Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			ARES MANAGEMENT CORPORATION
Dated: February 27, 2020			By:						/s/ Michael J Arougheti
						Name:			Michael J Arougheti
						Title:			Co-Founder, Chief Executive Officer & President (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:			/s/ Antony P. Ressler
			Name:			Antony P. Ressler						Dated: February 27, 2020
			Title:			Executive Chairman & Co-Founder
By:			/s/ Michael J Arougheti
			Name:			Michael J Arougheti						Dated: February 27, 2020
			Title:			Director, Co-Founder, Chief Executive Officer & President (Principal Executive Officer)
By:			/s/ Michael R. McFerran
			Name:			Michael R. McFerran						Dated: February 27, 2020
			Title:			Chief Operating Officer & Chief Financial Officer (Principal Financial and Accounting Officer)
By:			/s/ David B. Kaplan
			Name:			David B. Kaplan						Dated: February 27, 2020
			Title:			Director, Co-Founder & Co-Chairman of Private Equity Group
By:			/s/ Bennett Rosenthal
			Name:			Bennett Rosenthal						Dated: February 27, 2020
			Title:			Director, Co-Founder & Co-Chairman of Private Equity Group
By:			/s/ R. Kipp deVeer
			Name:			R. Kipp deVeer						Dated: February 27, 2020
			Title:			Director & Head of Credit Group
By:			/s/ Paul G. Joubert
			Name:			Paul G. Joubert						Dated: February 27, 2020
			Title:			Director
By:			/s/ Michael Lynton
			Name:			Michael Lynton						Dated: February 27, 2020
			Title:			Director
By:			/s/ Judy D. Olian
			Name:			Dr. Judy D. Olian						Dated: February 27, 2020
			Title:			Director
By:			/s/ Antoinette Bush
			Name:			Antoinette Bush						Dated: February 27, 2020
			Title:			Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm						F-2
Consolidated Statements of Financial Condition as of December 31, 2019 and 2018						F-3
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017						F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017						F-5
Consolidated Statements of Changes in Equity for the years ended December 31, 2019, 2018 and 2017						F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017						F-7
Notes to Consolidated Financial Statements						F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Ares Management Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Ares Management Corporation (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2020 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for revenue from contracts with customers in 2018.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

Valuation of underlying investments of equity method investments

Description of the Matter			At December 31, 2019, the carrying value of the Company’s investments totaled $1,664 million, primarily consisting of equity method private investment partnership interests - principal of $390 million and equity method - carried interest of $1,135 million. As discussed further in Note 2 to the consolidated financial statements, the underlying investments of the Company’s equity method investments (“underlying investments”) are reported at fair value as determined by management by applying the valuation techniques and using the significant unobservable inputs described therein. Auditing management’s determination of the fair value of the underlying investments that are valued using significant unobservable inputs is complex and involves a high degree of auditor subjectivity to address the higher estimation uncertainty.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s investment valuation process for the underlying investments. This included management’s review controls over the assessment of the valuation techniques and significant unobservable inputs used to estimate the fair value of the underlying investments and management’s review of the completeness and accuracy of the data used in these estimates. Our audit procedures included, among others, evaluating, on a sample basis, the valuation techniques and significant unobservable inputs used by the Company in valuing the underlying investments and testing, on a sample basis, the mathematical accuracy of the related valuation models. For example, for a sample of underlying investments that were valued using the market approach, we performed procedures to evaluate the appropriateness of significant unobservable inputs such as the selected earnings before interest, taxes, depreciation and amortization multiples or revenue multiples that were derived from comparable companies. These procedures included assessing the appropriateness of management’s determination of the comparable companies, and, where applicable, comparing the selected multiples to market observed transactions of such companies. For a sample of underlying investments that were valued using the discounted cash flow valuation technique, we performed procedures to evaluate the appropriateness of significant unobservable inputs such as the selected discount rates and projections of future cash flows. These procedures included comparing the selected discount rates to market data and/or recalculating these discount rates using investee specific information, such as the cost of equity. In addition, these procedures included comparing future projections to the current performance and the historical growth rates of the investees as well as to the growth rates of publicly traded comparable companies. In some instances, with the involvement of our valuation specialists, we independently developed fair value estimates using investee specific and market information and compared our estimates to the fair value of the underlying investments. We searched for and evaluated information that corroborated or contradicted the significant unobservable inputs. We also evaluated subsequent events and transactions and considered whether they corroborated or contradicted the year-end valuations.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2011.

Los Angeles, California

February 27, 2020

F-3

Ares Management Corporation

Consolidated Statements of Financial Condition

(Amounts in Thousands, Except Share Data)

			As of December 31,
			2019						2018
Assets
Cash and cash equivalents			$	138,384					$	110,247
Investments (includes accrued carried interest of $1,134,967 and $841,079 at December 31, 2019 and 2018, respectively)			1,663,664						1,326,137
Due from affiliates			268,099						199,377
Other assets			341,293						377,651
Right-of-use operating lease assets			143,406						—
Assets of Consolidated Funds:
Cash and cash equivalents			606,321						384,644
Investments, at fair value			8,727,947						7,673,165
Due from affiliates			6,192						17,609
Receivable for securities sold			88,809						42,076
Other assets			30,081						23,786
Total assets			$	12,014,196					$	10,154,692
Liabilities
Accounts payable, accrued expenses and other liabilities			$	88,173					$	83,221
Accrued compensation			37,795						29,389
Due to affiliates			71,445						82,411
Performance related compensation payable			829,764						641,737
Debt obligations			316,609						480,952
Operating lease liabilities			168,817						—
Liabilities of Consolidated Funds:
Accounts payable, accrued expenses and other liabilities			61,857						83,876
Payable for securities purchased			500,146						471,390
CLO loan obligations, at fair value			7,973,748						6,678,091
Fund borrowings			107,244						209,284
Total liabilities			10,155,598						8,760,351
Commitments and contingencies
Non-controlling interest in Consolidated Funds			618,020						503,637
Non-controlling interest in Ares Operating Group entities			472,288						302,780
Stockholders' Equity
Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding at December 31, 2019 and 2018, respectively)			298,761						298,761
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (115,242,028 shares and 101,594,095 shares issued and outstanding at December 31, 2019 and 2018, respectively)			1,152						1,016
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding at December 31, 2019 and 2018, respectively)			—						—
Class C common stock, $0.01 par value, 499,999,000 shares authorized (1 share issued and outstanding at December 31, 2019 and 2018, respectively)			—						—
Additional paid-in-capital			525,244						326,007
Retained earnings			(50,820)						(29,336)
Accumulated other comprehensive loss, net of tax			(6,047)						(8,524)
Total stockholders' equity			768,290						587,924
Total equity			1,858,598						1,394,341
Total liabilities, non-controlling interests and equity			$	12,014,196					$	10,154,692

See accompanying notes to the consolidated financial statements.

F-4

Ares Management Corporation

Consolidated Statements of Operations

(Amounts in Thousands, Except Share Data)

						Year Ended December 31,
						2019						2018						2017
Revenues																		As Adjusted
Management fees (includes ARCC Part I Fees of $164,396, $128,805 and $105,467 for the years ended December 31, 2019, 2018, and 2017, respectively)						$	979,417					$	802,502					$	722,419
Carried interest allocation						621,872						42,410						620,454
Incentive fees						69,197						63,380						16,220
Principal investment income (loss)						56,555						(1,455)						64,444
Administrative, transaction and other fees						38,397						51,624						56,406
Total revenues						1,765,438						958,461						1,479,943
Expenses
Compensation and benefits						653,352						570,380						514,109
Performance related compensation						497,181						30,254						479,722
General, administrative and other expenses						270,219						215,964						196,730
Transaction support expense						—						—						275,177
Expenses of Consolidated Funds						42,045						53,764						39,020
Total expenses						1,462,797						870,362						1,504,758
Other income (expense)
Net realized and unrealized gains (losses) on investments						9,554						(1,884)						8,262
Interest and dividend income						7,506						7,028						7,043
Interest expense						(19,671)						(21,448)						(21,219)
Other income (expense), net						(7,840)						(851)						19,470
Net realized and unrealized gains (losses) on investments of Consolidated Funds						15,136						(1,583)						100,124
Interest and other income of Consolidated Funds						395,599						337,875						187,721
Interest expense of Consolidated Funds						(277,745)						(222,895)						(126,727)
Total other income						122,539						96,242						174,674
Income before taxes						425,180						184,341						149,859
Income tax expense (benefit)						52,376						32,202						(23,052)
Net income						372,804						152,139						172,911
Less: Net income attributable to non-controlling interests in Consolidated Funds						39,704						20,512						60,818
Less: Net income attributable to non-controlling interests in Ares Operating Group entities						184,216						74,607						35,915
Net income attributable to Ares Management Corporation						148,884						57,020						76,178
Less: Series A Preferred Stock dividends paid						21,700						21,700						21,700
Net income attributable to Ares Management Corporation Class A common stockholders						$	127,184					$	35,320					$	54,478
Net income per share of Class A common stock
Basic						$	1.11					$	0.30					$	0.62
Diluted						$	1.06					$	0.30					$	0.62
Weighted-average shares of Class A common stock:(1)
Basic						107,914,953						96,023,147						81,838,007
Diluted						119,877,429						96,023,147						81,838,007

(1) Year ended December 31, 2017 represents common units.

Substantially all revenue is earned from affiliated funds of the Company. See accompanying notes to the consolidated financial statements.

F-5

Ares Management Corporation

Consolidated Statements of Comprehensive Income

(Amounts in Thousands)

						Year Ended December 31,
						2019						2018						2017
																		As Adjusted
Net income						$	372,804					$	152,139					$	172,911
Other comprehensive income:
Foreign currency translation adjustments, net of tax						3,322						(13,190)						13,927
Total comprehensive income						376,126						138,949						186,838
Less: Comprehensive income attributable to non-controlling interests in Consolidated Funds						37,869						15,575						62,165
Less: Comprehensive income attributable to non-controlling interests in Ares Operating Group entities						186,896						70,670						43,764
Comprehensive income attributable to Ares Management Corporation						$	151,361					$	52,704					$	80,909

See accompanying notes to the consolidated financial statements.

F-6

Ares Management Corporation

Consolidated Statements of Changes in Equity

(Amounts in Thousands)

			Preferred Equity						Series A Preferred Stock						Shareholders' Equity						Class A Common Stock						Additional Paid-in-Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Non-Controlling Interest in Ares Operating Group Entities									Non-Controlling Interest in Consolidated Funds						Total Equity
Balance at December 31, 2016			$	298,761					$	—					$	301,790					$	—					$	—					$	—					$	(8,939)					$	447,615								$	338,035					$	1,377,262
Changes in ownership interests and related tax benefits			—						—						(11,979)						—						—						—						—						(10,197)									—						(22,176)
Contributions			—						—						1,036						—						—						—						—						4,213									190,154						195,403
Distributions			(21,700)						—						(92,587)						—						—						—						—						(169,069)									(61,866)						(345,222)
Net income			21,700						—						54,478						—						—						—						—						35,915									60,818						172,911
Currency translation adjustment			—						—						—						—						—						—						4,731						7,849									1,347						13,927
Equity compensation			—						—						26,327						—						—						—						—						41,860									—						68,187
Balance at December 31, 2017			298,761						—						279,065						—						—						—						(4,208)						358,186									528,488						1,460,292
Cumulative effect of the adoption of ASC 606			—						—						(10,827)						—						—						—						—						(17,117)									5,333						(22,611)
As adjusted balance at January 1, 2018			298,761						—						268,238						—						—						—						(4,208)						341,069									533,821						1,437,681
Adoption of ASU 2018-02			—						—						1,202						—						—						—						(1,202)						—									—						—
Changes in ownership interests and related tax benefits			—						—						(26,712)						—						9,140						—						—						16,361									—						(1,211)
Consolidation of a new fund			—						—						—						—						—						—						—						—									42,942						42,942
Contributions			—						—						106,283						—						—						—						—						3,128									71,009						180,420
Dividends/Distributions			(16,275)						(5,425)						(104,501)						—						—						(30,348)						—						(177,797)									(159,710)						(494,056)
Net income			16,275						5,425						34,308						—						—						1,012						—						74,607									20,512						152,139
Currency translation adjustment			—						—						—						—						—						—						(3,114)						(3,937)									(4,937)						(11,988)
Equity compensation			—						—						36,245						—						2,820						—						—						49,349									—						88,414
Reclassifications resulting from conversion to a corporation			(298,761)						298,761						(315,063)						1,016						314,047						—						—						—									—						—
Balance at December 31, 2018			—						298,761						—						1,016						326,007						(29,336)						(8,524)						302,780									503,637						1,394,341
Relinquished with deconsolidation of funds			—						—						—						—						—						—						—						—									(55)						(55)
Changes in ownership interests and related tax benefits			—						—						—						22						(133,976)						—						—						105,341									—						(28,613)
Repurchases of Class A common stock			—						—						—						(4)						(10,445)						—						—						—									—						(10,449)
Contributions			—						—						—						70						206,635						—						—						1,876									172,851						381,432
Dividends/Distributions			—						(21,700)						—						—						—						(148,668)						—						(174,999)									(96,282)						(441,649)
Net income			—						21,700						—						—						—						127,184						—						184,216									39,704						372,804
Currency translation adjustment			—						—						—						—						—						—						2,477						2,680									(1,835)						3,322
Equity compensation			—						—						—						—						46,560						—						—						50,394									—						96,954
Stock option exercises			—						—						—						48						90,463						—						—						—									—						90,511
Balance at December 31, 2019			$	—					$	298,761					$	—					$	1,152					$	525,244					$	(50,820)					$	(6,047)					$	472,288								$	618,020					$	1,858,598

See accompanying notes to the consolidated financial statements.

F-7

Ares Management Corporation

Consolidated Statements of Cash Flows

(Amounts in Thousands)

			For the Year Ended December 31,
			2019						2018						2017
Cash flows from operating activities:
Net income			$	372,804					$	152,139					$	172,911
Adjustments to reconcile net income to net cash used in operating activities
Equity compensation expense			97,691						89,724						69,711
Depreciation and amortization			39,459						28,517						32,809
Net realized and unrealized gains (losses) on investments			(53,092)						12,935						(67,034)
Contingent consideration			—						—						(20,156)
Other non-cash amounts			—						10						(1,731)
Investments purchased			(278,798)						(248,460)						(257,295)
Proceeds from sale of investments			284,810						381,703						154,278
Allocable to non-controlling interests in Consolidated Funds:
Net realized and unrealized gains (losses) on investments			(15,136)						1,583						(100,124)
Other non-cash amounts			(8,383)						(4,519)						(4,470)
Investments purchased			(5,216,931)						(4,919,118)						(4,058,936)
Proceeds from sale of investments			3,077,755						2,756,924						2,303,315
Cash flows due to changes in operating assets and liabilities:
Net performance income receivable			(103,962)						29,578						(90,444)
Due to/from affiliates			(76,107)						33,023						(2,483)
Other assets			27,653						(66,795)						(36,786)
Accrued compensation and benefits			7,650						114						(105,109)
Accounts payable, accrued expenses and other liabilities			30,669						2,306						14,640
Allocable to non-controlling interest in Consolidated Funds:
Change in cash and cash equivalents held at Consolidated Funds			(221,677)						171,856						(101,224)
Cash acquired/relinquished with consolidation/deconsolidation of Consolidated Funds			(81,059)						11,915						198,297
Change in other assets and receivables held at Consolidated Funds			(54,834)						11,962						(48,837)
Change in other liabilities and payables held at Consolidated Funds			88,467						137,545						85,654
Net cash used in operating activities			(2,083,021)						(1,417,058)						(1,863,014)
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements, net			(16,796)						(18,419)						(33,160)
Net cash used in investing activities			(16,796)						(18,419)						(33,160)
Cash flows from financing activities:
Proceeds from issuance of Class A common stock			206,705						105,333						—
Proceeds from credit facility			335,000						680,000						455,000
Proceeds from term notes			—						44,050						100,459
Repayments of credit facility			(500,000)						(655,000)						(245,000)
Repayments of term loans			—						(206,089)						—
Dividends and distributions			(323,667)						(312,646)						(261,656)
Series A Preferred Stock dividends and distributions			(21,700)						(21,700)						(21,700)
Repurchases of Class A common stock			(10,449)						—						—
Stock option exercises			90,511						950						1,036
Taxes paid related to net share settlement of equity awards			(33,554)						(18,014)						(14,308)
Other financing activities			(3,212)						3,128						2,819
Allocable to non-controlling interests in Consolidated Funds:
Contributions from non-controlling interests in Consolidated Funds			172,851						71,009						190,154
Distributions to non-controlling interests in Consolidated Funds			(96,282)						(159,710)						(61,866)
Borrowings under loan obligations by Consolidated Funds			3,341,837						2,901,633						2,949,949
Repayments under loan obligations by Consolidated Funds			(1,035,710)						(1,027,649)						(1,440,010)
Net cash provided by financing activities			2,122,330						1,405,295						1,654,877
Effect of exchange rate changes			5,624						21,500						17,365
Net change in cash and cash equivalents			28,137						(8,682)						(223,932)
Cash and cash equivalents, beginning of period			110,247						118,929						342,861
Cash and cash equivalents, end of period			$	138,384					$	110,247					$	118,929
Supplemental information:
Ares Management Corporation and consolidated subsidiaries:
Cash paid during the period for interest			$	17,922					$	19,881					$	17,222
Cash paid during the period for income taxes			$	35,021					$	26,740					$	18,034
Consolidated Funds:
Cash paid during the period for interest			$	215,168					$	165,070					$	76,889
Cash paid during the period for income taxes			$	604					$	742					$	145

See accompanying notes to the consolidated financial statements.

F-8

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

1. ORGANIZATION

Ares Management Corporation (the “Company”), a Delaware corporation, together with its subsidiaries, is a leading global alternative investment manager operating integrated businesses across Credit, Private Equity and Real Estate. Information about segments should be read together with Note 15, “Segment Reporting.” Subsidiaries 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”). Such subsidiaries provide investment advisory services to the Ares Funds in exchange for management fees. Ares is managed and operated by its Board of Directors and Executive Management Committee. Unless the context requires otherwise, references to “Ares” or the “Company” refer to Ares Management, L.P., together with its subsidiaries prior to November 26, 2018 and thereafter to Ares Management Corporation, together with its subsidiaries. See Note 14, "Equity," for detailed description of the Company's ownership structure and relevant changes.

The accompanying audited financial statements include the consolidated results of the Company and its subsidiaries. The Company is a holding company, and the Company’s sole assets are equity interests in Ares Holdings Inc. (“AHI”), Ares Offshore Holdings, Ltd., and Ares AI Holdings L.P. In this annual report, the following of the Company’s subsidiaries are collectively referred to as the “Ares Operating Group”: Ares Offshore Holdings L.P. (“Ares Offshore”), 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.

In addition, certain Ares-affiliated funds, related co-investment entities and collateralized loan obligations (“CLOs”) (collectively, the “Consolidated Funds”) managed by Ares Management LLC (“AM LLC”) and its wholly owned subsidiaries have been consolidated in the accompanying financial statements as described in Note 2, “Summary of Significant Accounting Policies.” Including the results of the Consolidated Funds significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows in the accompanying consolidated financial statements; however, the Consolidated Funds results included herein have no direct effect on the net income attributable to Ares Management Corporation or to Stockholders' Equity. Instead, economic ownership interests of the investors in the Consolidated Funds are reflected as non-controlling interests in Consolidated Funds. Further, cash flows allocable to non-controlling interest in Consolidated Funds are specifically identifiable in the Consolidated Statements of Cash Flows.

Non-Controlling Interests in Ares Operating Group Entities

The non-controlling interests in Ares Operating Group (“AOG”) entities represent a component of equity and net income attributable to the owners of the Ares Operating Group Units (“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 AOG entities based on their historical ownership percentage for the proportional number of days in the reporting period.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”). The Company’s Consolidated Funds are investment companies under GAAP based on the following characteristics: the Consolidated Funds obtain funds from one or more investors and provide investment management services and the Consolidated Funds’ business purpose and substantive activities are investing funds for returns from capital appreciation and/or investment income. Therefore, investments of Consolidated Funds are recorded at fair value and the unrealized appreciation (depreciation) in an investment’s fair value is recognized on a current basis in the Consolidated Statements of Operations. Additionally, the Consolidated Funds do not consolidate their majority-owned and controlled investments in portfolio companies. In the preparation of these consolidated financial statements, the Company has retained the investment company accounting for the Consolidated Funds under GAAP.

All of the investments held and CLO loan obligations issued by the Consolidated Funds are presented at their estimated fair values in the Company’s Consolidated Statements of Financial Condition. Net income attributable to holders of

F-9

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

subordinated notes of the CLOs is included in net income (loss) attributable to non-controlling interests in Consolidated Funds in the Consolidated Statements of Operations.

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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and other income (expense) during the reporting periods. Assumptions and estimates regarding the valuation of investments involve a high degree of judgment and complexity and may have a significant impact on net income. Actual results could differ from these estimates and such differences could be material to the consolidated financial statements.

Principles of Consolidation

The Company consolidates those entities in which it has a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. As such, the Company consolidates (a) entities in which it holds a majority voting interest or has majority ownership and control over the operational, financial and investing decisions of that entity, including Ares affiliates and affiliated funds and co-investment entities and (b) entities that the Company concludes are variable interest entities (“VIEs”), including limited partnerships and CLOs, in which the Company has more than insignificant economic interest and power to direct the activities that most significantly impact the entities, and for which the Company is deemed to be the primary beneficiary.

The Company determines whether an entity should be consolidated by first evaluating whether it holds a variable interest in the entity. Fees that are customary and commensurate with the level of services provided by the Company, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered a variable interest. The Company factors in all economic interests, including proportionate interests through related parties, to determine if fees are considered a variable interest. As the Company’s interests in funds are primarily management fees, performance income, and/or insignificant direct or indirect equity interests through related parties, the Company is not considered to have a variable interest in many of these entities. Entities that are not VIEs are further evaluated for consolidation under the voting interest model (“VOE”).

Variable Interest Model

An entity is considered to be a variable interest entity (“VIE”) if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

The Company consolidates all VIEs for which it is the primary beneficiary. An entity is determined to be the primary beneficiary if it holds a controlling financial interest, which is defined as having (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and continuously reconsiders the conclusion. In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity. The consolidation analysis is generally performed qualitatively, however, if the primary beneficiary is not readily determinable, a quantitative analysis may also be performed. This analysis requires judgment. These judgments include: (1) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, (3) determining whether two or more

F-10

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

parties' equity interests should be aggregated, (4) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity and (5) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and hence would be deemed the primary beneficiary.

Consolidated CLOs

As of December 31, 2019 and 2018, the Company consolidated 16 and 13 CLOs, respectively.

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 within the GAAP fair value hierarchy. 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).

The loan obligations issued by the CLOs are collateralized by diversified asset portfolios and by structured debt or equity. In exchange for managing the collateral for the CLOs, the Company typically earns a variety of management fees, including senior and subordinated management fees, and in some cases, contingent incentive fee income. In cases where the Company earns fees from a CLO that it consolidates, those fees have been eliminated as intercompany transactions. The Company's holdings in these CLOs are generally subordinated to other interests in the entities and entitle the Company to receive a pro rata portion of the residual cash flows, if any, from the entities. Additionally, the Company may invest in other senior secured notes, which are repaid based on available cash flows subject to priority of payments under each consolidated CLO's governing documents. Investors in the CLOs generally have no recourse against the Company for any losses sustained in the capital structure of each CLO.

Fair Value Measurements

GAAP establishes a hierarchal disclosure framework that prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market price observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

Financial assets and liabilities measured and reported at fair value are classified as follows:

*•*Level I—Quoted prices in active markets for identical instruments.

*•*Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates.

*•*Level III—Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available.

In some instances, an instrument may fall into more than one level of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. The Company’s assessment of the significance of an input requires judgment and

F-11

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

considers factors specific to the instrument. The Company accounts for the transfer of assets into or out of each fair value hierarchy level as of the beginning of the reporting period. (See Note 5 for further detail).

Cash and Cash Equivalents

Cash and cash equivalents for the Company includes investments with maturities at purchase of less than three months, money market funds and demand deposits. Cash and cash equivalents held at Consolidated Funds represents cash that, although not legally restricted, is not available to support the general liquidity needs of the Company, as the use of such amounts is generally limited to the activities of the Consolidated Funds.

At December 31, 2019 and 2018, the Company had cash balances with financial institutions in excess of Federal Deposit Insurance Corporation insured limits. The Company monitors the credit standing of these financial institutions.

Investments

The Company has retained the specialized investment company accounting guidance under GAAP with respect to its Consolidated Funds, which hold substantially all of its investments. Thus, the consolidated investments are reflected in the Consolidated Statements of Financial Condition at fair value, with unrealized appreciation (depreciation) resulting from changes in fair value reflected as a component of net realized and unrealized gains (losses) on investments in the Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the exit price).

Equity Method Investments

The Company accounts for its investments in which it has or is otherwise presumed to have significant influence, including investments in unconsolidated funds, strategic investments and carried interest, using the equity method of accounting. The carrying amounts of equity method investments are reflected in investments in the Consolidated Statements of Financial Condition. Certain of the Company's equity method investments are reported at fair value. Management's determination of fair value includes various valuation techniques. These techniques may include market approach, recent transaction price, net asset value approach, discounted cash flows, acreage valuation and may use one or more significant unobservable inputs such as EBITDA or revenue multiples, discount rates, weighted average cost of capital, exit multiples, terminal growth rates and other unobservable inputs. Alternatively, the carrying value of investments accounted for using equity method accounting is determined based on amounts invested by the Company, adjusted for the equity in earnings or losses of the investee allocated based on the respective partnership agreements, less distributions received. The Company evaluates the equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. Except for carried interest, the Company’s share of the investee’s income and expenses for the Company’s equity method investments is included within principal investment income (loss) and net realized and unrealized gains (losses) on investments within the Consolidated Statements of Operations. Carried interest allocation is presented separately as a revenue line item within the Consolidated Statements of Operations, and the accrued but unpaid carried interest as of the reporting date is reported in within investments in the Consolidated Statements of Financial Condition.

Derivative Instruments

The Company recognizes all derivatives as either assets or liabilities in the Consolidated Statements of Financial Condition within other assets or accounts payable, accrued expenses and other liabilities, respectively, and reports them at fair value.

Goodwill and Intangible Assets

The Company's finite-lived intangible assets consists primarily of contractual rights to earn future management fees from the acquired management contracts. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from approximately 2.2 to 8.5 years. The purchase price of the acquired management contract is treated as an intangible asset and is amortized over the life of the contract. Amortization is included as part of general, administrative and other expenses in the Consolidated Statements of Operations.

F-12

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The Company tests finite-lived intangible assets for impairment if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. The Company evaluates impairment by comparing the estimated fair value attributable to the intangible asset being evaluated with its carrying amount. If an impairment is determined to exist by management, the Company accelerates amortization expense so that the carrying amount represents fair value. The Company estimates fair value using undiscounted future cash flow.

Goodwill represents the excess cost over identifiable net assets of an acquired business. The Company tests goodwill annually for impairment. If, after assessing qualitative factors, the Company believes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company will evaluate impairment quantitatively to determine and record the amount of goodwill impairment as the excess of the carrying amount of the reporting unit over its fair value.

The Company also tests goodwill for impairment in other periods if an event occurs or circumstances change such that is more likely than not to reduce the fair value of the reporting unit below its carrying amount. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including the Company’s interpretation of current economic indicators and market valuations, and assumptions about the Company’s strategic plans with regard to its operations. Due to the uncertainties associated with such estimates, actual results could differ from such estimates.

The Company's intangible assets and goodwill are included within other assets on the Company’s Consolidated Statements of Financial Condition.

Fixed Assets

Fixed assets, consisting of furniture, fixtures and equipment, leasehold improvements, computer hardware and internal-use software, are recorded at cost, less accumulated depreciation and amortization. Fixed assets are included within other assets on the Company’s Consolidated Statements of Financial Condition.

Direct costs associated with developing, purchasing or otherwise acquiring software for internal use (“Internal-Use Software”) are capitalized and amortized on a straight-line basis over the expected useful life of the software, beginning when the software is ready for its intended purpose. Costs incurred for upgrades and enhancements that will not result in additional functionality are expensed as incurred.

Fixed assets are depreciated or amortized on a straight-line basis over an asset's estimated useful life, with the corresponding depreciation and amortization expense included within general, administrative and other expenses on the Company’s Consolidated Statements of Operations. The estimated useful life for leasehold improvements is the lesser of the lease term or the life of the asset while other fixed assets and internal-use software are generally depreciated between three and seven years. Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Revenue Recognition

Revenues primarily consist of management fees, carried interest allocation, incentive fees, principal investment income and administrative, transaction and other fees.

Adoption of ASC 606

Effective January 1, 2018, the Company adopted the Financial Accounting Standards Board (“FASB”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers. The Company adopted ASC 606 to all applicable contracts under the modified retrospective approach using the practical expedient provided for within paragraph 606-10-65-1(f)(3); therefore, the presentation of prior year periods has not been adjusted. The Company recognized the cumulative effect of initially adopting ASC 606 as an adjustment to the opening balance of components of equity as of January 1, 2018.

Pursuant to ASC 606, the Company recognizes revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Under this standard, revenue is based on a contract with a determinable transaction price and distinct performance obligations with probable collectability. Revenues cannot be recognized until the performance obligation(s) are

F-13

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

satisfied and control is transferred to the customer. The Company's adoption of ASC 606 impacted the timing and recognition of incentive fees in the Company’s Consolidated Statements of Operations. The adoption of ASC 606 did not have an impact on the Company’s management fees, administrative fees, transaction fees or other fees. The details of the significant changes and quantitative impact of the adoption of ASC 606 are further discussed below.

The adoption of ASC 606 had the following impact on the Company’s revenue streams:

Revenues of the Company			Impact of ASC 606
Management fees			No impact - Management fees are recognized as revenue in the period advisory services are rendered.
Performance income - Carried interest allocation			No impact. See discussion below for change in accounting policy.
Performance income - Incentive fees			See discussion below for impact.
Administrative, transaction and other fees			No impact - Administrative, transaction and other fees are recognized as revenue in the period in which the related services are rendered.

Management Fees

Management fees are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value (“NAV”), net investment income, total assets or par value of the investment portfolios managed by the Company. Principally all management fees are earned from affiliated funds of the Company. The contractual terms of management fees vary by fund structure and investment strategy. Management fees are recognized as revenue in the period advisory services are rendered, subject to the Company’s assessment of collectability.

Management fees also include a quarterly incentive fee based on the net investment income (“ARCC Part I Fees”) from Ares Capital Corporation (NASDAQ: ARCC) (“ARCC”), a publicly traded business development company registered under the Investment Company Act and managed by a subsidiary of the Company.

ARCC Part I Fees are equal to 20.0% of its net investment income (before ARCC Part I Fees and incentive fees payable based on capital gains), subject to a fixed “hurdle rate” of 1.75% per quarter, or 7.0% per annum. No fee is recognized until ARCC's net investment income exceeds a 1.75% hurdle rate, with a “catch-up” provision to ensure that the Company receives 20% of ARCC's net investment income from the first dollar earned. Such fees from ARCC are classified as management fees as they are paid quarterly, predictable and recurring in nature, not subject to contingent repayment and are typically cash settled each quarter.

Performance Income

Performance income revenues consist of carried interest allocation and incentive fees. Performance income is based on certain specific hurdle rates as defined in the applicable investment management agreements or governing documents. Substantially all performance income is earned from affiliated funds of the Company.

Carried Interest Allocation

In certain fund structures, typically in private equity and real estate equity funds, carried interest is allocated to the Company based on cumulative fund performance to date, subject to the achievement of minimum return levels in accordance with the respective terms set out in each fund’s investment management agreement. At the end of each reporting period, a fund will allocate carried interest applicable to the Company based upon an assumed liquidation of that fund's net assets on the reporting date, irrespective of whether such amounts have been realized. Carried interest is recorded to the extent such amounts have been allocated, and may be subject to reversal to the extent that the amount allocated exceeds the amount due to the general partner or investment manager based on a fund’s cumulative investment returns.

As the fair value of underlying assets varies between reporting periods, it is necessary to make adjustments to amounts recorded as carried interest to reflect either (i) positive performance resulting in an increase in the carried interest allocated to the Company or (ii) negative performance that would cause the amount due to the Company to be less than the amount previously recognized as revenue, resulting in a reversal of previously recognized carried interest allocated to the Company.

F-14

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Accrued but unpaid carried interest as of the reporting date is recorded within investments in the Consolidated Statements of Financial Condition.

Carried interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates as defined in the applicable investment management agreements or governing documents. Since carried interest is subject to reversal, the Company may need to accrue for potential repayment of previously received carried interest. This accrual represents all amounts previously distributed to the Company that would need to be repaid to the funds if the funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual repayment obligations, however, generally does not become realized until the end of a fund’s life. As of December 31, 2019, if the funds were liquidated at their fair values, there would be no contingent repayment obligation or liability. As of December 31, 2018, if the funds were liquidated at their fair values, there would have been $0.4 million of repayment obligations, which the Company recorded as a contingent repayment liability that is presented within accrued carried interest within investments and performance related compensation payable on the Company's Consolidated Statements of Financial Condition.

Prior to January 1, 2018, the Company accounted for carried interest under Method 2 described in ASC 605-20-S99-1, which provided guidance on accounting for incentive-based performance income, including carried interest. The Company has reassessed its accounting policy for carried interest, and has determined that carried interest is addressed within scope of ASC 323, Investments-Equity Method and Joint Ventures, and out of scope under the scoping provision of ASC 606. Therefore, following the application of ASC 323, the Company accounted for carried interest, which represents a performance-based capital allocation from an investment fund to the Company, as earnings from financial assets within the scope of ASC 323. Accordingly, the Company recognizes carried interest allocation as a separate revenue line item in the Consolidated Statements of Operations with uncollected carried interest as of the reporting date reported within investments in the Consolidated Statements of Financial Condition.

The Company has applied the change in accounting principle on a full retrospective basis, and prior periods presented herein have been recast to conform with the current period's presentation. The change in accounting principle did not change the timing or the amount of carried interest recognized. Instead, the change in accounting principle resulted in reclassification from performance income to carried interest allocation, and therefore did not have any impact on net income. See the tables below for the impact of the change in accounting principle of carried interest*.*

Incentive Fees

Incentive fees earned on the performance of certain fund structures, typically in credit funds, are recognized based on the fund’s performance during the period, subject to the achievement of minimum return levels in accordance with the respective terms set out in each fund’s investment management agreement. Incentive fees are realized at the end of a measurement period, typically annually. Once realized, such fees are no longer subject to reversal.

Prior to January 1, 2018, the Company accounted for incentive fees under Method 2 as described above. However, the accounting for incentive fees is separate and distinct from the accounting for carried interest because the incentive fees are contractual fee arrangements and do not represent allocations of returns from partners' capital accounts. The Company now accounts for incentive fees in accordance with ASC 606. Accordingly, the Company recognizes incentive fee revenue only when the amount is realized and no longer subject to reversal. Therefore, the Company no longer recognizes unrealized incentive fees in revenues in the consolidated financial statements. The adoption of ASC 606 results in the delayed recognition of unrealized incentive fees in the consolidated financial statements until they become realized at the end of the measurement period, which is typically annually.

The Company adopted ASC 606 for incentive fees using the modified retrospective approach with an effective date of January 1, 2018. The cumulative effect of the adoption resulted in the reversal of $22.6 million of unrealized incentive fees and is presented as a reduction to the opening balances of components of equity as of January 1, 2018.

Principal Investment Income

Principal investment income consists of interest and dividend income and net realized and unrealized gain (loss) from the equity method investments that the Company manages.

F-15

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Administrative, Transaction and Other Fees

The Company provides administrative services to certain of its affiliated funds that are reported within administrative and other fees. The administrative fees generally represent expense reimbursements for a portion of overhead and other expenses incurred by certain Operations Management Group professionals directly attributable to performing services for a fund but may also be based on a fund’s NAV for certain funds domiciled outside the U.S. The Company also receives transaction fees from certain affiliated funds for activities related to fund transactions, such as loan originations. These fees are recognized as other revenue in the period in which the administrative services and the transaction related services are rendered.

The following table presents the adjustments made in connection with the Company's change in accounting principle related to carried interest under ASC 323, Investments-Equity Method and Joint Ventures on the financial statement line items for the periods presented in the consolidated financial statements:

Consolidated Statement of Operations
						For the Year Ended December 31, 2017
						As Previously Reported						Adjustments						As Adjusted
Revenues
Performance income						$	636,674					$	(636,674)					$	—
Carried interest allocation						—						620,454						620,454
Incentive fees						—						16,220						16,220
Principal investment income						—						64,444						64,444
Total revenues						1,415,499						64,444						1,479,943
Other income (expense)
Net realized and unrealized gain on investments						67,034						(58,772)						8,262
Interest and dividend income						12,715						(5,672)						7,043

The Company's change in accounting policy related to carried interest did not impact the Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity or Consolidated Statements of Cash Flows for the year ended December 31, 2017.

The following tables present the impact of incentive fees on the consolidated financial statements upon the adoption of ASC 606 effective January 1, 2018:

Consolidated Statement of Financial Condition

			As of January 1, 2018
			As adjusted December 31, 2017						Adjustments						As Adjusted for ASC 606 adoption
Investments			$	1,724,571					$	—					$	1,724,571
Other assets			130,341						(22,611)			(1)			107,730
Total assets			8,563,522						(22,611)						8,540,911
Total liabilities			7,103,230						—						7,103,230
Cumulative effect adjustment to equity(2)			—						(22,611)						(22,611)
Total equity			1,460,292						(22,611)						1,437,681
Total liabilities, non-controlling interests and equity			8,563,522						(22,611)						8,540,911

(1)Unrealized incentive fees receivable balance as of December 31, 2017.

(2)See detail below.

F-16

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Consolidated Statement of Changes in Equity

									Preferred Equity						Shareholders' Capital						Accumulated Other Comprehensive Loss						Non-controlling interest in Ares Operating Group Entities						Non-Controlling Interest in Consolidated Funds						Total Equity
			Balance at December 31, 2017						$	298,761					$	279,065					$	(4,208)					$	358,186					$	528,488					$	1,460,292
			Cumulative effect of the adoption of ASC 606						—						(10,827)						—						(17,117)						5,333						(22,611)
			As adjusted balance at January 1, 2018						$	298,761					$	268,238					$	(4,208)					$	341,069					$	533,821					$	1,437,681

In accordance with the ASC 606 disclosure requirements, the following tables present the adjustments made by the Company to remove the effects of adopting ASC 606 on the consolidated financial statements as of and for the year ended December 31, 2018:

Consolidated Statement of Financial Condition
						As of December 31, 2018
						As Reported						Adjustments						Balances without adoption of ASC 606
Assets
Cash and cash equivalents						$	110,247					$	—					$	110,247
Investments (includes $841,079 of accrued carried interest)						1,326,137						—						1,326,137
Due from affiliates						199,377						—						199,377
Other assets						377,651						40,374						418,025
Total assets						10,154,692						40,373						10,195,065
Commitments and contingencies
Non-controlling interest in Consolidated Funds						503,637						(7,574)						496,063
Non-controlling interest in Ares Operating Group entities						302,780						29,663						332,443
Stockholders' Equity
Additional paid-in-capital						326,007						23,587						349,594
Retained earnings						(29,336)						(5,095)						(34,431)
Accumulated other comprehensive loss, net of tax						(8,524)						(208)						(8,732)
Total stockholders' equity						587,924						18,284						606,208
Total equity						1,394,341						40,373						1,434,714
Total liabilities and equity						10,154,692						40,373						10,195,065

F-17

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			Consolidated Statement of Operations
									For the Year Ended December 31, 2018
									As Reported						Adjustments						Balances without adoption of ASC 606
			Revenues
			Incentive fees						$	63,380					$	20,997					$	84,377
			Total revenues						958,461						20,997						979,458
			Expenses
			Expenses of Consolidated Funds						53,764						—						53,764
			Total expenses						870,362						—						870,362
			Other income (expense)
			Other income, net						(851)						30						(821)
			Total other income						96,242						30						96,272
			Income before taxes						184,341						21,027						205,368
			Income tax expense						32,202						2,475						34,677
			Net income						152,139						18,552						170,691
			Less: Net income attributable to non-controlling interests in Consolidated Funds						20,512						(1,921)						18,591
			Less: Net income attributable to non-controlling interests in Ares Operating Group entities						74,607						12,808						87,415
			Net income attributable to Ares Management Corporation						57,020						7,665						64,685
			Less: Series A Preferred Stock dividends paid						21,700						—						21,700
			Net income attributable to Ares Management Corporation Class A common stockholders						35,320						7,665						42,985

Consolidated Statement of Comprehensive Income

			For the Year Ended December 31, 2018
			As Reported						Adjustments						Balances without adoption of ASC 606
Net income			$	152,139					$	18,552					$	170,691
Other comprehensive income:
Foreign currency translation adjustments			(13,190)						(470)						(13,660)
Total comprehensive income			138,949						18,082						157,031
Less: Comprehensive income attributable to non-controlling interests in Consolidated Funds			15,575						(1,921)						13,654
Less: Comprehensive income attributable to non-controlling interests in Ares Operating Group entities			70,670						12,546						83,216
Comprehensive income attributable to Ares Management Corporation			$	52,704					$	7,457					$	60,161

F-18

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Consolidated Statement of Cash Flows

						For the Year Ended December 31, 2018
						As Reported						Adjustments						Balances without adoption of ASC 606
Cash flows from operating activities:
Net income						$	152,139					$	18,552					$	170,691
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Other assets						(66,795)						(20,473)						(87,268)
Change in other liabilities and payables held at Consolidated Funds						137,545						1,921						139,466
Net cash used in operating activities						$	(1,417,058)					$	—					(1,417,058)

Equity-Based Compensation

The Company recognizes expense related to equity-based compensation in which it receives employee services in exchange for (a) equity instruments of the Company, (b) derivatives based on the Company’s Class A common stock or (c) liabilities that are based on the fair value of the Company’s equity instruments. Equity-based compensation expense represents expenses associated with restricted units, options and phantom shares granted under 2014 Equity Incentive Plan, as amended and restated on March 1, 2018 and as further amended and restated effective November 26, 2018 (the “Equity Incentive Plan”).

Equity-based compensation expense for restricted units and options is determined based on the fair value of the respective equity award on the grant date and is recognized on a straight-line basis over the requisite service period, with a corresponding increase in additional paid-in-capital. Grant date fair value of the restricted units was determined to be the most recent closing price of shares of the Company's Class A common stock. Certain restricted units are subject to a lock-up provision that expired on the fifth anniversary of the IPO. The Company used Finnerty’s average strike-price put option model to estimate the discount associated with this lack of marketability. The Company estimated the grant date fair value of the options as of the grant date using Black-Scholes option pricing model. The phantom shares were settled in cash and represented a liability that was remeasured at each reporting period until the final settlement in May 2019. Prior to the final settlement, fair value of the phantom shares was determined to be the most recent closing price as of each reporting period.

The Company recognizes 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.

The Company records deferred tax assets or liabilities for equity compensation plan awards based on deductions for income tax purposes of equity-based compensation recognized at the statutory tax rate in the jurisdiction in which the Company is expected to receive a tax deduction. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income tax returns are recorded as adjustments to additional paid-in-capital. If the tax deduction is less than the deferred tax asset, the calculated shortfall reduces the pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase the income tax expense.

Equity-based compensation expense is presented within compensation and benefits in the Consolidated Statements of Operations.

Performance Related Compensation

The Company has agreed to pay a portion of the performance income earned from certain funds, including income from Consolidated Funds that is eliminated in consolidation, to investment and non-investment professionals. Depending on the nature of each fund, the performance income allocation may be structured as a fixed percentage subject to vesting based on continued employment or service (generally over a period of four to six years) or as an annual award that is fully vested for the particular year. Other limitations may apply to performance income allocation as set forth in the applicable governing documents of the fund or award documentation. Performance related compensation is recognized in the same period that the

F-19

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

related performance income is recognized. Performance related compensation can be reversed during periods when there is a reversal of performance income that was previously recognized.

Performance related compensation payable represents the amounts payable to professionals who are entitled to a proportionate share of performance income in one or more funds. The liability is calculated based upon the changes to realized and unrealized performance income but not payable until the performance income itself is realized.

Net Realized and Unrealized Gains (Losses) on Investments

Realized gain (loss) occurs when the Company redeems all or a portion of its investment or when the Company receives cash income, such as dividends or distributions. Unrealized appreciation (depreciation) results from changes in the fair value of the underlying investment as well as from the reversal of previously recognized unrealized appreciation (depreciation) at the time an investment is realized. Realized and unrealized gains (losses) are presented together as net realized and unrealized gains (losses) on investments in the Consolidated Statements of Operations. Also, the Company’s share of the investee’s income and expenses for the Company’s equity method investments is included within net realized and unrealized gains (losses) on investments.

Interest and Dividend Income

Interest, dividends and other investment income are included in interest and dividend income. Interest income is recognized on an accrual basis to the extent that such amounts are expected to be collected using the effective interest method. Dividends and other investment income are recorded when the right to receive payment is established.

Foreign Currency

The U.S. dollar is the Company's functional currency; however, certain transactions of the Company may not be denominated in U.S. dollars. Foreign exchange revaluation arising from these transactions is recognized within other income (expense) in the Consolidated Statements of Operations. For the years ended December 31, 2019, 2018 and 2017, the Company recognized $8.5 million, $0.1 million and $1.7 million, respectively, in transaction losses related to foreign currencies revaluation.

In addition, the combined and consolidated results include certain foreign subsidiaries and Consolidated Funds that use functional currencies other than the U.S. dollar. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the prevailing exchange rates as of the reporting date. Income and expense and gain and loss transactions denominated in foreign currencies are generally translated into U.S. dollars monthly using the average exchange rates during the respective transaction period. Translation adjustments resulting from this process are recorded to currency translation adjustment in accumulated other comprehensive income.

Income Taxes

The Company elected to be taxed as a corporation effective March 1, 2018 (the “Tax Election”). Prior to the Tax Election, the Company's share of carried interest and investment income generally were not subject to U.S. corporate income taxes. Upon the effectiveness of the Tax Election, all earnings allocated to the Company are subject to U.S. corporate income taxes. Prior to March 1, 2018, a significant portion of Company's share of carried interest and investment income flowed through to investors without being subject to entity level income taxes. Consequently, we did not reflect a provision for income taxes on such income except those for foreign, state, and local income taxes at the entity level. Beginning March 1, 2018, the Company's share of unrealized gains and income items became subject to U.S. corporate tax. A provision for corporate level income taxes imposed on these previously unrealized gains and income items as well as taxes imposed on certain subsidiaries’ earnings is included in the consolidated tax provision. Also included in the consolidated tax provision are entity level income taxes incurred by certain affiliated funds and co-investment entities that are consolidated in these financial statements. The portion of consolidated earnings not allocated to the Company continues to flow through to owners of the Ares Operating Group entities without being taxed at the corporate level.

Income taxes are accounted for using the liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse.

F-20

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The effect on deferred assets and liabilities of a change in tax rates is recognized as income, in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current and deferred tax liabilities are reported on a net basis and included within other assets in the Consolidated Statements of Financial Condition.

The Company analyzes its tax filing positions in all U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns for all open tax years in these jurisdictions. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (“UTBs”) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. Both accrued interest and penalties, where appropriate, related to UTBs are shown in general, administrative and other expenses in the Consolidated Statements of Operations.

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. The Company reviews its tax positions quarterly and adjusts its tax balances as new legislation is passed or new information becomes available.

Income Allocation

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

Earnings Per Share

Basic earnings per share of Class A common stock is computed by dividing income available to Class A common stockholders by the weighted-average number shares of Class A common stock outstanding during the period. Income available to Class A common stockholders represents net income attributable to Ares Management Corporation after giving effect to the Series A Preferred stock dividends paid.

Diluted earnings per share of Class A common stock is computed by dividing income available to Class A common stockholders by the weighted-average number of shares of Class A common stock outstanding during the period, increased to include the number of additional shares of Class A common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options to acquire shares of Class A common stock, unvested restricted units and AOG Units exchangeable for shares of Class A common stock. The effect of potentially dilutive securities is reflected in diluted earnings per share of Class A common stock using the more dilutive result of the treasury stock method or the two-class method.

Unvested share-based payment awards that contain non-forfeitable rights to dividend or dividend equivalents (whether paid or unpaid) are participating securities and are considered in the computation of earnings per share of Class A common stock pursuant to the two-class method. Unvested restricted units that pay dividend equivalents are deemed participating securities and are included in basic and diluted earnings per share of Class A common stock calculation under the two-class method.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other appreciation (depreciation) affecting stockholders' equity that, under GAAP, are excluded from net income (loss). The Company's other comprehensive income (loss) includes foreign currency translation adjustments.

Adoption of ASC 842

Effective January 1, 2019, the Company adopted the Financial Accounting Standards Board (“FASB”) Topic 842

F-21

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

(“ASC 842”), Leases. The Company adopted ASC 842 under the modified retrospective approach using the practical expedient provided for within paragraph 842-10-65-1; therefore, the presentation of prior year periods has not been adjusted. There is no cumulative effect upon adoption because no adjustment to the opening balances of the components of equity was necessary.

The Company has entered into operating and finance leases for corporate offices and certain equipment and makes the determination if an arrangement constitutes a lease at inception. Operating leases are included in right-of-use operating lease assets and operating lease liabilities in the Company's Consolidated Statements of Financial Condition. Finance leases are included in accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the Consolidated Statements of Financial Condition.

Right-of-use operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease right-of-use assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses the its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The right-of-use operating lease asset also includes any lease prepayments and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the company will exercise that option. Lease expense is primarily recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. However, for certain equipment leases where the non-lease components are not material, the Company accounts for the lease and non-lease components as a single lease component.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued. ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the guidance in ASU 2016-13 is to allow entities to recognize estimated credit losses in the period that the change in valuation occurs. ASU 2016-13 requires an entity to present financial assets measured on an amortized cost basis on the balance sheet net of an allowance for credit losses. Available for sale and held to maturity debt securities are also required to be held net of an allowance for credit losses. The guidance should be applied using a modified retrospective approach. ASU 2016-13 is effective for public entities for annual reporting periods beginning after December 15, 2019 and interim periods within those reporting periods. Early adoption is permitted for annual and quarterly reporting periods beginning after December 15, 2018. In April, May, and November 2019, ASU 2019-04, C**odification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses were issued to provide clarification to previously issued credit losses guidance (ASU 2016-13) that has not yet been implemented. These updates are required to be adopted with ASU 2016-13. The Company has concluded this guidance will not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). ASU 2018-15 amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This ASU aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a cloud computing arrangement that is considered a service contract. The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. In addition, this ASU states that a cloud computing arrangement that is a service contract does not give rise to a recognizable intangible asset because it is an executory service contract. Consequently, any costs incurred to implement a cloud computing arrangement that is a service contract would not be capitalized as an intangible asset since they do not form part of an intangible asset but instead would be characterized in the financial statements

F-22

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

in the same manner as other service costs and assets related to service contracts such as prepaid expense. That is, these costs would be capitalized as part of the service contract and the related amortization would be consistent with the ongoing periodic costs of the underlying cloud computing arrangement. ASU 2018-15 is effective for public entities for annual reporting periods beginning after December 15, 2019 and interim periods within those reporting periods, with early adoption permitted. The guidance may be applied either prospectively or retrospectively. The Company has concluded this guidance will not have a material impact on its consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU 2018-17, amends ASC 810 to address whether indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE. For example, if a decision maker or service provider owns a 20 percent interest in a related party and that related party owns a 40 percent interest in the legal entity being evaluated, the decision maker’s or service provider’s indirect interest in the VIE held through the related party under common control should be considered the equivalent of an eight percent direct interest for determining whether its fees are variable interests. ASU 2018-17 is effective for public entities for annual reporting periods beginning after December 15, 2019 and interim periods within those reporting periods, with early adoption permitted. The guidance should be applied retrospectively. The Company has concluded this guidance will not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for public entities for annual reporting periods beginning after December 15, 2020 and interim periods within those reporting periods, with early adoption permitted. The amendments in this update related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

3. GOODWILL AND INTANGIBLE ASSETS

Finite Lived Intangible Assets, Net

The following table summarizes the carrying value, net of accumulated amortization, of the Company's intangible assets that are included within other assets in the Consolidated Statements of Financial Condition:

			Weighted Average Amortization Period as of December 31, 2019						As of December 31,
									2019						2018
Management contracts			2.2 years						$	12,498					$	42,335
Client relationships			8.5 years						6,341						38,600
Trade name			2.5 years						378						3,200
Intangible assets									19,217						84,135
Less: accumulated amortization									(11,242)						(52,701)
Intangible assets, net									$	7,975					$	31,434

Amortization expense associated with intangible assets, excluding impairment charges, was $3.4 million, $9.0 million and $17.9 million for the years ended December 31, 2019, 2018 and 2017, respectively, and is presented within general, administrative and other expenses within the Consolidated Statements of Operations. During the first quarter of 2019, the Company removed $29.8 million of intangible assets that were fully amortized.

F-23

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

During the year ended December 31, 2019, the Company recorded a non-cash impairment charge of $20.0 million to general, administrative and other expenses within the Consolidated Statements of Operations related to certain intangible assets recorded in connection with the Company’s acquisition of Energy Investors Funds (“EIF”). The EIF funds are a component of the Private Equity Group operating segment. The primary indicators of impairment were lower legacy EIF investor commitments into successor funds from the Company’s original projections and the Company’s decision to no longer introduce successor funds under its EIF trade name. As a result, the Company expects a decrease in the future expected cash flows from management fees generated by EIF’s existing client relationships and a decrease in royalties attributed to EIF’s trade name. The Company determined that the carrying value of these intangible assets exceeded the expected undiscounted future cash flows and recorded an impairment charge equal to the difference between its carrying value of each asset and the asset’s estimated fair value, as calculated using a discounted cash flow methodology. Following the recognition of the impairment charge, the Company removed $35.1 million of the client relationships and trade name intangible assets to reflect the adjusted carrying value to be amortized over the remaining useful life.

At December 31, 2019, future annual amortization of finite-lived intangible assets for the years 2020 through 2024 and thereafter is estimated to be:

Year			Amortization
2020			$	1,627
2021			1,542
2022			895
2023			711
2024			711
Thereafter			2,489
Total			$	7,975

Goodwill

The following table summarizes the carrying value of the Company's goodwill assets that are included within other assets in the Consolidated Statements of Financial Condition:

			Credit Group						Private Equity Group						Real Estate Group						Total
Balance as of December 31, 2017			$	32,196					$	58,600					$	53,099					$	143,895
Foreign currency translation			—						—						(109)						(109)
Balance as of December 31, 2018			32,196						58,600						52,990						143,786
Foreign currency translation			—						—						69						69
Balance as of December 31, 2019			$	32,196					$	58,600					$	53,059					$	143,855

There was no impairment of goodwill recorded during the years ended December 31, 2019 and 2018. The impact of foreign currency translation is reflected within other comprehensive income.

F-24

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

4. INVESTMENTS

The Company’s investments are comprised of the following:

																					Percentage of total investments as of
			December 31,																		December 31,
			2019						2018						2019						2018
Equity method investments:
Equity method private investment partnership interests - principal (1)			$	390,407					$	357,655					23.5		%				27.0		%
Equity method - carried interest (1)			1,134,967						841,079						68.2		%				63.4		%
Equity method private investment partnership interests and other (held at fair value)			51,528						46,449						3.1		%				3.5		%
Equity method private investment partnership interests and other			16,536						18,846						1.0		%				1.4		%
Total equity method investments			1,593,438						1,264,029						95.8		%				95.3		%
Collateralized loan obligations			22,265						20,824						1.3		%				1.6		%
Other fixed income			46,918						40,000						2.8		%				3.0		%
Collateralized loan obligations and other fixed income, at fair value			69,183						60,824						4.1		%				4.6		%
Common stock, at fair value			1,043						1,284						0.1		%				0.1		%
Total investments			$	1,663,664					$	1,326,137

(1)Investment or portion of the investment is denominated in foreign currency and is translated into U.S. dollars at each reporting date.

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 evaluates each of its equity method investments to determine if any were significant as defined by guidance from the SEC. As of and for the years ended December 31, 2019, 2018 and 2017 no individual equity method investment held by the Company met the significance criteria. As such, the Company is not required to present separate financial statements for any of its equity method investments.

The following tables present summarized financial information for the Company's equity method investments, which are primarily funds managed by the Company, for the years ended December 31, 2019, 2018 and 2017.

			As of December 31, 2019 and the Year then Ended
			Credit Group						Private Equity Group						Real Estate Group						Total
Statement of Financial Condition
Investments			$	10,937,224					$	9,700,725					$	4,939,245					$	25,577,194
Total assets			11,625,699						10,077,149						5,314,908						27,017,756
Total liabilities			3,416,429						534,965						958,020						4,909,414
Total equity			8,209,270						9,542,184						4,356,888						22,108,342
Statement of Operations
Revenues			$	871,168					$	325,529					$	205,274					$	1,401,971
Expenses			(211,984)						(112,610)						(120,467)						(445,061)
Net realized and unrealized gains (losses) from investments			5,040						1,674,002						382,383						2,061,425
Income tax expense			(1,537)						(27,887)						(926)						(30,350)
Net income			$	662,687					$	1,859,034					$	466,264					$	2,987,985

F-25

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			As of December 31, 2018 and the Year then Ended
			Credit Group						Private Equity Group						Real Estate Group						Total
Statement of Financial Condition
Investments			$	8,210,094					$	9,574,998					$	3,337,076					$	21,122,168
Total assets			8,799,290						9,785,312						3,763,907						22,348,509
Total liabilities			1,542,058						423,687						813,269						2,779,014
Total equity			7,257,232						9,361,625						2,950,638						19,569,495
Statement of Operations
Revenues			$	766,009					$	264,376					$	144,706					$	1,175,091
Expenses			(189,432)						(85,801)						(96,353)						(371,586)
Net realized and unrealized gains (losses) from investments			(67,477)						(892,800)						417,974						(542,303)
Income tax expense			(2,526)						(20,554)						(4,075)						(27,155)
Net income			$	506,574					$	(734,779)					$	462,252					$	234,047

			For the Year Ended December 31, 2017
			Credit Group						Private Equity Group						Real Estate Group						Total
Statement of Operations
Revenues			$	603,682					$	144,829					$	154,967					903,478
Expenses			(169,086)						(91,803)						(67,396)						(328,285)
Net realized and unrealized gains from investments			41,185						2,335,027						365,091						2,741,303
Income tax expense			(2,700)						(31,359)						(13,092)						(47,151)
Net income			$	473,081					$	2,356,694					$	439,570					$	3,269,345

The Company recognized net gains related to its equity method investments of $57.4 million and $78.3 million for the years ended December 31, 2019 and 2017, respectively. The Company recognized a net loss related to its equity method investments of $3.8 million for the year ended December 31, 2018. The net gains and losses were included within principal investment income, net realized and unrealized gains on investments, and interest and dividend income within the Consolidated Statements of Operations.

With respect to the Company's equity method investments, the material assets are expected to generate either long-term capital appreciation and or interest income, the material liabilities are debt instruments collateralized by, or related to, the financing of the assets and net income is materially comprised of the changes in fair value of these net assets.

F-26

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Investments of the Consolidated Funds

Investments held in the Consolidated Funds are summarized below:

						Fair value at																		Fair value as a percentage of total investments as of
						December 31,																		December 31,
						2019						2018						2019						2018
United States
			Fixed income investments:
			Bonds			$	10,074					$	31,517					0.1		%				0.4		%
			Loans			4,871,752						4,618,542						55.8						60.2
			Total fixed income investments (cost: $4,920,272 and $4,876,915 at December 31, 2019 and December 31, 2018, respectively)			4,881,826						4,650,059						55.9						60.6
			Equity securities (cost: $431 and $354 at December 31, 2019 and December 31, 2018, respectively)			432						335						—						—
			Partnership interests (cost: $201,000 and $210,000 at December 31, 2019 and December 31, 2018, respectively)			296,012						271,447						3.4						3.5
Total investments, at fair value - United States									5,178,270						4,921,841						59.3						64.1
Europe
			Fixed income investments:
			Bonds			202,302						282,799						2.3						3.8
			Loans			3,086,655						2,140,551						35.4						27.9
			Investments in CLO warehouse			44,435						—						0.5						—
			Total fixed income investments (cost: $3,340,351 and $2,484,519 at December 31, 2019 and December 31, 2018, respectively)			3,333,392						2,423,350						38.2						31.7
			Equity securities (cost: $45,549 and $56,154 at December 31, 2019 and December 31, 2018, respectively)			1,063						23,536						—						0.3
Total investments, at fair value - Europe									3,334,455						2,446,886						38.2						32.0
Asia and other
			Fixed income investments:
			Bonds			—						4,183						—						0.1
			Loans			104,333						127,656						1.2						1.7
			Total fixed income investments (cost: $105,495 and $140,139 at December 31, 2019 and December 31, 2018, respectively)			104,333						131,839						1.2						1.8
			Equity securities (cost: $104,997 and $122,418 at December 31, 2019 and December 31, 2018, respectively)			110,889						172,599						1.3						2.2
Total investments, at fair value - Asia and other									215,222						304,438						2.5						4.0
Total Investments, at fair value									$	8,727,947					$	7,673,165

At December 31, 2019 and 2018, no single issuer or investment, including derivative instruments and underlying portfolio investments of the Consolidated Funds, had a fair value that exceeded 5.0% of the Company’s total assets.

5. FAIR VALUE

Financial Instrument Valuations

The valuation techniques used by the Company to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation techniques applied to investments held by the Company and by the Consolidated Funds vary depending on the nature of the investment.

CLOs and CLO loan obligations: The fair value of CLOs held by the Company are estimated based on either a third-party pricing service or broker quote and are classified as Level III. The Company measures its CLO loan obligations of the Consolidated Funds by first determining whether the fair values of the financial assets or financial liabilities of its consolidated CLOs are more observable.

F-27

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Corporate debt, bonds, bank loans and derivative instruments: The fair value of corporate debt, bonds, bank loans and derivative instruments is estimated based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs. These investments are generally classified as Level II. The Company obtains prices from independent pricing services that generally utilize broker quotes and may use various other pricing techniques, which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. If management is only able to obtain a single broker quote, or utilizes a pricing model, such securities will generally be classified as Level III.

Equity and equity-related securities: Securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. Securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.

Partnership interests: The Company generally values its investments using the NAV per share equivalent calculated by the investment manager as a practical expedient to determining an independent fair value or estimates based on various valuation models of third-party pricing services, as well as internal models. The Company does not categorize within the fair value hierarchy investments where fair value is measured using the net asset value per share practical expedient.

Certain investments of the Company are valued at NAV per share of the fund. In limited circumstances, the Company may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Company will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP. As of December 31, 2019 and 2018, NAV per share represents the fair value of the investments for the Company and discounted cash flow analysis is used to determine the fair value for an investment held by the Consolidated Funds.

The substantial majority of the Company's private commingled funds are closed-ended, and accordingly, do not permit investors to redeem their interests other than in limited circumstances that are beyond the control of the Company, such as instances in which retaining the interest could cause the investor to violate a law, regulation or rule. Investors in open-ended and evergreen funds have the right to withdraw their capital, subject to the terms of the respective constituent documents, over periods generally ranging from one month to three years. In addition, separately managed investment vehicles for a single fund investor may allow such investors to terminate the fund at the discretion of the investor pursuant to the terms of the applicable constituent documents of such vehicle.

Fair Value of Financial Instruments Held by the Company and Consolidated Funds

The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31, 2019:

Financial Instruments of the Company						Level I						Level II						Level III						Investments Measured at NAV						Total
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income						$	—					$	—					$	69,183					$	—					$	69,183
Common stock and other equity securities						—						1,043						14,704						—						15,747
Partnership interests						—						—						35,192						1,632						36,824
Total investments, at fair value						—						1,043						119,079						1,632						121,754
Derivatives-foreign exchange contracts						—						4,023						—						—						4,023
Total assets, at fair value						$	—					$	5,066					$	119,079					$	1,632					$	125,777
Liabilities, at fair value
Derivatives-foreign exchange contracts						$	—					$	(113)					$	—					$	—					$	(113)
Total liabilities, at fair value						$	—					$	(113)					$	—					$	—					$	(113)

F-28

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Financial Instruments of the Consolidated Funds						Level I						Level II						Level III						Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds						$	—					$	207,966					$	4,410					$	212,376
Loans						—						7,728,014						334,726						8,062,740
Investments in CLO warehouse						—						44,435						—						44,435
Total fixed income investments						—						7,980,415						339,136						8,319,551
Equity securities						26,396						—						85,988						112,384
Partnership interests						—						—						296,012						296,012
Total investments, at fair value						26,396						7,980,415						721,136						8,727,947
Derivatives-foreign exchange contracts						—						667						—						667
Total assets, at fair value						$	26,396					$	7,981,082					$	721,136					$	8,728,614
Liabilities, at fair value
Derivatives:
Foreign exchange contracts						$	—					$	(670)					$	—					$	(670)
Asset swaps-other						—						—						(4,106)						(4,106)
Total derivative liabilities, at fair value						—						(670)						(4,106)						(4,776)
Loan obligations of CLOs						—						(7,973,748)						—						(7,973,748)
Total liabilities, at fair value						$	—					$	(7,974,418)					$	(4,106)					$	(7,978,524)

The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31, 2018:

Financial Instruments of the Company						Level I						Level II						Level III						Investments Measured at NAV						Total
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income						$	—					$	—					$	60,824					$	—					$	60,824
Common stock and other equity securities						280						1,004						10,397						—						11,681
Partnership interests						—						—						35,192						861						36,053
Total investments, at fair value						280						1,004						106,413						861						108,558
Derivatives-foreign exchange contracts						—						1,066						—						—						1,066
Total assets, at fair value						$	280					$	2,070					$	106,413					$	861					$	109,624
Liabilities, at fair value
Derivatives-foreign exchange contracts						$	—					$	(869)					$	—					$	—					$	(869)
Total liabilities, at fair value						$	—					$	(869)					$	—					$	—					$	(869)

F-29

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Financial Instruments of the Consolidated Funds						Level I						Level II						Level III						Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds						$	—					$	316,850					$	1,649					$	318,499
Loans						—						6,340,440						546,309						6,886,749
Total fixed income investments						—						6,657,290						547,958						7,205,248
Equity securities						45,718						—						150,752						196,470
Partnership interests						—						—						271,447						271,447
Total investments, at fair value						45,718						6,657,290						970,157						7,673,165
Derivatives:
Foreign exchange contracts						—						1,881						—						1,881
Asset swaps-other						—						—						1,328						1,328
Total derivative assets, at fair value						—						1,881						1,328						3,209
Total assets, at fair value						$	45,718					$	6,659,171					$	971,485					$	7,676,374
Liabilities, at fair value
Derivatives:
Foreign exchange contracts						$	—					$	(1,864)					$	—					$	(1,864)
Asset swaps-other						—						—						(648)						(648)
Total derivative liabilities, at fair value						—						(1,864)						(648)						(2,512)
Loan obligations of CLOs						—						(6,678,091)						—						(6,678,091)
Total liabilities, at fair value						$	—					$	(6,679,955)					$	(648)					$	(6,680,603)

F-30

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the year ended December 31, 2019:

						Level III Assets
Level III Assets of the Company						Equity Securities						Fixed Income						Partnership Interests						Total
Balance, beginning of period						$	10,397					$	60,824					$	35,192					$	106,413
Deconsolidation of fund						—						10,021						—						10,021
Purchases(1)						3,000						27,795						—						30,795
Sales/settlements(2)						—						(31,387)						—						(31,387)
Realized and unrealized appreciation, net						1,307						1,930						—						3,237
Balance, end of period						$	14,704					$	69,183					$	35,192					$	119,079
Increase in net unrealized appreciation included in earnings related to financial assets still held at the reporting date						$	1,307					$	1,365					$	—					$	2,672

Level III Assets of Consolidated Funds						Equity Securities						Fixed Income						Partnership Interests						Derivatives, Net						Total
Balance, beginning of period						$	150,752					$	547,958					$	271,447					$	680					$	970,837
Deconsolidation of fund						—						(184,919)						—						—						(184,919)
Transfer in						—						56,914						—						—						56,914
Transfer out						—						(187,925)						—						—						(187,925)
Purchases(1)						1,363						432,760						13,000						—						447,123
Sales/settlements(2)						(40,857)						(333,220)						(22,000)						(431)						(396,508)
Amortized discounts/premiums						—						361						—						(129)						232
Realized and unrealized appreciation (depreciation), net						(25,270)						7,207						33,565						(4,226)						11,276
Balance, end of period						$	85,988					$	339,136					$	296,012					$	(4,106)					$	717,030
Increase (decrease) in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date						$	(24,690)					$	783					$	33,565					$	(4,400)					$	5,258

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.

(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

F-31

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following tables set forth a summary of changes in the fair value of the Level III measurements for the year ended December 31, 2018:

						Level III Assets
Level III Assets of the Company						Equity Securities						Fixed Income						Partnership Interests						Total
Balance, beginning of period						$	—					$	195,158					$	44,769					$	239,927
Deconsolidation of fund						—						78						—						78
Transfer in						250						—						—						250
Purchases(1)						1,000						92,797						—						93,797
Sales/settlements(2)						—						(222,934)						—						(222,934)
Realized and unrealized appreciation (depreciation), net						9,147						(4,275)						(9,577)						(4,705)
Balance, end of period						$	10,397					$	60,824					$	35,192					$	106,413
Increase (decrease) in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date						$	9,147					$	(3,923)					$	(9,577)					$	(4,353)

Level III Assets of Consolidated Funds						Equity Securities						Fixed Income						Partnership Interests						Derivatives, Net						Total
Balance, beginning of period						$	162,577					$	267,889					$	232,332					$	904					$	663,702
Consolidation of fund						506						46,829						—						—						47,335
Transfer in						—						86,995						—						—						86,995
Transfer out						—						(45,647)						—						—						(45,647)
Purchases(1)						203						492,142						25,000						—						517,345
Sales/settlements(2)						(21,141)						(283,620)						(5,000)						(186)						(309,947)
Amortized discounts/premiums						—						380						—						(140)						240
Realized and unrealized appreciation (depreciation), net						8,607						(17,010)						19,115						102						10,814
Balance, end of period						$	150,752					$	547,958					$	271,447					$	680					$	970,837
Increase (decrease) in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date						$	8,686					$	(13,157)					$	19,115					$	(57)					$	14,587

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.

(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

The Company recognizes transfers between the levels as of the beginning of the period. Transfers out of Level III were generally attributable to certain investments that experienced a more significant level of market activity during the period and thus were valued using observable inputs either from independent pricing services or multiple brokers. Transfers into Level III were generally attributable to certain investments that experienced a less significant level of market activity during the period and thus were only able to obtain one or fewer quotes from a broker or independent pricing service.

The following table summarizes the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of December 31, 2019:

F-32

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Level III Measurements of the Company						Fair Value						Valuation Technique(s)						Significant Unobservable Input(s)						Range
Assets
Equity securities						$	14,704					Transaction price(1)						N/A						N/A
Partnership interests						32,661						Transaction price(1)						N/A						N/A
						2,531						Other						N/A						N/A
Collateralized loan obligations						22,265						Broker quotes and/or 3rd party pricing services						N/A						N/A
Other fixed income						46,918						Other						N/A						N/A
Total						$	119,079

Level III Measurements of the Consolidated Funds						Fair Value						Valuation Technique(s)						Significant Unobservable Input(s)						Range						Weighted Average
Assets
Equity securities
						$	431					Enterprise value market multiple analysis						EBITDA multiple(2)						8.2x - 21.3x						16.1x
						40,745						Other						Net income multiple						36.2x						36.2x
																		Illiquidity discount						25.0%						25.0%
						44,812						Transaction price(1)						N/A						N/A						N/A
Partnership interest						296,012						Discounted cash flow						Discount rate						19.6%						19.6%
Fixed income securities
						271,919						Broker quotes and/or 3rd party pricing services						N/A						N/A						N/A
						67,217						Income approach						Yield						4.8% - 14.3%						9.7%
Total assets						$	721,136
Liabilities
Derivatives instruments						$	(4,106)					Broker quotes and/or 3rd party pricing services						N/A						N/A						N/A
Total liabilities						$	(4,106)

(1)Transaction price consists of securities recently purchased or restructured. The Company determined that there was no change to the valuation based on the underlying assumptions used at the closing of such transactions.

(2)“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

F-33

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table summarizes the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of December 31, 2018:

Level III Measurements of the Company						Fair Value						Valuation Technique(s)						Significant Unobservable Input(s)						Range
Assets
Equity securities						$	10,397					Transaction price(1)						N/A						N/A
Partnership interests						35,192						Discounted cash flow						Discount rate						8.0%
Collateralized loan obligations						20,824						Broker quotes and/or 3rd party pricing services						N/A						N/A
Other fixed income						40,000						Other						N/A						N/A
Total						$	106,413

Level III Measurements of the Consolidated Funds						Fair Value						Valuation Technique(s)						Significant Unobservable Input(s)						Range						Weighted Average
Assets
Equity securities
						$	23,871					Enterprise value market multiple analysis						EBITDA multiple(2)						7.2x - 22.9x						7.7x
						41,562						Other						Net income multiple						38.8x						38.8x
																		Illiquidity discount						25.0%						25.0%
						271,447						Discounted cash flow						Discount rate						20.8%						20.8%
						85,319						Transaction price(1)						N/A						N/A						N/A
Fixed income securities
						441,368						Broker quotes and/or 3rd party pricing services						N/A						N/A						N/A
						106,590						Income approach						Yield						1.0% - 14.8%						9.6%
Derivative instruments						1,328						Broker quotes and/or 3rd party pricing services						N/A						N/A						N/A
Total assets						$	971,485
Liabilities
Derivatives instruments						$	(648)					Broker quotes and/or 3rd party pricing services						N/A						N/A						N/A
Total liabilities						$	(648)

(1)Transaction price consists of securities purchased or restructured. The Company determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.

(2)“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

The Company has an insurance-related investment in a private fund managed by a third party that is valued using net asset value (“NAV”) per share. The terms and conditions of this fund do not allow for redemptions without certain events or approvals that are outside the Company's control. This investment had a fair value of $1.6 million and $0.8 million as of December 31, 2019 and December 31, 2018, respectively. The Company has no unfunded commitments for this investment.

F-34

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

6. DERIVATIVE FINANCIAL INSTRUMENTS

In the normal course of business, the Company and the Consolidated Funds are exposed to certain risks relating to their ongoing operations and use various types of derivative instruments primarily to mitigate against credit and foreign exchange risk. The derivative instruments are not designated as hedging instruments under the accounting standards for derivatives and hedging. The Company recognizes all of its derivative instruments at fair value as either assets or liabilities in the Consolidated Statements of Financial Condition within other assets or accounts payable, accrued expenses and other liabilities, respectively. These amounts may be offset to the extent that there is a legal right to offset and if elected by management.

By using derivatives, the Company and the Consolidated Funds are exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, the Company's counterparty credit risk is equal to the amount reported as a derivative asset in the Consolidated Statements of Financial Condition. The Company minimizes counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate.

To the extent the master netting arrangements and other criteria meet the applicable requirements, which includes determining the legal enforceability of the arrangements, the Company may choose to offset the derivative assets and liabilities in the same currency by specific derivative type, or in the event of default by the counterparty, offset derivative assets and liabilities with the same counterparty. The Company generally presents derivative and other financial instruments on a gross basis within the Consolidated Statements of Financial Condition with certain instruments subject to enforceable master netting arrangements that could allow for the derivative and other financial instruments to be offset. The Consolidated Funds present derivative and other financial instruments on a net basis. This election is determined at management's discretion on a fund by fund basis. The Company has retained the Consolidated Fund's election upon consolidation.

Qualitative Disclosures of Derivative Financial Instruments

Derivative instruments are marked-to-market daily based upon quotations from pricing services or by the Company and the change in value, if any, is recorded as an unrealized gain (loss) within net realized and unrealized gains (losses) on investments in the Consolidated Statements of Operations. Upon settlement of the instrument, the Company records the realized gain (loss) within net realized and unrealized gains (losses) on investments in the Consolidated Statements of Operations.

Significant derivative instruments utilized by the Company and the Consolidated Funds during the reporting periods presented include the following:

Forward Foreign Currency Contracts: The Company and the Consolidated Funds enter into foreign currency forward exchange contracts to hedge against foreign currency exchange rate risk on certain non-U.S. dollar denominated cash flows. When entering into a forward currency contract, the Company and the Consolidated Funds agree to receive and/or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed-upon future date. Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Consolidated Statements of Financial Condition. The Company and the Consolidated Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. In addition, the potential inability of the counterparties to meet the terms of their contracts poses a risk to the Company and the Consolidated Funds.

Asset Swap: The Consolidated Funds enter into asset swap contracts to hedge against foreign currency exchange rate risk on certain non-Euro denominated loans. Assets swap contracts provide the Consolidated Funds with the opportunity to purchase or sell an underlying asset that is not denominated in Euros at a pre-agreed exchange rate and receives Euro interest payments from the swap counter party in exchange for non-Euro interest payments pegged to the currency of the underlying loan and applicable interest rates. The swap contracts can be optionally cancelled at any time, normally due the disposal or redemption of the underlying asset, however in the absence of sale or redemption the swap contracts maturity matches that of the underlying asset. By entering into asset swap contracts to exchange interest payments and principal on equally valued loans denominated in a different currency than that of the underlying assets the Consolidated Funds can mitigate the risk of exposure to foreign currency fluctuations. Generally, the fair value of asset swap contracts are calculated using a model that utilizes the spread between the fair value of the underlying asset and the exercise value of the contract, as well as any other relevant inputs. Broker quotes may also be used to calculate the fair value of asset swaps, if available.

F-35

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Quantitative Disclosures of Derivative Financial Instruments

The following tables identify the fair value and notional amounts of derivative contracts by major product type on a gross basis for the Company and the Consolidated Funds as of December 31, 2019 and 2018. These amounts may be offset (to the extent that there is a legal right to offset) and presented on a net basis within other assets or accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition:

						As of December 31, 2019																																										As of December 31, 2018
						Assets																		Liabilities																		Assets																		Liabilities
The Company						Notional(1)						Fair Value						Notional(1)						Fair Value						Notional(1)						Fair Value						Notional(1)						Fair Value
Foreign exchange contracts						$	67,930					$	4,023					$	10,846					$	113					$	33,026					$	1,066					$	27,140					$	869
Total derivatives, at fair value(2)						$	67,930					$	4,023					$	10,846					$	113					$	33,026					$	1,066					$	27,140					$	869

						As of December 31, 2019																																										As of December 31, 2018
						Assets																		Liabilities																		Assets																		Liabilities
Consolidated Funds						Notional(1)						Fair Value						Notional(1)						Fair Value						Notional(1)						Fair Value						Notional(1)						Fair Value
Foreign exchange contracts						$	667					$	667					$	667					$	670					$	1,881					$	1,881					$	1,881					$	1,864
Asset swap - other						—						—						7,640						4,106						5,226						1,328						2,605						648
Total derivatives, at fair value(3)						$	667					$	667					$	8,307					$	4,776					$	7,107					$	3,209					$	4,486					$	2,512

(1)Represents the total contractual amount of derivative assets and liabilities outstanding.

(2)As of December 31, 2019 and December 31, 2018, the Company had the right to, but elected not to, offset $0.1 million and $0.9 million of its derivative liabilities, respectively.

(3)As of December 31, 2019 and December 31, 2018, the Consolidated Funds offset $0.1 million and $5.7 million of their derivative assets and liabilities, respectively.

The following tables present a summary of net realized gains (losses) and unrealized appreciation (depreciation) on the Company's and Consolidated Funds' derivative instruments, that are included within net realized and unrealized gains (losses) on investments in the Consolidated Statements of Operations, for the years ended December 31, 2019, 2018 and 2017:

						For the Year Ended December 31,
The Company						2019						2018						2017
Net realized gains (losses) on derivatives
Foreign currency forward contracts						2,284						(1,197)						(1,830)
Net realized gains (losses) on derivatives						$	2,284					$	(1,197)					$	(1,830)
Net change in unrealized appreciation (depreciation) on derivatives
Foreign currency forward contracts						3,713						2,338						(5,299)
Net change in unrealized appreciation (depreciation) on derivatives						$	3,713					$	2,338					$	(5,299)

						For the Year Ended December 31,
Consolidated Funds						2019						2018						2017
Net realized gains (losses) on derivatives of Consolidated Funds
Foreign currency forward contracts						8						96						(181)
Asset swap - other						(1,197)						(795)						903
Net realized gains (losses) on derivatives of Consolidated Funds						$	(1,189)					$	(699)					$	722
Net change in unrealized appreciation (depreciation) on derivatives of Consolidated Funds
Foreign currency forward contracts						(20)						15						(529)
Asset swap - other						(4,751)						(183)						2,338
Net change in unrealized appreciation (depreciation) on derivatives of Consolidated Funds						$	(4,771)					$	(168)					$	1,809

F-36

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

7. DEBT

The following table summarizes the Company’s and its subsidiaries’ debt obligations:

																					As of December 31, 2019																		As of December 31, 2018
			Debt Origination Date						Maturity						Original Borrowing Amount						Carrying Value						Interest Rate						Carrying Value						Interest Rate
Credit Facility(1)			Revolver						3/21/2024						N/A						$	70,000					3.06%						$	235,000					4.00%
Senior Notes(2)			10/8/2014						10/8/2024						$	250,000					246,609						4.21%						245,952						4.21%
Total debt obligations																					$	316,609											$	480,952

(1)The AOG entities are borrowers under the Credit Facility, which provides a $1.065 billion revolving line of credit. It has a variable interest rate based on LIBOR or a base rate plus an applicable margin with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating. On March 21, 2019, the Company amended the Credit Facility to, among other things, extend the maturity date from February 2022 to March 2024 and to reduce borrowing costs on the drawn and undrawn amounts. As of December 31, 2019, base rate loans bear interest calculated based on the base rate plus 0.25% and the LIBOR rate loans bear interest calculated based on LIBOR plus 1.25%. The unused commitment fee is 0.15% per annum. There is a base rate and LIBOR floor of zero.

(2)The Senior Notes were issued in October 2014 by Ares Finance Co. LLC, a subsidiary of the Company, at 98.268% of the face amount with interest paid semi-annually. The Company may redeem the Senior Notes prior to maturity, subject to the terms of the indenture.

As of December 31, 2019, the Company and its subsidiaries were in compliance with all covenants under the debt obligations.

The Company typically incurs and pays debt issuance costs when entering into a new debt obligation or when amending an existing debt agreement. Debt issuance costs related to the Company's Senior Notes are recorded as a reduction of the corresponding debt obligation, and debt issuance costs related to the Credit Facility are included in other assets in the Consolidated Statements of Financial Condition. All debt issuance costs are amortized over the remaining term of the related obligation.

The following table presents the activity of the Company's debt issuance costs:

			Credit Facility						Senior Notes						Term Loans						Repurchase Agreement Loan
Unamortized debt issuance costs as of December 31, 2017			$	6,543					$	1,571					$	1,171					$	—
Debt issuance costs incurred			—						—						98						259
Amortization of debt issuance costs			(1,571)						(237)						(56)						(7)
Debt extinguishment expense			—						—						(1,213)						(252)
Unamortized debt issuance costs as of December 31, 2018			4,972						1,334						—						—
Debt issuance costs incurred			1,594						—						—						—
Amortization of debt issuance costs			(1,311)						(232)						—						—
Unamortized debt issuance costs as of December 31, 2019			$	5,255					$	1,102					$	—					$	—

Loan Obligations of the Consolidated CLOs

Loan obligations of the Consolidated Funds that are CLOs (“Consolidated CLOs”) represent amounts due to holders of debt securities issued by the Consolidated CLOs. The Company measures the loan obligations of the Consolidated CLOs using the fair value of the financial assets of its Consolidated CLOs.

As of December 31, 2019 and December 31, 2018, the following loan obligations were outstanding and classified as liabilities of the Consolidated CLOs:

F-37

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			As of December 31, 2019																														As of December 31, 2018
			Loan Obligations						Fair Value of Loan Obligations						Weighted Average Remaining Maturity In Years						Loan Obligations						Fair Value of Loan Obligations						Weighted Average Remaining Maturity In Years
Senior secured notes(1)			$	7,738,337					$	7,700,038					10.97						$	6,642,616					$	6,391,643					10.94
Subordinated notes(2)			449,877						273,710						11.02						455,333						286,448						11.21
Total loan obligations of Consolidated CLOs			$	8,188,214					$	7,973,748											$	7,097,949					$	6,678,091

(1)Original borrowings under the senior secured notes totaled $7.7 billion, with various maturity dates ranging from July 2028 to October 2032. The weighted average interest rate as of December 31, 2019 was 2.91%.

(2)Original borrowings under the subordinated notes totaled $449.9 million, with various maturity dates ranging from July 2028 to October 2032. The notes do not have contractual interest rates, instead holders of the notes receive distributions from the excess cash flows generated by each Consolidated CLO.

Loan obligations of the Consolidated CLOs are collateralized by the assets held by the Consolidated CLOs, consisting of cash and cash equivalents, corporate loans, corporate bonds and other securities. The assets of one Consolidated CLO may not be used to satisfy the liabilities of another Consolidated CLO. Loan obligations of the Consolidated CLOs include floating rate notes, deferrable floating rate notes, revolving lines of credit and subordinated notes. Amounts borrowed under the notes are repaid based on available cash flows subject to priority of payments under each Consolidated CLO’s governing documents. Based on the terms of these facilities, the creditors of the facilities have no recourse to the Company.

Credit Facilities of the Consolidated Funds

Certain Consolidated Funds maintain credit facilities to fund investments between capital drawdowns. These facilities generally are collateralized by the unfunded capital commitments of the Consolidated Funds’ limited partners, bear an annual commitment fee based on unfunded commitments and contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments and portfolio asset dispositions. The creditors of these facilities have no recourse to the Company and only have recourse to a subsidiary of the Company to the extent the debt is guaranteed by such subsidiary. Credit facilities of the Consolidated Funds are reflected at cost in the Consolidated Statements of Financial Condition. As of December 31, 2019 and December 31, 2018, the Consolidated Funds were in compliance with all covenants under such credit facilities.

The Consolidated Funds had the following revolving bank credit facilities and term loan outstanding as of December 31, 2019 and December 31, 2018:

																		As of December 31, 2019																		As of December 31, 2018
Consolidated Funds' Debt Facilities						Maturity Date						Total Capacity						Outstanding Loan(1)						Effective Rate						Outstanding Loan(1)						Effective Rate
Credit Facilities:
						1/1/2023						$	18,000					$	17,550					3.44%						$	14,953					3.98%
						12/29/2019(2)						—						—						—						43,624						1.55			(3)
						3/7/2020						71,500						71,500						3.14						71,500						3.47
						6/30/2021						196,315						—						1.00			(3)			38,844						1.00			(3)
						7/15/2028						75,000						17,000						4.75						39,000						4.75
Revolving Term Loan						1/31/2022						1,900						1,194						7.70						1,363						8.07
Total borrowings of Consolidated Funds																		$	107,244											$	209,284

(1)The fair values of the borrowings approximate the carrying value as the interest rate on the borrowings is a floating rate.

(2)On August 27, 2019, the facility was terminated at the Consolidated Fund's discretion.

(3)The effective rate is based on the three month EURIBOR or zero, whichever is higher, plus a spread of 1.00% or 1.55%.

F-38

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

8. OTHER ASSETS

The components of other assets as of December 31, 2019 and 2018 were as follows:

			As of December 31,
			2019						2018
Other assets of the Company:
Accounts and interest receivable			$	5,749					$	11,624
Incentive fees receivable			40,650						49,697
Fixed assets, net			62,883						63,380
Deferred tax assets, net			46,364						42,137
Goodwill			143,855						143,786
Intangibles			7,975						31,434
Other assets			33,817						35,593
Total other assets of the Company			$	341,293					$	377,651
Other assets of Consolidated Funds:
Dividends and interest receivable			26,030						19,330
Income tax and other receivables			4,051						4,456
Total other assets of Consolidated Funds			$	30,081					$	23,786

Fixed Assets, Net

Fixed assets included the following as of December 31, 2019 and 2018:

			As of December 31,
			2019						2018
Furniture			$	9,484					$	9,536
Office and computer equipment			19,963						19,722
Internal-use software			36,966						29,005
Leasehold improvements			56,619						53,494
Fixed assets, at cost			123,032						111,757
Less: accumulated depreciation			(60,149)						(48,377)
Fixed assets, net			$	62,883					$	63,380

For the years ended December 31, 2019, 2018 and 2017, depreciation expense was $17.1 million, $16.1 million and $12.6 million, respectively, and is included in general, administrative and other expense in the Consolidated Statements of Operations. During 2019, the Company disposed of approximately $5.2 million of fixed assets that were fully depreciated.

F-39

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

9. COMMITMENTS AND CONTINGENCIES

Indemnification Arrangements

Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain indemnities for affiliates of the Company, persons acting on behalf of the Company or such affiliates and third parties. The terms of the indemnities vary from contract to contract and the Company’s maximum exposure under these arrangements cannot be determined and has not been recorded in the Consolidated Statements of Financial Condition. As of December 31, 2019, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

Commitments

As of December 31, 2019 and December 31, 2018, the Company had aggregate unfunded commitments to invest in funds it manages or to support certain strategic initiatives of $387.4 million and $267.6 million, respectively.

Guarantees

The Company guaranteed loans provided to certain professionals to support these professionals' investments in affiliated co-investment entities, permitting these professionals to invest alongside the Company and its investors in the funds managed by the Company. The total committed and outstanding loan balances were not material as of December 31, 2019 and 2018.

Performance Income

Performance income is affected by changes in the fair values of the underlying investments in the funds that we advise. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, public equity market volatility, industry trading multiples and interest rates. Generally, if at the termination of a fund (and increasingly at interim points in the life of a fund), the fund has not achieved investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company will be obligated to repay carried interest that was received by the Company in excess of the amounts to which the Company is entitled. This contingent obligation is normally reduced by income taxes paid by the Company related to its carried interest.

Senior professionals of the Company who have received carried interest distributions are responsible for funding their proportionate share of any contingent repayment obligations. However, the governing agreements of certain of the Company's funds provide that if a current or former professional does not fund his or her respective share for such fund, then the Company may have to fund additional amounts beyond what was received in carried interest, although the Company will generally retain the right to pursue any remedies under such governing agreements against those carried interest recipients who fail to fund their obligations.

Additionally, at the end of the life of the funds there could be a payment due to a fund by the Company if the Company has recognized more performance income than was ultimately earned. The general partner obligation amount, if any, will depend on final realized values of investments at the end of the life of the fund.

At December 31, 2019 and 2018, if the Company assumed all existing investments were worthless, the amount of performance income subject to potential repayment, net of tax distributions, which may differ from the recognition of revenue, would have been approximately $233.4 million and $469.0 million, respectively, of which approximately $175.1 million and $364.4 million, respectively, is reimbursable to the Company by certain professionals who are the recipients of such performance income. Management believes the possibility of all of the investments becoming worthless is remote. As of December 31, 2019, if the funds were liquidated at their fair values, there would be no contingent repayment obligation or liability. As of December 31, 2018, if the funds were liquidated at their fair values, there would have been $0.4 million of repayment obligations, which the Company recorded as a contingent repayment liability that is presented within accrued carried interest within investments and performance related compensation payable on the Company's Consolidated Statements of Financial Condition.

F-40

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Litigation

From time to time, the Company is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, the Company does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial condition or cash flows.

Leases

The Company leases office space and certain office equipment. The Company's leases have remaining lease terms of one to 11 years. The tables below present certain supplemental quantitative disclosures regarding the Company's leases as of and for the years ended December 31, 2019, 2018 and 2017:

						Classification						As of December 31, 2019
Operating lease assets						Right-of-use operating lease assets						$	143,406
Finance lease assets						Other assets(1)						1,787
Total lease assets												$	145,193
Operating lease liabilities						Operating lease liabilities						$	168,817
Finance lease obligations						Accounts payable, accrued expenses and other liabilities						1,651
Total lease liabilities												$	170,468

(1) Finance lease assets are recorded net of accumulated amortization of $0.6 million as of December 31, 2019.

												For the Year Ended December 31,
						Classification						2019						2018						2017
Operating lease expense						General, administrative and other expenses						$	28,814					$	30,497					$	26,122
Finance lease expense:
Amortization of finance lease assets						General, administrative and other expenses						304						260						—
Interest on finance lease liabilities						Interest expense						39						39						—
Total lease expense												$	29,157					$	30,796					$	26,122

Maturity of lease liabilities						Operating Leases						Finance Leases
2020						$	30,314					$	504
2021						29,453						504
2022						30,618						471
2023						27,062						144
2024						23,913						122
After 2024						50,600						—
Total future payments						191,960						1,745
Less: interest						23,143						94
Total lease liabilities						$	168,817					$	1,651

As of December 31, 2019, the Company has entered into an operating lease for office space of $10.5 million that is expected to commence in 2020 with a lease term of eight years.

F-41

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Lease term and discount rate						As of December 31, 2019
Weighted-average remaining lease terms (in years):
Operating leases						6.5
Finance leases						3.3
Weighted-average discount rate:
Operating leases						4.00		%
Finance leases						3.39		%

Other information						Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases						$	31,509
Operating cash flows from finance leases						58
Financing cash flows from finance leases						311
Leased assets obtained in exchange for new finance lease liabilities						778
Leased assets obtained in exchange for new operating lease liabilities						49,833

10. RELATED PARTY TRANSACTIONS

Substantially all of the Company’s revenue is earned from its affiliates, including management fees, carried interest allocation, incentive fees, principal investment income and administrative expense reimbursements. The related accounts receivable are included within due from affiliates within the Consolidated Statements of Financial Condition, except that accrued carried interest allocations and incentive fees receivable, which are predominantly due from affiliated funds, are presented separately within investments and other assets, respectively, within the Consolidated Statements of Financial Condition.

The Company has investment management agreements with Ares Funds that it manages. In accordance with these agreements, these Ares Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Ares Funds.

The Company also has entered into agreements to be reimbursed for its expenses incurred for providing administrative services to certain related parties, including ARCC, ACRE, ARDC, Ivy Hill Asset Management, L.P., ACF FinCo I L.P. and CION Ares Diversified Credit Fund.

Employees and other related parties may be permitted to participate in co-investment vehicles that generally invest in Ares funds alongside fund investors. Participation is limited by law to individuals who qualify under applicable securities laws. These co-investment vehicles generally do not require these individuals to pay management or performance income.

Performance income the Company earns from the funds can be distributed to professionals or their related entities on a current basis, subject to repayment by the subsidiary of the Company that acts as general partner of the relevant fund in the event that certain specified return thresholds are not ultimately achieved. The professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several, and not joint, and are limited to distributions received by the relevant recipient.

F-42

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The Company considers its professionals and non-consolidated funds to be affiliates. Amounts due from and to affiliates were composed of the following:

			As of December 31,
			2019						2018
Due from affiliates:
Management fees receivable from non-consolidated funds			$	203,554					$	151,455
Payments made on behalf of and amounts due from non-consolidated funds and employees			64,545						47,922
Due from affiliates—Company			$	268,099					$	199,377
Amounts due from portfolio companies and non-consolidated funds			$	6,192					$	17,609
Due from affiliates—Consolidated Funds			$	6,192					$	17,609
Due to affiliates:
Management fee rebate payable to non-consolidated funds			$	2,420					$	2,105
Management fees received in advance			3,012						5,491
Tax receivable agreement liability			26,542						24,927
Undistributed carried interest and incentive fees			28,086						31,162
Payments made by non-consolidated funds on behalf of and payable by the Company			11,385						18,726
Due to affiliates—Company			$	71,445					$	82,411

Due from Ares Funds and Portfolio Companies

In the normal course of business, the Company pays certain expenses on behalf of Consolidated Funds and non-consolidated funds for which it is reimbursed. Amounts advanced on behalf of Consolidated Funds are eliminated in consolidation. Certain expenses initially paid by the Company, primarily professional services, travel and other costs associated with particular portfolio company holdings, are subject to reimbursement by the portfolio companies. The Company reimbursed ARCC approximately $0.6 million for certain recurring rent and utilities incurred by ARCC during the first quarter of 2018. In addition, in the second quarter ended June 30, 2018, the Company reimbursed ARCC approximately $2.2 million, $3.0 million, $3.2 million and $2.9 million of rent and utilities for the years ended 2017, 2016, 2015 and 2014, respectively, for an aggregate reimbursement to ARCC of $11.8 million. Beginning April 1, 2018, the Company directly incurs these expenses.

ARCC Investment Advisory and Management Agreement

In connection with ARCC's board approval of the modification of the asset coverage requirement applicable to senior securities from 200% to 150% effective on June 21, 2019, the investment advisory and management agreement was amended effective June 6, 2019 to reduce the annual base management fee paid to the Company from 1.5% to 1.0% on all assets financed using leverage over 1.0 times debt to equity.

Transaction Support Expense

On January 3, 2017, ARCC and American Capital, Ltd. (“ACAS”) consummated a merger transaction valued at approximately $4.2 billion (the “ARCC-ACAS Transaction”). To support the ARCC-ACAS Transaction, the Company, through its subsidiary Ares Capital Management LLC, which serves as the investment adviser to ARCC, paid $275.2 million to ACAS shareholders in accordance with the terms and conditions set forth in the merger agreement.

ARCC Fee Waiver

In conjunction with ARCC's acquisition of ACAS, the Company agreed to waive up to $10 million per quarter of ARCC's Part I Fees for ten calendar quarters, which began with the second quarter of 2017 and ended with the third quarter of 2019. ARCC Part I Fees are reported net of the fee waiver. For the years ended December 31, 2019, 2018 and 2017, the Company waived $30.0 million, $40.0 million and $30.0 million, respectively.

F-43

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

11. INCOME TAXES

Effective March 1, 2018, the Company elected to be treated as a corporation for U.S. federal and state income tax purposes. Upon the effectiveness of this election, all earnings allocated to the Company are subject to U.S. federal, state and local corporate income taxes and certain of its foreign subsidiaries are subject to foreign income taxes (for which a foreign tax credit can generally offset U.S. corporate taxes imposed on the same income, subject to applicable limitations). Prior to March 1, 2018, a substantial portion of the Company's share of carried interest and investment income flowed through to investors without being subject to corporate level income taxes. Consequently, the Company did not reflect a provision for income taxes on such income except those for foreign, state and local income taxes incurred at the entity level. Beginning March 1, 2018, the Company's share of unrealized gains and income items became subject to U.S. corporate tax.

The Company’s effective income tax rate is dependent on many factors, including the estimated nature and amounts of income and expenses allocated to the non-controlling interests without being subject to federal, state and local income taxes at the corporate level. Additionally, the Company’s effective tax rate is influenced by the amount of income tax provision recorded for any affiliated funds and co-investment entities that are consolidated in the Company's consolidated financial statements.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state, local and foreign tax authorities. With limited exceptions, the Company is no longer subject to income tax audits by taxing authorities for any years prior to 2015. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s consolidated financial statements.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law creating significant and material updates to the Internal Revenue Code. The most significant change is a decrease of the corporate tax rate from 35% to 21%. The reduction in the corporate tax rate is effective for tax years beginning on or after January 1, 2018.

F-44

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The provision for income taxes attributable to the Company and the Consolidated Funds, consisted of the following for the years ended December 31, 2019, 2018 and 2017. Supplemental information on an unaudited pro forma basis assumes that the Company's election to be taxed as a corporation for U.S. federal income tax purposes was effective for the year ended December 31, 2017.

						For the Year Ended December 31,
Provision for Income Taxes						2019						2018						2017						Unaudited 2017 Pro Forma
The Company
Current:
U.S. federal income tax expense (benefit)						$	32,012					$	16,859					$	(21,559)					$	2,634
State and local income tax expense						6,940						4,306						454						2,963
Foreign income tax expense						6,103						6,607						3,741						3,741
						45,055						27,772						(17,364)						9,338
Deferred:
U.S. federal income tax expense (benefit)						8,820						10,572						(3,466)						18,297
State and local income tax expense (benefit)						1,001						(4,789)						(2,414)						(721)
Foreign income tax benefit						(1,970)						(1,484)						(1,695)						(1,695)
						7,851						4,299						(7,575)						15,881
Total:
U.S. federal income tax expense (benefit)						40,832						27,431						(25,025)						20,931
State and local income tax expense (benefit)						7,941						(483)						(1,960)						2,242
Foreign income tax expense						4,133						5,123						2,046						2,046
Income tax expense (benefit)						52,906						32,071						(24,939)						25,219
Consolidated Funds
Current:
Foreign income tax expense (benefit)						(530)						131						1,887						1,887
Income tax expense (benefit)						(530)						131						1,887						1,887
Total Provision for Income Taxes
Total current income tax expense (benefit)						44,525						27,903						(15,477)						11,225
Total deferred income tax expense (benefit)						7,851						4,299						(7,575)						15,881
Total income tax expense (benefit)						$	52,376					$	32,202					$	(23,052)					$	27,106

F-45

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The effective income tax rate differed from the federal statutory rate for the following reasons for the years ended December 31, 2019, 2018 and 2017. Supplemental information on an unaudited pro forma basis assumes that the Company's election to be taxed as a corporation for U.S. federal income tax purposes was effective for the year ended December 31, 2017.

						For the Year Ended December 31,
						2019						2018						2017						Unaudited 2017 Pro Forma
Income tax expense at federal statutory rate						21.0		%				21.0		%				35.0		%				35.0		%
Income passed through to non-controlling interests						(10.4)						(9.9)						(51.1)						(23.2)
State and local taxes, net of federal benefit						1.9						2.1						(1.4)						0.4
Foreign taxes						0.3						0.3						0.3						0.3
Permanent items						(0.4)						(0.8)						0.3						0.3
Tax Cuts and Jobs Act						—						(0.4)						(0.4)						3.3
Corporate conversion expense						—						5.4						—						—
Other, net						(0.1)						(0.3)						0.4						0.4
Valuation allowance						—						0.1						1.3						1.3
Total effective rate						12.3		%				17.5		%				(15.6)		%				17.8		%

Deferred Taxes

The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows as of December 31, 2019 and 2018. Deferred tax assets, net are included within other assets on the Consolidated Statements of Financial Condition.

						As of December 31,
Deferred Tax Assets and Liabilities of the Company						2019						2018
Deferred tax assets
Amortizable tax basis for AOG unit exchanges						$	25,994					$	25,928
Investment in partnerships						12,841						11,527
Net operating losses						367						865
Other, net						7,216						5,416
Total gross deferred tax assets						46,418						43,736
Valuation allowance						(54)						(22)
Total deferred tax assets, net						46,364						43,714
Deferred tax liabilities
Investment in partnerships						—						(1,577)
Total deferred tax liabilities						—						(1,577)
Net deferred tax assets						$	46,364					$	42,137

						As of December 31,
Deferred Tax Assets and Liabilities of the Consolidated Funds						2019						2018
Deferred tax assets
Net operating loss						$	5,391					$	5,525
Other, net						2,173						2,173
Total gross deferred tax assets						7,564						7,698
Valuation allowance						(7,564)						(7,698)
Total deferred tax assets, net						$	—					$	—

F-46

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

In assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred taxes are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances are provided to reduce the amounts of deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts.

The Company’s income tax provision includes corporate income taxes and other entity level income taxes, as well as income taxes incurred by certain affiliated funds that are consolidated in these financial statements. In connection with its election to be taxed as a corporation effective March 1, 2018, the Company recorded a significant one-time deferred tax liability arising from the embedded net unrealized gains of both carried interest and the investment portfolio that were not previously subject to corporate taxes. Cash taxes will be paid only on gains to the extent realized.

The valuation allowance for deferred tax assets decreased by $0.1 million in 2019 due to the utilization of certain operating losses in foreign jurisdictions. The deferred tax assets related to these operating losses do not meet the more likely than not threshold and continue to have a valuation allowance recorded for the net balance. The valuation allowance for deferred tax assets increased by $0.8 million in 2018 due to additional net valuation allowances recorded related to operating losses that generated deductible temporary differences in various jurisdictions in which the Company operates, offset by the reduction of valuation allowances recorded in prior years for which the Company is able to conclude that as of December 31, 2018 the related deferred tax asset is more likely than not to be realized.

At December 31, 2019, the Company had $39.1 million of foreign net operating loss (“NOL”) carryforwards attributable to its Consolidated Funds available to reduce future foreign income taxes for which a full valuation allowance has been provided. The majority of the foreign NOLs have no expiry.

As of, and for the three years ended December 31, 2019, 2018 and 2017, the Company had no significant uncertain tax positions.

12. EARNINGS PER SHARE

Basic earnings per share of Class A common stock is computed by using the two-class method. Diluted earnings per share of Class A common stock is computed using the more dilutive method of either the two-class method or the treasury stock method.

The treasury stock method is used to determine potentially dilutive securities resulting from options and unvested restricted units granted under the Equity Incentive Plan. The two-class method is an earnings allocation method under which earnings per share is calculated for shares of Class A common stock and participating securities considering both dividends declared (or accumulated) and participation rights in undistributed earnings as if all such earnings had been distributed during the period. Because the holders of unvested restricted units have the right to participate in dividends when declared, the unvested restricted units are considered participating securities to the extent they are expected to vest.

For the year ended December 31, 2019, the treasury stock method was the more dilutive method. For the years ended December 31, 2018 and December 31, 2017, the two-class method was the more dilutive method. No participating securities had rights to undistributed earnings during any period presented.

The computation of diluted earnings per share for the years ended December 31, 2019, 2018 and 2017 excludes the following options, restricted units and AOG Units, as their effect would have been anti-dilutive:

			For the Year Ended December 31,
			2019						2018						2017
Options			—						19,194,615						21,001,916
Restricted units			82						15,970,004						14,105,481
AOG Units			116,802,160						121,296,583						130,244,013

F-47

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table presents the computation of basic and diluted earnings per common share:

			For the Year Ended December 31,
			2019						2018						2017
Net income attributable to Ares Management Corporation Class A common stockholders			$	127,184					$	35,320					$	54,478
Distributions on unvested restricted units			(7,670)						(6,948)						(3,588)
Net income available to Class A common stockholders			$	119,514					$	28,372					$	50,890
Basic weighted-average shares of Class A common stock			107,914,953						96,023,147						81,838,007
Basic earnings per share of Class A common stock			$	1.11					$	0.30					$	0.62
Net income attributable to Ares Management Corporation Class A common stockholders			$	127,184					$	35,320					$	54,478
Distributions on unvested restricted units			—						(6,948)						(3,588)
Net income available to Class A common stockholders			$	127,184					$	28,372					$	50,890
Effect of dilutive shares:
Restricted units			7,838,200						—						—
Options			4,124,276						—						—
Diluted weighted-average shares of Class A common stock			119,877,429						96,023,147						81,838,007
Diluted earnings per share of Class A common stock			$	1.06					$	0.30					$	0.62
Dividend declared and paid per Class A common stock			$	1.28					$	1.33					$	1.13

13. EQUITY COMPENSATION

Equity Incentive Plan

In exchange for services provide by certain employees, the Company grants equity-based compensation under the Equity Incentive Plan. Based on a formula as defined in the Equity Incentive Plan, the total number of shares available to be issued under the Equity Incentive Plan resets and may increase on January 1 each year. Accordingly, on January 1, 2019, the total number of shares available for issuance under the Equity Incentive Plan reset to 32,792,005 shares, and as of December 31, 2019, 28,930,797 shares remain available for issuance.

Generally, unvested phantom shares, restricted units and options are forfeited upon termination of employment in accordance with the Equity Incentive Plan. The Company recognizes forfeitures as a reversal of previously recognized compensation expense in the period the forfeiture occurs.

Equity-based compensation expense, net of forfeitures, recorded by the Company is included in the following table:

			For the Year Ended December 31,
			2019						2018						2017
Restricted units			$	88,979					$	74,441					$	54,339
Restricted units with a market condition			3,613						1,524						—
Options			4,362						12,449						13,848
Phantom shares			737						1,310						1,524
Equity-based compensation expense			$	97,691					$	89,724					$	69,711

F-48

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Restricted Units

During July 2018, the Company granted 2,000,000 restricted units to an executive of which 1,333,334 restricted units are subject to vesting based on the future price of shares of the Company's Class A common stock (described in greater detail below under the heading “Restricted Unit Awards with a Market Condition”) and 666,666 restricted units that vest subject to the executive's continued service on terms similar to those described below.

Each restricted unit represents an unfunded, unsecured right of the holder to receive a share of the Company's Class A common stock on a specific date. The restricted units generally vest and are settled in shares of Class A common stock either (i) at a rate of one-third per year, beginning on the third anniversary of the grant date, (ii) in their entirety on the fifth anniversary of the grant date, (iii) at a rate of one quarter per year, beginning on either the first or second anniversary of the grant date or the holder's employment commencement date, or (iv) at a rate of one third per year, beginning on the first anniversary of the grant date in each case generally subject to the holder’s continued employment as of the applicable vesting date (subject to accelerated vesting upon certain qualifying terminations of employment). Compensation expense associated with restricted units is recognized on a straight-line basis over the requisite service period of the award.

The holders of restricted units, other than the market condition awards described below, generally have the right to receive as current compensation an amount in cash equal to (i) the amount of any dividend paid with respect to a share of Class A common stock multiplied by (ii) the number of restricted units held at the time such dividends are declared (“Dividend Equivalent”). During the year ended December 31, 2019, the Company declared a dividend each quarter of $0.32 per share to Class A common stockholders at the close of business on March 15, 2019, June 14, 2019, September 16, 2019, and December 17, 2019, respectively. For the year ended December 31, 2019, Dividend Equivalents were made to the holders of restricted units in the aggregate amount of $21.5 million, which are presented as a component of dividends within the Consolidated Statements of Changes in Equity. When units are forfeited, the cumulative amount of dividend equivalents previously paid is reclassified to compensation and benefits expense in the Consolidated Statements of Operations.

The following table presents unvested restricted units' activity during the year ended December 31, 2019:

			Restricted Units						Weighted Average Grant Date Fair Value Per Unit
Balance - January 1, 2019			16,255,475						$	19.21
Granted			4,499,563						21.42
Vested			(3,691,234)						17.96
Forfeited			(253,331)						19.68
Balance - December 31, 2019			16,810,473						$	20.07

The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $203.0 million as of December 31, 2019 and is expected to be recognized over the remaining weighted average period of 2.81 years.

Restricted Unit Awards with a Market Condition

In July 2018, the Company granted certain restricted units with a vesting condition based upon the volume-weighted, average closing price of shares of the Company’s Class A common stock meeting or exceeding a stated price for 30 consecutive calendar days on or prior to January 1, 2028, referred to as a market condition. 666,667 restricted units with a market condition of $35.00 per share (“Tranche I”) and 666,667 restricted units with a market condition of $45.00 per share (“Tranche II”) were granted. Vesting is also generally subject to continued employment at the time such market condition is achieved. Under the terms of the awards, if the price target is not achieved by the close of business on January 1, 2028, the unvested market condition awards will be automatically canceled and forfeited. Restricted units subject to a market condition are not eligible to receive a Dividend Equivalent.

The grant date fair values for Tranche I and Tranche II awards were $10.92 and $7.68 per share, respectively, based on

a probability distributed Monte-Carlo simulation. Due to the existence of the market condition, the vesting period for the awards is not explicit, and as such, compensation expense is recognized on a straight-line basis over the median vesting period

F-49

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

derived from the positive iterations of the Monte Carlo simulations where the market condition was achieved. The median vesting period is 3.0 years and 4.3 years for Tranche I and Tranche II, respectively.

Below is a summary of the significant assumptions used to estimate the grant date fair value of the market condition awards. There were no new market condition awards granted during the year ended December 31, 2019.

						2018
Closing price of the Company's common shares as of valuation date						$	20.95
Risk-free interest rate						2.95		%
Volatility						30.0		%
Dividend yield						5.0		%
Cost of equity						10.0		%

The following table presents the unvested market condition awards' activity during the year ended December 31, 2019:

			Market Condition Awards Units						Weighted Average Grant Date Fair Value Per Unit
Balance - January 1, 2019			1,333,334						$	9.30
Granted			—						—
Vested			—						—
Forfeited			—						—
Balance - December 31, 2019			1,333,334						$	9.30

The total compensation expense expected to be recognized in all future periods associated with the market condition awards is approximately $7.3 million as of December 31, 2019 and is expected to be recognized over the remaining weighted average period of 2.2 years.

Options

Each option entitles the holders to purchase from the Company, upon exercise thereof, one share of Class A common stock at the stated exercise price. The term of the options is generally ten years, beginning on the grant date. The options generally vest at a rate of one-third per year, beginning on the third anniversary of the grant date. Compensation expense associated with these options is being recognized on a straight-line basis over the requisite service period of the respective award. Net cash proceeds from exercises of stock options were $90.5 million for the year ended December 31, 2019. The Company realized tax benefits of approximately $4.3 million from those exercises.

A summary of options activity during the year ended December 31, 2019 is presented below:

			Options						Weighted Average Exercise Price						Weighted Average Remaining Life (in years)						Aggregate Intrinsic Value
Balance - January 1, 2019			18,741,504						$	18.99					4.88						$	—
Granted			—						—						—						—
Exercised			(4,905,998)						19.00						—						—
Expired			(366,366)						19.00						—						—
Forfeited			(42,270)						19.00						—						—
Balance - December 31, 2019			13,426,870						$	18.99					4.34						$	224,260
Exercisable at December 31, 2019			13,317,053						$	18.99					4.33						$	222,372

Aggregate intrinsic value represents the value of the Company’s closing share price of Class A common stock on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options exercisable or expected to vest.

F-50

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The fair value of an award is affected by the Company’s share price of Class A common stock on the date of grant as well as other assumptions including the estimated volatility of the Company’s share price of Class A common stock over the term of the awards and the estimated period of time that management expects employees to hold their unit options. The estimated period of time that management expects employees to hold their options was estimated as the midpoint between the vesting date and maturity date.

The fair value of each option granted was measured on the date of the grant using the Black Scholes option pricing model. No new options have been granted since 2014.

Phantom Shares

Each phantom share represents an unfunded, unsecured right of the holder to receive an amount in cash per phantom share equal to the average closing price of a share of Class A common stock for the 15 trading days immediately prior to, and the 15 trading days immediately following, the vesting date. The phantom shares vested in equal installments over five years at the anniversaries of the IPO date, with the final payment made in May 2019. The phantom shares are accounted for as liability awards with compensation expense being recognized on a straight-line basis based on the number of unvested shares. Forfeitures will reduce the expenses in the period in which the forfeiture occurs. During the year ended December 31, 2019 the Company paid $1.5 million to settle vested phantom shares.

A summary of unvested phantom shares' activity during the year ended December 31, 2019 is presented below:

						Phantom Shares						Weighted Average Grant Date Fair Value Per Share
Balance - January 1, 2019						66,287						$	19.00
Vested						(61,502)						19.00
Forfeited						(4,785)						19.00
Balance - December 31, 2019						—						$	—

14. EQUITY

Common Stock

The Company completed its conversion from a Delaware limited partnership to a Delaware corporation (the “Conversion”) effective on November 26, 2018. Prior to the Conversion, common shares represented limited partnership interests in the Company. The holders of common shares were entitled to participate pro rata in distributions from the Company and to exercise the rights or privileges that were available to common shareholders under the Company’s limited partnership agreement. The common shareholders had limited voting rights and had no right to remove the Company’s general partner, Ares Management GP LLC, or, except in limited circumstances, to elect the directors of the general partner.

Since the Conversion on November 26, 2018, the Company's common stock consists of Class A, Class B and Class C common stock. As a result of the Conversion on November 26, 2018, (i) each outstanding common share representing limited partner interests in the Company before the Conversion converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.01 par value per share, of the Company, (ii) the general partner share of the Company before the Conversion converted into 1,000 issued and outstanding, fully paid and nonassessable shares of Class B common stock, $0.01 par value per share, of the Company and (iii) the special voting share of the Company before the Conversion converted into one issued and outstanding, fully paid and nonassessable share, of Class C common stock, $0.01 par value per share, of the Company.

The Class B common stock and Class C common stock are non-economic and holders are not entitled to (i) dividends from the Company or (ii) receive any assets of the Company in the event of any dissolution, liquidation or winding up of the Company. Ares Management GP LLC is the sole holder of the Class B common stock and Ares Voting LLC is the sole holder of the Class C common stock.

In February 2019, the Company's board of directors authorized the repurchase of up to $150 million of shares of Class

F-51

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

A common stock. Under this stock repurchase program, shares may be repurchased from time to time in open market purchases,

privately negotiated transactions or otherwise, including in reliance on Rule 10b5-1 of the Securities Act. In February 2020, our board of directors approved the renewal of the program and reset the repurchase amount back to $150 million. The program is scheduled to expire in March 2021. Repurchases under the program, if any, will depend on the prevailing market conditions and other factors. During the year ended December 31, 2019, the Company repurchased 0.4 million shares at a total cost of $10.4 million. As of December 31, 2019, the amount remaining available for repurchases under the program was $139.6 million.

On September 20, 2019, the Company sold 7,000,000 shares of its Class A common stock in an underwritten public offering (the “Offering”) from which it received $207.3 million in gross proceeds. The Company incurred approximately $0.6 million of expenses in connection with the Offering. The expenses have been recorded as a reduction in the proceeds received and are presented on a net basis together with contributions in additional paid-in-capital within the Consolidated Statements of Changes in Equity.

The following table presents the changes in each class of common stock for the year ended December 31, 2019:

			Class A Common Stock						Class B Common Stock						Class C Common Stock						Total
Balance - January 1, 2019			101,594,095						1,000						1						101,595,096
Issuance of stock			7,000,000						—						—						7,000,000
Exchanges of AOG Units			163,509						—						—						163,509
Stock option exercises			4,785,131						—						—						4,785,131
Repurchases of stock			(400,000)						—						—						(400,000)
Vesting of restricted stock awards, net of shares withheld for tax			2,099,293						—						—						2,099,293
Balance Outstanding - December 31, 2019			115,242,028						1,000						1						115,243,029

The following table presents each partner's AOG Units and corresponding ownership interest in each of the Ares Operating Group entities as of December 31, 2019 and December 31, 2018, as well as its daily average ownership of AOG Units in each of the Ares Operating Group entities for the years ended December 31, 2019, 2018 and 2017.

																											Daily Average Ownership
						As of December 31, 2019																		As of December 31, 2018																		For the Year Ended December 31,
						AOG Units						Direct Ownership Interest						AOG Units						Direct Ownership Interest						2019						2018						2017
Ares Management Corporation						115,242,028						49.70		%				101,594,095						46.47		%				48.02		%				44.19		%				38.59		%
Ares Owners Holding L.P.						116,641,833						50.30		%				117,019,274						53.53		%				51.98		%				53.99		%				55.52		%
Affiliate of Alleghany Corporation						—						—		%				—						—		%				—		%				1.82		%				5.89		%
Total						231,883,861						100.00		%				218,613,369						100.00		%

During the quarter ended March 31, 2018, an affiliate of Alleghany Corporation (“Alleghany”) exchanged 9,750,000 of its AOG Units into 9,750,000 common shares. During the quarter ended September 30, 2018, Alleghany exchanged its remaining 2,750,000 of AOG Units into 2,750,000 common shares.

The Company’s ownership percentage of the AOG Units will continue to change upon: (i) the vesting of restricted units and exercise of options that were granted under the Equity Incentive Plan; (ii) the exchange of AOG Units for shares of Class A common stock; (iii) the cancellation of AOG Units in connection with certain individuals’ forfeiture of AOG Units upon termination of employment and (iv) the issuance of new AOG Units, including in connection with acquisitions, among other reasons. Holders of the AOG Units, subject to any applicable transfer restrictions, may up to four times each year (subject to the terms of the exchange agreement) exchange their AOG Units for shares of Class A common stock on a one-for-one basis. Equity is reallocated among partners upon a change in ownership to ensure each partners’ capital account properly reflects their respective claim on the residual value of the Company. This change is reflected as either a reallocation of interest or as dilution in the Consolidated Statements of Changes in Equity.

F-52

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

Except as otherwise expressly provided in the Company’s Certificate of Incorporation (the “Certificate of Incorporation”), the Company’s common stockholders are entitled to vote on all matters on which stockholders of a corporation are generally entitled to vote under the Delaware General Corporation Law (the “DGCL”), including the election of the Company’s board of directors. Holders of shares of the Company’s Class A common stock are entitled to one vote per share of the Company’s Class A common stock. On any date on which the Ares Ownership Condition (as defined in the Certificate of Incorporation) is satisfied, holders of shares of the Company’s Class B common stock are, in the aggregate, entitled to a number of votes equal to (x) four times the aggregate number of votes attributable to the Company’s Class A common stock minus (y) the aggregate number of votes attributable to the Company’s Class C common stock. On any date on which the Ares Ownership Condition is not satisfied, holders of shares of the Company’s Class B common stock are not entitled to vote on any matter submitted to a vote of the Company’s stockholders. The holder of shares of the Company’s Class C common stock is generally entitled to a number of votes equal to the number of Ares Operating Group Units (as defined in the Certificate of Incorporation) held of record by each Ares Operating Group Limited Partner (as defined in the Certificate of Incorporation) other than the Company and its subsidiaries.

Preferred Stock

In connection with the Conversion on November 26, 2018, each 7.00% Series A preferred share of the Company before the Conversion was converted into one share of 7.00% Series A Preferred Stock, $0.01 par value per share of the Company. As of December 31, 2019 and December 31, 2018, the Company had 12,400,000 shares of the Series A Preferred Stock outstanding. When, as and if declared by the Company’s board of directors, dividends on the Series A Preferred Stock are payable quarterly at a rate per annum equal to 7.00%. The Series A Preferred Stock may be redeemed at the Company’s option, in whole or in part, at any time on or after June 30, 2021, at a price per share of $25.00.

In connection with the Series A Preferred Stock issuance, the Ares Operating Group issued mirror preferred units (“GP Mirror Units”) paying the same 7.00% rate per annum to wholly owned subsidiaries of the Company including AHI. Although income allocated in respect of distributions on the GP Mirror Units may be subject to tax, cash dividends to our Series A Preferred stockholders will not be reduced on account of any income taxes owed by us. As a result, the amounts of dividend ultimately paid by us to our Class A common stockholders may be reduced by any corporate taxes imposed on us or AHI.

In July 2018, the Company's board of directors authorized the repurchase, from time to time in open market purchases

or privately negotiated transactions of the Series A Preferred Stock with an aggregate liquidation preference of up to $50.0 million. Such repurchases, if any, will depend on the prevailing market conditions and other factors. As of December 31, 2019, the program has expired and the Company has not had any repurchases of the Series A Preferred Stock.

Except as provided in the Certificate of Incorporation and the Company’s Bylaws and under the DGCL and the rules of the NYSE, shares of the Series A Preferred Stock are generally non-voting.

F-53

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

15. SEGMENT REPORTING

The Company operates through its distinct operating segments. During the year ended December 31, 2019, the Company reclassified certain expenses from OMG to its operating segments. The Company has modified historical results to conform with its current presentation.

The Company’s operating segments are summarized below:

Credit Group: The Credit Group manages credit strategies across the liquid and illiquid spectrum, including syndicated loans, high yield bonds, multi-asset credit, alternative credit investments and direct lending.

Private Equity Group: The Private Equity Group manages investment strategies broadly categorized as corporate private equity, infrastructure and power, special opportunities, and energy opportunities.

Real Estate Group: The Real Estate Group manages comprehensive real estate equity and debt strategies.

The Company has an OMG that consists of shared resource groups to support the Company’s operating segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, strategy and relationship management, legal, compliance and human resources. Additionally, the OMG provides services to certain of the Company’s investment companies and partnerships, which reimburse the OMG for expenses equal to the costs of services provided. The OMG’s expenses are not allocated to the Company’s reportable segments but the Company does consider the cost structure of the OMG when evaluating its financial performance.

Segment Profit Measures: These measures supplement and should be considered in addition to, and not in lieu of, the Consolidated Statements of Operations prepared in accordance with GAAP.

Fee related earnings (“FRE”) is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate profits. FRE differs from income before taxes computed in accordance with GAAP as it excludes performance income, performance related compensation, investment income from the Consolidated Funds and non-consolidated funds and certain other items that the Company believes are not indicative of its core operating performance.

Realized income (“RI”) is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and expenses, which may or may not be eventually realized at the levels presented and whose realizations depend more on future outcomes than current business operations. RI differs from net income by excluding (a) income tax expense, (b) operating results of the Consolidated Funds, (c) depreciation and amortization expense, (d) the effects of changes arising from corporate actions, (e) unrealized gains and losses related to performance income and investment performance and (f) certain other items that the Company believes are not indicative of operating 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, underwriting costs and expenses incurred in connection with corporate reorganization. Management believes RI is a more appropriate metric to evaluate the Company's current business operations.

Management makes operating decisions and assesses the performance of each of the Company’s business segments based on financial and operating metrics and other data that is presented before giving effect to the consolidation of any of the Consolidated Funds. Consequently, all segment data excludes the assets, liabilities and operating results related to the Consolidated Funds and non-consolidated funds.

F-54

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table presents the financial results for the Company’s operating segments, as well as the OMG, for the year ended December 31, 2019:

			Credit Group						Private Equity Group						Real Estate Group						Total Segments						OMG						Total
Management fees (Credit Group includes ARCC Part I Fees of $164,396)			$	713,853					$	211,614					$	87,063					$	1,012,530					$	—					$	1,012,530
Other fees			17,124						162						792						18,078						—						18,078
Compensation and benefits			(261,662)						(78,259)						(49,124)						(389,045)						(139,162)						(528,207)
General, administrative and other expenses			(55,103)						(19,098)						(13,249)						(87,450)						(91,292)						(178,742)
Fee related earnings			414,212						114,419						25,482						554,113						(230,454)						323,659
Performance income—realized			104,442						264,439						33,637						402,518						—						402,518
Performance related compensation—realized			(61,641)						(211,550)						(17,191)						(290,382)						—						(290,382)
Realized net performance income			42,801						52,889						16,446						112,136						—						112,136
Investment income—realized			2,457						47,696						8,020						58,173						—						58,173
Interest and other investment income (expense) —realized			18,670						5,046						5,633						29,349						(160)						29,189
Interest expense			(6,497)						(7,486)						(3,824)						(17,807)						(1,864)						(19,671)
Realized net investment income (loss)			14,630						45,256						9,829						69,715						(2,024)						67,691
Realized income			$	471,643					$	212,564					$	51,757					$	735,964					$	(232,478)					$	503,486
Total assets			$	997,064					$	1,123,254					$	467,741					$	2,588,059					$	165,122					$	2,753,181

The following table presents the financial results for the Company’s operating segments, as well as the OMG, for the year ended December 31, 2018:

			Credit Group						Private Equity Group						Real Estate Group						Total Segments						OMG						Total
Management fees (Credit Group includes ARCC Part I Fees of $128,805)			$	564,899					$	198,182					$	73,663					$	836,744					$	—					$	836,744
Other fees			23,247						1,008						33						24,288						—						24,288
Compensation and benefits			(218,148)						(74,672)						(38,623)						(331,443)						(124,812)						(456,255)
General, administrative and other expenses			(44,845)						(18,482)						(11,123)						(74,450)						(75,015)						(149,465)
Fee related earnings			325,153						106,036						23,950						455,139						(199,827)						255,312
Performance income—realized			121,270						139,820						96,117						357,207						—						357,207
Performance related compensation—realized			(75,541)						(111,764)						(64,292)						(251,597)						—						(251,597)
Realized net performance income			45,729						28,056						31,825						105,610						—						105,610
Investment income—realized			2,492						17,816						11,409						31,717						4,790						36,507
Interest and other investment income —realized			10,350						4,624						2,257						17,231						2,184						19,415
Interest expense			(11,386)						(6,000)						(1,836)						(19,222)						(2,226)						(21,448)
Realized net investment income			1,456						16,440						11,830						29,726						4,748						34,474
Realized income			$	372,338					$	150,532					$	67,605					$	590,475					$	(195,079)					$	395,396
Total assets			$	729,930					$	942,928					$	469,595					$	2,142,453					$	65,961					$	2,208,414

F-55

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table presents the financial results for the Company’s operating segments, as well as the OMG, for the year ended December 31, 2017:

			Credit Group						Private Equity Group						Real Estate Group						Total Segments						OMG						Total
Management fees (Credit Group includes ARCC Part I Fees of $105,467)			$	481,466					$	198,498					$	64,861					$	744,825					$	—					$	744,825
Other fees			20,830						1,495						106						22,431						—						22,431
Compensation and benefits			(194,821)						(68,569)						(39,586)						(302,976)						(110,759)						(413,735)
General, administrative and other expenses			(34,335)						(17,561)						(10,519)						(62,415)						(74,116)						(136,531)
Fee related earnings			273,140						113,863						14,862						401,865						(184,875)						216,990
Performance income—realized			21,087						287,092						9,608						317,787						—						317,787
Performance related compensation—realized			(9,218)						(228,774)						(4,338)						(242,330)						—						(242,330)
Realized net performance income			11,869						58,318						5,270						75,457						—						75,457
Investment income—realized			7,102						22,625						5,534						35,261						3,880						39,141
Interest and other investment income —realized			10,192						3,226						511						13,929						1,142						15,071
Interest expense			(12,405)						(5,218)						(1,650)						(19,273)						(1,946)						(21,219)
Realized net investment income			4,889						20,633						4,395						29,917						3,076						32,993
Realized income			$	289,898					$	192,814					$	24,527					$	507,239					$	(181,799)					$	325,440
Total assets			$	837,562					$	1,255,454					$	306,463					$	2,399,479					$	119,702					$	2,519,181

The following table presents the components of the Company’s operating segments’ revenue, expenses and realized net investment income:

			For the Year Ended December 31,
			2019						2018						2017
Segment revenues
Management fees (includes ARCC Part I Fees of $164,396, $128,805 and $105,467 for the years ended December 31, 2019, 2018, and 2017, respectively)			$	1,012,530					$	836,744					$	744,825
Other fees			18,078						24,288						22,431
Performance income—realized			402,518						357,207						317,787
Total segment revenues			$	1,433,126					$	1,218,239					$	1,085,043
Segment expenses
Compensation and benefits			$	389,045					$	331,443					$	302,976
General, administrative and other expenses			87,450						74,450						62,415
Performance related compensation—realized			290,382						251,597						242,330
Total segment expenses			$	766,877					$	657,490					$	607,721
Segment realized net investment income
Investment income—realized			$	58,173					$	31,717					$	35,261
Interest and other investment income —realized			29,349						17,231						13,929
Interest expense			(17,807)						(19,222)						(19,273)
Total segment realized net investment income			$	69,715					$	29,726					$	29,917

F-56

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table reconciles the Company's consolidated revenues to segment revenue:

			For the Year Ended December 31,
			2019						2018						2017
Total consolidated revenue			$	1,765,438					$	958,461					$	1,479,943
Performance (income) loss-unrealized			(303,142)						247,212						(325,915)
Management fees of Consolidated Funds eliminated in consolidation			34,920						34,242						22,406
Carried interest allocation of Consolidated Funds eliminated in consolidation			—						—						1,017
Incentive fees of Consolidated Funds eliminated in consolidation			13,851						4,000						4,075
Principal investment (income) loss of Consolidated Funds eliminated in consolidation			(12,235)						2,502						24,587
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation			12,641						—						—
Administrative fees(1)			(31,629)						(27,380)						(34,049)
Performance loss reclass(2)			740						205						1,936
Principal investment income			(44,320)						(1,047)						(89,031)
Net (income) expense of non-controlling interests in consolidated subsidiaries			(3,138)						44						74
Total consolidation adjustments and reconciling items			(332,312)						259,778						(394,900)
Total segment revenue			$	1,433,126					$	1,218,239					$	1,085,043

(1)Represents administrative fees that are presented in administrative, transaction and other fees in the Company’s Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.

(2)Related to performance income for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Consolidated Statements of Operations.

The following table reconciles the Company's consolidated expenses to segment expenses:

			For the Year Ended December 31,
			2019						2018						2017
Total consolidated expenses			$	1,462,797					$	870,362					$	1,504,758
Performance related compensation-unrealized			(206,799)						221,343						(237,392)
Expenses of Consolidated Funds added in consolidation			(90,816)						(92,006)						(65,501)
Expenses of Consolidated Funds eliminated in consolidation			48,771						38,242						26,481
Administrative fees(1)			(31,629)						(27,380)						(34,049)
OMG expenses			(230,454)						(199,827)						(184,875)
Acquisition and merger-related expense			(16,266)						(2,936)						(280,055)
Equity compensation expense			(97,691)						(89,724)						(69,711)
Deferred placement fees			(24,306)						(20,343)						(19,765)
Depreciation and amortization expense			(40,602)						(25,087)						(30,481)
Other expense(2)			—						(11,836)						—
Expense of non-controlling interests in consolidated subsidiaries			(6,128)						(3,318)						(1,689)
Total consolidation adjustments and reconciling items			(695,920)						(212,872)						(897,037)
Total segment expenses			$	766,877					$	657,490					$	607,721

(1)Represents administrative fees that are presented in administrative, transaction and other fees in the Company’s Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.

(2)2018 period includes $11.8 million payment to ARCC for rent and utilities for the years ended 2017, 2016, 2015 and 2014, and the first quarter of 2018.

F-57

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

The following table reconciles the Company's consolidated other income to segment realized net investment income:

			For the Year Ended December 31,
			2019						2018						2017
Total consolidated other income			$	122,539					$	96,242					$	174,674
Investment (income) loss - unrealized			26,620						49,241						(46,860)
Interest and other investment loss - unrealized			9,061						233						1,868
Other income from Consolidated Funds added in consolidation, net			(117,405)						(114,286)						(154,869)
Other (income) loss from Consolidated Funds eliminated in consolidation, net			(12,991)						(865)						1,059
OMG other income			(1,190)						(3,315)						(11,828)
Performance income reclass(1)			(740)						(205)						(1,936)
Principal investment loss			44,320						1,047						89,031
Change in value of contingent consideration			—						—						(20,156)
Other (income) expense, net			(460)						1,653						(1,042)
Other income of non-controlling interests in consolidated subsidiaries			(39)						(19)						(24)
Total consolidation adjustments and reconciling items			(52,824)						(66,516)						(144,757)
Total segment realized net investment income			$	69,715					$	29,726					$	29,917

(1)Related to performance income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Consolidated Statements of Operations.

The following table presents the reconciliation of income before taxes as reported in the Consolidated Statements of Operations to segment results of RI and FRE:

			For the Year Ended December 31,
			2019						2018						2017
Income before taxes			$	425,180					$	184,341					$	149,859
Adjustments:
Depreciation and amortization expense			40,602						25,087						30,481
Equity compensation expense			97,691						89,724						69,711
Acquisition and merger-related expense			16,266						2,936						259,899
Deferred placement fees			24,306						20,343						19,765
OMG expense, net			229,264						196,512						173,047
Other (income) expense, net(1)			(460)						13,489						(1,042)
Net expense of non-controlling interests in consolidated subsidiaries			2,951						3,343						1,739
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations			(39,174)						(20,643)						(62,705)
Total performance (income) loss - unrealized			(303,142)						247,212						(325,915)
Total performance related compensation - unrealized			206,799						(221,343)						237,392
Total investment (income) loss - unrealized			35,681						49,474						(44,992)
Realized income			735,964						590,475						507,239
Total performance income - realized			(402,518)						(357,207)						(317,787)
Total performance related compensation - realized			290,382						251,597						242,330
Total investment income - realized			(69,715)						(29,726)						(29,917)
Fee related earnings			$	554,113					$	455,139					$	401,865

(1)2018 period includes $11.8 million payment to ARCC for rent and utilities for the years ended 2017, 2016, 2015 and 2014, and the first quarter of 2018.

F-58

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

16. CONSOLIDATION

Deconsolidated Funds

Certain funds that have historically been consolidated in the financial statements that are no longer consolidated because, as of the reporting period: (a) the Company deconsolidated such funds as a result of being liquidated or dissolved; or (b) the Company is no longer deemed to be the primary beneficiary of the VIEs as it no longer has a significant economic interest. During the year ended December 31, 2019, two entities were liquidated/dissolved and two entities experienced a significant change in ownership that resulted in deconsolidation of the fund or CLO during the period. During the year ended December 31, 2018 and 2017, one entity was liquidated/dissolved and no non-VIE entities experienced a significant change in ownership or control that resulted in deconsolidation during each of the periods. 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 in which the Company has a variable interest 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 represent 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 carried at fair value.

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

			As of December 31,
			2019						2018
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs(1)			$	260,520					$	222,477
Maximum exposure to loss attributable to the Company's investment in consolidated VIEs(1)			181,856						186,455
Assets of consolidated VIEs			9,454,572						8,141,280
Liabilities of consolidated VIEs			8,679,869						7,479,383

(1)As of December 31, 2019, the Company's maximum exposure of loss for CLO securities was equal to the cumulative fair value of our capital interest in CLOs that are managed and totaled $104.7 million.

			For the Year Ended December 31,
			2019						2018						2017
Net income attributable to non-controlling interests related to consolidated VIEs			$	39,704					$	20,512					$	60,818

F-59

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

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, 2019 and December 31, 2018 and results from operations for the year ended December 31, 2019 and 2018 and 2017.

			As of December 31, 2019
			Consolidated Company Entities						Consolidated Funds						Eliminations						Consolidated
Assets
Cash and cash equivalents			$	138,384					$	—					$	—					$	138,384
Investments (includes $1,134,967 of accrued carried interest)			1,845,520						—						(181,856)						1,663,664
Due from affiliates			282,197						—						(14,098)						268,099
Other assets			343,674						—						(2,381)						341,293
Right-of-use operating lease assets			143,406						—						—						143,406
Assets of Consolidated Funds
Cash and cash equivalents			—						606,321						—						606,321
Investments, at fair value			—						8,723,169						4,778						8,727,947
Due from affiliates			—						6,192						—						6,192
Receivable for securities sold			—						88,809						—						88,809
Other assets			—						30,081						—						30,081
Total assets			$	2,753,181					$	9,454,572					$	(193,557)					$	12,014,196
Liabilities
Accounts payable, accrued expenses and other liabilities			$	88,173					$	—					$	—					$	88,173
Accrued compensation			37,795						—						—						37,795
Due to affiliates			71,445						—						—						71,445
Performance related compensation payable			829,764						—						—						829,764
Debt obligations			316,609						—						—						316,609
Operating lease liabilities			168,817						—						—						168,817
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities			—						61,857						—						61,857
Due to affiliates			—						11,700						(11,700)						—
Payable for securities purchased			—						500,146						—						500,146
CLO loan obligations, at fair value			—						7,998,922						(25,174)						7,973,748
Fund borrowings			—						107,244						—						107,244
Total liabilities			1,512,603						8,679,869						(36,874)						10,155,598
Commitments and contingencies
Non-controlling interest in Consolidated Funds			—						774,703						(156,683)						618,020
Non-controlling interest in Ares Operating Group entities			472,288						—						—						472,288
Stockholders' Equity
Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding)			298,761						—						—						298,761
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (115,242,028 shares issued and outstanding)			1,152						—						—						1,152
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)			—						—						—						—
Class C common stock, $0.01 par value, 499,999,000 shares authorized (1 share issued and outstanding)			—						—						—						—
Additional paid-in-capital			525,244						—						—						525,244
Retained earnings			(50,820)						—						—						(50,820)
Accumulated other comprehensive loss, net of tax			(6,047)						—						—						(6,047)
Total stockholders' equity			768,290						—						—						768,290
Total equity			1,240,578						774,703						(156,683)						1,858,598
Total liabilities, non-controlling interests and equity			$	2,753,181					$	9,454,572					$	(193,557)					$	12,014,196

F-60

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			As of December 31, 2018
			Consolidated Company Entities						Consolidated Funds						Eliminations						Consolidated
Assets
Cash and cash equivalents			$	110,247					$	—					$	—					$	110,247
Investments (includes $841,079 of accrued carried interest)			1,512,592						—						(186,455)						1,326,137
Due from affiliates			207,924						—						(8,547)						199,377
Other assets			377,651						—						—						377,651
Assets of Consolidated Funds
Cash and cash equivalents			—						384,644						—						384,644
Investments, at fair value			—						7,673,165						—						7,673,165
Due from affiliates			—						17,609						—						17,609
Receivable for securities sold			—						42,076						—						42,076
Other assets			—						23,786						—						23,786
Total assets			$	2,208,414					$	8,141,280					$	(195,002)					$	10,154,692
Liabilities
Accounts payable, accrued expenses and other liabilities			$	83,221					$	—					$	—					$	83,221
Accrued compensation			29,389						—						—						29,389
Due to affiliates			82,411						—						—						82,411
Performance related compensation payable			641,737						—						—						641,737
Debt obligations			480,952						—						—						480,952
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities			—						83,876						—						83,876
Due to affiliates			—						8,547						(8,547)						—
Payable for securities purchased			—						471,390						—						471,390
CLO loan obligations			—						6,706,286						(28,195)						6,678,091
Fund borrowings			—						209,284						—						209,284
Total liabilities			1,317,710						7,479,383						(36,742)						8,760,351
Commitments and contingencies
Non-controlling interest in Consolidated Funds			—						661,897						(158,260)						503,637
Non-controlling interest in Ares Operating Group entities			302,780						—						—						302,780
Stockholders' Equity
Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding)			298,761						—						—						298,761
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (101,594,095 shares issued and outstanding)			1,016						—						—						1,016
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)			—						—						—						—
Class C common stock, $0.01 par value, 499,999,000 shares authorized (1 share issued and outstanding)			—						—						—						—
Additional paid-in-capital			326,007						—						—						326,007
Retained earnings			(29,336)						—						—						(29,336)
Accumulated other comprehensive loss, net of tax			(8,524)						—						—						(8,524)
Total stockholders' equity			587,924						—						—						587,924
Total equity			890,704						661,897						(158,260)						1,394,341
Total liabilities, non-controlling interests and equity			$	2,208,414					$	8,141,280					$	(195,002)					$	10,154,692

F-61

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			For the Year Ended December 31, 2019
			Consolidated Company Entities						Consolidated Funds						Eliminations						Consolidated
Revenues
Management fees (includes ARCC Part I Fees of $164,396)			$	1,014,337					$	—					$	(34,920)					$	979,417
Carried interest allocation			621,872						—						—						621,872
Incentive fees			83,048						—						(13,851)						69,197
Principal investment income			44,320						—						12,235						56,555
Administrative, transaction and other fees			51,038						—						(12,641)						38,397
Total revenues			1,814,615						—						(49,177)						1,765,438
Expenses
Compensation and benefits			653,352						—						—						653,352
Performance related compensation			497,181						—						—						497,181
General, administrative and other expense			270,219						—						—						270,219
Expenses of the Consolidated Funds			—						90,816						(48,771)						42,045
Total expenses			1,420,752						90,816						(48,771)						1,462,797
Other income (expense)
Net realized and unrealized gains on investments			10,405						—						(851)						9,554
Interest and dividend income			9,599						—						(2,093)						7,506
Interest expense			(19,671)						—						—						(19,671)
Other expense, net			(8,190)						—						350						(7,840)
Net realized and unrealized gains on investments of the Consolidated Funds			—						3,312						11,824						15,136
Interest and other income of the Consolidated Funds			—						395,599						—						395,599
Interest expense of the Consolidated Funds			—						(281,506)						3,761						(277,745)
Total other income (expense)			(7,857)						117,405						12,991						122,539
Income before taxes			386,006						26,589						12,585						425,180
Income tax expense (benefit)			52,906						(530)						—						52,376
Net income			333,100						27,119						12,585						372,804
Less: Net income attributable to non-controlling interests in Consolidated Funds			—						27,119						12,585						39,704
Less: Net income attributable to non-controlling interests in Ares Operating Group entities			184,216						—						—						184,216
Net income attributable to Ares Management Corporation			148,884						—						—						148,884
Less: Series A Preferred Stock dividends paid			21,700						—						—						21,700
Net income attributable to Ares Management Corporation Class A common stockholders			$	127,184					$	—					$	—					$	127,184

F-62

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			For the Year Ended December 31, 2018
			Consolidated Company Entities						Consolidated Funds						Eliminations						Consolidated
Revenues
Management fees (includes ARCC Part I Fees of $128,805)			$	836,744					$	—					$	(34,242)					$	802,502
Carried interest allocation			42,410						—						—						42,410
Incentive fees			67,380						—						(4,000)						63,380
Principal investment income			1,047						—						(2,502)						(1,455)
Administrative, transaction and other fees			51,624						—						—						51,624
Total revenues			999,205						—						(40,744)						958,461
Expenses
Compensation and benefits			570,380						—						—						570,380
Performance related compensation			30,254						—						—						30,254
General, administrative and other expense			215,964						—						—						215,964
Expenses of the Consolidated Funds			—						92,006						(38,242)						53,764
Total expenses			816,598						92,006						(38,242)						870,362
Other income (expense)
Net realized and unrealized losses on investments			(2,867)						—						983						(1,884)
Interest and dividend income			7,121						—						(93)						7,028
Interest expense			(21,448)						—						—						(21,448)
Other expense, net			(1,715)						—						864						(851)
Net realized and unrealized gains (losses) on investments of the Consolidated Funds			—						664						(2,247)						(1,583)
Interest and other income of the Consolidated Funds			—						337,875						—						337,875
Interest expense of the Consolidated Funds			—						(224,253)						1,358						(222,895)
Total other income (expense)			(18,909)						114,286						865						96,242
Income before taxes			163,698						22,280						(1,637)						184,341
Income tax expense			32,071						131						—						32,202
Net income			131,627						22,149						(1,637)						152,139
Less: Net income attributable to non-controlling interests in Consolidated Funds			—						22,149						(1,637)						20,512
Less: Net income attributable to non-controlling interests in Ares Operating Group entities			74,607						—						—						74,607
Net income attributable to Ares Management Corporation			57,020						—						—						57,020
Less: Series A Preferred Stock dividends paid			21,700						—						—						21,700
Net income attributable to Ares Management Corporation Class A common stockholders			$	35,320					$	—					$	—					$	35,320

F-63

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

			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
Carried interest allocation			621,471						—						(1,017)						620,454
Incentive fees			20,295						—						(4,075)						16,220
Principal investment income			89,031						—						(24,587)						64,444
Administrative, transaction and other fees			56,406						—						—						56,406
Total revenues			1,532,028						—						(52,085)						1,479,943
Expenses
Compensation and benefits			514,109						—						—						514,109
Performance related compensation			479,722						—						—						479,722
General, administrative and other expense			196,730						—						—						196,730
Transaction Support Expenses			275,177						—						—						275,177
Expenses of the 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 gains on investments			13,565						—						(5,303)						8,262
Interest and dividend income			9,048						—						(2,005)						7,043
Interest expense			(21,219)						—						—						(21,219)
Other income, net			19,470						—						—						19,470
Net realized and unrealized gains on investments of the Consolidated Funds			—						126,836						(26,712)						100,124
Interest and other income of the Consolidated Funds			—						187,721						—						187,721
Interest expense of the Consolidated Funds			—						(159,688)						32,961						(126,727)
Total other income			20,864						154,869						(1,059)						174,674
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 dividends paid			21,700						—						—						21,700
Net income attributable to Ares Management L.P. common shareholders			$	54,478					$	—					$	—					$	54,478

F-64

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

17. SUBSEQUENT EVENTS

The Company evaluated all events or transactions that occurred after December 31, 2019 through the date the consolidated financial statements were issued. During this period, the Company had the following material subsequent events that require disclosure:

In February 2020, the Company's board of directors declared a quarterly dividend of $0.40 per share of Class A common stock payable on March 31, 2020 to common stockholders of record at the close of business on March 17, 2020.

In February 2020, the Company's board of directors declared a quarterly dividend of $0.4375 per share of Series A Preferred Stock payable on March 31, 2020 to preferred stockholders of record at the close of business on March 15, 2020. As March 15, 2020 falls on a Sunday, the effective record date for the dividend will be Friday, March 13, 2020.

F-65

Ares Management Corporation

Notes to the Consolidated Financial Statements (Continued)

(Dollars in Thousands, Except Share Data and As Otherwise Noted)

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

Unaudited quarterly information for each of the three months in the years ended December 31, 2019 and 2018 are presented below.

			For the Three Months Ended
			March 31, 2019						June 30, 2019						September 30, 2019						December 31, 2019
Revenues			$	477,197					$	384,822					$	466,490					$	436,929
Expenses			369,107						335,701						395,701						362,288
Other income			27,870						35,262						32,787						26,620
Income before taxes			135,960						84,383						103,576						101,261
Net income			121,576						74,878						91,875						84,475
Net income attributable to Ares Management Corporation			44,949						32,139						33,331						38,465
Series A Preferred Stock dividends paid			5,425						5,425						5,425						5,425
Net income attributable to Ares Management Corporation Class A common stockholders			39,524						26,714						27,906						33,040
Net income per share of Class A common stock
Basic			$	0.36					$	0.24					$	0.24					$	0.27
Diluted			$	0.36					$	0.23					$	0.23					$	0.25
Dividends declared per share of Class A common stock			$	0.32					$	0.32					$	0.32					$	0.32

			For the Three Months Ended
			March 31, 2018						June 30, 2018						September 30, 2018						December 31, 2018
Revenues			$	266,089					$	204,163					$	240,777					$	247,432
Expenses			206,283						221,017						227,188						215,874
Other income (loss)			2,240						67,926						38,754						(12,678)
Income before taxes			62,046						51,072						52,343						18,880
Net income			74,421						14,169						47,212						16,337
Net income (loss) attributable to Ares Management Corporation(1)			40,948						(11,775)						15,910						11,937
Series A Preferred Stock dividends paid			5,425						5,425						5,425						5,425
Net income (loss) attributable to Ares Management Corporation Class A common stockholders(1)			35,523						(17,200)						10,485						6,512
Net income (loss) per share of Class A common stock(1):
Basic			$	0.39					$	(0.20)					$	0.09					$	0.05
Diluted			$	0.28					$	(0.20)					$	0.09					$	0.05
Dividends declared per share of Class A common stock(1)			$	0.24					$	0.28					$	0.28					$	0.28

(1)Periods prior to the Conversion on November 26, 2018 were attributable to Ares Management L.P. common shareholders.

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F-66