Ares Management (ARES) 10-K risk factor changes: FY2020 vs FY2019

We believe that the primary risks affecting our businesses and an investment in [removed: our] shares [removed: are:][added: of our Class A common stock:]

- [added: we operate in] a complex regulatory and tax environment involving rules and regulations (both domestic and foreign), some of which are outdated relative to today’s [removed: complex] [added: global] financial activities and some of which are subject to political influence, which could restrict or require us to adjust our operations or the operations of our funds or portfolio companies and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities;

- [removed: poor performance by] our funds [added: may perform poorly] due to market conditions, political actions or environments, monetary and fiscal policy or other conditions beyond our control;

- [removed: the] [added: we may experience] reputational harm [removed: that] [added: if] we [removed: would experience as a result of inappropriately addressing] [added: fail to appropriately address] conflicts of [removed: interest, poor performance by the investments we manage or the actual] [added: interest] or [removed: alleged failure by us,] [added: if we,] our employees, our funds or our portfolio companies [added: fail (or are alleged] to [added: have failed) to] comply with applicable regulations in an increasingly complex political and regulatory environment;

[removed: As a result of this variability, the market price of shares of our Class A common stock may be volatile and subject to fluctuations;] [added: -] the increasing demands of [removed: the investing community,] [added: fund investors,] including the potential for fee compression and changes to other terms, [removed: which] could materially adversely affect our [added: future] revenues; [removed: and]

Our businesses are materially affected by conditions in the global financial markets and economic and political conditions throughout the world, such as interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to our taxation, taxation of our investors and the possibility of changes to regulations applicable to alternative asset managers), trade policies, commodity prices, tariffs, currency exchange rates and controls and national and international political circumstances (including wars and other forms of conflict, terrorist acts, and security operations) and catastrophic events such as fires, floods, earthquakes, tornadoes, [removed: hurricanes] [added: hurricanes, other adverse weather] and [added: climate conditions and] pandemics.

For example, the [removed: June 2016 referendum in] [added: withdrawal of] the U.K. [removed: in favor of exiting] [added: from] the EU [added: in January 2020] and subsequent ongoing uncertainty regarding the [removed: terms] [added: future relationship between the U.K. and the EU following the end] of the [removed: exit,] [added: Brexit transition period on December 31, 2020,] hostilities in the Middle East region, recent U.S. presidential and congressional elections and resulting uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies, and concerns over increasing [added: inflation and deflation, as well as] interest [removed: rates (particularly short-term rates)] [added: rate volatility] and [removed: uncertainty regarding the long-term effects of tax reform] [added: fluctuations] in [removed: the United States,] [added: oil and gas prices resulting from global production and demand levels,] have precipitated market volatility.

[added: Concerns over significant declines in the commodities markets, sluggish economic expansion in non-U.S. economies, including continued] concerns over growth prospects in China and emerging markets, growing debt loads for certain countries and uncertainty about the consequences of the U.S. and other governments withdrawing monetary stimulus measures all highlight the fact that economic conditions remain unpredictable and volatile.

[removed: Trade] [added: In recent periods, trade] tensions between the U.S. and China [removed: continued to escalate in 2019.][added: have]

These and other conditions in the global financial markets and the global economy [removed: have resulted in, and] may [removed: continue to] result [removed: in,] [added: in] adverse consequences for us and many of our funds, each of which could adversely affect the business of such funds, restrict such funds’ investment activities, impede such funds’ ability to effectively achieve their investment objectives and result in lower returns than we anticipated at the time certain of our investments were made.

As a result of market disruptions and highly publicized financial scandals in recent years, regulators and investors have exhibited concerns over the integrity of the U.S. financial [removed: markets, and the businesses in which we operate both in the United States and outside the United States will be subject to new or additional regulations.][added: markets.]

[removed: Over the course of 2019] [added: Throughout 2020] and continuing into [removed: 2020] [added: 2021] there has been an increasing level of public discourse, debate and media coverage regarding the appropriate extent of regulation and oversight of the financial industry, including investment firms, as well as the tax treatment of certain investments and income generated from such investments.

[added: Overview of certain relevant U.S. tax laws.] In addition, tax laws, regulations or treaties newly enacted or enacted in the future may cause us to revalue our net deferred tax assets and have a material change to our effective tax rate and tax liabilities.

For example, the [removed: Tax] [added: United States, Public Law No. 115-97 (the “Tax] Cuts and Jobs [removed: Act,] [added: Act”),] which was enacted in December 2017 and amended various aspects of U.S. federal income tax legislation, has resulted in various changes to U.S. tax laws, including meaningful reduction to the U.S. federal corporate income tax [removed: rate] [added: rate, changes to the rules for the carryback] and [added: carryforward of net operating losses, changes to U.S. taxation on earnings from international business operations, certain modifications to the Section 162(m) of the Code and] a partial limitation on the deductibility of business interest expense, which could have a material effect on our business [removed: operations and] [added: operations,] our [removed: funds'] [added: funds’] investment [removed: activities.][added: activities and the business of our portfolio companies.]

In December [removed: 2019,] [added: 2020,] the U.S. Internal Revenue Service (the “IRS”) released [removed: proposed] [added: final] regulations under Section [removed: 162(m),] [added: 162(m) (which are generally consistent with the proposed regulations released in December 2019),] which addressed changes made by the Tax Cuts and Jobs Act and, among other things, extended the coverage of Section 162(m) to include compensation paid by a partnership for services performed for it by a covered employee of a corporation that is a partner in the partnership.

The [removed: proposed regulations, if they become effective in their current form,] [added: regulations] may reduce the amount of tax deductions available to us.

Additionally, foreign and state and local governments may [added: continue to] enact tax laws in response to the Tax Cuts and Jobs Act that could result in further changes to foreign and state and local taxation and materially affect our financial position and results of operations.

[added: Overview of certain relevant foreign tax laws.] Her Majesty’s Treasury (“HM Treasury”), the Organization for Economic Co-operation and Development (the “OECD”) and other government agencies in jurisdictions where we and our affiliates invest or conduct business have maintained a focus on issues related to the taxation of businesses, including multinational entities.

[removed: In the United Kingdom, the] [added: The] U.K. [removed: Criminal Finances Act 2017 created] [added: has implemented] two [removed: separate] corporate criminal offenses: failure to prevent facilitation of U.K. tax evasion and failure to prevent facilitation of overseas tax evasion.

The scope of [removed: the law and guidance] [added: these offences] is extremely wide and could have an impact on Ares’ global businesses.

Liability [added: under these offences] can be mitigated where the relevant business has in place reasonable prevention procedures.

[removed: Separately, the United Kingdom] [added: The U.K.] has [added: also] implemented transparency legislation that requires many large businesses to publish their U.K. tax strategies [added: and their approach to dealing with the U.K. tax authority] on their websites.

These developments show that the [removed: United Kingdom] [added: U.K.] is seeking to bring tax matters further into the public domain.

The [removed: OECD has been actively working towards exchange of information on a global scale] [added: EU, the U.K.] and [removed: in 2014 published a global] [added: many other countries have implemented the OECD’s] Common Reporting Standard for the automatic exchange of financial account information in tax matters (the [removed: “CRS”), which many countries have now implemented.][added: “CRS”).]

Investors in our funds will be required (i) to consent to the taking of any action [removed: (including any disclosure)] in connection with FATCA, the CRS, [removed: the] DAC [added: 6] and/or any [removed: local law relating to, implementing or having] similar [removed: effect to any] [added: other tax reporting regimes, including the disclosure] of [removed: these regimes to enable disclosures] [added: information] to [added: tax authorities which may in turn] be [removed: made by any relevant persons and/or to enable our funds or any person to receive payments free of any withholding, deduction or retention for or on account of any] [added: exchanged between other] tax [added: authorities,] and (ii) to agree to provide the AIFM and/or the general partner with [removed: all such] [added: the] information [removed: and documents as] they [removed: shall] require [removed: in relation] to [added: comply with] FATCA, the CRS, [removed: the] DAC [added: 6] and/or any [removed: law relating to, implementing or having] similar [removed: effect to any of these] [added: other tax reporting] regimes in any relevant jurisdiction.

[removed: This] [added: The breadth of the disclosure requirements under such tax reporting regimes] will likely create [removed: additional] costs and administrative burdens and penalties [added: and withholding taxes] could be imposed for [removed: failure to adequately provide such disclosure in a timely manner.][added: non-compliance.]

Changes in tax laws as a result of the BEPS Project may, for example, result in: (a) the restriction or loss of existing access by partners in our funds or their subsidiaries to tax relief under applicable double taxation treaties or EU directives, such as the EU Interest and Royalties Directive; (b) restrictions on permitted levels of deductibility of expenses (such as interest) for tax purposes; [removed: or] (c) [added: rules affecting profit allocation and local nexus requirements, transfer pricing, or the treatment of hybrid entities/investments or (d)] an increased risk of activity undertaken in a jurisdiction constituting a permanent establishment of our funds and/or any of their subsidiaries.

On May 29, 2017, the Council of the EU formally adopted the Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (commonly referred to as “ATAD II”), which [added: came into force in member states on January 1, 2020 (subject to relevant derogations) and which contains a set of anti-hybrid rules.]

[removed: The] [added: Although the] OECD [removed: aims] [added: originally aimed] to reach a consensual solution on the new international tax rules during 2020, with a final report [removed: expected] by the end of [removed: 2020.][added: 2020, the OECD’s October 12, 2020 report indicated that a consensus will likely not be reached]

Furthermore, the IRS has [removed: issued] [added: recently finalized] proposed regulations implementing the anti-hybrid provisions [removed: and recently finalized] [added: (and issued new] proposed regulations [added: providing additional guidance on such anti-hybrid provisions)] and [removed: issued new] [added: recently finalized] proposed regulations [added: (and revised certain final regulations)] under the “base erosion and anti-abuse tax” (“BEAT”) provisions that were enacted as part of the Tax Cuts and Jobs Act.

If the value of an investor’s portfolio decreases as a whole, the amount available to allocate to alternative [removed: assets (including private equity)] [added: investments] could decline.

If economic and market conditions deteriorate or continue to be [removed: so] volatile, [removed: it could cause] investors [removed: to] [added: may] delay making new commitments to investment funds and/or we may be unable to raise sufficient amounts of capital to support the investment activities of future funds.

Furthermore, while our senior professionals have committed substantial capital to our funds, commitments from new investors may depend on the commitments made by our senior professionals to new funds and there can be no assurance that there will be further commitments to our [removed: funds,] [added: funds by these individuals,] and any future investments by them in our funds or other alternative investment categories will likely depend on the performance of our funds, the performance of their overall investment portfolios and other investment opportunities available to them.

[removed: The] [added: Further the] departure of some or all of those individuals could also trigger certain “key person” provisions in the documentation governing certain of our funds, which would permit the investors in those funds to suspend or terminate such funds’ investment periods or, in the case of certain funds, permit investors to withdraw their capital prior to expiration of the applicable lock-up date.

[added: Competition for qualified, motivated, and highly-skilled executives, professionals and other key personnel in investment management firms is significant, both in the] United States and internationally, and we may not succeed in recruiting additional personnel or we may fail to effectively replace current personnel who depart with qualified or effective successors.

In addition, following the Tax Cuts and Jobs Act, the tax treatment of carried interest [removed: may continue] [added: has continued] to be an area of focus for policymakers and government officials, which could result in a further regulatory action by federal or state governments.

[removed: Other] [added: Tax authorities and legislators in other] jurisdictions that Ares has investments [added: or employees] in could [removed: clarify or] [added: clarify,] modify [added: or challenge] their treatment of carried interest.

In the year ended December 31, [removed: 2019,] [added: 2020,] we incurred equity compensation expenses of [removed: $97.7] [added: $123.0] million, and we expect these costs to continue to increase in the future as we increase the use of equity compensation awards to attract, retain and compensate employees.

As we have expanded and as we continue to expand the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our [added: and our] funds’ investment activities.

[removed: Certain] [added: We and certain] of our funds may have overlapping investment objectives, including funds that have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment [removed: opportunities among those funds.][added: opportunities.]

Risk Factor Summary

- we are subject to risks related to COVID-19 and measures taken to mitigate its impact and spread, which have affected and may continue to affect various aspects of our and our funds’ businesses;

- challenging market and political conditions in the United States and globally may reduce the value or hamper the performance of the investments made by us and our funds or impair the ability of our funds to raise or deploy capital;

- if we are unable to raise capital from investors or deploy capital into investments, or if any of our management fees are waived or reduced, or if we fail to generate performance income, our revenues and cash flows would be materially reduced;

- we are subject to risks related to our dependency on our members of the Executive Management Committee, senior professionals and other key personnel as well as attracting and retaining and developing human capital in a highly competitive talent market;

- we face intense competition in the investment management business;

- our growth strategy contemplates acquisitions and entering new lines of business and expanding into new investment strategies, geographic markets and businesses, which subject us to numerous risks, expenses and uncertainties, including related to the integration of development opportunities, acquisitions or joint ventures;

- we derive a significant portion of our management fees from ARCC;

- economic U.S. and foreign sanction laws may prohibit us and our affiliates from transacting with certain countries, individuals and companies;

- our international operations subject us to numerous regulatory and operational risks and expenses;

- we are subject to operational risks and risks in using prime brokers, custodians, counterparties, administrators and other agents;

- we may be subject to cybersecurity risks and changes to data protection regulation;

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

- we may be subject to litigation risks and related liabilities or risks related employee misconduct, fraud and other deceptive practices;

- the use of leverage by us and our funds exposes us to substantial risks, including related to changes to the method of determining LIBOR or the selection of a replacement for LIBOR;

- asset valuation methodologies can be highly subjective and the value of assets may not be realized;

- third-party investors in our funds may not satisfy their contractual obligation to fund capital calls;

- we are subject to risks relating to our contractual rights and obligations under our funds’ governing documents and investment management agreements;

- a downturn in the global credit markets could adversely affect our CLO investments;

- due to our and our funds’ investments in certain market sectors, such as power, infrastructure and energy, real estate and insurance, we are subject to risks and regulations inherent to those industries;

- if we were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated;

- due to the Holdco Members ownership and control of our shares of common stock, holders of our Class A common stock will generally have no influence over matters on which holders of our common stock vote and limited ability to influence decisions regarding our business;

- we are subject to risks related to our categorization as a “controlled company” within the meaning of the NYSE listing standards;

- potential conflicts of interest may arise among the holders of Class B and Class C common stock and the holders of our Class A common stock and preferred stock;

- our holding company structure, Delaware law and contractual restrictions may limit our ability to pay dividend to the holders of our Class A common stock and our dividends are non-cumulative;

- other anti-takeover provisions in our charter documents could delay or prevent a change in control;

- we are subject to risks related to our tax receivable agreement; and

- limitations on the amount of interest expense that we may deduct could materially increase our tax liability and negatively affect an investment in shares of our Class A common stock.

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy, has disrupted, and may continue to disrupt, industries in which we, our funds and our funds’ portfolio companies operate and could potentially negatively impact us, our funds or our funds’ portfolio companies.

Over the past year, the COVID-19 pandemic has resulted in a global and national health crisis, adversely impacted global commercial activity and contributed to significant volatility in equity and debt markets.

Many countries and states in the United States, including those in which we, our funds’ and our funds’ portfolio companies operate, issued (and continue to re-issue) orders requiring the closure of, or certain restrictions on the operation of, nonessential businesses and/or requiring residents to stay at home.

The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns or the re-introduction of business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States.

Such measures, as well as the general uncertainty surrounding the dangers and impact of the COVID-19 pandemic, have created significant disruption in supply chains and economic activity and have had a particularly adverse impact on the energy, hospitality, travel, retail and restaurant industries, as well as other industries, including industries in which certain of our funds’ portfolio companies operate.

Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

While several countries, as well as certain states, counties and cities in the United States, relaxed the early public health restrictions with a view to partially or fully reopening their economies, many cities, both globally and in the United States, have since experienced a surge in the reported number of cases and hospitalizations related to the COVID-19 pandemic.

This increase in cases has led to the re-introduction of such restrictions and business shutdowns in certain states, counties and cities in the United States and globally and could lead to the re-introduction of such restrictions elsewhere.

In December 2020, the Federal Food and Drug Administration authorized COVID‑19 vaccines and the distribution of such vaccines has commenced.

However, it remains unclear how quickly the vaccines will be distributed nationwide and globally or when “herd immunity” will be achieved and whether the restrictions that were imposed to slow the spread of the virus will be lifted entirely.

Ongoing restrictions and any delay in distributing the vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time.

Summary of Risks

- potential variability in our period to period earnings due primarily to mark-to-market valuations of our funds’ investments.

- an investment in our Class A common stock is not an investment in our underlying funds.

Moreover, valuation methodologies for certain assets can be subject to significant subjectivity, and the values of assets may never be realized.

In particular, the recent outbreak of COVID-19 could materially affect our business to the extent it materially affects the Chinese and global economies or global financial markets.

More recently, market uncertainty and volatility have been magnified as a result of the upcoming 2020 U.S. presidential and congressional elections and resulting uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies, as well as rising trade tensions between the United States and China and hostilities between the United States and Iran.

Any escalation of such tensions and hostilities would likely exacerbate these dynamics.

Concerns over significant declines in the commodities markets, sluggish economic expansion in non-U.S. economies, including continued

As a result, growth of major global economies generally slowed in 2019, and there is a high risk of significant ongoing volatility.

Furthermore, some of the provisions under the 2017 tax law amendments in the United States, Public Law No. 115-97 (the “Tax Cuts and Jobs Act”) could have a negative impact on the cost of financing and dampen the attractiveness of credit.

In June 2019, the SEC adopted a rule, effective as of September 10, 2019, that requires a broker-dealer, or a natural person who is an associated person of a broker-dealer, to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities, without placing the financial or other interest of the broker, dealer or natural person who is an associated person of a broker-dealer making the recommendation ahead of the interest of the retail customer.

The term "retail customer" is defined as a natural person who uses such a recommendation primarily for personal, family or household purposes, without reference to investor sophistication or net worth.

The "best interest" standard would be satisfied through compliance with certain disclosure, duty of care, conflict of interest mitigation and compliance obligations.

While the rule has been challenged by litigation, and full implementation is not expected to begin until June 2020, we expect that compliance with the rule will impose additional costs to us, in particular with respect to our product offerings and investment platforms that include retail investors.

In July 2019, proposed legislation entitled the “Stop Wall Street Looting Act” was introduced into the U.S. Congress by sponsors including Senator Elizabeth Warren.

The bill contains a number of provisions that, if they were to become law, would adversely impact alternative asset management firms.

Among other things, the bill would: (1) subject private funds and certain holders of economic interests therein to joint and several liability for all liabilities of portfolio companies; (2) require private funds to offer identical terms and benefits to all limited partners; (3) require disclosure of names of each limited partner invested in a private fund, as well as sensitive fund and portfolio company-level information; (4) impose a limitation on the deductibility of interest expense only applicable to companies owned by private funds; (5) modify settled bankruptcy law to target transactions by private equity funds; (6) increase tax rates on carried interest; and (7) prohibit portfolio companies from paying dividends or repurchasing their shares during the first two years following the acquisition of the portfolio company.

If the proposed bill, or other similar legislation, were to become law, it could adversely affect us, our portfolio companies and our fund investors.

We anticipate that such active debate and media coverage will continue to increase in connection with the 2020 U.S. election cycle as financial proposals are put forth by potential U.S. presidential and Congressional candidates.

Any substantial changes in domestic or international corporate tax policies, regulations or guidance, enforcement activities or legislative initiatives may adversely affect our business, the amount of taxes we are required to pay and our financial condition and results of operations generally.

These and other changes from the Tax Cuts and Jobs Act, including the changes to the carryback and carryforward of net operating losses, U.S. taxation on earnings from international business operations and certain modifications to the Section 162(m) of the Code, could also have a significant effect on the business of our portfolio companies.

As part of the publication requirement, organizations must disclose information on tax risk management and governance, tax planning, tax risk appetite and their approach to dealing with Her Majesty’s Revenue and Customs.

With effect from January 1, 2016, a new mandatory automatic exchange of information regime was implemented under EU Council Directive 2011/16/EU on administrative co-operation in the field of taxation (as amended, the “Directive on Administrative Co-operation” or the “DAC”).

The DAC, which effectively implements the CRS, requires governments to obtain detailed account information from financial institutions and exchange that information automatically with other jurisdictions annually.

The DAC does not impose withholding taxes.

The DAC has also more recently been amended, with effect from June 25, 2018, to require “intermediaries” (as defined), and in some cases taxpayers, to report information to EU tax authorities about cross-border arrangements that contain certain prescribed hallmarks.

A tax authority receiving such a report must automatically exchange that information with tax authorities in other EU member states.

Our funds may need to comply with the aforementioned exchange of information requirements as they progress and develop; in particular, Ares and/or Ares’ funds may be required to disclose to any governmental or tax authorities any information provided to them and such information may be transferred from such governmental or tax authority to other governmental or tax authorities in another jurisdiction.

This position is likely to remain uncertain for a number of years.

came into force in member states on January 1, 2020 (subject to relevant derogations) and which contains a set of anti-hybrid rules.

See “-Risks Related to Taxation.”

With several large buyout funds in the market, a decrease in the amount an investor commits to our funds could have an impact on the ultimate size of the fund and amount of management fees we generate.

There remains significant uncertainty as to whether and, if so, to what extent our funds or their subsidiaries may benefit from the protections afforded by such treaties and whether our funds may look to their investors (and their treaty status) to derive tax treaty benefits.

However, the market for qualified investment professionals is extremely competitive, both in the

Similarly, there have been changes in the United Kingdom with respect to the taxation of carried interest, including the treatment of certain carried interest returns as income, which became effective from April 6, 2016.

Our future growth depends on our ability to effectively attract, retain and develop human capital in a highly competitive talent market.

The success of our business will continue to depend upon our key personnel.

Competition for qualified, motivated, and highly-skilled executives, professionals and other key personnel in asset management firms is significant.

Our future success will depend upon our ability to find, attract, retain and motivate highly-skilled and highly-qualified individuals.

In addition, funds in one group could be restricted from selling their positions in such

“Consolidated Funds” refers collectively to certain [removed: Ares-affiliated] [added: Ares] funds, [removed: related] co-investment entities and [removed: certain] CLOs that are required under generally accepted accounting principles in the United States (“GAAP”) to be consolidated in our consolidated financial statements included in this Annual Report on Form 10-K.

*The following discussion and analysis should be read in conjunction with the [removed: audited,] [added: audited] consolidated financial statements of Ares Management Corporation and the related notes included in this Annual Report on Form 10-K.*

*This section of the Annual Report on Form 10-K discusses activity as of and for the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

[removed: For discussion on activity for the year ended December 31, 2017 and period-over-period analysis on results for the year ended December 31, 2018 to 2017, refer to Part II, Item 7 "Management's] [added: Management's] Discussion and Analysis of Financial Condition and Results of Operations" in our* [removed: *[Annual] [added: *[](https://www.sec.gov/Archives/edgar/data/0001176948/000162828020002489/ares-20191231.htm)[Annual] Report on Form [removed: 10-K](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/0001628280-19-001988-index.htm)*] [added: 10-K](https://www.sec.gov/Archives/edgar/data/0001176948/000162828020002489/ares-20191231.htm)*] *for the year ended December 31, [removed: 2018.*][added: 2019.*]

We use the following non-GAAP measures to [added: making operating decisions,] assess [added: performance] and [removed: track our performance:][added: allocate resources:]

- Fee Related Earnings [removed: (FRE)][added: ("FRE")]

- Realized Income [removed: (RI)][added: ("RI")]

For the specific components and calculations of these non-GAAP measures, as well as a reconciliation of [removed: these measures] [added: the reportable segments] to the most comparable [removed: measure] [added: measures] in accordance with GAAP, see [removed: Note 15, “Segment Reporting,” to our audited consolidated financial statements included in this Annual Report on Form 10-K.][added: “Note 15.]

We [removed: monitor] [added: measure our business performance using] certain operating metrics that are common to the alternative asset management industry, which are discussed below.

[removed: We view] AUM [added: refers to the assets we manage and is viewed] as a metric to measure our investment and fundraising performance as it reflects assets generally at fair value plus available uncalled capital.

The tables below present rollforwards of our total AUM by [removed: segment for the years ended December 31, 2019 and 2018 ($ in millions):][added: segment:]

| | | | [added: | | |] Credit Group | | | | | | Private Equity Group | | | | | | Real Estate Group | | | | | | [added: Strategic Initiatives | | | | | |] Total AUM | | |

| Balance at 12/31/2018 | | | [added: | | |] $ | 95,836 | | | | | $ | 23,487 | | | | | $ | 11,340 | | | | | $ | [added: — | | | | | $ |] 130,663 | |

| Net new par/equity commitments | | | [added: | | |] 6,591 | | | | | | 3,151 | | | | | | 2,361 | | | | | | [added: — | | | | | |] 12,103 | | |

| Net new debt commitments | | | [added: | | |] 10,684 | | | | | | 25 | | | | | | 633 | | | | | | [added: — | | | | | |] 11,342 | | |

| Change in fund value | | | [added: | | |] 3,700 | | | | | | 2,316 | | | | | | 562 | | | | | | [added: — | | | | | |] 6,578 | | |

| Balance at 12/31/2019 | | | [added: | | |] $ | 110,543 | | | | | $ | 25,166 | | | | | $ | 13,207 | | | | | $ | [added: — | | | | | $ |] 148,916 | |

| [removed: Average AUM(1)] [added: Average AUM(1)] | | | [added: | | |] $ | 103,853 | | | | | $ | 24,537 | | | | | $ | 12,142 | | | | | $ | [added: — | | | | | $ |] 140,532 | |

| Net new par/equity commitments | | | [removed: 21,105] | | | [added: 1,559] | | | [removed: 1,498] | | | [added: —] | | | [removed: 2,847] | | | [added: 1,592] | | | [removed: 25,450] | | | [added: 3,151 | | |]

| Net new debt commitments | | | [removed: 9,340] | | | [added: —] | | | [removed: 100] | | | [added: —] | | | [removed: 75] | | | [added: 25] | | | [removed: 9,515] | | | [added: 25 | | |]

| Change in fund value | | | [removed: 1,403] | | | [added: (36)] | | | [removed: (741)] | | | [added: —] | | | [removed: 398] | | | [added: —] | | | [removed: 1,060] | | | [added: (36) | | |]

[added: |] (1) Represents a five-point average of quarter-end balances for each period. [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

The components of our AUM are presented below as of [removed: December 31, 2019 and 2018] ($ in [removed: millions):][added: billions):]

[removed: ][added: ]

| | | | [added: | | |] FPAUM | | | | | | AUM not yet paying fees | | | | | | Non-fee paying(1) | | | | | | General partner and affiliates | | |

(1) Includes [removed: $7.9] [added: $9.0] billion and [removed: $6.7] [added: $7.9] billion of AUM of funds from which we indirectly earn management fees as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

Please refer to “— Results of Operations by Segment” for a more detailed presentation of AUM by segment for each of the periods [removed: presented.][added: presented]

The tables below present rollforwards of our total FPAUM by [removed: segment for the years ended December 31, 2019 and 2018 ($ in millions):][added: segment:]

| | | | [added: | | |] Credit Group | | | | | | Private Equity Group | | | | | | Real Estate Group | | | | | | [added: Strategic Initiatives | | | | | |] Total | | |

| FPAUM Balance at 12/31/2018 | | | [added: | | |] $ | 57,847 | | | | | $ | 17,071 | | | | | $ | 6,952 | | | | | $ | [added: — | | | | | $ |] 81,870 | |

| Commitments | | | [added: | | |] 4,997 | | | | | | 362 | | | | | | 1,080 | | | | | | [added: — | | | | | |] 6,439 | | |

| Subscriptions/deployment/increase in leverage | | | [added: | | |] 13,674 | | | | | | 2,019 | | | | | | 1,269 | | | | | | [added: — | | | | | |] 16,962 | | |

| Change in fund value | | | [added: | | |] 2,181 | | | | | | 3 | | | | | | (16) | | | | | | [added: — | | | | | |] 2,168 | | |

| Change in fee basis | | | [added: | | |] (373) | | | | | | (848) | | | | | | (455) | | | | | | [added: — | | | | | |] (1,676) | | |

| FPAUM Balance at 12/31/2019 | | | [added: | | |] $ | 71,880 | | | | | [removed: 17,040] [added: $] | [added: 17,040] | | | | | $ | 7,963 | | | | | $ | [added: — | | | | | $ |] 96,883 | |

| Average [removed: FPAUM(1)] [added: FPAUM(1)] | | | [added: | | |] $ | 65,278 | | | | | $ | 17,108 | | | | | $ | 7,353 | | | | | $ | [added: — | | | | | $ |] 89,739 | |

| Subscriptions/deployment/increase in leverage | | | [removed: 10,434] | | | [added: 38] | | | [removed: 896] | | | [added: —] | | | [removed: 678] | | | [added: 1,547] | | | [removed: 12,008] | | | [added: 1,585 | | |]

| Change in fund value | | | [removed: (10)] | | | [added: 3] | | | [removed: 6] | | | [added: —] | | | [removed: (20)] | | | [added: —] | | | [removed: (24)] | | | [added: 3 | | |]

| Change in fee basis | | | [removed: (7)] | | | [added: —] | | | [removed: (129)] | | | [added: (40)] | | | [removed: (341)] | | | [added: —] | | | [removed: (477)] | | | [added: — | | | | | | — | | | | | | — | | | | | | (40) | | |]

The charts below present FPAUM by its fee basis [removed: as of December 31, 2019 and 2018] ($ in [removed: millions):][added: billions):]

*Ares Management Corporation is a Delaware corporation.

For discussion on activity for the year ended December 31, 2018 and period-over-period analysis on results for the year ended December 31, 2019 to 2018, refer to Part II, “Item 7.

Global capital markets performance was dominated by the onset of the COVID-19 pandemic and the associated uncertainty and significant market declines in the first half of 2020.

The markets experienced a rebound in the second half of 2020, primarily driven by additional fiscal stimulus, accommodative global monetary policy and positive vaccine developments to combat COVID-19.

Investor concerns over rising infection rates and newly implemented lockdown measures subsided relative to optimism in connection with the announced approval and initial distribution of vaccines in the U.S. and more broadly.

In the U.S., corporate credit spreads narrowed into year-end and lower quality paper, along with more cyclical segments, drove returns for the quarter.

Specifically, the Credit Suisse Leveraged Loan Index (“CSLLI”), a leveraged loan index, returned 2.8% for 2020 compared to a return of 8.2% for the prior year.

The ICE BAML High Yield Master II Index, a high yield bond index, returned 6.2% for 2020 compared to a return of 14.4% for the prior year.

European credit markets experienced similar results, as European high yield and leveraged loan markets recovered alongside the global capital markets primarily driven by positive vaccine developments.

Continued investor confidence in a Brexit trade deal ahead of a formal agreement at year-end, coupled with the European Central Bank’s plan to increase the size and extend the time horizon of their asset purchasing programs contributed to positive returns.

The Credit Suisse Western European Leveraged Loan Index returned 2.4% for 2020 compared to a return of 5.0% for the prior year.

The ICE BAML European Currency High Yield Index returned 2.9% for 2020 compared to a return of 11.4% for the prior year.

The equity market experienced similar performance, rebounding in the second half of the year.

In the U.S., the S&P 500 returned 18.4% for 2020 compared to a return of 31.5% for the prior year.

Outside the U.S., the MSCI All Country World ex USA Index returned 10.7% for 2020 compared to a return of 21.5% for the prior year.

Despite the ongoing pandemic and uncertainty surrounding the timing of recovery, private equity transaction volume rose during the fourth quarter.

Re-introduction of social distancing measures in Europe and the U.S. contributed to real estate fundamentals remaining depressed.

The impact of the pandemic upon commercial real estate has varied significantly by property sector and geography.

Incidences of asset-level distress are elevated, especially for retail and hospitality properties, which have borne much of the impact from COVID-19 restrictions.

With many countries beginning vaccination programs, the overall trajectory of economies and real estate markets is positive.

European and U.S. publicly-traded real estate investment trusts (“REITs”) rose over the fourth quarter, boosted by news surrounding the vaccine.

In the U.S., the FTSE NAREIT All Equity REITs Index returned a negative 8.4% for 2020 compared to a return of 24.0% for the prior year.

In Europe, the FTSE EPRA/NAREIT Developed Europe Index returned a negative 13.1% for 2020 compared to a return of 24.7% for the prior year.

On December 18, 2020, a subsidiary of Ares completed an acquisition of all outstanding common shares of F&G Reinsurance Ltd (“F&G Re”), a reinsurance company.

F&G Re was renamed as Aspida Life Re Ltd and its AUM and financial results are presented within Strategic Initiatives.

On February 4, 2021, Ares Acquisition Corporation (NYSE: AAC), Ares’ first sponsored SPAC, consummated its initial public offering.

The initial public offering generated gross proceeds of $1.0 billion, which includes the partial exercise of the underwriters’ option to purchase additional shares at the initial public offering price to cover over-allotments.

On February 17, 2021, Ares adopted resolutions authorizing a Second Amended and Restated Certificate of Incorporation in connection with an internal reorganization that is expected to occur on or about April 1, 2021.

The internal reorganization will consist of, among other matters, a merger of each of Ares Investments and Ares Offshore Holdings, with and into Ares Holdings.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

*Ares Management Corporation is a Delaware corporation, which was formerly a limited partnership formed on November 15, 2013 and which converted to a Delaware corporation effective on November 26, 2018.

Assets under management (“AUM”) refers to the assets we manage.

For our funds other than CLOs, our AUM equals the sum of the following:

- net asset value (“NAV”) of such funds;

- the drawn and undrawn debt (at the fund-level including amounts subject to restrictions); and

- uncalled committed capital (including commitments to funds that have yet to commence their investment periods).

NAV refers to the fair value of all of the assets of a fund less the liabilities of the fund.

For CLOs, our AUM is equal to initial principal amounts of notes adjusted for paydowns.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Distributions | | | (6,268) | | | | | | (3,813) | | | | | | (1,689) | | | | | | (11,770) | | |

| Balance at 12/31/2017 | | | $ | 71,732 | | | | | $ | 24,530 | | | | | $ | 10,229 | | | | | $ | 106,491 | |

| Distributions | | | (7,744) | | | | | | (1,900) | | | | | | (2,209) | | | | | | (11,853) | | |

| Average AUM(1) | | | $ | 84,647 | | | | | $ | 23,784 | | | | | $ | 10,793 | | | | | $ | 119,224 | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| AUM: $148,916 | | | | | | AUM: $130,663 | | |

Our FPAUM is generally comprised of the following components:

- The amount of limited partner capital commitments for certain closed-end funds within the reinvestment period;

- The amount of limited partner invested capital for the aforementioned closed-end funds beyond the reinvestment period;

- The gross amount of aggregate collateral balance for CLOs, at par, adjusted for defaulted or discounted collateral; and

- The portfolio value, gross asset value or NAV.

| Redemptions/distributions/decrease in leverage | | | (6,446) | | | | | | (1,567) | | | | | | (867) | | | | | | (8,880) | | |

| FPAUM Balance at 12/31/2017 | | | $ | 49,450 | | | | | $ | 16,858 | | | | | $ | 6,189 | | | | | $ | 72,497 | |

| Commitments | | | 4,768 | | | | | | 1,049 | | | | | | 1,580 | | | | | | 7,397 | | |

| Redemptions/distributions/decrease in leverage | | | (6,788) | | | | | | (1,609) | | | | | | (1,134) | | | | | | (9,531) | | |

| Average FPAUM(1) | | | $ | 53,616 | | | | | $ | 17,306 | | | | | $ | 6,738 | | | | | $ | 77,660 | |

| FPAUM: $96,883 | | | | | | FPAUM: $81,870 | | |

It generally represents the NAV or total assets of our funds, as applicable, for which we are entitled to receive performance income, excluding capital committed by us and our professionals (from which we generally do not earn performance income).

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Our significant funds include those that contributed at least 1% of our total management fees for the year ended December 31, 2019 or represented at least 1% of the Company’s total FPAUM as of December 31, 2019, and for which we have sole discretion for investment decisions within the fund.

Management fees on the lower end of the typical fee range are generally accompanied by transaction-based fees.

As of the reporting date, accrued but unpaid management fees, net of management fee reductions and management fee offsets, are included in due from affiliates on the Consolidated Statements of Financial Condition.

*Income Taxes.* Effective March 1, 2018, our operations are conducted through domestic corporations that are subject to corporate level taxes and for which we record current and deferred income taxes at the prevailing rates in the various jurisdictions in which these entities operate.

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.

The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted.

Net income attributable to non-controlling interests in Ares Operating Group entities represents the results attributable to strategic investment partners based on the proportional daily average ownership in Ares Operating Group entities.

U.S. credit markets rallied in the fourth quarter of 2019, capping off a strong year of performance.

Prices moved higher across the markets as relatively attractive valuations and a constructive macroeconomic backdrop supported investor sentiment.

For the year ended December 31, [removed: 2019,] [added: 2020,] the fund management fees that were recognized from open-ended funds in liquid credit strategies with fees subject to change based upon fluctuations in market values were approximately 4%.

As such, a hypothetical 10% decrease in fair value of our managed funds’ investments as of December 31, [removed: 2019] [added: 2020] would not have a material impact on our management fees.

We earn [removed: carried interest allocation] [added: performance income] from certain of our funds when such funds achieve specified performance criteria.

Our [removed: carried interest allocation] [added: performance income] will be impacted by changes in market risk factors.

As a result, the impact of changes in market risk factors on [removed: carried interest allocation] [added: performance income] will vary widely from fund to fund.

An overall increase of 10% in the general equity markets would not necessarily drive the same impact on our funds’ [added: ability to generate income or its asset] valuations, as many of our investments in our funds are illiquid and do not trade on any exchange.

Additionally, as a large percentage of our [removed: carried interest allocation] [added: performance income] are paid to employees as performance related compensation, the overall net impact to our income would be mitigated by lower compensation payments.

[removed: See Note 9, “Commitments] [added: Commitments] and Contingencies,” to our [added: audited] consolidated financial statements included in this Annual Report on Form 10-K for discussion on amount of performance income, net of tax distributions, subject to contingent repayment if we assumed all existing investments were worthless.

A hypothetical incremental 10% decrease in the fair value of our investments as of December 31, [removed: 2019] [added: 2020] would result in declines in principal investment income and unrealized gains on investments of [removed: $54.7] [added: $69.1] million and [removed: $16.3] [added: $22.8] million, respectively.

[removed: Our] [added: We and our] funds hold investments that are denominated in foreign currencies that may be affected by movements in the rate of exchange between those currencies and the U.S. dollar.

Movements in the exchange rate between currencies impact the management fees [added: and performance income] earned by funds with fee paying AUM denominated in foreign currencies as well as by funds with fee paying AUM denominated in U.S. dollars that hold investments denominated in foreign currencies.

A portion of our management [removed: fees] [added: fees, performance income and investments] are denominated in foreign currencies that may be affected by movements in the rate of exchange between currencies.

We estimate that as of December 31, [removed: 2019] [added: 2020] a hypothetical 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would not result in a material change to management [removed: fees] [added: fees, performance income or investments] for the year ended December 31, [removed: 2019,] [added: 2020,] and would be largely offset by the currency conversions of the expenses denominated in foreign currencies.

Our Credit Facility provides a $1.065 billion revolving line of credit with the ability to upsize to $1.35 billion (subject to obtaining commitments for any such additional borrowing capacity) with a maturity date of March [removed: 21, 2024.][added: 30, 2025.]

Currently, base rate loans bear interest calculated based on the base rate plus [removed: 0.25%] [added: 0.125%] and the LIBOR rate loans bear interest calculated based on LIBOR rate plus [removed: 1.25%.][added: 1.125%.]

Our unused commitment fee is [removed: 0.15%] [added: 0.10%] per annum.

As of December 31, [removed: 2019,] [added: 2020,] we had [removed: $70.0 million of] [added: no] borrowings outstanding under the Credit Facility.

Conversely, securities that accrue interest at variable rates would be expected to benefit from a 100 basis points increase in interest rates because these securities would generate higher levels of current [removed: income and therefore positively impact interest and dividend] income.

*Effect on Performance Income*

See “Note 9.

This would positively impact interest and dividend income but have an offsetting decrease in the fair value of the securities and negatively impact the net change in unrealized gains.

In the ordinary course of business, we may extend loans to our funds or guarantee credit facilities held by our funds and could be subject to risk of loss or repayment if our funds do not perform.

Certain of our funds’ investments include lower-rated and comparable quality unrated distressed investments and other instruments.

These issuers can be more sensitive to adverse market conditions, such as a recession or increasing interest rates, as compared to higher rated issuers.

We seek to minimize risk exposure by subjecting each prospective investment to our rigorous, credit-oriented investment approach.

*Effect on Carried Interest Allocation*

Ares is a leading global alternative investment manager with [removed: $148.9] [added: $197.0] billion of assets under management and over [removed: 1,200] [added: 1,450] employees in over [removed: 20] [added: 25] offices in more than 10 countries.

We offer our investors a range of investment strategies and seek to deliver attractive performance to an investor base that includes over [removed: 850] [added: 1,090] direct institutional relationships and a significant retail investor base across our publicly traded and sub-advised funds.

Ares believes each of its [removed: three] distinct but complementary investment groups in Credit, Private [removed: Equity and] [added: Equity,] Real Estate [added: and Strategic Initiatives] is a market leader based on assets under management and investment performance.

Our AUM has grown to [removed: $148.9] [added: $197.0] billion as of December 31, [removed: 2019] [added: 2020] from [removed: $34.0] [added: $42.0] billion a decade earlier.

As shown in the chart below, over the past five and ten years, our assets under management have achieved a compound annual growth rate (“CAGR”) of [removed: 13%] [added: 16%] and [removed: 16%,] [added: 17%,] respectively ($ in billions):

[removed: ][added: ]

We believe our consistent and strong performance in a broad range of alternative [removed: assets] [added: investments] has been shaped by several distinguishing features of our platform:

- Differentiated Market Intelligence: Our proprietary research on [removed: approximately 60] [added: over 55] industries and insights from a broad, global investment portfolio enable us to more effectively diligence and structure our products and investments.

We have established deep and sophisticated independent research capabilities in [removed: approximately 60] [added: over 55] industries and insights from active investments in over [removed: 1,700] [added: 2,025] companies, over [removed: 625] [added: 760] alternative credit investments and over [removed: 290] [added: 210] properties.

In addition, [removed: each fund, account or other vehicle has] [added: our] investment [added: vehicles have investment] policies and procedures that generally contain requirements and limitations, such as concentrations of securities, industries, and geographies in which [removed: a fund, account or other] [added: such investment] vehicle will invest, as well as other limitations required by law.

- Credit: Our experienced team takes a value-oriented approach [added: which, among other factors, considers industry] and [removed: uses] market [added: analysis,] technical [added: analysis, fundamental credit] analysis and [removed: fundamental] [added: in-house] research to identify investments that offer attractive value in comparison to the [removed: fundamental] [added: perceived] credit risk profile.

Each investment decision involves an intensive due diligence process that [removed: includes research into] [added: is generally focused on evaluating] the target [removed: company,] [added: company and] its [removed: industry,] [added: current and future prospects,] its [removed: growth prospects] [added: management team] and [added: industry,] its ability to withstand adverse [removed: conditions, as appropriate.][added: conditions and its capital structure, sponsorship and structural protection, among others.]

Our debt strategies leverage [removed: our] [added: the] Real Estate [removed: Group's] [added: Group’s] diverse sources of capital to directly originate and manage commercial mortgage investments on properties that range from stabilized to [added: those] requiring hands-on value creation.

[removed: Our] [added: The activities of our] Real Estate [removed: Group's activities] [added: Group] are managed by dedicated equity and debt teams in the U.S. and Europe.

We believe that our strong performance, consistent growth and high talent retention through economic cycles is due largely to the effective application of this principle across our broad organization of over [removed: 1,200] [added: 1,450] employees.

The management of our operating businesses is currently overseen by our Executive Management Committee which typically meets weekly to discuss strategy and operational [removed: matters.][added: matters, and includes as representatives Holdco Members and other senior leadership from our investment groups and business operations team.]

We also have a [removed: Management] [added: Partners] Committee comprised of senior leadership from [removed: our investment, investor relations, marketing and business operations teams, which] [added: across the firm that] meets periodically to discuss our business, including investment and operating performance, fundraising, market conditions, strategic initiatives and other firm matters.

In [removed: 2019,] [added: 2020,] we raised [removed: $23.8] [added: $41.2] billion in gross new capital for more than [removed: 75] [added: 85] different [removed: funds.][added: investment vehicles.]

Of the [removed: $23.8] [added: $41.2] billion, [removed: $16.2] [added: $34.7] billion was raised directly from [removed: 151] [added: 358] institutional investors [removed: (100] [added: (203] existing and [removed: 51] [added: 155] new to Ares) and [removed: $7.6] [added: $6.5] billion was raised through intermediaries.

[removed: ][added:  ]

| [removed: Credit: $17.5] | | | [removed: Private] [added: Credit | | | | | | Private] Equity [removed: $3.2] | | | [removed: Real Estate: $3.1] | | | [added: Real Estate | | | | | | Strategic Initiatives | | |]

| | | | [removed: U.S.] [added: | | | European] Direct Lending | | | | | | [removed: Syndicated Loans] [added: U.S. Direct Lending] | | | | | | Alternative Credit | | | | | | | | | [removed: Special Opportunities | | | | | |] Corporate Private Equity | | | | | | [removed: Energy] [added: Special] Opportunities | | | | | | [removed: | | | Real Estate Debt | | | | | | European Real Estate Equity | | |] [added: Infrastructure & Power] | | | [removed: U.S. Real Estate Equity] | | |

| | | | [removed: European Direct Lending] | | | [removed: | | | High Yield] [added: Syndicated Loans] | | | | | | Multi-Asset Credit | | | | | | [removed: | | | | | | | | | | | |] [added: High Yield] | | | | | | | | | | | | | | | | | | | | | | | | | | |

We took advantage of our diverse global platform to invest more than [removed: $27.4] [added: $26.7] billion (excluding permanent capital) globally in [removed: 2019] [added: 2020] as shown in the following charts ($ in billions):

[removed: ][added:  ]

| | | | [added: | | |] European Direct Lending | | | | | | U.S. Direct Lending | | | | | | [removed: Syndicated Loans] [added: Alternative Credit] | | | | | | | | | Corporate Private Equity | | | | | | Special Opportunities | | | | | | Infrastructure and Power | | | | | | [removed: | | | Real Estate Debt | | | | | | U.S. Real Estate Equity | | | | | | European Real Estate Equity | | |]

| | | | [removed: Alternative Credit] | | | [added: Syndicated Loans] | | | [added: | | |] Multi-Asset Credit | | | | | | High Yield | | | | | | | | | [removed: Energy Opportunities] | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | | | | | | | |]

Of the [removed: $27.4] [added: $26.7] billion invested, [removed: $21.5] [added: $21.4] billion was tied to our drawdown funds.

[removed: ][added:  ]

| | | | [removed: Credit | | |] [added: Credit: $32.1] | | | [removed: Private Equity] | | | [added: Private Equity: $6.2] | | | [removed: Real Estate] | | |

[removed: ][added:  ]

Our Credit Group is [removed: a leading manager] [added: one] of [added: the largest managers of] credit strategies across the non-investment grade credit universe, with [removed: $110.5] [added: $145.5] billion of AUM and over [removed: 150] [added: 200] funds as of December 31, [removed: 2019.][added: 2020.]

The Credit Group provides solutions for investors seeking to access a [added: wide] range of credit assets, including liquid credit, alternative credit products and direct lending [removed: markets.][added: products.]

[removed: It additionally provides] [added: The Credit Group capitalizes on opportunities across traded and non-traded corporate and consumer debt across the U.S. and European markets, providing] investors access to directly originated fixed and floating rate credit assets [removed: and] [added: along] with the ability to capitalize on illiquidity premiums across the credit spectrum.

- *Syndicated* *Loans:* Our syndicated loans strategy delivers a diversified portfolio of liquid, traded [added: non-investment grade secured loans to corporate issuers.]

We focus on evaluating individual credit opportunities related primarily to non-investment grade senior secured loans and primarily target first lien secured debt, with a secondary focus on second lien [removed: loans, mezzanine loans, high yield bonds] [added: secured loans] and [added: subordinated and other] unsecured loans.

These portfolios are designed to offer investors a flexible solution to [removed: global] credit investing by allowing us to tactically allocate between multiple asset classes in various market conditions.

As of December 31, [removed: 2019,] [added: 2020,] our team [added: of over 30 professionals] managed [removed: $7.6] [added: $12.9] billion in AUM in over [removed: 15] [added: 20] private [removed: commingled] funds and [removed: separately managed accounts ("SMAs")] [added: SMAs] for a global investor base.

Our investment approach is designed to capture and create value by [removed: focusing on investments with features that protect and preserve principal by] leveraging our firm's platform insights to assess risk and relative value.

Direct Lending: Our direct lending strategy is one of the largest self-originating direct lenders to the U.S. and European markets, with [removed: $74.5] [added: $98.8] billion of AUM [removed: and] [added: in] over [removed: 75] [added: 85] funds and investment vehicles as of December 31, [removed: 2019.][added: 2020.]

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

We use our longstanding relationships, considerable scale, research, industry knowledge, structuring expertise and often our self-origination capabilities to invest actively across capital structures with a focus on selecting the best risk adjusted returns for our investors, while also seeking to provide our borrowers a valued capital solution.

Across our real estate equity and debt investment strategies, our Real Estate Group differentiates itself through its cycle-tested leadership, demonstrated performance across market cycles, access to real-time property market and corporate trends, and proven ability to create value through a disciplined investment process.

These individuals collaborate frequently within and across

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

strategies to enhance sourcing, exchange information to inform underwriting and leverage relationships to drive pricing power.

Our Real Estate Group's equity team focuses on value-add and opportunistic investing, while our Real Estate Group’s debt team focuses on directly originated commercial mortgage investments across the risk spectrum.

- Strategic Initiatives: Our strategic initiatives team executes investment strategies that expand our reach and scale in new and existing global markets.

Strategic Initiatives includes the Ares SSG platform subsequent to the completion of the acquisition on July 1, 2020.

Ares SSG makes credit and special situations investments through its local originating presence across Asia-Pacific on behalf of its institutional client base.

Strategic Initiatives also includes Ares Insurance Solutions (“AIS”), our dedicated in-house team that provides solutions to insurance clients including asset management, capital solutions and corporate development.

In addition, as part of our growth strategy, we may from time to time engage in discussions with counterparties with respect to various potential strategic transactions, including potential investments in, and acquisitions of, other companies or assets.

In connection with evaluating potential strategic transactions and assets, we may incur significant expenses for the evaluation and due diligence investigation and negotiation of any potential transaction.

Human Capital

We believe that our people and our culture are the most critical strategic drivers of our success as a firm.

Creating a welcoming and inclusive work environment with opportunities for growth and development is essential to attracting and retaining a high-performance team, which is in turn necessary to drive differentiated outcomes.

We believe that our unique culture, which centers upon values of collaboration, responsibility, entrepreneurialism, self-awareness and trustworthiness makes Ares a preferred place for top talent at all levels to build a long-term career within the alternative asset management industry.

We invest heavily in our human capital efforts, including:

We provide a comprehensive set of programs, policies and benefits to enable team members to thrive, grow and contribute to their highest potential.

- Governance and Policies: Ares is committed to providing a work environment in which all individuals are treated with respect and dignity.

While our culture is the foundation of our work environment, our equal opportunity employment, diversity, and anti-harassment/anti-discrimination policies reinforce a professional atmosphere.

- Recruiting and Onboarding: We pursue several strategic paths to hire top talent, including campus and lateral recruiting efforts, and focus on diversity.

We prioritize making all new team members feel welcome and seek to set

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

them up for success through onboarding training, peer advisor programs, ongoing touchpoints, and connecting them with our employee resource groups (“ERGs”), which are open to all team members.

- Mentoring, Training and Employee Engagement: We provide formal and informal mentoring, learning and development, and employee engagement opportunities.

We conduct periodic pulse surveys, frequent townhall meetings hosted by senior leadership, and events to foster belonging.

- Performance Management: We take an ongoing feedback approach to performance management, encouraging leaders and team members to participate in goal setting and ongoing feedback discussions throughout the year, in addition to our firm-wide 360 annual review process.

- Retention, Rewards and Recognition: We provide competitive compensation and benefits to attract, retain and align the incentives of our employees with our investors and stakeholders.

We also have programs that seek to recognize significant team member contributions at the firm level.

Diversity, Equity and Inclusion: We invest heavily in diversity, equity and inclusion (“DEI”) as a strategic pillar that integrates with all talent processes and global business practices.

In partnership with our Human Resources function, our global DEI Council implements a strategic framework to attract, develop, engage and advance diverse talent within an inclusive, welcoming environment.

- Recruiting: We prioritize growing diversity through our campus recruiting efforts, as well as our early pipeline programs to educate women and minorities on the industry.

We are focused on building relationships with diversity-focused recruiting agencies and deepening diversity partnerships.

- Education, Celebration and Belonging: We focus on holding educational and employee engagement events, including many in partnership with our six ERGs, which are grassroots, employee-led, executive-sponsored groups that seek to enhance DEI and support minority team members.

In addition, we conduct regular mandatory anti-harassment and unconscious bias training.

- Equity: We strive to ensure pay equity, regardless of gender or race/ethnicity, and have undertaken pay equity studies for our employees in the U.S. and the U.K.

Health and Wellness: We believe that healthy team members are more productive, and we invest heavily in benefits and initiatives to support our working families.

In addition to medical, dental, vision, life insurance, disability insurance, and retirement benefits, we provide generous primary and non-primary caregiver leave, adoption and reproductive assistance, family care resources and mental health benefits.

We also host several wellness-related events throughout the year on topics such as nutrition and stress management.

We use our flexibility, structuring expertise and self-origination capabilities to invest across capital structures to best meet the full spectrum of our clients’ financing needs.

Members of our investment committees average approximately 25 years of relevant middle-market lending, alternative credit and liquid credit experience.

Our Real Estate Group's equity investments focus on implementing hands-on value creation initiatives to mismanaged and capital-starved assets, as well as new

development, ultimately selling stabilized assets back into the market.

Our investment process includes a rigorous analysis of property cash flows, local real estate fundamentals, demographics, industry, market and tenanting trends, among other criteria.

By identifying key risks, appropriate pricing and structure is determined based on market, credit-worthiness of tenants or other deal-specific risks identified early in the process.

The members of the Executive Management Committee are Michael Arougheti, David Kaplan, Antony Ressler, Bennett Rosenthal, Ryan Berry, R.

Kipp deVeer and Michael McFerran.

2019 Highlights

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Credit $20.3 | | | Private Equity: $4.6 | | | Real Estate: $2.5 | | |

On July 9, 2019, we expanded our existing insurance platform, Ares Insurance Solutions, through the launch of Aspida Financial (“Aspida”).

Aspida entered into an agreement to acquire a Michigan-domiciled insurance company and its insurance operations.

The insurance company is headquartered in North Carolina and has historically offered life insurance, annuities and reinsurance products and services.

The transaction is expected to close during 2020, subject to regulatory approval and other closing conditions.

On January 21, 2020, we entered into a definitive agreement to acquire a controlling interest in SSG Capital Holdings Limited and its operating subsidiaries (collectively, “SSG”), a leading Asian alternative asset management firm.

Headquartered in Hong Kong with offices across Asia, SSG manages private credit and special situations funds.

Supported by a global, institutional investor base, we believe SSG is a widely recognized investment firm in Asia given its numerous industry distinctions and accolades for its lending and distressed activities.

SSG is led by an experienced management team that has invested across various market cycles, transaction types and Asian countries, including India, Indonesia, China and Thailand.

The transaction consideration will be primarily comprised of shares of our Class A common stock subject to a multi-year lock-up and includes a cash component.

In certain circumstances, Ares may acquire full ownership of SSG pursuant to a contractual arrangement that may be initiated by Ares or the equity holders of SSG.

The transaction is expected to close in the second or third quarter of 2020 and is subject to customary closing conditions, including regulatory approvals.

The Credit

Group capitalizes on opportunities across traded and non-traded corporate, consumer and real estate debt across the U.S. and European markets.

As of December 31, 2019, our liquid credit strategy team advised over 65 funds with $28.4 billion of AUM.

non-investment grade secured loans to corporate issuers.

*U.S. Direct Lending:* Our U.S. team is comprised of approximately 140 investment professionals in eight offices.

- *Ares* *Capital Corporation:* ARCC is a leading specialty finance company that provides one-stop debt and equity financing solutions to U.S. middle market companies and power generation projects.

AUM from U.S. commingled funds and SMAs accounts totaled $23.9 billion as of December 31, 2019.

*European Direct Lending:* Our European team is comprised of approximately 55 investment professionals in seven offices.

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| AUM: $110.5 | | | FPAUM: $71.9 | | |

The group’s activities are managed by three dedicated investment teams in North America, Europe and China.

Energy Opportunities: Our energy opportunities strategy targets opportunities in the energy industry where its flexible capital can provide attractive risk-adjusted returns while mitigating commodity risk.

We seek to enhance downside protection by utilizing (i) conservative capital structures and robust hedging programs to mitigate commodity price risk in traditional investments and (ii) senior capital to mitigate risk in structured investments.

This approach enables us to capitalize on opportunities arising from the structural changes occurring in the energy market, which requires an increasing need for flexible capital to fund production and infrastructure growth.

As of December 31, [removed: 2019] [added: 2020] and [removed: December 31, 2018,] [added: 2019,] we were not subject to any material pending legal proceedings.

For the fiscal year ended December 31, [removed: 2019][added: 2020]

| Large Accelerated Filer | | | x | | | Accelerated Filer | | | [added: ☐] | | | Non-Accelerated Filer | | | ☐ | | | Smaller Reporting Company | | | ☐ | | | Emerging Growth Company | | | ☐ | | |

The aggregate market value of the common shares held by non-affiliates of the registrant on June 30, [removed: 2019,] [added: 2020,] based on the closing price on that date of [removed: $26.17] [added: $39.70] on the New York Stock Exchange, was approximately [removed: $1,980,043,921.][added: $4,469,964,167.]

As of February [removed: 21, 2020] [added: 18, 2021] there were [removed: 118,610,306] [added: 149,539,441] of the registrant’s shares of Class A common stock outstanding, 1,000 shares of the registrant's Class B common stock outstanding, and [removed: 1 share] [added: 112,447,618] of the registrant's Class C common stock outstanding.

| | | | | | | | | | | | | Page | | | [removed: | | | | | | | | |]

[removed: | [PART I](#i3e11666bc35348be937de74e61bb5043_16) | | | | | | | | | | | | | | | | | | | | | | | |][added: PART I]

| [Item 1A. Risk [removed: Factors](#i3e11666bc35348be937de74e61bb5043_2362) | | | | | | | | |] [added: Factors](#ia941a4c408f84e8aa050b827583b9b86_205)] | | | | | | | | | [removed: [28](#i3e11666bc35348be937de74e61bb5043_2362)] | | | [added: [32](#ia941a4c408f84e8aa050b827583b9b86_205)] | | |

| [Item 1B. Unresolved Staff [removed: Comments](#i3e11666bc35348be937de74e61bb5043_2069) | | | | | | | | |] [added: Comments](#ia941a4c408f84e8aa050b827583b9b86_208)] | | | | | | | | | [removed: [81](#i3e11666bc35348be937de74e61bb5043_2069)] | | | [added: [87](#ia941a4c408f84e8aa050b827583b9b86_208)] | | |

| [Item 4. Mine Safety [removed: Disclosures](#i3e11666bc35348be937de74e61bb5043_199) | | | | | | | | |] [added: Disclosures](#ia941a4c408f84e8aa050b827583b9b86_178)] | | | | | | | | | [removed: [81](#i3e11666bc35348be937de74e61bb5043_199)] | | | [added: [88](#ia941a4c408f84e8aa050b827583b9b86_178)] | | |

| [Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases [removed: of](#i3e11666bc35348be937de74e61bb5043_2085) [Equity Securities](#i3e11666bc35348be937de74e61bb5043_2085) | | | | | | | | |] [added: of Equity Securities](#ia941a4c408f84e8aa050b827583b9b86_214)] | | | | | | | | | [removed: [82](#i3e11666bc35348be937de74e61bb5043_2085)] | | | [added: [88](#ia941a4c408f84e8aa050b827583b9b86_214)] | | |

| [Item 6. Selected Financial [removed: Data](#i3e11666bc35348be937de74e61bb5043_2080) | | | | | | | | |] [added: Data](#ia941a4c408f84e8aa050b827583b9b86_2621)] | | | | | | | | | [removed: [85](#i3e11666bc35348be937de74e61bb5043_2080)] | | | [added: [91](#ia941a4c408f84e8aa050b827583b9b86_2621)] | | |

[removed: | [Item 7.] Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i3e11666bc35348be937de74e61bb5043_121) | | | | | | | | | | | | | | | | | | [87](#i3e11666bc35348be937de74e61bb5043_121) | | | | | |][added: Operations” and “ Item 1A.]

| [Item 7A. Quantitative and Qualitative Disclosures about Market [removed: Risk](#i3e11666bc35348be937de74e61bb5043_178) | | | | | | | | |] [added: Risk](#ia941a4c408f84e8aa050b827583b9b86_226)] | | | | | | | | | [removed: [129](#i3e11666bc35348be937de74e61bb5043_178)] | | | [added: [139](#ia941a4c408f84e8aa050b827583b9b86_226)] | | |

| [Item [removed: 8.](#i3e11666bc35348be937de74e61bb5043_2100) [Financial] [added: 8. Financial] Statements and Supplementary [removed: Data](#i3e11666bc35348be937de74e61bb5043_2100) | | | | | | | | |] [added: Data](#ia941a4c408f84e8aa050b827583b9b86_232)] | | | | | | | | | [removed: [131](#i3e11666bc35348be937de74e61bb5043_2100)] | | | [added: [141](#ia941a4c408f84e8aa050b827583b9b86_232)] | | |

| [Item [removed: 9.](#i3e11666bc35348be937de74e61bb5043_2095) [Changes] [added: 9. Changes] in and [removed: Disagreements](#i3e11666bc35348be937de74e61bb5043_2095) [W](#i3e11666bc35348be937de74e61bb5043_2095)[ith] [added: Disagreements With] Accountants on Accounting and Financial [removed: Disclosure](#i3e11666bc35348be937de74e61bb5043_2095) | | | | | | | | |] [added: Disclosure](#ia941a4c408f84e8aa050b827583b9b86_253)] | | | | | | | | | [removed: [131](#i3e11666bc35348be937de74e61bb5043_2095)] | | | [added: [141](#ia941a4c408f84e8aa050b827583b9b86_253)] | | |

| [Item 9B. Other [removed: Information](#i3e11666bc35348be937de74e61bb5043_202) | | | | | | | | |] [added: Information](#ia941a4c408f84e8aa050b827583b9b86_2388)] | | | | | | | | | [removed: [133](#i3e11666bc35348be937de74e61bb5043_202)] | | | [added: [144](#ia941a4c408f84e8aa050b827583b9b86_2388)] | | |

| [Item 10. Directors, Executive Officers and Corporate [removed: Governance](#i3e11666bc35348be937de74e61bb5043_2203) | | | | | | | | |] [added: Governance](#ia941a4c408f84e8aa050b827583b9b86_259)] | | | | | | | | | [removed: [134](#i3e11666bc35348be937de74e61bb5043_2203)] | | | [added: [144](#ia941a4c408f84e8aa050b827583b9b86_259)] | | |

| [Item 11. Executive [removed: Compensation](#i3e11666bc35348be937de74e61bb5043_2209) | | | | | | | | |] [added: Compensation](#ia941a4c408f84e8aa050b827583b9b86_262)] | | | | | | | | | [removed: [134](#i3e11666bc35348be937de74e61bb5043_2209)] | | | [added: [144](#ia941a4c408f84e8aa050b827583b9b86_262)] | | |

| [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder [removed: Matters](#i3e11666bc35348be937de74e61bb5043_2223) | | | | | | | | |] [added: Matters](#ia941a4c408f84e8aa050b827583b9b86_265)] | | | | | | | | | [removed: [134](#i3e11666bc35348be937de74e61bb5043_2223)] | | | [added: [144](#ia941a4c408f84e8aa050b827583b9b86_265)] | | |

| [Item 13. Certain Relationships and Related [removed: Transactions](#i3e11666bc35348be937de74e61bb5043_2230)[,](#i3e11666bc35348be937de74e61bb5043_2230) [and] [added: Transactions, and] Director [removed: Independence](#i3e11666bc35348be937de74e61bb5043_2230) | | | | | | | | |] [added: Independence](#ia941a4c408f84e8aa050b827583b9b86_268)] | | | | | | | | | [removed: [134](#i3e11666bc35348be937de74e61bb5043_2230)] | | | [added: [144](#ia941a4c408f84e8aa050b827583b9b86_268)] | | |

| [Item 14. Principal [removed: Account](#i3e11666bc35348be937de74e61bb5043_2237)[ing](#i3e11666bc35348be937de74e61bb5043_2237) [Fees] [added: Accounting Fees] and [removed: Services](#i3e11666bc35348be937de74e61bb5043_2237) | | | | | | | | |] [added: Services](#ia941a4c408f84e8aa050b827583b9b86_271)] | | | | | | | | | [removed: [134](#i3e11666bc35348be937de74e61bb5043_2237)] | | | [added: [144](#ia941a4c408f84e8aa050b827583b9b86_271)] | | |

| [Item 15. Exhibits, Financial Statement [removed: Schedules](#i3e11666bc35348be937de74e61bb5043_205) | | | | | | | | |] [added: Schedules](#ia941a4c408f84e8aa050b827583b9b86_280)] | | | | | | | | | [removed: [135](#i3e11666bc35348be937de74e61bb5043_205)] | | | [added: [145](#ia941a4c408f84e8aa050b827583b9b86_280)] | | |

| [Item 16. Form 10-K [removed: Summary](#i3e11666bc35348be937de74e61bb5043_2144) | | | | | | | | |] [added: Summary](#ia941a4c408f84e8aa050b827583b9b86_283)] | | | | | | | | | [removed: [137](#i3e11666bc35348be937de74e61bb5043_2144)] | | | [added: [148](#ia941a4c408f84e8aa050b827583b9b86_283)] | | |

You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” [removed: “approximately,”] “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words, other comparable words or other statements that do not relate to historical or factual matters.

Some of these factors are described in this Annual Report on Form 10-K for the year ended December 31, [removed: 2019,] [added: 2020,] under the headings [removed: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”.][added: “Item 7.]

In this Annual Report on Form 10-K, in addition to presenting our results on a consolidated basis in accordance with GAAP, we present revenues, expenses and other results on a (i) “segment basis,” which deconsolidates [removed: these entities] [added: the consolidated funds] and [added: removes the proportional results attributable to third-party investors in the consolidated joint ventures, and] therefore shows the results of our reportable segments without giving effect to the consolidation of [removed: the] [added: these] entities and (ii) “unconsolidated reporting basis,” which shows the results of our reportable segments on a combined segment basis together with our Operations Management Group.

[removed: In addition to our reportable segments, we have an Operations Management Group (the “OMG”) that] [added: The OMG] consists of shared resource groups to support our reportable 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.

The OMG’s expenses are not allocated to our reportable segments but we [added: consider the cost structure of the OMG when evaluating our financial performance.]

[removed: Our management uses this information to assess] the performance of our reportable segments and [removed: our] [added: the] OMG, and we believe that this information enhances the ability of shareholders to analyze our performance.

Such fees from ARCC are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment and generally cash-settled each [removed: quarter;][added: quarter, unless subject to a payment deferral;]

- “Ares”, [removed: “the Company”,] [added: the “Company”,] “we”, “us” and “our” refer to [removed: (i)] Ares Management Corporation and its [removed: subsidiaries following the Conversion and (ii) Ares Management, L.P. and its subsidiaries prior to the Conversion;][added: subsidiaries;]

For our funds other than CLOs, our AUM represents the sum of the net asset value [added: ("NAV")] of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods).

- “Consolidated Funds” refers collectively to certain [removed: Ares-affiliated] [added: Ares] funds, [removed: related] co-investment entities and [removed: certain] CLOs that are required under GAAP to be consolidated in our consolidated financial statements;

[removed: Fee paying AUM] [added: FPAUM] is equal to the sum of all the individual fee bases of our funds that directly contribute to our management [removed: fees;][added: fees.]

It generally represents the NAV plus uncalled equity or total assets plus uncalled debt, as applicable, of our funds for which we are entitled to receive [removed: a] performance income, excluding capital committed by us and our professionals (from which we generally do not earn performance income).

- “Incentive generating AUM” or “IGAUM” refers to the AUM of our funds that are currently [removed: generating,] [added: generating performance income] on a realized or unrealized [removed: basis, performance income.][added: basis.]

ARCC is only included in IGAUM when [added: ARCC] Part II Fees are being generated;

- “management fees” refers to fees we earn for advisory services provided to our funds, which are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or par value of the investment portfolios managed by us and [removed: also] include ARCC Part I [removed: Fees that are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment and generally cash-settled each quarter;][added: Fees, among others;]

[removed: - “net performance income” refers to performance income net of performance] [added: Performance] related [removed: compensation, which] [added: compensation] is the portion of [removed: the] performance income [removed: earned from certain funds] that is [added: typically] payable to our professionals;

It also includes funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of [removed: ARCC,] [added: ARCC] and [removed: a registered] [added: an SEC-registered] investment adviser;

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)


Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☒ No ¨

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference information from the registrant’s definitive proxy statement related to the 2021 annual meeting of stockholders.

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [Item 1. Business](#ia941a4c408f84e8aa050b827583b9b86_202) | | | | | | | | | | | | [8](#ia941a4c408f84e8aa050b827583b9b86_202) | | |

| [Item 2. Properties](#ia941a4c408f84e8aa050b827583b9b86_211) | | | | | | | | | | | | [88](#ia941a4c408f84e8aa050b827583b9b86_211) | | |

| [Item 3. Legal Proceedings](#ia941a4c408f84e8aa050b827583b9b86_166) | | | | | | | | | | | | [88](#ia941a4c408f84e8aa050b827583b9b86_211) | | |

| [PART II](#ia941a4c408f84e8aa050b827583b9b86_163) | | | | | | | | | | | | | | |

| [Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ia941a4c408f84e8aa050b827583b9b86_100) | | | | | | | | | | | | [92](#ia941a4c408f84e8aa050b827583b9b86_100) | | |

| [Item 9A. Controls and Procedures](#ia941a4c408f84e8aa050b827583b9b86_160) | | | | | | | | | | | | [141](#ia941a4c408f84e8aa050b827583b9b86_160) | | |

| [PART III](#ia941a4c408f84e8aa050b827583b9b86_256) | | | | | | | | | | | | | | |

| [PART IV](#ia941a4c408f84e8aa050b827583b9b86_277) | | | | | | | | | | | | | | |

| [Signatures](#ia941a4c408f84e8aa050b827583b9b86_307) | | | | | | | | | | | | [149](#ia941a4c408f84e8aa050b827583b9b86_307) | | |

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

Risk Factors”.

We also consolidate joint ventures that we have established with third-party investors for strategic distribution and expansion purposes.

The results of these entities are reflected on a gross basis in the consolidated financial statements, subject to eliminations from consolidation, and net income attributable to third-party investors in the consolidated joint ventures is included in net income attributable to redeemable interest and non-controlling interests in Ares Operating Group entities.

In addition to our reportable segments, we have an Operations Management Group (the “OMG”).

Our management uses this information to assess

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

NAV refers to the fair value of the assets of a fund less the fair value of the liabilities of the fund.

- “AUM not yet paying fees” (also referred to as "shadow AUM") refers to AUM that is not currently paying fees and is eligible to earn management fees upon deployment;

- “catch-up fees” refers to management fees that are one-time in nature and represents management fees charged to fund investors in subsequent closings of a fund that apply to the time period between the fee initiation date and the subsequent closing date;

- “Class B membership interests” refers to the interests that were retained by the former owners of Crestline Denali Capital LLC and represent the financial interests in the subordinated notes of the related CLOs;

For our funds other than CLOs, our FPAUM represents the amount of limited partner capital commitments for certain closed-end funds within the reinvestment period, the amount of limited partner invested capital for the aforementioned closed-end funds beyond the reinvestment period and the portfolio value, gross asset value or NAV.

For our funds that are CLOs, our FPAUM is equal to the gross amount of aggregate collateral balance, at par, adjusted for defaulted or discounted collateral;

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

- “net performance income” refers to performance income net of performance related compensation.

In addition, permanent capital includes certain insurance related assets that are owned or related to Aspida Life Re Ltd (“Aspida”);

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

- “2030 Senior Notes” refers to senior notes issued by a wholly owned subsidiary of Ares Holdings in June 2020 with a maturity in June 2030.

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [Item 1.](#i3e11666bc35348be937de74e61bb5043_2038) [](#i3e11666bc35348be937de74e61bb5043_2038)[Business](#i3e11666bc35348be937de74e61bb5043_2038) | | | | | | | | | | | | | | | | | | [8](#i3e11666bc35348be937de74e61bb5043_16) | | | | | |

| [Item 2. Properties](#i3e11666bc35348be937de74e61bb5043_2064) | | | | | | | | | | | | | | | | | | [81](#i3e11666bc35348be937de74e61bb5043_2064) | | | | | |

| [Item 3. Legal Proceedings](#i3e11666bc35348be937de74e61bb5043_187) | | | | | | | | | | | | | | | | | | [81](#i3e11666bc35348be937de74e61bb5043_2064) | | | | | |

| [PART II](#i3e11666bc35348be937de74e61bb5043_184) | | | | | | | | | | | | | | | | | | | | | | | |

| [Item 9A.](#i3e11666bc35348be937de74e61bb5043_181) [Controls](#i3e11666bc35348be937de74e61bb5043_181) [a](#i3e11666bc35348be937de74e61bb5043_181)[nd Procedures](#i3e11666bc35348be937de74e61bb5043_181) | | | | | | | | | | | | | | | | | | [131](#i3e11666bc35348be937de74e61bb5043_181) | | | | | |

| [PART III](#i3e11666bc35348be937de74e61bb5043_2112) | | | | | | | | | | | | | | | | | | | | | | | |

| [PART IV](#i3e11666bc35348be937de74e61bb5043_2119) | | | | | | | | | | | | | | | | | | | | | | | |

| [Signatures](#i3e11666bc35348be937de74e61bb5043_208) | | | | | | | | | | | | | | | | | | [138](#i3e11666bc35348be937de74e61bb5043_208) | | | | | |

Unless the context suggests otherwise, references in this Annual Report on Form 10 K to (1) “Ares,” the "Company," “we,” “us” and “our” refer to our businesses, both before and after our conversion to a corporation.

The use of any defined term in this report to mean more than one entities, persons, securities or other items collectively is solely for convenience of reference and in no way implies that such entities, persons, securities or other items are one indistinguishable group.

For example, notwithstanding the use of the defined terms “Ares,” “we” and “our” in this report to refer to Ares Management Corporation and its subsidiaries, each subsidiary of Ares Management Corporation is a standalone legal entity that is separate and distinct from Ares Management Corporation and any of its other subsidiaries.

consider the cost structure of the OMG when evaluating our financial performance.

- “Conversion” refers to our conversion effective November 26, 2018 from a Delaware limited partnership named Ares Management, L.P. into a Delaware corporation named Ares Management Corporation;

- “Co-Founders” refers to Michael Arougheti, David Kaplan, John Kissick, Antony Ressler and Bennett Rosenthal;

- “Term Loans” refers to term loans held by wholly owned subsidiaries of Ares Management LLC (“AM LLC”).

References in this Annual Report on Form 10-K to (1) “common shares” and “preferred shares” refer to shares of our Class A common stock and the Series A Preferred Stock, respectively, previously outstanding prior to our Conversion and (2) “common shareholders” and “preferred shareholders” refer to holders of shares of our Class A common stock and shares of the Series A Preferred Stock, respectively, prior to our Conversion.

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

We also lease office space in Culver City, New York, [removed: London,] [added: London] and other cities around the world.

[removed: This] [added: The number of holders of record of our Class A common stock as of February 18, 2021 was 15, which] does not include the number of shareholders that hold shares in “street name” through banks or broker-dealers.

The following graph depicts the total return to holders of our Class A common stock from the closing price on December 31, [removed: 2014] [added: 2015] through December 31, [removed: 2019,] [added: 2020,] relative to the performance of the S&P 500 Index and the Dow Jones U.S. Asset Managers Index.

The graph assumes $100 invested on December 31, [removed: 2014] [added: 2015] and dividends received reinvested in the security or index.

[removed: ][added: ]

| Period | | | Total Number of Shares Purchased | | | Average Price Paid Per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or [removed: Programs (1)] [added: Programs (1)] | | |

(1)In February [removed: 2019,] [added: 2020,] our board of directors [removed: authorized] [added: approved] the [added: renewal of our stock] repurchase [added: program that authorizes the repurchase] of up to $150 million of shares of our Class A common stock.

In February [removed: 2020,] [added: 2021,] our board of directors approved the renewal of the program and [removed: reset the repurchase amount back] [added: it is scheduled] to [removed: $150 million.][added: expire in February 2022.]

As of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the Company had 12,400,000 shares of Series A Preferred Stock outstanding.

During [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] we paid quarterly dividends [removed: of] [added: totaling] approximately $21.7 million in each year to holders of record of shares of the Series A Preferred Stockholders, and in February [removed: 2020,] [added: 2021,] the Company's board of directors declared a quarterly dividend of $5.4 million payable on March 31, [removed: 2020] [added: 2021] to holders of record of shares of the Series A Preferred Stock at the close of business on March 15, [removed: 2020.][added: 2021.]

During [removed: 2019,] [added: 2020,] we declared a dividend each quarter of [removed: $0.32] [added: $0.40] (totaling [removed: $1.28)] [added: $1.60 annually)] per share to Class A common stockholders at the close of business on March [removed: 15, 2019,] [added: 17, 2020,] June [removed: 14, 2019,] [added: 16, 2020,] September 16, [removed: 2019,] [added: 2020,] and December 17, [removed: 2019,] [added: 2020,] respectively, or approximately [removed: $138.6] [added: $217.7] million.

In February [removed: 2020,] [added: 2021,] the Company's board of directors declared a quarterly dividend of [removed: $0.40] [added: $0.47] per share of Class A common stock, or approximately [removed: $47.4] [added: $70.3] million, with respect to the first quarter of [removed: 2020] [added: 2021] payable on March 31, [removed: 2020] [added: 2021] to common stockholders of record at the close of business on March 17, [removed: 2020.][added: 2021.]

We intend to provide a steady quarterly dividend for each calendar year that will be based on our [added: expected] after-tax fee related earnings, with future potential changes based on the level and growth of our after-tax fee related earnings.

Subject to the approval of our board of directors, we intend to pay a dividend of [removed: $0.40] [added: $0.47] per share of our Class A common stock per quarter in [removed: 2020.][added: 2021.]

Generally, these tax distributions are computed based on our estimate of the net taxable income of the relevant entity multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an [removed: individual or corporate resident in Los Angeles, California or New York, New York, whichever is higher (taking into account the non-deductibility of certain expenses and the character of our income).]

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

| October 1, 2020 - October 31, 2020 | | | — | | | $ | — | | — | | | $ | 150,000 | |

| November 1, 2020 - November 30, 2020 | | | — | | | — | | | — | | | 150,000 | | |

| December 1, 2020 - December 31, 2020 | | | — | | | — | | | — | | | 150,000 | | |

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

During 2019, we declared a dividend each quarter of $0.32 (totaling $1.28 annually) per share to Class A common stockholders, or approximately $138.6 million.

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

individual or corporate resident in Los Angeles, California or New York, New York, whichever is higher (taking into account the non-deductibility of certain expenses and the character of our income).

The number of holders of record of our Class A common stock as of February 21, 2020 was two.

| October 1, 2019 - October 31, 2019 | | | — | | | $ | — | | — | | | $ | 139,551 | |

| November 1, 2019 - November 30, 2019 | | | — | | | — | | | — | | | 139,551 | | |

| December 1, 2019 - December 31, 2019 | | | — | | | — | | | — | | | 139,551 | | |

The program is scheduled to expire in March 2021.

As March 15, 2020 falls on a Sunday, the effective record date for the dividend will be Friday, March 13, 2020.

During 2018, we declared dividends of $0.40, $0.0933, $0.28, $0.28 and $0.28 (totaling $1.33) per share to Class A common stockholders, or approximately $125.8 million.

[removed: We derived the following selected consolidated] [added: Consolidated] financial data of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] and for the years ended December 31, [added: 2020,] 2019, [removed: 2018,] and [removed: 2017] [added: 2018 can be derived] from the audited consolidated financial statements included in this Annual Report on Form 10-K.

[removed: The selected consolidated] [added: Consolidated] financial data of the Company as of [added: December 31, 2018, 2017] and [added: 2016 and] for the years ended December 31, [removed: 2016] [added: 2017] and [removed: 2015 were] [added: 2016 can be] derived from [removed: the audited consolidated financial statements of the Company, which are not included in this Annual Report on Form 10-K.][added: Part II, “Item 6.]

Selected Financial Data” in our [Annual Report on Form 10-K](https://www.sec.gov/Archives/edgar/data/0001176948/000162828020002489/ares-20191231.htm) for the year ended December 31, 2019.

Management believes that no material trends have been omitted by removing the tabular disclosure.

The following tables present selected consolidated financial information and other data of the Company.

The Company, which was formed on November 15, 2013 as a partnership and converted to a Delaware corporation effective November 26, 2018, was formed to serve as a holding company for our businesses.

See “Item 1.

Business—Organizational Structure.”

The consolidated financial statements were prepared on substantially the same basis as the audited consolidated financial statements and include all adjustments that we consider necessary for a fair presentation of the Company’s consolidated financial position and results of operations.

The selected historical financial data is not indicative of the expected future operating results of the Company.

The entities comprising our Consolidated Funds are not the same entities for all periods presented.

The consolidation of funds during the periods generally has the effect of grossing up reported assets, liabilities and cash flow, and has no effect on net income attributable to the Company or total stockholders' equity.

See “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation and Deconsolidation of Ares Funds” and “—Critical Accounting Estimates—Principles of Consolidation” and Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

The following selected historical consolidated financial data should be read together with “Item 1.

Business—Organizational Structure,” “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K ($ in thousands):

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | Year Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | 2016 | | | | | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Statements of operations data | | | | | | | | | | | | | | | As Adjusted | | | | | | As Adjusted | | | | | | As Adjusted | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total revenues | | | $ | 1,765,438 | | | | | $ | 958,461 | | | | | $ | 1,479,943 | | | | | $ | 1,254,373 | | | | | $ | 825,732 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total expenses | | | 1,462,797 | | | | | | 870,362 | | | | | | 1,504,758 | | | | | | 1,016,420 | | | | | | 769,040 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total other income | | | 122,539 | | | | | | 96,242 | | | | | | 174,674 | | | | | | 59,967 | | | | | | 24,792 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Income before taxes | | | 425,180 | | | | | | 184,341 | | | | | | 149,859 | | | | | | 297,920 | | | | | | 81,484 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Income tax expense (benefit) | | | 52,376 | | | | | | 32,202 | | | | | | (23,052) | | | | | | 11,019 | | | | | | 19,064 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income | | | 372,804 | | | | | | 152,139 | | | | | | 172,911 | | | | | | 286,901 | | | | | | 62,420 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds | | | 39,704 | | | | | | 20,512 | | | | | | 60,818 | | | | | | 3,386 | | | | | | (5,686) | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Less: Net income attributable to redeemable interests in Ares Operating Group entities | | | — | | | | | | — | | | | | | — | | | | | | 456 | | | | | | 338 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Less: Net income attributable to non-controlling interests in Ares Operating Group entities | | | 184,216 | | | | | | 74,607 | | | | | | 35,915 | | | | | | 171,251 | | | | | | 48,390 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income attributable to Ares Management Corporation | | | 148,884 | | | | | | 57,020 | | | | | | 76,178 | | | | | | 111,808 | | | | | | 19,378 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Less: Series A Preferred Stock dividends paid | | | 21,700 | | | | | | 21,700 | | | | | | 21,700 | | | | | | 12,176 | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income attributable to Ares Management Corporation Class A common stockholders | | | $ | 127,184 | | | | | $ | 35,320 | | | | | $ | 54,478 | | | | | $ | 99,632 | | | | | $ | 19,378 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income per share of Class A common stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Basic | | | $ | 1.11 | | | | | $ | 0.30 | | | | | $ | 0.62 | | | | | $ | 1.22 | | | | | $ | 0.23 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Diluted | | | $ | 1.06 | | | | | $ | 0.30 | | | | | $ | 0.62 | | | | | $ | 1.20 | | | | | $ | 0.23 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Dividend declared and paid per share of Class A common stock | | | $ | 1.28 | | | | | $ | 1.33 | | | | | $ | 1.13 | | | | | $ | 0.83 | | | | | $ | 0.88 | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | As of December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Statements of financial condition data | | | | | | | | | | | | | | | As Adjusted | | | | | | As Adjusted | | | | | | As Adjusted | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total assets | | | $ | 12,014,196 | | | | | $ | 10,154,692 | | | | | $ | 8,563,522 | | | | | $ | 5,829,712 | | | | | $ | 4,321,408 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Debt obligations | | | 316,609 | | | | | | 480,952 | | | | | | 616,176 | | | | | | 305,784 | | | | | | 389,120 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| CLO loan obligations of Consolidated Funds | | | 7,973,748 | | | | | | 6,678,091 | | | | | | 4,963,194 | | | | | | 3,031,112 | | | | | | 2,174,352 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Consolidated Funds’ borrowings | | | 107,244 | | | | | | 209,284 | | | | | | 138,198 | | | | | | 55,070 | | | | | | 11,734 | | | | | | | | | | | | | | | | | | | | | | | | | | |

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our [removed: co-principal] [added: principal] executive [removed: officers] [added: officer] and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, [removed: 2019.][added: 2020.]

Based upon that evaluation and subject to the foregoing, our principal executive [removed: officers] [added: officer] and principal financial officer concluded that, as of December 31, [removed: 2019,] [added: 2020,] the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, [removed: 2019] [added: 2020] that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our consolidated financial statements would be prevented or [removed: detected on a timely basis.]

Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

We have audited Ares Management Corporation’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”).

In our opinion, Ares Management Corporation (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] 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, [removed: 2019,] [added: 2020,] and the related notes and our report dated February [removed: 27, 2020] [added: 25, 2021] expressed an unqualified opinion thereon.

detected on a timely basis.

February 25, 2021

February 27, 2020

On February 22, 2021, the Company’s board of directors amended the terms of certain outstanding equity awards held by certain of the Company’s executive officers, including our Chief Operating Officer and Chief Financial Officer (the “Previously Granted Awards”), to make the “double-trigger” vesting provisions of such awards consistent with the vesting provisions of equity awards that were subsequently granted to executives of the Company.

The Previously Granted Awards, as amended, provide that, upon the participant’s termination of employment by the Company without cause or the participant’s resignation for good reason, in each case, within six months following a change in control, any unvested Previously Granted Awards will fully vest.

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) and Section 13(r) of the Exchange Act, require an issuer to disclose in its annual and quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions relating to Iran.

On June 20, 2019, certain investment funds managed or advised by U.K.-based affiliates of Ares (the “Ares Entities”) acquired approximately 28.7% of the ordinary shares and 54.3% of the preferred shares of AgriBriefing 1364 Limited (“AgriBriefing”), a company based in London that provides price reporting data on a subscription basis to participants in the agricultural industry.

Although the Ares Entities do not hold the largest voting position in AgriBriefing, their holdings of ordinary and preferred shares represent a majority of the outstanding equity interests in AgriBriefing.

In addition, the Ares Entities hold certain contractual veto rights and the right to appoint a director to the board of directors of AgriBriefing.

As a result, under applicable SEC definitions, the Ares Entities may be deemed to control AgriBriefing; however, this statement is not meant to be an admission that common control exists.

Subsequent to completion of the Ares Entities’ investment in AgriBriefing, in connection with Ares’ routine quarterly survey of its investment funds’ portfolio companies, AgriBriefing informed the Ares Entities that it had subscription contracts with five customers whose billing addresses were based in Iran.

We have not been able to verify the identity or affiliations of these customers.

As a result, it appears that we are required to provide this disclosure under ITRA and Section 13(r) of the Exchange Act.

These subscriptions generated annual gross revenues of less than €25,000 (less than 1% of AgriBriefing’s revenues) and de minimus net profits.

AgriBriefing confirmed that each of the subscriptions commenced prior to the investment in AgriBriefing by the Ares Entities, and that it terminated these subscriptions in July 2019 and does not intend to engage in any further dealings or transactions with these customers.

Based on currently available information, we and the Ares Entities have no reason to believe that any of the five customers are listed on the U.S. Treasury Department Office of Foreign Assets Control list of Specially Designated Nationals or that AgriBriefing has conducted any dealings in violation ITRA.

This disclosure does not relate to any activities conducted by Ares and does not involve Ares.

This disclosure relates solely to activities conducted by AgriBriefing and its consolidated subsidiaries.

The information required by this item is incorporated by reference to our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, [removed: 2019.][added: 2020.]

The information required by this item is incorporated by reference to our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, [removed: 2019.][added: 2020.]

The information required by this item is incorporated by reference to our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, [removed: 2019.][added: 2020.]

The information required by this item is incorporated by reference to our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, [removed: 2019.][added: 2020.]

The information required by this item is incorporated by reference to our definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, [removed: 2019.][added: 2020.]

| Consolidated Statements of Financial Condition as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] | | |

| Consolidated Statements of Operations for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | | |

| Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | | |

| Consolidated Statements of Changes in Equity for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | | |

| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | | |

| [removed: [4.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit41.htm)] [added: [4.1](http://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit41.htm)] | | | | | | Description of Ares Management Corporation's Securities. | | |

| [removed: [4.5](http://www.sec.gov/Archives/edgar/data/1176948/000110465914070769/a14-21394_4ex4d2.htm)] [added: [4.5](https://www.sec.gov/Archives/edgar/data/1176948/000110465914070769/a14-21394_4ex4d2.htm)] | | | | | | Form of 4.000% Senior Note due 2024 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (File No. 001-36429) filed with the SEC on October 8, 2014). | | |

| [removed: [10.16](http://www.sec.gov/Archives/edgar/data/1176948/000104746914003833/a2219658zex-10_11.htm)] [added: [10.18](http://www.sec.gov/Archives/edgar/data/1176948/000104746914003833/a2219658zex-10_11.htm)] | | | | | | Restated Investment Advisory and Management Agreement between Ares Capital Corporation and Ares Capital Management LLC, dated as of June 6, 2011 (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-194919) filed with the SEC on April 16, 2014). | | |

| [removed: [10.17](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1017.htm)] [added: [10.20](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1017.htm)] | | | | | | Form of Indemnification Agreement. # | | |

| [removed: [10.18](http://www.sec.gov/Archives/edgar/data/1176948/000110465918069794/a18-40419_1ex10d2.htm)] [added: [10.21](http://www.sec.gov/Archives/edgar/data/1176948/000110465918069794/a18-40419_1ex10d2.htm)] | | | | | | Form of Restricted Unit Agreement under the Second Amended & Restated 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-8 POS (File No. 333-225271) filed with the SEC on November 26, 2018). # | | |

| [removed: [10.](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1019.htm)[1](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1019.htm)[9](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1019.htm)] [added: [10.22](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1019.htm)] | | | | | | Form of Option Agreement under the Second Amended & Restated 2014 Equity Incentive Plan. # | | |

| [removed: [10.20](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1020.htm)] [added: [10.23](http://www.sec.gov/Archives/edgar/data/1176948/000162828019001988/a2018q4exhibit1020.htm)] | | | | | | Form of Phantom Unit Agreement under the Second Amended & Restated 2014 Equity Incentive Plan. # | | |

| [removed: [10.21](http://www.sec.gov/Archives/edgar/data/1176948/000104746914003681/a2219594zex-10_16.htm)] [added: [10.24](http://www.sec.gov/Archives/edgar/data/1176948/000104746914003681/a2219594zex-10_16.htm)] | | | | | | Form of ARCC Incentive Fee Award (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S‑1/A (File No. 333-194919) filed with the SEC on April 11, 2014). | | |

| [removed: [10.22](http://www.sec.gov/Archives/edgar/data/1176948/000155837016003647/ares-20151231ex1028283d6.htm)] [added: [10.25](http://www.sec.gov/Archives/edgar/data/1176948/000155837016003647/ares-20151231ex1028283d6.htm)] | | | | | | Form of Amended and Restated Limited Partnership Agreement of Carry Vehicles (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-36429, filed with the SEC on February 29, 2016). | | |

| [removed: [10.23](http://www.sec.gov/Archives/edgar/data/1176948/000155837016003647/ares-20151231ex102906696.htm)] [added: [10.26](http://www.sec.gov/Archives/edgar/data/1176948/000155837016003647/ares-20151231ex102906696.htm)] | | | | | | Form of Supplemental Award Agreement for Carried Interest (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-36429, filed with the SEC on February 29, 2016). | | |

| [removed: [10.24](http://www.sec.gov/Archives/edgar/data/1176948/000162828017001756/exhibit1024.htm)] [added: [10.27](http://www.sec.gov/Archives/edgar/data/1176948/000162828017001756/exhibit1024.htm)] | | | | | | Form of Annual Incentive Fee Award Letter (incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 001-36429, filed with the SEC on February 27, 2017). | | |

| [removed: [10.25](http://www.sec.gov/Archives/edgar/data/1176948/000110465918069794/a18-40419_1ex10d3.htm)] [added: [10.28](http://www.sec.gov/Archives/edgar/data/1176948/000110465918069794/a18-40419_1ex10d3.htm)] | | | | | | Form of Deferred Restricted Unit Agreement under the Second Amended & Restated 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 POS (File No. 333-225271) filed with the SEC on November 26, 2018). # | | |

| [removed: [10.26](http://www.sec.gov/Archives/edgar/data/1176948/000104746915002528/a2223704zex-10_26.htm)] [added: [10.29](http://www.sec.gov/Archives/edgar/data/1176948/000104746915002528/a2223704zex-10_26.htm)] | | | | | | Offer Letter for Michael R. McFerran, dated March 10, 2015 (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K (File No. 001-36429) filed with the SEC on March 20, 2015). [added: #] | | |

| [removed: [10.27](http://www.sec.gov/Archives/edgar/data/1176948/000110465918069794/a18-40419_1ex10d4.htm)] [added: [10.30](http://www.sec.gov/Archives/edgar/data/1176948/000110465918069794/a18-40419_1ex10d4.htm)] | | | | | | Form of Director Restricted Unit Agreement under the Second Amended & Restated 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-8 POS (File No. 333-225271) filed with the SEC on November 26, 2018). # | | |

| [removed: [10.28](http://www.sec.gov/Archives/edgar/data/1176948/000162828018010477/a201802exhibit101.htm)] [added: [10.31](http://www.sec.gov/Archives/edgar/data/1176948/000162828018010477/a201802exhibit101.htm)] | | | | | | Restricted Unit Agreement, dated as of July 31, 2018, by and between Michael J Arougheti and Ares Management, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36429) filed with the SEC on August 6, 2018). # | | |

| [removed: [10.29](http://www.sec.gov/Archives/edgar/data/1176948/000110465919017422/a19-7225_1ex10d1.htm)] [added: [10.16](http://www.sec.gov/Archives/edgar/data/1176948/000110465919017422/a19-7225_1ex10d1.htm)] | | | | | | Amendment No. 8, dated as of March 21, 2019, to the Sixth Amended and Restated Credit Agreement, dated as of April 21, 2014, by and among Ares Holdings L.P., Ares Investments L.P., the Guarantors party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-36429) filed with the SEC on March 26, 2019). | | |

| [removed: 10.30] [added: [10.32](http://www.sec.gov/Archives/edgar/data/1176948/000110465919039710/a19-12367_1ex2d1.htm#Exhibit992_1_032715)] | | | | | | Stock Purchase Agreement, dated July 9, 2019, between Aspida Holdco, LLC and GBIG Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K (File 001-36429) filed with the SEC on July 9, 2019). | | |

| [removed: [10.31](http://www.sec.gov/Archives/edgar/data/1176948/000162828019013488/exhibit102-secondarima.htm)] [added: [10.19](http://www.sec.gov/Archives/edgar/data/1176948/000162828019013488/exhibit102-secondarima.htm)] | | | | | | Second Amended and Restated Investment Advisory and Management Agreement, dated June 6, 2019, between Ares Capital Corporation and Ares Capital Management LLC (incorporated by reference to exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-36429) filed with the SEC on November 6, 2019). | | |

| [removed: [21.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit211.htm)] [added: [21.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit211.htm)] | | | | | | Subsidiaries of Ares Management Corporation. | | |

| [removed: [23.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit231.htm)] [added: [23.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit231.htm)] | | | | | | Consent of Ernst and Young LLP. | | |

| [removed: [31.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit311.htm)] [added: [31.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit311.htm)] | | | | | | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a). | | |

| [removed: [31.2*](https://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit312.htm)] [added: [31.2*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit312.htm)] | | | | | | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a). | | |

| [removed: [32.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828020002489/a2019q4exhibit321.htm)] [added: [32.1*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit321.htm)] | | | | | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | | |

| [4.7](https://www.sec.gov/Archives/edgar/data/1176948/000162828020009441/june2020exhibit41bondo.htm) | | | | | | Indenture dated as of June 15, 2020 among Ares Finance Co. II LLC, Ares Holdings L.P., Ares Investments L.P., Ares Management LLC, Ares Investments Holdings LLC, Ares Finance Co. LLC and Ares Offshore Holdings L.P. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K (File No. 001-36429) filed with the SEC on June 15, 2020). | | |

| [4.8](https://www.sec.gov/Archives/edgar/data/1176948/000162828020009441/june2020exhibit42bondo.htm) | | | | | | First Supplemental Indenture dated as of June 15, 2020 among Ares Finance Co. II LLC, Ares Holdings L.P., Ares Investments L.P., Ares Management LLC, Ares Investments Holdings LLC, Ares Finance Co. LLC and Ares Offshore Holdings L.P. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K (File No. 001-36429) filed with the SEC on June 15, 2020). | | |

| [4.9](https://www.sec.gov/Archives/edgar/data/1176948/000162828020009441/june2020exhibit42bondo.htm) | | | | | | Form of 3.250% Senior Note due 2030 (incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K (File No. 001-36429) filed with the SEC on June 15, 2020). | | |

| [10.17](http://www.sec.gov/Archives/edgar/data/1176948/000162828020004534/april2020exhibit101.htm) | | | | | | Amendment No. 9, dated as of March 30, 2020, to the Sixth Amended and Restated Credit Agreement, dated as of April 21, 2014, by and among Ares Holdings L.P., Ares Investments L.P., the Guarantors party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-36429) filed with the SEC on April 1, 2020). | | |

| [10.33](http://www.sec.gov/Archives/edgar/data/1176948/000110465920039830/tm2014100d1_ex10-1.htm) | | | | | | Share Purchase Agreement, dated March 27, 2020, between Sumitomo Mitsui Banking Corporation and Ares Management Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File 001-36429) filed with the SEC on March 30, 2020). | | |

| [10.34](https://www.sec.gov/Archives/edgar/data/0001176948/000110465920039830/tm2014100d1_ex10-2.htm) | | | | | | Investor Rights Agreement, dated March 31, 2020, by and between Sumitomo Mitsui Banking Corporation and Ares Management Corporation. | | |

| [10.35*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit1035.htm) | | | | | | Form of Executive Officer Time-Based Restricted Unit Agreement under the Second Amended & Restated 2014 Equity Incentive Plan. # | | |

| [10.36*](https://www.sec.gov/Archives/edgar/data/1176948/000162828021003314/a2020q4exhibit1036.htm) | | | | | | Form of Executive Officer Performance-Based Restricted Unit Agreement under the Second Amended & Restated 2014 Equity Incentive Plan. # | | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Exhibit No. | | | | | | Description | | |

| | | | ARES MANAGEMENT CORPORATION | | | | | | | | | [removed: | | | | | |]

| Dated: February [removed: 27, 2020] [added: 25, 2021] | | | [removed: By:] | | | [added: By:] | | | /s/ Michael J Arougheti | | | [removed: | | | | | |]

| | | | | | | Name: | | | Michael J Arougheti | | | [removed: | | | | | |]

| | | | | | | Title: | | | Co-Founder, Chief Executive Officer & President (Principal Executive Officer) | | | [removed: | | | | | |]

| By: | | | /s/ Antony P. Ressler | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Antony P. Ressler | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| | | | Title: | | | Executive Chairman & Co-Founder | | | | | | | | | [removed: | | |]

| By: | | | /s/ Michael J Arougheti | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Michael J Arougheti | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| | | | Title: | | | Director, Co-Founder, Chief Executive Officer & President (Principal Executive Officer) | | | | | | | | | [removed: | | |]

| By: | | | /s/ Michael R. McFerran | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Michael R. McFerran | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| | | | Title: | | | Chief Operating Officer & Chief Financial Officer (Principal Financial and Accounting Officer) | | | | | | | | | [removed: | | |]

| By: | | | /s/ David B. Kaplan | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | David B. Kaplan | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| | | | Title: | | | Director, Co-Founder & Co-Chairman of Private Equity Group | | | | | | | | | [removed: | | |]

| By: | | | /s/ Bennett Rosenthal | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Bennett Rosenthal | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| By: | | | /s/ R. Kipp deVeer | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | R. Kipp deVeer | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| | | | Title: | | | Director & Head of Credit Group | | | | | | | | | [removed: | | |]

| By: | | | /s/ Paul G. Joubert | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Paul G. Joubert | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| | | | Title: | | | Director | | | | | | | | | [removed: | | |]

| By: | | | /s/ Michael Lynton | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Michael Lynton | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| By: | | | /s/ Judy D. Olian | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Dr. Judy D. Olian | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| By: | | | /s/ Antoinette Bush | | | | | | | | | | | | [removed: | | |]

| | | | Name: | | | Antoinette Bush | | | | | | Dated: February [removed: 27, 2020 | | |] [added: 25, 2021] | | |

| [Report of Independent Registered Public Accounting [removed: Firm](#i3e11666bc35348be937de74e61bb5043_19)] [added: Firm](#ia941a4c408f84e8aa050b827583b9b86_304)] | | | | | | [removed: [F-2](#i3e11666bc35348be937de74e61bb5043_19)] [added: [F-2](#ia941a4c408f84e8aa050b827583b9b86_304)] | | |

| [Consolidated Statements of Financial Condition as [removed: of](#i3e11666bc35348be937de74e61bb5043_22) [December] [added: of December] 31, [removed: 2019](#i3e11666bc35348be937de74e61bb5043_22)] [added: 20](#ia941a4c408f84e8aa050b827583b9b86_22)[20](#ia941a4c408f84e8aa050b827583b9b86_22)] [and [removed: 2018](#i3e11666bc35348be937de74e61bb5043_22)] [added: 201](#ia941a4c408f84e8aa050b827583b9b86_22)[9](#ia941a4c408f84e8aa050b827583b9b86_22)] | | | | | | [removed: [F-3](#i3e11666bc35348be937de74e61bb5043_22)] [added: [F-4](#ia941a4c408f84e8aa050b827583b9b86_22)] | | |

| [Consolidated Statements of Operations for the years ended December 31, [removed: 2019, 2018 and 2017](#i3e11666bc35348be937de74e61bb5043_28)] [added: 20](#ia941a4c408f84e8aa050b827583b9b86_25)[20](#ia941a4c408f84e8aa050b827583b9b86_25)[, 201](#ia941a4c408f84e8aa050b827583b9b86_25)[9](#ia941a4c408f84e8aa050b827583b9b86_25) [and 201](#ia941a4c408f84e8aa050b827583b9b86_25)[8](#ia941a4c408f84e8aa050b827583b9b86_25)] | | | | | | [removed: [F-4](#i3e11666bc35348be937de74e61bb5043_28)] [added: [F-5](#ia941a4c408f84e8aa050b827583b9b86_25)] | | |

| [Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2019, 2018 and 2017](#i3e11666bc35348be937de74e61bb5043_34)] [added: 20](#ia941a4c408f84e8aa050b827583b9b86_31)[20](#ia941a4c408f84e8aa050b827583b9b86_31)[, 201](#ia941a4c408f84e8aa050b827583b9b86_31)[9](#ia941a4c408f84e8aa050b827583b9b86_31) [and 201](#ia941a4c408f84e8aa050b827583b9b86_31)[8](#ia941a4c408f84e8aa050b827583b9b86_31)] | | | | | | [removed: [F-5](#i3e11666bc35348be937de74e61bb5043_34)] [added: [F-6](#ia941a4c408f84e8aa050b827583b9b86_31)] | | |

| [Consolidated Statements of Changes in Equity for the years ended December [removed: 31, 2019, 2018 and 2017](#i3e11666bc35348be937de74e61bb5043_37)] [added: 31,](#ia941a4c408f84e8aa050b827583b9b86_235) [2020](#ia941a4c408f84e8aa050b827583b9b86_235)[, 201](#ia941a4c408f84e8aa050b827583b9b86_235)[9](#ia941a4c408f84e8aa050b827583b9b86_235) [and 201](#ia941a4c408f84e8aa050b827583b9b86_235)[8](#ia941a4c408f84e8aa050b827583b9b86_235)] | | | | | | [removed: [F-6](#i3e11666bc35348be937de74e61bb5043_37)] [added: [F-7](#ia941a4c408f84e8aa050b827583b9b86_235)] | | |

| [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2019, 2018 and 2017](#i3e11666bc35348be937de74e61bb5043_40)] [added: 20](#ia941a4c408f84e8aa050b827583b9b86_37)[20](#ia941a4c408f84e8aa050b827583b9b86_37)[, 201](#ia941a4c408f84e8aa050b827583b9b86_37)[9](#ia941a4c408f84e8aa050b827583b9b86_37) [and 201](#ia941a4c408f84e8aa050b827583b9b86_37)[8](#ia941a4c408f84e8aa050b827583b9b86_37)] | | | | | | [removed: [F-7](#i3e11666bc35348be937de74e61bb5043_40)] [added: [F-8](#ia941a4c408f84e8aa050b827583b9b86_37)] | | |

| [Notes to Consolidated Financial [removed: Statements](#i3e11666bc35348be937de74e61bb5043_43)] [added: Statements](#ia941a4c408f84e8aa050b827583b9b86_43)] | | | | | | [removed: [F-8](#i3e11666bc35348be937de74e61bb5043_43)] [added: [F-9](#ia941a4c408f84e8aa050b827583b9b86_43)] | | |

We have audited the accompanying consolidated statements of financial condition of Ares Management Corporation (the “Company”) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] 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, [removed: 2019,] [added: 2020,] 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, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] 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, [removed: 2019,] [added: 2020,] 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 [removed: 27, 2020] [added: 25, 2021] expressed an unqualified opinion thereon.

| | | | Title: | | | Director, Co-Founder & Co-Chairman of Private Equity Group | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | Title: | | | Director | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | Title: | | | Director | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | Title: | | | Director | | | | | | | | |

[Table of](#ia941a4c408f84e8aa050b827583b9b86_199) [Contents](#ia941a4c408f84e8aa050b827583b9b86_199)

February 25, 2021

| | | | | | | | | | | | |

| | | | 2020 | | | | | | 2019 | | |

| | | | | | | | | | | | |

| Due from affiliates | | | 405,887 | | | | | | 267,130 | | |

| Other assets | | | 812,419 | | | | | | 342,262 | | |

| | | | | | | | | | | | |

| Redeemable interest in Ares Operating Group entities | | | 100,366 | | | | | | — | | |

| Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (147,182,562 shares and 115,242,028 shares issued and outstanding at December 31, 2020 and 2019, respectively) | | | 1,472 | | | | | | 1,152 | | |

| | | | | | | | | | | | |

| Class C common stock, $0.01 par value, 499,999,000 shares authorized (112,447,618 shares and 1 share issued and outstanding at December 31, 2020 and 2019, respectively) | | | 1,124 | | | | | | — | | |

| Net income attributable to Ares Operating Group entities | | | | | | | | | | | | | | | 296,400 | | | | | | 333,100 | | | | | | 131,627 | | |

| Less: Net loss attributable to redeemable interest in Ares Operating Group entities | | | | | | | | | | | | | | | (976) | | | | | | — | | | | | | — | | |

| Less: Comprehensive income attributable to redeemable interest in Ares Operating Group entities | | | | | | | | | | | | | | | 562 | | | | | | — | | | | | | — | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Consolidation and deconsolidation of funds, net | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,407) | | | | | | (2,407) | | |

| Issuances of common stock | | | | | | | | | — | | | | | | | | | | | | 198 | | | | | | 1,152 | | | | | | 687,142 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 688,492 | | |

| Capital contributions | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 481 | | | | | | — | | | | | | — | | | | | | 44,799 | | | | | | 132,430 | | | | | | 177,710 | | |

| Dividends/Distributions | | | | | | | | | (21,700) | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | (231,446) | | | | | | — | | | | | | (215,334) | | | | | | (251,507) | | | | | | (719,987) | | |

| Net income | | | — | | | | | | 21,700 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 130,442 | | | | | | — | | | | | | 145,234 | | | | | | 28,085 | | | | | | 325,461 | | |

| Currency translation adjustment, net of tax | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,530 | | | | | | 5,561 | | | | | | 15,099 | | | | | | 27,190 | | |

| Equity compensation | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 66,394 | | | | | | — | | | | | | — | | | | | | 56,592 | | | | | | — | | | | | | 122,986 | | |

| Stock option exercises | | | — | | | | | | — | | | | | | — | | | | | | 49 | | | | | | — | | | | | | 92,827 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 92,876 | | |

| Balance at December 31, 2020 | | | $ | — | | | | | $ | 298,761 | | | | | $ | — | | | | | $ | 1,472 | | | | | $ | 1,124 | | | | | $ | 1,043,669 | | | | | $ | (151,824) | | | | | $ | 483 | | | | | $ | 738,369 | | | | | $ | 539,720 | | | | | $ | 2,471,774 | |

| Equity compensation expense | | | 122,986 | | | | | | 97,691 | | | | | | 89,724 | | |

| Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds: | | | | | | | | | | | | | | | | | |

| Cash flows due to changes in operating assets and liabilities allocable to non-controlling interest in Consolidated Funds: | | | | | | | | | | | | | | | | | |

| Acquisitions, net of cash acquired | | | (120,822) | | | | | | — | | | | | | — | | |

| Net cash used in investing activities | | | (136,764) | | | | | | (16,796) | | | | | | (18,419) | | |

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

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.

February 27, 2020

| Other assets | | | 341,293 | | | | | | 377,651 | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Transaction support expense | | | | | | — | | | | | | — | | | | | | 275,177 | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | As Adjusted | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance at December 31, 2016 | | | $ | 298,761 | | | | | $ | — | | | | | $ | 301,790 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | (8,939) | | | | | $ | 447,615 | | | | | | | | $ | 338,035 | | | | | $ | 1,377,262 | |

| 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) | | |

| Contingent consideration | | | — | | | | | | — | | | | | | (20,156) | | | | | | | | | | | | | | |

| Ares Management Corporation and consolidated subsidiaries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

Net income attributable to holders of

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.

considers factors specific to the instrument.

Adoption of ASC 606

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.

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. | | |

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.