1.ORGANIZATION AND PRESENTATION

Significant Relationships Referenced in Notes to Consolidated Financial Statements

References to “we,” “us,” “our” or “AHGP” mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

References to “AHGP Partnership” mean the business and operations of Alliance Holdings GP, L.P., the parent company, as well as its consolidated subsidiaries, including Alliance Resource Management GP, LLC and Alliance Resource Partners, L.P. and its consolidated subsidiaries.

References to “AGP” mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., also referred to as our general partner.

References to “ARLP Partnership” mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

References to “ARLP” mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

References to “MGP” mean Alliance Resource Management GP, LLC, the managing general partner of Alliance Resource Partners, L.P.

References to “SGP” mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P.

References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

References to “Alliance Resource Properties” mean Alliance Resource Properties, LLC, the land-holding company for the mining operations of Alliance Resource Operating Partners, L.P.

References to “Alliance Coal” mean Alliance Coal, LLC, the holding company for the operations of Alliance Resource Operating Partners, L.P.

Organization and Formation

We are a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol “AHGP”. We own directly and indirectly 100% of the members’ interest in MGP, ARLP’s managing general partner. The ARLP Partnership is a diversified producer and marketer of coal to major U.S. utilities and industrial users. ARLP conducts substantially all of its business through its wholly owned subsidiary, the Intermediate Partnership. ARLP and the Intermediate Partnership were formed in May 1999, to acquire upon completion of ARLP’s initial public offering on August 19, 1999, certain coal production and marketing assets of Alliance Resource Holdings, Inc. (“ARH”), a Delaware corporation. We and ARH, through its wholly owned subsidiary, SGP, maintain general partner interests in ARLP and the Intermediate Partnership. ARH is owned by Joseph W. Craft III, the Chairman, President and Chief Executive Officer of AGP as well as the President and Chief Executive Officer and a Director of MGP, and Kathleen S. Craft. SGP, a Delaware limited liability company, is owned by ARH and holds a 0.01% general partner interest in each of ARLP and the Intermediate Partnership.

We are owned 100% by limited partners. Our general partner, AGP, has a non-economic interest in us and is owned by Mr. Craft.

Alliance Resource Management GP, LLC, a Delaware limited liability company, and ARM GP Holdings, Inc., a Delaware corporation, are our direct subsidiaries. The Delaware limited partnerships, limited liability companies and corporation that comprise the ARLP Partnership, which we consolidate, are as follows: ARLP; Intermediate Partnership; Alliance Coal; Alliance Design Group, LLC, (“Alliance Design”); Alliance Land, LLC; Alliance Minerals, LLC (“Alliance Minerals”); Alliance Properties, LLC; Alliance Resource Properties; AROP Funding, LLC (“AROP Funding”); ARP Sebree, LLC (“ARP Sebree”); ARP Sebree South, LLC; Alliance WOR Properties, LLC (“WOR Properties”); Alliance Service, Inc. (“ASI”); Backbone Mountain, LLC; Cavalier Minerals JV, LLC (“Cavalier Minerals”); CR Services, LLC; Excel Mining, LLC; Gibson County Coal, LLC (“Gibson County Coal”); Hamilton County Coal, LLC (“Hamilton” previously known as Alliance WOR Processing, LLC); Hopkins County Coal, LLC (“Hopkins County Coal”); Matrix Design Group, LLC (“Matrix Design”); Matrix Design International, LLC; Matrix Design Africa (PTY) LTD; MC Mining, LLC (“MC Mining”); Mettiki Coal, LLC (“Mettiki (MD)”); Mettiki Coal (WV), LLC (“Mettiki (WV)”); Mid-America Carbonates, LLC (“MAC”); Mt. Vernon Transfer Terminal, LLC (“Mt. Vernon”); Penn Ridge Coal, LLC (“Penn Ridge”); Pontiki Coal, LLC (“Pontiki”); River View Coal, LLC (“River View”); Rough Creek Mining, LLC; Sebree Mining, LLC (“Sebree Mining”); Steamport, LLC; Tunnel Ridge, LLC (“Tunnel Ridge”); UC Coal, LLC; UC Mining, LLC; UC Processing, LLC; Warrior Coal, LLC (“Warrior”); Webster County Coal, LLC (“Webster County Coal”); White County Coal, LLC (“White County Coal”); WOR Land 6, LLC; White Oak Resources LLC (“White Oak”) and Wildcat Insurance, LLC (“Wildcat Insurance”).

Initial Public Offering and Concurrent Transactions

On May 15, 2006, we completed our initial public offering (“IPO”) of 12,500,000 common units representing limited partner interests in us at a price of $25.00 per unit. In connection with the IPO, Alliance Management Holdings, LLC (“AMH”) and AMH II, LLC (“AMH II”) (which were the previous owners of MGP), AHGP and SGP entered into a contribution agreement (“Contribution Agreement”) pursuant to which 100% of the members’ interest in MGP (which includes ARLP’s incentive distribution rights (“IDRs”) and MGP’s general partner interests in ARLP), 15,550,628 of ARLP’s common units, as represented before the 2014 ARLP unit split as discussed below, and a 0.001% managing interest in Alliance Coal were contributed to us. As consideration for this contribution and in accordance with the terms of the Contribution Agreement, we distributed substantially all of the proceeds from our IPO to AMH and AMH II and issued 6,863,470, 19,858,362 and 20,641,168 of AHGP’s common units to AMH, AMH II and SGP, respectively. In June 2006, subsequent to the IPO, the AHGP common units and substantially all of the IPO proceeds distributed to AMH and AMH II were distributed to the individual members of AMH and AMH II. On April 26, 2007, our 0.001% managing interest in Alliance Coal was transferred to our subsidiary, MGP.

Basis of Presentation

Since we own MGP, our consolidated financial statements reflect the consolidated results of the ARLP Partnership. The earnings of the ARLP Partnership allocated to its limited partners’ interests not owned by us and allocated to SGP’s general partner interest in ARLP, are reflected as a noncontrolling interest in our consolidated income statement and balance sheet. Our consolidated financial statements do not differ materially from those of the ARLP Partnership. The differences between our financial statements and those of the ARLP Partnership are primarily attributable to (a) amounts reported as noncontrolling interests and (b) additional general and administrative costs and taxes attributable to us. The additional general and administrative costs principally consist of costs incurred by us as a result of being a publicly traded partnership, amounts billed by, and reimbursed to, Alliance Coal under an amended and restated administrative services agreement (“Administrative Services Agreement”) and amounts billed by, and reimbursed to, AGP under our partnership agreement (Note 19 – Related-Party Transactions).

The accompanying consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of December 31, 2015 and 2014, and results of our operations, comprehensive income, cash flows and changes in partners’ capital for each of the three years in the period ended December 31, 2015. All of our intercompany transactions and accounts have been eliminated.

On July 31, 2015, the ARLP Partnership acquired the remaining equity interest in White Oak which resulted in the restructuring of our reportable segments. All prior periods have been recast to reflect this new segment presentation. See Note 3 – Acquisitions for further discussion on the acquisition and Note 22 – Segment Information for further discussion of our reportable segments.

On June 16, 2014, the ARLP Partnership completed a two-for-one split of its common units, whereby holders of record as of May 30, 2014 received a one unit distribution on each unit outstanding on that date. The unit split resulted in the issuance of 37,030,317 million ARLP common units. Accordingly, we received an additional 15,544,169 ARLP common units, which brought our total ownership to 31,088,338 ARLP common units. Unless otherwise noted, all references to the number of ARLP units and distribution amounts included in this report have been adjusted to give effect for this unit split for all periods presented. Also, ARLP’s partnership agreement was amended effective June 16, 2014, to reduce by half the target thresholds for the incentive distribution rights per unit.