Fiscal Year 2020 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
Investment Results (Overview) ............................................................................................................................................. 3【Section 1 Administration and Investment of Funds in FY2020】
1 Market environment ........................................................................................................................................................... 5
2 Investment results(1) Asset mix ..................................................................................................................................................................... 6(2) Investment return......................................................................................................................................................... 7(3) Contribution analysis of excess return.......................................................................................................................... 8(4) Investment income...................................................................................................................................................... 10(5) Value of assets........................................................................................................................................................... 11(6) Fees........................................................................................................................................................................... 12
3 Benchmark portfolio ......................................................................................................................................................... 13
4 Risk management(1) Approach to risk management ................................................................................................................................... 14(2) Risk management efforts ........................................................................................................................................... 15(3) Status of risk management (overall assets)................................................................................................................ 17
5 Stewardship activities ...................................................................................................................................................... 18
6 Other major efforts .......................................................................................................................................................... 20【Section 2 Fund Investment System, etc. of the Federation】
1 Organizational structure ................................................................................................................................................... 22
2 Fund Management Committee ......................................................................................................................................... 25
3 Basic approach to investment ......................................................................................................................................... 27【Section 3 Reference Data】
1 Changes in the investment results .................................................................................................................................. 29
2 Issues held ....................................................................................................................................................................... 30
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Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Investment Results (Overview)

Investment return+24.44%

Modified total return (market value basis)(FY2020)

Investment income+JPY 1,285.5 billion

Investment income (market value basis)(FY2020)

Value of investment assets:

JPY 6,382.3 billion

Total market value(End of FY2020)

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) The return and income represent figures after the deduction of fees, etc. settled within the relevant period.

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

Section 1 Administration and Investment of Funds in FY2020

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

1 Market environment

Change in benchmark return
The benchmark return of the total assets for the year was +24.83%, mainly driven by the sharp rise in domestic andforeign stocks from the development of the COVID-19 vaccines and from expectations of economic recovery due tolarge additional economic measures in the United States.

(Note) The level as of March 31, 2020 is the base figure of 100.
Asset class

BenchmarkReturns
Q1

Q2

Q3

Q4

Full fiscal year

Domestic bonds NOMURA-BPI Overall-0.49％

0.17％-0.00％-0.38％-0.70％

Domestic equities TOPIX (with dividends)

11.25％

5.17％

11.19％

9.25％

42.13％

2.60％

0.81％

0.67％

1.27％

5.43％

19.94％

5.97％

12.27％

12.27％

60.21％

8.17％

3.13％

6.04％

5.53％

24.83％

Foreign bonds
Foreign equities

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

MSCI ACWI ex. JAPAN(yen-based, with dividends)
Total(Note) The total is the return calculated by weight-averaging the benchmark returns for individual asset classes based on
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)

2 Investment results(1) Asset mix
The composition by asset is as follows:(Note 1) Deviation tolerances from the benchmark portfolio are ±20% for domestic bonds, ±12% for domestic equities, ±9% for foreign bonds and ±11% for foreign equities.
(Note 2) Due to rounding, the total sum of individual figures may not necessarily add up to 100%.
(Note 3) Loans and invested real properties are included in domestic bonds (percentage of 11.0% occupied in domestic bonds).
(Note 4) 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)

2 Investment results(2) Investment return
Changes in modified total return

The modified total return for FY2020 was 24.44% for the overall assets.
(Unit: %)25.00%

24.44%FY2020FY total

20.00%

Q1

Q2

Q3

Q4

Modified total return

7.70

3.04

6.09

5.88

24.44

15.00%

Domestic bonds

-0.05

0.27

0.18

-0.26

0.17

10.00%

Short-term assets(0.00)(0.00)(0.00)(0.00)(0.00)

17.67%

Eachquarter
各四半期
Aggregate
累計

10.97%
7.70%
6.09%

5.88%

Q3

Q4

5.00%
3.04%

Domestic equities

11.90

5.31

10.86

8.99

41.93
0.00%
Q1

Foreign bonds
Foreign equities

2.88
20.02

0.83
6.00

0.87
12.03

1.44
11.92

58.91

Modified total return by asset(aggregate for the fiscal year)(Unit: %)FY2020Realized return

Q1

Q2

Q3

Q4

0.49

1.16

1.23

2.71

FY total

5.60(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.

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Q2

5.93

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

2 Investment results(3) Contribution analysis of excess return ①
The modified total return for overall investment assets was 24.44%, while the excess return compared with the benchmark return was -0.39%.
As for the asset allocation factor, overweight of domestic bonds and underweight of foreign equities made negative contributions.
As for the individual asset factor, domestic bonds and foreign bonds made positive contributions.

* The benchmark return for overall assets is calculated by weight-averaging the benchmark
portfolio. Due to rounding, the total sum of individual figures may not necessarily add up to
the total.

Asset allocation
factor①

Individual asset
factor②①+②

Domestic bonds-1.93%

0.59%-1.34%

Domestic equities

0.04%

0.18%

0.22%

Foreign bonds

1.20%

0.30%

1.50%

Foreign equities-0.68%-0.09%

Total-1.37%

0.98%(Reference) Deviation of the Federation's portfolio (book value averagebalance + accrued income as of the end of previous period + valuation
gains/losses as of the end of previous period) from the benchmark portfolio
Federation's
portfolio

Benchmarkportfolio

Deviation

Deviation
tolerance

Domestic bonds

34.0%

25.0%

9.0%

±20%

-0.77%

Domestic equities

23.9%

25.0%

-1.1%

±12%

-0.39%

Foreign bonds

19.7%

25.0%

-5.3%

±9%

Foreign equities

22.4%

25.0%

-2.6%

±11%

Total

100.0%

100.0%

0.0%① Asset allocation factor: A factor that is attributable to the difference between the asset mix of thefund and the benchmark portfolio.
② Individual asset factor: A factor that is attributable to the difference between the modified total returnand 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)

2 Investment results(3) Contribution analysis of excess return ②○ Domestic bonds
The modified total return of domestic bonds was 0.17%, which exceeded the benchmark return (-0.70%) by 0.87%.
In addition to benchmark factors making slightly positive contributions by the 20 year ladder-type investments, which
accounts for 90% of the balance, the funds are operated with an higher ownership ratio of municipal bonds compared withthe benchmark, and the bond type factors from having ownership made a positive contribution. The rate of return ofmunicipal bonds purchased privately by financial institutions with no market valuation made a positive contribution, which
made all domestic bonds exceeded the benchmark.
○ Domestic equities
The modified total return of foreign equities was 41.93%, which was below the benchmark return (42.13%) by 0.20%.
The passive funds were almost the same as the benchmark. As for the active funds, there are differences in performance
depending on the fund strategies. Many funds with a growth strategy and medium- to small-sized stock funds were strong.
The manager benchmark of funds with low volatility strategy among smart beta funds was well below the rate of return of
TOPIX while the market rose significantly. These made all domestic equities below the benchmark.
○ Foreign bonds
The modified total return of domestic bonds was 5.93%, which exceeds the benchmark return (5.43%) by 0.49%.
The passive funds were below the benchmark due to factors such as the timing of adding funds to the funds. The active
funds generally performed well. The returns of five out of eight companies that uses the Bloomberg Barclays Global
Aggregate Index (8.54%) as a manager benchmark (8.54%) greatly exceeded the benchmark return rate, meaning that thebrand selection for all five companies was successful. As a result, all foreign bonds exceeded the benchmark.
○ Foreign equities
The modified total return of foreign equities was 58.91%, which was below the benchmark return (60.21%) by 1.30%.
The passive funds was below the benchmark due to the negative impact of the factors such as taxation on dividends. As
for the active funds, there are differences in performance depending on the fund strategies. The funds that manage
portfolios with reduced volatility struggled as the markets rise significantly. All foreign equities was below the benchmark.

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

2 Investment results(4) Investment income
The investment income for FY2020 was JPY 1,285.5 billion for overall assets.

Changes in investment income(Unit: JPY100M)

FY2020
Q1

Q2

Q3

Q4

FY total

Investment income

4,041

1,714

3,516

3,584

12,855

Domestic bonds

-10

49

31

-39

31

Short-term assets

(0)

(0)

(0)

(0)

(0)

Domestic equities

1,459

737

1,598

1,470

5,265

Foreign bonds

254

81

96

183

614

Foreign equities

2,338

846

1,791

1,970

6,945

(Unit: JPY100M)

FY2020
Q1
Realized income

237

Q2

557

Q3

593

Q4

FY total

1,319

2,706

(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) Due to rounding, the total sum of individual figures may not necessarily add up to FY total.

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Total investment income by asset(aggregate for the fiscal year)

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

2 Investment results(5) Value of assets
The book value, total market value and valuation gains/losses by asset is as follows.

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

The amounts of funds allocated and withdrawn in FY2020 by asset class are as follows.
(Unit: JPY100M)

Domesticbonds
Amount of funds
allocated andwithdrawn-5,793

Domestic
equities

Foreign bonds

0

4,710

Foreignequities-980(Note) The above figures are the total sums of asset cancellations (cash-out) for the purpose of securing funds for pension benefits and fund transfer for each

asset class related to asset cancellation and reinvestment for the purpose of asset portfolio mix adjustment (rebalancing).

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

2 Investment results(6) Fees
The amount of fees totaled about JPY 3.3 billion in FY2020.
The fee rate relative to the value of investment assets came to 0.06%.

(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 balance12Transitional Long-term Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

3 Benchmark portfolio

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

Domestic equities

Foreign bonds

Foreign equities

Asset mix

25%

25%

25%

25%

Deviation tolerance

±20%

±12%

±9%

±11%

2. Verification of the benchmark portfolio○ Verification mechanism
In accordance with the basic policy on the administration and investment of the Transitional Long-term Benefit Association Reserve Fund,
regular verifications shall be performed for the Federation’s benchmark portfolio. The results of the verification carried out in FY2020 are as
follows.
○ Verification method
After calculating the expected return of each asset and the risk/correlation coefficient based on the recent market environment, a Monte
Carlo simulation (Note) was carried out, and we confirmed that there was no problem with the quantitative standard used when reviewing
the benchmark portfolio (March FY2020).
① Securing the expected reserve fund
• Will the average reserve ratio (percentage of average assets calculated by simulation for reserve fund necessary for financial
recalculation) be 100% or more?
• Will an expected investment yield (nominal wage increase rate +1.7%) of 4.1% be achieved?
② Downside risk
• Is the probability of underfunding less than that in the case of domestic bonds 100%?
• Is the downward probability (probability that the annual return will be less than the nominal wage increase rate) less than the probability
in the case where domestic bonds are 100%?
• Is there a big difference between the conditional average deficiency rate (average deficiency rate when the annual return is less than
the nominal wage increase rate) and the rate when the benchmark portfolio was reviewed?

○ Verification results
As a result of the above verification, it is expected that the reserve ratio can be maintained at 100% or more and the portfolio meets the
expected investment yield. Also, because the downward probability and conditional average deficiency rate have no particular issues,
overall, we judged that there is no need to change the current benchmark portfolio and decided to continue our current benchmark portfolio.
(Note) The Monte Carlo simulation is a method for conducting analysis from the statistical values ​of data distribution obtained by systematically generating
thousands to tens of thousands or more pseudo-random sequences and substituting each sequence into the formula.

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

4 Risk management(1) Approach to risk management○ Generally speaking, "risk" refers to danger or possibility of negative impact. In the field of asset investment. In the field of asset
investment, risk means uncertainty of returns, etc. associated with market volatility or other factors. (”Uncertainty of returns” includes
upside risks as well as downside risks of asset values.)○ Risks in the field of asset investment include interest rate fluctuation risk, price fluctuation risk, credit risk and liquidity risk. Therefore,
it is important to understand the magnitude and multifaceted impacts of various risks commensurate with investment from a longterm perspective.
○ The Federation appropriately implements risk management concerning investment in accordance with the implementation policy forrisk management concerning investment of the funds in consideration of the points including the following: that investment of funds
should be made safely and efficiently from a long-term perspective; and that diversified investments should be maintained inprinciple.
Implementation policy for risk management concerning investment of the fund (extract)
1. Basic approach concerning risk management
The National Federation of Mutual Aid Associations for Municipal Personnel appropriately conducts risk management related to theinvestment of funds in light of the following matters.
(1) Investment of funds should be made safely and efficiently from a long-term perspective.
(2) 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 other characteristics (hereinafter referred to as "diversified
investment") in principle.
3． Method of risk management(2) Matters unique to each reserve fund② Transitional Long-term Benefit Association Reserve Fund
A. The Federation shall conduct appropriate risk management, especially paying attention to downside risks in light of the characteristics of aclosed pension plan which receives no new contribution income, with constant awareness of the relationship between future liabilities andthe fund.

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

4 Risk management(2) Risk management efforts ①○ Management of the deviation of the asset mix• Investment based on the benchmark portfolio requires the management of various risk factors. Therefore, in order tosecure returns in line with 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 statusof the deviation of the asset mix of the fund from that of the benchmark portfolio and manages the actual portfolio so as tokeep 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 from the 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 ofshare price and interest rate within a certain 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 thebenchmark by diversifying investment strategies and investment issues within each asset class. Therefore, theFederation 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 intrading volume) from the 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, it monitors
the status of management (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 the smooth operation.

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

4 Risk management(2) Risk management efforts ②○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 theFund Management Committee.

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

4 Risk management(3) Status of risk management (overall assets)○ Asset mix and estimated tracking error
The asset mix of domestic equities and foreign equities changed near the center value. On the other hand, the asset mixof domestic bonds and foreign bonds approached the median at the end of the period through the transfers between thebonds with the review of the benchmark portfolio. The estimated tracking errors of overall assets fluctuated due to theimpact of transfers of domestic and foreign bonds between assets with the review of the benchmark portfolio and factors ofmarket fluctuations.
【Changes in the asset mix】

【Changes in the estimated tracking error】

Estimated tracking error:
A benchmark used to estimate the degreeof deviation (standard deviation) of the
future excess return (the difference
between the return for the portfolio and thebenchmark return)17

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

5 Stewardship activities(1) Efforts in FY2020○ As a part of its stewardship activities for FY2020, the Federation confirmed the situation of efforts made by entrusted investment management
institutions through the surveys and hearings for them in relation to the situations of shareholders' voting right exercises and engagement activities.
Furthermore, by asking additional questions to clarify the differences among the institutions, we encouraged them to carry out efficient stewardship
activities in line with their operational style and team arrangement. In addition, the Federation made periodical reports on its stewardship activities.
○ Based on the re-revision of Japan's Stewardship Code by the Financial Services Agency in March 2020, in September of the same year, theacceptance statement of the code was revised.

Surveys and hearings of entrusted investment management institutions
Subjects

PeriodSurvey on exercise of voting rights

August 2020

Survey on performance of stewardship
activities

September 2020

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

12 entrusted investment management institutions
for domestic equities
Additional survey on the above two items

November 2020

Main subjects••

results of exercise of voting rights
structure for exercise of voting rights••

structure for managing conflicts of interest
details of engagement••

strengthened efforts, challenges and issues
reason for the decision to exercise voting rights inrelation to specific, individual proposals(Note 1) The following twelve companies are entrusted with the investment management of domestic equities: Asset Management One Co., Ltd., Invesco Asset Management (Japan)
Limited, Capital International K. K., Schroder Investment Management (Japan) Limited, Nikko Asset Management Co., Ltd., Nissay Asset Management Corporation, Nomura
Asset Management Co., Ltd., Mizuho Trust & Banking Co., Ltd., Sumitomo Mitsui DS Asset Management Company, Limited, Sumitomo Mitsui Trust Bank, Limited, Mitsubishi
UFJ Trust and Banking Corporation and Resona Bank, Limited(Note 2) The following eight companies are entrusted with the investment management of foreign equities: Wellington Management, MFS Investment Management, State Street Global
Advisors, SEIRYU Asset Management Ltd., Tokio Marine Asset Management Co., Ltd., Natixis Investment Managers, BlackRock Japan Co., Ltd. and Sumitomo Mitsui Trust
Bank, Limited.

Periodical reports related to stewardship activities

Subjects

PeriodTargets

Providing information on an as-neededbasis in addition to regular reports at
executive meetings

Executives of the Federation Executives andemployees of member associations

As necessary

Report of the Federation's stewardship
activity in its PR papers

February 2021

Executives and employees of the Federation andexecutives and employees of member associations

Annual Stewardship Activity Report
FY2020March 2021

Publicized on the Federation's website

Main subjects
Federation's approach to stewardship activities and ESG
investment

Executives and employees of member associations
•

•

18

Results of monitoring of stewardship activities
conducted by entrusted investment management
institutions
Status of exercise of voting rights of shareholders

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

5 Stewardship activities(2) Main activities and future initiatives①Periodical report○ Annual Stewardship Activity Report FY2020○ Federation’s Newsletter (February issue)

https://ssl.shichousonren.or.jp/fund/stewardship_active.html②Future initiatives○ Discussion of methods for evaluating entrusted investment
management institutions according to their characteristics○ Gathering wide range of information
The Federation will continue gathering information by such way as meetingwith other institutional investors, participating in online seminars by outside
experts and information exchange with entrusted investment management
institutions. In the future, we will collect information widely regarding thesummary of issues in product evaluation and method of reflecting on
investment and measuring effect, and enhance our knowledge in this field.
Also, We will continue to look out for the response of entrusted investment
management institutions during the COVID-19 pandemic.

The Federation will continue discussing the methods formonitoring entrusted investment management institutions’ effective
stewardship activities and the appropriate methods for evaluation.

○ Strengthening of information feedback
The Federation will publicize information through its website andother means and exercise its efforts to deepen the understandingby its members (beneficiaries) as to its stewardship activity bysuch means as PR papers and periodical reports at its general
meetings.

○ Revision of regulations
We will consider reviewing the “Federation Corporate GovernancePrinciples” as needed based on the revision of the “Corporate GovernanceCode”.

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

6 Other major efforts

Administration and evaluation of entrusted investment management institutions, etc.
① Administration and evaluation of entrusted investment management institutions
The Federation requires entrusted investment management institutions to submit monthly reports on investment results and the risk
status and checks the status of compliance with the investment guidelines. The Federation also requires quarterly reports on theportfolio status, a factor breakdown of the excess return, and changes in the organizational structure and investment management
system and conducts administration through measures such as receiving explanations about summary investment results and future
investment policy, among other matters, as necessary at meetings.
The evaluation is conducted with the end of each fiscal year as the reference date based comprehensively on qualitative evaluation(e.g., investment management systems and processes, risk management, and compliance) and quantitative evaluation (the excess
return and tracking error in the case of passive investment and the excess return and the information ratio, among other items, in thecase of active investment). Quantitative evaluation is conducted based on actual results in the past three years and in the past five
years, with the possible effects of the market environment and investment style taken into consideration.
☞ One fund was partially cancelled (reduction) in the comprehensive evaluation whose base date is at the end of FY2019.
② Administration and evaluation of asset administration institutions
The Federation requires monthly reports on the asset administration status in order to check the status of compliance with the asset
administration guidelines and conducts administration through measures such as receiving explanations at meetings as necessary.
Qualitative evaluation is conducted with respect to such items as the business operation system and asset administration system.

March

December

September

June

March

【Performance check】◇ Monthly

＊

＊

＊

＊

＊

＊

＊

＊

＊

＊

＊

＊

☆

・・・

【Report on the investment status】◇Quarterly

☆

☆

☆

【Comprehensive evaluation】◇Annual

☆

20

・・・

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

Section 2 Businesses and Fund Investment of the Federation21

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

1 Organizational structure

Organizational structure ①
1. Organization
As of April 1, 2021, it is required that 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 122.
The organization consists of the General Affairs Department (General Affairs Division, Planning Division, Insurance Division andWelfare Division), the Finance Department (Accounting Division, Investment Planning Division, In-house Investment Division, FundManagement Division and Alternative 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.
2. General Assembly
The General Assembly consists of 61 members, 47 of which are elected by mutual vote the Presidents of associations which are themembers of the Federation (hereinafter the "Member Associations"). Among the members of the General Assembly, 14 are elected bymutual 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 andaccount settlement, disposal of 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, finance and 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 tobasic policies for investment 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 ofbusiness administration and fund management implemented by the Federation and the Member Associations, as well as assessment ofbusiness.

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

1 Organizational structure

Organizational structure ②
6. Fund Investment Review Council
This is a council for ensuring the safe and effective investment of surplus from business operation of each of theaccountings of the Federation, discussing decision-makings as to the investment of funds. This council is constituted by afull-time managing director (hereinafter a “Senior Managing Director”), the Secretary-General, the General Manager ofFinance 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
Alternative Fund Management Division, the Manager of Investment Risk Management Office, and other members as may bedeemed necessary. In principle, the council regularly meets once a month, and from time to time depending on the necessity.
7. Investment Risk Management Committee
This is a committee to conduct activities such as verification, reporting and discussion so as to ensure appropriate risk
management related to fund investment. This committee is constituted by the Senior Managing Director, the SecretaryGeneral, the General Manager of Finance Department and other members as may be deemed necessary. In principle, thecouncil regularly meets once a month, and from time to time as depending on the necessity.

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

1 Organizational structure

Organizational structure ③
As of April 1, 2021

8. Organizational structure of Federation
Report of status of investment,risk management, etc.

Fund Management
Committee(Discussion by financial experts)
Basic policy, benchmark portfolio,risk management, investment
methods, etc.

GeneralAssembly

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

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

Use of expert
knowledge

Recommendation

President

Auditor
Audits of businesses

Managing
Director

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

SecretaryGeneral

Investment Risk
Management Committee
Cooperation(Check and discussion by officers
and employees [monthly])
Risk management, etc.

Audit Office

Investment Risk
Management Office

General Manager ofFinance Department
Chief Investment Specialist

Risk management

Senior Investment Specialist

Investment Planning
Division

In-house Investment
Division

Fund Management
Division

Alternative FundManagement Division

Basic policy, funding plan,benchmark portfolio

In-house investment

Entrusted investment management

Alternative investment

24

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

2 Fund Management Committee

Fund Management Committee ①○ Fund Management Committee
A Fund Management Committee is established within the Federation. The Committee shall comprise of members who possess
academic knowledge or practical experience in areas such as the pension system, economics, finance and fund management. Members
are appointed 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 is required.

List of Fund Management Committee Members (As of April 2021)

Chairperson

Ohno Sanae

Professor, Faculty of Economics, Musashi University

Kato Yasuyuki

Professor, Graduate School of Business Administration, Kyoto University of Advanced Science
Specially Appointed Professor, Graduate School of Management, Tokyo Metropolitan University
Adjunct Professor, Graduate School of Management, Kyoto University

Takehara Hitoshi

Professor, Waseda Business School (Graduate School of Business and Finance)

Tokushima Katsuyuki
Toshino Masashi
Miwa Yumiko

Chief fixed income analyst(Director), Financial Research Department, NLI Research Institute
Professor, Faculty of Business Administration , Seikei University
Professor, Faculty of Commerce, Meiji University(Note)In Japanese alphabetical order, honorifics omitted.

25

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

2 Fund Management Committee

Fund Management Committee ②○ Meetings of the Fund Management Committee (FY2020)
Meeting
number

46th

47th

48th

Meeting date

September 28, 2020
(Web conference)

February 8, 2021
(Web conference)

March 29, 2021

Main subjects
•
•
•
•
•
•

Consultation paper
Subjects to be discussed this year and how to proceed with themExamination of the benchmark portfolio for the Annuity Retirement Benefit
Association Reserve Fund
Recommendation paper (draft)
Acceptance statement of Japan’s Stewardship CodeStatus of investment of pension funds•••

Concept of safe and efficient investment of pension funds
Status of stewardship activities
Status of investment of pension funds•

Examination of the benchmark portfolio for the Welfare Pension Insurance
Benefit Association Reserve Fund
Examination of the benchmark portfolio for the Transitional Long-term
Benefit Association Reserve Fund
Recommendation paper (draft)
Status of investment of pension funds in FY2021•(Web conference)

•
•

26

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

3 Basic approach to investment

Basic approach to investment○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, especially paying
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
reserve fund with the minimum risk, while fully paying attention to the relationship between future liabilities and the reserve fund. In
addition, efforts shall be made to earn the benchmark return for overall assets and each asset class, as well as generating benchmark
returns for overall assets and each asset class over the long term.
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 thecharacteristics of a closed-end pension fund that will have no new contribution income, especially paying attention to downside risks, with constant awarenessof the relationship between future liabilities and the fund and from a long-term perspective and in 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 the long-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 relationshipbetween future liabilities and the fund.
In doing so, attention shall be paid not to distort price formation in the market and private sector investment activities.
In addition, efforts shall be made to earn the benchmark return for overall assets each asset class for each fiscal year, as well as generating benchmark
returns for overall assets and each asset class over the long term.

27

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

Section 3 Reference Data28

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

1 Changes in the investment results

Changes in the investment return, etc. (since the integration of employee pension plans)②Value of investment income①Investment return(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.
(Note 4) Short-term assets in FY2020 are short-term bonds included in domestic bonds.

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

2 Issues held

Issues held
The tables below show the top 10 bond and equity issues held indirectly through entrusted investment, directly through in-house investment,
and indirectly through depositing with member associations as of the end of March 2021, with bond issues classified by issuer name and equity
issues by issue name. For information concerning bond and equity 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○ Domestic equity (in order of total market value)
Total market
value(in 100M yen)
4,523

No.

Issue names

No. of shares

Total market value(in 100M yen)

1

Toyota Motor Corporation

5,780,800

504

3,084

2

Sony Corporation

3,379,800

393

Hyogo Prefecture

546

3

SoftBank Group

3,926,800

367

4East Japan Railway Company

309

4

Keyence Corporation

569,000287

5Osaka City

305

5

Mitsubishi UFJ Financial Group40,457,900244

6Kitakyushu City

240

6

Shin-Etsu Chemical

1,160,100

217

7

Kyoto City

228

7

Sumitomo Mitsui Financial Group

5,205,100

213

8

Kobe City

193

8

Nippon Telegraph and Telephone Corporation

6,815,300

197

9

Nagoya City

188

9

Recruit Holdings

3,590,900

194

10Development Bank of Japan

166

10

KDDI Corporation

5,264,300

13,771Total

1Japan Finance Organization for Municipalities

2

Government of Japan

3

Total

473 Issuers○ Foreign bond (in order of total market value)No.

Names of issuer

182

2,214 Issues

17,535○ Foreign equity (in order of total market value)
Total market
value(in 100M yen)
5,787

No.

Issue names

No. of shares

Total market value(in 100M yen)

1

UNITED STATES TREASURY

1

APPLE INC

4,023,503

543

2

FRANCE (GOVERNMENT)

1,370

2

MICROSOFT CORPORATION

1,748,985

456

3

ITALY, REPUBLIC OF (GOVERNMENT)

1,348

3

AMAZON COM INC

106,508

364

4

GERMANY (GOVERNMENT OF)

968

4

FACEBOOK INC-A

648,678

211

5

UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND

849

5

ALPHABET INC-CL A

86,643197

6

SPAIN, KINGDOM OF (GOVERNMENT)832

6

ALPHABET INC-CL C

79,606

182

7

BELGIUM, KINGDOM OF (GOVERNMENT)

311

7

TAIWAN SEMICONDUCTOR

6,362,861

145

8

AUSTRALIA, COMMONWEALTH OF (GOVERNMENT)296

8

JPMORGAN CHASE & CO

844,798

142

9

CANADA (GOVERNMENT)260

9VISA INC-CLASS A SHR

567,667133

10

NETHERLANDS, KINGDOM OF (GOVERNMENT)

237

10

TESLA INC

176,958

14,174

Total

Total

687 Issuers

3,001 Issues

131
17,494(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 asof the end of March 2021.
(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 published separately on t he website.

30