REDEEMABLE INTERESTS AND EQUITY COMPENSATION PUT OPTION LIABILITY

The following table sets forth a summary of changes in the redeemable interests and equity compensation put option liability in Consolidated Funds as of December 31, 2016 and 2015:



	As of December 31,
		2016			2015
Redeemable interests in Ares Operating Group Entities
Beginning balance		$	23,505		$	23,988
Net income		—			—
Distributions		—			—
Currency translation adjustment		—			—
Equity compensation		—			—
Tandem award compensation adjustment		—			—
Equity Balance Post-Reorganization		23,505			23,988
Issuance cost		—			—
Allocation of contributions in excess of the carrying value of the net assets (dilution)		—			—
Reallocation of Partners' capital for change in ownership interest		—			82
Deferred tax liabilities arising from allocation of contribution and Partners' capital		—			(1		)
Redemption of redeemable interest in consolidated subsidiary		(20,000		)	—
Forfeiture of equity in connection with redemption of ownership interest		(3,337		)	—
Distributions		(661		)	(998		)
Net income		456			338
Currency translation adjustment		(47		)	(36		)
Equity compensation		84			132
Ending Balance		$	—		$	23,505

Upon acquisition of Indicus Advisors, LLP (“Indicus”) in November 2011, certain former owners of Indicus, who became employees of the Company (“Indicus Owners”), exchanged their respective equity interests in Indicus for a 1% ownership interest (the “Equity Interest”) in the Predecessor entities of the Company. One-half of the Equity Interest was fully vested, was determined to be consideration exchanged pursuant to the acquisition (the “Purchase Consideration”) and was classified as redeemable interest. The remaining one-half of the Equity Interest was classified as a tandem award. The tandem award was comprised of a service condition that vested on the earlier of the fifth anniversary of the award date or a qualifying liquidity event (the “Service Award”), and a put option on their Equity Interest was a strike price of $40 million exercisable at a future date (the “Fixed Price Put Option”). The Fixed Price Put Option was not detachable from the Equity Interest. The Company determined that the Fixed Price Put Option did not require bifurcation from the host contract and that the Equity Interest is not mandatorily redeemable. The two parts of the Equity Interest, the Purchase Consideration and the Service Award, were accounted for separately.

The Purchase Consideration was classified in the redeemable interest in Ares Operating Group to be paid in cash in an amount equal to $20 million, with the residual value reclassified to permanent equity. The put option liability portion of the Service Award of $20 million was classified as a liability to be paid in cash in an amount equal to $20.0 million.

In July 2016, the Indicus Owners exercised their Fixed Price Put Option. The Company paid the Indicus Owners $40 million with $20 million recorded as a reduction to the put option liability, and $20 million recorded as a reduction to the redeemable interest in AOG entities. The residual value of the redeemable interest in the AOG entities of $3.3 million was reclassified to permanent equity. The payment to settle the put option resulted in an increase in tax basis. In connection with this payment, a liability was recorded for the Company’s obligations under the tax receivable agreement (“TRA”) with respect to the tax savings that resulted from the amortization of the increased basis.