PAUL, WEISS, RIFKIND. WHARTON 6? GARRISON LLP

PAUL, WEISS, RIFKIND. WHARTON 6? GARRISON LLP I21115 AVENUE OF THE AMERICAS NEW YORK. NEW YORK 10019-6064 TELEPHONE LLOYD K GARRISON RANDOLPH E. PAUL SI/40N N RWKIND LOUIS • WM* JOHN I WHARTON WRITER'S DIRECT DIAL NUMBER WRITER'S DIRECT FACSIMILE WRITERS DIRECT EMAIL ADDRESS May 13, 2016 UNIT 3501. OFFICE TOWER A. OILISNO FORTUNE PLAZA NO 7 OCIIIIIMIANHUAN ZINONOLU CHAOYANG DISTRICT BEIJING 100020 PEOPLE'S R TELEPHONE 13TH FLOOR HON* HON* CLUB BYROM. SA CRATER ROAD. CENTRAL TELEPHONE.... PERSONAL & CONFIDENTIAL By FEDEx Mr. Lawrence Falk Estate & Gift Tax Attorney Internal Revenue Service 290 Broadway New York, NY 10007-1867 Dear Mr. Falk: CASTLE 10 NOBLE STREET LONDON ECM. >JO U •. TELEPHONE FUKOKU SEIMEI BUILDING ucHisAiwAicHo 2.cHomE CHIVOIDAlm. TOKYO TELEPHONE TORONTO-DOMINION 77 KING STREET WEST. WRY 3100 P.O. BOX 210 TORONTO. NOME 1001 K STREET, NW WASHINO HON TCa BOO DELAWARE AVENUE. SURE 200 POST OFFICE SOX 22 WILMINGTON, NONE MATTHEW W ABBOTT EDWARD AN T C ERM JACOB A IN ALLAN) ARFFA ROBERT A ATKINS WAVATALOUHAY Juigh • • UOMMAN LYNN L. SAYARD DANIEL J SELL CRAIG A UNION MITCHELL CRO MARK S • R NAN DAVID M. •11.ANICK BRUCE IIIRENDOIM N cHAISTOPHER ANGELO BONVINOBOINNIN0 itZURS BR DAVID W/4 •U LLLLL BROWN SUSANNA PATRICK Zihrkp AN ILL • K CH GEOFFREY R. CHEPIGA LL LL N CHINO EL WISPt' C.L5Atr"" JAY COHEN KELLEY A CORNISH CHRISTOPHER J CUMMINGS DAVIDOW THOMAS V DE LA IIASTIDE 111 ARIEk J DEC KELSAUM ^Lc •ELISLE EATON Alto CW .3 EHRLICH GREGORY A carom) hilitYS2ecnoW FAGEN ROSS A FIELDSTON GRAD) ANDREW C PINCH IN BRIAN P FINNCOAN ROBERTO mai PETER E FISCH ralcI PZ 1, ARIL ANDREW J. FOLEY HARRIS • FREIDUS reimpft%Vag KENN TH A GALL MICHAEL GERTIMAN ADAM &I OIVERTZ SAV RE 000L10/4 L ROBERT 0 CIOLDBAUMLLLL NEIL GOLDMAN RODERTO 00112•LEZ• CATHERINE L O000ALL ERIC 0000100/4 H 0000E, JR ItIV0 IMAV RD" NICHOLAS OROOMORIDOE BRUCE • GUTENPLAN GAINES OWATIIMEE AL•N 4•11 14• 01114 JUSTIN 0 HAM LL •RIAN CLAUDTI HERMAN IA HAM LLL N AN MI HIASHMAN MICHAEL S HONG DAVID • HUNTINGTON MUM ' i SMAILITO BRIAN M. JANSON •NOT AMMITTO TO TIM 111.WVOIIK BAR MEREDITH) NGHOROANI KANE A KAPLAN BRADS KARP PATRICK N KARSHIT7 J OHN C KENNEDY LAN W BRIAN KIM DANIEL ) K LLLLL DAVID K LAKHOHIR • L JOHN LANGE AM•• GREGORY Lauren DANIEL MACY.) GREG LIU JEFFREY D MARCO V 14•60T71 82:41.1.1,HAY IARD ELIZABETH RW NCCOLM MARK I MENDEL•OHN CLAUDINE NEREOITH-GOUJON WIFAM • MICHAEL JU 1E NO SHO LLLLL• TO S MYERSON LLLLL INC HVARADV i.1211 YOYNOr014 BRAD R OK_UN NEWLY C. BARKER MA CL LLLLL WIER VALERIE RADwANER CARL L REISHER LORIN L NEWER WALTERI 21t114521AAIN RICHARD A ROSEN tret k HAEL &I reatt liPIR° RAP RUS 'FAC ELIZABETH KSTEDER IN • SAMUELS. DALE II *ARMS TERRY E SCHIMEK ROGER) I•1 SCHNEIDER SCHUMER JOHN SCOTT STEPHEN ) SHIPASHAK PIOST EN SRSIMIIVAIN STEV SIMKIN JOSEPH ) 111/40N• ACCRA J soLowAY T s sonywo con AR m STEWART ERIC ALAN STONE te& V.V14=.... THU LLLLL DANIEL J TOAL liatalgttai tal R V. WELLS. J. STEVEN) WILLIANB LAWRENCE I vnyDoacHic MARK B W... LAIL._ JULIA MASON W JENNIFVA ER M WU •ETTY P• JORDAN C YARETT TOKAT NG YU E N VOSHINO ♦ T20W N. i[•1617 T ROBERT ZOCHOWSKI. JR. On behalf of Leon D. Black, I am responding to your letter dated March 31, 2016. For ease of reference, I enclose a copy of your letter. I further enclose a copy of the Power of Attorney by which Mr. Black consents to my representation of him in connection with this audit, as well as a binder with a detailed index that contains the supporting documentation in response to your questions. Please allow me to respond to your questions in the order presented. 1. The 2013 gift amount related to the economic benefit of Mr. Black's split dollar life insurance held in the Leon D. Black 1999 Life Insurance Trust #1 was calculated based on each insurance carrier's published one-year term Doc,: US1:10623708v6 EFTA01071396 PAUL. WEISS. RIFKIND. WHARTON & GARRISON LLP rates. Exhibit A in the enclosed binder contains a schedule from Bryant Group indicating the 2013 gift amount for each policy held in this trust. 2. As is the case with the insurance held in the Leon D. Black 1999 Life Insurance Trust #1, the 2013 gift amount related to the economic benefit of Mr. Black's split dollar life insurance held in the Leon D. Black 1999 Life Insurance Trust #2 was calculated based on each insurance carrier's published one-year term rates. Please see Exhibit A in the enclosed binder, described in the preceding paragraph, for a schedule from Bryant Group indicating the 2013 gift amount for each policy held in this trust. 3. Exhibit B in the enclosed binder is a letter from Scott Nammacher of Empire Valuation Consultants, LLC, which explains how Empire Valuation Consultants arrived at a total discount of 15% (representing a combined minority/marketability discount) for the transfer of a 37.75% Limited Partnership interest in Black Family Partners, L.P. 4. Please see Exhibit B in the enclosed binder, described in the preceding paragraph, for an explanation of how Empire Valuation Consultants arrived at a total discount of 15% (representing a combined minority/marketability discount) for the transfer of a 34.53% Limited Partnership interest in Black Family Partners, L.P. 5. The APOI GRAT and APO1 GRAT No. 2 each called for annuity payments to be made quarter-annually and each GRAT had a two-year tent Each annuity payment was made in a timely manner and in a combination of a cash payment and a distribution of interests in Black Family Partners, L.P. Each distribution of Black Family Partners interests in connection with an annuity payment, in turn, was supported by an appraisal (and each such appraisal used the same 15% discount as was used in connection with the initial funding of the GRATs). For the final annuity payment for each GRAT, because the value of the assets held in the GRAT had declined during the GRAT term, the trustee returned all remaining assets to the grantor, and no property passed under the GRAT to the remainder beneficiary. Does: US1:10623708v6 EFTA01071397 PAUL. WEISS. RIFKIND. WHARTON & GARRISON LLP 3 The following is a summary of the annuity payments for the APO1 GRAT. Date Cash Amount Value of Black Family Partners Interest (and Percentage of Outstanding Ownership Interests) Total Value of Annuity Payment January 24, 2014 $47,000,000.00 $62,808,497.00 $109,808,497.00 (2.5808%) April 24, 2014 $56,000,000.00 $53,808,497.00 $109,808,497.00 (2.4038%) July 24, 2014 $35,900,000.00 $73,908,497.00 $109,808,497.00 (3.5009%) October 24, 2014 $11,700,000.00 $98,108,497.00 $109,808,497.00 (5.2864%) January 24, 2015 $20,200,000.00 $111,556,087.00 $131,756,087.00 (5.6222%) April 24, 2015 $15,000,000.00 $116,756,087.00 $131,756,087.00 (6.2891%) July 24, 2015 $3,680,000.00 $128,076,087.00 $131,756,087.00 (7.1266%) October 24, 2015 All remaining cash All remaining BFP All remaining $2,525,730.25 interests property $81,167,486.00 (4.9402%) Exhibit C in the enclosed binder includes copies of the banks atements demonstrating the payment of the cash portion of each annuity for the APOI GRAT. Exhibit D in the enclosed binder includes copies of the assignment documents for each distribution of Black Family Partners interests made in connection with the annuity payments for the APOI GRAT. Exhibit E in the enclosed binder includes copies of the supporting appraisals for the distributions of Black Family Partners interests that were made in connection with the annuity payments for the APO1 GRAT. nod,: US1:10623708v6 EFTA01071398 PAUL. WEISS. RIFKIND. WHARTON & GARRISON LLP 4 The following is a summary of the annuity payments for the APOI GRAT No. 2. Date Cash Amount Value of Black Family Partners Interest (and Percentage of Outstanding Ownership Interests) Total Value of Annuity Payment March 3, 2014 $27,500,000.00 $63,205,946.50 $90,705,946.50 (2.6640%) June 3, 2014 $47,700,000.00 $43,005,946.50 $90,705,946.50 (2.1525%) September 3, $23,900,000.00 $66,805,946.50 $90,705,946.50 2014 (3.5281%) December 3, 2014 $15,000,000.00 $75,705,946.50 $90,705,946.50 (3.9477%) March 3, 2015 $17,770,000.00 $91,072,916.00 $108,842,916.00 (4.7350%) June 3, 2015 $10,062,000.00 $98,780,916.00 $108,842,916.00 (5.0143%) September 3, $6,482,000.00 $102,360,916.00 $108,842,916.00 2015 (6.0212%) December 3, 2015 All remaining cash All remaining BFP All remaining $2,075,249.00 interests property $97,654,720 (6.4672%) Exhibit F in the enclosed binder includes copies of the bank s atements demonstrating the payment of the cash portion of the annuities for the APOI GRAT No. 2. Exhibit G in the enclosed binder includes copies of the assignment documents for each distribution of Black Family Partners interests made in connection with the annuity payments for the APO1 GRAT No. 2. Exhibit H in the enclosed binder includes copies of the supporting appraisals for the distributions of Black Family Partners interests that were made in connection with the annuity payments for the APO1 GRAT No. 2. Docti: US1:10623708v6 EFTA01071399 PAUL. WEISS. RIFKIND. WHARTON & GARRISON LLP Again, due to the decline in values, nothing passed to the remainder beneficiaries from either GRAT. In the end, all trust assets were returned to the grantor. Sincerely, Alan Halperin Enclosures Does: US1:10623708v6 EFTA01071400