Update on Uses of Cash & Subsequent Returns on Share Prices June 6, 2012

1. Windy City Summit Update on Uses of Cash & Subsequent Returns on Share Prices June 6, 2012 W. Mark Meierhoffer Practice Leader and Senior Consultant

2. Takeaway Provide an Understanding of the Alternatives Companies Use to Deploy Their Cash and Borrowing Capacity – What Have Been the Total Returns for Each Strategy?

3. Topics Covered • Overview of DeMarche Associates • Update on General Stock Market Environment • Study Background and Definitions • Study Results • General Conclusions

4. DeMarche Associates Products and Services Defined Benefit Plan/Endowment/Foundation Consulting • Tactical Asset Allocation Policy • Investment Policy Development • Investment Manager Selection • Performance Measurement Investment Management • Global Tactical Asset Allocation Fund • Specialty Index Funds Corporate Finance/Investor Relations • P/E Valuation and Analysis • Dividend Policy Review • Treasury Buyback Analysis

5. Update on General Market Environment

6. Data as of 3/31/12

7. Source: (Top) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next twelve months. Price to Book is price divided by book value per share. Data post-1992 include intangibles and are provided by Standard & Poor’s. Price to Cash Flow is price divided by consensus analyst estimates of cash flow per share for the next twelve months. Price to Sales is calculated as price divided by consensus analyst estimates of sales per share for the next twelve months. PEG Ratio is calculated as NTM P/E divided by NTM earnings growth. Dividend Yield is calculated as consensus analyst estimates of dividends for the next twelve months divided by price. All consensus analyst estimates are provided by FactSet. (Bottom left) Q-Ratio based on data from the Federal Reserve, table B.102. *1Q12 is an estimate provided by J.P. Morgan Asset Management as of 3/31/12. (Bottom right) Standard & Poor’s, Moody’s, FactSet, J.P. Morgan Asset Management. Data are as of 3/31/12.

8. Source: (Top left) Standard & Poor’s, Compustat, FactSet, J.P. Morgan Asset Management. (Top right) Standard & Poor’s, Compustat, FactSet, J.P. Morgan Asset Management. Earnings estimates are for calendar years and taken at quarter end dates throughout the year. (Bottom) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. Forward Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next twelve months. Data are as of 3/31/12.

9. The Genesis ofDeMarche Research Absence of Academic or Practitioner Studies Long-term Time Frame Multi-Cap & Style Differentiated Multiple Use of Cash Strategies Segregated by Economic Sector & Industry

10. Uses of Cash StudyDefinitions and Background Date of Study: 1990 – 2011 (22 years) 4,000+ Stocks Subsequent Annualized Returns Analyzed (For 1, 3, and 5 Years) Minimum Liquidity Requirement

11. Uses of Cash Study METRICS: Distributing to Shareholders • Dividend Policy (Primarily Increases) • Stock Buybacks (Average Annual Repurchases Over Past 5 Years)

12. Uses of Cash Study METRICS: Reinvesting in the Business • 3. Mergers and Acquisitions (M&A) • (Cash M&A / Assets Over Past 5 Years) • Research and Development (R&D) • (Total 5-Year R&D / Total Sales) • 5. Capital Expenditures (CapEx) • (Total 5-Year CapEx / Assets)

13. Uses of Cash Study Other Metrics Included Does Leverage Deter Returns? What about P/E? Does Free Cash Flow Matter?

14. Uses of Cash Study Cap Size Ranges Large Cap: ≥$20 Billion $2 Billion ≤ Mid Cap < $20 Billion $600 Million ≤ Small < $2 Billion Micro: < $600 Million 14

15. Uses of Cash Study Number of Observations by Cap Size Large-Cap 3,400 Mid-Cap 15,500 Small-Cap 16,500 Micro-Cap 36,200 TOTAL 71,600

16. DeMarche Style Factors VALUE TO GROWTH SPECTRUM Value Stocks Value Stocks Factor Factor Growth Stocks Growth Stocks High High Book Book - - to to - - Price Price Low Low High High Sales Sales - - to to - - Price Price Low Low High High Dividend Yield Dividend Yield Low Low High High Cash Flow Yield Cash Flow Yield Low Low Low Low Dividend Growth Dividend Growth High High Low Low Asset Growth Asset Growth High High Low Low Earnings Growth Earnings Growth High High Low Low Relative Price Strength Relative Price Strength High High

17. 2011 Study Findings

18. Review of Total Returns by Cap Size & Style Three-Year Annualized Returns (1990-2011) Total Universe of Stocks 6.68% Large Cap Stocks 7.61% Mid Cap Stocks 8.15% Small Cap Stocks 7.68% Micro Cap Stocks 5.16% Value Stocks 7.50% Growth Stocks 5.80%

19. All StocksUses of Cash Return Rankings

20. All Stocks Three-Year Annualized Return Spreads (1990 – 2011) 12% 10% 8% 8.30 6% 6.73 6.17 5.81 4.82 4% 2% 0% M & A Buybacks Dividend Increases R & D Cap Ex * Median 3-Year Return For All Stocks: 6.68%

21. “Drill-Down” on Buybacks By Cap Size & Style By Sector Effect of Leverage on Buyback Programs

22. Share Buyback Background 2011 (est) $437 bb 2010 $299 bb 2009 $260 bb Source: Standard and Poor's

23. Treasury Stock Buybacks by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Companies Premium (Discount) By Size with Buybacks All Stocks to Index Returns All Stocks 6.73 % 6.68 % 0.05 %

24. Treasury Stock Buybacks by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Companies Cap Size Premium (Discount) By Size with Buybacks Index to Index Returns Large CAP 7.98 7.61 0.37 Mid CAP 7.92 8.15 < 0.23 > Small CAP 7.96 7.68 0.28 Micro CAP 4.88 5.16 < 0.28 >

25. Treasury Stock Buybacks by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Companies Premium (Discount) By Size with Buybacks Style Index to Index Returns Growth 5.96 % 5.80 % 0.16 % Value 7.56 7.50 0.06

26. Stock Buybacks 1990-2011 Three-Year Annualized Return (10 Economic Sectors) Premium Discount WithtoBuybacks Sector Sector Returns 10.08% 10.25% 9.90% 10.12% 8.90% 9.94% 8.11% 7.11% 8.04% 7.88% 7.59% 7.25% 6.90% 4.72% 6.41% 5.91% 4.53% 4.20% 3.12% 2.23% 6.73% - 3 Year Returns Financials Utilities Energy Telecommunication Services Consumer Staples Industrials Health Care Materials Consumer Discretionary Information Technology All Stocks with Repurchases * Median 3-Year Return For All Stocks: 6.68%

27. Largest Buybacks * Median 3-Year Return For All Stocks: 6.68%

28. “Drill-Down” on Dividends By Cap Size & Investment Style By Sector Stratify by P/E Summary of Various Dividend Strategies

29. Dividend Background Initiations Terminations & Increases & Decreases 2011 1,953 101 2010 1,729 145 2009 1,191 804 Source: Standard and Poor's

30. Dividend Increases by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Increasing Stable Decreasing Dividends Dividends Dividends Median 8.30% 6.89% 7.64% Returns Median 3-Year Return for All Stocks – 6.68%

31. Dividend Increases by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Companies with Premium (Discount) By Size Dividend Increases All Stocks to Index Returns All Stocks 8.30 % 6.68 % 1.62 %

32. Dividend Increases by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Companies with Cap Size Premium (Discount) By Size Dividend Increases Index to Index Returns Large CAP 8.38 % 7.61 % 1.24 % Mid CAP 8.858.15 0.70 Small CAP 9.12 7.68 1.79 Micro CAP 7.15 5.16 1.99

33. Dividend Increases by Cap Size and StyleThree-Year Annualized Returns(1990-2011) Companies with Cap Size Premium (Discount) By Size Dividend Increases Index to Index Returns Growth 8.55 % 5.80 % 2.75 % Value 9.03 7.501.53

34. Level of Dividend Increases Three-Year Annualized Returns (1990 – 2011) 12% 10% 8% 6% 4% 2% 8.47% 8.25% 8.31% 0% > 25% 11 – 25% 0 – 10% * Median 3-Year Return For All Stocks: 6.68%

35. Dividend Increases (By Economic Sector) 1990-2011 Three-Year Annualized Return (10 Sectors) With Premium (Discount) Dividend to Increases Sector Sector Returns 12.07% 9.94% 10.74% 10.25% 10.22% 10.12% 9.67% 4.72% 8.82% 7.11% 8.62% 7.25% 8.20% 7.88% 7.30% 5.91% 5.71% 2.23% 5.55% 4.20% 8.30% Energy Financials Utilities Health Care Telecommunication Services Industrials Consumer Staples Materials Information Technology Consumer Discretionary All Stocks (w/Dividend Increases) * Median 3-Year Return For All Stocks: 6.68% 35

36. Free Cash Flow Does Free Cash Flow Make a Difference?

37. * Median 3-Year Return For All Stocks: 6.68%

38. Does Debt Matter?

39. * Median 3-Year Return For All Stocks: 6.68%

40. Conclusions In General (When Ranking 4,000+ Stocks) Increasing dividends is the best use of cash Maintaining dividends is the second best use of cash Buybacks are the third best use of cash M&A in number four spot CapEx and R/D rank in the bottom

41. Conclusions Returns depend upon Company’s “DNA” Mid-Cap: Best Performer by size Value: Best Performer by style Dividend increases had largest positive effect on Growth Stocks and Micro-Cap Stocks Buybacks had largest positive effect on Growth Stocks and Large-Cap Stocks

42. Conclusions Higher Free Cash Flow equates to better total returns Higher Leverage does not appear to negatively impact returns We are not advocating one use of cash strategy over any other - Need to balance between reinvesting in the business and rewarding shareholders

43. DeMarche Associates913-384-4994www.demarche.com