CONSOLIDATION

Adoption of ASU 2015-02

The Company adopted ASU 2015-02 under the modified retrospective approach with an effective date of January 1, 2015. As a result of the adoption of ASU 2015-02, the Company deconsolidated certain previously consolidated CLOs and certain previously consolidated non-CLOs effective January 1, 2015 as the Company is no longer deemed to be the primary beneficiary. The deconsolidation of such entities had the following impact on the Consolidated Statement of Financial Condition as of January 1, 2015:



	As of January 1, 2015
	As originally reported		As adjusted			Effect of deconsolidation
CLOs:
Number of entities	31		4			(27		)
Total assets	$	12,682,054	$	2,109,780		$	(10,572,274	)
Total liabilities	$	12,719,980	$	2,122,355		$	(10,597,625	)
Cumulative- effect adjustment to equity appropriated for Consolidated Funds	$	—	$	25,352		$	25,352
Non-CLOs:
Number of entities	35		6			(29		)
Total assets	$	7,271,422	$	395,730		$	(6,875,692	)
Total liabilities	$	1,242,484	$	55,430		$	(1,187,054	)
Cumulative- effect adjustment to redeemable interests in Consolidated Funds and non-controlling interest in Consolidated Funds	$	—	$	(5,688,639	)	$	(5,688,639	)
Total impact of deconsolidation of entities:
Number of entities	66		10			(56		)
Total assets	$	19,953,476	$	2,505,510		$	(17,447,966	)
Total liabilities	$	13,962,463	$	2,177,785		$	(11,784,679	)
Cumulative- effect adjustment to redeemable interests in Consolidated Funds and non-controlling interest in Consolidated Funds	$	—	$	(5,663,287	)	$	(5,663,287	)

The impact of the adoption on redeemable interest in Consolidated Funds and non-controlling interest in Consolidated Funds as of January 1, 2015 was a reduction of $1.0 billion and $4.6 billion, respectively. Adoption of the amended guidance had no impact on net income attributable to Ares Management, L.P.

Based on the Company’s assessments, no additional entities have been consolidated in the Company’s financial statements purely as a result of the adoption of ASU 2015-02. Additionally, under the new accounting guidance, certain consolidated entities previously accounted for as voting interest entities (“VOEs”) became VIEs, while certain entities previously accounted for as VIEs became VOEs.

Deconsolidated Funds

Certain funds that have historically been consolidated in the financial statements are no longer consolidated because, as of the reporting period: (a) the Company deconsolidated such funds as a result of a change in accounting principle, including fifty-six entities for the year ended December 31, 2015, (b) such funds were liquidated or dissolved, including two funds for the year ended December 31, 2017, or (c) the Company is no longer deemed to be the primary beneficiary of the VIEs as it has no longer has a significant economic interest in two funds for the year ended December 31, 2015. There were no additional funds deconsolidated for the year ended December 31, 2016. For deconsolidated funds, the Company will continue to serve as the general partner and/or investment manager until such funds are fully liquidated.

Investments in Consolidated Variable Interest Entities

The Company consolidates entities that the Company has a variable interest in, and as the general partner or investment manager, has both the power to direct the most significant activities and a potentially significant economic interest. Investments in the consolidated VIEs are reported at fair value, and represents the Company’s maximum exposure to loss.

Investments in Non-Consolidated Variable Interest Entities

The Company holds interests in certain VIEs that are not consolidated as the Company is not the primary beneficiary. The Company's interest in such entities generally is in the form of direct equity interests, fixed fee arrangements or both. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. Investments in the non-consolidated VIEs are held at their carrying value, which approximates fair value.

The Company's interests in consolidated and non-consolidated VIEs, as presented in the Consolidated Statements of Financial Condition, and their respective maximum exposure to loss relating to non-consolidated VIEs are as follows:



	As of December 31,
	2017		2016
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs	$	413,415	$	268,950
Maximum exposure to loss attributable to the Company's investment in consolidated VIEs	$	175,620	$	153,746
Assets of consolidated VIEs	$	6,231,245	$	3,822,010
Liabilities of consolidated VIEs	$	5,538,054	$	3,360,329



	For the Years Ended December 31,
	2017		2016		2015
Net income (loss) attributable to non-controlling interests related to consolidated VIEs	$	60,818	$	3,386	$	(5,686	)

CONSOLIDATING SCHEDULES

The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial condition as of December 31, 2017 and 2016 and results from operations for the years ended December 31, 2017, 2016 and 2015.



	As of December 31, 2017
	Consolidated Company Entities			Consolidated Funds		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	118,929		$	—	$	—		$	118,929
Investments	822,955			—		(175,620		)	647,335
Performance fees receivable	1,105,180			—		(5,333		)	1,099,847
Due from affiliates	171,701			—		(5,951		)	165,750
Intangible assets, net	40,465			—		—			40,465
Goodwill	143,895			—		—			143,895
Deferred tax asset, net	8,326			—		—			8,326
Other assets	107,730			—		—			107,730
Assets of Consolidated Funds
Cash and cash equivalents	—			556,500		—			556,500
Investments, at fair value	—			5,582,842		—			5,582,842
Due from affiliates	—			15,884		—			15,884
Dividends and interest receivable	—			12,568		—			12,568
Receivable for securities sold	—			61,462		—			61,462
Other assets	—			1,989		—			1,989
Total assets	$	2,519,181		$	6,231,245	$	(186,904	)	$	8,563,522
Liabilities
Accounts payable, accrued expenses and other liabilities	$	81,955		$	—	$	—		$	81,955
Accrued compensation	27,978			—		—			27,978
Due to affiliates	14,642			—		—			14,642
Performance fee compensation payable	846,626			—		—			846,626
Debt obligations	616,176			—		—			616,176
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities	—			64,316		—			64,316
Due to affiliates	—			11,285		(11,285		)	—
Payable for securities purchased	—			350,145		—			350,145
CLO loan obligations	—			4,974,110		(10,916		)	4,963,194
Fund borrowings	—			138,198		—			138,198
Total liabilities	1,587,377			5,538,054		(22,201		)	7,103,230
Commitments and contingencies
Preferred equity (12,400,000 units issued and outstanding)	298,761			—		—			298,761
Non-controlling interest in Consolidated Funds	—			693,191		(164,703		)	528,488
Non-controlling interest in Ares Operating Group entities	358,186			—		—			358,186
Controlling interest in Ares Management, L.P.:
Partners' Capital (82,280,033 units issued and outstanding)	279,065			—		—			279,065
Accumulated other comprehensive loss, net of tax	(4,208		)	—		—			(4,208		)
Total controlling interest in Ares Management, L.P.	274,857			—		—			274,857
Total equity	931,804			693,191		(164,703		)	1,460,292
Total liabilities, non-controlling interests and equity	$	2,519,181		$	6,231,245	$	(186,904	)	$	8,563,522



	As of December 31, 2016
	Consolidated Company Entities			Consolidated Funds		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	342,861		$	—	$	—		$	342,861
Investments	622,215			—		(153,744		)	468,471
Performance fees receivable	767,429			—		(8,330		)	759,099
Due from affiliates	169,252			—		(6,316		)	162,936
Intangible assets, net	58,315			—		—			58,315
Goodwill	143,724			—		—			143,724
Deferred tax asset, net	6,731			—		—			6,731
Other assets	65,565			—		—			65,565
Assets of Consolidated Funds
Cash and cash equivalents	—			455,280		—			455,280
Investments, at fair value	—			3,330,203		—			3,330,203
Due from affiliates	—			3,592		—			3,592
Dividends and interest receivable	—			8,479		—			8,479
Receivable for securities sold	—			21,955		—			21,955
Other assets	—			2,501		—			2,501
Total assets	$	2,176,092		$	3,822,010	$	(168,390	)	$	5,829,712
Liabilities
Accounts payable and accrued expenses	$	83,336		$	—	$	—		$	83,336
Accrued compensation	131,736			—		—			131,736
Due to affiliates	17,959			—		(395		)	17,564
Performance fee compensation payable	598,050			—		—			598,050
Debt obligations	305,784			—		—			305,784
Equity compensation put option liability	—			—		—			—
Deferred tax liability, net	—			—		—			—
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities	—			21,056		—			21,056
Due to affiliates	—			10,599		(10,599		)	—
Payable for securities purchased	—			208,742		—			208,742
CLO loan obligations	—			3,064,862		(33,750		)	3,031,112
Fund borrowings	—			55,070		—			55,070
Total liabilities	1,136,865			3,360,329		(44,744		)	4,452,450
Commitments and contingencies
Preferred equity (12,400,000 units issued and outstanding)	298,761			—		—			298,761
Non-controlling interest in Consolidated Funds	—			461,681		(123,646		)	338,035
Non-controlling interest in Ares Operating Group entities	447,615			—		—			447,615
Controlling interest in Ares Management, L.P.:
Partners' Capital (80,814,732 units issued and outstanding)	301,790			—		—			301,790
Accumulated other comprehensive loss, net of tax benefit	(8,939		)	—		—			(8,939		)
Total controlling interest in Ares Management, L.P.	292,851			—		—			292,851
Total equity	1,039,227			461,681		(123,646		)	1,377,262
Total liabilities, non-controlling interests and equity	$	2,176,092		$	3,822,010	$	(168,390	)	$	5,829,712



	For the Year Ended December 31, 2017
	Consolidated Company Entities			Consolidated Funds			Eliminations			Consolidated
Revenues
Management fees (includes ARCC Part I Fees of $105,467)	$	744,825		$	—		$	(22,406	)	$	722,419
Performance fees	641,766			—			(5,092		)	636,674
Administrative, transaction and other fees	56,406			—			—			56,406
Total revenues	1,442,997			—			(27,498		)	1,415,499
Expenses
Compensation and benefits	514,109			—			—			514,109
Performance fee compensation	479,722			—			—			479,722
General, administrative and other expense	196,730			—			—			196,730
Transaction support expense	275,177			—			—			275,177
Expenses of Consolidated Funds	—			65,501			(26,481		)	39,020
Total expenses	1,465,738			65,501			(26,481		)	1,504,758
Other income (expense)
Net realized and unrealized gain on investments	96,568			—			(29,534		)	67,034
Interest and dividend income	15,076			—			(2,361		)	12,715
Interest expense	(21,219		)	—			—			(21,219		)
Other income, net	19,470			—			—			19,470
Net realized and unrealized gain on investments of Consolidated Funds	—			126,836			(26,712		)	100,124
Interest and other income of Consolidated Funds	—			187,721			—			187,721
Interest expense of Consolidated Funds	—			(159,688		)	32,961			(126,727		)
Total other income	109,895			154,869			(25,646		)	239,118
Income before taxes	87,154			89,368			(26,663		)	149,859
Income tax expense (benefit)	(24,939		)	1,887			—			(23,052		)
Net income	112,093			87,481			(26,663		)	172,911
Less: Net income attributable to non-controlling interests in Consolidated Funds	—			87,481			(26,663		)	60,818
Less: Net income attributable to non-controlling interests in Ares Operating Group entities	35,915			—			—			35,915
Net income attributable to Ares Management, L.P.	76,178			—			—			76,178
Less: Preferred equity distributions paid	21,700			—			—			21,700
Net income attributable to Ares Management, L.P. common unitholders	$	54,478		$	—		$	—		$	54,478



	For the Year Ended December 31, 2016
	Consolidated Company Entities				Consolidated Funds				Eliminations			Consolidated
Revenues
Management fees (includes ARCC Part I Fees of $121,181)	$	659,451			$	—			$	(17,383	)	$	642,068
Performance fees	518,991				—				(1,139		)	517,852
Administrative, transaction and other fees	39,285				—				—			39,285
Total revenues	1,217,727				—				(18,522		)	1,199,205
Expenses
Compensation and benefits	447,725				—				—			447,725
Performance fee compensation	387,846				—				—			387,846
General, administrative and other expense	159,776				—				—			159,776
Expenses of Consolidated Funds	—				42,520				(21,447		)	21,073
Total expenses	995,347				42,520				(21,447		)	1,016,420
Other income (expense)
Net realized and unrealized gain on investments	26,961				—				1,290			28,251
Interest and dividend income	28,261				—				(4,480		)	23,781
Interest expense	(17,981		)		—				—			(17,981		)
Other income, net	35,650				—				—			35,650
Net realized and unrealized loss on investments of Consolidated Funds	—				(2,999		)		942			(2,057		)
Interest and other income of Consolidated Funds	—				138,943				—			138,943
Interest expense of Consolidated Funds	—				(98,556		)		7,104			(91,452		)
Total other income	72,891				37,388				4,856			115,135
Income (loss) before taxes	295,271				(5,132		)		7,781			297,920
Income tax expense (benefit)	11,756				(737		)		—			11,019
Net income (loss)	283,515				(4,395		)		7,781			286,901
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds	—				(4,395		)		7,781			3,386
Less: Net income attributable to redeemable interests in Ares Operating Group entities	456				—				—			456
Less: Net income attributable to non-controlling interests in Ares Operating Group entities	171,251				—				—			171,251
Net income attributable to Ares Management, L.P.	$	111,808			$	—			$	—		$	111,808
Less: Preferred equity distributions paid	12,176			—	—			—	—			12,176
Net income attributable to Ares Management, L.P. common unitholders	$	99,632			$	—			$	—		$	99,632



	For the Year Ended December 31, 2015
	Consolidated Company Entities			Consolidated Funds			Eliminations			Consolidated
Revenues
Management fees (includes ARCC Part I Fees of $121,491)	$	650,918		$	—		$	(16,519	)	$	634,399
Performance fees	146,197			—			4,418			150,615
Administrative, transaction and other fees	30,606			—			(1,178		)	29,428
Total revenues	827,721			—			(13,279		)	814,442
Expenses
Compensation and benefits	414,454			—			—			414,454
Performance fee compensation	111,683			—			—			111,683
General, administrative and other expense	224,798			—			—			224,798
Expenses of Consolidated Funds	—			36,417			(18,312		)	18,105
Total expenses	750,935			36,417			(18,312		)	769,040
Other income (expense)
Net realized and unrealized gain on investments	2,784			—			14,225			17,009
Interest and dividend income	17,542			—			(3,497		)	14,045
Interest expense	(18,949		)	—			—			(18,949		)
Debt extinguishment expense	(11,641		)	—			—			(11,641		)
Other expense, net	20,644			—			1,036			21,680
Net realized and unrealized loss on investments of Consolidated Funds	—			(17,614		)	(7,002		)	(24,616		)
Interest and other income of Consolidated Funds	—			117,373			—			117,373
Interest expense of Consolidated Funds	—			(86,064		)	7,245			(78,819		)
Total other income	10,380			13,695			12,007			36,082
Income (loss) before taxes	87,166			(22,722		)	17,040			81,484
Income tax expense	19,060			4			—			19,064
Net income	68,106			(22,726		)	17,040			62,420
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds	—			(22,726		)	17,040			(5,686		)
Less: Net income attributable to redeemable interests in Ares Operating Group entities	338			—			—			338
Less: Net income attributable to non-controlling interests in Ares Operating Group entities	48,390			—			—			48,390
Net income attributable to Ares Management, L.P.	$	19,378		$	—		$	—		$	19,378