Morgan Stanley | researcs NORTH AMERICA INSIGHT 2 January 30, 2018 05:01 AM GMT Alternative Asset Managers Can Alts Unlock Value with C-Corp Conversions ° We think APO could unlock the most value by converting to a C-corp with 26% in our upside case vs. -14% in our downside case. ARES could be the first to convert, but this is largely priced in. These firms have more sticky management fee-related earnings vs. BX/CG/KKR that may see Less benefit. YD a . <a “ > Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. HOUSE_OVERSIGHT_025551

Morgan Stanley | RESEARCH Contributors MORGAN STANLEY & CO. LLC Michael J. Cyprys, CFA, CPA Equity Analyst +1212 761-7619 [email protected] NORTH AMERICA INSIGHT | e MORGAN STANLEY & CO. LLC Alex D Combs, CFA Research Associate +1212 296-5221 [email protected] HOUSE_OVERSIGHT_025552

Morgan Stanley | RESEARCH Contents 5 11 16 18 2] Executive Summary 6 (C-corp Conversion Could Be the Catalyst to Unlock Value and Drive Multiple Expansion 8 Impact to Current Valuations in Upside and Downside Case 10 ARES Conversion Largely Priced In Why Should Fee-Related Earnings Re-Rate Higher? Tl 1) Premium to Traditionals Asset Managers 13 2) Publicly Traded Alts Comps 13. 3) Bond Yield Approach 14 What Is the Impact of Higher FRE Multiples ina SOTP approach? What Is the Appropriate Multiple for Performance Fees? Deconstructing Our Implied Carry Valuation: What Is the Market Paying? 19 Upside Scenario 20 Downside Scenario Appendix A: Company Scenario Analysis 22 23 24 25 26 27 28 29 30 31 NORTH AMERICA INSIGHT ~~ Apollo Global Management SOTP and Sensitivity Analysis Ares Management SOTP and Sensitivity Analysis Blackstone SOTP and Sensitivity Analysis The Carlyle Group Management SOTP and Sensitivity Analysis KKR & Co. SOTP and Sensitivity Analysis Oaktree Capital Group SOTP and Sensitivity Analysis Appendix B: Valuation of Alternative Managers - What@in the Price? Appendix C: Notable Alt Reports: In Case You Missed Them™% Brokers & Asset Managers Comps Sheet Valuation and Risks HOUSE_OVERSIGHT_025553

Morgan Stanley | RESEARCH Alternative Asset Managers NORTH AMERICA INSIGHT | ¥ Can Alts Unlock Value with C-Corp Conversions ? e think APO could unlock the most value by converting to a C-corp with 26% in our upside case vs. -14% in our downside case. ARES could be the first to convert, but this is largely priced in. These Brokers & Asset Managers firms have more sticky management fee-related earnings @ North america industry View vs. BX/CG/KKR that may see less benefit. We believe ARES could be the first Alt stock to convert; we would view that as a positive catalyst for the group that, if suc- cessful, could lead others to follow. ARES reports 4Q earnings on February 15, and we expect a potential announcement or indications of mgmt@ intentions and/or timing. C-corp conversion has domi- nated our conversations with investors of late with increased inbound questions including interest from some new to the Alts. As a result, in this report we expand on prior work here, and here, cre- ating a C-corp conversion scorecard with qualitative pros/cons for each company. We also evaluate the potential valuation impact if Alts convert, and we take a deep dive into how the market might value two earnings components ina C-corp structure: )) sticky, recur- ring management fee-related earnings and 2) performance fees. We see an opportunity for Alts to unlock value by shedding the partnership structure and converting to C-corps. Changing from a partnership structure could help alleviate the complexities of cur- rent K-1 tax reporting and expand the universe of eligible investors in the Alts. Some investors today are restricted from investing in lim- ited partnerships, while others don®want the operational and tax complexities of investing in a partnership structure. Management fee-related earnings could re-rate higher toward 22.5xin our upside case, as we look at three different approaches for valuing this sticky earnings stream: 1) traditional asset man- ager comps vs. organic growth, 2) publicly traded C-corp Alts comps, and 3) an approach looking at FRE as bond yield proxy with a credit spread, to determinate an appropriate cap rate. In-Line Performance fees appear cheap (at 6.1x) if management fees re-rate to 22.5x in the context of Alts converting to C-corps anda 24% overall tax rate. This suggests the market is misvaluing perform- ance fees, and we could also see Alts performance fee earnings re-rate higher if C-corp conversion expanded the investor base. We see companies that have a greater skew to management fees as best positioned for conversion, as we see the greatest potential for multiple expansion on for this portion of the earnings. For stocks under coverage, we see APO as potentially being able to unlock the most value, with near-term upside to current prices of 26%, if the shares re-rate. We see ARES as another winner from conver- sion but the we belive this is priced with shares up 23.5% YTD. Our analysis suggests a less favorable upside/downside scenario for con- version for companies under coverage with lower taxes and/or greater exposure to performance fees (KKR, CG, BX). Exhibit 1: Upside/Downside Scenario Impact to Alts' Share Price if They Convert to C-Corps from Current Partnership Structure Estimated Change to Curent Share Price 30% 20% 10% 11% 9, -10% -14% -15% 26% Downside ™ Upside -18% 5 -21% ~20% -20% 27% -30% -40% APO OAK KKR- BX ARES CG Avg. Source: Company Data, Morgan Stanley Research estimates Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to th®isclosure Section, located at the end of this report. HOUSE_OVERSIGHT_025554

Morgan Stanley | RESEARCH Executive Summary Will the Alts simplify their structure and convert to C-corporations from partnerships? What would this mean for valuations? We think the Tax Cuts and Jobs Act could accelerate cost-benefit analyses and decision- making by management teams as a 21% federal tax rate vs. 35% previously implies less tax leakage and less expense in moving from single-layer taxation to a double taxation structure. While investors would give up economics in the process, the new business structure would, we think, com- mand a higher valuation multiple. For context, investor questions on the topic have picked up recently, including from a number of long-only accounts, which have historically avoided the Alts. Some investors have said they currently cannot invest in Alts given the partnership structure but would be interested and able to do work on them if they were to con- vert to C-corps. We had conversations around conversion a year ago as President Trump took office amid promises of tax reform, and the subject came up on nearly every 4Q16 earnings call. Management teams seemed to table the idea because of too many moving parts that needed to be clarified before they conduct a proper cost/benefit analysis. Post tax reform, conversion is at the top of investors@ninds and becomes a key debate/catalyst for the sector. We believe Ares Management L.P. (ARES, Equal-weight) could be the first Alt to convert to a C-corp, potentially sparking other conversions within our coverage. We believe this prospect has likely driven much of the stock©24% return year-to-date and +16% outperformance vs. the S&P 500 and +10% its Alts peers. Over the past few months, ARES management has stated clearly that they have been actively considered conversion. CFO Mike McFerran recently told investors, "This topic has become clearly very elevated in light of possible tax reform. Absent that and even before this became so topical, this is the thing we@e been thinking about. And the overarching question is, can public traded partnerships attract the breadth of shareholder base to support an appropriate valuation notwithstanding some other obstacles." Even without tax reform, the company was considering the structure change, and with a 21% corporate statutory rate (vs. 35%), we believe cost-benefit analysis may make sense for ARES. The company reports earnings on Thursday, February 15, and we expect an update or additional color on conversion. We think all Alts shares could benefit as investors see a higher probability of others following in their footsteps and/or investors re-rate AltsGRE higher. NORTH AMERICA INSIGHT ~~ Against this backdrop, we@e created a conversion scorecard with qualitative pros/cons for each company. To be clear, these are our views on where conversion makes the most sense and not calls on which companies will commit or the timing of potential conversions. We focus selectively on the factors we view as most important in deciding whether to convert. e FRE %ofEarningsD We believe the higher fee related earn- ings as a % of total earnings, the more likely for a re-rating of the shares and therefore more likely to consider C-corp con- version. e Effective Tax Rate D The lower the current tax rate, the more tax slippage if companies convert and are subject toa higher corporate tax rate, and lower EPS. Conversely, compa- nies with a higher tax rate today already have more tax leakage, and thus could make sense to pay a little more tax in a corporate structure for a broader investor base. e Current P/ERatioD The lower the current P/E multiple, the more management may be inclined to take action to drive a re-rating. © Management Commentary D Lastly we look at manage- ment commentary from earnings calls/conferences to assess the extent that companies are evaluating conversion and seri- ously considering it as a strategic option. Exhibit 2: Based on our qualitative scorecard, our work suggests APO and ARES may be most likely to convert eee ae Core FRE % of JENIEffective Tax |Current P/E ratio | Management | Average Overall pany 8 Earnings Rate (2018e) Commentary Score ARES (ARES) Equal-weight © & of @ y | Apollo (APO) Overweight a) »D D D ~dD Oaktree (OAK) Overweight »D &B e »D Q KKR (KKR) Equal-weight ¢ © a) a Q Carlyle (CG) Overweight O a 2) 6 im ) Blackstone (BX) Overweight »D & D D mY Source: Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025555

Morgan Stanley | RESEARCH For Ares, we believe conversion makes sense, given the company is largely a play on fee related earnings from draw down funds, separately managed accounts, and their relationship with ARCC, the publicly traded business development company. Earnings from per- formance fees at ARES are a smaller portion of overall profitability, which is furthered by relatively higher compensation payout on per- formance fee revenues, which in turn approach 80% in strategies such as private equity vs. peers typically in the 45-55% range. The company could benefit as a first mover and if the stock price reacts favorably, we could see other alternative peers follow suit. Apollo in our view may stand to benefit the most from conver- sion with the best risk reward skew in our analysis using a SOTP framework. Why? Similar to ARES, the company has meaningful fee-related earnings as a percentage of overall operating income. This is largely driven by their advisory relationship with Athene, where APO earns a fee on ~$74b of assets and should benefit from additional management fees from the company©most recent $24b flagship private equity fund. Our deep dive suggests Apollo has relatively longer-duration stickier assets under management vs. peers, which gives us greater confidence in APO® fee-related earnings stability, growth, and potential for a re-rating. ApolloOAUM has a 12-year duration on average (measured as outflows and realizations as a per- centage of beginning of period AUM). This is noticeably better than HLNE@at 9.1 years, which trades at 23.4x P/E, and below Partners Group of 16.7 years, which trades at 28x P/E. We see Blackstone as potentially less likely to convert, but see amore nuanced story at KKR given their token dividend policy; for both we do not see as much valuation upside from are-rating of FRE multiples. BX and KKR have larger concentration to perform- ance fees and as a result we see less of an impact to potential upside should fee related earnings multiples re-rate. Our estimated tax rates for KKR and BX are also significantly Lower than the group given the earnings mix and other offsets. We see a greater downside to current share prices if there was a conversion that had a higher tax drag and multiples did not expand. That said, KKR has a history of making major changes, such as its payout policy change in 2015 that sharply reduced the dividend with a shift in strategy to grow book value. At the time we thought such a change by KKR was a prelude NORTH AMERICA INSIGHT ~~ i. od to converting to a C-corp, as we wrote here. However, the stock has lagged and KKR@limited/token dividend means investors do not receive the full benefit of a flow through partnership structure with single-layer taxation. So we again raise the question, Why not convert to a C-corp with a token dividend that is effectively single layer taxation? C-corp Conversion Could Be the Catalyst to Unlock Value and Drive Multiple Expansion The alternative asset managers trade at a steep discount to broader financial peers. We believe this is largely due to 4 factors: 1) volatility of the earnings (particulary performance fees) and ques- tions as to alpha persistency going forward by public market inves- tors, 2) complicated business models, 3) corporate governance concerns, and 4) corporate structure as a partnership. We do not expect to see the first three factors change, but conversion could make a meaningful difference by: 1) Expanding the universe of eligible investors in the Alts, 2) Alleviating the tax complexities of current K-1 tax reporting, 3) Unlocking value via multiple re-rating, particularly for manage- ment fee-related earnings in the widely used sum-of-the-parts valua- tion for Alts. We could also see incremental upside to current valuations if multiples on performance fee earnings adjust upward (more details below). Exhibit 3: Alts trade on average FY2 of 10.5x, a 28% discount on average to other financials subsectors Alts vs. Financial Subsectors P/E m2018P/E Alts % Discount/Premium (RHS) 30.0x x ; 10% 25.0x 7% ee , 0% 22.1x : | tii ‘Oxi an 7 + : | 0% = I Thr ee -30% : LULU anes 5.0x -50% 0.0x -60% A Pee, Mon, ie, A usin ‘ay, Pho aa Fas par. com Mio, Sung, "ati, Cony a0, One, Se dng, 0 ps “ss Sen ans — ng Pani ong era 4, 8, wang eo “range Meg hy Source: Company Documents, Rowen Stanley Data Note: P/E multiples for other financials subsectors aside from brokers and asset managers are based on Morgan Stanley Estimates as of 1/18/2017 HOUSE_OVERSIGHT_025556

Morgan Stanley | RESEARCH On average the group currently trades at 10.8x on 2018e EPS with an average effective tax rate for economic net income (the metric NORTH AMERICA INSIGHT ~~ Exhibit 4: Breakeven P/E multiple expansion of 2.1x required to offset 16% lower earnings in a C-corp on average. Ticker 2018E 2018E Pro-Forma EPS Current Tax Rate EPS % P/E AP/E Price Tax Rate EPS P/E used for EPS calculations) of 9.6%. The low tax rate is aresult of AF ‘cain The f ble treat t £ ARES $24.70 8.7% avorable treatment of pass- - — 589, through performance fees and tax cc $25.60 17.8% offsets. This is well below broader KKR $24.40 3.8% financials peers and on average, a OAK $45.20 10.5% 26% discount to P/E multiples. Average 9.6% @ 24% Tax Rate Change 3.68 9.9x 24% 3.15 -14.3% 11.5x 1.7x 1.73 14.3x 24% 1.42 “17.7% 17.4x 3.1x 3.26 11.3x 24% 2.62 -19.8% 14.1x 2.8x 3.03 8.5x 24% 2.80 -7.7% 9.2x 0.7x 2.74 8.9x 24% 2.16 -21.3% 11.3x 2.4x 3.55 12.7x 24% 3.01 -15.1% 15.0x 2.3x 3.00 10.9x 2.53 -16% 13.1x 2.1x Source: Thomson Reuters Company Data, Morgan Stanley Research estimates If the Alts converted to C-corps, there would be tax leakage as aresult no pass-through of earnings for carried interest and investment income. We estimate an effective tax rate of 24% (21% federal + 3% state and local). The companies may be able to keep some of the tax offsets in place; however, we conserv- atively use a full 24% to evaluate the earnings impact. As a result of higher taxes and -16% lower earnings on average in a C-corp, the stocks would need to re-rate upward by 2.1x turns to maintain their current valuations. Exhibit 5: On average we estimate a -16% hit to EPS using a 24% tax rate in a C-corp structure. This would require 201 8e multiples to expand 2.1x0n average in order for shares to hold the current price P/E Multiples for Alts: Current vs 24% taxed EPS = P/E Multiple Expansion required to Maintain CurrentValuiton @ 24% Taxed EPS = Current Multiple on 2018e EPS 20.0x + 18.0x —/-4% tee 14.1% 13.1x 12.0x 2.8% 10.0x 8.0x - 6.0x : 4.0x ; 2.0x j 0.0x % EPS ARES Avg Change O24 RAE 47 7% 19.8% -21.3% -15.1% -14.3% -7.7% -16.0% Source: Thomson Reuters Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025557

Morgan Stanley | RESEARCH NORTH AMERICA INSIGHT ~~ Impact to Current Valuations in Upside and Downside Case In the sections following we explain in greater detail our approach to potential Upside/Downside scenarios and the impact to valuation under potential conversion. The actual impact is very difficult to quantify given the variety of moving pieces and the reliance on investors to drive the a re-rating. We have pre- sented it as a scenario analysis to evaluate conversion on a risk reward spectrum. Upside/downside scenarios show a positive skew for companies that have higher earnings contribution from manage- ment fees vs. more downside skew for companies with more per- formance fees (less certain re-rating of performance fees). As the examples herein illustrate, we see significant value in the re-rating of fee-related earnings that could unlock share value and result in higher stock prices. We believe these stable and growing fee earnings can support higher multiples and broader own- Exhibit 6: ership of the Alts and be the catalyst for the re-rating (explained in greater detail in the sections that follow). In both our upside and downside approaches we look at a Sum-of-the-Parts that values at) fee-related earnings, 2) balance sheet investments and net cash, 3) the net accrued carry balance, and&) future value of carry. In both the current and upside case we use a fully taxed fee-related earnings at a 24% tax rate and our value for the balance sheet remains unchanged in both scenarios as well. However, we make several adjustments to our upside and downside case to reflect a C-corp structure with full tax rate on all earnings: 1) Tax the net accrued carry receivable balance at a24%.2) Tax our esti- mate for average net carry earnings at a full 24% rate. Further, in the upside case we also adjust the multiple upwards for fee related earn- ings driven by broader ownership of the stocks, and we conserva- Potential Upside Scenario SOTP Valuation for APO. We see potentially significant value from a re-rating of fee-related earnings driving higher valua- tion Apollo Global Management (APO) Downside Case Upside Case C- Sum-of-the-Parts Components Cortent APO) Price ( SOTP 2018e Pre-Tax Core FRE / Sh $1.66 Tax Rate 24% Fee Rel eo) 6 Poesancerr Gere oh $1.26 Earnings FRE Multiple 1510x Core FRE Value $18.94 + Balance Balance Sheet Net Cash and $2.72 Sheet Investments / Sh (as of 3Q17) . Accrued Net Accrued Carry / Sh (as of $2.16 Carry 3Q17) . a Avg Net Carried interest / Sh $2.45 Market (2018e-2020e) ‘ Implied Carry ; Market Implied Carry Value I $12.61! Total Value $36.42 Valuation 2018e EPS $3.68 P/E 9.9x Source: Thomson Reuters Company Data, Morgan Stanley Research estimates C-Corp Corp Conversion Conversion $1.66 0% $1.66 0% 24% 0% 24% 0% $1.26 0% $1.26 0% 15.0x 0.0x 22.5Xx 15x $18.94 0% $28.40 $2.72 0% $2.72 0% $1.64 -24% $1.64 -24% $1.86 -24% $1.86 -24% 4.2x -0.9x 7.1x 2.0x $7.91 -37% $13.30 6% $31.20 14% $46.07 (26% $3.15 -14% $3.15 -14% 9.9x 0.0x 14.6x 4.7x HOUSE_OVERSIGHT_025558

Morgan Stanley | RESEARCH tively adjust upward our multiple on future carried interest earnings by 2 turns. For Apollo, we see that nearly the entire the increase in value in the upside case is driven by the expansion of the FRE multiple from 15x to 22.5x. 2018 Impact: Upside case impact is +13% vs. current price on average and 3.8x multiple expansion to a fully taxed EPS. In our upside case scenario, we assume a 22.5x multiple on fee-related earn- ings in our SOTP. We see favorable risk/reward skew APO. Exhibit 7: We see the greatest contribution of fee-related earnings at ARES and APO as a percentage of pre-tax earnings 2018e Pre-Tax Earnings Contribution ulnvestment Income = Performance Fees 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% mCore Fee Related Earnings 29% 399 ARES APO BX OAK KKR Source: Company Documents, Morgan Stanley Research estimates Note; Fee Related earnings are on MSe Core methodology, ARES Core FRE include BDC Part 1 Manage- ment fees that are typically excluded from MSe Core FRE definition CG Avg. NORTH AMERICA INSIGHT ~~ Downside case impact assumes no multiple expansion of any kind, and that the stocks trade at their same current P/E, however on lower, fully taxed EPS. This represents -18% average downside from current prices. While this is likely an unreasonable outcome this is the concern among some investors, given that the only certainty in the analysis is a higher tax drag and lower earnings. We see less favor- able upside/downside skew for BX and KKR. Exhibit 8: On average we see potential for 3.7x turns of multiple expansion on in our upside case with fully taxed EPS at a 24% effective rate. This could drive +12% upside on average to current share prices P/E Multiples for Alts: Potential Expansion =Total Multiple Expansion in C-Corp Upside Scenario (on fuly taxed EPS @ 24%) = Current Multiple on 2018e EPS 22.0x ~49.0x 167 15.4x 1x 17.0x 14.7x Ate 12.5x 40x 14.6x 12.0x aa 9.8x 7K 11.3x 2.0x -3.0x % Upside ARES APO BX OAK KKR CG_ Avg toStork 99% = 26.5% 9.3% 11.3% 10.7% 7.5% 12.4% Source: Company Data, Morgan Stanley Research estimates Exhibit 9: Summary Scenario Analysis: Potential upside/downside valuation and multiples impact if Alts convert to C-corp structure and pay a full 24% tax rate Upside Case Assumptions: 1) Fully taxed earnings and carry receivable Downside Case Assumptions: 1) Fully taxed earnings and carry receivable balance 2) 22.5x Multiple on core FRE 3) Multiple expansion on carry of two balance 2) 15.0x Multiple on Core FRE 3) No P/E multiple expansion on fully turns to an average of 9.5x 2018-20 avg. performance fee earnings taxed EPS 4) Back into implied multiple on future carry of 5.6x on avg. i si 9, i js . ba A 9, . < ; Current Valuation (C Valuation Price/Fully A Current P/E vs. % Upside Price Valuation (C ; Valuation AGurrent PIE vs. % Downside Price Ticker Price Corp Taxed EPS wi 24% Taxed Change From Corp Price/Fully Taxed wi 24% Taxed EPS Change From Conversion) EPS Current Conversion) EPS ° Current APO $36.42 $46.07 14.6x 4.7x 26.5% $31.20 9.9x 0.0x -14.3% ARES $24.70 $27.18 19.1x 4.8x 10.0% $17.95 12.6x -1.7x -27.3% BX $36.78 $40.18 15.4x 4.1x 9.3% $29.51 11.3% 0.0x -19.8% cG $25.60 $27.52 9.8x 1.4x 75% $23.62 8.5x 0.0x -7.7% KKR $24.40 $27.01 12. 5x 3.6x 10.7% $19.21 8.9x 0.0x -21.3% OAK $45.20 $50.31 16.7x 4.0x 11.3% $38.39 12. 7x 0.0x -15.1% Average 14.7x 3.8x 12.6% 10.7x -0.3x -17.6% Median 15.0x 4.0x 10.4% 10.6x 0.0x 17.4% Source: Company Data, Thomson Reuters, Morgan Stanley Research estimates. Note: Price as of 1/26/2017 HOUSE_OVERSIGHT_025559

Morgan Stanley | RESEARCH Exhibit 10: We see more favorable risk-reward skew at APO given greater concen- tration of fee related earnings vs. performance fees Estimated Change to Curent Share Price 30% PCE 26% Downside m Upside 10% 14% 15% "21% 20% “8% -20% -27% -30% -40% APO OAK KKR BX ARES CG Avg. Source: Company Data, Morgan Stanley Research estimates ARES Conversion Largely Priced In With the recent run up of ARES stock price, the market seems to have already priced in a good portion of the upside from conver- sion. Year to date, ARES has out performed peers by ~10% likely on the back of this expected conversion. As a result we have looked at the share price of ARES at several time periods to assess what is embedded in the price already. We see the market valuing ARES@FRE at 18.3x, with about 3.4x turns of multiple expansion YTD and pricing in a large degree of the poten- tial benefit from C-corp conversion. This is just under half of the total 7.5x turns of FRE multiple expansion that we expect to see in our upside scenario for the Alts. As a result, our upside/downside from for ARES has a less favorable risk reward skew, as much of the upside is already baked in. NORTH AMERICA INSIGHT ~~ How do we arrive as such an estimate? We start with the 12/31/2017 share price of $20.00. We then gross up this starting point for the broader performance of peers to isolate just the outperformance of ARES vs the group. The alts group ex ARES YTD is up +10% so we use a starting price for ARES of $21.90. e We first estimate the implied multiple on future carry for ARES at the pro forma stock price before C-corp conversoin began to be priced in. (we explain this in process in greater detail in the section on Deconstructing Ourlmplied Carry Val- uation). @ We then take the current share price today and assume that the run up in price was a result purely from multiple expan- sion on fee related earnings. In doing this we hold the per- formance fee multiple and value of future performance fees constant. e@ We then back into an implied value of FRE using the various components of the SOTP and the current share price. We divide that value by our 2018e FRE to determine our estimate for baked in multiple expansion at ARES. (Please see Ares Management SOTP and Sensitivity Analysis for more details.) HOUSE_OVERSIGHT_025560

Morgan Stanley | RESEARCH NORTH AMERICA INSIGHT ~~ Why Should Fee-Related Earnings Re-Rate Higher? We point to three approaches to thinking about how to value fee-related earnings and what the right multiple should be on this earnings stream. We believe that under a C-corporation structure with a broader potential investor base and ownership, this portion of the Alts earnings are most likely to re-rate significantly higher while there could be more variability in the multiple investors ascribe to per- formance fees. We currently believe the market is pricing in fee related earnings around 15x times, a discount to where these earnings could trade up to. As we explain in greater detail in the Appendix, we see ARES asa stock that is likely to convert, and as we take a look at the SOTP, we believe FRE for ARES has already seen significant expansion. We estimate the multiple on ARES FRE has already gone up from 15.0x to 18.4x. Below we look at where multiples could trade for the broader group as a whole, but acknowledge that investors likely use dif- ferent FRE multiples for companies to account for duration of assets, growth in AUM, franchise value etc. On average, our three approaches suggest a 23.4x multiple for fee related earnings. In our upside case we use a 22.5x multiple. These multiples are on 2018e fee related earnings as we are trying to evaluate where the stocks trade today, and where they could potentially trade to in the near term. 1) Premium to Traditionals Asset Managers We see the historical average P/E multiple for traditional asset managers of 15.4x as a starting point for FRE multiples. The tradi- tional asset manager business model earns management fees with a significantly smaller portion of revenues from performance fees rela- tive to alternative asset managers. We believe the AltsGmanagement fee earnings, however, com- mand a premium multiple given several factors: A) faster organic growth, B) stickier long-term committed assets, C) fees paid on com- mitted capital which limits downside risk to revenues, and D) more insulation from fee pressure. Exhibit 11: 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 30.0x 26.0x 25.0x 23.4x 20.0x 45 4x 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 12: Traditional managers trade at a 15.4x FY2 P/E multiple with average net flows of just +1% during that time period Covered Trad. AMs' FY2 P/E, and Annualized Flows mmm Covered Trad. FY2 Avg. P/E Historical Multiple 05'-17' ~-~=Median Ann. - Quarterly LT Net Flows/BoP LT AuM (%) 25.0X 7 Tralting 10Y:~2.3% Avg. Annualized 15.0% Organic Net Flows/BoP LT AuM 2Q15: Average FY2 PIE 13.8x below historical avg of 15.8x 10.0% 20.0x 4 ~ | f \ ih, 5.0% a Vf | AAT LAARAA 15.4x 15.0x 4 i 7 = my 7 rd pros j * Af{™~ Ay | Tied ; 5.0% 10.0x aR Ee / .0% i} i) |i 10.0% 5.0x 15.0% 0.0x J -20.0% 2 8s SSSSCOCDDGGGCDGGGGGGGGGGGGGGGGGGGGGGCGGr eer eS NOPHAADTEASTHANATHASTHABDTHANHTHABATANGDGOGGG Q Source: Thomson Reuters, Company Data, Morgan Stanley Research A) Faster net organic growth in fee-paying assets under manage- ment for Alts vs. slower growth rates at traditional asset man- agers. The Alts have outpaced organic growth rate of traditional asset mgrs over the past 4 years by nearly 700 bps, and we estimate 900bps of continued outperformance on average from 2018 through 2019. Organic growth has averaged 5% for the alts from the period 2014-17e, while the traditionals have seen net outflows and organic decay of -2%. Looking two years out, we see traditionals net inflows of 1% vs. alts on average at 10% driven by continued fun- draising strength and fees turning on for existing funds that have already been raised. HOUSE_OVERSIGHT_025561

Morgan Stanley | RESEARCH Exhibit 13: NORTH AMERICA INSIGHT ~~ Alts organic growth has outpaced traditionals by 7% over the past 4 years, and we expect average Alts growth over the next to years to be 10x that of Traditionals Organic Asset Growth: Traditionals vs. Alts mAvg. 2014 - 2017E Growth Rate 20% 15% 10% 79, 5% 5% , 3% 0 | PEW 198% ox 0% i_| i | =a -5% -10% -15% 13% << N 2 ea a KE = => = = m7 Qa a ¢ xy = 27 > FEF Oo Source: Company Data, Morgan Stanley Research estimates Note: We look at fee paying AUM for the alts to calculate organic growth Despite the more favorable view on asset growth, the alterna- tive asset mangers continue to trade at a significant P/E discount to traditionals. The group currently trades at 10.8x MSe 2018 EPS, a 3.0x turn discount to traditionals peers. This however is on total earnings per share, and is inclusive of performance fees which inves- tors use a Lower multiple on given volatility. However, we believe a re-rating of the management fee portion of earnings ina SOTP valua- tion alone could help close the overall P/E gap vs. traditionals. Exhibit 14: Organic Growth for Traditional Asset Managers (2018e avg) vs. Current 2018e P/E Multiple 2018 P/E Ratio 25x e 23x 4 21x 4 19x 17x 15x BEN @ 13x 11x 9x ; ; + 1 -15% -10% -5% 0% 5% 10% 2018 Organic Growth Rate (%) @ HLNE BLK @ * enz VRTS @ ese MAM WDR @ Source: Company Data, Morgan Stanley Research estimates = Avg. 2018 - 2019 Growth Rate 18% 11% 40% 10% rl -2% -2% op) < od) dD) fo 8 & & R 2 & xt x ing (e) < Q g es < i Exhibit 15: Organic Growth for Traditional Asset Managers (9m17 Annualized) vs. Current 2018e P/E Multiple 2018 P/E Ratio 27x 4 25x | 23x | 21x 4 19x | 17x BEN 1 15x ba + WDR | Iz . © AMG RT. Son8 9x 5 OMAM | -15% -10% -5% 0% 5% 10% 15% 9m17 Organic Growth Rate (% annualized) ® HLNE BLK ¢ > = < Source: Company Data, Morgan Stanley Research estimates B) Longer-term capital that is committed for a defined period of time and pays fees with an average duration of 12 years in a typical drawdown fund. As you can see in the following exhibit based on full- year 2016 data, we see larger redemption rates from traditionalasset managers (those that disclose redemption rates) relative to alts. For traditionals we look at total redemption rates. For the alternatives we look at realizations/harvesting of investments along with redemptions of open ended products from fee paying AUM as it is more comparable to traditional asset managers. If we take 1 divided by the redemption rate, we can back into an average duration of assets under management. For traditionals below (both covered and non covered), this equates to 4.3 years duration and for the alterna- HOUSE_OVERSIGHT_025562

Morgan Stanley | RESEARCH tives 6.8 years. Said differently, the alternatives have nearly 55% longer duration of the asset base. Exhibit 16: Redemption Rates by Company for 2016: Alts see less redemption money as a % of AuM relative to traditionals and duration of assets ~55% longer and C-corp alts with the longest duration. Annual Redemption Rates by Company: 2016 35% 33% Alts have ~55% longer duration of AUM 5 compared to traditionals. Based on 2016 30% 29% redemptions and outflows we see alts avg. duration of 6.8 years vs. trads at 25%, 4.3. C-Corp alts have the longest 9 25% 24% 23%00, implied duration of assets at 11.8 years 23% 20% 18%18%17%4 7%, 6% 15% 15% 13%q 2%, 1% 10% 8% 9% 6% 5% LT 0% SS = x ES E48 x SMO ES ov Source: We use Fee Paying AUM for the Alts; Soure: Company Data, Morgan Stanley Research Note: HLNE outflows are for an average of FY 2016 and FY2017 C) Management fees that are paid on committed money rather than net asset value. This provides much more stability and down- side protection, but limits upside to management fees as invest- ments appreciate in value do not automatically translate into higher mgmt fees. The Alts then participate in investment performance through performance fees or carried interest, whereas the tradi- tionals participate in performance via greater management fees ona higher value of invested assets. D) Relatively more insulation from fee pressure in private mar- kets given limited low cost competitors (indexed funds and ETFs for traditionals) and higher demand for products driven by the search for higher return and diversification from investors. In fact, recent demand for some PE funds has actually led to supply constraints and allowed Alts to give less fee concessions. Apollo, for example, closed fundraising for their flagship Fund IX last year at $24b, but the demand was 25% higher at $30b. As a result, the company said "eco- nomics to Apollo for Fund IX are considerably better since we did not need to provide as many management fee discounts." This supports the forward look on growth in management fee revenues; however, we could see some mix shift into lower return profile (and Lower fee) products that could begin to pressure fee rates over time. NORTH AMERICA INSIGHT ~~ 2) Publicly Traded Alts Comps We see Hamilton Lane (HLNE, Equal-weight) and Partners Group (PGHN, Equal-weight, covered by Anil Sharma) as offering an upside scenario for Alts©fee-related earnings multiples. Hamilton Lane is ~90% fee earnings and currently trades at 23.4x multiple on our CY2018e EPS. Similar to alternative asset manager peers, the company gets paid management fees on drawdown funds and customized separately managed accounts with stable fees paid on committed capital. PGHN is a publicly traded alternative asset manager in Switzerland, and as a C-corporation it is the closest true comp for HLNE. While we see the publicly traded C-corps as good comps, there are several factors that could be elevating the multiples. HLNE is a small cap stock with $2b market cap and may not be the best comp for the large cap PE firms. The company has limited float (currently at ~25%) and scarcity value as the only US based publicly traded alt in a C-corp structure. PGHN is a trades in Europe and may not be a great comp because of that. Lastly, while not drastically different, HLNE and PGHN have had higher organic growth historically and looking out over the next 2 years we expect their growth to outpace most of the alts. As aresult of the high multiples at the public C-corp alts, we have heard partnership alts increasingly use HLNE as a peer comp. Exhibit 17: We expect Alts to deliver similar organic growth profile over the next few years as C-Corp Alts Hamilton Lane and Partners Group Organic Asset Growth:C-Corp Alts vs. Partnership Alts 20% mAvg. 2014 - 2017E Growth Rate = Avg. 2018 - 2019 Growth Rate 1% 14% % 11% 1% 10% 2% 10% 11% 11% % os : Jit ii 0% -5% APO cc KKR BX ARES OAK HLNE PGHN Alts Average Source: Company Data, Morgan Stanley Research Note: HLNE average organic growth includes years 2015 - 2017e where we have data; The alts average uses 2014 - 2017e for consistency with the traditionals organic growth chart above HOUSE_OVERSIGHT_025563

Morgan Stanley | RESEARCH Exhibit 18: HLNE Currently Trades 23.4x on FY2 P/E (an 18% premium to when the company began trading after going public in early 2017); Partners Group currently trades at a 28.2x P/E (a 21% premium to its last 3 year average P/E ratio) C-Corp Alts FY2 P/E Multiple ——HLNE =—==PGHN 29.0x — 27.0x 25.0x 23.0x -_ 21.0x 19.0x 17.0x 15.0x - . . Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Source: Thomson Reuters, Morgan Stanley Data Note: Hamilton FY2 EPS estimates are on the company's fiscal year basis, the twelve months ending 3/31 HLNE and PGHN P/E multiples as of 1/12/2018 based on consensus EPS 3) Bond Yield Approach Our third approach to coming up with the appropriate multiple for fee-related earnings is to compare fee revenues to a similar to a bond with a 10-year duration given the locked-in nature of committed capital with fees paid on commitments (Par Value) as opposed to paid on NAV. Importantly, the Alts are increasingly growing permanent capital or very long duration capital that has attractive life-time value of the contract. APO has the largest amount of permanent capital, representing about 43% of AUM, followed by ARES at 16%. This results in a stable stream of reve- nues, however there could be variability on the expenses that would impact fee related earnings. Under the bond approach the "default risk" in this scenario would be counter party risk that management fees would not be paid by limited partners. These LPs include sover- eign wealth funds, pensions, and other institutional investors that we view as highly unlikely to default. Our methodology starts with the 10-year US treasury yield, given the similar duration to the life of the draw down funds management fees. We then add an appropriate credit spread on top of the 10-year yield to account for the risk that these institutions "miss" payment of their management fees. We also consider the fact that not all fee paying assets under management at the alts are subject to lock ups (such as hedge fund AUM, open ended funds). Those alts with larger amounts of permanent capital or longer duration of assets would suggest a Lower credit spread given less risk of lost revenues in our view. NORTH AMERICA INSIGHT ~~ We look at AA and BBB credit spreads as a proxy for high and low "default risk" for LPs paying management fees. AA credit spreads are currently at 53bps and BBBare currently at 122bps. Again, the risk of "default" is likely overstated by using these yields but we show this range to account for other factors including differences in duration of assets. We then add these spreads to the current 10 yr treasury yield of 2.62% to get a yield of 3.15% and 3.84% respectively. Lastly, we capitalize these yields to back into implied FRE multiples by taking 1 divided by each of the yields. This implies a multiple of 31.7x using AA spread and 26.0x using BBB spread. Finally we take an average of the two credit spread approaches to get to 28.9x. Exhibit 19: Permanent capital represents 15% of AUM on average for alternatives and we see 63% on average with a contractual life of 7+ years Alts Contractual Life of AUM = 7+ Years at Commitment 89% m= Permanent Capital 100% 90% -84% 83% 80% 70% 60% 50% 40% 30% 20% 10% 0% 80% APO ARES BX KKR CG OAK Source: Company Data, Morgan Stanley Research Note: KKR permanent capital refers to capital of infinite duration. Contractual life of AUM refers to the duration at inception for KKR Exhibit 20: Our cap rate approach to valuing FRE implies a multiple of 26.0 to 31.7x based on a yield of 3.15% using a AA credit spread on the 10-year trea- sury yield and a 3.84% yield using a BBB credit spread Walk to Assumed Yields for Cap Rates 4.50% 4.00% 3.50% 3.00% 2.50% 3.84% 3.15% 2.62% 0.53% 2.00% 1.50% 1.00% 0.50% 0.00% 10-Yr Credit Yield 10-Yr Credit Yield Treasury Spread Treasury Spread (low end) (high end) Source: Thomson Reuters, Morgan Stanley Research HOUSE_OVERSIGHT_025564

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 hx 26.0x 20K. Te 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 CCC ed 7.1x KKR a 5.4x OK ES 45x APO ES 2.0x 10.0x NG ee) 6.1x Med EE 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 é 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 : . 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 y 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 | $25.60 $2.17 KKR $24.40 475 22.5x $9.57 $0.00 $9.71 $19.28 $1.32 | $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

Morgan Stanley | RESEARCH NORTH AMERICA INSIGHT ~~ What Is the Appropriate Multiple for Performance Fees? Investors have a wide dispersion of responses on what is the appropriate multiple for performance fees. We believe that at cur- rent share prices, the market is valuing fee-related earnings 15.Ox. This represents an 1.8x turn premium or +13% premium to current traditional multiples on 2018e EPS of 13.2x. Using this as a starting point, we see the market valuing performance fees at 7.5x on average using a sum of the parts framework. If we assume C-corp conversion with a higher 24% tax rate, and believe alts@ee related earnings can re-rate from 15x to 22.5x, then we see the market valuing performance fees at just 6.1x on average today. Where should performance fee-related earnings trade? Given that carry earnings (performance fees) are cyclical and historically volatile, we look to Goldman Sachs as a comp for this earnings stream. On average since 2010 (post crisis) the FY2 price to earnings multiple at GS has been 9.5x, with a standard deviation of 14x. We see a range of multiples of +6.7x to +12.3x using two standard deviations above and below the average. We see this as reasonable starting point for valuing performance fees. The group average implied future carry multiple of 7.5x is 1.4 standard deviations away from GS FY2 P/E multiple. If alts convert, we believe this multiple should be able to move upward but will likely remain at a steep dis- count to the FRE multiple given the volatile nature of the perform- ance fees. In our upside case scenario, we bake in two turns of multiple expansion from current implied rate for each company. This results in median performance fee multiple across the group of 8.5x, about slightly less than one standard deviation from GS FY2 multiple since dating back to 2010. On acash basis, the volatility of performance fee earnings (net cash carry) for the alts on a TTM basis has been fairly similar to the volatility of Goldman Sachs@© operating earnings. For Goldman, we look at operating earnings both with and without investment management revenues to isolate the more volatile busi- nesses. The following bar graph looks at the standard deviation of the year over year % change of the trailing twelve months earnings. The alts average is 1.2 about double the volatility of GS (ex invest- ment management) of 0.6. This suggests even further upside and greater conviction in our multiples for performance fee multiples, especially for those companies with less volatility (Carlyle and KKR). Exhibit 24: With a 24% tax rate on all earnings and a 22.5x FRE multiple, we see future performance fees valued at and implied 6.1x multiple on average. Implied Future Carry Multiple Implied Future Carry Multiple using a 22.5x FRE multiple using a 15.0x FRE multiple APO 5.1x 2.0x ARES 11.6x 8.4x BX 9.5x 9.3x CG 6.0x 7.1x KKR 7.0x 5.4x OAK 5.5x 4.5x Avg. 7.5x 6.1x Med. 6.5x 6.2x Source: Company Data, Morgan Stanley Research Note: We use a 18.4x multiple for ARES as the stock has already priced in much of the potential value of C-corp conversion Note 2: Scenario using 15x FRE does not use fully taxed net accrued carry and future carry while the scenario using a 22.5x FRE multiple assumes C-corp conversion and full 24% effective tax rate on both net accrued carry and future carry earnings Exhibit 25: Goldman sachs has historically traded at an average FY2 P/E of 9.5x and a standard deviation of 1.4x GS FY2 P/E Multiple 14.0x 13.0x 12.0:x [RRR ey OO er le 10.0x 9.0x 8.0x ee ee 7.0x 6.0x 5.0x_ ; 1 1 1 Jan-10 Jan-12 Jan-14 Jan-16 Source: Thomson Reuters, Company Data , Morgan Stanley research +2 St. Dev 12.3x j----| -1 St. Dev 10.9x. ooo Avg 9.5x aan nnn ne nn nnn nnn -1 St. Dev 8.1x SSeS eS ea ee eee. -2 St. Dev 6.7x Jan-18 Note.: Data includes daily FY2 P/E ratios to calculate standard deviation of P/E ratios using data begin- ning January 2010 HOUSE_OVERSIGHT_025566

Morgan Stanley | RESEARCH Exhibit 26: Alts Net Cash Carry Volatility vs. GS earnings volatility ona TTM basis Y/Y TTM Historical Earnings Volatility (St. Dev) 3.0 2: 2 5 24 om *it 16 45 —_—- = 1.2 ne 62. 6B 0.9 0.0 BX OAK APO 0.4 0.5 0.6 Alts ARES KKR CG GS GSEx- Average IM Source: Company Data, Morgan Stanley Research NORTH AMERICA INSIGHT ~~ HOUSE_OVERSIGHT_025567

Morgan Stanley | RESEARCH NORTH AMERICA INSIGHT ~~ Deconstructing Our Implied Carry Valuation: What Is the Market Paying? We deconstruct the various pieces of a SOTP for the alts in order to determine our best guess on how much the market is valuing future performance fees. We then divide that implied value by future performance fee earn- ings, to determine the implied multiple that the market is paying for this earings stream. This is the groundwork for our upside and downside scenarios if the alts were to convert to C-corps. We simplify our the SOTP and standardize it across the group to look at &4 main components. 1) after-tax core fee-related earnings, 2) balance sheet value of investments plus net cash/debt, 3) net accrued carry balance, and &) future value of performance fees. The values of the balance sheet and net accrued carry receivable are static items with balances as of 3Q17. We then adjust the multiple on our core FRE to determine a value for what we believe the street is using. To be conservative, we use 15x as a starting point for what we believe is currently priced in. We then take the current share price and subtract out the value of the FRE, net accrued carry performance fees and the balance sheet and we are left with an implied value of what the marketis pricing in for future carry. Once we have the future carry value, we divide by the net performance fee earnings per share for each company and get an implied multiple on the future perform- ance fees. Using this approach and a 15x multiple on FRE, we see the market is valuing future performance fees at 7.5x on average anda We make several key adjustments in the SOTP valuations: First, we use our own Morgan Stanley definition of "core fee-related earn- ings" in our calculation. We use our core approach as we attempt to normalize the various definitions of FRE across the companies. The main difference vs. company-reported FRE is that we fully burden all expenses, including equity-based compensation. KKR differs the most on company-reported vs. MS Core FRE. For more information on our core FRE methodology, please see our note Alternative Asset Managers: Who@Got Swimsuits? (19 May 2016). We also make adjustments for ARES an OAK. For Ares: a signifi- cant portion of the fee related earnings come from Part 1 BDC fees. These are investment income sharing fees from their management agreement with ARCC. In the MS approach, we value these sepa- rately from more traditional management fees. However, we do not believe that the market looks at the fees this way, and so we include them in the total FRE by using the same multiple as we are using for FRE (15x). For presentation purposes in the table below, we break out the BDC Part 1 fees separately for ARES to show the value. OAK: We adjust the balance of OAK@investments on balance sheet to account for OAK© 20% ownership stake in DoubleLine which it currently holds at cost of $21m as adjusted under the equity method of accounting. With the benefit of lower corporate taxes we currently value OAK@ownership stake at $1B. We do not believe the market gives full value for this 20% ownership and haircut our MSe value by median 6.5x. 50% to $500m. We then add this value to the balance of investments and net cash for OAK@total balance sheet value. Exhibit 27: Market Implied Value of Future Carry at current share price and 15x FRE multiple = B+C+D =A-E-F =E+F+G Son | A B (a D E F G H I J | I I I l vena ne After-Tax SOTP _ Pre-Tax Net | vere Total | Pre-Tax Avg. Implied | Ticker Current 2018E FRE Share @ BDC BS Value Value Ex- Carry | Gains of I Value Per [Net Carry Per Future | Price Core FRE Multiple Value Per Per Share Carry Per Receivable | I Share (2018- Carry | 24% tax I Future I Share I ci | Share Share Per Share 2019) Multiple Rate | Carry | I | APO $36.42 669 15.0x $18.94 $0.00 Na $21.66 $2.16 $12.61 $36.42 $2.45 5.1%! ARES $24.70 185 18.4x $12.02 $3.70 $0.69 $16.41 $1.03 I $7.26 l $24.70 I $0.63 11.6x} BX $36.78 1,196 15.0x $11.36 $0.00 $2.83 $14.19 $3.01 I $19.59 | $36.78 I $2.07 9.5x] CG $25.60 100 15.0x $3.34 $0.00 $0.85 $4.19 $4.40 | $17.01 | $25.60 I $2.85 6.0x] KKR $24.40 475 15.0x $6.38 $0.00 $9.71 $16.09 $1.74 | $6.57 | $24.40 | $0.93 7.0x| OAK $45.20 166 15.0x Si2an $0.00 $15.19 $27.30 $5.76 | $12.14 | $45.20 I $2.20 5.5x| —— lAverage 7.5x\ IMedian 6.5x sc — Source: Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025568

Morgan Stanley | RESEARCH Upside Scenario Starting with the framework laid out above, we make several key adjustments in our upside scenario to illustrate where we think mul- tiples go and where the stocks can trade over the near term if the alts convert. Our upside scenario implies an average share price increase of 13% across the group. e First we fully tax effect the performance fee earnings. Under a C-corp structure these would not get the pass- through benefit and would be subject to full taxes. We use a full 24% tax drag on the net accrued carry receivable balance and the future net carry per share. e@ Second we adjust the FRE multiples upward. As we dis- cussed previously with our three approaches for FREmulti- ples, we believe there is significant upside to the value of these earnings if alts were to convert. This drives nearly all of the upside from current prices in our upside scenario. We use a 22.5x multiple on FRE in our upside case, which represents 50% increase from the 15x multiple that we believe is priced in today. Exhibit 28: Upside Scenario SOTP Valuation = B+C+D A B c D E wore ie After-Tax SOTP Ticker Current 2018E FRE Snare BDC BS NAV Value Ex- Price CoreFRE Multiple @ Value Per Per Share Carry Per 24% tax Share Share Rate APO $36.42 669 22.5x $28.40 $0.00 $2.72 $31.13 ARES $24.70 185 22.5x $14.71 $4.52 $0.69 $19.92 BX $36.78 1,196 22.5x $17.03 $0.00 $2.83 $19.86 CG $25.60 100 22.5x $5.01 $0.00 $0.85 $5.86 KKR $24.40 475 =. 22..5x $9.57 $0.00 $9.71 $19.28 OAK $45.20 166 22.5x $18.17 $0.00 $15.19 $33.36 Source: Company data, Morgan Stanley Research estimates NORTH AMERICA INSIGHT ~~ e Last we assume 2x of multiple expansion for performance fees. As a starting point, we look at the implied multiples using current share prices and a 15x multiple for FRE as described above. We then add 2x turns of multiple expansion to each of the companies@urrent implied multiples. We look to the Goldman Sachs example earlier in the note as a comp for cyclical financials earnings. Our group median for implied future carry multiples of 8.5x is just under one standard devi- ation away from GS@historical P/E average of 9.5x. Although we use the higher multiple, this is on a lower value of fully taxed future performance fee earnings. The impact to valua- tion of future performance fees are mixed from company and can be seen in greater detail in the following appendix with company specific SOTP and scenario analysis. While we expect some multiple expansion for performance fees ina C-corp, the structure will not change the inherent vola- tility of the performance fee portion of earnings that is marked to market. =GxH =E+F+I F G H I J After-Tax % Net Carry Net Carry Per Future Value of Total Increase ‘ Share After 24% Receivable Carry Future jJValuePer from Tax (Avg. 2018e- . Per Share 2020e) Multiple Carry Share Current @24% Rate Price $1.64 $1.86 7.1x $13.30 $46.07 26% $0.78 $0.48 13.6x $6.47 $27.18 10% $2.29 $1.57 11.5x $18.04 $40.18 9% $4.40 $2.17 8.0x $17.26 $27.52 8% PAesZ $0.71 9.0x $6.42 $27.01 11% $4.38 $1.68 7.5x $12.58 $50.31 11% Average 9.5x 13% Median 8.5x 10% HOUSE_OVERSIGHT_025569

Morgan Stanley | RESEARCH Downside Scenario Our downside scenario is fairly straightforward: We assume that alts convert to C-corps and pay full taxes on earnings but the cur- rent p/e multiple does not re-rate upward at all. We assume the stocks trade at their current P/E, but on lower, fully taxed earnings. Therefore, our downside case for share prices is the same percentage downside to EPS if alts earnings are fully taxed. While we do not believe there is a high probability of this happening, this does represent a worst case scenario for the names, in our view. On average we see 18% potential downside for the group if this were to happen. We then usea similar approach to deconstruct the SOTP and see what the value for performance fees would be. e First, we determine the downside case share price by taking fully taxed 2018e EPS (at 24%) and multiplying by the current 2018e P/E (the current P/E using our published EPS and cur- rent partnership tax structure). ® Inthe SOTP, we assume that fee-related earnings multiples do not re-rate at all in the downside scenario and that the market continues to pay 15x. We believe there is a floor here in FRE will maintain current value. NORTH AMERICA INSIGHT ~~ © Similar to the upside case, we then fully tax effect the per- formance fee earnings and use a full 24% tax drag on the net accrued carry receivable balance and the future net carry per share. We then subtract out the value of the FRE, net accrued carry performance fees (tax adjusted) and the balance sheet value from our downside case derived share price. This gives us our downside case implied value of future carry. Finally, we divide that implied future carry value by our fully taxed performance fee earnings (@24%) to arrive at our downside case implied value of future carry. On average, our downside case implied future value of carry mul- tiple is 5.6x, nearly 3 standard deviations away Goldman Sachs FY2 P/E. Exhibit 29: Downside Scenario SOTP Valuation = B+C+D H I A B c D E F G =1/G = J-F-E - 9 Vola ne: After-Tax SOTP Nee Net Carry Per Implied Value of Implied increase . Current 2018E FRE BDC BS NAV Value Ex- a‘ 'Y Share After 24% Future Total Ticker . . Share @ Receivable Future from Price CoreFRE Multiple Value Per Per Share Carry Per Tax (Avg. Carry Value Per 2a tex share Share PerShare 518020206) Multiple SY | share Current Rate @24% Rate P Price APO $36.42 669 15.0x $18.94 $0.00 $2.72 $21.66 $1.64 $1.86 4.2x $7.91 $31.20 -14% ARES $24.70 185 15.0x $9.81 $3.01 $0.69 $13.51 $0.78 $0.48 recs $3.65 $17.95 -27% BX $36.78 1,196 15.0x $11.36 $0.00 $2.83 $14.19 $2.29 $1.57 8.3x $13.04 $29.51 -20% CG $25.60 100 15.0x $3.34 $0.00 $0.85 $4.19 $4.40 $2.17 6.9x $15.03 $23.62 -8% KKR $24.40 475 15.0x $6.38 $0.00 $9.71 $16.09 $1.32 $0.71 2.5x $1.80 $19.21 -21% OAK $45.20 166 15.0x $12.11 $0.00 $15.19 $27.30 $4.38 $1.68 4.0x $6.71 $38.39 -15% Average 5.6x -18% Median 5.6x -17% Source: Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025570

Morgan Stanley | RESEARCH NORTH AMERICA INSIGHT ~~ Appendix A: Company Scenario Analysis In the following tables, we flex the inputs in our SOTP valuation methodology to take a look at the potential impact at varying fee related earnings multiples and multiples on future carry. We use the same assumptions that we used in our upside scenario above, including a fully taxed (@24%) net carry receivable value as well as using a multiple on after tax net carry per share for future perform- ance fees. For fee-related earnings, we use constant multiples for all com- panies. We begin with 12.5x, a slight discount to where the traditional asset managers trade today, and end at 30x, or closer to our bond yield cap rate multiple approach. On performance fees, we set the mid point at our estimate for the current market implied multiple on performance fees (using a 15x FRE as our starting point), as explained in our valuation methodology above. HOUSE_OVERSIGHT_025571

Morgan Stanley | RESEARCH NORTH AMERICA INSIGHT ~~ Apollo Global Management SOTP and Sensitivity Analysis Exhibit 30: SOTP for APO Apollo Global Management (APO) Suimeot-the-Parte Components uno Downside Case Upside Case C- APO Price C-Corp Corp ( ) SOTP Conversion Conversion 2018e Pre-Tax Core FRE / Sh $1.66 $1.66 0% $1.66 0% Tax Rate 24% 24% 0% 24% 0% Fee Related Earnings 2018e After-Tax Core FRE / Sh $1.26 $1.26 0% $1.26 0% FRE Multiple 15.0x 15.0x 0.0x 22.5x 7.5X Core FRE Value $18.94 $18.94 0% $28.40 50% + Balance Balance Sheet Net Cash and 5 5 Sheet Investments / Sh (as of 3Q17) eae EUS Ue EU OM + meer y xa _ Carry Sh (as of $2.16 $1.64 -24% $1.64 -24% + Avg Net Carried interest / Sh , 5 Market (2018e-2020e) $2.45 $1.86 -24% $1.86 -24% Implied Carry ; Value Multiple 5.1x 4.2x -0.9x ibs 2.0x Market Implied Carry Value ! ‘$12.641 $7.91 37% $13.30 6% Total Value $36.42 $31.20 -14% $46.07 26% Valuation 2018e EPS $3.68 $3.15 -14% $3.15 -14% P/E 9.9x 9.9x 0.0x 14.6x 4.7x Source: Company Data, Morgan Stanley Research estimates Exhibit 31: Exhibit 32: APO Estimated Potential Share Price in C-corp Conversion APO Estimated % Change From Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees 2.2x 3.2x 4.2x 5.2x 6.2x 7.1x 8.2x 2.2x 3.2x 4.2x 5.2x 6.2x 7.1x 8.2x Fee Related Earnings Multiple Fee Related Earnings Multiple Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025572

Morgan Stanley | sesearcs NORTH AMERICA INSIGHT ~~ Ares Management SOTP and Sensitivity Analysis Exhibit 33: SOTP for ARES Ares Management (ARES) Sum-of-the-Parts Components Pro Forma eumrent Downside (ase Upside Case C- (ARES) Price Price C-Corp Corp SOTP Conversion Conversion 2018e Pre-Tax Core FRE / Sh $1.12 $1.12 $1.12 0% $1.12 0% Tax Rate 24% 24% 24% 0% 24% 0% Fee Related eninge 2018e After-Tax Core FRE / Sh $0.85 $0.85 $0.85 0% $0.85 0% FRE Multiple 15:0x 18.4x 15.0x -3.4x 22.5x 4.1x Core FRE Value $12.82 $15.72 $12.82 -18% $19.23 22% + Balance Balance Sheet Net Cash and 5 6 Sheet Investments / Sh (as of 3Q17) m0ee 70.82 #062 Wh: nace Oe + Accrued Net Accrued Carry / Sh (as of $1.03 $1.03 $0.78 24% $0.78 24% Carry 3Q17) + Avg Net Carried interest / Sh 9 9 Market (2018e-2020e) $0.63 $0.63 $0.48 -24% $0.48 -24% Implied Carry ; ; Value Multiple 11.6x 11.6x LIX -3.9x 13.6x 2.0x Market Implied Carry Value [ ~ "37.26 _ $7.26! $3.65 -50% $6.47 11% Total Value $21.80 $24.70 $17.95 -27% $27.17 10% Valuation 2018e EPS $1.73 $1.73 $1.42 -18% $1.42 -18% P/E 12.6x 14.3x 12.6x -1.7x 19.1x 4.8x Source: Company Data, Morgan Stanley Research estimates Exhibit 34: Exhibit 35: ARES Estimated Potential Share Price in C-corp Conversion ARES Estimated % Change in Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees © 7.7 9.6x 10.6x 11.6x 12.6x 13.6x 14.6x ° 7.7Xx 9.6x 10.6x 11.6x 12.6x 13.6x 14.6x = S 3 3 = s = E a a 8 8 z z o 8 8 Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025573

Morgan Stanley | sesearcs NORTH AMERICA INSIGHT ~~ Blackstone SOTP and Sensitivity Analysis Exhibit 36: SOTP for BX Blackstone (BX) Siimeot-the-Parte/Components oe Downside Case Upside Case C- (BX) Price C-Corp Corp Change SOTP Conversion Conversion 2018e Pre-Tax Core FRE / Sh $1.00 $1.00 0% $1.00 0% Tax Rate 24% 24% 0% 24% 0% Fee Related Earni 2018e After-Tax Core FRE / Sh $0.76 $0.76 0% $0.76 0% arnings FRE Multiple 15.0x 15.0x 0.0x ZOUK 1.95x Core FRE Value $11.36 $11.36 0% $17.03 50% + Balance Balance Sheet Net Cash and rn c Sheet Investments / Sh (as of 3Q17) oad eee thee wane ao a Accrued Net Accrued Carry / Sh (as of $3.01 $2.29 24% $2.29 24% Carry 3Q17) + Avg Net Carried interest / Sh ° A Market (2018e-2020e) $2.07 $1.57 -24% $1.57 -24% Implied Carry ; Value Multiple 9.5x 8.3x -1.2x alex 2.0x Market Implied Carry Value ! $19.59] $13.04 -33% $18.04 8% Total Value $36.78 $29.51 -20% $40.18 9% Valuation 2018e EPS $3.26 $2.62 -20% $2.62 -20% P/E 11.3x 11.3x 0.0x 15.4x 4.1x Source: Company Data, Morgan Stanley Research estimates Exhibit 37: Exhibit 38: BX Estimated Potential Share Price in C-corp Conversion BX Estimated % Change in Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees © 6.3x 7.3x 8.3x 9.3x 10.3x 11.5x 12.3x » 6.3x 7.3x 8.3x 9.3x 10.3x 11.5x 12.3x é é Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025574

NORTH AMERICA INSIGHT ~~ i. od Morgan Stanley | RESEARCH The Carlyle Group Management SOTP and Sensitivity Analysis Exhibit 39: SOTP for CG The Carlyle Group (CG) Suimeof-the-Parte|Gomponents uno Downside Case Upside Case C- CG Price C-Corp Corp (Ce) SOTP Conversion Conversion 2018e Pre-Tax Core FRE / Sh $0.29 $0.29 0% $0.29 0% Tax Rate 24% 24% 0% 24% 0% Fee Rel cand ated 20186 After-Tax Core FRE / Sh $0.22 $0.22 0% $0.22 0% arnings FRE Multiple 15.0x 15.0x 0.0x 22.5x 7.5X Core FRE Value $3.34 $3.34 0% $5.01 50% + Balance Balance Sheet Net Cash and 5 5 Sheet Investments / Sh (as of 3Q17) Bee) see Ue ES) OM + Accrued Net Accrued Carry / Sh (as of ° ° Carry 3Q17) $4.40 $4.40 0% $4.40 0% + Avg Net Carried interest / Sh , 5 Market (2018e-2020e) $2.85 $2.17 -24% $2.17 -24% Implied Carry ; Value Multiple 6.0x 6.9x 1.0x 8.0x 2.0x Market Implied Carry Value ~ ‘s17.01! $15.03 12% $17.26 1% Total Value $25.60 $23.62 -8% $27.52 8% Valuation 2018e EPS $3.03 $2.80 -8% $2.80 -8% P/E 8.5x 8.5x 0.0x 9.8x 1.4x Source: Company Data, Morgan Stanley Research estimates Exhibit 40: Exhibit 41: CG Estimated Potential Share Price in C-corp Conversion CG Estimated % Change in Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees 5.0x 6.0x 7.0x 8.0x 11.0x 5.0x 6.0x 7.0x 11.0x 9.0x 10.0x 8.0x 9.0x 10.0x Fee Related Earnings Multiple Fee Related Earnings Multiple Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025575

NORTH AMERICA INSIGHT ~~ Morgan Stanley | RESEARCH KKR & Co. SOTP and Sensitivity Analysis Exhibit 42: SOTP for KKR KKR & Co. (KKR) Downside Case C-Corp Conversion Current Price SOTP Upside Case C- Corp Conversion Sum-of-the-Parts Components (KKR) 2018e Pre-Tax Core FRE / Sh $0.56 $0.56 0% $0.56 0% Tax Rate 24% 24% 0% 24% 0% Fee Rel Earn ated 20180 After-Tax Core FRE / Sh $0.43 $0.43 0% $0.43 0% arnings FRE Multiple 15.0x 15.0x 0.0x 225K. 7.5x Core FRE Value $6.38 $6.38 0% $9.57 50% le Balance Balance Sheet Net Cash and ° 5 Sheet Investments / Sh (as of 3Q17) LE oval Ws ua oe + Accrued Net Accrued Carry / Sh (as of $1.74 $1.32 24% $1.32 24% Carry 3Q17) as Avg Net Carried interest / Sh 940 -949 Market (2018e-2020e) $0.93 $0.71 24% $0.71 24% Implied Carry ; Value Multiple 7.0x 2.5Xx -4.5x 9.0x 2.0x Market Implied Carry Value I _ _ $6.57) $1.80 -73% $6.42 -2% Total Value $24.40 $19.21 -21% $27.01 11% 2018e EPS $2.74 $2.16 -21% $2.16 -21% Valuation P/E 8.9x 8.9x 0.0x 12.5x 3.6x 3Q17 Book Value / Sh $13.80 $13.80 $13.80 Price-to-Book 1.77x 1.39x -0.4x 1.96x 0.2x 2018e ROE 19.1% 19.1% 0.0% 15.3% 3.8% Source: Company Data, Morgan Stanley Research estimates Exhibit 43: Exhibit 44: KKR Estimated Potential Share Price in C-corp Conversion KKR Estimated % Change in Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees 2.5x 3.5x 4.5x 5.5x 6.5x 7.5x 2.5x 3.5x 4.5x 5.5x 6.5x 7.5x Fee Related Earnings Multiple Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates 9.0x Fee Related Earnings Multiple Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025576 9.0x

NORTH AMERICA INSIGHT ~~ Morgan Stanley | RESEARCH Oaktree Capital Group SOTP and Sensitivity Analysis Exhibit 45: SOTP for OAK Oaktree Capital Group (OAK) Downside Case C-Corp Conversion Current Price SOTP Upside Case C- Corp Conversion Sum-of-the-Parts Components (OAK) Fee Related Earnings + Balance Sheet oe Accrued Carry + Market Implied Carry Value Valuation 2018e Pre-Tax Core FRE / Sh Tax Rate 2018e After-Tax Core FRE / Sh FRE Multiple Core FRE Value Balance Sheet Net Cash and Investments / Sh (as of 3Q17) Net Accrued Carry / Sh (as of 3Q17) Avg Net Carried interest / Sh (2018e-2020e) Multiple Market Implied Carry Value Total Value 2018e EPS P/E Source: Company Data, Morgan Stanley Research estimates Exhibit 46: $1.06 24% $0.81 15.0x $12.11 $15.19 $5.76 $2.20 o o x< I~ "S1 fh $45.20 $3.55 12.7x OAK Estimated Potential Share Price in C-corp Conversion 2.0x Fee Related Earnings Multiple Multiple on Future Performance Fees 3.0x 4.0x 5.0x 6.0x Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates 7.5x 8.0x I | el al 2 -1 _ $1.06 24% $0.81 15.0x $12.11 $15.19 $4.38 $1.68 4.0x $6.71 $38.39 $3.01 12.7x Exhibit 47: OAK Estimated % Change in Current Share Price Fee Related Earnings Multiple 2.0x 0% 0% 0% 0.0x 0% 0% -24% -24% -1.5x -45% -15% -15% 0.0x Multiple on Future Performance Fees 3.0x 4.0x 5.0x $1.06 24% $0.81 22. 5X $18.17 $15.19 $4.38 $1.68 7.5x $12.58 $50.31 $3.01 16.7x 6.0x Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates 7.5x 0% 0% 0% 7.5x 50% 0% -24% -24% 2.0x 4% 11% -15% 4.0x 8.0x HOUSE_OVERSIGHT_025577

Morgan Stanley | sesearcs NORTH AMERICA INSIGHT ~~ Appendix B: Valuation of Alternative Managers - What@in the Price? Exhibit 48: Exhibit 49: Covered Alternative Asset managers NTM Relative P/E Covered Alternative Asset managers NTM Absolute P/E Alts NTM P/E Ratios Relative to Trad. AMs and S&P Alts P/E Ratios 500 20.0% Alts NTM P/E Relative to Trad. ——-Alts NTM P/E Relative to S&P 500 sede Alts Avg. FY1 P/E ———-Alts Avg. FY2 P/E ——Alts Avg. NTM P/E 10.0% 25x 9 0.0% | 1 r r 1 1 Cr r 1 1 1 r r 1 1 20x -10.0% Relative to -20.0% Trad. ,- 27% 15x FY4 PIE, 730.0% Relative to 10x NTM PIE, -40.0% ag S&P,- 45% 10.1x 9 Ver A 5x FY2 PIE, -50.0% ks 10.1x “60.0% Ox ; 1 T T 1 T r r r ; 1 1 1 Cr 1 e-re3reseeseeers Fe ee ess erraanenmses + © HW © © ER > > > > > > y~ > > > > > y» > Y oY FY Y YT FY YF FY FT FY FY FY FY ¥ > > > >a F DP F FP F DB SP DB SF BD BD 2822828282838 2838282 ess SG SSE RSSE RSE B Source: Company Data, Thomson Reuters, Morgan Stanley Research estimates Source: Company Data, Thomson Reuters, Morgan Stanley Research estimates HOUSE_OVERSIGHT_025578

Morgan Stanley | sesearcs NORTH AMERICA INSIGHT ~~ Appendix C: Notable Alt Reports: In Case You Missed Them™% Asset Managers & Brokers: 4Q17 Preview: Buy CG and ETFC into the Print (12 Jan 2018) Raising Est on Tax Cuts & Strong Mkts, Upgrading APO and ETFC to Overweight (3 Jan 2018) Asset Managers & Brokers: 2018 Outlook: Key Debates in a Year of Change (3 Jan 2018, The Carlyle Group L.P.: Fundraising Ahead of Expectations; Buy the Dip (4 Dec 2017) Alternative Asset Managers and Credit Strategy: Interest Deductibility at Risk: Game Changer for High Yield and Private Equity? (9 Nov 2017) Alternative Asset Managers: C-Corp Conversion: To convert or not to convert, that is the question (6 Nov 2017) Asset Managers & Brokers: Uncovering Long-Term Value with ESG (20 Sep 2017) Global Asset Management: Building the Money Manager of Tomorrow (13 Sep 2017) The Blackstone Group L.P.: Management Meeting Takeaways: Significant Runway for Growth (10 Aug 2017) The Blackstone Group L.P.: Why Blackstone's "Innovation Machine" Suggests Upside to $60 Bull Case (24 Jul 2017) The Carlyle Group L.P: Inflection Point for Carlyle Supports $40 Bull Case (12 Jul 2017) Hamilton Lane Incorporated: Unique Play on Private Markets; Initiating at Overweight (27 Mar 2017) Asset Managers & Wholesale Banks: The World Turned Upside Down (16 Mar 2017) The Blackstone Group L.P.: $100 Billion Reasons to Thrive in Uncertainty: Mgmt Meeting Takeaways (10 Nov 2016) Alternative Asset Managers: Who@Got Swimsuits? (19 May 2016) Asset Managers: Convergence of Alts/Traditionals Multiple: Put This Chart on Your Wall (21 Jul 2019 US Asset Managers: Benchmark Inclusion of Alts: What If...? (22 Jan 2015) US Asset Managers: Introducing *Core® Fee-Related Earnings (FRE) Metric (15 Jan 2015) US Asset Managers: Cash In On the Harvesting Super-Cycle: Initiating on Alts: OW BX, KKR, OAK (19 Dec 2014) HOUSE_OVERSIGHT_025579

Morgan Stanley | ®esearcs NORTH AMERICA INSIGHT Brokers & Asset Managers Comps Sheet Exhibit 50: Brokers & Asset Managers Comps Sheet Brokers & Asset Managers 26/Jan/18 EPS As % Dividend Earnings Per Share (EPS) © CAGR (%) Price/Earnings (P/E) EV/ EBITDA of AuM Yield (%) LTM Net Price Price Market Cap Flows/BoP YTD Stock Company Ticker Rating 26/Jan/18 Target Upside (%) Shares (M) ($B) AUM ($B) — AuM (%) Perf. (%) 2017E 2018E 2019E 17-19 2017E 2018E 2019E 2018E 2019E 2017E 2018E 2019E Mkt Cap 2018E Covered Brokers & Asset Managers Franklin Resources (5) BEN UW $45.86 $42 555 2 753 BlackRock Inc BLK Ow $586.80 $660 12.5 162 94.8 5,977 14.2 14.5x 13.4x 1.6 Hamilton Lane HLNE EW $38.85 $38 (2.2) 53 2.1 29 9.8 19.2x 15.5x 71 2.0 Invesco Ltd IVZ EW $38.40 $39 1.6 407 15.6 917 1.2 5.1 9.1x 8.6x 17 3.3 a) Janus Henderson Group JHG OW $41.43 $50 214 198 8.2 361 (2.9) 8.3 10.0x 9.0x 2.3 3.4 © Legg Mason (5) LM uw $45.75 $43 (6.0) 92 42 754 (3.0) 9.0 9.5x 9.8x 0.6 24 & OM Asset Mgmt. (4) OMAM EW $18.31 $19 3.8 110 2.0 236 (0.3) 9.3 7.6x 7.2% 0.9 2.2 & T. Rowe Price TROW, EW $119.99 $115 (4.2) 244 29.3 948 0.7 14.4 10.7x 10.9x 3.1 19 a Virtus Investment Partners VRTS EW $131.00 $127 (3.1) 7 0.9 91 0.4 13.9 71x 6.6x 1.0 15 Waddell & Reed Financial WDR UW $22.98 $20 (13.0) 83 19 81 (15.3) 2.9 7.0x 7.9x 24 44 WisdomTree Investments WETF EW $12.33 $14 13.5 137 17 46 Mean (Excl. HLNE, JHG, WETF), (Market Cap, EV and AuM equals Total) (2.1) 176.0 9,804 Median (Excl. HLNE, JHG, WETF) (3.6) Apollo Global Mgmt APO Ow $36.42 $42 403 14.7 242 Ares Mgmt. ARES EW $24.70 $20 216 5.3 106 3 Blackstone Group BX OW $40 1,199 387 a Carlyle Group CG OW $33 343 174 s KKR & Co KKR EW $24 848 153 Oaktree Capital Group (2) OAK ow $45.20 $60 156 100 Mean (Covered Alts), (Market Cap, EV and AuM equals Total) 100.6 1,162 Median (Covered Alts) TD Ameritrade Holding Corp AMTD EW $54.97 $61 11.0 567 31.2 1,119 E*TRADE Financial Corp ETFC OW $53.49 $66 23.4 271 14.5 365 § LPL Financial Holdings Inc LPLA EW $60.76 $62 2.0 90 5.5 560 é Charles Schwab Corp SCHW OW $54.27 $63 16.1 1,340 20 3,181 Mean (Market Cap, EV and AuM equals Total) 13.1 123.8 5,225 Median 13.5 Covered Brokers & Asset Managers Mean (Excl. WETF and HLNE), (Market Cap, EV and AuM equals Total) 5.6 398.8 16,144 3.4 10.2 12.6 15.8x 13.8x 13.0x 14.6x 13.6x 11.2x 10.2x 9.5x 4.0 3.3 Median (Excl. WETF and HLNE) 2.9 2.2 8.9 10.2 14.1x 12.9x 12.4x 12.8x 12.9x 10.7x 9.9x 9.4x 2.9 cosh Non-Covered Brokers & Asset Managers SS ee AllianceBernstein AB NC $27.85 NC NC 94 2.6 535 1.8 11.2 2.11 2.38 2.64 12.0 13.2x 11.7x 10.5x n/a n/a 3.7x 3.3x 3.1x 0.5 8.5 Affiliated Managers Group AMG NC $215.76 NC NC 56 12.0 804 (0.1) 5.1 14.49 17.39 18.81 13.9 14.9x 12.4x 11.5x n/a n/a 14.4x 13.0x 11.9x 15 0.5 z Eaton Vance (5) EV NC $60.87 NC NC 118 7.2 422 11.2 7.9 2.61 3.36 3.79 20.6 23.3x 18.1x 16.1x n/a n/a 14.4x 12.3x n/a 17 2.2 3 Fortress Investment Group FIG NC N/A NC NC 240 n/a 0 (0.9) n/a 0.06 0.07 0.08 20.7 n/a n/a n/a n/a n/a 4.5x 3.7x 3.0x n/a n/a q QcheZiffCapital Mgmt OZM_ NC $2.38 NCC 8588) 2 Stifel Financial Corp__st__NC___$6636_ NCC AS 65a =a 321 L__ 5.40296 207K 1x 123K inva eG 403K AT Raymond James Financial, Inc. RJF NC $98.26 NC NC 145 14.3 664 n/a 10.0 5.47 6.90 714 18.9 18.0x 14.2x 12.7x n/a n/a 28.2x 25.1x n/a 2.2 11 Interactive Brokers Group, Inc. IBKR NC $64.20 NC NC 71 46 97 n/a 8.4 1.22 2.04 2.34 38.4 52.6x 31.4x 27.5x n/a n/a 6.4x 47x 4.0x 47 0.6 S&P 500 (3) 2,872.9 2,750 (4.3) 75 131.60 145.00 150.00 6.8 21.8x 19.8x 19.2x 19.0x 18.3x 2.2 Source: Company data, Thomson Reuters, Morgan Stanley Research estimates, except for NC (not covered), which are Thomson Reuters estimates (1) Alternative asset manager net flows include fee-paying fundraising and inflows net of redemptions and distributions. (2) OAK estimates reflect Adjusted Net Income (ANI), given that is the primary metric reported by the company. (3) S&P500 EPS based off of MS Equity Strategy Team's estimates (4) ENI/Unit represents EPS and P/ENI represents P/E (5) BEN, LM and EV have fiscal years not ending in December, so for these companies CY estimates were used in order to have temporal consistency. BEN and LM reflect MS estimates; EV reflects consensus Thom son estimates. Source: Company Data, Thompson Reuters, Morgan Stanley Research estimates, except for non-covered companies (NC), which are consensus estimates HOUSE_OVERSIGHT_025580

Morgan Stanley | RESEARCH Valuation and Risks NORTH AMERICA INSIGHT ~~ Alternative Asset Managers: We value the stocks using a sum of the parts valuation and discounted cash flow as well as price/earnings and price/cash earnings multiples. Our DCF (COE of 12+15%, free cash flow = distributable earnings and terminal growth rate = 4%) captures the long-term value of the business model, while the sum of the parts captures some of the shorter-term volatility. For our SOTP, we use 2019 *Core® FRE and apply a 18x-21x multiple; apply 12x multiple on BDC income share; use NPV to estimate future carry and apply discount rate to represent volatile nature of carry; 10% haircut on accrued carry; 10% haircut on B/S assets. APO.N Apollo Global Management: We value APO using a sum-of-the- parts, supported by a DCF, and back into an implied target multiple on next 3 years DE, and ENI. Our price target implies a 11.5x multiple on 2019 EPS, reflecting a 25% premium to historical valuation of 9.2x that's warranted due accelerating growth in and mix shift toward sticky fee related earnings for which investors ascribe a higher mul- tiple, and APO is entering their harvesting stage that will see port- folio monetizations accelerate driving stronger cash earnings generation. Upside risks: Better FPAUM growth, capital deployment accelerates, better returns. Downside risks: Declining valuations reduce cash earnings (fewer exits or lower multiples); slower deploy- ment; Funds V, Vland VIland ANRP remain in escrow, pressuring near term cash earnings. ARES.N Ares: We value ARES using a sum-of-the-parts, supported by a DCF, and back into an implied target multiple on next 3 years DE, and ENI. Our PT represents a 10.8x PE multiple, slightly above the 3 year average of 9.3x on improving cash earnings trajectory. Upside risk includes better asset gathering, stronger investment performance and faster monetization of portfolio investments. Downside risk that strong AUM baked into our model over the next several years will not materialize. ARCC concentration risk (a BDC which contributes 40% of mgmt fees / 29% of revenue), and harvesting delays if there's an extended financial & capital markets pullback. BX.N Blackstone: We value BX using a sum-of-the-parts, supported by a DCF, and back into an implied target multiple on next 3 years DE and ENI. Our PT represents a 12.6x PE multiple, above the 3 year average of 9.4x on expectations for accelerated growth in fee-related earn- ings growth, cash earnings growth and fundraising. Upside risks: Stronger investment performance, faster monetization of portfolio companies, better asset growth through new initiatives. Downside risks: Weakness in public markets and commercial real estate mar- kets pressure investment performance. Harvesting delaysD An extended pull-back in financial and capital markets that delays har- vesting of investments and dampens returns which lower cash earn- ings. cG.O Carlyle: We value CG using a blended sum-of-the-parts, supported by a DCF, and back into an implied target multiple on next 3 years DE and ENI. Our PT implies a 13.5x multiple on 2019 EPS, reflecting a 55% premium to historical valuation of 8.8x given resolution of legacy issues and accelerating fee related earnings and asset gathering momentum that will support the multiple. We expect less volatile financial performance across all segments in our forward Look, vs. greater volatility in historicals driven legacy challenges. Upside risks include: Better investment performance, strong asset gathering and faster monetization of portfolio companies. Downside risks include an extended pull-back in financial and capital mkts that delays har- vesting of investments and dampens returns which lower cash earn- ings, and poor investment performance. KKR.N KKR: We value KKR using a 1.3x multiple on 2019 estimated book value and back into an implied target multiple on next 3 years DE and ENI. Our price target is also supported by a sum-of-the-parts valua- tion. Our PT implies a 8.2x multiple on 2019 EPS, reflecting a 9% pre- mium to historical valuation of 7.5x given improving fee related earnings trajectory. Upside risks include better investment perform- ance, compounding book value growth and faster asset gathering from newer initiatives. Downside risks include an extended pull-back in financial and capital markets that delays harvesting of investments and dampens returns which lower cash earnings and impairs signifi- cant investments held on balance. HOUSE_OVERSIGHT_025581

Morgan Stanley | RESEARCH OAK.N Oaktree: We value OAK using a sum-of-the-parts, supported by a DCF, and back into an implied target multiple on next 3 years DE and ENI. Our PT implies a 12.6x multiple on 2019 EPS, reflecting a 7% pre- mium to historical valuation of 11.8x given expectations for their Opps Xb fund to turn fees on during 2019 and sharply boost fee related earnings. Upside risks include better investment perform- ance, faster monetization of portfolio investments, strong asset gathering from newer initiatives and inflection higher in fee related earnings. Risks include poor investment performance, an extended pull-back in financial and capital markets that delays harvesting of investments and dampens returns which Lower cash earnings. Morgan Stanley & Co. International plc (“Morgan Stanley”) is cur- rently acting as financial advisor to Banco Popular Espafiol, S.A. (“Banco Popular”) in relation to its agreements with Balsam Invest- ment S.a rl., (“Blackstone”) for the acquisition by Blackstone of 51% of, and hence the assignment of control over, Banco Popular's real estate business, as announced on August 8, 2017. Closing of the transaction is subject to relevant regulatory authorisations and other customary conditions. Banco Popular has agreed to pay fees to Morgan Stanley for its financial services. Please refer to the notes at the end of the report. Morgan Stanley & Co. International plc (“Morgan Stanley”) is acting as financial advisor to Unilever plc and Unilever N. V. (together “Uni- lever”) in relation to an offer received from KKR & Co. to acquire Uni- lever's global spreads business, as announced on 15 December 2017. Unilever has agreed to pay fees to Morgan Stanley for its financial services. Please refer to the notes at the end of the report. Morgan Stanley is acting as financial advisor to Jack in the Box Inc. (“Jack”) with respect to a definitive agreement to sell its wholly owned subsidiary, Qdoba Restaurant Corporation, to Funds affili- ated with Apollo Global Management, LLC. Jack has agreed to pay fees to Morgan Stanley contingent upon the consummation of the transaction. The proposed transaction is subject to customary closing conditions and adjustments. Please review the notes at the end of this report. NORTH AMERICA INSIGHT ~~ HOUSE_OVERSIGHT_025582

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Rowe Price Group, Inc., TD Ameritrade Holding Corp., The Blackstone Group L.P., The Carlyle Group L.P, Virtus Investment Partners, Waddell & Reed Financial Inc, WisdomTree Investments, Inc.. Morgan Stanley & Co. LLC makes a market in the securities of Apollo Global Management LLC, BlackRock Inc., Charles Schwab Corp, E*Trade Financial Corp, Franklin Resources Inc., Goldman Sachs Group Inc, Invesco, KKR & CO. L.P,, Legg Mason Inc., LPL Financial Holdings Inc., Oaktree Capital Group, LLC, OM Asset Management Plc, T. Rowe Price Group, Inc., TD Ameritrade Holding Corp., The Blackstone Group L.P, The Carlyle Group L.P, Virtus Investment Partners, Waddell & Reed Financial Inc, WisdomTree Investments, Inc.. 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Other Material Investment Services Clients Coverage Universe Investment Banking Clients (IBC) (MISC) Stock Rating Cate- . aany Count % of Total Count % of Total IBC % of Rating Category Count % of Total Other MISC Overweight/Buy 1142 36% 320 40% 28% 560 38% Equal-weight/Hold 1424 44% 371 47% 26% 674 46% Not-Rated/Hold 55 2% 6 1% 11% 9 1% Underweight/Sell 583 18% 95 12% 16% 237 16% Total 3,204 792 1480 Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months. Due to rounding off of decimals, the percentages provided in the "% of total" column may not add up to exactly 100 percent. Analyst Stock Ratings Overweight (O). The stock@total return is expected to exceed the average total return of the analyst@industry (or industry team® coverage universe, on a risk-adjusted basis, over the next 12-18 months. Equal-weight (E). The stock@total return is expected to be in line with the average total return of the analyst@industry (or industry team) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock@total return relative to the average total return of the analyst@industry (or industry team® coverage universe, on a risk-adjusted basis, over the next 12-18 months. Underweight (U). The stock@total return is expected to be below the average total return of the analyst@industry (or industry team® coverage universe, ona risk-adjusted basis, over the next 12-18 months. Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (1): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in Line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - HOUSE_OVERSIGHT_025584

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Morgan Stanley | RESEARCH INDUSTRY COVERAGE: Brokers & Asset Managers COMPANY (TICKER) Michael J. Cyprys, CFA, CPA Apollo Global Management LLC (APO.N) Ares Management, L.P. (ARES.N) BlackRock Inc. (BLK.N) Charles Schwab Corp (SCHW.N) E*Trade Financial Corp (ETFC.O) Franklin Resources Inc. (BEN.N) Hamilton Lane Incorporated (HLNE.O) Invesco (IVZ.N) KKR & CO. L.P. (KKR.N) Legg Mason Inc. (LM.N) LPL Financial Holdings Inc. (LPLA.O) Oaktree Capital Group, LLC (OAK.N) OM Asset Management Plc (OMAM.N) T. Rowe Price Group, Inc. (TROW.O) TD Ameritrade Holding Corp. (AMTD.O) The Blackstone Group L.P. (BX.N) The Carlyle Group L.P. (CG.O) Virtus Investment Partners (VRTS.O) Waddell & Reed Financial Inc (WDR.N) WisdomTree Investments, Inc. (WETF.O) Stock Ratings are subject to change. Please see latest research for each company. * Historical prices are not split adjusted. RATING (AS OF) 0 (01/03/201 E (12/15/201 0 (09/18/201 0 (09/26/201 0 (01/03/201 U (03/16/201 E (10/05/201 E (01/03/201 E (02/17/201 U (10/05/201 E (01/03/201 O (12/15/201 E (01/26/201 E (10/05/201 E (09/26/201 0 (12/15/201 0 (02/17/201 E (06/01/201 U (09/18/201 E (09/18/201 8 4 5 6 8 7 7 8 6 7 8 4 6 7 6 4 wewrevevewvereaveewere rere Sr rere Se VP re rere SDS 7 5 5 NORTH AMERICA INSIGHT ~~ PRICE* (01/29/2018) $35.60 $24.50 $574.42 $54.05 $52.62 $45.12 $38.31 $37.48 $24.25 $44.27 $60.11 $45.30 $18.19 $117.55 $55.59 $36.56 $25.50 $129.80 $23.18 $12.13 HOUSE_OVERSIGHT_025587

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