LDB 2011 LLC

LDB 2011 LLC Valuation of a 25% non-managing membership interest As of June 30, 2014 EMPIRE VALUATION CONSULTANTS. uk EFTA01108985 Table of Contents Executive Summary 1 Valuation Standards 1 Sources of Information 2 Business Profile 4 A. Ownership 5 B. Description of Assets and Liabilities 5 C. LDB Agreement Provisions 11 D. PLB Agreement Provisions 13 E. Phaidon Global Agreement Provisions 14 F. Phaidon Agreement Provisions 15 Economic, Capital Markets, and Private Equity Outlooks 16 A. General Economy 17 B. Capital Markets Overview 18 C. Private Equity Industry Outlook 24 D. Fine Art Outlook 28 Valuation Overview 29 A. General Valuation Methods 29 B. Outline of Valuation Proces • 30 Valuation of LDB's Assets and Liabilities 32 A. Valuation of Fixed-Term Fund Interests 32 B. Valuation of Restricted Investments 35 C. Valuation of PLB 38 D. Valuation of Cash, Marketable Securities, Fine Art, and Receivables 40 E. Liabilities 41 Valuation of LDB 2011 LLC 41 A. LDB's Adjusted Book Value 41 B. Investment Company Discount 43 C. Discount for Lack of Marketability 45 EFTA01108986 1. Background 45 2. Restricted Stock Studies — Qualitative Assessment 45 3. Estimated Lack of Marketability Discount - Qualitative Analysis 45 4. Restricted Stock Study Data — Quantitative Assessment 47 5. Summary Findings from the 2013 Discount Study Data 48 6. Quantitative Analysis Based on 2013 Discount Study 48 7. Concluded Discount for Lack of Marketability / Fair Market Value 50 Valuation Summary 51 Valuation Addenda Valuation Exhibits EFTA01108987 EMPIRE VALUATION CONSULTANTS, PRIVATE & CONFIDENTIAL August II, 2015 Alan S. Halperin, Esq. Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas, Suite 3115 New York, NY 10019-6064 Dear Mr. Halperin: You have engaged Empire Valuation Consultants, LLC ("Empire") to estimate the fair market value of a 25% non-managing membership interest (the "Interest") in LDB 2011 LLC ("LDB" or the "Company") as of June 30, 2014 (the "Valuation Date"). It is our understanding that this valuation will be used by you in advising your client for estate planning purposes. For purposes of this report, fair market value is defined in accordance with Treasury Regulations established for income, estate and gift taxes as the price at which ownership interests would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. Executive Summary The estimated fair market value of the Interest as of the Valuation Date is $23,000,000. The primary valuation method employed in the analysis was the adjusted book value method. A full description of how the valuation was performed is provided later in this report. Valuation Standards This report is an Appraisal Report as defined in Standards Rule 10 of The Appraisal Foundation's Uniform Standards of Professional Appraisal Practice ("USPAP"), which New York Boston • Cleveland Rochester • West Hartford EFTA01108988 Alan S. Halperin, Esq. August II, 2015 Page 2 specifically applies to the preparation of valuation reports of business interests. This report has also been prepared in accordance with the American Institute of Certified Public Accountants Statement on Standards for Valuation Services 1: Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset. This appraisal considered all pertinent factors outlined in USPAP Standards Rule 9 and IRS Revenue Ruling 59-60, including, but not limited to, the following: • the nature and history of LDB; • the financial and economic conditions affecting the general economy, the Company, and its industry; • the past results, current operations, and future prospects of LDB; • the earning capacity and dividend-paying capacity of the Company; • the economic benefit to the Company of both its tangible and intangible assets; • the market price of actively traded interests in public entities engaged in the same or similar lines of business as LDB, as well as sales of ownership interests in entities similar to the Company; • the prices, terms, and conditions of past sales of ownership interests in LDB; and • the impact on the value of ownership interests in LDB resulting from the existence of buy-sell and option agreements, investment letter stock restrictions, restrictive shareholders agreements, or other such agreements. Sources of Information Information used in determining the fair market value of the Interest was provided by the documents and sources listed below: • Copies of the Company's internally prepared financial statements for the fiscal years ended December 31, 2011 through 2013 and the six-months ended June 30, 2014; • A copy of LDB's Amended and Restated Limited Liability Company Agreement, dated June 30, 2014 (the "LDB Agreement"); • A copy of the J.P. Morgan brokerage account statement outlining the cash and marketable securities held in the account as of June 30, 2014; EMPIRE VALUATiON CONSULTANTS EFTA01108989 Alan S. Halperin, Esq. August II, 2015 Page 3 • Copies of the 2013 Schedule K-1 for each of the following entities: (1) AIF II, L.P. ("AIF II"); (2) AP SHL Investors, LLC ("AP SHL"); (3) AP Technology Partners, L.P. ("AP Tech"); (4) Apollo Investment Fund, L.P. ("AIF"); (5) Apollo Real Estate Investment Fund, LP ("REIF"); (6) AREIF III Transfer Members, LLC ("REIF III"); (7) AREIF IV Co-Invest, LLC ("REIF IV"); (8) BHM Investors, LLC ("BHM"); (9) Microbes Investors, LLC ("Microbes"); (10) PAM Centre, L.P. ("PAM"); and (11) Viropro Investors, LLC ("Viropro"); • A copy of an internally prepared capital account statement for REIF, REIF, III, and REIF IV; • For LDB's investment in FCI Co-Investors I (A), L.P. ("FCI"), copies of: (1) the June 30, 2014 capital account statement; (2) FCI's amended and restated partnership agreement, dated February 15, 2011; and (3) FCI's audited financial statements for the year ended December 31, 2013. • For LDB's investment in Quadrangle Capital Partners LP ("QCP"), copies of: (1) the June 30, 2014 capital account statement; (2) QCP's amended and restated limited partnership agreement, dated May 23, 2000; and (3) QCP's audited financial statements for the year ended December 31, 2013. • For LDB's investment in Quadrangle (Access) Capital Partners LP ("QACP"), a copy of the June 30, 2014 capital account statement. • For LDB's investment in Quadrangle (Offshore) Capital Partners LP ("QOCP"), a copy of the June 30, 2014 capital account statement. • For LDB's investment in Searchlight Capital, L.P. ("Searchlight"), copies of: (1) the June 30, 2014 capital account statement; (2) Searchlight's second amended and restated limited partnership agreement, dated December 29, 2011; and (3) Searchlight's audited financial statements for the year ended December 31, 2013. • For LDB's investment in Searchlight Capital AIV I, L.P. ("Searchlight AIV"), copies of: (1) the June 30, 2014 capital account statement; and (2) Searchlight AIV's audited financial statements for the year ended December 31, 2013. • A signed copy of the appraisal of a Selected Group of Works (the "Fine Art") held by LDB, prepared by Sotheby's Inc. as of June 23, 2014 (the "Fine Art Appraisal"); • A signed copy of the Valuation Agreement for the Fine Art Appraisal outlining that no blockage discount was applied to the Fine Art included in the Fine Art Appraisal; EMPIRE VALUATION CONSULTANTS EFTA01108990 Alan S. Halperin, Esq. August II, 2015 Page 4 • A copy of PLB, LLC's ("PLB") Limited Liability Company Agreement, dated October 2, 2012 (the "PLB Agreement"); • A copy of Phaidon Global, LLC's ("Phaidon Global") Limited Liability Company Agreement, dated August 15, 2013 (the "Phaidon Global Agreement"); • A copy of Phaidon, LLC's ("Phaidon") Limited Liability Company Agreement, dated June 24, 2014 (the "Phaidon Agreement"); • A copy of the valuation report prepared by Empire outlining the fair market value of a 100% controlling interest in Phaidon Press Limited ("Phaidon Limited"), held by LDB through a series of holding companies, with an effective date of June 30, 2014 (the "Phaidon Limited Report"); • Balance sheets as of June 30, 2014 for the following entities: (1) JMWT Bidco LTD ("Bidco"); (2) JMWT Midco LTD ("Midco"); (3) JMWT Topco LTD ("Topco"); (4) JMWT Acquisition LLP ("Acquisition", along with Bidco, Midco, and Topco, the "JMWT Entities"); (5) Phaidon; (6) Regan Arts, LLC ("Regan"); (7) Phaidon Global; and (8) PLB; • Conversations and correspondence regarding LDB, its management policies, financial status and investments with Mr. Richard Joslin, Elysium Management LLC's CFO, and Mr. Richard D'Agostino of Elysium Management LLC (collectively referred to as "Management"); and • Other reviews, analyses, and research as were deemed necessary. Business Profile LDB operated as an investment holding company. The Company was formed on June 9, 2011. As of the Valuation Date, the Company's assets included: (1) the Fine Art; (2) cash; (3) a number of private equity investments; (4) a 14.925% non-managing interest in PLB; (5) receivables from related entities; (6) a J.P. Morgan brokerage account that included a number of marketable securities; and (7) a number of restricted investments that consisted of direct investments and private equity investments that were past their term and only held the remaining unliquidated assets. Details regarding the Company's investments are outlined further in this report. As of the Valuation Date, the Company's only liability was a distribution payable to members. As of the Valuation Date, the Company had total EMPIRE VALUATION CONSULTANTS EFTA01108991 Alan S. Halperin, Esq. August II, 2015 Page 5 assets with a book value of $377.6 million,' rounded and total liabilities with a book value of $14,329. While LDB made a material distribution of notes in 2013, historically the Company did not pay cash distributions in an amount that is greater than the members' pass-through tax liability. Please refer to Exhibits A through C for further details. A. Ownership LDB's ownership as of the Valuation Date is presented in the following table. LDB Ownership Ms ner Percentage BEB 2011 Tnist 25% .1MB 2011 Trust 25% ASB 2011 Trust 25% VRB 2011 Trust 25% Total 100% B. Description of Assets and Liabilities LDB was invested in cash, marketable securities, multiple private equity investments, restricted investments, the Fine Art, a 14.925% non-managing membership interest in PLB, and receivables from related parties. Details regarding the assets are provided below. A summary of the capital account balance for each interest is presented in Exhibit D. Cash and Marketable Securities: The Company had a J.P. Morgan brokerage account that had a cash balance of $25.2 million and marketable securities. The marketable securities included 24 publicly traded capital appreciation securities. The market value of the publicly traded equities, based on the average trading price as of the Valuation Date, was $5.1 million. Private Equity Investments: The Searchlight, and Searchlight AIV. are outlined below. • FCI: The capital account as of the Valuation Date. which $12.6 million had Company had investments in FCI, QCP, QACP, QOCP, Details regarding each of the private equity investments balance for LDB's investment in FCI was $18.5 million LDB had a capital commitment of $25.0 million, of been contributed. FCI invests substantially all of its Total assets as presented on Exhibit B of $377.6 million is inclusive of an interest in Black Family Partners LP that had an estimated value of $233.9 million. Further, Management stated that LDB contributed its interest in Black Family Partners LP to LDB 2014 LLC (an entity wholly-owned by LDB) and then LDB distributed its interest in LDB 2014 LLC to the members of LDB. However, the interest in LDB 2014 LLC (which held the interest in Black Family Partners LP) had not been removed from the Company's balance sheet as of the Valuation Date. As a result, "Private Investments", as presented in Exhibit B, include the interest in LDB 2014 LLC. EMPIRE VALUATION CONSULTANTS EFTA01108992 Alan S. Halperin, Esq. August II, 2015 Page 6 investable assets in Financial Credit Investment I, L.P. ("FCI LP"). FCI LP carries out its investment activities through a special purpose vehicle, Financial Credit Investment I Limited ("FCI I Limited"). FCI I Limited is primarily invested in life insurance settlements. As such, FCI I Limited makes premium payments on the insurance policies and will receive proceeds at the time of death of the insured. Future capital calls to fund insurance premiums are expected for this investment. FCI (as well as the underlying funds) does not have a contractual termination date. However, given the nature of the investment, it was reasonable to consider that FCI's term would extend to 10 years or beyond the Valuation Date. • QCP, QACP, and QOCP (collectively, the "Quadrangle Entities"): The capital account balances for LDB's investments in QCP, QACP, and QOCP were $278,289, $125,977, and $409,182, respectively, as of the Valuation Date. QACP and QOCP were alternative investment vehicles for QCP. For QCP, LDB had a capital commitment of $427,638, of which $425,044 had been contributed. For QACP, LDB had a capital commitment of $193,585, of which $192,411 had been contributed. For QOCP, LDB had a capital commitment of $628,777, of which $624,964 had been contributed. Future capital calls were not expected for these investments. QCP has a contractual termination date of May 23, 2010 which can be extended for up to two additional 1-year terms based on the terms of QCP's agreement. However, limited partners agreed to two 1-year extensions to May 23, 2014. In 2014, LP's delegated their authority to the LP Advisory Committee to consider extending the fund for an additional year through May 23, 2015. As alternative investment vehicles, QACP's and QOCP's terms correspond with QCP. QCP's limited partners paid a 1.75% management fee and 20% carried interest fee and received an 8% preferred return. • Searchlight and Searchlight AIV: The capital account balance for LDB's investments in Searchlight and Searchlight AIV were $776,558 and $168,712, respectively, as of the Valuation Date. Searchlight AIV was alternative investment vehicle for Searchlight. For Searchlight and Searchlight AIV, LDB had a combined capital commitment of $2.0 million, of which $812,823 had been contributed. Future capital calls were not expected for these investments. Searchlight has a contractual termination date of March 30, 2022 which can be extended for up to two additional 1-year terms based on the terms of Searchlight's agreement. As an alternative investment vehicle, Searchlight AIV's term corresponds with Searchlight. Searchlight's limited partners paid a 20% carried interest fee and received an 8% preferred return. Searchlight AIV's limited partners do not pay management and carried interest fees and do not receive a preferred return. EMPIRE VALUATION CONSULTANTS EFTA01108993 Alan S. Halperin, Esq. August II, 2015 Page 7 Restricted Investments: The Company had restricted investments in AIF II, AP SHL, AP Tech, AIF, REIF, REIF III, REIF IV, BHM, Microbes, PAM, and Viropro. Capital account balances for each as of the Valuation Date are presented in the following table. Restricted Investment Capital Account Balances as of the Valuation Date Restricted Investment Capital Account Balance AIF II SO AP SHL $02 AP Tech $174,459 AIF $225 REIF $183,325 REIF III $25,308 REIF IV $735,778 BHM $159,692 Microbes $142,916 PAM $02 Viropro $300,000 Total $1,721,703 LDB's investments in AIF II, AP SHL, AP Tech, AIF, REIF, REIF III, and REIF IV were investments in private equity funds that had completed their respective terms and were in wind-up. The remaining assets held by these private equity funds were considered side-pocket assets. A date for liquidation of side-pocket assets, distribution of proceeds to each private equity funds' respective limited partners, and wind-up of the private equity funds was not known as of the Valuation Date. As a limited partner in each, LDB had limited ability to enforce liquidation and distribution of proceeds from each private equity funds' side-pocket investments. LDB's investments in BHM, Microbes, PAM, and Viropro were direct investments in holding companies. Each holding company held an interest in an operating company. No information on operations and profitability for each of the operating companies is provided to the members/partners of the respective holding company. As a non-managing member or limited partner in each holding company, LDB had limited ability to influence the operations of the underlying operating companies. An exit event and return of capital was not expected in the near term for LDB's investments in BHM, Microbes, PAM, and Viropro. Fine Art: As of the Valuation Date, the Company held collector quality art. According to the Fine Art Appraisal, the fair market value of the Fine Art held by LDB was $74,750,000 as of June 23, 2014. In addition, the Valuation Agreement for the Fine Art Appraisal stated that Sotheby's Inc. did not consider the applicability of a blockage discount for the Fine Art. 2 Schedule K-I presented a negative capital account balance. EMPIRE VALUATION CONSULTANTS EFTA01108994 Alan S. Halperin, Esq. August 11, 2015 Page 8 The following table presents each piece of the fine art and that appraised value as outlined in the Fine Art Appraisal. Fine Art and Respective Appraised Value Pieter 1' itle/A rt is t t Market Value The Parable of the Wise and Foolish Virgins (1825) William Blake $2,500,000 Portrait de Fernand Leger (1930) Alexander Calder 52,500,000 L `Esprit veille (Te Arii Vahine) (Circa 1899) Paul Gauguin $2,500,000 Woman (1951) Willem De Kooning $3,500,000 Church Facade IV, Domburg (1914) Piet Mondrian $2,500,000 Composition with Color Planes and Gray Lines 1 (1918) Piet Mondrian $15,000,000 Untitled (1946) Barnett Newman 53,000,000 Deux femmes (1907.1908) Pablo Picasso $5,000,000 Jeune homme et cheval (1906) Pablo Picasso $2,500,000 Vent, pipe et paquet de tabac (1914) Pablo Picasso $2,000,000 Flusslandschaft mit zwei Baumen (1913) Egon Schiele $25,000,000 Au divan japonais (1887-1888) Georges Seurat $6,000,000 Le chien noir (Etude pour Un Dimanche a La Grande Jatte) (1884-1885) Georges Seurat $1,750,000 Study of a Seated Woman (date not presented) Jean-Antoine Watteau $1,000,000 Total $74,750,000 PLB: As of the Valuation Date, the Company held a 14.925% non-managing membership interest in PLB. The book value of the investment in PLB was $9.9 million as of the Valuation Date. PLB is a holding company whose primary asset is a 99.9% non-managing membership interest in Phaidon Global. PLB's primary liability as of the Valuation Date was $3.2 million due to Black Family Partners LP. See Exhibit G-8 for further details. Phaidon Global holds 100% interests in Regan and Phaidon and a 99.9% interest in Acquisition. According to Management, Regan has very limited operations and has not been active for a material amount of time. EMPIRE VALUATION CONSULTANTS EFTA01108995 Alan S. Halperin, Esq. August 11, 2015 Page 9 Phaidon holds a 0.1% interest in Acquisition. According to Management, Phaidon does not have any other assets and has no liabilities. Through Topco, Midco, and Bidco, a series of wholly-owned holding companies, Acquisition holds a 100% interest in Phaidon Limited. Phaidon Limited is an operating company that is a global publisher of books focused on the creative arts with over 1,500 titles in print as of the Valuation Date. Specifically, Phaidon Limited produces books on art, photography, design, architecture, fashion, food and cookery, travel, and illustrated books for children. Phaidon Limited is headquartered in London, U.K. For further details on Phaidon Limited, please refer to the Phaidon Limited Report. LDB's indirect ownership of Phaidon Limited through PLB, Phaidon Global, Phaidon, and the JMWT Entities is presented in the following diagram. (THIS SPACE INTENTIONALLY LEFT BLANK) EMPIRE VALUATION CONSULTANTS EFTA01108996 Alan S. Halperin, Esq. August 11, 2015 Page 10 Phaidon Limited's Ownership Structure tax /*miming hetetII Regan marmini innesi Phaidon Global Phaidon 01% mendini MOW WWI Acquisition LW JIAWT loofa Limited MAW MidCo Limited HAM' BidCo Limited Phaidon Limited EMPIRE VALUATION CONSULTANTS EFTA01108997 Alan S. Halperin, Esq. August II, 2015 Page 11 Related Party Receivables: As of the Valuation Date, the Company had related party receivables from the BEB 2011 Trust and the JMB 2011 Trust in the amounts of $3.3 million and $6.0 million, respectively. According to Management, the amounts receivable reflected their market value and were expected to be fully collectible as of the Valuation Date. Liabilities: As of the Valuation Date, LDB's only liability was a $14,329 distribution payable to members. Summary: Based on the most recent capital account statements, Schedule K-1, and/or information provided by Management, the Company's total assets had an aggregate market value of $144.3 million.1" Since LDB's only liability was a $14,329 distribution payable to members, its aggregate members' capital was $144.2 million. See Exhibit D. Valuation adjustments necessary to reflect the market value of the Company's individual assets taking into consideration various restrictions that hinder LDB's control over the assets and lack of a ready market to dispose of or trade its assets is considered in detail in the valuation section of this report. C. LDB Agreement Provisions LDB was formed pursuant to Delaware Limited Liability Company Act (the "Act"). The LDB Agreement dictates the rights, responsibilities and restrictions placed on the Interest. A summary of key provisions impacting the fair market value of the Interest is presented below. • Management: The business affairs of the Company shall be managed by the managers. The managers may appoint officers of the Company who shall be authorized to perform actions on behalf of the Company. The managers may remove any officer at any time, without cause. (Section 8.1.1). There shall always be at least one manager. Each manager shall hold office until their death, incapacity, resignation or removal (Section 8.2). A majority in interest of the members may designate another entity or person to serve as an additional manager or as a successor manager. As a condition precedent to a designated person or entity becoming an additional or successor manager, such entity or person must qualify for the position of manager. A successor or additional manager shall 3 Based on the book value of $9.9 million for LDB's investment in PLB. 4 The variance between the total assets as presented on Exhibit B of $377.6 million and Exhibit D of $144.3 million is largely driven by an interest in Black Family Partners LP. According to Management, the interest in Black Family Partners LP had an estimated value of $233.9 million. Further, Management stated that LDB contributed its interest in Black Family Partners LP to LDB 2014 LLC (an entity wholly-owned by LDB) and then LDB distributed its interest in LDB 2014 LLC to the members of LDB. However, the interest in LDB 2014 LLC (which held the interest in Black Family Partners LP) had not been removed from the Company's balance sheet as of the Valuation Date. As a result, assets as presented in Exhibit B include the interest in LDB 2014 LLC while the assets as presented on Exhibit D do not include the interest in LDB 2014 LLC. EMPIRE VARIATION CONSVITANTS EFTA01108998 Alan S. Halperin, Esq. August II, 2015 Page 12 qualify as a manager if such entity or person provides the members with a statement that it, he or she agrees to become a manager and to be bound by all of the terms and conditions of the LDB Agreement as a manager. However, if any member who is an individual makes a gratuitous transfer of all or a portion of his or her interest, such transferor member may not in his or her individual capacity serve as a manager and if then serving, shall immediately cease to serve as a manager (Section 8.3). The members holding at least two-thirds interest may, by vote or written consent, remove any acting manager at any time, without cause (Section 8.4.2). If there is more than one manager serving at any time and an action is to be taken by the managers (or the Company), such action shall be taken by the managers, unanimously, or, if there are more than two managers, with the agreement of a majority of such managers (Section 11.1). The LDB Agreement identifies Barry J. Cohen as the manager (Definitions section). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined in the sole discretion of the managers (Section 5.1). No member shall be required to make additional contributions (Section 3.2). • Disclosure of Information: The books of the Company shall be open to the inspection and examination of all members, in person or by their duly authorized representatives, at reasonable times. The books of the Company shall be maintained based on generally accepted accounting principles, consistently applied (Section 10.2). At the request of any member, the Company shall furnish the members with a copy of the Company's financial statements for the current or any prior fiscal year and with a statement of such member's capital account, as reflected on the books of the Company. Each member shall also be supplied with all information with respect to the Company required in connection with the preparation of such member's tax returns (Section 10.3). • Right of Withdrawal: No member may withdraw from the Company or reduce their capital account. No member shall be entitled to receive or be credited with any interest on the balance in their capital account at any time (Section 6.5.1). However, at the request of a particular member, the managers may, but are not required to, redeem the withdrawing member's interest, in whole or in part, by distributing assets to such withdrawing member, the fair market value of which is to be determined by the managers (Section 6.5.2). • Death Consequences: The death, incapacity, liquidation, dissolution, or entry of an order for relief in a bankruptcy case of a member shall not dissolve the Company. In any such event, the successors, assigns, executors, administrators or personal representatives of such former member shall have all the rights of a member in respect of distributions, allocations and capital, but shall not become a member unless a majority in interest (excluding interests held by the former member) of the remaining members consent and the assignee agrees to the terms of EMPIRE VALUATION CONSULTANTS EFTA01108999 Alan S. Halperin, Esq. August 11, 2015 Page 13 the LDB Agreement and has agreed to pay all reasonable expenses relating to admission. The estate of a deceased former member shall be deemed to be the assignee of such former member's interest and such estate shall be bound in all respects by the deceased former member's obligations to the Company (Section 8.6.1). • Amendment of Agreement: The LDB Agreement may be amended from time to time upon the unanimous written consent of the members. Notwithstanding the foregoing, the administrative provisions in the LDB Agreement may be amended solely by the managers (Section 11.2). • Reimbursement of Expense: The managers shall be entitled to reimbursement from the Company funds for any reasonable out of pocket costs or expenses incurred by the managers in the conduct of Company business (Section 8.9). • Transfer Restrictions: No member or any assignee has the right to sell, assign, or otherwise transfer all or any part of its interest (Section 6.1). However, members may sell, assign, pledge or otherwise transfer all or any part of their interest to an eligible persons (Section 6.2 and Definitions section). Transfers to anyone other than an eligible person requires: (1) a bona fide written offer; (2) notification to each member that the member desires to sell their interest; and (3) an offer to sell the interest to current members on the same terms as the written offer (Section 6.1). Upon transfer, the transferee may not be admitted as a substituted member unless the transferee agrees to the terms of the LDB Agreement and has agreed to pay all reasonable expenses relating to admission (Section 9.1). • Dissolution: The term of the Company will be perpetual unless dissolved upon the occurrence o£ (1) the unanimous consent of the members; (2) at any time there are no members; or (3) the entry of a decree of judicial dissolution (Sections 1.5 and 7.1). D. PLB Agreement Provisions • Management: The business and affairs of PLB shall be managed by a manager (Section 16.a). The members shall appoint the manager and may remove the manager at any time with or without cause. A person appointed as manager shall serve until the earlier of his death, resignation or removal. Upon the occurrence of s Defined by the LDB Agreement as: (1) members; (2) Leon D. Black and his descendants; (3) the spouse of any member or Leon D. Black and his descendants; (4) the estate of any member; (5) trusts for the benefit of a member or Leon D. Black and his descendants, qualified charitable organizations, spouse of a member or Leon D. Black and his descendants, and descendants of members; (6) a beneficiary of any trust which is a member; and (7) any entity all the beneficial owners of which are persons or entities previously described as an eligible person. EMPIRE VALUATION CONK/TANTS EFTA01109000 Alan S. Halperin, Esq. August 11, 2015 Page 14 any such event, the members shall promptly appoint a replacement manager. The members appoint John J. Hannan as the initial manager (Section 16.6). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined by the manager (Section 14). Members are not required to make any additional capital contribution to PLB (Section 11). • Disclosure of Information: The manager shall keep or cause to be kept complete and accurate books of account and records with respect to PLB's business. The members and their duly authorized representatives shall have the right to examine PLB's books, records and documents during normal business hours. PLB, and the manager on behalf of PLB, shall not have the right to keep confidential from the members any information that the manager would otherwise be permitted to keep confidential from the members pursuant to Section 18-305(c) of the Act (Section 22). • Transfer and Withdrawal Restrictions: The PLB Agreement did not outline any provision regarding transfers or withdrawals. Therefore, the transfer and withdrawal provisions of the Act were considered. A limited liability company interest is assignable in whole or in part except as provided in a limited liability company agreement. The assignee of a member's limited liability company interest shall have no right to participate in the business and affairs of a limited liability company except as provided in a limited liability company agreement and upon the approval of all the members of the limited liability company other than the member assigning his interest (Section 18-702 of the Act). One or more additional members may be admitted to PLB with the written consent of the members. The admission of an additional member shall be effective upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of the PLB Agreement (Section 20). Unless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company (Section 18-603 of the Act). • Dissolution: PLB will be dissolved upon the earliest to occur of: (1) the written consent of the members; (2) at any time there are no members unless PLB is continued in accordance with the Act; or (3) the entry of a decree of judicial dissolution (Section 21.a). E. Phaidon Global Agreement Provisions • Management: The business and affairs of Phaidon Global shall be managed by a manager (Section 16.a). The members shall appoint the manager and may remove the manager at any time with or without cause. A person appointed as manager shall serve until the earlier of his death, resignation or removal. Upon the EMPIRE VALUATION CONSULTANTS EFTA01109001 Alan S. Halperin, Esq. August 11, 2015 Page 15 occurrence of any such event, the members shall promptly appoint a replacement manager. The members appoint JMWT LLC as the initial manager (Section 16.b). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined by the manager (Section 14). Members are not required to make any additional capital contribution to Phaidon Global (Section 11). • Disclosure of Information: The manager shall keep or cause to be kept complete and accurate books of account and records with respect to Phaidon Global's business. The members and their duly authorized representatives shall have the right to examine Phaidon Global's books, records and documents during normal business hours. Phaidon Global, and the manager on behalf of Phaidon Global, shall not have the right to keep confidential from the members any information that the manager would otherwise be permitted to keep confidential from the members pursuant to Section 18-305(c) of the Act (Section 22). • Transfer and Withdrawal Restrictions: The Phaidon Global Agreement did not outline any provision regarding transfers or withdrawals. Therefore, the transfer and withdrawal provisions of the Act were considered. A limited liability company interest is assignable in whole or in part except as provided in a limited liability company agreement. The assignee of a member's limited liability company interest shall have no right to participate in the business and affairs of a limited liability company except as provided in a limited liability company agreement and upon the approval of all the members of the limited liability company other than the member assigning his interest (Section 18-702 of the Act). One or more additional members may be admitted to Phaidon Global with the written consent of the members. The admission of an additional member shall be effective upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of the Phaidon Global Agreement (Section 20). Unless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company (Section 18-603 of the Act). • Dissolution: Phaidon Global will be dissolved upon the earliest to occur of: (1) the written consent of the members; (2) at any time there are no members unless Phaidon Global is continued in accordance with the Act; or (3) the entry of a decree of judicial dissolution (Section 21.a). F. Phaidon Agreement Provisions • Management: The business and affairs of Phaidon shall be managed by a manager (Section 15.a). The members shall appoint the manager and may remove the manager at any time with or without cause. A person appointed as manager EMPIRE VALUATION CONSULTANTS EFTA01109002 Alan S. Halperin, Esq. August II, 2015 Page 16 shall serve until the earlier of his death, resignation or removal. Upon the occurrence of any such event, the members shall promptly appoint a replacement manager. The members appoint JMWT LLC as the initial manager (Section 15.b). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined by the Manager (Section 13). Members are not required to make any additional capital contribution to Phaidon (Section II). • Disclosure of Information: The manager shall keep or cause to be kept complete and accurate books of account and records with respect to Phaidon's business. The members and their duly authorized representatives shall have the right to examine Phaidon's books, records and documents during normal business hours. Phaidon, and the manager on behalf of Phaidon, shall not have the right to keep confidential from the members any information that the manager would otherwise be permitted to keep confidential from the members pursuant to Section 18-305(c) of the Act (Section 21). • Transfer and Withdrawal Restrictions: The Phaidon Agreement did not outline any provision regarding transfers or withdrawals. Therefore, the transfer and withdrawal provisions of the Act were considered. A limited liability company interest is assignable in whole or in part except as provided in a limited liability company agreement. The assignee of a member's limited liability company interest shall have no right to participate in the business and affairs of a limited liability company except as provided in a limited liability company agreement and upon the approval of all the members of the limited liability company other than the member assigning his interest (Section 18-702 of the Act). One or more additional members may be admitted to Phaidon with the written consent of the members. The admission of an additional member shall be effective upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of the Phaidon Agreement (Section 19). Unless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company (Section 18-603 of the Act). • Dissolution: Phaidon will be dissolved upon the earliest to occur of: (1) the written consent of the members; (2) at any time there are no members unless Phaidon is continued in accordance with the Act; or (3) the entry of a decree of judicial dissolution (Section 20.a). Economic, Capital Markets, and Private Equity Outlooks In the appraisal of any company, the general economic factors prevailing at the valuation date, as well as those foreseen then, must be considered. Assimilation of these facts and forecasts provides insight into the economic climate in which investors are dealing. EMPIRE VAWAllON CONSVITANTS EFTA01109003 Alan S. Halperin, Esq. August II, 2015 Page 17 Although individual factors may or may not have a direct impact upon a particular industry, the overall economy and its outlook have a strong influence on how investors perceive investment opportunities. Economic and industry outlooks relevant to Phaidon Limited are incorporated in the Phaidon Limited Report and are reported there. A. General Economy6 According to Value Line, the United States ("U.S.") economy experienced stable growth through the second half of 2013, reporting GDP growth of 4.1% and 2.6% in the third and fourth quarters, respectively. Strong inventory expansion followed by greater consumer spending drove growth through the end of the year. The U.S. economy then waned through the first quarter of 2014 as a result of major disruptions from a series of storms and plunging temperatures, slowdown in inventory investment, a pullback in exports, a decelerating housing market and a reversal in non-residential fixed investments. GDP was reported to increase by 0.1% in the first quarter. However, the U.S. economy was expected to gain traction through the second half of 2014 as employment gains were expected to strengthen, exports were anticipated to rise, business capital investments were projected to grow, and a partial revival in housing was forecast to occur. Industrial production remained in question and retail performance was tepid, but Value Line believed that there was enough underlying strength in the U.S. economy for GDP growth of 3.0% for the second quarter of 2014. Thereafter, the job market was expected to continue to firm up, following the 288,000 positions that were added in April 2014. In addition, the housing market was projected to regain momentum and non-residential fixed investment was forecast to make gains. GDP growth was predicted to marginally exceed the 3.0% mark in the final half of 2014 and hold in this range through 2015. Inflation: Inflation was of limited concern as of May 2014 since producer and consumer prices remained well below the Federal Reserve's (the "Fed") stated average target of 2.0%. The Fed maintained a forgiving monetary policy due to the absence of pricing pressures and the intermittent threat of deflation. The newly appointed Fed Chair, Janet Yellen, stated that the factors contributing to the softness in inflation over the past year were transitory and inflation was projected to return to the Fed's target of 2.0% by the end of the year. The Fed was likely to respond by raising short-term interest rates in 2015. Value Line projected that prices would increase modestly over the horizon, but a repeat of the serious pricing problems faced in the 1970s and 1980s was unlikely. Interest Rates: As with inflation, the outlook for interest rates over the next several years was fairly benign. Short-term interest rates, which the central bank controlled directly through the federal funds rate target, remained near zero but were forecast to begin a multi-year ascent in 2015. The rise in short-term interest rates was anticipated to be slow and measured in light of the very low inflation backdrop that was expected for the late decade. Longer-term interest rates, a key influence on the housing market, were also projected to rise gradually. If the housing market does not revive as anticipated, a restrain 6 Quarterly Economic Review, Value Line Publishing LLC ("Value Line"), May 23, 2014. EMPIRE VALUATION OYOUTTANTS EFTA01109004 Alan S. Halperin, Esq. August 11, 2015 Page 18 on the broader recovery could further delay the Fed's timetable for gradually increasing interest rates. Corporate Profits: Earnings in the first quarter of 2014 were strong compared to meek projections for the period. A clear majority of companies reported profits that were above the mean estimate, while approximately half reported revenues above expectation. However, a number of corporations issued negative earnings guidance for the second quarter. Value Line predicted that the dramatic earnings gains recorded in the early years of the business upturn would not translate to the future. However, it was probable that corporate profits will acquit themselves through the rest of the year. Assuming the economy gains additional traction in 2015, income was forecast to push forward at a stronger pace, but not without occasional resistance within selective sectors. Other Economic Indicators: For the years 2014 through 2016, Value Line forecasted the economic environment as shown in the table below. U.S. National Economic Indicator Annual Projections Annual Statistics GDP Growth (%) 2014 2.3% 2015 3.2% 2016 3.4% Unemployment Rate (%) 6.5% 6.0% 5.6% Housing Starts (millions of units) 1.02 1.39 1.55 Oil Prices? $98.25 $92.50 $95.00 Long-Term Treasury Bond Rate (%) 3.8% 4.3% 4.5% Prime Rate (%) 3.5% 5.3% 5.5% AAA Corporate Bond Rates (%) 4.4% 4.8% 5.5% Personal Savings Rate (%) 4.0% 4.4% 5.0% Summary: In conclusion, Value Line reported increased activity in the U.S. economy in the latter half of 2014, and predicted that, despite a brief slowdown in the first quarter of 2014, robust growth would continue through 2015. B. Capital Markets Overview Economic Conditions:8 GDP for the first quarter of 2014 increased at an annual rate of 2.6%, which was below the 4.1% annual rate registered in 2013's fourth quarter. • The unemployment rate continued to improve, falling from 7.0% to 6.7% through February. Employers added 175,000 new jobs in February, a decrease from the 203,000 jobs added in November 2013. 7 Represents a dollar volume weighted average of oil prices (U.S. Refiners' Cost) throughout the year, rather than an explicit projection of spot prices. 8 AMG Funds, Financial Markets Review and Outlook First Quarter 2014. EMPIRE VALUATION CONSULTANTS EFTA01109005 Alan S. Halperin, Esq. August 11, 2015 Page 19 • A recovering labor market and improving economy contributed to the Fed's decision to begin tapering its quantitative easing program ("QE3"). However, the Fed intended to hold short-term interest rates low until significant economic hurdles were met. • Outside of the U.S., tensions between Russia and the Ukraine dominated the headlines. The situation caused many Western investors to avoid the inherent risk in that market given current tensions in the region. Russia's equity markets sold off sharply during the first quarter. Public Markets Performance: After a strong 2013, equity markets delivered mixed results for the first quarter of 2014. Early in the quarter, major equity benchmarks were down 5.0% as concerns about the impact of slowing emerging markets along with the onset of tapering of QE3. While the S&P 500 Index ("S&P 500") finished in positive ground for the quarter, returning 1.8%, the Dow Jones Industrial Average had a slightly negative quarter, returning -0.2%. A summary of recent performance for select indices is presented in the following table. Index Performance — Period Ended March 31, 20149 Index Q I 2014 \ TI) 1.‘ car 3-year 5-) ca r S&P 500 1.81% 1.81% 21.86% 14.66% 21.16% Russell 2000 1.12% 1.12% 24.9% 13.18% 24.31% MSCI EAFE 0.66% 0.66% 17.56% 7.21% 16.01% MSCI World 1.26% 1.26% 19.07% 10.23% 18.28% Barclays Capital Aggregate 1.84% 1.84% -0.10% 3.75% 4.80% Barclays Capital Credit 2.91% 2.91% 1.01% 5.80% 8.90% • Domestic markets, as measured by the S&P 500 returned 1.8% in the first quarter, after recording a 10.5% gain in the fourth quarter of 20 3. Small-capitalization equities returned more than 24.9% for the year, as measured by the Russell 2000, but were outperformed by large-capitalization equities in the fourth quarter. • Developed foreign markets fell in the first quarter of 2014, returning only 0.7%, compared to 11.6% in the third quarter of 2013 and 6.0% in the fourth quarter, as measured by the MSCI EAFE Index. • Yield on the 10-year Treasury bond was 2.7% as of March 31, 2014, down slightly from the fourth quarter of 2013. • After negative returns in 2013, bonds, as measured by the broad Barclays Capital Aggregate Bond Index gained 1.84% in the first quarter of 2014. 9 The Concord Advisory Group Ltd., March 2014 Market Performance Review. EMPIRE VALUATION CONSULTANTS EFTA01109006 Alan S. Halperin, Esq. August II, 2015 Page 20 • Corporates reported strong performance in the first quarter of 2014, returning 2.9%, as measured by the Barclays Credit Bond Index. The index reported 1.0% return over the last year. Volatility: Volatility, as measured by the Chicago Board Options Exchange Volatility Index ("VIX"),10 indicated that investors remained relatively confident that the equity market would remain stable. • During the first quarter of 2014, the VIX ranged from 12.1 to 21.4. The VIX closed at 13.9 on the last day of the first quarter. The average in the first quarter was 14.8, which was slightly higher than the fourth quarter 2013 average of 14.2. • For comparative purposes, the VIX rose above 80 during the depths of the financial crisis in November 2008, but resettled below 25 for most of the periods since then. The gauge has risen above 45 only three times since late 2008: in May 2010 (amidst the flash crash), and twice in the second half of 2011 (August and October). Private Equity Performance:" Private equity funds in the U.S. remained positive through the end of 2013, marking the sixth consecutive quarter of positive returns. U.S. Private Equity Index Returns Index Q4 2013 1-year 3-' ear 5-year 14.9% I 15.8% U.S. Private Equity 63% 20.6% I • The Cambridge Associates U.S. Private Equity Index ("PE Index") returned 6.7% in the quarter ending December 31, 2013. The quarterly PE Index landed in-line with the S&P 500 in the second and third quarters of 2013, but fell slightly behind in the last quarter of the year. The PE Index 1-year returned 20.6% in 2013 and trailed the S&P 500's 2013 return of 32.4%. Hedge Fund Performance:" As measured by the Credit Suisse/Standard & Poor's Capital IQ ("S&P") Dow Jones Hedge Fund Index (the "DJCS Index"), seven of the ten sub-strategies of the index recorded negative returns for the month of March 2014, resulting in a -0.5% return for the broad hedge fund index. • The only strategies that reported positive earnings were convertible arbitrage, dedicated short bias, and fixed income arbitrage. In December 2013, the only sub- strategy to record a negative return was dedicated short bias. 10 The VIX is a key measure of expected movement, in either direction, of near-term volatility in S&P 500 Index option prices. Investors believe that a high VIX reading (above 30) translates into a greater degree of market uncertainty, while a low reading (below 20) is consistent with greater stability. II Cambridge Associates LLC, U.S. Private Equity Index and Selected Benchmark Statistics for Quarter Ending December 31, 2013. Latest available publication as of the Valuation Date. I2 S&P Dow Jones Credit Suisse Hedge Fund Index, March 2014. EMPIRE VALUATION CONSULTANTS EFTA01109007 Alan S. Halperin, Esq. August II, 2015 Page 21 Middle Market M&A Activity:13 Middle market merger and acquisition activity accelerated throughout 2013 with volume increasing 19.0% in the fourth quarter of 2013. This activity was fueled by the abundance of capital available in the debt markets and historically low interest rates. Leverage multiples increased to their highest level since 2007. The increased leverage available was enabling financial buyers to compete more aggressively for assets, ultimately driving up purchase price valuations. • Middle market transaction volume increased by 19.0% in the fourth quarter of 2013. The transaction environment was expected to remain favorable heading into 2014 with historically low interest rates and ample cash reserves from strategic and financial investors. • Middle market transaction multiples increased from 7.4x in the third quarter to 7.6x in the fourth quarter. • GF Data reported that the middle market average equity contribution for transactions with enterprise values below $50 million was 45.6% for the fourth quarter of 2013, up from 41.2% through year-end 2012. • The debt multiple (total debt-to-EBITDA) in middle market transactions with enterprise values below $50 million averaged 4.8x in the fourth quarter of 2013, down from 5.4x in the third quarter. These, and other M&A summary statistics, can be found in the table below. The purchase multiple is calculated based on transactions between $10 and $250 million, while the debt multiple and equity contribution are based on transactions with EBITDA below $50 million. Summary M&A Statistics Year/ Quarter Purchase Multiple Debt Multiple Equity Contribution 2009 5.8x 3.3x 45.6% 2010 7.2x 4.2x 44.8% 2011 7.5x 4.3x 40.7% 2012 7.2x 4.5x 41.2% 2013 7.6x 4.8x 45.6% (THIS SPACE INTENTIONALLY LEFT BLANK) 13 Quarton Partners ("Quarton"), Middle Market Transaction Update, First Quarter 2014. EMPIRE VALUATION CONSULTANTS EFTA01109008 Alan S. Halperin, Esq. August 11, 2015 Page 22 Flow of Capital: An analysis of fund flows information indicated that bond funds reported net outflows over the last seven months as investors continued to favor equity and hybrid funds. The following table is a summary of mutual fund capital flows for recent measurement periods. Flow of Capital (in billions of USD)10 Year/Quarter Equit) Mutual Funds ll;brid Bond 2009 $ 9 $23 $376 2010 $23 $241 2011 $ 98 $84 $239 2012 $46 $303 1' 2013 $66 $25 $69 2 2013 $10 $20 $ 36 3a 2013 $32 $17 4 2013 $43 $15 $ 59) 1 2014 $54 $16 $18 IPOs:Is Following a very active 2013, the global IPO market continued i s fast pace in the first quarter of 2014. North American first quarter 2014 proceeds were $34.1 billion, up 76.7% year-over-year. IPO proceeds in the first quarter were led by the Asia Pacific and Europe regions, which accounted for 41.0% and 35.0% of quarterly proceeds, respectively. • Global IPO proceeds were $34.1 billion in the first quarter of 2014, a 76.7% increase year-over-year. • IPO returns were exceptionally strong for the quarter, averaging 19.5% globally. Returns were led by Asia Pacific and North America, where IPOs rose 23.9% on average. Summary of Global IPO Data 2010 Number of Deals I 479 Total Proceeds (B) $234.4 Median Size (MM) $205.1 2011 2012 2013 IQ 2014 339 203 303 81 $137.9 $99.6 $137.8 $34.1 $209.7 $215.3 $256.9 $221 14 http://www.ici.org/researchistatst 15 Renaissance Capital, LLC, Global IPO IQ 2014 Quarterly Review. EMPIRE VALUATIONCTINRATANTS EFTA01109009 Alan S. Halperin, Esq. August II, 2015 Page 23 Secondary Market Activity: For private funds, secondary transaction activity was a tale of two halves in 2013. The first half of 2013 generated the lowest level of secondary transaction volume in private funds since the first half of 2009. The low number of deals was a result of positive stock market returns, positive cash flows from private equity funds, and persistent uncertainty regarding economic, political, regulatory and market conditions. However, the second half of 2013 was active as sellers decided to seize secondary market prices that exceeded 2007 pre-crisis levels. According to NYPPEX,16 secondary interest transaction volume declined approximately 7.2% overall in 2013, to $24.5 billion. Buyout funds were estimated to account for 46.0% of the secondary volume in private funds worldwide for the year, followed by real estate funds at 16.0% and funds of funds at 9.0%. For private funds, secondary median bid prices increased approximately 9.1% to 76.3% of net asset value. Secondary median price increases were highest for secondary interests in fund of funds as more investment advisors and wealthy clients entered the secondary market as purchasers. Sellers of large fund portfolios increasingly sought price executions at or near par in 2013 in an effort to minimize the recognition of losses on sales. This trend resulted in more structured transactions, such as deferred payments and distribution preferences, to provide secondary buyers with an opportunity to generate attractive returns. NYPPEX projected that in addition to more innovative structured transactions being utilized in 2014, sellers of large portfolios would increasingly consider derivative instruments, particularly when the seller's objective is to remove specific risk. For 2014, NYPPEX projected that secondary transaction volume in private companies worldwide would increase approximately 56.0% as private equity firms exit and institutions increase target allocations to secondary direct investments in search of higher returns. Secondary high bids were forecast to decline approximately 4.0% and secondary median bids were anticipated to fall 9.0%, driven by an increase in supply from banks and insurance companies with tail end funds and small client funds. In addition, investors were expected to become more selective if net asset values decline and net cash distributions become negative. (THIS SPACE INTENTIONALLY LEFT BLANK) le NYPPEX Holdings, LLC's ("NYPPEX") 2014 Secondary Market Valuation Trends and Outlook for Private Funds & Companies Worldwide, March 2014. EMPIRE VALUATION CONSULTANTS EFTA01109010 Alan S. Halperin, Esq. August II, 2015 Page 24 The following table includes median secondary bids, by sectors, on a year-over-year basis. Median Secondary Bids by Sector Sector 12/31/2010 (% of NAV) 12/31/2011 (% of NAV) 12/31/2012 ( % of NAV) 12131/2013 (re of NAV) Change Bu out 83.7% 83.4% 87.3% 90.8% +4.1% Venture 75.1% 65.6% 69.2% 72.6% +5.0% Fund of Funds 56.4% 61.0% 60.6% 72.2% +19.1% Real Estate 52.4% 62.1% 65.2% 72.5% +11.2% Distressed Debt 69.6% 66.8% 76.0% 81.4% +7.2% Natural Resources 55.6% 69.9% 80.8% 86.5% +7.0% Fled:e Funds 90.1% 77.4% 80.6% 83.2% +3.2% All Fund Sectors 69.0% 69.5% 73.1% 76.3% +9.1% NYPPEX also provides information regarding the average times for transactions to complete. The following table illustrates the year-over-year changes in transactions trends. NYPPEX Transaction Speeds Days Offered Days in Settlement Days in Market NYPPEX Bid Accuracy (Launch to (Price Match to (Launch to Period (Execution vs. Bid) Price Match) Settlement) Settlement) 2013 +1.66% 17.7 43.1 60.8 2012 ±3.92% 16.0 32.9 48.8 2011 ±3.33% 17.2 26.3 41.0 In response to the 2008 financial crisis, new regulations were introduced to establish higher standards for risk and operations management, capital adequacy, and asset valuation in 2013. These regulations included Basel III, Solvency II, the Volcker Rule, the U.K. Alternative Investment Fund Managers Directive ("AIFMD"), and were expected to have a significant impact on investors, alternative investment fund managers, and their respective auditors and legal advisors. NYPPEX anticipated that banks in Europe, North America and Asia would be forced to reduce their holdings in private equity assets in order to increase Tier I Capital ratios and to increase capital solvency ratios. In addition, the Volcker Rule was also expected to force banks to sell or spinoff private equity funds and hedge fund in an effort to emphasize traditional banking services. Finally, NYPPEX believed that AIFMD would significantly increase operating expenses for general partners, which in turn, was projected to cause divestitures of tail end funds and fund restructuring. C. Private Equity Industry Outlook This first quarter 2014 private equity ("PE") industry outlook contains an analysis of the following: (1) an overview of the industry; (2) recent performance trends; (3) asset flows; and (4) secondary market activity. Each topic is discussed below. EMPIRE VALVATON CONSMANTS EFTA01109011 Alan S. Halperin, Esq. August II, 2015 Page 25 Industry Overview: PE involves investments in privately held companies. For most investors, PE investing is accomplished through illiquid, long-term partnerships, i.e., funds, which are formed by PE firms. Funds are generally closed-end with finite lives, usually ten to fifteen years. Investors typically participate in the asset class through one of three ways: (I) direct investment in private companies; (2) investment in private equity funds, which pool capital and invest in private companies; or (3) investment in a fund of funds ("FOFs"), which pools capital and invest in funds. Direct funds and FOFs are typically structured as closed-end limited partnerships, and encompass three phases: (1) fundraising; (2) investment; and (3) realization. Funds are generally structured with an annual management fee ranging from 1.5% to 3.0%. In addition to management fees, PE fund managers are usually entitled to participate in the limited partners' profits from the investments. The profit participation, or carried interest, on most direct funds is 20%, although in certain instances, it can be higher or lower. Performance: According to Cambridge Associates, LLC ("Cambridge"), U.S. private equity capital funds maintained positive returns through the third quarter. Cambridge's Private Equity Index (the "PE Index"), which is presented in the following table, provides market returns as of December 31, 2013 (latest available as of the Valuation Date)," together with comparisons of select indices.18 Market Returns as of December 31, 2013 Index Q4 2013 I -Year 3-Year 5-Year U.S. Private Equity Index 6.7% 20.6% 14.9% 15.8% Barclay's Capital Gov't/Credit Bond Index -0.03% -2.4% 3.6% 4.4% Dow Jones Industrial Average 10.2% 29.7% 15.7% 16.7% Dow Jones U.S. Small Cap Index 8.6% 34.7% 15.9% 22.3% Dow Jones U.S. TopCap Index 10.2% 32.9% 16.2% 18.4% Nasdaq Composite 10.7% 38.3% 16.3% 21.5% Russell 1000 10.2% 33.1% 16.3% 18.6% Russell 2000 8.7% 38.8% 15.7% 20.1% S&P 500 10.5% 32.4% 16.2% 17.9% Wilshire 500 10.1% 33.1% 16.0% 18.6% The PE Index returned 6.7% in the quarter ending December 31, 2013, a moderate 'ncrease from the 5.1% return in the previous quarter. The quarterly PE Index landed in-line with the S&P 500 in the second and third quarter of 2013, but fell slightly behind in the last quarter of the year. The PE Index 1-year return was 20.6% and trailed the S&P 500's annual return of 32.4% as of the fourth quarter. IT Private equity performance is net to limited partners, i.e., after management fee and carry. General partners typically have up to 120 days to provide limited partners with financial data. Hence, there is generally a "lag" in performance reporting. IS Cambridge Associates, LLC U.S. Private Equity Index and Selected Benchmark Statistics: December 31. 2013. EMPIRE VALUATION CONSULTANTS EFTA01109012 Alan S. Halperin, Esq. August 11, 2015 Page 26 The following table presents annualized, one-year return data for funds with vintage years 2001 through 2012. Private Equity Returns19 2001 to 2012 Vintage Mean Net Year to ' s M van Net Number to I,'s , 2001 23.3% 20.9% 27 2002 16.0% 16.8% 35 2003 14.5% 11.0% 37 2004 11.4% 10.2% 67 2005 8.8% 9.4% 93 2006 11.2% 11.0% 81 2007 12.4% 11.2% 96 2008 17.8% 14.5% 70 2009 18.5% 14.6% 35 2010 17.2% 14.0% 30 2011 10.4% 8.2% 55 2012 -15.9% -2.4% 37 As shown in the following table, PE performance has been positive for each of the periods studied. The 5-year return encompassed the financial crisis and recessionary years from late 2008 through mid-2010, and also includes the tepid and moderate recovery through 2012. The high 1—year was a result of the strong pickup in the recovery through 2013. Returns include all vintage years reporting data for the applicable measurement period. Private Equity Multi Year Returns20 Duration ( ears) Returns 1 20.6% 3 14.9% 5 15.8% 10 14.0% 15 12.1% 20 13.6% 25 13.6% A Pepperdine University ("Pepperdine") survey21 analyzed, among other items: (1) minimum return thresholds required to qualify for capital in various market segments; (2) 19 Returns are net of fees, expenses, and carried interests. 10 Pooled end-to-end returns, net of fees, expenses, and carried interest based on 1,054 funds formed between 1986 and 2011. 21 Paglia, Dr. John K. Private Capital Markets Project 2014 Capital Markets Report, 4Q 2013. EMPIRE VALUATION CONSITIANTS EFTA01109013 Alan S. Halperin, Esq. August II, 2015 Page 27 accessibility of capital; and (3) required rates of return by market segments, which are presented in the table below. It was noted that, as the size of the loan or investment increases, the cost of borrowing or financing from any of the following sources tends to decline. Pepperdine Required Rates of Return Market Segment Median Required Rate of Returns Banks, $ 1 M Loan 5.5% Banks, $50M Loan 3.5% Asset-Backed Lenders, $ 1 M Loan 8.3% Asset-Backed Lenders, $50M 6.1% Mezzanine Funds, EBITDA of$IM 21.0% Mezzanine Funds, EBITDA of 525M 11.2% Private Equity Groups, EBITDA of$IM 28.3% Private Equity Groups, EBITDA of $50M 19.7% Venture Capital Firms, Startup 28.0% Venture Capital Finns, Later Stage 22.5% Asset Flow:22 According to PitchBook Data, Inc. ("PitchBook"), private equity deal making in the U.S. dropped slightly in the first quarter of 2014, falling from 633 closed deals and $151 billion in capital invested for the fourth quarter of 2013 to 589 transactions and $108 billion invested. However, these levels remained in line with quarterly deal flow totals from the previous three years. Despite a difficult deal-sourcing environment as purchase price multiples climbed, deal making was strong. Indicators that PE deal making should continue to remain strong in 2014 included the high level of dry powder and continued strength on the fundraising front. Private equity investors increasingly shifted their attention towards smaller investments, particularly add-ons. In fact, add-ons accounted for 59.0% of all buyouts in the first quarter, reaching an all-time high and accounted for 42.0% of all overall deal activity. This was a significant climb from the 35.0% measured in 2013. Purchase price multiples reached a median low of 7.7x in 2009 and slowly rebounded through 2012 before quickly accelerating to 10.0x in 2013. The trend toward higher multiples continued in the first quarter of 2014 significantly, jumping to 11.6x. The median debt-to-EBITDA multiple jumped to 6.8x in the first quarter, another decade high and a pronounced increase over the 6.5x recorded in 2013. The median debt-to-EBITDA multiples in 2013 and the first quarter of 2014 easily eclipsed the 5.7x average from the boom years of 2006 to 2008. However, firms used significantly less leverage in the first quarter than they did in 2013. Debt as a percentage of deal size decreased to 58.0%, its first dip below the 60.0% mark since 2011, most likely attributable to the push toward smaller transactions. 22 Pitchbook Data, Inc., 2Q 2014 U.S. Private Equity Breakdown Report, April 9, 2014. EMPIRE VALVAllON CONSULT/CM EFTA01109014 Alan S. Halperin, Esq. August II, 2015 Page 28 Over the last few years there has been a clear trend toward smaller transactions for PE investors. This was a result of the significant increase in add-ons and minority deals, which together represented 66.0% of overall deal activity in the first quarter, continuing an upward trend over the combined 61.0% in 2013 and 57.0% in 2012. Transactions of less than $500 million accounted for 55.0% of all capital invested in the first quarter and deals under the $1 billion mark accounted for 89.0% of all invested capital. The percentage of deals under $25 million remained fairly steady over the years. From 2006 to 2008, sub-$25 million deals consistently accounted for approximately 35.0% to 38.0% of all deal activity. Post 2009, that percentage has hovered in the low 4.0% range. D. Fine Art Outlook23 According to BAA, the worldwide auction art market continued to respond to global economic uncertainty with an incline of 1.3% in the MEI Moses World All An Index ("M&M Index"), at year-end 2013. The index significantly underperformed the almost 35% gain in equities. Additionally, the average ten year Compound Annual Return ("CAR") for art was 7.0% while the S&P 500 index was slightly higher at 8.5%. The almost 50% gain the S&P 500 TR over the last two years compared to the flat performance of the M&M Index for the same period has caused these CAR differentials to rise dramatically to levels not seen for many years. All the world collecting category indexes showed a weakening position in art versus equities through the year. The returns of the individual items that made up each of the indexes showed similar results. Knowing the purchase and sale price for each of the 3745 objects added to the Fine Art database for 2013 allows for the computation of the CAR for each object as well as the average of those individual object returns. This resulted in a below average CAR of 6.4%. Equal sums invested in the S&P 500 TR index for the same holding period as the art objects yielded an average CAR of 8.4%. This was not surprising since the equity indexes were at an all-time high. Many investors and collectors were interested in wealth preservation rather than only equity returns as a comparable measure for their allocation to art in their wealth portfolio. Thus, as with equities, it was possible to compute the change in the consumer price index for equal holding periods as each art object in our database. Then a comparison can be made of the average results to see which performed better. In January 2014 when mostly old masters were for sale, there were seven items that had been held for over 225 years and produced an average CAR of 3.5% while the change in the US CPI for these periods was about 2%. There were 79 works with auction intervals between 30 and 146 years and their average CAR was 6.12%. This was more than twice the CPI value for equivalent holding periods but only 60% of the returns achievable by investing equal sums in the S&P 500 Index. a Sources for this outlook include: (I) Beautiful Asset Advisors, LLC's ("BAA") Insights on An Market Financial Performance in 2013, February 2014; and (2) BAA's Insights on An Market Financial Performance through May 2014, June 7,2014. EMPIRE VALUATION CONSULTANTS EFTA01109015 Alan S. Halperin, Esq. August II, 2015 Page 29 Knowing the purchase and sale price for each of the 690 objects added to the Mei Moses database in May 2014, the compound annual return for each object and the average of those individual object returns was computed. The result is an average CAR of 7.6% which is almost 10% above the average CAR of the entire 40,000 repeat sale pair database. The average CAR of equal sums invested in the S&P 500 TR index for the same holding period as the May 2014 art objects was 9.1%. The analysis of the financial returns available in the art market clearly showed that there were periods of time when the M&M Index outperformed total return equity indexes. On a total return and a risk adjusted return basis this was especially true over the last ten and 20 years. However equities clearly outperformed the M&M Index from both performance perspectives over the last 40 years. The performance of the M&M Index, from a returns and risk per unit of return perspective, was close to the equity index over the last 60 years. Valuation Overview The purpose of the valuation section is to incorporate the information considered and/or presented previously into a quantitative representation, thus assigning a value to the ownership privileges of the closely-held entity. The valuation methodology reflects the analyst's expectation of how free and open capital markets would assign value to the economic activities of the business asset under analysis. A. General Valuation Methods Generally, there are three commonly used approaches to determine the value of a company. These three approaches are the Income, Market and Asset (or Cost) Approaches. The nature of the business, industry, and economic circumstances of the particular company/asset being valued at the specific valuation date, as well as the availability of data will dictate which approach(es) will ultimately be used in determining the company's/asset's value. The Income Approach uses valuation techniques to estimate value based on an expected stream of benefits, such as earnings or cash flow. Two common methods under this approach are the capitalization of benefits method, which is based on adjusted historical results, and the discounted future benefits method. In the capitalization of benefits method, a representative benefit level is divided by an appropriate capitalization factor to convert the benefit to a value?' In the discounted future benefits method, benefits are estimated for each of several future periods. These benefits are converted to value by applying an appropriate discount rate and using present value calculations. For LDB, as an investment holding company, an asset based approach was considered more appropriate. However, an income approach was used to estimate the value of LDB's indirect interest in Phaidon Limited. For more details, please refer to the Phaidon Limited Report. 24 This is the inverse of applying valuation multiples in a market approach. EMPIRE VAWATION CONN./TANTS EFTA01109016 Alan S. Halperin, Esq. August II, 2015 Page 30 The Market Approach uses prices and other relevant information generated by market transactions involving guideline companies. For example, valuation techniques consistent with the market approach often use market multiples derived from a set of guideline companies. Multiples might lie in ranges with a different multiple for each guideline company. The selection of where within the range the appropriate multiple falls requires judgment, considering factors specific to the measurement (qualitative and quantitative). For an investment holding company, comparison with similar publicly traded investment companies, such as closed-end funds, is generally considered appropriate. There are two important pricing multiples that can be derived from the freely traded shares in investment holding companies: (1) discount to net asset value ("NAV"); and (2) price to yield. Discount (or premium) to NAV is calculated by dividing the company's market price by its reported NAV per share, and then subtracting the result (as a percentage) from 100%. A discount to NAV is also referred to as an investment company discount ("ICD"). The other important pricing measure for public investment holding companies, particularly for those that earn substantial income (e.g., municipal bonds, utility stocks, commercial real estate) and pay out most of this income, is yield (i.e., the dividend per share divided by the market price per share). When either of these pricing measures is applied to the closely held investment company's corresponding financial figures, the end result is the fully marketable value of owners' capital on a non-controlling (i.e., minority) interest basis. This methodology was applied, in conjunction with an asset based approach, described below, to derive the fair market value of the Interest. The Asset (or Cost) Approach determines the value of a business based on the value of its assets net of liabilities. Typically the asset-based approach should be considered in valuations conducted at the enterprise level or involving: • When valuing an investment or real estate holding company; or • When the market value of an entity's net assets materially exceeds the value derived under the income or market approaches. Because the Interest is an investment in an investment holding company, the value of its underlying assets and any related liabilities are important to an investor. This is true even though a minority interest is being valued, and such an interest obviously does not have the right to liquidate the Company or its assets. Therefore, an asset accumulation approach ("AAM") was used to determine the minority value of the Interest. B. Outline of Valuation Process As previously mentioned, the AAM was used to value the Interest. First, the adjusted book value of LDB's assets (except cash and receivables) was calculated. The summary of which is presented in Exhibit D. EMPIRE VALUATION CONSULTANTS EFTA01109017 Alan S. Halperin, Esq. August II, 2015 Page 31 The assets were placed in four groups: (1) capital appreciation securities; (2) fixed-term funds; (3) restricted investments; and (4) miscellaneous interests. Details for each are outlined below. The first group consisted of capital appreciation securities held in a brokerage account. The most recent statement for the brokerage account was used to identify the adjusted book value ("ABV") of the capital appreciation securities. The second group consisted of interests in fixed-term funds,25 most of which were not expected to liquidate for several years after the Valuation Date. The most recent available capital account balances were used as a starting point, reflecting the pro rata NAV in each fund associated with the subject interests. A restriction period discount was then applied to reflect the rights and restrictions associated with each investment, together with its economic characteristics. Application of this adjustment resulted in a cash equivalent value (i.e. fair market value) that was included in the derivation of LDB's ABV. This analysis is presented in Exhibits E-1 through E-3. The third group consisted of LDB's interests in restricted investments. These investments were either investments in fixed-term funds or direct investments in illiquid assets. The fixed-term funds in this group have reached their maturity and the only assets held by each fund are side-pocket investments. Liquidation of the side-pocket investments and distribution of those proceeds was not expected in the near future and an expected date was not known as of the Valuation Date. The direct investments consist of minority positions in holding companies that hold investments in private operating companies. Information available to LDB on the operations is limited to an annual Schedule K-1. In addition, liquidation of each holding company's respective underlying operating company was not expected in the near future and an expected date was not known as of the Valuation Date. Based on these factors, each of these investments was considered a restricted investment. A restriction period discount was applied to each restricted investment. Application of this adjustment resulted in a cash equivalent value (i.e. fair market value) that was included in the derivation of LDB's ABV. The fourth group consisted of the interest in the Fine Art and the investment in PLB. As previously mentioned, the Fine Art consisted of collector quality art. According to the Fine Art Appraisal, the fair market value of the Fine Art held by LDB was $74,750,000 as of June 23, 2014. In addition, the Valuation Agreement for the Fine Art Appraisal stated that Sotheby's Inc. did not consider the applicability of a blockage discount for the Fine Art. Therefore, the value concluded by the Fine Art Appraisal was included in the derivation of LDB's ABV. PLB is a holding company that has a 99.9% non-managing membership interest in Phaidon Global. Phaidon Global holds interests in Regan and Phaidon. Through the JMWT Entities, Phaidon holds a 100% interest in Phaidon Limited. Using the AAM, the ABV of LDB's interest in PLB (and its underlying assets) was estimated. The Phaidon FCI, QCP, QACP, QOCP, Searchlight, and Searchlight AIV. EMPIRE UAWAllON CONSULTANTS EFTA01109018 Alan S. Halperin, Esq. August II, 2015 Page 32 Limited Report was used to estimate the value of PLB's interest (through a series of holding companies) in Phaidon Limited. This analysis is presented in Exhibits H-1 through H-8. Once LDB's adjusted book value was estimated, the pro rata ABV associated with the Interest was calculated. Next, a discount for lack of control and lack of marketability were applied sequentially (i.e. multiplicatively) to estimate the fair market value of the Interest. Valuation of LDB's Assets and Liabilities A. Valuation of Fixed-Term Fund Interests In assessing the fair market value of the Company's underlying PE fund investments the capital account balance associated with each interest was used as a starting point. An appropriate restriction period discount was then applied to account for the economic characteristics of the interest, its performance, and the investment risks associated with the underlying investment fund, together with the rights and restrictions attributable to the interest as described in the fund's governing documents. Market and general economic conditions at the Valuation Date were also a consideration. In estimating an appropriate restriction period discount to apply to the Company's underlying PE fund investments, we considered the economic and financial risks of each investment as a prospective investor may perceive them. In addition to each fund's vintage year, investment strategy, portfolio composition and other descriptive information provided earlier in this report, several risk factors were considered, including, but not limited to, the following: (1) remaining term; (2) stage of lifecycle; (3) remaining capital commitment; (4) cumulative returns; (5) distributions; (6) preferred returns to limited partners, if any; and (7) potential carried interest payments to the general partner, if any. The general impact of each on the selected restriction period discount is discussed below. On a relative basis, estimated restriction period discounts would be greater for funds with: (I) longer remaining terms, which would also suggest that the funds were earlier in the fund cycle and could have greater investment risk; (2) larger unfunded capital commitments, which could reduce the number of potential buyers;2 6 (3) capital appreciation as the expected source of value creation, as investors in funds expected to create value through cash flow (i.e., debt service income or rental income) were likely to receive distributions earlier than investors in otherwise similar funds that were invested for capital appreciation; (4) lower distributions as a percentage of contributed capital and net multiples of contributed capital, both of which could suggest a lack of strong historical performance; and (5) no preferred return, which would provide less of a return to limited partners before carried interest payments could be made to general partners or managers. 26 In addition to the fact that the landscape of potential willing buyers would be limited to "accredited investors" in most situations, any potential buyer would need to have the capacity to fund future capital calls. EMPIRE VALUATION CONSULTANTS EFTA01109019 Alan S. Halperin, Esq. August II, 2015 Page 33 In selecting a reasonable restriction period discount to be applied to each of the Company's underlying private investments, several benchmarks were considered. These included, but were not limited to, the following: (I) discounts to NAV associated with publicly-traded closed-end investment companies ("CEICs"); (2) restricted stock studies; and (3) the limited market data available for the private equity interests in the secondary market. Each is described further below. • CEIC Samples: Two closed-end fund samples were developed: (1) business development companies ("BDCs") and CEICs invested in underlying private equity investments; and (2) capital appreciation securities. The BDC sample included nine domestic closed-end funds invested primarily in mezzanine debt, private equity and venture capital securities. Implied discounts to NAV ranged from a premium of 8.8% to a discount of 38.5%, with mean and median observed discounts of 11.8% and 10.3% for the sample. Note that discounts for equity focused funds had discounts between 20.7% and 38.5%. The capital appreciation sample had implied discounts that ranged between 1.9% and 19.1%, with mean and median implied discounts of 11.7% and 11.2% respectively. Note that the CEICs in the capital appreciation sample invested in publicly traded equity securities. See Exhibits F-1 and F-2. • Restricted Stock Studies: Addendum 4 to this report describes the results of several restricted stock studies which encompass several hundred restricted stock transactions that were completed between 1966 and 2008. Addendum 4 demonstrates that restricted stock discounts have declined over time as Rule 144 resale provisions have become less restrictive. Median restricted stock discounts for studies involving transactions completed prior to 1990, involving minimum required holding periods of at least two years, generally range from 25% to 45%. Median discounts associated with these studies are generally concentrated between 30% and 35%. • Secondary Market Data: As described in the "Capital Markets Overview" section of this report, limited secondary market transaction data is available from NYPPEX. Median bids for all fund sectors had implied discounts to NAV of 23.7%. Application of the PE Analysis: Application of a selected restriction period discount to each PE interest resulted in their respective market values, which were then included in the derivation of the Company's ABV. FCI: In selecting the restriction period discount applicable to FCI, it was considered that: (I) FCI's term does not have a specific expiration date and that a term of 10-years, or longer, was considered reasonable; (2) FCI expected to generate returns through capital appreciation; (3) the Company had contributed 50% of its capital commitment; (4) further capital contributions were expected in the future to fund insurance premiums; (5) since EMPIRE VALUATION CONSULTANTS EFTA01109020 Alan S. Halperin, Esq. August II, 2015 Page 34 inception, FCI had distributed $8,474,291, which represented 67.4% of contributed capital; and (6) the investment in FCI exhibited a net multiple of contributed capital of 2.1 times; See Exhibits E-1 and E-2. Taking these and other factors into consideration, including the provisions of FCI's governing documents and relevant market data available at the Valuation Date, an estimated restriction period discount of 30% was considered reasonable for this interest. Applying a 30% restriction period discount to the capital account balance of $18,490,092 resulted in a fair market value of $12,940,000, rounded, for the Company's interest in FCI as of the Valuation Date. See Exhibit E-3. Quadrangle Entities: In selecting the restriction period discount applicable to the Quadrangle Entities, it was considered that: (1) the Quadrangle Entities' initial term has expired and has been extended beyond the extensions permitted by the QCP agreement; (2) QCP's LP's delegated their authority to the LP Advisory Committee to consider extending the fund for an additional year through May 23, 2015; (3) the Quadrangle Entities expected to generate returns through capital appreciation; (4) the Company had contributed 99% of its capital commitment; (5) since inception, the Quadrangle Entities had distributed $1.9 million, which represented 155.4% of contributed capital; (6) the investment in the Quadrangle Entities exhibited a net multiple of contributed capital of 2.2 times; and (7) QCP's limited partners limited partners paid a 1.75% management fee and 20% carried interest fee and received an 8% preferred return. See Exhibits E-1 and E-2. Taking these and other factors into consideration, including the provisions of QCP's governing documents and relevant market data available at the Valuation Date, an estimated restriction period discount of 25% was considered reasonable for these interests. Applying a 25% restriction period discount to the capital account balances of $278,289, $125,977, and $409,182, for QCP, QACP, and QOCP, respectively, resulted in fair market values of $210,000, $90,000, and $310,000, each rounded, for the Company's interests in QCP, QACP, and QOCP, respectively, as of the Valuation Date. See Exhibit E-3. Searchlight: In selecting the restriction period discount applicable to Searchlight and Searchlight AIV, it was considered that: (I) Searchlight's initial term expires on March 20, 2022; (2) Searchlight's term can be extended up to two years; (3) Searchlight expected to generate returns through capital appreciation; (4) the Company had contributed 41% of its capital commitment in Searchlight and Searchlight AIV; (5) since inception, Searchlight and Searchlight AIV had not paid any cash distributions to its partners; (6) the investment in Searchlight exhibited a net multiple of contributed capital of 1.1 times and the investment in Searchlight AIV exhibited a net multiple of contributed capital of 1.3 times; and (7) Searchlight and Searchlight AIV's limited partners paid a 20% carried interest fee and received an 8% preferred return. See Exhibits El and E-2. Taking these and other factors into consideration, including the provisions of Searchlight and Searchlight AIV's governing documents and relevant market data available at the Valuation Date, an estimated restriction period discount of 35% was considered reasonable EMPIRE VALUATION CONSULTANTS EFTA01109021 Alan S. Halperin, Esq. August II, 2015 Page 35 for these interests. Applying a 35% restriction period discount to the capital account balances of $776,558 and $168,712, for Searchlight and Searchlight AIV, respectively, resulted in fair market values of $500,000 and $110,000, each rounded, for the Company's interests in Searchlight and Searchlight AIV, respectively, as of the Valuation Date. See Exhibit E-3. Summary: The following table summarizes the previously discussed factors related to the fixed-term investments. Selected Restriction Period Discounts Entit:t Remaining 'term I) rs.) Capital Account Selected Discount Markel N.altic. rounded FCI N/A $18,490,092 30% $12,940,000 2.00 S278 289 25% 8210 000 2.00 $125,977 25% $90,000 OCP 2.00 $409,182 25% $310,000 Seachli ht 7.75 $776 558 35% 8500,000 Searchli•ht AIV 7.75 $168,712 35% $110,000 See Exhibit D for summary details of LDB's ABV and Exhibits E-1 through E-3 for PE restriction period discount details. B. Valuation of Restricted Investments As previously discussed, LDB's had a number of restricted investments. These investments were either investments in fixed-term funds or direct investments in illiquid assets. The fixed-term funds in this group have reached their maturity and held only side-pocket investments. Liquidation of the side-pocket investments and distribution of those proceeds was not expected in the near future and an expected date was not known as of the Valuation Date. The direct investments consist of minority positions in holding companies that hold investments in private operating companies. These investments provided LDB with limited information and liquidation of each holding company's respective underlying operating company was not expected in the near future and an expected date was not known as of the Valuation Date. Based on these factors, each of these investments was considered a restricted investment. Based on restricted stock studies, a restriction period discount was applied to each restricted investment. Restricted Stock Data: Restricted stock studies were sought for use in determining a benchmark for the discounts appropriate for application to each investment. Relevant restricted stock studies are summarized and described in Addendum 4 to this report. Overview: The restricted stock studies demonstrate that discounts do exist to compensate investors for their relative inability to liquidate an investment over the course of a given EMPIRE VALUATION CONSULTANTS EFTA01109022 Alan S. Halperin, Esq. August 11, 2015 Page 36 holding period. The statistics associated with the studies fell within a reasonably close range, although variation of implied discounts was noted within each of the studies. Variations in observed discounts were generally attributed to company-specific (i.e., investment specific) factors. The restricted stock study data also supports the notion that discounts declined when holding periods were reduced, which can be anticipated based on accepted financial theory. Based on these studies, we estimated that the discounts appropriate for lock-up periods of two years could be as high as 33%. While data points underlying the specific studies suggested that discounts could range much higher, it was considered that such high levels of discounts were frequently observed with investments that were subject to high levels of stock price volatility or business risk. As a result, the overall median restricted stock discount of approximately 33% for a two-year holding period was considered a reasonable upper boundary for use in this analysis. TVA Study — Holding Period Analysis: Addendum 4 includes a description of a study completed by Trugman Valuation Associates, Inc. ("TVA") that was published in the fall of 2009. After a detailed screening process, TVA identified 80 transactions occurring between January 1, 2007 and August 19, 2008. The summary statistics associated with this study are presented at the beginning of Addendum 4. As a component of its study, TVA completed a holding period analysis by analyzing the impact of contractual registration rights on implied discounts. TVA indicated that a large majority of the 80 transactions in the study had registration rights. TVA performed additional research to verify the actual registration date, and calculated the number of days between the transaction date and the actual registration date. If no registration statement was filed with respect to a specific transaction, TVA assumed that the securities remained unregistered for the entire required holding period.27 TVA separated this data into quartiles, resulting in the statistics shown in the following table. TVA Analysis of Registration Rights Days Before erage cdian Standard Quartile Registration Discount DISC I/11111 DeN haunt 0-31 days 11.6% 10.0% 8.0% 2 32-63 days 14.3% 12.9% 11.3% 3 64-185 days 20.4% 15.9% 18.4% 4 185+ days 26.9% 18.8% 18.6% TVA's registration rights analysis suggests that implied discounts are positively correlated to implied holding periods, and provides useful information to assist in the development of benchmark discounts for holding periods up to six months. This analysis implies that holding period discounts even for short periods of time can be relatively significant. 27 365 days prior to the change in Rule 144 on February 15, 2008, and 182 days thereafter. EMPIRE VALUATION CONSULTANTS EFTA01109023 Alan S. Halperin, Esq. August 11, 2015 Page 37 Although this information is helpful, the lack of block size and volatility data associated with each quintile makes the data difficult to interpret. For example, registered shares may still be subject to trading restrictions depending on the block size. Therefore, it is not clear based on the published data that the subject blocks of stock would be fully liquid upon registration. Further, discounts are generally recognized to increase as volatility increases, and the data presented does not permit an assessment of the relative impact of volatility on the observed discount. Analysis of FMV Study Data: Addendum 4 describes the 2013 edition of the FMV Restricted Stock StudyTM (the "2013 Discount Study") in detail, together with Empire's analysis of the underlying transaction data. To provide some additional data that will assist in developing benchmark discounts to account for the illiquidity of hedge fund investments, we refer to Empire's analysis of stock price volatility on implied discounts. This is considered relevant given the relatively low volatility that may be associated with hedge fund investments in comparison to many of the companies included in the data set. As described further in Addendum 4, the 779 transactions in the 2013 Discount Study were filtered and sorted based on certain key variables, including volatility. The sorted data included 345 transactions, and was divided into quintiles. The lowest quintile of volatility data had historical stock price volatility ranging from 19.0% to 55.7%, with an average of 42.4%. Implied discounts associated with this quintile ranged from 0% to 84.6%. This quintile reflected a median discount of 13.1%, as compared to a discount of 20.0% for the 337 remaining transactions for which volatility data was available. Conclusion: The overall restricted stock study data suggests that discounts are clearly applicable to account for lock-up periods during which an investment cannot be sold. The holding period analysis conducted by TVA provided the most relevant data for short periods. Therefore, it was considered reasonable to estimate a range of discounts applicable to investments with lock-up periods up to two years. This is shown in the following table. Estimated Restriction Period Discounts tuck-up Period Eqiniated Di‘Lount Range 0-1 Months 1-5% 1.6 Months 5-7% 6-12 Months 7-10% 13.1S Months 11-25% 19-24 Months 26.33% It should be recognized that these estimated ranges are likely to overlap; i.e., the restriction period discount ultimately appropriate to a specific investment is dependent on the attributes of that particular investment. EMPIRE VALUATION CONSULTANTS EFTA01109024 Alan S. Halperin, Esq. August II, 2015 Page 38 Application of the Restricted Investment Analysis: Application of a selected restriction period discount to each restricted investment resulted in their respective market values, which were then included in the derivation of the Company's ABV. Given: (1) that the fixed-term restricted investments were beyond their contractual term and held only side-pocket investments; (2) the direct restricted investments provided limited financial information and liquidation of each holding company's respective underlying operating company was not expected in the near future; and (3) an expected date for liquidation of the side-pocket investments (fixed-term investments) and operating companies (direct restricted investments) was not known as of the Valuation Date, a restriction period discount of 30% was considered reasonable to apply to the capital account balance for each of the restricted investments. The following table summarizes the estimated cash equivalent value of the restricted investments. Selected Restriction Period Discounts — Capital Market Funds Entity Capital Account Restriction Period Discount Market Value, rounded AIF II $0 ttia $0 AP SHL $0 n/a $0 AP Tech $174,459 30% $122,100 AIF $225 30% $160 REIF $183,325 30% $128,300 REIF III $25,308 30% $17,700 REIF IV $735,778 30% $515,000 BHM $159,692 30% $111,800 Microbes $142,916 30% $100,000 PAM $0 n/a $0 Viropro $300,000 30% $210,000 C. Valuation of PLB As previously mentioned, LDB held a 14.925% non-managing interest in PLB. In addition, PLB is a holding company whose primary asset is a 99.9% non-managing membership interest in Phaidon Global. Phaidon Global holds 100% interests in Regan and Phaidon and a 99.9% interest in Acquisition. Phaidon holds the remaining 0.1% interest in Acquisition. According to Management, Phaidon does not have any other assets and has no liabilities. Through Topco, Midco, and Bidco, a series of wholly-owned holding companies, Acquisition holds a 100% interest in Phaidon Limited. This analysis began by using the balance sheets for the JMWT Entities, Phaidon, Regan, Phaidon Global, and PLB. In doing so, each asset and liability for each holding company was assessed to determine its estimated market value as of the Valuation Date. Please see Exhibits G-1 through G-8 for each entity's balance sheet as of the Valuation Date. EMPIRE VALUATION CONSULTANTS EFTA01109025 Alan S. Halperin, Esq. August 11, 2015 Page 39 Using the ABV approach, the valuation of LDB's interest in PLB starts with calculating the ABV of Bidco, which holds a 100% interest in Phaidon Limited. The ABV for each of the wholly-owned holding companies is than calculated and then applied to each holding companies' respective parent. The following refers to Exhibit H-1 through H-8. The ABV of Bidco is calculated to estimate the pro rata capital account balance of Midco's 100% interest in Bidco. As of the Valuation Date, Bidco's primary asset was its 100% interest in Phaidon Limited. Based on the Phaidon Limited Report, the book value of Bidco's investment in Phaidon Limited was adjusted to $19,200,000.28 No adjustments were made to Bidco's other assets and liabilities. Given this adjustment, Bidco's ABV can be stated at $15,610,610 at the Valuation Date. Therefore, the pro rata ABV of Midco's interest in Bidco is estimated to be $15,610,610, which is a fully controlling and fully marketable value. See Exhibit H-1. The ABV of Midco is calculated to estimate the pro rata capital account balance of Topco's 100% interest in Midco. As of the Valuation Date, Midco's primary asset was its 100% interest in Bidco. Based on the pro rata ABV of Midco's interest in Bidco, the book value of Midco's investment in Bidco was adjusted to $15,610,610. No adjustments were made to Midco's other assets and liabilities. Given this adjustment, Midco's ABV can be stated at negative $7,748,233 at the Valuation Date. Therefore, the pro rata ABV of Topco's interest in Midco is estimated to be negative $7,748,233, which is a fully controlling and fully marketable value. See Exhibit H-2. The ABV of Topco is calculated to estimate the pro rata capital account balance of Acquisition's 100% interest in Topco. As of the Valuation Date, Topco's primary asset was its 100% interest in Midco. Based on the pro rata ABV of Topco's interest in Midco, the book value of Topco's investment in Midco was adjusted to negative $7,748,233. No adjustments were made to Topco's other assets and liabilities. Given this adjustment, Topco's ABV can be stated at negative $7,748,233 at the Valuation Date. Therefore, the pro rata ABV of Acquisition's interest in Topco is estimated to be negative $7,748,233, which is a fully controlling and fully marketable value. See Exhibit H-3. The ABV of Acquisition is calculated to estimate the pro rata capital account balance of Phaidon's 0.1% interest and Phaidon Global's 99.9% interest in Acquisition. As of the Valuation Date, Acquisition's primary asset was its 100% interest in Topco. Based on the pro rata ABV of Acquisition's interest in Topco, the book value of Acquisition's investment in Topco was adjusted to negative $7,748,233. No adjustments were made to Acquisition's other assets and liabilities. Given this adjustment, Acquisition's ABV can be stated at $15,610,609 at the Valuation Date. Therefore, the pro rata ABV of Phaidon's 0.1% interest in Acquisition is estimated to be $19,200, which is a fully controlling and fully marketable value. The pro rata ABV of Phaidon Global's 99.9% interest in Acquisition is estimated to be $19,180,800, which is a non-controlling and fully marketable value. See Exhibit H-4. 28 Please refer to the Phaidon Limited Report for further details regarding the valuation of Phaidon Limited. EMPIRE VALUATION CONSVITANTS EFTA01109026 Alan S. Halperin, Esq. August 11, 2015 Page 40 The ABV of Phaidon is calculated to estimate the pro rata capital account balance of Phaidon Global's 100% interest in Phaidon. As of the Valuation Date, Phaidon's primary asset was its 0.1% interest in Acquisition. Based on the pro rata ABV of Phaidon's interest in Acquisition, the book value of Phaidon's investment in Acquisition was adjusted to $19,200. Phaidon had no other assets or liabilities. Given this adjustment, Phaidon's ABV can be stated at $19,200 at the Valuation Date. Therefore, the pro rata ABV of Phaidon Global's interest in Phaidon is estimated to be $19,200, which is a fully controlling and fully marketable value. See Exhibit H-5. The ABV of Regan is calculated to estimate the pro rata capital account balance of Phaidon Global's 100% interest in Regan. As of the Valuation Date, Regan had limited operations and according to Management, the value of Regan was based on its assets less its liabilities. Based on conversations with Management, no adjustments were made to Regan's assets and liabilities. Therefore, Regan's ABV can be stated at $303,880 at the Valuation Date and the pro rata ABV of Phaidon Global's interest in Regan is estimated to be $303,880, which is a fully controlling and fully marketable value. See Exhibit H-6. The ABV of Phaidon Global is calculated to estimate the pro rata capital account balance of PLB's 99.9% interest in Phaidon Global. As of the Valuation Date, Phaidon Global's primary assets were its 100% interests in Phaidon and Regan and 99.9% interest in Acquisition. Based on the pro rata ABV of Phaidon Global's interests in Phaidon, Regan and Acquisition, the book value of Phaidon Global's investments in Phaidon, Regan, and Acquisition were adjusted to $19,200, $303,880, and $19,180,800, respectively. No adjustments were made to Phaidon Global's other assets and liabilities. Given these adjustments, Phaidon Global's ABV can be stated at $17,917,900 at the Valuation Date. Therefore, the pro rata ABV of PLB's 99.9% interest in Phaidon Global is estimated to be $17,899,982. While this is a non-controlling interest, a lack of control discount was not applied to PLB's interest in Phaidon Global. See Exhibit H-7. Finally, the ABV of PLB is calculated to estimate the pro rata capital account balance of LDB's 14.925% interest in PLB. As of the Valuation Date, PLB's primary asset was its 99.9% interest in Phaidon Global. Based on the pro rata ABV of PLB's interest in Phaidon Global, the book value of PLB's investment in Phaidon Global was adjusted to $17,899,982. No adjustments were made to PLB's other assets and liabilities. Given these adjustments, PLB's ABV can be stated at $15,151,304 at the Valuation Date. Therefore, the pro rata ABV of LDB's 14.925% interest in PLB is estimated to be $2,300,000, rounded. While this is a non-controlling interest, a lack of control discount was not applied to LDB's interest in PLB. See Exhibit H-8. D. Valuation of Cash, Marketable Securities, Fine Art, and Receivables No discounts were applied to the cash, marketable securities, Fine Art, and related party receivables held by LDB as of the Valuation Date. Therefore, the book value as presented on the Company's balance sheet was considered to accurately reflect each asset's ABV. EMPIRE VALUAllON CONK/LTA-1'M EFTA01109027 Alan S. Halperin, Esq. August II, 2015 Page 41 E. Liabilities The Company's only liability as of the Valuation Date was distributions payable in the amount of $14,329. No adjustment was made to the liability. Valuation of LDB 2011 LLC A. LDB's Adjusted Book Value As discussed above, a willing buyer would typically assess the value of LDB's capital on the basis of its underlying assets. Thus, it is reasonable to utilize AAM as a valuation method. Book value, unadjusted, is another name for the shareholders' equity account as it appears on the balance sheet. Again, ABV as a willing buyer would assess it involves determining the value of a company's bundle of assets, less its liabilities, but before transaction costs. This analysis began by using the Company's Valuation Date balance sheet. In doing so, each asset and liability was assessed to determine its estimated market value as of the Valuation Date. A summary of the Company's assets and liabilities adjusted to reflect their market values as of the Valuation Date is summarized below. In general the adjustments made to stated capital account balances reflect the restrictions imposed upon LDB and its inherent inability to realize the stated capital account balance value of its assets. Detailed analyses regarding the adjustments were discussed above. • Cash and Marketable Securities: The Company had a J.P. Morgan brokerage account that had a cash balance of $25.2 million and marketable securities. No adjustments were made to the cash and marketable securities account balances. • PE/Fixed-Term Entity Direct Interests: The PE interests were direct investments in various private equity funds. The capital account balances were adjusted, as summarized in detail previously in this report. The following table presents the capital account balance and adjusted book value of each interest. PE/Fixed-Term Fund Interests Film% Capital Account Balance Adjusted Book Value, rounded FCI $18,490,092 $12,940,000 r ig a $278,289 $210,000 n $125,977 $90,000 n $409 182 $310 000 Searchlight 5776.558 5500.000 Searchlight AR' 5168.712 SI 10.000 EMPIRE VALUATION CONSULTANTS EFTA01109028 Alan S. Halperin, Esq. August 11, 2015 Page 42 • Restricted Investments: Based on the previously discussed analysis regarding this group of assets, a 30% restriction period discount was applied to each of the restricted investments. The following table presents the capital account balance and adjusted book value of each interest. Restricted Investments Ellin Capital Account Balance Adjusted Book Value, rounded AIF II $0 SO AP SHL $0 SO AP Tech $174,459 $122,100 AIF $225 $160 REIF $183 325 $128 300 REIF III $25,308 $17,700 REIF IV $735,778 $515,000 BHM $159692 $111800 Microbes $142,916 $100,000 PAM $0 SO Viro ro $300.000 52)0.000 • Fine Art: As of the Valuation Date, the Company held collector quality art. According to the Fine Art Appraisal, the fair market value of the Fine Art held by LDB was $74,750,000 as of June 23, 2014. Therefore, an adjustment was made to the book value of the Fine Art to equate the adjusted book value to the value concluded in the Fine Art Appraisal. • PLB: The adjusted book value for PLB was set to $2.3 million based on LDB's pro rata capital account balance, through a series of holding companies, and the concluded value of Phaidon Limited as outlined in the Phaidon Limited Report. • Related Party Receivables: No adjustments were made to LDB's related party receivables. • Liabilities: The Company's only liability at the Valuation Date was a distribution payable in the amount of $14,329. Based on the estimated market value of LDB's assets and liabilities, the Company's ABV can be stated at $132,032,702, or $33,008,176 for a pro rata 25% limited partnership interest. See Exhibit D. EMPIRE VALUATION CONSULTANTS EFTA01109029 Alan S. Halperin, Esq. August II, 2015 Page 43 B. Investment Company Discount When valuing a company, a valuation methodology which utilizes required rates of return from the public market is generally assumed to be a minority interest value. However, when consideration is given for a controlling interest position, as is the case when using the asset accumulation method, the controlling interest holder has the ability to exercise the prerogatives of control (e.g., the ability to set dividends and salaries, and make daily business decisions). The value of this control is usually recognized by a premium over the non-controlling interest valuation, as is demonstrated by the transaction data cited below. Since a non-controlling interest position is being valued, some discount for lack of control, or the inverse of the stated premiums, must be considered. The application of a discount for lack of control is particularly warranted in appraising limited partnership and non-managing membership interests in investment holding companies. Even without overt restrictions, a holding company interposes itself between an owner and the investment assets, thus creating administrative costs that would otherwise not be present. If an investor can purchase the same investment assets directly, without a discount there is no incentive for that investor to buy an interest in a holding company at its pro rata capital account value. The owners of non-controlling interests lack the ability to control operations, make or determine the level of distributions, or force dissolution. In order to benchmark an appropriate discount for lack of control to use in valuing a non-managing membership interest, two samples of CEIC's invested in Capital Appreciation securities and U.S. Government and Agency bonds and securities were reviewed. These samples were selected to reflect the fact that the assets held by LDB were similar to capital appreciation securities or were marked to cash equivalent values. Closed-End Investment Company Benchmark: Discounts to NAV, or investment company discounts ("ICD"), associated with publicly traded closed-end funds or limited partnerships provide estimates that can serve as a base to determine a reasonable proxy for a lack of control discount. Generally, ICDs tend to be lower for funds with diversified portfolios of low risk assets (i.e., U.S. government and agency securities). ICDs tend to increase as the portfolios become more risky (equities and private investments) or less diversified (either concentrated in one industry or with a concentration in a specific security). While no CEICs were identified that ideally matched LDB's investment portfolio, there has been interest among investors to utilize fine art as an investment vehicle. One of the more prominent drivers of this movement began with a research paper published by Jianging Mei and Michael Moses ("M&M"), two professors at New York University's Stem School of Business. In this paper, M&M developed an index of repeat sales of artwork sold at major auction houses in the U.S. using pricing records obtained from the New York Public Library and the Watson Library at the Metropolitan Museum of Art. The universe of data, albeit limited, encompasses more than 5,000 pricing pairs occurring since 1953. Some paintings had multiple re-sales that occurred over many years. However, each re-sale pair was considered as its own unique data point. The M&M study resulted in the creation of the EMPIRE VALUATION CONSULTANTS EFTA01109030 Alan S. Halperin, Esq. August II, 2015 Page 44 M&M Index. For the period considered by the M&M index, starting in 1960, the annualized compound rate of return of the Index has been found to track closely with that of the S&P 500. Therefore, to derive an ICD for LDB's non-controlling interest on a fully marketable basis, a market approach was utilized whereby a reasonably comparable group of publicly traded CEICs was selected and the public pricing of these funds was used to determine an ICD appropriate for the Company's non-controlling interests. To determine an ICD to apply, a sample of capital appreciation CEICs were chosen as proxies for the Fine Art and marketable securities. For the remaining assets, a sample of government bonds and securities CEICs were considered. We analyzed the following attributes of both the Company and the CEICs: (I) size; (2) portfolio diversification; (3) liquidity of underlying investments; (4) whether or not the portfolios are professionally managed; and (5) dividend yield. The relevant statistics are as follows. See Exhibits F-2 and F-3 for additional detail. Closed-End Fund Samples ('EIC Sample Discount from NAV Disidend Yield Median Mean Median Mean Capital Appreciation 11.2% 11.7% 1.0% 1.2% Government Bonds and Securities 8.9% 8.7% 3.9% 3.6% A weighted average of the selected ICD for each sample was calculated based on the relative weights of the Company's asset classes. The following table highlights the weighting factors used to determine a base ICD of 9.0%, rounded. Weighted ICD Used to Discount Portfolio Position Percent of Portfolio Selected IC1)2" Weighted Average ICI) Cash 19.1% 5.0% 1.0% Marketable Securities 3.8% 11.2% 0.4% Fixed-term/PE Investments 10.7% 5.0% 0.5% Restricted Investments 0.9% 5.0% 0.0% Fine Art 56.7% 11.2% 6.3% PLB 1.7% 5.0% 0.1% Receivables 7.1% 5.0% 0.4% Total, rounded 100.0% 9.0% " The median discount from NAV for the capital appreciation sample was selected as the ICD for marketable securities and the Fine Art. The remaining assets are either cash or have been discounted to a cash equivalent basis. Based on the median discount from NAV for the government bonds and securities sample, 5% was considered a reasonable 1CD for these assets. EMPIRE VALUATION CONSULTANTS EFTA01109031 Alan S. Halperin, Esq. August II, 2015 Page 45 Using a 9% ICD, the non-controlling fully marketable value of the Interest is reasonably stated at $30,037,440. [$33,008,176 x (1 - 0.09)] See Exhibit D. C. Discount for Lack of Marketability 1. Background Since there is no public market in which the Interest can be sold, we applied a discount for lack of marketability ("DLOM") to account for its illiquid nature. In selecting an appropriate DLOM, we performed both a qualitative and quantitative analysis. The qualitative analysis involved an assessment of key factors impacting marketability, as well as relevant restricted stock studies. The quantitative assessment involved analyzing restricted stock data based on key financial measures that influence the degree of marketability for the interest in question. 2. Restricted Stock Studies — Qualitative Assessment As part of the qualitative analysis, we reviewed restricted stock studies covering transactions between 1966 and 2013. These studies are summarized in Addendum 4 of this report. The studies, which cover several hundred transactions over the specified time period, concluded that mean or median lack of marketability discounts typically range between 25% and 35%. It is important to note that all shares of restricted stock observed in these studies would be tradable (subject to blockage issues) on an established public exchange following the expiration of a defined restriction period.3° As the required holding period decreased from two years to one year, observed restricted stock discounts declined. This is consistent with financial theory that the required discount should decline as holding period restrictions are relaxed. However, changes in the securities laws which have resulted in shorter required holding periods do not make the older restricted stock studies obsolete. In contrast to restricted stock, which can trade on an exchange once the restricted period has lapsed, shares of most privately-held companies will never have access to such a market because the characteristics of those businesses do not make them candidates for public stock offerings. As a result, the observed discounts in the pre-1990 restricted stock studies (i.e., when the restrictions were most stringent) provide a useful comparison along with the more current studies. 3. Estimated Lack of Marketability Discount - Qualitative Analysis The impact of the qualitative factors on marketability is determined after reviewing many factors including, but not limited to, the factors discussed below. 10 Due to changes in securities law over time, the initial restriction period declined from two years to one year in 1997. Prior to that, the adoption of Rule 144A in 1990 provided partially improved liquidity, but did not modify the two-year holding period requirement. The initial required restriction period was reduced to one year effective April 1997 and further shortened, to six months, effective February 2008. EMPIRE VALUATION CONSONANTS EFTA01109032 Alan S. Halperin, Esq. August II, 2015 Page 46 • Level of Distributions: A company with a history of paying consistent distributions is generally considered more marketable than one that does not have such a history. According to the LDB Agreement, distributions shall be made to the members at the times and in the aggregate amounts determined in the sole discretion of the managers. As presented on Exhibit C, the Company has not historically made cash distributions in an amount that is greater than the members' pass-through tax liability. The distribution of notes in the amount of $20.8 million in 2013 was considered by Management to be a non-recurring event. This combination of factors tends to increase the DLOM. • Information Access & Reliability: A purchaser of a non-controlling interest has to accept the information provided, and that information can often be curtailed by the general partners or managers. Concern about this issue is mitigated somewhat when management has a history of providing the minority owners with audited financial statements and/or access to the company's books and records. According to the LDB Agreement, the books of the Company shall be open to the inspection and examination of all members and maintained based on generally accepted accounting principles, consistently applied. In addition, each member shall also be supplied with all information with respect to the Company required in connection with the preparation of such member's tax returns. However, financial information is not required to be audited or prepared by an external accountant. This combination of factors tends to be neutral with respect to the DLOM. • Transfer and Withdrawal Restrictions: The ability of an investor to transfer or liquidate his interest, along with the time required to do so, is a major factor in assessing the appropriate DLOM. According to the LDB Agreement, no member or any assignee has the right to sell, assign, or otherwise transfer all or any part of interest without a bona fide written offer, notification to each member, and an offer to sell the interest to current members on the same terms as the written offer. In regards to withdrawals, no member may withdraw from the Company or reduce their capital account. This combination of factors tends to increase the DLOM. • Expected Holding Period: The length of the expected holding period of the interest impacts marketability; the longer the expected holding period, the less marketable an asset will be. For example, the presence of a near-term exit event, such as dissolution, an IPO, or a sale/merger, generally improves marketability. While the existence of legal restrictions may adversely impact an owner's ability to sell, the absence of such restrictions does not necessarily improve marketability if there is no active public market in which an asset can be sold. Separately, to the extent that the owner of an equity interest in a subject company has a contractual or legal right to EMPIRE VALUATION CONSIATAN'TS EFTA01109033 Alan S. Halperin, Esq. August 11, 2015 Page 47 "put" the stock back to the company or the other owners, the marketability of an interest is typically improved. According to the LDB Agreement, term of the Company is perpetual unless dissolved upon the unanimous consent of the members. In addition, liquidation of LDB's assets and termination of the Company was not expected in the near-term. While the LDB Agreement did not provide for members to put their interest to the Company, at the request of a particular member, the managers may, but are not required to, redeem the withdrawing member's interest, by distributing assets to such withdrawing member. This combination of factors tends to increase the DLOM. • Historical Trading Activity: To the extent that arms' length transaction activity exists involving shares of the subject company's stock, marketability may be improved. As of the Valuation Date, there were no historical transactions of interests in the Company. This combination of factors tends to be neutral with respect to the DLOM. Based on the qualitative analysis above, as well as the range of discounts for lack of marketability from the studies in Addendum 4, we believe that a DLOM between 25% and 35% is appropriate for the subject interest. 4. Restricted Stock Study Data — Quantitative Assessment In 2013, FMV Opinions updated The FMV Restricted Stock Studirm31 (referred to here as the "2013 Discount Study"), which contains 779 restricted stock transactions occurring from 1980 to 2013, and provides data on approximately 50 variables for each transaction. The market reference price used to calculate the discount is the average of the highest and lowest share price for the month of the transaction. The overall average discount in the 2013 Discount Study data is 18.6%, while the median discount is 14.6%.32 Several conclusions reached by the 2013 Discount Study are listed in Addendum 4. The underlying data from the 2013 Discount Study can be used to estimate a DLOM for closely-held companies. The 2013 Discount Study recommends using a two-step process in which: (1) a quantitative analysis of the company-specific risk factors results in an "as if" publicly traded Restricted Stock Equivalent Discount; 33 and (2) a second quantitative 31 Determining Discounts for Lack of Marketability: A Companion Guide to the FMV Restricted Stock Study.TM FMV Opinions, Inc., 2013 (data used within study current through March 2013). 32 The reported overall discounts are based on the full data set of 779 transactions. J3 For this step, we limited the sample to transactions involving block sizes of 20% or less of a firm's outstanding stock following the restricted stock transaction. Due to the relatively long periods generally required to liquidate larger blocks of restricted stock following the expiration of the initial restriction period, larger blocks of restricted stock in the 2013 Discount Study tend to have illiquidity characteristics more similar to stock in privately-held companies (in blocks of any size), for which no market exists. EMPIRE VALUATION CONSULTAN'TS EFTA01109034 Alan S. Halperin, Esq. August 11, 2015 Page 48 analysis is used to estimate an incremental discount above the Restricted Stock Equivalent Discount to recognize the similar illiquidity characteristics between privately-held companies and large blocks of restricted stock to estimate a Private Company Discount Increment. We followed this process for the quantitative part in estimating the lack of marketability discount. 5. Summary Findings from the 2013 Discount Study Data Please see Addendum 4 for a description of how we analyzed the data, and the conclusions drawn, from the 2013 Discount Study. Some of the more significant findings from this analysis are highlighted below. Analysis of Size Metrics: As shown in Exhibit J-1, implied restricted stock discounts are inversely related to a company's size, measured as revenue, market value, book value or total assets. Analysis of Risk Metrics: Discounts are positively correlated with volatility, given that a greater lack of marketability discount would be demanded by an investor for taking on greater risk. See Exhibit J-2. Analysis of Profitability Metrics: Discounts are inversely related to net profit margins. See Exhibit J-2. Dividend Payments: As shown in Exhibit J-2, discounts for dividend paying firms are less than for those not paying dividends. 6. Quantitative Analysis Based on 2013 Discount Study Restricted Stock Equivalent Discount: The previously identified variables were considered in calculating the Restricted Stock Equivalent Discount. Each of the inputs was analyzed to identify the relevant quintile for each metric. The median observed restricted stock discount from the appropriate quintile was then selected for that measure. This is described in greater detail below. • Historical Financial Metrics: These metrics were based on the subject entity's most recent annual financial results. Therefore, an adjustment based on the differential discounts between small and large blocks of restricted stock is appropriate to estimate a DLOM. EMPIRE VALUATION CONSULTANTS EFTA01109035 Alan S. Halperin, Esq. August II, 2015 Page 49 Regarding net profit margin and dividends, the analysis was based on whether or not the subject company was: (I) profitable or not profitable; and (2) dividend paying or non-dividend paying.34 The Company reported net operating income in 2013 and reported a net operating loss for the 6-months ended June 30, 2014. However, unrealized gains and losses comprised the vast majority of net operating income and losses. In addition, the Fine Art was approximately 56% of the Company's ABV as of the Valuation Date and was not considered an income producing asset. As previously discussed, the Company has not historically made cash distributions in an amount that is greater than the members' pass-through tax liability. The distribution of notes in the amount of $20.8 million in 2013 was considered by Management to be a non-recurring event. • Market Value of Equity: This is equivalent to the aggregate marketable minority interest value of the subject entity's equity derived in Empire's analysis. • Volatility: Volatility was estimated at 13.0% after an analysis of the volatilities of relevant samples.35 Exhibit J-3 summarizes the calculation of the Restricted Stock Equivalent Discount. In deriving this discount, the results of the analysis of each metric were weighted as follows: (I) a 33'A% weighting on the market value of equity metric; (2) a 33'/s% weighting on the equity volatility metric: and (3) a 33'A% weighting on the dividend metric. Given the assets held by LDB at the Valuation Date, no weight was applied to the revenue, book value of equity, total assets, and profitability metrics. As a result of this analysis, a reasonable Restricted Stock Equivalent Discount for LDB was estimated at 15.6%. Again, see Exhibits J-1 through J-3. Private Company Discount Increment:36 A Private Company Discount Increment was selected based primarily on an analysis of the differential discounts between large and small block transactions and also considers the qualitative factors impacting marketability. As shown in Exhibit J-4, a range of Private Company Discount Increments of 1.27 times to 2.12 times the Restricted Stock Equivalent Discount was calculated. This calculation is based on a comparison of: (I) the median Restricted Stock Equivalent Discount of 20% for Td In the event that the subject company is a pass-through entity, the company would be considered to be "dividend-paying" if it paid dividends or distributions in excess of those required for the payment of related income taxes. 35 The selected volatility was based on the weighted average volatility of the median volatility from the CEIC samples. See Exhibit I. 16 See Addendum 4 for further detail regarding the Private Company Discount Increment. EMPIRE VALUATION CONSULTANTS EFTA01109036 Alan S. Halperin, Esq. August II, 2015 Page 50 all 345 transactions involving less than 20% of the post-transaction shares outstanding; and (2) the minimum and maximum observed median discounts for block sizes in excess of 20% shown in Exhibit J-4. Applying the range of Private Equity Discount Increments to the selected Restricted Stock Equivalent Discount of 15.6% for LDB indicates that a reasonable DLOM would range from 20% to 33%, rounded, with a mid-point of 26%. 7. Concluded Discount for Lack of Marketability / Fair Market Value In addition to the range of discounts implied by the application of the Private Company Discount Increment described above (20% to 33%), the qualitative analysis described earlier was also considered, which indicated a range of lack of marketability discounts from 25% to 35%. Although dividend payments are considered directly in the derivation of the Restricted Stock Equivalent Discount, the magnitude of distributions was not specifically considered in that analysis and has been determined to be an important factor impacting marketability. As previously discussed, the Company has not historically made cash distributions in an amount that is greater than the members' pass-through tax liability. After assessing all factors, we applied a 25% DLOM in valuing the Interest. Applying a 25% discount to the fully marketable value of $30,037,440 results in a fair market value of $23,000,000, rounded, for a 25% non-managing membership interest as of the Valuation Date. [$30,037,440 x (I — 25%).] See Exhibit D. (THIS SPACE INTENTIONALLY LEFT BLANK) EMPIRE I/ALL/ASTON CONSULTANTS EFTA01109037 Alan S. Halperin, Esq. August 11, 2015 Page 51 Valuation Summary Given the foregoing review and analysis, and subject to the attached Statement of Limiting Conditions, it is our estimate that the fair market value of a 25% non-managing interest in LDB 2011 LLC is reasonably stated as $23,000,000, as of June 30, 2014. It is our understanding that this valuation will be used by you in advising your client for estate planning purposes. This appraisal is not intended for any other purpose nor for any other users and the sharing of the contents herein is not permitted without the express written consent of Empire Valuation Consultants, LLC. Empire has no obligation to update this appraisal for information that comes to our attention after the date of this report. Respectfully submitted, Empire Valuation Consultants, LLC Je tz S or Valuation Associate of.i~1 4 avid J. Tho < pson, CFA Manager cott A.1Vammacher, ASA, CFA Managing Director EMPIRE VALUATION CONSULTANTS EFTA01109038 Addendum 1-1 STATEMENT OF LIMITING CONDITIONS I. Financial statements and other related information provided by or on behalf of the client entity or its representatives, in the course of this engagement, have been accepted without any verification as fully and correctly reflecting the enterprise's business conditions and operating results for the respective periods, except as specifically noted herein. Empire Valuation Consultants, LLC has not audited, reviewed, or compiled the financial information provided to us and, accordingly, we express no audit opinion or any other form of assurance on this information. 2. Public information and industry and statistical information have been obtained from sources we believe to be reliable. However, we make no representation as to the accuracy or completeness of such information and have performed no procedures to corroborate the information. Information used was limited to that available on or before the Valuation Date, or which could be reasonably ascertained as of that date. We reserve the right to make such adjustments to the valuation herein reported as may be required by consideration of additional or more reliable data that may become available subsequent to the issuance of this report. 3. We do not provide assurance on the achievability of the results forecasted by the client entity because events and circumstances frequently do not occur as expected; differences between actual and expected results may be material; and achievement of the forecasted results is dependent on actions, plans, and assumptions of management. 4. The conclusion of value arrived at herein is based on the assumption that the current level of management expertise and effectiveness would continue to be maintained, and that the character and integrity of the enterprise through any sale, reorganization, exchange, or diminution of the owners' participation would not be materially or significantly changed. 5. This report and the conclusion of value arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein. They may not be used for any other purpose or by any other party for any purpose. Furthermore the report and conclusion of value are not intended by Empire Valuation Consultants, LLC and should not be construed by the reader to be investment advice in any manner whatsoever. The conclusion of value represents the considered opinion of Empire Valuation Consultants, LLC, based on information furnished to them by the client entity and other sources. 6. Neither all nor any part of the contents of this report (especially the conclusion of value, the identity of any valuation specialist(s), or the firm with which such valuation specialists are connected or any reference to any of their professional designations) should be disseminated to the public through advertising media, public relations, news media, sales media, mail, direct transmittal, or any other means of communication without the prior written consent and approval of Empire Valuation Consultants, LLC. EFTA01109039 Addendum 1-2 7. Future services regarding the subject matter of this report, including, but not limited to testimony or attendance in court, shall not be required of Empire Valuation Consultants, LLC unless previous arrangements have been made in writing. 8. Empire Valuation Consultants, LLC is not an environmental consultant or auditor, and it takes no responsibility for any actual or potential environmental liabilities. Any person entitled to rely on this report, wishing to know whether such liabilities exist, or the scope and their effect on the value of the property, is encouraged to obtain a professional environmental assessment. Empire Valuation Consultants, LLC does not conduct or provide environmental assessments and has not performed one for the subject property. 9. Empire Valuation Consultants, LLC has not determined independently whether the client entity is subject to any present or future liability relating to environmental matters (including, but not limited to CERCLA/Superfund liability) nor the scope of any such liabilities. Empire Valuation Consultants, LLC's valuation takes no such liabilities into account, except as they have been reported to Empire Valuation Consultants, LLC by the client entity or by an environmental consultant working for the client entity, and then only to the extent that the liability was reported to us in an actual or estimated dollar amount. Such matters, if any, are noted in the report. To the extent such information has been reported to us, Empire Valuation Consultants, LLC has relied on it without verification and offers no warranty or representation as to its accuracy or completeness. 10. Empire Valuation Consultants, LLC has not made a specific compliance survey or analysis of the subject property to determine whether it is subject to, or in compliance with, the Americans with Disabilities Act of 1990, and this valuation does not consider the effect, if any, of noncompliance. II. No change of any item in this appraisal report shall be made by anyone other than Empire Valuation Consultants, LLC, and we shall have no responsibility for any such unauthorized change. 12. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on the subject business due to future Federal, state, or local legislation, including any environmental or ecological matters or interpretations thereof. 13. If prospective financial information approved by management has been used in our work, we have not examined or compiled the prospective financial information and therefore, do not express an audit opinion or any other form of assurance on the prospective financial information or the related assumptions. Events and circumstances frequently do not occur as expected and there will usually be differences between prospective financial information and actual results, and those differences may be material. 14. We have conducted interviews with the current management of the client entity concerning the past, present, and prospective operating results of the company, as applicable for this analysis. EFTA01109040 Addendum 1-3 15. Except as noted, we have relied on the representations of the owners, management, and other third parties concerning the value and useful condition of all equipment, real estate, investments used in the business, and any other assets or liabilities, except as specifically stated to the contrary in this report. We have not attempted to confirm whether or not all assets of the business are free and clear of liens and encumbrances or that the client entity has good title to all assets. 16. The fee established for the formulation and reporting of these conclusions is not contingent upon the value or other opinions presented. 17. Neither the appraiser nor any officer or employee of Empire Valuation Consultants, LLC has any interest in the property appraised. 18. We assume that there are no hidden or unexpected conditions of the assets valued that would adversely affect value. 19. No opinion is intended for matters which require legal or specialized expertise, investigation or knowledge, beyond that customarily employed by appraisers. EFTA01109041 Addendum 2 CERTIFICATION OF APPRAISERS We the appraisers certify that, to the best of our knowledge and belief: I. Our analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 2. All statements of fact contained in this report are true and correct. 3. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. 4. Neither Empire nor any of its employees has, to the best of our knowledge, either a present or intended financial interest in the entity that is the subject of this report, in any affiliates that may exist, or with respect to the parties involved. 5. Empire has performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. 6. We have no bias with respect to the entity that is the subject of this report or to the parties involved with this assignment. 7. Empire's engagement in this assignment was not contingent upon developing or reporting predetermined results. 8. The professional fee paid to Empire for the preparation of this report is not contingent upon its conclusion, including: developing or reporting a predetermined value or direction of value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 9. No one provided significant business appraisal assistance to the persons signing this certification, unless specifically stated herein. The American Society of Appraisers has a mandatory recertification program for all of its Accredited Senior Appraisers. The senior members signing below, designated by the "ASA," are in compliance with that program. Je T Schultz Senior Valuation Associate Dav Mana Scott A. Nammacher, ASA, CFA Managing Director August II, 2015 EFTA01109042 Addendum 3-1 EMPIRE VALUATION CONSULTANTS, LLC www.empireval.com 777 Canal View Blvd. Suite 200 Rochester, NY 14623 Tel: (585) 475-9260 Fax: (585) 475-9380 350 Fifth Avenue Suite 6115 New York NY 10118 Tel: (212) 714-0122 Fax: (212) 714-0124 61 South Main Street Suite 201 West Hartford, CT 06107 Tel: (860) 233-6552 Fax: (860) 521-7575 One International Place Suite 1400 Boston, MA 02110 Tel: (617) 535-7785 Fax: (617) 535-7555 1422 Euclid Avenue Suite 706 Cleveland, OH 44115 Tel: (216) 861-0500 Valuation Services Empire Valuation Consultants, LLC provides valuations to private equity and hedge funds, business owners, attorneys, accountants, commercial bankers, investment bankers, trust departments, insurance agents, and financial planners, among others. Empire's consultants have prepared or managed the preparation of over 20,000 appraisals for the following reasons: • Private Equity & Hedge Fund Marking • Financial and SEC Reporting • Transfer Pricing • Fairness Opinions • Solvency Opinions • Litigation Support • Buy/Sell Agreements • Redemptions • Gifting Programs • Recapitalizations • Estate Taxes • Going Private Transactions • Mergers & Acquisitions • Stock Option Plans • Blocks of Publicly • Dissenting Shareholder Suits Traded Securities • Impairment Testing • Employee Stock Ownership • Intellectual Property Plans (ESOPs) • Purchase Price Allocations Other Financial Services Litigation Support & Expert Testimony Empire can assist you with research and litigation support and its professionals are available to provide expert testimony in matters involving questions of valuation. ESOP Feasibility Studies & Preliminary Valuations Empire is available to work with our client's team of financial advisors or participate in independent feasibility studies and preliminary valuation reviews in connection with ESOP formation planning. EFTA01109043 Addendum 3-2 JEFFREY T. SCHULTZ Academic Degrees M.B.A. University of Rochester, William E. Simon Graduate School of Business Administration, Finance, 2004 B.S. Rochester Institute of Technology, College of Business, Manufacturing and Materials Management, 1996 Employment Empire Valuation Consultants, Rochester, New York Senior Valuation Associate, 2006 — Present. Ontario and Trumansburg Telephone Cos., Phelps, NY Customer Service and Sales Manager, 2004 - 2006. Rochester Gas and Electric Corp., Rochester, NY Subprocess Owner, 1980 - 2003. Experience Mr. Schultz joined Empire Valuation Consultants in 2006, bringing with him strong quantitative and financial analysis experience, as well as significant operational, managerial and consulting skills. While at Rochester Gas and Electric, he was responsible for creating and providing testimony for gas and electric rate cases. Mr. Schultz' work also involved developing detailed analysis that highlighted the costs, projected savings, and net present value for numerous technology deployments. Mr. Schultz is a former Board Member of the Wayne Central School District Board of Education. During his tenure, he acted as the Board's President, Vice President, and Chairperson for the District's Audit Committee. EFTA01109044 Addendum 3-3 DAVID J. THOMPSON, CFA Academic Degrees M.B.A. University of New South Wales & University of Sydney, Australian Graduate School of Management, Finance, Dean Scholarship winner, 2005 Ed.M. University at Buffalo, Secondary Mathematics Education, 1997 B.A. University at Buffalo, Mathematics, with distinction, magna cum laude 1994 Employment Empire Valuation Consultants, Rochester, New York Manager, 2011 - Present Senior Valuation Associate, 2008 - 2011 Valuation Associate, 2006 - 2008 Idea Connections Consulting, Inc., Rochester, New York Vice President of Operations, 2002 - 2003 and 2005 - 2006 IKON Office Solutions, Buffalo New York Senior Application Developer, 1998 - 2002 Experience David is a Chartered Financial Analyst. Since joining Empire, David has been involved in hundreds of business valuations covering a diverse array of industries. He has been involved in the valuation of various classes of equity and debt, family limited partnerships, limited liability companies, intangible assets, purchase price allocations and stock options. These valuations have been for estate and gift tax reporting, employee stock ownership plan administration, acquisitions, recapitalizations, matrimonial litigation, general corporate reporting, and SEC reporting. He has extensive experience with the valuation hedge fund and private equity fund management companies and general partners. Prior to joining Empire, David worked as Vice President of Operations at Idea Connections where he was responsible for financial analysis and projections, effective cost control, project management and assisted in the negotiations for the separation of the group from its parent company. While with IKON he developed workflow and document management applications for private companies and government agencies. EFTA01109045 Addendum 3-4 SCOTT A. NAMMACHER, ASA, CFA Academic Degrees M.B.A. New York University Graduate School of Business, Finance, 1985 B.S. University of Minnesota, Business, 1977 Employment Principal and Managing Director, Empire Valuation Consultants, LLC, New York, New York, 1992-Present Manager, Financial Valuations, Arthur Andersen & Co., New York, 1990-1991 V.P., Marigold Capital Development, Investment Banking Div. of Marigold Enterprises, Greenwich, Connecticut, 1989-1990 Manager - Domestic Finance, PepsiCo, Inc. Purchase, New York, 1985-1989 Experience Mr. Nammacher is an Accredited Senior Appraiser (ASA) of the American Society of Appraisers and is a Chartered Financial Analyst (CFA). He has over 20 years of experience in financial consulting and business valuations. He has valued the equity, debt, warrants, NOLs, etc. of publicly and privately held businesses for acquisitions, divestitures, stock repurchases, estate and gift tax reporting, buy/sell agreements, recapitalizations, and general corporate planning purposes. Mr. Nammacher has also developed business plans and financing packages, and has been involved in completed transactions totaling over $1.5 billion. In addition, he played key roles in the successful launch of a new business publication. Mr. Narmnacher has testified as an expert witness in U.S. Tax Court, U.S. Bankruptcy Court, Delaware Chancery Court and other courts and arbitration settings around the country, and published a book and several articles on "junk bonds." He also received the prestigious "Graham & Dodd Scroll Award" from the Financial Analysts Journal for outstanding financial writing relating to a cover story he co-authored. He served two terms as an elected member of the American Society of Appraisers' Business Valuation Committee, the oversight entity for the business valuation arm of the ASA. He has spoken on valuation issues around the country and has chaired an annual valuation conference in New York City for over 17 years. He co-chaired the first joint AICPA/ASA valuation conference ever presented. EFTA01109046 Addendum 4-1 LACK OF MARKETABILITY BENCHMARK STUDIES Overview of Restricted Stock Studies' Study Years ('overcd or Transactions Nlean Discount Nledian 1>iscount Two-Year Holding Period (Pre-1990) SEC, Overall Average 1966-1969 398 25.8% 24.0% SEC, Non-reporting OTC Companies 1966.1969 112 N/A 32.6% Gelman 1968-1970 89 33.0% 33.0% Trout 1968-1972 60 33.5% N/A Moroney Unknown 146 35.5% 33.0% Maher 1969-1973 33 35.4% 33.3% Standard Research Consultants 1978-1982 28 N/A 45.0% FMV Opinions, Inc. (2013)2 1980-1989 58 23.2% 23.2% Management Planning, Inc. (2011) Pre-I990 79 30.5% 32.3% Hertzel & Smith 1980-1987 106 20.1% 13.3% Willamette Management Associates 1981.1984 33 N/A 31.2% Silber 1981-1988 69 33.8% 35.0% Two-Year Holding Period (Post-1990) FMV Opinions, Inc. (2013) 1990 — 3/31/97 141 23.5% 21.0% Management Planning, Inc. (2011) 1990-4/30/97 110 25.1% 22.5% Bruce Johnson 1991-1995 72 20.0% N/A Columbia Financial Advisors, Inc. 1996.1997 23 21.0% 14.0% One-Year Holding Period Columbia Financial Advisors, Inc. 1997-1998 15 13.0% 9.0% FMV Opinions, Inc. (2013) 4/1/97-11/15/07 169 25.3% 21.1% Management Planning, Inc. (2011) 5/1997 — 2/2008 164 20.8% 16.6% Trugman Valuation Associates, Inc. 1/1/07-11/15/07 46 17.9% 14.7% Six Month Holding Period Trugman Valuation Associates, Inc. 11/16/07-12/31/08 34 18.4% 14.4% Management Planning, Inc.(201 I) 2/2008 — 2009 49 5.9% 5.0% FMV Opinions, Inc. (2013) 11/16/07-2013 27 17.8% 14.4% Stout Risius Ross, Inc. 9/2005 to 5/2010 98 10.9% 9.3% I Citations are included with the subsequent description of each study. 2 The results of the FMV Opinions, Inc. studies for all holding periods exclude transactions which took place at implied premiums, as well as those which included registration rights. EFTA01109047 Addendum 4-2 The restricted stock studies are divided into three primary groups: (1) studies ending before May 1997, when the required holding period under SECS Rule 144 was two years; (2) studies ending after May 1997, when the required holding period was reduced to one year, and prior to November 15, 2007; (3) studies including transactions after November 15, 2007, when the SEC announced that the required holding period would be reduced to six months.' The first group is subdivided into two categories, before 1990 and after 1990. In 1990, the SEC adopted Rule 144A, which relaxed the SEC filing restrictions on private transactions. The rule allows qualified institutional investors to trade unregistered securities among themselves without filing registration statements, which improved liquidity. As noted above, the rule change which reduced the Rule 144 required holding period to six months was announced by the SEC on November 15, 2007, and would take effect 60 days after its publication in the Federal Register. The rule was published in the Federal Register on December 17, 2007,5 and took effect on February 15, 2008. Therefore, although the rule did not take effect until February 15, 2008, the pending rule change would have been a consideration to potential buyers after its announcement on November 15, 2007. The studies are discussed further in the following sections of this document. Institutional Investor Study:6 The SEC published study #77-287 in 1971, called the "Institutional Investor Study." The Institutional Investor Study examined the amount of discount at which transactions in restricted stock, or letter stock, took place compared to the prices of identical but unrestricted stock on the open market from 1966 through 1969. The study shows that the discounts on the letter stocks were the least for New York Stock Exchange ("NYSE") listed stocks, but increased, in order, for American Stock Exchange ("ASE") listed stocks, over-the-counter ("OTC") reporting companies and OTC non- reporting companies. For OTC non-reporting companies, the largest number of restricted stock transactions fell in the 30% to 40% discount range. Slightly over 56% of the OTC non-reporting companies experienced discounts greater than 30% on the sale of their restricted stock. A little over 30% of the OTC reporting companies experienced discounts over 30%, and over 52% experienced discounts over 20%. The following table segments the data observed by the SEC according to the size of the discount. [This space intentionally left blank] 3 Securities and Exchange Commission. 4 "SEC Votes to Adopt Three Rules to Improve Regulation of Smaller Businesses." www.sec.gov/news/press/2007/2007.233.htm. s Federal Register, Vol. 72, No. 241., pg. 71551. December 17, 2007. 6 "Discounts Involved in Purchases of Common Stock (1966-1969)," Institutional Investor Study Report of the Securities and Exchange Commission, H.R. Doc. No. 64, Part 5, 92d Congress., 1st Session. 1971, pp. 2444-2456. EFTA01109048 Addendum 4-3 Institutional Investors Study Data Dim:mint IPremium I Number of Transactions Percent of Study Total -15.0% to 0.0% 26 6.5% 0.1% to 10.0% 67 16.8% 10.1% to 20.0% 78 19.6% 20.1% to 30.0% 77 19.3% 30.1% to 40.0% 67 16.8% 40.1% to 50.0% 35 8.8% 50.1% to 80.0% 48 12.1% -15.0% to 80.0% total 398 100.0% The magnitude of the discount for restric ed securities from the trading price of the unrestricted securities was generally related to the factors listed below. • Earnings: Earnings played the most significant role in determining the discounts at which these stocks were sold from the current market price. The degree of risk of an investment is determined more by earnings patterns, rather than sales patterns. • Sales: Companies with the largest sales volumes received the smallest discounts and the companies with the smallest sales volumes received the largest discounts. • Trading Market: Discounts were greatest on restricted stocks with unrestricted counterparts traded over-the-counter, followed by those with unrestricted counterparts listed on the ASE, while the discounts for those stocks with unrestricted counterparts listed on the NYSE were the smallest. Gelman Study:7 Milton Gelman conducted a study analyzing the prices paid by four closed-end investment companies specializing in restricted securities investments. Based on an analysis of 89 transactions between 1968 and 1970, Gelman found both the mean and median discounts to be 33%. Almost 60% of the transactions were at discounts of 30% or more, and over one-third were at discounts of 40% or more. Trout Study:8 Robert Trout studied 60 transactions involving the purchase of restricted stock by mutual funds between 1968 and 1972. He observed a mean discount of 33.5%. ' Gelman, Milton. "An Economist-Financial Analyst's Approach to Valuing Stock of a Closely Held Company," Journal of Taxation, June 1972. pp. 353.354. 8 Trout, Robert R. "Estimation of the Discount Associated with the Transfer of Restricted Securities," Taxes, June 1977, pp. 381-385. EFTA01109049 Addendum 4-4 Moroney Study:9 In an article published in 1973, Robert Moroney presented the results of his study of the prices paid in 146 transactions for restricted securities by 10 registered investment companies. The mean discount in these transactions was 35.5%, and the median discount was 33%. Although the years covered in this study are likely to be 1969-1972, no specific years were given in the published account. Maher Study:19 In 1976, Michael Maher published the results of a study of restricted stock discounts in 33 transactions taking place from 1969 to 1973. He found that the mean discount was 35.4%. The median discount calculated to be 33.3%. Standard Research Consultants Study:" In 1983, Standard Research Consultants conducted a study of 28 private placements of common stock from October 1978 through June 1982. A median discount of 45% was observed. Hertzel & Smith:12 In a 1993 article published in the Journal of Finance, Hertzel & Smith analyzed a sample of 106 private placements from the 1980-1987 period with overall average and median discounts of 20.1% and 13.3%, respectively. A lower average discount was observed for registered shares. The authors theorized that the discounts observed in private placements can be explained as compensation to the investors for costs they incurred to reduce asymmetries of information. The authors performed regression analysis on the data to test their theory. They regressed the discount on a number of variables associated with increased uncertainty about firm value, such as evidence of distress or high market-to- book ratios. Willamette Management Associates ("Willamette") Study:13 Willamette Management Associates analyzed private placements of restricted stocks that occurred during the period from January 1, 1981 to May 31, 1984. Most of these transactions occurred in 1983. Willamette identified 33 arm's length transactions during that period for which an unrestricted publicly traded equivalent was available. The median implied discount for the 33 transactions in this study was 31.2%. Silber Study:14 In 1991, William Silber published the results of a study of restricted stock discounts in 69 transactions taking place between 1981 and 1988. He found that the mean discount was 33.8% and median was 35%. This study found larger discounts when the size of the restricted stock block was large in proportion to the total shares outstanding. 9 Moroney, Robert E "Most Courts Overvalue Closely Held Stocks," Taxes, March 1973, pp. 144-154. I° Maher, J. Michael. "Discounts for Lack of Marketability for Closely-Held Business Interests," Taxes, September 1976, pp. 562-571. " "Revenue Ruling 77-287 Revisited," SRC Quarterly Reports, Spring 1983, pp. 1.3. 12 Hertzel, M, and R. Smith (1993), "Market Discounts and Shareholder Gains for Placing Equity Privately," Journal of Finance, 48, 459-485. 13 Valuing a Business: The Analysis and Appraisal of Closely Held Companies (Fifth Edition), Shannon P. Pratt and Alina V. Niculita (New York: McGraw Hill: 2008), p. 425. 1.1 Silber, William L. "Discounts on Restricted Stock: The Impact of Illiquidity on Stock Prices," Financial Analysts Journal, July-August 1991, pp. 60.64. EFTA01109050 Addendum 4-5 Additionally, the study indicated that firms with higher revenues, earnings and market capitalizations are associated with lower discounts. Bruce Johnson Study:Is Mr. Johnson conducted a restricted stock study in which he examined 72 transactions that occurred between 1991 and 1995. These transactions exhibited a median implied discount of 20%. Columbia Financial Advisors, Inc. (i°CFAI") Study: 16 CFAI conducted a study of the sale of restricted securities in the U.S. in which they examined 23 private common equity placements over the period January 1, 1996 through April 30, 1997. The resulting mean discount was 21% and median discount was 14%. A similar study was repeated over the period January 1997 through December 1998 in which 15 transactions were identified. The mean discount was 13% and median discount was 9%. Trugman Valuation Associates, Inc. (i°TVA") Study:17 The intent of the TVA Study was to analyze implied restricted stock discounts associated with transactions that took place between January 2007 and December 2008. After a detailed screening process, TVA identified 80 transactions occurring between January 1, 2007 and August 19, 2008. Notably, TVA did not find any transactions that met its search criteria between August 19, 2008 and December 31, 2008, which encompasses the period of the financial market collapse in September and October 2008. Separately, Empire sorted the transactions and broke the data set into two groups: (1) transactions that took place on or before November 15, 2007; and (2) transactions after November 15, 2007. Again, on November 15, 2007, the SEC announced the pending change in the Rule 144 required holding period from one year to six months. The statistics associated with each data set are shown in the following table. TVA Study Data - Statistics Transaction Dates Number of Transactions Mean Discount Median Discount Standard Deviation 1 11/16/07 - 8/19/081s 1/1/07 - 11/15/07 Overall 46 17.9% 14.7% 14.8% 34 18.4% 14.4% 16.9% 80 18.1% 14.4% 15.6% TVA analyzed the data to assess the correlation between the size of the implied discount and several factors, including, but not limited to, the following: (1) volatility;' (2) debt ratio; (3) 15 "Restricted Stock Discounts: 1991-1995," Shannon Pratt's Business Valuation Update (March 1999): 1-5. 16 Aschwald, Kathryn F., "Restricted Stock Discounts Decline as Result of 1-Year Holding Period," Shannon Pratt's Business Valuation Update, May 2000, pp. 1-5. 17 Harris, William. `Trugman Valuation Associates, Inc. (TVA) Restricted Stock Study," Business Valuation Review, Volume 28, No. 3. 18 No transactions occurred between August 19, 2008 and December 31, 2008. 19 As measured by one year annualized historical daily price volatility. EFTA01109051 Addendum 4-6 trading volume; (4) shares placed per average volume (i.e., block size); (5) share tumover;2° (6) market capitalization; (7) trailing twelve month revenue; (8) total assets; (9) book value of equity; and (10) days until registration. TVA found that historical stock price volatility was the main driver in the magnitude of the implied discounts based on its regression analysis. Although TVA considered the explanatory power of most other variables to be weaker, it noted that the directional trends suggested by the correlation coefficients were consistent with expectations. In general, TVA's quartile analysis by variable suggested that: • The magnitude of implied discounts was positively correlated with measures of risk, such as volatility and debt ratios; • The magnitude of implied discounts was negatively correlated with measures of liquidity, such as trading volume and share turnover; • The magnitude of implied discounts was positively correlated with shares placed per average volume, or block size, as well as days until registration; and • The magnitude of implied discounts was negatively correlated with measures of size, including market capitalization, revenue, total assets and book value. TVA did not analyze the impact of dividend paying history on implied discounts, primarily because a significant majority of the 80 transactions involved non-dividend paying companies. Due to the extremely small number of companies in the sample which paid dividends, TVA concluded that such an analysis was unlikely to produce meaningful results. TVA also completed a holding period analysis by analyzing the impact of contractual registration rights on implied discounts. TVA indicated that a large majority of the 80 transactions in the study had registration rights. TVA performed additional research to verify the actual registration date, and calculated the number of days between the transaction date and the actual registration date. If no registration statement was filed with respect to a specific transaction, TVA assumed that the securities remained unregistered for the entire required holding period 2' TVA separated this data into quartiles, resulting in the statistics shown in the following table. [This space intentionally left blank] 13 Average volume divided by total shares outstanding. 21 365 days prior to the change in Rule 144 on February 15, 2008, and 182 days thereafter. EFTA01109052 Addendum TVA Analysis of Registration Rights 4-7 Quartile Days Before Average Nledian Standard Registration Discount Discount Deviation 0-31 days 11.6' ( 10.0f,e S.0.1/4 32-63 days 14.3% 12.9% 11.3% 3 64-185 days 20.4% 15.9% 18.4% 4 185+ days 26.9% 18.8% 18.6% TVA's registration rights analysis suggests that implied discounts are positively correlated to implied holding periods. The growth in the standard deviation for each quartile also appears to be consistent with the notion that risk increases as the required holding period grows. However, Empire noted that the exact period of time between the transaction date and the registration date may not have been known in all cases at the time the transactions took place. MPI 2011 Study:22 In 2011, MPI updated its prior discount study by including additional private placement transactions from 2000 to September 2009 and performing additional analyses of the data. The number of included transactions expanded from approximately 220 in the original MPI Study covering the 1980 to 1999 period to 1,863 between 1980 and 2009. Note that MPI excluded companies whose closing price was less than $1.00 as these stocks were deemed to be speculative. The study's authors asserted that private placement discounts are a function of company- specific factors, transaction-specific factors, and contemporaneous market conditions. For each transaction, MPI collected the following information: (1) transaction data such as transaction date, transaction price, stock price prior to the transaction, registration status, block size, and holding period; (2) issuer-specific data such as market capitalization, stock volatility and operating and financial metrics; and (3) market data such as stock market indices and interest rates. Then each transaction was classified based on registration status, registered, unregistered, or agreement to register, both at the transaction date and at the expiration of the holding period. Initial Findings: MPI's initial findings that registration status and historical time periods had a meaningful impact on the implied discount. Each is discussed below. Registration Status: Of the 1,863 transactions in the study, 402 were unregistered, 203 were registered, and 1,258 either had registration rights or agreements to register at a later date or were subsequently registered. As shown in the table below, the unregistered shares had the highest average discount, shares with some registration rights or were later registered exhibited a somewhat lower average discount, and registered shares had the lowest discount. n Angrist, E., H. Curtiss, Ill and D. Kerrigan, "Regression Analysis and Discounts for tack of Marketability," Business Valuation Review, Volume 30, Number 1, pp. 36-48. EFTA01109053 Addendum 4-8 Discounts by Registration Status Status Observations Average Discount Unregistered 402 22.1% Registration Ri • hts/A • rcements or Later Rc • istcrcd 1.258 15.0% Registered 203 8.7% Total 1,863 15.9% Time Period: Transactions in unregistered shares were divided into four distinct time periods that match the changes in holding period restrictions: (i) prior to 1990 (time period I); (ii) between 1990 and April 1997 (time period II); (iii) between May 1997 and February 2008 (time period III); and (iv) after February 2008 (time period IV). The discounts by time period are shown in the following table. Discounts by Time Period Time Period Observations Average Discount Median Discount • 0 • 79 30.5% 32.3% 110 25.1% 22.5% 5/1 'I 1 t: 164 20.8% 16.6% ' a el 49 5.9% 5.0% aal 402 22.1% 19.6 Regression Analysis & Conclusions: MPI performed a detailed regression analysis to measure the impact of a variety of factors, including: (1) registration status; (2) market conditions during the time period in which the transaction occurred, as measured by the 30- year Treasury yield and the S&P Twelve-Month Index; (3) the company's stock price volatility; (4) the company's market capitalization; (5) the volatility of the S&P; and (6) several company-specific factors, including price-to-book ratios, revenue, and prior year earnings. MPI had the observations listed below upon the completion of its study. 1. The changes in SEC Rule 144 holding periods have had a significant impact on private placement discounts, with sharp decreases in discounts as the holding period shortened. 2. Unregistered shares without the prospect of being registered in the near term resulted in large private placement discounts. 3. Private placement discounts were also affected by market conditions, as measured by yield on the 30-year Treasury (higher yields lead to lower discounts) and performance of the S&P 500 (stronger performance in the prior year leads to higher discounts). EFTA01109054 Addendum 4-9 4. The relationship between market capitalization and private placement discounts has varied over the years. Prior to 1997 (during the two year holding periods), there was a significant relationship between size and private placement discounts. After 1997, size seems to have less of an impact. 5. Volatility in the company's stock price had a significant impact on the private placement discount, as higher volatility leads to larger discounts. 6. Lastly, revenue, earnings, stock market volatility and industry factors had little impact on the private placement discounts. Stout Risius Ross, Inc. ("SRR") Restricted Stock Study:23 In 2011, Stout Risius Ross, Inc. published The SRR Restricted Stock Study (the "SRR Study"). The SRR Study included restricted stock transactions that had announcement dates between September 2005 and May 2010. According to SRR, this study: (1) provided updated data and analysis to measure the impact of the reduction in Rule 144 holding period from twelve months to six months, which was enacted on February 15, 2008; (2) helped to quantify, since the data included the financial crisis of 2008, the way in which restricted stock discounts change during different market environments and in periods of heightened volatility; and (3) provided a more robust and comprehensive data set by including numerous ways to analyze factors such as size, growth, profitability, risk, and financial market conditions. Screening Criteria: In order to minimize factors other than lack of marketability that could contribute to the restricted stock discount, SRR utilized the following screening criteria: (1) determination that the company was not a development-stage company; (2) establishment of a minimum $1.00 stock price to remove the companies that were likely trading at a speculative price; (3) exclusion of financially distressed companies; (4) requirement of minimum six-month average daily trading volume greater than 10,000 shares in order to consider only actively traded companies; (5) removal of transactions between related parties; (6) exclusion of transactions involving financial institutions which may have issued restricted stock under duress in order to satisfy regulatory capital requirements; and (7) removal of transactions involving significant control attributes such as board seats. Initial Findings: Based on the above criteria, 98 transactions involving companies in a variety of industries were selected. The price at which the transactions were consummated was then compared with the price one day prior to the transaction announcement date. Overall, these transactions exhibited average and median discounts of 10.9% and 9.3%, respectively. Quantity of transactions over time: During market turmoil, companies often find it difficult to complete private placement transactions because there are fewer interested investors. During the financial crisis during the fourth quarter of 2008 and first quarter of 2009, there were no transactions that occurred that satisfied SRR's screening criteria. 13 The SRR Restricted Stock Study. Stout Risius Ross, Inc., 2011. EFTA01109055 Addendum 4-10 Discounts by industry: SRR noted that different industries exhibited varying discounts. For example, the 18 transactions involving manufacturing companies exhibited an average discount of 14.6% while the 10 transactions involving transportation, communication, and utilities companies exhibited an average discount of 7.9%. Discounts prior to and after Rule 144 change: SRR noted that the 73 transactions prior to enactment of the Rule 144 change in 2008 had median and average discounts of 9.3% and 10.6%, while the 25 transactions after had median and average discounts of 11.1% and 11.5%. This is contrary to what one would expect when the holding period was shortened from one year to six months. Additional factors may explain this trend, as discussed below. 1. Transaction activity declined drastically during the financial crisis in 2008. As a result, the small sample size after the rule change makes it difficult to draw effective conclusions. 2. The volatility for the overall stock market and the companies in the study increased significantly after 2008. It is possible that the increased market volatility offset any decrease in the discount attributable to the shortened holding period. 3. The majority of transactions in the study included registration rights granted to the acquirer. The presence of registration rights mitigates any impact from the Rule 144 change as someone who has been granted registrations rights within six months would not be impacted by the change. Statistical Analysis: In addition to the comparisons of discounts to industry and time period, SRR also performed two statistical analyses of the data. First, a linear regression was performed with the independent variable being company specific factors and the dependent variable being the restricted stock discount. Factors that were statistically significant at the 5% level were deemed to exhibit a "very strong" relationship. However, due to the nature of private placement transactions, few factors were significant at the 5% level. Therefore, a quartile analysis was also performed to determine if there were any apparent linear relationships for the remaining factors. Those factors that showed a consistently increasing trend (i.e., each subsequent quartile exhibited an equal or greater average discount than the prior quartile) were deemed to exhibit a "strong" relationship, those factors that showed a generally increasing trend (e.g., the third and fourth quartiles exhibited larger average discounts than the first and second quartiles) were deemed to exhibit a "moderate" relationship. Very Strong Relationships: The following factors exhibited very strong relationships with the restricted stock discount. 1. Volatility: Investors were expected to demand larger discounts for companies with greater volatility. Volatility was determined to be significant at the 5% level and consistently increased from the first quartile to the fourth quartile, increasing from 6.3% to 16.6% as shown below. EFTA01109056 Addendum 411 Annualized Volatility A 4 Quartile Range <36.7% 36.7% to 47.9% 47.9% to 68.9% >68.9% Average Discount 6.3% 8.7% 13.4% 16.6% Median Discount 7.0% 8.5% 14.4% 16.1% 2. Block size: Larger blocks were expected to warrant a higher discount since it would take longer for an investor to liquidate them after the expiration of Rule 144 holding period. Block size (as measured by the shares placed as a percentage of shares outstanding) was determined to be significant at the 5% level and exhibited a very strong linear relationship as shown below. Block Size 2 4 Quartile Range <6.6% 6.6% to 13.3% 13.3% to 19.3% 19.3% Average Discount 6.5% 10.6% 12.2% 14.2% Median Discount 6.5% 9.1% 9.5% 12.4% 3. Dividends: Transactions involving dividend-paying companies were expected to feature lower discounts as consistent, meaningful dividends provide a current return and reduce the importance of an uncertain future liquidity event. The companies that paid a dividend traded at an average discount of 7.4% while discounts for non- dividend-paying companies were higher at 11.9%. The results were deemed to be significant at the 5% level and are summarized in the following table. Dividends Dividends No Dividends # of Transactions 23 75 Average Dividend Yield 5.2% 0.0% Average Discount 7.4% 11.9% Median Discount 7.7% 10.1% Strong Relationship: Companies with higher profitability were viewed as more stable and therefore investors were expected to require a smaller discount for these companies. [This space intentionally left blank] EFTA01109057 Addendum 4-12 LTM EBITDA Margin 4 Quartile Range >30.2% 11.9% to 30.2% 5.0% to 11.9% <5.0% Average Discount 9.0% 10.3% 11.9% 12.2% Median Discount 7.5% 9.3% 9.9% 11.0% Moderate Relationships: The following factors exhibited moderate relationships with the restricted stock discount. I. Growth: Companies with higher growth were expected to exhibit lower discounts since investors are compensated for their longer holding period with growth during that time period. SRR reviewed 21 growth factors and nearly every growth factor exhibited a moderate relationship. The strongest relationship related to EBITDA growth over the last fiscal year ("LFY") as shown below. LFY EBITDA Growth 4 Quartile Range >88.4% 32.0% to 88.4% 2.2% to 32.0% <2.2% Average Discount 9.5% 10.0% 10.2% 11.9% Median Discount 7.8% 10.1% 9.9% 10.6% 2. Size: Larger companies were expected to exhibit lower discounts since they are subject to less risk because they have established products and customers and greater liquidity. SRR considered various size metrics, including revenues, earnings, enterprise value, book value of equity, market capitalization, and total assets. The majority of these metrics resulted in a moderate relationship with the transaction discount. 3. Leverage: Companies with lower financial leverage were generally perceived as less risky and therefore were expected to exhibit lower discounts. SRR considered various leverage ratios, including interest coverage and debt/EBITDA. The majority of the leverage ratios predicted on interest coverage resulted in a moderate relationship, with the three-year average interest coverage ratio exhibiting the strongest relationship as shown below. 3-Year Average EBIT/Interest Expense 4 Quartile Range >13.2x 2.8x to 13.2x 0.7x to 2.8x <0.7x Average Discount 7.9% 11.8% 11.8% 12.2% Median Discount 7.7% 13.3% 9.5% 9.2% EFTA01109058 Addendum 4-13 Conclusion: Overall, the transactions SRR analyzed exhibited average and median discounts of 10.9% and 9.3%, respectively, which were generally lower than restricted stock discounts from prior years when holding periods were longer. SRR also concluded that the Rule 144 change appeared to have had minimal impact on private placement discounts due to the registration rights attached to these transactions. Additionally, the global financial crisis resulted in a drastic decline in private placement transactions due to investors' flight to quality. Lastly, SRR concluded that the most reliable factors influencing the transaction discounts were volatility, block size, dividends, profitability, growth, and size. Quantitative Analysis of FMV Database A. FMV Restricted Stock Study Overview: In 2013, FMV updated The FMV Restricted Stock Study'``' 24 (the "2013 Discount Study"). At March 2013, the 2013 Discount Study contained data on 779 restricted stock transactions occurring from 1980 to 2013. The study provided data on approximately 50 variables for each transaction. FMV used multiple techniques to define the market reference price including: (1) the stated discount, if explicitly in the language describing the transaction; (2) the closing market price as of the date prior to the agreement date; or (3) the closing market price as of the day prior to either the announcement date or the closing date, whichever occurred first. For many transactions in the 2013 Discount Study, only the month of the transaction, rather than the exact transaction date, was specified. In those instances, FMV used the highest and lowest average stock price for the month of the transaction. Analysis: In its analysis, FMV eliminated all transactions which occurred at a premium to the market price. It is assumed that these transactions had deal-specific characteristics that were available to a specific investor, and are not generally representative of the overall market for restricted stocks. When transactions involving premiums are excluded, the sample set declines to 715 transactions. This group of 715 transactions exhibited an average restricted stock discount of 21%, and a median restricted stock discount of 16.1%. A summary of transactions by time periods, which coincides with changes in the Rule 144 holding period, is presented in the following table. [This space intentionally left blank] 24 Detertninktg Discounts for Lack of Marketability: A Companion Guide to The FMV Restricted Stock Study. FMV Opinions, Inc., 2013 (data within study current through March 2013). EFTA01109059 Addendum 4-14 FMV Restricted Stock Study Transaction? Time Perim' Observations Median Discount Pre-1990 65 23.7% 1990 - 3/31/97 178 21.1% 4/1/97 - 11/15/07 342 15.7% 11/16/07 - 2013 130 12.0% Total 715 16.1% Several conclusions reached by the 2013 Discount Study are listed below. 1. The median discounts varied slightly across industries. This conclusion is based upon an analysis of 715 underlying transactions by primary SIC grouping. However, FMV noted that differences between observed discounts were more the result of differing key financial data than from the SIC group itself. This supports the assertion that the most important determinants of marketability are: (1) company-specific risk factors; and (2) the differential in observed discounts between small and large blocks of restricted stock. 2. Observed discounts tend to increase in periods of overall economic and financial uncertainty. 3. Observed discounts tend to be inversely related to measures of company size, including revenue, book value, market value, and total assets; i.e., as these measures increase, discounts tend to decrease. Companies with larger revenues, book value, market value, or total assets will tend to be more financially stable than smaller companies, suggesting a lower degree of financial risk. 4. Observed discounts tend to be higher for companies with lower market values of equity. The market capitalization is perceived as a measure of increased financial risk. 5. Observed discounts tend to be inversely related to profitability. No clear relationship was identified between the absolute dollar value of a firm profit and observed discounts. However, profitable firms (as measured by net profit margin) were observed to have lower discounts than firms which were not profitable. 6. Dividend-paying firms have lower observed discounts than non-dividend paying firms. 7. The 2013 Discount Study identified the market-to-book ("MTB") ratio as a measure of balance sheet risk not tied directly to firm size. It was observed that discounts tended to increase as MTB ratios increased. Additionally, firms with a market value below book value, or firms with a negative book value, were also considered more risky. 25 Excluding transactions that transacted at a premium. EFTA01109060 Addendum 4-15 8. Observed discounts tend to increase as stock price volatility increases. Stock price volatility is an observable measure of risk. As risk increases, discounts can be expected to increase. 9. The size of the block of restricted stock being sold impacts the expected holding period because of the limitations imposed by Rule 144 following the expiration of the initial restriction period; i.e., larger blocks of restricted stock are frequently subject to the "dribble-out" provisions of Rule 144, which limits the number of shares that can be sold in a given three-month period. As a result, the required holding period generally increases with block size. Observed discounts increase as the expected holding period increases, with holding periods expressed in terms of block size. In the valuation of interests in closely-held companies, regardless of the block size of the subject interest in the closely-held company, the transaction in the data set involving large blocks of restricted stock become most comparable because they represent the most illiquid blocks of restricted stocks being traded. Registration Rights Analysis: FMV indicated that registration rights may be negotiated with the issuing company to provide for possible liquidity prior to the end of the required holding period. The presence of registration rights agreements tends to improve the liquidity of restricted stock. When the data in FMV' s study is adjusted to remove transactions including registration rights, the trend in the implied discounts tends to confirm this conclusion. This is presented in the table below. FMV Restricted Stock Study Transaction? 'time 'erit • • tucount Pre-1990 SS 13.9% 1990 - 3/31/97 141 21.0% 4/1/97 - 11/15/07 169 21.1% 11/16/07 - 2013 27 14.4% Total 395 20.2% B. Empire's Analysis of the 2013 Discount Study Data Overview: The underlying data from the 2013 Discount Study can be used to estimate a discount for lack of marketability for closely-held companies. The 2013 Discount Study recommends using a multi-step process in which: (1) a quantitative analysis of the company- specific risk factors result in an "as if" publicly traded restricted stock discount (the "Restricted Stock Equivalent Discount"); and (2) a second quantitative analysis is used to estimate an incremental discount above the Restricted Stock Equivalent Discount to recognize the similar illiquidity characteristics between privately-held companies and large blocks of restricted stock (the "Private Company Discount Increment"). /5 Excluding transactions that transacted at a premium and those that included registration rights. EFTA01109061 Addendum 4-16 Empire analyzed the data set in the 2013 Discount Study as guidance in estimating discounts for lack of marketability for certain interests in privately-held businesses. We then applied the two-step process described in the preceding paragraph to estimate a reasonable discount for lack of marketability to apply in valuing the interests. We applied the quantitative analysis described in the first step using a sample of the most liquid restricted stock transactions to estimate a Restricted Stock Equivalent Discount, limiting the sample to transactions involving block sizes of 20% or less of a firm's outstanding stock following the restricted stock transaction.27 We then estimated a range of Private Company Discount Increments based on the discount differential between small and large block restricted stock transactions. Analysis: The 2013 Discount Study dataset included 779 transactions. Between the time when FMV published the 2013 Discount Study and when Empire analyzed the underlying data (September 2013), three additional transactions were added to database. As such, 782 transactions were considered in Empire's analysis. Again, the discounts observed in the study data are calculated from the difference between the price for the restricted shares and one of the following, depending on the level of pricing disclosure: (1) the stated discount, if explicitly stated in the language describing the transaction; (2) the closing market price as of the date prior to the agreement date; (3) the closing market price as of the day prior to either the announcement date or the closing date, whichever occurred first; or (4) the average of the highest and lowest market price of the company's shares for the month of the transaction if the specific transaction date was not disclosed. Empire first reduced the sample to 717 transactions by removing 65 transactions which occurred at a premium. These transactions were removed because it was considered to be highly likely that observed premiums were due to material company-specific or transaction- specific factors, as an illiquidity premium is counterintuitive and not consistent with financial theory. Empire further reduced the data set by excluding 320 transactions in which the subject block of restricted stock included registration rights. It is recognized that registration rights improve marketability, and that the shares of closely-held companies do not have such rights. This screen reduced the sample set to 397 transactions. The remaining sample of 397 transactions was separated into two groups, based on block size, using a break point between the small and large block samples of 20% of the subject 27 Because of the relatively long periods generally required to liquidate larger blocks of restricted stock following the expiration of the initial restricted period, larger blocks of restricted stock in the 2013 Discount Study data set tend to have illiquidity characteristics more similar to stock in privately-held companies (in blocks of any size), for which no market exists. Therefore, an adjustment based on the differential discounts between small and large blocks of restricted stock is appropriate to estimate a discount for lack of marketability. EFTA01109062 Addendum 4-17 firm's outstanding stock following the transaction. There were 345 transactions involving blocks of less than 20%, and 52 transactions involving blocks greater than 20%. Finally, the 345 transactions involving blocks less than 20% were sorted based on the following metrics selected by Empire: (I) revenue; (2) market value; (3) book value; (4) total assets; (5) volatility; (6) net profit margin; and (7) dividends. In selecting these metrics, several factors were considered, including, but not limited to, the following: (1) analysis of revenue, market value, book value, total assets, and volatility produced clear trends in observed discounts across quintiles in the data set; (2) there were clear differences in median observed discounts between profitable and unprofitable firms, as measured by net profit margin; and (3) there were clear differences in median observed discounts between dividend-paying and non-dividend paying firms. Additional measures of profitability were not included in the selected metrics because the determinant of financial risk appeared to be profitability versus lack of profitability, rather than the relative magnitude of profit margins, and because this test could be applied to all firms. Empire opted not to utilize the MTB ratio as a measure of risk because it was recognized that challenges exist in interpreting the data and applying it appropriately. While an MTB ratio below 1.0 times may indicate financial distress, high MTB ratios will not necessarily be caused by balance sheet risk. For example, a service business may have stable cash flows and a low asset base. If the market places value on the company's stable cash flows, it is likely that the company will exhibit an MTB ratio in excess of 1.0 times. As a result, one cannot assume that a high MTB ratio is a clear indicator of financial risk. Conclusions: The results of Empire's analysis are summarized below. • Analysis of Size Metrics: Implied restricted stock discounts are inversely related to a company's size, measured as revenue, market value, book value or total assets. This is demonstrated by the trend in the median discounts for each quintile. • Analysis of Risk Metrics: Discounts are positively correlated with volatility, given that a greater lack of marketability discount would be demanded by an investor for taking on greater risk. • Analysis of Profitability Metrics: Discounts are inversely related to net profit margins. Many of the companies in the data set are start-up firms which have not yet reached profitability. For the 91 companies with a net profit margin greater than 0%, the median discount was 14.5%. This compared to a median of 22.6% for the 229 companies with negative margins. • Dividend Payments: Finally, discounts for dividend paying firms are less than for those not paying dividends. This result also likely reflects the fact that dividends provide shareholders with more immediate economic returns, partially mitigating the impact of illiquidity. A company's dividend history and expectations for EFTA01109063 Addendum 4-18 dividends going forward should therefore be considered, as a richer payout policy provides an early form of liquidity. Block Size Analysis: In addition to the initial holding period requirements under Rule 144, restricted stock is subject to a "dribble out" provision following the expiration of the holding period. This provision limits the volume of quarterly resales to the greater of: (1) one percent of the total shares outstanding; or (2) the average weekly trading volume for the four weeks preceding the sale.28 Therefore, a 20% block could take up to five years after the expiration of the initial holding period to fully resell. Because of the relatively long periods generally required to liquidate larger blocks of restricted stocks following the expiration of the initial restriction period, larger blocks of restricted stock in the 2013 Discount Study data set tend to have illiquidity characteristics more similar to stock in privately-held companies (in blocks of any size), or which no market exists. As described earlier, there were 52 transactions involving blocks of more than 20%. These were reviewed, and segmented further as block size increased up to 40% and greater. This additional segmentation further reflects that observed median discounts tend to increase with block size. Block Size Comparative Analysis Observations Median Discount More than 40% 5 42.3% More than 35% 6 40.4% More than 30% 12 41.6% More than 25% 23 38.5% More than 20% 52 25.5% 20% or Less 345 20.0% The median discount for blocks less than 20% was 20.0%, while median discounts for transactions involving larger blocks ranges from 25.5% to 42.3%. These results demonstrate that larger blocks of restricted stock are more illiquid than smaller blocks of restricted stock. As noted earlier, larger blocks of restricted stock (i.e., blocks representing more than 20% of post-transaction shares outstanding) are considered to be more similar to the securities of privately-held companies (in blocks of any size) due to the liquidity issues they face. Therefore, if a Restricted Stock Equivalent Discount is estimated based on an analysis of the subject company's financial risk characteristics relative to small blocks of restricted stock (i.e., blocks representing less than 20% of post-transaction shares outstanding), an adjustment based on the differential discounts between small and large blocks of restricted For OTCBB and Pink Sheets companies, only the 1% of outstanding metric applies. EFTA01109064 Addendum 4-19 stock is appropriate to estimate a discount for lack of marketability previously, this is referred to as the Private Company Discount Increment. C. Quantitative Analysis Based on 2013 Discount Study As discussed Based on Empire's analysis of the 2013 Discount Study data, we estimated a reasonable range of discounts for lack of marketability. In doing so, an estimated Restricted Stock Equivalent Discount was developed by comparing the subject's financial metrics to the size, risk, profitability, and distribution paying metrics analyzed by Empire in the previous section. Next, a range of Private Company Discount Increments was developed based on the block size analysis described earlier. This results in an estimated range of reasonable discounts for lack of marketability for the subject interest. Restricted Stock Equivalent Discount: The seven variables which were identified and described earlier are considered in the calculation of the Restricted Stock Equivalent Discount. They include measures of size (revenue, market value, book value, and total assets), volatility, net profit margin, and dividends. Private Company Discount Increment: As discussed earlier, the selection of the Restricted Stock Equivalent Discount was based upon an analysis of the subject's financial characteristics relative to the financial characteristics of transactions involving blocks of restricted stock representing less than 20% of the post-transaction shares outstanding. However, it was shown earlier that transactions involving large blocks of restricted stock (i.e., greater than 20% of the post-transaction shares outstanding) have illiquidity characteristics more in common with the equity of closely-held companies. This is because the volume limitations imposed by Rule 144 following the expiration of the initial restriction period generally prevent large blocks of restricted stock from being sold quickly; i.e., the liquidity issues associated with larger blocks of restricted stock are generally much more significant than those associated with smaller blocks of restricted stock due to the Rule 144 volume limitations. EFTA01109065 EXHIBIT A COMPARATIVE INCOME STATEMENTS LDB 2011 LLC FOR THE YEARS ENDED DECEMBER 31, HISTORY 2011 HISTORY 2012 HISTORY 2013 6-Months 6/30/2014 Ordinary Business Income 4.081.573 24.975.428 0 0 Dividend Income 40.394 114.633 102.029 60.075 Unrealized Gains and Losses 0 0 142.152.726 (11.045.316) TOTAL REVENUES 4.121.967 25.090.061 142.254.755 (10.985.241) Bank Charges 60 160 360 140 Legal and Accounting Fees 0 231.229 35.000 0 Insurance 0 0 21.038 0 Other 0 3.245 0 0 Total Operating Expenses 60 234.634 56.398 140 NET OPERATING INCOME 4.121.907 24.855.426 142.198.357 (10.985.381) Interest Income 55.186 201.246 6.991 13.182 Interest Expense (20.844) (309) 0 0 Non-tax Return of Capital 0 533.910 0 0 Miscellaneous Receipts 3.602 216.059 116.947 0 Total Other Income (Expense) 37.944 950.906 123.938 13.182 PRE-TAX INCOME 4.159.852 25.806.333 142.322.295 (10.972.199) Provision (Benefit) for Taxes 0 0 0 0 NET INCOME 4.159.852 25.806.333 142.322.295 (10.972.199) EFTA01109066 EXHIBIT B COMPARATIVE BALANCE SHEETS LDB 2011 LLC FOR THE YEARS ENDED DECEMBER 31, ASSETS HISTORY 2011 HISTORY 2012 HISTORY 2013 HISTORY 6/30/2014 Checking and Savings 17.183.956 248.600 8.453.916 25.180.846 Total Current Assets 17,183,956 248,600 8,453.916 25,180,846 Receivables 0 11,318 9,366,566 9,378,176 Loans and Exchange 354,182 (367,608) 0 0 Equity Securities 1,889,108 7,850,756 4,077,601 5,068,941 Private Investments 119,957,227 151,294,436 284,071,674 255,360,634 (1) Fine An 57,894,282 57,894,282 72,750,000 72,750,000 Investment in PLB. LLC 0 0 9,909.828 9.909,283 Total Other Assets 180,094,800 216,683,184 380,175,669 352,467,034 TOTAL ASSETS 197.278.756 216.931.784 388.629.585 377.647.880 LIABILITIES & MEMBERS' EQUITY Accounts Payable 0 0 13.932 14.329 Total Current Liabilities 0 0 13.932 14.329 TOTAL LIABILITIES 0 13.932 14.329 Capital • BEB 2011 Trust 48,279,726 47,781,363 61.573.339 97,144,314 Capital • ASB 2011 Trust 48,279,726 47,781,363 61.573.339 97,149,314 Capital • JMB 2011 Trust 48,279,726 47,781,363 61,573.339 97,144,314 Capital • VRB 2011 Trust 48,279,726 47,781,363 61,573,339 97,149,314 Net Income 4.159.852 25.806.333 142.322.297 (10.953.706) Total Members' Equity 197.278.756 216.931.784 388.615.653 377.633.551 TOTAL LIABILITIES & MEMBERS' EQUITY 197,278.756 216.931,784 388.629.585 377,647.880 (1) Private Investments is inclusive of an interest in Black Family Partners LP that had an estimated value of $233.9 million. Further. Management stated that LDB 2011 LLC contributed its interest in Black Family Partners LP to LDB 2014 LLC (an entity wholly owned by LDB) and then LDB 2011 LLC distributed its interest in LDB 2014 LLC to the members of LDB 2011 LLC. However, the interest in LDB 2014 LLC (which held the interest in Black Family Partners LP) had not been removed from the Company's balance sheet as of the Valuation Date. As a result. Private Investments includes the interest in LDB 2014 LLC. EFTA01109067 EXHIBIT C COMPARATIVE CASH FLOW STATEMENTS LDB 2011 LLC FOR THE YEARS ENDED DECEMBER 31, CASH FLOW FROM OPERATING ACTIVITIES HISTORY 2012 HISTORY 2013 6•Months 6/3012014 Net Income 25.806.333 142.322.295 (10.972.199) Adjustments to reconcile Net Income to Net Cash Provided from Operating Activities (Inc.) Dec. in Receivables (11.318) (9.355.248) (11.611) (Inc.) Dec. in Loans and Exchange 721.790 (367.608) 0 (Inc.) Dec. in Equity Securities (5.961.648) 3.773.155 (991.340) (Inc.) Dec. in Private Investments (31.337.209) (132.777.238) 28.711.040 (Inc.) Dec. in Fine Art 0 (14.855.718) 0 (Inc.) Dec. in Investment in PLB. LLC 0 (9.909.828) 545 Inc. (Dec.) in Accounts Payable 0 13.932 397 Net Cash Provided By (Used In) Operating Activities (10.782.052) (21.156.257) 16.736.833 CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditures 0 0 0 Net Cash Provided By (Used In) Investing Activities 0 0 0 CASH FLOW FROM FINANCING ACTIVITIES Distribution of Cash 0 (167.260) (10,000) Distribution of Notes 0 (20.820.221) 0 Contribution of Securities 959.760 0 0 Change in Accounting Method 0 50.349.054 0 Other Capital Adjustment (7.113.064) 0 97 Net Cash Provided By (Used In) Financing Activities (6.153.304) 29.361.573 (9.903) NET INCREASE (DECREASE) IN CASH (16.935.356) 8.205.316 16.726.930 Beginning Cash 17.183.956 248.600 8.453.916 Ending Cash 248.600 8.453.916 25.180.846 EFTA01109068 EXHIBIT D CALCULATION OF ADJUSTED BOOK VALUE LDB 2011 LLC AS OF JUNE 30. 2014 SUPPORTING EXHIBIT CAPITAL ACCOUNT BALANCE MARKET ADJUSTMENTS ADJUSTED BOOK VALUE % of Assets ASSETS Cash JP Morgan Cash riga $25,180,846 $0 S25.180.846 19.1% Marketable Securities JP Morgan Brokerage Account Capital Appreciation Secunlies riga $5.072.948 $0 $5.072.946 3.8% Fixed Term Entitles (Private Equity Direct Mterests) FCI Co-Investors I (A). LP Exhibits E-1 through E-3 $18.490.092 ($5,550,092) $12.940.000 9.8% Quadrangle Capital Partners LP Exhibits E-1 through E-3 $278.289 ($68.289) $210.000 0.2% Quadrangle (Access) Capital Partners LP Exhibits E-I through E-3 $125.977 ($35.977) $90.000 0.1% Quadrangle (Onshore) Capital Partners LP Exhibits E-I through E-3 $403.182 ($99.182) $310.000 0.2% SearcNighl Capital. L.P. Exhibits E-1 through E-3 $776.558 ($276.558) 5500.000 0.4% Searchlight Capital AN I. L.P. Exhibits E-1 through E-3 $168.712 ($5t712) $110.000 0.1% Restricted Investments (1{ AIF II. L.P. $0 $0 $0 0.0% AP SHL Investors. LLC $0 $0 $0 0.0% AP Technology Partners. LP. $174,459 ($52.338) $122.100 0.1% Apollo Investment Fund. LP. $225 ($67.50) $160 0.0% Apollo Real Estate InvesimeM Fwd. LP $183.325 ($54.997.50) $128.300 0.1% AREIF III Transfer Members. LLC $25.308 ($7.592.40) $17.700 0.0% AREIF IV Co-Invest. LLC $735.776 ($220.733.40) $515.000 0.4% BHM Investors. LLC $159.692 ($47.907.60) $111.800 0.1% Morctes Investors. LLC $142.916 ($42874.80) $100000 0.1% PAM Centre. L.P. $0 $0 $0 0.0% Viropro Investors. LLC $300.000 ($30.000) $210.000 0.2% Miscellaneous Interests Fine Art $72,750,000 $2.000.000 $74.750.000 56.6% (2) PLB. LLC ExNbit H43 $9,909,283 ($7,609,283) $2.300.000 1.7% Receivables Cue from BEB 2011 Trust $2331.880 $0 $2331.880 2.5% Cue from JMS 2011 Trust $6.046.297 $0 $6.046.297 4.6% TOTAL ASSETS $144.261.767 r$12 2i4.504, $132.047.031 100% LIABILITIES 8 MEMBERS' CAPITAL 514.329 $0 $14,329 DmirIbution Payable TOTAL LIABILITIES $14,329 10 $14.329 MEMBERS' CAPITAL $144.247.438 ($12214504) $132.032.702 TOTAL LIABILITIES & CAPITAL S144261.767 ($12,214 604) 5132047.031 /waisted Book Value 5132.032.702 Pro Rata ABV of Subject Interest 25% $33,008,176 Less: Investment Company Disown' USIA 9% ($2.970.736) Fully Marketable Value of a 25% Limited ParMership Interest $30,037,440 Less: Discount lor Lad of Marketability Exhibit J-4 25% ($7,509,360) Fair Market Value ol a 25% Limited Partnership Interest $22.528.080 Pro Rata Fair Market Value of a 25% Limited Partnership Interest, rounded $21000.000 (I{ Discount 0130% applied to each restricted Investment. (2{ Appraised value of $74,750,000 per appraisal prepared by Sotheby's. EFTA01109069 EXHIBIT E-1 PRIVATE EQUITY INVESTMENTS - CAPITAL ACCOUNT ANALYSIS LDB 2011 LLC AS OF JUNE 30, 2014 It Fund Name Total Capital Commitment Total Capital Contributed Distributions Since Inception % of Capital Called (1) Capital Account Balance (2) L.P. Investment Positions 1 FCI Co-Investors I (A), LP $25,000,000 $12,578,606 $8,474,291 50% $18,490,092 2 Quadrangle Capital Partners LP $427,638 $425,044 $660,368 99% $278,289 (3) 3 Quadrangle (Access) Capital Partners LP $193,585 $192,411 $298,938 99% $125,977 (3) 4 Quadrangle (Offshore) Capital Partners LP $628,777 $624,964 $970,972 99% $409,182 (3) 5 Searchlight Capital, L.P. $1,689,903 $686,796 $0 41% $776,558 6 Searchlight Capital AIV I. L.P. $310,097 $126,027 $0 41% $168,712 Total Capital Account Balance S20,248,810 (1) Certain distributions were recallable, allowing for called amounts greater than 100%. (2) The most recent quarterly capital account balance was adjusted to reflect contributions and distributions after the statement date and as of the Valuation Date. (3) The interests in QCP, QACP. and OOCP were received from a related entity. Upon transfer. the contributed capital and distribution history was no longer available. As of December 31. 2010, prior to the transfer. neatly all of the capital commitment had been met and distributions were in excess of the contributed capital. Capital commitment. contributed capital. and distributions reflect the capital account statement as of December 31. 2010. EFTA01109070 11101817 E-2 PRIVATE EQUITY INVESTMENTS - RISK ANALYSIS LOB 2011 LLC Valuation Date 6102014 CUIrtuted Toter Estimated Expected (SI N CPO IP Contractual Exlamlone Years Primary Cause el Remain:1g Remaining g 0 % ILION ill Fund Termination Possible Remaining Lifeeycle Investment Growth Capital Capital Contrihrted ContrItutal Planted Curled a Noma Dale (In years) In Term Magill) Sept e (2) In Value CornratmeM (3) Conwralment Capital (4) Capital (5) Ream % 'Mist % L.P. Myanmar., PositiOns I FCI Go ego. I (Ai. LP NA 16) PA (6) 10 plc yews te) VCM APO 612.421.394 49.7% 67.4% 2.1 0.0% 0.0% 2 Ouadrange CapPartners LP 6102016 PA (7) 2.00 VCM 4P *Bea 0.6% 155.4% 2.2 8.0% 20.0% 3 Ouadrange (Access) Coped Pantos LP 6102016 PA (7) 2.00 VCM AP $1.174 0.6% 155.4% 2.2 8.0% 20.0% 4 ChaPardd (Onshore) CPI& Penmen LP 6102016 WAIT) 2.00 VCM App 23.813 aft 155.4% 2.2 81% 200% 5 Searchlight Capal. LP. 3102022 2.00 7.70. VCM App 51.003.107 50.4% 0.0% 1.1 8.0% 20.0% (I Serirehltpx Cplal AIV I. LP. 3102022 2.00 7.75 VCM App 6184.070 59.4% 00% 1.9 80% 20114 (I) I. Imp:Amore Slap. VGH . Value CreenenHarvetd Slap 42) FOF • Curd of Funds: D. Owen (3) InelaleS tetanale diStrIbunent 44) IDatrbuted Cash) cleated by (Capita, Coninbusons) (5) ICkitibuted Cure • Capital Aomori ealance)0•Me0 by Mental Coma:mm:00 (6) FCI Colnyesters I IA) LP wasformed on February 15. 2011 and is renntod n Final-gem Clean nvocumert t LP. Arwood Craft Investment I LPt only nvostmont is a note recentatie from Fnancsd Cron, Inyestrrom I Lamed that is du, in 2111. Fawned Creel, IrweatMent I LLC IS priniarly e'wetted h Ire insurance Seltlementt Financial C4004 IrwesiMenl l LLC 4‘11 Cealrue 10 make premium payment, cache nittente Se.Thenenit until 8000 boneril le 4000M90 Write FCICO.arreStOnt 1(A) LP lard the vIdenyho Mena) do Pa have a Faclegorrrinediguidalan daLe. C was conscbred reascnablo to assume a remanng tenni:fat least 10 years larva/plan purposes. (7) The nbal term of the Ands PS rot to exceed May 23. 2012. 14,WeV0/. Ironed panrcrs agreed to tee I year adonsons sa May 23.2014. In 2014. LP: delegated Mar outherty to tho LP iv/AwayComma toconsider exterdro me had tar an adlbonal year through May 21.2015. EFTA01109071 EXHIBIT E-3 PRIVATE EQUITY INVESTMENTS - SUMMARY OF FAIR MARKET VALUES LDB 2011 LLC AS OF JUNE 30, 2014 Fund Name Selected Capital Less: Selected Estimated Restriction Period Account Restriction Period Fair Market Discount Balance Discount Value L.P. Investment Positions 1 FCI Co-Investors I (A), LP 30% $18,490,092 ($5,547,028) $12,940,000 2 Quadrangle Capital Partners LP 25% $278,289 ($69,572) $210,000 3 Quadrangle (Access) Capital Partners LP 25% $125,977 ($31,494) $90,000 4 Quadrangle (Offshore) Capital Partners LP 25% $409,182 ($102,296) $310,000 5 Searchlight Capital, L.P. 35% $776,558 ($271,795) $500,000 6 Searchlight Capital AIV I, L.P. 35% $168,712 ($59,049) $110,000 Total Fair Market Value of Private Equity Interests $14,160,000 EFTA01109072 EXHIBIT F-1 PRICE & HISTORICAL VOLATILITIES OF PUBLICLY TRADED BUSINESS DEVELOPMENT COMPANIES AND CEICS INVESTED PRIMARILY IN PRIVATE EQUITY AS OF JUNE 30, 2014 # COMPANY TICKER TYPE OF ENTITY (1) PRICE 0613012014 (2) NAV PER SHARE (2,3) DISCOUNT FROM' (PREMIUM OVER) NAV 5-YEAR VOLATILITY (2) 1 Ares Capital Corp. ARCC BDC $17.86 $16.42 -8.8% 22.6% 2 Apollo Investment Corp. AINV BDC $8.61 $8.67 0.7% 32.7% 3 TICC Capital Corp. TICC BDC $9.90 $9.78 -1.2% 23.5% 4 MCG Capital Corp. MCGC BDC $3.92 $4.37 10.3% 41.3% 5 Gladstone Capital Corp. GLAD BDC 510.06 $9.79 -2.8% 28.3% 6 American Capital Ltd. ACAS BDC 515.29 $19.29 20.7% 45.6% 7 RENN Global Entrepreneurs Fund. Inc. RCG CEIC $1.47 $2.39 38.5% 34.2% 8 MVC Capital Inc. MVC BDC 512.95 $16.42 21.1% 21.7% 9 Capital Southwest Corp. CSWC BDC $36.01 $49.98 28.0% 25.2% AVERAGE 11.8% 30.6% MEDIAN 10.3% 28.3% MINIMUM -8.8% 21.7% MAXIMUM 38.5% 45.6% 'BDC denotes a business develOpfnent COMO,. and 'CSC' denotes a Nosed-end investment company. invested in private equity. Source. Bloombetg Nehvotk lot BDCs: CEPConneacom tor CEICs, Closing Prices 5 Funds I through s are focused en debt saturates. ANN funds 6 through 9 are 10CuSed On e4ufy SeturnteS. NAVs per sham for the BDCs are as the most recent avails:* quarter. NA Vs per share to• the CEICs are as ol the Valuation Date. EFTA01109073 EXHIBIT F-2 PRICE & DIVIDEND YIELDS FOR PUBLICLY-TRADED CLOSED END FUNDS INVESTED PRIMARILY IN CAPITAL APPRECIATION SECURITIES AS OF JUNE 30, 2014 # COMPANY' TICKER PRICE 0630114 NAV PER SHARE' DISCOUNT FROM NAY LTM DIVIDEND INCOME' LTM INCOME YIELD 5-YEAR VOLATILITY3 1 Adams Express ADX $13.75 $16.07 14.4% 0.20 1.5% 17.1% 2 Denali Fund DNY $21.46 $26.52 19.1% 0.09 0A% 17.7% 3 Eagle Capital Growth GRF $7.93 $8.85 10.4% 0.14 1.7% 26.3% 4 General American Investors GAM $36.82 $43.45 15.3% 0.18 0.5% 18.3% 5 Nuveen Core Equity Alpha JCE $18.17 $18.53 1.9% 0.11 0.6% 17.0% 6 Source Capital Inc SOR $69.98 $77.56 9.8% 0.00 0.0% 19.9% 7 Tri-Continental Corporation TY $20.98 $24.40 14.0% 0.68 3.3% 16.3% 8 Zweig Fund ZF $15.65 $17.62 11.2% 0.15 1.0% 15.6% 9 Zweig Total Return ZTR $14.39 $15.81 9.0% 0.32 2.2% 10.8% AVERAGE 11.7% 1.2% 17.6% MEDIAN 11.2% 1.0% 17.1% MINIMUM 1.9% 0.0% 10.8% MAXIMUM 19.1% 3.3% 26.3% 'Sample was created using funds listed in Barron's . 2lnformation from CEFConnect.com. 'Information from Bloomberg. closing prices. EFTA01109074 EXHIBIT F-3 PRICE & DIVIDEND YIELDS FOR PUBLICLY-TRADED CLOSED END FUNDS INVESTED PRIMARILY IN GOVERNMENT BONDS AND SECURITIES AS OF JUNE 30, 2014 # COMPANY' TICKER PRICE 06130/14 NAV PER SHARE DISCOUNT FROM/ NAV3 LTM DIVIDEND INCOME2 LTM INCOME YIELD 5-YEAR VOLATILITY3 1 AllianceBemstein Income Fund ACG $7.52 $8.42 10.7% $0.42 5.6% 8.2% 2 BlackRock Enhanced Gov Fund EGF $14.29 $15.21 6.0% $0.43 3.0% 6.7% 3 BlackRock Income Trust BKT $6.64 $7.33 9.4% $0.32 4.8% 7.2% 4 Federated Enhanced Treasury In FTT $13.49 $14.74 8.5% $0.15 1.1% 8.1% AVERAGE 8.7% 3.6% 7.5% MEDIAN 8.9% 3.9% 7.6% MINIMUM 6.0% 1.1% 6.7% MAXIMUM 10.7% 5.6% 8.2% 'Sample was created using funds listed in Barron's . 2Information from CEFConnect.com. 3Information from Bloomberg. closing prices. EFTA01109075 EXHIBIT G-1 COMPARATIVE BALANCE SHEETS JMWT BIDCO LTD AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/14 Total Current Assets 0 Net Fixed Assets 0 Investment in Phaidon Press Limited 73,665,922 Due from JMWT MidCo 70,076,532 Other Assets 0 Total Other Assets 143,742,454 TOTAL ASSETS 143,742,454 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 Payable to JMWT Acquisition LLP 73,665,922 Total Other Liabilities 73,665,922 TOTAL LIABILITIES 73,665,922 Share Capital 70,076,532 Total Partners' Equity 70,076,532 TOTAL LIABILITIES & PARTNERS' EQUITY 143142.454 EFTA01109076 EXHIBIT G-2 COMPARATIVE BALANCE SHEETS JMWT MIDCO LTD AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/14 Total Current Assets 0 Net Fixed Assets 0 Investment in JMWT BidCo Ltd 70.076,532 Due from JMWT TopCo. 46,717,689 P&L Reserves 2.803.061 Total Other Assets 119.597,282 TOTAL ASSETS 119,597,282 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 Payable to JMWT BidCo 70,076.532 Loans from Group Undertakings Plus Accrued Interest 2.803,061 Total Other Liabilities 72,879,593 TOTAL LIABILITIES 72,879,593 Share Capital 46,717,689 Total Partners' Equity 46,717,689 TOTAL LIABILITIES & PARTNERS' EQUITY 119.597.282 EFTA01109077 EXHIBIT G-3 COMPARATIVE BALANCE SHEETS JMWT TOPCO LTD AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/14 Total Current Assets 0 Net Fixed Assets 0 Investment in JMWT MidCo Ltd 46,717,689 Due from JMWT Acquisition LLP 46,717,689 Other Assets 0 Total Other Assets 93,435,378 TOTAL ASSETS 93,435,378 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 Payable to JMWT MidCo 46,717,689 Other Liabilities 0 Total Other Liabilities 46,717,689 TOTAL LIABILITIES 46,717,689 Share Capital 46,717,689 Total Partners' Equity 46,717,689 TOTAL LIABILITIES & PARTNERS' EQUITY 93.435.378 EFTA01109078 EXHIBIT G-4 COMPARATIVE BALANCE SHEETS JMWT ACQUISITION LLP AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/14 Total Current Assets 0 Net Fixed Assets 0 Investment in JMWT TopCo Ltd 46,717,689 Due from JMWT BidCo 73,665.922 Accrued Interest Receivable 2.803.061 Total Other Assets 123.186.672 TOTAL ASSETS 123,186,672 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 Payable to JMWT TopCo 46.717.689 P&L Reserves 2.803,061 Total Other Liabilities 49,520,750 TOTAL LIABILITIES 49,520,750 Share Capital 73,665,922 Total Partners' Equity 73,665,922 TOTAL LIABILITIES & PARTNERS' EQUITY 123.186.672 EFTA01109079 EXHIBIT G-5 COMPARATIVE BALANCE SHEETS PHAIDON LLC AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/2014 Investment in JMWT Acquisition LLP 66,002 (1) Total Current Assets 66,002 TOTAL ASSETS 66,002 LIABILITIES & MEMBERS' EQUITY TOTAL LIABILITIES 0 Contribution - Phaidon LLC 66,002 Total Members' Equity 66,002 TOTAL LIABILITIES & MEMBERS' EQUITY 66.002 (1) According to Management, a balance sheet was not available for Phaidon LLC. Management stated that Phaidon LLC's only asset was its 0.1% interest in JMWT Acquisition LLP and that there were no liabilities. The book value of $66,002 for the 0.1% interest in JMWT Acquisition Corp is based on the purchase price paid for the acquisition of Phaidon Press Ltd. See the Phaidon Press Report for further details. EFTA01109080 EXHIBIT G-6 COMPARATIVE BALANCE SHEETS REGAN ARTS LLC AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/2014 Checking and Savings 349,290 Total Current Assets 349,290 TOTAL ASSETS 349,290 LIABILITIES & MEMBERS' EQUITY Accounts Payable 19,457 Credit Cards 25,953 Total Current Liabilities 45,410 Total Other Liabilities 0 TOTAL LIABILITIES 45,410 Contribution - Phaidon Global LLC 1,500,000 Retained Earnings (1,196,120) Total Members' Equity 303,880 TOTAL LIABILITIES & MEMBERS' EQUITY 349,290 EFTA01109081 EXHIBIT G-7 COMPARATIVE BALANCE SHEETS PHAIDON GLOBAL LLC AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/2014 Checking and Savings 2,755,660 Investment - JMWT Acquisition LLP 69,135,798 Investment - Phaidon LLC 66,002 Investment - Regan Arts LLC 1,500,000 Phaidon Press Ltd 5 Year Loans 4,394,142 Total Current Assets 77,851.602 TOTAL ASSETS 77,851,602 LIABILITIES & MEMBERS' EQUITY Line of Credit - Due to BFP 8,735,782 Total Current Liabilities 8,735,782 Total Other Liabilities 0 TOTAL LIABILITIES 8,735,782 Net Income (28,115) Retained Earnings (57,865) PLB LLC 69,135,798 JMWT LLC 66,002 Total Members' Equity 69,115,820 TOTAL LIABILITIES & MEMBERS' EQUITY 77,851,602 EFTA01109082 EXHIBIT G-8 COMPARATIVE BALANCE SHEETS PLB LLC AS OF JUNE 30, 2014 ASSETS HISTORY 6/30/2014 Cash and Equivalents 459.912 Investment in Phaidon Global LLC 69,049.904 Total Current Assets 69,509.816 TOTAL ASSETS 69,509.816 LIABILITIES & MEMBERS' EQUITY Due to Black Family Partners LP 3.208,131 Due to JMWT LLC 459 Total Current Liabilities 3.208,590 Total Other Liabilities 0 TOTAL LIABILITIES 3,208.590 LDB 2011 LLC 10,000,000 Black 1997 Trust 54,000,000 1997 GST Exempt 3,000,000 Members' Equity (604,158) Net Income (94,616) Total Members' Equity 66,301,226 TOTAL LIABILITIES & MEMBERS' EQUITY 69.509.816 EFTA01109083 EXHIBIT H-1 CALCULATION OF ADJUSTED BOOK VALUE JMWT BIDCO LTD AS OF JUNE 30, 2014 ASSETS HISTORY MARKET ADJUSTED BOOK 2013 ADJUSTMENTS VALUE Total Current Assets 0 0 0 Net Fixed Assets 0 0 0 Intangible Assets 0 0 Investment in Phaidon Press Limited 73.665.922 (54.465.922) 19.200.000 (1) Due from JMWT MidCo 70.076.532 70.076.532 Other Assets 0 0 Total Other Assets 143.742.454 (54.465.922) 89.276.532 TOTAL ASSETS 143 742 454 54 465 922 89 276 532 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 0 0 Payable to JMWT Acquisition LLP 73.665.922 73.665.922 Total Other Liabilities 73.665.922 0 73.665.922 TOTAL LIABILITIES 73.665.922 0 73.665.922 Share Capital 70.076.532 (54.465.922) 15.610.610 Total Partners' Equity 70.076.532 (54.465.922) 15.610.610 TOTAL LIABILITIES & PARTNERS' EQUITY 143.742.454 (54.465.922) 89.276.532 Pro Rata Capital Account Balance of Subject Interest $15,610,610 Pro Rata Capital Account Balance of Subject Interest (to Exhibit H-2) $15,610,610 (1) From Phaidon Limited Report. Exhibit F. EFTA01109084 EXHIBIT H-2 CALCULATION OF ADJUSTED BOOK VALUE JMWT MIDCO LTD AS OF JUNE 30, 2014 ASSETS HISTORY MARKET ADJUSTED BOOK 2013 ADJUSTMENTS VALUE Total Current Assets 0 0 0 Net Fixed Assets 0 0 0 Intangible Assets 0 0 Investment in JMWT BidCo Ltd 70.076.532 (54.465.922) 15.610.610 (1) Due from JMWT TopCo. 46.717.689 46.717.689 P&L Reserves 2.803.061 2.803.061 Total Other Assets 119.597.282 (54.465.922) 65.131.360 TOTAL ASSETS 119.597.282 (54.465.922) 65.131.360 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 0 0 Payable to JMWT BidCo 70.076.532 70.076.532 Loans from Group Undertakings Plus Accrued Interest 2.803.061 2.803.061 Total Other Liabilities 72.879.593 0 72.879.593 TOTAL LIABILITIES 72.879.593 0 72.879.593 Share Capital 46.717.689 (54.465.922) (7.748.233) Total Partners' Equity 46.717.689 (54.465.922) (7.748.233) TOTAL LIABILITIES & PARTNERS' EQUITY 119.597.282 (54.465.922) 65.131.360 Pro Rata Capital Account Balance of Subject Interest ($7,748,233) Pro Rata Capital Account Balance of Subject Interest (to Exhibit H-3) (S7,748,233) (1) From Exhibit H-1. EFTA01109085 EXHIBIT H-3 CALCULATION OF ADJUSTED BOOK VALUE JMWT TOPCO LTD AS OF JUNE 30, 2014 ASSETS HISTORY MARKET ADJUSTED BOOK 2013 ADJUSTMENTS VALUE Total Current Assets 0 0 0 Net Fixed Assets 0 0 0 Intangible Assets 0 0 Investment in JMWT MidCo Ltd 46.717.689 (54.465.922) (7.748.233) (1) Due from JMWT Acquisition LLP 46.717.689 46.717.689 Other Assets 0 0 Total Other Assets 93.435.378 (54.465.922) 38.969.456 TOTAL ASSETS 93.435.378 (54.465.922) 38.969.456 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 0 0 Payable to JMWT MidCo 46.717.689 46.717.689 Other Liabilities 0 0 Total Other Liabilities 46.717.689 0 46.717.689 TOTAL LIABILITIES 46.717.689 0 46.717.689 Share Capital 46.717.689 (54.465.922) (7.748.233) Total Partners' Equity 46.717.689 (54.465.922) (7.748.233) TOTAL LIABILITIES & PARTNERS' EQUITY 93.435.378 (54.465.922) 38.969.456 Pro Rata Capital Account Balance of Subject Interest (S7,748,233) Pro Rata Capital Account Balance of Subject Interest (to Exhibit H-4) (S7,748,233) (1) From Exhibit H-2. EFTA01109086 EXHIBIT H-4 CALCULATION OF ADJUSTED BOOK VALUE JMWT ACQUISITION LLP AS OF JUNE 30, 2014 ASSETS HISTORY MARKET ADJUSTED BOOK 2013 ADJUSTMENTS VALUE Total Current Assets 0 0 0 Net Fixed Assets 0 0 0 Intangible Assets 0 0 Investment in JMWT TopCo Ltd 46.717.689 (54.465.922) (7.748.233) (1) Due from JMWT BidCo 73.665.922 73.665.922 Accrued Interest Receivable 2.803.061 2.803.061 Total Other Assets 123.186.672 (54.465.922) 68.720.750 TOTAL ASSETS 123 186 672 54 465 922 68 720 750 LIABILITIES & PARTNERS' EQUITY Total Current Liabilities 0 0 0 Payable to JMWT TopCo 46.717.689 46.717.689 P&L Reserves 2.803.061 2.803.061 Total Other Liabilities 49.520.750 0 49.520.750 TOTAL LIABILITIES 49.520.750 0 49.520.750 Share Capital 73.665.922 (54.465.922) 19.200.000 Total Partners' Equity 73.665.922 (54.465.922) 19.200.000 TOTAL LIABILITIES & PARTNERS' EQUITY 123.186.672 (54.465.922) 68.720.750 Pro Rata Capital Account Balance of Subject Interest $19,200,000 Pro Rata Capital Account Balance of 0.1% Interest (to Exhibit H-5) $19,200 Pro Rata Capital Account Balance of 99.9% Interest (to Exhibit H-7) $19,180,800 (1) From Exhibit H3. EFTA01109087 EXHIBIT H-5 CALCULATION OF ADJUSTED BOOK VALUE PHAIDON LLC AS OF JUNE 30, 2014 ASSETS HISTORY 613012014 ADJUSTMENTS VALUE MARKET ADJUSTED BOOK Investment in JMWT Acquisition LLP 66,002 (46,802) 19,200 (1) Total Current Assets 66.002 (46.802) 19.200 TOTAL ASSETS 66.002 (46.802) 19.200 LIABILITIES TOTAL LIABILITIES 0 0 0 Contribution - Phaidon LLC 66.002 (46.802) 19.200 Total Members' Equity 66.002 (46.802) 19.200 TOTAL LIABILITIES & MEMBERS' EQUITY 66.002 (46.802) 19.200 Pro Rata Capital Account Balance of Subject Interest $19,200 Pro Rata Capital Account Balance of Subject Interest (to Exhibit H-T, $19,200 (1) From Exhibit H-4. EFTA01109088 EXHIBIT H-6 CALCULATION OF ADJUSTED BOOK VALUE REGAN ARTS LLC AS OF JUNE 30, 2014 ASSETS HISTORY 613012014 ADJUSTMENTS VALUE MARKET ADJUSTED BOOK Checking and Savings 349,290 349,290 Total Current Assets 349.290 0 349.290 Net Fixed Assets 0 0 0 Total Other Assets 0 0 0 TOTAL ASSETS 349.290 0 349,290 LIABILITIES Accounts Payable 19.457 19.457 Credit Cards 25.953 25.953 Total Current Liabilities 45.410 0 45.410 Total Other Liabilities 0 0 0 TOTAL LIABILITIES 45.410 0 45.410 Contribution - Phaidon Global LLC 1.500,000 1.500.000 Retained Earnings (1.196.120) 0 (1.196.120) Total Members' Equity 303,880 0 303.880 TOTAL LIABILITIES & MEMBERS' EQUITY 349.290 0 349.290 Pro Rata Capital Account Balance of Subject Interest 5303,880 Pro Rata Capital Account Balance of Subject Interest (to Exhibit H-T, $303,880 EFTA01109089 EXHIBIT H-7 CALCULATION OF ADJUSTED BOOK VALUE PHAIDON GLOBAL LLC AS OF JUNE 30, 2014 HISTORY 6/30/2014 ADJUSTMENTS VALUE ASSETS MARKET ADJUSTED BOOK Checking and Savings 2,755.660 2,755.660 Investment - JMWT Acquisition LLP 69.135.798 (49,954.998) 19,180.800 (1) Investment - Phaidon LLC 66.002 (46.802) 19.200 (2) Investment - Regan Arts LLC 1.500.000 (1,196.120) 303.880 (3) Phaidon Press Ltd 5 Year Loans 4.394.142 4.394.142 Total Current Assets 77.851.602 (51,197.920) 26,653.682 Net Fixed Assets 0 0 0 Total Other Assets 0 0 0 TOTAL ASSETS 77.851.602 (51,197.920) 26,653.682 LIABILITIES Line of Credit - Due to BFP 8.735.782 8.735.782 Total Current Liabilities 8.735.782 0 8,735.782 Total Other Liabilities 0 0 0 TOTAL LIABILITIES 8.735,782 0 8,735.782 Net Income (28.115) (28.115) Retained Earnings (57.865) (51,197.920) (51,255.785) PLB LLC 69.135.798 69,135.798 JMWT LLC 66.002 66.002 Total Members' Equity 69.115.820 (51.197.920) 17.917.900 TOTAL LIABILITIES & MEMBERS' EQUITY 77.851.602 (51,197.920) 26,653.682 Pro Rata Capital Account Balance of Subject Interest (99.9%) $17,899,982 Pro Rata Capital Account Balance of Subject Interest (to Exhibit H-8) $17,899,982 (1) From Exhibit H-4. (2) From Exhibit H-5. (3) From Exhibit H-6. EFTA01109090 EXHIBIT H-8 CALCULATION OF ADJUSTED BOOK VALUE PLB LLC AS OF JUNE 30, 2014 HISTORY 6/30/2014 ADJUSTMENTS VALUE ASSETS MARKET ADJUSTED BOOK Cash and Equivalents 459.912 459.912 Investment in Phaidon Global LLC 69.049.904 (51,149.922) 17.899.982 (1) Total Current Assets 69.509.816 (51.149.922) 18.359.894 Net Fixed Assets 0 0 0 Total Other Assets 0 0 0 TOTAL ASSETS 69.509.816 (51,149.922) 18,359.894 LIABILITIES Due to Black Family Partners LP 3.208.131 3,208.131 Due to JMWT LLC 459 459 Total Current Liabilities 3.208.590 0 3,208.590 Total Other Liabilities 0 0 0 TOTAL LIABILITIES 3,208,590 0 3,208.590 LDB 2011 LLC 10.000.000 (7,738.625) 2,261.375 (2) Black 1997 Trust 54.000.000 (41,788.494) 12,211.506 1997 GST Exempt 3.000.000 (2,321.577) 678.423 Members' Equity (604.158) 604.158 0 Net Income (94.616) 94.616 0 Total Members' Equity 66.301.226 (51,149.922) 15,151.304 TOTAL LIABILITIES & MEMBERS' EQUITY 69.509.816 (51.149.922) 18.359.894 Pro Rata Capital Account Balance of Subject Interest $2,261,375 Pro Rata Capital Account Balance of Subject Interest, Rounded (to Exhibit D) $2,300,000 (1) From Exhibit H-7. (2) The market adjustment for each member reflects their pro rata portion of the market adjustment to assets. members' equity. and net income. Specific to LDB 2011 LLC, the adjustment of ($7.738.625) equals (($51,149,922)* 14.9254%) + (($604,158) ' 14.9254%) + (($94,616) • 14.9254%)". The adjustment for the other members was calculated using their respective percentage interest. EFTA01109091 EXHIBIT I INVESTMENT COMPANY DISCOUNT & VOLATILITY LDB 2011 LLC AS OF JUNE 30, 2014 Selected Reference % of Selected Asset Asset Specific Exhibit(s) Assets ICD Volatility (2) ASSETS Cash Exhibit F-3 19.1% 5.0% 0) 7.6°4 Marketable Securities Exhibit F-2 3.8% 11.2% 17.1% Fixed Term Entities (Private Equity Direct Interests) Exhibit F-3 10.7% 5.0% (t) 7.6% Restricted Investments Exhibit F-3 0.9% 5.0% (t) 7.6% Fine An Exhibit F-2 56.6% 11.2% 17.1% PLB, LLC Exhibit F-3 1.7% 5.0% (1) 7.6% Receivables Exhibit F-3 7.1% 5.0% (t) 7.6% 8.7% 13.3% Selected ICD and Volatility, rounded (to Exhibits D and J-3, respectively) 9.0% 13.0% (I ) While the mean and median discount to NAV for the Government Bonds and Securities sample (Exhibit F.3) were 8.7% and 8.9%. respectively. 5.0% was selected as a reasonable ICD for this analysis. (2) This is an estimated upper.bound for the equity volatility of the Company's investment portfolio. Asset correlation was not known and would likely reduce the portfolio volatility. unless all assets were perfectly correlated. EFTA01109092 EXHIBIT J-1 QUANTITATIVE FINANCIAL RISK ANALYSIS LDB 2011 LLC AS OF VALUATION DATE MEASURES OF COMPANY SIZE A. Revenue Revenue ($MM) Discount Low High I Average Low I High I Average I Median Top Quintile $50.1 $7.859.1 $360.2 0.0% 55.0% 18.3% 14.7% Second Quintile $12.8 $49.9 $26.5 0.0% 84.6% 20.6% 14.5% Third Quintile $4.4 $12.6 $8.6 0.0% 59.2% 20.9% 18.3% Fourth Quintile $0.6 $4.4 $2.3 0.0% 70.0% 28.1% 25.7% Bottom Quintile $0.0 $0.6 $0.1 0.0% 80.8% 26.5% 24.1% B. Market Value of Equity Market Value (SMM Discount Low I High Average Low I High I Average I Median Top Quintile $190.5 $5.726.1 $664.7 0.0% 65.8% 17.6% 12.8% Second Quintile $98.1 $184.7 $132.6 0.0% 56.8% 16.9% 12.8% Third Quintile $50.2 $98.0 $76.2 2.3% 84.6% 25.8% 24.1% Fourth Quintile $25.1 $50.0 $34.5 0.0% 80.8% 29.1% 27.3% Bottom Quintile $2.0 $24.4 $14.1 0.0% 59.2% 24.9% 22.8% C. Book Value of Equity Book Value ($MM) Discount Low High I Average Low I High I Average I Median Top Quintile $39.6 $789.4 $162.0 0.0% 65.8% 15.0% 11.2% Second Quintile $14.2 $39.6 $26.4 0.0% 84.6% 18.4% 14.8% Third Quintile $5.5 $14.2 $8.5 0.0% 70.0% 25.7% 24.7% Fourth Quintile $1.6 $5.4 $3.1 0.0% 57.9% 25.7% 26.1% Bottom Quintile ($76.2) S1.6 ($2.6) 0.0% 80.8% 29.6% 26.0% D. Book Value of Total Assets Total Assets ($MM Discount Low I High Average Low I High I Average I Median Top Quintile $79.2 $12471.4 $1.027.8 0.0% 84.6% 16.7% 13.2% Second Quintile $29.6 $78.5 $50.6 0.0% 65.8% 17.2% 12.8% Third Quintile $10.7 $28.8 $17.6 0.0% 56.7% 21.4% 19.6% Fourth Quintile $4.4 $10.5 $7.4 0.0% 70.0% 27.2% 26.5% Bottom Quintile $0.0 $4.4 $2.4 0.0% 80.8% 31.8% 30.6% EFTA01109093 EXHIBIT J-2 QUANTITATIVE FINANCIAL RISK ANALYSIS LDB 2011 LLC AS OF VALUATION DATE MEASURES OF RISK & PROFITABILITY A. EQUITY VOLATILITY 1.2.3 Volatility Discount Low I High I Average Low I Nigh I Average I Median Top Quintile 115.2% 2024.7% 208.5% 0.0% 80.8% 34.9% JL.o 70 Second Quintile 86.1% 114.2% 100.7% 0.0% 55.6% 25.3% 24.7% Third Quintile 73.0% 86.0% 78.8% 0.0% 64.2% 20.3% 17.5% Fourth Quintile 55.9% 73.0% 64.6% 0.0% 53.2% 17.9% 15.0% Bottom Quintile 19.0% 55.7% 42.4% 0.0% 84.6% 15.4% 13.1% B. NET PROFIT MARGIN Net Profit Margin Discount Low I High I Count Low I Nigh I Average I Median Margin n 0% Margin < 0% No Data Reported C. DIVIDENDS Dividend Paying Non-Dividend Paying 0.1% 91 .J70 oY .000 . 0 . 0 -58225.0% -0.1% 229 0.0% 80.8% 24.6% 22.6% N/A N/A 25 N/A N/A N/A N/A Dividend Yield Discount Median I Average I Count Low I Nigh I Average I Median 3.5% N/A 5.0% N/A 319 .V 70 0.0% .LI 70 84.6% .L 0 23.7% Notes: 'Volatility is defined as the annualized standard deviation of the continuously compounded rate of return on the company's common stock. The standard deviation was calculated using the change in weekly closing prices over the one-year period prior to the transaction date. 2 Includes 337 transactions. Volatility was not reported with 8 transactions. 3 Implied discounts are positively correlated with volatility, and negatively correlated with size metrics. . 0 20.9% EFTA01109094 EXHIBIT J-3 ESTIMATED RESTRICTRED STOCK EQUIVALENT DISCOUNT LDB 2011 LLC AS OF VALUATION DATE BASED ON QUANTITATIVE FINANCIAL RISK ANALYSIS Metric Exhibit Company Measure Implied Quintile Median Discount Weighting Weighted Average Sized Metrics Revenue (SMM) EXHIBIT J-1 -$10.99 Bottom Quintile 24.1% 0.00% 0.0% Market Value ol Equity ($MM) EXHIBIT J-1 $120.15 Second Quintile 12.8% 33.33% 4.3% Book Value ol Equity ($MM) EXHIBIT J-1 $144.25 Top Quintile 11.2% 0.00% 0.0% Total Assets ($MM) EXHIBIT J-1 $144.26 Top Quintile 13.2% 0.00% 0.0% Other Metrics Equity Volatility (%) EXHIBIT J-2 13.0% Bottom Quintile 13.1% 33.33% 4.4% Profitable (Based on Net Profit Margin) EXHIBIT J-2 N/A 14.5% 0.00% 0.0% Dividend-Paying EXHIBIT J-2 N N/A 20.9% 33.33% 7.0% ESTIMATED RESTRICTED STOCK EQUIVALENT DISCOUNT (TO EXHIBIT J-4) 100.0% 15.6% Notes: Y Yes: N a• No EFTA01109095 EXHIBIT J4 ESTIMATED PRIVATE COMPANY DISCOUNT INCREMENT LDB 2011 LLC AS OF VALUATION DATE BASED ON BLOCK SIZE ILLIQUIDITY ANALYSIS % Shares Place Discount Low High Count Low High Average Median More than 40% 40.4% 48.0% 5 10.6% 62.3% 42.1% 42.3% More than 35% 39.3% 48.0% 6 0.0% 62.3% 35.0% 40.4% More than 30% 30.4% 48.0% 12 0.0% 72.4% 40.9% 41.6% More than 25% 25.0% 48.0% 23 0.0% 72.4% 33.8% 38.5% More than 20% 20.2% 48.0% 52 0.0% 91.3% 30.2% 25.5% 20% or Less 0.10% 19.8% 345 0.0% 84.6% 22.9% 20.0% Summary Low Mid High Range of Median Discounts for Blocks > 20% 25.5% 33.9% 42.3% Divided by Median for Blocks c 20% 20.0% 20.0% 20.0% Multiplicative Adjustment Factors for Private Company Discount Increment' 1.27 1.69 2.12 Times: Estimated Restricted Stock Equivalent (see EXHIBIT J-3) 15.6% 15.6% 15.6% Implied Range of Private Company Discounts 2 19.8% 26.4% 33.0% Blocks > 20%. excluding blocks with registration rights Implied Reasonable Range of Discounts for Lack of Marketability 20.0% 33.0% Notes: Equal to min or max median discount for block sizes > than 20% divided by median discount for block sizes c 20%. 2 Equal to multiplicative adjustment factor times the restricted stock equivalent. EFTA01109096