CONFIDENTIAL

CONFIDENTIAL Valuation Analysis of Rockefeller Financial Services, Inc. as of December 31, 2015 Berkshire Capital EFTA01079016 Rockefeller Financial Services, Inc. Table of Contents TAB SECTION PAGE I Valuation Letter 1 II Market & Industry Overview 4 III Valuation Methodologies 12 IV Valuation Model Berkshire Capital CONFIDENTIAL EFTA01079017 Rockefeller Financial Services, Inc. Valuation Letter Pursuant to an engagement letter dated October 9, 2015 between Rockefeller Financial Services, Inc. (the "Company" or "RFS") and Berkshire Capital Securities LLC ("Berkshire Capital"), Berkshire Capital has prepared a valuation of the Company with its consolidated subsidiaries (the "Valuation") as of December 31, 2015 (the "Reference Date"). We understand that the Valuation will be used by the Company to establish a value for both the Class A (Voting) and the Class B (Non-Voting) shares of RFS as of the Reference Date. The Valuation was completed in a manner consistent with the requirements of: (i) the Shareholders' Agreement, by and among RFS, the Family Trust established under Indenture dated December 21, 1979 (the "Family Trust") and the Shareholders named therein, dated as of February 1, 1991 as amended and supplemented to date; (ii) the Stockholders Agreement dated as of May 29, 2012 and effective as of September 28, 2012 among RFS, the Family Trust and RIT Capital Partners plc ("RIT"); and (iii) the Resolution adopted by the RFS Compensation Committee on January 8, 2009 on fair market methodology. The valuation standard is nonmarketable minority interest, where the analysis presumes the continued operation of the business as a going concern without a sale of the assets or businesses of the Company. Berkshire Capital is a private investment bank that focuses exclusively on providing financial advisory services to the investment management and securities industries. Berkshire Capital, as a customary part of its investment banking business, is regularly engaged in the valuation of financial services companies in connection with mergers and acquisitions, and valuations for estate, corporate and other purposes. Since inception in 1983, Berkshire Capital has acted as financial advisor in over 310 transactions with an aggregate value exceeding $10 billion. Over this period, Berkshire Capital has rendered over 275 valuations, strategic reviews and fairness opinions for publicly traded and privately owned financial services firms. For purposes of the estimate of value set forth herein, we have: (i) reviewed certain audited financial statements, unaudited financial statements, organizational documents and other financial and operating data provided by the management of the Company; (ii) discussed the businesses, financial condition, recent results of operations and the prospects of the Company with senior management; (iii) compared certain financial information for the Company with similar information for certain other companies the securities of which are publicly traded; (iv) reviewed the financial terms, to the extent publicly available or otherwise available to Berkshire Capital due to its role as financial advisor to one of the parties to the transaction, of certain mergers and acquisitions of companies which we deemed to be relevant to the Valuation of the Company; and (v) performed such other analyses and considered such other information as we deemed appropriate. We have assumed and relied upon, without independent verification, the accuracy and completeness of all of the information reviewed by us for purposes of this Valuation, and we have assumed no responsibility for and did not conduct any independent verification of the information. In that regard, we have assumed that the information relating to the prospects of the Company were reasonably prepared on a basis reflecting the best currently available judgments and estimates of senior management. Berkshire Capital Page 1 EFTA01079018 Rockefeller Financial Services, Inc. Valuation Letter In connection with the preparation of this Valuation, we performed a variety of financial analyses. Our Valuation conclusions are based upon various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. In performing our analyses, we made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. The analyses performed by us are not necessarily indicative of future values or future results that might be achieved, all of which may be more or less favorable than that suggested by such analyses, and such analyses and estimates are inherently subject to substantial uncertainty. With respect to the analysis of guideline publicly traded companies and the analysis of guideline acquisitions, an evaluation of the results of those analyses is not entirely mathematical. Accordingly, an analysis of guideline publicly traded companies and guideline acquisitions necessarily involves complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading values or announced transaction values, as the case may be, of the companies being analyzed. Our estimate of value is based on all relevant financial information, operating data and market, economic and other conditions as of the Reference Date that was available to us as of the date hereof. Events occurring after the Reference Date could materially affect the assumptions and conclusions contained in this Valuation. Neither Berkshire Capital nor the individuals involved in the preparation of this Valuation on behalf of Berkshire Capital have any present or contemplated future interest in the Company. This Valuation has been prepared solely for the internal use of the Company and is not intended for dissemination to, and may not be relied upon by, persons other than the senior management of the Company. Neither the contents of this report, nor its conclusions, may be disclosed, referred or communicated in whole or in part to any third party for any purpose whatsoever except with our written consent in each instance. In furnishing this report, we do not admit that we are experts on the securities laws of any foreign or domestic jurisdiction. Berkshire Capital Page 2 EFTA01079019 Rockefeller Financial Services, Inc. Valuation Letter Based on the foregoing, and the other matters discussed in greater detail in this report, we are of the opinion that, as of the Reference Date, the value of the Company on a non-marketable minority interest basis is $188.9 million. Very truly yours, Berkshire Capital Securities LLC By: R. Bruce Cameron President January 23, 2016 Berkshire Capital Page 3 EFTA01079020 Rockefeller Financial Services, Inc. Market & Industry Overview Throughout 2015, the market generally has continued the broad-based rally that started in the summer of 2011, with a brief decline between August and October. As of the end of December 2015, the market has gained 202.1% since its 2009 low. Year over year, the market was relatively flat, with the market falling 0.7% from the end of December 2014 to the end of December 2015. S&P 500 Index 60% Fannie Mae, Freddie Mac Conservatorships Lehman Bankruptcy, Merrill Sale 40% WaMu Failure Bear Stearns/ First AIG Bailout JP Morgan Credit Markets Seize 20% TARP Enacted Citigroup Loss Sharing Deal 0% -20% -40% -60% 045 01 OS 1, 9 v10.10 vec,10 1- 1.1 1-5 le• Vec 'Dec01 \O°. Oec:0 101v09 0 1% oec1% 1Oec; )O<%- Oe°' 1%>('"OytAa Oec.1$ Berkshire Capital Page 4 EFTA01079021 Rockefeller Financial Services, Inc. Market & Industry Overview In 2015, market performance in AUM, revenue and pre-tax income growth varied for each participant, and, while some investment management firms experienced strong growth, others encountered steep declines in 2015. Trends in AUM, Revenues & Pre-Tax Income, 2Q14 - 2Q15 Growth Rates, 2Q14 - 2Q15 Pre-Tax Firm AUM Revenues Income Affiliated Managers Group, Inc. 5.9% 6.8% 12.0% BlackRock, Inc. 2.8% 3.9% 5.0% Calamos Asset Management Inc. -5.1% -14.1% -48.0% Cohen & Steers, Inc. -4.1% 3.2% -4.1% Diamond Hill Investment Group 17.8% 24.3% 50.8% Eaton Vance Corp. 8.8% 2.3% 6.1% Federated Investors, Inc. -0.6% 2.2% 3.5% Franklin Resources, Inc. -5.9% -0.5% 2.0% GAMCO Investors, Inc. -8.0% -8.5% -18.9% Invesco Ltd. 0.1% 0.9% 0.4% Janus Capital Group Inc. 8.3% 13.2% 17.4% Legg Mason, Inc. -0.7% 2.0% 3.1% Manning & Napier, Inc. -20.3% -4.8% 84.1% Pzena Investment Management, Inc. 3.7% 9.5% 1.3% T. Rowe Price Group, Inc. 4.7% 9.9% 8.3% Virtus Investment Partners, Inc. -14.6% -3.7% -18.6% Waddell & Reed Financial, Inc. -11.0% 3.9% -1.1% Westwood Holdings Group, Inc. 15.0% 17.3% 13.6% MEAN -0.2% 3.8% 6.5% MEDIAN -0.2% 2.8% 3.3% Source: SNL Database Berkshire Capital Page 5 EFTA01079022 Rockefeller Financial Services, Inc. Market & Industry Overview Median Publicly Traded Investment Management Multiples' 20.0x 18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 14.8x 12.9x 10.2x 12.7x 11.0x 9.3x 4.3x 3.8x 3.2x Median Price-to-Current Fiscal Year Median Price-to-Forward Fiscal Year Median Price-to-Current Fiscal Year Pre-Tax Income Pre-Tax Income Revenues • December 2013 • December 2014 tv December 2015 I 2013 multiples include the following firms: APAM, BPFH, CLMS, CNS, DHIL, EV, GBONS, PZN, SAMG, VRTS, WDR and WHG. 2014 multiples include the following firms: APAM, BPFH, CLMS, CNS, DHIL, EV, GBL, JNS, PZN, SAMG, VRTS, WDR and WHG. 2015 multiples include APAM, BPFH, CLMS, CNS, OHIL, EV, GSL, INS, PZN, SAMG, VRTS, WDR and WHG. Berkshire Capital Page 6 EFTA01079023 Rockefeller Financial Services, Inc. Market & Industry Overview Earnings estimates have rebounded from their 2009 lows due to the sustained market rebound and an increasingly optimistic economic outlook. However, estimates remain volatile due to uncertainty around U.S. fiscal policy and the global economic recovery, with fourth quarter 2015 estimates decreasing in the face of this uncertainty. Forward EPS Estimates — T. Rowe Price Forward EPS Estimates — Franklin Resources $6.00 - $4.50 5.50 -4.00 5.00 - 4.50 -3.50 4.00 - 3.00 3.50 -2.50 3.00 - 2.50 - 2.00 2.00 1.50 1.50 1.00 1.00 0.50 0.50 0.00 0.00 -/' •O t. pe~09 1-\ No 1. 11 pe~O9 O PQt.11cyte-N 6: :15 Oe~1S tx`) pc ye( IXY"<-Pr lot c1- m, c...9 (Ya tx‘M, ixol vac' Source: SNL Database, Berkshire Capital research Berkshire Capital Page 7 EFTA01079024 Rockefeller Financial Services, Inc. Market & Industry Overview While investment manager five-year EPS growth expectations increased throughout the first three quarters of 2014, expectations have declined from the fourth quarter of 2014 and throughout 2015 due to increased uncertainty in the global economy. Five-Year Estimated EPS Growth Rates — Investment Managers 20% 18% 16% 14% 12% 10% 8% 100114 6% sil)Nov"):40Ned).S.2.0) G.11. /,:•S G.0 sPt %.5 S5 .S5 N•C" kl% o kik .0 se oe kika No se oe osc Or 40 cog% 02S- ov c: s oe Ranges defined by 25th and 75th percentile projected growth rates. Index includes AMG, APAM (as of 3/13), ART (3/11 through 12/12), BEN, BLK, CLMS, CNS, EPHC (3/11 through 11/12), EV, FII, GBL, GROW (3/11 through 4/12), IVZ, JNS, LM, MN (as of 6/12), OMAM (as of 10/14), PZN, SAMG (as of 9/13), TROW and WDR. Source: SNL Database, Berkshire Capital research Berkshire Capital Page 8 EFTA01079025 Rockefeller Financial Services, Inc. Market & Industry Overview After steadily rising since 2011, multiples began a steady decline in the second half of 2014 and into 2015, with investment managers currently trading at LTM pre-tax of 8.1x— 10.0x as of December 2015, compared to 10.2x— 12.3x one year ago. Price / LTM Pre-Tax Multiples — Investment Managers 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x x.11 11 •ys. .‘"S. \,1, 1. 1 1. '3 0) c, c,*1 et,"1.$ e.S% .11e‘ API Sell '15 SI' :15 '15 't oe v. oe sey t< O-% sec vac tpc sec v.e.• Ranges defined by 25th and 75th percentile Price / LTM Pre-Tax Multiples. Index includes AMG, APAM (as of 3/13), ART (3/11 through 12/12), BEN, BLK, CLMS, CNS, EPHC (3/11 through 11/12), EV, File GBL, GROW (10/09 through 4/12), IVZ_INS, LM, MN (as of 6/12), OMAM (as of 10/14), PZN, SAMG (as of 9/13), TROW and WDR. Source: SNL Database, Berkshire Capital research Berkshire Capital Page 9 EFTA01079026 Rockefeller Financial Services, Inc. Market & Industry Overview When viewed on a forward-looking basis, relative valuations increased steadily throughout 2012 and 2013 but fell slightly in 2014 and continued to decline in 2015. At the end of December 2015, firms were valued at 7.5x — 10.2x forward fiscal year projected pre- tax income, compared to 9.7x — 12.4x one year ago. Price / Forward Fiscal Year Projected Pre-Tax Multiples — Investment Managers 20.0x 16.0x 12.0x 8.0x II Ilvi I woo I 4.0x 0.0x r1))- „11. e;11- „.11- e:O Sc% ‘,10 \\Y- SeX ‘.40' \%)•- CAT 0e- kVb' - Berkshire Capital I ASC1/4 ^AP% f.SC1/4 ( .S5 ASS ^NS c.SS O2/ ‘‘I• sex roe= tp: \a,-- sex vs= Ranges defined by 25th and 75th percentile Price / Forward Fiscal Year Pre-Tax multiples. Index includes AMG, APAM (as of 3/13), ART (3/11 through 12/12), BEN, BLK, CLMS, CNS, EPHC (3/11 through 11/12), EV, FII, GBL, GROW (10/09 through 4/12), IVZ, JNS, LM, MN (as of 6/12), OMAM (as of 10/14), PZN, SAMG (as of 9/13), TROW and WDR. Source: SNL Database, Berkshire Capital research Page 10 EFTA01079027 Rockefeller Financial Services, Inc. Market & Industry Overview Investment managers have experienced a decline in market performance in 2015. As of the end of December 2015, equity managers were down 19.2% relative to their December 2014 levels, while fixed income managers were down 10.4% over the same period. Banks, in comparison, were only down 1.6% relative to their December 2014 levels. Indexed Stock Price Performance 100% 75% - 50% 25% 0% -25% -50% v (,„ A A. AS NS oat ND'A"' ND• N NS NS NS NS ISS IN IN O. 1O. IN 'O tit O-1-1-SSS .0e ce tt..9‘,P pc pe tptso NV' ce 07.4 O6Oecov$84 Ovisi,seoscs.N2pio-teyt • O-sec, O6-Oev —Equity Firms (BEN, JNS, TROW) Fixed Income Firms (BLK, EV, FII) —S&P 500 —KBW Bank Index Source: Bloomberg Berkshire Capital Page 11 EFTA01079028 Rockefeller Financial Services, Inc. Valuation Methodologies LEVELS OF VALUE In general, a security can be valued on one of three levels: control interest value; marketable minority interest value; or nonmarketable minority interest value! • A control interest value represents the value of the enterprise as a whole, as if the enterprise were sold to a hypothetical buyer. The control interest value can be derived directly from the valuation multiples paid for comparable companies in recent acquisition transactions or indirectly by applying control premiums paid in recent acquisitions of comparable publicly traded companies to the current valuation multiples of comparable companies the securities of which are currently publicly traded.; • A marketable minority interest value reflects quoted prices on a stock exchange or in the over-the-counter market. • The nonmarketable minority interest value of a privately held company reflects the value of a security for which there is no active market or other ability to convert readily into cash or cash equivalents. By definition, these interests lack indicia of control over the affairs of the subject company. Levels of Value 4 Relevant Market Data CONTINUUM OF VALUE Control Value Control Premium Discount for Lack of Control Freely Traded Minority Interest Value Marketability Discount Nonmarketable Minority Interest Value Guideline Acquisitions Premiums Paid in Acquisitions of Public Companies Guideline Publicly Traded Companies Restricted Stock Studies; Proprietary Analysis 2 Abrams, Jay B., Quantitative Business Valuation, McGraw-Hill, 2001. Hitchner, James R., Financial Valuation: Applications and Models, John Wiley & Sons, 2003. 4 Mercer, Z. Christopher, Quantifying Marketability Discounts, Peabody Publishing, 2001. Berkshire Capital Page 12 EFTA01079029 Rockefeller Financial Services, Inc. Valuation Methodologies VALUATION METHODOLOGIES Current valuation theory encompasses three distinct approaches: the income, market and asset-based (or cost) approaches to valuation. s4 • The income approach involves discounting projected cash flows and terminal value at an appropriate discount rate. • The market approach involves capitalizing earnings, revenues, cash flow or other measures at multiples drawn from current market valuations of publicly traded companies or recent acquisition transactions. • The asset-based approach involves marking to market tangible and intangible assets. Berkshire Capital's valuation model focuses on the income and market approaches and derives indicated values from (1) current market multiples for publicly traded investment management firms; (2) transaction multiples for recent acquisitions of investment management firms; and (3) a discounted cash flow analysis incorporating the current financial condition and prospects of the subject company. The asset-based approach is not considered to be relevant in most cases due to (i) the characteristics of the investment management industry and (ii) the fact that the asset-based approach is primarily used when valuing not-for-profit organizations, holding companies, manufacturing companies, asset-intensive companies, such as family limited partnerships, or companies in bankruptcy proceedings. $) MARKET APPROACH The market approach is based on the premise that the fair market value of securities for which no trading market exists can be inferred from recent sales of securities of guideline companies. These sales can take the form of (i) trades of minority interests of registered securities on a securities exchange or in the over-the-counter market and (ii) the sale of control in mergers or acquisitions. For purposes of this Valuation, Berkshire Capital applied guideline publicly traded company multiples of current fiscal year (2015E) pre-tax income, forward fiscal year (2016E) pre-tax income and current fiscal year (2015E) revenues to the Company's pro forma financial statistics for 2015E pre-tax income, 2016E pre-tax income and 2015E revenues, respectively. Berkshire Capital MA Business Valuation Standards, American Society of Appraisers, 2002. 6 Statement on Standards for Valuation Services No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset, American Institute of Certified Public Accountants, 2007. 7 Trugman, Gary R., Understanding Business Valuation, American Institute of Certified Public Accountants, 1998. Berkshire Capital Page 13 EFTA01079030 Rockefeller Financial Services, Inc. Valuation Methodologies applied the guideline acquisition multiples of last twelve months' ("LTM") pre-tax income and LTM revenues to the Company's pro forma financial statistics for 2015E pre-tax income and 2015E revenues, respectively. Berkshire Capital compares the subject firm's financial condition to the guideline publicly traded companies and guideline acquired companies in order to select the appropriate percentile multiples within the ranges defined by the respective peer groups. Berkshire Capital selected the median multiples from the guideline publicly traded companies and the median multiples from the guideline acquisitions for purposes of valuing the Company. Berkshire Capital assigns weightings to the indicated values derived from each of the reference guideline company multiples. In this Valuation, the weightings assigned for the guideline publicly traded companies were 35% on 2015E pre-tax income, 35% on 2016E pre-tax income and 30% on 2015E revenues. For the guideline acquisitions, the weightings assigned were 60% on 2015E pre-tax income and 40% on 2015E revenues. Adjustments to the Financial Statements. Where appropriate, Berkshire Capital may make certain adjustments to the historical, current and/or forward fiscal year financial statements in order to make the financial statements more meaningful for the valuation process. Adjustments may be appropriate for the following reasons, among others: (1) to present financial data of the subject and guideline companies on a consistent basis; (2) to adjust reported values to current values; (3) to adjust revenues and expenses to levels which are reasonably representative of continuing results; and (4) to adjust for non-operating assets and liabilities and the related revenue and expenses. a For purposes of this Valuation, Berkshire Capital made adjustments for the current fiscal year income statement, forward fiscal year income statement and current balance sheet to reflect the sale of the Rockit Solutions, LLC. INCOME APPROACH Financial Projections. Berkshire Capital prepares five- and ten-year financial projections of free cash flow and estimated terminal values at the end of the fifth and tenth years. The projections of free cash flow are intended to estimate cash available to pay dividends on basic shares of the Company. Present Value Analysis. The after-tax cash flows and terminal value are then discounted to present value at the estimated cost of equity capital, on both a five- and ten-year basis. The five- and ten-year DCF values are weighted 60%/40%. The disproportionate weighting attributed to the five-year DCF values is a function of the relatively greater level of confidence attached to five-year projections compared to ten-year projections. a ASA Business Valuation Standards, American Society of Appraisers, 2002. Berkshire Capital Page 14 EFTA01079031 Rockefeller Financial Services, Inc. Valuation Methodologies Discount Rate. Berkshire Capital uses a variation of the Capital Asset Pricing Model ("CAPM") to derive an estimate of the cost of equity capital for a subject firm:9'1°'11 Rf + X ERP + RP, + RPu, where estimated cost of equity capital risk-free rate beta general equity risk premium for the market risk premium for small size risk premium attributable to the specific company, or nonsystematic risk Risk-Free Rate ( 1O. Berkshire Capital uses the long-horizon equity risk premiums published by Morningstar, Inc., which quantifies the return generated by stocks, as measured by the S&P 500, in excess of the 20-year constant maturity Treasury bond. To ensure comparability, Berkshire Capital references the 20-year constant maturity Treasury bond as the risk-free rate. The appropriate time horizon is a function of the indeterminate (i.e., long-term) life of the company being valued as a going concern, as opposed to the investor's expected holding period.'2 Beta ( B ). Berkshire Capital selects the median unlevered beta for the guideline publicly traded companies 13 and then adjusts the unlevered beta for the subject company's targeted leverage ratio.'" Equity Risk Premium ( ERP). The equity risk premium is a prospective concept (i.e., an estimate of the premium required by the market in the future in order to accept the uncertain outcomes associated with owning equity securities). Unlike bond yields to maturity, market quotes cannot be obtained for the equity risk premium. Due to a lack of widely accepted forecasting techniques to estimate a forward-looking equity risk premium,ls•16 Berkshire Capital refers to historical data Ku= Ku= RI= (3 = ERP = RP, = RP„ = 9 Pratt, Shannon P., Robert F. Reilly and Robert P. Schweihs, Valuing a Business: The Analysis and Appraisal of Closely Held Companies, 4th ed., McGraw-Hill, 2000. 143 Pratt, Shannon P., Cost of Capitol: Estimation and Applications, John Wiley & Sons, 1998. " Reilly, Robert F. and Robert P. Schweihs, The Handbook of Advanced Business Valuation, McGraw-Hill, 2000. 12 Ibbotson SBBI, 2014 Valuation Yearbook, Morningstar, Inc., 2014. 13 Pratt, Shannon P. and Alina V. Niculita, Valuing a Business: The Analysis and Appraisal of Closely Held Companies, McGraw-Hill, 2008. 14 Pratt, Shannon P., Cost of Capitol: Estimation and Applications, John Wiley & Sons, 1998. IS Equity Risk Premium Forum, sponsored by the Association for Investment Management and Research, November 8, 2001. 16 Damodaran, Aswath, Equity Risk Premiums (ERP): Determinants, Estimation and Implications —The 2011 Edition, Stern School of Business, 2011. Berkshire Capital Page 15 EFTA01079032 Rockefeller Financial Services, Inc. Valuation Methodologies for insights into the magnitude of the equity risk premium 17 Berkshire Capital uses the 30-year average long-horizon equity risk premium published by Morningstar in the Stocks, Bonds, Bills and Inflation ("SBB1") series, reduced by the historical P/E multiple effect in order to eliminate the upward bias in historical data introduced by changes in investor expectations. 18'19 This approach is consistent with a recent valuation opinion issued by the Delaware Chancery Court.2° The equity risk premium component of the estimated cost of equity capital represents the expected premium that holders of similar securities can expect to achieve on average in the future. The total return on the S&P 500 reflects both periodic distributions on, and capital appreciation or depreciation reflected by continuous trades in, minority interests of component stocks. While a control shareholder may be able to improve the cash flows generated by the acquired company, such improvements may not necessarily have an impact on the general risk level of the cash flows. Adjustments for minority or controlling interest value are more suitably made to the projected cash flows rather than to the discount rate. So long as there is no disproportionate return to certain shareholders, either through the enterprise cash flows or the equity rights, there is no distinction between minority owners and control owners in the estimation of costs of equity capital.21,22 Size Premium (RP, ). Research published by Morningstar and others offers compelling statistical evidence of small firm premiums. 32'23,20 Morningstar's annual small capitalization study sorts the universe of eligible stocks traded on the NYSE into deciles ranked by market capitalization, with deciles rebalanced quarterly, and calculates (1) betas for each decile since 1926 and (2) returns predicted by beta for each decile based on the average risk-free rate over the time horizon. If CAPM were functioning properly for small companies, all the decile portfolios would fall on the security market line. Instead, Morningstar's research shows that smaller stocks consistently generate returns in excess of the returns that would be predicted by CAPM. Berkshire Capital has developed a size premium calculator using the Morningstar data that " Reilly, Robert F. and Robert P. Schweihs, The Handbook of Advanced Business Valuation, McGraw-Hill, 2000. 19 Ibbotson, Roger G. and Peng Chen, "Long-Run Stock Returns: Participating in the Real Economy," Financial Analysts Journal, vol. 59, no. 1 (January/February 2003). 19 Kasper, Larry J., "S Corporation Valuations — An Analysis in Search of a Solution," Business Valuation Review (Winter 2007). n Global CT LP v Golden Telecom, Inc., 2010 WL 1663987 (Del. Ch.)(April 23, 2010). 31 Speech at the 2004 Thirty-Second AICPA National Conference on Current SEC and PCAOB Developments, by Todd E. Hardiman, Associate Chief Accountant, Division of Corporate Finance, Securities and Exchange Commission, Washington, DC, December 6, 2004. 22 lbbotson SBB1, 2014 Valuation Yearbook, Morningstar, Inc., 2014. 23 Banz, R., "The Relationship between Return and Market Value of Common Stocks," Journal of Financial Economics (1981). Pratt, Shannon P. and Alina V. Niculita, Valuing a Business: The Analysis and Appraisal of Closely Held Companies, McGraw-Hill, 2008. Berkshire Capital Page 16 EFTA01079033 Rockefeller Financial Services, Inc. Valuation Methodologies estimates the size premiums for the subject firm as well as the guideline publicly traded companies. This approach is consistent with a recent valuation opinion issued by the Delaware Chancery Court.25 Security Market Line & Size Premium by Decile, 1926 - 2014 25.00% 20.00% 3 15.00% 2 110.00% f itt. 5.00% • • 0.00% 0.80 0.20 0.40 060 0.80 1.00 1.20 1.40 1.60 1.80 Beta — Company-Specific Risk Premium ( Rp, ). This risk premium accounts for additional elements of risk not captured by the systematic, or market, risk factor beta, such as: (1) relatively higher or lower volatility of economic income; (2) concentration of customer base; (3) key person dependence or small management base; (4) key supplier dependence; (5) abnormal present or pending competition; (6) pending regulatory changes; (7) pending lawsuits; or (8) relatively undiversified operations, by product or by geography.26,27 Recent valuation opinions issued by the Delaware Chancery Court have accepted the use of RPu so long as the risk factors are truly company-specific and not already reflected in zs In re Sunbelt Beverage Corporation, 2010 Consol. CA. No. 16089-CC (Del. Ch.) (Jan. 5, 2010). 26 Kasper, Larry J., Business Valuations: Advanced Topics, Quorum Books, 1997. 27 Reilly, Robert F. and Robert P. Schweihs, The Handbook of Advanced Business Valuation, McGraw-Hill, 2000. Berkshire Capital Page 17 EFTA01079034 Rockefeller Financial Services, Inc. Valuation Methodologies projected cash flows, beta or RPs, and the estimated RP. is based on specific financial analysis.28 Berkshire Capital incorporates volatility of economic income and risk of insolvency due to limited capital resources in the scenario analysis of the subject firm; as a result, these factors do not influence the magnitude of RP,,. For purposes of this Valuation, Berkshire Capital assumed that there were no material company-specific risk factors, so RP„ is assumed to be nil. Scenario Analysis. Cash flow projections should be based on the concept of expected cash flows rather than most likely or base- case cash flows.29 The determination of expected cash flows centers on the projection of future cash flows across a range of scenarios, to which probabilities are then attached. Berkshire Capital's valuation model performs the DCF analysis across 25 discrete scenarios. In the case of investment management firms, the scenarios are based on a range of inputs for two key value drivers: total return on managed assets and rate of net new business acquisition. Berkshire Capital has identified these two factors as those with the greatest influence on revenues, profitability and value. The scenario analysis is designed to capture, at least in part, the uncertainty inherent in operating the subject firm's business in the future, and as a result, introduces a broader range of potential outcomes into the ultimate determination of value than offered by a single scenario. The outcomes are then weighted based on an assessment of the appropriate probability distribution in light of the ranges of the respective value drivers relative to historical norms and expectations for the future. This probability distribution is ordinarily designed to reflect the assessment that the scenario outcomes exhibit symmetrical but declining probabilities the more the assumptions underlying a particular scenario diverge from the assumptions underlying the central scenario. Because we run multiple scenarios, we have automated all decision rules governing the subject firm's cost structure to mimic the concept that management teams adjust staffing and expense levels to changes in revenues brought about by market, industry and economic developments. 28 Rosenbloom, Arthur H., Bala G. Dharan and Ihsan Dogramaci, "Using Company-Specific Risk in the Delaware Chancery Court," Business Valuation Update (December 2011). 29 Ibbotson SBBI, 2014 Valuation Yearbook, Morningstar, Inc., 2014. Berkshire Capital Page 18 EFTA01079035 Rockefeller Financial Services, Inc. Valuation Methodologies VALUATION DISCOUNTS AND PREMIUMS Where appropriate, Berkshire Capital applies relevant discounts and premiums to values indicated by the income and market approaches. Discount for Small Size. In many cases, the firm being valued is substantially smaller than the guideline publicly traded companies, as measured by market capitalization. As a result, an adjustment must be made to valuations indicated by guideline publicly traded company valuation multiples in order to account for this differential. The size discount recognizes the direct relationship between P/E ratios and discount rates. Financial theory holds that the price in the numerator of the P/E ratio equals the PV of the market's consensus estimate of future free cash flows and terminal value discounted at the market's consensus estimate of the firm's cost of equity capital. For a given set of free cash flows, if the discount rate is higher due to the size premium, then the P/E ratio will be correspondingly lower. As a result, Berkshire Capital estimates the appropriate small-firm discount to be applied to public market multiples by calculating the percentage difference between the DCF calculated at the subject firm cost of equity capital and the DCF calculated at the median guideline company cost of equity capital. Berkshire Capital's approach is conceptually consistent with methodologies published by Goeldner30, Hitchner31 and Mercer.32 Goeldner proposed that the principal factors influencing the difference between capitalization rates, or the inverse of P/E multiples, for public and private firms are differences in risk factors (A .—risk premium) and earnings growth (Agrowth). where: P/Esubject = 1 / (Cap Rateguideline Arisk premium + Agrowth) The -risk premium factor is captured in the difference in estimated Ke. At the time, assuming that the private firm beta is equal to the public firm median, Goeldner maintained that tirisk premium can be reduced to the difference in RP„. Peters33 elaborated on Goeldner's equation by expanding the definition of risk factors to include a proxy for the size premium, which was later adopted by Goeldner through the inclusion of RPs as a risk factor.34 Goeldner's fundamental discount does not adjust for other value impairments, such as illiquidity or lack of control. 3° Goeldner, Richard, "Bridging the Gap Between Public and Private Market Multiples," Business Valuation Review (September 1998). 31 Hitchner, James R., Financial Valuation: Applications and Models, John Wiley & Sons, 2006. 32 Mercer, Z. Christopher, Valuing Enterprise and Shareholder Cash Flows — The Integrated Theory of Business Valuation, Peabody Publishing, 2004. 13 Peters, Jerry O., "Adjusting Price/Earnings Ratios for Difference in Company Size," Business Valuation Review (June 1999). 34 Goeldner, Richard, "Practical Application of the Fundamental Discount," Business Valuation Review (September 2000). Berkshire Capital Page 19 EFTA01079036 Rockefeller Financial Services, Inc. Valuation Methodologies Similarly, Hitchner proposed that: P/Esubjed = 1 / [( 1 / P/Eguidekne ) where "6" equals the difference between the respective costs of equity capital for the guideline companies and the subject company, reflected primarily in the difference between respective size premiums published in SBB1. Mercer uses the CAPM with differential RPu and growth rates to estimate differential capitalization rates and implied multiples. For purposes of this Valuation, RFS has fewer assets under management and lower pre-tax income than all of the guideline publicly traded companies, warranting the use of a discount for small size. In this Valuation, the discount for small size is 17.0%. Discount for Lack of Marketability. The principal risks associated with lack of marketability include the inability to sell shares (A) in the face of deteriorating fundamentals, which would have otherwise prompted a decision to sell; (B) when the contemplated means of disposing of the stock through an IPO or sale of the company does not materialize; or (C) when the investor's personal circumstances require liquidity.35 Many factors affect the extent to which the marketability of a security in a privately held firm differs from the marketability found in active, freely traded securities markets: (1) put rights; (2) dividends or distributions; (3) size of potential market of buyers, including limitations on who can own shares; (4) prospects for going public or being acquired; (5) restrictive transfer provisions; (6) absolute and relative size of the block to be sold; and (7) size and financial strength of the firm.36.37 In theory, investors who own nonmarketable securities must be compensated in the form of a higher expected return for the incremental risk introduced by the inability to readily convert such an investment into cash. Purchases and sales of minority interests in publicly traded companies, and the valuation multiples that result, are based on the buyers' and sellers' ability to execute a trade virtually at any time, with cash settlement in three trading days. With no readily available data on pricing of minority interests in privately held firms, Berkshire Capital draws from other empirical data in order to arrive at a credible adjustment to public market multiples to reflect the fact that the holder of a minority interest in a private firm does not enjoy the same ability to achieve liquidity when desired. For guidance on this issue, valuation practitioners have routinely referenced studies of (a) discounts on restricted stock transactions, and (b) pricing of pre-IPO common stock sales.38 Berkshire Capital has not incorporated the pre-IPO common stock sale studies in its analysis due to potential conflicting biases, and resulting lack of reliability, introduced by survivorship bias, potential "friends and 3S Revenue Ruling 77-287, C.B. 1977-2, 319. 36 Pratt, Shannon P., Business Valuation: Discounts and Premiums, John Wiley & Sons, 2001. 37 Mercer, Z. Christopher, Quantifying Marketability Discounts, Peabody Publishing, 2001. Heidt, Paul, ed., BVR's Guide to Discounts for Lack of Marketability, Business Valuation Resources, 2009. Berkshire Capital Page 20 EFTA01079037 Rockefeller Financial Services, Inc. Valuation Methodologies family" pricing discounts on pre-IPO stock, underpricing of IP0s,39 underwriter hype resulting in post-IPO underperformance, 49 earnings accretion41 and non-contemporaneous price comparisons. Berkshire Capital also noted the potential bias introduced as a result of (a) significantly higher RP, and RPL, for pre-IPO companies compared to the subject company due to the early development stage of most IPO companies and (b) likely significant change (i.e., reduction) in RP, and RP„, between the date of issuance of pre-IPO shares and the IPO due to the subject company's advances in corporate development and reduction of business risk. Facebook's valuation history is a prime example of the inapplicability of pre-IPO pricing data. Facebook Valuation History Date Enterprise Valuation ($8) Est Price Per Share Holding Period (Months) Implied Discount for tack of Marketability Event May 2012 81.2 38.00 NA NA IPO Mar 2011 65.0 37.95 14 0% General Atlantic purchases shares from Facebook employee! Feb 2011 52.0 30.36 15 20% Kleiner Perkins invests 538MM for <1% stake Jan 2011 50.0 29.19 16 23% Raises 5500MM from Goldman Sad's and DST Nov 2010 35.0 20.43 18 46% Accel sells approx. 17% of its stake lun 2010 23.0 14.26 23 62% Elevation Partners buys 5120MM of secondary shares lan 2010 14.0 8.68 28 77% Secondary trades on SecondMarket Nov 2009 9.0 5.58 30 85% Elevation Partners invests 590MM Based on shares of convertible preferred stock, Class A common StoCk and Class B common stock outstanding as of most recent balance sheet date. Sources: Facebook prospectus, The New York Times, Benjamin Christine, Berkshire Capital analysis Berkshire Capital estimated the discount for lack of marketability through the use of simulation analysis incorporating the reported discounts on restricted stock transactions and estimates of stock price expected return, stock price volatility, dividend yield, the 39 Ibbotson, Roger G., Jody L. Sindelar and Jay R. Ritter, "The Market's Problems with the Pricing of Initial Public Offerings," Journal of Applied Corporate Finance (Spring 1994). 4° Rajan, Raghuram and Henri Servaes, "Analyst Following of Initial Public Offerings," Journal of Finance (June 1997). 41 Paulson, Jon, "Quantifying Lack of Marketability and Minority Interest Discounts," TAXES, The Tax Magazine (August 1996). Berkshire Capital Page 21 EFTA01079038 Rockefeller Financial Services, Inc. Valuation Methodologies probable length of the restriction period and discount rates reflective of the risks of holding illiquid stock. A restricted stock discount refers to the contemporaneous discount on the pricing of a restricted stock private placement to the reported sales price of the issuer's publicly traded stock. Based on restricted stock pricing data obtained from a commercial database,62 Berkshire Capital estimated that the implied illiquidity risk premium, or excess return required by purchasers of restricted stock to compensate for the incremental risk associated with the inability to freely sell the stock during the lock-out period, was 11.0% during the sample period. Berkshire Capital limited the analysis to restricted stock transactions completed between April 1997 and February 2008 on the theory that the Securities and Exchange Commission's relaxation of the minimum holding period under Rule 144 from two years to one year in April 1997 and to six months in February 2008 materially altered investors' perceptions of holding period risk. Berkshire Capital also examined historical volatility, estimated costs of equity capital, payout ratios, dividend yields and price/earnings multiples for selected publicly traded investment management firms in order to develop a current estimate for the appropriate discount for lack of marketability for a private investment management firm. Berkshire Capital's use of historical volatility as a proxy for expected volatility is consistent with research showing that historical stock volatilities exhibit a high degree of persistency. 63 Statement of Financial Accounting Standards No. 123 also directs preparers to use historical volatility in estimating the fair value of employee stock grants." Berkshire Capital constructed a hypothetical private firm with the same expected total return as the median guideline public company expected total return but with an assumed payout ratio of 80%, which Berkshire Capital's experience suggests is typical of a private investment management firm. Because the timing of sale is unknown and cannot be known with certainty, Berkshire Capital assumed that the timing of the future liquidity event would be subject to a uniform probability distribution following a three-year lock-out, with a 10-year maximum holding period. Berkshire Capital also (i) imposed the same implied illiquidity risk premium of 11.0% to the private stock cash flows and (ii) assumed that the holder of the public stock would choose to sell the stock in the absence of any restrictions once the stock appreciated 100% or declined in value by 25%. These buy/sell decision rules are conceptually consistent with those routinely employed by investment management firms, based on Berkshire Capital's experience. This framework also captures the two principal components of price risk: (i) the risk that the realized price is lower than the purchase price and (ii) the opportunity loss that occurs when the asset increases in price during the period of non-marketability and then declines to a lower value before the asset can be liquidated. 05 Based on the foregoing, Berkshire Capital derived an implied discount for lack of marketability of 21.5% for a minority interest in the private stock. 42 The FMV Restricted Stock Study, FMV Opinions, Inc. (online subscription). 43 Dyl, Edward A. and George J. Jiang, 'Valuing Illiquid Common Stock," Financial Analysts Journal (July/August 2008). "Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (Financial Accounting Standards Board, 2008). Abbott, Ashok, "Discount for Lack of Liquidity: Understanding and Interpreting Option Models," Business Valuation Review (Fall 2009). Berkshire Capital Page 22 EFTA01079039 Rockefeller Financial Services, Inc. Valuation Methodologies Our model is conceptually consistent with methodologies developed by Mercer," Finnerty,07 Stockdale," Dyl et a109 and Seaman.5° The Quantitative Marketability Discount Model ("QMDM") has been developed by Mercer in order to replicate, in quantitative terms, the investment decision-making process of hypothetical investors in nonmarketable securities. The QMDM is a static model that integrates assumptions regarding the current price of the freely traded security, the growth rate of the security's value, dividends, a point estimate for the probable holding period and the required holding period rate of return into the determination of the appropriate discount for lack of marketability. Mercer has demonstrated that the QMDM produces discounts for lack of marketability that are consistent with the discounts observed in the restricted stock studies. The discount rate is intended to include the analyst's estimate of the incremental return required by a holder of the nonmarketable security due to holding period uncertainty, uncertainty of a favorable exit and transfer restrictions. Finnerty presented an enhancement to the QMDM in which the discount is a function of stock volatility, the length of the restriction period, the stock dividend yield and the time value of money, where the restriction period assumption is static. Finnerty's approach is supported by a study by Bajaj et al.,S1 which found that the standard deviation of stock returns was the most important explanatory variable in regressing restricted stock discounts against a variety of statistics including volatility, relative issue size and whether or not the issue was registered. Stockdale elaborated on Finnerty's model and posited that the discount for lack of marketability is a function of three factors: (1) the future value as a function of time; (2) the probability of sale as a function of time; and (3) the present value as a function of time. Because the timing of future sale is unknown and cannot be known with certainty, Stockdale maintained that the timing of future sale must be considered through the use of a uniform probability distribution over a defined period of time following a fixed minimum. Stockdale's model does not explicitly address the incremental risk premium required by investors for the timing uncertainty. Dyl applied an options-based framework developed by Longstaff52 based on Longstaff's insight that liquidity is essentially the option to sell a security at any time and that the cost of illiquidity can therefore be estimated using techniques from options-pricing theory. The Dyl model incorporates stock price volatility and length of the restriction period in determining the Mercer, Z. Christopher, Quantifying Marketability Discounts, Peabody Publishing, 2001. 17 Finnerty, John D., "The Impact of Transfer Restrictions on Stock Prices," presented at the 22nd Annual Advanced Business Valuation Conference (Chicago, IL, October 2003). As Stockdale, Jr., John J., "Time is of the Essence," Business Valuation Review (Fall 2006). Dyl, Edward A. and George J. Jiang, "Valuing Illiquid Common Stock," Financial Analysts Journal (July/August 2008). so Seaman, Ronald M., "Minimum Marketability Discounts, 3rd Edition," Business Valuation Review (Spring 2008). si Bajaj, M., DJ. Denis, S.P. Ferris and A. Sarin, "Firm Value and Marketability Discounts," Journal of Corporation Law (Fall 2001). S2 Longstaff, F.A., "How Much Can Marketability Affect Security Values?" Journal of Finance (December 1995). Berkshire Capital Page 23 EFTA01079040 Rockefeller Financial Services, Inc. Valuation Methodologies maximum applicable discount, which is then adjusted based on parameters in the Bajaj regression 51 to arrive at an estimated discount for lack of marketability. Similar to Longstaff, Seaman examined pricing of Long-Term Equity Anticipation Securities ("LEAPS"), which are actively traded put and call options on common stock with maturities of up to 32 months, in order to gain insight into minimum marketability discounts. Consistent with these other studies, Seaman found that the costs of LEAPS were negatively correlated with company size and positively correlated with company risk (as measured by Value Line Safety Ratings) and option maturity. Stockdale also tested the effectiveness of various mathematical DLOM models in replicating observed restricted stock discounts53 and found that the Finnerty model produced results that fall within the scatter of restricted stock discounts for both one- and two-year time horizons. Abbott tested Black-Scholes put options, Asian put options and maximum price strike look-back put options against observed restricted stock discounts based on uniform assumptions regarding risk-free rate, annual volatility and liquidation period 50 Asian put options provide a payout based on the average price achieved for the asset during the life of the option (examined by