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Morgan Stanley | RESEARCH What Is the Impact of Higher FRE Multiples in a SOTP approach? If we take an average of the three approaches described above of 1) traditionals at a historical 15.4x, 2) publicly traded C-corp alts at an average 26.Ox, and 3) our capitalized bond yield approach at an average 28.9x, we arrive at a 23.4x multiple for fee related earn- ings. Exhibit 21: The average of our three approaches to FRE multiples suggests and FRE multiple of 23.4x FRE Multiples Across Three Approaches 35.0x 28.9x shi 26.0x 20K ae ax 15.0x 10.0x 5.0x 0.0x Traditionals C-Corp Alts Bond Yield Average | MSe Upside Method Cap Rate Case Average Source: Company Data, Morgan Stanley Research estimates Exhibit 23: NORTH AMERICA INSIGHT __ © Exhibit 22: Using a 22.5x FRE multiple implies an average 6.1x multiple on fully taxed future performance fee earnings Implied Future Carry (Fully Taxed) Multiples using 22.5x FRE Multiple 0.0x 2.0x 4.0x 6.0x 8.0x ARES Ss 84x Ca 93x CC ed 7.1x KKR 5.4x OK ES 45x APO EN 2.0x 10.0x NG ee 6.1x Med a 6.2x Source: Company Data, Morgan Stanley Research estimates If the market re-rates FRE multiple to 22.5x, then we see the cur- rent share price valuing performance fees at 6.1x. This is based on our SOTP framework. (See Deconstructing Our Implied Carry Val- uation: What Is the Market Paying? for more details on method- ology.) SOTP analysis using a22.5x FRE multiple and current share price implies future carry is being valued at 6.1x future performance earnings on average = B+C+D =A-E-F =E+F+G =G/I A B Cc D F G H J I I Core ERE After-Tax SOTP Attar Tax Market I After Tax Avg. Implied Value Per Net Carry Implied Total . Current 2018E FRE BDC BS Value Value Ex- . | Net Carry Per Future Ticker i . Share @ Receivable ; Value of ,;Value Per Price Core FRE Multiple Value Per Per Share Carry Per I Share (2018- Carry 24% tax Share Share Per Share Future | Share 2020) Multiple Rate @24% Rate | Carry | P APO $36.42 669 22.5x $28.40 $0.00 $2.72 $31.13 $1.64 $3.66 | $36.42 $1.86 ARES $24.70 185 22.5x $14.71 $4.52 $0.69 $19.92 $0.78 4 $3.99 4 $24.70 $0.48 BX $36.78 1,196 22.5x $17.03 $0.00 $2.83 $19.86 $2.29 I $14.63 I $36.78 $1.57 CG $25.60 100 22.5x $5.01 $0.00 $0.85 $5.86 $4.40 | $15.34 J $25.60 $2.17 KKR $24.40 475 22.5x $9.57 $0.00 $9.71 $19.28 $1.32 I $3.80 | $24.40 OAK $45.20 166 22.5x $18.17 $0.00 $15.19 $33.36 $4.38 | $7.47 | $45.20 Source: Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025565