5. FAIR VALUE

U.S. GAAP establishes a hierarchal disclosure framework which prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Financial assets and liabilities measured and reported at fair value are classified as follows:

•

Level I—Quoted unadjusted prices for identical instruments in active markets to which the Company has access at the date of measurement.

•

Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are directly or indirectly observable. Level II inputs include prices in markets for which there are few transactions, prices that are not current, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates.

•

Level III—Model-derived valuations for which one or more significant inputs are unobservable. These inputs reflect the Company's assessment of the assumptions that market participants use to value the investment based on the best available information.

In some instances, an instrument may fall into different levels of the fair value hierarchy. In such instances, the instrument's level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. The Company's assessment of the significance of an input requires judgment and considers factors specific to the instrument. The Company accounts for the transfer of assets into or out of each fair value hierarchy level as of the beginning of the reporting period.

Investment / Liability Valuations

The valuation techniques used by the Company to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation techniques applied to the Consolidated Funds and AIH LLC vary depending on the nature of the investment.

CLO loan obligations: The Company has elected the fair value option to measure the CLO loan obligations at fair value as the Company has determined that measurement of the loan obligations issued by the CLOs at fair value better correlates with the value of the assets held by the CLOs, which are held to provide the cash flows for the note obligations.

The fair value of CLO liabilities is estimated based on various valuation models of third party pricing services as well as internal models. The valuation models generally utilize discounted cash flows and take into consideration prepayment and loss assumptions, based on historical experience and projected performance, economic factors, the characteristics and condition of the underlying collateral, comparable yields for similar securities and recent trading activity. These securities are classified as Level III.

Corporate debt, bonds, bank loans, securities sold short and derivative instruments: The fair value of corporate debt, bonds, bank loans, securities sold short and derivative instruments is estimated based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs. These investments are generally classified within Level II. The Company obtains prices from independent pricing services that generally utilize broker quotes and may use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. If the pricing services are only able to obtain a single broker quote or utilize a pricing model, such securities will be classified as Level III. If the pricing services are unable to provide prices, the Company will attempt to obtain one or more broker quotes directly from a dealer, price such securities at the last bid price obtained and classify such securities as Level III.

Equity and equity-related securities: Securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. Securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.

Partnership interests: In accordance with ASU 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), the Company generally values its investments using the net asset value ("NAV") per share equivalent calculated by the investment manager as a practical expedient to determining an independent fair value or estimates based on various valuation models of third-party pricing services, as well as internal models. Such valuations are classified as Level II to the extent the investments are currently redeemable; if the investments are subject to a lock-up period, they are classified as Level III.

Certain investments of AIH and the Consolidated Funds are valued at NAV per share of the fund. In limited circumstances, the Company may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Company will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP. However, for the three months ended March 31, 2014, the Company believes that NAV per share represents the fair value of the investments.

The substantial majority of the Company's comingled funds are closed-ended, and accordingly, do not permit investors to redeem their interest other than in limited circumstances that are beyond the control of the Company, such as instances in which retaining the limited partnership interest could cause the limited partner to violate a law, regulation or rule. Investors in open ended and evergreen funds generally have the right to withdraw their capital, subject to the terms of the respective limited partnership agreements, over periods ranging from one month to three years. In addition, separately managed investment vehicles for a single fund investor may allow such investors to terminate the fund at the discretion of the investor pursuant to the terms of the applicable constituent documents of such vehicle.

In the absence of observable market prices, the Company values Level III investments using consistent valuation methodologies, typically market- or income-based approaches. The main inputs into the Company's valuation model for Level III securities include earnings multiples (based on the historical earnings of the issuer) and discounted cash flows. The Company may also consider original transaction price, recent transactions in the same or similar instruments, completed third-party transactions in comparable instruments and other liquidity, credit and market risk factors. The quarterly valuation process for Level III investments begins with each investment or loan being valued by the investment or valuation teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the investment team and other senior managers. All Level III investment values are ultimately approved by the valuation committees and designated investment professionals. For certain investments, the valuation process also includes a review by independent valuation parties, at least annually, to determine whether the fair values determined by management are reasonable. Results of the valuation process are evaluated each quarter, including an assessment of whether the underlying calculations should be adjusted. In connection with this process, the Company evaluates changes in fair-value measurements from period to period for reasonableness, considering items such as industry trends, general economic and market conditions and factors specific to the investment.

Certain Level III assets are valued using prices obtained from brokers or pricing vendors. The Company obtains an average of one to two broker non-binding quotes. The Company seeks to obtain at least one quote directly from a broker making a market for the asset and one price from a pricing vendor for each security or similar securities. These investments are classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustment for investment-specific factors or restrictions. Generally, the Company does not adjust any of the prices received from these sources but material prices are reviewed against the Company's valuation models with a limited exception for securities that are deemed to have no value. The Company evaluates the prices obtained from brokers and pricing vendors based on available market information, including trading activity of the subject or similar securities or by performing a comparable security analysis to ensure that fair values are reasonably estimated. The Company may also perform back-testing of valuation information obtained from brokers and pricing vendors against actual prices received in transactions to validate pricing discrepancies. In addition to on-going monitoring and back-testing, the Company performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process and to ensure compliance with required accounting disclosures.

Fair Value of Financial Instruments Held by the Company and Consolidated Funds

The table below summarizes the valuation of investments and other financial instruments by fair value hierarchy levels as of March 31, 2014:

Investments of the Company

	Level I		Level II			Level III		Total

Investments, at fair value
Equity securities	$	92	$	—		$	—	$	92
Bonds		—		1,174			—		1,174
Partnership interests		—		—			120,342		120,342

Total investments, at fair value		92		1,174			120,342		121,608

Derivative assets, at fair value
Forward foreign currency contracts		—		367			—		367
Purchased option contracts		—		765			—		765

Total derivative assets, at fair value		—		1,132			—		1,132

Total	$	92	$	2,306		$	120,342	$	122,740


Derivative liabilities, at fair value
Forward foreign currency contracts	$	—	$	(1,745	)	$	—	$	(1,745	)
Interest rate contracts		—		(1,197	)		—		(1,197	)

Total derivative liabilities, at fair value	$	—	$	(2,942	)	$	—	$	(2,942	)

The table below summarizes the valuation of investments and other financial instruments by fair value hierarchy levels as of March 31, 2014:

Investments of Consolidated Funds

	Level I		Level II			Level III			Total

Investments, at fair value
Equity securities	$	112,075	$	538,158		$	2,825,221		$	3,475,454
Bonds		—		1,466,070			1,477,844			2,943,914
Loans		—		11,448,952			983,174			12,432,126
Collateralized loan obligations		—		—			567,846			567,846
Partnership interests		—		—			43,993			43,993
Other		—		19,141			2,593			21,734

Total investments, at fair value		112,075		13,472,321			5,900,671			19,485,067

Derivative assets, at fair value
Interest rate contracts		—		0			—			0
Credit contracts		—		6,272			2,330			8,602
Equity contracts		—		244			—			244
Foreign exchange contracts		—		115			—			115

Total derivative assets, at fair value		—		6,631			2,330			8,961

Total	$	112,075	$	13,478,952		$	5,903,001		$	19,494,028


Derivative liabilities, at fair value
Forward foreign currency contracts	$	—	$	(2,544	)	$	—		$	(2,544	)
Written options		—		—			(78	)		(78	)
Credit contracts		—		(39,177	)		(9,299	)		(48,476	)
Interest rate swaps		—		(2,545	)		—			(2,545	)

Total derivative liabilities, at fair value		—		(44,266	)		(9,377	)		(53,643	)
Loan obligations of CLOs(1)		—		—			(11,066,253	)		(11,066,253	)

Total liabilities	$	—	$	(44,266	)	$	(11,075,630	)	$	(11,119,896	)

(1): Ares Enhanced Loan Investment Strategy II, Ltd. has not elected to fair value its loan obligation and is therefore carried at cost of $209,604.

The table below summarizes the valuation of investments and other financial instruments by fair value hierarchy levels as of December 31, 2013:

Investments of the Company

	Level I		Level II			Level III		Total

Investments, at fair value
Equity securities	$	89	$	—		$	—	$	89
Bonds		—		1,172			—		1,172
Partnership interests		—		—			88,177		88,177

Total investments, at fair value		89		1,172			88,177		89,438

Derivative assets, at fair value
Forward foreign currency contracts		—		247			—		247
Purchased option contracts		—		917			—		917

Total derivative assets, at fair value		—		1,164			—		1,164

Total	$	89	$	2,336		$	88,177	$	90,602


Derivative liabilities, at fair value
Forward foreign currency contracts	$	—	$	(1,653	)	$	—	$	(1,653	)
Interest rate contracts		—		(1,254	)		—		(1,254	)

Total derivative liabilities, at fair value	$	—	$	(2,907	)	$	—	$	(2,907	)

The table below summarizes the valuation of investments and other financial instruments by fair value hierarchy levels as of December 31, 2013:

Investments of Consolidated Funds

	Level I		Level II			Level III			Total

Investments, at fair value
Equity securities	$	166,535	$	482,568		$	2,958,232		$	3,607,335
Bonds		—		1,576,942			2,052,984			3,629,926
Loans		—		11,868,584			1,058,635			12,927,219
Collateralized loan obligations		—		65,405			515,534			580,939
Partnership interests		—		—			41,001			41,001
Other		—		34,546			2,372			36,918

Total investments, at fair value		166,535		14,028,045			6,628,758			20,823,338

Derivative assets, at fair value
Interest rate contracts		—		8			—			8
Credit contracts		—		2,651			—			2,651
Equity contracts		—		179			—			179
Foreign exchange contracts		—		8,652			—			8,652
Other financial instruments		—		—			3,135			3,135

Total derivative assets, at fair value		—		11,490			3,135			14,625

Total	$	166,535	$	14,039,535		$	6,631,893		$	20,837,963


Derivative liabilities, at fair value
Forward foreign currency contracts	$	—	$	(38,594	)	$	(899	)	$	(39,493	)
Written options		—		(34	)		—			(34	)
Credit contracts		—		(25,754	)		(1,633	)		(27,387	)
Interest rate swaps		—		(3,703	)		(371	)		(4,074	)
Other financial instruments		—		(175	)		(3,952	)		(4,127	)

Total derivative liabilities, at fair value		—		(68,260	)		(6,855	)		(75,115	)
Loan obligations of CLOs(1)		—		—			(11,534,956	)		(11,534,956	)
Securities sold short, at fair value		—		(1,633	)		—			(1,633	)

Total liabilities	$	—	$	(69,893	)	$	(11,541,811	)	$	(11,611,704	)

(1): Ares Enhanced Loan Investment Strategy II, Ltd. has not elected to fair value its loan obligation and is therefore carried at cost of $239,201.

The following tables set forth a summary of changes in the fair value of the Level III investments for the three months ended March 31, 2014:

	For the Three Months Ended March 31, 2014 Investments of AIH LLC

	Fixed Income		Partnership Interests			Total
Balance, beginning of period	$	—	$	88,177		$	88,177
Initial consolidation of new funds		—		9,951			9,951
Transfer out		—		—			—
Purchases		—		21,504			21,504
Sales		—		(23,124	)		(23,124	)
Realized and unrealized appreciation, net		—		23,834			23,834

Balance, end of period	$	—	$	120,342		$	120,342


Changes in unrealized appreciation included in earnings related to financial assets still held at the reporting date	$	—	$	4,286		$	4,286

	For the Three Months Ended March 31, 2014 Investments of Consolidated Funds

	Equity Securities			Fixed Income			Partnership Interests		Other Financial Instruments			Total
Balance, beginning of period	$	2,958,232		$	3,627,153		$	41,001	$	(1,348	)	$	6,625,038
Initial consolidation of new funds		8,152			—			—		—			8,152
Deconsolidation of previous funds		—			(378,397	)		—		—			(378,397	)
Transfer in		—			222,382			—		—			222,382
Transfer out		—			(364,608	)		—		—			(364,608	)
Purchases		11,337			215,514			2,276		5			229,132
Sales		(167,142	)		(274,491	)		—		(6,387	)		(448,020	)
Accrued discounts/premiums		15			10,849			—		(0	)		10,864
Realized and unrealized appreciation (depreciation), net		14,627			(29,540	)		717		3,277			(10,919	)

Balance, end of period	$	2,825,221		$	3,028,862		$	43,994	$	(4,453	)	$	5,893,624


Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date	$	118,757		$	(21,711	)	$	717	$	1,102		$	98,865

The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2013:

	For the Year Ended December 31, 2013 Investments of AIH LLC

	Fixed Income			Partnership Interests			Total
Balance, beginning of period	$	1,170		$	21,695		$	22,865
Transfer out		(1,170	)		—			(1,170	)
Purchases		—			51,329			51,329
Sales		—			(2,447	)		(2,447	)
Realized and unrealized appreciation, net		—			17,600			17,600

Balance, end of period	$	—		$	88,177		$	88,177


Changes in unrealized appreciation included in earnings related to financial assets still held at the reporting date	$	—		$	16,816		$	16,816

	For the Year Ended December 31, 2013 Investments of Consolidated Funds

	Equity Securities			Fixed Income			Partnership Interests			Other Financial Instruments			Total
Balance, beginning of period	$	1,978,138		$	3,920,451		$	6,177		$	5,202		$	5,909,968
Initial consolidation of new funds		—			29,570			—			—			29,570
Transfer in		74,438			237,312			—			(29	)		311,721
Transfer out		(52,573	)		(249,763	)		—			—			(302,336	)
Purchases		555,589			1,313,850			34,369			1,135			1,904,943
Sales		(43,695	)		(1,704,939	)		(851	)		(23,743	)		(1,773,228	)
Accrued discounts/premiums		—			27,149			—			88			27,237
Realized and unrealized appreciation (depreciation), net		446,335			53,523			1,306			15,999			517,163

Balance, end of period	$	2,958,232		$	3,627,153		$	41,001		$	(1,348	)	$	6,625,038


Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date	$	417,659		$	(26,038	)	$	1,306		$	(4,896	)	$	388,031

The following tables set forth a summary of changes in the fair value of the Level III investments for the three months ended March 31, 2013:

	For the Three Months Ended March 31, 2013 Investments of AIH LLC

	Fixed Income			Partnership Interests			Total
Balance, beginning of period	$	1,170		$	21,695		$	22,865
Transfer out		(1,170	)		—			(1,170	)
Purchases		—			503			503
Sales		—			(86	)		(86	)
Realized and unrealized appreciation (depreciation), net		—			1,207			1,207

Balance, end of period	$	—		$	23,319		$	23,319


Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date	$	—		$	1,179		$	1,179

	For the Three Months Ended March 31, 2013 Investments of Consolidated Funds

	Equity Securities			Fixed Income			Partnership Interests			Other Financial Instruments			Total
Balance, beginning of period	$	1,978,138		$	3,920,451		$	6,177		$	5,202		$	5,909,968
Initial consolidation of new funds		—			28,471			—			—			28,471
Transfer in		135			362,811			—			—			362,946
Transfer out		(8,725	)		(316,201	)		—			(2,420	)		(327,346	)
Purchases		21,794			310,985			43			(3,974	)		328,848
Sales		(7,382	)		(285,685	)		—			(7,446	)		(300,513	)
Accrued discounts/premiums		—			10,342			—			9			10,351
Realized and unrealized appreciation (depreciation), net		119,481			(86,157	)		(41	)		17,780			51,063

Balance, end of period	$	2,103,441		$	3,945,017		$	6,179		$	9,151		$	6,063,788


Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date	$	(1,441	)	$	(35,663	)	$	1,307		$	5,657		$	(30,140	)

Total realized and unrealized appreciation (depreciation) recorded for AIH's Level III investments are included in net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments in the Combined and Consolidated Statements of Operations, respectively.

Total realized and unrealized appreciation (depreciation) recorded for the Consolidated Funds' Level III investments are included in net realized gain (loss) on investments of Consolidated Funds and net change in unrealized appreciation (depreciation) on investments of Consolidated Funds in the Combined and Consolidated Statements of Operations, respectively.

The Company recognizes transfers between the levels as of the beginning of the period. Transfers out of Level III were generally attributable to certain investments that experienced a more significant level of market activity during the period and thus were valued using observable inputs either from independent pricing services or multiple brokers. Transfers into Level III were generally attributable to certain investments that experienced a less significant level of market activity during the period and thus were only able to obtain one quote from a broker or independent pricing service. Transfers from Level I to Level II for the three months ended March 31, 2014 included $15.4 million due to restricted common stock received in exchange for an exchange-traded common equity investment upon the exercise of warrants.

The following table sets forth a summary of changes in the fair value of the Level III investments for the CLO loan obligations for the three months ended March 31, 2014 and the year ended December 31, 2013:

	For the Three Months Ended March 31, 2014			For the Year Ended December 31, 2013

Balance, beginning of period	$	11,534,956		$	9,422,570
Equity appropriated for Consolidated Funds		—			3,309,986
Borrowings		23,528			79,859
Paydowns		(475,467	)		(1,511,971	)
Issuances		—			—
Realized and unrealized gains, net		(16,764	)		234,512

Balance, end of period	$	11,066,253		$	11,534,956

The following tables summarize the quantitative inputs and assumptions used for the Company's Level III inputs as of March 31, 2014:

ARES INVESTMENTS HOLDINGS LLC
As of March 31, 2014

Investments	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range

Assets
Partnership interests	$	120,342	NAV	N/A	N/A

Total	$	120,342

CONSOLIDATED FUNDS
As of March 31, 2014

Investments	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range

Assets
Equity securities
Consumer discretionary	$	11,168	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		5,491	EV market multiple analysis	EBITDA multiple	6.6x - 9.0x	8.4x
		1,035	Discounted cash flow	Yield to worst	5.0%	5.0	%
		231,434	Market approach (comparable companies)	Book value multiple	2.0x - 2.3x	2.1x
		1,228,877	Market approach (comparable companies)	EBITDA multiple	7.5x - 15.0x	10.6x
		71,288	Market approach (comparable companies)	Net income multiple	15.0x	15.0x
		1,112	Market approach (other)	Other	N/A	N/A
		1,642	Other	N/A	N/A	N/A
		4,961	Other	Volume weighted average price	25.2x	25.2x
		1,478	Other	Volume weighted average price / illiquidity discount	15%/25.2x	15%/25.2x
		250,000	Recent transaction price(1)	N/A	N/A	N/A
Consumer staples		762	EV market multiple analysis	EBITDA multiple	7.9x	7.9x
		221,864	Market approach (comparable companies)	EBITDA multiple	6.0x - 8.0x	7.5x
		30,293	Market approach (comparable companies)	Net income multiple	8.0x - 10.0x	9.0x
Energy		128,493	Market approach (comparable companies)	EBITDA multiple	1.0x - 1.4x	1.2x
		34,125	Other	N/A	N/A	N/A
		6,600	Option pricing model	Volatility	26.0%	26.0	%
Financials		7,069	EV market multiple analysis	EBITDA multiple	10.5x	10.5x
Healthcare, education, and childcare		28,075	EV market multiple analysis	EBITDA multiple	7.8x - 19.7x	7.3x
		316,317	Market approach (comparable companies)	EBITDA multiple	8.0x - 12.0x	10.4x
		33,610	Market approach (comparable companies)	Net income multiple	30.0x - 40.0x	35.0x
Industrials		86	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		130,478	Market approach (comparable companies)	EBITDA multiple	8.0x - 12.7x	10.0x
Materials		52,947	Market approach (comparable companies)	Net income multiple	8.0x - 10.0x	9.0x
Telecommunication services		1,367	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		570	EV market multiple analysis	EBITDA multiple	6.9x	6.9x
Utilities		15,253	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
Fixed Income
Consumer discretionary		340,008	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		18,508	EV market multiple analysis	EBITDA multiple	6.2x - 10.0x	7.3x
		6,741	Income approach (other)	Yield to worst	4.8% - 5.8%	5.3	%
		115,076	Market approach (comparable companies)	Book value multiple	2.0x - 2.3x	2.1x
		15,454	Market approach (comparable companies)	EBITDA multiple	8.1x	8.1x
		783,465	Recent transaction price(1)	N/A	N/A	N/A
		291,435	Yield analysis	Market yield	2.5% - 13.0%	9.9	%
Consumer staples		515	Discounted cash flow	Other	20.0%	20.0	%
		4,297	Income approach (other)	Yield	18.4%	18.4	%
Energy		66,912	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		11,888	Recent transaction price(1)	N/A	N/A	N/A
Financials		491,152	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		74,439	Discounted cash flow	Discount rate, Constant default rate, Recovery rate, prepayment rate	10.8%, 2.0%, 70.0%, 20.0%	36.0	%
		13,201	EV market multiple analysis	EBITDA multiple	2.4x	2.4x
		287,824	Yield analysis	Market yield	4.5% - 13.5%	10.6	%
		2,030	Income approach (other)	Weighted average collection rate	1.2x	1.2x
		2,892	Recent transaction price(1)	N/A	N/A	N/A
Healthcare, education, and childcare		57,847	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		5,959	EV market multiple analysis	EBITDA multiple	32.0x	32.0x
		7,390	Income approach (other)	Yield to worst	6.0%	6.0	%
		72,874	Yield analysis	Market yield	6.0% - 10.0%	7.5	%
Industrials		83,495	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		5,075	Yield analysis	Market yield	18.8%	18.8	%
		4,773	Income approach (other)	Yield	4.8% - 5.6%	5.3	%
		31,018	Market approach (comparable companies)	EBITDA multiple	10.0x - 12.7x	11.4x
		43,400	Yield analysis	Market yield	2.5% - 12.8%	8.9	%
Information technology		18,410	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		39,748	Yield analysis	Market yield	5.3% - 14.0%	11.5	%
Materials		31,369	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		14,850	Market approach (comparable companies)	EBITDA multiple	8.0x - 10.0x	9.3x
		731	Market approach (comparable companies)	Recovery rate	1.1% - 2.5%	1.8	%
		16,212	Yield analysis	Market yield	6.0% - 13.0%	8.8	%
Telecommunication services		69,877	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
Partnership and LLC interests		52,818	NAV	N/A	N/A	N/A
Other		2,593	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
Derivative instruments of Consolidated Funds		2,330	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A

Total assets	$	5,903,001


Liabilities
Loans payable of Consolidated Funds:
Fixed income	$	10,860,388	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
		42,228	Discounted cash flow	Discount Rate	10.7%	10.7	%
		163,637	Market approach (other)	Other	N/A	N/A
Derivatives instruments of Consolidated Funds		9,377	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A

Total liabilities	$	11,075,630

(1): Recent transaction price consists of securities purchased or restructured within the last six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.

The following tables summarize the quantitative inputs and assumptions used for the Company's Level III inputs as of December 31, 2013:

ARES INVESTMENTS HOLDINGS LLC
As of December 31, 2013

Investments	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range

Assets
Partnership interests	$	88,177	NAV	N/A	N/A

Total	$	88,177

CONSOLIDATED FUNDS
As of December 31, 2013

Investments	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range

Assets
Equity securities
Consumer discretionary	$	13,044	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		6,146	EV market multiple analysis	EBITDA multiple	6.2x - 18.0x	9.3x
		246,227	Market approach (comparable companies)	Book value multiple	1.5x - 1.8x	1.6x
		1,162,641	Market approach (comparable companies)	EBITDA multiple	7.5x - 15.0x	10.6x
		42,080	Market approach (comparable companies)	Net income multiple	9.6x	9.6x
		1,114	Market approach (comparable companies)	Yield to worst	5.0%	5.0	%
		1,557	Market approach (other)	Other	N/A	N/A
		1,729	Other	Other	N/A	N/A
		8,466	Other	Volume weighted average price	25.2x	25.2x
		1,418	Other	Volume weighted average price / illiquidity discount	25.2x / 15%	25.2x / 15	%
		505,270	Recent transaction price(1)	N/A	N/A	N/A
Consumer staples		668	EV market multiple analysis	EBITDA multiple	7.9x	7.9x
		201,059	Market approach (comparable companies)	EBITDA multiple	6.0x - 8.5x	7.5x
		25,000	Recent transaction price(1)	N/A	N/A	N/A
Energy		119,344	Market approach (comparable companies)	EBITDA multiple	1.0x - 1.4x	1.2x
		58,987	Other	Other	N/A	N/A
Financials		6,172	EV market multiple analysis	EBITDA multiple	10.5x	10.5x
Healthcare, education, and childcare		28,607	EV market multiple analysis	EBITDA multiple	7.8x - 43.7x	10.9x
		296,817	Market approach (comparable companies)	EBITDA multiple	8.0x - 12.0x	10.5x
		23,493	Market approach (comparable companies)	Net income multiple	20.0x - 25.0x	22.5x
Industrials		8,595	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		130,478	Market approach (comparable companies)	EBITDA multiple	8.0x - 14.5x	10.3x
Materials		773	EV market multiple analysis	EBITDA multiple	6.0x	6.0x
		52,947	Market approach (comparable companies)	Net income multiple	8.0x - 10.0x	9.0x
Telecommunication services		957	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		566	EV market multiple analysis	EBITDA multiple	6.9x	6.9x
Utilities		14,077	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
Fixed Income
Consumer discretionary		287,572	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		394,891	Discounted cash flow	Yield to maturity	7.0% - 10.0%	8.5	%
		18,383	EV market multiple analysis	EBITDA multiple	6.2x - 18.0x	8.0x
		4,565	Income approach (other)	Yield	17.9%	17.9	%
		5,366	Income approach (other)	Yield to worst	4.8% - 5.8%	5.3	%
		113,305	Market approach (comparable companies)	Book value multiple	1.5x - 1.8x	1.6x
		406,854	Market approach (comparable companies)	EBITDA multiple	8.0x 10.5x	9.2x
		9,730	Recent transaction price(1)	N/A	N/A	N/A
		623,437	Yield analysis	Market yield	2.5% - 13.0%	9.2	%
Consumer staples		469	Discounted cash flow	Other	20.0%	20.0	%
		4,032	Income approach (other)	Yield	4.4%	4.4	%
Energy		112,362	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		7,327	Recent transaction price(1)	N/A	N/A	N/A
Financials		561,569	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		942	Discounted cash flow	Weighted average collection rate	N/A	N/A
		13,177	EV market multiple analysis	EBITDA multiple	2.4x	2.4x
		214,719	Yield analysis	Market yield	2.8% - 13.5%	9.3	%
Healthcare, education, and childcare		100,868	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		5,919	EV market multiple analysis	EBITDA multiple	7.8x - 43.7x	10.9x
		3,916	Income approach (other)	Discount rate	4.1% - 4.2%	4.2	%
		146,983	Yield analysis	Market yield	6.0% - 10.0%	7.7	%
Industrials		89,817	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		17,894	Income approach (other)	Yield	4.4% - 5.8%	4.6	%
		30,579	Market approach (comparable companies)	EBITDA multiple	9.7x - 14.5x	12.1x
		4,760	Market approach (comparable companies)	Illiquidity premium	2.0% - 2.5%	2.3	%
		53,194	Yield analysis	Market yield	2.5% - 12.8%	9.6	%
Information technology		51,357	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		6,851	Recent transaction price(1)	N/A	N/A	N/A
		38,317	Yield analysis	Market yield	5.3% - 14.0%	11.5	%
Materials		39,743	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		20,259	Discounted cash flow	Discount rate	13.0%	13.0	%
		14,056	Market approach (comparable companies)	EBITDA multiple	6.0x - 10.0x	9.0x
		54,714	Yield analysis	Market yield	6.0% - 13.0%	7.7	%
Telecommunication services		112,901	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
		52,989	Yield analysis	Market yield	8.8%	8.8	%
Utilities		3,336	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
Partnership and LLC interests		41,001	NAV	N/A	N/A	N/A
Other		2,372	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A
Derivative instruments of Consolidated Funds		3,135	Broker quotes and/or 3^rd party pricing services	N/A	N/A	N/A

Total assets	$	6,631,893


Liabilities
Loans payable of Consolidated Funds:
Fixed income	$	10,931,836	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A
		41,920	Discounted cash flow	Discount Rate	10.7%	10.7	%
		561,200	Market approach (other)	Other	N/A	N/A
Derivatives instruments of Consolidated Funds		6,855	Broker quotes and/or 3rd party pricing services	N/A	N/A	N/A

Total liabilities	$	11,541,811

(1): Recent transaction price consists of securities purchased or restructured within the last six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.

The significant unobservable inputs used in the fair value measurement of the Company's investments in equity securities include earnings before interest, tax, depreciation and amortization ("EBITDA"), book value, and net income multiples. Significant increase (decrease) in EBITDA, book value, or net income multiples in isolation would result in a significantly higher (lower) fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Company's investments in bonds are EBITDA and book value multiples, discount rates, prepayment rates, recovery rates, and market yields. Significant increases (decreases) in EBITDA and book value multiples and recovery rates, would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in prepayment rates and market yields would result in lower (higher) fair value measurements.

The significant unobservable inputs used in the fair value measurement of the Company's loans payable are discount rates, default rates, prepayment rates and other. Significant increases (decreases) in discount rates or default rates in isolation would result in a significantly lower (higher) fair value measurement.

For investments valued using NAV per share, a summary of fair value by segment along with the remaining unfunded commitment and any redemption restriction of such investments as of March 31, 2014 is presented below:

Strategy	Fair Value		Unfunded Commitments

Direct Lending Group	$	20,336	$	30,503	(1)(3)
Real Estate Group		34,894		9,686	(1)
Tradable Credit Group		72,818		150,464	(1)(2)(3)
Private Equity Group		45,112		153,327	(1)

Totals	$	173,160	$	343,980

Strategy	Fair Value		Unfunded Commitments

Direct Lending Group	$	2,298	$	1,045	(3)
Real Estate Group		34,521		9,734	(1)
Tradable Credit Group		50,349		145,818	(1)(2)(3)
Private Equity Group		42,010		156,966	(1)

Totals	$	129,178	$	313,563

(1): The funds within these strategies are closed-ended and generally do not permit investors to redeem their interests. Distributions are received as the underlying investments are liquidated.
(2): The funds within these strategies are open-ended and subject to a lock-up period of six months after the closing date, an investor has the right to withdraw their capital. Distributions are received as the underlying investments are liquidated.
(3): The funds within these strategies are separately managed investment vehicles, which may be redeemed only upon dissolution or liquidation of the fund at the discretion of the investor. Distributions are received as the underlying investments are liquidated.