EFTA00645546.pdf

From: Richard Kahn To: Jeffrey Epstein <jeevacation@gmail.com> Subject: Fwd: Apollo Global Management LLC: Mixed Results in a Choppy Backdrop Date: Thu, 05 May 2016 21:43:19 +0000 Sent from my iPhone Begin forwarded message: From: "Morgan Stanley" <ms-wmir@morganstanlean> Date: May 5, 2016 at 4:36:11 PM EDT To: Subject: Apollo Global Management LLC: Mixed Results in a Choppy Backdrop Reply-To: <mswmir-cie-feedback@morganstanley.com> WEALTH MANAGEMENT Subscription Notification: May 5 Pin Apollo Global Management LLC: Mixed Results in a Choppy Backdrop Michael J. Cyprys, CFA, CPA — Morgan Stanley May 5, 2016 8:32 PM GMT Results versus expectations: APO reported a large miss on EPS vs our estimates and consensus in 1Q16. EPS loss of -18c missed our 9c est by -27c and consensus by -21c due to lower net performance fees (-23c) and investment income (-Sc), offset slightly by lower taxes (+4c). The miss was mostly attributable to a negative mark on a large strategic investment held on APO's balance sheet and in their funds. APO marked the strategic investment down -11% vs our -5% est. Stripping out the loss on the strategic investment, APO missed our EPS est by —3c. Cash earnings (pre-tax) of 26c was in-line but cash earnings (after-tax) of 25c, was 3c above our 22c est due to lower cash taxes. APO paid out 100% of their distributable earnings for a dividend of 25c, above our 20c est but below consensus at 27c. How does our investment thesis change? Unchanged with potential downside risk from incremental negative marks on APO's strategic EFTA00645546 investment which could be more than offset by lower taxes, higher fee-paying AuM levels on strong fundraising/deployment and catch-up carry in Fund VIII. We remain Equal-weight given muted outlook for cash earnings and the —9% run up in APO's stock price YTD vs peers who are down -2.5% on avg. We'd look to get more positive if the current deployment pace in Fund VIII continues over the next few quarters and if Credit fundraising picks up significantly from here, driving meaningful growth in cash earnings. Fund returns better but performance fees weaker: PE (+0.5% vs MSe -1%) and RE (+2.2% vs MSe 1.2%) fund performance beat our estimates while Credit (+1.1% vs MSe +1.4%) slightly lagged. APO had some of the best credit performance vs peers who had a median return of -0.5% (see our Alt coverage IQ key metric comp tables here). PE fund returns benefited from strong appreciation in Fund VIII of +9% while Fund VI and Fund VII were down -5%. Despite the strong overall fund returns, performance fees came in much lower than we were expecting at -$130m vs ou 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 https://www.morganstanley.com/online/researchdisclosures. 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. O 2016 Morgan Stanley Smith Barney LLC. Member SIPC. EFTA00645547