EFTA02714460

Morgan Stanley Apollo Global Management LLC I April 1.2015 MORGAN STANLEY RESEARCH April 1, 2015 Apollo Global Management LLC Winter Is Coming: Sell APO Into 1Q Earnings Industry View In-Line Stock Rating Price Target Underweight 523.00 Lowering 1Q divi estimate by 38% to 30c; we're now 38% below consensus. Risk is that dividends may skew towards our bear case in 2015-16 with APO largely through its harvesting mode. Near-term we see downside risk to APO shares with our 30c dividend estimate in 1Q that is 38% below consensus and 64% lower than 1Q14's 84c div. Our 2015 dividend of 1.96c is 6% below consensus and we see downside risk of —36c if the cash performance fees held in Fund VI escrow are not released this year (we expect this is released in 4Q15, but if timing is pushed out then our 2015 divi declines to 1.60c which is 23% below consensus). While we see long-term value in APO, given the firm's strong track record of above average market returns, we think the stock will likely underperform peers over the next 12 months due to a declining cash earnings and dividend trajectory. Also see our 1Q Alts preview here: US Asset Managers: Summer of Realizations: Buy BX and CG into 1Q Earnings (01 Apr 2015). 34 divi expected to be the lowest since 2Q12. If this trend persists, there could be a disconnect between near-term share-price performance and longer-term fundamentals. APO's high dividend yield (9.6% currently on cons 2015 divi) is a core part of the APO investment appeal in the short-term, until the outlook for cash earnings improves after another deployment cycle or incremental scaling of the credit business. We see downside risk to consensus dividend estimates and we're 6% below in 2015 (with downside bias to our estimate) and 13% below in 2016. No PE Monetizations Announced in 1Q: APO did not announce any PE exits in 1Q in which they can take cash carry. Yes APO exited Sprouts but that's held in the Fund VI escrow which is not released until the portfolio value exceeds 115% of cost (last at 104% in 4Q and likely declines further in 1Q with the Sprouts exit). We're estimating 3c in cash carry for PE in 1Q as we bake in potential dividend recaps in portfolio companies. APO announced sales of Brit Insurance and Great Wolf in 1Q which we estimate could generate 21c of cash carry but we do not expect these to close until 2Q or 3Q. CNS Monitoring fee expired in 4Q, drops to zero in 1Q: this drives a 29% decline in credit mgmt fee revenues in 1Q15, worth 8c to EPS. We're relatively less concerned about this as it's been expected for some time now and does not impact cash earnings or the dividend... but presents headline risk to reported EPS. Founder and significant shareholder lock-ups expired March 29, could MORGAN STANLEY & co. LLC Michael J. Cyprys, CM, CPA Nicholas Stelzner, CFA Apollo Global Management LLC ( APO N, APO US US Asset Managers Un tog States of Amenca Stock Rating Industry View Price target Shr price. dose (Mar 31, 2015) 52-Week Range Underweight In•Une 523.00 $21.60 531 59-20.02 Fiscal Year Ending 12/14 12/15e 12/16e 12/17e ModelWare EPS (5) 1.42 L88 2.15 2.27 Prior ModelWare EPS 1.86 2.07 2.22 (5) P/E 16.6 11.5 10.1 9.5 Consensus EPS (5)5 1.64 2.01 2.25 Div yid (%) 12.3 9.1 8.7 8.1 Unless otherwise noted. all meows am based on Mogan Stanley al adelivia• loam re** I • COM4tOindliu s worded by Thomsen Rea leis tataiatios r • Mag.,. StanIty Rose...eh *amides QUARTERLY MODELWARE EN :Si 2015e 2015e 2016e 2016e Quarter 2014 Prior Current Prior Current Q1 0.55 0.38 0.36 0.58 0.60 Q2 0.52 0.54 0.56 055 0.57 Q3 0.12 0.42 0.43 0.43 0.45 Q4 0.23 0.51 0.53 0.51 0.53 t • Malian Sunk,/ Reierch *tamales Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. EFTA_R1_02140295 EFTA02714460 Morgan Stanley Apollo Global Manarmant LLC I April 1.2015 MORGAN STANLEY RESEARCH potentially see insider share sales post black-out period in May: this is worth 7.6% of sharecount, which could pressure the shares near-term. While its possible none could sell, history suggests partial selling. Where we could be wrong: higher than expected divi could be driven by 1) dividend recap that may not be reported in the press/loan data services, for which we pencil in 3c, 2) greater monetization of APO's GP stake in funds beyond the beyond the 4c that we model in 1Q for realized investment income, 3) dividend payout greater than 90% of cash earnings using on- balance sheet cash or funded through debt issuance (which we think is highly unlikely), 4) greater than expected management fee-related earnings which we estimate at 19c pre-tax, 15c after-tax, 5) greater net realized cash performance fees from the credit business which we model at 450m or 12c pre-tax. Changes to our Estimates: Lowering 1Q divi by 38% to 30c and lowering 1Q EPS estimate by 7% to 36c. Our 2015-16 dividend estimates decline by 15%/6% to 51.96/51.88 (that's 696/13% below cons). 2 EFTA_R1_02140296 EFTA02714461 Morgan Stanley Apollo Global Management LLC I April 1.2015 MORGAN STANLEY RESEARCH Apollo Global Management (APO, $21.60, Underweight, PT $23) Less attractive risk-reward as largely through cash harvesting vs peers; long-term potential in unlocking value from Athene but still early days $ 40 35 30 25 20 15 10 5 0 MY-15 544.13 w ,-1. 54.14 Mails 5•5-15 010,-10 a Ore Can Oaf 141 —macro pm. 4•4••••••• • Oren SNVi.P4 • 532 CO b44%i $23/401•11111 • 015 00 01%) S0uKK•'. Thomson Revues. Morgan slant•), ****** ch $23 Based on DCF and sum-of-the-parts; back into implied multiple Bull $32 11.3x 2016e Bull Case EPS Base $23 10.7x 2016e Base Case EPS Bear $15 nix 2016e Bear Case EPS Returns more in-line with historical. Fundraising +50% and deployment +25% above base case; faster Athene asset growth; carry taxed as ordinary income. Below historical returns with rising allocations to alternatives: 5% fee-paying AVM CAGR declining pace of harvesting investments; ramp to full corp. tax rate in 2019-20. Challenging exit and investing environment negative near- term marks on accrued performance fees, delayed eats; returns well below historical average, slower capital deployment and weaker fundraising environment; full corp. tax rate in 2018. Exhibit 1: Bull to Bear Drivers Impact ($lshare) Bun 3200 0 23 134 114 075 4 .9 Target 23.00 Pncit 22.01 ID 49) (2 ICI) (043) KO Bear 15 00 45- flow — 50) Fundraising and ollocadorp Investment Myna Invynamoot 10010 woods LP capital deployed aiMne lace% Why Underweight? • Less upside relative to our Overweight stocks, driven by Apollo's early cycle skew. We see lower cash earnings over the next several years as APO harvested its investments earlier than peers (80% thru harvesting vs peers at 45.65% thru) which leaves less upside at this point in APO's cycle. • Athene catalyst longer tailed with IPO potentially delayed to 2016 but we would look to get more positive as cash monetization approaches. • Expect lower fundraising at 19% of AVM in 2015-16 vs. peer average of 30% this drives fee- paying AUM CAGR of 5% in 2014-17 (below peer avg of 11%) Founder and significant shareholder lock-ups expire March 29th (worth 7.6% of share count) could weigh on the stock near-term Key Value Drivers • Athene: IPO as early as 4Q15 but most likely in 2016, resolution of internal control weaknesses, strategic actions should accelerate already strong asset growth: and shifting earnings profile toward fee-related earnings • Strategic actions: including acquisitions to further scale the credit and real estate businesses Potential Catalysts • Stronger fundraising • Continued pace of realizations • Strategic actions • Potential share buybacks Risks to Our Price Target • Upside: Better FPAuM growth, capital deployment accelerates, better returns • Downside: declining valuations reduce cash earnings (fewer exits or lower multiples); slower deployment 3 EFTA_R1_02140297 EFTA02714462 Morgan Stanley Apollo Global Manarmant LLC I April 1.2015 MORGAN STANLEY RESEARCH Headwinds for APO Declining performance fee (carry) receivable balance: this balance sheet receivable represents the amount of performance fees that could be realized in cash if the fund investments were liquidated. During 2014 the balance declined from $3.49 in 2013 to $1.31/share with about 70% of the beginning of period balance realized in cash in 2014 worth $2.33 to cash earnings. A similar 70% realization rate during 2015 would imply cash performance fees of $0.90 in 2015. This suggests downside risk to our $1.39 realized cash performance fee estimate (our est implies a 106% realization rate). Deployment in Fund um set to pick-up in 2015 (-7% invested and almost 20% committed) but realizations are still a few years away. Exhibit 2: EOP Gross Performance Fee (Carry) Receivable Balance (Smm) 2,500 2,000 1,500 1,000 500 1,867 2,367 -45-- 1,878 484 2010 2011 2012 2013 2014 ■ Private Equity Credit ■ Real Estate SOU1CO: COIN/Any Oati. Morgan Stinky AAAAA ICA 4 EFTA_R1_02140298 EFTA02714463 Morgan Stanley Apollo Global Manarmant LLC I Aced 1.2015 MORGAN STANLEY RESEARCH Exhibit 3: EOP Net Performance Fee Receivable Balance Per Share vs. Realized Carry Flow Through Rate 160% 140% 120% 100% 80% 60% 40% 20% 0% 2011 2012 2013 2014 2015E Realized Carry Flow Through Rate Performance Fee (Carry) Receivable Balance (RHS) $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Note. Realized carry flow through rate is calculated as the net realized carry tor the period as a % of the BOP net performance fee gainfirecewable balance. Source. Company Data. Morgan Stanley Research Exhibit 4: Net Performance Fee Receivable Balance Per Share Roll Forward Net Performance Fee (Carry) Receivable Balance Rollfoward 2011 2012 2013 2014 2015E BoP $3.41 $1.39 $2.64 $3.49 $1.31 Add: Fund Apprec ($1.10) $2.68 $4.60 $0.15 $1.00 Less: Realized Gain ($0.92) ($1.43) ($3.75) ($2.33) ($1.39) EoP $1.39 $2.64 $3.49 $1.31 $0.92 Flow Through Rate (%): Represents % of BoP Carry Balance that is Realized in Cash 2011 2012 2013 2014 2015E Realized Carry 26.9% 103.0% 142.0% 66.8% 106.2% Total Carry -32.3% 193.5% 173.9% 4.3% 76.2% Note Realized carry flow through rete is calculated as the net realized carry for the period as a % of the BOP net performance fee (cany)resenfable per share balance; Source. Company Data. Morgan Stanley Research Fee-paying AUM outflows In credit: net outflows to fee-paying AUM in credit of -$475m in 2014 or -0.5%, improved vs outflows of -$1.5b in 2013 or -3.1%. In our forward look we expect this stabilizes and build in solid growth from Athene. All in, were expecting about -513b in gross fee-paying inflows in each 2015-16, and on a net basis (net of outflows) we're expecting net inflows of $9.2b and $6.1b in 2015-16. Additionally, we're baking in $3b of additional sub-advised assets from Athene in each 2015-16. Potential upside to estimates if APO successfully scales the newly announced sub-advised relationship with Oppenheimer, but it's still early days and details of the product remain light (questions around specific type of credit products, liquidity provisions for retail, economics, risk mgmt etc). 5 EFTA_R1_02140299 EFTA02714464 Morgan Stanley Apollo Global Manarmant LLC I Aced 1.2015 MORGAN STANLEY RESEARCH Exhibit 5: Net Organic Fee-Paying AUM Flows in Credit (SMM) 2,500 2,000 1,500 1,031 2,017 1,000 500 0 (500) (1,000) (444) (472) (1,500) (2,000) (1,541) 2010 2011 2012 2013 2014 Note Net organic flows in credit ere tolcutsted by summing the subsenptoonsicapdel fused, distcobutoons and redemptions Imes m {PAO.. roll forward table. Source Company Data. ao•gen Stanley linear°, Founder and significant shareholder lock-ups expire March 29th: this is worth 7.6% of share count which could pressure the shares near-term. White its possible none could sell, history suggests partial selling. CNS Monitoring fee expires in 4Q14, drops to zero in 1Q15: We flag as a headline risk given the magnitude with an expected 29% decline in credit management fee revenues in 1Q15. This is worth 8c to 1Q15 EPS. But, we're not as concerned about this falling out of the run rate in 1Q15 because its been expected for some time now and does not impact cash earnings nor the dividend. 6 EFTA_R1_02140300 EFTA02714465 Morgan Stanley Model Summary Exhibit 6: APO Model Summary ••••• 044~40444944." Wadi Wear Tr atil• Van. Claw: -I Taco ;1= ital~11~94ITI 54.4 1•TeD•al Wan twat O.4♦a1rYw 1, 3 in IA» », 4> 2341 5.3• X0 in. ln I» I> la rr r• On 4% 454 12 tan I 1, 3 I3 "Me na lot 91,3 IMO I.40 Apollo Global Management LLC I Aprd 17015 MORGAN STANLEY RESEARCH ~VOW ~we " n 04" P " 2.2.1r• on us" on >I" hasp 09•94 Rtnan la IT PI W4 11242 11" In " m IA 11% 05•Mar• 9p• Cat Cam» Av Wpm .174 45. 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Ia) tin 010 0 0 SI 55 ♦ 55 • 111 MI TO To 014 025 50 113 55 55 »5 140 WI W.2 912 »It Irl 1.9 2 44 13 45 51 Ir 514 114 • I» / IV 11 IMO 00* 44 MI in MO Ma 415 e) Int. 0 1 0 no SI (bC. in% NM OM On 01 •1/ 56 IO 10• Ma no NO >13 at 211 41n 4n1 Ynl PA 4A ma Si Rh 0A 0% /16 nA 5351 11a On 0A nn as na Oa ea Jn •3% 4A Ø015 7 A TM .3A 14% 10% 4A run un 0 14 )A 10% 1311 an 41 711% .an »A »A 41.4 an 5554 33051 an in W5 24% ST TM EFTA_R1_02140301 EFTA02714466 Morgan Stanley Apollo Global Manarmant LLC I April 1.2015 MORGAN STANLEY RESEARCH Valuation and Risks Alternative Asset Managers: We value the stocks using a sum of the parts valuation supported by a discounted cash flow. Our DCF (COE of 11-14%, free cash flow = distributable earnings, terminal growth rate = 3% and betas benchmarked off BX's 1.6x) captures the long-term value of the business model, while the sum of the parts captures some of the shorter-term volatility. For our SOTP, we use 201.6 "Core FRE and apply a 15x multiple which is a 1-2 turn premium to traditionals reflecting value in long term locked up capital; apply 12x multiple on BDC income share; use DCF to estimate future carry and apply discount rate to represent volatile nature of carry; 10% haircut on accrued carry; 10% haircut on B/S assets. Apollo Global Management Upside risks include better FPAuM growth, accelerated capital deployment and better returns. Downside risks: declining valuations reduce cash earnings (fewer exits or lower multiples); slower deployment. 8 EFTA_R1_02140302 EFTA02714467 Morgan Stanley Apollo Global Manarmant LLC I April 1.2015 MORGAN STANLEY RESEARCH Disclosure Section The information and °priors in Morgan Staley Research were prepared by Morgan Staley & Co. LLC. andor Morgan Staley CT.V.M. S.A. anda Morgan Staley Mexico, Casa de Boise SA de C.V., at Morgan Stanley Canada United. As used in this disclosure section, "Morgan Staley" includes Morgan Stanley & Co. LLC, Morgan Stanley C.T.V.M. S.A. Morgan Staley Mexico. Casa de Boise SA de CV., Nagai Staley Canada United and their affiliates as necessary. Fa important disclosures. stock price charts and equity rating histories regaling conparies that are the subject of Was report, please see the Morgan Staley Research Molests° Website at bwiwinaganstarley.canfreseerclxisclostres. a contact your imestment representatia a Morgan Stanley Research at 1585 Broadway. (Attention: Research Management). New Yak. hhe. 10036 USA. Fa valuation methodology and risks associated with any nice targets referenced in this research report, please contact the Oient Swart Teen as idiom: US/Canada +1 800 303-2495; Hag Kong +852 2848-5999 Latin America +1 718 759-5444 (U.S.)-, union +44 (0)20-7425-8169: Singapore +65 68346860, Sydney +61 (0)2-9770-1505: Tokyo +81 (0)3-6836-9303. Alternalnely you may contact your imestment representatne a Maw Stanley Research* 1585 Broadway. (Attention: Research Management), New Yak. NY 10036 USA Analyst Certification The following analysts hereby certify that their dens about the comparies at their securities dscussed in this repot are accurately expressed and that they have not maned at win not recast direct a indrect compensation in exchange fix expressing specific recornmendaticnsoniews in ttis report: Nichael CYprys. Bless otherwise stated, the inchiduals listed on the we page of this report we research analysts. Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our solid managemerd party, which is malaria at www.morganstanley.carYinstitutionanresearchrcarlictpolicies. Important US Regulatory Disclosures on Subject Companies As of February 27. 2015. Morgan Staley beneficially owned 1% a more declass of common equity secuities of the blowing companies ocnered in Morgan Staley Research: Apollo Global Management LLC. EllaricRook Inc.. KKR & CO. LP.. Oaktree Capital Group. LLC. The Blackstone Gap LP., The Carlyle Groin LP., WisdornTree hastments, Inc.. Within the last 12 months. Morgan Stanley managed a coneraged a pudic offering (a 144A °kiting) of securities d Apollo Global Management U.C. Ares Management. LP.. FraNdin Resources Inc.. Imesco, KKR & CO. L.P., Legg Mason Inc.. Oaktree Capital Group LLC. OA Asset Management Plc, Be Blackstone Grow LP., The Carlyle Group LP.. Within the last 12 months, Morgan Stanley has received compensation for imestment barking senices bon Apollo Global Management LW, Ares Management. LP.. BlackFtcli Inc.. Franklin Resources Inc.. Imesco. KKR & CO. L.P., Legg Mason hc.. Oaktree Capital Gap. LLC, CM Asset Mareigelt Plc. lte Blackstone Group L.P., The Carlyle Group LP.. Virtus Imestment Partners Inc.. In the next 3 nuts, Morgan Stanley expects to receive a intends to seek carpersation fa irrastment banking senices from AllianceBemstein Hddng L.P., Apollo Global Management LLC. Ares Managernent. L.P., Black Inc.. Franklin Resources Inc.. [mesa KKR & CO. LP.. Legg Mason Inc.. LPL hwestment hbldngs Inc., Oaktree Capital Gap. LLC. OM Asset Management Plc. T. Rowe Price Gran. Inc.. The Blackstone Grow LP.. Be Carlyle Gap LP., VOUS Imestment Parties Inc., Waddell & Reed Financial Inc, Wiwi:entree blast:ants, it .. Wittin the last 12 months. Morgan Stanley has maned compensation for products and senices other than imestment baking sautes from AllianceBemstein Hoeing LP.. Apollo Global Management LLC. Ares Management. LP.. BlackRod< Inc.. Federated Inastors. hc.. Franklin Reserves Inc., Masco, Janus Capital Gap Inc., KKR & CO. LP., Legg Mason Inc., LPL it estment Holdings Inc., Oaktree Capital Grap, LLC. CM Asset Management Plc, T. Rowe Price Gap, Inc., The Blackstone Crap LP., The Carlyle Gap LP., Wits kwestment Partners Inc., Waddell & Reed Financial Inc. WisdomTree nestments. hc.. YOU-in the last 12 nulls. Mogan Staley has prodded a is proidrg imestment banking senices to, a has an iniestmant banking client relationship with, the following company: AllianceBenstein Holding LP., Apollo Global Management LLC, Ares Managtmant, LP.. BlackRodc Inc.. Frarklin Resources Inc., Immo°. KKR & CO. LP.. Legg Mason Inc.. LPL Imestment Hollings Inc., Oaktree Capital Gap. LLC. OM Asset Management Plc. T. Rowe Price Group. Inc.. The Blackstone Gap LP.. The Catyle Gap LP.. Virtus hiastmerd Partners Inc.. Waddell & Reed Financial Inc. ViAsdomTree Imestments, Inc.. Within the last 12 months. Morgan Stanley has either graded or is waking non-irwestrtent balking, securities-related senices to andict in the past has entered into an agreement to pride senices a has a chant relationship with the fdlowirg company. AllianoeBernstein Holdng LP.. Apollo Global Management LLC. Ares Management, LP., BlackRock Inc., Federated !mesh:es, Inc., Franldin Resources Inc., !mesa, Janis Capital Grow Inc., KKR & CO. LP.. Legg Mason Inc., LPL Imestment Holdings hc., Oaktree Capital Gap. LLC. OM Asset Management Plc. T. Rowe Rice Gap, Inc., The Blackstone Grap LP.. The Carlyle Group L.P., Virtus nestment Partners Inc.. Wadden & Reed Financial Inc. WisdomTree Intestments. Inc.. Morgan Staley & Co. LLC makes a market in the securities of AJlianceBemstein lioldng LP., Apollo Global Management LLC, BlackRoth Federated Imestors, Inc., Ratan Resources Inc., kwesco, Janus Capital Grap Inc., KKR & CO. LP.. Legg Mason Inc., LPL Imestment Hckings Oaktree Capital Gap. U.C. T. Rom Price Group Inc., Be Elladutate Group LP.. The Carlyle Gap L.P., Virtus iwastment Partners Inc.. Waddell & Reed Financial Inc, WisdanTree Irrestments. Inc.. The equity research analysts a strategsts principally responsible for the preparation of Morgan Staley Researth tea recoiled conpenSati0n based upon arias factors. incluing quality of research. investor dial feedback, stock picking, competitive factors. firm re ales and email iniestment balking reanues. Morgan Staley and Its affiliates do business that relates to companies/instruments cowed in Morgan Staley Research, inducing market making. inking lionidty and specialized trading, risk arbitrage and ether proprietary trading, Mot management, commercial baking. extension of ore& imestment senices a-d imestment baking. Morgan Stanley sells to and buys from customers the secuities/instruments of companies coated in Morgan Staley Research on a principal basis. Morgan Staley may hare a position in the debt of the Company a instruments discussed in this report. Certain disdosires listed abate we also for caripliance with applicable regulations in non-US jurist:fictions. STOCK RATINGS Morgan Staley MOS a relative rating system using term such as 0.emeight. Equal-weight, Not-Rated a Underweight (see definitions below). Morgan Staley does not assign ratings of Buy. Hold a Sell to the stocks we we . Oar...eight. Equal-weight. Not-Rated a-d Underweight we not the ernialent of buy. hold at sell. hest= staid carefully read the definitions of all ratings used in Morgan Staley Research. In addition, since Morgan Staley Research contains more compete information concerning the analysts %eve, knestors should cae&ily read Morgan Staley Research, in its entirety, and not infer the contents fran the rating alone In any case, ratings (or research) should not be used a relied won as imestment advice. An imeStCeS decision to buy or sell a stock should depend on inthidual circumstances (such as the iniesta% existing hddings) and either considerations. Global Stock Ratings Distribution (as cf Mach 31. 2015) For disclosure purposes only (in accordance wth NASD and NYSE requirements). we include the category heeings of Buy, Held, at Sell alongside ors ratings ciOrameight, Equal-weight. Not-Rated and Underweight. Morgan Staley does not assign ratings of Buy, Hold a Sell to the stocks we cow. Chaweight. Equalweight. Not-Rated and Underweigl are not the annelerd of buy. ltd. and sell but reoesent recommended relatne weightings (see defiritions below). To satisfy regUatay recairements, we correspond 0.erwaight. as most positive stock rating, with a buy recommendation; we correspond 9 EFTA_R1_02140303 EFTA02714468 Morgan Stanley Apollo Global Management LLC I Aced 1.2015 MORGAN STANLEY RESEARCH Equal-weight and Nat-Rated to hold and Underweight to sell recommendations, COVERAGE INVESTMENT BANKING OJENTS (IBC) respectively. UMVERSE STOCK RATING CATEGORY COUNT % OF TOTAL COUNT % OF TOTAL % OF RATING CC CATEGORY Overweight/Buy 1164 35% 331 43% 28% EqualweightlHold 1466 44% 353 46% 24% Not-Rated/Hold 100 3% 11 1% 11% Underweight/Sell 605 18% 80 10% 13% TOTAL 3,335 775 Data include corm= stock and ACRs caratly assigled ratings. lmestment Bating Clients an corrpanies from whom Morgan Staley received investment balking compensation in the last 12 montts. Analyst Stock Ratings Chemeight (0). The stock's total return is expected to exceed the average total return of the analyst's irdustry (a indusby teeMs) overage unherse, at a risk-adjusted basis. over the next 12-18 maths. Equal-weigh (E). The stock's total return is expected to be in line with the mange total (stun of the analyst's industry (a industry team's) coverage treerse, cn a risk-adjusted basis, char the ned 12-18 maths. Nat-Rated (142). Currently the analyst does not hate adequate cawicticri about the stock's total rettrn relathe to the average total rerun of the analyst's industry (a industry team's) caerage unease, at a riskeciusted basis. over the next 12-18 mats. underweight (U). The stock's total rerun is expected to be below the average total rettm d the analyst's industry (a industry team's) coverage treas.. co a risk-adjusted basis, over the next 12-18 months. Unless othavAse specified the time tame for price targets included in Morgan Stanley Research is 12 to 18 mat. Analyst Industry Views Attractive (A): The analyst expects the pedomence ci his cr her industry coinage umerse au the next 12-18 months to be Macao vs. the relment broad market benchmark, as indicated below. In-Lire (I): The arelyst expects the pabrmance of Ns a ha industry coverage uniterse as the next 12-18 moats to be in line with the relevant broad market benchmark, as incicated below. CAI tin rs (cy The analyst Wens the performance of his a her industry coverage uw.erse over the next 12-18 nulls with caution 'a. the relent breed maket benchmark, as indcated below. Benchmarks for each region ae as idiom: North America - S&P 500: Latin America - relaent MSCI country index a MSCI Latin America hdex: Etrope - MSCI Europe: Japan - TCPIX Asia • raiment MSCI country index a MSCI submcjonal index a MSCI AC Asia Peak ex Japan Mex. Stock Price, Price Target and Rating History (See Rating Definitions) Apollo Global Management LLC (APO.N) - As of 3/31/15 in USD Industry : US Asset Managers NA/1 • NA/ I • C/1 ♦NA/I e C/1 • 0/1 aV/I 34 NA 34 Wi 33 S ock Rating History: 3/1/12 i NA/I1 9/11/13 2 0/I; 11/8/13 : I/I1 1/16/14 2 NA/12 2/26/14 i 5/12 5/12/14 2 NA/I1 12/15/14 2 0/1 ice Target History: 9/11/13 : 332 11/13/13 : 34; 1/16/14 : NA; 2/26/14 : 34; 5/12/14 : NA; 12/15/14 : 24; 3/12/151 23 Source: Morgan Stanley Research Date Fermis% : POI/DD/YY Price Target No Price Target Assigned (RR) Stock Price (NotCoseredbyCurrent Analyst) Stock Price (Covered byC Analyst) Stock and Industry Ratings(abbrieustions belove) appear OF *Stook Rating/kidurtry View Stock Ratings: Overweight(0) Equal-weightlE) tOnderweieht(V) Not-Rated (NR) No Rating Available(NA) Industry View: Attractive (A) In-line (I) Cautious (C) Na Rating (RR) Ett4Ctivs lain40t.0 2014. the stocks c400.4 by Nor San Stanley NSW Pacer is W111 be rated relative to the analyst's industry tor industry team'sr coverage. Effective January 13. 2014. the industry view tanctakaphs for Morgan Stanley Asia Pacific axe as follows: relevant MSC! Country index or MSC' sub-regional index or NSC1 RC Asia Patine ex Japan Inge,. 10 EFTA_R1_02140304 EFTA02714469 Morgan Stanley Apollo Global Manarmant LLC I April 1.2015 MORGAN STANLEY RESEARCH Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclostres regarding the relationship between the companies that are the subject of Morgan Staley Research and Morgan Stanley Smith Barney LLC a Morgan Stanley or any al their afiliates, are mailable on the Magee Stanley Wealth Management disclosure v.iebsite at VAYN.mcrgEnstariley.corrYaiineiresearchcisclosures. Fa Morgan Staley specific disclosures, you may refer to anise. maganst alley . cordreseachdsclosures. Each Morgan Stanley Equity Research repot is renewed and appraed an Wee of Morgan Staley Smith Barney LLC. 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Apollo Gael Management LLC (WON) U (12/15.2014) $21.60 has Management, L P. (PREEN) E (12/150014) $18.54 KKR &CO. LP. (KKR.N) 0(12/150014) $22.81 Oalaree Capital Group. LLC (Q0KN) 0(12/15(2014) $51.66 The Bladdione Goup L.P. (BXN) 0(12/15(2014) $38.89 The Carlyle Group L.P. (CGO) E (12/15/2014) $27.10 Graseck CFA, Betsy L ElaaRook Inc. (BAN) 0(05/12/2014) $365.84 Franklin Resources Inc (BENN) E (05/1212014) $51.32 wesco (IVZN) E (05/12/2014) $3989 CMPeset Mmagernent Plc (Q#MN) 0(11/18/2014) $18.64 T. Rost Price Gulp, Inc. (TRON.0) E (0912/2014) $80.98 Whitehead CFA Thomas AllianceBernstein Flakfing LP. (AS N) E (05/120014) $30.87 Federated Westin. Inc (FIN) U (05/120014) $33.89 Janus Capital Goup Inc (JNS.N) E (09/290014) $17.19 Legg Meson knc. (LMN) E (05/12/2014) $55.20 LPL Westmont Holdings Inc (LPLAO) E (05/12/2014) $43.813 Urals Westmont Patters Inc. (VRTS0) E (05/12/2014) $130.77 Waddell & Reed Rnancial Inc (ADR.N) E(05/12/2014) $49.54 WsdomTree Iniestments. Inc. (WETF.0) 0(06/09/2014) $21.46 Stock Ratings are subject to change. Please see latest research for each corrpeny. • listalcal vices are not split Austad. 2015 Morgan Stanley 12 EFTA_R1_02140306 EFTA02714471