1. Impact of the MicroWaxBuster ® on Receiver Returns Sergei Kochkin, Ph.D. Knowles Electronics, Inc. February 18, 2002

2. The Cerumen Problem Historically cerumen in the receiver tube in in-the- ear hearing instruments continues to be one of the key reliability problems facing manufacturers, dispensers, and consumers resulting in: Historically cerumen in the receiver tube in in-the- ear hearing instruments continues to be one of the key reliability problems facing manufacturers, dispensers, and consumers resulting in: –Increased repairs –Greater consumer dissatisfaction –Increased expenses for the manufacturer –Increased administrative work for the dispenser –Continued negative word-of-mouth advertising on hearing instruments (due to negative perceptions of reliability). –Increased receiver returns to Knowles Electronics

3. The Solution Knowles Electronics has extensively researched methods for preventing clogging the receiver tube, with little success. Knowles Electronics has extensively researched methods for preventing clogging the receiver tube, with little success. It is our belief that the MicroWaxbuster ® is an effective solution to the cerumen problem. It is our belief that the MicroWaxbuster ® is an effective solution to the cerumen problem. In six months of field testing prior to market introduction it was determined: In six months of field testing prior to market introduction it was determined: –The MicroWaxbuster ® did not contribute to discomfort –Consumers found it “easy” to use –100% of receiver tubes were free of cerumen –Acoustical specifications were not impacted

4. The Solution But what about the long term implications of MicroWaxbuster ® usage? But what about the long term implications of MicroWaxbuster ® usage? Two studies: Two studies: –Manufacturer returns across 7,000,000 receivers as a function of Waxbuster or MicroWaxbuster usage. –Service records on 90,000 consumers comparing MicroWaxbuster users and non- users.

5. Study # 1- Method Using Knowles internal sales databases, manufacturer purchases of Knowles’ smaller receivers (EH, ES, FK, FS, FH, FD), Waxbuster ®, and MicroWaxbuster ® as well as receiver returns were simultaneously tracked for the period 1998-2000. Using Knowles internal sales databases, manufacturer purchases of Knowles’ smaller receivers (EH, ES, FK, FS, FH, FD), Waxbuster ®, and MicroWaxbuster ® as well as receiver returns were simultaneously tracked for the period 1998-2000. The following indices were calculated over the three year period for 94 hearing aid manufacturers: The following indices were calculated over the three year period for 94 hearing aid manufacturers: –Small receiver within-warranty return ratio –Waxbuster ® penetration = (Waxbuster ® /small receiver purchases) –7,000,000 receivers were studied during this time period. Receiver returns were analyzed as a function of Waxbuster ® penetration for each manufacturer. Receiver returns were analyzed as a function of Waxbuster ® penetration for each manufacturer.

6. Impact of the Waxbuster ® on Small Receiver Returns Receiver returns index =return rate as percent of non-users of Micro/Waxbuster There is a clear relationship between usage of the Micro/Waxbuster ® and receiver returns. Heavy users of the Micro/Waxbuster are 8 times less likely to return receivers for credit

7. Study # 2 – 90,000 Consumers Database query of one US manufacturer: Database query of one US manufacturer: 24 month study across three styles of hearing instruments: CIC, ITC, ITE. 24 month study across three styles of hearing instruments: CIC, ITC, ITE. Consumers segmented: Consumers segmented: –Age of instrument – 1-24 months –MicroWaxbuster usage or None. Tracked receiver replacements in corporate service files. Tracked receiver replacements in corporate service files.

8. Receiver replacement rates per 100 CIC hearing aids (n=21,345)

9. Receiver replacement rates per 100 ITC hearing aids (n=47,316)

10. Receiver replacement rates per 100 ITE hearing aids (n=21,647)

11. Percent reductions in receiver replacements by style of hearing aid due to the MicroWaxbuster across all months and over two years (n=90,308).

12. Conclusions Increased penetration of ITE, ITC, and CIC hearing instruments with the MicroWaxbuster ® product will have a positive impact on the market place. Increased penetration of ITE, ITC, and CIC hearing instruments with the MicroWaxbuster ® product will have a positive impact on the market place. We believe that manufacturers should offer this as a strongly recommended option to the dispensing community. We believe that manufacturers should offer this as a strongly recommended option to the dispensing community. Both manufacturers and dispensers should recognize increased profits by selling this optional component while reducing within-warranty repairs. Both manufacturers and dispensers should recognize increased profits by selling this optional component while reducing within-warranty repairs. Consumers for a small additional fee, will experience greater reliability in their product resulting in fewer hearing instrument repairs, reduced frustration and therefore increased consumer satisfaction. Consumers for a small additional fee, will experience greater reliability in their product resulting in fewer hearing instrument repairs, reduced frustration and therefore increased consumer satisfaction.