EFTA02470328.pdf

From: Marc Rowan Sent: Friday, March 4, 2016 4:43 AM To: Jeffrey Epstein Subject: Fwd: TRA Valuation Process Sent from my iPhone Begin forwarded message: From: Chris Weidler Date: March 4, 2016 at 12:35:36 AM GMT+2 To: Marc Rowan Subject: RE: TRA Valuation Process Marc Not to be confusing but one point to clarify When we calculate the incremental DTA arising from each TRA payment we are =equired to calculate the amount of the payment related to principal versus=interest. The portion that is deemed to be a 'principal' payment cr=ates additional 0TA. That amount is also undiscounted when creating the b=lance sheet asset. The rate used to compute the 'interest' portion of each TRA is the IRS=applicable federal rate ('AFR') at the time of the original exchange. =he interest amount does not create incremental DTA. For the November exchange it was 2.57% so the majority of any TRA payment r=sults in incremental DTA Not sure if you needed this information as well so wanted to pass it along Thanks Chris From: Marc Rowan Sent: Thursday, March 03, 2016 5:25 PM To: Chris Weidler Subject: Re: TRA Valuation Process Tks Sent from my iPhone On Mar 4, 2016, at 12:19 AM, Chris Weidler wrote: Marc For purposes of establishing the balance sheet asset the DTA/TRA are undisc=unted. EFTA_R1_01581233 EFTA02470328 Each period we re-assess our ability to realize the asset over the allotted=time frame. If we have any concerns we would then establish a valuation =llowance We also review the tax rate each period and if that changes for any reason =new York state rate change, etc) we apply that change and adjust the DTA/T=A. This we have done in 13 and 14 as there were rate changes. chris From: Marc Rowan Sent: Thursday, March 03, 2016 5:05 PM To: Chris Weidler Subject: Re: TRA Valuation Process This tells me what I already know. What rate do we discount future cash flo=s/TRA pmts at for purposes of establishing the balance sheet asset? Sent from my iPad On Mar 4, 2016, at 12:02 AM, Chris Weidler wrote: Marc, Please see below for how the deferred tax asset ('DTA') and tax receiva=le agreement (TRA') is calculated as well as the key inputs into the =amputation. I tried to simplify as much as possible but obviously a compl=x calculation. Please let me know if this is sufficient or if you need mo=e. We have example detailed calculations if you would find that useful. Each exchange related to the TRA is valued using a multi -step process desc=ibed below The TRA is valued as 85% of DTA that is created as a result of an AOG excha=ge. The DTA is calculated as: <image002.png> The tax rate is the combined federal and state rates. Currently 38.83% for=AGM The DTA is then amortized over 15 years. 85% of the tax benefit derived fr=m the amortization for any given year is paid out to the individuals that =xchanged. Each actual TRA payment then creates additional DTA/TRA calculated as TRA payment X the current tax rate Notes: *The % of the business allocated to taxable entities is calculated as the present value of the future cash flows attributable to taxable entities=as a % of the present value of the total cash flows of the business. This=% is —75% as of 12/31/2015. 2 EFTA_R1_01581234 EFTA02470329 The key inputs used to determine the present value of the cash flows attrib=table to AMH and the total business are o Management Fees and Carried Interest cash flows sourced from the most r=cently approved 5-year Budget Plan o Management Fee Cash Flows are discounted by - 8-14% and Carried Interest=Cash Flows are discounted by 20% o For perpetual funds and unidentified future funds a Long-Term Growth ra=e of 3% is applied with a discount rate of 10-20% to determine the Termina= Value of these entities. The results of the fair values of the Management Fees and Carried Interest =ash flows are mapped to the appropriate parts of the business to determine=the final allocation of value that is attributable to taxable entities. Regards Chris This email and any files transmitted with it are confidential and intended =olely for the person or entity to whom they are addressed and may contain =onfidential and/or privileged material. Any review, retransmission, dissem=nation or other use of, or taking of any action in reliance upon this info=mation by persons or entities other than the intended recipient is prohibi=ed. If you have received this email in error please contact the sender and=delete the material from any computer. 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