SEGMENT REPORTING

Apollo conducts its management and incentive businesses primarily in the United States and substantially all of its revenues are generated domestically. These businesses are conducted through the following three reportable segments:


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


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


•	Real Estate—primarily invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities.

These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and 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 Apollo manages, 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 business and incentive business as of March 31, 2014 and 2013, and for the three months ended March 31, 2014 and 2013, respectively, which management believes is useful to the reader. The Company’s management business has fairly stable revenues and expenses except for transaction fees, while its incentive business is more volatile and can have significant fluctuations as it is affected by changes in the fair value of investments due to market performance. The financial results of the management entities, as reflected in the “management” business section of the segment tables that follow, generally include management fee 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 and profit sharing expense.

During the second quarter of 2013, monitoring fees based on Athene's capital and surplus and the change in the market value of the Athene Services Derivative recorded in advisory and transaction fees from affiliates, net, as disclosed in note 13 to the condensed consolidated financial statements, were reclassified from the private equity segment to the credit segment to better evaluate the performance of Apollo's private equity and credit segments in making key operating decisions. Reclassifications have been made to the prior period financial data for Apollo's reportable segments to conform to the current presentation. The impact of this reclassification on the Company’s Economic Net Income (“ENI”) for the private equity and credit segment is reflected in the table below for the three months ended March 31, 2013:



	Impact of Reclassification on Economic Net (Loss) Income
	Private Equity Segment	Credit Segment
For the three months ended March 31, 2013	$(19,711)	$19,711

During the fourth quarter of 2013, certain reclassifications were made to prior period financial data within salary, bonus and benefits and profit sharing expense to conform to the current presentation. The impact of these reclassifications on management business ENI and incentive business ENI is reflected in the table below for Apollo’s three reportable segments for the three months ended March 31, 2013.



	Impact of Reclassification on Management Business Economic Net Income (Loss)
	Private Equity Segment	Credit Segment	Real Estate Segment
For the Three Months Ended March 31, 2013	$5,037	$(4,518)	$(519)



	Impact of Reclassification on Incentive Business Economic Net (Loss) Income
	Private Equity Segment	Credit Segment	Real Estate Segment
For the Three Months Ended March 31, 2013	$(3,564)	$3,220	$344

As it relates to the reclassifications described above, the impact to the combined segments Economic Net Income (Loss) for all periods presented was zero.

Economic Net Income (Loss)

ENI is a key performance measure used by management in evaluating the performance of Apollo’s private equity, credit and real estate segments. Management believes the components of ENI such as the amount of management fees, advisory and transaction fees and carried interest income are indicative of the Company’s performance. Management also uses ENI in making key operating decisions such as the following:


•	Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires;


•	Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansion into new businesses; and

•

Decisions relating to expenses, such as determining annual discretionary bonuses and equity-based compensation awards to its employees. With respect to compensation, management seeks to align the interests of certain professionals and selected other individuals with those of the investors in such funds and those of the Company’s shareholders by providing such individuals a profit sharing interest in the carried interest income earned in relation to the funds. To achieve that objective, a certain amount of compensation is based on the Company’s performance and growth for the year.

ENI is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. ENI represents segment income (loss) attributable to Apollo Global Management, LLC, which excludes the impact of (i) non-cash charges related to RSUs granted in connection with the 2007 private placement and amortization of AOG Units, (ii) income tax expense, (iii) amortization of intangibles associated with the 2007 Reorganization as well as acquisitions and (iv) Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our credit management companies. In addition, segment data excludes the assets, liabilities and operating results of the funds and VIEs that are included in the condensed consolidated financial statements.

The following table presents the financial data for Apollo’s reportable segments as of and for the three months ended March 31, 2014:



	As of and for the Three Months Ended March 31, 2014
	Private Equity Segment		Credit Segment			Real Estate Segment			Total Reportable Segments
Revenues:
Advisory and transaction fees from affiliates, net	$	37,636	$	77,480		$	949		$	116,065
Management fees from affiliates	79,421		131,629			12,780			223,830
Carried interest income (loss) from affiliates	103,251		66,352			(344		)	169,259
Total Revenues	220,308		275,461			13,385			509,154
Expenses	131,484		153,876			18,081			303,441
Other Income	22,093		43,537			1,164			66,794
Non-Controlling Interests	—		(3,256		)	—			(3,256		)
Economic Net Income (Loss)	$	110,917	$	161,866		$	(3,532	)	$	269,251
Total Assets	$	2,719,888	$	2,075,860		$	187,958		$	4,983,706

The following table reconciles the total segments to Apollo Global Management, LLC’s condensed consolidated financial statements as of and for the three months ended March 31, 2014:



	As of and for the Three Months Ended March 31, 2014
	Total Reportable Segments				Consolidation Adjustments and Other				Consolidated
Revenues	$	509,154			$	(17,754	)	⁽¹⁾	$	491,400
Expenses	303,441				10,678			⁽²⁾	314,119
Other income	66,794				248,118			⁽³⁾	314,912
Non-Controlling Interests	(3,256		)		(384,219		)		(387,475		)
Economic Net Income	$	269,251		⁽⁵⁾	N/A				N/A
Total Assets	$	4,983,706			$	17,928,676		⁽⁶⁾	$	22,912,382


(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 2007 private placement.


(3)	Results from the following:



	For the Three Months Ended March 31, 2014
Net gains from investment activities	$	205,395
Net gains from investment activities of consolidated variable interest entities	47,735
Loss from equity method investments⁽⁴⁾	(5,386		)
Other Income, net	374
Total Consolidation Adjustments	$	248,118


(4)	Included is $328 reflecting remaining interest of certain individuals who receive an allocation of income from a private equity co-investment vehicle.


(5)	The reconciliation of Economic Net Income to Net Income Attributable to Apollo Global Management, LLC reported in the condensed consolidated statements of operations consists of the following:



	For the Three Months Ended March 31, 2014
Economic Net Income	$	269,251
Income tax provision	(32,549		)
Net income attributable to Non-Controlling Interests in Apollo Operating Group	(155,100		)
Non-cash charges related to equity-based compensation⁽⁷⁾	(323		)
Amortization of intangible assets	(9,110		)
Net Income Attributable to Apollo Global Management, LLC	$	72,169


(6)	Represents the addition of assets of consolidated funds and the consolidated VIEs.


(7)	Includes impact of non-cash charges related to amortization of RSU Plan Grants made in connection with the 2007 private placement as discussed in note 12 to our condensed consolidated financial statements.

The following tables present additional financial data for Apollo’s reportable segments for the three months ended March 31, 2014:



	For the Three Months Ended March 31, 2014
	Private Equity								Credit
	Management		Incentive			Total			Management			Incentive			Total
Revenues:
Advisory and transaction fees from affiliates, net	$	37,636	$	—		$	37,636		$	77,480		$	—		$	77,480
Management fees from affiliates	79,421		—			79,421			131,629			—			131,629
Carried interest income from affiliates:
Unrealized losses	—		(293,589		)	(293,589		)	—			(7,898		)	(7,898		)
Realized gains	—		396,840			396,840			8,464			65,786			74,250
Total Revenues	117,057		103,251			220,308			217,573			57,888			275,461
Compensation and benefits⁽¹⁾	46,718		66,095			112,813			78,995			38,466			117,461
Other expenses⁽²⁾	18,671		—			18,671			36,415			—			36,415
Total Expenses	65,389		66,095			131,484			115,410			38,466			153,876
Other Income	1,694		20,399			22,093			4,335			39,202			43,537
Non-Controlling Interests	—		—			—			(3,256		)	—			(3,256		)
Economic Net Income	$	53,362	$	57,555		$	110,917		$	103,242		$	58,624		$	161,866


(1)	Compensation and benefits include equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.


(2)	Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.



	For the Three Months Ended March 31, 2014
	Real Estate
	Management			Incentive			Total
Revenues:
Advisory and transaction fees from affiliates, net	$	949		$	—		$	949
Management fees from affiliates	12,780			—			12,780
Carried interest income (loss) from affiliates:
Unrealized losses	—			(344		)	(344		)
Realized gains	—			—			—
Total Revenues	13,729			(344		)	13,385
Compensation and benefits⁽¹⁾	12,955			(602		)	12,353
Other expenses⁽²⁾	5,728			—			5,728
Total Expenses	18,683			(602		)	18,081
Other Income	417			747			1,164
Economic Net (Loss) Income	$	(4,537	)	$	1,005		$	(3,532	)


(1)	Compensation and benefits include equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.


(2)	Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.

The following table presents the financial data for Apollo’s reportable segments as of and for the three months ended March 31, 2013:



	As of and for the Three Months Ended March 31, 2013
	Private Equity Segment⁽¹⁾		Credit Segment⁽¹⁾			Real Estate Segment			Total Reportable Segments
Revenues:
Advisory and transaction fees from affiliates, net	$	24,617	$	21,677		$	1,125		$	47,419
Management fees from affiliates	66,272		84,364			13,591			164,227
Carried interest income from affiliates	990,993		133,775			952			1,125,720
Total Revenues	1,081,882		239,816			15,668			1,337,366
Expenses	445,535		119,022			17,481			582,038
Other Income	24,183		15,417			1,014			40,614
Non-Controlling Interests	—		(3,464		)	—			(3,464		)
Economic Net Income (Loss)	$	660,530	$	132,747		$	(799	)	$	792,478
Total Assets	$	3,224,096	$	1,807,262		$	95,795		$	5,127,153


(1)	Reclassified to conform to current presentation.

The following table reconciles the total reportable segments to Apollo Global Management, LLC’s financial statements as of and for the three months ended March 31, 2013:



	As of and for the Three Months Ended March 31, 2013
	Total Reportable Segments				Consolidation Adjustments and Other				Consolidated
Revenues	$	1,337,366			$	(28,293	)	⁽¹⁾	$	1,309,073
Expenses	582,038				40,564			⁽²⁾	622,602
Other income	40,614				91,559			⁽³⁾	132,173
Non-Controlling Interests	(3,464		)		(547,623		)		(551,087		)
Economic Net Income	$	792,478		⁽⁵⁾	N/A				N/A
Total Assets	$	5,127,153			$	16,162,184		⁽⁶⁾	$	21,289,337


(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 2007 private placement and equity-based compensation expense comprising of amortization of AOG Units and amortization of intangible assets.


(3)	Results from the following:



	For the Three Months Ended March 31, 2013
Net gains from investment activities	$	48,103
Net gains from investment activities of consolidated variable interest entities	47,861
Loss from equity method investments⁽⁴⁾	(1,569		)
Interest	438
Other	(3,274		)
Total Consolidation Adjustments	$	91,559


(4)	Included is $(372), reflecting remaining interest of certain individuals who receive an allocation of income from a private equity co-investment vehicle.


(5)	The reconciliation of Economic Net Income to Net Income Attributable to Apollo Global Management, LLC reported in the condensed consolidated statements of operations consists of the following:



	For the Three Months Ended March 31, 2013
Economic Net Income	$	792,478
Income tax provision	(18,579		)
Net income attributable to Non-Controlling Interests in Apollo Operating Group	(485,246		)
Non-cash charges related to equity-based compensation⁽⁷⁾	(27,930		)
Amortization of intangible assets	(11,745		)
Net Income Attributable to Apollo Global Management, LLC	$	248,978


(6)	Represents the addition of assets of consolidated funds and the consolidated VIEs.


(7)	Includes impact of non-cash charges related to amortization of AOG Units and RSU Plan Grants made in connection with the 2007 private placement as discussed in note 12 to our condensed consolidated financial statements.

The following tables present additional financial data for Apollo’s reportable segments for the three months ended March 31, 2013:



	For the Three Months Ended March 31, 2013
	Private Equity⁽¹⁾						Credit⁽¹⁾
	Management		Incentive		Total		Management			Incentive		Total
Revenues:
Advisory and transaction fees from affiliates, net	$	24,617	$	—	$	24,617	$	21,677		$	—	$	21,677
Management fees from affiliates	66,272		—		66,272		84,364			—		84,364
Carried interest income from affiliates:
Unrealized gains⁽²⁾	—		697,614		697,614		—			73,247		73,247
Realized gains	—		293,379		293,379		9,051			51,477		60,528
Total Revenues	90,889		990,993		1,081,882		115,092			124,724		239,816
Compensation and benefits⁽³⁾	35,747		387,821		423,568		45,356			35,343		80,699
Other expenses⁽⁴⁾	21,967		—		21,967		38,323			—		38,323
Total Expenses	57,714		387,821		445,535		83,679			35,343		119,022
Other Income	1,632		22,551		24,183		4,455			10,962		15,417
Non-Controlling Interests	—		—		—		(3,464		)	—		(3,464		)
Economic Net Income	$	34,807	$	625,723	$	660,530	$	32,404		$	100,343	$	132,747


(1)	Reclassified to conform to current presentation.

(2)

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


(3)	Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.


(4)	Other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.



	For the Three Months Ended March 31, 2013
	Real Estate
	Management			Incentive			Total
Revenues:
Advisory and transaction fees from affiliates, net	$	1,125		$	—		$	1,125
Management fees from affiliates	13,591			—			13,591
Carried interest income from affiliates:
Unrealized gains	—			598			598
Realized gains	—			354			354
Total Revenues	14,716			952			15,668
Compensation and benefits⁽¹⁾	9,649			456			10,105
Other expenses⁽²⁾	7,376			—			7,376
Total Expenses	17,025			456			17,481
Other Income	1,138			(124		)	1,014
Economic Net (Loss) Income	$	(1,171	)	$	372		$	(799	)


(1)	Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.


(2)	Other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.