Edgar Filing: Apollo Global Management LLC

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-35107

APOLLO GLOBAL MANAGEMENT, LLC

(Exact name of Registrant as specified in its charter)

Delaware

20-8880053

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9 West 57th Street, 43rd Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 515-3200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 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”, “accelerate filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

As of August 9, 2011 there were 121,798,795 Class A shares and 1 Class B share outstanding.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS		6

	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Financial Condition (Unaudited) as of June 30, 2011 and December 31, 2010		6

	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2011 and 2010		7

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended June 30, 2011 and 2010		8

	Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the Six Months Ended June 30, 2011 and 2010		9

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2011 and 2010		10

	Notes to Condensed Consolidated Financial Statements (Unaudited)		12

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		65

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		118

ITEM 4.	CONTROLS AND PROCEDURES		120

PART II	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		121

ITEM 1A.	RISK FACTORS		121

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		121

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		122

ITEM 4.	(REMOVED AND RESERVED)		122

ITEM 5.	OTHER INFORMATION		122

ITEM 6.	EXHIBITS		123

SIGNATURES			127

-2-

Forward-Looking Statements

This quarterly report may contain forward looking statements that are within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, discussions related to Apollo’s expectations regarding the performance of its business, its liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this quarterly report, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new private equity, capital markets 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 the Company’s prospectus filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) of the Securities Act of 1933 on March 30, 2011, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in 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.

-3-

In this quarterly report, references to “Apollo,” “we,” “us,” “our” and the “company” refer collectively to Apollo Global Management, LLC and its subsidiaries, including the Apollo Operating Group and all of its subsidiaries.

“Apollo funds” and “our funds” refer to the funds, alternative asset companies and other entities that are managed by the Apollo Operating Group. “Apollo Operating Group” refers to:

(i)

the limited partnerships through which our managing partners currently operate our businesses and;

(ii)

one or 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”

“AMH” refers to Apollo Management Holdings, L.P., a Delaware limited partnership owned by APO Corp. and Holdings. “APO Corp.” refers to APO Corp., a Delaware corporation and a wholly-owned subsidiary of Apollo Global Management, LLC. “Holdings” means AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership through which our managing partners and our contributing partners hold their Apollo Operating Group units; “managing partners” refers 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; “our manager” means AGM Management, LLC, a Delaware limited liability company that is controlled by our managing partners.

“AAA” refers to AP Alternative Assets, L.P., a Guernsey limited partnership that generally invests alongside certain of our private equity funds and directly in certain of our capital markets funds and in other transactions that we sponsor and manage; the common units of AAA are listed on NYSE Euronext in Amsterdam, which we refer to as “Euronext Amsterdam”; “AAA Investments” refers to AAA Investments, L.P., a Guernsey limited partnership through which AAA’s investments are made.

Assets Under Management,” or “AUM,” refers to the assets we manage or with respect to which we have control, including capital we have the right to call from our investors pursuant to their capital commitments to various funds. Our AUM equals the sum of:

(i)

the fair value of our private equity investments plus the capital that we are entitled to call from our investors pursuant to the terms of their capital commitments plus non-recallable capital to the extent a fund is within the commitment period in which management fees are calculated based on total commitments to the fund;

(ii)

the net asset value, or “NAV,” of our capital markets funds, other than certain senior credit funds, which are structured as collateralized loan obligations (such as Artus, which we measure by using the mark-to-market value of the aggregate principal amount of the underlying collateralized loan obligations), plus used or available leverage and/or capital commitments;

(iii)

the gross asset values of our real estate entities and the structured portfolio vehicle investments included within the funds we manage, which includes the leverage used by such structured portfolio vehicles;

(iv)

the incremental value associated with the reinsurance investments of the funds we manage; and

(v)

the fair value of any other assets that we manage plus unused credit facilities, including capital commitments for investments that may require pre-qualification before investment plus any other capital commitments available for investment that are not otherwise included in the clauses above.

Fee-generating AUM consists of assets that we manage and on which we earn management fees or monitoring fees pursuant to management agreements on a basis that varies among the Apollo funds. Management fees are normally based on “net asset value,” “gross assets,” “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 for AUM purposes are based on the total value of certain structured portfolio vehicle investments, which normally include leverage, less any portion of such total value that is already considered in fee-generating AUM.

-4-

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 vehicle investments that do not generate monitoring fees and (f) the difference between gross assets and net asset value for those funds that earn management fees based on net asset value. We use non-fee generating AUM combined with fee generating AUM as a performance measurement of our investment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs. Non-fee generating AUM includes assets on which we could earn carried interest income.

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.

-5-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED

STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(dollars in thousands, except share data)


	June 30, 2011			December 31, 2010
Assets:
Cash and cash equivalents	$	837,040		$	382,269
Cash and cash equivalents held at Consolidated Funds		46			—
Restricted cash		7,218			6,563
Investments		2,181,439			1,920,553
Assets of consolidated variable interest entities
Cash and cash equivalents		194,972			87,556
Investments, at fair value		1,070,125			1,342,611
Other assets		17,877			36,754
Carried interest receivable		2,201,009			1,867,073
Due from affiliates		133,569			144,363
Fixed assets, net		50,500			44,696
Deferred tax assets		566,843			571,325
Other assets		23,258			35,141
Goodwill		48,894			48,894
Intangible assets, net		56,937			64,574

Total Assets	$	7,389,727		$	6,552,372


Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	28,036		$	31,706
Accrued compensation and benefits		71,955			54,057
Deferred revenue		241,603			251,475
Due to affiliates		468,388			517,645
Profit sharing payable		836,543			678,125
Debt		738,784			751,525
Liabilities of consolidated variable interest entities
Debt, at fair value		1,174,568			1,127,180
Other liabilities		98,410			33,545
Other liabilities		26,396			25,695

Total Liabilities		3,684,683			3,470,953


Commitments and Contingencies (see note 12)

Shareholders’ Equity:
Apollo Global Management, LLC shareholders’ equity:
Class A shares, no par value, unlimited shares authorized, 121,721,490 shares and 97,921,232 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		—			—
Class B shares, no par value, unlimited shares authorized, 1 share issued and outstanding at June 30, 2011 and December 31, 2010		—			—
Additional paid-in-capital		2,757,158			2,078,890
Accumulated deficit		(1,959,696	)		(1,937,818	)
Appropriated partners’ capital		1,728			11,359
Accumulated other comprehensive loss		(1,247	)		(1,529	)

Total Apollo Global Management, LLC shareholders’ equity		797,943			150,902
Non-Controlling Interests in consolidated entities		1,774,151			1,888,224
Non-Controlling Interests in Apollo Operating Group		1,132,950			1,042,293

Total Shareholders’ Equity		3,705,044			3,081,419

Total Liabilities and Shareholders’ Equity	$	7,389,727		$	6,552,372

See accompanying notes to condensed consolidated financial statements.

-6-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars in thousands, except share data)


	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Revenues:
Advisory and transaction fees from affiliates	$	23,556		$	26,844		$	42,972		$	37,913
Management fees from affiliates		121,187			106,112			239,337			209,916
Carried interest income (loss) from affiliates		164,133			(53,676	)		722,909			55,045

Total Revenues		308,876			79,280			1,005,218			302,874


Expenses:
Compensation and benefits:
Equity-based compensation		287,358			279,960			570,965			553,606
Salary, bonus and benefits		64,286			60,289			136,355			120,059
Profit sharing expense		70,733			(32,566	)		287,818			5,950
Incentive fee compensation		(3,594	)		6,314			6,565			9,259

Total Compensation and Benefits		418,783			313,997			1,001,703			688,874
Interest expense		10,327			9,502			21,209			20,324
Professional fees		12,992			9,539			30,353			22,404
General, administrative and other		22,502			16,990			39,109			31,503
Placement fees		575			680			1,114			4,541
Occupancy		7,925			5,361			15,151			10,808
Depreciation and amortization		6,902			6,041			12,948			12,146

Total Expenses		480,006			362,110			1,121,587			790,600


Other Income (Loss):
Net gains (losses) from investment activities		63,311			(11,005	)		221,240			100,716
Net (losses) gains from investment activities of consolidated variable interest entities		(12,369	)		(19,432	)		4,719			(265	)
Income (loss) from equity method investments		5,370			(1,712	)		27,196			6,168
Interest income		612			300			870			662
Other income, net		13,111			25,264			21,174			21,906

Total Other Income (Loss)		70,035			(6,585	)		275,199			129,187

(Loss) income before income tax provision		(101,095	)		(289,415	)		158,830			(358,539	)
Income tax provision		(3,550	)		(12,727	)		(12,370	)		(16,782	)

Net (Loss) Income		(104,645	)		(302,142	)		146,460			(375,321	)
Net loss (income) attributable to Non-Controlling Interests		53,656			227,018			(159,293	)		239,515

Net Loss Attributable to Apollo Global Management, LLC	$	(50,989	)	$	(75,124	)	$	(12,833	)	$	(135,806	)


Dividends Declared per Class A Share	$	0.22		$	0.07		$	0.39		$	0.07


Net Loss Per Class A Share:
Net Loss Per Class A Share – Basic and Diluted	$	(0.46	)	$	(0.79	)	$	(0.19	)	$	(1.42	)

Weighted Average Number of Class A Shares – Basic and Diluted		120,963,248			96,346,032			109,652,330			96,065,452

See accompanying notes to condensed consolidated financial statements.

-7-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(dollars in thousands, except share data)


	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Net (Loss) Income	$	(104,645	)	$	(302,142	)	$	146,460		$	(375,321	)
Other Comprehensive Income, net of tax:
Net unrealized gain on interest rate swaps (net of taxes of $305 and $(1,172) for Apollo Global Management, LLC for the three months ended June 30, 2011 and June 30, 2010, respectively, and $345 and $1,021 for Apollo Global Management, LLC for the six months ended June 30, 2011 and 2010, respectively, and $0 for Non-Controlling Interests in Apollo Operating Group for both the three months and six months ended June 30, 2011 and 2010)		1,419			3,461			3,146			7,732
Net (loss) income on available-for-sale securities (from equity method investment)		(60	)		123			(109	)		123

Total Other Comprehensive Income, net of tax		1,359			3,584			3,037			7,855

Comprehensive (Loss) Income		(103,286	)		(298,558	)		149,497			(367,466	)
Comprehensive Loss (Income) attributable to Non-Controlling Interests		40,087			220,640			(171,323	)		229,681

Comprehensive Loss Attributable to Apollo Global Management, LLC	$	(63,199	)	$	(77,918	)	$	(21,826	)	$	(137,785	)

See accompanying notes to condensed consolidated financial statements.

-8-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(dollars in thousands, except share data)


	Apollo Global Management, LLC Shareholders
	Class A Shares		Class B Shares		Additional Paid-In Capital			Accumu- lated Deficit			Approp- riated Partners (Deficit) Capital			Accumu- lated Other Comprehe- nsive Loss			Apollo Global Manage- ment, LLC Total Share- holders’ (Deficit) Equity			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Apollo Operating Group			Total Shareholders’ Equity
Balance at January 1, 2010		95,624,541		1	$	1,729,593		$	(2,029,541	)	$	—		$	(4,088	)	$	(304,036	)	$	1,283,262		$	319,884		$	1,299,110
Transition adjustment relating to consolidation of variable interest entity		—		—		—			—			—			—			—			411,885			—			411,885
Capital increase related to equity-based compensation		—		—		182,898			—			—			—			182,898			—			368,966			551,864
Purchase of AAA shares		—		—		—			—			—			—			—			(740	)		—			(740	)
Capital contributions		—		—		—			—			—			—			—			15			—			15
Cash distributions		—		—		—			—			—			—			—			(11,527	)		—			(11,527	)
Dividends		—		—		(7,704	)		—			—			—			(7,704	)		(6,602	)		(16,800	)		(31,106	)
Distributions related to deliveries of Class A shares for RSUs		721,491		—		—			(773	)		—			—			(773	)		—			—			(773	)
Non-cash contributions		—		—		—			—			—			—			—			57			—			57
Non-cash distributions		—		—		—			(18	)		—			—			(18	)		(575	)		—			(593	)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities		—		—		(4,605	)		—			—			—			(4,605	)		4,605			—			—
Satisfaction of liability related to AAA RDUs		—		—		6,099			—			—			—			6,099			—			—			6,099
Net (loss) income		—		—		—			(135,806	)		(3,584	)		—			(139,390	)		110,982			(346,913	)		(375,321	)
Net income on available-for-sale securities (from equity method investment)		—		—		—			—			—			123			123			—			—			123
Net unrealized gain on interest rate swaps (net of taxes of $1,021 and $0 for Apollo Global Management, LLC and Non-Controlling Interests in Apollo Operating Group, respectively)		—		—		—			—			—			1,482			1,482			—			6,250			7,732

Balance at June 30, 2010		96,346,032		1	$	1,906,281		$	(2,166,138	)	$	(3,584	)	$	(2,483	)	$	(265,924	)	$	1,791,362		$	331,387		$	1,856,825

Balance at January 1, 2011		97,921,232		1	$	2,078,890		$	(1,937,818	)	$	11,359		$	(1,529	)	$	150,902		$	1,888,224		$	1,042,293		$	3,081,419
Issuance of Class A shares		21,500,000		—		382,488			—			—			—			382,488			—			—			382,488
Dilution impact of issuance of Class A shares		—		—		135,218			—			—			(356	)		134,862			—			(127,096	)		7,766
Capital increase related to equity-based compensation		—		—		215,391			—			—			—			215,391			—			354,916			570,307
Cash distributions		—		—		—			—			—			—			—			(308,276	)		—			(308,276	)
Dividends		—		—		(51,390	)		—			—			—			(51,390	)		(27,284	)		(93,600	)		(172,274	)
Distributions related to deliveries of Class A shares for RSUs		2,300,258		—		(683	)		(9,045	)		—			—			(9,728	)		—			—			(9,728	)
Net transfers of AAA ownership interest to (from) Non-Controlling Interests in consolidated entities		—		—		(6,601	)		—			—			—			(6,601	)		6,601			—			—
Satisfaction of liability related to AAA RDUs		—		—		3,845			—			—			—			3,845			—			—			3,845
Net (loss) income		—		—					(12,833	)		(9,631	)					(22,464	)		214,886			(45,962	)		146,460
Net loss on available-for-sale securities (from equity method investment)		—		—		—			—			—			(109	)		(109	)		—			—			(109	)
Net unrealized gain on interest rate swaps (net of taxes of $345 and $0 for Apollo Global Management, LLC and Non-Controlling Interests in Apollo Operating Group, respectively)		—		—		—			—			—			747			747			—			2,399			3,146

Balance at June 30, 2011		121,721,490		1	$	2,757,158		$	(1,959,696	)	$	1,728		$	(1,247	)	$	797,943		$	1,774,151		$	1,132,950		$	3,705,044

See accompanying notes to condensed consolidated financial statements.

-9-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands, except share data)


	Six Months Ended June 30,
	2011			2010
Cash Flows from Operating Activities:
Net income (loss)	$	146,460		$	(375,321	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity-based compensation		570,965			553,606
Depreciation		5,311			5,795
Amortization of intangible assets		7,637			6,351
Amortization of debt issuance costs		255			28
Gain from investment in HFA		(20,061	)		—
Income from equity awards received for director’s fees		(2,437	)		—
Income from equity method investments		(27,196	)		(6,168	)
Waived management fees		(15,432	)		(14,631	)
Non-cash compensation related to waived management fees		15,432			14,631
Deferred taxes, net		13,146			12,550
Loss on sale of assets		571			—
Changes in assets and liabilities:
Carried interest receivable		(333,936	)		99,159
Due from affiliates		11,203			(11,226	)
Other assets		(1,285	)		(2,110	)
Accounts payable and accrued expenses		(3,309	)		(3,801	)
Accrued compensation and benefits		21,084			39,698
Deferred revenue		(9,872	)		(50,109	)
Due to affiliates		(55,172	)		(4,850	)
Profit sharing payable		158,418			(31,261	)
Other liabilities		2,279			(600	)
Apollo Funds related:
Net realized losses (gains) from investment activities		12,619			(186	)
Net unrealized gains from investment activities		(226,369	)		(85,569	)
Net realized gains on debt		(41,819	)		(1,679	)
Net unrealized losses on debt		46,904			339
Dividends from investment activities		28,000			16,991
Cash transferred in from Metals Trading Fund		—			38,033
Change in cash held at consolidated variable interest entities		(107,416	)		(86,271	)
Purchases of investments		(840,719	)		(371,583	)
Sales of investments		1,125,468			82,972
Change in other assets		18,881			(14,986	)
Change in other liabilities		64,865			77,006

Net Cash Provided by (Used in) Operating Activities		564,475			(113,192	)

Cash Flows from Investment Activities:
Purchases of fixed assets		(12,125	)		(2,169	)
Business acquisition		—			(1,354	)
Proceeds from disposals of fixed assets		356			—
Purchase of investments in HFA (see note 3)		(52,069	)		—
Cash contributions to equity method investments		(16,518	)		(42,023	)
Cash distributions from equity method investments		31,919			17,676
Change in restricted cash		(655	)		358

Net Cash Used in Investing Activities	$	(49,092	)	$	(27,512	)

See accompanying notes to condensed consolidated financial statements.

-10-

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (UNAUDITED) (CONT’D)

(dollars in thousands, except share data)


	Six Months Ended June 30
	2011			2010
Cash Flows from Financing Activities:
Issuance of Class A shares	$	383,990		$	—
Issuance costs		(1,502	)		—
Principal repayments on debt		(1,672	)		(803	)
Distributions related to deliveries of Class A shares for RSUs		(9,045	)		(773	)
Distributions to Non-Controlling Interests in consolidated entities		(7,355	)		(11,527	)
Contributions from Non-Controlling Interests in consolidated entities		—			15
Dividends paid to Non-Controlling Interests in Apollo Operating Group		(93,600	)		(16,800	)
Dividends paid		(45,476	)		(7,704	)
Apollo Funds related:
Issuance of debt		454,356			320,154
Principal repayment of term loans		(412,057	)		(17,239	)
Purchase of AAA shares		—			(740	)
Dividends paid to Non-Controlling Interests in consolidated entities		(27,284	)		(6,602	)
Distributions paid to Non-Controlling Interests in consolidated variable interest entities		(300,921	)		—

Net Cash (Used in) Provided by Financing Activities		(60,566	)		257,981

Net Increase in Cash and Cash Equivalents		454,817			117,277
Cash and Cash Equivalents, Beginning of Period		382,269			366,226

Cash and Cash Equivalents, End of Period	$	837,086		$	483,503


Supplemental Disclosure of Cash Flow Information:
Interest paid	$	24,596		$	22,540
Interest paid by consolidated variable interest entities		10,484			4,330
Income taxes paid		6,804			4,539
Supplemental Disclosure of Non-Cash Investment Activities:
Change in accrual for purchase of fixed assets		83			749
Non-cash contributions on equity method investments		3,640			—
Non-cash distributions on equity method investments		(409	)		—
Non-cash sale of assets held-for-sale for repayment of CIT loan		(11,069	)		—
Non-cash purchases of other investments, at fair value		2,437			—
Supplemental Disclosure of Non-Cash Financing Activities:
Non-cash distributions		—			(18	)
Non-cash dividends		(5,914	)		—
Non-cash distributions to Non-Controlling Interests in consolidated entities		—			(575	)
Unrealized gain on interest rate swaps attributable to Non-Controlling Interests in Apollo Operating Group, net of taxes		2,399			6,250
Satisfaction of liability related to AAA RDUs		3,845			(6,099	)
Net transfers of AAA ownership interest to Non-Controlling Interests in consolidated entities		6,601			4,605
Net transfers of AAA ownership interest from AGM		(6,601	)		(4,605	)
Dilution impact of issuance of Class A shares		134,862			—
Dilution impact of issuance of Class A shares on Non-Controlling Interests in Apollo Operating Group		(127,096	)		—
Unrealized (loss) gain on available-for-sale securities (from equity method investment)		(109	)		123
Non-cash contributions to Non-Controlling Interests related to equity-based compensation		354,916			368,966
Unrealized gain on interest rate swaps		1,092			2,503
Deferred tax asset related to interest rate swaps		(345	)		(1,021	)
Capital increases related to equity-based compensation		215,391			182,898
Non-cash contribution from Non-Controlling Interests in consolidated entities		—			57
Tax benefits from RSU deliveries		(683	)		—
Non-cash accrued compensation related to ARI RSUs		430			421
Non-cash accrued compensation related to AAA RDUs		223			1,320
Satisfaction of liability related to repayment on CIT loan		11,069			—
Net Assets Transferred from Metals Trading Fund:
Cash		—			38,033
Other assets		—			443
Net Assets Transferred from Consolidated Variable Interest Entity:
Investments		—			1,102,114
Other assets		—			28,789
Debt		—			(706,027	)
Other liabilities		—			(12,991	)

See accompanying notes to condensed consolidated financial statements.

-11-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

1. ORGANIZATION AND BASIS OF PRESENTATION

Apollo Global Management, LLC and its consolidated subsidiaries (the “Company” or “Apollo”), is a global alternative asset manager whose predecessor was founded in 1990. Its primary business is to raise, invest and manage private equity, capital markets and real estate funds on behalf of pension and endowment funds, as well as other institutional and high net worth individual investors. For these investment and management services, Apollo receives management fees generally related to the amount of assets managed, transaction and advisory fees for the investments made and carried interest income related to the performance of the respective funds that it manages. Apollo has three primary business segments:

•

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

•

Capital markets—primarily invests in non-control debt and non-control equity investments, including distressed debt securities; and

•

Real estate—primarily invests in legacy commercial mortgage-backed securities, commercial first mortgage loans, mezzanine investments and other commercial real estate-related debt investments. The Company may seek to sponsor additional real estate funds that focus on opportunistic investments in distressed debt and equity recapitalization transactions.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and instructions to Form 10-Q. The condensed consolidated financial statements and these notes are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which the Company is considered the primary beneficiary, and certain entities which are not considered variable interest entities but in which the Company has a controlling financial interest. Intercompany accounts and transactions have been eliminated upon consolidation. These condensed consolidated financial statements should be read in conjunction with the consolidated statements of the Company for the year ended December 31, 2010 included in the Company’s prospectus dated March 29, 2011 filed with the Securities and Exchange Commission on March 30, 2011.

Reorganization 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 “Reorganization”). The Company is managed and operated by its manager, AGM Management, LLC, which in turn is wholly owned and controlled by Leon Black, Joshua Harris and Marc Rowan (the “Managing Partners”).

As of June 30, 2011, the Company owned, through three intermediate holding companies that include APO Corp. (“APO Corp”), a Delaware corporation that is a domestic corporation for U.S. Federal income tax purposes, APO Asset Co., LLC (“APO Asset”), a Delaware limited liability company that is a disregarded entity for U.S. Federal income tax purposes, and APO (FC), LLC (“APO (FC)”), an Anguilla limited liability company that is treated as a corporation for U.S Federal income tax purposes (collectively, the “Intermediate Holding Companies”), 33.7% of the economic interests of, and operated and controlled all of the businesses and affairs of, the Apollo Operating Group as general partners.

AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partners and the contributing partners (the “Contributing Partners”) hold Apollo Operating Group Units (“AOG Units”) that represent 66.3% of the economic interests in the Apollo Operating Group as of June 30, 2011. The Company consolidates the financial results of the Apollo Operating Group and its consolidated subsidiaries. Holdings’ ownership interest in the Apollo Operating Group is reflected as a Non-Controlling Interest in the accompanying condensed consolidated financial statements.

-12-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Apollo also entered into an exchange agreement with Holdings that allows the partners in Holdings, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Apollo Operating Group, to exchange their AOG Units for the Company’s Class A shares on a one-for-one basis up to four times each year, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. A limited partner must exchange one partnership unit in each of the ten Apollo Operating Group partnerships to effect an exchange for one Class A share.

Initial Public Offering—On April 4, 2011, the Company completed the initial public offering (“IPO”) of its Class A shares, representing limited liability company interests of the Company. AGM received net proceeds from the initial public offering of approximately $382.5 million, which was used to acquire additional AOG Units. As a result, Holdings ownership interest in the Apollo Operating Group decreased from 70.7% to 66.5% and the Company’s ownership interest increased from 29.3% to 33.5%. As such, the difference between the fair value of the consideration paid for the Apollo Operating Group level ownership interest and the book value on the date of the IPO is reflected in Additional Paid in Capital.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—Apollo consolidates those entities it controls through a majority voting interest or through other means, including those funds in which the general partner is presumed to have control over them (e.g., AP Alternative Assets, L.P. (“AAA”)). Apollo also consolidates entities that are VIEs for which Apollo is the primary beneficiary. Under the amended consolidation rules, an enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity’s business and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

Certain of our subsidiaries hold equity interests in and/or receive fees qualifying as variable interests from the funds that the Company manages. The amended consolidation rules require an analysis to determine whether (a) an entity in which Apollo holds a variable interest is a VIE and (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., carried interest and management fees), would give it a controlling financial interest. When the VIE has qualified for the deferral of the amended consolidation rules in accordance with U.S. GAAP, the analysis is based on previous consolidation rules, which require an analysis to determine whether (a) an entity in which Apollo holds a variable interest is a VIE and (b) Apollo’s involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., carried interest and management fees), would be expected to absorb a majority of the variability of the entity.

Under both guidelines, the determination of whether an entity in which Apollo holds a variable interest is a VIE requires judgments which include determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, determining whether two or more parties’ equity interests should be aggregated, and determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity. Under both guidelines, Apollo determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion continuously. The consolidation analysis can generally be performed qualitatively. However, if it is not readily apparent whether Apollo is the primary beneficiary, a quantitative expected losses and expected residual returns calculation will be performed. Investments and redemptions (either by Apollo, affiliates of Apollo or third parties) or amendments to the governing documents of the respective Apollo fund may affect an entity’s status as a VIE or the determination of the primary beneficiary.

Apollo assesses whether it is the primary beneficiary and will consolidate or deconsolidate the entity accordingly. Performance of that assessment requires the exercise of judgment. Where the variable interests have qualified for the deferral, judgments are made in estimating cash flows in evaluating which member within the equity group absorbs a majority of the expected profits or losses of the VIE. Where the variable interests have not qualified for the deferral, judgments are made in determining whether a member in the equity group has a controlling financial interest including power to direct activities that most significantly impact the VIE’s economic performance and rights to receive benefits or obligations to absorb losses that are potentially significant to the VIE. Under both guidelines, judgment is made in evaluating the nature of the relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE. The use of these judgments has a material impact to certain components of Apollo’s condensed consolidated financial statements.

-13-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Assets and liability amounts of the consolidated VIEs are shown in separate sections within the condensed consolidated statement of financial condition.

Refer to additional disclosures regarding VIEs in note 4. Intercompany transactions and balances, if any, have been eliminated in the 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 these entities. Income (loss) from equity method investments is recognized as part of other income (loss) in the condensed 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 condensed consolidated statement of comprehensive income (loss) . The carrying amounts of equity method investments are reflected in investments in the condensed consolidated statements of financial condition. As the underlying entities that the Company manages and invests in are, for U.S. GAAP purposes, investment companies which reflect their investments at estimated fair value, the carrying value of the Company’s equity method investments in such entities are at fair value.

Non-Controlling Interest—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 Interest in the condensed consolidated financial statements. The Non-Controlling Interests relating to Apollo Global Management, LLC primarily includes the 66.3% 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 approximate 98% ownership interest held by limited partners in AAA as of June 30, 2011. 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 condensed consolidated financial statements requires reporting entities to present Non-Controlling Interest as equity and provides guidance on the accounting for transactions between an entity and Non-Controlling Interests. According to the guidance, (1) Non-Controlling Interests are presented as a separate component of shareholders’ equity on the company’s condensed consolidated statements of financial condition, (2) net income (loss) includes the net income (loss) attributed to the Non-Controlling Interest holders on the company’s condensed consolidated statements of operations, (3) the primary components of Non-Controlling Interest are separately presented in the company’s condensed consolidated statements of changes in shareholders’ equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities and (4) profits and losses are allocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis.

Revenues—Revenues are reported in three separate categories that include (i) advisory and transaction fees from affiliates, which relate to the investments of the funds and may include individual monitoring agreements with the portfolio companies and debt investment vehicles of the private equity funds and capital markets 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—Advisory and transaction fees, including directors’ fees are recognized when the underlying services rendered are substantially completed in accordance with the terms of their transaction and advisory agreements. Additionally, during the normal course of business, the Company incurs certain costs related to private equity fund transactions that are not consummated (“Broken Deal Costs”).

As a result of providing advisory services to certain private equity and capital markets portfolio companies, Apollo is entitled to receive fees for transactions related to the acquisition and disposition of portfolio companies as well as ongoing monitoring of portfolio company operations. The amounts due from portfolio companies are included in “Due from Affiliates,” which is discussed further in note 11. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds is 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 in the condensed consolidated statements of operations.

-14-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Management Fees from Affiliates—Management fees for private equity funds, real estate funds and certain capital markets funds are recognized in the period during which the related services are performed in accordance with the contractual terms of the related agreement. Management fees for private equity funds and certain capital markets funds are based upon a percentage of the capital committed during the commitment period, and thereafter based on the remaining invested capital of unrealized investments. For most capital markets funds, management fees are recognized in the period during which the related services are performed and are based upon 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 funds’ 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 condensed consolidated statements of financial condition. The net carried interest income 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.

Compensation and Benefits

The components of compensation and benefits have been expanded for the three and six month periods ended June 30, 2010 to conform with the 2011 presentation.

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 of equity instruments generally be 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 the affiliates are remeasured to fair value at the end of each reporting period and expensed over the relevant service period.

Salaries, Bonus and Benefits—Salaries, bonus and benefits includes base salaries, discretionary and non-discretionary bonuses, severance and employee benefits. Bonuses are accrued over the service period.

From time to time, the Company may assign profits interests received in lieu of management fees to certain investment professionals. Such assignments of profits interests are treated as compensation and benefits when assigned.

The Company sponsors a 401(k) Savings Plan whereby U.S.-based employees are entitled to participate in the plan based upon satisfying 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 six months ended June 30, 2011 and 2010, respectively.

Profit Sharing Expense—Profit sharing expense consists of a portion of carried interest earned in one or more funds allocated to employees and former employees. Profit sharing expense is recognized as the related carried interest income is recognized. Profit sharing expense can be reversed during periods when there is a decline in carried interest income that was previously recognized.

In June 2011, the Company adopted a performance based bonus arrangement for certain Apollo partners and employees designed to more closely align compensation on an annual basis with the overall performance of the Company. This arrangement enables certain partners and employees to earn discretionary bonuses based on carried interest realizations earned by the Company in a given year which amounts are reflected as profit sharing expense in the accompanying condensed consolidated financial statements.

-15-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Incentive Fee Compensation—Certain employees are entitled to receive a discretionary portion of incentive fee income from certain of our capital markets funds, based on performance for the year. Incentive fee compensation expense is recognized on accrual basis as the related carried interest income is earned. Incentive fee compensation expense may be subject to reversal during the interim period where there is a decline in the related carried interest income, however it is not subject to reversal once the carried interest income crystallizes.

Other Income (Loss)

Net Gains (Losses) from Investment Activities—Net gains (losses) from investment activities include both realized gains and losses and the change in unrealized gains and losses in the Company’s investment portfolio between the opening balance sheet date and the closing balance sheet date. Net unrealized gains (losses) are a result of changes in the fair value of investments that have not been realized as of the balance sheet date. The condensed consolidated financial statements include the net realized and unrealized gains (losses) of AAA, the Apollo fund that was consolidated during the six months ended June 30, 2011 and 2010 and the investment in HFA Holdings Limited (“HFA”) (see note 3).

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

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 fair value option was elected and the unrealized gains and losses resulting from changes in the fair value are reflected as net gains from investment activities and net gains from investment activities of the consolidated variable interest entities, respectively, in the condensed 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 partnership interests in corporate private equity and real estate funds, mezzanine funds, funds of hedge funds, distressed debt and non-investment grade residual interests in securitizations and collateralized debt obligations 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. Some of the factors we consider include the number of broker quotes we obtain, 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 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.

-16-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

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 last sales price on the date of determination.

Valuation approaches used to estimate the fair value of investments that are less liquid include the income approach and the market approach. 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 used 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. 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 of actual trading levels of similar companies and actual transaction data of similar companies. 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 information and assumptions, general economic and market conditions and other factors deemed relevant. As part of management’s process, the Company utilizes a valuation committee to review and approve the valuations. 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.

Capital Markets Investments—The majority of the investments in Apollo’s capital markets funds are valued using quoted market prices. 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. The capital markets funds also enter into foreign currency exchange 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. 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 credit default 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 investments included in Apollo’s capital markets funds also may use the income approach or market approach. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.

Real Estate Investments—For Apollo’s CMBS portfolio, the estimated fair value 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 in accordance with U.S. GAAP. Loans that the funds plan to sell or liquidate in the near term will be treated as loans held-for-sale and will be held at the lower of cost or fair value. For Apollo’s illiquid investments, 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. For portfolio or operating company investments, valuations may also incorporate the use of sales comparisons, valuing statistically meaningful samples, and the use of other techniques such as earnings multiples of similar companies due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the value of investments by certain of our real estate funds may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

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 amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

-17-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Except for the Company’s debt obligation related to the AMH Credit Agreement (as defined in note 8), Apollo’s financial instruments are recorded at fair value or at amounts whose carrying value approximates 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. Other 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. As disclosed in note 8, the Company’s long term debt obligation related to the AMH Credit Agreement is believed to have an estimated fair value of approximately $743.4 million based on a yield analysis using available market data of comparable securities with similar terms and remaining maturities. However, the carrying value that is recorded on the condensed consolidated statement of financial condition is the amount for which we expect to settle the long term debt obligation.

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 of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among other factors.

The consolidated VIEs also have debt obligations that are recorded at fair value. The valuation approach used to estimate the fair values of debt obligations 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 has elected the fair value option 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 these entities that otherwise would not have been carried at fair value. Refer to note 4 for further disclosure on financial instruments of the consolidated VIEs for which the fair value option has been elected.

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 dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends 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 common 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. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding common shares and all potential common shares assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential common shares.

Use of Estimates—The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimates include goodwill, intangible assets, income taxes, carried interest income from affiliates, non-cash compensation and fair value of investments and debt in the consolidated and unconsolidated funds and VIEs. Actual results could differ materially from those estimates.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Recent Accounting Pronouncements

In April 2011, the FASB amended existing guidance for agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The amendments remove from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee and the collateral maintenance implementation guidance related to that criterion. The guidance is effective for the first interim or annual period beginning on or after December 15, 2011 and is to be applied prospectively. The adoption of this guidance is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In May 2011, the FASB issued an update which includes amendments that result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Certain of the amendments could change how the fair value measurement guidance is applied including provisions related to highest and best use and valuation premise for nonfinancial assets, application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk, premiums or discounts in fair value measurement, fair value of an instrument classified in a reporting entity’s shareholders’ equity, and additional disclosure requirements about fair value measurements. The update is effective for interim and annual periods beginning after December 15, 2011 for public entities to be applied prospectively. The Company is currently evaluating the impact that this guidance will have on its condensed consolidated financial statements.

In June 2011, the FASB issued an update which includes amendments that eliminate the option to present components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity and requires entities to report components of other comprehensive income in either (1) a single continuous statement of comprehensive income or (2) two separate but consecutive statements. In a single continuous statement, entities must include the components of net income, a total for net income, the components of OCI, a total for OCI, and a total for comprehensive income. Under the two separate but continuous statements approach, the first statement would include components of net income, consistent with the income statement format used today, and the second statement would include components of OCI. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For all entities, the amendments must be applied retrospectively for all periods presented and do not require any transition disclosures. The adoption of this guidance will not have an impact on the Company’s condensed consolidated financial statements as the Company presents a separate statement of comprehensive income.

3. INVESTMENTS

The following table represents Apollo’s investments:


	June 30, 2011		December 31, 2010
Investments, at fair value	$	1,883,075	$	1,637,091
Other investments		298,364		283,462

Total Investments	$	2,181,439	$	1,920,553

Investments at Fair Value

Investments at fair value consist of financial instruments held by AAA, consolidated VIEs and other investments as discussed further in note 4, the investment in HFA and other investments held at fair value. As of June 30, 2011 and December 31, 2010, the net assets of the consolidated funds and VIEs were $1,819.1 million and $1,951.6 million, respectively. The following investments, except the investment in HFA and other investments, are presented as a percentage of net assets of the consolidated funds and VIEs:

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)


Investments, at Fair Value – Affiliates	June 30, 2011											December 31, 2010
	Fair Value						Cost		% of Net Assets of Consolidated Funds and VIEs			Fair Value						Cost		% of Net Assets of Consolidated Funds and VIEs
	Private Equity		Capital Markets		Total		Cost					Private Equity		Capital Markets		Total		Cost		% of Net Assets of Consolidated Funds and VIEs
Investments, at fair value:
AAA	$	1,810,577	$	—	$	1,810,577	$	1,668,299		99.5	%	$	1,637,091	$	—	$	1,637,091	$	1,695,992		83.9	%
HFA		—		70,061		70,061		52,069		—	⁽¹⁾		—		—		—		—		—
Other		2,437		—		2,437		2,437		—	⁽¹⁾		—		—		—		—		—

Total	$	1,813,014	$	70,061	$	1,883,075	$	1,722,805		99.5	%	$	1,637,091	$	—	$	1,637,091	$	1,695,992		83.9	%

(1)	Investments were not held by a consolidated fund or consolidated VIEs.

Securities

At June 30, 2011 and December 31, 2010, the sole investment of AAA was its investment in AAA Investments, L.P. (“AAA Investments”). The following tables represent each investment of AAA Investments constituting more than five percent of the net assets of the consolidated funds and VIEs as of the aforementioned dates:


	June 30, 2011
	Instrument Type	Cost		Fair Value		% of Net Assets of Consolidated Funds and VIEs
Apollo Life Re Ltd.	Equity	$	201,098	$	278,700		15.3	%
Momentive Performance Materials Holdings Inc.	Equity		76,007		184,323		10.1
Apollo Strategic Value Offshore Fund, Ltd.	Investment Fund		113,772		172,258		9.5
Rexnord Corporation	Equity		37,461		138,700		7.6
Charter Communications, Inc.	Equity		44,585		124,075		6.8
LeverageSource, L.P.	Equity		139,851		120,060		6.6
Apollo Asia Opportunity Offshore Fund, Ltd.	Investment Fund		96,357		101,281		5.6
Caesars Entertainment Corporation	Equity		176,729		95,100		5.2


	December 31, 2010
	Instrument Type	Cost		Fair Value		% of Net Assets of Consolidated Funds and VIEs
Apollo Life Re Ltd.	Equity	$	201,098	$	249,900		12.8	%
Apollo Strategic Value Offshore Fund, Ltd.	Investment Fund		113,772		160,262		8.2
Momentive Performance Materials Holdings Inc.	Equity		76,007		137,992		7.1
Rexnord Corporation	Equity		37,461		133,700		6.9
LeverageSource, L.P.	Equity		140,743		115,677		5.9
Apollo Asia Opportunity Offshore Fund, Ltd.	Investment Fund		102,530		110,029		5.6
Caesars Entertainment Corporation	Equity		176,729		99,000		5.1

In addition to AAA Investments’ private equity co-investment in Caesars Entertainment Corporation (formerly known as Harrah’s Entertainment, Inc.) (“Caesars”), as shown in the tables above, AAA Investments has an ownership interest in LeverageSource, L.P., which owns Caesars’ debt. AAA Investments’ combined share of these debt and equity investments is greater than 5% of the net asset of the consolidated funds and VIEs and is valued at $98.8 million and $102.8 million at June 30, 2011 and December 31, 2010, respectively. In addition to AAA Investments’ private equity co-investment in Momentive Performance Materials Holdings Inc. (“Momentive”) noted above, AAA Investments has an ownership interest in the debt of Momentive. AAA Investments’ combined share of these debt and equity investments is greater than 5% of the net assets of consolidated funds and VIEs and is valued at $185.1 million and $138.8 million at June 30, 2011 and December 31, 2010, respectively. Furthermore, AAA Investments owns equity, as a private equity co-investment, and debt, through its investment in Autumnleaf, L.P. and Apollo Fund VI BC, L.P., in CEVA Logistics. AAA Investments’ combined share of CEVA Logistics’ debt and equity investments was greater than 5% of the net assets of consolidated funds and was valued at $165.2 million and $124.6 million as of June 30, 2011 and December 31, 2010, respectively.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Apollo Strategic Value Offshore Fund, Ltd. (the “Apollo Strategic Value Fund”) primarily invests in the securities of leveraged companies in North America and Europe through three core strategies: distressed investments, value-driven investments and special opportunities. In connection with the redemptions requested by AAA Investments of its investment in the Apollo Strategic Value Fund, the remainder of AAA Investments’ investment in the Apollo Strategic Value Fund, was converted into liquidating shares issued by the Apollo Strategic Value Fund. The liquidating shares are generally allocated a pro rata portion of each of Apollo Strategic Value Fund’s existing investments and liabilities, and as those investments are sold, AAA Investments is allocated the proceeds from such disposition less its proportionate share of any expenses incurred by the Apollo Strategic Value Fund.

Apollo Asia Opportunity Offshore Fund, Ltd. (“Asia Opportunity Fund”) is an investment vehicle that seeks to generate attractive risk-adjusted returns across market cycles by capitalizing on investment opportunities created by the increasing demand for capital in the rapidly expanding Asian markets. In connection with a redemption requested by AAA Investments of its investment in Asia Opportunity Fund, a portion of AAA Investments’ investment was converted into liquidating shares issued by the Asia Opportunity Fund. The liquidating shares are generally allocated a pro rata portion of each of Asia Opportunity Fund’s existing investments and liabilities, and as those investments are sold, AAA Investments is allocated the proceeds from such disposition less its proportionate share of any expenses incurred or reserves set by Asia Opportunity Fund. At June 30, 2011, the liquidating shares of Asia Opportunity Fund had a fair value of $38.6 million.

Apollo Life Re Ltd. is an Apollo-sponsored vehicle that owns the majority of the equity of Athene Holding Ltd., the parent of Athene Life Re Ltd. (“Athene”), a Bermuda-based reinsurance company focusing on the life reinsurance sector, Liberty Life Insurance Company, a recently acquired South Carolina-domiciled stock life insurance company focused on retail sales and reinsurance in the retirement services market, and Athene Life Insurance Company, a recently organized Indiana-domiciled stock life insurance company focused on the Institutional Guaranteed Investment Contracts (GIC)-backed note and funding agreement markets.

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 specialist global funds management company providing absolute return fund products to investors.

The terms of the convertible note allow the Company to convert the note, in whole or in part, into common shares of HFA at an exchange rate equal to the principal plus accrued payment-in-kind interest (or “PIK” interest) divided by US$0.98 at any time, and convey participation rights, on an as-converted basis, in any dividends declared in excess of $6.0 million per annum, as well as seniority rights over HFA common equity holders. Unless previously converted, repurchased or cancelled, the note shall be converted on the eighth anniversary of its issuance. Additionally, the note has a percentage coupon interest of 6% per annum, paid via principal capitalization (PIK interest) for the first four years, and thereafter either in cash or via principal capitalization at HFA’s discretion. The PIK provides for the Company to receive additional common shares of HFA if the note is converted. The Company has elected the fair value option for the convertible note. The convertible note was valued using an as “if-converted basis”. The terms of the stock options allow for the Company to acquire 20,833,333 fully paid ordinary shares of HFA at an exercise price in Australian Dollars (“A$”) of A$8.00 (exchange rate of A$1.00 to $1.07 as of June 30, 2011) per stock option. The stock options became exercisable upon issuance and expire on the eighth anniversary of the issuance date. The stock options are accounted for as a derivative and are valued at their fair value under U.S. GAAP at each balance sheet date. As a result, for the three and six months ended June 30, 2011, the Company recorded an unrealized gain of approximately $2.2 million and $20.1 million, respectively, related to the convertible note and stock options within net gains (losses) from investment activities in the condensed consolidated statements of operations.

The Company has classified all instruments associated with the HFA investment as Level III.

-21-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Net Gains (Losses) from Investment Activities

Net gains (losses) from investment activities in the condensed consolidated statements of operations include net realized gains from sales of investments, and the change in net unrealized gains (losses) resulting from changes in fair value of the affiliated funds’ investments and realization of previously unrealized gains (losses). The following tables present Apollo’s net gains (losses) from investment activities for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended June 30, 2011
	Private Equity			Capital Markets			Total
Net unrealized gains due to changes in fair value	$	61,079		$	2,232		$	63,311

Net Gains from Investment Activities	$	61,079		$	2,232		$	63,311


	Three Months Ended June 30, 2010
	Private Equity			Capital Markets			Total
Net unrealized losses due to changes in fair value	$	(9,961	)	$	(1,044	)	$	(11,005	)

Net Losses from Investment Activities	$	(9,961	)	$	(1,044	)	$	(11,005	)


	Six Months Ended June 30, 2011
	Private Equity		Capital Markets			Total
Net unrealized gains due to changes in fair value	$	201,179	$	20,061		$	221,240

Net Gains from Investment Activities	$	201,179	$	20,061		$	221,240


	Six Months Ended June 30, 2010
	Private Equity		Capital Markets			Total
Net unrealized gains (losses) due to changes in fair value	$	102,990	$	(2,274	)	$	100,716

Net Gains (Losses) from Investment Activities	$	102,990	$	(2,274	)	$	100,716

Other Investments

Other Investments primarily consist of equity method investments. Apollo’s share of operating income (loss) generated by these investments is recorded within income from equity method investments in the condensed consolidated statements of operations.

-22-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Income (loss) from equity method investments for the three and six months ended June 30, 2011 and 2010 consisted of the following:


	For the Three Months Ended June 30						For the Six Months Ended June 30,
	2011			2010			2011			2010
Investments:
Private Equity Funds:
AAA Investments	$	39		$	(3	)	$	119		$	64
Apollo Investment Fund IV, L.P. (“Fund IV”)		2			13			12			16
Apollo Investment Fund V, L.P. (“Fund V”)		12			(12	)		17			25
Apollo Investment Fund VI, L.P. (“Fund VI”)		222			139			2,896			(241	)
Apollo Investment Fund VII, L.P. (“Fund VII”)		3,295			2,655			13,665			2,703
Capital Markets Funds:
Apollo Special Opportunities Managed Account, L.P.		(152	)		114			142			321
Apollo Value Investment Fund, L.P.		(11	)		7			4			13
Apollo Strategic Value Fund, L.P.		(6	)		(1	)		3			8
Apollo Credit Liquidity Fund, L.P.		(197	)		(1,563	)		496			(1,088	)
Apollo/Artus Investors 2007-I, L.P.		(97	)		487			369			1,191
Apollo Credit Opportunity Fund I, L.P. (“COF I”)		175			(1,190	)		4,360			(2,130	)
Apollo Credit Opportunity Fund II, L.P. (“COF II”)		323			(363	)		938			172
Apollo European Principal Finance Fund, L.P.		1,516			357			2,863			1,960
Apollo Investment Europe II, L.P.		235			(569	)		1,410			(111	)
Apollo Palmetto Strategic Partnership, L.P.		173			11			521			133
Real Estate:
Apollo Commercial Real Estate Finance, Inc.		175			263			312			120
CPI Capital Partners NA Fund		81			—			81			—
CPI Capital Partners Asia Pacific Fund		14			—			14			—
Other Equity Method Investments:
VC Holdings, L.P. Series A (“Vantium A”)		(683	)		(96	)		(1,306	)		(526	)
VC Holdings, L.P. Series C (“Vantium C”)		174			(2,010	)		220			3,514
VC Holdings, L.P. Series D (“Vantium D”)		80			49			60			24

Total Income (loss) from Equity Method Investments	$	5,370		$	(1,712	)	$	27,196		$	6,168

-23-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Other investments as of June 30, 2011 and December 31, 2010 consisted of the following:


	Equity Held as of
	June 30, 2011			% of Ownership			December 31, 2010			% of Ownership
Investments:
Private Equity Funds:
AAA Investments	$	1,034			0.056	%	$	929			0.056	%
Fund IV		28			0.006			48			0.005
Fund V		228			0.013			231			0.013
Fund VI		8,531			0.069			5,860			0.051
Fund VII		129,482			1.333			122,384			1.345
Capital Markets Funds:
Apollo Special Opportunities Managed Account, L.P.		5,992			0.540			5,863			0.537
Apollo Value Investment Fund, L.P.		157			0.084			152			0.085
Apollo Strategic Value Fund, L.P.		146			0.055			144			0.055
Apollo Credit Liquidity Fund, L.P.		15,780			2.305			18,736			2.450
Apollo/Artus Investors 2007-I, L.P.		6,441			6.156			7,143			6.156
Apollo Credit Opportunity Fund I, L.P.		44,234			1.957			41,793			1.949
Apollo Credit Opportunity Fund II, L.P		26,257			1.446			27,415			1.441
Apollo European Principal Finance Fund, L.P.		17,192			1.363			15,352			1.363
Apollo Investment Europe II, L.P.		9,563			2.051			8,154			2.045
Apollo Palmetto Strategic Partnership, L.P.		7,228			1.186			6,403			1.186
Apollo Senior Floating Rate Fund (“AFT”)		100			0.034			—			—
Apollo/JH Loan Portfolio, L.P.		100			0.191			—			—
Apollo Residential Mortgage, Inc.		1			—			—			—
Real Estate:
Apollo Commercial Real Estate Finance, Inc.		9,195	⁽²⁾		3.198	⁽²⁾		9,440	⁽¹⁾		3.198	⁽¹⁾
AGRE U.S. Real Estate Fund		5,963			5.892			—			—
CPI Capital Partners NA Fund		592			0.332			—			—
CPI Capital Partners Europe Fund		5			0.001			—			—
CPI Capital Partners Asia Pacific Fund		227			0.040			—			—
Other Equity Method Investments:
Vantium A		914			14.773			2,219			12.240
Vantium C		7,853			2.163			10,135			2.166
Vantium D		1,121			6.345			1,061			6.345

Total Other Investments	$	298,364					$	283,462

(1)	Amounts are as of September 30, 2010.

(2)	Amounts are as of March 31, 2011.

-24-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

For the six months ended June 30, 2011, four equity method investees held by Apollo individually exceeded 20% of it’s total consolidated income. As such, Apollo is required to present summarized aggregate income statement information for the four equity method investees, which is presented as follows:


	Private Equity						Capital Markets						Aggregate Totals
	For the Six Months Ended June 30,						For the Six Months Ended June 30,						For the Six Months Ended June 30,
Income Statement Information	2011			2010			2011			2010			2011			2010
Revenues/investment income	$	412,393		$	227,248		$	124,500		$	36,986		$	536,893		$	264,234
Expenses		(90,394	)		(83,609	)		(53,026	)		(42,174	)		(143,420	)		(125,783	)

Net Investment Income (Loss)		321,999			143,639			71,474			(5,188	)		393,473			138,451
Net Realized and Unrealized Gain (Loss)		1,881,709			450,192			240,929			(43,236	)		2,122,638			406,956

Net Income (Loss)	$	2,203,708		$	593,831		$	312,403		$	(48,424	)	$	2,516,111		$	545,407

Fair Value Measurements

The following table summarizes the valuation of Apollo’s investments in fair value hierarchy levels as of June 30, 2011 and December 31, 2010:


	Level I				Level II				Level III				Totals
	June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010
Assets, at fair value:
Investment in AAA Investments, L.P.	$	—	$	—	$	—	$	—	$	1,810,577	$	1,637,091	$	1,810,577	$	1,637,091
Investments in HFA and Other		—		—		—		—		72,498		—		72,498		—

Total	$	—	$	—	$	—	$	—	$	1,883,075	$	1,637,091	$	1,883,075	$	1,637,091


	Level I				Level II				Level III				Totals
	June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010
Liabilities, at fair value:
Interest rate swap agreements	$	—	$	—	$	8,475	$	11,531	$	—	$	—	$	8,475	$	11,531

Total		—	$	—		8,475	$	11,531		—	$	—		8,475	$	11,531

There were no transfers between Level I, II or III during the three and six months ended June 30, 2011 relating to assets and liabilities, at fair value, noted in the tables above.

The following table summarizes the changes in AAA Investments, which is measured at fair value and characterized as a Level III investment:


	For the Three Months Ended June 30						For the Six Months Ended June 30
	2011			2010			2011			2010
Balance, Beginning of Period	$	1,777,191		$	1,437,947		$	1,637,091		$	1,324,939
Purchases		307			286			307			343
Distributions		(28,000	)		(16,991	)		(28,000	)		(16,991	)
Change in unrealized gains (losses), net		61,079			(9,961	)		201,179			102,990

Balance, End of Period	$	1,810,577		$	1,411,281		$	1,810,577		$	1,411,281

-25-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

The following table summarizes the changes in investment in HFA and Other, which is measured at fair value and characterized as a Level III investment:


	For the Three Months Ended June 30			For the Six Months Ended June 30
	2011			2011
Balance, Beginning of Period	$	69,898		$	—
Purchases		2,437			54,506
Change in unrealized gains, net		2,232			20,061
Expenses incurred		(2,069	)		(2,069	)

Balance, End of Period	$	72,498		$	72,498

The change in unrealized gains, net have been recorded within the caption “Net gains (losses) from investment activities” in the condensed consolidated statements of operations.

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:


	Private Equity
	June 30, 2011						December 31, 2010
				% of Investment of AAA						% of Investment of AAA
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:
Comparable company and industry multiples	$	989,599			49.4	%	$	782,775			42.6	%
Discounted cash flow models		485,978			24.3			490,024			26.6
Listed quotes		297,948			14.9			24,232			1.3
Broker quotes		209,018			10.4			504,917			27.5
Other net assets⁽¹⁾		20,082			1.0			37,351			2.0

Total Investments		2,002,625			100.0	%		1,839,299			100.0	%

Other net liabilities⁽²⁾		(192,048	)					(202,208	)

Total Net Assets	$	1,810,577					$	1,637,091

(1)

Balances include other assets and liabilities of certain funds in which AAA Investments has invested. Other assets and liabilities at the fund level primarily include cash and cash equivalents, broker receivables and payables and amounts due to and from affiliates. Carrying values approximate fair value for other assets and liabilities, and accordingly, extended valuation procedures are not required.

(2)

Balances include other assets, liabilities and general partner interests of AAA Investments and are primarily comprised of $400.5 million and $537.5 million in long-term debt offset by cash and cash equivalents at the June 30, 2011 and December 31, 2010 balance sheet dates, respectively. Carrying values approximate fair value for other assets and liabilities (except for debt), and, accordingly, extended valuation procedures are not required.

-26-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

4. VARIABLE INTEREST ENTITIES

The Company consolidates entities that are VIEs of 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 and capital markets 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.

Consolidated Variable Interest Entities

In accordance with the methodology described in note 2, Apollo consolidated four VIEs under the amended consolidation guidance during 2010 and consolidated a fifth VIE during the three months ended June 30, 2011.

One of the consolidated VIEs was formed to purchase loans and bonds in a leveraged structure for the benefit of its limited partners, which included certain Apollo funds that contributed equity to the consolidated VIE. Through its role as general partner of this VIE, it was determined that Apollo had the characteristics of the power to direct the activities that most significantly impact the VIE’s economic performance. Additionally, the Apollo funds have involvement with the VIE that have the characteristics of the right to receive benefits from the VIE that could potentially be significant to the VIE. As a group, the Company and its related parties have the characteristics of a controlling financial interest. Apollo determined that it is the party within the related party group that is most closely associated with the VIE and therefore should consolidate it.

Three of the consolidated VIEs including the VIE formed during the three months ended June 30, 2011 were formed for the sole purpose of issuing collateralized notes to investors, which include one Apollo fund. 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 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 fifth VIE was formed during the fourth quarter of 2010 which qualified as an asset-backed financing entity and the Company determined that it was the primary beneficiary. Based on a restructuring of this VIE which occurred later in the fourth quarter of 2010, the Company no longer possessed the power to direct the activities of such VIE resulting in deconsolidation of such VIE in the fourth quarter of 2010.

Apollo holds no equity interest in any of the consolidated VIEs described above. 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 to 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 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 sixty days.

-27-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Fair Value Measurements

The following table summarizes the valuation of Apollo’s consolidated VIEs in fair value hierarchy levels as of June 30, 2011 and December 31, 2010:


	Level I				Level II				Level III				Totals
	June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010
Investments, at fair value⁽¹⁾⁽³⁾	$	—	$	—	$	797,134	$	1,172,242	$	272,991	$	170,369	$	1,070,125	$	1,342,611

	Level I				Level II				Level III				Totals
	June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010
Liabilities, at fair value⁽²⁾⁽³⁾	$	—	$	—	$	—	$	—	$	1,174,568	$	1,127,180	$	1,174,568	$	1,127,180

(1)

During the first quarter of 2011, one of the consolidated VIEs sold all of its investments. At December 31, 2010, the cost and fair value of the investments of this VIE were $719.5 million and $684.1 million, respectively. The consolidated VIE had a net investment gain of $16.0 million relating to the sale for the six months ended June 30, 2011, which is reflected in the net (losses) gains from investment activities of consolidated variable interest entities on the condensed consolidated statement of operations.

(2)

At December 31, 2010, the cost and fair value of the term loans were $453.9 million and $408.7 million, respectively. The term loans were paid down in the first quarter of 2011, with payments totaling $412.1 million, resulting in a gain of $41.8 million. Combined with net unrealized depreciation on the term loans of $45.2 million, as such, the consolidated VIE had a net loss on term loans of $3.4 million for the six months ended June 30, 2011, which is reflected in the net (losses) gains from investment activities of consolidated variable interest entities on the condensed consolidated statement of operations.

(3)

During the three months ended June 30, 2011, the Company consolidated another VIE which included investments and notes. At June 30, 2011, the cost and fair value of the investments of this VIE were $352.7 million and $352.4 million, respectively. At June 30, 2011, the cost and fair value of the term loans were $454.4 million and $448.9 million, respectively.

Level III investments include corporate loan and corporate bond investments held by the consolidated VIEs, while the Level III liabilities consist of notes and loans, the valuations of which are discussed further in note 2. All Level II and III investments were valued using broker quotes. Transfers of investments out of Level III and into Level II or Level I, if any, are recorded as of the quarterly period in which the transfer occurred.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

-28-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

The following table summarizes the changes in investments of consolidated VIEs, which are measured at fair value and characterized as a Level III investment:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
Balance, Beginning of Period	$	135,427		$	1,121,723		$	170,369		$	—
Transition adjustment relating to consolidation of VIE on January 1, 2010		—			—			—			1,102,114
Purchases		200,890			313,485			485,515			371,240
Sale of investments		(30,130	)		(24,128	)		(80,589	)		(82,972	)
Net realized gains		546			819			1,834			186
Net unrealized gains (losses)		268			(36,478	)		2,690			(15,147	)
Elimination of equity investment attributable to consolidated VIEs		—			(1,054	)		—			(1,054	)
Transfers out of Level III		(102,599	)		—			(398,981	)		—
Transfers into Level III		68,589			—			92,153			—

Balance, End of Period	$	272,991		$	1,374,367		$	272,991		$	1,374,367

Investments were transferred out of Level III into Level II and into Level III out of Level II, respectively as a result of subjecting the broker 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.

The following table summarizes the changes in liabilities of consolidated VIEs, which are measured at fair value and characterized as Level III liabilities:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
Balance, Beginning of Period	$	723,232		$	702,298		$	1,127,180		$	—
Transition adjustment relating to consolidation of VIE on January 1, 2010		—			—			—			706,027
Elimination of equity investments attributable to consolidated VIEs		20			(1,054	)		4			(1,054	)
Additions		454,356			320,154			454,356			320,154
Repayments		—			(3,794	)		(412,057	)		(17,239	)
Net realized gains on debt		—			(681	)		(41,819	)		(1,679	)
Net unrealized (gains) losses on debt		(3,040	)		(10,375	)		46,904			339

Balance, End of Period	$	1,174,568		$	1,006,548		$	1,174,568		$	1,006,548

-29-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Net (Losses) Gains from Investment Activities of Consolidated Variable Interest Entities

The following table presents net (losses) gains from investment activities of the consolidated VIEs for the three and six months ended June 30, 2011 and 2010:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
Net unrealized (losses) gains from investment activities	$	(6,957	)	$	(36,478	)	$	25,190		$	(15,147	)
Net realized gains (losses) from investment activities		2,425			819			(12,619	)		186

Net (losses) gains from investment activities		(4,532	)		(35,659	)		12,571			(14,961	)

Net unrealized gains (losses) from debt		3,040			10,375			(46,904	)		(339	)
Net realized gains from debt		—			681			41,819			1,679

Net gains (losses) from debt		3,040			11,056			(5,085	)		1,340

Interest and other income		10,187			12,164			24,948			23,429
Other expenses		(21,064	)		(6,993	)		(27,715	)		(10,073	)

Net (Losses) Gains from Investment Activities of Consolidated VIEs	$	(12,369	)	$	(19,432	)	$	4,719		$	(265	)

-30-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Investments of Consolidated VIEs

The following table presents a condensed summary of the consolidated VIEs investments that are included in the condensed consolidated statements of financial condition as of June 30, 2011 and December 31, 2010:


	Fair Value as of June 30, 2011			% of Net Assets of Consolidated Funds and VIEs			Fair Value as of December 31, 2010			% of Net Assets of Consolidated Funds and VIEs
Corporate Loans:
North America
Communications
Intelsat Jackson term loan due February 1, 2014	$	—			N/A		$	105,659			5.4	%
Other		92,850			5.1	%		221,383			11.3

Communications		92,850			5.1			327,042			16.7

Chemicals		34,978			1.9			13,950			0.7
Consumer & Retail		154,642			8.4			114,931			5.9
Distribution & Transportation		8,561			0.5			7,794			0.4
Energy		35,860			2.0			25,026			1.3
Financial and Business Services		144,691			8.0			85,713			4.4
Healthcare		146,812			8.1			144,343			7.4
Manufacturing & Industrial		120,298			6.6			200,290			10.3
Media, Cable & Leisure		138,421			7.6			93,798			4.8
Metals & Mining		13,072			0.7			14,025			0.7
Packaging & Materials		31,101			1.7			21,066			1.1
Technology		114,612			6.3			34,862			1.8
Other		5,605			0.3			9,539			0.5

Total Corporate Loans – North America (amortized cost $1,034,192 and $1,075,287)		1,041,503			57.2			1,092,379			56.0

Europe
Manufacturing & Industrial		13,610			0.7			7,696			0.4
Healthcare
Alliance Boots seniors facility B1 due July 5, 2015		—			N/A			143,105			7.3
Consumer & Retail		—			N/A			75,007			3.8
Media, Cable & Leisure		—			N/A			10,787			0.6
Chemicals		8,191			0.5			9,909			0.5

Total Corporate Loans – Europe (amortized cost $21,639 and $284,760)		21,801			1.2			246,504			12.6

Total Corporate Loans (amortized cost $1,055,831 and $1,360,047)		1,063,304			58.4			1,338,883			68.6

Corporate Bonds:
North America
Communications		—			N/A			1,564			0.1
Distribution & Transportation		3,785			0.2			4,160			0.2
Energy		—			N/A			3,640			0.2
Manufacturing & Industrial		—			N/A			—			—
Media, Cable & Leisure		5,151			0.3			3,550			0.2

Total Corporate Bonds – North America (amortized cost $8,451 and $12,406)		8,936			0.5			12,914			0.7

Europe
Media, Cable & Leisure		—			N/A			1,599			0.1

Total Corporate Bonds – Europe (amortized cost $0 and $1,519)		—			N/A			1,599			0.1

Total Corporate Bonds (amortized cost $8,451 and $13,925)		8,936			0.5			14,513			0.8
Elimination of equity investments attributable to consolidated VIEs		(2,115	)		(0.1	)		(10,785	)		(0.6	)

Total Investments, at fair value, of Consolidated VIEs (amortized cost $1,064,282 and $1,373,972)	$	1,070,125			58.8	%	$	1,342,611			68.8	%

-31-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

Senior Secured Notes, Subordinated Note, Term Loans—Included within debt are amounts due to third-party institutions of the consolidated VIEs. The following table summarizes the principal provisions of the consolidated VIEs debt as of June 30, 2011 and December 31, 2010:


	As of June 30, 2011									As of December 31, 2010
Description	Outstanding Principal Balance			Fair Value			Weighted Average Interest Rate			Outstanding Principal Balance		Fair Value		Weighted Average Interest Rate			Maturity Date	Interest Rate
Loans:
Term A Loan	$	—		$	—			—	%	$	146,502	$	142,601		0.91	%	October 29, 2012	BBA 3 mo. LIBOR (USD) plus 0.5%
Term B Loan		—			—			—			145,390		111,655		0.91	%	June 13, 2013	BBA 3 mo. LIBOR (GBP) plus 0.5%
Term C Loan		—			—			—			161,984		154,394		0.91	%	October 29, 2013	BBA 3 mo. LIBOR (USD) plus 0.5%

		—	⁽¹⁾		—	⁽¹⁾		—			453,876		408,650


Notes:⁽²⁾⁽³⁾
Senior secured notes – A1		215,400			215,977			2.23			215,400		215,400		2.02	%	May 20, 2020	BBA 3 mo LIBOR (USD) plus 1.7%
Senior secured notes – A2		11,100			10,930			2.84			11,100		10,767		2.48	%	May 20, 2020	BBA 3 mo LIBOR (USD) plus 2.25%
Senior secured notes – B		24,700			23,898			2.89			24,700		22,971		2.52	%	May 20, 2020	BBA 3 mo LIBOR (USD) plus 2.30%
Subordinated note		70,946			69,660			N/A			70,946		70,376		N/A		May 20, 2020	N/A

		322,146			320,465						322,146		319,514


Notes:⁽²⁾⁽⁴⁾
Senior secured notes – A1		262,000			264,017			2.10			262,000		261,371		2.22	%	November 20, 2020	BBA 3 mo LIBOR (USD) plus 1.7%
Senior secured notes – A1		20,500			20,746			2.90			20,500		19,959		3.05	%	November 20, 2020	BBA 3 mo LIBOR (USD) plus 2.5%
Senior secured notes – B		25,750			25,428			3.41			25,750		24,426		3.58	%	November 20, 2020	BBA 3 mo LIBOR (USD) plus 3.0%
Senior secured notes – C		14,000			13,741			4.41			14,000		12,604		4.62	%	November 20, 2020	BBA 3 mo LIBOR (USD) plus 4.0%
Senior secured notes – D		10,000			9,542			6.42			10,000		9,398		6.71	%	November 20, 2020	BBA 3 mo LIBOR (USD) plus 6.0%
Subordinated note⁽⁵⁾		71,258			71,779			N/A			71,258		71,258		N/A		November 20, 2020	N/A

		403,508			405,253						403,508		399,016


Notes:⁽²⁾⁽⁶⁾
Senior secured notes – A		274,500			274,500			1.67			—		—		—		July 18, 2022	BBA 3 mo LIBOR (USD) plus 1.24%
Senior secured notes – B		58,500			58,061			2.33			—		—		—		July 18, 2022	BBA 3 mo LIBOR (USD) plus 1.90%
Senior secured notes – C		29,812			29,365			3.18			—		—		—		July 18, 2022	BBA 3 mo LIBOR (USD) plus 2.75%
Senior secured notes – D		20,250			18,681			3.63			—		—		—		July 18, 2022	BBA 3 mo LIBOR (USD) plus 3.20%
Senior secured notes – E		23,625			19,609			4.63			—		—		—		July 18, 2022	BBA 3 mo LIBOR (USD) plus 4.20%
Senior secured notes – F		11,270			9,185			5.93			—		—		—		July 18, 2022	BBA 3 mo LIBOR (USD) plus 5.50%
Subordinated note		43,350			39,449			N/A			—		—		—		July 18, 2022	N/A

		461,307			448,850						—		—


Total notes and loans	$	1,186,961		$	1,174,568					$	1,179,530	$	1,127,180

(1)

At December 31, 2010, the cost and fair value of the term loans were $453.9 million and $408.7 million, respectively. The term loans were paid down in the first quarter of 2011, with payments totaling $412.1 million, resulting in a gain of $41.8 million. Combined with net unrealized depreciation on the term loans of $45.2 million, the consolidated VIE had a net loss on term loans of $3.4 million for the six months ended June 30, 2011, which is reflected in the net (losses) gains from investment activities of consolidated variable interest entities on the condensed consolidated statements of operations.

(2)

Each class of notes will mature at par on the stated maturity, unless previously redeemed or repaid. Principal will not be payable on the notes except in certain limited circumstances. Interest on the notes is payable quarterly in arrears on the outstanding amount of the notes on scheduled payment dates. The subordinated note will be fully redeemed on the stated maturity unless previously redeemed. The subordinated note may be redeemed, in whole but not in part, on or after the redemption or repayment in full of principal and interest on the secured notes. No interest accrues or is payable on the subordinated note.

-32-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

(3)

The notes are subject to two coverage tests. These tests are primarily used to determine whether principal and interest may be paid on the secured notes and distributions may be made on the subordinated notes. The “Coverage Tests” consist of the Overcollateralization Ratio Test and the Interest Coverage Test; each test applies to each note. The Overcollateralization Ratio Test and Interest Coverage Test applicable to the indicated classes of secured notes will be satisfied as of any date on which such Coverage Test is applicable, if (1) the applicable Overcollateralization Ratio or Interest Coverage Ratio is at least equal to the applicable ratio or (2) the class or classes of secured notes is no longer outstanding. The applicable Interest Coverage Ratio for Class A Notes and B Notes is 110.0% and 105.0%, respectively. The applicable Overcollateralization Ratio for Class A Notes and B Notes is 137.5% and 126.4%, respectively.

(4)

The notes are subject to two coverage tests. These tests are primarily used to determine whether principal and interest may be paid on the secured notes and distributions may be made on the subordinated notes. The “Coverage Tests” consist of the Overcollateralization Ratio Test and the Interest Coverage Test; each test applies to each note. The Overcollateralization Ratio Test and Interest Coverage Test applicable to the indicated classes of secured notes will be satisfied as of any date on which such Coverage Test is applicable, if (1) the applicable Overcollateralization Ratio or Interest Coverage Ratio is at least equal to the applicable ratio or (2) the class or classes of secured notes is no longer outstanding. The applicable Interest Coverage Ratio for Class A Notes, Class B Notes, Class C Notes and Class D Notes is 110.0%, 105.0%, 102.0% and 101.0%, respectively. The applicable Overcollateralization Ratio for Class A Notes, Class B Notes, Class C Notes and Class D Notes is 135.59%, 124.76%, 120.13% and 117.39%, respectively.

(5)	The subordinated notes were issued to an affiliate of the Company. Amount is reduced by approximately $2.1 million due to elimination of equity investment attributable to consolidated VIEs as of June 30, 2011 and December 31, 2010, respectively.

(6)

The notes are subject to two coverage tests. These tests are primarily used to determine whether principal and interest may be paid on the secured notes and distributions may be made on the subordinated notes or whether funds which would otherwise be used to pay interest on the Secured Notes other than the Class A Notes and the Class B Notes and to make distributions on the Subordinated Notes must instead be used to pay principal on one or more Classes of Secured Notes according to the priorities defined. The “Coverage Tests” consist of the Overcollateralization Ratio Test and the Interest Coverage Test; each test applies to each specified Class or Classes of Secured Notes. The Overcollateralization Ratio Test and Interest Coverage Test applicable to the indicated classes of secured notes will be satisfied as of any date of determination on which such Coverage Test is applicable, if (1) the applicable Overcollateralization Ratio or Interest Coverage Ratio is at least equal to the applicable ratio or (2) the class or classes of secured notes is no longer outstanding. The applicable Interest Coverage Ratio for Class A and B Notes, Class C Notes and Class D Notes is 100.0% in respect of the first determination date and 120% thereafter, 110.0%, and 105.0%, respectively. The applicable Overcollateralization Ratio for Class A and B Notes, Class C Notes, Class D Notes and Class E Notes is 125.1%, 118.0%, 113.5% and 107.7%, respectively.

The consolidated VIEs have elected the fair value option to value the term loans and notes payable. The general partner uses its discretion and judgment in considering and appraising relevant factors in determining valuation of these loans. As of June 30, 2011, the notes payable are classified as Level III liabilities. Because of the inherent uncertainty in the valuation of the term loans and notes payable, which are not publicly traded, estimated values may differ significantly from the values that would have been reported had a ready market for such investments existed.

The consolidated VIEs debt obligations contain various customary loan covenants as described above. As of the balance sheet date, the Company was not aware of any instances of noncompliance with any of these covenants.

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.

-33-

APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

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. In addition, the tables present the maximum exposure to loss relating to those VIEs:


	June 30, 2011
	Total Assets			Total Liabilities			Apollo Exposure
Private Equity	$	13,457,451		$	(32,290	)	$	9,887
Capital Markets		3,123,834			(606,859	)		12,736
Real Estate		1,577,713			(1,271,954	)		—

Total	$	18,158,998	⁽¹⁾	$	(1,911,103	)⁽²⁾	$	22,623	⁽³⁾

(1)	Consists of $206,394 in cash, $17,590,304 in investments and $362,300 in receivables.

(2)	Represents $1,846,009 in debt and other payables, $63,263 in securities sold, not purchased, and $1,831 in capital withdrawals payable.

(3)	Apollo’s exposure is limited to its direct and indirect investments in those entities in which Apollo holds a significant variable interest.


	December 31, 2010
	Total Assets			Total Liabilities			Apollo Exposure
Private Equity	$	11,593,805		$	(39,625	)	$	13,415
Capital Markets		3,117,013			(824,957	)		13,302
Real Estate		1,569,147			(1,263,354	)		—

Total	$	16,279,965	⁽¹⁾	$	(2,127,936	)⁽²⁾	$	26,717	⁽³⁾

(1)	Consists of $207,168 in cash, $15,672,604 in investments and $400,193 in receivables.

(2)	Represents $2,011,194 in debt and other payables, $21,369 in securities sold, not purchased, and $95,373 in capital withdrawals payable.

(3)	Apollo’s exposure is limited to its direct and indirect investments in those entities in which Apollo holds a significant variable interest.

At June 30, 2011 and December 31, 2010, AAA Investments, the sole investment of AAA, invested in certain of the Company’s unconsolidated VIEs, including LeverageSource, L.P., AutumnLeaf, L.P., Apollo ALS Holdings, L.P., and A.P. Charter Holdings, L.P. At June 30, 2011 and December 31, 2010, the aggregate amount of such investments were $166.6 million and $251.5 million, respectively. The Company’s ownership interest in AAA was 2.43% and 2.81% at June 30, 2011 and December 31, 2010, respectively.

5. CARRIED INTEREST RECEIVABLE

The table below provides a roll-forward of the carried interest receivable balance for the six months ended June 30, 2011:


	Private Equity			Capital Markets			Total
Carried interest receivable at January 1, 2011	$	1,578,135		$	288,938		$	1,867,073
Carried interest income from change in fair value of funds		580,681			142,228			722,909
Foreign exchange gain		—			2,241			2,241
Fund cash distributions		(289,948	)		(101,266	)		(391,214	)

Carried Interest Receivable at June 30, 2011	$	1,868,868		$	332,141		$	2,201,009

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 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 capital markets 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. There is currently no carried interest receivable associated with the Company’s real estate segment.

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APOLLO GLOBAL MANAGEMENT, LLC

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands, except share data)

6. OTHER LIABILITIES

Other liabilities consist of the following:


	June 30, 2011		December 31, 2010
Interest rate swap agreements	$	8,475<

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Non-accelerated filer

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