Item 1. Financial Statements

See accompanying notes to the consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

1. Organization

Hamilton Lane Incorporated (“HLI”) was incorporated in the State of Delaware on December 31, 2007. As of March 6, 2017, following its initial public offering (“IPO”) and related transactions, HLI became a publicly-traded entity, and is a holding company whose principal asset is a controlling equity interest in Hamilton Lane Advisors, L.L.C. (“HLA”). As the sole managing member of HLA, HLI operates and controls all of the business and affairs of HLA, and through HLA, conducts its business. As a result, HLI consolidates HLA’s financial results and reports a non-controlling interest related to the portion of HLA units not owned by HLI. The assets and liabilities of HLA represent substantially all of HLI’s consolidated assets and liabilities with the exception of certain deferred tax assets and liabilities, payable to related parties pursuant to a tax receivable agreement, and dividends payable. As of June 30, 2018 and March 31, 2018 , HLI held approximately 42.1% of the economic interest in HLA. As future exchanges of HLA units occur pursuant to the exchange agreement in place with HLA’s members, the economic interest in HLA held by HLI will increase.

HLA is a registered investment advisor with the United States Securities and Exchange Commission (“SEC”), providing asset management and advisory services, primarily to institutional investors, to design, build and manage private markets portfolios. HLA sponsors the formation, and serves as the general partner or managing member, of various limited partnerships or limited liability companies consisting of specialized funds and certain single client separate account entities (“Partnerships”) that acquire interests in third-party managed investment funds that make private equity and equity-related investments. The Partnerships may also make direct co-investments, including investments in debt, equity, and other equity-based instruments. HLA, which includes certain subsidiaries that serve as the general partner or managing member of the Partnerships, may invest its own capital in the Partnerships and generally makes all investment and operating decisions for the Partnerships. HLA operates several wholly-owned entities through which it conducts its foreign operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Management believes it has made all necessary adjustments (which consisted of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. Results of operations for the three months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending March 31, 2019. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of March 31, 2018.

Fair Value of Financial Instruments

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below:

The carrying amount of cash and cash equivalents, fees receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments.

The carrying amounts of the term loan and revolving loan facility of $73,257 and $10,450 , respectively, as of June 30, 2018 approximated fair values based on then-current market rates for similar debt instruments and are classified as Level II within the fair value hierarchy.

Distributions and Dividends

Distributions and dividends are reflected in the condensed consolidated financial statements when declared. Distributions to members represent amounts paid to the non-controlling interest holders of HLA. All distributions received by HLI from HLA are eliminated in the condensed consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards update (ASU) No. 2014-09, “ Revenue from Contracts with Customers ” (ASU 2014-09). ASU 2014-09 represents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services. The Company adopted the new standard on April 1, 2018 using the modified retrospective approach. Refer to Note 3 for additional information related to revenue recognition and impact from the adoption.

In January 2016, the FASB issued ASU 2016-01, “ Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01) , which requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and entities may early adopt. The Company adopted the standard on April 1, 2018 and the adoption did not have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “ Leases” (ASU 2016-02). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The Company expects its total assets and total liabilities on its condensed consolidated balance sheets to

increase upon adoption of this guidance as a result of recording a lease asset and lease liability related to our operating leases. The Company is continuing to evaluate the impact that this guidance will have on its consolidated financial statements. The Company expects to adopt the new leasing guidance on April 1, 2019.

In August 2016, the FASB issued ASU No. 2016-15, “ Classification of Certain Cash Receipts and Payments ” (ASU 2016-15). ASU 2016-15 clarifies cash flow classification of several discrete cash flows issues including debt prepayment costs and distributions received from equity method investees. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted the standard on April 1, 2018 and the adoption did not have a material impact on its condensed consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

3. Revenue Recognition

On April 1, 2018, the Company adopted the new Accounting Standards Codification 606, Revenue from Contracts with Customers , using the modified retrospective method and applied the guidance only to contracts that were not completed as of that date. As a result, prior period amounts continue to be reported under legacy GAAP. The adoption did not change the historical pattern of recognizing revenue for management and advisory fees and incentive fees. The Company recorded a cumulative-effect adjustment which increased beginning additional paid-in-capital, retained earnings and non-controlling interest in Hamilton Lane Advisors, L.L.C. by $411 , $20 and $566 , respectively. The adjustment related to commission payments that are considered a cost of obtaining a contract under the new guidance and are capitalized and amortized over the expected life of the contractual relationship. These amounts were previously expensed when incurred.

Management and advisory fees

The Company earns management fees from services provided to its specialized funds, customized separate accounts, and distribution management clients, and advisory fees from services provided to advisory clients where the Company does not have discretion over investment decisions. Revenue is recognized when control of the promised services is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. Specialized funds are structured as partnerships having multiple investors with a subsidiary of the Company serving as general partner or managing member. Customized separate accounts are generally contractual arrangements involving an investment management agreement between the Company and a single client. In some cases, a customized separate account will be structured as a partnership with a subsidiary of the Company as general partner or managing member. The Company determined that the partnership is generally considered to be the customer with respect to specialized funds, while the individual investor or single limited partner is the customer with respect to customized separate accounts and advisory clients.

Management fees generally exclude the reimbursement of any partnership expenses paid by the Company on behalf of its customers pursuant to its contracts, including amounts related to professional fees and other fund administrative expenses. For the professional and administrative services performed by third parties that the Company arranges for the partnerships, the Company concluded that the nature of its promise is to arrange for the services to be provided and it does not control the services provided by third parties before they are transferred to the customer. Therefore, the Company is acting as an agent.

Accordingly, the reimbursement for these professional fees paid on behalf of the partnerships is generally presented on a net basis.    

The Company also incurs certain costs, primarily employee travel, organization and syndication costs, for which it receives reimbursement from its customer in connection with satisfying these performance obligations. For reimbursable travel, organization and syndication costs, the Company concluded it controls the services provided by its employees and other parties and therefore is a principal. Accordingly, the Company records the reimbursement for these costs incurred on a gross basis as revenue in management and advisory fees and as expense in general, administrative and other expenses in the Condensed Consolidated Statements of Operations.

The Company considers its performance obligations in its customer contracts to be one of the following based upon the services promised: asset management services, arrangement of administrative services, distribution management services, and reporting services.

For asset management and arrangement of administrative services, the Company satisfies these performance obligations over time as the services are rendered and the customer simultaneously receives and consumes the benefits of the services as they are performed. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to the customer. Management fees from these performance obligations for contracts where the Company has discretion over investment decisions are generally calculated by applying a percentage to unaffiliated committed capital or net invested capital under management and are usually billed quarterly. For many partnerships, fees are based on committed capital during the investment period and then net invested capital through the remainder of the partnership term. The management fee base is subject to factors outside the Company’s control and therefore estimates of future period management fees are not included in the transaction price, as those estimates would be considered constrained. Advisory fees from these performance obligations for contracts where the Company does not have discretion over investment decisions are generally based upon fixed amounts and are usually billed quarterly.

For distribution management services, the Company satisfies these performance obligations at a point in time when shares are sold/liquidated and the proceeds are delivered and the customer receives and consumes the benefits of the services. Distribution management fees are calculated by applying a percentage to the amounts sold/liquidated and are billed at the completion of each transaction.

For reporting services, the Company satisfies these performance obligations over time as the services are rendered and the customer simultaneously receives and consumes the benefits of the services as they are performed. Reporting fees are calculated by applying a fixed rate multiplied by the number of funds monitored and are billed quarterly.

Incentive Fees

Contracts with certain customized separate accounts and specialized funds provide incentive fees, which generally range from 6% to 12.5% of profits, when investment returns exceed minimum return levels or other performance targets on either an annual or inception to date basis. Investment returns are highly susceptible to market factors and judgments and actions of third parties which are outside of the Company’s control. Accordingly, incentive fees are considered variable consideration and are therefore constrained until it is probable that a significant reversal will not occur. Incentive fees from specialized funds and customized separate accounts are generally payable after all contributed capital and the preferred return on that capital has been distributed to investors. The Company recognizes incentive fees when it is probable that a significant reversal will not occur. Incentive fees received before the revenue recognition criteria have been met are deferred and recorded within deferred incentive fee revenue in the

condensed consolidated balance sheets. The Company recognized $2,541 of incentive fees during the three months ended June 30, 2018 which was previously received and deferred.

The following presents management and advisory fee revenues disaggregated by product offering, which aligns with the identified performance obligations and the basis for calculating management and advisory fees:

Cost to obtain contracts

The Company incurs incremental costs related to non-discretionary sales commissions paid to certain employees directly related to customized separate account contracts. These incremental costs are capitalized and amortized over the expected contract length of 10 years proportionately to the management fee revenue expected to be recognized in each year as a percentage of the total expected revenue for the contract. The contract asset related to the cost to obtain contracts was $999 as of June 30, 2018 and is included in other assets in the Condensed Consolidated Balance Sheets. Amortization expense related to this contract asset was $122 for the three months ended June 30, 2018 and is included in general, administrative and other in the Condensed Consolidated Statements of Income.

4. Investments

Investments consist of the following:

Equity method investments

The Company’s equity method investments in Partnerships represent its ownership in certain specialized funds and customized separate accounts. The strategies and geographic location of investments within the Partnerships vary by fund. The Company has a 1% interest in substantially all of the Partnerships. The Company’s other equity method investments represent its ownership in a technology company that provides benchmarking and analytics of private equity data and its ownership in a joint venture that automates the collection of fund and underlying portfolio company data from general

partners. The Company recognized equity method (loss) income related to its investments in Partnerships and other equity method investments of ($114) and $5,919 for the three months ended June 30, 2018 and 2017 , respectively.

Other investments

The Company’s other investments include equity securities in other proprietary investments for which fair value is not readily determinable. The accounting guidance requires equity securities to be recorded at cost and adjusted to fair value at each reporting period. However, the guidance allows for a measurement alternative, which is to record the investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer.

5. Variable Interest Entities

The Company consolidates certain VIEs in which it is determined that the Company is the primary beneficiary. The consolidated VIEs are general partner entities of the Partnerships, which are not wholly owned by the Company. The total assets of the consolidated VIEs are $13,597 and $14,704 as of June 30, 2018 and March 31, 2018 , respectively, and are recorded in Investments in the Condensed Consolidated Balance Sheets. The consolidated VIEs had no liabilities as of June 30, 2018 and March 31, 2018 other than deferred incentive fee revenue of $3,704 and $6,245 as of June 30, 2018 and March 31, 2018 , respectively. The assets of the consolidated VIEs may only be used to settle obligations of the consolidated VIEs, if any. In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities, except for certain entities in which there could be a claw back of previously distributed carried interest.

The Company holds variable interests in certain Partnerships that are VIEs, which are not consolidated, as it is determined that the Company is not the primary beneficiary based upon the Company’s equity interest percentage in each of the VIEs. Certain Partnerships are considered VIEs because limited partners lack the ability to remove the general partner or dissolve the entity without cause, by simple majority vote (i.e. do not have substantive “kick out” or “liquidation” rights). The Company’s involvement with such entities is in the form of direct equity interests in, and fee arrangements with, the Partnerships in which it also serves as the general partner or managing member. In the Company’s role as general partner or managing member, it generally considers itself the sponsor of the applicable Partnership and makes all investment and operating decisions. As of June 30, 2018 , the total commitments and remaining unfunded commitments from the limited partners and general partners to the unconsolidated VIEs are $14,454,389 and $5,458,926 , respectively. These commitments are the primary source of financing for the unconsolidated VIEs.

The maximum exposure to loss represents the potential loss of assets recognized by the Company relating to these unconsolidated entities. The Company believes that its maximum exposure to loss is limited because it establishes separate limited partnerships or limited liability companies to serve as the general partner or managing member of the Partnerships.

6. Acquisition

On August 11, 2017, HLA acquired substantially all the assets of Real Asset Portfolio Management LLC (“RAPM”) for a total aggregate purchase price of approximately $5,840 , of which $5,228 was paid in cash with the remainder settled in 27,240 shares of Class A common stock valued at approximately $612 . An additional amount based upon an agreed multiple of earnings, which is currently estimated at approximately $7,925 of which $6,172 has previously been recognized since the acquisition date through June 30, 2018, could be payable to the principals of RAPM who are now employees of HLA if they remain employed by HLA through the expected payment date in October 2018. As the amount is contingent upon future employment, the amount will be recognized as compensation expense over the required performance period. The Company recorded approximately $2,948 of intangible assets related to the acquired investment management contracts, which assets will be amortized over eight years, and $2,874 of goodwill, which are both recorded in other assets in the Condensed Consolidated Balance Sheets. The remaining assets acquired and liabilities assumed were not material to the condensed consolidated financial statements. Revenue and net income attributable to the acquisition of RAPM were not material for the three months ended June 30, 2018 , and pro forma information related to this acquisition is not included because the impact on the Company’s Condensed Consolidated Statements of Income is not considered to be material.

7. Equity

The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2018 :

During the three months ended June 30, 2018 , the Company retired 3,328 shares of Class A common stock at a total cost of $150 , which were purchased from employees to fund statutory tax withholding requirements.

As of June 30, 2018 , total unrecognized compensation expense related to restricted stock was $14,957 .

9. Compensation and Benefits

The Company has recorded the following amounts related to compensation and benefits:

10. Income Taxes

HLI is the sole managing member of HLA, which is organized as a limited liability company and treated as a “flow-through” entity for income tax purposes. As a “flow-through” entity, HLA is not subject to income taxes apart from certain local taxes assessed at the limited liability company level and foreign taxes attributable to its operations in foreign jurisdictions. Any taxable income or loss generated by HLA is passed through to and included in the taxable income or loss of its members, including HLI, on a pro rata basis. As a result, the Company does not record income taxes on pre-tax income or loss attributable to the non-controlling interests in the general partnerships and HLA, except for certain local and foreign taxes discussed above. HLI is subject to U.S. federal and applicable state corporate income taxes with respect to its allocable share of any taxable income from HLA.

The Company’s effective tax rate used for interim periods is based on an estimated annual effective tax rate including the tax effect of items required to be recorded discretely in the interim period in which those items occur. The effective tax rate is dependent on many factors, including the estimated amount of income subject to income tax; therefore, the effective tax rate can vary from period to period.

The Company’s effective tax rate was 6.5% and 12.6% for the three months ended June 30, 2018 and 2017 , respectively. These rates were less than the statutory rate primarily due to the portion of income allocated to the non-controlling entities and discrete tax adjustments recorded in the three months ended June 30, 2018 .

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, resulting in significant changes to U.S. federal income tax laws which include, but are not limited to: (1) a reduction of the corporate income tax rate from a maximum graduated tax rate of 35% to a flat tax rate of 21% effective January 1, 2018, (2) a limitation of the tax deduction for interest expense, (3) expensing the cost of acquired qualified property, and (4) a one-time transition tax on accumulated, undistributed earnings of certain foreign subsidiaries. The SEC Staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) in December 2017 which addresses situations where the information needed to account for the income tax effects of the Tax Act is either not available, not prepared, or incomplete for the reporting period in which the Tax Act was enacted. During the year ended March 31, 2018, the Company recorded a provisional amount as a reasonable estimate of the impact of the Tax Act in accordance with SAB 118. As of June 30, 2018, the Company has not completed the accounting for the effects of the Tax Act and there have been no changes to the previously recorded provisional amounts.

The Company evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts the valuation allowance when it is more likely than not that all or a portion of the deferred tax asset may not be realized.

As of June 30, 2018 , the Company had no unrecognized tax positions and believes there will be no changes to uncertain tax positions within the next 12 months.

Tax Receivable Agreement

HLI’s purchase of HLA Class A units in connection with the IPO, and the subsequent and future exchanges by holders of HLA units for shares of HLI’s Class A common stock pursuant to the exchange agreement, are expected to result in increases in HLI’s share of the tax basis of the tangible and intangible assets of HLA. This will increase the tax depreciation and amortization deductions that otherwise would not have been available to HLI. These increases in tax basis and tax depreciation and amortization deductions are expected to reduce the amount of cash taxes that HLI would otherwise be required to pay in the future. On March 6, 2017, HLI entered into a tax receivable agreement (“TRA”) with the other members of HLA that requires HLI to pay exchanging HLA unitholders (the “TRA Recipients”) 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that HLI actually realizes (or, under certain circumstances, is deemed to realize) as a result of the increases in tax basis in connection with exchanges by the TRA Recipients described above and certain other tax benefits attributable to payments under the TRA.

Based on current projections, we anticipate having sufficient taxable income to utilize these tax attributes and receive corresponding tax deductions in future periods. Changes in the projected liability resulting from the TRA may occur based on changes in anticipated future taxable income, changes in applicable tax rates or other changes in tax attributes that may occur and could affect the expected future tax benefits to be received by us.

The payable to related parties pursuant to the TRA increased to $34,335 as of June 30, 2018 from $34,133 as of March 31, 2018 as a result of being re-measured due to changes in state tax rates. The change in liability was recorded to other non-operating loss in the Condensed Consolidated Statements of Income. No amounts were paid to TRA Recipients during the three months ended June 30, 2018 .

11. Earnings per Share

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to HLI, and therefore are not participating securities. As a result, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been included. Shares of the Company’s Class B common stock are, however, considered potentially dilutive to the Class A common stock because each share of Class B common stock, together with a corresponding Class B unit, is exchangeable for a share of Class A common stock on a one-for-one basis.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:

The calculation of diluted earnings per share for the three months ended June 30, 2018 and 2017 excludes 30,603,983 and 34,438,669 outstanding Class B and C Units of HLA, respectively, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive.

12. Related-Party Transactions

The Company has investment management agreements with various specialized funds and customized separate accounts that it manages. The Company earned management and advisory fees from Partnerships of $30,593 and $32,867 for the three months ended June 30, 2018 and 2017 , respectively. The Company earned incentive fees from Partnerships of $11,892 and $598 for the three months ended June 30, 2018 and 2017 , respectively.

The Company entered into a service agreement on June 1, 2017 with its joint venture pursuant to which it had expenses of $1,195 for the three months ended June 30, 2018 that are included in general, administrative and other expenses in the Condensed Consolidated Statements of Income. The Company also has a payable to the joint venture of $405 and $393 as of June 30, 2018 and March 31, 2018 , respectively, which is included in other liabilities in the Condensed Consolidated Balance Sheets.

Due from related parties in the Condensed Consolidated Balance Sheets consists primarily of advances made on behalf of the Partnerships for the payment of certain operating costs and expenses for which the Company is subsequently reimbursed and refundable tax distributions made to members.

Fees receivable from the Partnerships were $6,446 and $1,929 as of June 30, 2018 and March 31, 2018 , respectively, and are included in fees receivable in the Condensed Consolidated Balance Sheets.

14. Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may be subject to various legal, regulatory, and/or administrative proceedings from time to time. Although there can be no assurance of the outcome of such proceedings, in the opinion of management, the Company does not believe it is probable that any pending or, to its knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect its condensed consolidated financial statements.

Incentive Fees

In connection with carried interest from the Partnerships, the Company only recognizes its allocable share of the Partnerships’ earnings to the extent that this income is not subject to continuing contingencies. Carried interest allocated to the Company from the Partnerships that is subject to continuing contingencies is not recognized in the accompanying Condensed Consolidated Balance Sheets. The Partnerships have allocated carried interest still subject to contingencies and that did not meet the Company’s criteria for recognition in the amounts of $292,893 and $303,766 , net of amounts attributable to non-controlling interests, at June 30, 2018 and March 31, 2018 , respectively, of which $3,704 and $6,245 at June 30, 2018 and March 31, 2018 , respectively, has been received and deferred by the Company.

If the Company ultimately receives the unrecognized carried interest, a total of $73,223 and $75,306 as of June 30, 2018 and March 31, 2018 , respectively, would potentially be payable to certain employees and third parties pursuant to compensation arrangements related to carried interest profit-sharing plans. Such amounts have not been recorded in the Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Income as the payment is not yet probable.

Commitments

The Company serves as the investment manager of the Partnerships. The general partner or managing member of each Partnership is generally a separate subsidiary of the Company and has agreed to invest funds on the same basis as the limited partners in most instances. The aggregate unfunded commitment of the general partners to the Partnerships was $102,617 and $101,054 as of June 30, 2018 and March 31, 2018 , respectively.

15. Subsequent Events

On July 12, 2018, the Company fully repaid the outstanding balance on its revolving loan facility of $10,450 .

On August 2, 2018, the previously announced acquisition of an entity in which the Company held an investment closed. The Company estimates it will record a gain of approximately $7,600 in connection with the transaction during the fiscal second quarter ending September 30, 2018.

On August 7, 2018, the Company declared a quarterly dividend of $0.2125 per share of Class A common stock to record holders at the close of business on September 14, 2018. The payment date will be October 4, 2018.

Three months ended June 30, 2018 compared to three months ended June 30, 2017

Total revenues increased $10.7 million, or 20%, to $63.4 million, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 , due to an increase in incentive fees.

Management and advisory fees decreased $0.7 million, or 1%, to $51.0 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 . Specialized funds revenue decreased $4.2 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 , due primarily to $5.8 million in retroactive fees from our latest secondary fund in the prior year period. This was partially offset by a $2.6 million increase from our latest co-investment fund, which added $0.9 billion in fee-earning AUM between periods. Included in our latest co-investment fund’s revenue for the quarter was $0.5 million in retroactive fees. Retroactive fees are management fees earned in the current period from investors that commit to a specialized fund towards the end of the fundraising period and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period. Customized separate accounts revenue increased $1.6 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 due to the addition of several new accounts and additional allocations from existing accounts as compared to the prior year period. Advisory and reporting fees increased $1.5 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 , due primarily to the addition of new accounts during the preceding 12 months.

Incentive fees increased $11.4 million to $12.4 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 , due primarily to $6.4 million recognized from one of our customized separate accounts which included the general partner catch-up and $5.2 million from one of our co-investment funds in the period. Recognition of $2.7 million of carried interest did not result in cash incentive fee payments for the period as $0.2 million was attributable to non-controlling interests and $2.5 million was related to the $41.5 million of incentive fee payments that were received in fiscal 2016 but were not recognized as revenue in that period.

Expenses

Three months ended June 30, 2018 compared to three months ended June 30, 2017

Total expenses increased $9.3 million, or 33%, to $37.7 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 due to increases in compensation and benefits and general, administrative and other expenses.

Compensation and benefits expenses increased $6.7 million, or 33%, to $26.6 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 , due to increased base compensation, incentive fee compensation and contingent compensation. Base compensation increased $1.6 million, or 9%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 , due primarily to increased salary expense from additional headcount in the current year period compared to the prior year period. Incentive fee compensation increased $2.2 million due to the increase in incentive fee revenue. Contingent compensation related to the RAPM acquisition was $2.8 million for the three months ended June 30, 2018 . The $26.6 million of compensation expense reported above excludes compensation expense related to the $2.5 million recognition of deferred incentive fees from one of our co-investment funds. The compensation expense related to these incentive fees was recognized in fiscal 2016 when the incentive fee payments were received. Of the $10.4 million of incentive fee compensation and the $9.9 million of base compensation and benefits recognized in advance of the

associated revenue in fiscal 2016, $0.6 million and $0.6 million, respectively, was related to the $2.5 million of deferred incentive fees recognized in this period.

General, administrative and other expenses increased by $2.6 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 . This change consisted primarily of a $1.4 million increase in consulting and professional fees, which included $0.9 million in fees related to Private Market Connect, our joint venture, as well as increases in accounting and legal fees.

Other Income (Expense)

The following shows the equity in income of investees included in other income (expense):