Fiscal Year 2019 Review of Operations
Employees' Pension Insurance 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

Employees' Pension Insurance 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 FY2019】
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 Review of 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 Investment in alternative assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 18
6 Stewardship activities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・･・･・・・・・・ 21
7 Other major efforts ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 23【Section 2 Fund Investment System, etc. of the Federation】
1 Organizational structure・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 25
2 Fund Management Committee・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 28
3 Basic approach to investment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 30【Section 3 Reference Data】
1 Changes in the investment results・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 32
2 Issues held・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 33
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Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Investment Results (Overview)

Investment return-4.60% Modified total return (market value basis)(FY2019)

Investment income -JPY250.6 billion Investment income(FY2019)(market value basis)

Value of investment assets: JPY5,222.5 billion Total market value(End of FY2019)* 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 thatit 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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Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Section 1 Administration and Investment of Funds in FY20194

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

1 Market environment

Change in benchmark return
The benchmark return for overall assets continued to be positive until the third quarter. However, as domestic andforeign equity prices fell steeply due to the spread of novel coronavirus infections in the fourth quarter, the benchmark
return for the full year came to minus 4.83%.
120
Foreign equities
115
110

Domestic equities

105
100

Domestic bonds

95

Foreign bonds
90
85
80
75
Mar. 31,2019

Apr. 30,
2019

May. 31,2019

Jun. 30,
2019

Jul. 31,2019

Aug. 31,2019

Sep. 30,
2019

Oct. 31,2019

Nov. 30,
2019

Dec. 31,2019

Jan. 31, Feb. 29,
2020
2020

Mar. 31,2020(Note) The level as of March 31, 2019 is the base figure of 100.
Returns
Asset class

Benchmark
Q1

Q2

Q3

Q4

NOMURA-BPI Overall

0.91%

0.40%

-1.05%-0.43%-0.18%

Domestic equities TOPIX (with dividends)-2.35%

3.39%

8.59% -17.45%-9.50%

0.73%

1.32%

0.52%

4.37%

(yen-based, with dividends)

1.25%

0.17%

9.78% -22.14% -13.31%

Total

0.26%

1.30%

4.23% -10.09%

Domestic bonds

Foreign bonds
Foreign equities

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

MSCI ACWI ex. JAPAN

1.74%

Full fiscal year

-4.83%(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)

Employees' Pension Insurance 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:(Unit: %)FY2019FY2018End of FY

End of Q1

End of Q2

End of Q3

End of Q4(End of FY)

Benchmarkportfolio

Domestic
bonds

32.8

35.5

33.2

33.1

34.0

35.0

Domestic
equities

22.1

23.2

23.0

25.1

21.7

25.0

Foreign
bonds

14.0

15.1

14.5

14.5

15.4

15.0

Foreignequities

23.4

25.0

23.9

25.8

20.5

25.0

Short-term
assets

7.7

1.2

5.4

1.6

8.4

-

100.0

100.0

100.0

100.0

100.0

100.0

Total

Composition by Asset Class(as of end of FY2019)
Short-term
assets8.4%

Foreignequities
20.5%

Foreign
bonds
15.4%

Domestic
bonds
34.0%

Domestic
equities
21.7%(Note 1) Deviation tolerances from the benchmark portfolio are ±15% for domestic bonds, ±14% for domestic equities, ±6% for foreign bonds and ±12% for foreign equities.
(Note 2) Due to rounding, the total sum of individual figures may not necessarily add up to 100%.
(Note 3) Short-term assets held by each fund were classified into relevant asset classes in principle.
(Note 4) The ratio of alternative assets to the total amount of funds is 0.7% (the upper limit for the benchmark portfolio is 5%).

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Employees' Pension Insurance 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 FY2019 was -4.60% for the overall assets.
6.00%(Unit: %)FY2019Modified total return

5.51%

4.00%

2.00%

Q1

Q2

Q3

Q4

FY total

0.00%

0.19

1.11

4.21

-9.67

-4.60

-2.00%

4.21%
1.31%

0.19%

1.11%

-4.00%

Domestic bonds

1.01

0.36

-0.72

-0.53

0.13

-4.60%
Each quarter-6.00%

Aggregate-8.00%

Domestic equities

-2.40

3.37

8.67

-17.62-9.58

Foreign bonds

0.68

1.34

0.79

1.02

3.88

Foreign equities

1.23

0.17

9.55

-21.87-12.35

Short-term assets

0.00

0.00

0.00

0.00

0.00

-10.00%-9.67%-12.00%
Q1

Q2

Q3

Q4

Modified total return by asset(aggregate for the fiscal year)
6.00%
3.88%

4.00%
2.00%

(Unit: %)FY2019
Q1

Q2

Q3

0.13%

0.00%

0.00%

-2.00%Q4

FY total-4.00%-4.60%-6.00%

Realized return

0.86

0.78

0.68

0.67

2.98

(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 adjustment of the economic burden on the national treasury andpublic organizations transferred from the employees’ pension insurance account to the transitional longterm account was deducted from the figures for domestic bonds.

7-8.00%-10.00%-9.58%-12.00%-12.35%-14.00%

Domestic Domestic
bonds
equities

Foreignbonds

Foreignequities

Short-term
assetsOverallassetsEmployees' Pension Insurance 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 -4.60%, while the excess return compared with the benchmark return was 0.22%.
Regarding the asset allocation factor, underweighting in domestic equities and holding of short-term assets made positive contributions.
As for the individual asset factor, foreign equities and domestic bonds made positive contributions.
Excess Returns (by Asset Class)
FY2019 (April 2019 through March 2020)
OverallassetsModified total return(Unit: %)Domesticbonds

Domestic
equities

Foreignbonds

Foreignequities

0.95%

1.00%
0.75%

- 4.600.13- 9.583.88- 12.35

0.50%- 4.83- 0.18- 9.504.37- 13.31

0.25%

0.22

0.30

- 0.08- 0.49

0.95

0.30%

Benchmark return
Excess return

*

0.22%

0.00%
-0.08%-0.25%* 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. Due to rounding, the total sum of individual figures may not necessarily add up to
the total.

-0.50%-0.49%-0.75%-1.00%Overall assets

Asset allocation
factor①

Individual asset
factor②-0.11%

0.06%-0.05%

Domestic equities

0.06%-0.05%

0.01%

Foreign bonds-0.07%-0.10%-0.17%

Foreign equities

0.03%

0.20%

0.23%

Short-term assets

0.21%-0.01%

0.20%

Total

0.12%

0.10%

0.22%

Domestic equities

Foreign bonds

Foreign equities(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 portfolio①＋②

Domestic bonds

Domestic bonds

Federation's
portfolio

Benchmarkportfolio

Deviation

Deviation
tolerance

Domestic bonds

33.8%

35.0%

-1.2%

±15%

Domestic equities

23.1%

25.0%

-1.9%

±14%

Foreign bonds

14.4%

15.0%

-0.6%

±6%

Foreign equities

24.2%

25.0%

-0.8%

±12%

Short-term assets

4.5%

Total

100.0%

4.5%
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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2 Investment results

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)(3) Contribution analysis of excess return ②○ Domestic bonds
The modified total return of domestic bonds was 0.13%, which exceeds the benchmark return (-0.18%) by 0.30%.
Regarding passive funds, as investments were made in a way that allowed an overweighting in local bonds, the return exceeded
the benchmark due to the shrinkage of the spread between local bonds and government bonds. As for active funds, bond selection
related to industrial bonds (including some yen-denominated foreign bonds) was successful and currency-hedged foreign bond funds,
classified as domestic bonds, made positive contributions, resulting in a higher return than the benchmark.
○ Domestic equities
The modified total return of domestic equities was -9.58%, which was below the benchmark return (-9.50%) by 0.08%.
Regarding passive funds, the return exceeded the benchmark due to the effects of lending income, among other factors. However,as the return for active funds fell short of the benchmark, the excess return for overall domestic equities was negative. As for active
funds, some growth-style funds performed strongly, but for some smart beta funds, the manager benchmark fell far short of the returnfor TOPIX. In addition, some value-style funds and funds mainly investing in small- and mid-cap stocks performed poorly due to an
adverse market environment.
○ Foreign bonds
The modified total return of foreign bonds was 3.88%, which was below the benchmark return (4.37%) by 0.49%.
The modified total return was negatively impacted, as the return for the Bloomberg Barclays Global-Aggregate index (1.96%), which
is used as a manager benchmark by more than half of active funds, fell far short of the benchmark return (4.37%). In addition, somefunds using the aggregate index as a manager benchmark delivered a lower return than the benchmark because of the unsuccessful
results of country-by-country allocation and bond selection related to industrial bonds and mortgages when the market was disrupted
due to concerns over the global economy toward the end of the fiscal year. As a result, the excess return for overall foreign bonds was
negative.
○ Foreign equities
The modified total return of foreign equities was -12.35%, which exceeds the benchmark return (-13.31%) by 0.95%.
Regarding passive funds, the return exceeded the benchmark due to the positive effects of the successful timing of some asset
sales, resulting in a positive excess return for overall foreign equities. As for active funds, the performance varied widely from fund to
fund according to the strategy adopted. Investment performance was poor for some funds that invested in companies selected
because they were judged to be attractive according to internal evaluation standards. The return for overall active funds was lower
than the benchmark.

9

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

2 Investment results(4) Investment income
The investment income for FY2019 was -JPY250.6 billion (for overall assets).
(Unit: JPY100M)

FY2019Changes in investment income(Unit: JPY100M)
2,995

3,000

2,283

2,000

Q1

Q2

Q3

Q4

FY total

1,000

Investment income

105

607

2,283

-5,502-2,5060

Domestic bonds

186

66

-132

-97

23

Domestic equities

-298

412

1,103

-2,423-1,205

Foreign bonds

53

106

63

82

304

163

23

1,250

-3,064-1,629

712
105

607

-1,000Foreign equities-2,000-2,506-3,000-4,000Each quarter-5,000Aggregate-5,502-6,000Q1

0

Short-term assets

0

0

0

Q1
Realized income

412

Q2

379

325

Q4

Investment income by asset(aggregate for the fiscal year)
500

Q4

Q3

0
(Unit: JPY100M)

FY2019Q3Q2

FY total

326

1,442

(Unit: JPY100M)

304

23

0

0
-500

(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 in valuation
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 adjustment of the economic burden on the national treasury andpublic organizations transferred from the employees’ pension insurance account to the transitional longterm account was deducted from the figures for domestic bonds.
(Note 5) Due to rounding, the total sum of individual figures may not necessarily add up to FY Total.

10-1,000-1,205-1,500-1,629-2,000-2,500-2,506-3,000
Domesticbonds

Domestic
equities

Foreignbonds

Foreignequities

Short-term
assetsOverallassetsEmployees' Pension Insurance 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.
(Unit: JPY100M)

FY2019FY2018End of FY
Book
value

End of Q1

Total market Valuation
gains/losses
value

Book
value

End of Q2

Total market Valuation
gains/losses
value

Book
value

End of Q3

Total market Valuation
gains/losses
value

Book
value

End of Q4 (End of FY)

Total market Valuation
gains/losses
value

Book
value

Total market Valuation
gains/losses
value

Domestic
bonds

17,794

18,584790

17,76018,644884

17,456

18,256799

17,47618,149673

17,25317,750497

Domestic
equities

10,811

12,515

1,704

10,804

12,217

1,413

10,828

12,6301,802

11,053

13,733

2,679

11,176

11,310134

Foreign
bonds

8,022

7,964

-58

7,940

7,962

23

7,872

7,975

103

7,822

7,948

126

7,949

8,063

114

Foreignequities

9,701

13,291

3,590

9,592

13,125

3,532

9,685

13,147

3,462

9,566

14,117

4,550

9,370

10,702

1,332

Short-term
assets

4,341

4,341

0

615

615

0

2,985

2,985

0

855

855

0

4,399

4,399

0

Total

50,66956,695

6,026

46,71052,562

5,852

48,82654,992

6,166

46,77254,801

8,029

50,14752,2252,078(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 FY2019 by asset class are as follows.
(Unit: JPY100M)

Amount of funds
allocated and withdrawn

Domestic bonds

Domestic equities

-857

0

Foreign bonds-205

Foreign equities-960(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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Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

2 Investment results(6) Fees
The amount of fees totaled about JPY3.6 billion in fiscal year 2019.
The fee rate relative to the value of investment assets came to 0.06%.
(Unit: JPY100M, %)FY2019Fees

Fee rate

Domestic bonds

8

0.03

Domestic equities

10

0.08

Foreign bonds

5

0.06

Foreign equities

12

0.09

Alternative assets

1

0.36

Overall assets

36

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 balance(Note 4) In the above table, the figures for alternative assets are separately indicated.

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Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

3 Review of benchmark portfolio

Mechanism of the review of the benchmark portfolio and the results(1) Mechanism of review
In accordance with the basic policy on the administration and investment of the Employees' Pension Insurance Benefit Association
Reserve Fund, the National Federation of Mutual Aid Associations for Municipal Personnel (hereinafter the “Federation”) shall, if it isconsidered necessary in cases, such as that the investment environment assumed at the time of establishing the benchmark portfolio
deviates from reality, examine the benchmark portfolio and revise it as necessary. To reflect the amendment to the administration andinvestment policy due to the revision of the benchmark portfolio for the entire Local Public Service Mutual Aid Associations based on
the results of the FY2019 Actuarial Valuation, the Federation decided to review its benchmark portfolio (amended on March 31, 2020,
effective from April 1, 2020).
(2) Result of review
As a result of the estimation of an asset portfolio mix which achieves the effective return required for pension finance (1.7%) andwhich meets risk constraints, the benchmark portfolio has been revised as follows.
○Revised benchmark portfolio
Domestic bonds

Domestic equities

Foreign bonds

Foreign equities

Asset mix

25%

25%

25%

25%

Deviation tolerance

±20%

±12%

±9%

±11%

(Note) Short-term assets are classified as domestic bonds.

○Attributes of the benchmark portfolio
Effective return

Nominal return

Standard
deviation

Downward
probability

Conditional average
shortfall rate

1.7%

4.0%

12.3%

44.4%

9.2%

(Note) The downward probability refers to the probability of the return falling short of the wage growth rate, while the conditional average shortfall rate refers
to the average shortfall rate when the return is lower than the wage growth rate.

(Reference) Benchmark portfolio before revision
Domestic bonds

Domestic equities

Foreign bonds

Foreign equities

Asset mix

35%

25%

15%

25%

Deviation tolerance

±15%

±14%

±6%

±12%

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4 Risk management

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)(1) Approach to risk management○ Generally speaking, "risk" refers to danger or a possibility of negative impact. In the field of asset investment, risk means
uncertainty of returns, etc. associated with market volatility or other factors. (”Uncertainty of returns” refers to thepresence of the risk of the value of assets rising as well as falling.)○ 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 withinvestment from a long-term perspective.
○ The Federation appropriately implements risk management concerning investment in accordance with the implementation
policy for risk management concerning investment of the funds in consideration of the points including the following: thatinvestment of funds should be made safely and efficiently from a long-term perspective; and that diversified investments
should be maintained in principle.

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 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) The probability of the return for the benchmark portfolio falling short of the nominal wage growth rate (hereinafterreferred to as the “downward probability’) and the average shortfall rate when the return is lower than the nominal
wage growth rate (hereinafter referred to as the “conditional average shortfall rate”) should be appropriately managed.

14

4 Risk management

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)(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.
15

4 Risk management

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)(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

Employees' Pension Insurance 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
In fiscal year 2019, 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 overall
assets generally stayed stable, but it rose toward the end of the fiscal year due to the effects of market fluctuations
associated with the spread of novel coronavirus infections.
【Changes in the asset mix】
Domestic bonds【Changes in the estimated tracking error】
Domestic equities

55%

45%

Deviation tolerance (upper limit: 50%)

Deviation tolerance (upper limit: 39%)

(%)

50%

40%

3.0

45%

35%

2.5

40%

30%

Benchmark portfolio (35%)

2.0Benchmark portfolio (25%)

35%

25%

30%

20%

25%

15%

1.5

20%

1.0

10%

Deviation tolerance (lower limit: 11%)

Deviation tolerance (lower limit: 20%)
15%
Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

0.5

5%
Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

0.0
Apr

Foreign bonds

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Foreign equities

23%

40%

Estimated tracking error:

Deviation tolerance (upper limit: 21%)
21%

35%

Deviation tolerance (upper limit: 37%)

19%

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)

30%
17%

Benchmark portfolio (25%)

Benchmark portfolio (15%)
15%

25%

13%

20%

11%

15%
9%

Deviation tolerance (lower limit: 9%)

7%
5%

10%

Deviation tolerance (lower limit: 13%)

5%

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

17

Jan

Feb

Mar

5 Investment in alternative assets

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Investment in alternative assets (1)The Federation started alternative investment in fiscal year 2018 in order to promote diversified investment of the Employees' Pension
Insurance Benefit Association Reserve Fund for the purpose of ensuring safe and efficient investment management of the fund from thelong-term perspective. The status of investment is as shown in the next page.

Investment policy pertaining to diversification of eligible investment instruments (investment in alternative assets) (Excerpt)1.

Definition of diversification of eligible investment instruments
i. Definition of diversification of eligible investment instruments"Diversification of eligible investment instruments" means making investments in assets whose characteristics, such as the risk/return profiles, are different fromthose of traditional assets such as equities and bonds ("alternative assets").
ii. Scope of alternative assets
Alternative assets are assets such as real estate, infrastructure and private equities, and negotiable securities, trust beneficiary rights and other assets backed
by those assets.

2.

Purpose of diversification of eligible investment instruments
Diversification is used to promote diversified investment of the Employees' Pension Insurance Benefit Association Reserve Fund for the purpose of investing thefunds safely and efficiently from a long-term perspective.

3.

Classification of alternative assets in the benchmark portfolio
i. Classification of alternative assets in the benchmark portfolio
Alternative assets are classified into domestic bonds, domestic equities, foreign bonds or foreign equities according to their risk/return profiles and othercharacteristics.
ii. Share of alternative assets in the asset mix of the portfolio
The share of alternative assets in the asset mix is limited to a maximum of 5% of the overall assets of the Employees' Pension Insurance Benefit Association
Reserve Fund.

4.

Matters to note when diversifying eligible investment instruments
The National Federation of Mutual Aid Associations for Municipal Personnel (hereinafter referred to as the "Federation") takes note of the following matters when
diversifying eligible investment instruments.
i. In principle, investment shall be diversified between traditional assets, such as equities and bonds, and alternative assets and across different types of alternative
assets.
ii. Diversification shall made after the effects of diversified investment have been recognized and sufficient evidence to support the expectation that an excess
returns can be obtained has been obtained.
iii. Because alternative assets are different from traditional assets in many points, such as marketability, profitability, individuality, transaction cost, and information
disclosure status, the Federation shall conduct a study with due consideration of the development of the market environment, including the steady improvementof the earning capacity of each asset and the development of the secondary market.
iv. The Federation shall make alternative investment after developing the investment and risk management systems necessary for the investment (including hiring
personnel with advanced expert skills).
v. The Federation shall use the expert knowledge of the Fund Management Committee.

18

5 Investment in alternative assets

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Investment in alternative assets (2)1. Invitation of public applications for entrusted investment management institutions through Asset Manager Registration System
The Federation started accepting entries with respect to products investing in real estate from fiscal year 2017 and products investing
in infrastructure and private equity from fiscal year 2018.
(Reference)

Asset class

Main investment
targets

Main income source and characteristics

Real estate

Real estate

Stable rent income earned from real estate via funds

Infrastructure

Stocks of infrastructure
operating companies

Stable business income earned from investee companies and projects via
funds

Private equity

Unlisted stocks

Income earned via funds in the form of a rise in corporate value due tomedium- to long-term investments in companies with high growth potential

2. Adoption of entrusted investment management institutions
In fiscal year 2019, the Federation adopted entrusted investment management institutions for two funds related to investment ininfrastructure.
 JPMorgan Asset Management (Japan) Limited (foreign infrastructure) Tokio Marine Asset Management Co., Ltd. (foreign infrastructure)(Fund of funds manager: BlackRock Financial Management, Inc.)(Note) As of the end of fiscal year 2019, investment has not been effectively started with respect to the above two funds.

19

5 Investment in alternative assets

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Investment in alternative assets (3)3. Status of investments○ Domestic real estate investments (counted as domestic bonds)
Entrusted investment
management
institutions
Nomura AssetManagement

Outline of investment funds
Diversified investment in sectors such as offices, rental houses, andindustrial and commercial facilities mainly in the three major
metropolitan areas

Total market
value(End of the
fiscal year)

Starting dateof investment

Time-weighted
return(Fiscal year)¥2.7 billion

December
2018-1.75%○ Foreign real estate investments (counted as foreign bonds)
Entrusted investment
management
institutions

Outline of investment funds

Total market
valueStarting date(End of the of investment
fiscal year)

Diversified investments in real estate funds (mainly in the office,
Tokio Marine Assetcommercial facility, industrial facility, and rental house sectors) in global ¥23.3 billion
Management
developed countries excluding JapanPGIM Japan

Diversified investments in such sectors as offices, commercial facilities,
industrial facilities and rental houses in major U.S. cities¥10.2 billion

Time-weighted
return(Fiscal year)

December
2018-1.02%

December
2018

1.91%

(Note 1) The return for domestic real estate (Nomura Asset Management) was negative due to a time lag between additional investments and market-price evaluation.
(Note 2) Foreign investment funds were affected by changes in market price valuation due to foreign exchange fluctuations.
(Note 3) The above table covers only items for which entrusted investment management institutions consented to disclosure.

20

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

6 Stewardship activities(1) Efforts in fiscal year 2019
○ As a part of its stewardship activities for fiscal year 2019, the Federation conducted surveys and hearings for entrusted investment
management institutions in relation to the situations of exercise of shareholders' voting rights and engagement activities. The
Federation encouraged them to engage in stewardship activities in an effective way adapted to their respective investment styles andresources. In addition, the Federation made periodical reports on its stewardship activities and revision to related rules.
Surveys and hearings of entrusted investment management institutions
Subjects

PeriodSurvey on exercise of voting rights

August 2019

Survey on performance of stewardship
activities

September 2019

Hearing related to the two subjects
mentioned above

October toNovember, 2019

Targets

Main subjects

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

Verification of:results of exercise of voting rights
structure for exercise of voting rights

12 entrusted investment management
institutions for domestic equities

Verification of:structure for managing conflicts of interest
details of engagement
strengthened efforts, challenges and issues
reason for the decision to exercise voting rights in relation
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

Main subjects

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

As necessary

Executives of the Federation
Executives and employees of member
associations

Federation's approach to stewardship activities and ESG
investment

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

February 2020

Executives and employees of theFederation
Executives and employees of member
associations

Stewardship activity of the Federation

Annual Stewardship Activity Report
FY2019March 2020

Publicized on the Federation's website

•
•

21

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

6 Stewardship activities

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)(2) Main activities and future initiatives
1. Periodical report○ Annual Stewardship Activity Report FY2019○ Federation’s Newsletter (February issue)

https://ssl.shichousonren.or.jp/fund/stewardship_active.html

2. Points of revision of regulations○ Corporate GovernancePrinciples
Consideration of wide variety of
stakeholders, consideration ofgender and international
background of board members,
establishment of an advisorycommittee, etc.

○ Guidelines on Exercising
Shareholders’ Voting Rights
Requirement of exercising voting
rights and conducting
engagement in an integrated
manner and utilizing the PDCA
cycle, creation or revision of
criteria for exercising voting rights
in relation to some proposals

3. Future initiatives○ Strengthening of information feedback○ Discussion of methods for evaluating entrusted investment
management institutions according to their characteristics
The Federation will continue discussing the methods for monitoring entrusted
investment management institutions’ effective stewardship activities and theappropriate methods for evaluation.

The Federation will publicize information through its website andother means and exercise its efforts to deepen the understanding by
its members (beneficiaries) as to its stewardship activity by suchmeans as PR papers and periodical reports at its general meetings.

○ Revision of regulations○ Gathering wide range of information
The Federation will continue gathering information by such way as meeting withother institutional investors, holding study sessions, participating in seminars
and information exchange with entrusted investment management institutions.
Amid the restricted social and economic activities due to the global COVID-19
pandemic, in anticipation of post-pandemic situations, the Federation will also
consider subjects and methodologies for company research and engagement
as well as expected changes in the desirable image of companies.

22

On March 24, 2020, the second revised version of the Japan's
Stewardship Code was issued by the Financial Services Agency. Inline with this, the Federation will renew its Signup to Japan's
Stewardship Code (November 2017 version) and publicize it.

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

7 Other major efforts

Administration and evaluation of entrusted investment management institutions, etc. (traditional assets)(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.
☞ As a result of the comprehensive evaluation conducted with the end of FY2018 as the reference date, one fund was partiallycancelled (reduction).
(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

☆

23

・・・

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Section 2 Fund Investment System, etc. of the Federation24

1 Organizational structure

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Organizational structure (1)1. Organization
As of April 1 of 2020, 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 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.
The Alternative Fund Management Division of the Finance Department was established as of April 1, 2020 in order to establish
decision-making and administration and management systems independent from systems related to traditional assets following theearnest start of investment in alternative assets.
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 areelected 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 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 ofbasic 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 for investment of Funds and other important matters.

25

1 Organizational structure

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Organizational structure (2)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 assessmentof 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 theFederation, discussing decision-makings as to the investment of funds. 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 Alternative Fund Management Division, theManager 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.
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 Secretary-General, the General
Manager of Finance Department and other members as may be deemed necessary. In principle, the council regularly meets once amonth, and from time to time as depending on the necessity.

26

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

1 Organizational structure

Organizational structure (3)8. Organizational structure of Federation

As of April 1, 2020

Report of status ofinvestment, 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

Use of expert
knowledge(Monitoring by certified public accountants, etc.)

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

27

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

2 Fund Management Committee

Fund Management Committee (1)○ 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 is required.

List of Committee Members (As of April 2020)
Ohno Sanae

Professor, Faculty of Economics, Musashi University

Kato Yasuyuki

Project 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

NLI Research Institute, Head of Pension Research, CMA Financial Research
Department

Toshino Masashi

Professor, Faculty of Economics, Seikei University

Miwa Yumiko

Professor, Faculty of Commerce, Meiji University28

Employees' Pension Insurance 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 (fiscal year 2019)
Meeting
number

43rd

Meeting date

September 18, 2019

Main subjects
•
•
•
•
•

44th

February 27, 2020

•
•
•
•

45th

March 27, 2020

•
•
•
•

Consultation paper
Issues for deliberation in FY2019 and method of discussion
Examination of the benchmark portfolio for the Annuity Retirement Benefit
Association Reserve Fund
Recommendation paper (draft)
Status of investment of pension funds in the first quarter of FY2019
Status of investment of pension funds in the third quarter of FY2019
Status of stewardship activities
Review of the Federation’s benchmark portfolio (first and second tiers)(proposal)
Review of the Federation’s benchmark portfolio (former third tier) (proposal)
Deviation tolerance in the Federation’s benchmark portfolio
Recommendation paper (draft)
Partial revision of basic policy on administration and investment of pension
funds
Safe and effective investment of pension funds29

3 Basic approach to investment

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Basic approach to investment○Basic policy
The Federation shall make investments for the purpose of contributing to the stable management of the Employees Pension
Insurance (“EPI”) scheme operations in the future, from a long-term perspective and in a stable and efficient manner for the benefit of
the insured of the EPI.
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.
In addition, in order to ensure investment returns which is set as the investment targets of managed funds provided in Article 79-6,
Paragraph (1) of the Employees' Pension Insurance Act, a benchmark portfolio shall be set and appropriately managed, and efforts
shall be made to earn the benchmark return for overall assets and each asset class, as well as generating benchmark returns foroverall assets and each asset class over the long term.

Basic Policy for Management and Investment of Employees' Pension Insurance Benefit Association Reserve Fund (Extract)
1. Basic Policy
Especially keeping in mind that the Employees' Pension Insurance Benefit Association Reserve Fund is part of insurance premiums collectedfrom insured persons of the EPI and valuable resources for funding future pension benefits, the funds shall be managed with the objective ofcontributing to the stable operation of EPI schemes in the future by investing it safely and efficiently "solely for" ("for" in the case of investing inline with the objectives of the Act under Article 79-3, Paragraph (3), of the EPI Act) the interests of insured persons of the EPI from the long-term
perspective.
Accordingly, the Employees' Pension Insurance Benefit Association Reserve Fund shall be managed and invested with an asset mix
established from the long-term perspective (the "benchmark portfolio") based on appropriately diversifying investments in multiple assets thatdiffer in risk/return and other characteristics ("diversified investment").
2. Investment target
Investment of the Employees' Pension Insurance Benefit Association Reserve Fund shall be managed appropriately by establishing a
Benchmark Portfolio, so as to secure investment returns targeted for managed funds provided in Article 79-6, Paragraph (1) of the EPI Act (the"managed funds").
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 secure benchmark returns for overall assets and each asset class in each fiscal year by appropriately
selecting, managing and assessing entrusted investment management institutions, as well as securing benchmark returns for overall assets andeach asset class over the long term.

30

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Section 3 Reference Data

31

Employees' Pension Insurance 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)(1) Investment return(2) Value of investment income(Unit: JPY100M)(Unit: %)FY2015(second half)

FY2016FY2017FY2018FY2019FY2015(second half)

FY2016FY2017FY2018FY2019Modified total
return

0.89

4.16

6.40

1.59

-4.60

Investment
income

473

2,150

3,429

879

-2,506

Domestic
bonds

3.32

-0.79

1.25

1.94

0.13

Domestic
bonds

984

-188

248

364

23

Domestic
equities

-3.98

14.76

15.85

-5.24

-9.58

Domestic
equities

-330

1,331

1,836

-702

-1,205

Foreign
bonds

-2.32

-5.23

3.47

2.64

3.88

Foreign
bonds

-105

-320

247

204

304

Foreignequities

-1.04

14.43

9.34

7.82

-12.35

Foreignequities

-75

1,327

1,098

1,013

-1,629

Short-term
assets

-0.03

0.00

0.00

0.00

0.00

Short-term
assets

-1

0

0

0

0

(Unit: JPY100M)(Unit: %)Realized return

FY2015(second half)

FY2016FY2017FY2018FY2019

2.29

2.24

4.37

2.96

2.98

FY2015(second half)

FY2016FY2017FY2018FY2019Realized income

1,111

1,066

2,112

1,436

1,442

(Income gain)

(349)

(820)

(1,170)(1,017)(972)(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

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

2 Issues held

Issues held (1)The tables below show the top 10 bond issues and equity issues indirectly held through entrusted investment and throughin-house investment as of the end of March 2020, with bond issues classified by issuer name and equity issues by issuename. 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

1 Government of Japan
2 Japan Finance Organization for Municipalities
3 Japan Expressway Holding and Debt Repayment Agency
4 Joint LGB
5 Tokyo Metropolitan Government
6 Osaka Prefecture
7 Kanagawa Prefecture
8 Saitama Prefecture
9 Aichi Prefecture
10 Japan Housing Finance Agency (former Government Housing Loan Corporation)
Total
329 Issuers○ Domestic equity (in order of total market value)
Total market value(in 100M yen)
6,672
640
639
552
504
335
327
295
282
264
16,399○ Foreign bond (in order of total market value)

Issue names

1 Toyota Motor Corporation
2 Sony Corporation
3 Nippon Telegraph and Telephone Corporation
4 Keyence Corporation
5 Mitsubishi UFJ Financial Group
6 SoftBank Group
7 KDDI Corporation
8 Takeda Pharmaceutical Company Limited
9 Nintendo Co., Ltd.
10 NTT DOCOMO, INC.
2,194 Issues
Total

Total market value(in 100M yen)
5,597,900
371
3,145,800
203
7,368,700
193
473,500
165
35,633,300
148
3,853,600
147
4,266,700
139
3,997,100
136
283,700
120
3,483,600
120
11,213

No. of shares○ Foreign equity (in order of total market value)

Total market value(in 100M yen)
1 UNITED STATES TREASURY
3,432
2 ITALY, REPUBLIC OF (GOVERNMENT)682
3 FRANCE (GOVERNMENT)671
4 SPAIN, KINGDOM OF (GOVERNMENT)524
5 UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND
430
6 GERMANY (GOVERNMENT OF)
424
7 FEDERAL NATIONAL MORTGAGE ASSOCIATION254
8 BELGIUM, KINGDOM OF (GOVERNMENT)208
9 CANADA (GOVERNMENT)
137
10 IRELAND, REPUBLIC OF (GOVERNMENT)
128
Total
669 Issuers
8,798
No.

No.

Names of issuer

33

No.

Issue names

1 MICROSOFT CORPORATION
2 APPLE INC
3 AMAZON COM INC
4 FACEBOOK INC-A
5 NESTLE SA (REGISTERED)
6 ALPHABET INC-CL A
7 ALIBABA GROUP HOLDING
8 ALPHABET INC-CL C
9 VISA INC-CLASS A SHRS
10 JOHNSON AND JOHNSON
2,864 Issues
Total

Total market value(in 100M yen)
1,745,689
297
1,055,343
290
103,609218
636,308115
995,318110
87,131
109
476,900
100
78,002
98545,430
95
643,41491
10,613

No. of shares2 Issues held

Employees' Pension Insurance Benefit Association Reserve Fund(National Federation of Mutual Aid Associations for Municipal Personnel)

Issues held (2)○ Alternative investment (classified by asset class and arranged in the descending order of total market value)
Names of entrusted investment management
Names of beneficial Total market value
institutions
investment institutions(in 100M yen)Domestic real estate Nomura Asset Management Co., Ltd.
27－
Foreign real estate Tokio Marine Asset Management Co., Ltd.
233－
Foreign real estate PGIM Japan Co., Ltd.
PGIM REAL ESTATE
102
Asset class(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 of the end of March 2020.
(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) Issuers of bonds held in relation to active investment of hedged foreign bonds are classified as issuers of foreign bonds.
(Note 4) The names of issuers and issues may be different from those on the list of all issues held published separately on the website.
(Note 5) The above table covers only items for which entrusted investment management institutions consented to disclosure.

34