May 2012 J.E. CASCADING GRAT & INSTALLMENT SALE ANALYSIS Investment products: Not FDIC insured ¢ No bank guarantee « May lose value Please see important information at the end of this presentation. J.P Morgan HOUSE_OVERSIGHT_022350

A sale to an IDGT is a tax-efficient way to transfer future appreciation of an asset Intentionally Defective Grantor Trust (“IDGT”) e Grantor makes arm’s length sale of assets to an irrevocable trust e Grantor receives a note for the fair market value of the asset plus interest at current AFR e Grantor pays income taxes generated by trust assets e After the note is paid, remaining trust assets pass to heirs gift tax free e Additional considerations — trust should be “pre-funded” by grantor to provide sufficient coverage for the note — having the loan guaranteed by trust beneficiaries may be beneficial — advisable to allocate GST exemption to trust in order to maximize benefit to heirs J.P Morgan i HOUSE_OVERSIGHT_022351

How a sale to an IDGT works G) Sell asset at fair market value to the trust in return for a promissory note bearing interest G) Sell asset to trust for a note at proper AFR* based upon term of loan —==> (EE @) Grantor IDGT @) Receive payments satisfying terms of note ©) Pay income taxontrust ecelve Remaining assets G) Pay income tax on trust income and realized income and Payments pass to beneficiaries* gain realized gain () After note is paid off, remaining assets in trust Beneficiaries are available, free of gift tax, for beneficiaries** To enhance the potential benefits consider funding a series of cascading GRATs - the remainders can be added to the IDGT If the cascading GRATs are successful, at the end of the cascading GRAT terms additional assets can be sold to the IDGT * AFRs are defined as: 1) short-term - not over three years; 2) mid-term - over three, but not over nine years; 3) long-term - over nine years. ** |f Grantor dies before note is satisfied, the fair market value of the note is includible in grantor’s estate. J.P Morgan 2 HOUSE_OVERSIGHT_022352

A “Cascading GRAT” strategy enhances the benefits of a GRAT e The “Cascading GRAT” strategy uses a GRAT’s annuity stream to fund subsequent short-term GRATs — annual reinvestment of annuity stream enhances potential value for beneficiaries e Multiple short-term GRATs allow you to take advantage of market volatility — shorter terms permit market “spikes” to be captured immediately e Short-term GRATs enable you to better manage mortality risks — if grantor dies during term of trust, the assets in the GRAT are included in the estate — grantor has greater probability of surviving a shorter term J.P Morgan 3 HOUSE_OVERSIGHT_022353

How a “Cascading GRAT” strategy works G) Grantor transfers asset(s) to an irrevocable trust. Grantor may manage GRAT assets as trustee. @) Grantor pays little or no gift tax, or uses gift tax exemption*, on present value of trust remainder** Annuity payments from existing GRATs fund a new GRAT Grantor pays tax on ordinary income and realized gain earned by the trust (but not on annuity amount transferred from trust to grantor) ©; When trust term ends, remaining trust assets pass to beneficiaries free of gift tax if grantor does not survive the term, trust assets are included in the estate and subject to estate tax If necessary, grantor pays gift tax or uses gift tax exemption on transfer Grantor pays tax on ordinary income Grantor and realized gain earned by the trust Grantor transfers G) asset(s) Year 0 @) Annuity payments funds new GRAT Year 1 Anguity 1a Remaining Beneficiaries’ Estas © Trust ends G) Annuity payment funds new GRAT *Gift tax exemption in 2012 shelters up to $5,120,000 per individual of value transferred from gift tax. **Calculation based on Treasury discount rate in effect at time of funding GRAT. A recent Tax Court decision (Walton v. Commissioner, 115 T.C. No. 41 (Dec. 22, 2000)) allows GRAT to be “zeroed out,” eliminating the need to incur any gift tax. J.P Morgan 4 HOUSE_OVERSIGHT_022354

Economic flows of Cascading GRATs Example Value of initial transfer to GRAT $50,000,000 IRS discount rate 1.60% Number of GRATs 4 Length of strategy 5 years Annuity rate 51.20% Escalating annuity percentage 0% Term of individual GRATs 2 years Future IRS discount rate 1.60% Note: Assumes grantor survives all GRAT terms Note: Model does not include income taxes; the ongoing income taxes generated by the trust are paid by the grantor, income tax implications should be carefully considered Note: Model assumes all annuity payments are made in cash GRAT First Year 50,000,000 25,601,587 38,710,413 32,929,786 12,743,825 21,180,642 34,224,114 Appreciation 7,500,000 3,840, 238 5,806, 562 4,939,468 0 11,081,587 5,674, 124 8,579,456 7,298, 286 (25,601,587) (13, 108, 825) (19,820, 960) (16,861,096) 0 11,081,587 18,417,950 29,760,099 41,522,399 31,898,413 16,333,000 24,696,014 21,008, 158 42,184,364 4,784,762 2,449,950 3,704,402 3,151,224 36,682,056 16,861,096 Pre-tax annual return of asset Return 15.00% 15.00% 15.00% 15.00% 15.00% GRAT Second Year Appreciation Annuit (25,601,587) (13, 108,825) (19,820, 960) (16,861,096) 36,682,056 59,045,460 Numbers have been rounded for convenience, are only estimates for illustrative purposes and should not be relied upon. Corporate insiders should consult with securities counsel as to any reporting issues under Section 16 of the Securities Exchange Act of 1934 associated with receiving shares in-kind. Note: Above example is for illustrative purposes only. These materials should not be construed as providing legal, tax or accounting advice. GRATs involve complex tax and, in the case of insiders, securities laws issues that should be discussed with your own advisors and company counsel. Annuity will be paid for full term to the grantor or, in case of the grantor’s death, to the grantor’s estate. Calculation is based on 2000 Tax Court ruling in Walton v. Commissioner (115 T.C. No. 41 (Dec. 22, 2000). J.P Morgan HOUSE_OVERSIGHT_022355

Economic flows of IDGT* Example - Initial Funding Total assets transferred to trust Valuation discount Valuation of assets for gift tax purposes Seed capital/coverage Trust term Lifetime gift tax exemption applied Gift tax paid Applicable interest rate (AFR) Annual interest payment on note Note face value (year 20 balloon payment) Assumptions - The arithmetic return of assets = 15%; of which ordinary income/short term capital gains = 15% $50,000,000 $5,000,000 20 years $5,000,000 $0 2.89% $1,300,500 $45,000,000 Additional funding in year 5 from cascading GRATs Assumed assets in trust at the end of year 5 Additional assets from GRATs Additional note (9:1 leverage) Initial note outstanding face value Total outstanding notes Remaining note term Lifetime gift tax exemption applied Gift tax paid Applicable AFR Annual interest payment on notes - Income tax rate used for majority of analysis = 48.4% (Federal = 39.6%, New York City = 8.33%, Medicare = 3.8%) - Capital gains tax rate used for majority of analysis = 28.8% (Federal = 20%, New York City = 8.33%, Medicare = 3.8%) - Income and capital gains tax rates adjusted in early years to reflect current law $91,799,393 $41,522,399 $373,701,591 $45,000,000 $418,701,591 15 years $0 $0 2.89% $12,100,476 - Assumes note payments are satisfied using yield first, then seed capital, and finally other assets. If a valuation discount is specified, a pre-disount value is used Return (asset and seed Interest and principal Trust Value (pre- capital) payments on note discount) 0 69,285,714 1 10,392,857 1,300,500 78,378,071 2 11,756,711 1,300,500 88,834,282 3 13,325,142 1,300,500 100,858,924 4 15,128,839 1,300,500 114,687,263 5 17,203,089 1,300,500 705,971,667" 6 105,895,750 12,100,476 799,766,941 7 119,965,041 12,100,476 907,631,507 8 136,144,726 12,100,476 1,031,675,757 9 154,751,364 12,100,476 1,174,326,644 10 176,148,997 12,100,476 1,338,375,165 on 200,756,275 12,100,476 1,527,030,964 ea 229,054,645 12,100,476 1,743,985,132 13 261,597,770 12,100,476 1,993,482,426 14 299,022,364 12,100,476 2,280,404,314 15 342,060,647 12,100,476 2,610, 364,485 16 391,554,673 12,100,476 2,989,818, 682 17 448,472,802 12,100,476 3,426, 191,008 18 513,928,651 12,100,476 3,928,019, 183 19 589,202,878 12,100,476 4,505, 121,585 20 675,768,238 430,802,067 4,750,087,756 Return to grantor (nominal) 606,711,231 Net trust amount 4,750,087,756 * Analysis assumes that at the end of year 5 the $41,522,399 cumulative remainder of cascading J.P Morgan GRATs from the previous page is used as seed capital for another note at 9:1 leverage used to 6 purchase $373,701,591 of assets at a 30% discount using today’s long-term AFR of 2.89% HOUSE_OVERSIGHT_022356

A sale to an IDGT results in greater value for heirs than if the asset were held outright Cash flow example: Scenario 1 Scenario 2: Sell asset to IDGT Hold asset Grantor Cost of taxes Asset held/sold to trust* $64,285,714 $64,285,714 Coverage 5,000,000 5,000,000 Gift tax on coverage Assets from initial funding 100,544,702 7,570,535 (37,615,685) 130,589,853 Assets from cascading GRATS 72,558,032 59,045,460 (28,009,827) 41,522,399 Assets held/sold to trust** 533,859,416 533,859,416 Value of assets 2,066,664,527 763,711,690 (3,447,134,919) 4,750,087,756 Estate tax*** (1,136,115,490) (420,041,430) 1,895,924,205 - Net wealth to beneficiaries 930,549,037 343,670,261 (1,551,210,713) 4,750,087,756 Total value to beneficiaries $930,549,037 $3,542,547,303 ™ a Value added by IDGT $2,611,998,266 1. Assets do not receive a step up in basis upon death * Value shown is prior to assumed valuation discount of 30%, the value of assets for gift tax purposes is assumed to be $45,000,000 ** Value shown is prior to assumed valuation discount of 30%, the value of assets for gift tax purposes is assumed to be $373,701,591 *** In scenario 1 an estate tax exemption of $1,000,000 is applied. This is the lesser of the $5,000,000 gift tax exemption applied to scenario 2 and the $1,000,000 applicable estate tax exemption in year 20 Assumptions: The arithmetic return of asset years 1-20=15%;of which ordinary income/short term capital gains = 15%;interest rate paid to grantor = 2.89%; annual interest payment=$1,300,500; valuation discount = 30%; transfer tax rate (for transfers at the end of year 20) = 55%. Numbers have been rounded for convenience, are only estimates for illustrative purposes and should not be relied upon. Corporate insiders should consult with securities counsel as to any reporting issues under SEC Section 16 of the Securities Exchange Act of 1934 associated with receiving shares in-kind. Note: These materials should not be construed as providing legal, tax, or accounting advice. On June 7, 2001, President Bush signed into law the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA") which significantly changed estate, gift, and generation-skipping transfer taxes. On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010, which institutes estate, gift, and GST taxes at 35% with a $5MM exemption for 2011 and 2012 (adjusted for inflation), after which rates and exemptions will return to pre-EGTRRA levels. NOTE: Analysis assumes that at the end of year 5 the $41,522,399 cumulative remainder of cascading GRATs from page 5 is used as seed capital for another note at 9:1 leverage used to purchase $373,701,591 of assets at a 30% discount using today’s long-term AFR of 2.89% J.P Morgan ; HOUSE_OVERSIGHT_022357

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