Ares Management Corporation · NYSE:ARES
Ares Management — Corporate Update (February 2018)
14 slides from Ares Management's corporate update, Feb 15, 2018
Slide 1: Presentation on Corporate Status Election
Confidential – Not for Publication or Distribution Presentation on Corporate Status Election February 15, 2018
Slide 2: Disclaimer
Confidential – Not for Publication or Distribution 2 Disclaimer This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ material
Slide 3: Certain Tax Considerations
Confidential – Not for Publication or Distribution 3 Certain Tax Considerations The Election for Ares Management, L.P. to be Taxed as a Corporation We have filed an election with the Internal Revenue Service (“IRS”) to be treated as a U.S. corporation for U.S. federal income tax purposes, with an ef
Slide 4: Summary
Confidential – Not for Publication or Distribution 4 Summary We believe changing our tax status from a partnership to a corporation will unlock long term value for our public shareholders We believe these strategic decisions will lead to long term shareholder value creation Note: Going forward we wi
Slide 5: Rationale for Change to Corporate Tax Status
Confidential – Not for Publication or Distribution 5 Rationale for Change to Corporate Tax Status Corporate Tax Status Offers Multiple Benefits QUALIFIED DIVIDEND TO SHAREHOLDERS • For U.S. individuals, dividends are treated as qualified dividends • Public shareholders will also own a share of a com
Slide 6: Structural Considerations for Investors
Confidential – Not for Publication or Distribution 6 Structural Considerations for Investors Partnership Tax Status (OLD) • Ares paid corporate taxes on income generated from management fees(2) and from a small portion of its net realized performance fees; the remaining net performance fees passed-t
Slide 7: Income Flow and Tax Impact - Old
Confidential – Not for Publication or Distribution 7 Preferred Unitholders Receive blend of ordinary income and qualified dividend income PRE FRE Taxable Income Ares Management, L.P. Income Flow and Tax Impact - Old Common unitholders’ earnings from FRE are subject to corporate level tax, but most p
Slide 8: Income Flow and Tax Impact - New
Confidential – Not for Publication or Distribution 8 Preferred Shareholders Receive qualified dividends subject to lower tax rate Taxable Income Ares Management, L.P. (24.4% 2018 effective tax rate) Income Flow and Tax Impact - New Corporate tax election makes all common shareholders’ earnings subje
Slide 9: Adopting Dividend Policy and New Dividend Declaration
Confidential – Not for Publication or Distribution 9 • Ares has adopted a dividend policy to provide a steady quarterly dividend for each calendar year with future potential changes based on the level and growth of after-tax fee related earnings • Ares plans to retain earnings from realized performa
Slide 10: Financial Implications From Corporate Tax Status Election
Confidential – Not for Publication or Distribution 10 Financial Implications From Corporate Tax Status Election Due to the large percentage of Ares FRE already subject to corporate level taxes, the corporate tax status election is expected to have a modest impact to our key earnings metrics Backgrou
Slide 11: Illustrative Impact of Corporate Tax Status Election on Common Shareholder Income
Confidential – Not for Publication or Distribution 11 Illustrative Impact of Corporate Tax Status Election on Common Shareholder Income Using illustrative 2017 results and assuming taxable income matches FRE and realized PRE, shareholder after-tax income is moderately higher after the corporate tax
Slide 12: Illustrative Economic Impact of Common Shareholder Benefits Under Ares Dividend Policy
Confidential – Not for Publication or Distribution 12 Illustrative Economic Impact of Common Shareholder Benefits Under Ares Dividend Policy In addition to the common shareholder tax benefits associated with Ares’ corporate tax status election, the economic benefits of a company with higher retained
Slide 13: Accretion / (Dilution) Comparison of Partnership vs. Corporation
Confidential – Not for Publication or Distribution 13 For the year ended December 31, 2017 (dollars in millions) Total Share Ownership by Common Partnership Taxes at 2017 Rate (37.8%) Corporate Taxes at 2018 Rate (24.4%) FRE $ 217.0 $ 217.0 FRE Taxes (82.0) (52.9) FRE, Net of Taxes $ 135.0 $ 164.1 R
Slide 14: Key Takeaways
Confidential – Not for Publication or Distribution 14 • Elimination of Schedule K-1 filings and other tax impediments potentially expands our investor base which could help increase our liquidity and trading volume • Asset managers structured with pass-through tax status have historically traded at