UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q  

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019 OR

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

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number: 001-35107

APOLLO GLOBAL MANAGEMENT, LLC

(Exact name of Registrant as specified in its charter) 

Delaware	20-8880053
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9 West 57th Street, 43rd Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 515-3200

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒   No ☐

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
			☐

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A shares representing limited liability company interests	APO	New York Stock Exchange
6.375% Series A Preferred shares	APO.PR A	New York Stock Exchange
6.375% Series B Preferred shares	APO.PR B	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

As of August 5, 2019 there were 200,788,068 Class A shares and 1 Class B share outstanding.

	TABLE OF CONTENTS
		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	8
	Unaudited Condensed Consolidated Financial Statements
	Condensed Consolidated Statements of Financial Condition (Unaudited) as of June 30, 2019 and December 31, 2018	8
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2019 and 2018	9
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended June 30, 2019 and 2018	10
	Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2019 and 2018	11
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2019 and 2018	12
	Notes to Condensed Consolidated Financial Statements (Unaudited)	13
ITEM 1A.	UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION	63
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	65
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	111
ITEM 4.	CONTROLS AND PROCEDURES	113
PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	114
ITEM 1A.	RISK FACTORS	114
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	116
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	117
ITEM 4.	MINE SAFETY DISCLOSURES	117
ITEM 5.	OTHER INFORMATION	117
ITEM 6.	EXHIBITS	118
SIGNATURES

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Forward-Looking Statements

This quarterly report may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, discussions related to Apollo’s expectations regarding the performance of its business, liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this quarterly report, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new credit, private equity, or real assets funds, market conditions generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our businesses and investments by our funds and litigation risks, among others. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 1, 2019 (the “2018 Annual Report”) and in this report; as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other filings. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Terms Used in This Report

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

“AMH” refers to Apollo Management Holdings, L.P., a Delaware limited partnership, that is an indirect subsidiary of Apollo Global Management, LLC;

“Apollo funds”, “our funds” and references to the “funds” we manage, refer to the funds (including the parallel funds and alternative investment vehicles of such funds), partnerships, accounts, including strategic investment accounts or “SIAs,” alternative asset companies and other entities for which subsidiaries of the Apollo Operating Group provide investment management or advisory services;

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

“Assets Under Management”, or “AUM”, refers to the assets of the funds, partnerships and accounts to which we provide investment management, advisory, or certain other investment-related services, including, without limitation, capital that such funds, partnerships and accounts have the right to call from investors pursuant to capital commitments. Our AUM equals the sum of:

(i) the net asset value, or “NAV,” plus used or available leverage and/or capital commitments, or gross assets plus capital commitments, of the credit funds, partnerships and accounts for which we provide investment management or advisory services, other than certain collateralized loan obligations (“CLOs”), collateralized debt obligations (“CDOs”), and certain permanent capital vehicles, which have a fee-generating basis other than the mark-to-market value of the underlying assets;

(ii) the fair value of the investments of the private equity and real assets funds, partnerships and accounts we manage or advise plus the capital that such funds, partnerships and accounts are entitled to call from investors pursuant to capital commitments, plus portfolio level financings; for certain permanent capital vehicles in real assets, gross asset value plus available financing capacity;

(iii) the gross asset value associated with the reinsurance investments of the portfolio company assets we manage or advise; and

(iv) the fair value of any other assets that we manage or advise for the funds, partnerships and accounts to which we provide investment management, advisory, or certain other

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investment-related services, plus unused credit facilities, including capital commitments to such funds, partnerships and accounts for investments that may require pre-qualification or other conditions before investment plus any other capital commitments to such funds, partnerships and accounts available for investment that are not otherwise included in the clauses above.

Our AUM measure includes Assets Under Management for which we charge either nominal or zero fees. Our AUM measure also includes assets for which we do not have investment discretion, including certain assets for which we earn only investment-related service fees, rather than management or advisory fees. Our definition of AUM is not based on any definition of Assets Under Management contained in our operating agreement or in any of our Apollo fund management agreements. We consider multiple factors for determining what should be included in our definition of AUM. Such factors include but are not limited to (1) our ability to influence the investment decisions for existing and available assets; (2) our ability to generate income from the underlying assets in our funds; and (3) the AUM measures that we use internally or believe are used by other investment managers. Given the differences in the investment strategies and structures among other alternative investment managers, our calculation of AUM may differ from the calculations employed by other investment managers and, as a result, this measure may not be directly comparable to similar measures presented by other investment managers. Our calculation also differs from the manner in which our affiliates registered with the SEC report “Regulatory Assets Under Management” on Form ADV and Form PF in various ways;

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

“Non-Fee-Generating AUM” refers to AUM that does not produce management fees or monitoring fees. This measure generally includes 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 interests;

(iii) unused credit facilities;

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

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

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

“Performance Fee-Eligible AUM” refers to the AUM that may eventually produce performance fees. All funds for which we are entitled to receive a performance fee allocation or incentive fee are included in Performance Fee-Eligible AUM, which consists of the following:

(i) “Performance Fee-Generating AUM”, which refers to invested capital of the funds, partnerships and accounts we manage, advise, or to which we provide certain other investment-related services, that is currently above its hurdle rate or preferred return, and profit of such funds, partnerships and accounts is being allocated to, or earned by, the general partner in accordance with the applicable limited partnership agreements or other governing agreements;

(ii) “AUM Not Currently Generating Performance Fees”, which refers to invested capital of the funds, partnerships and accounts we manage, advise, or to which we provide certain other investment-related services, that is currently below its hurdle rate or preferred return; and

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(iii) “Uninvested Performance Fee-Eligible AUM”, which refers to capital of the funds, partnerships and accounts we manage, advise, or to which we provide certain other investment-related services, that is available for investment or reinvestment subject to the provisions of applicable limited partnership agreements or other governing agreements, which capital is not currently part of the NAV or fair value of investments that may eventually produce performance fees allocable to, or earned by, the general partner.

“AUM with Future Management Fee Potential” refers to the committed uninvested capital portion of total AUM not

currently earning management fees. The amount depends on the specific terms and conditions of each fund;

We use AUM as a performance measure of our funds’ investment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs. Non-Fee-Generating AUM includes assets on which we could earn performance fees;

“Advisory” refers to certain assets advised by Apollo Asset Management Europe PC LLP, a wholly-owned subsidiary of Apollo Asset Management Europe LLP (collectively, “AAME”). The AAME entities are subsidiaries of Apollo;

“Athene Holding” refers to Athene Holding Ltd. (together with its subsidiaries, “Athene”), a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs, and to which Apollo, through its consolidated subsidiary Athene Asset Management LLC (“Athene Asset Management” or “AAM’), provides asset management and advisory services;

“Athora” refers to a strategic platform established to acquire or reinsure blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”). The Company, through its consolidated subsidiary, AAME, provides investment advisory services to Athora. Athora Non-Sub-Advised Assets includes the Athora assets which are managed by Apollo but not sub-advised by Apollo nor invested in Apollo funds or investment vehicles. Athora Sub-Advised includes assets which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages;

“capital deployed” or “deployment” is the aggregate amount of capital that has been invested during a given period (which may, in certain cases, include leverage) by (i) our commitment based funds and (ii) SIAs that have a defined maturity date;

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

“gross IRR” of a credit fund and the principal finance funds within the real assets segment represents the annualized return of a fund based on the actual timing of all cumulative fund cash flows before management fees, performance fees allocated to the general partner and certain other expenses. Calculations may include certain investors that do not pay fees. The terminal value is the net asset value as of the reporting date. Non-U.S. dollar denominated (“USD”) fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;

“gross IRR” of a private equity fund represents the cumulative investment-related cash flows (i) for a given investment for the fund or funds which made such investment, and (ii) for a given fund, in the relevant fund itself (and not any one investor in the fund), in each case, on the basis of the actual timing of investment inflows and outflows (for unrealized investments assuming disposition on June 30, 2019 or other date specified) aggregated on a gross basis quarterly, and the return is annualized and compounded before management fees, performance fees and certain other expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all of the returns would, if distributed, be payable to the fund’s investors. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;

“gross IRR” of a real assets fund excluding the principal finance funds represents the cumulative investment-related cash flows in the fund itself (and not any one investor in the fund), on the basis of the actual timing of cash inflows and outflows (for unrealized investments assuming disposition on June 30, 2019 or other date specified) starting on the date that each investment closes, and the return is annualized and compounded before management fees, performance fees, and certain other expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all of the returns would, if distributed, be payable to the fund’s investors. Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;

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“gross return” of a credit or real assets fund is the monthly or quarterly time-weighted return that is equal to the percentage change in the value of a fund’s portfolio, adjusted for all contributions and withdrawals (cash flows) before the effects of management fees, incentive fees allocated to the general partner, or other fees and expenses. Returns for credit funds are calculated for all funds and accounts in the respective strategies excluding assets for Athene, Athora and certain other entities where we manage or may manage a significant portion of the total company assets. Returns of CLOs represent the gross returns on assets. Returns over multiple periods are calculated by geometrically linking each period’s return over time;

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

“inflows” represents (i) at the individual segment level, subscriptions, commitments, and other increases in available capital, such as acquisitions or leverage, net of inter-segment transfers, and (ii) on an aggregate basis, the sum of inflows across the credit, private equity and real assets segments;

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

“net IRR” of a credit fund and the principal finance funds within the real assets segment represents the annualized return of a fund after management fees, performance fees allocated to the general partner and certain other expenses, calculated on investors that pay such fees. The terminal value is the net asset value as of the reporting date. Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;

“net IRR” of a private equity fund means the gross IRR applicable to a fund, including returns for related parties which may not pay fees or performance fees, net of management fees, certain expenses (including interest incurred or earned by the fund itself) and realized performance fees all offset to the extent of interest income, and measures returns at the fund level on amounts that, if distributed, would be paid to investors of the fund. The timing of cash flows applicable to investments, management fees and certain expenses, may be adjusted for the usage of a fund’s subscription facility. To the extent that a fund exceeds all requirements detailed within the applicable fund agreement, the estimated unrealized value is adjusted such that a percentage of up to 20.0% of the unrealized gain is allocated to the general partner of such fund, thereby reducing the balance attributable to fund investors. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;

“net IRR” of a real assets fund excluding the principal finance funds represents the cumulative cash flows in the fund (and not any one investor in the fund), on the basis of the actual timing of cash inflows received from and outflows paid to investors of the fund (assuming the ending net asset value as of June 30, 2019 or other date specified is paid to investors), excluding certain non-fee and non-performance fee bearing parties, and the return is annualized and compounded after management fees, performance fees, and certain other expenses (including interest incurred by the fund itself) and measures the returns to investors of the fund as a whole.  Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;

“net return” of a credit or real assets fund represents the gross return after management fees, performance fees allocated to the general partner, or other fees and expenses. Returns over multiple periods are calculated by geometrically linking each period’s return over time;

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

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

“permanent capital vehicles” refers to (a) assets that are owned by or related to Athene or Athora Holding Ltd. (“Athora Holding” and together with its subsidiaries, “Athora”), (b) assets that are owned by or related to MidCap FinCo Designated Activity Company (“MidCap”) and managed by Apollo, (c) assets of publicly traded vehicles managed by Apollo such as Apollo Investment Corporation (“AINV”), Apollo Commercial Real Estate Finance, Inc. (“ARI”), Apollo Tactical Income Fund Inc. (“AIF”), and Apollo Senior Floating Rate Fund Inc. (“AFT”), in each case that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law and (d) a non-traded business development company from which Apollo earns certain investment-related service fees. The investment management agreements of AINV, AIF and AFT have one year terms, are reviewed annually and remain in effect only if approved by the boards

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of directors of such companies or by the affirmative vote of the holders of a majority of the outstanding voting shares of such companies, including in either case, approval by a majority of the directors who are not “interested persons” as defined in the Investment Company Act of 1940. In addition, the investment management agreements of AINV, AIF and AFT may be terminated in certain circumstances upon 60 days’ written notice. The investment management agreement of ARI has a one year term and is reviewed annually by ARI’s board of directors and may be terminated under certain circumstances by an affirmative vote of at least two-thirds of ARI’s independent directors. The investment management or advisory arrangements between each of MidCap and Apollo, Athene and Apollo, and Athora and Apollo, may also be terminated under certain circumstances. The agreement pursuant to which Apollo earns certain investment-related service fees from a non-traded business development company may be terminated under certain limited circumstances;

“private equity fund appreciation (depreciation)” refers to gain (loss) and income for the traditional private equity funds (as defined below), Apollo Natural Resources Partners, L.P. (“ANRP I”), Apollo Natural Resources Partners II, L.P. (“ANRP II”), Apollo Natural Resources Partners III, L.P. (“ANRP III”), Apollo Special Situations Fund, L.P., AION Capital Partners Limited (“AION”) and Apollo Hybrid Value Fund, L.P. (together with its parallel funds and alternative investment vehicles, “Hybrid Value Fund”) for the periods presented on a total return basis before giving effect to fees and expenses. The performance percentage is determined by dividing (a) the change in the fair value of investments over the period presented, minus the change in invested capital over the period presented, plus the realized value for the period presented, by (b) the beginning unrealized value for the period presented plus the change in invested capital for the period presented. Returns over multiple periods are calculated by geometrically linking each period’s return over time;

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

“Realized Value” refers to all cash investment proceeds received by the relevant Apollo fund, including interest and dividends, but does not give effect to management fees, expenses, incentive compensation or performance fees to be paid by such Apollo fund;

“Redding Ridge” refers to Redding Ridge Asset Management, LLC and its subsidiaries, which is a standalone, self-managed asset management business established in connection with risk retention rules that manages CLOs and retains the required risk retention interests;

“Remaining Cost” represents the initial investment of the fund in a portfolio investment, reduced for any return of capital distributed to date on such portfolio investment;

“Strategic Investor” refers to the California Public Employees’ Retirement System, or “CalPERS”;

“Total Invested Capital” refers to the aggregate cash invested by the relevant Apollo fund and includes capitalized costs relating to investment activities, if any, but does not give effect to cash pending investment or available for reserves;

“Total Value” represents the sum of the total Realized Value and Unrealized Value of investments;

“traditional private equity funds” refers to Apollo Investment Fund I, L.P. (“Fund I”), AIF II, L.P. (“Fund II”), a mirrored investment account established to mirror Fund I and Fund II for investments in debt securities (“MIA”), Apollo Investment Fund III, L.P. (together with its parallel funds, “Fund III”), Apollo Investment Fund IV, L.P. (together with its parallel fund, “Fund IV”), Apollo Investment Fund V, L.P. (together with its parallel funds and alternative investment vehicles, “Fund V”), Apollo Investment Fund VI, L.P. (together with its parallel funds and alternative investment vehicles, “Fund VI”), Apollo Investment Fund VII, L.P. (together with its parallel funds and alternative investment vehicles, “Fund VII”), Apollo Investment Fund VIII, L.P. (together with its parallel funds and alternative investment vehicles, “Fund VIII”) and Apollo Investment Fund IX, L.P. (together with its parallel funds and alternative investment vehicles, “Fund IX”);

“Unrealized Value” refers to the fair value consistent with valuations determined in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), for investments not yet realized and may include payments in kind, accrued interest and dividends receivable, if any, and before the effect of certain taxes.  In addition, amounts include committed and funded amounts for certain investments; and

“Vintage Year” refers to the year in which a fund’s final capital raise occurred, or, for certain funds, the year in which a fund’s investment period commences as per its governing agreements.

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PART I—FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(dollars in thousands, except share data)

	As of June 30, 2019			As of December 31, 2018
Assets:
Cash and cash equivalents	$	945,725		$	609,747
Restricted cash	17,651			3,457
U.S. Treasury securities, at fair value	713,061			392,932
Investments (includes performance allocations of $1,229,894 and $912,182 as of June 30, 2019 and December 31, 2018, respectively)	3,219,950			2,722,612
Assets of consolidated variable interest entities:
Cash and cash equivalents	67,085			49,671
Investments, at fair value	1,183,487			1,175,677
Other assets	59,131			65,543
Incentive fees receivable	—			6,792
Due from related parties	449,167			378,108
Deferred tax assets, net	277,037			306,094
Other assets	228,321			192,169
Lease assets	98,777			—
Goodwill	88,852			88,852
Total Assets	$	7,348,244		$	5,991,654
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	89,776		$	70,878
Accrued compensation and benefits	112,792			73,583
Deferred revenue	92,274			111,097
Due to related parties	401,631			425,435
Profit sharing payable	595,954			452,141
Debt	2,350,915			1,360,448
Liabilities of consolidated variable interest entities:
Debt, at fair value	859,357			855,461
Other liabilities	86,712			78,977
Other liabilities	112,679			111,794
Lease liabilities	105,164			—
Total Liabilities	4,807,254			3,539,814
Commitments and Contingencies (see note 15)
Shareholders’ Equity:
Apollo Global Management, LLC shareholders’ equity:
Series A Preferred shares, 11,000,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018	264,398			264,398
Series B Preferred shares, 12,000,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018	289,815			289,815
Class A shares, no par value, unlimited shares authorized, 200,435,587 and 201,400,500 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	—			—
Class B shares, no par value, unlimited shares authorized, 1 share issued and outstanding as of June 30, 2019 and December 31, 2018	—			—
Additional paid in capital	1,052,259			1,299,418
Accumulated deficit	(222,007		)	(473,276		)
Accumulated other comprehensive loss	(5,192		)	(4,159		)
Total Apollo Global Management, LLC shareholders’ equity	1,379,273			1,376,196
Non-Controlling Interests in consolidated entities	280,662			271,522
Non-Controlling Interests in Apollo Operating Group	881,055			804,122
Total Shareholders’ Equity	2,540,990			2,451,840
Total Liabilities and Shareholders’ Equity	$	7,348,244		$	5,991,654

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(dollars in thousands, except share data)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Management fees	$	388,215		$	341,626		$	768,241		$	628,352
Advisory and transaction fees, net	31,124			15,440			50,693			28,991
Investment income:
Performance allocations	176,862			129,085			428,359			4,920
Principal investment income	39,602			22,175			65,627			9,181
Total investment income	216,464			151,260			493,986			14,101
Incentive fees	776			14,990			1,436			18,775
Total Revenues	636,579			523,316			1,314,356			690,219
Expenses:
Compensation and benefits:
Salary, bonus and benefits	123,669			115,075			242,832			230,901
Equity-based compensation	44,662			37,784			89,739			73,309
Profit sharing expense	68,278			70,545			191,725			58,268
Total compensation and benefits	236,609			223,404			524,296			362,478
Interest expense	23,302			15,162			42,410			28,959
General, administrative and other	81,839			62,517			153,501			124,194
Placement fees	775			311			335			638
Total Expenses	342,525			301,394			720,542			516,269
Other Income:
Net gains (losses) from investment activities	45,060			(67,505		)	63,889			(134,638		)
Net gains from investment activities of consolidated variable interest entities	4,631			9,213			14,097			15,745
Interest income	8,710			4,547			15,786			8,106
Other income (loss), net	6,603			(5,443		)	6,693			(1,197		)
Total Other Income (Loss)	65,004			(59,188		)	100,465			(111,984		)
Income before income tax provision	359,058			162,734			694,279			61,966
Income tax provision	(16,897		)	(18,924		)	(36,551		)	(27,504		)
Net Income	342,161			143,810			657,728			34,462
Net income attributable to Non-Controlling Interests	(177,338		)	(80,200		)	(343,848		)	(29,114		)
Net Income Attributable to Apollo Global Management, LLC	164,823			63,610			313,880			5,348
Net income attributable to Series A Preferred Shareholders	(4,383		)	(4,383		)	(8,766		)	(8,766		)
Net income attributable to Series B Preferred Shareholders	(4,781		)	(4,569		)	(9,562		)	(4,569		)
Net Income (Loss) Attributable to Apollo Global Management, LLC Class A Shareholders	$	155,659		$	54,658		$	295,552		$	(7,987	)
Net Income Per Class A Share:
Net Income (Loss) Available to Class A Share – Basic	$	0.75		$	0.25		$	1.41		$	(0.09	)
Net Income (Loss) Available to Class A Share – Diluted	$	0.75		$	0.25		$	1.41		$	(0.09	)
Weighted Average Number of Class A Shares Outstanding – Basic	199,578,950			200,711,475			200,202,174			199,578,334
Weighted Average Number of Class A Shares Outstanding – Diluted	199,578,950			200,711,475			200,202,174			199,578,334

See accompanying notes to condensed consolidated financial statements.

- 9-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(dollars in thousands, except share data)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net Income	$	342,161		$	143,810		$	657,728		$	34,462
Other Comprehensive Income (Loss), net of tax:
Currency translation adjustments, net of tax	4,596			(17,885		)	(2,405		)	(12,865		)
Net gain (loss) from change in fair value of cash flow hedge instruments	(1,938		)	25			(1,912		)	52
Net gain (loss) on available-for-sale securities	312			(196		)	230			(237		)
Total Other Comprehensive Income (Loss), net of tax	2,970			(18,056		)	(4,087		)	(13,050		)
Comprehensive Income	345,131			125,754			653,641			21,412
Comprehensive Income attributable to Non-Controlling Interests	(180,690		)	(64,459		)	(340,794		)	(17,385		)
Comprehensive Income Attributable to Apollo Global Management, LLC	$	164,441		$	61,295		$	312,847		$	4,027

See accompanying notes to condensed consolidated financial statements.

- 10-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(dollars in thousands, except share data)

	Apollo Global Management, LLC Shareholders
	Class A Shares		Class B Shares	Series A Preferred Shares			Series B Preferred Shares			Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Apollo Global Management, LLC Shareholders’ Equity			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Apollo Operating Group			Total Shareholders’ Equity
Balance at April 1, 2018	201,550,654		1	$	264,398		$	289,815		$	1,483,244		$	(481,772	)	$	(815	)	$	1,554,870		$	290,857		$	1,061,029		$	2,906,756
Capital increase related to equity-based compensation	—		—	—			—			28,753			—			—			28,753			—			—			28,753
Capital contributions	—		—	—			—			—			—			—			—			2,590			—			2,590
Distributions	—		—	(4,383		)	(4,569		)	(80,755		)	—			—			(89,707		)	(19,523		)	(127,491		)	(236,721		)
Payments related to issuances of Class A shares for equity-based awards	106,917		—	—			—			—			(3,221		)	—			(3,221		)	—			—			(3,221		)
Repurchase of Class A shares	(72,475	)	—	—			—			(2,284		)	—			—			(2,284		)	—			—			(2,284		)
Exchange of AOG Units for Class A shares	—		—	—			—			349			—			—			349			—			1			350
Net income	—		—	4,383			4,569			—			54,658			—			63,610			8,716			71,484			143,810
Currency translation adjustments, net of tax	—		—	—			—			—			—			(2,230		)	(2,230		)	(13,478		)	(2,177		)	(17,885		)
Net gain from change in fair value of cash flow hedge instruments	—		—	—			—			—			—			13			13			—			12			25
Net loss on available-for-sale securities	—		—	—			—			—			—			(98		)	(98		)	—			(98		)	(196		)
Balance at June 30, 2018	201,585,096		1	$	264,398		$	289,815		$	1,429,307		$	(430,335	)	$	(3,130	)	$	1,550,055		$	269,162		$	1,002,760		$	2,821,977
Balance at April 1, 2019	201,375,418		1	$	264,398		$	289,815		$	1,144,664		$	(372,576	)	$	(4,810	)	$	1,321,491		$	273,145		$	847,604		$	2,442,240
Dilution impact of issuance of Class A shares	—		—	—			—			(25		)	—			—			(25		)	—			—			(25		)
Capital increase related to equity-based compensation	—		—	—			—			34,298			—			—			34,298			—			—			34,298
Capital contributions	—		—	—			—			—			—			—			—			526			—			526
Distributions	—		—	(4,383		)	(4,781		)	(96,316		)	—			—			(105,480		)	(1,786		)	(138,462		)	(245,728		)
Payments related to issuances of Class A shares for equity-based awards	308,901		—	—			—			3,438			(5,090		)	—			(1,652		)	—			—			(1,652		)
Repurchase of Class A shares	(1,248,732	)	—	—			—			(33,800		)	—			—			(33,800		)	—			—			(33,800		)
Exchange of AOG Units for Class A shares	—		—	—			—			—			—			—			—			—			—			—
Net income	—		—	4,383			4,781			—			155,659			—			164,823			5,143			172,195			342,161
Currency translation adjustments, net of tax	—		—	—			—			—			—			428			428			3,634			534			4,596
Net loss from change in fair value of cash flow hedge instruments	—		—	—			—			—			—			(965		)	(965		)	—			(973		)	(1,938		)
Net gain on available-for-sale securities	—		—	—			—			—			—			155			155			—			157			312
Balance at June 30, 2019	200,435,587		1	$	264,398		$	289,815		$	1,052,259		$	(222,007	)	$	(5,192	)	$	1,379,273		$	280,662		$	881,055		$	2,540,990

	Apollo Global Management, LLC Shareholders
	Class A Shares		Class B Shares	Series A Preferred Shares			Series B Preferred Shares			Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Apollo Global Management, LLC Shareholders’ Equity			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Apollo Operating Group			Total Shareholders’ Equity
Balance at January 1, 2018	195,267,669		1	$	264,398		$	—		$	1,579,797		$	(379,460	)	$	(1,809	)	$	1,462,926		$	140,086		$	1,294,784		$	2,897,796
Adoption of new accounting guidance	—		—	—			—			—			(8,149		)	—			(8,149		)	—			(11,210		)	(19,359		)
Dilution impact of issuance of Class A shares	—		—	—			—			104			—			—			104			—			—			104
Equity issued in connection with Preferred shares offering	—		—	—			289,815			—			—			—			289,815			—			—			289,815
Capital increase related to equity-based compensation	—		—	—			—			57,065			—			—			57,065			—			—			57,065
Capital contributions	—		—	—			—			—			—			—			—			146,518			—			146,518
Distributions	—		—	(8,766		)	(4,569		)	(219,162		)	—			—			(232,497		)	(21,634		)	(261,180		)	(515,311		)
Payments related to issuances of Class A shares for equity-based awards	1,986,612		—	—			—			—			(34,739		)	—			(34,739		)	—			—			(34,739		)
Repurchase of Class A shares	(849,785	)	—	—			—			(28,728		)	—			—			(28,728		)	—			—			(28,728		)
Exchange of AOG Units for Class A shares	5,180,600		—	—			—			40,231			—			—			40,231			—			(32,827		)	7,404
Net income (loss)	—		—	8,766			4,569			—			(7,987		)	—			5,348			14,695			14,419			34,462
Currency translation adjustments, net of tax	—		—	—			—			—			—			(1,229		)	(1,229		)	(10,503		)	(1,133		)	(12,865		)
Net gain from change in fair value of cash flow hedge instruments	—		—	—			—			—			—			26			26			—			26			52
Net loss on available-for-sale securities	—		—	—			—			—			—			(118		)	(118		)	—			(119		)	(237		)
Balance at June 30, 2018	201,585,096		1	$	264,398		$	289,815		$	1,429,307		$	(430,335	)	$	(3,130	)	$	1,550,055		$	269,162		$	1,002,760		$	2,821,977
Balance at January 1, 2019	201,400,500		1	$	264,398		$	289,815		$	1,299,418		$	(473,276	)	$	(4,159	)	$	1,376,196		$	271,522		$	804,122		$	2,451,840
Dilution impact of issuance of Class A shares	—		—	—			—			(25		)	—			—			(25		)	—			—			(25		)
Capital increase related to equity-based compensation	—		—	—			—			68,322			—			—			68,322			—			—			68,322
Capital contributions	—		—	—			—			—			—			—			—			526			—			526
Distributions	—		—	(8,766		)	(9,562		)	(214,620		)	—			—			(232,948		)	(3,159		)	(251,720		)	(487,827		)
Payments related to issuances of Class A shares for equity-based awards	2,511,101		—	—			—			4,830			(44,283		)	—			(39,453		)	—			—			(39,453		)
Repurchase of Class A shares	(3,576,014	)	—	—			—			(106,116		)	—			—			(106,116		)	—			—			(106,116		)
Exchange of AOG Units for Class A shares	100,000		—	—			—			450			—			—			450			—			(368		)	82
Net income	—		—	8,766			9,562			—			295,552			—			313,880			13,805			330,043			657,728
Currency translation adjustments, net of tax	—		—	—			—			—			—			(195		)	(195		)	(2,032		)	(178		)	(2,405		)
Net loss from change in fair value of cash flow hedge instruments	—		—	—			—			—			—			(952		)	(952		)	—			(960		)	(1,912		)
Net gain on available-for-sale securities	—		—	—			—			—			—			114			114			—			116			230
Balance at June 30, 2019	200,435,587		1	$	264,398		$	289,815		$	1,052,259		$	(222,007	)	$	(5,192	)	$	1,379,273		$	280,662		$	881,055		$	2,540,990

See accompanying notes to condensed consolidated financial statements.

- 11-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(dollars in thousands, except share data)

	For the Six Months Ended June 30,
	2019			2018
Cash Flows from Operating Activities:
Net income	$	657,728		$	34,462
Adjustments to reconcile net income to net cash provided by operating activities:
Equity-based compensation	89,739			73,309
Depreciation and amortization	7,392			7,574
Unrealized (gains) losses from investment activities	(63,088		)	140,517
Principal investment income	(65,627		)	(9,181		)
Performance allocations	(428,359		)	(4,920		)
Change in fair value of contingent obligations	20,051			(8,034		)
Deferred taxes, net	29,651			23,546
Net loss related to cash flow hedge instruments	(1,974		)	—
Non-cash lease expense	10,733			—
Other non-cash amounts included in net income, net	(18,413		)	(12,304		)
Cash flows due to changes in operating assets and liabilities:
Incentive fees receivable	6,792			(9,029		)
Due from related parties	(73,164		)	(48,586		)
Accounts payable and accrued expenses	18,898			5,593
Accrued compensation and benefits	39,209			47,837
Deferred revenue	(11,330		)	(17,279		)
Due to related parties	474			375
Profit sharing payable	125,076			(24,544		)
Lease liability	(11,075		)	—
Other assets and other liabilities, net	(32,560		)	(9,134		)
Cash distributions of earnings from principal investments	20,864			39,656
Cash distributions of earnings from performance allocations	123,142			257,128
Satisfaction of contingent obligations	(1,315		)	(2,564		)
Apollo Fund and VIE related:
Net realized and unrealized gains from investing activities and debt	(13,000		)	(20,714		)
Purchases of investments	(179,744		)	(288,914		)
Proceeds from sale of investments	186,778			279,606
Changes in other assets and other liabilities, net	13,732			(59,325		)
Net Cash Provided by Operating Activities	$	450,610		$	395,075
Cash Flows from Investing Activities:
Purchases of fixed assets	$	(9,624	)	$	(5,108	)
Proceeds from sale of investments	1,878			28,316
Purchase of investments	(15,048		)	(57,903		)
Purchase of U.S. Treasury securities	(541,530		)	(59,529		)
Proceeds from maturities of U.S. Treasury securities	229,322			425,830
Cash contributions to principal investments	(95,141		)	(160,346		)
Cash distributions from principal investments	33,434			53,770
Issuance of related party loans	(1,525		)	(1,650		)
Other investing activities	(13		)	171
Net Cash (Used in) Provided by Investing Activities	$	(398,247	)	$	223,551
Cash Flows from Financing Activities:
Principal repayments of debt	$	(29	)	$	(300,000	)
Issuance of Preferred shares, net of issuance costs	—			289,815
Distributions to Preferred Shareholders	(18,328		)	(13,335		)
Issuance of debt	1,005,964			299,676
Satisfaction of tax receivable agreement	(37,234		)	(50,267		)
Repurchase of Class A shares	(106,116		)	(52,482		)
Payments related to deliveries of Class A shares for RSUs	(44,283		)	(34,739		)
Distributions paid	(214,620		)	(219,162		)
Distributions paid to Non-Controlling Interests in Apollo Operating Group	(251,720		)	(261,180		)
Other financing activities	(17,509		)	(5,142		)
Apollo Fund and VIE related:
Principal repayment of debt	—			(92,153		)
Distributions paid to Non-Controlling Interests in consolidated entities	(1,207		)	(18,939		)
Contributions from Non-Controlling Interests in consolidated entities	305			147,189
Net Cash Provided by (Used in) Financing Activities	$	315,223		$	(310,719	)
Net Increase in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities	367,586			307,907
Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, Beginning of Period	662,875			848,060
Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, End of Period	$	1,030,461		$	1,155,967
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	29,440		$	25,706
Interest paid by consolidated variable interest entities	7,104			9,341
Income taxes paid	18,771			5,494
Supplemental Disclosure of Non-Cash Investing Activities:
Non-cash distributions from principal investments	$	(1,019	)	$	(24,902	)
Non-cash purchases of other investments, at fair value	—			194,003
Non-cash sales of other investments, at fair value	—			(46,623		)
Supplemental Disclosure of Non-Cash Financing Activities:
Capital increases related to equity-based compensation	$	68,322		$	57,065
Issuance of restricted shares	4,830			—
Other non-cash financing activities	(25		)	105
Adjustments related to exchange of Apollo Operating Group units:
Deferred tax assets	$	546		$	47,009
Due to related parties	(464		)	(39,605		)
Additional paid in capital	(82		)	(7,404		)
Non-Controlling Interest in Apollo Operating Group	368			32,827
Reconciliation of Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities to the Condensed Consolidated Statements of Financial Condition:
Cash and cash equivalents	$	945,725		$	1,093,125
Restricted cash	17,651			3,859
Cash held at consolidated variable interest entities	67,085			58,983
Total Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities	$	1,030,461		$	1,155,967

See accompanying notes to condensed consolidated financial statements.

- 12-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

1. ORGANIZATION

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

• Credit—primarily invests in non-control corporate and structured debt instruments including performing, stressed and distressed investments across the capital structure;

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

• Real assets—primarily invests in (i) real estate equity and infrastructure equity for the acquisition and recapitalization of real estate and infrastructure assets, portfolios, platforms and operating companies, (ii) real estate and infrastructure debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities and (iii) European performing and non-performing loans, and unsecured consumer loans.

Organization of the Company

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

As of June 30, 2019, the Company owned, through six intermediate holding companies, 49.8% of the economic interests of, and operated and controlled all of the businesses and affairs of, the Apollo Operating Group through its wholly owned subsidiaries.

AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partners and certain of the Company’s other partners (the “Contributing Partners”) indirectly beneficially own interests in each of the entities that comprise the Apollo Operating Group (“AOG Units”). As of June 30, 2019, Holdings owned the remaining 50.2% of the economic interests in the Apollo Operating Group. The Company consolidates the financial results of the Apollo Operating Group and its consolidated subsidiaries. Holdings’ ownership interest in the Apollo Operating Group is reflected as a Non-Controlling Interest in the accompanying condensed consolidated financial statements.

Conversion to a C Corporation

On May 2, 2019, the Company announced plans to convert from a publicly traded partnership to a C corporation. The conversion is expected to be effective during the third quarter of 2019. The details of the conversion remain subject to the approval of the conflicts committee of Apollo Global Management, LLC’s board of directors and certain required regulatory approvals.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements and these notes are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting only of normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the annual financial statements included in the 2018 Annual Report.

- 13-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities (“VIEs”) and for which the Company is considered the primary beneficiary, and certain entities which are not considered VIEs but which the Company controls through a majority voting interest. Intercompany accounts and transactions, if any, have been eliminated upon consolidation.

Certain reclassifications, when applicable, have been made to the prior periods’ condensed consolidated financial statements and notes to conform to the current period’s presentation and are disclosed accordingly.

Consolidation

The types of entities with which Apollo is involved generally include subsidiaries (e.g., general partners and management companies related to the funds the Company manages), entities that have all the attributes of an investment company (e.g., funds) and securitization vehicles (e.g., CLOs). Each of these entities is assessed for consolidation on a case by case basis depending on the specific facts and circumstances surrounding that entity.

Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity. Fees that are customary and commensurate with the level of services provided, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered a variable interest. Apollo factors in all economic interests including proportionate interests through related parties, to determine if such interests are considered a variable interest. As Apollo’s interests in many of these entities are solely through market rate fees and/or insignificant indirect interests through related parties, Apollo is not considered to have a variable interest in many of these entities and no further consolidation analysis is performed. For entities where the Company has determined that it does hold a variable interest, the Company performs an assessment to determine whether each of those entities qualify as a VIE.

The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity and therefore certain of Apollo’s funds may qualify as VIEs under the variable interest model whereas others may qualify as voting interest entities (“VOEs”) under the voting interest model. The granting of substantive kick-out rights is a key consideration in determining whether a limited partnership or similar entity is a VIE and whether or not that entity should be consolidated.

Under the variable interest model, Apollo consolidates those entities where it is determined that the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it has a controlling financial interest in the VIE, which is defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. When Apollo alone is not considered to have a controlling financial interest in the VIE but Apollo and its related parties under common control in the aggregate have a controlling financial interest in the VIE, Apollo will be deemed the primary beneficiary if it is the party that is most closely associated with the VIE. When Apollo and its related parties not under common control in the aggregate have a controlling financial interest in the VIE, Apollo would be deemed to be the primary beneficiary if substantially all the activities of the entity are performed on behalf of Apollo.

Apollo determines whether it is the primary beneficiary of a VIE at the time it becomes initially involved with the VIE and reconsiders that conclusion continuously. Investments and redemptions (either by Apollo, related parties of Apollo or third parties) or amendments to the governing documents of the respective entity may affect an entity’s status as a VIE or the determination of the primary beneficiary.

Assets and liabilities of the consolidated VIEs are primarily shown in separate sections within the condensed consolidated statements of financial condition. Changes in the fair value of the consolidated VIEs’ assets and liabilities and related interest, dividend and other income and expenses are presented within net gains from investment activities of consolidated variable interest entities in the condensed consolidated statements of operations. The portion attributable to Non-Controlling Interests is reported within net income attributable to Non-Controlling Interests in the condensed consolidated statements of operations. For additional disclosures regarding VIEs, see note 5.

Under the voting interest model, Apollo consolidates those entities it controls through a majority voting interest. Apollo does not consolidate those VOEs in which substantive kick-out rights have been granted to the unrelated investors to either dissolve the fund or remove the general partner.

- 14-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Cash and Cash Equivalents

Apollo considers all highly liquid short-term investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include money market funds and U.S. Treasury securities with original maturities of three months or less when purchased. Interest income from cash and cash equivalents is recorded in interest income in the condensed consolidated statements of operations. The carrying values of the money market funds and U.S. Treasury securities were $313.8 million and $231.8 million as of June 30, 2019 and December 31, 2018, respectively, which approximate their fair values due to their short-term nature and are categorized as Level I within the fair value hierarchy. Substantially all of the Company’s cash on deposit is in interest bearing accounts with major financial institutions and exceed insured limits.

Restricted Cash

Restricted cash includes cash held in reserve accounts used to make required payments in respect of the 2039 Senior Secured Guaranteed Notes. Restricted cash also includes cash deposited at a bank, which is pledged as collateral in connection with leased premises.

U.S. Treasury securities, at fair value

U.S. Treasury securities, at fair value includes U.S. Treasury bills with original maturities greater than three months when purchased. These securities are recorded at fair value. Interest income on such securities is separately presented from the overall change in fair value and is recognized in interest income in the condensed consolidated statements of operations. Any remaining change in fair value of such securities, that is not recognized as interest income, is recognized in net gains (losses) from investment activities in the condensed consolidated statements of operations.

Fair Value of Financial Instruments

Apollo has elected the fair value option for the Company’s investment in Athene Holding, the assets and liabilities of certain of its consolidated VIEs (including CLOs), the Company’s U.S. Treasury securities with original maturities greater than three months when purchased, and certain of the Company’s other investments. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition.

The fair value of a financial instrument is 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 under current market conditions.

Except for the Company’s debt obligations, financial instruments are generally recorded at fair value or at amounts whose carrying values approximate fair value. The actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based.

Fair Value Hierarchy

U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

Level I - Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments included in Level I include listed equities and debt. The Company does not adjust the quoted price for these financial instruments, 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.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Financial instruments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observable inputs. These financial instruments exhibit higher levels of liquid market observability as compared to Level III financial instruments.

Level III - Pricing inputs are unobservable for the financial instrument and includes situations where there is little observable market activity for the financial instrument. The inputs into the determination of fair value may require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partner interests in corporate private equity and real assets funds, opportunistic credit funds, distressed debt and non-investment grade residual interests in securitizations and CDOs and CLOs where the fair value is based on observable inputs as well as unobservable inputs.

When a security is valued based on broker quotes, the Company subjects those quotes to various criteria in making the determination as to whether a particular financial instrument would qualify for classification as Level II or Level III. These criteria include, but are not limited to, the number and quality of the broker quotes, the standard deviations of the observed broker quotes, and the percentage deviation from 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, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument when the fair value is based on unobservable inputs.

Equity Method Investments

For investments in entities over which the Company exercises significant influence but which do not meet the requirements for consolidation and for which the Company has not elected the fair value option, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or loss of such entities. The Company’s share of the underlying net income or loss of such entities is recorded in principal investment income in the condensed consolidated statements of operations.

The carrying amounts of equity method investments are recorded in investments in the condensed consolidated statements of financial condition. As the underlying entities that the Company manages and invests in are, for U.S. GAAP purposes, primarily investment companies which reflect their investments at estimated fair value, the carrying value of the Company’s equity method investments in such entities approximates fair value.

Financial Instruments held by Consolidated VIEs

The Company measures both the financial assets and financial liabilities of the consolidated CLOs in its condensed consolidated financial statements using the fair value of the financial assets of the consolidated CLOs, which are more observable than the fair value of the financial liabilities of the consolidated CLOs. As a result, the financial assets of the consolidated CLOs are measured at fair value and the financial liabilities are measured in consolidation as: (i) the sum of the fair value of the financial assets and the carrying value of any non-financial assets that are incidental to the operations of the CLOs less (ii) the sum of the fair value of any beneficial interests retained by the Company (other than those that represent compensation for services) and the Company’s carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financial liabilities (other than the beneficial interest retained by the Company) using a reasonable and consistent methodology. Under the measurement alternative, net income attributable to Apollo Global Management, LLC reflects the Company’s own economic interests in the consolidated CLOs including (i) changes in the fair value of the beneficial interests retained by the Company and (ii) beneficial interests that represent compensation for collateral management services.

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

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

interest and yield risks, among other factors. When market quotations are not available, a model based approach is used to determine fair value.

Leases

The Company determines if an arrangement is a lease or contains a lease at inception. Operating leases are included in lease assets and lease liabilities in the condensed consolidated statements of financial condition. The Company does not have any finance leases.

Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease assets and lease liabilities are recognized at the date of commencement of the lease (the “commencement date”) based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its derived incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The determination of an appropriate incremental borrowing rate requires judgment. The Company determined its incremental borrowing rate based on consideration of market conditions, the Company’s overall creditworthiness, and recent debt and preferred equity issuances. The Company adjusts its rate accordingly based on the term of the leases.

Lease assets also include any lease payments made (e.g. pre-paid rent) and are reduced by any deferred rent liabilities arising from lease escalation provisions and lease incentives within the Company’s lease agreements. Accordingly, as of June 30, 2019, the difference between lease assets and lease liabilities represents the Company’s deferred rent liabilities that are netted against the lease asset amount. Certain lease agreements contain lease escalation or lease incentive provisions based on the terms of the arrangement with the landlord. Lease escalations and lease incentives, if any, are recognized on a straight-line basis over the lease term. The Company’s lease agreements may also include options to extend or terminate the lease. Options to extend would not be included in the lease term until it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term and is recorded within general, administrative and other in the condensed consolidated statements of operations. The Company has lease agreements with non-lease components (e.g. estimated operating expenses associated with the lease), which are accounted for separately.

Other Assets

Other assets primarily includes fixed assets, net, deferred equity-based compensation and prepaid expenses. During 2019, the presentation of intangible assets, net was combined with other assets on the condensed consolidated statements of financial condition and the prior period was recast to conform to the current presentation.

Deferred Revenue

Apollo records deferred revenue, which is a type of contract liability, when consideration is received in advance of management services provided.

Apollo also earns management fees subject to the Management Fee Offset (described below). When advisory and transaction fees are earned by the management company, the Management Fee Offset reduces the management fee obligation of the fund. When the Company receives cash for advisory and transaction fees, a certain percentage of such advisory and/or transaction fees, as applicable, is allocated as a credit to reduce future management fees, otherwise payable by such fund. Such credit is recorded as deferred revenue in the condensed consolidated statements of financial condition. A portion of any excess advisory and transaction fees may be required to be returned to the limited partners of certain funds upon such fund’s liquidation. As the management fees earned by the Company are presented on a gross basis, any Management Fee Offsets calculated are presented as a reduction to advisory and transaction fees in the condensed 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 owned by the funds Apollo manages. When Apollo receives a payment from a portfolio company that exceeds the advisory fees earned at that point in time, the excess payment is recorded as deferred revenue in the condensed consolidated statements of financial condition. The advisory agreements with the portfolio companies vary in duration and the associated fees are received monthly, quarterly or annually. Deferred revenue is reversed and recognized as revenue over the period that the agreed upon services are performed. There was $55.4 million of revenue recognized during the six months ended June 30, 2019 that was previously deferred as of January 1, 2019.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Under the terms of the funds’ partnership agreements, Apollo is normally required to bear organizational expenses over a set dollar amount and placement fees or costs in connection with the offering and sale of interests in the funds it manages to investors. The placement fees are payable to placement agents, who are independent third parties that assist in identifying potential investors, securing commitments to invest from such potential investors, preparing or revising offering and marketing materials, developing strategies for attempting to secure investments by potential investors and/or providing feedback and insight regarding issues and concerns of potential investors, when a limited partner either commits or funds a commitment to a fund. In certain instances the placement fees are paid over a period of time. Based on the management agreements with the funds, Apollo considers placement fees and organizational costs paid in determining if cash has been received in excess of the management fees earned. Placement fees and organizational costs are normally the obligation of Apollo 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 deferred revenue balance will also be reduced during future periods when management fees are earned but not paid.

Revenues

The Company’s revenues are reported in four separate categories that include (i) management fees; (ii) advisory and transaction fees, net; (iii) investment income, which is comprised of performance allocations and principal investment income; and (iv) incentive fees.

On January 1, 2018, the Company adopted new revenue guidance issued by the FASB for recognizing revenue from contracts with customers. The new revenue guidance requires that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services (i.e., the transaction price). When determining the transaction price under the new revenue guidance, an entity may recognize variable consideration only to the extent that it is probable to not be significantly reversed. The new revenue guidance also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized.

The Company has concluded that its management fees, advisory and transaction fees, and incentive fees are within the scope of the new revenue guidance. For incentive fees, the new revenue guidance delays the timing of certain revenues compared to the prior accounting treatment. These amounts were previously recognized in carried interest income in the condensed consolidated statements of operations and are now recognized within a separate line, incentive fees.

Effective January 1, 2018, the Company implemented a change in accounting principle for performance allocations to be accounted for under guidance applicable to equity method investments, and therefore not within the scope of the new revenue guidance. The accounting change does not change the timing or amount of revenue recognized related to performance allocation arrangements. These amounts were previously recognized within carried interest income in the condensed consolidated statements of operations and carried interest receivable within the condensed consolidated statements of financial condition. As a result of the change in accounting principle, the Company recognizes performance allocations within investment income along with the related principal investment income (as further described below) in the condensed consolidated statements of operations and within the investments line in the condensed consolidated statements of financial condition. The Company applied this change in accounting principle on a full retrospective basis.

Management Fees

Management fees are recognized over time during the periods in which the related services are performed in accordance with the contractual terms of the related agreement. Management fees are generally based on (1) a percentage of the capital committed during the commitment period, and thereafter based on the remaining invested capital of unrealized investments, or (2) net asset value, gross assets or as otherwise defined in the respective agreements. Included in management fees are certain expense reimbursements where the Company is considered the principal under the agreements and is required to record the expense and related reimbursement revenue on a gross basis.

Advisory and Transaction Fees, Net

Advisory fees, including management consulting fees and directors’ fees, are generally recognized over time as the underlying services are provided in accordance with the contractual terms of the related agreement. The Company receives such fees in exchange for ongoing management consulting services provided to portfolio companies of funds it manages. Transaction fees, including structuring fees and arranging fees are generally recognized at a point in time when the underlying services rendered are complete.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The amounts due from fund portfolio companies are recorded in due from related parties, which is discussed further in note 14. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Advisory and transaction fees are presented net of the Management Fee Offset in the condensed consolidated statements of operations.

Underwriting fees, which are also included within advisory and transaction fees, net, include gains, losses and fees, arising from securities offerings in which one of the Company’s subsidiaries participates in the underwriter syndicate. Underwriting fees are recognized at a point in time when the underwriting is completed. Underwriting fees recognized but not received are recorded in other assets on the condensed consolidated statements of financial condition.

During the normal course of business, the Company incurs certain costs related to certain transactions that are not consummated (“broken deal costs”). These costs (e.g., research costs, due diligence costs, professional fees, legal fees and other related items) are determined to be broken deal costs upon management’s decision to no longer pursue the transaction. In accordance with the related fund agreement, in the event the deal is deemed broken, all of the costs are reimbursed by the funds and then included as a component of the calculation of the Management Fee Offset. If a deal is successfully completed, Apollo is reimbursed by the fund or fund’s portfolio company for all costs incurred and no offset is generated. As the Company acts as an agent for the funds it manages, any transaction costs incurred and paid by the Company on behalf of the respective funds relating to successful or broken deals are recorded net on the Company’s condensed consolidated statements of operations, and any receivable from the respective funds is recorded in due from related parties on the condensed consolidated statements of financial condition.

Investment Income

Investment income is comprised of performance allocations and principal investment income.

Performance Allocations

Performance allocations are a type of performance revenue (i.e., income earned based on the extent to which an entity’s performance exceeds predetermined thresholds). Performance allocations are generally structured from a legal standpoint as an allocation of capital in which the Company’s capital account receives allocations of the returns of an entity when those returns exceed predetermined thresholds. The determination of which performance revenues are considered performance allocations is primarily based on the terms of an agreement with the entity.

As noted above, as a result of a change in accounting principle, the Company recognizes performance allocations within investment income along with the related principal investment income (as described further below) in the condensed consolidated statements of operations and within the investments line in the condensed consolidated statements of financial condition.

Principal Investment Income

Principal investment income includes the Company’s income or loss from equity method investments and certain other investments in entities in which the Company is generally eligible to receive performance allocations. Income from equity method investments includes the Company’s share of net income or loss generated from its investments, which are not consolidated, but in which the Company exerts significant influence. Prior to the change in accounting principle noted above, income from equity method investments was included within other income (loss) in the condensed consolidated statements of operations. All prior periods have been conformed to reflect this change in presentation.

Incentive Fees

Incentive fees are a type of performance revenue. Incentive fees differ from performance allocations in that incentive fees do not represent an allocation of capital but rather a contractual fee arrangement with the entity.

Incentive fees are considered a form of variable consideration under the new revenue recognition guidance as they are subject to clawback or reversal and therefore must be deferred until the fees are probable to not be significantly reversed. Accrued but unpaid incentive fees are reported within incentive fees receivable in the Company’s condensed consolidated statements of financial condition. As noted earlier, prior to the adoption of the new revenue recognition guidance, incentive fees were recognized on an assumed liquidation basis. The Company’s incentive fees primarily relate to the credit segment and are generally received from CLOs, managed accounts and AINV.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Compensation and Benefits

Equity-Based Compensation

Equity-based awards granted to employees and non-employees as compensation are measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are expensed over the relevant service period. In addition, certain restricted share units (“RSUs”) granted by the Company vest based on both continued service and the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed probable. The Company accounts for forfeitures of equity-based awards when they occur.

Profit Sharing

Profit sharing expense and profit sharing payable primarily consist of a portion of performance revenues earned from certain funds that are allocated to employees, former employees and Contributing Partners. Profit sharing amounts are recognized as the related performance revenues are earned. Accordingly, profit sharing amounts can be reversed during periods when there is a decline in performance revenues that were previously recognized.

Profit sharing amounts are generally not paid until the related performance revenue is distributed to the general partner upon realization of the fund’s investments. Under certain profit sharing arrangements, the Company requires that a portion of certain of the performance revenues distributed to its employees be used to purchase Class A restricted shares issued under the Company’s 2007 Omnibus Equity Incentive Plan, which, effective as of July 22, 2019, was amended, restated and renamed the 2019 Omnibus Equity Incentive Plan (the “Equity Plan”). Prior to distribution of the performance revenue, the Company records the value of the equity-based awards expected to be granted in other assets and other liabilities within the condensed consolidated statements of financial condition. Such equity-based awards are recorded as equity-based compensation expense over the relevant service period once granted.

Additionally, profit sharing amounts previously distributed may be subject to clawback from employees, former employees and Contributing Partners. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the condensed consolidated statements of financial condition, represents all amounts previously distributed to employees, former employees and Contributing Partners that would need to be returned to the general partner if the Apollo funds were to be liquidated based on the fair value of the underlying funds’ investments as of the reporting date. The actual general partner receivable, however, would not become realized until the end of a fund’s life.

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

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

401(k) Savings Plan

The Company sponsors a 401(k) savings plan (the “401(k) Plan”) whereby U.S.-based employees are entitled to participate in the 401(k) Plan based upon satisfying certain eligibility requirements. The Company matches 50% of eligible annual employee contributions up to 3% of the eligible employees’ annual compensation. Matching contributions vest after three years of service.

General, Administrative and Other

General, administrative and other primarily includes professional fees, occupancy, depreciation and amortization, travel, information technology and administration expenses.

- 20-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimates include goodwill, intangible assets, income taxes, performance allocations, incentive fees, contingent consideration obligation related to an acquisition, non-cash compensation, and fair value of investments and debt. Actual results could differ materially from those estimates.

Recent Accounting Pronouncements

Recently Issued Accounting Standards Effective on January 1, 2019

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use lease assets and lease liabilities on the statements of financial condition. The most significant among the changes in the standard is the recognition of right-of-use lease assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objectives of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted the standard effective January 1, 2019 under the simplified transition method. The simplified transition method allows companies to forgo the comparative reporting requirements initially required under the modified retrospective transition approach and apply the new guidance prospectively. The Company also elected to use the practical expedients available under the standard whereby the Company would not need to reassess whether an arrangement is or contains a lease, lease classification, and the accounting for initial direct costs.

The adoption of the standard had an impact on the Company’s condensed consolidated statements of financial condition but did not have an impact on the Company’s condensed consolidated statements of operations, condensed consolidated statements of cash flows or beginning accumulated deficit. The most significant impact was the recognition of right-of-use lease assets and lease liabilities for operating leases. Refer to the condensed consolidated statements of financial condition and note 8 for further information on the impact of the adoption of the standard on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Standards Effective on January 1, 2020

In January 2017, the FASB issued guidance to simplify the test for goodwill impairment. The new guidance removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment (Step 2). Under the new guidance, a goodwill impairment is calculated as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill in the reporting unit. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be performed prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The guidance is not expected to have a material impact on the condensed consolidated financial statements of the Company.

3. INVESTMENTS

The following table presents Apollo’s investments: 

	As of June 30, 2019		As of December 31, 2018
Investments, at fair value	$	981,723	$	900,959
Equity method investments	1,008,333		909,471
Performance allocations	1,229,894		912,182
Total Investments	$	3,219,950	$	2,722,612

Investments, at Fair Value

Investments, at fair value, consist of investments for which the fair value option has been elected and primarily include the Company’s investment in Athene Holding and investments in debt of unconsolidated CLOs. Changes in the fair value related to these investments are presented in net gains (losses) from investment activities except for certain investments for which the

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Company is entitled to receive performance allocations. For those investments, changes in fair value are presented in principal investment income.

As of June 30, 2019 and for the three and six months ended June 30, 2019, no equity method investment held by Apollo met the significance criteria as defined by the SEC. Although the following disclosure is not required by the significance criteria for the six months ended June 30, 2019, the Company chose to continue to include this information as it was disclosed in its 2018 Annual Report. The following table presents summarized financial information of Athene Holding:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019(1)		2018		2019(1)			2018
	(in millions)
Statements of Operations
Revenues	$	4,961	$	1,802	$	6,115		$	2,813
Expenses	4,221		1,481		5,522			2,170
Income before income tax provision	740		321		593			643
Income tax provision	32		64		(11		)	109
Net income	$	708	$	257	$	604		$	534

(1) The financial information for the three and six months ended June 30, 2019 is presented a quarter in arrears and reflects the financial information for the three and six months ended March 31, 2019, which represents the latest available financial information as of the date of this report.

Net Gains (Losses) from Investment Activities

The following table presents the realized and net change in unrealized gains (losses) reported in net gains (losses) from investment activities: 

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019		2018			2019		2018
Realized gains on sales of investments, net	$	182	$	—		$	45	$	66
Net change in unrealized gains (losses) due to changes in fair value	44,878		(67,505		)	63,844		(134,704		)
Net gains (losses) from investment activities	$	45,060	$	(67,505	)	$	63,889	$	(134,638	)

Equity Method Investments

Apollo’s equity method investments include its investments in the credit, private equity and real assets funds it manages, which are not consolidated, but in which the Company exerts significant influence. Apollo’s share of net income generated by these investments is recorded in principal investment income in the condensed consolidated statements of operations.

Equity method investments consisted of the following:

	Equity Held as of
	June 30, 2019		(4)	December 31, 2018		(4)
Credit(2)	$	302,743		$	279,888
Private Equity(1)	609,141			534,818
Real Assets	96,449			94,765
Total equity method investments(3)	$	1,008,333		$	909,471

(1) The equity method investment in Fund VIII was $381.8 million and $356.6 million as of June 30, 2019 and December 31, 2018, respectively, representing an ownership percentage of 2.2% and 2.2% as of June 30, 2019 and December 31, 2018, respectively.

(2) The equity method investment in AINV was $52.3 million and $53.9 million as of June 30, 2019 and December 31, 2018, respectively. The value of the Company’s investment in AINV was $46.4 million and $36.7 million based on the quoted market price of AINV as of June 30, 2019 and December 31, 2018, respectively.

(3) Certain funds invest across multiple segments. The presentation in the table above is based on the classification of the majority of such funds’ investments.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

(4) Some amounts included are a quarter in arrears.

Performance Allocations

Performance allocations from credit, private equity and real assets funds consisted of the following: 

	As of June 30, 2019		As of December 31, 2018
Credit	$	332,950	$	241,896
Private Equity	755,804		520,892
Real Assets	141,140		149,394
Total performance allocations	$	1,229,894	$	912,182

The table below provides a roll forward of the performance allocations balance:

	Credit			Private Equity			Real Assets			Total
Performance allocations, January 1, 2019	$	241,896		$	520,892		$	149,394		$	912,182
Change in fair value of funds	138,743			307,454			(5,343		)	440,854
Fund distributions to the Company	(47,689		)	(72,542		)	(2,911		)	(123,142		)
Performance allocations, June 30, 2019	$	332,950		$	755,804		$	141,140		$	1,229,894

The change in fair value of funds excludes the reversal of previously realized performance allocations due to the general partner obligation to return previously distributed performance allocations, which is recorded in due to related parties in the consolidated statements of financial condition. See note 14 for further disclosure regarding the general partner obligation.

The timing of the payment of performance allocations due to the general partner or investment manager varies depending on the terms of the applicable fund agreements. Generally, performance allocations with respect to the private equity funds and certain credit and real assets funds are payable and are distributed to the fund’s general partner upon realization of an investment if the fund’s cumulative returns are in excess of the preferred return.

4. PROFIT SHARING PAYABLE

Profit sharing payable consisted of the following:

	As of June 30, 2019		As of December 31, 2018
Credit	$	233,212	$	178,093
Private Equity	301,085		205,617
Real Assets	61,657		68,431
Total profit sharing payable	$	595,954	$	452,141

The table below provides a roll forward of the profit sharing payable balance:

	Credit			Private Equity			Real Assets			Total
Profit sharing payable, January 1, 2019	$	178,093		$	205,617		$	68,431		$	452,141
Profit sharing expense	76,152			124,951			(3,350		)	197,753
Payments/other	(21,033		)	(29,483		)	(3,424		)	(53,940		)
Profit sharing payable, June 30, 2019	$	233,212		$	301,085		$	61,657		$	595,954

Profit sharing expense includes (i) changes in amounts payable to employees and former employees entitled to a share of performance revenues in Apollo’s funds and (ii) changes to the fair value of the contingent consideration obligations recognized in connection with certain Apollo acquisitions. Profit sharing expense excludes the potential return of profit sharing distributions that would be due if certain funds were liquidated, which is recorded in due from related parties in the consolidated statements of financial condition. See note 14 for further disclosure regarding the potential return of profit sharing distributions.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

As discussed in note 2, under certain profit sharing arrangements, the Company requires that a portion of certain of the performance revenues distributed to its employees be used to purchase Class A restricted shares issued under its Equity Plan. Prior to distribution of the performance revenues, the Company records the value of the equity-based awards expected to be granted in other assets and other liabilities within the condensed consolidated statements of financial condition. See note 7 for further disclosure regarding deferred equity-based compensation.

5. VARIABLE INTEREST ENTITIES

As described in note 2, the Company consolidates entities that are VIEs for which the Company has been designated as the primary beneficiary. There is no recourse to the Company for the consolidated VIEs’ liabilities.

Consolidated Variable Interest Entities

Apollo has consolidated VIEs in accordance with the policy described in note 2. Through its role as investment manager of these VIEs, the Company determined that Apollo has the power to direct the activities that most significantly impact the economic performance of these VIEs. Additionally, Apollo determined that its interests, both directly and indirectly from these VIEs, represent rights to returns that could potentially be significant to such VIEs. As a result, Apollo determined that it is the primary beneficiary and therefore should consolidate the VIEs.

Certain CLOs are consolidated by Apollo as the Company is considered to hold a controlling financial interest through direct and indirect interests in these CLOs exclusive of management and performance-based fees received. Through its role as collateral manager of these VIEs, the Company determined that Apollo has the power to direct the activities that most significantly impact the economic performance of these VIEs. These CLOs were formed for the sole purpose of issuing collateralized notes to investors. The assets of these VIEs are primarily comprised of senior secured loans and the liabilities are primarily comprised of debt.

The assets of consolidated CLOs are not available to creditors of the Company. In addition, the investors in these consolidated CLOs have no recourse against the assets of the Company. The Company measures both the financial assets and the financial liabilities of the CLOs using the fair value of the financial assets as further described in note 2. The Company has elected the fair value option for financial instruments held by its consolidated CLOs, which includes investments in loans and corporate bonds, as well as debt obligations and contingent obligations held by such consolidated CLOs. Other assets include amounts due from brokers and interest receivables. Other liabilities include payables for securities purchased, which represent open trades within the consolidated CLOs and primarily relate to corporate loans that are expected to settle within 60 days. As of June 30, 2019 and December 31, 2018, the Company held investments of $44.1 million and $44.2 million, respectively, in consolidated foreign currency denominated CLOs, which eliminate in consolidation.

Net Gains from Investment Activities of Consolidated Variable Interest Entities

The following table presents net gains from investment activities of the consolidated VIEs:

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2019			(1)	2018			(1)	2019			(1)	2018			(1)
Net gains (losses) from investment activities	$	5,805			$	(9	)		$	23,787			$	5,313
Net gains (losses) from debt	(2,134		)		6,824				(11,070		)		8,174
Interest and other income	8,454				9,148				13,415				18,727
Interest and other expenses	(7,494		)		(6,750		)		(12,035		)		(16,469		)
Net gains from investment activities of consolidated variable interest entities	$	4,631			$	9,213			$	14,097			$	15,745

(1) Amounts reflect consolidation eliminations.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Senior Secured Notes, Subordinated Notes and Secured Borrowings

Included within debt are amounts due to third-party institutions by the consolidated VIEs. The following table summarizes the principal provisions of the debt of the consolidated VIEs:

	As of June 30, 2019						As of December 31, 2018
	Principal Outstanding		Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years	Principal Outstanding		Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years
Senior Secured Notes(2)	$	762,652	1.67	%		10.7	$	768,860	1.67	%		11.2
Subordinated Notes(2)	94,913		N/A		(1)	20.9	95,686		N/A		(1)	21.4
Secured Borrowings(2)(3)	18,976		3.92	%		8.3	18,976		3.42	%		8.8
Total	$	876,541					$	883,522

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

(2) The debt of the consolidated VIEs is collateralized by assets of the consolidated VIEs and assets of one vehicle may not be used to satisfy the liabilities of another vehicle. The fair value of the debt and collateralized assets of the Senior Secured Notes, Subordinated Notes and Secured Borrowings are presented below:

	As of June 30, 2019		As of December 31, 2018
Debt, at fair value	$	859,357	$	855,461
Collateralized assets	$	1,309,703	$	1,290,891

(3) Secured borrowings consist of a consolidated VIE’s obligation through a repurchase agreement redeemable at maturity with a third party lender. The fair value of the secured borrowings as of June 30, 2019 and December 31, 2018 was $19.0 million and $19.0 million, respectively.

The consolidated VIEs’ debt obligations contain various customary loan covenants. As of June 30, 2019, the Company was not aware of any instances of non-compliance with any of these covenants.

As of June 30, 2019, the contractual maturities for debt of the consolidated VIEs is greater than 5 years.

Variable Interest Entities Which are Not Consolidated

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

- 25-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

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

	As of June 30, 2019		As of December 31, 2018
Assets:
Cash	$	216,907	$	404,660
Investments	5,578,049		4,919,118
Receivables	82,171		126,873
Total Assets	$	5,877,127	$	5,450,651
Liabilities:
Debt and other payables	$	3,433,437	$	3,673,219
Total Liabilities	$	3,433,437	$	3,673,219
Apollo Exposure(1)	$	257,538	$	244,894

(1) Represents Apollo’s direct investment in those entities in which Apollo holds a significant variable interest and certain other investments. Additionally, cumulative performance allocations are subject to reversal in the event of future losses, as discussed in note 15.

6. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

The following tables summarize the Company’s financial assets and financial liabilities recorded at fair value by fair value hierarchy level:

	As of June 30, 2019
	Level I		Level II		Level III			Total		Cost
Assets
U.S. Treasury securities, at fair value	$	713,061	$	—	$	—		$	713,061	$	697,589
Investments, at fair value:
Investment in Athene Holding	823,573		—		—			823,573		592,561
Other investments	—		43,711		114,439		(1)	158,150		137,549
Total investments, at fair value	823,573		43,711		114,439			981,723		730,110
Investments of VIEs, at fair value	—		881,583		301,066			1,182,649
Investments of VIEs, valued using NAV	—		—		—			838
Total investments of VIEs, at fair value	—		881,583		301,066			1,183,487
Derivative assets(2)	—		279		—			279
Total Assets	$	1,536,634	$	925,573	$	415,505		$	2,878,550
Liabilities
Liabilities of VIEs, at fair value	$	—	$	859,357	$	—		$	859,357
Contingent consideration obligations(3)	—		—		93,223			93,223
Derivative liabilities(2)	—		286		—			286
Total Liabilities	$	—	$	859,643	$	93,223		$	952,866

- 26-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

	As of December 31, 2018
	Level I		Level II		Level III			Total		Cost
Assets
U.S. Treasury securities, at fair value	$	392,932	$	—	$	—		$	392,932	$	390,336
Investments, at fair value:
Investment in Athene Holding	761,807		—		—			761,807		592,572
Other investments	—		42,782		96,370		(1)	139,152		124,379
Total investments, at fair value	761,807		42,782		96,370			900,959		716,951
Investments of VIEs, at fair value	—		877,427		295,987			1,173,414
Investments of VIEs, valued using NAV	—		—		—			2,263
Total investments of VIEs, at fair value	—		877,427		295,987			1,175,677
Derivative assets(2)	—		388		—			388
Total Assets	$	1,154,739	$	920,597	$	392,357		$	2,469,956
Liabilities
Liabilities of VIEs, at fair value	$	—	$	855,461	$	—		$	855,461
Contingent consideration obligations(3)	—		—		74,487			74,487
Derivative liabilities(2)	—		681		—			681
Total Liabilities	$	—	$	856,142	$	74,487		$	930,629

(1) Other investments as of June 30, 2019 and December 31, 2018 excludes $24.0 million and $17.0 million, respectively, of performance allocations classified as Level III related to certain investments for which the Company has elected the fair value option. The Company’s policy is to account for performance allocations as investments.

(2) Derivative assets and derivative liabilities are presented as a component of Other assets and Other liabilities, respectively, in the condensed consolidated statements of financial condition.

(3) Profit sharing payable includes contingent obligations classified as Level III.

The following tables summarize the changes in financial assets measured at fair value for which Level III inputs have been used to determine fair value:

	For the Three Months Ended June 30, 2019
	Other Investments			Investments of Consolidated VIEs		Total
Balance, Beginning of Period	$	109,351		$	293,448	$	402,799
Sales of investments/distributions	(819		)	—		(819		)
Changes in net unrealized gains	4,755			3,252		8,007
Cumulative translation adjustment	1,299			4,366		5,665
Transfer out of Level III(1)	(147		)	—		(147		)
Balance, End of Period	$	114,439		$	301,066	$	415,505
Change in net unrealized gains included in net gains from investment activities related to investments still held at reporting date	$	4,755		$	—	$	4,755
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date	—			3,253		3,253

- 27-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

	For the Three Months Ended June 30, 2018
	Other Investments			Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	57,292		$	293,260		$	350,552
Purchases	—			(4,665		)	(4,665		)
Sale of investments/distributions	(1		)	(2,544		)	(2,545		)
Net realized gains	2			48			50
Changes in net unrealized gains	1,635			8,210			9,845
Cumulative translation adjustment	(2,615		)	(8,030		)	(10,645		)
Transfer into Level III(2)	4,558			—			4,558
Transfer out of Level III(1)	—			(17,656		)	(17,656		)
Balance, End of Period	$	60,871		$	268,623		$	329,494
Change in net unrealized gains included in net gains from investment activities related to investments still held at reporting date	$	1,637		$	—		$	1,637
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date	—			9,951			9,951

	For the Six Months Ended June 30, 2019
	Other Investments			Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	96,370		$	295,987		$	392,357
Purchases	15,048			—			15,048
Sale of investments/distributions	(1,878		)	—			(1,878		)
Changes in net unrealized gains	6,573			11,172			17,745
Cumulative translation adjustment	(745		)	(1,977		)	(2,722		)
Transfer out of Level III(1)	(929		)	(4,116		)	(5,045		)
Balance, End of Period	$	114,439		$	301,066		$	415,505
Change in net unrealized gains included in principal investment income related to investments still held at reporting date	$	6,573		$	—		$	6,573
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date	—			11,173			11,173

	For the Six Months Ended June 30, 2018
	Other Investments			Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	35,701		$	132,348		$	168,049
Purchases	65,762			137,822			203,584
Sale of investments/distributions	(28,316		)	(14,205		)	(42,521		)
Net realized gains (losses)	415			(1,112		)	(697		)
Changes in net unrealized gains	1,420			17,119			18,539
Cumulative translation adjustment	(929		)	(4,476		)	(5,405		)
Transfer into Level III(1)	4,558			18,783			23,341
Transfer out of Level III(1)	(17,740		)	(17,656		)	(35,396		)
Balance, End of Period	$	60,871		$	268,623		$	329,494
Change in net unrealized losses included in principal investment income related to investments still held at reporting date	$	1,420		$	—		$	1,420
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date	—			15,963			15,963

(1) Transfers between Level II and III were a result of subjecting the broker quotes on these financial assets to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes and the percentage deviation from independent pricing services.

- 28-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following table summarizes the changes in fair value in financial liabilities measured at fair value for which Level III inputs have been used to determine fair value:

	For the Three Months Ended June 30,
	2019		2018
	Contingent Consideration Obligations		Contingent Consideration Obligations
Balance, Beginning of Period	$	76,500	$	90,500
Changes in net unrealized (gains) losses(1)	16,723		(8,500		)
Balance, End of Period	$	93,223	$	82,000

	For the Six Months Ended June 30,
	2019			2018
	Contingent Consideration Obligations			Liabilities of Consolidated VIEs & Apollo Funds			Contingent Consideration Obligations			Total
Balance, Beginning of Period	$	74,487		$	12,620		$	92,600		$	105,220
Payments	(1,315		)	(12,620		)	(2,564		)	(15,184		)
Changes in net unrealized (gains) losses(1)	20,051			—			(8,036		)	(8,036		)
Balance, End of Period	$	93,223		$	—		$	82,000		$	82,000

(1) Changes in fair value of contingent consideration obligations are recorded in profit sharing expense in the condensed consolidated statements of operations.

The following tables summarize the quantitative inputs and assumptions used for financial assets and liabilities categorized as Level III under the fair value hierarchy:

	As of June 30, 2019
	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average
Financial Assets
Other investments	$	5,623	Third Party Pricing	N/A	N/A	N/A
	108,816		Discounted cash flow	Discount rate	15.0% - 16.0%	15.6%
Investments of consolidated VIEs:
Equity securities	301,066		Book value multiple	Book value multiple	0.63x	0.63x
			Discounted cash flow	Discount rate	14.0%	14.0%
Total Financial Assets	$	415,505
Financial Liabilities
Contingent consideration obligation	$	93,223	Discounted cash flow	Discount rate	16.5%	16.5%
Total Financial Liabilities	$	93,223

- 29-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

	As of December 31, 2018
	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average
Financial Assets
Other investments	$	6,901	Third Party Pricing	N/A	N/A	N/A
	89,469		Discounted cash flow	Discount Rate	15.0% - 16.0%	15.5%
Investments of consolidated VIEs:
Corporate loans/bonds/CLO notes	4,116		Third party pricing	N/A	N/A	N/A
Equity securities	291,871		Book value multiple	Book value multiple	0.65x	0.65x
			Discounted cash flow	Discount rate	15.2%	15.2%
Total investments of consolidated VIEs	295,987
Total Financial Assets	$	392,357
Financial Liabilities
Contingent consideration obligation	$	74,487	Discounted cash flow	Discount rate	17.0%	17.0%
Total Financial Liabilities	$	74,487

Fair Value Measurement of Investment in Athene Holding

As of June 30, 2019 and December 31, 2018, the fair value of Apollo’s Level I investment in Athene Holding was calculated using the closing market price of Athene Holding shares of $43.06 and $39.83, respectively.

Discounted Cash Flow Model

When a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment and the contingent consideration obligations; conversely decreases in the discount rate can significantly increase the fair value of an investment and the contingent consideration obligations.

Consolidated VIEs

Investments

As of June 30, 2019 and December 31, 2018, the significant unobservable inputs used in the fair value measurement of the equity securities include the discount rate applied and the book value multiples applied in the valuation models. These unobservable inputs in isolation can cause significant increases or decreases in fair value. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks. When a comparable multiple model is used to determine fair value, the comparable multiples are generally multiplied by the underlying companies’ earnings before interest, taxes, depreciation and amortization (“EBITDA”) to establish the total enterprise value of the company. The comparable multiple is determined based on the implied trading multiple of public industry peers.

Liabilities

As of June 30, 2019 and December 31, 2018, the debt obligations of the consolidated CLOs were measured on the basis of the fair value of the financial assets of the CLOs as the financial assets were determined to be more observable and, as a result, categorized as Level II in the fair value hierarchy.

Contingent Consideration Obligations

The significant unobservable input used in the fair value measurement of the contingent consideration obligations is the discount rate applied in the valuation models. This input in isolation can cause significant increases or decreases in fair value. The discount rate was based on the hypothetical cost of equity in connection with the acquisition of Stone Tower. See note 15 for further discussion of the contingent consideration obligations.

Valuation of Underlying Investments of Equity Method Investees

As discussed previously, the underlying entities that the Company manages and invests in are primarily investment companies which account for their investments at estimated fair value.

- 30-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

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

Credit Investments

The majority of investments in Apollo’s credit funds are valued based on quoted market prices and valuation models. Quoted market prices are valued based on the average of the “bid” and the “ask” quotes provided by multiple brokers wherever possible without any adjustments. Apollo will designate certain brokers to use to value specific securities. In order to determine the designated brokers, Apollo considers the following: (i) brokers with which Apollo has previously transacted, (ii) the underwriter of the security and (iii) active brokers indicating executable quotes. In addition, when valuing a security based on broker quotes wherever possible Apollo tests the standard deviation amongst the quotes received and the variance between the concluded fair value and the value provided by a pricing service. When broker quotes are not available Apollo considers the use of pricing service quotes or other sources to mark a position. When relying on a pricing service as a primary source, Apollo (i) analyzes how the price has moved over the measurement period, (ii) reviews the number of brokers included in the pricing service’s population and (iii) validates the valuation levels with Apollo’s pricing team and traders.

Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing a model based approach to determine fair value. Valuation approaches used to estimate the fair value of illiquid credit investments also may include the market approach and the income approach, as previously described above. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.

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 the industry.

Market Approach

The market approach is driven by current market conditions, including actual trading levels of similar companies and, to the extent available, actual transaction data of similar companies. Judgment is required by management when assessing which companies are similar to the subject company being valued. Consideration may also be given to any of the following factors: (1) the subject company’s historical and projected financial data; (2) valuations given to comparable companies; (3) the size and scope of the subject company’s operations; (4) the subject company’s individual strengths and weaknesses; (5) expectations relating to the market’s receptivity to an offering of the subject company’s securities; (6) applicable restrictions on transfer; (7) industry and market information; (8) general economic and market conditions; and (9) other factors deemed relevant. Market approach valuation models typically employ a multiple that is based on one or more of the factors described above. Enterprise value as a multiple of EBITDA is common and relevant for most companies and industries, however, other industry specific multiples are employed where available and appropriate. Sources for gaining additional knowledge related to comparable companies include public filings, annual reports, analyst research reports, and press releases. Once a comparable company set is determined, Apollo reviews certain aspects of the subject company’s performance and determines how its performance compares to the group and to certain individuals in the group. Apollo compares certain measurements such as EBITDA margins, revenue growth over certain time periods, leverage ratios and growth opportunities. In addition, Apollo compares 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 measurement date.

Income Approach

For investments where the market approach does not provide adequate fair value information, Apollo relies on the income approach. The income approach is also used to validate the market approach within our private equity funds. The income approach provides an indication of fair value based on the present value of cash flows that a business or security is expected to generate in the future. The most widely used methodology for the income approach is a discounted cash flow method. Inherent in

- 31-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

the discounted cash flow method are significant assumptions related to the subject company’s expected results, the determination of a terminal value and a calculated discount rate, which is normally based on the subject company’s weighted average cost of capital, or “WACC.” The WACC represents the required rate of return on total capitalization, which is comprised of a required rate of return on equity, plus the 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 in determining the appropriate WACC for each subject company is to select companies that are comparable in nature to the subject company and the credit quality of the subject company. Sources for gaining additional knowledge about the comparable companies include public filings, annual reports, analyst research reports, and press releases. The general formula then 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 further considers the risk-free rate of return, market beta, market risk premium and small stock premium, if applicable. The variables used in the WACC formula are inferred from the comparable market data obtained. The Company evaluates the comparable companies selected and concludes on WACC inputs based on the most comparable company or analyzes the range of data for the investment.

Debt securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing a model based approach to determine fair value. Valuation approaches used to estimate the fair value of hybrid capital investments also may include the market approach and the income approach, as previously described above. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.

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

Real Assets Investments

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

Certain of the credit, private equity, and real assets funds may also enter into foreign currency exchange contracts, total return swap contracts, credit default swap contracts, and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. If securities are held at the end of the period, the changes in value are recorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Total return swap and credit default swap contracts are recorded at fair value as an asset or liability with changes in fair value recorded as unrealized appreciation or depreciation. Realized gains or losses are recognized at the termination of the contract based on the difference between the close-out price of the total return or credit default swap contract and the original contract price. Forward contracts are valued based on market rates obtained from counterparties or prices obtained from recognized financial data service providers.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

7. OTHER ASSETS

Other assets consisted of the following:

	As of June 30, 2019			As of December 31, 2018
Fixed assets	$	115,321		$	109,039
Less: Accumulated depreciation and amortization	(93,523		)	(89,049		)
Fixed assets, net	21,798			19,990
Deferred equity-based compensation(1)	97,663			80,443
Prepaid expenses	52,356			49,648
Intangible assets, net	19,323			18,899
Tax receivables	22,201			10,464
Other	14,980			12,725
Total Other Assets	$	228,321		$	192,169

(1) Deferred equity-based compensation relates to the value of equity-based awards that have been or are expected to be granted in connection with the settlement of certain profit sharing arrangements. A corresponding amount for awards expected to be granted of $75.3 million and $54.5 million, as of June 30, 2019 and December 31, 2018, respectively, is included in other liabilities on the condensed consolidated statements of financial condition.

Depreciation expense was $2.3 million and $2.1 million for the three months ended June 30, 2019 and 2018, respectively, and $4.6 million and $4.2 million for the six months ended June 30, 2019 and 2018, respectively, and is presented as a component of general, administrative and other expense in the condensed consolidated statements of operations.

8. LEASES

Apollo has operating leases for office space, data centers, and certain equipment under various lease agreements.

The table below presents operating lease expenses:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Operating lease cost	$	10,295	$	9,307	$	19,288	$	18,492

The following table presents supplemental cash flow information related to operating leases:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Operating cash flows for operating leases	$	10,246	$	7,334	$	19,630	$	16,603

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

As of June 30, 2019, the Company’s total lease payments by maturity are presented in the following table:

	Operating Leases
Remaining 2019	$	17,604
2020	20,690
2021	16,335
2022	12,131
2023	10,594
Thereafter	41,342
Total lease payments	$	118,696
Less imputed interest	(13,532		)
Present value of lease payments	$	105,164

The Company has undiscounted future operating lease payments of $413.4 million related to leases that have not commenced that were entered into as of and subsequent to June 30, 2019. Such lease payments are not yet included in the table above or the Company’s condensed consolidated statements of financial condition as lease assets and lease liabilities. These operating leases are anticipated to commence between fiscal years 2019 and 2021 with lease terms of approximately 15 years.

Supplemental information related to leases is as follows:

	As of June 30, 2019
Weighted average remaining lease term (in years)	7.5
Weighted average discount rate	3.3	%

As of December 31, 2018, the approximate aggregate minimum future payments required for operating leases under U.S. GAAP applicable to that period were as follows:

	2019		2020		2021		2022		2023		Thereafter		Total
Aggregate minimum future payments	$	39,970	$	25,923	$	33,022	$	36,243	$	35,231	$	400,889	$	571,278

9. INCOME TAXES

The Company’s income tax provision totaled $16.9 million and $18.9 million for the three months ended June 30, 2019 and 2018, respectively, and $36.6 million and $27.5 million for the six months ended June 30, 2019 and 2018, respectively. The Company’s effective tax rate was approximately 4.7% and 11.6% for the three months ended June 30, 2019 and 2018, respectively, and 5.3% and 44.4% for the six months ended June 30, 2019 and 2018, respectively.

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

The primary jurisdictions in which the Company operates are the United States, New York State, New York City, California and the United Kingdom. There are no unremitted earnings with respect to the United Kingdom and other foreign entities due to the flow-through nature of these entities.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax authorities. With a few exceptions, as of June 30, 2019, the Company’s U.S. federal, state, local and foreign income tax returns for the years 2015 through 2017 are open under the general statute of limitations provisions and therefore subject to examination. Currently, the Internal Revenue Service is examining the tax return of a subsidiary for the 2011 tax year. The State and City of New York are examining certain subsidiaries’ tax returns for tax years 2011 to 2013.

- 34-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The Company has recorded a deferred tax asset for the future amortization of tax basis intangibles resulting from the 2007 Reorganization. The Company recorded additional deferred tax assets as a result of the step-up in tax basis of intangibles from subsequent exchanges of AOG Units for Class A shares. A related tax receivable agreement liability is recorded in due to related parties in the condensed consolidated statements of financial condition for the expected payments under the tax receivable agreement entered into by and among APO Corp., the Managing Partners, the Contributing Partners, and other parties thereto (as amended, the “tax receivable agreement”) (see note 14). The benefit the Company obtains from the difference in the tax asset recognized and the related liability results in an increase to additional paid in capital. The amortization period for these tax basis intangibles is 15 years and the deferred tax assets will reverse over the same period.

The table below presents the impact to the deferred tax asset, tax receivable agreement liability and additional paid in capital related to the exchange of AOG Units for Class A shares.

Exchange of AOG Units for Class A shares	Increase in Deferred Tax Asset		Increase in Tax Receivable Agreement Liability		Increase to Additional Paid In Capital
For the Six Months Ended June 30, 2019	$	546	$	464	$	82
For the Six Months Ended June 30, 2018	$	47,009	$	39,605	$	7,404

Conversion to a C Corporation

On May 2, 2019, the Company announced plans to convert from a publicly traded partnership to a C corporation. The conversion is expected to be effective during the third quarter of 2019. The details of the conversion remain subject to the approval of the conflicts committee of Apollo Global Management, LLC’s board of directors and certain required regulatory approvals.

10. DEBT

Debt consisted of the following:

	As of June 30, 2019							As of December 31, 2018
	Outstanding Balance		Fair Value			Annualized Weighted Average Interest Rate		Outstanding Balance		Fair Value			Annualized Weighted Average Interest Rate
2024 Senior Notes(1)	$	496,838	$	516,334	(4)	4.00	%	$	496,512	$	498,736	(4)	4.00	%
2026 Senior Notes(1)	496,448		525,958		(4)	4.40		496,191		502,107		(4)	4.40
2029 Senior Notes(1)	674,799		727,144		(4)	4.87		—		—			—
2039 Senior Secured Guaranteed Notes(1)	315,628		329,229		(5)	4.77		—		—			—
2048 Senior Notes(1)	296,448		316,873		(4)	5.00		296,386		290,714		(4)	5.00
2014 AMI Term Facility I(2)	15,507		15,507		(3)	2.00		15,633		15,633		(3)	2.00
2014 AMI Term Facility II(2)	17,514		17,514		(3)	1.75		17,657		17,657		(3)	1.75
2016 AMI Term Facility I(2)	19,186		19,186		(3)	1.30		19,371		19,371		(3)	1.32
2016 AMI Term Facility II(2)	18,547		18,547		(3)	1.40		18,698		18,698		(3)	1.70
Total Debt	$	2,350,915	$	2,486,292				$	1,360,448	$	1,362,916

 

(1) Includes amortization of note discount, as applicable. Outstanding balance is presented net of unamortized debt issuance costs:

	As of June 30, 2019		As of December 31, 2018
2024 Senior Notes	$	2,670	$	2,946
2026 Senior Notes	3,248		3,483
2029 Senior Notes	6,165		—
2039 Senior Secured Guaranteed Notes	9,372		—
2048 Senior Notes	3,242		3,298

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

(2) Apollo Management International LLP (“AMI”), a subsidiary of the Company, entered into several five year credit facilities (collectively referred to as the “AMI Facilities”) to fund the Company’s investment in certain European CLOs it manages:

Facility	Date	Loan Amount
2014 AMI Term Facility I	July 3, 2014	€	13,636
2014 AMI Term Facility II	December 9, 2014	€	15,400
2016 AMI Term Facility I	January 18, 2016	€	16,870
2016 AMI Term Facility II	June 22, 2016	€	16,308

(3) Fair value is based on obtained broker quotes. These notes are classified as a Level III liability within the fair value hierarchy based on the number and quality of broker quotes obtained, the standard deviations of the observed broker quotes and the percentage deviation from independent pricing services. For instances where broker quotes are not available, a discounted cash flow method is used to obtain a fair value.

(4) Fair value is based on obtained broker quotes. These notes are classified as a Level II liability within the fair value hierarchy based on the number and quality of broker quotes obtained, the standard deviations of the observed broker quotes and the percentage deviation from independent pricing services.

(5) Fair value is based on a discounted cash flow method. These notes are classified as a Level III liability within the fair value hierarchy.

2013 AMH Credit Facilities—On December 18, 2013, AMH and its subsidiaries and certain other subsidiaries of the Company entered into credit facilities (the “2013 AMH Credit Facilities”) with the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders. The 2013 AMH Credit Facilities provided for (i) a term loan facility to AMH (the “Term Facility”) that included $750 million of term loan from third-party lenders and $271.7 million of term loan held by a subsidiary of the Company and (ii) a $500 million revolving credit facility (the “Revolver Facility”), in each case, with an original maturity date of January 18, 2019. On March 11, 2016, the maturity date of both the Term Facility and the Revolver Facility was extended by two years to January 18, 2021. The extension was determined to be a modification of the 2013 AMH Credit Facilities in accordance with U.S. GAAP.

In connection with the issuance of the 2024 Senior Notes, the 2026 Senior Notes and the 2048 Senior Notes (as described below), $250 million, $200 million and $300 million of the proceeds, respectively, were used to repay the entire remaining amount of both the term loan from third-party lenders and the term loan held by a subsidiary of the Company as of March 15, 2018. The Revolver Facility was replaced as of July 11, 2018 by the 2018 AMH Credit Facility, as described below. The 2013 AMH Credit Facilities and all related loan documents were terminated as of July 11, 2018.

2018 AMH Credit Facility—On July 11, 2018, AMH as borrower (the “Borrower”) entered into a new credit agreement (the “2018 AMH Credit Facility”) with the lenders and issuing banks party thereto and Citibank, N.A., as administrative agent for the lenders. The 2018 AMH Credit Facility provides for a $750 million revolving credit facility to the Borrower with a final maturity date of July 11, 2023. The 2018 AMH Credit Facility is to remain available until its maturity, and any undrawn revolving commitments bear a commitment fee. The interest rate on the 2018 AMH Credit Facility is based on adjusted LIBOR and the applicable margin as of June 30, 2019 was 1.00%. The commitment fee on the $750 million undrawn 2018 AMH Credit Facility as of June 30, 2019 was 0.09%.

Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including, without limitation, permitted acquisitions. The Borrower may incur incremental facilities in respect of the 2018 AMH Credit Facility in an aggregate amount not to exceed $250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. As of June 30, 2019, the 2018 AMH Credit Facility was undrawn.

2024 Senior Notes—On May 30, 2014, AMH issued $500 million in aggregate principal amount of its 4.000% Senior Notes due 2024 (the “2024 Senior Notes”), at an issue price of 99.722% of par. Interest on the 2024 Senior Notes is payable semi-annually in arrears on May 30 and November 30 of each year. The 2024 Senior Notes will mature on May 30, 2024. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2024 Senior Notes. The Company is obligated to settle the 2024 Senior Notes for the face amount of $500 million.

2026 Senior Notes—On May 27, 2016, AMH issued $500 million in aggregate principal amount of its 4.400% Senior Notes due 2026 (the “2026 Senior Notes”), at an issue price of 99.912% of par. Interest on the 2026 Senior Notes is payable semi-annually in arrears on May 27 and November 27 of each year. The 2026 Senior Notes will mature on May 27, 2026. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2026 Senior Notes. The Company is obligated to settle the 2026 Senior Notes for the face amount of $500 million.

- 36-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

2029 Senior Notes—On February 7, 2019, AMH issued $550 million in aggregate principal amount of its 4.872% Senior Notes due 2029 , at an issue price of 99.999% of par. On June 11, 2019, AMH issued an additional $125 million in aggregate principal amount of its 4.872% Senior Notes due 2029 (the “Additional Notes”). The Additional Notes constitute a single class of securities with the previously issued senior notes due 2029 (collectively, the “2029 Senior Notes”). Interest on the 2029 Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year. The 2029 Senior Notes will mature on February 15, 2029. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2029 Senior Notes. The Company is obligated to settle the 2029 Senior Notes for the face amount of $675 million.

2039 Senior Secured Guaranteed Notes—On June 10, 2019, APH Finance 1, LLC (the “Issuer”), a subsidiary of the Company, issued $325 million in aggregate principal amount of its 4.77% Series A Senior Secured Guaranteed Notes due 2039 (the “2039 Senior Secured Guaranteed Notes”). The 2039 Senior Secured Guaranteed Notes are secured by a lien on the Issuer’s and the guarantors’ participation interests in the rights to distributions in relation to a portfolio of equity investments owned by affiliates of the Company in certain existing and future funds managed or advised by subsidiaries of the Company. Interest on the 2039 Senior Secured Guaranteed Notes is payable on a quarterly basis. The 2039 Senior Secured Guaranteed Notes will mature in June 2039, but, unless prepaid to the extent permitted under the indenture governing the 2039 Senior Secured Guaranteed Notes, the anticipated repayment date will be in June 2029. If the Issuer has not repaid or refinanced the 2039 Senior Secured Guaranteed Notes prior to the anticipated repayment date an additional 5.0% per annum will accrue on the 2039 Senior Secured Guaranteed Notes. The issuance costs are amortized into interest expense on the condensed consolidated statements of operations over the expected term of the 2039 Senior Secured Guaranteed Notes. The Company is obligated to settle the 2039 Senior Secured Guaranteed Notes for the face amount of $325 million.

2048 Senior Notes—On March 15, 2018, AMH issued $300 million in aggregate principal amount of its 5.000% Senior Notes due 2048 (the “2048 Senior Notes”), at an issue price of 99.892% of par. Interest on the 2048 Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year. The 2048 Senior Notes will mature on March 15, 2048. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2048 Senior Notes. The Company is obligated to settle the 2048 Senior Notes for the face amount of $300 million.

As of June 30, 2019, the indentures governing the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes and the 2048 Senior Notes (the “Indentures”) include covenants that restrict the ability of AMH and, as applicable, the guarantors of the notes under the Indentures to incur indebtedness secured by liens on voting stock or profit participating equity interests of their respective subsidiaries, or merge, consolidate or sell, transfer or lease assets. The Indentures also provide for customary events of default.

As of June 30, 2019, the indenture governing the 2039 Senior Secured Guaranteed Notes includes a series of covenants and restrictions customary for transactions of this type, including covenants that (i) require the Issuer to maintain specified reserve accounts to be used to make required payments in respect of the 2039 Senior Secured Guaranteed Notes, (ii) relate to prepayments and related payments of specified amounts, including specified make-whole payments under certain circumstances and (iii) relate to recordkeeping, access to information and similar matters.

The following table presents the interest expense incurred related to the Company’s debt:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Interest Expense:(1)
2013 AMH Credit Facilities	$	—	$	280	$	—	$	2,244
2018 AMH Credit Facility	315		—		627		—
2024 Senior Notes	5,163		5,163		10,326		10,326
2026 Senior Notes	5,628		5,628		11,256		11,256
2029 Senior Notes	7,187		—		11,102		—
2039 Senior Secured Guaranteed Notes	959		—		959		—
2048 Senior Notes	3,781		3,778		7,562		4,445
AMI Term Facilities	269		313		578		688
Total Interest Expense	$	23,302	$	15,162	$	42,410	$	28,959

- 37-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

(1) Debt issuance costs incurred in connection with the 2013 AMH Credit Facilities, the 2018 AMH Credit Facility, the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2039 Senior Secured Guaranteed Notes and the 2048 Senior Notes are amortized into interest expense over the term of the debt arrangement.

11. NET INCOME (LOSS) PER CLASS A SHARE

The table below presents basic and diluted net income per Class A share using the two-class method:

	Basic and Diluted
	For the Three Months Ended June 30,							For the Six Months Ended June 30,
	2019			2018				2019			2018
Numerator:
Net income (loss) attributable to Apollo Global Management, LLC Class A Shareholders	$	155,659		$	54,658			$	295,552		$	(7,987	)
Distributions declared on Class A shares(1)	(92,201		)	(76,602		)		(205,546		)	(209,625		)
Distributions on participating securities(2)	(4,115		)	(4,153		)		(9,074		)	(9,537		)
Earnings allocable to participating securities	(2,848		)	—			(3)	(4,030		)	—			(3)
Undistributed income (loss) attributable to Class A shareholders: Basic and Diluted	$	56,495		$	(26,097	)		$	76,902		$	(227,149	)
Denominator:
Weighted average number of Class A shares outstanding: Basic and Diluted	199,578,950			200,711,475				200,202,174			199,578,334
Net Income per Class A Share: Basic and Diluted(4)
Distributed Income	$	0.46		$	0.38			$	1.02		$	1.04
Undistributed Income (Loss)	0.29			(0.13		)		0.39			(1.13		)
Net Income (Loss) per Class A Share: Basic and Diluted	$	0.75		$	0.25			$	1.41		$	(0.09	)

(1) See note 13 for information regarding the quarterly distributions declared and paid during 2019 and 2018.

(2) Participating securities consist of vested and unvested RSUs that have rights to distributions and unvested restricted shares.

(3) No allocation of undistributed losses was made to the participating securities as the holders do not have a contractual obligation to share in the losses of the Company with Class A shareholders.

(4) For the three and six months ended June 30, 2019 and 2018, all of the classes of securities were determined to be anti-dilutive.

The Company has granted RSUs that provide the right to receive, subject to vesting during continued employment, Class A shares pursuant to the Equity Plan. The Company has three types of RSU grants, which we refer to as Plan Grants, Bonus Grants and Performance Grants. “Plan Grants” vest over time (generally one to six years) and may or may not provide the right to receive distribution equivalents on vested RSUs on an equal basis with the Class A shareholders any time a distribution is declared. “Bonus Grants” vest over time (generally three years) and generally provide the right to receive distribution equivalents on both vested and unvested RSUs on an equal basis with the Class A shareholders any time a distribution is declared. “Performance Grants” generally vest over time (three to five years), subject to the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. Performance Grants provide the right to receive distribution equivalents on vested RSUs and may also provide the right to receive distribution equivalents on unvested RSUs.

Any distribution equivalent paid to an employee will not be returned to the Company upon forfeiture of the award by the employee. Vested and unvested RSUs that are entitled to non-forfeitable distribution equivalents qualify as participating securities and are included in the Company’s basic and diluted earnings per share computations using the two-class method. The holder of an RSU participating security would have a contractual obligation to share in the losses of the entity if the holder is obligated to fund the losses of the issuing entity or if the contractual principal or mandatory redemption amount of the participating security is reduced as a result of losses incurred by the issuing entity. The RSU participating securities do not have a mandatory redemption amount and the holders of the participating securities are not obligated to fund losses, therefore, neither the vested RSUs nor the unvested RSUs are subject to any contractual obligation to share in losses of the Company.

Holders of AOG Units are subject to the transfer restrictions set forth in the agreements with the respective holders and may, a limited number of times each year, upon notice (subject to the terms of an exchange agreement), exchange their AOG

- 38-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Units for Class A shares on a one-for-one basis. An AOG Unit holder must exchange one unit in each of the Apollo Operating Group partnerships to effectuate an exchange for one Class A share.

Apollo Global Management, LLC has one Class B share outstanding, which is held by BRH Holdings GP, Ltd. (“BRH”). The voting power of the Class B share is reduced on a one vote per one AOG Unit basis in the event of an exchange of AOG Units for Class A shares, as discussed above. The Class B share has no net income (loss) per share as it does not participate in Apollo’s earnings (losses) or distributions. The Class B share has no distribution or liquidation rights. The Class B share has voting rights on a pari passu basis with the Class A shares. The Class B share represented 52.2% and 52.4% of the total voting power of the Company’s shares entitled to vote as of June 30, 2019 and 2018, respectively.

The following table summarizes the anti-dilutive securities.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019	2018	2019	2018
Weighted average vested RSUs	137,573	111,995	740,021	641,282
Weighted average unvested RSUs	8,939,599	8,350,200	8,744,646	8,085,325
Weighted average unexercised options	204,167	204,167	204,167	204,167
Weighted average AOG Units outstanding	202,245,561	202,559,221	202,266,384	203,562,398
Weighted average unvested restricted shares	984,792	871,010	1,007,667	770,400

12. EQUITY-BASED COMPENSATION

Equity-based awards granted to employees and non-employees as compensation are measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are expensed over the relevant service period. Equity-based awards that require performance metrics to be met are expensed only when the performance metric is met or deemed probable.

RSUs

The Company grants RSUs under the Equity Plan. The fair value of all grants is based on the grant date fair value, which considers the public share price of the Company’s Class A shares subject to certain discounts, as applicable.

The estimated total grant date fair value for Plan Grants and Bonus Grants is charged to compensation expense on a straight-line basis over the vesting period, which for Plan Grants is generally one to six years, with the first installment vesting one year after grant and quarterly vesting thereafter, and for Bonus Grants is generally annual vesting over three years.

During the six months ended June 30, 2019, the Company awarded Performance Grants of 1.2 million RSUs to certain employees with a grant date fair value of $25.4 million, which vest over time (generally 3 to 5 years) subject to the receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for these and other Performance Grants will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed probable. The following table summarizes the equity based compensation expense recognized relating to Performance Grants.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019	2018	2019	2018
Equity-based compensation	14,548	14,504	29,131	26,948

Additionally, the Company entered into an agreement in 2018 with several employees under which it expects to grant them RSUs beginning in 2020 if year-over-year growth in certain discretionary earnings metrics is attained prior to grant and they remain employed at the grant date. Once granted, these RSUs will vest based on both continued service and the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed

- 39-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

probable. No equity-based compensation expense was recognized related to these RSUs for the three and six months ended June 30, 2019.

The fair value of all RSU grants made during the six months ended June 30, 2019 and 2018 was $97.6 million and $198.6 million, respectively.

The following table presents the actual forfeiture rates and equity-based compensation expense recognized:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Actual forfeiture rate	0.7		%	3.7		%	1.2		%	7.8		%
Equity-based compensation	$	34,185		$	31,630		$	67,938		$	62,377

The following table summarizes RSU activity:

	Unvested			Weighted Average Grant Date Fair Value		Vested		Total Number of RSUs Outstanding
Balance at January 1, 2019	9,839,968			$	26.52	2,380,783		12,220,751		(1)
Granted	3,994,718			24.44		—		3,994,718
Forfeited	(147,008	)		26.13		(18,524	)	(165,532	)
Vested	(1,716,439	)		28.28		1,716,439		—
Issued	—			23.88		(3,808,972	)	(3,808,972	)
Balance at June 30, 2019	11,971,239		(2)	$	25.58	269,726		12,240,965		(1)

 

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

(2) RSUs were expected to vest over the weighted average period of 3.2 years.

Restricted Share Awards—Athene Holding

The Company has granted Athene Holding restricted share awards to certain employees of the Company. Separately, Athene Holding has also granted restricted share awards to certain employees of the Company. Both awards are collectively referred to as the “AHL Awards.” Certain of the AHL Awards function similarly to options as they are exchangeable for Class A shares of Athene Holding upon payment of a conversion price and the satisfaction of certain other conditions. The awards granted are either subject to time-based vesting conditions that generally vest over three to five years or vest upon achieving certain metrics, such as attainment of certain rates of return and realized cash received by certain investors in Athene Holding upon sale of their shares.

The Company records the AHL Awards in other assets and other liabilities in the condensed consolidated statements of financial condition. The fair value of the asset is amortized through equity-based compensation over the vesting period. The fair value of the liability is remeasured each period, with any changes in fair value recorded in compensation expense in the condensed consolidated statements of operations. For AHL Awards granted by Athene Holding, compensation expense related to amortization of the asset is offset, with certain exceptions, by related management fees earned by the Company from Athene.

The grant date fair value of the AHL Awards is based on the share price of Athene Holding, less discounts for transfer restrictions, and has been categorized as Level II within the fair value hierarchy as a result. The AHL Awards that function similarly to options were valued using a multiple-scenario model, which considers the price volatility of the underlying share price of Athene Holding, time to expiration and the risk-free rate, while the other awards were valued using the share price of Athene Holding less any discounts for transfer restrictions.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following table summarizes the management fees, equity-based compensation expense and actual forfeiture rates for the AHL Awards:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Management fees	$	354		$	(1,009	)	$	542		$	(1,887	)
Equity-based compensation	961			(1,353		)	1,716			(2,273		)
Actual forfeiture rate	—		%	3.6		%	—		%	3.6		%

Equity-Based Compensation Allocation

Equity-based compensation is allocated based on ownership interests. Therefore, the amortization of equity-based compensation is allocated to shareholders’ equity attributable to AGM 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 AGM 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 Six Months Ended June 30, 2019
	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
RSUs, share options and restricted share awards	$	76,104	—	%	$	—		$	76,104
AHL Awards	1,716		50.2		862			854
Other equity-based compensation awards	11,919		50.2		5,986			5,933
Total equity-based compensation	$	89,739			6,848			82,891
Less other equity-based compensation awards(2)					(6,848		)	(14,569		)
Capital increase related to equity-based compensation					$	—		$	68,322

	For the Six Months Ended June 30, 2018
	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
RSUs, share options and restricted share awards	$	67,581		—	%	$	—		$	67,581
AHL Awards	(2,273		)	50.1		(1,139		)	(1,134		)
Other equity-based compensation awards	8,001			50.1		4,010			3,991
Total equity-based compensation	$	73,309				2,871			70,438
Less other equity-based compensation awards(2)						(2,871		)	(13,373		)
Capital increase related to equity-based compensation						$	—		$	57,065

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

(2) Includes equity-based compensation reimbursable by certain funds.

- 41-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

13. EQUITY

Class A Shares

Class A shares represent limited liability company interests in the Company. Holders of Class A shares are entitled to participate in distributions from the Company on a pro rata basis. Class A shareholders do not elect the Company’s manager or the manager’s executive committee and have limited voting rights.

During the three and six months ended June 30, 2019 and 2018, the Company issued Class A shares in settlement of vested RSUs. The Company has generally allowed holders of vested RSUs and exercised share options to settle their tax liabilities by reducing the number of Class A shares issued to them, which the Company refers to as “net share settlement.” Additionally, the Company has generally allowed holders of share options to settle their exercise price by reducing the number of Class A shares issued to them at the time of exercise by an amount sufficient to cover the exercise price. The net share settlement results in a liability for the Company and a corresponding accumulated deficit adjustment.

In February 2016, Apollo announced its adoption of a program to repurchase up to $250 million in the aggregate of its Class A shares, including up to $150 million in the aggregate of its outstanding Class A shares through a share repurchase program and up to $100 million through net share settlement of equity-based awards granted under the Equity Plan. In January 2019, Apollo increased its authorized share repurchase amount by $250 million bringing the total authorized repurchase amount to $500 million, which may be used to repurchase outstanding Class A shares as well as to reduce Class A shares to be issued to employees to satisfy associated tax obligations in connection withe the settlement of equity-based awards granted under the the Equity Plan (or any successor equity plan thereto). Class A shares may be repurchased from time to time in open market transactions, in privately negotiated transactions, pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or otherwise, with the size and timing of these repurchases depending on legal requirements, price, market and economic conditions and other factors. Apollo is not obligated under the terms of the program to repurchase any of its Class A shares. The repurchase program has no expiration date and may be suspended or terminated by the Company at any time without prior notice. Class A shares repurchased as part of this program will be canceled by the Company.

The table below summarizes the issuance of Class A shares for equity-based awards:

	For the Six Months Ended June 30,
	2019		2018
Class A shares issued in settlement of vested RSUs and share options exercised(1)	3,808,972		3,192,534
Reduction of Class A shares issued(2)	(1,446,436	)	(1,042,757	)
Class A shares purchased related to share issuances and forfeitures(3)	(103,954	)	(163,165	)
Issuance of Class A shares for equity-based awards	2,258,582		1,986,612

(1) The gross value of shares issued was $116.5 million and $106.6 million for the six months ended June 30, 2019 and 2018, respectively, based on the closing price of a Class A share at the time of issuance.

(2) Cash paid for tax liabilities associated with net share settlement was $44.3 million and $34.7 million for the six months ended June 30, 2019 and 2018, respectively.

(3) Certain Apollo employees receive a portion of the profit sharing proceeds of certain funds in the form of (a) restricted Class A shares of AGM that they are required to purchase with such proceeds or (b) RSUs, in each case which equity-based awards generally vest over three years. These equity-based awards are granted under the Company's Equity Plan. To prevent dilution on account of these awards, Apollo may, in its discretion, repurchase Class A shares on the open market and retire them. During the six months ended June 30, 2019 and 2018, we issued 136,686 and 569,452 of such restricted shares and 102,089 and 69,287 of such RSUs under the Equity Plan, respectively, and repurchased 238,775 and 720,215 Class A shares in open-market transactions not pursuant to a publicly-announced repurchase plan or program, respectively. In addition, there were 1,865 and 12,402 restricted shares forfeited during the six months ended June 30, 2019 and 2018, respectively.

Additionally, during the six months ended June 30, 2019 and 2018, 3,337,239 and 849,785 Class A shares were repurchased in open market transactions as part of the publicly announced share repurchase program adopted in February 2016, respectively, and such shares were subsequently canceled by the Company. The Company paid $98.6 million and $28.7 million for these open market share repurchases during the six months ended June 30, 2019 and 2018, respectively.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Preferred Share Issuance

On March 7, 2017, Apollo issued 11,000,000 6.375% Series A Preferred shares (the “Series A Preferred shares”) for gross proceeds of $275.0 million, or $264.4 million net of issuance costs and on March 19, 2018, Apollo issued 12,000,000 6.375% Series B Preferred shares (the “Series B Preferred shares” and collectively with the Series A Preferred shares, the “Preferred shares”) for gross proceeds of $300.0 million, or $289.8 million net of issuance costs. When, as and if declared by the manager of Apollo, distributions on the Preferred shares will be payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2018 for the Series B Preferred shares, at a rate per annum equal to 6.375%. Distributions on the Preferred shares are discretionary and non-cumulative. During 2019, quarterly cash distributions were $0.398438 per Series A Preferred share and Series B Preferred share.

Subject to certain exceptions, unless distributions have been declared and paid or declared and set apart for payment on the Preferred shares for a quarterly distribution period, during the remainder of that distribution period Apollo may not declare or pay or set apart payment for distributions on any Class A shares or any other equity securities that the Company may issue in the future ranking as to the payment of distributions, junior to the Preferred shares (“Junior Shares”) and Apollo may not repurchase any Junior Shares. These restrictions were not applicable during the initial distribution period, which was the period from March 19, 2018 to but excluding June 15, 2018 for the Series B Preferred shares.

The Series A Preferred shares and the Series B Preferred shares may be redeemed at Apollo’s option, in whole or in part, at any time on or after March 15, 2022 and March 15, 2023, respectively, at a price of $25.00 per Preferred share, plus declared and unpaid distributions to, but excluding, the redemption date, without payment of any undeclared distributions. Holders of the Preferred shares will have no right to require the redemption of the Preferred shares and there is no maturity date.

If a certain change of control event or a certain tax redemption event occurs prior to March 15, 2022 and March 15, 2023 for the Series A Preferred shares and the Series B Preferred shares, respectively, the Preferred shares may be redeemed at Apollo’s option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such change of control event or such tax redemption event, as applicable, at a price of $25.25 per Preferred share, plus declared and unpaid distributions to, but excluding, the redemption date, without payment of any undeclared distributions. If a certain rating agency event occurs prior to March 15, 2023, the Series B Preferred shares may be redeemed at Apollo’s option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such rating agency event, at a price of $25.50 per Series B Preferred share, plus declared and unpaid distributions to, but excluding, the redemption date, without payment of any undeclared distributions. If (i) a change of control event occurs (whether before, on or after March 15, 2022 and March 15, 2023 for the Series A Preferred shares and the Series B Preferred shares, respectively) and (ii) Apollo does not give notice prior to the 31st day following the change of control event to redeem all the outstanding Preferred shares, the distribution rate per annum on the Preferred shares will increase by 5.00%, beginning on the 31st day following such change of control event.

The Preferred shares are not convertible into Class A shares and have no voting rights, except in limited circumstances as provided in the Company’s limited liability company agreement. In connection with the issuance of the Preferred shares, certain Apollo Operating Group entities issued for the benefit of Apollo a series of preferred units with economic terms that mirror those of the Preferred shares.

Distributions

The table below presents information regarding the quarterly distributions which were made at the sole discretion of the manager of the Company (in millions, except per share data). Certain subsidiaries of AGM may be subject to U.S. federal, state, local and non-U.S. income taxes at the entity level and may pay taxes and/or make payments under the tax receivable agreement in a given fiscal year; therefore, the net amounts ultimately distributed by AGM to its Class A shareholders in respect of each fiscal year are generally expected to be less than the net amounts distributed to AOG Unitholders.

- 43-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Distribution Declaration Date	Distribution per Class A Share		Distribution Payment Date	Distribution to Class A Shareholders		Distribution to Non-Controlling Interest Holders in the Apollo Operating Group			Total Distributions from Apollo Operating Group		Distribution Equivalents on Participating Securities
February 1, 2018	$	0.66	February 28, 2018	$	133.0	$	133.7		$	266.7	$	5.4
April 12, 2018	—		April 12, 2018	—		50.5		(1)	50.5		—
May 3, 2018	0.38		May 31, 2018	76.6		77.0			153.6		4.1
August 2, 2018	0.43		August 31, 2018	86.5		87.1			173.6		4.2
November 1, 2018	0.46		November 30, 2018	92.6		93.0			185.6		4.4
For the year ended December 31, 2018	$	1.93		$	388.7	$	441.3		$	830.0	$	18.1
January 31, 2019	$	0.56	February 28, 2019	$	113.3	$	113.3		$	226.6	$	5.0
April 12, 2019	—		April 12, 2019	—		45.4		(1)	45.4		—
May 2, 2019	0.46		May 31, 2019	92.2		93.0			185.2		4.1
For the six months ended June 30, 2019	$	1.02		$	205.5	$	251.7		$	457.2	$	9.1

(1) On April 12, 2018 and April 12, 2019, the Company made a $0.25 and $0.18 per AOG Unit pro rata distribution, respectively, to the Non-Controlling Interest holders in the Apollo Operating Group, in connection with taxes and payments made under the tax receivable agreement. See note 14 for more information regarding the tax receivable agreement. On April 12, 2019, the Company made a $0.04 per AOG Unit pro rata distribution to the Non-Controlling Interest holders in the Apollo Operating Group, in connection with federal corporate estimated tax payments.

- 44-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

Non-Controlling Interests

The table below presents equity interests in Apollo’s consolidated, but not wholly-owned, subsidiaries and funds. Net income and comprehensive income attributable to Non-Controlling Interests consisted of the following: 

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to Non-Controlling Interests in consolidated entities:
Interest in management companies and a co-investment vehicle(1)	$	865		$	1,714		$	2,026		$	3,109
Other consolidated entities	4,278			7,002			11,779			11,586
Net income attributable to Non-Controlling Interests in consolidated entities	$	5,143		$	8,716		$	13,805		$	14,695
Net income attributable to Non-Controlling Interests in the Apollo Operating Group:
Net income	$	342,161		$	143,810		$	657,728		$	34,462
Net income attributable to Non-Controlling Interests in consolidated entities	(5,143		)	(8,716		)	(13,805		)	(14,695		)
Net income after Non-Controlling Interests in consolidated entities	337,018			135,094			643,923			19,767
Adjustments:
Income tax provision(2)	16,897			18,924			36,551			27,504
NYC UBT and foreign tax benefit(3)	(2,325		)	(2,631		)	(4,373		)	(4,187		)
Net loss in non-Apollo Operating Group entities	531			189			546			275
Net income attributable to Series A Preferred Shareholders	(4,383		)	(4,383		)	(8,766		)	(8,766		)
Net income attributable to Series B Preferred Shareholders	(4,781		)	(4,569		)	(9,562		)	(4,569		)
Total adjustments	5,939			7,530			14,396			10,257
Net income after adjustments	342,957			142,624			658,319			30,024
Weighted average ownership percentage of Apollo Operating Group	50.2		%	50.1		%	50.1		%	50.4		%
Net income attributable to Non-Controlling Interests in Apollo Operating Group	$	172,195		$	71,484		$	330,043		$	14,419
Net Income attributable to Non-Controlling Interests	$	177,338		$	80,200		$	343,848		$	29,114
Other comprehensive income (loss) attributable to Non-Controlling Interests	3,352			(15,741		)	(3,054		)	(11,729		)
Comprehensive Income Attributable to Non-Controlling Interests	$	180,690		$	64,459		$	340,794		$	17,385

(1) Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of the credit funds managed by Apollo.

(2) Reflects all taxes recorded in our condensed consolidated statements of operations. Of this amount, U.S. federal, state, and local corporate income taxes attributable to APO Corp. are added back to income of the Apollo Operating Group before calculating Non-Controlling Interests as the income allocable to the Apollo Operating Group is not subject to such taxes.

(3) Reflects New York City Unincorporated Business Tax (“NYC UBT”) and foreign taxes that are attributable to the Apollo Operating Group and its subsidiaries related to its operations in the U.S. as partnerships and in non-U.S. jurisdictions as corporations. As such, these amounts are considered in the income attributable to the Apollo Operating Group.

14. RELATED PARTY TRANSACTIONS AND INTERESTS IN CONSOLIDATED ENTITIES

Management fees, transaction and advisory fees and reimbursable expenses from the funds the Company manages and their portfolio companies are included in due from related parties in the condensed consolidated statements of financial condition. The Company also typically facilitates the payment of certain operating costs incurred by the funds that it manages as well as their related parties. These costs are normally reimbursed by such funds and are included in due from related parties. Other related party transactions include loans to employees and periodic sales of ownership interests in Apollo funds to employees. Due from related parties and due to related parties are comprised of the following:

- 45-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

	As of June 30, 2019		As of December 31, 2018
Due from Related Parties:
Due from credit funds	$	196,748	$	153,687
Due from private equity funds	22,185		19,993
Due from real assets funds	45,289		42,471
Due from portfolio companies	79,675		67,740
Due from Contributing Partners, employees and former employees	105,270		94,217
Total Due from Related Parties	$	449,167	$	378,108
Due to Related Parties:
Due to Managing Partners and Contributing Partners	$	248,827	$	285,598
Due to credit funds	3,590		3,444
Due to private equity funds	148,361		136,078
Due to real assets funds	853		315
Total Due to Related Parties	$	401,631	$	425,435

Tax Receivable Agreement

Subject to certain restrictions, each of the Managing Partners and Contributing Partners has the right to exchange his vested AOG Units for the Company’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, as amended (the “Internal Revenue Code”), which will result in an adjustment to the tax basis of the assets owned by the Apollo Operating Group at the time of the exchange. These exchanges will result in increases in tax deductions that will reduce the amount of tax that APO Corp. will otherwise be required to pay in the future.

The tax receivable agreement provides for the payment to 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 that APO Corp. would realize as a result of the increases in tax basis of assets that resulted from the 2007 Reorganization and exchanges of AOG Units for Class A shares. APO Corp. retains the benefit from the remaining 15% of actual cash tax savings. If the Company does not make the required annual payment on a timely basis as outlined in the tax receivable agreement, interest is accrued on the balance until the payment date.

As a result of the exchanges of AOG Units for Class A shares during the six months ended June 30, 2019 and 2018, a $0.5 million and $39.6 million liability was recorded, respectively, to estimate the amount of the future expected payments to be made by APO Corp. to the Managing Partners and Contributing Partners pursuant to the tax receivable agreement.

In April 2019, Apollo made a $37.2 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2018 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $37.4 million ($0.18 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group. In April 2018, Apollo made a $50.3 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2017 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $50.5 million ($0.25 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group.

Due from Contributing Partners, Employees and Former Employees

As of June 30, 2019 and December 31, 2018, due from Contributing Partners, Employees and Former Employees includes various amounts due to the Company including employee loans and return of profit sharing distributions. As of June 30, 2019 and December 31, 2018, the balance included interest-bearing employee loans receivable of $16.9 million and $16.8 million, respectively. The outstanding principal amount of the loans as well as all accrued and unpaid interest is required to be repaid at the earlier of the eighth anniversary of the date of the relevant loan or at the date of the relevant employee’s resignation from the Company.

- 46-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The Company recorded a receivable from the Contributing Partners and certain employees and former employees for the potential return of profit sharing distributions that would be due if certain funds were liquidated as of June 30, 2019 and December 31, 2018 of $72.9 million and $66.3 million, respectively.

Indemnity

Performance revenues from certain funds can be distributed to the Company on a current basis, but is subject to repayment by the subsidiaries of the Apollo Operating Group that act as general partners of the funds in the event that certain specified return thresholds are not ultimately achieved. The Managing Partners, Contributing Partners and certain other investment professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to a particular Managing Partner’s or Contributing Partner’s distributions. Pursuant to an existing shareholders agreement, the Company has agreed to indemnify each of the Company’s Managing Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of certain funds that the Company manages (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 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 pay amounts in connection with a general partner obligation for the return of previously made distributions with respect to Fund IV, Fund V and Fund VI, the Company will be obligated to reimburse the Company’s Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to pay even though the Company did not receive the certain distribution to which that general partner obligation related. The Company recorded an indemnification liability of $12.7 million and $12.2 million as of June 30, 2019 and December 31, 2018, respectively.

Due to Credit, Private Equity and Real Assets Funds

Based upon an assumed liquidation of certain of the credit, private equity and real assets funds the Company manages, the Company has recorded a general partner obligation to return previously distributed performance allocations, which represents amounts due to these funds. The general partner obligation is recognized based upon an assumed liquidation of a fund’s 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 or as otherwise set forth in the respective limited partnership agreement or other governing document of the fund.

The following table presents the general partner obligation to return previously distributed performance allocations related to certain funds by segment:

	As of June 30, 2019		As of December 31, 2018
Credit	$	327	$	1,370
Private Equity	147,052		135,723
Real Assets	516		—
Total general partner obligation	$	147,895	$	137,093

Athene

Athene Holding was founded in 2009 to capitalize on favorable market conditions in the dislocated life insurance sector. Athene Holding, through its subsidiaries, is a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs. The products and services offered by Athene include fixed and fixed indexed annuity products, reinsurance services offered to third-party annuity providers; and institutional products, such as funding agreements. Athene Holding became an effective registrant under the Exchange Act on December 9, 2016. Athene Holding is currently listed on the New York Stock Exchange under the symbol “ATH”.

The Company provides asset management and advisory services to Athene, including asset allocation services, direct asset management services, asset and liability matching management, mergers and acquisitions, asset diligence hedging and other asset management services. On September 20, 2018, Athene and Apollo agreed to revise the existing fee arrangements (the “amended fee agreement”) between Athene and Apollo. The amended fee agreement was subject to approval by Athene’s shareholders of a

- 47-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

bye-law amendment providing that Athene will not elect to terminate the investment management arrangement between Athene and Apollo, except for cause, for a period of four years from the date of the bye-law amendment and thereafter only on each successive two-year anniversary of the expiration of the initial four-year period. On June 10, 2019, the Athene shareholders approved the bye-law amendment and the amended fee agreement took effect retroactive to the month beginning January 1, 2019. The Company began recording fees pursuant to the amended fee agreement on January 1, 2019. The amended fee agreement provides for sub-allocation fees which vary based on portfolio allocation differentiation, as described below.

The amended fee agreement provides for a monthly fee to be payable by Athene to the Company in arrears, with retroactive effect to the month beginning on January 1, 2019, in an amount equal to the following, to the extent not otherwise payable to the Company pursuant to any one or more investment management or sub-advisory agreements or arrangements:

(i) The Company, through its consolidated subsidiary Athene Asset Management, or AAM, earns a base management fee of 0.225% per year on the aggregate market value of substantially all of the assets in substantially all of the investment accounts of or relating to Athene (collectively, the “Athene Accounts”) up to $103.443 billion (the level of assets in the Athene Accounts as of January 1, 2019, excluding certain assets, the “Backbook Value”) and 0.150% per year on all assets in excess of $103.443 billion (the “Incremental Value”), respectively; plus

(ii) with respect to each asset in an Account, subject to certain exceptions, that is managed by the Company and that belongs to a specified asset class tier (“core,” “core plus,” “yield,” and “high alpha”), a sub-allocation fee as follows, which will, in the case of assets acquired after January 1, 2019, be subject to a cap of 10% of the applicable asset’s gross book yield:

	As of June 30, 2019
Sub-Allocation Fees:
Core Assets(1)	0.065	%
Core Plus Assets(2)	0.130	%
Yield Assets(3)	0.375	%
High Alpha Assets(4)	0.700	%
Cash, Treasuries, Equities and Alternatives(5)	—	%

(1) Core assets include public investment grade corporate bonds, municipal securities, agency residential or commercial mortgage backed securities and obligations of any governmental agency or government sponsored entity that is not expressly backed by the U.S. government.

(2) Core plus assets include private investment grade corporate bonds, fixed rate first lien commercial mortgage loans (“CML”) and obligations issued or assumed by a financial institution (such an institution, a “financial issuer”) and determined by AAM to be “Tier 2 Capital” under the Basel III recommendations developed by the Basel Committee on Banking Supervision (or any successor to such recommendations).

(3) Yield assets include non-agency residential mortgage-backed securities, investment grade collateralized loan obligations, certain asset-backed securities, commercial mortgage-backed securities, emerging market investments, below investment grade corporate bonds, subordinated debt obligations, hybrid securities or surplus notes issued or assumed by a financial issuer, as rated preferred equity, residential mortgage loans, bank loans, investment grade infrastructure debt and certain floating rate commercial mortgage loans.

(4) High alpha assets include subordinated commercial mortgage loans, below investment grade collateralized loan obligations, unrated preferred equity, debt obligations originated by MidCap, below investment grade infrastructure debt, certain loans originated directly by Apollo and agency mortgage derivatives.

(5) With respect to Equities and Alternatives, Apollo earns performance revenues of 0% to 20%.

Athora

The Company, through its consolidated subsidiary, AAME, provides investment advisory services to certain portfolio companies of Apollo funds and Athora, a strategic platform established to acquire or reinsure blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”).

Athora Sub-Advised

The Company, through AAME, provides sub-advisory services with respect to a portion of the assets in certain portfolio companies of Apollo funds and the Athora Accounts. The Company broadly refers to “Athora Sub-Advised” assets as those assets in the Athora Accounts which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages. With limited exceptions, the sub-advisory fee earned by the Company on the Athora Sub-Advised assets is 0.35%.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

AAA Investments

Apollo, as general partner of AAA Investments, is generally entitled to performance allocations equal to 20% of the realized returns (net of related expenses, including borrowing costs) on AAA Investments’ investment in Athene Holding, except that Apollo is not entitled to receive any performance allocations with respect to the shares of Athene Holding that were acquired (and not in satisfaction of prior commitments to buy such shares) by AAA Investments in the contribution of certain assets by AAA to Athene in October 2012.

The following table presents the performance allocations earned from AAA Investments:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019		2018			2019		2018
Performance allocations from AAA Investments, net(1)	$	94	$	(158	)	$	133	$	(4,999	)

(1) Net of related profit sharing expense.

The following table presents the revenues earned in aggregate from Athene, Athora and AAA Investments:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Revenues earned in aggregate from Athene, Athora and AAA Investments, net(1)(2)	$	204,159	$	50,682	$	364,507	$	88,825

(1) Consisting of management fees, sub-advisory fees, performance revenues from Athene, Athora and AAA Investments, as applicable (net of related profit sharing expense) and changes in the market value of the Athene Holding shares owned directly by Apollo. These amounts exclude the deferred revenue recognized as management fees associated with the vesting of AHL Awards granted to employees of Apollo as further described in note 12.

(2) Gains (losses) on the market value of the shares of Athene Holding owned directly by Apollo were $43.2 million and $(68.1) million for the three months ended June 30, 2019 and 2018, respectively, and $61.8 million and $(135.0) million for the six months ended June 30, 2019 and 2018, respectively.

The following table presents performance allocations and profit sharing payable from AAA Investments:

	As of June 30, 2019		As of December 31, 2018
Performance allocations	$	1,788	$	1,611
Profit sharing payable	491		442

As of June 30, 2019 and December 31, 2018, the Company held a 10.7% and 10.2% economic ownership interest in Athene Holding, respectively.

AAA Investments Credit Agreement

On April 30, 2015, Apollo entered into a revolving credit agreement with AAA Investments (the “AAA Investments Credit Agreement”). Under the terms of the AAA Investments Credit Agreement, the Company shall make available to AAA Investments one or more advances at the discretion of AAA Investments in the aggregate amount not to exceed a balance of $10.0 million at an applicable rate of LIBOR plus 1.5%. The Company receives an annual commitment fee of 0.125% on the unused portion of the loan. As of June 30, 2019 and December 31, 2018, $8.2 million and $6.7 million, respectively, had been advanced by the Company and remained outstanding on the AAA Investments Credit Agreement. AAA Investments was obligated to pay the aggregate borrowings plus accrued interest at the earlier of (a) the third anniversary of the closing date, or (b) the date that was fifteen months following the initial public offering of shares of Athene Holding Ltd. (the “Maturity Date”). On January 30, 2019, the Company and AAA agreed to extend the maturity date of the AAA Investments Credit Agreement to April 30, 2020.

AINV Amended and Restated Investment Advisory Management Agreement

On May 17, 2018, the board of directors of AINV approved an amended and restated investment advisory management agreement with Apollo Investment Management, L.P., the Company’s consolidated subsidiary, which reduced the base management

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

fee and revised the incentive fee on income to include a total return requirement. Effective April 1, 2018, the base management fee was reduced from 2.0% to 1.5% of the average value of AINV’s gross assets (excluding cash or cash equivalents but including other assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters; provided, however, the base management fee would be 1.0% of the average value of AINV’s gross assets (excluding cash or cash equivalents but including other assets purchased with borrowed amounts) that exceeds the product of (i) 200% and (ii) the value of AINV’s net asset value at the end of the most recently completed calendar quarter. In addition, beginning January 1, 2019, the incentive fee on income calculation included a total return requirement with a rolling twelve quarter look-back starting from April 1, 2018. The incentive fee rate remained 20% and the performance threshold remained 1.75% per quarter (7% annualized).

Regulated Entities

Apollo Global Securities, LLC (“AGS”) is a registered broker dealer with the SEC and is a member of the Financial Industry Regulatory Authority, subject to the minimum net capital requirements of the SEC. AGS was in compliance with these requirements at June 30, 2019. From time to time, this entity is involved in transactions with related parties of Apollo, including portfolio companies of the funds Apollo manages, whereby AGS earns underwriting and transaction fees for its services.

15. COMMITMENTS AND CONTINGENCIES

Investment Commitments—As a limited partner, general partner and manager of the Apollo funds, Apollo had unfunded capital commitments as of June 30, 2019 and December 31, 2018 of $1.1 billion and $1.2 billion, respectively, of which $434 million and $469 million related to Fund IX as of June 30, 2019 and December 31, 2018, respectively.

Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of June 30, 2019, the Company was not aware of any instances of non-compliance with the financial covenants contained in the documents governing the Company’s debt obligations.

Litigation and Contingencies—Apollo is, from time to time, party to various legal actions arising in the ordinary course of business including claims and lawsuits, reviews, investigations or proceedings by governmental and self-regulatory agencies regarding its business.

On March 4, 2016, the Public Employees Retirement System of Mississippi filed a putative securities class action against Sprouts Farmers Market, Inc. (“SFM”), several SFM directors (including Andrew Jhawar, an Apollo partner), AP Sprouts Holdings, LLC and AP Sprouts Holdings (Overseas), L.P. (the “AP Entities”), which are controlled by entities managed by Apollo affiliates, and two underwriters of a March 2015 secondary offering of SFM common stock. The AP Entities sold SFM common stock in the March 2015 secondary offering. The complaint, filed in Arizona Superior Court and captioned Public Employees Retirement System of Mississippi v. Sprouts Farmers Market, Inc. (CV2016-050480), alleges that SFM filed a materially misleading registration statement for the secondary offering that incorporated alleged misrepresentations in SFM’s 2014 annual report regarding SFM’s business prospects, and failed to disclose alleged accelerating produce deflation. Plaintiff alleged causes of action against the AP Entities for violations of Sections 11 and 15 of the Securities Act of 1933, seeking compensatory damages for alleged losses sustained from a decline in SFM’s stock price. Defendants moved to dismiss the action, and the court dismissed the Section 11 claim against the AP Entities but not the Section 15 claim. On December 27, 2018, the parties executed a settlement agreement, and on December 28, 2018, the parties filed a motion for preliminary approval of the settlement. On May 31, 2019, the Court approved the settlement and dismissed the action with prejudice.

On June 20, 2016 Banca Carige S.p.A. (“Carige”) commenced a lawsuit in the Court of Genoa (Italy) (No. 8965/2016), against its former Chairman, its former Chief Executive Officer, AGM and certain entities (the “Apollo Entities”) organized and owned by investment funds managed by affiliates of AGM. The complaint alleged that AGM and the Apollo Entities (i) aided and abetted breaches of fiduciary duty to Carige allegedly committed by Carige’s former Chairman and former CEO in connection with the sale to the Apollo Entities of Carige subsidiaries engaged in the insurance business; and (ii) took wrongful actions aimed at weakening Banca Carige’s financial condition supposedly to facilitate an eventual acquisition of Carige. The causes of action were based in tort under Italian law. Carige purportedly seeks damages of €450 million in connection with the sale of the insurance businesses and €800 million for other losses. With judgment no. 3118/2018 published on December 6, 2018, the Court of Genoa fully rejected all the claims raised by Carige against AGM and the Apollo Entities, also awarding attorneys' fees in their favor for an amount of €428,996.10. Carige filed an appeal on January 3, 2019. The Apollo Entities appeared in the proceedings requesting the Court to reject Banca Carige’s appeal. The first hearing was held on May 8, 2019. The Court has reserved its decision on certain fact-finding and joinder requests made by the plaintiff and the former directors. Although the case appears to be in its final stages, no reasonable estimate of possible loss, if any, can be made at this time.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

On December 12, 2016, the CORE Litigation Trust (the “Trust”), which was created under the Chapter 11 reorganization plan for CORE Media and other affiliated entities, including CORE Entertainment, Inc. (“CORE”), commenced an action in California Superior Court for Los Angeles County, captioned Core Litigation Trust v. Apollo Global Management, LLC, et al., Case No. BC 643732, that was stayed on October 3, 2017, in favor of litigating in New York state court. On November 9, 2017, the Trust commenced an action in the Supreme Court of the State of New York, captioned Core Litigation Trust v. Apollo Global Management, LLC, et al., Index No. 656856/2017. The complaint names as defendants: (i) AGM and certain AGM affiliates including the Apollo-managed funds that were CORE’s beneficial owners (the “CORE Funds”), (ii) Twenty-First Century Fox, Inc. (“Fox”) and certain Fox affiliates, (iii) Endemol USA Holding, Inc. (“Endemol”) and certain Endemol-affiliated entities, and (iv) the joint venture through which the CORE Funds and Fox beneficially owned CORE Media and Endemol Shine (the “JV”). The Trust asserts claims against (i) all defendants for tortiously interfering with $360 million in loans under the 2011 loan agreements entered into between CORE and certain Lenders, and (ii) certain defendants for alter-ego and de-facto merger. The Trust seeks $240 million in compensatory, unspecified punitive damages, pre-judgment interests, and costs and expenses. The Court has scheduled further oral argument on Defendants’ motions to dismiss the complaint for September 6, 2019. On July 5, 2019, the parties reached an agreement in principle to settle and release all of the Trust’s claims against Defendants. The CORE Funds are indemnifying AGM against any losses in connection with the Trust’s claims.

On August 3, 2017, a complaint was filed in the United States District Court for the Middle District of Florida against AGM, a senior partner of Apollo and a former principal of Apollo by Michael McEvoy on behalf of a purported class of employees of subsidiaries of CEVA Group, LLC (“CEVA Group”) who purchased shares in CEVA Investment Limited (“CIL”), the former parent company of CEVA Group. The complaint alleged that the defendants breached fiduciary duties to and defrauded the plaintiffs by inducing them to purchase shares in CIL and subsequently participating in a debt restructuring of CEVA Group in which shareholders of CIL did not receive a recovery. On February 9, 2018, the Bankruptcy Court for the Southern District of New York held that the claims asserted in the complaint were assets of CIL, which is a chapter 7 debtor, and that the complaint was null and void as a violation of the automatic stay. McEvoy subsequently revised his complaint to attempt to assert claims that do not belong to CIL. The amended complaint no longer names any individual defendants, but Apollo Management VI, L.P. and CEVA Group have been added as defendants. The amended complaint purports to seek damages of approximately €30 million and asserts, among other things, claims for violations of the Investment Advisers Act of 1940, breach of fiduciary duties, and breach of contract. On December 7, 2018, after receiving permission from the Bankruptcy Court, McEvoy filed his amended complaint in the District Court in Florida. Apollo is currently seeking dismissal of this action and believes that there is no merit to the claims. Additionally, as the case is in its early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On December 21, 2017, Harbinger Capital Partners II, LP, Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Harbinger Capital Partners Special Situations GP, LLC, Harbinger Capital Partners Offshore Manager, L.L.C., Global Opportunities Breakaway Ltd. (in voluntary liquidation), and Credit Distressed Blue Line Master Fund, Ltd. (collectively, “Harbinger”) commenced an action in New York Supreme Court captioned Harbinger Capital Partners II LP et al. v. Apollo Global Management LLC, et al. (No. 657515/2017). The complaint names as defendants (i) AGM, (ii) the funds managed by Apollo that invested in SkyTerra Communications, Inc. (“SkyTerra”) equity before selling their interests to Harbinger under an April 2008 agreement that closed in 2010, and (iii) six former SkyTerra directors, five of whom are current or former Apollo employees.  The complaint alleges that during the period of Harbinger’s various equity and debt investments in SkyTerra, from 2004 to 2010, Defendants concealed from Harbinger material defects in SkyTerra technology that was to be used to create a new mobile wi-fi network.  The complaint alleges that Harbinger would not have made investments in SkyTerra totaling approximately $1.9 billion had it known of the defects, and that the public disclosure of these defects ultimately led to SkyTerra filing for bankruptcy in 2012 (after it had been renamed LightSquared). The complaint asserts claims against (i) all defendants for fraud, civil conspiracy, and negligent misrepresentation, (ii) AGM and the Apollo-managed funds only for breach of fiduciary duty, breach of contract, and unjust enrichment, and (iii) the SkyTerra director defendants only for aiding and abetting breach of fiduciary duty.  The complaint seeks $1.9 billion in damages, as well as punitive damages, interest, costs, and fees. This action was stayed from February 14, 2018, through June 12, 2019. On February 14, 2018, Defendants moved the United States Bankruptcy Court for the Southern District of New York to reopen the LightSquared bankruptcy proceeding for the limited purpose of enforcing Harbinger’s assignment and release in that bankruptcy of the claims that it asserts in the New York state court action. Briefing and hearing on this motion were adjourned while the state court stay was pending. On June 12, 2019, Harbinger voluntarily discontinued the state action without prejudice subject to a tolling agreement. On June 12, 2019, Apollo voluntarily withdrew its bankruptcy court motion subject to a right to refile the motion if Harbinger were to refile the state court action. Apollo believes these claims are without merit.  Because this action is in its early stages, no reasonable estimate of possible loss, if any, can be made at this time.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

On February 9, 2018, plaintiffs Joseph M. Dropp, Mary E. Dropp, Robert Levine, Susan Levine, and Kaarina Pakka filed a complaint in the United States District Court for the District of Nevada (the “Nevada Court”) against Apollo Management VIII, L.P. (“Management VIII”), AGM and Diamond Resorts International, Inc. (“Diamond”) and several of its affiliates and executives. Plaintiffs, who allege that they bought vacation interest points from Diamond, allege that the points are securities and that defendants violated federal securities laws by selling the points without registering them as securities. Plaintiffs also assert a “control person” claim against Management VIII and AGM. Plaintiffs assert their claims on their own behalf and on behalf of a purported class of Diamond customers who bought vacation interest points over a certain period of time. They seek injunctive relief prohibiting defendants from continuing to market and sell unregistered securities, the right to rescind their purchases, and unspecified compensatory damages. On April 11, 2018, Defendants filed motions to sever Ms. Pakka's claims from the claims of the other plaintiffs and to transfer those claims to the United States District Court for the District of Hawaii. On January 25, 2019, the Nevada Court entered an order granting defendants’ motion to compel the Dropps and Levines to arbitrate their claims individually and dismissing their claims without prejudice to pursue them in arbitration.  The Nevada Court also severed Ms. Pakka’s claims and transferred the complaint as to Ms. Pakka only to the United States District Court for the District of Hawaii (the “Hawaii Court”).  On January 28, 2019, the Hawaii Court entered an order directing Ms. Pakka to file an amended complaint to reflect only the claims that were transferred to that Court, after she obtains Hawaii counsel.  On May 29, 2019, Ms. Pakka voluntarily dismissed her complaint without prejudice.

Five shareholders filed substantially similar putative class action lawsuits in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida in March, April, and May 2018, alleging violations of the Securities Act in connection with the January 19, 2018 IPO of ADT Inc. common stock. The actions were consolidated on July 10, 2018, and the case was re-captioned In re ADT Inc. Shareholder Litigation. On August 24, 2018, the state-court plaintiffs filed a consolidated complaint naming as defendants ADT Inc., several ADT officers and directors, the IPO underwriters (including Apollo Global Securities, LLC), AGM and certain other Apollo affiliates. Plaintiffs generally allege that the registration statement and prospectus for the IPO contained false and misleading statements and failed to disclose material information about certain litigation in which ADT was involved, ADT’s efforts to protect its intellectual property, and competitive pressures ADT faced. Defendants filed motions to dismiss the consolidated complaint on October 23, 2018, and those motions are fully briefed. On May 21, 2018, a similar shareholder class action lawsuit was filed in the United States District Court for the Southern District of Florida, naming as defendants ADT, several officers and directors, and AGM. The federal action, captioned Perdomo v. ADT Inc., generally alleges that the registration statement was materially misleading because it failed to disclose ongoing deterioration in ADT’s financial results, along with certain customer and business metrics. On July 20, 2018, several alleged ADT shareholders filed competing motions to be named lead plaintiff in the federal action. On November 20, 2018, the court appointed a lead plaintiff, and on January 15, 2019, the lead plaintiff filed an amended complaint.  The amended complaint names the same Apollo-affiliated defendants as the state-court action, along with three new Apollo entities.  Defendants filed motions to dismiss on March 25, 2019, and those motions are fully briefed.  Based on the allegations in the complaints, Apollo believes that there is no merit to any of the claims against AGM or the other Apollo defendants. Thus, no reasonable estimate of possible loss, if any, can be made at this time.

On May 3, 2018, Caldera Holdings Ltd, Caldera Life Reinsurance Company, and Caldera Shareholder, L.P. (collectively, “Caldera”) filed a summons with notice in the Supreme Court of the State of New York, New York County, naming as defendants AGM, Apollo Management, L.P., Apollo Advisors VIII, L.P., Apollo Capital Management VIII, LLC, Athene Asset Management, L.P., Athene Holding, Ltd., and Leon Black (collectively, “Defendants” and all but Athene Holding, Ltd., the “Apollo Defendants”). On July 12, 2018, Caldera filed a complaint, Index No. 652175/2018 (the “Complaint”), alleging three causes of action: (1) tortious interference with prospective business relations/prospective economic advantage; (2) defamation/trade disparagement/injurious falsehood; and (3) unfair competition. The Complaint seeks damages of no less than $1.5 billion, as well as exemplary and punitive damages, attorneys’ fees, interest, and an injunction. Defendants moved to dismiss the Complaint on September 21, 2018 and Caldera filed an amended complaint on January 21, 2019 (the “Amended Complaint”).  Defendants have moved to dismiss the Amended Complaint, and the Apollo Defendants have submitted to the Court a Final Arbitration Award issued on April 26, 2019 in a JAMS arbitration, finding Caldera, Imran Siddiqui, and Ming Dang liable for various causes of action, including breaches of fiduciary duty and/or aiding and abetting thereof.  Oral argument on the motions to dismiss was held on May 31, 2019.   The Apollo Defendants believe that the claims contained in the Complaint lack merit and intend to defend the case vigorously. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On March 7, 2019, plaintiff Elizabeth Morrison filed an amended complaint in an action captioned Morrison v. Ray Berry, et. al., Case No. 12808-VCG, pending in the Chancery Court for the State of Delaware, adding as defendants AGM and certain AGM affiliates. The original complaint had only named as defendants certain officers and directors (the “TFM defendants”)

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

of The Fresh Market, Inc. (“TFM”), claiming that those defendants breached their fiduciary duties to the TFM shareholders in connection with their consideration and approval of a merger agreement between TFM and certain entities affiliated with Apollo, including by engaging in a sale process that improperly favored AGM, and/or Apollo Management VIII, L.P., by agreeing to an inadequate price and by filing materially deficient disclosures regarding the transaction. In addition to AGM, the amended complaint added as defendants Apollo Overseas Partners (Delaware 892) VIII, L.P., Apollo Overseas Partners (Delaware) VIII, L.P., Apollo Overseas Partners VIII, L.P., Apollo Management VIII, L.P., AIF VIII Management, LLC, Apollo Management, L.P., Apollo Management GP, LLC, Apollo Management Holdings, L.P., Apollo Management Holdings GP, LLC, APO Corp., AP Professional Holdings, L.P., Apollo Advisors VIII, L.P., Apollo Investment Fund VIII, L.P., and Pomegranate Holdings, Inc., and other defendants. The amended complaint alleges that the Apollo defendants aided and abetted the breaches of fiduciary duties by the TFM defendants. After the defendants moved to dismiss the complaint on May 1, 2019, Plaintiff filed a second amended complaint on June 3, 2019, maintaining the same claim against the same Apollo defendants as the prior complaint. Defendants moved to dismiss the second amended complaint on July 12, 2019, and those motions will be fully briefed by September 13, 2019. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

Commitments and Contingencies—Other long-term obligations relate to payments with respect to certain consulting agreements entered into by Apollo Investment Consulting LLC, a subsidiary of Apollo, as well as long-term service contracts. A significant portion of these costs are reimbursable by funds or portfolio companies. As of June 30, 2019, fixed and determinable payments due in connection with these obligations were as follows:

	Remaining 2019		2020		2021		2022		2023		Thereafter		Total
Other long-term obligations	$	14,356	$	5,786	$	1,501	$	919	$	682	$	682	$	23,926

Contingent Obligations—Performance allocations with respect to certain funds are subject to reversal in the event of future losses to the extent of the cumulative revenues recognized in income to date. If all of the existing investments became worthless, the amount of cumulative revenues that have been recognized by Apollo through June 30, 2019 and that would be reversed approximates $2.1 billion. Management views the possibility of all of the investments becoming worthless as remote. Performance allocations are affected by changes in the fair values of the underlying investments in the funds that Apollo manages. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, bond yields and industry trading multiples. Movements in these items can affect valuations quarter to quarter even if the underlying business fundamentals remain stable.

Additionally, at the end of the life of certain funds that the Company manages, there could be a payment due to a fund by the Company if the Company, as general partner, has received more performance allocations than was ultimately earned. The general partner obligation amount, if any, will depend on final realized values of investments at the end of the life of each fund or as otherwise set forth in the respective limited partnership agreement of the fund. See note 14 to our condensed consolidated financial statements for further details regarding the general partner obligation.

Certain funds may not generate performance allocations as a result of unrealized and realized losses that are recognized in the current and prior reporting period. In certain cases, performance allocations will not be generated until additional unrealized and realized gains occur. Any appreciation would first cover the deductions for invested capital, unreturned organizational expenses, operating expenses, management fees and priority returns based on the terms of the respective fund agreements.

One of the Company’s subsidiaries, AGS, provides underwriting commitments in connection with securities offerings to the portfolio companies of the funds Apollo manages. As of June 30, 2019, there were no underwriting commitments.

Contingent Consideration—In connection with the acquisition of Stone Tower in April 2012, the Company agreed to pay the former owners of Stone Tower a specified percentage of any future performance revenues earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liability was determined based on the present value of estimated future performance revenue payments, and is recorded in profit sharing payable in the condensed consolidated statements of financial condition. The fair value of the remaining contingent obligation was $93.2 million and $74.5 million as of June 30, 2019 and December 31, 2018, respectively.

The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied and are characterized as Level III liabilities. The changes in the fair value of the contingent consideration obligations

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

is reflected in profit sharing expense in the condensed consolidated statements of operations. See note 6 for further information regarding fair value measurements.

16. SEGMENT REPORTING

Apollo conducts its business primarily in the United States and substantially all of its revenues are generated domestically. Apollo’s business is conducted through three reportable segments: credit, private equity and real assets. Segment information is utilized by our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. These segments were established based on the nature of investment activities in each underlying fund, including the specific type of investment made and the level of control over the investment.

The performance is measured by the Company’s chief operating decision maker 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.

Segment Reporting Changes

During the first quarter of 2019, Apollo’s chief operating decision makers determined that Segment Distributable Earnings, together with its main components including Fee Related Earnings, is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. Accordingly, Apollo will no longer report Economic Income. Apollo believes these changes better reflect the manner in which it makes key operating decisions pertaining to resource allocation, capital deployment, budgeting and forecasting, and are consistent with what shareholders consider to be most important in evaluating its performance.

Apollo determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments.

Apollo changed its definition of “Distributable Earnings” to include depreciation and amortization expenses and renamed it “Segment Distributable Earnings.” Historically, depreciation and amortization expenses were not reflected in Apollo’s calculation of Segment Distributable Earnings. Apollo also renamed “Distributable Earnings after Taxes and Related Payables” to “Distributable Earnings.”

In connection with these changes, all prior periods have been recast to conform to the new presentation. Consequently, this information will be different from the historical segment financial results previously reported by Apollo in its reports filed with the SEC.

Segment Distributable Earnings

Segment Distributable Earnings, or “Segment DE”, is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. Management believes the components of Segment DE, such as the amount of management fees, advisory and transaction fees and realized performance fees, are indicative of the Company’s performance. Management uses Segment DE 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;

• Decisions related 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 the funds and those of Apollo’s shareholders by providing such individuals a profit sharing interest in

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

the performance fees earned in relation to the funds. To achieve that objective, a certain amount of compensation is based on Apollo’s performance and growth for the year; and

• Decisions related to the amount of earnings available for distribution to Class A shareholders, holders of RSUs that participate in distributions and holders of AOG Units.

Segment DE is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. Segment DE represents the amount of Apollo’s net realized earnings, excluding the effects of the consolidation of any of the related funds, Taxes and Related Payables, transaction-related charges and any acquisitions. Transaction-related charges includes equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. In addition, Segment DE excludes non-cash revenue and expense related to equity awards granted by unconsolidated related parties to employees of the Company, compensation and administrative related expense reimbursements, as well as the assets, liabilities and operating results of the funds and variable interest entities that are included in the condensed consolidated financial statements. We believe the exclusion of the non-cash charges related to the 2007 Reorganization for equity-based compensation provides investors with a meaningful indication of our performance because these charges relate to the equity portion of our capital structure and not our core operating performance. Segment DE also excludes impacts of the remeasurement of the tax receivable agreement recorded in other income, which arises from changes in the associated deferred tax balance.

Segment DE may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordance with U.S. GAAP. We use Segment DE as a measure of operating performance, not as a measure of liquidity. Segment DE should not be considered in isolation or as a substitute for net income or other income data prepared in accordance with U.S. GAAP. The use of Segment DE without consideration of related U.S. GAAP measures is not adequate due to the adjustments described above. Management compensates for these limitations by using Segment DE as a supplemental measure to U.S. GAAP results, to provide a more complete understanding of our performance as management measures it. A reconciliation of Segment DE to its most directly comparable U.S. GAAP measure of income (loss) before income tax provision can be found in this footnote.

Fee Related Earnings

Fee Related Earnings (“FRE”) is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure to assess whether revenues that we believe are generally more stable and predictable in nature, primarily consisting of management fees, are sufficient to cover associated operating expenses and generate profits. FRE is the sum across all segments of (i) management fees, (ii) advisory and transaction fees, (iii) performance fees earned from business development companies and Redding Ridge Holdings (as defined below) and (iv) other income, net, less (x) salary, bonus and benefits, excluding equity-based compensation, (y) other associated operating expenses and (z) non-controlling interests in the management companies of certain funds the Company manages.

- 55-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following tables present financial data for Apollo’s reportable segments.

	As of and for the Three Months Ended June 30, 2019
	Credit Segment			Private Equity Segment			Real Assets Segment			Total Reportable Segments
Management fees	$	190,275		$	129,638		$	46,398		$	366,311
Advisory and transaction fees, net	5,510			20,257			5,295			31,062
Performance fees(1)	9,261			—			—			9,261
Fee Related Revenues	205,046			149,895			51,693			406,634
Salary, bonus and benefits	(50,465		)	(40,267		)	(19,537		)	(110,269		)
General, administrative and other	(31,647		)	(22,962		)	(8,547		)	(63,156		)
Placement fees	(157		)	(618		)	—			(775		)
Fee Related Expenses	(82,269		)	(63,847		)	(28,084		)	(174,200		)
Other income, net of Non-Controlling Interest	1,968			3,963			156			6,087
Fee Related Earnings	124,745			90,011			23,765			238,521
Realized performance fees	18,030			12,231			3,074			33,335
Realized profit sharing expense	(7,877		)	(4,089		)	(1,340		)	(13,306		)
Net Realized Performance Fees	10,153			8,142			1,734			20,029
Realized principal investment income	7,909			1,877			1,495			11,281
Net interest loss and other	(4,656		)	(7,650		)	(2,708		)	(15,014		)
Segment Distributable Earnings(2)	$	138,151		$	92,380		$	24,286		$	254,817
Total Assets(2)	$	2,865,509		$	2,741,435		$	520,817		$	6,127,761

(1) Represents certain performance fees from business development companies and Redding Ridge Holdings LP (“Redding Ridge Holdings”), an affiliate of Redding Ridge.

(2) Refer below for a reconciliation of total revenues, total expenses, other income (loss) and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets.

- 56-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

	For the Three Months Ended June 30, 2018
	Credit Segment			Private Equity Segment			Real Assets Segment			Total Reportable Segments
Management fees	$	153,177		$	132,417		$	40,270		$	325,864
Advisory and transaction fees, net	2,100			13,319			161			15,580
Performance fees(1)	5,766			—			—			5,766
Fee Related Revenues	161,043			145,736			40,431			347,210
Salary, bonus and benefits	(42,729		)	(41,879		)	(19,893		)	(104,501		)
General, administrative and other	(27,843		)	(18,333		)	(9,500		)	(55,676		)
Placement fees	(279		)	(32		)	—			(311		)
Fee Related Expenses	(70,851		)	(60,244		)	(29,393		)	(160,488		)
Other income (loss), net of Non-Controlling Interest	(1,188		)	82			55			(1,051		)
Fee Related Earnings	89,004			85,574			11,093			185,671
Realized performance fees	14,635			54,640			45,199			114,474
Realized profit sharing expense	(11,493		)	(31,512		)	(26,805		)	(69,810		)
Net Realized Performance Fees	3,142			23,128			18,394			44,664
Realized principal investment income	5,931			9,079			4,363			19,373
Net interest loss and other	(3,952		)	(5,259		)	(1,968		)	(11,179		)
Segment Distributable Earnings(2)	$	94,125		$	112,522		$	31,882		$	238,529

(1) Represents certain performance fees from business development companies and Redding Ridge Holdings.

(2) Refer below for a reconciliation of total revenues, total expenses and other income (loss) for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income (loss).

The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments:

	For the Three Months Ended June 30,
	2019			2018
Total Consolidated Revenues	$	636,579		$	523,316
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)	(23,847		)	(20,200		)
Adjustments related to consolidated funds and VIEs(1)	90			1,979
Performance fees(2)	(163,014		)	(135,093		)
Principal investment income	(43,174		)	(22,792		)
Total Fee Related Revenues	406,634			347,210
Realized performance fees	33,335			114,474
Realized principal investment income and other	10,438			18,530
Total Segment Revenues	$	450,407		$	480,214

(1) Represents advisory fees, management fees and performance fees earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative related expense reimbursements.

(2) Excludes certain performance fees from business development companies and Redding Ridge Holdings.

- 57-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments:

	For the Three Months Ended June 30,
	2019			2018
Total Consolidated Expenses	$	342,525		$	301,394
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)	(23,865		)	(19,836		)
Reclassification of interest expenses	(23,302		)	(15,162		)
Transaction-related compensation charges, net(1)	(18,135		)	6,905
Charges associated with corporate conversion(2)	(10,006		)	—
Equity-based compensation	(18,237		)	(16,028		)
Total profit sharing expense(3)	(74,780		)	(96,785		)
Total Fee Related Expenses	174,200			160,488
Realized profit sharing expense	13,306			69,810
Total Segment Expenses	$	187,506		$	230,298

(1) Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.

(2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1.

(3) Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other.

The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments:

	For the Three Months Ended June 30,
	2019			2018
Total Consolidated Other Income (Loss)	$	65,004		$	(59,188	)
Adjustments related to consolidated funds and VIEs(1)	(4,367		)	(8,967		)
Net (gains) losses from investment activities	(45,053		)	67,565
Interest income and other, net of Non-Controlling Interest	(9,497		)	(461		)
Other Income (Loss), net of Non-Controlling Interest	6,087			(1,051		)
Net interest loss and other	(14,171		)	(10,336		)
Total Segment Other Loss	$	(8,084	)	$	(11,387	)

(1) Represents the addition of other income of consolidated funds and VIEs.

- 58-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following table presents the reconciliation of income (loss) before income tax provision reported in the condensed consolidated statements of operations to Segment Distributable Earnings:

	For the Three Months Ended June 30,
	2019			2018
Income before income tax provision	$	359,058		$	162,734
Transaction-related charges(1)	18,135			(6,905		)
Charges associated with corporate conversion(2)	10,006			—
Net income attributable to Non-Controlling Interests in consolidated entities and appropriated partners’ capital	(5,143		)	(8,716		)
Unrealized performance fees	(129,679		)	(20,619		)
Unrealized profit sharing expense	40,799			9,125
Equity-based profit sharing expense and other(3)	20,675			17,850
Equity-based compensation	18,237			16,028
Unrealized principal investment income	(31,893		)	(3,419		)
Unrealized net (gains) losses from investment activities and other	(45,378		)	72,451
Segment Distributable Earnings	$	254,817		$	238,529

 

(1) Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.

(2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1.

(3) Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit sharing expense and other also includes non-cash expenses related to equity awards granted by unconsolidated related parties to employees of Apollo.

The following tables present financial data for Apollo’s reportable segments.

	As of and for the Six Months Ended June 30, 2019
	Credit Segment			Private Equity Segment			Real Assets Segment			Total Reportable Segments
Management fees	$	373,017		$	260,134		$	91,783		$	724,934
Advisory and transaction fees, net	8,358			36,393			5,371			50,122
Performance fees(1)	9,922			—			—			9,922
Fee Related Revenues	391,297			296,527			97,154			784,978
Salary, bonus and benefits	(94,769		)	(83,500		)	(37,725		)	(215,994		)
General, administrative and other	(59,143		)	(48,824		)	(18,222		)	(126,189		)
Placement fees	148			(483		)	—			(335		)
Fee Related Expenses	(153,764		)	(132,807		)	(55,947		)	(342,518		)
Other income, net of Non-Controlling Interest	1,564			4,159			94			5,817
Fee Related Earnings	239,097			167,879			41,301			448,277
Realized performance fees	21,357			72,687			3,080			97,124
Realized profit sharing expense	(11,395		)	(41,816		)	(1,234		)	(54,445		)
Net Realized Performance Fees	9,962			30,871			1,846			42,679
Realized principal investment income	10,958			9,965			1,794			22,717
Net interest loss and other	(9,042		)	(13,783		)	(4,881		)	(27,706		)
Segment Distributable Earnings(2)	$	250,975		$	194,932		$	40,060		$	485,967
Total Assets(2)	$	2,865,509		$	2,741,435		$	520,817		$	6,127,761

(1) Represents certain performance fees from business development companies and Redding Ridge Holdings.

- 59-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

(2) Refer below for a reconciliation of total revenues, total expenses, other loss and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets.

	For the Six Months Ended June 30, 2018
	Credit Segment			Private Equity Segment			Real Assets Segment			Total Reportable Segments
Management fees	$	302,892		$	214,697		$	80,478		$	598,067
Advisory and transaction fees, net	4,295			23,974			305			28,574
Performance fees(1)	11,041			—			—			11,041
Fee Related Revenues	318,228			238,671			80,783			637,682
Salary, bonus and benefits	(89,550		)	(82,604		)	(38,878		)	(211,032		)
General, administrative and other	(54,211		)	(36,316		)	(19,524		)	(110,051		)
Placement fees	(555		)	(83		)	—			(638		)
Fee Related Expenses	(144,316		)	(119,003		)	(58,402		)	(321,721		)
Other income, net of Non-Controlling Interest	1,995			391			223			2,609
Fee Related Earnings	175,907			120,059			22,604			318,570
Realized performance fees(2)	17,749			167,412			51,615			236,776
Realized profit sharing expense(2)	(14,327		)	(89,260		)	(29,870		)	(133,457		)
Net Realized Performance Fees	3,422			78,152			21,745			103,319
Realized principal investment income	10,211			27,409			5,146			42,766
Net interest loss and other	(7,470		)	(10,615		)	(3,877		)	(21,962		)
Segment Distributable Earnings(3)	$	182,070		$	215,005		$	45,618		$	442,693

(1) Represents certain performance fees from business development companies and Redding Ridge Holdings.

(2) Excludes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018.

(3) Refer below for a reconciliation of total revenues, total expenses and other income (loss) for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income (loss).

The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments:

	For the Six Months Ended June 30,
	2019			2018
Total Consolidated Revenues	$	1,314,356		$	690,219
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)	(52,976		)	(39,113		)
Adjustments related to consolidated funds and VIEs(1)	1,722			3,618
Performance fees(2)	(411,186		)	(6,854		)
Principal investment income	(66,938		)	(10,188		)
Total Fee Related Revenues	784,978			637,682
Realized performance fees(3)	97,124			236,776
Realized principal investment income and other	21,032			41,081
Total Segment Revenues	$	903,134		$	915,539

(1) Represents advisory fees, management fees and performance fees earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative related expense reimbursements.

(2) Excludes certain performance fees from business development companies and Redding Ridge Holdings.

(3) Excludes realized performance fees settled in the form of shares of Athene Holding during the six months ended June 30, 2018.

- 60-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments:

	For the Six Months Ended June 30,
	2019			2018
Total Consolidated Expenses	$	720,542		$	516,269
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)	(52,707		)	(38,571		)
Reclassification of interest expenses	(42,410		)	(28,959		)
Transaction-related charges, net(1)	(23,598		)	5,053
Charges associated with corporate conversion(2)	(10,006		)	—
Equity-based compensation	(36,660		)	(33,463		)
Total profit sharing expense(3)	(212,643		)	(98,608		)
Total Fee Related Expenses	342,518			321,721
Realized profit sharing expense(4)	54,445			133,457
Total Segment Expenses	$	396,963		$	455,178

(1) Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.

(2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1.

(3) Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other.

(4) Excludes realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018.

The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments:

	For the Six Months Ended June 30,
	2019			2018
Total Consolidated Other Income (Loss)	$	100,465		$	(111,984	)
Adjustments related to consolidated funds and VIEs(1)	(13,501		)	(15,192		)
Net (gains) losses from investment activities	(63,878		)	134,702
Interest income and other, net of Non-Controlling Interest	(17,269		)	(4,917		)
Other Income, net of Non-Controlling Interest	5,817			2,609
Net interest loss and other	(26,021		)	(20,277		)
Total Segment Other Loss	$	(20,204	)	$	(17,668	)

(1) Represents the addition of other income of consolidated funds and VIEs.

- 61-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(dollars in thousands, except share data, except where noted)

The following table presents the reconciliation of income (loss) before income tax provision reported in the condensed consolidated statements of operations to Segment Distributable Earnings:

	For the Six Months Ended June 30,
	2019			2018
Income before income tax provision	$	694,279		$	61,966
Transaction-related charges(1)	23,598			(5,053		)
Charges associated with corporate conversion(2)	10,006			—
Net income attributable to Non-Controlling Interests in consolidated entities and appropriated partners’ capital	(13,805		)	(14,695		)
Unrealized performance fees(3)	(314,062		)	229,922
Unrealized profit sharing expense(3)	116,561			(67,263		)
Equity-based profit sharing expense and other(4)	41,637			32,414
Equity-based compensation	36,660			33,463
Unrealized principal investment (income) loss	(44,221		)	32,578
Unrealized net (gains) losses from investment activities and other	(64,686		)	139,361
Segment Distributable Earnings	$	485,967		$	442,693

 

(1) Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.

(2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1.

(3) Includes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018.

(4) Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit sharing expense and other also includes non-cash expenses related to equity awards granted by unconsolidated related parties to employees of Apollo.

The following table presents the reconciliation of Apollo’s total reportable segment assets to total assets:

	As of June 30, 2019		As of December 31, 2018
Total reportable segment assets	$	6,127,761	$	4,791,646
Adjustments(1)	1,220,483		1,200,008
Total assets	$	7,348,244	$	5,991,654

(1) Represents the addition of assets of consolidated funds and VIEs and consolidation elimination adjustments.

17. SUBSEQUENT EVENTS

On July 31, 2019, the Company declared a cash distribution of $0.50 per Class A share, which will be paid on August 30, 2019 to holders of record at the close of business on August 16, 2019.

On July 31, 2019, the Company declared a cash distribution of $0.398438 per Series A Preferred share and Series B Preferred share, which will be paid on September 16, 2019 to holders of record at the close of business on August 30, 2019.

- 62-

ITEM 1A.     UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS

OF FINANCIAL CONDITION

APOLLO GLOBAL MANAGEMENT, LLC

CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(dollars in thousands, except share data)

	As of June 30, 2019
	Apollo Global Management, LLC and Consolidated Subsidiaries			Consolidated Funds and VIEs			Eliminations			Consolidated
Assets:
Cash and cash equivalents	$	945,721		$	4		$	—		$	945,725
Restricted cash	17,651			—			—			17,651
U.S. Treasury securities, at fair value	713,061			—			—			713,061
Investments	3,307,560			569			(88,179		)	3,219,950
Assets of consolidated variable interest entities:
Cash and cash equivalents	—			67,085			—			67,085
Investments, at fair value	—			1,183,487			—			1,183,487
Other assets	—			59,131			—			59,131
Incentive fees receivable	—			—			—			—
Due from related parties	450,100			—			(933		)	449,167
Deferred tax assets, net	277,037			—			—			277,037
Other assets	229,001			—			(680		)	228,321
Lease assets	98,777			—			—			98,777
Goodwill	88,852			—			—			88,852
Total Assets	$	6,127,760		$	1,310,276		$	(89,792	)	$	7,348,244
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	89,776		$	—		$	—		$	89,776
Accrued compensation and benefits	112,792			—			—			112,792
Deferred revenue	92,274			—			—			92,274
Due to related parties	401,631			—			—			401,631
Profit sharing payable	595,954			—			—			595,954
Debt	2,350,915			—			—			2,350,915
Liabilities of consolidated variable interest entities:
Debt, at fair value	—			903,420			(44,063		)	859,357
Other liabilities	—			87,023			(311		)	86,712
Due to related parties	—			1,303			(1,303		)	—
Other liabilities	112,679			—			—			112,679
Lease liabilities	105,164			—			—			105,164
Total Liabilities	3,861,185			991,746			(45,677		)	4,807,254
Shareholders’ Equity:
Apollo Global Management, LLC shareholders’ equity:
Series A Preferred shares	264,398			—			—			264,398
Series B Preferred shares	289,815			—			—			289,815
Additional paid in capital	1,052,259			—			—			1,052,259
Accumulated deficit	(222,007		)	17,514			(17,514		)	(222,007		)
Accumulated other comprehensive loss	(4,956		)	(2,839		)	2,603			(5,192		)
Total Apollo Global Management, LLC shareholders’ equity	1,379,509			14,675			(14,911		)	1,379,273
Non-Controlling Interests in consolidated entities	6,011			303,855			(29,204		)	280,662
Non-Controlling Interests in Apollo Operating Group	881,055			—			—			881,055
Total Shareholders’ Equity	2,266,575			318,530			(44,115		)	2,540,990
Total Liabilities and Shareholders’ Equity	$	6,127,760		$	1,310,276		$	(89,792	)	$	7,348,244

- 63-

APOLLO GLOBAL MANAGEMENT, LLC

CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(dollars in thousands, except share data)

	As of December 31, 2018
	Apollo Global Management, LLC and Consolidated Subsidiaries			Consolidated Funds and VIEs			Eliminations			Consolidated
Assets:
Cash and cash equivalents	$	609,743		$	4		$	—		$	609,747
Restricted cash	3,457			—			—			3,457
U.S. Treasury securities, at fair value	392,932			—			—			392,932
Investments	2,811,445			558			(89,391		)	2,722,612
Assets of consolidated variable interest entities:
Cash and cash equivalents	—			49,671			—			49,671
Investments, at fair value	—			1,175,985			(308		)	1,175,677
Other assets	—			65,543			—			65,543
Incentive fees receivable	6,792			—			—			6,792
Due from related parties	379,525			—			(1,417		)	378,108
Deferred tax assets	306,094			—			—			306,094
Other assets	192,806			—			(637		)	192,169
Goodwill	88,852			—			—			88,852
Total Assets	$	4,791,646		$	1,291,761		$	(91,753	)	$	5,991,654
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	70,878		$	—		$	—		$	70,878
Accrued compensation and benefits	73,583			—			—			73,583
Deferred revenue	111,097			—			—			111,097
Due to related parties	425,435			—			—			425,435
Profit sharing payable	452,141			—			—			452,141
Debt	1,360,448			—			—			1,360,448
Liabilities of consolidated variable interest entities:
Debt, at fair value	—			899,651			(44,190		)	855,461
Other liabilities	—			79,244			(267		)	78,977
Due to related parties	—			1,787			(1,787		)	—
Other liabilities	111,794			—			—			111,794
Total Liabilities	2,605,376			980,682			(46,244		)	3,539,814
Shareholders’ Equity:
Apollo Global Management, LLC shareholders’ equity:
Series A Preferred shares	264,398			—			—			264,398
Series B Preferred shares	289,815			—			—			289,815
Additional paid in capital	1,299,418			—			—			1,299,418
Accumulated deficit	(473,275		)	17,673			(17,674		)	(473,276		)
Accumulated other comprehensive loss	(3,925		)	(2,479		)	2,245			(4,159		)
Total Apollo Global Management, LLC shareholders’ equity	1,376,431			15,194			(15,429		)	1,376,196
Non-Controlling Interests in consolidated entities	5,717			295,885			(30,080		)	271,522
Non-Controlling Interests in Apollo Operating Group	804,122			—			—			804,122
Total Shareholders’ Equity	2,186,270			311,079			(45,509		)	2,451,840
Total Liabilities and Shareholders’ Equity	$	4,791,646		$	1,291,761		$	(91,753	)	$	5,991,654

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

The following discussion should be read in conjunction with Apollo Global Management, LLC’s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section entitled “Risk Factors” in the 2018 Annual Report. The highlights listed below have had significant effects on many items within our condensed consolidated financial statements and affect the comparison of the current period’s activity with those of prior periods.

General

Our Businesses

Founded in 1990, Apollo is a leading global alternative investment manager. We are a contrarian, value-oriented investment manager in credit, private equity and real assets with significant distressed expertise and a flexible mandate in the majority of our funds which enables our funds to invest 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. Apollo is led by our Managing Partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 33 years and lead a team of 1,268 employees, including 423 investment professionals, as of June 30, 2019.

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

(i) Credit—primarily invests in non-control corporate and structured debt instruments including performing, stressed and distressed instruments across the capital structure;

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

(iii) Real assets—primarily invests in (i) real estate equity and infrastructure equity for the acquisition and recapitalization of real estate and infrastructure assets, portfolios, platforms and operating companies, (ii) real estate and infrastructure debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities and (iii) European performing and non-performing loans, and unsecured consumer loans.

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 managed funds.

Our financial results vary since performance fees, which generally constitute a large portion of the income we receive from the funds that we manage, 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 emphasize long-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 rate for these new credit products is at market rates for such products and in certain cases is below our historical rates. Also, due to the complexity of these new product offerings, the Company has incurred and will continue to incur additional costs associated with managing these products. To date, these additional costs have been offset by realized economies of scale and ongoing cost management.

As of June 30, 2019, we had total AUM of $311.9 billion across all of our businesses. More than 90% of our total AUM was in funds with a contractual life at inception of seven years or more, and 49% of such AUM was in permanent capital vehicles.

As of December 31, 2017, Fund IX held its final closing, raising a total of $23.5 billion in third-party capital and approximately $1.2 billion of additional capital from Apollo and affiliated investors for total commitments of $24.7 billion. On December 31, 2013, Fund VIII held a final closing raising a total of $17.5 billion in third-party capital and approximately $880 million of additional capital from Apollo and affiliated investors, and as of June 30, 2019, Fund VIII had $3.1 billion of uncalled commitments remaining. Additionally, Fund VII held a final closing in December 2008, raising a total of $14.7 billion, and as of

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June 30, 2019, Fund VII had $1.8 billion of uncalled commitments remaining. We have consistently produced attractive long-term investment returns in our traditional private equity funds, generating a 39% gross IRR and a 25% net IRR on a compound annual basis from inception through June 30, 2019. Apollo’s private equity fund appreciation was 2.5% and 7.2% for the three and six months ended June 30, 2019, respectively.

For our real assets segment, total gross return was 0.3% and 4.4% for the three and six months ended June 30, 2019, respectively. The gross return represents gross return for U.S. Real Estate Fund I and U.S. Real Estate Fund II including co-investment capital, Asia Real Estate Fund including co-investment capital, the European Principal Finance funds, and infrastructure equity funds.

For further detail related to fund performance metrics across all of our businesses, see “—The Historical Investment Performance of Our Funds.”

Subsequent to December 31, 2018, the Company determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments. 

Holding Company Structure

The diagram below depicts our current organizational structure:

Note: 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 August 1, 2019.

(1) Based on a Form 13F for the quarter ended March 31, 2019 filed with the SEC on May 3, 2019 by the Strategic Investor, the Strategic Investor holds 7.7% of the Class A shares outstanding and 3.9% of the economic interests in the Apollo Operating Group. The Class A shares held by investors other than the Strategic Investor represent 47.8% of the total voting power of our shares entitled to vote and 45.9% of the economic interests in the Apollo Operating Group. Class A shares held by the Strategic Investor do not have voting rights. However, such Class A shares will become entitled to vote upon transfers by the Strategic Investor in accordance with the agreements entered into in connection with the investments made by the Strategic Investor.

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(2) Our Managing Partners own BRH Holdings GP, Ltd., which in turn holds our only outstanding Class B share. The Class B share represents 52.2% of the total voting power of our shares entitled to vote but no economic interest in Apollo Global Management, LLC. Our Managing Partners’ economic interests are instead represented by their indirect beneficial ownership, through Holdings, of 45.6% 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 50.2% of the limited partner interests in each Apollo Operating Group entity. The AOG Units held by Holdings are exchangeable for Class A shares. Our Managing Partners, through their interests in BRH and Holdings, beneficially own 45.6% of the AOG Units. Our Contributing Partners, through their ownership interests in Holdings, beneficially own 4.6% of the AOG Units.

(5) BRH Holdings GP, Ltd. is the sole member of AGM Management, LLC, our manager. The management of Apollo Global Management, LLC is vested in our manager as provided in our operating agreement.

(6) Represents 49.8% of the limited partner interests in each Apollo Operating Group entity, held through the intermediate holding companies. Apollo Global Management, LLC, also indirectly owns 100% of the general partner interests in each Apollo Operating Group entity.

Each of the Apollo Operating Group entities 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 holding companies 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, partnerships or other entities within the Apollo Operating Group based on our views regarding the appropriate balance between (a) administrative convenience and (b) continued business, financial, tax and other optimization.

Conversion to a C Corporation

On May 2, 2019, the Company announced plans to convert from a publicly traded partnership to a C corporation. The conversion is expected to be effective during the third quarter of 2019. The details of the conversion remain subject to the approval of the conflicts committee of Apollo Global Management, LLC’s board of directors and certain required regulatory approvals.

Business Environment

As a global investment manager, we are affected by numerous factors, including the condition of financial markets and the economy. Price fluctuations within equity, credit, commodity, foreign exchange markets, as well as interest rates, which may be volatile and mixed across geographies, can significantly impact the valuation of our funds’ portfolio companies and related income we may recognize.

In the U.S., the S&P 500 Index increased by 3.8% in the second quarter of 2019, following an increase of 13.1% in the first quarter of 2019. Outside the U.S., global equity markets appreciated during the quarter, with the MSCI All Country World ex USA Index increasing 4.1% following an increase of 10.6% in the first quarter of 2019.

Conditions in the credit markets also have a significant impact on our business. Credit markets were positive in the second quarter of 2019, with the BofAML HY Master II Index increasing 2.6%, while the S&P/LSTA Leveraged Loan Index increased 1.7%. The U.S. 10-year Treasury yield fell slightly in the quarter to 2.0%. On July 31, 2019, The Federal Reserve reduced the benchmark interest rate, lowering it by a quarter point to a target range of 2.00% to 2.25%.

Foreign exchange rates can materially impact the valuations of our investments and those of our funds that are denominated in currencies other than the U.S. dollar. Relative to the U.S. dollar, the Euro appreciated 1.4% in the second quarter of 2019, after depreciating by 2.2% in the first quarter of 2019, while the British pound depreciated 2.6% in the second quarter of 2019, after appreciating 2.2% in the first quarter of 2019. Commodities generally decreased in the second quarter of 2019, with copper, natural gas, and sugar depreciating, while gold appreciated. The price of crude oil depreciated by 2.8% during the quarter ended June 30, 2019.

In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported real GDP increased at an annual rate of 2.1% in the second quarter of 2019, following an increase of 3.1% in the first quarter of 2019. As of July 2019, The International Monetary Fund estimated that the U.S. economy will expand by 2.6% in 2019 and 1.9% in 2020. Additionally, the U.S. unemployment rate stood at 3.7% as of June 30, 2019, slightly lower than in the previous quarter.

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Regardless of the market or economic environment at any given time, Apollo relies on its contrarian, value-oriented approach to consistently invest capital on behalf of its fund investors by focusing on opportunities that management believes are often overlooked by other investors. As such, Apollo’s global integrated investment platform deployed $5.2 billion and $9.5 billion of capital through the funds it manages during the three and six months ended June 30, 2019, respectively. We believe Apollo’s expertise in credit and its focus on nine core industry sectors, combined with more than 29 years of investment experience, has allowed Apollo to respond quickly to changing environments. Apollo’s core industry sectors include chemicals, manufacturing and industrial, natural resources, consumer and retail, consumer services, business services, financial services, leisure, and media/telecom/technology. Apollo believes that these attributes have contributed to the success of its private equity funds investing in buyouts and credit opportunities during both expansionary and recessionary economic periods.

In general, institutional investors continue to allocate capital towards alternative investment managers for more attractive risk-adjusted returns in a low interest rate environment, and we believe the business environment remains generally accommodative to raise larger successor funds, launch new products, and pursue attractive strategic growth opportunities, such as continuing to grow the assets of our permanent capital vehicles. As such, Apollo had $12.2 billion and $37.1 billion of capital inflows during the three and six months ended June 30, 2019, respectively. While Apollo continues to attract capital inflows, it also continues to generate realizations for fund investors. Apollo returned $2.2 billion and $3.9 billion of capital and realized gains to the investors in the funds it manages during the three and six months ended June 30, 2019, respectively.

Managing Business Performance

We believe that the presentation of Segment Distributable Earnings, or “Segment DE”, supplements a reader’s understanding of the economic operating performance of each of our segments.

Segment Distributable Earnings and Distributable Earnings

Segment Distributable Earnings is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. See note 16 to the condensed consolidated financial statements for more details regarding the components of Segment DE. Distributable Earnings (“DE”) represents Segment DE less estimated current corporate, local and non-U.S. taxes as well as the current payable under Apollo’s tax receivable agreement. DE is net of preferred distributions, if any, to the Series A and Series B Preferred shareholders. DE excludes the impacts of the remeasurement of deferred tax assets and liabilities which arises from changes in estimated future tax rates. The economic assumptions and methodologies that impact the implied income tax provision are similar to those methodologies and certain assumptions used in calculating the income tax provision for Apollo’s condensed consolidated statements of operations under U.S. GAAP. Management believes that excluding the remeasurement of the tax receivable agreement and deferred taxes from Segment DE and DE, respectively, is meaningful as it increases comparability between periods. Remeasurement of the tax receivable agreement and deferred taxes are estimates that may change due to changes in the interpretation of tax law.

We believe that Segment DE is helpful for an understanding of our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. This measure supplements and should be considered in addition to and not in lieu of the results of operations discussed below in “—Overview of Results of Operations” that have been prepared in accordance with U.S. GAAP. See note 16 to the condensed consolidated financial statements for more details regarding management’s consideration of Segment DE.

Fee Related Earnings and Fee Related EBITDA

Fee Related Earnings is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure. See note 16 to the condensed consolidated financial statements for more details regarding the components of FRE.

Fee related EBITDA is a non-U.S. GAAP measure derived from our segment reported results and is used to assess the performance of our operations as well as our ability to service current and future borrowings. Fee related EBITDA represents FRE plus amounts for depreciation and amortization. “Fee related EBITDA +100% of net realized performance fees” represents Fee related EBITDA plus realized performance fees less realized profit sharing expense.

We use Segment DE, DE, FRE and Fee related EBITDA as measures of operating performance, not as measures of liquidity. These measures should not be considered in isolation or as a substitute for net income or other income data prepared in accordance with U.S. GAAP. The use of these measures without consideration of their related U.S. GAAP measures is not adequate due to the adjustments described above.

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Segment Strategies

Apollo determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments.

In order to better reflect the grouping of synergistic credit strategies across the funds, accounts and permanent capital vehicles managed within our credit segment, Apollo has re-aligned its credit segment around four main strategies: corporate credit, structured credit, direct origination and advisory and other. The underlying assets managed within, and strategies employed by, Apollo’s credit segment have not changed as a result of this re-alignment.

Apollo has re-aligned its private equity segment around three strategies: traditional private equity, hybrid capital and natural resources. Hybrid capital includes our recently launched hybrid value strategy, other funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series.

Apollo has re-aligned its real assets segment around three strategies: real estate, principal finance and infrastructure. Real estate includes the commercial real estate mortgage loan assets discussed above, among other types of real estate assets. Principal finance includes our European Principal Finance Fund series.

Operating Metrics

We monitor certain operating metrics that are common to the alternative investment management industry. These operating metrics include Assets Under Management, capital deployed and uncalled commitments.

Assets Under Management

The tables below present Fee-Generating and Non-Fee-Generating AUM by segment:

	As of June 30, 2019
	Credit		Private Equity		Real Assets		Total
	(in millions)
Fee-Generating	$	163,089	$	47,082	$	25,965	$	236,136
Non-Fee-Generating	38,127		30,066		7,533		75,726
Total Assets Under Management	$	201,216	$	77,148	$	33,498	$	311,862

	As of June 30, 2018
	Credit		Private Equity		Real Assets		Total
	(in millions)
Fee-Generating	$	132,602	$	47,835	$	21,798	$	202,235
Non-Fee-Generating	30,620		31,032		5,565		67,217
Total Assets Under Management	$	163,222	$	78,867	$	27,363	$	269,452

	As of December 31, 2018
	Credit		Private Equity		Real Assets		Total
	(in millions)
Fee-Generating	$	144,071	$	46,633	$	23,663	$	214,367
Non-Fee-Generating	30,307		28,453		7,132		65,892
Total Assets Under Management	$	174,378	$	75,086	$	30,795	$	280,259

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The table below presents AUM with Future Management Fee Potential, which is a component of Non-Fee-Generating AUM, for each of Apollo’s three segments.

	As of June 30, 2019		As of June 30, 2018		As of December 31, 2018
	(in millions)
Credit	$	7,860	$	7,398	$	8,725
Private Equity	9,570		10,036		10,555
Real Assets	2,159		1,309		2,097
Total AUM with Future Management Fee Potential	$	19,589	$	18,743	$	21,377

The following tables present the components of Performance Fee-Eligible AUM for each of Apollo’s three segments:

	As of June 30, 2019
	Credit		Private Equity		Real Assets		Total
	(in millions)
Performance Fee-Generating AUM(1)	$	35,601	$	23,827	$	2,792	$	62,220
AUM Not Currently Generating Performance Fees	13,418		6,263		2,624		22,305
Uninvested Performance Fee-Eligible AUM	7,581		32,257		4,309		44,147
Total Performance Fee-Eligible AUM	$	56,600	$	62,347	$	9,725	$	128,672

	As of June 30, 2018
	Credit		Private Equity		Real Assets		Total
	(in millions)
Performance Fee-Generating AUM(1)	$	27,254	$	26,510	$	2,218	$	55,982
AUM Not Currently Generating Performance Fees	12,463		3,745		1,043		17,251
Uninvested Performance Fee-Eligible AUM	6,774		34,914		5,402		47,090
Total Performance Fee-Eligible AUM	$	46,491	$	65,169	$	8,663	$	120,323

	As of December 31, 2018
	Credit		Private Equity		Real Assets		Total
	(in millions)
Performance Fee-Generating AUM(1)	$	23,574	$	22,974	$	2,019	$	48,567
AUM Not Currently Generating Performance Fees	17,857		3,850		2,662		24,369
Uninvested Performance Fee-Eligible AUM	8,483		35,749		4,659		48,891
Total Performance Fee-Eligible AUM	$	49,914	$	62,573	$	9,340	$	121,827

(1) Performance Fee-Generating AUM of $2.2 billion, $2.5 billion and $0.2 billion as of June 30, 2019, June 30, 2018 and December 31, 2018, respectively, are above the applicable hurdle rates or preferred returns, but in accordance with the adoption of the revenue recognition standard effective January 1, 2018, recognition of performance fees associated with such Performance Fee-Generating AUM have been deferred to future periods when the fees are probable to not be significantly reversed.

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The following table presents AUM Not Currently Generating Performance Fees for funds that have invested capital for more than 24 months as of June 30, 2019 and the corresponding appreciation required to reach the preferred return or high watermark in order to generate performance fees:

Strategy / Fund	Invested AUM Not Currently Generating Performance Fees		Investment Period Active > 24 Months		Appreciation Required to Achieve Performance Fees(1)
	(in millions)
Credit:
Corporate Credit	$	5,538	$	5,538	3%
Structured Credit	1,236		808		12%
Direct Origination	136		—		N/A
Advisory and Other	6,508		—		N/A
Total Credit	13,418		6,346		4%
Private Equity:
ANRP I	381		381		67%
Hybrid Capital	2,328		1,950		81%
Other PE	3,554		146		118%
Total Private Equity	6,263		2,477		81%
Real Assets:
Total Real Assets	2,624		434		> 250bps
Total	$	22,305	$	9,257

(1) All investors in a given fund are considered in aggregate when calculating the appreciation required to achieve performance fees presented above. Appreciation required to achieve performance fees may vary by individual investor. Funds with an investment period less than 24 months are “N/A”.

The components of Fee-Generating AUM by segment are presented below:

	As of June 30, 2019
	Credit		Private Equity			Real Assets		Total
	(in millions)
Fee-Generating AUM based on capital commitments	$	3,284	$	26,849		$	5,405	$	35,538
Fee-Generating AUM based on invested capital	1,249		19,101			1,837		22,187
Fee-Generating AUM based on gross/adjusted assets	136,378		700			17,832		154,910
Fee-Generating AUM based on NAV	22,178		432			891		23,501
Total Fee-Generating AUM	$	163,089	$	47,082	(1)	$	25,965	$	236,136

(1) The weighted average remaining life of the traditional private equity funds as of June 30, 2019 was 83 months.

	As of June 30, 2018
	Credit		Private Equity			Real Assets		Total
	(in millions)
Fee-Generating AUM based on capital commitments	$	3,403	$	27,805		$	5,451	$	36,659
Fee-Generating AUM based on invested capital	1,106		18,677			5,946		25,729
Fee-Generating AUM based on gross/adjusted assets	109,695		807			10,336		120,838
Fee-Generating AUM based on NAV	18,398		546			65		19,009
Total Fee-Generating AUM	$	132,602	$	47,835	(1)	$	21,798	$	202,235

(1) The weighted average remaining life of the traditional private equity funds as of June 30, 2018 was 92 months.

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	As of December 31, 2018
	Credit		Private Equity			Real Assets		Total
	(in millions)
Fee-Generating AUM based on capital commitments	$	3,403	$	26,849		$	5,419	$	35,671
Fee-Generating AUM based on invested capital	1,020		18,601			6,659		26,280
Fee-Generating AUM based on gross/adjusted assets	119,525		776			11,435		131,736
Fee-Generating AUM based on NAV	20,123		407			150		20,680
Total Fee-Generating AUM	$	144,071	$	46,633	(1)	$	23,663	$	214,367

(1) The weighted average remaining life of the traditional private equity funds as of December 31, 2018 was 89 months.

The following table presents total AUM and Fee-Generating AUM amounts for our credit segment by category type:

	Total AUM						Fee-Generating AUM
	As of June 30,				As of December 31,		As of June 30,				As of December 31,
	2019		2018		2018		2019		2018		2018
	(in millions)
Corporate Credit	$	105,513	$	89,533	$	98,188	$	88,927	$	77,702	$	82,812
Structured Credit	49,662		39,358		42,693		43,651		34,417		37,932
Direct Origination	18,190		14,636		16,715		16,277		13,460		14,395
Advisory and Other	27,851		19,695		16,782		14,234		7,023		8,932
Total	$	201,216	$	163,222	$	174,378	$	163,089	$	132,602	$	144,071

Investment Management Agreement - AAM

Apollo, through its consolidated subsidiary, AAM, provides asset management services to Athene with respect to assets in the Athene Accounts, including asset allocation services, direct asset management services, asset and liability matching management, mergers and acquisitions, asset diligence, hedging and other asset management services and receives management fees for providing these services. The Company, through AAM, also provides sub-allocation services with respect to a portion of the assets in the Athene Accounts. See note 14 to the condensed consolidated financial statements for more details regarding the fee rates of the investment management and sub-allocation fee arrangements with respect to the assets in the Athene Accounts.

The following table presents the aggregate Athene Sub-Allocated Total AUM by asset class:

	As of June 30, 2019
	(in millions)
Core Assets	$	31,052
Core Plus Assets	30,102
Yield Assets	44,457
High Alpha	4,238
Cash, Treasuries, Equity and Alternatives	9,181
Total	$	119,030

Investment Advisory and Sub-Advisory Agreements - AAME

Apollo, through AAME, sub-advises the Athora Accounts and broadly refers to “Athora Sub-Advised” assets as those assets in the Athora Accounts which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages. The Company refers to the portion of the Athora AUM that is not Athora Sub-Advised AUM as “Athora Non-Sub Advised” AUM. See note 14 to the condensed consolidated financial statements for more details regarding the fee arrangements with respect to the assets in the Athora Accounts.

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The following table presents Athora Sub-Advised and Athora Non-Sub-Advised AUM:

	As of June 30,				As of December 31,
	2019		2018		2018
	(in millions)
Sub-Advised AUM	$	3,596	$	1,818	$	3,032
Non-Sub-Advised AUM	10,080		6,340		4,952
Total AUM	$	13,676	$	8,158	$	7,984

The following table presents total AUM and Fee-Generating AUM amounts for our private equity segment:

	Total AUM						Fee-Generating AUM
	As of June 30,				As of December 31,		As of June 30,				As of December 31,
	2019		2018		2018		2019		2018		2018
	(in millions)
Private Equity Funds	$	61,771	$	64,970	$	60,680	$	39,578	$	40,117	$	39,519
Hybrid Capital	9,217		9,083		8,886		3,405		3,622		3,025
Natural Resources	6,160		4,814		5,520		4,099		4,096		4,089
Total	$	77,148	$	78,867	$	75,086	$	47,082	$	47,835	$	46,633

The following table presents total AUM and Fee-Generating AUM amounts for our real assets segment:

	Total AUM						Fee-Generating AUM
	As of June 30,				As of December 31,		As of June 30,				As of December 31,
	2019		2018		2018		2019		2018		2018
	(in millions)
Real Estate	$	24,441	$	19,394	$	21,971	$	19,035	$	15,375	$	16,873
Principal Finance	6,996		7,398		7,050		5,207		5,852		5,468
Infrastructure	2,061		571		1,774		1,723		571		1,322
Total	$	33,498	$	27,363	$	30,795	$	25,965	$	21,798	$	23,663

The following tables summarize changes in total AUM for each of Apollo’s three segments:

	For the Three Months Ended June 30,
	2019												2018
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total
Change in Total AUM(1):
Beginning of Period	$	193,669		$	77,325		$	32,000		$	302,994		$	146,636		$	76,852		$	23,928		$	247,416
Inflows	9,664			751			1,790			12,205			23,278			2,774			4,324			30,376
Outflows(2)	(2,917		)	(101		)	(173		)	(3,191		)	(5,189		)	(16		)	—			(5,205		)
Net Flows	6,747			650			1,617			9,014			18,089			2,758			4,324			25,171
Realizations	(486		)	(1,381		)	(333		)	(2,200		)	(468		)	(1,578		)	(848		)	(2,894		)
Market Activity(3)	1,286			554			214			2,054			(1,035		)	835			(41		)	(241		)
End of Period	$	201,216		$	77,148		$	33,498		$	311,862		$	163,222		$	78,867		$	27,363		$	269,452

(1) At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions, and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.

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(2) Outflows for Total AUM include redemptions of $1.6 billion and $148.6 million during the three months ended June 30, 2019 and 2018, respectively.

(3) Includes foreign exchange impacts of $321.4 million, $15.4 million and $62.9 million for credit, private equity and real assets, respectively, during the three months ended June 30, 2019, and foreign exchange impacts of $(1.5) billion, $(108.0) million and $(130.5) million for credit, private equity and real assets, respectively, during the three months ended June 30, 2018.

	For the Six Months Ended June 30,
	2019												2018
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total
	(in millions)
Change in Total AUM(1):
Beginning of Period	$	174,378		$	75,086		$	30,795		$	280,259		$	144,807		$	80,694		$	23,427		$	248,928
Inflows	30,901			2,844			3,396			37,141			26,567			3,269			5,203			35,039
Outflows(2)	(5,279		)	(140		)	(399		)	(5,818		)	(6,585		)	(159		)	—			(6,744		)
Net Flows	25,622			2,704			2,997			31,323			19,982			3,110			5,203			28,295
Realizations	(720		)	(2,552		)	(668		)	(3,940		)	(1,887		)	(3,607		)	(1,469		)	(6,963		)
Market Activity(3)	1,936			1,910			374			4,220			320			(1,330		)	202			(808		)
End of Period	$	201,216		$	77,148		$	33,498		$	311,862		$	163,222		$	78,867		$	27,363		$	269,452

(1) At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.

(2) Outflows for Total AUM include redemptions of $2.0 billion and $332.8 million during the six months ended June 30, 2019 and 2018, respectively.

(3) Includes foreign exchange impacts of $(48.8) million, $(27.8) million and $22.5 million for credit, private equity and real assets, respectively, during the six months ended June 30, 2019, and foreign exchange impacts of $(750.8) million, $(46.9) million and $(42.1) million for credit, private equity and real assets, respectively, during the six months ended June 30, 2018.

Total AUM was $311.9 billion at June 30, 2019, an increase of $8.9 billion, or 2.9%, compared to $303.0 billion at March 31, 2019. The net increase was primarily due to:

Net flows of $9.0 billion primarily related to:

• a $6.7 billion increase related to funds we manage in the credit segment primarily consisting of an increase in AUM relating to Athene of $5.5 billion driven by portfolio company activity and subscriptions of $2.8 billion across our corporate credit funds; these increases were partially offset by redemptions of $1.3 billion and net segment transfers of $1.1 billion;

• a $1.6 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $1.1 billion and subscriptions of $0.3 billion; and

• a $0.7 billion increase related to funds we manage in the private equity segment primarily consisting of subscriptions of $0.6 billion primarily relating to certain hybrid capital funds.

Market activity of $2.1 billion primarily related to $1.3 billion and $0.6 billion of appreciation in the funds we manage in the credit and private equity segments, respectively.

Offsetting these increases were:

Realizations of $2.2 billion primarily related to:

• $1.4 billion related to funds we manage in the private equity segment primarily consisting of distributions from Fund VI and other traditional private equity funds of $0.7 billion and $0.3 billion, respectively;

• $0.5 billion related to funds we manage in the credit segment primarily consisting of distributions throughout the platform; and

• $0.3 billion related to funds we manage in the real assets segment.

Total AUM was $311.9 billion at June 30, 2019, an increase of $31.6 billion, or 11.3%, compared to $280.3 billion at December 31, 2018. The net increase was primarily due to:

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Net flows of $31.3 billion primarily related to:

• a $25.6 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM relating to Athene of $9.5 billion as a result of portfolio company activity, (ii) an increase in AUM in the advisory and other category as a result of the acquisition of Aspen Insurance Holdings Limited and Athora’s acquisition of Generali Belgium, which added approximately $7.5 billion and $6.5 billion of AUM, respectively, and (iii) subscriptions of $4.0 billion across our corporate credit funds; these increases were offset by net segment transfers of $2.6 billion;

• a $3.0 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $2.6 billion; and

• a $2.7 billion increase related to funds we manage in the private equity segment consisting of subscriptions of $2.6 billion primarily related to certain traditional private equity fund co-investments and certain hybrid capital funds of $1.4 billion and $0.8 billion, respectively.

Market activity of $4.2 billion primarily related to $1.9 billion and $1.9 billion of appreciation in the funds we manage in the credit and private equity segments, respectively.

Offsetting these increases were:

Realizations of $3.9 billion primarily related to:

• $2.6 billion related to funds we manage in the private equity segment primarily consisting of distributions of $1.1 billion, $0.6 billion and $0.4 billion from Fund VI, Fund VIII and certain hybrid capital funds, respectively;

• $0.7 billion related to funds we manage in the credit segment primarily consisting of distributions from our direct origination funds; and

• $0.7 billion related to funds we manage in the real assets segment primarily consisting of distributions from our principal finance funds.

The following tables summarize changes in Fee-Generating AUM for each of Apollo’s three segments:

	For the Three Months Ended June 30,
	2019												2018
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total
Change in Fee-Generating AUM(1):
Beginning of Period	$	156,860		$	46,372		$	25,033		$	228,265		$	116,722		$	47,519		$	18,226		$	182,467
Inflows	9,184			1,190			1,467			11,841			21,721			1,118			4,242			27,081
Outflows(2)	(3,548		)	(206		)	(473		)	(4,227		)	(5,203		)	(362		)	—			(5,565		)
Net Flows	5,636			984			994			7,614			16,518			756			4,242			21,516
Realizations	(177		)	(317		)	(164		)	(658		)	(242		)	(438		)	(586		)	(1,266		)
Market Activity(3)	770			43			102			915			(396		)	(2		)	(84		)	(482		)
End of Period	$	163,089		$	47,082		$	25,965		$	236,136		$	132,602		$	47,835		$	21,798		$	202,235

(1) At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.

(2) Outflows for Fee-Generating AUM include redemptions of $1.5 billion and $135.2 million during the three months ended June 30, 2019 and 2018, respectively.

(3) Includes foreign exchange impacts of $96.8 million, $(2.4) million and $27.4 million for credit, private equity and real assets, respectively, during the three months ended June 30, 2019, and foreign exchange impacts of $(730.4) million, $(19.6) million and $(138.3) million for credit, private equity and real assets, respectively, during the three months ended June 30, 2018.

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	For the Six Months Ended June 30,
	2019												2018
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total
	(in millions)
Change in Fee-Generating AUM(1):
Beginning of Period	$	144,071		$	46,633		$	23,663		$	214,367		$	116,352		$	34,063		$	18,550		$	168,965
Inflows	23,529			1,323			2,947			27,799			24,738			24,647			4,243			53,628
Outflows(2)	(5,752		)	(433		)	(483		)	(6,668		)	(7,545		)	(10,443		)	—			(17,988		)
Net Flows	17,777			890			2,464			21,131			17,193			14,204			4,243			35,640
Realizations	(279		)	(511		)	(285		)	(1,075		)	(1,130		)	(455		)	(1,031		)	(2,616		)
Market Activity(3)	1,520			70			123			1,713			187			23			36			246
End of Period	$	163,089		$	47,082		$	25,965		$	236,136		$	132,602		$	47,835		$	21,798		$	202,235

(1) At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.

(2) Outflows for Fee-Generating AUM include redemptions of $2.0 billion and $307.3 million during the six months ended June 30, 2019 and 2018, respectively.

(3) Includes foreign exchange impacts of $(46.1) million, $(2.4) million and $(5.2) million for credit, private equity and real assets, respectively, during the six months ended June 30, 2019, and foreign exchange impacts of $(374.1) million, $(8.2) million and $(52.5) million for credit, private equity and real assets, respectively, during the six months ended June 30, 2018.

Total Fee-Generating AUM was $236.1 billion at June 30, 2019, an increase of $7.9 billion or 3.5%, compared to $228.3 billion at March 31, 2019. The net increase was primarily due to:

Net flows of $7.6 billion primarily related to:

• a $5.6 billion increase related to funds we manage in the credit segment primarily consisting of an increase in AUM relating to Athene of $5.5 billion driven by portfolio company activity and an increase relating to fee-generating capital deployment of $1.5 billion; these increases were partially offset by net segment transfers of $0.9 billion and fee-generating capital reduction of $0.9 billion;

• a $1.0 billion increase related to funds we manage in the real assets segment primarily consisting of $1.0 billion of net segment transfers; and

• a $1.0 billion increase related to funds we manage in the private equity segment primarily consisting of fee-generating capital deployment of $1.2 billion.

Market activity of $0.9 billion primarily related to $0.8 billion of appreciation in the funds we manage in the credit segment.

Total Fee-Generating AUM was $236.1 billion at June 30, 2019, an increase of $21.8 billion or 10.2%, compared to $214.4 billion at December 31, 2018. The net increase was primarily due to:

Net flows of $21.1 billion primarily related to:

• a $17.8 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM relating to Athene of $9.5 billion as a result of portfolio company activity, (ii) an increase in AUM in advisory and other as a result of Athora’s acquisition of Generali Belgium, which added approximately $6.5 billion of AUM and (iii) an increase relating to fee-generating capital deployment of $2.6 billion; these increases were partially offset by fee-generating capital reduction of $1.5 billion;

• a $2.5 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $2.1 billion and $0.5 billion of fee-generating deployment primarily related to certain infrastructure funds; and

• a $0.9 billion increase related to funds we manage in the private equity segment primarily consisting of fee-generating capital deployment of $1.3 billion, offset by fee-generating capital reduction of $0.3 billion.

Market activity of $1.7 billion primarily related to:

• a $1.5 billion increase related to funds we manage in the credit segment as a result of appreciation across our corporate credit funds.

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Capital Deployed and Uncalled Commitments

Capital deployed is the aggregate amount of capital that has been invested during a given period by our commitment-based funds, SIAs that have a defined maturity date and funds and SIAs in our real estate debt strategy. Uncalled commitments, by contrast, represents unfunded capital commitments that certain of Apollo’s funds and SIAs have received from fund investors to fund future or current fund investments and expenses.

Capital deployed and uncalled commitments are indicative of the pace and magnitude of fund capital that is deployed or will be deployed, and which therefore could result in future revenues that include management fees, transaction fees and performance fees to the extent they are fee-generating. Capital deployed and uncalled commitments can also give rise to future 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 capital deployed and uncalled commitments as key operating metrics since we believe the results measure our fund’s investment activities.

Capital Deployed

The following table summarizes the capital deployed for funds and SIAs with a defined maturity date by segment:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
	(in millions)				(in millions)
Credit	$	1,837	$	897	$	2,746	$	1,501
Private Equity	2,540		1,746		5,655		3,168
Real Assets	821		783		1,076		973
Total capital deployed	$	5,198	$	3,426	$	9,477	$	5,642

Uncalled Commitments

The following table summarizes the uncalled commitments by segment:

	As of June 30, 2019		As of December 31, 2018
	(in millions)
Credit	$	8,317	$	8,066
Private Equity	38,798		41,585
Real Assets	5,388		5,980
Total uncalled commitments(1)	$	52,503	$	55,631

(1) As of June 30, 2019 and December 31, 2018, $44.4 billion and $48.5 billion, respectively, represented the amount of capital available for investment or reinvestment subject to the provisions of the applicable limited partnership agreements or other governing agreements of the funds, partnerships and accounts we manage. These amounts exclude uncalled commitments which can only be called for fund fees and expenses.

The Historical Investment Performance of Our Funds

Below we present information relating to the historical performance of our funds, including certain legacy Apollo funds that do not have a meaningful 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 future results that you should expect from such funds, from any future funds we may raise or from your investment in our Class A shares.

An investment in 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. 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 our Class 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 a negative effect on our performance and in all likelihood the value of our Class A shares.

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Moreover, the historical returns of our funds should not be considered indicative of the future results you should expect from such funds or from any future funds we may raise. There can be no assurance that any Apollo fund will continue to achieve the same results in the future.

Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund IV generated a 12% gross IRR and a 9% net IRR since its inception through June 30, 2019, while Fund V generated a 61% gross IRR and a 44% net IRR since its inception through June 30, 2019. Accordingly, the IRR going forward for any 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. Future returns will also be affected by the applicable risks, including risks of the industries and businesses in which a particular fund invests. See “Item 1A. Risk Factors—Risks Related to Our Businesses—The historical returns attributable to our funds 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 our Class A shares and our Preferred shares” in the 2018 Annual Report.

Investment Record

The following table summarizes the investment record by segment of Apollo’s significant commitment-based funds that have a defined maturity date in which investors make a commitment to provide capital at the formation of such funds and deliver capital when called as investment opportunities become available. The funds included in the investment record table below have greater than $500 million of AUM and/or form part of a flagship series of funds.

All amounts are as of June 30, 2019, unless otherwise noted:

($ in millions)	Vintage Year	Total AUM		Committed Capital		Total Invested Capital		Realized Value		Remaining Cost		Unrealized Value		Total Value		Gross IRR			Net IRR
Private Equity:
Fund IX	2018	$	24,522	$	24,729	$	2,081	$	—	$	2,081	$	2,182	$	2,182	NM		(1)	NM		(1)
Fund VIII	2013	20,499		18,377		15,760		5,859		12,827		17,025		22,884		17	%		12	%
Fund VII	2008	4,162		14,677		16,461		31,087		2,912		2,162		33,249		33			25
Fund VI	2006	640		10,136		12,457		21,102		405		28		21,130		12			9
Fund V	2001	261		3,742		5,192		12,715		120		6		12,721		61			44
Fund I, II, III, IV & MIA(2)	Various	13		7,320		8,753		17,400		—		—		17,400		39			26
Traditional Private Equity Funds(3)		$	50,097	$	78,981	$	60,704	$	88,163	$	18,345	$	21,403	$	109,566	39	%		25	%
ANRP II	2016	3,450		3,454		2,128		849		1,754		2,113		2,962		29			16
ANRP I	2012	637		1,323		1,144		968		655		411		1,379		6			2
AION	2013	779		826		668		288		471		638		926		19			9
Hybrid Value Fund	2019	3,230		3,238		530		7		530		534		541		NM		(1)	NM		(1)
Total Private Equity		$	58,193	$	87,822	$	65,174	$	90,275	$	21,755	$	25,099	$	115,374
Credit:
Structured Credit Funds
FCI III	2017	$	2,628	$	1,906	$	2,265	$	781	$	1,888	$	2,031	$	2,812	NM		(1)	NM		(1)
FCI II	2013	2,248		1,555		2,643		1,572		1,718		1,640		3,212		9	%		5	%
FCI I	2012	403		559		1,516		1,968		—		—		1,968		11			9
SCRF IV (6)	2017	2,928		2,502		2,795		1,087		1,955		2,021		3,108		NM		(1)	NM		(1)
SCRF III	2015	—		1,238		2,110		2,428		—		—		2,428		18			14
SCRF II	2012	—		104		467		528		—		—		528		15			12
SCRF I	2008	—		118		240		357		—		—		357		33			26
Total Credit		$	8,207	$	7,982	$	12,036	$	8,721	$	5,561	$	5,692	$	14,413
Real Assets:
European Principal Finance Funds
EPF III(4)	2017	$	4,575	$	4,531	$	2,040	$	22	$	2,018	$	2,171	$	2,193	NM		(1)	NM		(1)
EPF II(4)	2012	1,822		3,454		3,486		4,070		870		978		5,048		16	%		9	%
EPF I(4)	2007	240		1,473		1,936		3,251		—		10		3,261		23			17
U.S. RE Fund II(5)	2016	1,206		1,233		806		371		588		706		1,077		17			14
U.S. RE Fund I(5)	2012	348		650		633		693		232		256		949		14			11
Asia RE Fund(5)	2017	642		709		338		200		184		236		436		20			14
Infrastructure Equity Fund	2018	944		897		768		80		713		750		830		NM		(1)	NM		(1)
Total Real Assets		$	9,777	$	12,947	$	10,007	$	8,687	$	4,605	$	5,107	$	13,794

(1) Data has not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and such information was deemed not meaningful.

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(2) The general partners and managers of Funds I, II and MIA, as well as the general partner of Fund III, were excluded assets in connection with the 2007 Reorganization. As a result, Apollo did not receive the economics associated with these entities. The investment performance of these funds, combined with Fund IV, is presented to illustrate fund performance associated with Apollo’s Managing Partners and other investment professionals.

(3) Total IRR is calculated based on total cash flows for all funds presented.

(4) Funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.14 as of June 30, 2019.

(5) U.S. RE Fund I, U.S. RE Fund II and Asia RE Fund had $154 million, $761 million and $366 million of co-investment commitments as of June 30, 2019, respectively, which are included in the figures in the table. A co-invest entity within U.S. RE Fund I is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.27 as of June 30, 2019.

(6) Remaining cost for certain of our credit funds may include physical cash called, invested or reserved for certain levered investments.

Private Equity

The following table summarizes the investment record for distressed investments made in our traditional private equity fund portfolios, since the Company’s inception. All amounts are as of June 30, 2019:

	Total Invested Capital		Total Value		Gross IRR
	(in millions)
Distressed for Control	$	7,915	$	19,109	29	%
Non-Control Distressed	5,416		8,460		71
Total	13,331		27,569		49
Corporate Carve-outs, Opportunistic Buyouts and Other Credit(1)	47,373		81,997		21
Total	$	60,704	$	109,566	39	%

 

(1) Other Credit is defined as 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 the Fund VIII, Fund VII and Fund VI private equity portfolios based on investment strategy. Amounts for Fund I, II, III, IV, V and IX are included in the table above but not presented below as their remaining value is less than $100 million, the fund has been liquidated or the fund commenced investing capital less than 24 months prior to June 30, 2019 and such information was deemed not meaningful. All amounts are as of June 30, 2019:

Fund VIII⁽¹⁾ 

	Total Invested Capital		Total Value
	(in millions)
Corporate Carve-outs	$	2,673	$	5,225
Opportunistic Buyouts	12,543		16,810
Distressed	544		849
Total	$	15,760	$	22,884

Fund VII⁽¹⁾ 

	Total Invested Capital		Total Value
	(in millions)
Corporate Carve-outs	$	2,540	$	3,906
Opportunistic Buyouts	4,338		10,642
Distressed/Other Credit(2)	9,583		18,701
Total	$	16,461	$	33,249

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Fund VI

	Total Invested Capital		Total Value
	(in millions)
Corporate Carve-outs	$	3,397	$	5,900
Opportunistic Buyouts	6,374		10,254
Distressed/Other Credit(2)	2,686		4,976
Total	$	12,457	$	21,130

(1) Committed capital less unfunded capital commitments for Fund VIII and Fund VII $15.5 billion and $14.4 billion, respectively, which represents capital commitments from limited partners to invest in such funds less capital that is available for investment or reinvestment subject to the provisions of the applicable limited partnership agreement or other governing agreements.

(2) The distressed investment strategy includes distressed for control, non-control distressed and other credit.

During the recovery and expansionary periods of 1994 through 2000 and late 2003 through the first half of 2007, our private equity funds invested or committed to invest approximately $13.7 billion primarily in traditional and corporate partner buyouts. During the recessionary periods of 1990 through 1993, 2001 through late 2003 and the recessionary and post recessionary periods (beginning the second half of 2007 through June 30, 2019), our private equity funds have invested $53.4 billion, of which $19.7 billion was in distressed buyouts and debt investments when the debt securities of quality companies traded at deep discounts to par value. Our average entry multiple for Fund VIII, VII and VI was 5.7x, 6.1x and 7.7x, respectively, as of June 30, 2019. Our average entry multiple for a private equity fund is the average of the total enterprise value over an applicable adjusted earnings before interest, taxes, depreciation and amortization which may incorporate certain adjustments based on the investment team’s estimate and we believe captures the true economics of our funds’ investments in portfolio companies. The average entry multiple of actively investing funds may include committed investments not yet closed.

Credit

The following table presents the gross and net returns for Apollo’s credit segment by category type:

	Gross Returns				Net Returns
Category	For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019		For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019
Corporate Credit	2.3	%	6.4	%	2.1	%	5.8	%
Structured Credit	4.0		8.4		3.3		6.9
Direct Origination	3.3		6.3		2.6		4.8

Permanent Capital

The following table summarizes the investment record for our permanent capital vehicles by segment, excluding Athene-related and Athora-related assets managed or advised by Athene Asset Management and AAME:

				Total Returns(1)
	IPO Year(2)	Total AUM		For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019		For the Three Months Ended June 30, 2018		For the Six Months Ended June 30, 2018
Credit:		(in millions)
MidCap(3)	N/A	$	9,064	5	%	8	%	5	%	9	%
AIF	2013	376		3		12		1		3
AFT	2011	404		3		8		(1	)	4
AINV/Other(4)	2004	5,304		7		35		10		4
Real Assets:
ARI	2009	5,662		4	%	16	%	4	%	4	%
Total		$	20,810

(1) Total returns are based on the change in closing trading prices during the respective periods presented taking into account dividends and distributions, if any, as if they were reinvested without regard to commission.

(2) An IPO year represents the year in which the vehicle commenced trading on a national securities exchange.

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(3) MidCap is not a publicly traded vehicle and therefore IPO year is not applicable. The returns presented are a gross return based on NAV. The net returns based on NAV were 3% and 3% for the three months ended June 30, 2019 and 2018, respectively, and 6% and 6% for the six months ended June 30, 2019 and June 30, 2018, respectively.

(4) Included within Total AUM of AINV/Other is $1.9 billion of AUM related to a non-traded business development company from which Apollo earns investment-related service fees, but for which Apollo does not provide management or advisory services. Net returns exclude performance related to this AUM.

SIAs

As of June 30, 2019, Apollo managed approximately $26 billion of total AUM in SIAs, which include capital deployed from certain SIAs across Apollo’s credit, private equity and real assets funds.

Overview of Results of Operations

Revenues

Advisory and Transaction Fees, Net. As a result of providing advisory services with respect to actual and potential credit, private equity, and real assets investments, we are entitled to receive fees for transactions related to the acquisition and, in certain instances, disposition of portfolio companies as well as fees for ongoing monitoring of portfolio company operations and directors’ fees. We also receive advisory fees for advisory services provided to certain credit funds. In addition, monitoring fees are generated on certain structured portfolio company investments. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Such amounts are presented as a reduction to advisory and transaction fees, net, in the condensed consolidated statements of operations (see note 2 to our condensed consolidated financial statements for more detail on advisory and transaction fees, net).

The Management Fee Offsets are calculated for each fund as follows:

• 65%-100% for certain credit funds, gross advisory, transaction and other special fees;

• 65%-100% for private equity funds, gross advisory, transaction and other special fees; and

• 65%-100% for certain real assets funds, gross advisory, transaction and other special fees.

Management Fees. The significant growth of the assets we manage has had a positive effect on our revenues. Management fees are typically calculated based upon any of “net asset value,” “gross assets,” “adjusted par asset value,” “adjusted costs of all unrealized portfolio investments,” “capital commitments,” “invested capital,” “adjusted assets,” “capital contributions,” or “stockholders’ equity,” each as defined in the applicable limited partnership agreement and/or management agreement of the unconsolidated funds.

Performance Fees. The general partners of our funds are entitled to an incentive return of normally up to 20% of the total returns of a fund’s capital, depending upon performance of the underlying funds and subject to preferred returns and high water marks, as applicable. Performance fees, categorized as performance allocations, are accounted for as an equity method investment, and effectively, the performance fees for any period are based upon an assumed liquidation of the funds’ assets at the reporting date, and distribution of the net proceeds in accordance with the funds’ allocation provisions. Performance fees categorized as incentive fees, which are not accounted as an equity method investment, are deferred until fees are probable to not be significantly reversed. Prior to the adoption of the new revenue recognition guidance, incentive fees were recognized on an assumed liquidation basis. The majority of performance fees are comprised of performance allocations.

As of June 30, 2019, approximately 53% of the value of our funds’ investments on a gross basis was determined using market-based valuation methods (i.e., reliance on broker or listed exchange quotes) and the remaining 47% was determined primarily by comparable company and industry multiples or discounted cash flow models. For our credit, private equity and real assets segments, the percentage determined using market-based valuation methods as of June 30, 2019 was 75%, 19% and 17%, respectively. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Our funds’ performance, and our performance, may be adversely affected by the financial performance of our funds’ portfolio companies and the industries in which our funds invest” in the 2018 Annual Report for a discussion regarding certain industry-specific risks that could affect the fair value of our private equity funds’ portfolio company investments.

In our private equity funds, the Company does not earn performance fees until the investors in the fund have achieved cumulative investment returns on invested capital (including management fees and expenses) in excess of an 8% hurdle rate. Additionally, certain of our credit and real assets funds have various performance fee rates and hurdle rates. Certain of our credit and real assets funds allocate performance fees to the general partner in a similar manner as the private equity funds. In our private

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equity, certain credit and real assets 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 until the Company’s performance fees equate to its incentive fee rate for that fund; thereafter, the Company participates in returns from the fund at the performance fee rate. Performance fees, categorized as performance allocations, are subject to reversal to the extent that the performance fees distributed exceed the amount due to the general partner based on a fund’s cumulative investment returns. The Company recognizes potential repayment of previously received performance fees as a general partner obligation representing all amounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner obligation, however, would not become payable or realized until the end of a fund’s life or as otherwise set forth in the respective limited partnership agreement of the fund.

The table below presents an analysis of Apollo’s (i) performance fees receivable on an unconsolidated basis and (ii) realized and unrealized performance fees for Apollo’s combined segments:

	As of June 30, 2019		For the Three Months Ended June 30, 2019									For the Six Months Ended June 30, 2019
	Performance Fees Receivable on an Unconsolidated Basis		Unrealized Performance Fees			Realized Performance Fees			Total Performance Fees			Unrealized Performance Fees			Realized Performance Fees			Total Performance Fees
	(in thousands)
Credit:
Corporate Credit(1)	$	57,797	$	20,823		$	4,139		$	24,962		$	51,079		$	7,466		$	58,545
Structured Credit	175,512		13,974			16,882			30,856			36,516			16,536			53,052
Direct Origination	96,093		6,578			6,270			12,848			13,459			7,277			20,736
Total Credit	$	329,402	$	41,375		$	27,291		$	68,666		$	101,054		$	31,279		$	132,333
Total Credit, net of profit sharing expense	96,189		23,476			19,414			42,890			56,479			19,884			76,363
Private Equity:
Fund VIII(2)	$	622,949	$	113,408		$	10,054		$	123,462		$	181,754		$	67,533		$	249,287
Fund VII(1)(2)	224		(43,653		)	743			(42,910		)	(23,237		)	1,477			(21,760		)
Fund VI(2)	14,695		7,408			965			8,373			27,473			1,919			29,392
Fund IV and V(1)	—		(655		)	—			(655		)	(1,253		)	—			(1,253		)
ANRP I and II(1)(2)	53,876		12,885			330			13,215			19,703			655			20,358
Other(1)(3)	70,497		4,124			139			4,263			17,626			1,103			18,729
Total Private Equity	$	762,241	$	93,517		$	12,231		$	105,748		$	222,066		$	72,687		$	294,753
Total Private Equity, net of profit sharing expense	461,157		68,159			8,142			76,301			145,351			30,871			176,222
Real Assets:
Principal Finance	$	106,963	$	(9,101	)	$	1,742		$	(7,359	)	$	(15,217	)	$	1,760		$	(13,457	)
U.S. RE Fund I & II	13,383		(1,679		)	1,446			(233		)	(3,291		)	1,645			(1,646		)
Infrastructure Equity Fund	5,077		2,393			—			2,393			5,077			—			5,077
Other(3)	15,717		3,174			(114		)	3,060			4,373			(325		)	4,048
Total Real Assets	$	141,140	$	(5,213	)	$	3,074		$	(2,139	)	$	(9,058	)	$	3,080		$	(5,978	)
Total Real Assets, net of profit sharing expense	79,483		(2,755		)	1,734			(1,021		)	(4,329		)	1,846			(2,483		)
Total	$	1,232,783	$	129,679		$	42,596		$	172,275		$	314,062		$	107,046		$	421,108
Total, net of profit sharing expense(4)	$	636,829	$	88,880		$	29,290		$	118,170		$	197,501		$	52,601		$	250,102

(1) As of June 30, 2019, certain credit funds, private equity funds and real assets funds had $0.3 million, $147.1 million and $0.5 million, respectively, in general partner obligations to return previously distributed performance fees. The fair value gain on investments and income at the fund level needed to reverse the general partner obligations for certain credit funds, private equity funds and real assets funds was $1.6 million, $1,182.1 million and $2.0 million respectively, as of June 30, 2019.

(2) As of June 30, 2019, the remaining investments and escrow cash of Fund VIII were valued at 125% of the fund’s unreturned capital, which was above the required escrow ratio of 115%. As of June 30, 2019, the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 73%, 37%, 62% and 112% of the fund’s unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation. As of June 30, 2019, Fund VII had $128.5 million of gross performance fees, or $73.1 million net of profit sharing, in escrow. As of June 30, 2019, Fund VI had $167.6 million of gross performance fees, or $112.4 million net of profit sharing, in escrow. As of June 30, 2019, ANRP I had $40.2 million of gross performance fees, or $25.2 million net of profit sharing, in escrow. As of June 30, 2019, ANRP II had $18.4 million of gross performance fees, or $12.5 million net of profit sharing, in escrow. With respect to Fund VII, Fund VI, ANRP II and ANRP I, realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per the funds’ partnership agreements. Performance fees receivable as of June 30, 2019 and realized performance fees include interest earned on escrow balances that is not subject to contingent repayment.

(3) Other includes certain SIAs.

(4) There was a corresponding profit sharing payable of $596.0 million as of June 30, 2019, including profit sharing payable related to amounts in escrow and contingent consideration obligations of $93.2 million.

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The general partners of certain of our credit funds accrue performance fees, categorized as performance allocations, when the fair value of investments exceeds the cost basis of the individual investors’ investments in the fund, including any allocable share of expenses incurred in connection with such investments, which we refer to as “high water marks.” These high water marks are applied on an individual investor basis. Certain of our credit funds have investors with various high water marks, the achievement of which is subject to market conditions and investment performance.

Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from inception to date exceeds the amount computed as due to the general partner at the final distribution. These general partner obligations, if applicable, are included in due to related parties on the condensed consolidated statements of financial condition.

The following table summarizes our performance fees since inception for our combined segments through June 30, 2019:

	Performance Fees Since Inception(1)
	Undistributed by Fund and Recognized		Distributed by Fund and Recognized(2)		Total Undistributed and Distributed by Fund and Recognized(3)		General Partner Obligation(3)		Maximum Performance Fees Subject to Potential Reversal(4)
	(in millions)
Credit:
Corporate Credit	$	57.8	$	1,079.6	$	1,137.4	$	0.3	$	77.3
Structured Credit	175.5		143.5		319.0		—		141.7
Direct Origination	96.1		10.0		106.1		—		88.1
Total Credit	329.4		1,233.1		1,562.5		0.3		307.1
Private Equity:
Fund VIII	622.9		498.1		1,121.0		—		918.9
Fund VII	0.2		3,130.2		3,130.4		61.8		421.6
Fund VI	14.7		1,663.9		1,678.6		—		5.6
Fund IV and V	—		2,053.1		2,053.1		30.5		1.3
ANRP I and II	53.9		91.0		144.9		12.0		71.8
Other	70.5		707.4		777.9		42.8		100.8
Total Private Equity	762.2		8,143.7		8,905.9		147.1		1,520.0
Real Assets:
Principal Finance	107.0		375.5		482.5		—		236.9
U.S. RE Fund I and II	13.4		27.8		41.2		0.5		35.1
Infrastructure Equity Fund	5.1		—		5.1		—		5.1
Other(5)	15.7		30.7		46.4		—		24.5
Total Real Assets	141.2		434.0		575.2		0.5		301.6
Total	$	1,232.8	$	9,810.8	$	11,043.6	$	147.9	$	2,128.7

(1) Certain funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.14 as of June 30, 2019. Certain funds are denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.27 as of June 30, 2019.

(2) Amounts in “Distributed by Fund and Recognized” for the CPI, Gulf Stream Asset Management, LLC (“Gulf Stream”) and Stone Tower funds and SIAs are presented for activity subsequent to the respective acquisition dates.

(3) Amounts were computed based on the fair value of fund investments on June 30, 2019. Performance fees have been allocated to and recognized by the general partner. Based on the amount allocated, a portion is subject to potential reversal or, to the extent applicable, has been reduced by the general partner obligation to return previously distributed performance fees at June 30, 2019. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of the fund’s investments based on contractual termination of the fund.

(4) Represents the amount of performance fees that would be reversed if remaining fund investments became worthless on June 30, 2019. Amounts subject to potential reversal of performance fees include amounts undistributed by a fund (i.e., the performance fees receivable), as well as a portion of the amounts that have been distributed by a fund, net of taxes not subject to a general partner obligation to return previously distributed performance fees, except for those funds that are gross of taxes as defined in the respective funds’ governing documents.

(5) Other includes certain SIAs.

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Expenses

Compensation and Benefits. Our most significant expense is compensation and benefits expense. This consists of fixed salary, discretionary and non-discretionary bonuses, profit sharing expense associated with the performance fees earned from credit, private equity, and real assets funds and compensation expense associated with the vesting of non-cash equity-based awards.

Our compensation arrangements with certain partners and employees contain a significant performance-based incentive component. Therefore, as our net revenues increase, our compensation costs rise. Our compensation costs also reflect the increased investment in people as we expand geographically and create new funds.

In addition, certain professionals and selected other individuals have a profit sharing interest in the performance fees earned in relation to our private equity, certain credit and real assets funds in order to better align their interests with our own and with those of the investors in these funds. Profit sharing expense is part of our compensation and benefits expense and is generally based upon a fixed percentage of credit, private equity and real assets performance fees. Profit sharing expense can reverse during periods when there is a decline in performance fees that were previously recognized. Profit sharing amounts are normally distributed to employees after the corresponding investment gains have been realized and generally before preferred returns are achieved for the investors. Therefore, changes in our unrealized performance fees have the same effect on our profit sharing expense. Profit sharing expense increases when unrealized performance fees increases. Realizations only impact profit sharing expense to the extent that the effects on investments have not been recognized previously. If losses on other investments within a fund are subsequently realized, the profit sharing amounts previously distributed are normally subject to a general partner obligation to return performance fees previously distributed back to the funds. This general 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 obligations also exist for realized gains with respect to Fund IV, Fund V and Fund VI, which, although our Managing Partners and Contributing Partners would remain personally liable, may indemnify our Managing Partners and Contributing Partners for 17.5% to 100% of the previously distributed profits regardless of the fund’s future performance. See note 14 to our condensed consolidated financial statements for further information regarding the Company’s indemnification liability.

Each Managing Partner receives $100,000 per year in base salary for services rendered to us. Additionally, our Managing Partners can receive other forms of compensation. In addition, AHL Awards (as defined in note 12 to our condensed consolidated financial statements) and other equity-based compensation awards have been granted to the Company and certain employees, which amortize over the respective vesting periods. The Company grants equity awards to certain employees, including RSUs, restricted Class A shares and options, that generally vest and become exercisable in quarterly installments or annual installments depending on the contract terms over a period of three to six years. In some instances, vesting of an RSU is also subject to the Company’s receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. See note 12 to our condensed consolidated financial statements for further discussion of equity-based compensation.

Other Expenses. The balance of our other expenses includes interest, placement fees, and general, administrative and other operating expenses. Interest expense consists primarily of interest related to the 2013 AMH Credit Facilities, the 2018 AMH Credit Facility, the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2039 Senior Secured Guaranteed Notes and the 2048 Senior Notes as discussed in note 10 to our condensed consolidated financial statements. Placement fees are incurred in connection with our capital raising activities. General, administrative and other expenses includes occupancy expense, depreciation and amortization, professional fees and costs related to travel, information technology and administration. Occupancy expense represents charges related to office leases and associated expenses, such as utilities and maintenance fees. Depreciation and amortization of fixed assets is normally calculated using the straight-line method over their estimated useful lives, ranging from two to sixteen years, taking into consideration any residual value. Leasehold improvements are amortized over the shorter of the useful life of 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.

Other Income (Loss)

Net Gains (Losses) from Investment Activities. Net gains (losses) from investment activities include both realized gains and losses and the change in unrealized gains and losses in our investment portfolio between the opening reporting date and the closing reporting date. Net unrealized gains (losses) are a result of changes in the fair value of unrealized investments and reversal of unrealized gains (losses) due to dispositions of investments during the reporting period. Significant judgment and estimation goes into the assumptions that drive these models and the actual values realized with respect to investments could be materially different from values obtained based on the use of those models. The valuation methodologies applied impact the reported value of investment company holdings and their underlying portfolios in our condensed consolidated financial statements.

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

Other Income (Losses), Net. Other income (losses), net includes gains (losses) arising from the remeasurement of foreign currency denominated assets and liabilities, remeasurement of the tax receivable agreement liability and other miscellaneous non-operating income and expenses.

Income Taxes. The Apollo Operating Group and its subsidiaries generally operate as partnerships for U.S. federal income tax purposes. As a result, except as described below, the Apollo Operating Group has not been subject to U.S. income taxes. However, the U.S. entities, in some cases, are subject to New York City unincorporated business tax (“NYC UBT”), and non-U.S. entities, in some cases, are subject to non-U.S. corporate income taxes. In addition, certain consolidated entities are, or are treated as, corporations for U.S. and non-U.S. tax purposes and therefore subject to federal, state, local and foreign corporate income tax. The Company's provision for income taxes is accounted for in accordance with U.S. GAAP.

Significant judgment is required in determining the provision for income taxes and in evaluating income tax positions, including evaluating uncertainties. We recognize the income tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained upon examination, including resolutions of any related appeals or litigation, based on the technical merits of the positions. The tax benefit 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 not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s income tax positions are reviewed and evaluated quarterly to determine whether or not we have uncertain tax positions that require financial statement recognition or de-recognition.

Deferred tax assets and liabilities are recognized for the expected future tax consequences, using currently enacted tax rates, of differences between the carrying amount of assets and liabilities and their respective tax basis. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income 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 or all of the deferred tax assets will not be realized.

Non-Controlling Interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than Apollo. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in Non-Controlling Interests in the condensed consolidated financial statements. The Non-Controlling Interests relating to Apollo Global Management, LLC primarily include the 50.2% and 50.1% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings as of June 30, 2019 and 2018, respectively. Non-Controlling Interests also include limited partner interests in certain consolidated funds and VIEs.

The authoritative guidance for Non-Controlling Interests in the condensed 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 the guidance, (1) Non-Controlling Interests are presented as a separate component of shareholders’ equity on the Company’s condensed consolidated statements of financial condition, (2) net income (loss) includes the net income (loss) attributable to the Non-Controlling Interest holders on the Company’s condensed consolidated statements of operations, (3) the primary components of Non-Controlling Interest are separately presented in the Company’s condensed consolidated statements of changes in shareholders’ equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities and (4) profits and losses are allocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis.

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Results of Operations

Below is a discussion of our condensed consolidated results of operations for the three and six months ended June 30, 2019 and 2018. For additional analysis of the factors that affected our results at the segment level, see “—Segment Analysis” below:

	For the Three Months Ended June 30,						Amount Change			Percentage Change		For the Six Months Ended June 30,						Amount Change			Percentage Change
	2019			2018								2019			2018
Revenues:	(in thousands)											(in thousands)
Management fees	$	388,215		$	341,626		$	46,589		13.6	%	$	768,241		$	628,352		$	139,889		22.3	%
Advisory and transaction fees, net	31,124			15,440			15,684			101.6		50,693			28,991			21,702			74.9
Investment income:
Performance allocations	176,862			129,085			47,777			37.0		428,359			4,920			423,439			NM
Principal investment income	39,602			22,175			17,427			78.6		65,627			9,181			56,446			NM
Total investment income	216,464			151,260			65,204			43.1		493,986			14,101			479,885			NM
Incentive fees	776			14,990			(14,214		)	(94.8	)	1,436			18,775			(17,339		)	(92.4	)
Total Revenues	636,579			523,316			113,263			21.6		1,314,356			690,219			624,137			90.4
Expenses:
Compensation and benefits:
Salary, bonus and benefits	123,669			115,075			8,594			7.5		242,832			230,901			11,931			5.2
Equity-based compensation	44,662			37,784			6,878			18.2		89,739			73,309			16,430			22.4
Profit sharing expense	68,278			70,545			(2,267		)	(3.2	)	191,725			58,268			133,457			229.0
Total compensation and benefits	236,609			223,404			13,205			5.9		524,296			362,478			161,818			44.6
Interest expense	23,302			15,162			8,140			53.7		42,410			28,959			13,451			46.4
General, administrative and other	81,839			62,517			19,322			30.9		153,501			124,194			29,307			23.6
Placement fees	775			311			464			149.2		335			638			(303		)	(47.5	)
Total Expenses	342,525			301,394			41,131			13.6		720,542			516,269			204,273			39.6
Other Income:
Net gains (losses) from investment activities	45,060			(67,505		)	112,565			NM		63,889			(134,638		)	198,527			NM
Net gains from investment activities of consolidated variable interest entities	4,631			9,213			(4,582		)	(49.7	)	14,097			15,745			(1,648		)	(10.5	)
Interest income	8,710			4,547			4,163			91.6		15,786			8,106			7,680			94.7
Other income (loss), net	6,603			(5,443		)	12,046			NM		6,693			(1,197		)	7,890			NM
Total Other Income (Loss)	65,004			(59,188		)	124,192			NM		100,465			(111,984		)	212,449			NM
Income before income tax provision	359,058			162,734			196,324			120.6		694,279			61,966			632,313			NM
Income tax provision	(16,897		)	(18,924		)	2,027			(10.7	)	(36,551		)	(27,504		)	(9,047		)	32.9
Net Income	342,161			143,810			198,351			137.9		657,728			34,462			623,266			NM
Net income attributable to Non-Controlling Interests	(177,338		)	(80,200		)	(97,138		)	121.1		(343,848		)	(29,114		)	(314,734		)	NM
Net Income Attributable to Apollo Global Management, LLC	164,823			63,610			101,213			159.1		313,880			5,348			308,532			NM
Net income attributable to Series A Preferred Shareholders	(4,383		)	(4,383		)	—			—		(8,766		)	(8,766		)	—			—
Net income attributable to Series B Preferred Shareholders	(4,781		)	(4,569		)	(212		)	4.6		(9,562		)	(4,569		)	(4,993		)	109.3
Net Income (Loss) Attributable to AGM Class A Shareholders	$	155,659		$	54,658		$	101,001		184.8	%	$	295,552		$	(7,987	)	$	303,539		NM

Note: “NM” denotes not meaningful. Changes from negative to positive amounts and positive to negative amounts are not considered meaningful. Increases or decreases from zero and changes greater than 500% are also not considered meaningful.

Revenues

Our revenues and other income include fixed components that result from measures of capital and asset valuations and variable components that result from realized and unrealized investment performance, as well as the value of successfully completed transactions.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Management fees increased by $46.6 million for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene, Fund VIII and Apollo Structured Credit Recovery Master Fund IV, L.P. (“SCRF IV”) of $32.6 million, $2.2 million and $2.1 million,

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respectively, during the three months ended June 30, 2019 as compared to the same period in 2018. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.

Advisory and transaction fees, net, increased by $15.7 million for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. This change was primarily attributable to a increase in net advisory and transaction fees earned with respect to Hybrid Value Fund’s portfolio companies and Apollo European Principal Finance Fund III, L.P. (“EPF III”) of $11.1 million and $3.8 million during the three months ended June 30, 2019 as compared to the same period in 2018.

Performance allocations increased by $47.8 million for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. The increase in performance allocations was primarily attributable to increased performance allocations earned from Fund VIII, Fund VI and ANRP II of $61.9 million, $31.4 million and $13.1 million, respectively, partially offset by a decrease in performance allocations earned from Fund VII of $63.5 million.

The increase in performance allocations from Fund VIII was primarily driven by lower depreciation of the fund’s public portfolio companies primarily in the business services sector, and greater appreciation of the fund’s portfolio companies primarily in the leisure, consumer services and natural resources sectors, during the three months ended June 30, 2019 as compared to the same period during 2018. The increase in performance fees from Fund VI was primarily driven by appreciation of the fund’s public portfolio companies primarily in the leisure sector, as well as appreciation of the fund’s private portfolio companies primarily in the business services and chemicals sectors, during the three months ended June 30, 2019 as compared to the same period during 2018. The increase in performance allocations from ANRP II was primarily driven by appreciation of the fund’s private portfolio companies in the natural resources sector during the three months ended June 30, 2019 as compared to the same period during 2018. The decrease in performance allocations from Fund VII was primarily attributable to decreased appreciation of the fund’s public portfolio companies primarily in the natural resources sector during the three months ended June 30, 2019 as compared to the same period during 2018.

Principal investment income increased by $17.4 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily driven by increases in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to VA Capital Company, L.P. (“VA Capital”) and Fund VIII of $10.0 million and $7.7 million, respectively, during the three months ended June 30, 2019 as compared to the same period in 2018.

Incentive fees decreased by $14.2 million for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. This change was primarily attributable to a decrease in incentive fees earned from a strategic investment account and AINV of $8.8 million and $5.8 million, respectively, during the three months ended June 30, 2018 as compared to the three months ended June 30, 2018. The decrease in incentive fees from a strategic investment account were driven by incentive fees that crystallized during the three months ended June 30, 2018, which did not recur during the three months ended June 30, 2019. The decrease in incentive fees earned from AINV was a result of the amended and restated investment management agreement with AINV, as described in note 14 to our condensed consolidated financial statements. The fee arrangement with AINV was revised to be on a total return measure and the total return hurdle rate was not achieved as of June 30, 2019.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Management fees increased by $139.9 million for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. This change was primarily attributable to the commencement of Fund IX’s investment period in April 2018, resulting in an increase of $79.5 million in management fees during the six months ended June 30, 2019, compared to the same period during 2018, and an increase in management fees earned from Athene of $66.2 million. The increase in management fees was partially offset by decreased management fees earned from Fund VIII of $23.0 million during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.

Advisory and transaction fees, net, increased by $21.7 million for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Fund IX’s portfolio companies and Hybrid Value Fund’s portfolio companies of $12.1 million and $11.1 million, respectively, during the six months ended June 30, 2019, as compared to the same period during 2018.

Performance allocations increased by $423.4 million for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The increase in performance allocations was primarily attributable to increased performance allocations earned from Fund VIII, Fund VI and ANRP II of $356.3 million, $56.3 million and $20.2 million, respectively, partially offset by a decrease in performance allocations earned from Fund VII of $66.1 million.

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The increase in performance allocations from Fund VIII was primarily driven by greater appreciation of the fund’s public portfolio companies primarily in the financial services and consumer services sectors, and greater appreciation of the fund’s private portfolio companies in the manufacturing and industrial, consumer services, leisure and natural resources sectors, during the six months ended June 30, 2019 as compared to the same period during 2018. The increase in performance fees from Fund VI was primarily driven by appreciation of the fund’s public portfolio companies primarily in the leisure sector, during the six months ended June 30, 2019 as compared to the same period during 2018. The increase in performance allocations from ANRP II was primarily driven by appreciation from private investments in the natural resources sector during the six months ended June 30, 2019 as compared to the same period during 2018. The decrease in performance allocations from Fund VII was primarily attributable to decreased appreciation of the fund’s public portfolio companies primarily in the natural resources sector during the six months ended June 30, 2019 as compared to the same period during 2018.

Principal investment income increased by $56.4 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily driven by increases in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to Fund VIII and VA Capital of $42.3 million and $5.3 million, respectively, during the six months ended June 30, 2019 as compared to the same period in 2018.

Incentive fees decreased by $17.3 million for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. This change was primarily attributable to a decrease in incentive fees earned from AINV and a strategic investment account of $9.5 million and $8.8 million, respectively, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The decrease in incentive fees earned from AINV was a result of the amended and restated investment management agreement with AINV, as described in note 14 to our condensed consolidated financial statements. The fee arrangement with AINV was revised to be on a total return measure and the total return hurdle rate was not achieved as of June 30, 2019. The decrease in incentive fees from a strategic investment account was driven by incentive fees that crystallized during the six months ended June 30, 2018, which did not recur during the six months ended June 30, 2019.

Expenses

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Compensation and benefits increased by $13.2 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This increase was primarily driven by an increase in salary, bonus and benefits of $8.6 million and an increase in equity-based compensation of $6.9 million for the three months ended June 30, 2019, as compared to the same period in 2018. The increase in salary, bonus and benefits was primarily due to increased headcount and the increase in equity-based compensation was primarily due to increased amortization expense relating to grants of RSUs to certain employees under the Equity Plan.

Included in profit sharing expense is $18.9 million for the three months ended June 30, 2018 related to a performance based incentive arrangement for certain Apollo partners and employees designed to more closely align compensation on an annual basis with the overall realized performance of the Company (referred to herein as the “Incentive Pool”). There was no profit sharing expense related to the Incentive Pool for the three months ended June 30, 2019. Allocations to participants in the Incentive Pool contain both a fixed component and a discretionary component, each of which may vary year to year. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.

Interest expense increased by $8.1 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, as a result of the issuance of the 2029 Senior Notes, as described in note 10 to our condensed consolidated financial statements.

General, administrative and other expenses increased by $19.3 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, primarily due to an increase in professional fees and fund organizational expenses during the three months ended June 30, 2019, as compared to the three months ended June 30, 2018.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Compensation and benefits increased by $161.8 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to an increase in profit sharing expense of $133.5 million due to a corresponding increase in performance allocations during the six months ended June 30, 2019, as compared to the same period in 2018. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. In addition, equity-based compensation increased by $16.4 million primarily attributable to increased amortization expense relating to grants of RSUs to certain employees under the Equity Plan.

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Included in profit sharing expense is $17.0 million and $34.4 million for the six months ended June 30, 2019 and 2018, respectively, related to the Incentive Pool. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.

Interest expense increased by $13.5 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, primarily due to additional interest expense incurred during the six months ended June 30, 2019 as a result of the issuance of the 2029 Senior Notes, partially offset by a decrease in interest expense as a result of the repayment of the remaining amount of the 2013 AMH Credit Facilities, as described in note 10 to our condensed consolidated financial statements.

General, administrative and other expenses increased by $29.3 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily driven by an increase in professional fees and fund organizational expenses during the six months ended June 30, 2019 as compared to the same period in 2018.

Other Income (Loss)

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Net gains from investment activities were $45.1 million for the three months ended June 30, 2019, as compared to net losses from investment activities of $67.5 million for the three months ended June 30, 2018. This change was primarily attributable to a gain on the Company’s investment in Athene Holding during the three months ended June 30, 2019 as compared to a loss on the Company’s investment in Athene Holding during the three months ended June 30, 2018. See note 6 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.

Net gains from investment activities of consolidated VIEs decreased by $4.6 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, primarily driven by a decrease in net gains from Champ, L.P. during the three months ended June 30, 2019, as compared to the same period in 2018. See note 5 to the condensed consolidated financial statements for details regarding net gains from investment activities of consolidated VIEs.

Interest income increased by $4.2 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, primarily due to increased interest income earned from U.S. Treasury securities held during the three months ended June 30, 2019, as compared to the same period in 2018.

Other income, net was $6.6 million during the three months ended June 30, 2019, as compared to other loss, net of $5.4 million during the three months ended June 30, 2018. This change was primarily attributable to the reversal of a liability relating to a favorable judgment in a legal proceeding during the three months ended June 30, 2019, which did not occur during the same period in 2018. The increase was also driven by a decrease in foreign exchange losses during the three months ended June 30, 2018, as compared to the same period in 2018.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Net gains from investment activities were $63.9 million for the six months ended June 30, 2019, as compared to net losses from investment activities of $134.6 million for the six months ended June 30, 2018. This change was primarily attributable to a gain on the Company’s investment in Athene Holding during the six months ended June 30, 2019 as compared to a loss on the Company’s investment in Athene Holding during the six months ended June 30, 2018. See note 6 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.

Net gains from investment activities of consolidated VIEs decreased by $1.6 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, primarily driven by a decrease in net gains from Champ, L.P. during the six months ended June 30, 2019, as compared to the same period in 2018. See note 5 to the condensed consolidated financial statements for details regarding net gains from investment activities of consolidated VIEs.

Interest income increased by $7.7 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, primarily due to increased interest income earned from U.S. Treasury securities held during the six months ended June 30, 2018, as compared to the same period in 2018.

Other income, net was $6.7 million during the six months ended June 30, 2019, as compared to other loss, net of $1.2 million during the six months ended June 30, 2018. This change was primarily attributable to the reversal of a liability relating to a favorable judgment in a legal proceeding during the six months ended June 30, 2019, which did not occur during the same period in 2018. The increase was also driven by a decrease in foreign exchange losses during the six months ended June 30, 2019, as compared to the same period in 2018. For additional details regarding changes in other income, net in each segment, see “—Segment Analysis” below.

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Net Income Attributable to Non-Controlling Interests and Series A and Series B Preferred Shareholders

For information related to net income attributable to Non-Controlling Interests and net income attributable to Series A and Series B Preferred shareholders, see note 13 to the condensed consolidated financial statements.

Income Tax Provision

The Apollo Operating Group and its subsidiaries generally operate as partnerships for U.S. federal income tax purposes. As a result, only a portion of the income we earn is subject to corporate-level tax in the United States and foreign jurisdictions. The provision for income taxes includes federal, state and local income taxes in the United States and foreign income taxes.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

The income tax provision decreased by $2.0 million for three months ended June 30, 2019, as compared to the three months ended June 30, 2018. The decrease in the income tax provision was primarily due to an overall change in the mix of earnings when comparing the amount of earnings that are subject to corporate-level tax to those earnings that are not subject to corporate-level tax as such earnings are passed through to Non-Controlling Interests and Class A shareholders. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of 4.7% and 11.6% for the three months ended June 30, 2019 and 2018, respectively. The most significant reconciling items between our U.S. federal statutory income tax rate and our effective income tax rate were due to the following: (i) income passed through to Non-Controlling Interests; (ii) income passed through to Class A shareholders; and (iii) state and local income taxes including NYC UBT (see note 9 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

The income tax provision increased by $9.0 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The increase was due to an increase in pre-tax GAAP net income during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 and an overall change in the mix of earnings when comparing the amount of earnings that are subject to corporate-level tax to those earnings that are not subject to corporate-level tax as such earnings are passed through to Non-Controlling Interests and Class A shareholders. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of 5.3% and 44.4% for the six months ended June 30, 2019 and 2018, respectively. The most significant reconciling items between our U.S. federal statutory income tax rate and our effective income tax rate were due to the following: (i) income passed through to Non-Controlling Interests; (ii) income passed through to Class A shareholders and (iii) state and local income taxes including NYC UBT (see note 9 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).

Segment Analysis

Discussed below are our results of operations for each of our reportable segments. They represent the segment information available and utilized by our executive management, which consists of our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. See note 16 to our condensed consolidated financial statements for more information regarding our segment reporting.

Our financial results vary, since performance fees, which generally constitute a large portion of the income from the funds that we manage, 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 emphasize long-term financial growth and profitability to manage our business.

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Credit

The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our credit segment.

	For the Three Months Ended June 30,						Total Change			Percentage Change		For the Six Months Ended June 30,						Total Change			Percentage Change
	2019			2018								2019			2018
	(in thousands)
Credit:
Management fees	$	190,275		$	153,177		$	37,098		24.2	%	$	373,017		$	302,892		$	70,125		23.2	%
Advisory and transaction fees, net	5,510			2,100			3,410			162.4		8,358			4,295			4,063			94.6
Performance fees(1)	9,261			5,766			3,495			60.6		9,922			11,041			(1,119		)	(10.1	)
Fee Related Revenues	205,046			161,043			44,003			27.3		391,297			318,228			73,069			23.0
Salary, bonus and benefits	(50,465		)	(42,729		)	(7,736		)	18.1		(94,769		)	(89,550		)	(5,219		)	5.8
General, administrative and other	(31,647		)	(27,843		)	(3,804		)	13.7		(59,143		)	(54,211		)	(4,932		)	9.1
Placement fees	(157		)	(279		)	122			(43.7	)	148			(555		)	703			NM
Fee Related Expenses	(82,269		)	(70,851		)	(11,418		)	16.1		(153,764		)	(144,316		)	(9,448		)	6.5
Other income (loss), net of Non-Controlling Interest	1,968			(1,188		)	3,156			NM		1,564			1,995			(431		)	(21.6	)
Fee Related Earnings	124,745			89,004			35,741			40.2		239,097			175,907			63,190			35.9
Realized performance fees	18,030			14,635			3,395			23.2		21,357			17,749			3,608			20.3
Realized profit sharing expense	(7,877		)	(11,493		)	3,616			(31.5	)	(11,395		)	(14,327		)	2,932			(20.5	)
Net Realized Performance Fees	10,153			3,142			7,011			223.1		9,962			3,422			6,540			191.1
Realized principal investment income	7,909			5,931			1,978			33.4		10,958			10,211			747			7.3
Net interest loss and other	(4,656		)	(3,952		)	(704		)	17.8		(9,042		)	(7,470		)	(1,572		)	21.0
Segment Distributable Earnings	$	138,151		$	94,125		$	44,026		46.8	%	$	250,975		$	182,070		$	68,905		37.8	%

(1) Represents certain performance fees from business development companies and Redding Ridge Holdings.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Management fees increased by $37.1 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene, SCRF IV and Apollo Total Return Fund, L.P. of $27.1 million, $2.1 million and $1.9 million, respectively, during the three months ended June 30, 2019, as compared to the same period during 2018.

Advisory and transaction fees, net increased by $3.4 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in net transaction and advisory fees earned from Financial Credit Investment III, L.P. (“FCI III”) of $2.8 million during the three months ended June 30, 2019, as compared to the same period during 2018.

Performance fees increased by $3.5 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in performance fees earned from Redding Ridge Holdings and a business development company of $4.9 million and $4.4 million during the three months ended June 30, 2019, as compared to the same period during 2018. The performance fees from Redding Ridge Holdings and the business development company were primarily driven by the vehicles achieving their annualized hurdle rate during the three months ended June 30, 2019, which did not occur during the same period during 2018. This increase in performance fees was partially offset by decreased performance fees from AINV of $5.8 million during the three months ended June 30, 2019, as compared to the same period during 2018, as a result of the amended and restated investment management agreement with AINV, as described in note 14 to our condensed consolidated financial statements. The fee arrangement with AINV was revised to be on a total return measure and the total return hurdle rate was not achieved as of June 30, 2019.

Salary, bonus and benefits expense increased by $7.7 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018 primarily due to an increase in headcount and changes in bonus accrual estimates.

General, administrative and other increased by $3.8 million during the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. The change was primarily driven by an increase in professional fees and technology expenses during the three months ended June 30, 2019, as compared to the same period in 2018.

Other income, net of Non-Controlling Interest was $2.0 million for the three months ended June 30, 2019, as compared to other loss, net of Non-Controlling Interest of $1.2 million the three months ended June 30, 2018. This change was primarily

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attributable to the reversal of a liability relating to a favorable judgment in a legal proceeding during the three months ended June 30, 2019.

Realized performance fees increased by $3.4 million during the three months ended June 30, 2019, as compared to the same period in 2018. This change was primarily attributable to increases in realized performance fees generated from Financial Credit Investment I, L.P. (“FCI I”) of $12.0 million, offset by a decrease in realized performance fees generated from a strategic investment account of $8.8 million during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. The increase in realized performance fees generated from FCI I was primarily driven by realizations of the fund’s investments in various life settlement policies during the three months ended June 30, 2019, while the fund had no realized performance fees during the three months ended June 30, 2018. The decrease in realized performance fees generated from the strategic investment account was driven by incentive fees that crystallized during the three months ended June 30, 2018, while the strategic investment account had no realizations during the three months ended June 30, 2019.

Realized profit sharing expense decreased by $3.6 million during the three months ended June 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in profit sharing expense related to the Incentive Pool. Included in realized profit sharing expense is $1.3 million related to the Incentive Pool for the three months ended June 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the three months ended June 30, 2019. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Realized principal investment income increased by $2.0 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in realizations from Apollo’s equity ownership interest in MidCap of $2.3 million during the three months ended June 30, 2019, as compared to the same period in 2018.

Net interest loss and other increased by $0.7 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, primarily due to additional interest expense incurred during the three months ended June 30, 2019 as a result of the issuance of the 2029 Senior Notes, as described in note 10 to our condensed consolidated financial statements.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Management fees increased by $70.1 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene, Apollo Total Return Fund, L.P. and SCRF IV of $54.7 million, $3.9 million and $3.8 million, respectively, during the six months ended June 30, 2019, as compared to the same period during 2018. This increase in management fees was partially offset by decreased management fees earned from Apollo Credit Master Fund Ltd. (“Credit Fund”) of $3.6 million during the six months ended June 30, 2019, as compared to the same period during 2018.

Performance fees decreased by $1.1 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to a decrease in performance fees earned from AINV of $9.5 million during the six months ended June 30, 2019, as compared to the same period during 2018, as a result of the amended and restated investment management agreement with AINV, as described in note 14 to our condensed consolidated financial statements. The fee arrangement with AINV was revised to be on a total return measure and the total return hurdle rate was not achieved as of June 30, 2019. This decrease in performance fees was partially offset by increased performance fees from Redding Ridge Holdings and a business development company of $4.5 million and $3.9 million during the six months ended June 30, 2019, as compared to the same period during 2018. The performance fees from Redding Ridge Holdings and the business development company was primarily driven by the vehicles achieving their annualized hurdle rates during the during the six months ended June 30, 2019, which did not occur during the same period during 2018.

Salary, bonus and benefits expense increased by $5.2 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018 primarily due to an increase in headcount.

General, administrative and other increased by $4.9 million during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The change was primarily driven by an increase in technology and other expenses during the six months ended June 30, 2019, as compared to the same period in 2018.

Realized performance fees increased by $3.6 million during the six months ended June 30, 2019, as compared to the same period in 2018. This change was primarily attributable to an increase in realized performance fees generated from FCI I of $12.0 million, offset by a decrease in realized performance fees generated from a strategic investment account of $8.8 million during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The increase in realized performance

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fees generated from FCI I was primarily driven by realizations of the fund’s investments in various life settlement policies during the six months ended June 30, 2019, while the fund had no realized performance fees during the six months ended June 30, 2018. The decrease in realized performance fees generated from the strategic investment account was driven by incentive fees that crystallized during the six months ended June 30, 2018, while the strategic investment account had no realizations during the six months ended June 30, 2019.

Realized profit sharing expense decreased by $2.9 million during the six months ended June 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in profit sharing expense related to the Incentive Pool. Included in realized profit sharing expense is $0.1 million and $1.4 million related to the Incentive Pool for the six months ended June 30, 2019 and 2018, respectively. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Net interest loss and other increased by $1.6 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, primarily due to additional interest expense incurred during the six months ended June 30, 2019 as a result of the issuance of the 2029 Senior Notes, as described in note 10 to our condensed consolidated financial statements.

Private Equity

The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our private equity segment.

	For the Three Months Ended June 30,						Total Change			Percentage Change		For the Six Months Ended June 30,						Total Change			Percentage Change
	2019			2018								2019			2018
	(in thousands)
Private Equity:
Management fees	$	129,638		$	132,417		$	(2,779	)	(2.1	)%	$	260,134		$	214,697		$	45,437		21.2	%
Advisory and transaction fees, net	20,257			13,319			6,938			52.1		36,393			23,974			12,419			51.8
Fee Related Revenues	149,895			145,736			4,159			2.9		296,527			238,671			57,856			24.2
Salary, bonus and benefits	(40,267		)	(41,879		)	1,612			(3.8	)	(83,500		)	(82,604		)	(896		)	1.1
General, administrative and other	(22,962		)	(18,333		)	(4,629		)	25.2		(48,824		)	(36,316		)	(12,508		)	34.4
Placement fees	(618		)	(32		)	(586		)	NM		(483		)	(83		)	(400		)	481.9
Fee Related Expenses	(63,847		)	(60,244		)	(3,603		)	6.0		(132,807		)	(119,003		)	(13,804		)	11.6
Other income, net	3,963			82			3,881			NM		4,159			391			3,768			NM
Fee Related Earnings	90,011			85,574			4,437			5.2		167,879			120,059			47,820			39.8
Realized performance fees	12,231			54,640			(42,409		)	(77.6	)	72,687			167,412			(94,725		)	(56.6	)
Realized profit sharing expense	(4,089		)	(31,512		)	27,423			(87.0	)	(41,816		)	(89,260		)	47,444			(53.2	)
Net Realized Performance Fees	8,142			23,128			(14,986		)	(64.8	)	30,871			78,152			(47,281		)	(60.5	)
Realized principal investment income	1,877			9,079			(7,202		)	(79.3	)	9,965			27,409			(17,444		)	(63.6	)
Net interest loss and other	(7,650		)	(5,259		)	(2,391		)	45.5		(13,783		)	(10,615		)	(3,168		)	29.8
Segment Distributable Earnings	$	92,380		$	112,522		$	(20,142	)	(17.9	)%	$	194,932		$	215,005		$	(20,073	)	(9.3	)%

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Management fees decreased by $2.8 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to a decrease in management fees earned from Credit Opportunity Fund III, L.P. (“COF III”) and Fund VII of $1.8 million and $1.0 million, respectively, during the three months ended June 30, 2019.

Advisory and transaction fees, net increased by $6.9 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Hybrid Value Fund’s portfolio companies of $11.1 million, partially offset by a decrease in net advisory and transaction fees earned with respect to Fund VIII’s portfolio companies of $5.8 million during the three months ended June 30, 2019, as compared to the same period during 2018.

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Salary, bonus and benefits expense decreased by $1.6 million for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 primarily due to changes in bonus accrual estimates.

General, administrative and other increased by $4.6 million during the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. The change was primarily driven by increased professional fees and fund organizational expenses related to Apollo Natural Resources Partners III, L.P. during the three months ended June 30, 2019, as compared to the same period in 2018.

Other income, net increased by $3.9 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. The change was primarily driven by the reversal of a liability relating to a favorable judgment in a legal proceeding during the three months ended June 30, 2019.

Realized performance fees decreased by $42.4 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to decreases in realized performance fees generated from Fund VIII and ANRP II of $24.6 million and $7.5 million, respectively, during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. The decrease in realized performance fees from Fund VIII was primarily driven by a decrease in profits realized from investment sales and income from the fund’s investments. The realized performance fees from Fund VIII during the three months ended June 30, 2019 were the result of sales and income generated from investments primarily in the natural resources and financial services sectors. The realized performance fees during the three months ended June 30, 2018 were the result of sales and income generated from investments primarily in the natural resources, leisure and consumer services sectors. The decrease in realized performance fees from ANRP II was primarily driven by a decrease in profits realized from investment sales. The realized performance fees from ANRP II during the three months ended June 30, 2019 were the result of income earned on an escrow account balance and the realized performance fees during the same period in 2018 were from the result of sales generated from investments in the natural resources sector.

Realized profit sharing expense decreased by $27.4 million during the three months ended June 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $9.8 million related to the Incentive Pool for the three months ended June 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the three months ended June 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Realized principal investment income decreased by $7.2 million for the three months ended June 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in Fund VIII and Fund VII of $4.6 million and $1.1 million, respectively, during the three months ended June 30, 2019, as compared to the same period in 2018.

Net interest loss and other increased by $2.4 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018, primarily due to additional interest expense incurred during the three months ended June 30, 2019 as a result of the issuance of the 2029 Senior Notes, as described in note 10 to our condensed consolidated financial statements.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Management fees increased by $45.4 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to the commencement of Fund IX’s investment period in April 2018, resulting in an increase of $79.5 million in management fees during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The increase in management fees was partially offset by decreased management fees earned from Fund VIII and COF III of $23.0 million and $4.6 million, respectively, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

Advisory and transaction fees, net increased by $12.4 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Fund IX’s portfolio companies and Hybrid Value Fund’s portfolio companies of $12.1 million and $11.1 million, respectively, during the six months ended June 30, 2019, as compared to the same period during 2018. The increase in net advisory and transaction fees was partially offset by decreased net advisory and transaction fees earned from Fund VIII’s portfolio companies of $8.5 million during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

General, administrative and other increased by $12.5 million during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The change was primarily driven by increased professional fees and fund organizational

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expenses related to Apollo Natural Resources Partners III, L.P. during the six months ended June 30, 2019, as compared to the same period in 2018.

Other income, net increased by $3.8 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The change was primarily driven by the reversal of a liability relating to a favorable judgment in a legal proceeding during the six months ended June 30, 2019.

Realized performance fees decreased by $94.7 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to decreases in realized performance fees generated from Fund VIII and ANRP II of $66.3 million and $7.4 million, respectively, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The decrease in realized performance fees from Fund VIII was primarily driven by a decrease in profits realized from investments sales. The realized performance fees from Fund VIII during the six months ended June 30, 2019 were the result of sales and income generated from investments primarily in the business services, manufacturing and industrial, financial services and leisure sectors. The realized performance fees during the six months ended June 30, 2018 were the result of sales and income generated from investments primarily in the chemicals, natural resources, consumer services and leisure sectors. The decrease in realized performance fees from ANRP II was primarily driven by a decrease in profits realized from investment sales. The realized performance fees from ANRP II during the six months ended June 30, 2019 were the result of income earned on an escrow account balance and the realized performance fees during the same period in 2018 were the result of sales generated from investments in the natural resources sector.

Realized profit sharing expense decreased by $47.4 million during the six months ended June 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $16.9 million and $24.6 million related to the Incentive Pool for the six months ended June 30, 2019 and 2018, respectively. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Realized principal investment income decreased by $17.4 million for the six months ended June 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in Fund VIII, Fund VII, COF III and ANRP 1 of $9.7 million, $2.1 million, $2.0 million, and $1.5 million, respectively, during the six months ended June 30, 2019, as compared to the same period in 2018.

Net interest loss and other increased by $3.2 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, primarily due to additional interest expense incurred during the six months ended June 30, 2019 as a result of the issuance of the 2029 Senior Notes, as described in note 10 to our condensed consolidated financial statements.

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Real Assets

The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our real assets segment.

	For the Six Months Ended June 30,						Total Change			Percentage Change		For the Six Months Ended June 30,						Total Change			Percentage Change
	2019			2018								2019			2018
	(in thousands)
Real Assets:
Management fees	$	46,398		$	40,270		$	6,128		15.2	%	$	91,783		$	80,478		$	11,305		14.0	%
Advisory and transaction fees, net	5,295			161			5,134			NM		5,371			305			5,066			NM
Fee Related Revenues	51,693			40,431			11,262			27.9		97,154			80,783			16,371			20.3
Salary, bonus and benefits	(19,537		)	(19,893		)	356			(1.8	)	(37,725		)	(38,878		)	1,153			(3.0	)
General, administrative and other	(8,547		)	(9,500		)	953			(10.0	)	(18,222		)	(19,524		)	1,302			(6.7	)
Fee Related Expenses	(28,084		)	(29,393		)	1,309			(4.5	)	(55,947		)	(58,402		)	2,455			(4.2	)
Other income, net of Non-Controlling Interest	156			55			101			183.6		94			223			(129		)	(57.8	)
Fee Related Earnings	23,765			11,093			12,672			114.2		41,301			22,604			18,697			82.7
Realized performance fees	3,074			45,199			(42,125		)	(93.2	)	3,080			51,615			(48,535		)	(94.0	)
Realized profit sharing expense	(1,340		)	(26,805		)	25,465			(95.0	)	(1,234		)	(29,870		)	28,636			(95.9	)
Net Realized Performance Fees	1,734			18,394			(16,660		)	(90.6	)	1,846			21,745			(19,899		)	(91.5	)
Realized principal investment income	1,495			4,363			(2,868		)	(65.7	)	1,794			5,146			(3,352		)	(65.1	)
Net interest loss and other	(2,708		)	(1,968		)	(740		)	37.6		(4,881		)	(3,877		)	(1,004		)	25.9
Segment Distributable Earnings	$	24,286		$	31,882		$	(7,596	)	(23.8	)%	$	40,060		$	45,618		$	(5,558	)	(12.2	)%

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Management fees increased by $6.1 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene, ARI and Apollo Infrastructure Equity Fund (“Infrastructure Fund”) of $4.2 million, $1.3 million and $0.7 million, respectively, along with modest increases in management fees earned across most of our real assets funds during the three months ended June 30, 2019, as compared to the same period during 2018. The increase in management fees was partially offset by decreased management fees earned from Apollo European Principal Finance Fund II, L.P. (“EPF II”) of $2.4 million during the three months ended June 30, 2019, as compared to the same period during 2018.

Advisory and transaction fees, net increased by $5.1 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to EPF III of $3.8 million during the three months ended June 30, 2019, as compared to the same period during 2018.

Realized performance fees decreased by $42.1 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. The decrease in realized performance fees was primarily attributable to decreases in realized performance fees generated from EPF II and strategic investment accounts of $37.2 million and $3.5 million, respectively, during the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. The decrease in realized performance fees from EPF II is primarily due to the realizations of UK hotel assets held by the fund during the three months ended June 30, 2018, while the fund had no realizations during the three months ended June 30, 2019. Realized performance fees generated from certain funds, including U.S. RE Fund I, U.S. RE Fund II, Apollo Asia Real Estate Fund, L.P. (“Asia RE Fund”) and EPF II, includes an allocation of realized performance fees from strategic investment accounts that invest in the funds. Realized performance fees from strategic investment accounts decreased primarily due to lower allocations of realizations relating to underlying fund investments for the three months ended June 30, 2019, as compared to the same period during 2018.

Realized profit sharing expense decreased by $25.5 million during the three months ended June 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $7.8 million related to the Incentive Pool for the three months ended June 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the three months ended June 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

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Realized principal investment income decreased by $2.9 million for the three months ended June 30, 2019, as compared to the three months ended June 30, 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in EPF II of $3.3 million during the three months ended June 30, 2019, as compared to the same period in 2018.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Management fees increased by $11.3 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene, ARI and Apollo Infrastructure Equity Fund of $9.1 million, $2.4 million and $1.4 million, respectively, along with modest increases in management fees earned across most of our real assets funds during the six months ended June 30, 2019, as compared to the same period during 2018. The increase in management fees was partially offset by decreased management fees earned from EPF II of $5.2 million during the six months ended June 30, 2019, as compared to the same period during 2018.

Advisory and transaction fees, net increased by $5.1 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to EPF III and AGRE Debt Fund I of $3.8 million and $1.1 million, respectively, during the six months ended June 30, 2019, as compared to the same period during 2018.

Realized performance fees decreased by $48.5 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. The decrease in realized performance fees was primarily attributable to decreases in realized performance fees generated from EPF II and strategic investment accounts of $39.0 million and $7.2 million, respectively, during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. Realized performance fees from EPF II decreased primarily due to the realization of UK hotel assets held by the fund during the six months ended June 30, 2018, while the fund had no realizations during the six months ended June 30, 2019. Realized performance fees generated from certain funds, including U.S. RE Fund I, U.S. RE Fund II, Asia RE Fund and EPF II, includes an allocation of realized performance fees from strategic investment accounts that invest in the funds. The decrease in realized performance fees from strategic investment accounts was primarily due to lower allocations of realizations relating to underlying investments for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

Realized profit sharing expense decreased by $28.6 million during the six months ended June 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $8.4 million related to the Incentive Pool for the six months ended June 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the six months ended June 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Realized principal investment income decreased by $3.4 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in EPF II of $4.0 million during the six months ended June 30, 2019.

Net interest loss and other increased by $1.0 million for the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, primarily due to additional interest expense incurred during the six months ended June 30, 2019 as a result of the issuance of the 2029 Senior Notes, as described in note 10 to our condensed consolidated financial statements.

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Summary of Distributable Earnings

The following table is a reconciliation of Distributable Earnings per share of common and equivalent to net distribution per share of common and equivalent.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands, except per share data)
Segment Distributable Earnings	$	254,817		$	238,529		$	485,967		$	442,693
Taxes and related payables	(14,878		)	(13,838		)	(29,514		)	(25,036		)
Preferred distributions	(9,164		)	(8,952		)	(18,328		)	(13,335		)
Distributable Earnings	230,775			215,739			438,125			404,322
Add back: Tax and related payables attributable to common and equivalents	12,777			11,808			25,252			20,975
Distributable Earnings before certain payables(1)	243,552			227,547			463,377			425,297
Percent to common and equivalents	51		%	51		%	51		%	51		%
Distributable Earnings before other payables attributable to common and equivalents	124,212			116,049			236,322			216,901
Less: Taxes and related payables attributable to common and equivalents	(12,777		)	(11,808		)	(25,252		)	(20,975		)
Distributable Earnings attributable to common and equivalents(2)	$	111,435		$	104,241		$	211,070		$	195,926
Distributable Earnings per share(3)	$	0.56		$	0.52		$	1.06		$	0.98
Retained capital per share(3)	(0.06		)	(0.09		)	(0.10		)	(0.17		)
Net distribution per share(3)	$	0.50		$	0.43		$	0.96		$	0.81

(1) Distributable Earnings before certain payables represents Distributable Earnings before the deduction for the estimated current corporate taxes and the amounts payable under Apollo’s tax receivable agreement.

(2) “Common and equivalents” consists of total Class A shares outstanding and RSUs that participate in distributions.

(3) Per share calculations are based on end of period Distributable Earnings Shares Outstanding, which consists of total Class A shares outstanding, AOG Units and RSUs that participate in distributions.

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Summary of Non-U.S. GAAP Measures

The table below sets forth a reconciliation of net income attributable Apollo Global Management, LLC Class A Shareholders to our non-U.S. GAAP performance measures:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)
Net Income (Loss) Attributable to Apollo Global Management, LLC Class A Shareholders	$	155,659		$	54,658		$	295,552		$	(7,987	)
Preferred distributions	9,164			8,952			18,328			13,335
Net income attributable to Non-Controlling Interests in consolidated entities	5,143			8,716			13,805			14,695
Net income attributable to Non-Controlling Interests in the Apollo Operating Group	172,195			71,484			330,043			14,419
Net Income	$	342,161		$	143,810		$	657,728		$	34,462
Income tax provision	16,897			18,924			36,551			27,504
Income Before Income Tax Provision	$	359,058		$	162,734		$	694,279		$	61,966
Transaction-related charges(1)	18,135			(6,905		)	23,598			(5,053		)
Charges associated with corporate conversion(2)	10,006			—			10,006			—
Net income attributable to Non-Controlling Interests in consolidated entities	(5,143		)	(8,716		)	(13,805		)	(14,695		)
Unrealized performance fees(3)	(129,679		)	(20,619		)	(314,062		)	229,922
Unrealized profit sharing expense(3)	40,799			9,125			116,561			(67,263		)
Equity-based profit sharing expense and other(4)	20,675			17,850			41,637			32,414
Equity-based compensation	18,237			16,028			36,660			33,463
Unrealized principal investment (income) loss	(31,893		)	(3,419		)	(44,221		)	32,578
Unrealized net (gains) losses from investment activities and other	(45,378		)	72,451			(64,686		)	139,361
Segment Distributable Earnings(5)	$	254,817		$	238,529		$	485,967		$	442,693
Taxes and related payables	(14,878		)	(13,838		)	(29,514		)	(25,036		)
Preferred distributions	(9,164		)	(8,952		)	(18,328		)	(13,335		)
Distributable Earnings	$	230,775		$	215,739		$	438,125		$	404,322
Preferred distributions	9,164			8,952			18,328			13,335
Taxes and related payables	14,878			13,838			29,514			25,036
Realized performance fees	(33,335		)	(114,474		)	(97,124		)	(236,776		)
Realized profit sharing expense	13,306			69,810			54,445			133,457
Realized principal investment income	(11,281		)	(19,373		)	(22,717		)	(42,766		)
Net interest loss and other	15,014			11,179			27,706			21,962
Fee Related Earnings	$	238,521		$	185,671		$	448,277		$	318,570
Depreciation, amortization and other, net	2,733			2,494			5,312			2,494
Fee Related EBITDA	$	241,254		$	188,165		$	453,589		$	321,064
Realized performance fees(6)	33,335			114,474			97,124			236,776
Realized profit sharing expense(6)	(13,306		)	(69,810		)	(54,445		)	(133,457		)
Fee Related EBITDA + 100% of Net Realized Performance Fees	$	261,283		$	232,829		$	496,268		$	424,383

(1) Transaction-related charges include contingent consideration, equity-based compensation charges and the amortization of intangible assets and certain other charges associated with acquisitions.

(2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1 to the condensed consolidated financial statements.

(3) Includes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018.

(4) Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit

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sharing expense and other also includes non-cash expenses related to equity awards in unconsolidated related parties granted to employees of Apollo.

(5) See note 16 to the condensed consolidated financial statements for more details regarding Segment Distributable Earnings for the combined segments.

(6) Excludes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018.

Liquidity and Capital Resources

Overview

Apollo’s business model primarily derives revenues and cash flows from the assets it manages. Apollo targets operating expense levels such that fee income exceeds total operating expenses each period. The company intends to distribute to its shareholders on a quarterly basis substantially all of its distributable earnings after taxes and related payables in excess of amounts determined to be necessary or appropriate to provide for the conduct of the business. As a result, the Company requires limited capital resources to support the working capital or operating needs of the business. While primarily met by cash flows generated through fee income received, liquidity needs are also met (to a limited extent) through proceeds from borrowings and equity issuances as described in notes 10 and 13 to the condensed consolidated financial statements, respectively. The Company had cash and cash equivalents of $945.7 million at June 30, 2019.

Primary Sources and Uses of Cash

The Company has multiple sources of short-term liquidity to meet its capital needs, including cash on hand, annual cash flows from its activities, and available funds from the Company’s $750 million revolving credit facility as of June 30, 2019. The Company believes these sources will be sufficient to fund our capital needs for at least the next twelve months. If the Company determines that market conditions are favorable after taking into account our liquidity requirements, we may seek to issue additional senior notes, preferred equity, or other financing instruments.

The section below discusses in more detail the Company’s primary sources and uses of cash and the primary drivers of cash flows within the Company’s condensed consolidated statements of cash flows:

	For the Six Months Ended June 30,
	2019			2018
	(in thousands)
Operating Activities	$	450,610		$	395,075
Investing Activities	(398,247		)	223,551
Financing Activities	315,223			(310,719		)
Net Increase in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities	$	367,586		$	307,907

Operating Activities

The Company’s operating activities support its investment management activities. The primary sources of cash within the operating activities section include: (a) management fees, (b) advisory and transaction fees, (c) realized performance revenues, and (d) realized principal investment income. The primary uses of cash within the operating activities section include: (a) compensation and non-compensation related expenses, (b) placement fees, and (c) interest and taxes.

• During the six months ended June 30, 2019 and 2018, cash provided by operating activities primarily includes cash inflows from the receipt of management fees, advisory and transaction fees, realized performance revenues, and realized principal investment income, offset by cash outflows for compensation, general, administrative, and other expenses. Net cash provided by operating activities also reflects the operating activity of our consolidated funds and VIEs, which primarily include cash inflows from the sale of investments offset by cash outflows for purchases of investments.

Investing Activities

The Company’s investing activities support growth of its business. The primary sources of cash within the investing activities section include distributions from investments. The primary uses of cash within the investing activities section include: (a) capital expenditures, (b) investment purchases, including purchases of U.S. Treasury securities, and (c) equity method investments in the funds we manage.

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• During the six months ended June 30, 2019 and 2018, cash used by investing activities primarily reflects purchases of U.S. Treasury securities and other investments and net contributions to equity method investments, offset by proceeds from maturities of U.S. Treasury securities.

Financing Activities

The Company’s financing activities reflect its capital market transactions and transactions with owners. The primary sources of cash within the financing activities section includes proceeds from debt and preferred equity issuances. The primary uses of cash within the financing activities section include: (a) distributions, (b) payments under the tax receivable agreement, (c) share repurchases, (d) cash paid to settle tax withholding obligations in connection with net share settlements of equity-based awards, and (e) repayments of debt.

• During the six months ended June 30, 2019, cash provided by financing activities primarily reflects proceeds from the issuance of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, partially offset by distributions to Class A shareholders and Non-Controlling interest holders.

• During the six months ended June 30, 2018, cash used by financing activities primarily reflected repayments on the term loan facility to AMH and distributions to Class A shareholders and Non-Controlling interest holders, partially offset by proceeds from the issuance of the Series B Preferred shares and the 2048 Senior Notes.

Future Debt Obligations

The Company had long-term debt of $2.4 billion at June 30, 2019, which includes $2.3 billion of senior notes with maturities in 2024, 2026, 2029, 2039 and 2048. See note 10 to the condensed consolidated financial statements for further information regarding the Company’s debt arrangements.

Contractual Obligations, Commitments and Contingencies

The Company had unfunded general partner commitments of $1.1 billion at June 30, 2019, of which $434 million related to Fund IX. For a summary and a description of the nature of the Company’s commitments, contingencies and contractual obligations, see note 15 to the condensed consolidated financial statements and “—Contractual Obligations, Commitments and Contingencies”. The Company’s commitments are primarily fulfilled through cash flows from operations and (to a limited extent) through borrowings and equity issuances as described in notes 10 and 13 to the condensed consolidated financial statements, respectively.

Consolidated Funds and VIEs

The Company manages its liquidity needs by evaluating unconsolidated cash flows; however, the Company’s financial statements reflect the financial position of Apollo as well as Apollo’s consolidated funds and VIEs. The primary sources and uses of cash at Apollo’s consolidated funds and VIEs include: (a) raising capital from their investors, which have been reflected historically as Non-Controlling Interests of the consolidated subsidiaries in our financial statements, (b) using capital to make investments, (c) generating cash flows from operations through distributions, interest and the realization of investments, (d) distributing cash flow to investors, and (e) issuing debt to finance investments (CLOs).

Other Liquidity and Capital Resource Considerations

Future Cash Flows

Our ability to execute our business strategy, particularly our ability to increase our AUM, depends on our ability to establish new funds and to raise 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, access to credit facilities, compliance with existing credit agreements, as well as industry and market trends. Also during economic downturns the funds we manage might experience cash flow issues or liquidate entirely. In these situations we might be asked to reduce or eliminate the management fee and performance fees we charge, which could adversely impact our cash flow in the future.

An increase in the fair value of our funds’ investments, by contrast, could favorably impact our liquidity through higher management fees where the management fees are calculated based on the net asset value, gross assets or adjusted assets. Additionally, higher performance fees not yet realized would generally result when investments appreciate over their cost basis which would not have an impact on the Company’s cash flow until realized.

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Consideration of Financing Arrangements

As noted above, in limited circumstances, the Company may issue debt or equity to supplement its liquidity. The decision to enter into a particular financing arrangement is made after careful consideration of various factors including the Company’s cash flows from operations, future cash needs, current sources of liquidity, demand for the Company’s debt or equity, and prevailing interest rates.

Revolver Facility

Under the Company’s 2018 AMH Credit Facility, the Company may borrow in an aggregate amount not to exceed $750 million and may incur incremental facilities in an aggregate amount not to exceed $250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including without limitation, permitted acquisitions. As of June 30, 2019, the 2018 AMH Credit Facility was undrawn.

Distributions

For information regarding the quarterly distributions which were made at the sole discretion of the Company’s manager during 2019 and 2018 to Class A shareholders, Non-Controlling Interest holders in the Apollo Operating Group and participating securities, see note 13 to the condensed consolidated financial statements.

Although the Company expects 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 pay distributions, we may have to borrow funds to pay distributions, or we may determine not to pay distributions. The declaration, payment and determination of the amount of our quarterly distributions are at the sole discretion of our manager.

On July 31, 2019, the Company declared a cash distribution of $0.50 per Class A share, which will be paid on August 30, 2019 to holders of record at the close of business on August 16, 2019. Also, the Company declared a cash distribution of $0.398438 per Series A Preferred share and Series B Preferred share which will be paid on September 16, 2019 to holders of record at the close of business on August 30, 2019.

Tax Receivable Agreement

The tax receivable agreement provides for the payment to 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 that APO Corp. realizes subject to the agreement. For more information regarding the tax receivable agreement, see note 14 to the condensed consolidated financial statements.

AGM Share Repurchases

For information regarding the Company’s share repurchase program, see note 13 to the condensed consolidated financial statements.

AINV Share Purchases

On March 11, 2016, it was announced that Apollo intended to embark on a program to purchase $50 million of AINV’s common stock, subject to certain regulatory approvals. Under the program, shares may be purchased from time to time in open market transactions and in accordance with applicable law. As of June 30, 2019, Apollo had purchased approximately 871 thousand shares, or approximately $4.9 million of AINV’s common stock.

Athora

On April 14, 2017, Apollo made an unfunded commitment of €125 million to purchase new Class B-1 equity interests in Athora, a strategic platform established to acquire traditional closed life insurance policies and provide capital and reinsurance solutions to insurers in Europe. In January 2018, Apollo purchased Class C-1 equity interests in Athora that represent a profits interest in Athora which, upon meeting certain vesting triggers, will be convertible by Apollo into additional Class B-1 equity interests in Athora. Apollo and Athene are minority investors in Athora and long term strategic partners with aggregate voting power of 35% and 10%, respectively. For more information regarding unfunded general partner commitments, see “—Contractual Obligations, Commitments and Contingencies”.

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In June 2019, Athora announced its intention to acquire VIVAT N.V.s life insurance business, which is expected to close in 2020 subject to customary closing conditions including regulatory approvals. VIVAT is expected to provide Athora with a platform for future growth due to its scale in the Dutch market, strong brands and deep distribution and underwriting capabilities

Fund VIII, Fund VII, Fund VI, ANRP I and ANRP II Escrow

As of June 30, 2019, the remaining investments and escrow cash of Fund VIII were valued at 125% of the fund’s unreturned capital, which was above the required escrow ratio of 115%. As of June 30, 2019, the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 73%, 37%, 62% and 112% of the fund’s unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation.

Clawback

Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from inception to date exceeds the amount computed as due to the general partner at the final distribution. See “—Overview of Results of Operations—Performance Fees” for the maximum performance fees subject to potential reversal by each fund.

Indemnification Liability

The Company recorded an indemnification liability in the event that our Managing Partners, Contributing Partners and certain investment professionals are required to pay amounts in connection with a general partner obligation to return previously distributed performance fees. See note 14 to the condensed consolidated financial statements for further information regarding the Company’s indemnification liability.

Investment Management Agreements - Athene Asset Management

The Company provides asset management and advisory services to Athene as described in note 14 to the condensed consolidated financial statements. On September 20, 2018, Athene and Apollo agreed to revise the existing fee arrangements (the “amended fee agreement”) between Athene and Apollo. The amended fee agreement was subject to approval by Athene’s shareholders of a bye-law amendment providing that Athene will not elect to terminate the investment management arrangement between Athene and Apollo, except for cause, for a period of four years from the date of the bye-law amendment and thereafter only on each successive two-year anniversary of the expiration of the initial four-year period. On June 10, 2019, the Athene shareholders approved the bye-law amendment and the amended fee agreement took effect retroactive to the month beginning January 1, 2019. The Company began recording fees pursuant to the amended fee agreement on January 1, 2019. The amended fee agreement provides for sub-allocation fees which vary based on portfolio allocation differentiation, as described below.

The base management fee covers a range of investment services that Athene receives from the Company, including investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services such as investment compliance, tax, legal and risk management support, among others. Additionally, the amended fee agreement provides for a possible payment by the Company to Athene, or a possible payment by Athene to the Company, equal to 0.025% of the Incremental Value as of the end of each year, beginning on December 31, 2019, depending upon the percentage of Athene’s investments that consist of core assets and core plus assets. In furtherance of yield support for Athene, if more than 60% of Athene’s invested assets which are subject to the sub-allocation fees are invested in core and core plus assets, Athene will receive a 0.025% fee reduction on the Incremental Value. As an incentive for differentiated asset management, if less than 50% of Athene’s invested assets which are subject to the sub-allocation fee are invested in core and core plus assets, thereby reflecting a higher allocation toward assets with the highest alpha-generating abilities, Athene will pay an additional fee of 0.025% on Incremental Value.

The amended fee agreement is intended to provide for further alignment of interests between Athene and the Company. On the Backbook Value, assuming constant portfolio allocations, the near-term impact of the amended fee agreement is anticipated to be immaterial. On the Incremental Value, assuming the same allocations as the Backbook Value, total fees paid by Athene to the Company are expected to be marginally lower than fees paid by Athene to the Company would have been under the prior fee arrangement. If invested asset allocations are more heavily weighted to assets with lower alpha-generating abilities than Athene’s current investment portfolio, the fees that Athene pays to the Company under the Fee Agreement would be expected to decline relative to the prior fee arrangement. Conversely, if a greater proportion of Athene’s investment portfolio is allocated to differentiated assets with higher alpha-generating abilities, Athene’s net investment earned rates would be expected to increase, and so would the fees Athene pays to the Company relative to the prior fee arrangement.

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Equity-Based Profit Sharing Expense

Profit sharing amounts are generally not paid until the related performance fees are distributed to the general partner upon realization of the fund’s investments. Under certain profit sharing arrangements, a portion of the performance fees distributed to the general partner is allocated by issuance of equity-based awards, rather than cash, to employees. See note 2 to the condensed consolidated financial statements for further information regarding the accounting for the Company’s profit sharing arrangements.

Strategic Relationship Agreement with CalPERS

On April 20, 2010, the Company announced that it entered into a strategic relationship agreement with CalPERS. The strategic relationship agreement provides that Apollo will reduce fees charged to CalPERS on funds it manages, or in the future will manage, solely for CalPERS by $125 million over a five-year period or as close a period as required to provide CalPERS with that benefit. The agreement further provides that Apollo will not use a placement agent in connection with securing any future capital commitments from CalPERS. As of June 30, 2019, the Company had reduced fees charged to CalPERS on the funds it manages by approximately $108.2 million.

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. A summary of our significant accounting policies is presented in note 2 to our condensed consolidated financial statements. The following is a summary of our accounting policies that are affected most by judgments, estimates and assumptions.

Consolidation

The Company assesses all entities with which it is involved for consolidation on a case by case basis depending on the specific facts and circumstances surrounding each entity. Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity. Apollo factors in all economic interests including proportionate interests through related parties, to determine if such interests are to be considered a variable interest. As Apollo’s interest in many of these entities is solely through market rate fees and/or insignificant indirect interests through related parties, Apollo is generally not considered to have a variable interest in many of these entities under the guidance and no further consolidation analysis is performed. For entities where the Company has determined that it does hold a variable interest, the Company performs an assessment to determine whether each of those entities qualify as a VIE.

The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity and therefore certain of Apollo’s funds may qualify as VIEs under the variable interest model whereas others may qualify as voting interest entities (“VOEs”) under the voting interest model. The granting of substantive kick-out rights is a key consideration in determining whether a limited partnership or similar entity is a VIE and whether or not that entity should be consolidated.

Under the voting interest model, Apollo consolidates those entities it controls through a majority voting interest. Apollo does not consolidate those VOEs in which substantive kick-out rights have been granted to the unaffiliated investors to either dissolve the fund or remove the general partner.

 Under the variable interest model, Apollo consolidates those entities where it is determined that the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If Apollo alone is not considered to have a controlling financial interest in the VIE but Apollo and its related parties under common control in the aggregate have a controlling financial interest in the VIE, Apollo will still be deemed to be the primary beneficiary if it is the party within the related party group that is most closely associated with the VIE. If Apollo and its related parties not under common control in the aggregate have a controlling financial interest in a VIE, then Apollo is deemed to be the primary beneficiary if substantially all the activities of the entity are performed on behalf of Apollo. Apollo determines whether it is the primary beneficiary of a VIE at the time it becomes initially involved with the VIE and reconsiders that conclusion continuously. Investments and redemptions (either by Apollo, related parties of Apollo or third parties) or amendments to the governing documents of the respective entity may affect an entity’s status as a VIE or the determination of the primary beneficiary.

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The assessment of whether an entity is a VIE and the determination of whether Apollo should consolidate such VIE requires judgment by our management. Those judgments include, but are not limited to: (i) determining whether the total equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (ii) evaluating whether the holders of equity investment at risk, as a group, can make decisions that have a significant effect on the success of the entity, (iii) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive the expected residual returns from an entity and (iv) evaluating the nature of the relationship and activities of those related parties with shared power or under common control for purposes of determining which party within the related-party group is most closely associated with the VIE. Judgments are also made in determining whether a member in the equity group has a controlling financial interest including power to direct activities that most significantly impact the VIE’s economic performance and rights to receive benefits or obligations to absorb losses that could be potentially significant to the VIE. This analysis considers all relevant economic interests including proportionate interests held through related parties.

Revenue Recognition

Performance Fees. We earn performance fees from our funds as a result of such funds achieving specified performance criteria. Such performance fees generally are earned based upon a fixed percentage of realized and unrealized gains of various funds after meeting any applicable hurdle rate or threshold minimum.

Performance allocations are performance fees that are generally structured from a legal standpoint as an allocation of capital to the Company. Performance allocations from certain of the funds that we manage are subject to contingent repayment and are 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 us as performance fees exceeds the amount actually due to us based upon the aggregate performance of the fund, the excess (in certain cases net of taxes) is required to be returned by us to that fund. We account for performance allocations as an equity method investment, and accordingly, we accrue performance allocations quarterly based on fair value of the underlying investments and separately assess if contingent repayment is necessary. The determination of performance allocations and contingent repayment considers both the terms of the respective partnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. See “Investments, at Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds.

Incentive fees are performance fees structured as a contractual fee arrangement rather than a capital allocation. Incentive fees are generally received from the management of CLOs, managed accounts and AINV. For a majority of our incentive fees, once the quarterly or annual incentive fees have been determined, there is no look-back to prior periods for a potential contingent repayment, however, certain other incentive fees can be subject to contingent repayment at the end of the life of the entity. In accordance with the new revenue recognition standard, certain incentive fees are considered a form of variable consideration and therefore are deferred until fees are probable to not be significantly reversed. There is significant judgment involved in determining if the incentive fees are probable to not be significantly reversed, but generally the Company will defer the revenue until the fees are crystallized or are no longer subject to clawback or reversal. Prior to the adoption of the new revenue recognition guidance, incentive fees were recognized on an assumed liquidation basis.

Management Fees. Management fees related to our credit funds, can be based on net asset value, gross assets, adjusted cost of all unrealized portfolio investments, capital commitments, adjusted assets, capital contributions, or stockholders’ equity all as defined in the respective partnership agreements. The credit management fee calculations that consider net asset value, gross assets, adjusted cost of all unrealized portfolio investments and adjusted assets are normally based on the terms of the respective partnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. The management fees related to our private equity funds, by contrast, are generally based on a fixed percentage of the committed capital or invested capital. The corresponding fee calculations that consider committed capital or invested capital are both objective in nature and therefore do not require the use of significant estimates or assumptions. The management fees related to our real assets funds are generally based on a specific percentage of the funds’ stockholders’ equity or committed or net invested capital or the capital accounts of the limited partners. See “Investments, at Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds.

Investments, at Fair Value

On a quarterly basis, Apollo utilizes valuation committees consisting of members from senior management, to review and approve the valuation results related to the investments of the funds it manages. For certain publicly traded vehicles managed by Apollo, a review is performed by an independent board of directors. The Company also retains independent valuation firms to

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

The fair values of the investments in our funds can be impacted by changes to the assumptions used in the underlying valuation models. For further discussion on the impact of changes to valuation assumptions see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Sensitivity” in our 2018 Annual Report. There have been no material changes to the valuation approaches utilized during the periods that our financial results are presented in this report.

Fair Value of Financial Instruments

Except for the Company’s debt obligations (each as defined in note 10 to our condensed consolidated financial statements), Apollo’s financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. See “—Investments, at Fair Value” above. While Apollo’s valuations of portfolio investments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Financial instruments’ carrying values generally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings.

Profit Sharing Expense. Profit sharing expense is primarily a result of agreements with our Contributing Partners and employees to compensate them based on the ownership interest they have in the general partners of the Apollo funds. Therefore, changes in the fair value of the underlying investments in the funds we manage and advise affect profit sharing expense. The Contributing Partners and employees are allocated approximately 30% to 50%, of the total performance fees which is driven primarily by changes in fair value of the underlying fund’s investments and is treated as compensation expense. Additionally, profit sharing expenses paid may be subject to clawback from employees, former employees and Contributing Partners to the extent not indemnified. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the condensed consolidated statements of financial condition, represents all amounts previously distributed to employees, former employees and Contributing Partners that would need to be returned to the general partner if the Apollo funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner receivable, however, would not become realized until the end of a fund’s life.

Several of the Company’s employee remuneration programs are dependent upon performance fee realizations, including the Incentive Pool, and dedicated performance fee rights.  The Company established these programs to attract and retain, and provide incentive to, partners and employees of the Company and to more closely align the overall compensation of partners and employees with the overall realized performance of the Company.  Dedicated performance fee rights entitle their holders to payments arising from performance fee realizations.  The Incentive Pool enables certain partners and employees to earn discretionary compensation based on realized performance fees in a given year, which amounts are reflected in profit sharing expense in the Company’s condensed consolidated financial statements.  Amounts earned by participants as a result of their performance fee rights (whether dedicated or Incentive Pool) will vary year-to-year depending on the overall realized performance of the Company (and, in the case of the Incentive Pool, on their individual performance). There is no assurance that the Company will continue to compensate individuals through the same types of arrangements in the future and there may be periods when the executive committee of the Company’s manager determines that allocations of realized performance fees are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits, the modification of existing programs or the use of new remuneration programs.  Reductions in performance fee revenues could also make it harder to retain employees and cause employees to seek other employment opportunities.

Fair Value Option. Apollo has elected the fair value option for the Company’s investment in Athene Holding, the assets and liabilities of certain of its consolidated VIEs (including CLOs), the Company’s U.S. Treasury securities with original maturities greater than three months when purchased and certain of the Company’s other investments. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. See notes 3, 5, and 6 to the condensed consolidated financial statements for further disclosure.

Equity-Based Compensation. Equity-based compensation is accounted for in accordance with U.S. GAAP, which requires that the cost of employee services received in exchange for an award is generally measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are recognized over the relevant service period. In addition, certain RSUs granted

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by the Company vest subject to continued employment and the Company’s receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance fee metrics are met or deemed probable. The addition of these performance measures helps to promote the interests of our Class A shareholders and fund investors by making RSU vesting contingent on the realization and distribution of profits on our funds. Forfeitures of equity-based awards are accounted for when they occur. Apollo’s equity-based awards consist of, or provide rights with respect to, AOG Units, RSUs, share options, restricted shares, AHL Awards and other equity-based compensation awards. For more information regarding Apollo’s equity-based compensation awards, see note 12 to our condensed consolidated financial statements. The Company’s assumptions made to determine the fair value on grant date are embodied in the calculations of compensation expense.

A significant part of our compensation expense is derived from amortization of RSUs. The fair value of all RSU grants after March 29, 2011 is based on the grant date fair value, which considers the public share price of the Company. The Company has three types of RSU grants, which we refer to as Plan Grants, Bonus Grants, and Performance Grants. Plan Grants may or may not provide the right to receive distribution equivalents until the RSUs vest and, for grants made after 2011, the underlying shares are generally issued by March 15th after the year in which they vest. For Plan Grants, the grant date fair value is based on the public share price of the Company, and is discounted for transfer restrictions and lack of distributions until vested if applicable. Bonus Grants provide the right to receive distribution equivalents on both vested and unvested RSUs and Performance Grants provide the right to receive distribution equivalents on vested RSUs and may also provide the right to receive distribution equivalents on unvested RSUs. Both Bonus Grants and Performance Grants are generally issued by March 15th of the year following the year in which they vest. For Bonus Grants and Performance Grants, the grant date fair value for the periods presented is based on the public share price of the Company, and is discounted for transfer restrictions.

We utilized the present value of a growing annuity formula to calculate a discount for the lack of pre-vesting distributions on certain Plan Grant and Performance Grant RSUs.

We utilize the Finnerty Model to calculate a marketability discount on the Plan Grant, Bonus Grant and Performance Grant RSUs to account for the lag between vesting and issuance. The Finnerty Model provides for a valuation discount reflecting the holding period restriction embedded in a restricted security preventing its sale over a certain period of time.

The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. This model has gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and the length of restriction. The concept underpinning the Finnerty Model is that a restricted security cannot be sold over a certain period of time. Further simplified, a restricted 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 (also known as an “Asian Put Option”). If we price an Asian Put Option and compare this value to that of the assumed fully marketable underlying security, we can effectively estimate the marketability discount. The inputs utilized in the Finnerty Model are (i) length of holding period, (ii) volatility and (iii) distribution yield.

Bonus Grants constitute a component of the discretionary annual compensation awarded to certain of our professionals. During 2016, the Company increased the default portion of annual compensation to be awarded as a discretionary Bonus Grant relative to the portion awarded in previous years. The increase in the proportion of discretionary annual compensation awarded as a Bonus Grant has generally been offset by a decrease in discretionary annual cash bonuses. These changes are intended to further align the interests of Apollo’s employees and stakeholders and strengthen the long-term commitment of our partners and employees.

Fair Value Measurements

See note 6 to our condensed consolidated financial statements for a discussion of the Company’s fair value measurements.

Recent Accounting Pronouncements

A list of recent accounting pronouncements that are relevant to Apollo and its industry is included in note 2 to our condensed consolidated financial statements.

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Off-Balance Sheet Arrangements

In 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 15 to our condensed consolidated financial statements for a discussion of guarantees and contingent obligations.

Contractual Obligations, Commitments and Contingencies

The Company’s material contractual obligations consisted of lease obligations, contractual commitments as part of the ongoing operations of the funds and debt obligations. Fixed and determinable payments due in connection with these obligations are as follows as of June 30, 2019:

	Remaining 2019		2020		2021		2022		2023		Thereafter		Total
	(in thousands)
Operating lease obligations(8)	$	19,644	$	28,954	$	39,747	$	42,508	$	41,169	$	495,893	$	667,915
Other long-term obligations(1)	14,356		5,786		1,501		919		682		682		23,926
2018 AMH Credit Facility(2)	338		675		675		675		358		—		2,721
2024 Senior Notes(3)	10,000		20,000		20,000		20,000		20,000		508,333		598,333
2026 Senior Notes(4)	11,000		22,000		22,000		22,000		22,000		552,983		651,983
2029 Senior Notes(5)	16,443		32,886		32,886		32,886		32,886		847,652		995,639
2039 Senior Secured Guaranteed Notes(6)	7,751		15,503		15,503		15,503		15,503		565,289		635,052
2048 Senior Notes(7)	7,500		15,000		15,000		15,000		15,000		663,750		731,250
2014 AMI Term Facility I	155		310		15,757		—		—		—		16,222
2014 AMI Term Facility II	153		306		306		17,594		—		—		18,359
2016 AMI Term Facility I	125		249		249		249		249		19,445		20,566
2016 AMI Term Facility II	130		260		260		260		18,693		—		19,603
Obligations	$	87,595	$	141,929	$	163,884	$	167,594	$	166,540	$	3,654,027	$	4,381,569

(1) Includes (i) payments on management service agreements related to certain assets and (ii) payments with respect to certain consulting agreements entered into by the Company. Note that a significant portion of these costs are reimbursable by funds.

(2) The commitment fee as of June 30, 2019 on the $750 million undrawn 2018 AMH Credit Facility was 0.09%. See note 10 of the condensed consolidated financial statements for further discussion of the 2018 AMH Credit Facility.

(3) $500 million of the 2024 Senior Notes matures in May 2024. The interest rate on the 2024 Senior Notes as of June 30, 2019 was 4.00%. See note 10 of the condensed consolidated financial statements for further discussion of the 2024 Senior Notes.

(4) $500 million of the 2026 Senior Notes matures in May 2026. The interest rate on the 2026 Senior Notes as of June 30, 2019 was 4.40%. See note 10 of the condensed consolidated financial statements for further discussion of the 2026 Senior Notes.

(5) $675 million of the 2029 Senior Notes matures in February 2029. The interest rate on the 2029 Senior Notes as of June 30, 2019 was 4.87%. See note 10 of the condensed consolidated financial statements for further discussion of the 2029 Senior Notes.

(6) $325 million of the 2039 Senior Secured Guaranteed Notes matures in June 2039. The interest rate on the 2039 Senior Secured Guaranteed Notes as of June 30, 2019 was 4.77%. See note 10 of the condensed consolidated financial statements for further discussion of the 2039 Senior Secured Guaranteed Notes.

(7) $300 million of the 2048 Senior Notes matures in March 2048. The interest rate on the 2048 Senior Notes as of June 30, 2019 was 5.00%. See note 10 of the condensed consolidated financial statements for further discussion of the 2048 Senior Notes.

(8) Operating lease obligations excludes $135.9 million of other operating expenses.

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 contractual commitments 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 to our Managing Partners and Contributing Partners 85% of any tax savings received by APO Corp. from our step-up in tax basis. The tax savings achieved may not ensure that we have sufficient cash available to pay this liability and we might be required to incur additional debt to satisfy this liability.

(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.

(iii) In connection with the Stone Tower acquisition, the Company agreed to pay the former owners of Stone Tower a specified percentage of any future performance fees earned from certain of the Stone Tower funds, CLOs and strategic investment accounts. This contingent consideration liability is remeasured to fair value at each reporting period until the obligations are satisfied. See note 15 to the condensed consolidated financial statements for further information regarding the contingent consideration liability.

(iv) Commitments from certain of our subsidiaries to contribute to the funds we manage and certain related parties.

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Commitments

Certain of our management companies and general partners are committed to contribute to the funds we manage and certain related parties. While a small percentage of these amounts are funded by us, the majority of these amounts have historically been funded by our related parties, including certain of our employees and certain Apollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its related parties, the percentage of total fund commitments of Apollo and its related parties, the commitment and remaining commitment amounts of Apollo only (excluding related parties), and the percentage of total fund commitments of Apollo only (excluding related parties) for each credit, private equity and real assets fund as of June 30, 2019 as follows ($ in millions):

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Fund	Apollo and Related Party Commitments		% of Total Fund Commitments		Apollo Only (Excluding Related Party) Commitments		Apollo Only (Excluding Related Party) % of Total Fund Commitments		Apollo and Related Party Remaining Commitments		Apollo Only (Excluding Related Party) Remaining Commitments
Credit:
Apollo Credit Opportunity Fund II, L.P. (“COF II”)	$	30.5	1.93	%	$	23.4	1.48	%	$	0.8	$	0.6
Apollo Credit Opportunity Fund I, L.P. (“COF I”)	449.2		30.26		29.7		2.00		237.1		4.2
FCI III	224.3		11.76		0.1		0.01		112.6		0.1
Financial Credit Investment II, L.P. (“FCI II”)	245.3		15.77		—		—		116.3		—
FCI I	151.3		27.07		—		—		—		—
SCRF IV	416.1		16.63		33.1		1.32		131.6		10.5
MidCap	1,672.9		80.23		110.9		5.32		74.0		31.0
Apollo Moultrie Credit Fund, L.P.	400.0		100.00		—		—		155.0		—
Apollo/Palmetto Short-Maturity Loan Portfolio, L.P.	300.0		100.00		—		—		—		—
Apollo Accord Master Fund II, L.P.	116.6		24.01		11.6		2.39		20.4		7.6
Apollo Accord Master Fund III, L.P.	212.1		32.86		0.1		0.02		212.1		0.1
Athora(1)	673.9		27.37		142.2		5.77		467.5		98.6
Other Credit	3,442.5		Various		150.9		Various		1,583.0		68.2
Private Equity:
Fund IX	1,849.5		7.48		468.7		1.90		1,691.9		433.6
Fund VIII	1,543.5		8.40		396.4		2.16		262.6		68.5
Fund VII	467.2		3.18		178.1		1.21		60.9		23.2
Fund VI	246.3		2.43		6.1		0.06		9.7		0.2
Fund V	100.0		2.67		0.5		0.01		6.2		—
Fund IV	100.0		2.78		0.2		0.01		0.5		—
AION	151.5		18.34		50.0		6.05		19.3		6.2
ANRP I	426.1		32.21		10.1		0.76		59.7		1.1
ANRP II	561.2		16.25		26.0		0.75		226.2		9.9
ANRP III	648.1		49.71		28.1		2.16		648.1		28.1
A.A. Mortgage Opportunities, L.P.	625.0		80.31		—		—		261.6		—
Apollo Rose, L.P.	299.1		100.00		—		—		—		—
Apollo Rose II, L.P.	887.1		51.01		33.0		1.9		394.6		14.9
Champ, L.P.	191.6		78.25		26.4		10.8		7.1		1.1
Apollo Royalties Management, LLC	108.6		100.00		—		—		—		—
Apollo Hybrid Value Fund, L.P.	834.2		25.76		89.2		2.75		725.1		77.5
COF III	358.1		10.45		83.1		2.43		76.9		19.0
Apollo Asia Private Credit Fund, L.P.	126.5		55.12		0.1		0.04		31.9		—
AEOF	125.5		12.01		25.5		2.44		92.6		18.8
Other Private Equity	684.3		Various		134.4		Various		206.1		77.9
Real Assets:
U.S. RE Fund II(2)	717.6		58.18		4.7		0.39		338.7		1.8
U.S. RE Fund I(2)	434.3		66.79		16.5		2.53		81.7		2.7
CPI Capital Partners Europe, L.P.(1)	6.2		0.47		—		—		—		—
CPI Capital Partners Asia Pacific, L.P.	6.9		0.53		0.5		0.04		0.1		—
Asia RE Fund(2)	376.9		53.12		8.4		1.18		246.9		5.9
Infrastructure Equity Fund(3)	322.8		35.97		13.1		1.46		81.3		2.7
EPF III(1)	609.4		13.45		72.6		1.60		332.3		40.7
EPF II(1)	411.2		11.91		60.2		1.74		93.1		18.1
Apollo European Principal Finance Fund, L.P. (“EPF I”)(1)	305.5		20.74		20.1		1.37		49.5		4.6
Other Real Assets	577.4		Various		1.6		Various		51.8		0.1
Other:
Apollo SPN Investments I, L.P.	14.6		0.32		14.6		0.32		9.2		9.2
Total	$	22,450.9			$	2,270.2			$	9,176.0	$	1,086.7

(1) Apollo’s commitment in these funds is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.14 as of June 30, 2019.

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(2) Figures for U.S. RE Fund I include base, additional, and co-investment commitments. A co-investment vehicle within U.S. RE Fund I is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.27 as of June 30, 2019. Figures for U.S. RE Fund II and Asia RE Fund include co-investment commitments.

(3) Figures for Apollo Infrastructure Equity Fund include Apollo Infra Equity US Fund, L.P. and Apollo Infra Equity International Fund, L.P. commitments.

On April 30, 2015, Apollo entered into the AAA Investments Credit Agreement (see note 14 of our condensed consolidated financial statements for further disclosure regarding this facility). The 2018 AMH Credit Facility, 2024 Senior Notes, 2026 Senior Notes, 2029 Senior Notes, 2039 Senior Secured Guaranteed Notes and 2048 Senior Notes will have future impacts on our cash uses. See note 10 of our condensed consolidated financial statements for information regarding the Company’s debt arrangements.

Contingent Obligation—Performance fees with respect to certain credit and private equity funds and real assets funds is subject to reversal in the event of future losses to the extent of the cumulative performance fees recognized in income to date. See note 15 of our condensed consolidated financial statements for a description of our contingent obligation.

One of the Company’s subsidiaries, AGS, provides underwriting commitments in connection with securities offerings to the portfolio companies of the funds Apollo manages. As of June 30, 2019, there were no underwriting commitments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our predominant exposure to market risk is related to our role as investment manager and general partner for our funds and the sensitivity to movements in the fair value of their investments and resulting impact on performance fees and management fee revenues. Our direct investments in the funds also expose us to market risk whereby movements in the fair values of the underlying investments will increase or decrease both net gains (losses) from investment activities and income (loss) from equity method investments. For a discussion of the impact of market risk factors on our financial instruments see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Investments, at Fair Value.”

The fair value of our financial assets and liabilities of our funds may fluctuate in response to changes in the value of investments, foreign exchange, commodities and interest rates. The net effect of these fair value changes impacts the gains and losses from investments in our condensed consolidated statements 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 1,000 investors in Apollo’s active credit, private equity and real assets funds, no individual investor accounts for more than 10% of the total committed capital 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 and analyze data, monitor investments and markets in detail, and constantly strive to better quantify, qualify and circumscribe relevant risks.

Each risk management process is subject to our overall risk tolerance and philosophy and our enterprise-wide risk management framework. This framework includes identifying, measuring and managing market, credit and operational risks at each segment, as well as at the fund and Company level.

Each segment runs its own investment and risk management process subject to our overall risk tolerance and philosophy:

• Our credit and real assets funds continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditional and customized risk management metrics to analyze risk related to specific assets or portfolios, as well as, fund-wide risks.

• The investment process of our private equity funds involves a detailed analysis of potential acquisitions, and investment management teams assigned to monitor the strategic development, financing and capital deployment decisions of each portfolio investment.

At the direction of the Company’s manager, the Company has established a risk committee comprised of various members of senior management including the Company’s Chief Financial Officer, Chief Legal Officer, and the Company’s Chief Risk Officer. The risk committee is tasked with assisting the Company’s manager in monitoring and managing enterprise-wide risk. The risk committee generally meets on a quarterly basis and reports to senior management of the Company’s manager at such times as the committee deems appropriate and at least on an annual basis.

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On at least a monthly basis, the Company’s risk department provides a summary analysis of fund level market and credit risk to the portfolio managers of the Company’s funds and the heads of the various business segments. On a periodic basis, the Company’s risk department presents a consolidated summary analysis of fund level market and credit risk to the Company’s risk committee. In addition, the Company’s Chief Risk Officer reviews specific investments from the perspective of risk mitigation and discusses such analysis with the Company’s risk committee and/or the executive committee of the Company’s manager at such times as the Company’s Chief Risk Officer determines such discussions are warranted. On an annual basis, the Company’s Chief Risk Officer provides senior management of the Company’s manager with a comprehensive overview of risk management along with an update on current and future risk initiatives.

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;

• the gross, net or adjusted asset value of an Apollo fund, as defined; or

• as otherwise defined in the respective agreements.

Management fees could be impacted by changes in market risk factors and management could consider an investment permanently impaired as a result of (i) such market risk factors causing changes in invested capital or in market values to below cost, in the case of certain credit funds and our private equity 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 are based on NAV is dependent on the number and types of our funds in existence and the current stage of each fund’s life cycle.

Impact on Advisory and Transaction Fees—We earn transaction fees relating to the negotiation of credit, private equity and real assets transactions 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, dispositions, or follow-on transactions, may be earned. Management Fee Offsets and any broken deal costs, if applicable, are reflected as a reduction to advisory and transaction fees. Advisory and transaction fees will be impacted by changes in market risk factors to the extent that they limit our opportunities to engage in credit, private equity and real assets transactions or impair our ability to consummate such transactions. The impact of changes in market risk factors on advisory and transaction fees is not readily predicted or estimated.

Impact on Performance Fees—We earn performance fees from our funds as a result of such funds achieving specified performance criteria. Our performance fees will be impacted by changes in market risk factors. However, several major factors will influence the degree of impact:

• the performance criteria for each individual fund in relation to how that fund’s results of operations are impacted by changes in market 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’ performance fee distributions are subject to contingent repayment.

As a result, the impact of changes in market risk factors on performance fees will vary widely from fund to fund. The impact is heavily dependent on the prior and future performance of each fund, and therefore is not readily predicted or estimated.

Market Risk—We are directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values of assets and liabilities or revenues and expenses will be adversely affected by changes in market conditions. Market risk is inherent in each of our investments and activities, including equity investments, loans, short-term borrowings, long-term debt, hedging instruments, credit default swaps and derivatives. Just a few of the market conditions that may shift from time to time, thereby exposing us to market risk, include fluctuations in interest and currency exchange rates, equity prices, changes in the implied volatility of interest rates and price deterioration. Volatility in debt and equity markets can impact our pace of capital deployment, the timing of receipt of transaction fee revenues and the timing of realizations. These market conditions could have an impact on the value of fund investments and rates of return. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse effects on our results from operations and our overall financial condition. We monitor market risk using certain strategies and methodologies which management evaluates periodically for appropriateness. We intend to continue to monitor this risk going forward and continue to monitor our exposure to all market factors.

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Interest Rate Risk—Interest rate risk represents exposure we and our funds have to instruments whose values vary with the change in interest rates. These instruments include, but are not limited to, loans, borrowings, investments in interest bearing securities and derivative instruments. We may seek to mitigate risks associated with the exposures by having our funds take offsetting positions in derivative contracts. Hedging instruments allow us to seek to mitigate risks by reducing the effect of movements in the level of interest rates, changes in the shape of the yield curve, as well as, changes in interest rate volatility. Hedging instruments used to mitigate these risks may include related derivatives such as options, futures and swaps.

Credit Risk—Certain of our funds are subject to certain inherent risks through their investments.

Certain of our entities invest substantially all of their excess cash in open-end money market funds and money market demand accounts, which are included in cash and cash equivalents. The money market funds invest primarily in government securities and other short-term, highly liquid instruments with a low risk of loss. We continually monitor the funds’ performance in order to manage any risk associated with these investments.

Certain of our funds hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We seek to minimize our risk exposure by limiting the counterparties with which our funds enter into contracts to banks and investment banks who meet established credit and capital guidelines. As of June 30, 2019, we do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.

Foreign Exchange Risk—Foreign exchange risk represents exposures our funds have to changes in the values of current fund holdings and future cash flows denominated in other currencies and investments in non-U.S. companies. The types of investments exposed to this risk include investments in foreign subsidiaries, foreign currency-denominated loans, foreign currency-denominated transactions, and various foreign exchange derivative instruments whose values fluctuate with changes in currency exchange rates or foreign interest rates. Instruments used to mitigate this risk are foreign exchange options, currency swaps, futures and forwards. These instruments may be used to help insulate our funds against losses that may arise due to volatile movements in foreign exchange rates and/or interest rates.

In our capacity as investment manager of the funds we manage, we continuously monitor a variety of markets for attractive opportunities for managing risk. For example, certain of the funds we manage may put in place foreign exchange hedges or borrowings with respect to certain foreign currency denominated investments to provide a hedge against foreign exchange exposure.

Non-U.S. Operations—We conduct business throughout the world and are continuing to expand into foreign markets. We currently have offices outside the U.S. in Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong, Shanghai and Tokyo and have been strategically growing our international presence. Our fund investments and our revenues are primarily derived from our U.S. operations. With respect to our non-U.S. operations, we are subject to risk of loss from currency fluctuations, social instability, changes in governmental policies or policies of central banks, expropriation, nationalization, unfavorable political and diplomatic developments and changes in legislation relating to non-U.S. ownership. Our funds also invest in the securities of companies which are located in non-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 specific non-U.S. investments.

ITEM 4. CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required 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 certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures 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 Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose

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in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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 Exchange Act) occurred during our most recent quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See note 15 to our condensed consolidated financial statements for a summary of the Company’s legal proceedings.

ITEM 1A.    RISK FACTORS

For a discussion of our potential risks and uncertainties, see the information under the heading "Risk Factors" in our 2018 Annual Report, which is accessible on the Securities and Exchange Commission's website at www.sec.gov. On May 2, 2019, we announced our decision to convert from a publicly traded partnership to a corporation (the “Corporation” and such conversion, the “Conversion”), which we anticipate will become effective during the third quarter of 2019 (the “Effective Time”). At the Effective Time, (i) each Class A share that is outstanding immediately prior to the Effective Time shall be converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock of the Corporation (“Class A Common Stock”), (ii) each Class B share that is outstanding immediately prior to the Effective Time shall be converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock of the Corporation (“Class B Common Stock”), (iii) each Series A Preferred share that is outstanding immediately prior to the Effective Time shall be converted into one issued and outstanding, fully paid and nonassessable share of Series A preferred stock of the Corporation, (iv) each Series B preferred share that is outstanding immediately prior to the Effective Time shall be converted into one issued and outstanding, fully paid and nonassessable share of Series B preferred stock of the Corporation, and (v) all of our manager’s rights in the Company pursuant to the Third Amended and Restated Limited Liability Company Agreement, dated as of March 19, 2018 shall be exchanged for one issued and outstanding, fully paid and nonassessable share of Class C common stock of the Corporation (“Class C Common Stock”). In addition to the risks identified in our 2018 Annual Report, the following risks have been identified related to the expected conversion.

Following the Conversion, we expect to pay more corporate income taxes than we would have as a limited liability company taxed as a partnership for U.S. federal income tax purposes.

On May 2, 2019, we announced our decision to convert Apollo Global Management, LLC from a Delaware limited liability company to a Delaware corporation. We anticipate that the Conversion will be effective during the third quarter of 2019. Following the Conversion, all of the net income attributable to the Corporation will be subject to U.S. federal (and state and local) corporate income taxes, which we anticipate will have a dilutive impact to Distributable Earnings per share of Class A Common Stock and net income attributable to the Corporation and reduce the amount of cash available for dividends to the holders of the Corporation’s Class A Common Stock (the “Class A Common Stockholders”), although this dilution should initially be mitigated by a partial tax basis step-up related to the Conversion. As a result of the tax basis step-up, we anticipate that the dilutive impact to Distributable Earnings from the Conversion will be approximately 7% to 9% over a cycle, as realizations occur. Our estimates of the dilutive impact of the Conversion to after-tax earnings are presented for illustrative purposes only and are subject to various risks and uncertainties. Actual results could differ materially from these estimates. Among other things, these estimates are based on the currently enacted maximum U.S. federal corporate income tax rate of 21%. This rate may increase in the future, which would cause us to pay more corporate income taxes than currently anticipated.

Following the Conversion, because all of the net income attributable to the Corporation will be subject to corporate income taxes, we expect the amount of the Corporation’s cash tax savings from future exchanges of Apollo Operating Group units for shares of Class A Common Stock to increase as compared to the cash tax savings historically realized by the Company from such exchanges for Class A Common Shares. As a result, we expect the amount the Corporation will be required to pay under the tax receivable agreement (i.e., 85% of cash tax savings it realizes) will in the aggregate, over time, be higher for exchanges following the Conversion. This would similarly have the effect of increasing the amount of any early termination payment or the amounts due upon the occurrence of an acceleration event, which are determined in part by reference to amounts payable in respect of future exchanges.

Following the Conversion, the declaration, payment and determination of dividends to our Class A Common Stockholders will be at the sole discretion of the board of directors of the Corporation (the “New Board”), and our dividend policy may be

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changed at any time. Because of additional taxes to be paid by us as a corporation, the net income available for dividends to the Corporation’s Class A Common Stockholders, if declared, will be lower than it would otherwise have been in prior periods as a limited liability company (based on the same level of pre-tax income). Our distribution policy as a limited liability company has been to distribute to the holders of our Class A shares substantially all of our Distributable Earnings attributable to the holders of Class A shares, in excess of amounts determined by the manager to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our businesses and our funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future distributions to the holders of our Class A shares for any ensuing quarter, and we currently do not anticipate any change to our dividend policy. For U.S. federal income tax purposes, any dividends we pay following the Conversion generally will be treated as qualified dividend income (generally taxable to U.S. individual stockholders at capital gain rates) paid by a domestic corporation to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Following the Conversion, none of our income, gains, losses, deductions or credits will flow through to the Class A Common Stockholders for U.S. federal income tax purposes.

Although we believe that the Conversion will, among other things, simplify our tax reporting for stockholders, expand our stockholder base, and increase the liquidity of the Corporation’s Class A Common Stock, we may fail to realize all or some of the anticipated benefits of the Conversion, or those benefits may take longer to realize than we expected, which could contribute to a decline in the trading price of our Class A shares or, after the Conversion, the Class A Common Stock. Moreover, there can be no assurance that the anticipated benefits of the Conversion will over time offset the cost of the Conversion.

We may fail to realize the anticipated benefits of the Conversion or those benefits may take longer to realize than expected or not offset the costs of the Conversion, which could have a material and adverse impact on the trading price of our securities.

We believe that the Conversion will, among other things, make it significantly easier for both domestic and international investors to own stock in the Corporation, expand our global investor base and drive greater value for all of our shareholders over time. However, the level of investor interest in the Class A Common Stock may not meet our expectations. For example, benchmark stock indices may change their eligibility requirements in a manner that is adverse to us or otherwise determine not to include the Class A Common Stock. Moreover, even if we succeed in having our shares included in key stock indices and simplify our tax structure and reporting, this may not result in the increased demand for our securities that we anticipate. Consequently, we may fail to realize the anticipated benefits of the Conversion or those benefits may take longer to realize than we expect. Moreover, there can be no assurance that the anticipated benefits of the Conversion will offset its costs, which could be greater than we expect, particularly if there were to be an increase in the U.S. federal corporate income tax rate. Our failure to achieve the anticipated benefits of the Conversion at all or in a timely manner, or a failure of any benefits realized to offset their costs, could have a material and adverse impact on the trading price of our securities.

Because the Class A Common Stock generally will have limited voting rights as expressly provided in the certificate of incorporation of the Corporation (the “Certification of Incorporation”) or required by the General Corporation Law of the State of Delaware (“the DGCL”) or the rules of the New York Stock Exchange (“NYSE”), we will not be required to comply with certain provisions of U.S. securities laws relating to proxy statements, shareholder proposals and other matters.

Following the Conversion, the Class A Common Stock will have limited voting rights as expressly provided in the Certificate of Incorporation or required by the DGCL or the rules of the NYSE following the Conversion. As a result, practically all matters submitted to stockholders will be decided by the vote of the holders of the Class C Common Stock (the “Class C Common Stockholder”). Our Certificate of Incorporation provides that, for so long as there is a Class C Stockholder and the Apollo Group (as such term will be defined in the Certificate of Incorporation) beneficially owns, in the aggregate, 10% or more of the voting power of the Corporation, holders of the Class A Common Stock (voting together with the holder of the Class B Common Stock as a single class) shall, unless otherwise required by the DGCL, have the right to vote only with respect to (i) certain sales of all or substantially all of our assets, (ii) a merger, consolidation or other business combination and (iii) certain amendments to our Certificate of Incorporation or the bylaws of the Corporation (the “Bylaws”). Our Certificate of Incorporation also provides that, for so long as there is a Class C Stockholder and the Apollo Group beneficially owns, in the aggregate, 10% or more of the voting power of the Corporation, the number of authorized shares of the Class A Common Stock may be increased or decreased solely with the approval of the holder of the Class C Common Stock. Our Certificate of Incorporation also provides that, for so long as there is a Class C Stockholder and the Apollo Group beneficially owns, in the aggregate, 10% or more of the Voting Power of the Corporation, the Class C Stockholder shall nominate and elect all directors serving on the New Board, set the total number of directors which shall constitute the New Board and fill any vacancies or newly created directorships on the New Board. As a result, holders of the Class A Common Stock will have a very limited ability to influence stockholder decisions.

The Bylaws will provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain legal actions between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum

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viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees, and the enforceability of the exclusive forum provision may be subject to uncertainty.

Article VII of the Bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees or stockholders to us or our stockholders or any current or former member or fiduciary of the Company to the Company or the Company’s members; (c) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or (d) any action asserting a claim related to or involving the Corporation that is governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations. The exclusive forum provision also provides that it will not apply to claims arising under the Securities Act, the Exchange Act or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. Article VII will provide that any person or entity who acquires an interest in the capital stock of the Corporation will be deemed to have notice of and consented to the provisions of Article VII. Stockholders cannot waive, and will not be deemed to have waived under the exclusive forum provision, the Corporation’s compliance with the federal securities laws and the rules and regulations thereunder. Although we believe this exclusive forum provision will benefit us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, this exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Further, in the event a court finds the exclusive forum provision contained in the Bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES

On May 7, 2019,and May 17, 2019, we issued 202,080 and 107,338 Class A shares, respectively, net of taxes to Apollo Management Holdings, L.P., a subsidiary of Apollo Global Management, LLC, in connection with issuances of shares to participants in the Equity Plan for an aggregate purchase price of $6.6 million and $3.5 million, respectively. The issuance was exempt from registration under the Securities Act in accordance with Section 4(a)(2) and Rule 506(b) thereof, as transactions by the issuer not involving a public offering. We determined that the purchaser of Class A shares in the transactions, Apollo Management Holdings, L.P., was an accredited investor.

Issuer Purchases of Equity Securities

The following table sets forth purchases of our Class A shares made by us or on our behalf during the fiscal quarter ended June 30, 2019.

Period	Number of Class A Shares Purchased(1)	Average Price Paid per Share		Class A Shares Purchased as Part of Publicly Announced Plans or Programs(2)	Approximate Dollar Value of Class A Shares that May be Purchased Under the Plan or Programs
April 1, 2019 through April 30, 2019	728,342	$	28.62	728,342	$	235,691,769
May 1, 2019 through May 31, 2019	398,601	32.50		254,896	227,407,649
June 1, 2019 through June 30, 2019	—	—		—	227,407,649
Total	1,126,943			983,238

(1) Certain Apollo employees receive a portion of the profit sharing proceeds of certain funds in the form of (a) restricted Class A shares of AGM that they are required to purchase with such proceeds or (b) RSUs, in each case which equity-based awards generally vest over three years. These equity-based awards are granted under the Company's Equity Plan. To prevent dilution on account of these awards, Apollo may, in its discretion, repurchase Class A shares on the open market and retire them. During the three months ended June 30, 2019, we repurchased 143,705 Class A shares at an average price paid per share of $32.50 in open-market transactions not pursuant to a publicly-

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announced repurchase plan or program on account of these awards. See note 13 to the condensed consolidated financial statements for further information on Class A shares.

(2) Pursuant to a publicly announced share repurchase program, the Company is authorized to repurchase up to $500 million in the aggregate of its Class A shares, including through the repurchase of outstanding Class A shares and through a reduction of Class A shares to be issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards granted under the Equity Plan (or any successor equity plan thereto). Class A shares may be repurchased from time to time in open market transactions, in privately negotiated transactions, pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or otherwise, with the size and timing of these repurchases depending on legal requirements, price, market and economic conditions and other factors. The Company is not obligated under the terms of the program to repurchase any of its Class A shares. The repurchase program has no expiration date and may be suspended or terminated by the Company at any time without prior notice. Class A shares repurchased as part of this program are canceled by the Company. Reductions of Class A shares issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards granted under the Equity Plan are not included in the table.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

Exhibit Number	Exhibit Description
3.1	Certificate of Formation of Apollo Global Management, LLC (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
3.2	Third Amended and Restated Limited Liability Company Agreement of Apollo Global Management, LLC dated March 19, 2018 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 19, 2018 (File No. 001-35107)).
4.1	Specimen Certificate evidencing the Registrant’s Class A shares (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
4.2	Indenture dated as of May 30, 2014, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014 (File No. 001-35107)).
4.3	First Supplemental Indenture dated as of May 30, 2014, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014 (File No. 001-35107)).
4.4	Form of 4.000% Senior Note due 2024 (included in Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014 (File No. 001-35107), which is incorporated by reference).
4.5	Second Supplemental Indenture dated as of January 30, 2015, among Apollo Management Holdings, L.P., the Guarantors party thereto, Apollo Principal Holdings X, L.P. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.5 to the Registrant’s Form 10-K for the period ended December 31, 2014 (File No. 001-35107)).
4.6	Third Supplemental Indenture dated as of February 1, 2016, among Apollo Management Holdings, L.P., the Guarantors party thereto, Apollo Principal Holdings XI, LLC and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.6 to the Registrant’s Form 10-Q for the period ended March 31, 2016 (File No. 001-35107)).
4.7	Fourth Supplemental Indenture dated as of May 27, 2016, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 27, 2016 (File No. 001-35107)).
4.8	Form of 4.400% Senior Note due 2026 (included in Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 27, 2016 (File No. 001-35107), which is incorporated by reference).
4.9	Fifth Supplemental Indenture dated as of April 13, 2017, among Apollo Management Holdings, L.P., the Guarantors party thereto, Apollo Principal Holdings XII, L.P. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.8 to the Registrant’s Form 10-Q for the period ended March 31, 2017 (File No. 001-35107)).

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Exhibit Number	Exhibit Description
4.10	Sixth Supplemental Indenture dated as of March 15, 2018, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed with the Securities and Exchange Commission on March 15, 2018 (File No. 001-35107)).
4.11	Form of 5.000% Senior Note due 2048 (included in Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 15, 2018 (File No. 001-35107), which is incorporated by reference).
4.12	Seventh Supplemental Indenture dated as of February 7, 2019, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2019 (File No. 001-35107)).
4.13	Form of 4.872% Senior Note due 2029 (included in Exhibit 4.1 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2019 (File No. 001-35107), which is incorporated by reference).
4.14	Form of 6.375% Series A Preferred Shares Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 7, 2017 (File No. 001-35107)).
4.15	Form of 6.375% Series B Preferred Shares Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 19, 2018 (File No. 001-35107)).
4.16	Eighth Supplemental Indenture dated as of June 11, 2019, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed with the Securities and Exchange Commission on June 11, 2019 (File No. 001-35107)).
*4.17	Indenture dated as of June 10, 2019, among APH Finance I, LLC, APH Finance 2, LLC, APH Finance 3, LLC and U.S. Bank National Association, as trustee.
*10.1	Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan.
*10.2	Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan for Estate Planning Vehicles.
10.3	Form of Director Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Form S-8 filed with the Securities and Exchange Commission on July 25, 2019 (File No. 333-232797)).
10.4	Form of Incentive Program Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form S-8 filed with the Securities and Exchange Commission on July 25, 2019 (File No. 333-232797)).
10.5	Form of Performance Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form S-8 filed with the Securities and Exchange Commission on July 25, 2019 (File No. 333-232797)).

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Exhibit Number	Exhibit Description
10.6	Form of Share Award Grant Notice under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Form S-8 filed with the Securities and Exchange Commission on July 25, 2019 (File No. 333-232797)).
10.7	Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Form S-8 filed with the Securities and Exchange Commission on July 25, 2019 (File No. 333-232797)).
10.8	Form of Restricted Share Award Grant Notice under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Form S-8 filed with the Securities and Exchange Commission on July 25, 2019 (File No. 333-232797)).
*10.9	Form of Restricted Share Award Grant Notice under the Apollo Global Management, LLC 2019 Omnibus Equity Incentive Plan for Estate Planning Vehicles.
*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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
*101.SCH	XBRL Taxonomy Extension Schema 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.

+ Management contract or compensatory plan or arrangement.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents

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were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Apollo Global Management, LLC
		(Registrant)
Date: August 6, 2019	By:	/s/ Martin Kelly
		Name:	Martin Kelly
		Title:	Chief Financial Officer and Co-Chief Operating Officer (principal financial officer and authorized signatory)

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