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 $23.00 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 201546 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). 1Q 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 no