, 2010, the plaintiffs filed a motion to amend the complaint by adding an additional eight transactions andadding Apollo as a defendant. On October 6, 2010, the court granted plaintiffs’ motion to file that amended complaint. Plaintiffs’ fourth amended complaint,filed on October 7, 2010, adds Apollo as a defendant. Apollo joined in the other defendants’ October 21, 2010 motion to dismiss the third claim for relief andall claims by the PanAmSat Damages Sub-class in the fourth amended complaint, which motion was granted on January 13, 2011. On November 4, 2010,Apollo moved to dismiss, arguing that the claims against Apollo are time-barred and that the allegations against Apollo are insufficient to state an antitrustconspiracy claim. On February 17, 2011, the court denied Apollo’s motion to dismiss, ruling that Apollo should raise the statute of limitations issues onsummary judgment after discovery is completed. Apollo filed its answer to the fourth amended complaint on March 21, 2011. On July 11, 2011, theplaintiffs filed a motion for leave to file a fifth amended complaint, adding ten additional transactions and expanding the scope of the class seeking relief. OnSeptember 7, 2011, the court denied the motion for leave to amend without prejudice and gave plaintiffs permission to take limited discovery on the tenadditional transactions. By court order, the parties concluded discovery on May 21, 2012. The plaintiffs then filed a fifth amended complaint on June 14,2012. One week later, the defendants filed a motion to dismiss portions of the Fifth Amended Complaint. On July 18, 2012, the court granted the defendants’motion in part and denied it in part. On July 21, 2012, all defendants filed motions for summary judgment. While those motions were pending, the New YorkTimes moved to intervene and unseal the fifth amended complaint. After a court order, the defendants submitted a version of the complaint containing onlyfour redactions. The court publicly filed this version of the fifth amended complaint on the case docket on October 10, 2012. On December 18 and 19, 2012,the court heard oral argument on the defendants’ motions for summary judgment. Those motions remain pending. Apollo does not believe that a loss fromliability in this case is either probable or reasonably estimable. Apollo believes the plaintiffs’ claims lack factual and legal merit and intends to defend itselfvigorously. For these reasons, no estimate of possible loss, if any, can be made at this time.In March 2012, plaintiffs filed two putative class actions, captioned Kelm v. Chase Bank (No. 12-cv-332) and Miller v. 1-800-Flowers.com, Inc.(No. 12-cv-396), in the District of Connecticut on behalf of a class of consumers alleging online fraud. The defendants included, among others, TrilegiantCorporation, Inc. (“Trilegiant”), its parent company, Affinion Group, LLC (“Affinion”), and Apollo Global Management, LLC, which is affiliated withfunds that are the beneficial owners of 69% of Affinion’s common stock. In both cases, plaintiffs allege that Trilegiant, aided by its business partners, whoinclude e-merchants and credit card companies, developed a set of business practices intended to create consumer confusion and ultimately defraud consumersinto unknowingly paying fees to clubs for unwanted services. Plaintiffs allege that Apollo is a proper defendant because of its indirect stock ownership andability to appoint the majority of Affinion’s board. The complaints assert claims under the Racketeer Influenced Corrupt Organizations Act; the ElectronicCommunications Privacy Act; the Connecticut Unfair Trade Practices Act; and the California Business and Professional Code, and seek, among otherthings, restitution or disgorgement, injunctive relief, compensatory, treble and punitive damages, and attorneys’ fees. The allegations in Kelm and Miller aresubstantially similar to those in Schnabel v. Trilegiant Corp. (No. 3:10-cv-957), a putative class action filed in the District of Connecticut in 2010 that namesonly Trilegiant and Affinion as defendants. The court has consolidated the Kelm, Miller, and Schnabel cases under the caption In re: Trilegiant Corporation,Inc. and ordered that they proceed on the same schedule. On June 18, 2012, the court appointed lead plaintiffs’ counsel, and on September 7, 2012, plaintiffsfiled their consolidated amended complaint (“CAC”), which alleges the same causes of action against Apollo as did the complaints in the Kelm and Millercases. Defendants filed motions to dismiss on December 7, 2012, and plaintiffs filed opposition papers on February 7, 2013. Defendants’ replies are due onMarch 11, 2013. On December 5, 2012, plaintiffs filed another putative class action, captioned Frank v. Trilegiant Corp. (No. 12-cv-1721), in the District ofConnecticut, naming the same defendants and containing allegations substantially similar to those in the CAC. On January 23, 2013, plaintiffs moved totransfer and consolidate Frank into In re: Trilegiant, and on February 15, 2013, the Frank Court extended all defendants’ deadlines to respond to the Frankcomplaint until the earlier of (i) April 1, 2013 or (ii) a ruling on the motion to transfer and consolidate. Apollo believes that plaintiffs’ claims against it in thesecases are without merit. For this reason, and because the claims against Apollo are in their early stages, no reasonable estimate of possible loss, if any, can bemade at this time. -65-Table of ContentsOn July 9, 2012, Apollo was served with a subpoena by the New York Attorney General’s Office regarding Apollo’s fee waiver program. Thesubpoena is part of what we understand to be an industry-wide investigation by the New York Attorney General into the tax implications of the fee waiverprogram implemented by numerous private equity and hedge funds. Under the fee waiver program, individual fund managers for Apollo-managed funds mayelect to prospectively waive their management fees. Program participants receive an interest in the future profits, if any, earned on the invested amounts thatrepresent waived fees. They receive such profits from time to time in the ordinary course when distributions are made generally, as provided for in theapplicable fund governing documents and waiver agreements. Four Apollo funds have implemented the program. Apollo believes its fee waiver programcomplies with all applicable laws, and is cooperating with the investigation.Various state attorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents inconnection with the solicitation of investments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have receivedsubpoenas and other requests for information from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding theuse of placement agents. CalPERS, one of our Strategic Investors, announced on October 14, 2009, that it had initiated a special review of placement agentsand related issues. The Report of the CalPERS Special Review was issued on March 14, 2011. That report does not allege any wrongdoing on the part ofApollo or its affiliates. Apollo is continuing to cooperate with all such investigations and other reviews. In addition, on May 6, 2010, the California AttorneyGeneral filed a civil complaint against Alfred Villalobos and his company, Arvco Capital Research, LLC (“Arvco”) (a placement agent that Apollo has used)and Federico Buenrostro Jr., the former Chief Executive Officer of CalPERS, alleging conduct in violation of certain California laws in connection withCalPERS’s purchase of securities in various funds managed by Apollo and another asset manager. Apollo is not a party to the civil lawsuit and the lawsuitdoes not allege any misconduct on the part of Apollo. On December 29, 2011, the United States Bankruptcy Court for the District of Nevada approved anapplication made by Mr. Villalobos, Arvco and related entities (the “Arvco Debtors”) in their consolidated bankruptcy proceedings to hire special litigationcounsel to pursue certain claims on behalf of the bankruptcy estates of the Arvco Debtors, including potential claims against Apollo (a) for fees that Apollopurportedly owes the Arvco Debtors for placement agent services, and (b) for indemnification of legal fees and expenses arising out of the Arvco Debtors’defense of the California Attorney General action described above. To date, no such claims have been brought. On April 23, 2012, the SEC filed a lawsuitalleging securities fraud on the part of Arvco, as well as Messrs. Buenrostro and Villalobos, in connection with their activities concerning certain CalPERSinvestments in funds managed by Apollo. This lawsuit also does not allege wrongdoing on the part of Apollo, and in fact alleges that Apollo was defrauded byArvco, Villalobos, and Buenrostro. Apollo believes that it has handled its use of placement agents in an appropriate manner. Apollo denies the merit of all 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.Iran Related ActivitiesSection 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “ITRA”) added a new subsection (r) to Section 13 of theExchange Act, requiring a public reporting issuer to disclose in its annual or quarterly reports whether it or any of its affiliates have knowingly engaged inspecified activities or transactions relating to Iran, including activities not prohibited by U.S. law and conducted outside the U.S. by non-U.S. affiliates incompliance with local law. On February 12, 2013, certain investment funds affiliated with Apollo beneficially owned approximately 19.6% of the ordinaryshares of LyondellBasell Industries N.V. (“LyondellBasell”) and have certain director nomination rights. LyondellBasell may be deemed to be under commoncontrol with Apollo, but this statement is not meant to be an admission that common control exists. As a result, it appears that we are required to providedisclosures as set forth below pursuant to Section 219 of the ITRA and Section 13(r) of the Exchange Act. The Annual Report on Form 10-K for the yearended December 31, 2012 filed by LyondellBasell with the SEC on February 12, 2013 contained the disclosure set forth below (with all references containedtherein to “the Company” being references to LyondellBasell and its consolidated subsidiaries). -66-Table of ContentsThe disclosure below does not relate to any activities conducted by the Company and does not involve the Company or the Company’smanagement. The disclosure relates solely to activities conducted by LyondellBasell and its consolidated subsidiaries.“Disclosure pursuant to Section 219 of the Iran Threat Reduction & Syria Human Rights Act • Certain non-U.S. subsidiaries of our predecessor, LyondellBasell AF, licensed processes to construct and operatemanufacturing plants in Iran that produce polyolefin plastic material, which is used in the packaging of household andconsumer goods. The subsidiaries also provided engineering support and supplied catalyst products to be used in thesemanufacturing operations. In 2009, the Company made the decision to suspend the pursuit of any new business dealings inIran. • As previously disclosed by the Company, in 2010, our management made the further decision to terminate all business bythe Company and its direct and indirect subsidiaries with the government, entities and individuals in Iran. The terminationwas made in accordance with all applicable laws and with the knowledge of U.S. Government authorities. As part of thetermination, we entered into negotiations with Iranian counterparties in order to exit our contractual obligations. As describedbelow, two transactions occurred under settlement agreements in early 2012, although the agreements to cease our activitieswith these counterparties were entered into in 2011. In January 2012, one of our non-U.S. subsidiaries received a finalpayment of approximately €3.5 million for a shipment of catalyst from an entity that is 50% owned by the NationalPetrochemical Company of Iran. • Our shipment of the catalyst was in February 2012 as part of the agreement related to our termination and cessation of allbusiness under agreements with the counterparty. In 2012, the gross revenue from this limited activity was approximately,€4.2 million and profit attributable to it was approximately, €2.4 million. • In January and February of 2012, one of the Company’s non-U.S. subsidiaries provided certain engineering documentsrelating to a polyolefin plastic process to a licensee comprising three Iranian companies, one of which is 20% owned by theNational Oil Company of Iran. The provision of documents was the Company’s final act with respect to the termination andcessation of all business under agreements with the counterparties. No gross revenue or profit was attributable to this activityin 2012. The transactions disclosed in this report do not constitute violations of applicable anti-money laundering laws orsanctions laws administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), and are notthe subject of any enforcement actions under the Iran sanction laws. • We have not conducted, and do not intend to conduct, any further business activities in Iran or with Iranian counterparties.”PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIESOur Class A shares are traded on the NYSE under the symbol “APO.” Our Class A shares began trading on the NYSE on March 30, 2011.The number of holders of record of our Class A shares as of February 26, 2013 was 4. This does not include the number of shareholders thathold shares in “street name” through banks or broker-dealers. As of February 26, 2013, there is 1 holder of our Class B shares. -67-Table of ContentsThe 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 theNYSE: Sales Price 2012 High Low First Quarter $15.48 $12.50 Second Quarter 14.70 10.42 Third Quarter 15.06 12.00 Fourth Quarter 17.85 13.83 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 Cash Distribution PolicyWith respect to fiscal year 2012, we have paid four cash distributions of $0.46, $0.25, $0.24 and $0.40 per Class A share onFebruary 29, May 30, August 31 and November 30, 2012 (aggregating $1.35 per Class A share) to record holders of Class A shares and we have declared anadditional cash distribution of $1.05 per Class A shares to shareholders in respect of the fourth quarter of 2012 which was paid on February 28, 2013 toholders of record of Class A shares at the close of business on February 20, 2013. These distributions represented our net after-tax cash flow from operationsin excess of amounts determined by our manager to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments inour business and our funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future distributions to ourshareholders for any ensuing quarter.With 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 represented 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 business, to make appropriate investments in ourbusiness and our funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future distributions to ourshareholders for any ensuing quarter.Our current intention is to distribute to our Class A shareholders on a quarterly basis substantially all of our net after-tax cash flow fromoperations in excess of amounts determined by our manager to be necessary or appropriate to provide for the conduct of our businesses, to make appropriateinvestments in our businesses and our funds, to comply with applicable law, to service our indebtedness or to provide for future distributions to our Class Ashareholders for any ensuing quarter. Because we will not know what our actual available cash flow from operations will be for any year until sometime afterthe end of such year, our 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 maychange our cash distribution policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, will or can be paid. In makingdecisions regarding our quarterly distribution, our manager will take into account 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 and regulatory restrictions, restrictions and other implications on the -68-Table of Contentspayment of distributions by us to our common shareholders or by our subsidiaries to us and such other factors as our manager may deem relevant.Because we are a holding company that owns intermediate holding companies, the funding of each distribution, if declared, will occur in threesteps, as follows. • First, we will cause one or more entities in the Apollo Operating Group to make a distribution to all of its partners, includingour wholly-owned subsidiaries APO Corp., APO Asset Co., LLC and APO (FC), LLC (as applicable), and Holdings, on apro rata basis; • Second, we will cause our intermediate holding companies, APO Corp., APO Asset Co., LLC and APO (FC), LLC (asapplicable), to distribute to 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 beavailable for distribution by us on our Class A shares. See note 15 to our consolidated financial statements.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-ingain” assets at the time of the Private Offering Transactions. Tax distributions will be made only to the extent all distributions from the Apollo OperatingGroup for such 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 theirrespective interests in the applicable partnership. There can be no assurance that we will pay cash distributions on the Class A shares in an amount sufficientto cover any 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 ofour assets. 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 Agreement, 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 equity holders.In addition, the Apollo Operating Group’s cash flow from operations may be insufficient to enable it to make required minimum tax distributionsto its partners, 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. -69-Table of ContentsOur cash distribution policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay distributionsaccording to 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 cashnecessary to pay the intended distributions.As of December 31, 2012, approximately 26.9 million RSUs granted to Apollo employees (net of forfeited awards) were entitled to distributionequivalents, to be paid in the form of cash compensation.Securities Authorized for Issuance Under Equity Compensation PlansSee table under “Securities Authorized for Issuance Under Equity Compensation Plans” set forth in “Item 12. Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.”Class A Shares Repurchases in the Fourth Quarter of 2012No purchases of our Class A shares were made by us or on our behalf in the fourth quarter of the year ended December 31, 2012.Unregistered Sale of Equity SecuritiesNone.ITEM 6. SELECTED FINANCIAL DATAThe following selected historical consolidated and combined financial and other data of Apollo Global Management, LLC should be read togetherwith “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and relatednotes included 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 31,2012, 2011 and 2010 and the selected historical consolidated statements of financial condition data as of December 31, 2012 and 2011 have been derived fromour consolidated financial statements which are included in “Item 8. Financial Statements and Supplementary Data.” -70-Table of ContentsWe derived the selected historical consolidated and combined statements of operations data of Apollo Global Management, LLC for the yearsended December 31, 2009 and 2008 and the selected consolidated and combined statements of financial condition data as of December 31, 2010, 2009 and2008 from our audited consolidated and combined financial statements which are not included in this document. Year EndedDecember 31, 2012 2011 2010 2009 2008 (in thousands, except per share amounts) Statement of Operations Data Revenues: Advisory and transaction fees from affiliates $149,544 $81,953 $79,782 $56,075 $145,181 Management fees from affiliates 580,603 487,559 431,096 406,257 384,247 Carried interest income (loss) from affiliates 2,129,818 (397,880) 1,599,020 504,396 (796,133) Total Revenues 2,859,965 171,632 2,109,898 966,728 (266,705) Expenses: Compensation and benefits: Equity-based compensation 598,654 1,149,753 1,118,412 1,100,106 1,125,184 Salary, bonus and benefits 274,574 251,095 249,571 227,356 201,098 Profit sharing expense 871,394 (63,453) 555,225 161,935 (482,682) Incentive fee compensation 739 3,383 20,142 5,613 — Total Compensation and Benefits 1,745,361 1,340,778 1,943,350 1,495,010 843,600 Interest expense 37,116 40,850 35,436 50,252 62,622 Professional fees 64,682 59,277 61,919 33,889 76,450 Litigation settlement — — — — 200,000 General, administrative and other 87,961 75,558 65,107 61,066 71,789 Placement fees 22,271 3,911 4,258 12,364 51,379 Occupancy 37,218 35,816 23,067 29,625 20,830 Depreciation and amortization 53,236 26,260 24,249 24,299 22,099 Total Expenses 2,047,845 1,582,450 2,157,386 1,706,505 1,348,769 Other Income (Loss): Net income (loss) from investment activities 288,244 (129,827) 367,871 510,935 (1,269,100) Net (losses) gains from investment activities ofconsolidated variable interest entities (71,704) 24,201 48,206 — — Income (loss) from equity method investments 110,173 13,923 69,812 83,113 (57,353) Interest income 9,693 4,731 1,528 1,450 19,368 Gain from repurchase of debt — — — 36,193 — Other income (loss), net 1,964,679 205,520 195,032 41,410 (4,609) Total Other Income (Loss) 2,301,085 118,548 682,449 673,101 (1,311,694) Income (Loss) Before Income Tax (Provision) Benefit 3,113,205 (1,292,270) 634,961 (66,676) (2,927,168) Income tax (provision) benefit (65,410) (11,929) (91,737) (28,714) 36,995 Net Income (Loss) 3,047,795 (1,304,199) 543,224 (95,390) (2,890,173) Net (income) loss attributable to Non-Controlling Interests (2,736,838) 835,373 (448,607) (59,786) 1,977,915 Net Income (Loss) Attributable to Apollo GlobalManagement, LLC $310,957 $(468,826) $94,617 $(155,176) $(912,258) Distributions Declared per Class A share $1.35 $0.83 $0.21 $0.05 $0.56 Net Income (Loss) Per Class A Share—Basic and Diluted $2.06 $(4.18) $0.83 $(1.62) $(9.37) (1)(2)(3)(4) As ofDecember 31, 2012 2011 2010 2009 2008 (in thousands) Statement of Financial Condition Data Total assets $20,636,858 $7,975,873 $6,552,372 $3,385,197 $2,474,532 Debt (excluding obligations of consolidated variable interest entities) 737,818 738,516 751,525 933,834 1,026,005 Debt obligations of consolidated variable interest entities 11,834,955 3,189,837 1,127,180 — — Total shareholders’ equity 5,703,383 2,648,321 3,081,419 1,299,110 325,785 Total Non-Controlling Interests 3,036,565 1,921,920 2,930,517 1,603,146 822,843 (1)Litigation settlement charge was incurred in connection with an agreement with Huntsman to settle certain claims related to Hexion’s now terminatedmerger agreement with Huntsman. Insurance proceeds of $162.5 million and $37.5 million are included in other income during the years endedDecember 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 netgain of $36.2 million which is included in other (loss) income in the consolidated and combined statements of operations for the year endedDecember 31, 2009.(3)Reflects Non-Controlling Interests attributable to AAA, consolidated variable interest entities and the remaining interests held by certain individuals whoreceive an allocation of income from certain of our credit 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 andContributing Partners after the 2007 Reorganization which is calculated by applying the ownership percentage of Holding in the Apollo Operating Group. -71-Table of ContentsThe ownership interest was impacted by a share repurchase in February 2009, the Company’s IPO in April 2011, and issuances of Class A shares insettlement of vested RSUs in 2010, 2011 and 2012. Refer to “Item 8. Financial Statements and Supplementary Data” for details of the ownershippercentage. -72-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 the relatednotes as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010. This discussion contains forward-lookingstatements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly fromthose expressed or implied in such forward-looking statements due to a number of factors, including those included in the section of this reportentitled “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, creditand real estate with significant distressed expertise and a flexible mandate in the majority of our funds that enables our funds to invest opportunistically acrossa company’s capital structure. We raise, invest and manage funds on behalf of some of the world’s most prominent pension, endowment and sovereign wealthfunds 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 generateddomestically. These businesses are conducted through the following three reportable segments: (i)Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debtinstruments; (ii)Credit—primarily invests in non-control corporate and structured debt instruments; and (iii)Real estate—primarily invests in legacy commercial mortgage-backed securities, commercial first mortgage loans,mezzanine investments and other commercial real estate-related debt investments. Additionally, the Company sponsors realestate funds that focus on opportunistic investments in distressed debt and equity recapitalization transactions.During the third quarter of 2012, the Company changed the name of its capital markets business to the credit segment. The Company believesthis new name provides a more accurate description of the types of assets which are managed within this segment. In addition, this segment name change isconsistent with the Company’s management reporting and organization structure, as well as the manner in which resource deployment and compensationdecisions are made.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 wemanage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasizelong-term financial growth and profitability to manage our business.In addition, the growth in our fee-generating AUM during the last year has primarily been in our credit segment. The average management fee ratefor these new credit products is at market rates for such -73-Table of Contentsproducts and in certain cases is below our historical rates. Also, due to the complexity of these new product offerings, the Company has incurred and willcontinue to incur additional costs associated with managing these products. To date, these additional costs have been offset by realized economies of scale andongoing cost management.As of December 31, 2012, we had total AUM of $113.4 billion across all of our businesses. Our latest private equity buyout fund, Fund VII,completed its closing in December 2008, raising a total of $14.7 billion, and as of December 31, 2012 Fund VII had $4.7 billion of uncalled commitments, or“dry powder”, remaining. We have consistently produced attractive long-term investment returns in our private equity funds, generating a 39% gross IRR anda 25% net IRR on a compound annual basis from inception through December 31, 2012. For further detail related to fund performance metrics across all ofour businesses, see “—The Historical Investment Performance of Our Funds.”As of December 31, 2012, approximately 93% of our total AUM was in funds with a contractual life at inception of seven years or more, and10% of our total AUM was in permanent capital vehicles with unlimited duration.Holding Company StructureThe diagram below depicts our current organizational structure: -74-Table of ContentsNote: The organizational structure chart above depicts a simplified version of the Apollo structure. It does not include all legal entities in the structure.Ownership percentages are as of the date of the filing of this Annual Report on Form 10-K. (1)The Strategic Investors hold 45.4% of the Class A shares outstanding. The Class A shares held by investors other than the Strategic Investors represent23.1% of the total voting power of our shares entitled to vote and 19.4% of the economic interests in the Apollo Operating Group. Class A shares held bythe Strategic Investors do not have voting rights. However, such Class A shares will become entitled to vote upon transfers by a Strategic Investor inaccordance with the agreements entered into in connection with the investments made by the Strategic Investors.(2)Our Managing Partners own BRH, which in turns holds our only outstanding Class B share. The Class B share represents 76.9% of the total votingpower of our shares entitled to vote but no economic interest in Apollo Global Management, LLC. Our Managing Partners’ economic interests are insteadrepresented by their indirect beneficial ownership, through Holdings, of 57% of the limited partner interests in the Apollo Operating Group.(3)Through BRH Holdings, L.P., our Managing Partners indirectly beneficially own through estate planning vehicles limited partner interests in Holdings.(4)Holdings owns 64.5% of the limited partner interests in each Apollo Operating Group entity. The AOG Units held by Holdings are exchangeable forClass A shares. Our Managing Partners, through their interests in BRH and Holdings, beneficially own 57% of the AOG Units. Our ContributingPartners, through their ownership interests in Holdings, beneficially own 7.9% of the AOG Units.(5)BRH is the sole member of AGM Management, LLC, our manager. The management of Apollo Global Management, LLC is vested in our manager asprovided in our operating agreement.(6)Represents 35.5% of the limited partner interests in each Apollo Operating Group entity, held through intermediate holding companies. Apollo GlobalManagement, LLC, also indirectly owns 100% of the general partner interests in each Apollo Operating Group entity.Each of the Apollo Operating Group partnerships holds interests in different businesses or entities organized in different jurisdictions.Our structure is designed to accomplish a number of objectives, the most important of which are as follows: • We are a holding company that is qualified as a partnership for U.S. Federal income tax purposes. Our intermediate holdingcompanies enable us to maintain our partnership status and to meet the qualifying income exception. • We have historically used multiple management companies to segregate operations for business, financial and other reasons.Going forward, we may increase or decrease the number of our management companies or partnerships within the ApolloOperating Group based on our views regarding the appropriate balance between (a) administrative convenience and(b) continued business, financial, tax and other optimization.Business EnvironmentDuring the fourth quarter of 2012, global equity and credit markets continued to improve, assisted in part by low interest rate policies and othergovernmental actions. Against this backdrop, Apollo continued to generate realizations for fund investors, playing to the strengths of its flexible businessmodel. Apollo returned $4.9 billion of capital and realized gains to the limited partners of the funds it manages during the fourth quarter of 2012. Apollo’sfundraising activities also continued at a strong pace, as evidenced by the $1.6 billion of new capital that was raised during the fourth quarter as institutionalinvestors continued to turn to alternative investment managers for more attractive risk-adjusted returns in a low rate environment.Regardless of the market or economic environment at any given time, Apollo relies on its contrarian, value-oriented approach to consistently investcapital on behalf of its investors by focusing on opportunities that management believes are often overlooked by other investors. Apollo’s expertise in credit andits focus on nine core industry sectors combined with more than 20 years of investment experience have allowed Apollo to respond quickly to changingenvironments. Apollo’s core industry sectors cover chemicals, commodities, consumer and retail, distribution and transportation, financial and businessservices, manufacturing and industrial, media and cable and leisure, packaging and materials and the satellite and wireless industries. Apollo believes thatthese attributes have contributed to the success of its private equity funds investing in buyouts and credit opportunities during both expansionary andrecessionary economic periods. -75-Table of ContentsFrom the beginning of the third quarter of 2007 through December 31, 2012, we have deployed approximately $35.0 billion of gross investedcapital across our private equity and certain credit funds focused on control, distressed and buyout investments, leveraged loan portfolios and mezzanine,non-control distressed and non-performing loans. In addition, from the beginning of the fourth quarter of 2007 through December 31, 2012, the fundsmanaged by Apollo have acquired approximately $17.7 billion in face value of distressed debt at discounts to par value and purchased approximately $47.3billion in face value of leveraged senior loans at discounts to par value from financial institutions. Since we purchased many of these leveraged loan portfoliosfrom highly motivated sellers, we were able to secure, in certain cases, attractive long-term, low cost financing.Since the financial crisis in 2008, we have relied on our deep industry, credit and financial structuring experience, coupled with our strengths as avalue-oriented, distressed investor, to deploy significant amounts of new capital within challenging economic environments. In addition, we actively work withthe management of each of the portfolio companies of the funds we manage to maximize the underlying value of the business, including helping the companiesto generate cost and working capital savings. We also rely on our deep credit structuring experience and work with management of the portfolio companies tohelp optimize the capital structure of such companies through proactive restructuring of the balance sheet to address near-term debt maturities or capturingdiscounts on publicly traded debt securities through exchange offers and potential debt buybacks. For example, as of December 31, 2012, Fund VI and itsunderlying portfolio companies purchased or retired approximately $19.8 billion in face value of debt and captured approximately $9.7 billion of discount topar value of debt in portfolio companies such as CEVA Logistics, Caesars Entertainment, Realogy and Momentive Performance Materials. Additionally, theportfolio companies of Fund VI have implemented approximately $3.8 billion of cost savings programs on an aggregate basis from the date Fund VI investedin them through December 31, 2012, which we believe will positively impact their operating profitability.In certain situations, funds managed by Apollo are the largest owner of the total outstanding debt of the portfolio company. In addition to theattractive return profile associated with these portfolio company debt purchases, we believe that building positions as senior creditors within the existingportfolio companies is strategic to the existing equity ownership positions.During the recovery and expansionary periods of 1994 through 2000 and late 2003 through the first half of 2007, our private equity fundsinvested or committed to invest approximately $13.7 billion primarily in traditional and corporate partner buyouts. During the recessionary periods of 1990through 1993, 2001 through late 2003 and the current recessionary and post recessionary periods (second half of 2007 through the year end of 2012), ourprivate equity funds have invested $27.4 billion, of which $16.2 billion was in distressed buyouts and debt investments when the debt securities of qualitycompanies traded at deep discounts to par value. Our average entry multiple for Fund VII, VI and V was 6.2x, 7.7x and 6.6x, respectively as ofDecember 31, 2012. The average entry multiple for a private equity fund is the average of the total enterprise value over an applicable EBITDA which webelieve captures the true economics for our purchases of portfolio companies.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 unrealizedportfolio investments,” “capital commitments,” “adjusted assets,” “invested capital” or “stockholders’ equity,” each asdefined in the applicable management agreement of the unconsolidated funds; • Advisory and transaction fees relating to the investments our funds make, or individual monitoring agreements withindividual portfolio companies of the private equity funds and certain credit funds as well as advisory services provided tocertain credit funds; and • Carried interest with respect to our funds. -76-Table of ContentsOur 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 markets, including the availability and cost of leverage, and economicconditions in the United States, Western Europe, Asia, and to some extent, elsewhere in the world. The market factors that impact this include the following: • The strength of the alternative investment management industry, including the amount of capital invested andwithdrawn from alternative investments. Allocations of capital to the alternative investment sector are dependent, in part,on the strength of the economy and the returns available from other investments relative to returns from alternativeinvestments. Our share of this capital is dependent on the strength of our performance relative to the performance of ourcompetitors. The capital we attract and our returns are drivers of our Assets Under Management, which, in turn, drive thefees we earn. In light of the current volatile conditions in the financial markets, our funds’ returns may be lower than theyhave 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 offeringmarket specifically. The strength of these markets affects the value of, and our ability to successfully exit, our equitypositions in our private equity portfolio companies in a timely manner. • The strength and liquidity of the U.S. and relevant global debt markets. Our funds and our portfolio companies borrowmoney to make acquisitions and our funds utilize leverage in order to increase investment returns that ultimately drive theperformance of our funds. Furthermore, we utilize debt to finance the principal investments in our funds and for workingcapital purposes. To the extent our ability to borrow funds becomes more expensive or difficult to obtain, the net returns wecan earn on those investments may be reduced. • Stability in interest rate and foreign currency exchange rate markets. We generally benefit from stable interest rate andforeign currency exchange rate markets. The direction and impact of changes in interest rates or foreign currency exchangerates on certain of our funds are dependent on the funds’ expectations and the related composition of their investments at suchtime.For the most part, we believe the trends in these factors have historically created a favorable investment environment for our funds. However,adverse market conditions may affect our businesses in many ways, including reducing the value or hampering the performance of the investments made byour funds, 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,and affect our financial condition and prospects. As a result of our value-oriented, contrarian investment style which is inherently long-term in nature, theremay be significant 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 andimpacted the performance of many of our funds’ portfolio companies. The impact of such events on our private equity and credit funds resulted in volatilityin our revenue. If the market were to experience similar periods of volatility, we and the funds we manage may experience tightening of liquidity, reducedearnings and cash flow, impairment charges, as well as challenges in raising additional capital, obtaining investment financing and making investments onattractive 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 andcondition, see “Item 1A. Risk Factors—Risks Related to Our Businesses—Difficult market conditions may adversely affect our businesses in many ways,including by reducing the value or hampering the performance of the investments made by our funds or reducing the -77-Table of Contentsability of our funds to raise or deploy capital, each of which could materially reduce our revenue, net income and cash flow and adversely affect our financialprospects and condition.”Uncertainty remains regarding Apollo’s future taxation levels. On May 28, 2010, the House of Representatives passed legislation that would, ifenacted in its present form, preclude us from qualifying for treatment as a partnership for U.S. Federal income tax purposes under the publicly tradedpartnership rules. See “Item 1A. Risk Factors—Risks Related to Our Organization and Structure—Although not enacted, the U.S. Congress has consideredlegislation 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 carriedinterest through taxable corporations; and (ii) taxed certain income and gains at increased rates. If similar legislation were to be enacted and apply to us, thevalue of our Class A shares could be adversely affected” and “Item 1A. Risk Factors—Risks Related to Taxation—Our structure involves complex provisionsof U.S. Federal income tax law for which no clear precedent or authority may be available. Our structure is also subject to potential legislative, judicial oradministrative change and differing interpretations, possibly on a retroactive basis.”Managing Business PerformanceWe believe that the presentation of Economic Net Income (Loss) supplements a reader’s understanding of the economic operating performance ofeach of our segments.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 AOG Units, income tax expense, amortization of intangibles associated with the 2007 Reorganization as well as acquisitions andNon-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our creditmanagement companies. In addition, segment data excludes the assets, liabilities and operating results of the funds and variable interest entities (“VIEs”) thatare included in the consolidated financial statements. Adjustments relating to income tax expense, intangible asset amortization and Non-Controlling Interestsare common in the calculation of supplemental measures of performance in our industry. We believe the exclusion of the non-cash charges related to the 2007Reorganization for equity-based compensation provides investors with a meaningful indication of our performance because these charges relate to the equityportion 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,credit 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 credit management companies and an add-back for amortization ofintangibles associated with the 2007 Reorganization and acquisitions. These modifications to ENI have been reflected in the prior period presentation of oursegment results. The impact of this modification on ENI is reflected in the table below for the year ended December 31, 2010. Impact of Modification on ENI PrivateEquitySegment CreditSegment RealEstateSegment TotalReportableSegments For the year ended December 31, 2010 $(6,525) $(23,449) $(3,975) $(33,949) During the third quarter of 2012, the Company changed the name of its capital markets business to the credit segment. The Company believesthis new name provides a more accurate description of the types of assets which are managed within this segment. In addition, this segment name change isconsistent with the Company’s management reporting and organizational structure as well as the manner in which resource deployment and compensationdecisions are made. -78-Table of ContentsENI is a key performance measure used for understanding the performance of our operations from period to period and although not everycompany in our industry defines these metrics in precisely the same way we do, we believe that this metric, as we use it, facilitates comparisons with othercompanies in our industry. We use ENI to evaluate the performance of our private equity, credit and real estate segments. Management also believes thecomponents 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 thenew hires. As the amount of fees, investment income, and ENI is indicative of the performance of the management companiesand advisors within each segment, management can assess the need for additional resources and the location for deploymentof the new hires based on the results of this measure. For example, a positive ENI could indicate the need for additional staffto manage the respective segment whereas a negative ENI could indicate the need to reduce staff assigned to manage therespective segment. • Decisions related to capital deployment such as providing capital to facilitate growth for our business and/or to facilitateexpansion into new businesses. As the amount of fees, investment income, and ENI is indicative of the performance of themanagement companies and advisors within each segment, management can assess the availability and need to providecapital to facilitate growth or expansion into new businesses based on the results of this measure. For example, a negative ENImay indicate the lack of performance of a segment and thus indicate a need for additional capital to be deployed into therespective segment. • Decisions related to expenses, such as determining annual discretionary bonuses and equity-based compensation awards toits employees. With respect to compensation, management seeks to align the interests of certain professionals and selectedother individuals with those of the investors in such funds and those of the Company’s shareholders by providing suchindividuals a profit sharing interest in the carried interest income earned in relation to the funds. To achieve that objective, acertain amount of compensation is based on the Company’s performance and growth for the year.ENI does not take into account certain items included when calculating net income under U.S. GAAP and as such, we do not rely solely on ENIas a performance measure and also consider our U.S. GAAP results. The following items, which are significant to our business, are excluded whencalculating ENI: (i)non-cash charges related to RSUs granted in connection with the 2007 private placement and amortization of AOG Units,although these costs are expected to be recurring components of our costs we may be able to incur lower cash compensationcosts with the granting of equity-based compensation; (ii)income tax, which represents a necessary and recurring element of our operating costs and our ability to generate revenuebecause ongoing revenue generation 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 allintangibles have been fully amortized; and (iv)Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation of incomefrom certain of our credit management companies, which is expected to be a recurring item and represents the aggregate of theincome or loss that is not owned by the Company. -79-Table of ContentsWe believe that ENI is helpful for an understanding of our business and that investors should review the same supplemental financial measurethat management 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.The following summarizes the adjustments to ENI that reconcile ENI to the net income (loss) attributable to Apollo determined in accordance withU.S. GAAP: • Inclusion of the impact of RSUs granted in connection with the 2007 private placement and non-cash equity-basedcompensation expense comprising amortization of AOG Units. Management assesses our performance based on managementfees, advisory and transaction fees, and carried interest income generated by the business and excludes the impact of non-cash charges related to RSUs granted in connection with the 2007 private placement and amortization of AOG Units becausethese 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 ofour segments or when determining compensation for our employees. Additionally, income taxes at the segment level (whichexclude APO Corp.’s corporate taxes) are not meaningful, as the majority of the entities included in our segments operate aspartnerships and therefore are only subject to New York City unincorporated business taxes (“NYC UBT”) and foreign taxeswhen applicable. • Inclusion of amortization of intangible assets associated with the 2007 Reorganization and subsequent acquisitions as thesenon-cash charges are not viewed as part of our core operations. • Carried interest income, management fees and other revenues from Apollo funds are reflected on an unconsolidated basis. Assuch, ENI excludes the Non-Controlling Interests in consolidated funds, which remain consolidated in our consolidatedfinancial statements. Management views the business as an alternative investment management firm and therefore assessesperformance using the combined total of carried interest income and management fees from each of our funds. One exceptionis the non-controlling interest related to certain individuals who receive an allocation of income from certain of our creditmanagement companies which is deducted from ENI to better reflect the performance attributable to shareholders.ENI may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordancewith U.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 asubstitute for operating income, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared inaccordance with U.S. GAAP. The use of ENI without consideration of related U.S. GAAP measures is not adequate due to the adjustments described above.Management compensates for these limitations by using ENI as a supplemental measure to U.S. GAAP results, to provide a more complete understanding ofour performance as management measures it. A reconciliation of ENI to our U.S. GAAP net income (loss) attributable to Apollo Global Management, LLC canbe found 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 AssetsUnder Management, private equity dollars invested and uncalled private equity commitments. -80-Table of ContentsAssets Under ManagementAssets 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 theterms of their capital commitments to the extent a fund is within the commitment period in which management fees arecalculated based on total commitments to the fund; (ii)the NAV of our credit funds, other than certain CLOs (such as Artus, which we measure by using the mark-to-market valueof the aggregate principal amount of the underlying collateralized loan obligations) or certain CLO and CDO credit funds thathave a fee generating basis other than mark-to-market asset values, plus used or available leverage and/or capitalcommitments; (iii)the gross asset value or net asset value of our real estate entities and the structured portfolio company investments includedwithin the funds we manage, which includes the leverage used by such structured portfolio companies; (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 forinvestments that may require pre-qualification before investment plus any other capital commitments available for investmentthat are not otherwise included in the clauses above.Our AUM measure includes Assets Under Management for which we charge either no or nominal fees. Our definition of AUM is not based onany definition 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.We use AUM as a performance measurement of our investment activities, as well as to monitor fund size in relation to professional resource andinfrastructure needs.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 managementagreements on a basis that varies among the Apollo funds. Management fees are normally based on “net asset value,” “gross assets,” “adjusted par assetvalue,” “adjusted cost of all unrealized portfolio investments,” “capital commitments,” “adjusted assets,” “stockholders’ equity,” “invested capital” or“capital contributions,” each as defined in the applicable management agreement. Monitoring fees, also referred to as advisory fees, generally are based on thetotal value of certain structured portfolio company investments, which normally includes leverage, less any portion of such total value that is alreadyconsidered 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 thefollowing: (a) fair value above invested capital for those funds that earn management fees based on invested capital, (b) net asset values related to generalpartner interests and co-investments, (c) unused credit facilities, (d) available commitments on those funds that generate -81-Table of Contentsmanagement fees on invested capital, (e) structured portfolio company investments that do not generate monitoring fees and (f) the difference between grossassets and net asset value for those funds that earn management fees based on net asset value.We use non-fee generating AUM combined with fee-generating AUM as a performance measurement of our investment activities, as well as tomonitor fund size in relation to professional resource and infrastructure needs. Non-fee generating AUM includes assets on which we could earn carriedinterest income.The table below displays fee-generating and non-fee generating AUM by segment as of December 31, 2012, 2011 and 2010. Changes in marketconditions, additional funds raised and acquisitions have had significant impacts to our AUM: As ofDecember 31, 2012 2011 2010 (in millions) Total Assets Under Management $113,379 $75,222 $67,551 Fee-generating 81,934 58,121 47,037 Non-fee generating 31,445 17,101 20,514 Private Equity 37,832 35,384 38,799 Fee-generating 27,932 28,031 27,874 Non-fee generating 9,900 7,353 10,925 Credit 64,406 31,867 22,283 Fee-generating 49,518 26,553 16,484 Non-fee generating 14,888 5,314 5,799 Real Estate 8,800 7,971 6,469 Fee-generating 4,484 3,537 2,679 Non-fee generating 4,316 4,434 3,790 (1)Includes $2.3 billion of commitments that have yet to be deployed to an Apollo fund within our three segments.(2)Includes fee-generating and non-fee generating AUM as of September 30, 2012 for certain publicly traded vehicles managed by Apollo.During the year ended December 31, 2012, our total fee-generating AUM increased primarily due to acquisitions in our credit segment, as well asincreases in subscriptions across our three segments. The fee-generating AUM of our credit funds increased primarily due to the acquisition in 2012 of StoneTower Capital LLC and its related management companies (“Stone Tower”) as well as increased subscriptions, capital raised and leverage. The fee-generatingAUM of our real estate segment increased due to net segment transfers from other segments and subscriptions, partially offset by distributions. The fee-generating AUM of our private equity funds decreased due to distributions, partially offset by subscriptions.When the fair value of an investment exceeds invested capital, we are normally entitled to carried interest income on the difference between the fairvalue once realized and invested capital after also considering certain expenses and preferred return amounts, as specified in the respective partnershipagreements; 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 haveexperienced an increase in our management fees and advisory and transaction fees. To support this growth, we have also experienced an increase in operatingexpenses, resulting from hiring additional personnel, opening new offices to expand our geographical reach and incurring additional professional fees. -82-(1)(1)(2)(2)Table of ContentsWith respect to our private equity funds and certain of our credit and real estate funds, we charge management fees on the amount of committed orinvested capital and we generally are entitled to realized carried interest on the realized gains on the disposition of such funds’ 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 the applicable management agreement. In addition, our fee-generating AUMreflects leverage vehicles that generate monitoring fees on value in excess of fund commitments. As of December 31, 2012, our total fee-generating AUM iscomprised of approximately 92% of assets that earn management fees and the remaining balance of assets earn monitoring fees.The Company’s entire fee-generating AUM is subject to management or monitoring fees. The components of fee-generating AUM by segment as ofDecember 31, 2012, 2011 and 2010 are presented below: As ofDecember 31, 2012 PrivateEquity Credit RealEstate Total (in millions) Fee-generating AUM based on capital commitments $15,854 $5,156 $194 $21,204 Fee-generating AUM based on invested capital 7,613 3,124 1,866 12,603 Fee-generating AUM based on gross/adjusted assets 855 31,599 2,134 34,588 Fee-generating AUM based on leverage 3,610 3,101 — 6,711 Fee-generating AUM based on NAV — 6,538 290 6,828 Total Fee-Generating AUM $27,932 $49,518 $4,484 $81,934 (1)Monitoring fees are normally based on the total value of certain structured portfolio company investments, which includes leverage, less any portion ofsuch total 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, 2012 is 61 months.(3)The fee-generating AUM for certain of our publicly traded vehicles is based on an adjusted equity amount as specified by the respective managementagreements. As ofDecember 31, 2011 PrivateEquity Credit 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 structured portfolio company investments, which includes leverage, less any portion ofsuch total 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 certain of our publicly traded vehicles is based on an adjusted equity amount as specified by the respective managementagreements. -83-(3)(3)(1)(2)(3)(1)(2)Table of Contents As ofDecember 31, 2010 PrivateEquity Credit 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 structured portfolio company investments, which includes leverage, less any portion ofsuch total 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.AUM as of December 31, 2012, 2011 and 2010 was as follows: Total Assets Under Management As ofDecember 31, 2012 2011 2010 (in millions) AUM: Private equity $37,832 $35,384 $38,799 Credit 64,406 31,867 22,283 Real estate 8,800 7,971 6,469 Total $113,379 $75,222 $67,551 (1)Includes $2.3 billion of commitments that have yet to be deployed to an Apollo fund within our three segments.The following table presents total Assets Under Management and fee generating Assets Under Management amounts for our private equity segmentby strategy: Total AUM Fee Generating AUM As ofDecember 31, As ofDecember 31, 2012 2011 2010 2012 2011 2010 (in millions) Traditional Private Equity Funds $35,617 $34,232 $37,341 $25,706 $26,984 $26,592 ANRP 1,284 — — 1,295 — — AAA 931 1,152 1,458 931 1,047 1,282 Total $37,832 $35,384 $38,799 $27,932 $28,031 $27,874 (1)Includes co-investments contributed to Athene by AAA, through its investment in AAA Investments, as part of the AAA Transaction. -84-(1)(2)(1)(1)Table of ContentsThe following table presents total Assets Under Management and fee generating Assets Under Management amounts for our credit segment bystrategy: Total AUM Fee Generating AUM As ofDecember 31, As ofDecember 31, 2012 2011 2010 2012 2011 2010 (in millions) U.S. Performing Credit $27,509 $14,719 $11,159 $20,567 $11,377 $7,379 Structured Credit 11,436 2,442 246 7,589 1,789 246 Athene 10,970 5,974 1,473 10,845 5,974 1,221 NPL 6,404 1,935 1,908 4,527 1,636 1,689 Opportunistic Credit 6,177 5,310 6,691 4,722 4,603 5,362 European Credit 1,910 1,434 755 1,268 1,122 544 Other — 53 51 — 52 43 Total $64,406 $31,867 $22,283 $49,518 $26,553 $16,484 (1)Reclassified to conform to current presentation.(2)Excludes AUM that is either sub-advised by Apollo or invested in Apollo funds and investment vehicles across its private equity, credit and real estatefunds.The 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, 2012 2011 2010 2012 2011 2010 (in millions) Fixed Income $4,826 $4,042 $2,827 $2,332 $1,411 $549 Equity 3,974 3,929 3,642 2,152 2,126 2,130 Total $8,800 $7,971 $6,469 $4,484 $3,537 $2,679 -85-(1)(1)(1)(1)(2)Table of ContentsThe following tables summarize changes in total AUM and total AUM for each of our segments for the years ended December 31, 2012, 2011 and2010: For the Year EndedDecember 31, 2012 2011 2010 (in millions) Change in Total AUM: Beginning of Period $75,222 $67,551 $53,609 Income (Loss) 12,038 (1,477) 8,623 Subscriptions/capital raised 9,688 3,797 617 Other inflows/acquisitions 23,629 9,355 3,713 Distributions (10,858) (5,153) (2,518) Redemptions (1,221) (532) (338) Leverage 4,881 1,681 3,845 End of Period $113,379 $75,222 $67,551 Change in Private Equity Total AUM: Beginning of Period $35,384 $38,799 $34,002 Income (Loss) 8,108 (1,612) 6,387 Subscriptions/capital raised 662 417 — Distributions (6,537) (3,464) (1,568) Net segment transfers 317 167 (68) Leverage (102) 1,077 46 End of Period $37,832 $35,384 $38,799 Change in Credit Total AUM: Beginning of Period $31,867 $22,283 $19,112 Income (Loss) 3,274 (110) 2,207 Subscriptions/capital raised 5,504 3,094 512 Other inflows/acquisitions 23,629 9,355 — Distributions (3,197) (1,237) (698) Redemptions (948) (532) (338) Net segment transfers (1,023) (1,353) (291) Leverage 5,300 367 1,779 End of Period $64,406 $31,867 $22,283 Change in Real Estate Total AUM: Beginning of Period $7,971 $6,469 $495 Income 656 245 29 Subscriptions/capital raised 475 286 105 Other inflows/acquisitions — — 3,713 Distributions (1,124) (452) (252) Redemptions (273) — — Net segment transfers 1,412 1,186 359 Leverage (317) 237 2,020 End of Period $8,800 $7,971 $6,469 (1)Reclassified to conform to current period’s presentation.(2)Includes $2.3 billion of commitments that have yet to be deployed to an Apollo fund within our three segments at the end of 2012.(3)Includes $273 million of released unfunded commitments primarily related to two legacy real estate funds that were past their investment periods. -86-(1)(2)(3)(3)Table of ContentsThe following tables summarize changes in total fee-generating AUM and fee-generating AUM for each of our segments for the years endedDecember 31, 2012, 2011 and 2010: For the Year EndedDecember 31, 2012 2011 2010 (in millions) Change in Total Fee-Generating AUM: Beginning of Period $58,121 $47,037 $43,224 Income (Loss) 1,390 (393) 1,244 Subscriptions/capital raised 5,873 2,547 1,234 Other inflows/acquisitions 21,277 9,355 2,130 Distributions (3,728) (734) (1,327) Redemptions (909) (481) (291) Net movements between Fee Generating/Non Fee Generating (564) 761 (197) Leverage 474 29 1,020 End of Period $81,934 $58,121 $47,037 Change in Private Equity Fee-Generating AUM: Beginning of Period $28,031 $27,874 $28,092 Income (Loss) 285 (112) 391 Subscriptions/capital raised 644 410 — Distributions (1,256) (272) (432) Net segment transfers 50 (88) (59) Net movements between Fee Generating/Non Fee Generating 515 285 (218) Leverage (337) (66) 100 End of Period $27,932 $28,031 $27,874 Change in Credit Fee-Generating AUM: Beginning of Period $26,553 $16,484 $14,854 Income 988 301 842 Subscriptions/capital raised 4,953 1,795 1,234 Other inflows/acquisitions 21,277 9,355 — Distributions (2,029) (283) (696) Redemptions (909) (481) (291) Net segment transfers (1,096) (638) (300) Net movements between Fee Generating/Non Fee Generating (1,030) 356 21 Leverage 811 (336) 820 End of Period $49,518 $26,553 $16,484 Change in Real Estate Fee-Generating AUM: Beginning of Period $3,537 $2,679 $278 Income (Loss) 117 (582) 11 Subscriptions/capital raised 276 342 — Other inflows/acquisitions — — 2,130 Distributions (443) (179) (199) Net segment transfers 1,045 726 359 Net movements between Fee Generating/Non Fee Generating (48) 120 — Leverage — 431 100 End of Period $4,484 $3,537 $2,679 Private EquityDuring the year ended December 31, 2012, the total AUM in our private equity segment increased by $2.4 billion, or 6.9%. This increase wasprimarily a result of income of $8.1 billion attributable to improved unrealized gains in our private equity funds, including $4.5 billion from Fund VII and$3.1 billion from Fund VI. In addition, contributing to this increase was an additional $0.7 billion in subscriptions from AION Capital Partners Limited(“AION”) and ANRP. Offsetting this increase was $6.5 billion in distributions, including $3.7 billion from Fund VII and $2.1 billion from Fund VI. -87-Table of ContentsDuring the year ended December 31, 2011, the total AUM in our private equity segment decreased by $3.4 billion, or 8.8%. This decrease wasprimarily a 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. Inaddition, $1.6 billion of unrealized losses were incurred that were primarily attributable to Fund VI. Offsetting these decreases was a $1.1 billion increase inleverage, 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 by $1.6 billion of distributions primarily fromFund V.CreditDuring the year ended December 31, 2012, total AUM in our credit segment increased by $32.5 billion, or 102.1%. This increase was primarilyattributable to $18.5 billion in acquisitions related to Stone Tower, $5.1 billion in other inflows related to Athene and $5.3 billion in increased leverage,including $3.4 billion from AMTG. The increase was also a result of $5.5 billion of additional subscriptions, including $3.0 billion by Apollo EuropeanPrincipal Finance Fund II, L.P. (“EPF II”), $0.6 billion by Apollo Centre Street Partnership, L.P. (“ACSP”) and $0.4 billion by AMTG. This increase waspartially offset by $3.2 billion of distributions, including $1.5 billion collectively from COF I and COF II and $0.3 billion from Apollo European PrincipalFinance Fund I, L.P. (“EPF I”).During the year ended December 31, 2011, total AUM in our credit 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 the acquisition of Gulf Stream Asset Management, LLC (“GulfStream”). Also contributing to this increase was $3.1 billion of capital raised driven by $0.8 billion in Apollo Palmetto Strategic Partnership, L.P.(“Palmetto”), $0.4 billion in Financial Credit Investment I, L.P. (“FCI”), $0.3 billion in AFT, $0.5 billion in Apollo European Strategic Investments, L.P.(“AESI”) 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 $1.4billion in net transfers between segments.During the year ended December 31, 2010, total AUM in our credit segment increased by $3.2 billion, or 16.6%. This increase was attributableto $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 ofincreased leverage primarily in COF II and Athene of $1.1 billion and $0.5 billion, respectively, and $0.5 billion of additional subscriptions. These increaseswere partially offset by $0.7 billion of distributions and $0.3 billion in redemptions.Real EstateDuring the year ended December 31, 2012, total AUM in our real estate segment increased by $0.8 billion, or 10.4%. This increase was primarilya result of $1.4 billion in net transfers from other segments and additional subscriptions of $0.5 billion, including $0.2 billion from a real estate investment.In addition, also contributing to this increase was income of $0.7 billion attributable to improved unrealized gains in our real estate funds, including $0.4billion from the CPI funds. Partially offsetting this increase was $1.1 billion in distributions, including $0.8 billion from the CPI funds.During 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 from AGRE CMBSFund, L.P. and 2011 A-4 Fund, L.P. In addition, there was $0.2 billion of income that was primarily attributable to improved unrealized gains in our realestate funds. These increases were 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 AUMincrease in our real estate segment was primarily driven by -88-Table of Contentsthe acquisition of CPI during the fourth quarter of 2010, which had approximately $3.6 billion of AUM at December 31, 2010. Additionally, $2.0 billion ofincremental leverage was added during the year ended December 31, 2010 to our real estate segment, which was primarily attributable to the AGRE CMBSAccounts and ARI.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. Uncalledprivate equity commitments, by contrast, represent unfunded commitments by investors in our private equity funds to contribute capital to fund futureinvestments or expenses incurred by the funds, fees and applicable expenses as of the reporting date. Private equity dollars invested and uncalled privateequity commitments are indicative of the pace and magnitude of fund capital that is deployed or will be deployed, and which therefore could result in futurerevenues that include transaction fees and incentive income. Private equity dollars invested and uncalled private equity commitments can also give rise tofuture costs that are related to the hiring of additional resources to manage and account for the additional capital that is deployed or will be deployed.Management uses private equity dollars invested and uncalled private equity commitments as key operating metrics since we believe the results measure ourinvestment activities.The following table summarizes the private equity dollars invested during the specified reporting periods: For the Year EndedDecember 31, 2012 2011 2010 (in millions) Private equity dollars invested $3,191 $3,350 $3,863 The following table summarizes the uncalled private equity commitments as of December 31, 2012, 2011 and 2010: As ofDecember 31, 2012 2011 2010 (in millions) Uncalled private equity commitments $7,464 $8,204 $10,345 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 ameaningful amount 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 futureresults that you should expect from such funds, from any future funds we may raise or from your investment in our Class A shares. Aninvestment in our Class 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. Asa result of the deconsolidation of most of our funds, we will not be consolidating those funds in our financial statements for periods after either August 1, 2007or November 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 investment in ourClass A shares. However, poor performance of the funds that we manage would cause a decline in our revenue from such funds, and would therefore have anegative effect on our performance and in all likelihood the value in our Class A shares. There can be no assurance that any Apollo fund will continue toachieve 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 fromany future funds we may raise, in part because: -89-Table of Contents • market conditions during previous periods were significantly more favorable for generating positive performance, particularlyin our private equity business, than the market conditions we have experienced for the last few years and may experience inthe future; • our funds’ returns have benefited from investment opportunities and general market conditions that currently do not exist andmay not repeat themselves, and there can be no assurance that our current or future funds will be able to avail themselves ofprofitable 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 repeatthemselves, including the availability of debt capital on attractive terms and the availability of distressed debt opportunities,and we may not be able to achieve the same returns 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, whereasfuture fund returns will depend increasingly on the performance of our newer funds, which may have little or no realizedinvestment track record; • Fund VI and Fund VII are several times larger than our previous private equity funds, and this additional capital may not bedeployed as profitably 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 occurredwith respect to all of our funds and we believe is less likely to occur in the future; • our track record with respect to our credit 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 increasedamount of capital invested in private equity funds and periods of high liquidity in debt markets, which may result in lowerreturns 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 provide return information for any funds which have not been actively investing capital for at least 24 months priorto the valuation date as we believe this information 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 a9% net IRR since its inception through December 31, 2012, while Fund V has generated a 61% gross IRR and a 44% net IRR since its inception throughDecember 31, 2012. Accordingly, the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by anyparticular fund, or for our private equity funds as a whole. Future returns will also be affected by the applicable risks, including risks of the industries andbusinesses in which a particular fund invests. See “Item 1A. Risk Factors—Risks Related to Our Businesses—The historical returns attributable to ourfunds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in ourClass 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, 2012,unless otherwise noted: VintageYear CommittedCapital TotalInvestedCapital CommittedCapital LessUnfundedCapitalCommitments Realized Unrealized TotalValue As ofDecember 31,2012 As ofDecember 31,2011 As ofDecember 31,2010 GrossIRR NetIRR GrossIRR NetIRR GrossIRR NetIRR ($ in millions) AION 2012 $274 $— $— $— $— $— NM NM N/A N/A N/A N/A ANRP 2012 1,323 265 305 11 239 250 NM NM NM NM N/A N/A Fund VII 2008 14,676 13,585 9,998 10,757 12,367 23,124 35% 26% 31% 22% 46% 32% Fund VI 2006 10,136 11,813 9,065 6,657 10,343 17,000 11 9 6 5 13 10 Fund V 2001 3,742 5,192 3,742 11,618 1,198 12,816 61 44 61 44 62 45 Fund IV 1998 3,600 3,481 3,600 6,767 54 6,821 12 9 12 9 11 9 Fund III 1995 1,500 1,499 1,500 2,654 28 2,682 18 11 18 12 18 12 Fund I, II &MIA 1990/92 2,220 3,773 2,220 7,924 — 7,924 47 37 47 37 47 37 Totals $37,471 $39,608 $30,430 $46,388 $24,229 $70,617 39% 25% 39% 25% 39% 26% VintageYear Net Asset Valueas of December 31, 2012 Net Return For the Year EndedDecember 31, 2012 For the Year EndedDecember 31,2011 For the Year EndedDecember 31, 2010 AAA 2006 $1,662.9 20% (8)% 28% (1)“Committed Capital Less Unfunded Capital Commitments” represent capital commitments from limited partners to invest in a particular fund lesscapital that is available for investment or reinvestment subject to the provisions of the applicable limited partnership agreements.(2)Figures include the market values, estimated fair value of certain unrealized investments and capital committed to investments.(3)AION and ANRP commenced investing capital less than 24 months prior to the period indicated. Given the limited investment period and overall longerinvestment period for private equity funds, the return information was deemed not meaningful.(4)Fund I and Fund II were structured such that investments were made from either fund depending on which fund had available capital. We do notdifferentiate between Fund I and Fund II investments for purposes of performance figures because they are not meaningful on a separate basis and do notdemonstrate the progression of returns over time. The general partners and managers of Funds I, II and MIA, as well as the general partner of Fund IIIwere excluded assets in connection with the 2007 Reorganization of Apollo Global Management, LLC. As a result, Apollo Global Management, LLC didnot receive the economics associated with these entities. The investment performance of these funds is presented to illustrate fund performance associatedwith our Managing Partners and other investment professionals.(5)Total IRR is calculated based on total cash flows for all funds presented.(6)AAA completed its IPO in June 2006 and is the sole limited partner in AAA Investments. AAA was originally designed to give investors in its commonunits exposure as a limited partner to certain of the strategies that we employ and allowed us to manage the asset allocations to those strategies byinvesting alongside our private equity funds and directly in our credit funds and certain other opportunistic investments that we sponsor and manage.On October 31, 2012, AAA and AAA Investments consummated a transaction whereby a wholly-owned subsidiary of AAA Investments contributedsubstantially all of its investments to Athene in connection with the AAA Transaction. After the AAA Transaction, Athene was AAA’s only materialinvestment and as of December 31, 2012, AAA, through its investment in AAA Investments, was the largest shareholder of Athene Holding Ltd. with anapproximate 77% ownership stake (without giving effect to restricted common shares issued under Athene’s management equity plan). Subsequent toDecember 31, 2012, Athene called additional capital from other investors, and as a result AAA’s ownership of Athene Holding Ltd. was reduced toapproximately 72% (without giving effect to restricted common shares issued under Athene’s management equity plan). Additional information related toAAA can be found on its website at www.apolloalternativeassets.com. The information contained in AAA’s website is not part of this report. -91-(1)(2)(3)(3)(3)(3)(3)(3)(3)(3)(4)(5)(5)(5)(5)(5)(5)(6)Table of ContentsThe following table summarizes the investment record for distressed investments made in our private equity fund portfolios excluding ANRP andAION, since the Company’s inception. All amounts are as of December 31, 2012: Total InvestedCapital Total Value Gross IRR (in millions) Distressed for Control $5,568 $15,508 29% Non-Control Distressed 5,961 8,399 71 Total 11,529 23,907 49 Buyout Equity, Portfolio Company Debt and Other Credit 27,814 46,460 21 Total $39,343 $70,367 39% (1)IRR information is presented gross and does not give effect to management fees, incentive compensation, certain other expenses and taxes.(2)Other Credit means investments in debt securities of issuers other than portfolio companies that are not considered to be distressed.The following tables provide additional detail on the composition of our Fund VII, Fund VI and Fund V private equity portfolios based oninvestment strategy. All amounts are as of December 31, 2012.Fund VII Total InvestedCapital Total Value (in millions) Buyout Equity and Portfolio Company Debt $8,558 $15,539 Other Credit & Classic Distressed 5,027 7,585 Total $13,585 $23,124 Fund VI Total InvestedCapital Total Value (in millions) Buyout Equity and Portfolio Company Debt $9,667 $13,543 Other Credit & Classic Distressed 2,146 3,457 Total $11,813 $17,000 Fund V Total InvestedCapital Total Value (in millions) Buyout Equity $4,412 $11,856 Classic Distressed 780 960 Total $5,192 $12,816 (1)Classic Distressed means investments in debt securities of issuers other than portfolio companies that are considered to be distressed. -92-(1)(2)(1)(1)(1)Table of ContentsCreditThe following table summarizes the investment record for certain funds and SIAs with a defined maturity date and internal rate of return sinceinception, which is computed for the purposes of this table based on the actual dates of capital contributions, distributions and ending limited partners’capital as of the specified date. Apollo also manages CLOs within our credit segment with total AUM of approximately $10.6 billion as of December 31, 2012,which fund performance information is not included in the following credit investment tables. All amounts are as of December 31, 2012, unless otherwisenoted: As ofDecember 31,2012 As ofDecember 31,2011 As ofDecember 31,2010 Strategy VintageYear CommittedCapital TotalInvestedCapital Realized Unrealized TotalValue GrossIRR NetIRR GrossIRR NetIRR GrossIRR NetIRR (in millions) ACRF II StructuredCredit 2012 $85.2 $85.2 $2.4 $87.6 $90.0 NM NM NM NM NM NM EPF II Non-PerformingLoans 2012 3,615.2 175.9 19.7 173.0 192.7 NM NM NM NM NM NM FCI StructuredCredit 2012 558.8 347.3 15.0 401.2 416.2 NM NM NM NM NM NM AESI EuropeanCredit 2011 469.0 371.4 184.1 269.4 453.5 NM NM NM NM NM NM AEC EuropeanCredit 2011 292.5 197.1 103.5 125.5 229.0 NM NM NM NM NM NM AIE II EuropeanCredit 2008 272.4 860.1 994.2 280.3 1,274.5 19.4% 15.6% 18.2% 14.2% 27.5% 21.8% COF I U.S.PerformingCredit 2008 1,484.9 1,611.3 1,980.4 2,048.6 4,029.0 30.7 27.6 25.0 22.4 32.5 29.0 COF II U.S.PerformingCredit 2008 1,583.0 2,176.4 1,703.7 1,320.2 3,023.9 14.3 11.7 10.3 8.5 17.4 14.9 EPF I Non-PerformingLoans 2007 1,708.5 1,837.6 1,465.3 1,046.4 2,511.7 18.6 11.6 16.6 8.8 14.8 7.9 ACLF U.S.PerformingCredit 2007 984.0 1,448.5 2,081.2 258.1 2,339.3 13.0 11.2 10.1 9.2 12.1 11.2 Artus U.S.PerformingCredit 2007 106.6 190.1 225.9 — 225.9 7.0 6.8 3.6 3.4 3.0 2.8 Totals $11,160.1 $9,300.9 $8,775.4 $6,010.3 $14,785.7 (1)Figures include the market values, estimated fair value of certain unrealized investments and capital committed to investments.(2)As part of the Stone Tower acquisition, Apollo acquired the manager of Apollo Structured Credit Recovery Master Fund II, Ltd. (“ACRF II”). Apollobecame the manager of this fund upon completing the acquisition on April 2, 2012.(3)EPF II, AESI and Apollo European Credit Master Fund, L.P. (“AEC”) were launched during 2011 and have not established their vintage year. FCI hadits final capital raise in 2012, establishing its vintage year.(4)Returns have not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and therefore such returninformation was deemed not meaningful.(5)Certain funds are denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.32 as of December 31, 2012.The following table summarizes the investment record for certain funds and SIAs with no maturity date. All amounts are as of December 31, 2012, unlessotherwise noted:(1)(2)(4)(4)(4)(4)(4)(4)(3)(5)(4)(4)(4)(4)(4)(4)(3)(4)(4)(4)(4)(4)(4)(3)(5)(4)(4)(4)(4)(4)(4)(3)(4)(4)(4)(4)(4)(4)(5)(5) Net Return Strategy VintageYear Net Asset Valueas ofDecember 31,2012 SinceInception toDecember 31,2012 For the YearEndedDecember 31,2012 For the YearEndedDecember 31,2011 For the YearEndedDecember 31,2010 (in millions) ACSP Opportunistic Credit 2012 $216.4 NM NM NM NM ACSF Opportunistic Credit 2011 164.5 NM NM NM NM AFT U.S. Performing Credit 2011 290.8 NM NM NM NM AMTG Structured Credit 2011 691.4 NM NM NM NM STCS Opportunistic Credit 2010 105.3 NM NM NM NM SOMA Opportunistic Credit 2007 758.2 44.9% 15.1% (10.5)% 16.9% ACF U.S. Performing Credit 2005 1,790.1 NM NM NM NM AINV Opportunistic Credit 2004 1,652.1 47.1 9.9 (5.1) 4.8 Value Funds Opportunistic Credit 2003/2006 713.2 66.2 10.8 (9.6) 12.2 Totals $6,382.0 (1)Returns have not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and therefore such returninformation was deemed not meaningful.(2)ACSP is a strategic investment account with $615.0 million of committed capital.(3)As part of the Stone Tower acquisition, Apollo acquired the manager of Apollo Credit Strategies Master Fund Ltd. (“ACSF”), Stone Tower CreditSolutions Master Fund Ltd. (“STCS”), and Apollo Credit Master Fund Ltd (“ACF”). As of December 31, 2012, the net returns from inception for ACFand STCS were (6.9)% and 28.8%, respectively. These returns were primarily achieved during a period in which Apollo did not make the initialinvestment decisions. Apollo became the manager of these funds upon completing the acquisition on April 2, 2012.(4)AFT completed its IPO during the first quarter of 2011. Refer to www.agmfunds.com for the most recent financial information on AFT. The informationcontained in AFT’s website is not part of this report.(5)Refer to www.apolloresidentialmortgage.com for the most recent financial information on AMTG. The information contained in AMTG’s website is notpart of this report.(6)All amounts are as of September 30, 2012.(7)NAV and returns are for the primary mandate, which follows similar strategies as the Value Funds and excludes Apollo Special Opportunities ManagedAccount, L.P.’s (“SOMA”) investments in other Apollo funds.(8)Net return for AINV represents NAV return including reinvested dividends. Refer to www.apolloic.com for the most recent public financial informationon AINV. The information contained in AINV’s website is not part of this report.(9)Value Funds consist of Apollo Strategic Value Master Fund, L.P., together with its feeder funds and Apollo Value Investment Master Fund, L.P., togetherwith its feeder funds. -93-(1)(2)(1)(1)(1)(1)(3)(1)(1)(1)(1)(1)(4)(1)(1)(1)(1)(1)(5)(6)(1)(1)(1)(1)(3)(3)(3)(3)(3)(7) (3)(3)(3)(3)(3)(8)(9)Table of ContentsReal EstateThe following table summarizes the investment record for certain funds and SIAs with a defined maturity date and internal rate of return sinceinception, which for the purposes of this table is computed based on the actual dates of capital contributions, distributions and ending limited partners’capital as of the specified date. All amounts are as of December 31, 2012, unless otherwise noted: As ofDecember 31,2012 As ofDecember 31,2011 As ofDecember 31,2010 VintageYear CommittedCapital Current NetAsset Value TotalInvestedCapital Realized Unrealized Total Value GrossIRR NetIRR GrossIRR NetIRR GrossIRR NetIRR (in millions) AGRE U.S. Real EstateFund 2012 $785.2 $180.3 $202.7 $— $202.1 $202.1 NM NM NM NM NM NM AGRE Debt Fund I, LP 2011 155.5 155.8 155.0 18.5 155.0 173.5 NM NM NM NM NM NM 2011 A4 Fund, L.P. 2011 234.7 254.9 930.8 — 974.6 974.6 NM NM NM NM NM NM AGRE CMBS Fund,L.P. 2009 418.8 158.9 1,572.9 — 632.3 632.3 14.1% 11.8% NM NM NM NM CPI Capital PartnersNorth America 2006 600.0 110.3 452.6 250.2 99.3 349.5 NM NM NM NM NM NM CPI Capital PartnersAsia Pacific 2006 1,291.6 479.8 1,126.7 1,082.9 463.5 1,546.4 NM NM NM NM NM NM CPI Capital PartnersEurope 2006 1,533.0 557.4 994.8 151.8 543.4 695.2 NM NM NM NM NM NM CPI Other Various 2,998.3 1,047.5 N/A N/A N/A N/A NM NM NM NM NM NM Totals $8,017.1 $2,944.9 $5,435.5 $1,503.4 $3,070.2 $4,573.6 (1)Figures include estimated fair value of unrealized investments.(2)Returns have not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and therefore such returninformation was deemed not meaningful.(3)AGRE U.S. Real Estate Fund, a closed-end private investment fund that intends to make real estate-related investments principally located in the UnitedStates, held closings in January 2011, June 2011 and April 2012 for a total of $263.2 million in base capital commitments and $450 million inadditional capital commitments. Additionally, there was $72.0 million of co-invest commitments raised for an investment in the first quarter of 2012,which is included in the figures in the table above.(4)As part of the CPI acquisition, Apollo acquired general partner interests in fully invested funds. The net IRRs from the inception of the respective fundto December 31, 2012 were (9.6)%, 6.9% and (11.1)% for the CPI Capital Partners North America, Asia Pacific and Europe funds, respectively. Thesenet IRRs were primarily achieved during a period in which Apollo did not make the initial investment decisions and Apollo only became the generalpartner or manager of these funds upon completing the acquisition on November 12, 2010.(5)CPI Capital Partners Europe is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.32 as of December 31, 2012.(6)CPI 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 and administrative agreement. CPI Other fund performance is a result of invested capital prior toApollo’s management of these funds. Return and certain other performance data is therefore not considered meaningful as we perform primarily anadministrative role.The following table summarizes the investment record for Apollo Commercial Real Estate Finance, Inc. (“ARI”): Vintage Year Raised Capital Gross Assets Current Net Asset Value (in millions) ARI 2009 $440.4 $684.2 $427.4 (1)Refer to www.apolloreit.com for the most recent financial information on ARI. Results are presented as of September 30, 2012.Athene and SIAsAs of December 31, 2012, Athene Asset Management had $15.8 billion of total AUM, of which approximately $5 billion was either sub-advisedby Apollo or invested in Apollo funds and investment vehicles.In addition to certain funds and SIAs included in the investment record tables and capital deployed from certain SIAs across our private equity,credit and real estate funds, we also managed approximately an additional $7.5 billion of total AUM in SIAs as of December 31, 2012. The above investmentrecord tables exclude certain funds and SIAs with an aggregate -94-(1)(3)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(4)(4)(4)(4)(4)(4)(4)(4)(4)(4)(4)(4)(4)(4)(4)(5)(4)(4)(4)(4)(4)(4)(6)(6)(6)(6)(6)(6)(6)(6)(6)(6)(1)Table of ContentsAUM of approximately $4 billion as of December 31, 2012, which were excluded because management deemed them to be immaterial.Performance information for our funds is included throughout this discussion and analysis to facilitate an understanding of our results ofoperations for the periods presented. An investment in our Class A shares is not an investment in any of our funds. The performance information reflected inthis discussion and analysis is not indicative of the possible performance of our Class A shares and is also not necessarily indicative of the future results ofany particular fund. 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 listed by segment: As ofDecember 31,2012 As ofDecember 31,2011 As ofDecember 31,2010 (in millions) Private Equity: Cost $16,927 $15,956 $14,322 Fair Value 25,867 20,700 22,485 Credit: Cost 15,097 10,917 10,226 Fair Value 16,287 11,696 11,476 Real Estate: Cost 3,848 4,791 4,028 Fair Value 3,680 4,344 3,368 (1)Cost and fair value amounts are presented for investments of the funds that are listed in the investment record tables.(2)AMTG and ARI cost and fair value amounts are as of September 30, 2012.(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.Overview of Results of OperationsRevenuesAdvisory and Transaction Fees from Affiliates. As a result of providing advisory services with respect to actual and potential private equityand credit investments, we are entitled to receive fees for transactions related to the acquisition and, in certain instances, disposition of portfolio companies aswell as fees for ongoing monitoring of portfolio company operations and directors’ fees. We also receive an advisory fee for advisory services provided tocertain credit funds. In addition, monitoring fees are generated on certain structured portfolio company investments. Under the terms of the limited partnershipagreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory andtransaction fees, net of applicable broken deal costs (“Management Fee Offset”). Such amounts are presented as a reduction to Advisory and Transaction Feesfrom Affiliates in the consolidated statements of operations.The Management Fee Offsets are calculated for each fund as follows: • 65%-80% for private equity funds gross advisory, transaction and other special fees; -95-(1)(2)(2)(2)(3)(2)(3)Table of Contents • 65%-80% for certain credit funds gross advisory, transaction and other special fees; and • 100% for certain other credit 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 creditfunds) transactions that are not consummated, or “broken deal costs.” In accordance with the related fund agreements, in the event the deal is broken, all ofthe costs are generally reimbursed by the funds and considered in the calculation of the Management Fee Offset (except for Fund VII and certain of our creditfunds which initially bear all broken deal costs and these costs are factored into the Management Fee Offsets). These offsets are included in Advisory andTransaction Fees from Affiliates in the Company’s consolidated statements of operations. If a deal is successfully completed, Apollo is reimbursed by thefund or a fund’s portfolio company for all costs incurred.Management Fees from Affiliates. The significant growth of the assets we manage has had a positive effect on our revenues. Management feesare typically calculated based upon any of “net asset value,” “gross assets,” “adjusted par asset value,” “adjusted costs of all unrealized portfolioinvestments,” “capital commitments,” “invested capital,” “adjusted assets,” “capital contributions,” or “stockholders’ equity,” each as defined in theapplicable management agreement of the unconsolidated funds.Carried Interest Income from Affiliates. The general partners of our funds, in general, are entitled to an incentive return that can amount to asmuch as 20% of the total returns on fund capital, depending upon performance of the underlying funds and subject to preferred returns and high watermarks, as applicable. The carried interest income from affiliates is recognized in accordance with U.S. GAAP guidance applicable to accounting forarrangement fees based on a formula. In applying the U.S. GAAP guidance, the carried interest from affiliates for any period is based upon an assumedliquidation of the funds’ assets at the reporting date, and distribution of the net proceeds in accordance with the funds’ allocation provisions.At December 31, 2012, approximately 74% 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 26% was determined primarily by comparable company and industry multiples or discountedcash flow models. For our private equity, credit and real estate segments, the percentage determined using market-based valuation methods as of December 31,2012 was 64%, 89% and 47%, respectively. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Our private equity funds’ performance, andour performance, may be adversely affected by the financial performance of our portfolio companies and the industries in which our funds invest” fordiscussion regarding certain industry-specific risks that could affect the fair value of our private equity funds’ portfolio company investments.Carried interest income fee rates can be as much as 20% for our private equity funds. In our private equity funds, the Company does not earncarried interest income until the investors in the fund have achieved cumulative investment returns on invested capital (including management fees andexpenses) in excess of an 8% hurdle rate. Additionally, certain of our credit funds have various carried interest rates and hurdle rates. Certain credit fundsallocate carried interest to the general partner in a similar manner as the private equity funds. In our private equity, certain credit and certain real 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 portion of the return untilthe Company’s carried interest income equates to its incentive fee rate for that fund; thereafter, the Company participates in returns from the fund at the carriedinterest income rate. Carried interest income is subject to reversal to the extent that the carried interest income distributed exceeds the amount due to the generalpartner based on a fund’s cumulative investment returns. The accrual for potential repayment of previously received carried interest income represents allamounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the currentfair value of the underlying funds’ investments as of the -96-Table of Contentsreporting date. This actual general partner obligation, however, would not become payable or realized until the end of a fund’s life.The table below presents an analysis of our (i) carried interest receivable as of December 31, 2012 and 2011 and (ii) realized and unrealizedcarried interest (loss) income for our combined segments for the years ended December 31, 2012, 2011 and 2010: As ofDecember 31, 2012 As ofDecember 31, 2011 For the Year EndedDecember 31, 2012 For the Year EndedDecember 31, 2011 For the Year EndedDecember 31, 2010 CarriedInterestReceivable CarriedInterestReceivable UnrealizedCarriedInterestIncome(Loss) RealizedCarriedInterestIncome TotalCarriedInterestIncome(Loss) UnrealizedCarriedInterest(Loss)Income RealizedCarriedInterestIncome TotalCarriedInterestIncome(Loss) UnrealizedCarriedInterestIncome RealizedCarriedInterestIncome TotalCarriedInterestIncome (in millions) Private Equity Funds: Fund VII $904.3 $508.0 $435.5 $472.1 $907.6 $(135.9) $260.2 $124.3 $427.1 $38.7 $465.8 Fund VI 270.3 — 345.6 294.0 639.6 (723.6) 80.7 (642.9) 647.6 13.1 660.7 Fund V 134.3 125.0 9.3 33.4 42.7 (51.6) 24.9 (26.7) 29.4 17.8 47.2 Fund IV 10.9 17.9 (7.0) 2.9 (4.1) (118.1) 204.7 86.6 136.0 — 136.0 Other (AAA,Stanhope) 93.6 22.1 71.5 10.2 81.7 9.5 — 9.5 11.4 — 11.4 Total Private EquityFunds $1,413.4 $673.0 $854.9 $812.6 $1,667.5 $(1,019.7) $570.5 $(449.2) $1,251.5 $69.6 $1,321.1 Credit Funds: U.S. PerformingCredit $273.9 $114.5 $206.3 $154.3 $360.6 $(79.6) $62.0 $(17.6) $85.8 $56.7 $142.5 Opportunistic Credit 36.7 21.6 7.7 41.5 49.2 (21.8) 43.4 21.6 6.4 104.6 111.0 Structured Credit 23.0 — 18.5 13.4 31.9 — — — — — — European Credit 18.4 8.0 18.0 8.5 26.5 (18.7) 13.2 (5.5) 11.7 12.7 24.4 Non-Performing Loans 102.1 51.5 50.6 — 50.6 53.2 — 53.2 — — — Total Credit Funds $454.1 $195.6 $301.1 $217.7 $518.8 $(66.9) $118.6 $51.7 $103.9 $174.0 $277.9 Real Estate Funds: CPI Other $10.8 $— $10.4 $4.7 $15.1 $— $— $— $— $— $— Total Real EstateFunds $10.8 $— $10.4 $4.7 $15.1 $— $— $— $— $— $— Total $1,878.3 $868.6 $1,166.4 $1,035.0 $2,201.4 $(1,086.6) $689.1 $(397.5) $1,355.4 $243.6 $1,599.0 (1)See the following table summarizing the fair value gains on investments and income needed to reverse the general partner obligation to return previouslydistributed carried interest income as of December 31, 2012. Included in unrealized carried interest income (loss) from affiliates for the year endedDecember 31, 2011 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributedcarried interest income of $75.3 million and $18.1 million for Fund VI and SOMA, respectively.(2)$602.6 million and $136.0 million for Fund VI and IV, respectively, related to the catch-up formula whereby the Company earns a disproportionatereturn (typically 80%) for a portion of the return until the Company’s carried interest equates to its 20% incentive fee rate.(3)Reclassified to conform to current presentation.(4)There was a corresponding profit sharing payable of $857.7 million and $352.9 million as of December 31, 2012 and 2011, respectively, that resultsin a net carried interest receivable amount of $1,020.6 million and $515.7 million as of December 31, 2012 and 2011, respectively. Included withinprofit sharing payable are contingent consideration obligations of $141.0 million as of December 31, 2012.The general partners of the private equity and real estate funds and funds in the credit strategies listed in the table above were accruing carriedinterest income as of December 31, 2012. As of December 31, 2012, Fund VII, Fund VI, Fund V and Fund IV were each above their hurdle rate of 8% andgenerating carried interest income. The investment manager of AINV accrues carried interest in the management company business as it is earned.Additionally, certain of our credit funds, including ACSP, AEC, AIE II, COF I, COF II, FCI, Apollo Credit Liquidity Advisors, L.P. (“ACLF”), AESI, EPFI, and ACRF II were each above their hurdle rates or preferred return of 7.0%, 6.0%, 7.5%, 8.0%, 7.5%, 7.0%, 10.0%, 8.0%, 8.0%, and 8.0%, respectively,and generating carried interest income.The general partners of certain of our credit funds accrue carried interest when the fair value of investments exceeds the cost basis of theindividual investors’ investments in the fund, including any allocable share of expenses incurred in connection with such investments. These high watermarks are applied on an individual investor basis. Certain of our credit funds have investors with various high water marks and are subject to marketconditions and investment performance. As of December 31, 2012, approximately 38% of the limited partners’ capital in the Value Funds was generatingcarried interest income.Carried interest income from our private equity funds and certain credit 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, 2012, there were no such general partner obligations related to our privateequity funds or our real estate funds. Carried interest receivables are reported on a separate line item within the consolidated statements of financial condition. -97-(1)(2)(2)(3)(1)(1)(4)(4)Table of ContentsThe following table summarizes our carried interest income since inception through December 31, 2012:Carried Interest Income Since Inception Undistributedby Fund andRecognized Distributed byFund andRecognized TotalUndistributedand Distributedby Fund andRecognized GeneralPartnerObligation as ofDecember 31,2012 MaximumCarriedInterest IncomeSubject toPotentialReversal (in millions) Private Equity Funds: Fund VII $904.3 $796.2 $1,700.5 $— $1,441.0 Fund VI 270.3 418.6 688.9 — 567.1 Fund V 134.3 1,311.0 1,445.3 — 213.7 Fund IV 10.9 595.4 606.3 — 19.7 Other (AAA, Stanhope) 93.6 16.4 110.0 — 93.6 Total Private Equity Funds 1,413.4 3,137.6 4,551.0 — 2,335.1 Credit Funds: U.S. Performing Credit 401.7 275.7 677.4 — 656.5 Opportunistic Credit 27.6 150.3 177.9 19.6 27.2 Structured Credit 21.2 33.3 54.5 — 30.9 European Credit 18.4 29.0 47.4 — 47.2 Non-Performing Loans 102.1 — 102.1 — 102.1 Total Credit Funds 571.0 488.3 1,059.3 19.6 863.9 Real Estate Funds: CPI Other 10.8 4.3 15.1 — 10.4 Total Real Estate Funds 10.8 4.3 15.1 — 10.4 Total $1,995.2 $3,630.2 $5,625.4 $19.6 $3,209.4 (1)Amounts in “Distributed by Fund and Recognized” for the CPI, Gulf Stream and Stone Tower funds and SIAs are presented for activity subsequent tothe respective acquisition dates as described in note 3 to our consolidated financial statements.(2)Amounts were computed based on the fair value of fund investments on December 31, 2012. 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, 2012. 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.(3)Represents the amount of carried interest income that would be reversed if remaining fund investments became worthless on December 31, 2012.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.(4)Reclassified to conform to current presentation.(5)Amounts exclude (i) AINV, as carried interest income from this fund is not subject to contingent repayment by the general partner, and (ii) ApolloInvestment Europe I, L.P. as this fund is winding down.The following table summarizes the fair value gains on investments and the income to reverse the general partner obligation to return previouslydistributed carried interest income based on the current fair value of the underlying funds’ investments as of December 31, 2012: Fund General PartnerObligation Net Asset Valueas ofDecember 31, 2012 Fair Value Gain onInvestments and Incometo Reverse GeneralPartner Obligation (in millions) SOMA $19.3 $915.5 $20.4 Asia Private Credit (“APC”) 0.3 28.6 3.4 $19.6 $944.1 $23.8 (1)Based upon a hypothetical liquidation as of December 31, 2012, Apollo has recorded a general partner obligation to return previously distributed carriedinterest income, which represents amounts due to this fund. The actual determination and any required payment of a general partner obligation wouldnot take place until the final disposition of the fund’s investments based on contractual termination of the fund. -98-(1)(2)(2)(3)(4)(5)(1)(2)Table of Contents(2)The fair value gain on investments and income to reverse the general partner obligation is based on the life-to-date activity of the entire fund and assumesa hypothetical liquidation of the fund as of December 31, 2012.ExpensesCompensation and Benefits. Our most significant expense is compensation and benefits expense. This consists of fixed salary, discretionaryand non-discretionary bonuses, incentive fee compensation and profit sharing expense associated with the carried interest income earned from private equity,credit and real estate 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, asour net revenues increase, our compensation costs also rise or can be lower when net revenues decrease. In addition, our compensation costs reflect theincreased investment in people as we expand geographically and create new funds. All payments for services rendered by our Managing Partners prior to the2007 Reorganization 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 2007 Reorganization. Subsequent to the 2007 Reorganization, our Managing Partners are consideredemployees of Apollo. As such, payments for services made to these individuals, including the expense associated with the AOG Units described below, havebeen recorded as compensation expense. The AOG Units were granted to the Managing Partners and Contributing Partners at the time of the 2007Reorganization, as discussed in note 1 to our consolidated 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, certain credit and real estate funds in order to better align their interests with our own and with those of the investors in these funds. Profitsharing expense is part of our compensation and benefits expense and is generally based upon a fixed percentage of private equity, credit, and real estate carriedinterest income on a pre-tax and a pre-consolidated basis. Profit sharing expense can reverse during periods when there is a decline in carried interest incomethat was previously recognized. Profit sharing amounts are normally distributed to employees after the corresponding investment gains have been realized andgenerally before preferred returns are achieved for the investors. Therefore, changes in our unrealized gains (losses) for investments have the same effect on ourprofit sharing expense. Profit sharing expense increases when unrealized gains increase. Realizations only impact profit sharing expense to the extent that theeffects on investments have not been recognized previously. If losses on other investments within a fund are subsequently realized, the profit sharing amountspreviously distributed are normally subject to a general partner obligation to return carried interest income previously distributed back to the funds. Thisgeneral partner obligation due to the funds would be realized only when the fund is liquidated, which generally occurs at the end of the fund’s term. However,indemnification clauses also exist for pre-reorganization realized gains, which, although our Managing Partners and Contributing Partners would remainpersonally liable, may indemnify our Managing Partners and Contributing Partners for 17.5% to 100% of the previously distributed profits regardless of thefund’s future performance. Refer to note 15 to our consolidated financial 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. Additionally, our ManagingPartners can receive other forms of compensation. In connection with the 2007 Reorganization, the Managing Partners and Contributing Partners received AOGUnits with a vesting period of five to six years and certain employees were granted RSUs that typically have a vesting period of six years. Managing Partners,Contributing Partners and certain employees have also been granted AAA restricted depository units (“RDUs”), or incentive units that provide the right toreceive AAA RDUs, which both represent common units of AAA and generally vest over three years for employees and are fully-vested for Managing Partnersand Contributing Partners on the grant date. In addition, ARI RSUs, ARI restricted stock and AMTG RSUs have been granted to the Company and certainemployees in the real estate and credit segments and generally vest over three years. In addition, the Company granted share options to certain employees thatgenerally vest and become exercisable in quarterly installments or annual installments depending on the contract terms over the next two to six years. -99-Table of ContentsRefer to note 14 to our consolidated financial statements for further discussion of AOG Units and other equity-based compensation.Other Expenses. The balance of our other expenses includes interest, litigation settlement, professional fees, placement fees, occupancy,depreciation and amortization and other general operating expenses. Interest expense consists primarily of interest related to the AMH Credit Agreement whichhas a variable interest amount based on LIBOR and ABR interest rates as discussed in note 12 to our consolidated financial statements. Placement fees areincurred in connection with our capital raising activities. Occupancy expense represents charges related to office leases and associated expenses, such asutilities and maintenance fees. Depreciation and amortization of fixed assets is normally calculated using the straight-line method over their estimated usefullives, ranging from two to sixteen years, taking into consideration any residual value. Leasehold improvements are amortized over the shorter of the useful lifeof the asset or the expected term of the lease. Intangible assets are amortized based on the future cash flows over the expected useful lives of the assets. Othergeneral operating expenses 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 these models and the actual values realized with respect to investments could be materially different fromvalues obtained based on the use of those models. The valuation methodologies applied impact the reported value of investment company holdings and theirunderlying portfolios in our consolidated financial statements.Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities. Changes in the fair value of the consolidatedVIEs’ assets and liabilities and related interest, dividend and other income and expenses subsequent to consolidation are presented within net gains (losses)from investment activities of consolidated variable interest entities and are attributable to Non-Controlling Interests in the 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 assetsand liabilities of foreign subsidiaries and other miscellaneous income and expenses.Income Taxes. The Apollo Operating Group and its subsidiaries generally operate as partnerships for U.S. Federal income tax purposes. As aresult, except as described below, the Apollo Operating Group has not been subject to U.S. income taxes. However, these entities in some cases are subject toNYC UBT and non-U.S. entities, in some cases, are subject to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of theCompany, 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 withU.S. GAAP.As significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties, we recognize thetax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The taxbenefit is measured as the largest amount of benefit that has a greater than 50% 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 to determine whether or not we have uncertain tax positions that require financial statement recognition. -100-Table of ContentsDeferred 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.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 thanApollo. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in Non-Controlling Interest in theconsolidated financial statements. The Non-Controlling Interests relating to Apollo Global Management, LLC primarily include the 64.9%, 65.9% and 71.0%ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdingsas of December 31, 2012, 2011 and 2010, respectively, and other ownership interests in consolidated entities, which primarily consist of the approximate97%, 98% and 97% ownership interest held by limited partners in AAA for the years ended December 31, 2012, 2011 and 2010, respectively. Non-Controlling Interests 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-Controlling Interest as equity and provides guidance on the accounting for transactions between an entity and Non-Controlling Interests. According to theguidance, (1) Non-Controlling Interests are presented as a separate component of shareholders’ equity on the Company’s consolidated statements of financialcondition, (2) net income (loss) includes the net income (loss) attributed to the Non-Controlling Interest holders on the Company’s consolidated statements ofoperations, (3) the primary components of Non-Controlling Interest are separately presented in the Company’s consolidated statements of changes inshareholders’ equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities and (4) profitsand losses are allocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis.On January 1, 2010, the Company adopted amended consolidation guidance issued by the Financial Accounting Standards Board (“FASB”) onissues related to VIEs. The amended guidance significantly affects the overall consolidation analysis, changing the approach taken by companies inidentifying which entities are VIEs and in determining which party is the primary beneficiary. The amended guidance requires continuous assessment of thereporting entity’s involvement with such VIEs. The amended guidance also enhances the disclosure requirements for a reporting entity’s involvement withVIEs, including presentation on the consolidated statements of financial condition of assets and liabilities of consolidated VIEs that meet the separatepresentation criteria and disclosure of assets and liabilities recognized in the consolidated statements of financial condition and the maximum exposure to lossfor those VIEs in which a reporting entity is determined to not be the primary beneficiary but in which it has a variable interest. The guidance provides alimited scope deferral for a reporting entity’s interest in an entity that meets all of the following conditions: (a) the entity has all the attributes of an investmentcompany as defined under the American Institute of Certified Public Accountants (“AICPA”) Audit and Accounting Guide, Investment Companies, or doesnot have all the attributes of an investment company but is an entity for which it is acceptable based on industry practice to apply measurement principles thatare consistent with the AICPA Audit and Accounting Guide, Investment Companies, (b) the reporting entity does not have explicit or implicit obligations tofund any losses of the entity that could potentially be significant to the entity and (c) the entity is not a securitization entity, asset-backed financing entity or anentity that was formerly considered a qualifying special-purpose entity. The reporting entity is required to perform a consolidation analysis for entities thatqualify for the deferral in accordance with previously issued guidance on variable interest entities. Apollo’s involvement with the funds it manages is such thatall three of the above conditions are met with the exception of certain vehicles which fail condition (c) above. As -101-Table of Contentspreviously discussed, the incremental impact of adopting the amended consolidation guidance has resulted in the consolidation of certain VIEs managed by theCompany. Additional disclosures related to Apollo’s involvement with VIEs are presented in note 5 to our consolidated financial statements.Results of OperationsBelow is a discussion of our consolidated results of operations for the years ended December 31, 2012, 2011 and 2010, respectively. Foradditional analysis 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 2012 2011 2011 2010 (in thousands) (in thousands) Revenues: Advisory and transaction feesfrom affiliates $149,544 $81,953 $67,591 82.5% $81,953 $79,782 $2,171 2.7% Management fees from affiliates 580,603 487,559 93,044 19.1 487,559 431,096 56,463 13.1 Carried interest income (loss)from affiliates 2,129,818 (397,880) 2,527,698 NM (397,880) 1,599,020 (1,996,900) NM Total Revenues 2,859,965 171,632 2,688,333 NM 171,632 2,109,898 (1,938,266) (91.9) Expenses: Compensation and benefits: Equity-basedcompensation 598,654 1,149,753 (551,099) (47.9) 1,149,753 1,118,412 31,341 2.8 Salary, bonus andbenefits 274,574 251,095 23,479 9.4 251,095 249,571 1,524 0.6 Profit sharing expense 871,394 (63,453) 934,847 NM (63,453) 555,225 (618,678) NM Incentive fee compensation 739 3,383 (2,644) (78.2) 3,383 20,142 (16,759) (83.2) Total Compensationand Benefits 1,745,361 1,340,778 404,583 30.2 1,340,778 1,943,350 (602,572) (31.0) Interest expense 37,116 40,850 (3,734) (9.1) 40,850 35,436 5,414 15.3 Professional fees 64,682 59,277 5,405 9.1 59,277 61,919 (2,642) (4.3) General, administrative andother 87,961 75,558 12,403 16.4 75,558 65,107 10,451 16.1 Placement fees 22,271 3,911 18,360 469.4 3,911 4,258 (347) (8.1) Occupancy 37,218 35,816 1,402 3.9 35,816 23,067 12,749 55.3 Depreciation and amortization 53,236 26,260 26,976 102.7 26,260 24,249 2,011 8.3 Total Expenses 2,047,845 1,582,450 465,395 29.4 1,582,450 2,157,386 (574,936) (26.6) Other Income: Net gains (losses) frominvestment activities 288,244 (129,827) 418,071 NM (129,827) 367,871 (497,698) NM Net (losses) gains frominvestment activities ofconsolidated variable interestentities (71,704) 24,201 (95,905) NM 24,201 48,206 (24,005) (49.8) Income from equity methodinvestments 110,173 13,923 96,250 NM 13,923 69,812 (55,889) (80.1) Interest income 9,693 4,731 4,962 104.9 4,731 1,528 3,203 209.6 Other income, net 1,964,679 205,520 1,759,159 NM 205,520 195,032 10,488 5.4 Total Other Income 2,301,085 118,548 2,182,537 NM 118,548 682,449 (563,901) (82.6) Income (loss) before income taxbenefit (provision) 3,113,205 (1,292,270) 4,405,475 NM (1,292,270) 634,961 (1,927,231) NM Income tax provision (65,410) (11,929) (53,481) (448.3) (11,929) (91,737) 79,808 (87.0) Net Income (Loss) 3,047,795 (1,304,199) 4,351,994 NM (1,304,199) 543,224 (1,847,423) NM Net income (loss) attributable toNon-Controlling Interests (2,736,838) 835,373 (3,572,211) NM 835,373 (448,607) 1,283,980 NM Net Income (Loss)Attributable toApollo GlobalManagement,LLC $310,957 $(468,826) $779,783 NM $(468,826) $94,617 $(563,443) NM “NM” denotes not meaningful. Changes from negative to positive amounts and positive to negative amounts are not considered meaningful. Increases ordecreases from zero and changes greater than 500% are also not considered meaningful.RevenuesOur revenues and other income include fixed components that result from measures of capital and asset valuations and variable components thatresult from realized and unrealized investment performance, as well as the value of successfully completed transactions.Year Ended December 31, 2012 Compared to Year Ended December 31, 2011Advisory and transaction fees from affiliates, including directors’ fees and reimbursed broken deal costs, increased by $67.6 million forthe year ended December 31, 2012 as compared to the year ended December 31, 2011. This increase was primarily attributable to an increase in advisory andtransaction fees in the private equity segment of $71.6 million during the period. During the year ended December 31, 2012, gross and net advisory fees,including directors’ fees, were $152.1 million and $66.3 million, respectively, and gross and net transaction fees were $176.7 million and $88.5 million,respectively. During the year ended December 31, 2011, gross and net advisory fees, including directors’ fees, were $143.1 million and $56.1 million,respectively, and gross and net transaction fees were $62.9 million and $30.7 million, respectively. The net transaction and advisory fees were further offsetby $5.3 million and $4.8 million in broken deal costs during the years ended December 31, 2012 and 2011, respectively, primarily -102-Table of Contentsrelating to Fund VII. Advisory and transaction fees are reported net of Management Fee Offsets as calculated under the terms of the respective limitedpartnership agreements. See “—Overview of Results of Operations—Revenues—Advisory and Transaction Fees from Affiliates” for a summary thataddresses how the Management Fee Offsets are calculated for each fund.Management fees from affiliates increased by $93.0 million for the year ended December 31, 2012 as compared to the year ended December 31,2011. This change was primarily attributable to an increase in management fees earned by our credit, private equity and real estate segments of $113.0million, $13.8 million and $6.0 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 an increase of $39.8 million of fees earned from VIEs eliminated inconsolidation in our credit segment during the year ended December 31, 2012 as compared to the year ended December 31, 2011.Carried interest income from affiliates increased by $2,527.7 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to increased carried interest income driven by increases in the fair value of portfolio investmentsheld by certain funds, primarily Fund VI, Fund VII, COF I, ACLF, CLOs, Fund V, COF II, AAA and Apollo Credit Fund, which had increased carriedinterest income of $1,282.5 million, $783.3 million, $134.9 million, $77.4 million, $72.2 million, $69.4 million, $69.1 million, $47.6 million and $25.7million, respectively, during the year ended December 31, 2012 as compared to the same period in 2011. The remaining change was attributable to an overallincrease in the fair value of portfolio investments of the remainder of funds, which generated increased carried interest income of $36.8 million during theperiod. Included in the above for the year ended December 31, 2012 was a reversal of $75.3 million of the general partner obligation to return previouslydistributed carried interest income with respect to Fund VI and reversal of previously recognized carried interest income due to the general partner obligation toreturn previously distributed carried interest income of $1.2 million and $0.3 million for SOMA and APC, respectively. Part of the increase in carried interestincome from affiliates was attributable to an increase in carried interest income of $71.2 million earned from consolidated VIEs which are included in thecredit segment results but were eliminated in consolidation during year ended December 31, 2012 as compared to the same period in 2011.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 yearended December 31, 2011 as compared to the year ended December 31, 2010. This increase was primarily attributable to an increase of advisory fees in theprivate equity segment during the period of $6.5 million, partially offset by a decline in transaction fees in the credit segment of $4.6 million. During the yearended 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, credit 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. -103-Table of ContentsCarried 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 credit funds, which resulted in reversals of previously recognized carried interest income, primarily by Fund VI, FundVII, 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, $254.1million, $81.0 million, $59.5 million, $57.9 million, $49.9 million, $30.4 million and $27.8 million, respectively. Included in the above for the year endedDecember 31, 2011 was a reversal of previously recognized carried interest income due to general partner obligations to return carried interest income that waspreviously distributed on Fund VI and SOMA of $75.3 million and $18.1 million, respectively. The $445.5 million increase in realized carried interestincome was attributable to increased dispositions along with higher interest and dividend income distributions from portfolio investments held by certain ofour private equity and credit funds, primarily by Fund VII, Fund IV and Fund VI of $221.5 million, $204.7 million and $67.6 million, respectively, duringthe year ended December 31, 2011 as compared to the same period during 2010.ExpensesYear Ended December 31, 2012 Compared to Year Ended December 31, 2011Compensation and benefits increased by $404.6 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to an increase in profit sharing expense of $934.8 million driven by an increase in unrealized and realized carried interestincome earned from our private equity and credit funds during the period. This increase was partially offset by a decrease in equity-based compensation of$551.1 million, specifically the amortization of AOG Units decreased by $551.8 million due to the expiration of the vesting period for certain ManagingPartners, along with an increase in equity-based compensation relating to RSUs and share options of $0.1 million due to additional grants during the yearended December 31, 2012. Included in profit sharing expense is $25.8 million related to change in fair value of our contingent consideration obligations.Included in profit sharing expense is $62.1 million and $35.2 million of expense related to the Incentive Pool (as defined below) for the years endedDecember 31, 2012 and 2011, respectively.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 decreased by $3.7 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. This changewas primarily attributable to decreased interest expense of -104-Table of Contents$4.9 million mainly due to a lower margin rate on the AMH Credit Agreement during the year ended December 31, 2012 as compared to the same period in2011.Professional fees increased by $5.4 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. This changewas attributable to higher external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31, 2012, as compared to thesame period during 2011.General, administrative and other expenses increased by $12.4 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. 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, 2012 as compared to the sameperiod during 2011.Placement fees increased by $18.4 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Placementfees are incurred in connection with the raising of capital for new and existing funds. The fees are normally payable to placement agents, who are third partiesthat assist 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 increased fundraising efforts during the period in connection with our credit funds, primarilyEPF II, which incurred $12.9 million of placement fees during the year ended December 31, 2012.Occupancy expense increased by $1.4 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to additional expenses incurred from additional office space leased as a result of the increase in our headcount to support theexpansion of our global investment platform during the year ended December 31, 2012 as compared to the same period during 2011.Depreciation and amortization expense increased by $27.0 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to increased amortization expense due to amortization of intangible assets acquired subsequent toDecember 31, 2011.Year 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. This change was primarily attributable to a reduction of profit sharing expense of $618.7 million driven by the change in carried interest income earnedfrom certain of our private equity and credit funds due to the significant decline in the fair value of the underlying investments in these funds during theperiod. In addition, incentive fee compensation decreased by $16.8 million as a result of the unfavorable performance of certain of our credit funds during theperiod. Management business compensation and benefits expense increased by $39.2 million for the year ended December 31, 2011 as compared to the yearended December 31, 2010. This change was primarily the result of increased headcount, partially offset by a decrease related to the performance basedincentive arrangement discussed below.Interest expense increased by $5.4 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. This changewas primarily attributable to higher interest expense incurred during 2011 on the AMH Credit Agreement due to the margin rate increase once the maturity datewas extended 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. Thischange was attributable to lower external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31, 2011, as compared tothe same period during 2010. -105-Table of ContentsGeneral, 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. Thischange was 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.Other Income (Loss)Year Ended December 31, 2012 Compared to Year Ended December 31, 2011Net (losses) gains from investment activities increased by $418.1 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was attributable to a $412.1 million increase in net unrealized gains related to changes in the fair value of AAA Investments’portfolio during the period. In addition, there was a $4.7 million increase in unrealized gain related to the change in the fair value of the investment in HFAHoldings Limited (“HFA”) and a $1.2 million increase in net unrealized and realized gains related to changes in the fair value of portfolio investments ofApollo Credit Senior Loan Fund, L.P. (“Apollo Senior Loan Fund”) during the year ended December 31, 2012.Net losses from investment activities of consolidated VIEs increased by $95.9 million during the year ended December 31, 2012 as compared tothe year ended December 31, 2011. This was primarily attributable to a change in net realized and unrealized losses of $519.6 million relating to the debt heldby the consolidated VIEs, along with higher expenses which resulted in an increased loss of $329.4 million during the period, primarily due to the acquisitionof Stone Tower in April 2012. These changes were partially offset by higher net unrealized and realized gains relating to the increase in the fair value ofinvestments held by the consolidated VIEs of $246.5 million and higher interest income of $506.6 million during the year ended December 31, 2012 ascompared to the same period during 2011.Income from equity method investments increased by $96.3 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily driven by changes in the fair values of certain Apollo funds in which Apollo has a direct interest. Fund VII,COF I, COF II and ACLF had the most significant impact and together generated $89.5 million of income from equity method investments during the yearended December 31, 2012 as compared to $11.5 million of income from equity method investments during the year ended December 31, 2011 resulting in anet increase of income from equity method investments totaling $77.6 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, 2012 and 2011.Other income, net increased by $1,759.2 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to an increase in gains on acquisitions of $1,755.7 million driven by the $1,951.1 million bargain purchase gain recordedon the Stone Tower acquisition during April 2012, partially offset by the bargain purchase gain on the Gulf Stream acquisition of $195.5 million duringOctober 2011. Refer to note 3 to our consolidated financial statements for further discussion of the Stone Tower and Gulf Stream acquisitions. The remainingchange was primarily attributable to losses resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries during theyear ended December 31, 2012 as compared to the same period in 2011. Refer to note 10 of our consolidated financial statements for a complete summary ofother income, net, for the years ended December 31, 2012 and 2011.Year 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 endedDecember 31, 2010. This change was primarily attributable to a -106-Table of Contents$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 HFA during the year ended December 31, 2011, partiallyoffset by $2.3 million of net unrealized and realized gains related to changes in the fair value of Metals Trading Fund, L.P. (“Metal’s Trading Fund”) portfolioinvestments 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 tothe year ended December 31, 2010. This change was primarily attributable to a decrease in net realized and unrealized gains (losses) relating to the decrease inthe 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 tothe acquisition of Gulf Stream in October 2011. These decreases were partially offset by higher net unrealized and realized gains relating to the debt held by theconsolidated VIEs of $55.7 million and higher interest income of $12.3 million during the year ended December 31, 2011 as compared to the same periodduring 2010.Income from equity method investments decreased by $55.9 million for the year ended December 31, 2011 as compared to the year endedDecember 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. FundVII, COF I, Artus, COF II and ACLF had the most significant impact and together generated $11.9 million of income from equity method investments duringthe year ended December 31, 2011 as compared to $62.1 million of income from equity method investments during the year ended December 31, 2010resulting in a net decrease of income from equity method investments totaling $50.2 million. Refer to note 4 to our consolidated financial statements for acomplete summary of 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. Thischange was primarily attributable to an increase in gains on acquisitions of $166.5 million driven by the $195.5 million bargain purchase gain recorded onthe Gulf Stream acquisition during October 2011, partially offset by the bargain purchase gain on the CPI acquisition of $24.1 million during November2010. This was offset by $162.5 million of insurance reimbursement received during the year ended December 31, 2010 relating to a $200.0 million litigationsettlement incurred during 2008, along with $7.8 million of other income attributable to the change in the estimated tax receivable agreement liability. Duringthe year ended December 31, 2011, approximately $8.0 million of offering costs were reimbursed that were incurred 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 to the launch of AMTG. The remaining change wasprimarily attributable to gains resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries during the year endedDecember 31, 2011 as compared to the same period in 2010. Refer to note 10 of our consolidated financial statements for a complete summary of other income,net, for the years ended December 31, 2011 and 2010.Income Tax ProvisionYear Ended December 31, 2012 Compared to Year Ended December 31, 2011The income tax provision increased by $53.5 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Asdiscussed in note 11 to our consolidated financial statements, the Company’s income tax provision primarily relates to the earnings generated by APO Corp.,which is subject to U.S. Federal, state and local taxes. APO Corp. had income before taxes of $130.8 million and $1.7 million for the years endedDecember 31, 2012 and 2011, respectively, after adjusting for permanent tax differences. The $129.1 million change in income before taxes resulted inincreased federal, state and local taxes of $51.3 million during the period utilizing a marginal corporate tax rate, and an increase in the NYC UBT and thetaxes on foreign subsidiaries of $2.2 million.Year 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.As discussed in note 11 to our consolidated financial -107-Table of Contentsstatements, the Company’s income tax provision primarily relates to the earnings generated by APO Corp. APO Corp. had income before taxes of $1.7 millionand $211.0 million for the years ended December 31, 2011 and 2010, respectively, after adjusting for permanent tax differences. The $209.3 million changein income before taxes resulted in decreased federal, state and local taxes of $77.2 million utilizing a marginal corporate tax rate. The remaining decrease in theincome tax provision of $2.6 million in 2011 as compared to 2010 was primarily affected by decreases in the NYC UBT, as well as taxes on foreignsubsidiaries.Non-Controlling InterestsNet (income) loss attributable to Non-Controlling Interests consisted of the following: Year EndedDecember 31, 2012 2011 2010 (in thousands) AAA $(278,454) $123,400 $(356,251) Interest in management companies and a co-investment vehicle (7,307) (12,146) (16,258) Other consolidated entities 50,956 (13,958) (36,847) Net (income) loss attributable to Non-Controlling Interests in consolidatedentities (234,805) 97,296 (409,356) Net (income) attributable to Appropriated Partners’ Capital (1,816,676) (202,235) (11,359) Net (income) loss attributable to Non-Controlling Interests in the ApolloOperating Group (685,357) 940,312 (27,892) Net (income) loss attributable to Non-Controlling Interests $(2,736,838) $835,373 $(448,607) Net income attributable to Appropriated Partners’ Capital 1,816,676 202,235 11,359 Other Comprehensive Income attributable to Non-Controlling Interests (2,010) (5,106) (9,219) Comprehensive (Income) Loss Attributable to Non-Controlling Interests $(992,172) $1,032,502 $(446,467) (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 97% during the year ended December 31, 2012, approximately 98% during the year ended December 31, 2011 andapproximately 97% during the year ended 2010, respectively.(2)Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of our credit management companies.(3)Reflects net income of the consolidated CLOs classified as VIEs. Includes the bargain purchase gain from the Stone Tower acquisition of $1,951.1million for the year ended December 31, 2012 and the bargain purchase gain from the Gulf Stream acquisition of $0.8 million and $195.4 million forthe years ended December 31, 2012 and 2011, respectively.(4)Appropriated Partners’ Capital is included in total Apollo Global Management, LLC shareholders’ equity and is therefore not a component ofcomprehensive (income) loss attributable to non-controlling interest on the statement of comprehensive income (loss). -108-(1)(2)(3)(4)Table of ContentsInitial Public Offering—On April 4, 2011, the Company completed the IPO of its Class A shares, representing limited liability companyinterests of the Company. Apollo Global Management, LLC received net proceeds from the IPO of approximately $382.5 million, which were used to acquireadditional AOG Units. As a result, Holdings’ ownership interest in the Apollo Operating Group decreased from 70.7% to 66.5% and Apollo GlobalManagement, LLC’s ownership interest in the Apollo Operating Group increased from 29.3% to 33.5% upon consummation of the IPO. As such, thedifference between the fair value of the consideration paid for the Apollo Operating Group level ownership interest and the book value on the date of the IPO isreflected in Additional Paid in Capital.Net income (loss) attributable to Non-Controlling Interests in the Apollo Operating Group consisted of the following: Year EndedDecember 31, 2012 2011 2010 (in thousands) Net income (loss) $3,047,795 $(1,304,199) $543,224 Net (income) loss attributable to Non-Controlling Interests inconsolidated entities (2,051,481) (104,939) (420,715) Net income (loss) after Non-Controlling Interests in consolidatedentities 996,314 (1,409,138) 122,509 Adjustments: Income tax provision 65,410 11,929 91,737 NYC UBT and foreign tax provision (10,889) (8,647) (11,255) Capital increase related to equity-based compensation — (22,797) — Net loss in non-Apollo Operating Group entities 948 1,345 4,197 Total adjustments 55,469 (18,170) 84,679 Net income (loss) after adjustments 1,051,783 (1,427,308) 207,188 Approximate ownership percentage of Apollo Operating Group 64.9% 65.9% 71.0% Net income (loss) attributable to Apollo Operating Group before otheradjustments 685,357 (940,312) 145,379 AMH special allocation — — (117,487) Net income (loss) attributable to Non-Controlling Interests in ApolloOperating Group $685,357 $(940,312) $27,892 (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 65.2%, 67.4% and 71.0% during the yearsended December 31, 2012, 2011 and 2010, 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.Segment AnalysisDiscussed below are our results of operations for each of our reportable segments. They represent the segment information available and utilizedby our executive management, which consists of our Managing Partners, who operate collectively as our chief operating decision maker, to assess performanceand to allocate resources. Management divides its operations into three reportable segments: private equity, credit 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 comprised of AOG Units, incometaxes, amortization of intangibles associated with the 2007 -109-(1)(2)(3)(4)Table of ContentsReorganization and acquisitions and Non-Controlling Interests with the exception of allocations of income to certain individuals.In addition to providing the financial results of our three reportable business segments, we further evaluate our individual reportable segmentsbased on what we refer to as our management and incentive businesses. Our management business is generally characterized by the predictability of itsfinancial metrics, including revenues and expenses. The management business includes management fee revenues, advisory and transaction revenues, carriedinterest income from one of our opportunistic credit funds and expenses, each of which we believe are more stable in nature. The financial performance of ourincentive business is partially dependent upon quarterly mark-to-market unrealized valuations in accordance with U.S. GAAP guidance applicable to fairvalue measurements. The incentive business includes carried interest income, income from equity method investments and profit sharing expense that areassociated with 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 wellas 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.Private EquityThe following tables set forth our segment statement of operations information and our supplemental performance measure, ENI, for our privateequity segment for the years ended December 31, 2012, 2011 and 2010, respectively. ENI represents segment income (loss), excluding the impact of non-cashcharges related to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprising amortization of AOGUnits, income taxes, amortization of intangibles associated with the 2007 Reorganization and acquisitions and Non-Controlling Interest with the exception ofallocations of income to certain individuals. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds and consolidatedVIEs that are included in the consolidated financial statements. ENI is not a U.S. GAAP measure. For the Year EndedDecember 31, 2012 For the Year EndedDecember 31, 2011 For the Year EndedDecember 31, 2010 Management Incentive Total Management Incentive Total Management Incentive Total (in thousands) Private Equity: Revenues: Advisory and transaction fees fromaffiliates $138,531 $— $138,531 $66,913 $— $66,913 $60,444 $— $60,444 Management fees from affiliates 277,048 — 277,048 263,212 — 263,212 259,395 — 259,395 Carried interest income (loss) fromaffiliates: Unrealized gain (loss) — 854,919 854,919 — (1,019,748) (1,019,748) — 1,251,526 1,251,526 Realized gains — 812,616 812,616 — 570,540 570,540 — 69,587 69,587 Total Revenues 415,579 1,667,535 2,083,114 330,125 (449,208) (119,083) 319,839 1,321,113 1,640,952 Expenses: Compensation and Benefits: Equity compensation 31,213 — 31,213 31,778 — 31,778 16,182 — 16,182 Salary, bonus and benefits 128,465 — 128,465 125,145 — 125,145 133,999 — 133,999 Profit sharing expense — 702,477 702,477 — (100,267) (100,267) — 519,669 519,669 Total compensation and benefits 159,678 702,477 862,155 156,923 (100,267) 56,656 150,181 519,669 669,850 Other expenses 83,311 — 83,311 99,338 — 99,338 97,750 — 97,750 Total Expenses 242,989 702,477 945,466 256,261 (100,267) 155,994 247,931 519,669 767,600 Other Income: Income from equity method investments — 74,038 74,038 — 7,960 7,960 — 50,632 50,632 Other income, net 4,653 — 4,653 7,081 — 7,081 162,213 — 162,213 Total Other Income 4,653 74,038 78,691 7,081 7,960 15,041 162,213 50,632 212,845 Economic Net Income (Loss) $177,243 $1,039,096 $1,216,339 $80,945 $(340,981) $(260,036) $234,121 $852,076 $1,086,197 (1)Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a $75.3 million reversal of the entiregeneral partner obligation to return previously distributed carried interest income with respect to Fund VI. -110-(1)Table of Contents Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2011 was a reversal of previously realized carriedinterest income due to the general partner obligation to return previously distributed carried interest income of $75.3 million for Fund VI. The generalpartner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of the balance sheet date. The actual determination andany required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on thecontractual termination of the fund. For the Year EndedDecember 31, For the Year EndedDecember 31, 2012 2011 AmountChange PercentageChange 2011 2010 AmountChange PercentageChange (in thousands) (in thousands) Private Equity: Revenues: Advisory and transaction fees fromaffiliates $138,531 $66,913 $71,618 107.0% $66,913 $60,444 $6,469 10.7% Management fees from affiliates 277,048 263,212 13,836 5.3 263,212 259,395 3,817 1.5 Carried interest income (loss) fromaffiliates: Unrealized gains (losses) 854,919 (1,019,748) 1,874,667 NM (1,019,748) 1,251,526 (2,271,274) NM Realized gains 812,616 570,540 242,076 42.4 570,540 69,587 500,953 NM Total carried interest income(losses) from affiliates 1,667,535 (449,208) 2,116,743 NM (449,208) 1,321,113 (1,770,321) NM Total Revenues 2,083,114 (119,083) 2,202,197 NM (119,083) 1,640,952 (1,760,035) NM Expenses: Compensation and benefits: Equity-based compensation 31,213 31,778 (565) (1.8) 31,778 16,182 15,596 96.4 Salary, bonus and benefits 128,465 125,145 3,320 2.7 125,145 133,999 (8,854) (6.6) Profit sharing expense 702,477 (100,267) 802,744 NM (100,267) 519,669 (619,936) NM Total compensation andbenefits expense 862,155 56,656 805,499 NM 56,656 669,850 (613,194) (91.5) Other expenses 83,311 99,338 (16,027) (16.1) 99,338 97,750 1,588 1.6 Total Expenses 945,466 155,994 789,472 NM 155,994 767,600 (611,606) (79.7) Other Income: Income from equity method investments 74,038 7,960 66,078 NM 7,960 50,632 (42,672) (84.3) Other income, net 4,653 7,081 (2,428) (34.3) 7,081 162,213 (155,132) (95.6) Total Other Income 78,691 15,041 63,650 423.2% 15,041 212,845 (197,804) (92.9)% Economic Net Income (Loss) $1,216,339 $(260,036) $1,476,375 NM $(260,036) $1,086,197 $(1,346,233) NM (1)Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a $75.3 million reversal of the entiregeneral partner obligation to return previously distributed carried interest income with respect to Fund VI. Included in unrealized carried interest income(loss) from affiliates for the year ended December 31, 2011 was a 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. The general partner obligation is recognized based upona hypothetical liquidation of the funds’ net assets as of the balance sheet date. The actual determination and any required payment of any such generalpartner 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, 2012 Compared to Year Ended December 31, 2011Advisory and transaction fees from affiliates, including directors’ fees, termination fees and reimbursed broken deal costs, increased by $71.6million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. This change was primarily attributable to an increase intransaction and advisory services rendered during the year, primarily relating to Fund VII of $46.1 million and Fund VI of $11.2 million, as well as $13.5million relating to AGS, ANRP and AAA Investments. Gross advisory and transaction fees, including directors’ fees and termination fees, were $291.2million and $164.5 million for the years ended December 31, 2012 and 2011, respectively, an increase of $126.7 million or 77%. The transaction andtermination fees earned during the year ended December 31, 2012 primarily related to seven portfolio investment transactions, specifically EP Energy, Realogy,Rexnord, Great Wolf Resorts, Taminco, Smart & Final and Athlon, which together generated $153.8 million and $78.4 million of the gross and nettransaction fees, respectively, as compared to transaction and termination fees earned during the year ended December 31, 2011 primarily in connection withfive portfolio investment transactions, specifically Constellium (formerly Alcan), Ascometal, Athene Life Re Ltd., Brit Insurance and CORE Media Group(formerly CKx), which together generated $35.5 million and $18.4 million of the gross and net transaction fees, respectively. The advisory fees earned duringthe year ended December 31, 2012 were principally generated by advisory arrangements with eight portfolio investments including Athene Life Re Ltd, DebtInvestment Vehicles, EP Energy, Caesars Entertainment, Berry Plastics, Momentive Performance Materials, CEVA Logistics and Realogy, which generatedgross and net -111-(1)Table of Contentsfees of $87.5 million and $46.6 million, respectively. The advisory fees earned during the year ended December 31, 2011 were primarily generated byadvisory and monitoring arrangements with six portfolio investments including Athene Life Re Ltd., Berry Plastics, Caesars Entertainment, CEVA Logistics,Debt Investment Vehicles and Realogy, which generated gross and net fees of $78.1 million and $34.9 million, respectively. Advisory and transaction fees,including directors’ fees and termination fees, are reported net of Management Fee Offsets totaling $152.7 million and $97.6 million for the years endedDecember 31, 2012 and 2011, respectively, an increase of $55.1 million or 56.5%.Management fees from affiliates increased by $13.8 million for the year ended December 31, 2012 as compared to the year ended December 31,2011. This change was primarily attributable to increased management fees of $17.3 million earned from ANRP, which began paying fees during the thirdquarter of 2011 based on committed capital. This increase was partially offset by a decrease in the management fees earned from AAA Investments of $2.6million due to lower adjusted gross assets for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Also offsetting thisincrease was a decrease in management fees of $0.9 million as a result of lower management fees earned from Fund V, Fund VI and other funds.Carried interest income (loss) from affiliates increased by $2,116.7 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to an increase in net unrealized carried interest income of $1,874.7 million as a result ofimprovements in the fair values of the underlying portfolio investments held during the year, including an increase of $571.5 million from Fund VII, $60.9million from Fund V and $62.0 million from AAA Investments and other funds. In addition, net unrealized carried interest income increased by $1,069.2 asa result of unrealized carried interest income recorded in connection with Fund VI. For the year ended December 31, 2011, Fund VI had significant unrealizedcarried interest losses which resulted in the recognition of a general partner obligation to return previously distributed carried interest income. For the year endedDecember 31, 2012, the unrealized carried interest losses were recouped and unrealized carried interest income was recognized which resulted in the reversal ofthe general partner obligation of $75.3 million. Also contributing to the increase in net unrealized carried interest income was a decrease to Fund IV’s netunrealized carried interest loss of $111.1 million during the year ended December 31, 2012. The remaining increase in the carried interest income (loss) fromaffiliates relates to an increase in realized carried interest income of $242.1 million resulting from increased dispositions of portfolio investments held by FundVII, Fund VI, Fund V and AAA Investments of $211.8 million, $213.4 million, $8.5 million and $10.2 million, respectively, offset by a decrease in FundIV of $201.8 million.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 $6.5 million for the yearended December 31, 2011 as compared to the year ended December 31, 2010. This change was primarily attributable to an increase in advisory servicesrendered during the period, primarily with respect to AAA Investments. 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 Constellium (formerly Alcan), Ascometal, Athene Life Re Ltd., Brit Insurance andCORE Media Group (formerly CKx), which together generated $35.5 million and $18.4 million of the gross and net transaction fees, respectively, ascompared to transaction fees primarily earned during 2010 from four portfolio investment transactions, specifically LyondellBasell, Noranda Aluminum,CKE Restaurants Inc. and EVERTEC, 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 arrangements with six portfolio investments including Athene Life Re Ltd., BerryPlastics, Caesars Entertainment, CEVA Logistics, Debt Investment Vehicles and Realogy, which generated gross and net fees of $78.1 million and $34.9million, respectively. The advisory fees earned during 2010 were primarily generated by advisory and monitoring arrangements with several portfolioinvestments including Caesars Entertainment, Debt Investment Vehicles and Realogy 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 millionfor the year ended December 31, 2011 and 2010, 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 -112-Table of Contentsmillion in broken deal 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 adjustedgross assets managed during the period. In addition, management fees of $2.9 million were earned from ANRP which began earning fees during the thirdquarter of 2011 based on committed capital. These increases were partially offset by decreased management fees earned by Fund V of $1.8 million as a resultof decreases in fee-generating invested capital. In addition, during the third quarter of 2010, Fund IV started its winding down and no longer earnedmanagement fees which resulted in a decrease in management fees of $0.7 million during the year ended December 31, 2011 as compared to the same periodduring 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 for the year ended December 31, 2011 was a reversal of previously recognized carried interest income due to general partner obligations toreturn previously distributed carried interest income on Fund VI of $75.3 million. 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.ExpensesYear Ended December 31, 2012 Compared to Year Ended December 31, 2011Compensation and benefits expense increased by $805.5 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to a $802.7 million increase in profit sharing expense mostly driven by the increase in carriedinterest income earned from our private equity funds during the year and a $3.3 million increase in salary, bonus and benefits expense as a result of anincrease in headcount. Included in profit sharing expense is $25.8 million related to change in fair value of our contingent consideration obligations. Includedin profit sharing expense is $25.9 million and $16.2 million of expenses related to the Incentive Pool for the years ended December 31, 2012 andDecember 31, 2011, respectively.Other expenses decreased by $16.0 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. This changewas primarily attributable to decreased interest expense of $6.5 million mainly due to a lower margin rate on the AMH Credit Agreement. Also contributing tothis decrease were lower professional fees of $1.9 million attributable to lower external accounting, tax, audit, legal and consulting fees incurred and loweroccupancy expenses of $2.8 million due to the allocation of occupancy cost based on segment size due to acquisitions in the credit segment during the yearended December 31, 2012 as compared to the same period during 2011. General, administrative and other expenses also decreased by $3.4 million mainly dueto a decrease in travel and related expenses and other non-compensation related expenses.Year 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 endedDecember 31, 2010. This change was primarily a result of a $619.9 million decrease in profit sharing expense primarily attributable to a change in carriedinterest income earned by our funds during the period and an $8.9 million decrease in salary, bonus and benefits expense. The Incentive Pool also contributedto the decrease in salary, bonus and benefits expense during the period. -113-Table of ContentsThese decreases were partially offset by increased non-cash equity-based compensation expense of $15.6 million primarily related to additional grants ofRSUs 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 changewas primarily 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 expansion of our investment platform during the period, along with increased interest expense incurred of $3.7 million in connection with themargin rate increase under the AMH Credit Agreement once the maturity date was extended in December 2010. These increases were partially offset bydecreased professional fees of $6.7 million due to lower external accounting, tax, audit, legal and consulting fees incurred during the period.Other (Loss) IncomeYear Ended December 31, 2012 Compared to Year Ended December 31, 2011Income from equity method investments increased by $66.1 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was driven by increases in the fair values of our private equity investments held, primarily relating to Apollo’s ownershipinterest in Fund VII and AAA, which resulted in increased income from equity method investments of $51.7 million and $11.0 million, respectively, duringthe year ended December 31, 2012 as compared to the year ended December 31, 2011.Other income net, decreased by $2.4 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to losses resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries and otheradjustments during the year ended December 31, 2012 as compared to the year ended December 31, 2011.Year 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 endedDecember 31, 2010. This change was driven by decreases in the fair values of our private equity investments held, primarily relating to Apollo’s ownershipinterest in Fund VII and AAA units which resulted in decreased income from equity method investments of $27.3 million and $14.2 million, respectively,during the year ended 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. Thischange was primarily attributable to $162.5 million of insurance reimbursement received during the year ended December 31, 2010 relating to the $200.0million litigation settlement incurred during 2008. The remaining change was primarily attributable to gains (losses) resulting from fluctuations in exchangerates of foreign denominated assets and liabilities of subsidiaries during the year ended December 31, 2011 as compared to the same period during 2010. -114-Table of ContentsCreditThe following tables set forth segment statement of operations information and ENI for our credit segment for the years ended December 31, 2012,2011 and 2010, respectively. ENI represents segment income (loss), excluding the impact of non-cash charges related to RSUs granted in connection with the2007 private placement and equity-based compensation expense comprising of 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, 2012 Year EndedDecember 31, 2011 Year EndedDecember 31, 2010 Management Incentive Total Management Incentive Total Management Incentive Total (in thousands) Credit Revenues: Advisory and transaction fees fromaffiliates $10,764 $— $10,764 $14,699 $— $14,699 $19,338 $— $19,338 Management fees from affiliates 299,667 — 299,667 186,700 — 186,700 160,318 — 160,318 Carried interest income (loss) fromaffiliates: Unrealized gains (losses) — 301,077 301,077 — (66,852) (66,852) — 103,918 103,918 Realized gains 37,842 179,933 217,775 44,540 74,113 118,653 47,385 126,604 173,989 Total Revenues 348,273 481,010 829,283 245,939 7,261 253,200 227,041 230,522 457,563 Expenses: Compensation and Benefits: Equity-based compensation 26,988 — 26,988 23,283 — 23,283 9,879 — 9,879 Salary, bonus and benefits 122,813 — 122,813 92,898 — 92,898 93,884 — 93,884 Profit sharing expense — 154,787 154,787 — 35,461 35,461 — 35,556 35,556 Incentive fee compensation — 739 739 — 3,383 3,383 — 20,142 20,142 Total compensation andbenefits 149,801 155,526 305,327 116,181 38,844 155,025 103,763 55,698 159,461 Other expenses 149,051 — 149,051 94,995 — 94,995 80,880 — 80,880 Total Expenses 298,852 155,526 454,378 211,176 38,844 250,020 184,643 55,698 240,341 Other Income (Loss): Net (loss) from investment activities — (1,142) (1,142) — (5,881) (5,881) — — — Income from equity methodinvestments — 46,100 46,100 — 2,143 2,143 — 30,678 30,678 Other income (loss), net 15,008 — 15,008 (1,978) — (1,978) 10,928 — 10,928 Total Other Income(Loss) 15,008 44,958 59,966 (1,978) (3,738) (5,716) 10,928 30,678 41,606 Non-Controlling Interests (8,730) — (8,730) (12,146) — (12,146) (16,258) — (16,258) Economic Net Income (Loss) $55,699 $370,442 $426,141 $20,639 $(35,321) $(14,682) $37,068 $205,502 $242,570 (1)Included in unrealized carried interest income from affiliates for the year ended December 31, 2012 was a reversal of previously realized carried interestincome due to the general partner obligation to return previously distributed carried interest income for SOMA and APC of $1.2 million and $0.3million, respectively. Included in unrealized carried interest income from affiliates for the year ended December 31, 2011 was a reversal of previouslyrealized carried interest income due to the general partner obligation to return previously distributed carried interest income for SOMA of $18.1 million.The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of the balance sheet date. 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. -115-(1)Table of Contents For the Year EndedDecember 31, For the Year EndedDecember 31, 2012 2011 AmountChange PercentageChange 2011 2010 AmountChange PercentageChange (in thousands) (in thousands) Credit Revenues: Advisory and transaction fees from affiliates $10,764 $14,699 $(3,935) (26.8)% $14,699 $19,338 $(4,639) (24.0)% Management fees from affiliates 299,667 186,700 112,967 60.5 186,700 160,318 26,382 16.5 Carried interest income from affiliates: Unrealized gain (loss) 301,077 (66,852) 367,929 NM (66,852) 103,918 (170,770) NM Realized gains 217,775 118,653 99,122 83.5 118,653 173,989 (55,336) (31.8) Total carried interest income from affiliates 518,852 51,801 467,051 NM 51,801 277,907 (226,106) (81.4) Total Revenues 829,283 253,200 576,083 227.5 253,200 457,563 (204,363) (44.7) Expenses: Compensation and benefits Equity-based compensation 26,988 23,283 3,705 15.9 23,283 9,879 13,404 135.7 Salary, bonus and benefits 122,813 92,898 29,915 32.2 92,898 93,884 (986) (1.1) Profit sharing expense 154,787 35,461 119,326 336.5 35,461 35,556 (95) (0.3) Incentive fee compensation 739 3,383 (2,644) (78.2) 3,383 20,142 (16,759) (83.2) Total compensation and benefits 305,327 155,025 150,302 97.0 155,025 159,461 (4,436) (2.8) Other expenses 149,051 94,995 54,056 56.9 94,995 80,880 14,115 17.5 Total Expenses 454,378 250,020 204,358 81.7 250,020 240,341 9,679 4.0 Other Income (Loss): Net (loss) from investment activities (1,142) (5,881) 4,739 (80.6) (5,881) — (5,881) NM Income from equity method investments 46,100 2,143 43,957 NM 2,143 30,678 (28,535) (93.0) Other income (loss), net 15,008 (1,978) 16,986 NM (1,978) 10,928 (12,906) NM Total Other Income (Loss) 59,966 (5,716) 65,682 NM (5,716) 41,606 (47,322) NM Non-Controlling Interests (8,730) (12,146) 3,416 (28.1) (12,146) (16,258) 4,112 (25.3) Economic Net Income (Loss) $426,141 $(14,682) $440,823 NM $(14,682) $242,570 $(257,252) NM (1)Included in unrealized carried interest income from affiliates for the year ended December 31, 2012 was a reversal of previously realized carried interestincome due to the general partner obligation to return previously distributed carried interest income for SOMA and APC of $1.2 million and $0.3million, respectively. Included in unrealized carried interest income from affiliates for the year ended December 31, 2011 was a reversal of previouslyrealized carried interest income due to the general partner obligation to return previously distributed carried interest income for SOMA of $18.1 million.The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of the balance sheet date. 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, 2012 Compared to Year Ended December 31, 2011Advisory and transaction fees from affiliates decreased by $3.9 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. Gross advisory and transaction fees, including directors’ fees, were $37.4 million and $41.2 million for the years ended December 31,2012 and 2011, respectively, a decrease of $3.8 million or 9.2%. The transaction fees earned during 2012 primarily related to portfolio investments of EPF Iand EPF II which together generated gross and net fees of $9.1 million and $2.4 million, respectively, whereas the transaction fees earned during 2011primarily related to two portfolio investment transactions of FCI and EPF I which together generated gross and net fees of $9.6 million and $5.7 million,respectively. The advisory fees earned during both periods were primarily generated by deal activity related to investments in LeverageSource, L.P., whichresulted in gross and net advisory fees of $23.0 million and $3.4 million, respectively, during the year ended December 31, 2012 and gross and net fees of$25.9 million and $3.3 million, respectively, during the year ended December 31, 2011. Advisory and transaction fees, including directors’ fees, are reportednet of Management Fee Offsets totaling $26.6 million and $26.5 million for the years ended December 31, 2012 and 2011, respectively, an increase of $0.1million or 0.4%. Management fees from affiliates increased by $113.0 million for the year ended December 31, 2012 as compared to the year ended December 31,2011. This change was primarily attributable to EPF II which began earning management fees during the second quarter of 2012 totaling $43.1 million. Inaddition, management fees increased due to the recent acquisitions of Gulf Stream and Stone Tower in October 2011 and April 2012, respectively, resulting inan increase in fees generated from CLOs of $29.3 million and Apollo Credit Fund of $11.6 million during the period. Also, assets managed by Athene AssetManagement, LLC, AMTG and AEC, together generated increased fees of $31.5 million during the year -116-(1)Table of Contentsended December 31, 2012 as compared to the same period in 2011. These increases were partially offset by decreased management fees earned from EPF I of$13.3 million during the period due to a change in management fee basis from committed to invested capital as a result of the launch of EPF II in April 2012.In addition, management fees earned from AINV decreased by $6.4 million as a result of a decrease in gross adjusted assets managed of the Company duringthe period as compared to the same period in 2011. The remaining change was attributable to an overall increase in assets managed by the other credit fundswhich collectively contributed to an increase of $17.2 million in management fees during the year ended December 31, 2012 as compared to the same period in2011.Carried interest income from affiliates increased by $467.1 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to an increase in net unrealized carried interest income of $367.9 million driven by an increase innet asset values primarily with respect to COF I, CLOs, COF II, ACLF, AIE II, and ACF resulting in increased net unrealized carried interest income of $74.4million, $71.8 million, $65.9 million, $65.9 million, $27.0 million, $9.0 million and $7.0 million, respectively, during the period. The remaining changein unrealized carried interest income was attributable to an increase in net asset values of the other credit funds which collectively contributed to an increase of$46.9 million. During the year ended December 31, 2012, there was a reversal of previously recognized carried interest income from SOMA and APC due togeneral partner obligations to return carried interest income that was previously distributed of $1.2 million and $0.3 million, respectively. In addition, realizedcarried interest increased by $99.1 million resulting from increased dispositions during the period, primarily by COF I, Apollo Credit Fund, and ACLF of$60.5 million, $16.7 million, $11.5 million and $9.7 million respectively. The remaining change in realized carried interest income was attributable to anoverall increase in dispositions of the other credit funds which collectively contributed to an increase of $0.7 million during the period.Year 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 I 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 I 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, L.P., which resulted in gross and netadvisory fees 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, during2010. Advisory and transaction fees, including directors’ fees, are reported net of Management Fee Offsets totaling $26.5 million and $40.5 million for theyear ended December 31, 2011 and 2010, respectively, a decrease of $14.0 million or 34.6%.Management 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 partiallyoffset by a corresponding expense categorized as sub-advisory fees and included within professional fees expense. In addition, management fees of $3.4 millionwere earned from AFT, $1.7 million from FCI and $1.4 million from AMTG, which all began earning management fees in 2011. Gulf Stream CLOs generated$2.5 million of fees and two new Senior Credit Funds, AESI and Palmetto Loan, generated fees of $1.2 million and $1.0 million, respectively, during the yearended December 31, 2011. Furthermore an increase in fee-generating invested capital in COF II, gross adjusted assets managed by AINV and increased valueof commitments in EPF I resulted in increased management fees earned of $2.6 million, $2.0 million and $1.4 million, respectively, during the period. Theseincreases 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 byAIE I of $1.4 million as a result of sales of investments and resulting decrease in net assets managed during the period. -117-Table of ContentsThe remaining change was attributable to overall increased assets managed by the remaining credit funds, which collectively contributed to the increase ofmanagement 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 endedDecember 31, 2010. This change was primarily attributable to a decrease in net unrealized carried interest income of $170.8 million driven by decreased netasset values, primarily with respect to COF II, COF I, ACLF, AIE II and SOMA which collectively resulted in decreased net unrealized carried interest incomeof $225.4 million, partially offset by increased unrealized carried interest income earned in 2011 by EPF I of $53.2 million due to increased valuation ofinvestments. During the year ended December 31, 2011, there was a reversal of previously recognized carried interest income from SOMA due to generalpartner obligations to return carried interest income that was previously distributed of $18.1 million. The remaining change was attributable to a decrease innet realized gains of $55.3 million resulting primarily from a decrease in dividend and interest income on portfolio investments held by certain of our creditfunds, primarily by SOMA, during the year ended December 31, 2011 as compared to the same period during 2010.ExpensesYear Ended December 31, 2012 Compared to Year Ended December 31, 2011Compensation and benefits expense increased by $150.3 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily a result of an increase in profit sharing expense of $119.3 million due to the favorable performance of certainof our credit funds along with the Incentive Pool, which included $28.9 million and $17.6 million of expense related to the Incentive Pool for the years endedDecember 31, 2012 and 2011, respectively. In addition, salary, bonus and benefits expense increased by $29.9 and equity based compensation increased by$3.7 million due to an increase in headcount during the period, including new hires related to the Stone Tower acquisition in April 2012. These increases werepartially offset by decreased incentive fee compensation expense of $2.6 million due to the performance of certain of our credit funds during the period.Other expenses increased by $54.1 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. This changewas primarily a result of increased general, administrative and other expenses of $18.5 million due to higher travel, information technology, recruiting andother expenses incurred during the year ended December 31, 2012 as compared to the same period in 2011. Placement fees also increased by $19.0 million dueto increased fundraising activities during the year ended December 31, 2012 as compared to the same period in 2011, primarily relating to EPF II and costsassociated with the acquisition of Stone Tower for which the Company incurred fees of $12.9 million and $4.9 million, respectively.Year 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. This change was primarily a result of a $16.8 million decrease in incentive fee compensation due to unfavorable performance of certain of our capitalmarket funds during the period and a $1.0 million decrease in salary, bonus and benefits. The Incentive Pool also contributed to the decrease in salary, bonusand benefits expense during the period. These decreases were partially offset by increased non-cash equity-based compensation expense of $13.4 millionprimarily related to additional grants of RSUs subsequent to December 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 changewas primarily attributable to increased professional fees of $5.3 million primarily driven by structuring fees associated with AFT totaling $3.6 millionincurred during 2011. In addition, general, administrative and other expenses increased by $6.3 million due to higher travel, information technology,recruiting and other expenses incurred, along with increased occupancy expense of $3.5 million due to additional office spaced leased as a result of an increasein our headcount to support the expansion of our investment platform during the period. These increases were partially offset by decreased placement fees of$1.0 million due to decreased fundraising efforts related to one of our funds during the year ended December 31, 2011 as compared to the same period during2010. -118-Table of ContentsOther Income (Loss)Year Ended December 31, 2012 Compared to Year Ended December 31, 2011Net losses from investment activities decreased by $4.7 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to an unrealized loss related to the change in the fair value of the investment in HFA, whichresulted in a decrease in losses from investment activities of $4.7 million during the period.Income from equity method investments increased by $44.0 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was driven by increases in the fair values of investments held by certain of our credit funds, primarily COF I, COF II, andACLF, which resulted in an increase in income from equity method investments of $17.3 million, $5.7 million and $4.5 million, respectively, during theyear ended December 31, 2012 as compared to the same period during 2011.Other income (loss), net increased by $17.0 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011.During the year ended December 31, 2011, approximately $8.0 million of offering costs were incurred related to the launch of AMTG. The remaining changewas primarily attributable to higher interest income and rental income.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 onthe change 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 endedDecember 31, 2010. This change was driven by decreases in the fair values of investments held by certain of our credit funds, primarily COF I, Artus, COFII, 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.During the year ended December 31, 2011, approximately $8.0 million of offering costs were incurred related to the launch of AMTG. The remaining changewas primarily attributable to gains (losses) resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries during theyear ended December 31, 2011 as compared to the same period in 2010. -119-Table of ContentsReal EstateThe following tables set forth our segment statement of operations information and our supplemental performance measure, ENI, for our realestate segment for the years ended December 31, 2012, 2011 and 2010, respectively. ENI represents segment income (loss), excluding the impact of non-cashcharges related to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprising amortization of AOGUnits, income taxes and Non-Controlling Interests. 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. For the Year EndedDecember 31, 2012 For the Year EndedDecember 31, 2011 For the Year EndedDecember 31, 2010 Management Incentive Total Management Incentive Total Management Incentive Total (in thousands) Real Estate: Revenues: Advisory and transaction fees from affiliates $749 $— $749 $698 $— $698 $— $— $— Management fees from affiliates 46,326 — 46,326 40,279 — 40,279 11,383 — 11,383 Carried interest income from affiliates Unrealized gains — 10,401 10,401 — — — — — — Realized gains — 4,673 4,673 — — — — — — Total Revenues 47,075 15,074 62,149 40,977 — 40,977 11,383 — 11,383 Expenses: Compensation and Benefits: Equity-based compensation 10,741 — 10,741 13,111 — 13,111 4,408 — 4,408 Salary, bonus and benefits 23,296 — 23,296 33,052 — 33,052 21,688 — 21,688 Profit sharing expense — 14,130 14,130 — 1,353 1,353 — — — Total compensation and benefits 34,037 14,130 48,167 46,163 1,353 47,516 26,096 — 26,096 Other expenses 24,270 — 24,270 29,663 — 29,663 19,938 — 19,938 Total Expenses 58,307 14,130 72,437 75,826 1,353 77,179 46,034 — 46,034 Other Income (loss): Income (loss) from equity method investments — 982 982 — 726 726 — (391) (391) Other income, net 1,271 — 1,271 9,694 — 9,694 23,622 — 23,622 Total Other Income (Loss) 1,271 982 2,253 9,694 726 10,420 23,622 (391) 23,231 Economic Net (Loss) Income $(9,961) $1,926 $(8,035) $(25,155) $(627) $(25,782) $(11,029) $(391) $(11,420) For the Year EndedDecember 31, For the Year EndedDecember 31, 2012 2011 AmountChange PercentageChange 2011 2010 AmountChange PercentageChange (in thousands) Real Estate: Revenues: Advisory and transaction fees from affiliates $749 $698 $51 7.3% $698 $— $698 NM Management fees from affiliates 46,326 40,279 6,047 15.0 40,279 11,383 28,896 253.9% Carried interest income from affiliates Unrealized gains 10,401 — 10,401 NM — — — — Realized gains 4,673 — 4,673 NM — — — — Total Revenues 62,149 40,977 21,172 51.7 40,977 11,383 29,594 260.0 Expenses: Compensation and Benefits Equity-based compensation 10,741 13,111 (2,370) (18.1) 13,111 4,408 8,703 197.4 Salary, bonus and benefits 23,296 33,052 (9,756) (29.5) 33,052 21,688 11,364 52.4 Profit sharing expense 14,130 1,353 12,777 NM 1,353 — 1,353 NM Total compensation and benefits 48,167 47,516 651 1.4 47,516 26,096 21,420 82.1 Other expenses 24,270 29,663 (5,393) (18.2) 29,663 19,938 9,725 48.8 Total Expenses 72,437 77,179 (4,742) (6.1) 77,179 46,034 31,145 67.7 Other Income (Loss): Income (loss) from equity method investments 982 726 256 35.3 726 (391) 1,117 NM Other income, net 1,271 9,694 (8,423) (86.9) 9,694 23,622 (13,928) (59.0) Total Other Income 2,253 10,420 (8,167) (78.4) 10,420 23,231 (12,811) (55.1) Economic Net (Loss) $(8,035) $(25,782) $17,747 (68.8)% $(25,782) $(11,420) $(14,362) 125.8% -120-Table of ContentsRevenuesYear Ended December 31, 2012 Compared to Year Ended December 31, 2011Management fees increased by $6.0 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to increased management fees earned of $4.1 million as a result of additional capital raised for the Athene CRE Lendingbusiness, AGRE CMBS Accounts, and the launching of the 2012 CMBS funds during the year ended December 31, 2012. In addition, increasedmanagement fees were earned from AGRE U.S. Real Estate Fund of $2.5 million due to additional capital commitments raised during the year and due to anincrease in invested capital during the year. Also contributing to the increase was a $0.9 million increase in management fees as a result of additional capitalraised for ARI during the year and a $2.2 million increase to management fees from other funds. These increases were offset by decreased management feesearned from the CPI funds of $3.6 million as a result of the realization of underlying investments.Carried interest income from affiliates increased by $15.1 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was primarily attributable to an increase in net unrealized gains of $10.4 million, driven by an increase in the fair values ofthe underlying portfolio investments held during the year. The remaining change in the carried interest income from affiliates relates to an increase in realizedgains of $4.7 million resulting from increased dispositions of portfolio investments during the year.Year 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, AGREDebt Fund 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. Thischange was primarily attributable to an increase of $22.8 million of fees earned from CPI funds that were acquired during November 2010, therefore, 2011included a full year of management fees earned in comparison to 2010. CPI Capital Partners Europe, CPI Capital Partners Asia Pacific and CPI CapitalPartners North America earned increased fees of $8.1 million, $7.4 million and $7.3 million, respectively, during the year ended December 31, 2011 ascompared to 2010. In addition, increased net assets managed by ARI, AGRE CMBS Accounts, AGRE U.S. Real Estate Fund and AGRE Debt Fund I, L.P.account resulted in increased management fees earned of $2.7 million, $1.8 million, $1.5 million and $0.2 million, respectively, during the year endedDecember 31, 2011 as compared to the same period during 2010.ExpensesYear Ended December 31, 2012 Compared to Year Ended December 31, 2011Compensation and benefits increased in total by $0.7 million during the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. The increase was primarily attributable to an increase of $12.8 million in profit sharing expense driven by the increase carried interestincome earned from our real estate funds and performance based incentive arrangement the Company adopted in June 2011 for certain Apollo partners andemployees. Offsetting this increase were decreases of $9.8 million and $2.4 million in salary, bonus and benefits and equity-based compensation,respectively, due to a decrease in headcount and the Incentive Pool. Included in profit sharing expense are $7.3 million and $1.4 million related to the IncentivePool for the years ended December 31, 2012 and December 31, 2011, respectively.Other expenses decreased by $5.4 million during the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to decreased occupancy expense of $2.7 million due to headcount reductions and the allocation of occupancy cost based onsegment size due to acquisitions in the credit segment. Also contributing to the decrease was decreased general, -121-Table of Contentsadministrative and other expenses of $2.5 million mainly due to a decrease in travel and related expenses during the year ended December 31, 2012 ascompared to the year ended December 31, 2011.Year 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 an $11.4 million increase in salary, bonus and benefits expense primarily driven by an increase in headcountas a result 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 related to the Incentive Poolarrangement.Other expenses increased by $9.7 million during the year ended December 31, 2011 as compared to the year ended December 31, 2010. Thischange was primarily attributable to increased occupancy expense of $5.3 million due to additional office space leased as a result of an increase in ourheadcount to support the expansion of our real estate funds during the year ended December 31, 2011 as compared to the same period during 2010 and anincrease in general, administrative and other expenses of $3.7 million driven by increased travel, information technology, recruiting and other expensesincurred associated with the launch of our new real estate funds during the period. These increases were partially offset by decreased professional fees of $1.2million due to lower external accounting, tax, audit, legal and consulting fees incurred during the period.Other Income (Loss)Year Ended December 31, 2012 Compared to Year Ended December 31, 2011Income from equity method investments increased by $0.3 million for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. This change was driven by increases in the fair values of our real estate investments held, primarily relating to Apollo’s ownershipinterest in ARI, which resulted in increased income from equity method investments of $0.8 million during the year ended December 31, 2012 as compared tothe year ended December 31, 2011. This increase was offset by decreased income from equity method investments of $0.5 million from Apollo’s ownershipinterest in the CPI funds, AGRE U.S. Real Estate Fund and other funds.Other income, net decreased by $8.4 million for the year ended December 31, 2012 as compared to the year ended December 31, 2011. Thischange was primarily attributable to a decrease in reimbursed offering costs for the year ended December 31, 2012 as compared to the year endedDecember 31, 2011. During the year ended December 31, 2011, approximately $8.0 million of reimbursed offering costs was recognized as a result of a onetime transaction related to the 2009 launch of ARI. The remaining change was mostly due to losses resulting from fluctuations in exchange rates of foreigndenominated assets and liabilities of subsidiaries during the year ended December 31, 2012 as compared to the year ended December 31, 2011.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. -122-Table of ContentsSummary 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, 2012, 2011 and 2010, 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 referto as our 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 one of ouropportunistic credit funds and expenses, each of which we believe are more stable in nature. Year EndedDecember 31, 2012 2011 2010 (in thousands) Management Business Revenues: Advisory and transaction fees from affiliates $150,044 $82,310 $79,782 Management fees from affiliates 623,041 490,191 431,096 Carried interest income from affiliates 37,842 44,540 47,385 Total Revenues 810,927 617,041 558,263 Expenses: Equity-based compensation 68,942 68,172 30,469 Salary, bonus and benefits 274,574 251,095 249,571 Interest expense 37,116 40,850 35,436 Professional fees 63,250 58,315 60,870 General, administrative and other 86,550 73,972 63,466 Placement fees 22,271 3,911 4,258 Occupancy 37,218 35,816 23,067 Depreciation 10,227 11,132 11,471 Total Expenses 600,148 543,263 478,608 Other Income: Interest income 8,149 4,731 1,508 Other income, net 12,783 10,066 195,255 Total Other Income 20,932 14,797 196,763 Non-Controlling Interests (8,730) (12,146) (16,258) Economic Net Income $222,981 $76,429 $260,160 (1)Excludes professional fees related to the consolidated funds.(2)Excludes general and administrative expenses and interest income related to the consolidated funds.(3)Includes $162.5 million of insurance proceeds related to a litigation settlement included in other income during the year ended December 31, 2010.The financial performance of our incentive business, which is dependent upon quarterly mark-to-market unrealized valuations in accordancewith U.S. GAAP guidance applicable to fair value measurements, includes carried interest income, income from equity method investments, profit sharingexpenses and incentive fee compensation that are associated with our general partner interests in the Apollo funds, which are generally less predictable andmore volatile in nature. -123-(1)(2)(2)(3)Table of Contents Year EndedDecember 31, 2012 2011 2010 (in thousands) Incentive Business Revenues: Carried interest income (loss) from affiliates: Unrealized gains (losses) $1,166,397 $(1,086,600) $1,355,444 Realized gains 997,222 644,653 196,191 Total Revenues 2,163,619 (441,947) 1,551,635 Expenses: Compensation and benefits: Profit sharing expense: Unrealized profit sharing expense 426,098 (370,485) 504,537 Realized profit sharing expense 445,296 307,032 50,688 Total Profit Sharing Expense 871,394 (63,453) 555,225 Incentive fee compensation 739 3,383 20,142 Total Compensation and Benefits 872,133 (60,070) 575,367 Other Income: Net (loss) gains from investment activities (1,142) (5,881) — Income from equity method investments 121,120 10,829 80,919 Total Other Income 119,978 4,948 80,919 Economic Net Income (Loss) $1,411,464 $(376,929) $1,057,187 (1)Included in unrealized carried interest (loss) income from affiliates for the year ended December 31, 2012 was a reversal of $75.3 million of the entiregeneral partner obligation to return previously distributed carried interest income with respect to Fund VI and reversal of previously realized carriedinterest income due to the general partner obligation to return previously distributed carried interest income of $1.2 million and $0.3 million for SOMAand APC, respectively. Included in unrealized carried interest (loss) income from affiliates for the year ended December 31, 2011 was a reversal ofpreviously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $75.3 millionand $18.1 million for Fund VI and SOMA, respectively. Included in unrealized profit sharing expense for the year ended December 31, 2012 was areversal of the entire receivable from Contributing Partners and certain employees of $22.1 million due to the reversal of the general partner obligation.Included in unrealized profit sharing expense for the year ended December 31, 2011 was a 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. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as ofthe balance sheet date. The actual determination and any required payment of any such general partner obligation would not take place until the finaldisposition 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. -124-(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, 2012 2011 2010 (in thousands) Revenues $2,974,546 $175,094 $2,109,898 Expenses 1,472,281 483,193 1,053,975 Other income 140,910 19,745 277,682 Non-Controlling Interests (8,730) (12,146) (16,258) Economic Net Income (Loss) 1,634,445 (300,500) 1,317,347 Non-cash charges related to equity-based compensation (529,712) (1,081,581) (1,087,943) Income tax provision (65,410) (11,929) (91,737) Net (income) loss attributable to Non-Controlling Interests inApollo Operating Group (685,357) 940,312 (27,892) Net loss of Metals Trading Fund — — (2,380) Amortization of intangible assets (43,009) (15,128) (12,778) Net Income (Loss) Attributable to Apollo Global Management, LLC $ 310,957 $(468,826) $ 94,617 Liquidity and Capital ResourcesHistoricalAlthough we have managed our historical liquidity needs by looking at deconsolidated cash flows, our historical consolidated statement of cashflows reflects 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 consolidatedsubsidiaries in our financial 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.While primarily met by cash flows generated through fee income and carried interest income received, working capital needs have also been met(to a limited extent) through borrowings as follows: December 31, 2012 December 31, 2011 OutstandingBalance AnnualizedWeightedAverageInterest Rate OutstandingBalance AnnualizedWeightedAverageInterest Rate (in thousands) AMH Credit Agreement $728,273 4.95% $728,273 5.39% CIT secured loan agreements 9,545 3.47 10,243 3.39 Total Debt $737,818 4.93% $738,516 5.35% (1)Includes the effect of interest rate swaps.We determine whether to make capital commitments to our funds in excess of our minimum required amounts based on a variety of factors,including estimates regarding our liquidity resources over the estimated time period during which commitments will have to be funded, estimates regarding theamounts of capital that may be appropriate for other funds that we are in the process of raising or are considering raising, and our general working capitalrequirements.We have made one or more distributions to our Managing Partners and Contributing Partners, representing all of the undistributed earningsgenerated by the businesses contributed to the Apollo -125-(1)(1)Table of ContentsOperating Group prior to the Private Offering Transactions. For this purpose, income attributable to carried interest on private equity funds related to eithercarry-generating transactions that closed prior to the Private Offering Transactions which closed in July 2007 or carry-generating transactions to which adefinitive agreement was executed, but that did not close, prior to the Private Offering Transactions are treated as having been earned prior to the PrivateOffering Transactions.Cash FlowsSignificant amounts from our consolidated statements of cash flows for the years ended December 31, 2012, 2011 and 2010 are summarized anddiscussed within the table and corresponding commentary below:Year Ended December 31, 2012 Compared to the Years Ended December 31, 2011 and 2010 Year EndedDecember 31, 2012 2011 2010 (in thousands) Operating Activities $265,551 $743,821 $(218,051) Investing Activities (84,791) (129,536) (9,667) Financing Activities 21,960 (251,823) 243,761 Net Increase in Cash and Cash Equivalents $202,720 $362,462 $16,043 Operating ActivitiesNet cash provided by operating activities was $265.6 million during the year ended December 31, 2012. During this period, there was$3,047.8 million in net income, to which $598.7 million of equity-based compensation, $1,951.9 million gain on business acquisitions and non-cashexpenses were added to reconcile net loss to net cash provided by operating activities. Additional adjustments to reconcile cash provided by operating activitiesduring the year ended December 31, 2012 included $7,182.4 million in proceeds from sales of investments held by the consolidated VIEs, $497.7 millionincrease in net unrealized losses on debt and $361.6 million increase in profit sharing payable. These favorable cash adjustments were offset by$458.0 million in net unrealized gains from investments held by the consolidated funds and VIEs, a $103.8 million decrease in due to affiliates,$348.1 million change in cash held at consolidated VIEs and $973.6 million increase in carried interest receivable and $7,525.5 million of purchases ofinvestments held by the consolidated VIEs.Net cash provided by operating activities was $743.8 million during the year ended December 31, 2011. During this period, there was$1,304.2 million in net losses, to which $1,149.8 million of equity-based compensation and $196.2 million gain on business acquisitions, non-cashexpenses were added to reconcile net loss to net cash provided by operating activities. Additional adjustments to reconcile cash provided by operating activitiesduring the year ended December 31, 2011 included $1,530.2 million in proceeds from sales of investments held by the consolidated VIEs, $113.1 million innet unrealized losses from investments held by the consolidated funds and VIEs, a $43.8 million increase in due to affiliates and $998.5 million decrease incarried interest receivable. The decrease in our carried interest receivable balance during the year ended December 31, 2011 was driven primarily by$304.5 million of carried interest 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. These favorable cash adjustments were offset by $1,294.5 million of purchases of investments held by the consolidated VIEs, $325.2million decrease in profit sharing 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 millionin net income, to which $87.6 million of cash held by the consolidated VIEs, $1,240.8 million in net purchases of investments primarily by the consolidatedVIEs and $416.6 million of net unrealized gains from investment activities of consolidated funds and consolidated VIEs were each added to reconcile netincome to net cash used in operating activities. Additional adjustments to reconcile cash used in operating activities during the year ended December 31, 2010included a $1,383.2 million increase in our carried interest receivables. The increase in our carried -126-Table of Contentsinterest receivable balance during the year ended December 31, 2010 was driven by a $1,585.9 million increase in the fair value of the funds for which we actas general partner, offset by fund cash distributions of $204.4 million. These adjustments were offset by $1,118.4 million of equity-based compensation, anon-cash expense, as well as $503.6 million increase in our profit sharing payable, which was also primarily driven by increases in the fair value of thefunds for which we act as general partner. Additional offsets include $627.3 million of sales of investments held by the consolidated VIEs, and a $107.9million increase in other liabilities of the consolidated VIEs, which is primarily due to the refinancing of a portfolio investment.The operating cash flow amounts from the Apollo funds and consolidated VIEs represent the significant variances between net income (loss) andcash flow from operations and were classified as operating activities pursuant to the AICPA Audit and Accounting Guide, Investment Companies. Theincreasing capital needs reflect the growth of our business while the fund-related requirements vary based upon the specific investment activities beingconducted at a point in time. These movements do not adversely affect our liquidity or earnings trends because we currently have sufficient cash reservescompared to planned expenditures.Investing ActivitiesNet cash used in investing activities was $84.8 million for the year ended December 31, 2012, which was primarily comprised of $11.3 millionin purchases of fixed assets, $99.2 million relating to the acquisition of Stone Tower (see note 3 to our consolidated financial statements), $126.9 million ofcash contributions to equity method investments, partially offset by $152.6 million of cash distributions from equity method investments. Cashcontributions to equity method investments were primarily related to EPF I, EPF II, ASCP, Fund VII, AINV and AGRE U.S. Real Estate Fund. Cashdistributions from equity method investments were primarily related to Fund VII, ACLF, AGRE U.S. Real Estate Fund, COF I, COF II, Artus, EPF I andEPF II.Net cash used in investing activities was $129.5 million for the year ended December 31, 2011, which was primarily comprised of $21.3million in purchases of fixed assets, $64.2 million of cash contributions to equity method investments, a $52.1 million investment in HFA, the $29.6million for the acquisition of Gulf Stream and $26.0 million for the acquisition of investments in the Apollo Senior Loan Fund, partially offset by $64.8million of cash distributions from equity method investments. Cash contributions to equity method investments were primarily related to EPF I, Fund VII andAGRE U.S. Real Estate Fund. Cash distributions from equity method investments were primarily related to Fund VII, ACLF, COF I, COF II, Artus, EPF Iand 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 millionof cash contributions to equity method investments and $5.6 million of fixed asset purchases, offset by $21.6 million in cash received from businessacquisitions and dispositions and $38.9 million of cash distributions from equity method investments. Cash contributions to equity method investments wereprimarily related to Fund VII, COF I, COF II, Palmetto and EPF I. Cash distributions from equity method investments were primarily related to Fund VII,ACLF, COF I, COF II and Vantium C.Financing ActivitiesNet cash provided by financing activities was $22.0 million for the year ended December 31, 2012, which was primarily comprised of $1,413.3million related to issuance of debt by consolidated VIEs and $4.1 million in contributions from Non-Controlling Interests in consolidated entities. This amountwas offset by $515.9 million in repayment of term loans by consolidated VIEs, $486.7 million in distributions by consolidated VIEs, $335.0 million ofdistributions paid to Non-Controlling Interests in the Apollo Operating Group, $202.4 million in distributions and $26.0 million related to employee taxwithholding payments in connection with deliveries of Class A shares in settlement of RSUs, $8.8 million in distributions to Non-Controlling Interests inconsolidated entities and $102.1 million in purchases of AAA Units. -127-Table of ContentsNet cash used in financing activities was $251.8 million for the year ended December 31, 2011, which was primarily comprised of $415.9million in repayment 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.DistributionsThe 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): Distributions Declaration Date Distributions perClass A ShareAmount Distributions Payment Date Distributions toAGM Class AShareholders Distributions toNon-ControllingInterest Holdersin the ApolloOperating Group TotalDistributions fromApollo OperatingGroup DistributionEquivalents onParticipatingSecurities 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 February 12, 2012 0.46 February 29, 2012 58.1 110.4 168.5 10.3 May 8, 2012 0.25 May 30, 2012 31.6 60.0 91.6 6.2 August 2, 2012 0.24 August 31 2012 31.2 57.6 88.8 5.3 November 9, 2012 0.40 November 30, 2012 52.0 96.0 148.0 9.4 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 toraise additional 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, its shareholders subsequently approved a monetization plan. The primary objective of the monetization plan is to maximize shareholder recovery valueby (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. TheCompany waived 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 limit the adverse impact that deteriorating market conditions were having on AIE I’s performance. AIE I management fees were terminated onAugust 23, 2012 as the fund received a majority vote from shareholders to approve the wind down resolution to terminate the management agreement.Management elected not to seek shareholder approval for a one-year extension and currently aims to wind up the company in a quick and cost efficient manner.Management anticipates that all related corporate entities -128-Table of Contentswill be dissolved by the end of 2013 and a final distribution will be made to shareholders of remaining cash, if any, in the first quarter of 2013. However,there can be no assurances that this timeframe will be met.On October 31, 2012, AAA and Apollo Alternative Assets entered into an amendment to the services agreement pursuant to which ApolloAlternative Asset manages AAA’s assets in exchange for a quarterly management fee. Pursuant to the amendment, the parties agreed that there will be nomanagement fees payable by AAA with respect to the Excluded Athene Shares. Likewise, affiliates of Apollo Alternative Assets will not be entitled to receiveany carried interest in respect of the Excluded Athene Shares. AAA will continue to pay Apollo Alternative Assets the same management fee on AAA’sinvestment in Athene (other than the Excluded Athene Shares), except that Apollo Alternative Assets agreed that AAA’s obligation to pay the existingmanagement fee shall terminate on December 31, 2014. The amendment provides for Apollo Alternative Assets to receive a formulaic unwind of itsmanagement fee in the event that AAA makes a tender offer for all or substantially all of its outstanding units where the consideration is to be paid in shares ofAthene Holding Ltd (or if AAA accomplishes a similar transaction using an alternative structure): up to a cap of $30.0 million if the realization eventcommences in 2013, $25.0 million if the realization event commences in 2014, $20.0 million if the realization event commences in 2015 and zero if therealization event commences in 2016 or thereafter. Apollo Alternative Assets has further agreed that AAA has the option to settle all such management feespayable either in cash or shares of Athene Holding Ltd. valued at the then fair market value (or an equivalent derivative). Carried interest payable to an affiliateof Apollo Alternative Assets will be paid in shares of Athene Holding Ltd. (valued at the then fair market value) if there is a distribution in kind or paid in cashif AAA sells the shares of Athene Holding Ltd.On April 20, 2010, the Company announced that it entered into a strategic relationship agreement with the CalPERS. The strategic relationshipagreement provides that Apollo will reduce fees charged to CalPERS on funds it manages, or in the future will manage, solely for CalPERS by $125 millionover a five-year period or as close a period as required to provide CalPERS with that benefit. The agreement further provides that Apollo will not use aplacement agent in connection with securing any future capital commitments from CalPERS. In March 2012, the Company received a notice of withdrawalfrom CalPERS, to withdraw a total of $400 million from SOMA. We currently expect the capital to be distributed over the next several years. ThroughDecember 31, 2012, the Company has reduced fees charged to CalPERS on the funds it manages by approximately $66.9 million.An increase in the fair value of our funds’ investments, by contrast, could favorably impact our liquidity through higher management fees wherethe management 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.The Company granted approximately 5.4 million and 8.1 million RSUs to its employees during the years ended December 31, 2012 and 2011,respectively. The average estimated fair value per share on the grant date was $13.68 and $14.45 with a total fair value of the grants of $73.5 million and$116.6 million at December 31, 2012 and 2011, respectively. This will impact the Company’s compensation expense as these grants are amortized over theirvesting term of three to six years. The Company expects to -129-Table of Contentsincur annual compensation expenses on all grants, net of forfeitures, of approximately $82.7 million, $38.7 million, $22.7 million, $10.5 million, $4.5million and $2.7 million during the years ended December 31, 2013, 2014, 2015, 2016, 2017 and 2018, respectively.Although we expect to pay distributions according to our 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 to pay the intended distributions. To the extent we do not have cash on hand sufficient to paydistributions, we may have to borrow funds to pay distributions, or we may determine not to pay distributions. The declaration, payment and determinationof the amount of our quarterly distributions are 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 subsidiaries of the ApolloOperating Group that act as general partner of such funds in the event that certain specified return thresholds are not ultimately achieved. The ManagingPartners, Contributing Partners and certain other investment professionals have personally guaranteed, to the extent of their ownership interest, subject tocertain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited toa particular Managing Partner’s or Contributing Partner’s distributions. Pursuant to the shareholders agreement dated July 13, 2007 (the “Managing PartnersShareholders Agreement”), we agreed to indemnify each of our Managing Partners and certain Contributing Partners against all amounts that they paypursuant to any of these personal guarantees in favor of Fund IV, Fund V and Fund VI (including costs and expenses related to investigating the basis for orobjecting to any claims made in respect of the guarantees) for all interests that our Managing Partners and Contributing Partners have contributed or sold to theApollo 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.On February 8, 2013, the Company declared a cash distribution of $1.05 per Class A share, which was paid on February 28, 2013 to holders ofrecord on February 20, 2013.On January 9, 2013, the Company issued 150,000 Class A shares in settlement of vested RSUs. This issuance caused the Company’sownership interest in the Apollo Operating Group to increase from 35.1% to 35.2%.On January 28, 2013, the Company issued 23,231 Class A shares in settlement of vested RSUs. The issuance had minimal impact on theCompany’s ownership in the Apollo Operating Group.On February 11, 2013, the Company issued 1,912,632 Class A shares in settlement of vested RSUs. This issuance caused the Company’sownership interest in the Apollo Operating Group to increase from 35.2% to 35.5%.Distributions to Managing Partners and Contributing PartnersThe three Managing Partners who became employees of Apollo on July 13, 2007 are each entitled to a $100,000 base salary. Additionally, ourManaging Partners can receive other forms of compensation. Any additional consideration will be paid to them in their proportional ownership interest inHoldings. Additionally, 85% of any tax savings APO Corp. recognizes as a result of the tax receivable agreement will be paid to any exchanging or sellingManaging Partners.It should be noted that subsequent to the 2007 Reorganization, the Contributing Partners retained ownership interests in subsidiaries of the ApolloOperating Group. Therefore, any distributions that flow up to management or general partner entities in which the Contributing Partners retained ownership -130-Table of Contentsinterests are shared pro rata with the Contributing Partners who have a direct interest in such entities prior to flowing up to the Apollo Operating Group. Thesedistributions are considered compensation expense after the 2007 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 valueof the underlying fund investments would result in changes to Apollo Global Management, LLC’s profit sharing payable. • Net Management Fee Income—distributable cash determined by the general partner of each management company, fromdirect ownership of the management company entity. The Contributing Partners will continue to receive net management feeincome payments based on the interests they retained in management companies directly. Such payments are treated ascompensation expense after the 2007 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 anyexchanging or selling Contributing 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 financialstatements, which have been prepared in accordance with U.S. GAAP. We also report segment information from our consolidated statements of operations andinclude a supplemental performance measure, ENI, for our private equity, credit 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 credit management companies. 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.The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that could affect thereported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual resultscould differ 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. -131-Table of ContentsConsolidationApollo 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 (e.g., AAA and Apollo Senior 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. Acontrolling 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.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’sinvolvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., carried interest and managementfees), would give it a controlling financial interest. When the VIE has qualified for the deferral of the amended consolidation rules in accordance with U.S.GAAP, the analysis is based on previous consolidation rules, which require an analysis to determine whether (a) an entity in which Apollo holds a variableinterest is a VIE and (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g.,carried interest and management fees), would be expected to absorb a majority 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 entity mayaffect 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 -132-Table of Contentsconsolidated entities in the consolidated statement of financial condition and within net gains from investment activities of consolidated VIEs and net (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. The differencebetween the fair value of the assets and liabilities of these VIEs is presented within appropriated partners’ capital in the consolidated statements of financialcondition as these VIEs are funded solely with debt. Changes in the fair value of the assets and liabilities of these VIEs and the related interest and otherincome is presented within net gains from investment activities of consolidated variable interest entities and net (income) loss attributable to Non-ControllingInterests in the consolidated statement of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIE’s note holders,not Apollo, will ultimately receive the benefits or absorb the losses associated with the VIE’s assets and liabilities.Assets and liability amounts of the consolidated VIEs are shown in separate sections within the consolidated statement of financial condition as ofDecember 31, 2012 and 2011.Additional disclosures regarding VIEs are set forth in note 5 to our consolidated financial statements. Inter-company transactions and balances, ifany, have been eliminated in consolidation.Revenue RecognitionCarried Interest Income from Affiliates. We earn carried interest income from our funds as a result of such funds achieving specifiedperformance criteria. Such carried interest income generally is earned based upon a fixed percentage of realized and unrealized gains of various funds aftermeeting any applicable hurdle rate or threshold minimum. Carried interest income from certain of the funds that we manage is subject to contingent repaymentand is generally paid to us as particular investments made by the funds are realized. If, however, upon liquidation of a fund, the aggregate amount paid to usas carried 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 requiredto be returned by us to that fund. For a majority of our credit funds, once the annual carried interest income has been determined, there generally is no look-back to prior periods for a potential contingent repayment; however, carried interest income on certain other credit funds can be subject to contingentrepayment 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 management fees basedon a formula, and under this method, we accrue carried interest income quarterly based on fair value of the underlying investments and separately assess ifcontingent 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 (loss) income from affiliates that was generated from realized versusunrealized losses. See “—Investments, at Fair Value” below for further discussion related to significant estimates and assumptions used for determining fairvalue of the underlying investments in our private equity, credit 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 thecommitted capital or invested capital. The corresponding fee calculations that consider committed capital or invested capital are both objective in nature andtherefore do not require the use of significant estimates or assumptions. Management fees related to our credit 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 credit management fee calculations that consider net asset value, gross assets, adjusted cost of all unrealized portfolioinvestments 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 -133-Table of Contents“—Investments, at Fair Value” section below for further discussion related to significant estimates and assumptions used for determining fair value of theunderlying investments in our credit and private equity funds.Investments, at Fair ValueThe Company follows U.S. GAAP attributable to fair value measurements, which among other things, requires enhanced disclosures aboutinvestments that are measured and reported at fair value. Investments at fair value represent investments of the consolidated funds, investments of theconsolidated VIEs and certain financial instruments for which the fair value option was elected. The unrealized gains and losses resulting from changes in thefair value are reflected as net gains (losses) from investment activities and net gains (losses) from investment activities of the consolidated variable interestentities, respectively, in the consolidated statements of operations. In accordance with U.S. GAAP, investments measured and reported at fair value areclassified 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 inLevel I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for theseinvestments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date,and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this categoryinclude corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is basedon observable inputs. These investments exhibit higher levels of liquid market observability as compared to Level III investments. The Companysubjects broker quotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a LevelII investment. These criteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained brokerquotes, and the percentage deviation from independent pricing services.Level III—Pricing inputs are unobservable for the investment and includes situations where there is little observable market activity for theinvestment. The inputs into the determination of fair value may require significant management judgment or estimation. Investments that areincluded in this category generally include general and limited partnership interests in corporate private equity and real estate funds, opportunisticcredit funds, distressed debt and non-investment grade residual interests in securitizations and CDOs and CLOs 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 tovarious criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment.Some of the factors we consider include the number of broker quotes we obtain, the quality of the broker quotes, the standard deviations of theobserved broker quotes and the corroboration of the broker quotes to independent pricing services.In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s 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 valuehierarchy, 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 -134-Table of Contentssuch 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 as part of other comprehensive income (loss), net of tax in theconsolidated statements of comprehensive income (loss). The carrying amounts of equity method investments are reflected in investments in the consolidatedstatements of financial condition. As the underlying entities that the Company manages and invests in are, for U.S. GAAP purposes, primarily investmentcompanies which reflect their investments at estimated fair value, the carrying value of the Company’s equity method investments in such entities are at fairvalue.Private Equity Investments. The majority of the illiquid investments within our private equity funds are valued using the market approach,which provides an indication of fair value based on a comparison of the subject Company to comparable publicly traded companies and transactions in theindustry.Market Approach. The market approach is driven by current market conditions, including actual trading levels of similar companies and, tothe extent available, actual transaction data of similar companies. Judgment is required by management when assessing which companies are similar to thesubject company being valued. Consideration may also be given to any of the following factors: (1) the subject company’s historical and projected financialdata; (2) valuations given to comparable companies; (3) the size and scope of the subject company’s operations; (4) the subject company’s individualstrengths and weaknesses; (5) expectations relating to the market’s receptivity to an offering of the subject company’s securities; (6) applicable restrictions ontransfer; (7) industry and market information; (8) general economic and market conditions; and (9) other factors deemed relevant. Market approach valuationmodels typically employ a multiple that is based on one or more of the factors described above. Sources for gaining additional knowledge related to comparablecompanies include public filings, annual reports, analyst research reports, and press releases. Once a comparable company set is determined, we reviewcertain aspects of the subject company’s performance and determine how its performance compares to the group and to certain individuals in the group. Wecompare certain measurements such as EBITDA margins, revenue growth over certain time periods, leverage ratios, and growth opportunities. In addition, wecompare our entry multiple and its relation to the comparable set at the time of acquisition to understand its relation to the comparable set on each measurementdate.Income Approach. For investments where the market approach does not provide adequate fair value information, we rely on the incomeapproach. The income approach is also used to value investments or validate the market approach within our private equity funds. The income approachprovides 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 widelyused methodology used in the income approach is a discounted cash flow method. Inherent in the discounted cash flow method are significant assumptionsrelated to the subject company’s expected results and a calculated discount rate, which is normally based on the subject company’s weighted average cost ofcapital, or “WACC.” The WACC represents the required rate of return on total capitalization, which is comprised of a required rate of return on equity, plusthe current 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 marketprices. Such prices are generally based on the close price on the date of determination.On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuationresults related to our private equity investments. -135-Table of ContentsManagement also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limitedprocedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist managementwith validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuationapproaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analysis. However, because of the inherentuncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investmentsexisted, and the differences could be material.Credit Investments. The majority of investments in Apollo’s credit funds are valued based on quoted market prices and valuation models. Debtand equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing recognized pricing services,market participants or other sources. The credit funds also enter into foreign currency exchange contracts, total return swap contracts, credit default 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. Total returnswap and credit default swap contracts are recorded at fair value as an asset or liability with changes in fair value recorded as unrealized appreciation ordepreciation. Realized gains or losses are recognized at the termination of the contract based on the difference between the close-out price of the total return orcredit default swap contract and the original contract price.Forward contracts are valued based on market rates obtained from counterparties or prices obtained from recognized financial data serviceproviders. When determining fair value pricing when no observable market value exists, the value attributed to an investment is based on the enterprise valueat the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.Valuation approaches used to estimate the fair value of illiquid investments included in Apollo’s credit investments also may include the market approach andthe income approach, as previously described above. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risksand foreign currency risks.On a quarterly basis, Apollo also utilizes a valuation committee, consisting of members from senior management, to review and approve thevaluation results related to our credit investments. The Company performs various back-testing procedures to validate their valuation approaches, includingcomparisons between expected and observed outcomes, forecast evaluations 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 Apollo’s opportunistic and value added real estate funds, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable 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.On a quarterly basis, Apollo also utilizes a valuation committee, consisting of members from senior management, to review and approve thevaluation results related to our real estate investments. The Company performs various back-testing procedures to validate their valuation approaches,including comparisons between expected and observed outcomes, forecast evaluations and variance analysis.The fair values of the investments in our private equity, credit and real estate funds can be impacted by changes to the assumptions used in theunderlying valuation models. For further discussion on the impact of changes to valuation assumptions refer to “Item 7A. Quantitative and QualitativeDisclosures -136-Table of ContentsAbout Market Risk—Sensitivity”. There have been no material changes to the underlying valuation models during the periods that our financial results arepresented.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 theamount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.Except for the Company’s debt obligation related to the AMH Credit Agreement, Apollo’s financial instruments are recorded at fair value or atamounts whose carrying value approximates fair value. See “—Investments, at Fair Value” above. While Apollo’s valuations of portfolio investments arebased 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 $795.6 millionbased on a yield analysis using available market data of comparable securities with similar terms and remaining maturities as of December 31, 2012.However, the carrying value that is recorded on the consolidated statement of financial condition is the amount for which we expect to settle the long term debtobligation. The Company has determined that the long term debt obligation related to the AMH Credit Agreement would be categorized as a Level III liability inthe fair-value hierarchy.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 orcomparable over-the-counter quotation systems are valued based on the last reported sale price at that date. If no sales of such investments are reported on suchdate, and in the case of over-the-counter securities or other investments for which the last sale date is not available, valuations are based on independent marketquotations obtained from market participants, recognized pricing services or other sources deemed relevant, and the prices are based on the average of the“bid” and “ask” prices, or at ascertainable prices at the close of business on such day. Market quotations are generally based on valuation pricing models ormarket transactions of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, amongother factors. When market quotations are not available, a model based approach is used to determine fair value.The consolidated VIEs also have debt obligations that are recorded at fair value. The primary valuation methodology used to determine fair valuefor debt obligation is market quotation. Prices are based on the average of the “bid” and “ask” prices. In the event that market quotations are not available, amodel based approach is used. The valuation approach used to estimate the fair values of debt obligations for which market quotations are not available is thediscounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interest payments andquarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and credit rating. Managementuses 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 andis applied to financial instruments on an individual basis at initial recognition. Apollo has applied the fair value option for certain corporate loans, otherinvestments and debt obligations held by these entities that otherwise would not have been carried at fair value. For the convertible notes issued by HFA, Apollohas elected to separately present interest income from other changes in the fair value of the convertible notes within the consolidated statement of operations.Refer to note 5 to our consolidated financial statements for further disclosure on financial instruments of the consolidated VIEs for which the fair value optionhas been elected. -137-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, 2012, 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 and benefits, profit sharing expense, incentive fee compensation, and equity-based compensation.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.From time to time, the Company may assign profits interests received in lieu of management fees to certain investment professionals. Suchassignments of profits interests are treated as compensation and benefits when assigned.The Company sponsors a 401(k) Savings Plan whereby U.S.-based employees are entitled to participate in the plan based upon satisfying 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, 2012, 2011 and 2010, respectively.Profit Sharing Expense. Profit sharing expense is primarily a result of agreements with our Contributing Partners and employees to compensatethem based on the ownership interest they have in the general partners of the Apollo funds. Therefore, movements in the fair value of the underlyinginvestments in the funds we manage and advise affect the profit sharing expense. As of December 31, 2012, our total private equity investments wereapproximately $25.9 billion. The Contributing Partners and employees are allocated approximately 30% to 50% of the total carried interest income which isdriven primarily by changes in fair value of the underlying fund’s investments and is treated as compensation expense. Additionally, profit sharing expensespaid may be subject to clawback from employees, former employees and Contributing Partners.Changes in the fair value of the contingent obligations that were recognized in connection with certain Apollo acquisitions will be reflected in theCompany’s consolidated settlement of operations as profit sharing expense.Profit sharing expense also includes expense resulting from profits interests issued to certain employees who are entitled to a share in earnings ofand any appreciation of the value in a subsidiary of the Company during the term of their employment. Profit sharing expense related to these profits interestsis recognized ratably over the requisite service period and thereafter will be recognized at the time the distributions are determined.In June 2011, the Company adopted a performance based incentive arrangement for certain Apollo partners and employees designed to moreclosely align compensation on an annual basis with the overall realized performance of the Company. This arrangement, which we refer to herein as theIncentive Pool, enables certain partners and employees to earn discretionary compensation based on carried interest realizations earned by the Company in agiven year, which amounts are reflected in profit sharing expense in 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 creditfunds, based on performance for the year. Incentive fee compensation expense is recognized on accrual basis as the related carried interest income is earned. -138-Table of ContentsIncentive fee compensation expense may be subject to reversal during the interim period where there is a decline in the related carried interest income; however itis not subject to reversal once the carried interest income crystallizes.Equity-Based Compensation. Equity-based compensation is accounted for in accordance with U.S. GAAP, which requires that the cost ofemployee services received in exchange for an award of equity instruments is generally measured based on the grant date fair value of the award. Equity-basedawards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service arerecognized over the relevant service period. Further, as required under U.S. GAAP, the Company estimates forfeitures using industry comparables orhistorical trends for equity-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, and AMTG RSUs. For more information regarding Apollo’s equity-based compensation awards, see note 14 to our consolidated financial statements. The Company’s assumptions made to determine the fair value on grant dateand the estimated forfeiture rate are embodied in the calculations of compensation expense.Another significant part of our compensation expense is derived from amortization of the AOG Units subject to forfeiture by our ManagingPartners and Contributing Partners. The estimated fair value was determined and recognized over the forfeiture period on a straight-line basis. We haveestimated a 0% and 3% forfeiture rate for our Managing Partners and Contributing Partners, respectively, based on the Company’s historical attrition rate forthis level of staff as well as industry comparable rates. If either the Managing Partners or Contributing Partners are no longer associated with Apollo or if thereis no turnover, we will revise our estimated compensation expense to the actual amount of expense based on the units vested at the balance sheet date inaccordance 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 Partnersand Contributing Partners as well as the lack of rights to participate in future Apollo Global Management, LLC equity offerings. These awards have thefollowing characteristics: • Awards granted to the Managing Partners (i) are not permitted to be sold to any parties outside of the Apollo GlobalManagement, LLC control group and transfer restrictions lapse pro rata during the forfeiture period over 60 or 72 months,and (ii) allow the Managing Partners to initiate a change in control. • Awards granted to the Contributing Partners (i) are not permitted to be sold or transferred to any parties except to the ApolloGlobal Management, LLC control group and (ii) the transfer restriction period lapses over six years (which is longer than theforfeiture period which lapses ratably over 60 months).As noted above, the AOG Units issued to the Managing Partners and Contributing Partners have different restrictions which affect the liquidity ofand the 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 security 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 the AOG Units granted to the Contributing Partners and aminority interest consideration as compared to the units sold in the Strategic Investors Transaction in 2007. The combination of these adjustments yielded afair value estimate of 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. Thismodel has gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and thelength of restriction. The concept underpinning the Finnerty Model is that restricted security cannot be sold over a certain period of time. Further simplified, arestricted share 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 (alsoknown -139-Table of Contentsas an “Asian Put Option”). If we price an Asian Put Option and compare this value to that of the assumed fully marketable underlying security, we caneffectively estimate 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 assumptionswere as 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%. Thismarketability discount, along with adjustments to account for the existence of liquidity clauses and consideration of non-controlling interests as compared tounits sold in the Strategic Investors Transaction in 2007, resulted in an overall 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 ofthe grants 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 TaxesThe Apollo Operating Group and its subsidiaries generally operate as partnerships for U.S. Federal income tax purposes. As a result, except asdescribed below, the Apollo Operating Group has not been subject to U.S. income taxes. However, these entities in some cases are subject to NYC UBT andnon-U.S. entities, in some cases, are subject 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 thetax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The taxbenefit is measured as the largest amount of benefit that has a greater than 50% 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 to determine whether or not we have uncertain tax positions that require financial statement recognition.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. -140-Table of ContentsFair Value MeasurementsThe following table summarizes the valuation of Apollo’s investments in fair value hierarchy levels as of December 31, 2012 and 2011: Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Assets, at fair value: Investment in AAA Investments $— $— $— $— $1,666,448 $1,480,152 $1,666,448 $1,480,152 Investments held by Apollo Senior Loan Fund — — 27,063 23,757 590 456 27,653 24,213 Investments in HFA and Other — — — — 50,311 47,757 50,311 47,757 Total $— $— $27,063 $23,757 $1,717,349 $1,528,365 $1,744,412 $1,552,122 Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Liabilities, at fair value: Interest rate swap agreements $— $— $— $3,843 $— $— $— $3,843 Total $— $— $— $3,843 $— $— $— $3,843 There was a transfer of investments from Level III into Level II as well as a transfer from Level II into Level III relating to investments held by theApollo Senior Loan Fund during 2012, as a result of subjecting the broker quotes on these investments to various criteria which include the number andquality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services. There were notransfers between Level I, II or III during the year ended December 31, 2011 relating to assets and liabilities, at fair value, noted in 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, 2012 2011 2010 Balance, Beginning of Period $1,480,152 $1,637,091 $1,324,939 Purchases — 432 375 Distributions (101,844) (33,425) (58,368) Change in unrealized gains (losses), net 288,140 (123,946) 370,145 Balance, End of Period $1,666,448 $1,480,152 $1,637,091 -141-Table of ContentsThe following table summarizes the changes in the investment in HFA and Other Investments, which are measured at fair value and characterizedas Level III investments: For the Year EndedDecember 31, 2012 2011 Balance, Beginning of Period $47,757 $— Acquisitions related to consolidated fund 46,148 — Purchases 5,759 57,509 Deconsolidation (48,037) — Director Fees — (1,802) Expenses incurred — (2,069) Change in unrealized losses (1,316) (5,881) Balance, End of Period $50,311 $47,757 (1)During the third quarter of 2012, the Company deconsolidated GSS Holding (Cayman), L.P., which was consolidated by the Company during thesecond quarter of 2012.The change in unrealized losses, net has been recorded within the caption “Net gains (losses) from investment activities” in the consolidatedstatements of operations.The following table summarizes the changes in the Apollo Senior Loan Fund, which is measured at fair value and characterized as a Level IIIinvestment for the years ended December 31, 2012 and 2011: For the Year EndedDecember 31, 2012 2011 Balance, Beginning of Period $456 $— Acquisition — 456 Purchases of investments 496 — Sale of investments (1,291) — Realized gains 20 — Change in unrealized gains 8 — Transfers out of Level III (935) — Transfers into Level III 1,836 — Balance, End of Period $590 $456 The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securitiesheld by AAA Investments as of December 31, 2012 and 2011: Private Equity December 31, 2012 December 31, 2011 % ofInvestmentof AAA % ofInvestmentof AAA Approximate values based on net asset value of the underlying funds,which are based on the funds underlying investments that arevalued using the following: Discounted cash flow models $1,581,975 98.6% $643,031 38.4% Comparable company and industry multiples — — 749,374 44.6 Listed quotes 22,029 1.4 139,833 8.3 Broker quotes — — 179,621 10.7 Other net liabilities — — (33,330) (2.0) Total Investments 1,604,004 100.0% 1,678,529 100.0% Other net assets (liabilities) 62,444 (198,377) Total Net Assets $1,666,448 $1,480,152 (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. Balance at December 31, 2012 is primarily comprised of$113.3 million in notes receivable from affiliate. Balance at December 31, 2011 was primarily -142-(1)(1)(1)(2)Table of Contents comprised of $402.5 million in long-term debt offset by cash and cash equivalents. Carrying values approximate fair value for other assets andliabilities (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, 2012 and 2011: Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Investments, at fair value $168 $— $11,045,902 $3,055,357 $1,643,465 $246,609 $12,689,535 $3,301,966 Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Liabilities, at fair value $— $— $— $— $11,834,955 $3,189,837 $11,834,955 $3,189,837 (1)During the first quarter of 2011, one of the consolidated VIEs sold all of its investments. The consolidated VIE had a net investment gain of $16.0million relating to the sale for the year ended December 31, 2011, which is reflected in the net (losses) gains from investment activities of consolidatedvariable 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 ofnotes and loans, the valuations of which are discussed further in note 2 to our consolidated financial statements. All Level II investments were valued usingbroker quotes. Transfers of investments out of Level III and into Level II or Level I, if any, are accounted for as of the end of the reporting period in which thetransfer 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 years ended December 31, 2012, 2011 and 2010: For the Year EndedDecember 31, 2012 2011 2010 Balance, Beginning of Period $246,609 $170,369 $— Acquisition of VIEs 1,706,145 335,353 — Transition adjustment relating of consolidation of VIE — — 1,102,114 Deconsolidation of VIE — — (20,751) Elimination of investments attributable to consolidation of VIEs (69,437) — — Purchases 1,236,232 663,438 840,926 Sale of investments (1,561,589) (273,719) (125,638) Net realized gains (losses) 21,603 980 131 Changes in net unrealized (losses) gains (56,013) (7,669) 29,981 Transfers out of Level III (712,040) (802,533) (1,663,755) Transfers into Level III 831,955 160,390 7,361 Balance, End of Period $1,643,465 $246,609 $170,369 Changes in net unrealized gains (losses) included in Net (Losses) Gainsfrom Investment Activities of consolidated VIEs related toinvestments still held at reporting date $7,464 $(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 quoteson these investments to various criteria which -143-(1)Table of Contentsinclude the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricingservices.The following table summarizes the changes in liabilities of consolidated VIEs, which are measured at fair value and characterized as Level IIIliabilities for the years ended December 31, 2012, 2011 and 2010: For the Year EndedDecember 31, 2012 2011 2010 Balance, Beginning of Period $3,189,837 $1,127,180 $— Acquisition of VIEs 7,317,144 2,046,157 — Transition adjustment relating to consolidation of VIE — — 706,027 Additions 1,639,271 454,356 1,050,377 Repayments (741,834) (415,869) (331,120) Net realized gains on debt — (41,819) (21,231) Changes in net unrealized losses from debt 497,704 19,880 55,040 Deconsolidation of VIE — — (329,836) Elimination of debt attributable to consolidated VIEs (67,167) (48) (2,077) Balance, End of Period $11,834,955 $3,189,837 $1,127,180 Changes in net unrealized losses (gains) included in Net (Losses) Gainsfrom Investment Activities of consolidated VIEs related to liabilities stillheld at reporting date $446,649 $(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 financialstatements.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, 2012, the Company’s material contractual obligations consist of lease obligations, contractual commitments as part of theongoing operations of the funds and debt obligations. Fixed and determinable payments due in connection with these obligations are as follows: 2013 2014 2015 2016 2017 Thereafter Total (in thousands) Operating lease obligations $36,109 $36,853 $36,105 $35,265 $32,680 $74,174 $251,186 Other long-term obligations 7,418 700 250 — — — 8,368 AMH Credit Agreement 29,503 84,457 77,402 25,367 623,478 — 840,207 CIT secured loan agreements 9,612 — — — — — 9,612 Total Obligations as of December 31, 2012 $82,642 $122,010 $113,757 $60,632 $656,158 $74,174 $1,109,373 (1)The Company has entered into sublease agreements and is expected to contractually receive approximately $14.5 million over the remaining periods of2013 and thereafter.(2)Includes (i) payments on management service agreements related to certain assets and (ii) payments with respect to certain consulting agreements enteredinto by the Company. Note that a significant portion of these costs are reimbursable by funds.(3)$723.3 million ($995.0 million portion less amount repurchased) of the outstanding AMH loan matures in January 2017 and the remaining $5.0million portion of the loan matures in April 2014. Amounts represent estimated interest payments until the loan matures using an estimated weightedaverage annual interest rate of 4.06%. Note: Due to the fact that the timing of certain amounts to be paid cannot be determined or for other reasons discussed below, the following contractualcommitments have not been presented in the table above. (i)As noted previously, we have entered into a tax receivable agreement with our Managing Partners and Contributing Partners which requires us to pay toour Managing Partners and Contributing Partners 85% of any tax savings received by APO Corp. from our step-up in tax basis. The tax savingsachieved may not ensure that we have sufficient cash available to pay this liability and we might be required to incur additional debt to satisfy thisliability. -144-(1)(2)(3)Table of Contents(ii)Debt amounts related to the consolidated VIEs are not presented in the table above as the Company is not a guarantor of these non-recourse liabilities.CommitmentsCertain of our management companies and general partners are committed to contribute to the funds and affiliates. While a small percentage ofthese amounts are funded by us, the majority of these amounts have historically been funded by our affiliates, including certain of our employees and certainApollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its affiliates, the percentage of total fundcommitments of Apollo and its affiliates, the commitment and remaining commitment amounts of Apollo only (excluding affiliates), and the percentage of totalfund commitments of Apollo only (excluding affiliates) for each private equity fund, each credit fund and each real estate fund as of December 31, 2012 asfollows ($ in millions): Fund Apollo andAffiliatesCommitments % of TotalFundCommitments Apollo Only(ExcludingAffiliates)Commitments Apollo Only(ExcludingAffiliates)% of Total FundCommitments Apollo andAffiliatesRemainingCommitments Apollo Only(ExcludingAffiliates)RemainingCommitments Private Equity: Fund VII $467.2 3.18% $180.0 1.23% $151.4 $60.4 Fund VI 246.2 2.43 6.1 0.06 24.3 0.6 Fund V 100.0 2.67 0.5 0.01 6.3 — Fund IV 100.0 2.78 0.2 0.01 0.5 — Fund III 100.6 6.71 — — 15.5 — ANRP 426.1 32.21 9.9 0.74 325.8 7.7 AION 127.4 46.56 27.4 10.00 127.4 27.4 Credit: EPF I 354.4 20.74 23.4 1.37 93.2 7.5 EPF II 415.2 11.48 77.1 2.13 366.7 69.1 SOMA — — — — — — COF I 451.1 30.38 29.7 2.00 237.4 4.2 COF II 30.5 1.93 23.4 1.48 0.8 0.6 ACLF 23.9 2.43 23.9 2.43 17.3 17.3 Palmetto 18.0 1.19 18.0 1.19 7.7 7.7 AIE II 8.6 3.15 5.3 1.94 0.8 0.5 A-A European Senior Debt Fund, L.P. 50.0 100.00 — — — — FCI 150.7 26.96 — — 57.0 — Apollo/Palmetto Loan Portfolio, L.P. 300.0 100.00 — — 85.0 — Apollo/Palmetto Short-Maturity Loan Portfolio,L.P. 200.0 100.00 — — — — AESI 4.6 0.99 4.6 0.99 2.1 2.1 AEC 7.3 2.50 3.2 1.08 4.0 1.7 Apollo Centre Street Partnership, L.P. 15.0 2.44 15.0 2.44 10.1 10.1 Apollo Asia Private Credit Fund, L.P. 157.4 91.30 0.1 0.06 128.8 0.1 Apollo SK Strategic Investments, L.P. 2.0 0.99 2.0 0.99 1.5 1.5 Stone Tower Structured Credit Recovery MasterFund II, Ltd. 1.5 1.80 — — — — Stone Tower Credit Solutions Master Fund Ltd. 1.0 0.92 — — 0.3 — Real Estate: AGRE U.S. Real Estate Fund 613.2 78.09 13.2 1.68 496.6 7.7 CPI Capital Partners North America 7.6 1.27 2.1 0.35 0.6 0.2 CPI Capital Partners Europe 7.2 0.47 — — 1.2 — CPI Capital Partners Asia Pacific 6.9 0.53 0.5 0.04 0.7 — London Prime Apartments Guernsey HoldingsLimited (Guernsey) 18.4 7.80 0.6 0.23 11.8 0.4 Apollo GSS Holding (Cayman), L.P. 10.6 14.71 3.2 4.52 2.5 0.7 2012 CMBS I Fund, L.P 66.2 100.00 — — 0.9 — 2012 CMBS II Fund, L.P. 66.2 100.00 — — 8.1 — 2012 CMBS III, Fund, L.P. 68.3 100.00 — — 12.8 — 2011 A4 Fund, L.P. 234.7 100.00 — — — — AGRE CMBS Fund, L.P. 418.8 100.00 — — — — Other: Apollo SPN Investments I, L.P. 30.9 1.02 30.9 1.02 30.8 30.8 Total $5,307.7 $500.3 $2,229.9 $258.3 (1)As of December 31, 2012, Palmetto had commitments and remaining commitment amounts in Fund VII of $110.0 million and $35.0 million,respectively, ANRP of $150.0 million and $114.5 million, respectively, Apollo/Palmetto Loan Portfolio, L.P. of $300.0 million and $85.0 million,respectively, Apollo/Palmetto Short-Maturity Loan Portfolio, L.P. of $200.0 million and $0.0 million, respectively, and AGRE U.S. Real Estate Fund,L.P. of $300 million and $231.8 million, respectively.(1)(1)(2)(2)(1)(1)(3)(4)(5)(3)(6)(7)(7)(8)(9)(3)(1)(1)(1)(1)(3)(1)(1)(3)(10)(10)L.P. of $300 million and $231.8 million, respectively.(2)As of December 31, 2012, 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)Apollo’s commitment in these funds is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.32 as of December 31,2012.(4)Of the total commitment amount in EPF I, AAA Investments, L.P., SOMA and Palmetto have approximately €54.5 million, €75.0 million and€106.0 million, respectively.(5)Of the total remaining commitment amount in EPF I, AAA Investments, L.P., SOMA and Palmetto have approximately €13.9 million, €19.1 millionand €27.0 million, respectively. -145-Table of Contents(6)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, 2012, Apollo and affiliated investors’ capital balances exceeded the 1% requirement and therefore they are not requiredto fund a capital commitment.(7)As of December 31, 2012, SOMA had commitments and remaining commitment amounts in COF I of $250.0 million and $202.0 million, respectively.(8)As of December 31, 2012, 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.(9)As of December 31, 2012, commitments in Palmetto also included commitments related to Apollo Palmetto Athene Partnership, L.P.(10)Apollo’s commitment in these investments is denominated in pound sterling and translated into U.S. dollars at an exchange rate of ₤1.00 to $1.62 as ofDecember 31, 2012.As a limited partner, the general partner and manager of the Apollo private equity, credit and real estate funds, Apollo has unfunded capitalcommitments at December 31, 2012 and December 31, 2011 of $258.3 million and $137.9 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 cashdistributions, if any, that are made to its affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAAInvestments.On December 21, 2012, the Company agreed to provide up to $100 million of capital support to Athene to the extent such support is necessary inconnection with Athene’s pending acquisition of Aviva plc’s annuity and life insurance operations in the United States.The AMH Credit Agreement, which provides for a variable-rate term loan, will have future impacts on our cash uses. Borrowings under the AMHCredit Agreement 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 Companyhad hedged $167 million of the variable-rate loan with fixed rate swaps to minimize our interest rate risk as of December 31, 2011 which expired in May2012. The loan originally had a maturity date of April 2014.On December 20, 2010, Apollo amended the AMH Credit Agreement to extend the maturity date of $995.0 million (including the $90.9 million offair value debt repurchased by the Company) of the term loan from April 20, 2014 to January 3, 2017 and modified certain other terms of the AMH CreditAgreement. Pursuant to this amendment, AMH or an affiliate was required to purchase from each lender that elected to extend the maturity date of its term loana portion of such extended term loan equal to 20% thereof. In addition, AMH or an affiliate is required to repurchase at least $50.0 million aggregate principalamount of the term loan by December 31, 2014 and at least $100.0 million aggregate principal amount of the term loan (inclusive of the previously purchased$50.0 million) by December 31, 2015 at a price equal to par plus accrued interest. The sweep leverage ratio was also extended to end at the new loan termmaturity date. The interest rate for the highest applicable margin for the loan portion extended changed to LIBOR plus 4.25% and ABR plus 3.25%. OnDecember 20, 2010, an affiliate of AMH that is a guarantor under the AMH Credit Agreement repurchased approximately $180.8 million of the term loan inconnection with the extension of the maturity date of such loan and thus the AMH Credit Agreement (excluding the portions held by AMH affiliates) had aremaining balance of $728.3 million. The Company determined that the amendments to the AMH Credit Agreement resulted in a debt extinguishment whichdid 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, 2012was 4.07% and the interest rate on the remaining $5.0 million portion of the loan at December 31, 2012 was 1.32%. The estimated fair value of the Company’slong-term debt obligation related to the AMH Credit Agreement is believed to be approximately $795.6 million based on a yield analysis using available marketdata of comparable securities with similar terms and remaining maturities as of December 31, 2012. The $728.3 million carrying value of debt that isrecorded on the consolidated statement of financial condition at December 31, 2012 is the amount for which the Company expects to settle the AMH CreditAgreement.During the second quarter of 2008, the Company entered into four secured loan agreements totaling $26.9 million with CIT Group/EquipmentFinancing Inc. (“CIT”) to finance the purchase of certain -146-Table of Contentsfixed assets. The loans bear interest at LIBOR plus 318 basis points per annum with interest and principal to be repaid monthly and a balloon payment of theremaining principal totaling $9.4 million due at the end of the terms in April 2013. At December 31, 2012, the interest rate was 3.40%. On April 28, 2011, theCompany sold its ownership interest in certain assets which served as collateral to the CIT secured loan agreements for $11.3 million with $11.1 million ofthe proceeds going to CIT directly. As a result of the sale and an additional payment made by the Company of $1.1 million, the Company satisfied the loanassociated with the related asset of $12.2 million on April 28, 2011. As of December 31, 2012, the carrying value of the remaining CIT secured loan was$9.5 million.On June 30, 2008, the Company entered into a credit agreement with Fund VI, pursuant to which Fund VI advanced $18.9 million of carriedinterest income to the limited partners of Apollo Advisors VI, L.P., and who are also employees of the Company. The loan obligation accrues interest at anannual fixed rate of 3.45% and terminates on the earlier of June 30, 2017 or the termination of Fund VI. In March 2011, a right of offset for the indemnifiedportion of the loan obligation was established between the Company and Fund VI, and therefore the loan was reduced in the amount of $10.9 million, whichwas offset in carried interest receivable on the consolidated statements of financial condition. During the year ended December 31, 2011, there was a $0.9million interest paid and $0.3 million accrued interest on the outstanding loan obligation. At December 31, 2011, the total outstanding loan aggregated $9.0million, including accrued interest of $1.0 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. During the year ended December 31, 2012, there was no interestpaid and $1.3 million accrued interest on the outstanding loan obligation. As of December 31, 2012, the total outstanding loan aggregated $9.3 million,including accrued interest of $1.3 million which approximated fair value, of which approximately $6.7 million was not subject to the indemnity discussedabove and is a receivable from the Contributing Partners and certain employees.In accordance with the Managing Partners Shareholders Agreement and the above credit agreement with Fund VI, we have indemnified theManaging Partners and certain Contributing Partners (at varying percentages) for any carried interest income distributed from Fund IV, Fund V and Fund VIthat is subject to contingent repayment by the general partner. As of the years ended December 31, 2012 and 2011, the Company had not recorded anobligation for any previously made distributions. -147-Table of ContentsContingent Obligations—Carried interest income in private equity and certain credit and real estate 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, 2012 and that would be reversed approximates $3.2 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, 2012 Private Equity Funds: Fund VII $1,440,907 Fund VI 567,106 Fund V 213,739 Fund IV 19,739 Other (AAA, Stanhope Life, L.P. “Stanhope”) 93,635 Total Private Equity Funds $2,335,126 Credit Funds: U.S. Performing Credit 656,518 Opportunistic Credit 27,222 Structured Credit 30,863 European Credit 47,206 NPLs 102,101 Total Credit Funds $863,910 Real Estate Funds: CPI Other 10,406 Total Real Estate Funds 10,406 Total $3,209,442 (1)Reclassified to conform to current presentation.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 theCompany as general partner has received more carried interest income than was ultimately earned. The general partner obligation amount, if any, will dependon final realized values of investments at the end of the life of each fund. As discussed in note 15 to our consolidated financial statements, the Company hasrecorded a general partner obligation to return previously distributed carried interest income of $19.3 million and $0.3 million relating to SOMA and APC,respectively, as of December 31, 2012. As of December 31, 2012, the general partner obligation for Fund VI was reversed and there was no liability asdiscussed in note 15 to our consolidated financial statements.Certain funds may not generate carried interest income as a result of unrealized and realized losses that are recognized in the current and priorreporting period. In certain cases, carried interest income will not be generated until additional unrealized and realized gains occur. Any appreciation would firstcover the deductions for invested capital, unreturned organizational expenses, operating expenses, management fees and priority returns based on the terms ofthe respective fund agreements.One of the Company’s subsidiaries, Apollo Global Securities, provides underwriting commitments in connection with security offerings to theportfolio companies of the funds we manage. As of December 31, 2012, there were no underwriting commitments outstanding related to such offerings.Contingent ConsiderationIn connection with the Stone Tower acquisition, the Company agreed to pay the former owners of Stone Tower a specified percentage of any futurerealized carried interest income earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liabilityhad an -148-(1)Table of Contentsacquisition date fair value of approximately $117.7 million, which was determined based on the present value of estimated future carried interest payments,and is recorded in profit sharing payable in the consolidated statements of financial condition. The fair value of the contingent obligation was $126.9 millionas of December 31, 2012. Refer to note 3 to our consolidated financial statements for additional details related to the Stone Tower acquisition.In connection with the Gulf Stream acquisition, as discussed in note 3 to our consolidated financial statements, the Company will also makepayments to the former owners of Gulf Stream under a contingent consideration obligation which requires the Company to transfer cash to the former ownersof Gulf Stream based on a specified percentage of carried interest income. The contingent liability had a fair value of approximately $14.1 million as ofDecember 31, 2012, which is recorded in profit sharing payable in the consolidated statements of financial condition. The contingent liability had a fair valueof approximately $4.7 million as of December 31, 2011, which is recorded in due to affiliates in the consolidated statements of financial condition.In connection with the CPI acquisition, the consideration transferred in the acquisition was a contingent consideration in the form of a liabilityincurred by Apollo to CPI. The liability is an obligation of Apollo to transfer cash to CPI based on a specified percentage of future earnings. The estimated fairvalue of the contingent liability was $1.2 million as of December 31, 2012 and is recorded in due to affiliates in the consolidated statements of financialcondition.The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied. The changes inthe fair value of the contingent consideration obligations will be reflected in profit sharing expense in the consolidated statements of operations.During the one year measurement period, any changes resulting from facts and circumstances that existed as of the acquisition date will bereflected as a retrospective adjustment to the bargain purchase gain and the respective asset acquired or liability assumed.The Company has determined that the contingent consideration obligations are categorized as a Level III liability in the fair value hierarchy as thepricing inputs into the determination of fair value requires significant management judgment and estimation. 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 tomovements in the fair value of their investments and resulting impact on carried interest income and management fee revenues. Our direct investments in thefunds also expose us to market risk whereby movements in the fair values of the underlying investments will increase or decrease both net gains (losses) frominvestment activities and income (loss) from equity method investments. For a discussion of the impact of market risk factors on our financial instrumentsrefer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Investments, atFair Value.”The fair value of our financial assets and liabilities of our funds may fluctuate in response to changes in the value of investments, foreignexchange, commodities and interest rates. The net effect of these fair value changes impacts the gains and losses from investments in our consolidatedstatements of operations. 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 limitedpartner investors in Apollo’s active private equity, credit and real estate funds, no individual investor accounts for more than 10% of the total committedcapital to Apollo’s active funds.Risks are analyzed across funds from the “bottom up” and from the “top down” with a particular focus on asymmetric risk. We gather andanalyze data, monitor investments and markets in detail, and constantly strive to better quantify, qualify and circumscribe relevant risks. -149-Table of ContentsEach 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 investmentmanagement teams assigned to monitor the strategic development, financing and capital deployment decisions of each portfolioinvestment. • Our credit funds continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditionaland customized 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 aresult of (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 certaincredit funds, or (ii) such market risk factors causing changes in gross or net asset value, for the credit funds. The proportion of our management fees that arebased 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, credit 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, credit and real estate transactions or impair our ability to consummatesuch 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 specifiedperformance criteria. Our carried interest income will be impacted by changes in market risk factors. However, several major factors will influence the degreeof impact: • the performance criteria for each individual fund in relation to how that fund’s results of operations are impacted by changes inmarket risk factors; • 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. -150-Table of ContentsMarket Risk—We are directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values ofassets and liabilities or revenues and expenses will be adversely affected by changes in market conditions. Market risk is inherent in each of our investmentsand activities, including equity investments, loans, short-term borrowings, long-term debt, hedging instruments, credit default swaps, and derivatives. Just afew of the market conditions that may shift from time to time, thereby exposing us to market risk, include fluctuations in interest and currency exchangerates, equity prices, changes in the implied volatility of interest rates and price deterioration. For example, subsequent to the second quarter of 2007, debt creditaround the world began to experience significant dislocation, severely limiting the availability of new credit to facilitate new traditional buyouts, and themarkets remain volatile. Volatility in debt and equity markets can impact our pace of capital deployment, the timing of receipt of transaction fee revenues, andthe timing of realizations. These market conditions could have an impact on the value of investments and our rates of return. Accordingly, depending on theinstruments 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, whichare included 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 theterms of such agreements. We seek to minimize our risk exposure by limiting the counterparties with which we enter into contracts to banks and investmentbanks who meet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incurany loss due to counterparty default.Foreign Exchange Risk—Foreign exchange risk represents exposures we have to changes in the values of current holdings and future cashflows denominated 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 central banks, expropriation, nationalization, unfavorable politicaland diplomatic developments and changes in legislation relating to non-U.S. ownership. We also invest in the securities of corporations which are located innon-U.S. jurisdictions. As we continue to expand globally, we will continue to focus on monitoring and managing these risk factors as they relate to specificnon-U.S. investments. -151-Table of ContentsSensitivityOur assets and unrealized gains, and our related equity and net income are sensitive to changes in the valuations of our funds’ underlyinginvestments and could vary materially as a result of changes in our valuation assumptions and estimates. See “Item 7. Management’s Discussion andAnalysis of Financial Conditions and Results of Operations—Critical Accounting Policies—Investments, at Fair Value” for details related to the valuationmethods that are used and the key assumptions and estimates employed by such methods. We also quantify the Level III investments that are included on ourconsolidated statements of financial condition by valuation methodology in “Item 7. Management’s Discussion and Analysis of Financial Conditions andResults of Operations—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, 2012 and 2011: • Management fees from the funds in our credit 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 theinvestments in credit funds that earn management fees based on net asset value or gross assets will have a direct impact on theamount of management fees that are earned. Management fees earned from our credit segment on a segment basis that weredependent upon estimated fair value during the years ended December 31, 2012 and 2011 would decrease by approximately $11.9million and $11.1 million, respectively, if the fair values of the investments held by such funds were 10% lower during the samerespective periods. By contrast, a 10% increase in fair value would increase management fees for the years ended December 31,2012 and 2011 by approximately $9.8 million and $10.8 million, respectively. • Management fees for our private equity funds, excluding AAA, range from 0.65% to 1.50% and are charged on either (a) a fixedpercentage of committed capital over a stated investment period or (b) a fixed percentage of invested capital of unrealized portfolioinvestments. Changes in values of investments could indirectly affect future management fees from private equity funds by, amongother things, reducing the funds’ access to capital or liquidity and their ability to currently pay the management fees or if suchchange resulted in a write-down of investments below their associated invested capital. • Management fees earned from AAA and its affiliates range between 1.0% and 1.25% of AAA adjusted assets, defined as investedcapital plus proceeds of any borrowings of AAA Investments, plus its cumulative distributable earnings at the end of each quarterlyperiod (taking into account actual distributions but excluding the management fees relating to the period or any non-cash equitycompensation expense), net of any amount AAA pays for the repurchase of limited partner interests, as well as capital invested inApollo funds and temporary investments and any distributable earnings attributable thereto. Management fees earned from AAAInvestments during the years ended December 31, 2012 and 2011 would increase or decrease by approximately $1.5 million and$1.7 million, respectively, if the fair values of the investments held by AAA Investments were 10% higher or lower during the samerespective periods. • Carried interest income from most of our credit funds, which are quantified in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Segment Analysis,” are impacted directly by changes in the fair value of theirinvestments. Carried interest income from most of our credit funds generally is earned based on achieving specified performancecriteria. We anticipate that a -152-Table of Contents 10% decline in the fair values of investments held by all of the credit funds at December 31, 2012 and 2011 would decrease carriedinterest income on a segment basis for the years ended December 31, 2012 and 2011 by approximately $289.4 million and $121.4million, respectively. Additionally, the changes to carried interest income from most of our credit funds assume there is no loss inthe fund for the relevant period. If the fund had a loss for the period, no carried interest income would be earned by us. By contrast,a 10% increase in fair value would increase carried interest income on a segment basis for the years ended December 31, 2012 and2011 by approximately $256.6 million and $115.2 million, respectively. • Carried interest income from private equity funds generally is earned based on achieving specified performance criteria and isimpacted by changes in the fair value of their fund investments. We anticipate that a 10% decline in the fair values of investmentsheld by all of the private equity funds at December 31, 2012 and 2011 would decrease carried interest income on a segment basisfor the years ended December 31, 2012 and 2011 by $848.4 million and $230.6 million, respectively. The effects on private equityfees and income assume that a decrease in value does not cause a permanent write-down of investments below their associatedinvested capital. By contrast, a 10% increase in fair value would increase carried interest income on a segment basis for the yearsended December 31, 2012 and 2011 by $789.2 million and $231.5 million, respectively. • For select Apollo funds, our share of investment income as a limited partner in such funds is derived from unrealized gains orlosses on investments in funds included in the consolidated financial statements. For funds in which we have an interest, but arenot included in our consolidated financial statements, our share of investment income is limited to our accrued compensation unitsand direct investments in the funds, which ranges from 0.001% to 22.207%. A 10% decline in the fair value of investments atDecember 31, 2012 and 2011 would result in an approximate $35.9 million and $31.1 million decrease in investment income at theconsolidated level, respectively. By contrast, a 10% increase in the fair value of investments at December 31, 2012 would result inan approximate $35.9 million increase in investment income at the consolidated level. -153-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 155 Consolidated Statements of Financial Condition as of December 31, 2012 and 2011 157 Consolidated Statements of Operations for the Years Ended December 31, 2012, 2011 and 2010 158 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2012, 2011 and 2010 159 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2012, 2011 and 2010 160 Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 162 Notes to Consolidated Financial Statements 165 -154-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, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), changes inshareholders’ equity and cash flows for each of the three years in the period ended December 31, 2012. We also have audited the Company’s internal controlover financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements, for maintaining effectiveinternal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion onthe Company’s internal control over financial reporting 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 and whethereffective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates madeby management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessaryin the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executiveand principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnelto provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain tothe maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’sassets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changesin conditions, or that the degree of compliance with the policies or procedures may deteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ApolloGlobal Management, LLC and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three -155-Table of Contentsyears in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in ouropinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission./s/ Deloitte & Touche LLPNew York, New YorkMarch 1, 2013 -156-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONDECEMBER 31, 2012 AND DECEMBER 31, 2011(dollars in thousands, except share data) December 31,2012 December 31,2011 Assets: Cash and cash equivalents $946,225 $738,679 Cash and cash equivalents held at Consolidated Funds 1,226 6,052 Restricted cash 8,359 8,289 Investments 2,138,096 1,857,465 Assets of consolidated variable interest entities: Cash and cash equivalents 1,682,696 173,542 Investments, at fair value 12,689,535 3,301,966 Other assets 299,978 57,855 Carried interest receivable 1,878,256 868,582 Due from affiliates 173,312 176,740 Fixed assets, net 53,452 52,683 Deferred tax assets 542,208 576,304 Other assets 36,765 26,976 Goodwill 48,894 48,894 Intangible assets, net 137,856 81,846 Total Assets $20,636,858 $7,975,873 Liabilities and Shareholders’ Equity Liabilities: Accounts payable and accrued expenses $38,337 $33,545 Accrued compensation and benefits 56,125 45,933 Deferred revenue 252,157 232,747 Due to affiliates 477,451 578,764 Profit sharing payable 857,724 352,896 Debt 737,818 738,516 Liabilities of consolidated variable interest entities: Debt, at fair value 11,834,955 3,189,837 Other liabilities 634,053 122,264 Other liabilities 44,855 33,050 Total Liabilities 14,933,475 5,327,552 Commitments and Contingencies (see note 16) Shareholders’ Equity: Apollo Global Management, LLC shareholders’ equity: Class A shares, no par value, unlimited shares authorized, 130,053,993 shares and 123,923,042 sharesissued and outstanding at December 31, 2012, and 2011, respectively — — Class B shares, no par value, unlimited shares authorized, 1 share issued and outstanding at December 31,2012, and 2011 — — Additional paid in capital 3,043,334 2,939,492 Accumulated deficit (2,142,020) (2,426,197) Appropriated partners’ capital 1,765,360 213,594 Accumulated other comprehensive income (loss) 144 (488) Total Apollo Global Management, LLC shareholders’ equity 2,666,818 726,401 Non-Controlling Interests in consolidated entities 1,893,212 1,444,767 Non-Controlling Interests in Apollo Operating Group 1,143,353 477,153 Total Shareholders’ Equity 5,703,383 2,648,321 Total Liabilities and Shareholders’ Equity $20,636,858 $7,975,873 See accompanying notes to consolidated financial statements. -157-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF OPERATIONSYEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(dollars in thousands, except share data) 2012 2011 2010 Revenues: Advisory and transaction fees from affiliates $149,544 $81,953 $79,782 Management fees from affiliates 580,603 487,559 431,096 Carried interest income (loss) from affiliates 2,129,818 (397,880) 1,599,020 Total Revenues 2,859,965 171,632 2,109,898 Expenses: Compensation and benefits: Equity-based compensation 598,654 1,149,753 1,118,412 Salary, bonus and benefits 274,574 251,095 249,571 Profit sharing expense 871,394 (63,453) 555,225 Incentive fee compensation 739 3,383 20,142 Total Compensation and benefits 1,745,361 1,340,778 1,943,350 Interest expense 37,116 40,850 35,436 Professional fees 64,682 59,277 61,919 General, administrative and other 87,961 75,558 65,107 Placement fees 22,271 3,911 4,258 Occupancy 37,218 35,816 23,067 Depreciation and amortization 53,236 26,260 24,249 Total Expenses 2,047,845 1,582,450 2,157,386 Other Income: Net gains (losses) from investment activities 288,244 (129,827) 367,871 Net (losses) gains from investment activities of consolidated variable interest entities (71,704) 24,201 48,206 Income from equity method investments 110,173 13,923 69,812 Interest income 9,693 4,731 1,528 Other income, net 1,964,679 205,520 195,032 Total Other Income 2,301,085 118,548 682,449 Income (loss) before income tax provision 3,113,205 (1,292,270) 634,961 Income tax provision (65,410) (11,929) (91,737) Net Income (Loss) 3,047,795 (1,304,199) 543,224 Net (income) loss attributable to Non-Controlling Interests (2,736,838) 835,373 (448,607) Net Income (Loss) Attributable to Apollo Global Management, LLC $310,957 $(468,826) $94,617 Distributions Declared per Class A Share $1.35 $0.83 $0.21 Net Income (Loss) Per Class A Share: Net Income (Loss) Per Class A Share – Basic and Diluted $2.06 $(4.18) $0.83 Weighted Average Number of Class A Shares – Basic 127,693,489 116,364,110 96,964,769 Weighted Average Number of Class A Shares – Diluted 129,540,377 116,364,110 96,964,769 See accompanying notes to consolidated financial statements. -158-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME (LOSS)YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(dollars in thousands, except share data) 2012 2011 2010 Net Income (Loss) $3,047,795 $(1,304,199) $543,224 Other Comprehensive Income, net of tax: Net unrealized gain on interest rate swaps (net of taxes of $410, $855 and $1,449 for ApolloGlobal Management, LLC and $0 for Non-Controlling Interests in Apollo Operating Group forthe years ended December 31, 2012, 2011 and 2010, respectively) 2,653 6,728 11,435 Net (loss) income on available-for-sale securities (from equity method investment) (11) (225) 343 Total Other Comprehensive Income, net of tax 2,642 6,503 11,778 Comprehensive Income (Loss) 3,050,437 (1,297,696) 555,002 Comprehensive (Income) Loss attributable to Non-Controlling Interests (922,172) 1,032,502 (446,467) Comprehensive Income (Loss) Attributable to Apollo Global Management, LLC $2,128,265 $(265,194) $108,535 See accompanying notes to consolidated financial statements. -159-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS’ EQUITYYEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(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, 2010 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 of variableinterest entity — — — — — — — 411,885 — 411,885 Capital increase related to equity-based compensation — — 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 Distributions — — (24,115) — — — (24,115) (166,918) (50,400) (241,433) Distributions related to deliveries of Class A shares forRSUs 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 consolidated entities — — (7,014) — — — (7,014) 7,014 — — Satisfaction of liability related to AAA RDUs — — 7,594 — — — 7,594 — — 7,594 Net income — — — 94,617 11,359 — 105,976 409,356 27,892 543,224 Net income on available-for-sale securities (from equitymethod investment) — — — — — 343 343 — — 343 Net unrealized gain on interest rate swaps (net of taxes of$1,499 and $0 for Apollo Global Management, LLCand Non-Controlling Interests in Apollo OperatingGroup, 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 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-based compensation — — 451,543 — — — 451,543 — 696,361 1,147,904 Distributions — — (115,139) — — — (115,139) (349,509) (199,199) (663,847) Distributions related to deliveries of Class A shares forRSUs 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 consolidated entities — — (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 (from equity methodinvestment) — — — — — (225) (225) — — (225) Net unrealized gain on interest rate swaps (net of taxes of$855 and $0 for Apollo Global Management, LLCand Non-Controlling Interests in Apollo OperatingGroup, 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. 160Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS’ EQUITYYEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(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’Equity (Deficit) Non-ControllingInterests inConsolidatedEntities Non-ControllingInterests inApolloOperatingGroup TotalShareholders’Equity Balance at January 1, 2012 123,923,042 1 $2,939,492 $(2,426,197) $213,594 $(488) $726,401 $1,444,767 $477,153 $2,648,321 Dilution impact of issuance of Class A shares — — 1,589 — — — 1,589 — — 1,589 Capital increase related to equity-basedcompensation — — 282,288 — — — 282,288 — 313,856 596,144 Capital contributions — — — — — — — 551,154 — 551,154 Distributions — — (203,997) — (264,910) — (468,907) (495,506) (335,023) (1,299,436) Distributions related to deliveries of Class A sharesfor RSUs 6,130,951 — 9,090 (25,992) — — (16,902) — — (16,902) Purchase of AAA shares — — — — — — — (102,072) — (102,072) Non-cash distributions — — — (788) — — (788) (3,605) — (4,393) Non-cash contributions to Non-controlling interests — — — — — — — 2,547 — 2,547 Capital increase related to business acquisition(note 3) — — 14,001 — — — 14,001 — — 14,001 Non-controlling interests in consolidated entities atacquisition date — — — — — — — 306,351 — 306,351 Deconsolidation — — — — — — — (46,148) — (46,148) Net transfers of AAA ownership interest to (from)Non-Controlling Interests in consolidatedentities — — (919) — — — (919) 919 — — Satisfaction of liability related to AAA RDUs — — 1,790 — — — 1,790 — — 1,790 Net income — — — 310,957 1,816,676 — 2,127,633 234,805 685,357 3,047,795 Net loss on available-for-sale securities (from equitymethod investment) — — — — — (11) (11) — — (11) Net unrealized gain on interest rate swaps (net oftaxes of $410 and $0 for Apollo GlobalManagement, LLC and Non-ControllingInterests in Apollo Operating Group,respectively) — — — — — 643 643 — 2,010 2,653 Balance at December 31, 2012 130,053,993 1 $3,043,334 $(2,142,020) $1,765,360 $144 $2,666,818 $1,893,212 $1,143,353 $5,703,383 See accompanying notes to consolidated financial statements. 161Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(dollars in thousands, except share data) 2012 2011 2010 Cash Flows from Operating Activities: Net income (loss) $3,047,795 $(1,304,199) $543,224 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Equity-based compensation 598,654 1,149,753 1,118,412 Depreciation and amortization 10,226 11,132 11,472 Amortization of intangible assets 43,010 15,128 12,777 Amortization of debt issuance costs 511 511 44 Losses from investment in HFA 1,316 5,881 — Non-cash interest income (3,187) (2,486) — Income from equity awards received for directors’ fees (2,536) (19) — Income from equity method investment (110,173) (13,923) (69,812) Waived management fees (6,161) (23,549) (24,826) Non-cash compensation expense related to waived management fees 6,161 23,549 24,826 Change in fair value of contingent obligations 25,787 — — Deferred taxes, net 55,309 10,580 71,241 Gain on business acquisitions and dispositions (1,951,897) (196,193) (29,741) Loss on fixed assets 923 570 6,700 Changes in assets and liabilities: Carried interest receivable (973,578) 998,491 (1,383,219) Due from affiliates 5,779 (30,241) (11,066) Other assets (7,901) (7,019) (7,880) Accounts payable and accrued expenses 559 3,079 (5,052) Accrued compensation and benefits 8,007 (6,128) 24,931 Deferred revenue 15,000 (21,934) (69,949) Due to affiliates (103,773) 43,767 (33,529) Profit sharing payable 361,606 (325,229) 503,589 Other liabilities (5,052) 5,778 (7,573) Apollo Funds related: Net realized (gains) losses from investment activities (77,408) 11,313 (4,931) Net unrealized (gains) losses from investment activities (458,031) 113,114 (416,584) Net realized gains on debt — (41,819) (21,231) Net unrealized losses on debt 497,704 19,880 55,040 Distributions from investment activities 99,675 30,248 58,368 Cash transferred in from consolidated funds — 6,052 38,033 Change in cash held at consolidated variable interest entities (348,138) (17,400) (87,556) Purchases of investments (7,525,473) (1,294,477) (1,240,842) Proceeds from sale of investments and liquidating distributions 7,182,392 1,530,194 627,278 Change in other assets (71,921) (7,109) (8,086) Change in other liabilities (49,634) 56,526 107,891 Net Cash Provided by (Used in) Operating Activities 265,551 743,821 (218,051) Cash Flows from Investing Activities: Purchases of fixed assets (11,259) (21,285) (5,601) Acquisitions (net of cash assumed) (see note 3) (99,190) (29,632) (1,354) Proceeds from disposals of fixed assets — 631 — Cash received from business acquisition and disposition — — 21,624 Purchase of investments in HFA (see note 4) — (52,142) — Investment in Apollo Senior Loan Fund (see note 4) — (26,000) — Cash contributions to equity method investments (126,917) (64,226) (63,459) Cash distributions from equity method investments 152,645 64,844 38,868 Change in restricted cash (70) (1,726) 255 Net Cash Used in Investing Activities $(84,791) $(129,536) $(9,667) See accompanying notes to consolidated financial statements. -162-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(dollars in thousands, except share data) 2012 2011 2010 Cash Flows from Financing Activities: Issuance of Class A shares $— $383,990 $— Repurchase of Class A shares — (2,472) (43) Principal repayments of debt and repurchase of debt (698) (1,939) (182,309) Debt issuance costs — — (3,085) Issuance costs — (1,502) — Distributions related to deliveries of Class A shares for RSUs (25,992) (17,081) (2,876) Distributions to Non-Controlling Interests in consolidated entities (8,779) (13,440) (13,628) Contributions from Non-Controlling Interests in consolidated entities 4,069 — 187 Distributions paid (202,430) (102,598) (21,284) Distributions paid to Non-Controlling Interests in Apollo Operating Group (335,023) (199,199) (50,400) Apollo Funds related: Issuance of debt 1,413,334 454,356 1,050,377 Principal repayment of debt (515,897) (415,869) (331,120) Purchase of AAA shares (102,072) — (48,768) Distributions Paid (264,910) — — Distributions paid to Non-Controlling Interests in consolidated variable interest entities (486,727) (308,785) (146,688) Distributions paid to Non-Controlling Interests in consolidated entities — (27,284) (6,602) Contributions to Non-Controlling Interests in consolidated entities 547,085 — — Net Cash Provided by (Used in) Financing Activities 21,960 (251,823) 243,761 Net Increase in Cash and Cash Equivalents 202,720 362,462 16,043 Cash and Cash Equivalents, Beginning of Period 744,731 382,269 366,226 Cash and Cash Equivalents, End of Period $947,451 $744,731 $382,269 Supplemental Disclosure of Cash Flow Information: Interest paid $49,590 $49,296 $38,317 Interest paid by consolidated variable interest entities 116,392 20,892 12,522 Income taxes paid 7,128 10,732 13,468 Supplemental Disclosure of Non-Cash Investing Activities: Non-cash contributions on equity method investments 4,866 9,847 — Non-cash distributions from equity method investments (2,807) (703) — Non-cash sale of assets held-for-sale for repayment of CIT loan — (11,069) — Non-cash distributions from investing activities — 3,176 — Change in accrual for purchase of fixed assets (659) 967 (814) -163-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCCONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(dollars in thousands, except share data) 2012 2011 2010 Supplemental Disclosure of Non-Cash Financing Activities: Non-cash distributions $(788) $— $(18) Declared and unpaid distributions (1,567) (12,541) (2,831) Non-cash distributions to Non-Controlling Interests in consolidated entities (3,605) (3,176) (590) Non-cash contributions from Non-Controlling Interests in Apollo Operating Group related toequity-based compensation 313,856 696,361 735,698 Non-cash contributions from Non-Controlling Interests in consolidated entities 2,547 — — Unrealized gain on interest rate swaps to Non-Controlling Interests in Apollo Operating Group,net of taxes 2,010 5,106 9,219 Satisfaction of liability related to AAA RDUs 1,790 3,845 7,594 Net transfers of AAA ownership interest to Non-Controlling Interests in consolidated entities 919 6,524 7,014 Net transfer of AAA ownership interest from AGM (919) (6,524) (7,014) Unrealized gain on interest rate swaps 1,053 2,477 3,715 Unrealized (loss) gain on available for sale securities (from equity method investment) (11) (225) 343 Capital increases related to equity-based compensation 282,288 451,543 376,380 Dilution impact of issuance of Class A shares 1,589 132,353 — Dilution impact of issuance of Class A shares on Non-Controlling Interests in Apollo OperatingGroup — (127,096) — Deferred tax asset related to interest rate swaps (410) (855) (1,499) 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 (9,090) (11,680) — Capital increase related to business acquisition 14,001 — — 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 1,161,016 68,586 — Investments 8,805,916 2,195,986 1,102,114 Other assets 169,937 14,039 28,789 Debt (7,255,172) (2,046,157) (706,027) Other liabilities (560,262) (31,959) (12,991) Non-Controlling interest in consolidated entities related to acquisition 260,203 — — 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. -164-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 managerwhose predecessor was founded in 1990. Its primary business is to raise, invest and manage private equity, credit and real estate funds as well as strategicinvestment accounts, on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors. For theseinvestment management services, Apollo receives management fees generally related to the amount of assets managed, transaction and advisory fees for theinvestments made and carried interest income related to the performance of the respective funds that it manages. Apollo has three primary business segments: • Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debtinvestments; • Credit—primarily invests in non-control corporate and structured debt instruments; and • Real estate—primarily invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanineinvestments and other commercial real estate-related debt investments. Additionally, the Company sponsors real estate funds thatfocus on opportunistic investments in distressed debt and equity recapitalization transactions.During the third quarter of 2012, the Company changed the name of its capital markets business segment to the credit segment. The Companybelieves this new name provides a more accurate description of the types of assets which are managed within this segment. In addition, this segment namechange is consistent with the Company’s management reporting and organizational structure as well as the manner in which resource deployment andcompensation decisions are made.Basis of PresentationThe accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company, its wholly-owned or majority-ownedsubsidiaries, the consolidated entities which are considered to be variable interest entities and for which the Company is considered the primary beneficiary,and certain entities which are not considered variable interest entities but which the Company controls through a majority voting interest. Intercompanyaccounts and transactions have been 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 businesseson July 13, 2007 (the “2007 Reorganization”). The Company is managed and operated by its manager, AGM Management, LLC, which in turn is indirectlywholly-owned and controlled by Leon Black, Joshua Harris and Marc Rowan (the “Managing Partners”).As of December 31, 2012, the Company owned, through three intermediate holding companies that include APO Corp., a Delaware corporationthat is a domestic corporation for U.S. Federal income tax purposes, APO Asset Co., LLC (“APO Asset”), a Delaware limited liability company that is adisregarded entity for U.S. Federal income tax purposes, and APO (FC), LLC (“APO (FC)”), an Anguilla limited liability company that is treated as acorporation for U.S Federal income tax purposes (collectively, the “Intermediate Holding Companies”), 35.1% of the economic interests of, and operated andcontrolled all of the businesses and affairs of, the Apollo Operating Group through its wholly-owned subsidiaries. -165-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partnersand certain of the Company’s other partners (the “Contributing Partners”) indirectly beneficially own, including in certain cases estate planning vehicles(through Holdings), Apollo Operating Group units (“AOG Units”) that represent 64.9% of the economic interests in the Apollo Operating Group as ofDecember 31, 2012. The Company consolidates the financial results of the Apollo Operating Group and its consolidated subsidiaries. Holdings’ ownershipinterest 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, upon notice, subject to customary conversion rate adjustments for splits, unitdistributions and reclassifications. A limited partner in Holdings must exchange one partnership unit in each of the ten Apollo Operating Group partnerships toaffect an exchange for one Class A share.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. The Company received net proceeds from the IPO of approximately $382.5 million, which were used to acquireadditional AOG Units. As a result, Holdings’ ownership interest in the Apollo Operating Group decreased from 70.7% to 66.5% and Apollo GlobalManagement, LLC’s ownership interest in the Apollo Operating Group increased from 29.3% to 33.5% upon consummation of the IPO. As such, thedifference between the fair value of the consideration paid for the Apollo Operating Group level ownership interest and the book value on the date of the IPO isreflected 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, includingthose funds in which the general partner is presumed to have control (e.g., AP Alternative Assets, L.P., (“AAA”) and the Apollo Credit Senior Loan Fund, L.P.(“Apollo Senior Loan Fund”)). Apollo also consolidates entities that are VIEs for which Apollo is the primary beneficiary. Under the amended consolidationrules, an enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) thepower to direct the activities of a VIE that most significantly impact the entity’s business and (b) the obligation to absorb losses of the entity or the right toreceive benefits from the entity that could potentially be significant to the VIE.Certain of the Company’s subsidiaries hold equity interests in and/or receive fees qualifying as variable interests from the funds that theCompany manages. The amended consolidation rules require an analysis to determine whether (a) an entity in which Apollo holds a variable interest is a VIEand (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., carried interestand management fees), would give it a controlling financial interest. When the VIE has qualified for the deferral of the amended consolidation rules inaccordance with U.S. GAAP, the analysis is based on previous consolidation rules, which require an analysis to determine whether (a) an entity in whichApollo holds a variable interest is a VIE and (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually throughother variable interests (e.g., carried interest and management fees), would be expected to absorb a majority of the variability of the entity.Under both the previous and amended consolidation rules, the determination of whether an entity in which Apollo holds a variable interest is aVIE requires judgments which include determining whether the equity investment at risk is sufficient to permit the entity to finance its activities withoutadditional subordinated financial support, evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the successof the entity, determining whether two or more parties’ equity -166-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) interests should be aggregated, and determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights toreceive returns from an entity. Under both the previous and amended consolidation rules, Apollo determines whether it is the primary beneficiary of a VIE atthe time it becomes involved with a VIE and reconsiders that conclusion continuously. The consolidation analysis can generally be performed qualitatively.However, if it is not readily apparent whether Apollo is the primary beneficiary, a quantitative expected losses and expected residual returns calculation will beperformed. Investments and redemptions (either by Apollo, affiliates of Apollo or third parties) or amendments to the governing documents of the respectiveApollo 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 if there is a related-party group, and if so, which party within the related-party group is most closely associated with the VIE. The use of these judgments has a material impact tocertain components of Apollo’s consolidated financial 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. The differencebetween the fair value of the assets and liabilities of these VIEs is presented within appropriated partners’ capital in the consolidated statements of financialcondition as these VIEs are funded solely with debt. Changes in the fair value of the assets and liabilities of these VIEs and the related interest and otherincome is presented within net gains from investment activities of consolidated variable interest entities and net (income) loss attributable to Non-ControllingInterests in the consolidated statement of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIE’s note holders,not Apollo, will ultimately receive the benefits or absorb the losses associated with the VIE’s assets and liabilities.Assets and liability amounts of the consolidated VIEs are shown in separate sections within the consolidated statements of financial condition asof December 31, 2012 and 2011.Refer to additional disclosures regarding VIEs in note 5 to our consolidated financial statements. Intercompany transactions and balances, if any,have been eliminated in 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 -167-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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 Interests—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. As of December 31, 2012, the Non-Controlling Interests relating to Apollo Global Management,LLC primarily includes the 64.9% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through theirlimited partner interests in Holdings and other ownership interests in consolidated entities, which primarily consist of the approximately 97% ownershipinterest held by limited partners in AAA as of December 31, 2012. Non-Controlling Interests also include limited partner interests of Apollo managed funds incertain 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 holders of Non-Controlling Interests on the Company’s consolidated statements ofoperations; the primary components of Non-Controlling Interests are separately presented in the Company’s consolidated statements of changes inshareholders’ equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities; and profitsand losses are allocated 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 whenpurchased to be cash equivalents. Substantially all amounts are on deposit in interest-bearing accounts with major financial institutions and exceed insuredlimits.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 credit funds; (ii) management fees from affiliates, which are based on committed capital, invested capital, net asset value, gross assets or asotherwise defined in the respective agreements; and (iii) carried interest income (loss) from affiliates, which is normally based on the performance of the fundssubject to preferred return.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 the transaction and advisory agreements. Additionally, during the normal courseof business, the Company incurs certain costs related to certain transactions that are not consummated (“broken deal costs”). These costs (e.g. research costs,due diligence costs, professional fees, legal fees and other related items) are determined to be broken deal costs upon management’s decision to no longer pursuethe transaction. In accordance with the related fund agreement, in the event the deal is deemed broken, all of the costs are reimbursed by the funds and thenincluded in the calculation of the Management Fee Offset described below. If a deal is successfully completed, Apollo is reimbursed by the fund or fund’sportfolio company of all costs incurred and no offset is generated.Advisory and Transaction fees from Affiliates also include underwriting fees. Underwriting fees include gains, losses and fees, net of syndicateexpenses, arising from securities offerings in which one of -168-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) the Company’s subsidiaries participates in the underwriter syndicate. Underwriting fees are recognized at the time the underwriting is completed and theincome is reasonably assured and are included in the consolidated statements of operations. Fees recognized but not received are included in other assets on theconsolidated statements of financial condition.As a result of providing advisory services to certain private equity and credit portfolio companies, Apollo is generally entitled to receive fees fortransactions related to the acquisition, in certain cases, and disposition of portfolio companies as well as ongoing monitoring of portfolio company operationsand directors’ fees. The amounts due from portfolio companies are included in “—Due from Affiliates,” which is discussed further in note 15. Under theterms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certainpercentage of such advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Such amounts are presented as a reduction toAdvisory and Transaction Fees from Affiliates in the consolidated statements of operations.Management Fees from Affiliates—Management fees for private equity funds, real estate funds and certain credit funds are recognized in theperiod during which the related services are performed in accordance with the contractual terms of the related agreement, and are generally 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 totalreturns on funds’ capital, depending upon performance. Performance-based fees are assessed as a percentage of the investment performance of the funds. Thecarried interest income from affiliates for any period is based upon an assumed liquidation of the fund’s net assets on the reporting date, and distribution ofthe net proceeds 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 from affiliates may be subject to reversal to the extent that the carried interest income recorded exceeds theamount due to the general partner based on a fund’s cumulative investment returns. When applicable, the accrual for potential repayment of previouslyreceived carried interest income, which is a component of due to affiliates, represents all amounts previously distributed to the general partner that would needto be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reportingdate. The actual general partner 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, Apollomay from 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 infuture distributions of profits of those funds. Waived fees recognized during the period are included in management fees from affiliates in the consolidatedstatements of 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 a cash distribution, title and ownership of the profits interests in the respective fund. Apollo immediately assigns the profits interests received to itsemployees. Such assignments of profits interests are treated as compensation and benefits when assigned. The investment period for Fund VII and ANRP forthe management fee waiver plan was terminated as of December 31, 2012.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 of such advisory and/or transaction fees, as applicable, is allocated as a credit to reduce future managementfees, otherwise payable by such fund. Such credit is classified as deferred revenue in the consolidated statements of financial condition. As the managementfees earned by the management company are presented on a gross basis, any Management Fee Offsets calculated are -169-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) presented as a reduction to Advisory and Transaction Fees from Affiliates in the consolidated statements of operations.Additionally, Apollo earns advisory fees pursuant to the terms of the advisory agreements with certain of the portfolio companies that are ownedby the funds. When Apollo receives a payment from a portfolio company that exceeds the advisory fees earned at that point in time, the excess payment isclassified as deferred revenue in the consolidated statements of financial condition. The advisory agreements with the portfolio companies vary in duration andthe associated fees are received monthly, quarterly or annually. Deferred revenue is reversed and recognized as revenue over the period that the agreed uponservices are performed.Under the terms of the funds’ partnership agreements, Apollo is normally required to bear organizational expenses over a set dollar amount andplacement fees or costs in connection with the offering and sale of interests in the funds to investors. The placement fees are payable to placement agents, whoare independent 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 accrualbasis. Discounts and premiums on securities purchased are accreted or amortized over the life of the respective securities using the effective interest method.Realized gains 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, credit and real estate funds to be affiliates or related parties.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. 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 inLevel I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for theseinvestments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date,and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this categoryinclude corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is basedon observable inputs. These investments exhibit -170-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) higher levels of liquid market observability as compared to Level III investments. The Company subjects broker quotes to various criteria inmaking the determination as to whether a particular investment would qualify for treatment as a Level II investment. These criteria include, butare not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation fromindependent pricing services.Level III—Pricing inputs are unobservable for the investment and includes situations where there is little observable market activity for theinvestment. The inputs into the determination of fair value may require significant management judgment or estimation. Investments that areincluded in this category generally include general and limited partnership interests in corporate private equity and real estate funds, opportunisticcredit funds, distressed debt and non-investment grade residual interests in securitizations and CDOs and CLOs 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 tovarious criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment.Some of the factors we consider include the number of broker quotes we obtain, the quality of the broker quotes, the standard deviations of theobserved broker quotes and the corroboration of the broker quotes to independent pricing services.In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s 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 fairvalue hierarchy, the Company accounts for the transfer as of the end of the reporting period.Private Equity InvestmentsThe value of liquid investments, where the primary market is an exchange (whether foreign or domestic) is determined using period end marketprices. Such prices are generally based on the close price on the date of determination.Valuation approaches used to estimate the fair value of investments that are less liquid include the income approach and the market approach. Themarket approach provides an indication of fair value based on a comparison of the subject company to comparable publicly traded companies andtransactions in the industry. The market approach is driven more by current market conditions, including actual trading levels of similar companies and, tothe extent available, actual transaction data of similar companies. Judgment is required by management when assessing which companies are similar to thesubject company being valued. Consideration may also be given to such factors as the Company’s historical and projected financial data, valuations given tocomparable companies, the size and scope of the Company’s operations, the Company’s strengths, weaknesses, expectations relating to the market’sreceptivity to an offering of the Company’s securities, applicable restrictions on transfer, industry and market information and assumptions, generaleconomic and market conditions and other factors deemed relevant. The income approach provides an indication of fair value based on the present value ofcash 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 discountedcash flow method. Inherent in the discounted cash flow method are assumptions of expected results and a calculated discount rate.On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuationresults related to our private equity investments. The Company also retains independent valuation firms to provide third-party valuation consulting services toApollo, which consist of certain limited procedures that management identifies and requests them to -171-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fairvalue. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observedoutcomes, forecast evaluations and variance analysis. However, because of the inherent uncertainty of valuation, those estimated values may differsignificantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.Credit InvestmentsThe majority of the investments in Apollo’s credit funds are valued based on quoted market prices and valuation models. Debt and equitysecurities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing recognized pricing services, marketparticipants or other sources. The credit funds also enter into foreign currency exchange contracts, total return swap contracts, credit default swap contracts,and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by recognizingthe difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. If securities are held at the end of thisperiod, the changes in value are recorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Total return swapcontracts and credit default swap contracts are recorded at fair value as an asset or liability with changes in fair value recorded as unrealized appreciation ordepreciation. Realized gains or losses are recognized at the termination of the contract based on the difference between the close-out price of the total return orcredit default swap contract and the original contract price.Forward contracts are valued based on market rates obtained from counterparties or prices obtained from recognized financial data serviceproviders. When determining fair value pricing when no 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 credit funds also may use the income approach or market approach.The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuationresults related to our credit investments. The Company performs various back-testing procedures to validate their valuation approaches, includingcomparisons between expected and observed outcomes, forecast evaluations and variance analysis.Real Estate InvestmentsFor the CMBS portfolio of Apollo’s funds, the estimated fair value is determined by reference to market prices provided by certain dealers whomake a market in these financial instruments. Broker quotes are only indicative of fair value and may not necessarily represent what the funds would receivein an actual trade for the applicable instrument. Additionally, the loans held-for-investment are stated at the principal amount outstanding, net of deferred loanfees and costs for certain investments. For Apollo’s opportunistic and value added real estate funds, valuations of non-marketable underlying investments aredetermined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable analysis prepared internally, (ii) third partyappraisals or valuations by qualified real estate appraisers, and (iii) contractual sales value of investments/properties subject to bona fide purchase contracts.Methods (i) and (ii) also incorporate consideration of the use of the income, cost, or sales comparison approaches of estimating property values.On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuationresults related to our real estate investments. The Company performs various back-testing procedures to validate their valuation approaches, includingcomparisons between expected and observed outcomes, forecast evaluations and variance analysis. -172-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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,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), Apollo’s financial instruments are recordedat fair value or at amounts whose carrying value approximates fair value. See “—Investments, at Fair Value” above. While Apollo’s valuations of portfolioinvestments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains or losses will depend on, amongother factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing andmanner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Other financial instrumentscarrying values generally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings. Asdisclosed in note 12, the Company’s long term debt obligation related to the AMH Credit Agreement is believed to have an estimated fair value of approximately$795.6 million based on a yield analysis using available market data of comparable securities with similar terms and remaining maturities as ofDecember 31, 2012. However, the carrying value that is recorded on the consolidated statements of financial condition is the amount for which we expect tosettle the long term debt obligation. The Company has determined that the long term debt obligation related to the AMH Credit Agreement would be categorizedas a Level III liability in the fair-value hierarchy.Fair Value Option—Apollo has elected the fair value option for the convertible notes issued by HFA 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 applied the fairvalue option for certain corporate loans, other investments and debt obligations held by the consolidated VIEs that otherwise would not have been carried at fairvalue. For the convertible notes issued by HFA, Apollo has elected to separately present interest income from other changes in the fair value of the convertiblenotes in the consolidated statements of operations. Refer to notes 4 and 5 for further disclosure on the investment in HFA and financial instruments of theconsolidated VIEs for which the fair value option has been elected.Interest Rate Swap Agreements—Apollo recognizes derivatives as either an asset or liability measured at fair value. In order to reduce interestrate risk, Apollo entered into interest rate swap agreements which were formally designated as cash flow hedges. To qualify for cash flow hedge accounting,interest rate 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 highlyeffective in reducing Apollo’s exposure to interest rate risk. Apollo formally documents at inception its hedge relationships, including identification of thehedging instruments and the hedged items, its risk management objectives, its strategy for undertaking the hedge transaction and Apollo’s evaluation ofeffectiveness. Effectiveness is periodically assessed based upon a comparison of the relative changes in the cash flows of the interest rate swaps and the itemsbeing hedged.For derivatives that have been formally designated as cash flow hedges, the effective portion of changes in the fair value of the derivatives arerecorded in accumulated other comprehensive (loss) income (“OCI”). Amounts in OCI are reclassified into earnings when interest expense on the underlyingborrowings is recognized. If, at any time, the swaps are determined to be ineffective, in whole or in part, due to changes in the interest rate swap or underlyingdebt agreements, the fair value of the portion of the interest rate swap determined to be ineffective will be recognized as a gain or loss in the consolidatedstatements 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 orcomparable over-the-counter quotation systems are valued based -173-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) on the last reported sale price at that date. If no sales of such investments are reported on such date, and in the case of over-the-counter securities or otherinvestments for which the last sale date is not available, valuations are based on independent market quotations obtained from market participants, recognizedpricing 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 closeof business on such day. Market quotations are generally based on valuation pricing models or market transactions of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among other factors. When market quotations are not available a modelbased approach is used to determine fair value.The consolidated VIEs also have debt obligations that are recorded at fair value. The primary valuation methodology used to determine fair valuefor debt obligation is market quotation. Prices are based on the average of the “bid” and “ask” prices. In the event that market quotations are not available amodel based approach is used. The valuation approach used to estimate the fair values of debt obligations for which market quotations are not available is thediscounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interest payments andquarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and credit rating. Managementuses 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 to private equity, credit and real estate fund transactions that we are pursuing but which have not yet been consummated. These costs are deferred untilsuch transactions are broken or successfully completed. A transaction is determined to be broken upon management’s decision to no longer pursue thetransaction. In accordance with the related fund agreements, in the event the deal is broken, all of the costs are generally reimbursed by the funds andconsidered in the calculation of the Management Fee Offset. These offsets are included in Advisory and Transaction Fees from Affiliates in the Company’sconsolidated statements of operations. If a deal is successfully completed, Apollo is reimbursed by the fund or a fund’s portfolio company for all costsincurred.Fixed AssetsFixed Assets consist primarily of ownership interests in aircraft, leasehold improvements, furniture, fixtures and equipment, computer hardwareand software and are recorded at cost, net of accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-linemethod over 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 engineoverhauls are capitalized and depreciated until the next expected overhaul. Expenditures for repairs and maintenance are charged to expense when incurred. TheCompany evaluates long-lived assets for impairment periodically and whenever events or changes in circumstances indicate the carrying amounts of the assetsmay be impaired.Business Combinations—The Company accounts for acquisitions using the purchase method of accounting in accordance with U.S. GAAP.Under the purchase method of accounting, the purchase price of an acquisition is allocated to the assets acquired and liabilities assumed using the fair valuesdetermined by management as of the acquisition 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 of -174-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) amortization. At June 30, 2012, the Company performed its annual impairment testing and determined there was no impairment of goodwill or indefinite lifeintangible assets at such time.Profit Sharing Payable—Profit sharing payable primarily represents the amounts payable to employees and former employees who are entitledto a proportionate share of carried interest income in one or more funds. This portion of the liability is calculated based upon the changes to realized andunrealized carried interest and is therefore not payable until the carried interest itself is realized.Profit sharing payable also includes amounts payable to certain employees of the Company who are entitled to a share in the earnings of and anyappreciation in the value in one of the Company’s subsidiaries, during the term of their employment. This portion of the liability is recognized ratably over therequisite service period and thereafter will be recognized at the time the distributions are determined. This amount shall be payable out of distributable fundsbased upon proceeds received by the subsidiary through management fees earned.Profit sharing payable also includes contingent obligations that were recognized in connection with certain Apollo acquisitions.Debt Issuance Costs—Debt issuance costs consist of costs incurred in obtaining financing and are amortized over the term of the financingusing the effective 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 liabilitiesare translated using the exchange rates prevailing at the end of each reporting period. The functional currency of the Company’s international subsidiaries isthe U.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 BenefitsEquity-Based Compensation—Equity-based compensation is 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 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, severanceand employee benefits. Bonuses are generally accrued over the related service period.From time to time, the Company may assign profits interests received in lieu of management fees to certain investment professionals. Suchassignments of profits interests are treated as compensation and benefits when assigned.The Company sponsors a 401(k) Savings Plan whereby U.S.-based employees are entitled to participate in the plan based upon satisfying 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, 2012, 2011 and 2010, respectively. -175-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Profit Sharing Expense—Profit sharing expense consists of a portion of carried interest recognized in one or more funds allocated to employeesand former employees. Profit sharing expense is recognized on an accrued basis as the related carried interest income is earned. Profit sharing expense can bereversed during periods when there is a decline in carried interest income that was previously recognized. Additionally, profit sharing expenses previouslydistributed may be subject to clawback from employees, former employees and Contributing Partners.Changes in the fair value of the contingent obligations that were recognized in connection with certain Apollo acquisitions will be reflected in theCompany’s consolidated statements of operations as profit sharing expense.Profit sharing expense is also the result of profits interests issued to certain employees whereby they are entitled to a share in earnings of and anyappreciation of the value in a subsidiary of the Company during their term of employment. Profit sharing expense related to these profits interests is recognizedratably over the requisite service period and thereafter will be recognized at the time the distributions are determined.In June 2011, the Company adopted a performance based incentive arrangement for certain Apollo partners and employees designed to moreclosely align compensation on an annual basis with the overall realized performance of the Company. This arrangement enables certain partners and employeesto earn discretionary compensation based on carried interest realizations earned by the Company in a given year, which amounts are reflected in profit sharingexpense in 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 creditfunds, based on performance for the year. Incentive fee compensation expense is recognized on an accrual basis as the related carried interest income is earned.Incentive fee compensation expense may be subject to reversal until the carried interest income crystallizes.Other Income (Loss)Net Gains (Losses) from Investment Activities—Net gains (losses) from investment activities include both realized gains and losses and thechange in 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 investments at fair value.Net Gains from Investment Activities of Consolidated Variable Interest Entities—Changes in the fair value of the consolidated VIEs’ assetsand liabilities 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.Other Income (Loss), Net—Other income, net includes the recognition of bargain purchase gains as a result of Apollo acquisitions, gains(losses) arising from the remeasurement of foreign currency denominated assets and liabilities of foreign subsidiaries, and other miscellaneous non-operatingincome and expenses.Comprehensive (Loss) Income—U.S. GAAP guidance establishes standards for reporting comprehensive income and its components in afinancial statement that is displayed with the same prominence as other financial statements. U.S. GAAP requires that the Company classify items of OCI bytheir nature in the financial statements and display the accumulated balance of OCI separately in the shareholders’ equity section of the Company’sconsolidated statements of financial condition. Comprehensive income (loss) consists of net income (loss) and OCI. Apollo’s OCI is primarily comprised ofthe effective portion of changes in the fair value of the interest rate swap agreements discussed -176-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) previously. If, at any time, any of the Company’s subsidiaries’ functional currency becomes non-U.S. dollar denominated, the Company will record foreigncurrency cumulative translation adjustments in OCI.Income Taxes—The Apollo Operating Group and its subsidiaries generally operate as partnerships for U.S. Federal income tax purposes. As aresult, except as described below, the Apollo Operating Group has not been subject to U.S. income taxes. However, these entities in some cases are subject toNew York City unincorporated business taxes (“ NYC UBT”) and non-U.S. entities, in some cases, are subject to non-U.S. corporate income taxes. Inaddition, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. Federal, state and local corporate income tax, and the Company’sprovision 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 thetax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The taxbenefit is measured as the largest amount of benefit that has a greater than 50% 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 to determine whether or not we have uncertain tax positions that require financial statement recognition.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.Net Income (Loss) Per Class A Share—U.S. GAAP requires use of the two-class method of computing earnings per share for all periodspresented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, duringperiods of net income, the net income is first reduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods ofnet losses, the net loss is reduced for distributions declared on participating securities only if the security has the right to participate in the earnings of theentity and an objectively determinable contractual obligation to share in net losses of the entity.The remaining earnings are allocated to Class A Shares and participating securities to the extent that each security shares in earnings as if all 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 affectthe reported amounts of assets and liabilities at the date of the consolidated financial statements, the disclosure of contingent assets and liabilities at the date ofthe consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimatesinclude goodwill, intangible assets, income taxes, carried interest income from affiliates, contingent consideration obligations related to acquisitions, non-cashcompensation and fair value of investments and debt in the consolidated and unconsolidated funds and VIEs. Actual results could differ materially from thoseestimates. -177-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Recent Accounting PronouncementsIn December 2011, the FASB issued guidance to enhance disclosures about financial instruments and derivative instruments that are either(1) offset or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset. Under the guidance, an entityis required to disclose quantitative information relating to recognized assets and liabilities that are offset or subject to an enforceable master netting arrangementor similar agreement, including the gross amounts of those recognized assets and liabilities, the amounts offset to determine the net amount presented in thestatement of financial position, and the net amount presented in the statement of financial position. With respect to amounts subject to an enforceable masternetting arrangement or similar agreement which are not offset, disclosure is required of the amounts related to recognized financial instruments and otherderivative instruments, the amount related to financial collateral (including cash collateral), and the overall net amount after considering amounts that have notbeen offset. The guidance is effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods andretrospective application is required. As the amendments are limited to disclosure only, the adoption of this guidance will not have a material impact on theCompany’s financial statements.In July 2012, the FASB issued amended guidance related to testing indefinite-lived intangible assets, other than goodwill, for impairment. Underthe revised guidance, entities have the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangibleasset is impaired. If an entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is more likely than not tobe less than the carrying amount, then the entity must perform the quantitative impairment test; otherwise, further testing would not be required. Theamendments are effective for all entities for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoptionof this guidance will not have an impact on the Company’s consolidated financial statements when the Company performs its annual impairment test in June2013.In February 2013, the FASB issued an update which includes amendments that require an entity to report the effect of significant reclassificationsout of accumulated other comprehensive income (OCI) on the respective line items in net income if the amount being reclassified is required under U.S. GAAPto be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in thesame reporting period, an entity is required to cross-reference other required disclosures that provide additional detail about those amounts. The newrequirement presents information on amounts reclassified out of accumulated OCI and their corresponding effect on net income in one place or in some cases,provides for cross-references to related footnote disclosures. For public entities, the amendments are effective prospectively for reporting periods beginning afterDecember 15, 2012. As the amendments are limited to disclosure only, the adoption of this guidance is not expected to have a material impact on theCompany’s consolidated financial statements. -178-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 3. ACQUISITIONS AND BUSINESS COMBINATIONSBusiness CombinationsStone TowerOn April 2, 2012, the Company completed its previously announced acquisition of the membership interests of Stone Tower Capital LLC and itsrelated management companies (“Stone Tower”), a leading alternative credit manager. The acquisition was consummated by the Company for totalconsideration at fair value of approximately $237.2 million. The transaction added significant scale and several new credit product capabilities and increasedthe assets under management of the credit segment.Consideration exchanged at closing included a payment of approximately $105.5 million, which the Company funded from its existing cashresources, and equity granted to the former owners of Stone Tower with grant date fair value of $14.0 million valued using the Company’s closing stock priceon April 2, 2012 of $14.40. Additionally, the Company will also make payments to the former owners of Stone Tower under a contingent considerationobligation which requires the Company to transfer cash to the former owners of Stone Tower based on a specified percentage of carried interest income. Thecontingent consideration obligation had an acquisition date fair value of approximately $117.7 million, which was determined based on the present value ofthe estimated future carried interest payments of approximately $139.4 million using a discount rate of 9.5%, and is reflected in profit sharing payable in theconsolidated statements of financial condition.As a result of the acquisition, the Company incurred $4.6 million in acquisition costs, of which $2.8 million was incurred during the year endedDecember 31, 2012.Tangible assets acquired in the acquisition consisted of management and carried interest receivable and other assets. Intangible assets acquiredconsisted primarily of certain management contracts providing economic rights to management fees, senior fees, subordinate fees, and carried interest fromexisting CLOs, funds and strategic investment accounts. -179-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 theassets acquired exceeded the estimated fair value of the liabilities assumed as of the acquisition date resulting in a bargain purchase gain of approximately$1,951.1 million for the year ended December 31, 2012. The bargain purchase gain is reflected in other income, net within the consolidated statements ofoperations with corresponding amounts reflected as components of appropriated partners’ capital within the consolidated statements of changes inshareholders’ equity. The estimated fair values for the net assets acquired and liabilities assumed are summarized in the following table: Tangible Assets: Cash $6,310 Carried Interest Receivable 36,097 Due from Affiliates 1,642 Other Assets 2,492 Total assets of consolidated variable interest entities 10,136,869 Intangible Assets: Management Fees Contracts 9,658 Senior Fees Contracts 568 Subordinate Fees Contracts 2,023 Carried Interest Contracts 85,071 Non-Compete Covenants 200 Fair Value of Assets Acquired 10,280,930 Liabilities Assumed: Accounts payable and accrued expenses 3,570 Due to Affiliates 4,410 Other Liabilities 8,979 Total liabilities of consolidated variable interest entities 7,815,434 Fair Value of Liabilities Assumed 7,832,393 Fair Value of Net Assets Acquired 2,448,537 Less: Net assets attributable to Non-Controlling Interests in consolidated entities 260,203 Less: Fair Value of Consideration Transferred 237,201 Gain on Acquisition $1,951,133 The bargain purchase gain was recorded in other income, net in the consolidated statements of operations. During the one year measurementperiod, any changes resulting from facts and circumstances that existed as of the acquisition date will be reflected as a retrospective adjustment to the bargainpurchase gain and the respective asset acquired or liability assumed.The acquisition related intangible assets valuation and related amortization are as follows: Weighted AverageUseful Life in Years As ofDecember 31, 2012 Management Fees contracts 2.2 $9,658 Senior Fees Contracts 2.4 568 Subordinate Fees Contracts 2.5 2,023 Carried Interest Contracts 3.7 85,071 Non-Compete Covenants 2.0 200 Total Intangible Assets 97,520 Less: Accumulated amortization (20,456) Net Intangible Assets $77,064 -180-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The results of operations of the acquired business since the acquisition date included in the Company’s consolidated statements of operations forthe period from April 2, 2012 to December 31, 2012 were as follows: For the Period from April 2, 2012 toDecember 31 2012 Total Revenues $51,719 Net Income Attributable to Non-Controlling Interest $(1,925,053) Net Income Attributable to Apollo Global Management,LLC $12,446 Unaudited Supplemental Pro Forma InformationUnaudited supplemental pro forma results of operations of the combined entity for the years ended December 31, 2012 and 2011 assuming theacquisition had occurred as of January 1, 2011 are presented below. This pro forma information has been prepared for comparative purposes only and is notintended to be indicative of what the Company’s results would have been had the acquisition been completed on January 1, 2011, nor does it purport to beindicative of any future results. For theYear EndedDecember 31, 2012 2011 (in millions, except for per share data) Total Revenues $2,873,903 $217,347 Net (Income) Attributable to Non-Controlling Interest $(739,862) $(1,194,226) Net Income (Loss) Attributable to Apollo Global Management, LLC $321,420 $(456,112) Net Income (Loss) per Class A Share: Net Income (Loss) per Class A Share – Basic and Diluted $2.14 $(4.07) Weighted Average Number of Class A Shares – Basic 127,693,489 116,364,110 Weighted Average Number of Class A Shares – Diluted 129,540,377 116,364,110 The supplemental pro forma earnings include an adjustment to exclude $5.5 million of compensation expense not expected to recur due totermination of certain contractual arrangements as part of the closing of the acquisition.Gulf StreamOn October 24, 2011, the Company completed its previously announced acquisition of 100% of the membership interests of Gulf Stream AssetManagement, LLC (“Gulf Stream”), a manager of collateralized loan obligations. The acquisition was consummated by the Company for total consideration atfair value of approximately $39.0 million.The transaction broadens Apollo’s existing senior credit business by expanding our credit coverage as well as investor relationships and increasesthe assets under management of Apollo’s credit business.Consideration exchanged at closing consisted of payment of approximately $29.6 million, of which $6.7 million was used to repay subordinatednotes and 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 contingent -181-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) consideration obligation which requires the Company to transfer cash to the former owners of Gulf Stream based on a specified percentage of carried interestincome. The contingent consideration liability had an acquisition date fair value of approximately $5.4 million, which was determined based on the presentvalue of the estimated range of future carried interest payments 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.The Company has performed an analysis and an evaluation of the net assets acquired and liabilities assumed. The estimated fair value of theassets acquired exceeded the estimated fair value of the liabilities assumed as of the acquisition date resulting in a bargain purchase gain of approximately$196.2 million. The bargain purchase gain is reflected in other income, net within the consolidated statements of operations with a corresponding amountreflected in appropriated partners’ capital within the consolidated statements of changes in shareholders’ equity. The estimated fair values for the net assetsacquired and liabilities 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 33,900 Fair Value of Assets Acquired 2,314,232 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 235,244 Less: Fair Value of Consideration Transferred 39,026 Gain on Acquisition $196,218 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 inYears December 31,2012 December 31,2011 Management contracts 3.7 $33,900 $32,400 Less: Accumulated amortization (9,351) (284) Net intangible assets $24,549 $32,116 (1)During 2012 the Company recorded a purchase price adjustment of $1.5 million to management contracts acquired as part of the Gulf Streamacquisition. -182-(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The results of operations of the acquired business since the acquisition date included in the Company’s consolidated statements of operations forthe period 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 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 theGulf Stream acquisition had occurred as of January 1, 2010 are presented below. This pro forma information has been prepared for comparative purposesonly and is 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 itpurport to be 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 and Diluted 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 ofcompensation expense 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 andrelated entities thereto. The Company paid cash consideration of $1.4 million for identifiable assets with a combined fair value of $0.4 million, which resultedin $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 estateinvestment management group of Citigroup Inc. CPI had AUM of approximately $3.6 billion as of December 31, 2010. CPI is an integrated real estateinvestment platform with investment professionals located in Asia, Europe and North America. As part of the acquisition, Apollo received cash of $15.5million and acquired general partner interests in, and advisory agreements with, various real estate investment funds and co-invest vehicles and added to itsteam 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 was $1.2 million as of November 12, 2010. The acquisition was accounted for as a business combination and the Company recorded a $24.1million gain on acquisition which is included in other income (loss), net in the accompanying consolidated statements of operations for the year endedDecember 31, 2010. -183-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 wasestimated to 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 estimateduseful life using the straight-line method. As ofDecember 31, Useful Life inYears 2012 2011 Management contracts 2.5 $8,300 $8,300 Less: Accumulated amortization of intangibles (7,081) (3,761) Net intangible assets $1,219 $4,539 Intangible AssetsIntangible assets, net consists of the following: As ofDecember 31, 2012 2011 Finite-lived intangible assets/management contracts $240,020 $141,000 Accumulated amortization (102,164) (59,154) Intangible assets, net $137,856 $81,846 The changes in intangible assets, net consist of the following: For the Year EndedDecember 31, 2012 2011 Balance, beginning of year $81,846 $64,574 Amortization expense (43,009) (15,128) Acquisitions 99,019 32,400 Balance, end of year $137,856 $81,846 (1)Includes impact of purchase price adjustments related to Gulf Stream acquisitionAmortization expense related to intangible assets was $43.0 million, $15.1 million, and $12.8 million for the years ended December 31, 2012,2011, and 2010, respectively.Expected amortization of these intangible assets for each of the next 5 years and thereafter is as follows: -184-(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 2013 2014 2015 2016 2017 There-After Total Amortization of intangible assets $41,351 $36,246 $33,714 $7,881 $4,952 $13,712 $137,856 4. INVESTMENTSThe following table represents Apollo’s investments: December 31,2012 December 31,2011 Investments, at fair value $1,744,412 $1,552,122 Other investments 393,684 305,343 Total Investments $2,138,096 $1,857,465 Investments, at Fair ValueInvestments, at fair value consist of financial instruments held by AAA, investments held by the Apollo Senior Loan Fund, the Company’sinvestment in HFA and other investments held by the Company at fair value. As of December 31, 2012 and 2011, the net assets of the consolidated funds(excluding VIEs) were $1,691.3 million and $1,505.5 million, respectively. The following investments, except the investment in HFA and other investments,are presented as a percentage of net assets of the consolidated funds: Investments, at Fair Value – Affiliates December 31, 2012 December 31, 2011 Fair Value Cost % of NetAssets ofConsolidatedFunds Fair Value Cost % of NetAssets ofConsolidatedFunds PrivateEquity Credit Total PrivateEquity Credit Total Investments held by: AAA $1,666,448 $— $1,666,448 $1,561,154 98.5% $1,480,152 $— $1,480,152 $1,662,999 98.4% Investments held by Apollo Senior Loan Fund — 27,653 27,653 27,296 1.5 — 24,213 24,213 24,569 1.6 HFA — 48,723 48,723 57,815 N/A — 46,678 46,678 54,628 N/A Other Investments 1,588 — 1,588 3,563 N/A 1,079 — 1,079 2,881 N/A Total $1,668,036 $76,376 $1,744,412 $1,649,828 100.0% $1,481,231 $70,891 $1,552,122 $1,745,077 100.0% SecuritiesAt December 31, 2012 and 2011, the sole investment held by AAA was its investment in AAA Investments, L.P. (“AAA Investments”), which ismeasured based on AAA’s share of net asset value of AAA investments. The following tables represent each investment of AAA Investments constituting morethan five percent of the net assets of the funds that the Company consolidates (excluding VIEs) as of the aforementioned dates: December 31, 2012 Instrument Type Cost Fair Value % of NetAssets ofConsolidatedFunds Athene Holding Ltd. Equity $1,276,366 $1,578,954 93.4% (1)Two subsidiaries of AAA Investments, AAA Guarantor-Athene, L.P. and Apollo Life Re Ltd., own the majority of the equity of Athene Holding Ltd.AAA Investments owns through its subsidiaries the majority of the equity of Athene Holding Ltd. (“Athene”), the direct or indirect parent of thefollowing principal operating subsidiaries: Athene Life Re Ltd., a Bermuda-based reinsurance company focused on the fixed annuity reinsurance sector,Athene Annuity & Life Assurance Company (formerly Liberty Life Insurance Company), a Delaware-domiciled (formerly South Carolina-domiciled) stocklife insurance company focused on retail sales and reinsurance in the retirement services market, Athene Life Insurance Company, a Delaware-domiciled(formerly Indiana-domiciled) stock -185-(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) life insurance company focused on the institutional funding agreement backed note and funding agreement markets, and Presidential Life Corporation, a New-York-domiciled stock life insurance company focused on retail sales of fixed annuity products principally in New York.During the fourth quarter of 2012, AAA and AAA Investments consummated a transaction whereby a wholly-owned subsidiary of AAAInvestments contributed substantially all of its investments to Athene Holding Ltd. in exchange for common shares of Athene Holding Ltd., cash and a shortterm promissory note (the “AAA Transaction”). After the AAA Transaction, Athene Holding Ltd. was AAA’s only material investment and as ofDecember 31, 2012, AAA through its investment in AAA Investments was the largest shareholder of Athene Holding Ltd with an approximate 77% ownershipstake (without giving to effect to restricted common shares issued under Athene’s management equity plan). December 31, 2011 Instrument Type Cost Fair Value % of NetAssets ofConsolidatedFunds Apollo Life Re Ltd. Equity $358,241 $430,800 28.6% Apollo Strategic Value Offshore Fund, Ltd. Investment Fund 105,889 164,811 10.9 Rexnord Corporation Equity 37,461 139,100 9.2 LeverageSource, L.P. Equity 139,913 102,834 6.8 Apollo Asia Opportunity Offshore Fund, Ltd. Investment Fund 88,166 86,329 5.7 Momentive Performance Materials Equity 80,657 85,300 5.7 Apollo Strategic Value Offshore Fund, Ltd. (the “Apollo Strategic Value Fund”) has an ownership interest in a special purpose vehicle, ApolloVIF/SVF Bradco LLC, which owns interests in Bradco Supply Corporation. AAA Investments’ combined share of these investments is greater than 5.0% ofthe net assets of the consolidated funds valued at $80.9 million at December 31, 2011.In addition to the AAA Investments’ private equity co-investment in Momentive Performance Materials (“Momentive”) noted above, AAAInvestments had an ownership interest in the debt of Momentive. AAA Investments’ combined share of these debt and equity investments is greater than 5% ofthe net assets of the consolidated funds and is valued at $85.9 million at December 31, 2011.The Apollo Strategic Value Fund primarily invests in the securities of leveraged companies in North America and Europe through three corestrategies: distressed investments, value-driven investments and special opportunities. In connection with the redemptions requested by AAA Investments of itsinvestment in the Apollo Strategic Value Fund, the remainder of AAA Investments’ investment in the Apollo Strategic Value Fund was converted intoliquidating shares issued by the Apollo Strategic Value Fund. The liquidating shares were initially allocated a pro rata portion of each of the Apollo StrategicValue Fund’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 by the Apollo Strategic Value Fund.During the first quarter of 2012, the general partner of the Apollo Asia Opportunity Offshore Fund, Ltd. (the “Apollo Asia Opportunity Fund”)determined that it was in the best interests of the limited partners in the Apollo Asia Opportunity Fund to wind down the fund and begin making distributionsto investors as investments are liquidated. The remainder of the investment in the Apollo Asia Opportunity Fund is currently expected to be distributed as theless liquid investments are realized, with the final liquidation expected to occur in 2013, although the actual timing of the realizations may differ substantiallyfrom this estimate.Apollo Senior Loan FundOn December 31, 2011, the Company invested $26.0 million in the Apollo Credit Senior Loan Fund, L.P. (“Apollo Senior Loan Fund”). As aresult, the Company became the sole investor in the fund and therefore consolidated the assets and liabilities of the fund. The fund invests in U.S.denominated -186-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) senior secured loans, senior secured bonds and other income generating fixed-income investments. At least 90% of the Apollo Senior Loan Fund’s portfolio ofinvestments must consist of senior secured, floating rate loans or cash or cash equivalents. Up to 10% of the Apollo Senior Loan Fund’s portfolio may consistof non-first lien fixed income investments and other income generating fixed income investments, including but not limited to senior secured bonds. The ApolloSenior Loan Fund may not purchase assets rated (tranche rating) at B3 or lower by Moody’s, or equivalent rating by another nationally recognized ratingagency.The Company has classified the instruments associated with the Apollo Senior Loan Fund investment as Level II and Level III investments. AllLevel II and Level III investments of the Apollo Senior Loan Fund were valued using broker quotes.HFAOn March 7, 2011, the Company invested $52.1 million (including expenses related to the purchase) in a convertible note with an aggregateprincipal amount of $50.0 million and received 20,833,333 stock options issued by HFA, an Australian based specialist global funds management company.The terms of the convertible note allow the Company to convert the note, in whole or in part, into common shares of HFA at an exchange rate equalto the principal plus accrued payment-in-kind interest (or “PIK” interest) divided by US$0.98 at any time, and convey participation rights, on an as-converted basis, in any dividends declared in excess of $6.0 million per annum, as well as seniority rights over HFA common equity holders. Unlesspreviously converted, repurchased or cancelled, the note will be converted on the eighth anniversary of its issuance on March 11, 2019. Additionally, the notehas a percentage coupon interest of 6% per annum, paid via principal capitalization (PIK interest) for the first four years, and thereafter either in cash or 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 convertible note. The convertible note is valued using an “if-converted basis,” which is based on ahypothetical exit through conversion to common equity( for which quoted price exists) as of the valuation date. The Company separately presents interestincome in the consolidated statements of operations from other changes in the fair value of the convertible note. For the years ended December 31, 2012 and2011 the Company has recorded $3.1 million and $2.5 million, respectively in PIK interest income included in interest income in the consolidated statementsof operations. The terms of the stock options allow for the Company to acquire 20,833,333 fully paid ordinary shares of HFA at an exercise price in AustralianDollars (“A$”) of A$8.00 (exchange rate of A$1.00 to $1.04 and A$1.00 to $0.84 as of December 31, 2012 and 2011, respectively) per stock option. Thestock options became exercisable upon issuance and expire on the eighth anniversary of the issuance date. The stock options are accounted for as a derivativeand are valued at their fair value under U.S. GAAP at each balance sheet date. As a result, for the years ended December 31, 2012 and 2011, the Companyrecorded an unrealized loss of approximately $1.1 million and $5.9 million, respectively, related to the convertible note and stock options within net gains(losses) from investment activities in the consolidated statements of operations.The Company has classified the instruments associated with the HFA investment as Level III investments. -187-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Net Gains (Losses) from Investment ActivitiesNet gains (losses) from investment activities in the consolidated statements of operations include net realized gains from sales of investments, andthe change in net unrealized gains (losses) resulting from changes in fair value of the consolidated funds’ investments and realization of previously unrealizedgains (losses). Additionally net gains (losses) 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 gains (losses) from investment activities for the years ended December 31, 2012, 2011 and 2010: For the Year EndedDecember 31, 2012 Private Equity Credit Total Realized gains on sales of investments $— $443 $443 Change in net unrealized gains due to changes in fair values 288,140 (339) 287,801 Net Gains from Investment Activities $288,140 $104 $288,244 For the Year EndedDecember 31, 2011 Private Equity Credit Total Change in net unrealized (losses) gains due to changes in fair values $(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 Credit Total Realized (losses) gains on sales of investments $— $(2,240) $(2,240) Change in net unrealized gains (losses) due to changes in fair values 370,145 (34) 370,111 Net Gains (Losses) from Investment Activities $370,145 $(2,274) $367,871 -188-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 isrecorded within 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, 2012, 2011 and 2010: For the Years EndedDecember 31, 2012 2011 2010 Investments: Private Equity Funds: AAA Investments $195 $(55) $215 Apollo Investment Fund IV, L.P. (“Fund IV”) (2) 8 24 Apollo Investment Fund V, L.P. (“Fund V”) 20 (9) 39 Apollo Investment Fund VI, L.P. (“Fund VI”) 3,947 2,090 599 Apollo Investment Fund VII, L.P. (“Fund VII”) 60,576 10,156 37,499 Apollo Natural Resources Partners, L.P. (“ANRP”) (71) (141) — AION Capital Management Limited (“AION”) 71 — — Credit Funds: Apollo Special Opportunities Managed Account, L.P. (“SOMA”) 843 (793) 1,106 Apollo Value Investment Fund, L.P. (“VIF”) 19 (25) 29 Apollo Strategic Value Fund, L.P. (“SVF”) 15 (21) 21 Apollo Credit Liquidity Fund, L.P. (“ACLF”) 4,219 (295) 3,431 Apollo/Artus Investors 2007-I, L.P. (“Artus”) 1,466 368 4,895 Apollo Credit Opportunity Fund I, L.P. (“COF I”) 19,731 2,410 12,618 Apollo Credit Opportunity Fund II, L.P. (“COF II”) 4,989 (737) 3,610 Apollo European Principal Finance Fund, L.P. (“EPF I”) 3,933 1,729 2,568 Apollo Investment Europe II, L.P. (“AIE II”) 1,948 (308) 1,496 Apollo Palmetto Strategic Partnership, L.P. (“Palmetto”) 2,228 (100) 903 Apollo Senior Floating Rate Fund (“AFT”) 14 (16) — Apollo/ JH Loan Portfolio 5 — — Apollo Residential Mortgage, Inc. (“AMTG”) 1,053 (80) — Apollo European Credit, L.P. (“AEC”) 203 (10) — Apollo European Strategic Investments, L.P. (“AESI”) 576 21 — Apollo Centre Street Partnership, L.P. (“ACSP”) 433 — — Apollo Investment Corporation (“AINV”) 1,761 — — Apollo European Principle Finance Fund II, L.P. (“EPF II”) 568 — — Apollo SK Strategic Investments, L.P. 18 — — Apollo SPN Investments I, L.P. (10) — — Real Estate: Apollo Commercial Real Estate Finance, Inc. (“ARI”) 1,100 636 (390) AGRE US Real Estate Fund, L.P. (172) (79) — CPI Capital Partners North America 17 98 — CPI Capital Partners Asia Pacific 72 71 — Apollo GSS Holding (Cayman), L.P. (39) — — Other Equity Method Investments: VC Holdings, L.P. Series A (“Vantium A/B”) (306) (1,860) (951) VC Holdings, L.P. Series C (“Vantium C”) 165 580 1,370 VC Holdings, L.P. Series D (“Vantium D”) 588 285 730 Total Income from Equity Method Investments $110,173 $13,923 $69,812 (1)Amounts are as of September 30, 2012.(2)Amounts are as of September 30, 2011.(3)Amounts are as of September 30, 2010. -189-(1)(2)(1)(2)(3)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Other investments as of December 31, 2012 and 2011 consisted of the following: Equity Held as of December 31,2012 % ofOwnership December 31,2011 % ofOwnership Investments: Private Equity Funds: AAA Investments $998 0.057% $859 0.057% Fund IV 9 0.015 15 0.010 Fund V 173 0.014 202 0.014 Fund VI 9,814 0.094 7,752 0.082 Fund VII 164,773 1.316 139,765 1.318 ANRP 2,355 0.903 1,982 2.544 AION 625 10.000 — — Credit Funds: SOMA 5,887 0.643 5,051 0.525 VIF 141 0.093 122 0.081 SVF 137 0.076 123 0.059 ACLF 9,281 2.579 14,449 2.465 Artus 667 6.156 6,009 6.156 COF I 39,416 1.924 37,806 1.977 COF II 19,654 1.429 22,979 1.472 EPF I 18,329 1.363 14,423 1.363 AIE II 7,207 2.205 7,845 2.076 Palmetto 13,614 1.186 10,739 1.186 AFT 98 0.034 84 0.034 Apollo/JH Loan Portfolio, L.P. — 0.000 100 0.189 AMTG 4,380 0.811 4,000 1.850 AEC 1,604 1.079 542 1.053 AESI 3,076 0.991 1,704 1.035 ACSP 5,327 2.457 — — AINV 51,761 2.955 — — EPF II 5,337 1.316 — — Apollo SK Strategic Investments, L.P. 1,002 0.988 — — Asia Private Credit (“APC”) 17 0.058 — — Apollo SPN Investments I, L.P. 90 0.083 — — CION Investment Corporation 1,000 22.207 — — Real Estate: ARI 11,469 2.729 11,288 2.730 AGRE U.S. Real Estate Fund 5,210 1.845 5,884 2.065 CPI Capital Partners North America 455 0.413 564 0.344 CPI Capital Partners Europe 5 0.001 5 0.001 CPI Capital Partners Asia Pacific 186 0.039 256 0.039 Apollo GSS Holding (Cayman), L.P. 2,428 4.621 — — Other Equity Method Investments: Vantium A/B 54 6.450 359 6.450 Vantium C 5,172 2.071 6,944 2.300 Vantium D 1,933 6.345 1,345 6.300 Portfolio Company Holdings — N/A 2,147 N/A Total Other Investments $393,684 $305,343 (1)Amounts are as of September 30, 2012.(2)Amounts are as of September 30, 2011.(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.(4)Ownership percentages are not presented for these equity method investments in our portfolio companies as we only present ownership percentages forthe funds in which we are the general partner. All equity methods of investments were sold during the year ended December 31, 2012.(5)The value of the Company’s investment in AINV was $51,351 based on the quoted market price as of December 31, 2012. -190-(3)(5)(1)(1)(2)(2)(5)(1)(1)(3)(5)(1)(1)(2)(2)(4)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The most recently issued summarized aggregated financial information of the funds and other equity method investments in which Apollo hasequity method investments is as follows: Private Equity Credit Real Estate As ofDecember 31, As ofDecember 31, As ofDecember 31, Balance Sheet Information 2012 2011 2012 2011 2012 2011 Investments $25,896,569 $22,759,853 $17,089,006 $10,004,744 $1,912,369 $1,980,613 Assets 26,606,324 24,219,637 19,397,579 11,335,170 2,038,877 2,196,460 Liabilities 101,803 686,558 7,823,274 2,773,163 290,392 587,576 Equity 26,504,521 23,533,079 11,574,305 8,562,007 1,748,485 1,608,884 (1)Certain real estate amounts are as of September 30, 2012 and 2011.(2)Certain equity investment amounts are as of September 30, 2012 and 2011.(3)Financial information of certain equity method investments is not available as of December 31, 2012 and 2011. Aggregate Totalsas ofDecember 31, Balance Sheet Information 2012 2011 Investments $44,897,944 $34,745,210 Assets 48,042,780 37,751,267 Liabilities 8,215,469 4,047,297 Equity 39,827,311 33,703,970 Private Equity Credit Real Estate Income StatementInformation For the Years EndedDecember 31, For the Years EndedDecember 31, For the Years EndedDecember 31, 2012 2011 2010 2012 2011 2010 2012 2011 2010 Revenues/Investment Income $1,682,837 $1,522,831 $610,899 $1,330,160 $852,282 $304,332 $54,720 $46,654 $14,468 Expenses 275,126 377,985 286,719 699,250 290,843 145,138 32,077 30,350 6,377 Net Investment Income 1,407,711 1,144,846 324,180 630,910 561,439 159,194 22,643 16,304 8,091 Net Realized and Unrealized Gain (Loss) 6,856,074 2,239,373 5,918,694 2,053,440 (537,017) 1,531,056 275,659 172,018 (1,058) Net Income $8,263,785 $3,384,219 $6,242,874 $2,684,350 $24,422 $1,690,250 $298,302 $188,322 $7,033 (1)Certain real estate amounts are as of September 30, 2012, 2011 and 2010.(2)Certain equity investment amounts are as of September 30, 2012 and 2011.(3)Financial information of certain equity method investments is not available as of December 31, 2012 and 2011. Aggregate Totalsfor the Years EndedDecember 31, Income Statement Information 2012 2011 2010 Revenues/Investment Income $3,067,717 $2,421,767 $929,699 Expenses 1,006,453 699,178 438,234 Net Investment Income 2,061,264 1,722,589 491,465 Net Realized and Unrealized Gain 9,185,173 1,874,374 7,448,692 Net Income $11,246,437 $3,596,963 $7,940,157 -191-(2)(3)(2)(3)(1)(1)(2)(3)(2)(3)(1)(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Fair Value MeasurementsThe following table summarizes the valuation of Apollo’s investments in fair value hierarchy levels as of December 31, 2012 and 2011: Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Assets, at fair value: Investment in AAA Investments $— $— $— $— $1,666,448 $1,480,152 $1,666,448 $1,480,152 Investments held by Apollo Senior LoanFund — — 27,063 23,757 590 456 27,653 24,213 Investments in HFA and Other — — — — 50,311 47,757 50,311 47,757 Total $— $— $27,063 $23,757 $1,717,349 $1,528,365 $1,744,412 $1,552,122 Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Liabilities, at fair value: Interest rate swap agreements $— $— $— $3,843 $— $— $— $3,843 Total $— $— $— $3,843 $— $— $— $3,843 There was a transfer of investments from Level III into Level II as well as a transfer from Level II into Level III relating to investments held by theApollo Senior Loan Fund during 2012, as a result of subjecting the broker quotes on these investments to various criteria which include the number andquality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services. There were notransfers between Level I, II or III during the year ended December 31, 2011 relating to assets and liabilities, at fair value, noted in 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, 2012 2011 2010 Balance, Beginning of Period $1,480,152 $1,637,091 $1,324,939 Purchases — 432 375 Distributions (101,844) (33,425) (58,368) Change in unrealized gains (losses), net 288,140 (123,946) 370,145 Balance, End of Period $1,666,448 $1,480,152 $1,637,091 -192-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes the changes in the investment in HFA and Other Investments, which are measured at fair value and characterizedas Level III investments: For the Year EndedDecember 31, 2012 2011 Balance, Beginning of Period $47,757 $— Acquisitions related to consolidated fund 46,148 — Purchases 5,759 57,509 Deconsolidation (48,037) — Director Fees — (1,802) Expenses incurred — (2,069) Change in unrealized losses (1,316) (5,881) Balance, End of Period $50,311 $47,757 (1)During the third quarter of 2012, the Company deconsolidated GSS Holding (Cayman), L.P., which was consolidated by the Company during thesecond quarter of 2012.The change in unrealized losses, net has been recorded within the caption “Net gains (losses) from investment activities” in the consolidatedstatements of operations.The following table summarizes the changes in the Apollo Senior Loan Fund, which is measured at fair value and characterized as a Level IIIinvestment for the years ended December 31, 2012 and 2011: For the Year EndedDecember 31, 2012 2011 Balance, Beginning of Period $456 $— Acquisition — 456 Purchases of investments 496 — Sale of investments (1,291) — Realized gains 20 — Change in unrealized gains 8 — Transfers out of Level III (935) — Transfers into Level III 1,836 — Balance, End of Period $590 $456 -193-(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securitiesheld by AAA Investments as of December 31, 2012 and 2011: Private Equity December 31, 2012 December 31, 2011 % ofInvestmentof AAA % ofInvestmentof AAA Approximate values based on net asset value of the underlying funds, which are based onthe funds underlying investments that are valued using the following: Discounted cash flow models $1,581,975 98.6% $643,031 38.4% Comparable company and industry multiples — — 749,374 44.6 Listed quotes 22,029 1.4 139,833 8.3 Broker quotes — — 179,621 10.7 Other net liabilities — — (33,330) (2.0) Total Investments 1,604,004 100.0% 1,678,529 100.0% Other net assets (liabilities) 62,444 (198,377) Total Net Assets $1,666,448 $1,480,152 (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. Balance at December 31, 2012 is primarily comprised of$113.3 million in notes receivable from affiliate. Balance at December 31, 2011 was primarily comprised of $402.5 million in long-term debt offset bycash and cash equivalents. Carrying values approximate fair value for other assets and liabilities (except for debt), and, accordingly, extended valuationprocedures are not required.The significant unobservable inputs used in the fair value measurement of the Level III investments are the comparable multiples and weighed averagecost of capital rates applied in the valuation models for each investment. These inputs in isolation can cause significant increases or decreases in fair value.Specifically, the comparable multiples are generally multiplied by the underlying companies embedded value to establish the total enterprise value of ourportfolio company investments. The comparable multiple is determined based on the implied trading multiple of public industry peers. Similarly, when adiscounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value theprojected cash flows. An increase in the discount rate can significantly lower the fair value of an investment; conversely a decrease in the discount rate cansignificantly increase the fair value of an investment. The discount rate is determined based on the weighted average cost of capital calculation that weights thecost of equity and the cost of debt based on comparable debt to equity ratios.5. VARIABLE INTEREST ENTITIESThe Company consolidates entities that are VIEs for which the Company has been designated as the primary beneficiary. The purpose of suchVIEs is to provide strategy-specific investment opportunities for investors in exchange for management and performance based fees. The investment strategiesof the entities 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 credit entities. The nature of theCompany’s involvement with VIEs includes direct and indirect investments and fee arrangements. The Company does not provide performance guaranteesand has no other financial obligations to provide funding to VIEs other than its own capital commitments. There is no recourse to the Company for theconsolidated VIEs’ liabilities.The assets and liabilities of the consolidated VIEs are comprised primarily of investments and debt, at fair value, and are included within assetsand liabilities of consolidated variable interest entities, respectively, in the consolidated statements of financial condition. -194-(1)(2)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Consolidated Variable Interest EntitiesIn accordance with the methodology described in note 2, Apollo has consolidated VIEs as of December 31, 2012, in connection with theCompany’s October 2011 acquisition of Gulf Stream Asset Management, LLC and the Company’s April 2012 acquisition of Stone Tower. Refer to note 3 forfurther discussion of the Stone Tower and Gulf Stream acquisitions.The majority of the consolidated VIEs were formed for the sole purpose of issuing collateralized notes to investors. The assets of these VIEs areprimarily comprised of senior secured loans and the liabilities are primarily comprised of debt. Through its role as collateral manager of these VIEs, it wasdetermined that Apollo had the power to direct the activities that most significantly impact the economic performance of these VIEs. Additionally, Apollodetermined that the potential fees that it could receive directly and indirectly from these VIEs represent rights to returns that could potentially be significant tosuch VIEs. As a result, Apollo determined that it is the primary beneficiary and therefore should consolidate the VIEs.The assets of these consolidated VIEs are not available to creditors of the Company. In addition, the investors in these consolidated VIEs have norecourse against the assets of the Company. The Company has elected the fair value option for financial instruments held by its consolidated VIEs, whichincludes 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, 2012 and 2011: Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Investments, at fair value $168 $— $11,045,902 $3,055,357 $1,643,465 $246,609 $12,689,535 $3,301,966 Level I Level II Level III Totals December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 December 31,2012 December 31,2011 Liabilities, at fair value $— $— $— $— $11,834,955 $3,189,837 $11,834,955 $3,189,837 (1)During the first quarter of 2011, one of the consolidated VIEs sold all of its investments. The consolidated VIE had a net investment gain of $16.0million relating to the sale for the year ended December 31, 2011, which is reflected in the net (losses) gains from investment activities of consolidatedvariable 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 ofnotes and loans, the valuations of which are discussed further in note 2. All Level II investments were valued using broker quotes. Transfers of investmentsout of Level III and into Level II or Level I, if any, are accounted for as of the end of the reporting period in which the transfer occurred.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 fair value transfers between Level I and Level II: -195-(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) December 31, 2012 December 31, 2011 Transfers from Level II into Level I $164 $— (1)Transfers into Level I represents those financial instruments for which an unadjusted quoted price in an active market became available for the identicalasset.The following table summarizes the quantitative inputs and assumptions used for Investments, at fair value, categorized as Level III in the fairvalue hierarchy as of December 31, 2012. The disclosure below excludes Level III Investments, at fair value as of December 31, 2012, for which thedetermination of fair value is based on broker quotes: Fair Value atDecember 31, 2012 Valuation Techniques UnobservableInputs Ranges WeightedAverage Financial Assets: Bank Debt Term Loans $67,920 Discounted Cash Flow –Comparable Yields DiscountRates 11.8%–25.2% 16.3% Stocks 3,624 Market Comparable Companies ComparableMultiples 6.63x 6.63x Total $71,544 The significant unobservable inputs used in the fair value measurement of the bank debt term loans and stocks include the discount rate appliedand the multiples applied in the valuation models. These unobservable inputs in isolation can cause significant increases (decreases) in fair value.Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate appliedto present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment; conversely decreases in thediscount rate can significantly increase the fair value of an investment. The discount rate is determined based on the market rates an investor would expect fora similar investment with similar risks. When a comparable multiple model is used to determine fair value, the comparable multiples are generally multipliedby the underlying companies EBITDA to establish the total enterprise value of the company. The comparable multiple is determined based on the impliedtrading multiple of public industry peers.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, 2012 2011 2010 Balance, Beginning of Period $246,609 $170,369 $— Acquisition of VIEs 1,706,145 335,353 — Transition adjustment relating of consolidation of VIE — — 1,102,114 Deconsolidation of VIE — — (20,751) Elimination of investments attributable to consolidation of VIEs (69,437) — — Purchases 1,236,232 663,438 840,926 Sale of investments (1,561,589) (273,719) (125,638) Net realized gains (losses) 21,603 980 131 Changes in net unrealized (losses) gains (56,013) (7,669) 29,981 Transfers out of Level III (712,040) (802,533) (1,663,755) Transfers into Level III 831,955 160,390 7,361 Balance, End of Period $1,643,465 $246,609 $170,369 Changes in net unrealized gains (losses) included in Net (Losses) Gains fromInvestment Activities of consolidated VIEs related to investments still held atreporting date $7,464 $(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 quoteson these 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. -196-(1)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 IIIliabilities: For the Year EndedDecember 31, 2012 2011 2010 Balance, Beginning of Period $3,189,837 $1,127,180 $— Acquisition of VIEs 7,317,144 2,046,157 — Transition adjustment relating to consolidation of VIE — — 706,027 Additions 1,639,271 454,356 1,050,377 Repayments (741,834) (415,869) (331,120) Net realized gains on debt — (41,819) (21,231) Changes in net unrealized losses from debt 497,704 19,880 55,040 Deconsolidation of VIE — — (329,836) Elimination of debt attributable to consolidated VIEs (67,167) (48) (2,077) Balance, End of Period $11,834,955 $3,189,837 $1,127,180 Changes in net unrealized losses (gains) included in Net (Losses) Gains fromInvestment Activities of consolidated VIEs related to liabilities still held at reportingdate $446,649 $(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, 2012 and2011, respectively: For the Year EndedDecember 31, 2012 2011 2010 Net unrealized gains from investment activities $169,087 $10,832 $46,406 Net realized gains (losses) from investment activities 76,965 (11,313) 7,239 Net gains (losses) from investment activities 246,052 (481) 53,645 Net unrealized losses from debt (497,704) (19,880) (55,040) Net realized gains from debt — 41,819 21,231 Net (losses) gains from debt (497,704) 21,939 (33,809) Interest and other income 581,610 75,004 62,696 Other expenses (401,662) (72,261) (34,326) Net (Losses) Gains from Investment Activities of Consolidated VIEs $(71,704) $24,201 $48,206 -197-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 consolidatedVIEs. The following table summarizes the principal provisions of the debt of the consolidated VIEs as of December 31, 2012 and 2011: December 31, 2012 December 31, 2011 PrincipalOutstanding WeightedAverageInterest Rate WeightedAverageRemainingMaturity inYears PrincipalOutstanding WeightedAverageInterest Rate WeightedAverageRemainingMaturity inYears Senior Secured Notes $11,409,825 1.30% 7.3 $3,121,126 1.35% 8.9 Subordinated Notes 1,074,904 N/A 7.7 416,275 N/A 8.8 $12,484,729 $3,537,401 (1)The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the VIEs.(2)The fair value of Senior Secured and Subordinated Notes as of December 31, 2012 and December 31, 2011 was $11,835 million and $3,190 million,respectively.(3)The debt at fair value of the consolidated VIEs is collateralized by assets of the consolidated VIEs and assets of one vehicle may not be used to satisfythe liabilities of another. As of December 31, 2012 and December 31, 2011, the fair value of the consolidated VIE assets was $14,672 million and$3,533 million, respectively. This collateral consists of cash and cash equivalents, investments at fair value and other assets.The following table summarizes the quantitative inputs and assumptions used for Liabilities, at fair value categorized as Level III in the fair valuehierarchy as of December 31, 2012. The disclosure below excludes Level III Liabilities, at fair value as of December 31, 2012, for which the determination offair value is based on broker quotes: As ofDecember 31, 2012 Fair Value ValuationTechnique Unobservable Input RangesSubordinated Notes $195,357 Discounted Cash Discount Rate 17.0% Flow Default Rate 1.5%–4.0% Recovery Rate 80.0%Senior Secured Notes $2,066,250 Discounted Cash Discount Rate 1.65%–1.95% Flow Default Rate 2.0% Recovery Rate 30.0%–60.0%The significant unobservable inputs used in the fair value measurement of the subordinated and senior secured notes include the discount rateapplied in the valuation models, default and recovery rates applied in the valuation models. These inputs in isolation can cause significant increases(decreases) in fair value. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model isthe discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of subordinated andsenior secured notes; conversely decrease in the discount rate can significantly increase the fair value of subordinated and senior secured notes. The discountrate is determined based on the market rates an investor would expect for similar subordinated and senior secured notes with similar risks.The consolidated VIEs have elected the fair value option to value the term loans and notes payable. The general partner uses its discretion andjudgment in considering and appraising relevant factors in determining valuation of these loans. As of December 31, 2012, the debt, at fair value, is classifiedas Level III liabilities. Because of the inherent uncertainty in the valuation of the term loans and notes payable, which are not publicly traded, estimated valuesmay differ significantly from the values that would have been reported had a ready market for such investments existed. -198-(2)(3)(2)(3)(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The consolidated VIEs’ debt obligations contain various customary loan covenants as described above. As of the balance sheet date, the Companywas not aware of any instances of noncompliance with any of the covenants.As of December 31, 2012, the table below presents the maturities for debt of the consolidated VIEs: 2013 2014 2015 2016 2017 Thereafter Total Secured notes $— $— $— $2,175,000 $378,999 $8,855,826 $11,409,825 Subordinated notes 22,000 — — — 88,250 964,654 1,074,904 Total Obligations as of December 31, 2012 $22,000 $— $— $2,175,000 $467,249 $9,820,480 $12,484,729 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 primarybeneficiary.The following tables present the carrying amounts of the assets and liabilities of the VIEs for which Apollo has concluded that it holds asignificant variable 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, 2012 Total Assets Total Liabilities Apollo Exposure Private Equity $13,498,100 $(34,438) $7,105 Credit 3,276,198 (545,547) 12,605 Real Estate 1,685,793 (1,237,462) — Total $18,460,091 $(1,817,447) $19,710 (1)Consists of $452,116 in cash, $17,092,814 in investments and $915,161 in receivables.(2)Represents $1,752,294 in debt and other payables, $32,702 in securities sold, not purchased, and $32,451 in capital withdrawals payable.(3)Apollo’s exposure is limited to its direct and indirect investments in those entities in which Apollo holds a significant variable interest. December 31, 2011 Total Assets Total Liabilities Apollo Exposure Private Equity $11,879,948 $(146,374) $8,753 Credit 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.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. As of December 31, 2012 AAA Investments did not hold investments in any of the Company’sunconsolidated VIEs. -199-(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, credit, and real estate funds consists of the following: For the Year EndedDecember 31, 2012 2011 Private equity $1,413,306 $672,952 Credit 454,155 195,630 Real Estate 10,795 — Total Carried Interest Receivable $1,878,256 $868,582 The table below provides a roll-forward of the carried interest receivable balance for the years ended December 31, 2012 and 2011: PrivateEquity Credit Real Estate Total Carried interest receivable, January 1, 2011 $1,578,135 $288,938 $— $1,867,073 Change in fair value of funds (373,906) 67,971 — (305,935) Fund cash distributions to the Company (531,277) (161,279) — (692,556) Carried Interest Receivable, December 31, 2011 $672,952 $195,630 $— $868,582 Change in fair value of funds 1,592,234 448,670 15,074 2,055,978 Acquisition of Stone Tower — 36,097 — 36,097 Fund cash distributions to the Company (851,880) (226,242) (4,279) (1,082,401) Carried Interest Receivable, December 31, 2012 $1,413,306 $454,155 $10,795 $1,878,256 (1)Included in change in fair value of funds for the year ended December 31, 2012 was a reversal of $75.3 million of the entire general partner obligation toreturn previously distributed carried interest income with respect to Fund VI and reversal of previously realized carried interest income due to the generalpartner obligation to return previously distributed carried interest income of $1.2 million and $0.3 million for SOMA and APC, respectively. Included inchange in fair value of funds for the year ended December 31, 2011 was a reversal of previously realized carried interest income due to the generalpartner obligation to return previously distributed carried interest income of $75.3 million and $18.1 million for Fund VI and SOMA, respectively. Thegeneral partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of the balance sheet date. 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.(2)Reclassified to include related foreign exchange loss attributable to credit segment in order to conform to current period presentation.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 credit funds, carried interest is payable based on realizations afterthe end of the relevant fund’s fiscal year or fiscal quarter, subject to high watermark provisions. -200-(1)(2)(1)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, 2012 2011 Ownership interests in aircraft 15 $10,184 $10,184 Leasehold improvements 8-16 48,610 44,433 Furniture, fixtures and other equipment 4-10 16,047 14,455 Computer software and hardware 2-4 27,744 22,789 Other 4 509 506 Total fixed assets 103,094 92,367 Less – accumulated depreciation and amortization (49,642) (39,684) Fixed Assets, net $53,452 $52,683 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. Asa result of reclassifying the assets to assets held for sale, the Company recognized a loss of $2.8 million during the year ended December 31, 2010 on theassets 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 thanits current fair value. In 2010, the Company recognized an impairment loss of $3.1 million related to its remaining ownership in aircraft. This loss is includedin other income (loss), net in the accompanying consolidated statements of operations.Depreciation expense for the years ended December 31, 2012, 2011 and 2010 was $10.2 million, $11.1 million and $11.5 million, respectively.8. OTHER ASSETSOther assets consist of the following: December 31,2012 December 31,2011 Prepaid expenses $12,650 $6,271 Tax receivables 5,380 10,465 Underwriting fee receivable 5,569 — Receivable from broker 3,537 604 Debt issuance costs 2,113 2,624 Rent deposits 1,336 1,482 Other 6,180 5,530 Total Other Assets $36,765 $26,976 -201-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 9. OTHER LIABILITIESOther liabilities consist of the following: December 31,2012 December 31,2011 Deferred rent $14,829 $14,798 Deferred taxes 13,717 2,774 Unsettled trades and redemption payable 3,986 2,902 Deferred payment related to acquisition (note 3) — 3,858 Interest rate swap agreements — 3,843 Other 12,323 4,875 Total Other Liabilities $44,855 $33,050 Interest Rate Swap Agreements—The principal financial instruments used for cash flow hedging purposes are interest rate swaps. Apolloenters into interest rate swap agreements to manage its exposure to interest rate changes. The swaps effectively converted a portion of the Company’s variablerate debt under the AMH Credit Agreement (discussed in note 12) to a fixed rate, without exchanging the notional principal amounts. Apollo entered into interestrate swap agreements whereby Apollo receives floating rate payments in exchange for fixed rate payments of 5.175%, on the notional amount of $167.0million, effectively converting a portion of its floating rate borrowings to a fixed rate. The interest rate swap agreement related to the $167.0 million notionalamount expired in May 2012. Apollo had hedged only the risk related to changes in the benchmark interest rate (three month LIBOR). As of December 31,2012 and 2011, the Company has recorded a liability of $0.0 million and $3.8 million, 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 estimatesthe fair value of its interest rate swaps using discounted cash flow models, which project future cash flows based on the instruments’ contractual terms usingmarket-based expectations for interest rates. The Company also includes a credit risk adjustment to the cash flow discount rate to incorporate the impact ofnon-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 arein a net asset position and on the Company’s own credit risk when the swaps are in a net liability position.10. OTHER INCOME, NETOther income, net consists of the following: For the Year EndedDecember 31, 2012 2011 2010 Insurance proceeds $— $— $162,500 Tax receivable agreement adjustment 3,937 (137) 7,614 Gain on acquisitions and dispositions 1,951,897 196,193 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 (790) 6,169 (3,025) Rental income 4,387 1,999 1,699 Other 5,248 1,296 2,372 Total Other Income, Net $1,964,679 $205,520 $195,032 -202-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 11. INCOME TAXESThe Company is treated as a partnership for income tax purposes and is therefore not subject to U.S. Federal and State income taxes. APO Corp.,a wholly-owned subsidiary of the Company, is subject to U.S. Federal, State and Local corporate income taxes. In addition, certain subsidiaries of theCompany are subject to NYC UBT attributable to the Company’s operations apportioned to New York City. Certain non-U.S. subsidiaries of the Companyare subject to income taxes in their local jurisdictions. APO Corp. is required to file a standalone Federal corporate income tax return, as well as file standalonecorporate state and local income tax returns in California, New York State and New York City. The Company’s provision for income taxes is accounted for inaccordance with U.S. GAAP.The Company’s (provision) benefit for income taxes totaled $(65.4) million, $(11.9) and $(91.7) million for the years ended December 31,2012, 2011 and 2010, respectively. The Company’s effective tax rate was approximately 2.10%, (0.92) % and 14.45% for the years ended December 31,2012, 2011 and 2010, respectively.The provision for income taxes is presented in the following table: For the Year EndedDecember 31, 2012 2011 2010 Current: Federal income tax $— $(856) $(8,051) Foreign income tax (3,411) (3,705) (3,726) State and local income tax (7,722) (6,943) (8,648) Subtotal (11,133) (11,504) (20,425) Deferred: Federal income tax (55,114) 248 (64,633) Foreign income tax 277 301 260 State and local income tax (net of federal (benefit) provision) 560 (974) (6,939) Subtotal (54,277) (425) (71,312) Total Income Tax Provision $(65,410) $(11,929) $(91,737) For the years ended 2012, 2011 and 2010, the amount of federal income tax provision netted in the deferred state and local income tax amountswas $(0.4) million, $1.4 million and $4.2 million, respectively.The following table reconciles the provision for taxes to the U.S. Federal statutory tax rate: For the Year EndedDecember 31, 2012 2011 2010 U.S. Statutory Tax Rate 35.00% 35.00% 35.00% Income Passed Through to Non-Controlling Interest (30.88) (24.67) (24.54) Income passed through to Class A holders (4.41) (1.28) (15.93) Equity Based Compensation – AOG Units 1.84 (9.12) 16.49 Foreign income tax 0.10 (0.17) 0.54 State and Local Income Taxes (net of Federal Benefit) 0.20 (0.56) 2.32 Amortization & Other Accrual Adjustments 0.25 (0.12) 0.57 Effective Income Tax Rate 2.10% (0.92)% 14.45% Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount inthe consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years. -203-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The Company’s deferred tax assets and liabilities on the consolidated statements of financial condition consist of the following: For the Year EndedDecember 31, 2012 2011 Deferred Tax Assets: Depreciation and amortization $448,372 $476,812 Revenue recognition 40,597 36,732 Net operating loss carry forward 5,514 17,238 Equity-based compensation – RSUs and AAA RDUs 41,083 37,336 Other 6,642 8,186 Total Deferred Tax Assets 542,208 576,304 Deferred Tax Liabilities: Unrealized gains from investments 12,882 1,307 Other 835 1,467 Total Deferred Tax Liabilities $13,717 $2,774 As of December 31, 2012, the Company has approximately $4.8 million of federal net operating loss (NOL) carryforwards and $60.7 million ofstate and local NOL carryforwards available to be utilized in future periods. If the Company is unable to utilize its NOL carryforwards, they will begin toexpire in 2031. For tax year ended December 31, 2012, the Company expects to utilize NOLs carried forward from prior periods to offset its entire federal andstate taxable income. In addition, the Company has foreign tax credit carryforwards of $6.0 million that will begin to expire in 2020.The Company has recorded a significant deferred income tax asset for the future amortization of tax basis intangibles as a result of the 2007Reorganization. The amortization period for these tax basis intangibles is 15 years and accordingly, the related deferred income tax assets will reverse over thesame period.The Company considered its historical and current year earnings in addition to the 15-year amortization period of the tax basis of its intangibleassets in evaluating whether it should establish a valuation allowance. The Company also considered large recurring book expenses that do not provide acorresponding reduction in taxable income. The Company’s short-term and long-term projections anticipate positive book income. In addition, the Company’sprojection of future taxable income, including the effects of originating and reversing temporary differences including those for the tax basis intangibles,indicates that deferred income tax liabilities will reverse substantially in the same period and jurisdiction and are of the same character as the temporarydifferences giving rise to the deferred income tax assets. Based upon this positive evidence, the Company has concluded it is more likely than not, that thedeferred income tax assets will be realized and that no valuation allowance is needed at December 31, 2012.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 besustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Based upon the Company’sreview of its federal, state, local and foreign income tax returns and tax filing positions, the Company determined that no unrecognized tax benefits foruncertain tax positions were required to be recorded. In addition, the Company does not believe that it has any tax positions for which it is reasonably possiblethat it will be required to record significant amounts 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, theCompany is subject to examination by federal and certain state, local and foreign tax authorities. With a few exceptions, as of December 31, 2012, Apollo andits predecessor entities’ U.S. Federal, state, local and foreign income tax returns for the years 2009 through 2012 are open under the general statute oflimitations provisions and therefore subject to examination. In addition, the State of New York is examining APO Corp.’s tax returns for tax years 2008 to 2010and the -204-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Internal Revenue Service is examining APO Corp.’s tax returns for tax years 2010 and 2011 in connection with the NOL carryback claim from tax year 2011to tax year 2010.12. DEBTDebt consists of the following: December 31, 2012 December 31, 2011 OutstandingBalance AnnualizedWeightedAverageInterest Rate OutstandingBalance AnnualizedWeightedAverageInterest Rate AMH Credit Agreement $728,273 4.95% $728,273 5.39% CIT secured loan agreements 9,545 3.47 10,243 3.39 Total Debt $737,818 4.93% $738,516 5.35% (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 irrevocably elected three-month LIBOR for $167 million of the debt for five years from the closing date of theAMH Credit Agreement, which expired in May 2012. The interest rate of the Eurodollar loan, which was amended as discussed below, is the daily Eurodollarrate plus the applicable margin rate (3.75% for $995 million of the loan, as discussed below, and 1.00% for $5 million of the loan as of December 31, 2012and 3.75% for $995 million of the loan and 1.00% for $5 million of the loan as of December 31, 2011). The interest rate on the ABR term loan, which wasamended as discussed below, for any day, will be the greatest of (a) the prime rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus0.5% and (c) the one-month Eurodollar Rate plus 1.00%, in each case plus the applicable margin. The AMH Credit Agreement originally had a maturity date ofApril 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 offair value debt repurchased by the Company) of the term loan from April 20, 2014 to January 3, 2017 and modified certain other terms of the AMH CreditAgreement. Pursuant to this amendment, AMH or an affiliate was required to purchase from each lender that elected to extend the maturity date of its term loana portion of such extended term loan equal to 20% thereof. In addition, AMH or an affiliate is required to repurchase at least $50.0 million aggregate principalamount of the term loan by December 31, 2014 and at least $100.0 million aggregate principal amount of the term loan (inclusive of the previously purchased$50.0 million) by December 31, 2015 at a price equal to par plus accrued interest. The sweep leverage ratio was also extended to end at the new loan termmaturity date. The interest rate for the highest applicable margin for the loan portion extended changed to LIBOR plus 4.25% and ABR plus 3.25%. OnDecember 20, 2010, an affiliate of AMH that is a guarantor under the AMH Credit Agreement repurchased approximately $180.8 million of the term loan inconnection with the extension of the maturity date of such loan and thus the AMH Credit Agreement (excluding the portions held by AMH affiliates) had aremaining balance of $728.3 million. The Company determined that the amendments to the AMH Credit Agreement resulted in a debt extinguishment whichdid 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, 2012was 4.07% and the interest rate on the remaining $5.0 million portion of the loan at December 31, 2012 was 1.32%. The estimated fair value of the Company’slong-term debt obligation related to the AMH Credit Agreement is believed to be approximately $795.6 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 -205-(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) financial condition at December 31, 2012 is the amount for which the Company expects to settle the AMH Credit Agreement.As of December 31, 2012 and 2011, 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, 2012, 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 $94.9 million, $91.1 million, $62.3 million, $217.5 million and $(858.9) million, respectively. As of December 31, 2011,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 $56.6 million, $46.2 million, $50.1 million, $131.9 million and $(1,014.3) million, respectively.In accordance with the AMH Credit Agreement as of December 31, 2012, Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P.,Apollo Principal Holdings V, L.P., Apollo Principal Holdings IX, L.P. and AMH and their respective subsidiaries were subject to certain negative andaffirmative covenants. Among other things, the AMH Credit Agreement includes an excess cash flow covenant and an asset sales covenant. The AMH CreditAgreement does not contain any financial maintenance covenants.If AMH’s debt to EBITDA ratio (the “Leverage Ratio”) as of the end of any fiscal year exceeds the level set forth in the next sentence (the “ExcessSweep Leverage Ratio”), AMH must deposit in the cash collateral account the lesser of (a) 100% of its Excess Cash Flow (as defined in the AMH CreditAgreement) 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 ExcessSweep Leverage 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; andfor 2015 and thereafter, 3.50 to 1.00.In addition, AMH must deposit the lesser of (a) 50% of any remaining Excess Cash Flow and (b) the amount required to reduce the Leverage Ratioon a pro forma basis at the end of each fiscal year to a level 0.25 to 1.00 below the Sweep Leverage Ratio (as defined in the next paragraph) for such fiscal year.If AMH receives net cash proceeds from certain non-ordinary course asset sales, then such net cash proceeds shall be deposited in the cashcollateral account as necessary to reduce its Leverage Ratio on a pro forma basis as of the last day of the most recently completed fiscal quarter (after givingeffect to such non-ordinary course asset sale and such deposit) to (the following specified levels for the specified years, the “Sweep Leverage Ratio”) (i) for2011, 2012 and 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 other years, 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, materialmisrepresentations, breaches of covenants, cross default to material indebtedness, bankruptcy and changes in control of AMH. As of December 31, 2012, theCompany was not aware of any instances of non-compliance with the AMH Credit Agreement.CIT Secured Loan Agreements—During the second quarter of 2008, the Company entered into four secured loan agreements totaling $26.9million with CIT Group/Equipment Financing Inc. (“CIT”) to finance the purchase of certain fixed assets. The loans bear interest at LIBOR plus 318 basispoints per annum with interest and principal to be repaid monthly and a balloon payment of the remaining principal totaling $9.4 million due at the end of theterms in April 2013. At December 31, 2012, the interest rate was 3.40%. On April 28, 2011, the Company sold its ownership interest in certain assets whichserved as collateral to the CIT secured loan agreements for $11.3 million with $11.1 million of the proceeds going to -206-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) CIT directly. As a result of the sale and an additional payment made by the Company of $1.1 million, the Company satisfied the loan associated with therelated asset of $12.2 million on April 28, 2011. As of December 31, 2012, the carrying value of the remaining CIT secured loan is $9.5 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, 2012, the table below presents the contractual maturities for the AMH Credit Agreement and CIT secured loan agreements: 2013 2014 2015 2016 2017 Total AMH Credit Agreement $— $55,000 $50,000 $— $623,273 $728,273 CIT secured loan agreements 9,545 — — — — 9,545 Total Obligations as of December 31, 2012 $9,545 $55,000 $50,000 $— $623,273 $737,818 13. NET INCOME (LOSS) 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.The remaining earnings are allocated to 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. -207-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The table below presents basic and diluted net income (loss) per Class A share using the two-class method for the years ended December 31,2012, 2011 and 2010: Basic and Diluted For the Year EndedDecember 31, 2012 2011 2010 Numerator: Net income (loss) attributable to Apollo Global Management, LLC $310,957 $(468,826) $94,617 Distributions declared on Class A shares (172,887) (97,758) (20,453) Distributions on participating securities (31,175) (17,381) (3,662) Earnings allocable to participating securities (16,855) — (10,357) Undistributed Income (Loss) Attributable to Class A Shareholders $90,040 $(583,965) $60,145 Denominator: Weighted average number of Class A shares outstanding 127,693,489 116,364,110 96,964,769 Net income (loss) per Class A share: Basic and Diluted Distributable Earnings $1.35 $0.84 $0.21 Undistributed income (loss) 0.71 (5.02) 0.62 Net Income (Loss) per Class A Share $2.06 $(4.18) $0.83 (1)The Company declared a $0.46 distribution on Class A shares on February 10, 2012, a $0.25 distribution on Class A shares on May 8, 2012, a $0.24distribution on Class A shares on August 12, 2012, and a $0.40 distribution on Class A shares on November 9, 2012. As a result, there is a decreasein undistributed income attributable to Class A shareholders presented during the year ended December 31, 2012(2)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 inundistributed loss attributable to Class A shareholders presented during the year ended December 31, 2011.(3)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 adecrease in undistributed income attributable to Class A shareholders presented during the year ended December 31, 2010.(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, 2012, unvested RSUs and share options were determined to be dilutive and accordingly included in the dilutedearnings per share calculation. For the year ended December 31, 2011, unvested RSUs, share options, AOG Units and RSUs that participate individends were determined to be anti-dilutive. For the year ended December 31, 2010, unvested RSUs were determined to be dilutive and accordinglyincluded in the diluted earnings per share calculation. The resulting diluted earnings per share amounts were not significantly different from basicearnings per share and therefore were presented as the same amount. The AOG Units and RSUs that participate in dividends were determined to be anti-dilutive for the years ended December 31, 2012 and 2010. The share options were also determined to be anti-dilutive for the year ended December 31,2010.(1)(2)(3) (4)(5)On October 24, 2007, the Company commenced the granting of restricted share units (“RSUs”) that provide the right to receive, upon vesting,Class A shares of Apollo Global Management, LLC, pursuant to the Company’s 2007 Omnibus Equity Incentive Plan. Certain RSU grants to employeesduring 2011 and 2012 provide the right to receive distribution equivalents on vested RSUs on an equal basis any time a distribution is declared. TheCompany refers to these RSU grants as “Plan Grants.” For certain Plan Grants made before 2010, distribution equivalents are paid in January of the calendaryear next following the calendar year in which a distribution on Class A shares was declared. In addition, certain RSU grants to employees in 2011 and 2012(the Company refers to these as “Bonus Grants”) provide that both vested and unvested RSUs participate in distribution equivalents on an equal basis withthe Class A shareholders any time a distribution is declared. As of December 31, 2012, approximately 22.5 million vested RSUs and 4.4 million unvestedRSUs 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 andunvested RSUs that are entitled to non-forfeitable -208-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) distribution equivalents qualify as participating securities and are included in the Company’s basic and diluted earnings per share computations using thetwo-class method. The holder of an RSU participating security would have a contractual obligation to share in the losses of the entity if the holder is obligatedto fund the losses of the issuing entity or if the contractual principal or mandatory redemption amount of the participating security is reduced as a result oflosses incurred by the issuing entity. Because the RSU participating securities do not have a mandatory redemption amount and the holders of the participatingsecurities are not obligated to fund losses, neither the vested RSUs nor the unvested RSUs are subject to any contractual obligation to share in losses of theCompany.Holders of AOG Units are subject to the vesting requirements and transfer restrictions set forth in the agreements with the respective holders, andmay up to four times each year, upon notice (subject to the terms of the exchange agreement), exchange their AOG Units for Class A shares on a one-for-onebasis. A limited partner must exchange one partnership unit in each of the ten Apollo Operating Group partnerships to affect an exchange for one Class Ashare. If fully converted, the result would be an additional 240,000,000 Class A shares added to the diluted earnings per share calculation.Apollo has one Class B share outstanding, which is held by BRH Holdings GP, Ltd. The voting power of the Class B share is reduced on a onevote per one AOG Unit basis in the event of an exchange of AOG Units for Class A shares, as discussed above. The Class B share has no net income (loss)per share as it does not participate in Apollo’s earnings (losses) or distributions. The Class B share has no distribution or liquidation rights. The Class Bshare has voting rights on a pari passu basis with the Class A shares. The Class B share currently has a super voting power of 240,000,000 votes. -209-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, 2012, 2011 and 2010 and the resulting impact onthe Company’s and Holdings’ ownership interests in the Apollo Operating Group: Date Type of AGMClass A SharesTransaction Number of Shares Issued(Repurchased/Cancelled) inAGM Class A SharesTransaction(in thousands) AGMownership%in AOG beforeAGM Class ASharesTransaction AGMownership%in AOG afterAGM Class ASharesTransaction Holdingsownership%in AOG beforeAGM ClassASharesTransaction Holdingsownership%in AOG afterAGM Class ASharesTransaction 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 January 18, 2012 Issuance 394 34.1% 34.1% 65.9% 65.9% February 13, 2012 Issuance 1,994 34.1% 34.5% 65.9% 65.5% March 5, 2012 Issuance 50 N/A N/A N/A N/A April 3, 2012 Issuance 150 N/A N/A N/A N/A July 9, 2012 Issuance 1,452 34.5% 34.7% 65.5% 65.3% August 6, 2012 Issuance 1,962 34.7% 35.1% 65.3% 64.9% October 9, 2012 Issuance 150 N/A N/A N/A N/A November 12, 2012 Issuance 25 N/A N/A N/A N/A November 19, 2012 Issuance 5 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 2012, 2011 and 2010, $480.9 million, $1,032.8 million and $1,032.9 million of compensationexpense was recognized, respectively. The estimated forfeiture rate was 0% for Contributing Partners and 0% for Managing Partners based on actual forfeituresas well as the Company’s future forfeiture expectations. As of December 31, 2012, there was $30.0 million of total unrecognized compensation cost related tounvested AOG Units that are expected to vest over the next 6 months. -210-(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)(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, 2012, 2011 and 2010: Apollo OperatingGroup Units Weighted AverageGrant DateFair Value Balance at January 1, 2010 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 (44,149,696) 23.39 Balance at December 31, 2011 22,593,210 $22.64 Granted 199,050 17.36 Forfeited (199,050) 20.00 Vested (21,092,844) 22.80 Balance at December 31, 2012 1,500,366 $20.00 Units Expected to Vest—As of December 31, 2012, 1,500,366 AOG Units are expected to vest over the next 6 months.RSUsOn October 24, 2007, the Company commenced the granting of RSUs under the Company’s 2007 Omnibus Equity Incentive Plan. These grantsare accounted for as a grant of equity awards in accordance with U.S. GAAP. All grants after March 29, 2011 consider the public share price of theCompany. The fair value of grants made in 2012, 2011 and 2010 was approximately $73.5 million, $116.6 million and $120.2 million, respectively. Ofthese awards, 972,266 RSUs relate to awards granted as part of the Stone Tower acquisition. The fair value of these awards was not charged to compensationexpense, but charged to additional paid in capital in the consolidated statements of changes in shareholder’s equity. Refer to note 3 for further discussion of theStone Tower acquisition. For Plan Grants, the fair value is based on grant date fair value, and is discounted for transfer restrictions and lack of distributionsuntil vested. For Bonus Grants, the valuation methods consider transfer restrictions and timing of distributions. The total fair value is charged tocompensation expense on a straight-line basis over the vesting period, which is generally up to 24 quarters (for Plan Grants) or annual vesting over three years(for Bonus Grants). The actual forfeiture rate was 3.9%, 2.3% and 7.9% for the years ended December 31, 2012, 2011 and 2010, respectively. For the yearsended December 31, 2012, 2011 and 2010, $110.2 million, $108.2 million and $78.9 million of compensation expense was recognized, respectively.Delivery of Class A SharesDuring 2012 and 2011, the Company delivered Class A Shares for vested RSUs. The Company generally allows RSU participants to settle theirtax liabilities with a reduction of their Class A share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant,results in a tax liability and a corresponding accumulated deficit adjustment. The adjustment was $26.0 million and $19.6 million in 2012 and 2011,respectively, and is disclosed in the consolidated statement of 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 income allocated to the Non-Controlling Interests to shift to the Class A shareholdersfrom the date of delivery forward. During the year ended December 31, 2012, the Company delivered 6.1 -211-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) million Class A shares in settlement of vested RSUs, which caused the Company’s ownership interest in the Apollo Operating Group to increase to 35.1%from 34.1%.The following table summarizes RSU activity for the years ended December 31, 2012, 2011 and 2010: Unvested Weighted AverageGrant Date FairValue Vested Total Number ofRSUsOutstanding Balance at January 1, 2010 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 Granted 5,377,562 13.68 — 5,377,562 Forfeited (966,725) 11.02 — (966,725) Delivered — 11.69 (7,894,214) (7,894,214) Vested (10,167,136) 12.28 10,167,136 — Balance at December 31, 2012 14,724,474 $11.62 22,512,930 37,237,404 (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, 2012, approximately 13,841,000 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 andbecame exercisable with respect to 4/24 of the option shares on December 31, 2011 and the remainder vest in equal installments over each of the remaining 20quarters with full vesting on December 31, 2016. In addition, 555,556 options were granted on January 22, 2011 and 25,000 options were granted onApril 9, 2011. Of the options granted on January 22, 2011, half of such options that vested and became exercisable on December 31, 2011 were exercised onMarch 5, 2012 and the other half that were due to become exercisable on December 31, 2012 were forfeited during the quarter ended March 31, 2012. Theoptions granted on April 9, 2011 vested and became exercisable with respect to half of the options shares on December 31, 2011 and the other half vests infour equal quarterly installments starting on March 31, 2012 and ending on December 31, 2012. In addition, 50,000 and 200,000 options were granted onJuly 9, 2012 and December 28, 2012, respectively. These options will vest and become exercisable with respect to 4/24 of the option shares on June 30, 2013and the remainder vest in equal installments over each of the remaining 20 quarters with full vesting on June 30, 2018. For the years ended December 31,2012, 2011, and 2010, $4.8 million, $6.9 million, and $0.3 million of compensation expense were recognized as a result of option grants, respectively. -212-(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 2012 and 2011: Assumptions: 2012 2011 2010 Risk-free interest rate 1.11% 2.79% 2.34% Weighted average expected dividend yield 8.13% 2.25% 2.79% Expected volatility factor 45.00% 40.22% 40.00% Expected life in years 6.66 5.72 6.79 Fair value of options per share $3.01 $8.44 $5.62 (1)The Company determined its expected volatility based on comparable companies using daily stock prices and the Company’s volatility.(2)Represents weighted average of 2012 and 2011 grants, respectively.The following table summarizes the share option activity for the years ended December 31, 2012, 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 Granted 250,000 16.26 752 9.90 Exercised (277,778) 9.00 (2,364) — Forfeited (277,778) 9.00 (2,364) — Balance at December 31, 2012 5,275,000 8.44 $29,020 8.01 Exercisable at December 31, 2012 1,691,665 $8.15 $9,535 7.92 Units Expected to Vest—As of December 31, 2012, approximately 3,368,000 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 contractualterm of the option. Unamortized compensation cost related to unvested share options at December 31, 2012 was $18.3 million and is expected to be recognizedover a weighted average period of 4.0 years. The total intrinsic value of options exercised during the year ended December 31, 2012 was $1.4 million.AAA RDUsIncentive units that provide the right to receive AAA restricted depository units (“RDUs”) following vesting are granted periodically to employeesof Apollo. 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 valueis based on the public share price of AAA. Vested AAA RDUs can be converted into ordinary common units of AAA subject to applicable securities lawrestrictions. During the years ended December 31, 2012, 2011 -213-(2)(2)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) and 2010, the actual forfeiture rate was 0%, 0% and 1.5%, respectively. For the years ended December 31, 2012, 2011 and 2010, $1.0 million, $0.5 millionand $5.5 million of compensation expense was recognized, respectively.During the years ended December 31, 2012, 2011 and 2010, the Company delivered 60,702, 389,785 and 596,375 RDUs, respectively, toindividuals who had vested in these units. The deliveries in 2012, 2011 and 2010 resulted in a satisfaction of liability of $1.8 million, $3.8 million and $7.6million, respectively, and the recognition of a net decrease of additional paid in capital in 2012 of $2.5 million and a net decrease and increase in 2011 and2010 of $2.7 million and $0.6 million, respectively. These amounts are presented in the consolidated statement of changes in shareholders’ equity. There was$1.0 million and $0.5 million of liability for undelivered RDUs included in accrued compensation and benefits in the consolidated statements of financialcondition as of December 31, 2012 and 2011, respectively. The following table summarizes RDU activity for the years ended December 31, 2012, 2011 and2010: Unvested WeightedAverageGrant DateFair Value Vested Total Numberof RDUsOutstanding Balance at January 1, 2010 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 Granted 256,673 9.45 — 256,673 Forfeited — — — — Delivered — 8.69 (60,702) (60,702) Vested (114,896) 9.02 114,896 — Balance at December 31, 2012 338,430 $8.85 114,896 453,326 -214-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) Units Expected to Vest—As of December 31, 2012, approximately 318,000 RDUs are expected to vest over the next three years.The following table summarizes the activity of RDUs available for future grants: RDUs AvailableFor FutureGrants Balance at January 1, 2010 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 Purchases 187,261 Granted/Issued (449,753) Forfeited — Balance at December 31, 2012 1,685,345 (1)During 2012, the Company delivered 193,080 RDUs to certain employees as part of AAA’s carry reinvestment program. This resulted in a decrease inprofit sharing payable of $1.2 million in the consolidated statements of financial condition. No additional compensation expense was recognized.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’semployees, respectively. Additionally, on December 31, 2009, 5,000 shares of ARI restricted stock were granted to an employee of the company. The fair valueof the Company and employee awards granted was $1.8 million and $2.7 million, respectively. These awards generally vest over three years or twelvequarters, with the first quarter 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 ARIrestricted stock units (“ARI RSUs”), respectively, were granted to certain of the Company’s employees. Pursuant to the March 23, 2010 and July 21, 2010issuances, 102,084 and 16,875 shares of ARI restricted stock, respectively, were forfeited by the Company’s employees. As the fair value of ARI RSUs wasnot greater than the forfeiture of the restricted stock, no additional value will be amortized. On April 1, 2011 and August 4, 2011, 5,000 and 152,750 ARIRSUs, respectively, were granted to certain of the Company’s employees. On August 4, 2011, 156,000 ARI RSUs were granted to the Company. OnDecember 28, 2011, the Company issued 45,587 ARI RSUs to certain of the Company’s employees. On March 15, 2012, 20,000 ARI RSUs were granted toan employee of the Company. The awards granted to the Company are accounted for as investments and deferred revenue in the consolidated statements offinancial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method ofaccounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense will berecognized 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 fair value of the awards to employees is based on the grant date fair value, which utilizes thepublic share price of ARI, less discounts for transfer restrictions and timing of distributions. The awards granted to the Company’s employees are remeasuredeach period to reflect the fair value of the asset and other liabilities and any changes in these values are recorded in the consolidated statements of operations.For the years ended December 31, 2012, 2011 and 2010, $2.3 million, $2.9 million and $1.5 million of management fees and $1.5 million, $1.3 million and$0.8 million of compensation expense were recognized in the consolidated statements of operations, respectively. The actual forfeiture rate for unvested ARIrestricted stock awards and ARI RSUs was 1%, 7% and 2% for the years ended December 31, 2012, 2011 and 2010, respectively. -215-(1)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 ofits employees for the years ended December 31, 2012, 2011 and 2010: ARIRestrictedStockUnvested ARI RSUsUnvested WeightedAverageGrant DateFair Value ARI RSUsVested TotalNumber ofRSUsOutstanding Balance at January 1, 2010 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 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 Granted to employees of the Company — 20,000 15.17 — 20,000 Granted to the Company — — — — — Forfeited by employees of the Company — (5,522) 14.09 — (5,522) Vested awards for employees of the Company — (99,690) 15.43 99,690 — Vested awards of the Company (32,502) (52,000) 16.25 52,000 — Balance at December 31, 2012 — 237,542 $14.62 225,232 462,774 Units Expected to Vest—As of December 31, 2012, approximately 230,000 shares of ARI RSUs 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 theCompany’s employees, respectively. On September 26, 2011, 875 AMTG RSUs were granted to certain employees of the Company. The fair value of theCompany and employee awards granted were $0.3 million and $0.2 million, respectively. These awards generally vest over three years or twelve calendarquarters, with the first quarter vesting on October 1, 2011. On June 30, 2012 and September 30, 2012, 5,000 AMTG RSUs were granted to employees of theCompany with a Fair Value of $0.1 million. On November 26, 2012, 133,244 AMTG RSUs were granted to employees of the Company with a fair value of$2.8 million. The awards granted to the Company are accounted for as investments and deferred revenue in the consolidated statement of financial condition.As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method of accounting forawards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense will be recognized on astraight line-basis over the vesting period for the awards granted to the employees. The Company recorded an asset and a liability upon receiving the awards onbehalf of the Company’s employees. The awards granted to the Company’s employees are remeasured each period to reflect the fair value of the asset and otherliabilities 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 fortransfer restrictions and timing of distributions. For the year ended December 31, 2012, $0.2 million of management fees and $0.1 million of compensationexpense were recognized in the consolidated statements of operations. For the year ended December 31, 2011, $0.1 million of management fees and $0.0 millionof compensation expense were recognized in the consolidated statement of operations. The actual forfeiture rate for AMTG RSUs was 0% for the years endedDecember 31, 2012 and December 31, 2011. -216-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The following table summarizes activity for the AMTG RSUs that were granted to both the Company and certain of its employees for the yearsended December 31, 2012 and December 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 Granted to employees of the Company 143,244 20.62 — 143,244 Granted to the Company — — — — Forfeited by employees of the Company — — — — Vested awards of the employees of the Company (4,042) 16.57 4,042 — Vested awards of the Company (6,250) 18.20 6,250 — Balance at December 31, 2012 161,257 $20.28 12,862 174,119 Units Expected to Vest—As of December 31, 2012, approximately 152,000 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’Equity attributable 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.Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2012: TotalAmount Non-ControllingInterest % inApolloOperatingGroup Allocated toNon-ControllingInterest inApolloOperatingGroup Allocated toApolloGlobalManagement,LLC AOG Units $480,931 64.9% $313,856 $167,075 RSUs and Share Options 115,013 — — 115,013 ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs 1,674 64.9 1,093 581 AAA RDUs 1,036 64.9 676 360 Total Equity-Based Compensation $598,654 315,625 283,029 Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs (1,769) (741) Capital Increase Related to Equity-Based Compensation $313,856 $282,288 (1)Calculated based on average ownership percentage for the period considering Class A share issuances during the period. -217-(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, 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. -218-(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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.These costs are normally reimbursed by such funds and are included in due from affiliates.Due from affiliates and due to affiliates are comprised of the following: As ofDecember 31, 2012 2011 Due from Affiliates: Due from private equity funds $28,201 $28,465 Due from portfolio companies 46,048 61,867 Management and advisory fees receivable from credit funds 46,000 23,545 Due from credit funds 22,278 15,822 Due from Contributing Partners, employees and former employees 9,536 30,353 Due from real estate funds 17,950 13,453 Other 3,299 3,235 Total Due from Affiliates $173,312 $176,740 Due to Affiliates: Due to Managing Partners and Contributing Partners in connection with the taxreceivable agreement $441,997 $451,743 Due to private equity funds 12,761 86,500 Due to credit funds 19,926 18,817 Due to real estate funds 1,200 1,200 Distributions payable to employees 1,567 12,532 Other — 7,972 Total Due to Affiliates $477,451 $578,764 (1)As of December 31, 2011, includes a $4.7 million contingent consideration liability at fair value due to former owners of Gulf Stream as discussed innote 3 to the consolidated financial statements.Tax Receivable Agreement and OtherSubject 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 of 1986, asamended, 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 willresult in increases 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 paymentto the Managing Partners and Contributing Partners of 85% of the amount of cash savings, if any, in U.S. Federal, state, local and foreign income taxes thatAPO Corp. would realize as a result of the increases in tax basis of assets that resulted from the 2007 Reorganization. If the Company does not make therequired annual payment on a timely basis as outlined in the TRA, interest is accrued on the balance until the payment date. These payments are expected tooccur approximately over the next 20 years. In connection with the amendment of the AMH partnership agreement in April of 2010, the tax receivable agreementwas revised to reflect the Managing Partners’ agreement to defer 25% or $12.1 million of the required payments pursuant to the TRA that is attributable to the2010 fiscal year for a period of four years until April 5, 2014. -219-(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) In April 2011, Apollo made cash payments of $39.8 million, in connection with the TRA to the Managing Partners and Contributing Partnersresulting from realized tax benefits for the 2010 tax year. Included in the 2011 payment was $29.0 thousand and $3.0 thousand of interest paid to theManaging Partners and Contributing Partners, respectively. In April 2012, Apollo made a $5.8 million cash payment pursuant to the TRA resulting from therealized tax benefit for the 2011 tax year. Included in the payment was approximately $1.2 million and approximately $0.1 million of interest paid to theManaging Partners and Contributing Partners, respectively. Because distributions from the Apollo Operating Group are made pari passu to all unit holders, theTRA payment noted above resulted in an additional $11.0 million distribution to Holdings.In addition, Apollo adjusted the remaining liability by $(3.9) million, $(0.1) million and $7.6 million and recorded a corresponding gain in otherincome (loss), net in the consolidated statement of operations during the years ended December 31, 2012 and 2011, respectively, and a corresponding loss inother income (loss), net in the consolidated statement of operations for the year ended December 31, 2010 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 ofincome allocated to Holdings for the 2009 and 2010 calendar years. The amendment allowed for a maximum allocation of income from Holdings of $22.1million in 2009 and $117.5 million in 2010. There was no extension of the special allocation after December 31, 2010. Therefore as a result, the Company didnot allocate 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 EmployeesFor the year ended December 31, 2011, the Company accrued $22.1 million in receivables from the Contributing Partners and certain employeesand former employees of Fund VI for the potential return of carried interest income that would be due if the private equity fund were liquidated at the balancesheet date. For the year ended December 31, 2012, the Company has no liability to Fund VI in connection with the potential general partner obligation to returnpreviously distributed carried interest income. As a result, for the year ended December 31, 2012, the Company has no receivables from the ContributingPartners, certain employees and former employees of Fund VI in connection with the potential general partner obligation to return previously distributed carriedinterest income.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 $6.2million, $23.5 million and $24.8 million for the years ended December 31, 2012, 2011 and 2010, respectively. The investment period for Fund VII andANRP for the management fee waiver plan was terminated as of December 31, 2012. -220-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) DistributionsIn addition to other distributions such as TRA payments, the table below presents information regarding the quarterly distributions which weremade at the sole discretion of the manager of the Company during 2010, 2011, and 2012 (in millions, except per share amounts): Distributions Declaration Date Distributions perClass A ShareAmount DistributionsPayment Date Distributions toAGM Class AShareholders Distributions toNon-ControllingInterest Holdersin the ApolloOperating Group TotalDistributions fromApollo OperatingGroup DistributionEquivalents onParticipatingSecurities 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 February 12, 2012 0.46 February 29, 2012 58.1 110.4 168.5 10.3 May 8, 2012 0.25 May 30, 2012 31.6 60.0 91.6 6.2 August 2, 2012 0.24 August 31, 2012 31.2 57.6 88.8 5.3 November 9, 2012 0.40 November 30, 2012 52.0 96.0 148.0 9.4 IndemnityCarried interest income from certain funds that the Company manages can be distributed to us on a current basis, but is subject to repayment bythe subsidiary 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. The Company recorded an indemnification liability of $0.8 million as of December 31,2011. There was no indemnification liability as of December 31, 2012.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 carriedinterest income to the limited partners of Apollo Advisors VI, L.P., who are also employees of the Company. The loan obligation accrues interest at an annualfixed rate of 3.45% and terminates on the earlier of June 30, 2017 or the termination of Fund VI. In March 2011, a right of offset for the indemnified portion ofthe loan obligation was established between the Company and Fund VI, therefore the loan was reduced in the amount of $10.9 million, which is offset incarried interest receivable on the consolidated statements of financial condition. During the year ended December 31, 2011, there was a $0.9 million interestpaid and $0.3 million accrued interest on the outstanding loan obligation. At 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 andis a receivable from the Contributing Partners and certain employees. During the year ended December 31, 2012, there was no interest paid and $1.3 millionaccrued interest on the outstanding loan obligation. As of December 31, 2012, the total outstanding loan aggregated -221-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) $9.3 million, including accrued interest of $1.3 million which approximated fair value, of which approximately $6.7 million was not subject to the indemnitydiscussed above and is a receivable from the Contributing Partners and certain employees.As of December 31, 2011, the Company had also accrued a liability to Fund VI of $75.3 million, in connection with the potential general partnerobligation to return carried interest income that was previously distributed from Fund VI. Of this amount, approximately $22.1 million was a receivable fromContributing Partners, employees and former employees. As of December 31, 2012, the general partner obligation was reversed and there was no liability.Due to Credit FundsIn connection with the Gulf Stream acquisition during October 2011, 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. Additionally the Company has deferred a payment obligation to the former owners. This obligation was $3.9 million at date ofacquisition and was paid in December 2012. The contingent consideration liability had a fair value of approximately $4.7 million as of October 24, 2011 (thedate of acquisition) and $14.1 million as of December 31, 2012. As of December 31, 2012, the former owner is no longer an employee of Apollo therefore thecontingent consideration is reported within profit sharing payable in the consolidated statements of financial condition.Similar to the private equity funds, certain credit funds allocate carried interest income to the Company. As of December 31, 2011, the Companyhad accrued a liability to SOMA of $18.1 million, in connection with the potential general partner obligation for carried interest income that was previouslydistributed from SOMA. This amount increased by $1.2 million during the year ended December 31, 2012. The Company also accrued a liability to APC of$0.3 million, in connection with the potential general obligation for carried interest income that was previously distributed from APC as of December 31, 2012.As such, there was a general partner obligation to return previously distributed carried interest income of $19.6 million accrued as of December 31, 2012.Due to Real Estate FundsIn connection with the acquisition of CPI during November 2010, Apollo has a contingent liability to Citigroup Inc. based on a specifiedpercentage of future earnings from the date of acquisition through December 31, 2012. The estimated fair value of the contingent liability was $1.2 million asof December 31, 2012 and 2011, 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 Securitiesand Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority, subject to the minimum net capital requirements of theSEC. AGS is in compliance with these requirements at December 31, 2012. From time to time, this entity is involved in transactions with affiliates of Apollo,including portfolio companies of the funds we manage, whereby AGS earns underwriting and transaction fees for its services. The Company also has anentity based in London which is subject to the capital requirements of the U.K. Financial Services Authority. This entity has continuously operated in excessof these regulatory capital requirements.All of the investment advisors of the Apollo funds are affiliates of certain subsidiaries of the Company that are registered as investment advisorswith the SEC. Registered investment advisors are subject to the requirements and regulations of the Investment Advisers Act of 1940, as amended. -222-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 duringany period of four consecutive calendar quarters during the sixteen full calendar quarters after the consummation of ARI’s IPO on September 29, 2009, ARI’score earnings, as defined in the corresponding management agreement, for any such four-quarter period exceeds an 8% performance hurdle rate. During thesecond quarter of 2011, the core earnings had exceeded the hurdle rate and the Company recorded $8.0 million of other income in the consolidated statement ofoperations.Interests in Consolidated EntitiesThe table below presents equity interests in Apollo’s consolidated, but not wholly-owned, subsidiaries and funds.Net (income) loss attributable to Non-Controlling Interests consisted of the following: Year EndedDecember 31, 2012 2011 2010 (in thousands) AAA $(278,454) $123,400 $(356,251) Interest in management companies and a co-investment vehicle (7,307) (12,146) (16,258) Other consolidated entities 50,956 (13,958) (36,847) Net (income) loss attributable to Non-Controlling Interests in consolidatedentities (234,805) 97,296 (409,356) Net (income) attributable to Appropriated Partners’ Capital (1,816,676) (202,235) (11,359) Net (income) loss attributable to Non-Controlling Interests in the ApolloOperating Group (685,357) 940,312 (27,892) Net (income) loss attributable to Non-Controlling Interests $(2,736,838) $835,373 $(448,607) Net income attributable to Appropriated Partners’ Capital 1,816,676 202,235 11,359 Other Comprehensive Income attributable to Non-Controlling Interests (2,010) (5,106) (9,219) Comprehensive (Income) Loss Attributable to Non-Controlling Interests $(922,172) $1,032,502 $(446,467) (1)Reflects the Non-Controlling Interests in the net (income) loss of AAA and is calculated based on the Non-Controlling Interests ownership percentage inAAA, which was approximately 97% during the year ended December 31, 2012, approximately 98% during the year ended December 31, 2011 andapproximately 97% during the year ended 2010, respectively.(2)Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of our credit management companies.(3)Reflects net income of the consolidated CLOs classified as VIEs. Includes the bargain purchase gain from the Stone Tower acquisition of $1,951.1million for the year ended December 31, 2012 and the bargain purchase gain from the Gulf Stream acquisition of $0.8 million and $195.4 million forthe years ended December 31, 2012 and 2011, respectively.(4)Appropriated Partners’ Capital is included in total Apollo Global Management, LLC shareholders’ equity and is therefore not a component ofcomprehensive (income) loss attributable to non-controlling interest on the statement of comprehensive income (loss).16. COMMITMENTS AND CONTINGENCIESFinancial Guarantees—Apollo has provided financial guarantees on behalf of certain employees for the benefit of unrelated third-party lenders,in connection with their capital commitment to certain funds managed by the Company. As of December 31, 2012, the maximum exposure relating to thesefinancial guarantees approximated $3.4 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. -223-(1)(2)(3)(4)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 thoseallocable to the limited partners to the extent that there is negative equity in that fund. As of December 31, 2012, the Company had no current obligations toArtus.Investment Commitments—As a limited partner, general partner and manager of the Apollo private equity funds, credit and real estate funds,Apollo has unfunded capital commitments as of December 31, 2012 and 2011 of $258.3 million and $137.9 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 cashdistributions, if any, that are made to its affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAAInvestments.On December 21, 2012, the Company agreed to provide up to $100 million of capital support to Athene to the extent such support is necessary inconnection with Athene’s pending acquisition of Aviva plc’s annuity and life insurance operations in the United States.Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of the balance sheet date, the Company was not awareof any 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, includingclaims 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,among other defendants, numerous private equity firms. The suit alleges that beginning in mid-2003, Apollo and the other private equity firm defendantsviolated the U.S. antitrust laws by forming “bidding clubs” or “consortia” that, among other things, rigged the bidding for control of various publiccorporations, restricted the supply of private equity financing, fixed the prices for target companies at artificially low levels, and allocated amongst themselvesan alleged market for private equity services in leveraged buyouts. The suit seeks class action certification, declaratory and injunctive relief, unspecifieddamages, and attorneys’ fees. On August 27, 2008, Apollo and its co-defendants moved to dismiss plaintiffs’ complaint and on November 20, 2008, theCourt granted Apollo’s motion. The court also dismissed two other defendants, Permira and Merrill Lynch. On September 17, 2010, the plaintiffs filed amotion to amend the complaint by adding an additional eight transactions and adding Apollo as a defendant. On October 6, 2010, the court granted plaintiffs’motion to file that amended complaint. Plaintiffs’ fourth amended complaint, filed on October 7, 2010, adds Apollo as a defendant. Apollo joined in the otherdefendants’ October 21, 2010 motion to dismiss the third claim for relief and all claims by the PanAmSat Damages Sub-class in the fourth amendedcomplaint, which motion was granted on January 13, 2011. On November 4, 2010, Apollo moved to dismiss, arguing that the claims against Apollo are time-barred and that the allegations against Apollo are insufficient to state an antitrust conspiracy claim. On February 17, 2011, the court denied Apollo’s motion todismiss, ruling that Apollo should raise the statute of limitations issues on summary judgment after discovery is completed. Apollo filed its answer to thefourth amended complaint on March 21, 2011. On July 11, 2011, the plaintiffs filed a motion for leave to file a fifth amended complaint, adding tenadditional transactions and expanding the scope of the class seeking relief. On September 7, 2011, the court denied the motion for leave to amend withoutprejudice and gave plaintiffs permission to take limited discovery on the ten additional transactions. By court order, the parties concluded discovery onMay 21, 2012. The plaintiffs then filed a fifth amended complaint on June 14, 2012. One week later, the defendants filed a motion to dismiss portions of theFifth Amended Complaint. On July 18, 2012, the court granted the defendants’ motion in part and denied it in part. On July 21, 2012, all defendants filedmotions for summary judgment. While those motions were pending, the New York Times moved to intervene and unseal the fifth amended complaint. After acourt order, the defendants submitted a version of the complaint containing only four redactions. The court publicly filed this version of the fifth amendedcomplaint on the case docket on October 10, 2012. On December 18 and 19, 2012, the court heard oral argument on the defendants’ motions -224-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) for summary judgment. Those motions remain pending. Apollo does not believe that a loss from liability in this case is either probable or reasonablyestimable. Apollo believes the plaintiffs’ claims lack factual and legal merit and intends to defend it vigorously. For these reasons, no estimate of possible loss,if any, can be made at this time.In March 2012, plaintiffs filed two putative class actions, captioned Kelm v. Chase Bank (No. 12-cv-332) and Miller v. 1-800-Flowers.com, Inc.(No. 12-cv-396), in the District of Connecticut on behalf of a class of consumers alleging online fraud. The defendants included, among others, TrilegiantCorporation, Inc. (“Trilegiant”), its parent company, Affinion Group, LLC (“Affinion”), and Apollo Global Management, LLC, which is affiliated withfunds that are the beneficial owners of 69% of Affinion’s common stock. In both cases, plaintiffs allege that Trilegiant, aided by its business partners, whoinclude e-merchants and credit card companies, developed a set of business practices intended to create consumer confusion and ultimately defraud consumersinto unknowingly paying fees to clubs for unwanted services. Plaintiffs allege that Apollo is a proper defendant because of its indirect stock ownership andability to appoint the majority of Affinion’s board. The complaints assert claims under the Racketeer Influenced Corrupt Organizations Act; the ElectronicCommunications Privacy Act; the Connecticut Unfair Trade Practices Act; and the California Business and Professional Code, and seek, among otherthings, restitution or disgorgement, injunctive relief, compensatory, treble and punitive damages, and attorneys’ fees. The allegations in Kelm and Miller aresubstantially similar to those in Schnabel v. Trilegiant Corp. (No. 3:10-cv-957), a putative class action filed in the District of Connecticut in 2010 that namesonly Trilegiant and Affinion as defendants. The court has consolidated the Kelm, Miller, and Schnabel cases under the caption In re: Trilegiant Corporation,Inc. and ordered that they proceed on the same schedule. On June 18, 2012, the court appointed lead plaintiffs’ counsel, and on September 7, 2012, plaintiffsfiled their consolidated amended complaint (“CAC”), which alleges the same causes of action against Apollo as did the complaints in the Kelm and Millercases. Defendants filed motions to dismiss on December 7, 2012, and plaintiffs filed opposition papers on February 7, 2013. Defendants’ replies are due onMarch 11, 2013. On December 5, 2012, plaintiffs filed another putative class action, captioned Frank v. Trilegiant Corp. (No. 12-cv-1721), in the District ofConnecticut, naming the same defendants and containing allegations substantially similar to those in the CAC. On January 23, 2013, plaintiffs moved totransfer and consolidate Frank into In re: Trilegiant, and on February 15, 2013, the Frank Court extended all defendants’ deadlines to respond to the Frankcomplaint until the earlier of (i) April 1, 2013 or (ii) a ruling on the motion to transfer and consolidate. Apollo believes that plaintiffs’ claims against it in thesecases are without merit. For this reason, and because the claims against Apollo are in their early stages, no reasonable estimate of possible loss, if any, can bemade at this time.On July 9, 2012, Apollo was served with a subpoena by the New York Attorney General’s Office regarding Apollo’s fee waiver program. Thesubpoena is part of what we understand to be an industry-wide investigation by the New York Attorney General into the tax implications of the fee waiverprogram implemented by numerous private equity and hedge funds. Under the fee waiver program, individual fund managers for Apollo-managed funds mayelect to prospectively waive their management fees. Program participants receive an interest in the future profits, if any, earned on the invested amounts thatrepresent waived fees. They receive such profits from time to time in the ordinary course when distributions are made generally, as provided for in theapplicable fund governing documents and waiver agreements. Four Apollo funds have implemented the program. Apollo believes its fee waiver programcomplies with all applicable laws, and is cooperating with the investigation.Various state attorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents inconnection with the solicitation of investments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have receivedsubpoenas and other requests for information from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding theuse of placement agents. CalPERS, one of our Strategic Investors, announced on October 14, 2009, that it had initiated a special review of placement agentsand related issues. The Report of the CalPERS Special Review was issued on March 14, 2011. That report does not allege any wrongdoing on the part ofApollo or its affiliates. Apollo is continuing to cooperate with all such investigations and other reviews. In addition, on May 6, 2010, the California AttorneyGeneral filed a civil complaint against Alfred Villalobos and his company, Arvco Capital Research, LLC (“Arvco”) (a placement agent that Apollo has used)and Federico Buenrostro Jr., the former Chief Executive Officer of -225-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) CalPERS, alleging conduct in violation of certain California laws in connection with CalPERS’s purchase of securities in various funds managed by Apolloand another asset manager. Apollo is not a party to the civil lawsuit and the lawsuit does not allege any misconduct on the part of Apollo. On December 29,2011, the United States Bankruptcy Court for the District of Nevada approved an application made by Mr. Villalobos, Arvco and related entities (the “ArvcoDebtors”) in their consolidated bankruptcy proceedings to hire special litigation counsel to pursue certain claims on behalf of the bankruptcy estates of theArvco Debtors, 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. On April 23, 2012, the SEC filed a lawsuit alleging securities fraud on the part of Arvco, as well as Messrs. Buenrostro andVillalobos, in connection with their activities concerning certain CalPERS investments in funds managed by Apollo. This lawsuit also does not allegewrongdoing on the part of Apollo, and in fact alleges that Apollo was defrauded by Arvco, Villalobos, and Buenrostro. Apollo believes that it has handled itsuse of placement agents in an appropriate manner. 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 variousdates through 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, 2012, the approximate aggregate minimum future payments required for operating leases were as follows: 2013 2014 2015 2016 2017 Thereafter Total Aggregate minimum future payments $36,109 $36,853 $36,105 $35,265 $32,680 $74,174 $251,186 Expenses related to non-cancellable contractual obligations for premises, equipment, auto and other assets were $41.2 million, $38.3 million and$28.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.Other Long-term Obligations—These obligations relate to payments on management service agreements related to certain assets and paymentswith respect to certain consulting agreements entered into by Apollo Investment Consulting, LLC. A significant portion of these costs are reimbursable byfunds or portfolio companies. As of December 31, 2012, fixed and determinable payments due in connection with these obligations are as follows: 2013 2014 2015 2016 2017 Thereafter Total Other long-term obligations $7,418 $700 $250 $— $— $— $8,368 Contingent Obligations—Carried interest income in private equity funds and certain credit and real estate funds is subject to reversal in theevent of future losses to the extent of the cumulative carried interest recognized in income to date. If all of the existing investments became worthless, the amountof cumulative revenues that has been recognized by Apollo through December 31, 2012 and that would be -226-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) reversed approximates $3.2 billion. Management views the possibility of all of the investments becoming worthless as remote. Carried interest income isaffected by changes in the fair values of the underlying investments in the funds that Apollo manages. Valuations, on an unrealized basis, can be significantlyaffected by a variety of external factors including, but not limited to, bond yields and industry trading multiples. Movements in these items can affectvaluations quarter to quarter even if the underlying business fundamentals remain stable. The table below indicates the potential future reversal of carriedinterest income: December 31, 2012 Private Equity Funds: Fund VII $1,440,907 Fund VI 567,106 Fund V 213,739 Fund IV 19,739 Other (AAA, Stanhope Life, L.P. “Stanhope”) 93,635 Total Private Equity Funds 2,335,126 Credit Funds: U.S. Performing Credit 656,518 Opportunistic Credit 27,222 Structured Credit 30,863 European Credit 47,206 Non-Performing Loans 102,101 Total Credit Funds 863,910 Real Estate Funds: CPI Other 10,406 Total Real Estate Funds 10,406 Total $3,209,442 (1)Reclassified to conform to current presentation.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 theCompany as general partner has received more carried interest income than was ultimately earned. The general partner obligation amount, if any, will dependon final realized values of investments at the end of the life of each fund. As discussed in note 15, the Company has recorded a general partner obligation toreturn previously distributed carried interest income of $19.3 million and $0.3 million relating to SOMA and APC, respectively, as of December 31, 2012. Asof December 31, 2012, the general partner obligation for Fund VI was reversed and there was no liability as discussed in note 15.Certain funds may not generate carried interest income as a result of unrealized and realized losses that are recognized in the current and priorreporting period. In certain cases, carried interest income will not be generated until additional unrealized and realized gains occur. Any appreciation would firstcover the deductions for invested capital, unreturned organizational expenses, operating expenses, management fees and priority returns based on the terms ofthe respective fund agreements.One of the Company’s subsidiaries, AGS, provides underwriting commitments in connection with security offerings to the portfolio companies ofthe funds we manage. As of December 31, 2012 and 2011, there were no underwriting commitments outstanding related to such offerings.Contingent ConsiderationIn connection with the Stone Tower acquisition, the Company agreed to pay the former owners of Stone Tower a specified percentage of any futurecarried interest income earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liability had anacquisition date fair value of $117.7 million, which was determined based on the present value of estimated future carried interest payments, and is recordedin profit sharing payable in the consolidated statements of -227-(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) financial condition. The fair value of the contingent obligation was $126.9 million as of December 31, 2012. Refer to note 3 for additional details related to theStone Tower acquisition.In connection with the Gulf Stream acquisition, as discussed in note 3, the Company will also make payments to the former owners of GulfStream under a contingent consideration obligation which requires the Company to transfer cash to the former owners of Gulf Stream based on a specifiedpercentage of carried interest income. The contingent liability had a fair value of approximately $14.1 million as of December 31, 2012, which is recorded inprofit sharing payable in the consolidated statements of financial condition. The contingent liability had a fair value of approximately $4.7 million as ofDecember 31, 2011, which is recorded in due to affiliates in the consolidated statements of financial condition.In connection with the CPI acquisition, the consideration transferred in the acquisition was a contingent consideration in the form of a liabilityincurred by Apollo to CPI. The liability is an obligation of Apollo to transfer cash to CPI based on a specified percentage of future earnings. The estimated fairvalue of the contingent liability is $1.2 million as of December 31, 2012 and 2011 and is recorded in due to affiliates in the consolidated statements offinancial condition.The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied. The changes inthe fair value of the contingent consideration obligations will be reflected in profit sharing expense in the consolidated statements of operations.During the one year measurement period, any changes resulting from facts and circumstances that existed as of the acquisition date will bereflected as a retrospective adjustment to the bargain purchase gain and the respective asset acquired or liability assumed.The Company has determined that the contingent consideration obligations are categorized as a Level III liability in the fair value hierarchy as thepricing inputs into the determination of fair value requires significant management judgment and estimation.The following table summarizes the quantitative inputs and assumptions used for the contingent consideration obligations categorized in Level IIIof the fair value hierarchy as of December 31, 2012: Fair Value atDecember 31, 2012 ValuationTechniques Unobservable Inputs RangesFinancial Assets: Contingent consideration obligations $142,219 Discounted cash flow Discount rate 7.0%-11.6% -228-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) The significant unobservable input used in the fair value measurement of the contingent obligations is the discount rate applied in the valuationmodels. This input in isolation can cause significant increases (decreases) in fair value. Specifically, when a discounted cash flow model is used to determinefair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount ratecan significantly lower the fair value of the contingent consideration obligations; conversely decrease in the discount rate can significantly increase the fairvalue of the contingent consideration obligations. In order to determine the discount rate the Company considered the following: the weighted average cost ofcapital for the Company, the implied internal rate of return for the transaction, and weighted average return on assets.The following table summarizes the changes in contingent consideration obligations, which are measured at fair value and characterized as LevelIII liabilities: For theYear EndedDecember 31, 2012 2011 2010 Balance, Beginning of Period $5,900 $1,200 $— Acquisition (see note 3) 117,700 4,700 1,200 Payments (8,168) — — Purchase accounting adjustments 1,000 — — Change in fair value 25,787 Balance, End of Period $142,219 $5,900 $1,200 17. MARKET AND CREDIT RISKIn the normal course of business, Apollo encounters market and credit risk concentrations. Market risk reflects changes in the value ofinvestments due to changes in interest rates, credit spreads or other market factors. Credit risk includes the risk of default on Apollo’s investments, where thecounterparty is unable 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, 2012, there were more than 1,000 limitedpartner investors in Apollo’s active private equity, credit and real estate funds, and no individual investor accounted for more than 10% of the total committedcapital 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.Apollo seeks to minimize this risk by limiting its counterparties to highly rated major financial institutions with good credit ratings. Management does notexpect any material 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 withU.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 forthe services 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.Additionally, Apollo is exposed to interest rate risk. Apollo has debt obligations that have variable rates. Interest rate changes may therefore affectthe amount of interest payments, future earnings and cash flows. At December 31, 2012 and 2011, $737.8 million and $738.5 million of Apollo’s debtbalance (excluding debt of the consolidated VIEs) had a variable interest rate, respectively. However, as of December 31, 2011, $167.0 million of the debt hadbeen effectively converted to a fixed rate using interest -229-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) rate swaps as discussed in note 12. As the interest rate swap expired in May 2012, the $167 million of debt was no longer converted to a fixed rate.18. SEGMENT REPORTINGApollo conducts its management and incentive businesses primarily in the United States and substantially all of its revenues are generateddomestically. These businesses are conducted through the following three reportable segments: • Private Equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debtinvestments; • Credit—primarily invests in non-control corporate and structured debt instruments; and • Real Estate—primarily invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanineinvestments and other commercial real estate-related debt investments. Additionally, the Company sponsors real estate funds that focuson opportunistic investments 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 tables below present the financial data for Apollo’s reportable segments further separated between the management and incentive business asof December 31, 2012, 2011 and 2010 and for the years ended December 31, 2012, 2011 and 2010, 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.During the third quarter of 2012, the Company changed the name of its capital markets business segment to the credit segment. The Companybelieves this new name provides a more accurate description of the types of assets which are managed within this segment. In addition, this segment namechange aligns with the Company’s management reporting and organizational structure and is consistent with the manner in which resource deployment andcompensation decisions are made.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, creditand real estate segments. Management also believes the components of ENI such as the amount of management fees, advisory and transaction fees and carriedinterest income are indicative of the Company’s performance. Management also uses ENI in making key operating decisions such as the following: -230-Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) • Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the newhires; • Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansioninto new businesses; and • Decisions relating to expenses, such as determining annual discretionary bonuses and equity-based compensation awards to itsemployees. With respect to compensation, management seeks to align the interests of certain professionals and selected otherindividuals with those of the investors in such funds and those of the Company’s shareholders by providing such individuals aprofit sharing interest in the carried interest income earned in relation to the funds. To achieve that objective, a certain amount ofcompensation 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 (i) non-cash charges related to RSUs grantedin connection with the 2007 private placement and amortization of AOG Units, (ii) income tax expense, (iii) amortization of intangibles associated with the2007 Reorganization as well as acquisitions and (iv) Non-Controlling Interests excluding the remaining interest held by certain individuals who receive anallocation of income from certain of our credit management companies. In addition, segment data excludes the assets, liabilities and operating results of thefunds and 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,credit and real estate segments in making key operating decisions. These modifications include a reduction to ENI for equity-based compensation expense forRSUs (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 credit 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 year ended December 31, 2010: Impact of Modification on ENI PrivateEquitySegment CreditSegment RealEstateSegment TotalReportableSegments For the year ended December 31, 2010 $(6,525) $(23,449) $(3,975) $(33,949) -231-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, 2012: As of and for the Year EndedDecember 31, 2012 PrivateEquitySegment CreditSegment RealEstateSegment TotalReportableSegments Revenues: Advisory and transaction fees from affiliates $138,531 $10,764 $749 $150,044 Management fees from affiliates 277,048 299,667 46,326 623,041 Carried interest income from affiliates 1,667,535 518,852 15,074 2,201,461 Total Revenues 2,083,114 829,283 62,149 2,974,546 Expenses 945,466 454,378 72,437 1,472,281 Other Income 78,691 59,966 2,253 140,910 Non-Controlling Interests — (8,730) — (8,730) Economic Net Income (Loss) $1,216,339 $426,141 $(8,035) $1,634,445 Total Assets $2,589,645 $1,791,814 $76,851 $4,458,310 The following table reconciles the total segments to Apollo Global Management, LLC’s consolidated financial statements for the year endedDecember 31, 2012: As of and for the Year EndedDecember 31, 2012 TotalReportableSegments ConsolidationAdjustmentsand Other Consolidated Revenues $2,974,546 $(114,581) $2,859,965 Expenses 1,472,281 575,564 2,047,845 Other income 140,910 2,160,175 2,301,085 Non-Controlling Interests (8,730) (2,728,108) (2,736,838) Economic Net Income $1,634,445 N/A N/A Total Assets $4,458,310 $16,178,548 $20,636,858 (1)Represents advisory, management fees and carried interest income 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.(3)Results from the following: For theYear EndedDecember 31,2012 Net gains from investment activities $289,386 Net losses from investment activities of consolidated variable interest entities (71,704) Loss from equity method investments (10,947) Interest and other income 1,543 Gain on acquisition 1,951,897 Total Consolidation Adjustments $2,160,175 (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: -232-(1)(2)(3)(4)(5)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) For theYear EndedDecember 31,2012 Economic Net Income $1,634,445 Income tax provision (65,410) Net income attributable to Non-Controlling Interests in Apollo Operating Group (685,357) Non-cash charges related to equity-based compensation (529,712) Amortization of intangible assets (43,009) Net Income Attributable to Apollo Global Management, LLC $310,957 (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.The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2012: For the Year EndedDecember 31, 2012 Private Equity Credit Management Incentive Total Management Incentive Total Revenues: Advisory and transaction fees from affiliates $138,531 $— $138,531 $10,764 $— $10,764 Management fees from affiliates 277,048 — 277,048 299,667 — 299,667 Carried interest income from affiliates: Unrealized gains — 854,919 854,919 — 301,077 301,077 Realized gains — 812,616 812,616 37,842 179,933 217,775 Total Revenues 415,579 1,667,535 2,083,114 348,273 481,010 829,283 Compensation and benefits 159,678 702,477 862,155 149,801 155,526 305,327 Other expenses 83,311 — 83,311 149,051 — 149,051 Total Expenses 242,989 702,477 945,466 298,852 155,526 454,378 Other Income 4,653 74,038 78,691 15,008 44,958 59,966 Non-Controlling Interests — — — (8,730) — (8,730) Economic Net Income $177,243 $1,039,096 $1,216,339 $55,699 $370,442 $426,141 (1)Included in unrealized carried interest (loss) income from affiliates for the year ended December 31, 2012 was a reversal of $75.3 million of the entiregeneral partner obligation to return previously distributed carried interest income with respect to Fund VI and reversal of previously realized carriedinterest income due to the general partner obligation to return previously distributed carried interest income of $1.2 million and $0.3 million for SOMAand APC, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assets as of December 31,2012. The actual determination and any required payment of a general partner obligation would not take place until the final disposition of a fund’sinvestments 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. For the Year EndedDecember 31, 2012 Real Estate Management Incentive Total Revenues: Advisory and transaction fees from affiliates $749 $— $749 Management fees from affiliates 46,326 — 46,326 Carried interest income from affiliates: Unrealized gains — 10,401 10,401 (6)(1)(2)(2)Realized gains — 4,673 4,673 Total Revenues 47,075 15,074 62,149 Compensation and benefits 34,037 14,130 48,167 Other expenses 24,270 — 24,270 Total Expenses 58,307 14,130 72,437 Other Income 1,271 982 2,253 Economic Net (Loss) Income $(9,961) $1,926 $(8,035) (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. -233-(1)(1)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 CreditSegment 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 endedDecember 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.(3)Results from the following: -234-(1)(2)(3)(4)(5)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) 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.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 Credit 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 for the year ended December 31, 2011 was a reversal of previously realized carriedinterest income due to the general partner obligation to return previously distributed carried interest income of $75.3 million and $18.1 million withrespect to Fund VI and SOMA, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the funds’ net assetsas 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. -235-(6)(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.The following table reconciles the total reportable segments to Apollo Global Management, LLC’s financial statements for the year endedDecember 31, 2010: As of and for the Year EndedDecember 31, 2010 PrivateEquitySegment CreditSegment 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 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. -236-(1)(1)(1)(2)(3)(4)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) (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 (4)Represents the addition of assets of consolidated funds and consolidated VIEs.(5)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 Credit 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. -237-(5)(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.19. SUBSEQUENT EVENTSOn January 9, 2013, the Company issued 150,000 Class A shares in settlement of vested RSUs. This issuance caused the Company’sownership interest in the Apollo Operating Group to increase from 35.1% to 35.2%.On January 28, 2013, the Company issued 23,231 Class A shares in settlement of vested RSUs. The issuance had minimal impact on theCompany’s ownership in the Apollo Operating Group.On February 11, 2013, the Company issued 1,912,632 Class A shares in settlement of vested RSUs. This issuance caused the Company’sownership interest in the Apollo Operating Group to increase from 35.2% to 35.5%.On February 8, 2013, the Company declared a cash distribution of $1.05 per Class A share, which was paid on February 28, 2013 to holders ofrecord on February 20, 2013.20. QUARTERLY FINANCIAL DATA (UNAUDITED) For the Three Months Ended March 31,2012 June 30,2012 September 30,2012 December 31,2012 Revenues $776,743 $211,628 $712,373 $1,159,221 Expenses 523,230 316,962 520,008 687,645 Other Income 192,188 1,950,461 27,348 131,088 Income Before Provision for Taxes $445,701 $1,845,127 $219,713 $602,664 Net Income $431,141 $1,834,477 $197,796 $584,381 Income (Loss) attributable to Apollo Global Management, LLC. $98,043 $(41,386) $82,791 $171,509 Net Income (Loss) per Class A Share – Basic and Diluted $0.66 $(0.38) $0.55 $1.12 -238-(1)(1)Table of ContentsAPOLLO GLOBAL MANAGEMENT, LLCNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(dollars in thousands, except share data) For the 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 and Diluted $0.33 $(0.46) $(3.86) $0.05 -239-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 Exchange Act, that aredesigned to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated andcommunicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regardingrequired disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certainassumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potentialfuture conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desiredobjectives.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.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is a process designed by, or under the supervision of, its principal executive and principal financial officers, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance withaccounting principles generally accepted in the United States of America.The internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect transactions and disposition of assets; provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only inaccordance with authorizations of management and the directors; and provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the company’s assets that could have a material effect on its financial statements.Management conducted an assessment of the effectiveness of Apollo’s internal control over financial reporting as of December 31, 2012 based onthe framework established in Internal Control—Integrated Framework issued by the Committee of Organizations of the Treadway Commission. Based onthis assessment, management has determined that Apollo’s internal control over financial reporting as of December 31, 2012 was effective.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 SecuritiesExchange Act) occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control overfinancial reporting. -240-Table of ContentsOur independent registered public accounting firm, Deloitte & Touche LLP, has issued its attestation report on our internal control over financialreporting which is included in “Item 8. Financial Statements and Supplementary Data.” ITEM 9B.OTHER INFORMATIONNone. -241-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 61 Chairman, Chief Executive Officer and DirectorJoshua Harris 48 Senior Managing Director and DirectorMarc Rowan 50 Senior Managing Director and DirectorMarc Spilker 48 PresidentMartin Kelly 45 Chief Financial OfficerBarry Giarraputo 49 Chief Accounting Officer and ControllerJohn Suydam 53 Chief Legal Officer and Chief Compliance OfficerJames Zelter 50 Managing Director – CreditMichael Ducey 64 DirectorPaul Fribourg 58 DirectorA.B. Krongard 76 DirectorPauline Richards 64 DirectorLeon Black. Mr. Black is the Chairman of the board of directors and Chief Executive Officer of Apollo and a Managing Partner of ApolloManagement, 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 ofinstitutional investors, focusing on corporate restructuring, leveraged buyouts and taking minority positions in growth-oriented companies. From 1977 to1990, Mr. Black worked at Drexel Burnham Lambert Incorporated, where he served as a Managing Director, head of the Mergers & Acquisitions Group, andco-head of the Corporate Finance Department. Mr. Black also serves on the board of directors of the general partner of AAA and previously served on the boardof directors of Sirius XM Radio Inc. Mr. Black is a trustee of The Museum of Modern Art, The Mount Sinai Medical Center, The Metropolitan Museum ofArt, and The Asia Society. He is also a member of The Council on Foreign Relations and The Partnership for New York City. He is also a member of theboards of directors of FasterCures and the Port Authority Task Force. Mr. Black graduated summa cum laude from Dartmouth College in 1973 with a majorin Philosophy and History and received an MBA from Harvard Business School in 1975. Mr. Black has significant experience making and managingprivate equity investments on behalf of Apollo and has over 34 years experience financing, analyzing and investing in public and private companies. In hisprior positions with Drexel and in his positions at Apollo, Mr. Black is responsible for leading and overseeing teams of professionals. His extensive experienceallows Mr. Black to provide insight into various aspects 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, EPE Acquisition, LLC and the holding company for Alcan Engineered Products. Mr. Harris has previouslyserved on the boards of directors of Verso Paper Corp., Metals USA, Inc., Nalco Corporation, Allied Waste Industries, Inc., Pacer International, Inc., GeneralNutrition Centers, Inc., Furniture Brands International Inc., Compass Minerals International, Inc., Alliance Imaging, Inc., NRT Inc., Covalence SpecialtyMaterials Corp., United Agri Products, Inc., Quality Distribution, Inc., Whitmire Distribution Corp. and Noranda Aluminum Holding Corporation.Mr. Harris is actively involved in charitable and political organizations. He also serves on the Corporate Affairs Committee of the Council on Foreign Relations.Mr. Harris serves as Chairman of the Department of Medicine Advisory Board for The Mount Sinai Medical Center and is on the board of trustees of theMount Sinai Medical Center. He is also a member of The Federal Reserve Bank of New York Investors Advisory Committee on Financial Markets and amember of The University of Pennsylvania’s Wharton Undergraduate Executive Board and is on the board of trustees for The Allen-Stevenson School and theHarvard Business School. Mr. Harris graduated summa cum laude -242-Table of Contentsand Beta Gamma Sigma from the University of Pennsylvania’s Wharton School of Business with a BS in Economics and received his MBA from theHarvard Business School, where he graduated as a Baker and Loeb Scholar. Mr. Harris has significant experience in making and managing private equityinvestments on behalf of Apollo and has over 24 years experience in financing, analyzing and investing in public and private companies. Mr. Harris’sextensive knowledge of Apollo’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 ApolloManagement, L.P., which he co-founded in 1990. Prior to 1990, Mr. Rowan was a member of the Mergers & Acquisitions Group of Drexel BurnhamLambert Incorporated, with responsibilities in high yield financing, transaction idea generation and merger structure negotiation. Mr. Rowan currently serveson the boards of directors of the general partner of AAA, Athene Holding Ltd, Athene Life Re Ltd., Caesars Entertainment Corporation and Norwegian CruiseLines. He has previously served on the boards of directors of AMC Entertainment, Inc., Cablecom GmbH, Culligan Water Technologies, Inc., CountrywideHoldings Limited, Furniture Brands International Inc., Mobile Satellite Ventures, LLC, National Cinemedia, Inc., National Financial Partners, Inc., NewWorld Communications, Inc., Quality Distribution, Inc., Samsonite Corporation, SkyTerra Communications Inc., Unity Media SCA, Vail Resorts, Inc. andWyndham International, Inc. Mr. Rowan is also active in charitable activities. He is a founding member and Chairman of the Youth Renewal Fund and is amember of the boards of directors of the National Jewish Outreach Program, Inc., the Undergraduate Executive Board of the University of Pennsylvania’sWharton School of Business and the New York City Police Foundation. Mr. Rowan graduated summa cum laude from the University of Pennsylvania’sWharton School of Business with a BS and an MBA in Finance. Mr. Rowan has significant experience making and managing private equity investments onbehalf of Apollo and has over 26 years experience financing, analyzing and investing in public and private companies. Mr. Rowan’s extensive financialbackground and expertise in private equity investments enhance the breadth of experience of 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 careerwith the firm, where he served as the co-head of Goldman Sachs’ Investment Management Division and also as a member of the firm-wide ManagementCommittee. Mr. Spilker joined IMD in 2006 as head of Global Alternative Asset Management and became chief operating officer in 2007. Prior to that,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, is on the board of directors of The New 42nd Street, Inc., is the Founder of ThirdWay’s Capital Markets Initiative and chairs the RFK Leadership Council at the Robert F. Kennedy Center for Justice & Human Rights. Mr. Spilker is also aboard member of the Samuel Bronfman Department of Medicine Advisory Board at Mount Sinai School of Medicine, an Advisory Board member for MountSinai’s Institute for Genomics and Multiscale Biology, a board member of the New York State Financial Control Board and a member of the Council ofEconomic and Fiscal Advisors for Governor Andrew Cuomo. He has previously been a member of the Google Investment Advisory Committee, the AmericanStock Exchange and the Chicago Mercantile Exchange, and has served on the Boards of the Philadelphia Stock Exchange, the Stone and Bridge Street funds,BrokerTec and Bondbook, LLC. Mr. Spilker graduated with a B.S. in Economics from the Wharton School of the University of Pennsylvania.Martin Kelly. Mr. Kelly joined Apollo as Chief Financial Officer in 2012. Prior to that time, Mr. Kelly was a Managing Director at Barclays andserved as the Chief Financial Officer of Barclays’ Americas division since 2009 and also served as the Global Head of Financial Control for Barclays’Corporate and Investment Bank since 2011. From September 2008 to March 2009, Mr. Kelly served in a variety of senior finance roles at Barclays. Prior tohis tenure at Barclays, Mr. Kelly was employed in a variety of roles at Lehman Brothers since 2000, including serving as a Managing Director and as GlobalFinancial Controller from 2007 to 2008. From 2000 to 2007, Mr. Kelly provided accounting and regulatory expertise to support the development anddistribution of investment and financing products to corporate and financial institution clients. Prior to joining Lehman Brothers in 2000, Mr. Kellyspent thirteen years with PricewaterhouseCoopers, where he served in the Financial Services Group in New York from 1994 to 2000. He was appointed apartner of the firm in 1999. Mr. Kelly received a degree in Commerce, majoring in Finance and Accounting, from the University of New South Wales in1989. -243-Table of ContentsBarry Giarraputo. Mr. Giarraputo joined Apollo in 2006. Before joining Apollo, Mr. Giarraputo was a Senior Managing Director at BearStearns & Co. where he served in a variety of finance roles over nine years. Prior 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 with a BBA inAccountancy.John Suydam. Mr. Suydam joined Apollo in 2006 and serves as Apollo’s Chief Legal Officer and Chief Compliance Officer. From 2002 to2006, Mr. Suydam was a partner at O’Melveny & Myers LLP where he served as head of Mergers and Acquisitions and co-head of the Corporate Department.Prior to that time, Mr. Suydam served as Chairman of the law firm O’Sullivan, LLP which specialized in representing private equity investors. Mr. Suydamserves on the boards of Environmental Solutions Worldwide, Inc. and New York University School of Law, and is a member of the Department of MedicineAdvisory Board of the Mount Sinai Medical Center. Mr. Suydam received his J.D. from New York University and graduated magna cum laude with a B.A.in History from the State University of New York at Albany.James Zelter. Mr. Zelter joined Apollo in 2006. Mr. Zelter is the Managing Director of Apollo’s credit business, Chief Executive Officer anddirector of AINV. Prior to joining Apollo, Mr. Zelter was with Citigroup Inc. and its predecessor companies from 1994 to 2006. From 2003 to 2005, Mr. Zelterwas Chief Investment Officer of Citigroup Alternative Investments, and prior to that he was responsible for the firm’s Global High Yield franchise. Prior tojoining Citigroup in 1994, Mr. Zelter was a High Yield Trader at Goldman, Sachs & Co. Mr. Zelter has significant experience in global credit markets andhas overseen the broad expansion of Apollo’s credit platform. Mr. Zelter is a board member of DUMAC, the investment management company that overseesthe Duke Endowment and Duke Foundation, and is on the board of the Dalton School. 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 ofdirectors since 2011. From 1997 to the present, Mr. Fribourg has served as Chairman and Chief Executive Officer of Continental Grain Company. Prior to1997, Mr. Fribourg served in a variety of other roles at Continental Grain Company, including Merchandiser, Product Line Manager, Group President andChief Operating Officer. Mr. Fribourg serves on the boards of directors of Burger King Holdings, Inc., Loews Corporation, Castleton CommoditiesInternational LLC and The Estee Lauder Companies, Inc. He also serves as a board member of the Rabobank International North American AgribusinessAdvisory Board, the Harvard Business School Board of Dean’s Advisors, the New York University Mitchell Jacobson Leadership Program in Law andBusiness Advisory Board, the America-China Society, Endeavor Global Inc. and Teach For America–New York. Mr. Fribourg is also a member of theCouncil on Foreign Relations, the Brown University Advisory Council on China, the International Business Leaders Advisory Council for The Mayor ofShanghai. Mr. Fribourg graduated magna cum laude from Amherst College and completed the Advanced Management Program at Harvard Business School.Mr. Fribourg’s extensive corporate 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 directorssince 2011. 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 the 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 insuch capacity until joining the Central Intelligence Agency. Mr. Krongard serves as the Lead Director and audit committee Chairman of Under Armour, Inc.and also serves as a board member of Iridium Communications Inc. Mr. Krongard graduated with honors from Princeton University and received a J.D. fromthe University of Maryland School of Law, where he also graduated with honors. Mr. Krongard also serves as the interim Chairman of the Johns HopkinsHealth System. Mr. -244-Table of ContentsKrongard’s comprehensive corporate background contributes to the range 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 ofdirectors since 2011. From 2008 to the present, Ms. Richards served as Chief Operating Officer of Armour Reinsurance Group Limited. Prior to 2008,Ms. Richards served 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 theaudit committee and Chairman of the corporate governance committee of the board of directors of Butterfield Bank and as a member of the audit andcompensation committees of the board of directors of Wyndham Worldwide. Ms. Richards also serves as the Treasurer 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 obtainedcertification as a Certified Management Accountant. Ms. Richards’ extensive finance experience and her service on the boards of other public companies addsignificant value to the board of directors.Michael Ducey. Mr. Ducey has served as an independent director of Apollo and a member of the audit committee and as Chairman of theconflicts committee of our board of directors since 2011. Most recently, Mr. Ducey was with Compass Minerals International, Inc., from March 2002 to May2006, 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. He is also the Chairman of the compliance and governance committee and the nominationscommittee of the board of directors of HaloSource, Inc. From September 2009 to December 2012, Mr. Ducey was the non-executive Chairman of TPC Group,Inc. and served on the audit committee and the environmental health and safety committee. From June 2006 to May 2008, Mr. Ducey served on the board ofdirectors of and as a member of the governance and compensation committee of the board of directors of UAP Holdings Corporation. Also, from July 2010 toMay 2011, Mr. Ducey was a member of the board of directors and served on the audit committee of Smurfit-Stone Container Corporation. Mr. Duceygraduated from Otterbein University with a degree in Economics and an M.B.A. in finance from the University of Dayton. Mr. Ducey’s comprehensivecorporate background and his experience serving on various boards and committees add significant value to the board of directors.Our ManagerOur operating agreement provides that so long as the Apollo Group beneficially owns at least 10% of the aggregate number of votes that may becast by holders of outstanding voting shares, our manager, which is owned and controlled by our Managing Partners, will manage all of our operations andactivities and will have discretion over significant corporate actions, such as the issuance of securities, payment of distributions, sales of assets, makingcertain amendments to our operating agreement and other matters, and our board of directors will have no authority other than that which our manager choosesto delegate to it. We refer to the Apollo Group’s beneficial ownership of at least 10% of such voting power as the “Apollo control condition.” For purposes of ouroperating agreement, the “Apollo Group” means (i) our manager and its affiliates, including their respective general partners, members and limited partners,(ii) Holdings and its affiliates, including their respective general partners, members and limited partners, (iii) with respect to each managing partner, suchmanaging partner and such managing partner’s “group” (as defined in Section 13(d) of the Exchange Act), (iv) any former or current investment professionalof or other employee of an “Apollo employer” (as defined below) or the Apollo Operating Group (or such other entity controlled by a member of the ApolloOperating Group), (v) any former or current executive officer of an Apollo employer or the Apollo Operating Group (or such other entity controlled by amember of the Apollo Operating Group); and (vi) any former or current director of an Apollo employer or the Apollo Operating Group (or such other entitycontrolled by a member of the Apollo Operating Group). With respect to any person, “Apollo employer” means Apollo Global Management, LLC or such otherentity controlled by Apollo Global Management, LLC or its successor as may be such person’s employer. -245-Table of ContentsDecisions by our manager are made by its executive committee, which is composed of our three Managing Partners and our President, the latter ofwhich serves as a non-voting member. Each Managing Partner will remain on the executive committee for so long as he is employed by us, provided thatMr. Black, upon his retirement, may at his option remain on the executive committee until his death or disability or any commission of an act that wouldconstitute cause if Mr. Black had still been employed by us. Other than those actions that require unanimous consent, actions by the executive committee aredetermined by majority vote of its voting members, except as to the following matters, as to which Mr. Black will have the right of veto: (i) the designations ofdirectors 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 Group units and interestsin our Class B share for Class A shares, transfers by a founder or a permitted transferee to another permitted transferee, or the issuance of bona fide equityincentives to any of our non-founder employees) that constitutes (x) a direct or indirect sale of a ratable interest (or substantially ratable interest) in each entitythat constitutes the Apollo Operating Group or (y) a sale of all or substantially all of the assets of Apollo. Exchanges of Apollo Operating Group units forClass A shares that are not pro rata among our Managing Partners or in which each Managing Partner has the option not to participate are not subject toMr. 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 substantiallyall of our 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 thatour manager will determine the expenses that are allocable to us. The agreement does not limit the amount of expenses for which we will reimburse our managerand its 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 thenumber of 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, eachof our directors 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 electedor appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal. Our board currently consists of sevenmembers. For so long as the Apollo control condition is satisfied, our manager may remove any director, with or without cause, at anytime. After suchcondition is no longer 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 votingpower of our shares.As noted, so long as the Apollo control condition is satisfied, our manager will manage all of our operations and activities, and our board ofdirectors will 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, ourboard of directors 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 willmaintain audit and conflicts committees of the board of directors that have the responsibilities described below under “—Committees of the Board of Directors—Audit Committee” 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 committeemembers present 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 the case may be. Our board of directors or any committee thereof may also act by unanimous written consent. -246-Table of ContentsUnder the Agreement Among Managing Partners, the vote of a majority of the independent members of our board of directors will decide thefollowing: (i) in the event that a vacancy exists on the executive committee of our manager and the remaining members of the executive committee cannot agreeon a replacement, the independent members of our board of directors shall select one of the two nominees to the executive committee of our manager presented tothem by the remaining members of such executive committee to fill the vacancy on such executive committee and (ii) in the event that at any time afterDecember 31, 2009, Mr. Black wishes to exercise his ability to cause (x) the direct or indirect sale of a ratable interest (or substantially ratable interest) in eachApollo Operating Group entity, or (y) a sale of all or substantially all of our assets, through a merger, recapitalization, stock sale, asset sale or otherwise, to anunaffiliated third party, the affirmative vote of the majority of the independent members of our board of directors shall be required to approve such atransaction. We are not a party to the Agreement Among Managing Partners, and neither we nor our shareholders (other than our Strategic Investors, asdescribed under “Item 13. Certain Relationships and Related Transactions—Lenders Rights Agreement—Amendments to Managing Partner TransferRestrictions”) have any right to enforce the provisions described above. Such provisions can be amended or waived upon agreement of our Managing Partnersat 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 currentSEC and NYSE rules relating to corporate governance matters. Our board of directors may from time to time establish other committees of our board ofdirectors.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 and Ms. Richards. 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 Ethics is available on our Internet website at www.agm.com under the “InvestorRelations” section. We intend to disclose any amendment to or waiver of the Code of Business Conduct and Ethics on behalf of an executive officer or directoreither on our Internet website or in an 8-K filing. -247-Table of ContentsSection 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of a registered class ofthe Company’s equity securities to file initial reports of ownership and reports of changes in ownership with the SEC and furnish us with copies of allSection 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us or written representations from suchpersons that they were not required to file a Form 5 to report previously unreported ownership or changes in ownership, we believe that, with respect to thefiscal year ended December 31, 2012, such persons complied with all such filing requirements. 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’, Contributing Partners’, and other investment professionals’ direct beneficialownership of equity in our business in the form of AOG Units and Class A shares, their ownership of rights to receive a portion of the incentive income earnedfrom our funds, the direct investment by our investment professionals in our funds, and our practice of paying annual incentive compensation partly in theform of equity-based grants that are subject to vesting. As a result of this alignment, the compensation of our professionals is closely tied to the performance ofour businesses.Significant Personal Investment. Like our fund investors and Class A shareholders, certain of our investment professionals make significantpersonal investments in our funds (as more fully described under “Item 13. Certain Relationships and Related Party Transactions”), directly or indirectly, andour professionals who receive carried interests in our funds are generally required to invest their own capital in the funds they manage in amounts that aregenerally proportionate to the size of their participation in incentive income. We believe that these investments help to ensure that our professionals have capitalat risk and reinforce the linkage between the success of the funds we manage, the success of the Company and the compensation paid 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 vesting requirements and minimum retained ownership requirements for these awards and the AOG Units beneficiallyowned by our Managing Partners and Contributing Partners contribute to our professionals’ focus on long-term performance while enhancing retention of theseprofessionals.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 that we accrue compensation for our carried interest programs (described below) as increases in the value of the portfolio investmentsare recorded in the related funds, we generally make payments in respect of carried interest allocations to our employees only after profitable investments haveactually been realized. This helps to ensure that our professionals take a long-term view that is consistent with the Company’s and our shareholders’ interests.Moreover, if a fund fails to achieve specified investment returns due to diminished performance of later investments, our carried interest program relating tothat fund generally permits, for the benefit of the limited partner investors in that fund, the return of carried interest payments (generally net of tax) previouslymade to us, our Contributing Partners or our other employees. These provisions discourage excessive risk-taking and promote a long-term view that isconsistent with the interests of our investors and shareholders. Our general requirement that our professionals invest in the funds we manage further aligns theinterests of our professionals, fund investors and Class A shareholders. Finally, the vesting provisions and minimum retained ownership requirements of ourRSUs and AOG Units noted above discourage excessive risk-taking because the value of these units is tied directly to the long-term performance of ourClass A shares. -248-Table of ContentsCompensation 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 six 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 2012 are describedbelow. We distinguish among the compensation components applicable to our six 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,” and Mr. Zelter is a member of the group referred to elsewhere in thisreport as the “Contributing Partners.”Annual Salary. Each of our named executive officers other than Mr. Zelter receives an annual salary. The base salaries of our named executive officersare set forth in the Summary Compensation Table below, and those base salaries were set by our Managing Partners in their judgment after considering thehistoric compensation levels of the officer, competitive market dynamics, and each officer’s level of responsibility and anticipated contributions to our overallsuccess.RSUs. Most of our professionals, including our named executive officers other than Messrs. Black and Zelter, received a Plan Grant (as defined below)of RSUs, either at the time of the 2007 Reorganization or in connection with their subsequent commencement of employment. In 2012, a portion of our namedexecutive officers’ compensation (other than for Messrs. Black and Donnelly) was also paid in the form of RSUs. We refer to our annual grants of RSUs asBonus Grants. Mr. Zelter received a special grant of RSUs in 2012, based on a determination by our Managing Partners in their discretion that hiscontributions merited such grant, and Mr. Azrack received a special grant of RSUs in 2012 consistent with the terms of his employment agreement. TheRSUs are subject to multi-year vesting and minimum retained ownership requirements. In 2012, all named executive officers were required to retain at least85% of any Class A shares issued to them pursuant to RSU awards (net of an assumed rate of 50% of gross shares sold or netted to pay applicable income oremployment taxes). The named executive officer Plan Grants, Bonus Grants and special grants are described below under “—Narrative Disclosure to theSummary Compensation Table and Grants of Plan-Based Awards Table—Awards of Restricted 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 (generally net of tax) if the fund fails to achieve specified investment returns due to diminished performance of laterinvestments. The actual gross amount of carried interest allocations available is a function of the performance of the applicable fund. For these reasons, webelieve that carried interest participation aligns the interests of our professionals with 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, Zelter, Suydam and Azrack have beenawarded rights to participate in a dedicated percentage of the carried interest income earned by the general partners of certain of our funds. Participation indedicated carried interest is typically subject to vesting, which rewards long-term commitment to the firm and thereby enhances the alignment of participants’interests with the Company. Our financial statements characterize the carried interest income allocated to participating professionals in respect of theirdedicated interests as compensation. Actual distributions in respect of dedicated carried interests are included in the “All Other Compensation” column of thesummary compensation table.Our performance based incentive arrangement referred to as the incentive pool further aligns the overall compensation of our professionals to the realizedperformance of our business. The incentive pool provides for discretionary compensation based on carried interest realizations earned by us during the yearand enhances our capacity to offer competitive compensation opportunities to our professionals. “Carried interest realizations earned” means carried interestearned by the general partners of our funds under the applicable fund limited partnership agreements based upon transactions that have closed or other rightsto cash that have become fixed in the applicable calendar year period. Under this arrangement, Messrs. Kelly, Zelter, Suydam and Azrack, among other of ourprofessionals, were awarded incentive pool compensation based on carried interest realizations we earned during 2012. Allocations to participants in theincentive pool contain both a fixed component ($18,000 in 2012) and a discretionary component, both of which may vary year-to-year, including as a result ofour overall realized performance and the contributions and performance of each participant. The Managing Partners determine the amount of the carried interestrealizations to place into the incentive pool in their discretion after considering various factors, including Company profitability, management company cashrequirements and anticipated future costs, provided that -249-Table of Contentsthe incentive pool consists of an amount equal to at least one percent (1%) of the carried interest realizations attributable to profits generated after creation of theincentive pool program that were taxable in the applicable year and not allocable to dedicated carried interests. The $18,000 figure noted above was chosen asan amount that was in excess of this one percent (1%) threshold, without exceeding the minimum distribution that the Managing Partners determined that allincentive pool participants were entitled to receive. Our financial statements characterize the carried interest income allocated to participating professionals inrespect of incentive pool interests as compensation. The “All Other Compensation” column of the summary compensation table includes actual distributionspaid from the incentive pool.Bonus. Three of our named executive officers, Messrs. Kelly, Donnelly and Zelter, received cash bonuses in 2012. Pursuant to his employmentagreement, Mr. Kelly received a special one-time sign-on bonus in connection with entering into his employment agreement. Mr. Donnelly’s separationagreement entitled him to a cash bonus for his services in 2012, including with respect to the filing of our Form 10-Q for the period ending June 30, 2012 andas a full-time senior advisor assisting us in the transition of his responsibilities as chief financial officer to Mr. Kelly. Mr. Zelter is entitled to receive an annualbonus based on the management fee and incentive income of certain of our businesses in which he participates, which encourages him to maintain a long-termfocus on the performance of those businesses. Because Mr. Zelter’s bonus is performance-based, nondiscretionary, and not a retention bonus, we report it inthe “Non-Equity Incentive Plan” column of the summary compensation table.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 AOG Units. In particular, as ofDecember 31, 2012, the Managing Partners beneficially owned, through their interest in Holdings, approximately 57% of the total limited partner interests inthe Apollo Operating Group. When made, distributions on these units (which are made on both vested and unvested units) are in the same amount per unit asdistributions made to us in respect of the AOG Units we hold. Accordingly, although distributions on AOG Units are distributions on equity rather thancompensation, they play a central role in aligning our Managing Partners’ and Contributing Partners’ interests with those of our Class A shareholders, whichis consistent with our compensation philosophy. In 2012, the Managing Partners, including Mr. Black, and Contributing Partners, including Mr. Zelter, wererequired to retain 100% of their AOG Units.Compensation Committee Interlocks and Insider ParticipationOur board of directors does not have a compensation committee. Our Managing Partners make all such compensation determinations, as discussedabove under “—Determination of Compensation of Named Executive Officers.” For a description of certain transactions between us and the ManagingPartners, see “Item 13. Certain Relationships and Related Party Transactions.” -250-Table of ContentsCompensation Committee ReportAs noted above, our board of directors does not have a compensation committee. The executive committee of the board of directors identified below hasreviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussion, has determinedthat the Compensation Discussion and Analysis should be included in this Annual Report on Form 10-K. Leon Black, ChairmanJoshua HarrisMarc RowanSummary 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, 2012. 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 beneficial ownership of AOG Units and their rights underthe tax receivable agreement (described elsewhere in this report, including above under “Item 5. Market for Registrant’s Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities—Cash Distribution Policy”), rather than from compensation, and accordingly are not included in thebelow tables. The officers named in the table are referred to as the named executive officers. Name and Principal Position Year Salary($) Bonus($) StockAwards($) Non-EquityIncentive Plan($) AllOtherCompensation($) Total($) Leon Black, 2012 100,000 — — — 187,368 287,368 Chairman, Chief Executive Officer and Director 20112010 100,000100,000 — — — 7,391,825 — — 372,9961,312,412 472,9968,804,237 Martin Kelly, 2012 300,000 200,000 4,687,530 — 1,433,411 6,620,941 Chief Financial Officer (assumed this positioneffective September 13, 2012) Gene Donnelly, 201220112010 875,0001,000,000500,000 1,487,500— 1,360,000 1,556,5922,049,1943,630,000 — — — — 1,360,000— 3,919,0924,409,1945,490,000 Chief Financial Officer and Vice President (ceasedserving in this position on August 14, 2012) James Zelter, 2012 — — 2,606,310 5,099,193 14,959,920 22,665,423 Managing Director, Credit 2011 — — 2,631,239 2,230,843 8,227,188 13,089,270 2010 — — 1,338,548 5,373,638 3,070,459 9,782,645 John Suydam, 2012 3,000,000 — 496,715 — 3,405,953 6,902,668 Chief Legal Officer and Chief Compliance Officer 20112010 3,000,0003,000,000 — 1,487,500 1,555,133945,566 — — 1,786,111262,312 6,341,2445,695,378 Joseph Azrack, 2012 791,667 — 1,994,702 — 208,333 2,994,702 Managing Director, Real Estate 2011 500,000 — 11,149,657 — 519,750 12,169,407 (1)Amounts shown for 2012 represent cash bonuses earned in 2012.(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 for further information concerning the assumptions made in valuing our RSU awards. The amounts shown donot reflect compensation actually received by the named executive officers, but instead represent the aggregate grant date fair value of the awards.Mr. Black’s 2010 amount represents an allocation of AOG Units to him in accordance with the Agreement Among Managing Partners upon the forfeitureof such AOG Units by a retiring contributing partner. For Mr. Donnelly, the Accounting Standards Codification (“ASC”) amount represents theincremental fair value for accounting purposes, computed in accordance with FASB ASC Topic 718, of the vesting on December 31, 2012 of 25% ofhis unvested RSUs that had been granted in prior years, in accordance with his separation agreement. Mr. Donnelly -251-(1)(2)(3)(4)Table of Contents did not receive a new grant of RSUs in 2012.(3)Mr. Zelter’s annual cash compensation is derived from the management fee and incentive income generated by various of our funds in which heparticipates pursuant to his employment agreement.(4)Amounts included for 2012, 2011 and 2010 represent, in part, actual distributions in respect of dedicated carried interest allocations relating to thenamed executive officers in those years. Of these 2012 distribution amounts, $18,108 and $5,432, respectively, was paid in the form of AAA RDUsfor Messrs. Zelter and Suydam, which RDUs are not subject to vesting. To the extent that compensation expense recorded by us on an accrual basis inrespect of dedicated carried interest allocations had been included in the table for 2012 (rather than actual distributions), the accrued amounts wouldhave been $0 for Mr. Black, $15,522,718 for Mr. Zelter, and $1,875,426 for Mr. Suydam. For financial statement reporting purposes, accruedcarried interest related to investments is classified as compensation expense for the relevant period (we note that this expense can be negative in a givenyear, in the event of a reversal of previously allocated carried interest due to negative adjustments in the fair value on certain portfolio investments). Theultimate amount of actual dedicated carried interest distributions that may be generated in connection with fund investments and subsequentlydistributed to our named executive officers in future years, as well as the associated compensation expense, may be more or less than the accruedamounts stated in this footnote. Additionally, such amounts are generally subject to vesting conditions and to contingent repayment (generally net of tax)in certain instances.For 2012, the “All Other Compensation” column also includes actual incentive pool distributions ($1,433,411 for Mr. Kelly, $18,000 for Mr. Zelter,$500,000 for Mr. Suydam and $208,333 for Mr. Azrack).The “All Other Compensation” column also includes the following amounts for 2012: (a)Costs relating to Company-provided cars and drivers for the business and personal use of Messrs. Black and Suydam. We provide this benefitbecause we believe that its cost is outweighed by the convenience, increased efficiency and added security and confidentiality that it offers. Thepersonal use cost was approximately $166,718 for Mr. Black and $36,639 for Mr. Suydam. For Mr. Black, this amount includes both fixedand variable costs, including lease costs, driver compensation, driver meals, fuel, parking, tolls, repairs, maintenance and insurance. ForMr. Suydam, this amount includes the costs to the Company associated with his use of a car service. (b)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$12,400.Except as discussed above in paragraphs (a) and (b) of this footnote 4, no 2012 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. Kelly, Donnelly, Zelter or Azrack received perquisites orpersonal benefits in 2012, 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. -252-Table of ContentsNarrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards TableEmployment, Non-Competition and Non-Solicitation Agreement with Chairman and Chief Executive OfficerIn July 2012, we entered into an employment, non-competition and non-solicitation agreement with Leon Black, our chairman and chief executive officerand a member of our manager’s executive committee, which agreement supersedes and is substantially similar to the agreement we entered into with Mr. Blackdated July 13, 2007. The term of the agreement concludes on July 19, 2015. Mr. Black has the right to terminate his employment voluntarily at any time, butwe may terminate his employment only for cause or by reason of death or disability (as such terms are defined in his employment agreements.)Mr. 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.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.If Mr. Black becomes subject to a potential termination for cause or by reason of disability, our manager may appoint an investment professional toperform his functional responsibilities and duties until cause or disability definitively results in his termination or is determined not to have occurred, but themanager may so appoint an investment professional only if Mr. Black is unable to perform his responsibilities and duties 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 executive committee of our manager unless otherwiseprohibited 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 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 Officer Martin KellyOn July 2, 2012, we entered into an employment, non-competition and non-solicitation agreement with Martin Kelly, who became our chief financialofficer on September 13, 2012. Pursuant to his employment agreement, Mr. Kelly received a sign-on bonus in the amount of $200,000, which amount issubject to repayment if he resigns without good reason or is terminated with cause (as such terms are defined in his employment agreement) within one yearafter payment. His annual base salary is $1,000,000, which amount was prorated for 2012. As provided in his employment agreement, Mr. Kelly received aPlan Grant of 375,000 RSUs in connection with his commencement of employment. He is eligible for an annual bonus in an amount to be determined by us inour discretion, except that his minimum bonus for services performed in 2012 was $1,890,000 and his minimum bonus for services performed in 2013 shallbe $1,500,000, a portion of which bonuses is subject to payment in the form of Bonus Grants. Consistent with his employment agreement, Mr. Kellyparticipates in the incentive pool carried interest program and is eligible to receive discretionary distributions thereunder. Any distributions actually receivedunder the incentive pool reduce his 2012 and 2013 bonuses by an equivalent amount.We may terminate Mr. Kelly’s employment with or without cause, and we will provide 90 days’ notice (or payment in lieu of such period of notice) priorto a termination without cause. Under the employment agreement, Mr. Kelly will give us 90 days’ notice prior to a resignation for any reason. If Mr. Kelly’semployment is terminated by us without cause or he resigns for good reason, we will pay him the balance of the 2013 minimum annual bonus not yet paid. Ifsuch termination or resignation occurs after the payment of the 2013 annual bonus, Mr. Kelly will be entitled to severance of six months’ base pay andreimbursement of health insurance premiums paid in the six months following his employment termination.The employment agreement obligates Mr. Kelly to protect the confidential information of Apollo both during and after employment. In addition, theagreement provides that during the term and for 12 -253-Table of Contentsmonths after employment, Mr. Kelly will refrain from soliciting our employees, interfering with our relationships with investors or other business relations,and competing with us in a business that manages or invests in assets substantially similar to those managed or invested in by Apollo or its affiliates. If weterminate Mr. Kelly’s employment without cause or he resigns for good reason, he will vest in 50% of any unvested portion of his RSU Plan Grant. If hisemployment is terminated by reason of death or disability, he will vest in 50% of any unvested portion of his Bonus Grant RSUs.Employment, Non-Competition and Non-Solicitation Agreement and subsequent Separation Letter with former Chief Financial Officer GeneDonnellyOur former chief financial officer, Gene Donnelly, ceased employment with us effective December 31, 2012. On July 2, 2012, our employment, non-competition and non-solicitation agreement with Mr. Donnelly, dated May 13, 2012, was superseded in part by a letter agreement entered into by Mr. Donnellyand Apollo, which we refer to as the separation letter.Under his employment agreement, Mr. Donnelly had been entitled to an annual salary of $1,000,000 and to an annual bonus determined by theManaging Partners in their discretion. Mr. Donnelly’s annual target bonus was 170% of his base salary. During his employment, Mr. Donnelly was eligible toparticipate in our employee benefit plans as in effect from time to time. In accordance with the separation letter, Mr. Donnelly remained our chief financialofficer until August 14, 2012 and thereafter served as a senior advisor, assisting us in the transition of his previous responsibilities to his successor, untilDecember 31, 2012. Consistent with the separation letter, Mr. Donnelly received a payment of $1,487,500 for services performed on or before December 31,2012, and vested in 25% of his RSUs that remained unvested as of December 31, 2012. Pursuant to his separation letter and employment agreement,Mr. Donnelly is required to protect the confidential information of Apollo after employment. In addition, Mr. Donnelly is required, for 12 months afteremployment, to refrain from soliciting our employees or interfering with our relationships with investors and other business relations, and for six (6) monthsafter employment, to refrain from competing with us in a business that manages or invests in assets substantially similar to those invested in or managed byApollo or its affiliates.Employment, Non-Competition and Non-Solicitation Agreement and Roll-Up Agreement with Managing Director—CreditWe entered into an employment agreement with our Managing Director—Credit, James Zelter, on May 15, 2006. The agreement was amended inconnection with the 2007 Reorganization, when Mr. Zelter entered into a Roll-Up Agreement dated as of July 13, 2007, and this discussion refers to theemployment agreement as so amended. The agreement provides Mr. Zelter with the right to participate in management fee net income and incentive incomeattributable to various funds managed by us. It also entitles Mr. Zelter to dedicated carried interests in one of our private equity funds, which carried interestrights are subject to vesting. A portion of Mr. Zelter’s total annual compensation is payable in the form of a Bonus Grant, as discussed below under the sectionentitled, “Awards of Restricted Share Units Under the Equity Plan.” In connection with the management and incentive income rights provided to him under theemployment agreement, Mr. Zelter is required to make investments of his own capital in various of our funds.In the event of his termination without cause and other than by reason of death or disability, Mr. Zelter will continue to receive payments with respect tocertain funds for one year after his employment termination. Upon his termination by reason of death or disability, without cause, or due to his resignation forgood reason (as these terms are defined in the Roll-Up Agreement), Mr. Zelter will generally vest in additional AOG Units equal to one half of his then-unvestedAOG Units. Upon his termination by reason of death or disability, Mr. Zelter will vest in 50% of his then unvested Bonus Grant RSUs granted after March2011 and 50% of his then unvested special grant RSUs.Mr. Zelter is subject to the restrictive covenants contained in his Roll-Up Agreement, as discussed under “Certain Relationships and Related PartyTransactions—Roll-Up Agreements.”Employment Terms of Chief Legal Officer and Chief Compliance OfficerJohn Suydam, our chief legal officer and chief compliance officer, does not have an employment agreement with us. Pursuant to the RSU awardagreement provided in connection with his Plan Grant, Mr. Suydam is required to protect our confidential information at all times. The Plan Grant agreementalso provides that during his employment and for one year thereafter, Mr. Suydam will refrain from soliciting -254-Table of Contentsour employees, interfering with our relationships with investors or other business relations, and competing with us in a business that manages or invests inassets substantially similar to those invested in or managed by Apollo or its affiliates. If Mr. Suydam’s employment is terminated by reason of death ordisability, he will vest in 50% of his then unvested Bonus Grant RSUs granted after March 2011 and 50% of his then unvested Plan Grant RSUs. If hisemployment is terminated without cause or due to his resignation for good reason, Mr. Suydam will vest in 50% of his then unvested Plan Grant RSUs.Employment, Non-Competition and Non-Solicitation Agreement with Managing Director—Real EstateOn June 1, 2012, we amended and restated the employment, non-competition and non-solicitation agreement with Joseph Azrack. Pursuant to theagreement, Mr. Azrack transitioned from being Managing Partner of AGRE to its Chairman, effective January 1, 2013, whereupon he ceased to be one of ourexecutive officers. Under the amended agreement, Mr. Azrack’s annual base pay while serving as Managing Partner of AGRE was increased from $500,000 to$1,000,000 for the balance of 2012 in acknowledgement of his level of responsibility in that role. His annual base pay as Chairman of AGRE is $350,000.Mr. Azrack is also entitled to carried interests with respect to various real estate funds or investments that we manage. During his employment, Mr. Azrack iseligible to participate in our employee benefit plans as in effect from time to time.We may terminate Mr. Azrack’s employment without cause on 30 days’ written notice. No notice is required if his employment is terminated for cause. IfMr. Azrack remains employed with us through December 31, 2013 or his employment is terminated before that date without cause or by him for good reason,grants of our RSUs made to him prior to 2012 will vest immediately, our RSU grant made to him in 2012 will be vested as if his employment had terminatedon December 31, 2013, and we will recommend that grants of ARI RSUs made to him prior to 2012 will also vest immediately. Upon his termination byreason of death or disability, Mr. Azrack will vest in 50% of the RSUs that are then unvested under his 2011 special grant. In addition, if Mr. Azrack remainsemployed on December 31, 2013 or his employment is terminated without cause or he resigns for good reason prior to that date, his carried interest in AGREU.S. Real Estate Advisors, L.P., the general partner of one of our real estate funds, as of his termination date will be equal to what would have vested had hisemployment terminated on June 30, 2014. However, if he continues to be employed after June 30, 2014, the regular vesting schedule for the carried interestsshall apply and any interests that remain unvested at his termination date shall be forfeited.The agreement entitles Mr. Azrack to up to two additional RSU grants, each to be made on the last day of any calendar quarter in which the aggregateassets under management of our real estate funds reach dollar thresholds set forth in the agreement. Any such additional RSUs shall vest 25% on the firstanniversary of the grant date, and thereafter in equal quarterly installments over the next three years.Mr. Azrack’s agreement requires him to protect our confidential information at all times. It also provides that during his service with us, and for sixmonths after his termination without cause or resignation for good reason (12 months after his termination for any other reason), Mr. Azrack will refrain frominterfering with our relationships with investors or other business relations, soliciting our employees, and competing with us in any entity specified in hisemployment agreement. Until the later of September 30, 2013 or 90 days after he ceases providing services to us, Mr. Azrack is required to refrain fromcompeting with us in any other business that manages or invests in assets substantially similar to those invested in or managed by Apollo or its affiliates.Mr. Azrack may terminate his employment on 30 days’ notice.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 2007 Reorganization, PlanGrants were made to Mr. Suydam and a broad range of our other employees. Plan Grants have also been made to subsequent hires, including Messrs. Kelly,Donnelly and Azrack. The Plan Grants generally vest over six years (although Mr. Azrack’s Plan Grant vests over three and one-half years), with the firstinstallment becoming vested approximately one year after grant and the balance vesting thereafter in equal quarterly installments. Holders of Plan Grant RSUsbecome entitled to distribution equivalents on their vested RSUs if we pay ordinary distributions on our outstanding Class A shares. Once vested, the Class Ashares -255-Table of Contentsunderlying Plan Grants granted prior to 2012 generally are issued on fixed dates, with 7.5% of the shares generally issued once each year over a four-yearperiod and the remaining 70% issued in seven equal quarterly installments commencing in the fifth year. Vested Class A shares underlying Plan Grants issuedin 2012 are generally issuable by March 15th after the year in which they vest. The administrator of the 2007 Omnibus Equity Incentive Plan determineswhen shares issued pursuant to the RSU awards may be disposed of, except that a participant will generally be permitted to sell shares if necessary to covertaxes. In 2012, all named executive officers were required to retain at least 85% of any Class A shares issued to them pursuant to RSU awards (net of anassumed rate of 50% of gross shares sold or netted to pay applicable income or employment taxes).During the restricted period set forth in a participant’s award agreement evidencing his Plan Grant (or, for Messrs. Kelly and Donnelly, his employmentagreement), the participant will not (i) engage in any business activity in which the Company operates, (ii) render any services to any competitive business or(iii) acquire a financial interest in, or become actively involved with, any competitive business (other than as a passive holding of less than a specifiedpercentage of publicly traded companies). In addition, the grant recipient will be subject to non-solicitation, non-hire and non-interference covenants duringemployment and for a specified period thereafter. Each grant recipient is generally also bound to a non-disparagement covenant with respect to us and theManaging Partners and to confidentiality restrictions. Any resignation by a grant recipient shall generally require at least 90 days’ notice. Any restricted periodapplicable to the grant recipient 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 ofour investors by requiring RSU holders to abide by the provisions regarding non-competition, confidentiality and other limitations on behavior described inthe immediately preceding paragraph.In 2012 we also awarded special RSU grants to each of Messrs. Zelter and Azrack. Mr. Zelter’s grant was made by our Managing Partners in theirdiscretion based on their determination that his contributions merited such grant and Mr. Azrack’s grant was awarded in accordance with the terms of hisemployment 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. Kelly, Donnelly and Suydam, subject to the employee’s continuedservice through 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. • Distribution equivalents are earned on Bonus Grant RSUs (whether or not vested) when ordinary distributions are made on Class A shares afterthe grant date, but distribution equivalents are earned on Plan Grant RSUs only after they have vested. • Bonus Grants generally do not contain restrictive covenants (however, an individual who has received both a Plan Grant and a Bonus Grantremains subject to the restrictive covenants contained in his or her Plan Grant).Grants of Plan-Based AwardsThe following table presents information regarding the awards granted to the named executive officers under a plan in 2012. All such awards weregranted under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan. No options were granted to a named executive officer in 2012. -256-Table of ContentsName Award Grant Date StockAwards:Number ofShares ofStock orUnits Grant DateFair Value ofStockAwards($) Leon Black — — — — Martin Kelly Bonus Grant RSUs December 28, 2012 27,033 442,530 Plan Grant RSUs September 30, 2012 375,000 4,245,000 Gene Donnelly Various RSUs — 94,179 1,556,592 James Zelter Bonus Grant RSUs April 5, 2012 54,902 645,099 Special Grant RSUs December 28, 2012 148,016 1,961,212 John Suydam Bonus Grant RSUs December 28, 2012 30,343 496,715 Joseph Azrack Special Grant RSUs June 30, 2012 204,166 1,994,702 (1)Represents the aggregate number of RSUs covering our Class A shares (none of the Bonus Grants awarded in 2012 vested in 2012 except for Mr. Zelter’sApril 5, 2012 Bonus Grant, the first vesting date for which was December 31, 2012). For a discussion of these grants, please see the discussion aboveunder “—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Awards of Restricted Share UnitsUnder the Equity Plan.” One sixth of Mr. Zelter’s special RSU grant vests on December 31, 2013 and the balance vests in twenty substantially equalquarterly installments thereafter. Mr. Azrack’s special RSU grant vests in equal installments on the last day of the 12 calendar quarters that beginMarch 31, 2013.(2)Represents the number of RSUs granted to Mr. Donnelly prior to 2012 for which vesting was accelerated in 2012 pursuant to Mr. Donnelly’s separationagreement.(3)Represents the aggregate grant date fair value of the RSUs granted in 2012, computed in accordance with FASB ASC Topic 718. The amount showndoes not reflect compensation actually received, but instead represents the aggregate grant date fair value of the award.(4)Represents the incremental fair value for accounting purposes, computed in accordance with FASB ASC Topic 718, of the vesting on December 31,2012 of 25% of Mr. Donnelly’s unvested RSUs that had been granted in prior years, in accordance with his separation agreement. Mr. Donnelly did notreceive a new grant of RSUs in 2012.Outstanding 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, 2012. Stock Awards Name Source of Award Number of UnearnedShares, Units orOther Rights ThatHave Not Vested Market or Payout Value of UnearnedShares, Units or Other RightsThat Have Not Vested($) Leon Black — — — Martin Kelly 2007 Omnibus Equity 375,000 6,510,000 Incentive Plan 27,033 469,293 Gene Donnelly — — — James Zelter AOG Units 200,160 3,474,778 2007 Omnibus Equity 148,016 2,569,558 Incentive Plan 51,023 885,759 36,602 635,411 John Suydam 2007 Omnibus Equity 95,487 1,657,654 Incentive Plan 21,355 370,723 27,710 481,046 30,343 526,754 Joseph Azrack 2007 Omnibus Equity 204,166 3,544,322 Incentive Plan 46,719 811,042 204,166 3,544,322 -257-(1)(3)(1)(3)(2)(4)(1)(3)(1)(3)(1)(3)(1)(3)(11)(1)(12)(2)(12)(13)(3)(14)(4)(12)(5)(12)(6)(12)(7)(12)(5)(12)(8)(12)(2)(12)(8)(12)(9)(12)(10)(12)Table of Contents(1)Plan Grant RSUs, one sixth of which vest on September 30, 2013, with the balance vesting in substantially equal installments over the next 20 calendarquarters.(2)Bonus Grant RSUs that vest in substantially equal annual installments on December 31 of each of 2013, 2014 and 2015.(3)AOG Units that vest in six substantially equal monthly installments beginning January 31, 2013.(4)Special grant RSUs, one sixth of which vest on December 31, 2013, with the balance vesting in substantially equal installments over the next 20calendar quarters.(5)Bonus Grant RSUs that vest on December 31, 2013.(6)Bonus Grant RSUs that vest in equal annual installments on December 31 of each of 2013 and 2014.(7)Plan Grant RSUs that vest in equal installments on March 31, 2013 and June 30, 2013.(8)Special grant RSUs, one quarter of which vest on March 31, 2013, with the balance vesting in substantially equal installments over the next 12calendar quarters.(9)Bonus Grant RSUs that vest on December 31, 2013.(10)Special grant RSUs that vest in four equal quarterly installments beginning March 31, 2013.(11)Mr. Black vested in all of his AOG Units on December 31, 2012 in accordance with their vesting schedule.(12)Amounts calculated by multiplying the number of unvested RSUs held by the named executive officer by the closing price of $17.36 per Class A shareon December 31, 2012.(13)In connection with his December 31, 2012 employment termination, Mr. Donnelly vested in 94,179 RSUs and forfeited his 282,537 RSUs that hadnot vested.(14)Amounts calculated by multiplying the number of unvested AOG Units held by Mr. Zelter by the closing price of $17.36 per Class A share onDecember 31, 2012.Option Exercises and Stock VestedThe following table presents information regarding the number of outstanding initially unvested RSUs made to our named executive officers that vestedduring 2012. The amounts shown below do not reflect compensation actually received by the named executive officers, but instead are calculations of thenumber of RSUs or AOG Units that vested during 2012 based on the closing price of our Class A shares on the date of vesting. Stock Awards Name Type of Award Number of SharesAcquired on Vesting Value Realized on Vesting($) Leon Black AOG Units 15,663,846 221,262,568Martin Kelly — — — Gene Donnelly RSUs 243,372 3,911,137James Zelter AOG Units 400,320 5,647,514 RSUs 114,899 1,994,647John Suydam RSUs 254,654 3,908,034Joseph Azrack RSUs 391,247 6,004,048 (1)Amounts calculated by multiplying the number of AOG Units beneficially held by the named executive officer that vested on each month-end vestingdate in 2012 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 2012 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 a named executive officer in 2012.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. -258-(3)(1)(2)(1)(2)(2)(2)Table of ContentsMr. 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 vested in his interest in AOG Units in equal monthly installments over the 72-month periodthat concluded on December 31, 2012. We may not terminate Mr. Black except for cause or by reason of disability (as such terms are defined in hisemployment agreement).If Mr. Kelly’s employment is terminated by us without cause or he resigns for good reason, we will pay him the balance of the 2013 minimum annualbonus not yet paid. If such termination or resignation occurs after the payment of the 2013 annual bonus, Mr. Kelly will be entitled to severance of six months’base pay and reimbursement of health insurance premiums paid in the six months following his employment termination. If Mr. Kelly’s employment isterminated by us without cause or he resigns for good reason, or his employment is terminated by reason of death or disability, he will vest in 50% of anyunvested portion of his Plan Grant RSUs. If his employment is terminated by reason of death or disability, he will vest in 50% of any unvested portion of hisBonus Grant RSUs.On July 2, 2012, Mr. Donnelly entered into a separation letter entitling him, if he remained employed until December 31, 2012, to a one-time bonus of$1,487,500 in January 2013, and to immediate vesting in 25% of his outstanding RSUs that remained unvested as of that date.Upon his termination without cause and other than by reason of death or disability, Mr. Zelter will continue to receive payments with respect to certainfunds for one year after his employment termination. Upon his termination by reason of death or disability, without cause, or due to his resignation for goodreason, Mr. Zelter will generally vest in additional AOG Units equal to one half of his then-unvested AOG Units. Upon his termination by reason of death ordisability, Mr. Zelter will vest in 50% of his then unvested Bonus Grant RSUs granted after March 2011 and 50% of his then unvested special grant RSUs.If Mr. Suydam’s employment is terminated by reason of death or disability, he will vest in 50% of his then unvested Bonus Grant RSUs granted afterMarch 2011 and 50% of his then unvested Plan Grant RSUs. If his employment is terminated without cause or due to his resignation for good reason,Mr. Suydam will vest in 50% of his then unvested Plan Grant RSUs.If Mr. Azrack’s employment is terminated before December 31, 2013 without cause or by him for good reason, grants of our RSUs made to him prior to2012 will vest immediately, our RSU grant made to him in 2012 will be vested as if his employment had terminated on December 31, 2013, and we willrecommend that grants of ARI RSUs made to him prior to 2012 will also vest immediately. Upon his termination by reason of death or disability, Mr. Azrackwill vest in 50% of the RSUs that are then unvested under his 2011 special grant. In addition, if Mr. Azrack’s employment is terminated without cause or heresigns for good reason prior to December 31, 2013, his carried interest in AGRE U.S. Real Estate Advisors, L.P. as of his termination, if any, will be vestedto the extent it would have been had had his employment terminated on June 30, 2014.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 shows the actual amount that became payable to Mr. Donnelly in connection with his separation from employment effective December 31, 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, 2012 and that the price per share of our common stock was $17.36, which is equal to the closing price on suchdate. For purposes of this table, RSU and option acceleration values are based on the $17.36 closing price. -259-Table of ContentsName Reason for EmploymentTermination Estimated Valueof CashPayments($) Estimated Valueof EquityAcceleration($) Leon Black Cause — — Death, disability — — Martin Kelly Without cause; by executive for good reason 1,500,000 3,255,000 Death, disability — 3,489,646 Gene Donnelly Actual termination effective December 31, 2012 1,487,500 1,634,947 James Zelter Without cause; by executive for good reason 3,128,688 1,737,389 Death; disability — 3,339,873 John Suydam Without cause; by executive for good reason — 828,827 Death; disability — 1,332,727 Joseph Azrack Without cause; by executive for good reason — 4,444,686 Death, disability — 1,772,161 (1)This amount would have been payable to Mr. Kelly 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, 2012.(2)This amount became payable to Mr. Donnelly in connection with his actual employment termination on December 31, 2012.(3)Pursuant to Mr. Zelter’s employment agreement, had his employment terminated on December 31, 2012, he would have been entitled to be treated as if hehad remained employed, for purposes of receiving distributions in respect of certain funds, for 12 additional months. The value of any such futuredistributions is unknowable at this time, so we have assumed, for purposes of determining the value of this right, that such distributions are equal tothose earned for 2012 from the applicable funds.(4)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, 2012, based on the closing price of a Class A shareon such date. Please see our “Outstanding Equity Awards at Fiscal Year-End” table above for information regarding the named executive officer’sunvested equity as of December 31, 2012.(5)This amount represents the additional equity vesting that Mr. Donnelly received upon his actual employment termination on December 31, 2012, basedon the closing price of a Class A share on such date. Upon his employment termination, Mr. Donnelly forfeited his 282,537 RSUs that had not vested.(6)This amount represents the additional equity vesting that Mr. Zelter would have received had his employment terminated in the circumstances describedin the column, “Reason for Employment Termination,” on December 31, 2012, based on the closing price of a Class A share on such date. Please seeour “Outstanding Equity Awards at Fiscal Year-End” table above for information regarding his unvested equity as of December 31, 2012.Director CompensationWe do not pay additional remuneration to our employees, including Mr. Black, for their service on our board of directors. The 2012 compensation ofMr. Black is set forth above on the Summary Compensation Table.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 (incremental to the fee described in (2)) if he or she serves as the chairperson of the audit -260-(1)(4)(4)(2)(5)(3)(6)(4)(4)(4)(4)(4)Table of Contentscommittee, and (5) an additional annual director fee of $15,000 (incremental to the fee described in (3)) if he or she serves as the chairperson of the conflictscommittee.The following table provides the compensation for our independent directors during the year ended December 31, 2012. The directors received no equityawards in 2012. Name Fees Earned or Paid inCash Stock Awards Total Michael Ducey $150,000 — $150,000 Paul Fribourg $110,000 — $110,000 A. B. Krongard $125,000 — $125,000 Pauline Richards $150,000 — $150,000 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 February 26, 2013 by (i) each personknown to us to beneficially own more than 5% of the voting Class A shares of Apollo Global Management, LLC, (ii) each of our directors, (iii) each personwho is a named executive officer for 2012 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 solevoting and 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, exceptas otherwise set forth in the notes to the table and pursuant to applicable community property laws. Unless otherwise indicated, the address of each personnamed in the table is c/o Apollo Global 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 AOG Units for our Class A shares with respectto which the person listed below has the right to direct such exchange pursuant to the exchange agreement described under “Item 13. Certain Relationships andRelated Party Transactions—Exchange Agreement,” and the distribution of such shares to such person as a limited partner of Holdings. -261-Table of Contents Class A Shares Beneficially Owned Class B Share Beneficially Owned Number ofShares Percent TotalPercentageof VotingPower Number ofShares Percent TotalPercentageof VotingPower Directors and Executive Officers: Leon Black 92,727,166 41.2% 76.9% 1 100% 76.9% Joshua Harris 59,008,262 30.9% 76.9% 1 100% 76.9% Marc Rowan 59,008,262 30.9% 76.9% 1 100% 76.9% Pauline Richards 6,181 * * — — — Alvin Bernard Krongard 256,181 * * — — — Michael Ducey 10,481 * * — — — Paul Fribourg 25,181 * * — — — Martin Kelly — — — — — — Gene Donnelly 292,918 * * — — — Joseph Azrack 287,244 * * — — — John Suydam 412,446 * * — — — James Zelter 2,816,159 2.1% * — — — All directors and executive officers as a group (twelve persons) 216,874,128 62.5% 69.1% 1 100% 76.9% BRH — — — 1 100% 76.9% AP Professional Holdings, L.P. 240,000,000 64.5% 76.9% — — — 5% Stockholders: Waddell & Reed Financial, Inc. 15,140,260 11.5% 4.9% — — — Fidelity Management & Research Company 7,287,097 5.5% 2.3% — — — *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.(3)The shares beneficially owned by the directors and executive officers reflected above do not include the following number of Class A shares that will bedelivered to the respective individual more than 60 days after February 26, 2013 in settlement of vested restricted share units: Gene Donnelly—268,624; Joseph Azrack—1,006,771; John Suydam—792,535; and all directors and executive officers as a group – 1,413,368.(4)The number of Class A shares presented are held by estate planning vehicles, for which this individual disclaims beneficial ownership except to theextent of his pecuniary interest therein. The number of Class A shares presented do not include any Class A shares owned by Holdings with respect towhich 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 AmongManaging Partners described under “Item 13. Certain Relationships and Related Party Transactions—Agreement Among Managing Partners” or theManaging Partner Shareholders Agreement described under “Item 13. Certain Relationships and Related Party Transactions—Managing PartnerShareholders Agreement,” may be deemed to have shared voting or dispositive power. Each of these individuals disclaims any beneficial ownership ofthese shares, except to the extent of his pecuniary interest therein.(5)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 of by BRH based on the determination of at least two of thethree Managing Partners; as such, they share voting and dispositive power with respect to the Class B share.(6)On August 14, 2012, Mr. Donnelly ceased to be the Chief Financial Officer of the Company and on December 31, 2012, Mr. Donnelly’s employmentwith the Company and its subsidiaries terminated.(7)Includes 49,827 Class A shares held by a trust for the benefit of Mr. Suydam’s spouse and children, for which Mr. Suydam’s spouse is the trustee.Mr. Suydam disclaims beneficial ownership with respect to such shares, except to the extent of his pecuniary interest therein.(8)Includes 879,103 Class A shares held by a trust for the benefit of certain of Mr. Zelter’s family members, for which Mr. Zelter is a trustee. Mr. Zelterdisclaims beneficial ownership with respect to such shares, except to the extent of his pecuniary interest therein.(9)Refers to shares beneficially owned by the individuals who were directors and executive officers as of February 26, 2013.(10)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 indirectly beneficially own (through estate planning vehicles)their limited partner interests in AP Professional Holdings, L.P. These individuals disclaim any beneficial ownership of these Class A shares, except tothe extent of their pecuniary interest therein.(11)Based on a Schedule 13G/A filed on February 7, 2013 by Waddell & Reed Financial, Inc. (“WDR”), Ivy Investment Management Company (“IICO”),Waddell & Reed Investment Management Company (“WRIMCO”), Waddell & Reed, Inc. (“WRI”) and Waddell & Reed Financial Services, Inc.(“WRFSI”) as joint reporting persons. These shares are beneficially owned by one or more open-end investment companies or other managed accountsthat are advised or sub-advised by IICO, an investment advisory subsidiary of WDR or WRIMCO, an investment advisory subsidiary of WRI. WRI isa broker-dealer and underwriting subsidiary of WRFSI, a parent holding company. In turn, WRFSI is a subsidiary of WDR, a publicly tradedcompany. The investment advisory contracts grant IICO and WRIMCO all investment and/or voting power over securities owned by such advisoryclients. The investment sub-advisory contracts grant IICO and WRIMCO investment power over securities owned by such sub-advisory clients and, inmost cases, voting power. Any investment restriction of a sub-advisory contract does not restrict investment discretion or power in a material manner Asof December 31, 2012, WDR indirectly has sole voting and dispositive power over 15,140,260 Class A shares; WRFSI indirectly has sole voting anddispositive power over 2,180,720 of -262-(1)(2)(2)(3)(4)(5)(4)(5)(4)(5)(6)(7)(8)(9)(5)(10)(11)(12)Table of Contents the Class A shares; WRI indirectly has sole voting and dispositive power over 2,180,720 of the Class A shares; WRIMCO directly has sole voting anddispositive power over 2,180,720 of the Class A shares and IICO directly has sole voting and dispositive power over 12,959,540 of the Class Ashares. The address of the beneficial owners is 6300 Lamar Avenue, Overland Park, KS 66202.(12)Based on a Schedule 13G/A filed on February 14, 2013 by FMR LLC and Edward C. Johnson 3d as joint reporting persons. Fidelity Management &Research Company (“Fidelity”), a wholly owned subsidiary of FMR LLC, is the beneficial owner of 7,287,097 of the Class A shares as a result ofacting as investment adviser to various investment companies. FMR LLC and Edward C. Johnson 3d, through their control of Fidelity and its funds,have sole power to dispose of the 7,287,097 shares owned by the Fidelity funds. Neither FMR LLC nor Edward C. Johnson 3d has the sole power tovote or direct the voting of the shares owned directly by the Fidelity funds, which power resides with the funds’ Boards of Trustees. Fidelity carries outthe voting of the shares under written guidelines established by the funds’ Boards of Trustees. The address of the beneficial owner is 82 DevonshireStreet, Boston, MA 02109.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, 2012. 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 42,512,404 $8.44 39,558,144 Equity Compensation Plans Not Approved by SecurityHolders — — — Total 42,512,404 $8.44 39,558,144 (1)Reflects the aggregate number of outstanding options and RSUs granted under the Company’s 2007 Omnibus Equity Incentive Plan (the “Equity Plan”)as of December 31, 2012.(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 AOG Units exchangeable for Class A shares on a fully converted and diluted basis on the last day of theimmediately preceding fiscal year exceeds (b) the number of shares then reserved and available for issuance under the Equity Plan, or (ii) such lesseramount by which the administrator may decide to increase the number of Class A shares. The number of shares reserved under the Equity Plan is alsosubject 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 awards under the Equity Plan will be available for future awards. We have filed a registration statement andintend to file additional registration statements on Form S-8 under the Securities Act to register Class A shares under the Equity Plan (including pursuantto automatic 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 PecuniaryInterest (as defined below) in the AOG Units that he holds indirectly through Holdings would be subject to vesting. The Managing Partners own Holdings inaccordance 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 AOG Units that would bedistributable to such Managing Partner assuming that Holdings was liquidated and its assets distributed in accordance with its governing agreements.Pursuant to the Agreement Among Managing Partners, each of Messrs. Harris and Rowan vested in his interest in the AOG Units in 60 equalmonthly installments, and Mr. Black vested in his interest in the AOG Units in 72 equal monthly installments. Although the Agreement Among ManagingPartners was entered into on July 13, 2007, for purposes of its vesting provisions, our Managing Partners were credited for their employment with us sinceJanuary 1, 2007. We may not terminate a Managing Partner except for cause or by reason of disability. -263-Table of ContentsThe transfer by a Managing Partner of any portion of his Pecuniary Interest to a permitted transferee will in no way affect any of his obligationsunder the Agreement Among Managing Partners; provided, that all permitted transferees are required to sign a joinder to the Agreement Among ManagingPartners.The Managing Partners’ respective Pecuniary Interests in certain funds, or the “Heritage Funds,” within the Apollo Operating Group are not heldin accordance with the Managing Partners’ respective Sharing Percentages. Instead, each Managing Partner’s Pecuniary Interest in such Heritage Funds is heldin accordance with the historic ownership arrangements among the Managing Partners, and the Managing Partners continue to share the operating income insuch Heritage 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 bechanged or modified upon the unanimous approval of the Managing Partners. We, our shareholders (other than the Strategic Investors, as set forth under “—Lenders Rights Agreement—Amendments to Managing Partner Transfer Restrictions”) and the Apollo Operating Group have no ability to enforce anyprovision thereof or to prevent the Managing Partners from amending the Agreement Among Managing Partners.The Managing Partners differ on the interpretation of a provision in the Agreement Among Managing Partners regarding benefits provided by theCompany to the Managing Partners. The amounts involved are not material.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. -264-Table of ContentsBoard 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 cumulativetransfers of 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 the Apollo Operating Group, or any other person exercising control over us or the Apollo OperatingGroup by contract, which would include a transfer of control of our manager.The percentages referenced in the preceding paragraph will apply to the aggregate amount of Equity Interests held by each Managing Partner (andhis permitted 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) alineal descendant of such Managing Partner’s parents (or any such descendant’s spouse), (iii) a charitable institution controlled by such Managing Partner,(iv) a trustee of a trust (whether inter vivos or testamentary), the current beneficiaries and presumptive remaindermen of which are one or more of suchManaging Partner and persons described in clauses (i) through (iii) above, (v) a corporation, limited liability company or partnership, of which all of theoutstanding shares 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) an individual mandated under a qualified domestic relations order, (vii) a legal or personal representative of such Managing Partner in the eventof his death or disability, (viii) any other Managing Partner with respect to transactions contemplated by the Managing Partner Shareholders Agreement, and(ix) any other Managing Partner who is then employed by Apollo or any of its affiliates or any permitted transferee of such Managing Partner in respect of anytransaction not contemplated by the Managing Partner Shareholders Agreement, in each case that agrees in writing to be bound by these transfer restrictions. -265-Table of ContentsAny waiver of the above transfer restrictions may only occur with our consent. As our Managing Partners control the management of ourcompany, however, they have discretion to cause us to grant one or more such waivers. Accordingly, the above transfer restrictions might not be effective inpreventing our 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 subsidiaries of the ApolloOperating Group that act as general partner of the funds in the event that certain specified return thresholds are not ultimately achieved. The ManagingPartners, Contributing Partners and certain other investment professionals have personally guaranteed, subject to certain limitations, the obligations of thesesubsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to a particular Managing Partner’s orContributing Partner’s distributions. Pursuant to the Managing Partner Shareholders Agreement, we agreed to indemnify each of our Managing Partners andcertain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of Fund 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 ourManaging 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 other investment professionals are required to payamounts in connection with a general partner obligation for the return of previously made distributions with respect to Fund IV, Fund V and Fund VI, we willbe obligated to reimburse our Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to payeven though we did 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 andContributing Partners own their Apollo Operating Group units, and its permitted transferees the right, under certain circumstances and subject to certainrestrictions, to require us to register under the Securities Act our Class A shares held or acquired by them. Under the Managing Partner ShareholdersAgreement, the registration rights holders (i) will have “demand” registration rights, exercisable two years after the registration effectiveness date, but unlimitedin number thereafter, which require us to register under the Securities Act the Class A shares that they hold or acquire, (ii) may require us to make availableregistration statements permitting sales of Class A shares they hold or acquire in the market from time to time over an extended period and (iii) have the abilityto exercise certain piggyback registration rights in connection with registered offerings requested by other registration rights holders or initiated by us. We haveagreed to indemnify each registration rights holders and certain related parties against any losses or damages resulting from any untrue statement or omissionof material fact in any registration statement or prospectus pursuant to which they sell our shares, unless such liability arose from such holder’s misstatementor omission, 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 exchangefor their contribution of assets to the Apollo Operating Group. The Holdings Units received by our Contributing Partners and any units into which they areexchanged 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 Holdings Units will become tradable on each of the second, third, fourth andfifth anniversaries of the registration effectiveness date, with the remaining Holdings Units becoming tradable on the sixth anniversary of the registration -266-Table of Contentseffectiveness 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 isstill providing 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 hisservice as 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 fifthanniversary of 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 anniversaryof the date of his Roll-Up Agreement. During that period, our Contributing Partners will be prohibited from (i) engaging in any business activity that weoperate in, (ii) rendering any services to any alternative asset management business (other than that of us or our affiliates) that involves primarily (i.e., morethan 50%) third-party capital or (iii) acquiring a financial interest in, or becoming actively involved with, any competitive business (other than as a passiveholding of a specified percentage of publicly traded companies). In addition, our Contributing Partners are subject to nonsolicitation, nonhire andnoninterference covenants during employment and for two years thereafter. Our Contributing Partners are also bound to a nondisparagement covenant withrespect to us and our Contributing Partners and to confidentiality restrictions. Any resignation by any of our Contributing Partners shall require ninety 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 vestingschedules applicable to our Managing Partners and any applicable transfer restrictions and lock-up agreements described above) upon 60 days’ written noticeprior to a designated quarterly date, each Managing Partner and Contributing Partner (or certain transferees thereof) has the right to cause Holdings to exchangethe AOG 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 price thatsuch 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 AOG Unit (being an equal limited partner interest in each Apollo Operating Group entity) for each Class A share received from our intermediateholding companies. As a Managing Partner or Contributing Partner exchanges his AOG Units, our interest in the AOG Units will be correspondingly increasedand 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 AOG Units at suchtime to sell AOG Units to us, provided that the aggregate amount of designated quarterly dates for exchanges and such opportunities for the sale of such unitsmay not exceed four. We will use an independent, third-party valuation expert for purposes of determining the purchase price of any such purchases of AOGUnits.Tax Receivable AgreementWith respect to any exchange by a Managing Partner or Contributing Partner of AOG Units (together with the corresponding interest in our ClassB share) that he owns through Holdings for our Class A shares in a taxable transaction, each of AMH Holdings (Cayman), L.P. and the Apollo OperatingGroup entities controlled by it or Apollo Management Holdings, L.P. has made or will make an election under Section 754 of the Internal Revenue Code, whichmay result 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 exchangesmay result in increases in the tax depreciation and amortization deductions from depreciable and amortizable assets, as well as an increase in the tax basis ofother assets, 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 AOG Units from the Managing Partners or Contributing Partners, such as our acquisition -267-Table of Contentsof AOG Units from the Managing Partners in the Strategic Investors Transaction, may result in increases in tax deductions and tax basis that reduces theamount 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 byAPO Corp. 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,local and 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,as discussed 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 that 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 the amount of suchtaxes 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 the applicable ApolloOperating Group entity as a result of the transaction and had APO Corp. not entered into the tax receivable agreement. The tax savings achieved may not ensurethat we have sufficient cash available to pay our tax liability or generate additional distributions to our investors. Also, we may need to incur additional debt torepay the tax receivable agreement if our cash flows are not met. The term of the tax receivable agreement will continue until all such tax benefits have beenutilized or expired, unless APO Corp. exercises the right to terminate the tax receivable agreement by paying an amount based on the present value of paymentsremaining to be made under the agreement with respect to units that have been exchanged or sold and units which have not yet been exchanged or sold. Suchpresent value will be determined based on certain assumptions, including that APO Corp. would have sufficient taxable income to fully utilize the deductionsthat would have arisen from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. No payments willbe made if a Managing Partner or Contributing Partner elects to exchange his or her AOG Units in a tax-free transaction. In the event that other of our current orfuture subsidiaries become taxable as corporations and acquire AOG Units in the future, or if we become taxable as a corporation for U.S. Federal income taxpurposes, each will become subject to a tax receivable agreement with substantially similar terms. In connection with an amendment of the AMH partnershipagreement in April 2010, the tax receivable agreement was revised to reflect the Managing Partners’ agreement to defer 25% of required payments pursuant tothe tax receivable agreement that are attributable to the 2010 fiscal year for a period of four years.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 theexchanges entered into by the Managing Partners or Contributing Partners. The IRS could also challenge any additional tax depreciation and amortizationdeductions or other 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 basisincrease or tax benefits we previously claimed from a tax basis increase, our Managing Partners and Contributing Partners would not be obligated under the taxreceivable agreement to reimburse APO Corp. for any payments previously made to it (although future payments would be adjusted to reflect the result of suchchallenge). As a result, in certain circumstances, payments could be made to our Managing Partners and Contributing Partners under the tax receivableagreement in excess of 85% of APO Corp.’s actual cash tax savings. In general, estimating the amount of payments that may be made to our ManagingPartners and Contributing Partners under the tax receivable agreement is by its nature, imprecise, in the absence of an actual transaction, insofar as thecalculation of amounts payable depends on a variety of factors. The actual increase in tax basis and the amount and timing of any payments under the taxreceivable agreement will vary depending 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, whichmay fluctuate over 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 inother assets, of the Apollo Operating Group entities, is directly proportional to the price of the Class A shares at the time of thetransaction; -268-Table of Contents • 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. IfAPO Corp. does not have taxable income, it is not required to make payments under the tax receivable agreement for that taxableyear because no tax savings were actually realized.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. As noted above, no payments will be made if aManaging Partner or Contributing Partner elects to exchange his or her AOG 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 theirAOG Units for an aggregate purchase price of $1,068 million, and to purchase from our Contributing Partners a portion of their points for an aggregatepurchase price of $156 million. The Strategic Investors hold non-voting Class A shares, which represented 46.1% of our issued and outstanding Class Ashares and 16.2% of the economic interest in the Apollo Operating Group, in each case as of December 31, 2012.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 otherfees 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 periodas required 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. Through December 31, 2012, the Company has reduced fees charged to CalPERS on the funds it manages byapproximately $66.9 million.Lenders Rights AgreementIn connection with the Strategic Investors Transaction, we entered into a shareholders agreement, or the “Lenders Rights Agreement,” with theStrategic Investors.Transfer RestrictionsExcept in connection with the drag-along covenants provided for in the Lenders Rights Agreement, prior to the second anniversary of theregistration effectiveness date, each Strategic Investor may not transfer its rights, other than to an “Investor Permitted Transferee,” as defined below, withoutthe prior written 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 forthbelow during the relevant periods identified: -269-Table of ContentsPeriod MaximumCumulativeAmount Registration Effectiveness Date – 2nd anniversary of the Registration EffectivenessDate 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% 5th anniversary of Registration Effectiveness Date (and thereafter) 100% Notwithstanding the foregoing, at no time following the registration effectiveness date may a Strategic Investor make a transfer representing 2% ormore of 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, orcertain of its affiliates 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 ManagingPartners.Apollo Operating Group Limited Partnership AgreementsPursuant to the partnership agreements of the Apollo Operating Group partnerships, the wholly-owned subsidiaries of Apollo Global Management,LLC that are the general partners of those partnerships have the right to determine when distributions will be made to the partners of the Apollo OperatingGroup and the amount of any such distributions. If a distribution is authorized, such distribution will be made to the partners of Apollo Operating Group prorata in accordance with their respective partnership interests.The partnership agreements of the Apollo Operating Group partnerships also provide that substantially all of our expenses, includingsubstantially all expenses solely incurred by or attributable to Apollo Global Management, LLC (such as expenses incurred in connection with the PrivateOffering Transactions), 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.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 feerevenue that is due from the funds and instead receive a right to a proportionate interest in future distributions of profits of those funds. This election allowscertain executive officers and other professionals 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 the participatingindividuals. The investment period for Fund VII and ANRP for the management fee waiver plan was terminated as of December 31, 2012. -270-Table of ContentsEmployment ArrangementsPlease see the section entitled “Item 11. Executive Compensation—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table” for a description of the employment agreements of our named executive officers who have employment agreements.In addition, Joshua M. Black, a son of Leon Black, is employed by the Company as an Associate in the Company’s private equity business. Heis entitled to receive a base salary, incentive compensation and other employee benefits that are offered to similarly situated employees of the Company. He isalso eligible to receive an annual performance-based bonus in an amount determined by the Company in its discretion.ReimbursementsIn the normal course of business, our personnel have made use of aircraft owned as personal assets by Messrs. Black and Rowan. Messrs. Blackand Rowan 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 totaled $1,219,890 and $2,053,580 for 2012for Mr. Black and Mr. Rowan, respectively (which amounts exclude fixed costs of operating the aircraft). In addition, Mr. Harris makes business andpersonal use of various aircraft in which we have fractional interests, and pays the contractual cost of his personal usage. Mr. Harris paid $525,761 for thispersonal usage in 2012. We also have fractional interests in an aircraft owned by Heliflite Shares, LLC (“Heliflite”). For 2012, Mr. Harris paid Heliflite$95,377 for his use of this aircraft, and we paid Heliflite $300,457 for its use by individuals other than Mr. Harris. Mr. Spilker, our President, has anapproximately 21% indirect ownership interest in Heliflite and serves as a member of its board of directors.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 in our funds, and in general, such investments are not subject to management fees, and in certain instances, may not be subject to carried interest.The opportunity to invest in our funds is available to all of the senior Apollo professionals and to those of our employees whom we have determined to have astatus that reasonably permits us to offer them these types of investments in compliance with applicable laws. From our inception through December 31,2012, 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 2012 was$46,868, $1,671,679, $97,631, $2,500,851, $977,358, and $605,857, for Messrs Black, Rowan, Harris, Zelter, Suydam, and Giarraputo,respectively. The amount of distributions, including profits and return of capital to our directors and executive officers (and their estate planning vehicles)during 2012 was $88,449,682, $26,233,366, $32,969,759, $14,964,478, $3,043,697, and $1,598,657, for Messrs Black, Rowan, Harris, Zelter,Suydam and Giarraputo.Sub-Advisory Arrangements and Strategic Investment AccountsFrom time to time, we may enter into sub-advisory arrangements with, or establish strategic investment accounts for, our directors and executiveofficers or vehicles they manage. Such arrangements would be approved in advance in accordance with our policy regarding transactions with related persons.In addition, any such sub-advisory arrangement or strategic investment account would be entered into with, or advised by, an Apollo entity serving asinvestment advisor registered under the Investment Advisers Act, 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 andagainst all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlementsor other amounts: our manager; any departing manager; any person who is or was an affiliate of our manager -271-Table of Contentsor any departing manager; any person who is or was a member, partner, tax matters partner, officer, director, employee, agent, fiduciary or trustee of us orour subsidiaries, our manager or any departing manager or any affiliate of us or our subsidiaries, our manager or any departing manager; any person who isor was serving at the request of our manager or any departing manager or any affiliate of our manager or any departing manager as an officer, director,employee, member, partner, agent, fiduciary or trustee of another person; or any person designated by our manager. We have agreed to provide thisindemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in badfaith or engaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Any indemnification under theseprovisions will only be out of our assets. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities,regardless of whether we would have the power to indemnify the 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 requiredto pay in connection with a general partner obligation for the return of previously made carried interest distributions in respect of Fund IV, Fund V and FundVI. See the 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 “relatedperson policy.” Our related person policy requires that a “related person” (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose toour Chief Legal Officer any “related person transaction” (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which wewere or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest)and all material facts with respect thereto. Our Chief Legal Officer will then promptly communicate that information to our manager. No related persontransaction will be consummated without the approval or ratification of the executive committee of our manager or any committee of our board of directorsconsisting exclusively of disinterested directors. It is our policy that persons interested in a related person transaction will recuse themselves from any vote of arelated 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 and we are exempt from the NYSE rules that require that: • our board of directors be comprised of a majority of independent directors; • we establish a compensation committee composed solely of independent directors; and • we establish a nominating and corporate governance committee composed solely of independent directors.While our board of directors is currently comprised of a majority of independent directors, we plan on availing ourselves of the controlledcompany exceptions. Our board of directors has determined that four of our seven directors meet the independence standards under the NYSE and theSEC. These directors are Messrs. Ducey, Fribourg and Krongard and Ms. Richards.At such time that we are no longer deemed a controlled company, our board of directors will take all action necessary to comply with all applicablerules within the applicable time period under the NYSE listing standards. -272-Table of ContentsITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table summarizes the aggregate fees for professional services provided by Deloitte & Touche LLP, the member firms of DeloitteTouche Tohmatsu, and their respective affiliates (collectively, the “Deloitte Entities”) for the years ended December 31, 2012 and 2011: Year EndedDecember 31, 2012 Year EndedDecember 31, 2011 Audit fees $12,100 $6,692 Audit fees for Apollo fund entities 18,470 13,612 Audit-related fees 875 896 Tax fees 1,550 1,505 Tax fees for Apollo fund entities 12,125 5,205 Other fees 775 140 (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 $0.6 million and $0.1 million for the year ended December 31, 2012 and 2011, respectively.(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.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. -273-(1)(1)(2)(2)(3)(4)(3)(4)(5)(5)(2)(2)(6)(6)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 Registration Statementon 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 3.2 tothe 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 and CreditSuisse Securities (USA) LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.8 Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.8 tothe 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)). 10.11 Exchange Agreement, dated as of July 13, 2007, by and among Apollo Global Management, LLC, Apollo Principal Holdings I, L.P., ApolloPrincipal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Management Holdings, L.P. and theApollo Principal Holders (as defined therein), from time to time party thereto (incorporated by reference -274-Table of ContentsExhibitNumber Exhibit Description to Exhibit 10.11 to the Registrant’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 Principal HoldingsIV, L.P., Apollo Management Holdings, L.P. and each Holder defined therein (incorporated by reference to Exhibit 10.12 to the Registrant’sRegistration 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., Apollo CapitalManagement, L.P., Apollo International Management, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P. and AAAHoldings, L.P., as guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated by referenceto 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, dated July 19, 2012 (incorporated by reference to Exhibit 10.43 to the Registrant’s Form 10-Q forthe period ended June 30, 2012 (File No. 001-35107)). 10.15 Employment Agreement with Marc. J. Rowan, dated July 19, 2012 (incorporated by reference to Exhibit 10.44 to the Registrant’s Form 10-Qfor the period ended June 30, 2012 (File No. 001-35107)). 10.16 Employment Agreement with Joshua J. Harris, dated July 19, 2012 (incorporated by reference to Exhibit 10.45 to the Registrant’s Form 10-Qfor the period ended June 30, 2012 (File No. 001-35107)). 10.17 Employment Agreement with Barry Giarraputo (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on FormS-1 (File No. 333-150141)). 10.18 Amended and Restated Employment Agreement with Joseph F. Azrack, dated June 1, 2012 (incorporated by reference to Exhibit 10.40 to theRegistrant’s Form 10-Q for the period ended June 30, 2012 (File No. 001-35107)). 10.19 Employment Agreement with Henry Silverman (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration Statement on FormS-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 byreference 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 (incorporatedby 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 (incorporatedby 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)). 10.25 Third Amended and Restated Limited Partnership Agreement of Apollo Management Holdings, L.P. dated as of April 14, 2010 (incorporated byreference 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 -275-Table of ContentsExhibitNumber Exhibit Description Registration Statement on Form S-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 (File No.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 (for BonusGrants) (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 parties partythereto (incorporated by reference to Exhibit 10.38 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)). 10.39 Second Amendment, dated as of December 20, 2010, to the Credit Agreement, dated as of April 20, 2007, as amended by the First Amendmentthereto dated as of May 16, 2007, among Apollo Management Holdings, L.P., as borrower, the lenders party thereto from time to timeJPMorgan Chase Bank as administrative agent and the other parties party thereto (incorporated by reference to Exhibit 10.39 to the Registrant’sRegistration 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 with MarcSpilker 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 with HenrySilverman dated January 21, 2011 (incorporated by reference to Exhibit 10.41 to the Registrant’s Registration Statement on Form S-1 (File No.333-150141)). 10.42 Form of Independent Director Engagement Letter (incorporated by reference to Exhibit 10.42 to -276-Table of ContentsExhibitNumber Exhibit Description the Registrant’s Form 10-Q for the quarter period ended March 31, 2011 (File No. 001-35107)). 10.43 Separation Agreement with Henry Silverman (incorporated by reference to Exhibit 10.43 to the Registrant’s Annual Report on Form 10-Kfor the year ended December 31, 2011 (File No. 001-35107)). 10.44 Separation Agreement with Eugene Donnelly, dated July 2, 2012 (incorporated by reference to Exhibit 10.41 to the Registrant’s Form 10-Q for the period ended June 30, 2012 (File No. 001-35107)). 10.45 Employment Agreement with Martin Kelly, dated July 2, 2012 (incorporated by reference to Exhibit 10.42 to the Registrant’s Form 10-Qfor the period ended June 30, 2012 (File No. 001-35107)). 10.46 Amended and Restated Exempted Limited Partnership Agreement of AMH Holdings, L.P., dated October 30, 2012. (incorporated byreference to Exhibit 10.46 to the Registrant’s Form 10-Q for the period ended September 30, 2012 (File No. 001-35107)). *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 of1933 and 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 thanwith respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representationsand warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and maynot describe the actual state of affairs as of the date they were made or at any other time. -277-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 1, 2013 By: /s/ Martin Kelly Name: Martin Kelly 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 BlackLeon Black Chairman and Chief Executive Officer and Director(principal executive officer) March 1, 2013 /s/ Martin Kelly Chief Financial Officer(principal financial officer) March 1, 2013Martin Kelly /s/ Barry Giarraputo Chief Accounting Officer March 1, 2013Barry Giarraputo (principal accounting officer) /s/ Joshua Harris Senior Managing Director and Director March 1, 2013Joshua Harris /s/ Marc Rowan Senior Managing Director and Director March 1, 2013Marc Rowan /s/ Michael Ducey Director March 1, 2013Michael Ducey /s/ Paul Fribourg Director March 1, 2013Paul Fribourg /s/ AB Krongard Director March 1, 2013AB Krongard /s/ Pauline Richards Director March 1, 2013Pauline Richards -278-Exhibit 21.1LIST OF SUBSIDIARIES 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 DelawareApollo 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. DelawareLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationAIF 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. DelawareApollo 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 MarylandLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationA/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. DelawareApollo 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 DelawareLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationApollo 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 AnguillaApollo 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 AnguillaApollo 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. DelawareLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationApollo 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 DelawareAP 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 Capital Credit Management, LLC DelawareLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationApollo 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 IslandsAION 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 IslandsLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationApollo 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 DelawareApollo EPF Management II, L.P. DelawareApollo VII TXU Administration, LLC DelawareApollo APC Management, L.P. DelawareApollo APC Management GP, LLC DelawareApollo EPF Co-Investors II (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 DelawareApollo Credit Senior Loan Fund, L.P. DelawareApollo Athlon GenPar, Ltd. Cayman IslandsApollo 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LIST OF SUBSIDIARIES 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. DelawareApollo ANRP Advisors (APO FC), L.P. Cayman IslandsApollo ANRP Advisors (APO FC-GP), LLC AnguillaApollo ANRP Co-Investors (FC-D), L.P. AnguillaApollo ANRP Advisors (APO DC), L.P. DelawareApollo ANRP Advisors (APO DC-GP), LLC DelawareApollo ANRP Fund Administration, LLC DelawareStone Tower Capital LLC DelawareApollo ST Debt Advisors LLC DelawareStone Tower Europe LLC IrelandStone Tower Europe Limited IrelandApollo ST Fund Management LLC DelawareStone Tower Operating LP DelawareStone Tower Loan Value Recovery Fund GP LLC DelawareApollo ST Credit Partners GP LLC DelawareApollo ST Credit Strategies GP LLC DelawareStone Tower Credit Solutions GP LLC DelawareStone Tower Offshore Ltd. Cayman IslandsANRP Talos GenPar, Ltd. Cayman IslandsApollo Talos GenPar, Ltd. Cayman IslandsStone Tower Structured Credit Recovery Partners GP, LLC DelawareApollo ST Structured Credit Recovery Partners II GP LLC DelawareApollo EPF II Capital Management, LLC Marshall IslandsApollo European Senior Debt Advisors II, LLC DelawareApollo ST CLO Holdings GP, LLC Delaware2012 CMBS-I GP LLC (fka 2012 CMBS GP LLC) Delaware2012 CMBS-I Management LLC (fka 2012 CMBS Management LLC) Delaware2012 CMBS-II GP LLC Delaware2012 CMBS-II Management LLC Delaware2012 CMBS-III GP LLC Delaware2012 CMBS-III Management LLC DelawareApollo Credit Fund LP (fka Stone Tower Credit Fund LP) DelawareLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationApollo Offshore Credit Fund Ltd. (fka Stone Tower Cayman IslandsOffshore Credit Fund Ltd) Apollo Credit Funding I Ltd. (fka Stone Tower Credit Funding I Ltd.) Cayman IslandsAGRE U.S. Real Estate Advisors Cayman, Ltd. Cayman IslandsRampart CLO 2006-1 Ltd. Cayman IslandsRampart CLO 2007 Ltd. Cayman IslandsStone Tower CLO II Ltd. Cayman IslandsStone Tower CLO III Ltd. Cayman IslandsStone Tower CLO IV Ltd. Cayman IslandsStone Tower CLO V Ltd. Cayman IslandsStone Tower CLO VI Ltd. Cayman IslandsStone Tower CLO VII Ltd. Cayman IslandsGranite Ventures II Ltd. Cayman IslandsGranite Ventures III Ltd. Cayman IslandsCornerstone CLO Ltd. Cayman IslandsStone Tower Credit Solutions Fund LP DelawareEPE Acquisition Holdings, LLC DelawareALM VI, Ltd DelawareApollo AION Capital Partners Cayman IslandsApollo SK Strategic Management, LLC DelawareApollo SK Strategic Co-Investors (FC-D), LLC Marshall IslandsApollo SK Strategic Advisors, L.P. Cayman IslandsApollo SK Strategic Advisors, LLC AnguillaAION Co-Investors (D) Ltd MauritiusEPF II Team Carry Plan, L.P. Marshall IslandsApollo Credit Management (Senior Loans) II, LLC DelawareAGRE Asia Pacific Real Estate Advisors GP, Ltd. Cayman IslandsApollo AGRE APREF Co-Investors (D), LP Cayman IslandsAGRE Asia Pacific Real Estate Advisors, L.P. Cayman IslandsSmart & Final Holdco LLC DelawareALM VII, Ltd. Cayman IslandsApollo Credit Income Co-Investors (D) LLC DelawareApollo Credit Income Advisors LLC DelawareApollo Credit Income Management LLC DelawareApollo BSL Management, LLC DelawareApollo Credit Opportunity Management III LLC DelawareApollo Credit Opportunity Advisors III, L.P. DelawareApollo Credit Opportunity Advisors III GP LLC DelawareApollo Credit Opportunity Co-Investors III (D) LLC DelawareAMH Holdings (Cayman), L.P. Cayman IslandsAMH Holdings GP, Ltd. Cayman IslandsAIF VIII Management, LLC DelawareApollo Management VIII, L.P. DelawareApollo Co-Investors VIII (D), L.P. DelawareLIST OF SUBSIDIARIES Entity Name Jurisdiction of OrganizationApollo Fund Administration VIII, LLC DelawareApollo Capital Management VIII, LLC DelawareApollo Advisors VIII, L.P. DelawareApollo Palmetto Athene Management, LLC DelawareCAI Strategic European Real Estate Advisors GP, LLC Marshall IslandsCAI Strategic European Real Estate Advisors, L.P. Marshall IslandsApollo ANRP Co-Investors (DC-D), L.P. DelawareALM V, Ltd. Cayman IslandsLondon Prime Apartments Guernsey Holdings Limited GuernseyLondon Prime Apartments Guernsey Limited GuernseyANRP PG GenPar, Ltd. Cayman IslandsApollo PG GenPar, Ltd. Cayman IslandsApollo Management (AOP) VIII, LLC DelawareExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements of our report, dated March 1, 2013, relating to the consolidatedfinancial statements of Apollo Global Management, LLC and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control overfinancial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2012: • Registration Statement No. 333-182844 on Form S-3ASR • Registration Statement No. 333-173161 on Form S-8./s/ DELOITTE & TOUCHE LLPNew York, New YorkMarch 1, 2013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, 2012 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 1, 2013 /s/ Leon BlackLeon BlackChief Executive OfficerExhibit 31.2CHIEF FINANCIAL OFFICER CERTIFICATIONI, Martin Kelly, certify that: 1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2012 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 1, 2013 /s/ Martin KellyMartin KellyChief 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, 2012 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 1, 2013 /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, 2012 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin Kelly, 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 1, 2013 /s/ Martin KellyMartin KellyChief 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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