Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)



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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020 OR



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

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-35107

APOLLO GLOBAL MANAGEMENT, INC.

(Exact name of Registrant as specified in its charter)



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

9 West 57th Street, 43rd Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 515-3200

(Registrant’s telephone number, including area code)

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

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

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



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

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

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



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

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

As of August 4, 2020 there were 229,230,880 shares of Class A common stock, 1 share of Class B common stock and 1 share of Class C common stock of the registrant outstanding.

Table of Contents



	TABLE OF CONTENTS
		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	9

	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Financial Condition (Unaudited) as of June 30, 2020 and December 31, 2019	9

	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019	10

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019	11

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019	12

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2020 and 2019	13

	Notes to Condensed Consolidated Financial Statements (Unaudited)	14

ITEM 1A.	UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION	68

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	70

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	116

ITEM 4.	CONTROLS AND PROCEDURES	118

PART II	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	120

ITEM 1A.	RISK FACTORS	120

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	120

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	121

ITEM 4.	MINE SAFETY DISCLOSURES	121

ITEM 5.	OTHER INFORMATION	121

ITEM 6.	EXHIBITS	122

SIGNATURES

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Forward-Looking Statements

This quarterly report may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, discussions related to Apollo’s expectations regarding the performance of its business, liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this quarterly report, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” or future or conditional verbs, such as “will,” “should,” “could,” or “may,” and variations of such words or 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 be correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new credit, private equity, or real assets funds, the outbreak of the novel coronavirus disease 2019 (“COVID-19”), the impact of energy market dislocation, 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. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of the Apollo funds and their portfolio companies, for an indefinite period of time. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on February 21, 2020 (the “2019 Annual Report”) and quarterly report on Form 10-Q filed with the SEC on May 11, 2020, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Terms Used in This Report

Effective September 5, 2019, Apollo Global Management, Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC (“AGM LLC”) to a Delaware corporation named Apollo Global Management, Inc. (“AGM Inc.” and such conversion, the “Conversion”). This quarterly report includes the results for AGM LLC prior to the Conversion and the results for AGM Inc. following the Conversion. In this report, references to “Apollo,” “we,” “us,” “our” and the “Company” refer collectively to (a) AGM Inc. and its subsidiaries, including the Apollo Operating Group and all of its subsidiaries, following the Conversion and (b) AGM LLC and its subsidiaries, including the Apollo Operating Group and all of its subsidiaries, prior to the Conversion, or as the context may otherwise require; references to our Class A Common Stock (“Class A shares”), Class B Common Stock (“Class B share”), our 6.375% Series A Preferred Stock (“Series A Preferred shares”) and 6.375% Series B Preferred Stock (“Series B Preferred shares” and collectively with the Series A Preferred shares, the “Preferred shares”) for periods prior to the Conversion mean the Class A shares, Class B share, Series A Preferred shares and Series B Preferred shares of AGM LLC, respectively; and references to dividends to our stockholders for periods prior to the Conversion mean distributions to our shareholders;

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

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

“Apollo Group” means (i) the Class C Stockholder and its affiliates, including their respective general partners, members and limited partners, (ii) Holdings and its affiliates, including their respective general partners, members and limited partners, (iii) with respect to each Managing Partner, such Managing Partner and such Managing Partner’s group (as defined in Section 13(d) of the Exchange Act), (iv) any former or current investment professional of or other employee of an Apollo employer (as defined below) or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and any member of such person’s group, (v) any former or current executive officer of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and any member of such person’s group; and (vi) any former or current director of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and any member of such person’s group. With respect to any person, Apollo employer means AGM Inc. or such

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successor thereto or such other entity controlled by AGM Inc. or its successor as may be such person’s employer at such time, but does not include any portfolio companies.

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

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

(i)

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


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


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

(iv)

the fair value of any other assets that we manage or advise for the funds, partnerships and accounts to which we provide investment management, advisory, or certain other investment-related services, plus unused credit facilities, including capital commitments to such funds, partnerships and accounts for investments that may require pre-qualification or other conditions before investment plus any other capital commitments to such funds, partnerships and accounts available for investment that are not otherwise included in the clauses above.

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

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

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

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(i)	fair value above invested capital for those funds that earn management fees based on invested capital;


(ii)	net asset values related to general partner and co-investment interests;


(iii)	unused credit facilities;


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


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


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

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

(i)

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


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

(iii)

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

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

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

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

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

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

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

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

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

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“Equity Plan” refers to the Company’s 2007 Omnibus Equity Incentive Plan, which effective as of July 22, 2019, was amended, restated and renamed the 2019 Omnibus Equity Incentive Plan;

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

“gross IRR” of a private equity fund represents the cumulative investment-related cash flows (i) for a given investment for the fund or funds which made such investment, and (ii) for a given fund, in the relevant fund itself (and not any one investor in the fund), in each case, on the basis of the actual timing of investment inflows and outflows (for unrealized investments assuming disposition on June 30, 2020 or other date specified) aggregated on a gross basis quarterly, and the return is annualized and compounded before management fees, performance fees and certain other expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all of the returns would, if distributed, be payable to the fund’s investors. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;

“gross IRR” of a real assets fund excluding the principal finance funds represents the cumulative investment-related cash flows in the fund itself (and not any one investor in the fund), on the basis of the actual timing of cash inflows and outflows (for unrealized investments assuming disposition on June 30, 2020 or other date specified) starting on the date that each investment closes, and the return is annualized and compounded before management fees, performance fees, and certain other expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all of the returns would, if distributed, be payable to the fund’s investors. Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;

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

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

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

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

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

“net IRR” of a private equity fund means the gross IRR applicable to a fund, including returns for related parties which may not pay fees or performance fees, net of management fees, certain expenses (including interest incurred or earned by the fund itself) and realized performance fees all offset to the extent of interest income, and measures returns at the fund level on amounts that, if distributed, would be paid to investors of the fund. The timing of cash flows applicable to investments, management fees and certain expenses, may be adjusted for the usage of a fund’s subscription facility. To the extent that a fund exceeds all requirements detailed within the applicable fund agreement, the estimated unrealized value is adjusted such that a percentage of up to 20.0% of

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the unrealized gain is allocated to the general partner of such fund, thereby reducing the balance attributable to fund investors. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;

“net IRR” of a real assets fund excluding the principal finance funds represents the cumulative cash flows in the fund (and not any one investor in the fund), on the basis of the actual timing of cash inflows received from and outflows paid to investors of the fund (assuming the ending net asset value as of June 30, 2020 or other date specified is paid to investors), excluding certain non-fee and non-performance fee bearing parties, and the return is annualized and compounded after management fees, performance fees, and certain other expenses (including interest incurred by the fund itself) and measures the returns to investors of the fund as a whole. Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;

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

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

“permanent capital vehicles” refers to (a) assets that are owned by or related to Athene or Athora, (b) assets that are owned by or related to MidCap FinCo Designated Activity Company (“MidCap”) and managed by Apollo, (c) assets of publicly traded vehicles managed by Apollo such as Apollo Investment Corporation (“AINV”), Apollo Commercial Real Estate Finance, Inc. (“ARI”), Apollo Tactical Income Fund Inc. (“AIF”), and Apollo Senior Floating Rate Fund Inc. (“AFT”), in each case that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law and (d) a non-traded business development company from which Apollo earns certain investment-related service fees. The investment management agreements of AINV, AIF and AFT have one year terms, are reviewed annually and remain in effect only if approved by the boards of directors of such companies or by the affirmative vote of the holders of a majority of the outstanding voting shares of such companies, including in either case, approval by a majority of the directors who are not “interested persons” as defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, the investment management agreements of AINV, AIF and AFT may be terminated in certain circumstances upon 60 days’ written notice. The investment management agreement of ARI has a one year term and is reviewed annually by ARI’s board of directors and may be terminated under certain circumstances by an affirmative vote of at least two-thirds of ARI’s independent directors. The investment management or advisory arrangements between each of MidCap and Apollo, Athene and Apollo, and Athora and Apollo, may also be terminated under certain circumstances. The agreement pursuant to which Apollo earns certain investment-related service fees from a non-traded business development company may be terminated under certain limited circumstances;

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

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

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

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

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

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

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

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

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

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

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APOLLO GLOBAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

AS OF JUNE 30, 2020 AND DECEMBER 31, 2019

(dollars in thousands, except share data)



	As of June 30, 2020			As of December 31, 2019
Assets:
Cash and cash equivalents	$	939,824		$	1,556,202
Restricted cash	81,378			19,779
U.S. Treasury securities, at fair value	764,923			554,387
Investments (includes performance allocations of $691,022 and $1,507,571 as of June 30, 2020 and December 31, 2019, respectively)	3,346,435			3,609,859
Assets of consolidated variable interest entities:
Cash and cash equivalents	671,761			45,329
Investments, at fair value	10,038,800			1,213,169
Other assets	181,259			41,688
Incentive fees receivable	864			2,414
Due from related parties	485,374			415,069
Deferred tax assets, net	744,733			473,165
Other assets	277,934			326,449
Lease assets	308,165			190,696
Goodwill	116,958			93,911
Total Assets	$	17,958,408		$	8,542,117
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	119,934		$	94,364
Accrued compensation and benefits	139,750			64,393
Deferred revenue	63,156			84,639
Due to related parties	711,705			501,387
Profit sharing payable	486,936			758,669
Debt	3,147,276			2,650,600
Liabilities of consolidated variable interest entities:
Debt, at fair value	5,679,493			850,147
Notes payable	1,952,619			—
Other liabilities	918,330			79,572
Other liabilities	158,300			210,740
Lease liabilities	338,972			209,479
Total Liabilities	13,716,471			5,503,990
Commitments and Contingencies (see note 16)
Stockholders’ Equity:
Apollo Global Management, Inc. stockholders’ equity:
Series A Preferred Stock, 11,000,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019	264,398			264,398
Series B Preferred Stock, 12,000,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019	289,815			289,815
Class A Common Stock, $0.00001 par value, 90,000,000,000 shares authorized, 229,189,715 and 222,994,407 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	—			—
Class B Common Stock, $0.00001 par value, 999,999,999 shares authorized, 1 share issued and outstanding as of June 30, 2020 and December 31, 2019	—			—
Class C Common Stock, $0.00001 par value, 1 share authorized, 1 share issued and outstanding as of June 30, 2020 and December 31, 2019	—			—
Additional paid in capital	1,032,442			1,302,587
Accumulated deficit	(653,745		)	—
Accumulated other comprehensive loss	(3,879		)	(4,578		)
Total Apollo Global Management, Inc. Stockholders’ equity	929,031			1,852,222
Non-Controlling Interests in consolidated entities	2,107,870			281,904
Non-Controlling Interests in Apollo Operating Group	1,205,036			904,001
Total Stockholders’ Equity	4,241,937			3,038,127
Total Liabilities and Stockholders’ Equity	$	17,958,408		$	8,542,117

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(dollars in thousands, except share data)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Management fees	$	409,953		$	388,215		$	806,557		$	768,241
Advisory and transaction fees, net	61,957			31,124			98,920			50,693
Investment income (loss):
Performance allocations	924,599			176,862			(809,724		)	428,359
Principal investment income (loss)	111,621			39,602			(76,228		)	65,627
Total investment income (loss)	1,036,220			216,464			(885,952		)	493,986
Incentive fees	205			776			19,724			1,436
Total Revenues	1,508,335			636,579			39,249			1,314,356
Expenses:
Compensation and benefits:
Salary, bonus and benefits	151,019			123,669			290,288			242,832
Equity-based compensation	59,420			44,662			111,542			89,739
Profit sharing expense	375,959			68,278			(260,039		)	191,725
Total compensation and benefits	586,398			236,609			141,791			524,296
Interest expense	32,291			23,302			63,533			42,410
General, administrative and other	83,729			81,839			168,251			153,501
Placement fees	359			775			768			335
Total Expenses	702,777			342,525			374,343			720,542
Other Income (Loss):
Net gains (losses) from investment activities	268,667			45,060			(995,884		)	63,889
Net gains (losses) from investment activities of consolidated variable interest entities	57,862			4,631			(108,058		)	14,097
Interest income	3,994			8,710			11,928			15,786
Other income (loss), net	3,327			6,603			(13,180		)	6,693
Total Other Income (Loss)	333,850			65,004			(1,105,194		)	100,465
Income (loss) before income tax (provision) benefit	1,139,408			359,058			(1,440,288		)	694,279
Income tax (provision) benefit	(140,323		)	(16,897		)	155,530			(36,551		)
Net Income (Loss)	999,085			342,161			(1,284,758		)	657,728
Net (income) loss attributable to Non-Controlling Interests	(552,756		)	(177,338		)	734,869			(343,848		)
Net Income (Loss) Attributable to Apollo Global Management, Inc.	446,329			164,823			(549,889		)	313,880
Series A Preferred Stock Dividends	(4,383		)	(4,383		)	(8,766		)	(8,766		)
Series B Preferred Stock Dividends	(4,782		)	(4,781		)	(9,563		)	(9,562		)
Net Income (Loss) Attributable to Apollo Global Management, Inc. Class A Common Stockholders	$	437,164		$	155,659		$	(568,218	)	$	295,552
Net Income (Loss) Per Share of Class A Common Stock:
Net Income (Loss) Available to Class A Common Stock – Basic	$	1.84		$	0.75		$	(2.55	)	$	1.41
Net Income (Loss) Available to Class A Common Stock – Diluted	$	1.84		$	0.75		$	(2.55	)	$	1.41
Weighted Average Number of Shares of Class A Common Stock Outstanding – Basic	227,653,988			199,578,950			227,205,866			200,202,174
Weighted Average Number of Shares of Class A Common Stock Outstanding – Diluted	227,653,988			199,578,950			227,205,866			200,202,174

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(dollars in thousands, except share data)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Net Income (Loss)	$	999,085		$	342,161		$	(1,284,758	)	$	657,728
Other Comprehensive Income (Loss), net of tax:
Currency translation adjustments, net of tax	6,943			4,596			1,128			(2,405		)
Net gain (loss) from change in fair value of cash flow hedge instruments	50			(1,938		)	101			(1,912		)
Net gain (loss) on available-for-sale securities	3,552			312			(1,348		)	230
Total Other Comprehensive Income (Loss), net of tax	10,545			2,970			(119		)	(4,087		)
Comprehensive Income (Loss)	1,009,630			345,131			(1,284,877		)	653,641
Comprehensive (Income) Loss attributable to Non-Controlling Interests	(558,979		)	(180,690		)	735,687			(340,794		)
Comprehensive Income (Loss) Attributable to Apollo Global Management, Inc.	$	450,651		$	164,441		$	(549,190	)	$	312,847

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

APOLLO GLOBAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(dollars in thousands, except share data)

The following statement for the three and six months ended June 30, 2019 represents Apollo Global Management, LLC as a limited liability company prior to the Conversion:



	Apollo Global Management, LLC Shareholders
	Class A Shares		Class B Shares	Series A Preferred Shares			Series B Preferred Shares			Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Apollo Global Management, LLC. Shareholders’ Equity			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Apollo Operating Group			Total Shareholders’ Equity
Balance at April 1, 2019	201,375,418		1	$	264,398		$	289,815		$	1,144,664		$	(372,576	)	$	(4,810	)	$	1,321,491		$	273,145		$	847,604		$	2,442,240
Dilution impact of issuance of Class A shares	—		—	—			—			(25		)	—			—			(25		)	—			—			(25		)
Capital increase related to equity-based compensation	—		—	—			—			34,298			—			—			34,298			—			—			34,298
Capital contributions	—		—	—			—			—			—			—			—			526			—			526
Distributions	—		—	(4,383		)	(4,781		)	(96,316		)	—			—			(105,480		)	(1,786		)	(138,462		)	(245,728		)
Payments related to issuances of Class A shares for equity-based awards	308,901		—	—			—			3,438			(5,090		)	—			(1,652		)	—			—			(1,652		)
Repurchase of Class A shares	(1,248,732	)	—	—			—			(33,800		)	—			—			(33,800		)	—			—			(33,800		)
Net income	—		—	4,383			4,781			—			155,659			—			164,823			5,143			172,195			342,161
Currency translation adjustments, net of tax	—		—	—			—			—			—			428			428			3,634			534			4,596
Net gain from change in fair value of cash flow hedge instruments	—		—	—			—			—			—			(965		)	(965		)	—			(973		)	(1,938		)
Net loss on available-for-sale securities	—		—	—			—			—			—			155			155			—			157			312
Balance at June 30, 2019	200,435,587		1	$	264,398		$	289,815		$	1,052,259		$	(222,007	)	$	(5,192	)	$	1,379,273		$	280,662		$	881,055		$	2,540,990
Balance at January 1, 2019	201,400,500		1	$	264,398		$	289,815		$	1,299,418		$	(473,276	)	$	(4,159	)	$	1,376,196		$	271,522		$	804,122		$	2,451,840
Dilution impact of issuance of Class A shares	—		—	—			—			(25		)	—			—			(25		)	—			—			(25		)
Capital increase related to equity-based compensation	—		—	—			—			68,322			—			—			68,322			—			—			68,322
Capital contributions	—		—	—			—			—			—			—			—			526			—			526
Distributions	—		—	(8,766		)	(9,562		)	(214,620		)	—			—			(232,948		)	(3,159		)	(251,720		)	(487,827		)
Payments related to issuances of Class A shares for equity-based awards	2,511,101		—	—			—			4,830			(44,283		)	—			(39,453		)	—			—			(39,453		)
Repurchase of Class A shares	(3,576,014	)	—	—			—			(106,116		)	—			—			(106,116		)	—			—			(106,116		)
Exchange of AOG Units for Class A shares	100,000		—	—			—			450			—			—			450			—			(368		)	82
Net income	—		—	8,766			9,562			—			295,552			—			313,880			13,805			330,043			657,728
Currency translation adjustments, net of tax	—		—	—			—			—			—			(195		)	(195		)	(2,032		)	(178		)	(2,405		)
Net loss from change in fair value of cash flow hedge instruments	—		—	—			—			—			—			(952		)	(952		)	—			(960		)	(1,912		)
Net gain on available-for-sale securities	—		—	—			—			—			—			114			114			—			116			230
Balance at June 30, 2019	200,435,587		1	$	264,398		$	289,815		$	1,052,259		$	(222,007	)	$	(5,192	)	$	1,379,273		$	280,662		$	881,055		$	2,540,990

The following statement for the three and six months ended June 30, 2020 represents Apollo Global Management, Inc. as a corporation subsequent to the Conversion:



	Apollo Global Management, Inc. Stockholders
	Class A Common Stock		Class B Common Stock	Class C Common Stock	Series A Preferred Stock			Series B Preferred Stock			Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Apollo Global Management, Inc. Stockholders’ Equity			Non- Controlling Interests in Consolidated Entities			Non- Controlling Interests in Apollo Operating Group			Total Stockholders’ Equity
Balance at April 1, 2020	228,834,099		1	1	$	264,398		$	289,815		$	1,085,949		$	(1,075,323	)	$	(8,201	)	$	556,638		$	2,122,281		$	820,115		$	3,499,034
Dilution impact of issuance of Class A Common Stock	—		—	—	—			—			126			—			—			126			—			—			126
Capital increase related to equity-based compensation	—		—	—	—			—			47,539			—			—			47,539			—			—			47,539
Capital contributions	—		—	—	—			—			—			—			—			—			38,826			—			38,826
Dividends/ Distributions	—		—	—	(4,383		)	(4,782		)	(99,789		)	—			—			(108,954		)	(98,633		)	(128,662		)	(336,249		)
Payments related to issuances of Class A Common Stock for equity-based awards	355,616		—	—	—			—			(1,383		)	(15,586		)	—			(16,969		)	—			—			(16,969		)
Net income (loss)	—		—	—	4,383			4,782			—			437,164			—			446,329			41,068			511,688			999,085
Currency translation adjustments, net of tax	—		—	—	—			—			—			—			2,178			2,178			4,328			437			6,943
Net gain from change in fair value of cash flow hedge instruments	—		—	—	—			—			—			—			26			26			—			24			50
Net loss on available-for-sale securities	—		—	—	—			—			—			—			2,118			2,118			—			1,434			3,552
Balance at June 30, 2020	229,189,715		1	1	$	264,398		$	289,815		$	1,032,442		$	(653,745	)	$	(3,879	)	$	929,031		$	2,107,870		$	1,205,036		$	4,241,937
Balance at January 1, 2020	222,994,407		1	1	$	264,398		$	289,815		$	1,302,587		$	—		$	(4,578	)	$	1,852,222		$	281,904		$	904,001		$	3,038,127
Equity transaction with Athene Holding	—		—	—	—			—			(54,868		)	—			—			(54,868		)	—			1,214,577			1,159,709
Consolidation of VIEs	—		—	—	—			—			—			—			—			—			1,895,095			—			1,895,095
Dilution impact of issuance of Class A Common Stock	—		—	—	—			—			8,329			—			—			8,329			—			—			8,329
Capital increase related to equity-based compensation	—		—	—	—			—			93,230			—			—			93,230			—			—			93,230
Capital contributions	—		—	—	—			—			—			—			—			—			181,853			—			181,853
Dividends/ Distributions	—		—	—	(8,766		)	(9,563		)	(312,638		)	—			—			(330,967		)	(127,570		)	(284,300		)	(742,837		)
Payments related to issuances of Class A Common Stock for equity-based awards	3,151,903		—	—	—			—			28,991			(85,527		)	—			(56,536		)	—			—			(56,536		)
Repurchase of Class A Common Stock	(2,194,095	)	—	—	—			—			(64,205		)	—			—			(64,205		)	—			—			(64,205		)
Exchange of AOG Units for Class A Common Stock	5,237,500		—	—	—			—			31,016			—			—			31,016			—			(16,967		)	14,049
Net income (loss)	—		—	—	8,766			9,563			—			(568,218		)	—			(549,889		)	(123,341		)	(611,528		)	(1,284,758		)
Currency translation adjustments, net of tax	—		—	—	—			—			—			—			1,381			1,381			(71		)	(182		)	1,128
Net gain from change in fair value of cash flow hedge instruments	—		—	—	—			—			—			—			54			54			—			47			101
Net loss on available-for-sale securities	—		—	—	—			—			—			—			(736		)	(736		)	—			(612		)	(1,348		)
Balance at June 30, 2020	229,189,715		1	1	$	264,398		$	289,815		$	1,032,442		$	(653,745	)	$	(3,879	)	$	929,031		$	2,107,870		$	1,205,036		$	4,241,937

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

APOLLO GLOBAL MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(dollars in thousands, except share data)



	For the Six Months Ended June 30,
	2020			2019
Cash Flows from Operating Activities:
Net income (loss)	$	(1,284,758	)	$	657,728
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity-based compensation	111,542			89,739
Depreciation and amortization	8,549			7,392
Unrealized (gains) losses from investment activities	994,434			(63,088		)
Principal investment (income) loss	76,228			(65,627		)
Performance allocations	809,724			(428,359		)
Change in fair value of contingent obligations	(547		)	20,051
Deferred taxes, net	(180,016		)	29,651
Net loss related to cash flow hedge instruments	—			(1,974		)
Non-cash lease expense	26,288			10,733
Other non-cash amounts included in net income (loss), net	7,180			(18,413		)
Cash flows due to changes in operating assets and liabilities:
Incentive fees receivable	1,550			6,792
Due from related parties	(73,671		)	(73,164		)
Accounts payable and accrued expenses	25,570			18,898
Accrued compensation and benefits	74,430			39,209
Deferred revenue	(19,798		)	(11,330		)
Due to related parties	(911		)	474
Profit sharing payable	(258,316		)	125,076
Lease liability	(14,265		)	(11,075		)
Other assets and other liabilities, net	(27,588		)	(32,560		)
Cash distributions of earnings from principal investments	12,276			20,864
Cash distributions of earnings from performance allocations	200,846			123,142
Satisfaction of contingent obligations	(12,870		)	(1,315		)
Apollo Fund and VIE related:
Net realized and unrealized (gains) losses from investing activities and debt	319,347			(13,000		)
Cash transferred from consolidated VIEs	502,153			—
Purchases of investments	(1,349,102		)	(179,744		)
Proceeds from sale of investments	1,158,433			186,778
Changes in other assets and other liabilities, net	(169,334		)	13,732
Net Cash Provided by Operating Activities	$	937,374		$	450,610
Cash Flows from Investing Activities:
Purchases of fixed assets	$	(37,619	)	$	(9,624	)
Acquisitions	48,518			—
Proceeds from sale of investments	21,855			1,878
Purchase of investments	(522,432		)	(15,048		)
Purchase of U.S. Treasury securities	(1,056,827		)	(541,530		)
Proceeds from maturities of U.S. Treasury securities	840,020			229,322
Cash contributions to equity method investments	(159,781		)	(95,141		)
Cash distributions from equity method investments	91,892			33,434
Issuance of related party loans	(315		)	(1,525		)
Other investing activities	(241		)	(13		)
Net Cash Used in Investing Activities	$	(774,930	)	$	(398,247	)
Cash Flows from Financing Activities:
Principal repayments of debt	$	(16,990	)	$	(29	)
Dividends to Preferred Stockholders	(18,329		)	(18,328		)
Issuance of debt	518,756			1,005,964
Satisfaction of tax receivable agreement	(48,195		)	(37,234		)
Repurchase of Class A Common Stock	(64,205		)	(106,116		)
Payments related to deliveries of Class A Common Stock for RSUs	(85,527		)	(44,283		)
Dividends paid	(312,638		)	(214,620		)
Distributions paid to Non-Controlling Interests in Apollo Operating Group	(284,300		)	(251,720		)
Issuance of related party loans	(28,280		)	—
Repayment of related party loans	28,280			—
Other financing activities	(8,690		)	(17,509		)
Apollo Fund and VIE related:
Issuance of debt	821,573			—
Principal repayment of debt	(716,184		)	—
Issuances of debt within other liabilities of consolidated VIEs	67,459			—
Distributions paid to Non-Controlling Interests in consolidated entities	(125,208		)	(1,207		)
Contributions from Non-Controlling Interests in consolidated entities	181,687			305
Net Cash Provided by (Used in) Financing Activities	$	(90,791	)	$	315,223
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities	71,653			367,586
Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, Beginning of Period	1,621,310			662,875
Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, End of Period	$	1,692,963		$	1,030,461
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	60,837		$	29,440
Interest paid by consolidated variable interest entities	116,365			7,104
Income taxes paid	16,399			18,771
Supplemental Disclosure of Non-Cash Investing Activities:
Non-cash distributions from principal investments	$	(4,642	)	$	(1,019	)
Non-cash purchases of other investments, at fair value	1,153,316			—
Non-cash loss on Athene equity swap	(61,261		)	—
Acquisition of goodwill	663			—
Contingent consideration	(6,208		)	—
Supplemental Disclosure of Non-Cash Financing Activities:
Capital increases related to equity-based compensation	$	93,230		$	68,322
Issuance of restricted shares	28,991			4,830
Non-cash issuance of AOG units to Athene	1,214,577			—
Other non-cash financing activities	8,329			(25		)
Net Assets Transferred from Consolidated Variable Interest Entity:
Investments, at fair value	$	9,061,907		$	—
Other assets	130,907			—
Debt, at fair value	(6,829,326		)	—
Other liabilities	(967,575		)	—
Non-Controlling interest in consolidated entities related to acquisition	(1,898,067		)	—
Adjustments related to exchange of Apollo Operating Group units:
Deferred tax assets	$	76,580		$	546
Due to related parties	(62,531		)	(464		)
Additional paid in capital	(14,049		)	(82		)
Non-Controlling Interest in Apollo Operating Group	16,967			368

Reconciliation of Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities to the Consolidated Statements of Financial Condition:
Cash and cash equivalents	$	939,824		$	945,725
Restricted cash	81,378			17,651
Cash and cash equivalents held at consolidated variable interest entities	671,761			67,085
Total Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities	$	1,692,963		$	1,030,461

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

1. ORGANIZATION

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


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


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

•

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

Organization of the Company

Effective September 5, 2019, AGM Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC to a Delaware corporation named Apollo Global Management, Inc. (the “Conversion”). The Company was formed as a Delaware limited liability company on July 3, 2007, and, until the Conversion, was managed by AGM Management, LLC, which is indirectly wholly-owned and controlled by Leon Black, Joshua Harris and Marc Rowan, its Managing Partners.

As of June 30, 2020, the Company owned, through six intermediate holding companies, 52.9% of the economic interests of, and operated and controlled all of the businesses and affairs of, the Apollo Operating Group through its wholly owned subsidiaries.

AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partners and certain of the Company’s other partners (the “Contributing Partners”) indirectly beneficially own interests in each of the entities that comprise the Apollo Operating Group. As of June 30, 2020, Holdings owned 40.4% of the economic interests in the Apollo Operating Group. The Company consolidates the financial results of the Apollo Operating Group and its consolidated subsidiaries. Holdings’ ownership interest in the Apollo Operating Group is reflected as a Non-Controlling Interest in the accompanying condensed consolidated financial statements.

Athene and Apollo Strategic Transaction

On February 28, 2020, pursuant to a transaction agreement (the “Transaction Agreement”) between Athene Holding, AGM Inc. and the entities that form the Apollo Operating Group, the Apollo Operating Group issued 29,154,519 non-voting equity interests of the Apollo Operating Group to Athene Holding. As a result, as of June 30, 2020, Athene Holding owned 6.7% of the economic interests in the Apollo Operating Group. See note 15 for further disclosure regarding the Transaction Agreement.

As noted further in note 15, Apollo purchased a 17% incremental equity ownership stake in Athene, bringing Apollo’s beneficial ownership in Athene to 28.0%. This has resulted in Apollo’s indirect ownership in certain VIEs, through Athene, being considered significant such that the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Accordingly, there has been a significant increase in consolidated VIE assets, liabilities and Non-Controlling Interests as of June 30, 2020 as compared to December 31, 2019.

Conversion to a Corporation

On September 4, 2019, AGM LLC notified the New York Stock Exchange (the “NYSE”) that a Certificate of Conversion (the “Certificate of Conversion”) had been filed with the Secretary of State of the State of Delaware. Effective at 12:01 a.m. (Eastern Time) on September 5, 2019 (the “Effective Time”), (i) each Class A share (“Class A Share”) representing limited

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

liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.00001 par value per share, of the Company (“Class A Common Stock”), (ii) the Class B share (the “Class B Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock, $0.00001 par value per share, of the Company (the “Class B Common Stock”), (iii) each Series A preferred share (“Series A Preferred Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series A preferred stock, having a liquidation preference of $25.00 per share, of the Company (“Series A Preferred Stock”), (iv) each Series B preferred share (“Series B Preferred Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series B preferred stock, having a liquidation preference of $25.00 per share, of the Company (“Series B Preferred Stock”) and (v) AGM Management, LLC, a Delaware limited liability company (the “Former Manager”), was granted one issued and outstanding, fully paid and nonassessable share of Class C common stock, $0.00001 par value per share, of the Company (“Class C Common Stock”), which bestows to its holder certain management rights over the Company. References to the Class A Common Stock, the Class B Common Stock, the Series A Preferred Stock and the Series B Preferred Stock for periods prior to the Conversion means Class A Shares, Class B Share, Series A Preferred Share and Series B Preferred Share of AGM LLC, respectively. Prior to the Effective Time, the Former Manager held all such management powers over the business and affairs of AGM LLC pursuant to the Third Amended and Restated Limited Liability Company Agreement of AGM LLC, dated as of March 19, 2018.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements and these notes are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting only of normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the annual financial statements included in the 2019 Annual Report.

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

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

Consolidation

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

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

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FINANCIAL STATEMENTS

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

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

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

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

Assets and liabilities of the consolidated VIEs are primarily shown in separate sections within the condensed consolidated statements of financial condition. Changes in the fair value of the consolidated VIEs’ assets and liabilities and related interest, dividend and other income and expenses are presented within net gains from investment activities of consolidated variable interest entities in the condensed consolidated statements of operations. The portion attributable to Non-Controlling Interests is reported within net income attributable to Non-Controlling Interests in the condensed consolidated statements of operations. For additional disclosures regarding VIEs, see note 6.

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

Cash and Cash Equivalents

Apollo considers all highly liquid short-term investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include money market funds and U.S. Treasury securities with original maturities of three months or less when purchased. Interest income from cash and cash equivalents is recorded in interest income in the condensed consolidated statements of operations. The carrying values of the money market funds and U.S. Treasury securities were $657.7 million and $253.5 million as of June 30, 2020 and December 31, 2019, respectively, which approximate their fair values due to their short-term nature and are categorized as Level I within the fair value hierarchy. Substantially all of the Company’s cash on deposit is in interest bearing accounts with major financial institutions and exceed insured limits.

Restricted Cash

Restricted cash includes cash held in reserve accounts used to make required payments in respect of the 2039 Senior Secured Guaranteed Notes, as well as cash held in reserve accounts related to security deposits and maintenance reserves for loans held by a consolidated CLO. Restricted cash also includes cash deposited at a bank, which is pledged as collateral in connection with leased premises.

U.S. Treasury securities, at fair value

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

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FINANCIAL STATEMENTS

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

Fair Value of Financial Instruments

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

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.

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

Fair Value Hierarchy

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

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

Level I - Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments included in Level I include listed equities and debt. The Company does not adjust the quoted price for these financial instruments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.

Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Financial instruments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observable inputs. These financial instruments exhibit higher levels of liquid market observability as compared to Level III financial instruments.

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

When a security is valued based on broker quotes, the Company subjects those quotes to various criteria in making the determination as to whether a particular financial instrument would qualify for classification as Level II or Level III. These criteria include, but are not limited to, the number and quality of the broker quotes, the standard deviations of the observed broker quotes, and the percentage deviation from external pricing services.

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

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FINANCIAL STATEMENTS

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

Equity Method Investments

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

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

Financial Instruments held by Consolidated VIEs

The Company measures both the financial assets and financial liabilities of the consolidated CLOs in its condensed consolidated financial statements using the fair value of the financial assets or financial liabilities of the consolidated CLOs, whichever are more observable.

Where financial assets are more observable, the financial assets of the consolidated CLOs are measured at fair value and the financial liabilities are measured in consolidation as: (i) the sum of the fair value of the financial assets and the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs less (ii) the sum of the fair value of any beneficial interests retained by the Company (other than those that represent compensation for services) and the Company’s carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financial liabilities (other than the beneficial interest retained by the Company) using a reasonable and consistent methodology.

Where financial liabilities are more observable, the financial liabilities of the consolidated CLOs are measured at fair value and the financial assets are measured in consolidation as: (i) the sum of the fair value of the financial liabilities, and the carrying value of any nonfinancial liabilities that are incidental to the operations of the CLOs less (ii) the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs. The resulting amount is allocated to the individual financial assets using a reasonable and consistent methodology.

Under the measurement alternative, net income attributable to Apollo Global Management, Inc. reflects the Company’s own economic interests in the consolidated CLOs including (i) changes in the fair value of the beneficial interests retained by the Company and (ii) beneficial interests that represent compensation for collateral management services.

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

Certain consolidated VIEs have applied the fair value option for certain investments in private debt securities that otherwise would not have been carried at fair value with gains and losses in net income.

Goodwill

Goodwill represents the excess of cost over the fair value of identifiable net assets of an acquired business. Goodwill and other indefinite lived intangible assets are tested annually for impairment or more frequently if circumstances indicate impairment may have occurred.

The Company performed its annual goodwill impairment test as of October 1, 2019 and did not identify any impairment.

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FINANCIAL STATEMENTS

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

Deferred Revenue

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

Apollo also earns management fees subject to the Management Fee Offset (described below). When advisory and transaction fees are earned by the management company, the Management Fee Offset reduces the management fee obligation of the fund. When the Company receives cash for advisory and transaction fees, a certain percentage of such advisory and/or transaction fees, as applicable, is allocated as a credit to reduce future management fees, otherwise payable by such fund. Such credit is recorded as deferred revenue in the condensed consolidated statements of financial condition. A portion of any excess advisory and transaction fees may be required to be returned to the limited partners of certain funds upon such fund’s liquidation. As the management fees earned by the Company are presented on a gross basis, any Management Fee Offsets calculated are presented as a reduction to advisory and transaction fees in the condensed consolidated statements of operations.

Additionally, Apollo earns advisory fees pursuant to the terms of the advisory agreements with certain of the portfolio companies that are owned by the funds Apollo manages. When Apollo receives a payment from a portfolio company that exceeds the advisory fees earned at that point in time, the excess payment is recorded as deferred revenue in the condensed consolidated statements of financial condition. The advisory agreements with the portfolio companies vary in duration and the associated fees are received monthly, quarterly or annually.

Deferred revenue is reversed and recognized as revenue over the period that the agreed upon services are performed. There was $74.6 million of revenue recognized during the six months ended June 30, 2020 that was previously deferred as of January 1, 2020.

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

Revenues

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

Management Fees

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

Advisory and Transaction Fees, Net

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

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NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

The amounts due from fund portfolio companies are recorded in due from related parties, which is discussed further in note 15. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Advisory and transaction fees are presented net of the Management Fee Offset in the condensed consolidated statements of operations.

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

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

Investment Income

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

Performance Allocations

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

The Company recognizes performance allocations within investment income along with the related principal investment income (as described further below) in the condensed consolidated statements of operations and within the investments line in the condensed consolidated statements of financial condition.

When applicable, the Company may record a general partner obligation to return previously distributed performance allocations. The general partner obligation is based upon an assumed liquidation of a fund’s net assets as of the reporting date and is reported within due to related parties. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement or other governing document of the fund.

Principal Investment Income

Principal investment income includes the Company’s income or loss from equity method investments and certain other investments in entities in which the Company is generally eligible to receive performance allocations. Income from equity method investments includes the Company’s share of net income or loss generated from its investments, which are not consolidated, but in which the Company exerts significant influence.

Incentive Fees

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

Incentive fees are considered a form of variable consideration as they are subject to clawback or reversal and therefore must be deferred until the fees are probable to not be significantly reversed. Accrued but unpaid incentive fees are reported within incentive fees receivable in the Company’s condensed consolidated statements of financial condition. The Company’s incentive fees primarily relate to the credit segment and are generally received from CLOs, managed accounts and AINV.

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FINANCIAL STATEMENTS

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

Compensation and Benefits

Equity-Based Compensation

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

Profit Sharing

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

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

Additionally, profit sharing amounts previously distributed may be subject to clawback from employees and former employees. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the condensed consolidated statements of financial condition, represents all amounts previously distributed to employees and former employees that would need to be returned to the general partner if the Apollo funds were to be liquidated based on the fair value of the underlying funds’ investments as of the reporting date. The actual general partner receivable, however, would not become realized until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement or other governing document of the fund.

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

The Company has a performance-based incentive arrangement for certain Apollo partners and employees designed to more closely align compensation on an annual basis with the overall realized performance of the Company. This arrangement enables certain partners and employees to earn discretionary compensation based on performance revenue earned by the Company in a given year, which amounts are reflected in profit sharing expense in the accompanying condensed consolidated financial statements. The Company may also use dividends it receives from investments in MidCap, ARI and AINV to compensate employees. These amounts are recorded as profit sharing expense in the Company’s condensed consolidated statements of operations.

401(k) Savings Plan

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

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NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

General, Administrative and Other

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

Income Taxes

Prior to the Conversion, certain entities in the Apollo Operating Group operated as partnerships for U.S. federal income tax purposes. As a result, these entities were not subject to U.S. federal income taxes. However, certain of these entities were subject to New York City unincorporated business taxes (“NYC UBT”) and certain non-U.S. entities were subject to non-U.S. corporate income taxes. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluated quarterly to determine whether or not the Company has uncertain tax positions that require financial statement recognition.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period during which the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Non-Controlling Interests

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

Non-Controlling Interests are presented as a separate component of stockholders’ equity on the Company’s condensed consolidated statements of financial condition. The primary components of Non-Controlling Interests are separately presented in the Company’s consolidated statements of changes in stockholders’ equity to clearly distinguish the interest in the Apollo Operating Group and other ownership interests in the consolidated entities. Net income includes the net income attributable to the holders of Non-Controlling Interests on the Company’s condensed consolidated statements of operations. Profits and losses are allocated to Non-Controlling Interests in proportion to their relative ownership interests regardless of their basis.

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimates include goodwill, intangible assets, income taxes, performance allocations, incentive fees, contingent consideration obligation related to an acquisition, non-cash compensation, and fair value of investments and debt. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is unable to predict the adverse impact the COVID-19 pandemic will ultimately have. While such impact may change considerably over time, the estimates and assumptions affecting the Company’s condensed consolidated financial statements are based on information available as of June 30, 2020. Actual results could differ materially from those estimates.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

Recent Accounting Pronouncements

In June 2016, the FASB issued guidance intended to provide financial statement users with more useful information about the expected credit losses on financial instruments held by a reporting entity at each reporting date. To achieve this objective, the new guidance replaces the incurred loss methodology in current U.S. GAAP with a methodology that reflects expected credit losses. The new guidance will affect entities to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current U.S. GAAP. The new guidance is effective for the Company on January 1, 2020. The new guidance did not have a material impact on the condensed consolidated financial statements of the Company.

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

In August 2018, the FASB issued guidance which changes the fair value disclosure requirements. The guidance includes new fair value disclosure requirements and eliminates and modifies certain other fair value disclosure requirements. The Company previously early adopted the eliminated and modified disclosure requirements upon issuance of the guidance during the three month period ended September 30, 2018. The remaining guidance was adopted by the Company on January 1, 2020 and did not have a material impact on the condensed consolidated financial statements of the Company.

In December 2019, the FASB issued guidance intended to simplify the accounting for income taxes. The new guidance eliminates certain exceptions to the existing approach in ASC 740, and clarifies other guidance within the standard. It is effective for the Company on January 1, 2021. The guidance is not excepted to have a material impact on the condensed consolidated financial statements of the Company.

3. GOODWILL

The carrying value of goodwill was $117.0 million and $93.9 million as of June 30, 2020 and December 31, 2019, respectively. Goodwill primarily relates to the 2007 reorganization of the Company’s predecessor business (the “2007 Reorganization”) and the Company’s acquisition of Stone Tower Capital LLC and its related management companies (“Stone Tower”) in 2012. As of June 30, 2020, there was $92.2 million, $23.8 million and $1.0 million of goodwill related to the credit, private equity and real assets segments, respectively. As of December 31, 2019, there was $69.8 million, $23.1 million and $1.0 million of goodwill related to the credit, private equity and real assets segments, respectively.

On June 26, 2020, the Company acquired the remaining portion of the PK AirFinance platform. In connection with the acquisition, the Company recognized goodwill of $22.4 million as of the acquisition date. The Company recognized $27.4 million in total goodwill related to the acquisition of the PK AirFinance platform.

In addition, the Company recognized an additional $1.3 million of goodwill relating to an equity method investment that was consolidated during the three months ended June 30, 2020.

4. INVESTMENTS

The following table presents Apollo’s investments:



	As of June 30, 2020		As of December 31, 2019
Investments, at fair value	$	1,714,125	$	1,053,556
Equity method investments	941,288		1,048,732
Performance allocations	691,022		1,507,571
Total Investments	$	3,346,435	$	3,609,859

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

Investments, at Fair Value

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

For the three and six months ended June 30, 2020, the Company’s investment in Athene Holding, for which the fair value option was elected, met the significance criteria as defined by the SEC. As a result, the following table presents summarized financial information of Athene Holding:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020			2019
	(in millions)
Statements of Operations
Revenues	$	4,398	$	3,423	$	2,849		8,418
Expenses	3,317		2,673		3,150			6,928
Income (loss) before income tax provision	1,081		750		(301		)	1,490
Income tax provision (benefit)	150		30		(16		)	$	62
Net income (loss)	931		$	720	(285		)	1,428
Net loss attributable to Non-Controlling Interests	88		—		(81		)	—
Net income (loss) available to Athene shareholders	$	843	720		$	(204	)	1,428
Preferred stock dividends	19		—		37			—
Net income (loss) available to Athene common shareholders	$	824	720		$	(241	)	$	1,428

Net Gains (Losses) from Investment Activities

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020			2019
Realized gains on sales of investments, net	$	70	$	182	$	1,877		$	45
Net change in unrealized gains (losses) due to changes in fair value	268,597		44,878		(997,761		)	63,844
Net gains (losses) from investment activities	$	268,667	$	45,060	$	(995,884	)	$	63,889

Equity Method Investments

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

Equity method investments consisted of the following:



	Equity Held as of
	June 30, 2020		⁽⁴⁾	December 31, 2019		⁽⁴⁾
Credit⁽¹⁾	$	264,797		$	318,054
Private Equity⁽²⁾	601,870			632,540
Real Assets	74,621			98,138
Total equity method investments⁽³⁾	$	941,288		$	1,048,732

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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


(1)	The equity method investment in AINV was $41.2 million and $51.0 million as of June 30, 2020 and December 31, 2019, respectively. The value of the Company’s investment in AINV was $27.8 million and $51.3 million based on the quoted market price of AINV as of June 30, 2020 and December 31, 2019, respectively.


(2)	The equity method investment in Fund VIII was $309.5 million and $370.7 million as of June 30, 2020 and December 31, 2019, respectively, representing an ownership percentage of 2.2% and 2.2% as of June 30, 2020 and December 31, 2019, respectively.


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


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

Performance Allocations

Performance allocations receivable recorded within investments in the condensed consolidated statements of financial condition from credit, private equity and real assets funds consisted of the following:



	As of June 30, 2020		As of December 31, 2019
Credit	$	309,880	$	418,517
Private Equity	257,713		822,531
Real Assets	123,429		266,523
Total performance allocations	$	691,022	$	1,507,571

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



	Credit			Private Equity			Real Assets			Total
Performance allocations, January 1, 2020	$	418,517		$	822,531		$	266,523		$	1,507,571
Change in fair value of funds	43,831			(558,111		)	(101,423		)	(615,703		)
Fund distributions to the Company	(152,468		)	(6,707		)	(41,671		)	(200,846		)
Performance allocations, June 30, 2020	$	309,880		$	257,713		$	123,429		$	691,022

The change in fair value of funds excludes the general partner obligation to return previously distributed performance allocations, which is recorded in due to related parties in the condensed consolidated statements of financial condition. See note 15 for further disclosure regarding the general partner obligation.

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

5. PROFIT SHARING PAYABLE

Profit sharing payable consisted of the following:



	As of June 30, 2020		As of December 31, 2019
Credit	$	283,859	$	314,125
Private Equity	117,706		329,817
Real Assets	85,371		114,727
Total profit sharing payable	$	486,936	$	758,669

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	Credit			Private Equity			Real Assets			Total
Profit sharing payable, January 1, 2020	$	314,125		$	329,817		$	114,727		$	758,669
Profit sharing expense	43,898			(205,165		)	(14,323		)	(175,590		)
Payments/other	(74,164		)	(6,946		)	(15,033		)	(96,143		)
Profit sharing payable, June 30, 2020	$	283,859		$	117,706		$	85,371		$	486,936

Profit sharing expense includes (i) changes in amounts payable to employees and former employees entitled to a share of performance revenues in Apollo’s funds and (ii) changes to the fair value of the contingent consideration obligations recognized in connection with certain Apollo acquisitions. Profit sharing expense excludes the potential return of profit sharing distributions that would be due if certain funds were liquidated, which is recorded in due from related parties in the condensed consolidated statements of financial condition. See note 15 for further disclosure regarding the potential return of profit sharing distributions.

As discussed in note 2, under certain profit sharing arrangements, the Company requires that a portion of certain of the performance revenues distributed to its employees be used to purchase restricted shares of Class A Common Stock issued under its Equity Plan. Prior to distribution of the performance revenues, the Company records the value of the equity-based awards expected to be granted in other assets and other liabilities within the condensed consolidated statements of financial condition. See note 8 for further disclosure regarding deferred equity-based compensation.

6. VARIABLE INTEREST ENTITIES

As described in note 2, the Company consolidates entities that are VIEs for which the Company has been designated as the primary beneficiary.

Consolidated Variable Interest Entities

As noted further in note 15, Apollo purchased a 17% incremental equity ownership stake in Athene, bringing Apollo’s beneficial ownership in Athene to approximately 28.0% as of June 30, 2020. This has resulted in Apollo’s indirect ownership through Athene in several VIEs being considered significant and therefore Apollo has consolidated such VIEs given that the Company also has the power to direct the activities that most significantly impact the economic performance of these VIEs. Accordingly, there has been a significant increase in consolidated VIE assets and liabilities as of June 30, 2020 when compared to December 31, 2019.

The Company consolidated the financial positions and results of operations of VIEs where the Company is the primary beneficiary. These consolidated VIEs include certain CLOs as well as certain funds managed by the Company that were consolidated as a result of the Transaction Agreement. Through its role as collateral manager or general partner of these VIEs, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. In addition, the Company’s combined interests in these VIEs are significant. The assets are not available to creditors of the Company, and the investors in these consolidated VIEs have no recourse against the assets of the Company. There is no recourse to the Company for the consolidated VIEs’ liabilities.

The Company measures the fair value of the financial assets and the financial liabilities of the CLOs using the fair value of either the financial assets or financial liabilities, whichever is more observable (see note 2 for further discussion). The Company has elected the fair value option for financial instruments held by its consolidated CLOs, which includes investments in loans and corporate bonds, as well as debt obligations and contingent obligations. Other assets include amounts due from brokers and interest receivables. Other liabilities include payables for securities purchased, which represent open trades within the consolidated CLOs and primarily relate to corporate loans that are expected to settle within 60 days.

The consolidated funds managed by the Company are investment companies and their investments, which include equity securities as well as debt securities, are held at fair value. Other assets of the consolidated funds include interest receivables and receivables from affiliates. Other liabilities include debt held at amortized cost as well as short-term payables.

Included within liabilities of the consolidated VIEs are notes payable related to certain funds managed by the Company. Each series of notes in a respective consolidated VIE participates in distributions from the VIE, including principal and interest from underlying investments, in accordance with the terms of the note series. Amounts allocated to the noteholders reflect amounts that would be distributed if the VIE’s affairs were wound up and its assets sold for cash equal to their respective carrying values,

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

its liabilities satisfied in accordance with their terms, and all the remaining amounts distributed to the noteholders. The respective VIEs that issue the notes payable are marked at their prevailing net asset value, which approximates fair value.

Results from certain funds managed by the Company are reported on a three month lag based upon the availability of financial information.

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

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



	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2020			⁽¹⁾	2019			⁽¹⁾	2020			⁽¹⁾	2019			⁽¹⁾
Net gains (losses) from investment activities	$	478,480			$	5,805			$	(500,744	)		$	23,787
Net gains (losses) from debt	(353,182		)		(2,134		)		181,269				(11,070		)
Interest and other income	84,609				8,454				236,051				13,415
Interest and other expenses	(152,045		)		(7,494		)		(24,634		)		(12,035		)
Net gains (losses) from investment activities of consolidated variable interest entities	$	57,862			$	4,631			$	(108,058	)		$	14,097


(1)	Amounts reflect consolidation eliminations.

Senior Secured Notes, Subordinated Notes and Secured Borrowings

Included within debt, at fair value and other liabilities are amounts due to third-party institutions by the consolidated VIEs. The following table summarizes the principal provisions of those amounts:



	As of June 30, 2020						As of December 31, 2019
	Principal Outstanding		Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years	Principal Outstanding		Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years
Senior Secured Notes⁽²⁾	$	5,154,883	3.04	%		5.9	$	757,628	1.56	%		10.2
Subordinated Notes⁽²⁾	600,846		N/A		⁽¹⁾	21.1	93,572		N/A		⁽¹⁾	20.4
Secured Borrowings⁽²⁾⁽³⁾	313,985		2.70	%		0.4	18,976		3.69	%		7.8
Total	$	6,069,714					$	870,176


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


(2)	The notes and borrowings of the consolidated VIEs are collateralized by assets held by each respective vehicle and assets of one vehicle may not be used to satisfy the liabilities of another vehicle. As of June 30, 2020 and December 31, 2019, the fair value of these consolidated VIEs’ assets were $6.3 billion and $1.3 billion, respectively.

(3)

As of June 30, 2020 and December 31, 2019, secured borrowings consist of consolidated VIEs’ obligations through a repurchase agreement redeemable at maturity with third party lenders. The fair value of the secured borrowings as of June 30, 2020 approximates principal outstanding due to the short term nature of the borrowings. These secured borrowings are classified as a Level III liability within the fair value hierarchy. The fair value of the secured borrowing as of December 31, 2019 was $19.0 million. This secured borrowing was repaid during the six months ended June 30, 2020.

The consolidated VIEs’ debt obligations contain various customary loan covenants. As of June 30, 2020, the Company was not aware of any instances of non-compliance with any of these covenants.

As of June 30, 2020, except for the secured borrowings, the contractual maturities for debt of the consolidated VIEs are greater than 5 years.

Variable Interest Entities Which are Not Consolidated

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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	As of June 30, 2020		As of December 31, 2019
Assets:
Cash	$	469,164	$	222,481
Investments	4,261,295		5,418,295
Receivables	76,121		137,165
Total Assets	$	4,806,580	$	5,777,941

Liabilities:
Debt and other payables	$	1,297,938	$	3,449,227
Total Liabilities	$	1,297,938	$	3,449,227

Apollo Exposure⁽¹⁾	$	154,687	$	250,521


(1)	Represents Apollo’s direct investment in those entities in which Apollo holds a significant variable interest and certain other investments. Additionally, cumulative performance allocations are subject to reversal in the event of future losses, as discussed in note 16.

7. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

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



	As of June 30, 2020
	Level I		Level II		Level III			Total		Cost
Assets
U.S. Treasury securities, at fair value	$	764,923	$	—	$	—		$	764,923	$	735,804
Investments, at fair value:
Investment in Athene Holding	—		1,403,481		—			1,403,481		2,093,426
Other investments	—		43,291		267,353		⁽¹⁾	310,644		290,390
Total investments, at fair value	—		1,446,772		267,353			1,714,125		2,383,816
Investments of VIEs, at fair value	—		1,970,920		8,015,580			9,986,500
Investments of VIEs, valued using NAV	—		—		—			52,300
Total investments of VIEs, at fair value	—		1,970,920		8,015,580			10,038,800
Derivative assets⁽²⁾	—		410		—			410
Total Assets	$	764,923	$	3,418,102	$	8,282,933		$	12,518,258

Liabilities
Debt of VIEs, at fair value	$	—	$	1,437,435	$	4,242,058		$	5,679,493
Other liabilities of VIEs, at fair value	—		—		16,689			16,689
Contingent consideration obligations⁽³⁾	—		—		99,097			99,097
Derivative liabilities⁽²⁾	—		55		—			55
Total Liabilities	$	—	$	1,437,490	$	4,357,844		$	5,795,334

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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



	As of December 31, 2019
	Level I		Level II		Level III			Total		Cost
Assets
U.S. Treasury securities, at fair value	$	664,249	$	—	$	—		$	664,249	$	642,176
Investments, at fair value:
Investment in Athene Holding	897,052		—		—			897,052		590,110
Other investments	—		43,094		113,410		⁽¹⁾	156,504		135,686
Total investments, at fair value	897,052		43,094		113,410			1,053,556		725,796
Investments of VIEs, at fair value	—		891,256		321,069			1,212,325
Investments of VIEs, valued using NAV	—		—		—			844
Total investments of VIEs, at fair value	—		891,256		321,069			1,213,169
Derivative assets⁽²⁾	—		249		—			249
Total Assets	$	1,561,301	$	934,599	$	434,479		$	2,931,223

Liabilities
Liabilities of VIEs, at fair value	$	—	$	850,147	$	—		$	850,147
Contingent consideration obligations⁽³⁾	—		—		112,514			112,514
Derivative liabilities⁽²⁾	—		93		—			93
Total Liabilities	$	—	$	850,240	$	112,514		$	962,754


(1)	Other investments as of December 31, 2019 excludes $25.8 million of performance allocations classified as Level III related to certain investments for which the Company has elected the fair value option. The Company’s policy is to account for performance allocations as investments.


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


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

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



	For the Three Months Ended June 30, 2020
	Other Investments			Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	118,112		$	7,640,903		$	7,759,015
Purchases	128,551			530,348			658,899
Sales of investments/distributions	(966		)	(154,724		)	(155,690		)
Settlements	—			(252,776		)	(252,776		)
Net realized gains	966			1,355			2,321
Changes in net unrealized gains	16,443			308,146			324,589
Cumulative translation adjustment	4,521			7,637			12,158
Transfer into Level III⁽¹⁾	—			1,706			1,706
Transfer out of Level III⁽¹⁾	(274		)	(67,015		)	(67,289		)
Balance, End of Period	$	267,353		$	8,015,580		$	8,282,933
Change in net unrealized gains included in net gains from investment activities related to investments still held at reporting date	$	16,442		$	—		$	16,442
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date	—			70,639			70,639

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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



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



	For the Six Months Ended June 30, 2020
	Other Investments			Investments of Consolidated VIEs			Total
Balance, Beginning of Period	$	113,410		$	321,069		$	434,479
Transfer in due to consolidation	—			7,794,128			7,794,128
Purchases	159,955			859,580			1,019,535
Sale of investments/distributions	(9,378		)	(183,877		)	(193,255		)
Settlements	—			(437,948		)	(437,948		)
Net realized gains (losses)	1,751			121			1,872
Changes in net unrealized gains	(1,181		)	(334,556		)	(335,737		)
Cumulative translation adjustment	3,070			(3,784		)	(714		)
Transfer into Level III⁽¹⁾	—			70,636			70,636
Transfer out of Level III⁽¹⁾	(274		)	(69,789		)	(70,063		)
Balance, End of Period	$	267,353		$	8,015,580		$	8,282,933
Change in net unrealized gains included in principal investment income related to investments still held at reporting date	$	(1,181	)	$	—		$	(1,181	)
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date	—			(47,303		)	(47,303		)



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


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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	For the Three Months Ended June 30,
	2020									2019
	Contingent Consideration Obligations			Debt and Other Liabilities of Consolidated VIEs			Total			Contingent Consideration Obligations
Balance, Beginning of Period	$	76,700		$	3,795,866		$	3,872,566		$	76,500
Transfer in due to consolidation	—			—			—			—
Issuances	—			213,828			213,828			—
Repayments	(219		)	(18,750		)	(18,969		)	—
Net realized gains	—			3,459			3,459			—
Changes in net unrealized (gains) losses⁽¹⁾	22,616			255,950			278,566			16,723
Cumulative translation adjustment	—			8,394			8,394			—
Balance, End of Period	$	99,097		$	4,258,747		$	4,357,844		$	93,223



	For the Six Months Ended June 30,
	2020									2019
	Contingent Consideration Obligations			Liabilities of Consolidated VIEs & Apollo Funds			Total			Contingent Consideration Obligations
Balance, Beginning of Period	$	112,514		$	—		$	112,514		$	74,487
Transfer in due to consolidation	—			4,291,286			4,291,286			—
Issuances	—			302,928			302,928			—
Repayments	(12,870		)	(198,750		)	(211,620		)	(1,315		)
Net realized gains	—			3,459			3,459
Changes in net unrealized (gains) losses⁽¹⁾	(547		)	(142,043		)	(142,590		)	20,051
Cumulative translation adjustment	—			1,867			1,867			—
Balance, End of Period	$	99,097		$	4,258,747		$	4,357,844		$	93,223


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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	As of June 30, 2020
	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average ⁽¹⁾
Financial Assets
Investment in Athora Holding	$	192,575	Transactional value	N/A	N/A	N/A
Investment in Redding Ridge	67,524		Discounted cash flow	Discount rate	18.0%	18.0%
Other investments	7,254		Third party pricing	N/A	N/A	N/A
Investments of consolidated VIEs:
Bank loans	3,726,635		Discounted cash flow	Discount rate	2.8% - 18.2%	4.9%
			Guideline public company	TEV / EBITDA	2.0x - 14.1x	9.1x
			Third party pricing	N/A	N/A	N/A
			Transactional value	Cost	N/A	N/A
Bonds	49,793		Discounted cash flow	Discount rate	5.5% - 17.5%	7.1%
Equity Securities	852,290		Discounted cash flow	Discount rate	7.5% - 23.0%	8.9%
			Option model	Volatility	60% - 75%	75.0%
			Dividend discount model	Discount rate	9.1% - 13.0%	10.6%
			Market comparable companies	Comparable company multiple	1.2x	1.2x
			Market comparable company	TBV	0.4	0.4
			Adjusted transaction value	Purchase multiple	1.35x	1.35x
			Transactional value	Cost	N/A	N/A
Other Equity Investments	536,517		Discounted cash flow	Discount rate	4.4% - 8.0%	6.4%
Real Estate	360,003		Discounted cash flow	Discount rate	6.3% - 13.5%	7.9%
			Discounted cash flow	Capitalization rate	5.8% - 8.3%	6.9%
			Direct capitalization	Capitalization rate	5.3% - 8.5%	6.8%
Profit participating notes	2,447,245		Discount cash flow	Discount rate	7.5% - 15.0%	14.7%
Warrants	1,836		Option model	Volatility	50.0% - 59.3%	52.9%
CLO notes	41,261		Third party pricing	N/A	N/A	N/A
Total Investments of Consolidated VIEs	8,015,580
Total Financial Assets	$	8,282,933
Financial Liabilities
Liabilities of Consolidated VIEs:
Secured loans	$	3,931,840	Discounted cash flow	Discount rate	2.8% - 11.2%	3.4%
Subordinated notes	99,260		Discounted cash flow	Discount rate	17.0%	17.0%
Preferred equity	210,958		Discounted cash flow	Discount rate	15.0%	15.0%
Other liabilities	16,689		Discounted cash flow	Discount rate	4.8% - 7.5%	6.4%
			Transactional value	Cost	N/A	N/A
			Third party pricing	N/A	N/A	N/A
Total liabilities of Consolidated VIEs:	4,258,747
Contingent Consideration Obligation	$	99,097	Discounted cash flow	Discount rate	17.0%	17.0%
Total Financial Liabilities	$	4,357,844

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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



	As of December 31, 2019
	Fair Value		Valuation Techniques	Unobservable Inputs	Ranges	Weighted Average ⁽¹⁾
Financial Assets
Other investments	$	5,350	Third Party Pricing	N/A	N/A	N/A
Other investments	108,060		Discounted cash flow	Discount Rate	15.0% - 16.0%	15.6%
Investments of consolidated VIEs:
Equity securities	321,069		Book value multiple	Book value multiple	0.61x	0.61x
Equity securities	321,069		Discounted cash flow	Discount rate	13.1%	13.1%
Total Financial Assets	$	434,479
Financial Liabilities
Contingent consideration obligation	$	112,514	Discounted cash flow	Discount rate	17.3%	17.3%
Total Financial Liabilities	$	112,514

N/A Not applicable

EBITDA Earnings before interest, taxes, depreciation and amortization

TEV Total enterprise value

TBV Total book value


(1)	Unobservable inputs were weighted based on the fair value of the investments included in the range.

Fair Value Measurement of Investment in Athene Holding

As of June 30, 2020, the fair value of Apollo’s Level II investment in Athene Holding was estimated using the closing market price of Athene Holding shares of $31.19 less a DLOM of 17.6%, as applicable. The DLOM was derived based on the average remaining lock up restrictions on the shares of Athene Holding held by Apollo (36 months from the closing date of the transactions contemplated by the Transaction Agreement) and the estimated volatility in such shares of Athene Holding. The historical share price volatility of a representative set of Athene Holding’s publicly traded insurance peers was calculated over a three year period equivalent to the lock up on the shares of Athene Holding held by Apollo and used as a proxy to estimate the projected volatility in Athene Holding’s shares. As of December 31, 2019, the fair value of Apollo’s Level I investment in Athene Holding was calculated using the closing market price of Athene Holding shares of $47.03.

Discounted Cash Flow Model

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

Consolidated VIEs

Investments

The significant unobservable inputs used in the fair value measurement of bank loans are discount rates. Significant increases (decreases) in any of discount rates would result in a significantly lower (higher) fair value measurement. Where guideline public company method is used to determine fair value, total enterprise value and earnings before interest, taxes, depreciation and amortization (“EBITDA”) are used. The guideline public company method values a business based on trading multiples derived from publicly traded companies that are similar to the subject company.

The significant unobservable inputs used in the fair value measurement of bonds, other equity investments and profit participating notes are discount rates. Significant increases (decreases) in discount rates would result in a significantly lower (higher) fair value measurements.

The significant unobservable inputs used in the fair value measurement of the equity securities include the discount rate applied, volatility rate, purchase multiple, total book value and comparable company multiple applied in the valuation models. These unobservable inputs in isolation can cause significant increases or decreases in fair value. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks. When a comparable multiple model is used to determine fair value, the comparable multiples are generally multiplied by the underlying companies’ EBITDA to establish

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

the total enterprise value of the company. The comparable multiple is determined based on the implied trading multiple of public industry peers.

The significant unobservable inputs used in the fair value measurement of warrants are volatility rates. Significant increases (decreases) in volatility rates would result in a significantly higher (lower) fair value measurement.

The significant unobservable inputs used in the fair value measurement of real estate are discount rates and capitalization rates. Significant increases (decreases) in any of discount rates and capitalization rates in isolation would result in a significantly lower (higher) fair value measurement.

Liabilities

The debt obligations of the certain consolidated VIEs, that are CLOs, were measured on the basis of the fair value of the financial assets of those CLOs as the financial assets were determined to be more observable and, as a result, categorized as Level II in the fair value hierarchy.

The significant unobservable inputs used in the fair value measurement of the Company’s liabilities of consolidated VIEs are discount rates. Significant increases (decreases) in discount rates would result in a significantly lower (higher) fair value measurement.

Contingent Consideration Obligations

The significant unobservable input used in the fair value measurement of the contingent consideration obligations is the discount rate applied in the valuation models. This input in isolation can cause significant increases or decreases in fair value. The discount rate was based on the hypothetical cost of equity in connection with the acquisition of Stone Tower. See note 16 for further discussion of the contingent consideration obligations.

Valuation of Underlying Investments of Equity Method Investees

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

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

Credit Investments

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

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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

Private Equity Investments

The majority of the illiquid investments within our private equity funds are valued using the market approach, which provides an indication of fair value based on a comparison of the subject company to comparable publicly traded companies and transactions in the industry.

Market Approach

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

Income Approach

For investments where the market approach does not provide adequate fair value information, Apollo relies on the income approach. The income approach is also used to validate the market approach within our private equity funds. The income approach provides an indication of fair value based on the present value of cash flows that a business or security is expected to generate in the future. The most widely used methodology for the income approach is a discounted cash flow method. Inherent in the discounted cash flow method are significant assumptions related to the subject company’s expected results, the determination of a terminal value and a calculated discount rate, which is normally based on the subject company’s weighted average cost of capital, or “WACC.” The WACC represents the required rate of return on total capitalization, which is comprised of a required rate of return on equity, plus the current tax-effected rate of return on debt, weighted by the relative percentages of equity and debt that are typical in the industry. The most critical step in determining the appropriate WACC for each subject company is to select companies that are comparable in nature to the subject company and the credit quality of the subject company. Sources for gaining additional knowledge about the comparable companies include public filings, annual reports, analyst research reports, and press releases. The general formula then used for calculating the WACC considers the after-tax rate of return on debt capital and the rate of return on common equity capital, which further considers the risk-free rate of return, market beta, market risk premium and small stock premium, if applicable. The variables used in the WACC formula are inferred from the comparable market data obtained. The Company evaluates the comparable companies selected and concludes on WACC inputs based on the most comparable company or analyzes the range of data for the investment.

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

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

Real Assets Investments

The estimated fair value of commercial mortgage-backed securities (“CMBS”) in Apollo’s real assets funds is determined by reference to market prices provided by certain dealers who make a market in these financial instruments. Broker quotes are only indicative of fair value and may not necessarily represent what the funds would receive in an actual trade for the applicable instrument. Additionally, the loans held-for-investment are stated at the principal amount outstanding, net of deferred loan fees and costs for certain investments. The loans in Apollo’s real assets funds are evaluated for possible impairment on a

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

quarterly basis. For Apollo’s real assets funds, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable analysis prepared internally, (ii) third party appraisals or valuations by qualified real estate appraisers and (iii) contractual sales value of investments/properties subject to bona fide purchase contracts. Methods (i) and (ii) also incorporate consideration of the use of the income, cost, or sales comparison approaches of estimating property values.

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

8. OTHER ASSETS

Other assets consisted of the following:



	As of June 30, 2020			As of December 31, 2019
Fixed assets	$	173,249		$	138,359
Less: Accumulated depreciation and amortization	(105,774		)	(96,347		)
Fixed assets, net	67,475			42,012
Deferred equity-based compensation⁽¹⁾	57,982			132,422
Prepaid expenses	45,745			55,189
Intangible assets, net	24,222			20,615
Tax receivables	53,390			48,106
Other	29,120			28,105
Total Other Assets	$	277,934		$	326,449

(1)

Deferred equity-based compensation relates to the value of equity-based awards that have been or are expected to be granted in connection with the settlement of certain profit sharing arrangements. A corresponding amount for awards expected to be granted of $23.4 million and $112.4 million, as of June 30, 2020 and December 31, 2019, respectively, is included in other liabilities on the condensed consolidated statements of financial condition.

Depreciation expense was $1.6 million and $2.3 million for the three months ended June 30, 2020 and 2019, respectively, and $3.1 million and $4.6 million for the six months ended June 30, 2020 and 2019, respectively, and is presented as a component of general, administrative and other expense in the condensed consolidated statements of operations.

9. LEASES

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

The table below presents operating lease expenses:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Operating lease cost	$	13,617	$	10,295	$	25,979	$	19,288

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Operating cash flows for operating leases	$	3,307	$	10,246	$	13,956	$	19,630

As of June 30, 2020, the Company’s total lease payments by maturity are presented in the following table:



	Operating Lease Payments
Remaining 2020	$	11,646
2021	36,568
2022	35,853
2023	33,372
2024	30,987
Thereafter	270,469
Total lease payments	$	418,895
Less imputed interest	(79,923		)
Present value of lease payments	$	338,972

The Company has undiscounted future operating lease payments of $244.6 million related to leases that have not commenced that were entered into as of and subsequent to June 30, 2020. Such lease payments are not yet included in the table above or the Company’s condensed consolidated statements of financial condition as lease assets and lease liabilities. These operating leases are anticipated to commence by 2021 with lease terms of approximately 15 years.

Supplemental information related to leases is as follows:



	As of June 30, 2020		As of June 30, 2019
Weighted average remaining lease term (in years)	13.9		7.5
Weighted average discount rate	3.1	%	3.3	%

As of December 31, 2019, the approximate aggregate minimum future payments required for operating leases under U.S. GAAP applicable to that period were as follows:



	2020		2021		2022		2023		2024		Thereafter		Total
Aggregate minimum future payments	$	28,094	$	40,516	$	51,184	$	49,383	$	47,237	$	467,698	$	684,112

10. INCOME TAXES

The Company’s income tax (provision) benefit totaled $(140.3) million and $(16.9) million for the three months ended June 30, 2020 and 2019, respectively, and $155.5 million and $(36.6) million for the six months ended June 30, 2020 and 2019, respectively. The Company’s effective tax rate was approximately 12.3% and 4.7% for the three months ended June 30, 2020 and 2019, respectively, and 10.8% and 5.3% for the six months ended June 30, 2020 and 2019, respectively.

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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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

In the normal course of business, the Company is subject to examination by federal, state, local and foreign tax authorities. With a few exceptions, as of June 30, 2020, the Company’s U.S. federal, state, local and foreign income tax returns for the years 2016 through 2018 are open under the general statute of limitations provisions and therefore subject to examination. Currently, the Internal Revenue Service is examining the tax return of a subsidiary for the 2011 tax year. The State and City of New York are examining certain subsidiaries’ tax returns for tax years 2011 to 2018. No provisions with respect to these examinations have been recorded.

Prior to the Conversion, Apollo and certain of its subsidiaries operated in the U.S. as partnerships for income tax purposes. Effective September 5, 2019, Apollo Global Management, Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, generally all of the income the Company earns is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

The Company’s estimate of income tax assets and liabilities is based on the most recent information available including the tax and book basis of underlying assets of certain partnerships not previously subject to corporate income tax. The tax basis of the partnerships and their underlying assets and liabilities are based on estimates subject to finalization of the Company’s 2019 tax return information. As a result, the impact of the Conversion may differ from the current estimates described herein, but any change is not anticipated to be material.

The Company recorded additional deferred tax assets as a result of the step-up in tax basis of intangibles related to exchanges of AOG Units for Class A Common Stock by the Managing and Contributing Partners. A related liability is recorded in “Due to Related Parties” in the condensed consolidated statements of financial condition for the expected payments under the tax receivable agreement entered into by and among APO Corp., the Managing Partners, the Contributing Partners, and other parties thereto (as amended, the “tax receivable agreement”) (see note 15). The benefit the Company obtains from the difference in the tax asset recognized and the related liability results in an increase to additional paid in capital. The amortization period for a portion of these tax basis intangibles is 15 years and the remaining portion relates to the disposition of the underlying assets to which the step-up is attributable. The associated deferred tax assets will reverse over the same corresponding time periods.

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



Exchange of AOG Units for Class A Common Stock	Increase in Deferred Tax Asset		Increase in Tax Receivable Agreement Liability		Increase to Additional Paid In Capital
For the Six Months Ended June 30, 2020	$	76,580	$	62,531	$	14,049
For the Six Months Ended June 30, 2019	$	546	$	464	$	82

On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, contains numerous income tax provisions. While the Company continues to evaluate the impact of the CARES Act, it does not currently believe it will have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

11. DEBT

Debt consisted of the following:



	As of June 30, 2020							As of December 31, 2019
	Outstanding Balance		Fair Value			Annualized Weighted Average Interest Rate		Outstanding Balance		Fair Value			Annualized Weighted Average Interest Rate
2024 Senior Notes⁽¹⁾	$	497,491	$	544,194	⁽⁴⁾	4.00	%	$	497,164	$	529,333	⁽⁴⁾	4.00	%
2026 Senior Notes⁽¹⁾	496,960		562,952		⁽⁴⁾	4.40		496,704		540,713		⁽⁴⁾	4.40
2029 Senior Notes⁽¹⁾	674,742		794,629		⁽⁴⁾	4.87		674,727		761,780		⁽⁴⁾	4.87
2030 Senior Notes⁽¹⁾	494,121		498,912		⁽⁴⁾	2.65		—		—			—
2039 Senior Secured Guaranteed Notes⁽¹⁾	316,571		369,595		⁽⁵⁾	4.77		316,100		354,093		⁽⁵⁾	4.77
2048 Senior Notes⁽¹⁾	296,571		351,167		⁽⁴⁾	5.00		296,510		350,331		⁽⁴⁾	5.00
2050 Subordinated Notes⁽¹⁾	296,497		272,700		⁽⁴⁾	4.95		297,008		304,125		⁽⁴⁾	4.95
Secured Borrowing I⁽²⁾	17,956		17,787		⁽³⁾	1.84		17,921		17,921		⁽³⁾	1.99
Secured Borrowing II⁽²⁾	19,097		18,919		⁽³⁾	1.72		—		—			—
2014 AMI Term Facility II⁽²⁾	—		—			—		17,266		17,266		⁽³⁾	1.75
2016 AMI Term Facility I⁽²⁾	18,951		18,951		⁽³⁾	1.30		18,915		18,915		⁽³⁾	1.30
2016 AMI Term Facility II⁽²⁾	18,319		18,319		⁽³⁾	1.40		18,285		18,285		⁽³⁾	1.40
Total Debt	$	3,147,276	$	3,468,125				$	2,650,600	$	2,912,762


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



	As of June 30, 2020		As of December 31, 2019
2024 Senior Notes	$	2,118	$	2,394
2026 Senior Notes	2,779		3,014
2029 Senior Notes	5,605		5,928
2030 Senior Notes	4,411		—
2039 Senior Secured Guaranteed Notes	8,429		8,900
2048 Senior Notes	3,129		3,185
2050 Subordinated Notes	3,503		2,992
Total	$	29,974	$	26,413


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



Facility	Date	Loan Amount
Secured Borrowing I	December 19, 2019	€	15,984
Secured Borrowing II	March 5, 2020	€	17,000
2016 AMI Term Facility I	January 18, 2016	€	16,870
2016 AMI Term Facility II	June 22, 2016	€	16,308

The Secured Borrowings consists of obligations through repurchase agreements redeemable at maturity with third party lenders. The weighted average remaining maturity of Secured Borrowing I and II is 11.2 years.

(3)

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


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


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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

2018 AMH Credit Facility—On July 11, 2018, AMH as borrower (the “Borrower”) entered into a new credit agreement (the “2018 AMH Credit Facility”) with the lenders and issuing banks party thereto and Citibank, N.A., as administrative agent for the lenders. The 2018 AMH Credit Facility provides for a $750 million revolving credit facility to the Borrower with a final maturity date of July 11, 2023. The 2018 AMH Credit Facility is to remain available until its maturity, and any undrawn revolving commitments bear a commitment fee. The interest rate on the 2018 AMH Credit Facility is based on adjusted London Inter-bank Offered Rate (“LIBOR”) and the applicable margin as of June 30, 2020 was 1.00%. The commitment fee on the $750 million undrawn 2018 AMH Credit Facility as of June 30, 2020 was 0.09%.

Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including, without limitation, permitted acquisitions. The Borrower may incur incremental facilities in respect of the 2018 AMH Credit Facility in an aggregate amount not to exceed $250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. As of June 30, 2020, the 2018 AMH Credit Facility was undrawn.

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

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

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

2030 Senior Notes—On June 5, 2020, AMH issued $500 million in aggregate principal amount of its 2.65% Senior Notes due 2030 (the “2030 Senior Notes”), at an issue price of 99.704% of par. Interest on the 2030 Senior Notes is payable semi-annually in arrears on June 5 and December 5 of each year. The 2030 Senior Notes will mature on June 5, 2030. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2030 Senior Notes. The Company is obligated to settle the 2030 Senior Notes for the face amount of $500 million.

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

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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

2050 Subordinated Notes—On December 17, 2019, AMH issued $300 million in aggregate principal amount of its 4.950% Fixed-Rate Resettable Subordinated Notes due 2050 (the “2050 Subordinated Notes”), at an issue price of 100.000% of par. Interest on the 2050 Subordinated Notes is payable semi-annually in arrears on June 17 and December 17 of each year. The 2050 Subordinated Notes will mature on January 14, 2050. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2050 Subordinated Notes. The Company is obligated to settle the 2050 Subordinated Notes for the face amount of $300 million.

As of June 30, 2020, the indentures governing the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2030 Senior Notes, the 2048 Senior Notes and the 2050 Subordinated Notes (the “Indentures”) include covenants that restrict the ability of AMH and, as applicable, the guarantors of the notes under the Indentures to incur indebtedness secured by liens on voting stock or profit participating equity interests of their respective subsidiaries, or merge, consolidate or sell, transfer or lease assets. The Indentures also provide for customary events of default.

As of June 30, 2020, the indenture governing the 2039 Senior Secured Guaranteed Notes includes a series of covenants and restrictions customary for transactions of this type, including covenants that (i) require the Issuer to maintain specified reserve accounts to be used to make required payments in respect of the 2039 Senior Secured Guaranteed Notes, (ii) relate to prepayments and related payments of specified amounts, including specified make-whole payments under certain circumstances and (iii) relate to recordkeeping, access to information and similar matters.

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Interest Expense:⁽¹⁾
2018 AMH Credit Facility	$	314	$	315	$	628	$	627
2024 Senior Notes	5,163		5,163		10,326		10,326
2026 Senior Notes	5,628		5,628		11,256		11,256
2029 Senior Notes	8,229		7,187		16,458		11,102
2030 Senior Notes	964		—		964		—
2039 Senior Secured Guaranteed Notes	4,111		959		8,223		959
2048 Senior Notes	3,780		3,781		7,562		7,562
2050 Subordinated Notes	3,742		—		7,486		—
AMI Term Facilities/Secured Borrowings	360		269		630		578
Total Interest Expense	$	32,291	23,302		$	63,533	$	42,410


(1)	Debt issuance costs incurred are amortized into interest expense over the term of the debt arrangement, as applicable.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

12. NET INCOME (LOSS) PER SHARE OF CLASS A COMMON STOCK

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



	Basic and Diluted
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020				2019
Numerator:
Net income attributable to Apollo Global Management, Inc. Class A Common Stockholders	$	437,164		$	155,659		$	(568,218	)		$	295,552
Dividends declared on Class A Common Stock⁽¹⁾	(96,181		)	(92,201		)	(301,783		)		(205,546		)
Dividends on participating securities⁽²⁾	(3,608		)	(4,115		)	(10,855		)		(9,074		)
Earnings allocable to participating securities	(13,947		)	(2,848		)	—			⁽³⁾	(4,030		)
Undistributed income (loss) attributable to Class A Common Stockholders: Basic and Diluted	323,428			56,495			(880,856		)		76,902
Denominator:
Weighted average number of shares of Class A Common Stock outstanding: Basic and Diluted	227,653,988			199,578,950			227,205,866				200,202,174
Net Income per share of Class A Common Stock: Basic and Diluted⁽⁴⁾
Distributed Income	$	0.42		$	0.46		$	1.31			$	1.02
Undistributed Income (Loss)	1.42			0.29			(3.86		)		0.39
Net Income (Loss) per share of Class A Common Stock: Basic and Diluted	$	1.84		$	0.75		$	(2.55	)		$	1.41


(1)	See note 14 for information regarding the quarterly dividends declared and paid during 2020 and 2019.


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


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


(4)	For the three months and six months ended June 30, 2020 and 2019, all of the classes of securities were determined to be anti-dilutive.

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

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

Certain holders of AOG Units are subject to the transfer restrictions set forth in the agreements with the respective holders and may, upon notice (subject to the terms of an exchange agreement), exchange their AOG Units for shares of Class A Common Stock on a one-for-one basis. An AOG Unit holder must exchange one unit in each of the Apollo Operating Group partnerships or limited liability companies to effectuate an exchange for one share of Class A Common Stock.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

Apollo Global Management, Inc. has one share of Class B Common Stock outstanding, which is held by BRH Holdings GP, Ltd. (“BRH”). The voting power of the share of Class B Common Stock is reduced on a one vote per one AOG Unit basis in the event of an exchange of AOG Units for shares of Class A Common Stock, subject to the terms of the AGM Inc. Certificate of Incorporation. The Class B Common Stock has no net income (loss) per share as it does not participate in Apollo’s earnings (losses) or dividends. The Class B Common Stock has no dividend rights and only a de minimis liquidation right. The Class B Common Stock represented 47.2% and 52.2% of the total voting power of the Company’s Class A Common Stock and Class B Common Stock with respect to the limited matters upon which they were entitled to vote together as a single class pursuant to the Company’s governing documents as of June 30, 2020 and 2019, respectively.

The following table summarizes the anti-dilutive securities.



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2020	2019	2020	2019
Weighted average vested RSUs	254,147	137,573	834,718	740,021
Weighted average unvested RSUs	8,252,215	8,939,599	7,670,111	8,744,646
Weighted average unexercised options	—	204,167	—	204,167
Weighted average AOG Units outstanding⁽¹⁾	174,873,808	202,245,561	175,737,132	202,266,384
Weighted average unvested restricted shares	1,310,805	984,792	1,245,164	1,007,667


(1)	Excludes AOG Units owned by Athene. Athene can only redeem their AOG Units by selling to Apollo or to a different buyer with Apollo’s agreement as detailed in the Liquidity Agreement (see note 15). As these AOG Units are not convertible into shares of Class A Common Stock, they are excluded when calculating diluted net income per share.

13. EQUITY-BASED COMPENSATION

RSUs

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

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

During the six months ended June 30, 2020 and June 30, 2019, the Company awarded Performance Grants of 2.0 million and 1.2 million RSUs to certain employees with a grant date fair value of $81.4 million and $25.4 million, respectively, which vest subject to continued employment and the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for these and other Performance Grants will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed probable.

Additionally, the Company entered into an agreement in 2018 with several employees under which RSUs would be granted in 2020 if year-over-year growth in certain discretionary earnings metrics were attained prior to grant and they remained employed at the grant date. In connection with these agreements, during the three months ended June 30, 2020, the Company granted 0.3 million RSUs to certain employees with a grant date fair value of $11.7 million. The awards vest subject to continued employment and the Company’s receipt of performance revenues sufficient to cover the associated equity-based compensation expense. The Company’s receipt of performance revenues was sufficient to cover the associated equity-based compensation expense, therefore the awards were fully vested and expensed during the three months ended June 30, 2020.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

The following table summarizes the equity based compensation expense recognized relating to Performance Grants:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Equity-based compensation	$	28,467	$	14,548	$	57,331	$	29,131

The fair value of all RSU grants made during the six months ended June 30, 2020 and June 30, 2019 was $179.7 million and $97.6 million, respectively.

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



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Forfeiture rate	5.8		%	0.7		%	6.4		%	1.2		%
Equity-based compensation	$	47,282		$	34,185		$	92,800		$	67,938

The following table summarizes RSU activity:



	Unvested			Weighted Average Grant Date Fair Value		Vested		Total Number of RSUs Outstanding
Balance at January 1, 2020	9,784,693			$	26.38	2,349,618		12,134,311		⁽¹⁾
Granted	4,242,044			42.35		—		4,242,044
Forfeited	(895,296	)		22.31		(4,340	)	(899,636	)
Vested	(2,216,790	)		30.25		2,216,790		—
Issued	—			28.08		(4,366,569	)	(4,366,569	)
Balance at June 30, 2020	10,914,651		(2)	$	32.14	195,499		11,110,150		⁽¹⁾


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


(2)	RSUs were expected to vest over the weighted average period of 2.5 years.

Equity-Based Compensation Allocation

Equity-based compensation is allocated based on ownership interests. Therefore, the amortization of equity-based compensation is allocated to stockholders’ equity attributable to AGM Inc. and the Non-Controlling Interests, which results in a difference in the amounts charged to equity-based compensation expense and the amounts credited to stockholders’ equity attributable to AGM Inc. in the Company’s condensed consolidated financial statements.

Below is a reconciliation of the equity-based compensation allocated to AGM Inc.:



	For the Six Months Ended June 30, 2020
	Total Amount		Non-Controlling Interest % in Apollo Operating Group		Allocated to Non-Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, Inc.
RSUs, share options and restricted share awards	$	107,069	—	%	$	—		$	107,069
Other equity-based compensation awards	4,473		47.1		2,109			2,364
Total equity-based compensation	$	111,542			2,109			109,433
Less other equity-based compensation awards⁽²⁾					(2,109		)	(16,203		)
Capital increase related to equity-based compensation					$	—		$	93,230

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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



	For the Six Months Ended June 30, 2019
	Total Amount		Non-Controlling Interest % in Apollo Operating Group		Allocated to Non-Controlling Interest in Apollo Operating Group⁽¹⁾			Allocated to Apollo Global Management, Inc.
RSUs, share options and restricted share awards	$	76,104	—	%	$	—		$	76,104
Other equity-based compensation awards	13,635		50.2		6,848			6,787
Total equity-based compensation	$	89,739			6,848			82,891
Less other equity-based compensation awards⁽²⁾					(6,848		)	(14,569		)
Capital increase related to equity-based compensation					$	—		$	68,322


(1)	Calculated based on average ownership percentage for the period considering issuances of Class A shares or Class A Common Stock, as applicable, during the period.


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

14. EQUITY

Common Stock

As a result of the Conversion, (i) each Class A share converted into one share of Class A Common Stock (ii) the Class B share converted into one share of Class B Common Stock and (iii) the Former Manager was granted one issued and outstanding, fully paid and nonassessable share of Class C Common Stock, which bestows to its holder certain management rights over the Company.

Holders of Class A Common Stock are entitled to participate in dividends from the Company on a pro rata basis. As of June 30, 2020, the holders of Class A Common Stock had limited voting rights.

During the three and six months ended June 30, 2020 and 2019, the Company issued shares of Class A Common Stock in settlement of vested RSUs. The Company has generally allowed holders of vested RSUs and exercised share options to settle their tax liabilities by reducing the number of shares of Class A Common Stock issued to them, which the Company refers to as “net share settlement.” Additionally, the Company has generally allowed holders of share options to settle their exercise price by reducing the number of shares of Class A Common Stock issued to them at the time of exercise by an amount sufficient to cover the exercise price. The net share settlement results in a liability for the Company and a corresponding accumulated deficit adjustment.

In January 2019, Apollo increased its authorized share repurchase amount by $250 million, bringing the total authorized repurchase amount to $500 million. On March 12, 2020, Apollo announced that the executive committee of the Company’s board of directors approved a new share repurchase authorization that allows the Company to repurchase up to $500 million of its Class A common stock. This new authorization increased the Company’s capacity to repurchase shares from $80 million of unused capacity under the Company’s previously approved the share repurchase plan authorization. The share repurchase plan authorization may be used to repurchase outstanding shares of Class A Common Stock as well as to reduce the number of shares of Class A Common Stock to be issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards granted under the Equity Plan (or any successor equity plan thereto). Shares of Class A Common Stock may be repurchased from time to time in open market transactions, in privately negotiated transactions, pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or otherwise, with the size and timing of these repurchases depending on legal requirements, price, market and economic conditions and other factors. Apollo is not obligated under the terms of the program to repurchase any of its shares of Class A Common Stock. The repurchase program has no expiration date and may be suspended or terminated by the Company at any time without prior notice.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	For the Six Months Ended June 30,
	2020		2019
Shares of Class A Common Stock issued in settlement of vested RSUs and share options exercised⁽¹⁾	4,366,569		3,808,972
Reduction of shares of Class A Common Stock issued⁽²⁾	(1,843,305	)	(1,446,436	)
Shares of Class A Common Stock purchased related to share issuances and forfeitures⁽³⁾	628,639		(103,954	)
Issuance of shares of Class A Common Stock for equity-based awards	3,151,903		2,258,582


(1)	The gross value of shares issued was $202.2 million and $116.5 million for the six months ended June 30, 2020 and 2019, respectively, based on the closing price of a share of Class A Common Stock at the time of issuance.


(2)	Cash paid for tax liabilities associated with net share settlement was $85.5 million and $44.3 million for the six months ended June 30, 2020 and 2019, respectively.

(3)

Certain Apollo employees receive a portion of the profit sharing proceeds of certain funds in the form of (a) restricted shares of Class A Common Stock of AGM Inc. that they are required to purchase with such proceeds or (b) RSUs, in each case which equity-based awards generally vest over three years. These equity-based awards are granted under the Company's Equity Plan. To prevent dilution on account of these awards, Apollo may, in its discretion, repurchase shares of Class A Common Stock on the open market and retire them. During the six months ended June 30, 2020 and 2019, we issued 636,314 and 136,686 of such restricted shares and 149,042 and 102,089 of such RSUs under the Equity Plan, respectively, and repurchased 0 and 238,775 shares of Class A Common Stock in open-market transactions not pursuant to a publicly-announced repurchase plan or program, respectively. In addition, there were 7,675 and 1,865 restricted shares forfeited during the six months ended June 30, 2020 and 2019, respectively.

Additionally, during the six months ended June 30, 2020 and 2019, 2,194,095 and 3,337,239 shares of Class A Common Stock were repurchased in open market transactions as part of the publicly announced share repurchase program discussed above, respectively, and such shares were subsequently canceled by the Company. The Company paid $64.2 million and $98.6 million for these open market share repurchases during the six months ended June 30, 2020 and 2019, respectively.

Preferred Stock Issuance

On March 7, 2017, Apollo issued 11,000,000 6.375% Series A Preferred shares (the “Series A Preferred shares”) for gross proceeds of $275.0 million, or $264.4 million net of issuance costs and on March 19, 2018, Apollo issued 12,000,000 6.375% Series B Preferred shares (the “Series B Preferred shares” and collectively with the Series A Preferred shares, the “Preferred shares”) for gross proceeds of $300.0 million, or $289.8 million net of issuance costs.

As a result of the Conversion, (i) each Series A Preferred share representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series A Preferred Stock, having a liquidation preference of $25.00 per share, of the Company and (ii) each Series B Preferred share representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series B Preferred Stock, having a liquidation preference of $25.00 per share, of the Company (the Series A Preferred Stock and the Series B Preferred Stock collectively, the “Preferred Stock”).

When, as and if declared by the executive committee of the board of directors of AGM Inc., dividends on the Preferred Stock will be payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2018 for the Series B Preferred Stock, at a rate per annum equal to 6.375%. Dividends on the Preferred Stock are discretionary and non-cumulative. During 2019, quarterly cash dividends were $0.398438 per share of Series A Preferred Stock and Series B Preferred Stock.

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

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

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

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

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

Dividends and Distributions

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



Dividend Declaration Date	Dividend per share of Class A Common Stock		Payment Date	Dividend to Class A Common Stockholders		Distribution to Non-Controlling Interest Holders in the Apollo Operating Group			Total Distributions from Apollo Operating Group		Distribution Equivalents on Participating Securities
January 31, 2019	$	0.56	February 28, 2019	$	113.3	$	113.3		$	226.6	$	5.0
N/A	—		April 12, 2019	—		45.4		⁽¹⁾	45.4		—
May 2, 2019	0.46		May 31, 2019	92.2		93.0			185.2		4.1
July 31, 2019	0.50		August 30, 2019	100.4		101.0			201.4		4.4
N/A	—		August 15, 2019	—		4.1		⁽¹⁾	4.1		—
N/A	—		September 26, 2019	—		17.8		⁽¹⁾	17.8		—
October 31, 2019	0.50		November 29,2019	111.5		90.1			201.6		4.4
For the Year Ended December 31, 2019	$	2.02		$	417.4	$	464.7		$	882.1	$	17.9
January 30, 2020	$	0.89	February 28, 2020	$	205.6	$	155.6		$	361.2	$	7.2
N/A	—		April 15, 2020	—		43.0		⁽¹⁾	43.0		—
May 1, 2020	0.42		May 29, 2020	96.2		85.7			181.9		3.6
For the Six Months Ended June 30, 2020	$	1.31		$	301.8	$	284.3		$	586.1	$	10.8

(1)

On April 15, 2020 and April 12, 2019, the Company made $0.21 and $0.18 per AOG Unit pro rata distribution, respectively, to the Non-Controlling Interest holders in the Apollo Operating Group, in connection with taxes and payments made under the tax receivable agreement. See note 15 for more information regarding the tax receivable agreement. On April 12, 2019, August 15, 2019 and September 26, 2019,

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

the Company made a $0.04, $0.02 and $0.10 per AOG Unit pro rata distribution, respectively, to the Non-Controlling Interest holders in the Apollo Operating Group, in connection with federal corporate estimated tax payments.

Non-Controlling Interests

As discussed in note 1, Athene Holding acquired 29,154,519 non-voting equity interests of the Apollo Operating Group, which as of June 30, 2020 represented a 6.7% economic interest in the Apollo Operating Group. The table below presents equity interests in Apollo’s consolidated, but not wholly-owned, subsidiaries and funds. Net income and comprehensive income attributable to Non-Controlling Interests consisted of the following:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Net income (loss) attributable to Non-Controlling Interests in consolidated entities:
Interest in management companies and a co-investment vehicle⁽¹⁾	$	1,031		$	865		$	1,279		$	2,026
Other consolidated entities	40,037			4,278			(124,620		)	11,779
Net income (loss) attributable to Non-Controlling Interests in consolidated entities	$	41,068		$	5,143		$	(123,341	)	$	13,805

Net income attributable to Non-Controlling Interests in the Apollo Operating Group:
Net income (loss)	$	999,085		$	342,161		$	(1,284,758	)	$	657,728
Net income (loss) attributable to Non-Controlling Interests in consolidated entities	(41,068		)	(5,143		)	123,341			(13,805		)
Net income (loss) after Non-Controlling Interests in consolidated entities	958,017			337,018			(1,161,417		)	643,923
Adjustments:
Income tax provision (benefit)⁽²⁾	140,323			16,897			(155,530		)	36,551
NYC UBT and foreign tax (provision) benefit⁽³⁾	(3,181		)	(2,325		)	(10,643		)	(4,373		)
Net income (loss) in non-Apollo Operating Group entities	10			531			18			546
Series A Preferred Stock Dividends	(4,383		)	(4,383		)	(8,766		)	(8,766		)
Series B Preferred Stock Dividends	(4,782		)	(4,781		)	(9,563		)	(9,562		)
Total adjustments	127,987			5,939			(184,484		)	14,396
Net income (loss) after adjustments	1,086,004			342,957			(1,345,901		)	658,319
Weighted average ownership percentage of Apollo Operating Group	47.1		%	50.2		%	46.7		%	50.1		%
Net income (loss) attributable to Non-Controlling Interests in Apollo Operating Group	$	511,688		$	172,195		$	(611,528	)	$	330,043

Net Income (loss) attributable to Non-Controlling Interests	$	552,756		$	177,338		$	(734,869	)	$	343,848
Other comprehensive income (loss) attributable to Non-Controlling Interests	6,223			3,352			(818		)	(3,054		)
Comprehensive Income (Loss) Attributable to Non-Controlling Interests	$	558,979		$	180,690		$	(735,687	)	$	340,794


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


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


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

15. RELATED PARTY TRANSACTIONS AND INTERESTS IN CONSOLIDATED ENTITIES

Management fees, transaction and advisory fees and reimbursable expenses from the funds the Company manages and their portfolio companies are included in due from related parties in the condensed consolidated statements of financial

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FINANCIAL STATEMENTS

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

condition. The Company also typically facilitates the payment of certain operating costs incurred by the funds that it manages as well as their related parties. These costs are normally reimbursed by such funds and are included in due from related parties. Other related party transactions include loans to employees and periodic sales of ownership interests in Apollo funds to employees. Due from related parties and due to related parties are comprised of the following:



	As of June 30, 2020		As of December 31, 2019
Due from Related Parties:
Due from credit funds	$	175,886	$	186,495
Due from private equity funds	27,915		27,724
Due from real assets funds	32,698		26,626
Due from portfolio companies	40,131		53,394
Due from Contributing Partners, employees and former employees	208,744		120,830
Total Due from Related Parties	$	485,374	$	415,069
Due to Related Parties:
Due to Managing Partners and Contributing Partners	$	316,387	$	302,050
Due to credit funds	8,154		7,213
Due to private equity funds	352,328		191,620
Due to real assets funds	34,836		504
Total Due to Related Parties	$	711,705	$	501,387

Tax Receivable Agreement

Subject to certain restrictions, each of the Managing Partners and Contributing Partners has the right to exchange his vested AOG Units for the Company’s Class A Common Stock. All Operating Group entities have made, or will make, an election under Section 754 of the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which will result in an adjustment to the tax basis of the assets owned by the Apollo Operating Group at the time of the exchange. These exchanges will result in increases in the basis of underlying assets that will reduce the amount of tax that AGM Inc. and its subsidiaries will otherwise be required to pay in the future.

The tax receivable agreement provides for the payment to the Managing Partners and Contributing Partners of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that AGM Inc. and its subsidiaries would realize as a result of the increases in tax basis of assets that resulted from the 2007 Reorganization, the Conversion, and other exchanges of AOG Units for Class A Common Stock that have occurred in prior years. AGM Inc. and its subsidiaries retain the benefit from the remaining 15% of actual cash tax savings. If the Company does not make the required annual payment on a timely basis as outlined in the tax receivable agreement, interest is accrued on the balance until the payment date.

As a result of the exchanges of AOG Units for Class A Common Stock during the six months ended June 30, 2020 and 2019, a $62.5 million and $0.5 million liability was recorded, respectively, to estimate the amount of the future expected payments to be made by AGM Inc. and its subsidiaries to the Managing Partners and Contributing Partners pursuant to the tax receivable agreement.

In April 2020, Apollo made a $48.2 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2019 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $43.0 million ($0.21 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group. In April 2019, Apollo made a $37.2 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2018 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $37.4 million ($0.18 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group.

Due from Contributing Partners, Employees and Former Employees

As of June 30, 2020 and December 31, 2019, due from Contributing Partners, Employees and Former Employees includes various amounts due to the Company including employee loans and return of profit sharing distributions. As of June 30, 2020 and December 31, 2019, the balance included interest-bearing employee loans receivable of $17.3 million and $17.1 million,

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FINANCIAL STATEMENTS

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

respectively. The outstanding principal amount of the loans as well as all accrued and unpaid interest is required to be repaid at the earlier of the eighth anniversary of the date of the relevant loan or at the date of the relevant employee’s resignation from the Company.

The Company recorded a receivable from the Contributing Partners and certain employees and former employees for the potential return of profit sharing distributions that would be due if certain funds were liquidated as of June 30, 2020 and December 31, 2019 of $174.7 million and $88.5 million, respectively.

Indemnity

Performance revenues from certain funds can be distributed to the Company on a current basis, but are subject to repayment by the subsidiaries of the Apollo Operating Group that act as general partners of the funds in the event that certain specified return thresholds are not ultimately achieved. The Managing Partners, Contributing Partners and certain other investment professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to a particular Managing Partner’s or Contributing Partner’s distributions. Pursuant to an existing shareholders agreement, the Company has agreed to indemnify each of the Company’s Managing Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of certain funds that the Company manages (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees) for all interests that the Company’s Managing Partners and Contributing Partners have contributed or sold to the Apollo Operating Group.

Accordingly, in the event that the Company’s Managing Partners, Contributing Partners and certain investment professionals are required to pay amounts in connection with a general partner obligation for the return of previously made distributions with respect to Fund IV, Fund V and Fund VI, the Company will be obligated to reimburse the Company’s Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to pay even though the Company did not receive the certain distribution to which that general partner obligation related. The Company recorded an indemnification liability of $12.8 million and $12.7 million as of June 30, 2020 and December 31, 2019, respectively.

Due to Credit, Private Equity and Real Assets Funds

Based upon an assumed liquidation of certain of the credit, private equity and real assets funds the Company manages, the Company has recorded a general partner obligation to return previously distributed performance allocations, which represents amounts due to these funds. The general partner obligation is recognized based upon an assumed liquidation of a fund’s net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement or other governing document of the fund.

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



	As of June 30, 2020		As of December 31, 2019
Credit	$	145	$	—
Private Equity	351,317		189,252
Real Assets	34,531		—
Total general partner obligation	$	385,993	$	189,252

Athene

Athene Holding, through its subsidiaries, is a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs. The products and services offered by Athene include fixed and fixed indexed annuity products, reinsurance services offered to third-party annuity providers; and institutional products, such as funding agreements. Athene Holding is currently listed on the New York Stock Exchange under the symbol “ATH”.

The Company provides asset management and advisory services to Athene, including asset allocation services, direct asset management services, asset and liability matching management, mergers and acquisitions, asset diligence hedging and other

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asset management services. On September 20, 2018, Athene and Apollo agreed to revise the existing fee arrangements (the “amended fee agreement”) between Athene and Apollo. The Company began recording fees pursuant to the amended fee agreement on January 1, 2019. The amended fee agreement provides for sub-allocation fees which vary based on portfolio allocation differentiation, as described below.

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

(i)

The Company, through its consolidated subsidiary Apollo Insurance Solutions Group LP, or ISG, earns a base management fee of 0.225% per year on the aggregate market value of substantially all of the assets in substantially all of the investment accounts of or relating to Athene (collectively, the “Athene Accounts”) up to $103.4 billion (the level of assets in the Athene Accounts as of January 1, 2019, excluding certain assets, the “Backbook Value”) and 0.150% per year on all assets in excess of $103.4 billion (the “Incremental Value”), respectively; plus


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



	As of June 30, 2020
Sub-Allocation Fees:
Core Assets⁽¹⁾	0.065	%
Core Plus Assets⁽²⁾	0.130	%
Yield Assets⁽³⁾	0.375	%
High Alpha Assets⁽⁴⁾	0.700	%
Cash, Treasuries, Equities and Alternatives⁽⁵⁾	—	%


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

(2)

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

(3)

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


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


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

Athene and Apollo Strategic Transaction

On October 28, 2019 Athene Holding, AGM Inc. and the entities that form the Apollo Operating Group entered into the Transaction Agreement, pursuant to which, among other things:

•

(i) Athene Holding issued, on February 28, 2020 (the “Closing Date”), 35,534,942 Class A common shares of Athene Holding (the “AHL Class A Common Shares”) to certain subsidiaries of the Apollo Operating Group in exchange for (i) issuance by the Apollo Operating Group of 29,154,519 non-voting equity interests of the Apollo Operating Group to AHL and (ii) $350 million in cash (“Share Issuance”);

•

Athene Holding has granted to AGM Inc. the right to purchase additional AHL Class A Common Shares from the Closing Date until 180 days thereafter to the extent the issued and outstanding AHL Class A Common Shares beneficially owned by Apollo and certain of its related parties and employees (collectively, the “Apollo Parties”) (inclusive of AHL Class A Common Shares over which any such persons have a valid proxy) do not equal at least 35% of the issued and outstanding AHL Class A Common Shares, on a fully diluted basis;

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


•	A representative of the Apollo Operating Group will have the right to purchase up to that number of AHL Class A Common Shares that would increase by up to 5% the percentage of the issued and outstanding AHL Class A Common Shares beneficially owned by the Apollo Parties (inclusive of AHL Class A Common Shares over which any such persons have a valid proxy), calculated on a fully diluted basis;

•

Athene Holding has amended and restated its Twelfth Amended and Restated Bye-laws of Athene Holding to, among other items, eliminate Athene Holding’s multi-class share structure (“Multi-Class Share Elimination”). In connection with the Multi-Class Share Elimination, (i) all of the Class B common shares of Athene Holding would be converted into an equal number of AHL Class A Common Shares on a one-for-one basis and (ii) all of the Class M common shares of Athene Holding was converted into a combination of AHL Class A Common Shares and warrants to purchase AHL Class A Common Shares.

Liquidity Agreement

In connection with the consummation of the Share Issuance and the Multi-Class Share Elimination, AGM Inc. has also entered into a Liquidity Agreement, dated as of the Closing Date, with Athene Holding (the “Liquidity Agreement”), pursuant to which, once each quarter, Athene Holding is entitled to request to sell a number of AOG Units or request AGM Inc. to sell a number of AGM Inc. Class A Common Stock or AOG Units representing at least $50 million, in each case, in exchange for payment of the Cash Amount (as defined below). If Athene Holding intends to exercise such sale request, it will provide a notice of such intent to sell such AOG Units to AGM Inc. Upon receipt of such notice, subject to certain restrictions described below, AGM Inc. will consummate, or, in the case of an AOG Transaction (as defined below), permit the consummation of, one of the following transactions:


•	a transaction whereby AGM Inc. purchases AOG Units from Athene Holding at a price agreed upon, in good faith, by AGM Inc. and Athene Holding (a “Purchase Transaction”);

•

if Athene Holding and AGM Inc. do not agree to consummate a Purchase Transaction, AGM Inc. will use its best efforts to consummate a public offering of AGM Inc. Class A Common Stock, the proceeds (net of certain commissions, fees and expenses consistent with customary and prevailing market practices for similar offerings) of which will be used to fund the purchase of AOG Units from Athene Holding (a “Registered Sale”);

•

if AGM Inc. notifies Athene Holding that it cannot consummate a Registered Sale, upon Athene Holding’s request, AGM Inc. will use its best efforts to consummate a sale of AGM Inc. Class A Common Stock pursuant to an exemption from the registration requirements of the Securities Act, the proceeds (net of certain commissions, fees and expenses consistent with customary and prevailing market practices for similar offerings) of which will be used to fund the purchase of AOG Units from Athene Holding (a “Private Placement,” and collectively with a Purchase Transaction and a Registered Sale, a “Sale Transaction”); or


•	if AGM Inc. elects (in its sole discretion) not to consummate a Sale Transaction, Athene Holding will be permitted to sell AOG Units in one or more transactions that are exempt from the registration requirements of the Securities Act, subject to certain restrictions (an “AOG Transaction”).

For purposes of this description, “Cash Amount” means (i) in the case of a Registered Sale, the cash proceeds that AGM Inc. receives upon the consummation of a Registered Sale after deducting a capped amount of documented commissions, fees and expenses, (ii) in the case of a Purchase Transaction, the cash proceeds to which AGM Inc. and Athene Holding agree, (iii) in the case of a Private Placement, the cash proceeds that AGM Inc. receives upon the consummation of a Private Placement after deducting a capped amount of documented commissions, fees and expenses and (iv) in the case of an AOG Transaction, the cash proceeds to which the purchaser and Athene Holding agree. Each of the Purchase Transaction, Private Placement, Registered Sale and AOG Transaction are subject to the terms and conditions set forth in the Liquidity Agreement.

In the event that an AOG Transaction is consummated, the buyer of such AOG Units will be prohibited from exchanging such AOG Units into AGM Inc. Class A Common Stock for at least 30 days after such purchase. Athene Holding is prohibited from consummating an AOG Transaction with any purchaser (i) who would, after giving effect to such transfer, own more than 3.5% of the issued and outstanding AGM Inc. Class A Common Stock (on a fully-diluted basis) or (ii) who is a “bad actor” (as defined in Regulation D of the Act) or otherwise a prohibited transferee, as described in the Liquidity Agreement.

Athene Holding’s liquidity rights are subject to certain other limitations and obligations, including that in a Registered Sale or a Private Placement, AGM Inc. will not be required to sell any AGM Inc. Class A Common Stock at a price that is less

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than 90% of the volume-weighted average price of the AGM Inc. Class A Common Stock for the 10 consecutive business days prior to the day Athene Holding submits a notice for sale of AOG Units.

The Liquidity Agreement also provides that Athene Holding is prohibited from transferring its AOG Units other than to an affiliate or pursuant to the options set forth above. AGM Inc. has the right not to consummate a Registered Sale or a Private Placement if the recipient of the Class A Common Stock would receive more than 2.0% of the outstanding and issued shares of AGM Inc. Class A Common Stock. Additionally, AGM Inc. has the right not to consummate an AOG Transaction if the recipient would, following such AOG Transaction, be the beneficial owner of greater than 3.5% of the AOG Units.

On February 28, 2020, Apollo and Athene closed on a strategic transaction as discussed above. In connection with the transaction, Apollo purchased a 17% incremental equity stake in Athene at a premium, bringing Apollo’s beneficial ownership in Athene to 28%, or 35% including shares and warrants owned by related parties and employees, on a fully diluted basis. Apollo has entered into a lock-up agreement restricting transfers of Apollo’s existing and newly acquired shares of Athene for three years from the Closing Date.

As of June 30, 2020 and December 31, 2019, the Company held a 28% and an 11% ownership interest in the Class A Common Shares of Athene Holding, respectively.

Athora

The Company, through ISGI, provides investment advisory services to certain portfolio companies of Apollo funds and Athora, a strategic platform that acquires or reinsures blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”). The Company has commitments to make additional equity investments in Athora of $312.8 million as of June 30, 2020, $280.8 million of which is subject to certain conditions.

Athora Sub-Advised

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

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020			2019
Revenues earned in aggregate from Athene and Athora, net⁽¹⁾⁽²⁾	$	463,823	$	204,159	$	(661,670	)	$	364,507

(1)

Consisting of management fees, sub-advisory fees, performance revenues from Athene and Athora, as applicable (net of related profit sharing expense) and changes in the market value of the Athene Holding shares owned directly by Apollo. These amounts exclude the deferred revenue recognized as management fees associated with the vesting of AHL Awards granted to employees of Apollo as further described in note 13.


(2)	Gains (losses) on the market value of the shares of Athene Holding owned directly by Apollo were $267.0 million and $43.2 million for the three months ended June 30, 2020 and 2019, respectively, and $(996.4) million and $61.8 million for the six months ended June 30, 2020 and 2019, respectively.

AAA Investments Credit Agreement

On April 30, 2015, Apollo entered into a revolving credit agreement with AAA Investments (the “AAA Investments Credit Agreement”). Under the terms of the AAA Investments Credit Agreement, the Company shall make available to AAA Investments one or more advances at the discretion of AAA Investments in the aggregate amount not to exceed a balance of $10.0 million at an applicable rate of LIBOR plus 1.5%. The Company receives an annual commitment fee of 0.125% on the unused portion of the loan. As of June 30, 2020 and December 31, 2019, $9.0 million and $8.7 million, respectively, had been advanced by the Company and remained outstanding on the AAA Investments Credit Agreement. AAA Investments was obligated to pay the aggregate borrowings plus accrued interest at the earlier of (a) the third anniversary of the closing date, or (b) the date that was fifteen months following the initial public offering of shares of Athene Holding (the “Maturity Date”). On January 30, 2019, the Company and AAA agreed to extend the maturity date of the AAA Investments Credit Agreement to December 31, 2020.

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Regulated Entities

Apollo Global Securities, LLC (“AGS”) is a registered broker dealer with the SEC and is a member of the Financial Industry Regulatory Authority, subject to the minimum net capital requirements of the SEC. AGS was in compliance with these requirements at June 30, 2020. From time to time, this entity is involved in transactions with related parties of Apollo, including portfolio companies of the funds Apollo manages, whereby AGS earns underwriting and transaction fees for its services.

16. COMMITMENTS AND CONTINGENCIES

Investment Commitments—As a limited partner, general partner and manager of the Apollo funds, Apollo had unfunded capital commitments as of June 30, 2020 and December 31, 2019 of $0.9 billion and $1.1 billion, respectively, of which $350.3 million and $394.0 million related to Fund IX.

Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of June 30, 2020, the Company was not aware of any instances of non-compliance with the financial covenants contained in the documents governing the Company’s debt obligations.

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

On June 20, 2016, Banca Carige S.p.A. (“Carige”) commenced a lawsuit in the Court of Genoa (Italy) (No. 8965/2016), against its former Chairman, its former Chief Executive Officer, AGM Inc., and certain entities (the “Apollo Entities”) organized and owned by investment funds managed by affiliates of AGM Inc. The complaint alleged that AGM Inc. and the Apollo Entities (i) aided and abetted breaches of fiduciary duty to Carige allegedly committed by Carige’s former Chairman and former CEO in connection with the sale to the Apollo Entities of Carige subsidiaries engaged in the insurance business; and (ii) took wrongful actions aimed at weakening Carige’s financial condition supposedly to facilitate an eventual acquisition of Carige. The causes of action were based in tort under Italian law. Carige purportedly sought damages of €450 million in connection with the sale of the insurance businesses and €800 million for other losses. With judgment no. 3118/2018 published on December 6, 2018, the Court of Genoa fully rejected all the claims raised by Carige against AGM Inc. and the Apollo Entities, and also awarded attorneys' fees in their favor for an amount of €428,996.10. Carige filed an appeal on January 3, 2019 before the Court of Appeal of Genoa. The Apollo Entities appeared in the proceedings requesting the Court to reject Carige’s appeal. On November 21, 2019, Carige and the Apollo Entities entered into a settlement agreement whereby, among other things, each party finally and irrevocably released and discharged the other parties from all their respective claims, actions and/or requests raised in the litigation. Accordingly, immediately after signing the settlement agreement, Carige and the Apollo Entities filed with the Court a joint declaration whereby they reported to the Court that they had waived and withdrawn their respective claims.

On August 3, 2017, a complaint was filed in the United States District Court for the Middle District of Florida against AGM Inc., a senior partner of Apollo and a former principal of Apollo by Michael McEvoy on behalf of a purported class of employees of subsidiaries of CEVA Group, LLC (“CEVA Group”) who purchased shares in CEVA Investment Limited (“CIL”), the former parent company of CEVA Group. The complaint alleged that the defendants breached fiduciary duties to and defrauded the plaintiffs by inducing them to purchase shares in CIL and subsequently participating in a debt restructuring of CEVA Group in which shareholders of CIL did not receive a recovery. On February 9, 2018, the Bankruptcy Court for the Southern District of New York held that the claims asserted in the complaint were assets of CIL, which is a chapter 7 debtor, and that the complaint was null and void as a violation of the automatic stay. McEvoy subsequently revised his complaint to attempt to assert claims that do not belong to CIL. The amended complaint no longer named any individual defendants, but Apollo Management VI, L.P. and CEVA Group were added as defendants. The amended complaint sought damages of approximately €30 million and asserts, among other things, claims for violations of the Investment Advisers Act of 1940, breach of fiduciary duties, and breach of contract. On December 7, 2018, after receiving permission from the Bankruptcy Court, McEvoy filed his amended complaint in the District Court in Florida. On January 18, 2019, Apollo filed a motion to dismiss the amended complaint. A hearing on that motion was held December 3, 2019. On January 6, 2020, the Florida court granted in part Apollo’s motion to dismiss, dismissing McEvoy’s Investment Advisers Act claim with prejudice, and denying without prejudice Apollo’s motion with respect to the remaining claims, and directing the parties to conduct limited discovery, and submit new briefing, solely with respect to the statute of limitations. On July 30, 2020, Apollo and CEVA filed a joint motion for summary judgment on statute of limitations grounds.

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On December 21, 2017, Harbinger Capital Partners II, LP, Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Harbinger Capital Partners Special Situations GP, LLC, Harbinger Capital Partners Offshore Manager, L.L.C., Global Opportunities Breakaway Ltd. (in voluntary liquidation), and Credit Distressed Blue Line Master Fund, Ltd. (collectively, “Harbinger”) commenced an action in New York Supreme Court captioned Harbinger Capital Partners II LP et al. v. Apollo Global Management LLC, et al. (No. 657515/2017). The complaint named as defendants (i) AGM Inc., (ii) the funds managed by Apollo that invested in SkyTerra Communications, Inc. (“SkyTerra”) equity before selling their interests to Harbinger under an April 2008 agreement that closed in 2010, and (iii) six former SkyTerra directors, five of whom are current or former Apollo employees. The complaint alleged that during the period of Harbinger’s various equity and debt investments in SkyTerra, from 2004 to 2010, the defendants concealed from Harbinger material defects in SkyTerra technology that was to be used to create a new mobile wi-fi network. The complaint alleged that Harbinger would not have made investments in SkyTerra totaling approximately $1.9 billion had it known of the defects, and that the public disclosure of these defects ultimately led to SkyTerra filing for bankruptcy in 2012 (after it had been renamed LightSquared). The complaint asserted claims against (i) all defendants for fraud, civil conspiracy, and negligent misrepresentation, (ii) AGM Inc. and the Apollo-managed funds only for breach of fiduciary duty, breach of contract, and unjust enrichment, and (iii) the SkyTerra director defendants only for aiding and abetting breach of fiduciary duty. The complaint sought $1.9 billion in damages, as well as punitive damages, interest, costs, and fees. This action was stayed from February 14, 2018, through June 12, 2019. On February 14, 2018, the defendants moved the United States Bankruptcy Court for the Southern District of New York to reopen the LightSquared bankruptcy proceeding for the limited purpose of enforcing Harbinger’s assignment and release in that bankruptcy of the claims that it asserted in the New York state court action. Briefing and hearing on this motion were adjourned while the state court stay was pending. On June 12, 2019, Harbinger voluntarily discontinued the state action without prejudice subject to a tolling agreement. On June 12, 2019, Apollo voluntarily withdrew its bankruptcy court motion subject to a right to refile the motion if Harbinger were to refile the state court action. On June 8, 2020, Harbinger refiled its litigation in New York Supreme Court, captioned Harbinger Capital Partners II, LP et al. v. Apollo Global Management, LLC et al. (No. 652342/2020). The complaint adds eight new defendants: two former SkyTerra executives, one former SkyTerra consultant, and five entities that were Harbinger’s counterparties in a transaction involving TVCC One Six Holdings LLC (“TVCC”). It also adds three new claims relating to Harbinger’s contention that the new defendants induced Harbinger to buy TVCC to support SkyTerra’s network even though they allegedly knew that the network had material defects. Apollo and the director defendants have not yet been served with the new complaint. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

Five shareholders filed substantially similar putative class action lawsuits in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida in March, April, and May 2018, alleging violations of the Securities Act in connection with the January 19, 2018 IPO of ADT Inc. common stock. The actions were consolidated on July 10, 2018, and the case was re-captioned, In re ADT Inc. Shareholder Litigation. On August 24, 2018, the state-court plaintiffs filed a consolidated complaint naming as defendants ADT Inc., several ADT officers and directors, the IPO underwriters (including Apollo Global Securities, LLC), AGM Inc. and certain other Apollo affiliates. Plaintiffs generally alleged that the registration statement and prospectus for the IPO contained false and misleading statements and failed to disclose material information about certain litigation in which ADT was involved, ADT’s efforts to protect its intellectual property, and competitive pressures ADT faced. Defendants filed motions to dismiss the consolidated complaint on October 23, 2018, and those motions were fully briefed. On May 21, 2018, a similar shareholder class action lawsuit was filed in the United States District Court for the Southern District of Florida, naming as defendants ADT, several officers and directors, and AGM Inc. The federal action, captioned Perdomo v. ADT Inc., generally alleged that the registration statement was materially misleading because it failed to disclose ongoing deterioration in ADT’s financial results, along with certain customer and business metrics. On July 20, 2018, several alleged ADT shareholders filed competing motions to be named lead plaintiff in the federal action. On November 20, 2018, the court appointed a lead plaintiff, and on January 15, 2019, the lead plaintiff filed an amended complaint. The amended complaint named the same Apollo-affiliated defendants as the state-court action, along with three new Apollo entities. Defendants filed motions to dismiss on March 25, 2019, and those motions were fully briefed. On July 26, 2019, the state court denied defendants’ motions to dismiss, except it reserved judgment on the question whether it has personal jurisdiction over certain defendants, including the Apollo defendants. On September 12, 2019, all parties to the state and federal actions reached a settlement in principle that would resolve both actions. The plaintiffs in the federal action voluntarily dismissed their action on October 28, 2019, and the settlement will be submitted to the state court for approval. The settlement requires no payment from any Apollo defendants.

On May 3, 2018, Caldera Holdings Ltd, Caldera Life Reinsurance Company, and Caldera Shareholder, L.P. (collectively, “Caldera”) filed a summons with notice in the Supreme Court of the State of New York, New York County, naming as defendants AGM Inc., Apollo Management, L.P., Apollo Advisors VIII, L.P., Apollo Capital Management VIII, LLC, Athene

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Asset Management, L.P., Athene Holding, Ltd., and Leon Black (collectively, “Defendants” and all but Athene Holding, Ltd., the “Apollo Defendants”). On July 12, 2018, Caldera filed a complaint, Index No. 652175/2018 (the “Complaint”), alleging three causes of action: (1) tortious interference with prospective business relations/prospective economic advantage; (2) defamation/trade disparagement/injurious falsehood; and (3) unfair competition. The Complaint sought damages of no less than $1.5 billion, as well as exemplary and punitive damages, attorneys’ fees, interest, and an injunction. Defendants moved to dismiss the Complaint on September 21, 2018 and Caldera filed an amended complaint on January 21, 2019 (the “Amended Complaint”). Defendants moved to dismiss the Amended Complaint, and the Apollo Defendants submitted to the Court a Final Arbitration Award issued on April 26, 2019 in a JAMS arbitration, finding Caldera, Imran Siddiqui, and Ming Dang liable for various causes of action, including breaches of fiduciary duty and/or aiding and abetting thereof. Oral argument on the motions to dismiss was held on May 31, 2019. On December 20, 2019, the Court issued a Decision and Order dismissing Caldera’s complaint in its entirety as against all Defendants. On December 23, 2019, the Apollo Defendants filed a Notice of Entry of the Decision and Order. On January 8, 2020, Caldera filed a Notice of Appeal.

On March 7, 2019, plaintiff Elizabeth Morrison filed an amended complaint in an action captioned Morrison v. Ray Berry, et. al., Case No. 12808-VCG, pending in the Delaware Court of Chancery, adding as defendants AGM Inc. and certain AGM Inc. affiliates. The original complaint had only named as defendants certain officers and directors (the “TFM defendants”) of The Fresh Market, Inc. (“TFM”), claiming that those defendants breached their fiduciary duties to the TFM shareholders in connection with their consideration and approval of a merger agreement between TFM and certain entities affiliated with Apollo, including by engaging in a sale process that improperly favored AGM Inc., and/or Apollo Management VIII, L.P., by agreeing to an inadequate price and by filing materially deficient disclosures regarding the transaction. In addition to AGM Inc., the amended complaint added as defendants Apollo Overseas Partners (Delaware 892) VIII, L.P., Apollo Overseas Partners (Delaware) VIII, L.P., Apollo Overseas Partners VIII, L.P., Apollo Management VIII, L.P., AIF VIII Management, LLC, Apollo Management, L.P., Apollo Management GP, LLC, Apollo Management Holdings, L.P., Apollo Management Holdings GP, LLC, APO Corp., AP Professional Holdings, L.P., Apollo Advisors VIII, L.P., Apollo Investment Fund VIII, L.P., Pomegranate Holdings, Inc., and other defendants. The amended complaint alleged that the Apollo defendants aided and abetted the breaches of fiduciary duties by the TFM defendants. After the defendants moved to dismiss the complaint on May 1, 2019, Plaintiff filed a second amended complaint on June 3, 2019, maintaining the same claim against the same Apollo defendants as the prior complaint. Defendants moved to dismiss the second amended complaint on July 12, 2019. On December 31, 2019, the court issued a decision dismissing certain of the TFM defendants while denying the motions of others. The court deferred ruling on the motions filed by several defendants, including the Apollo-affiliated defendants. On June 1, 2020, the Court granted the Apollo-affiliated defendants’ motion to dismiss.

On October 21, 2019, a putative class action complaint was filed in the Delaware Court of Chancery against Presidio, Inc. (“Presidio”), all of the members of Presidio’s board of directors (including five directors who are affiliated with Apollo), and BC Partners Advisors L.P. and Port Merger Sub, Inc. (together, “BCP”) challenging the then-pending acquisition of Presidio by BCP (the “Merger”). The action is captioned Firefighters Pension System of City of Kansas City, Missouri Trust v. Presidio, Inc. et al, C.A. No. 2019-0839-JTL. The original complaint alleged that the Presidio directors breached their fiduciary duties in connection with the negotiation of the Merger and that the disclosures Presidio made in its filings with the SEC in connection with the Merger omitted material information, and that BCP aided and abetted those alleged breaches. On November 5, 2019, the Court of Chancery held a hearing on a motion by plaintiffs to preliminarily enjoin the stockholder vote and denied that motion. On January 28, 2020, following the closing of the Merger, plaintiffs filed an amended class action complaint, adding as defendants AGM Inc. and AP VIII Aegis Holdings, L.P. (together, the “Apollo Defendants”) and LionTree Advisors, LLC (Presidio’s financial advisor in connection with the Merger). The amended complaint alleges, among other things, that the Presidio directors breached their fiduciary duties in connection with the Merger, that the filings with the SEC in connection with the Merger omitted material information, that the Apollo Defendants were controlling stockholders of Presidio and breached their alleged fiduciary duties to Presidio’s public stockholders, and that BCP, LionTree and the Apollo Defendants aided and abetted breaches of fiduciary duties. The amended complaint seeks, among other relief, declaratory relief, class certification, and unspecified money damages. The defendants have filed motions to dismiss the amended complaint and filed supporting memoranda April 30, 2020. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On November 1, 2019, plaintiff Benjamin Fongers filed a putative class action in Illinois Circuit Court, Cook County, against CareerBuilder, LLC (“CareerBuilder”) and AGM Inc. Plaintiff alleges that in March 2019, CareerBuilder changed its compensation plan so that sales representatives such as Fongers would (i) receive reduced commissions; and (ii) only be able to receive commissions for accounts they originated that were not reassigned to anyone else, a departure from the earlier plan. Plaintiff also claims that the plan applied retroactively to deprive sales representatives of commissions to which they were earlier entitled. Plaintiff alleges that AGM Inc. exercises complete control over CareerBuilder and thus, CareerBuilder acts as AGM Inc.’s agent.

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Based on these allegations, Plaintiff alleges claims against both defendants for breach of written contract, breach of implied contract, unjust enrichment, violation of the Illinois Sales Representative Act, and violation of the Illinois Wage and Payment Collection Act. The defendants removed the action to the Northern District of Illinois on December 5, 2019, and Plaintiff moved to remand on January 6, 2020. That motion was fully briefed on February 14, 2020. Defendants’ deadline to respond to the complaint is 21 days after the court rules on the remand motion. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On January 15, 2020, DISH Network L.L.C. (“DISH”) filed a lawsuit in the Circuit Court of Cook County, Illinois against Terrier Media Buyer, Inc. d/b/a Cox Media Group (“CMG”), AGM Inc., NBI Holdings, LLC, Camelot Media Buyer, Inc. and Camelot Media Holdings, LLC., among other defendants. DISH’s lawsuit alleges that the defendants engaged in a series of transactions designed to take control of certain local television broadcast stations in a way that deprived DISH of its contractual right to retransmit to its subscribers the signals of certain of the local broadcast television stations. DISH seeks a declaration that it may continue to retransmit under its prior retransmission agreement, among other relief. On the same day it filed its lawsuit, DISH obtained an ex parte temporary restraining order (“TRO”) that enjoined all defendants (i) from taking any action to interfere with performance of a retransmission agreement concerning certain local television stations, (ii) from prohibiting DISH from retransmitting the signals of those stations, and (iii) from otherwise interfering with DISH’s right to retransmit the signals of those stations. On January 24, 2020, the Circuit Court of Cook County extended the TRO. On the same day, the defendants removed the case to the U.S. District Court for the Northern District of Illinois. DISH subsequently moved to remand the case back to state court, which motion was denied, and for leave to name additional AGM Inc. subsidiaries as defendants, which motion was granted in part and denied in part. The court granted DISH leave to name AP IX Titan Holdings GP, LLC and AP IX (PMC) VoteCo, LLC as defendants in DISH’s amended complaint. On May 1, 2020, DISH filed its amended complaint. On July 20, 2020, the court denied DISH’s motion for a preliminary injunction and dissolved the TRO on July 22, 2020. On July 21, 2020, the court denied DISH’s request to stay dissolution of the TRO, and that order was affirmed by the United States Court of Appeals for the Seventh Circuit on July 22, 2020. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

In March 2020, Frank Funds, which claims to be a former shareholder of MPM Holdings, Inc. (“MPM”), commenced an action in the Delaware Court of Chancery, captioned Frank Funds v. Apollo Global Management, Inc., et al., C.A. No. 2020-0130, against AGM Inc., certain former MPM directors (including three Apollo officers and employees), and members of the consortium that acquired MPM in a May 2019 merger. The complaint asserts, on behalf of a putative class of former MPM shareholders, a claim against Apollo for breach of its fiduciary duties as MPM’s alleged controlling shareholder in connection with the May 2019 merger in which a consortium acquired MPM. Frank Funds seeks unspecified compensatory damages. Apollo believes the claims in this action are without merit. On July 1, 2020, Apollo moved to dismiss the complaint; briefing on that motion has not yet begun. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On March 12, 2020, AGM Inc. and several investment funds managed by subsidiaries of AGM Inc. (the “Apollo Funds”) were added as defendants in a class action filed by plaintiff Zachary Blair on December 7, 2017, in the Superior Court of California. Plaintiff alleges he is a former employee of Classic Party Rentals, a party equipment rental company previously owned by the Apollo Funds. Plaintiff alleges that Classic Party Rentals failed to comply with California wage and hour and related laws, and also has asserted claims based on various provisions of the California labor code and California’s unfair competition laws. On October 11, 2019, the court certified a class of current and former non-exempt drivers, assistant drivers, and organizer employees of Classic Party Rentals who were paid on an hourly basis and who worked at Classic Party Rentals in California at any time from December 7, 2013, through the date of the class certification order. AGM Inc.’s response to the complaint is currently due by August 24, 2020. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On May 29, 2020, plaintiff Vrajeshkumar Patel filed a putative stockholder derivative and class action complaint in the Delaware Court of Chancery against Talos Energy, Inc. (“Talos”), all of the members of Talos’s board of directors (including two Apollo partners), Riverstone Holdings, LLC (“Riverstone”), AGM Inc., and Guggenheim Securities, LLC in connection with the acquisition of certain assets from Castex Energy 2014, LLC and ILX Holdings, LLC in February 2020. The complaint asserts, on behalf of a putative class of shareholders and Talos, direct and derivative claims against Apollo, Riverstone, and the individual defendants for breach of their fiduciary duties. The plaintiff alleges that Apollo and Riverstone comprise a controlling shareholder group. The complaint seeks, among other relief, class certification and unspecified money damages. On August 4, 2020, the defendants filed motions to dismiss the complaint in its entirety. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

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On June 3, 2020, a group of former MPM shareholders seeking appraisal of their MPM shares in a consolidated appraisal proceeding, In re Appraisal of MPM Holdings, Inc., C.A. No. 2019-0519 (Del. Ch.), moved for leave to file a verified amended appraisal petition and class-action complaint. In that motion, the petitioners stated that they seek leave to assert claims for breach of fiduciary duty and/or aiding and abetting breaches of fiduciary duty against AGM Inc., an affiliated Apollo fund, certain former MPM directors (including three Apollo officers and employees), and members of the consortium that acquired MPM, based on alleged actions related to the May 2019 merger. The petitioners also seek to consolidate their appraisal proceeding with the Frank Funds action. The Delaware Court of Chancery has not yet ruled on the motion. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On August 4, 2020, a putative class action complaint was filed in the United States District Court for the District of Nevada against PlayAGS Inc. (“PlayAGS”), all of the members of PlayAGS’s board of directors (including three directors who are affiliated with Apollo), certain underwriters of AGS (including Apollo Global Securities, LLC), as well as AGM Inc., Apollo Investment Fund VIII, L.P., Apollo Gaming Holdings, L.P., and Apollo Gaming Voteco, LLC (these last four parties, together, the “Apollo Defendants”). The complaint asserts claims arising under the Securities Act of 1933 in connection with certain secondary offerings of PlayAGS stock conducted in August 2018 and March 2019, alleging that the registration statements issued in connection with those offerings did not fully disclose certain business challenges facing PlayAGS. Such claims are asserted against all defendants, including Apollo Global Securities, LLC and the Apollo Defendants, as well as all directors (including the directors affiliated with Apollo). The complaint further asserts a control person claim under Section 20(a) of the Securities Exchange Act of 1934 against the Apollo Defendants and the director defendants (including the directors affiliated with Apollo), alleging that the Apollo Defendants and the director defendants were responsible for certain misstatements and omissions by PlayAGS about its business during a putative class period from May 3, 2018 through August 7, 2019. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

Commitments and Contingencies—Other long-term obligations relate to payments with respect to certain consulting agreements entered into by Apollo Investment Consulting LLC, a subsidiary of Apollo, as well as long-term service contracts. A significant portion of these costs are reimbursable by funds or portfolio companies. As of June 30, 2020, fixed and determinable payments due in connection with these obligations were as follows:



	Remaining 2020		2021		2022		2023		2024		Thereafter		Total
Other long-term obligations	$	13,140	$	4,613	$	1,908	$	674	$	674	$	—	$	21,009

Contingent Obligations—Performance allocations with respect to certain funds are subject to reversal in the event of future losses to the extent of the cumulative revenues recognized in income to date. If all of the existing investments became worthless, the amount of cumulative revenues that have been recognized by Apollo through June 30, 2020 and that would be reversed approximates $1.6 billion. Management views the possibility of all of the investments becoming worthless as remote. Performance allocations are affected by changes in the fair values of the underlying investments in the funds that Apollo manages. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, bond yields and industry trading multiples. Movements in these items can affect valuations quarter to quarter even if the underlying business fundamentals remain stable.

Additionally, at the end of the life of certain funds that the Company manages, there could be a payment due to a fund by the Company if the Company, as general partner, has received more performance allocations than was ultimately earned. The general partner obligation amount, if any, will depend on final realized values of investments at the end of the life of each fund or as otherwise set forth in the respective limited partnership agreement of the fund. See note 15 to our condensed consolidated financial statements for further details regarding the general partner obligation.

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

One of the Company’s subsidiaries, AGS, provides underwriting commitments in connection with securities offerings. As of June 30, 2020, AGS had an unfunded contingent commitment of $21.6 million outstanding related to such offerings. The commitment expired on July 2, 2020 with no funding on the part of the Company.

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As of June 30, 2020, one of the Company’s subsidiaries had an unfunded contingent commitment of $116.5 million, to facilitate fundings at closing by the lead arranger for syndicated term loans issued by a portfolio company of a fund managed by Apollo. The commitment expires by August 14, 2020. As of August 6, 2020, the unfunded commitment was approximately $5.5 million.

Contingent Consideration—In connection with the acquisition of Stone Tower in April 2012, the Company agreed to pay the former owners of Stone Tower a specified percentage of any future performance revenues earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liability was determined based on the present value of estimated future performance revenue payments, and is recorded in profit sharing payable in the condensed consolidated statements of financial condition. The fair value of the remaining contingent obligation was $99.1 million and $112.5 million as of June 30, 2020 and December 31, 2019, respectively.

The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied and are characterized as Level III liabilities. The changes in the fair value of the contingent consideration obligations is reflected in profit sharing expense in the condensed consolidated statements of operations. See note 7 for further information regarding fair value measurements.

17. SEGMENT REPORTING

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

The performance is measured by the Company’s chief operating decision maker on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the affiliated funds.

Segment Distributable Earnings

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


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


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

•

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


•	Decisions related to the amount of earnings available for dividends to Class A Common Stockholders, holders of RSUs that participate in dividends and holders of AOG Units that participate in dividends.

Segment DE is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. Segment DE represents the amount of Apollo’s net realized earnings, excluding the effects of the consolidation of any of the related funds, taxes and related payables, transaction-related charges and any acquisitions. Transaction-related charges includes equity-based compensation charges, the amortization of intangible assets, contingent consideration, and certain other charges associated with acquisitions, and restructuring charges. In addition, Segment DE excludes non-cash revenue and expense related to equity awards granted by unconsolidated related parties to employees of the Company, compensation and administrative related expense reimbursements, as well as the assets, liabilities and operating results of the funds and variable

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

interest entities that are included in the condensed consolidated financial statements. Segment DE also excludes impacts of the remeasurement of the tax receivable agreement liability recorded in other income, which arises from changes in the associated deferred tax balance.

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

Fee Related Earnings

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

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



	As of and for the Three Months Ended June 30, 2020
	Credit Segment			Private Equity Segment			Real Assets Segment			Total Reportable Segments
Management fees	$	224,721		$	127,592		$	49,509		401,822
Advisory and transaction fees, net	13,756			44,802			3,191			61,749
Performance fees⁽¹⁾	3,440			—			—			3,440
Fee Related Revenues	241,917			172,394			52,700			467,011
Salary, bonus and benefits	(52,806		)	(53,202		)	(28,991		)	(134,999		)
General, administrative and other	(37,251		)	(21,770		)	(12,782		)	(71,803		)
Placement fees	(358		)	—			—			(358		)
Fee Related Expenses	(90,415		)	(74,972		)	(41,773		)	(207,160		)
Other income (loss), net of Non-Controlling Interest	(724		)	2			116			(606		)
Fee Related Earnings	150,778			97,424			11,043			259,245
Realized performance fees	4,359			3,549			2,929			10,837
Realized profit sharing expense	(4,359		)	(3,549		)	(2,929		)	(10,837		)
Net Realized Performance Fees	—			—			—			—
Realized principal investment income, net⁽²⁾	1,810			3,404			5			5,219
Net interest loss and other	(11,857		)	(11,686		)	(5,507		)	(29,050		)
Segment Distributable Earnings⁽³⁾	$	140,731		$	89,142		$	5,541		$	235,414
Total Assets⁽³⁾	$	4,093,638		$	2,502,259		$	708,957		$	7,304,854


(1)	Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.


(2)	Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.


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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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



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


(1)	Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.


(2)	Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.


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

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



	For the Three Months Ended June 30,
	2020			2019
Total Consolidated Revenues	$	1,508,335		$	636,579
Equity awards granted by unconsolidated related parties, reimbursable expenses and other⁽¹⁾	(24,847		)	(23,847		)
Adjustments related to consolidated funds and VIEs⁽¹⁾	16,165			90
Performance fees⁽²⁾	(918,493		)	(163,014		)
Principal investment income	(114,149		)	(43,174		)
Total Fee Related Revenues	467,011			406,634
Realized performance fees	10,837			33,335
Realized principal investment income, net and other	4,376			10,438
Total Segment Revenues	$	482,224		$	450,407


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


(2)	Excludes certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	For the Three Months Ended June 30,
	2020			2019
Total Consolidated Expenses	$	702,777		$	342,525
Equity awards granted by unconsolidated related parties, reimbursable expenses and other⁽¹⁾	(21,662		)	(23,865		)
Reclassification of interest expenses	(32,291		)	(23,302		)
Transaction-related charges, net⁽¹⁾	(32,110		)	(18,135		)
Charges associated with corporate conversion⁽²⁾	—			(10,006		)
Equity-based compensation	(17,747		)	(18,237		)
Total profit sharing expense⁽³⁾	(389,987		)	(74,780		)
Dividend-related compensation expense	(1,820		)	—
Total Fee Related Expenses	207,160			174,200
Realized profit sharing expense	10,837			13,306
Total Segment Expenses	$	217,997		$	187,506

(1)

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


(2)	Represents expenses incurred in relation to the Conversion, as described in note 1.


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

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



	For the Three Months Ended June 30,
	2020			2019
Total Consolidated Other Income	$	333,850		$	65,004
Adjustments related to consolidated funds and VIEs⁽¹⁾	(56,197		)	(4,367		)
Net gains from investment activities	(270,112		)	(45,053		)
Interest income and other, net of Non-Controlling Interest	(8,147		)	(9,497		)
Other Loss, net of Non-Controlling Interest	(606		)	6,087
Net interest loss and other	(28,207		)	(14,171		)
Total Segment Other Loss	$	(28,813	)	$	(8,084	)


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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	For the Three Months Ended June 30,
	2020			2019
Income before income tax provision	$	1,139,408		$	359,058
Transaction-related charges⁽¹⁾	32,110			18,135
Charges associated with corporate conversion⁽²⁾	—			10,006
Net income attributable to Non-Controlling Interests in consolidated entities	(41,068		)	(5,143		)
Unrealized performance fees	(907,656		)	(129,679		)
Unrealized profit sharing expense	340,687			40,799
Equity-based profit sharing expense and other⁽³⁾	38,463			20,675
Equity-based compensation	17,747			18,237
Unrealized principal investment income	(107,110		)	(31,893		)
Unrealized net gains from investment activities and other	(277,167		)	(45,378		)
Segment Distributable Earnings	$	235,414		$	254,817


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


(2)	Represents expenses incurred in relation to the Conversion, as described in note 1.

(3)

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



	As of and for the Six Months Ended June 30, 2020
	Credit Segment			Private Equity Segment			Real Assets Segment			Total Reportable Segments
Management fees	$	432,950		$	252,860		$	98,380		784,190
Advisory and transaction fees, net	29,023			65,145			4,313			98,481
Performance fees⁽¹⁾	5,844			—			—			5,844
Fee Related Revenues	467,817			318,005			102,693			888,515
Salary, bonus and benefits	(109,814		)	(95,682		)	(53,524		)	(259,020		)
General, administrative and other	(72,624		)	(43,764		)	(23,768		)	(140,156		)
Placement fees	(664		)	(107		)	—			(771		)
Fee Related Expenses	(183,102		)	(139,553		)	(77,292		)	(399,947		)
Other income (loss), net of Non-Controlling Interest	(1,387		)	25			95			(1,267		)
Fee Related Earnings	283,328			178,477			25,496			487,301
Realized performance fees	30,220			4,692			41,671			76,583
Realized profit sharing expense	(29,916		)	(4,996		)	(41,671		)	(76,583		)
Net Realized Performance Fees	304			(304		)	—			—
Realized principal investment income, net⁽²⁾	3,184			3,946			3,672			10,802
Net interest loss and other	(28,971		)	(27,360		)	(9,853		)	(66,184		)
Segment Distributable Earnings⁽³⁾	$	257,845		$	154,759		$	19,315		$	431,919
Total Assets⁽³⁾	$	4,093,638		$	2,502,259		$	708,957		$	7,304,854


(1)	Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.


(2)	Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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


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



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


(1)	Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.


(2)	Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.


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

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



	For the Six Months Ended June 30,
	2020			2019
Total Consolidated Revenues	$	39,249		$	1,314,356
Equity awards granted by unconsolidated related parties, reimbursable expenses and other⁽¹⁾	(60,688		)	(52,976		)
Adjustments related to consolidated funds and VIEs⁽¹⁾	14,714			1,722
Performance fees⁽²⁾	815,942			(411,186		)
Principal investment (income) loss	79,298			(66,938		)
Total Fee Related Revenues	888,515			784,978
Realized performance fees	76,583			97,124
Realized principal investment income, net and other	9,117			21,032
Total Segment Revenues	$	974,215		$	903,134

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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


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


(2)	Excludes certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.

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



	For the Six Months Ended June 30,
	2020			2019
Total Consolidated Expenses	$	374,343		$	720,542
Equity awards granted by unconsolidated related parties, reimbursable expenses and other⁽¹⁾	(53,873		)	(52,707		)
Reclassification of interest expenses	(63,533		)	(42,410		)
Transaction-related charges, net⁽¹⁾	(10,711		)	(23,598		)
Charges associated with corporate conversion⁽²⁾	(1,064		)	(10,006		)
Equity-based compensation	(31,817		)	(36,660		)
Total profit sharing expense⁽³⁾	190,962			(212,643		)
Dividend-related compensation expense	(4,360		)	—
Total Fee Related Expenses	399,947			342,518
Realized profit sharing expense	76,583			54,445
Total Segment Expenses	$	476,530		$	396,963

(1)


(2)	Represents expenses incurred in relation to the Conversion, as described in note 1.


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

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



	For the Six Months Ended June 30,
	2020			2019
Total Consolidated Other Income (Loss)	$	(1,105,194	)	$	100,465
Adjustments related to consolidated funds and VIEs⁽¹⁾	110,268			(13,501		)
Net (gains) losses from investment activities	994,132			(63,878		)
Interest income and other, net of Non-Controlling Interest	(473		)	(17,269		)
Other Income (Loss), net of Non-Controlling Interest	(1,267		)	5,817
Net interest loss and other	(64,499		)	(26,021		)
Total Segment Other Loss	$	(65,766	)	$	(20,204	)


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

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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



	For the Six Months Ended June 30,
	2020			2019
Income (Loss) before income tax (provision) benefit	$	(1,440,288	)	$	694,279
Transaction-related charges⁽¹⁾	10,711			23,598
Charges associated with corporate conversion⁽²⁾	1,064			10,006
Net (income) loss attributable to Non-Controlling Interests in consolidated entities	123,341			(13,805		)
Unrealized performance fees	892,525			(314,062		)
Unrealized profit sharing expense	(340,496		)	116,561
Equity-based profit sharing expense and other⁽³⁾	72,951			41,637
Equity-based compensation	31,817			36,660
Unrealized principal investment (income) loss	94,460			(44,221		)
Unrealized net (gains) losses from investment activities and other	985,834			(64,686		)
Segment Distributable Earnings	$	431,919		$	485,967


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


(2)	Represents expenses incurred in relation to the Conversion, as described in note 1.

(3)

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



	As of June 30, 2020		As of December 31, 2019
Total reportable segment assets	$	7,304,854	$	7,337,517
Adjustments⁽¹⁾	10,653,554		1,204,600
Total assets	$	17,958,408	$	8,542,117


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

18. SUBSEQUENT EVENTS

On July 29, 2020, the Company entered into the Seventh Amended and Restated Exchange Agreement (the “Amended Exchange Agreement”) by and among the Company, the Apollo Principal Entities defined therein and the Apollo Principal Holders defined therein. The Amended Exchange Agreement provides holders of Apollo Operating Group units (the “AOG units”), which include the Company’s managing partners and contributing partners, the ability to exchange their AOG units for shares of the Company’s Class A Common Stock upon shorter notice periods in connection with sales of shares of Class A Common Stock and the ability to establish a trading plan pursuant to Rule 10b5-1(c) of the Exchange Act using AOG units. Each exchange of AOG units is a taxable event for the exchanging holder. The exchange process under the Amended Exchange Agreement will enable the taxable event and the liquidity event for a holder to occur contemporaneous.

Dividends

On July 30, 2020, the Company declared a cash dividend of $0.49 per share of Class A Common Stock, which will be paid on August 31, 2020 to holders of record at the close of business on August 18, 2020.

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APOLLO GLOBAL MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

On July 30, 2020, the Company declared a cash dividend of $0.398438 per share of Series A Preferred Stock and Series B Preferred Stock, which will be paid on September 15, 2020 to holders of record at the close of business on August 31, 2020.

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ITEM 1A. UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS OF FINANCIAL CONDITION

APOLLO GLOBAL MANAGEMENT, INC.

CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(dollars in thousands, except share data)



	As of June 30, 2020
	Apollo Global Management, Inc. and Consolidated Subsidiaries			Consolidated Funds and VIEs			Eliminations			Consolidated
Assets:
Cash and cash equivalents	$	939,818		$	6		$	—		$	939,824
Restricted cash	81,378			—			—			81,378
U.S. Treasury securities, at fair value	764,923			—			—			764,923
Investments	3,546,915			339			(200,819		)	3,346,435
Assets of consolidated variable interest entities:
Cash and cash equivalents	—			670,691			1,070			671,761
Investments, at fair value	—			10,776,386			(737,586		)	10,038,800
Other assets	—			189,592			(8,333		)	181,259
Incentive fees receivable	864			—			—			864
Due from related parties	522,650			—			(37,276		)	485,374
Deferred tax assets, net	744,733			—			—			744,733
Other assets	278,450			—			(516		)	277,934
Lease assets	308,165			—			—			308,165
Goodwill	116,958			—			—			116,958
Total Assets	$	7,304,854		$	11,637,014		$	(983,460	)	$	17,958,408
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	119,934		$	—		$	—		$	119,934
Accrued compensation and benefits	139,750			—			—			139,750
Deferred revenue	63,156			—			—			63,156
Due to related parties	712,562			—			(857		)	711,705
Profit sharing payable	486,936			—			—			486,936
Debt	3,147,276			—			—			3,147,276
Liabilities of consolidated variable interest entities:
Debt, at fair value	—			5,954,801			(275,308		)	5,679,493
Notes payable	—			2,571,962			(619,343		)	1,952,619
Other liabilities	—			945,648			(27,318		)	918,330
Due to related parties	—			21,285			(21,285		)	—
Other liabilities	158,300			—			—			158,300
Lease liabilities	338,972			—			—			338,972
Total Liabilities	5,166,886			9,493,696			(944,111		)	13,716,471

Stockholders’ Equity:
Apollo Global Management, Inc. stockholders’ equity:
Series A Preferred Stock	264,398			—			—			264,398
Series B Preferred Stock	289,815			—			—			289,815
Additional paid in capital	1,032,442			—			—			1,032,442
Retained earnings (accumulated deficit)	(653,741		)	60,016			(60,020		)	(653,745		)
Accumulated other comprehensive loss	(5,841		)	(18,709		)	20,671			(3,879		)
Total Apollo Global Management, Inc. stockholders’ equity	927,073			41,307			(39,349		)	929,031
Non-Controlling Interests in consolidated entities	5,859			2,102,011			—			2,107,870
Non-Controlling Interests in Apollo Operating Group	1,205,036			—			—			1,205,036
Total Stockholders’ Equity	2,137,968			2,143,318			(39,349		)	4,241,937
Total Liabilities and Stockholders’ Equity	$	7,304,854		$	11,637,014		$	(983,460	)	$	17,958,408

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APOLLO GLOBAL MANAGEMENT, INC.

CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(dollars in thousands, except share data)



	As of December 31, 2019
	Apollo Global Management, LLC and Consolidated Subsidiaries			Consolidated Funds and VIEs			Eliminations			Consolidated
Assets:
Cash and cash equivalents	$	1,556,202		$	—		$	—		$	1,556,202
Restricted cash	19,779			—			—			19,779
U.S. Treasury securities, at fair value	554,387			—			—			554,387
Investments	3,704,332			595			(95,068		)	3,609,859
Assets of consolidated variable interest entities:
Cash and cash equivalents	—			45,329			—			45,329
Investments, at fair value	—			1,213,169			—			1,213,169
Other assets	—			41,688			—			41,688
Incentive fees receivable	2,414			—			—			2,414
Due from related parties	415,622			—			(553		)	415,069
Deferred tax assets	473,165			—			—			473,165
Other assets	327,009			—			(560		)	326,449
Lease assets	190,696			—			—			190,696
Goodwill	93,911			—			—			93,911
Total Assets	$	7,337,517		$	1,300,781		$	(96,181	)	$	8,542,117
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	94,364		$	—		$	—		$	94,364
Accrued compensation and benefits	64,393			—			—			64,393
Deferred revenue	84,639			—			—			84,639
Due to related parties	501,387			—			—			501,387
Profit sharing payable	758,669			—			—			758,669
Debt	2,650,600			—			—			2,650,600
Liabilities of consolidated variable interest entities:
Debt, at fair value	—			893,711			(43,564		)	850,147
Other liabilities	—			79,762			(190		)	79,572
Due to related parties	—			923			(923		)	—
Other liabilities	210,740			—			—			210,740
Lease liabilities	209,479			—			—			209,479
Total Liabilities	4,574,271			974,396			(44,677		)	5,503,990

Stockholders’ Equity:
Apollo Global Management, Inc. stockholders’ equity:
Series A Preferred stock	264,398			—			—			264,398
Series B Preferred stock	289,815			—			—			289,815
Additional paid in capital	1,302,587			—			—			1,302,587
Retained earnings (accumulated deficit)	—			26,744			(26,744		)	—
Accumulated other comprehensive loss	(4,331		)	(3,379		)	3,132			(4,578		)
Total Apollo Global Management, Inc. stockholders’ equity	1,852,469			23,365			(23,612		)	1,852,222
Non-Controlling Interests in consolidated entities	6,776			303,020			(27,892		)	281,904
Non-Controlling Interests in Apollo Operating Group	904,001			—			—			904,001
Total Stockholders’ Equity	2,763,246			326,385			(51,504		)	3,038,127
Total Liabilities and Stockholders’ Equity	$	7,337,517		$	1,300,781		$	(96,181	)	$	8,542,117

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

The following discussion should be read in conjunction with Apollo Global Management, Inc.’s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section entitled “Risk Factors” in the 2019 Annual Report and quarterly report on Form 10-Q filed with the SEC on May 11, 2020. The highlights listed below have had significant effects on many items within our condensed consolidated financial statements and affect the comparison of the current period’s activity with those of prior periods.

General

Our Businesses

Founded in 1990, Apollo is a leading global alternative investment manager. We are a contrarian, value-oriented investment manager in credit, private equity and real assets with significant distressed expertise and a flexible mandate in the majority of our funds which enables our funds to invest opportunistically across a company’s capital structure. We raise, invest and manage funds on behalf of some of the world’s most prominent pension, endowment and sovereign wealth funds as well as other institutional and individual investors. Apollo is led by our Managing Partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 34 years and lead a team of 1,511 employees, including 501 investment professionals, as of June 30, 2020.

Apollo conducts its business primarily in the United States through the following three reportable segments:


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


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

(iii)

These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the managed funds.

Our financial results vary since performance fees, which generally constitute a large portion of the income we receive from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business.

In addition, the growth in our Fee-Generating AUM during the last year has primarily been in our credit segment driven by continued growth in traditional funds and managed accounts as well as growth in asset management services to the insurance industry and in performing credit products. The average management fee rate for these new credit products is at market rates for such products and in certain cases is below our historical rates. Also, due to the complexity of these new product offerings, the Company has incurred and will continue to incur additional costs associated with managing these products. To date, these additional costs have been offset by realized economies of scale and ongoing cost management.

As of June 30, 2020, we had total AUM of $413.6 billion across all of our businesses. More than 90% of our total AUM was in funds with a contractual life at inception of five years or more, and 60% of such AUM was in permanent capital vehicles.

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



	Gross Returns		Net Returns
Category	For the Three Months Ended June 30, 2020	For the Six Months Ended June 30, 2020	For the Three Months Ended June 30, 2019	For the Six Months Ended June 30, 2020
Corporate Credit	7.7%	(1.1)%	7.2%	(1.7)%
Structured Credit	8.9%	(7.3)%	8.7%	(7.3)%
Direct Origination	2.7%	(2.0)%	1.4%	(3.5)%

As of December 31, 2017, Fund IX held its final closing, raising a total of $23.5 billion in third-party capital and approximately $1.2 billion of additional capital from Apollo and affiliated investors for total commitments of $24.7 billion. On December 31, 2013, Fund VIII held a final closing raising a total of $17.5 billion in third-party capital and approximately $880 million of additional capital from Apollo and affiliated investors, and as of June 30, 2020, Fund VIII had $2.6 billion of uncalled commitments remaining. Additionally, Fund VII held a final closing in December 2008, raising a total of $14.7 billion, and as of June 30, 2020, Fund VII had $1.8 billion of uncalled commitments remaining. We have consistently produced attractive long-term investment returns in our traditional private equity funds, generating a 39% gross IRR and a 24% net IRR on a compound annual basis from inception through June 30, 2020. Apollo’s private equity fund appreciation/(depreciation) was 11.7% and (12.4%) for the three and six months ended June 30, 2020, respectively.

For our real assets segment, there was a total gross return of 1.4% and (5.2)% for the three and six months ended June 30, 2020, respectively. Included in the gross return are U.S. Real Estate Fund I and U.S. Real Estate Fund II including co-investment capital, Asia Real Estate Fund including co-investment capital, the European Principal Finance funds, and infrastructure equity funds.

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

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Holding Company Structure

The diagram below depicts our current organizational structure:

Note: The organizational structure chart above depicts a simplified version of the Apollo structure. It does not include all legal entities in the structure. Ownership percentages are as of August 5, 2020.

(1)

As of August 5, 2020, the Class A shares represented 9.2% of the total voting power of the Class A shares, the Class B share and the Class C share, voting together as a single class, with respect to General Stockholder Matters. As of August 5, 2020, the Class A shares represented 52.8% of the total voting power of the Class A shares and the Class B share with respect to certain matters upon which they are entitled to vote pursuant to the certificate of incorporation of AGM Inc. (“COI”).

(2)

Our Managing Partners own BRH Holdings GP, Ltd., which in turn holds our only outstanding Class B share. As of May 7, 2020, the Class B share represented 8.2% of the total voting power of the Class A shares, the Class B share and the Class C share, voting together as a single class, with respect to General Stockholder Matters, and a de minimus economic interest in AGM Inc. As of August 5, 2020, the Class B share represented 47.2% of the total voting power of the Class A shares and the Class B share with respect to certain matters upon which they are entitled to vote as a single class.


(3)	Through BRH Holdings, L.P., our Managing Partners indirectly beneficially own through estate planning vehicles, limited partner interests in Holdings. Our Managing Partners’ economic interests are represented by their indirect beneficial ownership, through Holdings, of 36.5% of the limited partner interests in the Apollo Operating Group.

(4)

Holdings owns 40.4% of the limited partner or limited liability company interests in each Apollo Operating Group entity. The AOG Units held by Holdings are exchangeable for Class A shares. Our Managing Partners, through their interests in BRH and Holdings, beneficially own 36.5% of the AOG Units. Our Contributing Partners, through their interests in Holdings, beneficially own 3.8% of the AOG Units.

(5)

BRH Holdings GP, Ltd. is the sole member of AGM Management, LLC, which in turns holds our only outstanding Class C share. The Class C share bestows to its holder certain management rights over AGM Inc. As of August 5, 2020, the Class C share represented 82.6% of the total voting power of the Class A shares, the Class B share and the Class C share, voting together as a single class, with respect to General Stockholder Matters, and a de minimus economic interest in AGM Inc.


(6)	Represents 52.9% of the limited partner or limited liability company interests in each Apollo Operating Group entity, held through the intermediate holding companies. AGM Inc. also indirectly owns 100% of the general partner or managing member interests in each Apollo Operating Group entity.


(7)	Represents 6.7% of the limited partner or limited liability company interests in each Apollo Operating Group entity held by Athene Holding Ltd. and/or its affiliates. AOG Units held by Athene are non-voting equity interests of the Apollo Operating Group and are not exchangeable for Class A shares.

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Each of the Apollo Operating Group entities holds interests in different businesses or entities organized in different jurisdictions.

Our structure is designed to accomplish a number of objectives, the most important of which are as follows:

•

Historically, we were a holding company that was qualified as a partnership for U.S. federal income tax purposes. Our intermediate holding companies enabled us to maintain our partnership status and to meet the qualifying income exception. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc.

•

We have historically used multiple management companies to segregate operations for business, financial and other reasons. Going forward, we may increase or decrease the number of our management companies, partnerships or other entities within the Apollo Operating Group based on our views regarding the appropriate balance between (a) administrative convenience and (b) continued business, financial, tax and other optimization.

Conversion to a C Corporation

Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Prior to the Conversion, a portion of the investment income, performance allocations and principal investment income we earned was not subject to corporate-level tax in the United States. Subsequent to the Conversion, generally all of the income is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

Business Environment

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

In the U.S., the S&P 500 Index increased by 20% in the second quarter of 2020, following a decrease of 20% in the first quarter of 2020. Global equity markets also appreciated during the quarter, with the MSCI All Country World ex USA Index increasing 15.6% following a decrease of 23% in the first quarter of 2020.

Conditions in the credit markets also have a significant impact on our business. Credit markets were positive in the second quarter of 2020, with the BofAML HY Master II Index increasing by 9.6%, while the S&P/LSTA Leveraged Loan Index increased 6.6%. The U.S. 10-year Treasury yield fell during the quarter to 0.66%. On March 16, 2020, the Federal Reserve reduced the benchmark interest rate, lowering it for the first time this year, to a target range of 0% to 0.25%, down from to a target range of 1.50% to 1.75% at the end of 2019.

Foreign exchange rates can materially impact the valuations of our investments and those of our funds that are denominated in currencies other than the U.S. dollar. Relative to the U.S. dollar, the Euro appreciated 1.81% during the second quarter, after depreciating by 1.6% in the first quarter of 2020, while the British pound depreciated 0.10% in the second quarter of 2020, after depreciating 6.4% in the first quarter of 2020. The price of crude oil appreciated by 91.7% during the quarter ended June 30, 2020.

In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported real GDP decreased at an annual rate of 32.9%, in the second quarter of 2020, following a decrease of 5.0% in the first quarter of 2020. As of June 2020, the International Monetary Fund estimated that the U.S. economy will contract by 8.0% in 2020 and expand by 4.5% in 2021. The U.S. Bureau of Labor Statistics reported that the U.S. unemployment rate increased to 11.1% as of June 30, 2020, due to the impacts of the COVID-19 pandemic on the labor force.

Regardless of the market or economic environment at any given time, Apollo relies on its contrarian, value-oriented approach to consistently invest capital on behalf of its fund investors by focusing on opportunities that management believes are often overlooked by other investors. As such, Apollo’s global integrated investment platform deployed $7.2 billion and $12.4 billion of capital through the funds it manages during the three and six months ended June 30, 2020, respectively. We believe Apollo’s expertise in credit and its focus on nine core industry sectors, combined with more than 30 years of investment experience, has allowed Apollo to respond quickly to changing environments. Apollo’s core industry sectors include chemicals, manufacturing and industrial, natural resources, consumer and retail, consumer services, business services, financial services, leisure, and media/

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telecom/technology. Apollo believes that these attributes have contributed to the success of its private equity funds investing in buyouts and credit opportunities during both expansionary and recessionary economic periods.

In general, institutional investors continue to allocate capital towards alternative investment managers for more attractive risk-adjusted returns in a low interest rate environment, and we believe the business environment remains generally accommodative to raise larger successor funds, launch new products, and pursue attractive strategic growth opportunities, such as continuing to grow the assets of our permanent capital vehicles. As such, Apollo had $89.2 billion and $96.5 billion of capital inflows during the three and six months ended June 30, 2020, respectively. While Apollo continues to attract capital inflows, it also continues to generate realizations for fund investors. Apollo returned $1.4 billion and $3.5 billion of capital and realized gains to the investors in the funds it manages during the three and six months ended June 30, 2020, respectively.

Managing Business Performance

We believe that the presentation of Segment DE supplements a reader’s understanding of the economic operating performance of each of our segments.

Segment Distributable Earnings and Distributable Earnings

Segment DE is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. See note 17 to the condensed consolidated financial statements for more details regarding the components of Segment DE. DE represents Segment DE less estimated current corporate, local and non-U.S. taxes as well as the current payable under Apollo’s tax receivable agreement. DE is net of preferred dividends, if any, to the Series A and Series B preferred stockholders. DE excludes the impacts of the remeasurement of deferred tax assets and liabilities which arises from changes in estimated future tax rates. The economic assumptions and methodologies that impact the implied income tax provision are similar to those methodologies and certain assumptions used in calculating the income tax provision for Apollo’s condensed consolidated statements of operations under U.S. GAAP. Management believes that excluding the remeasurement of the tax receivable agreement and deferred taxes from Segment DE and DE, respectively, is meaningful as it increases comparability between periods. Remeasurement of the tax receivable agreement and deferred taxes are estimates that may change due to changes in the interpretation of tax law.

We believe that Segment DE is helpful for an understanding of our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. This measure supplements and should be considered in addition to and not in lieu of the results of operations discussed below in “—Overview of Results of Operations” that have been prepared in accordance with U.S. GAAP. See note 17 to the condensed consolidated financial statements for more details regarding management’s consideration of Segment DE.

Fee Related Earnings and Fee Related EBITDA

Fee Related Earnings, or “FRE”, is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure. See note 17 to the condensed consolidated financial statements for more details regarding the components of FRE.

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

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

Operating Metrics

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

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Assets Under Management

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



	As of June 30, 2020
	Credit		Private Equity		Real Assets		Total
	(in millions)
Fee-Generating	$	254,332	$	43,840	$	31,606	$	329,778
Non-Fee-Generating	46,122		29,461		8,245		83,828
Total Assets Under Management	$	300,454	$	73,301	$	39,851	$	413,606



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



	As of December 31, 2019
	Credit		Private Equity		Real Assets		Total
	(in millions)
Fee-Generating	$	172,893	$	43,826	$	29,727	$	246,446
Non-Fee-Generating	42,637		32,962		9,060		84,659
Total Assets Under Management	$	215,530	$	76,788	$	38,787	$	331,105

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



	As of June 30, 2020		As of June 30, 2019		As of December 31, 2019
	(in millions)
Credit	$	8,404	$	7,860	$	10,898
Private Equity	7,858		9,570		9,441
Real Assets	2,051		2,159		2,208
Total AUM with Future Management Fee Potential	$	18,313	$	19,589	$	22,547

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



	As of June 30, 2020
	Credit		Private Equity		Real Assets		Total
	(in millions)
Performance Fee-Generating AUM⁽¹⁾	$	18,186	$	18,015	$	3,768	$	39,969
AUM Not Currently Generating Performance Fees	31,861		12,158		1,342		45,361
Uninvested Performance Fee-Eligible AUM	8,571		26,160		4,734		39,465
Total Performance Fee-Eligible AUM⁽²⁾	$	58,618	$	56,333	$	9,844	$	124,795

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	As of June 30, 2019
	Credit		Private Equity		Real Assets		Total
	(in millions)
Performance Fee-Generating AUM⁽¹⁾	$	35,601	$	23,827	$	2,792	$	62,220
AUM Not Currently Generating Performance Fees	7,487		6,263		2,624		16,374
Uninvested Performance Fee-Eligible AUM	7,581		32,257		4,309		44,147
Total Performance Fee-Eligible AUM⁽²⁾	$	50,669	$	62,347	$	9,725	$	122,741



	As of December 31, 2019
	Credit		Private Equity		Real Assets		Total
	(in millions)
Performance Fee-Generating AUM⁽¹⁾	$	38,560	$	22,907	$	5,179	$	66,646
AUM Not Currently Generating Performance Fees	6,889		8,112		589		15,590
Uninvested Performance Fee-Eligible AUM	9,922		30,084		4,676		44,682
Total Performance Fee-Eligible AUM⁽²⁾	$	55,371	$	61,103	$	10,444	$	126,918


(1)	Performance Fee-Generating AUM of $0.1 billion, $2.2 billion and $3.2 billion as of June 30, 2020, June 30, 2019 and December 31, 2019, respectively, are above the hurdle rates or preferred returns and has been deferred to future periods when the fees are probable to not be significantly reversed.


(2)	Effective as of June 30, 2020, performance fee-eligible AUM for Athora includes only capital commitments. Prior period performance fee-eligible AUM has been conformed to reflect this change in presentation.

The following table presents AUM Not Currently Generating Performance Fees for funds that have invested capital for more than 24 months as of June 30, 2020 and the corresponding appreciation required to reach the preferred return or high watermark in order to generate performance fees:



Strategy / Fund	Invested AUM Not Currently Generating Performance Fees		Investment Period Active > 24 Months		Appreciation Required to Achieve Performance Fees⁽¹⁾
	(in millions)
Credit:
Corporate Credit	$	22,008	$	19,850	5%
Structured Credit	3,494		3,494		22%
Direct Origination	4,043		3,935		4%
Advisory and Other	2,316		2,442		1%
Total Credit	31,861		29,721		7%
Private Equity:
Fund VIII	5,264		5,264		10%
ANRP II	1,379		1,379		30%
Hybrid Capital	2,035		2,035		93%
Other PE	3,480		2,466		39%
Total Private Equity	12,158		11,144		34%
Real Assets:
Total Real Assets	1,342		650		> 250bps
Total	$	45,361	$	41,515


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

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



	As of June 30, 2020
	Credit		Private Equity			Real Assets		Total
	(in millions)
Fee-Generating AUM based on capital commitments	$	2,559	$	26,849		$	5,063	$	34,471
Fee-Generating AUM based on invested capital	2,135		15,528			2,299		19,962
Fee-Generating AUM based on gross/adjusted assets	223,902		992			23,059		247,953
Fee-Generating AUM based on NAV	25,736		471			1,185		27,392
Total Fee-Generating AUM	$	254,332	$	43,840	⁽¹⁾	$	31,606	$	329,778


(1)	The weighted average remaining life of the traditional private equity funds as of June 30, 2020 was 71 months.



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


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



	As of December 31, 2019
	Credit		Private Equity			Real Assets		Total
	(in millions)
Fee-Generating AUM based on capital commitments	$	3,921	$	26,849		$	4,932	$	35,702
Fee-Generating AUM based on invested capital	1,372		15,743			2,273		19,388
Fee-Generating AUM based on gross/adjusted assets	144,028		814			21,403		166,245
Fee-Generating AUM based on NAV	23,572		420			1,119		25,111
Total Fee-Generating AUM	$	172,893	$	43,826	⁽¹⁾	$	29,727	$	246,446


(1)	The weighted average remaining life of the traditional private equity funds as of December 31, 2019 was 80 months.

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



	Total AUM						Fee-Generating AUM
	As of June 30,				As of December 31,		As of June 30,				As of December 31,
	2020		2019		2019		2020		2019		2019
	(in millions)
Corporate Credit	$	146,955	$	105,513	$	110,659	$	115,655	$	88,927	$	92,601
Structured Credit	54,793		49,662		52,735		47,969		43,651		45,453
Direct Origination	24,407		18,190		24,234		21,868		16,277		22,031
Advisory and Other	74,299		27,851		27,902		68,840		14,234		12,808
Total	$	300,454	$	201,216	$	215,530	$	254,332	$	163,089	$	172,893

Investment Management Agreement - ISG

Apollo, through its consolidated subsidiary, ISG, provides asset management services to Athene with respect to assets in the Athene Accounts, including asset allocation services, direct asset management services, asset and liability matching management, mergers and acquisitions, asset diligence, hedging and other asset management services and receives management fees for providing these services. The Company, through ISG, also provides sub-allocation services with respect to a portion of the assets in the Athene Accounts. See note 15 to the condensed consolidated financial statements for more details regarding the fee rates of the investment management and sub-allocation fee arrangements with respect to the assets in the Athene Accounts.

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



	As of June 30,				As of December 31,
	2020		2019		2019
	(in millions)
Core Assets	$	45,350	$	31,052	$	32,346
Core Plus Assets	36,181		30,102		30,132
Yield Assets	55,529		44,457		48,552
High Alpha	5,799		4,238		5,051
Cash, Treasuries, Equity and Alternatives	22,250		9,181		14,220
Total ⁽¹⁾	$	165,109	$	119,030	$	130,301


(1)	Includes $39.5 billion, $8.2 billion and $10.0 billion of gross assets related to Athene Co-Invest Reinsurance Affiliate 1A Ltd. and $2.4 billion, $0.9 billion and $2.6 billion of unfunded commitments related to Apollo/Athene Dedicated Investment Program (“ADIP”) as of June 30, 2020, June 30, 2019 and December 31, 2019, respectively.

Investment Advisory and Sub-Advisory Agreements - ISGI

Apollo, through ISGI, provides investment advisory services with respect to certain assets in certain portfolio companies of Apollo funds and sub-advises the Athora Accounts and broadly refers to “Athora Sub-Advised” assets as those assets in the Athora Accounts which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages. The Company refers to the portion of the Athora AUM that is not Athora Sub-Advised AUM as “Athora Non-Sub Advised” AUM. See note 15 to the condensed consolidated financial statements for more details regarding the fee arrangements with respect to the assets in the Athora Accounts.

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



	As of June 30,				As of December 31,
	2020		2019		2019
	(in millions)
Sub-Advised AUM	$	4,514	$	3,596	$	3,877
Non-Sub-Advised AUM	55,640		10,080		10,019
Total AUM	$	60,154	$	13,676	$	13,896

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



	Total AUM						Fee-Generating AUM
	As of June 30,				As of December 31,		As of June 30,				As of December 31,
	2020		2019		2019		2020		2019		2019
	(in millions)
Private Equity Funds	$	59,685	$	61,771	$	62,139	$	35,910	$	39,578	$	36,947
Hybrid Capital	9,089		9,217		9,113		4,020		3,405		2,961
Natural Resources	4,527		6,160		5,536		3,910		4,099		3,918
Total	$	73,301	$	77,148	$	76,788	$	43,840	$	47,082	$	43,826

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



	Total AUM						Fee-Generating AUM
	As of June 30,				As of December 31,		As of June 30,				As of December 31,
	2020		2019		2019		2020		2019		2019
	(in millions)
Real Estate	$	30,890	$	24,441	$	29,401	$	24,837	$	19,035	$	22,890
Principal Finance	6,732		6,996		7,181		5,018		5,207		5,102
Infrastructure	2,229		2,061		2,205		1,751		1,723		1,735
Total	$	39,851	$	33,498	$	38,787	$	31,606	$	25,965	$	29,727

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



	For the Three Months Ended June 30,
	2020												2019
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total

Change in Total AUM⁽¹⁾:
Beginning of Period	$	209,745		$	67,669		$	38,097		$	315,511		$	193,669		$	77,325		$	32,000		$	302,994
Inflows⁽²⁾	85,347			1,768			2,122			89,237			5,905			751			1,790			8,446
Outflows⁽³⁾	(5,788		)	(51		)	(283		)	(6,122		)	(2,917		)	(101		)	(173		)	(3,191		)
Net Flows	79,559			1,717			1,839			83,115			2,988			650			1,617			5,255
Realizations	(653		)	(536		)	(224		)	(1,413		)	(486		)	(1,381		)	(333		)	(2,200		)
Market Activity⁽²⁾⁽⁴⁾	11,803			4,451			139			16,393			5,045			554			214			5,813
End of Period	$	300,454		$	73,301		$	39,851		$	413,606		$	201,216		$	77,148		$	33,498		$	311,862

(1)

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


(2)	For the three months ended June 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.


(3)	Outflows for Total AUM include redemptions of $0.7 billion and $1.6 billion during the three months ended June 30, 2020 and 2019, respectively.


(4)	Includes foreign exchange impacts of $522.7 million, $42.8 million and $52.4 million for credit, private equity and real assets, respectively, during the three months ended June 30, 2020, and foreign exchange impacts of $321.4 million, $15.4 million and $62.9 million for credit, private equity and real assets, respectively, during the three months ended June 30, 2019.

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	For the Six Months Ended June 30,
	2020												2019
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total
	(in millions)
Change in Total AUM⁽¹⁾:
Beginning of Period	$	215,530		$	76,788		$	38,787		$	331,105		$	174,378		$	75,086		$	30,795		$	280,259
Inflows⁽²⁾	91,616			2,249			2,629			96,494			23,140			2,844			3,396			29,380
Outflows⁽³⁾	(6,626		)	(61		)	(517		)	(7,204		)	(5,218		)	(140		)	(399		)	(5,757		)
Net Flows	84,990			2,188			2,112			89,290			17,922			2,704			2,997			23,623
Realizations	(1,165		)	(1,704		)	(590		)	(3,459		)	(720		)	(2,552		)	(668		)	(3,940		)
Market Activity⁽²⁾⁽⁴⁾	1,099			(3,971		)	(458		)	(3,330		)	9,636			1,910			374			11,920
End of Period	$	300,454		$	73,301		$	39,851		$	413,606		$	201,216		$	77,148		$	33,498		$	311,862

(1)

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


(2)	For the six months ended June 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.


(3)	Outflows for Total AUM include redemptions of $1.2 billion and $2.0 billion during the six months ended June 30, 2020 and 2019, respectively.


(4)	Includes foreign exchange impacts of $(457.0) million, $30.6 million and $(39.2) million for credit, private equity and real assets, respectively, during the six months ended June 30, 2020, and foreign exchange impacts of $(48.8) million, $(27.8) million and $22.5 million for credit, private equity and real assets, respectively, during the six months ended June 30, 2019.

Three Months Ended June 30, 2020

Total AUM was $413.6 billion at June 30, 2020, an increase of $98.1 billion, or 31.1%, compared to $315.5 billion at March 31, 2020. The net increase was primarily due to client transactions which increased insurance assets under management and market activity of $16.4 billion. More specifically, the net increase was due to:


•	Net flows of $83.1 billion primarily related to:

•

a $79.6 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM in the advisory and other category, (ii) an increase in AUM as Athene closed its reinsurance transaction with Jackson National Life Insurance Company, which added $28 billion of AUM, and (iii) subscriptions across the corporate credit funds we manage of $8.9 billion, primarily due to an additional $6 billion of new commitments for Apollo Strategic Origination Partners, a new origination platform expected to provide approximately $12 billion in financings over the next three years;


•	a $1.8 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $2.1 billion offset by a $0.3 billion decrease in leverage; and


•	a $1.7 billion increase related to funds we manage in the private equity segment consisting primarily of an increase in subscriptions of $1.5 billion related to the private equity funds we manage.


•	Market activity of $16.4 billion related to (i) $11.8 billion of appreciation in the funds we manage in the credit segment, primarily related to the market activity of Athene, (ii) $4.5 billion of appreciation in the funds we manage in the private equity segment, primarily related to Fund VIII, as well as (iii) $0.1 billion of appreciation in the funds we manage in the real assets segment.


•	Realizations of $1.4 billion primarily related to:


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


•	$0.5 billion related to funds we manage in the private equity segment primarily consisting of distributions from Fund VIII, Fund VII and Fund IX.

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Six Months Ended June 30, 2020

Total AUM was $413.6 billion at June 30, 2020, an increase of $82.5 billion, or 24.9%, compared to $331.1 billion at December 31, 2019. The net increase was primarily due to client transactions which increased insurance assets under management. More specifically, the net increase was due to:


•	Net flows of $89.3 billion primarily related to:

•

an $85.0 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM in the advisory and other category, (ii) an increase in AUM as Athene closed its reinsurance transaction with Jackson National Life Insurance Company, which added $28 billion of AUM, and (iii) subscriptions across the corporate credit funds we manage of $10.5 billion, primarily due to an additional $6 billion of new commitments for Apollo Strategic Origination Partners, a new origination platform expected to provide approximately $12 billion in financings over the next three years;


•	a $2.2 billion increase related to funds we manage in the private equity segment primarily consisting of (i) subscriptions across the traditional private equity funds we manage of $1.5 billion, and (ii) an increase in leverage of $0.7 billion; and


•	a $2.1 billion increase related to funds we manage in the real assets segment primarily consisting of (i) net segment transfers of $1.9 billion, and (ii) subscriptions of $0.2 billion.

•

Market activity of $(3.3) billion related to (i) $(4.0) billion of depreciation in the funds we manage in the private equity segment, primarily related to Fund VIII, as well as (ii) $(0.4) billion of depreciation in the funds we manage in the real assets segment, offset by (iii) $1.1 billion of appreciation in the funds we manage in the credit segment, primarily related to the market activity of Athene.


•	Realizations of $(3.5) billion primarily related to:


•	$(1.7) billion related to funds we manage in the private equity segment primarily consisting of distributions of $0.9 billion, $0.3 billion and $0.2 billion from Fund VIII, Fund VII and certain hybrid capital funds, respectively;


•	$(1.2) billion related to funds we manage in the credit segment primarily consisting of distributions from the corporate credit and direct origination funds; and


•	$(0.6) billion related to funds we manage in the real assets segment primarily consisting of distributions from the real estate and principal finance funds.

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



	For the Three Months Ended June 30,
	2020												2019
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total

Change in Fee-Generating AUM⁽¹⁾:
Beginning of Period	$	168,262		$	43,976		$	29,412		$	241,650		$	156,860		$	46,372		$	25,033		$	228,265
Inflows ⁽²⁾	80,745			829			2,535			84,109			4,549			1,190			1,467			7,206
Outflows⁽³⁾	(5,664		)	(977		)	(278		)	(6,919		)	(2,672		)	(206		)	(473		)	(3,351		)
Net Flows	75,081			(148		)	2,257			77,190			1,877			984			994			3,855
Realizations	(75		)	(203		)	(134		)	(412		)	(177		)	(317		)	(164		)	(658		)
Market Activity⁽⁴⁾	11,064			215			71			11,350			4,530			43			102			4,675
End of Period	$	254,332		$	43,840		$	31,606		$	329,778		$	163,089		$	47,082		$	25,965		$	236,136

(1)


(2)	For the three months ended June 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.


(3)	Outflows for Fee-Generating AUM include redemptions of $0.7 billion and $1.5 billion during the three months ended June 30, 2020 and 2019, respectively.


(4)	Includes foreign exchange impacts of $268.4 million, $2.4 million and $45.2 million for credit, private equity and real assets, respectively, during the three months ended June 30, 2020, and foreign exchange impacts of $96.8 million, $(2.4) million and $27.4 million for credit, private equity and real assets, respectively, during the three months ended June 30, 2019.

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	For the Six Months Ended June 30,
	2020												2019
	Credit			Private Equity			Real Assets			Total			Credit			Private Equity			Real Assets			Total
	(in millions)
Change in Fee-Generating AUM⁽¹⁾:
Beginning of Period	$	172,893		$	43,826		$	29,727		$	246,446		$	144,071		$	46,633		$	23,663		$	214,367
Inflows⁽²⁾	88,256			1,445			2,726			92,427			14,377			1,323			2,947			18,647
Outflows⁽³⁾	(7,006		)	(1,022		)	(677		)	(8,705		)	(4,300		)	(433		)	(483		)	(5,216		)
Net Flows	81,250			423			2,049			83,722			10,077			890			2,464			13,431
Realizations	(470		)	(546		)	(202		)	(1,218		)	(279		)	(511		)	(285		)	(1,075		)
Market Activity⁽⁴⁾	659			137			32			828			9,219			70			123			9,412
End of Period	$	254,332		$	43,840		$	31,606		$	329,778		$	163,089		$	47,082		$	25,965		$	236,136

(1)


(2)	For the six months ended June 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.


(3)	Outflows for Fee-Generating AUM include redemptions of $1.1 billion and $2.0 billion during the six months ended June 30, 2020 and 2019, respectively.


(4)	Includes foreign exchange impacts of $(378.5) million, $(12.9) million and $(29.6) million for credit, private equity and real assets, respectively, during the six months ended June 30, 2020, and foreign exchange impacts of $(46.1) million, $(2.4) million and $(5.2) million for credit, private equity and real assets, respectively, during the six months ended June 30, 2019.

Three Months Ended June 30, 2020

Total Fee-Generating AUM was $329.8 billion at June 30, 2020, an increase of $88.1 billion or 36.5%, compared to $241.7 billion at March 31, 2020. The net increase was primarily due to:


•	Net flows of $77.2 billion primarily related to:


•	a $75.1 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM in the advisory and other category, (ii) an increase in AUM as Athene closed its reinsurance transaction with Jackson National Life Insurance Company, which added $28 billion of AUM, and (iii) subscriptions across the corporate credit funds we manage of $1.1 billion;

•

a $2.3 billion increase related to funds we manage in the real assets segment primarily consisting of (i) net segment transfers of $2.0 billion, and (ii) $0.5 billion of fee-generating capital deployment, primarily related to the commencement of U.S. Real Estate Fund III’s investment period; these increases were offset by $0.3 billion of fee-generating capital reduction, primarily related to certain real estate funds we manage.


•	Market activity of $11.4 billion primarily related to a $11.1 billion increase related to funds we manage in the credit segment, primarily as a result of the market activity of Athene.

Six Months Ended June 30, 2020

Total Fee-Generating AUM was $329.8 billion at June 30, 2020, an increase of $83.3 billion or 33.8%, compared to $246.4 billion at December 31, 2019. The net increase was primarily due to net flows of $83.7 billion primarily related to:


•	an $81.3 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM in the advisory and other category, (ii) an increase in AUM as Athene closed its reinsurance transaction with Jackson National Life Insurance Company, which added $28 billion of AUM, and (iii) subscriptions across the corporate credit funds we manage of $2.4 billion; and


•	a $2.0 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $1.7 billion and fee-generating capital deployment, primarily related to the commencement of U.S. Real Estate Fund III’s investment period.

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Capital Deployed and Uncalled Commitments

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

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

Capital Deployed

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
					(in millions)
Credit⁽¹⁾	$	2,900	$	2,087	$	6,287	$	3,343
Private Equity	3,935		$	2,540	5,608		5,655
Real Assets	413		821		554		1,076
Total capital deployed	$	7,248	$	5,448	$	12,449	$	10,074


(1)	Prior period numbers were recast to include Apollo Accord Master Fund, L.P. (“Accord”) and other defined maturity date funds.

Uncalled Commitments

The following table summarizes the uncalled commitments by segment:



	As of June 30, 2020		As of December 31, 2019
	(in millions)
Credit	$	22,492	$	11,591
Private Equity	32,262		36,346
Real Assets	5,891		5,736
Total uncalled commitments⁽¹⁾	$	60,645	$	53,673

(1)

As of June 30, 2020 and December 31, 2019, $47.4 billion and $46.4 billion, respectively, represented the amount of capital available for investment or reinvestment subject to the provisions of the applicable limited partnership agreements or other governing agreements of the funds, partnerships and accounts we manage. These amounts exclude uncalled commitments which can only be called for fund fees and expenses.

The Historical Investment Performance of Our Funds

Below we present information relating to the historical performance of our funds, including certain legacy Apollo funds that do not have a meaningful amount of unrealized investments, and in respect of which the general partner interest has not been contributed to us.

When considering the data presented below, you should note that the historical results of our funds are not indicative of the future results that you should expect from such funds, from any future funds we may raise or from your investment in our Class A common stock.

An investment in our Class A common stock is not an investment in any of the Apollo funds, and the assets and revenues of our funds are not directly available to us. The historical and potential future returns of the funds we manage are not directly linked to returns on our Class A shares. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in our Class A shares. However, poor performance

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of the funds that we manage would cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and in all likelihood the value of our Class A shares.

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

Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund VI generated a 12% gross IRR and a 9% net IRR since its inception through June 30, 2020, while Fund V generated a 61% gross IRR and a 44% net IRR since its inception through June 30, 2020. Accordingly, the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by any particular fund, or for our private equity funds as a whole. Future returns will also be affected by the applicable risks, including risks of the industries and businesses in which a particular fund invests. See “Item 1A. Risk Factors—Risks Related to Our Businesses—The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares and our Preferred shares” in the 2019 Annual Report and “Item 1A. Risk Factors—The current, and uncertain future, impact of the COVID-19 outbreak is expected to continue to impact our business, financial condition and results of operations” in the quarterly report on Form 10-Q filed with the SEC on May 11, 2020.

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Investment Record

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

All amounts are as of June 30, 2020, unless otherwise noted:



($ in millions)	Vintage Year	Total AUM		Committed Capital		Total Invested Capital		Realized Value		Remaining Cost		Unrealized Value		Total Value		Gross IRR		Net IRR
Private Equity:
Fund IX	2018	$	24,343	$	24,729	$	5,571	$	621	$	5,175	$	5,542	$	6,163	16	%	(8	)%
Fund VIII	2013	17,586		18,377		16,017		9,587		10,224		13,596		23,183		13		9
Fund VII	2008	2,939		14,677		16,461		31,539		2,459		967		32,506		33		24
Fund VI	2006	647		10,136		12,457		21,132		405		3		21,135		12		9
Fund V	2001	260		3,742		5,192		12,721		120		2		12,723		61		44
Fund I, II, III, IV & MIA⁽²⁾	Various	13		7,320		8,753		17,400		—		—		17,400		39		26
Traditional Private Equity Funds⁽³⁾		$	45,788	$	78,981	$	64,451	$	93,000	$	18,383	$	20,110	$	113,110	39	%	24
ANRP II	2016	2,291		3,454		2,647		1,384		1,984		1,477		2,861		6		(2	)
ANRP I	2012	349		1,323		1,149		1,011		618		139		1,150		—		(4	)
AION	2013	609		826		689		327		442		503		830		9		2
Hybrid Value Fund	2019	3,396		3,238		1,897		130		1,833		1,970		2,100		NM¹		NM¹
Total Private Equity		$	52,433	$	87,822	$	70,833	$	95,852	$	23,260	$	24,199	$	120,051
Credit:
FCI III	2017	$	2,734	$	1,906	$	2,544	$	1,267	$	1,890	$	1,973	$	3,240	23	%	17	%
FCI II	2013	2,260		1,555		2,894		1,940		1,689		1,588		3,528		8		5
FCI I	2012	—		559		1,516		1,975		—		—		1,975		11		8
SCRF IV⁽⁶⁾	2017	2,048		2,502		4,534		2,417		2,151		1,891		4,308		(6	)	(7	)
SCRF III	2015	—		1,238		2,110		2,428		—		—		2,428		18		14
SCRF II	2012	—		104		467		528		—		—		528		15		12
SCRF I	2008	—		118		240		357		—		—		357		33		26
Accord IIIB	2020	1,768		1,761		408		85		352		331		416		NM¹		NM¹
Accord III	2019	961		886		2,184		1,850		586		567		2,417		NM¹		NM¹
Accord II⁽⁷⁾	2018	—		781		801		821		—		—		821		16		12
Accord I⁽⁷⁾	2017	—		308		111		113		—		—		113		10		5
Total Credit		$	9,771	$	11,718	$	17,809	$	13,781	$	6,668	$	6,350	$	20,131
Real Assets:
European Principal Finance Funds
EPF III⁽⁴⁾	2017	$	4,737	$	4,513	$	2,802	$	1,068	$	1,993	$	2,419	$	3,487	21	%	10	%
EPF II⁽⁴⁾	2012	1,349		3,442		3,408		4,319		658		583		4,902		14		9
EPF I⁽⁴⁾	2007	234		1,455		1,912		3,217		—		8		3,225		23		17
U.S. RE Fund III	2020	442		442		31		^—		31		31		31		NM¹		NM¹
U.S. RE Fund II⁽⁵⁾	2016	1,127		1,243		878		480		629		700		1,180		14		11
U.S. RE Fund I⁽⁵⁾	2012	230		649		632		791		147		143		934		13		10
Asia RE Fund⁽⁵⁾	2017	678		719		434		206		281		368		574		18		13
Infrastructure Equity Fund	2018	1,107		897		801		218		658		824		1,042		NM¹		NM¹
Total Real Assets		$	9,904	$	13,360	$	10,898	$	10,299	$	4,397	$	5,076	$	15,375


(1)	Data has not been presented as the fund’s effective date is less than 24 months prior to the period indicated and such information was deemed not meaningful.

(2)

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


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


(4)	Funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.12 as of June 30, 2020.


(5)	U.S. RE Fund I, U.S. RE Fund II and Asia RE Fund had $152 million, $771 million and $375 million of co-investment commitments as of June 30, 2020, respectively, which are included in the figures in the table. A co-invest entity within U.S. RE Fund I is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.24 as of June 30, 2020.


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


(7)	Gross and Net IRR have been presented for these funds as they have a defined maturity date of less than 24 months and have substantially liquidated.

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Credit

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



	Gross Returns				Net Returns
Category	For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020		For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020
Corporate Credit	7.7	%	(1.1	)%	7.2	%	(1.7	)%
Structured Credit	8.9		(7.3	)	8.7		(7.3	)
Direct Origination	2.7		(2.0	)	1.4		(3.5	)

Private Equity

The following table summarizes the investment record for distressed investments made in our traditional private equity fund portfolios, since the Company’s inception. All amounts are as of June 30, 2020:



	Total Invested Capital		Total Value		Gross IRR
	(in millions)
Distressed for Control	$	7,795	$	18,685	29	%
Non-Control Distressed	5,558		8,693		71
Total	13,353		27,378		49
Corporate Carve-outs, Opportunistic Buyouts and Other Credit⁽¹⁾	51,098		85,732		21
Total	$	64,451	$	113,110	39	%


(1)	Other Credit is defined as investments in debt securities of issuers other than portfolio companies that are not considered to be distressed.

The following tables provide additional detail on the composition of the Fund VIII and Fund VII private equity portfolios based on investment strategy. Amounts for Fund I, II, III, IV, V, VI and IX are included in the table above but not presented below as their remaining value is less than $100 million, the fund has been liquidated or the fund commenced investing capital less than 24 months prior to June 30, 2020 and such information was deemed not meaningful. All amounts are as of June 30, 2020:

Fund VIII⁽¹⁾



	Total Invested Capital		Total Value
	(in millions)
Corporate Carve-outs	$	2,706	$	5,919
Opportunistic Buyouts	12,744		16,495
Distressed⁽²⁾	567		769
Total	$	16,017	$	23,183

Fund VII⁽¹⁾



	Total Invested Capital		Total Value
	(in millions)
Corporate Carve-outs	$	2,539	$	3,505
Opportunistic Buyouts	4,339		10,593
Distressed/Other Credit⁽²⁾	9,583		18,408
Total	$	16,461	$	32,506


(1)	Committed capital less unfunded capital commitments for Fund VIII and Fund VII were $16.0 billion and $14.4 billion, respectively, which represents capital commitments from limited partners to invest in such funds less capital that is available for investment or reinvestment subject to the provisions of the applicable limited partnership agreement or other governing agreements.


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

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During the recovery and expansionary periods of 1994 through 2000 and late 2003 through the first half of 2007, our private equity funds invested or committed to invest approximately $13.7 billion primarily in traditional and corporate partner buyouts. During the recessionary periods of 1990 through 1993, 2001 through late 2003 and the recessionary and post recessionary periods (beginning the second half of 2007 through June 30, 2020), our private equity funds have invested $59.0 billion, of which $20.8 billion was in distressed buyouts and debt investments when the debt securities of quality companies traded at deep discounts to par value. Our average entry multiple for Fund VIII, VII and VI was 5.7x, 6.1x and 7.7x, respectively, as of June 30, 2020. Our average entry multiple for a private equity fund is the average of the total enterprise value over an applicable adjusted earnings before interest, taxes, depreciation and amortization, which may incorporate certain adjustments based on the investment team’s estimates and we believe captures the true economics of our funds’ investments in portfolio companies. The average entry multiple of actively investing funds may include committed investments not yet closed.

Permanent Capital

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



				Total Returns⁽¹⁾
	IPO Year⁽²⁾	Total AUM		For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020		For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019
Credit:		(in millions)
MidCap⁽³⁾	N/A	$	8,552	4	%	—	%	5	%	8	%
AIF	2013	320		12		(14	)	3	%	12	%
AFT	2011	350		9		(15	)	3	%	8	%
AINV/Other⁽⁴⁾	2004	4,551		49		(39	)	7	%	35	%
Real Assets:
ARI	2009	6,978		37	%	(41	)%	4	%	16	%
Total		$	20,751


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


(2)	An initial public offering (“IPO”) year represents the year in which the vehicle commenced trading on a national securities exchange.


(3)	MidCap is not a publicly traded vehicle and therefore IPO year is not applicable. The returns presented are a gross return based on NAV. The net returns based on NAV were 1% and 3% for the three months ended June 30, 2020 and June 30, 2019, respectively, and (2)% and 6% for the six months ended June 30, 2020 and June 30, 2019, respectively.

(4)

Total AUM is as of March 31, 2020. Refer to www.apolloic.com for the most recent financial information on AINV. Included within Total AUM of AINV/Other is $1.7 billion of AUM related to a non-traded business development company from which Apollo earns investment-related service fees, but for which Apollo does not provide management or advisory services. Total returns exclude performance related to this AUM.

SIAs

As of June 30, 2020, Apollo managed approximately $28 billion of total AUM in SIAs, which include capital deployed from certain SIAs across Apollo’s credit, private equity and real assets funds.

Overview of Results of Operations

Revenues

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

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

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


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


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

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

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

As of June 30, 2020, approximately 53% of the value of our funds’ investments on a gross basis was determined using market-based valuation methods (i.e., reliance on broker or listed exchange quotes) and the remaining 47% was determined primarily by comparable company and industry multiples or discounted cash flow models. For our credit, private equity and real assets segments, the percentage determined using market-based valuation methods as of June 30, 2020 was 71%, 18% and 21%, respectively. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Our funds’ performance, and our performance, may be adversely affected by the financial performance of our funds’ portfolio companies and the industries in which our funds invest” in the 2019 Annual report for a discussion regarding certain industry-specific risks that could affect the fair value of our private equity funds’ portfolio company investments.

In our private equity funds, the Company does not earn performance fees until the investors in the fund have achieved cumulative investment returns on invested capital (including management fees and expenses) in excess of an 8% hurdle rate. Additionally, certain of our credit and real assets funds have various performance fee rates and hurdle rates. Certain of our credit and real assets funds allocate performance fees to the general partner in a similar manner as the private equity funds. In our private equity, certain credit and real assets funds, so long as the investors achieve their priority returns, there is a catch-up formula whereby the Company earns a priority return for a portion of the return until the Company’s performance fees equate to its incentive fee rate for that fund; thereafter, the Company participates in returns from the fund at the performance fee rate. Performance fees, categorized as performance allocations, are subject to reversal to the extent that the performance fees distributed exceed the amount due to the general partner based on a fund’s cumulative investment returns. The Company recognizes potential repayment of previously received performance fees as a general partner obligation representing all amounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner obligation, however, would not become payable or realized until the end of a fund’s life or as otherwise set forth in the respective limited partnership agreement of the fund.

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



	As of June 30, 2020		For the Three Months Ended June 30, 2020								For the Six Months Ended June 30, 2020
	Performance Fees Receivable on an Unconsolidated Basis		Unrealized Performance Fees			Realized Performance Fees		Total Performance Fees			Unrealized Performance Fees			Realized Performance Fees			Total Performance Fees
	(in thousands)
Credit:
Corporate Credit ⁽¹⁾	$	114,427	$	85,541		$	4,359	$	89,900		$	96,527		$	16,341		$	112,868
Structured Credit	130,427		14,022			—		14,022			(60,215		)	13,846			(46,369		)
Direct Origination	47,108		4,797			3,440		8,237			(16,969		)	5,877			(11,092		)
Total Credit	291,962		104,360			7,799		112,159			19,343			36,064			55,407
Total Credit, net of profit sharing payable/expense	23,938		57,059			3,440		60,499			9,597			6,148			15,745
Private Equity:
Fund VIII ⁽²⁾	203,530		745,109			—		745,109			(512,001		)	—			(512,001		)
Fund VII⁽¹⁾⁽²⁾	17		43,535			61		43,596			(114,233		)	471			(113,762		)
Fund VI⁽²⁾	17,649		(12		)	77		65			(90		)	609			519
Fund IV and V ⁽¹⁾	—		(57		)	—		(57		)	(161		)	—			(161		)
ANRP I and II⁽¹⁾⁽²⁾	203		184			33		217			(21,418		)	260			(21,158		)
Hybrid Value Fund⁽²⁾	29,189		29,189			—		29,189			29,189			—			29,189
Other⁽¹⁾⁽³⁾	7,125		(314		)	3,378		3,064			(114,789		)	3,352			(111,437		)
Total Private Equity	257,713		817,634			3,549		821,183			(733,503		)	4,692			(728,811		)
Total Private Equity, net of profit sharing payable/expense	140,007		517,910			—		517,910			(458,551		)	(304		)	(458,855		)
Real Assets:
Principal Finance⁽¹⁾	88,602		(10,878		)	907		(9,971		)	(126,233		)	35,025			(91,208		)
U.S. RE Fund I and II⁽¹⁾	12,288		(7,532		)	—		(7,532		)	(21,525		)	4,624			(16,901		)
Infrastructure Equity Fund	19,237		(514		)	2,022		1,508			1,048			2,022			3,070
Other⁽¹⁾⁽³⁾	6,473		4,371			—		4,371			(28,315		)	—			(28,315		)
Total Real Assets	126,600		(14,553		)	2,929		(11,624		)	(175,025		)	41,671			(133,354		)
Total Real Assets, net of profit sharing payable/expense	41,292		(8,001		)	—		(8,001		)	(103,076		)	—			(103,076		)
Total	$	676,275	$	907,441		$	14,277	$	921,718		$	(889,185	)	$	82,427		$	(806,758	)
Total, net of profit sharing payable⁽⁴⁾/expense	$	205,237	$	566,968		$	3,440	$	570,408		$	(552,030	)	$	5,844		$	(546,186	)

(1)

As of June 30, 2020, certain credit funds, certain private equity funds, and certain real asset funds had $1.0 million, $351.3 million, and $34.5 million, respectively, in general partner obligations to return previously distributed performance fees. The fair value gain on investments and income at the fund level needed to reverse the general partner obligations for certain credit funds, certain private equity funds and certain real assets funds was $9.2 million, $2,953.7 million and $110.5 million, respectively, as of June 30, 2020.

(2)

As of June 30, 2020, the remaining investments and escrow cash of Fund VIII, Hybrid Value Fund, Fund VII, Fund VI, ANRP I and ANRP II were valued at 113%, 109%, 40%, 34%, 25% and 69% of the fund’s unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation. As of June 30, 2020, Fund VII had $128.5 million of gross performance fees, or $73.2 million net of profit sharing, in escrow. As of June 30, 2020, Fund VI had $167.6 million of gross performance fees, or $112.4 million net of profit sharing, in escrow. As of June 30, 2020, ANRP I had $40.2 million of gross performance fees, or $26.0 million net of profit sharing, in escrow. As of June 30, 2020, ANRP II had $31.2 million of gross performance fees, or $18.7 million net of profit sharing, in escrow. Realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per these funds’ partnership agreements. Performance fees receivable as of June 30, 2020 and realized performance fees for the three and six months ended June 30, 2020 include interest earned on escrow balances that is not subject to contingent repayment.


(3)	Other includes certain SIAs.


(4)	There was a corresponding profit sharing payable of $471.0 million as of June 30, 2020, including profit sharing payable related to amounts in escrow and contingent consideration obligations of $99.1 million.

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

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

The following table summarizes our performance fees since inception for our combined segments through June 30, 2020:



	Performance Fees Since Inception⁽¹⁾
	Undistributed by Fund and Recognized		Distributed by Fund and Recognized⁽²⁾		Total Undistributed and Distributed by Fund and Recognized⁽³⁾		General Partner Obligation⁽³⁾		Maximum Performance Fees Subject to Potential Reversal⁽⁴⁾
	(in millions)
Credit:
Corporate Credit	$	114.5	$	1,187.8	$	1,302.3	$	1.0	$	128.5
Structured Credit	130.4		170.5		300.9		—		130.4
Direct Origination	47.1		45.4		92.5		—		45.5
Total Credit	292.0		1,403.7		1,695.7		1.0		304.4
Private Equity:
Fund VIII	203.5		818.6		1,022.1		—		743.9
Fund VII	—		3,132.0		3,132.0		211.9		188.7
Fund VI	17.7		1,663.9		1,681.6		—		0.7
Fund IV and V	—		2,053.1		2,053.1		30.7		0.3
ANRP I and II	0.2		104.6		104.8		32.0		—
Hybrid Value Fund	29.2		—		29.2		—		29.2
Other	7.1		730.6		737.7		76.7		45.4
Total Private Equity	257.7		8,502.8		8,760.5		351.3		1,008.2
Real Assets:
Principal Finance	88.6		407.3		495.9		15.8		248.2
U.S. RE Fund I and II	12.3		32.4		44.7		11.1		27.0
Infrastructure Equity Fund	19.2		2.1		21.3		—		20.2
Other⁽⁵⁾	6.5		36.6		43.1		7.6		14.7
Total Real Assets	126.6		478.4		605.0		34.5		310.1
Total	$	676.3	$	10,384.9	$	11,061.2	$	386.8	$	1,622.7


(1)	Certain funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.12 as of June 30, 2020. Certain funds are denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.24 as of June 30, 2020.

(2)

Amounts in “Distributed by Fund and Recognized” for the Citi Property Investors (“CPI”), Gulf Stream Asset Management, LLC (“Gulf Stream”), Stone Tower Capital LLC and its related companies (“Stone Tower”) funds and SIAs are presented for activity subsequent to the respective acquisition dates. Amounts exclude certain performance fees from business development companies and Redding Ridge Holdings LP (“Redding Ridge Holdings”), an affiliate of Redding Ridge.

(3)

Amounts were computed based on the fair value of fund investments on June 30, 2020. Performance fees have been allocated to and recognized by the general partner. Based on the amount allocated, a portion is subject to potential reversal or, to the extent applicable, has been reduced by the general partner obligation to return previously distributed performance fees at June 30, 2020. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of the fund’s investments based on contractual termination of the fund.

(4)

Represents the amount of performance fees that would be reversed if remaining fund investments became worthless on June 30, 2020. Amounts subject to potential reversal of performance fees include amounts undistributed by a fund (i.e., the performance fees receivable), as well as a portion of the amounts that have been distributed by a fund, net of taxes and not subject to a general partner obligation to return previously distributed performance fees, except for those funds that are gross of taxes as defined in the respective funds’ governing documents.


(5)	Other includes certain SIAs.

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Expenses

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

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

In addition, certain professionals and selected other individuals have a profit sharing interest in the performance fees earned in relation to our private equity, certain credit and real assets funds in order to better align their interests with our own and with those of the investors in these funds. Profit sharing expense is part of our compensation and benefits expense and is generally based upon a fixed percentage of credit, private equity and real assets performance fees. Profit sharing expense can reverse during periods when there is a decline in performance fees that were previously recognized. Profit sharing amounts are normally distributed to employees after the corresponding investment gains have been realized and generally before preferred returns are achieved for the investors. Therefore, changes in our unrealized performance fees have the same effect on our profit sharing expense. Profit sharing expense increases when unrealized performance fees increases. Realizations only impact profit sharing expense to the extent that the effects on investments have not been recognized previously. If losses on other investments within a fund are subsequently realized, the profit sharing amounts previously distributed are normally subject to a general partner obligation to return performance fees previously distributed back to the funds. This general partner obligation due to the funds would be realized only when the fund is liquidated, which generally occurs at the end of the fund’s term. However, indemnification obligations also exist for realized gains with respect to Fund IV, Fund V and Fund VI, which, although our Managing Partners and Contributing Partners would remain personally liable, may indemnify our Managing Partners and Contributing Partners for 17.5% to 100% of the previously distributed profits regardless of the fund’s future performance. See note 15 to our condensed consolidated financial statements for further information regarding the Company’s indemnification liability.

Each Managing Partner receives $100,000 per year in base salary for services rendered to us. Additionally, our Managing Partners can receive other forms of compensation. In addition, AHL Awards (as defined in note 13 to our condensed consolidated financial statements) and other equity-based compensation awards have been granted to the Company and certain employees, which amortize over the respective vesting periods. The Company grants equity awards to certain employees, including RSUs, restricted Class A shares and options, that generally vest and become exercisable in quarterly installments or annual installments depending on the contract terms over a period of three to six years. In some instances, vesting of an RSU is also subject to the Company’s receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. See note 13 to our condensed consolidated financial statements for further discussion of equity-based compensation.

Other Expenses. The balance of our other expenses includes interest, placement fees, and general, administrative and other operating expenses. Interest expense consists primarily of interest related to the the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2030 Senior Notes, the 2039 Senior Secured Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes as discussed in note 11 to our condensed consolidated financial statements. Placement fees are incurred in connection with our capital raising activities. General, administrative and other expenses includes occupancy expense, depreciation and amortization, professional fees and costs related to travel, information technology and administration. Occupancy expense represents charges related to office leases and associated expenses, such as utilities and maintenance fees. Depreciation and amortization of fixed assets is normally calculated using the straight-line method over their estimated useful lives, ranging from two to sixteen years, taking into consideration any residual value. Leasehold improvements are amortized over the shorter of the useful life of the asset or the expected term of the lease. Intangible assets are amortized based on the future cash flows over the expected useful lives of the assets.

Other Income (Loss)

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

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

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

Income Taxes. Prior to the Conversion, certain entities in the Apollo Operating Group operated as partnerships for U.S. federal income tax purposes. As a result, these members of the Apollo Operating Group were not subject to U.S. federal income taxes. However, certain of these entities were subject to New York City unincorporated business taxes (“NYC UBT”) and certain non-U.S. entities were subject to non-U.S. corporate income taxes. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

Significant judgment is required in determining the provision for income taxes and in evaluating income tax positions, including evaluating uncertainties. We recognize the income tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained upon examination, including resolutions of any related appeals or litigation, based on the technical merits of the positions. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s income tax positions are reviewed and evaluated quarterly to determine whether or not we have uncertain tax positions that require financial statement recognition or de-recognition.

Deferred tax assets and liabilities are recognized for the expected future tax consequences, using currently enacted tax rates, of differences between the carrying amount of assets and liabilities and their respective tax basis. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Non-Controlling Interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than Apollo. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in Non-Controlling Interests in the condensed consolidated financial statements. The Non-Controlling Interests relating to Apollo Global Management, Inc. primarily include the 40.4% and 50.2% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings as of June 30, 2020 and 2019, respectively. Additionally, as of June 30, 2020, Athene holds a 6.7% Non-Controlling Interest in the Apollo Operating Group as a result of the Transaction Agreement. Non-Controlling Interests also include limited partner interests in certain consolidated funds and VIEs.

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

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Results of Operations

Below is a discussion of our condensed consolidated results of operations for the three and six months ended June 30, 2020 and 2019. For additional analysis of the factors that affected our results at the segment level, see “—Segment Analysis” below:



	For the Three Months Ended June 30,						Amount Change			Percentage Change		For the Six Months Ended June 30,						Amount Change			Percentage Change
	2020			2019			Amount Change			Percentage Change		2020			2019			Amount Change			Percentage Change
Revenues:	(in thousands)											(in thousands)
Management fees	$	409,953		$	388,215		$	21,738		5.6	%	$	806,557		$	768,241		$	38,316		5.0	%
Advisory and transaction fees, net	61,957			31,124			30,833			99.1		98,920			50,693			48,227			95.1
Investment income (loss):
Performance allocations	924,599			176,862			747,737			422.8		(809,724		)	428,359			(1,238,083		)	NM
Principal investment income (loss)	111,621			39,602			72,019			181.9		(76,228		)	65,627			(141,855		)	NM
Total investment income (loss)	1,036,220			216,464			819,756			378.7		(885,952		)	493,986			(1,379,938		)	NM
Incentive fees	205			776			(571		)	(73.6	)	19,724			1,436			18,288			NM
Total Revenues	1,508,335			636,579			871,756			136.9		39,249			1,314,356			(1,275,107		)	(97.0	)
Expenses:
Compensation and benefits:
Salary, bonus and benefits	151,019			123,669			27,350			22.1		290,288			242,832			47,456			19.5
Equity-based compensation	59,420			44,662			14,758			33.0		111,542			89,739			21,803			24.3
Profit sharing expense	375,959			68,278			307,681			450.6		(260,039		)	191,725			(451,764		)	NM
Total compensation and benefits	586,398			236,609			349,789			147.8		141,791			524,296			(382,505		)	(73.0	)
Interest expense	32,291			23,302			8,989			38.6		63,533			42,410			21,123			49.8
General, administrative and other	83,729			81,839			1,890			2.3		168,251			153,501			14,750			9.6
Placement fees	359			775			(416		)	(53.7	)	768			335			433			129.3
Total Expenses	702,777			342,525			360,252			105.2		374,343			720,542			(346,199		)	(48.0	)
Other Income (Loss):
Net gains (losses) from investment activities	268,667			45,060			223,607			496.2		(995,884		)	63,889			(1,059,773		)	NM
Net gains (losses) from investment activities of consolidated variable interest entities	57,862			4,631			53,231			NM		(108,058		)	14,097			(122,155		)	NM
Interest income	3,994			8,710			(4,716		)	(54.1	)	11,928			15,786			(3,858		)	(24.4	)
Other income (loss), net	3,327			6,603			(3,276		)	(49.6	)	(13,180		)	6,693			(19,873		)	NM
Total Other Income (Loss)	333,850			65,004			268,846			413.6		(1,105,194		)	100,465			(1,205,659		)	NM
Income (Loss) before income tax (provision) benefit	1,139,408			359,058			780,350			217.3		(1,440,288		)	694,279			(2,134,567		)	NM
Income tax (provision) benefit	(140,323		)	(16,897		)	(123,426		)	NM		155,530			(36,551		)	192,081			NM
Net Income (Loss)	999,085			342,161			656,924			192.0		(1,284,758		)	657,728			(1,942,486		)	NM
Net income (loss) attributable to Non-Controlling Interests	(552,756		)	(177,338		)	(375,418		)	211.7		734,869			(343,848		)	1,078,717			NM
Net Income (Loss) Attributable to Apollo Global Management, Inc.	446,329			164,823			281,506			170.8		(549,889		)	313,880			(863,769		)	NM
Series A Preferred Stock Dividends	(4,383		)	(4,383		)	—			—		(8,766		)	(8,766		)	—			—
Series B Preferred Stock Dividends	(4,782		)	(4,781		)	(1		)	—		(9,563		)	(9,562		)	(1		)	—
Net Income (Loss) Attributable to AGM Class A Shareholders	$	437,164		$	155,659		$	281,505		180.8	%	$	(568,218	)	$	295,552		$	(863,770	)	NM


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

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) a pandemic, which has resulted in uncertainty and disruption in the global economy and financial markets. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of the Apollo Funds and their portfolio companies, for an indefinite period of time.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

In this section, references to 2020 refer to the three months ended June 30, 2020 and references to 2019 refer to the three months ended June 30, 2019.

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Revenues

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

Management fees increased by $21.7 million to $410.0 million in 2020 from $388.2 million in 2019. This change was primarily attributable to increases in management fees earned from Athora and Athene of $15.8 million and $10.9 million, respectively. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.

Advisory and transaction fees, net, increased by $30.8 million to $62.0 million in 2020 from $31.1 million in 2019. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to certain portfolio companies in the media, telecom and technology industries and an increase in structuring fees earned from a company in the consumer and retail industry.

Performance allocations increased by $747.7 million to $924.6 million in 2020 from $176.9 million in 2019. This change was primarily attributable to increased performance allocations earned from Fund VIII, Fund VII and Apollo Credit Strategies Master Fund Ltd. of $621.6 million, $86.5 million and $45.6 million, respectively, in 2020.

The increase in performance allocations from Fund VIII was primarily driven by appreciation in the value of the fund’s investments in public portfolio companies in the consumer services, manufacturing and industrial sectors during 2020. The increase in performance allocations from Fund VII was primarily driven by appreciation in the value of the fund’s investments in public portfolio companies primarily in the consumer, retail and natural resources sectors during 2020. The increase in performance allocations from Apollo Credit Strategies Master Fund Ltd. was driven by unrealized gains on the fund’s investments across a number of sectors, primarily in banking, utilities, retail and transportation.

Principal investment income increased by $72.0 million to $111.6 million in 2020 from $39.6 million in 2019. This change was primarily driven by increases in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to Fund VIII, Voya Financial, Athora and Fund VII of $28.7 million, $24.5 million, $10.4 million and $6.1 million, respectively, during 2020.

Expenses

Compensation and benefits increased by $349.8 million to $586.4 million in 2020 from $236.6 million in 2019. This change was primarily attributable to an increase in profit sharing expense of $307.7 million due to a corresponding increase in performance allocations during 2020. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. Additionally, salary, bonus and benefits increased by $27.4 million primarily due to an increase in headcount, and equity-based compensation increased $14.8 million due to higher amortization expenses associated with previously granted performance awards.

Included in profit sharing expense is $5.0 million for 2020 related to the Incentive Pool. There was no profit sharing expense related to the Incentive Pool for 2019. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.

Interest expense increased by $9.0 million to $32.3 million in 2020 from $23.3 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.

Other Income (Loss)

Net gains from investment activities increased by $223.6 million to $268.7 million in 2020 from $45.1 million in 2019. This change was primarily attributable to increased appreciation on the Company’s investment in Athene Holding during 2020. See note 7 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.

Net gains from investment activities of consolidated VIEs increased by $53.2 million to $57.9 million in 2020 from $4.6 million in 2019. This change was primarily driven by gains from newly consolidated funds during 2020 as discussed in note 6 to the condensed consolidated financial statements.

Interest income decreased by $4.7 million to $4.0 million in 2020 from $8.7 million in 2019. primarily due to decreased interest income earned from U.S. Treasury securities as a result of lower interest rates during 2020.

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

For information related to net income attributable to Non-Controlling Interests and net income attributable to Series A and Series B Preferred Stockholders, see note 14 to the condensed consolidated financial statements.

Income Tax Provision

Effective September 5, 2019, Apollo Global Management, LLC, a Delaware limited liability company, converted to a Delaware corporation named Apollo Global Management, Inc. Prior to the Conversion, a portion of the investment income, performance allocations and principal investment income we earned was not subject to corporate-level tax in the United States. Subsequent to the Conversion, generally all of the income is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. The provision for income taxes includes federal, state and local income taxes in the United States and foreign income taxes.

The income tax provision increased by $123.4 million to $140.3 million in 2020 from $16.9 million in 2019. The increase was primarily related to: (i) earnings now subject to corporate-level tax subsequent to the Conversion effective September 5, 2019, and (ii) the subsequent increase in value of previous unrealized book losses generated from the earlier market dislocation due to the impacts of COVID-19. The provision for income taxes includes, federal, state, local and foreign income taxes resulting in an effective income tax rate of 12.3% and 4.7% for 2020 and 2019, respectively. The most significant reconciling items between our U.S. federal statutory income tax rate and our effective income tax were due to the following: (i) income passed through to Non-Controlling Interests and (ii) state and local income taxes including NYC UBT, as well as foreign income taxes (see note 10 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

In this section, references to 2020 refer to the six months ended June 30, 2020 and references to 2019 refer to the six months ended June 30, 2019.

Revenues

Management fees increased by $38.3 million to $806.6 million in 2020 from $768.2 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $26.1 million and $16.5 million, respectively. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.

Advisory and transaction fees, net, increased by $48.2 million to $98.9 million in 2020 from $50.7 million in 2019. This change was primarily driven by increased net advisory and transaction fees earned with respect to certain portfolio companies in the media, telecom, technology, and financial services industries, increased net advisory and transaction fees earned related to the structuring of a loan for a portfolio company and an increase in structuring fees from a company in the consumer and retail industry during 2020.

Performance allocations decreased by $1.2 billion to $(0.8) billion in 2020 from $0.4 billion in 2019. The pandemic resulting from COVID-19 and the actions taken in response have caused severe disruption to the global economy and financial markets. In line with public equity and credit indices, we have experienced significant unrealized mark-to-market losses in our underlying funds. The decrease in performance allocations was primarily attributable to decreased performance allocations earned from Fund VIII, Structured Credit Recovery Fund IV (“SCRF IV”) and Fund VII of $812.4 million, $98.5 million and $92.0 million, respectively, during 2020.

The decrease in performance allocations from Fund VIII was primarily driven by depreciation in the value of the fund’s investments in public portfolio companies primarily in the financial services and manufacturing and industrial sectors, and in private portfolio companies primarily in the consumer services, leisure and natural resources sectors during 2020. The decrease in performance allocations from SCRF IV was primarily driven by the fund’s mark-to-market losses on its investments in structured credit products due to widespread market sell-off and spread widening during 2020. The decrease in performance allocations from Fund VII was primarily driven by depreciation in the value of the fund’s investments in public portfolio companies primarily in the consumer, retail and natural resources sectors during 2020.

Principal investment income decreased by $141.9 million to $(76.2) million in 2020 from $65.6 million in 2019. This change was primarily driven by decreases in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to Fund VIII, Redding Ridge, SCRF IV, AION and ARI of $82.2 million, $10.8 million, $10.6 million, $10.3 million and $10.0 million, respectively, during 2020.

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Expenses

Compensation and benefits decreased by $382.5 million to $141.8 million in 2020 from $524.3 million in 2019. This change was primarily attributable to a decrease in profit sharing expense of $451.8 million due to a corresponding decrease in performance allocations during 2020, as compared to the same period in 2019. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. The decrease in profit sharing expense was partially offset by an increase in salary, bonus and benefits of $47.5 million, primarily attributable to an increase in headcount, as well as an increase in equity-based compensation of $21.8 million due to higher amortization expenses associated with previously granted performance awards.

Included in profit sharing expense is $42.9 million and $17.0 million for 2020 and 2019, respectively, related to the Incentive Pool. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.

Interest expense increased by $21.1 million to $63.5 million in 2020 from $42.4 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.

General, administrative and other expenses increased by $14.8 million to $168.3 million in 2020 from $153.5 million in 2019. This change was primarily driven by an increase in occupancy expenses during 2020.

Other Income (Loss)

Net losses from investment activities were $(1.0) billion in 2020 as compared to net gains from investment activities of $63.9 million in 2019. This change was primarily attributable to unrealized mark-to-market losses from the Company’s investment in Athene Holding from the combined impact of COVID-19 related market dislocation and the DLOM during 2020. See note 7 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.

Net losses from investment activities of consolidated VIEs were $(108.1) million in 2020, as compared to net gains from investment activities of consolidated VIEs of $14.1 million in 2019. This change was primarily driven by losses from newly consolidated funds during 2020, as discussed in note 6 to the condensed consolidated financial statements.

Interest income decreased by $3.9 million to $11.9 million in 2020 from $15.8 million in 2019, primarily due to decreased interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020.

Other loss, net was $13.2 million in 2020, as compared to other income, net of $6.7 million in 2019. This change was primarily attributable to one-time costs to wind down a managed account arrangement incurred in 2020 and the reversal of a liability relating to a favorable judgment in a legal proceeding during 2019, which did not occur during 2020.

Income Tax Provision

The income tax benefit was $155.5 million for 2020, compared to the income tax provision of $36.6 million for 2019. The change was primarily related to: (i) earnings now subject to corporate-level tax subsequent to the Conversion effective September 5, 2019, and (ii) the year-to-date unrealized mark-to-market book losses generated from the recent market dislocation due to the impacts of COVID-19. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of 10.8% and 5.3% for 2020 and 2019, respectively. The most significant reconciling items between our U.S. federal statutory income tax rate and our effective income tax rate were due to the following: (i) income passed through to Non-Controlling Interests and (ii) state and local income taxes, including NYC UBT, as well as foreign income taxes (see note 10 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).

Segment Analysis

Discussed below are our results of operations for each of our reportable segments. They represent the segment information available and utilized by our executive management, which consists of our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. See note 17 to our condensed consolidated financial statements for more information regarding our segment reporting.

Our financial results vary, since performance fees, which generally constitute a large portion of the income from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business.

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Credit

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



	For the Three Months Ended June 30,						Total Change			Percentage Change		For the Six Months Ended June 30,						Total Change			Percentage Change
	2020			2019			Total Change			Percentage Change		2020			2019			Total Change			Percentage Change
	(in thousands)											(in thousands)
Credit:
Management fees	$	224,721		$	190,275		$	34,446		18.1	%	$	432,950		$	373,017		$	59,933		16.1	%
Advisory and transaction fees, net	13,756			5,510			8,246			149.7		29,023			8,358			20,665			247.2
Performance fees⁽¹⁾	3,440			9,261			(5,821		)	(62.9	)	5,844			9,922			(4,078		)	(41.1	)
Fee Related Revenues	241,917			205,046			36,871			18.0		467,817			391,297			76,520			19.6
Salary, bonus and benefits	(52,806		)	(50,465		)	(2,341		)	4.6		(109,814		)	(94,769		)	(15,045		)	15.9
General, administrative and other	(37,251		)	(31,647		)	(5,604		)	17.7		(72,624		)	(59,143		)	(13,481		)	22.8
Placement fees	(358		)	(157		)	(201		)	128.0		(664		)	148			(812		)	NM
Fee Related Expenses	(90,415		)	(82,269		)	(8,146		)	9.9		(183,102		)	(153,764		)	(29,338		)	19.1
Other income (loss), net of Non-Controlling Interest	(724		)	1,968			(2,692		)	NM		(1,387		)	1,564			(2,951		)	NM
Fee Related Earnings	150,778			124,745			26,033			20.9		283,328			239,097			44,231			18.5
Realized performance fees	4,359			18,030			(13,671		)	(75.8	)	30,220			21,357			8,863			41.5
Realized profit sharing expense	(4,359		)	(7,877		)	3,518			(44.7	)	(29,916		)	(11,395		)	(18,521		)	162.5
Net Realized Performance Fees	—			10,153			(10,153		)	(100.0	)	304			9,962			(9,658		)	(96.9	)
Realized principal investment income, net ⁽²⁾	1,810			7,909			(6,099		)	(77.1	)	3,184			10,958			(7,774		)	(70.9	)
Net interest loss and other	(11,857		)	(4,656		)	(7,201		)	154.7		(28,971		)	(9,042		)	(19,929		)	220.4
Segment Distributable Earnings	$	140,731		$	138,151		$	2,580		1.9	%	$	257,845		$	250,975		$	6,870		2.7	%


(1)	Represents certain performance fees related to business development companies and Redding Ridge Holdings, and MidCap.


(2)	Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

In this section, references to 2020 refer to the three months ended June 30, 2020 and references to 2019 refer to the three months ended June 30, 2019.

Management fees increased by $34.4 million to $224.7 million in 2020 from $190.3 million in 2019. This change was primarily attributable to an increase in management fees earned from Athora and Athene of $16.2 million and $10.2 million, respectively.

Advisory and transaction fees, net increased by $8.2 million to $13.8 million in 2020 from $5.5 million in 2019. This was primarily driven by structuring fees earned related to a portfolio company in the consumer and retail industry during 2020.

Performance fees decreased by $5.8 million to $3.4 million in 2020 from $9.3 million in 2019, primarily attributable to a decrease in performance fees generated from Redding Ridge Holdings of $4.9 million, as Redding Ridge Holdings achieved its annualized hurdle rate during 2019 but did not during 2020.

General, administrative and other increased by $5.6 million to $37.3 million in 2020 from $31.6 million in 2019 primarily driven by an increase in technology and occupancy expenses in 2020.

Realized performance fees decreased by $13.7 million to $4.4 million in 2020 from $18.0 million in 2019. This change was primarily attributable to a decrease in realized performance fees generated from FCI I. The decrease in realized performance fees generated from FCI I was primarily driven by realizations of the fund’s investments in various life settlement policies during 2019, while the fund had no realized performance fees during 2020.

Realized profit sharing expense decreased by $3.5 million to $4.4 million in 2020 from $7.9 million in 2019 as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $1.3 million related to the Incentive Pool for 2020. There was no profit sharing expense related to the Incentive Pool for 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

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Realized principal investment income decreased by $6.1 million to $1.8 million in 2020 from $7.9 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in Midcap.

Net interest loss and other increased by $7.2 million to $11.9 million in 2020 from $4.7 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

In this section, references to 2020 refer to the six months ended June 30, 2020 and references to 2019 refer to the six months ended June 30, 2019.

Management fees increased by $59.9 million to $433.0 million in 2020 from $373.0 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $23.6 million and $17.5 million, respectively, as well as modest increases across other credit funds during 2020.

Advisory and transaction fees, net increased by $20.7 million to $29.0 million in 2020 from $8.4 million in 2019. This increase was primarily driven by structuring fees earned related to portfolio companies in the energy and consumer & retail industries during 2020.

Performance fees decreased by $4.1 million to $5.8 million in 2020 from $9.9 million in 2019 primarily attributable to a decrease in performance fees earned from Redding Ridge Holdings of $4.5 million as Redding Ridge Holdings achieved its annualized hurdle rate during 2019 but did not during 2020.

Salary, bonus and benefits expense increased by $15.0 million to $109.8 million in 2020 from $94.8 million in 2019 primarily due to an increase in headcount and changes in bonus accruals.

General, administrative and other increased by $13.5 million to $72.6 million in 2020 from $59.1 million in 2019. The change was primarily driven by an increase in occupancy and technology expenses in 2020.

Realized performance fees increased by $8.9 million to $30.2 million in 2020 from $21.4 million in 2019. This change was primarily attributable to an increase in realized performance fees generated from Athene and certain CLOs of $13.9 million and $5.3 million, respectively, partially offset by a decrease in realized performance fees generated from FCI I of $12.0 million.

The increase in realized performance fees from Athene was a result of realizations from the sale of insurance linked securities during 2020. The increase in realized performance fees from certain CLOs was attributable to crystallization of performance fees as the CLOs liquidated during 2020. The decrease in realized performance fees generated from FCI I was primarily driven by realizations of the fund’s investments in various life settlement policies during 2019, while the fund had no realized performance fees during 2020.

Realized profit sharing expense increased by $18.5 million to $29.9 million in 2020 from $11.4 million in 2019, as a result of a corresponding increase in realized performance fees as described above, and an increase in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $16.6 million and $0.1 million related to the Incentive Pool for 2020 and 2019, respectively. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Realized principal investment income decreased by $7.8 million to $3.2 million in 2020 from $11.0 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in Midcap and Redding Ridge of $4.6 million and $1.8 million, respectively.

Net interest loss and other increased by $19.9 million to $29.0 million in 2020 from $9.0 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements. Additionally, the increase was partially due to one-time costs to wind down a managed account arrangement incurred during 2020.

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Private Equity

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



	For the Three Months Ended June 30,						Total Change			Percentage Change		For the Six Months Ended June 30,						Total Change			Percentage Change
	2020			2019			Total Change			Percentage Change		2020			2019			Total Change			Percentage Change
	(in thousands)											(in thousands)
Private Equity:
Management fees	$	127,592		$	129,638		$	(2,046	)	(1.6	)%	$	252,860		$	260,134		$	(7,274	)	(2.8	)%
Advisory and transaction fees, net	44,802			20,257			24,545			121.2		65,145			36,393			28,752			79.0
Fee Related Revenues	172,394			149,895			22,499			15.0		318,005			296,527			21,478			7.2
Salary, bonus and benefits	(53,202		)	(40,267		)	(12,935		)	32.1		(95,682		)	(83,500		)	(12,182		)	14.6
General, administrative and other	(21,770		)	(22,962		)	1,192			(5.2	)	(43,764		)	(48,824		)	5,060			(10.4	)
Placement fees	—			(618		)	618			(100.0	)	(107		)	(483		)	376			(77.8	)
Fee Related Expenses	(74,972		)	(63,847		)	(11,125		)	17.4		(139,553		)	(132,807		)	(6,746		)	5.1
Other income, net	2			3,963			(3,961		)	(99.9	)	25			4,159			(4,134		)	(99.4	)
Fee Related Earnings	97,424			90,011			7,413			8.2		178,477			167,879			10,598			6.3
Realized performance fees	3,549			12,231			(8,682		)	(71.0	)	4,692			72,687			(67,995		)	(93.5	)
Realized profit sharing expense	(3,549		)	(4,089		)	540			(13.2	)	(4,996		)	(41,816		)	36,820			(88.1	)
Net Realized Performance Fees	—			8,142			(8,142		)	(100.0	)	(304		)	30,871			(31,175		)	NM
Realized principal investment income	3,404			1,877			1,527			81.4		3,946			9,965			(6,019		)	(60.4	)
Net interest loss and other	(11,686		)	(7,650		)	(4,036		)	52.8		(27,360		)	(13,783		)	(13,577		)	98.5
Segment Distributable Earnings	$	89,142		$	92,380		$	(3,238	)	(3.5	)%	$	154,759		$	194,932		$	(40,173	)	(20.6	)%

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

In this section, references to 2020 refer to the three months ended June 30, 2020 and references to 2019 refer to the three months ended June 30, 2019.

Advisory and transaction fees, net increased by $24.5 million to $44.8 million in 2020 from $20.3 million in 2019. This change was primarily attributable to a transaction fee earned with respect to a portfolio company in the media, telecom and technology industry and a structuring fee earned related to a portfolio company in the consumer and retail industry.

Salary, bonus and benefits expense increased by $12.9 million to $53.2 million in 2020 from $40.3 million in 2019 primarily due to an increase in headcount and changes in bonus accruals.

Realized performance fees decreased by $8.7 million to $3.5 million in 2020 from $12.2 million in 2019. This change was primarily attributable to a decrease in realized performance fees generated from Fund VIII of $10.0 million. The realized performance fees generated from Fund VIII during 2019 were a result of sales and income generated from investments primarily in the natural resources and financial services sectors, while the fund had no realized performance fees during 2020.

Realized profit sharing expense decreased by $0.5 million to $3.5 million in 2020 from $4.1 million in 2019. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $1.8 million related to the Incentive Pool for 2020. There was no profit sharing expense related to the Incentive Pool for 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Net interest loss and other increased by $4.0 million to $11.7 million in 2020 from $7.7 million in 2019, primarily due to a decrease in interest income as a result of lower interest rates, as well as additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

In this section, references to 2020 refer to the six months ended June 30, 2020 and references to 2019 refer to the six months ended June 30, 2019.

Management fees decreased by $7.3 million to $252.9 million in 2020 from $260.1 million in 2019. This change was primarily attributable to a decrease in management fees earned from Fund VII and Fund VIII of $5.2 million for each fund.

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Advisory and transaction fees, net increased by $28.8 million to $65.1 million in 2020 from $36.4 million in 2019. This change was primarily attributable to transaction fees earned with respect to a portfolio company in the media, telecom and technology industry and a structuring fee earned from a portfolio company in the consumer and retail industry in 2020.

Salary, bonus and benefits expense increased by $12.2 million to $95.7 million in 2020 from $83.5 million in 2019 primarily due to an increase in headcount and changes in bonus accruals.

General, administrative and other decreased by $5.1 million to $43.8 million in 2020 from $48.8 million in 2019. The change was primarily driven by decreased legal expense in 2020.

Realized performance fees decreased by $68.0 million to $4.7 million in 2020 from $72.7 million in 2019. This change was primarily attributable to a decrease in realized performance fees generated from Fund VIII of $67.5 million as a result of sales and income generated from investments primarily in the business services, manufacturing and industrial, financial services and leisure sectors during 2019, while the fund had no realized performance fees in 2020.

Realized profit sharing expense decreased by $36.8 million to $5.0 million in 2020 from $41.8 million in 2019, as a result of a corresponding decrease in realized performance fees as described above, and a decrease in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $1.8 million and $16.9 million related to the Incentive Pool for 2020 and 2019, respectively. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Realized principal investment income decreased by $6.0 million to $3.9 million in 2020 from $10.0 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in Fund VIII of $8.5 million partially offset by an increase in realizations from Apollo’s equity ownership in Fund IX of $2.7 million.

Net interest loss and other increased by $13.6 million to $27.4 million in 2020 from $13.8 million in 2019 primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements. Additionally, the increase was partially due to one-time costs to wind down a managed account arrangement incurred during 2020.

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Real Assets

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



	For the Three Months Ended June 30,						Total Change			Percentage Change		For the Six Months Ended June 30,						Total Change			Percentage Change
	2020			2019			Total Change			Percentage Change		2020			2019			Total Change			Percentage Change
	(in thousands)											(in thousands)
Real Assets:
Management fees	$	49,509		$	46,398		$	3,111		6.7	%	$	98,380		$	91,783		$	6,597		7.2	%
Advisory and transaction fees, net	3,191			5,295			(2,104		)	(39.7	)%	4,313			5,371			(1,058		)	(19.7	)
Fee Related Revenues	52,700			51,693			1,007			1.9	%	102,693			97,154			5,539			5.7
Salary, bonus and benefits	(28,991		)	(19,537		)	(9,454		)	48.4	%	(53,524		)	(37,725		)	(15,799		)	41.9
General, administrative and other	(12,782		)	(8,547		)	(4,235		)	49.5	%	(23,768		)	(18,222		)	(5,546		)	30.4
Placement fees	—			—			—			NM		—			—			—			NM
Fee Related Expenses	(41,773		)	(28,084		)	(13,689		)	48.7	%	(77,292		)	(55,947		)	(21,345		)	38.2
Other income, net of Non-Controlling Interest	116			156			(40		)	(25.6	)%	95			94			1			1.1
Fee Related Earnings	11,043			23,765			(12,722		)	(53.5	)%	25,496			41,301			(15,805		)	(38.3	)
Realized performance fees	2,929			3,074			(145		)	(4.7	)%	41,671			3,080			38,591			NM
Realized profit sharing expense	(2,929		)	(1,340		)	(1,589		)	118.6	%	(41,671		)	(1,234		)	(40,437		)	NM
Net Realized Performance Fees	—			1,734			(1,734		)	(100.0	)%	—			1,846			(1,846		)	(100.0	)
Realized principal investment income	5			1,495			(1,490		)	(99.7	)%	3,672			1,794			1,878			104.7
Net interest loss and other	(5,507		)	(2,708		)	(2,799		)	103.4	%	(9,853		)	(4,881		)	(4,972		)	101.9
Segment Distributable Earnings	$	5,541		$	24,286		$	(18,745	)	(77.2	)%	$	19,315		$	40,060		$	(20,745	)	(51.8	)%

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

In this section, references to 2020 refer to the three months ended June 30, 2020 and references to 2019 refer to the three months ended June 30, 2019.

Management fees increased by $3.1 million to $49.5 million in 2020 from $46.4 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $2.0 million and $1.6 million, respectively.

Salary, bonus and benefits increased by $9.5 million to $29.0 million in 2020 from $19.5 million in 2019 primarily due to an increase in headcount.

General, administrative and other increased by $4.2 million to $12.8 million in 2020 from $8.5 million in 2019. This change was primarily driven by increases in technology and occupancy expenses in 2020.

Realized profit sharing expense increased by $1.6 million to $2.9 million in 2020 from $1.3 million in 2019, as a result of an increase in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $1.8 million related to the Incentive Pool for the three months ended June 30, 2020. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Net interest loss and other increased by $2.8 million to $5.5 million in 2020 from $2.7 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

In this section, references to 2020 refer to the six months ended June 30, 2020 and references to 2019 refer to the six months ended June 30, 2019.

Management fees increased by $6.6 million to $98.4 million in 2020 from $91.8 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $4.1 million and $2.1 million, respectively.

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Salary, bonus and benefits expense increased by $15.8 million to $53.5 million in 2020 from $37.7 million in 2019 primarily due to an increase in headcount.

General, administrative and other increased by $5.5 million to $23.8 million in 2020 from $18.2 million in 2019. The change was primarily driven by an increase in occupancy, organization and technology expenses in 2020.

Realized performance fees increased by $38.6 million to $41.7 million in 2020 from $3.1 million in 2019. The increase in realized performance fees was primarily attributable to realized performance fees generated from EPF III of $34.1 million in 2020 as a result of the sale of investments in logistics assets, while the fund had no realizations during 2019.

Realized profit sharing expense increased by $40.4 million to $41.7 million in 2020 from $1.2 million in 2019 as a result of a corresponding increase in realized performance fees as described above, and an increase in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $24.3 million related to the Incentive Pool for 2020. There was no profit sharing expense related to the Incentive Pool for 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.

Net interest loss and other increased by $5.0 million to $9.9 million in 2020 from $4.9 million in 2019 primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.

Summary of Distributable Earnings

The following table is a reconciliation of Distributable Earnings per share of common and equivalent to net dividend per share of common and equivalent.



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
	(in thousands, except per share data)
Segment Distributable Earnings	$	235,414		$	254,817		$	431,919		$	485,967
Taxes and related payables	(21,040		)	(14,878		)	(43,233		)	(29,514		)
Preferred dividends	(9,165		)	(9,164		)	(18,329		)	(18,328		)
Distributable Earnings	205,209			230,775			370,357			438,125
Add back: Tax and related payables attributable to common and equivalents	17,776			12,777			37,020			25,252
Distributable Earnings before certain payables⁽¹⁾	222,985			243,552			407,377			463,377
Percent to common and equivalents	54		%	51		%	54		%	51		%
Distributable Earnings before other payables attributable to common and equivalents	120,412			124,212			219,984			236,322
Less: Taxes and related payables attributable to common and equivalents	(17,776		)	(12,777		)	(37,020		)	(25,252		)
Distributable Earnings attributable to common and equivalents⁽²⁾	$	102,636		$	111,435		$	182,964		$	211,070
Distributable Earnings per share⁽³⁾	$	0.46		$	0.56		$	0.83		$	1.06
(Retained) contributed capital per share⁽³⁾	0.03			(0.06		)	0.08			(0.10		)
Net dividend per share⁽³⁾	$	0.49		$	0.50		$	0.91		$	0.96


(1)	Distributable Earnings before certain payables represents Distributable Earnings before the deduction for the estimated current corporate taxes and the amounts payable under Apollo’s tax receivable agreement.


(2)	“Common and equivalents” consists of total shares of Class A Common Stock outstanding and RSUs that participate in dividends.


(3)	Per share calculations are based on end of period Distributable Earnings Shares Outstanding, which consists of total shares of Class A Common Stock outstanding, AOG Units that participate in dividends and RSUs that participate in dividends.

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Summary of Non-U.S. GAAP Measures

The table below sets forth a reconciliation of net income attributable to Apollo Global Management, Inc. Class A Common Stockholders to our non-U.S. GAAP performance measures:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
	(in thousands)
Net Income (Loss) Attributable to Apollo Global Management, Inc. Class A Common Stockholders	$	437,164		$	155,659		$	(568,218	)	$	295,552
Preferred dividends	9,165			9,164			18,329			18,328
Net income (loss) attributable to Non-Controlling Interests in consolidated entities	41,068			5,143			(123,341		)	13,805
Net income (loss) attributable to Non-Controlling Interests in the Apollo Operating Group	511,688			172,195			(611,528		)	330,043
Net Income (Loss)	$	999,085		$	342,161		$	(1,284,758	)	$	657,728
Income tax provision (benefit)	140,323			16,897			(155,530		)	36,551
Income Before Income Tax Provision (Benefit)	$	1,139,408		$	359,058		$	(1,440,288	)	$	694,279
Transaction-related charges⁽¹⁾	32,110			18,135			10,711			23,598
Charges associated with corporate conversion⁽²⁾	—			10,006			1,064			10,006
Net income (loss) attributable to Non-Controlling Interests in consolidated entities	(41,068		)	(5,143		)	123,341			(13,805		)
Unrealized performance fees	(907,656		)	(129,679		)	892,525			(314,062		)
Unrealized profit sharing expense	340,687			40,799			(340,496		)	116,561
Equity-based profit sharing expense and other⁽³⁾	38,463			20,675			72,951			41,637
Equity-based compensation	17,747			18,237			31,817			36,660
Unrealized principal investment (income) loss	(107,110		)	(31,893		)	94,460			(44,221		)
Unrealized net (gains) losses from investment activities and other	(277,167		)	(45,378		)	985,834			(64,686		)
Segment Distributable Earnings⁽⁴⁾	$	235,414		$	254,817		$	431,919		$	485,967
Taxes and related payables	(21,040		)	(14,878		)	(43,233		)	(29,514		)
Preferred dividends	(9,165		)	(9,164		)	(18,329		)	(18,328		)
Distributable Earnings	$	205,209		$	230,775		$	370,357		$	438,125
Preferred dividends	9,165			9,164			18,329			18,328
Taxes and related payables	21,040			14,878			43,233			29,514
Realized performance fees	(10,837		)	(33,335		)	(76,583		)	(97,124		)
Realized profit sharing expense	10,837			13,306			76,583			54,445
Realized principal investment income, net	(5,219		)	(11,281		)	(10,802		)	(22,717		)
Net interest loss and other	29,050			15,014			66,184			27,706
Fee Related Earnings	$	259,245		$	238,521		$	487,301		$	448,277
Depreciation, amortization and other, net	2,712			2,733			5,823			5,312
Fee Related EBITDA	$	261,957		$	241,254		$	493,124		$	453,589
Realized performance fees	10,837			33,335			76,583			97,124
Realized profit sharing expense	(10,837		)	(13,306		)	(76,583		)	(54,445		)
Fee Related EBITDA + 100% of Net Realized Performance Fees	$	261,957		$	261,283		$	493,124		$	496,268


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


(2)	Represents expenses incurred in relation to the Conversion, as described in note 1 to the condensed consolidated financial statements.

(3)

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


(4)	See note 17 to the condensed consolidated financial statements for more details regarding Segment Distributable Earnings for the combined segments.

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The table below sets forth a reconciliation of Class A Common Stock Outstanding to our Distributable Earnings Shares Outstanding:



	As of June 30, 2020	As of June 30, 2019	As of December 31, 2019
Total Class A Common Stock Outstanding	229,189,715	200,435,587	222,994,407
Non-GAAP Adjustments:
Participating Apollo Operating Group Units	204,028,327	202,245,561	180,111,308
Vested RSUs	195,499	269,726	2,349,618
Unvested RSUs Eligible for Dividend Equivalents	8,128,861	8,832,203	6,610,369
Distributable Earnings Shares Outstanding	441,542,402	411,783,077	412,065,702

Liquidity and Capital Resources

Overview

Apollo’s business model primarily derives revenues and cash flows from the assets it manages. Apollo targets operating expense levels such that fee income exceeds total operating expenses each period. The company intends to distribute to its stockholders on a quarterly basis substantially all of its distributable earnings after taxes and related payables in excess of amounts determined to be necessary or appropriate to provide for the conduct of the business. As a result, the Company requires limited capital resources to support the working capital or operating needs of the business. While primarily met by cash flows generated through fee income received, liquidity needs are also met (to a limited extent) through proceeds from borrowings and equity issuances as described in notes 11 and 14 to the condensed consolidated financial statements, respectively. The Company had cash and cash equivalents of $939.8 million at June 30, 2020.

Due to the COVID-19 pandemic, there has been volatility in the financial markets. While the Company is not aware of any events that would result in an immediate impact to our liquidity needs, we continue to monitor developments on the global spread of COVID-19 as additional information is obtained.

Primary Sources and Uses of Cash

The Company has multiple sources of short-term liquidity to meet its capital needs, including cash on hand, annual cash flows from its activities, and available funds from the Company’s $750 million revolving credit facility as of June 30, 2020. The Company believes these sources will be sufficient to fund our capital needs for at least the next twelve months. If the Company determines that market conditions are favorable after taking into account our liquidity requirements, we may seek to issue additional senior notes, preferred equity, or other financing instruments.

The section below discusses in more detail the Company’s primary sources and uses of cash and the primary drivers of cash flows within the Company’s condensed consolidated statements of cash flows:



	For the Six Months Ended June 30,
	2020			2019
	(in thousands)
Operating Activities	$	937,374		$	450,610
Investing Activities	(774,930		)	(398,247		)
Financing Activities	(90,791		)	315,223
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities	$	71,653		$	367,586

Operating Activities

The Company’s operating activities support its investment management activities. The primary sources of cash within the operating activities section include: (a) management fees, (b) advisory and transaction fees, (c) realized performance revenues, and (d) realized principal investment income. The primary uses of cash within the operating activities section include: (a) compensation and non-compensation related expenses, (b) placement fees, and (c) interest and taxes.


•	During the six months ended June 30, 2020 and 2019, cash provided by operating activities primarily includes cash inflows from the receipt of management fees, advisory and transaction fees, realized performance revenues, and realized principal investment income, offset by cash outflows for compensation, general, administrative,

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and other expenses. Net cash provided by operating activities also reflects the operating activity of our consolidated funds and VIEs, which primarily include cash inflows from consolidated funds and from sale of investments offset by cash outflows for purchases of investments.

Investing Activities

The Company’s investing activities support growth of its business. The primary sources of cash within the investing activities section include distributions from investments. The primary uses of cash within the investing activities section include: (a) capital expenditures, (b) investment purchases, including purchases of U.S. Treasury securities, and (c) equity method investments in the funds we manage.


•	During the six months ended June 30, 2020 and 2019, cash used by investing activities primarily reflects purchases of U.S. Treasury securities and other investments and net contributions to equity method investments, offset partially by proceeds from maturities of U.S. Treasury securities.

Financing Activities

The Company’s financing activities reflect its capital market transactions and transactions with owners. The primary sources of cash within the financing activities section includes proceeds from debt and preferred equity issuances. The primary uses of cash within the financing activities section include: (a) distributions, (b) payments under the tax receivable agreement, (c) share repurchases, (d) cash paid to settle tax withholding obligations in connection with net share settlements of equity-based awards, and (e) repayments of debt.

•

During the six months ended June 30, 2020, cash used in financing activities primarily reflects dividends to Class A Common Stockholders, distributions to Non-Controlling interest holders, and repurchases of Class A Common Stock, partially offset by proceeds from the issuance of the 2030 Senior Notes. Net cash used in financing activities also reflects the financing activity of our consolidated funds and VIEs, which primarily include cash inflows from the issuance of debt offset by cash outflows for the principal repayment of debt.


•	During the six months ended June 30, 2019, cash provided by financing activities primarily reflects proceeds from the issuance of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, partially offset by distributions to Class A shareholders and Non-Controlling interest holders.

Future Debt Obligations

The Company had long-term debt of $3.1 billion at June 30, 2020, which includes $3.1 billion of notes with maturities in 2024, 2026, 2029, 2030, 2039, 2048 and 2050. See note 11 to the condensed consolidated financial statements for further information regarding the Company’s debt arrangements.

Contractual Obligations, Commitments and Contingencies

The Company had unfunded general partner commitments of $0.9 billion at June 30, 2020, of which $350 million related to Fund IX. For a summary and a description of the nature of the Company’s commitments, contingencies and contractual obligations, see note 16 to the condensed consolidated financial statements and “—Contractual Obligations, Commitments and Contingencies”. The Company’s commitments are primarily fulfilled through cash flows from operations and (to a limited extent) through borrowings and equity issuances as described in notes 11 and 14 to the condensed consolidated financial statements, respectively.

Consolidated Funds and VIEs

The Company manages its liquidity needs by evaluating unconsolidated cash flows; however, the Company’s financial statements reflect the financial position of Apollo as well as Apollo’s consolidated funds and VIEs. The primary sources and uses of cash at Apollo’s consolidated funds and VIEs include: (a) raising capital from their investors, which have been reflected historically as Non-Controlling Interests of the consolidated subsidiaries in our financial statements, (b) using capital to make investments, (c) generating cash flows from operations through distributions, interest and the realization of investments, (d) distributing cash flow to investors, and (e) issuing debt to finance investments (CLOs).

Other Liquidity and Capital Resource Considerations

Future Cash Flows

Our ability to execute our business strategy, particularly our ability to increase our AUM, depends on our ability to establish new funds and to raise additional investor capital within such funds. Our liquidity will depend on a number of factors, such as our ability to project our financial performance, which is highly dependent on our funds and our ability to manage our

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projected costs, fund performance, access to credit facilities, compliance with existing credit agreements, as well as industry and market trends. Also during economic downturns the funds we manage might experience cash flow issues or liquidate entirely. In these situations we might be asked to reduce or eliminate the management fee and performance fees we charge, which could adversely impact our cash flow in the future.

An increase in the fair value of our funds’ investments, by contrast, could favorably impact our liquidity through higher management fees where the management fees are calculated based on the net asset value, gross assets or adjusted assets. Additionally, higher performance fees not yet realized would generally result when investments appreciate over their cost basis which would not have an impact on the Company’s cash flow until realized.

Income Taxes

Effective September 5, 2019, Apollo Global Management, LLC, a Delaware limited liability company, converted to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

Consideration of Financing Arrangements

As noted above, in limited circumstances, the Company may issue debt or equity to supplement its liquidity. The decision to enter into a particular financing arrangement is made after careful consideration of various factors including the Company’s cash flows from operations, future cash needs, current sources of liquidity, demand for the Company’s debt or equity, and prevailing interest rates.

Revolver Facility

Under the Company’s 2018 AMH Credit Facility, the Company may borrow in an aggregate amount not to exceed $750 million and may incur incremental facilities in an aggregate amount not to exceed $250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including without limitation, permitted acquisitions. The 2018 AMH Credit Facility has a final maturity date of July 11, 2023.

Dividends and Distributions

For information regarding the quarterly dividends and distributions which were made at the sole discretion of the Company’s Former Manager prior to the Conversion to Class A Common Stockholders, Non-Controlling Interest holders in the Apollo Operating Group and participating securities, see note 14 to the condensed consolidated financial statements.

Although the Company expects to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended dividends. To the extent we do not have cash on hand sufficient to pay dividends, we may have to borrow funds to pay dividends, or we may determine not to pay dividends. The declaration, payment and determination of the amount of our quarterly dividends are at the sole discretion of the executive committee of our board of directors.

Our current intention is to distribute to our Class A Common Stockholders on a quarterly basis substantially all of our Distributable Earnings attributable to Class A Common Stockholders, in excess of amounts determined by the executive committee of our board of directors to be necessary or appropriate to provide for the conduct of our business and, at a minimum, a quarterly dividend of $0.40 per share.

On July 30, 2020, the Company declared a cash dividend of $0.49 per Class A share, which will be paid on August 31, 2020 to holders of record at the close of business on August 18, 2020. Also, the Company declared a cash dividend of $0.398438 per share of Series A Preferred share and Series B Preferred share which will be paid on September 15, 2020 to holders of record at the close of business on August 31, 2020.

Tax Receivable Agreement

The tax receivable agreement provides for the payment to the Managing Partners and Contributing Partners of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that AGM Inc. and its subsidiaries realizes subject to the agreement. For more information regarding the tax receivable agreement, see note 15 to the condensed consolidated financial statements.

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Share Repurchases

For information regarding the Company’s share repurchase program, see note 14 to the condensed consolidated financial statements.

Athora

On April 14, 2017, Apollo made a commitment of €125 million to purchase new Class B-1 equity interests in Athora, a strategic platform that acquires and reinsures traditional closed life insurance policies and provides capital and reinsurance solutions to insurers in Europe which, as of April 2020 was fully drawn. In January 2018, Apollo purchased Class C-1 equity interests in Athora that represent a profits interest in Athora which, upon meeting certain vesting triggers, will be convertible by Apollo into additional Class B-1 equity interests in Athora.

As part of an ongoing capital raise in connection with Athora’s acquisition of VIVAT N.V., Apollo exercised its preemptive rights and made an additional incremental commitment of approximately €58 million to purchase new Class B-1 equity interests in Athora. In addition, in April 2020, Apollo purchased Class C-2 equity interests in Athora that represent a profits interest in Athora which, upon meeting certain vesting triggers, will be convertible by Apollo into additional Class B-1 equity interests in Athora.

Apollo and Athene are minority investors in Athora with a long term strategic relationship. Through its share ownership, Apollo has approximately 19% of the total voting power in Athora, and Athene holds shares in Athora representing 10% of the total voting power in Athora. In addition, Athora shares held by funds and other accounts managed by Apollo represent, in the aggregate, approximately 16% of the total voting power in Athora.

For more information regarding unfunded general partner commitments, see “—Contractual Obligations, Commitments and Contingencies”.

Fund VIII, Fund VII, Fund VI, ANRP I and ANRP II Escrow

As of June 30, 2020, the remaining investments and escrow cash of Fund VIII, Hybrid Value Fund, Fund VII, Fund VI, ANRP I and ANRP II were valued at 113%, 109% 40%, 34%, 25% and 69% of the fund’s unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation. Realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per these funds’ partnership agreements.

Clawback

Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from inception to date exceeds the amount computed as due to the general partner at the final distribution. See “—Overview of Results of Operations—Performance Fees” for the maximum performance fees subject to potential reversal by each fund.

Indemnification Liability

The Company recorded an indemnification liability in the event that our Managing Partners, Contributing Partners and certain investment professionals are required to pay amounts in connection with a general partner obligation to return previously distributed performance fees. See note 15 to the condensed consolidated financial statements for further information regarding the Company’s indemnification liability.

Investment Management Agreements - ISG

The Company provides asset management and advisory services to Athene as described in note 15 to the condensed consolidated financial statements.

The base management fee covers a range of investment services that Athene receives from the Company, including investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services such as investment compliance, tax, legal and risk management support, among others. Additionally, the amended fee agreement provides for a possible payment by the Company to Athene, or a possible payment by Athene to the Company, equal to 0.025% of the Incremental Value as of the end of each year, beginning on December 31, 2019, depending upon the percentage of Athene’s investments that consist of core assets and core plus assets. In furtherance of yield support for Athene, if more than 60% of Athene’s invested assets which are subject to the sub-allocation fees are invested in core and core plus assets, Athene will receive a 0.025%

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fee reduction on the Incremental Value. As an incentive for differentiated asset management, if less than 50% of Athene’s invested assets which are subject to the sub-allocation fee are invested in core and core plus assets, thereby reflecting a higher allocation toward assets with the highest alpha-generating abilities, Athene will pay an additional fee of 0.025% on Incremental Value.

The amended fee agreement is intended to provide for further alignment of interests between Athene and the Company. On the Backbook Value, assuming constant portfolio allocations, the near-term impact of the amended fee agreement is anticipated to be immaterial. On the Incremental Value, assuming the same allocations as the Backbook Value, total fees paid by Athene to the Company are expected to be marginally lower than fees paid by Athene to the Company would have been under the prior fee arrangement. If invested asset allocations are more heavily weighted to assets with lower alpha-generating abilities than Athene’s current investment portfolio, the fees that Athene pays to the Company under the amended fee agreement would be expected to decline relative to the prior fee arrangement. Conversely, if a greater proportion of Athene’s investment portfolio is allocated to differentiated assets with higher alpha-generating abilities, Athene’s net investment earned rates would be expected to increase, and so would the fees Athene pays to the Company relative to the prior fee arrangement.

Strategic Transaction with Athene Holding

On October 27, 2019 Athene Holding, AGM Inc. and the entities that form the Apollo Operating Group entered into the Transaction Agreement. Pursuant to the Transaction Agreement, Athene Holding issued, on February 28, 2020, 35,534,942 AHL Class A Common Shares to certain subsidiaries of the Apollo Operating Group in exchange for (i) issuance by the Apollo Operating Group of 29,154,519 non-voting equity interests of the Apollo Operating Group to Athene Holding and (ii) $350 million in cash. See note 18 to the condensed consolidated financial statements for further information regarding the Transaction Agreement with Athene Holding.

Equity-Based Profit Sharing Expense

Profit sharing amounts are generally not paid until the related performance fees are distributed to the general partner upon realization of the fund’s investments. Under certain profit sharing arrangements, a portion of the performance fees distributed to the general partner is allocated by issuance of equity-based awards, rather than cash, to employees. See note 2 to the condensed consolidated financial statements for further information regarding the accounting for the Company’s profit sharing arrangements.

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. A summary of our significant accounting policies is presented in note 2 to our condensed consolidated financial statements. The following is a summary of our accounting policies that are affected most by judgments, estimates and assumptions.

The COVID-19 pandemic has created disruption and uncertainty in the global economy and financial markets. Although we cannot predict with certainty the full magnitude of the economic ramifications, we have accounted for pandemic-related circumstances when applying judgments and assumptions and updated our estimates accordingly when and as applicable.

Consolidation

The Company assesses all entities with which it is involved for consolidation on a case by case basis depending on the specific facts and circumstances surrounding each entity. Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity. Apollo factors in all economic interests including proportionate interests through related parties, to determine if such interests are to be considered a variable interest. As Apollo’s interest in many of these entities is solely through market rate fees and/or insignificant indirect interests through related parties, Apollo is generally not considered to have a variable interest in many of these entities under the guidance and no further consolidation analysis is performed. For entities where the Company has determined that it does hold a variable interest, the Company performs an assessment to determine whether each of those entities qualify as a VIE.

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

Under the variable interest model, Apollo consolidates those entities where it is determined that the Company is the primary beneficiary of the entity.

The assessment of whether an entity is a VIE and the determination of whether Apollo should consolidate such VIE requires judgment by our management. Those judgments include, but are not limited to: (i) determining whether the total equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (ii) evaluating whether the holders of equity investment at risk, as a group, can make decisions that have a significant effect on the success of the entity, (iii) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive the expected residual returns from an entity and (iv) evaluating the nature of the relationship and activities of those related parties with shared power or under common control for purposes of determining which party within the related-party group is most closely associated with the VIE. Judgments are also made in determining whether a member in the equity group has a controlling financial interest including power to direct activities that most significantly impact the VIE’s economic performance and rights to receive benefits or obligations to absorb losses that could be potentially significant to the VIE. This analysis considers all relevant economic interests including proportionate interests held through related parties.

Revenue Recognition

Performance Fees. We earn performance fees from our funds as a result of such funds achieving specified performance criteria. Such performance fees generally are earned based upon a fixed percentage of realized and unrealized gains of various funds after meeting any applicable hurdle rate or threshold minimum.

Performance allocations are performance fees that are generally structured from a legal standpoint as an allocation of capital to the Company. Performance allocations from certain of the funds that we manage are subject to contingent repayment and are generally paid to us as particular investments made by the funds are realized. If, however, upon liquidation of a fund, the aggregate amount paid to us as performance fees exceeds the amount actually due to us based upon the aggregate performance of the fund, the excess (in certain cases net of taxes) is required to be returned by us to that fund. We account for performance allocations as an equity method investment, and accordingly, we accrue performance allocations quarterly based on fair value of the underlying investments and separately assess if contingent repayment is necessary. The determination of performance allocations and contingent repayment considers both the terms of the respective partnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. See “Investments, at Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds.

Incentive fees are performance fees structured as a contractual fee arrangement rather than a capital allocation. Incentive fees are generally received from the management of CLOs, managed accounts and AINV. For a majority of our incentive fees, once the quarterly or annual incentive fees have been determined, there is no look-back to prior periods for a potential contingent repayment, however, certain other incentive fees can be subject to contingent repayment at the end of the life of the entity. In accordance with the revenue recognition standard, certain incentive fees are considered a form of variable consideration and therefore are deferred until fees are probable to not be significantly reversed. There is significant judgment involved in determining if the incentive fees are probable to not be significantly reversed, but generally the Company will defer the revenue until the fees are crystallized or are no longer subject to clawback or reversal.

Management Fees. Management fees related to our credit funds, can be based on net asset value, gross assets, adjusted cost of all unrealized portfolio investments, capital commitments, adjusted assets, capital contributions, or stockholders’ equity all as defined in the respective partnership agreements. The credit management fee calculations that consider net asset value, gross assets, adjusted cost of all unrealized portfolio investments and adjusted assets are normally based on the terms of the respective partnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. The management fees related to our private equity funds, by contrast, are generally based on a fixed percentage of the committed capital or invested capital. The corresponding fee calculations that consider committed capital or invested capital are both objective in nature and therefore do not require the use of significant estimates or assumptions. The management fees related to our real assets funds are generally based on a specific percentage of the funds’ stockholders’ equity or committed or net invested capital or the capital accounts of the limited partners. See “Investments, at Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds.

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Investments, at Fair Value

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

The fair values of the investments in our funds can be impacted by changes to the assumptions used in the underlying valuation models. For further discussion on the impact of changes to valuation assumptions see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Sensitivity” in this Annual Report on Form 10-K. There have been no material changes to the valuation approaches utilized during the periods that our financial results are presented in this report.

Fair Value of Financial Instruments

Except for the Company’s debt obligations (each as defined in note 11 to our condensed consolidated financial statements), Apollo’s financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. See “—Investments, at Fair Value” above. While Apollo’s valuations of portfolio investments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Financial instruments’ carrying values generally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings.

Profit Sharing Expense. Profit sharing expense is primarily a result of agreements with our Contributing Partners and employees to compensate them based on the ownership interest they have in the general partners of the Apollo funds. Therefore, changes in the fair value of the underlying investments in the funds we manage and advise affect profit sharing expense. The Contributing Partners and employees are allocated approximately 30% to 50%, of the total performance fees which is driven primarily by changes in fair value of the underlying fund’s investments and is treated as compensation expense. Additionally, profit sharing expenses paid may be subject to clawback from employees, former employees and Contributing Partners to the extent not indemnified. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the condensed consolidated statements of financial condition, represents all amounts previously distributed to employees, former employees and Contributing Partners that would need to be returned to the general partner if the Apollo funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner receivable, however, would not become realized until the end of a fund’s life.

Several of the Company’s employee remuneration programs are dependent upon performance fee realizations, including the Incentive Pool, and dedicated performance fee rights and certain RSU awards for which vesting is contingent, in part, on the realization of performance fees in a specified period. The Company established these programs to attract and retain, and provide incentive to, partners and employees of the Company and to more closely align the overall compensation of partners and employees with the overall realized performance of the Company. Dedicated performance fee rights entitle their holders to payments arising from performance fee realizations. The Incentive Pool enables certain partners and employees to earn discretionary compensation based on realized performance fees in a given year, which amounts are reflected in profit sharing expense in the Company’s condensed consolidated financial statements. Amounts earned by participants as a result of their performance fee rights (whether dedicated or Incentive Pool) will vary year-to-year depending on the overall realized performance of the Company (and, in the case of the Incentive Pool, on their individual performance). There is no assurance that the Company will continue to compensate individuals through the same types of arrangements in the future and there may be periods when the executive committee of the Company’s manager determines that allocations of realized performance fees are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits, the modification of existing programs or the use of new remuneration programs. Reductions in performance fee revenues could also make it harder to retain employees and cause employees to seek other employment opportunities.

Fair Value Option. Apollo has elected the fair value option for the Company’s investment in Athene Holding, the assets and liabilities of certain of its consolidated VIEs (including CLOs), the Company’s U.S. Treasury securities with original maturities greater than three months when purchased and certain of the Company’s other investments. Such election is irrevocable

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and is applied to financial instruments on an individual basis at initial recognition. See notes 4, 6, and 7 to the condensed consolidated financial statements for further disclosure.

Equity-Based Compensation. Equity-based compensation is accounted for in accordance with U.S. GAAP, which requires that the cost of employee services received in exchange for an award is generally measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are recognized over the relevant service period. In addition, certain RSUs granted by the Company vest subject to continued employment and the Company’s receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance fee metrics are met or deemed probable. The addition of these performance measures helps to promote the interests of our Class A Common Stockholders and fund investors by making RSU vesting contingent on the realization and distribution of profits on our funds. Forfeitures of equity-based awards are accounted for when they occur. Apollo’s equity-based awards consist of, or provide rights with respect to, AOG Units, RSUs, share options, restricted shares, AHL Awards and other equity-based compensation awards. For more information regarding Apollo’s equity-based compensation awards, see note 13 to our condensed consolidated financial statements. The Company’s assumptions made to determine the fair value on grant date are embodied in the calculations of compensation expense.

A significant part of our compensation expense is derived from amortization of RSUs. The fair value of all RSU grants after March 29, 2011 is based on the grant date fair value, which considers the public share price of the Company. The Company has three types of RSU grants, which we refer to as Plan Grants, Bonus Grants, and Performance Grants. Plan Grants may or may not provide the right to receive dividend equivalents until the RSUs vest and, for grants made after 2011, the underlying shares are generally issued by March 15th after the year in which they vest. For Plan Grants, the grant date fair value is based on the public share price of the Company, and is discounted for transfer restrictions and lack of dividends until vested if applicable. Bonus Grants provide the right to receive dividend equivalents on both vested and unvested RSUs and Performance Grants provide the right to receive dividend equivalents on vested RSUs and may also provide the right to receive dividend equivalents on unvested RSUs. Both Bonus Grants and Performance Grants are generally issued by March 15th of the year following the year in which they vest. For Bonus Grants and Performance Grants, the grant date fair value for the periods presented is based on the public share price of the Company, and is discounted for transfer restrictions.

We utilized the present value of a growing annuity formula to calculate a discount for the lack of pre-vesting dividends on certain Plan Grant and Performance Grant RSUs.

We utilize the Finnerty Model to calculate a marketability discount on the Plan Grant, Bonus Grant and Performance Grant RSUs to account for the lag between vesting and issuance. The Finnerty Model provides for a valuation discount reflecting the holding period restriction embedded in a restricted security preventing its sale over a certain period of time.

The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. This model has gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and the length of restriction. The concept underpinning the Finnerty Model is that a restricted security cannot be sold over a certain period of time. Further simplified, a restricted share of equity in a company can be viewed as having forfeited a put on the average price of the marketable equity over the restriction period (also known as an “Asian Put Option”). If we price an Asian Put Option and compare this value to that of the assumed fully marketable underlying security, we can effectively estimate the marketability discount. The inputs utilized in the Finnerty Model are (i) length of holding period, (ii) volatility and (iii) dividend yield.

Income Taxes

Prior to the Conversion, certain entities in the Apollo Operating Group operated as partnerships for U.S. federal income tax purposes. As a result, these members of the Apollo Operating Group were not subject to U.S. federal income taxes. However, certain of these entities were subject to NYC UBT and certain non-U.S. entities were subject to non-U.S. corporate income taxes. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

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realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluated quarterly to determine whether or not the Company has uncertain tax positions that require financial statement recognition.

Fair Value Measurements

See note 7 to our condensed consolidated financial statements for a discussion of the Company’s fair value measurements.

We continue to monitor the impact of COVID-19 in our valuation considerations. Any updated information available from the portfolio companies and relevant market data as of the date of this report were incorporated in Apollo’s valuation considerations. Where an updated forecast was not available, Apollo’s valuation assumed change in the portfolio company’s performance guided by relevant market data and our understanding of the underlying business.

As discussed in Note 7 to the condensed consolidated financial statements, Apollo utilizes valuation committees consisting of members from senior management, to review and approve the valuation results related to the investments of the funds it manages. For certain publicly traded vehicles managed by the Company, a review is performed by an independent board of directors. The Company also retains external valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. Please refer to Note 7 of this report for more details on valuation techniques employed by Apollo to determine fair value of its investments in credit, private equity and real assets investments. The following section outlines some of the additional considerations with respect to COVID-19 that are incorporated in our valuation approach.

Credit Investments

The majority of investments in Apollo’s credit funds are valued based on quoted market prices. Quoted market prices are considered to be indicative of fair value, incorporating all the risks and uncertainties associated with the underlying instrument in the prevailing market environment. Apollo’s valuation team further analyzes how prices have moved over the measurement period within each asset class and sector and compared it with the relevant benchmark indices.

Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing a model-based approach to determine fair value. Apollo’s privately valued credit portfolio is concentrated in bank loans to middle-market companies, loans backed by commercial real estate, aviation and other asset backed loans, and life settlements. Valuation approaches used to estimate the fair value of illiquid credit investments may also include the market approach and the income approach. Most private debt instruments are valued utilizing discounted cash flow models where the key valuation drivers are market yield/credit spread, timing of cash flows and recovery of principal amount. Some of the considerations incorporated in determining the key valuation inputs in our model-based valuation approaches include but are not limited to:


•	relative liquidity and change in liquidity profile of an asset class compared to underlying assets in an observable benchmark;


•	specific contractual terms such as LIBOR floor, covenants or extension features;


•	portfolio company specific business strength or weakness as it relates to COVID-19;


•	portfolio company’s liquidity profile;


•	expected maturity of debt instruments, which could be different than the contractual maturity;


•	requested or granted amendments or deferrals;


•	and expected recovery and timing of recovery for distressed debt instruments.

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Private Equity Investments

Over two thirds of Apollo’s private equity investments are valued using a market approach or an observable market price making overall portfolio returns in-line with relevant benchmark indices. Some of the additional considerations incorporated in valuation approaches includes but are not limited to:


•	relative liquidity and change in liquidity profile of the portfolio company;


•	portfolio company-specific business strength or weakness as it relates to COVID-19.

Real Assets Investments

The estimated fair value of commercial mortgage-backed securities (“CMBS”) in Apollo’s real assets funds is determined by reference to market prices provided by certain dealers who make a market in these financial instruments. Debt and equity securities that are not publicly traded or whose market prices are not readily available, such as private commercial real estate debt and equity investments in entities that own real estate, are valued at fair value utilizing a model-based approach to determine fair value. Some of the considerations incorporated in our model-based valuation approaches includes but are not limited to:


•	property type specific considerations of potential disruption e.g., higher impact on hospitality or retail than residential;


•	individual property specific considerations: region and sub-market, tenant profile and liquidity profile;


•	requested or granted amendments or deferrals;


•	expected maturity of debt instruments; for example, debt maturing in near term are priced utilizing extensions assuming borrowers may not re-finance in the current market environment; and


•	loans evaluated for possible impairment.

Recent Accounting Pronouncements

A list of recent accounting pronouncements that are relevant to Apollo and its industry is included in note 2 to our condensed consolidated financial statements.

Off-Balance Sheet Arrangements

In the normal course of business, we engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications and potential contingent repayment obligations. See note 16 to our condensed consolidated financial statements for a discussion of guarantees and contingent obligations.

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Contractual Obligations, Commitments and Contingencies

The Company’s material contractual obligations consisted of lease obligations, contractual commitments as part of the ongoing operations of the funds and debt obligations. Fixed and determinable payments due in connection with these obligations are as follows as of June 30, 2020:



	Remaining 2020		2021		2022		2023		2024		Thereafter		Total
	(in thousands)
Operating lease obligations⁽¹⁾	$	11,671	$	40,653	$	47,767	$	49,405	$	47,020	$	466,914	$	663,430
Other long-term obligations⁽²⁾	13,140		4,613		1,908		674		674		—		21,009
2018 AMH Credit Facility⁽³⁾	338		675		675		358		—		—		2,046
2024 Senior Notes⁽³⁾	10,000		20,000		20,000		20,000		508,333		—		578,333
2026 Senior Notes⁽³⁾	11,000		22,000		22,000		22,000		22,000		530,983		629,983
2029 Senior Notes⁽³⁾	16,443		32,886		32,886		32,886		32,886		810,818		958,805
2030 Senior Notes⁽³⁾	6,625		13,250		13,250		13,250		13,250		571,912		631,537
2039 Senior Secured Guaranteed Notes⁽³⁾⁽⁴⁾	7,751		15,503		15,503		15,503		15,503		395,063		464,826
2048 Senior Notes⁽³⁾	7,500		15,000		15,000		15,000		15,000		648,750		716,250
2050 Subordinated Notes⁽³⁾	7,425		14,850		14,850		14,850		14,850		671,844		738,669
Secured Borrowing I	165		330		330		330		330		19,951		21,436
Secured Borrowing II	162		325		325		325		325		21,463		22,925
2016 AMI Term Facility I	123		246		246		246		246		18,960		20,067
2016 AMI Term Facility II	128		256		256		18,463		—		—		19,103
Obligations	$	92,471	$	180,587	$	184,996	$	203,290	$	670,417	$	4,156,658	$	5,488,419


(1)	Operating lease obligations excludes $134.1 million of other operating expenses associated with operating leases.


(2)	Includes (i) payments on management service agreements related to certain assets and (ii) payments with respect to certain consulting agreements entered into by the Company. Note that a significant portion of these costs are reimbursable by funds.


(3)	See note 11 of the condensed consolidated financial statements for further discussion of these debt obligations.


(4)	Payments based on anticipated repayment date of July 2029.


Note:	Due to the fact that the timing of certain amounts to be paid cannot be determined or for other reasons discussed below, the following contractual commitments have not been presented in the table above.

(i)

As noted previously, we have entered into a tax receivable agreement with our Managing Partners and Contributing Partners which requires us to pay to our Managing Partners and Contributing Partners 85% of any tax savings received by AGM Inc. and its subsidiaries from our step-up in tax basis. The tax savings achieved may not ensure that we have sufficient cash available to pay this liability and we might be required to incur additional debt to satisfy this liability.


(ii)	Debt amounts related to the consolidated VIEs are not presented in the table above as the Company is not a guarantor of these non-recourse liabilities.

(iii)

In connection with the Stone Tower acquisition, the Company agreed to pay the former owners of Stone Tower a specified percentage of any future performance fees earned from certain of the Stone Tower funds, CLOs and strategic investment accounts. This contingent consideration liability is remeasured to fair value at each reporting period until the obligations are satisfied. See note 16 to the condensed consolidated financial statements for further information regarding the contingent consideration liability.


(iv)	Commitments from certain of our subsidiaries to contribute to the funds we manage and certain related parties.

Commitments

Certain of our management companies and general partners are committed to contribute to the funds we manage and certain related parties. While a small percentage of these amounts are funded by us, the majority of these amounts have historically been funded by our related parties, including certain of our employees and certain Apollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its related parties, the percentage of total fund commitments of Apollo and its related parties, the commitment and remaining commitment amounts of Apollo only (excluding related parties), and the percentage of total fund commitments of Apollo only (excluding related parties) for each credit, private equity and real assets fund as of June 30, 2020 as follows ($ in millions):

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Fund	Apollo and Related Party Commitments		% of Total Fund Commitments		Apollo Only (Excluding Related Party) Commitments		Apollo Only (Excluding Related Party) % of Total Fund Commitments		Apollo and Related Party Remaining Commitments		Apollo Only (Excluding Related Party) Remaining Commitments
Credit:
Apollo Credit Opportunity Fund II, L.P. (“COF II”)	$	30.5	1.93	%	$	23.4	1.48	%	$	0.8	$	0.6
Apollo Credit Opportunity Fund I, L.P. (“COF I”)	449.2		30.26		29.7		2.00		—		—
Financial Credit Investment IV, L.P. (“FCI IV”)	177.3		23.07		14.3		1.86		177.3		14.3
Financial Credit Investment III, L.P. (“FCI III”)	224.3		11.76		0.1		0.01		108.3		—
Financial Credit Investment II, L.P. (“FCI II”)	244.6		15.72		—		—		114.9		—
Financial Credit Investment I, L.P. (“FCI I”)	151.3		27.07		—		—		—		—
SCRF IV	416.1		16.63		33.1		1.32		—		—
MidCap	1,859.7		77.32		126.9		5.27		74.7		6.4
Apollo Moultrie Credit Fund, L.P.	400.0		100.00		—		—		160.0		—
Apollo Accord Master Fund II, L.P.	—		—		—		—		—		—
Apollo Accord Master Fund III, L.P.	225.1		25.40		0.1		0.01		76.2		—
Apollo Revolver Fund, L.P.	322.1		61.31		10.2		1.94		322.1		10.2
Apollo Strategic Origination Partners	6,121.2		50.50		121.2		1.00		6,121.2		121.2
Athora⁽¹⁾⁽⁴⁾	1,263.6		32.51		205.2		5.28		129.2		32.0
Other Credit	4,193.1		Various		233.3		Various		1,648.0		105.8
Private Equity:
Fund IX	1,917.5		7.75		455.2		1.84		1,464.3		350.3
Fund VIII	1,543.5		8.40		396.8		2.16		221.1		58.3
Fund VII	467.2		3.18		178.1		1.21		60.0		23.1
Fund VI	246.3		2.43		6.1		0.06		9.7		0.2
Fund V	100.0		2.67		0.5		0.01		6.2		—
Fund IV	100.0		2.78		0.2		0.01		0.5		—
AION	151.0		18.28		50.0		6.05		19.1		6.1
ANRP I	426.1		32.21		10.1		0.76		54.4		1.0
ANRP II	490.1		14.19		25.9		0.75		110.7		5.8
ANRP III	650.1		46.44		27.0		1.93		640.8		26.6
A.A. Mortgage Opportunities, L.P.	625.0		80.31		—		—		261.6		—
Apollo Rose II, L.P.	887.1		51.01		33.0		1.9		325.8		12.4
Champ, L.P.	189.2		78.25		26.1		10.8		15.8		2.4
Apollo Royalties Management, LLC	108.6		100.00		—		—		—		—
Apollo Hybrid Value Fund, L.P.	847.3		26.17		63.8		1.97		327.8		24.6
COF III	358.1		10.45		36.4		1.06		73.3		8.0
Apollo Asia Private Credit Fund, L.P.	126.5		55.12		0.1		0.04		31.9		—
AEOF	125.5		12.01		25.5		2.44		92.5		18.8
Other Private Equity	826.3		Various		104.7		Various		140.9		41.7
Real Assets:
U.S. RE Fund III	317.1		71.68		7.1		1.60		317.1		7.1
U.S. RE Fund II⁽²⁾	676.1		54.38		4.9		0.39		275.8		1.9
U.S. RE Fund I⁽²⁾	434.1		66.93		16.4		2.53		79.8		2.7
Asia RE Fund⁽²⁾	386.8		53.77		8.4		1.16		189.4		3.7
Infrastructure Equity Fund⁽³⁾	246.1		27.43		9.0		1.00		49.1		2.0
EPF III⁽¹⁾	609.4		13.50		74.6		1.65		366.9		45.6
EPF II⁽¹⁾	362.9		10.54		2.0		0.06		82.9		0.4
Apollo European Principal Finance Fund, L.P. (“EPF I”)⁽¹⁾	301.8		20.74		19.9		1.37		48.7		4.5
Other Real Assets	397.5		Various		1.3		Various		50.4		—
Other:
Apollo SPN Investments I, L.P.	17.3		0.37		17.3		0.37		11.9		11.9
Total	$	30,012.6			$	2,397.9			$	14,261.1	$	949.6


(1)	Apollo’s commitment in these funds is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.12 as of June 30, 2020.


(2)	Figures for U.S. RE Fund I include base, additional, and co-investment commitments. A co-investment vehicle within U.S. RE Fund I is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.24 as of June 30, 2020. Figures for U.S. RE Fund II and Asia RE Fund include co-investment commitments.

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(3)	Figures for Apollo Infrastructure Equity Fund include Apollo Infra Equity US Fund, L.P. and Apollo Infra Equity International Fund, L.P. commitments.


(4)	Apollo only (excluding related party) remaining commitments excludes a €250 million unfunded commitment that is subject to satisfaction of certain conditions.

On April 30, 2015, Apollo entered into the AAA Investments Credit Agreement (see note 15 of our condensed consolidated financial statements for further disclosure regarding this facility). The 2018 AMH Credit Facility, 2024 Senior Notes, 2026 Senior Notes, 2029 Senior Notes, 2030 Senior Notes, 2039 Senior Secured Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes will have future impacts on our cash uses. See note 11 of our condensed consolidated financial statements for information regarding the Company’s debt arrangements.

Contingent Obligation—Performance fees with respect to certain credit and private equity funds and real assets funds is subject to reversal in the event of future losses to the extent of the cumulative performance fees recognized in income to date. See note 16 of our condensed consolidated financial statements for a description of our contingent obligation.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our predominant exposure to market risk is related to our role as investment manager and general partner for our funds and the sensitivity to movements in the fair value of their investments and resulting impact on performance fees and management fee revenues. Our direct investments in the funds also expose us to market risk whereby movements in the fair values of the underlying investments will increase or decrease both net gains (losses) from investment activities and income (loss) from equity method investments. For a discussion of the impact of market risk factors on our financial instruments see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Investments, at Fair Value.”

The fair value of our financial assets and liabilities of our funds may fluctuate in response to changes in the value of investments, foreign exchange, commodities and interest rates. The net effect of these fair value changes impacts the gains and losses from investments in our condensed consolidated statements of operations. However, the majority of these fair value changes are absorbed by the Non-Controlling Interests.

The Company is subject to a concentration risk related to the investors in its funds. Although there are more than 1,000 investors in Apollo’s active credit, private equity and real assets funds, no individual investor accounts for more than 10% of the total committed capital to Apollo’s active funds.

Risks are analyzed across funds from the “bottom up” and from the “top down” with a particular focus on asymmetric risk. We gather and analyze data, monitor investments and markets in detail, and constantly strive to better quantify, qualify and circumscribe relevant risks.

Each risk management process is subject to our overall risk tolerance and philosophy and our enterprise-wide risk management framework. This framework includes identifying, measuring and managing market, credit and operational risks at each segment, as well as at the fund and Company level.

Each segment runs its own investment and risk management process subject to our overall risk tolerance and philosophy:


•	Our credit and real assets funds continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditional and customized risk management metrics to analyze risk related to specific assets or portfolios, as well as, fund-wide risks.


•	The investment process of our private equity funds involves a detailed analysis of potential acquisitions, and investment management teams assigned to monitor the strategic development, financing and capital deployment decisions of each portfolio investment.

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The Company has established a Global Risk Committee comprised of various members of senior management including the Company’s Co-Presidents, Co-Chief Operating Officers, Chief Legal Officer, Global Head of Human Capital, Chief Risk Officer, Head of Enterprise Risk Management and Head of Internal Audit. The risk committee is tasked with assisting the Company in monitoring and managing enterprise-wide risk. The risk committee generally meets on a quarterly basis and reports to senior management of the Company at such times as the committee deems appropriate and at least on an annual basis.

On at least a monthly basis, the Company’s risk department provides a summary analysis of fund level market and credit risk to the portfolio managers of the Company’s funds and the heads of the various business segments. On a periodic basis, the Company’s risk department provides analyses of select market and credit risk components to various members of senior management. In addition, the Company’s Chief Risk Officer reviews specific investments from the perspective of risk mitigation and discusses such analysis with the Company’s risk committee and/or the executive committee of the Company’s Board at such times as the Company’s Chief Risk Officer determines such discussions are warranted.

Impact on Management Fees—Our management fees are based on one of the following:


•	capital commitments to an Apollo fund;


•	capital invested in an Apollo fund;


•	the gross, net or adjusted asset value of an Apollo fund, as defined; or


•	as otherwise defined in the respective agreements.

Management fees could be impacted by changes in market risk factors and management could consider an investment permanently impaired as a result of (i) such market risk factors causing changes in invested capital or in market values to below cost, in the case of certain credit funds and our private equity funds or (ii) such market risk factors causing changes in gross or net asset value, for the credit funds. The proportion of our management fees that are based on NAV is dependent on the number and types of our funds in existence and the current stage of each fund’s life cycle.

Impact on Advisory and Transaction Fees—We earn transaction fees relating to the negotiation of credit, private equity and real assets transactions and may obtain reimbursement for certain out-of-pocket expenses incurred. Subsequently, on a quarterly or annual basis, ongoing advisory fees, and additional transaction fees in connection with additional purchases, dispositions, or follow-on transactions, may be earned. Management Fee Offsets and any broken deal costs, if applicable, are reflected as a reduction to advisory and transaction fees. Advisory and transaction fees will be impacted by changes in market risk factors to the extent that they limit our opportunities to engage in credit, private equity and real assets transactions or impair our ability to consummate such transactions. The impact of changes in market risk factors on advisory and transaction fees is not readily predicted or estimated.

Impact on Performance Fees—We earn performance fees from our funds as a result of such funds achieving specified performance criteria. Our performance fees will be impacted by changes in market risk factors. However, several major factors will influence the degree of impact:


•	the performance criteria for each individual fund in relation to how that fund’s results of operations are impacted by changes in market risk factors;


•	whether such performance criteria are annual or over the life of the fund;


•	to the extent applicable, the previous performance of each fund in relation to its performance criteria; and


•	whether each funds’ performance fee distributions are subject to contingent repayment.

As a result, the impact of changes in market risk factors on performance fees will vary widely from fund to fund. The impact is heavily dependent on the prior and future performance of each fund, and therefore is not readily predicted or estimated.

Market Risk—We are directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values of assets and liabilities or revenues and expenses will be adversely affected by changes in market conditions. Market risk is inherent in each of our investments and activities, including equity investments, loans, short-term borrowings, long-term debt, hedging instruments, credit default swaps and derivatives. Just a few of the market conditions that may shift from time to time, thereby exposing us to market risk, include fluctuations in interest and currency exchange rates, equity prices, changes in the implied volatility of interest rates and price deterioration. Volatility in debt and equity markets can impact our pace of capital deployment, the timing of receipt of transaction fee revenues and the timing of realizations. These market conditions could have an impact on the value of fund investments and rates of return. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse effects on our results from operations and our overall financial condition.

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We monitor market risk using certain strategies and methodologies which management evaluates periodically for appropriateness. We intend to continue to monitor this risk going forward and continue to monitor our exposure to all market factors.

Interest Rate Risk—Interest rate risk represents exposure we and our funds have to instruments whose values vary with the change in interest rates. These instruments include, but are not limited to, loans, borrowings, investments in interest bearing securities and derivative instruments. We may seek to mitigate risks associated with the exposures by having our funds take offsetting positions in derivative contracts. Hedging instruments allow us to seek to mitigate risks by reducing the effect of movements in the level of interest rates, changes in the shape of the yield curve, as well as, changes in interest rate volatility. Hedging instruments used to mitigate these risks may include related derivatives such as options, futures and swaps.

Credit Risk—Certain of our funds are subject to certain inherent risks through their investments.

Certain of our entities invest substantially all of their excess cash in open-end money market funds and money market demand accounts, which are included in cash and cash equivalents. The money market funds invest primarily in government securities and other short-term, highly liquid instruments with a low risk of loss. We continually monitor the funds’ performance in order to manage any risk associated with these investments.

Certain of our funds hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We seek to minimize our risk exposure by limiting the counterparties with which our funds enter into contracts to banks and investment banks who meet established credit and capital guidelines. As of June 30, 2020, we do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.

Certain of our funds’ investments include lower-rated and comparable quality unrated distressed investments and other instruments. Investments in such debt instruments are accompanied by a greater degree of risk of loss due to default by the issuer because such debt instruments are generally unsecured and subordinated to other creditors of the issuer. These issuers generally have high levels of indebtedness and can be more sensitive to adverse market conditions, such as a recession or increasing interest rates, as compared to higher rated issuers. We seek to minimize risk exposure by subjecting each prospective investment to rigorous credit analysis and by making investment decisions based upon objectives that include capital preservation and appreciation, and industry and issuer diversification.

Foreign Exchange Risk—Foreign exchange risk represents exposures our funds have to changes in the values of current fund holdings and future cash flows denominated in other currencies and investments in non-U.S. companies. The types of investments exposed to this risk include investments in foreign subsidiaries, foreign currency-denominated loans, foreign currency-denominated transactions, and various foreign exchange derivative instruments whose values fluctuate with changes in currency exchange rates or foreign interest rates. Instruments used to mitigate this risk are foreign exchange options, currency swaps, futures and forwards. These instruments may be used to help insulate our funds against losses that may arise due to volatile movements in foreign exchange rates and/or interest rates.

In our capacity as investment manager of the funds we manage, we continuously monitor a variety of markets for attractive opportunities for managing risk. For example, certain of the funds we manage may put in place foreign exchange hedges or borrowings with respect to certain foreign currency denominated investments to provide a hedge against foreign exchange exposure.

Non-U.S. Operations—We conduct business throughout the world and are continuing to expand into foreign markets. We currently have offices outside the U.S. in London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong, Shanghai and Tokyo and have been strategically growing our international presence. Our fund investments and our revenues are primarily derived from our U.S. operations. With respect to our non-U.S. operations, we are subject to risk of loss from currency fluctuations, social instability, changes in governmental policies or policies of central banks, expropriation, nationalization, unfavorable political and diplomatic developments and changes in legislation relating to non-U.S. ownership. Our funds also invest in the securities of companies which are located in non-U.S. jurisdictions. As we continue to expand globally, we will continue to focus on monitoring and managing these risk factors as they relate to specific non-U.S. investments.


ITEM 4.	CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible

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disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

No changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) occurred during our most recent quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II—OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

See note 16 to our condensed consolidated financial statements for a summary of the Company’s legal proceedings.

ITEM 1A. RISK FACTORS

For a discussion of our potential risks and uncertainties, see the information under the heading "Risk Factors" in our 2019 Annual Report and our Quarterly Report for the quarter ended March 31, 2020 which are accessible on the Securities and Exchange Commission's website at www.sec.gov. There have been no material changes to the risk factors for the three months ended June 30, 2020.

The risks described in our 2019 Annual Report and our Quarterly Report for the quarter ended March 31, 2020 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/ or operating results.


ITEM 2.	UNREGISTERED SALE OF EQUITY SECURITIES

On May 12, 2020, May 19, 2020, May 27, 2020, June 2, 2020, and June 16, 2020, we issued 169,135, 1,126, 26,222, 6,659, and 152,492 shares of Class A shares, respectively, net of taxes to Apollo Management Holdings, L.P., a subsidiary of Apollo Global Management, Inc., in connection with issuances of stock to participants in the Equity Plan for an aggregate purchase price of $7.7 million, $0.05 million, $1.2 million, $0.3 million, and $7.8 million, respectively. The issuance was exempt from registration under the Securities Act in accordance with Section 4(a)(2) and Rule 506(b) thereof, as transactions by the issuer not involving a public offering. We determined that the purchaser of Class A shares in the transactions, Apollo Management Holdings, L.P., was an accredited investor.

Issuer Purchases of Equity Securities

The following table sets forth purchases of our Class A Common Stock made by us or on our behalf during the fiscal quarter ended June 30, 2020. There were no repurchases of any Class A Common Stock in the open market during the fiscal quarter ended June 30, 2020. From April 1, 2020 through June 30, 2020, the Company paid approximately $15.5 million in cash to satisfy tax withholding and cash settlement obligations in lieu of issuing shares of Class A Common Stock upon the vesting of equity awards representing 319,116 shares of Class A Common Stock.



Period	Total number of Class A Common Stock purchased⁽¹⁾	Average price paid per share		Total number of Class A Common Stock purchased as part of publicly announced plans or programs⁽²⁾	Approximate dollar value of Class A Common Stock that may yet be purchased under the plans or programs ⁽³⁾
April 1, 2020 through April 30, 2020	—	$	—	—	$	435,794,563
May 1, 2020 through May 31, 2020	—	$	—	—	$	428,455,838
June 1, 2020 through June 30, 2020	—	$	—	—	$	420,274,885
Total	—

(1)

Certain Apollo employees receive a portion of the profit sharing proceeds of certain funds in the form of (a) restricted Class A Common Stock of AGM Inc. that they are required to purchase with such proceeds or (b) RSUs, in each case which equity-based awards generally vest over three years. These equity-based awards are granted under the Company's Equity Plan. To prevent dilution on account of these awards, Apollo may, in its discretion, repurchase Class A Common Stock on the open market and retire them. See note 14 to the condensed consolidated financial statements for further information on Class A Common Stock.

(2)

Pursuant to a share repurchase program that was publicly announced on March 12, 2020, the Company is authorized to repurchase up to $500 million in the aggregate of its Class A Common Stock, including through the repurchase of outstanding Class A Common Stock and through a reduction of Class A Common Stock to be issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards granted under the 2019 Equity Plan (or any successor equity plan thereto). This new authorization increased the Company’s capacity to repurchase shares from $80 million of unused capacity under the Company’s previously approved share repurchase plan. Class A Common Stock may be repurchased from time to time in open market transactions, in privately negotiated transactions, pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or otherwise, with the size and timing of these repurchases depending on legal requirements, price, market and economic conditions and other factors. The Company is not obligated under the terms of the program to repurchase any of its Class A Common Stock. The repurchase program has no expiration date

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and may be suspended or terminated by the Company at any time without prior notice. Class A Common Stock repurchased as part of this program are canceled by the Company.


(3)	Amounts have been adjusted to account for reductions of Class A Common Stock to satisfy associated tax obligations in connection with the settlement of equity-based awards granted to employees under the Equity Plan.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

Not applicable.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION

Not applicable.

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ITEM 6.	EXHIBITS



Exhibit Number		Exhibit Description

3.1		Certificate of Conversion of Apollo Global Management, LLC (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 5, 2019 (File No. 001-35107)).

3.2		Amended and Restated Certificate of Incorporation of Apollo Global Management, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 30, 2020 (File No. 001-35107)).

3.3		Amended and Restated Bylaws of Apollo Global Management, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 30, 2020 (File No. 001-35107)).

4.1		Form of 6.375% Series A Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on September 5, 2019 (File No. 001-35107)).

4.2		Form of 6.375% Series B Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on September 5, 2019 (File No. 001-35107)).

4.3		Indenture dated as of May 30, 2014, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014 (File No. 001-35107)).

4.4		First Supplemental Indenture dated as of May 30, 2014, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014 (File No. 001-35107)).

4.5		Form of 4.000% Senior Note due 2024 (included in Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014 (File No. 001-35107), which is incorporated by reference).

4.6		Second Supplemental Indenture dated as of January 30, 2015, among Apollo Management Holdings, L.P., the Guarantors party thereto, Apollo Principal Holdings X, L.P. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.5 to the Registrant’s Form 10-K for the period ended December 31, 2014 (File No. 001-35107)).

4.7		Third Supplemental Indenture dated as of February 1, 2016, among Apollo Management Holdings, L.P., the Guarantors party thereto, Apollo Principal Holdings XI, LLC and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.6 to the Registrant’s Form 10-Q for the period ended March 31, 2016 (File No. 001-35107)).

4.8		Fourth Supplemental Indenture dated as of May 27, 2016, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 27, 2016 (File No. 001-35107)).

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Exhibit Number		Exhibit Description

4.9		Form of 4.400% Senior Note due 2026 (included in Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 27, 2016 (File No. 001-35107), which is incorporated by reference).

4.10		Fifth Supplemental Indenture dated as of April 13, 2017, among Apollo Management Holdings, L.P., the Guarantors party thereto, Apollo Principal Holdings XII, L.P. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.8 to the Registrant’s Form 10-Q for the period ended March 31, 2017 (File No. 001-35107)).

4.11		Sixth Supplemental Indenture dated as of March 15, 2018, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed with the Securities and Exchange Commission on March 15, 2018 (File No. 001-35107)).

4.12		Form of 5.000% Senior Note due 2048 (included in Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 15, 2018 (File No. 001-35107), which is incorporated by reference).

4.13		Seventh Supplemental Indenture dated as of February 7, 2019, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2019 (File No. 001-35107)).

4.14		Form of 4.872% Senior Note due 2029 (included in Exhibit 4.1 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2019 (File No. 001-35107), which is incorporated by reference).

4.15		Eighth Supplemental Indenture dated as of June 11, 2019, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed with the Securities and Exchange Commission on June 11, 2019 (File No. 001-35107)).

4.16		Indenture dated as of June 10, 2019, among APH Finance I, LLC, APH Finance 2, LLC, APH Finance 3, LLC and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.17 to the Registrant’s Form 10-Q for the period ended June 30, 2019 (File No. 001-35107)).

4.17		Amendment No. 1, dated and effective as of September 30, 2019, to Indenture dated as of June 10, 2019, among APH Finance I, LLC, APH Finance 2, LLC, APH Finance 3, LLC and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.17 to the Registrant’s Form 10-Q for the period ended September 30, 2019 (File No. 001-35107)).

4.18		Indenture, dated as of December 17, 2019, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 17, 2019 (File No. 001-35107)).

4.19		Form of 4.950% Fixed-Rate Resettable Subordinated Note due 2050 (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 17, 2019 (File No. 001-35107)).

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Exhibit Number		Exhibit Description

4.20		Ninth Supplemental Indenture, dated as of June 5, 2020, among Apollo Management Holdings, L.P., the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 5, 2020 (File No. 001-35107)).

4.21		Form of 2.650% Senior Note due 2030 (included in Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 5, 2020 (File No. 001-35107), which is incorporated by reference).

10.1		Seventh Amended and Restated Exchange Agreement, dated as of July 29, 2020, among Apollo Global Management, Inc., Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P., Apollo Principal Holdings IX, L.P., Apollo Principal Holdings X, L.P., Apollo Principal Holdings XI, LLC, Apollo Principal Holdings XII, L.P., AMH Holdings (Cayman), L.P. and the Apollo Principal Holders (as defined therein) from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on July 30, 2020 (File No. 001-35107)).

*10.2		Amendment to Amended and Restated Shareholders Agreement, dated as of July 29, 2020, by and among Apollo Global Management, Inc., AP Professional Holdings, L.P., BRH Holdings, L.P., Black Family Partners, L.P., MJH Partners, L.P., MJR Foundation LLC, Leon D. Black, Marc J. Rowan and Joshua J. Harris.

*10.3		Amendment to Agreement Among Principals, dated as of July 29, 2020, by and among Leon D. Black, Marc J. Rowan, Joshua J. Harris, Black Family Partners, L.P., MJH Partners, L.P., MJR Foundation LLC, AP Professional Holdings, L.P. and BRH Holdings, L.P.

*10.4		Amendment to Roll-Up Agreement with James Zelter, dated July 29, 2020.

*10.5		Amendment to Roll-Up Agreement with Scott Kleinman, dated July 29, 2020.

*10.6		Amended and Restated Agreement of Exempted Limited Partnership of Apollo Global Carry Pool Aggregator III, L.P., dated June 29, 2020.

*10.7		Form of Award Agreement for Apollo Global Carry Pool Aggregator III, L.P.

*31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).

*31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).

*32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

*32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

*101.SCH		XBRL Taxonomy Extension Schema Document

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Exhibit Number		Exhibit Description


*101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

*101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

*101.LAB		XBRL Taxonomy Extension Label Linkbase Document

*101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).



*	Filed herewith.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




		Apollo Global Management, Inc.
		(Registrant)

Date: August 7, 2020	By:	/s/ Martin Kelly
		Name:	Martin Kelly
		Title:	Chief Financial Officer and Co-Chief Operating Officer (principal financial officer and authorized signatory)

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Exhibit 10.6

This exempted limited partnership is a limited partner of certain entities that earn "carried interest" on profits from various funds, accounts or investments managed or advised by AGM.

APOLLO GLOBAL CARRY POOL AGGREGATOR III, L.P.

Amended and Restated

Exempted Limited Partnership Agreement

Dated June 29, 2020

TABLE OF CONTENTS



			Page

ARTICLE 1 DEFINITIONS			1
	Section 1.1	Definitions; Interpretation	1

ARTICLE 2 CONTINUATION AND ORGANIZATION			9
	Section 2.1	Continuation	9
	Section 2.2	Name	10
	Section 2.3	Organizational Certificates and Other Filings	10
	Section 2.4	Offices	10
	Section 2.5	Term of Partnership	10
	Section 2.6	Purpose of the Partnership; Classes	11
	Section 2.7	Actions by the General Partner	12
	Section 2.8	Admission of Limited Partners	12
	Section 2.9	Withdrawal of Initial Limited Partner	13
	Section 2.10	Effective Date	13
	Section 2.11	Register	13

ARTICLE 3 CAPITAL			13
	Section 3.1	Contributions to Capital	13
	Section 3.2	Rights of Partners in Capital	14
	Section 3.3	Capital Accounts	14
	Section 3.4	Allocation of Profit and Loss	16
	Section 3.5	Tax Allocations	17
	Section 3.6	Tax Treatment of Interests in the Partnership	17
	Section 3.7	AEOI	18
	Section 3.8	Reserves; Adjustments for Certain Future Events	19
	Section 3.9	Finality and Binding Effect of General Partner’s Determinations	20

ARTICLE 4 DISTRIBUTIONS			20
	Section 4.1	Distributions	20
	Section 4.2	Withholding of Certain Amounts	22
	Section 4.3	Limitation on Distributions	23
	Section 4.4	Distributions in Excess of Basis	23

ARTICLE 5 MANAGEMENT			23
	Section 5.1	Rights and Powers of the General Partner	23
	Section 5.2	Delegation of Duties	24
	Section 5.3	Transactions with Affiliates	25
	Section 5.4	Expenses	25
	Section 5.5	Rights of Limited Partners	25
	Section 5.6	Other Activities of General Partner	26
	Section 5.7	Duty of Care; Indemnification	26
	Section 5.8	Discretion; Good Faith	28

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ARTICLE 6 ADMISSIONS, TRANSFERS AND WITHDRAWALS			28
	Section 6.1	Admission of Additional Limited Partners; Effect on Points	28
	Section 6.2	Admission of Additional General Partner	28
	Section 6.3	Transfer of Interests of Limited Partners	29
	Section 6.4	Withdrawal of Partners	30
	Section 6.5	Pledges or Charges	30

ARTICLE 7 ALLOCATION OF POINTS; ADJUSTMENTS OF POINTS AND RETIREMENT OF PARTNERS			30
	Section 7.1	Allocation of Points	30
	Section 7.2	Retirement of Partner	32
	Section 7.3	Effect of Retirement on Points	32

ARTICLE 8 WINDING UP AND DISSOLUTION			32
	Section 8.1	Winding Up and Dissolution of Partnership	32

ARTICLE 9 GENERAL PROVISIONS			33
	Section 9.1	Amendment of Partnership Agreement and Co-Investors (A) Partnership Agreements	33
	Section 9.2	Special Power-of-Attorney	34
	Section 9.3	Notices	35
	Section 9.4	Agreement Binding Upon Successors and Assigns	36
	Section 9.5	Merger, Consolidation, etc.	36
	Section 9.6	Governing Law; Dispute Resolution	37
	Section 9.7	Termination of Right of Action	38
	Section 9.8	Not for Benefit of Third Parties	38
	Section 9.9	Reports	38
	Section 9.10	Filings	39
	Section 9.11	Counterparts	39

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APOLLO GLOBAL CARRY POOL AGGREGATOR III, L.P.

AMENDED AND RESTATED
AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP

AMENDED AND RESTATED AGREEMENT OF EXEMPTED LIMITED PARTNERSHIP of APOLLO GLOBAL CARRY POOL AGGREGATOR III, L.P., a Cayman Islands exempted limited partnership (the “Partnership”), dated June 29, 2020 (the “Effective Date”), by and among Apollo Global Carry Pool GP, LLC with respect to Series A, a Delaware limited liability company registered as a foreign company in the Cayman Islands, as the sole general partner (in such capacity, the “General Partner”), the Initial Limited Partner, and the Persons whose names are recorded from time to time as limited partners of the Partnership in the Register of Partners.

R E C I T A L S :

WHEREAS, on June 22, 2020, the General Partner filed with the Registrar a statement (the “Section 9 Statement”) under section 9 of the Exempted Limited Partnership Law (as amended) of the Cayman Islands (the “Partnership Law”) to form the Partnership as an exempted limited partnership under the Partnership Law,

WHEREAS, the General Partner and the Initial Limited Partner entered into the Exempted Limited Partnership Agreement of the Partnership, dated June 22, 2020 (the “Original Agreement”),

WHEREAS, in connection with the admission of additional Limited Partners, the parties wish to amend and restate the Original Agreement in its entirety to reflect certain matters as set forth herein.

NOW, THEREFORE, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.1 Definitions; Interpretation

(a) Capitalized terms used but not otherwise defined herein have the following meanings:

“AEOI” means (a) legislation known as the U.S. Foreign Account Tax Compliance Act, sections 1471 through 1474 of the Code and any associated legislation, regulations (whether proposed, temporary or final) or guidance, any applicable intergovernmental agreement and related statutes, regulations or rules, and other guidance thereunder, (b) any other similar legislation, regulations, or guidance enacted in any other jurisdiction which seeks to implement similar financial account information reporting and/or withholding tax regimes, including the OECD Standard for Automatic Exchange of Financial Account Information in Tax Matters– the Common Reporting Standard and any associated guidance, (c) any other intergovernmental agreement, treaty, regulation, guidance, standard or other agreement entered into in order to comply with, facilitate, supplement or implement the legislation, regulations, guidance or standards described in clauses (a) and (b) of

702100.0018 4811-5354-6432 v6

this definition, and (d) any legislation, regulations or guidance in any jurisdiction that give effect to the matters outlined in the preceding clauses of this definition.

“Affiliate” means with respect to any Person any other Person directly or indirectly controlling, controlled by or under common control with such Person. Except as the context otherwise requires, the term “Affiliate” in relation to AGM includes each collective investment fund and other client account sponsored or managed by AGM or its affiliated asset management entities, but, in each case, does not include Portfolio Companies (except with respect to Bad Acts).

“AGM” means Apollo Global Management, Inc., a Delaware corporation.

“Agreement” means this Amended and Restated Exempted Limited Partnership Agreement, as amended or supplemented from time to time.

“APH” means, as the context requires, any or all of (i) APH Holdings (DC), L.P., (ii) APH Holdings (FC), L.P., and/or (iii) APH Holdings, L.P., each a Cayman Islands exempted limited partnership.

“Award Letter” means, with respect to any Limited Partner, the letter agreement between the Partnership and such Limited Partner (including any Annex or Schedule thereto) setting forth (i) such Limited Partner’s Points, (ii) such Limited Partner’s vesting terms relating to Points, (iii) any restrictive covenants with respect to such Limited Partner, (iv) the definition of “Bad Act,” and (v) any other terms applicable to such Limited Partner, as the same may be modified, amended or supplemented from time to time.

“Bad Act” has the meaning ascribed to that term in a Limited Partner’s Award Letter.

“BBA Audit Rules” means Subchapter C of Chapter 63 of the Code (sections 6221 through 6241 of the Code), as enacted by the United States Bipartisan Budget Act of 2017, Pub. L. No. 114-74, as amended from time to time, and the Treasury Regulations (whether proposed, temporary or final), including any subsequent amendments and administrative guidance, promulgated thereunder (or which may be promulgated in the future), together with any similar United States state, local or non-U.S. law.

“Book-Tax Difference” means the difference between the Carrying Value of each asset referred to in the definition of Carrying Value and its adjusted tax basis for United States federal income tax purposes, as determined at the time of any of the events described in the definition of Carrying Value. The General Partner shall maintain an account in the name of each Limited Partner that reflects such Limited Partner’s share of any Book-Tax Difference. Book-Tax Difference shall be allocated to the Limited Partners in accordance with Points immediately prior to the relevant event described in the definition of Carrying Value, and the Newly-Admitted Limited Partner’s share of any such Book-Tax Difference shall be zero. If the amount of the Book-Tax Difference with respect to any Partnership asset as of any determination date (the “current determination date”) is less than the amount of such Book-Tax Difference as determined as of the most recent prior determination date (the “prior determination date”), the General Partner has the discretion (but not the obligation) to make either of the following adjustments:

(1)

with respect to all Partners who were previously allocated a share of the Book-Tax Difference as of the prior determination date, to reduce their respective shares of such prior Book-Tax Difference by substituting the Book-Tax Difference as of the current determination date in place of the prior Book-Tax Difference, and to make corresponding reductions to the Catch Up Amounts previously applicable to any Newly-Admitted Limited Partners based on the Book-Tax Difference as of the prior determination date; or

(2)

for purposes of calculating and allocating the Book-Tax Difference as of the current determination date and the corresponding Catch Up Amounts applicable with respect to any Newly-Admitted Limited Partner being admitted as of the current determination date, to adopt the Book-Tax Difference as of the prior determination date rather than applying the Book-Tax Difference as of the current determination date (unless the adjustment contemplated by the preceding clause is being adopted with respect to all Partners).

The General Partner may establish a current determination date in order to implement the operation of clause (1) at a time other than a required determination date.

“Capital Account” means with respect to each Partner the capital account(s) established and maintained on behalf of such Partner as described in Section 3.3.

“Carried Interest Revenues” means, with respect to any Fund, any carried interest, incentive allocations, performance allocations or similar performance-based compensation earned by the applicable Fund General Partner with respect to such Fund.

“Carrying Value” means, with respect to (i) the Partnership’s indirect interest in any Fund asset attributable to the Partnership’s interest in the Fund and (ii) any Partnership asset other than the interest in the Fund, the asset’s adjusted basis for United States federal income tax purposes, except that the Carrying Values of all Partnership assets shall be adjusted to equal their respective fair market values (as determined by the General Partner), in accordance with the rules set forth in Treasury Regulations section 1.704-1(b)(2)(iv)(f) (without regard to whether the book basis of the Partnership’s assets is adjusted for such difference for purposes of sections 704(b) and (c) of the Code), except as otherwise provided herein, immediately prior to: (a) the date of the acquisition of any interests in the Partnership by any new Partner or of any additional interests by any existing Partner in exchange for more than a de minimis capital contribution; (b) the date of the distribution of more than a de minimis amount of any Partnership asset to a Partner, including cash as consideration for an interest in the Partnership; (c) the date of the grant of more than a de minimis profits interest in the Partnership as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner, or by a new Partner acting in his capacity as a Partner or in anticipation of becoming a Partner; or (d) the liquidation of the Partnership within the meaning of Treasury Regulations section 1.704-l(b)(2)(ii)(g); provided, that any adjustment pursuant to clauses (a), (b) and (c) above shall be made only if the General Partner reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners. The Carrying Value of any Partnership asset distributed to any Partner shall be adjusted immediately prior to such distribution to equal its fair market value (as determined by the General

Partner). The Carrying Value of any asset contributed by a Partner to the Partnership shall be the fair market value (as determined by the General Partner) of the asset at the date of its contribution.

“Catch Up Amount” means the product derived by multiplying (a) the amount of any positive Book-Tax Difference present on the admission to the Partnership of a Newly-Admitted Limited Partner by (b) the percentage derived by dividing the number of Points issued to the Newly-Admitted Limited Partner, by the aggregate number of Points on the date the Newly-Admitted Limited Partner is admitted to the Partnership. The General Partner shall maintain an account in the name of each Newly-Admitted Limited Partner that reflects such Limited Partner’s Catch Up Amount, which shall be subject to adjustment as contemplated by the last two sentences in the definition of Book-Tax Difference, and which may be further adjusted to the extent the General Partner determines is necessary to cause the Catch Up Amount to be equal to the amount necessary to provide such Limited Partner with a requisite share of Partnership capital based on such Limited Partner’s Points in accordance with the terms of this Agreement and any Other Agreement entered into by such Limited Partner pursuant to Section 9.1(b).

“Class” means any class of Interests as may from time to time be established by the General Partner.

“Clawback Payment” means any payment required to be made by the Partnership to any Fund General Partner in respect of any “general partner giveback,” “general partner clawback” or similar obligation of such Fund General Partner pursuant to the Fund LP Agreement of the applicable Fund.

“Clawback Share” means, as of the time of determination, with respect to any Limited Partner and any Clawback Payment, a portion of such Clawback Payment equal to (a) the cumulative amount distributed to such Limited Partner of Operating Profit attributable to the Fund to which the Clawback Payment is required to be made, divided by (b) the cumulative amount so distributed to all Limited Partners with respect to such Operating Profit attributable to such Fund. It is intended that the Clawback Share of a Limited Partner that does not hold a Class or tranche of Interests corresponding to the applicable Fund with respect to which such Clawback Share is attributable shall, to the extent related to distributions from the Partnership, be equal to zero percent (0%).

“Co-Investors (A) Entity” means an investment vehicle formed by AGM or any of its Affiliates to facilitate the investment in any Fund by employees of AGM or its Affiliates and their Related Parties.

“Co-Investors (A) Partnership Agreement” means the limited partnership agreement of any Co-Investors (A) Entity, as in effect from time to time.

“Code” means the United States Internal Revenue Code of 1986, as amended and as hereafter amended, or any successor law.

“Covered Person” has the meaning set forth in Section 5.7(a).

“Disability” has the meaning ascribed to that term in the Apollo Global Management, Inc. 2019 Omnibus Equity Incentive Plan.

“Effective Date” has the meaning set forth in the preamble.

“Final Adjudication” has the meaning set forth in Section 5.7(a).

“Fiscal Year” means, with respect to a year, the period commencing on January 1 of such year and ending on December 31 of such year (or on the date of a final distribution pursuant to Section 8.1(a)), unless the General Partner shall elect another fiscal year for the Partnership which is a permissible taxable year under the Code.

“Fund” means any pooled investment vehicle or managed account advised or managed by the applicable Fund General Partner and each “Parallel Fund” of such Fund within the meaning of the Fund LP Agreement of such Fund. Such term also includes each alternative investment vehicle created by a Fund and/or any such Parallel Fund, to the extent the context so requires.

“Fund General Partner” means the Affiliate of AGM that acts in the capacity of the general partner, managing member, manager or similar Person of any Fund pursuant to the Fund LP Agreement of such Fund, excluding any such Person set forth on Schedule III.

“Fund GP Agreement” means the constituent agreement, certificate or other document governing a Fund General Partner, as in effect from time to time.

“Fund LP Agreement” means the limited partnership agreement of any Fund, as in effect from time to time, and, to the extent the context so requires, the corresponding constituent agreement, certificate or other document governing each such Fund.

“GCP III Intermediate Pooling Vehicles” means Apollo Global Carry Pool Intermediate, L.P., Apollo Global Carry Pool Intermediate (DC), L.P., and Apollo Global Carry Pool Intermediate (FC), L.P., each a Cayman Islands exempted limited partnership.

“General Partner” has the meaning set forth in the preamble and includes any successor to the business of the General Partner in its capacity as general partner of the Partnership.

“Governmental Authority” means: (i) any government or political subdivision thereof, whether non‑U.S. or U.S., national, state, county, municipal or regional; (ii) any agency or instrumentality of any such government, political subdivision or other government entity (including any central bank or comparable agency); and (iii) any court.

“Home Address” has the meaning set forth in Section 9.3.

“Initial Limited Partner” means Apollo Principal Holdings VI GP, LLC, solely in its capacity as the Initial Limited Partner.

“Interest” means the entire limited partnership interest owned by a Partner in the Partnership as of any date of determination, including the right of such Partner to any and all benefits to which a Partner may be entitled as provided in this Agreement, together with the obligations of such Partner to comply with all the terms and provisions of this Agreement.

“JAMS” has the meaning set forth in Section 9.6(b).

“Limited Partner” means any Person admitted as a limited partner to the Partnership in accordance with this Agreement, including any Retired Partner, until such Person is withdrawn entirely as a limited partner of the Partnership, in his capacity as a limited partner of the Partnership, in accordance with the terms hereof. All references herein to a Limited Partner shall be construed as referring collectively to such Limited Partner and to each Related Party of such Limited Partner (and to each Person of which such Limited Partner is a Related Party) that also is or that previously was a Limited Partner, except to the extent that the General Partner determines that the context does not require such interpretation as between such Limited Partner and his Related Parties.

“Losses” has the meaning set forth in Section 5.7(a).

“Newly-Admitted Limited Partner” means any Limited Partner whose admission to the Partnership causes an adjustment to Carrying Values pursuant to the definitions of “Carrying Value” and “Book-Tax Difference.”

“Notice of Dissolution” has the meaning ascribed to that term in Section 8.1(c).

“Operating Loss” means, with respect to any Fiscal Year, any net loss of the Partnership. To the extent derived from any Fund, any items of income, gain, loss, deduction and credit shall be determined in accordance with the same accounting policies, principles and procedures applicable to the determination by the relevant Fund, and any items not derived from a Fund shall be determined in accordance with the accounting policies, principles and procedures used by the Partnership for U.S. federal income tax purposes. The General Partner shall allocate any Operating Loss derived from any Fund to the Classes or tranches of Interests to which such Operating Loss relates or in such other manner as determined by the General Partner. All references herein to the Operating Loss of the Partnership shall be construed as referring to the Operating Loss of the GCP III Intermediate Pooling Vehicles, as the context requires.

“Operating Profit” means, with respect to any Fiscal Year, any net income of the Partnership. To the extent derived from any Fund, any items of income, gain, loss, deduction and credit shall be determined in accordance with the same accounting policies, principles and procedures applicable to the determination by the relevant Fund, and any items not derived from a Fund shall be determined in accordance with the accounting policies, principles and procedures used by the Partnership for U.S. federal income tax purposes. The General Partner shall allocate any Operating Profit derived from any Fund to the Classes or tranches of Interests to which such Operating Profit relates or in such other manner as determined by the General Partner. All references herein to the Operating Profit of the Partnership shall be construed as referring to the Operating Profit of the GCP III Intermediate Pooling Vehicles, as the context requires.

“Original Agreement” has the meaning set forth in the recitals.

“Other Agreements” has the meaning set forth in Section 9.1(b).

“Partner” means the General Partner or any of the Limited Partners, and “Partners” means the General Partner and all of the Limited Partners.

“Partnership” has the meaning set forth in the preamble.

“Partnership Law” has the meaning set forth in the recitals.

“Partnership Representative” means for any relevant taxable year of the Partnership to which the BBA Audit Rules apply, the General Partner acting in the capacity of the “partnership representative” (as such term is defined under the BBA Audit Rules) or such other Person as is appointed to be the “partnership representative” by the General Partner from time to time. Unless the context otherwise requires, references to the Partnership Representative shall also include reference to the “designated individual” through whom, if the Partnership Representative is not an individual, such Partnership Representative will act for all purposes under the BBA Audit Rules.

“Person” means any individual, partnership (whether or not having separate legal personality), corporation, limited liability company, joint venture, joint stock company, unincorporated organization or association, trust (including the trustees thereof, in their capacity as such), government, governmental agency, political subdivision of any government, or other entity.

“Point” means, with respect to any Limited Partner and any Class or tranche of Interests, an economic interest in the Operating Profit or Operating Loss attributable to such Class or tranche of Interests. The aggregate number of Points available for assignment to all Partners shall be maintained by the General Partner and set forth in the books and records of the Partnership. All references herein to a Limited Partner’s Points shall be construed as referring to the Points assigned to a Limited Partner indirectly in, and at the level of, a GCP III Intermediate Pooling Vehicle, as the context requires. Unless otherwise determined by the General Partner in its sole and absolute discretion, any Limited Partner assigned Points shall be assigned that number of Points in all GCP III Intermediate Pooling Vehicles. Points may or may not be assigned to a Limited Partner in respect of a particular Class or tranche of Interests, as determined by the General Partner in its sole and absolute discretion. A Limited Partner may be assigned Points in respect of one or more than one Class or tranche of Interests, as determined by the General Partner in its sole and absolute discretion.

“Point Award Date” means the date on which a particular Point was assigned to a Limited Partner pursuant to an Award Letter.

“Portfolio Investment” or “Investment” or any similar term has the meaning ascribed to that term in each of the Fund LP Agreements.

“Reference Rate” means the interest rate announced publicly from time to time by JPMorgan Chase Bank in New York, New York as such bank’s prime rate.

“Register of Partners” means a register of partnership interests that is maintained by the General Partner.

“Registrar” means the Registrar of Exempted Limited Partnerships of the Cayman Islands.

“Related Party” means, with respect to any Limited Partner:

(a) any spouse, child, parent or other lineal descendant of such Limited Partner or such Limited Partner’s parent, or any natural Person who occupies the same principal residence as such Limited Partner;

(b) any trust or estate in which such Limited Partner and any Related Party or Related Parties (other than such trust or estate) collectively have more than 80% of the beneficial interests (excluding contingent and charitable interests);

(c) any entity of which such Limited Partner and any Related Party or Related Parties (other than such entity) collectively are beneficial owners of more than 80% of the equity interest; and

(d) any Person with respect to whom such Limited Partner is a Related Party.

“Retired Partner” means any Limited Partner who has become a retired partner in accordance with or pursuant to Section 7.2 and such Limited Partner’s Award Letter.

“Retirement Date” means, with respect to any Limited Partner, the date as of which such Person becomes a Retired Partner.

“Safe Harbor” means the election described in the Safe Harbor Regulation, pursuant to which a partnership and all of its partners may elect to treat the fair market value of a partnership interest that is transferred in connection with the performance of services as being equal to the liquidation value of that interest.

“Safe Harbor Election” means the election by a partnership and its partners to apply the Safe Harbor, as described in the Safe Harbor Regulation and IRS Notice 2005-43, issued on May 20, 2005.

“Safe Harbor Regulation” means Proposed Regulations section 1.83-3(l) issued on May 24, 2005.

“Section 9 Statement” has the meaning ascribed to that term in the recitals.

“Tax Obligation” has the meaning set forth in Section 4.2(a).

“Tranche A” has the meaning set forth in Section 2.6(d).

“Tranche A Capital Account” means a Capital Account established for a Tranche A Limited Partner.

“Tranche A Interests” shall have the meaning set forth in Section 2.6(d).

“Tranche A Limited Partner” means a Limited Partner holding a Tranche A Interest.

“Tranche B” has the meaning set forth in Section 2.6(d).

“Tranche B Capital Account” means a Capital Account established for a Tranche B Limited Partner.

“Tranche B Interests” shall have the meaning set forth in Section 2.6(d).

“Tranche B Limited Partner” shall mean a Limited Partner holding a Tranche B Interest.

“Transfer” means any direct or indirect sale, exchange, transfer, assignment or other disposition by a Partner of any or all of his interest in the Partnership (whether respecting, for example, economic rights only or all the rights associated with the interest) to another Person, whether voluntary or involuntary.

“Vested Points” means the amount of Points calculated as of a Retired Partner’s Retirement Date in the manner set forth in the applicable Award Letter.

“Winding-Up Event” has the meaning set forth in Section 2.5(a).

(b) The headings in this Agreement are inserted for convenience of reference only and shall not affect the interpretation of this Agreement. As used herein, masculine pronouns shall include the feminine and neuter, neuter pronouns shall include the masculine and the feminine, and the singular shall be deemed to include the plural. The use of the word “including” herein shall not be considered to limit the provision which it modifies but instead shall mean “including, without limitation.”

(c) As used in this Agreement, the phrases “any provision of this Agreement,” “the provisions of this Agreement” and derivative or similar phrases, and the terms “hereof,” “herein,” “hereby” and derivative or similar words, shall mean or refer only to any express provision actually written in this Agreement and not to any provision of the Partnership Law that may have application to the Partnership.

ARTICLE 2

CONTINUATION AND ORGANIZATION

Section 2.1 Continuation

The Partnership is hereby continued pursuant to the Partnership Law and this Agreement. The General Partner shall execute, acknowledge and file any amendments to the Section 9 Statement as may be required by the Partnership Law and any other instruments, documents and certificates which, in the opinion of the Partnership’s legal counsel, may from time to time be required by the laws of the Cayman Islands or any other jurisdiction in which the Partnership shall determine to do business, or any political subdivision or agency thereof, or which such legal counsel may deem necessary or appropriate to effectuate, implement and continue the valid and subsisting existence and business of the Partnership.

Section 2.2 Name

The name of the limited partnership continued hereby is “Apollo Global Carry Pool Aggregator III, L.P.” The General Partner is authorized to make any variations in the Partnership’s name and may otherwise conduct the business of the Partnership under any other name, subject to compliance with the Partnership Law and all other applicable laws, as the General Partner may deem it necessary or advisable; provided that (i) such name shall contain the words “Limited Partnership,” the letters “L.P.” or the designation “LP” or the equivalent translation thereof, (ii) such name shall not contain the name of any Limited Partner without the consent of such Limited Partner, and (iii) the General Partner shall promptly give written notice of any such variation to the Limited Partners.

Section 2.3 Organizational Certificates and Other Filings

If requested by the General Partner, the Limited Partners shall immediately execute all certificates and other documents, and any amendments or renewals of such certificates and other documents as thereafter required, consistent with the terms of this Agreement necessary for the General Partner to accomplish all filing, recording, publishing and other acts as may be appropriate to comply with all requirements for (a) the continuation and operation of the Partnership as an exempted limited partnership under the laws of the Cayman Islands, (b) if the General Partner deems it advisable, the operation of the Partnership as a limited partnership, or partnership in which the Limited Partners have limited liability, in all jurisdictions where the Partnership proposes to operate and (c) all other filings required to be made by the Partnership.

Section 2.4 Offices

(a) The Partnership shall maintain its principal office, and may maintain one or more additional offices, at such place or places as the General Partner may from time to time determine.

(b) The General Partner shall arrange for the Partnership to have and maintain in the Cayman Islands, at the expense of the Partnership, a registered office and registered agent for service of process on the Partnership at Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands or such other place in the Cayman Islands as the General Partner may in its absolute discretion determine from time to time.

Section 2.5 Term of Partnership

(a) The term of the Partnership commenced on the Effective Date and shall continue until the first to occur of any of the following events (each a “Winding-Up Event”):

(i) at any time there are no Limited Partners, unless the business of the Partnership is continued in accordance with the Partnership Law;

(ii) the occurrence of any event that results in the General Partner’s ceasing to be a general partner of the Partnership pursuant to the Partnership Law; provided that the Partnership shall not be wound up or dissolved in connection with any such event if (A) at the time of the occurrence of such event there is at least one remaining qualifying general partner of the Partnership who is hereby authorized to and does carry on the business of the Partnership, or (B) within 90 days after notice of the occurrence of such event, a majority of the Limited Partners agree in writing or vote to continue the business of the Partnership and to the appointment, effective from the date of such event, if required, of one or more additional general partners of the Partnership; or

(iii) the order of a court of competent jurisdiction for the winding up and dissolution of the Partnership under the Partnership Law.

(b) The parties agree that irreparable damage would be done to the Partnership and reputation of the Partners if any Limited Partner should bring an action for the winding up of the Partnership. Care has been taken in this Agreement to provide for fair and just payment in liquidation of the interests of all Partners. Accordingly, to the fullest extent permitted by law, each Limited Partner hereby waives and renounces his right to such action for a court order or direction for the winding up and dissolution of the Partnership or to seek the appointment of a liquidator for the Partnership, except as expressly provided herein.

Section 2.6 Purpose of the Partnership; Classes

(a) The principal purpose of the Partnership is to hold an indirect interest (including through the GCP III Intermediate Pooling Vehicles) in certain Fund General Partners in order to derive cash or other revenues therefrom that are attributable to Carried Interest Revenues received by such Fund General Partners from Funds and to undertake such related and incidental activities and execute and deliver such related documents necessary or incidental thereto. As of the date hereof, the Partnership holds interests (including through the GCP III Intermediate Pooling Vehicles), in the Fund General Partners set forth on Schedules I and II hereto.

(b) Without limiting the foregoing, the General Partner has established the Partnership as a special purpose investment vehicle through which the Limited Partners are treated as if they indirectly hold Points in the GCP III Intermediate Pooling Vehicles. In applying the provisions of this Agreement, in order to equitably determine the rights and obligations of the Partnership as a limited partner of the GCP III Intermediate Pooling Vehicles, the General Partner, in its capacity as the general partner of the GCP III Intermediate Pooling Vehicles, shall, to the maximum extent permissible under applicable law, treat each Limited Partner as if it were a limited partner of the GCP III Intermediate Pooling Vehicles with an interest in the GCP III Intermediate Pooling Vehicles determined with regard to the Points that are allocable to such Limited Partner’s Interest in the Partnership and any terms of the governing documents of the GCP III Intermediate Pooling Vehicles pertaining to a Limited Partner’s Points shall be incorporated by reference into this Agreement and applied as if each Limited Partner were a party to and bound by the terms of such governing documents, mutatis mutandis. The General Partner shall make such adjustments as it deems appropriate in its sole and absolute discretion to equitably reflect the economic interests

of the Limited Partners in respect of their respective Points and, upon any allocation or reallocation of Points to a Limited Partner at the level of the GCP III Intermediate Pooling Vehicles, the General Partner may take all actions or make other adjustments which the General Partner deems necessary or proper to cause the Partnership as a limited partner to replicate such actions at the level of the Partnership. Notwithstanding the foregoing and for the avoidance of doubt, no Limited Partner shall own an interest in any GCP III Intermediate Pooling Vehicle.

(c) The Partnership, in the General Partner’s sole and absolute discretion, may establish Classes or additional tranches of Interests from time to time having different terms than those of the Interests described in this Agreement, including in terms of the Fund General Partners associated with them. New Classes or additional tranches of Interests may be established by the General Partner without providing prior notice to, or receiving consent from, existing Limited Partners. The terms of such Classes or additional tranches of Interests shall be determined by the General Partner in its sole and absolute discretion. The General Partner may classify existing Interests as belonging to a Class.

(d) As of the date hereof, the General Partner, on behalf of the Partnership, has established “Tranche A” and “Tranche B.” Interests will be issued with respect to each of Tranche A and Tranche B – “Tranche A Interests” and “Tranche B Interests,” respectively. Upon admission of the Limited Partners to the Partnership, for bookkeeping purposes, a Tranche A Capital Account shall be established with respect to each Tranche A Interest, and a Tranche B Capital Account shall be established with respect to each Tranche B Interest. The General Partner or its Affiliate may cause corresponding capital accounts to be established and maintained at the level of the GCP III Intermediate Pooling Vehicles. The Tranche A Interests and the Tranche B Interests will be identical except with respect to the group of Fund General Partners with which each such tranche is associated (and the Operating Profit and Operating Loss attributable to the association with such Fund General Partners). Specifically, as of the date hereof, each such tranche shall be associated with the Fund General Partners set forth on Schedules I and II hereto, respectively. To the extent that Tranche A Interests and Tranche B Interests are entitled to share in Carried Interest Revenues derived from the same Fund, the General Partner will establish an apportionment methodology by means of initial Point valuations attributed to the overlapping portions of the Tranches or in such other manner as it may determine. A Limited Partner may hold one, or more than one, tranche of Interests. All references to Interests in this Agreement, unless otherwise specified, shall be deemed to include Tranche A Interests and Tranche B Interests, and any Classes or other tranches of Interests established by the General Partner pursuant to this Agreement.

Section 2.7 Actions by the General Partner

The General Partner may execute, deliver and perform all contracts, agreements and other undertakings, and engage in all activities and transactions for and on behalf of the Partnership as may in the opinion of the General Partner be necessary or advisable to carry out the objects and purposes of the Partnership, without the approval or vote of any Limited Partner.

Section 2.8 Admission of Limited Partners

Each Person whose name is set forth in the Register of Partners under the caption “Limited Partners” agrees to continue as a Limited Partner of the Partnership upon their

execution of this Agreement. The General Partner agrees to continue as the General Partner of the Partnership upon its execution of this Agreement. Additional Limited Partners may be admitted to the Partnership in accordance with Section 6.1. Admission as a Limited Partner (including a Limited Partner admitted after the date hereof) will not change a Person’s employment status with any Affiliate of the Partnership or make any such Person an employee of the Partnership.

Section 2.9 Withdrawal of Initial Limited Partner

Immediately following the admission of the Limited Partners to the Partnership pursuant to Section 2.8, the Initial Limited Partner shall (i) receive a return of its original capital contribution, if any, (ii) withdraw as a Partner of the Partnership, and (iii) have no further right, interest or obligation of any kind whatsoever as a Partner in the Partnership.

Section 2.10 Effective Date

Each of the Limited Partners hereto hereby agrees that their respective rights, duties and obligations pursuant to this Agreement shall have effect from the Effective Date, as between the parties hereto, and the parties agree to account to each other accordingly.

Section 2.11 Register

The General Partner shall cause to be maintained at the principal office of the Partnership or at such other place as the Partnership Law may permit the Register of Partners which shall include such information as may be required by the Partnership Law. The Register of Partners shall not form part of this Agreement. The General Partner shall from time to time, update the Register of Partners as required by the Partnership Law to accurately reflect the information therein and no action of any partner shall be required to amend or update the Register of Partners. The Register of Partners shall be open to inspection by all Limited Partners at any time for any purpose reasonably related to such Limited Partner’s interest in the Partnership and shall be available for inspection by such Limited Partner only with the consent of the General Partner.

ARTICLE 3

CAPITAL

Section 3.1 Contributions to Capital

(a) No Partner shall be obligated, nor shall any Partner have any right, to make any contribution to the capital of the Partnership, except as may be agreed from time to time between such Partner and the General Partner and other than as specified in this Section 3.1. No Limited Partner shall be obligated to restore any deficit balance in his Capital Account.

(b) To the extent, if any, that at the time of the Final Distribution (or the equivalent term, in each case, as defined in each of the Fund LP Agreements) or at any time prior thereto (whether pursuant to the provisions of the applicable Fund LP Agreement, upon the determination of the applicable Fund General Partner or otherwise), it is determined that the Partnership, as a holder, directly or indirectly, of equity interests in a Fund General Partner, is required to make any Clawback Payment with respect to any of the Funds, each Limited Partner

that holds an Interest in the particular Class or tranche of Interests to which such Clawback Payment relates, shall be required to participate in such payment and contribute to the Partnership, for ultimate distribution to the limited partners of the relevant Fund, an amount equal to such Limited Partner’s Clawback Share of any Clawback Payment, but not in any event in excess of the cumulative amount theretofore distributed to such Limited Partner with respect to the Operating Profit attributable to such Fund. For purposes of determining each applicable Limited Partner’s required contribution, each such Limited Partner’s allocable share of any Escrow Account (or the equivalent term, in each case, as defined in the Fund LP Agreements), to the extent applied to satisfy any portion of a Clawback Payment, shall be treated as if it had been distributed to such Limited Partner and re-contributed by such Limited Partner pursuant to this Section 3.1(b) at the time of such application.

(c) Certain Fund GP Agreements (i) authorize the payment of awards to Apollo personnel or others of amounts sourced from Carried Interest Revenues and based on the performance of one or more (but fewer than all) portfolio investments of the applicable Fund, and (ii) require participants in the Fund GP’s carried interest plan to return distributions to the extent it is subsequently determined that the return is necessary to enable the Fund GP to satisfy obligations associated with such an award. If a GCP III Intermediate Pooling Vehicle is called upon to return a distribution of Carried Interest Revenues to a Fund GP in these circumstances, and any portion of such amount is determined to have been attributable to amounts previously distributed through the Partnership to any Limited Partner, each such Limited Partner is required to return to the Partnership, on demand by the General Partner, an equitable share of the amount required to be restored to the Fund GP as determined by the General Partner. Any such returned amount is to be applied exclusively for the purpose described in this section.

(d) For the avoidance of doubt, the aggregate Clawback Payments required to be made by the Limited Partners hereunder with respect to any Fund shall not exceed the aggregate amount of distributions actually received by the Partnership from the applicable Fund General Partner that are attributable to Carried Interest Revenues, net of any amounts returned pursuant to the preceding section.

Section 3.2 Rights of Partners in Capital

(a) No Partner shall be entitled to interest on any capital contributions to the Partnership.

(b) No Partner shall have the right to distributions or the return of any contribution to the capital of the Partnership except (i) for distributions in accordance with Section 4.1 or (ii) upon the winding up and dissolution of the Partnership. The entitlement to any such return at such time shall be limited to the value of the Capital Account of the Partner. The General Partner shall not be liable for the return of any such amounts.

Section 3.3 Capital Accounts

(a) The Partnership shall maintain for each Partner a separate Capital Account in accordance with the provisions of Treas. Reg. section 1.704-1(b)(2)(iv) and, to the extent consistent with such provisions, the terms of this Agreement.

(b) Each Partner’s Capital Account shall have an initial balance of zero.

(i) the amount of cash and the net value of any securities or other property constituting additional contributions by such Partner to the capital of the Partnership permitted pursuant to Section 3.1; plus

(ii) the portion of any Operating Profit allocated to such Partner’s Capital Account pursuant to Section 3.4; plus

(iii) such Partner’s allocable share of any decreases in any reserves recorded by the Partnership pursuant to Section 3.8 and any receipts determined to be applicable to a prior period pursuant to Section 3.8(b), to the extent the General Partner determines that, pursuant to any provision of this Agreement, such item is to be credited to such Partner’s Capital Account on a basis which is not in accordance with the current respective Points of all Partners.

(d) Each Partner’s Capital Account shall be reduced by the sum of (without duplication):

(i) the portion of any Operating Loss allocated to such Partner’s Capital Account pursuant to Section 3.4; plus

(ii) the amount of any cash and the net value of any property distributed to such Partner pursuant to Section 4.1 or Section 8.1, including any amount deducted pursuant to Section 4.2 or Section 5.4 from any such amount distributed; plus

(iii) any withholding taxes or other items payable by the Partnership and allocated to such Partner pursuant to Section 5.4(b), any increases in any reserves recorded by the Partnership pursuant to Section 3.8 and any payments determined to be applicable to a prior period pursuant to Section 3.8(b), to the extent the General Partner determines that, pursuant to any provision of this Agreement, such item is to be charged to such Partner’s Capital Account on a basis which is not in accordance with the current respective Points of all Partners.

(e) If securities and/or other property are to be distributed in kind to the Partners or Retired Partners, including in connection with a liquidation pursuant to Section 8.1, they shall first be written up or down to their fair market value as of the date of such distribution, thus creating gain or loss for the Partnership, and the value of the securities and/or other property received by each Partner and each Retired Partner as so determined shall be debited against such Person’s Capital Account at the time of distribution.

(f) Within each Capital Account a separate sub-account may be established by the General Partner for each Class or tranche of Interests held by each Partner.

(g) The General Partner, in its capacity as the general partner of the GCP III Intermediate Pooling Vehicles, may elect to further establish a notional capital account at the level of each such GCP III Intermediate Pooling Vehicle to correspond with each capital account or sub-account established at the level of the Partnership and the tranches or Classes of Interests established at the level of the Partnership.

Section 3.4 Allocation of Profit and Loss

(a) Operating Profit or Operating Loss for any Fiscal Year shall be allocated to the Partners so as to produce Capital Accounts for the Partners (such Capital Accounts computed after taking into account any other Operating Profit or Operating Loss for the Fiscal Year in which such event occurred and all distributions pursuant to Article 4 with respect to such Fiscal Year and after adding back each Partner’s share, if any, of Partner Nonrecourse Debt Minimum Gain, as defined in Treasury Regulations sections 1.704 - 2(b)(2) and 1.704 - 2(i), or Partnership Minimum Gain, as defined in Treasury Regulations sections 1.704 - 2(b)(2) and 1.704 - 2(d)) such that a distribution of an amount of cash equal to such Capital Account balances in accordance with such Capital Account balances would be in the amounts, sequence and priority set forth in Article 4; provided, however, that the General Partner may allocate Operating Profit and Operating Loss and items thereof in such other manner as it determines in its sole and absolute discretion to be appropriate to reflect the Partners’ interests in the Partnership, including with respect to Operating Profit that relates to a particular Fund Investment, is borne by the Limited Partners.

(b) To the extent that the allocations of Operating Loss contemplated by Section 3.4(a) would cause the Capital Account of any Limited Partner to be less than zero, such Operating Loss shall to that extent instead be allocated to and debited against the Capital Account of the General Partner (or, at the direction of the General Partner, to those Limited Partners who are members of the General Partner in proportion to their limited partnership interests in the General Partner). Following any such adjustment pursuant to this Section 3.4(b) with respect to any Limited Partner, any Operating Profit for any subsequent Fiscal Year which would otherwise be credited to the Capital Account of such Limited Partner pursuant to Section 3.4(a) shall instead be credited to the Capital Account of the General Partner (or relevant Limited Partners) until the cumulative amounts so credited to the Capital Account of the General Partner (or relevant Limited Partners) with respect to such Limited Partner pursuant to this Section 3.4(b) is equal to the cumulative amount debited against the Capital Account of the General Partner (or relevant Limited Partners) with respect to such Limited Partner pursuant to this Section 3.4(b).

(c) Each Limited Partner’s rights and entitlements as a Limited Partner are limited to the rights to receive allocations and distributions of Operating Profit expressly conferred by this Agreement and any Other Agreement entered into pursuant to Section 9.1(b) and the other rights expressly conferred by this Agreement and any such Other Agreement or required by the Partnership Law, and a Limited Partner shall not be entitled to any other allocations, distributions or payments in respect of his interest, or to have or exercise any other rights, privileges or powers.

(d) Operating Profit and Operating Loss shall be determined on a daily, monthly or other basis, as reasonably approved by the General Partner using any permissible method under section 706 and the Treasury Regulations thereunder. If any Limited Partner shall be admitted to the Partnership, retire from the Partnership or assigned additional Points at different times during the Partnership’s Fiscal Year, Operating Profit or Operating Loss shall be allocated among the

Limited Partners on such proper basis as the General Partner shall determine consistent with the applicable requirements under section 706 of the Code.

Section 3.5 Tax Allocations

(a) For United States federal, state and local income tax purposes, Partnership income, gain, loss, deduction or credit (or any item thereof) for each Fiscal Year shall be allocated to and among the Partners in order to reflect the allocations of Operating Profit and Operating Loss pursuant to the provisions of Section 3.4 for such Fiscal Year; provided that any taxable income or loss associated with any Book-Tax Difference shall be allocated for tax purposes in accordance with the principles of section 704(c) of the Code in any such manner (as is permitted under that Code section and the Treasury Regulations promulgated thereunder) as determined by the General Partner.

(b) If any Partner or Partners are treated for United States federal income tax purposes as realizing ordinary income because of receiving interests in the Partnership (whether under section 83 of the Code or under any similar provision of any law, rule or regulation, the issuance of such interests may, in the General Partner’s discretion, be treated as a payment of the relevant cash amount by the Partnership to the issued Partner and, subsequently, a contribution of such cash amount by such Partner to the Partnership. Upon such issuance, all Partnership assets may, in the General Partner’s discretion, be adjusted to equal their respective fair market values (as determined by the General Partner) in connection with such issuance and, immediately following such issuance, no Book-Tax Difference shall be reflected with respect to the issued Partner for such interests. Any deduction arising from the issuance of such interests shall be allocated to and among the Partners whose distributions are reduced as a result of such issuance.

Section 3.6 Tax Treatment of Interests in the Partnership

(a) The Partnership and each Partner agree to treat the Interests as a “Profits Interest” with respect to the Partnership within the meaning of Rev. Proc. 93-27, 1993-2 C.B. 343. In accordance with Rev. Proc. 2001-43, 2001-2 C.B. 191, the Partnership shall treat a Partner holding an Interest as the owner of such Interest from the date such Interest was issued, and shall file its IRS form 1065, and issue appropriate Schedule K-1s to such Partner, allocating to such Partner its distributive share of all items of income, gain, loss, deduction and credit associated with such Interest as if it were fully vested. Each such Partner agrees to take into account such distributive share in computing its United States federal income tax liability for the entire period during which it holds the Interest. Except as required pursuant to a “Determination” as defined in section 1313(a) of the Code, none of the Partnership or any Partner shall claim a deduction (as wages, compensation or otherwise) for the fair market value of such Interest issued to a Partner in respect of the Partnership, either at the time of grant of the Interest, or at the time the Points assigned to the holder of the Interest become substantially vested. The undertakings contained in this Section 3.6 shall be construed in accordance with section 4 of Rev. Proc. 2001-43. The provisions of this Section 3.6 shall apply regardless of whether or not the holder of an Interest files an election pursuant to section 83(b) of the Code. This Section 3.6 shall apply only to an Interest granted while Rev. Proc. 93-27, 1993-2 C.B. 343 and Rev. Proc. 2001-43, 2001-2 C.B. 191, remain in effect.

(b) The Partners agree that, in the event the Safe Harbor Regulation is finalized, the Partnership shall be authorized and directed to make the Safe Harbor Election, and the Partnership and each Partner (including any Person to whom an interest in the Partnership is transferred in connection with the performance of services) agrees to comply with all requirements of the Safe Harbor with respect to all interests in the Partnership transferred in connection with the performance of services while the Safe Harbor Election remains effective. The General Partner shall be authorized to (and shall) prepare, execute, and file the Safe Harbor Election. The General Partner shall cause the Partnership to make any allocations of items of income, gain, loss, deduction or expense (including forfeiture allocations) necessary or appropriate to effectuate and maintain the Safe Harbor Election.

Section 3.7 AEOI

(a) Each Limited Partner:

(i) shall provide, in a timely manner, such information regarding the Limited Partner and its beneficial owners and/or controlling persons and such forms or documentation as may be requested from time to time by the General Partner or the Partnership to enable the Partnership to comply with the requirements and obligations imposed on it pursuant to AEOI and shall update such information as necessary;

(ii) acknowledges that any such forms or documentation provided to the Partnership or its agents pursuant to clause (i), or any financial or account information with respect to the Limited Partner’s investment in the Partnership, may be disclosed to any Governmental Authority which collects information in accordance with AEOI and to any withholding agent where the provision of that information is required by such agent to avoid the application of any withholding tax on any payments to the Partnership;

(iii) shall waive, and/or shall cooperate with the Partnership to obtain a waiver of, the provisions of any law which prohibits the disclosure by the Partnership, or by any of its agents, of the information or documentation requested from the Limited Partner pursuant to clause (i), prohibits the reporting of financial or account information by the Partnership or its agents required pursuant to AEOI or otherwise prevents compliance by the Partnership with its obligations under AEOI;

(iv) acknowledges that, if it provides information and documentation that is in any way misleading, or it fails to provide and/or update the Partnership or its agents with the requested information and documentation necessary, in either case, to satisfy the Partnership’s obligations under AEOI, the Partnership may (whether or not such action or inaction leads to compliance failures by the Partnership, or a risk of the Partnership or its investors being subject to withholding tax or other penalties under AEOI) take any action and/or pursue all remedies at its disposal, including compulsory withdrawal of the Limited Partner, and may hold back from any withdrawal proceeds, or deduct from the Limited Partner’s Capital Account, any liabilities, costs, expenses or taxes caused (directly or indirectly) by the Limited Partner’s action or inaction; and

(v) shall have no claim against the Partnership, or its agents, for any form of damages or liability as a result of actions taken or remedies pursued by or on behalf of the Partnership in order to comply with AEOI.

(b) The Limited Partner hereby indemnifies the General Partner and the Partnership and each of their respective partners, members, managers, officers, directors, employees and agents and holds them harmless from and against any AEOI-related liability, action, proceeding, claim, demand, costs, damages, expenses (including legal expenses), penalties or taxes whatsoever which such Person may incur as a result of any action or inaction (directly or indirectly) of such Limited Partner (or any Related Party) described in Section 3.7(a)(i) through (iv). This indemnification shall survive the Limited Partner’s death or disposition of its interests in the Partnership.

Section 3.8 Reserves; Adjustments for Certain Future Events

(a) Appropriate reserves may be created, accrued and charged against the Operating Profit or Operating Loss for contingent liabilities, if any, as of the date any such contingent liability becomes known to the General Partner or as of each other date as the General Partner deems appropriate, such reserves to be in the amounts which the General Partner deems necessary or appropriate (whether or not in accordance with generally accepted accounting principles). The General Partner may increase or reduce any such reserve from time to time by such amounts as the General Partner deems necessary or appropriate. The amount of any such reserve, or any increase or decrease therein, shall be proportionately charged or credited, as appropriate, to the Capital Accounts of those Persons who are Partners at the time when such reserve is created, increased or decreased, as the case may be, in proportion to their respective Points at such time; provided that the amount of such reserve, increase or decrease may instead be charged or credited to those Persons who were Partners at the time, as determined by the General Partner, of the act or omission giving rise to the contingent liability for which the reserve item was established in proportion to their respective Points at that time. The amount of any such reserve charged against the Capital Account of a Partner shall reduce the distributions such Partner would otherwise be entitled to under Section 4.1 or Section 8.1 hereof; and the amount of any such reserve credited to the Capital Account of a Partner shall increase the distributions such Partner would otherwise be entitled to under Section 4.1 or Section 8.1 hereof.

(b) If at any time an amount is paid or received by the Partnership and such amount was not accrued or reserved for but would nevertheless, in accordance with the Partnership’s accounting practices, be treated as applicable to one or more prior periods, then such amount may be proportionately charged or credited by the General Partner, as appropriate, to those Persons who were Partners during such prior period or periods, based on each such Partner’s Points for such applicable period.

(c) Any amount required to be charged pursuant to Section 3.8(a) or (b) shall be debited against the current balance in the Capital Account of the affected Partners. To the extent that the aggregate current Capital Account balances of such affected Partners are insufficient to cover the full amount of the required charge, the deficiency shall be debited against the Capital Accounts of the other Partners in proportion to their respective Capital Account balances at such

time; provided that each such other Partner shall be entitled to a preferential allocation, in proportion to and to the extent of such other Partner’s share of any such deficiency, together with a carrying charge at a rate equal to the Reference Rate, of any Operating Profit that would otherwise have been allocable after the date of such charge to the Capital Accounts of the affected Partners whose Capital Accounts were insufficient to cover the full amount of the required charge. In no event shall a current or former Partner be obligated to satisfy any amount required to be charged pursuant to Section 3.8(a) or (b) other than by means of a debit against such Partner’s Capital Account.


Section 3.9	Finality and Binding Effect of General Partner’s Determinations

All matters concerning the determination, valuation and allocation among the Partners with respect to any profit or loss of the Partnership and any associated items of income, gain, deduction, loss and credit, pursuant to any provision of this Article 3, including any accounting procedures applicable thereto, shall be determined by the General Partner unless specifically and expressly otherwise provided for by the provisions of this Agreement, and such determinations and allocations shall be final and binding on all the Partners.

ARTICLE 4
DISTRIBUTIONS

Section 4.1 Distributions

(a) The General Partner shall use reasonable efforts to cause the Partnership to distribute, as promptly as reasonably practicable after receipt by the Partnership (not more frequently than quarterly), any available cash or property attributable to items included in the determination of Operating Profit, subject to the provisions of the applicable Fund LP Agreements and the retention of such reserves as the General Partner considers appropriate for purposes of the prudent and efficient financial operation of the Partnership’s business including in accordance with Section 3.8. Any such distributions shall be made to the Limited Partners separately with respect to the Interests held by the applicable Limited Partners in the particular Class or tranche of Interests to which such distributions relate in proportion to the respective Points of such Limited Partners with respect to such Class or tranche of Interests, determined (i) in the case of any amount of cash or property received from any of the applicable Fund General Partners that is attributable to the disposition of a Portfolio Investment by the applicable Fund, as of the date of such disposition by such Fund, and (ii) in any other case, as of the date of receipt of such cash or property by the Partnership, in each case, as determined by the General Partner; provided, however, that any cash or other property that the General Partner determines is attributable to a Book-Tax Difference shall be distributed to the Limited Partners that are entitled to a share of such Book-Tax Difference pursuant to the definition of “Book-Tax Difference,” with any such distribution to be in the proportion that each such Limited Partner’s allocated share of the applicable Book-Tax Difference bears to the total Book-Tax Difference of the asset giving rise to the cash or property.

(b) Distributions of amounts attributable to Operating Profit and Book-Tax Difference shall be made in cash; provided, however, that if the Partnership receives a

distribution from a Fund General Partner in the form of property other than cash, the General Partner may distribute such property in kind to Partners in proportion to their respective Points pertaining to the Class or tranche of Interests to which such distributions relate.

(c) Any distributions or payments in respect of the interests of Limited Partners unrelated to Operating Profit or Book-Tax Difference shall be made at such time, in such manner and to such Limited Partners as the General Partner shall determine.

(d) Except as the General Partner otherwise may determine, any Newly-Admitted Limited Partner shall have the right, after the distribution of any amounts attributable to Book-Tax Differences present at the time of such Newly-Admitted Limited Partner’s admission pursuant to the proviso of Section 4.1(a) to the other Limited Partners, to receive a special distribution of the Catch Up Amount.

(i) Any such special distribution of the Catch Up Amount shall be in addition to the distributions to which the Newly-Admitted Limited Partner is entitled pursuant to Section 4.1(a) and shall be made to the Newly-Admitted Limited Partner (or, if there is more than one such Newly-Admitted Limited Partner, pro rata to all such Newly-Admitted Limited Partners based on the aggregate amount of such distributions each such Newly-Admitted Limited Partner has not yet received) from amounts otherwise distributable to the other Limited Partners from whom or from which the Points allocated to such Newly-Admitted Limited Partner(s) were reallocated (including from distributions of Book-Tax Difference arising after such Newly-Admitted Limited Partner’s admission), and shall reduce the amounts distributable to such other Limited Partners pursuant to Section 4.1(a), until each applicable Newly-Admitted Limited Partner has received an amount equal to the applicable Catch Up Amount. Any such Catch Up Amount shall be determined by the General Partner, and the General Partner may determine any such Catch Up Amount separately with respect to any Class or tranche of Interests, in each case, in its sole and absolute discretion.

(ii) Any reallocation of Points pursuant to Article 7 shall include the right to receive any Catch Up Amount associated with such Points and shall succeed to any Book-Tax Difference accounts associated with such Points, except to the extent that the General Partner determines that the inclusion of such right would be inconsistent with the treatment of the reallocation of Points to such Limited Partner as a “profits interest” for income tax purposes.

(e) Cash or property that the General Partner determines is associated with Operating Profit that has been specially allocated to a Limited Partner shall be distributed to such Limited Partner. The General Partner, in its sole and absolute discretion, shall make such determinations regarding distributions of cash and property that it determines are associated with such special allocations as are necessary to ensure that the manner in which distributions are made is consistent with the purpose, and benefits and burdens, of such special allocations.

(f) Notwithstanding anything to the contrary in this Agreement, if the General Partner determines, in its sole and absolute discretion, that all or a portion of the cash or property received by the Partnership from a GCP III Intermediate Pooling Vehicle constitutes cash

or property which the Partnership (or such GCP III Intermediate Pooling Vehicle) is not entitled to receive pursuant to the governing documents of the applicable Fund General Partner or otherwise, then the General Partner may, in its sole and absolute discretion, cause the Partnership (or cause the general partner of such GCP III Intermediate Pooling Vehicle to cause such GCP III Intermediate Pooling Vehicle) to return such cash or property to such Fund General Partner, or otherwise make such adjustments as it deems necessary or advisable such that the Partnership (or such GCP III Intermediate Pooling Vehicle) shall not receive the economic benefits associated with the receipt of such cash or property.

Section 4.2 Withholding of Certain Amounts

(a) If the Partnership incurs a withholding or other tax obligation (a “Tax Obligation”) with respect to the share of Partnership income allocable to any Partner (including pursuant to section 6225 of the BBA Audit Rules), then the General Partner, without limitation of any other rights of the Partnership, may cause the amount of such Tax Obligation to be debited against the Capital Account of such Partner when the Partnership pays such Tax Obligation, and any amounts then or thereafter distributable to such Partner shall be reduced by the amount of such taxes. If the amount of such taxes is greater than any such then distributable amounts, then such Partner and any successor to such Partner’s interest shall indemnify and hold harmless the Partnership and the General Partner against, and shall pay to the Partnership as a contribution to the capital of the Partnership, upon demand of the General Partner, the amount of such excess.

(b) If a Tax Obligation is required to be paid by the Partnership (including with respect to a tax liability imposed under section 6225 of the BBA Audit Rules) and the General Partner determines that such amount is allocable to the interest in the Partnership of a Person that is at such time a Partner, such Tax Obligation shall be treated as being made on behalf of or with respect to such Partner for purposes of this Section 4.2(b) whether or not the tax in question applies to a taxable period of the Partnership during which such Partner held an interest in the Partnership. To the extent that any liability with respect to a Tax Obligation (including a liability imposed under section 6225 of the BBA Audit Rules) relates to a former Partner that has withdrawn (including compulsorily pursuant to Section 3.7), sold, assigned, pledged, mortgaged, charged, or otherwise transferred all or a part of its interest in the Partnership, such former Partner (which in the case of a partial withdrawal, sale, assignment, pledge, mortgage, charge or other transfer shall include a continuing Partner with respect to the portion of its interests in the Partnership so withdrawn, sold, assigned, pledged, mortgaged, charged or transferred) shall indemnify the Partnership for its allocable portion of such liability, unless otherwise agreed to by the General Partner in writing. Each Partner acknowledges that, notwithstanding the sale, assignment, pledge, mortgage, charge, or other transfer of all or any portion of its interest in the Partnership, it may remain liable, pursuant to this Section 4.2(b), for tax liabilities with respect to its allocable share of income and gain of the Partnership for the Partnership’s taxable years (or portions thereof) prior to such sale, assignment, pledge, mortgage, charge, or other transfer, as applicable (including any such liabilities imposed under section 6225 of the BBA Audit Rules).

(c) The General Partner may (i) withhold from any distribution to any Limited Partner pursuant to this Agreement and (ii) arrange the withholding from any distribution

from any Co-Investors (A) Entity to such Limited Partner any other amounts due from such Limited Partner or a Related Party (without duplication) to the Partnership, any Co-Investors (A) Entity or to any other Affiliate of AGM pursuant to any binding agreement or published policy to the extent not otherwise paid. Any amounts so withheld shall be applied by the General Partner to discharge the obligation in respect of which such amounts were withheld.

Section 4.3 Limitation on Distributions

Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the General Partner on behalf of the Partnership, shall not make a distribution to any Partner on account of his interest in the Partnership if such distribution would violate the Partnership Law or other applicable law.

Section 4.4 Distributions in Excess of Basis

Notwithstanding anything in this Agreement to the contrary, the General Partner may refrain from making, at any time prior to the commencement of the winding up of the Partnership, all or any portion of any cash distribution that otherwise would be made to a Partner or Retired Partner, if such distribution would exceed such Person’s United States federal income tax basis in the Partnership. Any amount that is not distributed to a Partner or Retired Partner due to the preceding sentence, as determined by the General Partner, either shall be retained by the Partnership on such Person’s behalf or loaned to such Person. Subject to the first sentence of this Section 4.4, 100% of any or all subsequent cash distributions shall be distributed to such Person (or, if there is more than one such Person, pro rata to all such Persons based on the aggregate amount of distributions each such Person has not yet received) until each such Person has received the same aggregate amount of distributions such Person would have received had distributions to such Person not been deferred pursuant to this Section 4.4. If any amount is loaned to a Partner or Retired Partner pursuant to this Section 4.4, (a) any amount thereafter distributable to such Person shall be applied to repay the principal amount of such loan, and (b) interest, if any, accrued or received by the Partnership on such loan shall be allocated and distributed to such Person. Any such loan shall be repaid no later than immediately prior to the winding up of the Partnership. Until such repayment, for purposes of any determination hereunder based on amounts distributed to a Person, the principal amount of such loan shall be treated as having been distributed to such Person.

ARTICLE 5
MANAGEMENT

Section 5.1 Rights and Powers of the General Partner

(a) Subject to the terms and conditions of this Agreement, the General Partner shall have complete and exclusive responsibility (i) for all management decisions to be made on behalf of the Partnership and (ii) for the conduct of the business and affairs of the Partnership.

(b) Without limiting the generality of the foregoing, the General Partner shall have full power and authority to execute, deliver and perform such contracts, agreements and other undertakings, and to engage in all activities and transactions, as it may deem necessary or

advisable for, or as may be incidental to, the conduct of the business contemplated by this Section 5.1, including, without in any manner limiting the generality of the foregoing, contracts, agreements, undertakings and transactions with any Partner or with any other Person having any business, financial or other relationship with any Partner or Partners. The Partnership, and the General Partner on behalf of the Partnership, may enter into and perform the governing documents of the GCP III Intermediate Pooling Vehicles and any documents contemplated thereby or related thereto and any amendments thereto, without any further act, vote or approval of any Person, including any Partner, notwithstanding any other provision of this Agreement. The General Partner is hereby authorized to enter into the documents described in the preceding sentence on behalf of the Partnership, but such authorization shall not be deemed a restriction on the power of the General Partner to enter into other documents on behalf of the Partnership.

(c) The Partnership Representative shall be permitted to take any and all actions under the BBA Audit Rules (including making or revoking the election referred to in section 6226 of the BBA Audit Rules and all other applicable tax elections) and to act as the Partnership Representative thereunder, and shall have any powers necessary to perform fully in such capacity, in consultation with the General Partner if the General Partner is not the Partnership Representative. The General Partner shall (or shall cause another Partnership Representative to) promptly inform the Limited Partners of any tax deficiencies assessed or proposed to be assessed (of which a Partnership Representative or the General Partner is actually aware) by any taxing authority against the Partnership or the Limited Partners. Notwithstanding anything to the contrary contained herein, the acts of the General Partner (and with respect to applicable tax matters, any other Partnership Representative) in carrying on the business of the Partnership as authorized herein shall bind the Partnership. Each Partner shall upon request supply the information necessary to properly give effect to any elections described in this Section 5.1(c) or to otherwise enable a Partnership Representative to implement the provisions of this Section 5.1(c) (including filing tax returns, defending tax audits or other similar proceedings and conducting tax planning). The Limited Partners agree to reasonably cooperate with the Partnership or the General Partner, and undertake any action reasonably requested by the Partnership or the General Partner, in connection with any elections made by the Partnership Representative or as determined to be reasonably necessary by the Partnership Representative under the BBA Audit Rules.

(d) Each Partner agrees not to treat, on his United States federal income tax return or in any claim for a refund, any item of income, gain, loss, deduction or credit in a manner inconsistent with the treatment of such item by the Partnership. The General Partner shall have the exclusive authority to make any elections required or permitted to be made by the Partnership under any provisions of the Code or any other law.

Section 5.2 Delegation of Duties

(a) Subject to Section 5.1, the General Partner may delegate to any Person or Persons any of the duties, powers and authority vested in it hereunder on such terms and conditions as it may consider appropriate.

(b) Without limiting the generality of Section 5.2(a), the General Partner shall have the power and authority to appoint any Person, including any Person who is a Limited Partner, to provide services to and act as an employee or agent of the Partnership and/or General

Partner, with such titles and duties as may be specified by the General Partner; provided that such services and activities fall within the “safe harbor” provisions set out in section 20(2) of the Partnership Law or otherwise do not cause such Limited Partner to take part in the conduct of the business of the Partnership. Any Person appointed by the General Partner to serve as an employee or agent of the Partnership shall be subject to removal at any time by the General Partner; and shall report to and consult with the General Partner at such times and in such manner as the General Partner may direct.

(c) Any Person who is a Limited Partner and to whom the General Partner delegates any of its duties pursuant to this Section 5.1(c) or any other provision of this Agreement shall be subject to the same standard of care, and shall be entitled to the same rights of indemnification and exoneration, applicable to the General Partner under and pursuant to Section 5.7, unless such Person and the General Partner mutually agree to a different standard of care or right to indemnification and exoneration to which such Person shall be subject.

Section 5.3 Transactions with Affiliates

To the fullest extent permitted by applicable law, the General Partner (or any Affiliate of the General Partner), when acting on behalf of the Partnership, is hereby authorized to (a) purchase property from, sell property to, lend money to or otherwise deal with any Affiliates, any Limited Partner, the Partnership, any of the Fund General Partners or Funds or any Affiliate of any of the foregoing Persons, and (b) obtain services from any Affiliates, any Limited Partner, the Partnership, any of the Fund General Partners or Funds or any Affiliate of the foregoing Persons.

Section 5.4 Expenses

(a) The Partnership shall bear all ordinary course costs and expenses arising in connection with the organization and operations of the Partnership; provided, that the General Partner may, in its sole and absolute discretion, allocate certain costs or expenses to a particular Class or tranche of Interests, in which case only the Limited Partners holding Interests in respect of such Class or tranche shall bear such costs or expenses.

(b) Any withholding taxes payable by the Partnership, to the extent determined by the General Partner to have been paid or withheld on behalf of, or by reason of particular circumstances applicable to, one or more but fewer than all of the Partners, shall be allocated among and debited against the Capital Accounts of only those Partners on whose behalf such payments are made or whose particular circumstances gave rise to such payments in accordance with Section 4.2.

Section 5.5 Rights of Limited Partners

(a) Limited Partners shall have no right to take part in the management, control or conduct of the Partnership’s business, nor shall they have any right or authority to act for the Partnership or to vote on matters other than as set forth in this Agreement or as required by applicable law.

(b) Without limiting the generality of the foregoing and to the maximum

extent permitted under the Partnership Law, the General Partner shall have the full and exclusive authority, without the consent of any Limited Partner, to compromise the obligation of any Limited Partner to make a capital contribution or to return money or other property paid or distributed to such Limited Partner.

(c) Nothing in this Agreement shall entitle any Partner to any compensation for services rendered to or on behalf of the Partnership as an agent or in any other capacity, except for any amounts payable in accordance with this Agreement.

(d) Subject to the Fund LP Agreements and to full compliance with AGM’s code of ethics and other written policies relating to personal investment and any other transactions, admission into the Partnership as a Limited Partner of the Partnership shall not prohibit a Limited Partner from purchasing or selling as a passive investor any interest in any asset.

Section 5.6 Other Activities of General Partner

Nothing in this Agreement shall prohibit the General Partner from engaging in any activity other than acting as General Partner hereunder.

Section 5.7 Duty of Care; Indemnification

(a) The General Partner (including, without limitation for this purpose each former and present director, officer, stockholder, partner, member, manager or employee of the General Partner), the Partnership Representative, and each Limited Partner (including any former Limited Partner) in his capacity as such, and to the extent such Limited Partner participates, directly or indirectly, in the Partnership’s activities, whether or not a Retired Partner (each, a “Covered Person” and collectively, the “Covered Persons”), shall not be liable to the Partnership or to any of the other Partners for any loss, claim, damage, liability or expenses (including attorneys’ fees, judgments, fines, penalties and amounts paid in settlement (collectively, “Losses”) occasioned by any acts or omissions in the performance of his services hereunder, unless it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “Final Adjudication”) that such Losses are due to an act or omission of a Covered Person (i) made in bad faith or with criminal intent or (ii) that adversely affected any Fund and that failed to satisfy the duty of care owed pursuant to the applicable Fund LP Agreement or as otherwise required by law.

(b) A Covered Person shall be indemnified to the fullest extent permitted by law by the Partnership against any Losses incurred by or imposed upon him by reason of or in connection with any action taken or omitted by such Covered Person arising out of the Covered Person’s status as a Partner or his activities on behalf of the Partnership, including in connection with any action, suit, investigation or proceeding before any Governmental Authority to which it may be made a party or otherwise involved or with which it shall be threatened by reason of being or having been the General Partner, the Partnership Representative, or a Limited Partner or by reason of serving or having served, at the request of any Fund General Partner, as a director, officer, consultant, advisor, manager, stockholder, member or partner of any enterprise in which any of the Funds has or had a financial interest, including issuers of Portfolio Investments; provided that the Partnership may, but shall not be required to, indemnify a Covered Person with respect to any matter

as to which there has been a Final Adjudication that his acts or his failure to act (i) were in bad faith or with criminal intent or (ii) were of a nature that makes indemnification by the Funds unavailable. The right to indemnification granted by this Section 5.7 shall be in addition to any rights to which a Covered Person may otherwise be entitled and shall inure to the benefit of the successors by operation of law or valid assigns of such Covered Person. The Partnership shall pay the expenses incurred by a Covered Person in defending a civil or criminal action, suit, investigation or proceeding in advance of the Final Adjudication of such action, suit, investigation or proceeding, upon receipt of an undertaking by the Covered Person to repay such payment if there shall be a Final Adjudication that he is not entitled to indemnification as provided herein. In any suit brought by the Covered Person to enforce a right to indemnification hereunder it shall be a defense that the Covered Person has not met the applicable standard of conduct set forth in this Section 5.7, and in any suit in the name of the Partnership to recover expenses advanced pursuant to the terms of an undertaking the Partnership shall be entitled to recover such expenses upon Final Adjudication that the Covered Person has not met the applicable standard of conduct set forth in this Section 5.7. In any such suit brought to enforce a right to indemnification or to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Covered Person is not entitled to be indemnified, or to an advancement of expenses, shall be on the Partnership (or any Limited Partner acting derivatively or otherwise on behalf of the Partnership or the Limited Partners). The General Partner may not satisfy any right of indemnity or reimbursement granted in this Section 5.7 or to which it may be otherwise entitled except out of the assets of the Partnership (including, without limitation, insurance proceeds and rights pursuant to indemnification agreements), and no Partner shall be personally liable with respect to any such claim for indemnity or reimbursement. The General Partner may enter into appropriate indemnification agreements and/or arrangements reflective of the provisions of this Article 5 and obtain appropriate insurance coverage on behalf and at the expense of the Partnership to secure the Partnership’s indemnification obligations hereunder. Each Covered Person shall be deemed a third party beneficiary (to the extent not a direct party hereto) to this Agreement and, in particular, the provisions of this Article 5, may enforce any rights granted to it pursuant to this Agreement in its own right as if it were a party to this Agreement, and shall be entitled to the benefit of the indemnity granted to the Partnership by each of the Funds pursuant to the terms of the Fund LP Agreements, except to the extent otherwise determined by the General Partner, in its sole and absolute discretion.

(c) To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or the Partners, the Covered Person shall not be liable to the Partnership or to any Partner for his good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities of a Covered Person otherwise existing at law or in equity to the Partnership or the Partners, are agreed by the Partners to replace such other duties and liabilities of each such Covered Person.

(d) To the fullest extent permitted by law, notwithstanding any of the foregoing provisions of this Section 5.7, the Partnership may but shall not be required to indemnify (i) a Retired Partner (or any other former Limited Partner) with respect to any claim for indemnification or advancement of expenses arising from any conduct occurring more than six months after the date of such Person’s retirement (or other withdrawal or departure), or (ii) a Limited Partner with respect to any claim for indemnification or advancement of expenses as a director,

officer or agent of the issuer of any Portfolio Investment to the extent arising from conduct in such capacity occurring more than six months after the complete disposition of such Portfolio Investment by the applicable Fund, or (iii) any Person to the extent the General Partner so determines.

Section 5.8 Discretion; Good Faith

Except as otherwise expressly provided herein or as required by law, each power and authority vested in the General Partner by or pursuant to any provisions of this Agreement or the Partnership Law shall be construed as being exercisable by the General Partner in its sole and absolute discretion. To the fullest extent permitted by law and notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of law or equity or otherwise, whenever the General Partner is authorized to make a decision (a) in its discretion, the General Partner shall be entitled to consider only such interests and factors as it desires, including its and its Affiliates’ own interests, and shall otherwise have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or any other Person, or (b) in its good faith or under another express standard, the General Partner shall act under such express standard and shall not be subject to any other or different standard, and may exercise its discretion differently with respect to different Limited Partners.

ARTICLE 6
ADMISSIONS, TRANSFERS AND WITHDRAWALS

Section 6.1 Admission of Additional Limited Partners; Effect on Points

(a) The General Partner may at any time admit as an additional Limited Partner any Person who has agreed to be bound by and to adhere to this Agreement and may assign Points to such Person and/or increase the Points of any existing Limited Partner, in each case, subject to and in accordance with Section 7.1. Notwithstanding anything to the contrary in this Agreement, an assignment of Points to a Limited Partner in one year shall not create an entitlement to, or an expectation of, an assignment or allocation of additional Points to such Limited Partner at any subsequent time.

(b) Each additional Limited Partner shall execute either a counterpart to this Agreement or a separate instrument evidencing, to the satisfaction of the General Partner, such Limited Partner’s intent to become a Limited Partner and to adhere to and be bound by the provisions of this Agreement, and shall be admitted as a Limited Partner upon such execution.

Section 6.2 Admission of Additional General Partner

The General Partner may admit one or more additional general partners at any time without the consent of any Limited Partner. Any additional general partner shall be admitted as a general partner upon its execution of a counterpart signature page to this Agreement, or a separate instrument evidencing their agreement to adhere to and be bound by this Agreement, in a form satisfactory to the General Partner, pursuant to which such person undertakes and agrees to become a General Partner of the Partnership. The incumbent General Partner shall make such filings with the Registrar as are necessary pursuant to the Partnership Law to effect the admission of any general partner to the Partnership.

Section 6.3 Transfer of Interests of Limited Partners

(a) No voluntary Transfer of any Limited Partner’s interest in the Partnership shall be valid or effective, and no transferee shall become a substituted Limited Partner. In the event of any involuntary Transfer, all of the conditions of the remainder of this Section 6.3 must be satisfied. Any interest in the Partnership that is the subject of a Transfer that does not satisfy the requirements of this Section 6.3 shall be immediately forfeited for no consideration.

(b) A Limited Partner or his legal representative shall give the General Partner notice within 30 days after any involuntary Transfer, and shall provide sufficient information to allow legal counsel acting for the Partnership to make the determination that the proposed Transfer will not result in any of the following consequences:

(i) require registration of the Partnership or any interest therein under any securities or commodities laws of any jurisdiction;

(ii) result in a termination of the Partnership under section 708(b)(1)(B) of the Code or jeopardize the status of the Partnership as a partnership for United States federal income tax purposes; or

(iii) violate, or cause the Partnership, the General Partner or any Limited Partner to violate, any applicable law, rule or regulation of any jurisdiction.

Such notice must be supported by proof of legal authority and a valid instrument of assignment acceptable to the General Partner and such Transfer shall be subject to approval by the General Partner.

(c) If any Transfer shall result in multiple ownership of any Limited Partner’s interest in the Partnership, the General Partner may require one or more trustees or nominees whose names will be entered in the Register of Partners, to be designated to hold the legal title to the interest and to represent the entire interest transferred for the purpose of receiving all notices which may be given and all payments which may be made under this Agreement, and for the purpose of exercising the rights which the transferees have pursuant to the provisions of this Agreement. The Partnership shall not otherwise be required to recognize any trust or other beneficial ownership of any interest.

(d) A transferee shall not be entitled to any rights of a Limited Partner other than to the allocations and distributions attributable to the economic interest in the Partnership transferred to such transferee. No transferee may become a substituted Limited Partner except with the prior written consent of the General Partner (which consent may be given or withheld by the General Partner). Such transferee shall be admitted to the Partnership as a substituted Limited Partner upon execution of a counterpart of this Agreement or such other written instrument, in a form satisfactory to the General Partner, pursuant to which such transferee undertakes and agrees to become a Limited Partner of the Partnership and to adhere to and be bound by the provisions of this Agreement on admission as a Limited Partner. Notwithstanding the above, the Partnership and the General Partner shall incur no liability for allocations and distributions made in good faith to the transferring Limited Partner until a written instrument of Transfer has been received and accepted

by the Partnership and recorded on the Register of Partners and the effective date of the Transfer has passed.

(e) Any other provision of this Agreement to the contrary notwithstanding, to the fullest extent permitted by law, any successor or transferee of any Limited Partner’s interest in the Partnership shall be bound by the provisions hereof. Prior to recognizing any Transfer in accordance with this Section 6.3, the General Partner may require the transferee to make certain representations and warranties to the Partnership and Partners and to accept, adopt and approve in writing all of the terms and provisions of this Agreement.

(f) In the event of a Transfer or in the event of a distribution of assets of the Partnership to any Partner, the Partnership, at the direction of the General Partner, may, but shall not be required to, file an election under section 754 of the Code and in accordance with the applicable Treasury Regulations, to cause the basis of the Partnership’s assets to be adjusted as provided by section 734 or 743 of the Code.

(g) The Partnership shall maintain books for the purpose of registering the Transfer of partnership interests in the Partnership. No Transfer of a partnership interest shall be effective until the Transfer of the partnership interest is registered by the General Partner on the Register of Partners.

(h) In the event of a Transfer of all of a Limited Partner’s interest in the Partnership, such Limited Partner shall remain liable to the Partnership as contemplated by Section 4.2(b) and shall, if requested by the General Partner, expressly acknowledge such liability in such agreements as may be entered into by such Limited Partner in connection with such Transfer.

Section 6.4 Withdrawal of Partners

A Partner in the Partnership may not voluntarily withdraw from the Partnership prior to its dissolution unless so required by the General Partner pursuant to Section 7.2(a)(i)(B). For the avoidance of doubt, any Limited Partner who transfers to a Related Party such Limited Partner’s entire remaining entitlement to allocations and distributions shall remain a Limited Partner, notwithstanding the admission of the transferee Related Party as a Limited Partner, for as long as the transferee Related Party remains a Limited Partner.

Section 6.5 Pledges or Charges

A Limited Partner shall not pledge, charge or grant a security interest in such Limited Partner’s interest in the Partnership.

ARTICLE 7
ALLOCATION OF POINTS; ADJUSTMENTS OF POINTS
AND RETIREMENT OF PARTNERS

Section 7.1 Allocation of Points

(a) Except as otherwise provided herein, the General Partner shall be responsible for the allocation of Points from time to time to the Limited Partners. The General

Partner may allocate Points to a new Limited Partner and/or increase the Points of any existing Limited Partner at any time; provided that (i) if the General Partner or its designee determines that a Limited Partner has engaged in Bad Acts or violated any of his restrictive covenants in favor of AGM or any of its Affiliates, such Limited Partner’s Points shall be forfeited as of the date of such engagement or violation determined by the General Partner, and (ii) the allocation or reallocation of Points will be on such terms as are consistent with the treatment of the Points as profits interests for U.S. federal income tax purposes. For the avoidance of doubt, notwithstanding anything to the contrary contained herein, the Points issued in respect of a particular Class or tranche of Interests shall constitute a “single” pool and entitle the holders hereof to share in all of the Operating Profit and Operating Loss of the Partnership attributable to such Class or tranche of Interests, howsoever derived, on the terms and conditions set forth herein. As of the date hereof, 100,000 Points are reserved for allocation and such number of aggregate Points so reserved shall not be increased or reduced unless otherwise determined by the General Partner.

(b) Unless otherwise agreed by the General Partner, as a condition to the continued holding by a Limited Partner of any Points, concurrently with the Partnership’s becoming a partner or member of any Fund General Partner after the date hereof, each such Limited Partner shall execute and deliver to the General Partner (or, to the extent provided in an Award Letter or Other Agreement, by filing an election under section 83(b) of the Code, consent to a power of attorney authorizing the General Partner to execute on the Limited Partner’s behalf) the following documents, in form and substance satisfactory to the General Partner: (A) a guarantee or guarantees, for the benefit of such Fund’s investors, of such Limited Partner’s Clawback Share of the Partnership’s obligation to make Clawback Payments, and/or (B) an undertaking to reimburse any Affiliate of AGM for any payment made by it that is attributable to such Limited Partner’s Clawback Share of any Clawback Payment; it being understood that any of the documents contemplated by the foregoing clauses (A) and (B) may authorize the General Partner or its Affiliate to set-off any such Clawback Payment against distributions otherwise payable to such Limited Partner in respect of its Interests in the Partnership or any other Fund with respect to which such Limited Partner has a direct or indirect interest in the Carried Interest Revenues with respect to such Fund.

(c) Any change to a Limited Partner’s Points pursuant to this Agreement or such Limited Partner’s Award Letter shall apply on a prospective basis only, from and after the effective date of such change.

(d) The General Partner shall maintain on the books and records of the Partnership a record of the number of Points allocated to each Partner and shall give notice to each Limited Partner of the number of such Limited Partner’s Points upon admission to the Partnership of such Limited Partner and promptly upon any change in such Limited Partner’s Points pursuant to this Article 7 and such notice shall include the calculations used by the General Partner to determine the amount of any such reduction.

(e) Any Points that are forfeited under this Agreement or a Limited Partner’s Award Letter may be reallocated by the General Partner, in its sole and absolute discretion, to APH or any other Person or Persons. Unless otherwise provided by the General Partner, forfeited Points shall be deemed reallocated to APH.

Section 7.2 Retirement of Partner

(a) A Limited Partner shall become a Retired Partner upon:

(i) delivery to such Limited Partner of a notice by the General Partner or any of its Affiliates (A) terminating such Limited Partner’s employment by or service to AGM or an Affiliate thereof, unless otherwise determined by the General Partner or (B) requiring that such Limited Partner withdraw from the Partnership;

(ii) delivery by such Limited Partner of at least 90 days’ prior written notice to the General Partner, AGM or an Affiliate thereof stating that such Limited Partner elects to resign from or otherwise terminate his employment by or service to AGM or an Affiliate thereof; or

(iii) the death of the Limited Partner, whereupon the estate of the deceased Limited Partner shall be treated as a Retired Partner in the place of the deceased Limited Partner, or the Disability of the Limited Partner.

(b) Nothing in this Agreement shall obligate the General Partner to treat Retired Partners alike, and the exercise of any power or discretion by the General Partner in the case of any one such Retired Partner shall not create any obligation on the part of the General Partner to take any similar action in the case of any other such Retired Partner; it being understood that any power or discretion conferred upon the General Partner shall be treated as having been so conferred as to each such Retired Partner separately.

Section 7.3 Effect of Retirement on Points

(a) The consequences of a Limited Partner’s retirement on his Points shall be set forth in such Limited Partner’s Award Letter(s).

(b) The right of any Retired Partner to receive distributions pursuant to this Agreement or such Retired Partner’s Award Letter(s) shall be subject to the provision by the General Partner for all liabilities of the Partnership and for reserves for contingencies.

ARTICLE 8
WINDING UP AND DISSOLUTION

Section 8.1 Winding Up and Dissolution of Partnership

(a) The General Partner, except, where the General Partner is unable to perform this function, a liquidator elected by a majority in interest (determined by Points) of Limited Partners, shall commence the winding-up of the Partnership pursuant to the Partnership Law upon the occurrence of any Winding-Up Event. The General Partner or appointed liquidator shall terminate the business and administrative affairs of the Partnership and commence the winding up of the Partnership’s assets.

(b) Operating Profit and Operating Loss during the Fiscal Years that include the period of liquidation shall be allocated pursuant to Section 3.4. The proceeds from liquidation shall be distributed in the following manner:

(i) first, the debts, liabilities and obligations of the Partnership, including the expenses of liquidation (including legal and accounting expenses incurred in connection therewith), up to and including the date that distribution of the Partnership’s assets to the Partners has been completed, shall be satisfied (whether by payment or by making reasonable provision for payment thereof); and

(ii) thereafter, the Partners shall be paid amounts in accordance with Article 4.

(c) Following the completion of the winding up of the Partnership, the General Partner (or the liquidation agent, as applicable) shall execute, acknowledge and cause to be filed a notice of dissolution (the “Notice of Dissolution”) of the Partnership with the Registrar and the winding up of the Partnership shall be complete on the filing of the Notice of Dissolution. This Agreement shall terminate upon the filing of the Notice of Dissolution.

(d) Anything in this Section 8.1 to the contrary notwithstanding, the General Partner or liquidator may distribute ratably in kind rather than in cash, upon the winding-up of the Partnership, any assets of the Partnership in accordance with the priorities set forth in Section 8.1(b); provided that if any in kind distribution is to be made, the assets distributed in kind shall be valued as of the actual date of their distribution and charged as so valued and distributed against amounts to be paid under Section 8.1(b).

ARTICLE 9
GENERAL PROVISIONS


Section 9.1	Amendment of Partnership Agreement and Co-Investors (A) Partnership Agreements

(a) The General Partner may amend this Agreement (including the Schedules hereto) at any time, in whole or in part, without the consent of any Limited Partner by giving notice of such amendment to any Limited Partner whose rights or obligations as a Limited Partner pursuant to this Agreement are changed thereby; provided that any amendment that (x) increases a Limited Partner’s obligation to contribute to the capital of the Partnership, or (y) increases such Limited Partner’s Clawback Share shall not be effective with respect to such Limited Partner, unless such Limited Partner consents thereto in advance in writing. Notwithstanding the foregoing, the General Partner may amend this Agreement at any time, in whole or in part, without the consent of any Limited Partner to enable the Partnership to (i) comply with the requirements of the “Safe Harbor” Election within the meaning of the Proposed Revenue Procedure of Notice 2005-43, 2005-24 IRB 1, Proposed Treasury Regulation section 1.83-3(e)(1) or Proposed Treasury Regulation section 1.704-1(b)(4)(xii) at such time as such proposed Procedure and Regulations are effective and to make any such other related changes as may be required by pronouncements or Treasury Regulations issued by the Internal

Revenue Service or Treasury Department after the date of this Agreement, (ii) enable, when applicable, the Partnership (or the Partnership Representative) to comply with the BBA Audit Rules or to make any elections or take any other actions available thereunder, and (iii) comply with applicable law; provided that, unless otherwise provided in a Limited Partner’s Award Letter, any amendment pursuant to clause (i) that would cause a Limited Partner’s rights to allocations and distributions to suffer a material adverse change may be made only if the written consent of such Limited Partner is obtained prior to the effectiveness thereof. For the avoidance of doubt, an adjustment of Points shall not be considered an amendment.

(b) Notwithstanding the provisions of this Agreement, including Section 9.1(a), it is hereby acknowledged and agreed that the General Partner on its own behalf or on behalf of the Partnership without the approval of any Limited Partner or any other Person may enter into one or more side letters or similar agreements (“Other Agreements”) with one or more Limited Partners which have the effect of establishing rights under, or altering or supplementing the terms of this Agreement. The parties hereto agree that any terms contained in an Other Agreement with one or more Limited Partners shall govern with respect to such Limited Partner or Limited Partners notwithstanding the provisions of this Agreement. Any Other Agreements shall be binding upon the Partnership or the General Partner, as applicable, and the signatories thereto as if the terms were contained in this Agreement, but no such Other Agreement between the General Partner and any Limited Partner or Limited Partners and the Partnership shall adversely amend the contractual rights or obligations of any other Limited Partner without such other Limited Partner’s prior consent.

(c) The provisions of this Agreement that affect the terms of any Co-Investors (A) Partnership Agreement applicable to Limited Partners constitute a “side letter or similar agreement” between each Limited Partner and the general partner of the applicable Co-Investors (A) Entity, which has executed this Agreement exclusively for purposes of confirming the foregoing.

Section 9.2 Special Power-of-Attorney

(a) Each Partner hereby irrevocably makes, constitutes and appoints the General Partner with full power of substitution, the true and lawful representative and attorney-in-fact, and in the name, place and stead of such Partner, with the power from time to time to make, execute, sign, acknowledge, swear to, verify, deliver, record, file and/or publish:

(i) any amendment, or amendment and restatement to this Agreement which complies with the provisions of this Agreement (including the provisions of Section 9.1);

(ii) all such other instruments, documents and certificates which, in the opinion of legal counsel to the Partnership, may from time to time be required by the laws of the Cayman Islands or any other jurisdiction, or any political subdivision or agency thereof, or which such legal counsel may deem necessary or appropriate to effectuate, implement and continue the valid and subsisting existence and business of the Partnership as a limited partnership or partnership in which the limited partners thereof enjoy limited liability;

(iii) any written notice or letter of resignation from any board seat or office of any Person (other than a company that has a class of equity securities registered under the United States Securities Exchange Act of 1934, as amended, or that is registered under the United States Investment Company Act of 1940, as amended), which board seat or office was occupied or held at the request of the Partnership or any of its Affiliates; and

(iv) all such proxies, consents, assignments and other documents as the General Partner determines to be necessary or advisable in connection with any merger or other reorganization, restructuring or other similar transaction entered into in accordance with this Agreement (including the provisions of Section 9.5(c)).

(b) Each Limited Partner is aware that the terms of this Agreement permit certain amendments to this Agreement to be effected and certain other actions to be taken or omitted by or with respect to the Partnership without his consent. If an amendment to the Section 9 Statement or this Agreement or any action by or with respect to the Partnership is taken by the General Partner in the manner contemplated by this Agreement, each Limited Partner agrees that, notwithstanding any objection which such Limited Partner may assert with respect to such action, the General Partner is authorized and empowered, with full power of substitution, to exercise the authority granted above in any manner which may be necessary or appropriate to permit such amendment to be made or action lawfully taken or omitted. Each Partner is fully aware that each other Partner will rely on the effectiveness of this special power-of-attorney with a view to the orderly administration of the affairs of the Partnership. This power-of-attorney is intended to secure a proprietary interest of the General Partner and the performance of the obligations of each Limited Partner under this Agreement, and as such:

(i) shall be irrevocable and continue in full force and effect notwithstanding the subsequent death or incapacity of any party granting this power-of-attorney, regardless of whether the Partnership or the General Partner shall have had notice thereof; and

(ii) shall survive any Transfer by a Limited Partner of the whole or any portion of its interest in the Partnership, except that, where the transferee thereof has been approved by the General Partner for admission to the Partnership as a substituted Limited Partner, this power-of-attorney given by the transferor shall survive such Transfer for the sole purpose of enabling the General Partner to execute, acknowledge and file any instrument necessary to effect such substitution; and

(iii) extends to the heirs, executors, administrators, other legal representatives and successors, transferees and assigns of such Limited Partner, and may be exercised by the General Partner on behalf of such Limited Partner in executing any instrument by a facsimile or electronic signature or by listing all the Limited Partners and executing that instrument with a single signature as attorney and/or agent for all of them.

Section 9.3 Notices

Any notice required or permitted to be given under this Agreement shall be in writing. A notice to the General Partner shall be directed to the attention of Leon D. Black with a

copy to the general counsel of the Partnership. A notice to a Limited Partner shall be directed to such Limited Partner’s last known residence as set forth in the books and records of the Partnership or its Affiliates (a Limited Partner’s “Home Address”). A notice shall be considered given when delivered to the addressee either by hand at his Partnership office or electronically to the primary e-mail account supplied by the Partnership for Partnership business communications.

Section 9.4 Agreement Binding Upon Successors and Assigns

This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors by operation of law, but the rights and obligations of the Partners hereunder shall not be assignable, transferable or delegable except as expressly provided herein, and any attempted assignment, transfer or delegation thereof that is not made in accordance with such express provisions shall be void and unenforceable

Section 9.5 Merger, Consolidation, etc.

(a) To the maximum extent permitted by law, subject to Section 9.5(b) and Section 9.5(c), the Partnership may merge or consolidate with or into one or more limited partnerships formed under any applicable law or other business entities under any applicable law pursuant to a written plan of merger or consolidation which has been approved by the General Partner.

(b) Subject to Section 9.5(c), but notwithstanding any other provision to the contrary contained elsewhere in this Agreement, a written plan of merger or consolidation approved in accordance with Section 9.5(a) may, to the extent permitted by Section 9.5(a) and applicable law, (i) effect any amendment to this Agreement, (ii) effect the adoption of a new exempted limited partnership agreement for the Partnership if it is the surviving or resulting exempted limited partnership in the merger or consolidation, or (iii) provide that the exempted limited partnership agreement of any other constituent exempted limited partnership to the merger or consolidation (including an exempted limited partnership formed for the purpose of consummating the merger or consolidation) shall be the exempted limited partnership agreement of the surviving or resulting exempted limited partnership.

(c) The General Partner shall have the power and authority to approve and implement any merger, consolidation or other reorganization, restructuring or similar transaction without the consent of any Limited Partner, other than any Limited Partner with respect to which the General Partner has determined that such transaction will, or will reasonably be likely to, result in any material adverse change in the financial and other material rights of such Limited Partner conferred by this Agreement and any Other Agreement entered into pursuant to Section 9.1(b) or the imposition of any material new financial or other obligation on such Limited Partner. Subject to the foregoing, the General Partner may require one or more of the Limited Partners to sell, exchange, transfer or otherwise dispose of their interests in the Partnership in connection with any such transaction, and each Limited Partner shall take such action as may be directed by the General Partner to effect any such transaction.

Section 9.6 Governing Law; Dispute Resolution

(a) This Agreement, and the rights and obligations of each and all of the Partners hereunder, shall be governed by and construed in accordance with the laws of the Cayman Islands, without regard to conflict of laws principles thereof that would give effect to the laws of another jurisdiction.

(b) Subject to Section 9.6(c), any dispute, controversy, suit, action or proceeding arising out of or relating to this Agreement, will be settled exclusively by arbitration, conducted before a single arbitrator in New York County, New York (applying Cayman Islands law) in accordance with, and pursuant to, the applicable rules of JAMS (“JAMS”). The arbitration shall be conducted on a strictly confidential basis, and none of the parties shall disclose the existence of a claim, the nature of a claim, any documents, exhibits, or information exchanged or presented in connection with such a claim, or the result of any action, to any third party, except as required by law, with the sole exception of their legal counsel and parties engaged by that counsel to assist in the arbitration process, who also shall be bound by these confidentiality terms. The decision of the arbitrator will be final and binding upon the parties hereto. Any arbitral award may be entered as a judgment or order in any court of competent jurisdiction. Any party hereto may commence litigation in court to obtain injunctive relief in aid of arbitration, to compel arbitration, or to confirm or vacate an award, to the extent authorized by the U.S. Federal Arbitration Act or the New York Arbitration Act. The party that is determined by the arbitrator not to be the prevailing party will pay all of the JAMS administrative fees and the arbitrator’s fee and expenses. If neither party is so determined, such fees shall be shared. Each party shall be responsible for such party’s own attorneys’ fees. IF THIS AGREEMENT TO ARBITRATE IS HELD INVALID OR UNENFORCEABLE THEN, TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTNER AND THE PARTNERSHIP WAIVE AND COVENANT THAT THE PARTNER AND THE PARTNERSHIP WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER NOW OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND AGREE THAT THE PARTNERSHIP OR ANY OF ITS AFFILIATES OR ANY PARTNER MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTNERSHIP AND ITS AFFILIATES, ON THE ONE HAND, AND THE PARTNER, ON THE OTHER HAND, IRREVOCABLY TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN SUCH PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THAT ANY PROCEEDING PROPERLY HEARD BY A COURT UNDER THIS AGREEMENT WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

(c) Nothing in this Section 9.6 will prevent the General Partner or a Limited Partner from applying to a court for preliminary or interim relief or permanent injunction in a judicial proceeding (e.g., injunction or restraining order to enforce any restrictive covenants against a Limited Partner), in addition to and not in lieu of any other remedy to which it may be entitled at law or in equity, if such relief from a court is necessary to preserve the status quo pending

resolution or to prevent serious and irreparable injury in connection with any breach or anticipated breach of covenants to which a Limited Partner is subject; provided, however, that all parties explicitly waive all rights to seek preliminary, interim, injunctive or other relief in a judicial proceeding and all parties submit to the exclusive jurisdiction of the forum described in Section 9.6(b) hereto, for any dispute or claim concerning continuing entitlement to distributions or other payments, even if such dispute or claim involves or relates to any covenant to which a Limited Partner is subject. For the purposes of this Section 9.6(c), each party hereto consents to the exclusive jurisdiction and venue of the courts of the state and federal courts within the County of New York in the State of New York.

Section 9.7 Termination of Right of Action

Every right of action arising out of or in connection with this Agreement by or on behalf of any past, present or future Partner or the Partnership against any past, present or future Partner shall, to the fullest extent permitted by applicable law, irrespective of the place where the action may be brought and irrespective of the residence of any such Partner, cease and be barred by the expiration of three years from the date of the act or omission in respect of which such right of action arises.

Section 9.8 Not for Benefit of Third Parties

Except with respect to the rights of Covered Persons hereunder and the rights of any Person which retains indemnification rights pursuant to Section 5.7(b), each of whom shall be an intended third party beneficiary and shall be entitled to enforce the provisions of Section 5.7, none of the provisions of this Agreement shall be for the benefit of or enforceable by the creditors of the Partnership and this Agreement shall be binding upon and inure to the benefit of the Partners and their respective legal representatives, successors and permitted assigns. Without limitation to the foregoing, a Person who is not a party to this Agreement may not, in its own right or otherwise, enforce any term of this Agreement except that each Covered Person and any Person which retains indemnification rights pursuant to Section 5.7, may in its own right enforce directly its rights pursuant to the provisions of Section 5.7 subject to and in accordance with the provisions of the Contracts (Rights of Third Parties) Law, 2014, as amended, modified, re-enacted or replaced. Notwithstanding any other term of this Agreement, the consent of, or notice to, any Person who is not a party to this Agreement (including, without limitation, any Covered Person and any Person which retains indemnification rights pursuant to Section 5.7) is not required for any amendment to, or variation, release, rescission or termination of this Agreement.

Section 9.9 Reports

As soon as practicable after the end of each taxable year, the General Partner shall furnish to each Limited Partner (a) such information as may be required to enable each Limited Partner to properly report for United States federal and state income tax purposes his distributive share of each Partnership item of income, gain, loss, deduction or credit for such year, and (b) a statement of the total amount of Operating Profit or Operating Loss for such year, including a copy of the United States Internal Revenue Service Schedule “K-1” issued by the Partnership to such Limited Partner, and a reconciliation of any difference between (i) such Operating Profit or

Operating Loss and (ii) the aggregate net profits or net losses allocated by the Fund General Partners to the Partnership for such year.

Section 9.10 Filings

The Partners hereby agree to take any measures necessary (or, if applicable, refrain from any action) to ensure that the Partnership is treated as a partnership for U.S. federal, state and local income tax purposes.

Section 9.11 Counterparts

This Agreement may be executed in one or more counterparts, including by facsimile or other electronic signature. All such counterparts so executed shall constitute an original agreement binding on all the parties, but together shall constitute but one instrument.

[Signature pages follow.]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as a deed, on the date first set forth above.

GENERAL PARTNER:

APOLLO GLOBAL CARRY POOL GP, LLC, WITH RESPECT TO SERIES A

By:/s/ Joseph D. Glatt

Name: Joseph D. Glatt
Title: Vice President

INITIAL LIMITED PARTNER:

(solely for the purpose of Section 2.9)

APOLLO PRINCIPAL HOLDINGS VI GP, LLC

By:/s/ Joseph D. Glatt

Name: Joseph D. Glatt
Title: Vice President

LIMITED PARTNERS:

On behalf of all Limited Partners listed on the Register of Partners:


By:	Apollo Global Carry Pool GP, LLC, with respect to Series A

By:/s/ Joseph D. Glatt

Name: Joseph D. Glatt
Title: Vice President

Apollo Global Carry Pool Aggregator III, L.P.

Amended and Restated Exempted Limited Partnership

Agreement Signature Page


a)	The definition of “Exchange” is hereby amended and restated in its entirety as follows:


b)	The following definition is hereby added in the proper alphabetical order:


c)	The definition of “In-Kind Exchange Distribution” is hereby amended and restated in its entirety as follows:


d)	The definition of “Quarterly Exchange Date” is hereby deleted in its entirety.


2.	All references in the Agreement to “Quarterly Exchange Date” shall refer to “Exchange Date”.


3.	Effective Time. This Amendment shall be effective, and the provisions hereof shall become operative, at 12:01 a.m. on July 29, 2020 (the “Effective Time”) and no party shall be required to commence performance hereunder until the Effective Time.


4.	Miscellaneous. Sections 8.1 through 8.9 of the Agreement shall apply to this Amendment, mutatis mutandis. No amendment of the Agreement shall be required to the extent any entity becomes a successor of any of the parties thereto.


a)	The following definitions are hereby amended and restated in their entirety as follows:


b)	The following definitions are hereby inserted in Section 1.1 in the proper alphabetical order:


2.	Amendment to Section 2.4 of the Agreement -- Transfers; Registration Rights


a.	Sections 2.4(a) and (b) are hereby amended and restated in their entirety as follows:


b.	Section 2.4(c) is hereby deleted in its entirety and replaced with the following:


c.	Section 2.4(f) is hereby deleted in its entirety and replaced with the following:


3.	Amendment to Section 2.8(b) of the Agreement – Distributions


a.	The parenthetical at the end of Section 2.8(b) is hereby amended and restated in its entirety as follows:


a.	Section 6.1 is hereby amended and restated in their entirety as follows:


5.	Amendment to Section 6.4 of the Agreement -- Counterparts.


a.	Section 6.4 of the Agreement is hereby amended and restated in its entirety as follows:


6.	Amendment to Schedule IV (Permitted Transferees) and Schedule V (Notices) of the Agreement


a.	Schedule IV of the Agreement is hereby amended and restated in its entirety as set forth on Exhibit A hereto.


b.	Schedule V of the Agreement is hereby amended and restated in its entirety as set forth on Exhibit B hereto.


7.	Exhibit A (Joinder). Exhibit A to the Agreement is hereby amended by inserting the phrase “as amended by that certain Amendment, dated as of July 29, 2020,” to the end of the first sentence of the preamble thereof.


8.	Joinder. MJHP hereby agrees that upon execution by MJHP of this Amendment, MJHP shall become a party to the Agreement as amended by this Amendment and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as amended by this Amendment as though an original party thereto and as a member of the JH Group.


10.	Miscellaneous. Sections 6.1 through 6.11 of the Agreement (as amended by this Amendment) shall apply to this Amendment, mutatis mutandis. No amendment of the Agreement shall be required to the extent any entity becomes a successor of any of the parties thereto.


If to Holdings:	Any notice to Holdings shall be deemed given when notice is provided to LB, MR and JH.


If to Intermediate Holdings:	Any notice to Intermediate Holdings shall be deemed given when notice is provided to LB, MR and JH.


1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 of Apollo Global Management, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;


4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: