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# Thanks. But just wondering how you got 1.03bn of revenue from a...

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Thanks. But just wondering how you got 1.03bn of revenue from a ROIC of 130% and IEV of 2.79Bn? I can't seem to figure that out

@BullsLife

First of all, I worked out the IEV for each fund (as well as for the balance sheet component) using the same conversion rate of 15% used by Management (18.57bn\$*15% = 2.79bn\$).

Then, for the balance sheet component I used a weight of 100% (as there is no revenue sharing with external investors), so 838m\$*15%*100% = 126m\$. Note that an EPV/IEV conversion of 15% is conservative, both relative to what it is reasonable to expect from the on-balance-sheet investments and also to the overall portfolio (the average historical portfolio conversion rate is ~18%).

For each of the fund vehicles, I then used the corresponding revenue sharing formula.

For Fund 1 the IEV at a 15% conversion is 2,065m\$*15% = 310m\$; the portion of expected revenue earned by OBL is then given by 85%*[310m\$-(205m\$+16m\$)-75%*(205m\$+16m\$)*(15%+2%)*3]+25%*(205m\$+16m\$)+75%*(205m\$+16m\$)*2%*3 = 69m\$, where

85% = OBL participation after investor payout

75% = investor equity contribution

15% = investor preferred return (pa)

2% = OBL management fee (pa)

3 = expected # years until completion

25% = OBL equity contribution

16m\$ = capital yet to be deployed before fund gets fully utilised

For Funds 2 and 3, the IEV at a 15% conversion is 4,132m\$*15% = 620m\$; the portion of expected revenue earned by OBL is then given by 80%*[620m\$-80%*(98m\$+73m\$)*[1+(14%+2%)*3]+80%*(98m\$+73m\$)*2%*3 = 343m\$, where

80% = OBL participation after investor payout

80% = investor equity contribution

14% = investor preferred return (pa)

2% = OBL management fee (pa)

3 = expected # years until completion

20% = OBL equity contribution

73m\$ = capital yet to be deployed before fund gets fully utilised

For Funds 4 and 5, the IEV at a 15% conversion is (4,581m\$+3,778m\$)*15% = 1,254m\$; the portion of expected revenue earned by OBL is then given by 20%*1,254m\$+80%*(179m\$+366m\$)*2%*3+80%*(1,254m\$-179m\$-366m\$)*25% = 419m\$, where

80% = investor equity contribution

2% = OBL management fee (pa)

3 = expected # years until completion

20% = OBL equity contribution

25% = OBL performance fee

366m\$ = 1,254m\$/(1+130%)-179m\$ = capital yet to be deployed assuming 130% ROIC

For Fund 6 I assumed (for the sake of simplicity, given that the actual structure is more complex) a similar formula to Funds 4 and 5, obtaining an expected revenue earned by OBL of 159m\$ at 130% ROIC.

So, the total expected revenue earned by OBL is 126m\$+69m\$+343m\$+419m\$+159m\$ = 1,115m\$. This is slightly higher than the 1.03bn\$ I had previously quoted, because the capital yet to be deployed for Funds 2,3 had previously been estimated using a ROIC assumption, as opposed to looking at the actual residual money left in the corresponding funds. The latter estimate should be slightly more accurate.

Hope this helps. Please take all of it with a big pinch of salt, as there are obviously a lot of assumptions involved.

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