10. EQUITY-BASED COMPENSATION

AOG Units

The fair value of the AOG Units of approximately $5.6 billion is charged to compensation expense on a straight-line basis over the five or six year service period, as applicable. For the three and six months ended June 30, 2013, $15.0 million and $30.0 million of compensation expense was recognized, respectively. For the three and six months ended June 30, 2012, $116.2 million and $232.3 million of compensation expense was recognized, respectively. The estimated forfeiture rate was 0% for Contributing Partners and 0% for Managing Partners based on actual forfeitures as well as the Company’s future forfeiture expectations. As of June 30, 2013, there was no unrecognized compensation cost related to unvested AOG Units.

The following table summarizes the activity of the AOG Units for the six months ended June 30, 2013:


	AOG Units			Weighted Average Grant Date Fair Value
Balance at January 1, 2013		1,500,366		$	20.00
Vested at June 30, 2013		(1,500,366	)		20.00

Balance at June 30, 2013		—		$	—

RSUs

On October 24, 2007, the Company commenced the granting of RSUs under the Company’s 2007 Omnibus Equity Incentive Plan. These grants are accounted for as a grant of equity awards in accordance with U.S. GAAP. All grants after March 29, 2011 consider the public share price of the Company. For Plan Grants, the fair value is based on grant date fair value, and is discounted for transfer restrictions and lack of distributions until vested. For Bonus Grants, the valuation methods consider transfer restrictions and timing of distributions. The total fair value is charged to compensation expense on a straight-line basis over the vesting period, which is generally up to 24 quarters (for Plan Grants) or annual vesting over three years (for Bonus Grants). During the three months ended June 30, 2013, 239,062 RSUs were granted with a weighted average grant date fair value of $20.71 per RSU. The actual forfeiture rate was 2.9% and 3.8% for the three and six months ended June 30, 2013, respectively. For the six months ended June 30, 2013 and 2012, $54.2 million and $55.0 million of compensation expense were recognized, respectively. For the three months ended June 30, 2013 and 2012, $26.7 million and $24.0 million of compensation expense were recognized, respectively.

The following table summarizes RSU activity for the six months ended June 30, 2013:


	Unvested			Weighted Average Grant Date Fair Value		Vested			Total Number of RSUs Outstanding
Balance at January 1, 2013		14,724,474		$	11.62		22,512,930			37,237,404
Granted		443,632			20.35		—			443,632
Forfeited		(569,664	)		13.71		—			(569,664	)
Delivered		—			13.00		(3,356,149	)		(3,356,149	)
Vested		(3,361,655	)		11.65		3,361,655			—

Balance at June 30, 2013		11,236,787		$	11.85		22,518,436			33,755,223	⁽¹⁾

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

Units Expected to Vest—As of June 30, 2013, approximately 10,600,000 RSUs were expected to vest over the next 2.8 years.

Share Options

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


Date of Grant	Options Granted	Vesting Terms
December 2, 2010	5,000,000	Vested and became exercisable with respect to 4/24 of the option shares on December 31, 2011 and the remainder vest in equal installments over each of the remaining 20 quarters with full vesting on December 31, 2016.
January 22, 2011	555,556	Half of such options that vested and became exercisable on December 31, 2011 were exercised on March 5, 2012 and the other half that were due to become exercisable on December 31, 2012 were forfeited during the quarter ended March 31, 2012.
April 9, 2011	25,000	Vested and became exercisable with respect to half of the option shares on December 31, 2011 and the other half vested in four equal quarterly installments starting on March 31, 2012 and ending on December 31, 2012 and are fully vested as of the date of this report.
July 9, 2012	50,000	Will vest and become exercisable with respect to 4/24 of the option shares on June 30, 2013 and the remainder will vest in equal installments over each of the remaining 20 quarters with full vesting on June 30, 2018.
December 28, 2012	200,000

For the three and six months ended June 30, 2013, $1.2 million and $2.5 million of compensation expense were recognized as a result of option grants, respectively. For the three and six months ended June 30, 2012, $1.2 million and $2.4 million of compensation expense were recognized as a result of these grants, respectively.

There were no share options granted during the six months ended June 30, 2013. Apollo measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for options awarded during 2012:


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

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

(2)	Represents weighted average of 2012 grants.

The following table summarizes the share option activity for the six months ended June 30, 2013:


	Options Outstanding			Weighted Average Exercise Price		Aggregate Fair Value			Weighted Average Remaining Contractual Term
Balance at January 1, 2013		5,275,000		$	8.44	$	29,020			8.01
Granted		—			—		—			—
Exercised		(1,875,000	)		8.00		(10,538	)		—
Forfeited		—			—		—			—

Balance at June 30, 2013		3,400,000			8.68	$	18,482			7.56

Exercisable at June 30, 2013		274,997		$	10.16	$	1,464			7.75

Options Expected to Vest—As of June 30, 2013, approximately 2,938,000 options were expected to vest.

The expected life of the options granted represents the period of time that options are expected to be outstanding and is based on the contractual term of the option. Unamortized compensation cost related to unvested share options at June 30, 2013 was $16.0 million and is expected to be recognized over a weighted average period of 3.5 years. There were 1.9 million options exercised during the three and six months ended June 30, 2013.

Delivery of Class A Shares—RSUs and Share Options

During 2013 and 2012, the Company delivered Class A shares for vested RSUs and exercised share options. The Company generally allows holders of RSUs and exercised share options to elect to settle their tax liabilities with a reduction of Class A shares delivered to such holders in connection with the settlement of vested RSUs and/or exercised share options. The withholding of such shares results in a tax liability and a corresponding accumulated deficit adjustment. The adjustment for the six months ended June 30, 2013 and 2012 was $41.8 million and $16.9 million, respectively. The adjustment is disclosed in the condensed consolidated statements of changes in shareholders’ equity.

The delivery of Class A shares in settlement of vested RSUs and exercised share options does not cause a transfer of amounts in the condensed consolidated statements of changes in shareholders’ equity to the Class A Shareholders. The delivery of Class A shares and exercised share options for vested RSUs and exercised share options causes the income or loss allocated to the Non-Controlling Interests to shift to the Class A shareholders. During the six months ended June 30, 2013, the Company delivered 2,899,114 Class A shares in settlement of vested RSUs and exercised share options, which caused the Company’s ownership interest in the Apollo Operating Group to increase to 35.6% from 35.1%.

AAA RDUs

Incentive units that provide the right to receive AAA restricted depository units (“RDUs”) following vesting are granted periodically to employees of Apollo. These grants are accounted for as equity awards in accordance with U.S. GAAP. The incentive units granted to employees generally vest over three years. In contrast, the Company’s Managing Partners and Contributing Partners have received distributions of fully-vested AAA RDUs. The fair value at the date of the grants is recognized on a straight-line basis over the vesting period (or upon grant in the case of fully vested AAA RDUs). The grant date fair value is based on the public share price of AAA. Vested AAA RDUs can be converted into ordinary common units of AAA subject to applicable securities law restrictions. During the three and six months ended June 30, 2013 and 2012, the actual forfeiture rate was 0%. For the six months ended June 30, 2013 and 2012, $0.5 million and $0.4 million of compensation expense was recognized, respectively. For the three months ended June 30, 2013 and 2012, $0.3 million and $0.3 million of compensation expense was recognized, respectively.

During the six months ended June 30, 2013 and 2012, the Company delivered 114,896 and 60,702 RDUs, respectively. During the three months ended June 30, 2013 and 2012, there were no RDUs deliveries. The deliveries during the six months ended June 30, 2013 and 2012 resulted in a satisfaction of liability of $1.0 million and $0.5 million, respectively, and the recognition of a net increase of additional paid in capital in 2013 of $1.4 million and a net decrease in 2012 of $1.3 million, respectively. These amounts are presented in the condensed consolidated statements of changes in shareholders’ equity. There was $0.5 million and $1.0 million of liability for undelivered RDUs included in accrued compensation and benefits in the condensed consolidated statements of financial condition as of June 30, 2013 and December 31, 2012, respectively. The following table summarizes RDU activity for the six months ended June 30, 2013:


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

Balance at June 30, 2013		338,430	$	8.85		—			338,430

Units Expected to Vest—As of June 30, 2013, approximately 318,000 RDUs were expected to vest over the next three years.

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


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

Balance at June 30, 2013		1,691,581

Restricted Stock and Restricted Stock Unit Awards— Apollo Commercial Real Estate Finance, Inc.

ARI restricted stock awards and ARI restricted stock unit (“ARI RSUs”) awards granted to the Company and certain of the Company’s employees generally vest over three years, either quarterly or annually. The awards granted to the Company are accounted for as investments and deferred revenue in the condensed consolidated statements of financial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method of accounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense will be recognized on a straight line-basis over the vesting period for the awards granted to the employees. The Company recorded an asset and a liability upon receiving the awards on behalf of the Company’s employees. The fair value of the awards to employees is based on the grant date fair value, which utilizes the public share price of ARI, less discounts for transfer restrictions. The awards granted to the Company’s employees are remeasured each period to reflect the fair value of the asset and other liabilities and any changes in these values are recorded in the condensed consolidated statements of operations. For the six months ended June 30, 2013 and 2012, $1.8 million and $1.2 million of management fees and $1.3 million and $0.8 million of compensation expense were recognized in the condensed consolidated statements of operations, respectively. For the three months ended June 30, 2013 and 2012, $0.4 million and $0.7 million of management fees and $0.3 million and $0.4 million of compensation expense were recognized in the condensed consolidated statements of operations, respectively. The actual forfeiture rate for unvested ARI restricted stock awards and ARI RSUs was 1.6% and 2.1% for the three and six months ended June 30, 2013, respectively.

The following table summarizes activity for the ARI restricted stock awards and ARI RSUs that were granted to both the Company and certain of its employees for the six months ended June 30, 2013:


	ARI Restricted Stock Unvested		ARI RSUs Unvested			Weighted Average Grant Date Fair Value		ARI RSUs Vested		Total Number of ARI RSUs Outstanding
Balance at January 1, 2013		—		237,542		$	14.62		225,232		462,774
Granted to employees of the Company		—		195,000			16.66				195,000
Granted to the Company		—		40,000			17.59				40,000
Forfeited by employees of the Company				(5,000	)		16.66				(5,000	)
Vested awards of the employees of the Company		—		(49,249	)		14.93		49,249		—
Vested awards of the Company		—		(52,000	)		14.85		52,000		—

Balance at June 30, 2013		—		366,293		$	15.93		326,481		692,774

Units Expected to Vest—As of June 30, 2013, approximately 355,000 ARI RSUs were expected to vest over the next three years.

Restricted Stock Unit Awards—Apollo Residential Mortgage, Inc.

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

The fair value of the awards to employees is based on the grant date fair value, which utilizes the public share price of AMTG less discounts for transfer restrictions and timing of distributions. For the three and six months ended June 30, 2013, $0.2 million and $0.5 million of management fees and $0.2 million and $0.5 million of compensation expense were recognized in the condensed consolidated statements of operations, respectively. For the three and six months ended June 30, 2012, $0.0 million of management fees and $0.0 million of compensation expense were recognized in the condensed consolidated statements of operations, respectively. The actual forfeiture rate for AMTG RSUs was 0% for the three and six months ended June 30, 2013.

The following table summarizes activity for the AMTG RSUs that were granted to both the Company and certain of its employees for the six months ended June 30, 2013:


	AMTG RSUs Unvested			Weighted Average Grant Date Fair Value		AMTG RSUs Vested		Total Number of AMTG RSUs Outstanding
Balance at January 1, 2013		161,257		$	20.28		12,862		174,119
Granted to employees of the Company		6,250			18.09		—		6,250
Vested awards of the employees of the Company		(3,688	)		17.64		3,688		—
Vested awards of the Company		(3,125	)		18.20		3,125		—

Balance at June 30, 2013		160,694		$	20.30		19,675		180,369

Units Expected to Vest—As of June 30, 2013, approximately 152,000 AMTG RSUs were expected to vest over the next three years.

Equity-Based Compensation Allocation

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

Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the three months ended June 30, 2013:


	Total Amount		Non- Controlling Interest % in Apollo Operating Group			Allocated to Non- Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, LLC
AOG Units	$	15,004		62.0	%	$	9,461		$	5,543
RSUs and Share Options		27,776		—			—			27,776
ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs		462		62.0			291			171
AAA RDUs		259		62.0			163			96

Total Equity-Based Compensation	$	43,501					9,915			33,586

Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs							(454	)		181

Capital Increase Related to Equity-Based Compensation						$	9,461		$	33,767

(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 six months ended June 30, 2013:


	Total Amount		Non- Controlling Interest % in Apollo Operating Group			Allocated to Non- Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, LLC
AOG Units	$	30,008		62.0	%	$	19,163		$	10,845
RSUs and Share Options		56,505		—			—			56,505
ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs		1,757		62.0			1,089			668
AAA RDUs		517		62.0			321			196

Total Equity-Based Compensation	$	88,787					20,573			68,214

Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs							(1,410	)		(156	)

Capital Increase Related to Equity-Based Compensation						$	19,163		$	68,058

(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 three months ended June 30, 2012:


	Total Amount		Non- Controlling Interest % in Apollo Operating Group			Allocated to Non- Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, LLC
AOG Units	$	116,171		65.5	%	$	76,082		$	40,089
RSUs and Share Options		25,213		—			—			25,213
ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs		431		65.5			282			149
AAA RDUs		299		65.5			196			103

Total Equity-Based Compensation	$	142,114					76,560			65,554

Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs							(478	)		(252	)

Capital Increase Related to Equity-Based Compensation						$	76,082		$	65,302

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

Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the six months ended June 30, 2012:


	Total Amount		Non- Controlling Interest % in Apollo Operating Group			Allocated to Non- Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, LLC
AOG Units	$	232,342		65.5	%	$	152,412		$	79,930
RSUs and Share Options		57,375		—			—			57,375
ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs		826		—			541			285
AAA RDUs		437		—			286			151

Total Equity-Based Compensation	$	290,980					153,239			137,741

Less ARI Restricted Stock Awards, ARI RSUs and AMTG RSUs							(827	)		(436	)

Capital Increase Related to Equity-Based Compensation						$	152,412		$	137,305

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