Item 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy

Our business as a global alternative asset manager is dependent on the performance of our named executive officers (“NEOs”) and other key employees. Among other things, we depend on their ability to find, select and execute investments, oversee and improve the operations of our portfolio companies, find and develop relationships with fund investors and other sources of capital and provide other services essential to our success. Our compensation program is designed to attract, motivate and retain talented professionals who drive our success.

Our compensation philosophy has several primary objectives: (1) establish a clear relationship between performance and compensation, (2) align the interests of our NEOs and other key employees with our fund investors and shareholders to maximize value and (3) provide competitive incentive compensation opportunities, with an appropriate balance between short-term and long-term incentives.

Base salaries are dictated by employee proficiency and experience in their roles. In addition to base salary, we utilize a blend of variable and long-term pay vehicles to further incentivize and retain talent and provide an overall compensation package that is competitive with the market.

Performance-based discretionary bonuses are generally paid annually to employees based on our profitability, market analysis and employee performance. Select senior professionals may also receive carried interest or incentive fee participation in our funds. These awards will be distributed based on the rules of each individual fund, which generally provide for distributions either around the time of the fund’s inception or annually. Certain senior professionals are awarded carried interest or incentive fees in funds outside of their business lines to provide incentives for coordination and collaboration across the firm. In addition, our senior professionals are often offered the opportunity to invest their own capital in our private commingled funds (generally on a no fee, no carry basis).

We believe that carried interest and incentive fee participation as well as investment in our funds aligns the interests of our NEOs and other key employees with those of the investors in our funds, and this alignment has been a key contributor to our strong performance and growth. We also believe that ownership in our funds and the Company by our NEOs results in alignment of their interests with those of our fund investors and shareholders.

Our compensation program is a management tool supporting our mission and values. We believe our program supports, reinforces and aligns our values, business strategy and operations with the goal of increasing assets under management and profitability.

Certain of the Holdco Members (Antony P. Ressler, Michael J. Arougheti, David B. Kaplan and Bennett Rosenthal) in their capacity as our senior Partners, together with Michael R. McFerran, a Holdco Member and our chief financial officer and principal financial officer, are our NEOs for 2017. Incentive fee arrangements with our NEOs are described below under "Elements of Compensation-Incentive Fees." Our NEOs have entered into fair competition agreements with us that are described below under “-Summary Compensation Table-Fair Competition Provisions.”

Determination of Compensation for Named Executive Officers

We do not have a compensation committee. The Holdco Members, in their capacity as managers of Ares Partners Holdco LLC, make all determinations regarding the cash compensation of our NEOs, such as salaries and bonuses.

The Equity Incentive Committee of our general partner has been delegated the authority to make equity awards to individuals other than our executive officers and directors. The board of directors of our general partner makes all final determinations regarding equity awards pertaining to our executive officers and directors. For NEOs, carried interest and incentive fee awards are generally determined by the Holdco Members and approved by the Conflicts Committee of the board of directors of our general partner.

It is our policy that the Holdco Members who are Co-Founders generally do not receive compensation other than carried interest and incentive fees or, in certain circumstances, equity grants. For 2017, Mr. McFerran’s salary and bonus decisions were based on his individual performance, the performance of the business or group for which he has responsibility and his ability to contribute to our overall performance in both the long and short term. Salary and bonus determinations are based on the judgment

of the Holdco Members and do not rely on quantitative performance targets or other formulaic calculations. Factors that the Holdco Members typically consider in making such salary and bonus determinations include the NEO’s role, level of responsibilities and contributions to our success. The Holdco Members also consider the NEO’s prior-year compensation while balancing short-term and long-term incentives.

Elements of Compensation

Our NEOs are generally compensated through a combination of carried interest and incentive fees that are designed to reward performance and align the interests of our NEOs with the interests of our fund investors and shareholders, and for NEOs who are not Holdco Members, equity awards. In 2017, Mr. McFerran was the only NEO to receive a base salary and discretionary bonus payment, and Mr. McFerran was the only NEO that received equity awards.

We believe that the elements of compensation for our NEOs serve the primary objectives of our compensation program. However, we periodically review the compensation of our key employees, including our NEOs, and, from time to time, may implement new plans or programs or otherwise make changes to the compensation structure relating to current or future key employees, including our NEOs.

Annual Base Salary. In 2017, Mr. McFerran was the only NEO who received an annual salary, the details of which are set out in the Summary Compensation Table that follows.

We intend the base salary of Mr. McFerran to reflect his position, duties and responsibilities as our chief financial officer, as well as recognize his anticipated contribution to our ongoing initiatives and future success. Mr. McFerran was appointed as our Chief Operating Officer effective January 1, 2018 and his base salary was adjusted to $1,200,000 to reflect his new position. Although we believe that the base salary of our NEOs should not typically be the most significant amount of total compensation, we intend that any base salary amounts should attract and retain top talent as well as assist with the payment of basic living costs throughout the year.

Annual Cash Discretionary Bonus Payments. For 2017, Mr. McFerran is the only NEO who received an annual discretionary bonus.

Mr. McFerran’s total discretionary bonus was determined by certain of the Holdco members in their capacity as managers of Ares Partners Holdco LLC and recognizes Mr. McFerran’s individual contribution to our overall goals and performance. We intend the discretionary bonus payment to reward Mr. McFerran for assisting us to achieve our annual goals, both for the Company as a whole and in his respective area of responsibility. Factors that were included in determining the size of the bonus payment include Mr. McFerran’s accomplishments in driving our results, his leadership and management of his team and our overall performance. Comparisons were made to prior year performance and to our other senior professionals with the intention to reward, motivate and retain Mr. McFerran.

A portion of the 2017 annual discretionary bonus awarded to Mr. McFerran was granted in January 2018 in the form of restricted units to be settled in common shares. We paid 78% of his total discretionary bonus in cash in December 2017, and we awarded the balance in January 2018 as a grant of restricted units equal to 22% of his total discretionary bonus.

Incentive Fees. The general partners or managers of certain of our funds receive performance‑based fees from our funds based on the applicable fund’s performance each year. Our senior professionals may be awarded a percentage of such incentive fees. These incentive fees are determined based on the seniority of the senior professional and the role of such senior professional in the applicable fund. We intend our incentive fee awards to incentivize the growth of our various operations and help align our investment and other professionals, including our NEOs, with our fund investors and shareholders. Messrs. Arougheti and McFerran are the only NEOs who received incentive fees in 2017. For many partners and managers, these awards are made annually, are not subject to vesting and generally are forfeitable upon termination of employment in certain circumstances. However, for Mr. Arougheti, certain of the incentive fees are structured such that, notwithstanding his termination of employment with us, he may be eligible to continue to receive distributions relating to a declining portion of his incentive fee allocation for a period of up to twelve quarters following his termination of employment. The incentive fee participation interests held by our senior professionals generally are subject to dilution. Incentive fees, if any, in respect of a particular fund are paid to the senior professional only when actually received by the general partner, manager or other Ares entity entitled to receive such fees. In addition, the fees in which our senior professionals are entitled to share do not include base management fees, administrative fees or other expense reimbursements received from our funds. Because our senior professionals’ entitlement to incentive fees is generally subject to the fund meeting investment performance hurdles, the interests of our senior professionals are strongly aligned with the interests of our fund investors, thus ultimately benefitting our fund investors and shareholders through our success as a whole.

Carried Interest. The general partners or affiliates of certain of our funds receive a preferred allocation of income and gains from our funds if specified returns are achieved, which we refer to as “carried interest.” We intend our carried interest awards to incentivize the growth of our various operations and help align our senior professionals (including our NEOs) with our fund investors and shareholders. Our senior professionals (including our NEOs) who work in these operations collectively own a majority of the carried interest. The percentage of carried interest owned by individual senior professionals varies and generally is subject to dilution for senior professionals owning a larger portion of the carried interest by fund. The percentage of carried interest is determined based on the seniority of the senior professional and the role of such senior professional in such fund. Ownership of carried interest by senior professionals may be subject to a range of vesting conditions, including continued employment, thus serving as an important employment retention mechanism. Carried interest generally vests over the longer of a fund’s investment period and five or six years from the date of grant, but may also vest in connection with the end of the fund for certain funds. For certain of our NEOs, certain of their carried interest awards will accelerate upon termination of such NEO’s services to us without cause or by reason of death or disability of such NEO. Each of our NEOs (except Mr. McFerran) received cash distributions attributable to carried interest in 2017.

In addition, the general partners that receive allocations of carried interest generally are subject to contingent repayment obligations, under which the general partners are required to return to the applicable fund distributions from carried interest in certain situations. Our senior professionals (including certain of our NEOs) who receive allocations of carried interest are personally subject to this contingent repayment obligation, pursuant to which they may be required to repay previous distributions. Because the amount of carried interest distributions is directly tied to the realized performance of the underlying fund, our senior professionals’ direct ownership of carried interest fosters a strong alignment of their interests with the interests of our fund investors, thus ultimately benefitting our fund investors and shareholders through our success as a whole.

Ares Owners Holdings L.P. Interests. Messrs. Ressler, Arougheti, Kaplan and Rosenthal, as Holdco Members, receive cash distributions from Ares Owners Holdings L.P. based on their ownership of units in Ares Owners Holdings L.P. Such amounts are distributions in respect of their equity ownership interests and are not taxed as compensation. However, for purposes of this disclosure we have included the distributions from Ares Owners Holdings L.P. in calculating Messrs. Ressler, Arougheti, Kaplan and Rosenthal’s total compensation. We believe inclusion of the cash distributions on the Holdco Members’ interests in Ares Owners Holdings L.P. for purposes of this disclosure is appropriate because such distributions provide a more accurate reflection of incentives payable to, and amounts received by, Messrs. Ressler, Arougheti, Kaplan and Rosenthal since they otherwise do not receive cash compensation because of their substantial ownership interest in Ares Owners Holdings, L.P. For additional information related to the Ares Owners Holdings L.P., see “Part I. Item 1 - Business”.

Options and Other Equity Grants.

We may grant equity to incentivize our NEOs’ continued employment and to align their interests with our fund investors and shareholders. We utilize options to purchase common shares (“options”) and grants of restricted shares to be settled in common shares as our principal forms of long-term equity compensation. Option and restricted share awards are granted pursuant to our 2014 Equity Incentive Plan. NEOs are entitled to cash dividends, if any, in respect of restricted shares. In March 2017, pursuant to the terms of his offer letter, we granted Mr. McFerran 27,248 restricted units. On each of the third and fourth anniversaries of Mr. McFerran’s commencement of employment, Mr. McFerran is entitled to receive a further equity grant, subject to continued employment. The restricted units granted to Mr. McFerran in March 2017 vest in equal installments on the third, fourth and fifth anniversaries of the date of grant, subject to continued employment.

Upon termination of employment for any reason, the unvested portion of Mr. McFerran’s equity grants will generally be forfeited. However, if Mr. McFerran’s termination of employment or service is as a result of Mr. McFerran’s termination without Cause (as defined in his offer letter) or by reason of death or disability after the first anniversary of the date of grant and prior to the second anniversary of the date of grant, 11% of Mr. McFerran’s equity grants will vest. If Mr. McFerran’s termination of employment or service is as a result of Mr. McFerran’s termination without Cause or by reason of death or disability after the second anniversary of the date of grant and prior to the third anniversary of the date of grant, 22% of Mr. McFerran’s equity grants will vest. For further information regarding Mr. McFerran’s equity grants, see “-Termination Payments-Equity Arrangements with Michael McFerran.”

Deferred Unit Awards. Beginning in 2016, we awarded a portion of the annual discretionary bonus to key employees (including those NEOs who receive annual discretionary bonuses) in the form of restricted units to be settled in common shares. These restricted units vest in four equal installments on the first, second, third and fourth anniversaries of the date of grant, subject to continued employment. We refer to these restricted units as “Deferred Units.” In January 2017 we granted 11,462 Deferred Units to Mr. McFerran and in January 2018 we granted 12,103 Deferred Units to Mr. McFerran, in each case, in respect of his discretionary bonus for the preceding calendar year. Generally, upon termination of employment, the unvested portion of the award will lapse. Upon termination of employment without Cause, by reason of death or disability, or for normal retirement

or early retirement, the unvested portion of the award will vest upon termination of employment and the Deferred Units granted in 2017 and 2018 will be paid upon the termination. We believe the period of deferral and the vesting schedule sufficiently aligns the interests of NEOs who receive discretionary bonuses with our interests, as well as the interests of our fund investors and shareholders.

Pursuant to the 2014 Equity Incentive Plan, in January 2017 we granted 100,000 restricted units to Mr. McFerran. The restricted units granted to Mr. McFerran in January 2017 were granted in recognition of his continued service to the Company and will vest on the fifth anniversary of the date of grant, subject to continued employment. Upon termination of employment for any reason, the unvested portion of Mr. McFerran’s January 2017 equity grant will be forfeited.

401(k) Retirement Plan. Mr. McFerran is currently the only NEO who is eligible to participate in our 401(k) program. We intend that participation in our 401(k) program will assist him to set aside funds for retirement in a tax efficient manner. The Ares retirement plan provides options for contributing to a traditional pre-tax 401(k), a post-tax Roth 401(k) or a combination of both, up to allowable IRS limits. In addition, we provide a discretionary match equal to 50% of the first 6% of the individual’s earnings, up to allowable IRS limits. The match is subject to a four-year vesting schedule, vesting 25% per year over the first four years of employment at Ares. Once employed for four years, 100% of any match outstanding or due to the employee is vested.

Termination Payments

Equity Arrangements with Michael McFerran. With respect to equity grants to Mr. McFerran, other than his August 15, 2016 award, January 31, 2017 award, and the Deferred Units, in the event that Mr. McFerran’s employment is terminated without Cause or by reason of death or disability after the first anniversary of the date of grant and prior to the second anniversary of the date of grant, 11% of any grants of restricted units and options will vest. In the event that Mr. McFerran’s employment is terminated without Cause or by reason of death or disability after the second anniversary of the date of grant and prior to the third anniversary of the date of grant, 22% of any grants of restricted units and options will vest.

Deferred Unit Awards. If Mr. McFerran’s employment is terminated without Cause, by reason of his death or disability or for early or normal retirement, the unvested portion of his Deferred Units will vest and the Deferred Units granted in 2016 will be paid on the previously scheduled vesting dates, while the Deferred Units granted in 2017 and 2018 will vest and be settled upon termination.

Incentive Fees and Carried Interest. For certain of our NEOs, certain of their carried interest awards will accelerate upon termination of such NEO’s services to us without cause or by reason of death or disability of such NEO. Our incentive fee awards are generally annual awards and forfeitable upon termination of employment in certain circumstances. However, for Mr. Arougheti, certain of the incentive fees are structured such that, notwithstanding his termination of employment with us, he may be eligible to continue to receive distributions relating to a declining portion of his incentive fee allocation for a period of up to twelve quarters following his termination of employment.

Compensation Risk Assessment

Our compensation policies are targeted to incentivize investing in a risk-controlled fashion and are intended to discourage undue risk. Therefore, the key elements of our compensation consists of the grant of equity and, for senior professionals, carried interest subject to multi-year vesting or annual awards of incentive fees, particularly as employees become more senior in the organization and assume more leadership. We believe this policy encourages long-term thinking and protects us against excessive risk and investing for short-term gain.

Our funds generally distribute carried interest with respect to the disposition of an investment only after we have returned to our investors a preferred return and allocable capital relating to such disposition. As a result, in analyzing investments and making investment decisions, our investment professionals are motivated to take a long-term view of their investments, as short-term results typically do not affect their compensation and because they will have to return previously distributed excess carry due to subsequent under-performance of a fund. Importantly, the amount of carried interest paid to these investment professionals is determined by the performance of the fund as a whole, rather than specific investments, meaning that they have a material interest in every investment. This approach discourages excessive risk taking, as even a hugely successful single investment will result in carried interest payments only if the overall performance of the fund exceeds the requisite hurdle.

Incentive fees are generally paid out to the general partner or manager annually upon the achievement of the requisite hurdles by such fund and our senior professionals similarly receive their proportion of the incentive fee only upon receipt of payment by the fund. Certain of our funds also have “high water marks” such that if the high water mark for a particular fund is not surpassed even if such fund had positive returns in such period, we would not earn an incentive fee with respect to such fund

during a particular period as a result of losses in prior periods. Such hurdle rates or high water marks are an incentive to our professionals to maximize returns over the long run, as excessive risk taking and poor performance in the short term will affect their future receipt of incentive fees.

Compensation Committee Report

As described above, the board of directors of our general partner does not have a compensation committee. The entire board of directors has reviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussion, has determined that the Compensation Discussion and Analysis should be included in this annual report.

	Michael J. Arougheti David B. Kaplan John H. Kissick Antony P. Ressler Bennett Rosenthal Paul G. Joubert Michael Lynton Dr. Judy D. Olian

Compensation Committee Interlocks and Insider Participation

As described above, we do not have a compensation committee. Other than the grant of equity awards by the board of directors of our general partner to our executive officers, the Holdco Members make all determinations regarding executive officer compensation. In such capacity, the Holdco Members have determined that maintaining our existing compensation practices as closely as possible is desirable and intend that these practices will continue. Accordingly, the Holdco Members do not intend to establish a compensation committee of the board of directors of our general partner. For a description of certain transactions between us and our senior professionals see “Item 13. Certain Relationships and Related Transactions, and Director Independence."

COMPENSATION OF OUR EXECUTIVE OFFICERS

Summary Compensation Table for Fiscal 2017

The following table contains information about the compensation paid to or earned by each of our named executive officers during the most recently completed fiscal year.

				Salary			Bonus			Stock Awards			Option Awards			Non-Equity Incentive Plan Compensation			Change in Pension Value and Nonqualified Deferred Compensation Earnings			All Other Compensation			Total
Name and Principal Position		Year		($)(1)			($)(2)			($)(3)			($)(3)			($)			($)			($)			($)(12)
Antony P. Ressler, Co-Founder, Executive Chairman and Former Chief Executive Officer		2017		—			—			—			—			—			—			108,904,413		(4)(10)	108,904,413
		2016		—			—			—			—			—			—			94,074,455		(4)(10)	94,074,455
		2015		—			—			—			—			—			—			72,367,328		(4)(10)	72,367,328
Michael J Arougheti, Co-Founder, Chief Executive Officer and President		2017		—			—			—			—			—			—			22,090,000		(5)(10)	22,090,000
		2016		—			—			—			—			—			—			19,905,069		(5)(10)	19,905,069
		2015		—			—			—			—			—			—			22,549,681		(5)(10)	22,549,681
David B. Kaplan, Co-Founder and Partner		2017		—			—			—			—			—			—			54,242,110		(6)(10)	54,242,110
		2016		—			—			—			—			—			—			44,465,897		(6)(10)	44,465,897
		2015		—			—			—			—			—			—			17,506,743		(6)(10)	17,506,743
Bennett Rosenthal, Co-Founder and Partner		2017		—			—			—			—			—			—			54,242,110		(6)(10)	54,242,110
		2016		—			—			—			—			—			—			44,465,897		(6)(10)	44,465,897
		2015		—			—			—			—			—			—			17,506,743		(6)(10)	17,506,743
Michael R. McFerran, Chief Financial Officer and Chief Operating Officer(7)		2017		1,000,000			937,500			2,650,751			—			—			—			577		(8)	4,588,828
		2016		1,000,000			787,500			2,390,749			—			—			—			8,736		(9)	4,186,985
		2015		774,307			597,500			473,025			951,654			—			—			88,294		(11)	2,884,780

(1)	In 2017, 2016 and 2015, we did not make salary payments to Messrs. Ressler, Arougheti, Kaplan or Rosenthal.

(2)

Represents the cash portion of the discretionary bonuses, which were paid in December 2017 and 2016, and January 2016 related to 2017, 2016 and 2015, respectively. As further described in “—Compensation Discussion and Analysis—Annual Cash Discretionary Bonus Payments”, Mr. McFerran received 22%, 21% and 23% of his 2017, 2016 and 2015 discretionary bonuses in restricted units granted in January 2018, January 2017 and January 2016, respectively, which are not included in these amounts.

(3)	Represents the grant date fair value of restricted units and options to purchase common shares computed in accordance with ASC Topic 718. See Note 15 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

(4)	Includes actual cash distributions attributable to 'carried interest' allocations of $31,915,796, $32,345,129 and $4,374,304 in 2017, 2016 and 2015, respectively.

(5)	Includes actual cash distributions attributable to 'carried interest' allocations of $166,528, $553,796 and $210,324 and 'incentive fee' payments of $5,800,608, $6,423,991 and $8,100,339 for 2017, 2016 and 2015, respectively.

(6)	Includes actual cash distributions attributable to 'carried interest' allocations of $38,119,246, $31,538,615 and $3,267,725 in 2017, 2016 and 2015, respectively.

(7)	Mr. McFerran became an NEO in March 2015.

(8)	Includes $577 of actual cash distributions attributable to 'incentive fee' payments, and there were no matching contributions under our 401(k) plan.

(9)	Includes $5,194 of actual cash distributions attributable to 'incentive fee' payments and $3,542 in matching contributions under our 401(k) plan.

(10)

Messrs. Ressler, Arougheti, Kaplan and Rosenthal (and their family members and estate planning vehicles) also received cash distributions from Ares Owners Holdings L.P. based on their ownership of units in Ares Owners Holdings L.P. Such amounts are distributions in respect of their equity ownership interests and are included in compensation amounts presented. Mr. Ressler received distributions of $76,988,617, $61,729,326 and $67,993,024 in 2017, 2016 and 2015, respectively. Each of Messrs. Arougheti, Kaplan and Rosenthal received distributions of $16,122,864, $12,927,282 and $14,239,018 in 2017, 2016 and 2015, respectively.

(11)	Represents a relocation allotment of $88,294 received in 2015 in connection with his move from San Francisco, California to Los Angeles, California. This amount was to compensate him for the transportation of household goods to his new residence and temporary housing and tax gross-up for moving-related assistance reported as personal taxable income.

(12)	Excluding the cash distributions from Ares Owners Holdings L.P. based on their ownership of units in Ares Owners Holdings L.P., total compensation in 2017 for (i) Mr. Ressler was $31,915,796, (ii) Mr. Arougheti was $5,967,136, and (iii) Messrs. Kaplan and Rosenthal was $38,119,246.

Offer Letter with Michael R. McFerran

We entered into an offer letter with Mr. McFerran on March 10, 2015 relating to Mr. McFerran’s employment as chief financial officer, establishing his position and duties and providing for initial compensatory terms.

See “—Compensation Discussion and Analysis” for a discussion of the current compensatory terms applicable to NEOs.

Grants of Plan-Based Awards in 2017

The following table contains information about each grant of an award made to our NEOs in 2017 under any plan, including awards that subsequently have been transferred.

Name		Grant Date(1)			Stock Awards: Number of Shares of Stock or Units (8)			Option Awards: Number of Securities Underlying Options			Exercise or Base Price of Option Awards ($/Sh)			Grant Date Fair Value of Stock and Option Awards(2) ($)
Antony P. Ressler		—			—			—			—			—
Michael J Arougheti		—			—			—			—			—
David B. Kaplan		—			—			—			—			—
Bennett Rosenthal		—			—			—			—			—
Michael R. McFerran		1/20/2017			11,462		(3)	—			—			228,094
		1/31/2017	(4	)	100,000		(5)	—			—			1,945,000
		3/23/2017	(6	)	27,248		(7)	—			—			477,657

(1)	For information regarding the timing of restricted units and option grants, see “—Elements of Compensation—Options and Other Equity Grants.”

(2)	Represents the grant date fair value of restricted units and options to purchase common shares computed in accordance with ASC Topic 718. See Note 15 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

(3)	Represents restricted units granted under our 2014 Equity Incentive Plan to be settled in common shares, awarded to Mr. McFerran as a portion of his annual discretionary bonus. The restricted units generally vest in four equal installments on each of January 20, 2018, 2019, 2020, and 2021, subject to continued employment and earlier vesting upon the occurrence of specified events.

(4)	This award was approved by the Board of Directors on January 13, 2017.

(5)	Represents restricted units granted under our 2014 Equity Incentive Plan to be settled in common shares upon vesting. The restricted units generally vest on January 31, 2022, subject to continued employment.

(6)	On March 17, 2015, in connection with the approval of Mr. McFerran's offer letter, the Board of Directors approved annual restricted unit grants to Mr. McFerran as forth in his offer letter. Subject to Mr. McFerran's continued employment, these grants are made on each anniversary of March 23, 2015 until March 23, 2019.

(7)	Represents restricted units granted under our 2014 Equity Incentive Plan to be settled in common shares upon vesting. The restricted units generally vest in three equal installments on each of March 23, 2020, 2021 and 2022, subject to continued employment and earlier vesting upon the occurrence of specified events.

(8)	For further information regarding the vesting of restricted units and options, see “—Elements of Compensation—Options and Other Equity Grants.”

Outstanding Equity Awards at Fiscal Year-End

The following table contains information concerning unvested equity awards unexercised options; stock that has not vested; and equity incentive plan awards outstanding for each NEO as of December 31, 2017:

		Option Awards											Stock Awards
Name		Number of Securities Underlying Unexercised Options			Number of Securities Underlying Unexercised Options Unexercisable			Option Exercise Price ($)			Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested			Market Value of Shares or Units of Stock That Have Not Vested ($)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Antony P. Ressler		—			—			—			-		—			—			—			—
Michael J Arougheti		—			—			—			-		—			—			—			—
David B. Kaplan		—			—			—			-		—			—			—			—
Bennett Rosenthal		—			—			—			-		—			—			—			—
Michael R. McFerran		—			254,453		(1)	18.35			March 23, 2025		313,756		(2) (3) (4) (5) (6) (7) (8)	6,275,120			—			—

(1)	The options granted on March 23, 2015 vest in equal installments on each of March 23, 2018, March 23, 2019 and March 23, 2020, subject to continued employment and earlier vesting upon the occurrence of specified events.

(2)	27,248 of the restricted units were granted on March 23, 2015 and vest in equal installments on each of March 23, 2018, March 23, 2019 and March 23, 2020, subject to continued employment and earlier vesting upon the occurrence of specified events.

(3)	15,068 of the restricted units were granted on January 20, 2016 and vest in equal installments on each of January 20, 2017, January 20, 2018, January 20, 2019 and January 20, 2020, subject to continued employment and earlier vesting upon the occurrence of specified events. 3,767 restricted units vested on January 20, 2017 and 11,301 remain unvested.

(4)	36,497 of the restricted units were granted on March 23, 2016 and vest in equal installments on each of March 23, 2019, March 23, 2020, and March 23, 2021, subject to continued employment and earlier vesting upon the occurrence of specified events.

(5)	100,000 of the restricted units were granted on August 15, 2016 and vest on August 15, 2021, subject to continued employment.

(6)	11,462 of the restricted units were granted on January 20, 2017 and vest in equal installments on each of January 20, 2018; January 20, 2019; January 20, 2020; and January 20, 2021, subject to continued employment and earlier vesting upon the occurrence of specified events.

(7)	100,000 of the restricted units were granted on January 31, 2017 and vest on January 31, 2022, subject to continued employment.

(8)	27,248 of the restricted units were granted on March 23, 2017 and vest in equal installments on each of March 23, 2020, March 23, 2021, and March 23, 2022, subject to continued employment and earlier vesting upon the occurrence of specified events.

Common Shares and Ares Operating Group Units

We refer to the common shares and Ares Operating Group Units and common units received in exchange for such Ares Operating Group Units as “subject units.”

The subject units received by our senior professional owners are fully vested. Unless otherwise determined by our general partner, a senior professional owner will generally forfeit 25% of his or her subject units (i) in the case of Messrs. Arougheti, Kaplan, Rosenthal or Ressler, if such person resigns or (ii) generally in the case of a senior professional owner other than those listed in clause (i), if such senior professional owner resigns or is terminated for cause, in all cases prior to the fifth anniversary of our initial public offering or the second anniversary of our initial public offering if such person is at least 60 years old on the date of any resignation.

The subject units owned by each of our senior professional owners are generally subject to the following transfer restrictions: none of the subject units may be transferred or exchanged in the first two years following our initial public offering and up to 20% of the subject units may be transferred or exchanged in each year following the second anniversary of our initial public offering and prior to the seventh anniversary of our initial public offering. However, sales may occur prior to such time

pursuant to acquisitions or other transactions or programs approved by our general partner. After May 2021, any of the subject units may be transferred or exchanged at any time, subject to the restrictions in the exchange agreement.

The forfeiture provisions and transfer restrictions set forth above are generally applicable. There may be some different arrangements for some individuals in isolated instances, none of which are applicable to our NEOs.

Assuming that all of the outstanding Ares Operating Group Units were exchanged for common shares, each of Messrs. Arougheti, Kaplan and Rosenthal would hold, directly or indirectly, common shares representing 6.58% of the total number of common shares outstanding and Mr. Ressler would hold, directly or indirectly, common shares representing 31.14% of the total number of common shares outstanding, in each case subject to transfer restrictions and forfeiture provisions. Mr. McFerran does not hold any Ares Operating Group Units. Assuming that all of the outstanding Ares Operating Group Units were exchanged for common shares, an additional 60 or more senior professionals would own common shares representing approximately 18.61% of the total number of common shares outstanding.

Option Exercises and Stock Vested

Our NEOs did not exercise any options from compensation-related equity awards in fiscal 2017.

Our NEOs, other than Mr. McFerran, did not vest into equity from compensation-related equity awards in fiscal 2017. On January 20, 2017, Mr. McFerran received 3,767 vested Deferred Units representing 25% Mr. McFerran’s January 2016 award.

Pension Benefits For 2017

We provide no pension benefits to our NEOs.

Nonqualified Deferred Compensation For 2017

We provide no defined contribution plans for the deferral of compensation on a basis that is not tax-qualified.

Potential Payments upon Termination or Change-in-Control

Other than as set forth below, our NEOs are not entitled to any additional payments or benefits upon termination of employment, upon a change in control or upon retirement, death or disability. For certain of our NEOs, certain of their carried interest awards will accelerate upon termination of such NEO’s services to us without cause or by reason of death or disability of such NEO.

Equity Arrangements with Michael McFerran

In the event that Mr. McFerran’s employment is terminated without Cause or by reason of death or disability after the first anniversary of the date of grant and prior to the second anniversary of the date of grant, 11% of the restricted units granted on March 23, 2015, March 23, 2016, and March 23, 2017 and options granted on March 23, 2015 will vest. In the event that Mr. McFerran’s employment is terminated without Cause or by reason of death or disability after the second anniversary of the date of grant and prior to the third anniversary of the date of grant, 22% of any restricted units granted on March 23, 2015, March 23, 2016, and March 23, 2017 and options granted on March 23, 2015 will vest. If Mr. McFerran had experienced a termination without Cause or by reason of death or disability on December 31, 2017, Mr. McFerran would have vested in restricted units having a value of $200,180, based on the closing price for our common shares on December 29, 2017, which was $20.00.

Deferred Unit Awards

If Mr. McFerran’s employment is terminated without Cause, by reason of his death or disability or for early or normal retirement, the unvested portion of his Deferred Units will vest and the Deferred Units granted in 2016 will be paid on the previously scheduled vesting dates. If Mr. McFerran had experienced a termination without Cause, by reason of death or disability or for early or normal retirement on December 31, 2017, Mr. McFerran would have vested in Deferred Units having a value of $455,260, based on the closing price of our common shares on December 29, 2017, which was $20.00.

Pay Ratio

As a result of the rules recently adopted by the SEC under the Dodd-Frank Act, we are required to disclose the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee, using certain permitted methodologies. To determine our CEO pay ratio and our median employee, we took the following steps:

•

We identified our median employee utilizing data as of December 31, 2017 (the “Determination Date”) by examining the total amount of compensation as reflected in our payroll records and as reported to the Internal Revenue Service on Form W-2 and Schedule K-1 for 2017 (“total compensation”) for all individuals, excluding our CEO, who were employed by us on the Determination Date. Total compensation includes salary, wages and income from equity in the form of Ares Operating Group Units and unvested restricted units (including vesting thereof and distributions on such equity). We included all employees, whether employed on a full-time, part-time, seasonal or temporary basis.

•	We did not make any material assumptions, adjustments, or estimates with respect to total compensation. We did not annualize the compensation for any employees.

•	We included non-U.S. employees by converting their total compensation to U.S. Dollars from the applicable local currency using the 10-month average exchange rate from January 1, 2017 through October 31, 2017.

•	We believe the use of total compensation for all employees is a consistently applied compensation measure because the SEC released guidance providing that compensation determined based on the Company’s tax and/or payroll records is an appropriate consistently applied compensation measure.

•	After identifying the median employee based on total compensation, we calculated annual total compensation for that employee using the same methodology we used for our named executive officers as set forth in the Summary Compensation Table in this Annual Report on Form 10-K. The annual total compensation of our median employee for 2017 was $198,500.

•	The annual total compensation of our CEO for 2017 was $108,904,413, which includes distributions on his equity ownership in Ares Owners Holdings L.P. See the Summary Compensation Table above.

Our pay ratio may not be comparable to the CEO pay ratios presented by other companies. We believe our methodology most accurately reflects the incentives provided to our executives and employees in their roles at the Company. Based on the methodology described above, for 2017, the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee (other than our CEO) is 549:1; excluding distributions on equity ownership in Ares Owners Holdings L.P., the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee (other than our CEO) is 161:1. We believe excluding distributions on equity ownership in Ares Owners Holdings, L.P. reflects a pay ratio determined based on a methodology more similar to the methodologies used by our peers. As of January 1, 2018, Antony P. Ressler stepped down from his position as CEO and Michael J. Arougheti was appointed as the new CEO. The ratio of the annual total compensation of Mr. Arougheti, our current CEO, to the median employee is 111:1; excluding Mr. Arougheti’s distributions on equity ownership in Ares Owners Holdings L.P., the ratio of Mr. Arougheti’s annual total compensation, to the median employee is 30:1.

Fair Competition Provisions

In connection with the Reorganization, Ares Owners Holdings L.P. entered into new fair competition agreements with the NEOs, and Mr. McFerran entered into a fair competition agreement upon commencement of his employment. Such agreements contain customary restrictive covenants, including a non‑competition provision that runs through the one‑year period following withdrawal or dissociation from Ares Owners Holdings L.P. and provisions relating to non‑solicitation of employees and clients that run through the one‑year period following termination of employment. In addition, such agreements require our NEOs to preserve confidential information and include assignments of intellectual property to us and our affiliates, including investment track records.

Compensation of our Directors

Each director who is not an employee of or service provider to (other than as a director) any entity related to Ares Management, L.P. (“independent directors”) receives an annual retainer of $100,000, payable in cash for the actual service period. An additional annual cash retainer of $15,000 is payable annually to the chair of our audit committee. In addition, independent

directors received an initial equity grant of 3,947 restricted units upon the completion of our initial public offering, pursuant to the 2014 Equity Incentive Plan, which vested at a rate of one‑third per year, beginning on the first anniversary of the grant date.

We also reimburse independent directors for reasonable out‑of‑pocket expenses incurred in connection with the performance of their duties as directors, including travel expenses in connection with their attendance in‑person at board and committee meetings. Directors who are employees of or provide services to (other than as a director) any entity related to Ares Management, L.P. did not receive any compensation for their services as directors. See “Item 13. Certain Relationships and Related Transactions, and Director Independence-Other Transactions.”

Directors Compensation Table

The following table contains information concerning the compensation of the non-employee directors for the fiscal year ended December 31, 2017.

Name		Fees Earned or Paid in Cash ($)			Stock Awards ($)(1)			Option Awards ($)			Non-Equity Incentive Plan Compensation ($)			Change in Pension Value and Nonqualified Deferred Compensation Earnings			All Other Compensation ($)			Total ($)
Paul G. Joubert		115,000			—			—			—			—			—			115,000
John H. Kissick(2)		—			—			—			—			—			11,144,713		(3)	11,144,713
Michael Lynton		100,000			—			—			—			—			—			100,000
Dr. Judy D. Olian		100,000			—			—			—			—			—			100,000

(1)	On May 1, 2014, Messrs. Joubert and Lynton and Dr. Olian were each granted 3,947 restricted units, vesting in equal installments on each of May 1, 2015, 2016 and 2017. As of December 31, 2017, Messrs. Joubert and Lynton and Dr. Olian have each vested all of their respective grants of 3,947 restricted units.

(2)	Mr. Kissick receives no compensation for his service as a member of our board of directors.

(3)

Includes actual cash distributions attributable to 'carried interest' allocations of $4,726,004 and incentive fee payments of $42,969. Mr. Kissick (and his family members and estate planning vehicles) also received cash distributions from Ares Owners Holdings L.P. based on his ownership of units in Ares Owners Holdings L.P. Such amounts are distributions in respect of his equity ownership interests and are included in compensation amounts presented. Mr. Kissick received distributions of $6,375,740 in 2017.