APO-12.31.2014 10K
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  
 
Form 10-K  
 
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014 OR
o
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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Class A shares representing limited liability company interests
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
 
 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities. Yes x  No  ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  ¨    No   x
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 x  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 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 and post such files).    Yes  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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
 
T
  
Accelerated filer
  
o
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
  
Smaller reporting company
  
o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  T

The aggregate market value of the Class A shares of the Registrant held by non-affiliates as of June 30, 2014 was approximately $4,303.2 million, which includes non-voting Class A shares with a value of approximately $1,246.5 million.
As of February 26, 2015 there were 167,899,419 Class A shares and 1 Class B share outstanding.



Table of Contents

 
TABLE OF CONTENTS
 
 
 
Page
PART I
 
 
 
 
 
ITEM 1.
BUSINESS
 
 
 
ITEM 1A.
RISK FACTORS
 
 
 
ITEM 1B.
UNRESOLVED STAFF COMMENTS
 
 
 
ITEM 2.
PROPERTIES
 
 
 
ITEM 3.
LEGAL PROCEEDINGS
 
 
 
ITEM 4.
MINE SAFETY DISCLOSURES
 
 
 
PART II
 
 
 
 
 
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 
 
ITEM 6.
SELECTED FINANCIAL DATA
 
 
 
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
 
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 
 
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
 
ITEM 8A.
UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION
 
 
 
ITEM 9.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
 
 
ITEM 9A.
CONTROLS AND PROCEDURES
 
 
 
ITEM 9B.
OTHER INFORMATION
 
 
 
PART III
 
 
 
 
 
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 
 
ITEM 11.
EXECUTIVE COMPENSATION
 
 
 
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
 
 
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
 
 
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 
 
PART IV
 
 
 
 
 
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
 
 



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Forward-Looking Statements
This 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 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 private equity, credit or real estate funds, market conditions generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our 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 this report; as such factors may be updated from time to time in our periodic filings with the United States Securities and Exchange Commission (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 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, 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 services;
“Apollo Operating Group” refers to (i) the limited partnerships through which our Managing Partners currently operate our businesses and (ii) one or more limited partnerships formed for the purpose of, among other activities, holding certain of our gains or losses on our principal investments in the funds, which we refer to as our "principal investments";
“Assets Under Management,” or “AUM,” refers to the assets we manage for the funds, partnerships and accounts for which we provide investment management services, including, without limitation, capital which such funds, partnerships and accounts have the right to call from investors pursuant to capital commitments. Our AUM equals the sum of:
(i)
the fair value of the investments of the private equity funds, partnerships and accounts we manage plus the capital which such funds, partnerships and accounts are entitled to call from investors pursuant to capital commitments;
(ii)
the net asset value, or “NAV,” of the credit funds, partnerships and accounts for which we provide investment management services, other than certain collateralized loan obligations (“CLOs”) and collateralized debt obligations (“CDOs”), which have a fee generating basis other than the mark-to-market value of the underlying assets, plus used or available leverage and/or capital which such funds, partnerships and accounts are entitled to call from investors pursuant to capital commitments;
(iii)
the gross asset value or net asset value of the real estate funds, partnerships and accounts we manage, and the structured portfolio company investments of the funds, partnerships and accounts we manage, which includes the leverage used by such structured portfolio company investments;
(iv)
the incremental value associated with the reinsurance investments of the portfolio company assets that we manage; and
(v)
the fair value of any other assets that we manage for the funds, partnerships and accounts for which we provide investment management services, plus unused credit facilities,

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including capital commitments to such funds, partnerships and accounts for investments that may require pre-qualification 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 no or nominal 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;
"Fee-Generating AUM" consists of assets we manage for the funds, partnerships and accounts for which we provide investment management services and on which we earn management fees or, monitoring fees pursuant to management or other fee agreements on a basis that varies among the Apollo funds, partnerships and accounts we manage. 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 investments of the funds, partnerships and accounts we manage are generally based on the total value of such structured portfolio investments, which normally include leverage, less any portion of such total value that is already considered in Fee-Generating AUM.
"Non-Fee Generating AUM" consists of assets that do not produce management fees or monitoring fees. These assets generally consist of the following:
(i)
fair value above invested capital for those funds that earn management fees based on invested capital;
(ii)
net asset values related to general partner and co-investment ownership;
(iii)
unused credit facilities;
(iv)
available commitments on those funds that generate management fees on invested capital;
(v)
structured portfolio company investments that do not generate monitoring fees; and
(vi)
the difference between gross asset and net asset value for those funds that earn management fees based on net asset value.
"Carry Eligible AUM" refers to the AUM that may eventually produce carried interest income. All funds for which we are
entitled to receive a carried interest income allocation are included in Carry Eligible AUM, which consists of the following:

(i)
"Carry Generating AUM," which refers to funds' invested capital that is currently above its hurdle rate or preferred return, and the funds' profit is allocated to the general partner in accordance with the applicable limited partnership agreements or other governing agreements;

(ii)
"AUM Not Currently Generating Carry," which refers to funds' invested capital that is currently below its hurdle rate or preferred return; and

(iii)
"Uninvested Carry Eligible AUM," which refers to available capital for investment or reinvestment subject to the provisions of applicable limited partnership agreements or other governing agreements that are not currently part of the NAV or fair value of investments that may eventually produce carried interest income, which would be allocated to 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 Non-Fee Generating AUM combined with Fee-Generating 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 carried interest income;

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“carried interest,” “carried interest income,” 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;
“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;
“feeder funds” refer to funds that operate by placing substantially all of their assets in, and conducting substantially all of their investment and trading activities through, a master fund, which is designed to facilitate collective investment by the participating feeder funds. With respect to certain of our funds that are organized in a master-feeder structure, the feeder funds are permitted to make investments outside the master fund when deemed appropriate by the fund’s investment manager;
“gross IRR” of a private equity fund represents the cumulative investment-related cash flows in the fund itself (and not the investors in the fund) on the basis of the actual timing of investment inflows and outflows (for unrealized investments assuming disposition on December 31, 2014 or other date specified) aggregated on a gross basis quarterly, and the return is annualized and compounded before management fees, carried interest and certain other fund 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;
“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;
"IRS" refers to the Internal Revenue Service;
“Managing Partners” refer to Messrs. Leon Black, Joshua Harris and Marc Rowan collectively and, when used in reference to holdings of interests in Apollo or Holdings, includes certain related parties of such individuals;
“net IRR” of a private equity fund means the cumulative investment-related cash flows to the fund itself (and not to the investors in the fund) on the basis of the actual timing of cash inflows and outflows aggregated on a quarterly basis, less expenses (management fees, carried interest and certain other fund expenses). For the calculation of Net IRR the realized and estimated unrealized value is adjusted such that a percentage generally of up to 20.0% of the unrealized gain is allocated to the general partner, thereby reducing the balance attributable to fund investors' carried interest all offset to the extent of interest income, and measures returns based on amounts that, if distributed, would be paid to investors of the fund, to the extent that a private equity fund exceeds all requirements detailed within the applicable fund agreement;
“net return” represents the calculated return that is based on month-to-month changes in net assets and is calculated using the returns that have been geometrically linked based on capital contributions, distributions and dividend reinvestments, as applicable;
“our manager” means AGM Management, LLC, a Delaware limited liability company that is controlled by our Managing Partners;
“permanent capital” means (a) assets that are owned by or related to Athene Holding Ltd. ("Athene Holding") and its subsidiaries (collectively, "Athene") and managed by Athene Asset Management, L.P. and (b) assets of publicly traded vehicles managed by Apollo (such as AP Alternative Assets, L.P. ("AAA"), Apollo Investment Corporation ("AINV"), Apollo Commercial Real Estate Finance, Inc. ("ARI"), Apollo Residential Mortgage, Inc. ("AMTG"), 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.
“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; and
“Strategic Investors” refer to the California Public Employees’ Retirement System, or “CalPERS,” and an affiliate of the Abu Dhabi Investment Authority, or “ADIA.”

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PART I.

ITEM 1.     BUSINESS
Overview
Founded in 1990, Apollo is a leading global alternative investment manager. We are a contrarian, value-oriented investment manager in private equity, credit and real estate, with significant distressed investment expertise. We have a flexible mandate in many of the funds we manage 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. As of December 31, 2014, we had total AUM of $160 billion, including approximately $41 billion in private equity, $108 billion in credit and $10 billion in real estate. We have consistently produced attractive long-term investment returns in our private equity funds, generating a 39% gross IRR and a 25% net IRR on a compound annual basis from inception through December 31, 2014.
Apollo is led by our Managing Partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 24 years and lead a team of 845 employees, including 320 investment professionals, as of December 31, 2014. This team possesses a broad range of transaction, financial, managerial and investment skills. We have offices in New York, Los Angeles, Houston, Bethesda, Chicago, Toronto, London, Singapore, Frankfurt, Mumbai, Hong Kong and Luxembourg. We operate our private equity, credit and real estate investment management businesses in a highly integrated manner, which we believe distinguishes us from other alternative investment managers. Our investment professionals frequently collaborate across disciplines. We believe that this collaboration, including market insight, management, banking and consultant contacts, and investment opportunities, enables the funds we manage to more successfully invest across a company’s capital structure. This platform and the depth and experience of our investment team have enabled us to deliver strong long-term investment performance for our funds throughout a range of economic cycles.
Our objective is to achieve superior long-term risk-adjusted returns for our fund investors. The majority of the investment funds we manage are designed to invest capital over periods of seven or more years from inception, thereby allowing us to generate attractive long-term returns throughout economic cycles. Our investment approach is value-oriented, focusing on nine core industries in which we have considerable knowledge and experience, and emphasizing downside protection and the preservation of capital. Our core industry sectors include chemicals, natural resources, consumer and retail, distribution and transportation, financial and business services, manufacturing and industrial, media and cable and leisure, packaging and materials and the satellite and wireless industries. Our contrarian investment management approach is reflected in a number of ways, including:
our willingness to pursue investments in industries that our competitors typically avoid;
the often complex structures employed in some of the investments of our funds, including our willingness to pursue difficult corporate carve-out transactions;
our experience investing during periods of uncertainty or distress in the economy or financial markets when many of our competitors simply reduce their investment activity;
our orientation towards sole sponsored transactions when other firms have opted to partner with others; and
our willingness to undertake transactions that have substantial business, regulatory or legal complexity.
We have applied this investment philosophy to identify what we believe are attractive investment opportunities, deploy capital across the balance sheet of industry leading, or “franchise,” businesses and create value throughout economic cycles.
We rely on our deep industry, credit and financial structuring experience, coupled with our strengths as a value-oriented, distressed investment manager, to deploy significant amounts of new capital within challenging economic environments. Our approach towards investing in distressed situations often requires our funds to purchase particular debt securities as prices are declining, since this allows us both to reduce our funds’ average cost and accumulate sizable positions which may enhance our ability to influence any restructuring plans and maximize the value of our funds’ distressed investments. As a result, our investment approach may produce negative short-term unrealized returns in certain of the funds we manage. However, we concentrate on generating attractive, long-term, risk-adjusted realized returns for our fund investors, and we therefore do not overly depend on short-term results and quarterly fluctuations in the unrealized fair value of the holdings in our funds.
In addition to deploying capital in new investments, we seek to enhance value in the investment portfolios of the funds we manage. We have relied on our transaction, restructuring and credit experience to work proactively with our private equity funds’ portfolio company management teams to identify and execute strategic acquisitions, joint ventures, and other transactions, generate cost and working capital savings, reduce capital expenditures, and optimize capital structures through several means such as debt exchange offers and the purchase of portfolio company debt at discounts to par value.

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We have grown our total AUM at a 30% compound annual growth rate from December 31, 2004 to December 31, 2014. In addition, we benefit from mandates with long-term capital commitments in our private equity, credit and real estate businesses. Our long-lived capital base allows us to invest our funds' assets with a long-term focus, which is an important component in generating attractive returns for our investors. We believe the long-term capital we manage also leaves us well-positioned during economic downturns, when the fundraising environment for alternative assets has historically been more challenging than during periods of economic expansion. As of December 31, 2014, approximately 96% of our AUM was in funds with a contractual life at inception of seven years or more, and 45% of our AUM was considered permanent capital.
We expect our growth in AUM to continue over time by seeking to create value in our funds’ existing private equity, credit and real estate investments, continuing to deploy our funds’ available capital in what we believe are attractive investment opportunities, and raising new funds and investment vehicles as market opportunities present themselves. See “Item 1A. Risk Factors—Risks Related to Our Businesses—We may not be successful in raising new funds or in raising more capital for certain of our funds and may face pressure on fee arrangements of our future funds.”
Our financial results are highly variable, since carried interest (which generally constitutes a large portion of the income that we receive from the funds we manage), and the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. We manage our business and monitor our performance with a focus on long-term performance, an approach that is generally consistent with the investment horizons of the funds we manage and is driven by the investment returns of our funds.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available free of charge on or through our website at www.agm.com as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. The information on our website is not, and shall not be deemed to be, part of this report or incorporated into any other filings we make with the SEC.

Our Businesses

We have three business segments: private equity, credit and real estate. The diagram below summarizes our current businesses:
Apollo Global Management, LLC(1)
 
 
 
 
 
 
 
 
Private Equity
 
Credit
 
Real Estate
 
 
      Distressed Buyouts, Debt and Other Investments
      Corporate Carve-outs
      Opportunistic Buyouts
      Natural Resources

 
      U.S. Performing Credit
      Structured Credit
      Opportunistic Credit
      Non-Performing Loans
      European Credit
• Athene
 
      Opportunistic equity investing in real estate assets, portfolios, companies and platforms
      Commercial real estate debt investments including First Mortgage and Mezzanine Loans and Commercial Mortgage Backed Securities

 
 
AUM: $41.1 billion(2)
 
AUM: $108.4 billion(2)(3)
 
AUM: $9.5 billion(2)(3)(4)
 
 
 
 
 
 
 
 
 
Strategic Investment Accounts(5)
Generally invests in or alongside certain Apollo funds
and other Apollo-sponsored transactions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
All data is as of December 31, 2014.
(2)
See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information.

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(3)
Includes funds that are denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.21 as of December 31, 2014.
(4)
Includes funds that are denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.56 as of December 31, 2014.
(5)
As of December 31, 2014, there was $0.8 billion that had yet to be deployed to an Apollo fund within our three segments.
Private Equity
As a result of our long history of private equity investing across market cycles, we believe we have developed a unique set of skills on which we rely to make new investments and to maximize the value of our existing investments. As an example, through our experience with traditional private equity buyouts, which we also refer to herein as buyout equity, we apply a highly disciplined approach towards structuring and executing transactions, the key tenets of which include seeking to acquire companies at below industry average purchase price multiples, and establishing flexible capital structures with long-term debt maturities and few, if any, financial maintenance covenants.
We believe we have a demonstrated ability to adapt quickly to changing market environments and capitalize on market dislocations through our traditional, distressed and corporate buyout approach. In prior periods of strained financial liquidity and economic recession, our private equity funds have made attractive investments by buying the debt of quality businesses (which we refer to as “classic” distressed debt), converting that debt to equity, seeking to create value through active participation with management and ultimately monetizing the investment. This combination of traditional and corporate buyout investing with a “distressed option” has been deployed through prior economic cycles and has allowed our funds to achieve attractive long-term rates of return in different economic and market environments. In addition, during prior economic downturns we have relied on our restructuring experience and worked closely with our funds’ portfolio companies to seek to maximize the value of our funds’ investments.
We seek to focus on investment opportunities where competition is limited or non-existent. We believe we are often sought out early in the investment process because of our industry expertise, sizable amounts of available long-term capital, willingness to pursue investments in complicated situations and ability to provide value-added advice to portfolio companies regarding operational improvements, acquisitions and strategic direction. We generally prefer sole sponsored transactions and since inception through December 31, 2014, approximately 80% of the investments made by our private equity funds have been proprietary in nature. We believe that by emphasizing our proprietary sources of deal flow, our private equity funds will be able to acquire businesses at more compelling valuations which will ultimately create a more attractive risk/reward proposition.
Distressed Buyouts, Debt and Other Investments
During periods of market dislocation and volatility, we rely on our credit and capital markets expertise to build positions in distressed debt. We target assets with what we believe are high-quality operating businesses but low-quality balance sheets, consistent with our traditional buyout strategies. The distressed securities our funds purchase include bank debt, public high-yield debt and privately held instruments, often with significant downside protection in the form of a senior position in the capital structure, and in certain situations our funds also provide debtor-in-possession financing to companies in bankruptcy. Our investment professionals generate these distressed buyout and debt investment opportunities based on their many years of experience in the debt markets, and as such they are generally proprietary in nature.
We believe distressed buyouts and debt investments represent a highly attractive risk/reward profile. Our funds’ investments in debt securities have generally resulted in two outcomes. The first and preferred potential outcome, which we refer to as a distressed for control investment, is when our funds are successful in taking control of a company through its investment in the distressed debt. By working proactively through the restructuring process, we are often able to equitize the debt position of our funds to create a well-financed buyout which would then typically be held by the fund for a three-to-five year period, similar to other traditional leveraged buyout transactions. The second potential outcome, which we refer to as a non-control distressed investment is when our funds do not gain control of the company. This typically occurs as a result of an increase in the price of the debt investments to levels which are higher than what we consider to be an attractive acquisition valuation. In these instances, we may forgo seeking control, and instead our funds may seek to sell the debt investments over time, typically generating a higher short-term IRR with a lower multiple of invested capital than in the case of a typical distressed for control transaction. We believe that we are a market leader in distressed investing and that this is one of the key areas that differentiates us from our peers.
In addition to our opportunistic, distressed and corporate partner buyout activities, we also maintain the flexibility to deploy capital of our private equity funds in other types of investments such as the creation of new companies, which allows us to leverage our deep industry and distressed expertise and collaborate with experienced management teams to seek to capitalize on market opportunities that we have identified, particularly in asset-intensive industries that are in distress. In these types of situations, we have the ability to establish new entities that can acquire distressed assets at what we believe are attractive valuations without the burden of managing an existing portfolio of legacy assets. Similar to our corporate partner buyout activities, other

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investments, such as the creation of new companies, historically have not represented a large portion of our overall investment activities, although our private equity funds do make these types of investments selectively.
Corporate Carve-outs
Corporate Carve-outs are less market-dependent than distressed investing, but are equally complicated. In these transactions, Apollo funds seek to extract a business that is highly integrated within a larger corporate parent to create a stand-alone business. These are labor-intensive transactions, which we believe require deep industry knowledge, patience and creativity, to unlock value that has largely been overlooked or undermanaged. Importantly, because of the highly negotiated nature of many of these transactions, Apollo believes it is often difficult for the seller to run a competitive process, which ultimately allows Apollo funds to achieve compelling purchase prices.
Opportunistic Buyouts
We have extensive experience completing leveraged buyouts across various market cycles. We take an opportunistic and disciplined approach to these transactions, generally avoiding highly competitive situations in favor of proprietary transactions where there may be opportunities to purchase a company at a discount to prevailing market averages. Oftentimes, we will focus on complex situations such as out-of-favor industries or “broken” (or discontinued) sales processes where the inherent value may be less obvious to potential acquirers. To further alter the risk/reward profile in our funds’ favor, we often focus on certain types of buyouts such as physical asset acquisitions and investments in non-correlated assets where underlying values tend to change in a manner that is independent of broader market movements.
In the case of physical asset acquisitions, our private equity funds seek to acquire physical assets at discounts to where those assets trade in the financial markets, and to lock in that value arbitrage through comprehensive hedging and structural enhancements.
We believe buyouts of non-correlated assets or businesses also represent attractive investments since they are generally less correlated to the broader economy and provide an element of diversification to our funds' overall portfolio of private equity investments.
In the case of more conventional buyouts, we seek investment opportunities where we believe our focus on complexity and sector expertise will provide us with a significant competitive advantage, whereby we can leverage our knowledge and experience from the nine core industries in which our investment professionals have historically invested private equity capital. We believe such knowledge and experience can result in our ability to find attractive opportunities for our funds to acquire portfolio company investments at lower purchase price multiples.
Natural Resources
In 2011, Apollo established Apollo Natural Resources Partners, L.P. (together with its alternative investment vehicles, “ANRP”), and has assembled a team of dedicated investment professionals to capitalize on private equity investment opportunities in the natural resources industry, principally in the metals and mining, energy and select other natural resources sectors.
AP Alternative Assets, L.P.
We also manage AAA, a publicly listed permanent capital vehicle. The sole investment held by AAA is its investment in AAA Investments, L.P. (“AAA Investments”). AAA Investments is the largest equity holder of Athene Holding.
AAA is a Guernsey limited partnership whose partners are comprised of (i) AAA Guernsey Limited (“AAA Guernsey”), which holds 100% of the general partner interests in AAA, and (ii) the holders of common units representing limited partner interests in AAA. The common units are non-voting and are listed on NYSE Euronext in Amsterdam under the symbol “AAA”. AAA Guernsey is a Guernsey limited company and is owned 55% by an individual who is not an affiliate of Apollo and 45% by Apollo Principal Holdings III, L.P., an indirect subsidiary of Apollo. AAA Guernsey is responsible for managing the business and affairs of AAA. AAA generally makes all of its investments through AAA Investments, of which AAA is the sole limited partner.
Athene Holding is AAA’s only material investment. As of December 31, 2014, the Company, through its consolidation of AAA, had an approximate 47.7% economic ownership interest in Athene through its investment in AAA Investments (calculated as if the commitments on the Athene Private Placement (as described in note 4 to the consolidated financial statements) closed through December 31, 2014 were fully drawn down but without giving effect to (i) restricted common shares issued under Athene’s management equity plan, or (ii) common shares to be issued under the Amended Athene Services Agreement or the Amended AAA Services Agreement (each as described in note 17 to the consolidated financial statements) subsequent to December 31, 2014). Apollo owned approximately 2.5% of AAA as of December 31, 2014.

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Building Value in Portfolio Companies
We are a “hands-on” investor organized around nine core industries where we believe we have significant knowledge and expertise, and we remain actively engaged with the management teams of the portfolio companies of our private equity funds. We have established relationships with operating executives that assist in the diligence review of new opportunities and provide strategic and operational oversight for portfolio investments. We actively work with the management of each of the portfolio companies of the funds we manage to maximize the underlying value of the business. To achieve this, we take a holistic approach to value-creation, concentrating on both the asset side and liability side of the balance sheet of a company. On the asset side of the balance sheet, Apollo works with management of the portfolio companies to enhance the operations of such companies. Our investment professionals assist portfolio companies in rationalizing non-core and underperforming assets, generating cost and working capital savings, and maximizing liquidity. On the liability side of the balance sheet, Apollo relies on its deep credit structuring experience and works with management of the portfolio companies to help optimize the capital structure of such companies through proactive restructuring of the balance sheet to address near-term debt maturities. The companies in which our private equity funds invest also seek to capture discounts on publicly traded debt securities through exchange offers and potential debt buybacks. In addition, we have established a group purchasing program to help our funds' portfolio companies leverage the combined corporate spending among Apollo and portfolio companies of the funds it manages in order to seek to reduce costs, optimize payment terms and improve service levels for all program participants.
Exiting Investments
The value of the investments that have been made by our funds are typically realized through either an initial public offering of common stock on a nationally recognized exchange or through the private sale of the companies in which our funds have invested. We believe the advantage of having long-lived funds and investment discretion is that we are able to time our funds’ exit to maximize value.
Private Equity Fund Holdings
The following table presents a list of certain significant portfolio companies of our private equity funds as of December 31, 2014:
 
Company
 
Year of Initial
Investment
 
Fund(s)
 
Buyout Type
 
Industry
 
Region
CEC Entertainment
 
2014
 
Fund VIII
 
Opportunistic Buyout
 
Media, Cable & Leisure
 
North America
Caelus Energy Alaska
 
2014
 
Fund VIII / ANRP
 
Corporate Carve-Out
 
Natural Resources
 
North America
Express Energy Services
 
2014
 
Fund VIII / ANRP
 
Opportunistic Buyout
 
Natural Resources
 
North America
Jupiter Resources
 
2014
 
Fund VIII / ANRP
 
Corporate Carve-out
 
Natural Resources
 
North America
American Gaming Systems
 
2013
 
Fund VIII
 
Distressed Buyout
 
Media, Cable & Leisure
 
North America
Aurum
 
2013
 
Fund VII
 
Opportunistic Buyout
 
Consumer & Retail
 
Western Europe
Hostess
 
2013
 
Fund VII
 
Corporate Carve-out
 
Consumer & Retail
 
North America
McGraw-Hill Education
 
2013
 
Fund VII
 
Corporate Carve-out
 
Media, Cable & Leisure
 
North America
Nine Entertainment
 
2013
 
Fund VII
 
Distressed Buyout
 
Media, Cable & Leisure
 
Australia
EP Energy
 
2012
 
Fund VII & ANRP
 
Corporate Carve-out
 
Natural Resources
 
North America
Great Wolf Resorts
 
2012
 
Fund VII
 
Opportunistic Buyout
 
Media, Cable & Leisure
 
North America
Pinnacle
 
2012
 
Fund VII & ANRP
 
Opportunistic Buyout
 
Natural Resources
 
North America
Talos
 
2012
 
Fund VII & ANRP
 
Opportunistic Buyout
 
Natural Resources
 
North America

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Brit Insurance
 
2011
 
Fund VII
 
Opportunistic Buyout
 
Financial & Business Services
 
Western Europe
Endemol Shine Group
 
2011
 
Fund VII
 
Distressed Buyout
 
Media, Cable & Leisure
 
Global
Sprouts Farmers Markets
 
2011
 
Fund VI
 
Opportunistic Buyout
 
Consumer & Retail
 
North America
Welspun
 
2011
 
Fund VII & ANRP
 
Opportunistic Buyout
 
Natural Resources
 
India
Gala Coral Group
 
2010
 
Fund VII & VI
 
Distressed Buyout
 
Media, Cable & Leisure
 
Western Europe
Veritable Maritime
 
2010
 
Fund VII
 
Opportunistic Buyout
 
Distribution & Transportation
 
North America
Dish TV
 
2009
 
Fund VII
 
Opportunistic Buyout
 
Media, Cable & Leisure
 
India
Caesars Entertainment
 
2008
 
Fund VI
 
Opportunistic Buyout
 
Media, Cable & Leisure
 
North America
Norwegian Cruise Line
 
2008
 
Fund VII / VI
 
Opportunistic Buyout
 
Media, Cable & Leisure
 
North America
Claire’s
 
2007
 
Fund VI
 
Opportunistic Buyout
 
Consumer & Retail
 
Global
Berry Plastics(1)
 
2006
 
Fund VI & V
 
Corporate
Carve-out
 
Packaging & Materials
 
North America
CEVA Logistics(2)
 
2006
 
Fund VI
 
Corporate Carve-out
 
Distribution & Transportation
 
Western Europe
Momentive Performance Materials
 
2000/2004/
2006
 
Fund IV, V & VI
 
Corporate Carve-out
 
Chemicals
 
North America
Debt Investment Vehicles - Fund VII
 
Various
 
Fund VII
 
Debt Investments
 
Various
 
Various
Debt Investment Vehicles - Fund VI
 
Various
 
Fund VI
 
Debt Investments
 
Various
 
Various
 
Note: Represents portfolio companies of Fund IV, Fund V, Fund VI, Fund VII, Fund VIII and ANRP with a remaining value greater than $100 million, excluding the value associated with any portion of such private equity funds' portfolio company investments held by co-investment vehicles.

(1)
Prior to merger with Covalence Specialty Material Holdings Corp. Remaining holding is a tax receivable agreement.
(2)
Includes add-on investment in EGL, Inc.



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Credit
Since Apollo’s founding in 1990, we believe our expertise in credit has served as an integral component of our company’s growth and success. Our credit-oriented approach to investing commenced in 1990 with the management of a $3.5 billion high-yield bond and leveraged loan portfolio. Since that time, our credit activities have grown significantly, through both organic growth and strategic acquisitions. As of December 31, 2014, Apollo’s credit segment had total AUM and Fee-Generating AUM of $108.4 billion and $92.2 billion, respectively, across a diverse range of credit-oriented investments that utilize the same disciplined, value-oriented investment philosophy that we employ with respect to our private equity funds.
Apollo’s broad credit platform, which we believe is adaptable to evolving market conditions and different risk tolerances, has been organized by the following six functional groups:
Credit AUM as of December 31, 2014
(in billions)


(1)
Excludes sub-advised AUM.

U.S. Performing Credit
The U.S. performing credit group provides investment management services to funds, including SIAs, that primarily focus on income-oriented, senior loan and bond investment strategies. The U.S. performing credit group also includes CLOs that we raise and manage internally. As of December 31, 2014, our U.S. performing credit group had total AUM and Fee-Generating AUM of $24.9 billion and $20.0 billion, respectively.
Structured Credit
The structured credit group provides investment management services to funds, including SIAs, that primarily focus on structured credit investment strategies that target multiple tranches of structured securities with favorable and protective lending terms, predictable payment schedules, well diversified portfolios, and low historical defaults, among other characteristics. These strategies include investments in externally managed CLOs, residential mortgage-backed securities, asset-backed securities and other structured instruments, including insurance-linked securities and longevity-based products. The structured credit group also serves as substitute investment manager for a number of asset-backed CDOs and other structured vehicles. As of December 31, 2014, our structured credit group had total AUM and Fee-Generating AUM of $16.0 billion and $11.0 billion, respectively.
Opportunistic Credit
The opportunistic credit group provides investment management services to funds, including SIAs, that primarily focus on credit investment strategies that are often less liquid in nature and that utilize a similar value-oriented investment philosophy as our private equity business. The opportunistic credit funds and SIAs invest in a broad array of primary (including origination)and secondary opportunities encompassing performing, stressed and distressed public and private securities primarily within corporate credit, including senior loans (secured and unsecured), high yield, mezzanine, debtor in possession financings, rescue or bridge financings, and other debt investments. Additionally, certain opportunistic credit funds will selectively invest in aircraft,

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shipping assets, energy and structured credit investment opportunities. In certain cases, leverage can be employed in connection with these strategies by having fund subsidiaries or special-purpose vehicles incur debt or by entering into credit facilities or other debt transactions to finance the acquisition of various credit investments. Additionally, certain opportunistic credit funds will selectively purchase assets, including aircraft and shipping, as well as invest in energy and structured credit investment opportunities. As of December 31, 2014, our opportunistic credit group had total AUM and Fee-Generating AUM of $10.8 billion and $6.6 billion, respectively.
Non-Performing Loans
The non-performing loan group provides investment management services to funds, including SIAs, that primarily invest in European commercial and residential real estate performing and non-performing loans (“NPLs”) and unsecured consumer loans and acquiring assets as a result of distressed market situations. Certain of the non-performing loan investment vehicles that we manage own captive pan-European loan servicing and property management platforms. These loan servicing and property management platforms operate in five European countries, employed approximately 1,200 individuals as of December 31, 2014 and directly service consumer credit receivables and loans secured by commercial and residential properties. The post-investment loan servicing and real estate asset management requirements, combined with the illiquid nature of NPLs, limit participation by traditional long only investors, hedge funds, and private equity funds, resulting in what we believe to be a unique opportunity for our credit business. As of December 31, 2014, our non-performing loan group had total AUM and Fee-Generating AUM of $5.0 billion and $3.7 billion, respectively.
European Credit
The European credit group provides investment management services to funds, including SIAs, that focus on investment strategies in a variety of credit opportunities in Europe across a company’s capital structure. The European credit group invests in senior loans (secured and unsecured) and notes, mezzanine loans, subordinated notes, distressed and stressed credit and other idiosyncratic credit investments of companies established or operating primarily in Europe. Additionally, certain European credit funds will selectively invest in shipping assets and structured credit investment opportunities. The European credit group also includes CLOs that we raise and manage internally. As of December 31, 2014, our European credit group had total AUM and Fee-Generating AUM of $4.0 billion and $3.1 billion, respectively.
Athene
Athene Holding was founded in 2009 to capitalize on favorable market conditions in the dislocated life insurance sector. Athene Holding is the ultimate parent of various insurance company operating subsidiaries. Through its subsidiaries, Athene Holding provides insurance products focused primarily on the retirement market and its business centers primarily on issuing or reinsuring fixed and equity-indexed annuities.
On October 2, 2013, Athene Holding closed its acquisition of the U.S. annuity operations of Aviva plc ("Aviva USA"), which added approximately $44 billion of total and Fee-Generating AUM within Apollo's credit segment and as a result, Athene is currently estimated to be one of the largest fixed annuity companies in the United States.
Apollo, through its consolidated subsidiary, Athene Asset Management, L.P. (“Athene Asset Management”), provides asset management services to Athene, including asset allocation and portfolio management strategies, and receives fees from Athene for providing such services. As of December 31, 2014, all of Athene’s assets were managed by Athene Asset Management. Athene Asset Management had $60.3 billion of total AUM as of December 31, 2014 in accounts owned by or related to Athene (the “Athene Accounts”), of which approximately $12.6 billion, or approximately 20.9%, was either sub-advised by Apollo or invested in Apollo funds and investment vehicles. The vast majority of such assets are in sub-advisory managed accounts that manage high grade credit asset classes, such as CLO debt, commercial mortgage backed securities and insurance-linked securities. We expect this percentage to increase over time provided that Athene Asset Management continues to perform successfully in providing asset management services to Athene. Athene Asset Management receives a gross management fee equal to 0.40% per annum on all AUM in the Athene Accounts, with certain limited exceptions for all of the services which Athene Asset Management provides to Athene. In addition, the Company receives sub-advisory fees with respect to a portion of the assets in the Athene Accounts.
Real Estate
Our real estate group has a dedicated team of multi-disciplinary real estate professionals whose investment activities are integrated and coordinated with our private equity and credit business segments. We take a broad view of markets and property types in targeting debt and equity investment opportunities, including the acquisition and recapitalization of real estate portfolios,

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platforms and operating companies and distressed for control situations. As of December 31, 2014, our real estate group had total and fee generating AUM of approximately $9.5 billion and $6.2 billion, respectively, through a combination of investment funds, strategic investment accounts ("SIAs") and Apollo Commercial Real Estate Finance, Inc. ("ARI"), a publicly-traded, commercial mortgage real estate investment trust managed by Apollo.

With respect to our real estate funds' equity investments, we take a value-oriented approach and our funds will invest in assets located in primary, secondary and tertiary markets. The funds we manage pursue opportunistic investments in various real estate asset  classes, which historically have included hospitality, office, industrial, retail, healthcare, residential and non-performing loans. Our real estate equity funds under management currently include AGRE U.S. Real Estate Fund, L.P. and Apollo U.S. Real Estate Fund II, L.P., our U.S. focused, opportunistic funds, and our legacy Citi Property Investors ("CPI") business, the real estate investment management business we acquired from Citigroup in November 2010.
With respect to our real estate debt activities, our real estate funds and accounts offer financing across a broad spectrum of property types and at various points within a property’s capital structure, including first mortgage and mezzanine financing and preferred equity. In addition to ARI, we also manage strategic accounts focused on investing in commercial mortgage-backed securities and other commercial real estate loans.
Strategic Investment Accounts
We manage several SIAs established to facilitate investments by third-party investors directly in Apollo funds and other securities. Institutional investors are expressing increasing levels of interest in SIAs since these accounts can provide investors with greater levels of transparency, liquidity and control over their investments as compared to more traditional investment funds. Based on the trends we are currently witnessing among a select group of large institutional investors, we expect our AUM that is managed through SIAs to continue to grow over time. As of December 31, 2014, approximately $15 billion of our total AUM was managed through SIAs.
Fundraising and Investor Relations
We believe our performance track record across our funds and our focus on client service have resulted in strong relationships with our fund investors. Our fund investors include many of the world’s most prominent pension and sovereign wealth funds, university endowments and financial institutions, as well as individuals. We maintain an internal team dedicated to investor relations across our private equity, credit and real estate businesses.
In our private equity business, fundraising activities for new funds begin once the investor capital commitments for the current fund are largely invested or committed to be invested. The investor base of our private equity funds includes both investors from prior funds and new investors. In many instances, investors in our private equity funds have increased their commitments to subsequent funds as our private equity funds have increased in size. During the fundraising effort for Apollo Investment Fund VIII, L.P. ("Fund VIII"), investors representing over 92% of Apollo Investment Fund VII, L.P.'s ("Fund VII") capital committed to Fund VIII. In addition, many of our investment professionals commit their own capital to each private equity fund. The single largest unaffiliated investor in Fund VIII represents 5% of Fund VIII's commitments.
During the management of a private equity fund, we maintain an active dialogue with the fund's limited partner investors. We host quarterly webcasts that are led by members of our senior management team and we provide quarterly reports to the limited partner investors detailing recent performance by investment. We also organize an annual meeting for our private equity funds' investors that consists of detailed presentations by the senior management teams of many of our funds' current investments. From time to time, we also hold meetings for the advisory board members of our private equity funds.
In our credit business, we have raised private capital from prominent institutional investors and have also raised capital from public market investors, as in the case of AINV, AFT, AIF and AMTG. AINV is listed on the NASDAQ Global Select Market and complies with the reporting requirements of that exchange. AFT, AIF and AMTG are listed on the NYSE and comply with the reporting requirements of that exchange.
In our real estate business, we have raised capital from prominent institutional investors and we have also raised capital from public market investors, as in the case of ARI. ARI is listed on the NYSE and complies with the reporting requirements of that exchange.
Investment Process
We maintain a rigorous investment process and a comprehensive due diligence approach across all of our funds. We have developed policies and procedures, the adequacy of which are reviewed annually, that govern the investment practices of our

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funds. Moreover, each fund is subject to certain investment criteria set forth in its governing documents that generally contain requirements and limitations for investments, such as limitations relating to the amount that will be invested in any one company and the geographic regions in which the fund will invest. Our investment professionals are familiar with our investment policies and procedures and the investment criteria applicable to the funds that they manage. Our investment professionals interact frequently across our businesses on a formal and informal basis.
We have in place certain procedures to allocate investment opportunities among our funds. These procedures are meant to ensure that each fund is treated fairly and that transactions are allocated in a way that is equitable, fair and in the best interests of each fund, subject to the terms of the governing agreements of such funds.
Private Equity Investment Process
Our private equity investment professionals are responsible for selecting, evaluating, structuring, due diligence, negotiating, executing, monitoring and exiting investments for our traditional private equity funds, as well as pursuing operational improvements in our funds’ portfolio companies through management consulting arrangements. These investment professionals perform significant research into each prospective investment, including a review of the company’s financial statements, comparisons with other public and private companies and relevant industry data. The due diligence effort will also typically include:
on-site visits;
interviews with management, employees, customers and vendors of the potential portfolio company;
research relating to the company’s management, industry, markets, products and services, and competitors; and
background checks.
After an initial selection, evaluation and diligence process, the relevant team of investment professionals will prepare a detailed analysis of the investment opportunity for our private equity investment committee. Our private equity investment committee generally meets weekly to review the investment activity and performance of our private equity funds.
After discussing the proposed transaction with the deal team, the investment committee will decide whether to give its preliminary approval to the deal team to continue the selection, evaluation, diligence and negotiation process. The investment committee will typically conduct several meetings to consider a particular investment before finally approving that investment and its terms. Both at such meetings and in other discussions with the deal team, our Managing Partners and other investment professionals will provide guidance to the deal team on strategy, process and other pertinent considerations. Every private equity investment requires the approval of our Managing Partners.
Our private equity investment professionals are responsible for monitoring an investment once it is made and for making recommendations with respect to exiting an investment. Disposition decisions made on behalf of our private equity funds are subject to review and approval by the private equity investment committee, including our Managing Partners.
Credit and Real Estate Investment Process
Our credit and real estate investment professionals are responsible for selecting, evaluating, structuring, due diligence, negotiating, executing, monitoring and exiting investments for our credit funds and real estate funds, respectively. The investment professionals perform significant research into and due diligence of each prospective investment, and prepare analyses of recommended investments for the investment committee of the relevant fund.
Investment decisions are scrutinized by the investment committees where applicable, who review potential transactions, provide input regarding the scope of due diligence and approve recommended investments and dispositions. Close attention is given to how well a proposed investment is aligned with the distinct investment objectives of the fund in question, which in many cases have specific geographic or other focuses. The investment committee of each of our credit funds and real estate funds generally is provided with a summary of the investment activity and performance of the relevant funds on at least a monthly basis.
Overview of Fund Operations
Investors in our private equity funds and certain of our credit and real estate funds make commitments to provide capital at the outset of a fund and deliver capital when called by us as investment opportunities become available. We determine the amount of initial capital commitments for such funds by taking into account current market opportunities and conditions, as well as investor expectations. The general partner’s capital commitment is determined through negotiation with the fund’s underlying investor base. The commitments are generally available for approximately six years during what we call the investment period. We have typically invested the capital committed to such funds over a three to four year period. Generally, as each investment is realized, these funds first return the capital and expenses related to that investment and any previously realized investments to fund investors and then distribute any profits. These profits are typically shared 80% to the investors in our private equity funds

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and 20% to us so long as the investors receive at least an 8% compounded annual return on their investment, which we refer to as a “preferred return” or “hurdle.” Allocation of profits between fund investors and us, as well as the amount of the preferred return, among other provisions, varies for our real estate equity and many of our credit funds. Our private equity funds typically terminate ten years after the final closing, subject to the potential for two one-year extensions. Dissolution of those funds can be accelerated upon a majority vote of investors not affiliated with us and, in any case, all of our funds also may be terminated upon the occurrence of certain other events. Ownership interests in our private equity funds and certain of our credit and real estate funds are not, however, subject to redemption prior to termination of the funds.
The processes by which our credit and real estate funds receive and invest capital vary by type of fund. As noted above, certain of our credit and real estate funds have drawdown structures where investors made a commitment to provide capital at the formation of such funds and deliver capital when called by us as investment opportunities become available. In addition, we have several permanent capital vehicles with unlimited duration. Each of these publicly traded vehicles raises capital by selling shares in the public markets and these vehicles can also issue debt. We also have several credit funds which continuously offer and sell shares or limited partner interests via private placements through monthly subscriptions, which are payable in full upon a fund’s acceptance of an investor’s subscription. These hedge fund style credit funds have customary redemption rights (in many cases subject to the expiration of an initial lock-up period), and are generally structured as limited partnerships, the terms of which are determined through negotiation with the funds' underlying investor base. Management fees and incentive fees (whether in the form of carried interest income or incentive allocation) that we earn for management of these credit funds and from their performance as well as the terms governing their operation vary across our credit funds.
We conduct the management of our private equity, credit and real estate funds primarily through a partnership structure, in which partnerships organized by us accept commitments and/or funds for investment from investors. Funds are generally organized as limited partnerships with respect to private equity funds and other U.S. domiciled vehicles and limited partnership and limited liability (and other similar) companies with respect to non-U.S. domiciled vehicles. Typically, each fund has an investment advisor registered under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”). Responsibility for the day-to-day operations of the funds is typically delegated to the funds’ respective investment managers pursuant to an investment management (or similar) agreement. Generally, the material terms of our investment management agreements relate to the scope of services to be rendered by the investment manager to the applicable funds, certain rights of termination in respect of our investment management agreements and, generally, with respect to certain of our credit and real estate funds (as these matters are covered in the limited partnership agreements of the private equity funds), the calculation of management fees to be borne by investors in such funds, as well as the calculation of the manner and extent to which other fees received by the investment manager from fund portfolio companies serve to offset or reduce the management fees payable by investors in our funds. The funds themselves generally do not register as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”), generally in reliance on Section 3(c)(7) or Section 7(d) thereof or, typically in the case of funds formed prior to 1997, Section 3(c)(1) thereof. Section 3(c)(7) of the Investment Company Act excepts from its registration requirements funds privately placed in the United States whose securities are owned exclusively by persons who, at the time of acquisition of such securities, are “qualified purchasers” or “knowledgeable employees” for purposes of the Investment Company Act. Section 3(c)(1) of the Investment Company Act exempts from its registration requirements privately placed funds whose securities are beneficially owned by not more than 100 persons. In addition, under current interpretations of the SEC, Section 7(d) of the Investment Company Act exempts from registration any non-U.S. fund all of whose outstanding securities are beneficially owned either by non-U.S. residents or by U.S. residents that are qualified purchasers.
In addition to having an investment manager, each fund that is a limited partnership, or “partnership” fund, also has a general partner that makes all policy and investment decisions relating to the conduct of the fund’s business. The general partner is responsible for all decisions concerning the making, monitoring and disposing of investments, but such responsibilities are typically delegated to the fund’s investment manager pursuant to an investment management (or similar) agreement. The limited partners of the funds take no part in the conduct or control of the business of the funds, have no right or authority to act for or bind the funds and have no influence over the voting or disposition of the securities or other assets held by the funds. These decisions are made by the fund’s general partner in its sole discretion, subject to the investment limitations set forth in the agreements governing each fund. The limited partners often have the right to remove the general partner or investment manager for cause or cause an early dissolution by a simple majority vote. In connection with the private offering transactions that occurred in 2007 pursuant to which we sold shares of Apollo Global Management, LLC to certain initial purchasers and accredited investors in transactions exempt from the registration requirements of the Securities Act (“Private Offering Transactions”) and the reorganization of the Company’s predecessor business (the “2007 Reorganization”), we deconsolidated certain of our private equity and credit funds that have historically been consolidated in our financial statements and amended the governing agreements of those funds to provide that a simple majority of a fund’s investors have the right to accelerate the dissolution date of the fund.
In addition, the governing agreements of our private equity funds and certain of our credit and real estate funds enable the limited partners holding a specified percentage of the interests entitled to vote, to elect not to continue the limited partners’ capital commitments for new portfolio investments in the event certain of our Managing Partners do not devote the requisite time

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to managing the fund or in connection with certain triggering events (as defined in the applicable governing agreements). In addition to having a significant, immeasurable negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our funds would likely result in significant reputational damage to us. The loss of the services of any of our Managing Partners would have a material adverse effect on us, including our ability to retain and attract investors and raise new funds, and the performance of our funds. We do not carry any “key man” insurance that would provide us with proceeds in the event of the death or disability of any of our Managing Partners.
Fees and Carried Interest
Our revenues and other income consist principally of (i) management fees, which may be based upon a percentage of the committed or invested capital, adjusted assets, gross invested capital, fund net asset value, stockholders' equity or the capital accounts of the limited partners of the funds, and may be subject to offset as discussed in note 2 to the consolidated financial statements, (ii) advisory and transaction fees, net relating to certain actual and potential private equity, credit and real estate investments as more fully discussed in note 2 to the consolidated financial statements, (iii) income based on the performance of our funds, which consists of allocations, distributions or fees from our private equity, credit and real estate funds, and (iv) investment income from our investments as general partner and other direct investments primarily in the form of net gains from investment activities as well as interest and dividend income.
The composition of our revenues will vary based on market conditions and the cyclicality of the different businesses in which we operate. Our funds’ returns are driven by investment opportunities and general market conditions, including the availability of debt capital on attractive terms and the availability of distressed debt opportunities. Our funds initially record fund investments at cost and then such investments are subsequently recorded at fair value. Fair values are affected by changes in the fundamentals of the underlying portfolio company investments of the funds, the industries in which the portfolio companies operate, the overall economy as well as other market conditions.
General Partner and Professionals Investments and Co-Investments
General Partner Investments
Certain of our management companies, general partners and co-invest vehicles are committed to contribute to our funds and affiliates. As a limited partner, general partner and manager of the Apollo funds, Apollo had unfunded capital commitments as of December 31, 2014 of $646.6 million.
Apollo has an ongoing obligation, subject to certain stipulations, to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cash distributions, if any, that are made by AAA to Apollo's affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAA Investments.
Managing Partners and Other Professionals Investments
To further align our interests with those of investors in our funds, our Managing Partners and other professionals have invested their own capital in our funds. Our Managing Partners and other professionals will either re-invest their carried interest to fund these investments or use cash on hand or funds borrowed from third parties. We generally have not historically charged management fees or carried interest on capital invested by our Managing Partners and other professionals directly in our private equity, credit, and real estate funds.
Co-Investments
Investors in many of our funds, as well as certain other investors, may have the opportunity to make co-investments with the funds. Co-investments are investments in portfolio companies or other assets generally on the same terms and conditions as those to which the applicable fund is subject.
Regulatory and Compliance Matters
Our businesses, as well as the financial services industry generally, are subject to extensive regulation in the United States and elsewhere.
All of the investment advisors of our funds are registered as investment advisors either directly or as a "relying advisor" with the SEC. Registered investment advisors are subject to the requirements and regulations of the Investment Advisers Act. Such requirements relate to, among other things, fiduciary duties to clients, maintaining an effective compliance program, managing conflicts of interest and general anti-fraud prohibitions.

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Each of AFT and AIF is a registered management investment company under the Investment Company Act. AINV is an investment company that has elected to be treated as a business development company under the Investment Company Act. Each of AFT, AIF and AINV has elected for U.S. Federal tax purposes to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). As such, each of AFT, AIF and AINV is required to distribute during each taxable year at least 90% of its ordinary income and realized, net short-term capital gains in excess of realized net long-term capital losses, if any, to its shareholders. In addition, in order to avoid excise tax, each needs to distribute during each calendar year at least 98% of its ordinary income and 98.2% of its capital gains net income for one-year period ended on October 31st of such calendar year, plus any shortfalls from any prior year's distribution, which would take into account short-term and long-term capital gains and losses. In addition, as a business development company, AINV must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of AINV’s total assets are qualifying assets (with certain limited exceptions).
ARI elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code commencing with its taxable year ended December 31, 2009. AMTG also elected to be taxed as a REIT under the Internal Revenue Code, commencing with its fiscal year ended December 31, 2011. To maintain their qualification as REITs, ARI and AMTG must distribute at least 90% of their taxable income to their shareholders and meet, on a continuing basis, certain other complex requirements under the Internal Revenue Code.
In addition, Apollo Global Securities, LLC (“AGS”) is a registered broker dealer with the SEC and is a member of the Financial Industry Regulatory Authority, Inc. From time to time, this entity is involved in transactions with affiliates of Apollo, including portfolio companies of the funds we manage, whereby AGS will earn fees for its services.
Broker-dealers are subject to regulations that cover all aspects of the securities business. In particular, as a registered broker-dealer and member of a self regulatory organization, we are subject to the SEC’s uniform net capital rule, Rule 15c3-1. Rule 15c3-1 specifies the minimum level of net capital a broker-dealer must maintain and also requires that a significant part of a broker-dealer’s assets be kept in relatively liquid form. The SEC and various self-regulatory organizations impose rules that require notification when net capital falls below certain predefined criteria, limit the ratio of subordinated debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. Additionally, the SEC’s uniform net capital rule imposes certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital.
As the ultimate parent of the general partner or manager of certain shareholders of Athene Holding, we are subject to insurance holding company system laws and regulations in Delaware, Iowa and New York, which are the states in which the insurance company subsidiaries of Athene Holding are domiciled. These regulations generally require each insurance company subsidiary to register with the insurance department in its state of domicile and to furnish financial and other information about the operations of companies within its holding company system. These regulations also impose restrictions and limitations on the ability of an insurance company subsidiary to pay dividends and make other distributions to its parent company. In addition, transactions between an insurance company and other companies within its holding company system, including sales, loans, reinsurance agreements, management agreements and service agreements, must be on terms that are fair and reasonable and, if material or within a specified category, require prior notice and approval or non-disapproval by the applicable domiciliary insurance department.
The insurance laws of each of Delaware, Iowa and New York prohibit any person from acquiring control of a domestic insurance company or its parent company unless that person has filed a notification with specified information with that state’s Commissioner or Superintendent of Insurance (the “Commissioner”) and has obtained the Commissioner’s prior approval. Under applicable Delaware, Iowa and New York statutes, the acquisition of 10% or more of the voting securities of an insurance company or its parent company is presumptively considered an acquisition of control of the insurance company, although such presumption may be rebutted. Accordingly, any person or entity that acquires, directly or indirectly, 10% or more of the voting securities of Apollo without the requisite prior approvals will be in violation of these laws and may be subject to injunctive action requiring the disposition or seizure of those securities or prohibiting the voting of those securities, or to other actions that may be taken by the applicable state insurance regulators.
In addition, many U.S. state insurance laws require prior notification to state insurance departments of an acquisition of control of a non-domiciliary insurance company doing business in that state if the acquisition would result in specified levels of market concentration. While these pre-notification statutes do not authorize the state insurance departments to disapprove the acquisition of control, they authorize regulatory action in the affected state, including requiring the insurance company to cease and desist from doing certain types of business in the affected state or denying a license to do business in the affected state, if particular conditions exist, such as substantially lessening competition in any line of business in such state. Any transactions that would constitute an acquisition of control of Apollo may require prior notification in those states that have adopted pre-acquisition notification laws. These laws may discourage potential acquisition proposals and may delay, deter or prevent an acquisition of

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control of Apollo (in particular through an unsolicited transaction), even if Apollo might consider such transaction to be desirable for its shareholders.
Currently, there are proposals to increase the scope of regulation of insurance holding companies in both the United States and internationally. In the United States, the National Association of Insurance Commissioners ("NAIC") has promulgated amendments to its insurance holding company system model law and regulations for consideration by the various states that would provide for more extensive informational reporting regarding parents and other affiliates of insurance companies, with the purpose of protecting domestic insurers from enterprise risk, including requiring an annual enterprise risk report by the ultimate controlling person identifying the material risks within the insurance holding company system that could pose enterprise risk to domestic insurers. To date, both Iowa and New York have enacted laws to adopt such amendments.
Internationally, the International Association of Insurance Supervisors is in the process of adopting a framework for the “group wide” supervision of internationally active insurance groups. The NAIC has also promulgated additional amendments to its insurance holding company system model law that address “group wide” supervision of internationally active insurance groups. Changes to existing laws or regulations must be adopted by individual states or foreign jurisdictions before they will become effective. We cannot predict with any degree of certainty the additional capital requirements, compliance costs or other burdens these requirements may impose on us and our insurance company affiliates.
In addition, state insurance departments also have broad administrative powers over the insurance business of our insurance company affiliates, including insurance company licensing and examination, agent licensing, establishment of reserve requirements and solvency standards, premium rate regulation, admissibility of assets, policy form approval, unfair trade and claims practices and other matters. State regulators regularly review and update these and other requirements.
Although the federal government does not directly regulate the insurance business, federal legislation and administrative policies in several areas, including pension regulation, age and sex discrimination, financial services regulation, securities regulation and federal taxation, can significantly affect the insurance business. The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Federal Insurance Office (the “FIO”) within the Department of Treasury headed by a Director appointed by the Treasury Secretary. The FIO is designed principally to exercise a monitoring and information gathering role, rather than a regulatory role. In that capacity, the FIO has been charged with providing reports to the U.S. Congress on (i) modernization of U.S. insurance regulation and (ii) the U.S. and global reinsurance market. Such reports could ultimately lead to changes in the regulation of insurers and reinsurers in the U.S.
We are subject to the jurisdiction of the Federal Energy Regulatory Commission as a result of certain of the funds we manage directly or indirectly owning, controlling or holding, with power to vote, 10% or more of the voting securities in a “public-utility company” or a “holding company” of a public-utility company (as those terms are defined in the U.S. Public Utility Holding Company Act of 2005). See “Item 1A. Risk Factors-Risks Related to Our Businesses-We are a holding company subject to the jurisdiction of the Federal Energy Regulatory Commission (the “FERC”). An acquirer of our Class A shares may be required to obtain prior approval from the FERC and make other filings with the FERC.”
Apollo Management International LLP is authorized and regulated by the U.K. Financial Conduct Authority.
AAA is regulated under the Authorized Closed-ended Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission (“GFSC”) with effect from December 15, 2008 under The Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended (the “New Rules”). AAA is deemed to be an authorized closed-ended investment scheme under the New Rules.
Apollo Advisors (Mauritius) Ltd (“Apollo Mauritius”), one of our subsidiaries, and AION Capital Management Limited (“AION Manager”), one of our joint venture investments, are licensed providers of investment management services in the Republic of Mauritius and are subject to applicable Mauritian securities laws and the oversight of the Financial Services Commission (Mauritius) (the “FSC”). Each of Apollo Mauritius and AION Manager is subject to limited regulatory requirements under the Mauritian Securities Act 2005, Mauritian Financial Services Act 2007 and relevant ancillary regulations, including, ongoing reporting and record keeping requirements, anti-money laundering obligations, obligations to ensure that it and its directors, key officers and representatives are fit and proper and requirements to maintain positive shareholders’ equity. The FSC is responsible for administering these requirements and ensuring the compliance of Apollo Mauritius and AION Manager with them. If Apollo Mauritius or AION Manager contravenes any such requirements, such entities and/or their officers or representatives may be subject to a fine, reprimand, prohibition order or other regulatory sanctions.
AGM India Advisors Private Limited is regulated by the Company Law Board (also known as the Ministry of Company Affairs) through the Companies Act of 1956 in India. Additionally since there are foreign investments in the company, AGM India

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Advisors Private Limited is also subject to the rules and regulations applicable under the Foreign Exchange Management Act of 1999 which falls within the purview of Reserve Bank of India.
Apollo Management Singapore Pte Ltd. was granted a Capital Markets Service License with the Monetary Authority of Singapore in October 2013. In addition, Apollo Capital Management, L.P. is registered with the Securities and Exchange Board of India as a foreign institutional investor.
Certain of our businesses are subject to compliance with laws and regulations of U.S. Federal and state governments, non-U.S. governments, their respective agencies and/or various self-regulatory organizations or exchanges relating to, among other things, the privacy of client information, and any failure to comply with these regulations could expose us to liability and/or reputational damage. Our businesses have operated for many years within a legal framework that requires our being able to monitor and comply with a broad range of legal and regulatory developments that affect our activities.
However, additional legislation, changes in rules promulgated by self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules, either in the United States or elsewhere, may directly affect our mode of operation and profitability. For additional information concerning the competitive risks that we face, see “Item 1A. Risk Factors — Risks Related To Our Businesses — The investment management business is intensely competitive, which could have a material adverse impact on us.”
Rigorous legal and compliance analysis of our businesses and investments is important to our culture. We strive to maintain a culture of compliance through the use of policies and procedures, such as our code of ethics, compliance systems, communication of compliance guidance and employee education and training. We have a compliance group that monitors our compliance with the regulatory requirements to which we are subject and manages our compliance policies and procedures. Our Chief Compliance Officer supervises our compliance group, which is responsible for addressing all regulatory and compliance matters that affect our activities. Our compliance policies and procedures address a variety of regulatory and compliance risks such as the handling of material non-public information, personal securities trading, valuation of investments on a fund-specific basis, document retention, potential conflicts of interest and the allocation of investment opportunities.
We generally operate without information barriers between our businesses. In an effort to manage possible risks resulting from our decision not to implement these barriers, our compliance personnel maintain a list of issuers for which we have access to material, non-public information and for whose securities our funds and investment professionals are not permitted to trade. We could in the future decide that it is advisable to establish information barriers, particularly as our business expands and diversifies. In such event our ability to operate as an integrated platform will be restricted. See "Item 1A. Risk Factors — Risks Related to Our Businesses — Possession of material, non-public information could prevent Apollo funds from undertaking advantageous transactions; our internal controls could fail; we could determine to establish information barriers."
Competition
The investment management industry is intensely competitive, and we expect it to remain so. We compete globally and on a regional, industry and niche basis.
We face competition both in the pursuit of outside investors for our funds and in acquiring investments in attractive portfolio companies and making other investments. We compete for outside investors based on a variety of factors, including:
investment performance;
investor perception of investment managers’ drive, focus and alignment of interest;
quality of service provided to and duration of relationship with investors;
business reputation; and
the level of fees and expenses charged for services.
Depending on the investment, we expect to face competition in acquisitions primarily from other private equity, credit and real estate funds, specialized funds, hedge fund sponsors, other financial institutions, corporate buyers and other parties. Several of these competitors have significant amounts of capital and many of them have similar investment objectives to us, which may create additional competition for investment opportunities. Some of these competitors may also have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities. Competitors may also be subject to different regulatory regimes or rules that may provide them more flexibility or better access to pursue transactions or raise capital for their investment funds. In addition, some of these competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make. Corporate buyers may be able to achieve synergistic cost savings with regard to an investment that may provide them with a competitive advantage in bidding for an investment. Lastly, the allocation of increasing amounts of capital to alternative investment strategies by institutional and

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individual investors could well lead to a reduction in the size and duration of pricing inefficiencies that many of our funds seek to exploit.
Competition is also intense for the attraction and retention of qualified employees. Our ability to continue to compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing employees.
For additional information concerning the competitive risks that we face, see “Item 1A. Risk Factors—Risks Related to Our Businesses—The investment management business is intensely competitive, which could have a material adverse impact on us.”

ITEM 1A. RISK FACTORS

Risks Related to Our Businesses
Poor performance of our funds would cause a decline in our revenue and results of operations, may obligate us to repay incentive income previously paid to us and would adversely affect our ability to raise capital for future funds.
We derive revenues in part from:
management fees, which are based generally on the amount of capital invested in our funds;
transaction and advisory fees relating to the investments our funds make;
incentive income, based on the performance of our funds; and
investment income from our investments as general partner.
If a fund performs poorly, we will receive little or no incentive income with regard to the fund and little income or possibly losses from any principal investment in the fund. Furthermore, if, as a result of poor performance of later investments in a fund’s life, the fund does not achieve total investment returns that exceed a specified investment return threshold for the life of the fund, we may be obligated to repay the amount by which incentive income that was previously distributed to us exceeds amounts to which we are ultimately entitled. Our fund investors and potential fund investors continually assess our funds’ performance and our ability to raise capital. Accordingly, poor fund performance may deter future investment in our funds and thereby decrease the capital invested in our funds and ultimately, our management fee income.
We depend on Leon Black, Joshua Harris and Marc Rowan, and the loss of their services would have a material adverse effect on us.
The success of our businesses depends on the efforts, judgment and personal reputations of our Managing Partners, Leon Black, Joshua Harris and Marc Rowan. Their reputations, expertise in investing, relationships with our fund investors and relationships with members of the business community on whom our funds depend for investment opportunities and financing are each critical elements in operating and expanding our businesses. We believe our performance is strongly correlated to the performance of these individuals. Accordingly, our retention of our Managing Partners is crucial to our success. Subject to the terms of their employment, non-competition and non-solicitation agreements, our Managing Partners may resign, join our competitors or form a competing firm at any time. If our Managing Partners were to join or form a competitor, some of our investors could choose to invest with that competitor, another competitor or not at all, rather than in our funds. The loss of the services of our Managing Partners may have a material adverse effect on us, including our ability to retain and attract investors and raise new funds, and the performance of our funds. We do not carry any “key man” insurance that would provide us with proceeds in the event of the death or disability of any of our Managing Partners. In addition, the loss of two or more of our Managing Partners may result in the termination of our role as general partner of two or more of our funds and the termination of the commitment periods of certain of our funds. See “—If two or more of our Managing Partners or other investment professionals leave our company, the commitment periods of certain of our funds may be terminated, and we may be in default under our credit agreement.” Although our Managing Partners have entered into employment, non-competition and non-solicitation agreements, which impose certain restrictions on competition and solicitation of our employees by our Managing Partners if they terminate their employment, a court may not enforce these provisions. See “Item 11. Executive Compensation—Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Employment, Non-Competition and Non-Solicitation Agreement with Chairman and Chief Executive Officer” for a more detailed description of the terms of the agreement for one of our Managing Partners.

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Changes in the debt financing markets may negatively impact the ability of our funds and their portfolio companies to obtain attractive financing for their investments and may increase the cost of such financing if it is obtained, which could lead to lower-yielding investments and potentially decreasing our net income.
In the event that our funds are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an increased interest rate or on unfavorable terms, our funds may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than would otherwise be the case, either of which could lead to a decrease in the investment income earned by us. Any failure by lenders to provide previously committed financing can also expose us to potential claims by sellers of businesses which we may have contracted to purchase. Our funds' portfolio companies regularly utilize the corporate debt markets in order to obtain financing for their operations. Similarly, certain of our credit funds rely on the availability of attractive financing for their investments. To the extent that the current credit markets have rendered such financing difficult to obtain or more expensive, this may negatively impact the operating performance of such portfolio companies and lead to lower-yielding investments with respect to such funds and, therefore, the investment returns on our funds. In addition, to the extent that the current markets make it difficult or impossible to refinance debt that is maturing in the near term, a relevant portfolio company may face substantial doubt as to its status as a going concern (which may result in an event of default under various agreements) or be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.
Difficult market conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, net income and cash flow and adversely affect our financial prospects and condition.
Our businesses are materially affected by conditions in the global financial markets and economic conditions throughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations). These factors are outside our control and may affect the level and volatility of securities prices and the liquidity and the value of investments, and we may not be able to or may choose not to manage our exposure to these conditions. Global financial markets have experienced considerable volatility in the valuations of equity and debt securities, a contraction in the availability of credit and an increase in the cost of financing. Volatility in the financial markets can materially hinder the initiation of new, large-sized transactions for our private equity segment and, together with volatility in valuations of equity and debt securities, may adversely impact our operating results. If market conditions deteriorate, our business could be affected in different ways. In addition, these events and general economic trends are likely to impact the performance of portfolio companies in many industries, particularly industries that are more impacted by changes in consumer demand, such as the packaging, manufacturing, chemical and refining industries, as well as travel and leisure, gaming and real estate industries. The performance of our funds and our performance may be adversely affected to the extent our fund portfolio companies in these industries experience adverse performance or additional pressure due to downward trends. Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs, within a time frame sufficient to match any further decreases in net income or increases in net losses relating to changes in market and economic conditions.
The financial downturn that began in 2007 adversely affected our operating results in a number of ways, and if the economy were to re-enter a recessionary or inflationary period, it may cause our revenue and results of operations to decline by causing:
our AUM to decrease, lowering management fees from our funds;
increases in costs of financial instruments;
adverse conditions for our portfolio companies (e.g., decreased revenues, liquidity pressures, increased difficulty in obtaining access to financing and complying with the terms of existing financings as well as increased financing costs);
lower investment returns, reducing incentive income;
higher interest rates, which could increase the cost of the debt capital we use to acquire companies in our private equity business; and
material reductions in the value of our fund investments, affecting our ability to realize carried interest from these investments.
Lower investment returns and such material reductions in value may result, among other reasons, because during periods of difficult market conditions or slowdowns (which may be across one or more industries, sectors or geographies), companies in which we invest may experience decreased revenues, financial losses, difficulty in obtaining access to financing and increased funding costs. During such periods, these companies may also have difficulty in expanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, including expenses payable to us. In addition,

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during periods of adverse economic conditions, our funds and their portfolio companies may have difficulty accessing financial markets, which could make it more difficult or impossible to obtain funding for additional investments and harm our AUM and operating results. Furthermore, such conditions would also increase the risk of default with respect to investments held by our funds that have significant debt investments, such as our opportunistic and European credit funds and our U.S. performing credit funds. Our funds may be affected by reduced opportunities to exit and realize value from their investments, by lower than expected returns on investments made prior to the deterioration of the credit markets, and by the fact that we may not be able to find suitable investments for the funds to effectively deploy capital, which could adversely affect our ability to raise new funds and thus adversely impact our prospects for future growth.
A decline in the pace of investment in our funds, an increase in the pace of sales of investments in our funds, or an increase in the amount of transaction and advisory fees we share with our fund investors would result in our receiving less revenue from transaction and advisory fees.

The transaction and advisory fees that we earn are driven in part by the pace at which our funds make investments. Many factors could cause a decline in the pace of investment, including the inability of our investment professionals to identify attractive investment opportunities, competition for such opportunities among other potential acquirers, decreased availability of capital on attractive terms and our failure to consummate identified investment opportunities because of business, regulatory or legal complexities and adverse developments in the U.S. or global economy or financial markets. Any decline in the pace at which our funds make investments would reduce our transaction and advisory fees and could make it more difficult for us to raise capital. Likewise, during attractive selling environments, our funds may capitalize on increased opportunities to exit investments. Any increase in the pace at which our funds exit investments would reduce transaction and advisory fees. In addition, some of our fund investors have requested, and we expect to continue to receive requests from fund investors, that we share with them a larger portion, or all, of the transaction and advisory fees generated by our funds' investments. To the extent we accommodate such requests, it would result in a decrease in the amount of fee revenue we could earn. For example, in Fund VIII we have agreed that 100% of certain transaction and advisory fees will be shared with the investors in the fund through a management fee offset mechanism, whereas the percentage was 68% in Fund VII.

If two or more of our Managing Partners or other investment professionals leave our company, the commitment periods of certain of our funds may be terminated, and we may be in default under our credit agreement.

The governing agreements of certain of our funds provide that in the event certain “key persons” (such as two or more of Messrs. Black, Harris and Rowan and/or certain other of our investment professionals) fail to devote the requisite time to our business, the commitment period will terminate if a certain percentage in interest of the investors do not vote to continue the commitment period. This is true of Fund VI, Fund VII and Fund VIII, on which our near- to medium-term performance will heavily depend. Apollo Credit Opportunity Fund III, L.P. ("COF III"), Apollo European Principal Finance Fund II, L.P. ("EPF II"), Financial Credit Investment II, L.P. ("FCI II") and certain other credit funds have similar provisions. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our funds would likely result in significant reputational damage to us.
Messrs. Black, Harris and Rowan may terminate their employment with us at any time.
We may not be successful in raising new funds or in raising more capital for certain of our funds and may face pressure on fee arrangements of our future funds.
Our funds may not be successful in consummating their current capital-raising efforts or others that they may undertake, or they may consummate them at investment levels far lower than those currently anticipated. Any capital raising that our funds do consummate may be on terms that are unfavorable to us or that are otherwise different from the terms that we have been able to obtain in the past. These risks could occur for reasons beyond our control, including general economic or market conditions, regulatory changes or increased competition.
Over the last few years, a large number of institutional investors that invest in alternative assets and have historically invested in our funds experienced negative pressure across their investment portfolios, which may affect our ability to raise capital from them. As a result of the global economic downturn during 2008 and 2009, these institutional investors experienced, among other things, a significant decline in the value of their public equity and debt holdings and a lack of realizations from their existing private equity portfolios. Consequently, many of these investors were left with disproportionately outsized remaining commitments to a number of private equity funds, and were restricted from making new commitments to third-party managed private equity funds such as those managed by us. To the extent economic conditions remain volatile or these issues reoccur, we may be unable to raise sufficient amounts of capital to support the investment activities of our future funds.

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In addition, certain institutional investors have publicly criticized certain fund fee and expense structures, including management fees and transaction and advisory fees. In September 2009, the Institutional Limited Partners Association, or “ILPA,” published a set of Private Equity Principles, or the “Principles,” which were revised in January 2011. The Principles were developed in order to encourage discussion between limited partners and general partners regarding private equity fund partnership terms. Certain of the Principles call for enhanced “alignment of interests” between general partners and limited partners through modifications of some of the terms of fund arrangements, including proposed guidelines for fees and carried interest structures. We provided ILPA our endorsement of the Principles, representing an indication of our general support for the efforts of ILPA. Although we have no obligation to modify any of our fees with respect to our existing funds, we may experience pressure to do so.
The failure of our funds to raise capital in sufficient amounts and on satisfactory terms could result in a decrease in AUM and management fee and transaction fee revenue or us being unable to achieve an increase in AUM and management fee and transaction fee revenue, and could have a material adverse effect on our financial condition and results of operations. Similarly, any modification of our existing fee arrangements or the fee structures for new funds could adversely affect our results of operations.
Third-party investors in our funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested by us, which could adversely affect a fund’s operations and performance.
Investors in all of our private equity and certain of our credit and real estate funds make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their obligations when due. Any investor that did not fund a capital call would be subject to several possible penalties, including having a significant amount of its existing investment forfeited in that fund. However, the impact of the penalty is directly correlated to the amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instance early in the life of the fund, then the forfeiture penalty may not be as meaningful. If investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, the operation and performance of those funds could be materially and adversely affected.
The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares.
We have presented in this report the returns relating to the historical performance of our private equity, credit and real estate funds. The returns are relevant to us primarily insofar as they are indicative of incentive income we have earned in the past and may earn in the future, our reputation and our ability to raise new funds. The returns of the funds we manage are not, however, directly linked to returns on our Class A shares. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in Class A shares. However, poor performance of the funds we manage will cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and the value of our Class A shares. An investment in our Class A shares is not an investment in any of the Apollo funds.

Moreover, the historical returns of our funds should not be considered indicative of the future returns of these or from any future funds we may raise, in part because:

market conditions during previous periods may have been significantly more favorable for generating positive performance, particularly in our private equity business, than the market conditions we may experience in the future;
our private equity funds’ rates of returns, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains, which may never be realized;
our funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, including the availability of debt capital on attractive terms and the availability of distressed debt opportunities, and we may not be able to achieve the same returns or profitable investment opportunities or deploy capital as quickly;
the historical returns that we present in this report derive largely from the performance of our current private equity funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed, which may have little or no realized investment track record;
Fund VI, Fund VII and Fund VIII are larger private equity funds, and this capital may not be deployed as profitably as other funds;

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the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has not occurred with respect to all of our funds and we believe is less likely to occur in the future;
our track record with respect to our credit funds and real estate funds is relatively short as compared to our private equity funds;
in recent years, there has been increased competition for private equity investment opportunities resulting from the increased amount of capital invested in private equity funds and high liquidity in debt markets; and
our newly established funds may generate lower returns during the period that they take to deploy their capital.
Finally, our private equity IRRs have historically varied greatly from fund to fund. Accordingly, you should realize that 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 risks described elsewhere in this report and risks of the industries and businesses in which a particular fund invests. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—The Historical Investment Performance of Our Funds.”
Our reported net asset values, rates of return and incentive income from affiliates are based in large part upon estimates of the fair value of our investments, which are based on subjective standards and may prove to be incorrect.
A large number of investments in our funds are illiquid and thus have no readily ascertainable market prices. We value these investments based on our estimate of their fair value as of the date of determination. We estimate the fair value of our investments based on third-party models, or models developed by us, which include discounted cash flow analyses and other techniques and may be based, at least in part, on independently sourced market parameters. The material estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, the timing of and the estimated proceeds from expected financings. The actual results related to any particular investment often vary materially as a result of the inaccuracy of these estimates and assumptions. In addition, because many of the illiquid investments held by our funds are in industries or sectors which are unstable, in distress, or undergoing some uncertainty, such investments are subject to rapid changes in value caused by sudden company-specific or industry-wide developments.
We include the fair value of illiquid assets in the calculations of net asset values, returns of our funds and our AUM. Furthermore, we recognize incentive income from affiliates based in part on these estimated fair values. Because these valuations are inherently uncertain, they may fluctuate greatly from period to period. Also, they may vary greatly from the prices that would be obtained if the assets were to be liquidated on the date of the valuation and often do vary greatly from the prices we eventually realize.
In addition, the values of our investments in publicly traded assets are subject to significant volatility, including due to a number of factors beyond our control. These include actual or anticipated fluctuations in the quarterly and annual results of these companies or other companies in their industries, market perceptions concerning the availability of additional securities for sale, general economic, social or political developments, changes in industry conditions or government regulations, changes in management or capital structure and significant acquisitions and dispositions. Because the market prices of these securities can be volatile, the valuation of these assets will change from period to period, and the valuation for any particular period may not be realized at the time of disposition. In addition, because our private equity funds often hold very large amounts of the securities of their portfolio companies, the disposition of these securities often takes place over a long period of time, which can further expose us to volatility risk. Even if we hold a quantity of public securities that may be difficult to sell in a single transaction, we do not discount the market price of the security for purposes of our valuations.
If we realize value on an investment that is significantly lower than the value at which it was reflected in a fund’s net asset values, we would suffer losses in the applicable fund. This could in turn lead to a decline in asset management fees and a loss equal to the portion of the incentive income from affiliates reported in prior periods that was not realized upon disposition. These effects could become applicable to a large number of our investments if our estimates and assumptions used in estimating their fair values differ from future valuations due to market developments. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Analysis” for information related to fund activity that is no longer consolidated. If asset values turn out to be materially different than values reflected in fund net asset values, fund investors could lose confidence which could, in turn, result in redemptions from our funds that permit redemptions or difficulties in raising additional investments.

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We have experienced rapid growth, which may be difficult to sustain and which may place significant demands on our administrative, operational and financial resources.
Our AUM has grown significantly in the past and we are pursuing further growth in the near future. Our rapid growth has caused, and planned growth, if successful, will continue to cause, significant demands on our legal, accounting and operational infrastructure, and increased expenses. The complexity of these demands, and the expense required to address them, is a function not simply of the amount by which our AUM has grown, but of the growth in the variety, including the differences in strategy between, and complexity of, our different funds. In addition, we are required to continuously develop our systems and infrastructure in response to the increasing sophistication of the investment management market and legal, accounting, regulatory and tax developments.
Our future growth will depend in part, on our ability to maintain an operating platform and management system sufficient to address our growth and will require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we face significant challenges:
in maintaining adequate financial, regulatory and business controls;
implementing new or updated information and financial systems and procedures; and
in training, managing and appropriately sizing our work force and other components of our businesses on a timely and cost-effective basis.
We may not be able to manage our expanding operations effectively or be able to continue to grow, and any failure to do so could adversely affect our ability to generate revenue and control our expenses.
Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on our businesses. Changes in tax or law and other legislative or regulatory changes could adversely affect us.
Overview of Our Regulatory Environment. We are subject to extensive regulation, including periodic examinations, by governmental and self-regulatory organizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. and foreign government agencies and self-regulatory organizations, as well as state securities commissions in the United States, are empowered to conduct investigations and administrative proceedings that can result in fines, suspensions of personnel or other sanctions, including censure, the issuance of cease-and-desist orders or the suspension or expulsion of an investment advisor from registration or memberships. Even if an investigation or proceeding did not result in a sanction or the sanction imposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing investors or fail to gain new investors. The requirements imposed by our regulators are designed primarily to ensure the integrity of the financial markets and to protect investors in our funds and may not necessarily be designed to protect our shareholders. Consequently, these regulations often serve to limit our activities. For example, federal bank regulatory agencies have recently issued leveraged lending guidance covering transactions characterized by a degree of financial leverage. To the extent that such guidance limits the amount or cost of financing our funds are able to obtain for transactions, the returns on our funds’ investments may suffer.
Regulatory changes could adversely affect our business. As a result of highly publicized financial scandals, investors have exhibited concerns over the integrity of the financial markets and the regulatory environment in which we operate both in the United States and outside the United States is particularly likely to be subject to further regulation. There have been active debates both nationally and internationally over the appropriate extent of regulation and oversight in a number of areas which are or may be relevant to us, including private investment funds and their managers and the so-called “shadow banking” sector. Any changes in the regulatory framework applicable to our businesses may impose additional expenses on us, require the attention of senior management or result in limitations in the manner in which our business is conducted.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act,” continues to impose significant new regulations on almost every aspect of the U.S. financial services industry, including aspects of our business and the markets in which we operate. Among other things, the Dodd-Frank Act includes the following provisions that could have an adverse impact on our ability to continue to operate our businesses.
The Dodd-Frank Act established the Financial Stability Oversight Council (the “FSOC”), which is comprised of representatives of all the major U.S. financial regulators, to act as the financial system’s systemic risk regulator with the authority to review the activities of non-bank financial companies predominantly engaged in financial activities that are designated as “systemically important.” Such designation is applicable to companies where material financial distress could pose risk to the financial stability of the United States. On April 3, 2012, the

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FSOC issued a final rule and interpretive guidance regarding the process by which it will designate nonbank financial companies as systemically important. The final rule and interpretive guidance detail a three-stage process, with the level of scrutiny increasing at each stage. Initially, the FSOC will apply a broad set of uniform quantitative metrics to screen out financial companies that do not warrant additional review. The FSOC will consider whether a company has at least $50 billion in total consolidated assets and whether it meets other thresholds relating to credit default swaps outstanding, derivative liabilities, total debt outstanding, a minimum leverage ratio of total consolidated assets (excluding separate accounts) to total equity of 15 to 1, and a short-term debt ratio of debt (with maturities of less than 12 months) to total consolidated assets (excluding separate accounts) of 10%. A company that meets or exceeds both the asset threshold and one of the other thresholds will be subject to additional review. The review criteria could, and is expected to, evolve over time. While we believe it to be unlikely that we would be designated as systemically important, if such designation were to occur, we would be subject to significantly increased levels of regulation, which includes, without limitation, a requirement to adopt heightened standards relating to capital, leverage, liquidity, risk management, credit exposure reporting and concentration limits, restrictions on acquisitions and being subject to annual stress tests by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).

The Dodd-Frank Act, under what has become known as the “Volcker Rule,” generally prohibits depository institution holding companies (including certain foreign banks with U.S. branches and insurance companies with U.S. depository institution subsidiaries), insured depository institutions and subsidiaries and affiliates of such entities (collectively, “banking entities”) from investing in, sponsoring or having certain other relationships with private equity funds or hedge funds. The Volcker Rule became effective on July 21, 2012. The statute provides banking entities a period of two years to conform their activities and investments to the requirement of the statute, i.e., until July 21, 2014. However, the Federal Reserve is permitted to extend this conformance period, one year at a time, for a total of no more than three additional years. Pursuant to this authority on December 18, 2014, the Federal Reserve extended the conformance period for an additional year, until July 21, 2015. By the expiration of such date, banking entities must have wound down, sold or otherwise conformed their activities investments and relationships to the requirements of the Volcker Rule. In addition, the Dodd-Frank Act includes a special provision to address the difficulty banking entities may experience in conforming investments in a private equity fund that qualifies as an “illiquid fund,” specifically, a fund that as of May 1, 2010 was principally invested in, or was contractually committed to principally invest in, illiquid assets and makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets. For such a fund, a banking entity may seek approval for an extended conformance period of up to five years. While there remains substantial uncertainty regarding the availability of extensions and transition period relief, as well as general practical implications under the Volcker Rule, there are likely to be adverse implications on our ability to raise funds from banking organizations as a result of this prohibition.

The Dodd-Frank Act requires many private equity and hedge fund advisers to register with the SEC under the Investment Advisers Act, to maintain extensive records and to file reports if deemed necessary for purposes of systemic risk assessment by certain governmental bodies. As described elsewhere in this Form 10-K, all of the investment advisers of our investment funds operated in the U.S. are registered as investment advisers with the SEC.

The Dodd-Frank Act authorizes federal regulatory agencies to review and, in certain cases, prohibit compensation arrangements at financial institutions that give employees incentives to engage in conduct deemed to encourage inappropriate risk taking by covered financial institutions. Such restrictions could limit our ability to recruit and retain investment professionals and senior management executives.

Rules and regulations required under the Dodd-Frank Act have recently begun to become effective and comprehensively regulate the “over the counter” (“OTC”) derivatives markets for the first time. The Dodd-Frank Act imposes mandatory clearing and will impose exchange or swap execution facility trading and margin requirements on many swaps and derivative transactions (including formerly unregulated over-the-counter derivatives). The Commodity Futures Trading Commission (the “CFTC”) currently requires that certain interest rate and credit default index swaps be centrally cleared and the first requirement to execute certain contracts through a swap execution facility is now effective.  Additional standardized swap contracts are expected to be subject to new clearing and execution requirements in the future.  OTC trades submitted for clearing will be subject to minimum initial and variation margin requirements set by the relevant clearinghouse, as well as possible margin requirements mandated by the SEC or the CFTC.  For swaps that are cleared through a clearinghouse, the funds will face the clearinghouse as legal counterparty and will be subject to clearinghouse performance and credit risk.  Clearinghouse collateral requirements may differ from and be greater than the

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collateral terms negotiated with derivatives counterparties in the OTC market.  This may increase a fund’s cost in entering into these products and impact a fund’s ability to pursue certain investment strategies.  OTC derivative dealers are also required to post margin to the clearinghouses through which they clear their customers’ trades instead of using such margin in their operations for cleared derivatives, as is currently permitted.  This will increase the OTC derivative dealers’ costs and these increased costs are expected to be passed through to other market participants in the form of higher upfront and mark-to-market margin, less favorable trade pricing, and possible new or increased fees. 

OTC trades not cleared through a registered clearinghouse may not be subject to the protections afforded to participants in cleared swaps (for example, centralized counterparty, customer asset segregation and mandatory margin requirements). The regulators have proposed margin requirements on non-cleared OTC derivatives, but these regulations have not yet been finalized. Although the Dodd-Frank Act includes limited exemptions from the clearing and margin requirements for so-called “end-users,” our funds and portfolio companies may not be able to rely on such exemptions. 

The Dodd-Frank Act also creates new categories of regulated market participants, such as “swap-dealers,” “security-based swap dealers,” “major swap participants” and “major security-based swap participants” who will be subject to significant new capital, registration, recordkeeping, reporting, disclosure, business conduct and other regulatory requirements, which will give rise to new administrative costs. Even if certain new requirements are not directly applicable to us, they may still increase our costs of entering into transactions with the parties to whom the requirements are directly applicable. Moreover, new exchange or swap execution facility trading and trade reporting requirements may lead to reductions in the liquidity or price transparency of certain swaps and derivative transactions, causing higher pricing or reduced availability of derivatives, or the reduction of arbitrage opportunities for us, which could adversely affect the performance of certain of our trading strategies.

Position limits imposed by various regulators, self-regulatory organizations or trading facilities on derivatives may also limit our ability to affect desired trades. Position limits are the maximum amounts of net long or net short positions that any one person or entity may own or control in a particular financial instrument. For example, the CFTC, on November 5, 2013, re-proposed rules that would establish specific limits on positions in 28 physical commodity futures and option contracts as well as swaps that are economically equivalent to such contracts. In addition, the Dodd-Frank Act requires the SEC to set position limits on security-based swaps. If such proposed rules are adopted, we may be required to aggregate the positions of our various investment funds and the positions of our funds' portfolio companies. It is possible that trading decisions may have to be modified and that positions held may have to be liquidated in order to avoid exceeding such limits. Such modification or liquidation, if required, could adversely affect our operations and profitability.

On October 21, 2014, the final rules implementing the credit risk retention requirements of Section 941 of the Dodd-Frank Act (the "Risk Retention Rules") were issued.  Except with respect to asset-backed securities transactions that satisfy certain exemptions, the Risk Retention Rules generally require sponsors of asset-backed securities transactions to retain not less than 5% of the credit risk of the assets collateralizing asset-backed securities. The Risk Retention Rules will become effective beginning on December 24, 2016 with respect to asset-backed securities collateralized by assets other than residential mortgages (and December 24, 2015 for asset-backed securities collateralized by residential mortgages).  The new mandatory risk retention requirement for CLOs may result in us having to invest money in CLOs that we manage after the effective date of the Risk Retention Rules (including, potentially, in existing CLOs that are refinanced or as to which certain other material events occur after such effective date) that would otherwise be available for other uses.  While the impact of the Risk Retention Rules on the loan securitization market and the leveraged loan market generally are uncertain, the Risk Retention Rules may impact our ability or desire to manage CLOs in the future.

The Dodd-Frank Act requires public companies to adopt and disclose policies requiring, in the event the company is required to issue an accounting restatement, the clawback of related incentive compensation from current and former executive officers.

The Dodd-Frank Act amends the Exchange Act to compensate and protect whistleblowers who voluntarily provide original information to the SEC and establishes a fund to be used to pay whistleblowers who will be entitled to receive a payment equal to between 10% and 30% of certain monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower. We expect that these provisions will result in a significant increase in whistleblower claims across our industry, and investigating such claims

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could generate significant expenses and take up significant management time, even for frivolous and non-meritorious claims.
Many of these provisions are subject to further rulemaking and to the discretion of regulatory bodies, such as the FSOC, the Federal Reserve and the SEC.
In June 2010, the SEC adopted a “pay-to-play” rule that restricts politically active investment advisors from managing state pension funds. The rule prohibits, among other things, a covered investment advisor from receiving compensation for advisory services provided to a government entity (such as a state pension fund) for a two-year period after the advisor, certain covered employees of the advisor or any covered political action committee controlled by the advisor or its employees makes a political contribution to certain government officials. In addition, a covered investment advisor is prohibited from engaging in political fundraising activities for certain elected officials or candidates in jurisdictions where such advisor is providing or seeking governmental business. This rule complicates and increases the compliance burden for our investment advisors. It will be imperative for a covered investment advisor to adopt an effective compliance program in light of the substantial penalties associated with the rule.
It is impossible to determine the full extent of the impact on us of the Dodd-Frank Act or any other new laws, regulations or initiatives that may be proposed or whether any of the proposals will become law. Any changes in the regulatory framework applicable to our business, including the changes described above, may impose additional costs on us, require the attention of our senior management or result in limitations on the manner in which we conduct our business. Moreover, as calls for additional regulation have increased, there may be a related increase in regulatory investigations of the trading and other investment activities of alternative asset management funds, including our funds. Compliance with any new laws or regulations could make compliance more difficult and expensive, affect the manner in which we conduct our business and adversely affect our profitability.
Exemptions from Certain Laws. We regularly rely on exemptions from various requirements of law or regulation, including the Securities Act, the Exchange Act, the Investment Company Act, CFTC regulations, the Commodity Exchange Act of 1936, as amended, and the Employment Retirement Income Security Act of 1974, as amended in conducting our activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. For example, in raising new funds, we typically rely on private placement exemptions from registration under the Securities Act, including Regulation D, which was recently amended to prohibit issuers (including our funds) from relying on certain of the exemptions from registration if the fund or any of its "covered persons" (including certain officers and directors, but also including certain third parties including, among others, promoters, placement agents and beneficial owners of 20% of outstanding voting securities of the fund) has been the subject of a "disqualifying event," or constitutes a "bad actor," which can result from a variety of criminal, regulatory and civil matters. If any of the covered persons associated with our funds is subject to a disqualifying event, one or more of our funds could lose the ability to raise capital in a Rule 506 private offering for a significant period of time, which could significantly impair our ability to raise new funds, and, therefore, could materially adversely affect our business, financial condition and results of operations. In addition, if certain of our employees or any potential significant fund investor has been the subject of a disqualifying event, we could be required to reassign or terminate such an employee or we could be required to refuse the investment of such an investor, which could impair our relationships with investors, harm our reputation, or make it more difficult to raise new funds. If for any reason any of these exemptions were to become unavailable to us, we could become subject to regulatory action, third-party claims or be required to register under certain regulatory regimes, and our businesses could be materially and adversely affected. See, for example, “—Risks Related to Our Organization and Structure—If we were deemed an investment company under the Investment Company Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated and could have a material adverse effect on our businesses and the price of our Class A shares.”
Fund Regulatory Environment. The regulatory environment in which our funds operate may affect our businesses. For example, changes in antitrust laws or the enforcement of antitrust laws could affect the level of mergers and acquisitions activity, and changes in state laws may limit investment activities of state pension plans. See “Item 1. Business—Regulatory and Compliance Matters” for a further discussion of the regulatory environment in which we conduct our businesses.
Certain of the funds and accounts we manage that engage in originating, lending and/or servicing loans, may be subject to state and federal regulation, borrower disclosure requirements, limits on fees and interest rates on some loans, state lender licensing requirements and other regulatory requirements in the conduct of their business. These funds and accounts may also be subject to consumer disclosures and substantive requirements on consumer loan terms and other federal regulatory requirements applicable to consumer lending that are administered by the Consumer Financial Protection Bureau. These state and federal regulatory programs are designed to protect borrowers.

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State and federal regulators and other governmental entities have authority to bring administrative enforcement actions or litigation to enforce compliance with applicable lending or consumer protection laws, with remedies that can include fines and monetary penalties, restitution of borrowers, injunctions to conform to law, or limitation or revocation of licenses and other remedies and penalties. In addition, lenders and servicers may be subject to litigation brought by or on behalf of borrowers for violations of laws or unfair or deceptive practices. Failure to conform to applicable regulatory and legal requirements could be costly and have a detrimental impact on certain of Apollo’s funds and accounts and ultimately on Apollo.
Portfolio Company Regulatory Environment. The regulatory environment in which our funds' portfolio companies operate may affect our business. For example, certain of our funds may invest in the natural resources industry where environmental laws, regulations and regulatory initiatives play a significant role and can have a substantial effect on investments in the industry. See for additional examples "—Insurance Regulation" and "—We are a holding company subject to the jurisdiction of the Federal Energy Regulatory Commission (the "FERC"). An acquirer of our Class A shares may be required to obtain prior approval from the FERC and make other filings with FERC." Additionally, we or certain of our investment funds potentially could be held liable under ERISA for the pension obligations of one or more of our funds' portfolio companies if we or the investment fund were determined to be engaged in a "trade or business" and deemed part of the same "controlled group" as the portfolio company, and the pension obligations of any particular portfolio company could be material. In a 2013 decision of a federal appellate court (Sun Capital Partners III LP v. New England Teamsters & Trucking Indus. Pension Fund), a private equity fund was held to be engaged in a "trade or business" under ERISA. In addition, regulators may scrutinize, investigate or take action against us as a result of actions or inactions by portfolio companies operating in a regulated industry if such a regulator were to deem, or potentially deem, such portfolio company to be under our control.  For example, based on positions taken by European governmental authorities, we or certain of our investment funds potentially could be liable for fines if portfolio companies deemed to be under our control are found to have violated European antitrust laws. Such potential, or future, liability may materially affect our business.
Future Regulation. We may be adversely affected as a result of new or revised legislation or regulations imposed in the U.S. or elsewhere. As calls for additional regulation have increased, there may be a related increase in regulatory investigations of the trading and other investment activities of alternative asset management funds, including our funds. Such investigations may impose additional expenses on us, may require the attention of senior management and may result in fines or other sanctions if any of our funds are deemed to have violated any regulations.
We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules. New laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business and divert significant management and operational resources and attention from our business.
Apollo provides investment management services through registered investment advisors. Investment advisors are subject to extensive regulation in the United States and in the other countries in which our investment activities occur. The SEC oversees our activities as a registered investment advisor under the Investment Advisers Act. In the United Kingdom, we are subject to regulation by the U.K. Financial Conduct Authority, which replaced the Financial Services Authority as of April 1, 2013. Our other European operations, and our investment activities around the globe, are subject to a variety of regulatory regimes that vary country by country. A failure to comply with the obligations imposed by regulatory regimes to which we are subject, including the Investment Advisers Act, could result in investigations, sanctions and reputational damage.
In November 2010, the European Parliament adopted the Directive on Alternative Investment Fund Managers, or the “AIFM,” which was required to be implemented in the national laws of the European Union (“EU”) member states by July 22, 2013. The AIFM is also likely to be implemented in the countries which form part of the European Economic Area (the “EEA”). The AIFM imposes significant new regulatory requirements on investment managers operating within the EEA, including with respect to conduct of business, regulatory capital, valuations, disclosures and marketing, and rules on the structure of remuneration for certain personnel. Alternative investment funds organized outside of the EU in which interests are marketed within the EEA are now subject to significant conditions on their operations. In the immediate future, such funds may be marketed only in certain EEA jurisdictions and in compliance with requirements to register the fund for marketing in each relevant jurisdiction and to undertake periodic investor and regulatory reporting. In some countries, additional obligations are imposed, for example in Germany, marketing of a non-EEA fund now also requires the appointment of one or more depositaries (with cost implications for the fund). In the longer term (late 2015 at the earliest) non-EEA managers of non-EEA funds may be able to register under the AIFM. Where Apollo registers under the AIFM, Apollo will have more freedom to promote relevant funds in the EEA, although this will be subject to full compliance with all the requirements of the AIFM, which include (among other things) satisfying the competent authority of the robustness of internal arrangements with respect to risk management, in particular liquidity risks and additional operational and counterparty risks associated with short selling; the management and disclosure of conflicts of interest; the fair valuation of assets; and the security of depository/custodial arrangements. Additional requirements and restrictions apply where funds invest in an EEA portfolio company, including restrictions that may impose limits on certain investment and realization

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strategies, such as dividend recapitalizations and reorganizations. Such rules could potentially impose significant additional costs on the operation of our business or investments in the EEA and could limit our operating flexibility within the relevant jurisdictions.
In July 2012, the European Parliament adopted the Regulation on OTC derivatives, central counterparties and trade repositories, known as “EMIR.” EMIR comes into force in stages and implements requirements similar to, but not the same as, those in Title VII of Dodd Frank, in particular requiring reporting of all derivative transactions, risk mitigation (in particular initial and variation margin) for OTC derivative transactions and central clearing of certain OTC derivative contracts. EMIR has minimal impact on the Apollo funds at present but is likely to apply more fully as additional implementation stages are reached. Compliance with the requirements is likely to increase the burdens and costs of doing business.
In Germany, legislative amendments have been adopted which may limit deductibility of interest and other financing expenses in companies in which our funds have invested or may invest in the future. According to the German interest barrier rule, the tax deduction available to a company in respect of a net interest expense (interest expense less interest income) is limited to 30% of its tax earnings before interest, taxes, depreciation and amortization (“EBITDA”). Annual net interest expense that does not exceed the threshold of €3m can be deducted without any limitations for income tax purposes. Interest expense in excess of the interest deduction limitation may be carried forward indefinitely (subject to change in ownership restrictions) and used in future periods against all profits and gains. In respect of a tax group, interest paid by the German tax group entities to non-tax group parties (e.g. interest on bank debt, capex facility and working capital facility debt) will be restricted to 30% of the tax group’s tax EBITDA. However, the interest barrier rule may not apply where German company’s gearing under International Financial Reporting Standards (“IFRS”) accounting principles is at maximum of 2% higher than the overall group’s leverage ratio at the level of the very top level entity which would be subject to IFRS consolidation (the “escape clause test”). This test is failed where any worldwide company of the entire group pays more than 10% of its net interest expense on debt to substantial (i.e. greater than 25%) shareholders, related parties of such shareholders (that are not members of the group) or secured third parties (although security granted by group members should not be harmful). If the group does not apply IFRS accounting principles, EU member countries’ generally accepted accounting principles or generally accepted accounting principles in the United States of America (“U.S. GAAP”) may also be accepted for the purpose of the escape clause test. It should be noted that for trade tax purposes, there is principally a 25% add back on all deductible interest paid or accrued by any German entity after the consideration of a tax exempt amount kEUR 100 which is applied to the sum of all add back amounts. For trade tax purposes interest payments within a German tax group will not be considered. Our businesses are subject to the risk that similar measures might be introduced in other countries in which they currently have investments or plan to invest in the future, or that other legislative or regulatory measures might be promulgated in any of the countries in which we operate that adversely affect our businesses. Additionally, the Organization for Economic Co-Operation and Development ("OECD") issued an action plan in July 2013 calling for a coordinated multi-jurisdictional approach to "base erosion and profit shifting" by multinational companies. The action plan identified 15 actions the OECD determined are needed to address "base erosion and profit shifting" and generally set target dates for completion of each of the items between 2014 and 2015. Any changes to international tax laws or foreign domestic tax laws, including new definitions of “permanent establishment”, could impact the tax treatment of our foreign earnings and adversely impact the investment returns of our funds.
Insurance Regulation. State insurance departments have broad administrative powers over the insurance business of our insurance company affiliates, including insurance company licensing and examination, agent licensing, establishment of reserve requirements and solvency standards, premium rate regulation, admissibility of assets, policy form approval, unfair trade and claims practices, payment of dividends and distributions to shareholders, review and/or approval of transactions with affiliates and other matters. State regulators regularly review and update these and other requirements.
Currently, there are proposals to increase the scope of regulation of insurance holding companies in both the United States and internationally. In the United States, the NAIC has promulgated amendments to its insurance holding company system model law and regulations for consideration by the various states that would provide for more extensive informational reporting regarding parents and other affiliates of insurance companies, with the purpose of protecting domestic insurers from enterprise risk, including requiring an annual enterprise risk report by the ultimate controlling person identifying the material risks within the insurance holding company system that could pose enterprise risk to domestic insurers. To date, both Iowa and New York have enacted laws to adopt such amendments. Internationally, the International Association of Insurance Supervisors is in the process of adopting a framework for the “group wide” supervision of internationally active insurance groups. The NAIC has also promulgated additional amendments to its insurance holding company system model law that address “group wide” supervision of internationally active insurance groups. Changes to existing laws or regulations must be adopted by individual states or foreign jurisdictions before they will become effective. We cannot predict with any degree of certainty the additional capital requirements, compliance costs or other burdens these requirements may impose on us and our insurance company affiliates.

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The Dodd-Frank Act created the Federal Insurance Office (the “FIO”) within the Department of Treasury headed by a Director appointed by the Treasury Secretary. The FIO is designed principally to exercise a monitoring and information gathering role, rather than a regulatory role. In that capacity, the FIO has been charged with providing reports to the U.S. Congress on (i) modernization of U.S. insurance regulation and (ii) the U.S. and global reinsurance market. Such reports could ultimately lead to changes in the regulation of insurers and reinsurers in the U.S.
We are a holding company subject to the jurisdiction of the Federal Energy Regulatory Commission (the “FERC”). An acquirer of our Class A shares may be required to obtain prior approval from the FERC and make other filings with the FERC.

We are a holding company subject to the jurisdiction of the FERC as a result of certain of the funds we manage directly or indirectly owning, controlling or holding, with power to vote, 10% or more of the voting securities in a “public-utility company” or a “holding company” of a public-utility company (as those terms are defined in the U.S. Public Utility Holding Company Act of 2005, or “PUHCA”). Absent an exemption to or waiver from the FERC’s regulations implementing PUHCA, we and any affiliate, associate company and subsidiary company (as those terms are defined in PUHCA), would be required to maintain and make available to FERC, such books, accounts, memoranda and other records of transactions as the FERC may deem relevant to electric or natural gas rates subject to the FERC’s jurisdiction.  We have submitted a notification of holding company status and a notification of waiver of the accounting, record retention and reporting requirements to the FERC.  An acquirer of securities representing 10% or more of the total voting power of Apollo Global Management, LLC likewise would be required to submit similar filings to the FERC under PUHCA.

We are a holding company with subsidiaries that are the general partner and manager of certain funds that have an investment in entities that are “public utilities” (as defined in the Federal Power Act (the “FPA”)) and, therefore, subject to FERC’s jurisdiction under the FPA.  An acquirer of our Class A shares that (i) is, or is affiliated with, a “holding company” of a public-utility company, or (ii) is itself a public utility under the FPA, may have its own independent obligation to obtain prior approval from, or make other filings with, FERC with respect to an acquisition of 10% or more of the total voting power of Apollo Global Management, LLC.

Our revenue, net income and cash flow are all highly variable, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of our Class A shares to decline.

Our revenue, net income and cash flow are all highly variable, primarily due to the fact that carried interest from our private equity funds and certain of our credit and real estate funds, which constitutes the largest portion of income from our combined businesses, and the transaction and advisory fees that we receive can vary significantly from quarter to quarter and year to year. In addition, the investment returns of most of our funds are volatile. We may also experience fluctuations in our results from quarter to quarter and year to year due to a number of other factors, including changes in the values of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economic and market conditions. Our future results will also be significantly dependent on the success of our larger funds (e.g., Fund VIII), changes in the value of which may result in fluctuations in our results. In addition, carried interest income from our private equity funds and certain of our credit and real estate funds is subject to contingent repayment by the general partner if, upon the final distribution, the relevant fund’s general partner has received cumulative carried interest on individual portfolio investments in excess of the amount of carried interest it would be entitled to from the profits calculated for all portfolio investments in the aggregate. See “—Poor performance of our funds would cause a decline in our revenue and results of operations, may obligate us to repay incentive income previously paid to us and would adversely affect our ability to raise capital for future funds.” Such variability may lead to volatility in the trading price of our Class A shares and cause our results for a particular period not to be indicative of our performance in a future period. It may be difficult for us to achieve steady growth in net income and cash flow on a quarterly basis, which could in turn lead to large adverse movements in the price of our Class A shares or increased volatility in our Class A share price generally.
The timing of carried interest generated by our funds is uncertain and will contribute to the volatility of our results. Carried interest depends on our funds’ performance. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value or other proceeds of an investment through a sale, public offering, recapitalization or other exit. Even if an investment proves to be profitable, it may be several years before any profits can be realized in cash or other proceeds. We cannot predict when, or if, any realization of investments will occur. Generally, with respect to our private equity funds, although we recognize carried interest income on an accrual basis, we receive private equity carried interest payments only upon disposition of an investment by the relevant fund, which contributes to the volatility of our cash flow. If we were to have a realization event in a particular quarter or year, it may have a significant impact on our results for that particular quarter or year that may not be replicated in subsequent periods. We recognize revenue on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds, and a

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decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue, which could further increase the volatility of our results. With respect to a number of our credit funds, our incentive income is generally paid annually, semi-annually or quarterly, and the varying frequency of these payments will contribute to the volatility of our revenues and cash flow. Furthermore, we earn this incentive income only if the net asset value of a fund has increased or, in the case of certain funds, increased beyond a particular threshold. Certain of our credit funds also have “high water marks” with respect to the investors in these funds. If the high water mark for a particular investor is not surpassed, we would not earn incentive income with respect to such investor during a particular period even though such investor had positive returns in such period as a result of losses in prior periods. If such an investor experiences losses, we will not be able to earn incentive income from such investor until it surpasses the previous high water mark. The incentive income we earn is therefore dependent on the net asset value of investors’ investments in the fund, which could lead to significant volatility in our results.
Because our revenue, net income and cash flow can be highly variable from quarter to quarter and year to year, we plan not to provide any guidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in our Class A share price.
The investment management business is intensely competitive, which could have a material adverse impact on us.
The investment management business is intensely competitive. We face competition both in the pursuit of outside investors for our funds and in acquiring investments in attractive portfolio companies and making other investments. It is possible that it will become increasingly difficult for our funds to raise capital as funds compete for investments from a limited number of qualified investors. As a result of the global economic downturn during 2008 and 2009 and generally poor returns in alternative asset investment businesses during the crisis, institutional investors suffered from decreasing returns, liquidity pressure, increased volatility and difficulty maintaining targeted asset allocations, and a significant number of investors materially decreased or temporarily stopped making new fund investments during this period. As the economy continues to recover, such investors may elect to reduce their overall portfolio allocations to alternative investments such as private equity and hedge funds, resulting in a smaller overall pool of available capital in our industry. Even if such investors continue to invest at historic levels, they may seek to negotiate reduced fee structures or other modifications to fund structures as a condition to investing.
In the event all or part of this analysis proves true, when trying to raise new capital we will be competing for fewer total available assets in an increasingly competitive environment which could lead to fee reductions and redemptions as well as difficulty in raising new capital. Such changes would adversely affect our revenues and profitability.
Competition among funds is based on a variety of factors, including:
investment performance;
investor liquidity and willingness to invest;
investor perception of investment managers’ drive, focus and alignment of interest;
quality of service provided to and duration of relationship with investors;
business reputation; and
the level of fees and expenses charged for services.
We compete in all aspects of our businesses with a large number of investment management firms, private equity, credit and real estate fund sponsors and other financial institutions. A number of factors serve to increase our competitive risks:
fund investors may develop concerns that we will allow a business to grow to the detriment of its performance;
investors may reduce their investments in our funds or not make additional investments in our funds based upon current market conditions, their available capital or their perception of the health of our businesses;
some of our competitors have greater capital, lower targeted returns or greater sector or investment strategy-specific expertise than we do, which creates competitive disadvantages with respect to investment opportunities;
some of our competitors may also have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities;
some of our competitors may perceive risk differently than we do, which could allow them either to outbid us for investments in particular sectors or, generally, to consider a wider variety of investments;
some of our funds may not perform as well as competitors’ funds or other available investment products;

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our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment;
some fund investors may prefer to invest with an investment manager that is not publicly traded;
there are relatively few barriers to entry impeding new private equity and capital markets fund management firms, and the successful efforts of new entrants into our various businesses, including former “star” portfolio managers at large diversified financial institutions as well as such institutions themselves, will continue to result in increased competition;
there are relatively few barriers to entry to our businesses, implementing an integrated platform similar to ours or the strategies that we deploy at our funds, such as distressed investing, which we believe are our competitive strengths, except that our competitors would need to hire professionals with the investment expertise or grow it internally; and
other industry participants continuously seek to recruit our investment professionals away from us.
These and other factors could reduce our earnings and revenues and have a material adverse effect on our businesses. In addition, if we are forced to compete with other alternative investment managers on the basis of price, we may not be able to maintain our current management fee and incentive income structures. We have historically competed primarily on the performance of our funds, and not on the level of our fees or incentive income relative to those of our competitors. However, there is a risk that fees and incentive income in the alternative investment management industry will decline, without regard to the historical performance of a manager. Fee or incentive income reductions on existing or future funds, without corresponding decreases in our cost structure, would adversely affect our revenues and profitability.
Our ability to retain our investment professionals is critical to our success and our ability to grow depends on our ability to attract additional key personnel.
Our success depends on our ability to retain our investment professionals and recruit additional qualified personnel. We anticipate that it will be necessary for us to add investment professionals as we pursue our growth strategy. However, we may not succeed in recruiting additional personnel or retaining current personnel, as the market for qualified investment professionals is extremely competitive. Our investment professionals possess substantial experience and expertise in investing, are responsible for locating and executing our funds’ investments, have significant relationships with the institutions that are the source of many of our funds’ investment opportunities, and in certain cases have key relationships with our fund investors. Therefore, if our investment professionals join competitors or form competing companies it could result in the loss of significant investment opportunities and certain existing fund investors. Legislation has been proposed in the U.S. Congress to treat portions of carried interest as ordinary income rather than as capital gain for U.S. Federal income tax purposes. Because we compensate our investment professionals in large part by giving them an equity interest in our business or a right to receive carried interest, such legislation could adversely affect our ability to recruit, retain and motivate our current and future investment professionals. See “—Risks Related to Taxation—Our structure involves complex provisions of U.S. Federal income tax law for which no clear precedent or authority may be available. Our structure is also subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.” Many of our investment professionals are also entitled to receive carried interest or incentive income, and fluctuations in the distributions generated from such sources could also impair our ability to attract and retain qualified personnel. The loss of even a small number of our investment professionals could jeopardize the performance of our funds, which would have a material adverse effect on our results of operations. Efforts to retain or attract investment professionals may result in significant additional expenses, which could adversely affect our profitability.
We strive to maintain a work environment that promotes our culture of collaboration, motivation and alignment of interests with our fund investors and shareholders. If we do not continue to develop and implement effective processes and tools to manage growth and reinforce this vision, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations.
 
We may not be successful in expanding into new investment strategies, markets and businesses.
We actively consider the opportunistic expansion of our businesses, both geographically and into complementary new investment strategies. We may not be successful in any such attempted expansion. Attempts to expand our businesses involve a number of special risks, including some or all of the following:
the diversion of management’s attention from our core businesses;
the disruption of our ongoing businesses;
entry into markets or businesses in which we may have limited or no experience;
increasing demands on our operational systems;
potential increase in investor concentration; and

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the broadening of our geographic footprint, increasing the risks associated with conducting operations in foreign jurisdictions.
Additionally, any expansion of our businesses could result in significant increases in our outstanding indebtedness and debt service requirements, which would increase the risks in investing in our Class A shares and may adversely impact our results of operations and financial condition.
We also may not be successful in identifying new investment strategies or geographic markets that increase our profitability, or in identifying and acquiring new businesses that increase our profitability. Because we have not yet identified these potential new investment strategies, geographic markets or businesses, we cannot identify for you all the risks we may face and the potential adverse consequences on us and your investment that may result from our attempted expansion. We also do not know how long it may take for us to expand, if we do so at all. We have also entered into strategic partnerships and separately managed accounts, which lack the scale of our traditional funds and are more costly to administer. The prevalence of these accounts may also present conflicts and introduce complexity in the deployment of capital. We have total discretion, at the direction of our manager, without needing to seek approval from our board of directors or shareholders, to enter into new investment strategies, geographic markets and businesses, other than expansions involving transactions with affiliates which may require board approval.
Many of our funds invest in relatively high-risk, illiquid assets and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amount we invest in these activities.
Many of our funds invest in securities that are not publicly traded. In many cases, our funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Our funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration requirements is available. Accordingly, our funds may be forced, under certain conditions, to sell securities at a loss. The ability of many of our funds, particularly our private equity funds, to dispose of investments is heavily dependent on the public equity markets, inasmuch as the ability to realize value from an investment may depend upon the ability to complete an IPO of the portfolio company in which such investment is held. Furthermore, large holdings even of publicly traded equity securities can often be disposed of only over a substantial period of time, exposing the investment returns to risks of downward movement in market prices during the disposition period.
Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.
Because certain of our funds’ investments rely heavily on the use of leverage, our ability to achieve attractive rates of return on investments will depend on our continued ability to access sufficient sources of indebtedness at attractive rates. For example, in many of our private equity investments, indebtedness may constitute 70% or more of a portfolio company’s total debt and equity capitalization, including debt that may be incurred in connection with the investment, and a portfolio company’s leverage may increase as a result of recapitalization transactions subsequent to the company’s acquisition by a private equity fund. The absence of available sources of senior debt financing for extended periods of time could therefore materially and adversely affect our funds. An increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensive to finance those investments. Increases in interest rates could also make it more difficult to locate and consummate private equity investments because other potential buyers, including operating companies acting as strategic buyers, may be able to bid for an asset at a higher price due to a lower overall cost of capital. In addition, a portion of the indebtedness used to finance certain of our fund investments often includes high-yield debt securities. Availability of capital from the high-yield debt markets is subject to significant volatility, and there may be times when we might not be able to access those markets at attractive rates, or at all. For example, the dislocation in the credit markets which we believe began in July 2007 and the record backlog of supply in the debt markets resulting from such dislocation materially affected the ability and willingness of banks to underwrite new high-yield debt securities until relatively recently. The availability of debt facilities may be further limited following guidance issued to banks in March 2013 by the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. relating to loans to highly leveraged companies, and reported recent statements by the Federal Reserve and Office of the Comptroller of the Currency reaffirming their position on such loans.
Investments in highly leveraged entities are inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverse economic, market and industry developments. The incurrence of a significant amount of indebtedness by an entity could, among other things:
give rise to an obligation to make mandatory prepayments of debt using excess cash flow, which might limit the entity’s ability to respond to changing industry conditions to the extent additional cash is needed

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for the response, to make unplanned but necessary capital expenditures or to take advantage of growth opportunities;
allow even moderate reductions in operating cash flow to render it unable to service its indebtedness, leading to a bankruptcy or other reorganization of the entity and a loss of part or all of the equity investment in it;
limit the entity’s ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared to its competitors who have relatively less debt;
limit the entity’s ability to engage in strategic acquisitions that might be necessary to generate attractive returns or further growth; and
limit the entity’s ability to obtain additional financing or increase the cost of obtaining such financing, including for capital expenditures, working capital or general corporate purposes.
As a result, the risk of loss associated with a leveraged entity is generally greater than for companies with comparatively less debt. For example, many investments consummated by private equity sponsors during 2005, 2006 and 2007 that utilized significant amounts of leverage subsequently experienced severe economic stress and in certain cases defaulted on their debt obligations due to a decrease in revenues and cash flow precipitated by the economic downturn.
When certain of our funds’ existing portfolio investments reach the point when debt incurred to finance those investments matures in significant amounts and must be either repaid or refinanced, those investments may materially suffer if they have generated insufficient cash flow to repay maturing debt and there is insufficient capacity and availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or at all. If a limited availability of financing for such purposes were to persist for an extended period of time, when significant amounts of the debt incurred to finance these funds’ existing portfolio investments came due, these funds could be materially and adversely affected.
Our credit funds may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. The credit funds may borrow money from time to time to purchase or carry securities. The interest expense and other costs incurred in connection with such borrowing may not be recovered by appreciation in the securities purchased or carried, and will be lost-and the timing and magnitude of such losses may be accelerated or exacerbated-in the event of a decline in the market value of such securities. Gains realized with borrowed funds may cause the fund’s net asset value to increase at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund’s net asset value could also decrease faster than if there had been no borrowings.
In addition, as a business development company under the Investment Company Act, AINV is permitted to issue senior securities in amounts such that its asset coverage ratio equals at least 200% after each issuance of senior securities. Further, AFT and AIF, as registered investment companies, are permitted to (i) issue preferred shares in amounts such that their respective asset coverage equals at least 200% after issuance and (ii) to incur indebtedness, including through the issuance of debt securities, so long as immediately thereafter the fund will have an asset coverage of at least 300% after issuance. The ability of each of AFT, AIF and AINV to pay dividends will be restricted if its asset coverage ratio falls below 200% and any amounts that it uses to service its indebtedness are not available for dividends to its common stockholders. An increase in interest rates could also decrease the value of fixed-rate debt investments that our funds make. Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.
The potential requirement to convert our financial statements from being prepared in conformity with accounting principles generally accepted in the United States of America to International Financial Reporting Standards may strain our resources and increase our annual expenses.
As a public entity, the SEC may require in the future that we report our financial results under IFRS, instead of under U.S. GAAP. IFRS is a set of accounting principles that has been gaining acceptance on a worldwide basis. These standards are published by the London-based International Accounting Standards Board, or “IASB,” and are more focused on objectives and principles and less reliant on detailed rules than U.S. GAAP. Today, there remain significant and material differences in several key areas between U.S. GAAP and IFRS which would affect Apollo. Additionally, U.S. GAAP provides specific guidance in classes of accounting transactions for which equivalent guidance in IFRS does not exist. The adoption of IFRS is highly complex and would have an impact on many aspects and operations of Apollo, including but not limited to financial accounting and reporting systems, internal controls, taxes, borrowing covenants and cash management. It is expected that a significant amount of time, internal and external resources and expenses over a multi-year period would be required for this conversion.

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We face operational risk from errors made in the execution, confirmation or settlement of transactions and our dependence on our headquarters in New York City and third-party providers may have an adverse impact on our ability to continue to operate our businesses without interruption which could result in losses to us or limit our growth.
We face operational risk from errors made in the execution, confirmation or settlement of transactions. We also face operational risk from transactions not being properly recorded, evaluated or accounted for in our funds. In particular, our capital markets oriented credit business is highly dependent on our ability to process and evaluate, on a daily basis, transactions across markets and geographies in a time-sensitive, efficient and accurate manner. Consequently, we rely heavily on our financial, accounting and other data processing systems. New investment products we may introduce could create a significant risk that our existing systems may not be adequate to identify or control the relevant risks in the investment strategies employed by such new investment products. In addition, our information systems and technology might not be able to accommodate our growth, and the cost of maintaining such systems might increase from its current level. These risks could cause us to suffer financial loss, a disruption of our businesses, liability to our funds, regulatory intervention and reputational damage.
Furthermore, we depend on our headquarters, which is located in New York City, for the operation of many of our businesses. A disaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, may have an adverse impact on our ability to continue to operate our businesses without interruption which could have a material adverse effect on us. Although we have disaster recovery programs in place, these may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses.
Finally, we rely on third-party service providers for certain aspects of our businesses, including for certain information systems, technology and administration of our funds and compliance matters. Any interruption or deterioration in the performance of these third parties could impair the quality of the funds’ operations and could impact our reputation, adversely affect our businesses and limit our ability to grow.
We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
Our funds' portfolio companies also rely on data processing systems and the secure processing, storage and transmission of information, including payment and health information. A disruption or compromise of these systems could have a material adverse effect on the value of these businesses.
We derive a substantial portion of our revenues from funds managed pursuant to management agreements that may be terminated or fund partnership agreements that permit fund investors to request liquidation of investments in our funds on short notice.
The terms of our funds generally give either the general partner of the fund or the fund’s board of directors the right to terminate our investment management agreement with the fund. However, insofar as we control the general partner of our funds that are limited partnerships, the risk of termination of investment management agreement for such funds is limited, subject to our fiduciary or contractual duties as general partner. This risk is more significant for certain of our funds which have independent boards of directors.
With respect to our funds that are subject to the Investment Company Act, following the initial two years of operation each fund’s investment management agreement must be approved annually by such fund’s board of directors or by the vote of a majority of the shareholders and the majority of the independent members of such fund’s board of directors and, as required by law. Each investment management agreement for such funds can also be terminated by the majority of the shareholders. Termination of these agreements would reduce the fees we earn from the relevant funds, which could have a material adverse effect on our

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results of operations. Currently, AFT and AIF, management investment companies under the Investment Company Act, and AINV, a management investment company that has elected to be treated as a business development company under the Investment Company Act, are subject to these provisions of the Investment Company Act.
The governing documents of certain of our funds provide that a simple majority of a fund’s unaffiliated investors have the right to liquidate that fund, which would cause management fees and incentive income to terminate. Our ability to realize incentive income from such funds also would be adversely affected if we are required to liquidate fund investments at a time when market conditions result in our obtaining less for investments than could be obtained at later times. We do not know whether, and under what circumstances, the investors in our funds are likely to exercise such right.
In addition, the management agreements of our funds would terminate if we were to experience a change of control without obtaining investor consent. Such a change of control could be deemed to occur in the event our Managing Partners exchange enough of their interests in the Apollo Operating Group into our Class A shares such that our Managing Partners no longer own a controlling interest in us. We cannot be certain that consents required for the assignment of our management agreements will be obtained if such a deemed change of control occurs. Termination of these agreements would affect the fees we earn from the relevant funds and the transaction and advisory fees we earn from the underlying portfolio companies, which could have a material adverse effect on our results of operations.
Our use of leverage to finance our businesses will expose us to substantial risks, which are exacerbated by our funds’ use of leverage to finance investments.  
We have senior notes outstanding and loans outstanding and an undrawn revolving credit facility under the 2013 AMH Credit Facilities described in note 14 to our consolidated financial statements. We may choose to finance our business operations through further borrowings. Our existing and future indebtedness exposes us to the typical risks associated with the use of leverage, including those discussed above under “—Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.” These risks are exacerbated by certain of our funds’ use of leverage to finance investments and, if they were to occur, could cause us to suffer a decline in the credit ratings assigned to our debt by rating agencies, if any, which might result in an increase in our borrowing costs or result in other material adverse effects on our businesses.
As these borrowings, notes and other indebtedness mature (or are otherwise repaid prior to their scheduled maturities), we may be required to either refinance them by entering into new facilities or issuing new notes, which could result in higher borrowing costs, or issuing equity, which would dilute existing shareholders. We could also repay them by using cash on hand or cash from the sale of our assets. We could have difficulty entering into new facilities, issuing new notes or issuing equity in the future on attractive terms, or at all.
We are subject to third-party litigation that could result in significant liabilities and reputational harm, which could have a material adverse effect on our results of operations, financial condition and liquidity.
In general, we will be exposed to risk of litigation by our investors if our management of any fund is alleged to constitute bad faith, gross negligence, willful misconduct, fraud, willful or reckless disregard for our duties to the fund or other forms of misconduct. Investors could sue us to recover amounts lost by our funds due to our alleged misconduct, up to the entire amount of loss. Further, we may be subject to litigation arising from investor dissatisfaction with the performance of our funds or from third-party allegations that we (i) improperly exercised control or influence over companies in which our funds have large investments or (ii) are liable for actions or inactions taken by portfolio companies that such third parties argue we control. By way of example, we, our funds and certain of our employees are each exposed to the risks of litigation relating to investment activities in our funds and actions taken by the officers and directors (some of whom may be Apollo employees) of portfolio companies, such as the risk of shareholder litigation by other shareholders of public companies in which our funds have large investments. As an additional example, we are sometimes listed as a co-defendant in actions against portfolio companies on the theory that we control such portfolio companies. We are also exposed to risks of litigation or investigation relating to transactions that presented conflicts of interest that were not properly addressed. In addition, our rights to indemnification by the funds we manage may not be upheld if challenged, and our indemnification rights generally do not cover bad faith, gross negligence, willful misconduct, fraud, willful or reckless disregard for our duties to the fund or other forms of misconduct. If we are required to incur all or a portion of the costs arising out of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification from our funds, our results of operations, financial condition and liquidity would be materially adversely affected.
In addition, with a workforce that includes many very highly paid investment professionals, we face the risk of lawsuits relating to claims for compensation, which may individually or in the aggregate be significant in amount. Such claims are more likely to occur in the current environment where individual employees may experience significant volatility in their year-to-year

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compensation due to trading performance or other issues and in situations where previously highly compensated employees were terminated for performance or efficiency reasons. The cost of settling such claims could adversely affect our results of operations.
If any civil or criminal lawsuits brought against us were to result in a finding of substantial legal liability or culpability, the lawsuit could, in addition to any financial damage, cause significant reputational harm to us, which could seriously harm our business. We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and qualified professionals and to pursue investment opportunities for our funds. As a result, allegations of improper conduct by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the private equity industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses. See “Item 3. Legal Proceedings.”
Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our businesses.
As we have expanded and as we continue to expand the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our funds’ investment activities. Certain of our funds may have overlapping investment objectives, including funds that have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. For example, a decision to acquire material non-public information about a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it results in our having to restrict the ability of other funds to take any action. In addition, fund investors (or holders of Class A shares) may perceive conflicts of interest regarding investment decisions for funds in which our Managing Partners, who have and may continue to make significant personal investments in a variety of Apollo funds, are personally invested. Similarly, conflicts of interest may exist in the valuation of our investments and regarding decisions about the allocation of specific investment opportunities among us and our funds and the allocation of fees and costs among us, our funds and their portfolio companies.
Pursuant to the terms of our operating agreement, whenever a potential conflict of interest exists or arises between any of the Managing Partners, one or more directors or their respective affiliates, on the one hand, and us, any of our subsidiaries or any shareholder other than a Managing Partner, on the other, any resolution or course of action by our board of directors shall be permitted and deemed approved by all shareholders if the resolution or course of action (i) has been specifically approved by a majority of the voting power of our outstanding voting shares (excluding voting shares owned by our manager or its affiliates) or by a conflicts committee of the board of directors composed entirely of one or more independent directors, (ii) is on terms no less favorable to us or our shareholders (other than a Managing Partner) than those generally being provided to or available from unrelated third parties or (iii) it is fair and reasonable to us and our shareholders taking into account the totality of the relationships between the parties involved. All conflicts of interest described in this report will be deemed to have been specifically approved by all shareholders. Notwithstanding the foregoing, it is possible that potential or perceived conflicts could give rise to investor dissatisfaction or litigation or regulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest would have a material adverse effect on our reputation which would materially adversely affect our businesses in a number of ways, including as a result of redemptions by our investors from our funds, an inability to raise additional funds and a reluctance of counterparties to do business with us.
Our organizational documents do not limit our ability to enter into new lines of businesses, and we may expand into new investment strategies, geographic markets and businesses, each of which may result in additional risks and uncertainties in our businesses.
We intend, to the extent that market conditions warrant, to grow our businesses by increasing AUM in existing businesses and expanding into new investment strategies, geographic markets and businesses. Our organizational documents, however, do not limit us to the investment management business. Accordingly, we may pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners or other strategic initiatives, which may include entering into new lines of business, such as the insurance, broker-dealer or financial advisory industries. In addition, we expect opportunities will arise to acquire other alternative or traditional asset managers. To the extent we make strategic investments or acquisitions, undertake other strategic initiatives or enter into a new line of business, we will face numerous risks and uncertainties, including risks associated with (i) the required investment of capital and other resources, (ii) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, (iii) combining or integrating operational and management systems and controls and (iv) the broadening of our geographic footprint, including the risks associated with conducting operations in foreign jurisdictions. Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If a new business generates insufficient revenues or if we are unable to

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efficiently manage our expanded operations, our results of operations will be adversely affected. Our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control.

Employee misconduct could harm us by impairing our ability to attract and retain investors and by subjecting us to significant legal liability, regulatory scrutiny and reputational harm. Fraud and other deceptive practices or other misconduct at our portfolio companies could similarly subject us to liability and reputational damage and also harm our performance.
Our reputation is critical to maintaining and developing relationships with the investors in our funds, potential fund investors and third parties with whom we do business. In recent years, there have been a number of highly publicized cases involving fraud, conflicts of interest or other misconduct by individuals in the financial services industry. There is a risk that our employees could engage in misconduct that adversely affects our businesses. For example, if an employee were to engage in illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, investor relationships and ability to attract future investors. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in all cases. Misconduct by our employees, or the employees of our portfolio companies, or even unsubstantiated allegations, could result in a material adverse effect on our reputation and our businesses.
In recent years, the U.S. Department of Justice and the SEC have devoted greater resources to enforcement of the U.S. Foreign Corrupt Practices Act (“FCPA”). In addition, the United Kingdom has significantly expanded the reach of its anti-bribery laws. While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA, such policies and procedures may not be effective in all instances to prevent violations. Any determination that we have violated the FCPA or other applicable anticorruption laws or anti-bribery laws could subject us to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects and/or financial position.
In addition, we could also be adversely affected if there is misconduct by individuals associated with portfolio companies in which our funds invest. For example, failures by personnel, or individuals acting on behalf, of our funds’ portfolio companies to comply with anti-bribery, trade sanctions or other legal and regulatory requirements could adversely affect our business and reputation. There are a number of grounds upon which such misconduct at a portfolio company could subject us to criminal and/or civil liability, including on the basis of actual knowledge, willful blindness, or control person liability. Such misconduct might also undermine our funds' due diligence efforts with respect to such companies and could negatively affect the valuation of a fund’s investments.
Underwriting activities expose us to risks.
Apollo Global Securities, LLC, a subsidiary of ours, may act as an underwriter in securities offerings. We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities or indebtedness we purchased as an underwriter at the anticipated price levels. As an underwriter, we also are subject to potential liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings we underwrite.
AGS primarily provides these services for our funds’ portfolio companies. The relationship between the managers of our funds, their affiliates and AGS may give rise to conflicts of interest between the managers of the funds and the funds with respect to whom AGS provides services or the funds who have an interest in any portfolio companies or investment vehicles to whom AGS provides services.
While AGS’s services are primarily provided to our funds, it is possible that in the future, AGS may also provide services (including financing, capital market and advisory services) to third parties, including third parties that are our competitors or one or more of their affiliates or any portfolio companies. In the event that AGS provides services to third parties, it may not take into consideration the interests of relevant funds or portfolio companies.
The due diligence process that we undertake in connection with investments by our funds may not reveal all facts that may be relevant in connection with an investment.
Before making investments in private equity and other fund investments, including real estate investments, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, we may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an

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assessment regarding an investment, we rely on the resources available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful.
Certain of our funds utilize special situation and distressed debt investment strategies that involve significant risks.
Our funds often invest in obligors and issuers with weak financial conditions, poor operating results, substantial financial needs, negative net worth and/or special competitive problems. These funds also invest in obligors and issuers that are involved in bankruptcy or reorganization proceedings. In such situations, it may be difficult to obtain full information as to the exact financial and operating conditions of these obligors and issuers. Additionally, the fair values of such investments are subject to abrupt and erratic market movements and significant price volatility if they are publicly traded securities, and are subject to significant uncertainty in general if they are not publicly traded securities. Furthermore, some of our funds’ distressed investments may not be widely traded or may have no recognized market. A fund’s exposure to such investments may be substantial in relation to the market for those investments, and the assets are likely to be illiquid and difficult to sell or transfer. As a result, it may take a number of years for the market value of such investments to ultimately reflect their intrinsic value as perceived by us.
A central feature of our distressed investment strategy is our ability to successfully predict the occurrence of certain corporate events, such as debt and/or equity offerings, restructurings, reorganizations, mergers, takeover offers and other transactions, that we believe will improve the condition of the business. If the corporate event we predict is delayed, changed or never completed, the market price and value of the applicable fund’s investment could decline sharply.
In addition, these investments could subject us to certain potential additional liabilities that may exceed the value of our original investment. Under certain circumstances, payments or distributions on certain investments may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance, a preferential payment or similar transaction under applicable bankruptcy and insolvency laws. In addition, under certain circumstances, a lender that has inappropriately exercised control of the management and policies of a debtor may have its claims subordinated or disallowed, or may be found liable for damages suffered by parties as a result of such actions. In the case where the investment in securities of troubled companies is made in connection with an attempt to influence a restructuring proposal or plan of reorganization in bankruptcy, our funds may become involved in substantial litigation.
We often pursue investment opportunities that involve business, regulatory, legal or other complexities.
As an element of our investment style, we often pursue unusually complex investment opportunities. This can often take the form of substantial business, regulatory or legal complexity that would deter other investment managers. Our tolerance for complexity presents risks, as such transactions can be more difficult, expensive and time-consuming to finance and execute; it can be more difficult to manage or realize value from the assets acquired in such transactions; and such transactions sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities. Any of these risks could harm the performance of our funds.
Our funds make investments in companies that we do not control.
Investments by some of our funds will include debt instruments and equity securities of companies that we do not control. Such instruments and securities may be acquired by our funds through trading activities or through purchases of securities from the issuer. In addition, in the future, our funds may seek to acquire minority equity interests more frequently and may also dispose of a portion of their majority equity investments in portfolio companies over time in a manner that results in the funds retaining a minority investment. Those investments will be subject to the risk that the company in which the investment is made may make business, financial or management decisions with which we do not agree or that the majority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our interests. If any of the foregoing were to occur, the values of investments by our funds could decrease and our financial condition, results of operations and cash flow could suffer as a result.
Our funds may face risks relating to undiversified investments.
While diversification is generally an objective of our funds, we cannot give assurance as to the degree of diversification that will actually be achieved in any fund investments. Because a significant portion of a fund’s capital may be invested in a single investment or portfolio company, a loss with respect to such an investment or portfolio company could have a significant adverse impact on such fund’s capital. Accordingly, a lack of diversification on the part of a fund could adversely affect a fund’s performance and therefore our financial condition and results of operations.

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Some of our funds invest in foreign countries and securities of issuers located outside of the United States, which may involve foreign exchange, political, social, economic and tax uncertainties and risks.
Some of our funds invest all or a portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States, including Germany, China, India, Australia, Russia, and Singapore. In addition to business uncertainties, such investments may be affected by changes in exchange values as well as political, social and economic uncertainty affecting a country or region. Many financial markets are not as developed or as efficient as those in the United States, and as a result, liquidity may be reduced and price volatility may be higher. The legal and regulatory environment may also be different, particularly with respect to bankruptcy and reorganization. Financial accounting standards and practices may differ, and there may be less publicly available information in respect of such companies.
Restrictions imposed or actions taken by foreign governments may adversely impact the value of our fund investments. Such restrictions or actions could include exchange controls, seizure or nationalization of foreign deposits or other assets and adoption of other governmental restrictions that adversely affect the prices of securities or the ability to repatriate profits on investments or the capital invested itself. Income received by our funds from sources in some countries may be reduced by withholding and other taxes. Any such taxes paid by a fund will reduce the net income or return from such investments. Our fund investments could also expose us to risks associated with trade and economic sanctions prohibitions or other restrictions imposed by the United States or other governments or organizations, including the United Nations, the European Union and its member countries, such as the sanctions against certain Russian entities and individuals. While our funds will take these factors into consideration in making investment decisions, including when hedging positions, our funds may not be able to fully avoid these risks or generate sufficient risk-adjusted returns.
In addition, as a result of the complexity of, and lack of clear precedent or authority with respect to, the application of various income tax laws to our structures, the application of rules governing how transactions and structures should be reported is also subject to differing interpretations. For example, certain countries such as Australia, Canada, China, and India, where our funds have made investments, have sought to tax investment gains (including those from real estate) derived by nonresident investors, including private equity funds, from the disposition of the equity in companies operating in those countries. In some cases this development is the result of new legislation or changes in the interpretation of existing legislation and local authority assertions that investors have a local taxable presence or are holding companies for trading purposes rather than for capital purposes, or are not otherwise entitled to treaty benefits. In addition, the tax authorities in certain countries have sought to deny the benefits of income tax treaties for withholding taxes on interest and dividends of nonresident entities, if the entity is not the beneficial owner of the income but rather a mere conduit company inserted primarily to assess treaty benefits. With respect to India, in 2012 the Supreme Court of India held in favor of a taxpayer finding that the sale of a foreign company that indirectly held Indian assets was not subject to Indian tax. However, the tax laws were amended in 2012 to subject such gains to Indian tax with retroactive effect. Further, a general anti-avoidance rule was also introduced that would provide a basis for the tax authorities to subject other sales and investments through intermediate holding jurisdictions such as Mauritius to Indian tax. While such rule is effective for tax years beginning on or after April 1, 2015, concerns have been raised with respect to these new rules including their retroactive effect in certain circumstances. Indian taxation of the capital gains of a foreign investor, upon a direct or indirect sale of an Indian company, therefore remains uncertain.
Third-party investors in our funds will have the right under certain circumstances to terminate commitment periods or to dissolve the funds, and investors in some of our credit funds may redeem their investments in such funds at any time after an initial holding period. These events would lead to a decrease in our revenues, which could be substantial.
The governing agreements of certain of our funds allow the limited partners of those funds to (i) terminate the commitment period of the fund in the event that certain “key persons” (for example, one or more of our Managing Partners and/or certain other investment professionals) fail to devote the requisite time to managing the fund, (ii) (depending on the fund) terminate the commitment period, dissolve the fund or remove the general partner if we, as general partner or manager, or certain key persons engage in certain forms of misconduct, or (iii) dissolve the fund or terminate the commitment period upon the affirmative vote of a specified percentage of limited partner interests entitled to vote. Each of Fund VI, Fund VII and Fund VIII, on which our near- to medium-term performance will heavily depend, include a number of such provisions. COF III, EPF II and certain other credit funds have similar provisions. Also, after undergoing the 2007 Reorganization, subsequent to which we deconsolidated certain funds that had historically been consolidated in our financial statements, we amended the governing documents of those funds to provide that a simple majority of a fund’s unaffiliated investors have the right to liquidate that fund. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our funds would likely result in significant reputational damage to us.
Investors in some of our credit funds may also generally redeem their investments on an annual, semiannual or quarterly basis following the expiration of a specified period of time when capital may not be redeemed (typically between one and five

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years). Fund investors may decide to move their capital away from us to other investments for any number of reasons in addition to poor investment performance. Factors which could result in investors leaving our funds include changes in interest rates that make other investments more attractive, changes in investor perception regarding our focus or alignment of interest, unhappiness with changes in or broadening of a fund’s investment strategy, changes in our reputation and departures or changes in responsibilities of key investment professionals. In a declining market, the pace of redemptions and consequent reduction in our AUM could accelerate. The decrease in revenues that would result from significant redemptions in these funds could have a material adverse effect on our businesses, revenues, net income and cash flows.
In addition, the management agreements of all of our funds would be terminated upon an “assignment,” without the requisite consent, of these agreements, which may be deemed to occur in the event the investment advisors of our funds were to experience a change of control. We cannot be certain that consents required to assign our investment management agreements will be obtained if a change of control occurs. In addition, with respect to our publicly traded closed-end funds, each fund’s investment management agreement must be approved annually by the independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the fees we earn from such funds.
Our financial projections for portfolio companies and other fund investments could prove inaccurate.
Our funds generally establish the capital structure of portfolio companies and certain other fund investments, including real estate investments, on the basis of financial projections for such investments. These projected operating results will normally be based primarily on management judgments. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. General economic conditions, which are not predictable, along with other factors may cause actual performance to fall short of the financial projections we used to establish a given investment's capital structure. Because of the leverage we typically employ in our investments, this could cause a substantial decrease in the value of our equity holdings in such investments. The inaccuracy of financial projections could thus cause our funds’ performance to fall short of our expectations.
Our private equity funds’ performance, and our performance, may be adversely affected by the financial performance of our portfolio companies and the industries in which our funds invest.
Our performance and the performance of our private equity funds is significantly affected by the value of the companies in which our funds have invested. Our funds invest in companies in many different industries, each of which is subject to volatility based upon economic and market factors. Over the last few years, the credit crisis has caused significant fluctuations in the value of securities held by our funds and the global economic recession had a significant impact in overall performance activity and the demands for many of the goods and services provided by portfolio companies of the funds we manage. Although the U.S. economy has improved, there remain many obstacles to continued growth in the economy such as high unemployment, global geopolitical events, risks of inflation and high deficit levels for governmental agencies in the U.S. and abroad. These factors and other general economic trends are likely to impact the performance of portfolio companies in many industries and in particular, industries that are more impacted by changes in consumer demand, such as the packaging, manufacturing, chemical and refining industries, as well as travel and leisure, gaming and real estate industries. The performance of our private equity funds, and our performance, may be adversely affected to the extent our fund portfolio companies in these industries experience adverse performance or additional pressure due to downward trends. For example, the performance of certain of our portfolio companies in the packaging, manufacturing, chemical and refining industries is subject to the cyclical and volatile nature of the supply-demand balance in these industries. These industries historically have experienced alternating periods of capacity shortages leading to tight supply conditions, causing prices and profit margins to increase, followed by periods when substantial capacity is added, resulting in oversupply, declining capacity utilization rates and declining prices and profit margins. In addition to changes in the supply and demand for products, the volatility these industries experience occurs as a result of changes in energy prices, costs of raw materials and changes in various other economic conditions around the world.
The performance of our investments in the commodities markets is also subject to a high degree of business and market risk, as it is substantially dependent upon prevailing prices of oil and natural gas. Certain of our funds have investments in businesses involved in oil and gas exploration and development, which can be a speculative business involving a high degree of risk, including: the volatility of oil and natural gas prices; the use of new technologies; reliance on estimates of oil and gas reserves in the evaluation of available geological, geophysical, engineering and economic data; and encountering unexpected formations or pressures, premature declines of reservoirs, blow-outs, equipment failures and other accidents in completing wells and otherwise, cratering, sour gas releases, uncontrollable flows of oil, natural gas or well fluids, adverse weather conditions, pollution, fires, spills and other environmental risks. Prices for oil and natural gas are subject to wide fluctuation in response to relatively minor changes in the supply and demand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond our control, such as level of consumer product demand, the refining capacity of oil purchasers, weather conditions, government regulations,

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the price and availability of alternative fuels, political conditions, foreign supply of such commodities and overall economic conditions. It is common in making investments in the commodities markets to deploy hedging strategies to protect against pricing fluctuations but such strategies may or may not protect our investments.
Similarly, the performance of cruise ship operations is also susceptible to adverse changes in the economic climate, such as higher fuel prices, as increases in the cost of fuel globally would increase the cost of cruise ship operations. Economic and political conditions in certain parts of the world make it difficult to predict the price of fuel in the future. In addition, cruise ship operators could experience increases in other operating costs, such as crew, insurance and security costs, due to market forces and economic or political instability beyond their control.
In respect of real estate, even though the U.S. residential real estate market has recently shown some signs of stabilizing from a lengthy and deep downturn, various factors could halt or limit a recovery in the housing market and have an adverse effect on the performance of certain of our funds’ investments, including, but not limited to, continued high unemployment, a low level of consumer confidence in the economy and/or the residential real estate market and rising mortgage interest rates.
In addition, our funds’ investments in commercial mortgage loans and other commercial real-estate related loans are subject to risks of delinquency and foreclosure, and risks of loss that are greater than similar risks associated with mortgage loans made on the security of residential properties. If the net operating income of the commercial property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of a commercial property can be affected by various factors, such as success of tenant businesses, property management decisions, competition from comparable types of properties and declines in regional or local real estate values and rental or occupancy rates.
Our credit funds are subject to numerous additional risks.
Our credit funds are subject to numerous additional risks, including the risks set forth below.
Generally, there are few limitations on the execution of these funds’ investment strategies, which are subject to the sole discretion of the management company or the general partner of such funds.
These funds may engage in short-selling, which is subject to a theoretically unlimited risk of loss.
These funds are exposed to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the fund to suffer a loss.
Credit risk may arise through a default by one of several large institutions that are dependent on one another to meet their liquidity or operational needs, so that a default by one institution causes a series of defaults by the other institutions.
The efficacy of investment and trading strategies depend largely on the ability to establish and maintain an overall market position in a combination of financial instruments, which can be difficult to execute.
These funds may make investments or hold trading positions in markets that are volatile and which may become illiquid.
These funds’ investments are subject to risks relating to investments in commodities, futures, options and other derivatives, the prices of which are highly volatile and may be subject to a theoretically unlimited risk of loss in certain circumstances.

Fraud and other deceptive practices could harm fund performance.
Instances of bribery, fraud and other deceptive practices committed by senior management of portfolio companies in which an Apollo fund invests may undermine our due diligence efforts with respect to such companies, and if such fraud is discovered, negatively affect the valuation of a fund’s investments. Fraud or other deceptive practices by our own employees or advisors could have a similar effect. In addition, when discovered, financial fraud may contribute to overall market volatility that can negatively impact an Apollo fund’s investment program. As a result, instances of bribery, fraud and other deceptive practices could result in fund performance that is poorer than expected.
Contingent liabilities could harm fund performance.
We may cause our funds to acquire an investment that is subject to contingent liabilities. Such contingent liabilities could be unknown to us at the time of acquisition or, if they are known to us, we may not accurately assess or protect against the risks that they present. Acquired contingent liabilities could thus result in unforeseen losses for our funds. In addition, in connection with the disposition of an investment in a portfolio company, a fund may be required to make representations about

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the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. A fund may also be required to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. These arrangements may result in the incurrence of contingent liabilities by a fund, even after the disposition of an investment. Accordingly, the inaccuracy of representations and warranties made by a fund could harm such fund’s performance.

Our funds may be forced to dispose of investments at a disadvantageous time.
Our funds may make investments that they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration of such fund’s term or otherwise. Although we generally expect that investments will be disposed of prior to dissolution or be suitable for in-kind distribution at dissolution, and the general partners of the funds have a limited ability to extend the term of the fund with the consent of fund investors or the advisory board of the fund, as applicable, our funds may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution. This would result in a lower than expected return on the investments and, perhaps, on the fund itself.
Possession of material, non-public information could prevent Apollo funds from undertaking advantageous transactions; our internal controls could fail; we could determine to establish information barriers.
Our Managing Partners, investment professionals or other employees may acquire confidential or material non-public information and, as a result, be restricted from initiating transactions in certain securities. This risk affects us more than it does many other investment managers, as we generally do not use information barriers that many firms implement to separate persons who make investment decisions from others who might possess material, non-public information that could influence such decisions. Our decision not to implement these barriers could prevent our investment professionals from undertaking advantageous investments or dispositions that would be permissible for them otherwise.
In order to manage possible risks resulting from our decision not to implement information barriers, our compliance personnel maintain a list of restricted securities as to which we have access to material, non-public information and in which our funds and investment professionals are not permitted to trade. This internal control relating to the management of material non-public information could fail with the result that we, or one of our investment professionals, might trade when at least constructively in possession of material non-public information. Inadvertent trading on material non-public information could have adverse effects on our reputation, result in the imposition of regulatory or financial sanctions and as a consequence, negatively impact our financial condition. In addition, we could in the future decide that it is advisable to establish information barriers, particularly as our business expands and diversifies. In such event, our ability to operate as an integrated platform would be restricted. The establishment of such information barriers might also lead to operational disruptions and result in restructuring costs, including costs related to hiring additional personnel as existing investment professionals are allocated to either side of such barriers, which could adversely affect our business.
Regulations governing AINV’s operation as a business development company affect its ability to raise, and the way in which it raises, additional capital.  
As a business development company under the Investment Company Act, AINV may issue debt securities or preferred stock and borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the Investment Company Act. Under the provisions of the Investment Company Act, AINV is permitted to issue senior securities only in amounts such that its asset coverage, as defined in the Investment Company Act, equals at least 200% after each issuance of senior securities. If the value of its assets declines, it may be unable to satisfy this test. If that happens, it may be required to sell a portion of its investments and, depending on the nature of its leverage, repay a portion of its indebtedness at a time when such sales may be disadvantageous.
Business development companies may issue and sell common stock at a price below net asset value per share only in limited circumstances, one of which is during the one-year period after stockholder approval. AINV’s stockholders have, in the past, approved a plan so that during the subsequent 12-month period, AINV may, in one or more public or private offerings of its common stock, sell or otherwise issue shares of its common stock at a price below the then current net asset value per share, subject to certain conditions including parameters on the level of permissible dilution, approval of the sale by a majority of its independent directors and a requirement that the sale price be not less than approximately the market price of the shares of its common stock at specified times, less the expenses of the sale. AINV may ask its stockholders for additional approvals from year to year. There is no assurance such approvals will be obtained.
Regulations governing AFT's and AIF’s operation affect their ability to raise, and the way in which they raise, additional capital.

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As registered investment companies under the Investment Company Act, each of AFT and AIF may issue debt securities or preferred stock and borrow money from banks or other financial institutions, up to the maximum amount permitted by the Investment Company Act. Under the provisions of the Investment Company Act, each of AFT and AIF is permitted to (i) issue preferred shares in amounts such that their respective asset coverage equals at least 200% after issuance and (ii) to incur indebtedness, including through the issuance of debt securities, so long as immediately thereafter the fund will have an asset coverage of at least 300% after issuance. If the value of its assets declines, such fund may be unable to satisfy this test. If that happens, such fund may be required to sell a portion of its investments and, depending on the nature of its leverage, repay a portion of its indebtedness at a time when such sales may be disadvantageous. Further, each of AFT and AIF may raise capital by issuing common shares, however, the offering price per common share must equal or exceed the net asset value per share, exclusive of any underwriting commissions or discounts, of our shares.
Risks Related to Our Class A Shares
The market price and trading volume of our Class A shares may be volatile, which could result in rapid and substantial losses for our shareholders.
The market price of our Class A shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our Class A shares may fluctuate and cause significant price variations to occur. If the market price of our Class A shares declines significantly, you may be unable to resell your Class A shares at or above your purchase price, if at all. The market price of our Class A shares may fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our Class A shares or result in fluctuations in the price or trading volume of our Class A shares include:
variations in our quarterly operating results or distributions, which variations we expect will be substantial;
our policy of taking a long-term perspective on making investment, operational and strategic decisions, which is expected to result in significant and unpredictable variations in our quarterly returns;
failure to meet analysts’ earnings estimates;
publication of research reports about us or the investment management industry or the failure of securities analysts to cover our Class A shares;
additions or departures of our Managing Partners and other key management personnel;
adverse market reaction to any indebtedness we may incur or securities we may issue in the future;
actions by shareholders;
changes in market valuations of similar companies;
speculation in the press or investment community;
changes or proposed changes in laws or regulations or differing interpretations thereof affecting our businesses or enforcement of these laws and regulations, or announcements relating to these matters;
a lack of liquidity in the trading of our Class A shares;
adverse publicity about the asset management industry generally or individual scandals, specifically; and
general market and economic conditions.

In addition, from time to time, management may also declare special quarterly distributions based on investment realizations. Volatility in the market price of our Class A shares may be heightened at or around times of investment realizations as well as following such realization, as a result of speculation as to whether such a distribution may be declared.
An investment in Class A shares is not an investment in any of our funds, and the assets and revenues of our funds are not directly available to us.
Class A shares are securities of Apollo Global Management, LLC only. While our historical consolidated and combined financial information includes financial information, including assets and revenues of certain Apollo funds on a consolidated basis, and our future financial information will continue to consolidate certain of these funds, such assets and revenues are available to the fund and not to us except through management fees, incentive income, distributions and other proceeds arising from agreements with funds, as discussed in more detail in this report.
Our Class A share price may decline due to the large number of shares eligible for future sale and for exchange into Class A shares.
The market price of our Class A shares could decline as a result of sales of a large number of our Class A shares or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. As of December 31, 2014, we had

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163,046,554 Class A shares outstanding. The Class A shares reserved under our equity incentive plan are increased on the first day of each fiscal year by (i) the amount (if any) by which (a) 15% of the number of outstanding Class A shares and Apollo Operating Group units (“AOG Units”) exchangeable for Class A shares on a fully converted and diluted basis on the last day of the immediately preceding fiscal year exceeds (b) the number of shares then reserved and available for issuance under the Equity Plan, or (ii) such lesser amount by which the administrator may decide to increase the number of Class A shares. Taking into account grants of restricted share units (“RSUs”) and options made through December 31, 2014, 38,090,824 Class A shares remained available for future grant under our equity incentive plan. In addition, Holdings may at any time exchange its AOG Units for up to 222,680,477 Class A shares on behalf of our Managing Partners and Contributing Partners subject to the Amended and Restated Exchange Agreement. See "Item 13. Certain Relationships and Related Party Transactions—Amended and Restated Exchange Agreement." We may also elect to sell additional Class A shares in one or more future primary offerings.
Our Managing Partners and Contributing Partners, through their partnership interests in Holdings, owned an aggregate of 57.7% of the AOG Units as of December 31, 2014. Subject to certain procedures and restrictions (including any transfer restrictions and lock-up agreements applicable to our Managing Partners and Contributing Partners), each Managing Partner and Contributing Partner has the right, upon 60 days’ notice prior to a designated quarterly date, to exchange the AOG Units for Class A shares. These Class A shares are eligible for resale from time to time, subject to certain contractual restrictions and Securities Act limitations.
Our Managing Partners and Contributing Partners (through Holdings) have the ability to cause us to register the Class A shares they acquire upon exchange of their AOG Units, as was done in connection with the Company's Secondary Offering in May 2013. See “Item 13. Certain Relationships and Related Party Transactions—Managing Partner Shareholders Agreement— Registration Rights.”
The Strategic Investors have the ability to cause us to register any of their non-voting Class A shares, as was done in connection with the Company's Secondary Offering in May 2013. See “Item 13. Certain Relationships and Related Party Transactions—Lenders Rights Agreement.”
We have on file with the SEC a registration statement on Form S-8 covering the shares issuable under our equity incentive plan. Subject to vesting and contractual lock-up arrangements, such shares will be freely tradable.
We cannot assure you that our intended quarterly distributions will be paid each quarter or at all.
Our intention is to distribute to our Class A shareholders on a quarterly basis substantially all of our net after-tax cash flow from operations in excess of amounts determined by our manager to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments in our businesses and our funds, to comply with applicable laws and regulations, to service our indebtedness or to provide for future distributions to our Class A shareholders for any ensuing quarter. The declaration, payment and determination of the amount of our quarterly dividend, if any, will be at the sole discretion of our manager, who may change our dividend policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, will or can be paid. In making decisions regarding our quarterly dividend, our manager considers general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax, regulatory and other restrictions that may have implications on the payment of distributions by us to our common shareholders or by our subsidiaries to us, and such other factors as our manager may deem relevant.
Our Managing Partners’ beneficial ownership of interests in the Class B share that we have issued to BRH Holdings GP, Ltd. (“BRH”), the control exercised by our manager and anti-takeover provisions in our charter documents and Delaware law could delay or prevent a change in control.
Our Managing Partners, through their ownership of BRH, beneficially own the Class B share that we have issued to BRH. The Managing Partners interests in such Class B share represented 65.4% of the total combined voting power of our shares entitled to vote as of December 31, 2014. As a result, they are able to exercise control over all matters requiring the approval of shareholders and are able to prevent a change in control of our company. In addition, our operating agreement provides that so long as the Apollo control condition (as described in “Item 10. Directors, Executive Officers and Corporate Governance—Our Manager”) is satisfied, our manager, which is owned and controlled by our Managing Partners, manages all of our operations and activities. The control of our manager will make it more difficult for a potential acquirer to assume control of our Company. Other provisions in our operating agreement may also make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our shareholders. For example, our operating agreement requires advance notice for proposals by shareholders and nominations, places limitations on convening shareholder meetings, and authorizes the issuance of preferred shares that could be issued by our board of directors to thwart a takeover attempt. In addition, certain provisions of

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Delaware law may delay or prevent a transaction that could cause a change in our control. The market price of our Class A shares could be adversely affected to the extent that our Managing Partners’ control over our Company, the control exercised by our manager as well as provisions of our operating agreement discourage potential takeover attempts that our shareholders may favor.
We are a Delaware limited liability company, and there are certain provisions in our operating agreement regarding exculpation and indemnification of our officers and directors that differ from the Delaware General Corporation Law (DGCL) in a manner that may be less protective of the interests of our Class A shareholders.
Our operating agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. However, under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders, (ii) intentional misconduct or knowing violations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividend, or (iv) a transaction from which the director derived an improper personal benefit. In addition, our operating agreement provides that we indemnify our directors and officers for acts or omissions to the fullest extent provided by law. However, under the DGCL, a corporation can indemnify directors and officers for acts or omissions only if the director or officer acted in good faith, in a manner he reasonably believed to be in the best interests of the corporation, and, in criminal action, if the officer or director had no reasonable cause to believe his conduct was unlawful. Accordingly, our operating agreement may be less protective of the interests of our Class A shareholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors.
Awards of our Class A shares may increase shareholder dilution and reduce profitability.
We grant Class A restricted share units to our investment professionals, both when hired and as a portion of the discretionary annual compensation they may receive. In 2014 we also began to require that a portion of the incentive income distributions payable by the general partners of certain of the funds we manage be used by the recipients of those distributions to purchase restricted Class A shares issued under our equity incentive plan. While this practice promotes alignment with shareholders and encourages investment professionals to maximize the success of the Company as a whole, these equity awards, if fulfilled by issuances of new shares by us rather than by open market purchases (which do not cause any dilution), personnel-related shareholder dilution may increase. In addition, volatility in the price of our Class A shares could adversely affect our ability to attract and retain our investment professionals. To recruit and retain existing and future investment professionals, we may need to increase the level of compensation that we pay to them, which may cause a higher percentage of our revenue to be paid out in the form of compensation, which would have an adverse impact on our profit margins.

Risks Related to Our Organization and Structure
Although not enacted, the U.S. Congress has considered legislation that would have: (i) in some cases after a ten-year transition period, precluded us from qualifying as a partnership or required us to hold carried interest through taxable corporations; and (ii) taxed certain income and gains at increased rates. If similar legislation were to be enacted and apply to us, the value of our Class A shares could be adversely affected.
The U.S. Congress, the IRS and the U.S. Treasury Department have over the past several years examined the U.S. Federal income tax treatment of private equity funds, hedge funds and other kinds of investment partnerships. The present U.S. Federal income tax treatment of a holder of Class A shares and/or our own taxation may be adversely affected by any new legislation, new regulations or revised interpretations of existing tax law that arise as a result of such examinations. In May 2010, the U.S. House of Representatives passed legislation (the “May 2010 House Bill”) that would have, in general, treated income and gains, including gain on sale, attributable to an interest in an investment services partnership interest (“ISPI”) as income subject to a new blended tax rate that is higher than under current law, except to the extent such ISPI would have been considered under the legislation to be a qualified capital interest. The interests of Class A shareholders and our interests in the Apollo Operating Group that are entitled to receive carried interest may be classified as ISPIs for purposes of this legislation. The United States Senate considered, but did not pass, similar legislation. On February 14, 2012, Representative Levin introduced similar legislation (the “2012 Levin Bill”) that would tax carried interest at ordinary income rates (which would be higher than the proposed blended rate in the May 2010 House Bill). It is unclear whether or when the U.S. Congress will pass such legislation or what provisions would be included in any legislation, if enacted.
Both the May 2010 House Bill and the 2012 Levin Bill provide that, for taxable years beginning ten years after the date of enactment, income derived with respect to an ISPI that is not a qualified capital interest and that is treated as ordinary income under the rules discussed above would not meet the qualifying income requirements under the publicly traded partnership rules. Therefore, if similar legislation were to be enacted, following such ten-year period, we would be precluded from qualifying as a partnership for U.S. Federal income tax purposes or be required to hold all such ISPIs through corporations, possibly U.S.

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corporations. If we were taxed as a U.S. corporation or required to hold all ISPIs through corporations, our effective tax rate would increase significantly. The federal statutory rate for corporations is currently 35%. In addition, we could be subject to increased state and local taxes. Furthermore, holders of Class A shares could be subject to tax on our conversion into a corporation or any restructuring required in order for us to hold our ISPIs through a corporation.
On September 12, 2011, the Obama administration submitted similar legislation to Congress in the American Jobs Act that would tax income and gain, now treated as capital gains, including gain on disposition of interests attributable to an ISPI, at rates higher than the capital gains rate applicable to such income under current law, with an exception for certain qualified capital interests. The proposed legislation would also characterize certain income and gain in respect of ISPIs as non-qualifying income under the publicly traded partnership rules after a ten-year transition period from the effective date, with an exception for certain qualified capital interests. This proposed legislation follows several prior statements by the Obama administration in support of changing the taxation of carried interest. In its published revenue proposal for 2015, the Obama administration proposed that the current law regarding treatment of carried interest be changed to subject such income to ordinary income tax. The Obama administration's published revenue proposals for 2010, 2011, 2012, 2013 and 2014 contained similar proposals.
States and other jurisdictions have also considered legislation to increase taxes with respect to carried interest. For example, New York has periodically considered legislation under which non-residents of New York could be subject to New York state income tax on income in respect of our Class A shares as a result of certain activities of our affiliates in New York, although it is unclear when or whether such legislation would be enacted.
On February 22, 2012, the Obama administration announced its framework of key elements to change the U.S. Federal income tax rules for businesses. Few specifics were included, and it is unclear what any actual legislation could provide, when it would be proposed, or its prospects for enactment. Several parts of the framework, if enacted, could adversely affect us. First, the framework could reduce the deductibility of interest for corporations in some manner not specified. A reduction in interest deductions could increase our tax rate and thereby reduce cash available for distribution to investors or for other uses by us. Such a reduction could also limit our ability to finance new transactions and increase the effective cost of financing by companies in which we invest, which could reduce the value of our carried interest in respect of such companies. The framework also suggests that some entities currently treated as partnerships for tax purposes could be subject to an entity-level income tax similar to the corporate income tax. If such a proposal caused us to be subject to additional entity-level taxes, it could reduce cash available for distribution to investors or for other uses by us. The framework reiterates President Obama's support for treatment of carried interest as ordinary income, as provided for again in the President's revenue proposal for 2015, but the ultimate consequences of tax reform legislation, if any, are presently not known.
Our shareholders do not elect our manager or vote and have limited ability to influence decisions regarding our businesses.
So long as the Apollo control condition is satisfied, our manager, AGM Management, LLC, which is owned and controlled by our Managing Partners, will manage all of our operations and activities. AGM Management, LLC is managed by BRH, a Cayman entity owned by our Managing Partners and managed by an executive committee composed of our Managing Partners. Our shareholders do not elect our manager, its manager or its manager’s executive committee and, unlike the holders of common stock in a corporation, have only limited voting rights on matters affecting our businesses and therefore limited ability to influence decisions regarding our businesses. Furthermore, if our shareholders are dissatisfied with the performance of our manager, they will have little ability to remove our manager. As discussed below, the Managing Partners collectively had 65.4% of the voting power of Apollo Global Management, LLC as of December 31, 2014. Therefore, they have the ability to control any shareholder vote that occurs, including any vote regarding the removal of our manager.
Our board of directors has no authority over our operations other than that which our manager has chosen to delegate to it.
For so long as the Apollo control condition is satisfied, our manager, which is owned and controlled by our Managing Partners, manages all of our operations and activities, and our board of directors has no authority other than that which our manager chooses to delegate to it. In the event that the Apollo control condition is not satisfied, our board of directors will manage all of our operations and activities.
For so long as the Apollo control condition is satisfied, our manager (i) nominates and elects all directors to our board of directors, (ii) sets the number of directors of our board of directors and (iii) fills any vacancies on our board of directors. After the Apollo control condition is no longer satisfied, each of our directors will be elected by the vote of a plurality of our shares entitled to vote, voting as a single class, to serve until his or her successor is duly elected or appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal.

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Control by our Managing Partners of the combined voting power of our shares and holding their economic interests through the Apollo Operating Group may give rise to conflicts of interests.
Our Managing Partners controlled 65.4% of the combined voting power of our shares entitled to vote as of December 31, 2014. Accordingly, our Managing Partners have the ability to control our management and affairs to the extent not controlled by our manager. In addition, they are able to determine the outcome of all matters requiring shareholder approval (such as a proposed sale of all or substantially of our assets, the approval of a merger or consolidation involving the company, and an election by our manager to dissolve the company) and are able to cause or prevent a change of control of our company and could preclude any unsolicited acquisition of our company. The control of voting power by our Managing Partners could deprive Class A shareholders of an opportunity to receive a premium for their Class A shares as part of a sale of our company, and might ultimately affect the market price of the Class A shares.
In addition, our Managing Partners and Contributing Partners, through their partnership interests in Holdings, are entitled to 57.7% of Apollo Operating Group’s economic returns through the AOG Units owned by Holdings as of December 31, 2014. Because they hold their economic interest in our businesses directly through the Apollo Operating Group, rather than through the issuer of the Class A shares, our Managing Partners and Contributing Partners may have conflicting interests with holders of Class A shares. For example, our Managing Partners and Contributing Partners may have different tax positions from us, which could influence their decisions regarding whether and when to dispose of assets, and whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement. For a description of the tax receivable agreement, see “Item 13. Certain Relationships and Related Party Transactions—Amended and Restated Tax Receivable Agreement.” In addition, the structuring of future transactions may take into consideration the Managing Partners’ and Contributing Partners’ tax considerations even where no similar benefit would accrue to us.
We qualify for, and rely on, exceptions from certain corporate governance and other requirements under the rules of the NYSE.
We qualify for exceptions from certain corporate governance and other requirements under the rules of the NYSE. Pursuant to these exceptions, we may elect not to comply with certain corporate governance requirements of the NYSE, including the requirements (i) that a majority of our board of directors consist of independent directors, (ii) that we have a nominating/corporate governance committee that is composed entirely of independent directors and (iii) that we have a compensation committee that is composed entirely of independent directors. In addition, we are not required to hold annual meetings of our shareholders. Pursuant to the exceptions available to a controlled company under the rules of the NYSE, we have elected not to have a nominating and corporate governance committee comprised entirely of independent directors, nor a compensation committee comprised entirely of independent directors. Although we currently have a board of directors comprised of a majority of independent directors, we plan to continue to avail ourselves of these exceptions. Accordingly, you will not have the same protections afforded to equity holders of entities that are subject to all of the corporate governance requirements of the NYSE.
Potential conflicts of interest may arise among our manager, on the one hand, and us and our shareholders on the other hand. Our manager and its affiliates have limited fiduciary duties to us and our shareholders, which may permit them to favor their own interests to the detriment of us and our shareholders.
Conflicts of interest may arise among our manager, on the one hand, and us and our shareholders, on the other hand. As a result of these conflicts, our manager may favor its own interests and the interests of its affiliates over the interests of us and our shareholders. These conflicts include, among others, the conflicts described below.
Our manager determines the amount and timing of our investments and dispositions, indebtedness, issuances of additional stock and amounts of reserves, each of which can affect the amount of cash that is available for distribution to you.
Our manager is allowed to take into account the interests of parties other than us in resolving conflicts of interest, which has the effect of limiting its duties (including fiduciary duties) to our shareholders; for example, our affiliates that serve as general partners of our funds have fiduciary and contractual obligations to our fund investors, and such obligations may cause such affiliates to regularly take actions that might adversely affect our near-term results of operations or cash flow; our manager has no obligation to intervene in, or to notify our shareholders of, such actions by such affiliates.
Because our Managing Partners and Contributing Partners hold their AOG Units through entities that are not subject to corporate income taxation and Apollo Global Management, LLC holds the AOG Units in part through a wholly-owned subsidiary that is subject to corporate income taxation, conflicts may arise between our Managing Partners and Contributing Partners, on the one hand, and Apollo Global Management, LLC, on the other hand, relating to the selection, structuring, and disposition of investments. For example, the earlier taxable disposition of assets following an exchange transaction by a Managing Partner or Contributing

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Partner may accelerate payments under the tax receivable agreement and increase the present value of such payments, and the taxable disposition of assets before an exchange or transaction by a Managing Partner or Contributing Partner may increase the tax liability of a Managing Partner or Contributing Partner without giving rise to any rights to such Managing Partner or Contributing Partner to receive payments under the tax receivable agreement.
Other than as set forth in the non-competition, non-solicitation and confidentiality agreements to which our Managing Partners and other professionals are subject, which may not be enforceable, affiliates of our manager and existing and former personnel employed by our manager are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us.
Our manager has limited its liability and reduced or eliminated its duties (including fiduciary duties) under our operating agreement, while also restricting the remedies available to our shareholders for actions that, without these limitations, might constitute breaches of duty (including fiduciary duty). In addition, we have agreed to indemnify our manager and its affiliates to the fullest extent permitted by law, except with respect to conduct involving bad faith, fraud or willful misconduct. By purchasing our Class A shares, you will have agreed and consented to the provisions set forth in our operating agreement, including the provisions regarding conflicts of interest situations that, in the absence of such provisions, might constitute a breach of fiduciary or other duties under applicable state law.
Our operating agreement does not restrict our manager from causing us to pay it or its affiliates for any services rendered, or from entering into additional contractual arrangements with any of these entities on our behalf, so long as the terms of any such additional contractual arrangements are fair and reasonable to us as determined under the operating agreement.
Our manager determines how much debt we incur and that decision may adversely affect our credit ratings.
Our manager determines which costs incurred by it and its affiliates are reimbursable by us.
Our manager controls the enforcement of obligations owed to us by it and its affiliates.
Our manager decides whether to retain separate counsel, accountants or others to perform services for us. See “Item 13. Certain Relationships and Related Party Transactions” for a more detailed discussion of these conflicts.
Our operating agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our manager and limit remedies available to shareholders for actions that might otherwise constitute a breach of duty. It would be difficult for a shareholder to challenge a resolution of a conflict of interest by our manager or by its conflicts committee.
Our operating agreement contains provisions that waive or consent to conduct by our manager and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our operating agreement provides that when our manager is acting in its individual capacity, as opposed to in its capacity as our manager, it may act without any fiduciary obligations to us or our shareholders whatsoever. When our manager, in its capacity as our manager, is permitted to or required to make a decision in its “sole discretion” or “discretion” or that it deems “necessary or appropriate” or “necessary or advisable,” then our manager will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us or any of our shareholders and will not be subject to any different standards imposed by our operating agreement, the Delaware Limited Liability Company Act or under any other law, rule or regulation or in equity.
Whenever a potential conflict of interest exists between us and our manager, our manager may resolve such conflict of interest. If our manager determines that its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or available from unrelated third parties or is fair and reasonable to us, taking into account the totality of the relationships between us and our manager, then it will be presumed that in making this determination, our manager acted in good faith. A shareholder seeking to challenge this resolution of the conflict of interest would bear the burden of overcoming such presumption. This is different from the situation with Delaware corporations, where a conflict resolution by an interested party would be presumed to be unfair and the interested party would have the burden of demonstrating that the resolution was fair.
The above modifications of fiduciary duties are expressly permitted by Delaware law. Hence, we and our shareholders would have recourse and be able to seek remedies against our manager only if our manager breaches its obligations pursuant to our operating agreement. Unless our manager breaches its obligations pursuant to our operating agreement, we and our unitholders would not have any recourse against our manager even if our manager were to act in a manner that was inconsistent with traditional fiduciary duties. Furthermore, even if there has been a breach of the obligations set forth in our operating agreement, our operating agreement provides that our manager and its officers and directors would not be liable to us or our shareholders for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction

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determining that the manager or its officers and directors acted in bad faith or engaged in fraud or willful misconduct. These provisions are detrimental to the shareholders because they restrict the remedies available to them for actions that without those limitations might constitute breaches of duty, including fiduciary duties.
Also, if our manager obtains the approval of its conflicts committee, the resolution will be conclusively deemed to be fair and reasonable to us and not a breach by our manager of any duties it may owe to us or our shareholders. This is different from the situation with Delaware corporations, where a conflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstrating unfairness to the plaintiff. If you purchase a Class A share, you will be treated as having consented to the provisions set forth in the operating agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicable state law. As a result, shareholders will, as a practical matter, not be able to successfully challenge an informed decision by the conflicts committee.
The control of our manager may be transferred to a third party without shareholder consent.
Our manager may transfer its manager interest to a third party in a merger or consolidation or in a transfer of all or substantially all of its assets without the consent of our shareholders. Furthermore, at any time, the partners of our manager may sell or transfer all or part of their partnership interests in our manager without the approval of the shareholders, subject to certain restrictions as described elsewhere in this report. A new manager may not be willing or able to form new funds and could form funds that have investment objectives and governing terms that differ materially from those of our current funds. A new owner could also have a different investment philosophy, employ investment professionals who are less experienced, be unsuccessful in identifying investment opportunities or have a track record that is not as successful as Apollo’s track record. If any of the foregoing were to occur, we could experience difficulty in making new investments, and the value of our existing investments, our businesses, our results of operations and our financial condition could materially suffer.
Our ability to pay regular distributions may be limited by our holding company structure. We are dependent on distributions from the Apollo Operating Group to pay distributions, taxes and other expenses.
As a holding company, our ability to pay distributions will be subject to the ability of our subsidiaries to provide cash to us. We intend to make quarterly distributions to our Class A shareholders. Accordingly, we expect to cause the Apollo Operating Group to make distributions to its unitholders (Holdings, which is 100% owned, directly and indirectly, by our Managing Partners and our Contributing Partners, and the three intermediate holding companies, which are 100% owned by us), pro rata in an amount sufficient to enable us to pay such distributions to our Class A shareholders; however, such distributions may not be made. In addition, our manager can reduce or eliminate our dividend at any time, in its discretion. The Apollo Operating Group may make periodic distributions to its unitholders in amounts sufficient to cover hypothetical income tax obligations attributable to allocations of taxable income resulting from their ownership interest in the various limited partnerships making up the Apollo Operating Group, subject to compliance with any financial covenants or other obligations. By paying that cash distribution rather than investing that cash in our business, we might risk slowing the pace of our growth or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.
There may be circumstances under which we are restricted from paying distributions under applicable law or regulation (for example, due to Delaware limited partnership or limited liability company act limitations on making distributions if liabilities of the entity after the distribution would exceed the value of the entity’s assets).
Tax consequences to our Managing Partners and Contributing Partners may give rise to conflicts of interests.
As a result of unrealized built-in gain attributable to the value of our assets held by the Apollo Operating Group entities at the time of the Private Offering Transactions, upon the sale, refinancing or disposition of the assets owned by the Apollo Operating Group entities, our Managing Partners and Contributing Partners may incur different and greater tax liabilities as a result of the disproportionately greater allocations of items of taxable income and gain to the Managing Partners and Contributing Partners upon a realization event. As the Managing Partners and Contributing Partners will not receive a corresponding greater distribution of cash proceeds, they may, subject to applicable fiduciary or contractual duties, have different objectives regarding the appropriate pricing, timing and other material terms of any sale, refinancing, or disposition, or whether to sell such assets at all. Decisions made with respect to an acceleration or deferral of income or the sale or disposition of assets with unrealized built-in gains may also influence the timing and amount of payments that are received by an exchanging or selling founder or partner under the tax receivable agreement. All other factors being equal, earlier disposition of assets with unrealized built-in gains following such exchange will tend to accelerate such payments and increase the present value of the tax receivable agreement, and disposition of assets with unrealized built-in gains before an exchange will increase a Managing Partner’s or Contributing Partner’s tax liability without giving rise to any rights to receive payments under the tax receivable agreement. Decisions made

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regarding a change of control also could have a material influence on the timing and amount of payments received by our Managing Partners and Contributing Partners pursuant to the tax receivable agreement.
We are required to pay our Managing Partners and Contributing Partners for most of the actual tax benefits we realize as a result of the tax basis step-up we receive in connection with our acquisitions of units from our Managing Partners and Contributing Partners.
Subject to certain restrictions, each Managing Partner and Contributing Partner has the right to exchange the AOG Units that he holds through his partnership interest in Holdings for our Class A shares in a taxable transaction. These exchanges, as well as our acquisitions of units from our Managing Partners or Contributing Partners, may result in increases in the tax basis of the intangible assets of the Apollo Operating Group that otherwise would not have been available. Any such increases may reduce the amount of tax that APO Corp. (“APO Corp.”), a wholly owned subsidiary of Apollo Global Management, LLC, would otherwise be required to pay in the future.
We have entered into a tax receivable agreement with our Managing Partners and Contributing Partners that provides for the payment by APO Corp., to our Managing Partners and Contributing Partners of 85% of the amount of actual tax savings, if any, that APO Corp. realizes (or is deemed to realize in the case of an early termination payment by APO Corp. or a change of control, as discussed below) as a result of these increases in tax deductions and tax basis and certain other tax benefits, including imputed interest expense, related to entering into the tax receivable agreement. In April 2014 and April 2013, the Apollo Operating Group made a distribution of $32.0 million and $30.4 million, respectively, to APO Corp. and APO Corp. made a payment to satisfy the liability under the tax receivable agreement to the Managing Partners and Contributing Partners from a realized tax benefit for the tax years 2012 and 2011. Future payments that APO Corp. may make to our Managing Partners and Contributing Partners could be material in amount. In the event that any other of our current or future U.S. subsidiaries become taxable as corporations and acquire AOG Units in the future, or if we become taxable as a corporation for U.S. Federal income tax purposes, we expect, and have agreed that, each U.S corporation will become subject to a tax receivable agreement with substantially similar terms.
The IRS could challenge our claim to any increase in the tax basis of the assets owned by the Apollo Operating Group that results from the exchanges entered into by the Managing Partners or Contributing Partners. The IRS could also challenge any additional tax depreciation and amortization deductions or other tax benefits (including deductions for imputed interest expense associated with payments made under the tax receivable agreement) we claim as a result of, or in connection with, such increases in the tax basis of such assets. If the IRS were to successfully challenge a tax basis increase or tax benefits we previously claimed from a tax basis increase, Holdings would not be obligated under the tax receivable agreement to reimburse APO Corp. for any payments previously made to them (although any future payments would be adjusted to reflect the result of such challenge). As a result, in certain circumstances, payments could be made to our Managing Partners and Contributing Partners under the tax receivable agreement in excess of 85% of the actual aggregate cash tax savings of APO Corp. APO Corp.’s ability to achieve benefits from any tax basis increase and the payments to be made under this agreement will depend upon a number of factors, including the timing and amount of its future income.
In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control, APO Corp.’s (or its successor’s) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control) would be based on certain assumptions, including that APO Corp. would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. See “Item 13. Certain Relationships and Related Party Transactions—Amended and Restated Tax Receivable Agreement.”
If we were deemed an investment company under the Investment Company Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated and could have a material adverse effect on our businesses and the price of our Class A shares.
We do not believe that we are an “investment company” under the Investment Company Act because the nature of our assets and the income derived from those assets allow us to rely on the exception provided by Rule 3a-1 issued under the Investment Company Act. In addition, we believe we are not an investment company under Section 3(b)(1) of the Investment Company Act because we are primarily engaged in non-investment company businesses. We intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, we would be taxed as a corporation and other restrictions imposed by the Investment Company Act, including limitations on our capital structure and our ability to transact with affiliates that apply to us, could make it impractical for us to continue our businesses as contemplated and would have a material adverse effect on our businesses and the price of our Class A shares.

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Risks Related to Taxation
You may be subject to U.S. Federal income tax on your share of our taxable income, regardless of whether you receive any cash distributions from us.
Under current law, so long as we are not required to register as an investment company under the Investment Company Act and 90% of our gross income for each taxable year constitutes “qualifying income” within the meaning of the Internal Revenue Code on a continuing basis, we will be treated, for U.S. Federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. You may be subject to U.S. Federal, state, local and possibly, in some cases, foreign income taxation on your allocable share of our items of income, gain, loss, deduction and credit for each of our taxable years ending with or within your taxable year, regardless of whether or not you receive cash distributions from us. Accordingly, you may be required to make tax payments in connection with your ownership of Class A shares that significantly exceed your cash distributions in any specific year.
If we are treated as a corporation for U.S. Federal income tax purposes, the value of the Class A shares would be adversely affected.
The value of your investment will depend in part on our company being treated as a partnership for U.S. Federal income tax purposes, which requires that 90% or more of our gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Internal Revenue Code, and that we are not required to register as an investment company under the Investment Company Act and related rules. Although we intend to manage our affairs so that our partnership will meet the 90% test described above in each taxable year, we may not meet these requirements or, as discussed below, current law may change so as to cause, in either event, our partnership to be treated as a corporation for U.S. Federal income tax purposes. If we were treated as a corporation for U.S. Federal income tax purposes, (i) we would become subject to corporate income tax and (ii) distributions to shareholders would be taxable as dividends for U.S. Federal income tax purposes to the extent of our earnings and profits.
Current law may change, causing us to be treated as a corporation for U.S. Federal or state income tax purposes or otherwise subjecting us to entity level taxation. See "—Risks Related to Our Organization and Structure—Although not enacted, the U.S. Congress has considered legislation that would have: (i) in some cases after a ten-year transition period, precluded us from qualifying as a partnership or required us to hold carried interest through taxable corporations and (ii) taxed certain income and gains at increased rates. If similar legislation were to be enacted and apply to us, the value of our Class A shares could be adversely affected." Because of widespread state budget deficits, several states are evaluating ways to subject partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us as an entity, our distributions to you would be reduced.
Our structure involves complex provisions of U.S. Federal income tax law for which no clear precedent or authority may be available. Our structure is also subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.
The U.S. Federal income tax treatment of holders of Class A shares depends in some instances on determinations of fact and interpretations of complex provisions of U.S. Federal income tax law for which no clear precedent or authority may be available. You should be aware that the U.S. Federal income tax rules are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. The IRS pays close attention to the proper application of tax laws to partnerships and entities taxed as partnerships. The present U.S. Federal income tax treatment of an investment in our Class A shares may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments and commitments previously made. Changes to the U.S. Federal income tax laws and interpretations thereof could make it more difficult or impossible to meet the exception for us to be treated as a partnership for U.S. Federal income tax purposes that is not taxable as a corporation, affect or cause us to change our investments and commitments, affect the tax considerations of an investment in us, change the character or treatment of portions of our income (including, for instance, the treatment of carried interest as ordinary income rather than capital gain) and adversely affect an investment in our Class A shares. For example, as discussed above under “—Risks Related to Our Organization and Structure—Although not enacted, the U.S. Congress has considered legislation that would have: (i) in some cases after a ten-year transition period, precluded us from qualifying as a partnership or required us to hold carried interest through taxable corporations; and (ii) taxed certain income and gains at increased rates. If similar legislation were to be enacted and apply to us, the value of our Class A shares could be adversely affected,” the U.S. Congress has considered various legislative proposals to treat all or part of the capital gain and dividend income that is recognized by an investment partnership and allocable to a partner affiliated with the sponsor of the partnership (i.e., a portion of the carried interest) as ordinary income to such partner for U.S. Federal income tax purposes.

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Our operating agreement permits our manager to modify our operating agreement from time to time, without the consent of the holders of Class A shares, to address certain changes in U.S. Federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all holders of Class A shares. For instance, our manager could elect at some point to treat us as an association taxable as a corporation for U.S. Federal (and applicable state) income tax purposes. If our manager were to do this, the U.S. Federal income tax consequences of owning our Class A shares would be materially different. Moreover, we will apply certain assumptions and conventions in an attempt to comply with applicable rules and to report income, gain, deduction, loss and credit to holders of Class A shares in a manner that reflects such beneficial ownership of items by holders of Class A shares, taking into account variation in ownership interests during each taxable year because of trading activity. However, those assumptions and conventions may not be in compliance with all aspects of applicable tax requirements. It is possible that the IRS will assert successfully that the conventions and assumptions used by us do not satisfy the technical requirements of the Internal Revenue Code and/or Treasury regulations and could require that items of income, gain, deductions, loss or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects holders of Class A shares.
Our interests in certain of our businesses are held through entities that are treated as corporations for U.S. Federal income tax purposes; such corporations may be liable for significant taxes and may create other adverse tax consequences, which could potentially adversely affect the value of your investment.
In light of the publicly traded partnership rules under U.S. Federal income tax law and other requirements, we hold our interests in certain of our businesses through entities that are treated as corporations for U.S. Federal income tax purposes. Each such corporation could be liable for significant U.S. Federal income taxes and applicable state, local and other taxes that would not otherwise be incurred, which could adversely affect the value of your investment. Furthermore, it is possible that the IRS could challenge the manner in which such corporation’s taxable income is computed by us.
Changes in U.S. tax law could adversely affect our ability to raise funds from certain foreign investors.
Under the Foreign Account Tax Compliance Act, or FATCA, certain U.S. withholding agents, or USWAs, foreign financial institutions, or FFIs, and non-financial foreign entities, or NFFEs, are required to report information about offshore accounts and investments to the U.S. or their local taxing authorities annually. In response to this legislation, various foreign governments have entered into Intergovernmental Agreements, or IGAs, with the U.S. Government and some have enacted similar legislation.
In order to meet these regulatory obligations, Apollo will be required to register FFIs with the IRS, evaluate internal FATCA procedures, expand the review of investor Anti-Money Laundering/Know Your Customer and tax forms, evaluate the FATCA offerings by third party administrators and ensure that Apollo is prepared for the new global tax and information reporting requirements created under the U.S. and Non U.S. FATCA regimes.
Further, FATCA as well as Chapters 3 and 61 of the Internal Revenue Code, require Apollo to collect new IRS Tax Forms (W-9 and W-8 series), UK/Cayman Self-Certifications and other supporting documentation from their investors. Apollo will undertake efforts to re-paper their existing investors.
Failure to meet these regulatory requirements could expose Apollo and/or its investors to a punitive withholding tax of 30% on certain U.S. payments (and beginning in 2017, a 30% withholding tax on gross proceeds from the sale of U.S. stocks and securities), and possibly limit their ability to open bank accounts and secure funding the global capital markets. The reporting obligations imposed under FATCA require FFIs to comply with agreements with the IRS to obtain and disclose information about certain investors to the IRS. The administrative and economic costs of compliance with FATCA may discourage some foreign investors from investing in U.S. funds, which could adversely affect our ability to raise funds from these investors.
Federal tax reform efforts will continue which may involve tax uncertainties and risks.
It is anticipated that the U.S. Congress will continue examining proposals that would provide for a comprehensive overhaul of U.S. Federal income tax laws, which could result in sweeping changes to many longstanding tax rules. Reform efforts could result in lower statutory tax rates, but could be offset by tax changes that would result in significant increases in the taxation of financial institutions and products, some of which could adversely affect our business. Examples of these tax reform proposals may include changing the tax treatment of executive compensation, including bonuses, consideration of taxes on derivatives and other financial instruments, and adverse changes to the tax treatment of carried interest. Other changes could eliminate or limit certain tax benefits currently available to cash value life insurance and deferred annuity products. Enactment of these changes or similar alternatives would likely adversely affect new sales, and possibly funding of existing cash value life insurance and deferred annuity products.

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Similarly, President Obama’s revenue proposal for 2015 provides for (among other things) (i) increasing the tax rate applicable to long-term capital gains from 20% to 24%, (ii) imposing a 14% transition tax on accumulated foreign earnings, and (iii) imposing a new 19% minimum tax on foreign earnings in future taxable years. At this time, it is difficult for management to predict what the overall impact of future tax reform efforts will have on our funds and our business, but there is the potential for significant changes in U.S. federal laws related to the tax treatment of products and services provided by Apollo and investments made by our funds.
    The President’s revenue proposal for 2015 recommends elimination of certain key U.S. federal income tax incentives currently available to oil and natural gas exploration and production companies, and legislation has been introduced in Congress that would implement many of these proposals. These changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and natural gas properties, (ii) the elimination of current deductions for intangible drilling and development costs, (iii) the elimination of the deduction for certain domestic production activities, and (iv) an extension of the amortization period for certain geological and geophysical expenditures. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could become effective. The passage of this legislation or any other similar changes in U.S. federal income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development, and any such change could negatively affect the performance of our funds and in turn our performance.

We may hold or acquire certain investments through an entity classified as a PFIC or CFC for U.S. Federal income tax purposes.
Certain of our investments may be in foreign corporations or may be acquired through foreign subsidiaries that would be classified as corporations for U.S. Federal income tax purposes. Such entities may be passive foreign investment companies, or “PFICs,” or controlled foreign corporations, or “CFCs,” for U.S. Federal income tax purposes. For example, APO (FC), LLC is considered to be a CFC for U.S. Federal income tax purposes. Class A shareholders indirectly owning an interest in a PFIC or a CFC may experience adverse U.S. tax consequences, including the recognition of taxable income prior to the receipt of cash relating to such income. In addition, gain on the sale of a PFIC or CFC may be taxable at ordinary income tax rates.
Complying with certain tax-related requirements may cause us to forego otherwise attractive business or investment opportunities or enter into acquisitions, borrowings, financings or arrangements we may not have otherwise entered into.
In order for us to be treated as a partnership for U.S. Federal income tax purposes, and not as an association or publicly traded partnership taxable as a corporation, we must meet the qualifying income exception discussed above on a continuing basis and we must not be required to register as an investment company under the Investment Company Act. In order to effect such treatment we (or our subsidiaries) may be required to invest through foreign or domestic corporations, forego attractive business or investment opportunities or enter into borrowings or financings we may not have otherwise entered into. This may cause us to incur additional tax liability and/or adversely affect our ability to operate solely to maximize our cash flow. Our structure also may impede our ability to engage in certain corporate acquisitive transactions because we generally intend to hold all of our assets through the Apollo Operating Group. In addition, we may be unable to participate in certain corporate reorganization transactions that would be tax free to our holders if we were a corporation. To the extent we hold assets other than through the Apollo Operating Group, we will make appropriate adjustments to the Apollo Operating Group agreements so that distributions to Holdings and us would be the same as if such assets were held at that level. Moreover, we are precluded by a contract with one of the Strategic Investors from acquiring assets in a manner that would cause that Strategic Investor to be engaged in a commercial activity within the meaning of Section 892 of the Internal Revenue Code.
Tax gain or loss on disposition of our Class A shares could be more or less than expected.
If you sell your Class A shares, you will recognize a gain or loss equal to the difference between the amount realized and your adjusted tax basis allocated to those Class A shares. Prior distributions to you in excess of the total net taxable income allocated to you will have decreased the tax basis in your Class A shares. Therefore, such excess distributions will increase your taxable gain, or decrease your taxable loss, when the Class A shares are sold and may result in a taxable gain even if the sale price is less than the original cost. A portion of the amount realized, whether or not representing gain, may be ordinary income to you.

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We cannot match transferors and transferees of Class A shares, and we have therefore adopted certain income tax accounting conventions that may not conform with all aspects of applicable tax requirements. The IRS may challenge this treatment, which could adversely affect the value of our Class A shares.
Because we cannot match transferors and transferees of Class A shares, we have adopted depreciation, amortization and other tax accounting positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to holders of Class A shares. It also could affect the timing of these tax benefits or the amount of gain on the sale of Class A shares and could have a negative impact on the value of Class A shares or result in audits of and adjustments to the tax returns of holders of Class A shares.
The sale or exchange of 50% or more of our capital and profit interests will result in the termination of our partnership for U.S. Federal income tax purposes. We will be considered to have been terminated for U.S. Federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. Our termination would, among other things, result in the closing of our taxable year for all holders of Class A shares and could result in a deferral of depreciation deductions allowable in computing our taxable income.
Non-U.S. persons face unique U.S. tax issues from owning Class A shares that may result in adverse tax consequences to them.
In light of our investment activities, we may be, or may become, engaged in a U.S. trade or business for U.S. Federal income tax purposes, in which case some portion of our income would be treated as effectively connected income with respect to non-U.S. holders of our Class A shares, or “ECI.” Moreover, dividends paid by an investment that we make in a real estate investment trust, or “REIT,” that are attributable to gains from the sale of U.S. real property interests and sales of certain investments in interests in U.S. real property, including stock of certain U.S. corporations owning significant U.S. real property, may be treated as ECI with respect to non-U.S. holders of our Class A shares. In addition, certain income of non-U.S. holders from U.S. sources not connected to any U.S. trade or business conducted by us could be treated as ECI. To the extent our income is treated as ECI, each non-U.S. holder generally would be subject to withholding tax on its allocable share of such income, would be required to file a U.S. Federal income tax return for such year reporting its allocable share of income effectively connected with such trade or business and any other income treated as ECI, and would be subject to U.S. Federal income tax at regular U.S. tax rates on any such income (state and local income taxes and filings may also apply in that event). Non-U.S. holders that are corporations may also be subject to a 30% branch profits tax on their allocable share of such income. In addition, certain income from U.S. sources that is not ECI allocable to non-U.S. holders may be reduced by withholding taxes imposed at the highest effective applicable tax rate.
An investment in Class A shares will give rise to UBTI to certain tax-exempt holders.
We will not make investments through taxable U.S. corporations solely for the purpose of limiting unrelated business taxable income ("UBTI") from “debt-financed” property and, thus, an investment in Class A shares will give rise to UBTI to tax-exempt holders of Class A shares. For example, APO Asset Co., LLC will hold interests in entities treated as partnerships, or otherwise subject to tax on a flow-through basis, that will incur indebtedness. Moreover, if the IRS successfully asserts that we are engaged in a trade or business, then additional amounts of income could be treated as UBTI.
We do not intend to make, or cause to be made, an election under Section 754 of the Internal Revenue Code to adjust our asset basis or the asset basis of certain of the Apollo Operating Group Partnerships. Thus, a holder of Class A shares could be allocated more taxable income in respect of those Class A shares prior to disposition than if such an election were made.
We did not make and currently do not intend to make, or cause to be made, an election to adjust asset basis under Section 754 of the Internal Revenue Code with respect to Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P., Apollo Principal Holdings IX, L.P. and Apollo Principal Holdings X, L.P. If no such election is made, there will generally be no adjustment for a transferee of Class A shares even if the purchase price of those Class A shares is higher than the Class A shares’ share of the aggregate tax basis of our assets immediately prior to the transfer. In that case, on a sale of an asset, gain allocable to a transferee could include built-in gain allocable to the transferor at the time of the transfer, which built-in gain would otherwise generally be eliminated if a Section 754 election had been made.

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Class A shareholders may be subject to state and local taxes and return filing requirements as a result of investing in our Class A shares.
In addition to U.S. Federal income taxes, our Class A shareholders may be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if our Class A shareholders do not reside in any of those jurisdictions. Our Class A shareholders may also be required to file state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Further, Class A shareholders may be subject to penalties for failure to comply with those requirements. It is the responsibility of each Class A shareholder to file all U.S. Federal, state and local tax returns that may be required of such Class A shareholder.
We may not be able to furnish to each Class A shareholder specific tax information within 90 days after the close of each calendar year, which means that holders of Class A shares who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax return. In addition, it is possible that Class A shareholders may be required to file amended income tax returns.
As a publicly traded partnership, our operating results, including distributions of income, dividends, gains, losses or deductions and adjustments to carrying basis, will be reported on Schedule K-1 and distributed to each Class A shareholder annually. It may require longer than 90 days after the end of our fiscal year to obtain the requisite information from all lower-tier entities so that K-1s may be prepared for us. For this reason, Class A shareholders who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due date of their income tax return for the taxable year.
In addition, it is possible that a Class A shareholder will be required to file amended income tax returns as a result of adjustments to items on the corresponding income tax returns of the partnership. Any obligation for a Class A shareholder to file amended income tax returns for that or any other reason, including any costs incurred in the preparation or filing of such returns, are the responsibility of each Class A shareholder.
You may be subject to an additional U.S. Federal income tax on net investment income allocated to you by us and on gain on the sale of the Class A shares.
As of 2013, individuals, estates and trusts are subject to an additional 3.8% tax on “net investment income” (or undistributed “net investment income,” in the case of estates and trusts) for each taxable year, with such tax applying to the lesser of such income or the excess of such person’s adjusted gross income (with certain adjustments) over a specified amount. Net investment income includes net income from interest, dividends, annuities, royalties and rents and net gain attributable to the disposition of investment property. It is anticipated that net income and gain attributable to an investment in us will be included in a holder of the Class A share's “net investment income” subject to this additional tax.


ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.
PROPERTIES
Our principal executive offices are located in leased office space at 9 West 57th Street, New York, New York 10019. We also lease the space for our offices in New York, Los Angeles, Houston, Bethesda, Chicago, Toronto, London, Singapore, Frankfurt, Mumbai, Hong Kong and Luxembourg. We do not own any real property. We consider these facilities to be suitable and adequate for the management and operation of our businesses.

ITEM 3.
LEGAL PROCEEDINGS

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.


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In March 2012, plaintiffs filed two putative class actions, captioned Kelm v. Chase Bank (No. 12-cv-332) and Miller v. 1-800-Flowers.com, Inc. (No. 12-cv-396), in the District of Connecticut on behalf of a class of consumers alleging online fraud. The defendants included, among others, Trilegiant Corporation, Inc. (“Trilegiant”), its parent company, Affinion Group, LLC (“Affinion”), and Apollo Global Management, LLC ("AGM"), which is affiliated with funds that are the beneficial owners of 68% of Affinion’s common stock. In both cases, plaintiffs allege that Trilegiant, aided by its business partners, who include e-merchants and credit card companies, developed a set of business practices intended to create consumer confusion and ultimately defraud consumers into unknowingly paying fees to clubs for unwanted services. Plaintiffs allege that AGM is a proper defendant because of its indirect stock ownership and ability to appoint the majority of Affinion’s board. The complaints assert claims under the Racketeer Influenced Corrupt Organizations Act; the Electronic Communications Privacy Act; the Connecticut Unfair Trade Practices Act; and the California Business and Professional Code, and seek, among other things, restitution or disgorgement, injunctive relief, compensatory, treble and punitive damages, and attorneys’ fees. The allegations in Kelm and Miller are substantially similar to those in Schnabel v. Trilegiant Corp. (No. 3:10-cv-957), a putative class action filed in the District of Connecticut in 2010 that names only Trilegiant and Affinion as defendants. The court has consolidated the Kelm, Miller, and Schnabel cases under the caption In re: Trilegiant Corporation, Inc. and ordered that they proceed on the same schedule. On June 18, 2012, the court appointed lead plaintiffs’ counsel, and on September 7, 2012, plaintiffs filed their consolidated amended complaint (“CAC”), which alleges the same causes of action against AGM as did the complaints in the Kelm and Miller cases. Defendants filed motions to dismiss on December 7, 2012, plaintiffs filed opposition papers on February 7, 2013, and defendants filed replies on April 5, 2013. On December 5, 2012, plaintiffs filed another putative class action, captioned Frank v. Trilegiant Corp. (No. 12- cv-1721), in the District of Connecticut, naming the same defendants and containing allegations substantially similar to those in the CAC. On January 23, 2013, plaintiffs moved to transfer and consolidate Frank into In re: Trilegiant. On July 24, 2013 the Frank court transferred the case to Judge Bryant, who is presiding over In re: Trilegiant, and on March 28, 2014, Judge Bryant granted the motion to consolidate. On September 25, 2013, the court held oral argument on defendants’ motions to dismiss. On March 28, 2014, the court granted in part and denied in part motions to dismiss filed by Affinion and Trilegiant on behalf of all defendants, and also granted separate motions to dismiss filed by certain defendants, including AGM. On that same day, the court directed the clerk to terminate AGM as a defendant in the consolidated action. On April 28, 2014, plaintiffs moved for interlocutory review of certain of the court’s motion-to-dismiss rulings, not including its order granting AGM’s separate dismissal motion. Defendants filed a response on May 23, 2014, and plaintiffs replied on June 5, 2014. On November 13, 2014, plaintiffs and the remaining defendants filed a Joint Status Report Regarding Discovery stating that no discovery has taken place since plaintiffs filed their interlocutory-review motion.
Various state attorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents in connection with the solicitation of investments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have received subpoenas and other requests for information from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding the use of placement agents. CalPERS, one of our Strategic Investors, announced on October 14, 2009, that it had initiated a special review of placement agents and related issues. The report of the CalPERS Special Review was issued on March 14, 2011. That report does not allege any wrongdoing on the part of Apollo or its affiliates. Apollo is continuing to cooperate with all such investigations and other reviews. In addition, on May 6, 2010, the California Attorney General filed a civil complaint against Alfred Villalobos and his company, Arvco Capital Research, LLC (“Arvco”) (a placement agent that Apollo has used) and Federico Buenrostro Jr., the former CEO of CalPERS, alleging conduct in violation of certain California laws in connection with CalPERS’s purchase of securities in various funds managed by Apollo and another asset manager. Apollo is not a party to the civil lawsuit and the lawsuit does not allege any misconduct on the part of Apollo. Likewise, on April 23, 2012, the SEC filed a lawsuit alleging securities fraud on the part of Arvco, as well as Messrs. Buenrostro and Villalobos, in connection with their activities concerning certain CalPERS investments in funds managed by Apollo. This lawsuit also does not allege wrongdoing on the part of Apollo, and alleges that Apollo was defrauded by Arvco, Villalobos, and Buenrostro. On March 14, 2013, the United States Department of Justice unsealed an indictment against Messrs. Villalobos and Buenrostro alleging, among other crimes, fraud in connection with those same activities; again, Apollo is not accused of any wrongdoing and in fact is alleged to have been defrauded by the defendants. The criminal action was set for trial in a San Francisco federal court in July 2014, but was put on hold after Mr. Buenrostro pleaded guilty on July 11, 2014. As part of Mr. Buenrostro’s plea agreement, he admitted to taking cash and other bribes from Mr. Villalobos in exchange for several improprieties, including attempting to influence CalPERS’ investing decisions and improperly preparing disclosure letters to satisfy Apollo’s requirements. There is no suggestion that Apollo was aware that Mr. Buenrostro had signed the letters with a corrupt motive. The government has indicated that they will file new charges against Mr. Villalobos incorporating Mr. Buenrostro’s admissions. On August 7, 2014, the government filed a superseding indictment against Mr. Villalobos asserting additional charges. Trial had been scheduled for February 23, 2015, but Mr. Villalobos passed away on January 13, 2015.  Additionally, on April 15, 2013, Mr. Villalobos, Arvco and related entities (the “Arvco Debtors”) brought a civil action in the United States Bankruptcy Court for the District of Nevada (the “Bankruptcy Court”) against Apollo. The action is related to the ongoing bankruptcy proceedings of the Arvco Debtors. This action alleges that Arvco served as a placement agent for Apollo in connection with several funds associated with Apollo, and seeks to recover purported fees the Arvco Debtors claim Apollo has not paid them for a portion of Arvco’s placement agent services. In addition, the Arvco Debtors allege that Apollo has interfered with the Arvco Debtors’

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commercial relationships with third parties, purportedly causing the Arvco Debtors to lose business and to incur fees and expenses in the defense of various investigations and litigations. The Arvco Debtors also seek compensation from Apollo for these alleged lost profits and fees and expenses. The Arvco Debtors’ complaint asserts various theories of recovery under the Bankruptcy Code and common law. Apollo denies the merit of all of the Arvco Debtors’ claims and will vigorously contest them. The Bankruptcy Court has stayed this action pending the result in the criminal case against Mr. Villalobos. For these reasons, no estimate of possible loss, if any, can be made at this time.
On June 18, 2014, BOKF N.A. (the “First Lien Trustee”), the successor indenture trustee under the indenture governing the First Lien Notes issued by Momentive Performance Materials, Inc. (“Momentive”), commenced a lawsuit in the Supreme Court for the State of New York, New York County against AGM and members of an ad hoc group of Second Lien Noteholders (including, but not limited to, Euro VI (BC) S.a.r.l.). The First Lien Trustee amended its complaint on July 2, 2014 (the “First Lien Intercreditor Action”). In the First Lien Intercreditor Action, the First Lien Trustee seeks, among other things, a declaration that the defendants violated an intercreditor agreement entered into between holders of the first lien notes and holders of the second lien notes. On July 16, 2014, the successor indenture trustee under the indenture governing the 1.5 Lien Notes (the “1.5 Lien Trustee,” and, together with the First Lien Trustee, the “Indenture Trustees”) filed an action in the Supreme Court of the State of New York, New York County that is substantially similar to the First Lien Intercreditor Action (the “1.5 Lien Intercreditor Action,” and, together with the First Lien Intercreditor Action, the “Intercreditor Actions”). AGM subsequently removed the Intercreditor Actions to federal district court, and the Intercreditor Actions were automatically referred to the Bankruptcy Court adjudicating the Momentive chapter 11 bankruptcy cases. The Indenture Trustees then filed motions with the Bankruptcy Court to remand the Intercreditor Actions back to the state court (the “Remand Motions”). On September 9, 2014, the Bankruptcy Court denied the Remand Motions. On August 15, 2014, the defendants in the Intercreditor Actions (including AGM) filed a motion to dismiss the 1.5 Lien Intercreditor Action and a motion for judgment on the pleadings in the First Lien Intercreditor Action (the “Dismissal Motions”). On September 30, 2014, the Bankruptcy Court granted the Dismissal Motions. In its order granting the Dismissal Motions, the Bankruptcy Court gave the Indenture Trustees until mid-November 2014 to move to amend some, but not all, of the claims alleged in their respective complaints. On November 14, 2014, the Indenture Trustees moved to amend their respective complaints pursuant to the Bankruptcy Court’s order (the “Motions to Amend”).  On January 9, 2015, the defendants filed their oppositions to the Motions to Amend.  On January 16, 2015, the Bankruptcy Court denied the Motions to Amend. The Bankruptcy Court gave the Indenture Trustees until March 2, 2015 to seek to amend their respective complaints. The Indenture Trustees have not yet indicated whether they intend to file additional motions to amend. Accordingly, we are unable at this time to assess a potential risk of loss.  In addition, we do not believe that AGM is a proper defendant in these actions.
On June 13, 2014, plaintiffs Stark Master Fund Ltd and Stark Global Opportunities Master Fund Ltd filed a lawsuit in the United States District Court for the Eastern District of Wisconsin against AGM and Apollo Management Holdings, L.P. (the “Apollo Defendants”), as well as Credit Suisse Securities (USA) LLC and Deutsche Bank Securities (USA) LLC (the “Bank Defendants”). The complaint alleges that AGM and the other defendants entered into an undisclosed and improper agreement concerning the financing of a potential acquisition by Hexion Specialty Chemicals Inc., and on this basis alleges a variety of common law misrepresentation claims, both intentional and negligent. The Apollo Defendants and Bank Defendants filed motions to dismiss the complaint on October 15, 2014.  Rather than respond to the motions, plaintiffs filed an Amended Complaint on November 5, 2014.  The Apollo Defendants and Bank Defendants filed motions to dismiss the Amended Complaint on December 23, 2014.  Plaintiffs filed a motion for leave to conduct jurisdictional discovery on February 2, 2015, and pursuant to the parties' stipulation approved by the court the motion shall be fully briefed on or before March 9, 2015. Plaintiffs must file their opposition to Defendants’ motion to dismiss the Amended Complaint on or before 30 days following either a decision from the Court on Plaintiffs’ motion for jurisdictional discovery or the close of jurisdictional discovery, whichever is later. Because the claims against the Apollo Defendants are in their early stages, no reasonable estimate of possible loss, if any, can be made at this time.
There are several pending actions concerning transactions related to Caesars Entertainment Operating Company, Inc.’s (“CEOC”) restructuring efforts.  Apollo is not a defendant in these matters.
In re: Caesars Entertainment Operating Company, Inc. bankruptcy proceedings, No. 15-10047 (Del. Bk.) (the “Delaware Bankruptcy Action”) and No. 15-01145 (N.D. Ill. Bk.) (the “Illinois Bankruptcy Action”). On January 12, 2015, three holders of CEOC second lien notes issued filed an involuntary bankruptcy petition against CEOC in the United States Bankruptcy Court for the District of Delaware.

On February 2, 2015, the court in the Delaware Bankruptcy Action ordered that all CEOC bankruptcy proceedings should take place in the Illinois Bankruptcy Action.

Wilmington Savings Fund Society, FSB v. Caesars Entertainment Corp. et al., No. 10004-CVG (Del. Ch.) (the “Trustee Action”). On August 4, 2014, Wilmington Savings Fund Society, FSB

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(“WSFS”), as trustee for certain CEOC second-lien notes, sued Caesars Entertainment Corporation (“Caesars Entertainment”), Caesars Entertainment’s subsidiary, CEOC, other Caesars Entertainment-affiliated entities, and certain of Caesars Entertainment’s directors, including Marc Rowan, Eric Press, David Sambur (each an Apollo Partner) and Jeff Benjamin (an Apollo consultant), in the Delaware Chancery Court. WSFS (i) asserts claims (against some or all of the defendants) for fraudulent conveyance, breach of fiduciary duty, breach of contract, corporate waste and aiding and abetting related to certain transactions between CEOC and other Caesars Entertainment affiliates, and (ii) requests (among other things) that the court unwind the challenged transactions and award damages. Defendants filed a motion to dismiss or stay the Trustee Action in favor of the Caesars Action, which was argued on December 5, 2014.

Caesars Entertainment Operating Co., et al. v. Appaloosa Investment Ltd. P’ship et al., No. 652392/2014 (N.Y. Sup. Ct.) (the “Caesars Action”). On August 5, 2014, Caesars Entertainment Corporation and Caesars Entertainment’s subsidiary CEOC sued certain institutional CEOC second-lien noteholders and CEOC first-lien noteholder Elliott Management Corporation (“EMC”). On September 15, 2014, an amended complaint was filed adding WSFS as a defendant. The amended complaint asserts claims for (among other things) tortious interference with prospective economic advantage, a declaratory judgment that certain transactions related to CEOC’s restructuring are valid and appropriate and that there has not been a default under the indentures governing the notes. On October 15, 2014, defendants moved to dismiss the complaint, and the motion was fully briefed on December 1, 2014. On January 15, 2015, Caesars Entertainment and CEOC agreed to voluntarily dismiss their claims against EMC without prejudice, and EMC agreed to withdraw its motion to dismiss without prejudice. The remaining parties in the Caesars Action and the parties in the Trustee action described below have agreed to stay discovery pending decision on the respective motions to dismiss.

Meehancombs Global Credit Opportunities Master Fund, L.P., et al. v. Caesars Entertainment Corp., et al., No. 14-cv-7091 (S.D.N.Y.) (the “Meehancombs Action”).  On September 3, 2014, institutional investors allegedly holding approximately $137 million in CEOC unsecured senior notes sued CEOC and Caesars Entertainment for breach of contract and the implied covenant of good faith, Trust Indenture Act violations and a declaratory judgment challenging the August 2014 private financing transaction in which a portion of outstanding senior unsecured notes were purchased by Caesars Entertainment, and a majority of the noteholders agreed to amend the indenture to terminate Caesars Entertainment’s guarantee of the notes and modify certain restrictions on CEOC’s ability to sell assets. On October 2, 2014, a related putative class action complaint was filed on behalf of the holders of these notes captioned Danner v. Caesars Entertainment Corp., et al., No. 14-cv-7973 (S.D.N.Y.) (the “Danner Action”), against Caesars Entertainment alleging similar claims to the Meehancombs Action. Caesars Entertainment and CEOC filed a motion to dismiss on November 12, 2014. On January 15, 2015, the court granted the motion with respect to a Trust Indenture Act claim by Meehancombs but otherwise denied the motion. On January 30, 2015, plaintiffs filed an amended complaint seeking relief against Caesars Entertainment only, which Caesars Entertainment answered on February 12, 2015.

UMB Bank v. Caesars Entertainment Corporation, et al., No. 10393 (Del. Ch.) (the “UMB Action.”). On November 25, 2014, UMB Bank, as trustee for certain CEOC notes, sued Caesars Entertainment, CEOC, other Caesars Entertainment-affiliated entities, and certain of Caesars Entertainment’s directors, including Marc Rowan, Eric Press, David Sambur (each an Apollo Partner) and Jeffrey Benjamin (an Apollo consultant), in Delaware Chancery Court. The lawsuit alleges claims for actual and constructive fraudulent conveyance and transfer, insider preferences, illegal dividends, breach of contract, intentional interference with contractual relations, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, usurpation of corporate opportunities, and unjust enrichment. The UMB Action seeks appointment of a receiver for CEOC, a constructive trust, and other relief. The UMB Action has been assigned to the same judge overseeing the Trustee Action. Upon filing the complaint, UMB Bank moved to expedite is claim seeking a receiver, on which the court held oral argument on December 17, 2014. On January 15, 2015, the court entered a stipulated order staying the UMB Action as to all parties due to CEOC’s bankruptcy filing.


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Koskie v. Caesars Acquisition Company, et al., No. A-14-711712-C (Clark Cnty Nev. Dist. Ct.) (the “Koskie Action”). On December 30, 2014, Nicholas Koskie brought a shareholder class action on behalf of shareholders of Caesars Acquisition Company (“CAC”) against CAC, Caesars Entertainment, and members of CAC’s Board of Directors, including Marc Rowan and David Sambur (each an Apollo partner). The lawsuit challenges CAC and Caesars Entertainment’s plan to merge, alleging that the proposed transaction will not give CAC shareholders fair value. Koskie asserts claims for breach of fiduciary duty relating to the director defendants’ interrelationships with the entities involved the proposed transaction.

Apollo believes that the claims in the Trustee Action, the UMB Action, the Meehancombs Action, the Danner Action, and the Koskie Action are without merit.  For this reason, and because the claims are in their early stages, and because of pending bankruptcy proceedings involving CEOC, no reasonable estimate of possible loss, if any, can be made at this time.
Following the January 16, 2014 announcement that CEC Entertainment, Inc. (“CEC”) had entered into a merger agreement with certain entities affiliated with Apollo (the “Merger Agreement”), four putative shareholder class actions were filed in the District Court of Shawnee County, Kansas on behalf of purported stockholders of CEC against, among others, CEC, its directors and Apollo and certain of its affiliates, which include Queso Holdings Inc., Q Merger Sub Inc., Apollo Management VIII, L.P., and AP VIII Queso Holdings, L.P. The first purported class action, which is captioned Hilary Coyne v. Richard M. Frank et al., Case No. 14C57, was filed on January 21, 2014 (the “Coyne Action”). The second purported class action, which was captioned John Solak v. CEC Entertainment, Inc. et al., Civil Action No. 14C55, was filed on January 22, 2014 (the “Solak Action”). The Solak Action was dismissed for lack of prosecution on October 14, 2014. The third purported class action, which is captioned Irene Dixon v. CEC Entertainment, Inc. et al., Case No. 14C81, was filed on January 24, 2014 and additionally names as defendants Apollo Management VIII, L.P. and AP VIII Queso Holdings, L.P. (the “Dixon Action”). The fourth purported class action, which is captioned Louisiana Municipal Public Employees’ Retirement System v. Frank, et al., Case No. 14C97, was filed on January 31, 2014 (the “LMPERS Action”) (together with the Coyne and Dixon Actions, the “Shareholder Actions”). A fifth purported class action, which was captioned McCullough v. Frank, et al., Case No. CC-14-00622-B, was filed in the County Court of Dallas County, Texas on February 7, 2014. This action was dismissed for want of prosecution on May 21, 2014. Each of the Shareholder Actions alleges, among other things, that CEC’s directors breached their fiduciary duties to CEC’s stockholders in connection with their consideration and approval of the Merger Agreement, including by agreeing to an inadequate price, agreeing to impermissible deal protection devices, and filing materially deficient disclosures regarding the transaction. Each of the Shareholder Actions further alleges that Apollo and certain of its affiliates aided and abetted those alleged breaches. As filed, the Shareholder Actions seek, among other things, rescission of the various transactions associated with the merger, damages and attorneys’ and experts’ fees and costs.   On February 7, 2014 and February 11, 2014, the plaintiffs in the Shareholder Actions pursued a consolidated action for damages after the transaction closed. Thereafter, the Shareholder Actions were consolidated under the caption In re CEC Entertainment, Inc. Stockholder Litigation, Case No. 14C57, and the parties have engaged in limited discovery. No defendant has any obligation to answer or otherwise respond to any of the complaints in the consolidated action until the plaintiffs file or designate an operative complaint. Although Apollo cannot predict the ultimate outcome of the above action, it believes that such action is without merit.
On June 10, 2014, Magnetar Global Event Driven Fund Ltd., Spectrum Opportunities Master Fund, Ltd., Magnetar Capital Master Fund, Ltd., and Blackwell Partners LLC, as the purported beneficial owners of shares held as of record by the nominal petitioner Cede & Co., (the “Appraisal Petitioners”), filed an action for statutory appraisal under Kansas state law against CEC in the U.S. District Court for the District of Kansas, captioned Magnetar Global Event Driven Master Fund Ltd, et al. v. CEC Entertainment, Inc., 2:14-cv-02279-RDR-KGS. The Appraisal Petitioners seek appraisal of 750,000 shares of common stock. CEC has answered the complaint and filed a verified list of stockholders, as required under Kansas law. On September 3, 2014, the court entered a scheduling order that contemplated that discovery would commence in the fall of 2014 and would be substantially completed by May 2015. On January 13, 2015, the court entered a revised scheduling order that contemplated that fact discovery would be completed by March 13, 2015, expert discovery would be completed by June 15, 2015, and a pretrial conference would occur on June 29, 2015. Thereafter, the scheduling order contemplates dispositive motion practice and a trial on the merits of the Appraisal Petitioners’ claims. Although Apollo cannot predict the ultimate outcome of the above actions, Apollo believes that such actions are without merit.
On September 29, 2014, Athlon Energy Inc. (“Athlon”) and Encana Corporation (“Encana”) jointly announced that they had entered into an Agreement and Plan of Merger, dated as of September 27, 2014 (the “Merger Agreement”), pursuant to which a wholly-owned subsidiary of Encana (“Merger Sub”) would commence a tender offer (the “Offer”) to acquire all of the issued and outstanding shares of Athlon common stock.  Following completion of the Offer, Merger Sub would be merged with and into Athlon (the “Proposed Transaction”).  On October 23, 2014, The City of Cambridge Retirement System filed a putative class action complaint captioned The City of Cambridge Retirement System v. Reeves, et al., C.A. No. 10277-VCG (the “Cambridge

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Action”) in the Delaware Court of Chancery naming Merger Sub, AGM and members of Athlon’s board of directors as defendants.  The Cambridge Action alleges, among other things, that members of Athlon’s board of directors breached their fiduciary duties in connection with their consideration and approval of the proposed transaction, and that Encana, Merger Sub and AGM aided and abetted those breaches of fiduciary duty.  On November 3, 2014, the parties to the Cambridge Action and several other similar actions filed in Delaware and Texas state court before the Cambridge Action (none of which named AGM as a defendant (collectively, the “Actions”)), entered into a Memorandum of Understanding to settle the Actions.  On December 19, 2014, the parties to the Actions entered into a formal settlement agreement, and on December 22, 2014, the parties submitted the settlement agreement and accompanying papers to the court for its approval.  Under the terms of the proposed settlement, AGM will not be required to contribute any cash and will be granted full and customary releases.
Although the ultimate outcome of these matters cannot be ascertained at this time, Apollo is of the opinion, after consultation with counsel, that the resolution of any such matters to which it is a party at this time will not have a material adverse effect on the consolidated financial statements. Legal actions material to Apollo could, however, arise in the future.


ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.



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PART II—OTHER INFORMATION

 
ITEM 5.
MARKETS FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A shares are traded on the NYSE under the symbol “APO.” Our Class A shares began trading on the NYSE on March 30, 2011.
The number of holders of record of our Class A shares as of February 26, 2015 was 20. This does not include the number of shareholders that hold shares in “street name” through banks or broker-dealers. As of February 26, 2015, there was 1 holder of our Class B share.
The following table sets forth the high and low intra-day sales prices per unit of our Class A shares, for the periods indicated, as reported by the NYSE:
 
 
 
Sales Price
2014
 
High
 
Low
First Quarter
 
$
36.51

 
$
29.91

Second Quarter
 
32.44

 
24.06

Third Quarter
 
28.18

 
22.41

Fourth Quarter
 
25.18

 
20.02


 
 
Sales Price
2013
 
High
 
Low
First Quarter
 
$
24.87

 
$
17.72

Second Quarter
 
28.14

 
20.86

Third Quarter
 
29.98

 
22.61

Fourth Quarter
 
34.88

 
28.04

 
Cash Distribution Policy
With respect to fiscal year 2014, we paid four cash distributions of $1.08, $0.84, $0.46 and $0.73 per Class A share on February 26, 2014, May 30, 2014, August 29, 2014, and November 21, 2014, respectively (aggregating to $3.11 per Class A share), and we have declared an additional cash distribution of $0.86 per Class A share in respect of the fourth quarter of 2014 which will be paid on February 27, 2015 to holders of record of Class A shares at the close of business on February 17, 2015.
With respect to fiscal year 2013, we paid four cash distributions of $1.05, $0.57, $1.32 and $1.01 per Class A share on February 28, 2013, May 30, 2013, August 30, 2013, and November 29, 2013, respectively, aggregating to $3.95 per Class A share.
"Distributable Earnings", or "DE", as well as "DE After Taxes and Related Payables", are derived from our segment reported results, and are supplemental measures to assess performance and amounts available for distribution to Class A shareholders, holders of RSUs that participate in distributions and holders of AOG units. DE represents the amount of net realized earnings without the effects of the consolidation of any of the affiliated funds. DE, which is a component of Economic Net Income or "ENI", is the sum across all segments of (i) total management fees and advisory and transaction fees, excluding monitoring fees received from Athene based on its capital and surplus (as defined in Apollo's transaction advisory services agreement with Athene), (ii) other income (loss), excluding the gains (losses) arising from the reversal of a portion of the tax receivable agreement liability, (iii) realized carried interest income, and (iv) realized investment income, less (i) compensation expense, excluding the expense related to equity-based awards, (ii) realized profit sharing expense, and (iii) non-compensation expenses, excluding depreciation and amortization expense. DE After Taxes and Related Payables represents DE less estimated current corporate, local and non-U.S. taxes as well as the payable under Apollo's tax receivable agreement.
Our current intention is to distribute to our Class A shareholders on a quarterly basis substantially all of our Distributable Earnings attributable to Class A shareholders, in excess of amounts determined by our manager to be necessary or appropriate to provide for the conduct of our businesses, 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 our Class A shareholders for any ensuing quarter. Because we will not know what our actual available cash flow from operations will be for any year until

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sometime after the end of such year, our fourth quarter distribution may be adjusted to take into account actual net after-tax cash flow from operations for that year.
The declaration, payment and determination of the amount of our quarterly distribution will be at the sole discretion of our manager, which may change our cash distribution policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, will or can be paid. In making decisions regarding our quarterly distribution, our manager will take into account general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax and regulatory restrictions, restrictions and other implications on the payment of distributions by us to our common shareholders or by our subsidiaries to us and such other factors as our manager may deem relevant.
Because we are a holding company that owns intermediate holding companies, the funding of each distribution, if declared, will occur in three steps, as follows.
First, we will cause one or more entities in the Apollo Operating Group to make a distribution to all of its partners, including our wholly-owned subsidiaries APO Corp., APO Asset Co., LLC, APO (FC), LLC and APO (FC II), LLC (as applicable), and Holdings, on a pro rata basis;
Second, we will cause our intermediate holding companies, APO Corp., APO Asset Co., LLC, APO (FC), LLC and APO (FC II), LLC (as applicable), to distribute to us, from their net after-tax proceeds, amounts equal to the aggregate distribution we have declared; and
Third, we will distribute the proceeds received by us to our Class A shareholders on a pro rata basis.
Payments that any of our intermediate holding companies make under the tax receivable agreement will reduce amounts that would otherwise be available for distribution by us on our Class A shares. See note 17 to our consolidated financial statements.
Under Delaware law we are prohibited from making a distribution to the extent that our liabilities, after such distribution, exceed the fair value of our assets. Our operating agreement does not contain any restrictions on our ability to make distributions, except that we may only distribute Class A shares to holders of Class A shares. The debt arrangements, as described in note 14 to our consolidated financial statements, do not contain restrictions on our or our subsidiaries' ability to pay distributions; however, instruments governing indebtedness that we or our subsidiaries incur in the future may contain restrictions on our or our subsidiaries' ability to pay distributions or make other cash distributions to equity holders.
In addition, the Apollo Operating Group’s cash flow from operations may be insufficient to enable it to make tax distributions to its partners, in which case the Apollo Operating Group may have to borrow funds or sell assets, and thus our liquidity and financial condition could be materially adversely affected. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.
Our cash distribution policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay distributions according to our cash distribution policy, we may not pay distributions according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended distributions.
As of December 31, 2014, approximately 22.4 million RSUs granted to Apollo employees (net of forfeited awards) were entitled to distribution equivalents, which are paid in cash.
Securities Authorized for Issuance Under Equity Compensation Plans
See the table under “Securities Authorized for Issuance Under Equity Compensation Plans” set forth in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Unregistered Sale of Equity Securities
On October 9, 2014, November 4, 2014 and November 12, 2014, we issued 711,805, 2,319,139 and 2,950 Class A shares, net of taxes, to Apollo Management Holdings, L.P., respectively, for an aggregate purchase price of $16,912,487, $52,435,733 and $69,178, respectively. The issuances were 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.

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Class A Shares Repurchases in the Fourth Quarter of 2014
No purchases of our Class A shares were made by us or on our behalf in the fourth quarter of the year ended December 31, 2014.

ITEM 6.     SELECTED FINANCIAL DATA
The following selected historical consolidated and combined financial and other data of Apollo Global Management, LLC should be read together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data.”
The selected historical consolidated statements of operations data of Apollo Global Management, LLC for each of the years ended December 31, 2014, 2013 and 2012 and the selected historical consolidated statements of financial condition data as of December 31, 2014 and 2013 have been derived from our audited consolidated financial statements which are included in “Item 8. Financial Statements and Supplementary Data.”

We derived the selected historical consolidated statements of operations data of Apollo Global Management, LLC for the years ended December 31, 2011 and 2010 and the selected consolidated statements of financial condition data as of December 31, 2012, 2011 and 2010 from our audited consolidated financial statements which are not included in this report.
 

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Year Ended December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
 
(in thousands, except per share amounts)
Statement of Operations Data
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
315,587

 
$
196,562

 
$
149,544

 
$
81,953

 
$
79,782

Management fees from affiliates
850,441

 
674,634

 
580,603

 
487,559

 
431,096

Carried interest income (loss) from affiliates
394,055

 
2,862,375

 
2,129,818

 
(397,880
)
 
1,599,020

Total Revenues
1,560,083

 
3,733,571

 
2,859,965

 
171,632

 
2,109,898

Expenses:
 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
 
Equity-based compensation
126,320

 
126,227

 
598,654

 
1,149,753

 
1,118,412

Salary, bonus and benefits
338,049

 
294,753

 
274,574

 
251,095

 
249,571

Profit sharing expense
276,190

 
1,173,255

 
872,133

 
(60,070
)
 
575,367

Total Compensation and Benefits
740,559

 
1,594,235

 
1,745,361

 
1,340,778

 
1,943,350

Interest expense
22,393

 
29,260

 
37,116

 
40,850

 
35,436

Professional fees
82,030

 
83,407

 
64,682

 
59,277

 
61,919

General, administrative and other
97,663

 
98,202

 
87,961

 
75,558

 
65,107

Placement fees
15,422

 
42,424

 
22,271

 
3,911

 
4,258

Occupancy
40,427

 
39,946

 
37,218

 
35,816

 
23,067

Depreciation and amortization
45,069

 
54,241

 
53,236

 
26,260

 
24,249

Total Expenses
1,043,563

 
1,941,715

 
2,047,845

 
1,582,450

 
2,157,386

Other Income:
 
 
 
 
 
 
 
 
 
Net gains (losses) from investment activities
213,243

 
330,235

 
288,244

 
(129,827
)
 
367,871

Net gains (losses) from investment activities of consolidated variable interest entities
22,564

 
199,742

 
(71,704
)
 
24,201

 
48,206

Income from equity method investments
53,856

 
107,350

 
110,173

 
13,923

 
69,812

Interest income
10,392

 
12,266

 
9,693

 
4,731

 
1,528

Other income, net
60,592

 
40,114

 
1,964,679

 
205,520

 
195,032

Total Other Income
360,647

 
689,707

 
2,301,085

 
118,548

 
682,449

Income (loss) before income tax provision
877,167

 
2,481,563

 
3,113,205

 
(1,292,270
)
 
634,961

Income tax provision
(147,245
)
 
(107,569
)
 
(65,410
)
 
(11,929
)
 
(91,737
)
Net Income (Loss)
729,922

 
2,373,994

 
3,047,795

 
(1,304,199
)
 
543,224

Net (income) loss attributable to Non-Controlling Interests(1)(2)
(561,693
)
 
(1,714,603
)
 
(2,736,838
)
 
835,373

 
(448,607
)
Net Income (Loss) Attributable to Apollo Global Management, LLC
$
168,229

 
$
659,391

 
$
310,957

 
$
(468,826
)
 
$
94,617

Distributions Declared per Class A Share
$
3.11

 
$
3.95

 
$
1.35

 
$
0.83

 
$
0.21

Net Income (Loss) Available to Class A Share – Basic
$
0.62

 
$
4.06

 
$
2.06

 
$
(4.18
)
 
$
0.83

Net Income (Loss) Available to Class A Share –Diluted
$
0.62

 
$
4.03

 
$
2.06

 
$
(4.18
)
 
$
0.83

 
As of December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
 
(in thousands)
Statement of Financial Condition Data
 
 
 
 
 
 
 
 
 
Total assets
$
23,178,837

 
$
22,477,981

 
$
20,636,858

 
$
7,975,873

 
$
6,552,372

Debt (excluding obligations of consolidated variable interest entities)
1,034,014

 
750,000

 
737,818

 
738,516

 
751,525

Debt obligations of consolidated variable interest entities
14,123,100

 
12,423,962

 
11,834,955

 
3,189,837

 
1,127,180

Total shareholders’ equity
5,943,461

 
6,688,722

 
5,703,383

 
2,648,321

 
3,081,419

Total Non-Controlling Interests
4,156,979

 
4,051,453

 
3,036,565

 
1,921,920

 
2,930,517

 

(1)
Reflects Non-Controlling Interests attributable to AAA, consolidated variable interest entities and the remaining interests held by certain individuals who receive an allocation of income from certain of our credit management companies.

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(2)
Reflects the Non-Controlling Interests in the net (income) loss of the Apollo Operating Group relating to the AOG Units held by our Managing Partners and Contributing Partners which is calculated by applying the ownership percentage of Holdings in the Apollo Operating Group. Holdings' ownership interest in the Apollo Operating Group was impacted by the Company’s initial public offering in April 2011, issuances of Class A shares in settlement of vested RSUs in each of the periods presented, and exchanges of certain AOG Units. See “Item 8. Financial Statements and Supplementary Data” for details of the ownership percentage in Holdings.


ITEM 7.
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 consolidated financial statements and the related notes as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013, and 2012. 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 of this report entitled "Item 1A. Risk Factors." The highlights listed below have had significant effects on many items within our 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 private equity, credit and real estate 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 24 years and lead a team of 845 employees, including 320 investment professionals, as of December 31, 2014.
Apollo conducts its management and incentive businesses primarily in the United States and substantially all of its revenues are generated domestically. These businesses are conducted through the following three reportable segments:
(i)
Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debt instruments;
(ii)
Credit—primarily invests in non-control corporate and structured debt instruments; and
(iii)
Real estate—primarily invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities.
These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the managed funds.
Our financial results vary since carried interest, which generally constitutes a large portion of the income we receive from the funds that we manage, 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 December 31, 2014, approximately 96% of our total AUM was in funds with a contractual life at inception of seven years or more, and 45% of our total AUM was considered permanent capital.
As of December 31, 2014, we had total AUM of $159.8 billion across all of our businesses. 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

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capital from Apollo and affiliated investors, and as of December 31, 2014, Fund VIII had $16.8 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 December 31, 2014, Fund VII had $3.2 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 December 31, 2014. For further detail related to fund performance metrics across all of our businesses, see “—The Historical Investment Performance of Our Funds.”
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 the date of the filing of this Annual Report on Form 10-K.
(1)
The Strategic Investors hold 26.79% of the Class A shares outstanding and 11.53% of the economic interests in the Apollo Operating Group. The Class A shares held by investors other than the Strategic Investors represent 35.59% of the total voting power of our shares entitled to vote and 31.51% of the economic interests in the Apollo Operating Group. Class A shares held by the Strategic Investors do not have voting rights. However, such Class A shares will become entitled to vote upon transfers by a Strategic Investor in accordance with the agreements entered into in connection with the investments made by the Strategic Investors.
(2)
Our Managing Partners own BRH Holdings GP, Ltd., which in turn holds our only outstanding Class B share. The Class B share represents 64.41% 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 50.48% 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 56.99% of the limited partner interests in each Apollo Operating Group entity ("AOG Units"). The AOG Units held by Holdings are exchangeable for Class A shares. Our Managing Partners, through their interests in BRH and Holdings, beneficially own 50.48% of the AOG Units. Our Contributing Partners, through their ownership interests in Holdings, beneficially own 6.51% of the AOG Units.

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(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 43.01% of the limited partner interests in each Apollo Operating Group entity, held through 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 partnerships holds interests in different businesses or entities organized in different jurisdictions.
Our structure is designed to accomplish a number of objectives, the most important of which are as follows:
We are a holding company that is qualified as a partnership for U.S. federal income tax purposes. Our intermediate 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 or partnerships 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.
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 terms of equity markets, in the U.S., the S&P 500 Index rose 4.4% in the fourth quarter of 2014, bringing the full year appreciation to 11.4%. Outside the U.S., global equity markets depreciated in the fourth quarter of 2014. The MSCI All Country World ex USA Index was down 4.2% in the fourth quarter of 2014, bringing the full year depreciation to 6.3%. Importantly, we believe that the generally positive momentum in the U.S. equity markets is conducive for continued equity capital markets activity, including IPOs and secondary offerings of the portfolio companies within our funds.
Conditions in the credit markets also have a significant impact on our business. Credit indices declined in the fourth quarter of 2014, with the BofAML HY Master II Index down 1.1% and the S&P/LSTA Leveraged Loan Index down 0.5%. For the full year, however, the BofAML HY Master II Index was up 2.5% and the S&P/LSTA Leveraged Loan Index was up 1.6%. Benchmark interest rates continued the year's bearish descent in the fourth quarter. The U.S. 10-year Treasury yield finished the quarter down 35 basis points and the year down more than 85 basis points from its starting point to 2.2%. Commodities generally saw price declines for the full year after a particularly weak fourth quarter that was driven by depreciation in oil. The price of crude oil declined approximately 42% during the fourth quarter and 46% for the full year primarily due to oversupply dynamics.
In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported that real GDP increased at an annual rate of 2.6% in the fourth quarter of 2014 due to increasing consumer spending, despite decreasing government spending, slowing exports, and slowing business investment. For the full year 2014, the BEA reported that real GDP increased at an annual rate of 2.4%. As of January 2015, The International Monetary Fund estimated that the U.S. economy will expand by 3.6% in 2015. Additionally, the U.S. unemployment rate continued to decline and stood at 5.6% as of December 31, 2014, compared to 5.9% as of September 30, 2014, making it the lowest level since July 2008.
Amid the generally favorable backdrop of elevated asset prices and positive equity market momentum, Apollo continued to generate realizations for fund investors. Apollo returned $5.7 billion and $16.4 billion of capital and realized gains to the limited partners of the funds it manages during the fourth quarter of 2014 and full year ended December 31, 2014, respectively. In general, institutional investors continue to allocate capital towards alternative investment managers for more attractive risk-adjusted returns in a low interest rate environment. Apollo reported $1.0 billion and $9.9 billion of new capital raised during the fourth quarter of 2014 and full year ended December 31, 2014, respectively.
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. Apollo reported $2.8 billion and $10.0 billion of dollars invested during the fourth quarter of 2014 and full year ended December 31, 2014, respectively. We believe Apollo’s expertise in credit and its focus on nine core industry sectors, combined with more than 20 years of investment experience, has allowed Apollo to respond quickly to changing environments. Apollo’s core industry sectors include chemicals, natural resources, consumer and retail, distribution and transportation, financial and business services, manufacturing and industrial, media and cable and leisure, packaging and materials and the satellite and wireless industries. 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.
Managing Business Performance
We believe that the presentation of Economic Net Income (Loss) supplements a reader’s understanding of the economic operating performance of each of our segments.
Economic Net Income (Loss)
Economic Net Income, or ENI, is a key performance measure used by management in evaluating the performance of Apollo’s private equity, credit and real estate segments. Management also believes the components of ENI such as the amount of management fees, advisory and transaction fees and carried interest income are indicative of Apollo’s performance. Management uses these performance measures in making key operating decisions such as the following:
 
 
Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires;
 
 
Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansion into new businesses; and
 
 
Decisions related to expenses, such as determining annual discretionary bonuses and equity-based compensation awards to our 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 the carried interest income 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.
ENI has certain limitations in that it does not take into account certain items included under U.S. GAAP. ENI represents segment income (loss) attributable to Apollo Global Management, LLC, which excludes the impact of (i) non-cash charges related to restricted share units ("RSUs") granted in connection with the 2007 private placement and amortization of AOG Units, (ii) income tax expense, (iii) amortization of intangibles associated with the 2007 Reorganization as well as acquisitions, (iv) Non-Controlling Interests (excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our credit management companies) and (v) non-cash revenue and expense related to equity awards granted by unconsolidated affiliates to employees of the Company. In addition, segment data excludes the assets, liabilities and operating results of the funds and VIEs that are included in the consolidated financial statements as such carried interest income, management fees and other revenues from these consolidated entities are reflected on an unconsolidated basis. Adjustments relating to income tax expense, intangible asset amortization and Non-Controlling Interests are common in the calculation of supplemental measures of performance in our industry. We believe the exclusion of the non-cash 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.
We believe that ENI 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.
ENI 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 ENI as a measure of operating performance, not as a measure of liquidity. ENI should not be considered in isolation or as a substitute for operating income, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordance with U.S. GAAP. The use of ENI without consideration of related U.S. GAAP measures is not adequate due to the adjustments described above. Management compensates for these limitations by using ENI as a supplemental measure to U.S. GAAP results, to provide a more complete understanding of our performance as management measures it. A reconciliation of ENI to our U.S. GAAP net income (loss) attributable to Apollo Global Management, LLC can be found in the notes to our consolidated financial statements.


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Operating Metrics
We monitor certain operating metrics that are common to the alternative investment management industry. These operating metrics include Assets Under Management, private equity dollars invested and uncalled private equity commitments.
Assets Under Management
Assets Under Management, or AUM, refers to the assets we manage for the funds, partnerships and accounts to which we provide investment management 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 fair value of the investments of the private equity funds, partnerships and accounts we manage plus the capital which such funds, partnerships and accounts are entitled to call from investors pursuant to capital commitments;
(ii)
the net asset value ("NAV") of the credit funds, partnerships and accounts for which we provide investment management services, other than certain CLOs and CDOs, which have a fee generating basis other than the mark-to-market value of the underlying assets, plus used or available leverage and/or capital which such funds, partnerships and accounts are entitled to call from investors pursuant to capital commitments;
(iii)
the gross asset value or net asset value of the real estate funds, partnerships and accounts we manage, and the structured portfolio company investments of the funds, partnerships and accounts we manage, which includes the leverage used by such structured portfolio company investments;
(iv)
the incremental value associated with the reinsurance investments of the portfolio company assets we manage; and
(v)
the fair value of any other assets that we manage for the funds, partnerships and accounts to which we provide investment management services, plus unused credit facilities, including capital commitments to such funds, partnerships and accounts for investments that may require pre-qualification 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 no or nominal 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 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.
We use AUM as a performance measure of our investment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs.

Assets Under Management—Fee-Generating/Non-Fee Generating
Fee-Generating AUM consists of assets we manage for the funds, partnerships and accounts to which we provide investment management services and on which we earn management fees or monitoring fees pursuant to management or other fee agreements on a basis that varies among the Apollo funds, partnerships and accounts we manage. 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 investments of the funds, partnerships and accounts we manage, 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.

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Non-Fee Generating AUM consists of assets that do not produce management fees or monitoring fees. These assets generally consist of the following: (a) fair value above invested capital for those funds that earn management fees based on invested capital, (b) net asset values related to general partner and co-investment ownership, (c) unused credit facilities, (d) available commitments on those funds that generate management fees on invested capital, (e) structured portfolio company investments that do not generate monitoring fees and (f) the difference between gross asset and net asset value for those funds that earn management fees based on net asset value.
Carry Eligible AUM refers to the AUM that may eventually produce carried interest income. All funds for which we are entitled to receive a carried interest income allocation are included in Carry Eligible AUM, which consists of the following:

(i)
Carry Generating AUM, which refers to funds' invested capital that is currently above its hurdle rate or preferred return, and the funds' profit is allocated to the general partner in accordance with the applicable limited partnership agreements or other governing agreements;
(ii)
AUM Not Currently Generating Carry, which refers to funds' invested capital that is currently below its hurdle rate or preferred return; and
(iii)
Uninvested Carry Eligible AUM, which refers to available capital for investment or reinvestment subject to the provisions of applicable limited partnership agreements or other governing agreements that are not currently part of the NAV or fair value of investments that may eventually produce carried interest income, which would be allocated to 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 Non-Fee Generating AUM combined with Fee-Generating 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 carried interest income.
The table below presents Fee-Generating and Non-Fee Generating AUM by segment as of December 31, 2014, 2013 and 2012. Changes in market conditions and additional funds raised have had significant impacts to Apollo's AUM:
 
As of  
 December 31,
 
2014
 
2013
 
2012
 
 
(in millions)
 
Total Assets Under Management
$
159,797

(1) 
$
161,177

(1) 
$
113,379

(1) 
Fee-Generating
128,714

 
128,368

 
81,934

 
Non-fee generating
31,083

(1) 
32,809

(1) 
31,445

(1) 
 
 
 
 
 
 
 
Private Equity
41,049

 
49,908

 
37,832

 
Fee-Generating

30,285

 
34,173

 
27,932

 
Non-Fee generating
10,764

 
15,735

 
9,900

 
 
 
 
 
 
 
 
Credit
108,445

 
100,886

 
64,406

 
Fee-Generating

92,192

 
88,249

 
49,518

 
Non-Fee-Generating
16,253

 
12,637

 
14,888

 
 
 
 
 
 
 
 
Real Estate
9,538

 
9,289

 
8,800

(2) 
Fee-Generating

6,237

 
5,946

 
4,484

(2) 
Non-Fee-Generating
3,301

 
3,343

 
4,316

(2) 
 
(1)
As of December 31, 2014, 2013 and 2012, includes $0.8 billion, $1.1 billion and $2.3 billion of commitments, respectively, that have yet to be deployed to an Apollo fund within Apollo's three segments.

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(2)
Includes Fee-Generating and Non-Fee Generating AUM as of September 30, 2012 for certain publicly traded vehicles managed by Apollo.
The table below sets forth AUM with Future Management Fee Potential for each of Apollo's three segments, which is a component of Non-Fee Generating AUM, as of December 31, 2014, 2013 and 2012.
 
As of  
 December 31,
 
2014
 
2013
 
2012
 
 
(in millions)    
 
Private Equity
$
1,793

 
$
4,225

 
$
1,158

 
Credit
4,608

 
3,312

 
2,916

 
Real Estate
623

 
640

 
1,051

 
Total AUM with Future Management Fee Potential
$
7,785

(1) 
$
9,246

(1) 
$
7,465

(1) 

(1)
As of December 31, 2014, 2013 and 2012, includes $0.8 billion, $1.1 billion and $2.3 billion of commitments, respectively, that have yet to be deployed to an Apollo fund within Apollo's three segments.

The following table presents Carry Eligible AUM and Carry Generating AUM for each of Apollo's three segments as of December 31, 2014, 2013 and 2012:

 
Carry Eligible AUM
 
Carry Generating AUM
 
As of  
 December 31,
 
As of  
 December 31,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(in millions)    
Private equity
$
36,128

 
$
45,050

 
$
36,869

 
$
14,463

 
$
24,791

 
$
28,728

Credit
38,502

 
34,580

 
34,461

 
16,218

 
23,539

 
23,693

Real estate
2,614

 
3,041

 
3,312

 
828

 
941

 
396

Total(1)(2)
$
78,003

 
$
83,729

 
$
76,979

 
$
31,509

 
$
49,271

 
$
52,817

 
(1)
As of December 31, 2014, 2013 and 2012, Carry Eligible AUM includes $0.8 billion, $1.1 billion and $2.3 billion of commitments, respectively, that have yet to be deployed to an Apollo fund within Apollo's three segments.
(2)
As of December 31, 2014, 2013 and 2012, Carry Eligible AUM includes $28.8 billion, $28.7 billion and $16.5 billion of Uninvested Carry Eligible AUM, respectively, and $17.7 billion, $5.8 billion and $7.7 billion of AUM Not Currently Generating Carry, respectively.

The components of Fee-Generating AUM by segment as of December 31, 2014, 2013 and 2012 are presented below:
 
As of 
 December 31, 2014
 
Private
Equity
 
Credit
 
Real
Estate
 
Total
 
(in millions)
Fee-Generating AUM based on capital commitments
$
20,080

 
$
6,191

 
$
173

 
$
26,444

Fee-Generating AUM based on invested capital
9,368

 
3,100

 
3,968

 
16,436

Fee-Generating AUM based on gross/adjusted assets
513

 
75,370

 
1,961

 
77,844

Fee-Generating AUM based on leverage
324

 
215

 

 
539

Fee-Generating AUM based on NAV

 
7,316

 
135

 
7,451

Total Fee-Generating AUM
$
30,285

(1) 
$
92,192

 
$
6,237

 
$
128,714

 
(1)
The weighted average remaining life of the private equity funds excluding permanent capital vehicles at December 31, 2014
was 72 months.


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As of 
 December 31, 2013
 
Private
Equity
 
Credit
 
Real
Estate
 
Total
 
(in millions)
Fee-Generating AUM based on capital commitments
$
19,630

 
$
5,834

 
$
156

 
$
25,620

Fee-Generating AUM based on invested capital
11,923

 
1,649

 
3,753

 
17,325

Fee-Generating AUM based on gross/adjusted assets
925

 
72,202

 
1,769

 
74,896

Fee-Generating AUM based on leverage
1,695

 
1,587

 

 
3,282

Fee-Generating AUM based on NAV

 
6,977

 
268

 
7,245

Total Fee-Generating AUM
$
34,173

(1) 
$
88,249

 
$
5,946

 
$
128,368

 
(1)
The weighted average remaining life of the private equity funds excluding permanent capital vehicles at December 31, 2013
was 75 months.

 
As of 
 December 31, 2012
 
Private
Equity
 
Credit
 
Real
Estate
 
Total
 
(in millions)
Fee-Generating AUM based on capital commitments
$
15,854

 
$
5,156

 
$
194

 
$
21,204

Fee-Generating AUM based on invested capital
7,613

 
3,124

 
1,866

 
12,603

Fee-Generating AUM based on gross/adjusted assets
855

 
31,599

 
2,134

 
34,588

Fee-Generating AUM based on leverage
3,610

 
3,101

 

 
6,711

Fee-Generating AUM based on NAV

 
6,538

 
290

 
6,828

Total Fee-Generating AUM
$
27,932

(1) 
$
49,518

 
$
4,484

 
$
81,934

 
(1)
The weighted average remaining life of the private equity funds excluding permanent capital vehicles at December 31, 2012
was 61 months.



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The following table presents total AUM and Fee-Generating AUM amounts for our private equity segment by strategy:
 
Total AUM
 
Fee-Generating AUM
 
 
As of  
 December 31,
 
As of  
 December 31,
 
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
 
(in millions)
 
Traditional Private Equity Funds (1)
$
35,310

 
$
46,998

(2) 
$
35,617

(2) 
$
27,181

 
$
31,929

(2) 
$
25,706

(2) 
Natural Resources
1,348

 
1,367

 
1,284

 
1,295

 
1,295

 
1,295

 
Other (3)
4,391

 
1,543

(2) 
931

(2) 
1,809

 
949

(2) 
931

(2) 
Total
$
41,049

 
$
49,908

 
$
37,832

 
$
30,285

 
$
34,173

 
$
27,932

 
 
(1)
Refers to Fund I, Fund II, MIA, Fund III, Fund IV, Fund V, Fund VI, Fund VII and Fund VIII.
(2)
Reclassified to conform with current presentation.
(3)
Includes co-investments contributed to Athene by AAA, through its investment in AAA Investments as discussed in note 17 of the consolidated financial statements.
The following table presents total AUM and Fee-Generating AUM amounts for our credit segment by strategy:
 
 
Total AUM
 
Fee-Generating AUM
 
As of  
 December 31,
 
As of  
 December 31,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(in millions)
Athene(1)
$
47,713

 
$
50,345

 
$
10,970

 
$
47,713

 
$
50,345

 
$
10,845

U.S. Performing Credit
24,882

 
22,177

 
27,509

 
20,031

 
17,510

 
20,567

Structured Credit
15,999

 
12,779

 
11,436

 
10,966

 
9,362

 
7,589

Opportunistic Credit
10,756

 
7,068

 
6,177

 
6,613

 
4,763

 
4,722

Non-Performing Loans
4,976

 
5,688

 
6,404

 
3,744

 
4,330

 
4,527

European Credit
4,119

 
2,829

 
1,910

 
3,125

 
1,939

 
1,268

Total
$
108,445

 
$
100,886

 
$
64,406

 
$
92,192

 
$
88,249

 
$
49,518

 
(1)
Excludes AUM that is either sub-advised by Apollo or invested in Apollo funds and investment vehicles across its private equity, credit and real estate funds.
The following table presents total AUM and Fee-Generating AUM amounts for our real estate segment by strategy:
 
 
Total AUM
 
Fee-Generating AUM
 
As of  
 December 31,
 
As of  
 December 31,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(in millions)
Debt
$
6,420

 
$
5,731

 
$
4,826

 
$
4,785

 
$
3,701

 
$
2,332

Equity
3,118

 
3,558

 
3,974

 
1,452

 
2,245

 
2,152

Total
$
9,538

 
$
9,289

 
$
8,800

 
$
6,237

 
$
5,946

 
$
4,484


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The following tables summarize changes in total AUM for each of Apollo's three segments for years ended December 31, 2014, 2013 and 2012:
 
 
For the Year Ended 
 December 31,
 
2014
 
2013
 
2012
 
 
 
 
 
Change in Total AUM:
 
 
 
 
 
 
Beginning of Period
$
161,177

(1) 
$
113,379

(1) 
$
75,222

 
Income
2,473

 
15,150

 
12,038

 
Subscriptions/Capital raised
9,862

(2) 
22,142

 
9,688

 
Other inflows/Acquisitions

 
43,832

 
23,629

 
Distributions
(16,382
)
 
(22,641
)
 
(10,858
)
 
Redemptions
(718
)
 
(1,508
)
 
(1,221
)
 
Leverage/Other(3)
3,385

 
(9,177
)
 
4,881

 
End of Period
$
159,797

(1) 
$
161,177

(1) 
$
113,379

(1) 
Change in Private Equity AUM:

 

 
 
 
Beginning of Period
$
49,908

 
$
37,832

 
$
35,384

 
Income
561

 
10,656

 
8,108

 
Subscriptions/Capital raised
3,041

(2) 
17,613

 
662

 
Distributions
(11,372
)
 
(15,620
)
 
(6,537
)
 
Redemptions(4) 

 
(176
)
 

 
Net segment transfers
(1,216
)
 
2,133

 
317

 
Leverage
127

 
(2,530
)
 
(102
)
 
End of Period
$
41,049

 
$
49,908

 
$
37,832

 
Change in Credit AUM:

 

 
 
 
Beginning of Period
$
100,886

 
$
64,406

 
$
31,867

 
Income
1,747

 
4,082

 
3,274

 
Subscriptions/Capital raised
6,128

(2) 
3,439

 
5,504

 
Other inflows/Acquisitions

 
43,832

 
23,629

 
Distributions
(3,457
)
 
(5,458
)
 
(3,197
)
 
Redemptions
(583
)
 
(1,042
)
 
(948
)
 
Net segment transfers
216

 
(2,056
)
 
(1,023
)
 
Leverage/Other(3)
3,508

 
(6,317
)
 
5,300

 
End of Period
$
108,445

 
$
100,886

 
$
64,406

 
Change in Real Estate AUM:
 
 
 
 
 
 
Beginning of Period
$
9,289

 
$
8,800

 
$
7,971

 
Income
244

 
399

 
656

 
Subscriptions/Capital raised
693

 
1,090

 
475

 
Distributions
(1,553
)
 
(1,559
)
 
(1,124
)
 
Redemptions(4)
(135
)
 
(290
)
 
(273
)
 
Net segment transfers
1,250

 
1,179

 
1,412

 
Leverage
(250
)
 
(330
)
 
(317
)
 
End of Period
$
9,538

 
$
9,289

 
$
8,800

 
 
(1)
As of December 31, 2014, 2013 and 2012, includes $0.8 billion, $1.1 billion, and $2.3 billion of commitments, respectively, that have yet to be deployed to an Apollo fund within Apollo's three segments.
(2)
For the year ended December 31, 2014, includes $2.5 billion of AUM from co-investment vehicles that was raised in prior periods.
(3)
Represents changes in used and available leverage, and includes the changes in NAV on AUM managed by Athene Asset Management that is not sub-advised by Apollo.
(4)
Represents release of unfunded commitments primarily related to Fund III in our private equity segment and two legacy CPI real estate funds in our real estate segment that were past their investment periods.

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Private Equity
During the year ended December 31, 2014, total AUM in our private equity segment decreased by $8.9 billion, or 17.8%. This decrease was a result of distributions of $11.4 billion primarily attributable to Fund VII and Apollo Investment Fund VI, L.P. ("Fund VI") of $6.4 billion and $3.7 billion, respectively. In addition there were transfers out of $1.2 billion. These decreases were offset by $0.6 billion of income that was primarily attributable to unrealized gains in Fund VII of $1.6 billion offset by unrealized losses in Fund VI and co-investment vehicles, of $0.6 billion and $0.6 billion, respectively, and an increase in subscriptions of $3.0 billion primarily attributable to co-investment vehicles that were raised in prior periods.
During the year ended December 31, 2013, the AUM in our private equity segment increased by $12.1 billion, or 31.9%. This increase was a result of subscriptions of $17.5 billion in Fund VIII and $10.7 billion of income from improved unrealized gains, including $5.9 billion from Fund VII and $4.3 billion from Fund VI. Offsetting this increase was $15.6 billion of distributions, including $8.7 billion from Fund VII and $5.8 billion from Fund VI, and $2.5 billion of decreased leverage.
During the year ended December 31, 2012, the total AUM in our private equity segment increased by $2.4 billion, or 6.9%. This increase was primarily a result of income of $8.1 billion attributable to improved unrealized gains in our private equity funds, including $4.5 billion from Fund VII and $3.1 billion from Fund VI. In addition, contributing to this increase was an additional $0.7 billion in subscriptions from AION and ANRP. Offsetting this increase was $6.5 billion in distributions, including $3.7 billion from Fund VII and $2.1 billion from Fund VI.
Credit
During the year ended December 31, 2014, total AUM in our credit segment increased by $7.6 billion, or 7.5%. This increase was a result of subscriptions of $6.1 billion, $3.5 billion of leverage, $1.7 billion of income and $0.2 billion in net segment transfers. Included in subscriptions was $2.5 billion in COF III, $0.5 billion in FCI II, $0.4 billion in Apollo Structured Credit Recovery Master Fund III, L.P. ("ACRF III") and $0.4 billion from Apollo Investment Europe III, L.P. (“AIE III”). These increases were offset by $3.5 billion of distributions including $1.1 billion and $0.4 billion from Apollo European Principal Finance Fund, L.P. ("EPF I") and Apollo Credit Opportunity Fund I, L.P. ("COF I"), respectively and $0.6 billion in redemptions.
During the year ended December 31, 2013, AUM in our credit segment increased by $36.5 billion, or 56.6%. This increase consisted of $43.8 billion in acquisitions related to the acquisition of Aviva USA by Athene Holding, $4.1 billion in unrealized gains, subscriptions of $3.4 billion, including $0.9 billion in FCI II and $0.6 billion in COF III. This increase in AUM was partially offset by a decrease in leverage of $6.3 billion, including $1.0 billion in the U.S. performing credit strategy from net CLO vehicle wind-downs, $1.3 billion in Apollo Credit Opportunity Fund II, L.P. ("COF II"), and $0.8 billion in AMTG, and $5.5 billion in distributions, including $1.9 billion from COF I, $0.6 billion from EPF I and $1.1 billion from COF II.
During the year ended December 31, 2012, total AUM in our credit segment increased by $32.5 billion, or 102.1%. This increase was primarily attributable to $18.5 billion in acquisitions related to Stone Tower Capital LLC and its related management companies ("Stone Tower"), $5.1 billion in other inflows related to Athene and $5.3 billion in increased leverage, including $3.4 billion from AMTG. The increase was also a result of $5.5 billion of additional subscriptions, including $3.0 billion by EPF II, $0.6 billion by Apollo Centre Street Partnership, L.P. (“ACSP”) and $0.4 billion by AMTG. This increase was partially offset by $3.2 billion of distributions, including $1.5 billion collectively from COF I and COF II and $0.3 billion from EPF I.
Real Estate
During the year ended December 31, 2014, total AUM in our real estate segment increased by $0.2 billion, or 2.7%, this was the result of $1.3 billion of net segment transfers in primarily related to the Athene Accounts, $0.7 billion of subscriptions, including $0.4 billion related to AGRE Debt Fund I, L.P. and $0.2 billion related to ARI, and $0.2 billion of income. These increases were partially offset by $1.6 billion of distributions, of which $0.4 billion was attributable to the Athene Accounts, $0.3 billion was attributable to CPI Capital Partners Europe, L.P., and $0.2 billion was attributable to AGRE 2011 A-4 Fund, LP ("CMBS II"), and a $0.3 billion decrease in leverage.
During the year ended December 31, 2013, AUM in our real estate segment increased by $0.5 billion, or 5.5%. This increase was the result of $1.2 billion in net segment transfers in, including $0.6 billion from Athene Accounts related to subordinate commercial real estate loans ("Athene CRE Lending") and $0.5 billion from Athene Accounts related to commercial mortgage backed securities, $1.1 billion in subscriptions, including $0.7 billion in AGRE Debt Fund I, L.P. and $0.3 billion in ARI. These increases were partially offset by distributions of $1.6 billion, including $0.4 billion from Athene CRE Lending and $0.4 billion from CPI Capital Partners Asia Pacific, L.P.

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During the year ended December 31, 2012, total AUM in our real estate segment increased by $0.8 billion, or 10.4%. This increase was primarily a result of $1.4 billion in net transfers from other segments and additional subscriptions of $0.5 billion. Also contributing to this increase was income of $0.7 billion attributable to improved unrealized gains in our real estate funds, including $0.4 billion from CPI Capital Partners North America L.P., CPI Capital Partners Europe L.P., CPI Capital Partners Asia Pacific, L.P. (collectively, the "CPI Funds"). Partially offsetting this increase was $1.1 billion in distributions, including $0.8 billion from the CPI Funds.

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The following tables summarize changes in total Fee-Generating AUM for each of Apollo's three segments for the years ended December 31, 2014, 2013, and 2012 :
 
 
For the Year Ended 
 December 31,
 
2014
 
2013
 
2012
 
 
 
 
 
 
Change in Total Fee-Generating AUM:
 
 
 
 
 
 
Beginning of Period
$
128,368

 
$
81,934

 
58,121

 
Income
350

 
2,100

 
1,390

 
Subscriptions/Capital raised
3,352

 
21,104

 
5,873

 
Other inflows/Acquisitions

 
43,832


21,277

 
Distributions
(6,184
)
 
(7,517
)
 
(3,728
)
 
Redemptions
(475
)
 
(946
)
 
(909
)
 
Net movements between Fee-Generating and Non-Fee Generating
609

 
(6,215
)
 
(564
)
 
Leverage/Other(1)
2,694

 
(5,924
)
 
474

 
End of Period
$
128,714

 
$
128,368

 
$
81,934

 
Change in Private Equity Fee-Generating AUM:
 
 
 
 
 
 
Beginning of Period
$
34,173

 
$
27,932

 
$
28,031

 
Income (Loss)
(1
)
 
398

 
285

 
Subscriptions/Capital raised
455

 
17,582

 
644

 
Distributions
(2,457
)
 
(3,430
)
 
(1,256
)
 
Redemptions

 
(19
)
 

 
Net segment transfers
(1,277
)
 
482

 
50

 
Net movements between Fee-Generating and Non-Fee Generating
(514
)
 
(6,858
)
 
515

 
Leverage
(94
)
 
(1,914
)
 
(337
)
 
End of Period
$
30,285

 
$
34,173

 
$
27,932

 
Change in Credit Fee-Generating AUM:
 
 
 
 
 
 
Beginning of Period
$
88,249

 
$
49,518

 
$
26,553

 
Income
377

 
1,630

 
988

 
Subscriptions/Capital raised
2,261

 
2,504

 
4,953

 
Other inflows/Acquisitions

 
43,832

 
21,277

 
Distributions
(2,258
)
 
(3,118
)
 
(2,029
)
 
Redemptions
(475
)
 
(927
)
 
(909
)
 
Net segment transfers
129

 
(1,611
)
 
(1,096
)
 
Net movements between Fee-Generating and Non-Fee Generating
1,121

 
431

 
(1,030
)
 
Leverage/Other(1)
2,788

 
(4,010
)
 
811

 
End of Period
$
92,192

 
$
88,249

 
$
49,518

 
Change in Real Estate Fee-Generating AUM:
 
 
 
 
 
 
Beginning of Period
$
5,946

 
$
4,484

 
$
3,537

 
Income (Loss)
(26
)
 
72

 
117

 
Subscriptions/Capital raised
636

 
1,018

 
276

 
Distributions
(1,469
)
 
(969
)
 
(443
)
 
Net segment transfers
1,148

 
1,129

 
1,045

 
Net movements between Fee-Generating and Non-Fee Generating
2

 
212

 
(48
)
 
End of Period
$
6,237

 
$
5,946

 
$
4,484

 

(1)
Represents changes in used and available leverage, and includes the changes in NAV on AUM managed by Athene Asset Management that is not sub-advised by Apollo.


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Private Equity
During the year ended December 31, 2014, Fee-Generating AUM in our private equity segment decreased by $3.9 billion, or 11.4%. This decrease was a result of distributions of $2.5 billion from Fund VII, Fund VI and co-investment vehicles. In addition there were net segment transfers out of $1.3 billion attributable to Fund VI and Fund VII, and $0.5 billion of net transfers from fee generating AUM to Non-Fee Generating AUM from Fund V and Fund VII. Offsetting these decreases were subscriptions of $0.5 billion.
During the year ended December 31, 2013, Fee-Generating AUM in our private equity segment increased by $6.2 billion, or 22.3%. This increase was a result of $17.6 billion of subscriptions, primarily from Fund VIII. Offsetting this increase was $6.9 billion of net transfers from Fee-Generating AUM to Non-Fee Generating AUM primarily attributable to Fund VII, $3.4 billion of distributions primarily attributable to Fund VII and Fund VI of $1.0 billion and $2.0 billion, respectively and $1.9 billion decrease in leverage primarily attributable to Fund VII.
During the year ended December 31, 2012, Fee-Generating AUM in our private equity segment decreased by $0.1 billion, or 0.4%. This decrease was a result of $1.3 billion of distributions from Fee-Generating AUM primarily attributable to Fund VI and Fund V of $0.8 billion and $0.3 billion, respectively. Offsetting this decrease was $0.6 billion of subscriptions in ANRP and AION of $0.5 billion and $0.2 billion, respectively and $0.3 billion of unrealized gains.
Credit
During the year ended December 31, 2014, Fee-Generating AUM in our credit segment increased by $3.9 billion, or 4.5%. This increase was a result of $2.8 billion of leverage, subscriptions of $2.3 billion attributable to FCI II of $0.5 billion and COF III of $0.4 billion, $1.1 billion of net transfers in from Non-Fee Generating AUM, including $0.8 billion attributable to COF III and $0.4 billion of income. These increases were offset by $2.3 billion of distributions, including $0.4 billion from EPF I and $0.5 billion in redemptions, primarily from Apollo Credit Master Fund Ltd. ("ACF") of $0.3 billion.
During the year ended December 31, 2013, Fee-Generating AUM in our credit segment increased by $38.7 billion, or 78.2%. This increase consisted of $43.8 billion in acquisitions related to the acquisition of Aviva USA by Athene Holding, a $2.5 billion increase in subscriptions attributable to FCI II and ACF of $0.9 billion and $0.3 billion, respectively, and unrealized gains of $1.6 billion. Offsetting this increase was $3.1 billion of distributions, attributable to COF I and COF II of $0.5 billion and $0.8 billion, respectively, a decrease in leverage of $4.0 billion and $1.6 billion of transfers out to Non-Fee Generating AUM.
During the year ended December 31, 2012, Fee-Generating AUM in our credit segment increased by $22.9 billion, or 86.4%. This increase was a result of $16.2 billion in acquisitions related to Stone Tower, $5.1 billion in other inflows related to Athene, and $5.0 billion of additional subscriptions, including $3.3 billion in EPF II and $0.3 billion in AMTG. Offsetting this increase was $2.0 billion of distributions, including $0.7 billion collectively from COF I and COF II and $0.9 billion of redemptions.
Real Estate
During the year ended December 31, 2014, Fee-Generating AUM in our real estate segment increased by $0.3 billion, or 4.9%, which was primarily the result of $1.1 billion of segment transfers in attributable to the Athene Accounts and $0.6 billion of subscriptions, including $0.4 billion attributable to AGRE Debt Fund I, L.P.. Offsetting these increases were $1.5 billion of distributions primarily attributable to the Athene Accounts, CPI Capital Partners Europe, L.P. and CPI Capital Partners Asia Pacific, L.P. of $0.4 billion, $0.2 billion and $0.2 billion, respectively.
During the year ended December 31, 2013, Fee-Generating AUM in our real estate segment increased by $1.5 billion, or 32.6%, which was primarily the result of $0.7 billion of capital invested by AGRE Debt Fund I, $0.3 billion of capital raised and invested by ARI, net segment transfers of $1.1 billion attributable to the Athene Accounts and $0.2 billion of transfers in from Non-Fee Generating AUM. These increases were partially offset by $1.0 billion of distributions of which $0.5 billion were attributable to the Athene Accounts.
During the year ended December 31, 2012, Fee-Generating AUM in our real estate segment increased by $0.9 billion, or 26.7%, which was primarily the result of transfers of $0.9 billion attributable to the Athene Accounts and $0.3 billion of subscriptions. These increases were partially offset by $0.4 billion of distributions.


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Dollars Invested and Uncalled Commitments
Dollars invested is the aggregate amount of capital that has been invested by our multi-year drawdown, commitment-based funds and SIAs that have a defined maturity date and for 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 investments and expenses.
Dollars invested 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 transaction fees and incentive income to the extent fee generating. Dollars invested 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 dollars invested and uncalled commitments as key operating metrics since we believe the results measure our investment activities.
Dollars Invested
The following table summarizes by segment the dollars invested for funds and SIAs with a defined maturity date and certain funds and SIAs in Apollo's real estate debt strategy during the specified reporting periods:
 
 
For the Year Ended 
 December 31,
 
2014
 
2013
 
2012
 
 
(in millions)
 
Private equity
$
2,163

 
$
2,561

 
$
3,191

 
Credit
5,174

 
2,865

 
1,835

 
Real Estate (1)
2,686

 
2,534

 
1,627

 
Total dollars invested
$
10,023

 
$
7,960

 
$
6,653

 
(1)
Included in dollars invested is $2,319.9 million, $2,177.3 million and $1,230.1 million for the years ended December 31, 2014, 2013, and 2012, respectively, for funds in Apollo's real estate debt strategy.
Uncalled Commitments
The following table summarizes the uncalled commitments by segment during the specified reporting periods:
 
 
As of 
 December 31, 2014
 
As of 
 December 31, 2013
 
As of 
 December 31, 2012
 
(in millions)
Private equity
$
22,383

 
$
23,689

 
$
7,464

Credit
8,706

 
7,113

 
6,171

Real Estate
997

 
971

 
1,438

Total uncalled commitments (1)(2)
$
32,841

 
$
32,852

 
$
17,428

(1)
As of December 31, 2014, 2013 and 2012, includes $0.8 billion, $1.1 billion and $2.3 billion of commitments, respectively, that have yet to be deployed to an Apollo fund within Apollo's three segments.
(2)
As of December 31, 2014, 2013 and 2012, $29.3 billion, $29.5 billion, and $16.4 billion, respectively, represents the amount of capital available for investment or reinvestment subject to the provisions of the applicable limited partnership agreements or other governing agreements.



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

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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. There can be no assurance that any Apollo fund will continue to achieve the same results in the future.
Moreover, the historical returns of our funds should not be considered indicative of the future results you should expect from such funds or from any future funds we may raise, in part because:
market conditions during previous periods were significantly more favorable for generating positive performance, particularly in our private equity business, than the market conditions we have experienced for the last few years and may experience in the future;
our private equity funds’ rates of return, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains, which may never be realized;
our funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, including the availability of debt capital on attractive terms and the availability of distressed debt opportunities, and we may not be able to achieve the same returns or profitable investment opportunities or deploy capital as quickly;
the historical returns that we present are derived largely from the performance of our earlier private equity funds, whereas future fund returns will depend increasingly on the performance of our newer funds, which may have little or no realized investment track record;
Fund VIII, Fund VII and Fund VI are several times larger than our previous private equity funds, and this additional capital may not be deployed as profitably as our prior funds;
the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has not occurred with respect to all of our funds and we believe is less likely to occur in the future;
our track record with respect to our credit and real estate funds is relatively short as compared to our private equity funds;
in recent years, there has been increased competition for private equity investment opportunities resulting from the increased amount of capital invested in private equity funds and periods of high liquidity in debt markets, which may result in lower returns for the funds; and
our newly established funds may generate lower returns during the period that they take to deploy their capital; consequently, we do not provide return information for any funds which have not been actively investing capital for at least 24 months prior to the valuation date as we believe this information is not meaningful.
Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Apollo Investment Fund IV, L.P. ("Fund IV") has generated a 12% gross IRR and a 9% net IRR since its inception through December 31, 2014, while Apollo Investment Fund V, L.P. ("Fund V") has generated a 61% gross IRR and a 44% net IRR since its inception through December 31, 2014. 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."


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Investment Record

The following table summarizes the investment record by segment of Apollo's multi-year drawdown, commitment based funds and SIAs 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. All amounts are as of December 31, 2014, unless otherwise noted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of 
 December 31, 2014
 
As of 
 December 31, 2013
 
As of 
 December 31, 2012
 
 
Strategy
 
Vintage
Year
 
Committed
Capital
 
Total Invested
Capital
 
Realized
 
Unrealized(1)
 
Total Value
 
Gross
IRR
 
Net
IRR
 
Gross
IRR
 
Net
IRR
 
Gross
IRR
 
Net
IRR
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Private Equity:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fund VIII
Traditional Private Equity Funds
 
2013
 
$
18,377

 
$
1,266

 
$

 
$
1,456

 
$
1,456

 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
N/A

 
N/A

 
Fund VII
Traditional Private Equity Funds
 
2008
 
14,677

 
15,199

 
26,006

 
6,229

 
32,235

 
37
%
 
28
%
 
39
%
 
30
%
 
35
%
 
26
%
 
Fund VI
Traditional Private Equity Funds
 
2006
 
10,136

 
12,457

 
16,339

 
5,116

 
21,455

 
13

 
11

 
15

 
12

 
11

 
9

 
Fund V
Traditional Private Equity Funds
 
2001
 
3,742

 
5,192

 
12,666

 
215

 
12,881

 
61

 
44

 
61

 
44

 
61

 
44

 
Fund IV
Traditional Private Equity Funds
 
1998
 
3,600

 
3,481

 
6,776

 
25

 
6,801

 
12

 
9

 
12

 
9

 
12

 
9

 
Fund III
Traditional Private Equity Funds
 
1995
 
1,500

 
1,499

 
2,695

 

 
2,695

 
18

 
11

 
18

 
11

 
18

 
11

 
Fund I, II & MIA(4)
Traditional Private Equity Funds
 
1990/
1992
 
2,220

 
3,773

 
7,924

 

 
7,924

 
47

 
37

 
47

 
37

 
47

 
37

 
Subtotal
 
 
 
 
$
54,252

 
$
42,867

 
$
72,406

 
$
13,041

 
$
85,447

 
39
%
(5) 
25
%
(5) 
39
%
(5) 
26
%
(5) 
39
%
(5) 
25
%
(5) 
AION
Other
 
2013
 
825

 
134

 
9

 
160

 
169

 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
ANRP
Natural Resources
 
2012
 
1,323

 
692

 
191

 
675

 
866

 
18
%
 
8
%
 
18
%
 
7
%
(3) 
NM

(3) 
NM

(3) 
Total Private Equity
 
 
 
 
$
56,400

 
$
43,693

 
$
72,606

 
$
13,876

 
$
86,482

 
 
 
 
 
 
 
 
 
 
 
 
 
Credit:(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACRF III (7)
Structured Credit
 
 
$
488

 
$
254

 
$
57

 
$
213

 
$
270

 
NM

(3) 
NM

(3) 
N/A

 
N/A

 
N/A

 
N/A

 
COF III (7)
Opportunistic Credit
 
 
3,426

 
1,579

 
222

 
1,222

 
1,444

 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
N/A

 
N/A

 
FCI II
Structured Credit
 
2013
 
1,555

 
653

 
5

 
802

 
807

 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
EPF II(8)
Non-Performing Loans
 
2012
 
3,518

 
2,520

 
640

 
2,381

 
3,021

 
24
%
 
11
%
 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
FCI
Structured Credit
 
2012
 
559

 
443

 
190

 
548

 
738

 
14

 
9

 
NM

(3) 
NM

(3) 
NM

(3) 
NM

(3) 
AEC
European Credit
 
2012
 
292

 
625

 
532

 
177

 
709

 
12

 
7

 
19
%
 
12
%
 
NM

(3) 
NM

(3) 
AIE II(8)
European Credit
 
2008
 
250

 
805

 
1,206

 
79

 
1,285

 
20

 
17

 
20

 
17

 
19
%
 
16
%
 
COF I
U.S. Performing Credit
 
2008
 
1,485

 
1,611

 
4,285

 
123

 
4,408

 
30

 
27

 
30

 
27

 
31

 
28

 
COF II
U.S. Performing Credit
 
2008
 
1,583

 
2,176

 
2,989

 
147

 
3,136

 
14

 
11

 
14

 
11

 
14

 
12

 
EPF I(8)
Non-Performing Loans
 
2007
 
1,567

 
2,059

 
2,863

 
574

 
3,437

 
24

 
17

 
21

 
16

 
19

 
12

 
ACLF
U.S. Performing Credit
 
2007
 
984

 
1,449

 
2,448

 
136

 
2,584

 
13

 
11

 
13

 
11

 
13

 
11

 
Total Credit
 
 
 
 
$
15,707

 
$
14,174

 
$
15,437

 
$
6,402

 
$
21,839

 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate:(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Apollo U.S. Real Estate Fund II, L.P. (7)
Equity
 
 
$
158

 
$
39

 
$

 
$
39

 
$
39

 
NM

(3) 
NM

(3) 
N/A

 
N/A

 
N/A

 
N/A

 
AGRE U.S. Real Estate Fund, L.P(9)
Equity
 
2012
 
864

 
615

 
312

 
488

 
800

 
19
%
 
15
%
 
17
%
 
14
%
 
NM

(3) 
NM

(3) 
AGRE Debt Fund I, LP
Debt
 
2011
 
1,190

 
1,185

 
299

 
1,021

 
1,320

 
9

 
7

 
13

 
11

 
NM

(3) 
NM

(3) 
CPI Capital Partners North America(10)
Equity
 
2006
 
600

 
453

 
352

 
25

 
377

 
15

 
10

 
17

 
13

 
NM

(3) 
NM

(3) 
CPI Capital Partners Asia Pacific(10)
Equity
 
2006
 
1,292

 
1,185

 
1,470

 
218

 
1,688

 
33

 
29

 
37

 
33

 
NM

(3) 
NM

(3) 
CPI Capital Partners Europe(8)(10)
Equity
 
2006
 
1,406

 
928

 
388

 
318

 
706

 
5

 
3

 
2

 
1

 
NM

(3) 
NM

(3) 
CPI Other(11)
Equity
 
Various
 
1,959

 
N/A

 
N/A

(11) 
N/A

(11) 
N/A

(11) 
NM

(11) 
NM

(11) 
NM

 
NM

(11) 
NM

(3) 
NM

(3) 
Total Real Estate
 
 
 
 
$
7,469

 
$
4,405

 
$
2,821

 
$
2,109

 
$
4,930

 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Figures include the market values, estimated fair value of certain unrealized investments and capital committed to investments.
(2)
Amounts presented are computed based on actual timing of the funds' cash inflows and outflows.
(3)
Returns have not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and therefore such return information was deemed not meaningful.
(4)
Fund I and Fund II were structured such that investments were made from either fund depending on which fund had available capital. Apollo does not differentiate between Fund I and Fund II investments for purposes of performance figures because they are not meaningful on a separate basis and do not demonstrate the progression of returns over time. The general partners and managers of Funds I, II and MIA, as well as the general partner of Fund III were excluded assets in connection with the 2007 Reorganization.

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As a result, Apollo Global Management, LLC did not receive the economics associated with these entities. The investment performance of these funds is presented to illustrate fund performance associated with Apollo's Managing Partners and other investment professionals.
(5)
Total IRR is calculated based on total cash flows for all funds presented.
(6)
The investment record table for the credit and real estate funds and SIAs presented is computed based on the actual dates of capital contributions, distributions and ending limited partners’ capital as of the specified date.
(7)
COF III, ACRF III and Apollo U.S. Real Estate Fund II were launched prior to December 31, 2014 and have not established their vintage year.
(8)
Funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.21 as of December 31, 2014.
(9)
AGRE U.S. Real Estate Fund, L.P., a closed-end private investment fund has $149 million of co-invest commitments raised, which are included in the figures in the table above. A co-invest entity within AGRE U.S. Real Estate Fund, L.P. is denominated in GBP and translated into U.S. dollars at an exchange rate of £1.00 to $1.56 as of December 31, 2014.
(10)
As part of the CPI acquisition, Apollo acquired general partner interests in fully invested funds. The gross and net IRRs are presented in the investment record table above since acquisition on November 12, 2010. The net IRRs from the inception of the respective fund to December 31, 2014 were (7)%, 7% and (7)% for the CPI Capital Partners North America, Asia Pacific and Europe funds, respectively. These net IRRs were primarily achieved during a period in which Apollo did not make the initial investment decisions and Apollo only became the general partner or manager of these funds upon completing the acquisition on November 12, 2010.
(11)
CPI Other consists of funds or individual investments of which Apollo is not the general partner or manager and only receives fees pursuant to either a sub-advisory agreement or an investment management and administrative agreement. CPI Other fund performance is a result of invested capital prior to Apollo’s management of these funds. Return and certain other performance data are therefore not considered meaningful as Apollo performs primarily an administrative role.
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 December 31, 2014:
 
 
Total Invested
Capital
 
Total Value
 
Gross IRR(1)
 
(in millions)
 
 
Distressed for Control
$
6,308

 
$
17,601

 
29
%
Non-Control Distressed
5,733

 
8,502

 
71

Total
12,041

 
26,103

 
49

Buyout Equity, Portfolio Company Debt and Other Credit(2)
30,826

 
59,344

 
22

Total
$
42,867

 
$
85,447

 
39
%
 
(1)
IRR information is presented gross and does not give effect to management fees, incentive compensation, certain other expenses and taxes.
(2)
Other Credit 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 our Fund VIII, Fund VII, Fund VI and Fund V private equity portfolios based on investment strategy. All amounts are as of December 31, 2014:
Fund VIII(1) 
 
Total Invested
Capital
 
Total Value
 
(in millions)
Buyout Equity and Portfolio Company Debt
$
1,266

 
$
1,456

Total
$
1,266

 
$
1,456

Fund VII(1) 
 
Total Invested
Capital
 
Total Value
 
(in millions)
Buyout Equity and Portfolio Company Debt
$
10,865

 
$
25,106

Other Credit and Classic Distressed(2)
4,334

 
7,129

Total
$
15,199

 
$
32,235


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Fund VI
 
Total Invested
Capital
 
Total Value
 
(in millions)
Buyout Equity and Portfolio Company Debt
$
10,312

 
$
17,755

Other Credit and Classic Distressed(2)
2,145

 
3,700

Total
$
12,457

 
$
21,455

Fund V
 
Total Invested
Capital
 
Total Value
 
(in millions)
Buyout Equity
$
4,412

 
$
11,907

Classic Distressed(2)
780

 
974

Total
$
5,192

 
$
12,881

 
(1)
Committed capital less unfunded capital commitments for Fund VIII and Fund VII was $1.6 billion and $13.1 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)
Classic Distressed is defined as investments in debt securities of issuers other than portfolio companies that are considered to be distressed.

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 $13.6 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 December 31, 2014, our private equity funds have invested $31.3 billion, of which $16.8 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, VI and V was 5.6x, 6.1x, 7.7x and 6.6x, respectively, as of the date of the filing of this Annual Report on Form 10-K. The average entry multiple for a private equity fund is the average of the total enterprise value over an applicable earnings before interest, taxes, depreciation and amortization ("EBITDA"), which we believe captures the true economics of our funds' purchases of portfolio companies.


Credit
The following table summarizes the investment record for certain funds and SIAs within Apollo's credit segment with no maturity date. All amounts are as of December 31, 2014, unless otherwise noted:
 
 
 
 
 
 
 
 
Net Return
 
 
Strategy
 
Vintage
Year
 
Net Asset Value as of December 31, 2014
 
Since Inception to December 31, 2014
 
For the Year Ended December 31, 2014
 
For the Year Ended December 31, 2013
 
For the Year Ended December 31, 2012
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
TRF(1)
U.S. Performing Credit
 
2014
 
$
353

 
NM

(1) 
NM

(1) 
N/A

 
N/A

 
ACSF(2)
Opportunistic Credit
 
2011
 
449

 
23
%
(2) 
1
 %
(2) 
NM

(2) 
NM

(2) 
SOMA(3)
Opportunistic Credit
 
2007
 
832

 
59

 

 
9
%
 
15
%
 
ACF(2)
U.S. Performing Credit
 
2005
 
1,977

 
35

(2) 
6

(2) 
NM

(2) 
NM

(2) 
Value Funds(4)
Opportunistic Credit
 
2003/2006
 
217

 
64

 
(6
)
 
5

 
11

 
Totals
 
 
 
 
$
3,828

 
 
 
 
 
 
 
 
 
 
(1)
Apollo Total Return Fund (“TRF”) returns have not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and therefore such return information was deemed not meaningful.

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(2)
As part of the Stone Tower acquisition, Apollo acquired the manager of Apollo Credit Strategies Master Fund Ltd. (“ACSF”) and ACF. The net returns are presented in the investment record table above since acquisition on April 2, 2012. As of December 31, 2014, the net returns from inception for ACSF and ACF were 39% and 9%, respectively. These returns were primarily achieved during a period in which Apollo did not make the initial investment decisions. Apollo became the manager of these funds upon completing the acquisition on April 2, 2012.
(3)
Net asset value and returns are for the primary mandate and excludes Apollo Special Opportunities Managed Account, L.P.’s (“SOMA”) investments in other Apollo funds.
(4)
Value Funds consist of Apollo Strategic Value Master Fund, L.P., together with its feeder funds, and Apollo Value Investment Master Fund, L.P., together with its feeder funds.

The following table summarizes the investment record for the publicly traded vehicles that Apollo manages by segment as of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
Total Returns(1)
 
 
Strategy
 
IPO Year (2)
 
Raised Capital (3)
 
Gross Assets
 
Current NAV
 
Since Inception to December 31, 2014
 
For the Year Ended December 31, 2014
 
For the Year Ended December 31, 2013
 
For the Year Ended December 31, 2012
 
 
 
 
 
 
(in millions)
 
 
 
 
 
 
 
 
 
Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AAA(4)
Other
 
2006
 
$
1,823

 
$
2,144

 
$
2,144

 
47%
 
4%
 
91%
 
75%
 
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AIF(5)
U.S. Performing Credit
 
2013
 
276

 
402

 
264

 
NM
(6 
) 
NM
(6 
) 
NM
(6) 
N/A
 
AFT(5)
U.S. Performing Credit
 
2011
 
295

 
434

 
285

 
8
 
(1)
 
NM
(6) 
NM
(6) 
AMTG
Structured Credit
 
2011
 
791

 
4,348

 
786

 
28
 
18
 
(17)
 
NM
(6) 
AINV
Opportunistic Credit
 
2004
 
3,080

 
3,701

 
1,997

 
50
 
(4)
 
12
 
43
 
Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARI(7)
Debt
 
2009
 
886

 
1,744

 
856

 
33
 
11
 
10
 
36
 
Totals
 
 
 
 
$
7,151

 
$
12,773

 
$
6,332

 
 
 
 
 
 
 
 
 
(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 commissions.
(2)
An initial public offering ("IPO") year represents the year in which the vehicle commenced trading on a national securities exchange. Apollo Tactical Income Fund Inc. ("AIF"), Apollo Senior Floating Rate Fund Inc. ("AFT"), AMTG and ARI are publicly traded vehicles traded on the New York Stock Exchange ("NYSE"). AINV is a public company traded on the National Association of Securities Dealers Automated Quotation. AAA is a publicly traded vehicle traded on NYSE Euronext in Amsterdam.
(3)
Amounts represent raised capital net of offering and issuance costs.
(4)
AAA is the sole limited partner in AAA Investments. Athene was AAA Investments’ only investment as of December 31, 2014. During the second quarter of 2014, Athene Holding raised $1.2 billion of net equity commitments primarily from third-party institutional investors, certain existing investors in Athene, and employees of Athene and its affiliates (the “Athene Private Placement”). For the period December 31, 2013 through December 31, 2014, AAA Investments' ownership stake in Athene was reduced as a result of the Athene Private Placement, the issuance of shares under the Amended AAA Services Agreement and the issuance of 3.7 million unrestricted common shares of Athene Holding under Athene’s management equity plan and was increased by the conversion to common shares of AAA Investments' note receivable from Athene, resulting in an approximate 47.7% economic ownership stake (calculated as if the commitments in the Athene Private Placement closed through December 31, 2014 were fully drawn down but without giving effect to (i) restricted common shares issued under Athene’s management equity plan or (ii) common shares to be issued after December 31, 2014 under the Amended AAA Services Agreement or the Amended Athene Services Agreement) and effectively 45% of the voting power of Athene.
(5)
Gross Assets presented for AFT and AIF represents total managed assets of these closed-end funds.
(6)
Returns have not been presented as the publicly traded vehicle commenced investing capital less than 24 months prior to the period indicated and therefore such return information was deemed not meaningful.
(7)
Refer to www.apolloreit.com for the most recent financial information on ARI. The information contained on ARI’s website is not part of this Annual Report on Form 10-K. All amounts are as of September 30, 2014 except for total returns.

Athene and SIAs

As of December 31, 2014, Athene Asset Management had $60.3 billion of total AUM in accounts owned by or related to Athene, of which approximately $12.6 billion, was either sub-advised by Apollo or invested in Apollo funds and investment vehicles. Of the approximately $12.6 billion of assets, the vast majority were in sub-advisory managed accounts that manage high grade credit asset classes, such as collateralized loan obligation ("CLO") debt, commercial mortgage backed securities, and insurance-linked securities.

Apollo also manages CLOs within Apollo's credit segment, with such CLOs representing a total AUM of approximately $13.5 billion as of December 31, 2014. Such CLO performance information is not included in the above investment record tables.

As of December 31, 2014, approximately $15 billion of total AUM was managed through SIAs, which include certain SIAs in the investment record tables above and capital deployed from certain SIAs across Apollo's private equity, credit

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and real estate funds. The above investment record tables exclude certain funds with an aggregate AUM of approximately $5.1 billion as of December 31, 2014 because management deemed them to be immaterial.
Overview of Results of Operations
Revenues
Advisory and Transaction Fees from Affiliates, Net. As a result of providing advisory services with respect to actual and potential private equity, credit, and real estate 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 an advisory fee 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 from affiliates, net, in the consolidated statements of operations. See note 2 to our consolidated financial statements for more detail.
The Management Fee Offsets are calculated for each fund as follows:
65%-100% for private equity funds, gross advisory, transaction and other special fees;
65%-100% for certain credit funds, gross advisory, transaction and other special fees; and
100% for certain real estate funds, gross advisory, transaction and other special fees.
Additionally, 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 presented net on the Company’s consolidated statements of operations, and any receivable from the respective funds is presented in Due from Affiliates on the consolidated statements of financial condition.
Management Fees from Affiliates. 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.
Carried Interest Income from Affiliates. The general partners of our funds, in general, are entitled to an incentive return that can normally amount to as much as 20% of the total returns on fund capital, depending upon performance of the underlying funds and subject to preferred returns and high water marks, as applicable. The carried interest income from affiliates is recognized in accordance with U.S. GAAP guidance applicable to accounting for arrangement fees based on a formula. In applying the U.S. GAAP guidance, the carried interest from affiliates for any period is based upon an assumed liquidation of the funds’ assets at the reporting date, and distribution of the net proceeds in accordance with the funds’ allocation provisions.
As of December 31, 2014, approximately 66% 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 34% was determined primarily by comparable company and industry multiples or discounted cash flow models. For our private equity, credit and real estate segments, the percentage determined using market-based valuation methods as of December 31, 2014 was 45%, 78% and 48%, respectively. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Our private equity funds’ performance, and our performance, may be adversely affected by the financial performance of our funds' portfolio companies and the industries in which our funds invest” for a discussion regarding certain industry-specific risks that could affect the fair value of our private equity funds’ portfolio company investments.
Carried interest income fee rates can be as much as 20% for our private equity funds. In our private equity funds, the Company does not earn carried interest income 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

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real estate funds have various carried interest rates and hurdle rates. Certain of our credit and real estate funds allocate carried interest to the general partner in a similar manner as the private equity funds. In our private equity, certain credit and real estate funds, so long as the investors achieve their priority returns, there is a catch-up formula whereby the Company earns a priority return for a portion of the return until the Company’s carried interest income equates to its incentive fee rate for that fund; thereafter, the Company participates in returns from the fund at the carried interest income rate. Carried interest income is subject to reversal to the extent that the carried interest income distributed exceeds the amount due to the general partner based on a fund’s cumulative investment returns. The Company recognizes potential repayment of previously received carried interest income 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. This 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) carried interest receivable on an unconsolidated basis and (ii) realized and unrealized carried interest income (loss) for Apollo's combined segments' Incentive Business as of December 31, 2014 and 2013 and for the years ended December, 31 2014, 2013 and 2012:
 
As of 
 December 31, 2014
 
As of 
 December 31, 2013
 
For the Year Ended 
 December 31, 2014
 
For the Year Ended 
 December 31, 2013
 
For the Year Ended 
 December 31, 2012
 
Carried Interest Receivable on an Unconsolidated Basis
 
Carried Interest Receivable on an Unconsolidated Basis
 
Unrealized
Carried
Interest 
Income
(Loss)
 
Realized
Carried
Interest
Income
 
Total
Carried
Interest
Income 
(Loss)
 
Unrealized
Carried
Interest 
Income
(Loss)
 
Realized
Carried
Interest
Income
 
Total
Carried
Interest
Income 
(Loss)
 
Unrealized
Carried
Interest 
Income
(Loss)
 
Realized
Carried
Interest
Income
 
Total
Carried
Interest
Income 
(Loss)
 
(in millions)
Private Equity Funds:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fund VII
$
288.2

 
$
890.8

 
$
(602.6
)
 
$
902.4

 
$
299.8

 
$
(13.6
)
 
$
1,163.6

 
$
1,150.0

 
$
435.5

 
$
472.1

 
$
907.6

Fund VI
183.4

(1) 
697.6

 
(514.1
)
 
401.4

 
(112.7
)
 
427.3

 
760.3

 
1,187.6

(4 
) 
345.6

(5) 
294.0

 
639.6

Fund V
3.2

 
43.0

 
(39.9
)
 
44.9

 
5.0

 
(91.2
)
 
99.1

 
7.9

 
9.3

 
33.4

 
42.7

Fund IV
5.6

 
7.7

 
(2.1
)
 

 
(2.1
)
 
(3.2
)
 
1.7

 
(1.5
)
 
(7.0
)
 
2.9

 
(4.1
)
AAA/Other(2)(3)
191.5

 
228.7

 
(37.4
)
 
79.4

 
42.0

 
135.4

(5 
) 
37.9

 
173.3

 
71.5

(5) 
10.2

 
81.7

Total Private Equity Funds
671.9

 
1,867.8

 
(1,196.1
)
 
1,428.1

 
232.0

 
454.7

 
2,062.6

 
2,517.3

 
854.9

 
812.6

 
1,667.5

Credit Funds:(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Performing Credit
54.1

 
179.9

 
(109.3
)
 
119.7

 
10.4

 
(164.1
)
 
284.6

 
120.5

 
206.3

 
154.3

 
360.6

Opportunistic Credit
26.6

 
59.8

 
(8.5
)
 
6.2

 
(2.3
)
 
20.4

(5 
) 
36.7

 
57.1

 
7.7

(5) 
41.5

 
49.2

Structured Credit
36.1

 
54.3

 
(14.7
)
 
5.9

 
(8.8
)
 
32.7

 
11.2

 
43.9

 
18.5

 
13.4

 
31.9

European Credit
8.4

 
35.6

 
(11.2
)
 
14.8

 
3.6

 
2.1

 
27.8

 
29.9

 
18.0

 
8.5

 
26.5

Non-Performing Loans
141.6

 
154.2

 
(13.0
)
 
134.4

 
121.4

 
52.3

 
33.0

 
85.3

 
50.6

 

 
50.6

Total Credit Funds
266.8

 
483.8

 
(156.7
)
 
281.0

 
124.3

 
(56.6
)
 
393.3

 
336.7

 
301.1

 
217.7

 
518.8

Real Estate Funds:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CPI Funds
1.5

 
5.3

 
(3.8
)
 
0.6

 
(3.2
)
 
(5.2
)
 
0.5

 
(4.7
)
 
10.4

 
4.7

 
15.1

AGRE U.S. Real Estate Fund, L.P.
11.4

 
5.6

 
5.8

 
2.7

 
8.5

 
5.6

 

 
5.6

 

 

 

Other
7.2

 
4.3

 
3.0

 
0.7

 
3.7

 
4.3

 

 
4.3

 

 

 

Total Real Estate Funds
20.1

 
15.2

 
5.0

 
4.0

 
9.0

 
4.7

 
0.5

 
5.2

 
10.4

 
4.7

 
15.1

Total
$
958.8

(7) 
$
2,366.8

(7 
) 
$
(1,347.8
)
 
$
1,713.1

 
$
365.3

 
$
402.8

 
$
2,456.4

 
$
2,859.2

 
$
1,166.4

 
$
1,035.0

 
$
2,201.4


(1)
Fund VI's remaining investments and escrow cash were valued at 104% of the funds unreturned capital, which was below a specified return ratio of 115%. As a result, Fund VI is required to place in escrow current and future carried interest income distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation of Fund VI. As of December 31, 2014, Fund VI carried interest receivable includes $165.6 million of carried interest income in escrow.
(2)
Includes certain SIAs.
(3)
Includes $121.5 million of carried interest receivable from AAA Investments which will be paid in common shares of Athene Holding (valued at the then fair market value) if there is a distribution in kind of shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended), or paid in cash if AAA sells the shares of Athene Holding.
(4)
Includes $452.3 million for Fund VI related to the catch-up formula whereby the Company earns a disproportionate return (typically 80%) for a portion of the return until the Company's carried interest income equates to its 20% of cumulative profits of the funds.
(5)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2014 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $3.4 million in aggregate for two of our credit funds. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2013 was a reversal of $19.3 million and $0.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to SOMA and APC, respectively. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a reversal of $75.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to Fund VI and reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $1.2 million and $0.3 million with respect to SOMA and APC, respectively.

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(6)
As of December 31, 2014, two of our credit funds had an aggregate $3.4 million general partner obligation to return carried interest income that was previously distributed. The fair value gain on investments and income at the fund level needed to reverse the general partner obligations for these two credit funds was $7.0 million and $2.2 million, respectively as of December 31, 2014.
(7)
There was a corresponding profit sharing payable of $434.9 million and $992.2 million as of December 31, 2014 and 2013, respectively, that resulted in a net carried interest receivable on an unconsolidated basis of $523.9 million and $1,374.6 million as of December 31, 2014 and 2013, respectively. Included within profit sharing payable are contingent consideration obligations of $96.1 million and $135.5 million as of December 31, 2014 and 2013, respectively, and profit sharing payable related to amounts in escrow.
The general partners of the private equity, credit and real estate funds listed in the table above were accruing carried interest income as of December 31, 2014. The investment manager of AINV accrues carried interest in the management business as it is earned. The general partners of certain of our credit funds accrue carried interest 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 are subject to market conditions and investment performance.
Carried interest income from our private equity funds and certain credit and real estate funds is subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative carried interest distributed from inception to date exceeds the amount computed as due to the general partner at the final distribution. These general partner obligations, if applicable, are included in due to affiliates on the consolidated statements of financial condition. As of December 31, 2014, there was a $3.4 million general partner obligation to return previously distributed carried interest income related to our funds recorded in due to affiliates in the consolidated statement of financial condition. Carried interest receivable is reported on a separate line item within the consolidated statements of financial condition.

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The following table summarizes our carried interest income since inception for our combined segments through December 31, 2014:
 
 
Carried Interest Income 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 as of
December 31,
2014(3)
 
Maximum Carried
Interest Income
Subject to
Potential Reversal(4)
 
(in millions)
Private Equity Funds:
 
 
 
 
 
 
 
 
 
Fund VII
$
288.2

 
$
2,862.1

 
$
3,150.3

 
$

 
$
917.7

Fund VI
183.4

 
1,580.1

 
1,763.5

 

 
1,246.1

Fund V
3.2

 
1,455.0

 
1,458.2

 

 
33.0

Fund IV
5.6

 
597.2

 
602.8

 

 
5.6

AAA/Other(5)
191.5

 
144.9

 
336.4

 

 
194.8

Total Private Equity Funds
671.9

 
6,639.3

 
7,311.2

 

 
2,397.2

Credit Funds:
 
 
 
 
 
 
 
 
 
U.S. Performing Credit
54.1

 
756.8

 
810.9

 
2.5

 
149.5

Opportunistic Credit(6)
16.1

 
183.7

 
199.8

 
0.9

 
48.4

Structured Credit
36.1

 
30.8

 
66.9

 

 
38.3

European Credit
8.4

 
67.5

 
75.9

 

 
67.9

Non-Performing Loans
141.6

 
155.1

 
296.7

 

 
170.4

Total Credit Funds
256.3

 
1,193.9

 
1,450.2

 
3.4

 
474.5

Real Estate Funds:
 
 
 
 
 
 
 
 
 
CPI Funds
1.5

 
5.8

 
7.3

 

 
2.2

AGRE U.S. Real Estate Fund, L.P.
11.4

 
2.7

 
14.1

 

 
11.1

Other
7.2

 
0.6

 
7.8

 

 
7.8

Total Real Estate Funds
20.1

 
9.1

 
29.2

 

 
21.1

Total
$
948.3

 
$
7,842.3

 
$
8,790.6

 
$
3.4

 
$
2,892.8

 
(1)
Certain funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.21 as of December 31, 2014.
(2)
Amounts in “Distributed by Fund and Recognized” for the CPI, 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 December 31, 2014. Carried interest income has been allocated to and recognized by the general partner. Based on the amount of carried interest income 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 carried interest income or fees at December 31, 2014. 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 or as otherwise set forth in the respective limited partnership agreement of the fund.
(4)
Represents the amount of carried interest income that would be reversed if remaining fund investments became worthless on December 31, 2014. Amounts subject to potential reversal of carried interest income include amounts undistributed by a fund (i.e., the carried interest 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 carried interest income, except for those funds that are gross of taxes as defined in the respective funds' management agreement.
(5)
Includes $121.5 million of carried interest receivable from AAA Investments which will be paid in common shares of Athene Holding (valued at the then fair market value) if there is a distribution in kind of shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended), or paid in cash if AAA sells the shares of Athene Holding.
(6)
Amounts exclude AINV, as carried interest income from this entity is not subject to contingent repayment.

Expenses

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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 carried interest income earned from private equity, credit and real estate funds and compensation expense associated with the vesting of non-cash equity-based awards.
Our compensation arrangements with certain partners and employees contain a significant performance-based incentive component. Therefore, as our net revenues increase, our compensation costs also rise or can be lower when net revenues decrease. In addition, our compensation costs reflect the increased investment in people as we expand geographically and create new funds. All payments for services rendered by our Managing Partners prior to the 2007 Reorganization have been accounted for as partnership distributions rather than compensation and benefits expense. See note 1 to our consolidated financial statements for further discussion of the 2007 Reorganization. Subsequent to the 2007 Reorganization, our Managing Partners are considered employees of Apollo. As such, payments for services made to these individuals, including the expense associated with the AOG Units described below, have been recorded as compensation expense. The AOG Units were granted to the Managing Partners and Contributing Partners at the time of the 2007 Reorganization, as discussed in note 1 to our consolidated financial statements.
In addition, certain professionals and selected other individuals have a profit sharing interest in the carried interest income earned in relation to our private equity, certain credit and real estate funds in order to better align their interests with our own and with those of the investors in these funds. Profit sharing expense is part of our compensation and benefits expense and is generally based upon a fixed percentage of private equity, credit and real estate carried interest income on a pre-tax and a pre-consolidated basis. Profit sharing expense can reverse during periods when there is a decline in carried interest income that was 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 gains (losses) for investments have the same effect on our profit sharing expense. Profit sharing expense increases when unrealized gains increase. 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 carried interest income 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 pre-reorganization realized gains, 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 17 to our consolidated financial statements for further discussion of indemnification.
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 connection with the 2007 Reorganization, the Managing Partners and Contributing Partners received AOG Units with a vesting period of five to six years (all of which have fully vested) and certain employees were granted RSUs with a vesting period of typically six years (all of which have also fully vested). Managing Partners, Contributing Partners and certain employees have also been granted AAA restricted depositary units ("RDUs"), or incentive units that provide the right to receive AAA RDUs, which both represent common units of AAA and generally vest over three years for employees and are fully-vested for Managing Partners and Contributing Partners on the grant date. In addition, AHL Awards (as defined in note 16 to our 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. In addition, the Company grants equity awards to certain employees, including RSUs 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. See note 16 to our consolidated financial statements for further discussion of AOG Units and other equity-based compensation.
Other Expenses. The balance of our other expenses includes interest, professional fees, placement fees, occupancy, depreciation and amortization and other general operating expenses. Interest expense consists primarily of interest related to the 2007 AMH Credit Agreement, the 2013 AMH Credit Facilities and the 2024 Senior Notes as discussed in note 14 to our consolidated financial statements. Placement fees are incurred in connection with our capital raising activities. 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 general operating expenses normally include costs related to travel, information technology and administration.
Other Income (Loss)
Net Gains (Losses) from Investment Activities. The performance of the consolidated Apollo funds has impacted our net gains (losses) from investment activities. Net gains (losses) from investment activities include both realized gains and losses

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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. For results of AAA, a portion of the net gains (losses) from investment activities are attributable to Non-Controlling Interests in the consolidated statements of operations. 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 consolidated financial statements.
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 consolidated statements of operations.
Interest Income. The Company recognizes security transactions on the trade date. Interest income is recognized as earned on an accrual basis. Discounts and premiums on securities purchased are accreted or amortized over the life of the respective securities using the effective interest method. Interest income also includes payment-in-kind interest (or "PIK" interest) on a convertible note and from one of our credit funds.
Other Income (Losses), Net. Other income (losses), net includes the recognition of bargain purchase gains as a result of Apollo acquisitions, gains (losses) arising from the remeasurement of foreign currency denominated assets and liabilities of foreign subsidiaries, reversal of a portion of the tax receivable agreement liability (see note 17 to our consolidated financial statements), gains (losses) arising from the remeasurement of derivative instruments associated with fees from certain of the Company’s affiliates 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, these entities in some cases are subject to New York City unincorporated business taxes ("NYC UBT"), and non-U.S. entities, in some cases, are subject to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. federal, state and local corporate income tax, and the Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.
As significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties, we recognize the 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 position. 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 tax positions are reviewed and evaluated quarterly to determine whether or not we have uncertain tax positions that require financial statement recognition.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized 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 consolidated financial statements. The Non-Controlling Interests relating to Apollo Global Management, LLC primarily include the 57.7% and 61.0% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings as of December 31, 2014 and 2013, respectively, and other ownership interests in consolidated entities, which primarily consist of the approximate 97.5% and 97.4% ownership interests held by limited partners in AAA as of December 31, 2014 and 2013, respectively. Non-Controlling Interests also include limited partner interests of Apollo managed funds in certain consolidated VIEs.
The authoritative guidance for Non-Controlling Interests in the consolidated financial statements requires reporting entities to present Non-Controlling Interest as equity and provides guidance on the accounting for transactions between an entity and Non-Controlling Interests. According to the guidance, (1) Non-Controlling Interests are presented as a separate component of shareholders’ equity on the Company’s consolidated statements of financial condition, (2) net income (loss) includes the net

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income (loss) attributable to the Non-Controlling Interest holders on the Company’s consolidated statements of operations, (3) the primary components of Non-Controlling Interest are separately presented in the Company’s consolidated statements of changes in shareholders’ equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities and (4) profits and losses are allocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis.

Results of Operations
Below is a discussion of our consolidated results of operations for the years ended December 31, 2014, 2013, and 2012. For additional analysis of the factors that affected our results at the segment level, see “—Segment Analysis” below:
 
 
 
Year Ended December 31,
 
Amount
Change
 
Percentage
Change
 
Year Ended December 31,
 
Amount
Change

Percentage
Change
 
 
2014
 
2013
 
 
2013
 
2012
 
 
 
(dollars in thousands)
 
 
 
 
 
(dollars in thousands)
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
 
$
315,587

 
$
196,562

 
$
119,025

 
60.6
 %
 
$
196,562

 
$
149,544

 
$
47,018

 
31.4
 %
Management fees from affiliates
 
850,441

 
674,634

 
175,807

 
26.1

 
674,634

 
580,603

 
94,031

 
16.2

Carried interest income from affiliates
 
394,055

 
2,862,375

 
(2,468,320
)
 
(86.2
)
 
2,862,375

 
2,129,818

 
732,557

 
34.4

Total Revenues
 
1,560,083

 
3,733,571

 
(2,173,488
)
 
(58.2
)
 
3,733,571

 
2,859,965

 
873,606

 
30.5

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
 
126,320

 
126,227

 
93

 
0.1

 
126,227

 
598,654

 
(472,427
)
 
(78.9
)
Salary, bonus and benefits
 
338,049

 
294,753

 
43,296

 
14.7

 
294,753

 
274,574

 
20,179

 
7.3

Profit sharing expense
 
276,190

 
1,173,255

 
(897,065
)
 
(76.5
)
 
1,173,255

 
872,133

 
301,122

 
34.5

Total Compensation and Benefits
 
740,559

 
1,594,235

 
(853,676
)
 
(53.5
)
 
1,594,235

 
1,745,361

 
(151,126
)
 
(8.7
)
Interest expense
 
22,393

 
29,260

 
(6,867
)
 
(23.5
)
 
29,260

 
37,116

 
(7,856
)
 
(21.2
)
Professional fees
 
82,030

 
83,407

 
(1,377
)
 
(1.7
)
 
83,407

 
64,682

 
18,725

 
28.9

General, administrative and other
 
97,663

 
98,202

 
(539
)
 
(0.5
)
 
98,202

 
87,961

 
10,241

 
11.6

Placement fees
 
15,422

 
42,424

 
(27,002
)
 
(63.6
)
 
42,424

 
22,271

 
20,153

 
90.5

Occupancy
 
40,427

 
39,946

 
481

 
1.2

 
39,946

 
37,218

 
2,728

 
7.3

Depreciation and amortization
 
45,069

 
54,241

 
(9,172
)
 
(16.9
)
 
54,241

 
53,236

 
1,005

 
1.9

Total Expenses
 
1,043,563

 
1,941,715

 
(898,152
)
 
(46.3
)
 
1,941,715

 
2,047,845

 
(106,130
)
 
(5.2
)
Other Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net gains from investment activities
 
213,243


330,235

 
(116,992
)
 
(35.4
)
 
330,235

 
288,244

 
41,991

 
14.6

Net gains (losses) from investment activities of consolidated variable interest entities
 
22,564


199,742

 
(177,178
)
 
(88.7
)
 
199,742

 
(71,704
)
 
271,446

 
NM

Income from equity method investments
 
53,856


107,350

 
(53,494
)
 
(49.8
)
 
107,350

 
110,173

 
(2,823
)
 
(2.6
)
Interest income
 
10,392


12,266

 
(1,874
)
 
(15.3
)
 
12,266

 
9,693

 
2,573

 
26.5

Other income, net
 
60,592


40,114

 
20,478

 
51.0

 
40,114

 
1,964,679

 
(1,924,565
)
 
(98.0
)
Total Other Income
 
360,647


689,707

 
(329,060
)
 
(47.7
)
 
689,707

 
2,301,085

 
(1,611,378
)
 
(70.0
)
Income before income tax provision
 
877,167


2,481,563

 
(1,604,396
)
 
(64.7
)
 
2,481,563

 
3,113,205

 
(631,642
)
 
(20.3
)
Income tax provision
 
(147,245
)

(107,569
)
 
(39,676
)
 
36.9

 
(107,569
)
 
(65,410
)
 
(42,159
)
 
64.5

Net Income
 
729,922


2,373,994

 
(1,644,072
)
 
(69.3
)
 
2,373,994

 
3,047,795

 
(673,801
)
 
(22.1
)
Net income attributable to Non-controlling Interests
 
(561,693
)

(1,714,603
)
 
1,152,910

 
(67.2
)
 
(1,714,603
)
 
(2,736,838
)
 
1,022,235

 
(37.4
)
Net Income Attributable to Apollo Global Management, LLC
 
$
168,229


$
659,391

 
$
(491,162
)
 
(74.5
)%
 
$
659,391

 
$
310,957

 
$
348,434

 
112.1
 %

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.

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Revenues
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
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.
Advisory and transaction fees from affiliates, net, increased by $119.0 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was attributable to an increase in the credit segment of $140.5 million offset by a decrease in the private equity segment of $20.1 million. The increase in the credit segment was primarily attributable to an increase in monitoring fees from Athene of $118.5 million as a result of Athene's acquisition of Aviva USA. The decrease in the private equity segment was primarily attributable to lower net advisory fees due to the realization of underlying investments, termination fees and waived fees related to debt investment vehicles, Taminco, Realogy and Caesars Entertainment that occurred during the year ended December 31, 2013 and lower net transaction fees earned for the year ended December 31, 2014 compared to 2013. Advisory and transaction fees are reported net of Management Fee Offsets as calculated under the terms of the applicable limited partnership agreements. See “—Overview of Results of Operations—Revenues—Advisory and Transaction Fees from Affiliates, Net” for a description of how the Management Fee Offsets are calculated.
Management fees from affiliates increased by $175.8 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to an increase in management fees earned by our credit and private equity segments of $146.3 million and $30.2 million, respectively. The primary driver of the increase in management fees earned from the credit funds was an increase in management fees earned from Athene of $126.1 million during the year ended December 31, 2014 as compared to the same period in 2013 as a result of Athene's acquisition of Aviva USA. The primary driver of the increase in management fees earned form the private equity funds was an increase in management fees earned from Fund VIII in the amount of $126.4 million during the year ended December 31, 2014, partially offset by decreased management fees earned from Fund VII of $92.9 million as a result of a change in the management fee rate and basis upon which management fees are earned from capital commitments to invested capital, due to the fund coming to the end of the fund's investment period.
Carried interest income from affiliates decreased by $2.5 billion for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to decreased carried interest income from Fund VI, Fund VII, AAA Investments (Co-Invest VI), L.P. ("AAA Co-Invest VI"), COF I, certain sub-advisory arrangements, SOMA, and EPF I of $1.3 billion, $850.1 million, $121.7 million, $46.2 million, $42.3 million, $38.8 million and $25.7 million, respectively.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Advisory and transaction fees from affiliates, net, increased by $47.0 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This was attributable to an increase in advisory and transaction fees, net in the credit segment of $87.1 million, offset by a decrease in advisory and transaction fees, net in the private equity segment of $43.4 million. During the year ended December 31, 2013, gross and net advisory fees, including directors’ fees, were $213.3 million and $140.0 million, respectively, and gross and net transaction fees were $133.5 million and $56.6 million, respectively. During the year ended December 31, 2012, gross and net advisory fees, including directors’ fees, were $152.1 million and $66.3 million, respectively, and gross and net transaction fees were $176.7 million and $88.5 million, respectively. The net transaction and advisory fees were further offset by $5.2 million and $5.3 million in broken deal costs during the years ended December 31, 2013 and 2012, respectively, primarily relating to Fund VII.
Management fees from affiliates increased by $94.0 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to an increase in management fees earned by our credit, private equity and real estate segments of $92.8 million, $7.8 million and $7.1 million, respectively, as a result of corresponding increases in the net assets managed and Fee-Generating invested capital with respect to these segments during the period. Part of the increase in management fees earned from the credit funds was attributable to an increase of $13.6 million of fees earned from consolidated VIEs which are included in the credit segment results but were eliminated in consolidation.
Carried interest income from affiliates increased by $732.6 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to increased carried interest income driven by increases in the fair value of portfolio investments held by certain funds and certain co-invest vehicles, primarily Fund VI, Fund VII, AAA Co-Invest VI, SOMA and EPF I which had increased carried interest income of $548.1 million, $242.4 million, $115.7 million, $40.0 million and $34.5 million, respectively. This was offset by COF I, COF II, certain CLOs and Fund V, which had decreased carried interest income of $100.1 million, $48.3 million, $44.5 million and $34.8 million, respectively, during the year ended December 31, 2013 as compared to the same period in 2012. The remaining change was attributable to an overall increase in the fair value of portfolio investments of the other funds, which generated increased carried interest income of $17.5 million

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during the period. Part of the change in carried interest income from affiliates was attributable to a decrease in carried interest income of $37.9 million earned from consolidated VIEs which are included in the credit segment results but were eliminated in consolidation during the year ended December 31, 2013 as compared to the same period in 2012.
Expenses
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Compensation and benefits decreased by $853.7 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to a decrease in profit sharing expense of $897.1 million due to lower carried interest income during the year ended December 31, 2014 as compared to the year ended December 31, 2013. In any year the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds that are generating carried interest in the period. During the year ended December 31, 2014, the fair value of Fund VII’s underlying fund investments appreciated while Fund VI's underlying fund investments depreciated, which contributed to an increased profit sharing percentage compared to the year ended December 31, 2013. Included within profit sharing expense was $62.0 million and $62.4 million related to the Incentive Pool (as defined below) for the year ended December 31, 2014 and 2013, respectively. The Incentive Pool is separate from the fund related profit sharing expense and, as described below, may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular quarter. The decrease in profit sharing expense was offset by an increase in salary, bonus and benefits of $43.3 million during the year ended December 31, 2014.
In June 2011, the Company adopted a performance based incentive arrangement (the “Incentive Pool”) whereby certain partners and employees earned discretionary compensation based on carried interest realizations earned by the Company during the year, which amounts are reflected as profit sharing expense in the Company’s consolidated financial statements. The Company adopted the Incentive Pool 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. Allocations to the Incentive Pool and to its participants contain both a fixed and a discretionary component and may vary year-to-year depending on the overall realized performance of the Company and the contributions and performance of each participant. There is no assurance that the Company will continue to compensate individuals through performance-based incentive arrangements in the future and there may be periods when the executive committee of the Company’s manager determines that allocations of realized carried interest income are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits.
Interest expense decreased by $6.9 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to a lower margin rate incurred from the 2013 AMH Credit Facilities as compared to the 2007 AMH Credit Agreement during the year ended December 31, 2014 as compared to the same period in 2013 (see note 14 to our consolidated financial statements).

Placement fees decreased by $27.0 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. Placement fees are incurred in connection with the raising of capital for new and existing funds. The fees are normally payable to placement agents, who are third parties that assist in identifying potential investors, securing commitments to invest from such potential investors, preparing or revising offering marketing materials, developing strategies for attempting to secure investments by potential investors and/or providing feedback and insight regarding issues and concerns of potential investors. This change was primarily attributable to decreases in placement fees with respect to EPF II and Fund VIII of $14.1 million and $13.2 million, respectively, during the year ended December 31, 2014 as compared to the same period in 2013.
Depreciation and amortization expense decreased by $9.2 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to lower amortization of intangible assets during the year ended December 31, 2014 as compared to the year ended December 31, 2013 as certain intangible assets were fully amortized in 2014.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Compensation and benefits decreased by $151.1 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a reduction of equity-based compensation by $472.4 million, specifically the amortization of AOG Units which decreased by $450.9 million due to the expiration of the vesting period for the Managing Partners in June 2013. This was partially offset by an increase in profit sharing expense of $301.1 million as a result of the favorable performance of certain of our private equity and credit funds during the period. Included in profit sharing expense was $62.4 million and $62.1 million of expenses related to the Incentive Pool (as defined below) for the year ended

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December 31, 2013 and 2012, respectively. In addition, salary, bonus and benefits increased by $20.2 million as a result of an increase in headcount during the period as compared to the same period in 2012.
Interest expense decreased by $7.9 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to decreased interest expense related to expiring of interest rate swaps and a lower margin rate on the 2007 AMH Credit Agreement during the year ended December 31, 2013 as compared to the same period in 2012.
Professional fees increased by $18.7 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was attributable to higher legal and consulting fees incurred during the year ended December 31, 2013, as compared to the same period in 2012 due to the continued expansion of our global investment platform.
General, administrative and other expenses increased by $10.2 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to an increase in costs associated with the launch of new funds, increased travel, information technology, recruiting and other expenses incurred during the year ended December 31, 2013 as compared to the same period in 2012.
Placement fees increased by $20.2 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to $15.4 million related to the launch of Fund VIII during the year ended December 31, 2013.
Occupancy expense increased by $2.7 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to additional expenses incurred from the extension of existing leases along with additional office space leased as a result of the increase in our headcount to support the expansion of our global investment platform during the year ended December 31, 2013 as compared to the same period in 2012.
Other Income (Loss)
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Net gains from investment activities decreased by $117.0 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to a $137.9 million decrease in net unrealized gains related to changes in the fair value of investments held by AAA, offset by a decrease in losses on the investment in HFA Holdings Limited ("HFA") of $21.4 million (see note 4 to the consolidated financial statements).
Net gains from investment activities of consolidated VIEs decreased by $177.2 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. The decrease was primarily attributable to a $238.5 million net loss from investment activities for the year ended December 31, 2014 as compared to a $54.2 million net gain from investment activities for the year ended December 31, 2013. The decrease was also driven by a $7.8 million decrease in interest and other income and a $74.6 million increase in other expenses for the year ended December 31, 2014 as compared to the same period in 2013. These changes were offset by a $102.5 million net gain from debt for the year ended December 31, 2014 as compared to a $95.4 million net loss from debt for the year ended December 31, 2013.
Income from equity method investments decreased by $53.5 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily driven by lower appreciation in the net asset value of entities in which the Company has a direct interest for the year ended December 31, 2014 as compared to the year ended December 31, 2013. Fund VI and Fund VII had the most significant impact and together had a reduction of $53.9 million of income from equity method investments during the year ended December 31, 2014 as compared to the same period in 2013.
Interest income decreased by $1.9 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to the decrease of payment-in-kind interest income as a result of the sale of the Company's investment in HFA during July 2014 as compared to the same period in 2013 (see note 4 to the consolidated financial statements).
Other income, net increased by $20.5 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to a gain from the reduction of the tax receivable agreement liability during the year ended December 31, 2014 resulting from changes in projected income estimates and in estimated tax rates (see note 17 to our consolidated financial statements) and a gain on extinguishment of a portion of the contingent consideration obligation related to the acquisition of Stone Tower (see note 18 to our consolidated financial statements) during the period. These increases were offset by losses resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries during the year ended December 31, 2014.

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Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Net gains from investment activities increased by $42.0 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a $54.3 million increase in net unrealized gains related to changes in the fair value of AAA Investments’ portfolio investments, partially offset by an $11.5 million decrease in unrealized gains related to the change in the fair value of the investment in HFA during the year ended December 31, 2013 as compared to the same period in 2012.
Net gains (losses) from investment activities of consolidated VIEs increased by $271.4 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a decrease in net realized and unrealized losses relating to the debt held by the consolidated VIEs of $402.3 million and higher interest and other income of $92.7 million during the period. This was offset by a decrease in the fair values of investments held by the consolidated VIEs of $191.9 million and an increase in other expenses of $31.7 million during the year ended December 31, 2013 as compared to the same period in 2012.
Income from equity method investments decreased by $2.8 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily driven by changes in the fair values of certain Apollo funds in which the Company has a direct interest. Fund VII, COF I and EPF I had the most significant impact and together generated $81.9 million of income from equity method investments during the year ended December 31, 2013 as compared to a $84.2 million of income from equity method investments during the year ended December 31, 2012, resulting in a net decrease of $2.3 million.
Other income, net decreased by $1,924.6 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a gain on acquisition of $1,951.1 million recorded on the Stone Tower acquisition during April 2012. See note 3 to our consolidated financial statements for further discussion of the Stone Tower acquisition. The remaining offset was primarily attributable to income related to the reduction of the tax receivable agreement liability due to a change in estimated tax rates, and an unrealized gain on Athene related derivative contracts (see note 17 to our consolidated financial statements) during the year ended December 31, 2012 as compared to the same period in 2011. See note 12 to our consolidated financial statements for a complete summary of other income, net, for the years ended December 31, 2013 and 2012.
Income Tax Provision
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Income tax provision increased by $39.7 million primarily due to an increase in management business income subject to corporate level taxation. There was also a reduction of the Company’s blended state tax rate which caused the Company to reduce its deferred tax assets and increased income tax expense. The Apollo Operating Group and its subsidiaries generally operate as partnerships for U.S. federal income tax purposes. Due to our legal structure, only a portion of the income we earn is subject to corporate-level tax rates 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 at an effective tax rate of 16.8% and 4.3% for the years ended December 31, 2014 and 2013, respectively. The reconciling items between our statutory tax rate and our effective tax rate were due to the following: (i) income passed through to Non-Controlling Interests; (ii) income passed through to Class A shareholders; (iii) amortization of AOG Units that are non-deductible for income tax purposes which were fully amortized as of June 30, 2013; and (iv) state and local income taxes including NYC UBT.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
The income tax provision increased by $42.2 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. As discussed in note 13 to our consolidated financial statements, the Company’s income tax provision primarily relates to the earnings generated by APO Corp., a wholly-owned subsidiary of Apollo Global Management, LLC that is subject to U.S. federal, state and local taxes. APO Corp. had taxable income of $209.5 million and $130.8 million for the year ended December 31, 2013 and 2012, respectively, after adjusting for permanent tax differences. The $78.7 million change in income before taxes resulted in increased federal, state and local taxes of $42.6 million during the period utilizing a marginal corporate tax rate and adjusting the estimated rate of tax Apollo expects to pay in the future. This was partially offset by a decrease in the income tax provision of $0.5 million which primarily resulted from a decrease in the NYC UBT, as well as taxes on foreign subsidiaries.


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

 
For the Year Ended December 31,
 
2014
 
2013
 
2012
 
(in thousands)
AAA(1)
$
(196,964
)
 
$
(331,504
)
 
(278,454
)
Interest in management companies and a co-investment vehicle(2)
(13,186
)
 
(18,872
)
 
(7,307
)
Other consolidated entities
(17,590
)
 
43,357

 
50,956

Net income attributable to Non-Controlling Interests in consolidated entities
(227,740
)
 
(307,019
)
 
(234,805
)
Net (income) loss attributable to Appropriated Partners’ Capital(3)
70,729

 
(149,934
)
 
(1,816,676
)
Net income attributable to Non-Controlling Interests in the Apollo Operating Group
(404,682
)
 
(1,257,650
)
 
(685,357
)
Net Income attributable to Non-Controlling Interests
$
(561,693
)
 
$
(1,714,603
)
 
$
(2,736,838
)
Net income (loss) attributable to Appropriated Partners’ Capital(4)
(70,729
)
 
149,934

 
1,816,676

Other Comprehensive (income) loss attributable to Non-Controlling Interests
591

 
(41
)
 
(2,010
)
Comprehensive Income Attributable to Non-Controlling Interests
$
(631,831
)
 
$
(1,564,710
)
 
$
(922,172
)
 
(1)
Reflects the Non-Controlling Interests in the net (income) loss of AAA and is calculated based on the Non-Controlling Interests' ownership percentage in AAA, which was approximately 97.5%, 97.4% and 97.3% as of December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, 2013 and 2012, Apollo owned approximately 2.5%, 2.6% and 2.7% of AAA, respectively.
(2)
Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of our credit funds.
(3)
Reflects net (income) loss of the consolidated CLOs classified as VIEs.
(4)
Appropriated Partners’ Capital is included in total Apollo Global Management, LLC shareholders’ equity and is therefore not a component of comprehensive income attributable to Non-Controlling Interests on the consolidated statements of comprehensive income.
Net income attributable to Non-Controlling Interests in the Apollo Operating Group consisted of the following:
 
 
For the Year Ended December 31,
 
 
2014
 
2013
 
2012
 
 
(in thousands)
Net income
 
$
729,922

 
$
2,373,994

 
$
3,047,795

Net income attributable to Non-Controlling Interests in consolidated entities
 
(157,011
)
 
(456,953
)
 
(2,051,481
)
Net income after Non-Controlling Interests in consolidated entities
 
572,911

 
1,917,041

 
996,314

Adjustments:
 
 
 
 
 
 
Income tax provision(1)
 
147,245

 
107,569

 
65,410

NYC UBT and foreign tax provision(2)
 
(10,995
)
 
(10,334
)
 
(10,889
)
 Net (income) loss in non-Apollo Operating Group entities
 
(31,150
)
 
(11,774
)
 
948

Total adjustments
 
105,100

 
85,461

 
55,469

Net income after adjustments
 
678,011

 
2,002,502

 
1,051,783

Approximate weighted average ownership percentage of Apollo Operating Group
 
57.8
%
 
61.0
%
 
64.9
%
Net income attributable to Non-Controlling Interests in Apollo Operating Group
 
$
404,682

 
$
1,257,650

 
$
685,357

 
(1)
Reflects all taxes recorded in our 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.
(2)
Reflects NYC UBT and foreign taxes that are attributable to the Apollo Operating Group and its subsidiaries related to its operations in the U.S. 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.




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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. Management divides its operations into three reportable segments: private equity, credit and real estate. These segments were established based on the nature of investment activities in each underlying fund, including the specific type of investment made, the frequency of trading, and the level of control over the investment. Segment results do not consider consolidation of funds, equity-based compensation expense comprised of AOG Units, income taxes, amortization of intangibles associated with the 2007 Reorganization and acquisitions, Non-Controlling Interests with the exception of allocations of income to certain individuals and non-cash revenue and expense related to equity awards granted by unconsolidated affiliates to employees of the Company.
In addition to providing the financial results of our three reportable business segments, we further evaluate our individual reportable segments based on what we refer to as our management and incentive businesses. Our management business is generally characterized by the predictability of its financial metrics, including revenues and expenses. The management business includes management fee revenues, advisory and transaction fee revenues, carried interest income from one of our opportunistic credit funds and expenses, each of which we believe are more stable in nature. The financial performance of our incentive business is partially dependent upon quarterly mark-to-market unrealized valuations in accordance with U.S. GAAP guidance applicable to fair value measurements. The incentive business includes carried interest income, income from equity method investments and profit sharing expense that are associated with our general partner interests in the Apollo funds, which are generally less predictable and more volatile in nature.
Our financial results vary, since carried interest, which generally constitutes a large portion of the income from the funds that we manage, as well as 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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Private Equity
The following tables set forth our segment statement of operations information and our supplemental performance measure, ENI, for our private equity segment, further broken out by our "management" and "incentive" businesses, for the years ended December 31, 2014, 2013 and 2012, respectively.
 
For the Year Ended December 31, 2014
 
For the Year Ended December 31, 2013
 
For the Year Ended December 31, 2012
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
 
(in thousands)
Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
58,241

 
$

 
$
58,241

 
$
78,371

 
$

 
$
78,371

 
$
121,744

 
$

 
$
121,744

Management fees from affiliates
315,069

 

 
315,069

 
284,833

 

 
284,833

 
277,048

 

 
277,048

Carried interest income (loss) from affiliates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses)(1)

 
(1,196,093
)
 
(1,196,093
)
 

 
454,722

 
454,722

 

 
854,919

 
854,919

Realized gains

 
1,428,076

 
1,428,076

 

 
2,062,525

 
2,062,525

 

 
812,616

 
812,616

Total Revenues
373,310

 
231,983

 
605,293

 
363,204

 
2,517,247

 
2,880,451

 
398,792

 
1,667,535

 
2,066,327

Expenses:
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and Benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
49,526

 

 
49,526

 
31,967

 

 
31,967

 
31,213

 

 
31,213

Salary, bonus and benefits
96,689

 

 
96,689

 
109,761

 

 
109,761

 
104,068

 

 
104,068

Profit sharing expense

 
178,373

 
178,373

 

 
1,030,404

 
1,030,404

 

 
726,874

 
726,874

Total compensation and benefits
146,215

 
178,373

 
324,588

 
141,728

 
1,030,404

 
1,172,132

 
135,281

 
726,874

 
862,155

Other expenses
78,735

 

 
78,735

 
112,525

 

 
112,525

 
83,311

 

 
83,311

Total Expenses
224,950

 
178,373

 
403,323

 
254,253

 
1,030,404

 
1,284,657

 
218,592

 
726,874

 
945,466

Other Income:
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Income from equity method investments

 
30,418

 
30,418

 

 
78,811

 
78,811

 

 
74,038

 
74,038

Other income, net
12,976

 
1,617

 
14,593

 
13,006

 
1,695

 
14,701

 
4,653

 

 
4,653

Total Other Income
12,976

 
32,035

 
45,011

 
13,006

 
80,506

 
93,512

 
4,653

 
74,038

 
78,691

Economic Net Income
$
161,336

 
$
85,645

 
$
246,981

 
$
121,957

 
$
1,567,349

 
$
1,689,306

 
$
184,853

 
$
1,014,699

 
$
1,199,552

 
(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a $75.3 million reversal of the entire general partner obligation to return previously distributed carried interest income with respect to Fund VI. The general partner obligation is recognized based upon a hypothetical liquidation of the funds' net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund's investments based on the contractual termination of the fund.




 


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For the Year Ended 
 December 31,
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
Amount
Change
 
Percentage
Change
 
2013
 
2012
 
Amount
Change
 
Percentage
Change
 
 
(dollars in thousands)
 
 
 
(dollars in thousands)
 
 
Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
 
$
58,241

 
$
78,371

 
$
(20,130
)
 
(25.7
)%
 
$
78,371

 
$
121,744

 
$
(43,373
)
 
(35.6
)%
Management fees from affiliates
 
315,069

 
284,833

 
30,236

 
10.6

 
284,833

 
277,048

 
7,785

 
2.8

Carried interest income (loss) from affiliates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses)(1)
 
(1,196,093
)
 
454,722

 
(1,650,815
)
 
NM

 
454,722

 
854,919

 
(400,197
)
 
(46.8
)
Realized gains
 
1,428,076

 
2,062,525

 
(634,449
)
 
(30.8
)
 
2,062,525

 
812,616

 
1,249,909

 
153.8

Total carried interest income from affiliates
 
231,983

 
2,517,247

 
(2,285,264
)
 
(90.8
)
 
2,517,247

 
1,667,535

 
849,712

 
51.0

Total Revenues
 
605,293

 
2,880,451

 
(2,275,158
)
 
(79.0
)
 
2,880,451

 
2,066,327

 
814,124

 
39.4

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
 
49,526

 
31,967

 
17,559

 
54.9

 
31,967

 
31,213

 
754

 
2.4

Salary, bonus and benefits
 
96,689

 
109,761

 
(13,072
)
 
(11.9
)
 
109,761

 
104,068

 
5,693

 
5.5

Profit sharing expense
 
178,373

 
1,030,404

 
(852,031
)
 
(82.7
)
 
1,030,404

 
726,874

 
303,530

 
41.8

Total compensation and benefits expense
 
324,588

 
1,172,132

 
(847,544
)
 
(72.3
)
 
1,172,132

 
862,155

 
309,977

 
36.0

Other expenses
 
78,735

 
112,525

 
(33,790
)
 
(30.0
)
 
112,525

 
83,311

 
29,214

 
35.1

Total Expenses
 
403,323

 
1,284,657

 
(881,334
)
 
(68.6
)
 
1,284,657

 
945,466

 
339,191

 
35.9

Other Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from equity method investments
 
30,418

 
78,811

 
(48,393
)
 
(61.4
)
 
78,811

 
74,038

 
4,773

 
6.4

Other income, net
 
14,593

 
14,701

 
(108
)
 
(0.7
)
 
14,701

 
4,653

 
10,048

 
215.9

Total Other Income
 
45,011

 
93,512

 
(48,501
)
 
(51.9
)
 
93,512

 
78,691

 
14,821

 
18.8

Economic Net Income
 
$
246,981

 
$
1,689,306

 
$
(1,442,325
)
 
(85.4
)%
 
$
1,689,306

 
$
1,199,552

 
$
489,754

 
40.8
 %

(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a $75.3 million reversal of the entire general partner obligation to return previously distributed carried interest income with respect to Fund VI. The general partner obligation is recognized based upon a hypothetical liquidation of the funds' net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund's investments based on the contractual termination of the fund.

Revenues
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Advisory and transaction fees from affiliates, net, decreased by $20.1 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to lower net advisory fees driven by the realization of underlying investments, termination fees and waived fees related to debt investment vehicles, EP Energy, Taminco, Realogy and Caesars Entertainment that occurred during the year ended December 31, 2013 and lower net transaction fees for the year ended December 31, 2014 compared to 2013.
Management fees from affiliates increased by $30.2 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This increase was primarily attributable to increased management fees earned from Fund VIII in the amount of $126.4 million during the year ended December 31, 2014. This increase was partially offset by decreased management fees earned from Fund VII of $92.9 million as a result of a change in the management fee rate and basis upon which management fees are earned from capital commitments to invested capital, due to the fund coming to the end of the fund's investment period.

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Carried interest income from affiliates decreased by $2.3 billion for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to decreases in carried interest income earned from Fund VI and Fund VII of $1.3 billion and $850.1 million, respectively. Realized carried interest income decreased $634.4 million, driven by decreased realized carried interest with respect to Fund VI and Fund VII of $358.9 million and $261.0 million, respectively, primarily due to decreased dispositions of underlying portfolio investments held during the year as compared to the prior year. Unrealized carried interest income decreased by $1.7 billion during the year ended December 31, 2014, driven by decreases in unrealized carried interest income with respect to Fund VI and Fund VII of $941.4 million and $589.2 million, respectively. These decreases were a result of decreases in the fair value of portfolio investments of Fund VI and Find VII and reversals of unrealized carried interest income to realized carried interest income.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
    
Advisory and transaction fees from affiliates, net, decreased by $43.4 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a decrease of $35.4 million in net transaction and termination fees driven by the portfolio company investments of Fund VI, AAA Investments and Fund VII. The net transaction and termination fees related to Fund VI and AAA Investments decreased by $17.9 million and $8.8 million, respectively, due to termination fees earned in 2012 from Realogy, Rexnord and Smart & Final, compared to zero termination fees earned during the year ended December 31, 2013. For the years ended December 31, 2013 and 2012, the net transaction and termination fees related to Fund VII were $42.2 million and $50.9 million, respectively, a decrease of $8.7 million. For 2012, the fees related to Fund VII were driven by net transaction fees earned from EP Energy LLC and Great Wolf Resorts of $42.4 million, whereas during 2013 the fees were driven by net transaction fees earned from McGraw-Hill Education of $14.8 million and net termination fees earned from Taminco and Constellium (formerly Alcan) of $20.6 million. Net advisory fees also decreased by $8.0 million mainly due to decreased monitoring fees earned from portfolio company investments of Fund VI and AAA Investments, which include Berry Plastics, CEVA Logistics, Momentive Performance Materials and Caesars Entertainment. Included in advisory and transaction fees from affiliates is $19.1 million and $0.5 million recognized as a reversal of the Management Fee Offset for Fund V and Fund IV, respectively, and $18.5 million of additional Management Fee Offsets related to director fees, net of director fee income.
Management fees from affiliates increased by $7.8 million for year ended December 31, 2013 as compared to the year ended December 31, 2012. This increase was primarily attributable to Fund VIII, which launched in August 2013 and generated $65.0 million in management fees during the year ended December 31, 2013. The increase was also attributed to the Contributed Partnerships, which began earning fees in the fourth quarter 2012 as a result of the AAA Transaction and generated $10.3 million of management fees during the year ended December 31, 2013. See notes 4 and 17 to our consolidated financial statements for a complete summary of the AAA Transaction and fee arrangements related to management fees earned from the Contributed Partnerships. This increase was partially offset by decreased management fees earned from Fund VII of $42.4 million as a result of a change in the management fee rate and basis from capital commitments to invested capital due to the end of its investment period. Management fees earned from Fund VI also decreased by $8.3 million due to lower invested capital during the year ended December 31, 2013 as compared to the year ended December 31, 2012.
Carried interest income from affiliates increased by $849.7 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to increases in carried interest income earned from Fund VI of $548.1 million, Fund VII of $242.4 million and AAA Co-Invest VI of $115.7 million, partially offset by a decrease of $34.8 million from Fund V. Included in carried interest income from affiliates was an increase of $1,249.9 million in realized gains mainly driven by increased dispositions of underlying portfolio investments held during the year by Fund VII, Fund VI, Fund V and AAA Co-Invest VI of $691.3 million, $466.3 million, $65.7 million and $37.9 million, respectively. The remaining change was attributable to a decrease in net unrealized carried interest income of $400.2 million mainly driven by Fund VII and Fund V of $449.0 million and $100.5 million, respectively, resulting from the reversal of unrealized carried interest income to realized carried interest income due to the realization of underlying portfolio investments held during the year. Partly offsetting the decrease in net unrealized carried interest income were increases by Fund VI and AAA Co-Invest VI of $81.7 million and $77.7 million, respectively, due to increases in the fair values of the underlying portfolio investments held during the year.
Expenses
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Compensation and benefits expense decreased by $847.5 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to a decrease in profit sharing expense of $852.0 million, due to lower carried interest income during the year ended December 31, 2014 as compared to the year ended December 31, 2013. In any year, the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating

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carried interest in the period. During the year ended December 31, 2014, the fair value of Fund VII’s underlying fund investments appreciated while Fund VI's underlying fund investments depreciated, which contributed to an increased profit sharing percentage compared to the year ended December 31, 2013. This decrease was partially offset by increased equity-based compensation of $17.6 million, driven by non-cash expense related to equity-based compensation in connection with the departure of an executive officer during the year ended December 31, 2014. Included in profit sharing expense is $55.5 million and $46.0 million related to the Incentive Pool for the years ended December 31, 2014 and December 31, 2013, respectively.
Other expenses decreased by $33.8 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to decreased organizational expenses and legal and consulting fees, as well as a reduction in placement fees relating to Fund VIII.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Compensation and benefits expense increased by $310.0 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily a result of an increase of $303.5 million in profit sharing expense driven by an increase in carried interest income earned by certain of our private equity funds during the year. Also, salary, bonus and benefits and equity-based compensation increased by $5.7 million and $0.8 million, respectively, due to an increase in headcount during the year ended December 31, 2013 as compared to the year ended December 31, 2012. Included in profit sharing expense is $46.0 million and $50.3 million related to the Incentive Pool for the years ended December 31, 2013 and 2012, respectively.
Other expenses increased by $29.2 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to increased placement fees and organizational expenses incurred in connection with the capital raising activities for Fund VIII. Professional fees also increased due to higher external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31, 2013 as compared to the year ended December 31, 2012.
Other Income    
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Income from equity method investments decreased by $48.4 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily driven by lower appreciation in the net asset value, primarily from Apollo's ownership interests in Fund VI and Fund VII, in the amounts of $4.6 million and $49.3 million, respectively, for the year ended December 31, 2014 as compared to the year ended December 31, 2013, which was offset by an increase in the fair value of Apollo's ownership interest in AION in the amount of $5.8 million.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Income from equity method investments increased by $4.8 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was driven by increases in the fair values of our private equity investments held, primarily from Apollo's ownership interest in Fund VII, Vantium A/B, C and D and AAA Investments which in total contributed to increased income from equity method investments of $5.6 million during the year. The increase in income from equity method investments was partially offset by a decrease of $1.2 million from the equity investment held in AION for the year ended December 31, 2013 as compared to the year ended December 31, 2012.
Other income, net increased by $10.0 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to gains resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries and reduction of the tax receivable agreement liability due to a change in estimated tax rates. See note 17 to our consolidated financial statements for more information on the tax receivable agreement.
    

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Credit
The following tables set forth segment statement of operations information and ENI for our credit segment, further broken out by our "management" and "incentive" businesses, for the years ended December 31, 2014, 2013 and 2012, respectively.
 
For the Year Ended December 31, 2014
 
For the Year Ended December 31, 2013
 
For the Year Ended December 31, 2012
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
 
(in thousands)
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
255,186

 
$

 
$
255,186

 
$
114,643

 
$

 
$
114,643

 
$
27,551

 
$

 
$
27,551

Management fees from affiliates
538,742

 

 
538,742

 
392,433

 

 
392,433

 
299,667

 

 
299,667

Carried interest income from affiliates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Unrealized gains (losses) (1)

 
(156,644
)
 
(156,644
)
 

 
(56,568
)
 
(56,568
)
 

 
301,077

 
301,077

Realized gains
41,199

 
281,034

 
322,233

 
36,922

 
393,338

 
430,260

 
37,842

 
179,933

 
217,775

Total Revenues
835,127

 
124,390

 
959,517

 
543,998

 
336,770

 
880,768

 
365,060

 
481,010

 
846,070

Expenses:
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and Benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
48,737

 

 
48,737

 
24,167

 

 
24,167

 
26,988

 

 
26,988

Salary, bonus and benefits
210,546

 

 
210,546

 
153,056

 

 
153,056

 
139,895

 

 
139,895

Profit sharing expense

 
95,070

 
95,070

 

 
142,728

 
142,728

 

 
138,444

 
138,444

Total compensation and benefits
259,283

 
95,070

 
354,353

 
177,223

 
142,728

 
319,951

 
166,883

 
138,444

 
305,327

Other expenses
163,082

 

 
163,082

 
162,064

 

 
162,064

 
149,051

 

 
149,051

Total Expenses
422,365

 
95,070

 
517,435

 
339,287

 
142,728

 
482,015

 
315,934

 
138,444

 
454,378

Other Income:
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Net gains (losses) from investment activities

 
9,062

 
9,062

 

 
(12,593
)
 
(12,593
)
 

 
(1,142
)
 
(1,142
)
Income from equity method investments

 
18,812

 
18,812

 

 
30,678

 
30,678

 

 
46,100

 
46,100

Other income, net
28,538

 
22,674

 
51,212

 
28,540

 
8,508

 
37,048

 
15,008

 

 
15,008

Total Other Income
28,538

 
50,548

 
79,086

 
28,540

 
26,593

 
55,133

 
15,008

 
44,958

 
59,966

Non-Controlling Interests
(12,688
)
 

 
(12,688
)
 
(13,985
)
 

 
(13,985
)
 
(8,730
)
 

 
(8,730
)
Economic Net Income
$
428,612

 
$
79,868

 
$
508,480

 
$
219,266

 
$
220,635

 
$
439,901

 
$
55,404

 
$
387,524

 
$
442,928


(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2014 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $3.4 million in aggregate with respect to two of our credit funds. Included in unrealized carried interest income from affiliates for the year ended December 31, 2013 was a reversal of $19.3 million and $0.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to SOMA and APC, respectively. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income with respect to SOMA and APC of $1.2 million and $0.3 million, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the funds' net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement of the fund.



 


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For the Year Ended 
 December 31,
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
Amount
Change
 
Percentage
Change
 
2013
 
2012
 
Amount
Change
 
Percentage
Change
 
 
(dollars in thousands)
 
 
 
(dollars in thousands)
 
 
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
 
$
255,186

 
$
114,643

 
$
140,543

 
122.6
 %
 
$
114,643

 
$
27,551

 
$
87,092

 
316.1
 %
Management fees from affiliates
 
538,742

 
392,433

 
146,309

 
37.3

 
392,433

 
299,667

 
92,766

 
31.0

Carried interest income (loss) from affiliates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses) (1)
 
(156,644
)
 
(56,568
)
 
(100,076
)
 
176.9

 
(56,568
)
 
301,077

 
(357,645
)
 
NM

Realized gains
 
322,233

 
430,260

 
(108,027
)
 
(25.1
)
 
430,260

 
217,775

 
212,485

 
97.6

Total carried interest income from affiliates
 
165,589

 
373,692

 
(208,103
)
 
(55.7
)
 
373,692

 
518,852

 
(145,160
)
 
(28.0
)
Total Revenues
 
959,517

 
880,768

 
78,749

 
8.9

 
880,768

 
846,070

 
34,698

 
4.1

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
 
48,737

 
24,167

 
24,570

 
101.7

 
24,167

 
26,988

 
(2,821
)
 
(10.5
)
Salary, bonus and benefits
 
210,546

 
153,056

 
57,490

 
37.6

 
153,056

 
139,895

 
13,161

 
9.4

Profit sharing expense
 
95,070

 
142,728

 
(47,658
)
 
(33.4
)
 
142,728

 
138,444

 
4,284

 
3.1

Total compensation and benefits
 
354,353

 
319,951

 
34,402

 
10.8

 
319,951

 
305,327

 
14,624

 
4.8

Other expenses
 
163,082

 
162,064

 
1,018

 
0.6

 
162,064

 
149,051

 
13,013

 
8.7

Total Expenses
 
517,435

 
482,015

 
35,420

 
7.3

 
482,015

 
454,378

 
27,637

 
6.1

Other Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net gains (losses) from investment activities
 
9,062

 
(12,593
)
 
21,655

 
NM

 
(12,593
)
 
(1,142
)
 
(11,451
)
 
NM

Income from equity method investments
 
18,812

 
30,678

 
(11,866
)
 
(38.7
)
 
30,678

 
46,100

 
(15,422
)
 
(33.5
)
Other income, net
 
51,212

 
37,048

 
14,164

 
38.2

 
37,048

 
15,008

 
22,040

 
146.9

Total Other Income
 
79,086

 
55,133

 
23,953

 
43.4

 
55,133

 
59,966

 
(4,833
)
 
(8.1
)
Non-Controlling Interests
 
(12,688
)
 
(13,985
)
 
1,297

 
(9.3
)
 
(13,985
)
 
(8,730
)
 
(5,255
)
 
60.2

Economic Net Income
 
$
508,480

 
$
439,901

 
$
68,579

 
15.6
 %
 
$
439,901

 
$
442,928

 
$
(3,027
)
 
(0.7
)%

(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2014 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $3.4 million in aggregate with respect to two of our credit funds. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2013 was a reversal of $19.3 million and $0.3 million of the entire general partner obligation to return previously distributed carried interest income to SOMA and APC, respectively. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income with respect to SOMA and APC of $1.2 million and $0.3 million, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the funds' net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement of the fund.
Revenues
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Advisory and transaction fees from affiliates, net, increased by $140.5 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013. The increase was primarily driven by an increase in monitoring fees from Athene of $118.5 million as a result of Athene's acquisition of Aviva USA and an increase in net transaction fees with respect to EPF II and FCI II during the year ended December 31, 2014 compared to the same period in 2013.
Management fees from affiliates increased by $146.3 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to increases in management fees earned from Athene (as a result of Athene's acquisition of Aviva USA) and AINV of $126.1 million and $8.4 million, respectively, during the year ended December 31, 2014 compared to the same period in 2013.

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Carried interest income from affiliates decreased by $208.1 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to decreased carried interest income related to COF I of $46.2 million, certain sub-advisory arrangements of $42.3 million, SOMA of $38.8 million, EPF I of $25.7 million, certain CLOs of $20.6 million, Apollo Offshore Credit Fund of $18.0 million, ACLF of $12.6 million, COF II of $11.4 million and Apollo Investment Europe II, L.P. ("AIE II") of $11.3 million during the year ended December 31, 2014 compared to the same period in 2013. These decreases were partially offset by increased carried interest income related to EPF II of $59.4 million. Included in carried interest income from affiliates was realized carried interest income which decreased $108.0 million primarily resulting from lower realizations from COF I of $127.4 million, COF II of $29.2 million, SOMA of $15.5 million, AIE II of $14.1 million and Apollo Offshore Credit Fund of $11.6 million, partially offset by increased realized carried interest income from EPF I of $100.1 million. Also included in carried interest income was unrealized carried interest income which decreased $100.1 million during the year ended December 31, 2014 compared to the same period in 2013, mainly driven by decreases with respect to EPF I of $125.8 million, certain sub-advisory arrangements of $39.1 million, certain CLOs of $34.7 million, SOMA of $23.2 million, partially offset by a decrease in unrealized carried interest losses with respect to COF I of $81.2 million and an increase in unrealized carried interest income with respect to EPF II of $59.4 million.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Advisory and transaction fees from affiliates, net, increased by $87.1 million, during the year ended December 31, 2013 as compared to the year ended December 31, 2012. Net advisory fees earned were $108.5 million and $21.5 million during the years ended December 31, 2013 and 2012, respectively, which was mainly driven by an increase in monitoring fees based on Athene capital and surplus fees of $91.1 million. Net transaction fees earned were $6.1 million and $6.0 million during the years ended December 31, 2013 and 2012, respectively. Advisory and transaction fees, including directors’ fees, are reported net of Management Fee Offsets which totaled $28.0 million and $26.6 million for the years ended December 31, 2013 and 2012, respectively, a decrease of $1.4 million.
Management fees from affiliates increased by $92.8 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to increases in management fees earned from Athene, EPF II, certain CLOs, and ACF of $72.5 million, $14.0 million, $10.4 million, and $8.7 million, respectively during the year ended December 31, 2013 compared to the same period in 2012. The increase in management fees was partially offset by a $7.8 million decrease in fees generated from COF II and a $7.7 million decrease in fees generated from SVF, compared to the same period in 2012. The remaining change was attributable to other credit funds, collectively, which contributed to an increase of $2.7 million in management fees during the year ended December 31, 2013 compared to the same period in 2012.
Carried interest income from affiliates decreased by $145.2 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to lower carried interest income related to COF I of $100.1 million, COF II of $48.3 million, certain CLOs of $44.5 million, offset by higher carried interest income related to SOMA of $40.0 million and EPF I of $34.5 million for the year ended December 31, 2013 compared to 2012. Included in carried interest income from affiliates was realized carried interest income which increased by $212.5 million, primarily resulting from increased dividends, interest income, and dispositions of portfolio investments held by COF I of $79.0 million, EPF I of $33.0 million, certain CLOs of $29.4 million, SOMA of $17.4 million, and CLF of $17.1 million as compared to 2012. The remaining change was attributable to other credit funds, which in aggregate contributed to an increase of $36.6 million in realized carried interest income. The increase in realized carried interest income was offset by a $357.6 million decrease in net unrealized carried interest loss. This offset primarily resulted from reversals of unrealized carried interest income to realized carried interest income due to the realization of underlying portfolio investments held during the period by COF I, certain CLOs, CLF, and COF II.
Expenses    
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Compensation and benefits expense increased by $34.4 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily due to an increase in salary, bonus and benefits of $57.5 million due to increased headcount and an increase in equity-based compensation of $24.6 million. The increase in equity-based compensation was driven by non-cash expense of $23.2 million related to equity-based compensation in connection with the departure of an executive officer during the year ended December 31, 2014 as compared to the same period in 2013. These increases were offset by a decrease in profit sharing expense of $47.7 million during the year ended December 31, 2014 as compared to the same period in 2013, primarily attributable to a corresponding decrease in carried interest income. Within our credit segment, the Company is seeking to further align total compensation for investment professionals with the profitability of the credit business as a whole rather than on a fund-by-fund basis.  As a result, the Company incurred approximately $22.0 million of additional profit sharing expense at the inception of the compensation plan during 2014. Additionally, included within profit sharing expense is

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the Incentive Pool, which resulted in additional profit sharing expense of $6.3 million and $16.3 million for the year ended December 31, 2014 and 2013, respectively.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Compensation and benefits expense increased by $14.6 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The change was primarily due to an increase in salary, bonus, and benefits of $13.2 million during the period, due to increased headcount, and an increase in profit-sharing expense of $4.3 million during the year ended December 31, 2013 as compared to the same period in 2012. Included in the profit sharing expense is the Incentive Pool, with expenses of $16.3 million and $11.8 million for the years ended December 31, 2013 and 2012, respectively.
Other expenses increased by $13.0 million during the year ended December 31, 2013, as compared to the year ended December 31, 2012. The change was driven by a $7.1 million increase in placement fees mainly due to AIF, and a $5.0 million increase in professional fees attributable to higher legal and IT consulting fees during the year ended December 31, 2013 as compared to the same period in 2012.
Other Income    
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Net gains from investment activities of $9.1 million increased by $21.7 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013 as a result of appreciation in the Company's investment in HFA during the year ended December 31, 2014 prior to the sale of the investment in HFA (see note 4 to the consolidated financial statements.)
Income from equity method investments decreased by $11.9 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was driven by decreases in the fair values of investments held by certain of our credit funds, primarily COF I, EPF I, AIE II, COF III and Apollo Palmetto Strategic Partnership, L.P. which resulted in decreases in income from equity method investments of $6.1 million, $2.2 million, $1.8 million, $1.6 million and $1.1 million, respectively, during the year ended December 31, 2014 as compared to the same period in 2013.
Other income increased by $14.2 million during the year ended December 31, 2014, as compared to the year ended December 31, 2013, mainly due to a gain from the reduction of the tax receivable agreement liability during the year ended December 31, 2014 resulting from changes in projected income estimates and estimated tax rates (see note 17 to our consolidated financial statements) and a gain on extinguishment of a portion of the contingent consideration obligation related to the acquisition of Stone Tower (see note 18 to our consolidated financial statements).
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Net losses from investment activities increased by $11.5 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was related to an increase in unrealized loss resulting from the change in the fair value of the investment in HFA as of December 31, 2013 as compared to the same period in 2012.
Income from equity method investments decreased by $15.4 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was driven by decreases in the fair values of investments held by certain of our credit funds, primarily COF I and COF II, which resulted in decreases in income from equity method investments of $13.3 million, and $4.0 million, respectively, during the year ended December 31, 2013 as compared to the same period in 2012.
Other income increased by $22.0 million during the year ended December 31, 2013, as compared to December 31, 2012, primarily due to a reduction of the tax receivable agreement liability due to a change in estimated tax rates and a $8.5 million unrealized gain on Athene-related derivative contracts (see note 17 to our consolidated financial statements).


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Real Estate
The following tables set forth our segment statement of operations information and ENI for our real estate segment, further broken out by our "management" and "incentive" businesses, for the years ended December 31, 2014, 2013 and 2012, respectively.
 
 
For the Year Ended December 31, 2014
 
For the Year Ended December 31, 2013
 
For the Year Ended December 31, 2012
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
 
(in thousands)
Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
2,655

 
$

 
$
2,655

 
$
3,548

 
$

 
$
3,548

 
$
749

 
$

 
$
749

Management fees from affiliates
47,213

 

 
47,213

 
53,436

 

 
53,436

 
46,326

 
 
 
46,326

Carried interest income from affiliates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains

 
4,951

 
4,951

 

 
4,681

 
4,681

 

 
10,401

 
10,401

Realized gains

 
3,998

 
3,998

 

 
541

 
541

 

 
4,673

 
4,673

Total Revenues
49,868

 
8,949

 
58,817

 
56,984

 
5,222

 
62,206

 
47,075

 
15,074

 
62,149

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and Benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity-based compensation
8,849

 

 
8,849

 
10,207

 

 
10,207

 
10,741

 

 
10,741

Salary, bonus and benefits
32,611

 

 
32,611

 
31,936

 

 
31,936

 
30,611

 

 
30,611

Profit sharing expense

 
2,747

 
2,747

 

 
123

 
123

 

 
6,815

 
6,815

Total compensation and benefits
41,460

 
2,747

 
44,207

 
42,143

 
123

 
42,266

 
41,352

 
6,815

 
48,167

Other expenses
23,784

 

 
23,784

 
27,620

 

 
27,620

 
24,270

 

 
24,270

Total Expenses
65,244

 
2,747

 
67,991

 
69,763

 
123

 
69,886

 
65,622

 
6,815

 
72,437

Other Income:
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Income from equity method investments

 
5,675

 
5,675

 

 
3,722

 
3,722

 

 
982

 
982

Other income, net
3,584

 

 
3,584

 
2,402

 

 
2,402

 
1,271

 

 
1,271

Total Other Income
3,584

 
5,675

 
9,259

 
2,402

 
3,722

 
6,124

 
1,271

 
982

 
2,253

Economic Net Income (Loss)
$
(11,792
)
 
$
11,877

 
$
85

 
$
(10,377
)
 
$
8,821

 
$
(1,556
)
 
$
(17,276
)
 
$
9,241

 
$
(8,035
)




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For the Year Ended 
 December 31,
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
Amount
Change
 
Percentage
Change
 
2013
 
2012
 
Amount
Change
 
Percentage
Change
 
 
(dollars in thousands)
 
 
 
(dollars in thousands)
 
 
Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
 
$
2,655

 
$
3,548

 
$
(893
)
 
(25.2
)%
 
$
3,548

 
$
749

 
$
2,799

 
373.7
 %
Management fees from affiliates
 
47,213

 
53,436

 
(6,223
)
 
(11.6
)
 
53,436

 
46,326

 
7,110

 
15.3

Carried interest income from affiliates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains
 
4,951

 
4,681

 
270

 
5.8

 
4,681

 
10,401

 
(5,720
)
 
(55.0
)
Realized gains
 
3,998

 
541

 
3,457

 
NM

 
541

 
4,673

 
(4,132
)
 
(88.4
)
Total carried interest income from affiliates
 
8,949

 
5,222

 
3,727

 
71.4

 
5,222

 
15,074

 
(9,852
)
 
(65.4
)
Total Revenues
 
58,817

 
62,206

 
(3,389
)
 
(5.4
)
 
62,206

 
62,149

 
57

 
0.1

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and Benefits:
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
Equity-based compensation
 
8,849

 
10,207

 
(1,358
)
 
(13.3
)
 
10,207

 
10,741

 
(534
)
 
(5.0
)
Salary, bonus and benefits
 
32,611

 
31,936

 
675

 
2.1

 
31,936

 
30,611

 
1,325

 
4.3

Profit sharing expense
 
2,747

 
123

 
2,624

 
NM

 
123

 
6,815

 
(6,692
)
 
(98.2
)
Total compensation and benefits
 
44,207

 
42,266

 
1,941

 
4.6

 
42,266

 
48,167

 
(5,901
)
 
(12.3
)
Other expenses
 
23,784

 
27,620

 
(3,836
)
 
(13.9
)
 
27,620

 
24,270

 
3,350

 
13.8

Total Expenses
 
67,991

 
69,886

 
(1,895
)
 
(2.7
)
 
69,886

 
72,437

 
(2,551
)
 
(3.5
)
Other Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from equity method investments
 
5,675

 
3,722

 
1,953

 
52.5

 
3,722

 
982

 
2,740

 
279.0

Other income, net
 
3,584

 
2,402

 
1,182

 
49.2

 
2,402

 
1,271

 
1,131

 
89.0

Total Other Income
 
9,259

 
6,124

 
3,135

 
51.2

 
6,124

 
2,253

 
3,871

 
171.8

Economic Net Income (Loss)
 
$
85

 
$
(1,556
)
 
$
1,641

 
NM

 
$
(1,556
)
 
$
(8,035
)
 
$
6,479

 
(80.6
)%
Revenues    
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Advisory and transaction fees from affiliates, net, decreased by $0.9 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was attributable to a decrease in capital raised and invested and the realization of underlying investments for which transaction fees and exit fees, respectively, were earned during the year ended December 31, 2013.
Management fees decreased by $6.2 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. The decrease in management fees was primarily due to decreased management fees from the CPI Funds for the year ended December 31, 2014 as compared to the year ended December 31, 2013.

Carried interest income from affiliates increased by $3.7 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to an increase in carried interest income relating to the AGRE U.S. Real Estate Fund, L.P. in the amount of $2.8 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Advisory and transaction fees from affiliates, net, increased by $2.8 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was attributable to additional capital raised and invested and the realization of underlying investments for which transaction fees and exit fees, respectively, were earned during the year.
Management fees increased by $7.1 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. Of this increase, $2.4 million was due to management fees earned from certain sub-advisory agreements and $1.2 million due to fees earned from 2012 CMBS-I Fund, L.P. and 2012 CMBS-II Fund, L.P., which began generating fees in the

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third quarter of 2012. Additionally, during 2013, ARI invested additional capital and AGRE Debt Fund I, L.P. raised additional fee generating capital which resulted in higher management fees earned during the year of $5.6 million. The increase in management fees was partially offset by a decrease in management fees earned from the CPI Funds of $2.4 million as a result of the realization of underlying investments during the year ended December 31, 2013. Further offsetting the increase was a decrease of $0.5 million in management fees from AGRE U.S. Real Estate Fund, L.P. which generated higher management fees in 2012 due to new commitments to the fund for which the management fees were calculated retrospectively back to the initial closing date of the fund.

Carried interest income from affiliates decreased by $9.9 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a $5.7 million decrease in net unrealized carried interest income driven by a decrease in the fair values of the underlying portfolio investments for certain of the CPI Funds, partially offset by increases in the fair values of the underlying investments of AGRE U.S. Real Estate Fund, L.P. Also driving the change was a decrease in realized carried interest of $4.1 million from the CPI Funds during the year ended December 31, 2013 as compared to the year ended December 31, 2012.
Expenses
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Compensation and benefits increased by $1.9 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was primarily attributable to an increase of $2.6 million in profit sharing expense, driven by the increase in carried interest income earned from our real estate funds, and a decrease in equity-based compensation of $1.4 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013.
Other expenses decreased by $3.8 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013, primarily attributable to decreased legal fees and organizational expenses, offset by higher consulting fees and technology expenses.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Compensation and benefits decreased by $5.9 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to a decrease in profit sharing expense of $6.7 million driven by the decreased carried interest income earned from our real estate funds during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This decrease was partially offset by an increase of $1.3 million in salary, bonus and benefits mainly driven by an increase in headcount during the year ended December 31, 2013 as compared to the year ended December 31, 2012.

Other expenses increased by $3.4 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to increased professional fees of $3.4 million due to higher external accounting, tax, audit, legal and consulting fees incurred during the year ended December 31, 2013 as compared to the year ended December 31, 2012. Also, general and administrative expenses increased by $1.8 million due to higher fund-related organizational expenses incurred during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This increase was partially offset by a decrease in interest expense of $1.5 million due to the expiring of interest rate swaps and due to a lower margin rate on the 2007 AMH Credit Agreement during the year ended December 31, 2013 as compared to the year ended December 31, 2012.
Other Income
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Other income increased by $3.1 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This change was driven by an increase in income from equity method investments of $2.0 million due to an increase in the fair values of our real estate investments held, primarily from Apollo's ownership interest in ARI, and an increase in other income, net primarily due to a gain resulting from the reduction of the tax receivable agreement liability during the year ended December 31, 2014 as a result of a change in projected income estimates and estimated tax rates (see note 17 to our consolidated financial statements).

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Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Income from equity method investments increased by $2.7 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily driven by an increase of $2.2 million in income from equity method investments in AGRE U.S. Real Estate Fund, L.P.
Other income, net increased by $1.1 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This change was primarily attributable to gains resulting from fluctuations in exchange rates of foreign denominated assets and liabilities of subsidiaries and reduction of the tax receivable agreement liability due to a change in estimated tax rates. See note 17 in the consolidated financial statements for additional information on the tax receivable agreement.


Summary Combined Segment Results for Management Business and Incentive Business
The following tables combine our reportable segments’ statements of operations information and supplemental performance measure, ENI, for our management and incentive businesses for the years ended December 31, 2014, 2013 and 2012, respectively. ENI represents segment income (loss), excluding the impact of (i) non-cash charges related to RSUs granted in connection with the 2007 private placement and amortization of AOG Units, (ii) income tax expense, (iii) amortization of intangibles associated with the 2007 Reorganization as well as acquisitions (iv) Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our credit management companies and (v) non-cash revenue and expense related to equity awards granted by unconsolidated affiliates to employees of the Company. In addition, segment data excludes the assets, liabilities and operating results of the funds and VIEs that are included in the consolidated financial statements. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds and consolidated VIEs that are included in the consolidated financial statements. ENI is not a U.S. GAAP measure.

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In addition to providing the financial results of our three reportable business segments, we evaluate our reportable segments based on what we refer to as our management and incentive businesses. Our management business is generally characterized by the predictability of its financial metrics, including revenues and expenses. This business includes management fee revenues, advisory and transaction fee revenues, carried interest income from one of our opportunistic credit funds and expenses, each of which we believe are more stable in nature.
 
 
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
2012
 
 
(in thousands)
Management Business
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
 
$
316,082

 
$
196,562

 
$
150,044

Management fees from affiliates
 
901,024

 
730,702

 
623,041

Carried interest income from affiliates
 
41,199

 
36,922

 
37,842

Total Revenues
 
1,258,305

 
964,186

 
810,927

Expenses:
 
 
 
 
 
 
Equity-based compensation
 
107,112

 
66,341

 
68,942

Salary, bonus and benefits
 
339,846

 
294,753

 
274,574

Interest expense
 
22,394

 
29,260

 
37,116

Professional fees(1)
 
80,607

 
82,448

 
63,250

General, administrative and other(2)
 
96,485

 
97,085

 
86,550

Placement fees
 
15,422

 
42,424

 
22,271

Occupancy
 
40,511

 
39,946

 
37,218

Depreciation and amortization
 
10,182

 
11,046

 
10,227

Total Expenses
 
712,559

 
663,303

 
600,148

Other Income:
 
 
 
 
 
 
Interest income
 
9,194

 
10,763

 
8,149

Other income, net
 
35,904

 
33,185

 
12,783

Total Other Income
 
45,098

 
43,948

 
20,932

Non-Controlling Interests
 
(12,688
)
 
(13,985
)
 
(8,730
)
Economic Net Income
 
$
578,156

 
$
330,846

 
$
222,981


(1)
Excludes professional fees related to the consolidated funds.
(2)
Excludes general and administrative expenses and interest income related to the consolidated funds.

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The financial performance of our incentive business, which is dependent upon quarterly mark-to-market unrealized valuations in accordance with U.S. GAAP guidance applicable to fair value measurements, includes carried interest income, income from equity method investments, other income, net and profit sharing expenses that are associated with our general partner interests in the Apollo funds, which are generally less predictable and more volatile in nature.
 
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
2012
 
 
(in thousands)
Incentive Business
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
Carried interest income (loss) from affiliates:
 
 
 
 
 
 
Unrealized gains (losses)(1)
 
$
(1,347,786
)
 
$
402,835

 
$
1,166,397

  Realized gains
 
1,713,108

 
2,456,404

 
997,222

Total Revenues
 
365,322

 
2,859,239

 
2,163,619

Expenses:
 
 
 
 
 
 
Compensation and Benefits:
 
 
 
 
 
 
Profit sharing expense:
 
 
 
 
 
 
Unrealized profit sharing expense(2)
 
(506,026
)
 
195,298

 
426,098

Realized profit sharing expense
 
782,216

 
977,957

 
446,035

Total Profit Sharing Expense
 
276,190

 
1,173,255

 
872,133

Other Income:
 
 
 
 
 
 
Other income, net
 
24,291

 
10,203

 

Net gains (losses) from investment activities(3)
 
9,062

 
(12,593
)
 
(1,142
)
  Income from equity method investments
 
54,905

 
113,211

 
121,120

Total Other Income
 
88,258

 
110,821

 
119,978

Economic Net Income
 
$
177,390

 
$
1,796,805

 
$
1,411,464

 
(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2014 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $3.4 million in aggregate with respect to two of our credit funds. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2013 was a reversal of $19.3 million and $0.3 million of the entire general partner obligation to return previously distributed carried interest income to SOMA and APC, respectively. Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2012 was a reversal of $75.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to Fund VI and reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $1.2 million and $0.3 million with respect to SOMA and APC, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the funds' net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement of the fund.
(2)
Included in unrealized profit sharing expense for the year ended December 31, 2012 was a reversal of the entire receivable from Contributing Partners and certain employees of $22.1 million due to the reversal of the general partner obligation to return previously distributed carried interest income with respect to Fund VI.
(3)
Excludes investment income and net gains from investment activities related to consolidated funds and the consolidated VIEs.













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Summary
Below is the summary of our total reportable segments, including management and incentive businesses, and a reconciliation of ENI to Net Income Attributable to Apollo Global Management, LLC reported in our consolidated statements of operations:
 
 
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
2012
 
 
(in thousands)
Revenues
 
$
1,623,627

 
$
3,823,425

 
$
2,974,546

Expenses
 
988,749

 
1,836,558

 
1,472,281

Other income
 
133,356

 
154,769

 
140,910

Non-Controlling Interests
 
(12,688
)
 
(13,985
)
 
(8,730
)
Economic Net Income
 
755,546

 
2,127,651

 
1,634,445

Non-cash charges related to equity-based compensation
 
(502
)
 
(59,847
)
 
(529,712
)
Income tax provision
 
(147,245
)
 
(107,569
)
 
(65,410
)
Net income attributable to Non-Controlling Interests in Apollo Operating Group
 
(404,682
)
 
(1,257,650
)
 
(685,357
)
Amortization of intangible assets
 
(34,888
)
 
(43,194
)
 
(43,009
)
Net Income Attributable to Apollo Global Management, LLC
 
$
168,229

 
$
659,391

 
$
310,957



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Summary of Distributable Earnings and Economic Net Income
        
"Distributable Earnings," or "DE," as well as "DE After Taxes and Related Payables", are derived from our segment reported results, and are supplemental measures to assess performance and amounts available for distribution to Class A shareholders, holders of RSUs that participate in distributions and holders of AOG Units. DE represents the amount of net realized earnings without the effects of the consolidation of any of the affiliated funds. DE, which is a component of ENI, is the sum across all segments of (i) total management fees and advisory and transaction fees, excluding monitoring fees received from Athene based on its capital and surplus (as defined in Apollo's transaction advisory services agreement with Athene), (ii) other income (loss), excluding the gains (losses) arising from the reversal of a portion of the tax receivable agreement liability, (iii) realized carried interest income, and (iv) realized investment income, less (i) compensation expense, excluding the expense related to equity-based awards, (ii) realized profit sharing expense, and (iii) non-compensation expenses, excluding depreciation and amortization expense. DE After Taxes and Related Payables represents DE less estimated current corporate, local and non-U.S. taxes as well as the payable under Apollo's tax receivable agreement.
The following table is a summary of DE for the years ended December 31, 2014, 2013 and 2012.
 
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
2012
 
 
(in thousands)
Management Business Economic Net Income
 
$
578,156

 
$
330,846

 
$
222,981

Net realized carried interest income
 
930,892

 
1,478,447

 
551,187

Realized investment income(1)
 
63,951

 
107,615

 
66,063

Athene capital and surplus fees(2)
 
(228,331
)
 
(110,132
)
 

Reversal of tax receivable agreement liability(3)(5)
 
(32,182
)
 
(13,038
)
 
(3,937
)
Equity-based compensation
 
107,112

 
66,341

 
68,942

Depreciation and amortization
 
10,182

 
11,046

 
10,227

Distributable Earnings
 
1,429,780

 
1,871,125

 
915,463

Taxes and related payables(4)
 
(73,565
)
 
(41,151
)
 
(40,800
)
Distributable Earnings After Taxes and Related Payables
 
$
1,356,215

 
$
1,829,974

 
$
874,663

Net unrealized carried interest income (loss)
 
(841,760
)
 
207,537

 
740,299

Unrealized investment and other income (loss)
 
24,307

 
3,206

 
53,915

Add back: Athene capital and surplus fees(2)
 
228,331

 
110,132

 

Add back: Reversal of tax receivable agreement liability(3)(5)
 
32,182

 
13,038

 
3,937

Add back: Taxes and related payables(4)
 
73,565

 
41,151

 
40,800

Less: Equity-based compensation
 
(107,112
)
 
(66,341
)
 
(68,942
)
Less: Depreciation and amortization
 
(10,182
)
 
(11,046
)
 
(10,227
)
Total Economic Net Income
 
$
755,546

 
$
2,127,651

 
$
1,634,445


(1)
Represents realized gains from our general partner investments in our funds and other balance sheet investments.
(2)
Represents monitoring fees paid by Athene to Apollo by delivery of common shares of Athene Holding, calculated based on Athene's capital and surplus, as defined in our transaction and advisory services agreement with Athene.
(3)
Represents gains resulting from reductions of the tax receivable agreement liability due to changes in projected income estimates and estimated tax rates.
(4)
Represents the estimated current corporate, local and Non-U.S. taxes as well as the payable under Apollo's tax receivable agreement.
(5)
During the year ended December 31, 2014, the calculation of Distributable Earnings was revised to exclude the gains (losses) arising from the reversal of a portion of the tax receivable agreement liability. The prior period financial data was recast to conform to the revised definition of Distributable Earnings. The difference in Distributable Earnings After Taxes and Related Payables under the revised definition as compared to the previous methodology was $13.0 million and $3.9 million for the year ended December 31, 2013 and 2012, respectively.


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The following table is a reconciliation of Distributable Earnings per share of common and equivalents(1) to net distribution per share of common and equivalents for the years ended December 31, 2014, 2013 and 2012.
 
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
2012
 
 
 
 
 
Distributable Earnings After Taxes and Related Payables
 
$
1,356,215

 
$
1,829,974

 
$
874,663

Add back: Tax related payables attributable to common and equivalents
 
66,429

 
32,192

 
40,800

Distributable Earnings before certain payables(2)
 
1,422,644

 
1,862,166

 
915,463

Percent to common and equivalents
 
45
%
 
42
%
 
39
%
Distributable Earnings before other payables attributable to common and equivalents
 
633,380

 
784,268

 
357,725

Less: Tax related payables attributable to common and equivalents
 
(66,429
)
 
(32,192
)
 
(40,800
)
Distributable Earnings attributable to common and equivalents
 
566,951

 
752,076

 
316,925

Distributable Earnings per share of common and equivalent(3)
 
$
3.13

 
$
4.49

 
$
2.02

Retained capital per share of common and equivalent(3)
 
(0.24
)
 
(0.51
)
 
(0.08
)
Net distribution per share of common and equivalent(3)
 
$
2.89

 
$
3.98

 
$
1.94


(1)
Common and equivalents refers to Class A shares and RSUs that participate in distributions.
(2)
Distributable Earnings before certain payables represents distributable earnings before the deduction for the estimated current corporate taxes and the payable under Apollo's tax receivable agreement.
(3)
Per share calculations are based on total Class A shares outstanding and RSUs that participate in distributions.


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Summary of Fee-Related EBITDA and Fee-Related EBITDA + 100% of Net Realized Carried Interest

Fee-related EBITDA is a non-GAAP performance measure used to understand the performance of our operations and represents management business ENI (pre-tax), with amounts for equity-based compensation, interest expense and depreciation and amortization added to management business ENI. Fee-related EBITDA plus realized carried interest less realized profit sharing (referred to as “fee-related EBITDA +100% of net realized carried interest”) is a non-GAAP performance measure that combines operating results of the management business and incentive business. These performance measures are used to compare our current and potential debt service. See note 14 to our consolidated financial statements for more detail on our outstanding debt.
  
The table below sets forth fee-related EBITDA and fee-related EBITDA + 100% of net realized carried interest for the years ended December 31, 2014, 2013 and 2012, and a reconciliation of net income attributable to Apollo Global Management, LLC to ENI, fee-related EBITDA and fee-related EBITDA + 100% of net realized carried interest.
    
 
Year Ended 
 December 31,
 
2014
 
2013
 
2012
Management Business Economic Net Income
$
578,156

 
$
330,846

 
$
222,981

Equity-based compensation(1)
107,112

 
66,341

 
68,942

Interest expense
22,393

 
29,260

 
37,116

Depreciation and amortization(2)
10,182

 
11,046

 
10,227

Fee-Related EBITDA
717,843

 
437,493

 
339,266

Total realized carried interest
1,713,108

 
2,456,404

 
997,222

Total realized profit sharing expense
(782,216
)
 
(977,957
)
 
(446,035
)
Net realized carried interest
930,892

 
1,478,447

 
551,187

Fee-Related EBITDA + 100% of Net Realized Carried Interest
1,648,735

 
1,915,940

 
890,453

Net unrealized carried interest (loss) income
(841,760
)
 
207,537

 
740,299

Net investment income
88,258

 
110,821

 
119,978

Net interest expense
(22,393
)
 
(29,260
)
 
(37,116
)
Depreciation and amortization(2)
(10,182
)
 
(11,046
)
 
(10,227
)
Equity-based compensation(1)
(107,112
)
 
(66,341
)
 
(68,942
)
Economic Net Income
755,546

 
2,127,651

 
1,634,445

Income tax provision
(147,245
)
 
(107,569
)
 
(65,410
)
Net (income) attributable to non-controlling interests in Apollo Operating Group
(404,682
)
 
(1,257,650
)
 
(685,357
)
Charges related to equity-based compensation(3)
(502
)
 
(59,847
)
 
(529,712
)
Amortization of intangible assets
(34,888
)
 
(43,194
)
 
(43,009
)
Net income attributable to Apollo Global Management, LLC
$
168,229

 
$
659,391

 
$
310,957



(1)
Includes RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options. Excludes equity-based compensation expense comprising amortization of AOG Units.
(2)
Includes amortization of leasehold improvements.
(3)
Includes amortization amounts related to AOG Units.






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Liquidity and Capital Resources
Historical
Although we have managed our historical liquidity needs by looking at deconsolidated cash flows, our historical consolidated statements of cash flows reflects the cash flows of Apollo, as well as those of the consolidated Apollo funds.
The primary cash flow activities of Apollo are:
Generating cash flow from operations;
Making investments in Apollo funds;
Meeting financing needs through credit agreements; and
Distributing cash flow to equity holders and Non-Controlling Interests.
Primary cash flow activities of the consolidated Apollo funds and VIEs are:
Raising capital from their investors, which have been reflected historically as Non-Controlling Interests of the consolidated subsidiaries in our financial statements;
Using capital to make investments;
Generating cash flow from operations through distributions, interest and the realization of investments;
Distributing cash flow to investors; and
Issuing debt to finance investments (CLOs).
While primarily met by cash flows generated through fee income and carried interest income received, working capital needs have also been met (to a limited extent) through borrowings as follows:
 
 
 
As of December 31, 2014
 
As of December 31, 2013
 
 
Outstanding
Balance
 
Annualized
Weighted
Average
Interest Rate
 
Outstanding
Balance
 
Annualized
Weighted
Average
Interest Rate
 
2013 AMH Credit Facilities - Term Facility
$
500,000

 
1.36
%
 
$
750,000

 
1.37
%
 
2024 Senior Notes(1)
499,058

 
4.00

 
N/A

 
N/A

 
2014 AMI Term Facility(2)
16,204

 
2.34

 
N/A

 
N/A

 
2014 AMI Term Facility II(3)
18,752

 
1.93

 
N/A

 
N/A

 
Total Debt
$
1,034,014

 
 
 
$
750,000

 
 
 

(1) Includes impact of any amortization of note discount and interest rate hedge.
(2) On July 3, 2014, Apollo Management International LLP (“AMI”), a subsidiary of the Company, entered into a €13.4 million five year credit agreement (the “2014 AMI Term Facility”). Proceeds from the borrowing were used to fund the Company's investment in a CLO.
(3) On December 9, 2014, AMI entered into a €15.5 million five year credit agreement (the "2014 AMI Term Facility II"). Proceeds from the borrowing were used to fund the Company's investment in a CLO.

Additionally the 2013 AMH Credit Facilities provide for a $500 million revolving credit facility, which was undrawn as of December 31, 2014. See note 14 of our consolidated financial statements for information regarding the Company's debt arrangements.
We determine whether to make capital commitments to our funds in excess of our minimum required amounts based on a variety of factors, including estimates regarding our liquidity resources over the estimated time period during which commitments will have to be funded, estimates regarding the amounts of capital that may be appropriate for other funds that we are in the process of raising or are considering raising, and our general working capital requirements.

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Cash Flows
Significant amounts from our consolidated statements of cash flows for the years ended December 31, 2014, 2013 and 2012 are summarized and discussed within the table and corresponding commentary below:
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(in thousands)
Operating Activities
$
(372,917
)
 
$
1,134,458

 
$
331,614

Investing Activities
13,432

 
2,651

 
(150,854
)
Financing Activities
485,611

 
(1,005,023
)
 
21,960

Net Increase in Cash and Cash Equivalents
$
126,126

 
$
132,086

 
$
202,720

Operating Activities
Net cash used in operating activities was $372.9 million during the year ended December 31, 2014. During this period, there was $729.9 million in net income, to which $126.3 million of equity-based compensation and $83.7 million cash distributions of earnings from equity method investments were added to reconcile net income to net cash provided by operating activities. Additional adjustments to reconcile cash provided by operating activities during the year ended December 31, 2014 included $8,509.4 million in proceeds from sales of investments held by consolidated VIEs, $113.4 million in net unrealized losses from investments held by the consolidated funds and VIEs, a $1,375.4 million decrease in carried interest receivable, a $169.8 million increase in other liabilities of Apollo funds and a $34.0 million increase in accounts payable and accrued expenses. These favorable cash adjustments were offset by $10,330.1 million of purchases of investments held by the consolidated VIEs, a $13.8 million increase in cash held at consolidated VIEs, a $24.9 million increase in other assets, a $252.3 million increase in due from affiliates, a $43.5 million increase in other assets of Apollo funds, a $79.9 million decrease in deferred revenue, $101.7 million in net realized gains on debt of the consolidated funds and VIEs, a $97.5 million decrease in due to affiliates, a $518.0 million decrease in profit sharing payable, and $53.9 million of income from equity method investments.
Net cash provided by operating activities was $1,134.5 million during the year ended December 31, 2013. During this period, there was $2,374.0 million in net income, to which $126.2 million of equity-based compensation and a $60.8 million change in fair value of contingent obligations were added to reconcile net loss to net cash provided by operating activities. Additional adjustments to reconcile cash provided by operating activities during the year ended December 31, 2013 included $8,422.2 million in proceeds from sales of investments held by the consolidated VIEs, a $27.3 million change in deferred revenue, $66.8 million of distributions from investment activities, a $232.5 million increase in net unrealized losses on debt, a $587.5 million change in cash held at consolidated VIEs, a $141.2 million increase in profit sharing payable and $109.1 million relating to cash distributions of earnings from equity method investments. These favorable cash adjustments were offset by $309.1 million in net unrealized gains from investments held by the consolidated funds and VIEs, $107.4 million of income from equity method investments, a $44.2 million decrease in due to affiliates, a $130.5 million decrease in due from affiliates, $137.1 million of net realized gains on debt, a $64.1 million change in other liabilities of Apollo funds, a $408.8 million increase in carried interest receivable and $9,841.8 million of purchases of investments held by the consolidated VIEs.
Net cash provided by operating activities was $331.6 million during the year ended December 31, 2012. During this period, there was $3,047.8 million in net income, to which $598.7 million of equity-based compensation and a $1,951.9 million gain on business acquisitions and non-cash expenses were added to reconcile net loss to net cash provided by operating activities. Additional adjustments to reconcile cash provided by operating activities during the year ended December 31, 2012 included $7,182.4 million in proceeds from sales of investments held by the consolidated VIEs, a $497.7 million increase in net unrealized losses on debt, a $361.6 million increase in profit sharing payable and $66.0 million relating to cash distributions of earnings from equity method investments. These favorable cash adjustments were offset by $458.0 million in net unrealized gains from investments held by the consolidated funds and VIEs, a $103.8 million decrease in due to affiliates, a $348.1 million change in cash held at consolidated VIEs, a $973.6 million increase in carried interest receivable and $7,525.5 million of purchases of investments held by the consolidated VIEs.
Investing Activities
Net cash provided by investing activities was $13.4 million for the year ended December 31, 2014, which was primarily comprised of $76.3 million of cash distributions received from equity method investments, $50.0 million of proceeds from sales of investments, primarily offset by $109.9 million of cash contributions to equity method investments. Additional adjustments to reconcile cash provided by investing activities were $5.9 million of purchases of fixed assets. Cash contributions to equity method

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investments were primarily related to Fund VIII, EPF II, COF III, AESI, ACSP and AION. Cash distributions from equity method investments were primarily related to Fund VII, Fund VIII, EPF I, EPF II and AION.
Net cash provided by investing activities was $2.6 million for the year ended December 31, 2013, which was primarily comprised of $107.2 million relating to cash distributions received from equity method investments offset by $98.4 million of cash contributions to equity method investments. Cash contributions to equity method investments were primarily related to Fund VII, Fund VIII, COF III, EPF I, EPF II, AESI, ACSP, AION, AGRE U.S. Real Estate Fund, L.P. and Apollo SPN Investments I, L.P. Cash distributions from equity method investments were primarily related to Fund VI, Fund VII, COF I, COF II, Vantium C, ACLF, AIE II, ACSP and EPF II.
Net cash used in investing activities was $150.8 million for the year ended December 31, 2012, which was primarily comprised of $11.3 million in purchases of fixed assets, $99.2 million relating to the acquisition of Stone Tower (see note 3 to our consolidated financial statements), $126.9 million of cash contributions to equity method investments, partially offset by $86.6 million of cash distributions from equity method investments. Cash contributions to equity method investments were primarily related to EPF I, EPF II, ASCP, Fund VII, AINV and AGRE U.S. Real Estate Fund, L.P. Cash distributions from equity method investments were primarily related to Fund VII, ACLF, AGRE U.S. Real Estate Fund, L.P., COF I, COF II, Artus, EPF I and EPF II.
Financing Activities
Net cash provided by financing activities was $485.6 million for the year ended December 31, 2014, which was primarily comprised of $4,225.5 million related to issuance of debt by consolidated VIEs, $534.0 million of issuance of debt by AMH, and $889.7 million in contributions from Non-Controlling Interests in consolidated VIEs. This amount was offset by $2,371.5 million in repayment of debt held by consolidated VIEs, $32.0 million related to satisfaction of tax receivable agreement liabilities, $250 million in principal repayments of debt, $816.4 million of distributions paid to Non-Controlling Interests in the Apollo Operating Group, $506.0 million in distributions, $37.3 million in satisfaction of contingent obligations, $703.0 million in distributions paid to consolidated VIEs and $450.4 million of distributions paid to Non-Controlling Interests in consolidated VIEs.
Net cash used in financing activities was $1,005.0 million for the year ended December 31, 2013, which was primarily comprised of $2,747.0 million related to issuance of debt by consolidated VIEs, $750.0 million related to debt refinancing and $688.9 million in contributions from Non-Controlling Interests in consolidated variable interest entities. This amount was offset by $2,218.1 million in repayment of term loans by consolidated VIEs, $334.2 million in distributions to consolidated VIEs, $147.4 million of distributions paid to Non-Controlling Interests in consolidated VIEs, $975.5 million of distributions paid to Non-Controlling Interests in the Apollo Operating Group, $584.5 million in distributions, $85.9 million related to employee tax withholding payments in connection with deliveries of Class A shares in settlement of RSUs, $12.2 million in distributions to Non-Controlling Interests in consolidated entities, $737.8 million in principal repayments of debt and repurchases of debt, $30.4 million in satisfaction of tax receivable agreements, $67.5 million in satisfaction of contingent obligations and $62.3 million in purchases of AAA units.
Net cash provided by financing activities was $22.0 million for the year ended December 31, 2012, which was primarily comprised of $1,413.3 million related to issuance of debt by consolidated VIEs and $4.1 million in contributions from Non-Controlling Interests in consolidated entities. This amount was offset by $515.9 million in repayment of term loans by consolidated VIEs, $486.7 million in distributions by consolidated VIEs, $335.0 million of distributions paid to Non-Controlling Interests in the Apollo Operating Group, $202.4 million in distributions, $26.0 million related to employee tax withholding payments in connection with deliveries of Class A shares in settlement of RSUs, $8.8 million in distributions to Non-Controlling Interests in consolidated entities and $102.1 million in purchases of AAA units.
Distributions
In addition to other distributions such as payments pursuant to the tax receivable agreement, the table below presents information regarding the quarterly distributions which were made at the sole discretion of the Company's manager during for the years ended December 31, 2014, 2013 and 2012 (in millions, except per share amounts):

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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 10, 2012
 
$
0.46

 
February 29, 2012
 
$
58.1

 
$
110.4

 
$
168.5

 
$
10.3

April 13, 2012
 

 
April 13, 2012
 

 
11.0

 
11.0

 

May 8, 2012
 
0.25

 
May 30, 2012
 
31.6

 
60.0

 
91.6

 
6.2

August 2, 2012
 
0.24

 
August 31, 2012
 
31.2

 
57.6

 
88.8

 
5.3

November 9, 2012
 
0.40

 
November 30, 2012
 
52.0

 
96.0

 
148.0

 
9.4

For the year ended December 31, 2012
 
$
1.35

 
 
 
$
172.9

 
$
335.0

 
$
507.9

 
$
31.2

February 8, 2013
 
$
1.05

 
February 28, 2013
 
$
138.7

 
$
252.0

 
$
390.7

 
$
25.0

April 12, 2013
 

 
April 12, 2013
 

 
55.2

(1) 
55.2

 

May 6, 2013
 
0.57

 
May 30, 2013
 
80.8

 
131.8

 
212.6

 
14.3

August 8, 2013
 
1.32

 
August 30, 2013
 
189.7

 
305.2

 
494.9

 
30.8

November 7, 2013
 
1.01

 
November 29, 2013
 
147.7

 
231.2

 
378.9

 
24.1

For the year ended December 31, 2013
 
$
3.95

 
 
 
$
556.9

 
$
975.4

 
$
1,532.3

 
$
94.2

February 7, 2014
 
$
1.08

 
February 26, 2014
 
$
160.9

 
$
247.3

 
$
408.2

 
$
25.5

April 3, 2014
 

 
April 3, 2014
 

 
49.5

(1) 
49.5

 

May 8, 2014
 
0.84

 
May 30, 2014
 
130.0

 
188.4

 
318.4

 
20.9

June 16, 2014
 

 
June 16, 2014
 

 
28.5

(1) 
28.5

 

August 6, 2014
 
0.46

 
August 29, 2014
 
73.6

 
102.5

 
176.1

 
10.2

September 11, 2014
 

 
September 11, 2014
 

 
12.4

(1) 
12.4

 

October 30, 2014
 
0.73

 
November 21, 2014
 
119.0

 
162.6

 
281.6

 
15.5

December 15, 2014
 

 
December 15, 2014
 

 
25.2

(1) 
25.2

 

For the year ended December 31, 2014
 
$
3.11

 
 
 
$
483.5

 
$
816.4

 
$
1,299.9

 
$
72.1

(1)
On April 13, 2012, April 12, 2013, April 3, 2014, June 16, 2014, September 11, 2014 and December 15, 2014, the Company made a $0.05, $0.23, $0.22, $0.13, $0.06 and $0.11 distribution per AOG Unit, respectively, to the non-controlling interest holders in the Apollo Operating Group.
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, having access to credit facilities, being in 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 incentive 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 and adjusted assets. Additionally, higher carried interest income 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.
As of December 31, 2014, Fund VI's remaining investments and escrow cash were valued at 104% of the funds unreturned capital, which was below a specified return ratio of 115%.  As a result, Fund VI is required to place in escrow all current and future carried interest income distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation of Fund VI.

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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 December 31, 2014, the Company had reduced fees charged to CalPERS on the funds it manages by approximately $95.9 million. Based on the Company's current estimates, the reduction of fees will extend until 2017 in order for CalPERS to receive the full benefit of this arrangement.
The Company granted approximately 7.0 million RSUs during the year ended December 31, 2014. The average estimated fair value per share on the grant date was $21.16, per RSU with a total fair value of the grants of $149.1 million at December 31, 2014. This will impact the Company’s compensation expense as these grants are amortized over their vesting term of three to six years. The Company expects to incur annual compensation expenses on all grants, net of forfeitures, of approximately $62.5 million, $50.0 million, $31.3 million, $15.7 million, $13.0 million and $3.4 million during the years ended December 31, 2015, 2016, 2017, 2018, 2019 and thereafter, respectively.
Although we expect to pay distributions according to our distribution policy, we may not pay distributions according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended distributions. To the extent we do not have cash on hand sufficient to 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.
Carried interest income from our funds can be distributed to us on a current basis, but is subject to repayment by the subsidiaries of the Apollo Operating Group that act as general partner of such 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, to the extent of their ownership interest, 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 the shareholders agreement dated July 13, 2007 (the "Managing Partner Shareholders Agreement”), we agreed to indemnify each of our Managing Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of Fund IV, Fund V and Fund VI (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees) for all interests that our Managing Partners and Contributing Partners have contributed or sold to the Apollo Operating Group. See "Item 13. Certain Relationships and Related Party Transactions-Managing Partner Shareholders Agreement.”
Accordingly, 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 carried interest income with respect to Fund IV, Fund V and Fund VI, we will be obligated to reimburse our Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to pay even though we did not receive the distribution to which that general partner obligation related.
On January 13, 2015, the Company issued 681,421 Class A shares in settlement of vested RSUs. This issuance caused the Company's ownership interest in the Apollo Operating Group to increase from 42.3% to 42.4%.
On February 5, 2015 the Company declared a cash distribution of $0.86 per Class A share, which will be paid on February 27, 2015 to holders of record on February 17, 2015.
Athene
Athene Holding is the ultimate parent of various insurance company operating subsidiaries. Through its subsidiaries, Athene Holding provides insurance products focused primarily on the retirement market and its business centers primarily on issuing or reinsuring fixed indexed annuities.
Apollo, through its consolidated subsidiary, Athene Asset Management, provides asset management services to Athene, including asset allocation and portfolio management strategies, and receives fees from Athene for providing such services. As of December 31, 2014, all of Athene’s assets were managed by Athene Asset Management. Athene Asset Management had $60.3 billion of total AUM as of December 31, 2014 in accounts owned by or related to Athene (the “Athene Accounts”), of which approximately $12.6 billion, or approximately 20.9%, was either sub-advised by Apollo or invested in Apollo funds and investment vehicles. The vast majority of such assets are in sub-advisory managed accounts that manage high grade credit asset classes, such as CLO debt, commercial mortgage backed securities and insurance-linked securities. We expect this percentage to increase over time provided that Athene Asset Management continues to perform successfully in providing asset management services to Athene.

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Athene Asset Management receives a management fee equal to 0.40% per annum on all assets under management in the Athene Accounts, with certain limited exceptions. In addition, the Company receives sub-advisory management fees and carried interest income with respect to a portion of the assets in the Athene Accounts. With respect to capital invested in an Apollo fund, Apollo receives management fees directly from the relevant funds under the investment management agreements with such funds. Athene Asset Management and other Apollo subsidiaries incur all expenses associated with their provision of services to Athene, including but not limited to, asset allocation services, direct asset management services, risk management, asset and liability matching management, mergers and acquisitions asset diligence, hedging and other services.
Under a transaction advisory services agreement with Athene (the "Athene Services Agreement"), effective February 5, 2013, Apollo earns a quarterly monitoring fee of 0.50% of Athene’s capital and surplus as of the end of the applicable quarter multiplied by 2.5, excluding the shares of Athene Holding that were newly 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, at the end of each quarter through December 31, 2014, the termination date. This quarterly monitoring fee is not applicable to the amount of invested capital attributable to the Excluded Athene Shares. The Athene Services Agreement was amended in connection with the Athene Private Placement described below (the “Amended Athene Services Agreement”). The Amended Athene Services Agreement adjusts the calculation of Athene Holding’s capital and surplus downward by an amount equal to (x) the equity capital raised in the Athene Private Placement and (y) certain disproportionate increases to the statutory capital and surplus of Athene, as compared to the stockholders’ equity of Athene calculated on a U.S. GAAP basis, as a result of certain future acquisitions by Athene. Prior to the consummation of the Athene Private Placement, all such monitoring fees were paid pursuant to a derivative contract between Athene and Apollo (the "Athene Services Derivative"). In connection with the Athene Private Placement, the Athene Services Derivative was settled on April 29, 2014 by delivery to Apollo of common shares of Athene Holding, and as a result, such derivative was terminated. Following settlement of the Athene Services Derivative, future monitoring fees paid to Apollo pursuant to the Amended Athene Services Agreement, will be paid on a quarterly basis in arrears by delivery to Apollo of common shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended). Unsettled monitoring fees pursuant to the Amended Athene Services Agreement are recorded as due from affiliates in the consolidated statements of financial condition. For the years ended December 31, 2014, 2013 and 2012 Apollo earned $226.4 million, $107.9 million and $16.8 million, respectively, related to this monitoring fee. The monitoring fee is recorded in advisory and transaction fees from affiliates, net, in the consolidated statements of operations. As of December 31, 2014, Apollo had a $58.2 million receivable recorded in due from affiliates on the consolidated statements of financial condition. As of December 31, 2013, Apollo had a $116.4 million receivable, which was accounted for as a derivative recorded in due from affiliates on the consolidated statements of financial condition.
In accordance with the services agreement among AAA, AAA Investments and the other service recipients party thereto and Apollo (the "AAA Services Agreement"), Apollo receives a management fee for managing the assets of AAA Investments. In connection with each of the contribution of certain assets by AAA to Athene in October 2012, and the initial closing of the Athene Private Placement on April 4, 2014, the AAA Services Agreement was amended (the "Amended AAA Services Agreement"). Pursuant to the Amended AAA Services Agreement, the parties agreed that there will be no management fees payable by AAA Investments with respect to the Excluded Athene Shares. AAA Investments agreed to continue to pay Apollo the same management fee on its investment in Athene (other than with respect to the Excluded Athene Shares), except that Apollo agreed that the obligation to pay the existing management fee terminated on December 31, 2014 (although services will continue through December 31, 2020). Prior to the consummation of the Athene Private Placement, all such management fees were accrued pursuant to a derivative contract between AAA Investments and Apollo (the “AAA Services Derivative”). In connection with the Athene Private Placement, the AAA Services Derivative was settled on April 29, 2014 by delivery to Apollo of common shares of Athene Holding, and as a result, such derivative was terminated. Following settlement of the AAA Services Derivative, future management fees paid to Apollo pursuant to the Amended AAA Services Agreement will be paid on a quarterly basis in arrears by delivery to Apollo of common shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the Exchange Act). Unsettled management fees pursuant to the Amended AAA Services Agreement will be recorded as due from affiliates in the consolidated statements of financial condition. As of December 31, 2014, Apollo had a $3.1 million receivable recorded in due from affiliates related to this management fee on the consolidated statements of financial condition. As of December 31, 2013, Apollo had a $14.3 million receivable related to this management fee, which was accounted for as a derivative recorded in due from affiliates on the consolidated statements of financial condition. The total management fees earned by Apollo related to the Amended AAA Services Agreement for the years ended December 31, 2014, 2013 and 2012 were $1.9 million, $2.2 million and $0.6 million, respectively, which are recorded in management fees from affiliates in the consolidated statements of operations.
Pursuant to the Amended AAA Services Agreement, in the event that AAA (1) makes a tender offer to all of its qualified unitholders in which AAA offers to purchase all of their equity interests in AAA, pay the consideration for such purchase with equivalent equity interests in a new vehicle, of which Apollo will serve as general partner, and transfer to such new investment vehicle a pro rata portion of the common shares of Athene Holding held by AAA Investments, unburdened by the unwind fee, and

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(2) thereafter distributes all or any portion of the common shares of Athene Holding held by AAA (or disposes of such shares and distributes the proceeds thereof) to its unitholders, then AAA shall pay Apollo an unwind fee. The unwind fee is payable in pro rata increments to Apollo only when, as and if AAA distributes common shares of Athene Holding (or the proceeds thereof) to its unitholders and shall be equal to $20 million multiplied by the percentage of “net common shares” of Athene Holding held by AAA which are so distributed (or disposed of with the proceeds distributed) by AAA in 2015. There is no assurance that a AAA distribution will be made or that the unwind fee will be paid in 2015.
Prior to the settlement of the Athene Services Derivative and the AAA Services Derivatives, the Amended Athene Services Agreement and the Amended AAA Services Agreement together with the Athene Services Derivative and the AAA Services Derivative, met the definition of derivatives under U.S. GAAP. The Company had classified these derivatives as Level III assets in the fair value hierarchy, as the pricing inputs into the determination of fair value require significant judgment and estimation. After the settlement of the Athene Services Derivative and the AAA Services Derivatives the unsettled shares receivable recorded in due from affiliates related to the Amended Athene Services Agreement and the Amended AAA Services Agreement are valued at fair value based on the price of a common share of Athene Holding. The Company had classified the derivative and the shares receivable as Level III assets in the fair value hierarchy, as the pricing inputs into the determination of fair value require significant judgment and estimation. See note 6 for further discussion regarding fair value measurements.
Prior to the settlement of the Athene Services Derivative and the AAA Services Derivative, the change in unrealized market value of the derivatives was reflected in other income, net in the consolidated statements of operations. For the year ended December 31, 2013, there was $10.2 million of changes in market value recognized related to these derivatives.
In addition, Apollo, as general partner of AAA Investments, is generally entitled to a carried interest that allocates to it 20% of the realized returns (net of related expenses, including borrowing costs) on the investments of AAA Investments, except that Apollo will not be entitled to receive any carried interest in respect of the Excluded Athene Shares. Carried interest receivable from AAA Investments will be paid in common shares of Athene Holding (valued at the then fair market value) if there is a distribution in kind of shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the Exchange Act) or paid in cash if AAA sells the shares of Athene Holding. For the years ended December 31, 2014, 2013 and 2012, the Company recorded carried interest income less the related profit sharing expense of $14.6 million, $27.6 million and $35.3 million, respectively from AAA Investments, which is recorded in the consolidated statements of operations. As of December 31, 2014 and December 31, 2013, the Company had a $121.5 million and a $100.9 million carried interest receivable, respectively, related to AAA Investments. As of December 31, 2014 and December 31, 2013, the Company had a related profit sharing payable of $34.9 million and $28.8 million, respectively, recorded in profit sharing payable in the consolidated statements of financial condition.
For the years ended December 31, 2014, 2013 and 2012, Apollo earned revenues in the aggregate totaling $546.5 million, $435.1 million and $164.7 million, respectively, consisting of management fees, sub-advisory and monitoring fees and carried interest income from Athene after considering the related profit sharing expense and changes in the market value of the Athene shares owned directly by Apollo, which is recorded in the consolidated statements of operations.
On April 4, 2014, Athene Holding completed an initial closing of a private placement offering of common equity in which it raised $1.048 billion of primary commitments from third-party institutional and certain existing investors in Athene Holding (the “Athene Private Placement”). Shares in the Athene Private Placement were offered at a price per common share of Athene Holding of $26. In connection with the Athene Private Placement, Athene raised an additional $80 million of third party capital at $26 per share, all of which was used to buy back a portion of the shares of one of its existing investors at a price of $26 per share in a transaction that was consummated on April 29, 2014. As announced by AAA on June 24, 2014, a second closing of the Athene Private Placement occurred in which Athene Holding raised $170 million of commitments primarily from employees of Athene and its affiliates at a price per common share of Athene Holding of $26. The Investment Partnership did not purchase any additional common shares of Athene Holding as part of the Athene Private Placement.
In connection with the Athene Private Placement, Athene Holding amended its registration rights agreement to provide (i) investors who are party to such agreement, including AAA Investments, the potential opportunity for liquidity on their shares of Athene Holding through sales in registered public offerings over a 15 month period beginning on the date of Athene Holding’s initial public offering (the “Athene IPO”) and (ii) Athene Holding the right to cause certain investors who are party to the registration rights agreement to include in such offerings a certain percentage of their common shares of Athene Holding subject to the terms and conditions set forth in the agreement. However, pursuant to the registration rights agreement, any shares of Athene Holding held by Apollo will not be subject to such arrangements and instead will be subject to a lock-up period of two years following the effective date of the registration statement relating to the Athene IPO, but Athene Holding will not have the right to cause any shares owned by Apollo to be included in the Athene IPO or any follow-on offering.

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As part of its ongoing financial integration of Aviva USA, Athene identified material weaknesses in its internal controls over financial reporting for its U.S.     GAAP and statutory financials as of December 31, 2013. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. If Athene fails to maintain effective internal control over financial reporting, it may not be able to accurately report its financial results. In October 2014, Athene informed its shareholders, including the Company, that as part of its ongoing financial integration of Aviva USA and transition towards public company standards for financial controls, it anticipates that delivery of its GAAP financial statements for the quarter ended June 30, 2014 and September 30, 2014 will continue to be delayed. This delay will also cause Athene’s year end 2014 and first quarter 2015 GAAP financial statements to be delayed. As such, the Audit Committee of Athene has approved the extension of the delivery of these GAAP financial statements to June 30, 2015. On February 4, 2015, Athene informed its shareholders, including the Company, that Athene’s first quarter 2014 GAAP financial statements can no longer be relied upon and therefore these financial statements have been removed from the AAA website. Specifically, Athene discovered the need to change its calculations for reserve balances associated with its indexed products. As a result of this determination, Athene has begun a methodical process of restating their first quarter 2014 GAAP financial statements. The aforementioned delay in delivery of Athene’s 2014 GAAP financial statements and the announced restatement of Athene’s first quarter 2014 GAAP financial statements is not expected to have an impact on the Company’s previously issued financial statements. Athene has continued to meet all regulatory filing deadlines with regard to financial statements prepared in accordance with Statutory Accounting principles and expects to do so for the quarter ended December 31, 2014. As of December 31, 2014 the Company determined the value of its investment in Athene using an embedded value methodology. In doing so, the Company has given appropriate consideration to the control deficiencies and potential adjustments related to Athene and any potential impacts to the Company's financial statements. As the embedded value methodology is based on the projected future cash flows of the business rather than GAAP financials, the delay in the delivery of Athene’s GAAP financial statement will not have an impact on the Company's ability to prepare its financial statements. Based on the facts and circumstances as of the date of this report, the Company is not aware of any revisions to the financial statements as presented, or previously issued financial statements, and there is no impact to our ability to produce future financial statements.
See notes 4 and 17 to the consolidated financial statements for discussion regarding the Company’s ownership interest in AAA, AAA Investments and Athene.
Distributions to Managing Partners and Contributing Partners
The three Managing Partners who became employees of Apollo on July 13, 2007 are each entitled to a $100,000 base salary. Additionally, our Managing Partners can receive other forms of compensation. Any additional consideration will be paid to them in their proportional ownership interest in Holdings. Additionally, 85% of any tax savings APO Corp. recognizes as a result of the tax receivable agreement will be paid to the Managing Partners.
Subsequent to the 2007 Reorganization, the Contributing Partners retained ownership interests in subsidiaries of the Apollo Operating Group. Therefore, any distributions that flow up to management or general partner entities in which the Contributing Partners retained ownership interests are shared pro rata with the Contributing Partners who have a direct interest in such entities prior to flowing up to the Apollo Operating Group. These distributions are considered compensation expense after the 2007 Reorganization.
The Contributing Partners are entitled to receive the following:
Profit Sharing related to private equity carried interest income, from direct ownership of advisory entities. Any changes in fair value of the underlying fund investments would result in changes to Apollo Global Management, LLC’s profit sharing payable;
Additional consideration based on their proportional ownership interest in Holdings; and
Additionally, 85% of any tax savings APO Corp. recognizes as a result of the tax receivable agreement will be paid to the Contributing Partners.
Potential Future Costs
We may make grants of RSUs or other equity-based awards to employees and independent directors that we appoint in the future.


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Critical Accounting Policies
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the consolidated financial statements, which have been prepared in accordance with U.S. GAAP. 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 consolidated financial statements. The following is a summary of our accounting policies that are affected most by judgments, estimates and assumptions.
Consolidation
The types of entities with which Apollo is involved generally include subsidiaries (i.e., general partners and management companies related to the funds we manage), entities that have all the attributes of an investment company (e.g., funds) and securitization vehicles (e.g., collateralized loan obligations). 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 our consolidation policy, we first consider the appropriate consolidation guidance to apply including consideration of whether the entity qualifies for certain scope exceptions and whether the entity should be evaluated under either the previous rules on consolidation of variable interest entities (“VIEs”) or the amended consolidation rules depending on whether or not the entity qualifies for the deferral as further described below. We then perform an assessment to determine whether that entity qualifies as a VIE. An entity in which Apollo holds a variable interest is a VIE if any one of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity’s activities that have a significant effect on the success of the legal entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expected losses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantially all of the legal entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Entities that do not qualify as VIEs are generally assessed for consolidation as voting interest entities (“VOEs”) under the voting interest model.
Under the voting interest model, Apollo consolidates those entities it controls through a majority voting interest or through other means, including those VOEs in which the general partner is presumed to have control. Apollo does not consolidate those VOEs in which the presumption of control by the general partner has been overcome through either the granting of substantive rights to the unaffiliated investors to either dissolve the fund or remove the general partner (“kick-out rights”) or the granting of substantive participating rights.
As previously indicated, the consolidation assessment, including the determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity and therefore certain of our funds may qualify as VIEs whereas others may qualify as VOEs. The granting of substantive kick-out rights is a key consideration in determining whether an entity is a VIE and whether or not that entity should be consolidated. For example, when the unaffiliated holders of equity investment at risk of a fund with sufficient equity to permit the fund to finance its activities without additional subordinated financial support are not granted substantive kick-out rights and the Company is not part of the group of holders of equity investment at risk, the fund is generally determined to be a VIE, as the holders of equity investment at risk as a group lack the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the legal entity. Alternatively, when the unaffiliated holders of equity investment at risk are granted substantive kick-out rights, the fund is generally determined to be a VOE. However, in certain cases where the Company holds a substantive equity investment at risk in the fund, the fund may be determined to be a VOE even though substantive kick-out rights were not granted to the unaffiliated holders of equity investment at risk. In these cases, the Company is part of the group of holders of equity investment at risk and therefore the holders of equity investment at risk as a group do not lack the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the legal entity.
 If the entity is determined to be a VIE under the conditions above, we then assess whether the entity should be consolidated by applying either the previous consolidation rules or the amended consolidation rules depending on whether the entity qualifies for the deferral of the amended consolidation rules as further described below.
VIEs that qualify for the deferral of the amended consolidation rules because certain conditions are met, including if the entities have all the fundamental characteristics (and a number of the typical characteristics) of an investment company and are not securitization or asset-backed financing entities, will continue to apply the previous consolidation rules. VIEs that are

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securitization or asset-backed financing entities will apply the amended consolidation rules. Under both sets of rules, VIEs for which Apollo is determined to be the primary beneficiary are consolidated.
With respect to VIEs such as our funds that qualify for the deferral of the amended consolidation rules and therefore apply the previous consolidation rules, Apollo is determined to be the primary beneficiary if its involvement, through holding interests directly or indirectly in the VIE or contractually through other variable interests (e.g., carried interest and management fees), would be expected to absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. In cases where two or more Apollo related parties hold a variable interest in a VIE, and the aggregate variable interest held by those parties would, if held by a single party, identify that party as the primary beneficiary, then the Company is determined to be the primary beneficiary to the extent it is the party within the related party group that is most closely associated with the VIE.
For VIEs such as our CLOs that apply the amended consolidation rules, Apollo is determined to be the primary beneficiary if it holds a controlling financial interest defined as possessing both (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) 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. CLOs are generally determined to be VIEs if they are formed solely to issue collateralized notes in the legal form of debt and therefore do not have sufficient total equity investment at risk to permit the entity to finance its activities without additional subordinated financial support. With respect to such CLOs, we generally possess a controlling financial interest in, and therefore consolidate, such CLOs in accordance with the amended consolidation rules when our role as collateral manager provides us with the power to direct the activities that most significantly impact the CLO’s economic performance and we have the right to receive certain benefits from the CLO (e.g., incentive fees) that could potentially be significant to the CLO.
Under the previous and the amended consolidation rules, 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, affiliates 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.
The assessment of whether an entity is a VIE and the determination of whether Apollo should consolidate such VIE requires judgments. Under both sets of rules, 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 two or more parties’ equity interests should be aggregated, (iv) 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 (v) evaluating the nature of the relationship and activities of the parties involved in determining which party within a related-party group is most closely associated with the VIE. Where the VIEs have qualified for the deferral, judgments are also made in estimating cash flows to evaluate which member within the equity group absorbs a majority of the expected losses or residual returns of the VIE. Where the VIEs have not qualified for the deferral, 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 VIEs' economic performance and rights to receive benefits or obligations to absorb losses that could be potentially significant to the VIE.
Certain of the consolidated VIEs were formed to issue collateralized notes in the legal form of debt backed by financial assets. The difference between the fair value of the assets and liabilities of these VIEs is presented within appropriated partners’ capital in the consolidated statements of financial condition as these VIEs are funded solely with debt. Changes in the fair value of the assets and liabilities of these VIEs and the related interest and other income is presented within net gains from investment activities of consolidated variable interest entities and net income attributable to Non-Controlling Interests in the consolidated statements of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIE’s note holders, not Apollo, will ultimately receive the benefits or absorb the losses associated with the VIE’s assets and liabilities.
Assets and liabilities of the consolidated VIEs are shown in separate sections within the consolidated statements of financial condition as of December 31, 2014 and 2013.
Revenue Recognition
Carried Interest Income from Affiliates. We earn carried interest income from our funds as a result of such funds achieving specified performance criteria. Such carried interest income generally is earned based upon a fixed percentage of realized and unrealized gains of various funds after meeting any applicable hurdle rate or threshold minimum. Carried interest income from certain of the funds that we manage is subject to contingent repayment and is generally paid to us as particular investments made by the funds are realized. If, however, upon liquidation of a fund, the aggregate amount paid to us as carried interest exceeds

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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. For a majority of our credit funds, once the annual carried interest income has been determined, there generally is no look-back to prior periods for a potential contingent repayment, however, carried interest income on certain other credit funds can be subject to contingent repayment at the end of the life of the fund. We have elected to adopt Method 2 from U.S. GAAP guidance applicable to accounting for management fees based on a formula, and under this method, we accrue carried interest income quarterly based on fair value of the underlying investments and separately assess if contingent repayment is necessary. The determination of carried interest income 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 private equity, credit and real estate funds.
Management Fees from Affiliates. The management fees related to our private equity funds are generally based on a fixed percentage of 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. Management fees related to our credit funds, by contrast, 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 real estate 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 private equity, credit and real estate funds.
Investments, at Fair Value
The Company follows U.S. GAAP attributable to fair value measurements, which among other things, requires enhanced disclosures about investments that are measured and reported at fair value. Investments at fair value represent investments of the consolidated funds, investments of the consolidated VIEs and certain financial instruments for which the fair value option was elected. The unrealized gains and losses resulting from changes in the fair value are reflected as net gains (losses) from investment activities and net gains (losses) from investment activities of the consolidated variable interest entities, respectively, in the consolidated statements of operations. In accordance with U.S. GAAP, investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.
Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this 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 investments exhibit higher levels of liquid market observability as compared to Level III investments. The Company subjects broker quotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II investment. These criteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services.
Level III—Pricing inputs are unobservable for the investment and includes situations where there is little observable market activity for the investment. The inputs into the determination of fair value may require significant management judgment or estimation. Investments that are included in this category generally include general and limited partner interests in corporate private equity and real estate 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 investment would qualify for treatment as a Level II or Level III investment. These criteria include, but are not limited to, the number and quality of the broker

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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, an investment’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 investment where the fair value is based on unobservable inputs.
In cases where an investment or financial instrument measured and reported at fair value is transferred into or out of Level III of the fair value hierarchy, the Company accounts for the transfer as of the end of the reporting period.
Equity Method Investments. For investments in entities over which the Company exercises significant influence but which do not meet the requirements for consolidation, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or loss of such entities. Income (loss) from equity method investments is recognized as part of other income (loss) in the consolidated statements of operations and income (loss) on available-for-sale securities (from equity method investments) is recognized as part of other comprehensive income (loss), net of tax in the consolidated statements of comprehensive income (loss). The carrying amounts of equity method investments are reflected in investments in the 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.
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. 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, we review certain aspects of the subject company’s performance and determine how its performance compares to the group and to certain individuals in the group. We compare certain measurements such as EBITDA margins, revenue growth over certain time periods, leverage ratios, and growth opportunities. In addition, we compare 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, we rely on the income approach. The income approach is also used to value investments or 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 the discounted cash flow method are significant assumptions related to the subject company’s expected results and a calculated discount rate, which is normally based on the subject company’s weighted average cost of capital, or “WACC.” The WACC represents the required rate of return on total capitalization, which is comprised of a required rate of return on equity, plus 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.
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.

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On a quarterly basis, Apollo utilizes a valuation committee consisting of members from senior management, to review and approve the valuation results related to our funds' private equity investments. Management 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 analysis. 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. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing recognized pricing services, market participants or other sources. When market quotations are not available, a model based approach is used to determine fair value. The credit funds also enter into foreign currency exchange contracts, total return swap contracts, credit default swap contracts, and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by 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 this 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. When determining fair value pricing when no observable market value exists, the value attributed to an investment is based on the enterprise value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation approaches used to estimate the fair value of illiquid 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.
On a quarterly basis, Apollo also utilizes a valuation committee, consisting of members from senior management, to review and approve the valuation results related to our credit investments. For certain publicly traded vehicles, 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.
Real Estate Investments. For the CMBS portfolio of Apollo’s funds, the estimated fair value of the CMBS portfolio 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. The Company evaluates its loans for possible impairment on a quarterly basis. For Apollo’s opportunistic and value added real estate funds, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable 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.
On a quarterly basis, Apollo also utilizes a valuation committee, consisting of members from senior management, to review and approve the valuation results related to our real estate investments. For certain publicly traded vehicles, 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.

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The fair values of the investments in our private equity, credit and real estate funds can be impacted by changes to the assumptions used in 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 this Annual Report on Form 10-K. There have been no material changes to the underlying valuation models during the periods that our financial results are presented.
Fair Value of Financial Instruments
U.S. GAAP guidance requires the disclosure of the estimated fair value of financial instruments. 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.
Except for the Company’s debt obligations (as described in note 14 to our 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.
Valuation of Financial Instruments Held by Consolidated VIEs
The consolidated VIEs hold investments that are 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 for similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among other factors. When market quotations are not available, a model based approach is used to determine fair value.
The consolidated VIEs also have debt obligations that are recorded at fair value. The primary valuation methodology used to determine fair value for debt obligation is market quotation. Prices are based on the average of the “bid” and “ask” prices. In the event that market quotations are not available, a model based approach is used. The valuation approach used to estimate the fair values of debt obligations for which market quotations are not available is the discounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interest payments and quarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and credit rating. Management uses its discretion and judgment in considering and appraising relevant factors for determining the valuations of its debt obligations.
Fair Value Option. Apollo elected the fair value option for the Company's investment in Athene Holding, the convertible notes issued by HFA and for the assets and liabilities of the consolidated VIEs. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. Apollo applied the fair value option for certain corporate loans, other investments and debt obligations held by these entities that otherwise would not have been carried at fair value. For the convertible notes issued by HFA, Apollo elected to separately present interest income from other changes in the fair value of the convertible notes in the consolidated statements of operations. See notes 4, 5 and 6 to our consolidated financial statements for further disclosure on the investments in Athene Holding, HFA and financial instruments of the consolidated VIEs for which the fair value option has been elected.
Goodwill and Intangible AssetsGoodwill and indefinite-life intangible assets must be reviewed annually for impairment or more frequently if circumstances indicate impairment may have occurred. Identifiable finite-life intangible assets, by contrast, are amortized over their estimated useful lives, which are periodically re-evaluated for impairment or when circumstances indicate an impairment may have occurred. Apollo amortizes its identifiable finite-life intangible assets using a method of amortization reflecting the pattern in which the economic benefits of the finite-life intangible asset are consumed or otherwise used up. If that pattern cannot be reliably determined, Apollo uses the straight-line method of amortization. At June 30, 2014, the Company performed its annual impairment testing, and, as the fair value of each of the Company’s reporting units was in excess of its carrying value, there was no impairment of goodwill. Additionally, there was no impairment of indefinite-life intangible assets as of December 31, 2014.

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Compensation and Benefits
Compensation and benefits include salaries, bonuses and benefits, profit sharing expense and equity-based compensation.
Salaries, Bonus and Benefits. Salaries, bonus and benefits include base salaries, discretionary and non-discretionary bonuses, severance and employee benefits. Bonuses are accrued over the related service period.
The Company sponsors a 401(k) Savings Plan whereby U.S.-based employees are entitled to participate in the plan based upon satisfying certain eligibility requirements. The Company may provide discretionary contributions from time to time. No contributions relating to this plan were made by the Company for the years ended December 31, 2014 and 2013.
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 carried interest income 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.
Changes in the fair value of the contingent obligations that were recognized in connection with certain Apollo acquisitions are reflected in the Company’s consolidated statements of operations as profit sharing expense.
In June 2011, the Company adopted 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, which we refer to herein as the Incentive Pool, enables certain partners and employees to earn discretionary compensation based on carried interest realizations earned by the Company in a given year, which amounts are reflected in profit sharing expense in the accompanying consolidated financial statements. The Company adopted the Incentive Pool 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. Allocations to the Incentive Pool and to its participants contain both a fixed and a discretionary component and may vary year-to-year depending on the overall realized performance of the Company and the contributions and performance of each participant. There is no assurance that the Company will continue to compensate individuals through performance-based incentive arrangements in the future and there may be periods when the Executive Committee of the Company’s manager determines that allocations of realized carried interest income are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits.
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. Further, as required under U.S. GAAP, the Company estimates forfeitures using industry comparables or historical trends for equity-based awards that are not expected to vest. Apollo’s equity-based awards consist of, or provide rights with respect to AOG Units, RSUs, share options, AHL Awards (as defined in note 16 to our consolidated financial statements) and other equity-based compensation awards. For more information regarding Apollo’s equity-based compensation awards, see note 16 to our consolidated financial statements. The Company’s assumptions made to determine the fair value on grant date and the estimated forfeiture rate are embodied in the calculations of compensation expense.
Additionally, the value of the AOG Units have been reduced to reflect the transfer restrictions imposed on units issued to the Managing Partners and Contributing Partners as well as the lack of rights to participate in future Apollo Global Management, LLC equity offerings. These awards have the following characteristics:
Awards granted to the Managing Partners (i) are not permitted to be sold to any parties outside of the Apollo Global Management, LLC control group and transfer restrictions lapse pro rata during the forfeiture period over 60 or 72 months, and (ii) allow the Managing Partners to initiate a change in control; and
Awards granted to the Contributing Partners (i) are not permitted to be sold or transferred to any parties except to the Apollo Global Management, LLC control group and (ii) the transfer restriction period lapses over six years (which is longer than the forfeiture period which lapses ratably over 60 months).

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As noted above, the AOG Units issued to the Managing Partners and Contributing Partners have different restrictions which affect the liquidity of and the discounts applied to each grant.
We utilized the Finnerty Model to calculate a discount on the AOG Units granted to the Contributing Partners. The Finnerty Model provides for a valuation discount reflecting the holding period restriction embedded in a restricted security preventing its sale over a certain period of time. Along with the Finnerty Model we applied adjustments to account for the existence of liquidity clauses specific to the AOG Units granted to the Contributing Partners and a minority interest consideration as compared to the units sold in the Strategic Investors Transaction in 2007. The combination of these adjustments yielded a fair value estimate of the AOG Units granted to the Contributing Partners.
The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. 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 assumptions utilized in the model were (i) length of holding period, (ii) volatility, (iii) dividend yield and (iv) risk free rate. Our assumptions were as follows:
(i)
We assumed a maximum two year holding period.
(ii)
We concluded based on industry peers, that our volatility annualized would be approximately 40%.
(iii)
We assumed no distributions.
(iv)
We assumed a 4.88% risk free rate based on U.S. Treasuries with a two year maturity.
For the Contributing Partners’ grants, the Finnerty Model calculation, as detailed above, yielded a marketability discount of 25%. This marketability discount, along with adjustments to account for the existence of liquidity clauses and consideration of non-controlling interests as compared to units sold in the Strategic Investors Transaction in 2007, resulted in an overall discount for these grants of 29%.
We determined a 14% discount for the grants to the Managing Partners based on the equity value per share of $24. We determined that the value of the grants to the Managing Partners was supported by the 2007 sale of an identical security to Credit Suisse Management, LLC at $24 per share. Based on an equity value per share of $24, the implied discount for the grants to the Managing Partners was 14%. The Contributing Partners yielded a larger overall discount of 29%, as they are unable to cause a change in control of Apollo. This results in a lower fair value estimate, as their units have fewer beneficial features than those of the Managing Partners.
Another 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. RSUs are comprised of Plan Grants, which generally do not pay distributions until vested and, for grants made after 2011, the underlying shares are generally issued by March 15th after the year in which they vest, and Bonus Grants, which pay distributions on both vested and unvested grants and are generally issued after vesting on an approximate two-month lag. 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. For Bonus Grants, the grant date fair value 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 Plan Grant RSUs. The weighted average for the inputs utilized for the shares granted during the years ended December 31, 2014, 2013 and 2012 are presented in the table below for Plan Grants:

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For the Year Ended December 31,
 
 
2014
 
2013
 
2012
Distribution Yield(1)
 
14.3%
 
9.5%
 
8.4%
Cost of Equity Capital Rate(2)
 
12.3%
 
17.6%
 
17.6%
(1)
Calculated based on the historical distributions paid during the last twelve months and the Company's share price as of the measurement date of the grant on a weighted average basis.
(2)
Assumes a discount rate equivalent to a cost of equity capital rate as of the valuation date, based on the Capital Asset Pricing Model ("CAPM"). CAPM is a commonly used mathematical model for developing expected returns.
For Plan Grants that are not eligible for distributions on unvested shares, the discount for the lack of distributions until vested based on the present value of a growing annuity calculation had a weighted average of 32.5%, 30.5% and 23.3% for the years ended December 31, 2014, 2013 and 2012, respectively.
We utilized the Finnerty Model to calculate a marketability discount on the Plan Grant and Bonus 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 inputs utilized in the Finnerty Model were (i) length of holding period, (ii) volatility, (iii) risk-free rate and (iv) dividend yield. The weighted average for the inputs utilized for the shares granted during the years ended December 31, 2014, 2013 and 2012 are presented in the table below for Plan Grants and Bonus Grants:
 
For the Year Ended December 31,
 
2014
 
2013
 
2012
Plan Grants
 
 
 
 
 
Holding Period Restriction (in years)
0.6
 
0.6
 
0.6

Volatility(1)
31.4%
 
30.4%
 
34.0
%
Distribution Yield(2)
14.3%
 
8.2%
 
8.0
%
Bonus Grants
 
 
 
 
 
Holding Period Restriction (in years)
0.2
 
0.2
 
0.2

Volatility(1)
32.1%
 
30.0%
 
30.5
%
Distribution Yield(2)
13.7%
 
12.2%
 
7.8
%
(1)
The Company determined the expected volatility based on the volatility of the Company’s share price as of the grant date with consideration to comparable companies.
(2)
Calculated based on the historical distributions paid during the last twelve months and the Company's share price as of the measurement date of the grant on a weighted average basis.
For Plan Grants, the marketability discount for transfer restrictions based on the Finnerty Model calculation, after considering the discount for lack of pre-vesting distributions, had a weighted average of 5.1%, 6.0% and 5.0% for the years ended December 31, 2014, 2013 and 2012, respectively. For Bonus Grants, the marketability discount for transfer restrictions based on the Finnerty Model calculation had a weighted average of 3.2%, 3.2% and 4.9% for the years ended December 31, 2014, 2013 and 2012, respectively.
After the grant date fair value is determined, an estimated forfeiture rate is applied. The estimated fair value was determined and recognized over the vesting period on a straight-line basis. A 6.0% forfeiture rate is estimated for RSUs, based on the Company’s historical attrition rate as well as industry comparable rates. If employees are no longer associated with Apollo or if there is no turnover, we will revise our estimated compensation expense to the actual amount of expense based on the units vested at the reporting date in accordance with U.S. GAAP.

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 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, these entities in some cases are subject to NYC UBT and non-U.S. entities, in some cases, are subject to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. federal, state and local corporate income tax, and the Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.
Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. The Company recognizes the 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 processes, based on the technical merits of the position. 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 tax positions are reviewed and evaluated quarterly to determine whether or not we have uncertain tax positions that require financial statement recognition.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized 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.


Fair Value Measurements
See note 6 to our 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 consolidated financial statements.

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 18 to our consolidated financial statements for a discussion of guarantees and contingent obligations.

 
Contractual Obligations, Commitments and Contingencies
As of December 31, 2014, 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:
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
 
(in thousands)
Operating lease obligations(1)
$
38,863

 
$
38,225

 
$
36,114

 
$
31,742

 
$
31,348

 
$
24,214

 
$
200,506

Other long-term obligations(2)
10,400

 
4,575

 
4,470

 
4,470

 
2,235

 

 
26,150

2013 AMH Credit Facilities - Term Facility(3)
6,838

 
6,838

 
6,838

 
6,838

 
500,342

 

 
527,694

2013 AMH Credit Facilities - Revolver Facility(4)
625

 
625

 
625

 
625

 
8

 

 
2,508

2024 Senior Notes (5)
20,000

 
20,000

 
20,000

 
20,000

 
20,000

 
588,333

 
688,333

2014 AMI Term Facility I
380

 
380

 
380

 
380

 
16,395

 

 
17,915

2014 AMI Term Facility II
362

 
362

 
362

 
362

 
19,093

 

 
20,541

Obligations as of December 31, 2014
$
77,468

 
$
71,005

 
$
68,789

 
$
64,417

 
$
589,421

 
$
612,547

 
$
1,483,647

 

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(1)
The Company has entered into sublease agreements and is expected to contractually receive approximately $6.5 million over the remaining periods of 2014 and thereafter.
(2)
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.
(3)
$500 million of the outstanding Term Facility matures in January 2019. The interest rate on the $500 million Term Facility as of December 31, 2014 was 1.37%. See note 14 of the consolidated financial statements for further discussion of the 2013 AMH Credit Facilities.
(4)
The commitment fee as of December 31, 2014 on the $500 million undrawn Revolver Facility was 0.125%. See note 14 of the consolidated financial statements for further discussion of the 2013 AMH Credit Facilities.
(5)
$500 million of the 2024 Senior Notes matures in May 2024. The interest rate on the 2024 Senior Notes as of December 31, 2014 was 4.000%. See note 14 of the consolidated financial statements for further discussion of the 2024 Senior Notes.
Note:
Due to the fact that the timing of certain amounts to be paid cannot be determined or for other reasons discussed below, the following contractual commitments have not been presented in the table above.
(i)
As noted previously, we have entered into a tax receivable agreement with our Managing Partners and Contributing Partners which requires us to pay to our Managing Partners and Contributing Partners 85% of any tax savings received by APO Corp. from our step-up in tax basis. The tax savings achieved may not ensure that we have sufficient cash available to pay this liability and we might be required to incur additional debt to satisfy this liability.
(ii)
Debt amounts related to the consolidated VIEs are not presented in the table above as the Company is not a guarantor of these non-recourse liabilities.
Commitments
Certain of our management companies and general partners are committed to contribute to the funds and affiliates. While a small percentage of these amounts are funded by us, the majority of these amounts have historically been funded by our affiliates, including certain of our employees and certain Apollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its affiliates, the percentage of total commitments of Apollo and its affiliates, the commitment and remaining commitment amounts of Apollo only (excluding affiliates), and the percentage of total commitments of Apollo only (excluding affiliates) for each private equity, credit and real estate fund and affiliate as of December 31, 2014 as follows ($ in millions):

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Apollo and
Affiliates
Commitments
 
% of Total
Commitments
 
Apollo Only
(Excluding
Affiliates)
Commitments
 
Apollo Only
(Excluding
Affiliates)
% of 
Total
Commitments
 
Apollo and
Affiliates
Remaining
Commitments
 
Apollo Only
(Excluding
Affiliates)
Remaining
Commitments
 
Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Fund VIII
$
1,543.5


8.40
%
 
$
406.3

 
2.21
%
 
$
1,418.8

 
$
376.5

 
Fund VII
467.2

 
3.18

 
177.8

 
1.21

 
104.0

 
38.2

 
Fund VI
246.3

 
2.43

 
6.1

 
0.06

 
9.7

 
0.2

 
Fund V
100.0

 
2.67

 
0.5

 
0.01

 
6.3

 

 
Fund IV
100.0

 
2.78

 
0.2

 
0.01

 
0.5

 

 
ANRP
426.1

 
32.21

 
10.1

 
0.76

 
215.1

 
5.1

 
AION
150.0

 
18.19

 
50.0

 
6.06

 
120.2

 
39.7

 
APC
158.4

 
69.02

 
0.1

 
0.04

 
91.0

 
0.1

 
Apollo Rose, L.P.
215.7

 
100.00

 

 

 
85.7

 

 
A.A Mortgage Opportunities, L.P.
200.0

 
98.43

 

 

 
130.2

 

 
Champ, L.P.
78.5

 
100.00

 
20.1

 
25.56

 
15.5

 
4.0

 
          Apollo Royalties Management, LLC
100.0

 
100.00

 

 

 
47.4

 

 
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
EPF I(2)
325.0


20.74

 
21.4

 
1.37

 
54.9

 
5.0

 
EPF II(2)
412.9

 
12.25

 
63.3

 
1.88

 
162.3

 
26.3

 
COF I
450.7

 
30.35

 
29.7

 
2.00

 
237.4

 
4.2

 
COF II
30.5

 
1.93

 
23.4

 
1.48

 
0.8

 
0.6

 
COF III
358.1

 
10.45

 
83.1

 
2.43

 
212.3

 
49.4

 
ACLF
23.9

 
2.43

 
23.9

 
2.43

 
19.6

 
19.6

 
Palmetto
18.0

 
1.19

 
18.0

 
1.19

 
10.9

 
10.9

 
AIE II(2)
7.9

 
3.15

 
4.8

 
1.94

 

 

 
ESDF
50.0

 
100.00

 

 

 

 

 
FCI
193.5

 
34.62

 

 

 
97.9

 

 
FCI II
244.6

 
15.72

 

 

 
165.5

 

 
Franklin Fund
9.9

 
9.09

 
9.9

 
9.09

 

 

 
Apollo Lincoln Fixed Income Fund
2.5

 
0.99

 
2.5

 
0.99

 
1.1

 
1.1

 
Apollo/Palmetto Loan Portfolio, L.P.
300.0

 
100.00

 

 

 
85.0

 

 
Apollo/Palmetto Short-Maturity Loan Portfolio, L.P.
200.0

 
100.00

 

 

 

 

 
AESI(2)
3.5

 
0.99

 
3.5

 
0.99

 
0.6

 
0.6

 
AESI II
2.8

 
0.99

 
2.8

 
0.99

 
2.6

 
2.6

 
AEC
7.3

 
2.50

 
3.2

 
1.08

 
2.5

 
1.1

 
ACSP
18.8

 
2.44

 
18.8

 
2.44

 
8.7

 
8.7

 
Apollo SK Strategic Investments, L.P.
2.0

 
0.99

 
2.0

 
0.99

 
0.4

 
0.4

 
Stone Tower Structured Credit Recovery Master Fund II, Ltd.
7.9

 
7.61

 

 

 

 

 
Apollo Structured Credit Recovery Master Fund III, L.P.
137.3

 
28.12

 
0.6

 
0.13

 
67.7

 
0.3

 
Apollo Zeus Strategic Investments, L.P.
14.0

 
3.38

 
14.0

 
3.38

 
7.0

 
7.0

 
Apollo Lincoln Private Credit Fund, L.P.
2.5

 
0.99

 
2.5

 
0.99

 
2.3

 
2.3

 
AIE III(2)
10.9

 
2.91

 
10.9

 
2.91

 
9.3

 
9.3

 
Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
AGRE U.S. Real Estate Fund, L.P.
633.8

(1) 
75.03

 
16.3

 
1.81

 
360.8

(1) 
4.9

 
Apollo U.S. Real Estate Fund II, L.P.
157.5

 
100.00

 
7.5

 
4.76

 
157.5

 
7.5

 
BEA/AGRE China Real Estate Fund, L.P.
0.1

 
1.03

 
0.1

 
1.03

 

 

 
AGRE Asia Co-Invest I Limited
50.0

 
100.00

 

 

 
35.7

 

 
CAI Strategic European Real Estate Ltd.
19.0

 
100.00

 

 

 
3.6

 

 
CPI Capital Partners North America
7.6

 
1.27

 
2.1

 
0.35

 
0.6

 
0.2

 
CPI Capital Partners Europe(2)
6.6

 
0.47

 

 

 
0.5

 

 
CPI Capital Partners Asia Pacific
6.9

 
0.53

 
0.5

 
0.04

 
0.4

 

 
London Prime Apartments Guernsey Holdings Limited (Guernsey)(3)
27.6

 
7.80

 
0.8

 
0.23

 
7.6

 

 
2012 CMBS I Fund, L.P.
88.2

 
100.00

 

 

 

 

 
2012 CMBS II Fund, L.P.
93.5

 
100.00

 

 

 

 

 
AGRE Cobb West Investor, LP
22.1

 
86.41

 
0.1

 
0.39

 
2.1

 

 
AGRE CMBS Fund, L.P.
418.8

 
100.00

 

 

 

 

 
Other:
 
 
 
 
 
 
 
 
 
 
 
 
Apollo SPN Investments I, L.P.
25.4

 
0.84

 
25.4

 
0.84

 
20.8

 
20.8

 
Total
$
8,177.3

 
 
 
$
1,062.3

 
 
 
$
3,982.8

 
$
646.6

 
 
(1)
Figures for AGRE U.S. Real Estate Fund, L.P. include base, additional, and co-investment commitments. A co-investment vehicle within AGRE U.S. Real Estate Fund, L.P. is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.56 as of December 31, 2014.

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(2)
Apollo’s commitment in these funds is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.21 as of December 31, 2014.
(3)
Apollo’s commitment in these investments is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.56 as of December 31, 2014.

As a limited partner, the general partner and manager of the Apollo private equity, credit and real estate funds, Apollo has unfunded capital commitments of $646.6 million at December 31, 2014.
Apollo has an ongoing obligation to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cash distributions, if any, that are made by AAA to Apollo's affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAA Investments.
In addition, as of December 31, 2014, Apollo had an unfunded loan commitment of $15.0 million related to an employee's commitment to purchase common shares of Athene Holding.
Apollo, through its subsidiary Apollo MidCap Holdings (Cayman), L.P., has entered into a  subscription agreement providing for an aggregate commitment of $50.0 million to subscribe for (i) Class A Variable Funding Subordinated Notes due 2114 (“Class A Notes”) of Midcap Finco Limited (“FinCo”), an Irish company that includes the existing operations and assets of MidCap Financial LLC, a specialty finance company that originates commercial lending opportunities, and  (ii) ordinary shares of Finco’s holding company (“Ordinary Shares”). The subscription agreement has a commitment period of three years (subject to extension under certain circumstances), and $8.0 million of the commitment was drawn on February 3, 2015.  Pursuant to an investment management agreement, Apollo, through its subsidiary Apollo Capital Management, L.P., is acting as the investment manager of FinCo’s credit business. Certain third parties have also entered into subscription agreements for Class A Notes and Ordinary Shares.
The 2013 AMH Credit Facilities and 2024 Senior Notes (as defined below) will have future impacts on the use of our cash. See note 14 of our consolidated financial statements for information regarding the Company's debt arrangements.
In accordance with the Managing Partner Shareholders Agreement, we have indemnified the Managing Partners and certain Contributing Partners (at varying percentages) for any carried interest income distributed from Fund IV, Fund V and Fund VI that is subject to contingent repayment by the general partner. As of December 31, 2014 and December 31, 2013, the Company had not recorded an obligation for any previously made distributions.
Contingent Obligations—Carried interest income in private equity and certain credit and real estate funds is subject to reversal in the event of future losses to the extent of the cumulative carried interest recognized in income to date. If all of the existing investments became worthless, the amount of cumulative revenues that has been recognized by Apollo through December 31, 2014 and that would be reversed approximates $2.9 billion. Management views the possibility of all of the investments becoming worthless as remote. Carried interest income is 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 carried interest income than was ultimately earned. This 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.
Certain funds may not generate carried interest income as a result of unrealized and realized losses that are recognized in the current and prior reporting period. In certain cases, carried interest income 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.
AGS, one of the Company’s subsidiaries, provides underwriting commitments in connection with security offerings to the portfolio companies of the funds we manage. As of December 31, 2014, there were no underwriting commitments outstanding related to such offerings.
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 carried interest income earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liability had an acquisition date fair value of $117.7 million, which was determined

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based on the present value of estimated future carried interest payments, and is recorded in profit sharing payable in the consolidated statements of financial condition. On July 31, 2014, the Company extinguished a portion of this contingent consideration obligation and recognized a gain in the amount of $13.4 million, which was recorded in other income, net in the consolidated statements of operations for the year ended December 31, 2014. In exchange for the extinguishment, the Company granted a former owner of Stone Tower and current Apollo employee 350,000 RSUs with rights to receive, subject to a three-year vesting period, distribution equivalents. This grant is accounted for as a grant of equity awards in accordance with U.S. GAAP (see note 16 of the consolidated financial statements for further information regarding the accounting for RSUs). The fair value of the contingent obligation was $84.5 million and $121.4 million as of December 31, 2014 and December 31, 2013, respectively.
In connection with the Gulf Stream acquisition, the Company agreed to make payments to the former owners of Gulf Stream under a contingent consideration obligation which required the Company to transfer cash to the former owners of Gulf Stream based on a specified percentage of carried interest income. The contingent liability had a fair value of $11.6 million and $14.1 million as of December 31, 2014 and December 31, 2013, respectively, which was recorded in profit sharing payable in the consolidated statements of financial condition.
The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied. The changes in the fair value of the contingent consideration obligations will be reflected in profit sharing expense in the consolidated statements of operations.
The Company has determined that the contingent consideration obligations are categorized as a Level III liability in the fair value hierarchy as the pricing inputs used to determine fair value require significant management judgment and estimation. See note 6 of the consolidated financial statements for further disclosure regarding fair value of the contingent consideration obligations.

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ITEM 7A.
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 carried interest income 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 7. 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 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 approximately 1,000 investors in Apollo’s active private equity, credit and real estate 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:
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.
Our credit 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.
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 bi-weekly basis and reports to the executive committee of the Company’s manager at such times as the committee deems appropriate and at least on an annual basis.
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 the executive committee 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

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cost, in the case of our private equity funds and certain credit 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 private equity, credit and real estate 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 are reflected as a reduction to advisory and transaction fees from affiliates, net. Advisory and transaction fees will be impacted by changes in market risk factors to the extent that they limit our opportunities to engage in private equity, credit and real estate 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 Carried Interest Income—We earn carried interest income from our funds as a result of such funds achieving specified performance criteria. Our carried interest income will be impacted by changes in market risk factors. However, several major factors will influence the degree of impact:
the performance criteria for each individual fund in relation to how that fund’s results of operations are impacted by changes in market risk factors;
whether such performance criteria are annual or over the life of the fund;
to the extent applicable, the previous performance of each fund in relation to its performance criteria; and
whether each funds’ carried interest income is subject to contingent repayment.
As a result, the impact of changes in market risk factors on carried interest income will vary widely from fund to fund. The impact is 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. For example, subsequent to the second quarter of 2007, debt capital markets around the world began to experience significant dislocation, severely limiting the availability of new credit to facilitate new traditional buyouts, and the markets remain volatile. Volatility in debt and equity markets can impact our pace of capital deployment, the timing of receipt of transaction fee revenues, and the timing of realizations. These market conditions could have an impact on the value of investments and our rates of return. Accordingly, depending 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 our 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.
Interest Rate Risk—Interest rate risk represents exposure we have to instruments whose values vary with the change in interest rates. These instruments include, but are not limited to, loans, borrowings and derivative instruments. We may seek to mitigate risks associated with the exposures by taking 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.
Apollo has debt obligations that accrue interest at variable rates. Interest rate changes may therefore affect the amount of our interest payments, future earnings and cash flows. Based on our debt obligations payable as of December 31, 2014 and December 31, 2013, we estimate that interest expense would increase on an annual basis, in the event interest rates were to increase by one percentage point, by approximately $5.4 million and $7.5 million, respectively.




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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 entities 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 we enter into contracts to banks and investment banks who meet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.
Foreign Exchange Risk—Foreign exchange risk represents exposures we have to changes in the values of current 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 us against losses that may arise due to volatile movements in foreign exchange rates and/or interest rates.
We estimate for the year ended December 31, 2014, a 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would result in a decrease in management fees, carried interest income and income from equity method investments of $4.0 million, $10.5 million and $0.7 million, respectively. For the year ended December 31, 2013, a 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would result in a decrease in management fees, carried interest income and income from equity method investments of $5.1 million, $9.6 million and $0.8 million, respectively.
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, Luxembourg, Mumbai, Hong Kong and Singapore, 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.
Sensitivity
Our assets and unrealized gains, and our related equity and net income are sensitive to changes in the valuations of our funds’ underlying investments and could vary materially as a result of changes in our valuation assumptions and estimates. See “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations-Critical Accounting Policies-Investments, at Fair Value” for details related to the valuation methods that are used and the key assumptions and estimates employed by such methods. We also quantify the Level III investments that are included on our consolidated statements of financial condition by valuation methodology in note 6 to the consolidated financial statements. We employ a variety of valuation methods. Furthermore, the investments that we manage but are not on our consolidated statements of financial condition, and therefore impact carried interest, also employ a variety of valuation methods of which no single methodology is used more than any other. Changes in fair value will have the following impacts before a reduction of profit sharing expense and Non-Controlling Interests in the Apollo Operating Group and on a pre-tax basis on our results of operations for the years ended December 31, 2014 and 2013:
Management fees from the funds in our credit segment are based on the net asset value of the relevant fund, gross assets, capital commitments or invested capital, each as defined in the respective management agreements. Changes in the fair values of the investments in credit funds that earn management fees based on net asset value or gross assets will have a direct impact on the amount of management fees that are earned. Management fees earned from our credit segment on a segment basis that were dependent upon estimated fair value during the years ended December 31, 2014 and 2013 would decrease by approximately $37.7 million and $21.3 million, respectively, if the fair values of the investments held by such funds were 10% lower during the same respective periods. By contrast, a 10% increase in fair value would increase management fees for the years ended December 31, 2014 and 2013 by approximately $38.5 million and $21.0 million, respectively.
Management fees for our private equity, real estate and certain credit funds, excluding AAA, generally are charged on either (a) a fixed percentage of committed capital over a stated investment period or (b) a fixed percentage of invested

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capital of unrealized portfolio investments. Changes in values of investments could indirectly affect future management fees from private equity funds by, among other things, reducing the funds’ access to capital or liquidity and their ability to currently pay the management fees or if such change resulted in a write-down of investments below their associated invested capital.
Net gains from investment activities related to the Company's investment in Athene Holding would decrease by approximately $32.4 million for the year ended December 31, 2014 if the fair value of the Company's investment in Athene Holding decreased by 10%. By contrast, a 10% increase in fair value of the Company's investment in Athene Holding would increase net gains from investment activities by $32.4 million for the year ended December 31, 2014.
Other income, net earned from derivative contracts related to the amended services contract with Athene and Athene Life Re Ltd. and the Amended AAA Services Agreement would decrease by approximately $8.5 million for the year ended December 31, 2013, if the fair value of the accrued notional shares of Athene Holding decreased by 10% during the same respective period. By contrast, a 10% increase in fair value of the accrued notional shares of Athene Holding would increase other income, net for the year ended December 31, 2013 by approximately $8.5 million.
Carried interest income from most of our credit funds, which is quantified in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Analysis,” is impacted directly by changes in the fair value of their investments. Carried interest income from most of our credit funds generally is earned based on achieving specified performance criteria. We anticipate that a 10% decline in the fair values of investments held by all of the credit funds at December 31, 2014 and 2013 would decrease carried interest income on a segment basis for the years ended December 31, 2014 and 2013 by approximately $160.6 million and $203.7 million, respectively. Additionally, the changes to carried interest income from most of our credit funds assume there is no loss in the fund for the relevant period. If the fund had a loss for the period, no carried interest income would be earned by us. By contrast, a 10% increase in fair value would increase carried interest income on a segment basis for the years ended December 31, 2014 and 2013 by approximately $334.3 million and $240.1 million, respectively.
Carried interest income from private equity funds generally is earned based on achieving specified performance criteria and is impacted by changes in the fair value of their fund investments. We anticipate that a 10% decline in the fair values of investments held by all of the private equity funds at December 31, 2014 and 2013 would decrease carried interest income on a segment basis for the years ended December 31, 2014 and 2013 by $301.7 million and $524.8 million, respectively. The effects on private equity fees and income assume that a decrease in value does not cause a permanent write-down of investments below their associated invested capital. By contrast, a 10% increase in fair value would increase carried interest income on a segment basis for the years ended December 31, 2014 and 2013 by $323.8 million and $484.5 million, respectively.
Carried interest income from real estate funds generally is earned based on achieving specified performance criteria and is impacted by changes in the fair value of their fund investments. We anticipate that a 10% decline in the fair values of investments held by all of the real estate funds at December 31, 2014 and 2013 would decrease carried interest income on a segment basis for the years ended December 31, 2014 and 2013 by $12.6 million and $6.0 million, respectively. The effects on real estate fees and income assume that a decrease in value does not cause a permanent write-down of investments below their associated invested capital. By contrast, a 10% increase in fair value would increase carried interest income on a segment basis for the years ended December 31, 2014 and 2013 by $21.0 million and $16.1 million, respectively.
For select Apollo funds, our share of income from equity method investments as a limited partner in such funds is derived from unrealized gains or losses on investments in funds included in the consolidated financial statements. For funds in which we have an interest, but are not included in our consolidated financial statements, our share of investment income is limited to our direct investments in the funds, which ranges from 0.001% to 9.091%. A 10% decline in the fair value of investments at December 31, 2014 and 2013 would result in an approximate $37.8 million and $39.8 million decrease in investment income at the consolidated level, respectively. By contrast, a 10% increase in the fair value of investments at December 31, 2014 and 2013 would result in an approximate $37.8 million and $39.8 million increase in investment income at the consolidated level, respectively.

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ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
 
 
Page
Audited Consolidated Financial Statements
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
Consolidated Statements of Financial Condition as of December 31, 2014 and 2013
 
 
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012
 
 
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013, and 2012
 
 
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2014, 2013, and 2012
 
 
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and 2012
 
 
Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Apollo Global Management, LLC
New York, New York
We have audited the accompanying consolidated statements of financial condition of Apollo Global Management, LLC and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2014. We also have audited the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Apollo Global Management, LLC and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP
New York, New York
February 27, 2015

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APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2014 AND DECEMBER 31, 2013
(dollars in thousands, except share data)
 
December 31,
 
2014
 
2013
Assets:
 
 
 
Cash and cash equivalents
$
1,204,052

 
$
1,078,120

Cash and cash equivalents held at consolidated funds
1,611

 
1,417

Restricted cash
6,353

 
9,199

Investments
2,880,006

 
2,393,883

Assets of consolidated variable interest entities:
 
 
 
Cash and cash equivalents
1,088,952

 
1,095,170

Investments, at fair value
15,658,653

 
14,126,362

Other assets
323,240

 
280,718

Carried interest receivable
911,666

 
2,287,075

Due from affiliates
268,015

 
317,247

Fixed assets, net
35,906

 
40,251

Deferred tax assets
606,717

 
660,199

Other assets
84,384

 
44,170

Goodwill
49,243

 
49,243

Intangible assets, net
60,039

 
94,927

Total Assets
$
23,178,837

 
$
22,477,981

Liabilities and Shareholders’ Equity
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
44,246

 
$
38,159

Accrued compensation and benefits
59,278

 
41,711

Deferred revenue
199,614

 
279,479

Due to affiliates
565,153

 
595,371

Profit sharing payable
434,852

 
992,240

Debt
1,034,014

 
750,000

Liabilities of consolidated variable interest entities:
 
 
 
Debt, at fair value
14,123,100

 
12,423,962

Other liabilities
728,718

 
605,063

Other liabilities
46,401

 
63,274

Total Liabilities
17,235,376

 
15,789,259

Commitments and Contingencies (see note 18)


 
 
Shareholders’ Equity:
 
 
 
Apollo Global Management, LLC shareholders’ equity:
 
 
 
Class A shares, no par value, unlimited shares authorized, 163,046,554 and 146,280,784 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively

 

Class B shares, no par value, unlimited shares authorized, 1 share issued and outstanding at December 31, 2014 and December 31, 2013

 

Additional paid in capital
2,254,283

 
2,624,582

Accumulated deficit
(1,400,661
)
 
(1,568,487
)
Appropriated partners’ capital
933,166

 
1,581,079

Accumulated other comprehensive income (loss)
(306
)
 
95

Total Apollo Global Management, LLC shareholders’ equity
1,786,482

 
2,637,269

Non-Controlling Interests in consolidated entities
3,222,195

 
2,669,730

Non-Controlling Interests in Apollo Operating Group
934,784

 
1,381,723

Total Shareholders’ Equity
5,943,461

 
6,688,722

Total Liabilities and Shareholders’ Equity
$
23,178,837

 
$
22,477,981

See accompanying notes to consolidated financial statements.

- 146-

Table of Contents


APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012
(dollars in thousands, except share data)

 
2014
 
2013
 
2012
Revenues:
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
315,587

 
$
196,562

 
$
149,544

Management fees from affiliates
850,441

 
674,634

 
580,603

Carried interest income from affiliates
394,055

 
2,862,375

 
2,129,818

Total Revenues
1,560,083

 
3,733,571

 
2,859,965

Expenses:
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
Equity-based compensation
126,320

 
126,227

 
598,654

Salary, bonus and benefits
338,049

 
294,753

 
274,574

Profit sharing expense
276,190

 
1,173,255

 
872,133

Total Compensation and Benefits
740,559

 
1,594,235

 
1,745,361

Interest expense
22,393

 
29,260

 
37,116

Professional fees
82,030

 
83,407

 
64,682

General, administrative and other
97,663

 
98,202

 
87,961

Placement fees
15,422

 
42,424

 
22,271

Occupancy
40,427

 
39,946

 
37,218

Depreciation and amortization
45,069

 
54,241

 
53,236

Total Expenses
1,043,563

 
1,941,715

 
2,047,845

Other Income:
 
 
 
 
 
Net gains from investment activities
213,243

 
330,235

 
288,244

Net gains (losses) from investment activities of consolidated variable interest entities
22,564

 
199,742

 
(71,704
)
Income from equity method investments
53,856

 
107,350

 
110,173

Interest income
10,392

 
12,266

 
9,693

Other income, net
60,592

 
40,114

 
1,964,679

Total Other Income
360,647

 
689,707

 
2,301,085

Income before income tax provision
877,167

 
2,481,563

 
3,113,205

Income tax provision
(147,245
)
 
(107,569
)
 
(65,410
)
Net Income
729,922

 
2,373,994

 
3,047,795

Net income attributable to Non-controlling Interests
(561,693
)
 
(1,714,603
)
 
(2,736,838
)
Net Income Attributable to Apollo Global Management, LLC
$
168,229

 
$
659,391

 
$
310,957

Distributions Declared per Class A Share
$
3.11

 
$
3.95

 
$
1.35

Net Income Per Class A Share:
 
 
 
 
 
Net Income Available to Class A Share – Basic
$
0.62

 
$
4.06

 
$
2.06

Net Income Available to Class A Share – Diluted
$
0.62

 
$
4.03

 
$
2.06

Weighted Average Number of Class A Shares – Basic
155,349,017

 
139,173,386

 
127,693,489

Weighted Average Number of Class A Shares – Diluted
155,349,017

 
142,214,350

 
129,540,377

See accompanying notes to consolidated financial statements.

- 147-

Table of Contents

APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012
(dollars in thousands, except share data)
 
 
2014
 
2013
 
2012
Net Income
 
$
729,922

 
$
2,373,994

 
$
3,047,795

Other Comprehensive Income (Loss), net of tax:
 
 
 
 
 
 
Allocation of currency translation adjustment of consolidated CLO entities
 
724

 

 

Net loss from change in fair value of cash flow hedge instruments
 
(990
)
 

 

Net unrealized gain on interest rate swaps (net of taxes of $410 for Apollo Global Management, LLC and $0 for Non-Controlling Interests in Apollo Operating Group)
 

 

 
2,653

Net loss on available-for-sale securities (from equity method investment)
 
(2
)
 
(8
)
 
(11
)
Total Other Comprehensive Income (Loss), net of tax
 
(268
)
 
(8
)
 
2,642

Comprehensive Income
 
729,654

 
2,373,986

 
3,050,437

Comprehensive Income attributable to Non-Controlling Interests
 
(631,831
)
 
(1,564,710
)
 
(922,172
)
Comprehensive Income Attributable to Apollo Global Management, LLC
 
$
97,823

 
$
809,276

 
$
2,128,265

See accompanying notes to consolidated financial statements.

- 148-

Table of Contents

APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2014, 2013, AND 2012
(dollars in thousands, except share data)
 
Apollo Global Management, LLC Shareholders
 
 
 
 
 
 
 
 
 
Class A
Shares
 
Class B
Shares
 
Additional
Paid in
Capital
 
Accumulated
Deficit
 
Appropriated
Partners’
Capital
 
Accumulated
Other
Comprehensive Income (Loss)
 
Total Apollo
Global
Management,
LLC Total
Shareholders’
Equity
 
Non-
Controlling
Interests in
Consolidated
Entities
 
Non-
Controlling
Interests in
Apollo
Operating
Group
 
Total
Shareholders’
Equity
Balance at January 1, 2012
123,923,042

 
1

 
$
2,939,492

 
$
(2,426,197
)
 
$
213,594

 
$
(488
)
 
$
726,401

 
$
1,444,767

 
$
477,153

 
$
2,648,321

Dilution impact of issuance of Class A shares

 

 
1,589

 

 

 

 
1,589

 

 

 
1,589

Capital increase related to equity-based compensation

 

 
282,288

 

 

 

 
282,288

 
 
 
313,856

 
596,144

Capital contributions

 

 

 

 

 

 

 
551,154

 

 
551,154

Distributions

 

 
(203,997
)
 

 
(264,910
)
 

 
(468,907
)
 
(495,506
)
 
(335,023
)
 
(1,299,436
)
Distributions related to deliveries of Class A shares for RSUs
6,130,951

 

 
9,090

 
(25,992
)
 

 

 
(16,902
)
 

 

 
(16,902
)
Purchase of AAA shares

 

 

 

 

 

 

 
(102,072
)
 

 
(102,072
)
Non-cash distributions

 

 

 
(788
)
 

 

 
(788
)
 
(3,605
)
 

 
(4,393
)
Non-cash contribution to Non-Controlling Interests

 

 

 

 

 

 

 
2,547

 

 
2,547

Capital increase related to business acquisition (see note 3)

 

 
14,001

 

 

 

 
14,001

 

 

 
14,001

Non-Controlling Interests in consolidated entities at acquisition date

 

 

 

 

 

 

 
306,351

 

 
306,351

Deconsolidation

 

 

 

 

 

 

 
(46,148
)
 

 
(46,148
)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities

 

 
(919
)
 

 

 

 
(919
)
 
919

 

 

Satisfaction of liability related to AAA RDUs

 

 
1,790

 

 

 

 
1,790

 

 

 
1,790

Net income

 

 

 
310,957

 
1,816,676

 

 
2,127,633

 
234,805

 
685,357

 
3,047,795

Net loss on available-for-sale securities (from equity method investment)

 

 

 

 

 
(11
)
 
(11
)
 

 

 
(11
)
Net unrealized gain on interest rate swaps (net of taxes of $410 for Apollo Global Management, LLC and $0 for Non-Controlling Interests in Apollo Operating Group)

 

 

 

 

 
643

 
643

 

 
2,010

 
2,653

Balance at December 31, 2012
130,053,993

 
1

 
$
3,043,334

 
$
(2,142,020
)
 
$
1,765,360

 
$
144

 
$
2,666,818

 
$
1,893,212

 
$
1,143,353

 
$
5,703,383

Dilution impact of issuance of Class A shares

 

 
4,865

 

 

 

 
4,865

 

 

 
4,865

Capital increase related to equity-based compensation

 

 
104,935

 

 

 

 
104,935

 

 
19,163

 
124,098

Capital contributions

 

 

 

 

 

 

 
689,172

 

 
689,172

Distributions

 

 
(650,189
)
 

 
(334,215
)
 

 
(984,404
)
 
(159,573
)
 
(975,488
)
 
(2,119,465
)
Distributions related to deliveries of Class A shares for RSUs
5,181,389

 

 
37,263

 
(85,858
)
 

 

 
(48,595
)
 

 

 
(48,595
)
Purchase of AAA units

 

 

 

 

 

 

 
(62,326
)
 

 
(62,326
)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities

 

 
(2,226
)
 

 

 

 
(2,226
)
 
2,226

 

 

Satisfaction of liability related to AAA RDUs

 

 
1,205

 

 

 

 
1,205

 

 

 
1,205

Exchange of AOG Units for Class A shares
11,045,402

 

 
85,395

 

 

 

 
85,395

 

 
(62,996
)
 
22,399

Net income

 

 

 
659,391

 
149,934

 

 
809,325

 
307,019

 
1,257,650

 
2,373,994

Net gain (loss) on available-for-sale securities (from equity method investment)

 

 

 

 

 
(49
)
 
(49
)
 

 
41

 
(8
)
Balance at December 31, 2013
146,280,784

 
1

 
$
2,624,582

 
$
(1,568,487
)
 
$
1,581,079

 
$
95

 
$
2,637,269

 
$
2,669,730

 
$
1,381,723

 
$
6,688,722

Dilution impact of issuance of Class A shares

 

 
5,267

 

 

 

 
5,267

 

 

 
5,267

Capital increase related to equity-based compensation

 

 
108,871

 

 

 

 
108,871

 

 

 
108,871

Capital contributions

 

 

 

 
135,356

 

 
135,356

 
936,915

 

 
1,072,271

Distributions

 

 
(555,532
)
 

 
(713,264
)
 

 
(1,268,796
)
 
(615,301
)
 
(816,412
)
 
(2,700,509
)
Distributions related to deliveries of Class A shares for RSUs
10,491,649

 

 
27,899

 
(403
)
 

 

 
27,496

 

 

 
27,496

Purchase of AAA units

 

 

 

 

 

 

 
(312
)
 

 
(312
)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities

 

 
(3,423
)
 

 

 

 
(3,423
)
 
3,423

 

 

Satisfaction of liability related to AAA RDUs

 

 
1,183

 

 

 

 
1,183

 

 

 
1,183

Exchange of AOG Units for Class A shares
6,274,121

 

 
45,436

 

 

 

 
45,436

 

 
(34,618
)
 
10,818

Net income

 

 

 
168,229

 
(70,729
)
 

 
97,500

 
227,740

 
404,682

 
729,922

Allocation of currency translation adjustment of consolidated CLO entities

 

 

 

 
724

 

 
724

 

 

 
724

Change in cash flow hedge instruments

 

 

 

 

 
(399
)
 
(399
)
 

 
(591
)
 
(990
)
Net loss on available-for-sale securities (from equity method investment)

 

 

 

 

 
(2
)
 
(2
)
 

 

 
(2
)
Balance at December 31, 2014
163,046,554

 
1

 
$
2,254,283

 
$
(1,400,661
)
 
$
933,166

 
$
(306
)
 
$
1,786,482

 
$
3,222,195

 
$
934,784

 
$
5,943,461

See accompanying notes to consolidated financial statements.

- 149-

Table of Contents

APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2014, 2013, AND 2012
(dollars in thousands, except share data)
 
2014
 
2013
 
2012
Cash Flows from Operating Activities:
 
 
 
 
 
Net income
$
729,922

 
$
2,373,994

 
$
3,047,795

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Equity-based compensation
126,320

 
126,227

 
598,654

Non-cash management fees
(16,738
)
 

 

Depreciation and amortization
10,181

 
11,047

 
10,226

Amortization of intangible assets
34,888

 
43,194

 
43,010

Amortization of debt issuance costs
3,453

 
765

 
511

Unrealized (gains) losses from investment in other investments
(21,726
)
 
12,962

 
1,316

Gain on settlement of contingent obligation
(13,395
)
 

 

Non-cash interest income
(1,725
)
 
(3,403
)
 
(3,187
)
Income (Loss) from equity awards received for directors’ fees
333

 
378

 
(2,536
)
Cash distributions of earnings from equity method investments
83,656

 
109,076

 
66,063

Realized loss from investment in other investments
12,871

 

 

Income from equity method investments
(53,856
)
 
(107,350
)
 
(110,173
)
Change in market value on derivatives
(14,039
)
 
(10,203
)
 

Waived management fees

 

 
(6,161
)
Non-cash compensation expense related to waived management fees

 

 
6,161

Change in fair value of contingent obligations
11,281

 
60,826

 
25,787

Excess tax benefits from share-based payment arrangements
(27,899
)
 
(37,263
)
 

Deferred taxes, net
80,356

 
62,701

 
55,309

Net (gain) loss on disposal of fixed assets
(2
)
 
963

 
923

Gain on business acquisitions

 

 
(1,951,897
)
Changes in assets and liabilities:
 
 
 
 
 
Carried interest receivable
1,375,409

 
(408,819
)
 
(973,578
)
Due from affiliates
(252,339
)
 
(130,525
)
 
5,779

Other assets
(24,868
)
 
6,250

 
(7,901
)
Accounts payable and accrued expenses
33,986

 
34,034

 
559

Accrued compensation and benefits
16,185

 
(17,244
)
 
8,007

Deferred revenue
(79,865
)
 
27,322

 
15,000

Due to affiliates
(97,521
)
 
(44,223
)
 
(103,773
)
Profit sharing payable
(518,003
)
 
141,225

 
361,606

Other liabilities
6,889

 
(5,822
)
 
(5,052
)
Apollo Funds related:
 
 
 
 
 
Net realized gains from investment activities
(79,277
)
 
(87,881
)
 
(77,408
)
Net unrealized losses from investment activities
113,423

 
(309,138
)
 
(458,031
)
Net realized gains on debt
(101,745
)
 
(137,098
)
 

Net unrealized (gains) losses on debt
(809
)
 
232,510

 
497,704

Distributions from investment activities

 
66,796

 
99,675

Change in cash held at consolidated variable interest entities
(13,813
)
 
587,526

 
(348,138
)
Purchases of investments
(10,330,057
)
 
(9,841,763
)
 
(7,525,473
)
Proceeds from sale of investments and liquidating distributions
8,509,361

 
8,422,195

 
7,182,392

Change in other assets
(43,521
)
 
19,260

 
(71,921
)
Change in other liabilities
169,767

 
(64,061
)
 
(49,634
)
Net Cash (Used in) Provided by Operating Activities
$
(372,917
)
 
$
1,134,458

 
$
331,614

Cash Flows from Investing Activities:
 
 
 
 
 
Purchases of fixed assets
(5,949
)
 
(7,577
)
 
(11,259
)
Acquisitions (net of cash assumed) (see note 3)

 

 
(99,190
)
Proceeds from disposals of fixed assets
115

 
2,282

 

Proceeds from sale of investments
50,000

 

 

Cash contributions to equity method investments
(109,923
)
 
(98,422
)
 
(126,917
)
Cash distributions from equity method investments
76,343

 
107,208

 
86,582

Change in restricted cash
2,846

 
(840
)
 
(70
)
Net Cash Provided by (Used In) Investing Activities
$
13,432

 
$
2,651

 
$
(150,854
)
Cash Flows from Financing Activities:
 
 
 
 
 
Principal repayments of debt
$
(250,000
)
 
$
(737,818
)
 
$
(698
)
Issuance of debt
533,956

 
750,000

 

Issuance costs
(5,478
)
 
(7,750
)
 

Net loss related to cash flow hedge instruments
(1,051
)
 

 

Satisfaction of tax receivable agreement
(32,032
)
 
(30,403
)
 

Satisfaction of contingent obligations
(37,271
)
 
(67,535
)
 

Distributions related to deliveries of Class A shares for RSUs
(403
)
 
(85,858
)
 
(25,992
)
Distributions to Non-Controlling Interests in consolidated entities
(19,425
)
 
(12,171
)
 
(8,779
)
Contributions from Non-Controlling Interests in consolidated entities
2,001

 
273

 
4,069

Distributions paid
(506,043
)
 
(584,465
)
 
(202,430
)
Distributions paid to Non-Controlling Interests in Apollo Operating Group
(816,412
)
 
(975,488
)
 
(335,023
)
Excess tax benefits from share-based payment arrangements
27,899

 
37,263

 

Apollo Funds related:
 
 
 
 
 
Issuance of debt
4,225,451

 
2,747,033

 
1,413,334

Principal repayment of debt
(2,371,499
)
 
(2,218,060
)
 
(515,897
)
Purchase of AAA units
(312
)
 
(62,326
)
 
(102,072
)
Distributions paid
(703,041
)
 
(334,215
)
 
(264,910
)
Distributions paid to Non-Controlling Interests in consolidated variable interest entities
(450,419
)
 
(147,402
)
 
(486,727
)
Contributions from Non-Controlling Interests in consolidated variable interest entities
889,690

 
688,899

 
547,085

Subscriptions received in advance

 
35,000

 

Net Cash Provided by (Used in) Financing Activities
$
485,611

 
$
(1,005,023
)
 
$
21,960

Net Increase in Cash and Cash Equivalents
126,126

 
132,086

 
202,720

Cash and Cash Equivalents, Beginning of Period
1,079,537

 
947,451

 
744,731

Cash and Cash Equivalents, End of Period
$
1,205,663

 
$
1,079,537

 
$
947,451

Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Interest paid
$
22,191

 
$
43,760

 
49,590

Interest paid by consolidated variable interest entities
157,812

 
120,149

 
116,392

Income taxes paid
57,276

 
9,233

 
7,128

Supplemental Disclosure of Non-Cash Investing Activities:
 
 
 
 
 
Non-cash distributions from equity method investments
(6,720
)
 
(1,303
)
 
(2,807
)
Transfer of fixed assets held-for-sale

 
6,486

 

Change in accrual for purchase of fixed assets

 

 
(659
)
Supplemental Disclosure of Non-Cash Financing Activities:
 
 
 
 
 
Non-cash distributions
$

 
$

 
$
(788
)
Declared and unpaid distributions
(49,489
)
 
(65,724
)
 
(1,567
)
Non-cash contributions to Non-Controlling Interests in consolidated entities from Appropriated Partners' Capital
10,224

 

 

Non-cash distributions from Non-Controlling interests in consolidated entities to Appropriated Partners' Capital
(135,356
)
 

 

Non-cash contributions from Non-Controlling Interests in Apollo Operating Group related to equity-based compensation

 
19,163

 
313,856

Non-cash distributions from Non-Controlling Interests in consolidated entities

 

 
(3,605
)
Non-cash contributions from Non-Controlling Interests in consolidated entities

 

 
2,547

Unrealized gain on interest rate swaps to Non-Controlling Interests in Apollo Operating Group, net of taxes

 

 
2,010

Satisfaction of liability related to AAA RDUs
1,183

 
1,205

 
1,790

Net transfers of AAA ownership interest to Non-Controlling Interests in consolidated entities
3,423

 
2,226

 
919

Net transfer of AAA ownership interest from Apollo Global Management, LLC
(3,423
)
 
(2,226
)
 
(919
)
Unrealized gain on interest rate swaps

 

 
1,053

Unrealized loss on available-for-sale securities (from equity method investment)
(2
)
 
(49
)
 
(11
)
Capital increases related to equity-based compensation
108,871

 
104,935

 
282,228

Dilution impact of issuance of Class A shares
5,267

 
4,865

 
1,589

Deferred tax asset related to interest rate swaps

 

 
(410
)
Tax benefits related to deliveries of Class A shares for RSUs

 

 
(9,090
)
Capital increase related to business acquisition

 

 
14,001

Net Assets Transferred from Consolidated Variable Interest Entity:
 
 
 
 
 
Cash
$

 
$

 
$
1,161,016

Investments

 

 
8,805,916

Other assets

 

 
169,937

Debt

 

 
(7,255,172
)
Other liabilities

 

 
(560,262
)
Non-Controlling interest in consolidated entities related to acquisition

 

 
260,203

Adjustments related to exchange of Apollo Operating Group units:
 
 
 
 
 
Deferred tax assets
$
58,696

 
$
149,327

 
$

Due to affiliates
(47,878
)
 
(126,928
)
 

Additional paid in capital
(10,818
)
 
(22,399
)
 

Non-Controlling Interest in Apollo Operating Group
34,618

 
62,996

 

See accompanying notes to consolidated financial statements.

- 150-

Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)



1. ORGANIZATION AND BASIS OF PRESENTATION
Apollo Global Management, LLC (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 private equity, credit and real estate funds as well as strategic investment accounts (“SIAs”), 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 and carried interest income related to the performance of the respective funds that it manages. Apollo has three primary business segments:
Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debt investments;
Credit—primarily invests in non-control corporate and structured debt instruments; and
Real estate—primarily invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities.
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The 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 have been eliminated upon consolidation.
Certain reclassifications, when applicable, have been made to the prior period’s consolidated financial statements and notes to conform to the current period’s presentation and are disclosed accordingly.
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 (the “Managing Partners”).
As of December 31, 2014, the Company owned, through four intermediate holding companies that include APO Corp., a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes, APO Asset Co., LLC, a Delaware limited liability company that is a disregarded entity for U.S. federal income tax purposes, APO (FC), LLC, an Anguilla limited liability company that is treated as a corporation for U.S. federal income tax purposes and APO (FC II),LLC, an Anguilla limited liability company that is treated as a corporation for U.S. federal income tax purposes (collectively, the “Intermediate Holding Companies”), 42.3% 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 partnerships that comprise the Apollo Operating Group (“AOG Units”). As of December 31, 2014, Holdings owned the remaining 57.7% 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 consolidated financial statements.
Pursuant to an exchange agreement between Apollo and Holdings (as amended, the “Exchange Agreement”), the holders of the AOG Units (and certain permitted transferees thereof) may, upon notice and subject to the applicable vesting and minimum retained ownership requirements, transfer restrictions and other terms of the Exchange Agreement, exchange their AOG Units for the Company’s Class A shares on a one-for-one basis a limited number of times each year, subject to customary conversion rate adjustments for splits, distributions and reclassifications. Pursuant to the Exchange Agreement, a holder of AOG Units must

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


simultaneously exchange one partnership unit in each of the Apollo Operating Group partnerships to effectuate an exchange for one Class A share. As a holder exchanges its AOG Units, the Company’s indirect interest in the Apollo Operating Group is correspondingly increased.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—The types of entities with which Apollo is involved generally include subsidiaries (i.e. 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., collateralized loan obligations). 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 its consolidation policy, the Company first considers the appropriate consolidation guidance to apply including consideration of whether the entity qualifies for certain scope exceptions and whether the entity should be evaluated under either the previous rules on consolidation of variable interest entities (“VIEs”) or the amended consolidation rules depending on whether or not the entity qualifies for the deferral as further described below. The Company then performs an assessment to determine whether that entity qualifies as a VIE. An entity in which Apollo holds a variable interest is a VIE if any one of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity’s activities that have a significant effect on the success of the legal entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expected losses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantially all of the legal entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Entities that do not qualify as VIEs are generally assessed for consolidation as voting interest entities (“VOEs”) under the voting interest model.
Under the voting interest model, Apollo consolidates those entities it controls through a majority voting interest or through other means, including those VOEs in which the general partner is presumed to have control. Apollo does not consolidate those VOEs in which the presumption of control by the general partner has been overcome through either the granting of substantive rights to the unaffiliated investors to either dissolve the fund or remove the general partner (“kick-out rights”) or the granting of substantive participating rights.
As previously indicated, the consolidation assessment, including 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 whereas others may qualify as VOEs. The granting of substantive kick-out rights is a key consideration in determining whether an entity is a VIE and whether or not that entity should be consolidated. For example, when the unaffiliated holders of equity investment at risk of a fund with sufficient equity to permit the fund to finance its activities without additional subordinated financial support are not granted substantive kick-out rights and the Company is not part of the group of holders of equity investment at risk, the fund is generally determined to be a VIE, as the holders of equity investment at risk as a group lack the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the legal entity. Alternatively, when the unaffiliated holders of equity investment at risk are granted substantive kick-out rights, the fund is generally determined to be a VOE. However, in certain cases where the Company holds a substantive equity investment at risk in the fund, the fund may be determined to be a VOE even though substantive kick-out rights were not granted to the unaffiliated holders of equity investment at risk. In these cases, the Company is part of the group of holders of equity investment at risk and therefore the holders of equity investment at risk as a group do not lack the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the legal entity.
 If the entity is determined to be a VIE under the conditions above, the Company then assesses whether the entity should be consolidated by applying either the previous consolidation rules or the amended consolidation rules depending on whether the entity qualifies for the deferral of the amended consolidation rules as further described below.
VIEs that qualify for the deferral of the amended consolidation rules because certain conditions are met, including if the entities have all the fundamental characteristics (and a number of the typical characteristics) of an investment company and are not securitization or asset-backed financing entities, will continue to apply the previous consolidation rules. VIEs that are securitization or asset-backed financing entities will apply the amended consolidation rules. Under both sets of rules, VIEs for which Apollo is determined to be the primary beneficiary are consolidated.

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


With respect to VIEs such as Apollo's funds that qualify for the deferral of the amended consolidation rules and therefore apply the previous consolidation rules, Apollo is determined to be the primary beneficiary if its involvement, through holding interests directly or indirectly in the VIE or contractually through other variable interests (e.g., carried interest and management fees), would be expected to absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. In cases where two or more Apollo related parties hold a variable interest in a VIE, and the aggregate variable interest held by those parties would, if held by a single party, identify that party as the primary beneficiary, then the Company is determined to be the primary beneficiary to the extent it is the party within the related party group that is most closely associated with the VIE.
For VIEs such as Apollo's CLOs that apply the amended consolidation rules, the Company is determined to be the primary beneficiary if it holds a controlling financial interest defined as possessing both (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) 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. CLOs are generally determined to be VIEs if they are formed solely to issue collateralized notes in the legal form of debt and therefore do not have sufficient total equity investment at risk to permit the entity to finance its activities without additional subordinated financial support. With respect to such CLOs, Apollo generally possesses a controlling financial interest in, and therefore consolidates, such CLOs in accordance with the amended consolidation rules when Apollo's role as collateral manager provides the Company with the power to direct the activities that most significantly impact the CLO’s economic performance and the Company has the right to receive certain benefits from the CLO (e.g., incentive fees) that could potentially be significant to the CLO.
Under the previous and the amended consolidation rules, 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, affiliates 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.
The assessment of whether an entity is a VIE and the determination of whether Apollo should consolidate such VIE requires judgments. Under both sets of rules, 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 two or more parties’ equity interests should be aggregated, (iv) 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 (v) evaluating the nature of the relationship and activities of the parties involved in determining which party within a related-party group is most closely associated with the VIE. Where the VIEs have qualified for the deferral, judgments are also made in estimating cash flows to evaluate which member within the equity group absorbs a majority of the expected losses or residual returns of the VIE. Where the VIEs have not qualified for the deferral, 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 VIEs' economic performance and rights to receive benefits or obligations to absorb losses that could be potentially significant to the VIE.
Certain of the consolidated VIEs were formed to issue collateralized notes in the legal form of debt backed by financial assets. The difference between the fair value of the assets and liabilities of these VIEs is presented within appropriated partners’ capital in the consolidated statements of financial condition as these VIEs are funded solely with debt. Changes in the fair value of the assets and liabilities of these VIEs and the related interest and other income is presented within net gains from investment activities of consolidated variable interest entities and net income attributable to Non-Controlling Interests in the consolidated statements of operations. Such amounts are recorded within appropriated partners’ capital as, in each case, the VIEs' note holders, not Apollo, will ultimately receive the benefits or absorb the losses associated with the VIEs' assets and liabilities.
Assets and liabilities of the consolidated VIEs are shown in separate sections within the consolidated statements of financial condition as of December 31, 2014 and 2013.
For additional disclosures regarding VIEs, see note 5. Intercompany transactions and balances, if any, have been eliminated in consolidation.
Equity Method Investments—For investments in entities over which the Company exercises significant influence but which do not meet the requirements for consolidation, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or loss of such entities. Income (loss) from equity method investments is recognized as part of other income (loss) in the consolidated statements of operations. The carrying amounts of equity method investments are

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


reflected in investments in the 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.
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 consolidated financial statements. As of December 31, 2014, the Non-Controlling Interests relating to Apollo Global Management, LLC primarily includes the ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings and other ownership interests in consolidated entities, which primarily consist of the ownership interest held by limited partners in AP Alternative Assets, L.P. ("AAA"). Non-Controlling Interests also include limited partner interests of Apollo managed funds in certain consolidated VIEs.
Non-Controlling Interests are presented as a separate component of shareholders’ equity on the Company’s consolidated statements of financial condition. The primary components of Non-Controlling Interests are separately presented in the Company’s consolidated statements of changes in shareholders’ equity to clearly distinguish the interest in the Apollo Operating Group and other ownership interests in the consolidated entities. Net income (loss) includes the net income (loss) attributable to the holders of Non-Controlling Interests on the Company’s consolidated statements of operations. Profits and losses are allocated to Non-Controlling Interests in proportion to their relative ownership interests regardless of their basis.
Cash and Cash Equivalents—Apollo considers all highly liquid short-term investments with original maturities of 90 days or less when purchased to be cash equivalents. Substantially all amounts are on deposit in interest-bearing accounts with major financial institutions and exceed insured limits.
Restricted Cash—Restricted cash represents cash deposited at a bank, which is pledged as collateral in connection with leased premises.
Revenues—Revenues are reported in three separate categories that include (i) advisory and transaction fees from affiliates, net, which relate to the investments of the funds and may include individual monitoring agreements the Company has with the portfolio companies and debt investment vehicles of the private equity funds and credit funds; (ii) management fees from affiliates, which are based on committed capital, invested capital, net asset value, gross assets or as otherwise defined in the respective agreements; and (iii) carried interest income (loss) from affiliates, which is normally based on the performance of the funds subject to preferred return.
Advisory and Transaction Fees from Affiliates, Net—Advisory and transaction fees, including directors’ fees, are recognized when the underlying services rendered are substantially completed in accordance with the terms of the transaction and advisory agreements. Additionally, 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 described below. 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 presented net on the Company’s consolidated statements of operations, and any receivable from the respective funds is presented in due from affiliates on the consolidated statements of financial condition.
Advisory and transaction fees from affiliates, net, also includes underwriting fees. Underwriting fees include gains, losses and fees, net of syndicate expenses, arising from securities offerings in which one of the Company’s subsidiaries participates in the underwriter syndicate. Underwriting fees are recognized at the time the underwriting is completed and the income is reasonably assured and are included in the consolidated statements of operations. Underwriting fees recognized but not received are included in other assets on the consolidated statements of financial condition.
As a result of providing advisory services to certain private equity and credit portfolio companies, Apollo is generally entitled to receive fees for transactions related to the acquisition, in certain cases, and disposition of portfolio companies as well as ongoing monitoring of portfolio company operations and directors’ fees. The amounts due from portfolio companies are included in due from affiliates, which is discussed further in note 17. Under the terms of the limited partnership agreements for certain

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


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 from affiliates are presented net of the Management Fee Offset in the consolidated statements of operations.
Management Fees from Affiliates—Management fees for private equity, credit, and real estate funds are recognized in the period during which the related services are performed in accordance with the contractual terms of the related agreement, and are generally based upon (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.
Carried Interest Income from Affiliates—Apollo is entitled to an incentive return that can normally amount to as much as 20% of the total returns on a fund's capital, depending upon performance. Performance-based fees are assessed as a percentage of the investment performance of the funds. The carried interest income from affiliates for any period is based upon an assumed liquidation of the fund’s net assets on the reporting date, and distribution of the net proceeds in accordance with the fund’s income allocation provisions. Carried interest receivable is presented separately in the consolidated statements of financial condition. The carried interest income from affiliates may be subject to reversal to the extent that the carried interest income recorded exceeds the amount due to the general partner based on a fund’s cumulative investment returns. When applicable, the accrual for potential repayment of previously received carried interest income, which is a component of due to affiliates, represents all amounts previously distributed to the general partner that would need to be repaid to the 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.
Management Fee Waiver and Notional Investment Program—Under the terms of certain investment fund partnership agreements, Apollo elected to forgo a portion of the management fee revenue that was due from the funds and instead received a right to a proportionate interest in future distributions of profits of those funds. Waived fees recognized during the period were included in management fees from affiliates in the consolidated statements of operations. This election allowed certain employees of Apollo to waive a portion of their respective share of future income from Apollo and receive, in lieu of a cash distribution, title and ownership of the profits interests in the respective fund. Apollo immediately assigned the profits interests received to its employees. Such assignments of profits interests were treated as compensation and benefits
when assigned. The investment period for Apollo Investment Fund VII, L.P. ("Fund VII") and Apollo Natural Resources Partners, L.P. ("ANRP") for the management fee waiver plan was terminated as of December 31, 2012.
Deferred Revenue—Apollo earns management fees subject to the Management Fee Offset. When advisory and transaction fees are earned by the management company, the Management Fee Offset reduces the management fee obligation of the fund. When the management 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 classified as deferred revenue in the 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 management company are presented on a gross basis, any Management Fee Offsets calculated are presented as a reduction to Advisory and Transaction Fees from Affiliates in the consolidated statements of operations.
Additionally, Apollo earns advisory fees pursuant to the terms of the advisory agreements with certain of the portfolio companies that are owned by the funds. When Apollo receives a payment from a portfolio company that exceeds the advisory fees earned at that point in time, the excess payment is classified as deferred revenue in the 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.
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 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

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


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.
Interest and Other Income—Apollo recognizes security transactions on the trade date. Interest income is recognized as earned on an accrual basis. Discounts and premiums on securities purchased are accreted or amortized over the life of the respective securities using the effective interest method. Realized gains and losses are recorded based on the specific identification method. Interest income also includes payment-in-kind interest (or "PIK" interest) on a convertible note and from one of our credit funds.
Due from/to Affiliates—Apollo considers its existing partners, employees, certain former employees, portfolio companies of the funds and nonconsolidated private equity, credit and real estate funds to be affiliates or related parties.
Investments, at Fair Value—The Company follows U.S. GAAP attributable to fair value measurements which, among other things, requires enhanced disclosures about investments that are measured and reported at fair value. Investments, at fair value, represent investments of the consolidated funds, investments of the consolidated VIEs and certain financial instruments for which the fair value option was elected. The unrealized gains and losses resulting from changes in the fair value are reflected as net gains (losses) from investment activities and net gains (losses) from investment activities of the consolidated VIEs, respectively, in the consolidated statements of operations. In accordance with U.S. GAAP, investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.
Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this 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 investments exhibit higher levels of liquid market observability as compared to Level III investments. The Company subjects broker quotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II investment. These criteria include, but are not limited to, the number and quality of broker quotes, the standard deviation of obtained broker quotes, and the percentage deviation from independent pricing services.
Level III—Pricing inputs are unobservable for the investment and includes situations where there is little observable market activity for the investment. The inputs into the determination of fair value may require significant management judgment or estimation. Investments that are included in this category generally include general and limited partner interests in corporate private equity and real estate 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 investment would qualify for treatment as a Level II or Level III investment. 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, an investment’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 investment when the fair value is based on unobservable inputs.
In cases where an investment or financial instrument that is measured and reported at fair value is transferred between levels of the fair value hierarchy, the Company accounts for the transfer as of the end of the reporting period.

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


Private Equity Investments
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.
Valuation approaches used to estimate the fair value of investments that are less liquid include the market approach and the income approach. The market approach provides an indication of fair value based on a comparison of the subject company to comparable publicly traded companies and transactions in the industry. The market approach is driven more 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 such factors as the Company’s historical and projected financial data, valuations given to comparable companies, the size and scope of the Company’s operations, the Company’s strengths, weaknesses, expectations relating to the market’s receptivity to an offering of the Company’s securities, applicable restrictions on transfer, industry and market information and assumptions, general economic and market conditions and other factors deemed relevant. 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 in the income approach is a discounted cash flow method. Inherent in the discounted cash flow method are assumptions of expected results and a calculated discount rate.
On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuation results related to its funds' private equity investments. 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 the investments in Apollo’s credit funds are valued based on quoted market prices and valuation models. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing recognized pricing services, market participants or other sources. When market quotations are not available, a model based approach is used to determine fair value. The credit funds also enter into foreign currency exchange contracts, total return swap contracts, credit default swap contracts, and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by 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 this period, the changes in value are recorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Total return swap contracts 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. When determining fair value pricing when no market value exists, the value attributed to an investment is based on the enterprise value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation approaches used to estimate the fair value of illiquid credit investments also may use the income approach or market approach. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.
On a quarterly basis, Apollo utilizes a valuation committee consisting of members from senior management, to review and approve the valuation results related to its funds' credit investments. For certain publicly traded vehicles, 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.

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Real Estate Investments
The estimated fair value of commercial mortgage-backed securities (“CMBS”) in Apollo’s 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 Company evaluates its loans for possible impairment on a quarterly basis. For Apollo’s opportunistic and value added real estate funds, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable 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.
On a quarterly basis, Apollo utilizes a valuation committee, consisting of members from senior management, to review and approve the valuation results related to its funds' real estate investments. For certain publicly traded vehicles, 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.
Fair Value of Financial Instruments
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.
Except for the Company’s debt obligations (as described in note 14 to our 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.
Fair Value Option—Apollo has elected the fair value option for the Company's investment in Athene Holding ("Athene Holding" and, together with its subsidiaries, "Athene"), the convertible notes issued by HFA Holdings Limited (“HFA”) and for the assets and liabilities of the consolidated VIEs. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. Apollo has applied the fair value option for certain corporate loans, other investments and debt obligations held by the consolidated VIEs that otherwise would not have been carried at fair value. For the convertible notes issued by HFA, Apollo has elected to separately present interest income from other changes in the fair value of the convertible notes in the consolidated statements of operations. See notes 4, 5, and 6 for further disclosure on the investments in Athene Holding, HFA and financial instruments of the consolidated VIEs for which the fair value option has been elected.
Interest Rate Swap Agreements—Apollo recognizes derivatives as either an asset or liability measured at fair value. In order to reduce interest rate risk, Apollo entered into interest rate swap agreements which were formally designated as cash flow hedges. To qualify for cash flow hedge accounting, interest rate swaps must meet certain criteria, including (a) the items to be hedged expose Apollo to interest rate risk and (b) the interest rate swaps are highly effective in reducing Apollo’s exposure to interest rate risk. Apollo formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, its strategy for undertaking the hedge transaction and Apollo’s evaluation of effectiveness. Effectiveness is periodically assessed based upon a comparison of the relative changes in the cash flows of the interest rate swaps and the items being hedged.
For derivatives that have been formally designated as cash flow hedges, the effective portion of changes in the fair value of the derivatives are recorded in accumulated other comprehensive income (loss) (“OCI”). Amounts in accumulated OCI

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


are reclassified into earnings when interest expense on the underlying borrowings is recognized. If, at any time, the swaps are determined to be ineffective, in whole or in part, due to changes in the interest rate swap or underlying debt agreements, the fair value of the portion of the interest rate swap determined to be ineffective will be recognized as a gain or loss in the consolidated statements of operations.
Financial Instruments held by Consolidated VIEs
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 interest and yield risks, among other factors. When market quotations are not available, a model based approach is used to determine fair value.
The consolidated VIEs also have debt obligations that are recorded at fair value. The primary valuation methodology used to determine fair value for debt obligations is market quotation. Prices are based on the average of the “bid” and “ask” prices. In the event that market quotations are not available, a model based approach is used. The model based approach used to estimate the fair values of debt obligations for which market quotations are not available is the discounted cash flow method, which includes consideration of the cash flows of the debt obligation based on projected quarterly interest payments and quarterly amortization. Debt obligations are discounted based on the appropriate yield curve given the loan’s respective maturity and credit rating. Management uses its discretion and judgment in considering and appraising relevant factors for determining the valuations of its debt obligations.
Pending Deal Costs
Pending deal costs consist of certain costs incurred (e.g. research costs, due diligence costs, professional fees, legal fees and other related items) related to private equity, credit and real estate fund transactions that the Company is pursuing but which have not yet been consummated. These costs are deferred until such transactions are broken or successfully completed. A transaction is determined to be broken upon management’s decision to no longer pursue the transaction. In accordance with the related fund agreements, in the event the deal is broken, all of the costs are generally reimbursed by the funds and considered in the calculation of the Management Fee Offset. These offsets are included in advisory and transaction fees from affiliates, net in the Company’s consolidated statements of operations. If a deal is successfully completed, Apollo is reimbursed by the fund or a fund’s portfolio company for all costs incurred.
Fixed Assets
Fixed Assets consist primarily of leasehold improvements, furniture, fixtures and equipment, computer hardware and software and are recorded at cost, net of accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the assets’ estimated useful lives and in the case of leasehold improvements the lesser of the useful life or the term of the lease. Aircraft engine overhauls are capitalized and depreciated until the next expected overhaul. Expenditures for repairs and maintenance are charged to expense when incurred. The Company evaluates long-lived assets for impairment periodically and whenever events or changes in circumstances indicate the carrying amounts of the assets may be impaired.
Business Combinations
The Company accounts for acquisitions using the purchase method of accounting in accordance with U.S. GAAP. Under the purchase method of accounting, the purchase price of an acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date.

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Goodwill and Intangible Assets
Goodwill and indefinite-life intangible assets must be reviewed annually for impairment or more frequently if circumstances indicate impairment may have occurred. Identifiable finite-life intangible assets, by contrast, are amortized over their estimated useful lives, which are periodically re-evaluated for impairment or when circumstances indicate an impairment may have occurred. Apollo amortizes its identifiable finite-life intangible assets using a method of amortization reflecting the pattern in which the economic benefits of the finite-life intangible asset are consumed or otherwise used up. If that pattern cannot be reliably determined, Apollo uses the straight-line method of amortization. At June 30, 2014, the Company performed its annual impairment testing, and, as the fair value of each of the Company’s reporting units was in excess of its carrying value, there was no impairment of goodwill. Additionally, there was no impairment of indefinite-life intangible assets as of December 31, 2014.
Profit Sharing Payable
Profit sharing payable primarily represents the amounts payable to employees and former employees who are entitled to a proportionate share of carried interest income in one or more funds. This portion of the liability is calculated based upon the changes to realized and unrealized carried interest and is therefore not payable until the carried interest itself is realized. Profit sharing payable also includes contingent obligations that were recognized in connection with certain Apollo acquisitions.
Debt Issuance Costs
Debt issuance costs consist of costs incurred in obtaining financing and are amortized over the term of the financing using the effective interest method. These costs are included in other assets on the consolidated statements of financial condition.
Foreign Currency
The Company may, from time to time, hold foreign currency denominated assets and liabilities. Such assets and liabilities are translated using the exchange rates prevailing at the end of each reporting period. The functional currency of the Company’s international subsidiaries is the U.S. Dollar, as their operations are considered an extension of U.S. parent operations. Non-monetary assets and liabilities of the Company’s international subsidiaries are remeasured into the functional currency using historical exchange rates specific to each asset and liability. The results of the Company’s foreign operations are normally remeasured using an average exchange rate for the respective reporting period. All currency remeasurement adjustments are included within other income (loss), net in the consolidated statements of operations. Gains and losses on the settlement of foreign currency transactions are also included within other income (loss), net in the consolidated statements of operations.
Compensation and Benefits
Equity-Based Compensation—Equity-based awards granted to 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. The Company estimates forfeitures for equity-based awards that are not expected to vest. Equity-based awards granted to non-employees for services provided to affiliates are remeasured to fair value at the end of each reporting period and expensed over the relevant service period.
Salaries, Bonus and Benefits—Salaries, bonus and benefits include base salaries, discretionary and non-discretionary bonuses, severance and employee benefits. Bonuses are generally accrued over the related service period.
The Company sponsors a 401(k) savings plan whereby U.S.-based employees are entitled to participate in the plan based upon satisfying certain eligibility requirements. The Company may provide discretionary contributions from time to time. No contributions relating to this plan were made by the Company for the years ended December 31, 2014, 2013 and 2012.
Profit Sharing Expense—Profit sharing expense primarily consists of a portion of carried interest recognized in one or more funds allocated to employees and former employees. Profit sharing expense is recognized on an accrued basis as the related carried interest income is earned. Profit sharing expense can be reversed during periods when there is a decline in carried interest income that was previously recognized. Additionally, profit sharing expenses previously distributed may be subject to clawback from employees, former employees and Contributing Partners.

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Changes in the fair value of the contingent consideration obligations that were recognized in connection with certain Apollo acquisitions are reflected in the Company’s 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 carried interest realizations earned by the Company in a given year, which amounts are reflected in profit sharing expense in the accompanying consolidated financial statements.
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 the Company’s investment portfolio between the opening reporting date and the closing reporting date. The consolidated financial statements include the net realized and unrealized gains (losses) of investments, at fair value. For the Company's investments held by AAA (see note 4), a portion of the net gains (losses) from investment activities are attributable to Non-Controlling Interests in the consolidated statements of operations.
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 consolidated statements of operations.
Other Income (Loss), Net—Other income (loss), net includes the recognition of bargain purchase gains as a result of Apollo acquisitions, gains (losses) arising from the remeasurement of foreign currency denominated assets and liabilities of foreign subsidiaries, reversal of a portion of the tax receivable agreement liability (see note 17), gains (losses) arising from the remeasurement of derivative instruments associated with fees from certain of the Company’s affiliates, gains arising from extinguishment of contingent consideration obligations and other miscellaneous non-operating income and expenses.
Comprehensive Income (Loss)—U.S. GAAP guidance establishes standards for reporting comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. U.S. GAAP requires that the Company classify items of OCI by their nature in the financial statements and display the accumulated balance of OCI separately in the shareholders’ equity section of the Company’s consolidated statements of financial condition. Comprehensive income (loss) consists of net income (loss) and OCI. Apollo’s OCI is primarily comprised of the effective portion of changes in the fair value of the interest rate swap agreements discussed previously and foreign currency translation adjustments associated with the Company's non-U.S. dollar denominated subsidiaries.
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, these entities in some cases are subject to New York City unincorporated business taxes (“NYC UBT”) and non-U.S. entities, in some cases, are subject to non-U.S. corporate income taxes. In addition, APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. Federal, state and local corporate income tax, and the Company’s provision for income taxes is accounted for in accordance with U.S. GAAP.
Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. The Company recognizes the 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 processes, based on the technical merits of the position. 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 tax positions are reviewed and evaluated quarterly to determine whether or not the Company has uncertain tax positions that require financial statement recognition.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized 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.

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Net Income (Loss) Per Class A Share—U.S. GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for distributions declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to Class A shares and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Earnings or losses allocated to each class of security are then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding Class A shares and includes the number of additional Class A shares that would have been outstanding if the dilutive potential Class A shares had been issued. The numerator is adjusted for any changes in income or loss that would result from the issuance of these potential Class A shares.
Use of Estimates—The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the 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, carried interest income from affiliates, contingent consideration obligations related to acquisitions, non-cash compensation, and fair value of investments and debt. Actual results could differ materially from those estimates.

Consolidated Statements of Cash Flows— During the second quarter of 2014, the Company identified that return on capital related to cash distributions from equity method investments had been previously reported as cash flows provided by investing activities. Cash flows received from equity method investments should have been separately identified as either return of investment or return on investment. Cash flows from the return of investment should be presented in cash flows provided by investing activities and return on investment presented within cash flows provided by operating activities. The Company restated the previously presented cash flows for these cash distributions from equity method investments and, in doing so, for the years ended December 31, 2013 and December 31, 2012, the consolidated statements of cash flows were restated to increase net cash flows provided by operating activities by $109.1 million and $66.1 million, respectively, with a corresponding decrease in net cash flows provided by investing activities. The Company has evaluated the effect of the incorrect presentation both qualitatively and quantitatively, and concluded that it did not have a material impact on, nor require amendment of, any previously filed annual or quarterly consolidated financial statements.
Recent Accounting Pronouncements
In April 2013, the Financial Accounting Standards Board ("FASB") issued guidance that requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. The financial statements prepared using the liquidation basis of accounting should present relevant information about the expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities. Liabilities should be recognized and measured in accordance with U.S. GAAP that otherwise applies to those liabilities. The guidance requires an entity to accrue and separately present the costs that it expects to incur and the income that it expects to earn during the expected duration of the liquidation, including any costs associated with the sale or settlement of those assets and liabilities. Additionally, the amended guidance requires disclosures about an entity’s plan for liquidation, the methods and significant assumptions used to measure assets and liabilities, the type and amount of costs and income accrued, and the expected duration of the liquidation process. The guidance is effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In June 2013, the FASB issued guidance to change the assessment of whether an entity is an investment company by developing a new two-tiered approach that requires an entity to possess certain fundamental characteristics while allowing judgment in assessing certain typical characteristics. The fundamental characteristics that an investment company must have include the following: (1) it obtains funds from one or more investors and provides the investor(s) with investment management services; (2) it commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income or both; and (3) it does not obtain returns or benefits from an investee or its affiliates that

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


are not normally attributable to ownership interests. The typical characteristics of an investment company that an entity should consider before concluding whether it is an investment company include the following: (1) it has more than one investment; (2) it has more than one investor; (3) it has investors that are not related parties of the parent or the investment manager; (4) it has ownership interests in the form of equity or partnership interests; and (5) it manages substantially all of its investments on a fair value basis. The new approach requires an entity to assess all of the characteristics of an investment company and consider its purpose and design to determine whether it is an investment company. The guidance includes disclosure requirements about an entity’s status as an investment company and financial support provided or contractually required to be provided by an investment company to its investees. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2013. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In July 2013, the FASB issued guidance to eliminate the diversity in practice on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under the new guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carry forward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statement as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date (e.g. an entity should not evaluate whether the deferred tax asset expires before the statute of limitations on the tax position or whether the deferred tax asset may be used prior to the unrecognized tax benefit being settled). The guidance does not require new recurring disclosures. The guidance applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists at the reporting date. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date, although retrospective application is permitted. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In April 2014, the FASB issued guidance to improve the definition of discontinued operations and to enhance convergence between the FASB’s and International Accounting Standard Board’s (IASB) reporting requirements for discontinued operations. The new definition of discontinued operations limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. The new guidance affects entities that have either of the following: (1) a component of an entity that either is disposed of or meets the criteria under current guidance to be classified as held for sale or (2) a business or nonprofit activity that, on acquisition, meets the criteria under current guidance to be classified as held for sale. The guidance is effective for all disposals (or classifications as held for sale) of components of an entity and all businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications has held for sale) that have not been reported in financial statements previously issued or available for issuance. This guidance is not expected to have a material impact on the Company's consolidated financial statements.
In May 2014, the FASB issued guidance to establish a comprehensive and converged standard on revenue recognition to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions, and geographies. The core principle of the new guidance is 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. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also specifies the accounting for certain costs to obtain or fulfill a contract with a customer. The new guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Qualitative and quantitative information is required to be disclosed about: (1) contracts with customers, (2) significant judgments and changes in judgments, and (3) assets recognized from costs to obtain or fulfill a contract. The new guidance will apply to all entities. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early application is not permitted. The Company is in the process of

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


evaluating the impact that this guidance will have on its consolidated financial statements, including the timing of the recognition of carried interest income.
In June 2014, the FASB issued guidance to resolve diversity in practice in the accounting for share-based payments where the terms of an award provide that a performance target could be achieved after the requisite service period. The new guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Accordingly, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The new guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early application is permitted. The Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements.
In August 2014, the FASB issued guidance to eliminate diversity in practice in the accounting for measurement differences in both the initial consolidation and subsequent measurement of the financial assets and the financial liabilities of a collateralized financing entity. A reporting entity that consolidates a collateralized financing entity within the scope of the new guidance may elect to measure the financial assets and the financial liabilities of that collateralized financing entity using either the measurement alternative included in the new guidance or the existing guidance on fair value measurement. When the measurement alternative is not elected for a consolidated collateralized financing entity within the scope of the new guidance, the new guidance clarifies that (1) the fair value of the financial assets and the fair value of the financial liabilities of the consolidated collateralized financing entity should be measured using the requirements of the existing guidance on fair value measurement and (2) any differences in the fair value of the financial assets and the fair value of the financial liabilities of that consolidated collateralized financing entity should be reflected in earnings and attributed to the reporting entity in the consolidated statement of income (loss). When a reporting entity elects the measurement alternative included in the new guidance for a collateralized financing entity, the reporting entity should measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. The guidance applies to a reporting entity that is required to consolidate a collateralized financing entity under the existing variable interest entity guidance when (1) the reporting entity measures all of the financial assets and the financial liabilities of that consolidated collateralized financing entity at fair value in the consolidated financial statements based on other guidance and (2) the changes in the fair values of those financial assets and financial liabilities are reflected in earnings. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted as of the beginning of an annual period. The Company is in the process of evaluating the impact that this guidance will have on the recognition of appropriated partners’ capital, although the impact on net income attributable to the Company is not expected to be material.
In August 2014, the FASB issued guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires that management evaluate each annual and interim reporting period whether conditions exist that give rise to substantial doubt about the entity’s ability to continue as a going concern within one year from the financial statement issuance date, and if so, provide related disclosures. Disclosures are only required if conditions give rise to substantial doubt, whether or not the substantial doubt is alleviated by management’s plans. No disclosures are required specific to going concern uncertainties if an assessment of the conditions does not give rise to substantial doubt. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. If substantial doubt is alleviated as a result of the consideration of management’s plans, a company should disclose information that enables users of financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes): (1) principal conditions that initially give rise to substantial doubt, (2) management’s evaluation of the significance of those conditions in relation to the company’s ability to meet its obligations, and (3) management’s plans that alleviated substantial doubt. If substantial doubt is not alleviated after considering management’s plans, disclosures should enable investors to understand the underlying conditions, and include the following: (1) a statement indicating that there is substantial doubt about the company’s ability to continue as a going concern within one year

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


after the issuance date, (2) the principal conditions that give rise to substantial doubt, (3) management’s evaluation of the significance of those conditions in relation to the company’s ability to meet its obligations, and (4) management plans that are intended to mitigate the adverse conditions. The new guidance applies to all companies. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. This guidance is not expected to have an impact on the consolidated financial statements of the Company.
In November 2014, the FASB issued guidance to clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the new guidance clarifies that an entity should consider all relevant terms and features-including the embedded derivative feature being evaluated for bifurcation when evaluating the nature of the host contract. Further, the new guidance clarifies that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The new guidance applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements.
In January 2015, the FASB issued guidance to simplify income statement presentation by eliminating the concept of extraordinary items. Existing guidance requires that an entity separately classify, present, and disclose extraordinary events and transactions. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity is also required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The new guidance eliminates the requirement for reporting entities to consider whether an underlying event or transactions is extraordinary. However, the presentation and disclosure requirements under existing guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. Under the new guidance, items that are both unusual in nature and infrequently occurring should be presented within income from continuing operations or disclosed in the notes to the financial statements. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. This guidance is not expected to have an impact on the consolidated financial statements of the Company.
In February 2015, the FASB issued new guidance which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Existing guidance includes different requirements for performing a consolidation analysis if, among other factors, the entity under evaluation is any one of the following: (1) a legal entity that qualifies for the indefinite deferral under the amended consolidation rules, (2) a legal entity that is within the scope of the amended consolidation rules, or (3) a limited partnership or similar entity that is considered a voting interest entity. Under the new guidance, all reporting entities are within the scope of the new standard, including limited partnerships and similar legal entities, unless a scope exception applies. The presumption that a general partner controls a limited partnership has been eliminated. In addition, fees paid to decision makers that meet certain conditions (e.g. are both customary and commensurate with the level of effort required for the services provided) no longer cause decision makers to consolidate VIEs in certain instances. The new guidance places more emphasis in the consolidation evaluation on variable interests other than the fee arrangements such as principal investment risk (for example, debt or equity interests), guarantees of the value of the assets or liabilities of the VIE, written put options on the assets of the VIE, or similar obligations, including some liquidity commitments or agreements (explicit or implicit). Additionally, the new guidance reduces the extent to which related party arrangements cause an entity to be considered a primary beneficiary. The indefinite deferral of the amended consolidation rules for certain investment funds has been eliminated and a scope exception from the new consolidation standard has been added for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the investment Company Act of 1940 for registered money market funds. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period, and adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the new guidance using either a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or by applying the amendments retrospectively. The Company is in the process of evaluating the impact that this new guidance will have on its consolidated financial statements.


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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


3. ACQUISITIONS AND BUSINESS COMBINATIONS

Business Combinations
Stone Tower
On April 2, 2012, the Company completed its previously announced acquisition of the membership interests of Stone Tower Capital LLC and its related management companies (“Stone Tower”), a leading alternative credit manager. The acquisition was consummated by the Company for total consideration at fair value of approximately $237.2 million. The transaction added significant scale and several new credit product capabilities and increased the assets under management of the credit segment.
Consideration exchanged at closing included a payment of approximately $105.5 million, which the Company funded from its existing cash resources, and equity granted to the former owners of Stone Tower with grant date fair value of $14.0 million valued using the closing price of the Company's Class A shares on April 2, 2012 of $14.40. Additionally, the Company will also make payments to the former owners of Stone Tower under a contingent consideration obligation which requires the Company to transfer cash to the former owners of Stone Tower based on a specified percentage of carried interest income. The contingent consideration obligation had an acquisition date fair value of approximately $117.7 million, which was determined based on the present value of the estimated future carried interest payments of approximately $139.4 million using a discount rate of 9.5%, and is reflected in profit sharing payable in the consolidated statements of financial condition. See note 18 for additional disclosure regarding the contingent consideration obligation.
As a result of the acquisition, the Company incurred $4.6 million in acquisition costs, of which $2.8 million was incurred during the year ended December 31, 2012.
Tangible assets acquired in the acquisition consisted of management and carried interest receivable and other assets. Intangible assets acquired consisted primarily of certain management contracts providing economic rights to management fees, senior fees, subordinate fees, and carried interest from existing CLOs, funds and strategic investment accounts.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The Company performed an analysis and an evaluation of the net assets acquired and liabilities assumed. The estimated fair value of the assets acquired exceeded the estimated fair value of the liabilities assumed as of the acquisition date resulting in a bargain purchase gain of approximately $1,951.1 million for the year ended December 31, 2012. The bargain purchase gain is reflected in other income, net within the consolidated statement of operations for the year ended December 31, 2012, with corresponding amounts reflected as components of appropriated partners’ capital within the consolidated statement of changes in shareholders’ equity for the year ended December 31, 2012. The estimated fair values for the net assets acquired and liabilities assumed are summarized in the following table:
Tangible Assets:
 
Cash
$
6,310

Carried Interest Receivable
36,097

Due from Affiliates
1,642

Other Assets
2,492

Total assets of consolidated variable interest entities
10,136,869

Intangible Assets:
 
Management Fees Contracts
9,658

Senior Fees Contracts
568

Subordinate Fees Contracts
2,023

Carried Interest Contracts
85,071

Non-Compete Covenants
200

Fair Value of Assets Acquired
10,280,930

Liabilities Assumed:
 
Accounts payable and accrued expenses
3,570

Due to Affiliates
4,410

Other Liabilities
8,979

Total liabilities of consolidated variable interest entities
7,815,434

Fair Value of Liabilities Assumed
7,832,393

Fair Value of Net Assets Acquired
2,448,537

Less: Net assets attributable to Non-Controlling Interests in consolidated entities
260,203

Less: Fair Value of Consideration Transferred
237,201

Gain on Acquisition
$
1,951,133

The bargain purchase gain was recorded in other income, net in the consolidated statements of operations.
The acquisition related intangible assets valuation and related amortization are as follows:
 
 
 
As of  
 December 31,
 
Weighted Average Useful Life in Years
 
2014
 
2013
Management Fees Contracts
2.2
 
$
9,658

 
$
9,658

Senior Fees Contracts
2.4
 
568

 
568

Subordinate Fees Contracts
2.5
 
2,023

 
2,023

Carried Interest Contracts
3.7
 
85,071

 
85,071

Non-Compete Covenants
2.0
 
200

 
200

Total Intangible Assets
 
 
97,520

 
97,520

Less: Accumulated amortization

 
(73,568
)
 
(48,586
)
Net Intangible Assets

 
$
23,952

 
$
48,934


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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)



The results of operations of the acquired business since the acquisition date included in the Company’s consolidated statements of operations for the period from April 2, 2012 to December 31, 2012 were as follows:
 
For the Period from April 2, 2012 to
December 31, 2012
Total Revenues
$
51,719

Net Income Attributable to Non-Controlling Interest
$
(1,925,053
)
Net Income Attributable to Apollo Global Management, LLC
$
12,446

Other Acquisitions
On October 2, 2013, the Company acquired specified assets and liabilities of Aviva Investors North America, Inc., a wholly-owned subsidiary of Aviva plc. The acquisition provides the Company additional asset management allocation and related service capabilities for similar assets that it directly manages across its investment platform. The transaction was accounted for as a business combination. Identifiable assets having a combined fair value of $0.4 million were acquired in exchange for fair value of liabilities assumed of $0.8 million, which resulted in goodwill of $0.4 million as of the acquisition date. There was no consideration transferred relating to this acquisition.
Intangible Assets
Intangible assets, net consists of the following:
 
As of  
 December 31,
 
2014
 
2013
Finite-lived intangible assets/management contracts
$
240,285

 
$
240,285

Accumulated amortization
(180,246
)
 
(145,358
)
Intangible assets, net
$
60,039

 
$
94,927

The changes in intangible assets, net consist of the following:
 
For the Year Ended 
 December 31,
 
 
2014
 
2013
 
2012
 
Balance, beginning of year
$
94,927

 
$
137,856

 
$
81,846

 
Amortization expense
(34,888
)
 
(43,194
)
 
(43,009
)
 
Acquisitions

 
265

 
99,019

(1) 
Balance, end of year
$
60,039

 
$
94,927

 
$
137,856

 
(1)
Includes impact of purchase price adjustments related to the Gulf Stream acquisition.
Amortization expense related to intangible assets was $34.9 million, $43.2 million, and $43.0 million for the years ended December 31, 2014, 2013, and 2012, respectively.
Expected amortization of these intangible assets for each of the next 5 years and thereafter is as follows:
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Amortization of intangible assets
$
33,458

 
$
7,917

 
$
4,952

 
$
3,677

 
$
3,677

 
$
6,358

 
$
60,039



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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)



4. INVESTMENTS
The following table represents Apollo’s investments: 
 
As of 
 December 31, 2014
 
As of 
 December 31, 2013
Investments, at fair value
$
2,499,128

 
$
2,012,027

Equity method investments
380,878

 
381,856

Total Investments
$
2,880,006

 
$
2,393,883

 

Investments, at Fair Value

Investments, at fair value, consist of financial instruments held by AAA, the Company's investment in Athene Holding, investments held by the Apollo Credit Senior Loan Fund, L.P. ("Apollo Senior Loan Fund"), and other investments held by the Company at fair value. Other investments include the Company's investment in HFA. As of December 31, 2014 and December 31, 2013, the net assets of the consolidated funds (excluding VIEs) were $2,174.1 million and $1,971.1 million, respectively. The following investments, except the investment in Athene Holding and other investments, are presented as a percentage of net assets of the consolidated funds:
 
  
As of December 31, 2014
 
As of December 31, 2013
 
Fair Value
 
 
 
 
 
Fair Value
 
 
 
 
Investments, at
Fair Value –
Affiliates
Private
Equity
 
Credit
 
Total
 
Cost
 
% of Net
Assets of
Consolidated
Funds
 
Private Equity
 
Credit
 
Total
 
Cost
 
% of Net
Assets of
Consolidated
Funds
AAA
$
2,144,118

 
$

 
$
2,144,118

 
$
1,494,358

 
98.6
%
 
$
1,942,051

 
$

 
$
1,942,051

 
$
1,494,358

 
98.5
%
Athene Holding
25,104

 
299,410

 
324,514

 
324,293

 
N/A

 

 

 

 

 
N/A

Apollo Senior Loan Fund

 
29,896

 
29,896

 
30,100

 
1.4

 

 
29,603

 
29,603

 
29,226

 
1.5

Other Investments
486

 
114

 
600

 
3,318

 
N/A

 
839

 
39,534

 
40,373

 
65,377

 
N/A

Total
$
2,169,708

 
$
329,420

 
$
2,499,128

 
$
1,852,069

 
100.0
%
 
$
1,942,890

 
$
69,137

 
$
2,012,027

 
$
1,588,961

 
100.0
%
Securities
As of December 31, 2014 and December 31, 2013, the sole investment held by AAA was its investment in AAA Investments, L.P. (“AAA Investments”), which is measured based on AAA’s share of net asset value of AAA Investments. The following table represents the sole investment of AAA Investments, which constitutes more than five percent of the net assets of the funds that the Company consolidates (excluding VIEs) as of the aforementioned dates:
 
 
As of December 31, 2014
 
As of December 31, 2013
 
Instrument Type
 
Fair Value
 
Cost
 
% of Net
Assets of
Consolidated
Funds
 
Instrument Type
 
Fair Value
 
Cost
 
% of Net
Assets of
Consolidated
Funds
Athene Holding
Equity
 
$
2,244,192

 
$
1,363,532

 
103.2
%
 
Equity
 
$
1,950,010

 
$
1,331,942

 
98.9
%
As of December 31, 2014, AAA Investments' portfolio consisted of a single investment in the equity of Athene Holding. Athene Holding is the ultimate parent of various insurance company operating subsidiaries. Through its subsidiaries, Athene Holding provides insurance products focused primarily on the retirement market and its business centers primarily on issuing or reinsuring fixed indexed annuities.
As of December 31, 2014 and December 31, 2013, AAA, through its investment in AAA Investments was the largest equity holder in Athene Holding with an economic ownership stake of approximately 47.7% (calculated as if the commitments in

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


the Athene Private Placement (as defined below) closed through December 31, 2014 were fully drawn down but without giving effect to (i) restricted common shares issued under Athene’s management equity plan or (ii) common shares to be issued under the Amended AAA Services Agreement or the Amended Athene Services Agreement subsequent to December 31, 2013) and 72.5% (without giving effect to (i) restricted common shares issued under Athene's management equity plan, (ii) the common shares to be issued under the Amended AAA Services Agreement or the Amended Athene Services Agreement subsequent to December 31, 2013 and (iii) conversion of AAA Investments' note receivable), respectively, and effectively held 45% of the voting power of Athene. AAA Investments’ ownership interest in Athene is held indirectly through its subsidiaries. During 2014, AAA Investments' ownership stake in Athene was reduced as a result of the Athene Private Placement (as defined below), the issuance of 3.7 million unrestricted common shares of Athene Holding under Athene’s management equity plan) and issuances of shares under the Amended AAA Services Agreement and the Amended Athene Services Agreement, and increased by the conversion to common shares of AAA Investments’ note receivable from Athene. See note 17 for further information regarding Athene.
At December 31, 2014 and December 31, 2013, Athene’s fair value was determined using the embedded value method which was based on the present value of the future expected regulatory distributable income generated by the net assets of Athene plus the excess capital (i.e., the capital in excess of what is required to be held against Athene’s liabilities). The net assets of Athene consist of the current and projected assets less the current and projected liabilities related to in force insurance contracts. For purposes of the excess capital calculation the assets are valued at fair value using our valuation methodology disclosed in note 2. The approach of using actuarially projected asset and liability income to value an insurance company is widely used by market participants in the insurance industry, particularly in private company acquisitions. The embedded value of the in force insurance contracts incorporates actuarial projections of expected income utilizing most recently available policyholder contract and experience data, industry information and assumptions, general economic and market conditions, and other factors deemed relevant, including the cost of capital. In addition, consideration is also given to comparable company multiples in the determination of fair value.
Athene Holding
As further described in note 17, during 2014, Athene Holding raised $1.218 billion of net equity commitments (the “Athene Private Placement”), which was priced at $26 per common share of Athene Holding. In connection with the Athene Private Placement, both the Athene Services Derivative and the AAA Services Derivative (as defined in note 17) were settled on April 29, 2014 by delivery to Apollo of common shares of Athene Holding, and as a result, such derivatives were terminated. Following settlement of these derivatives, future monitoring fees and management fees paid to Apollo pursuant to the Amended Athene Services Agreement and the Amended AAA Services Agreement, respectively, will be paid on a quarterly basis in arrears by delivery to Apollo of common shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the Exchange Act).

The Company elected the fair value option for its investment in Athene Holding at the time of settlement of the Athene Services Derivative and AAA Services Derivative. The Company has classified this investment as a Level III asset in the fair value hierarchy, as the pricing inputs into the determination of fair value require significant judgment and estimation. The investment is valued based on the price of a common share of Athene Holding, which as of December 31, 2014 was determined using the embedded value method. See note 6 for further discussion regarding fair value leveling and note 17 for further information regarding Athene.
 Apollo Senior Loan Fund
On December 31, 2011, the Company became the sole investor in the Apollo Senior Loan Fund and therefore consolidated the assets and liabilities of the fund. The fund invests in U.S. denominated senior secured loans, senior secured bonds and other income generating fixed-income investments. At least 90% of the Apollo Senior Loan Fund’s portfolio of investments must consist of senior secured, floating rate loans or cash or cash equivalents. Up to 10% of the Apollo Senior Loan Fund’s portfolio may consist of non-first lien fixed income investments and other income generating fixed income investments, including but not limited to senior secured bonds. The Apollo Senior Loan Fund may not purchase assets rated (tranche rating) at B3 or lower by Moody’s, or equivalent rating by another nationally recognized rating agency.
The Company has classified the instruments associated with the Apollo Senior Loan Fund investment within the respective level in the fair value hierarchy. See note 6 for further discussion regarding fair value leveling.
HFA
On March 7, 2011, the Company invested $52.1 million (including expenses related to the purchase) in a convertible note with an aggregate principal amount of $50.0 million and received 20,833,333 stock options issued by HFA, an Australian based

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


specialist global funds management company. Pursuant to a buy-back agreement with HFA, effective July 2, 2014, HFA repurchased the convertible note at its face value of $50.0 million.
The note had a percentage coupon interest of 6% per annum, paid via principal capitalization (payment-in-kind, or "PIK", interest) for the first four years, and thereafter either in cash or via principal capitalization at HFA’s discretion. The PIK interest provided for the Company to receive additional common shares of HFA if the note was converted. For the years ended December 31, 2014, 2013, and 2012, the Company recorded $1.7 million, $4.0 million and $3.1 million, respectively, in PIK interest income included in interest income in the consolidated statements of operations. The Company separately presents interest income in the consolidated statements of operations from other changes in the fair value of the convertible note.
The Company classified the instruments associated with the HFA investment as Level III investments. See note 6 for further discussion regarding fair value leveling.


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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Net Gains (Losses) from Investment Activities
Net gains (losses) from investment activities in the consolidated statements of operations include net realized gains (losses) from sales of investments, and the change in net unrealized gains (losses) resulting from changes in fair value or reversal of realization of gains/losses of the consolidated funds’ investments and realization of previously unrealized gains/losses. Additionally, net gains from investment activities include changes in the fair value of the investment in HFA and other investments held at fair value. The following tables present Apollo’s net gains (losses) from investment activities for the years ended December 31, 2014, 2013 and 2012: 
 
For the Year Ended 
 December 31, 2014
 
Private Equity
 
Credit
 
Total
Realized losses on sales of investments
$

 
$
(12,651
)
 
$
(12,651
)
Change in net unrealized gains due to changes in fair values
204,542

 
21,352

 
225,894

Net Gains from Investment Activities
$
204,542

 
$
8,701

 
$
213,243

 
For the Year Ended 
 December 31, 2013
 
Private Equity
 
Credit
 
Total
Realized gains on sales of investments
$

 
$
409

 
$
409

Change in net unrealized gains (losses) due to changes in fair values
342,398

 
(12,572
)
 
329,826

Net Gains (Losses) from Investment Activities
$
342,398

 
$
(12,163
)
 
$
330,235

 
 
For the Year Ended 
 December 31, 2012
 
Private Equity
 
Credit
 
Total
Realized gains on sales of investments
$

 
$
443

 
$
443

Change in net unrealized gains (losses) due to changes in fair values
288,140

 
(339
)
 
287,801

Net Gains from Investment Activities
$
288,140

 
$
104

 
$
288,244



Equity Method Investments
Apollo's equity method investments include its investments in Apollo private equity, credit and real estate funds, which are not consolidated, but in which the Company exerts significant influence. Apollo’s share of operating income generated by these investments is recorded within income from equity method investments in the consolidated statements of operations.
 



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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Equity method investments as of December 31, 2014 and December 31, 2013 consisted of the following:
 
Equity Held as of
 
 
December 31, 2014
 
% of
Ownership
 
December 31, 2013
 
% of
Ownership
 
Investments:
 
 
 
 
 
 
 
 
Private Equity Funds:
 
 
 
 
 
 
 
 
AAA Investments
$
1,293

 
0.057
%
 
$
1,168

 
0.057
%
 
Apollo Investment Fund IV, L.P. ("Fund IV")
8

 
0.022

 
9

 
0.019

 
Apollo Investment Fund V, L.P. ("Fund V")
68

 
0.031

 
94

 
0.020

 
Apollo Investment Fund VI, L.P. ("Fund VI")
6,173

 
0.114

 
9,964

 
0.103

 
Fund VII
78,286

 
1.223

 
137,960

 
1.258

 
Apollo Investment Fund VIII, L.P. ("Fund VIII")
33,099

 
2.241

 
4,310

 
3.996

 
ANRP
5,608

 
0.807

 
3,735

 
0.831

 
AION Capital Partners Limited ("AION")
14,707

 
6.113

 
6,425

 
9.970

 
Apollo Asia Private Credit Fund, L.P. ("APC")
47

 
0.044

 
49

 
0.046

 
VC Holdings, L.P. Series A ("Vantium A/B")
12

 
6.450

 
15

 
6.450

 
VC Holdings, L.P. Series C ("Vantium C")
48

 
2.071

 
1,233

 
2.071

 
VC Holdings, L.P. Series D ("Vantium D")
180

 
6.345

 
2,190

 
6.345

 
Total Private Equity Funds(5)
139,529

 
 
 
167,152

 

 
Credit Funds:
 
 
 
 
 
 
 
 
Apollo Special Opportunities Managed Account, L.P. ("SOMA")
6,997

 
0.841

 
6,833

 
0.853

 
Apollo Value Strategic Fund, L.P. ("VIF")
146

 
0.067

 
151

 
0.124

 
Apollo Strategic Value Fund, L.P. ("SVF")
10

 
0.033

 
17

 
0.079

 
Apollo Credit Liquidity Fund, L.P. ("ACLF")
4,128

 
2.771

 
4,559

 
3.341

 
Apollo Credit Opportunity Fund I, L.P. ("COF I")
2,298

 
1.870

 
10,077

 
1.850

 
Apollo Credit Opportunity Fund II, L.P. ("COF II")
2,249

 
1.497

 
5,015

 
1.428

 
Apollo Credit Opportunity Fund III, L.P. ("COF III")
13,102

 
1.061

 
6,720

 
2.450

 
Apollo European Principal Finance Fund, L.P. ("EPF I")
7,647

 
1.449

 
19,332

 
1.363

 
Apollo European Principal Finance Fund II, L.P. ("EPF II")
44,523

 
1.760

 
23,212

 
1.994

 
Apollo Investment Europe II, L.P. ("AIE II")
3,203

 
1.937

 
4,500

 
2.772

 
Apollo Europe Co-Investors III (D) LLC ("AIE III")
1,540

 
2.914

 

 

 
Apollo Palmetto Strategic Partnership, L.P. ("Palmetto")
14,049

 
1.186

 
16,054

 
1.186

 
Apollo Senior Floating Rate Fund Inc. ("AFT")
86

 
0.031

 
95

 
0.034

 
Apollo Residential Mortgage, Inc. ("AMTG") (3)
4,263

(1) 
0.593

(1) 
4,015

(2) 
0.632

(2) 
Apollo European Credit, L.P. ("AEC")
2,443

 
1.081

 
2,482

 
1.230

 
Apollo European Strategic Investments, L.P. ("AESI")
3,834

 
0.990

 
3,732

 
0.956

 
Apollo European Strategic Investments II, L.P. ("AESI II")
123

 
0.990

 

 

 
Apollo Centre Street Partnership, L.P. ("ACSP")
11,474

 
2.439

 
7,690

 
2.465

 
Apollo Investment Corporation ("AINV") (4)
64,382

(1) 
3.057

(1) 
55,951

(2) 
2.933

(2) 
Apollo SK Strategic Investments, L.P. ("SK")
1,693

 
0.990

 
1,714

 
0.997

 
Apollo SPN Investments I, L.P.
5,500

 
0.720

 
4,457

 
0.828

 
CION Investment Corporation ("CION")
1,000

 
0.206

 
1,000

 
0.716

 
Apollo Tactical Income Fund Inc. ("AIF")
84

 
0.032

 
94

 
0.036

 
Apollo Franklin Partnership, L.P. ("Franklin Fund")
9,647

 
9.091

 
10,178

 
9.107

 
Apollo Zeus Strategic Investments, L.P. ("Zeus")
6,404

 
3.392

 
1,678

 
3.383

 
Apollo Lincoln Fixed Income Fund, L.P.
1,398

 
0.993

 

 

 
Apollo Lincoln Private Credit Fund, L.P.

194

 
0.990

 

 

 
Apollo Structured Credit Recovery Master Fund III, L.P.
315

 
0.126

 

 

 
Apollo Total Return Fund L.P.
163

 
0.046

 

 

 
Apollo Credit Short Opportunities Fund L.P.
19

 
0.027

 

 

 
Total Credit Funds(5)
212,914

 


 
189,556

 


 
Real Estate:
 
 
 
 
 
 
 
 
Apollo Commercial Real Estate Finance, Inc. (“ARI”)(3)
13,989

(1) 
1.495

(1) 
11,550

(2) 
1.500

(2) 
AGRE U.S. Real Estate Fund, L.P.
10,519

 
1.845

 
9,473

 
1.845

 
CPI Capital Partners North America, L.P.
137

 
0.408

 
272

 
0.416

 
CPI Capital Partners Europe, L.P.
5

 
0.001

 
5

 
0.001

 
CPI Capital Partners Asia Pacific, L.P.
96

 
0.039

 
106

 
0.042

 
Apollo GSS Holding (Cayman), L.P.
3,564

 
4.750

 
3,670

 
3.460

 
BEA/AGRE China Real Estate Fund, L.P.
87

 
1.031

 
72

 
1.031

 
Other
38

 
4.761

 

 

 
Total Real Estate Funds(5)
28,435

 


 
25,148

 


 
         Total
$
380,878

 


 
$
381,856

 


 
 
(1)
Amounts are as of September 30, 2014.
(2)
Amounts are as of September 30, 2013.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


(3)
Investment value includes the fair value of RSUs granted to the Company as of the grant date. These amounts are not considered in the percentage of ownership until the RSUs are vested and issued to the Company, at which point the RSUs are converted to common stock and delivered to the Company.
(4)
The value of the Company’s investment in AINV was $53,693 and $57,249 based on the quoted market price as of December 31, 2014 and December 31, 2013, respectively.
(5)
Certain funds invest across multiple segments. The presentation in the table above is based on the classification of the majority of each fund's investments.

The tables below represent summarized aggregated financial information of the funds and other equity method investments in which Apollo has an equity method investment as of December 31, 2014, 2013 and 2012, and for the years ended December 31, 2014, 2013 and 2012:
 
Private Equity 
 
Credit  
 
Real Estate  
 
Aggregate Totals
 
As of  
 December 31,
 
As of  
 December 31,
 
As of  
 December 31,
 
As of  
 December 31,
Balance Sheet Information  
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Investments
$
16,082,723

 
$
23,539,644

 
$
17,888,199

 
$
16,043,142

 
$
2,584,097

 
$
2,260,989

 
$
36,555,019

 
$
41,843,775

Assets
16,924,291

 
24,265,145

 
20,076,656

 
17,636,723

 
2,772,857

 
2,465,780

 
39,773,804

 
44,367,648

Liabilities
128,257

 
111,285

 
6,216,702

 
6,071,182

 
1,028,203

 
300,517

 
7,373,162

 
6,482,984

Equity
16,796,034

 
24,153,860

 
13,859,954

 
11,565,541

 
1,744,654

 
2,165,263

 
32,400,642

 
37,884,664


 
Private Equity
 
Credit
 
Real Estate
 
Aggregate Totals
 
For the Year Ended
December 31, 
 
 
For the Year Ended
December 31, 
 
 
For the Year Ended
December 31, 
 
 
For the Year Ended
December 31,
 
Income Statement Information
2014(1) 
 
2013(1)
 
2012(1)
 
2014(1) 
 
2013(1)
 
2012(1)
 
2014(1) 
 
2013(1)
 
2012(1)
 
2014(1) 
 
2013(1)
 
2012(1)
Revenues/Investment Income
$
340,380

 
$
675,844

 
$
1,686,855

 
$
1,954,270

 
$
1,297,324

 
$
1,326,142

 
$
89,579

 
$
73,429

 
$
54,720

 
$
2,384,229

 
$
2,046,597

 
$
3,067,717

Expenses
326,126

 
239,750

 
280,262

 
417,967

 
583,410

 
694,114

 
29,022

 
39,153

 
32,077

 
773,115

 
862,313

 
1,006,453

Net Investment Income
14,254

 
436,094

 
1,406,593

 
1,536,303

 
713,914

 
632,028

 
60,557

 
34,276

 
22,643

 
1,611,114

 
1,184,284

 
2,061,264

Net Realized and Unrealized Gain (Loss)
1,300,343

 
10,411,556

 
6,856,414

 
(548,088
)
 
953,227

 
2,053,100

 
62,516

 
214,764

 
275,659

 
814,771

 
11,579,547

 
9,185,173

Net Income
$
1,314,597

 
$
10,847,650

 
$
8,263,007

 
$
988,215

 
$
1,667,141

 
$
2,685,128

 
$
123,073

 
$
249,040

 
$
298,302

 
$
2,425,885

 
$
12,763,831

 
$
11,246,437


(1)
Certain private equity, credit and real estate fund amounts are as of and for the years ended September 30, 2014, 2013 and 2012.


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. The purpose of such VIEs is to provide strategy-specific investment opportunities for investors in exchange for management and performance based fees. The investment strategies of the entities that the Company manages may vary by entity; however, the fundamental risks of such entities have similar characteristics, including loss of invested capital and the return of carried interest income previously distributed to the Company by certain private equity, credit, and real estate entities. The nature of the Company’s involvement with VIEs includes direct and indirect investments and fee arrangements. The Company does not provide performance guarantees and has no other financial obligations to provide funding to VIEs other than its own capital commitments. There is no recourse to the Company for the consolidated VIEs’ liabilities.
The assets and liabilities of the consolidated VIEs are comprised primarily of investments and debt, at fair value, and are included within assets and liabilities of consolidated variable interest entities, respectively, in the consolidated statements of financial condition.
Consolidated Variable Interest Entities
Apollo has consolidated VIEs in accordance with the policy described in note 2. The majority of the consolidated VIEs 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. Through its role as collateral manager of these VIEs, it was determined that Apollo had the power to direct the activities that most significantly impact the economic performance of these

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


VIEs. Additionally, Apollo determined that the potential fees that it could receive 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.
The assets of these consolidated VIEs are not available to creditors of the Company. In addition, the investors in these consolidated VIEs have no recourse against the assets of the Company. The Company has elected the fair value option for financial instruments held by its consolidated VIEs, which includes investments in loans and corporate bonds, as well as debt obligations and contingent obligations held by such consolidated VIEs. Other assets include amounts due from brokers and interest receivables. Other liabilities include payables for securities purchased, which represent open trades within the consolidated VIEs and primarily relate to corporate loans that are expected to settle within the next 60 days. From time to time, Apollo makes investments in certain consolidated CLOs denominated in foreign currencies. As of December 31, 2014, the Company had investments in consolidated foreign currency denominated CLOs totaling $47.4 million, which eliminates in consolidation.
Pursuant to the terms in certain bank loan agreements, the consolidated VIEs have unfunded contingent liabilities of $67.6 million as of December 31, 2014.
Investment in Champ L.P.
On September 30, 2014, the Company, through a wholly-owned subsidiary, acquired a 25.6% ownership interest in Champ L.P. following which a wholly-owned subsidiary of Champ L.P. then acquired a 35% ownership interest in KBC Bank Deutschland AG ("KBC Bank"), the German subsidiary of Belgian KBC Group NV (the "KBC Transaction"). Following the closing of the transaction, KBC Bank was renamed Bremer Kreditbank AG and the bank will operate under the name BKB Bank. As of December 31, 2014, the Company had invested $16.9 million in Champ L.P. The Company, together with other affiliated investors, in aggregate, own 100% of Champ L.P.
The Company, through its aforementioned wholly-owned subsidiary, is the general partner and primary beneficiary of Champ, L.P., which meets the definition of a VIE. Accordingly, the Company has consolidated Champ, L.P. in accordance with the policy described in note 2. The Company's investment in Champ, L.P. is eliminated in consolidation.
Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities
The following table presents net gains (losses) from investment activities of the consolidated VIEs for the years ended December 31, 2014, 2013 and 2012, respectively: 
 
For the Year Ended 
 December 31,
 
2014
 
2013
 
2012
Net unrealized gains (losses) gains from investment activities
$
(317,591
)
 
$
(33,275
)
 
$
169,087

Net realized gains from investment activities
79,057

 
87,472

 
76,965

Net gains (losses) from investment activities
(238,534
)
 
54,197

 
246,052

Net unrealized gains (losses) from debt
809

 
(232,509
)
 
(497,704
)
Net realized gains from debt
101,745

 
137,098

 

Net gains (losses) from debt
102,554

 
(95,411
)
 
(497,704
)
Interest and other income
666,486

 
674,324

 
581,610

Interest and other expenses
(507,942
)
 
(433,368
)
 
(401,662
)
Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities
$
22,564

 
$
199,742

 
$
(71,704
)


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Senior Secured Notes and Subordinated Notes—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 December 31, 2014 and December 31, 2013:
 
 
As of 
 December 31, 2014
 
As of 
 December 31, 2013
 
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)(3)
$
13,459,387

 
1.60
%
 
7.8
 
$
11,877,744

 
1.31
%
 
7.3
Subordinated Notes(2)(3)
1,183,834

 
N/A

(1) 
9.0
 
963,099

 
N/A

(1) 
8.1
Total
$
14,643,221

 
 
 
 
 
$
12,840,843

 
 
 
 
 
(1)
The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the VIEs.
(2)
The fair value of Senior Secured Notes and Subordinated Notes as of December 31, 2014 and December 31, 2013 was $14,123.1 million and $12,424.0 million, respectively.
(3)
The debt at fair value of the consolidated VIEs is collateralized by assets of the consolidated VIEs and assets of one vehicle may not be used to satisfy the liabilities of another vehicle. As of December 31, 2014 and December 31, 2013, the fair value of the consolidated VIEs' assets was $17,070.8 million and $15,502.3 million, respectively. This collateral consisted of cash and cash equivalents, investments, at fair value, and other assets.
The consolidated VIEs’ debt obligations contain various customary loan covenants as described above. As of December 31, 2014, the Company was not aware of any instances of non-compliance with any of these covenants.
As of December 31, 2014, the table below presents the contractual maturities for debt of the consolidated VIEs:
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Senior Secured Notes
$

 
$
2,175,000

 
$

 
$

 
$
200,272

 
$
11,084,115

 
$
13,459,387

Subordinated Notes

 

 

 

 
23,250

 
1,160,584

 
1,183,834

Total Obligations as of December 31, 2014
$

 
$
2,175,000

 
$

 
$

 
$
223,522

 
$
12,244,699

 
$
14,643,221



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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)



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.
The following tables present 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 as of December 31, 2014 and December 31, 2013. In addition, the tables present the maximum exposure to losses relating to those VIEs.
 
 
As of 
 December 31, 2014
 
 
Total Assets
 
Total Liabilities
 
Apollo Exposure
 
Total
$
11,676,038

(1) 
$
(729,515
)
(2) 
$
30,752

(3) 
 
(1)
Consists of $794.5 million in cash, $10,456.0 million in investments and $425.6 million in receivables.
(2)
Represents $362.0 million in debt and other payables, $359.4 million in securities sold, not purchased, and $8.2 million in capital withdrawals payable.
(3)
Represents Apollo’s direct equity method investment in those entities in which Apollo holds a significant variable interest. Additionally, cumulative carried interest income is subject to reversal in the event of future losses. The maximum amount of future reversal of carried interest income from all of Apollo's funds, including those entities in which Apollo holds a significant variable interest, is $2,892.8 million as of December 31, 2014 as discussed in note 18.
 
As of 
 December 31, 2013
 
 
Total Assets
 
Total Liabilities
 
Apollo Exposure
 
Total
$
12,866,498

(1) 
$
(1,311,279
)
(2) 
$
34,665

(3) 
 
(1)
Consists of $354.7 million in cash, $12,034.5 million in investments and $477.3 million in receivables.
(2)
Represents $1,161.5 million in debt and other payables, $106.5 million in securities sold, not purchased, and $43.2 million in capital withdrawals payable.
(3)
Represents Apollo’s direct equity method investment in those entities in which Apollo holds a significant variable interest. Additionally, cumulative carried interest income is subject to reversal in the event of future losses. The maximum amount of future reversal of carried interest income from all of Apollo's funds, including those entities in which Apollo holds a significant variable interest, was $4,858.0 million as of December 31, 2013.


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


6. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
The following tables summarize the valuation of the Company’s financial assets and liabilities by the fair value hierarchy as of December 31, 2014 and December 31, 2013, respectively:

 
As of December 31, 2014
 
Level I(6)
 
Level II(6)
 
Level III
 
Total
Assets
 
 
 
 
 
 
 
Investment in AAA Investments(1)
$

 
$

 
$
2,144,118

 
$
2,144,118

Investments held by Apollo Senior Loan Fund(1)

 
25,537

 
4,359

 
29,896

Investments in Other(1)

 

 
600

 
600

Investment in Athene Holding(2)

 

 
324,514

 
324,514

AAA/Athene Receivable(2)

 

 
61,292

 
61,292

Investments of VIEs, at fair value(4)
176

 
13,135,564

 
2,522,913

 
15,658,653

Total Assets
$
176

 
$
13,161,101

 
$
5,057,796

 
$
18,219,073

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Liabilities of VIEs, at fair value(4)(5)
$

 
$
1,793,353

 
$
12,343,021

 
$
14,136,374

Contingent Consideration Obligations(3)

 

 
96,126

 
96,126

Total Liabilities
$

 
$
1,793,353

 
$
12,439,147

 
$
14,232,500


 
As of December 31, 2013
 
Level I(6)
 
Level II(6)
 
Level III
 
Total
Assets
 
 
 
 
 
 
 
Investment in AAA Investments(1)
$

 
$

 
$
1,942,051

 
$
1,942,051

Investments held by Apollo Senior Loan Fund(1)

 
28,711

 
892

 
29,603

Investments in Other(1)

 

 
40,373

 
40,373

Athene and AAA Services Derivatives(2)

 

 
130,709

 
130,709

Investments of VIEs, at fair value(4)
3,455

 
12,203,370

 
1,919,537

 
14,126,362

Total Assets
$
3,455

 
$
12,232,081

 
$
4,033,562

 
$
16,269,098

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Liabilities of VIEs, at fair value(4)
$

 
$
2,429,815

 
$
9,994,147

 
$
12,423,962

Contingent Consideration Obligations(3)

 

 
135,511

 
135,511

Total Liabilities
$

 
$
2,429,815

 
$
10,129,658

 
$
12,559,473

(1)
See note 4 for further disclosure regarding the investment in AAA Investments, investments held by Apollo Senior Loan Fund, and investments in Other.
(2)
See note 17 for further disclosure regarding the Athene Services Derivative, the AAA Services Derivative, the investment in Athene Holding and the AAA/Athene Receivable.
(3)
See note 18 for further disclosure regarding contingent consideration obligations.
(4)
See note 5 for further disclosure regarding VIEs.
(5)
As of December 31, 2014, liabilities of VIEs, at fair value includes debt and other liabilities of $14,123.1 million and $13.3 million, respectively. Other liabilities include contingent obligations classified as Level III.
(6)
All Level I and Level II investments and liabilities were valued using third party pricing.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


There were no transfers of financial assets into Level I for the year ended December 31, 2014 and 2013. The following table summarizes the fair value transfers of financial assets between Level I, Level II and Level III for positions that existed as of the years ended December 31, 2014 and 2013, respectively:
 
For the Year Ended 
 December 31,
 
2014
 
2013
Transfers from Level I into Level II
$
4,084

 
$

Transfers from Level III into Level II(1)
1,047,951

 
1,253,090

Transfers from Level II into Level III(1)
1,415,282

 
978,194

(1)
Transfers between Level I, II and III were a result of subjecting the broker quotes on these investments 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.

There were no transfers of financial liabilities into or out of Level I for year ended December 31, 2014. In addition, there were no transfers of financial liabilities between Level I and Level II for the year ended December 31, 2013. The following table summarizes the fair value transfers of financial liabilities between Level II and Level III for positions that existed as of the years ended December 31, 2014 and 2013, respectively:
 
For the Year Ended 
 December 31,
 
2014
 
2013
Transfers from Level III into Level II(1)
$
380,660

 
$
2,469,143

Transfers from Level II into Level III(1)
500,837

 

(1)
Transfers between Level II and III were a result of subjecting the broker quotes on these financial liabilities 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.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following tables summarize the changes in fair value in financial assets, which are measured at fair value and characterized as Level III investments, for the years ended December 31, 2014 and 2013, respectively:
 
For the Year Ended December 31, 2014
 
Investment in AAA Investments
 
Investments held by Apollo Senior Loan Fund
 
Investments in Other
 
Athene and AAA Services Derivatives
 
Investment in Athene Holding
 
AAA/Athene Receivable
 
Investments of Consolidated VIEs
 
Total
Balance, Beginning of Period
$
1,942,051

 
$
892

 
$
40,373

 
$
130,709

 
$

 
$

 
$
1,919,537

 
$
4,033,562

Elimination of investments attributable to consolidation of VIEs

 

 

 

 

 

 
19,187

 
19,187

Fees

 

 

 
60,422

 

 
178,332

 

 
238,754

Purchases

 
4,707

 
1,844

 

 
2,080

 

 
1,036,810

 
1,045,441

Sale of investments/Distributions
(2,500
)
 
(1,543
)
 
(51,052
)
 

 

 

 
(825,429
)
 
(880,524
)
Net realized gains (losses)

 
10

 
(12,871
)
 
24,242

 

 

 
20,972

 
32,353

Changes in net unrealized gains (losses)
204,567

 
(66
)
 
22,306

 
(10,203
)
 
224

 

 
(9,302
)
 
207,526

Cumulative translation adjustment

 

 

 

 

 

 
(5,834
)
 
(5,834
)
Transfer into Level III

 
1,594

 

 

 

 

 
1,413,688

 
1,415,282

Transfer out of Level III

 
(1,235
)
 

 

 

 

 
(1,046,716
)
 
(1,047,951
)
Settlement of derivatives/receivable(1)

 

 

 
(205,170
)
 
322,210

 
(117,040
)
 

 

Balance, End of Period
$
2,144,118

 
$
4,359

 
$
600

 
$

 
$
324,514

 
$
61,292

 
$
2,522,913

 
$
5,057,796

Change in net unrealized gains (losses) included in Net Gains (losses) from Investment Activities related to investments still held at reporting date
$
204,567

 
$
(66
)
 
$
580

 
$

 
$
224

 
$

 
$

 
$
205,305

Change in net unrealized gains included in Net Gains (Losses) from Investment Activities of Consolidated VIEs related to investments still held at reporting date

 

 

 

 

 

 
(52,485
)
 
(52,485
)
(1)
See note 17 for further disclosure regarding the settlement of the Athene Services Derivative, the AAA Services Derivative and the investment in Athene Holding.
 
For the Year Ended December 31, 2013
 
Investment in AAA Investments
 
Investments held by Apollo Senior Loan Fund
 
Investments in Other
 
Athene and AAA Services Derivatives
 
Investments of Consolidated VIEs
 
Total
Balance, Beginning of Period
$
1,666,448

 
$
590

 
$
50,311

 
$
2,126

 
$
1,643,465

 
$
3,362,940

Elimination of investments attributable to consolidation of VIEs

 

 

 

 
(35,410
)
 
(35,410
)
Fees

 

 

 
118,380

 

 
118,380

Purchases

 
520

 
4,901

 

 
1,326,095

 
1,331,516

Sale of investments/Distributions
(66,796
)
 
(6
)
 
(2,541
)
 

 
(724,666
)
 
(794,009
)
Net realized losses

 

 

 

 
(28,717
)
 
(28,717
)
Changes in net unrealized gains (losses)
342,399

 
15

 
(12,298
)
 
10,203

 
13,439

 
353,758

Transfer into Level III

 
831

 

 

 
977,363

 
978,194

Transfer out of Level III

 
(1,058
)
 

 

 
(1,252,032
)
 
(1,253,090
)
Balance, End of Period
$
1,942,051

 
$
892

 
$
40,373

 
$
130,709

 
$
1,919,537

 
$
4,033,562

Change in net unrealized gains (losses) included in Net Gains (Losses) from Investment Activities related to investments still held at reporting date
$
342,399

 
$
15

 
$
(12,298
)
 
$

 
$

 
$
330,116

Change in net unrealized losses included in Net Gains from Investment Activities of Consolidated VIEs related to investments still held at reporting date

 

 

 

 
9,083

 
9,083

Change in net unrealized gains included in Other Income, net related to assets still held at reporting date

 

 

 
10,203

 

 
10,203


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following tables summarize the changes in fair value in financial liabilities, which are measured at fair value and characterized as Level III liabilities:
 
For the Year Ended December 31,
 
2014
 
2013
 
Liabilities of Consolidated VIEs
 
Contingent Consideration Obligations
 
Total
 
Debt of Consolidated VIEs
 
Contingent Consideration Obligations
 
Total
Balance, Beginning of Period
$
9,994,147

 
$
135,511

 
$
10,129,658

 
$
11,834,955

 
$
142,219

 
$
11,977,174

Elimination of debt attributable to consolidation of VIEs
13,493

 

 
13,493

 
3,950

 

 
3,950

Additions
3,965,725

 

 
3,965,725

 
2,747,033

 

 
2,747,033

Payments/Extinguishment(1)
(1,551,533
)
 
(50,666
)
 
(1,602,199
)
 
(2,218,060
)
 
(67,534
)
 
(2,285,594
)
Net realized gains
(101,745
)
 

 
(101,745
)
 
(137,098
)
 

 
(137,098
)
Changes in net unrealized (gains) losses
(25,685
)
 
11,281

 
(14,404
)
 
232,510

 
60,826

 
293,336

Cumulative translation adjustment
(71,558
)
 

 
(71,558
)
 

 

 

Transfers into Level III
500,837

 

 
500,837

 

 

 

Transfers out of Level III
(380,660
)
 

 
(380,660
)
 
(2,469,143
)
 

 
(2,469,143
)
Balance, End of Period
$
12,343,021

 
$
96,126

 
$
12,439,147

 
$
9,994,147

 
$
135,511

 
$
10,129,658

Change in net unrealized gains losses included in Net (Losses) Gains from Investment Activities of consolidated VIEs related to liabilities still held at reporting date
$
(113,874
)
 
$

 
$
(113,874
)
 
$
(18,578
)
 
$

 
$
(18,578
)
Change in net unrealized losses included in Profit Sharing Expense related to liabilities still held at reporting date

 
11,281

 
11,281

 

 
47,523

 
47,523

(1)
For the year ended December 31, 2014, includes $13.4 million extinguishment of contingent consideration obligations, which is recorded in other income on the consolidated statements of operations.



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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following tables summarize the quantitative inputs and assumptions used for financial assets and liabilities categorized in Level III of the fair value hierarchy as of December 31, 2014 and December 31, 2013:
 
As of December 31, 2014
 
Fair Value
 
Valuation Techniques
 
Unobservable Inputs
 
Ranges
 
Weighted Average
Financial Assets
 
 
 
 
 
 
 
 
 
Investments of Consolidated Apollo Funds:
 
 
 
 
 
 
 
 
 
AAA Investments(1)
$
2,144,118

 
Net Asset Value
 
N/A
 
N/A
 
N/A
Apollo Senior Loan Fund
4,359

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
Investments in Other
600

 
Other
 
N/A
 
N/A
 
N/A
Investment in Athene Holding
324,514

 
Discounted Cash Flow
 
Discount Rate
 
15.0%
 
15.0%
AAA/Athene Receivable
61,292

 
Discounted Cash Flow
 
Discount Rate
 
15.0%
 
15.0%
Investments of Consolidated VIEs:
 
 
 
 
 
 
 
 
 
Bank Debt Term Loans
1,340,296

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
87,314

 
Discounted Cash Flow
 
Discount Rate
 
7.1% - 14.0%
 
8.4%
Corporate Loans/Bonds/CLO Notes(5)
1,009,873

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
Equity Securities
930

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
4,610

 
Market Comparable Companies
 
Comparable Multiples
 
5.8x
 
5.8x
58,923

 
Transaction
 
Purchase Price
 
N/A
 
N/A
20,967

 
Transaction
 
Implied Multiple
 
5.2x
 
5.2x
Total Investments of Consolidated VIEs
2,522,913

 
 
 
 
 
 
 
 
Total Financial Assets
$
5,057,796

 
 
 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
 
 
Liabilities of Consolidated VIEs:
 
 
 
 
 
 
 
 
 
Subordinated Notes
$
908,831

 
Discounted Cash Flow
 
Discount Rate
 
10.0% - 12.5%
 
11.5%
 
Default Rate
 
1.0% - 2.0%
 
1.7%
 
Recovery Rate
 
75.0%
 
75.0%
Subordinated Notes
106,090

 
Other
 
N/A
 
N/A
 
N/A
Senior Secured Notes
9,283,534

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
Senior Secured and Subordinated Notes
2,031,292

 
Discounted Cash Flow
 
Discount Rate
 
1.6% - 1.8%
 
1.7%
Default Rate
 
2.0%
 
2.0%
Recovery Rate
 
15.0% - 75.0%
 
69.0%
Contingent Obligation
13,274

 
Other
 
N/A
 
N/A
 
N/A
Total Liabilities of Consolidated VIEs
12,343,021

 
 
 
 
 
 
 
 
Contingent Consideration Obligation
96,126

 
Discounted Cash Flow
 
Discount Rate
 
11.0% - 18.5%
 
15.7%
Total Financial Liabilities
$
12,439,147

 
 
 
 
 
 
 
 
(1)
The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held by AAA Investments:
 
As of December 31, 2014
 
 
 
% of
Investment
of AAA
Investments
Approximate values based on net asset value of the underlying funds, which are based on the funds' underlying investments that are valued using the following:
 
 
 
Discounted cash flow
$
2,244,192

(3) 
100
%
Total Investments
2,244,192

 
100
%
Other net liabilities(4)
(100,074
)
 
 
Total Net Assets
$
2,144,118

 
 
(2)
These securities are valued primarily using broker quotes.
(3)
Represents the investment by AAA Investments in Athene, which is valued using the embedded value method which was based on the present value of the future expected regulatory distributable income generated by the net assets of Athene plus the excess capital (i.e., the capital in excess of what is required to be held against Athene’s liabilities). The unobservable inputs and respective ranges used are the same as noted

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


for the Investment in Athene Holding and the AAA/Athene Receivable in the table above. See note 17 for discussion of the investment in Athene Holding.
(4)
Balances include other assets, liabilities and general partner interests of AAA Investments. Balance at December 31, 2014 is primarily comprised of $26.7 million in assets, less $4.0 million and $122.8 million in liabilities and net assets allocated to the general partner, respectively. Carrying values approximate fair value for other assets and liabilities.
(5)
Balance includes investments in an affiliated fund, which primarily invests in corporate loans, bonds, and CLO notes. Balance at December 31, 2014 includes investments in an affiliated fund in the amount of $865.9 million, which were valued based on net asset value ("NAV").
 
As of December 31, 2013
 
Fair Value
 
Valuation Techniques
 
Unobservable Inputs
 
Ranges
 
Weighted Average
Financial Assets
 
 
 
 
 
 
 
 
 
Investments of Consolidated Apollo Funds:
 
 
 
 
 
 
 
 
 
AAA Investments(1)
$
1,942,051

 
Net Asset Value
 
N/A
 
N/A
 
N/A
Apollo Senior Loan Fund
892

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
Investments in HFA and Other
40,373

 
Third Party Pricing(2)
 
N/A
 
N/A
 
 
Athene and AAA Services Derivatives
130,709

 
Discounted Cash Flow
 
Discount Rate
 
15.0%
 
15.0%
 
Implied Multiple
 
1.1x
 
1.1x
Investments of Consolidated VIEs:
 
 
 
 
 
 
 
 
 
Bank Debt Term Loans
18,467

 
Other
 
N/A
 
N/A
 
N/A
Equity Securities
7,938

 
Market Comparable Companies
 
Comparable Multiples
 
6.0x - 9.5x
 
7.9x
Corporate Loans/Bonds/CLO Notes(5)
1,893,132

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
Total Investments of Consolidated VIEs
1,919,537

 
 
 
 
 
 
 
 
Total Financial Assets
$
4,033,562

 
 
 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
 
 
Liabilities of Consolidated VIEs:
 
 
 
 
 
 
 
 
 
Subordinated Notes
$
835,149

 
Discounted Cash Flow
 
Discount Rate
 
10.0% - 12.0%
 
10.8%
 
Default Rate
 
1.0% - 1.5%
 
1.3%
 
Recovery Rate
 
75.0%
 
75.0%
Senior Secured Notes
2,132,576

 
Discounted Cash Flow
 
Discount Rate
 
1.9% - 2.2%
 
2.0%
 
Default Rate
 
2.0%
 
2.0%
 
Recovery Rate
 
30.0% - 70.0%
 
65.2%
Senior Secured and Subordinated Notes
7,026,422

 
Third Party Pricing(2)
 
N/A
 
N/A
 
N/A
Total Liabilities of Consolidated VIEs
9,994,147

 
 
 
 
 
 
 
 
Contingent Consideration Obligation
135,511

 
Discounted Cash Flow
 
Discount Rate
 
10.5% - 18.5%
 
15.3%
Total Financial Liabilities
$
10,129,658

 
 
 
 
 
 
 
 
(1)
The following table summarizes a look-through of the Company’s Level III investments by valuation methodology of the underlying securities held by AAA Investments:
 
As of December 31, 2013
 
 
 
% of
Investment
of AAA
Investments
Approximate values based on net asset value of the underlying funds, which are based on the funds underlying investments that are valued using the following:
 
 
 
Discounted Cash Flow
$
1,950,010

(3) 
100
%
Total Investments
1,950,010

 
100
%
Other net liabilities(4)
(7,959
)
 
 
Total Net Assets
$
1,942,051

 
 

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


(2)
These securities are valued primarily using broker quotes.
(3)
Represents the investment by AAA Investments in Athene, which is valued using the embedded value method which was based on the present value of the future expected regulatory distributable income generated by the net assets of Athene plus the excess capital (i.e., the capital in excess of what is required to be held against Athene’s liabilities). The unobservable inputs and respective ranges used in the discounted cash flow model are the same as noted for the Athene and AAA Services Derivatives in the table above.
(4)
Balances include other assets, liabilities and general partner interests of AAA Investments. Balance at December 31, 2013 is primarily comprised of $110.8 million in assets, less $16.7 million and $102.1 million in liabilities and net assets allocated to the general partner, respectively. Carrying values approximate fair value for other assets and liabilities (except for the note receivable from an affiliate) and, accordingly, extended valuation procedures are not required. The note receivable from an affiliate is a Level III asset valued using a discounted cash flow model. The unobservable inputs and respective ranges used in the discounted cash flow model are the same as noted for the Athene and AAA Services Derivatives in the table above.
(5)
Balance includes investments in an affiliated fund, which primarily invests in corporate loans, bonds, and CLO notes. Balance at December 31, 2013 includes investments in an affiliated fund in the amount of $645.5 million, which were valued based on NAV.

Investment in Athene Holding and AAA/Athene Receivable
As of December 31, 2014, the significant unobservable input used in the fair value measurement of the investment in Athene Holding is the discount rate applied in the valuation model. This input in isolation can cause significant increases or decreases in fair value. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. An increase in the discount rate can significantly lower the fair value of an investment; conversely a decrease in the discount rate can significantly increase the fair value of an investment. The discount rate is determined based on the expected required rate of return based on the risk profile of similar cash flows.
Consolidated VIEs
Investments
The significant unobservable inputs used in the fair value measurement of the bank debt term loans and stocks include the discount rate applied and the multiples applied in the valuation models. These unobservable inputs in isolation can cause significant increases or decreases in fair value. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment; conversely decreases in the discount rate can significantly increase the fair value of an investment. 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
The significant unobservable inputs used in the fair value measurement of the subordinated and senior secured notes include the discount rate applied in the valuation models, default and recovery rates applied in the valuation models. These inputs in isolation can cause significant increases or decreases in fair value. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of subordinated and senior secured notes; conversely a decrease in the discount rate can significantly increase the fair value of subordinated and senior secured notes. The discount rate is determined based on the market rates an investor would expect for similar subordinated and senior secured notes with similar risks.
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. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of the contingent consideration obligations; conversely a decrease in the discount rate can significantly increase the fair value of the contingent consideration obligations. The discount rate was based on the weighted average cost of capital for the Company. See note 18 for further discussion of the contingent consideration obligations.



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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


7. CARRIED INTEREST RECEIVABLE
Carried interest receivable from private equity, credit and real estate funds consisted of the following: 
 
As of December 31,
 
2014
 
2013
Private Equity
$
672,119

 
$
1,867,771

Credit
226,430

 
408,342

Real Estate
13,117

 
10,962

Total carried interest receivable
$
911,666

 
$
2,287,075

 
The table below provides a roll-forward of the carried interest receivable balance for the years ended December 31, 2014 and 2013:
 
 
Private Equity
 
Credit
 
Real Estate
 
Total
Carried interest receivable, January 1, 2013
$
1,413,306

 
$
454,155

 
$
10,795

 
$
1,878,256

Change in fair value of funds (1)
2,516,990

 
324,859

 
967

 
2,842,816

Fund cash distributions to the Company
(2,062,525
)
 
(370,672
)
 
(800
)
 
(2,433,997
)
Carried interest receivable, December 31, 2013
$
1,867,771

 
$
408,342

 
$
10,962

 
$
2,287,075

Change in fair value of funds(1)
231,983

 
159,350

 
6,104

 
397,437

Fund cash distributions to the Company
(1,427,635
)
 
(341,262
)
 
(3,949
)
 
(1,772,846
)
Carried interest receivable, December 31, 2014
$
672,119

 
$
226,430

 
$
13,117

 
$
911,666


(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2014 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $3.4 million in aggregate with respect to two of our credit funds. Included in change in fair value of funds for the year ended December 31, 2013 was a reversal of $19.3 million and $0.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to SOMA and APC, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the 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 of the fund.

The timing of the payment of carried interest due to the general partner or investment manager varies depending on the terms of the applicable fund agreements. Generally, carried interest with respect to the private equity funds and certain credit and real estate funds is payable and is 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. For most credit funds, carried interest is payable based on realizations after the end of the relevant fund's fiscal year or fiscal quarter, subject to high watermark provisions.


8. PROFIT SHARING PAYABLE
Profit sharing payable from private equity, credit and real estate funds consisted of the following:
 
As of 
 December 31,
 
2014
 
2013
Private Equity
$
240,595

 
$
751,192

Credit
186,307

 
234,504

Real Estate
7,950

 
6,544

Total profit sharing payable
$
434,852

 
$
992,240


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The table below provides a roll-forward of the profit sharing payable balance for the years ended December 31, 2014 and 2013:
 
 
Private Equity
 
Credit
 
Real Estate
 
Total
Profit sharing payable, January 1, 2013
$
596,427

 
$
254,629

 
$
6,668

 
$
857,724

Profit sharing expense (1)
1,030,404

 
142,728

 
123

 
1,173,255

Payments/other
(875,639
)
 
(162,853
)
 
(247
)
 
(1,038,739
)
Profit sharing payable, December 31, 2013
$
751,192

 
$
234,504

 
$
6,544

 
$
992,240

Profit sharing expense (1)
178,373

 
95,070

 
2,747

 
276,190

Payments/other
(688,970
)
 
(143,267
)
 
(1,341
)
 
(833,578
)
Profit sharing payable, December 31, 2014
$
240,595

 
$
186,307

 
$
7,950

 
$
434,852


(1)
Includes both of the following: (i) changes in amounts payable to employees and former employees entitled to a share of carried interest income in Apollo's funds and (ii) changes to the fair value of the contingent consideration obligations (see notes 6 and 18) recognized in connection with certain Apollo acquisitions.




9. FIXED ASSETS
Fixed assets consisted of the following:
 
Useful Life in Years
 
As of December 31,
 
 
2014
 
2013
Leasehold improvements
8-16
 
$
51,745

 
$
50,478

Furniture, fixtures and other equipment
4-10
 
17,798

 
16,750

Computer software and hardware
2-4
 
34,560

 
31,200

Other
N/A
 
514

 
509

Total fixed assets
 
 
104,617

 
98,937

Less - accumulated depreciation and amortization
 
 
(68,711
)
 
(58,686
)
Fixed Assets, net
 
 
$
35,906

 
$
40,251


In December 2013, the Company committed to a plan to sell its ownership interests in certain aircraft. The sale of the ownership interest in one aircraft was completed in December 2013 while the sale of the remaining ownership interest was completed in the first quarter of 2014. Accordingly, in December 2013, the Company recorded the completed sale and reclassified the remaining aircraft interests committed for sale to assets held for sale which is included in other assets in the consolidated statement of financial condition. The aircraft reclassified to assets held for sale were recorded at the lower of cost or fair value less costs to sell. As a result of both the completed sale and reclassification, the Company recognized a net loss of approximately $1.0 million which is included in other income, net in the consolidated statements of operations for the year ended December 31, 2013.
Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $10.2 million, $11.0 million and $10.2 million, respectively.


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


10. OTHER ASSETS
Other assets consisted of the following:
 
As of December 31,
 
2014
 
2013
Prepaid expenses
$
32,873

 
$
9,867

Tax receivables
23,286

 
6,549

Interest Receivable
11,059

 
6,420

Debt issuance costs, net
8,575

 
6,407

Receivable from broker
3,229

 
1,436

Rent deposits
1,430

 
1,224

Assets held for sale

 
6,413

Underwriting fee receivable

 
2,090

Other
3,932

 
3,764

Total Other Assets
$
84,384

 
$
44,170


11. OTHER LIABILITIES
Other liabilities consisted of the following:
 
 
As of December 31,
 
2014
 
2013
Deferred tax liabilities
$

 
$
37,272

Deferred rent
12,202

 
14,701

Deferred compensation
24,939

 
4,285

Unsettled trades and redemption payable
4,090

 
2,516

Other
5,170

 
4,500

Total Other Liabilities
$
46,401

 
$
63,274



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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


12. OTHER INCOME, NET
Other income, net consisted of the following:


 
For the Year Ended
December 31,
 
2014
 
2013
 
2012
Tax receivable agreement adjustment
$
32,182

 
$
13,038

 
$
3,937

Gain on derivatives
14,039

 
10,203

 

Gain (Loss) on extinguishment of liability/debt
13,395

 
(2,741
)
 

Gain on acquisitions

 

 
1,951,897

Rental income
5,566

 
5,334

 
4,387

Foreign exchange gain (loss)
(7,131
)
 
4,142

 
(790
)
Loss on assets held for sale

 
(1,087
)
 

Other
2,541

 
11,225

 
5,248

Total Other Income, Net
$
60,592

 
$
40,114

 
$
1,964,679


 
13. INCOME TAXES

The Company is treated as a partnership for income tax purposes and is therefore not subject to U.S. federal, state and local income taxes. APO Corp., a wholly-owned subsidiary of the Company, is subject to U.S. federal, state and local corporate income taxes. Certain other subsidiaries of the Company are subject to New York City Unincorporated Business Tax (“NYC UBT”) attributable to the Company’s operations apportioned to New York City. In addition, certain non-U.S. subsidiaries of the Company are subject to income taxes in their local jurisdictions.
The Company’s provision for income taxes totaled $147.2 million, $107.6 million and $65.4 million for the years ended December 31, 2014, 2013 and 2012, respectively. The Company’s effective tax rate was approximately 16.8%, 4.3%, and 2.1% for the years ended December 31, 2014, 2013 and 2012, respectively.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The provision for income taxes is presented in the following table:
 
 
For the Year Ended
December 31, 
 
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
Federal income tax
$
53,426

 
$
30,422

 
$

Foreign income tax
6,080

 
4,733

 
3,411

State and local income tax
7,369

 
9,728

 
7,722

Subtotal
66,875

 
44,883

 
11,133

Deferred:
 

 
 

 
 

Federal income tax
28,702

 
40,955

 
55,114

Foreign income tax
(137
)
 
130

 
(277
)
State and local income tax
51,805

 
21,601

 
(560
)
Subtotal
80,370

 
62,686

 
54,277

Total Income Tax Provision
$
147,245

 
$
107,569

 
$
65,410

The following table reconciles the provision for taxes to the U.S. Federal statutory tax rate:
 
 
For the Year Ended
December 31, 
 
 
2014
 
 
2013
 
 
2012 
 
U.S. Statutory Tax Rate
35.0
 %
 
35.0
 %
 
35.0
 %
Income Passed Through to Non-Controlling Interests
(23.4
)
 
(24.1
)
 
(30.9
)
Income passed through to Class A shareholders
0.1

 
(7.9
)
 
(4.4
)
Equity Based Compensation - AOG Units

 
0.2

 
1.8

Foreign income tax
0.4

 
0.1

 
0.1

State and Local Income Taxes (net of Federal Benefit)
4.7

 
1.1

 
0.2

Amortization & Other Accrual Adjustments

 
(0.1
)
 
0.3

Effective Income Tax Rate
16.8
 %
 
4.3
 %
 
2.1
 %
Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The Company’s deferred tax assets and liabilities on the consolidated statements of financial condition consist of the following:
 
As of
December 31, 
 
 
2014
 
 
2013 
 
Deferred Tax Assets:
 
 
 
Depreciation and amortization
$
543,288

 
$
553,251

Revenue recognition
40,250

 
51,790

Net operating loss carryforwards

 
776

Equity-based compensation - RSUs and AAA RDUs
35,678

 
42,784

Foreign tax credit
3,457

 
7,528

Other
1,437

 
4,070

Total Deferred Tax Assets
624,110

 
660,199

Deferred Tax Liabilities:
 

 
 

Unrealized gains from investments
13,053

 
36,939

Other
4,340

 
333

Total Deferred Tax Liabilities
$
17,393

 
$
37,272


As of December 31, 2014, the Company had no remaining net operating loss carryforwards. In addition, the Company’s foreign tax credit carryforwards will begin to expire in 2021.

The Company considered its historical and current year earnings, current utilization of existing deferred tax assets and deferred tax liabilities, the 15 year amortization periods of the tax basis of its intangible assets and short and long term business forecasts in evaluating whether it should establish a valuation allowance. Based on this positive evidence, the Company concluded it is more likely than not, that the deferred tax assets will be realized and that no valuation allowance was needed at December 31, 2014.
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 Company's primary jurisdictions in which it operates are the United States, New York State, New York City, California and the United Kingdom. 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 December 31, 2014, the Company's U.S. federal, state, local and foreign income tax returns for the years 2011 through 2014 are open under the general statute of limitations provisions and therefore subject to examination. Currently, the Internal Revenue Service is examining the tax returns of Apollo Global Management, LLC and various subsidiaries for tax years 2010 to 2012. The City of New York is examining certain subsidiaries' tax returns for tax years 2011 and 2012, and the City of Los Angeles is examining certain subsidiaries' tax returns for tax years 2011 to 2013.
The Company has recorded a deferred tax asset for the future amortization of tax basis intangibles as a result of the 2007 Reorganization. The Company recognized an additional step-up in tax basis of intangibles as a result of subsequent exchanges of AOG Units for Class A shares in 2013 and 2014. As a result of these exchanges of AOG Units for Class A shares, there were increases in the deferred tax asset established from the 2007 Reorganization which was recorded in deferred tax assets in the consolidated statements of financial condition for the expected tax benefit associated with these increases. A related tax receivable agreement liability was recorded in due to affiliates in the 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 17). The increases in the deferred tax asset less the related liability resulted in increases to additional paid-in capital which was recorded in the consolidated statements of changes in

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


shareholders’ equity for the years ended December 31, 2014 and 2013. The amortization period for these tax basis intangibles is 15 years. Accordingly, the related deferred tax assets will reverse over the same period.
The tables below present the transactions during the years ended December 31, 2013 and 2014 related to the exchange of AOG Units for Class A shares and the resulting impact to the deferred tax asset, tax receivable agreement liability and additional paid-in capital.
 
 
For the Year Ended December 31, 2013
Date of 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 Year Ended December 31, 2013
 
$
149,327

 
$
126,928

 
$
22,399

 
 
For the Year Ended December 31, 2014
Date of 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 Year Ended December 31, 2014
 
$
58,696

 
$
47,878

 
$
10,818


During the years ended December 31, 2014 and 2013, the Company adjusted the estimated rate of tax it expects to pay in the future and thereby reduced its net deferred tax assets, and increased its income tax provision, by $36.2 million and $16.9 million, respectively (see note 17 for details regarding the impact on the tax receivable agreement liability).


14. DEBT

Debt consisted of the following:
 
 
As of December 31, 2014
 
As of December 31, 2013
 
 
Outstanding
Balance
 
Annualized
Weighted
Average
Interest Rate
 
Outstanding
Balance
 
Annualized
Weighted
Average
Interest Rate
 
2013 AMH Credit Facilities - Term Facility
$
500,000

 
1.36
%
 
$
750,000

 
1.37
%
 
2024 Senior Notes(1)
499,058

 
4.00
%
 
N/A

 
N/A

 
2014 AMI Term Facility I(2)
16,204

 
2.34
%
 
N/A

 
N/A

 
2014 AMI Term Facility II(3)
18,752

 
1.93
%
 
N/A

 
N/A

 
Total Debt
$
1,034,014

 
 
 
$
750,000

 
 
 
 
(1)
Includes impact of any amortization of note discount and interest rate hedge.
(2)
On July 3, 2014, Apollo Management International LLP (“AMI”), a subsidiary of the Company, entered into a €13.4 million five year credit agreement (the “2014 AMI Term Facility I”). Proceeds from the borrowing were used to fund the Company's investment in a European CLO it manages.
(3)
On December 9, 2014, AMI entered into a €15.5 million five year credit agreement (the "2014 AMI Term Facility II"). Proceeds from the borrowing were used to fund the Company's investment in a European CLO it manages.
2007 AMH Credit Agreement—On April 20, 2007, Apollo Management Holdings, L.P. (“AMH”), a subsidiary of the Company which is a Delaware limited partnership, entered into a $1.0 billion seven year credit agreement (the “2007 AMH Credit Agreement”). Interest payable under the 2007 AMH Credit Agreement was based on Eurodollar LIBOR or Alternate Base Rate

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


("ABR") as determined by the borrower. On December 20, 2010, Apollo amended the 2007 AMH Credit Agreement to extend the maturity date of $995.0 million (including the $90.9 million of fair value debt repurchased by the Company) of the term loan from April 20, 2014 to January 3, 2017 and modified certain other terms of the 2007 AMH Credit Agreement. On December 20, 2010, an affiliate of AMH that was a guarantor under the 2007 AMH Credit Agreement repurchased approximately $180.8 million of the term loan in connection with the extension of the maturity date of such loan and thus the 2007 AMH Credit Agreement (excluding the portions held by AMH affiliates) had a remaining balance of $728.3 million. Interest expense incurred by the Company related to the 2007 AMH Credit Agreement was $28.3 million and $36.0 million for the years ended December 31, 2013 and 2012, respectively. Amortization expense related to the 2007 AMH Credit Agreement was $0.7 million and $0.5 million for the years ended December 31, 2013 and 2012, respectively.
The outstanding loans under the 2007 AMH Credit Agreement were refinanced on December 18, 2013 with the net proceeds from the 2013 AMH Credit Facilities (as defined below). Additionally, the net proceeds were used to pay fees and expenses associated with the 2013 AMH Credit Facilities. The 2007 AMH Credit Agreement and all related loan documents and security with respect thereto were terminated in connection with the refinancing.
2013 AMH Credit Facilities—On December 18, 2013, AMH and its subsidiaries and certain other subsidiaries of the Company (collectively, the "Borrowers") entered into new credit facilities (the "2013 AMH Credit Facilities") with JPMorgan Chase Bank, N.A. The 2013 AMH Credit Facilities provide for (i) a term loan facility to AMH (the “Term Facility”) that includes $750 million of the term loan from third-party lenders and $271.7 million of the term loan held by a subsidiary of the Company and (ii) a $500 million revolving credit facility (the “Revolver Facility”), in each case, with a final maturity date of January 18, 2019.
Interest on the borrowings is based on an adjusted LIBOR rate or alternate base rate, in each case plus an applicable margin, and undrawn revolving commitments bear a commitment fee. Under the terms of the 2013 AMH Credit Facilities, the applicable margin ranges from 1.125% to 1.75% for LIBOR loans and 0.125% to 0.75% for alternate base rate loans, and the undrawn revolving commitment fee ranges from 0.125% to 0.25%, in each case depending on the Company’s corporate rating assigned by Standard & Poor’s Ratings Group, Inc. The 2013 AMH Credit Facilities do not require any scheduled amortization payments or other mandatory prepayments (except with respect to overadvances on the Revolver Facility) prior to the final maturity date, and the Borrowers may prepay the loans and/or terminate or reduce the revolving commitments under the 2013 AMH Credit Facilities at any time without penalty. In connection with the issuance of the 2024 Senior Notes (as defined below), $250 million of the proceeds were used to repay a portion of the Term Facility outstanding with third party lenders at par. The interest rate on the $500 million Term Facility as of December 31, 2014 was 1.37% and the commitment fee as of December 31, 2014 on the $500 million undrawn Revolver Facility was 0.125%. Interest expense incurred by the Company related to the 2013 AMH Credit Facilities was $9.0 million and $0.4 million for the years ended December 31, 2014 and 2013, respectively.
As of December 31, 2014 and December 31, 2013, $500 million and $750 million of the Term Facility was outstanding with third-party lenders, respectively, and there was approximately $271.7 million of the Term Facility that was held by a subsidiary of the Company. As of December 31, 2014 and December 31, 2013, the Revolver Facility was undrawn. The estimated fair value of the Company’s long-term debt obligation related to the 2013 AMH Credit Facilities is approximately $501.3 million based on obtained broker quotes as of December 31, 2014. The $500.0 million carrying value of debt that is recorded on the consolidated statements of financial condition at December 31, 2014 is the amount for which the Company expects to settle the 2013 AMH Credit Facilities. The Company has determined that the long-term debt obligation related to the 2013 AMH Credit Facilities would be categorized as a Level III liability in the fair value hierarchy based on the Company's number of broker quotes obtained, the quality of the broker quotes, the standard deviations of the observed broker quotes and the corroboration of the broker quotes to independent pricing services.
In accordance with U.S. GAAP, the Company determined that the refinancing of the outstanding loans under the 2007 AMH Credit Agreement resulted in a debt extinguishment. As a result, the Company recorded a loss on extinguishment of $2.7 million, of which $1.6 million related to previously capitalized costs incurred in relation to the 2007 AMH Credit Agreement and $1.1 million related to expenses incurred in relation to the 2013 AMH Credit Facilities, in other income, net in the consolidated statement of operations for the year ended December 31, 2013. In addition, the Company capitalized debt issuance costs of $6.6 million incurred in relation to the 2013 AMH Credit Facilities, which was recorded in other assets in the consolidated statements of financial condition as of December 31, 2013 to be amortized over the life of the term loan and line of credit. In connection with the repayment of the Term Facility, $1.9 million of unamortized debt issuance costs were recognized by the Company as loss on extinguishment recorded in other income, net in the consolidated statements of operations for the year ended December 31, 2014. Debt issuance cost amortization expense related to the 2013 AMH Credit Facilities was $1.0 million for the year ended December 31, 2014.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


As of December 31, 2014, the 2013 AMH Credit Facilities were guaranteed and collateralized by AMH and its subsidiaries, Apollo Management, L.P., Apollo Capital Management, L.P., Apollo International Management, L.P., AAA Holdings, L.P., Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P., Apollo Principal Holdings IX L.P., ST Holdings GP, LLC and ST Management Holdings, LLC. The 2013 AMH Credit Facilities contain affirmative and negative covenants which limit the ability of the Borrowers, the guarantors and certain of their subsidiaries to, among other things, incur indebtedness and create liens. Additionally, the 2013 AMH Credit Facilities contain financial covenants which require the Borrowers and their subsidiaries to maintain (1) at least $40 billion of Fee-Generating Assets Under Management and (2) a maximum total net leverage ratio of not more than 4.00 to 1.00 (subject to customary equity cure rights). The 2013 AMH Credit Facilities also contain customary events of default, including events of default arising from non-payment, material misrepresentations, breaches of covenants, cross default to material indebtedness, bankruptcy and changes in control of the Company.
Borrowings under the Revolver Facility may be used for working capital and general corporate purposes, including, without limitation, permitted acquisitions. In addition, the Borrowers may incur incremental facilities in respect of the Revolver Facility and the Term Facility in an aggregate amount not to exceed $500 million plus additional amounts so long as the Borrowers are in compliance with a net leverage ratio not to exceed 3.75 to 1.00.

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 will be amortized into interest expense on the consolidated statements of operations over the term of the 2024 Senior Notes. Interest expense incurred by the Company related to the 2024 Senior Notes was $11.7 million for the year ended December 31, 2014.

The Company capitalized debt issuance costs of $5.5 million incurred in connection with the issuance of the 2024 Senior Notes, which was recorded in other assets in the consolidated statements of financial condition as of December 31, 2014 to be amortized over the term of the notes. Debt issuance cost amortization expense related to the issuance of the 2024 Senior Notes was $0.3 million for the year ended December 31, 2014.

As of December 31, 2014, the 2024 Senior Notes were guaranteed by Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P., Apollo Principal Holdings IX, L.P., AMH Holdings (Cayman), L.P. and any other entity that is required to become a guarantor of the notes under the terms of the indenture governing the 2024 Senior Notes (the "2024 Senior Notes Indenture"). The 2024 Senior Notes Indenture includes covenants that restrict the ability of AMH and, as applicable, the guarantors 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 2024 Senior Notes Indenture also provides for customary events of default.

The estimated fair value of the Company's long-term debt obligation related to the 2024 Senior Notes is approximately $506.2 million based on obtained broker quotes as of December 31, 2014. The face amount of $500.0 million related to the 2024 Senior Notes is the amount the Company is obligated to settle the 2024 Senior Notes. The Company has determined that the long-term debt obligation related to the 2024 Senior Notes would be categorized as a Level II liability in the fair value hierarchy based on the number of broker quotes obtained, the quality of the broker quotes, the standard deviations of the observed broker quotes and the corroboration of the broker quotes to independent pricing services.


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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


As of December 31, 2014, the table below presents the contractual maturities for the Company's debt arrangements:
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
2013 AMH Credit Facilities - Term Facility
$

 
$

 
$

 
$

 
$
500,000

 
$

 
$
500,000

2024 Senior Notes

 

 

 

 

 
500,000

 
500,000

2014 AMI Term Facility I

 

 

 

 
16,204

 

 
16,204

2014 AMI Term Facility II

 

 

 

 
18,752

 

 
18,752

Total Obligations as of December 31, 2014
$

 
$

 
$

 
$

 
$
534,956

 
$
500,000

 
$
1,034,956





15. NET INCOME (LOSS) PER CLASS A SHARE
U.S. GAAP requires use of the two-class method of computing earnings per share for all periods presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for distributions declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for distributions declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.
The remaining earnings are allocated to Class A shares and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Earnings or losses allocated to each class of security are then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding Class A shares and includes the number of additional Class A shares that would have been outstanding if the dilutive potential Class A shares had been issued. The numerator is adjusted for any changes in income or loss that would result from the issuance of these potential Class A shares.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The table below presents basic and diluted net income (loss) per Class A share using the two-class method for the years ended December 31, 2014, 2013 and 2012:
 
For the Year Ended 
 December 31,
 
2014
 
2013
 
2012
 
Numerator:
 
 
 
 
 
 
Net income attributable to Apollo Global Management, LLC
$
168,229

 
$
659,391

  
$
310,957

 
Distributions declared on Class A shares
(483,458
)
(1)  
(556,954
)
(2) 
(172,887
)
(3) 
Distributions on participating securities
(72,074
)
 
(93,235
)
 
(31,175
)
 
Earnings allocable to participating securities

(4) 
(1,394
)
 
(16,855
)
 
Undistributed income (loss) attributable to Class A shareholders: Basic
(387,303
)
  
7,808

  
90,040

 
Dilution effect on undistributed income attributable to Class A shareholders

 
9,106

  
3,425

 
Dilution effect on distributable income attributable to participating securities

 
(1,329
)
 
(85
)
 
Undistributed income (loss) attributable to Class A shareholders: Diluted
$
(387,303
)
  
$
15,585

  
$
93,380

 
Denominator:

 

 
 
 
Weighted average number of Class A shares outstanding: Basic
155,349,017

 
139,173,386

  
127,693,489

 
Dilution effect of share options and unvested RSUs

 
3,040,964

  
1,846,888

 
Weighted average number of Class A shares outstanding: Diluted
155,349,017

  
142,214,350

  
129,540,377

 
Net Income per Class A share: Basic

 

 
 
 
Distributed Income
$
3.11

 
$
4.00

  
$
1.35

 
Undistributed Income (Loss)
(2.49
)
 
0.06

  
0.71

 
Net Income per Class A Share: Basic
$
0.62

  
$
4.06

  
$
2.06

 
Net Income per Class A Share: Diluted(5)

 

 
 
 
Distributed Income
$
3.11

 
$
3.92

  
$
1.34

 
Undistributed Income (Loss)
(2.49
)
 
0.11

  
0.72

 
Net Income per Class A Share: Diluted
$
0.62

  
$
4.03

  
$
2.06

 
 
(1)
The Company declared a $1.08, $0.84, $0.46 and $0.73 distribution on Class A shares on February 7, 2014, May 8, 2014, August 6, 2014 and October 30, 2014, respectively.
(2)
The Company declared a $1.05, $0.57, $1.32 and $1.01 distribution on Class A shares on February 8, 2013, May 6, 2013, August 8, 2013 and November 7, 2013, respectively.
(3)
The Company declared a $0.46, $0.25, $0.24 and $0.40 distribution on Class A shares on February 10, 2012, May 8, 2012, August 12, 2012 and November 9, 2012, respectively.
(4)
No allocation of 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.
(5)
For the year ended December 31, 2014, the Company had an undistributed loss attributable to Class A shareholders and none of the classes of securities resulted in dilution. For the year ended December 31, 2014, AOG Units, restricted share units ("RSUs"), share options and participating securities were anti-dilutive and were accordingly excluded from the diluted earnings per share calculation.  For the years ended December 31, 2013 and December 31, 2012, share options and unvested RSUs were determined to be dilutive, and were accordingly included in the diluted earnings per share calculation. For the year ended December 31, 2013 and 2012, the AOG Units and participating securities were determined to be anti-dilutive and were accordingly excluded from the diluted earnings per share calculation.

On October 24, 2007, the Company commenced the granting of RSUs that provide the right to receive, subject to vesting, Class A shares of Apollo Global Management, LLC, pursuant to the Company’s 2007 Omnibus Equity Incentive Plan. Certain RSU grants to employees provide the right to receive distribution equivalents on vested RSUs on an equal basis any time a distribution is declared. The Company refers to these RSU grants as “Plan Grants.” For certain Plan Grants, distribution equivalents are paid in January of the calendar year next following the calendar year in which a distribution on Class A shares was declared. In addition, certain RSU grants to employees provide that both vested and unvested RSUs participate in distribution equivalents on an equal basis with the Class A shareholders any time a distribution is declared. The Company refers to these as “Bonus Grants.” For the years ended December 31, 2014, 2013 and 2012, the weighted average vested RSUs were 19.5 million, 20.7 million and

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


18.5 million, respectively. For the years ended December 31, 2014, 2013 and 2012, the weighted average unvested RSUs were 9.6 million, 10.8 million and 16.7 million, respectively.
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. Because the RSU participating securities do not have a mandatory redemption amount and the holders of the participating securities are not obligated to fund losses, neither the vested RSUs nor the unvested RSUs are subject to any contractual obligation to share in losses of the Company.
In addition, certain share options were granted to employees under the Company's 2007 Omnibus Equity Incentive Plan. For the years ended December 31, 2014, 2013 and 2012, weighted average unexercised options were 0.5 million, 3.7 million and 5.1 million, respectively.
Holders of AOG Units are subject to the vesting requirements and 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 the Exchange Agreement), exchange their AOG Units for Class A shares on a one-for-one basis. A limited partner must exchange one partnership unit in each of the Apollo Operating Group partnerships to effectuate an exchange for one Class A share.
At December 31, 2014 and 2013, if all of the outstanding AOG Units were exchanged for Class A shares, the result would be an additional 222,680,477 and 228,954,598 Class A shares added to the basic earnings per share calculation. For the years ended December 31, 2014, 2013 and 2012, the weighted average AOG units outstanding were 225.0 million, 234.1 million and 240.0 million, respectively.
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 65.4% and 69.3% of the total voting power of the Company’s shares entitled to vote as of December 31, 2014 and December 31, 2013, respectively.


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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The table below presents transactions in Class A shares during each quarter during the years ended December 31, 2014, 2013 and 2012 and the resulting impact on the Company’s and Holdings’ ownership interests in the Apollo Operating Group:
 
Date
 
Type of Class A
Shares
Transaction
 
Number of 
Shares  Issued in
Class A  Shares
Transaction
(in thousands)
 
Apollo Global Management, LLC
ownership%
in Apollo Operating Group before Class  A
Shares
Transaction
 
Apollo Global Management, LLC
ownership%
in Apollo Operating Group after
Class  A
Shares
Transaction
 
Holdings
ownership%
in Apollo Operating Group before
Class A
Shares
Transaction
 
Holdings
ownership%
in Apollo Operating Group after
Class  A
Shares
Transaction
 
Quarter Ended
March 31, 2012
 
Issuance
 
2,388

 
34.1%
 
34.5%
 
65.9%
 
65.5%
 
Quarter Ended
June 30, 2012
 
Issuance
 
150

 
34.5%
 
34.5%
 
65.5%
 
65.5%
 
Quarter Ended September 30, 2012
 
Issuance
 
3,414

 
34.5%
 
35.1%
 
65.5%
 
64.9%
 
Quarter Ended December 31, 2012
 
Issuance
 
180

 
35.1%
 
35.1%
 
64.9%
 
64.9%
 
Quarter Ended March 31, 2013
 
Issuance
 
2,091

 
35.1%
 
35.5%
 
64.9%
 
64.5%
 
Quarter Ended
June 30, 2013
 
Issuance/Offering
 
9,577

(1) 
35.5%
 
38.0%
 
64.5%
 
62.0%
 
Quarter Ended September 30, 2013
 
Issuance
 
1,977

 
38.0%
 
38.3%
 
62.0%
 
61.7%
 
Quarter Ended December 31, 2013
 
Issuance/Exchange
 
2,581

(1) 
38.3%
 
39.0%
 
61.7%
 
61.0%
 
Quarter Ended March 31, 2014
 
Issuance
 
2,672

 
39.0%
 
39.4%
 
61.0%
 
60.6%
 
Quarter Ended
June 30, 2014
 
Issuance/Exchange
 
7,344

(1) 
39.4%
 
41.2%
 
60.6%
 
58.8%
 
Quarter Ended September 30, 2014
 
Issuance
 
3,660

 
41.2%
 
41.8%
 
58.8%
 
58.2%
 
Quarter Ended December 31, 2014
 
Issuance/Exchange
 
3,090

(1) 
41.8%
 
42.3%
 
58.2%
 
57.7%
 
 
(1)
In May 2013, November 2013, May 2014 and October 2014, certain holders of AOG Units exchanged their AOG Units for Class A shares and approximately 8.8 million, 2.3 million, 6.2 million and 0.1 million Class A shares were issued by the Company in the exchanges, respectively.


16. EQUITY-BASED COMPENSATION
AOG Units
The fair value of the AOG Units of approximately $5.6 billion was charged to compensation expense on a straight-line basis over the five or six year service period, as applicable. For the years ended December 31, 2013 and 2012, $30.0 million and $480.9 million of compensation expense was recognized, respectively. The AOG Units were fully vested and amortized as of June 30, 2013.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table summarizes the activity of the AOG Units for the years ended December 31, 2013 and 2012:
 
AOG Units
 
Weighted Average
Grant Date
Fair Value
Balance at January 1, 2012
22,593,210

 
22.64

Granted
199,050

 
17.36

Forfeited
(199,050
)
 
20.00

Vested
(21,092,844
)
 
22.80

Balance at December 31, 2012
1,500,366

 
20.00

Vested
(1,500,366
)
 
20.00

Balance at December 31, 2013

 
$


RSUs
On October 24, 2007, the Company commenced the granting of RSUs under the Company’s 2007 Omnibus Equity Incentive Plan. These grants are accounted for as a grant of equity awards in accordance with U.S. GAAP. The fair value of all grants after March 29, 2011 is based on the grant date fair value, which considers the public share price of the Company. For Plan Grants, the fair value is based on grant date fair value, and is discounted primarily for transfer restrictions and lack of distributions until vested. For Bonus Grants, the fair value is discounted primarily for transfer restrictions and in certain cases timing of distributions. For Plan Grants that are not eligible for distributions on unvested shares, the discount for the lack of distributions until vested based on the present value of a growing annuity calculation had a weighted average of 32.5%, 30.5% and 23.3% for the years ended December 31, 2014, 2013 and 2012, respectively. Additionally, for Plan Grants, the marketability discount for transfer restrictions based on the Finnerty Model calculation, after considering the discount for lack of pre-vesting distributions, had a weighted average of 5.1%, 6.0% and 5.0% for the years ended December 31, 2014, 2013 and 2012, respectively. For Bonus Grants, the marketability discount for transfer restrictions based on the Finnerty Model calculation had a weighted average of 3.2%, 3.2% and 4.9% for the years ended December 31, 2014, 2013 and 2012, respectively. The estimated total fair value is charged to compensation expense on a straight-line basis over the vesting period, which for Plan Grants is generally up to six years, with the first installment vesting one year after grant and quarterly vesting thereafter, and for Bonus Grants is annual vesting over three years.
The fair value of grants made in 2014, 2013 and 2012 is $149.1 million, $56.6 million and $73.5 million, respectively. Of the awards granted in 2012, 972,266 RSUs relate to awards granted as part of the Stone Tower acquisition. The fair value of these awards was not charged to compensation expense, but charged to additional paid in capital in the consolidated statements of changes in shareholder's equity. See note 3 for further discussion of the Stone Tower acquisition. The actual forfeiture rate was 6.7%, 5.3% and 3.9% for the years ended December 31, 2014, 2013 and 2012, respectively. For the years ended December 31, 2014, 2013 and 2012, $80.7 million, $87.7 million and $110.2 million of compensation expense was recognized, respectively.
In addition, during 2014, the Company entered into an agreement with an executive officer providing for the grant of RSUs when certain metrics have been achieved. In accordance with U.S. GAAP, equity-based compensation expense is recognized only when certain metrics are met or deemed probable. Accordingly, for the year ended December 31, 2014, no equity-based compensation expense was recognized relating to these RSUs.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table summarizes RSU activity for the years ended December 31, 2014, 2013 and 2012:
 
 
Unvested
 
Weighted Average
Grant Date Fair
Value
 
Vested
 
Total Number of
RSUs
Outstanding
 
Balance at January 1, 2012
20,480,773

 
$
11.38

 
20,240,008

 
40,720,781

(1) 
Granted
5,377,562

 
13.68

 

 
5,377,562

 
Forfeited
(966,725
)
 
11.02

 

 
(966,725
)
 
Delivered

 
11.69

 
(7,894,214
)
 
(7,894,214
)
 
Vested
(10,167,136
)
 
12.28

 
10,167,136

 

 
Balance at December 31, 2012
14,724,474

 
11.62

 
22,512,930

 
37,237,404

(1) 
Granted
2,101,277

 
26.95

 

 
2,101,277

 
Forfeited
(888,594
)
 
13.30

 

 
(888,594
)
 
Delivered

 
12.30

 
(6,879,050
)
 
(6,879,050
)
 
Vested
(7,159,871
)
 
12.60

 
7,159,871

 

 
Balance at December 31, 2013
8,777,286

 
14.32

 
22,793,751

 
31,571,037

(1) 
Granted
7,046,490

 
21.16

 

 
7,046,490

 
Forfeited(2)
(1,055,639
)
 
12.19

 

 
(1,055,639
)
 
Delivered

 
12.96

 
(9,490,011
)
 
(9,490,011
)
 
Vested(2)
(4,050,502
)
 
16.75

 
4,050,502

 

 
Balance at December 31, 2014
10,717,635

 
$
18.11

 
17,354,242

 
28,071,877

(1) 
 
(1)
Amount excludes RSUs which have vested and have been issued in the form of Class A shares.
(2)
In connection with the departure of an employee from the Company, such employee vested in 625,000 RSUs that were previously granted to him and forfeited 625,000 RSUs that were previously granted to him. As a result of the additional vesting, the Company recorded an incremental compensation expense of $17.5 million related to the relevant RSU award for the year ended December 31, 2014.
Units Expected to Vest—As of December 31, 2014, approximately 10,100,000 RSUs were expected to vest over the next 3.8 years.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Share Options
The following options have been granted under the Company's 2007 Omnibus Equity Incentive Plan:
 
Date of Grant
 
Options Granted
 
Vesting Terms
December 2, 2010 (1)
 
5,000,000
 
Vested and became exercisable with respect to 4/24 of the option shares on December 31, 2011 and the remainder vest in equal installments over each of the remaining 20 quarters with full vesting on December 31, 2016; 1,250,000 of these options vested in connection with the optionee's employment termination and an equal number of options were forfeited during the quarter ended March 31, 2014.
January 22, 2011
 
555,556
 
Half of such options that vested and became exercisable on December 31, 2011 were exercised on March 5, 2012 and the other half that were due to become exercisable on December 31, 2012 were forfeited during the quarter ended March 31, 2012.
April 9, 2011
 
25,000
 
Vested and became exercisable with respect to half of the option shares on December 31, 2011 and the other half vested in four equal quarterly installments starting on March 31, 2012 and ending on December 31, 2012 and are fully vested as of the date of this report.
July 9, 2012
 
50,000
 
Will vest and become exercisable with respect to 4/24 of the option shares on June 30, 2013 and the remainder will vest in equal installments over each of the remaining 20 quarters with full vesting on June 30, 2018.
December 28, 2012
 
200,000
 
Will vest and become exercisable with respect to 4/24 of the option shares on June 30, 2013 and the remainder will vest in equal installments over each of the remaining 20 quarters with full vesting on June 30, 2018.
(1)
In connection with the departure of an employee from the Company, such employee vested in 1,250,000 share options that were previously granted to him and forfeited 1,250,000 share options that were previously granted to him. As a result of the additional vesting, the Company recorded an incremental compensation expense of $28.1 million related to the relevant option award agreement for the year ended December 31, 2014.
For the years ended December 31, 2014, 2013 and 2012, $28.2 million, $4.7 million and $4.8 million of compensation expense was recognized as a result of these grants, respectively.
There were no share options granted during the year ended December 31, 2014. Apollo measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for options granted during 2012 and 2011: 

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Assumptions:
 
2012
 
2011
Risk-free interest rate
 
1.11
%
 
2.79
%
Weighted average expected dividend yield
 
8.13
%
 
2.25
%
Expected volatility factor(1)
 
45.00
%
 
40.22
%
Expected life in years
 
6.66

 
5.72

Fair value of options per share
 
$
3.01

 
$
8.44

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

The following table summarizes the share option activity for the years ended December 31, 2014, 2013 and 2012:
 
 
Options
Outstanding
 
Weighted
Average
Exercise
Price
 
Aggregate
Fair
Value
 
Weighted
Average
Remaining
Contractual
Term
Balance at January 1, 2012
5,580,556

 
$
8.14

 
$
32,996

 
8.93

Granted
250,000

 
16.26

 
752

 
9.90

Exercised
(277,778
)
 
9.00

 
(2,364
)
 

Forfeited
(277,778
)
 
9.00

 
(2,364
)
 

Balance at December 31, 2012
5,275,000

 
8.44

 
29,020

 
8.01

Granted

 

 

 

Exercised
(2,324,997
)
 
8.12

 
(12,896
)
 

Forfeited

 

 

 

Balance at December 31, 2013
2,950,003

 
8.69

 
16,124

 
7.08

Exercised
(1,468,750
)
 
8.03

 
(8,217
)
 

Forfeited
(1,250,000
)
 
8.00

 
(7,025
)
 

Balance at December 31, 2014
231,253

 
16.60

 
882

 
7.93

Exercisable at December 31, 2014
85,417

 
$
17.11

 
$
276

 
7.99

Options Expected to VestAs of December 31, 2014, approximately 137,000 options were expected to vest.
The expected life of the options granted represents the period of time that options are expected to be outstanding and is based on the contractual term of the option. Unamortized compensation cost related to unvested share options at December 31, 2014 was $0.4 million and is expected to be recognized over a weighted average period of 3.5 years. The intrinsic value of options exercised was $26.6 million, $42.9 million and $1.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Delivery of Class A Shares - RSUs and Share Options
During the years ended December 31, 2014, 2013 and 2012, the Company delivered Class A shares in settlement of vested RSUs and exercised share options. 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 delivered 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 delivered to them at the time of exercise by an amount sufficient to cover the exercise price. The net share settlement results in a tax liability for the Company and a corresponding accumulated deficit adjustment. This adjustment for the years ended December 31, 2014, 2013 and 2012 was $0.4 million, $85.9 million and $26.0 million, respectively, which is recorded as accumulated deficit in the consolidated statements of changes in shareholders’ equity. During the year ended December 31, 2014, the Company changed its methodology from net share settlement to a “sell-to-cover” methodology. Under this

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


methodology, holders of vested RSUs and exercised share options settle their tax liability through a broker-assisted sale of shares equal to their tax liability.  The proceeds from such sale are remitted back to the Company.
The delivery of Class A shares in settlement of vested RSUs and exercised share options does not cause a transfer of amounts in the consolidated statements of changes in shareholders’ equity to the Class A shareholders. The delivery of Class A shares in settlement of vested RSUs and exercised share options causes the income allocated to the Non-Controlling Interests to shift to the Class A shareholders from the date of delivery forward. During the years ended December 31, 2014, 2013 and 2012, the Company delivered 10,491,649, 5,181,389 and 6,130,951 Class A shares in settlement of vested RSUs and exercised share options, which caused the Company’s ownership interest in the Apollo Operating Group to increase to 40.6% from 39.0%. The gross value of the settlement of these shares was $289.0 million, $212.9 million and $110.1 million, respectively based on Apollo's share price at the time of the delivery.
AAA RDUs
Incentive units that provide the right to receive AAA restricted depositary units (“RDUs”) following vesting are granted periodically to employees of Apollo. These grants are accounted for as equity awards in accordance with U.S. GAAP. The incentive units granted to employees generally vest over three years. In contrast, the Company’s Managing Partners and Contributing Partners have received distributions of fully-vested AAA RDUs. The fair value at the date of the grants is recognized on a straight-line basis over the vesting period (or upon grant in the case of fully vested AAA RDUs). The grant date fair value is based on the public share price of AAA. Vested AAA RDUs can be converted into ordinary common units of AAA subject to applicable securities law restrictions. During the years ended December 31, 2014, 2013 and 2012, the actual forfeiture rate was 1.1%, 0.0% and 0.0%, respectively. For the years ended December 31, 2014, 2013 and 2012, $0.4 million, $1.2 million and $1.0 million of compensation expense was recognized, respectively.
During the years ended December 31, 2014, 2013 and 2012 the Company delivered 120,354, 114,896 and 60,702 RDUs, respectively. The deliveries in 2014, 2013 and 2012 resulted in a satisfaction of liability of $1.2 million, $1.2 million and $1.8 million, respectively, and the recognition of a net decrease of additional paid in capital in 2014, 2013 and 2012 of $2.2 million $1.0 million and $2.5 million, respectively. These amounts are presented in the consolidated statements of changes in shareholders’ equity. There was $1.2 million and $1.2 million of liability for undelivered RDUs included in accrued compensation and benefits in the consolidated statements of financial condition as of December 31, 2014 and December 31, 2013, respectively. The following table summarizes RDU activity for the years ended December 31, 2014, 2013, and 2012, respectively:
 
 
Unvested
 
Weighted
Average
Grant Date
Fair Value
 
Vested
 
Total Number
of RDUs
Outstanding
Balance at January 1, 2012
196,653

 
$
8.17

 
60,702

 
257,355

Granted
256,673

 
9.45

 

 
256,673

Delivered

 
8.69

 
(60,702
)
 
(60,702
)
Vested
(114,896
)
 
9.02

 
114,896

 

Balance at December 31, 2012
338,430

 
8.85

 
114,896

 
453,326

Granted
27,286

 
26.90

 

 
27,286

Delivered

 
9.02

 
(114,896
)
 
(114,896
)
Vested
(120,354
)
 
9.83

 
120,354

 

Balance at December 31, 2013
245,362

 
10.38

 
120,354

 
365,716

Granted
18,426

 
33.05

 

 
18,426

Forfeited
(2,861
)
 
8.36

 

 
(2,861
)
Delivered

 
9.02

 
(120,354
)
 
(120,354
)
Vested
(96,267
)
 
11.17

 
96,267

 

Balance at December 31, 2014
164,660

 
$
12.49

 
96,267

 
260,927



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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Units Expected to Vest—As of December 31, 2014, approximately 155,000 RDUs were expected to vest over the next 1.9 years.
The following table summarizes the activity of RDUs available for future grants:
 
RDUs Available
For Future
Grants
 
Balance at January 1, 2012
1,947,837

 
Purchases
187,261

 
Granted/Issued
(449,753
)
(1 
) 
Forfeited

 
Balance at December 31, 2012
1,685,345

 
Purchases
6,236

 
Granted/Issued
(39,272
)
(1 
) 
Forfeited

 
Balance at December 31, 2013
1,652,309

 
Purchases
9,719

 
Granted/Issued
(18,426
)
 
Forfeited
2,861

 
Balance at December 31, 2014
1,646,463

 
(1)
During 2013 and 2012, the Company delivered 11,986 and 193,080 to certain employees as part of AAA's carry reinvestment program, respectively. This resulted in a decrease in profit sharing payable of $0.2 million and $1.2 million in 2013 and 2012, respectively in the consolidated statements of financial condition.
Restricted Stock and Restricted Stock Unit Awards— Apollo Commercial Real Estate Finance, Inc.
ARI restricted stock awards and ARI restricted stock unit awards ("ARI RSUs") granted to the Company and certain of the Company’s employees generally vest over three years, either quarterly or annually. The awards granted to the Company are accounted for as investments and deferred revenue in the consolidated statements of financial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method of accounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense is recognized on a straight line-basis over the vesting period for the awards granted to the employees. The Company recorded an asset and a liability upon receiving the awards on behalf of the Company’s employees. The fair value of the awards to employees is based on the grant date fair value, which utilizes the public share price of ARI, less discounts for transfer restrictions. The awards granted to the Company’s employees are remeasured each period to reflect the fair value of the asset and other liabilities and any changes in these values are recorded in the consolidated statements of operations. For the years ended December 31, 2014, 2013, and 2012, $1.3 million, $2.8 million and $2.3 million of management fees and $1.3 million, $2.0 million and $1.5 million of compensation expense were recognized in the consolidated statements of operations, respectively. The actual forfeiture rate for unvested ARI restricted stock awards and ARI RSUs was 0%, 1.6% and 1.0% for the years ended December 31, 2014, 2013 and 2012, respectively.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table summarizes activity for the ARI restricted stock awards and ARI RSUs that were granted to both the Company and certain of its employees for the years ended December 31, 2014, 2013, and 2012:
 
 
ARI
Restricted
Stock
Unvested
 
ARI RSUs
Unvested
 
Weighted
Average
Grant Date
Fair Value
 
ARI RSUs
Vested
 
Total
Number of
ARI RSUs
Outstanding
Balance at January 1, 2012
32,502

 
374,754

 
$
15.12

 
73,542

 
448,296

Granted to employees of the Company

 
20,000

 
15.17

 

 
20,000

Granted to the Company

 

 

 

 

Forfeited by employees of the Company

 
(5,522
)
 
14.09

 

 
(5,522
)
Vested awards for employees of the Company

 
(99,690
)
 
15.43

 
99,690

 

Vested awards of the Company
(32,502
)
 
(52,000
)
 
16.25

 
52,000

 

Balance at December 31, 2012

 
237,542

 
14.62

 
225,232

 
462,774

Granted to employees of the Company

 
205,000

 
16.58

 

 
205,000

Granted to the Company

 
40,000

 
17.59

 

 
40,000

Forfeited by employees of the Company

 
(5,000
)
 
16.66

 

 
(5,000
)
Vested awards of the employees of the Company

 
(137,807
)
 
15.48

 
137,807

 

Vested awards of the Company

 
(65,333
)
 
15.41

 
65,333

 

Balance at December 31, 2013

 
274,402

 
15.86

 
428,372

 
702,774

Granted to employees of the Company

 
400,254

 
16.59

 

 
400,254

Vested awards of the employees of the Company

 
(129,148
)
 
15.55

 
129,148

 

Vested awards of the Company

 
(65,333
)
 
15.41

 
65,333

 

Balance at December 31, 2014

 
480,175

 
$
16.61

 
622,853

 
1,103,028

Units Expected to Vest—As of December 31, 2014, approximately 452,000 ARI RSUs were expected to vest over the next 2.7 years.

Restricted Stock Unit Awards—Apollo Residential Mortgage, Inc.
AMTG restricted stock units (“AMTG RSUs”) granted to the Company and certain of the Company’s employees generally vest over three years, either quarterly or annually. The awards granted to the Company are accounted for as investments and deferred revenue in the consolidated statements of financial condition. As these awards vest, the deferred revenue is recognized as management fees. The investment is accounted for using the equity method of accounting for awards granted to the Company and as a deferred compensation asset for the awards granted to employees. Compensation expense is recognized on a straight line-basis over the vesting period for the awards granted to the employees. The Company recorded an asset and a liability upon receiving the awards on behalf of the Company’s employees. The awards granted to the Company’s employees are remeasured each period to reflect the fair value of the asset and other liabilities and any changes in these values are recorded in the consolidated statements of operations.
The fair value of the awards to employees is based on the grant date fair value, which utilizes the public share price of AMTG less discounts for transfer restrictions and timing of distributions. For the years ended December 31, 2014, 2013 and 2012, $0.9 million, $0.9 million and $0.2 million of management fees were recognized in the consolidated statements of operations, respectively. For the years ended December 31, 2014, 2013 and 2012, $0.8 million, $0.8 million and $0.1 million of compensation expense was recognized in the consolidated statements of operations, respectively. The actual forfeiture rate for AMTG RSUs was 2.5%, 1.3% and 0% for the years ended December 31, 2014, 2013 and 2012, respectively.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table summarizes activity for the AMTG RSUs that were granted to both the Company and certain of its employees for the years ended December 31, 2014, 2013, and 2012:
 
 
AMTG RSUs
Unvested
 
Weighted
Average
Grant Date
Fair Value
 
AMTG RSUs Vested
 
Total
Number of
AMTG RSUs
Outstanding
Balance at January 1, 2012
28,305

 
$
17.56

 
2,570

 
30,875

Granted to employees of the Company
143,244

 
20.62

 

 
143,244

Vested awards of the employees of the Company
(4,042
)
 
16.57

 
4,042

 

Vested awards of the Company
(6,250
)
 
18.20

 
6,250

 

Balance at December 31, 2012
161,257

 
20.28

 
12,862

 
174,119

Granted to employees of the Company
25,848

 
14.73

 

 
25,848

Forfeited by employees of the Company
(2,359
)
 
18.74

 

 
(2,359
)
Vested awards of the employees of the Company
(51,259
)
 
20.30

 
51,259

 

Vested awards of the Company
(6,250
)
 
18.20

 
6,250

 

Balance at December 31, 2013
127,237

 
19.28

 
70,371

 
197,608

Granted to employees of the Company
130,124

 
16.01

 

 
130,124

Forfeited by employees of the Company
(4,855
)
 
21.22

 

 
(4,855
)
Vested awards of the employees of the Company
(57,982
)
 
19.56

 
57,982

 

Vested awards of the Company
(4,688
)
 
18.20

 
4,688

 

Balance at December 31, 2014
189,836

 
$
16.93

 
133,041

 
322,877

Units Expected to Vest—As of December 31, 2014, approximately 178,000 AMTG RSUs were expected to vest over the next 2.4 years.
Restricted Share Awards—Athene Holding
Athene Holding has granted restricted share awards ("AHL Awards") to certain employees of Apollo. Certain of the awards granted are subject to time-based vesting conditions that generally vest over five years and certain of the awards vest once certain metrics have been achieved. During 2014, the vesting terms of some of the AHL Awards were modified such that the portion of AHL Awards related to services provided from the date of grant were deemed vested.
The AHL Awards granted to employees of Athene Asset Management, L.P. ("Athene Asset Management"), a consolidated subsidiary of Apollo, are accounted for as a prepaid compensation asset within other assets and deferred revenue in the consolidated statements of financial condition. From the date of grant, the deferred revenue is recognized as management fees and the prepaid compensation asset is recognized as compensation expense over the vesting period. The fair value of the awards to employees is based on the grant date fair value, which utilizes the share price of Athene Holding, less discounts for transfer restrictions. Shares granted as part of the AHL Awards were valued using a multiple-scenario model, which considers the price volatility of the underlying stock price of Athene Holding, time to expiration and the risk-free rate. The awards granted are recognized as liability awards remeasured each period to reflect the fair value of the prepaid compensation asset and deferred revenue. Any changes in fair value are recorded in management fees and equity-based compensation expense in the consolidated statements of operations.
For the year ended December 31, 2014, $16.7 million of management fees and equity-based compensation expense was recognized in the consolidated statements of operations relating to these AHL Awards.
The following table summarizes activity for the AHL Awards that were granted to certain of its employees for the year ended December 31, 2014:

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


 
AHL Awards
Unvested
 
Weighted
Average
Grant Date
Fair Value
 
AHL Awards Vested
 
Total
Number of
AHL Awards
Outstanding
Balance at January 1, 2014
1,717,568

 
$
1.23

 

 
1,717,568

Granted to employees of the Company
850,000

 
9.31

 

 
850,000

Vested awards of the employees of the Company
(849,495
)
 
3.69

 
849,495

 

Balance at December 31, 2014
1,718,073

 
$
4.00

 
849,495

 
2,567,568

Units Expected to Vest—As of December 31, 2014, approximately 476,107 AHL Awards were expected to vest over the next 2.2 years and 1,241,966 AHL Awards may vest if certain metrics are achieved.
Equity-Based Compensation Allocation
Equity-based compensation is allocated based on ownership interests. Therefore, the amortization of the AOG Units is allocated to shareholders’ equity attributable to Apollo Global Management, LLC and the Non-Controlling Interests, which results in a difference in the amounts charged to equity-based compensation expense and the amounts credited to shareholders’ equity attributable to Apollo Global Management, LLC in the Company’s consolidated financial statements.
Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2014:

 
 
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 and Share Options
$
107,017

 
%
 
$

 
$
107,017

AHL Awards
16,738

 
57.7

 
9,938

 
6,800

Other equity-based compensation awards
2,565

 
57.7

 
1,517

 
1,048

Total Equity-Based Compensation
$
126,320

 
 
 
11,455

 
114,865

Less other equity-based compensation awards (2)
 
 
 
 
(11,455
)
 
(5,994
)
Capital Increase Related to Equity-Based Compensation
 
 
 
 
$

 
$
108,871

 
(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.
Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2013:
 
Total
Amount
 
Non-
Controlling
Interest  % in
Apollo
Operating
Group
 
Allocated to
Non-
Controlling
Interest in
Apollo
Operating
Group(1)
 
Allocated to
Apollo
Global
Management,
LLC
AOG Units
$
30,007

 
61.0
%
 
$
19,163

 
$
10,844

RSUs and Share Options
92,185

 

 

 
92,185

Other equity-based compensation awards
4,035

 
61.0

 
2,494

 
1,541

Total Equity-Based Compensation
$
126,227

 
 
 
21,657

 
104,570

Less other equity-based compensation awards(2)
 
 
 
 
(2,494
)
 
365

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

 
$
104,935



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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


(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.
Below is a reconciliation of the equity-based compensation allocated to Apollo Global Management, LLC for the year ended December 31, 2012:

 
Total
Amount
 
Non-
Controlling
Interest  % in
Apollo
Operating
Group
 
Allocated to
Non-
Controlling
Interest in
Apollo
Operating
Group(1)
 
Allocated to
Apollo
Global
Management,
LLC
AOG Units
$
480,931

 
64.9
%
 
$
313,856

 
$
167,075

RSUs and Share Options
115,013

 

 

 
115,013

Other equity-based compensation awards
2,710

 
64.9

 
1,769

 
941

Total Equity-Based Compensation
$
598,654

 
 
 
315,625

 
283,029

Less other equity-based compensation awards(2)
 
 
 
 
(1,769
)
 
(741
)
Capital Increase Related to Equity-Based Compensation
 
 
 
 
$
313,856

 
$
282,288


(1)
Calculated based on average ownership percentage for the period considering Class A share issuances during the period.
(2)
Includes equity-based compensation reimbursable by certain funds.


17. RELATED PARTY TRANSACTIONS AND INTERESTS IN CONSOLIDATED ENTITIES
The Company typically facilitates the initial payment of certain operating costs incurred by the funds that it manages as well as their affiliates. These costs are normally reimbursed by such funds and are included in due from affiliates.
Due from affiliates and due to affiliates are comprised of the following:
 
As of 
 December 31,
 
2014
 
2013
Due from Affiliates:
 
 
 
Due from private equity funds
$
30,091

 
$
57,582

Due from portfolio companies
41,844

 
23,484

Due from credit funds(1)
174,165

 
216,750

Due from Contributing Partners, employees and former employees
1,721

 
2,659

Due from real estate funds
20,162

 
12,119

Other
32

 
4,653

Total Due from Affiliates
$
268,015

 
$
317,247

Due to Affiliates:
 
 
 
Due to Managing Partners and Contributing Partners in connection with the tax receivable agreement
$
509,149

 
$
525,483

Due to private equity funds
1,158

 
825

Due to credit funds
5,343

 
1,773

Distributions payable to employees
49,503

 
67,290

Total Due to Affiliates
$
565,153

 
$
595,371


(1)
As of December 31, 2014 includes unsettled AAA and Athene management fee receivable as discussed in "Athene" below. As of December 31, 2013, includes Athene Services Derivative as discussed in "Athene" below.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Tax Receivable Agreement and Other
Subject to certain restrictions, each of the Managing Partners and Contributing Partners has the right to exchange their 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. 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. These payments are expected to occur approximately over the next 20 years. In connection with the amendment of the AMH partnership agreement in April 2010, the tax receivable agreement was revised to reflect the Managing Partners’ agreement to defer 25%, or $12.1 million, of the required payments pursuant to the tax receivable agreement that are attributable to the 2010 fiscal year for a period of four years until 2015.
In April 2013, Apollo made a $30.4 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2012 tax year. Included in the payment was approximately $7.6 million and approximately $0.3 million of interest paid to the Managing Partners and Contributing Partners, respectively.
During the years ended December 31, 2014, 2013 and 2012, the Company reduced the tax receivable agreement liability and recorded $32.2 million, $13.0 million and $3.9 million, respectively, in other income, net in the consolidated statement of operations due to changes in projected income estimates and in estimated tax rates.
In April 2014, Apollo made a $32.0 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2013 tax year. Included in the payment was approximately $8.3 million and approximately $0.5 million of interest paid to the Managing Partners and Contributing Partners, respectively.
During the years ended December 31, 2014 and 2013, the Intermediate Holding Companies acquired approximately 6.3 million and 11.1 million Class A shares of Apollo Global Management, LLC, respectively, which were used to acquire an equal number of AOG Units from certain Managing Partners and Contributing Partners in connection with exchanges of AOG Units for Class A shares. These exchanges were taxable for U.S. federal income tax purposes, and resulted in APO Corp. recording a U.S. federal income tax basis adjustment of approximately $97.6 million and $243.1 million in the intangible assets of certain Apollo Operating Group entities during the years ended December 31, 2014 and 2013, respectively.
Pursuant to the tax receivable agreement, the Managing Partners and Contributing Partners who exchanged AOG Units for Class A shares will receive payment from APO Corp. of 85% of the amount of the actual cash tax savings, if any, in U.S. Federal, state, local and foreign income tax that APO Corp. realizes as a result of these increases in tax deductions and tax basis, and certain other tax benefits, including imputed interest expense. APO Corp. retains the benefit from the remaining 15% of actual cash tax savings. As a result of the May 2013, November 2013, and May 2014 exchanges, a $174.8 million liability was recorded to estimate the amount of these future expected payments to be made by APO Corp. to the Managing Partners and Contributing Partners pursuant to the tax receivable agreement.
Due from Contributing Partners, Employees and Former Employees
As of December 31, 2014 and December 31, 2013, due from Contributing Partners, Employees and Former Employee balances include various amounts due to the Company including director fee receivables.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Distributions
In addition to other distributions such as payments pursuant to the tax receivable agreement, the table below presents information regarding the quarterly distributions which were made at the sole discretion of the manager of the Company during 2014, 2013 and 2012 (in millions, except per share data):
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 10, 2012
 
$
0.46

 
February 29, 2012
 
$
58.1

 
$
110.4

 
$
168.5

 
$
10.3

April 13, 2012
 

 
April 13, 2012
 

 
11.0

(1) 
11.0

 

May 8, 2012
 
0.25

 
May 30, 2012
 
31.6

 
60.0

 
91.6

 
6.2

August 2, 2012
 
0.24

 
August 31, 2012
 
31.2

 
57.6

 
88.8

 
5.3

November 9, 2012
 
0.40

 
November 30, 2012
 
52.0

 
96.0

 
148.0

 
9.4

For the year ended December 31, 2012
 
$
1.35

 
 
 
$
172.9

 
$
335.0

 
$
507.9

 
$
31.2

February 8, 2013
 
$
1.05

 
February 28, 2013
 
$
138.7

 
$
252.0

 
$
390.7

 
$
25.0

April 12, 2013
 

 
April 12, 2013
 

 
55.2

(1) 
55.2

 

May 6, 2013
 
0.57

 
May 30, 2013
 
80.8

 
131.8

 
212.6

 
14.3

August 8, 2013
 
1.32

 
August 30, 2013
 
189.7

 
305.2

 
494.9

 
30.8

November 7, 2013
 
1.01

 
November 29, 2013
 
147.7

 
231.2

 
378.9

 
24.1

For the year ended December 31, 2013
 
$
3.95

 
 
 
$
556.9

 
$
975.4

 
$
1,532.3

 
$
94.2

February 7, 2014
 
$
1.08

 
February 26, 2014
 
$
160.9

 
$
247.3

 
$
408.2

 
$
25.5

April 3, 2014
 

 
April 3, 2014
 

 
49.5

(1) 
49.5

 

May 8, 2014
 
0.84

 
May 30, 2014
 
130.0

 
188.4

 
318.4

 
20.9

June 16, 2014
 

 
June 16, 2014
 

 
28.5

(1) 
28.5

 

August 6, 2014
 
0.46

 
August 29, 2014
 
73.6

 
102.5

 
176.1

 
10.2

September 11, 2014
 

 
September 11, 2014
 

 
12.4

(1) 
12.4

 

October 30, 2014
 
0.73

 
November 21, 2014
 
119.0

 
162.6

 
281.6

 
15.5

December 15, 2014
 

 
December 15, 2014
 

 
25.2

(1) 
25.2

 

For the year ended December 31, 2014
 
$
3.11

 
 
 
$
483.5

 
$
816.4

 
$
1,299.9

 
$
72.1

(1)
On April 13, 2012, April 12, 2013, April 3, 2014, June 16, 2014, September 11, 2014 and December 15, 2014, the Company made a $0.05, $0.23, $0.22, $0.13, $0.06 and $0.11 distribution per AOG Unit, respectively, to the non-controlling interest holders in the Apollo Operating Group.


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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Indemnity
Carried interest income from certain funds that the Company manages can be distributed to the Company on a current basis, but is subject to repayment by the subsidiary of the Apollo Operating Group that acts as general partner of the fund in the event that certain specified return thresholds are not ultimately achieved. The Managing Partners, Contributing Partners and certain other investment professionals have personally guaranteed, subject to certain limitations, the obligation 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. An existing shareholders agreement includes clauses that 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, 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. There was no indemnification liability recorded as of December 31, 2014 and December 31, 2013.
Due to Credit Funds

Based upon a hypothetical liquidation of two of our credit funds, as of December 31, 2014, the Company has recorded a general partner obligation to return previously distributed carried interest income, which represents amounts due to these funds. The actual determination and any required payment of a general partner obligation would not take place until the final disposition of the fund’s investments based on contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement of the fund. As such, there was a general partner obligation to return previously distributed carried interest income of $3.4 million accrued as of December 31, 2014.
Athene
Athene Holding is the ultimate parent of various insurance company operating subsidiaries. Through its subsidiaries, Athene Holding provides insurance products focused primarily on the retirement market and its business centers primarily on issuing or reinsuring fixed indexed annuities.
Athene Asset Management receives a management fee equal to 0.40% per annum on all assets under management in accounts owned by or related to Athene (the "Athene Accounts"), with certain limited exceptions. In addition, the Company receives sub-advisory management fees and carried interest income with respect to a portion of the assets in the Athene Accounts. With respect to capital invested in an Apollo fund, Apollo receives management fees directly from the relevant funds under the investment management agreements with such funds. Athene Asset Management and other Apollo subsidiaries incur all expenses associated with their provision of services to Athene, including but not limited to, asset allocation services, direct asset management services, risk management, asset and liability matching management, mergers and acquisitions asset diligence, hedging and other services.
Under a transaction advisory services agreement with Athene (the "Athene Services Agreement"), effective February 5, 2013, Apollo earns a quarterly monitoring fee of 0.50% of Athene’s capital and surplus as of the end of the applicable quarter multiplied by 2.5, excluding the shares of Athene Holding that were newly 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, at the end of each quarter through December 31, 2014, the termination date. This quarterly monitoring fee is not applicable to the amount of invested capital attributable to the Excluded Athene Shares. The Athene Services Agreement was amended in connection with the Athene Private Placement described below (the “Amended Athene Services Agreement”). The Amended Athene Services Agreement adjusts the calculation of Athene Holding’s capital and surplus downward by an amount equal to (x) the equity capital raised in the Athene Private Placement and (y) certain disproportionate increases to the statutory capital and surplus of Athene, as compared to the stockholders’ equity of Athene calculated on a U.S. GAAP basis, as a result of certain future acquisitions by Athene. Prior to the consummation of the Athene Private Placement, all such monitoring fees were paid pursuant to a derivative contract between Athene and Apollo (the "Athene Services Derivative"). In connection with the Athene Private Placement, the Athene Services Derivative was settled on April 29, 2014 by delivery to Apollo of common shares of Athene Holding, and as a result, such derivative was terminated. Following settlement of the Athene Services Derivative, future monitoring fees paid to

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Apollo pursuant to the Amended Athene Services Agreement, will be paid on a quarterly basis in arrears by delivery to Apollo of common shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended). Unsettled monitoring fees pursuant to the Amended Athene Services Agreement are recorded as due from affiliates in the consolidated statements of financial condition. For the years ended December 31, 2014, 2013 and 2012, Apollo earned $226.4 million, $107.9 million and $16.8 million, respectively, related to this monitoring fee. The monitoring fee is recorded in advisory and transaction fees from affiliates, net, in the consolidated statements of operations. As of December 31, 2014, Apollo had a $58.2 million receivable recorded in due from affiliates on the consolidated statements of financial condition. As of December 31, 2013, Apollo had a $116.4 million receivable, which was accounted for as a derivative recorded in due from affiliates on the consolidated statements of financial condition.
In accordance with the services agreement among AAA, AAA Investments and the other service recipients party thereto and Apollo (the "AAA Services Agreement"), Apollo receives a management fee for managing the assets of AAA Investments. In connection with each of the contribution of certain assets by AAA to Athene in October 2012, and the initial closing of the Athene Private Placement on April 4, 2014, the AAA Services Agreement was amended (the "Amended AAA Services Agreement"). Pursuant to the Amended AAA Services Agreement, the parties agreed that there will be no management fees payable by AAA Investments with respect to the excluded Athene Shares. AAA Investments agreed to continue to pay Apollo the same management fee on its investment in Athene (other than with respect to the excluded Athene Shares), except that Apollo agreed that the obligation to pay the existing management fee terminated on December 31, 2014 (although services will continue through December 31, 2020). Prior to the consummation of the Athene Private Placement, all such management fees were accrued pursuant to a derivative contract between AAA Investments and Apollo (the “AAA Services Derivative”). In connection with the Athene Private Placement, the AAA Services Derivative was settled on April 29, 2014 by delivery to Apollo of common shares of Athene Holding, and as a result, such derivative was terminated. Following settlement of the AAA Services Derivative, future management fees paid to Apollo pursuant to the Amended AAA Services Agreement will be paid on a quarterly basis in arrears by delivery to Apollo of common shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the Exchange Act). Unsettled management fees pursuant to the Amended AAA Services Agreement will be recorded as due from affiliates in the consolidated statements of financial condition. As of December 31, 2014, Apollo had a $3.1 million receivable recorded in due from affiliates related to this management fee on the consolidated statements of financial condition. As of December 31, 2013, Apollo had a $14.3 million receivable related to this management fee, which was accounted for as a derivative recorded in due from affiliates on the consolidated statements of financial condition. The total management fees earned by Apollo related to the Amended AAA Services Agreement for the years ended December 31, 2014, 2013 and 2012 were $1.9 million, $2.2 million and $0.6 million, respectively, which are recorded in management fees from affiliates in the consolidated statements of operations.
Prior to the settlement of the Athene Services Derivative and the AAA Services Derivative, the Amended Athene Services Agreement and the Amended AAA Services Agreement together with the Athene Services Derivative and the AAA Services Derivative, met the definition of derivatives under U.S. GAAP. The Company had classified these derivatives as Level III assets in the fair value hierarchy, as the pricing inputs into the determination of fair value require significant judgment and estimation. After the settlement of the Athene Services Derivative and the AAA Services Derivatives the unsettled shares receivable recorded in due from affiliates related to the Amended Athene Services Agreement and the Amended AAA Services Agreement are valued at fair value based on the price of a common share of Athene Holding. The Company had classified the derivative and the shares receivable as Level III assets in the fair value hierarchy, as the pricing inputs into the determination of fair value require significant judgment and estimation. See note 6 for further discussion regarding fair value measurements.
Prior to the settlement of the Athene Services Derivative and the AAA Services Derivative, the change in unrealized market value of the derivatives was reflected in other income, net in the consolidated statements of operations. For the year ended December 31, 2013 there was $10.2 million of changes in market value recognized related to these derivatives.
In addition, Apollo, as general partner of AAA Investments, is generally entitled to a carried interest that allocates to it 20% of the realized returns (net of related expenses, including borrowing costs) on the investments of AAA Investments, except that Apollo will not be entitled to receive any carried interest in respect of the Excluded Athene Shares. Carried interest receivable from AAA Investments will be paid in common shares of Athene Holding (valued at the then fair market value) if there is a distribution in kind of shares of Athene Holding (unless such payment in shares would violate Section 16(b) of the Exchange Act) or paid in cash if AAA sells the shares of Athene Holding. For the years ended December 31, 2014, 2013, and 2012 the Company recorded carried interest income less the related profit sharing expense of $14.6 million, $27.6 million and $35.3 million, respectively, from AAA Investments, which is recorded in the consolidated statements of operations. As of December 31, 2014 and December 31, 2013, the Company had a $121.5 million and a $100.9 million carried interest receivable, respectively, related

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


to AAA Investments. As of December 31, 2014 and December 31, 2013, the Company had a related profit sharing payable of $34.9 million and $28.8 million, respectively, recorded in profit sharing payable in the consolidated statements of financial condition.
For the years ended December 31, 2014, 2013 and 2012, Apollo earned revenues in the aggregate totaling $546.5 million, $435.1 million and $164.7 million, respectively, consisting of management fees, sub-advisory and monitoring fees and carried interest income from Athene after considering the related profit sharing expense and changes in the market value of the Athene shares owned directly by Apollo, which is recorded in the consolidated statements of operations.
On April 4, 2014, Athene Holding completed an initial closing of a private placement offering of common equity in which it raised $1.048 billion of primary commitments from third-party institutional and certain existing investors in Athene Holding (the “Athene Private Placement”). Shares in the Athene Private Placement were offered at a price per common share of Athene Holding of $26. In connection with the Athene Private Placement, Athene raised an additional $80 million of third party capital at $26 per share, all of which was used to buy back a portion of the shares of one of its existing investors at a price of $26 per share in a transaction that was consummated on April 29, 2014. As announced by AAA on June 24, 2014, a second closing of the Athene Private Placement occurred in which Athene Holding raised $170 million of commitments primarily from employees of Athene and its affiliates at a price per common share of Athene Holding of $26. The Investment Partnership did not purchase any additional common shares of Athene Holding as part of the Athene Private Placement.
As of December 31, 2014, the Company, through its consolidation of AAA, had an approximate 47.7% economic ownership interest in Athene through its investment in AAA Investments (calculated as if the commitments on the Athene Private Placement closed through December 31, 2014 were fully drawn but without giving effect to (i) restricted common shares issued under Athene’s management equity plan, or (ii) common shares to be issued under the Amended Athene Services Agreement or the Amended AAA Services Agreement subsequent to December 31, 2014).
The Company had an approximate 8.1% economic ownership interest in Athene Holding as of December 31, 2014, which comprises Apollo’s direct ownership of 6.9% of the economic equity of Athene Holding plus an additional 1.2% economic ownership interest, which is calculated as the Company’s approximate 2.5% economic ownership interest in AAA plus the Company’s approximate 0.06% economic ownership interest in AAA Investments multiplied by AAA Investments’ approximate 47.7% economic ownership interest in Athene as of December 31, 2014. The remaining ownership interest in AAA is recognized in the Company’s consolidated statements of operations as non-controlling interest in consolidated entities.
As of December 31, 2013, the Company through its consolidation of AAA, had an approximate 68% fully-diluted interest in Athene (after giving effect to restricted common shares issued under Athene's management equity plan and conversion of AAA Investments' note receivable but without giving effect to common shares to be issued under the Amended Athene Services Agreement or the Amended AAA Services Agreement subsequent to December 31, 2013) through its investment in AAA Investments.
The Company had an approximate 1.9% economic ownership interest in Athene Holding as of December 31, 2013, which is calculated as the Company’s approximate 2.6% economic ownership interest in AAA plus the Company’s approximate 0.06% economic ownership interest in AAA Investments multiplied by AAA Investments’ approximate 68% fully diluted interest in Athene as of December 31, 2013. The remaining ownership interest in AAA is recognized in the Company’s consolidated statements of operations as non-controlling interest in consolidated entities.
For the year ended December 31, 2014, the Company accounted for a $7.5 million reduction in management fees from affiliates and salary, bonus and benefits related to Athene.
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 December 31, 2014. From time to time, this entity is involved in transactions with affiliates of Apollo, including portfolio companies of the funds Apollo manages, whereby AGS earns underwriting and transaction fees for its services.
Apollo Management International LLP, is authorized and regulated by the U.K. Financial Conduct Authority and as such is subject to the capital requirements of the U.K. Financial Conduct Authority. This entity has continuously operated in excess of these regulatory capital requirements.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


Certain other of the Company's U.S. and non-U.S. subsidiaries are subject to various regulations, including a number of U.S. entities that are registered as investment advisors with the SEC. To the extent applicable, these entities have continuously operated in excess of any minimum regulatory capital requirements.

Interests in Consolidated Entities
The table below presents equity interests in Apollo’s consolidated, but not wholly-owned, subsidiaries and funds. Net income attributable to Non-Controlling Interests consisted of the following: 
 
 
For the Year Ended December 31,
 
 
2014
 
2013
 
2012
AAA(1)
 
$
(196,964
)
 
$
(331,504
)
 
$
(278,454
)
Interest in management companies and a co-investment vehicle(2)
 
(13,186
)
 
(18,872
)
 
(7,307
)
Other consolidated entities
 
(17,590
)
 
43,357

 
50,956

Net income attributable to Non-Controlling Interests in consolidated entities
 
(227,740
)
 
(307,019
)
 
(234,805
)
Net (income) loss attributable to Appropriated Partners’ Capital(3)
 
70,729

 
(149,934
)
 
(1,816,676
)
Net income attributable to Non-Controlling Interests in the Apollo Operating Group
 
(404,682
)
 
(1,257,650
)
 
(685,357
)
Net Income attributable to Non-Controlling Interests
 
$
(561,693
)
 
$
(1,714,603
)
 
$
(2,736,838
)
Net income (loss) attributable to Appropriated Partners’ Capital(4)
 
(70,729
)
 
149,934

 
1,816,676

Other Comprehensive (income) loss attributable to Non-Controlling Interests
 
591

 
(41
)
 
(2,010
)
Comprehensive Income Attributable to Non-Controlling Interests
 
$
(631,831
)
 
$
(1,564,710
)
 
$
(922,172
)
 
(1)
Reflects the Non-Controlling Interests in the net (income) loss of AAA and is calculated based on the Non-Controlling Interests ownership percentage in AAA, which was approximately 97.5%, 97.4% and 97.3% as of December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, 2013 and 2012, Apollo owned approximately 2.5%, 2.6% and 2.7% of AAA, respectively.
(2)
Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of our credit funds.
(3)
Reflects net income of the consolidated CLOs classified as VIEs.
(4)
Appropriated Partners’ Capital is included in total Apollo Global Management, LLC shareholders’ equity and is therefore not a component of comprehensive income attributable to Non-Controlling Interests on the consolidated statements of comprehensive income.

18. COMMITMENTS AND CONTINGENCIES
Financial Guarantees—Apollo has provided financial guarantees on behalf of certain employees for the benefit of unrelated third-party lenders in connection with their capital commitments to certain funds managed by the Company. As of December 31, 2014, the maximum exposure relating to these financial guarantees approximated $0.2 million. Apollo has historically not incurred any liabilities as a result of these agreements and does not expect to in the future. Accordingly, no liability has been recorded in the accompanying consolidated financial statements.
Investment Commitments—As a limited partner, general partner and manager of the Apollo private equity, credit and real estate funds, Apollo has unfunded capital commitments as of December 31, 2014, and December 31, 2013 of $646.6 million and $843.7 million, respectively.
Apollo has an ongoing obligation to acquire additional common units of AAA in an amount equal to 25% of the aggregate after-tax cash distributions, if any, that are made by AAA to Apollo's affiliates pursuant to the carried interest distribution rights that are applicable to investments made through AAA Investments.
In addition, as of December 31, 2014, Apollo had an unfunded loan commitment of $15.0 million related to an employee's commitment to purchase common shares of Athene Holding.
Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of December 31, 2014, the Company was not aware of any instances of non-compliance with its financial covenants.

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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.

In March 2012, plaintiffs filed two putative class actions, captioned Kelm v. Chase Bank (No. 12-cv-332) and Miller v. 1-800-Flowers.com, Inc. (No. 12-cv-396), in the District of Connecticut on behalf of a class of consumers alleging online fraud. The defendants included, among others, Trilegiant Corporation, Inc. (“Trilegiant”), its parent company, Affinion Group, LLC (“Affinion”), and Apollo Global Management, LLC ("AGM"), which is affiliated with funds that are the beneficial owners of 68% of Affinion’s common stock. In both cases, plaintiffs allege that Trilegiant, aided by its business partners, who include e-merchants and credit card companies, developed a set of business practices intended to create consumer confusion and ultimately defraud consumers into unknowingly paying fees to clubs for unwanted services. Plaintiffs allege that AGM is a proper defendant because of its indirect stock ownership and ability to appoint the majority of Affinion’s board. The complaints assert claims under the Racketeer Influenced Corrupt Organizations Act; the Electronic Communications Privacy Act; the Connecticut Unfair Trade Practices Act; and the California Business and Professional Code, and seek, among other things, restitution or disgorgement, injunctive relief, compensatory, treble and punitive damages, and attorneys’ fees. The allegations in Kelm and Miller are substantially similar to those in Schnabel v. Trilegiant Corp. (No. 3:10-cv-957), a putative class action filed in the District of Connecticut in 2010 that names only Trilegiant and Affinion as defendants. The court has consolidated the Kelm, Miller, and Schnabel cases under the caption In re: Trilegiant Corporation, Inc. and ordered that they proceed on the same schedule. On June 18, 2012, the court appointed lead plaintiffs’ counsel, and on September 7, 2012, plaintiffs filed their consolidated amended complaint (“CAC”), which alleges the same causes of action against AGM as did the complaints in the Kelm and Miller cases. Defendants filed motions to dismiss on December 7, 2012, plaintiffs filed opposition papers on February 7, 2013, and defendants filed replies on April 5, 2013. On December 5, 2012, plaintiffs filed another putative class action, captioned Frank v. Trilegiant Corp. (No. 12- cv-1721), in the District of Connecticut, naming the same defendants and containing allegations substantially similar to those in the CAC. On January 23, 2013, plaintiffs moved to transfer and consolidate Frank into In re: Trilegiant. On July 24, 2013 the Frank court transferred the case to Judge Bryant, who is presiding over In re: Trilegiant, and on March 28, 2014, Judge Bryant granted the motion to consolidate. On September 25, 2013, the court held oral argument on defendants’ motions to dismiss. On March 28, 2014, the court granted in part and denied in part motions to dismiss filed by Affinion and Trilegiant on behalf of all defendants, and also granted separate motions to dismiss filed by certain defendants, including AGM. On that same day, the court directed the clerk to terminate AGM as a defendant in the consolidated action. On April 28, 2014, plaintiffs moved for interlocutory review of certain of the court’s motion-to-dismiss rulings, not including its order granting AGM’s separate dismissal motion. Defendants filed a response on May 23, 2014, and plaintiffs replied on June 5, 2014. On November 13, 2014, plaintiffs and the remaining defendants filed a Joint Status Report Regarding Discovery stating that no discovery has taken place since plaintiffs filed their interlocutory-review motion.
Various state attorneys general and federal and state agencies have initiated industry-wide investigations into the use of placement agents in connection with the solicitation of investments, particularly with respect to investments by public pension funds. Certain affiliates of Apollo have received subpoenas and other requests for information from various government regulatory agencies and investors in Apollo’s funds, seeking information regarding the use of placement agents. CalPERS, one of our Strategic Investors, announced on October 14, 2009, that it had initiated a special review of placement agents and related issues. The report of the CalPERS Special Review was issued on March 14, 2011. That report does not allege any wrongdoing on the part of Apollo or its affiliates. Apollo is continuing to cooperate with all such investigations and other reviews. In addition, on May 6, 2010, the California Attorney General filed a civil complaint against Alfred Villalobos and his company, Arvco Capital Research, LLC (“Arvco”) (a placement agent that Apollo has used) and Federico Buenrostro Jr., the former CEO of CalPERS, alleging conduct in violation of certain California laws in connection with CalPERS’s purchase of securities in various funds managed by Apollo and another asset manager. Apollo is not a party to the civil lawsuit and the lawsuit does not allege any misconduct on the part of Apollo. Likewise, on April 23, 2012, the SEC filed a lawsuit alleging securities fraud on the part of Arvco, as well as Messrs. Buenrostro and Villalobos, in connection with their activities concerning certain CalPERS investments in funds managed by Apollo. This lawsuit also does not allege wrongdoing on the part of Apollo, and alleges that Apollo was defrauded by Arvco, Villalobos, and Buenrostro. On March 14, 2013, the United States Department of Justice unsealed an indictment against Messrs. Villalobos and Buenrostro alleging, among other crimes, fraud in connection with those same activities; again, Apollo is not accused of any wrongdoing and in fact is alleged to have been defrauded by the defendants. The criminal action was set for trial in a San Francisco federal court in July 2014, but was put on hold after Mr. Buenrostro pleaded guilty on July 11, 2014. As part of Mr. Buenrostro’s plea agreement, he admitted to taking cash and other bribes from Mr. Villalobos in exchange for several improprieties, including attempting to influence CalPERS’ investing decisions and improperly preparing disclosure letters to satisfy Apollo’s requirements. There is no suggestion that Apollo was aware that Mr. Buenrostro had signed the letters with a corrupt motive. The government has indicated that they will file new charges against Mr. Villalobos incorporating Mr. Buenrostro’s admissions. On August 7, 2014,

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the government filed a superseding indictment against Mr. Villalobos asserting additional charges. Trial had been scheduled for February 23, 2015, but Mr. Villalobos passed away on January 13, 2015.  Additionally, on April 15, 2013, Mr. Villalobos, Arvco and related entities (the “Arvco Debtors”) brought a civil action in the United States Bankruptcy Court for the District of Nevada (the “Bankruptcy Court”) against Apollo. The action is related to the ongoing bankruptcy proceedings of the Arvco Debtors. This action alleges that Arvco served as a placement agent for Apollo in connection with several funds associated with Apollo, and seeks to recover purported fees the Arvco Debtors claim Apollo has not paid them for a portion of Arvco’s placement agent services. In addition, the Arvco Debtors allege that Apollo has interfered with the Arvco Debtors’ commercial relationships with third parties, purportedly causing the Arvco Debtors to lose business and to incur fees and expenses in the defense of various investigations and litigations. The Arvco Debtors also seek compensation from Apollo for these alleged lost profits and fees and expenses. The Arvco Debtors’ complaint asserts various theories of recovery under the Bankruptcy Code and common law. Apollo denies the merit of all of the Arvco Debtors’ claims and will vigorously contest them. The Bankruptcy Court has stayed this action pending the result in the criminal case against Mr. Villalobos. For these reasons, no estimate of possible loss, if any, can be made at this time.
On June 18, 2014, BOKF N.A. (the “First Lien Trustee”), the successor indenture trustee under the indenture governing the First Lien Notes issued by Momentive Performance Materials, Inc. (“Momentive”), commenced a lawsuit in the Supreme Court for the State of New York, New York County against AGM and members of an ad hoc group of Second Lien Noteholders (including, but not limited to, Euro VI (BC) S.a.r.l.). The First Lien Trustee amended its complaint on July 2, 2014 (the “First Lien Intercreditor Action”). In the First Lien Intercreditor Action, the First Lien Trustee seeks, among other things, a declaration that the defendants violated an intercreditor agreement entered into between holders of the first lien notes and holders of the second lien notes. On July 16, 2014, the successor indenture trustee under the indenture governing the 1.5 Lien Notes (the “1.5 Lien Trustee,” and, together with the First Lien Trustee, the “Indenture Trustees”) filed an action in the Supreme Court of the State of New York, New York County that is substantially similar to the First Lien Intercreditor Action (the “1.5 Lien Intercreditor Action,” and, together with the First Lien Intercreditor Action, the “Intercreditor Actions”). AGM subsequently removed the Intercreditor Actions to federal district court, and the Intercreditor Actions were automatically referred to the Bankruptcy Court adjudicating the Momentive chapter 11 bankruptcy cases. The Indenture Trustees then filed motions with the Bankruptcy Court to remand the Intercreditor Actions back to the state court (the “Remand Motions”). On September 9, 2014, the Bankruptcy Court denied the Remand Motions. On August 15, 2014, the defendants in the Intercreditor Actions (including AGM) filed a motion to dismiss the 1.5 Lien Intercreditor Action and a motion for judgment on the pleadings in the First Lien Intercreditor Action (the “Dismissal Motions”). On September 30, 2014, the Bankruptcy Court granted the Dismissal Motions. In its order granting the Dismissal Motions, the Bankruptcy Court gave the Indenture Trustees until mid-November 2014 to move to amend some, but not all, of the claims alleged in their respective complaints. On November 14, 2014, the Indenture Trustees moved to amend their respective complaints pursuant to the Bankruptcy Court’s order (the “Motions to Amend”).  On January 9, 2015, the defendants filed their oppositions to the Motions to Amend.  On January 16, 2015, the Bankruptcy Court denied the Motions to Amend. The Bankruptcy Court gave the Indenture Trustees until March 2, 2015 to seek to amend their respective complaints. The Indenture Trustees have not yet indicated whether they intend to file additional motions to amend. Accordingly, we are unable at this time to assess a potential risk of loss.  In addition, we do not believe that AGM is a proper defendant in these actions.
On June 13, 2014, plaintiffs Stark Master Fund Ltd and Stark Global Opportunities Master Fund Ltd filed a lawsuit in the United States District Court for the Eastern District of Wisconsin against AGM and Apollo Management Holdings, L.P. (the “Apollo Defendants”), as well as Credit Suisse Securities (USA) LLC and Deutsche Bank Securities (USA) LLC (the “Bank Defendants”). The complaint alleges that AGM and the other defendants entered into an undisclosed and improper agreement concerning the financing of a potential acquisition by Hexion Specialty Chemicals Inc., and on this basis alleges a variety of common law misrepresentation claims, both intentional and negligent. The Apollo Defendants and Bank Defendants filed motions to dismiss the complaint on October 15, 2014.  Rather than respond to the motions, plaintiffs filed an Amended Complaint on November 5, 2014.  The Apollo Defendants and Bank Defendants filed motions to dismiss the Amended Complaint on December 23, 2014.  Plaintiffs filed a motion for leave to conduct jurisdictional discovery on February 2, 2015, and pursuant to the parties' stipulation approved by the court the motion shall be fully briefed on or before March 9, 2015. Plaintiffs must file their opposition to Defendants’ motion to dismiss the Amended Complaint on or before 30 days following either a decision from the Court on Plaintiffs’ motion for jurisdictional discovery or the close of jurisdictional discovery, whichever is later. Because the claims against the Apollo Defendants are in their early stages, no reasonable estimate of possible loss, if any, can be made at this time.
There are several pending actions concerning transactions related to Caesars Entertainment Operating Company, Inc.’s (“CEOC”) restructuring efforts.  Apollo is not a defendant in these matters.
In re: Caesars Entertainment Operating Company, Inc. bankruptcy proceedings, No. 15-10047 (Del. Bk.) (the “Delaware Bankruptcy Action”) and No. 15-01145 (N.D. Ill. Bk.) (the “Illinois Bankruptcy

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Action”). On January 12, 2015, three holders of CEOC second lien notes issued filed an involuntary bankruptcy petition against CEOC in the United States Bankruptcy Court for the District of Delaware.

On February 2, 2015, the court in the Delaware Bankruptcy Action ordered that all CEOC bankruptcy proceedings should take place in the Illinois Bankruptcy Action.

Wilmington Savings Fund Society, FSB v. Caesars Entertainment Corp. et al., No. 10004-CVG (Del. Ch.) (the “Trustee Action”). On August 4, 2014, Wilmington Savings Fund Society, FSB (“WSFS”), as trustee for certain CEOC second-lien notes, sued Caesars Entertainment Corporation (“Caesars Entertainment”), Caesars Entertainment’s subsidiary, CEOC, other Caesars Entertainment-affiliated entities, and certain of Caesars Entertainment’s directors, including Marc Rowan, Eric Press, David Sambur (each an Apollo Partner) and Jeff Benjamin (an Apollo consultant), in the Delaware Chancery Court. WSFS (i) asserts claims (against some or all of the defendants) for fraudulent conveyance, breach of fiduciary duty, breach of contract, corporate waste and aiding and abetting related to certain transactions between CEOC and other Caesars Entertainment affiliates, and (ii) requests (among other things) that the court unwind the challenged transactions and award damages. Defendants filed a motion to dismiss or stay the Trustee Action in favor of the Caesars Action, which was argued on December 5, 2014.

Caesars Entertainment Operating Co., et al. v. Appaloosa Investment Ltd. P’ship et al., No. 652392/2014 (N.Y. Sup. Ct.) (the “Caesars Action”). On August 5, 2014, Caesars Entertainment Corporation and Caesars Entertainment’s subsidiary CEOC sued certain institutional CEOC second-lien noteholders and CEOC first-lien noteholder Elliott Management Corporation (“EMC”). On September 15, 2014, an amended complaint was filed adding WSFS as a defendant. The amended complaint asserts claims for (among other things) tortious interference with prospective economic advantage, a declaratory judgment that certain transactions related to CEOC’s restructuring are valid and appropriate and that there has not been a default under the indentures governing the notes. On October 15, 2014, defendants moved to dismiss the complaint, and the motion was fully briefed on December 1, 2014. On January 15, 2015, Caesars Entertainment and CEOC agreed to voluntarily dismiss their claims against EMC without prejudice, and EMC agreed to withdraw its motion to dismiss without prejudice. The remaining parties in the Caesars Action and the parties in the Trustee action described below have agreed to stay discovery pending decision on the respective motions to dismiss.

Meehancombs Global Credit Opportunities Master Fund, L.P., et al. v. Caesars Entertainment Corp., et al., No. 14-cv-7091 (S.D.N.Y.) (the “Meehancombs Action”).  On September 3, 2014, institutional investors allegedly holding approximately $137 million in CEOC unsecured senior notes sued CEOC and Caesars Entertainment for breach of contract and the implied covenant of good faith, Trust Indenture Act violations and a declaratory judgment challenging the August 2014 private financing transaction in which a portion of outstanding senior unsecured notes were purchased by Caesars Entertainment, and a majority of the noteholders agreed to amend the indenture to terminate Caesars Entertainment’s guarantee of the notes and modify certain restrictions on CEOC’s ability to sell assets. On October 2, 2014, a related putative class action complaint was filed on behalf of the holders of these notes captioned Danner v. Caesars Entertainment Corp., et al., No. 14-cv-7973 (S.D.N.Y.) (the “Danner Action”), against Caesars Entertainment alleging similar claims to the Meehancombs Action. Caesars Entertainment and CEOC filed a motion to dismiss on November 12, 2014. On January 15, 2015, the court granted the motion with respect to a Trust Indenture Act claim by Meehancombs but otherwise denied the motion. On January 30, 2015, plaintiffs filed an amended complaint seeking relief against Caesars Entertainment only, which Caesars Entertainment answered on February 12, 2015.

UMB Bank v. Caesars Entertainment Corporation, et al., No. 10393 (Del. Ch.) (the “UMB Action.”). On November 25, 2014, UMB Bank, as trustee for certain CEOC notes, sued Caesars Entertainment, CEOC, other Caesars Entertainment-affiliated entities, and certain of Caesars

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Entertainment’s directors, including Marc Rowan, Eric Press, David Sambur (each an Apollo Partner) and Jeffrey Benjamin (an Apollo consultant), in Delaware Chancery Court. The lawsuit alleges claims for actual and constructive fraudulent conveyance and transfer, insider preferences, illegal dividends, breach of contract, intentional interference with contractual relations, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, usurpation of corporate opportunities, and unjust enrichment. The UMB Action seeks appointment of a receiver for CEOC, a constructive trust, and other relief. The UMB Action has been assigned to the same judge overseeing the Trustee Action. Upon filing the complaint, UMB Bank moved to expedite is claim seeking a receiver, on which the court held oral argument on December 17, 2014. On January 15, 2015, the court entered a stipulated order staying the UMB Action as to all parties due to CEOC’s bankruptcy filing.

Koskie v. Caesars Acquisition Company, et al., No. A-14-711712-C (Clark Cnty Nev. Dist. Ct.) (the “Koskie Action”). On December 30, 2014, Nicholas Koskie brought a shareholder class action on behalf of shareholders of Caesars Acquisition Company (“CAC”) against CAC, Caesars Entertainment, and members of CAC’s Board of Directors, including Marc Rowan and David Sambur (each an Apollo partner). The lawsuit challenges CAC and Caesars Entertainment’s plan to merge, alleging that the proposed transaction will not give CAC shareholders fair value. Koskie asserts claims for breach of fiduciary duty relating to the director defendants’ interrelationships with the entities involved the proposed transaction.

Apollo believes that the claims in the Trustee Action, the UMB Action, the Meehancombs Action, the Danner Action, and the Koskie Action are without merit.  For this reason, and because the claims are in their early stages, and because of pending bankruptcy proceedings involving CEOC, no reasonable estimate of possible loss, if any, can be made at this time.
Following the January 16, 2014 announcement that CEC Entertainment, Inc. (“CEC”) had entered into a merger agreement with certain entities affiliated with Apollo (the “Merger Agreement”), four putative shareholder class actions were filed in the District Court of Shawnee County, Kansas on behalf of purported stockholders of CEC against, among others, CEC, its directors and Apollo and certain of its affiliates, which include Queso Holdings Inc., Q Merger Sub Inc., Apollo Management VIII, L.P., and AP VIII Queso Holdings, L.P. The first purported class action, which is captioned Hilary Coyne v. Richard M. Frank et al., Case No. 14C57, was filed on January 21, 2014 (the “Coyne Action”). The second purported class action, which was captioned John Solak v. CEC Entertainment, Inc. et al., Civil Action No. 14C55, was filed on January 22, 2014 (the “Solak Action”). The Solak Action was dismissed for lack of prosecution on October 14, 2014. The third purported class action, which is captioned Irene Dixon v. CEC Entertainment, Inc. et al., Case No. 14C81, was filed on January 24, 2014 and additionally names as defendants Apollo Management VIII, L.P. and AP VIII Queso Holdings, L.P. (the “Dixon Action”). The fourth purported class action, which is captioned Louisiana Municipal Public Employees’ Retirement System v. Frank, et al., Case No. 14C97, was filed on January 31, 2014 (the “LMPERS Action”) (together with the Coyne and Dixon Actions, the “Shareholder Actions”). A fifth purported class action, which was captioned McCullough v. Frank, et al., Case No. CC-14-00622-B, was filed in the County Court of Dallas County, Texas on February 7, 2014. This action was dismissed for want of prosecution on May 21, 2014. Each of the Shareholder Actions alleges, among other things, that CEC’s directors breached their fiduciary duties to CEC’s stockholders in connection with their consideration and approval of the Merger Agreement, including by agreeing to an inadequate price, agreeing to impermissible deal protection devices, and filing materially deficient disclosures regarding the transaction. Each of the Shareholder Actions further alleges that Apollo and certain of its affiliates aided and abetted those alleged breaches. As filed, the Shareholder Actions seek, among other things, rescission of the various transactions associated with the merger, damages and attorneys’ and experts’ fees and costs.   On February 7, 2014 and February 11, 2014, the plaintiffs in the Shareholder Actions pursued a consolidated action for damages after the transaction closed. Thereafter, the Shareholder Actions were consolidated under the caption In re CEC Entertainment, Inc. Stockholder Litigation, Case No. 14C57, and the parties have engaged in limited discovery. No defendant has any obligation to answer or otherwise respond to any of the complaints in the consolidated action until the plaintiffs file or designate an operative complaint. Although Apollo cannot predict the ultimate outcome of the above action, it believes that such action is without merit.
On June 10, 2014, Magnetar Global Event Driven Fund Ltd., Spectrum Opportunities Master Fund, Ltd., Magnetar Capital Master Fund, Ltd., and Blackwell Partners LLC, as the purported beneficial owners of shares held as of record by the nominal petitioner Cede & Co., (the “Appraisal Petitioners”), filed an action for statutory appraisal under Kansas state law against CEC in the U.S. District Court for the District of Kansas, captioned Magnetar Global Event Driven Master Fund Ltd, et al. v. CEC

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Entertainment, Inc., 2:14-cv-02279-RDR-KGS. The Appraisal Petitioners seek appraisal of 750,000 shares of common stock. CEC has answered the complaint and filed a verified list of stockholders, as required under Kansas law. On September 3, 2014, the court entered a scheduling order that contemplated that discovery would commence in the fall of 2014 and would be substantially completed by May 2015. On January 13, 2015, the court entered a revised scheduling order that contemplated that fact discovery would be completed by March 13, 2015, expert discovery would be completed by June 15, 2015, and a pretrial conference would occur on June 29, 2015. Thereafter, the scheduling order contemplates dispositive motion practice and a trial on the merits of the Appraisal Petitioners’ claims. Although Apollo cannot predict the ultimate outcome of the above actions, Apollo believes that such actions are without merit.
On September 29, 2014, Athlon Energy Inc. (“Athlon”) and Encana Corporation (“Encana”) jointly announced that they had entered into an Agreement and Plan of Merger, dated as of September 27, 2014 (the “Merger Agreement”), pursuant to which a wholly-owned subsidiary of Encana (“Merger Sub”) would commence a tender offer (the “Offer”) to acquire all of the issued and outstanding shares of Athlon common stock.  Following completion of the Offer, Merger Sub would be merged with and into Athlon (the “Proposed Transaction”).  On October 23, 2014, The City of Cambridge Retirement System filed a putative class action complaint captioned The City of Cambridge Retirement System v. Reeves, et al., C.A. No. 10277-VCG (the “Cambridge Action”) in the Delaware Court of Chancery naming Merger Sub, AGM and members of Athlon’s board of directors as defendants.  The Cambridge Action alleges, among other things, that members of Athlon’s board of directors breached their fiduciary duties in connection with their consideration and approval of the proposed transaction, and that Encana, Merger Sub and AGM aided and abetted those breaches of fiduciary duty.  On November 3, 2014, the parties to the Cambridge Action and several other similar actions filed in Delaware and Texas state court before the Cambridge Action (none of which named AGM as a defendant (collectively, the “Actions”)), entered into a Memorandum of Understanding to settle the Actions.  On December 19, 2014, the parties to the Actions entered into a formal settlement agreement, and on December 22, 2014, the parties submitted the settlement agreement and accompanying papers to the court for its approval.  Under the terms of the proposed settlement, AGM will not be required to contribute any cash and will be granted full and customary releases.
Although the ultimate outcome of these matters cannot be ascertained at this time, Apollo is of the opinion, after consultation with counsel, that the resolution of any such matters to which it is a party at this time will not have a material adverse effect on the consolidated financial statements. Legal actions material to Apollo could, however, arise in the future.
Commitments—Apollo leases office space and certain office equipment under various lease and sublease arrangements, which expire on various dates through 2024. As these leases expire, it can be expected that in the normal course of business, they will be renewed or replaced. Certain lease agreements contain renewal options, rent escalation provisions based on certain costs incurred by the landlord or other inducements provided by the landlord. Rent expense is accrued to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease term and renewal periods where applicable. Apollo has entered into various operating lease service agreements in respect of certain assets.
As of December 31, 2014, the approximate aggregate minimum future payments required for operating leases were as follows: 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Aggregate minimum future payments
$
38,863

 
$
38,225

 
$
36,114

 
$
31,742

 
$
31,348

 
$
24,214

 
$
200,506

Expenses related to non-cancellable contractual obligations for premises, equipment, auto and other assets were $42.5 million, $42.0 million and $41.2 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Other Long-term Obligations—These obligations relate to payments with respect to certain consulting agreements entered into by Apollo Investment Consulting LLC, a subsidiary of Apollo. A significant portion of these costs are reimbursable by funds or portfolio companies. As of December 31, 2014, fixed and determinable payments due in connection with these obligations were as follows:
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Other long-term obligations
$
10,400

 
$
4,575

 
$
4,470

 
$
4,470

 
$
2,235

 
$

 
$
26,150

 

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Contingent Obligations—Carried interest income with respect to private equity funds and certain credit and real estate funds is subject to reversal in the event of future losses to the extent of the cumulative carried interest recognized in income to date. If all of the existing investments became worthless, the amount of cumulative revenues that have been recognized by Apollo through December 31, 2014 and that would be reversed approximates $2.9 billion. Management views the possibility of all of the investments becoming worthless as remote. Carried interest income is 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 carried interest income 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. As of December 31, 2014, the Company has recorded a general partner obligation to return previously distributed carried interest income of $3.4 million relating to the Company's credit funds (see note 17 for further for further information).
Certain funds may not generate carried interest income as a result of unrealized and realized losses that are recognized in the current and prior reporting period. In certain cases, carried interest income 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 December 31, 2014, there were no underwriting commitments outstanding related to such offerings.
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 carried interest income earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liability had an acquisition date fair value of $117.7 million, which was determined based on the present value of estimated future carried interest payments, and is recorded in profit sharing payable in the consolidated statements of financial condition. On July 31, 2014, the Company extinguished a portion of this contingent consideration obligation and recognized a gain in the amount of $13.4 million, which was recorded in other income, net in the consolidated statements of operations for the year ended December 31, 2014. In exchange for the extinguishment, the Company granted a former owner of Stone Tower and current Apollo employee 350,000 RSUs with rights to receive, subject to a three-year vesting period, distribution equivalents. (see note 16 for further information regarding the accounting for RSUs). The fair value of the remaining contingent obligation was $84.5 million and $121.4 million as of December 31, 2014 and December 31, 2013, respectively.
In connection with the Gulf Stream acquisition, the Company agreed to make payments to the former owners of Gulf Stream under a contingent consideration obligation which required the Company to transfer cash to the former owners of Gulf Stream based on a specified percentage of carried interest income. The contingent liability had a fair value of $11.6 million and $14.1 million as of December 31, 2014 and December 31, 2013, respectively, which was recorded in profit sharing payable in the consolidated statements of financial condition.
The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied. The changes in the fair value of the contingent consideration obligations will be reflected in profit sharing expense in the consolidated statements of operations.
The contingent consideration obligations are measured at fair value and are characterized as Level III liabilities. See note 6 for further information regarding fair value measurements.

19. MARKET AND CREDIT RISK
In the normal course of business, Apollo encounters market and credit risk concentrations. Market risk reflects changes in the value of investments due to changes in interest rates, credit spreads or other market factors. Credit risk includes the risk of default on Apollo’s investments, where the counterparty is unable or unwilling to make required or expected payments.

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The Company is subject to a concentration risk related to the investors in its funds. As of December 31, 2014, there were more than 1,000 investors in Apollo’s active private equity, credit and real estate funds, and no individual investor accounted for more than 10% of the total committed capital to Apollo’s active funds.
Apollo’s derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. Apollo seeks to minimize this risk by limiting its counterparties to highly rated major financial institutions with good credit ratings. Management does not expect any material losses as a result of default by other parties.
Substantially all amounts on deposit with major financial institutions that exceed insured limits are invested in interest-bearing accounts with U.S. money center banks.
Apollo is exposed to economic risk concentrations insofar as Apollo is dependent on the ability of the funds that it manages to compensate it for the services it provides to these funds. Further, the incentive income component of this compensation is based on the ability of such funds to generate returns above certain specified thresholds.
Additionally, Apollo is exposed to interest rate risk. Apollo has debt obligations that have variable rates. Interest rate changes may therefore affect the amount of interest payments, future earnings and cash flows. At December 31, 2014 and December 31, 2013, $535.0 million and $750.0 million of Apollo’s debt balance (excluding debt of the consolidated VIEs) had a variable interest rate, respectively.


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20. SEGMENT REPORTING
Apollo conducts its management and incentive businesses primarily in the United States and substantially all of its revenues are generated domestically. These businesses are conducted through the following three reportable segments:
Private Equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debt investments;
Credit—primarily invests in non-control corporate and structured debt instruments; and
Real Estate—primarily invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities.
These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the affiliated funds.
The Company’s financial results vary since carried interest, which generally constitutes a large portion of the income from the funds that Apollo manages, as well as the transaction and advisory fees that the Company receives, can vary significantly from quarter to quarter and year to year. As a result, the Company emphasizes long-term financial growth and profitability to manage its business.
The tables below present the financial data for Apollo’s reportable segments further separated between the management business and incentive business as of December 31, 2014, 2013 and 2012, and for the years ended December 31, 2014, 2013 and 2012, respectively, which management believes is useful to the reader. The Company’s management business has fairly stable revenues and expenses except for transaction fees, while its incentive business is more volatile and can have significant fluctuations as it is affected by changes in the fair value of investments due to market performance. The financial results of the management entities, as reflected in the “management” business section of the segment tables that follow, generally include management fee revenues, advisory and transaction fees and expenses exclusive of profit sharing expense. The financial results of the advisory entities, as reflected in the “incentive” business sections of the segment tables that follow, generally include carried interest income, investment income and profit sharing expense.    
Economic Net Income (Loss)
ENI is a key performance measure used by management in evaluating the performance of Apollo’s private equity, credit and real estate segments. Management believes the components of ENI, such as the amount of management fees, advisory and transaction fees and carried interest income, are indicative of the Company’s performance. Management also uses ENI in making key operating decisions such as the following:
Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires;
Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansion into new businesses; and
Decisions relating to expenses, such as determining annual discretionary bonuses and equity-based compensation awards to its employees. With respect to compensation, management seeks to align the interests of certain professionals and selected other individuals with those of the investors in such funds and those of the Company’s shareholders by providing such individuals a profit sharing interest in the carried interest income earned in relation to the funds. To achieve that objective, a certain amount of compensation is based on the Company’s performance and growth for the year.
ENI is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. ENI represents segment income (loss) attributable to Apollo Global Management, LLC, which excludes the impact of (i) non-cash charges related to RSUs granted in connection with the 2007 private placement and amortization of AOG Units, (ii) income tax expense, (iii) amortization of intangibles associated with the 2007 Reorganization as well as acquisitions,

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


(iv) Non-Controlling Interests excluding the remaining interest held by certain individuals who receive an allocation of income from certain of our credit management companies and (v) non-cash revenue and expense related to equity awards granted by unconsolidated affiliates to employees of the Company. In addition, segment data excludes the assets, liabilities and operating results of the funds and VIEs that are included in the consolidated financial statements as such carried interest income, management fees and other revenues from these consolidated entities are reflected on an unconsolidated basis.
The following table presents financial data for Apollo’s reportable segments as of and for the year ended December 31, 2014:
 
 
As of and for the Year Ended 
 December 31, 2014
 
Private
Equity
Segment
 
Credit
Segment
 
Real
Estate
Segment
 
Total
Reportable
Segments
Revenues:
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
58,241

 
$
255,186

 
$
2,655

 
$
316,082

Management fees from affiliates
315,069

 
538,742

 
47,213

 
901,024

Carried interest income from affiliates
231,983

 
165,589

 
8,949

 
406,521

Total Revenues
605,293

 
959,517

 
58,817

 
1,623,627

Expenses
403,323

 
517,435

 
67,991

 
988,749

Other Income
45,011

 
79,086

 
9,259

 
133,356

Non-Controlling Interests

 
(12,688
)
 

 
(12,688
)
Economic Net Income
$
246,981


$
508,480

 
$
85

 
$
755,546

Total Assets
$
1,835,453

 
$
2,139,441

 
$
202,977

 
$
4,177,871


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table reconciles the total segments to Apollo Global Management, LLC’s consolidated financial statements as of and for the year ended December 31, 2014:
 
 
As of and for the Year Ended 
 December 31, 2014
 
Total
Reportable
Segments
 
Consolidation
Adjustments
and Other
 
Consolidated
Revenues
$
1,623,627

 
$
(63,544
)
(1) 
$
1,560,083

Expenses
988,749

 
54,814

(2) 
1,043,563

Other income
133,356

 
227,291

(3) 
360,647

Non-Controlling Interests
(12,688
)
 
(549,005
)
 
(561,693
)
Economic Net Income
$
755,546

(5) 
N/A

 
N/A

Total Assets
$
4,177,871

 
$
19,000,966

(6) 
$
23,178,837

 
(1)
Represents advisory fees, management fees and carried interest income earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated affiliates to employees of the Company.
(2)
Represents the addition of expenses of consolidated funds and the consolidated VIEs and expenses related to RSUs granted in connection with the 2007 private placement. Includes non-cash expenses related to equity awards granted by unconsolidated affiliates to employees of the Company.
(3)
Results from the following:
 
For the Year Ended 
 December 31, 2014
Net gains from investment activities
$
204,181

Net gains from investment activities of consolidated variable interest entities
22,564

Loss from equity method investments(4)
(1,049
)
Other Income, net
1,595

Total Consolidation Adjustments
$
227,291

 
(4)
Includes $498 reflecting the remaining interest of certain individuals who receive an allocation of income from a private equity co-investment vehicle.
(5)
The reconciliation of Economic Net Income to Net Income Attributable to Apollo Global Management, LLC reported in the consolidated statements of operations consists of the following:
 
For the Year Ended 
 December 31, 2014
Economic Net Income
$
755,546

Income tax provision
(147,245
)
Net income attributable to Non-Controlling Interests in Apollo Operating Group
(404,682
)
Non-cash charges related to equity-based compensation(7)
(502
)
Amortization of intangible assets
(34,888
)
Net Income Attributable to Apollo Global Management, LLC
$
168,229

 
(6)
Represents the addition of assets of consolidated funds and the consolidated VIEs.
(7)
Includes the impact of non-cash charges related to amortization of RSUs granted in connection with the 2007 private placement as discussed in note 16 to our consolidated financial statements. Additionally, includes non-cash revenues related to equity awards granted by unconsolidated affiliates to employees of the Company.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2014:
 
For the Year Ended 
 December 31, 2014
 
Private Equity
 
Credit
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
58,241

 
$

 
$
58,241

 
$
255,186

 
$

 
$
255,186

Management fees from affiliates
315,069

 

 
315,069

 
538,742

 

 
538,742

Carried interest income (loss) from affiliates:
 
 
 
 
 
 
 
 
 
 
 
Unrealized losses(1)

 
(1,196,093
)
 
(1,196,093
)
 

 
(156,644
)
 
(156,644
)
Realized gains

 
1,428,076

 
1,428,076

 
41,199

 
281,034

 
322,233

Total Revenues
373,310

 
231,983

 
605,293

 
835,127

 
124,390

 
959,517

Compensation and benefits(2)
146,215

 
178,373

 
324,588

 
259,283

 
95,070

 
354,353

Other expenses(3)
78,735

 

 
78,735

 
163,082

 

 
163,082

Total Expenses
224,950

 
178,373

 
403,323

 
422,365

 
95,070

 
517,435

Other Income
12,976

 
32,035

 
45,011

 
28,538

 
50,548

 
79,086

Non-Controlling Interests

 

 

 
(12,688
)
 

 
(12,688
)
Economic Net Income
$
161,336

 
$
85,645

 
$
246,981

 
$
428,612

 
$
79,868

 
$
508,480

 
(1)
Included in unrealized carried interest income (loss) from affiliates for the year ended December 31, 2014 was a reversal of previously realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $3.4 million in aggregate with respect to two of our credit funds. 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 of the fund.
(2)
Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.
(3)
Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.
 
For the Year Ended 
 December 31, 2014
 
Real Estate
 
Management
 
Incentive
 
Total
Revenues:
 
 
 
 
 
 Advisory and transaction fees from affiliates, net
$
2,655

 
$

 
$
2,655

Management fees from affiliates
47,213

 

 
47,213

Carried interest income from affiliates:
 
 
 
 
 
Unrealized gains

 
4,951

 
4,951

Realized gains

 
3,998

 
3,998

Total Revenues
49,868

 
8,949

 
58,817

Compensation and benefits(1)
41,460

 
2,747

 
44,207

Other expenses(2)
23,784

 

 
23,784

Total Expenses
65,244

 
2,747

 
67,991

Other Income
3,584

 
5,675

 
9,259

Economic Net Income (Loss)
$
(11,792
)
 
$
11,877

 
$
85

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

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


(2)
Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.
The following table presents the financial data for Apollo’s reportable segments as of and for the year ended December 31, 2013: 
 
As of and for the Year Ended 
 December 31, 2013
 
Private
Equity
Segment
 
Credit
Segment
 
Real
Estate
Segment
 
Total
Reportable
Segments
Revenues:
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
78,371

 
$
114,643

 
$
3,548

 
$
196,562

Management fees from affiliates
284,833

 
392,433

 
53,436

 
730,702

Carried interest income from affiliates
2,517,247

 
373,692

 
5,222

 
2,896,161

Total Revenues
2,880,451

 
880,768

 
62,206

 
3,823,425

Expenses
1,284,657

 
482,015

 
69,886

 
1,836,558

Other Income
93,512

 
55,133

 
6,124

 
154,769

Non-Controlling Interests

 
(13,985
)
 

 
(13,985
)
Economic Net Income (Loss)
$
1,689,306

 
$
439,901

 
$
(1,556
)
 
$
2,127,651

Total Assets
$
3,148,975

 
$
1,918,565

 
$
145,996

 
$
5,213,536

 




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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table reconciles the total reportable segments to Apollo Global Management, LLC’s financial statements as of and for the year ended December 31, 2013:
 
 
As of and for the Year Ended 
 December 31, 2013
 
Total
Reportable
Segments
 
Consolidation
Adjustments
and Other
 
Consolidated
Revenues
$
3,823,425

 
$
(89,854
)
(1) 
$
3,733,571

Expenses
1,836,558

 
105,157

(2) 
1,941,715

Other income
154,769

 
534,938

(3) 
689,707

Non-Controlling Interests
(13,985
)
 
(1,700,618
)
 
(1,714,603
)
Economic Net Income
$
2,127,651

(5) 
N/A

 
N/A

Total Assets
$
5,213,536

 
$
17,264,445

(6) 
$
22,477,981

 
(1)
Represents advisory fees, management fees and carried interest income earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated affiliates to employees of the Company.
(2)
Represents the addition of expenses of consolidated funds and the consolidated VIEs and expenses related to RSUs granted in connection with the 2007 private placement and equity-based compensation expense comprising amortization of AOG Units and amortization of intangible assets. Includes non-cash expenses related to equity awards granted by unconsolidated affiliates to employees of the Company.
(3)
Results from the following:
 
For the Year Ended 
 December 31, 2013
Net gains from investment activities
$
342,828

Net gains from investment activities of consolidated variable interest entities
199,742

Gain from equity method investments(4)
(5,860
)
Interest income
(1,772
)
Total Consolidation Adjustments
$
534,938

 
(4)
Includes $(4,888) reflecting the remaining interest of certain individuals who receive an allocation of income from a private equity co-investment vehicle.
(5)
The reconciliation of Economic Net Income to Net Income Attributable to Apollo Global Management, LLC reported in the consolidated statements of operations consists of the following:
 
For the Year Ended 
 December 31, 2013
Economic Net Income
$
2,127,651

Income tax provision
(107,569
)
Net income attributable to Non-Controlling Interests in Apollo Operating Group
(1,257,650
)
Non-cash charges related to equity-based compensation(7)
(59,847
)
Amortization of intangible assets
(43,194
)
Net Income Attributable to Apollo Global Management, LLC
$
659,391


(6)
Represents the addition of assets of consolidated funds and the consolidated VIEs.
(7)
Includes the impact of non-cash charges related to amortization of AOG Units and RSUs granted in connection with the 2007 private placement as discussed in note 16 to our consolidated financial statements. Additionally, includes non-cash revenues related to equity awards granted by unconsolidated affiliates to employees of the Company.
 

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2013:
 
 
For the Year Ended 
 December 31, 2013
 
Private Equity
 
Credit
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
78,371

 
$

 
$
78,371

 
$
114,643

 
$

 
$
114,643

Management fees from affiliates
284,833

 

 
284,833

 
392,433

 

 
392,433

Carried interest income from affiliates:
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains (losses)(1)

 
454,722

 
454,722

 

 
(56,568
)
 
(56,568
)
Realized gains

 
2,062,525

 
2,062,525

 
36,922

 
393,338

 
430,260

Total Revenues
363,204

 
2,517,247

 
2,880,451

 
543,998

 
336,770

 
880,768

Compensation and benefits(2)
141,728

 
1,030,404

 
1,172,132

 
177,223

 
142,728

 
319,951

Other expenses(3)
112,525

 

 
112,525

 
162,064

 

 
162,064

Total Expenses
254,253

 
1,030,404

 
1,284,657

 
339,287

 
142,728

 
482,015

Other Income
13,006

 
80,506

 
93,512

 
28,540

 
26,593

 
55,133

Non-Controlling Interests

 

 

 
(13,985
)
 

 
(13,985
)
Economic Net Income
$
121,957

 
$
1,567,349

 
$
1,689,306

 
$
219,266

 
$
220,635

 
$
439,901

 
(1)
Included in unrealized carried interest income from affiliates for the year ended December 31, 2013 was reversal of $19.3 million and $0.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to SOMA and APC, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the fund’s net assets as of the reporting date. The actual determination and any required payment of a general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund.
(2)
Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.
(3)
Other expenses excludes amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.



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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


 
For the Year Ended 
 December 31, 2013
 
Real Estate
 
Management
 
Incentive
 
Total
Revenues:
 
 
 
 
 
 Advisory and transaction fees from affiliates, net
$
3,548

 
$

 
$
3,548

Management fees from affiliates
53,436

 

 
53,436

Carried interest income from affiliates:
 
 
 
 
 
Unrealized gains

 
4,681

 
4,681

Realized gains

 
541

 
541

Total Revenues
56,984

 
5,222

 
62,206

Compensation and benefits(1)
42,143

 
123

 
42,266

Other expenses(2)
27,620

 

 
27,620

Total Expenses
69,763

 
123

 
69,886

Other Income
2,402

 
3,722

 
6,124

Economic Net (Loss) Income
$
(10,377
)
 
$
8,821

 
$
(1,556
)
 
(1)
Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.
(2)
Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following table presents financial data for Apollo’s reportable segments as of and for the year ended December 31, 2012:
 
 
As of and for the Year Ended 
 December 31, 2012
 
Private
Equity
Segment
 
Credit
Segment
 
Real
Estate
Segment
 
Total
Reportable
Segments
Revenues:
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
121,744

 
$
27,551

 
$
749

 
$
150,044

Management fees from affiliates
277,048

 
299,667

 
46,326

 
623,041

Carried interest income from affiliates
1,667,535

 
518,852

 
15,074

 
2,201,461

Total Revenues
2,066,327

 
846,070

 
62,149

 
2,974,546

Expenses
945,466

 
454,378

 
72,437

 
1,472,281

Other Income
78,691

 
59,966

 
2,253

 
140,910

Non-Controlling Interests

 
(8,730
)
 

 
(8,730
)
Economic Net Income (Loss)
$
1,199,552

 
$
442,928

 
$
(8,035
)
 
$
1,634,445

Total Assets
$
2,583,373

 
$
1,798,086

 
$
76,851

 
$
4,458,310

The following table reconciles the total segments to Apollo Global Management, LLC’s consolidated financial statements as of and for the year ended December 31, 2012:
 
 
As of and for the Year Ended 
 December 31, 2012
 
Total
Reportable
Segments
 
Consolidation
Adjustments
and Other
 
Consolidated
Revenues
$
2,974,546

 
$
(114,581
)
(1) 
$
2,859,965

Expenses
1,472,281

 
575,564

(2) 
2,047,845

Other income
140,910

 
2,160,175

(3) 
2,301,085

Non-Controlling Interests
(8,730
)
 
(2,728,108
)
 
(2,736,838
)
Economic Net Income
$
1,634,445

(5) 
N/A

 
N/A

Total Assets
$
4,458,310

 
$
16,178,548

(6) 
$
20,636,858

 
(1)
Represents advisory fees, management fees and carried interest income earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated affiliates to employees of the Company.
(2)
Represents the addition of expenses of consolidated funds and the consolidated VIEs and expenses related to RSUs granted in connection with the 2007 private placement. Includes non-cash expenses related to equity awards granted by unconsolidated affiliates to employees of the Company.
(3)
Results from the following:
 
For the Year Ended December 31, 2012
Net gains from investment activities
$
289,386

Net losses from investment activities of consolidated variable interest entities
(71,704
)
Loss from equity method investments(4)
(10,947
)
Other Income, net
1,543

Gain on acquisition
$
1,951,897

Total Consolidation Adjustments
$
2,160,175


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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


 
(4)
Includes $1,423 reflecting the remaining interest of certain individuals who receive an allocation of income from a private equity co-investment vehicle.
(5)
The reconciliation of Economic Net Income to Net Income Attributable to Apollo Global Management, LLC reported in the consolidated statements of operations consists of the following:
 
For the Year Ended December 31, 2012
Economic Net Income
$
1,634,445

Income tax provision
(65,410
)
Net income attributable to Non-Controlling Interests in Apollo Operating Group
(685,357
)
Non-cash charges related to equity-based compensation(7)
(529,712
)
Amortization of intangible assets
(43,009
)
Net Income Attributable to Apollo Global Management, LLC
$
310,957

 
(6)
Represents the addition of assets of consolidated funds and the consolidated VIEs.
(7)
Includes the impact of non-cash charges related to amortization of RSUs granted in connection with the 2007 private placement as discussed in note 16 to our consolidated financial statements. Additionally, includes non-cash revenues related to equity awards granted by unconsolidated affiliates to employees of the Company.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


The following tables present additional financial data for Apollo’s reportable segments for the year ended December 31, 2012:
 
For the Year Ended December 31, 2012
 
Private Equity
 
Credit
 
Management
 
Incentive
 
Total
 
Management
 
Incentive
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Advisory and transaction fees from affiliates, net
$
121,744

 
$

 
$
121,744

 
$
27,551

 
$

 
$
27,551

Management fees from affiliates
277,048

 

 
277,048

 
299,667

 

 
299,667

Carried interest income from affiliates:
 
 
 
 
 
 
 
 
 
 
 
Unrealized losses(1)

 
854,919

 
854,919

 

 
301,077

 
301,077

Realized gains

 
812,616

 
812,616

 
37,842

 
179,933

 
217,775

Total Revenues
398,792

 
1,667,535

 
2,066,327

 
365,060

 
481,010

 
846,070

Compensation and benefits(2)
135,281

 
726,874

 
862,155

 
166,883

 
138,444

 
305,327

Other expenses(3)
83,311

 

 
83,311

 
149,051

 

 
149,051

Total Expenses
218,592

 
726,874

 
945,466

 
315,934

 
138,444

 
454,378

Other Income
4,653

 
74,038

 
78,691

 
15,008

 
44,958

 
59,966

Non-Controlling Interests

 

 

 
(8,730
)
 

 
(8,730
)
Economic Net Income
$
184,853

 
$
1,014,699

 
$
1,199,552

 
$
55,404

 
$
387,524

 
$
442,928

 
(1)
Included in unrealized carried interest income from affiliates for December 31, 2012 was a reversal of $75.3 million of the entire general partner obligation to return previously distributed carried interest income with respect to Fund VI and reversal of previously recognized realized carried interest income due to the general partner obligation to return previously distributed carried interest income of $1.2 million and $0.3 million with respect to SOMA and APC, respectively. The general partner obligation is recognized based upon a hypothetical liquidation of the funds' net assets as of December 31, 2012. The actual determination and any required payment of a general partner obligation would not take place until the final disposition of a fund's investments based on the contractual termination of the fund.
(2)
Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.
(3)
Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.

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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


 
For the Year Ended December 31, 2012
 
Real Estate
 
Management
 
Incentive
 
Total
Revenues:
 
 
 
 
 
 Advisory and transaction fees from affiliates, net
$
749

 
$

 
$
749

Management fees from affiliates
46,326

 

 
46,326

Carried interest income from affiliates:
 
 
 
 
 
Unrealized losses

 
10,401

 
10,401

Realized gains

 
4,673

 
4,673

Total Revenues
47,075

 
15,074

 
62,149

Compensation and benefits(1)
41,352

 
6,815

 
48,167

Other expenses(2)
24,270

 

 
24,270

Total Expenses
65,622

 
6,815

 
72,437

Other Income
1,271

 
982

 
2,253

Economic Net (Loss) Income
$
(17,276
)
 
$
9,241

 
$
(8,035
)
 
(1)
Compensation and benefits includes equity-based compensation expense related to the management business for RSUs (excluding RSUs granted in connection with the 2007 private placement) and share options.
(2)
Other expenses exclude amortization of intangibles associated with the 2007 Reorganization as well as acquisitions.



21. SUBSEQUENT EVENTS
On January 13, 2015, the Company issued 681,421 Class A shares in settlement of vested RSUs. This issuance caused the Company's ownership interest in the Apollo Operating Group to increase from 42.3% to 42.4%.
On February 5, 2015, the Company declared a cash distribution of $0.86 per Class A share, which will be paid on February 27, 2015 to holders of record on February 17, 2015.
On February 6, 2015, the Company issued 225,000 Class A shares in exchange for AOG Units. This issuance did not cause a material change to the Company's ownership interest in the Apollo Operating Group.
On February 10, 2015, the Company issued 3,946,444 Class A shares in settlement of vested RSUs. This issuance caused the Company's ownership interest in the Apollo Operating Group to increase from 42.4% to 43.0%.
Apollo, through its subsidiary Apollo MidCap Holdings (Cayman), L.P., has entered into a subscription agreement providing for an aggregate commitment of $50.0 million to subscribe for (i) Class A Variable Funding Subordinated Notes due 2114 (“Class A Notes”) of Midcap Finco Limited (“FinCo”), an Irish company that includes the existing operations and assets of MidCap Financial LLC, a specialty finance company that originates commercial lending opportunities, and  (ii) ordinary shares of Finco’s holding company (“Ordinary Shares”). The subscription agreement has a commitment period of three years (subject to extension under certain circumstances), and $8.0 million of the commitment was drawn on February 3, 2015. Pursuant to an investment management agreement, Apollo, through its subsidiary Apollo Capital Management, L.P., is acting as the investment manager of FinCo’s credit business. Certain third parties have also entered into subscription agreements for Class A Notes and Ordinary Shares.





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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


22. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
For the Three Months Ended
 
March 31,
2014
 
June 30,
2014
 
September 30,
2014
 
December 31, 2014
Revenues
$
491,400

 
$
572,152

 
$
221,135

 
$
275,396

Expenses
314,119

 
354,369

 
177,388

 
197,687

Other Income (Loss)
314,912

 
69,556

 
(82,135
)
 
58,314

Income (Loss) Before Provision for Taxes
$
492,193

 
$
287,339

 
$
(38,388
)
 
$
136,023

Net Income (Loss)
$
459,644

 
$
252,302

 
$
(67,764
)
 
$
85,740

Net income attributable to Apollo Global Management, LLC
$
72,169

 
$
71,668

 
$
2,210

 
$
22,182

Net Income per Class A Share - Basic
$
0.32

 
$
0.33

 
$
(0.05
)
 
$
0.04

Net Income per Class A Share - Diluted
$
0.32

 
$
0.33

 
$
(0.05
)
 
$
0.04


 
For the Three Months Ended
 
March 31,
2013
 
June 30,
2013
 
September 30,
2013
 
December 31, 2013
Revenues
$
1,309,073

 
$
497,261

 
$
1,132,089

 
$
795,148

Expenses
622,602

 
322,787

 
600,115

 
396,211

Other Income (Loss)
132,173

 
(8,165
)
 
210,820

 
354,879

Income Before Provision for Taxes
$
818,644

 
$
166,309

 
$
742,794

 
$
753,816

Net Income
$
800,065

 
$
148,170

 
$
695,590

 
$
730,169

Net income attributable to Apollo Global Management, LLC
$
248,978

 
$
58,737

 
$
192,516

 
$
159,160

Net Income per Class A Share - Basic
$
1.60

 
$
0.32

 
$
1.13

 
$
0.94

Net Income per Class A Share - Diluted
$
1.59

 
$
0.32

 
$
1.13

 
$
0.93


 
For the Three Months Ended
 
March 31,
2012
 
June 30,
2012
 
September 30,
2012
 
December 31, 2012
Revenues
$
776,743

 
$
211,628

 
$
712,373

 
$
1,159,221

Expenses
523,230

 
316,962

 
520,008

 
687,645

Other Income
192,188

 
1,950,461

 
27,348

 
131,088

Income Before Provision for Taxes
$
445,701

 
$
1,845,127

 
$
219,713

 
$
602,664

Net Income
$
431,141

 
$
1,834,477

 
$
197,796

 
$
584,381

Net income (Loss) attributable to Apollo Global Management, LLC
$
98,043

 
$
(41,386
)
 
$
82,791

 
$
171,509

Net Income (Loss) per Class A Share-Basic
$
0.66

 
$
(0.38
)
 
$
0.55

 
$
1.12

Net Income (Loss) per Class A Share - Diluted
$
0.66

 
$
(0.38
)
 
$
0.55

 
$
1.12


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ITEM 8A.     UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS
OF FINANCIAL CONDITION


APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(dollars in thousands, except share data)
 
December 31, 2014
 
Apollo Global Management, LLC and Consolidated Subsidiaries
 
Consolidated Funds and VIE's
 
Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,204,052

 
$

 
$

 
$
1,204,052

Cash and cash equivalents held at consolidated funds

 
1,611

 

 
1,611

Restricted cash
6,353

 

 

 
6,353

Investments
857,391

 
2,173,989

 
(151,374
)
 
2,880,006

Assets of consolidated variable interest entities
 
 
 
 
 
 
 
Cash and cash equivalents

 
1,088,952

 

 
1,088,952

Investments, at fair value

 
15,658,948

 
(295
)
 
15,658,653

Other assets

 
323,932

 
(692
)
 
323,240

Carried interest receivable
958,846

 

 
(47,180
)
 
911,666

Due from affiliates
278,632

 

 
(10,617
)
 
268,015

Fixed assets, net
35,906

 

 

 
35,906

Deferred tax assets
606,717

 

 

 
606,717

Other assets
81,083

 
3,578

 
(277
)
 
84,384

Goodwill
88,852

 

 
(39,609
)
 
49,243

Intangible assets, net
60,039

 

 

 
60,039

Total Assets
$
4,177,871

 
$
19,251,010

 
$
(250,044
)
 
$
23,178,837

Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued expenses
43,772

 
474

 

 
44,246

Accrued compensation and benefits
59,278

 

 

 
59,278

Deferred revenue
199,614

 

 

 
199,614

Due to affiliates
564,799

 
354

 

 
565,153

Profit sharing payable
434,852

 

 

 
434,852

Debt
1,034,014

 

 

 
1,034,014

Liabilities of consolidated variable interest entities:
 
 
 
 
 
 
 
Debt, at fair value

 
14,170,474

 
(47,374
)
 
14,123,100

Other liabilities

 
728,957

 
(239
)
 
728,718

Due to affiliates

 
58,526

 
(58,526
)
 

Other liabilities
42,183

 
4,218

 

 
46,401

Total Liabilities
$
2,378,512

 
$
14,963,003

 
$
(106,139
)
 
$
17,235,376

 
 
 
 
 
 
 
 
Shareholders' Equity:
 
 
 
 
 
 
 
Apollo Global Management, LLC shareholders' equity:
 
 
 
 
 
 
 
Additional paid in capital
2,256,054

 

 
(1,771
)
 
2,254,283

Accumulated deficit
(1,433,759
)
 
2,175,406

 
(2,142,308
)
 
(1,400,661
)
Appropriated partners' capital

 
972,774

 
(39,608
)
 
933,166

Accumulated other comprehensive income (loss)
33,052

 

 
(33,358
)
 
(306
)
Total Apollo Global Management, LLC shareholders' equity
855,347

 
3,148,180

 
(2,217,045
)
 
1,786,482

Non-Controlling Interests in consolidated entities
9,228

 
1,139,827

 
2,073,140

 
3,222,195

Non-Controlling Interests in Apollo Operating Group
934,784

 

 

 
934,784

Total Shareholders' Equity
1,799,359

 
4,288,007

 
(143,905
)
 
5,943,461

Total Liabilities and Shareholders' Equity
$
4,177,871

 
$
19,251,010

 
$
(250,044
)
 
$
23,178,837








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APOLLO GLOBAL MANAGEMENT, LLC
CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(dollars in thousands, except share data)
 
December 31, 2013
 
Apollo Global Management, LLC and Consolidated Subsidiaries
 
Consolidated Funds and VIE's
 
Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,078,120

 
$

 
$

 
$
1,078,120

Cash and cash equivalents held at consolidated funds

 
1,417

 

 
1,417

Restricted cash
9,199

 

 

 
9,199

Investments
509,712

 
1,971,654

 
(87,483
)
 
2,393,883

Assets of consolidated variable interest entities
 
 
 
 
 
 
 
Cash and cash equivalents

 
1,095,170

 

 
1,095,170

Investments, at fair value

 
14,127,480

 
(1,118
)
 
14,126,362

Other assets

 
280,718

 

 
280,718

Carried interest receivable
2,366,766

 

 
(79,691
)
 
2,287,075

Due from affiliates
323,177

 

 
(5,930
)
 
317,247

Fixed assets, net
40,251

 

 

 
40,251

Deferred tax assets
660,199

 

 

 
660,199

Other assets
42,333

 
1,837

 

 
44,170

Goodwill
88,852

 

 
(39,609
)
 
49,243

Intangible assets, net
94,927

 

 

 
94,927

Total Assets
$
5,213,536

 
$
17,478,276

 
$
(213,831
)
 
$
22,477,981

Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued expenses
37,880

 
279

 

 
38,159

Accrued compensation and benefits
41,711

 

 

 
41,711

Deferred revenue
279,479

 

 

 
279,479

Due to affiliates
594,518

 
853

 

 
595,371

Profit sharing payable
992,240

 

 

 
992,240

Debt
750,000

 

 

 
750,000

Liabilities of consolidated variable interest entities:
 
 
 
 
 
 
 
Debt, at fair value

 
12,424,839

 
(877
)
 
12,423,962

Other liabilities

 
609,413

 
(4,350
)
 
605,063

Due to affiliates

 
81,272

 
(81,272
)
 

Other liabilities
60,647

 
2,627

 

 
63,274

Total Liabilities
$
2,756,475

 
$
13,119,283

 
$
(86,499
)
 
$
15,789,259

 
 
 
 
 
 
 
 
Shareholders' Equity:
 
 
 
 
 
 
 
Apollo Global Management, LLC shareholders' equity:
 
 
 
 
 
 
 
Additional paid in capital
2,624,113

 

 
469

 
2,624,582

Accumulated deficit
(1,587,536
)
 
1,971,682

 
(1,952,633
)
 
(1,568,487
)
Appropriated partners' capital

 
1,620,928

 
(39,849
)
 
1,581,079

Accumulated other comprehensive income (loss)
33,774

 

 
(33,679
)
 
95

Total Apollo Global Management, LLC shareholders' equity
1,070,351

 
3,592,610

 
(2,025,692
)
 
2,637,269

Non-Controlling Interests in consolidated entities
4,987

 
766,383

 
1,898,360

 
2,669,730

Non-Controlling Interests in Apollo Operating Group
1,381,723

 

 

 
1,381,723

Total Shareholders' Equity
2,457,061

 
4,358,993

 
(127,332
)
 
6,688,722

Total Liabilities and Shareholders' Equity
$
5,213,536

 
$
17,478,276

 
$
(213,831
)
 
$
22,477,981


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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.


ITEM 9A.
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 the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013 framework). 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 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. The effectiveness of our internal control over financial reporting as of December 31, 2014 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K.
 
ITEM 9B.
OTHER INFORMATION

None.


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PART III


ITEM  10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers
The following table presents certain information concerning our board of directors and executive officers:

Name
 
Age
 
Position(s)
Leon Black
 
63
 
Chairman, Chief Executive Officer and Director
Joshua Harris
 
50
 
Senior Managing Director and Director
Marc Rowan
 
52
 
Senior Managing Director and Director
Martin Kelly
 
47
 
Chief Financial Officer
John Suydam
 
55
 
Chief Legal Officer and Chief Compliance Officer
James Zelter
 
52
 
Managing Director-Credit
Christopher Weidler
 
39
 
Chief Accounting Officer and Controller
Michael Ducey
 
66
 
Director
Paul Fribourg
 
61
 
Director
Robert Kraft
 
73
 
Director
A.B. Krongard
 
78
 
Director
Pauline Richards
 
66
 
Director
Leon Black. Mr. Black is the Chairman of the board of directors and Chief Executive Officer of Apollo and a Managing Partner of Apollo Management, L.P. In 1990, Mr. Black founded Apollo Management, L.P. and Lion Advisors, L.P. to manage investment capital on behalf of a group of institutional investors, focusing on corporate restructuring, leveraged buyouts and taking minority positions in growth-oriented companies. From 1977 to 1990, Mr. Black worked at Drexel Burnham Lambert Incorporated, where he served as a Managing Director, head of the Mergers & Acquisitions Group, and co-head of the Corporate Finance Department. Mr. Black also serves on the board of directors of the general partner of AAA and previously served on the board of directors of Sirius XM Radio Inc. Mr. Black is a trustee of The Museum of Modern Art, The Mount Sinai Medical Center, The Metropolitan Museum of Art, and The Asia Society. He is also a member of The Council on Foreign Relations and The Partnership for New York City. He is also a member of the boards of directors of FasterCures and the Port Authority Task Force. Mr. Black graduated summa cum laude from Dartmouth College in 1973 with a major in Philosophy and History and received an MBA from Harvard Business School in 1975. Mr. Black has significant experience making and managing private equity investments on behalf of Apollo and has over 35 years’ experience financing, analyzing and investing in public and private companies. In his prior positions with Drexel and in his positions at Apollo, Mr. Black is responsible for leading and overseeing teams of professionals. His extensive experience allows Mr. Black to provide insight into various aspects of Apollo’s business and is of significant value to the board of directors.
Joshua Harris. Mr. Harris is a Senior Managing Director and a member of the board of directors of Apollo and a Managing Partner of Apollo Management, L.P., which he co-founded in 1990. Prior to 1990, Mr. Harris was a member of the Mergers and Acquisitions group of Drexel Burnham Lambert Incorporated. Mr. Harris has previously served on the board of directors of Berry Plastics Group Inc., EP Energy Corporation, EPE Acquisition, LLC, CEVA Logistics, Momentive Performance Materials Holdings LLC, Constellium N.V., LyondellBasell Industries B.V., Momentive Specialty Chemicals Inc. and Momentive Specialty Chemicals Holdings LLC. Mr. Harris is a member of the Federal Reserve Bank of New York’s Investor Advisory Committee, the Council of Foreign Relations, and is on the Board of Trustees of Mount Sinai Medical Center. He participates on the University of Pennsylvania’s Wharton School’s Board of Overseers, the Board of Dean’s Advisors at the Harvard Business School and certain other charitable and educational boards. Mr. Harris is the Managing Partner of the Philadelphia 76ers and the Managing Member of the New Jersey Devils. Mr. Harris graduated summa cum laude and Beta Gamma Sigma from the University of Pennsylvania’s Wharton School of Business with a B.S. in Economics and received his M.B.A. from the Harvard Business School, where he graduated as a Baker and Loeb Scholar. Mr. Harris has significant experience in making and managing private equity investments on behalf of Apollo and has over 25 years’ experience in financing, analyzing and investing in public and private companies. Mr. Harris’s extensive knowledge of Apollo’s business and experience in a variety of senior leadership roles enhance the breadth of experience of the board of directors.

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Marc Rowan. Mr. Rowan is a Senior Managing Director and member of the board of directors of Apollo and a Managing Partner of Apollo Management, L.P., which he co-founded in 1990. Prior to 1990, Mr. Rowan was a member of the Mergers & Acquisitions Group of Drexel Burnham Lambert Incorporated, with responsibilities in high yield financing, transaction idea generation and merger structure negotiation. Mr. Rowan currently serves on the boards of directors of Athene Holding Ltd, Caesars Entertainment Corporation, Caesars Acquisition Co. and Caesars Entertainment Operating Co. He has previously served on the boards of directors of the general partner of AAA, AMC Entertainment, Inc., Cablecom GmbH, Culligan Water Technologies, Inc., Countrywide Holdings Limited, Furniture Brands International Inc., Mobile Satellite Ventures, LLC, National Cinemedia, Inc., National Financial Partners, Inc., New World Communications, Inc., Norwegian Cruise Lines, Quality Distribution, Inc., Samsonite Corporation, SkyTerra Communications Inc., Unity Media SCA, Vail Resorts, Inc. and Wyndham International, Inc. Mr. Rowan is also active in charitable activities. He is a founding member and Chairman of the Youth Renewal Fund and is a member of the Board of Overseers of the University of Pennsylvania’s Wharton School of Business and serves on the boards of directors of Jerusalem Online and the New York City Police Foundation. Mr. Rowan graduated summa cum laude from the University of Pennsylvania’s Wharton School of Business with a B.S. and an M.B.A. in Finance. Mr. Rowan has significant experience making and managing private equity investments on behalf of Apollo and has over 26 years’ experience financing, analyzing and investing in public and private companies. Mr. Rowan’s extensive financial background and expertise in private equity investments enhance the breadth of experience of the board of directors.
Martin Kelly. Mr. Kelly joined Apollo in 2012 as Chief Financial Officer. Mr. Kelly also oversees the Firm's IT, Risk, Operations and Audit groups.  From 2008 to 2012, Mr. Kelly was with Barclays Capital and, from 2000 to 2008, Mr. Kelly was with Lehman Brothers Holdings Inc. Prior to departing Barclays Capital, Mr. Kelly served as Managing Director, CFO of the Americas, and Global Head of Financial Control for their Corporate and Investment Bank. Prior to joining Lehman Brothers in 2000, Mr. Kelly spent 13 years with PricewaterhouseCoopers LLP, including serving in the Financial Services Group in New York from 1994 to 2000. Mr. Kelly was appointed a Partner of the firm in 1999. Mr. Kelly received a degree in Commerce, majoring in Finance and Accounting, from the University of New South Wales in 1989.
John Suydam. Mr. Suydam joined Apollo in 2006 and serves as Apollo’s Chief Legal Officer. From 2002 to 2006, Mr. Suydam was a partner at O’Melveny & Myers LLP where he served as head of Mergers and Acquisitions and co-head of the Corporate Department. Prior to that time, Mr. Suydam served as Chairman of the law firm O’Sullivan, LLP which specialized in representing private equity investors. Mr. Suydam serves on the boards of The Legal Action Center, Environmental Solutions Worldwide, Inc. and New York University School of Law, and is a member of the Department of Medicine Advisory Board of the Mount Sinai Medical Center. Mr. Suydam received his J.D. from New York University and graduated magna cum laude with a B.A. in History from the State University of New York at Albany.
James Zelter. Mr. Zelter joined Apollo in 2006. Mr. Zelter is the Managing Director of Apollo’s credit business, Chief Executive Officer and director of AINV. Prior to joining Apollo, Mr. Zelter was with Citigroup Inc. and its predecessor companies from 1994 to 2006. From 2003 to 2005, Mr. Zelter was Chief Investment Officer of Citigroup Alternative Investments, and prior to that he was responsible for the firm’s Global High Yield franchise. Prior to joining Citigroup in 1994, Mr. Zelter was a High Yield Trader at Goldman, Sachs & Co. Mr. Zelter has significant experience in global credit markets and has overseen the broad expansion of Apollo’s credit platform. Mr. Zelter is a board member of DUMAC, the investment management company that oversees the Duke Endowment and Duke Foundation, and is on the board of the Dalton School. Mr. Zelter has a B.A. in Economics from Duke University.
Christopher Weidler. Mr. Weidler joined Apollo in 2013. Prior to joining Apollo, Mr. Weidler was with Barclays, where he most recently served as a Managing Director and the Financial Controller of the Americas. Since February 2005, Mr. Weidler served in a variety of leadership roles at Barclays that included Global Head of U.S. GAAP Technical Accounting and Global Head of Financial Reporting and Legal Entity Control for the Investment Bank. Prior to joining Barclays, Mr. Weidler spent eight years with PricewaterhouseCoopers LLP in the firm's New York Audit and Assurance practice and in London in the firm’s Global Capital Markets Group. Mr. Weidler received a B.S. in Accounting from Villanova University in 1997.
Michael Ducey. Mr. Ducey has served as an independent director of Apollo and a member of the audit committee and as Chairman of the conflicts committee of our board of directors since 2011. Most recently, Mr. Ducey was with Compass Minerals International, Inc., from March 2002 to May 2006, where he served in a variety of roles, including as President, Chief Executive Officer and Director prior to his retirement in May 2006. Prior to joining Compass Minerals International, Inc., Mr. Ducey worked for nearly 30 years at Borden Chemical, Inc., in various management, sales, marketing, planning and commercial development positions, and ultimately as President, Chief Executive Officer and Director. Mr. Ducey is currently a director of and serves as the Chairman of the audit committee of Verso Paper Holdings, Inc. He is also the Chairman of the compliance and governance committee and the nominations committee of the board of directors of HaloSource, Inc. From September 2009 to December 2012, Mr. Ducey was the non-executive Chairman of TPC Group, Inc. and served on the audit committee and the environmental health and safety committee. From June 2006 to May 2008, Mr. Ducey served on the board of directors of and as a member of the governance and compensation committee of the board of directors of UAP Holdings Corporation. Also, from July 2010 to May

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2011, Mr. Ducey was a member of the board of directors and served on the audit committee of Smurfit-Stone Container Corporation. Mr. Ducey graduated from Otterbein University with a degree in Economics and an M.B.A. in finance from the University of Dayton. Mr. Ducey’s comprehensive corporate background and his experience serving on various boards and committees add significant value to the board of directors.
Paul Fribourg. Mr. Fribourg has served as an independent director of Apollo and as a member of the conflicts committee of our board of directors since 2011. From 1997 to the present, Mr. Fribourg has served as Chairman and Chief Executive Officer of Continental Grain Company. Prior to 1997, Mr. Fribourg served in a variety of other roles at Continental Grain Company, including Merchandiser, Product Line Manager, Group President and Chief Operating Officer. Mr. Fribourg serves on the boards of directors of Restaurant Brands International Inc., Loews Corporation, Castleton Commodities International LLC and The Estee Lauder Companies, Inc. He also serves as a board member of the Rabobank International North American Agribusiness Advisory Board, the New York University Mitchell Jacobson Leadership Program in Law and Business Advisory Board and Endeavor Global Inc. Mr. Fribourg is also a member of the Council on Foreign Relations, the Brown University Advisory Council on China and the International Business Leaders Advisory Council for The Mayor of Shanghai. Mr. Fribourg graduated magna cum laude from Amherst College and completed the Advanced Management Program at Harvard Business School. Mr. Fribourg’s extensive corporate experience enhances the breadth of experience and independence of the board of directors.
Robert Kraft. Mr. Kraft has served as an independent director of Apollo and as a member of the conflicts committee of our board of directors since 2014. Mr. Kraft is Chairman and Chief Executive Officer of The Kraft Group, which includes the New England Patriots, New England Revolution, Gillette Stadium, Rand-Whitney Group and International Forest Products Corporation. Mr. Kraft serves on a number of NFL Committees, including the Executive Committee, Finance Committee and Broadcast Committee (Chairman). Since 2006, Mr. Kraft has been a member of the board of directors of Viacom Inc. He also serves as Chairman for both the New England Patriots Charitable Foundation and the Robert and Myra Kraft Family Foundation, and is a director of the Dana Farber Cancer Institute. Mr. Kraft’s corporate strategic and operational experience combined with his strong relationships in the business community make him a valuable member of the board of directors.
A.B. Krongard. Mr. Krongard has served as an independent director of Apollo and as a member of the audit committee of our board of directors since 2011. From 2001 to 2004, Mr. Krongard served as Executive Director of the Central Intelligence Agency. From 1998 to 2001, Mr. Krongard served as Counselor to the Director of Central Intelligence. Prior to 1998, Mr. Krongard served in various capacities at Alex Brown, Incorporated, including serving as Chief Executive Officer beginning in 1991 and assuming additional duties as Chairman of the board of directors in 1994. Upon the merger of Alex Brown, Incorporated with Bankers Trust Corporation in 1997, Mr. Krongard served as Vice-Chairman of the Board of Bankers Trust Corporation and served in such capacity until joining the Central Intelligence Agency. Mr. Krongard serves as the Lead Director and audit committee Chairman of Under Armour, Inc. and also serves as a board member of Iridium Communications Inc., Seventy-Seven Energy Inc. and In-Q-Tel, Inc. Mr. Krongard graduated with honors from Princeton University and received a J.D. from the University of Maryland School of Law, where he also graduated with honors. Mr. Krongard also serves as the Vice Chairman of the Johns Hopkins Health System. Mr. Krongard’s comprehensive corporate background contributes to the range of experience of the board of directors.
Pauline Richards. Ms. Richards has served as an independent director of Apollo and as Chairman of the audit committee of our board of directors since 2011. Ms. Richards currently serves as Chief Operating Officer of Armour Group Holdings Limited, a position she has held since 2008. Ms. Richards also serves as a member of the Audit and Compensation Committees of the board of directors of Wyndham Worldwide, a position she has held since 2006; is a director of Hamilton Insurance Group, serving on the audit and investment committees, a position she has held since 2013; and is the Treasurer of the board of directors of PRIDE Bermuda, a drug prevention organization of which she has been a member for over 20 years. Prior to 2008, Ms. Richards served as Director of Development of Saltus Grammar School from 2003 to 2008, as Chief Financial Officer of Lombard Odier Darier Hentsch (Bermuda) Limited from 2001 to 2003, and as Treasurer of Gulf Stream Financial Limited from 1999 to 2000. Ms. Richards also served as a member of the Audit Committee and chair of the Corporate Governance Committee of the board of directors of Butterfield Bank from 2006 to 2013. Ms. Richards graduated from Queen’s University, Ontario, Canada, with a BA in psychology and has obtained certification as a CPA, CMA. Ms. Richards’ extensive finance experience and her service on the boards of other public companies add significant value to the board of directors.
Our Manager
Our operating agreement provides that so long as the Apollo Group beneficially owns at least 10% of the aggregate number of votes that may be cast by holders of outstanding voting shares, our manager, which is owned and controlled by our Managing Partners, will manage all of our operations and activities and will have discretion over significant corporate actions, such as the issuance of securities, payment of distributions, sales of assets, making certain amendments to our operating agreement and other matters, and our board of directors will have no authority other than that which our manager chooses to delegate to it. We refer to the Apollo Group’s beneficial ownership of at least 10% of such voting power as the “Apollo control condition.” For

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purposes of our operating agreement, the “Apollo Group” means (i) our manager and its affiliates, including their respective general partners, members and limited partners, (ii) Holdings and its affiliates, including their respective general partners, members and limited partners, (iii) with respect to each Managing Partner, such Managing Partner and such Managing Partner’s “group” (as defined in Section 13(d) of the Exchange Act), (iv) any former or current investment professional of or other employee of an “Apollo employer” (as defined below) or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group), (v) any former or current executive officer of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group); and (vi) any former or current director of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group). With respect to any person, “Apollo employer” means Apollo Global Management, LLC or such other entity controlled by Apollo Global Management, LLC or its successor as may be such person’s employer but does not include any portfolio companies.
Decisions by our manager are made by its executive committee, which is composed of our three Managing Partners. Each Managing Partner will remain on the executive committee for so long as he is employed by us, provided that Mr. Black, upon his retirement, may at his option remain on the executive committee until his death or disability or any commission of an act that would constitute cause if Mr. Black had still been employed by us. Other than those actions that require unanimous consent, actions by the executive committee are determined by majority vote of its voting members, except as to the following matters, as to which Mr. Black will have the right of veto: (i) the designations of directors to our board, or (ii) a sale or other disposition of the Apollo Operating Group and/or its subsidiaries or any portion thereof, through a merger, recapitalization, stock sale, asset sale or otherwise, to an unaffiliated third party (other than through an exchange of Apollo Operating Group units, transfers by a founder or a permitted transferee to another permitted transferee, or the issuance of bona fide equity incentives to any of our non-founder employees) that constitutes (x) a direct or indirect sale of a ratable interest (or substantially ratable interest) in each entity that constitutes the Apollo Operating Group or (y) a sale of all or substantially all of the assets of Apollo (this clause (ii), an “LB Approval Event”). Exchanges of Apollo Operating Group units for Class A shares that are not pro rata among our Managing Partners or in which each Managing Partner has the option not to participate are not subject to Mr. Black’s right of veto.
Subject to limited exceptions described in our operating agreement, our manager may not sell, exchange or otherwise dispose of all or substantially all of our assets and those of our subsidiaries, taken as a whole, in a single transaction or a series of related transactions without the approval of holders of a majority of the aggregate number of voting shares outstanding; provided, however, that this does not preclude or limit our manager’s ability, in its sole discretion, to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets and those of our subsidiaries (including for the benefit of persons other than us or our subsidiaries, including affiliates of our manager) and does not apply to any forced sale of any or all of our assets pursuant to the foreclosure of, or other realization upon, any such encumbrance.
We will reimburse our manager and its affiliates for all costs incurred in managing and operating us, and our operating agreement provides that our manager will determine the expenses that are allocable to us. The agreement does not limit the amount of expenses for which we will reimburse our manager and its affiliates.
Board Composition and Limited Powers of Our Board of Directors
For so long as the Apollo control condition is satisfied, our manager shall (i) nominate and elect all directors to our board of directors, (ii) set the number of directors of our board of directors and (iii) fill any vacancies on our board of directors. After the Apollo control condition is no longer satisfied, each of our directors will be elected by the vote of a plurality of our shares entitled to vote, voting as a single class, to serve until his or her successor is duly elected or appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal. Our board currently consists of eight members. For so long as the Apollo control condition is satisfied, our manager may remove any director, with or without cause, at anytime. After such condition is no longer satisfied, a director or the entire board of directors may be removed by the affirmative vote of holders of 50% or more of the total voting power of our shares.
As noted, so long as the Apollo control condition is satisfied, our manager will manage all of our operations and activities, and our board of directors will have no authority other than that which our manager chooses to delegate to it. In the event that the Apollo control condition is not satisfied, our board of directors will manage all of our operations and activities.
Pursuant to a delegation of authority from our manager, which may be revoked, our board of directors has established and at all times will maintain audit and conflicts committees of the board of directors that have the responsibilities described below under “-Committees of the Board of Directors-Audit Committee” and “-Committees of the Board of Directors-Conflicts Committee.”
Where action is required or permitted to be taken by our board of directors or a committee thereof, a majority of the directors or committee members present at any meeting of our board of directors or any committee thereof at which there is a quorum shall be the act of our board or such committee, as the case may be. Our board of directors or any committee thereof may also act by unanimous written consent.

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Under the Agreement Among Managing Partners (as described under “Item 13. Certain Relationships and Related Transactions-Lenders Rights Agreement-Amendments to Managing Partner Transfer Restrictions”), the vote of a majority of the independent members of our board of directors will decide the following: (i) in the event that a vacancy exists on the executive committee of our manager and the remaining members of the executive committee cannot agree on a replacement (other than a replacement for Mr. Black nominated by Mr. Black or his representative, which requires the approval of only one member of the executive committee), the independent members of our board of directors shall select one of the two nominees to the executive committee of our manager presented to them by the remaining members of such executive committee to fill the vacancy on such executive committee and (ii) in the event that Mr. Black wishes to exercise his ability to cause an LB Approval Event, the affirmative vote of the majority of the independent members of our board of directors shall be required to approve such a transaction. We are not a party to the Agreement Among Managing Partners, and neither we nor our shareholders (other than our Strategic Investors, as described under “Item 13. Certain Relationships and Related Transactions-Lenders Rights Agreement-Amendments to Managing Partner Transfer Restrictions”) have any right to enforce the provisions described above. Such provisions can be amended or waived upon agreement of our Managing Partners at any time.
Committees of the Board of Directors
We have established an audit committee as well as a conflicts committee. Our audit committee has adopted a charter that complies with current SEC and NYSE rules relating to corporate governance matters. Our board of directors may from time to time establish other committees of our board of directors.
Audit Committee
The primary purpose of our audit committee is to assist our manager in overseeing and monitoring (i) the quality and integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our independent registered public accounting firm’s qualifications and independence and (iv) the performance of our independent registered public accounting firm.
The current members of our audit committee are Messrs. Ducey and Krongard and Ms. Richards. Ms. Richards currently serves as Chairperson of the committee. Each of the members of our audit committee meets the independence standards and financial literacy requirements for service on an audit committee of a board of directors pursuant to the Exchange Act and NYSE rules applicable to audit committees and corporate governance. Furthermore, our manager has determined that Ms. Richards is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K. Our audit committee has a charter which is available on our website at www.agm.com under the “Investor Relations” section.
Conflicts Committee
The current members of our conflicts committee are Messrs. Ducey, Fribourg and Kraft. Mr. Ducey currently serves as Chairman of the committee. The purpose of the conflicts committee is to review specific matters that our manager believes may involve conflicts of interest. The conflicts committee will determine whether the resolution of any conflict of interest submitted to it is fair and reasonable to us. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to us and not a breach by us of any duties that we may owe to our shareholders. In addition, the conflicts committee may review and approve any related person transactions, other than those that are approved pursuant to our related person policy, as described under “Item 13. Certain Relationships and Related Party Transactions-Statement of Policy Regarding Transactions with Related Persons,” and may establish guidelines or rules to cover specific categories of transactions.
Code of Business Conduct and Ethics
We have a Code of Business Conduct and Ethics, which applies to, among others, our principal executive officer, principal financial officer and principal accounting officer. A copy of our Code of Business Conduct and Ethics is available on our website at www.agm.com under the “Investor Relations” section. We intend to disclose any amendment to or waiver of the Code of Business Conduct and Ethics on behalf of an executive officer or director either on our website or in an 8-K filing.
Corporate Governance Guidelines
We have Corporate Governance Guidelines that address significant issues of corporate governance and set forth procedures by which our manager and board of directors carry out their respective responsibilities. The guidelines are available for viewing on our website at www.agm.com under the “Investor Relations” section. We will also provide the guidelines, free of charge, to shareholders who request them. Requests should be directed to our Secretary at Apollo Global Management, LLC, 9 West 57th Street, 43rd Floor, New York, New York 10019.
Communications with the Board of Directors

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A shareholder or other interested party who wishes to communicate with our directors, a committee of our board of directors, our independent directors as a group or our board of directors generally may do so in writing. Any such communications may be sent to our board of directors by U.S. mail or overnight delivery and should be directed to our Secretary at Apollo Global Management, LLC, 9 West 57th Street, 43rd Floor, New York, New York 10019, who will forward them to the intended recipient(s). Any such communications may be made anonymously. Unsolicited advertisements, invitations to conferences or promotional materials, in the discretion of our Secretary, are not required, however, to be forwarded to the directors.
Executive Sessions of Independent Directors
The independent directors serving on our board of directors meet periodically in executive sessions during the year at regularly scheduled meetings of our board of directors. These executive sessions will be presided over by one of the independent directors serving on our board of directors selected on an ad-hoc basis.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities to file initial reports of ownership and reports of changes in ownership with the SEC and furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us or written representations from such persons that they were not required to file a Form 5 to report previously unreported ownership or changes in ownership, we believe that, with respect to the fiscal year ended December 31, 2014, such persons complied with all such filing requirements.


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ITEM  11.    EXECUTIVE COMPENSATION

Compensation Discussion and Analysis
Overview of Compensation Philosophy
Alignment of Interests with Investors and Shareholders. Our principal compensation philosophy is to align the interests of our Managing Partners, Contributing Partners, and other senior professionals with those of our Class A shareholders and fund investors. This alignment, which we believe is a key driver of our success, has been achieved principally by our Managing Partners’, Contributing Partners’, and other investment professionals’ direct beneficial ownership of equity in our business in the form of AOG Units and Class A shares, their ownership of rights to receive a portion of the incentive income earned from our funds, the direct investment by our investment professionals in our funds, and our practice of paying annual incentive compensation partly in the form of equity-based grants that are subject to vesting. As a result of this alignment, the compensation of our professionals is closely tied to the performance of our businesses.
Significant Personal Investment. Our investment professionals generally make significant personal investments in our funds (as more fully described under “Item 13. Certain Relationships and Related Party Transactions”), directly or indirectly, and our professionals who receive carried interests in our funds are generally required to invest their own capital in the funds they work on in amounts that are generally proportionate to the size of their participation in incentive income. We believe that these investments help to ensure that our professionals have capital at risk and reinforce the linkage between the success of the funds we manage, the success of the Company and the compensation paid to our professionals.
Long-Term Performance and Commitment. Most of our professionals have been issued RSUs, which provide rights to receive Class A shares and distributions on those shares. The vesting requirements and minimum retained ownership requirements for these awards contribute to our professionals’ focus on long-term performance while enhancing retention of these professionals.
Discouragement of Excessive Risk-Taking. Although investments in alternative assets can pose risks, we believe that our compensation program includes significant elements that discourage excessive risk-taking while aligning the compensation of our professionals with our long-term performance. For example, notwithstanding that we accrue compensation for our carried interest programs (described below) as increases in the value of the portfolio investments are recorded in the related funds, we generally make payments in respect of carried interest allocations to our employees only after profitable investments have actually been realized. This helps to ensure that our professionals take a long-term view that is consistent with the interests of the Company, our shareholders and the investors in our funds. Moreover, if a fund fails to achieve specified investment returns due to diminished performance of later investments, our carried interest program relating to that fund generally permits, for the benefit of the limited partner investors in that fund, the return of carried interest payments (generally net of tax) previously made to us, our Contributing Partners or our other employees. These provisions discourage excessive risk-taking and promote a long-term view that is consistent with the interests of our investors and shareholders. Our general requirement that our professionals invest in the funds we manage further aligns the interests of our professionals, fund investors and Class A shareholders. Finally, the minimum retained ownership requirements of our RSUs, options and AOG Units, as well as a requirement that certain investment professionals use a portion of their distributions of carried interest income and incentive fees to purchase Class A restricted shares, discourage excessive risk-taking because the value of these interests is tied directly to the long-term performance of our Class A shares.
Compensation Elements for Named Executive Officers
Consistent with our emphasis on alignment of interests with our fund investors and Class A shareholders, compensation elements tied to the profitability of our different businesses and that of the funds that we manage are the primary means of compensating our six executive officers listed in the tables below, or the “named executive officers.” The key elements of the compensation of our named executive officers during fiscal year 2014 are described below. We distinguish among the compensation components applicable to our named executive officers as appropriate in the below summary. Mr. Black is a member of the group referred to elsewhere in this report as the “Managing Partners,” and Mr. Zelter is a member of the group referred to elsewhere in this report as the “Contributing Partners.”
Annual Salary. Each of our named executive officers receives an annual salary. The base salaries of our named executive officers are set forth in the Summary Compensation Table below, and those base salaries were set by our Managing Partners in their judgment after considering the historic compensation levels of the officer, competitive market dynamics, and each officer’s level of responsibility and anticipated contributions to our overall success.
RSUs. In 2014, a portion of our named executive officers’ compensation (other than for Messrs. Black and Spilker) was paid in the form of RSUs. We refer to our annual grants of RSUs as Bonus Grants. The RSUs are subject to multi-year vesting and minimum retained ownership requirements. In 2014, all named executive officers were required to retain at least 85% of any Class A shares issued to them pursuant to RSU awards, net of the number of gross shares sold or netted to pay applicable income or employment taxes. The named executive officer Plan Grants and Bonus Grants are described below under “—Narrative

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Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table—Awards of Restricted Share Units Under the Equity Plan.”
Carried Interest and Incentive Fees. Carried interests and incentive fee entitlements with respect to our funds confer rights to receive distributions if a distribution is made to investors following the realization of an investment or receipt of operating profit from an investment by the fund. These rights provide their holders with substantial incentives to attain strong returns in a manner that does not subject their capital investment in the Company to excessive risk. Distributions of carried interest generally are subject to contingent repayment (generally net of tax) if the fund fails to achieve specified investment returns due to diminished performance of later investments, while distributions in respect of incentive fees are not subject to contingent repayment. The actual gross amount of carried interest allocations or incentive fees available are a function of the performance of the applicable fund. For these reasons, we believe that participation in carried interest and incentive fees generated by our funds aligns the interests of our professionals with those of our Class A shareholders and fund investors.
We currently have two principal types of carried interest programs, which we refer to as dedicated and incentive pool. Messrs. Zelter and Suydam have been awarded rights to participate in a dedicated percentage of the carried interest or incentive fee income earned by the general partners of certain of our funds. Participation in dedicated carried interest in our private equity funds is typically subject to vesting, which rewards long-term commitment to the firm and thereby enhances the alignment of participants’ interests with the Company. As with our distributions in respect of incentive fees, our financial statements characterize the carried interest income allocated to participating professionals in respect of their dedicated carried interests as compensation. Actual distributions in respect of dedicated carried interests and incentive fees are included in the “All Other Compensation” column of the summary compensation table.
Our performance based incentive arrangement referred to as the incentive pool further aligns the overall compensation of our professionals to the realized performance of our business. The incentive pool provides for compensation based on carried interest realizations earned by us during the year and enhances our capacity to offer competitive compensation opportunities to our professionals. “Carried interest realizations earned” means carried interest earned by the general partners of our funds under the applicable fund limited partnership agreements based upon transactions that have closed or other rights to cash that have become fixed in the applicable calendar year period. Under this arrangement, Messrs. Kelly, Zelter, Suydam and Weidler, among other of our professionals, were awarded incentive pool compensation based on carried interest realizations we earned during 2014. Allocations to participants in the incentive pool contain both a fixed component and a discretionary component, both of which may vary year-to-year, including as a result of our overall realized performance and the contributions and performance of each participant. The managing partners determine the amount of the carried interest realizations to place into the incentive pool in their discretion after considering various factors, including Company profitability, management company cash requirements and anticipated future costs, provided that the incentive pool consists of an amount equal to at least one percent (1%) of the carried interest realizations attributable to profits generated after creation of the incentive pool program that were taxable in the applicable year and not allocable to dedicated carried interests. Each participant in the incentive pool is entitled to receive, as a fixed component of participation in the incentive pool, his or her pro rata allocation of this 1% amount each year, provided the participant remains employed by us at the time of allocation. Our financial statements characterize the carried interest income allocated to participating professionals in respect of incentive pool interests as compensation. The “All Other Compensation” column of the summary compensation table includes actual distributions paid from the incentive pool.
Restricted Shares. In 2014, we began to require that a portion of the carried interest and incentive fee distributions in respect of certain of the investment funds we manage be used by our employees who receive those distributions to purchase restricted Class A shares issued under our 2007 Omnibus Equity Incentive Plan. This practice further promotes alignment with our shareholders and encourages investment professionals to maximize the success of the Company as a whole. Like our RSUs, the restricted shares are subject to multi-year vesting, which fosters retention. The first purchases pursuant to this requirement were made in 2015. As a result of this requirement, Mr. Zelter purchased 58,817 restricted Class A shares on February 6, 2015 in respect of realizations for which he received the cash portion of the distributions in 2014. In accordance with SEC rules, these shares will be included in next year’s Summary Compensation Table and Grants of Plan-Based Awards Table if Mr. Zelter is one of our named executive officers for 2015. These shares are subject to vesting on June 16th of 2015, 2016 and 2017.
Bonus. One of our named executive officers, Mr. Zelter, received a cash bonus in 2014. The inclusion of discretionary annual bonuses as part of our overall compensation rewards superior performance and enables us to attract and retain talented professionals by enhancing our capacity to offer competitive compensation opportunities while retaining our flexibility to adjust or eliminate these payments from year to year.
Determination of Compensation of Named Executive Officers
Our Managing Partners make all final determinations regarding named executive officer compensation. Decisions about the variable elements of a named executive officer’s compensation, including participation in our carried interest and incentive

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fee programs and grants of equity-based awards, are based primarily on our Managing Partners’ assessment of such named executive officer’s individual performance, operational performance for the department or division in which the officer (other than a Managing Partner) serves, and the officer’s impact on our overall operating performance and potential to contribute to long-term shareholder value. In evaluating these factors, our Managing Partners do not utilize quantitative performance targets but rather rely upon their judgment about each named executive officer’s performance to determine an appropriate reward for the current year’s performance. The determinations by our Managing Partners are ultimately subjective, are not tied to specified annual, qualitative or individual objectives or performance factors, and reflect discussions among the Managing Partners. Factors that our Managing Partners typically consider in making such determinations include the named executive officer’s type, scope and level of responsibilities and the named executive officer’s overall contributions to our success. Our Managing Partners also consider each named executive officer’s prior-year compensation, the appropriate balance between incentives for long-term and short-term performance, competitive market dynamics, compensation provided to the named executive officer by other entities, and the compensation paid to the named executive officer’s peers within the Company.
Note on Distributions on Apollo Operating Group Units
We note that all of our Managing Partners and Contributing Partners, including Messrs. Black and Zelter, beneficially own AOG Units. In particular, as of December 31, 2014, the Managing Partners beneficially owned, through their interest in Holdings, approximately 51% of the total limited partner interests in the Apollo Operating Group. When made, distributions on these units (which are made on both vested and unvested units) are in the same amount per unit as distributions made to us in respect of the AOG Units we hold. Accordingly, although distributions on AOG Units are distributions on equity rather than compensation, they play a central role in aligning our Managing Partners’ and Contributing Partners’ interests with those of our Class A shareholders, which is consistent with our compensation philosophy. In 2014, the Managing Partners, including Mr. Black, were required to retain 85% of their AOG Units. The same requirement applied to our Contributing Partners, including Mr. Zelter.
Compensation Committee Interlocks and Insider Participation
Our board of directors does not have a compensation committee. Our Managing Partners make all such compensation determinations, as discussed above under “—Determination of Compensation of Named Executive Officers.” For a description of certain transactions between us and the managing partners, see “Item 13. Certain Relationships and Related Party Transactions.”
Compensation Committee Report
As noted above, our board of directors does not have a compensation committee. The executive committee of our manager identified below has reviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussion, has determined that the Compensation Discussion and Analysis should be included in this Annual Report on Form 10-K.
Leon Black
Joshua Harris
Marc Rowan
Summary Compensation Table
The following summary compensation table sets forth information concerning the compensation earned by, awarded to or paid to our principal executive officer, our principal financial officer, and our three other most highly compensated executive officers for the fiscal year ended December 31, 2014. In accordance with SEC rules, the table also describes the compensation of our former president, Mr. Spilker. Although he ceased to be one of our executive officers on March 19, 2014, Mr. Spilker’s compensation for 2014 placed him among the three most highly paid individuals (other than our principal executive officer and our principal financial officer) who served as an executive officer for a portion of 2014. Managing Partners Messrs. Harris and Rowan are not included in the table because their compensation, as tabulated in accordance with applicable rules, does not result in either of them being among the three most highly compensated executive officers after our principal executive officer and principal financial officer. Our Managing Partners’ earnings derive predominantly from distributions they receive as a result of their indirect beneficial ownership of AOG Units and their rights under the tax receivable agreement (described elsewhere in this report, including above under “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy”), rather than from compensation, and accordingly are not included in the below tables. The executive officers named in the table are referred to as the named executive officers.

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Name and Principal Position
 
Year
 
Salary
($)
 
Bonus
($)(1)
 
Stock
Awards
($)(2)
 
Option
Awards
($)(3)
 
Non-Equity Incentive Plan
($)
 
All
Other
Compensation
($)(4)
 
Total
($)
Leon Black,
Chairman, Chief Executive Officer and Director
 
2014
 
100,000

 

 

 

 

 
173,980

 
273,980

 
2013
 
100,000

 

 

 

 

 
173,053

 
273,053

 
2012
 
100,000

 

 

 

 

 
187,368

 
287,368

Martin Kelly,
Chief Financial Officer
 
2014
 
1,000,000

 

 
698,444

 

 

 
1,300,000

 
2,998,444

 
2013
 
1,000,000

 

 
541,246

 

 

 
950,000

 
2,491,246

 
2012
 
300,000

 
200,000

 
4,687,530

 

 

 
1,433,411

 
6,620,941

James Zelter,
Managing Director, Credit
 
2014
 
1,200,000

 
1,049,219

 
478,927

 

 

 
28,009,206

 
30,737,352

 
2013
 

 
3,749,788

 
3,065,771

 

 

 
32,599,739

 
39,415,298

 
2012
 

 

 
2,606,310

 

 
5,099,193

 
14,959,920

 
22,665,423

John Suydam,
Chief Legal Officer
 
2014
 
3,000,000

 

 
511,370

 

 

 
5,420,540

 
8,931,910

 
2013
 
3,000,000

 
949,788

 
504,345

 

 

 
7,148,168

 
11,602,301

 
2012
 
3,000,000

 

 
496,715

 

 

 
3,405,953

 
6,902,668

Christopher Weidler,
Chief Accounting Officer and Controller
 
2014
 
400,000

 

 
199,549

 

 

 
600,000

 
1,199,549

Marc Spilker,
Ceased serving as President on March 19, 2014

 
2014
 
765,151

 

 
12,337,500

 
21,025,000

 

 
950,000

 
35,077,651

 
2013
 
2,000,000

 

 

 

 

 

 
2,000,000


(1)
Amount shown for 2014 represents a cash bonus earned in 2014.
(2)
For Messrs. Kelly, Zelter, Suydam and Weidler, represents the aggregate grant date fair value of stock awards granted, as applicable, computed in accordance with FASB ASC Topic 718. For Mr. Spilker, represents the incremental fair value of an RSU award granted on December 2, 2010 and modified on March 26, 2014 in connection with his employment termination, computed in accordance with FASB ASC Topic 718. The amounts shown do not reflect compensation actually received by the named executive officers, but instead represent the aggregate grant date fair value (in the case of Mr. Spilker, the modification date incremental fair value) of the awards. See note 16 to our consolidated financial statements for further information concerning the assumptions made in valuing our RSU awards. Mr. Zelter’s employment agreement entered into on June 20, 2014 provides that if he resigns for good reason, is terminated without cause, or terminates employment due to death or disability in the last six months of 2016 and applicable performance measures are attained, he will be entitled to a grant of 500,000 RSUs in early 2017. Consequently, for accounting purposes the compensation expense for these RSUs, which will not be granted to Mr. Zelter under our equity incentive plan earlier than 2017 (if at all), is treated as established on the date shown, and the associated grant date fair value under FASB ASC Topic 718 is reported as zero in the table because as of June 20, 2014 the accounting recognition requirements for these RSUs had not been met. If all applicable performance measures are attained, the grant date fair value of these RSUs would be $13,555,000.
(3)
Represents the modification date incremental fair value of an option award granted on December 2, 2010 to Mr. Spilker and modified on March 26, 2014 in connection with his employment termination, computed in accordance with FASB ASC Topic 718. The amount shown does not reflect compensation actually received by Mr. Spilker, but instead represents the incremental fair value of the award on the date modified.
(4)
Amounts included for 2014 represent, in part, actual cash distributions in respect of dedicated carried interest allocations for Messrs. Zelter and Suydam of $25,892,649 and $4,884,786, respectively. Of such amount distributed to Mr. Zelter, $4,645,709 was paid in euros and converted to dollars based on the conversion rate on the date of payment. Also included for Mr. Zelter are cash distributions of $2,065,776 received in 2014 in respect of dedicated incentive fees. The 2014 amounts also include actual incentive pool cash distributions of $1,300,000 for Mr. Kelly, $600,000 for Mr. Weidler, $500,000 for Mr. Suydam and $50,781 for Mr. Zelter. The amount shown for Mr. Spilker represents his one-time lump sum payment received in connection with his employment termination under his transition agreement. The “All Other Compensation” column for 2014 also includes costs relating to Company-provided cars and drivers for the business and personal use of Messrs. Black and Suydam. We provide this benefit because we believe that its cost is outweighed by the convenience, increased efficiency and added security and confidentiality that it offers. The personal use cost was approximately $165,730 for Mr. Black and $34,254 for Mr. Suydam. For Mr. Black, this amount includes both fixed and variable costs, including lease costs, driver compensation, driver meals, fuel, parking, tolls, repairs, maintenance and insurance. For Mr. Suydam, this amount includes the costs to the Company associated with his use of a car service. Except as discussed in this paragraph, no 2014 perquisites or personal benefits individually exceeded the greater of $25,000 or 10% of the total amount of all perquisites and other personal benefits reported for the named executive officer. The cost of excess liability insurance provided to our named executive officers falls below this threshold. None of Messrs. Kelly, Zelter, Spilker or Weidler received perquisites or personal benefits in 2014, except for incidental benefits having an aggregate value of less than $10,000 per individual. Our named executive officers also receive occasional secretarial support with respect to personal matters. We incur no incremental cost for the provision of such additional benefits. Accordingly, no such amount is included in the Summary Compensation Table.

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Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table
Employment, Non-Competition and Non-Solicitation Agreement with Chairman and Chief Executive Officer
In July 2012, we entered into an employment, non-competition and non-solicitation agreement with Leon Black, our chairman and chief executive officer and a member of our manager’s executive committee, which agreement superseded and is substantially similar to the agreement we entered into with Mr. Black dated July 13, 2007. The term of the agreement concludes on July 19, 2015. Mr. Black is entitled during his employment to an annual salary of $100,000 and to participate in our employee benefit plans, as in effect from time to time.
Employment, Non-Competition and Non-Solicitation Agreement with Chief Financial Officer
On July 2, 2012, we entered into an employment, non-competition and non-solicitation agreement with Martin Kelly, our chief financial officer. His annual base salary is $1,000,000. As provided in his employment agreement, Mr. Kelly received a Plan Grant of 375,000 RSUs in connection with his commencement of employment. He is eligible for an annual bonus in an amount to be determined by us in our discretion. Mr. Kelly participates in the incentive pool and is eligible to receive distributions thereunder.
Employment, Non-Competition and Non-Solicitation Agreement with Managing Director-Credit
We entered into an amended and restated employment agreement with our Managing Director-Credit, James Zelter, on June 20, 2014. The agreement provides that Mr. Zelter is entitled to base pay of $1,200,000 per year and to distributions of carried interest (including incentive pool) income and a bonus equaling an additional $1,800,000 per year. A portion of any such bonus shall be payable in the form of Bonus Grant RSUs. Under the agreement, Mr. Zelter will be eligible to receive a grant of one million RSUs in early 2017 and another one million RSUs in early 2019, in each case if approved by the committee that administers our 2007 Omnibus Equity Incentive Plan and if applicable performance measures regarding profitability of our credit business are attained. We do not currently believe that the performance measures are likely to be attained. Because Mr. Zelter would be entitled to 500,000 of the 2017 RSUs if both (i) the performance measures are attained as of December 31, 2016 and (ii) during the last six months of 2016 Mr. Zelter’s employment terminates for good reason, without cause or due to death or disability, we treat the compensation expense for these RSUs, which will not be granted under our equity incentive plan earlier than 2017 (if at all), as established on June 20, 2014 and, in accordance with SEC rules, include these RSUs in the tables as if they had been granted on that date. Pursuant to his employment agreement, Mr. Zelter holds dedicated carried interests and incentive fee rights in respect of certain of the investment funds we manage. His carried interests are subject to vesting or to the right to retain such interests for a limited period following his employment termination. Mr. Zelter receives a portion of his total annual compensation in the form of a Bonus Grant, as discussed below under the section entitled, “Awards of Restricted Share Units Under the Equity Plan.” As required by his employment agreement, Mr. Zelter has made investments of his own capital in various of our funds.
Employment, Non-Competition and Non-Solicitation Agreement with Chief Accounting Officer and Controller
On June 4, 2013, we entered into a letter agreement with Christopher Weidler, our Chief Accounting Officer and Controller. The letter agreement provides for a base salary of $400,000 per year. Mr. Weidler is eligible for discretionary annual bonuses, and a portion of any such bonus is payable in the form of Bonus Grant RSUs. In connection with his commencement of employment, Mr. Weidler received a Plan Grant of 35,001 RSUs. Mr. Weidler participates in the incentive pool and is eligible to receive distributions thereunder.
Employment Terms of Chief Legal Officer
John Suydam, our chief legal officer, does not have an employment agreement with us.
Transition Agreement with President
On March 19, 2014, we entered into a transition agreement with Marc Spilker, who stepped down from his service as our president and a non-voting member of our executive committee on March 19, 2014. For the remainder of 2014, Mr. Spilker served as a senior advisor to the Company, assisting the Company with transitioning his duties, and did not receive a base salary. Pursuant to the agreement, he received a one-time lump sum payment of $950,000 in connection with the transition. The transition agreement provided that he forfeited one half of his unvested RSUs and one half of his unvested options to purchase Class A shares on March 19, 2014. Mr. Spilker’s employment agreement dated November 24, 2010 had provided for vesting in one half of his unvested options and RSUs in connection with certain employment terminations, and under the transition agreement Mr. Spilker vested in his remaining 625,000 RSUs and 1,250,000 options on March 26, 2014.


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Awards of Restricted Share Units Under the Equity Plan
On October 23, 2007, we adopted our 2007 Omnibus Equity Incentive Plan. Grants of RSUs under the plan have been made to certain of our named executive officers primarily pursuant to two programs, which we call the “Plan Grants” and the “Bonus Grants.” Following the 2007 Reorganization, Plan Grants were made to Mr. Suydam and a broad range of our other employees. Plan Grants have also been made to subsequent hires, including Messrs. Kelly, Weidler and Spilker. The Plan Grants generally vest over six years, with the first installment becoming vested approximately one year after grant and the balance vesting thereafter in equal quarterly installments. Holders of Plan Grant RSUs become entitled to distribution equivalents on their vested RSUs if we pay ordinary distributions on our outstanding Class A shares. The administrator of the 2007 Omnibus Equity Incentive Plan determines when shares issued pursuant to the RSU Awards may be disposed of, except that a participant will generally be permitted to sell shares if necessary to cover taxes. Under our retained ownership requirements, in 2014, all executive officers were required to retain at least 85% of any Class A shares issued to them pursuant to RSU awards (net of the number of gross shares sold or netted to pay applicable income or employment taxes).
The RSUs advance several goals of our compensation program. The Plan Grants align employee interests with those of our shareholders by making our employees, upon delivery of the underlying Class A shares, shareholders themselves. Because they vest over time, the Plan Grants reward employees for sustained contributions to the Company and foster retention. The size of the Plan Grants is determined by the Plan administrator based on the grantee’s level of responsibility and contributions to the Company. The restrictive covenants contained in the RSU agreements reinforce our culture of fiduciary protection of our investors by requiring RSU holders to abide by the provisions regarding non-competition, confidentiality and other limitations on behavior described in the immediately preceding paragraph.
The Bonus Grants are also grants of RSUs under the 2007 Omnibus Equity Incentive Plan. However, the Bonus Grants constitute payment of a portion of the annual compensation earned by certain of our professionals, including Messrs. Kelly, Zelter, Suydam and Weidler, subject to the employee’s continued service through the vesting dates. Our named executive officers’ Bonus Grants generally differ from their Plan Grants in the following principal ways:
The RSU Shares underlying Bonus Grants are scheduled to vest in three equal annual installments.
Distribution equivalents are earned on Bonus Grant RSUs (whether or not vested) when ordinary distributions are made on Class A shares after the grant date, but distribution equivalents are earned on Plan Grant RSUs only after they have vested.
In determining how many RSUs to grant to Mr. Zelter for services performed in 2014, the committee that administers our 2007 Omnibus Equity Incentive Plan took into account that the independent compensation committees of two publicly traded REITs that we manage, ARI and AMTG, consistent with recommendations they received from us, had authorized grants to Mr. Zelter of 7,500 restricted share units (having a grant date fair value of $124,425) and 6,226 restricted share units (having a grant date fair value of $99,678), respectively, in respect of ARI’s and AMTG’s publicly traded shares for services provided during the same period.
 
Grants of Plan-Based Awards
The following table presents information regarding RSUs granted to Messrs. Kelly, Zelter, Suydam and Weidler under our 2007 Omnibus Equity Incentive Plan in 2014 and a modification made to Mr. Spilker’s outstanding RSUs in 2014. No options were granted to a named executive officer in 2014, but Mr. Spilker’s outstanding options were modified in 2014 in connection with his employment termination.


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Name
 
Grant Date
 
Estimated Future Payouts under Equity Incentive Plan Awards
Target (#)
 
Stock Awards:
Number of Shares of
Stock or Units
(#)(2)
 
Option Awards: Number of Shares Underlying Options
(#)
 
Grant Date Fair Value or Modification Date Incremental Fair Value of
Stock and Option Awards
($)(3)
Leon Black
 

 

 

 

 

Martin Kelly
 
December 29, 2014

 

 
30,850

 

 
698,444

James Zelter
 
June 20, 2014

 
500,000

(1) 

 

 

December 29, 2014

 

 
21,154

 

 
478,927

John Suydam
 
December 29, 2014

 

 
22,587

 

 
511,370

Christopher Weidler
 
December 29, 2014

 

 
8,814

 

 
199,549

Marc Spilker
 
December 2, 2010 (modified March 26, 2014)

 

 
625,000

 

 
12,337,500

 
December 2, 2010 (modified March 26, 2014)

 

 

 
1,250,000

 
21,025,000


(1)
Mr. Zelter’s employment agreement entered into on the date shown provides that if he resigns for good reason, is terminated without cause, or terminates employment due to death or disability in the last six months of 2016 and applicable performance measures regarding profitability of our credit business are attained, he will be entitled to a grant of 500,000 RSUs in early 2017. Consequently, in accordance with applicable accounting rules we treat the compensation expense for these RSUs, which will not be granted under our equity incentive plan earlier than 2017 (if at all), as established on the date shown and, in accordance with SEC rules, include the award in the above table as if it had been granted on that date. These RSUs have no “threshold” or “maximum” values separate from the above “target” number of shares. The grant date fair value of these RSUs as of June 20, 2014 is considered to be zero because as of that date the accounting recognition requirements for these RSUs had not been met.
(2)
Represents the aggregate number of RSUs covering our Class A shares (none of the Bonus Grants awarded in 2014 vested in 2014). For a discussion of these grants, please see the discussion above under “Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards TableAwards of Restricted Share Units Under the Equity Plan.”
(3)
For Messrs. Kelly, Zelter, Suydam and Weidler, represents the aggregate grant date fair value of the RSUs granted in 2014, computed in accordance with FASB ASC Topic 718. For Mr. Spilker, represents the incremental fair value of options and RSUs granted on December 2, 2010 computed in accordance with FASB ASC Topic 718 as of the date such awards were modified on March 26, 2014 in connection with Mr. Spilker’s termination of employment. The amounts shown do not reflect compensation actually received, but instead represent the aggregate grant date fair value (in the case of Mr. Spilker, the modification date incremental fair value) of the award.

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Outstanding Equity Awards at Fiscal Year-End
The following table presents information regarding unvested RSU awards made by us to our named executive officers under our 2007 Omnibus Equity Incentive Plan that were outstanding at December 31, 2014. Our named executive officers did not hold any options at fiscal year-end.

 
 
 
 
Stock Awards
Name
 
 
 
Number of Unearned
Shares, Units or
Other Rights That
Have Not Vested
(#)
 
Market or
Payout Value of 
Unearned
Shares, Units or Other Rights
That Have Not Vested
($) (7)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested
(#) (8)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have not Vested
($) (9)
Leon Black
 

 

 


 

Martin Kelly
 
December 29, 2014

 
30,850

(1) 
727,443


 

December 26, 2013

 
12,076

(2) 
284,752


 

December 28, 2012

 
9,011

(3) 
212,479


 

September 30, 2012

 
234,375

(4) 
5,526,563


 

James Zelter
 
December 29, 2014

 
21,154

(1) 
498,811


 

 
June 20, 2014

 

 

500,000

 
11,790,000

 
December 26, 2013

 
31,838

(2) 
750,740


 

 
May 9, 2013

 
22,480

(3) 
530,078


 

 
December 28, 2012

 
98,677

(5) 
2,326,804


 

John Suydam
 
December 29, 2014

 
22,587

(1) 
532,601


 

December 26, 2013

 
11,253

(2) 
265,346


 

December 28, 2012

 
10,115

(3) 
238,512


 

Christopher Weidler
 
December 29, 2014

 
8,814

(1) 
207,834


 

 
September 30, 2013

 
27,710

(6) 
653,402


 

Marc Spilker
 
December 2, 2010

 

 


 

(1)
Bonus Grant RSUs that vest in substantially equal annual installments on December 31 of each of 2015, 2016 and 2017.
(2)
Bonus Grant RSUs that vest in substantially equal annual installments on December 31 of each of 2015 and 2016.
(3)
Bonus Grant RSUs that vest on December 31, 2015.
(4)
Plan Grant RSUs that vest in substantially equal installments over the 15 calendar quarters beginning March 31, 2015.
(5)
Plan Grant RSUs that vest in substantially equal installments over the 16 calendar quarters beginning March 31, 2015.
(6)
Plan Grant RSUs that vest in substantially equal installments over the 19 calendar quarters beginning March 31, 2015.
(7) Amounts calculated by multiplying the number of unvested RSUs held by the named executive officer by the closing price of $23.58 per Class A share on December 31, 2014.
(8)
Bonus RSUs that vest in substantially equal annual installments on December 31 of each of 2017, 2018 and 2019 but that have not yet been granted (except for accounting purposes). Mr. Zelter’s employment agreement entered into on the date shown provides that if he resigns for good reason, is terminated without cause, or terminates employment due to death or disability in the last six months of 2016 and applicable performance measures regarding profitability of our credit business are attained, he will be entitled to a grant of 500,000 RSUs in early 2017. Consequently, for accounting purposes we treat the compensation expense for these RSUs, which will not be granted under our equity plan earlier than 2017 (if at all), as established on the date shown, and, in accordance with SEC rules, include the award in the table as if it were outstanding.
(9)
Amount calculated by multiplying the 500,000 RSUs described in the immediately preceding footnote by the closing price of $23.58 per Class A share on December 31, 2014.


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Option Exercises and Stock Vested
The following table presents information regarding the number of outstanding initially unvested RSUs held by our named executive officers that vested during 2014 and the number of options exercised by our named executive officers in 2014. With respect to the RSUs, the amounts shown below do not reflect compensation actually received by the named executive officers, but instead are calculations of the number of RSUs that vested during 2014 based on the closing price of our Class A shares on the date of vesting. Shares received by our named executive officers are subject to our retained ownership requirements.

 
 
 
 
Option Awards
 
Stock Awards
 
Name
 
Type of Award
 
Number of Shares Acquired on Exercise(#)
 
Value Realized on Exercise($)
 
Number of Shares Acquired on Vesting(#)
 
Value Realized on Vesting($)
 
Leon Black
 
 

 

 
 
 

 
Martin Kelly
 
RSUs
 

 

 
77,549
 
 
2,025,793

(2) 
James Zelter
 
RSUs
 

 

 
81,370
 
 
1,996,540

(2) 
John Suydam
 
RSUs
 

 

 
29,595
 
 
697,850

(2) 
Christopher Weidler
 
RSUs
 

 

 
7,291
 
 
173,438

 
Marc Spilker
 
Options
 
1,458,334

 
26,421,925

(1) 
 
 

 
 
RSUs
 

 

 
625,000
 
 
19,025,000

(2) 
(1)
Amounts calculated based on the difference between the exercise price of the options and the price of the underlying Class A shares on the applicable exercise date.
(2)
Amounts calculated by multiplying the number of RSUs held by the named executive officer that vested on each applicable vesting date in 2014 by the closing price per Class A share on that date. Class A shares underlying these vested RSUs are issued to the named executive officer in accordance with the schedules described above under “Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards TableAwards of Restricted Share Units Under the Equity Plan.”
Potential Payments upon Termination or Change in Control
None of the named executive officers is entitled to payment or other benefits in connection with a change in control.
Mr. Black’s employment agreement does not provide for severance or other payments or benefits in connection with an employment termination. We may not terminate Mr. Black except for cause or by reason of disability (as such terms are defined in his employment agreement). Under his employment agreement, Mr. Black is required to protect the confidential information of Apollo both during and after employment. In addition, until one year after his employment terminates, Mr. Black is required to refrain from soliciting employees under specified circumstances or interfering with our relationships with investors and to refrain from competing with us in a business that involves primarily (i.e., more than 50%) third-party capital, whether or not the termination occurs during the term of the agreement or thereafter. These post-termination covenants survive any termination or expiration of the Agreement Among Managing Partners (described elsewhere in this report under “Item 13. Certain Relationships and Related Party Transactions—Agreement Among Managing Partners”). If Mr. Black becomes subject to a potential termination for cause or by reason of disability, our manager may appoint an investment professional to perform his functional responsibilities and duties until cause or disability definitively results in his termination or is determined not to have occurred, but the manager may so appoint an investment professional only if Mr. Black is unable to perform his responsibilities and duties or, as a matter of fiduciary duty, should be prohibited from doing so. During any such period, Mr. Black shall continue to serve on the executive committee of our manager unless otherwise prohibited from doing so pursuant to the Agreement Among Managing Partners.
If Mr. Kelly’s employment is terminated by us without cause or he resigns for good reason, Mr. Kelly will be entitled to severance of six months’ base pay and reimbursement of health insurance premiums paid in the six months following his employment termination. If Mr. Kelly’s employment is terminated by us without cause or he resigns for good reason, he will vest in 50% of any unvested portion of his Plan Grant RSUs. If his employment is terminated by reason of death or disability, he will vest in 50% of any unvested portion of his Plan Grant and Bonus Grant RSUs. We may terminate Mr. Kelly’s employment with or without cause, and we will provide 90 days’ notice (or payment in lieu of such period of notice) prior to a termination without cause. Mr. Kelly is required to give us 90 days’ notice prior to a resignation for any reason. He is required to protect the confidential information of Apollo both during and after employment. In addition, during employment and for 12 months after employment, Mr. Kelly is also obligated to refrain from soliciting our employees, interfering with our relationships with investors or other business relations, and competing with us in a business that manages or invests in assets substantially similar to those managed or invested in by Apollo or its affiliates.

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We may terminate Mr. Zelter’s employment with or without cause, and we will provide 90 days’ notice (or payment in lieu of such period of notice) prior to a termination without cause. Mr. Zelter is required to provide 90 days’ notice prior to a resignation for any reason. Upon his termination of employment by reason of death or disability, Mr. Zelter will vest in 50% of his then unvested RSUs and restricted shares. Subject to his execution of a release of claims in favor of the Company, upon his termination by the Company other than for cause, Mr. Zelter will vest in 50% of his then unvested restricted shares. Upon his termination of employment other than for cause, his annual cash bonus will be prorated through the last day of his employment termination. If Mr. Zelter’s employment is terminated for good reason, without cause or by reason of disability or death, subject to his continued compliance with the restrictive covenants to which he is subject and to his execution of a release of claims in favor of the Company, he will vest in 50% of his then unvested performance award RSUs and, if the employment termination occurs in the last six months of 2016, or if he terminates his employment or service due to the failure of the committee that administers the 2007 Omnibus Equity Incentive Plan to approve the 2016 performance award, then he will vest in 50% of the RSUs covered by that award. Similarly, if that type of employment termination occurs in the last six months of 2018, or if Mr. Zelter terminates his employment or service due to the failure of the committee that administers the 2007 Omnibus Equity Incentive Plan to approve the 2018 performance award, then he will vest in 50% of the RSUs covered by that award. If Mr. Zelter’s employment is terminated without cause, or he resigns for good reason, he will retain his dedicated carried interest rights that are not otherwise subject to vesting in respect of certain investment funds we manage in declining percentages for up to three years following his employment termination (100% for the first year, 50% for the second year, and 25% for the third year following employment termination) and the Class A shares that he is required to purchase with a portion of those amounts following his employment termination shall be fully vested shares. He will also be entitled to retain his dedicated carried interests that are subject to vesting to the extent then vested. Mr. Zelter is required to give us 90 days’ notice prior to a resignation for any reason. During his employment and for 12 months thereafter, he is also obligated to refrain from soliciting our employees, interfering with our relationships with investors or other business relations, and competing with us in a business that manages or invests in assets substantially similar to those invested in or managed by Apollo or its affiliates.
If Mr. Suydam’s employment is terminated by reason of death or disability, he will vest in 50% of his then unvested RSUs. Mr. Suydam is required to protect our confidential information at all times. During his employment and for 12 months thereafter, Mr. Suydam is also obligated to refrain from soliciting our employees, interfering with our relationships with investors or other business relations, and competing with us in a business that manages or invests in assets substantially similar to those invested in or managed by Apollo or its affiliates. Mr. Suydam is required to provide 90 days’ notice prior to a resignation for any reason.
Pursuant to Mr. Spilker’s transition agreement, he received a lump sum payment of $950,000 in July 2014 in connection with stepping down on March 19, 2014 as our president and as a non-voting member of our executive committee. In connection with his cessation of employment on May 19, 2014, Mr. Spilker also vested in 50% of his then unvested Plan Grant RSUs and options. Under the transition agreement, as in his employment agreement, Mr. Spilker is required to protect the confidential information of Apollo both during and after employment, and, for 12 months after the date of the transition agreement, to refrain from soliciting our employees, interfering with our relationships with investors and other business relations, and competing with us in a business that manages or invests in assets substantially similar to those of Apollo or its affiliates.
If Mr. Weidler’s employment is terminated by reason of death or disability, he will vest in 50% of any unvested portion of his RSUs. We may terminate Mr. Weidler’s employment with or without cause, and we will provide 90 days’ notice (or payment in lieu of such period of notice) prior to a termination without cause. Mr. Weidler is required to provide 90 days’ notice prior to a resignation for any reason. Mr. Weidler is required to protect the confidential information of Apollo both during and after employment. In addition, pursuant to his 2014 Bonus Grant, during and for 12 months after his employment with us, he is obligated to refrain from soliciting our employees and interfering with our relationships with investors or other business relations. In addition, during and for three months after his employment with us, he may not compete with us in a business that manages or invests in assets substantially similar to those managed or invested in by Apollo or its affiliates.
The named executive officers’ obligations during and after employment were considered by the Managing Partners in determining appropriate post-employment payments and benefits for the named executive officers.
The following table lists the estimated amounts that would have been payable to each of our named executive officers in connection with a termination that occurred on the last day of our last completed fiscal year and the value of any additional equity that would vest upon such termination, except that for Mr. Spilker the table shows the amounts received by him in connection with his actual employment termination on May 19, 2014. When listing the potential payments to named executive officers under the plans and agreements described above, we have assumed that the applicable triggering event occurred on December 31, 2014 and that the price per share of our Class A shares was $23.58, which is equal to the closing price on such date. For purposes of this table, RSU and option acceleration values are based on the $23.58 closing price.

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Name
 
Reason for Employment Termination
 
Estimated Value
of Cash
Payments
($)
 
Estimated Value
of Equity
Acceleration
($)
 
Leon Black
 
Cause
 
 
 

 
 
Death, disability
 
 
 

 
Martin Kelly
 
Without cause; by executive for good reason
 
517,592
 
(1) 
2,763,281

(4) 
 
Death, disability
 
 
 
3,375,618

(4) 
James Zelter
 
Without cause; by executive for good reason
 
11,861,478
 
(2) 
11,790,000

(4) 
 
Death, disability
 
 
 
13,843,217

(4) 
John Suydam
 
Without cause; by executive for good reason
 
 
 

 
 
Death; disability
 
 
 
518,229

(4) 
Christopher Weidler
 
Without cause; by executive for good reason
 
 
 

  
 
Death, disability
 
 
 
430,618

(4) 
Marc Spilker
 
Actual termination effective May 19, 2014
 
950,000
 
(3) 
40,342,767

(5) 
(1)
This amount would have been payable to the named executive officer had his employment been terminated by the Company without cause (and other than by reason of death or disability) or for good reason on December 31, 2014.
(2)
Pursuant to Mr. Zelter’s employment agreement, had his employment terminated on December 31, 2014, he would have been treated as if he had remained employed, for purposes of receiving carried interest distributions in respect of certain specified funds that remained in existence, for up to 36 additional months (100% in the first year, 50% in the second year, and 25% in the third year). For purposes of the above illustration, we have assumed that these percentages were applied in each of 2015, 2016 and 2017 to the amount of the distributions that he received in 2014 (including the portion of such distributions he was required to use to purchase Class A shares in 2015), and we have included in the amount shown the portion of his projected 2015, 2016 and 2017 distributions that would be required to be used to purchase Class A shares of the Company.             
(3)
This amount represents the cash payment actually made to Mr. Spilker in connection with his termination of employment on May 19, 2014.
(4)
This amount represents the additional equity vesting that the named executive officer would have received had his employment terminated in the circumstances described in the column, “Reason for Employment Termination,” on December 31, 2014, based on the closing price of a Class A share on such date. Please see our “Outstanding Equity Awards at Fiscal Year-End” table above for information regarding the named executive officer’s unvested equity as of December 31, 2014.                 
(5)
This amount represents the value received by Mr. Spilker from the additional vesting he received on March 26, 2014 in connection with entering into his transition agreement. The portion of this total that relates to options is calculated by multiplying the spread between the option exercise price and the closing price of a Class A share on the date he exercised the options (May 12, 2014) that vested in connection with entering into his transition agreement. The portion of this total that relates to RSUs is calculated by multiplying the number of RSUs that so vested by the closing price on the vesting date (March 26, 2014).                                
Director Compensation
We do not pay additional remuneration to our employees, including Messrs. Black, Harris and Rowan, for their service on our board of directors. The 2014 compensation of Mr. Black is set forth above on the Summary Compensation Table.
During 2014, each independent director received (1) a base annual director fee of $125,000, (2) an additional annual director fee of $25,000 if he or she a member of the audit committee, (3) an additional annual director fee of $10,000 if he or she was a member of the conflicts committee, (4) an additional annual director fee of $25,000 (incremental to the fee described in (2)) if he or she served as the chairperson of the audit committee, and (5) an additional annual director fee of $15,000 (incremental to the fee described in (3)) if he or she served as the chairperson of the conflicts committee. In addition, independent directors were reimbursed for reasonable expenses incurred in attending board meetings.
Currently, upon initial election to the board of directors, an independent director receives a grant of RSUs with a value of $300,000 that vests in equal annual installments on June 30 of each of the first, second and third years following the year that the grant is made. Mr. Kraft received this type of award on July 14, 2014 in connection with his appointment to the board of directors. Incumbent independent directors receive an annual RSU award with a value of $100,000 that vests on June 30 of the year following the year that the grant is made, and the directors listed on the below table (other than Mr. Kraft) received that award on July 14, 2014.

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The following table provides the compensation for our independent directors during the year ended December 31, 2014.
Name
 
Fees Earned or
Paid in Cash
 
Stock Awards
(#)(1)
 
Total
Michael Ducey
 
$175,000
 
85,540
 
$260,540
Paul Fribourg
 
$135,000
 
85,540
 
$220,540
Robert Kraft
 
$101,250
 
214,919
 
$316,169
A. B. Krongard
 
$150,000
 
85,540
 
$235,540
Pauline Richards
 
$175,000
 
85,540
 
$260,540

(1)
Represents the aggregate grant date fair value of stock awards granted, as applicable, computed in accordance with FASB ASC Topic 718. See note 16 to our consolidated financial statements for further information concerning the assumptions made in valuing our RSU Plan Grants. The amounts shown do not reflect compensation actually received by the independent directors, but instead represent the aggregate grant date fair value of the awards. Unvested director RSUs are not entitled to distributions or distribution equivalents. As of December 31, 2014, all 10,860 RSUs covered by Mr. Kraft’s 2014 award were unvested and outstanding, and for each of Ms. Richards and Messrs. Ducey Fribourg and Krongard, all 3,620 RSUs covered by his or her 2014 award were unvested and outstanding.                     


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ITEM  12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our Class A shares as of February 26, 2015 by (i) each person known to us to beneficially own more than 5% of the voting Class A shares of Apollo Global Management, LLC, (ii) each of our directors, (iii) each person who is a named executive officer for 2014 and (iv) all directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, each person named in the table below has sole voting and investment power with respect to all of the Class A shares and interests in our Class B share shown as beneficially owned by such person, except as otherwise set forth in the notes to the table and pursuant to applicable community property laws. Unless otherwise indicated, the address of each person named in the table is c/o Apollo Global Management, LLC, 9 West 57th Street, New York, NY 10019.
In respect of our Class A shares, the table set forth below assumes the exchange by Holdings of all AOG Units for our Class A shares with respect to which the person listed below has the right to direct such exchange pursuant to the exchange agreement described under “Item 13. Certain Relationships and Related Party Transactions—Exchange Agreement,” and the distribution of such shares to such person as a limited partner of Holdings.

 
 
Class A Shares Beneficially Owned
 
Class B Share Beneficially Owned
 
 
Number of
Shares
 
Percent(1)
 
Total Percentage
of Voting Power(2)
 
Number of
Shares
 
Percent
 
Total Percentage
of Voting Power(2)
Directors and Executive Officers:
 
 
 
 
 
 
 
 
 
 
 
 
 
Leon Black(3)(4)
 
92,727,166
 
35.6%
 
63.8%
 
1
 
100%
 
63.8%
Joshua Harris(3)(4)
 
54,382,643
 
24.5%
 
63.8%
 
1
 
100%
 
63.8%
Marc Rowan(3)(4)
 
50,157,022
 
23.0%
 
63.8%
 
1
 
100%
 
63.8%
Pauline Richards
 
21,443

 
 
*
 
*
 
 
 
Alvin Bernard Krongard(5)
 
270,043

 
 
*
 
*
 
 
 
Michael Ducey(6)
 
27,496

 
 
*
 
*
 
 
 
Robert Kraft(7)
 
40,000

 
 
*
 
*
 
 
 
Paul Fribourg
 
25,443

 
 
*
 
*
 
 
 
Marc Spilker(8)
 
1,554,321

 
 
*
 
*
 
 
 
Martin Kelly(9)
 
100,685

 
 
*
 
*
 
 
 
John Suydam(10)
 
765,749

 
 
*
 
*
 
 
 
James Zelter(11)
 
2,609,313

 
 
1.5%
 
*
 
 
 
Christopher Weidler(12)
 
5,924

 
 
*
 
*
 
 
 
All directors and executive officers as a group (twelve persons)(13)
 
201,132,927

 
 
54.7%
 
57.7%
 
1
 
100%
 
63.8%
BRH(4)
 

 
 
 
 
1
 
100%
 
63.8%
AP Professional Holdings, L.P.(14)
 
222,455,477

 
 
57.0%
 
63.8%
 
 
 
5% Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
TimesSquare Capital Management,
LLC(15)
 
8,998,700

 
 
  5.4%
 
 2.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
*Represents less than 1%.
(1)
The percentage of beneficial ownership of our Class A shares is based on voting and non-voting Class A shares outstanding.
(2)
The total percentage of voting power is based on voting Class A shares and the Class B share.
(3)
The number of Class A shares presented are held by estate planning vehicles, for which this individual disclaims beneficial ownership except to the extent of his pecuniary interest therein. The number of Class A shares presented do not include any Class A shares owned by Holdings with respect to which this individual, as one of the three owners of all of the interests in BRH, the general partner of Holdings, or as a party to the Agreement Among Managing Partners described under “Item 13. Certain Relationships and Related Party Transactions—Agreement Among Managing Partners” or the Managing Partner Shareholders Agreement described under “Item 13. Certain Relationships and Related Party Transactions—Managing Partner Shareholders Agreement,” may be deemed to have shared voting or dispositive power. Each of these individuals disclaims any beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
(4)
BRH, the holder of the Class B share, is one third owned by Mr. Black, one third owned by Mr. Harris and one third owned by Mr. Rowan. Pursuant to the Agreement Among Managing Partners, the Class B share is to be voted and disposed of by BRH based on the determination of at least two of the three Managing Partners; as such, they share voting and dispositive power with respect to the Class B share.
(5)
Includes 250,000 Class A shares held by a trust for the benefit of Mr. Krongard’s children, for which Mr. Krongard’s children are the trustees. Mr. Krongard disclaims beneficial ownership with respect to such shares, except to the extent of his pecuniary interest therein.

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(6)
Includes 1,500 Class A shares held by two trusts for the benefit of Mr. Ducey’s grandchildren, for which Mr. Ducey and several of Mr. Ducey’s immediate family members are trustees and have shared investment power. Mr. Ducey disclaims beneficial ownership of the Class A shares held in the trusts, except to the extent of his pecuniary interest therein.
(7) Includes 40,000 Class A shares held by an entity, which is under the sole control of Mr. Kraft, and may be deemed to be beneficially owned by Mr. Kraft.
(8)
Information is as of March 19, 2014, the date Mr. Spilker ceased to be an executive officer. Includes 26,350 Class A shares held by a trust for the benefit of Mr. Spilker’s children, for which one of Mr. Spilker’s immediate family members is a trustee and has investment power. The amount also includes 26,350 Class A shares held by a not-for-profit tax exempt foundation for which Mr. Spilker and his spouse are trustees with investment power. Mr. Spilker disclaims beneficial ownership with respect to such shares, except to the extent of his pecuniary interest therein.
(9)
Includes 15,625 RSUs covering Class A shares which have vested or with respect to which Mr. Kelly has the right to acquire beneficial ownership within 60 days of February 26, 2015.
(10)
Includes 114,584 RSUs covering Class A shares which have vested or with respect to which Mr. Suydam has the right to acquire beneficial ownership within 60 days of February 26, 2015. Does not include 343,751 Class A shares that will be delivered to Mr. Suydam, more than 60 days after February 26, 2015 in settlement of vested RSUs. Includes 120,488 Class A shares held by a trust for the benefit of Mr. Suydam’s spouse and children, for which Mr. Suydam’s spouse is the trustee. Mr. Suydam disclaims beneficial ownership with respect to such shares, except to the extent of his pecuniary interest therein.
(11)
Includes 6,167 RSUs covering Class A shares which have vested or with respect to which Mr. Zelter has the right to acquire beneficial ownership within 60 days of February 26, 2015. Includes 300,698 Class A shares held by vehicles, over which Mr. Zelter exercises voting and investment control.
(12)
Includes 1,459 RSUs covering Class A shares which have vested or with respect to which Mr. Weidler has the right to acquire beneficial ownership within 60 days of February 26, 2015.
(13)
Refers to shares beneficially owned by the individuals who were directors and executive officers as of February 26, 2015. The shares beneficially owned by the directors and executive officers reflected above do not include 343,751 Class A shares that will be delivered to Mr. Suydam more than 60 days after February 26, 2015 in settlement of vested RSUs.
(14)
Assumes that no Class A shares are distributed to the limited partners of Holdings. The general partner of Holdings, is BRH, which is one third owned by Mr. Black, one third owned by Mr. Harris and one third owned by Mr. Rowan. BRH is also the general partner of BRH Holdings, L.P., the limited partnership through which Messrs. Black, Harris and Rowan indirectly beneficially own (through estate planning vehicles) their limited partner interests in Holdings. These individuals disclaim any beneficial ownership of these Class A shares, except to the extent of their pecuniary interest therein.
(15) Based on a Schedule 13G filed on February 11, 2015, by TimesSquare Capital Management, LLC (“TimesSquare”). All of the shares reported on this Schedule 13G are owned by investment advisory clients of TimesSquare and in its role as investment advisor, TimesSquare has voting and dispositive power with respect to these shares. The address of TimesSquare Capital Management, LLC is 7 Times Square, 42nd floor, New York, New York 10036.

Securities Authorized for Issuance under Equity Incentive Plans
The following table sets forth information concerning the awards that may be issued under the Company’s Omnibus Equity Incentive Plan as of December 31, 2014.

Plan Category
 
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1)
 
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)(2)
 
 
(a)
(b)
 
(c)
Equity Compensation Plans Approved by Security Holders
 
28,306,686
 
$16.60
 
38,090,824
Equity Compensation Plans Not Approved by Security Holders
 
 
Total
 
28,306,686
$16.60
 
38,090,824

(1)
Reflects the aggregate number of outstanding options and RSUs granted under the Company’s 2007 Omnibus Equity Incentive Plan (the “Equity Plan”) as of December 31, 2014.
(2)
The Class A shares reserved under the Equity Plan are increased on the first day of each fiscal year by (i) the amount (if any) by which (a) 15% of the number of outstanding Class A shares and AOG Units exchangeable for Class A shares on a fully converted and diluted basis on the last day of the immediately

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preceding fiscal year exceeds (b) the number of shares then reserved and available for issuance under the Equity Plan, or (ii) such lesser amount by which the administrator may decide to increase the number of Class A shares. The number of shares reserved under the Equity Plan is also subject to adjustment in the event of a share split, share dividend, or other change in our capitalization. Generally, employee shares that are forfeited, canceled, surrendered or exchanged from awards under the Equity Plan will be available for future awards. We have filed a registration statement and intend to file additional registration statements on Form S-8 under the Securities Act to register Class A shares under the Equity Plan (including pursuant to automatic annual increases). Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, Class A shares registered under such registration statement will be available for sale in the open market.







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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Agreement Among Managing Partners
Our Managing Partners have entered into the Agreement Among Managing Partners. The Managing Partners own Holdings in accordance with their respective sharing percentages, or “Sharing Percentages,” as set forth in the Agreement Among Managing Partners. For the purposes of the Agreement Among Managing Partners, “Pecuniary Interest” means, with respect to each Managing Partner, the number of AOG Units that would be distributable to such Managing Partner assuming that Holdings was liquidated and its assets distributed in accordance with its governing agreements.

Pursuant to the Agreement Among Managing Partners, each of Messrs. Harris and Rowan vested in his interest in the AOG Units in 60 equal monthly installments, and Mr. Black vested in his interest in the AOG Units in 72 equal monthly installments. For the purposes of the vesting provisions of the Agreement Among Managing Partners, our Managing Partners were credited for their employment with us since January 1, 2007. Each is now vested in full. We may not terminate a Managing Partner except for cause or by reason of disability.

The transfer by a Managing Partner of any portion of his Pecuniary Interest to a permitted transferee will in no way affect any of his obligations under the Agreement Among Managing Partners; provided, that all permitted transferees are required to sign a joinder to the Agreement Among Managing Partners.
The Managing Partners’ respective Pecuniary Interests in certain funds, or the “Heritage Funds,” within the Apollo Operating Group are not held in accordance with the Managing Partners’ respective Sharing Percentages. Instead, each Managing Partner’s Pecuniary Interest in such Heritage Funds is held in accordance with the historic ownership arrangements among the Managing Partners, and the Managing Partners continue to share the operating income in such Heritage Funds in accordance with their historic ownership arrangement with respect to such Heritage Funds.
The Agreement Among Managing Partners may be amended and the terms and conditions of the Agreement Among Managing Partners may be changed or modified upon the unanimous approval of the Managing Partners. We, our shareholders (other than the Strategic Investors, as set forth under “-Lenders Rights Agreement-Amendments to Managing Partner Transfer Restrictions”) and the Apollo Operating Group have no ability to enforce any provision thereof or to prevent the Managing Partners from amending the Agreement Among Managing Partners.
Managing Partner Shareholders Agreement
We have entered into the Managing Partner Shareholders Agreement with our Managing Partners. The Managing Partner Shareholders Agreement provides the Managing Partners with certain rights with respect to the approval of certain matters and the designation of nominees to serve on our board of directors, as well as registration rights for our securities that they own.
Board Representation
The Managing Partner Shareholders Agreement requires our board of directors, so long as the Apollo control condition is satisfied, to nominate individuals designated by our manager such that our manager will have a majority of the designees on our board.

Transfer Restrictions
The Managing Partner Shareholders Agreement provides that no Managing Partner may, nor shall any of such Managing Partner’s permitted transferees, directly or indirectly, voluntarily effect cumulative transfers of Pecuniary Interests (as defined in the Managing Partner Shareholders Agreement), representing more than: (i) 15% of his Pecuniary Interests at any time on or after the third anniversary and prior to the fourth anniversary of our IPO; (ii) 22.5% of his Pecuniary Interests at any time on or after the fourth anniversary and prior to the fifth anniversary of our IPO; (iii) 30% of his Pecuniary Interests at any time on or after the fifth anniversary and prior to the sixth anniversary of our IPO; and (iv) 100% of his Pecuniary Interests at any time on or after the sixth anniversary of our IPO, other than, in each case, with respect to transfers (a) from one founder to another founder, (b) to a permitted transferee of such Managing Partner, or (c) in connection with a sale by one or more of our Managing Partners in one or a related series of transactions resulting in the Managing Partners owning or controlling, directly or indirectly, less than 50.1% of the economic or voting interests in us or the Apollo Operating Group, or any other person exercising control over us or the Apollo Operating Group by contract, which would include a transfer of control of our manager.

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The percentages referenced in the preceding paragraph will apply to the aggregate amount of Equity Interests held by each Managing Partner (and his permitted transferees) as of July 13, 2007. After six years, each Managing Partner and his permitted transferees may transfer all of the Equity Interests of such Managing Partner to any person or entity in accordance with Rule 144, in a registered public offering or in a transaction exempt from the registration requirements of the Securities Act. The above transfer restrictions will lapse with respect to a Managing Partner if such Managing Partner dies or becomes disabled.
A “permitted transferee” means, with respect to each Managing Partner and his permitted transferees, (i) such Managing Partner’s spouse, (ii) a lineal descendant of such Managing Partner’s parents (or any such descendant’s spouse), (iii) a charitable institution controlled by such Managing Partner, (iv) a trustee of a trust (whether inter vivos or testamentary), the current beneficiaries and presumptive remaindermen of which are one or more of such Managing Partner and persons described in clauses (i) through (iii) above, (v) a corporation, limited liability company or partnership, of which all of the outstanding shares of capital stock or interests therein are owned by one or more of such Managing Partner and persons described in clauses (i) through (iv) above, (vi) an individual mandated under a qualified domestic relations order, (vii) a legal or personal representative of such Managing Partner in the event of his death or disability, (viii) any other Managing Partner with respect to transactions contemplated by the Managing Partner Shareholders Agreement, and (ix) any other Managing Partner who is then employed by Apollo or any of its affiliates or any permitted transferee of such Managing Partner in respect of any transaction not contemplated by the Managing Partner Shareholders Agreement, in each case that agrees in writing to be bound by these transfer restrictions.
Any waiver of the above transfer restrictions may only occur with our consent. As our Managing Partners control the management of our company, however, they have discretion to cause us to grant one or more such waivers. Accordingly, the above transfer restrictions might not be effective in preventing our Managing Partners from selling or transferring their Equity Interests.
Indemnity
Carried interest income from our funds can be distributed to us on a current basis, but is subject to repayment by the subsidiaries of the 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 the Managing Partner Shareholders Agreement, we agreed to indemnify each of our Managing Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of Fund IV, Fund V and Fund VI (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees) for all interests that our Managing Partners and Contributing Partners have contributed or sold to the Apollo Operating Group.
Accordingly, in the event that our Managing Partners, Contributing Partners and certain other 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, we will be obligated to reimburse our Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to pay even though we did not receive the distribution to which that general partner obligation related.
Registration Rights
Pursuant to the Managing Partner Shareholders Agreement, we have granted Holdings, an entity through which our Managing Partners and Contributing Partners own their AOG units, and its permitted transferees the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act our Class A shares held or acquired by them. Under the Managing Partner Shareholders Agreement, the registration rights holders (i) have “demand” registration rights that require us to register under the Securities Act the Class A shares that they hold or acquire, (ii) may require us to make available registration statements permitting sales of Class A shares they hold or acquire in the market from time to time over an extended period and (iii) have the ability to exercise certain piggyback registration rights in connection with registered offerings requested by other registration rights holders or initiated by us. We have agreed to indemnify each registration rights holder and certain related parties against any losses or damages resulting from any untrue statement or omission of material fact in any registration statement or prospectus pursuant to which they sell our shares, unless such liability arose from such holder’s misstatement or omission, and each registration rights holder has agreed to indemnify us against all losses caused by his misstatements or omissions. We have filed a shelf registration statement in connection with the rights described above.

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Roll-Up Agreements
Pursuant to the Roll-Up Agreements, the Contributing Partners received interests in Holdings, which we refer to as AOG Units, in exchange for their contribution of assets to the Apollo Operating Group. The AOG Units received by our Contributing Partners and any units into which they are exchanged generally vested over six years in equal monthly installments and were fully vested on June 30, 2013. AOG Units were subject to a lock-up until two years after our IPO. Thereafter, 7.5% of the AOG Units became, or will become, tradable on each of the second, third, fourth and fifth anniversaries of our IPO, with the remaining AOG Units becoming tradable on the sixth anniversary of our IPO or upon subsequent vesting. An AOG Unit that is forfeited will revert to the Managing Partners. Our Contributing Partners have the ability to direct Holdings to exercise Holdings’ registration rights described above under “-Managing Partner Shareholders Agreement-Registration Rights.”
Under their Roll-Up Agreements, each of our Contributing Partners is subject to a noncompetition provision until the first anniversary of the date of termination of his service as a partner to us. During that period, our Contributing Partners are prohibited from (i) engaging in any business activity that we operate in, (ii) rendering any services to any alternative asset management business (other than that of us or our affiliates) that involves primarily (i.e., more than 50%) third-party capital or (iii) acquiring a financial interest in, or becoming actively involved with, any competitive business (other than as a passive holding of a specified percentage of publicly traded companies). In addition, our Contributing Partners are subject to nonsolicitation, nonhire and noninterference covenants during employment and for two years thereafter. Our Contributing Partners are also bound to a nondisparagement covenant with respect to us and our Contributing Partners and to confidentiality restrictions. Resignation by any of our Contributing Partners shall require ninety days’ notice. Any restricted period applicable to a Contributing Partner will commence after the ninety day notice of termination period.
Amended and Restated Exchange Agreement
We have entered into an exchange agreement with Holdings under which, subject to certain procedures and restrictions (including any applicable transfer restrictions and lock-up agreements described above) upon 60 days’ written notice prior to a designated quarterly date, each Managing Partner and Contributing Partner (or certain transferees thereof) has the right to cause Holdings to exchange the AOG Units that he owns through Holdings for our Class A shares and to sell such Class A shares at the prevailing market price (or at a lower price that such Managing Partner or Contributing Partner is willing to accept). To effect the exchange, Holdings distributes the AOG Units to be exchanged to the applicable Managing Partner or Contributing Partner. Under the exchange agreement, the Managing Partner or Contributing Partner must then simultaneously exchange one AOG Unit (being an equal limited partner interest in each Apollo Operating Group entity) for each Class A share received from our intermediate holding companies. As a Managing Partner or Contributing Partner exchanges his AOG Units, our interest in the AOG Units will be correspondingly increased and the voting power of the Class B share will be correspondingly decreased.
The exchange agreement was amended and restated on May 6, 2013 and further amended and restated on March 5, 2014. The amendments to the original exchange agreement (i) permit exchanging holders certain rights to revoke exchanges of their AOG Units in whole, but not in part, in certain circumstances; (ii) permit transfers of a holder’s exchanged shares to a qualifying entity that can sell them under a Rule 10b5-1 trading plan; (iii) require the Company to use its commercially reasonable efforts to file and keep effective a shelf registration statement relating to the exchange of Class A shares received upon an exchange of AOG Units; (iv) modify the exchange mechanics to address certain tax considerations of an exchange for exchanging holders; and (v) require exchanging holders to reimburse APO Corp. for any incremental U.S. federal income tax incurred by APO Corp. as a result of the modification of the exchange mechanics.
Amended and Restated Tax Receivable Agreement
As a result of each of AMH Holdings (Cayman), L.P. and the Apollo Operating Group entities controlled by it or Apollo Management Holdings, L.P. having made an election under Section 754 of the Internal Revenue Code, any exchanges by a Managing Partner or Contributing Partner of AOG Units (together with the corresponding interest in our Class B share), that he owns through Holdings, for our Class A shares in a taxable transaction may result in an adjustment to the tax basis of a portion of the assets owned by the Apollo Operating Group at the time of the exchange. The taxable exchanges may result in increases in the tax depreciation and amortization deductions from depreciable and amortizable assets, as well as an increase in the tax basis of other assets, of the Apollo Operating Group that otherwise would not have been available. A portion of these increases in tax depreciation and amortization deductions, as well as the increase in the tax basis of such other assets, will reduce the amount of tax that APO Corp. would otherwise be required to pay in the future. Additionally, our acquisition of AOG Units from the Managing Partners or Contributing Partners, such as our acquisition of AOG Units from the Managing Partners in the Strategic Investors Transaction, have and may continue to result in increases in tax deductions and tax basis that reduces the amount of tax that APO Corp. would otherwise be required to pay in the future.

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APO Corp. has entered into a tax receivable agreement with our Managing Partners and Contributing Partners that provides for the payment by APO Corp. to an exchanging or selling Managing Partner or Contributing Partner of 85% of the amount of actual cash savings, if any, in U.S. Federal, state, local and foreign income tax that APO Corp. realizes (or is deemed to realize in the case of an early termination payment by APO Corp. or a change of control, as discussed below) as a result of these increases in tax deductions and tax basis, and certain other tax benefits, including imputed interest expense, related to payments pursuant to the tax receivable agreement. APO Corp. expects to benefit from the remaining 15% of actual cash savings, if any, in income tax that it realizes. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing our actual income tax liability to the amount of such taxes that APO Corp. would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of the applicable Apollo Operating Group entity as a result of the transaction and had APO Corp. not entered into the tax receivable agreement. The tax savings achieved may not ensure that we have sufficient cash available to pay our tax liability or generate additional distributions to our investors. Also, we may need to incur additional debt to repay the tax receivable agreement if our cash flow needs are not met. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless APO Corp. exercises the right to terminate the tax receivable agreement by paying an amount based on the present value of payments remaining to be made under the agreement with respect to units that have been exchanged or sold and units which have not yet been exchanged or sold. Such present value will be determined based on certain assumptions, including that APO Corp. would have sufficient taxable income to fully utilize the deductions that would have arisen from the increased tax deductions and tax basis and other benefits related to the tax receivable agreement. In the event that other of our current or future U.S. subsidiaries become taxable as corporations and acquire AOG Units in the future, or if we become taxable as a corporation for U.S. Federal income tax purposes, each U.S. corporation will become subject to a tax receivable agreement with substantially similar terms. In connection with an amendment of the AMH partnership agreement in April 2010, the tax receivable agreement was revised to reflect the Managing Partners’ agreement to defer 25% of required payments pursuant to the tax receivable agreement that are attributable to the 2010 fiscal year until 2015.
The IRS could challenge our claim to any increase in the tax basis of the assets owned by the Apollo Operating Group that results from the exchanges entered into by the Managing Partners or Contributing Partners. The IRS could also challenge any additional tax depreciation and amortization deductions or other tax benefits we claim as a result of such increase in the tax basis of such assets. If the IRS were to successfully challenge a tax basis increase or tax benefits we previously claimed from a tax basis increase, our Managing Partners and Contributing Partners would not be obligated under the tax receivable agreement to reimburse APO Corp. for any payments previously made to it (although future payments would be adjusted to reflect the result of such challenge). As a result, in certain circumstances, payments could be made to our Managing Partners and Contributing Partners under the tax receivable agreement in excess of 85% of APO Corp.’s actual cash tax savings. In general, estimating the amount of payments that may be made to our Managing Partners and Contributing Partners under the tax receivable agreement is by its nature, imprecise, in the absence of an actual transaction, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis and the amount and timing of any payments under the tax receivable agreement will vary depending upon a number of factors, including:

the timing of the transactions-for instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time, of the depreciable or amortizable assets of the Apollo Operating Group entities at the time of the transaction;
the price of our Class A shares at the time of the transaction-the increase in any tax deductions, as well as tax basis increase in other assets, of the Apollo Operating Group entities, is directly proportional to the price of the Class A shares at the time of the transaction;
the taxability of exchanges - to the extent if an exchange is not taxable for any reason, increased deductions will not be available; and
the amount and timing of our income-APO Corp. will be required to pay 85% of the tax savings as and when realized, if any. If APO Corp. does not have taxable income, it is not required to make payments under the tax receivable agreement for that taxable year because no tax savings were actually realized.
In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control, APO Corp.’s (or its successor’s) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control) would be based on certain assumptions, including that APO Corp. would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As noted above, no payments will be made if a Managing Partner or Contributing Partner elects to exchange his or her AOG Units in a tax-free transaction.
In connection with the first amendment and restatement of the exchange agreement, the tax receivable agreement was amended and restated on May 6, 2013 to conform the agreement to the amended and restated exchange agreement, particularly to address the modified exchange mechanics, and to make non-substantive updates to recognize certain additional Apollo Operating Group entities that have been formed since the original tax receivable agreement was entered into in 2007.

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Strategic Investors Transaction
On July 13, 2007, we sold securities to the Strategic Investors in return for a total investment of $1.2 billion. Through our intermediate holding companies, we used all of the proceeds from the issuance of such securities to the Strategic Investors to purchase from our Managing Partners 17.4% of their AOG Units for an aggregate purchase price of $1,068 million, and to purchase from our Contributing Partners a portion of their points for an aggregate purchase price of $156 million. The Strategic Investors hold non-voting Class A shares, which represented 27.6% of our issued and outstanding Class A shares and 11.7% of the economic interest in the Apollo Operating Group, in each case as of December 31, 2014.
As all of their holdings in us are non-voting, neither of the Strategic Investors has any means for exerting control over our company.
Strategic Relationship Agreement
On April 20, 2010, we announced a new strategic relationship agreement with CalPERS, whereby we agreed to reduce management fees and other fees charged to CalPERS on funds we manage, or in the future will manage, solely for CalPERS by $125 million over a five-year period or as close a period as required to provide CalPERS with that benefit. The agreement further provides that we will not use a placement agent in connection with securing any future capital commitments from CalPERS. Through December 31, 2014, the Company has reduced fees charged to CalPERS on the funds it manages by approximately $95.9 million.
Lenders Rights Agreement
In connection with the Strategic Investors Transaction, we entered into a shareholders agreement, or the “Lenders Rights Agreement,” with the Strategic Investors.
Transfer Restrictions
Following the registration effectiveness date, each Strategic Investor may transfer its non-voting Class A shares up to the percentages set forth below during the relevant periods identified:

Period
Maximum
Cumulative Amount
Registration Effectiveness Date-2nd anniversary of our IPO
0%
2nd-3rd anniversary of our IPO
25%
3rd-4th anniversary of our IPO
50%
4th-5th anniversary of our IPO
75%
5th anniversary of our IPO (and thereafter)
100%
Notwithstanding the foregoing, at no time following the registration effectiveness date may a Strategic Investor make a transfer representing 2% or more of our total Class A shares to any one person or group of related persons.
Registration Rights
Pursuant to the Lenders Rights Agreement, each Strategic Investor is afforded four demand registrations with respect to non-voting Class A shares, covering offerings of at least 2.5% of our total equity ownership and customary piggyback registration rights. All cutbacks between the Strategic Investors and Holdings (or its members) in any such demand registration shall be pro rata based upon the number of shares available for sale at such time (regardless of which party exercises a demand).
Amendments to Managing Partner Transfer Restrictions
Each Strategic Investor has a consent right with respect to any amendment or waiver of any transfer restrictions that apply to our Managing Partners.

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Apollo Operating Group Limited Partnership Agreements
Pursuant to the partnership agreements of the Apollo Operating Group partnerships, the indirect wholly-owned subsidiaries of Apollo Global Management, LLC that are the general partners of those partnerships have the right to determine when distributions will be made to the partners of the Apollo Operating Group and the amount of any such distributions. If a distribution is authorized, such distribution will be made to the partners of the Apollo Operating Group pro rata in accordance with their respective partnership interests.
The partnership agreements of the Apollo Operating Group partnerships also provide that substantially all of our expenses, including substantially all expenses solely incurred by or attributable to Apollo Global Management, LLC (such as expenses incurred in connection with the Private Offering Transactions), will be borne by the Apollo Operating Group; provided that obligations incurred under the tax receivable agreement by Apollo Global Management, LLC and its wholly-owned subsidiaries (which currently consist of our three intermediate holding companies, APO Corp., APO (FC), LLC and APO Asset Co., LLC), income tax expenses of Apollo Global Management, LLC and its wholly-owned subsidiaries and indebtedness incurred by Apollo Global Management, LLC and its wholly-owned subsidiaries shall be borne solely by Apollo Global Management, LLC and its wholly-owned subsidiaries.
Employment Arrangements
Please see the section entitled “Item 11. Executive Compensation-Narrative Disclosure to the Summary Compensation Table and Grants of Plan-Based Awards Table” and “-Potential Payments upon Termination or Change in Control” for a description of the employment agreements of our named executive officers who have employment agreements.
In addition, Joshua Black and Benjamin Black, sons of Leon Black, are each employed by the Company as an Associate in the Company’s private equity business. They are each entitled to receive a base salary, incentive compensation and other employee benefits that are offered to similarly situated employees of the Company. Each is also eligible to receive an annual performance-based bonus in an amount determined by the Company in its discretion.
Reimbursements
In the normal course of business, our personnel have made use of aircraft owned as personal assets by Messrs. Black, Rowan and Harris. Messrs. Black, Rowan and Harris paid for their purchases of the aircraft and bear all operating, personnel and maintenance costs associated with their operation for personal use. Payment by us for the business use of these aircraft by Messrs. Black, Rowan and Harris and other of our personnel totaled $608,894, $928,572 and $1,601,325 for 2014 to Mr. Black, Mr. Rowan and Mr. Harris, respectively (which amounts are determined based on the lower of the actual costs of operating the aircraft or a specified hourly market rate).
Investments In Apollo Funds
Our directors and executive officers are generally permitted to invest their own capital (or capital of estate planning vehicles that they control) directly in our funds. In general, such investments are not subject to management fees, and in certain instances, may not be subject to carried interest. The opportunity to invest in our funds is available to all of the senior Apollo professionals and to those of our employees whom we have determined to have a status that reasonably permits us to offer them these types of investments in compliance with applicable laws. From our inception through December 31, 2014, our professionals have committed or invested approximately $1.2 billion of their own capital to our funds.
The amount invested in our investment funds by our directors and executive officers (and their estate planning vehicles) during 2014 was $21,594,185, $17,611,226, $10,047,553, $3,117,160, $3,487,560, $107,144, and $93,369 for Messrs Black, Harris, Rowan, Zelter, Suydam, Kelly, and Weidler respectively. The amount of distributions, including profits and return of capital to our directors and executive officers (and their estate planning vehicles) during 2014 was $62,371,465, $24,873,467, $20,342,373, $7,535,306, $4,208,409, $15,421, and $12,737 for Messrs. Black, Harris, Rowan, Zelter, Suydam, Kelly, and Weidler, respectively.
Sub-Advisory Arrangements and Strategic Investment Accounts
From time to time, we may enter into sub-advisory arrangements with, or establish strategic investment accounts for, our directors and executive officers or vehicles they manage. Such arrangements would be approved in advance in accordance with our policy regarding transactions with related persons.  In addition, any such sub-advisory arrangement or strategic investment account would be entered into with, or advised by, an Apollo entity serving as investment advisor registered under the Investment Advisers Act, and any fee arrangements, if applicable would be on an arms-length basis.

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Indemnification of Directors, Officers and Others
Under our operating agreement, in most circumstances we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts: our manager; any departing manager; any person who is or was an affiliate of our manager or any departing manager; any person who is or was a member, partner, tax matters partner, officer, director, employee, agent, fiduciary or trustee of us or our subsidiaries, our manager or any departing manager or any affiliate of us or our subsidiaries, our manager or any departing manager; any person who is or was serving at the request of our manager or any departing manager or any affiliate of our manager or any departing manager as an officer, director, employee, member, partner, agent, fiduciary or trustee of another person; or any person designated by our manager. We have agreed to provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Any indemnification under these provisions will only be out of our assets. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under our operating agreement.
We have entered into indemnification agreements with each of our directors, executive officers and certain of our employees which set forth the obligations described above.
We have also agreed to indemnify each of our Managing Partners and certain Contributing Partners against certain amounts that they are required to pay in connection with a general partner obligation for the return of previously made carried interest distributions in respect of Fund IV, Fund V and Fund VI. See the above description of the indemnity provisions of the Managing Partner Shareholders Agreement.
Statement of Policy Regarding Transactions with Related Persons
Our board of directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our “related person policy.” Our related person policy requires that a “related person” (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to our Chief Legal Officer any “related person transaction” (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. Our Chief Legal Officer will then promptly communicate that information to our manager. No related person transaction will be consummated without the approval or ratification of the executive committee of our manager or any committee of our board of directors consisting exclusively of disinterested directors. It is our policy that persons interested in a related person transaction will recuse themselves from any vote of a related person transaction in which they have an interest.
Director Independence
Because more than fifty percent of our voting power is controlled by BRH, we are considered a “controlled company” as defined in the listing standards of the NYSE and we are exempt from the NYSE rules that require that:

our board of directors be comprised of a majority of independent directors;
we establish a compensation committee composed solely of independent directors; and
we establish a nominating and corporate governance committee composed solely of independent directors.
While our board of directors is currently comprised of a majority of independent directors, we plan on availing ourselves of the controlled company exceptions.  We have elected not to have a nominating and corporate governance committee comprised entirely of independent directors, nor a compensation committee comprised entirely of independent directors. Our board of directors has determined that five of our eight directors meet the independence standards under the NYSE and the SEC.  These directors are Messrs. Ducey, Fribourg, Krongard and Kraft and Ms. Richards.
At such time that we are no longer deemed a controlled company, our board of directors will take all action necessary to comply with all applicable rules within the applicable time period under the NYSE listing standards.


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ITEM 14.     PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table summarizes the aggregate fees for professional services provided by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the "Deloitte Entities") for the years ended December 31, 2014 and 2013:
 
Year Ended December 31,
 
 
2014
 
2013
 
 
(in thousands)
 
Audit fees
$
12,810

(1) 
$
13,465

(1) 
Audit fees for Apollo fund entities
20,413

(2) 
19,505

(2) 
Audit-related fees
7,360

(3)(4) 
2,340

(3)(4) 
Tax fees
3,275

(5) 
3,580

(5) 
Tax fees for Apollo fund entities
16,857

(2) 
13,835

(2) 

(1)
Audit fees consisted of fees for (a) the audits of our consolidated financial statements in our Annual Report on Form 10-K and services attendant to, or required by, statute or regulation; (b) reviews of the interim condensed consolidated financial statements included in our quarterly reports on Form 10-Q.
(2)
Audit and Tax fees for Apollo fund entities consisted of services to investment funds managed by Apollo in its capacity as the general partner and/or manager of such entities.
(3)
Audit-related fees consisted of comfort letters, consents and other services related to SEC and other regulatory filings.
(4)
Includes audit-related fees for Apollo fund entities of $0.3 million and $0.5 million for the year ended December 31, 2014 and 2013, respectively.
(5)
Tax fees consisted of fees for services rendered for tax compliance and tax planning and advisory services.

Our audit committee charter requires the audit committee of our board of directors to approve in advance all audit and non-audit related services to be provided by our independent registered public accounting firm. All services reported in the Audit, Audit-related, Tax and Other categories above were approved by the committee.


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PART IV

ITEM 15.     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
  
Amended and Restated Limited Liability Company Agreement of Apollo Global Management, LLC (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
4.1
  
Specimen Certificate evidencing the Registrant’s Class A shares (incorporated by reference to Exhibit 4.1 to the Registrant’s 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.
 
 
 
10.1
  
Amended and Restated Limited Liability Company Operating Agreement of AGM Management, LLC dated as of July 10, 2007 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.2
  
Third Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings I, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.3
  
Third Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings II, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.4
  
Third Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings III, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.5
  
Third Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings IV, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).

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+10.6
  
Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.7
  
Agreement Among Principals, dated as of July 13, 2007, by and among Leon D. Black, Marc J. Rowan, Joshua J. Harris, Black Family Partners, L.P., MJR Foundation LLC, AP Professional Holdings, L.P. and BRH Holdings, L.P. (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.8
  
Shareholders Agreement, dated as of July 13, 2007, by and among Apollo Global Management, LLC, AP Professional Holdings, L.P., BRH Holdings, L.P., Black Family Partners, L.P., MJR Foundation LLC, Leon D. Black, Marc J. Rowan and Joshua J. Harris (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.9
  
Second Amended and Restated Exchange Agreement, dated as of March 5, 2014, by and among Apollo Global Management, LLC, Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P., Apollo Principal Holdings IX, L.P., AMH Holdings (Cayman), L.P. and the Apollo Principal Holders (as defined therein) from time to time party thereto (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-Q for the period ended March 31, 2014 (File No. 001-35107)).
 
 
10.10
  
Amended and Restated Tax Receivable Agreement, dated as of May 6, 2013, by and among APO Corp., Apollo Principal Holdings II, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings VI, Apollo Principal Holdings VIII, L.P., AMH Holdings (Cayman), L.P. and each Holder defined therein (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on May 7, 2013 (File No. 001-35107)).
 
 
+10.11
  
Employment Agreement with Leon D. Black (incorporated by reference to Exhibit 10.43 to the Registrant’s Form 10-Q for the period ended June 30, 2012 (File No. 001-35107)).
 
 
 
+10.12
  
Employment Agreement with Marc J. Rowan (incorporated by reference to Exhibit 10.44 to the Registrant’s Form 10-Q for the period ended June 30, 2012 (File No. 001-35107)).
 
 
+10.13
  
Employment Agreement with Joshua J. Harris (incorporated by reference to Exhibit 10.45 to the Registrant’s Form 10-Q for the period ended June 30, 2012 (File No. 001-35107)).
 
 
10.14
  
Second Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings V, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.15
  
Second Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings VI, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.16
  
Second Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings VII, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.22 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.17
  
Second Amended and Restated Limited Partnership Agreement of Apollo Principal Holdings VIII, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 

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10.18
  
Second Amended and Restated Exempted Limited Partnership Agreement of Apollo Principal Holdings IX, L.P. dated as of April 14, 2010 (incorporated by reference to Exhibit 10.24 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.19
  
Fourth Amended and Restated Limited Partnership Agreement of Apollo Management Holdings, L.P. dated as of October 30, 2012 (incorporated by reference to Exhibit 10.25 to the Registrant's Form 10-Q for the Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.20
  
Settlement Agreement, dated December 14, 2008, by and among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates (incorporated by reference to Exhibit 10.26 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.21
  
First Amendment and Joinder, dated as of August 18, 2009, to the Shareholders Agreement, dated as of July 13, 2007, by and among Apollo Global Management, LLC, AP Professional Holdings, L.P., BRH Holdings, L.P., Black Family Partners, L.P., MJR Foundation LLC, Leon D. Black, Marc J. Rowan and Joshua J. Harris (incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.22
  
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
+10.23
  
Amended and Restated Employment Agreement with James Zelter dated as of June 20, 2014 (incorporated by reference to Exhibit 10.27 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).
 
 
+10.24
  
Roll-Up Agreement with James Zelter (incorporated by reference to Exhibit 10.30 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
 
+10.25
  
Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (for Plan Grants) (incorporated by reference to Exhibit 10.31 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
+10.26
  
Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (for Bonus Grants) (incorporated by reference to Exhibit 10.32 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
+10.27
  
Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (for new independent directors) (incorporated by reference to Exhibit 10.31 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).
 
 
+10.28
  
Form of Restricted Share Unit Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (for continuing independent directors) (incorporated by reference to Exhibit 10.32 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).
 
 
+10.29
  
Form of Restricted Share Award Grant Notice and Restricted Share Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.33 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).
 
 
+10.30
  
Form of Share Award Grant Notice and Share Award Agreement under the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan (for Retired Partners) (incorporated by reference to Exhibit 10.34 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).

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+10.31
  
Apollo Management Companies AAA Unit Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
+10.32
  
Employment Agreement with Marc Spilker (incorporated by reference to Exhibit 10.35 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
*+10.33
  
Employment Agreement with Christopher Weidler, dated June 4, 2013.
 
 
+10.34
  
Non-Qualified Share Option Agreement pursuant to the Apollo Global Management, LLC 2007 Omnibus Equity Incentive Plan with Marc Spilker dated December 2, 2010 (incorporated by reference to Exhibit 10.40 to the Registrant’s Registration Statement on Form S-1 (File No. 333-150141)).
 
 
10.35
  
Amended Form of Independent Director Engagement Letter (incorporated by reference to Exhibit 10.38 to the Registrant’s Form 10-Q for the period ended March 31, 2014 (File No. 001-35107)).
 
 
+10.36
  
Employment Agreement with Martin Kelly, dated July 2, 2012 (incorporated by reference to Exhibit 10.42 to the Registrant’s Form 10-Q for the period ended June 30, 2012 (File No. 001-35107)).
 
 
10.37
  
Amended and Restated Exempted Limited Partnership Agreement of AMH Holdings, L.P., dated October 30, 2012 (incorporated by reference to Exhibit 10.46 to the Registrant’s Form 10-Q for the period ended September 30, 2012 (File No. 001-35107)).
 
 
 
+10.38
 
Amended and Restated Limited Partnership Agreement of Apollo Advisors VI, L.P., dated as of April 14, 2005 and amended as of August 26, 2005 (incorporated by reference to Exhibit 10.41 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
+10.39
 
Third Amended and Restated Limited Partnership Agreement of Apollo Advisors VII, L.P. dated as of July 1, 2008 and effective as of August 30, 2007 (incorporated by reference to Exhibit 10.42 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
+10.40
 
Third Amended and Restated Limited Partnership Agreement of Apollo Credit Opportunity Advisors I, L.P., dated January 12, 2011 and made effective as of July 14, 2009 (incorporated by reference to Exhibit 10.43 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
+10.41
 
Third Amended and Restated Limited Partnership Agreement of Apollo Credit Opportunity Advisors II, L.P., dated January 12, 2011 and made effective as of July 14, 2009 (incorporated by reference to Exhibit 10.44 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
+10.42
 
Third Amended and Restated Limited Partnership Agreement of Apollo Credit Liquidity Advisors, L.P., dated January 12, 2011 and made effective as of July 14, 2009 (incorporated by reference to Exhibit 10.45 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
+10.43
 
Second Amended and Restated Limited Partnership Agreement of Apollo Credit Liquidity CM Executive Carry, L.P., dated January 12, 2011 and made effective as of July 14, 2009 (incorporated by reference to Exhibit 10.46 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 

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+10.44
 
Second Amended and Restated Limited Partnership Agreement Apollo Credit Opportunity CM Executive Carry I, L.P. dated January 12, 2011 and made effective as of July 14, 2009 (incorporated by reference to Exhibit 10.47 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
+10.45
 
Second Amended and Restated Limited Partnership Agreement of Apollo Credit Opportunity CM Executive Carry II, L.P. dated January 12, 2011 and made effective as of July 14, 2009 (incorporated by reference to Exhibit 10.48 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
+10.46
 
Second Amended and Restated Exempted Limited Partnership Agreement of AGM Incentive Pool, L.P., dated June 29, 2012 (incorporated by reference to Exhibit 10.49 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
10.47
 
Credit Agreement, dated as of December 18, 2013, by and among Apollo Management Holdings, L.P., as the Term Facility Borrower and a Revolving Facility Borrower, the other Revolving Facility Borrowers party thereto, the other guarantors party thereto from time to time, the lenders party thereto from time to time, the issuing banks party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.50 to the Registrant's Form 10-K for the period ended December 31, 2013 (File No. 001-35107)).
 
 
 
*10.48
 
Guarantor Joinder Agreement, dated as of January 30, 2015, by Apollo Principal Holdings X, L.P. to the Credit Agreement, dated as of December 18, 2013, by and among Apollo Management Holdings, L.P., as the Term Facility Borrower and a Revolving Facility Borrower, the other Revolving Facility Borrowers party thereto, the existing guarantors party thereto, the lenders party thereto from time to time, the issuing banks party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent.
 
 
 
10.49
 
Transition Agreement, dated as of March 19, 2014, by and among Marc A. Spilker, Apollo Management Holdings, L.P. and Apollo Global Management, LLC (incorporated by reference to Exhibit 10.51 to the Registrant's Form 10-Q for the period ended March 31, 2014 (File No. 001-35107)).
 
 
 
+10.50
 
Form of Letter Agreement under the Amended and Restated Limited Partnership Agreement of Apollo Advisors VIII, L.P. effective as of January 1, 2014 (incorporated by reference to Exhibit 10.56 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).
 
 
 
+10.51
 
Form of Award Letter under the Amended and Restated Limited Partnership Agreement of Apollo Advisors VIII, L.P. effective as of January 1, 2014 (incorporated by reference to Exhibit 10.57 to the Form 10-Q for the period ended June 30, 2014 (File No. 001-35107)).
 
 
 
*+10.52
 
Amended and Restated Limited Partnership Agreement of Apollo EPF Advisors, L.P., dated as of February 3, 2011.
 
 
 
*+10.53
 
First Amended and Restated Exempted Limited Partnership Agreement of Apollo EPF Advisors II, L.P. dated as of April 9, 2012.
 
 
 
*+10.54
 
Amended and Restated Agreement of Exempted Limited Partnership of Apollo CIP Partner Pool, L.P., dated as of December 18, 2014.
 
 
 
*+10.55
 
Form of Award Letter under the Amended and Restated Agreement of Exempted Limited Partnership Agreement of Apollo CIP Partner Pool, L.P.
 
 
 
*+10.56
 
Second Amended and Restated Agreement of Limited Partnership of Apollo Credit Opportunity Advisors III (APO FC), L.P., dated as of December 18, 2014.

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*+10.57
 
Form of Award Letter under Second Amended and Restated Agreement of Limited Partnership of Apollo Credit Opportunity Advisors III (APO FC), L.P.
 
 
 
*21.1
 
Subsidiaries of Apollo Global Management, LLC.
 
 
 
*23.1
 
Consent of Deloitte & Touche LLP.
 
 
 
*31.1
 
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).
 
 
*31.2
 
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).
 
 
*32.1
 
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
 
 
*32.2
 
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
 
 
*101.INS
 
XBRL Instance Document
 
 
*101.SCH
 
XBRL Taxonomy Extension Scheme Document
 
 
*101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
*101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
*101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
*101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document

*
Filed herewith.

+
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 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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Table of Contents

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: February 27, 2015
By:
/s/ Martin Kelly
 
 
Name:
Martin Kelly
 
 
Title:
Chief Financial Officer
(principal financial officer and
authorized signatory)


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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
 
 
 
 
 
 
Name
  
Title
 
Date
 
 
 
/s/ Leon Black
  
Chairman and Chief Executive Officer and Director
(principal executive officer)
 
February 27, 2015

Leon Black
  
 
 
 
 
 
/s/ Martin Kelly
  
Chief Financial Officer
(principal financial officer)
 
February 27, 2015
Martin Kelly
  
 
 
 
 
 
/s/ Chris Weidler
  
Chief Accounting Officer
 
February 27, 2015
Chris Weidler
  
(principal accounting officer)
 
 
 
 
 
/s/ Joshua Harris
  
Senior Managing Director and Director
 
February 27, 2015
Joshua Harris
  
 
 
 
 
 
/s/ Marc Rowan
  
Senior Managing Director and Director
 
February 27, 2015
Marc Rowan
  
 
 
 
 
 
/s/ Michael Ducey
  
Director
 
February 27, 2015
Michael Ducey
  
 
 
 
 
 
 
/s/ Paul Fribourg
  
Director
 
February 27, 2015
Paul Fribourg
  
 
 
 
 
 
 
/s/ Robert Kraft
  
Director
 
February 27, 2015
Robert Kraft
  
 
 
 
 
 
 
 
 
/s/ AB Krongard
  
Director
 
February 27, 2015
AB Krongard
  
 
 
 
 
 
 
/s/ Pauline Richards
  
Director
 
February 27, 2015
Pauline Richards
  
 
 
 


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