From: Richard Kahn

From: Richard Kahn To: "Jeffrey E." <[email protected]> Subject: Fwd: Apollo Global Management LLC: Outlook Improving as Fund VIII Enters Carry Date: Wed, 03 Aug 2016 18:07:42 +0000 Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York NY 10022 tel Begin forwarded message: From: "Morgan Stanley" Subject: Apollo Global Management LLC: Outlook Improving as Fund VIII Enters Carry Date: Au ust 3. 2016 at 2:05:24 PM EDT To: < Reply-To: < WEALTH MANAGEMENT Subscription Notification: August 3 Apollo Global Management LLC: Outlook Improving as Fund VIII Enters Carry Michael J. Cyprys, CFA, CPA — Morgan Stanley August 3, 2016 6:02 PM GMT Results versus expectations: APO reported a large beat on EPS vs our estimates and consensus in 2Q 16. EPS of 98c beat our 14c est and beat consensus of 20c due to higher net performance fees (+51c), investment income (+34c) and fee-related earnings (+13c), offset slightly by higher taxes (-14c). The beat was mostly attributable to I) higher monitoring and transaction fees from rising deployment (+14c), 2) a positive mark on a large strategic investment held on APO's balance sheet (+40) and 3) Fund VIII entering EFTA00822649 carry earlier than expected (+22c). Cash earnings (after-tax) of 40c were above our 26c est driven by the transaction fee beat. APO paid out 93% of their distributable earnings for a dividend of 37c, above our 25c est and consensus of 28c. How does our investment thesis change? Slightly more positive on Equal-weight APO with deployment pace in Fund VIII accelerating, fund marks improving and robust fundraising in Credit. Despite a more positive view, we remain Equal-weight given muted outlook for cash earnings (which were down 17% y/y in 2Q) and the —16% run up in APO's stock price YTD vs peers who are up —3.3% on avg. We'd look to get more positive if: I) the current deployment pace in Fund VIII continues, pulling forward the fundraising for Fund IX to early 2017 (we model 4Q17-1Q18) and 2) Credit fundraising momentum persists and shifts gears to gathering assets with meaningfully higher economics to drive growth in the mgmt and incentive business. Fund returns better; Fund VIII enters carry earlier than expected: PE (+3.1% vs MSe -2.6%), Credit (+3.7% vs MSe +0.5%) and RE (+2.2% vs MSe +1%) all generated strong returns. For the second straight quarter, APO had some of the best credit performance vs peers who had a median return of +2.7% (see our Alt coverage 2Q key metric comp tables here). PE fund returns benefited from strong appreciation in privates, energy holdings and public debt positions. Better fund returns and Fund VIII entering carry earlier Click here to see the full report. This alert is sent from: Andrew Atlas, You received this because you asked to be alerted to: APOLLO GLOBAL MANAGEMENT, LLC Please contact your FA if you want to unsubscribe from the alerts. Disclosures: Please see the full report for risks, disclosures and other important information. Important disclosures regarding the relationship between the companies that are referenced in Morgan Stanley research and Morgan Stanley Wealth Management research are available on the Morgan Stanley Wealth Management disclosure website at Morgan Stanley Wealth Management Not Acting as Municipal Advisor Morgan Stanley Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the "Municipal Advisor Rule") and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule. Copyright The copyright in materials provided by Morgan Stanley is owned by Morgan Stanley & Co. LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. it) 2016 Morgan Stanley Smith Barney LLC. Member SIPC. EFTA00822650 IR I EFTA00822651