10-Q 1 ares-20160331x10q.htm 10-Q ares_Current folio_10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File No. 001‑36429

ARES MANAGEMENT, L.P.

(Exact name of Registrant as specified in its charter)

 

 

Delaware
(State or other jurisdiction of
incorporation or organization)

80‑0962035
(I.R.S. Employer
Identification Number)

 

2000 Avenue of the Stars, 12th Floor, Los Angeles, CA 90067

(Address of principal executive office) (Zip Code)

(310) 201‑4100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes   No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act. (Check one):

 

 

 

 

Large accelerated filer

Accelerated filer

Non‑accelerated filer
(Do not check if a
smaller reporting company)

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes   No 

The number of common units representing limited partner interests outstanding as of May 4, 2016 was 80,690,612.

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

Page

PART I—FINANCIAL INFORMATION 

 

 

Item 1. 

Financial Information

 

 

 

Unaudited Condensed Consolidated Financial Statements:

 

1

 

 

Condensed Consolidated Statements of Financial Condition as of March 31, 2016 and December 31, 2015

 

1

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and March 31, 2015

 

2

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and March 31, 2015

 

3

 

 

Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2016

 

4

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 31, 2015

 

5

 

 

Notes to the Condensed Consolidated Financial Statements

 

6

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

42

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

 

77

Item 4. 

Controls and Procedures

 

77

PART II—OTHER INFORMATION 

 

 

Item 1. 

Legal Proceedings

 

78

Item 1A. 

Risk Factors

 

78

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

 

78

Item 3. 

Defaults Upon Senior Securities

 

78

Item 4. 

Mine Safety Disclosures

 

78

Item 5. 

Other Information

 

78

Item 6. 

Exhibits

 

79

Signatures 

 

80

 

 

 

 

 


 

Forward‑Looking Statements

This report contains forward‑looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward‑looking statements by the use of forward‑looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. The forward‑looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward‑looking statements are subject to various risks, and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. Some of these factors are described in this form under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” These factors should not be construed as exhaustive and should be read in conjunction with the risk factors and other cautionary statements that are included in this form and in our other periodic filings. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these forward‑looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Therefore, you should not place undue reliance on these forward‑looking statements. Any forward‑looking statement speaks only as of the date on which it is made. We do not undertake any obligation to publicly update or review any forward‑looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

References in this report to an “Ares Operating Group Unit” or an “AOG Unit” refer to, collectively, a partnership unit in each of the Ares Operating Group entities.

Under generally accepted accounting principles in the United States (“GAAP”), we are required to consolidate (a) entities other than limited partnerships and entities similar to limited partnerships in which we hold a majority voting interest or have majority ownership and control over the operational, financial and investing decisions of that entity, including Ares‑affiliates and affiliated funds and co‑investment entities, for which we are presumed to have controlling financial interests, and (b) entities that we concluded are variable interest entities (“VIEs”), including limited partnerships and CLOs, for which we are deemed to be the primary beneficiary. When an entity is consolidated, we reflect the assets, liabilities, revenues, expenses and cash flows of the entity in our condensed consolidated financial statements on a gross basis, subject to eliminations from consolidation, including the elimination of the management fees, performance fees and other fees that we earn from the entity. However, the presentation of performance fee compensation and other expenses associated with generating such revenues is not affected by the consolidation process. In addition, as a result of the consolidation process, the net income attributable to third‑party investors in consolidated entities is presented as net income attributable to redeemable interests and non‑controlling interests in Consolidated Funds in our Condensed Consolidated Statements of Operations.

In this form, in addition to presenting our results on a consolidated basis in accordance with GAAP, we present revenues, expenses and other results on a (i) “segment basis,” which deconsolidates these entities and therefore shows the results of our reportable segments without giving effect to the consolidation of the entities and (ii) “Stand Alone basis,” which shows the results of our reportable segments on a combined segment basis together with our Operations Management Group. In addition to our three 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 three 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 OMG, and we believe that this information enhances the ability of unitholders to analyze our performance. For more information, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation—Consolidation and Deconsolidation of Ares Funds,” “—Managing Business Performance—Non‑GAAP Financial Measures” and “—Segment Analysis—ENI and Other Measures.”

i


 

Glossary

When used in this report, unless the context otherwise requires:

·

“ARCC Part I Fees” refers to a quarterly performance fee on the investment income from Ares Capital Corporation (NASDAQ: ARCC) (“ARCC”)

·

“assets under management” or “AUM” refers to the assets we manage. 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;

·

“CLOs” refers to “our funds” which are structured as collateralized loan obligations;

·

“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 condensed consolidated financial statements;

·

“distributable earnings” or “DE” refers to a pre‑income tax measure that is used to assess amounts potentially available for distributions to unitholders. Distributable earnings is calculated as the sum of fee related earnings, realized performance fees, realized performance fee compensation and realized net investment and other income, and is reduced by 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 fees, 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;”

·

“economic net income” or “ENI” refers to net income excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation and amortization 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 mergers, acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization. We believe the exclusion of these items provides investors with a meaningful indication of our core operating performance. ENI is evaluated regularly by management as a decision tool for deployment of resources and to assess performance of our business segments. We believe that reporting ENI is helpful in understanding our business and that investors should review the same supplemental non‑GAAP financial measures that our management uses to analyze our segment performance;

·

“fee earning AUM” or “FEAUM” refers to the AUM 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” or “FRE” refers to a component of ENI that 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, investment income from our Consolidated Funds and non-consolidated funds and certain other items that we believe are not indicative of our performance;

ii


 

·

“management fees” refers to fees we earn for advisory services provided to our funds, which are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or par value of the investment portfolios managed by us and also include ARCC Part I Fees that are classified as management fees as they are predictable and are recurring in nature, are not subject to contingent repayment and are generally cash‑settled each quarter;

·

“net performance fees” refers to performance fees net of performance fee compensation, which is the portion of the performance fees earned from certain funds that is payable to professionals;

·

“our funds” refers to the funds, alternative asset companies, co-investment vehicles and other entities and accounts that are managed or co‑managed by the Ares Operating Group, and which are structured to pay fees. It also includes funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC, and a registered investment adviser;

·

“performance fees” refers to fees we earn based on the performance of a fund, which are generally based on certain specific hurdle rates as defined in the fund’s investment management or partnership agreements and may be either an incentive fee or carried interest; and

·

“performance related earnings” or “PRE” refers to a measure used to assess our investment performance and our ability to cover performance fee compensation from performance fees and total investment income. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and total investment and other income (expense) earned from our Consolidated Funds and non‑consolidated funds.

Many of the terms used in this report, including AUM, fee earning AUM, ENI, FRE, PRE and DE, may not be comparable to similarly titled measures used by other companies. In addition, our definitions of AUM and fee earning AUM are not based on any definition of AUM or fee earning AUM that is set forth in the agreements governing the investment funds that we manage and may differ from definitions of AUM set forth in other agreements to which we are a party. Further, ENI, FRE, PRE and DE are not measures of performance calculated in accordance with GAAP. We use ENI, FRE, PRE and DE as measures of operating performance, not as measures of liquidity. ENI, FRE, PRE and DE should not be considered in isolation or as substitutes for operating income, net income, operating cash flows, or other income or cash flow statement data prepared in accordance with GAAP. The use of ENI, FRE, PRE and DE without consideration of related GAAP measures is not adequate due to the adjustments described above. Our management compensates for these limitations by using ENI, FRE, PRE and DE as supplemental measures to our GAAP results, to provide a more complete understanding of our performance as our management measures it. Amounts and percentages throughout this report may reflect rounding adjustments and consequently totals may not appear to sum.

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements

Ares Management, L.P.

Condensed Consolidated Statements of Financial Condition

(Amounts in Thousands, Except Unit Data)

 

 

 

 

 

 

 

 

 

As of March 31,

 

As of December 31,

 

 

 

2016

   

2015

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

109,934

 

$

121,483

 

 

    Investments (includes fair value investments of $473,806 and $446,779 at March 31, 2016 and December 31, 2015, respectively)

 

495,984

 

 

468,287

 

 

Performance fees receivable

 

524,271

 

 

534,661

 

 

Due from affiliates

 

165,781

 

 

144,982

 

 

Other assets

 

61,607

 

 

62,975

 

 

Intangible assets, net

 

77,689

 

 

84,971

 

 

Goodwill

 

144,017

 

 

144,067

 

 

Assets of Consolidated Funds:

 

 

 

 

 

 

 

Cash and cash equivalents

 

123,871

 

 

159,507

 

 

Investments, at fair value

 

2,553,169

 

 

2,559,783

 

 

Due from affiliates

 

11,955

 

 

12,923

 

 

Dividends and interest receivable

 

11,096

 

 

13,005

 

 

Receivable for securities sold

 

53,976

 

 

13,416

 

 

Other assets

 

2,983

 

 

1,348

 

 

Total assets

$

4,336,333

 

$

4,321,408

 

 

Liabilities

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

$

108,304

 

$

102,626

 

 

Accrued compensation

 

55,911

 

 

125,032

 

 

Due to affiliates

 

38,100

 

 

12,901

 

 

Performance fee compensation payable

 

394,668

 

 

401,715

 

 

Debt obligations

 

471,274

 

 

389,120

 

 

Equity compensation put option liability

 

20,000

 

 

20,000

 

 

Deferred tax liability, net

 

21,603

 

 

21,288

 

 

Liabilities of Consolidated Funds:

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

13,429

 

 

18,951

 

 

Payable for securities purchased

 

71,480

 

 

51,778

 

 

CLO loan obligations, at fair value

 

2,167,773

 

 

2,174,352

 

 

Fund borrowings

 

12,484

 

 

11,734

 

 

Total liabilities

 

3,375,026

 

 

3,329,497

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Redeemable interest in Ares Operating Group entities

 

23,353

 

 

23,505

 

 

Non-controlling interest in Consolidated Funds:

 

 

 

 

 

 

 

Non-controlling interest in Consolidated Funds

 

332,395

 

 

320,238

 

 

Equity appropriated for Consolidated Funds

 

 —

 

 

3,367

 

 

Non-controlling interest in Consolidated Funds

 

332,395

 

 

323,605

 

 

Non-controlling interest in Ares Operating Group entities

 

374,931

 

 

397,883

 

 

Controlling interest in Ares Management, L.P. :

 

 

 

 

 

 

 

Partners' Capital (80,690,612 units  and  80,679,600 units issued and outstanding at March 31, 2016 and at December 31, 2015, respectively)

 

236,270

 

 

251,537

 

 

Accumulated other comprehensive loss

 

(5,642)

 

 

(4,619)

 

 

Total controlling interest in Ares Management, L.P

 

230,628

 

 

246,918

 

 

Total equity

 

937,954

 

 

968,406

 

 

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

$

4,336,333

 

$

4,321,408

 

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

1


 

Ares Management, L.P.

Condensed Consolidated Statements of Operations

(Amounts in Thousands, Except Unit Data)

(unaudited)

 

 

 

 

 

 

 

 

Three Months Ended 

 

 

Ended March 31,

 

 

2016

    

2015

  

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $28,625 and $29,042 for the three months ended March 31, 2016 and 2015, respectively)

$

158,433

 

$

158,701

 

Performance fees

 

(29,947)

 

 

104,925

 

Other fees

 

7,529

 

 

6,279

 

Total revenues

 

136,015

 

 

269,905

 

Expenses

 

 

 

 

 

 

Compensation and benefits

 

110,679

 

 

101,851

 

Performance fee compensation

 

(21,330)

 

 

76,392

 

General, administrative and other expenses

 

39,962

 

 

45,547

 

Consolidated Funds' expenses

 

227

 

 

10,673

 

Total expenses

 

129,538

 

 

234,463

 

Other income (expense)

 

 

 

 

 

 

Net interest and investment income (expense) (net of interest expense of $4,855 and $3,684 for the three months ended March 31, 2016 and 2015, respectively)

 

(3,359)

 

 

1,413

 

Other income (expense), net

 

5,241

 

 

(1,876)

 

Net realized and unrealized gain on investments

 

5,142

 

 

14,839

 

Net interest and investment income of the Consolidated Funds (net of interest expense of $22,449 and $17,101 for the three months ended March 31, 2016 and 2015, respectively)

 

7,332

 

 

8,905

 

Net realized and unrealized loss on investments of Consolidated Funds

 

(29,807)

 

 

(12,274)

 

Total other income (expense)

 

(15,451)

 

 

11,007

 

Income (loss) before taxes

 

(8,974)

 

 

46,449

 

Income tax expense

 

4,665

 

 

4,059

 

Net income (loss)

 

(13,639)

 

 

42,390

 

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

 

(11,979)

 

 

(11,115)

 

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

 

10

 

 

243

 

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

 

1,420

 

 

34,806

 

Net income (loss) attributable to Ares Management, L.P.

$

(3,090)

 

$

18,456

 

Net income (loss) attributable to Ares Management, L.P. per common unit:

 

 

 

 

 

 

Basic

$

(0.04)

 

$

0.23

 

Diluted

$

(0.04)

 

$

0.23

 

Weighted-average common units

 

 

 

 

 

 

Basic

 

80,683,051

 

 

80,667,664

 

Diluted

 

80,683,051

 

 

80,667,664

 

Distribution declared and paid per common unit

$

0.20

 

$

0.24

 

 

 

 

Substantially all revenue is earned from affiliated funds of the Company.

See accompanying notes to the condensed consolidated financial statements.

2


 

Ares Management, L.P.

Condensed Consolidated Statements of Comprehensive Income

(Amounts in Thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended 

 

 

 

 

March 31,

 

 

 

 

2016

   

2015

   

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(13,639)

 

$

42,390

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(2,697)

 

 

(2,949)

 

 

 

Total comprehensive income (loss)

 

(16,336)

 

 

39,441

 

 

 

Less: Comprehensive loss attributable to non-controlling interests in Consolidated Funds

 

(11,979)

 

 

(11,213)

 

 

 

Less: Comprehensive income (loss) attributable to redeemable interests in Ares Operating Group entities

 

(1)

 

 

231

 

 

 

Less: Comprehensive income (loss) attributable to non-controlling interests in Ares Operating Group entities

 

(243)

 

 

33,059

 

 

 

Comprehensive income (loss) attributable to Ares Management, L.P.

$

(4,113)

 

$

17,364

 

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 

3


 

Ares Management, L.P.

Condensed Consolidated Statements of Changes in Equity

(Amounts in Thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Funds

 

 

 

 

 

 

 

 

 

Accumulated

 

Non-Controlling

 

Equity

 

Non-Controlling

 

 

 

 

 

 

 

 

 

Other

 

Interest in Ares

 

Appropriated

 

Interest in

 

 

 

 

 

 

Partners'

 

Comprehensive

 

Operating

 

for Consolidated

 

Consolidated

 

Total 

 

 

    

Capital

    

Loss

    

Group Entities

    

Funds

    

Funds

    

Equity

 

Balance at December 31, 2015

 

$

251,537

 

$

(4,619)

 

$

397,883

 

$

3,367

 

$

320,238

 

$

968,406

 

Cumulative effect of accounting change due to the adoption of ASU 2014-13

 

 

 —

 

 

 —

 

 

 —

 

 

(3,367)

 

 

 —

 

 

(3,367)

 

Changes in ownership interests

 

 

(51)

 

 

 —

 

 

(310)

 

 

 —

 

 

 —

 

 

(361)

 

Deferred tax assets (liabilities) arising from allocation of contributions and Partners' capital

 

 

726

 

 

 —

 

 

(25)

 

 

 —

 

 

 —

 

 

701

 

Contributions

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

47,366

 

 

47,366

 

Distributions

 

 

(16,137)

 

 

 —

 

 

(27,727)

 

 

 —

 

 

(23,230)

 

 

(67,094)

 

Net income (loss)

 

 

(3,090)

 

 

 —

 

 

1,420

 

 

 —

 

 

(11,979)

 

 

(13,649)

 

Currency translation adjustment

 

 

 —

 

 

(1,023)

 

 

(1,663)

 

 

 —

 

 

 —

 

 

(2,686)

 

Equity compensation

 

 

3,285

 

 

 —

 

 

5,353

 

 

 —

 

 

 —

 

 

8,638

 

Balance at March 31, 2016

 

$

236,270

 

$

(5,642)

 

$

374,931

 

$

 —

 

$

332,395

 

$

937,954

 

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 

4


 

Ares Management, L.P.

Condensed Consolidated Statements of Cash Flows

(Amounts in Thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2016

    

2015

    

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

(13,639)

 

$

42,390

 

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

Equity compensation expense

 

9,173

 

 

7,921

 

 

Depreciation and amortization

 

9,738

 

 

12,618

 

 

Net realized and unrealized gain on investments

 

(5,142)

 

 

(14,839)

 

 

Contingent consideration

 

228

 

 

1,251

 

 

Investments purchased

 

(23,424)

 

 

(32,233)

 

 

Proceeds from sale of investments

 

5,520

 

 

18,476

 

 

Allocable to non-controlling interests in Consolidated Funds:

 

 

 

 

 

 

 

Receipt of non-cash interest income and dividends from investments

 

(2,284)

 

 

(1,969)

 

 

Net realized and unrealized loss on investments

 

29,807

 

 

12,274

 

 

Amortization on debt and investments

 

(500)

 

 

756

 

 

Investments purchased

 

(188,040)

 

 

(859,776)

 

 

Proceeds from sale or pay down of investments

 

195,765

 

 

328,663

 

 

Cash flows due to changes in operating assets and liabilities:

 

 

 

 

 

 

 

Net performance fees receivable

 

3,343

 

 

(4,718)

 

 

Due to/from affiliates

 

3,268

 

 

5,669

 

 

Other assets

 

914

 

 

30,166

 

 

Accrued compensation and benefits

 

(69,089)

 

 

(74,738)

 

 

Accounts payable, accrued expenses and other liabilities

 

3,486

 

 

(34,977)

 

 

Deferred taxes

 

315

 

 

1,165

 

 

Allocable to non-controlling interest in Consolidated Funds:

 

 

 

 

 

 

 

Change in cash and cash equivalents held at Consolidated Funds

 

35,636

 

 

1,005,892

 

 

Cash relinquished with deconsolidation of Consolidated Funds

 

 —

 

 

(870,390)

 

 

Change in other assets and receivables held at Consolidated Funds

 

(39,319)

 

 

(19,187)

 

 

Change in other liabilities and payables held at Consolidated Funds

 

18,996

 

 

(152,272)

 

 

Net cash used in operating activities

 

(25,248)

 

 

(597,858)

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 —

 

 

(64,437)

 

 

Purchase of furniture, equipment and leasehold improvements, net

 

(2,799)

 

 

(3,256)

 

 

Net cash used in investing activities

 

(2,799)

 

 

(67,693)

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Other financing activities

 

(362)

 

 

85

 

 

Proceeds from credit facility

 

127,000

 

 

60,000

 

 

Repayments of credit facility

 

(45,000)

 

 

 —

 

 

Distributions 

 

(44,051)

 

 

(57,679)

 

 

Allocable to non-controlling interest in Consolidated Funds:

 

 

 

 

 

 

 

Contributions from non-controlling interests in Consolidated Funds

 

47,366

 

 

531

 

 

Distributions to non-controlling interests in Consolidated Funds

 

(23,230)

 

 

(28,454)

 

 

Borrowings under loan obligations by Consolidated Funds

 

750

 

 

615,735

 

 

Repayments under loan obligations by Consolidated Funds

 

(45,091)

 

 

(409)

 

 

Net cash provided by financing activities

 

17,382

 

 

589,809

 

 

Effect of exchange rate changes

 

(884)

 

 

(3,744)

 

 

Net decrease in cash and cash equivalents

 

(11,549)

 

 

(79,486)

 

 

Cash and cash equivalents, beginning of period

 

121,483

 

 

148,858

 

 

Cash and cash equivalents, end of period

$

109,934

 

$

69,372

 

 

Supplemental information:

 

 

 

 

 

 

 

Ares Management, L.P. and consolidated subsidiaries:

 

 

 

 

 

 

 

Cash paid during the period for interest

$

1,505

 

$

303

 

 

Cash paid during the period for income taxes

$

1,875

 

$

17

 

 

Consolidated Funds:

 

 

 

 

 

 

 

Cash paid during the period for interest

$

12,913

 

$

11,763

 

 

Cash paid during the period for income taxes

$

122

 

$

279

 

 

Non-cash increase in assets and liabilities:

 

 

 

 

 

 

 

Issuance of AOG Units to non-controlling interest holders in connection with acquisitions

$

 —

 

$

25,468

 

 

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

5


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

1. ORGANIZATION

Ares Management, L.P. (the “Company”), a Delaware limited partnership formed on November 15, 2013, is a leading global alternative asset management firm that operates three distinct but complementary investment groups: the Credit Group,  the Private Equity Group and the Real Estate Group. Information about segments should be read together with Note 14, “Segment Reporting.” Subsidiaries of Ares Management LLC (“AM LLC”), a subsidiary of the Company, serve as the general partners and/or investment managers to various investment funds and managed accounts within each investment group (the “Ares Funds”), which are generally organized as pass‑through entities for income tax purposes. Such subsidiaries provide investment advisory services to the Ares Funds in exchange for management fees. Ares is managed and operated by its general partner, Ares Management GP LLC. Unless the context requires otherwise, references to “Ares” or the “Company” refer to Ares Management, L.P. together with its subsidiaries.

The Company is a holding partnership, and the Company’s sole assets are equity interests in Ares Holdings Inc. (“AHI”), Ares Domestic Holdings, Inc. (“Domestic Holdings”), Ares Offshore Holdings, Ltd., AI Holdco LLC (“AI”), and Ares Real Estate Holdings LLC. In this quarterly report, the following of the Company’s subsidiaries are collectively referred to as the “Ares Operating Group”: Ares Domestic Holdings L.P. (“Ares Domestic”), Ares Offshore Holdings L.P. (“Ares Offshore”), Ares Real Estate Holdings L.P. (“Ares Real Estate”), Ares Holdings L.P. (“Ares Holdings”), and Ares Investments L.P. (“Ares Investments”). The Company, indirectly through its wholly owned subsidiaries, is the general partner of each of the Ares Operating Group entities. The Company operates and controls all of the businesses and affairs of and conducts all of its material business activities through, the Ares Operating Group.

Non-Controlling Interests in Ares Operating Group Entities

The non-controlling interests in Ares Operating Group (“AOG”) (collectively, the “Ares Operating Group Units” or “AOG Units”) represent a component of equity and net income attributable to the owners of AOG Units that are not held directly or indirectly by the Company. These interests are adjusted for contributions to and distributions from AOG during the reporting period and are allocated income from the Ares Operating Group entities based on their historical ownership percentage for the proportional number of days in the reporting period.

Income Allocation

Income (loss) before taxes is allocated based on each partner’s average daily ownership of the Ares Operating Group entities for each period presented.

 

As of March 31, 2016, the Company owned a 37.87% direct interest, or 80,690,612 AOG Units, in each of the Ares Operating Group entities; Ares Owners Holding L.P. owns a 56.26% direct interest, or 119,874,362 AOG Units, in each of the Ares Operating Group entities; and an affiliate of Alleghany Corporation (such affiliate, “Alleghany”) owns a 5.87% direct interest, or 12,500,000 AOG Units, in each of the Ares Operating Group entities. For the three months ended March 31, 2016, the daily average ownership of AOG Units in each of the AOG entities by Ares Owners Holding L.P., Alleghany and the Company was 56.26%, 5.87% and 37.87%, respectively.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are

6


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission.

The condensed consolidated financial statements include the accounts and activities of the AOG entities, their consolidated subsidiaries and certain Consolidated Funds. These Consolidated Funds include certain Ares-affiliated funds, related co-investment entities and collateralized loan obligations (“CLOs”) (collectively, the “Consolidated Funds”) managed by AM LLC and its wholly owned subsidiaries that have been consolidated pursuant to GAAP. Including the results of the Consolidated Funds significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows in the accompanying condensed consolidated financial statements; however, the Consolidated Funds results included herein have no direct effect on the net income attributable to controlling interests or on total controlling equity. Instead, economic ownership interests of the investors in the Consolidated Funds are reflected as non-controlling interests in Consolidated Funds in the accompanying condensed consolidated financial statements. Further, cash flows allocable to non-controlling interest in Consolidated Funds are specifically identifiable in the Condensed Consolidated Statements of Cash Flows. All intercompany balances and transactions have been eliminated upon consolidation.

 

The Company has reclassified certain prior period amounts to conform to the current presentation. 

Equity Appropriated for Consolidated Funds and Adoption of ASU 2014-13

Effective January 1, 2016, the Company adopted FASB Accounting Standards Update (“ASU”) No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity (“ASU 2014-13”). The Company applied the guidance using a modified retrospective approach by recording a cumulative-effect adjustment of $3.4 million to equity appropriated for Consolidated Funds as of January 1, 2016.

Prior to the adoption of ASU 2014-13, the Company elected the fair value option for eligible liabilities to mitigate the accounting mismatch between the carrying value of the assets and liabilities of its consolidated CLOs. As a result, the Company accounted for the excess of fair value of assets over liabilities as an increase in equity appropriated for Consolidated Funds.

Pursuant to the adoption of ASU 2014-13, the Company is required to determine whether the fair values of the financial assets or financial liabilities are more observable. Beginning January 1, 2016, the Company has determined that the fair value of the financial assets of the consolidated CLOs, which are mostly Level II assets within the GAAP fair value hierarchy, are more observable than the fair value of the financial liabilities of its consolidated CLOs, which are mostly Level III liabilities. As a result, the financial assets of consolidated CLOs are measured at fair value and the financial liabilities of the consolidated CLOs are measured in consolidation as: (1) the sum of the fair value of the financial assets, and the carrying value of any nonfinancial assets held temporarily, less (2) the sum of the fair value of any beneficial interests retained by the Company (other than those that represent compensation for services), and the Company’s carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financial liabilities (other than the beneficial interests retained by the Company).

Equity Compensation

Forfeitures

In accordance with ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”), the Company elected to recognize share-based award forfeitures in the period they occur as a reversal of previously recognized compensation expense. The reduction in compensation expense is determined based on the specific awards forfeited during that period. Prior to the adoption of ASU 2016-09, the Company applied an estimated forfeiture rate as a reduction of current period equity compensation expense.

7


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

Recent Accounting Pronouncements

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The objective of the guidance in ASU 2016-01 is to enhance the reporting model for financial instruments to provide more decision-useful information. ASU 2016-01 requires an entity to carry all of its investments in equity securities at fair value, and to recognize periodic changes of that fair value in income. This guidance excludes equity method investments, investments that result in the consolidation of the investee and investments for which the entity has elected the practicability exception to the fair value measurement requirements. The guidance should be applied using a cumulative-effect adjustment to the beginning balance of retained earnings as of the beginning of the fiscal year in which the guidance becomes effective. ASU 2016-01 is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods within those reporting periods. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The objective of the guidance in ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and liabilities in the balance sheet and disclosing key information. ASU 2016-02 amends previous lease guidance, which required a lessee to categorize and account for leases as either operating leases or capital leases, and instead requires a lessee to recognize a lease liability and a right-of-use asset on the entity’s balance sheet for all leases with terms that exceed one year. The lease liability and right-of-use asset are to be carried at the present value of remaining expected future lease payments. The guidance should be applied using a modified retrospective approach. ASU 2016-02 is effective for public entities for annual reporting periods beginning after December 15, 2018 and interim periods within those reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-07, Investments – Equity Method and Joint Ventures (Topic 323). ASU 2016-07 removes the requirement to retroactively apply the equity method of accounting for an investment that becomes eligible for the equity method due to an increase in the level of ownership interest or degree of influence. The investment should be accounted for as an equity method investment as of the date that it becomes qualified for such treatment. At this date, any unrealized holding gain (loss), if the investment was an available-for-sale equity security, should be recognized in earnings. ASU 2016-07 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The objective of the guidance in ASU 2016-08 is to provide clarity on the application of the current principal versus agent guidance. ASU 2016-08 clarifies how an entity should determine whether it is acting as a principal or an agent for each specified good or service promised to a customer and how to determine the nature of each specified good or service. The effective date and transition requirements of ASU 2016-08 are the same as that of ASU 2014-09. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-09. The objective of the guidance in ASU 2016-09 is to reduce the cost and complexity of providing stock compensation information while maintaining or  improving the usefulness of the information. ASU 2016-09 amends previous guidance around when and how excess tax benefits or deficiencies should be recognized, and now requires excess tax benefits to be recognized in the income statement, regardless of whether it will reduce the Company’s taxes payable in the current period. ASU 2016-09 also allows companies to elect whether to use an estimated forfeiture rate, or to recognize forfeitures as they occur. Another change related to this update, is the movement of excess tax benefits from stock options from financing activities to operating activities within the Condensed Consolidated Statements of Cash Flows. ASU 2016-09 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those reporting periods, with early adoption permitted. The Company adopted ASU 2016-09 as of January 1, 2016 using a modified retrospective approach and the cumulative

8


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

adjustment to the Company’s equity components had no net impact to the Company’s total equity. See Note 13 for a detailed impact of the adoption of this guidance.

 

 

3. GOODWILL AND INTANGIBLE ASSETS

Finite‑Lived Intangible Assets, Net

The Company’s intangible assets include management contracts, client relationships, a trade name, and the future benefits of managing new assets for existing clients that were recognized at fair value as of their acquisition dates. 

The following table summarizes the carrying value, net of accumulated amortization, for the Company’s intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average

 

 

 

 

 

 

 

 

 

Amortization Period

 

 

As of March 31,

 

 

As of December 31,

 

 

 

At March 31, 2016

 

2016

   

2015

 

Management contracts

 

2.4 years

 

$

111,939

 

$

163,469

 

Client relationships

 

12.3 years

 

 

38,600

 

 

38,600

 

Trade name

 

6.3 years

 

 

3,200

 

 

3,200

 

 

 

 

 

 

153,739

 

 

205,269

 

Foreign currency translation

 

 

 

 

(1,697)

 

 

(1,436)

 

Total intangible assets acquired

 

 

 

 

152,042

 

 

203,833

 

Less: accumulated amortization

 

 

 

 

(74,353)

 

 

(118,862)

 

Intangible assets, net

 

 

 

$

77,689

 

$

84,971

 

 

 

Amortization expense associated with intangible assets was $7.3 million and $10.9 million for the three months ended March 31, 2016 and 2015, respectively, and is included in general, administrative and other expenses within the Condensed Consolidated Statements of Operations. In the first quarter of 2016, the Company removed $51.5 million of intangible assets that were fully amortized.

Goodwill

The following table summarizes the carrying value of the Company's goodwill assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private

 

Real

 

 

 

 

 

 

Credit

 

Equity

 

Estate

 

Total

 

Balance as of  December 31, 2015

 

$

32,196

 

$

58,600

 

$

53,271

 

$

144,067

 

Foreign currency translation

 

 

 —

 

 

 —

 

 

(50)

 

 

(50)

 

Balance as of  March 31, 2016

 

$

32,196

 

$

58,600

 

$

53,221

 

$

144,017

 

 

There was no impairment of goodwill recorded as of March 31, 2016 or December 31, 2015.

 

 

 

 

 

 

 

4. INVESTMENTS

The Company’s investments are comprised of investments presented at fair value in accordance with the investment company guidance, equity-method investments (using the equity method or fair value option) and held-to-maturity investments. 

9


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

Fair Value Investments, excluding Equity-method Investments Held at Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value as a

 

 

 

 

 

 

 

 

 

percentage of total

 

 

 

Fair value at

 

investments at

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

    

2016

    

2015

    

2016

    

2015

    

Private Investment Partnership Interests:

 

 

 

 

 

 

 

 

 

 

 

AREA Sponsor Holdings, LLC

 

$

38,554

 

$

37,275

 

8.6

%  

8.7

%

ACE II Master Fund, L.P. (1)(2)

 

 

22,629

 

 

22,015

 

5.1

%  

5.2

%

Ares Corporate Opportunities Fund III, L.P.

 

 

116,470

 

 

108,506

 

26.0

%

25.4

%

Ares Corporate Opportunities Fund IV, L.P. (2)

 

 

29,480

 

 

30,571

 

6.6

%  

7.2

%

Ares Enhanced Credit Opportunities Fund, L.P.

 

 

25,598

 

 

26,073

 

5.7

%

6.1

%

Resolution Life L.P.

 

 

40,703

 

 

40,703

 

9.1

%  

9.5

%

Other private investment partnership Interests (1)(3)

 

 

120,164

 

 

106,332

 

26.9

%  

24.9

%

Total private investment partnership interests (cost: $311,187 and $297,026 at March 31, 2016 and December 31, 2015, respectively)

 

 

393,598

 

 

371,475

 

88.0

%  

87.0

%

Collateralized Loan Obligations Interests:

 

 

 

 

 

 

 

 

 

 

 

Collateralized loan obligations interests

 

 

54,118

 

 

55,752

 

12.0

%  

13.0

%  

Total collateralized loan obligations (cost: $58,556 and $53,669 at March 31, 2016 and December 31, 2015, respectively)

 

 

54,118

 

 

55,752

 

12.0

%  

13.0

%

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

83

 

 

81

 

0.0

%

0.0

%

Total common stock (cost: $118 and $116 at March 31, 2016 and December 31, 2015, respectively)

 

 

83

 

 

81

 

0.0

%

0.0

%

Total fair value investments (cost: $369,861 and $350,811 at March 31, 2016 and December 31, 2015, respectively)

 

$

447,799

 

$

427,308

 

100.0

%  

100.0

%


(1)

Investment or portion of the investment is denominated in foreign currency; fair value is translated into U.S. dollars at each reporting date

(2)

Represents underlying security that is held through various legal entities

(3)

No single issuer or investment had a fair value that exceeded 5% of the Company's total investments.

 

Equity-Method Investments

The Company’s equity-method investments include investments that are not consolidated but over which the Company exerts significant influence. The Company's equity-method investments, including those where the fair value option was elected, are summarized below:

 

 

 

 

 

 

 

 

 

 

As of March 31, 2016

 

As of December 31, 2015

 

Equity-method investments

 

$

4,322

 

$

4,486

 

Equity-method investments at fair value

 

 

26,007

 

 

19,471

 

Total equity-method investments

 

$

30,329

 

$

23,957

 

Held-to-Maturity Investments

The Company classifies its securities investments as held-to-maturity investments when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are reported as investments and are recorded at amortized cost. A summary of the cost and fair value of CLO notes classified as held-to-maturity investments is as follows:

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

    

 

2016

    

2015

Amortized Cost

$

17,856

 

$

17,022

Unrealized loss, net

 

(590)

 

 

(334)

Fair value

 

$

17,266

 

$

16,688

 

10


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

Based on the Company’s ability and intent to hold the investments until maturity, the Company has determined that the net unrealized losses are deemed to be temporary impairments as of March 31, 2016 and December 31, 2015, respectively.

 

There were no sales of held-to-maturity investments during the three months ended March 31, 2016 and 2015.  All contractual maturities are due after 10 years as of March 31, 2016. Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Investments of the Consolidated Funds

Investments held in the Consolidated Funds are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value as a

 

 

 

 

 

 

 

 

 

percentage of total

 

 

 

Fair value at

 

investments at

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

    

2016

    

2015

    

2016

    

2015

    

United States:

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

Consumer discretionary

 

$

403,139

 

$

393,902

 

15.7

%  

15.4

%

Consumer staples

 

 

36,938

 

 

40,030

 

1.4

%  

1.6

%

Energy

 

 

36,973

 

 

38,617

 

1.4

%  

1.5

%

Financials

 

 

77,988

 

 

78,806

 

3.1

%  

3.1

%

Healthcare, education and childcare

 

 

180,020

 

 

162,191

 

7.1

%  

6.3

%

Industrials

 

 

153,511

 

 

161,830

 

6.0

%  

6.3

%

Information technology

 

 

137,925

 

 

138,186

 

5.4

%  

5.4

%

Materials

 

 

89,973

 

 

95,767

 

3.5

%  

3.7

%

Partnership interests

 

 

103,621

 

 

86,902

 

4.1

%

3.4

%

Telecommunication services

 

 

189,418

 

 

202,256

 

7.4

%  

7.9

%

Utilities

 

 

13,112

 

 

12,733

 

0.5

%  

0.5

%

Total fixed income securities (cost: $1,458,969  and $1,462,570 at March 31, 2016 and December 31, 2015, respectively)

 

 

1,422,618

 

 

1,411,220

 

55.6

%  

55.1

%

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

Healthcare, education and childcare

 

 

1,740

 

 

344

 

0.1

%  

0.0

%

Telecommunication services

 

 

718

 

 

510

 

0.0

%  

0.0

%

Total equity securities (cost: $8,304 at March 31, 2016 and December 31, 2015, respectively)

 

$

2,458

 

$

854

 

0.1

%  

0.0

%

 

 

11


 

Table of Contents

Ares Management, L.P.

 

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Unit Data and as Otherwise Noted)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value as a

 

 

 

 

 

 

 

 

 

percentage of total

 

 

 

Fair value at

 

investments at

 

 

 

March 31,

 

 

December 31,

 

March 31,

 

December 31,

 

 

    

2016

    

2015

    

2016

    

2015

    

Europe:

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

Consumer discretionary

 

$

215,526

 

$

221,707

 

8.3

%  

8.7

%

Consumer staples

 

 

53,491

 

 

50,625

 

2.1

%  

2.0

%

Financials

 

 

29,308

 

 

29,922

 

1.1

%  

1.2

%

Healthcare, education and childcare

 

 

111,710

 

 

104,704

 

4.4

%  

4.1

%

Industrials

 

 

106,511

 

 

109,778

 

4.2

%  

4.3

%

Information technology

 

 

32,368

 

 

31,562

 

1.3

%  

1.2

%

Materials

 

 

105,726

 

 

98,450

 

4.1

%  

3.8

%

Telecommunication services

 

 

160,806

 

 

149,105

 

6.3

%  

5.8

%

Utilities

 

 

810

 

 

768

 

0.0

%  

0.0

%

Total fixed income securities (cost: $862,992  and $836,217 at March 31, 2016 and December 31, 2015, respectively)

 

 

816,256

 

 

796,621

 

31.8

%  

31.1

%

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

Consumer discretionary

 

 

4,203

 

 

4,306

 

0.2

%  

0.2

%

Consumer staples

 

 

1,437

 

 

1,286

 

0.1

%  

0.1

%

Healthcare, education and childcare

 

 

34,716

 

 

37,294

 

1.4

%  

1.5

%

Telecommunication services

 

 

155

 

 

159

 

0.0

%  

0.0

%

Total equity securities (cost: $80,830 and $ 80,827 at March 31, 2016 and December 31, 2015, respectively)

 

 

40,511

 

 

43,045

 

1.7

%  

1.8

%

Asia and other: