Fiscal Year 2017 Review of Operations
Transitional Long-term Benefit Association Reserve Fund

全国市町村職員共済組合連合会
National Federation of Mutual Aid Associations for Municipal Personnel

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Table of Contents
・Fiscal Year 2017 Investment Results (Overview)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 3
Section 1 Administration and Investment of Funds in FY2017
・Fiscal Year 2017 Market Environment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 5
・Fiscal Year 2017 Asset Mix ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 6
・Fiscal Year 2017 Investment Return・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 7
・Fiscal Year 2017 Contribution Analysis of Excess Return・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 8
・Fiscal Year 2017 Investment Income ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 10
・Fiscal Year 2017 Value of Assets ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 11
・Fiscal Year 2017 Status of Risk Management (Overall Assets)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 12
・Fiscal Year 2017 Fees・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 13
Section 2 Systems and Activities Concerning Administration and Investment of Funds
・Basic Approach to Investment ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 15
・Benchmark Portfolio・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 16
・Stewardship Activities ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 17
・Review of Manager Structure・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 23
・Administration and Evaluation of Entrusted Investment Management Institutions, etc.・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 24
・Governance・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 25
・Other systems・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 30
Section 3 Reference Data
・Changes in the investment return, etc. (since the integration of employee pension plans)・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 32
・Changes in the value of investment assets and the asset mix (since the integration of employee pension plans)・・・・・・・・P 33
・Change in number of passive/active funds by assets (entrusted) (since the integration of employee pension plans)・・・・・ P 34
・Issues held (as of the end of Fiscal Year 2017)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ P 35

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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Investment Results (Overview)

Investment return(FY2017)+6.81% *Modified total return (market value basis)+5.09% *Realized return (book value basis)

Investment income +JPY391.3 billion *Investment income(market value basis)(FY2017)+JPY250.8 billion *Realized income(book value basis)

Value of investment assets: JPY5,914 billion *Total market value(End of FY2017)* As pension funds are intended for long-term investment, the investment status must be judged from the long-term
perspective.
As investment income is based on the total market value as of the end of each term, it should be kept in mind that it
includes valuation gains/losses, which means it may change depending on market movements.
(Note 1) The return and income represent figures after the deduction of fees, etc. settled within the relevant period.
(Note 2) Realized income represents the sum of trading profits/losses and interest and dividend income, etc.

3Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Section 1 Administration and Investment of Funds in FY2017

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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Market Environment○ Change in benchmark return (March 31, 2017 = 100)
130
Domestic bonds
125
Domestic equities

120

Foreign bonds
Foreign equities

115

110

105

100

95
Mar. 31,2017

Apr. 30,
2017

May. 31,2017

Jun. 30,
2017

Asset class

Jul. 31,2017

Aug. 31,2017

BenchmarkSep. 30,
2017

Oct. 31,2017

Nov. 30,
2017

Dec. 31,2017

Jan. 31,2018

Feb. 28,2018

Mar. 31,2018

Returns
Q1

Q2

Q3

Q4

Domestic bonds NOMURA-BPI Overall

0.02%

0.18%

0.33%

0.37%

0.90%

Domestic equities TOPIX (with dividends)

6.76%

4.74%

8.69%

-4.67%

15.87%

4.76%

2.46%

1.29%

-4.14%

4.23%

Foreign equities MSCI ACWI ex. JAPAN (yen-based, with dividends)

5.26%

5.60%

5.69%

-6.54%

9.81%

Total

3.70%

3.02%

3.88%

-3.28%

7.34%

Foreign bonds

FTSE World Government Bond Index (excluding
Japan; without hedging, yen-based)

Full fiscal year

(Note) The total is the return calculated by weight-averaging the benchmark returns for individual asset classes basedon the shares in the asset mix of the benchmark portfolio.

5(Source: bloomberg)

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Asset Mix
The composition by asset is as follows:(Unit: %)FY2016End of FY

FY2017
End of Q1

End of Q2

End of Q3

End of FY

Domestic bonds

44.6

42.0

40.2

37.8

38.3

Domestic equities

23.8

25.2

25.9

27.4

26.7

Foreign bonds

10.6

11.2

11.5

11.6

11.7

Foreign equities

19.8

20.7

21.4

22.0

21.3

Short-term assets

Total

1.1

0.9

1.1

1.2

2.0

100.0

100.0

100.0

100.0

100.0

Composition by Asset Class(as of end of FY2017)
Short-term
assets2.0%
Foreignequities
21.3%
Foreign
bonds
11.7%

Domestic
bonds
38.3%

Domestic
equities
26.7%(Note 1) Concerning the benchmark portfolio, the share in the mix is 35% for domestic bonds (±15%), 25% for domestic equities (±14%), 15% for foreign bonds(±6%) and 25% for foreign equities (±12%) (the figures in the parentheses represent deviation tolerances).
(Note 2) Due to rounding, the total sum of individual figures may not necessarily add up to 100%.
(Note 3) Starting in fiscal year 2016, short-term assets held by each fund were classified into relevant asset classes in principle.

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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Investment Return
Changes in modified total return

The modified total return for FY2017 was 6.81% for the overall assets.

12.00%
Each quarter10.00%(Unit: %)FY2017

Modified total return10.08%

Aggregate

8.00%

Q1

Q2

Q3

Q4

FY total

6.00%

3.37

2.76

3.74

-3.05

6.81

4.00%

Domestic bonds

0.20

0.21

0.27

0.30

0.96

2.00%

Domestic equities

6.80

4.97

8.79

-4.41

16.32

0.00%

Foreign bonds

4.77

2.43

1.31

-4.35

3.65

6.81%

6.19%
3.74%

3.37%

2.76%

-2.00%-4.00%

Foreign equities

5.60

5.47

5.49

-6.60

9.57

Short-term assets

0.00

0.00

0.00

0.00

0.00

Q1

Q2

Q3

-3.05%
Q4

Modified total return by asset (aggregate for the fiscal year)
18.00%

16.32%

16.00%(Unit: %)12.00%FY2017

Realized return14.00%

Q1

Q2

Q3

Q4

FY total

1.19

1.04

1.18

1.68

5.09

9.57%

10.00%

8.00%

6.81%

6.00%

(Note 1) The return in each quarter is the period rate.
(Note 2) The modified total return and realized return represent figures after the deduction of fees,
etc. settled within the relevant period.
(Note 3) The amount of interest related to the settlement of additional expenses for the transferfrom the transitional long-term accounting to the employees' pension insurance
accounting is deducted from the return for domestic bonds.

7

3.65%

4.00%
2.00%

0.96%
0.00%

0.00%
Domestic Domestic
bonds
equities

Foreignbonds

Foreign Short-term
equities
assetsOverallassetsTransitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Contribution Analysis of Excess Return ①
The modified total return for overall investment assets was 6.81%, while the excess return compared with the benchmark
return was -0.53%.
For the asset allocation factors, domestic bonds whose benchmark return was relatively low were overweight against thebenchmark portfolio on average. This factor, among others, contributed to the negative excess return.
The excess return due to the individual asset factor made positive contributions because the modified total return on
domestic equities exceeded the benchmark return.
FY2017 (April 2017 through March 2018)(Unit: %)OverallassetsDomesticbonds

Domestic
equities

Foreignbonds

Foreignequities

0.40%

Modified total return

6.81

0.96

16.32

3.65

9.57

0.00%

Benchmark return* 7.34

0.90

15.87

4.23

9.81

Excess return

-0.53

0.05

0.45

-0.58

-0.24

* The benchmark return for overall assets is calculated by weight-averaging the benchmark returns
for individual asset classes based on the shares in the asset mix of the benchmark portfolio.

Asset allocation
factor①

Individual asset
factor②①＋②

Domestic bonds-0.47%

0.03%-0.44%

Domestic equities-0.02%

0.12%

0.09%

Foreign bonds

0.13%-0.07%

0.05%

Foreign equities-0.10%-0.05%-0.16%

Short-term assets-0.08%

0.00%-0.08%

Total-0.55%

0.02%-0.53%

Excess Returns (by Asset Class)

0.80%

0.45%
0.05%

-0.40%-0.80%-0.24%-0.53%Overallassets

-0.58%
Domesticbonds

Domestic
equities

Foreignbonds

Foreignequities(Reference) Deviation of the Federation's portfolio (book value average balance +accrued income as of the end of previous period + valuation gains/losses as of theend of previous period) from the benchmark portlolio
Federation's
portfolio

Benchmarkportfolio

Deviation

Deviation
tolerance

Domestic bonds

42.4%

Domestic equities

24.7%

35.0%

7.4%

±15%

25.0%

-0.3%

±14%

Foreign bonds

11.3%

15.0%

-3.7%

±6%

25.0%

-4.5%

±12%

Foreign equities

20.5%

Short-term assets

1.1%

Total

100.0%

1.1%
100.0%

0.0%(1) Asset allocation factor: A factor that is attributable to the difference between the asset mix of the fund and the benchmark portfolio.
(2) Individual asset factor: A factor that is attributable to the difference between the modified total return and benchmark returns concerning each asset class.

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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Contribution Analysis of Excess Return ②○ Domestic bonds
The modified total return of domestic bonds was 0.96%, which exceeds the benchmark return (0.90%) by 0.05%.
Although the deduction of the amount of interest related to the settlement of additional expenses for the transfer from thetransitional long-term accounting to the employees' pension insurance accounting had a negative impact, the excess return
was positive due to such factors as high returns on passive investment whose benchmark is NOMURA-BPI/Ladder (20years), which generated higher returns than the benchmark NOMURA-BPI Overall.
○ Domestic equities
The modified total return of domestic equities was 16.32%, which exceeds the benchmark return (15.87%) by 0.45%.
Owning to good selection of the issues of active fund and the entire active fund exceeding the benchmark, the excess
return turned out to be positive.
○ Foreign bonds
The modified total return of foreign bonds was 3.65%, which was below the benchmark return (4.23%) by 0.58%.
The excess return was negative due to such factors as the relatively lower returns on active funds whose benchmark is
Barclays Global Aggregate Index compared with active funds whose benchmark is FTSE Global Bond Index.
○ Foreign equities
The modified total return of foreign equities was 9.57%, which was below the benchmark return (9.81%) by 0.24%.
In addition to the negative impact of dividend taxation factors on passive funds, a part of active funds fell below thebenchmark, and the excess return turned out to be negative.

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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Investment Income
Changes in investment income

The investment income for FY2017 was JPY391.3 billion (for overall assets).

(Unit: JPY100M)
6,000(Unit: JPY100M)

FY2017

Investment income

Q1

Q2

Q3

Q4

FY total

1,939

1,616

2,237

-1,879

3,913

50

50

63

69

234

Domestic equities

944

736

1,375

-739

2,317

Foreign bonds

297

162

91

-313

238

Foreign equities

648

667

707

-897

1,125

Short-term assets

0

0

0

0

0

Aggregate

4,000

3,913

3,555
3,000
2,000

Domestic bonds

5,793

Each quarter

5,000

2,237

1,939

1,616

1,000
0
- 1,000- 2,000-1,879- 3,000
Q1

Q2

Q3

Q4

Investment income by asset (aggregate for the fiscal year)(Unit: JPY100M)(Unit: JPY100M)

3,500

FY2017

Realized income

3,913

4,000

Q1

Q2

Q3

Q4

589

512

579

829

FY total

3,000

2,508

2,500

2,317

2,000
(Note 1) The investment income and realized income represent figures after the deduction of fees, etc.
settled within the relevant period.
(Note 2) The investment income represents the realized income adjusted for the effects of changes invaluation gains/losses based on market value.
(Note 3) Realized income represents the sum of trading profits/losses and interest and dividend income, etc.
(Note 4) The amount of interest related to the settlement of additional expenses for the transfer from thetransitional long-term accounting to the employees' pension insurance accounting is deducted fromthe return for domestic bonds.
(Note 5) Due to rounding, the total sum of individual figures may not necessarily add up to FY total.

10

1,500

1,125

1,000

500

238

234

0
0
Domesticbonds

Domestic
equities

Foreignbonds

Foreignequities

Short-term
assetsOverallassetsTransitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Value of Assets
The book value, total market value and valuation gains/losses by asset is as follows.
(Unit: JPY100M)

FY2017FY2016End of FY
Book
value

End of Q1

Total market Valuations
profits/losses
value

Book
value

End of Q2

Total market Valuations
profits/losses
value

Book
value

End of Q3

Total market Valuations
profits/losses
value

Book
value

End of FY

Total market Valuations
profits/losses
value

Book
value

Total market Valuations
profits/losses
value

Domestic
bonds

23,15425,842

2,689

22,074

24,596

2,522

21,621

24,066

2,446

20,897

23,251

2,354

20,417

22,6252,208

Domestic
equities

11,25913,801

2,542

11,523

14,745

3,222

11,657

15,481

3,824

12,011

16,857

4,846

12,007

15,786

3,779

Foreign
bonds

6,152

6,160

8

6,311

6,578

267

6,496

6,870

374

6,704

7,111

408

6,927

6,948

21

Foreignequities

8,566

11,501

2,934

8,721

12,148

3,426

8,836

12,815

3,979

8,932

13,522

4,590

9,054

12,625

3,571

Short-term
assets

636

636

0

509

509

0

629

629

0

742

742

0

1,156

1,156

0

49,76757,941

8,174

49,13858,575

9,437

49,24059,862

10,62249,286

61,482

12,19749,56159,140

9,579

Total

(Note 1) Due to rounding, the total sum of individual figures may not necessarily add up to Total.
(Note 2) Starting in fiscal year 2016, short-term assets held by each fund were classified into relevant asset classes in principle.

The amount of funds allocated and withdrawn by asset class (for FY2017)(Unit: JPY100M)

Amount of funds
allocated and withdrawn

Domestic bonds

Domestic equities-3,451-332

Foreign bonds

Foreign equities

550

-0

(Note) The above figures represent the total amount of fund flows related to the allocation and withdrawal of funds (rebalancing) conducted for the purposeof changing the asset mix and pension benefit payment (cashing-out).

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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Status of Risk Management (Overall Assets)
Asset mix and estimated tracking error
In fiscal year 2017, the shares in the asset mix concerning all asset classes—domestic bonds, domestic equities, foreign
bonds and foreign equities—stayed within the deviation tolerance.
In addition, the estimated tracking error for the entire asset (*) declined at the end of the fiscal year compared with that of
the beginning of the fiscal year because the shares of each asset in the asset mix came close to the benchmark portfolio.
【Changes in the asset mix】
Domestic bonds
55%【Changes in the estimated tracking error】
Domestic equities

Deviation tolerance (upper limit: 50%)

45%

Deviation tolerance (upper limit: 39%)

50%

40%

45%

35%

40%

30%

Benchmark portfolio (35%)
35%

25%

30%

20%

25%

15%

20%

10%

(%)
3.0
2.5
2.0

Benchmark portfolio (25%)

1.5
1.0
0.5

Deviation tolerance (lower limit: 20%)
15%

Deviation tolerance (lower limit: 11%)
5%

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Foreign bonds

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Foreign equities

23%

40%

Deviation tolerance (upper limit: 37%)

Deviation tolerance (upper limit: 21%)
21%

35%

19%
30%
17%

Benchmark portfolio (15%)
15%

25%

13%

20%

Benchmark portfolio (25%)

11%
15%
9%

Deviation tolerance (lower limit: 9%)

7%

10%

Deviation tolerance (lower limit: 13%)

5%

5%

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

12

Nov

Dec

Jan

Feb

Mar

0.0
Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

(*) Measured the estimated tracking error against thebenchmark portfolio.

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Fiscal Year 2017 Fees
The amount of fees totaled about JPY3.0 billion in fiscal year 2017.
The fee rate relative to the value of investment assets came to 0.05%.
(Unit: JPY100M, %)FY2017Fees

Fee rate

Domestic bonds

0

0.00

Domestic equities

13

0.09

Foreign bonds

5

0.07

Foreign equities

12

0.10

Overall assets

30

0.05

(Note 1) Fees include management fees and custodian fees related to investment.
(Note 2) The amount of fee is rounded off to the nearest hundred million yen.
(Note 3) Fee rate = fee amount/month-end market value average balance13

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Section 2 Systems and Activities Concerning Administration and Investment of Funds

14

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Basic Approach to Investment○ As a basic policy, the Federation shall manage the fund with the objective of contributing to the stability of the transitional long-term benefit(“TLTB”) plan operations based on the characteristics of a closed-end pension fund that will have no new contribution income, especiallypaying attention to downside risks, with constant awareness of the relationship between future liabilities and the fund and from a long-term
perspective and in a stable and efficient manner.
○ In the management of funds, investments shall be made in a way that ensures appropriate diversification across multiple assets withdifferent risk/return profiles and other characteristics.
○ The investment of the Transitional Long-term Benefit Association Reserve Fund, which has the characteristics of a closed pension plan,
shall be managed appropriately by establishing the benchmark portfolio in order to generate investment returns needed for the fund with theminimum risk, while fully paying attention to the relationship between future liabilities and the fund. In addition, efforts shall be made to earn
the benchmark return for each asset class over the long term, as well as generating benchmark returns for each asset class.

Basic Policy for Management and Investment of Transitional Long-term Benefit Association Reserve Fund (Extract)
1. Basic Policy
The Federation shall manage the TLTB association reserve fund with the objective of contributing to the stability of the TLTB plan
operations based on the characteristics of a closed-end pension fund that will have no new contribution income, especially paying attention
to downside risks, with constant awareness of the relationship between future liabilities and the fund and from a long-term perspective andin a stable and efficient manner.
Accordingly, on the basis of appropriately diversifying investments in multiple assets that differ in risk/return and other characteristics(“Diversified Investment"), the Federation shall manage and invest the TLTB association reserve fund by establishing an asset mix from thelong-term perspective (the “Benchmark Portfolio").
2. Investment target
The investment of the TLTB association reserve fund, which has the characteristics of a closed pension plan, shall be managed
appropriately by establishing the benchmark portfolio in order to generate investment returns needed for the fund with the minimum risk,
while fully paying attention to the relationship between future liabilities and the fund.
In doing so, attention shall be paid not to distort, among other things, price formation in the market and private sector investment
activities.
In addition, efforts shall be made to earn the benchmark return for each asset class for each fiscal year, as well as generating benchmark
returns for each asset class over the long term.

15

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Benchmark Portfolio
1. Benchmark portfolio (asset mix)
Domestic bonds Domestic equities

Foreign bonds

Foreign equities

Asset mix

35%

25%

15%

25%

Deviation tolerance

±15%

±14%

±6%

±12%

16

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Stewardship Activities ①
1. Stewardship activities○ The Federation has the responsibility to increase medium to long-term investment returns for its members and beneficiaries by encouraging
improvements in enterprise value and sustainable growth of investee companies. Efforts for the fulfillment of these responsibilities, including
constructive dialogues with the investee companies (engagement) and exercise of voting rights, are collectively called "stewardship activities."<Stewardship Activities>
Entrusted investment

Equity investment(1) Guidelines for Exercising Shareholders' Voting Rights(2) Corporate Governance Principles

Federation

Research and hearing on activities

Entrusted
investment
management
institutions

Constructive dialogues

Companies
Exercise of Voting Rights

Report of activities

Enhancement of enterprise values

Medium- to long-term return○ The Federation has established the "Corporate Governance Principles of National Federation of Mutual Aid Associations for Municipal Personnel"
and "Guidelines for Exercising Shareholders' Voting Rights" setting forth basic approaches to stewardship activities. In addition, the Federationagreed with the purpose of Japan's Stewardship Code, and it announced its acceptance of the Code in May 2014 and the Revised Stewardship
Code (the "Revised SSC") in November 2017. As the Federation currently makes equity investments through entrusted investment management
institutions, it checks whether these institutions are implementing engagements and exercising voting rights in an appropriate way according to thepolicies of the Federation through investigations and hearings.

Past efforts•

May 2010

Established the "Guidelines for Exercising Shareholders' Voting Rights" (Document (1)), announcing the Federation's approaches to equity investment and exercise of voting rights as abeneficial shareholder.

•

May 2014

Announced its acceptance of the Japan's Stewardship Code.
Established the "Corporate Governance Principles" (Document (2)), announcing the Federation's approach for corporate governance necessary for the long-term enhancement of stock
values.

•

October 2015 Established the Basic Policy for Management and Investment of Funds associated with the integration of the employee pension plans, and newly established Documents (1) and (2).

•November 2017 Announced the acceptance of the Revised SSC

17

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Stewardship Activities ②
2. Efforts in fiscal year 2017
○ As a part of its stewardship activities for fiscal year 2017, the Federation conducted surveys and hearings for entrusted investment
management institutions in relation to the situations of engagement activities and exercise of shareholders' voting rights so as to verify thestatus of their efforts. In addition, the Federation sought their opinions on challenges and issues with their stewardship activities andencouraged them to engage in stewardship activities in an effective way adapted to their respective investment styles and resources.
○ For the Revised SSC published by the Financial Services Agency on May 29, 2017, the Federation agreed with the purpose and renewed
its acceptance at the end of November 2017, publishing it on its website. Further, the Federation confirmed that all twelve entrusted
investment management institutions of domestic equities have signed up for the Revised SSC.
○ On January 25, 2018, the Federation publicized its Annual Stewardship Activity Report FY2017 on its website.

Outline of efforts in fiscal year 2017
Subjects

PeriodSurveyed institutions

Survey on exercise of voting
rights

September 2017

Entrusted investment management
institutions for domestic and foreign
equities(12 companies for domestic equities
and 8 companies for foreign equities)

Survey on performance of
stewardship activities
Hearings of entrusted
investment management
institutions
Signup of Revised SSC (for thedetails, see the following page)

Public disclosure of Annual
Stewardship Activity Report
FY2017Main subjects confirmed••••

Results of exercise of voting rights
Changes to guidelines
Structure for exercise of voting rights
Special features of proposals and trends ofaffirmative and negative voting decisions

October 2017••

Structure for managing conflicts of interest
Specific details of engagement activities (target

November 2017•

companies, details, progress management, costs, etc.)

November 30,
2017

12 entrusted investment management
institutions for domestic and foreign
equities••

January 2018

Improvements, challenges and issues withengagement efforts
Reason for decision on exercise of individual
proposals
Method of self-assessment of stewardship
activities (including internal assessments andincentives of persons in charge)18

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Stewardship Activities ③
3. Signup to revised stewardship code
○ About three years have passed from the establishment of Japan's Stewardship Code, and some progress has been made in corporate
governance reform; however, it has been also pointed out that companies' responses are only formal. In this situation, in order to develop
the formal corporate governance reform into a substantive one, the Financial Services Agency published the revised SSC in May 2017.
○ The revised SSC provides for the more stringent management of conflicts of interest by entrusted investment management institutions,
expanded disclosure of results of exercise of voting rights and self-assessment of stewardship activities, in addition to existing provisions.
○ The following table shows the major items newly added to the Revised SSC and the Federation's responses.

Major new items of Revised SSC and responses by Federation
Major new items of Revised SSC

Responses of Federation(Principle 1)
Guidance
1-3,4,5

Effective monitoring ofasset managers byasset owners

The Federation made it clear in its signup statement that it will conduct monitoring focusing on the quality of efforts inrelation to stewardship activities by entrusted investment management institutions.

(Principle 2)
Guidance
2-2,3,4Strengthening
governance andmanagement of conflictof interest

The Federation made it clear in its signup statement that it will conduct monitoring of entrusted investment
management institutions to check whether they have established appropriate governance structures and manage
conflicts of interest in an appropriate way.

(Principle 5)
Guidance 5-3

Enhanced disclosure of
voting records(disclosure on the basisof individual investee
companies and agenda
items)The Federation required all twelve entrusted investment management institutions of domestic equities to makedisclosure on an individual basis. As a result, it was confirmed that eleven of them already made the disclosure on theindividual basis on their websites and that the remaining one company plans to make the disclosure in May 2018.

(Principle 7)
Guidance 7-4

Self-assessment ofstewardship activities

The Federation made clear in its signup statement that it will regularly conduct a review of the status of implementationof each principle as set out in the Revised SSC and make efforts to further improve its future stewardship activities.

In addition, the Federation made clear in its signup statement that it will require the entrusted investment management
institutions to make public disclosure of results of exercise of voting rights with respect to individual investee
companies and agenda items, and also that it will require any non-disclosing institution to provide an explanation for
non-disclosure.

19

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Stewardship Activities ④
4. Exercise of Voting Rights(i) Exercise of Voting Rights○ In order to fully achieve returns on equity investments, it is necessary to ensure that investee companies secure profits fora long time and manage their businesses paying attention to the interests of shareholders to the maximum degree.
Exercising of voting rights is an important means to enhance shareholder value, and the Federation encourages business
management which would contribute to the long-term enhancement of shareholder value through appropriately exercising
voting rights, in relation to all issues held in principle.
○ More concretely, in principle, entrusted investment management institutions exercise voting rights according to the policyon the exercise of shareholders' voting rights established by the institutions in line with the intent of the Guidelines for
Exercising Shareholders' Voting Rights of the Federation and reviewed by the Federation. In addition, the Federation seeks
reports from the entrusted investment management institutions on the status of exercising voting rights and considers themas part of the assessment of the institutions.
(ii) Exercise of Voting Rights in Fiscal Year 2016
○ For the exercise of voting rights at general meeting of shareholders of companies which settled accounts in fiscal year
2016 (between April 2016 and March 2017), the Federation received reports from its entrusted investment management
institutions on the results of exercising voting rights, reason for voting against the proposal, and organizational structure forexercise of voting rights. In addition, the Federation confirmed that voting rights were exercised in an appropriate way
according to the Guidelines for Exercising Shareholders' Voting Rights of the Federation through hearings.

20

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Stewardship Activities ⑤(iii) Results of the exercise of voting rights concerning domestic equities (companies with accounting settlement between April 2016 and March 2017)(Unit: Number of occasions)
Vote forItems on agenda

Vote against

Total
Rate

Total

Abstension

Rate

Rate

Vote-against ratein the previous
year

28,861

22,669

78.5%

6,192

21.5%

0

0.0%

19.0%

(1,388)(70)(5.0%)(1,318)(95.0%)(0)(0.0%)(97.3%)

Board of Directors/Directors

8,782

5,876

66.9%

2,906

33.1%

0

0.0%

30.3%

Board of Auditors/Auditors

5,090

4,442

87.3%

648

12.7%

0

0.0%

17.3%

Director Remuneration, etc.

3,460

2,891

83.6%

569

16.4%

0

0.0%

11.0%

Appropriation of Surplus

5,764

5,394

93.6%

370

6.4%

0

0.0%

4.6%

Capital Structure(Shareholder Proposal)
By subject

1,421

1,124

79.1%

297

20.9%

0

0.0%

30.2%

Takeover Defense Measures

449

160

35.6%

289

64.4%

0

0.0%

49.6%

Capital Increase or Reduction

27

27

100.0%

0

0.0%

0

0.0%

6.1%

Third Party Allotment of Shares

7

5

71.4%

2

28.6%

0

0.0%

26.7%

Acquisition of Own SharesBusiness Restructure
Incentives Improvement for Executives
Other proposals
Amendment to Articles of Incorporation

2

0

0.0%

2

100.0%

0

0.0%

40.7%

165

162

98.2%

3

1.8%

0

0.0%

0.0%

652

494

75.8%

158

24.2%

0

0.0%

35.9%

3,527

2,286

64.8%

1,241

35.2%

0

0.0%

20.9%

3,256

2,072

63.6%

1,184

36.4%

0

0.0%

21.7%

○ Main features relating to exercise of voting rights• Proposals for which the vote-against ratio was high mainly concerned board of director/directors, takeover defense measures, and amendment to articles ofincorporation.
• The vote-against ratio of proposals concerning board of director/directors slightly increased from the previous fiscal year (from 30.3% to 33.1%). The major
reason for this is that several entrusted investment management institutions tightened the criteria for the exercise of voting rights and proactively
implemented qualitative evaluation. Amidst investors' emphasized focus on corporate governance, a proposal for election of outside directors is increasing.
• The vote-against ratio of proposals concerning takeover defense measures significantly increased from the previous fiscal year (from 49.6% to 64.4%). The
major reason for this is that several entrusted investment management institutions tightened the criteria for the exercise of voting rights. On the other hand,more and more companies decide to abandon takeover defense measures due to investors' stringent policy for exercise of voting rights.

21

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Stewardship Activities ⑥(iv) Results of the exercise of voting rights concerning foreign equities (companies with accounting settlement between April 2016 and March 2017)(Unit: Number of occasions)
Vote forItems on agenda

Vote against

Rate
Total
(Shareholder Proposal)

Abstention

Total
Rate

Rate

Vote-against ratein the previous
year

17,64915,186

86.0%

2,411

13.7%

52

0.3%

12.9%

(1615)(625)(38.7%)(944)(58.5%)(46)(2.8%)(57.3%)

4,943

4,449

90.0%

490

9.9%

4

0.1%

11.3%

By subject
Board of Directors/Directors
Board of Auditors/Auditors

997

994

99.7%

3

0.3%

0

0.0%

1.7%

Director Remuneration, etc.

3,926

3,348

85.3%

577

14.7%

1

0.0%

9.4%

358

356

99.4%

2

0.6%

0

0.0%

0.0%

1,658

1,378

83.1%

280

16.9%

0

0.0%

10.2%

Takeover Defense Measures

222

203

91.4%

19

8.6%

0

0.0%

6.4%

Capital Increase or Reduction

725

553

76.3%

172

23.7%

0

0.0%

14.1%

Third Party Allotment of Shares

231

231

100.0%

0

0.0%

0

0.0%

0.6%

Acquisition of Own Shares

310

303

97.7%

7

2.3%

0

0.0%

3.7%

233

228

97.9%

5

2.1%

0

0.0%

13.1%

Appropriation of Surplus
Capital Structure

Business Restructure
Incentives Improvement for Executives
Other proposals
Amendment to Articles of Incorporation

779

682

87.5%

97

12.5%

0

0.0%

16.3%

4,755

3,751

78.9%

957

20.1%

47

1.0%

20.2%

412

342

83.0%

70

17.0%

0

0.0%

16.4%

(Note) In some countries, voting rights were
not exercised due to such factors as costconsideration and constraints related toadministration.

○ Main features relating to exercise of voting rights• The major proposals for which the vote-against ratio was high concerned director remuneration, etc., capital increase or reduction, andamendment to articles of incorporation.
• The vote-against ratio of director remuneration, etc. increased from the previous fiscal year (from 9.4% to 14.7%). In all markets, there is a
growing interest in transparent, performance-linked remuneration systems.
• In addition, against the background of the adoption of the Paris Agreement on December 2015, shareholder proposals on the environment (E) andsocial concerns (S) increased, voted for by many investors. Further, for some investees, a proposal was made for the appointment of experts witha view to reducing potential risks to shareholder value.

22

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Review of Manager Structure○ Annual comprehensive evaluation
The amount of active investment of domestic equities was reduced based on an annual comprehensive evaluation as of theend of fiscal year 2016.

23

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Administration and Evaluation of Entrusted Investment Management Institutions, etc.
1. Administration and evaluation of entrusted investment management institutions
For the administration of entrusted investment management institutions, the Federation seeks monthly reports fromthem on investment performance and the status of risk, verifies compliance with investment guidelines, and receives abriefing at regular meetings on the overview of investment results and future investment policies.
For the evaluation of entrusted investment management institutions, the Federation performs a qualitative assessment(investment structure, investment process, structures for risk management and compliance) and quantitative assessment(excess return and tracking error in the case of passive investments, and excess return and information ratio in the case ofactive investments) as of the end of each fiscal year.

2. Administration and evaluation of asset administration institutions
For the administration of asset administration institutions, the Federation seeks monthly reports from them on the statusof administration of assets, verifies compliance with asset administration guidelines, and receives a briefing at regularmeetings.
For the evaluation of asset administration institutions, the Federation performs qualitative assessment based onorganizations for business operation, asset administration system, etc.

24Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Governance ①
1. Organization
As of April 1 of 2018, the Federation has executives consisting of one president, 13 managing directors and three auditors, including one full-time managing
director and one full-time auditor with academic knowledge. The maximum number of employees is 120.
The organization consists of the General Affairs Department (General Affairs Division, Planning Division, Insurance Division and Welfare Division), the Finance
Department (Accounting Division, Investment Planning Division, In-house Investment Division and Fund Management Division), the Pension Department (Pension
Planning Division, Pension Information System Division, Pension Inspection Division, Pension Benefit Division and Retirement Pension Benefit Division), as wellas the Investment Risk Management Office and Audit Office.
The Investment Risk Management Office was newly established on April 1, 2018, as a section separate from the Finance Department from the standpoint of
improving and reinforcing risk management and the mutual checks and balances function.

2. General Assembly
The General Assembly consists of 61 members, 47 of which are elected by mutual vote the Presidents of associations which are the members of the Federation(hereinafter the "Member Associations"). Among the members of the General Assembly, 14 are elected by mutual vote of the Executive Directors of the Member
Associations.
Revision of the articles of incorporation, the formulation and revision of the rules of operations, annual business plans, budgets and account settlement, disposalof important assets and assumption of significant debt are subject to resolution of the General Assembly.

3. Fund Management Committee
This is a committee consisting of members who possess academic knowledge or practical experience in areas such as the pension system, economics, financeand fund management, which studies expert matters pertaining to the establishment and revision of basic policies and the administration and investment of the
Employees' Pension Insurance Benefit Association Reserve Fund, Annuity Retirement Benefit Association Reserve Fund and Transitional Long-term Benefit
Association Reserve Fund (hereinafter the "Funds").

4. Long-term Benefit Fund Committee
This is a committee also participated in by the representatives of Member Associations, which conducts research and study relating to basic policies forinvestment of Funds and other important matters.

5. Operational Management Committee
This is a committee also participated in by the representatives of Member Associations, which conducts research and monitoring of business administration andfund management implemented by the Federation and the Member Associations, as well as assessment of business.

6. Fund Investment Review Council
This is a council for ensuring the safe and effective investment of surplus from business operation of each of the accountings of the Federation, discussing
decision-makings as to the investment of funds, analyzing the investment status and checking the status of risk management indicators. This council is constituted
by a full-time managing director (hereinafter a “Senior Managing Director”), the Secretary-General, the General Manager of Finance Department, the Chief
Investment Specialist, the Senior Investment Specialist, the Manager of Investment Planning Division, the Manager of In-house Investment Division, the Manager
of Fund Management Division, the Manager of Investment Risk Management Office, and other members as may be deemed necessary. In principle, the council
regularly meets once a month, and from time to time depending on the necessity.

25Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Governance ②
7. Organizational structure of Federation
Report of status ofinvestment, risk
management, etc.

Fund Management
Committee

Use of expert
knowledge(Discussion by financial experts)
Basic policy, benchmark portfolio,risk management, investment
methods, etc.

As of April 1, 2018

GeneralAssembly
Audits of businesses

President

Fund Investment Review
CouncilManaging
Director(Check and discussion by officers andemployees [monthly])
Status of investment, risk management, etc.

Secretary-GeneralAuditorRecommendation

Cooperation

Long-term Benefit Fund
Committee(Discussion by representatives of Member
Associations, etc.)

Operational Management
Committee(Monitoring by certified public accountants, etc.)

Audit Office
Investment Risk
Management OfficeFinance Department
Chief Investment Specialist
Senior Investment Specialist

Investment Planning Division

In-house Investment Division

Fund Management Division

Basic policy, funding plan, benchmark portfolio

In-house investment

Entrusted investment management

26

Risk management

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Governance ③ (Fund Management Committee)○ Fund Management Committee
The Federation has established the Fund Management Committee, which is comprised of members who possess academic
knowledge or practical experience in areas such as the pension system, economics, finance and fund management. Members areappointed by the President.
As an advisory body for the President, the Fund Management Committee has a duty to conduct research on basic issues relating tofund management, discuss matters necessary for the achievement of the purpose to contribute to the safe and efficient fundmanagement, and to report the findings to the President. The Committee is also to give advice to the President for any other importantmatters relating to the fund management.
For expert matters relating to the management and investment of Funds, including the adoption and amendment of basic policies forthe management and investment of Funds including benchmark portfolio, deliberation at the Fund Management Committee isrequired.

List of Committee Members (As of April 2018)
Yoshitaka Kai

Professor, The Kyoto College of Graduate Studies for Informatics

Yasuyuki Kato

Professor, Graduate School of Management, Kyoto University

Katsuyuki Tokushima

Chief Fixed Income Analyst, Financial Research Department, NLI
Research Institute

Masashi Toshino

Professor, Faculty of Economics, Seikei University

Hiroshi Miyai

President and Representative Director, Asset Management Life

Kenji Wada

Professor, Faculty of Business and Commerce, Keio University

27

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Governance ④ (Approach to Risk Management)○ Generally speaking, "risk" refers to a danger or possibility of negative impact. In the field of asset investment, risk can mean themagnitude of price fluctuation occurring under a certain condition or uncertainty towards the future.
○ Risks in the field of asset investment include interest rate fluctuation risk, price fluctuation risk, credit risk and liquidity risk. For asset
investment, for various risks commensurate with investment, it is important to understand the magnitude and multifaceted impacts ofrisks from a long-term perspective.
○ The Federation, in accordance with the implementation policy for risk management concerning investment of funds as animplementing organization, appropriately implements risk management concerning investment in consideration of the following
points: that investment of funds should be made safely and efficiently from a long-term perspective; that diversified investments
should be maintained in principle; that particular attention shall be paid to downside risks in light of the characteristics of a closed
pension plan which receives no new contribution income; and that constant consideration shall be given to the relationship between
future liabilities and the funds of all Local Public Service Mutual Aid Associations.

Implementation policy for risk management concerning investment of the fund (extract)
Basic approach concerning risk management
The National Federation of Mutual Aid Associations for Municipal Personnel appropriately conducts risk management
related to the investment of adjustment funds in light of the following matters.
(i) Investment of funds should be made safely and efficiently from a long-term perspective.
(ii) A benchmark portfolio should be developed and investment of funds should be made based on the benchmark portfolio
through appropriate diversification across multiple asset classes with different risk/return profiles and othercharacteristics (hereinafter referred to as "diversified investment") in principle.
(iii) Each fund should be invested in consideration of the relationship between all Local Public Service Mutual Aid
Associations’ liabilities and the funds of all Local Public Service Mutual Aid Associations in the future.
(iv) The Federation shall conduct appropriate risk management, especially paying attention to downside risks in light of thecharacteristics of a closed pension plan which receives no new contribution income, with constant awareness of therelationship between future liabilities and the fund.
28

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Governance ⑤ (Risk Management Efforts)○ Management of the deviation of the asset mix• Investment based on the benchmark portfolio requires the management of various risk factors. Therefore, in order to secure returns in linewith the benchmark portfolio from the long-term perspective, it is important, in particular, to manage the degree of deviation of the asset
mix ratio of the fund from that of the benchmark portfolio.
• Specifically, as the asset mix constantly changes due to asset price fluctuations, the Federation keeps track of the status of the deviationof the asset mix of the fund from that of the benchmark portfolio, and manages the actual portfolio so as to keep the degree of deviation
within a certain range (deviation tolerance). In this way, the Federation checks whether or not there are problems such as a deviation fromthe benchmark portfolio in excess of the deviation tolerance.
○ Monitoring of market risk, etc.
• The Federation identifies downside risks by using the value at risk approach, which measures the maximum foreseeable amount of losses
expected under certain conditions, and the simulation of impact on funds in the case of fluctuation of share price and interest rate within acertain range (a stress test). As it also uses active investment in its investment of funds, the Federation seeks to earn an excess rate of
return over the benchmark by diversifying investment strategies and investment issues within each asset class.
• Therefore, the Federation monitors the status of market risk (price volatility risk, etc. in each asset market), credit risk (default risk), etc.
with respect to each asset class, mainly from the viewpoint of difference from the benchmark for each asset class.
○ Management of entrusted investment management institutions, etc.
The Federation manages liquidity risk (risk that purchasing and selling assets will become difficult due to a decline in trading volume) fromthe viewpoint of revising asset allocations (rebalancing) and smooth conversion of assets into cash. In addition, as the Federation entrusts
the operation of some investment-related activities to external institutions under its asset investment system, it manages the status ofmanagement (status of risk management and asset administration) of the institutions to which it entrusts asset management or asset
administration (entrusted investment management institutions and asset administration institutions), from the viewpoint of ensuring thesmooth operation.
○ Verification of the benchmark portfolio
It is necessary to periodically verify the benchmark portfolio, which is formulated in consideration of long-term economic forecasts. In theverification, the Federation also checks whether the existing benchmark portfolio is appropriate from the viewpoint of ensuring safe andefficient investment over the long term, and gives consideration to the viewpoint of comparison between the target investment return and thereturn that would be achieved if all funds were invested in domestic bonds.
○ Reporting on the status of risk management and improvement measures implemented
The status of risk management and improvement measures implemented are reported to the General Assembly and the Fund Management
Committee.

29

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Other Efforts○ Measures taken in response to low interest rate
The Bank of Japan (BOJ) has introduced the Quantitative and Qualitative Monetary Easing with a Negative Interest Rate(announced on January 29, 2016), which has resulted in decline in yield of many domestic bonds.
In addition, as a part of the monetary easing policy, the BOJ has introduced a negative interest rate policy for a part of thebalance in BOJ current accounts of financial institutions. Due to this policy, a principal bears the burden of a portion of theamount equivalent to the negative interest rate applied to its asset management institutions, according to the balance ofshort-term assets within funds.
In these situations, the Federation took the following measure in fiscal year 2017.
• For in-house investment fund for buy-and-hold investment strategy, the Federation withdrew surplus funds on a regularbasis from funds comprising interest and redemption payment, so as to reduce holdings of short-term assets within thefunds.

○ Increase of eligible investment instruments
In fiscal year 2017, the Federation discussed adding inflation-indexed government bonds to eligible investment
instruments so as to secure the substantive value of funds, considering that benefits are linked to prices, and it is moreprobable than not that the future prices will rise at least from the current level (investment will be started from fiscal year2018 in relation to an in-house investment).

30

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Section 3 Reference Data31

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Changes in the investment return, etc. (since the integration of employee pension plans)
1. Investment return

2. Value of investment income(Unit: JPY100M)(Unit: %)FY 2015(second half)

FY2016FY2017FY 2015(second half)

FY2016FY2017

Modified total return

0.97

4.90

6.81

Investment income

560

2,795

3,913

Domestic bonds

3.80

-0.52

0.96

Domestic bonds

1,198

-141

234

Domestic equities

-4.50

14.94

16.32

Domestic equities

-444

1,800

2,317

Foreign bonds

-2.21

-5.19

3.65

Foreign bonds

-119

-314

238

Foreign equities

-0.93

14.34

9.57

Foreign equities

-75

1,449

1,125

Short-term assets

0.02

0.01

0.00

Short-term assets

100(Unit: JPY100M)

FY 2015(second half)(Unit: %)FY 2015(second half)
Realized return

2.15

FY2016FY20172.59

5.09

FY2016FY2017

Realized income

1,085

1,305

2,508

(Income gain)(522)(1,078)(1,360)(Note 1) The investment return for fiscal year 2015 is the period rate for the second half of fiscal year 2015.
(Note 2) The investment income for fiscal year 2015 is the aggregate amount of investment income for the second half of fiscal year 2015.
(Note 3) Income gains comprise interest and dividend income.

32

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Changes in the value of investment assets and the asset mix (since the integration of employee pension plans)(Unit: JPY100M, %)End of FY2015

End of FY2016

End of FY2017

Total market
Total market
Total market
Composition
Composition
Composition
value
value
value

Total
Passive

Domesticbonds

Domestic
equities

48.28

25,84244.60

22,62538.26

24,772

42.97

23,334

40.27

0

0.00

Entrusted investment
management

0

0.00

0

0.00

0

0.00

Others

0

0.00

0

0.00

22,625

38.26

Others

3,063

5.31

2,509

4.33

0

0.00

Total

11,37419.73

13,801

23.82

15,786

26.69

Passive

8,725

15.13

8,527

14.72

9,886

16.72

Active

2,649

4.60

5,273

9.10

5,900

9.98

Total

5,965

10.35

6,160

10.63

6,948

11.75

5,727

9.93

4,485

7.74

5,219

8.82

Active

238

0.41

1,676

2.89

1,729

2.92

Total

9,759

16.93

11,501

19.85

12,625

21.35

Passive

7,878

13.67

9,314

16.08

10,226

17.29

Active

1,881
2,716

3.26
4.71

2,186
636

3.77
1.10

2,399
1,156

4.06
1.95

57,649100.0057,941100.0059,140100.00

ActiveForeign bonds Passive

Foreignequities

27,834

Short-term assets
Total(Note 1) Starting in fiscal year 2016, short-term assets held by each fund were classified into relevant asset classes in principle.
(Note 2) In principle, assets invested according to a methodology intended to achieve investment performance linked to the benchmark of each asset isclassified as "passive," and other assets as "active."(Note 3) Due to the reclassification, deposits of member associations that were classified as "others" related to domestic bonds (municipal bonds, loans,and invested real property) and the fund that was classified as "passive" related to domestic bonds until fiscal year 2016 are classified as "active“ fromfiscal year 201733

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Change in number of passive/active funds by assets (entrusted) (since the integration of employee pension plans)

FY 2015 (After the integration)
Cancellation New adoption

FY2016FY2017

End of FY Cancellation New adoption

End of FY Cancellation New adoption

End of FY

Domestic
bonds

Passive

0

0

0

0

0

0

0

0

0

Active

0

0

0

0

0

0

0

0

0

Domestic
equities

Passive

0

0

2

0

0

2

0

0

2

Active

1

11

19

0

0

19

1

0

18

Passive

0

0

2

0

0

2

0

0

2

Active

0

0

1

0

7

8

0

0

8

Passive
Active

0
1

0
5

2
8

0
0

0
0

2
8

0
0

0
0

2
8

Total

2

16

34

0

7

41

1

0

40

Asset administration institutions

0

0

4

0

0

4

0

0

4

Foreign bonds
Foreignequities(Note 1) Cancellations and new adoptions from fiscal year 2015 to 2017 are due to the review of the manager structure.
(Note 2) Newly adopted funds are classified by fiscal year to which the date of effective start of investment belongs.
(Note 3) Assets invested according to a methodology intended to achieve investment performance linked to the benchmark of each asset is classified as"passive," and other assets as "active."34

Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Issues held (as of the end of Fiscal Year 2017)
The tables below show the top 10 bond and equity issues held indirectly through entrusted investment, through in-house investment,
and indirectly through depositing with member associations as of the end of March 2018, with bond issues classified by issuer name andequity issues by issue name. For information concerning bond issues ranked 11th or lower, see the website of the Federation.
The status of holding of issues does not represent the assessment of investees by the Federation.

○ Domestic bond (in order of total market value)No.

Names of issuer

Japan Finance Organization for Municipalities
1
Government of Japan
2
Kanagawa Prefecture3
Hyogo Prefecture
4
Yokohama City
5
Fukuoka Prefecture
6
Chiba Prefecture
7
Japan Expressway Holding and Debt Repayment Agency
8
Aichi Prefecture
9
10 Osaka City
Total
468 Issuers○ Domestic equity (in order of total market value)

Total market
value(in 100M yen)
5,513
5,187
706
600
469
430
427
421
399
384
21,459○ Foreign bond (in order of total market value)No.

Names of issuer

UNITED STATES OF AMERICA
1
ITALY (REPUBLIC OF)
2
FRANCE (REPUBLIC OF)
3
GERMANY (FEDERAL REPUBLIC OF)
4
UNITED KINGDOM (GOVERNMENT OF)
5
SPAIN (KINGDOM OF)
6
BELGIUM (KINGDOM OF)
7
CANADA (GOVERNMENT OF)
8
NETHERLANDS (KINGDOM OF)
910 AUSTRALIA (COMMONWEALTH OF)
Total
528 Issuers

No.

Issue names

1
2
3
4
5
6
7
8
9
10
Total

Toyota Motor Corporation
Mitsubishi UFJ Financial Group
Sumitomo Mitsui Financial Group
Nippon Telegraph and Telephone Corporation
SoftBank Group
Keyence Corporation
Honda Motor Co., Ltd.
Sony Corporation
Mizuho Financial GroupKDDI Corporation
2,102 Issues

No. ofshares3,670,100
24,924,600
3,227,300
2,495,100
1,386,000
170,600
2,983,700
1,830,200
49,605,900
3,407,300

Total market
value(in 100M yen)
470
301
233
214
201
196
195
182
164
156
15,685○ Foreign equity (in order of total market value)

Total market
value(in 100M yen)
2,549
653
650
453
450
423
148
146
127
125
7,016

No.

Issue names

1
2
3
4
5
6
7
8
9
10
Total

APPLE INC
MICROSOFT CORPAMAZON COM INC
FACEBOOK INC-A
ALPHABET INC-CL A
JPMORGAN CHASE & CO
JOHNSON AND JOHNSONBANK OF AMERICA CORP
ALPHABET INC-CL C
NESTLE SA (REGISTERED)
2,623 Issues

No. ofshares1,277,442
1,828,902
104,259712,250
97,727879,015
689,151
2,780,168
79,651
1,021,613

Total market
value(in 100M yen)
228
178
160
121
108
103
94
89
87
86
12,527(Note 1) The names of issuers and issues are provided by the Federation based on data registered in the T-STAR/GX system of Nomura Research Institute and BarraOne system of MSCI as ofthe end of March 2018.
(Note 2) The total market value of bonds is an aggregated figure calculated for each issuer by the Federation based on data registered in T-STAR/GX system of Nomura Research Institute.
(Note 3) The names of issuers and issues may be different from those on the list of all issues held separately and published on the website.

35