The Offering Transactions and the Strategic Investors Transaction

On August 8, 2007, in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), we sold 27,000,000 Class A shares, at an initial offering price of $24 per share, to (i) Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Credit Suisse (USA) LLC, which we refer to as the “initial purchasers,” for their resale to qualified institutional buyers that are also qualified purchasers in reliance upon Rule 144A under the Securities Act, and (ii) to accredited investors, with the initial purchasers acting as placement agents, in a private placement, as defined in Rule 501(a) under the Securities Act. The initial purchasers exercised their over-allotment option and on September 5, 2007, we sold an additional 2,824,540 Class A shares to the initial purchasers at the price of $24 per share. We refer to this exempt sale of Class A shares to the initial purchasers and to accredited investors as the “Rule 144A Offering.” We entered into a registration rights agreement with the initial purchasers in the Rule 144A Offering, pursuant to which we undertook to register under the Securities Act the Class A shares sold in the Rule 144A Offering. A portion of the Class A shares offered by this prospectus are the shares sold in the Rule 144A Offering. See “Registration Rights.”

In connection with the Rule 144A Offering, on July 16, 2007, we entered into a purchase agreement with Credit Suisse Securities (USA) LLC, one of the Rule 144A Offering initial purchasers, pursuant to which Credit Suisse Management LLC, or the “CS Investor,” purchased from us in a private placement that closed concurrently with the Rule 144A Offering an aggregate of $180 million of the Class A shares at a price per share of $24, or 7,500,000 Class A shares. Pursuant to a shareholders agreement we entered into with the CS Investor, the CS Investor agreed not to sell its Class A shares for a period of one year from August 8, 2007, the closing date of the Rule 144A Offering. We entered into a registration rights agreement with the CS Investor in the Private Placement, pursuant to which we undertook to register under the Securities Act the Class A shares sold in the Private Placement. A portion of the Class A shares offered by this prospectus are the shares sold in the Private Placement. See “Registration Rights.” We refer to our sale of Class A shares to the CS Investor as the “Private Placement” and to the Private Placement, and the Rule 144A Offering collectively, as the “Offering Transactions.”

On July 13, 2007, we sold securities to the California Public Employees’ Retirement System, or “CalPERS,” and an affiliate of the Abu Dhabi Investment Authority, or “ADIA,” in return for a total investment of $1.2 billion. We refer to CalPERS and ADIA as the “Strategic Investors.” Upon completion of the Offering Transactions, the securities that we sold to the Strategic Investors converted into non-voting Class A shares. We refer to the foregoing issuance of securities, our use of proceeds from that sale and the conversion of such securities into non-voting Class A shares as the “Strategic Investors Transaction.” Pursuant to a lenders rights agreement we have entered into with the Strategic Investors, the Strategic Investors have agreed not to sell any of their Class A shares for a period of two years after the date on which the shelf registration statement of which this prospectus forms a part became effective, or the “shelf effectiveness date,” subject to limited exceptions. Thereafter, the amount of Class A shares they may sell is subject to a limit that increases with each year. See “Certain Relationships and Related Party Transactions—Lenders Rights Agreement—Transfer Restrictions.” The Strategic Investors are two of the largest alternative asset investors in the world and have been significant investors with us in multiple funds covering a variety of strategies. In total, from our inception through the date hereof, the Strategic Investors have invested or committed to invest approximately $6.4 billion of capital in us and our funds. The Strategic Investors are significant supporters of our integrated platform, with one or both having invested in multiple private equity and capital markets funds. With substantial combined assets, we believe the Strategic Investors will be an important source of future growth in the AUM in our existing and future funds for many years, as well as in new products and geographic expansions. Although they have no obligation to invest further in our funds, in connection with our sale of securities to the Strategic Investors, we granted to each of them the option, exercisable until July 13, 2010, to invest or commit to invest up to 10% of the aggregate dollar amount invested or committed by investors in the initial closing of any privately placed fund that we offer to third party investors, subject to limited exceptions.

 

Structure and Formation of the Company

Apollo Global Management, LLC is a holding company whose primary assets are 100% of the general partner interests in each limited partnership included in the Apollo Operating Group, which is described below under “—Holding Company Structure,” and 28.9% of the limited partner interests of the Apollo Operating Group entities, in each case held through intermediate holding companies. The remaining 71.1% limited partner interests of the Apollo Operating Group entities are owned directly by Holdings, an entity 100% owned, directly or indirectly, by our managing partners and contributing partners, and represent its economic interest in the Apollo Operating Group. With limited exceptions, the Apollo Operating Group owns each of the operating entities included in our historical consolidated and combined financial statements as described below under “—Our Assets.”

Apollo Global Management, LLC is owned by its Class A and Class B shareholders. Holders of our Class A shares and Class B share vote as a single class on all matters presented to the shareholders, although the Strategic Investors do not have voting rights in respect of any of their Class A shares. We have issued to BRH Holdings GP, Ltd., or “BRH,” a single Class B share solely for purposes of granting voting power to BRH. BRH is the general partner of Holdings and is a Cayman Islands exempted company owned and controlled by our managing partners. The Class B share does not represent an economic interest in Apollo Global Management, LLC. The voting power of the Class B share, however, increases or decreases with corresponding changes in Holdings’ economic interest in the Apollo Operating Group.

Our shareholders vote together as a single class on the limited set of matters on which shareholders have a vote. Such matters include a proposed sale of all or substantially all of our assets, certain mergers and consolidations, certain amendments to our operating agreement and an election by our manager to dissolve the company.

We intend to continue to employ our current management structure with strong central control by our managing partners and to maintain our focus on achieving successful growth over the long term. This desire to preserve our existing management structure is one of the principal reasons why upon listing of our Class A shares on the New York Stock Exchange, if achieved, we have decided to avail ourselves of the “controlled company” exception from certain of the NYSE governance rules. This exception eliminates the requirements that we have a majority of independent directors on our board of directors and that we have a compensation committee and a nominating and corporate governance committee composed entirely of independent directors. It is also the reason that the managing partners chose to have a manager that manages all of our operations and activities, with only limited powers retained by the board of directors, as long as the Apollo control condition, which is discussed below under “—Our Manager,” is satisfied.

We refer to the formation of the Apollo Operating Group described below under “—Holding Company Structure,” “—Our Manager,” “—Our Assets” and “—Equity Interests Retained by Our Managing Partners and Contributing Partners,” the deconsolidation of most Apollo funds described below under “—Deconsolidation of Apollo Funds” and the borrowing under the Apollo Management Holdings, L.P. (“AMH”) credit facility and the related distribution to our managing partners described below under “—Distributions to Our Managing Partners Prior to the Offering Transactions,” collectively, as the “Reorganization.”

Prior to the Reorganization, our business was conducted through a number of entities as to which there was no single holding entity but that were separately owned by our managing partners. In order to facilitate the Rule 144A Offering, which closed in August 2007, we effected the Reorganization to form our current holding company structure.

 

The diagram below depicts our current organizational structure.

 

(1)

Investors in the Rule 144A Offering hold 30.7% of the Class A shares, the CS Investor holds 7.7% of the Class A shares, and the Strategic Investors hold 61.6% of the Class A shares. The Class A shares held by investors in the Rule 144A Offering represent 10.8% of the total voting power of our shares entitled to vote and 8.8% of the economic interests in the Apollo Operating Group. Class A shares held by the CS Investor represent 2.7% of the total voting power of our shares entitled to vote and 2.2% of the economic interests in the Apollo Operating Group. Class A shares held by the Strategic Investors do not have voting rights and represent 17.8% of the economic

 

interests in the Apollo Operating Group. Such Class A shares will become entitled to vote upon transfers by a Strategic Investor in accordance with the agreements entered into in connection with the Strategic Investors Transaction.

(2)

Our managing partners own BRH, which in turn holds our only outstanding Class B share. The Class B share initially represents 86.5% of the total voting power of our shares entitled to vote but no economic interest in Apollo Global Management, LLC. Our managing partners’ economic interests are instead represented by their indirect ownership, through Holdings, of 71.1% of the limited partnership interests in the Apollo Operating Group.

(3)	Through BRH Holdings, L.P., our managing partners own limited partnership interests in Holdings.

(4)

Represents 71.1% of the limited partner interests in each Apollo Operating Group entity. The Apollo Operating Group units held by Holdings are exchangeable for Class A shares, as described below under “—Equity Interests Retained by Our Managing Partners and Contributing Partners.” Our managing partners, through their interests in BRH and Holdings, own 62.0% of the Apollo Operating Group units. Our contributing partners, through their ownership interests in Holdings, own 9.1% of the Apollo Operating Group units.

(5)	BRH is the sole member of AGM Management, LLC, our manager. The management of Apollo Global Management, LLC is vested in our manager as provided in our operating agreement. See “Description of Shares—Operating Agreement” for a description of the authority that our manager exercises.

(6)	Represents 28.9% of the limited partnership interests in each Apollo Operating Group entity, held through intermediate holding companies. Apollo Global Management, LLC also indirectly owns 100% of the general partner interests in each Apollo Operating Group entity.

(7)

Apollo Principal Holdings I, L.P. holds 100% of the non-economic general partner interests in the domestic general partners set forth below its name in the chart above. It also holds between 50% and 100% (depending on the particular fund investment) of all limited partner interests in the domestic general partners set forth below its name. The remaining limited partner interests in these domestic general partners are held by certain of our current and former professionals. Apollo Principal Holdings I, L.P. also holds 100% of the limited partner interests in Apollo Co-Investors VII (D), L.P. The general partner interest in Apollo Co-Investors VII (D), L.P. is held by Apollo Co-Investors Manager, LLC, which is solely owned by one of our managing partners. Apollo Principal Holdings I, L.P. is the sole owner of Apollo COF Investor, LLC.

(8)

Apollo Principal Holdings III, L.P. holds 100% of the non-economic general partner interests in the foreign general partners set forth below its name in the chart above. It also holds between 54% and 66% (depending on the particular fund investment) of all limited partner interests in the foreign general partners set forth below its name. The remaining limited partner interests in these foreign general partners are held by certain of our current and former professionals. Apollo Principal Holdings III, L.P. also holds 100% of the limited partner interests in the foreign private equity co-invest vehicle set forth below its name in the chart above. The general partner interest in the foreign private equity co-invest vehicle is held by Apollo Co-Investors Manager, LLC, which is solely owned by one of our managing partners.

(9)

Apollo Principal Holdings II, L.P. holds 100% of the non-economic general partner interests in the domestic general partners set forth below its name in the chart above. Apollo Principal Holdings II, L.P. also holds between 81% and 95% (depending on the particular fund investment) of all limited partner interests in the domestic general partners set forth below its name, except for A/A Capital Management, LLC. The remaining limited partner interests in these domestic general partners are held by certain of our current and former professionals. Apollo Principal Holdings II, L.P. is the sole owner of A/A Capital Management, LLC and the domestic capital markets co-invest vehicles set forth below its name in the chart above.

(10)

Apollo Principal Holdings IV, L.P. holds 100% of the non-economic general partner interests in the foreign general partners set forth below its name in the chart above. It also holds 95% of the limited partner interests in the foreign general partners set forth below its name. The remaining limited partner interests in the foreign general partners are held by certain of our professionals. Apollo Principal Holdings IV, L.P. also holds 100% of the limited partner interests in the foreign capital markets co-invest vehicles set forth below its name in the chart above. The general partner interest in Apollo EPF Co-Investors (B), L.P. is held by Apollo EPF Administration, Limited which is solely owned by one of our managing partners. The general partner interest in Apollo AIE II Co-Investors (B), L.P. is held by Apollo Co-Investors Manager, LLC, which is solely owned by one of our managing partners.

(11)

Apollo Management Holdings, L.P. holds 100% of the management companies comprising the investment advisors of all of Apollo’s funds including AIC, AIE I, and AAA; however, a portion of the management fees, incentive income and other fees payable to these investment advisors are allocated to certain of our current and former professionals, as described in more detail under “Our Structure—Reorganization—Our Assets.”

(12)

Apollo Advisors IV, L.P. is the general partner of Fund IV, Apollo Advisors V, L.P. is the general partner of Fund V, Apollo Advisors VI, L.P. is the general partner of Fund VI, Apollo Advisors VII, L.P. is the general partner of Fund VII, and Apollo Credit Opportunity Advisors, LLC is the sole general partner of COF I and COF II. Certain offshore vehicles that comprise the foregoing funds also have an administrative general partner, which is an affiliate of the foregoing general partner.

(13)

Apollo Advisors V (EH Cayman), L.P. is the sole general partner of Fund V’s Cayman Islands alternative investment vehicle, Apollo Advisors VI (EH), L.P. is the sole general partner of Fund VI’s Cayman Islands alternative investment vehicle, Apollo Advisors VII (EH), L.P. is the sole general partner of Fund VII’s Cayman Islands alternative investment vehicle and AAA Associates, L.P. is the sole general partner of AAA Investments, the limited partnership through which AAA’s investments are made.

(14)

Apollo SVF Advisors, L.P. is the general partner of SVF, Apollo Asia Advisors, L.P. is the general partner of AAOF, Apollo Credit Liquidity Advisors, L.P. is the sole general partner of ACLF, Apollo Value Advisors, L.P. is the general partner of VIF, Apollo SOMA Advisors, L.P. is the sole general partner of SOMA, and A/A Capital Management, LLC is the sole general partner of Artus. Certain offshore vehicles that comprise the foregoing funds also have an administrative general partner, which is an affiliate of the foregoing general partners.

(15)	Apollo EPF Advisors, L.P. is the sole general partner of EPF. Apollo Europe Advisors, L.P. is the sole general partner of AIE II.

 

Holding Company Structure

Apollo Global Management, LLC, through two intermediate holding companies (APO Corp. and APO Asset Co., LLC) owns 28.9% of the economic interests of, and operates and controls all of the businesses and affairs of, the Apollo Operating Group and its subsidiaries. Holdings owns the remaining 71.1% of the economic interests in the Apollo Operating Group. Apollo Global Management, LLC 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 minority interest in Apollo Global Management, LLC’s consolidated financial statements.

The “Apollo Operating Group” consists of the following partnerships: Apollo Principal Holdings I, L.P. (a Delaware limited partnership that is a partnership for U.S. Federal income tax purposes), Apollo Principal Holdings II, L.P. (a Delaware limited partnership that is a partnership for U.S. Federal income tax purposes), Apollo Principal Holdings III, L.P. (a Cayman Islands exempted limited partnership that is a partnership for U.S. Federal income tax purposes), Apollo Principal Holdings IV, L.P. (a Cayman Islands exempted limited partnership that is a partnership for U.S. Federal income tax purposes), and Apollo Management Holdings, L.P., or “AMH” (a Delaware limited partnership that is a partnership for U.S. Federal income tax purposes). Apollo Global Management, LLC conducts all of its material business activities through the Apollo Operating Group.

Each of the Apollo Operating Group partnerships holds interests in different businesses or entities organized in different jurisdictions. Apollo Principal Holdings I, L.P. holds our domestic general partners of private equity funds and certain capital markets funds and our domestic co-invest vehicles of our private equity funds and certain of our capital markets funds; Apollo Principal Holdings II, L.P. holds our domestic general partners of capital markets funds and two capital markets domestic co-invest vehicles; Apollo Principal Holdings III, L.P. holds our foreign general partners of private equity funds, including the foreign general partner of AAA Investments, and our private equity foreign co-invest vehicle; Apollo Principal Holdings IV, L.P. holds our foreign general partners of capital markets funds and two capital markets foreign co-invest vehicles; and Apollo Management Holdings, L.P. holds the management companies for our private equity funds (including AAA) and our capital markets funds.

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

 

•

We are a holding company that is qualified as a partnership for U.S. Federal income tax purposes. Our intermediate holding companies enable us to maintain our partnership status and to meet the qualifying income exception. See also “Material Tax Considerations—Material U.S. Federal Tax Considerations—Taxation of the Company—Taxation of Apollo” for a discussion of the qualifying income exception.

 

•

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

Our Manager

Our operating agreement provides that so long as the Apollo Group (as defined below) beneficially owns at least 10% of the aggregate number of votes that may be cast by holders of outstanding voting shares, our manager, which is 100% owned by BRH, will conduct, direct and manage all activities of Apollo Global Management, LLC. We refer to the Apollo Group’s beneficial ownership of at least 10% of such voting power as the “Apollo control condition.” So long as the Apollo control condition is satisfied, our manager will manage all of our operations and activities and will have discretion over significant corporate actions, such as the issuance of

 

securities, payment of distributions, sales of assets, making certain amendments to our operating agreement and other matters, and our board of directors will have no authority other than that which our manager chooses to delegate to it. See “Description of Shares.”

For purposes of our operating agreement, the “Apollo Group” means (i) our manager and its affiliates, including their respective general partners, members and limited partners, (ii) Holdings and its affiliates, including their respective general partners, members and limited partners, (iii) with respect to each managing partner, such managing partner and such managing partner’s “group” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, the “Exchange Act”), (iv) any former or current investment professional of or other employee of an “Apollo employer” (as defined below) or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group), (v) any former or current executive officer of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and (vi) any former or current director of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group). With respect to any person, “Apollo employer” means Apollo Global Management, LLC or such other entity controlled by Apollo Global Management, LLC or its successor as may be such person’s employer.

Holders of our Class A shares and Class B share have no right to elect our manager, which is controlled by our managing partners through BRH. Although our manager has no business activities other than the management of our businesses, conflicts of interest may arise in the future between us and our Class A shareholders, on the one hand, and our managing partners, on the other. The resolution of these conflicts may not always be in our best interests or those of our Class A shareholders. We describe the potential conflicts of interest in greater detail under “Risk Factors—Risks Related to Our Organization and Structure—Potential conflicts of interest may arise among our manager, on the one hand, and us and our shareholders on the other hand. Our manager and its affiliates have limited fiduciary duties to us and our shareholders, which may permit them to favor their own interests to the detriment of us and our shareholders.” We will reimburse our manager and its affiliates for all costs incurred in managing and operating us, and our operating agreement provides that our manager will determine the expenses that are allocable to us. Our operating agreement does not limit the amount of expenses for which we will reimburse our manager and its affiliates.

Our Assets

Prior to the Offering Transactions, our managing partners contributed to the Apollo Operating Group their interests in each of the entities included in our historical consolidated and combined financial statements, but excluding the “excluded assets” described under “Our Structure—Reorganization—Excluded Assets.”

Certain assets were not contributed to the Apollo Global Management, LLC structure as these assets were either at the end of their life ( e.g. , general partners of Funds I, II and III) or these assets were owned by the managing partners and the contributing partners. The managing partners chose which assets were to be included in the Apollo Global Management, LLC structure. Except for the general partners of Funds I, II and III, none of the excluded assets were included in the combined financial statements of the Apollo Operating Group prior to the Reorganization. As a result of the Reorganization, the general partner interests were treated as distributions to the managing partners and other Reorganization adjustments in the “Statements of Changes in Shareholders’ Equity and Partners’ Capital.” See our consolidated and combined financial statements included elsewhere in this prospectus.

The following is a condensed list of excluded assets from the Reorganization (for a more detailed description see “Our Structure—Reorganization—Excluded Assets”);

 

•

our managing partners’ personal investments or co-investments in our funds (subject to certain limitations);

 

•

amounts owed to any managing partners pursuant to any Apollo deferral or waiver programs or carried interest earned but held in escrow;

 

•

our managing partners’ interests in Apollo Real Estate, Ares and the general partners of Funds I, II and III;

 

•

compensation and benefits paid or given to the managing partners consistent with the terms of their employment agreements (as described below under “Management—Executive Compensation—Employment Non-Competition and Non-Solicitation Agreements with Managing Partners”);

 

•

director options issued prior to January 1, 2007 by any of our funds’ portfolio companies;

 

•

an entity partially owned by our managing partners (without any economics) that has 100% voting control over the investment of Fund VI in Harrah’s Entertainment, Inc.; and

 

•

other miscellaneous, non-core assets.

In addition, prior to the Offering Transactions, our contributing partners contributed to the Apollo Operating Group a portion of their rights to receive a portion of the management fees and incentive income that are earned from management of our funds, or “points.” We refer to such contributed points as “partner contributed interests.” In return for a contribution of points, each contributing partner received an interest in Holdings. Prior to the exchange, the points held by our managing partners and contributing partners were designated relative values based upon estimated 2007 cash flows. The partnership interests in Holdings (representing an indirect ownership interest of an equivalent number of Apollo Operating Group units) that were granted to each managing partner and contributing partner, correspond to the value of the points such partner contributed relative to each other. Each contributing partner continues to own directly those points that such contributing partner did not contribute to the Apollo Operating Group or sell to the Apollo Operating Group in connection with the Strategic Investors Transaction. Each contributing partner will remain entitled (on an individual basis and not through ownership interests in Holdings) to receive payments in respect of his partner contributed interests with respect to fiscal year 2007 based on the date his partner contributed interests were contributed or sold as described below under “—Distributions to Our Managing Partners and Contributing Partners Related to the Reorganization.” The Strategic Investors will similarly receive a pro rata portion of our net income prior to the date of the Offering Transactions for our fiscal year 2007, calculated in the same manner as for the managing partners and contributing partners, as described in more detail under “Our Structure—Strategic Investors Transaction.” In addition, we issued points in Fund VII, and intend to issue points in future funds, to our contributing partners and other of our professionals.

As a result of these contributions and the contributions of our managing partners, the Apollo Operating Group and its subsidiaries generally is entitled to:

 

•

all management fees payable in respect of all our current and future funds as well as transaction and other fees that may be payable by these funds’ portfolio companies (other than fees that certain of our professionals have a right to receive, as described below);

 

•

50% – 66% (depending on the particular fund investment) of all incentive income earned from the date of contribution in relation to investments by our current private equity and capital markets funds (with the remainder of such incentive income continuing to be held by certain of our professionals);

 

•

all incentive income earned from the date of contribution in relation to investments made by our future private equity and capital markets funds, other than the percentage we determine to allocate to our professionals, as described below; and

 

•

all returns on current or future investments of our own capital in the funds we sponsor and manage.

 

With respect to our existing funds that are currently investing, as well as any future funds that we may sponsor, we intend to continue to allocate a portion of the management fees, transaction and advisory fees and incentive income earned in relation to these funds to our professionals, including the contributing partners, in order to better align their interests with our own and with those of the investors in these funds. Our current estimate is that approximately 20% to 40% of management fees, 20% of transaction and advisory fees and 34% to 50% of incentive income earned in relation to our funds will be allocated to our investment professionals, although these percentages may fluctuate up or down over time. When apportioning incentive income to our professionals, we typically cause our general partners in the underlying funds to issue these professionals limited partner interests, thereby causing our percentage ownership of the limited partner interests in these general partners to fluctuate. For the next four years, our managing partners will not directly receive any allocations of management fees, transaction and advisory fees or incentive income, and all of their rights to receive such fees and incentive income earned in relation to our actively investing funds and future funds will be solely through their ownership of Apollo Operating Group units.

The income of the Apollo Operating Group (including management fees, transaction and advisory fees and incentive income) benefits Apollo Global Management, LLC to the extent of its equity interest in the Apollo Operating Group. See “Business—Fees, Carried Interest, Redemption and Termination.”

Equity Interests Retained by Our Managing Partners and Contributing Partners

In exchange for the contributions of assets described above and after giving effect to the Strategic Investor Transactions, Holdings (which is owned by BRH and contributing partners) received 80.0% of the limited partnership units in the Apollo Operating Group. We use the terms “Apollo Operating Group unit” or “unit in/of Apollo Operating Group” to refer to a limited partnership unit in each of the Apollo Operating Group partnerships. We refer to the managing partners’ and contributing partners’ contribution of assets to the Apollo Operating Group and Holdings’ receipt of Apollo Operating Group units in exchange therefor as the “Apollo Operating Group Formation.”

Our managing partners, through their interests in BRH and Holdings, own 62.0% of the Apollo Operating Group units and, through their ownership of BRH, the Class B share that we have issued to BRH. Our managing partners have entered into an agreement, which we refer to as the “Agreement Among Managing Partners,” providing that each managing partner’s interest in the Apollo Operating Group units that he holds indirectly through his partnership interest in BRH and Holdings is subject to vesting. Each of Messrs. Harris and Rowan vests in his interest in the Apollo Operating Group units in 60 equal monthly installments, and Mr. Black vests in his interest in the Apollo Operating Group units in 72 equal monthly installments. Although the Agreement Among Managing Partners was entered into on July 13, 2007, for purposes of its vesting provisions, our managing partners are credited for their employment with us since January 1, 2007. In the event that a managing partner terminates his employment with us for any reason, he will be required to forfeit the unvested portion of his Apollo Operating Group units to the other managing partners. The number of Apollo Operating Group units that must be forfeited upon termination depends on the cause of the termination. See “Certain Relationships and Related Party Transactions—Agreement Among Managing Partners.” However, this agreement may be amended and the terms and conditions of the agreement may be changed or modified upon the unanimous approval of the managing partners. We, our shareholders (other than the Strategic Investors, as set forth under “Certain Relationships and Related Party Transactions—Lenders Rights Agreement—Amendments to Managing Partner Transfer Restrictions”) and the Apollo Operating Group have no ability to enforce any provision of this agreement or to prevent the managing partners from amending the agreement or waiving any of its obligations.

Pursuant to a shareholders agreement that we entered into with our managing partners prior to the Offering Transactions, which we refer to as the “Managing Partners Shareholders Agreement,” no managing partner may

 

voluntarily effect transfers of the interests in Apollo Operating Group units that such managing partner owns through BRH and Holdings or Class A shares into which such Apollo Operating Group units are exchanged, or his “Equity Interests,” for a period of two years after the shelf effectiveness date, subject to certain exceptions, including an exception for certain transactions entered into by one or more managing partners the results of which are that the managing partners no longer exercise control over us or the Apollo Operating Group or no longer hold at least 50.1% of the economic interests in us or the Apollo Operating Group. The transfer restrictions applicable to Equity Interests held by our managing partners and the exceptions to such transfer restrictions are described in more detail under “Certain Relationships and Related Party Transactions—Managing Partner Shareholders Agreement—Transfer Restrictions.” Our managing partners and contributing partners also were granted demand, piggyback and shelf registration rights through Holdings which are exercisable six months after the shelf effectiveness date.

Our contributing partners, through their interests in Holdings, own 9.1% of the Apollo Operating Group units. Pursuant to the agreements by which our contributing partners contributed their partner contributed interests to the Apollo Operating Group and received interests in Holdings, which we refer to as the “Roll-Up Agreements,” no contributing partner may voluntarily effect transfers of his Equity Interests for a period of two years after the shelf effectiveness date. The transfer restrictions applicable to Equity Interests held by our contributing partners are described in more detail under “Certain Relationships and Related Party Transactions—Roll-Up Agreements.”

Subject to certain procedures and restrictions (including the vesting schedules applicable to our managing partners and any applicable transfer restrictions and lock-up agreements), upon 60 days’ notice prior to a designated quarterly date, each managing partner and contributing partner will have the right to cause Holdings to exchange the Apollo Operating Group units that he owns through his partnership interest in Holdings for Class A shares, to sell such Class A shares at the prevailing market price (or at a lower price that such managing partner or contributing partner is willing to accept) and to distribute the net proceeds of such sale to such managing partner or contributing partner. We have reserved for issuance 240,000,000 Class A shares, corresponding to the number of existing Apollo Operating Group units held by our managing partners and contributing partners. To effect an exchange, a managing partner or contributing partner, through Holdings, must simultaneously exchange one Apollo Operating Group unit, being an equal limited partner interest in each Apollo Operating Group entity, for each Class A share received. As a managing partner or contributing partner exchanges his Apollo Operating Group units, our interest in the Apollo Operating Group units will be correspondingly increased and the voting power of the Class B share will be correspondingly decreased. If and when any managing partner or contributing partner, through Holdings, exchanges an Apollo Operating Group unit for a Class A share of Apollo Global Management, LLC, the relative economic ownership positions of the exchanging managing partner or contributing partner and of the other equity owners of Apollo (whether held at Apollo Global Management, LLC or at the Apollo Operating Group) will not be altered.

Deconsolidation of Apollo Funds

Certain of our private equity and capital markets funds have historically been consolidated into our financial statements, due to our controlling interest in certain funds notwithstanding that we have only a non-controlling equity interest in these funds. Consequently, our pre-Reorganization financial statements do not reflect our ownership interest at fair value in these funds, but rather reflect on a gross basis the assets, liabilities, revenues, expenses and cash flows of our funds. We amended the governing documents of most of our funds to provide that a simple majority of the funds’ unaffiliated investors have the right to liquidate that fund. These amendments, which became effective on either August 1, 2007 or November 30, 2007, deconsolidated these funds that have historically been consolidated in our financial statements. Accordingly, we no longer reflect the share that other parties own in total assets and Non-Controlling Interest in these respective funds. The deconsolidation of these funds will present our financial statements in a manner consistent with how Apollo

 

evaluates its business and the related risks. Accordingly, we believe that deconsolidating these funds will provide investors with a better understanding of our business. See “Unaudited Condensed Consolidated Pro Forma Financial Information” for a more detailed description of the effect of the deconsolidation of these funds on our financial statements.

As a listed vehicle, AAA is able to access the public markets to raise additional capital. Through its relationship with AAA, Apollo is able to access AAA’s capital to seed new strategies in advance of a lengthy third party fundraising process. As a result, Apollo has not granted voting rights to the AAA limited partners to allow them to liquidate this entity, and therefore Apollo, for accounting purposes, will continue to control this entity.

Tax Considerations

We believe that under current law, Apollo Global Management, LLC is treated as a partnership and not as a corporation for U.S. Federal income tax purposes. An entity that is treated as a partnership for U.S. Federal income tax purposes is not a taxable entity and incurs no U.S. Federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. Federal income tax liability, regardless of whether or not cash distributions are then made. Investors in this offering will be deemed to be limited partners of Apollo Global Management, LLC for U.S. Federal income tax purposes. Accordingly, an investor will generally be required to pay U.S. Federal income taxes with respect to the income and gain of Apollo Global Management, LLC that is allocated to such investor, even if Apollo Global Management, LLC does not make cash distributions. See “Material Tax Considerations—Material U.S. Federal Tax Considerations” for a summary discussing certain U.S. Federal income tax considerations related to the purchase, ownership and disposition of our Class A shares as of the date of this offering.

Legislation was introduced in Congress in mid-2007 that would, if enacted in its present form, cause Apollo Global Management, LLC to become taxable as a corporation, and other proposed legislation could change the character of portions of our income to ordinary income, either of which would substantially reduce our net income or increase our net loss, as applicable, or cause other significant adverse tax consequences for us and/or the holders of Class A shares. See “Risk Factors—Risks Related to Taxation—The U.S. Federal income tax law that determines the tax consequences of an investment in Class A shares is under review and is potentially subject to adverse legislative, judicial or administrative change, possibly on a retroactive basis, including possible changes that would result in the treatment of our long-term capital gains as ordinary income, that would cause us to become taxable as a corporation and/or have other adverse effects” and “Risk Factors—Risks Related to Our Organization and Structure—Members of the U.S. Congress have introduced legislation that would, if enacted, preclude us from qualifying for treatment as a partnership for U.S. Federal income tax purposes under the publicly traded partnership rules. If this or any similar legislation or regulation were to be enacted and apply to us, we would incur a substantial increase in our tax liability and it could well result in a reduction in the value of our Class A shares.” See also “Material Tax Considerations—Material U.S. Federal Tax Considerations—Administrative Matters—Possible New Legislation or Administrative or Judicial Action.”

Distribution to Our Managing Partners Prior to The Offering Transactions

On April 20, 2007, AMH, one of the entities in the Apollo Operating Group, entered into a credit facility, or the “AMH credit facility,” under which AMH borrowed a $1.0 billion variable-rate term loan. We used these borrowings to make a $986.6 million distribution to our managing partners and to pay related fees and expenses. This distribution was a distribution of prior undistributed earnings, and an advance on possible future earnings, of AMH. As a result, this distribution caused the managing partners’ accumulated equity basis in AMH to become negative. The AMH credit facility is guaranteed by Apollo Management, L.P.; Apollo Capital Management, L.P.; Apollo International Management, L.P.; Apollo Principal Holdings II, L.P.; Apollo Principal Holdings IV, L.P.;

 

and AAA Holdings, L.P. and matures on April 20, 2014. It is secured by (i) a first priority lien on substantially all assets of AMH and the guarantors and (ii)  a pledge of the equity interests of each of the guarantors, in each case subject to customary carveouts.

Distributions to Our Managing Partners and Contributing Partners Related to the Reorganization

We intend to make one or more distributions to our managing partners and contributing partners, representing all of the undistributed earnings generated by the businesses contributed to the Apollo Operating Group prior to July 13, 2007. For this purpose, income attributable to carried interest on private equity funds related to either carry-generating transactions that closed prior to July 13, 2007 or carry-generating transactions in respect of which a definitive agreement was executed, but that did not close, prior to July 13, 2007 shall be treated as having been earned prior to that date. Undistributed earnings generated through the date of Reorganization that were payable to the managing partners and the contributing partners were approximately $193.0 million (see “Capitalization—Footnote (1)”) and $387.0 million, and were included in our consolidated and combined statements of financial condition as of March 31, 2008 and December 31, 2007, respectively. In addition, we have also entered into a Tax Receivable Agreement with our managing partners and contributing partners which requires us to pay them 85% of any tax savings received by APO Corp. from our step-up in tax basis. In our condensed and consolidated financial statements, the item Due to Affiliates includes $520.3 million payable to our managing partners and contributing partners in connection with the Tax Receivable Agreement as of March 31, 2008 and December 31, 2007.

As part of the Reorganization, the managing partners and the contributing partners received the following:

 

•

Apollo Operating Group units having a fair value on issuance date of approximately $5.6 billion (subject to five or six year forfeiture);

 

•

$1,224 million in cash in July 2007, excluding any potential contingent consideration;

 

•

In January 2008 and April 2008, a preliminary and final distribution related to a contingent consideration of $37.7 million. The determination of the amount and timing of the distribution were based on net income with discretionary adjustments, all of which were determined by Apollo Management Holdings GP, LLC, the general partner of AMH. Included in the distribution were AAA restricted depositary units (“RDUs”) valued at approximately $12.7 million and a distribution of interests in Apollo VIF Co-Investors, LLC in settlement of deferred compensation units in Apollo Value Investment Offshore Fund, Ltd. of approximately $0.8 million; and

 

•

The fair value of carried interest related to the sale of portfolio companies where definitive sales contracts were executed but had not closed at July 13, 2007. We have accrued an estimated payment of approximately $193.0 million (see “Capitalization—Footnote (1)”) and $387.0 million at March 31, 2008 and December 31, 2007, respectively.

The Historical Investment Performance of Our Funds

In this “Prospectus Summary” and elsewhere in this prospectus, 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 the general partners of which have not been contributed to Apollo Global Management, LLC.

When considering the data presented in this prospectus, you should note that the historical results of our funds are not indicative of the future results that you should expect from such funds, from any future funds we may raise or from your investment in our Class A shares. An investment in our Class A shares is not an investment in any of the Apollo funds, and the assets and revenues of our funds are not directly available

 

to us. As a result of the deconsolidation of most of our funds, we will not be consolidating those funds in our financial statements for periods after either August 1, 2007 or November 30, 2007. The historical and potential future returns of the funds we manage are not directly linked to returns on our Class A shares. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in our Class A shares. However, poor performance of the funds that we manage would cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and in all likelihood the value in our Class A shares. There can be no assurance that any Apollo fund will continue to achieve its historical results.

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

 

•

our private equity funds’ rates of return, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains, which may never be realized;

 

•

our funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, including the availability of debt capital on attractive terms, and we may not be able to achieve the same returns or profitable investment opportunities or deploy capital as quickly or that favorable financial market conditions will exist;

 

•

the historical returns that we present in this prospectus derive largely from the performance of our earlier private equity funds, whereas future fund returns will depend increasingly on the performance of our newer funds, which may have little or no investment track record;

 

•

Fund VI and Fund VII are several times larger than our previous private equity funds, and we may not be able to deploy this additional capital as profitably as our prior funds;

 

•

the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has not occurred with respect to all of our funds and we believe is less likely to occur in the future;

 

•

our track record with respect to our capital markets funds is relatively short as compared to our private equity funds and five out of nine of our capital markets funds commenced operations in the eighteen months prior to March 31, 2008;

 

•

in recent years, there has been increased competition for private equity investment opportunities resulting from the increased amount of capital invested in private equity funds and periods of high liquidity in debt markets; and

 

•

our newly established capital markets funds may generate lower returns during the period that they take to deploy their capital.

Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund IV has generated a 12% gross IRR and 10% net IRR since inception, while Fund V has generated a 68% gross IRR and 52% net IRR since inception. Accordingly, you should realize that the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by any particular fund, or for our private equity funds as a whole. Future returns will also be affected by the applicable risks described elsewhere in this prospectus, including risks of the industries and businesses in which a particular fund invests. See “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.”

 

Recent Developments

Subsequent to March 31, 2008, Fund VII raised an additional $2.3 billion of committed capital and as of the date hereof, Fund VII has raised over $14.0 billion of committed capital and has a target of $15.0 billion. As of June 30, 2008, our AUM for our private equity segment was $31.5 billion.

Subsequent to March 31, 2008, the capital markets segment raised approximately $4.4 billion as of the date hereof, centering on EPF, AIE I, AIE II, AIC, ACLF, COF I and COF II, which brings our AUM for our capital markets segment to $13.2 billion as of June 30, 2008.

Beginning in July 2007, the financial markets encountered a series of events from the sub-prime contagion to the ensuing credit crunch. These events led to a significant dislocation in the capital markets and created a backlog in the debt pipeline. Much of the backlog is left over from debt raised for large private equity-led transactions which reached record levels in 2006 and 2007. This record backlog of supply in the debt markets has materially affected the ability and willingness of lenders to fund new large private equity-led transactions and has applied downward pressure on prices of outstanding debt. Due to the difficulties in financing transactions in this market, the volume and size of traditional private equity-led transactions has declined significantly. We are drawing on our long history of investing across market cycles and are deploying capital in the following ways:

 

•

We are looking to acquire distressed securities in industries that we know well. Examples include investments in the transportation, media, financial services and packaging industries. We believe that we can find good companies with stressed balance sheets in this market at attractive prices.

 

•

We are investing in debt securities of companies that are performing well, but are attractively priced due to the disruption in the debt markets. For example, we are able to buy portfolios of performing debt from motivated sellers, such as financial institutions, at attractive rates of return.

 

•

We are taking advantage of more creative structures to use our equity to deleverage a company’s balance sheet and take a controlling position.

 

•

We are building our strategic platforms through the acquisition of synergistic add-on opportunities.

Our combination of traditional buyout investing with a “distressed option” has proven successful throughout economic cycles and has allowed us to achieve attractive rates of return for our funds in different economic and market environments. However, we cannot assure you that we will be successful in implementing this strategy in the current economic and market environments. See “Risk Factors—Risks Related to Our Businesses—Difficult market conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, net income and cash flow and adversely affect our financial prospects and condition.”

In light of the current adverse conditions in the financial markets, returns for funds may be lower than they were historically and our fundraising efforts may be challenging. While these conditions last, we will continue to focus on investing in distressed debt markets and raising capital for funds focusing on distressed debt markets. In particular, we formed two new capital markets funds: COF I and COF II in April 2008. Both funds seek to capitalize on the recent dislocations in the credit market by opportunistically investing through privately negotiated transactions in a broad range of debt and debt-related securities, including bank debt, publicly traded debt securities and “bridge” financings, using a wide variety of investment types and transaction structures. As of the date hereof, COF I is fully funded with $1.2 billion of committed capital, including a commitment by one of our Strategic Investors of $1.0 billion. COF I began investing in April 2008. As of the date hereof, COF II has raised approximately $1.5 billion of committed capital. COF II began investing in June 2008.

 

In April 2008, we formed AIE II, an unregistered private closed-end investment fund that utilizes the same strategy as AIE I.

We have formed a team of investment professionals to explore opportunities in commodities and in commodity businesses. We are also in the process of forming a team of investment professionals to explore opportunities in real estate.

We intend to form a strategic partnership for sourcing and making private equity investments in Europe with Lazard Group LLC (“Lazard”). The strategic partnership will focus on private equity investments in companies that have a majority of their assets and employees located in Europe. Individuals from each firm will be dedicated to the effort. The team will work closely with their colleagues across Europe, leveraging our strong track record in private investment and Lazard’s European presence and history of advising on merger and acquisitions transactions. Separately, Apollo and Lazard will continue to work with other financial advisory and private equity firms, respectively, in the ordinary course of business.

On April 4, 2008, we announced our first cash distribution amounting to $0.33 per Class A share, resulting from the first quarter 2008 quarterly distribution of $0.16 per Class A share plus a special distribution of $0.17 per Class A share primarily resulting from the sale by Fund V of Goodman Global, Inc., one of its portfolio companies, to affiliates of another private equity firm, in February 2008. The $111.3 million aggregate distribution was paid to the owners of the Apollo Operating Group. Of this amount, $32.2 million was received by Apollo Global Management, LLC and distributed to its Class A shareholders of record on April 18, 2008. Additionally, on July 15, 2008, we declared a cash distribution amounting to $0.23 per Class A share, resulting from our second quarter 2008 quarterly distribution of $0.16 per Class A share plus a special distribution of $0.07 per Class A share primarily resulting from realizations from (i) portfolio companies of Fund IV, Sky Terra Communications, Inc. and United Rentals, Inc., (ii) dividend income from a portfolio company of Fund VI, and (iii) interest income related to debt investments of Fund VI. This $77.6 million aggregate distribution was paid to the owners of the Apollo Operating Group. Of this amount, $22.4 million was received by Apollo Global Management, LLC and distributed on July 25, 2008, to its Class A shareholders of record on July 18, 2008.

On June 18, 2008, the company and certain of its affiliates, including Hexion Specialty Chemicals, Inc. (“Hexion”), a portfolio company of Funds IV and V, commenced legal action in Delaware to declare its contractual rights with respect to the Agreement and Plan of Merger (the “Merger Agreement”) by and among Hexion, Nimbus Merger Sub, Inc. and Huntsman Corporation (“Huntsman”). In this suit, Hexion alleges, among other things, that it believes that the capital structure agreed to by Huntsman and Hexion for the combined company is no longer viable because of Huntsman’s increased net debt and decreased earnings. The suit alleges that while both companies individually are solvent, consummating the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent. The suit alleges that, in light of this conclusion, Hexion does not believe that the banks will provide the debt financing for the merger contemplated by their commitment letters. The suit also alleges that in light of the substantial deterioration in Huntsman’s financial performance, the increase in its net debt and the expectation that the material downturn in Huntsman’s business that has occurred will continue for a significant period of time, Huntsman has suffered a material adverse effect as defined in the Merger Agreement. The suit further seeks a declaration that the company and certain of its affiliates have no liability to Huntsman in connection with the merger.

On June 23, 2008, the company, Leon Black, Joshua Harris and certain of the company’s affiliates were named as defendants in a lawsuit filed by Huntsman in Texas. Huntsman asserts certain fraud and tortious interference claims in connection with the facts surrounding the Merger Agreement and seeks, among other things, damages in excess of $3.0 billion. The company believes, after consulting with its counsel, that the Huntsman lawsuit is without merit and intends to vigorously defend itself.

 

On July 2, 2008, Huntsman filed an answer and counterclaims in the lawsuit filed in Delaware by the company and certain of its affiliates described above, which asserts claims against the company and certain of its affiliates, including Hexion, in connection with the Merger Agreement including breach of contract, breach of the duty of good faith and fair dealing, tortious interference with contract, and defamation. The company believes, after consulting with its counsel, that the claims alleged in Huntsman’s answer and counterclaims are without merit.

On July 7, 2008, the company and certain of its affiliates, including Hexion, filed an amended and supplemental complaint against Huntsman in the Delaware action. In this complaint, the company and certain of its affiliates assert the same claims as set forth in the June 18, 2008 complaint. In addition, they seek a declaration that Huntsman’s extension of the termination date of the Merger Agreement to October 2, 2008 was invalid, and they assert that Huntsman breached the Merger Agreement by bringing suit in Texas.

The Delaware court has scheduled trial to begin September 8, 2008.

On July 16, 2008, the company was joined as a defendant in a pre-existing purported class action pending in Massachusetts federal court against, among other defendants, numerous private equity firms. The suit alleges that beginning in mid-2003 the company, the other private equity firm defendants, and other unidentified alleged co-conspirators, violated U.S. antitrust laws by forming “bidding clubs” or “consortia” that, among other things, rigged the bidding for control of various public corporations, restricted the supply of private equity financing, fixed the prices for target companies at artificially low levels, and allocated amongst themselves an alleged market for private equity services in leveraged buyouts. The suit seeks class action certification, declaratory and injunctive relief, unspecified damages, and attorneys’ fees. The company believes that the lawsuit is without merit and intends to defend itself vigorously.

Investment Risks

An investment in our Class A shares involves a high degree of risk. Some of the more significant challenges and risks include those associated with our susceptibility to conditions in the global financial markets and global economic conditions, the volatility of our revenue, net income and cash flow, our dependence on our managing partners and other key investment professionals, our ability to retain and motivate our existing investment professionals and recruit, retain and motivate new investment professionals in the future and risks associated with adverse changes in tax law and other legislative or regulatory changes. See “Risk Factors” for a discussion of the factors you should consider before investing in our Class A shares.

Our Corporate Information

Apollo Global Management, LLC was formed in Delaware on July 3, 2007. Our principal executive offices are located at 9 West 57th Street, New York, New York 10019, and our telephone number is (212) 515-3200.

 

The Offering

Shares Offered for Resale by the Selling Shareholders in this Offering

37,324,540 Class A shares

Shares Outstanding:

 

Class A Shares

97,324,541 Class A shares

 

Class B Shares

1 Class B share

Shares Held by Our Managing Partners:

 

Class A Shares

None

 

Class B Share

Our managing partners indirectly hold the single Class B share that we have issued to BRH, representing 86.5% of the total voting power of our shares entitled to vote.

Apollo Operating Group Units Held:

 

By Us

97,324,541 or 28.9% of the total Apollo Operating Group units

 

Indirectly By Our Managing Partners and Contributing Partners

240,000,000 or 71.1% of the total Apollo Operating Group units

Voting:

 

Class A Shares

One vote per share (except that Class A shares held by the Strategic Investors and their affiliates do not have any voting rights).

 

Class B Share

Initially, 240,000,000 votes. In the event that a managing partner or contributing partner, through Holdings, exercises his right to exchange the Apollo Operating Group units that he owns through his partnership interest in Holdings for Class A shares, the voting power of the Class B share will be proportionately reduced.

 

Voting Rights

Holders of our Class A shares (other than the Strategic Investors and their affiliates, who have no voting rights) and our Class B share vote together as a single class on all matters submitted to our shareholders for their vote or approval. So long as the Apollo control condition is satisfied, however, our manager manages all of our operations and activities and exercises substantial control over extraordinary matters and other structural changes. You will have only limited voting rights on matters affecting our businesses and will have no right to elect our manager, which is owned and controlled by our managing partners. Moreover, our managing partners, through their ownership of BRH, hold 86.5% of the total combined voting power of our shares entitled to vote and thus are able to exercise control over all matters requiring shareholder approval. See “Description of Shares.”

 

Use of Proceeds

We will not receive any proceeds from the sale of the Class A shares pursuant to this prospectus.

 

Cash Dividend Policy

Our intention is to distribute to our Class A shareholders on a quarterly basis substantially all of our net after-tax cash flow from operations in excess of amounts determined by our manager to be necessary or

 

appropriate to provide for the conduct of our businesses, to make appropriate investments in our businesses and our funds, to comply with applicable law, to service our indebtedness or to provide for future distributions to our Class A shareholders for any one or more of the ensuing four quarters. Our quarterly dividend is determined based on available cash flow from our management companies as well as any special activities which provide excess cash flow from our private equity or capital markets funds. Items such as the sale of a portfolio company, dividends from portfolio companies and interest income from the funds debt investments typically provide excess cash flows for distribution. On April 4, 2008, we announced our first cash distribution amounting to $0.33 per Class A share, resulting from the first quarter 2008 quarterly distribution of $0.16 per Class A share plus a special distribution of $0.17 per Class A share primarily resulting from the sale by Fund V of Goodman Global, Inc., one of its portfolio companies, to affiliates of another private equity firm, in February 2008. The $111.3 million aggregate distribution was paid to the owners of the Apollo Operating Group. Of this amount, $32.2 million was received by Apollo Global Management, LLC and distributed to its Class A shareholders of record on April 18, 2008. Additionally, on July 15, 2008, we declared a cash distribution amounting to $0.23 per Class A share, resulting from our second quarter 2008 quarterly distribution of $0.16 per Class A share plus a special distribution of $0.07 per Class A share primarily resulting from realizations from (i) portfolio companies of Fund IV, Sky Terra Communications, Inc. and United Rentals, Inc., (ii) dividend income from a portfolio company of Fund VI, and (iii) interest income related to debt investments of Fund VI. This $77.6 million aggregate distribution was paid to the owners of the Apollo Operating Group. Of this amount, $22.4 million was received by Apollo Global Management, LLC and distributed on July 25, 2008, to its Class A shareholders of record on July 18, 2008. Because we will not know what our actual available cash flow from operations will be for any year until the end of such year, we expect that the fourth quarter dividend payment will be adjusted to take into account actual net after-tax cash flow from operations for that year. From time to time, management may also declare special quarterly distributions based on investment realizations. Our Class B shareholder is not entitled to any dividends.

The declaration, payment and determination of the amount of our quarterly dividend will be at the sole discretion of our manager. We cannot assure you that any dividends, whether quarterly or otherwise, will or can be paid. See “Cash Dividend Policy” for a discussion of the factors our manager is likely to consider in regard to our payment of cash dividends.

Because we are a holding company that owns intermediate holding companies, the funding of each dividend, if declared, will occur in three steps, as follows:

 

•

first, we will cause one or more entities in the Apollo Operating Group to make a distribution to all of its partners, including our

 

wholly-owned subsidiaries APO Corp. and APO Asset Co., LLC (as applicable), and Holdings, on a pro rata basis;

 

•

second, we will cause our intermediate holding companies, APO Corp. and APO Asset Co., LLC (as applicable), to distribute to us, from their net after-tax proceeds, amounts equal to the aggregate dividend we have declared; and

 

•

third, we will distribute the proceeds received by us to our Class A shareholders on a pro rata basis.

If Apollo Operating Group units are issued to other parties, such as employees, such parties would be entitled to a portion of the distributions from the Apollo Operating Group as partners described above.

In addition, the partnership agreements of the Apollo Operating Group partnerships provide for cash distributions, which we refer to as “tax distributions,” to the partners of such partnerships if the general partners of such partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. Federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). The Apollo Operating Group partnerships will make tax distributions only to the extent distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities and all such distributions will be made to all partners on a pro rata basis based upon their respective interests in the applicable partnership. No such tax distribution will necessarily be required to be distributed by us and there can be no assurance that we will pay cash dividends on the Class A shares in an amount sufficient to cover any tax liability arising from the ownership of Class A shares.

 

Managing Partners’ and Contributing Partners’ Exchange Rights

Subject to certain procedures and restrictions (including the vesting schedules applicable to our managing partners and any applicable transfer restrictions and lock-up agreements), at any time and from time to time, each managing partner and contributing partner has the right to cause Holdings to exchange Apollo Operating Group units for Class A shares to sell such Class A shares at the prevailing market price (or at a lower price that such managing partner or contributing partner is willing to accept) and to distribute the net proceeds of such sale to such managing partner or contributing partner. We have reserved for issuance 240,000,000 Class A shares, corresponding to the number of existing Apollo Operating Group units held by our managing partners and contributing partners. To effect an exchange, a managing partner or contributing partner, through Holdings, must

 

simultaneously exchange one Apollo Operating Group unit, being an equal limited partner interest in each Apollo Operating Group entity, for each Class A share received. As a managing partner or contributing partner exchanges his Apollo Operating Group units, our interest in the Apollo Operating Group units will be correspondingly increased and the voting power of the Class B share will be correspondingly reduced. If and when any managing partner or contributing partner, through Holdings, exchanges an Apollo Operating Group unit for a Class A share of Apollo Global Management, LLC, the relative economic ownership positions of the exchanging managing partner or contributing partner and of the other equity owners of Apollo (whether held at Apollo Global Management, LLC or at the Apollo Operating Group) will not be altered. See “Our Structure—Reorganization—Holding Company Structure” for further discussion of our Reorganization structure.

Any exchange of the Apollo Operating Group units generally is expected to result in increases in the tax basis of the tangible and intangible assets of APO Corp. that would not otherwise have been available. These increases in tax basis are expected to increase (for tax purposes) the depreciation and amortization deductions available to APO Corp. and therefore reduce the amount of tax that APO Corp. would otherwise be required to pay in the future. APO Corp. has entered into a tax receivable agreement with Holdings whereby it agrees to pay to Holdings 85% of the amount of actual cash savings, if any, in U.S. Federal, state and local income taxes that APO Corp. realizes as a result of these increases in tax basis. In the event that other of our current or future subsidiaries become taxable as corporations and acquire Apollo Operating Group units in the future, or if we become taxable as a corporation for U.S. Federal income tax purposes, we expect that each will become subject to a tax receivable agreement with substantially similar terms. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” and “Unaudited Condensed Consolidated Pro Forma Financial Information.”

 

Trading

We intend to apply for our Class A shares to be listed on the NYSE under the symbol “        .” The listing is subject to approval of our application.

 

Risk Factors

Please read the section entitled “Risk Factors” beginning on page 28 for a discussion of some of the factors you should carefully consider before deciding to invest in our Class A shares.

References in this section to the number of our Class A shares outstanding, and the percent of our voting rights held, exclude:

 

•

240,000,000 Class A shares issuable upon exchange of the Apollo Operating Group units and interests in our Class B share by Holdings on behalf of our managing partners and contributing partners;

 

•

interests granted or reserved under our equity incentive plan, consisting of:

 

•

20,477,101 restricted share units (“RSUs”) that were granted in 2007 and 6,403,553 that were granted (net of forfeited awards) in the first quarter of 2008, subject to vesting, to certain employees and consultants;

 

•

an additional 2,586,432 RSUs (net of awards forfeited in the second quarter of 2008) that were granted on June 30, 2008; and

 

•

effective as of January 1, 2008, 25,756,931 additional interests in respect of Class A shares that were reserved for issuance under the equity incentive plan, for a total number of shares covered by awards issued and reserved for issuance, as of January 1, 2008, of 78,706,931 shares. The plan is subject to automatic increases annually.

 

Summary Historical and Other Data

The following summary historical consolidated and combined financial and other data of Apollo Global Management, LLC should be read together with “Our Structure,” “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated and combined financial statements and related notes included elsewhere in this prospectus and the unaudited condensed consolidated pro forma financial information and notes thereto included elsewhere in this prospectus under “Unaudited Condensed Consolidated Pro Forma Financial Information.”

We derived the summary historical consolidated and combined statements of operations data of Apollo Global Management, LLC for the years ended December 31, 2007, 2006 and 2005 and the summary historical consolidated and combined statements of financial condition data as of December 31, 2007 and 2006 from our audited consolidated and combined financial statements, which are included elsewhere in this prospectus.

We derived the summary historical consolidated and combined statements of operations data for the years ended December 31, 2004 and 2003 and the summary consolidated and combined statements of financial condition data as of December 31, 2005, 2004 and 2003 from our unaudited consolidated and combined financial statements which are not included in this prospectus. The unaudited consolidated and combined financial statements have been prepared on substantially the same basis as the audited consolidated and combined financial statements and include all adjustments that we consider necessary for a fair presentation of our consolidated and combined financial position and results of operation for all periods presented.

We derived the summary historical condensed consolidated and combined statement of operations of Apollo Global Management, LLC for the three months ended March 31, 2008 and 2007 and the summary historical condensed consolidated and combined statement of financial condition data as of March 31, 2008 from our unaudited condensed consolidated and combined financial statements, which are included elsewhere in this prospectus. The unaudited condensed consolidated and combined financial statements of Apollo Global Management, LLC have been prepared on substantially the same basis as the audited consolidated and combined financial statements and include all adjustments that we consider necessary for a fair presentation of the company’s consolidated and combined financial condition and results of operations for all periods presented.

The summary historical financial data are not indicative of our expected future operating results. In particular, after undergoing the Reorganization on July 13, 2007 and providing liquidation rights to investors of most of the funds we manage on either August 1, 2007 or November 30, 2007, Apollo Global Management, LLC no longer consolidates in its financial statements most of the funds that have historically been consolidated in our financial statements.

 

 

		Three months ended March 31,								Year ended December 31,
		2008 (c)				2007 (c)				2007 (c)				2006 (c)				2005				2004				2003
		(in thousands)
Statement of Operations Data
Revenues:
Advisory and transaction fees from affiliates		$	72,975			$	26,399			$	150,191			$	147,051			$	80,926			$	67,503			$	42,126
Management fees from affiliates			84,692				31,210				192,934				101,921				33,492				26,391				9,299
Carried interest (loss) income from affiliates			(142,238	)			67,301				294,725				97,508				69,347				67,370				25,915
Total Revenues			15,429				124,910				637,850				346,480				183,765				161,264				77,340
Expenses:
Compensation and benefits			268,067				109,471				1,450,330				266,772				309,235				473,691				165,086
Interest expense—beneficial conversion feature			—				—				240,000				—				—				—				—
Interest expense			16,564				3,253				105,968				8,839				1,405				2,143				3,919
Professional fees			23,995				18,033				81,824				31,738				45,687				39,652				37,806
General, administrative and other			12,836				6,827				36,618				38,782				25,955				19,506				15,927
Placement fees			24,132				—				27,253				—				47,028				171				538
Occupancy			5,262				2,926				12,865				7,646				5,993				5,089				1,731
Depreciation and amortization			6,336				830				7,869				3,288				2,304				2,210				1,876
Total Expenses			357,192				141,340				1,962,727				357,065				437,607				542,462				226,883
Other (Loss) Income:
Net (losses) gains from investment activities			(125,300	)			753,017				2,279,263				1,620,554				1,970,770				2,826,300				1,809,319
Dividend income from affiliates			—				79,836				238,609				140,569				25,979				178,620				188,549
Interest income			6,752				14,924				52,500				38,423				33,578				41,745				73,064
(Loss) income from equity method investments			(2,639	)			584				1,722				1,362				412				1,010				321
Other (loss) income			(468	)			487				(36	)			3,154				2,832				3,098				3,457
Total Other (Loss) Income			(121,655	)			848,848				2,572,058				1,804,062				2,033,571				3,050,773				2,074,710
(Loss) Income Before Income Tax Tax Benefit (Provision) and Non-Controlling Interest			(463,418	)			832,418				1,247,181				1,793,477				1,779,729				2,669,575				1,925,167
Income tax benefit (provision)			2,494				(1,771	)			(6,726	)			(6,476	)			(1,026	)			(2,800	)			(2,506	)
(Loss) Income Before Non-Controlling Interest			(460,924	)			830,647				1,240,455				1,787,001				1,778,703				2,666,775				1,922,661
Non-Controlling Interest			364,520				(686,606	)			(1,810,106	)			(1,414,022	)			(1,577,459	)			(2,191,420	)			(1,725,815	)
Net (Loss) Income		$	(96,404	)		$	144,041			$	(569,651	)		$	372,979			$	201,244			$	475,355			$	196,846
Statement of Financial Condition Data (as of period end)
Total Assets		$	4,637,060			$	11,187,967			$	5,115,642			$	11,179,921			$	7,571,249			$	7,798,333			$	7,267,359
Total Debt Obligations			1,056,406				78,017				1,057,761				93,738				20,519				22,262				42,061
Total Equity			80,503				431,667				96,043				484,921				338,625				406,672				190,860
Non-Controlling Interest			2,073,693				9,971,875				2,312,286				9,847,069				6,556,621				6,843,076				6,843,741
Other Data (non-U.S. GAAP):
Economic Net (Loss) Income (a)		$	(57,341	)		$	145,368			$	152,846			$	376,600			$	198,860			$	475,796			$	196,962
Private equity dollars invested (b)			3,166,342				359,998				8,647,912				5,216,715				686,663				819,843				1,544,671
Assets Under Management (as of period end) (in millions):
Private Equity		$	30,553			$	19,534			$	30,237			$	20,186			$	18,734			$	9,765			$	9,200
Capital Markets			10,141				6,028				10,118				4,392				2,463				1,557				529
Total AUM		$	40,694			$	25,562			$	40,355			$	24,578			$	21,197			$	11,322			$	9,729

 

(a)

Economic Net Income (“ENI”) is a key performance measure used by management in evaluating the performance of our private equity and capital markets segments, as the amount of management fees, advisory and transaction fees and carried interest income are indicative of the company’s performance. ENI is a measure of profitability and has certain limitations in that is does not take into account certain items included under U.S. GAAP. ENI represents segment income (loss), which excludes the impact of non-cash charges related to equity-based compensation, income taxes and Non-Controlling Interest. In addition, segment data excludes the assets, liabilities and operating results of the Apollo funds that are included in the consolidated and combined financial statements. We believe that ENI is helpful to an understanding of our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. Refer to the section titled “Managing Business Performance” on page 97 for a more comprehensive explanation as to how economic net income is used to manage and evaluate our business.

 

Below is a reconciliation of our net (loss) income for the three months ended March 31, 2008 and 2007 and the years ended December 31, 2003 through 2007 to ENI for such periods:

 

		Three months ended March 31,								Year ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(in thousands)
Net (Loss) Income :		$	(96,404	)		$	144,041			$	(569,651	)		$	372,979			$	201,244			$	475,355			$	196,846
(i) Adjusted for the impact of non-cash charges related to equity-based compensation			283,277				189				989,849				—				—				—				—
(ii) Income tax (benefit) provision			(2,494	)			1,771				6,726				6,476				1,026				2,800				2,506
(iii) Non-Controlling Interest (d)			(241,720	)			(633	)			(274,078	)			(2,855	)			(3,410	)			(2,359	)			(2,390	)
Economic Net (Loss) Income		$	(57,341	)		$	145,368			$	152,846			$	376,600			$	198,860			$	475,796			$	196,962

 

(b)	Private equity dollars invested represents the aggregate amount of newly funded or committed capital invested by our private equity funds during a reporting period.

 

(c)	Significant changes in the statement of operations for 2008 and 2007 compared to their respective comparative period are due to (i) the Reorganization, (ii) the deconsolidation of certain funds and (iii) the Strategic Investors Transaction.

 

Some of the significant impacts of the above items are as follows:

 

•

Revenue from affiliates increased due to the deconsolidation of certain funds.

 

•

Compensation and benefits, including non-cash charges related to equity-based compensation increased due to amortization of Apollo Operating Group units, RDUs and RSUs.

 

•

Interest expense increased as a result of conversion of debt on which the Strategic Investors had a beneficial conversion feature. Additionally, interest expense increased related to the $1.0 billion AMH credit facility obtained in April 2007.

 

•

Professional fees increased due to Apollo Global Management, LLC’s formation and ongoing new requirements.

 

•

Net gain from investment activities increased due to increased activity in our consolidated funds through the date of deconsolidation.

 

•

Non-Controlling Interest changed significantly due to the formation of Holdings and reflects net losses attributable to Holdings post-Reorganization.

 

(d)	Amounts include Non-Controlling Interest for Holdings, and a trust which holds certain of our corporate aircraft (the “Aircraft Trust”).