Ares About Ares News Ares Management, L.P. Reports Fourth Quarter and Full Year 2015 Results

Ares Management, L.P. Reports Fourth Quarter and Full Year 2015 Results

Feb292016
  • Total assets under management (“AUM”)1 increased to $93.6 billion, a 14.5% increase year over year
  • $10.6 billion in gross capital raised during the three months ended December 31, 2015 and $23.0 billion raised over the year ended December 31, 2015
  • Available Capital increased to $22.4 billion compared to $18.2 billion at December 31, 2014
    – AUM Not Yet Earning Fees reached a record $15.5 billion, an increase of 67.6% compared to December 31, 2014
  • Fee related earnings of $39.8 million and $177.0 million for the three months and year ended December 31, 2015, respectively, down 0.6% and up 20.2% from the three months and year ended December 31, 2014, respectively
  • Economic net income of $51.4 million and $216.4 million on a pre-tax basis for the three months and year ended December 31, 2015, respectively, compared to $64.7 million and $289.2 million for the prior year periods
    – Economic net income after tax of $42.6 million and $185.2 million, or $0.20 per unit2 and $0.87 per unit, for the three months and year ended December 31, 2015, respectively
  • Distributable earnings of $50.8 million and $230.6 million for the three months and year ended December 31, 2015, respectively, compared to $64.5 million and $232.8 million for the prior year periods
    – Distributable Earnings after tax per common unit of $0.23 and $0.91 for the three months and year ended December 31, 2015
  • Declared fourth quarter distribution of $0.20 per common unit for a full year distribution of $0.84
  • Fourth quarter net income attributable to Ares Management, L.P. of $0.2 million, inclusive of non-recurring expenses associated with discontinued merger-related activities
    – Net income attributable to Ares Management, L.P. for the twelve months ended December 31, 2015 of $19.4 million

 

LOS ANGELES -- Ares Management, L.P. (the "Company," "Ares," "we," and "our") (NYSE:ARES) today reported its financial results for its fourth quarter and year ended December 31, 2015.

 

"Despite challenging market conditions, we delivered strong results on several of our key metrics in 2015, including a record $23 billion in gross new capital raised, 14.5% growth in assets under management and 20.2% growth in our fee related earnings," said Tony Ressler, Chairman and Chief Executive Officer of Ares, "In addition, more than three quarters of our direct institutional capital raised in 2015 was derived from existing institutional investors, a testament to our strong investment performance and value we provide to our investors."

 

Ares reported growth in AUM and Fee Earning Assets Under Management ("FEAUM") of 14.5% and 11.3%, year over year, reaching $93.6 billion and $68.3 billion, respectively. Fourth quarter gross new capital raised totaled $10.6 billion, primarily driven by fundraising in the Private Equity and Direct Lending Groups, bringing the total gross capital raised for the year ended December 31, 2015 to $23.0 billion. Of the $10.6 billion raised during the fourth quarter, $10.1 billion is eligible to earn fees with $2.1 billion earning fees and another $8.0 billion expected to become FEAUM upon deployment or during the investment period.

 

"With over $22 billion of dry powder, including $13.5 billion in AUM not yet earning fees and available for deployment, we are well positioned to take advantage of the increasingly attractive market for new investment opportunities in 2016," said Michael Arougheti, President of Ares.

 

Ares declared a fourth quarter distribution of $0.20 per common unit payable on March 28, 2016 to common unitholders of record as of March 14, 2016.

 

Ares has also provided additional information in its Fourth Quarter and Full Year 2015 Earnings Presentation, which can be viewed at www.aresmgmt.com under "Investor Resources — Presentations and Reports."

 

(1) In this press release we refer to certain non-GAAP financial measures, including assets under management, fee earning assets under management, economic net income, fee related earnings, performance related earnings and distributable earnings. The definitions and reconciliations of these measures to the most directly comparable GAAP measures, where applicable, are included in this press release.

 

(2) Total units outstanding represents the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis, and the dilutive effects of the Company’s equity-based awards. See Exhibit F for more details.

 

ARES MANAGEMENT, L.P.

Key Performance Metrics as of December 31, 2015

($ in thousands, except unit data and as otherwise noted)

 

Three months ended
December 31,

 

%

 

Year ended
December 31,

 

%

 
   

2015

 

2014

 

Change

 

2015

 

2014(1)

 

Change

 

Management Fees (includes ARCC Part I Fees of $31,520 and $33,396 for the three months ended December 31, 2015 and 2014, respectively, and $121,491 and $118,537 for the year ended December 31, 2015 and 2014, respectively)

 

$165,905

 

$161,106

 

3%

 

$650,918

 

$598,046

 

9%

 

Admin. & Other Fees

 

8,197

 

8,438

 

(3%)

 

30,606

 

28,447

 

8%

 

Compensation & Benefits(2)

 

(100,528)

 

(100,638)

 

0%

 

(382,210)

 

(373,142)

 

2%

 

General & Administrative Expenses(3)

 

(33,771)

 

(28,867)

 

17%

 

(122,322)

 

(106,087)

 

15%

 

Fee Related Earnings

 

$39,803

 

$40,039

 

(1%)

 

$176,992

 

$147,264

 

20%

 
                           

Net Performance Fees

 

$(1,960)

 

$20,580

 

NM

 

$41,912

 

$71,349

 

(41%)

 

Net Investment Income

 

13,597

 

4,077

 

234%

 

(2,526

)

70,593

 

NM

 

Performance Related Earnings

 

$11,637

 

$24,657

 

(53%)

 

$39,386

 

$141,942

 

(72%)

 
                           

Economic Net Income(4)

 

$51,440

 

$64,696

 

(20%)

 

$216,378

 

$289,206

 

(25%)

 

Economic Net Income After Income Taxes(5)

 

$42,616

 

$56,728

 

(25%)

 

$185,235

 

$266,537

 

(31%)

 

Economic Net Income After Income Taxes per Unit(5)

 

$0.20

 

$0.27

 

(26%)

 

$0.87

 

$1.26

 

(31%)

 

Distributable Earnings

 

$50,754

 

$64,538

 

(21%)

 

$230,589

 

$232,756

 

(1%)

 

Distributable Earnings After Income Taxes per Common Unit(6)

 

$0.23

 

$0.26

 

(12%)

 

$0.91

 

$0.92

 

(1%)

 
                           

Other Data

                         

Accrued Incentives (Gross)

 

$541,852

 

$548,098

 

(1%)

 

$541,852

 

$548,098

 

(1%)

 

Accrued Incentives (Net)

 

140,137

 

166,934

 

(16%)

 

140,137

 

166,934

 

(16%)

 

Total Fee Revenue(7)

 

163,945

 

181,686

 

(10%)

 

692,830

 

669,395

 

4%

 

Management Fees as a Percentage of Total Fee Revenue(7)

 

101.2%

 

88.7%

 

-

 

94.0%

 

89.3%

 

-

 

(1)

Ares completed its IPO and related reorganization on May 7, 2014, and accordingly the financial results for the year ended December 31, 2014 reported herein include the results of our predecessor owners.

(2)

Includes compensation and benefits expenses attributable to OMG of $31.8 million and $28.4 million for the three months ended December 31, 2015 and 2014, respectively, and $119.7 million and $109.0 million for the year ended December 31, 2015 and 2014, respectively, which are not allocated to an operating segment.

(3)

Includes G&A expenses attributable to OMG of $17.7 million and $15.7 million for the three months ended December 31, 2015 and 2014, respectively, and $64.2 million and $56.2 million for the year ended December 31, 2015 and 2014, respectively, which are not allocated to an operating segment.

(4)

For the three months and year ended December 31, 2015, expenses for discontinued merger-related activities of $44.6 million and $51.3 million, respectively, have been excluded.  The total merger-related expenses were comprised of operating expenses of $35.9 million and $15.4 million of financing related costs.

(5)

For the year ended December 31, 2014, represents pro forma results assuming Ares’ IPO and reorganization had taken place on January 1, 2014. Total units of 213,768,526 for the three months ended December 31, 2015 includes common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis, and the dilutive effects of the Company’s equity-based awards.

(6)

Distributable earnings attributable to common unitholders is presented on a pro forma basis for the year ending December 31, 2014 as if Ares’ IPO occurred on January 1, 2014. The per unit calculation uses total common units outstanding. See "Exhibit G. Per Unit Calculations for more detail.

(7)

Total fee revenue is calculated as management fees plus net performance fees.

 

Management Fee Revenue. Management fee revenue increased by $4.8 million to $165.9 million for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. For the year ended December 31, 2015, management fee revenue increased by $52.9 million to $650.9 million over the same period in 2014. The increase for both periods was primarily due to management fee contracts acquired in the Energy Investors Funds ("EIF") acquisition in the first quarter of 2015, deployment of European Direct Lending funds and incremental fees from new funds that were raised during the second half of 2014 and 2015 in the Tradable Credit and Direct Lending Groups. The increase was partially offset by a decrease in management fees in the Real Estate and Tradable Credit Groups due to certain funds moving past their respective reinvestment periods, as well as fund liquidations and distributions and one-time catch up fees attributable to certain funds in the Real Estate Group recognized in the fourth quarter of 2014.

 

Compensation and Benefits. Compensation and benefits expenses decreased by $0.1 million to $100.5 million for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. For the year ended December 31, 2015, compensation and benefits expenses increased by $9.1 million to $382.2 million over the same period in 2014. The increase was attributable to increased headcount associated with the 2014 acquisition of Keltic Financial Services and Keltic Financial Partners ("Keltic"), as well as the 2015 acquisitions of First Capital Holdings ("FCC") and EIF.

 

General and Administrative Expenses. General and administrative expenses increased by $4.9 million to $33.8 million for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. For the year ended December 31, 2015, general and administrative expenses increased by $16.2 million to $122.3 million over the same period in 2014. Both increases were primarily driven by additional occupancy and office expenses, growth in personnel and geographical expansion and expenses relating to the Keltic, FCC and EIF acquisitions.

 

Fee Related Earnings. FRE decreased by $0.2 million, or 0.6%, to $39.8 million for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. The decrease was primarily attributable to a decrease in management fees in the Real Estate Group due to certain funds moving past their reinvestment periods and one-time catch up fees attributable to certain funds in the Real Estate Group recognized in the fourth quarter of 2014.The decline was partially offset by an increase in management fees in the Private Equity and Direct Lending Groups. FRE increased by $29.7 million, or 20.2%, to $177.0 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. The growth in FRE was primarily attributable to an increase in management fees in the Private Equity and Direct Lending Groups and a decrease in compensation and benefits expenses in the Tradable Credit, Direct Lending and Real Estate Groups.

 

Performance Related Earnings. PRE was $11.6 million for the three months ended December 31, 2015 compared to $24.7 million for the three months ended December 31, 2014. The decrease in PRE was primarily attributable to lower performance of certain underlying investments in certain funds in the Tradable Credit Group that were negatively impacted by weakening credit markets, and to a lesser extent, ARCC Part II Fees in the Direct Lending Group, which resulted in the reversal of previously recognized unrealized performance fees. The decline in PRE for the three months ended December 31, 2015 was partially offset by unrealized appreciation in equity investments made by ACOF Asia in the Private Equity Group. PRE was $39.4 million for the year ended December 31, 2015 compared to $141.9 million for the year ended December 31, 2014. For the year ended December 31, 2015, the decrease in PRE was primarily attributable to lower performance of certain underlying investments in certain funds in the Tradable Credit Group and the reversal of previously recognized unrealized ARCC Part II Fees in the Direct Lending Group, and to a lesser extent, to unrealized market depreciation of equity investments held by ACOF Asia in the Private Equity Group.

 

Economic Net Income. ENI was $51.4 million for the three months ended December 31, 2015 compared to $64.7 million for the three months ended December 31, 2014. ENI after provision for income taxes was $42.6 million, or $0.20 per unit, for the three months ended December 31, 2015 compared to $56.7 million, or $0.27 per unit for the three months ended December 31, 2014. The decrease in ENI was due to a decline in net performance fees of $22.5 million. The decline was partially offset by an increase in net investment income of $9.5 million. For the year ended December 31, 2015, ENI was $216.4 million, compared to $289.2 million for the year ended December 31, 2014. The decrease in ENI was primarily driven by a decline in net investment income of $73.1 million and net performance fees of $29.4 million. The decline was partially offset by an increase in FRE of $29.7 million. ENI after provision for taxes was $185.2 million, or $0.87 per unit, for the year ended December 31, 2015 compared to $266.5 million, or $1.26 per unit for the year ended December 31, 2014.

 

Distributable Earnings. Total distributable earnings decreased by $13.8 million to $50.8 million for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. The decrease for the three months ended December 31, 2015 was primarily driven by declines in realized net performance fees in the Direct Lending, Tradable Credit and Private Equity Groups, realized net investment income in the Tradable Credit and Private Equity Groups and fee related earnings in the Real Estate Group. This decrease was partially offset by an increase in fee related earnings in the Private Equity, Tradable Credit and Direct Lending Groups. For the year ended December 31, 2015, total distributable earnings decreased by $2.2 million to $230.6 million compared to the year ended December 31, 2014. The decrease for the twelve months ended December 31, 2015 was primarily driven by declines in realized net performance fees in the Direct Lending, Tradable Credit and Private Equity Groups and in realized net investment income in the Tradable Credit and Private Equity Groups and in fee related earnings in the Real Estate Group. This decrease was partially offset by an increase in fee related earnings in the Private Equity, Tradable Credit and Direct Lending Groups and in realized net performance fees in the Real Estate Group.

 

Accrued Incentives Fees. Net accrued incentive fees as of December 31, 2015 decreased by $26.7 million to $140.1 million compared to $166.9 million as of December 31, 2014. The decrease in net accrued incentive fees was primarily attributable to the Tradable Credit Group as a result of (i) fund realizations and (ii) the reversal of unrealized performance fees due to weakening credit markets during 2015. This decrease was partially offset by (i) an increase in accrued incentive fees from ACOF III and ACOF IV in the Private Equity Group, as a result of market appreciation of their investment portfolios and (ii) an increase in accrued performance fees from ACE II in the Direct Lending Group, as a result of continued strong performance of the fund, which continues to exceed its performance fee hurdle rate on an increased capital base compared to the prior year.

 

Assets Under Management

 

($ in millions)

 

For the three
months ended
December 31, 2015

 

For the
year ended
December 31, 2015

 

Beginning of Period AUM

 

$91,517

 

$81,761

 

Acquisitions (1)

 

-

 

4,581

 

Commitments (2)

 

9,931

 

22,004

 

Capital Reduction (3)

 

(6,341)

 

(9,274)

 

Distribution (4)

 

(1,309)

 

(5,829)

 

Change in Fund Value (5)

 

(166)

 

389

 

End of Period AUM

 

$93,632

 

$93,632

 

Average AUM

 

$92,574

 

$87,696

 

(1)

Represents AUM acquired via acquisition.

(2)

Represents net new commitments during the period, including equity and debt commitments, reductions of previous commitments, and gross inflows into our open-ended managed accounts and sub-advised accounts, as well as equity offerings by our publicly traded vehicles.

(3)

Represents the permanent reduction in leverage during the period.

(4)

Represents distributions and redemptions net of recallable amounts.

(5)

Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency.

 

Total AUM was $93.6 billion as of December 31, 2015, an increase of $2.1 billion, or 2.3%, compared to total AUM of $91.5 billion as of September 30, 2015. For the three months ended December 31, 2015, the increase in AUM was primarily driven by net new commitments of $9.9 billion, which mainly consisted of (i) $408.5 million in debt commitments to the Tradable Credit Group’s long-only credit funds, (ii) $2.1 billion in equity commitments and $625.7 million in debt commitments to the Direct Lending Group’s funds, (iii) $6.2 billion in equity commitments to the Private Equity Group (consisting of $5.7 billion in our fifth North American/European flexible capital private equity fund and $370.8 million in our fifth power private equity fund) and (iv) $579.8 million in equity commitments to the Real Estate Group’s funds. The increase in AUM was partially offset by capital reductions of $6.3 billion primarily attributable the reduction in unfunded co-investment capital previously made available by General Electric Company and General Electric Capital Corporation ("GE") of $5.7 billion(1) and distributions of $1.3 billion, of which $488.3 million was attributable to the Tradable Credit Group, $246.8 million to the Direct Lending Group, $55.5 million to the Private Equity Group and $518.3 million to the Real Estate Group.

 

(1)During 2015, GE and affiliates exited the corporate lending sectors in the U.S. and Europe, which caused a fourth quarter 2015 reduction in AUM for Ares of $5.7 billion ($3.1 billion in the Direct Lending Group and $2.6 billion in the Tradable Credit Group), but it had no impact on FEAUM. The reduction was accounted for as a capital reduction/reduction of leverage. No direct management fees would have been paid on $5.0 billion of the $5.7 billion reduction in capital made available by GE.

 

Fee-Earning Assets Under Management

 

($ in millions)

 

For the three
months ended
December 31, 2015

 

For the
year ended
December 31, 2015

 

Beginning of Period FEAUM

 

$66,722

 

$61,359

 

Acquisitions (1)

 

-

 

4,046

 

Commitments (2)

 

2,163

 

6,215

 

Subscriptions / Deployment / Increase in Leverage (3)

 

2,015

 

6,256

 

Redemptions / Distributions / Decrease in Leverage (4)

 

(2,196)

 

(8,754)

 

Change in Fund Value (5)

 

(431)

 

(189)

 

Change in Fee Basis

 

-

 

(660)

 

End of Period FEAUM

 

$68,272

 

$68,272

 

Average FEAUM

 

$67,497

 

$64,816

 

(1)

Represents fee earning AUM acquired via acquisition.

(2)

Represents net new commitments during the period for funds that earn management fees based on committed capital.

(3)

Represents subscriptions, capital deployment and increase in leverage (for funds that earn fees on a gross asset basis).

(4)

Represents redemptions, distributions and decrease in leverage (for funds that earn fees on a gross asset basis).

(5)

Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency for funds that earn management fees based on market value.

 

Total FEAUM was $68.3 billion as of December 31, 2015, an increase of $1.6 billion, or 2.3%, compared to total FEAUM of $66.7 billion as of September 30, 2015. The increase in FEAUM was primarily driven by net new commitments of $2.2 billion, primarily comprised of $1.4 billion in the Tradable Credit Group, $448.3 million in the Private Equity Group, and $266.1 million in the Real Estate Group. Subscriptions / deployment / increase in leverage of $2.0 billion further added to the increase in FEAUM. Partially offsetting the increase in FEAUM were redemptions / distributions / decreases in leverage of $2.2 billion, comprised of $1.1 billion in the Tradable Credit Group, $857.3 million in the Direct Lending Group, $185.2 million in the Real Estate Group and $57.3 million in the Private Equity Group.

 

Incentive Generating AUM and Incentive Eligible AUM

($ in millions)

 

   

As of December 31, 2015

 

As of December 31, 2014

 
   

Incentive
Generating AUM

 

Incentive Eligible
AUM

 

Incentive
Generating AUM

 

Incentive Eligible
AUM

 

Tradable Credit Group

 

$737

 

$5,316

 

$2,891

 

$7,065

 

Direct Lending Group

 

3,275

 

18,456

 

11,037

 

14,466

 

Private Equity Group

 

7,748

 

15,216

 

6,541

 

9,457

 

Real Estate Group

 

2,136

 

6,784

 

2,079

 

6,365

 

Total

 

$13,896

 

$45,772

 

$22,547

 

$37,354

 

 

Total Incentive Generating AUM ("IGAUM") was $13.9 billion as of December 31, 2015 compared to total IGAUM of $22.5 billion as of December 31, 2014. The decrease was primarily attributable to a reduction in previously accrued ARCC Part II Fees during the fourth quarter, which were impacted by lower fund realization events and a decrease in the valuation of certain underlying investments. The reversal of $5.4 million of net ARCC Part II Fees accrued during the nine months ended September 30, 2015 was tied to ARCC’s gross asset value and therefore triggered a reduction of $9.2 billion in IGAUM. This reduction in IGAUM was offset by additional funds exceeding their hurdle rates in the Direct Lending Group and and market appreciation and capital deployment in the Private Equity Group.

 

Total Incentive Eligible AUM ("IEAUM") was $45.8 billion as of December 31, 2015, compared to IEAUM of $37.4 billion as of December 31, 2014. The increase was primarily attributable to new fund closings in Direct Lending and Private Equity Groups, of which most of the capital has not yet been invested.

 

Available Capital and Assets Under Management Not Yet Earning Fees

 ($ in millions)

   

As of December 31, 2015

 

As of December 31, 2014

 
   

Available
Capital

 

AUM Not Yet
Earning Fees

 

Available
Capital

 

AUM Not Yet
Earning Fees

 

Tradable Credit Group

 

$2,310

 

$1,663

 

$5,716

 

$1,884

 

Direct Lending Group

 

7,950

 

6,676

 

5,432

 

5,177

 

Private Equity Group

 

8,553

 

6,185

 

3,050

 

674

 

Real Estate Group

 

3,606

 

934

 

4,022

 

1,490

 

Total

 

$22,419

 

$15,457

 

$18,221

 

$9,225

 

 

 

Total Available Capital was $22.4 billion as of December 31, 2015, an increase of 23.0%, compared to $18.2 billion as of December 31, 2014. The increase was driven by $14.4 billion of new equity commitments and $2.8 billion of new debt commitments, primarily in the Direct Lending and Private Equity Groups and was partially offset by net capital reductions of $6.0 billion mainly due to the reduction in available capital from GE and a decrease in fund value of $0.6 billion due to the impact of foreign currency for funds that earn management fees based on market value.

 

Total AUM Not Yet Earning Fees was $15.5 billion as of December 31, 2015, an increase of 67.6%, compared to $9.2 billion as of December 31, 2014. The increase in AUM Not Yet Earning Fees was primarily due to new commitments of $5.4 billion to Private Equity Group funds for which fees have not yet been activated and new commitments to Direct Lending Group funds that pay fees based on invested capital. Of the $15.5 billion, approximately $12.4 billion is available for deployment, $1.1 billion is available for deployment for follow-on investments, $1.4 billion is currently in funds unlikely to be drawn due to desired leverage targets, and $0.6 billion is in funds that are in or are expected to be in wind down.

 

Results Excluding Consolidated Funds

 

Net income of the consolidated company entities was $4.2 million and $68.1 million for the three and twelve months ended December 31, 2015, respectively.

 

Investment Capacity and Liquidity

 

As of December 31, 2015, our cash and cash equivalents were $121.5 million, investments were $636.1 million, net performance fees receivable were $140.1 million and $110.0 million was drawn against the $1.03 billion revolving credit facility.

 

($ in thousands)

 

As of
December 31, 2015

 

As of
December 31, 2014

 
           

Cash and cash equivalents

 

$121,483

 

$148,858

 

Investments

 

636,092

 

598,074

 

Debt obligations

 

389,120

 

243,491

 

Net performance fees receivable

 

140,137

 

166,934

 

 

 

Distribution

 

We declared a quarterly distribution of $0.20 per common unit, payable to common unitholders of record at the close of business on March 14, 2016, payable on March 28, 2016.

 

Recent Developments

 

  • On February 16, 2016, we announced that we are combining our Tradable Credit Group and Direct Lending Group to form a single segment called the Ares Credit Group in order to manage Ares’ broad array of credit products in a more effective manner. With total combined AUM of $62 billion and fee earning AUM of $50 billion as of December 31, 2015, the Credit Group will offer comprehensive and global credit management client solutions and be well positioned to capitalize on future growth opportunities. We do not expect any material changes to existing strategies, teams or portfolio management as a result of the combination. Ares will begin reporting the new Credit Group as an operating segment for the quarter ending March 31, 2016.
  • Since December 31, 2015, we have held closings for an additional $1.1 billion of equity commitments to our fifth North American/European flexible capital private equity fund, bringing total commitments to date to $6.8 billion, above our target of $6.5 billion and compared to $4.7 billion for the predecessor fund.

 

Conference Call and Webcast Information

 

On February 29, 2016, the Company invites all interested persons to attend its webcast/conference call at 12:00pm (Eastern Time) to discuss its fourth quarter 2015 financial results.

 

All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Resources section of our website at http://www.aresmgmt.com. Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing (888) 317-6003. International callers can access the conference call by dialing +1 (412) 317-6061. All callers will need to enter the Participant Elite Entry Number 5336351 followed by the # sign and reference "Ares Management, L.P." once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected. For interested parties, an archived replay of the call will be available through March 29, 2016 to domestic callers by dialing (877) 344-7529 and to international callers by dialing +1 (412) 317-0088. For all replays, please reference conference number 10078855. An archived replay will also be available through March 29, 2016 on a webcast link located on the Home page of the Investor Resources section of our website.

 

Availability of SEC Filings

 

We filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 with the U.S. Securities and Exchange Commission on March 20, 2015. We filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 with the U.S. Securities and Exchange Commission on February 29, 2016.

Copies of our filings with the SEC are available through our website at www.aresmgmt.com by selecting the "SEC Filings" sub-tab under the "Investor Resources " section, as well as on the SEC’s website at www.sec.gov. Unitholders can request a printed copy of the complete audited financial statements free of charge upon request to IRARES@aresmgmt.com or by written request addressed to Ares Management, L.P, Attn: Investor Relations, 245 Park Ave, 44th Floor New York, NY 10167

 

About Ares Management, L.P.

 

Ares Management, L.P. is a publicly traded, leading global alternative asset manager with approximately $94 billion of assets under management as of December 31, 2015 and more than 15 offices in the United States, Europe and Asia. Since its inception in 1997, Ares has adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns throughout market cycles. Ares believes each of its four distinct but complementary investment groups in Tradable Credit, Direct Lending, Private Equity and Real Estate is a market leader based on assets under management and investment performance. Ares was built upon the fundamental principle that each group benefits from being part of the greater whole.

 

Forward-Looking Statements

 

Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Ares Management, L.P. undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call.

 

Nothing in this press release constitutes an offer to sell or solicitation of an offer to buy any securities of Ares or an investment fund managed by Ares or its affiliates.

 

Available Information

 

Ares Management, L.P.’s filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available on its website at www.aresmgmt.com. The contents of such website are not and should not be deemed to be incorporated by reference herein.

 

Contact

 

Ares Management, L.P.

 

Carl Drake
(800) 340-6597

 

Appendix

Exhibit A. Operating Segments as of December 31, 2015

($ in millions)

   

Available
Capital

 

Fair Value of
Capital

 

AUM

 

Tradable Credit Group

 

$2,310

 

$27,290

 

$29,600

 

Direct Lending Group

 

7,950

 

24,698

 

32,649

 

Private Equity Group

 

8,553

 

12,563

 

21,115

 

Real Estate Group

 

3,606

 

6,662

 

10,268

 

Total

 

$22,419

 

$71,213

 

$93,632

 

 

Exhibit B. Segment Results

($ in thousands)

As of and for the three months ended December 31, 2015:

   

Tradable

 

Direct

 

Private

 

Real

         

Total

   

Credit

 

Lending

 

Equity

 

Estate

 

Total

     

Stand

   

Group

 

Group

 

Group

 

Group

 

Segments

 

OMG

 

Alone

Management fees (includes ARCC Part I Fees of $31,520)

 

$

36,806

 

$

75,800

 

$

36,257

 

$

17,042

 

$

165,905

 

$

 

$

165,905

Administrative fees and other income

 

40

 

74

 

678

 

643

 

1,435

 

6,762

 

8,197

Compensation and benefits

 

(7,943)

 

(37,619)

 

(12,965)

 

(10,206)

 

(68,733)

 

(31,795)

 

(100,528)

General, administrative and other expenses

 

(3,898)

 

(3,094)

 

(5,140)

 

(3,919)

 

(16,051)

 

(17,720)

 

(33,771)

Fee related earnings (loss)

 

25,005

 

35,161

 

18,830

 

3,560

 

82,556

 

(42,753)

 

39,803

Performance fees—realized

 

10,549

 

 

2,697

 

6,370

 

19,616

 

 

19,616

Performance fees—unrealized

 

(25,283)

 

(5,107)

 

2,019

 

5,836

 

(22,535)

 

 

(22,535)

Performance fee compensation—realized

 

(1,868)

 

 

(2,158)

 

 

(4,026)

 

 

(4,026)

Performance fee compensation—unrealized

 

8,515

 

3,280

 

(1,218)

 

(5,592)

 

4,985

 

 

4,985

Net performance fees

 

(8,807)

 

(1,827)

 

1,340

 

6,614

 

(1,960)

 

 

(1,960)

Investment income (loss)—realized

 

438

 

312

 

(408)

 

1,208

 

1,550

 

(23)

 

1,527

Investment income (loss)—unrealized

 

(11,555)

 

(243)

 

21,222

 

560

 

9,984

 

52

 

10,036

Interest and other investment income

 

2,977

 

370

 

149

 

54

 

3,550

 

379

 

3,929

Interest expense

 

(440)

 

(69)

 

(193)

 

(35)

 

(737)

 

(1,158)

 

(1,895)

Net investment income (loss)

 

(8,580)

 

370

 

20,770

 

1,787

 

14,347

 

(750)

 

13,597

Performance related earnings (loss)

 

(16,667)

 

(1,457)

 

22,110

 

8,401

 

12,387

 

(750)

 

11,637

Economic net income (loss)

 

$

8,338

 

$

33,704

 

$

40,940

 

$

11,961

 

$

94,943

 

$

(43,503)

 

$

51,440

Distributable earnings (loss)

 

$

36,239

 

$

34,507

 

$

18,297

 

$

9,409

 

$

98,452

 

$

(47,698)

 

$

50,754

Total assets

 

$

302,167

 

$

273,896

 

$

882,454

 

$

186,058

 

$

1,644,575

 

$

96,637

 

$

1,741,211

 

As of and for the three months ended December 31, 2014:

   

Tradable

 

Direct

 

Private

 

Real

         

Total

   

Credit

 

Lending

 

Equity

 

Estate

 

Total

     

Stand

   

Group

 

Group

 

Group

 

Group

 

Segments

 

OMG

 

Alone

Management fees (includes ARCC Part I Fees of $33,396)

 

$

37,300

 

$

75,608

 

$

22,498

 

$

25,700

 

$

161,106

 

$

 

$

161,106

Administrative fees and other income

 

583

 

82

 

186

 

766

 

1,617

 

6,821

 

8,438

Compensation and benefits

 

(11,536)

 

(39,165)

 

(9,666)

 

(11,909)

 

(72,276)

 

(28,362)

 

(100,638)

General, administrative and other expenses

 

(3,576)

 

(3,353)

 

(2,557)

 

(3,721)

 

(13,207)

 

(15,660)

 

(28,867)

Fee related earnings (loss)

 

22,771

 

33,172

 

10,461

 

10,836

 

77,240

 

(37,201)

 

40,039

Performance fees—realized

 

30,891

 

24,839

 

 

1,057

 

56,787

 

 

56,787

Performance fees—unrealized

 

(29,190)

 

(8,593)

 

39,403

 

6,256

 

7,876

 

 

7,876

Performance fee compensation—realized

 

(18,976)

 

(14,900)

 

 

 

(33,876)

 

 

(33,876)

Performance fee compensation—unrealized

 

18,716

 

5,134

 

(31,835)

 

(2,222)

 

(10,207)

 

 

(10,207)

Net performance fees

 

1,441

 

6,480

 

7,568

 

5,091

 

20,580

 

 

20,580

Investment income (loss)—realized

 

13,163

 

2,020

 

(347)

 

1,502

 

16,338

 

 

16,338

Investment income (loss)—unrealized

 

(10,004)

 

(322)

 

(1,778)

 

(294)

 

(12,398)

 

 

(12,398)

Interest and other investment income

 

3,285

 

188

 

62

 

(21)

 

3,514

 

 

3,514

Interest expense

 

(640)

 

(681)

 

(1,889)

 

(167)

 

(3,377)

 

 

(3,377)

Net investment income (loss)

 

5,804

 

1,205

 

(3,952)

 

1,020

 

4,077

 

 

4,077

Performance related earnings (loss)

 

7,245

 

7,685

 

3,616

 

6,111

 

24,657

 

 

24,657

Economic net income (loss)

 

$

30,016

 

$

40,857

 

$

14,077

 

$

16,947

 

$

101,897

 

$

(37,201)

 

$

64,696

Distributable earnings (loss)

 

$

49,738

 

$

44,009

 

$

6,376

 

$

2,845

 

$

102,968

 

$

(38,430)

 

$

64,538

Total assets

 

$

656,710

 

$

289,310

 

$

501,392

 

$

224,333

 

$

1,671,745

 

$

15,206

 

$

1,686,951

 

 

Exhibit B. Segment Results (continued)

($ in thousands)

As of and for the year ended December 31, 2015:

   

Tradable

 

Direct

 

Private

 

Real

         

Total

   

Credit

 

Lending

 

Equity

 

Estate

 

Total

     

Stand

   

Group

 

Group

 

Group

 

Group

 

Segments

 

OMG

 

Alone

Management fees (includes ARCC Part I Fees of $121,491)

 

$

148,180

 

$

291,543

 

$

145,150

 

$

66,045

 

$

650,918

 

$

 

$

650,918

Administrative fees and other income

 

113

 

301

 

1,406

 

2,779

 

4,599

 

26,007

 

30,606

Compensation and benefits

 

(35,471)

 

(137,391)

 

(49,104)

 

(40,591)

 

(262,557)

 

(119,653)

 

(382,210)

General, administrative and other expenses

 

(15,539)

 

(13,271)

 

(14,266)

 

(15,044)

 

(58,120)

 

(64,202)

 

(122,322)

Fee related earnings (loss)

 

97,283

 

141,182

 

83,186

 

13,189

 

334,840

 

(157,848)

 

176,992

Performance fees—realized

 

86,137

 

4,295

 

22,000

 

9,516

 

121,948

 

 

121,948

Performance fees—unrealized

 

(114,858)

 

31,845

 

99,482

 

15,179

 

31,648

 

 

31,648

Performance fee compensation—realized

 

(43,190)

 

(2,575)

 

(17,600)

 

(1,826)

 

(65,191)

 

 

(65,191)

Performance fee compensation—unrealized

 

61,796

 

(18,134)

 

(81,602)

 

(8,553)

 

(46,492)

 

 

(46,492)

Net performance fees

 

(10,115)

 

15,431

 

22,280

 

14,316

 

41,912

 

 

41,912

Investment income (loss)—realized

 

14,293

 

1,632

 

4,189

 

2,658

 

22,772

 

(23)

 

22,749

Investment income (loss)—unrealized

 

(36,899)

 

1,563

 

6,400

 

1,522

 

(27,414)

 

52

 

(27,362)

Interest and other investment income

 

9,292

 

1,140

 

6,163

 

259

 

16,854

 

379

 

17,233

Interest expense

 

(5,157)

 

(1,918)

 

(5,936)

 

(977)

 

(13,988)

 

(1,158)

 

(15,146)

Net investment income (loss)

 

(18,471)

 

2,417

 

10,816

 

3,462

 

(1,776)

 

(750)

 

(2,526)

Performance related earnings (loss)

 

(28,586)

 

17,848

 

33,096

 

17,778

 

40,136

 

(750)

 

39,386

Economic net income (loss)

 

$

68,697

 

$

159,030

 

$

116,282

 

$

30,967

 

$

374,976

 

$

(158,598)

 

$

216,378

Distributable earnings (loss)

 

$

153,677

 

$

137,850

 

$

89,364

 

$

17,615

 

$

398,506

 

$

(167,918)

 

$

230,589

Total assets

 

$

302,167

 

$

273,896

 

$

882,453

 

$

186,058

 

$

1,644,574

 

$

96,637

 

$

1,741,211

 

As of and for the year ended December 31, 2014:

   

Tradable

 

Direct

 

Private

 

Real

         

Total

   

Credit

 

Lending

 

Equity

 

Estate

 

Total

     

Stand

   

Group

 

Group

 

Group

 

Group

 

Segments

 

OMG

 

Alone

Management fees (includes ARCC Part I Fees of $118,537)

 

$

144,102

 

$

275,571

 

$

90,690

 

$

87,683

 

$

598,046

 

$

 

$

598,046

Administrative fees and other income

 

636

 

556

 

219

 

4,889

 

6,300

 

22,147

 

28,447

Compensation and benefits

 

(43,607)

 

(138,945)

 

(34,386)

 

(47,174)

 

(264,112)

 

(109,030)

 

(373,142)

General, administrative and other expenses

 

(13,909)

 

(11,196)

 

(9,166)

 

(15,632)

 

(49,903)

 

(56,184)

 

(106,087)

Fee related earnings (loss)

 

87,222

 

125,986

 

47,357

 

29,766

 

290,331

 

(143,067)

 

147,264

Performance fees—realized

 

96,985

 

24,878

 

22,775

 

1,856

 

146,494

 

 

146,494

Performance fees—unrealized

 

(71,825)

 

11,447

 

137,853

 

17,408

 

94,883

 

 

94,883

Performance fee compensation—realized

 

(47,441)

 

(14,938)

 

(18,220)

 

 

(80,599)

 

 

(80,599)

Performance fee compensation—unrealized

 

29,017

 

(6,740)

 

(108,876)

 

(2,830)

 

(89,429)

 

 

(89,429)

Net performance fees

 

6,736

 

14,647

 

33,532

 

16,434

 

71,349

 

 

71,349

Investment income (loss)—realized

 

44,616

 

918

 

4,701

 

2,344

 

52,579

 

 

52,579

Investment income (loss)—unrealized

 

(28,629)

 

5,305

 

34,318

 

(61)

 

10,933

 

 

10,933

Interest and other investment income

 

10,086

 

606

 

4,741

 

265

 

15,698

 

 

15,698

Interest expense

 

(2,017)

 

(1,538)

 

(3,925)

 

(1,137)

 

(8,617)

 

 

(8,617)

Net investment income (loss)

 

24,056

 

5,291

 

39,835

 

1,411

 

70,593

 

 

70,593

Performance related earnings (loss)

 

30,792

 

19,938

 

73,367

 

17,845

 

141,942

 

 

141,942

Economic net income (loss)

 

$

118,014

 

$

145,924

 

$

120,724

 

$

47,611

 

$

432,273

 

$

(143,067)

 

$

289,206

Distributable earnings (loss)

 

$

183,479

 

$

133,510

 

$

54,156

 

$

10,460

 

$

381,605

 

$

(148,849)

 

$

232,756

Total assets

 

$

656,710

 

$

289,310

 

$

501,392

 

$

224,333

 

$

1,671,745

 

$

15,206

 

$

1,686,951

 


Exhibit C. Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials)

($ in thousands, except unit data)

   

As of December 31,

   

2015

 

2014

Assets

       

Cash and cash equivalents

 

$

121,483

 

$

148,858

Restricted cash and cash equivalents

 

234

 

32,734

Investments

 

468,287

 

174,052

Derivative assets, at fair value

 

1,339

 

7,623

Performance fees receivable

 

534,661

 

187,059

Due from affiliates

 

144,982

 

146,534

Other assets

 

61,402

 

58,716

Intangible assets, net

 

84,971

 

40,948

Goodwill

 

144,067

 

85,582

Assets of Consolidated Funds:

       

Cash and cash equivalents

 

159,507

 

1,314,397

Investments, at fair value

 

2,559,783

 

19,123,950

Loans held for investment, net

 

 

77,514

Due from affiliates

 

12,923

 

11,342

Dividends and interest receivable

 

13,005

 

81,331

Receivable for securities sold

 

13,416

 

132,753

Derivative assets, at fair value

 

 

3,126

Other assets

 

1,348

 

12,473

Total assets

 

$

4,321,408

 

$

21,638,992

Liabilities

       

Accounts payable and accrued expenses

 

$

103,974

 

$

101,310

Accrued compensation

 

125,032

 

129,433

Derivative liabilities, at fair value

 

390

 

2,850

Due to affiliates

 

11,163

 

19,030

Performance fee compensation payable

 

401,715

 

380,268

Debt obligations

 

389,120

 

243,491

Equity compensation put option liability

 

20,000

 

20,000

Deferred tax liability, net

 

21,288

 

19,861

Liabilities of Consolidated Funds:

       

Accounts payable and accrued expenses

 

8,275

 

68,589

Due to affiliates

 

 

2,441

Payable for securities purchased

 

51,778

 

618,902

Derivative liabilities, at fair value

 

10,676

 

42,332

Securities sold short, at fair value

 

 

3,763

Deferred tax liability, net

 

 

22,214

CLO loan obligations, at fair value

 

2,174,352

 

12,049,170

Fund borrowings

 

11,734

 

777,600

Mezzanine debt

 

 

378,365

Total liabilities

 

3,329,497

 

14,879,619

Commitments and contingencies

       

Redeemable interest in Consolidated Funds

 

 

1,037,450

Redeemable interest in Ares Operating Group entities

 

23,505

 

23,988

Non-controlling interest in Consolidated Funds:

       

Non-controlling interest in Consolidated Funds

 

320,238

 

4,988,729

Equity appropriated for Consolidated Funds

 

3,367

 

(37,926)

Non-controlling interest in Consolidated Funds

 

323,606

 

4,950,803

Non-controlling interest in Ares Operating Group entities

 

397,883

 

463,493

Controlling interest in Ares Management, L.P. :

       

Partners’ Capital (80,679,600 units and 80,667,664 units, issued and outstanding at December 31, 2015 and 2014, respectively)

 

251,537

 

285,025

Accumulated other comprehensive loss

 

(4,619)

 

(1,386)

Total controlling interest in Ares Management, L.P

 

246,917

 

283,639

Total equity

 

968,406

 

5,697,935

Total liabilities, redeemable interest, non-controlling interests and equity

 

$

4,321,408

 

$

21,638,992

 

 

Exhibit C. Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials) (continued)

($ in thousands, except unit data)

   

For the Years Ended December 31,

 
   

2015

 

2014

 

2013

 
           

(Predecessor)

 

Revenues

             

Management fees (includes ARCC Part I Fees of $121,491, $118,537 and $110,511 for the years ended December 31, 2015, 2014 and 2013, respectively)

 

$

634,399

 

$

486,477

 

$

375,572

 

Performance fees

 

150,615

 

91,412

 

79,800

 

Other fees

 

29,428

 

26,000

 

23,283

 

Total revenues

 

814,442

 

603,889

 

478,655

 

Expenses

             

Compensation and benefits

 

414,454

 

456,372

 

333,902

 

Performance fee compensation

 

111,683

 

170,028

 

194,294

 

General, administrative and other expenses

 

224,798

 

166,839

 

138,464

 

Consolidated Funds’ expenses

 

18,105

 

66,800

 

135,237

 

Total expenses

 

769,040

 

860,039

 

801,897

 

Other income (expense)

             

Interest and other investment income

 

14,045

 

7,244

 

5,996

 

Interest expense

 

(18,949)

 

(8,617)

 

(9,475)

 

Debt extinguishment expense

 

(11,641)

 

 

(1,862)

 

Other income (expense), net

 

21,680

 

(2,422)

 

(200)

 

Net realized gain (loss) on investments

 

20,090

 

7,812

 

(6,373)

 

Net change in unrealized appreciation on investments

 

(3,081)

 

24,316

 

15,295

 

Interest and other investment income of Consolidated Funds

 

117,373

 

937,835

 

1,236,037

 

Interest expense of Consolidated Funds

 

(78,819)

 

(666,373)

 

(534,431)

 

Debt extinguishment gain of Consolidated Funds

 

 

 

11,800

 

Net realized gain (loss) on investments of Consolidated Funds

 

(8,659)

 

44,781

 

64,382

 

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds

 

(15,957)

 

468,489

 

414,714

 

Total other income

 

36,082

 

813,065

 

1,195,883

 

Income before taxes

 

81,484

 

556,915

 

872,641

 

Income tax expense

 

19,064

 

11,253

 

59,263

 

Net income

 

62,420

 

545,662

 

813,378

 

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds

 

 

2,565

 

137,924

 

Less: Net income attributable to non-controlling interests in Consolidated Funds

 

(5,686)

 

417,793

 

448,847

 

Less: Net income attributable to redeemable interests in Ares Operating Group entities

 

338

 

731

 

2,451

 

Less: Net income attributable to non-controlling interests in Ares Operating Group entities

 

48,390

 

89,585

 

43,674

 

Less: Net income attributable to controlling interests in Predecessor

 

 

 

180,482

 

Net income attributable to Ares Management, L.P.

 

$

19,378

 

$

34,988

 

$

 

Net income attributable to Ares Management, L.P. per common unit

             

Basic

 

$

0.23

 

0.43

 

 

Diluted

 

$

0.23

 

0.43

 

 

Weighted-average common units

             

Basic

 

80,673,360

 

80,358,036

 

 

Diluted

 

80,673,360

 

80,358,036

 

 

Distribution declared per common unit

 

$

0.88

 

$

0.42

 

$

N/A

 

 

 

Exhibit D. Supplemental Financial Information Consolidating Schedules

($ in thousands, except unit data)

   

As of December 31, 2015

 
   

Consolidated

 

Consolidated

         
   

Company Entities

 

Funds

 

Eliminations

 

Consolidated

 

Assets

                 

Cash and cash equivalents

 

$

121,483

 

$

 

$

 

$

121,483

 

Restricted cash and cash equivalents

 

234

 

 

 

234

 

Investments

 

636,092

 

 

(167,805)

 

468,287

 

Derivative assets, at fair value

 

1,339

 

 

 

1,339

 

Performance fees receivable

 

541,852

 

 

(7,191)

 

534,661

 

Due from affiliates

 

149,771

 

 

(4,789)

 

144,982

 

Other assets

 

61,402

 

 

 

61,402

 

Intangible assets, net

 

84,971

 

 

 

84,971

 

Goodwill

 

144,067

 

 

 

144,067

 

Assets of Consolidated Funds

                 

Cash and cash equivalents

 

 

159,507

 

 

159,507

 

Investments, at fair value

 

 

2,559,783

 

 

2,559,783

 

Due from affiliates

 

 

13,360

 

(437)

 

12,923

 

Dividends and interest receivable

 

 

13,005

 

 

13,005

 

Receivable for securities sold

 

 

13,416

 

 

13,416

 

Derivative assets, at fair value

 

 

 

 

 

Other assets

 

 

1,348

 

 

1,348

 

Total assets

 

$

1,741,211

 

$

2,760,419

 

$

(180,222)

 

$

4,321,408

 

Liabilities

                 

Accounts payable and accrued expenses

 

$

104,082

 

$

 

$

(108)

 

$

103,974

 

Accrued compensation

 

125,032

 

 

 

125,032

 

Derivative liabilities, at fair value

 

390

 

 

 

390

 

Due to affiliates

 

11,278

 

 

(115)

 

11,163

 

Performance fee compensation payable

 

401,715

 

 

 

401,715

 

Debt obligations

 

389,120

 

 

 

389,120

 

Equity compensation put option liability

 

20,000

 

 

 

20,000

 

Deferred tax liability, net

 

21,288

 

 

 

21,288

 

Liabilities of Consolidated Funds

                 

Accounts payable, accrued expenses and other liabilities

 

 

8,280

 

(5)

 

8,275

 

Due to affiliates

 

 

5,617

 

(5,617)

 

 

Payable for securities purchased

 

 

51,778

 

 

51,778

 

Derivative liabilities, at fair value

 

 

10,676

 

 

10,676

 

CLO loan obligations

 

 

2,202,628

 

(28,276)

 

2,174,352

 

Fund borrowings

 

 

11,734

 

 

11,734

 

Total liabilities

 

1,072,905

 

2,290,713

 

(34,121)

 

3,329,497

 

Commitments and contingencies

                 

Redeemable interest in Ares Operating Group entities

 

23,505

 

 

 

23,505

 

Non-controlling interest in Consolidated Funds

                 

Non-controlling interest in Consolidated Funds

 

 

466,339

 

(146,101)

 

320,238

 

Equity appropriated for Consolidated Funds

 

 

3,367

 

 

3,367

 

Non-controlling interest in Consolidated Funds

 

 

469,706

 

(146,101)

 

323,606

 

Non-controlling interest in Ares Operating Group entities

 

397,883

 

 

 

397,883

 

Controlling interest in Ares Management, L.P.:

                 

Partners’ Capital (80,679,600 units issued and outstanding)

 

251,537

 

 

 

251,537

 

Accumulated other comprehensive loss

 

(4,619)

 

 

 

(4,619)

 

Total controlling interest in Ares Management, L.P

 

246,917

 

 

 

246,917

 

Total equity

 

644,801

 

469,706

 

(146,101)

 

968,406

 

Total liabilities, redeemable interests, non-controlling interests and equity

 

$

1,741,211

 

2,760,419

 

(180,222)

 

$

4,321,408

 

 

 

Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

   

As of December 31, 2014

 
   

Consolidated
Company Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

 

Assets

                 

Cash and cash equivalents

 

$

148,858

 

$

 

$

 

$

148,858

 

Restricted cash and cash equivalents

 

32,734

 

 

 

32,734

 

Investments

 

598,074

 

 

(424,022)

 

174,052

 

Derivative assets, at fair value

 

7,623

 

 

 

7,623

 

Performance fees receivable

 

548,098

 

 

(361,039)

 

187,059

 

Due from affiliates

 

166,225

 

 

(19,691)

 

146,534

 

Other assets

 

58,809

 

 

(93)

 

58,716

 

Intangible assets, net

 

40,948

 

 

 

40,948

 

Goodwill

 

85,582

 

 

 

85,582

 

Assets of Consolidated Funds

                 

Cash and cash equivalents

 

 

1,314,397

 

 

1,314,397

 

Investments, at fair value

 

 

19,123,950

 

 

19,123,950

 

Loans held for investment, net

 

 

77,514

 

 

77,514

 

Due from affiliates

 

 

13,262

 

(1,920)

 

11,342

 

Dividends and interest receivable

 

 

81,331

 

 

81,331

 

Receivable for securities sold

 

 

132,753

 

 

132,753

 

Derivative assets, at fair value

 

 

3,126

 

 

3,126

 

Other assets

 

 

12,473

 

 

12,473

 

Total assets

 

$

1,686,951

 

$

20,758,806

 

$

(806,765)

 

$

21,638,992

 

Liabilities

                 

Accounts payable and accrued expenses

 

101,912

 

 

(602)

 

101,310

 

Accrued compensation

 

129,433

 

 

 

129,433

 

Derivative liabilities, at fair value

 

2,850

 

 

 

2,850

 

Due to affiliates

 

19,881

 

 

(851)

 

19,030

 

Performance fee compensation payable

 

381,164

 

 

(896)

 

380,268

 

Debt obligations

 

243,491

 

 

 

243,491

 

Equity compensation put option liability

 

20,000

 

 

 

20,000

 

Deferred tax liability, net

 

19,861

 

 

 

19,861

 

Liabilities of Consolidated Funds

                 

Accounts payable, accrued expenses and other liabilities

 

 

68,674

 

(85)

 

68,589

 

Due to affiliates

 

 

63,417

 

(60,976)

 

2,441

 

Payable for securities purchased

 

 

618,902

 

 

618,902

 

Derivative liabilities, at fair value

 

 

42,332

 

 

42,332

 

Securities sold short, at fair value

 

 

3,763

 

 

3,763

 

Deferred tax liability, net

 

 

22,214

 

 

22,214

 

CLO loan obligations

 

 

12,120,842

 

(71,672)

 

12,049,170

 

Fund borrowings

 

 

777,600

 

 

777,600

 

Mezzanine debt

 

 

378,365

 

 

378,365

 

Total liabilities

 

918,592

 

14,096,109

 

(135,082)

 

14,879,619

 

Commitments and contingencies

                 

Redeemable interest in Consolidated Funds

 

 

1,037,450

 

 

1,037,450

 

Redeemable interest in Ares Operating Group entities

 

23,988

 

 

 

23,988

 

Non-controlling interest in Consolidated Funds:

                 

Non-controlling interest in Consolidated Funds

 

 

5,663,172

 

(674,443)

 

4,988,729

 

Equity appropriated for Consolidated Funds

 

 

(37,926)

 

 

(37,926)

 

Non-controlling interest in Consolidated Funds

 

 

5,625,246

 

(674,443)

 

4,950,803

 

Non-controlling interest in Ares Operating Group entities

 

463,493

 

 

 

463,493

 

Controlling interest in Ares Management, L.P.:

                 

Partners’ Capital (80,667,664 units issued and outstanding)

 

285,025

 

 

 

285,025

 

Accumulated other comprehensive loss

 

(4,146)

 

 

2,760

 

(1,386)

 

Total controlling interest in Ares Management, L.P

 

280,879

 

 

2,760

 

283,639

 

Total equity

 

744,372

 

5,625,246

 

(671,683)

 

5,697,935

 

Total liabilities, redeemable interests, non-controlling interests and equity

 

$

1,686,951

 

$

20,758,806

 

$

(806,765)

 

$

21,638,992

 

 

 

Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

   

For the Three months ended December 31, 2015

 
   

Consolidated
Company Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

 

Revenues

                 

Management fees (includes ARCC Part I Fees of $31,520)

 

$

165,905

 

$

 

$

(4,847)

 

$

161,058

 

Performance fees

 

(5,807)

 

 

(3,929)

 

(9,736)

 

Other fees

 

8,197

 

 

 

8,197

 

Total revenues

 

168,295

 

 

(8,776)

 

159,519

 

Expenses

                 

Compensation and benefits

 

108,646

 

 

 

108,646

 

Performance fee compensation

 

(960)

 

 

 

(960)

 

General, administrative and other expense

 

75,058

 

 

 

75,058

 

Consolidated Fund expenses

 

 

8,340

 

(5,462)

 

2,878

 

Total expenses

 

182,744

 

8,340

 

(5,462)

 

185,622

 

Other income (expense)

                 

Interest and other investment income

 

2,473

 

 

(874)

 

1,599

 

Interest Expense

 

(5,698)

 

 

 

(5,698)

 

Debt extinguishment expense

 

(11,641)

 

 

 

(11,641)

 

Other income (expense), net

 

22,240

 

 

59

 

22,479

 

Net realized gain (loss) on investments

 

7,897

 

 

(531)

 

7,366

 

Net change in unrealized appreciation (depreciation) on investments

 

6,553

 

 

(8,945)

 

(2,392)

 

Interest and other investment income of Consolidated Funds

 

 

27,381

 

 

27,381

 

Interest expense of Consolidated Funds

 

 

(19,991)

 

1,164

 

(18,827)

 

Net realized gain (loss) on investments of Consolidated Funds

 

 

(21,152)

 

 

(21,152)

 

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds

 

 

33,501

 

3,057

 

36,558

 

Total other income (expense)

 

22,004

 

19,739

 

(6,070)

 

35,673

 

Income before taxes

 

7,555

 

11,399

 

(9,384)

 

9,570

 

Income tax expense (benefit)

 

3,328

 

(4)

 

 

3323

 

Net income

 

4,227

 

11,403

 

(9,384)

 

6247

 

Less: Net income attributable to non-controlling interests in Consolidated Funds

 

 

11,403

 

(9,384)

 

2,020

 

Less: Net income attributable to redeemable interests in Ares Operating Group entities

 

28

 

 

 

28

 

Less: Net income attributable to non-controlling interests in Ares Operating Group entities

 

4,014

 

 

 

4,014

 

Net income attributable to Ares Management, L.P.

 

$

185

 

$

 

$

 

$

185

 

 

 

Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

   

For the Three Months Ended December 31, 2014

 
   

Consolidated
Company Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

 

Revenues

                 

Management fees (includes ARCC Part I Fees of $33,396)

 

$

161,106

 

$

 

$

(27,068)

 

$

134,038

 

Performance fees

 

61,013

 

 

(38,875)

 

22,138

 

Other fees

 

8,438

 

 

(1,132)

 

7,306

 

Total revenues

 

230,557

 

 

(67,075)

 

163,482

 

Expenses

                 

Compensation and benefits

 

108,781

 

 

 

108,781

 

Performance fee compensation

 

44,080

 

 

 

44,080

 

General, administrative and other expense

 

46,867

 

 

 

46,867

 

Consolidated Fund expenses

 

 

43,480

 

(29,738)

 

13,742

 

Total expenses

 

199,728

 

43,480

 

(29,738)

 

213,470

 

Other income (expense)

                 

Interest, dividend and other investment income

 

2,185

 

 

(2,614)

 

(429)

 

Interest expense

 

(3,376)

 

 

 

(3,376)

 

Other income (expense), net

 

1,203

 

 

1,222

 

2,425

 

Net realized gain (loss) on investments

 

17,395

 

 

(10,057)

 

7,338

 

Net change in unrealized appreciation (depreciation) on investments

 

(9,802)

 

 

9,160

 

(642)

 

Interest, dividend and other investment income of Consolidated Funds

 

 

199,683

 

(131)

 

199,552

 

Interest expense of Consolidated Funds

 

 

(105,966)

 

3,900

 

(102,066)

 

Net realized gain (loss) on investments of Consolidated Funds

 

 

(27,052)

 

 

(27,052)

 

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds

 

 

145,998

 

(4,122)

 

141,876

 

Total other income (expense)

 

7,605

 

212,663

 

(2,642)

 

217,626

 

Income (loss) before taxes

 

38,434

 

169,183

 

(39,980)

 

167,638

 

Income tax expense (benefit)

 

13,073

 

(2,791)

 

 

10,282

 

Net income

 

25,361

 

171,974

 

(39,980)

 

157,356

 

Less: Net income attributable to redeemable interests in Consolidated Funds

 

 

(24,995)

 

793

 

(24,202)

 

Less: Net income attributable to non-controlling interests in Consolidated Funds

 

 

196,969

 

(40,773)

 

156,196

 

Less: Net income attributable to redeemable interests in Ares Operating Group entities

 

158

 

 

 

158

 

Less: Net income attributable to non-controlling interests in Ares Operating Group entities

 

22,029

 

 

 

22,029

 

Net income attributable to Ares Management, L.P.

 

$

3,173

 

$

 

$

 

$

3,173

 

 

 

Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

   

For the Year Ended December 31, 2015

 
   

Consolidated

 

Consolidated

         
   

Company Entities

 

Funds

 

Eliminations

 

Consolidated

 

Revenues

                 

Management fees (includes ARCC Part I Fees of $121,491)

 

$

650,918

 

$

 

$

(16,519)

 

$

634,399

 

Performance fees

 

146,197

 

 

4,418

 

150,615

 

Other fees

 

30,606

 

 

(1,178)

 

29,428

 

Total revenues

 

827,721

 

 

(13,279)

 

814,442

 

Expenses

                 

Compensation and benefits

 

414,454

 

 

 

414,454

 

Performance fee compensation

 

111,683

 

 

 

111,683

 

General, administrative and other expense

 

224,798

 

 

 

224,798

 

Consolidated Fund expenses

 

 

36,417

 

(18,312)

 

18,105

 

Total expenses

 

750,935

 

36,417

 

(18,312)

 

769,040

 

Other income (expense)

                 

Interest and other investment income

 

17,542

 

 

(3,497)

 

14,045

 

Interest expense

 

(18,949)

 

 

 

(18,949)

 

Debt extinguishment expense

 

(11,641)

 

 

 

(11,641)

 

Other income (expense), net

 

20,644

 

 

1,036

 

21,680

 

Net realized gain (loss) on investments

 

29,221

 

 

(9,131)

 

20,090

 

Net change in unrealized appreciation (depreciation) on investments

 

(26,437)

 

 

23,356

 

(3,081)

 

Interest and other investment income of Consolidated Funds

 

 

117,373

 

 

117,373

 

Interest expense of Consolidated Funds

 

 

(86,064)

 

7,245

 

(78,819)

 

Net realized gain (loss) on investments of Consolidated Funds

 

 

(8,659)

 

 

(8,659)

 

Net change in unrealized appreciation on investments of Consolidated Funds

 

 

(8,955)

 

(7,002)

 

(15,957)

 

Total other income (expense)

 

10,380

 

13,695

 

12,007

 

36,082

 

Income (loss) before taxes

 

87,165

 

(22,721)

 

17,040

 

81,484

 

Income tax expense

 

19,059

 

5

 

 

19,064

 

Net income (loss)

 

68,106

 

(22,726)

 

17,040

 

62,420

 

Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds

 

 

(22,726)

 

17,040

 

(5,686)

 

Less: Net income attributable to redeemable interests in Ares Operating Group entities

 

338

 

 

 

338

 

Less: Net income attributable to non-controlling interests in Ares Operating Group entities

 

48,390

 

 

 

48,390

 

Net income attributable to Ares Management, L.P.

 

$

19,378

 

$

 

$

 

$

19,378

 

 

 

Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

   

For the Year Ended December 31, 2014

 
   

Consolidated
Company Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

 

Revenues

                 

Management fees (includes ARCC Part I Fees of $118,537)

 

$

598,046

 

$

 

$

(111,569)

 

$

486,477

 

Performance fees

 

226,790

 

 

(135,378)

 

91,412

 

Other fees

 

28,447

 

 

(2,447)

 

26,000

 

Total revenues

 

853,283

 

 

(249,394)

 

603,889

 

Expenses

                 

Compensation and benefits

 

456,372

 

 

 

456,372

 

Performance fee compensation

 

170,028

 

 

 

170,028

 

General, administrative and other expense

 

166,839

 

 

 

166,839

 

Consolidated Fund expenses

 

 

187,494

 

(120,694)

 

66,800

 

Total expenses

 

793,239

 

187,494

 

(120,694)

 

860,039

 

Other income (expense)

                 

Interest and other investment income

 

15,956

 

 

(8,712)

 

7,244

 

Interest expense

 

(8,617)

 

 

 

(8,617)

 

Other income (expense), net

 

(3,644)

 

 

1,222

 

(2,422)

 

Net realized gain on investments

 

54,434

 

 

(46,622)

 

7,812

 

Net change in unrealized appreciation on investments

 

23,667

 

 

649

 

24,316

 

Interest and other investment income of Consolidated Funds

 

 

939,735

 

(1,900)

 

937,835

 

Interest expense of Consolidated Funds

 

 

(674,373)

 

8,000

 

(666,373)

 

Net realized gain on investments of Consolidated Funds

 

 

44,781

 

 

44,781

 

Net change in unrealized appreciation on investments of Consolidated Funds

 

 

475,009

 

(6,520)

 

468,489

 

Total other income (expense)

 

81,796

 

785,152

 

(53,883)

 

813,065

 

Income before taxes

 

141,840

 

597,658

 

(182,583)

 

556,915

 

Income tax expense (benefit)

 

16,536

 

(5,283)

 

 

11,253

 

Net income

 

125,304

 

602,941

 

(182,583)

 

545,662

 

Less: Net income attributable to redeemable interests in Consolidated Funds

 

 

3,071

 

(506)

 

2,565

 

Less: Net income attributable to non-controlling interests in Consolidated Funds

 

 

599,870

 

(182,077)

 

417,793

 

Less: Net income attributable to redeemable interests in Ares Operating Group entities

 

731

 

 

 

731

 

Less: Net income attributable to non-controlling interests in Ares Operating Group entities

 

89,585

 

 

 

89,585

 

Net income attributable to Ares Management, L.P.

 

$

34,988

 

$

 

$

 

$

34,988

 

 

 

Exhibit E. Reconciliation from Segments(1) to GAAP Financials

($ in thousands)

   

For the Three
Months Ended
December 31, 2015

 

For the Three
Months Ended
December 31, 2014

 

For the Year Ended
December 31, 2015

 

For the Year Ended
December 31, 2014

 

Economic net income:

                 

Income (loss) before taxes

 

$

9,570

 

$

167,638

 

$

81,484

 

$

556,915

 

Adjustments:

                 

Amortization of intangibles

 

8,628

 

5,918

 

46,228

 

27,610

 

Depreciation expense

 

1,878

 

1,696

 

6,941

 

7,347

 

Equity compensation expenses

 

8,118

 

8,142

 

32,244

 

83,230

 

Net acquisition-related expenses (income)

 

(20,757)

 

3,459

 

(16,473)

 

11,043

 

Merger-related expenses

 

43,556

 

 

51,335

 

 

Placement fees and underwriting costs

 

2,362

 

6,928

 

8,825

 

14,753

 

OMG expenses, net

 

43,503

 

37,201

 

158,598

 

143,067

 

Loss on fixed asset disposal

 

 

125

 

10

 

3,062

 

Other non-cash expense

 

100

 

 

100

 

324

 

Income (loss) before taxes of non-controlling interests in Consolidated Funds, net eliminations

 

(2,015)

 

(129,203)

 

5,681

 

(415,075)

 

Total consolidation adjustments and reconciling items

 

85,373

 

(65,734)

 

293,489

 

(124,640)

 

Economic net income

 

$

94,943

 

$

101, 897

 

$

374,976

 

$

432,273

 

Total performance fees income—realized

 

(19,616)

 

(56,787)

 

(121,948)

 

(146,494)

 

Total performance fees income—unrealized

 

22,535

 

(7,876)

 

(31,648)

 

(94,883)

 

Total performance fee compensation expense—realized

 

4,026

 

33,876

 

65,191

 

80,599

 

Total performance fee compensation expense—unrealized

 

(4,985)

 

10,207

 

46,492

 

89,429

 

Net investment income

 

(14,347)

 

(4,077)

 

1,776

 

(70,593)

 

Fee related earnings

 

$

82,556

 

$

77,240

 

$

334,840

 

$

290,331

 

Management fees

 

$

165,905

 

$

161,106

 

$

650,918

 

$

598,046

 

Administrative fees and other income

 

1,435

 

1,617

 

4,599

 

6,300

 

Compensation and benefits

 

(68,733)

 

(72,276)

 

(262,557)

 

(264,112)

 

General, administrative and other expenses

 

(16,051)

 

(13,207)

 

(58,120)

 

(49,903)

 

Fee related earnings

 

$

82,556

 

$

77,240

 

$

334,840

 

$

290,331

 

Distributable Earnings:

                 

Income (loss) before taxes

 

$

9,570

 

$

167,638

 

$

81,484

 

$

556,915

 

Adjustments:

                 

Amortization of intangibles

 

8,628

 

5,918

 

46,228

 

27,610

 

Equity compensation expenses

 

8,118

 

8,142

 

32,224

 

83,230

 

OMG distributable loss

 

46,336

 

38,430

 

167,918

 

148,849

 

Non-cash acquisition-related expenses

 

(21,020)

 

 

(19,390)

 

 

Merger-related expenses

 

43,556

 

 

51,335

 

 

Taxes paid

 

(1,556)

 

(1,115)

 

(5,209)

 

(2,335)

 

Dividend equivalent

 

(493)

     

(3,337)

 

 

Other non-cash items

 

(186)

 

(1,525)

 

(658)

 

(1,201)

 

Income (loss) before taxes of non-controlling interests in Consolidated Funds, net eliminations

 

(2,051)

 

(129,203)

 

5,681

 

(415,075)

 

Unrealized performance fees

 

22,535

 

(7,876)

 

(31,648)

 

(94,883)

 

Unrealized performance fee compensation

 

(4,985)

 

10,207

 

46,492

 

89,429

 

Unrealized investment and other income (loss)

 

(10,036)

 

12,398

 

27,362

 

(10,933)

 

Distributable Earnings

 

$

98,452

 

$

102,968

 

$

398,506

 

$

381,605

 

Fee related earnings

 

$

82,556

 

$

77,240

 

$

334,840

 

$

290,331

 

Performance fees—realized

 

19,616

 

56,787

 

121,948

 

146,494

 

Performance fee compensation—realized

 

(4,026)

 

(33,876)

 

(65,191)

 

(80,599)

 

Investment and other income realized, net

 

4,363

 

14,950

 

25,638

 

59,659

 

Net performance related earnings—realized

 

19,953

 

37,861

 

82,395

 

125,554

 

Less:

                 

Dividend equivalent

 

(371)

 

 

(2,501)

 

 

One-time acquisition costs

 

(94)

 

(2,939)

 

(1,553)

 

(8,446)

 

Income tax expense

 

(368)

 

(1,150)

 

(1,462)

 

(1,722)

 

Non-cash income items

 

(286)

 

 

(758)

 

(1,525)

 

Placement fees and underwriting costs

 

(2,354)

 

(6,928)

 

(8,817)

 

(14,753)

 

Non-cash depreciation and amortization

 

(584)

 

(1,117)

 

(3,638)

 

(7,832)

 

Distributable earnings

 

$

98,452

 

$

102,968

 

$

398,506

 

$

381,605

 

(1)Segment results do not give effect to the revenues and expenses associated with the Operations Management Group.

 

 

Exhibit F. Weighted Average Units Outstanding as of December 31, 2015

 

   

Units Outstanding

 

Adjusted Common
Units Outstanding

 

Ares Management, L.P. Common Units

 

80,678,042

 

80,678,042

 

Ares Operating Group Units exchangeable into Common Units

 

132,405,131

 

 

Dilutive Effect of Unvested Restricted Common Units(1)

 

685,353

 

259,475(2)

 

Dilutive Effect of Unvested Options

 

 

 

Total

 

213,768,526

 

80,937,517

 

 

(1)For the three months ended December 31, 2015, we apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted units to be settled in common units and options to acquire common units. Under the treasury stock method, compensation expense attributed to future services and not yet recognized is presumed to be used to acquire outstanding common units, thus reducing the weighted-average number of units and the dilutive effect of these awards.

(2)Represent proportional dilutive impact based upon the percentage of the Ares Operating Group owned by Ares Management, L.P. (37.86%).

 

 

Exhibit G. Per Unit Calculations ($ in thousands, except per unit data)

   

Q4-15

 

Q3-15

 

Q2-15

 

Q1-15

 

Q4-14

 

After Tax Economic Net Income per Unit

                     

Economic Net Income Before Taxes

 

$51,440

 

$6,035

 

$75,977

 

$82,930

 

$64,696

 

Less: Entity Level Foreign, State and Local Taxes

 

2,919

 

905

 

906

 

479

 

1,155

 

Economic Net Income After Entity Level, Foreign, State and Local Taxes

 

$48,521

 

$5,127

 

$75,071

 

$82,451

 

$63,541

 

x Tax Rate

 

12.2%

 

111.0%

 

8.7%

 

9.4%

 

10.7%

 

Less: Income Tax Provision (1)

 

5,905

 

5,689

 

6,565

 

7,776

 

6,813

 

After Tax Economic Net Income (Loss)

 

$42,616

 

($562)

 

$68,506

 

$74,675

 

$56,728

 

After Tax Economic Net Income (Loss) per Unit Outstanding

 

$0.20

 

($0.00)

 

$0.32

 

$0.35

 

$0.27

 
                       

After Tax Economic Net Income per Common Unit

                     

Economic Net Income After Entity Level, Foreign, State and Local Taxes

 

$48,521

 

$5,127

 

$75,071

 

$82,451

 

$63,541

 

x Common Ownership Percentage

 

37.86%

 

37.86%

 

37.86%

 

37.85%

 

38.14%

 

Economic Net Income Attributable to Common Unitholders

 

$18,370

 

$1,941

 

$28,422

 

$31,211

 

$24,235

 

x Tax Rate

 

32.1%

 

293.1%

 

23.1%

 

24.9%

 

28.1%

 

Less: Income Tax Provision (1)

 

5,905

 

5,689

 

6,565

 

7,776

 

6,813

 

After Tax Economic Net (Loss) Income Attributable to Common Unitholders

 

$12,465

 

($3,748)

 

$21,856

 

$23,435

 

$17,422

 

After Tax Economic Net Income (Loss) per Adjusted Common Unit

 

$0.15

 

($0.05)

 

$0.27

 

$0.29

 

$0.22

 
                       

Distributable Earnings per Unit

                     

Distributable Earnings

 

$53,673

 

$40,488

 

$73,862

 

$67,774

 

$65,693

 

Less: Entity Level Foreign, State and Local Tax

 

2,919

 

905

 

906

 

479

 

1,155

 

Distributable Earnings After Entity Level Foreign, State and Local Tax

 

$50,754

 

$39,584

 

$72,956

 

$67,295

 

$64,538

 

x Common Ownership Percentage

 

37.86%

 

37.86%

 

37.86%

 

37.85%

 

38.14%

 

Distributable Earnings Attributable to Common Unitholders

 

$19,215

 

$14,987

 

$27,621

 

$25,473

 

$24,615

 

Less: Current Provision for Income Taxes(2)

 

298

 

3,723

 

4,714

 

4,513

 

3,423

 

Distributable Earnings After Tax Attributable to Common Unitholders

 

$18,917

 

$11,263

 

$22,906

 

$20,960

 

$21,192

 

Distributable Earnings per Common Unit Outstanding

 

$0.23

 

$0.14

 

$0.28

 

$0.26

 

$0.26

 

Actual Distribution per Common Unit Outstanding

 

$0.20

 

$0.13

 

$0.26

 

$0.25

 

$0.24

 

 

(1)The provision for income taxes on ENI was calculated by multiplying (1) Ares Management, L.P.’s share of ENI that is subject to corporate level taxes (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary and its share of other deductible items) by (2) the Company’s assumed corporate tax rate.

(2)The provision for income taxes on DE represents the current provision for income taxes on pre-tax net income or loss (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary), adjusted to reflect Ares Management, L.P.’s current ownership percentage of the Company’s tax paying corporate subsidiaries.

 

 

Exhibit H. Glossary of Terms

ARCC Part I Fees

 

ARCC Part I Fees refers to fees based on ARCC’s net investment income (before giving effect to ARCC Part I Fees and ARCC Part II Fees).

ARCC Part II Fees

 

ARCC Part II Fees refers to fees based on ARCC’s net capital gains, which are paid annually.

Ares Operating Group Units

 

Ares Operating Group Units refer, collectively, to a partnership unit in each of the Ares Operating Group entities, which include Ares Holdings L.P., Ares Domestic Holdings L.P., Ares Offshore Holdings L.P., Ares Investments L.P. and Ares Real Estate Holdings L.P.

Assets Under Management

 

Assets Under Management (or "AUM") refers to the assets of our funds. For our funds other than CLOs, our AUM represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). For our funds that are CLOs, our AUM represents subordinated notes (equity) plus all drawn and undrawn debt tranches. A portion of our AUM may be cancelled or otherwise not available. No assurance can be made that all AUM will be invested.

Available Capital

 

Available Capital is comprised of uncalled committed capital and undrawn amounts under credit facilities, and may include AUM that may be cancelled or not otherwise available to invest.

Consolidated Funds

 

Consolidated Funds refers collectively to certain Ares-affiliated funds, related co-investment entities and certain CLOs that are required under GAAP to be consolidated in our combined and consolidated financial statements.

Economic Net Income

 

Economic net income (or "ENI") represents net income excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we believe are not indicative of our core performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization.

Distributable Earnings

 

Distributable earnings (or "DE") is a pre-income tax measure that is used to assess amounts potentially available for distributions to stakeholders. Distributable earnings is calculated as the sum of Fee Related Earnings, realized performance fees, realized performance fee compensation expense, realized net investment and other income, and is reduced for expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes computed in accordance with GAAP as it is presented before giving effect to unrealized performance fee income, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles, equity compensation expense and is further adjusted by certain items described in "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures."

Fee Earning Assets Under Management

 

Fee earning AUM (or "FEAUM") refers to the AUM of our funds on which we directly or indirectly earn management fees. Fee earning AUM is equal to the sum of all the individual fee bases of our funds that contribute directly or indirectly to our management fees.

Fee Related Earnings

 

Fee related earnings (or "FRE") is a component of ENI and is used to assess the ability of our business to cover direct base compensation and operating expenses from management fees. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and excludes performance fees, performance fee compensation, and investment income from our Consolidated Funds, and non-consolidated funds, and certain other items.

 

Incentive Generating Assets Under Management

 

Incentive generating AUM (or "IGAUM") refers to the AUM of our funds that are currently generating, on a realized or unrealized basis, performance fee revenue. It generally represents the NAV of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee). IGAUM only includes ARCC Part II Fees.

Incentive Eligible Assets Under Management

 

Incentive eligible AUM (or "IEAUM") refers to the AUM of our funds that are eligible to produce performance fee revenue, regardless of whether or not they are currently generating performance fees. It generally represents the NAV plus uncalled equity of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee).

Operations Management Group

 

In addition to our four segments, we have an Operations Management Group (the "OMG") that consists of five independent, shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/information technology, business development, legal/compliance and human resources. The OMG’s expenses are not allocated to our four reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses this information to assess the performance of our reportable segments and our Operations Management Group, and we believe that this information enhances the ability of unitholders to analyze our performance.

Our Funds

 

Our funds refers to the funds, alternative asset companies and other entities and accounts that are managed or co-managed by Ares. It also includes funds managed by Ivy Hill Asset Management, L.P. ("IHAM"), a wholly owned portfolio company of ARCC, and a registered investment adviser.

Performance Related Earnings

 

Performance related earnings (or "PRE") is a measure used to assess our investment performance. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and investment income earned from our Consolidated Funds and non-consolidated funds.

Permanent Capital

 

Permanent capital refers to capital of our funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, which funds currently consist of Ares Capital Corporation ("ARCC"), Ares Commercial Real Estate Corporation ("ACRE"), and Ares Dynamic Credit Allocation Fund, Inc. ("ARDC"); such funds may be required, or elect, to return all or a portion of capital gains and investment income.

Total Fee Revenue

 

Total fee revenue refers to the sum of segment management fees and net performance fees.