JAPAN Benchmark Analysis included ten high technology companies, six of which were identified in ABC’s list of global competitors. Pension Reference Companies ABC Japan’s retirement / termination benefits curve seems ‰ 10 High Technology to be in line with market norms and the companies reviewed Companies in this analysis. While many companies still have more seniority-based curves where the benefits are small at early years of service and increase drastically after 20 years, the ABC curve increases in a more linear fashion (similar to a Cash Balance curve) and therefore the exposure to unpredictable future liability increases is limited. However, in terms of a funding vehicle, it should be noted that many companies are moving away from unfunded book reserve to external funding such as Defined Contribution option. There will also be a major shift away from “termination lump sum plan” to an old age pension plan in the Japanese corporate pension environment, as the social welfare pension is going to be reduced for younger generations and it would be more and more important for companies to encourage the employees to plan ahead for their post-retirement life. Life Insurance ABC currently offers no Life or AD&D insurance. This represents a weakness compared with the other companies reviewed, and it is advisable to offer life insurance as well as AD&D rider to remain competitive. Overall, the market average for Life Insurance is 2 x annual base salary, capped at JPY 20 - 40 million, with an additional 1 or 2 x annual base capped at JPY 10 million for AD&D. Disability Insurance ABC currently offers no Long Term Disability or Short Term Disability coverage, and this is typical for employers of similar size. When an employee becomes disabled and cannot work, 60% of average daily wage is provided by the government health insurance for up to 18 months. Because of these statutory benefits provided in Japan, most employers in Japan do not provide STD and LTD benefits, with the possible exception of mid-size or large companies that allow employees to choose disability benefits from a list of possible choices in a cafeteria plan. Medical Insurance In Japan, there are many industry-based healthcare plans that are quasi-governmental and contract out of the government medical insurance. Those semi-private plans offer slightly better coverage at smaller premiums to their member companies than the government plan. ABC Japan participates in the healthcare plan of Kanagawa prefecture’s Electric Machinery Association. Overall, the ABC plan is fully consistent with market norms. ABC Japan Co. Ltd. Page B - 10