Fiscal Year 2022 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 FY2022】
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) ………………………………………………………………………………… 16
5 Stewardship activities……………………………………………………………………………………………………………….. 17
6 Other major efforts……………………………………………………………………………………………………………………19【Section 2 Businesses and Fund Investment of the Federation】
1 Organizational structure…………………………………………………………………………………………………………….. 21
2 Fund Management Committee…………………………………………………………………………………………………….. 24
3 Basic approach to investment……………………………………………………………………………………………………… 26【Section 3 Reference Data】
1 Changes in the investment results………………………………………………………………………………………………… 28
2 Issues held…………………………………………………………………………………………………………………………… 29
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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+1.70%

Time-weighted return (market value basis)(FY2022)(Investment return before the deduction of fees, etc.)

Investment income+JPY 102.1 billion

Investment income (market value basis)(FY2022)

Value of investment assets:

JPY 6,434.3 billion

Total market value(End of FY2022)
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 1) The investment income represents the income after the deduction of fees, etc.

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

Section 1 Administration and Investment of Funds in FY2022

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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
Regarding the full-year benchmark return, while both the bond and stock markets declined as a result of a series ofinterest rate hikes by central banks amid rising inflation rates worldwide, the markets recovered in the second half of the
fiscal year because of the post-COVID-19 economic normalization and expectations for a halt to the round of interest
rate hikes in the United States. As a result, the total return came to +1.57%.

Domestic equities

Domestic bonds

Foreign bonds

Foreign equities

Mar. 312022

Apr. 30
2022

May. 312022

Jun. 30
2022

Jul. 312022

Aug. 312022

Sep. 302022

Oct. 312022

Nov. 30
2022

Dec. 312022

Jan. 312023

Feb. 28
2023

Mar. 312023(Note) The level as of March 31, 2021 is the base figure of 100.
Returns
Asset class

Benchmark
Q1

Q2

Q3

Q4

Full fiscal year

Domestic bonds NOMURA Bond Performance Index (Overall)-1.30%-0.66%-1.88%

2.22%

Domestic equities TOPIX (dividend-inclusive)-3.65%-0.79%

3.26%

7.21%

5.81%

2.66%

-1.78%-5.81%

4.69%-0.56%-5.51%-0.55%-0.01%

8.44%

1.88%

-1.96%-0.89%-1.05%

5.64%

1.57%

Foreign bonds
Foreign equities

FTSE World Government Bond Index(ex-Japan, ex-China, no hedge, in yen)

MSCI ACWI ex. Japan(in yen, dividend-inclusive)

Total-1.65%(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:(Unit: %)FY2022End of FY2021

Domestic bonds

22.6

End of Q1

End of Q2

End of Q3

End of Q4(End of FY)

23.0

23.9

23.3

23.0

Benchmarkportfolio

25.0

Short-term
assets

(0.9)

(0.8)

(1.7)

(0.6)

(1.0)

Domestic
equities

26.6

26.5

26.7

28.0

27.6

25.0

Foreign bonds

22.2

23.6

23.4

22.5

22.4

25.0

Foreign equities

28.5

26.9

26.0

26.2

27.0

25.0

Total

100.0

100.0

100.0

100.0

100.0

100.0

(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) Privately placed municipal bonds are included in domestic bonds (percentage of 11.7% 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
The time-weighted return for FY2022 was 1.70% for the overall assets.

Changes in time-weighted return(Unit: %)FY2022
Q1

Q2

Q3

Q4

FY totalTime-weighted return

-2.08

-0.70

-0.83

5.47

1.70

Domestic bonds

-0.89

-0.43

-1.79

1.77

-1.36

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

Domestic equities

-3.63

-0.35

3.04

6.78

5.66

Foreign bonds

2.65

-1.71

-5.53

4.52

-0.38

Foreign equities

-5.38

-0.56

0.23

8.26

2.10
(Unit: %)FY2022Modified total return

Q1

Q2

Q3

Q4

-2.09

-0.67

-0.80

5.40

FY total

1.56(Unit: %)FY2022

Realized return

Q1

Q2

Q3

Q4

1.76

1.75

1.27

1.34

FY total

6.12(Note 1) The return in each quarter is the period rate.
(Note 2) The time-weighted return represents the figure before the deduction of fees, etc.
(Note 3) The modified total return and realized return represent the figures after the deduction of fees, etc.

7Time-weighted return 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(3) Contribution analysis of excess return (i)The time-weighted return for overall investment assets was 1.70%, while the excess return compared with the benchmark
return was 0.13%.
The excess return for overall assets (0.13%) can be broken down as follows: asset allocation factor: 0.21%; individual asset
factor: 0.14%; composite factor: -0.21%.
FY2022 (April 2022 through March 2023)
OverallassetsModified total return
Benchmark return
Excess return*(Unit: %)Domestic Domestic Foreignbonds
equities
bonds

Foreignequities

1.70

-1.36

5.66

-0.38

2.10

1.57

-1.65

5.81

-0.56

1.88

0.13

0.29

-0.15

0.19

0.22

* 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.

Asset allocation
factorIndividual asset
factorComposite factor

Domestic bonds

0.07%

0.07%

-0.05%

Domestic equities

0.07%-0.04%-0.06%(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 the end of previous
period) from the benchmark portfolio

Federation's
portfolio

Benchmarkportfolio

Deviation

Deviation
tolerance

Domestic bonds

22.7%

25.0%

-2.3%

±20%

Domestic equities

26.8%

25.0%

1.8%

±12%

Foreign bonds

22.4%

25.0%

-2.6%

±9%
±11%

Foreign bonds

0.06%

0.05%

-0.05%

Foreign equities

0.01%

0.05%

-0.05%

Foreign equities

28.1%

25.0%

3.1%

Total

0.21%

0.14%

-0.21%

Total

100.0%

100.0%

0.0%

Asset allocation factor: A factor that is attributable to the difference between the asset mix of the fund and the benchmark portfolio.
Individual asset factor: A factor that is attributable to the difference between the time-weighted return and benchmark return concerning each asset class.
Composite factor: A factor combining elements of the asset allocation and individual asset factors and calculation errors.

8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 (ii)
○ Domestic bonds
The time-weighted return of domestic bonds was -1.36%, which exceeds the benchmark return (-1.65%) by 0.29%.
In passive investment, as the overweighting of municipal bonds was tolerated, the expansion of the yield spread between municipal
and government bonds had a negative impact. In active investment, regarding a 20-year laddered fund, classified as active investment,
the expansion of the spread had a negative impact. However, the return for domestic bonds as a whole exceeded the benchmark,supported by privately placed municipal bonds held by member associations, which are not subject to market evaluation.
○ Domestic equities
The time-weighted return of domestic equities was 5.66%, which was below the benchmark return (5.81%) by 0.15%.
In passive investment, the return was generally similar to the benchmark. In active investment, value funds generally performed well,
but growth funds and the performance of small- and mid-cap funds was poor. Regarding funds adopting smart beta strategies, themanager’s benchmark return (5.11%) was lower than the return on the TOPIX index for those using a low-volatility strategy. As aresult, the return on domestic equities as a whole was lower than the benchmark.
○ Foreign bonds
The time-weighted return of foreign bonds was -0.38%, which exceeds the benchmark return (-0.56%) by 0.19%.
In passive investment, the return was generally similar to the benchmark. In active investment, only two of the eight entrusted
investment management institutions delivered a return higher than the manager’s benchmark. As the return on the Bloomberg Global
Aggregate Index (1.14%), which was adopted as the manager’s benchmark by five of the eight institutions, was much higher than thebenchmark (WGBI), the returns for all of the five exceeded the return on the WGBI. As a result, the return on foreign bonds as a whole
exceeded the benchmark.
○ Foreign equities
The time-weighted return of foreign equities was 2.10%, which exceeds the benchmark return (1.88%) by 0.22%.
In passive investment, the return fell short of the benchmark due to the effects of dividend taxation. In active investment, some
growth funds performed poorly. However, focused funds that invest in a limited number of issues and funds that make investment inways that curb portfolio volatility performed well. As a result, an excess return was secured for active investments as a whole, and thereturn on foreign equities as a whole also exceeded 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 FY2022 was JPY 102.1 billion for overall assets.

Changes in investment income(Unit: JPY100M)

FY2022
Q1

Q2

Q3

Q4

FY total

Investment income-1,364

-426

-503

3,314

1,021

Domestic bonds

-133

-65

-262

250

-209

Short-term assets

(0)

(0)

(0)

(0)

(0)

Domestic equities

-632

-58

508

1,139

956

Foreign bonds

385

-255

-808

616

-61

Foreign equities

-984

-48

60

1,309

336

(Unit: JPY100M)

FY2022
Q1
Realized income

887

Q2

890

Q3

651

Q4

FY total

689

3,117

(Note 1) The total return and realized return represent the figures after the deduction of fees, etc.
(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.

10

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.

(Unit: JPY100M)

FY2022End of FY2021
End of Q1

End of Q2

End of Q3

End of Q4 (End of FY)

Book value

Total market
value

Valuation
gains/losses

Book value

Total market
value

Valuation
gains/losses

Book value

Total market
value

Valuation
gains/losses

Book value

Total market
value

Valuation
gains/losses

Book value

Total market
value

Valuation
gains/losses

Domestic bonds

14,22514,805579

14,13914,575436

14,626

14,944318

14,291

14,31524

14,634

14,829194

Short-term
assets

(605)

(605)

(0)

(524)

(524)

(0)

(1,035)(1,035)

(0)

(386)

(386)

(0)

(673)

(673)

(0)

Domestic
equities

13,113

17,393

4,280

13,208

16,7603,552

13,293

16,702

3,410

13,614

17,2103,596

13,462

17,7494,287

Foreign bonds

14,031

14,553522

14,097

14,938842

14,172

14,602430

14,324

13,794-530

14,532

14,410-121

Foreign equities

9,398

18,677

9,280

9,293

17,053

7,760

9,038

16,287

7,250

9,023

16,047

7,024

9,150

17,356

8,206

Total

50,76665,428

14,66150,73763,327

12,59051,12962,536

11,40751,252

61,366

10,114

51,77864,343

12,565(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.
(Note 3) Privately placed municipal bonds are included in domestic bonds

The amounts of funds allocated and withdrawn in FY2022 by asset class are as follows.
(Unit: JPY100M)

Domestic bonds Domestic equities Foreign bonds
Amount of funds
allocated and withdrawn

166

-600

-81

Foreign equities-1,658(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 classrelated 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 JPY 3.8 billion in FY2022.
The fee rate relative to the value of investment assets came to 0.06%.
(Unit: JPY100M, %)FY2022Fees

Fee rate

Domestic bonds

0

0.00

Domestic equities

15

0.09

Foreign bonds

7

0.05

Foreign equities

16

0.09

Overall assets

37

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
Domestic bonds

Domestic equities

Foreign bonds

Foreign equities

Asset mix

25%

25%

25%

25%

Deviation tolerance

±20%

±12%

±9%

±11%

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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, risk means
uncertainty of returns, etc. associated with market volatility or other factors. ("Uncertainties of returns, etc." refers to therisk 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)
1. Basic approach concerning risk management
The National Federation of Mutual Aid Associations for Municipal Personnel appropriately conducts risk management related to the investmentof 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 fund(ii) 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.

14

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

4 Risk management(2) Risk management efforts○ Management of the deviation of the asset mix• Investment based on the benchmark portfolio requires the management of various risk factors. Therefore, in order 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.
○ 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.
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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-by-asset share in the asset mix stayed mostly at around the median value for all asset classes. The
estimated tracking error concerning overall assets ranged from around 0.4% to 0.8%.
【Changes in the estimated tracking error】【Changes in the asset mix】

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)16

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

5 Stewardship activities(1) Efforts in FY2022○ As part of its stewardship activity in FY2022, the Federation conducted surveys and interviews with entrusted investment
management institutions regarding the status of their exercise of shareholders’ voting rights and engagement andencouraged them to conduct efficient stewardship activity in accordance with their own investment styles and staffing
situations. The Federation conducted surveys and interviews with investment management institutions entrusted with foreign
equities as well as those entrusted with domestic equities.
Surveys and hearings of entrusted investment management institutions
Subjects

PeriodSurvey on exercise of voting rights

September
2022

Survey on performance of stewardship
activities

September
2022

Interviews regarding the above two items

November2022

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

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 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

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

February 2023

Executives and employees of theFederation and executives and employeesof member associations

Federation's approach to stewardship activities

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

Annual Stewardship Activity Report
FY2022

March 2023

Publicized on the Federation's website

•
•

17

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 initiatives
1. Periodical report○ Annual Stewardship Activity Report FY2022〇Federation’s Newsletter (February issue)

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

2. Future initiatives〇Discussion of methods for evaluating entrusted investment
management institutions according to their characteristics○ Gathering wide range of information
The Federation will continue gathering information through activities such as
meetings with a broad range of institutional investors, participation in seminars
featuring outside experts as instructors and information exchange with entrusted
investment management institutions. Regarding assets other than domestic andforeign equities as well, the Federation has already held seminars with fundmanagers, analysts, etc. on themes such as the ESG approach concerning bonds,
and the status of ESG efforts by Japanese companies as viewed from abroad.
Going forward, the Federation will enhance its knowledge in the ESG field bygathering information from farther and wider than before with respect to ways ofreflecting the ESG factors into investment, techniques for efficient measurementof the effects of ESG investment, and points of discussion regarding productevaluation.

The Federation believes that it is necessary to evaluate stewardship activity withdue consideration given to the differences across entrusted investment
management institutions in the business model and product lineup. The
Federation will continue discussing the methods for monitoring entrusted
investment management institutions’ effective stewardship activities and theappropriate methods for evaluation.

〇Strengthening of information feedback
The Federation will publicize information through its website and other means andexercise its efforts to deepen the understanding by its members (beneficiaries) as
to its stewardship activity by such means as PR papers and periodical reports at
its general meetings.

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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. (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.
☞ Three funds were partially cancelled (reduction) in the comprehensive evaluation whose base date is at the end of FY2021.
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

June

September

March

December【Performance check】◇

Monthly

＊

＊

＊

＊

＊

＊

＊

＊

＊

＊

＊

＊

…

【Report on the investment status】◇ Quarterly

☆

☆

☆

【Comprehensive evaluation】◇ Annual

☆

19

☆

…

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

Section 2 Businesses and Fund Investment of the Federation20

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, 2023, 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 126.
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 IT and Information Security Office, 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 of the Presidents of associations which are
the members of the Federation (hereinafter the "Member Associations"). Among the members of the General Assembly, 14 are electedby 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 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.

21

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 be deemed necessary. In principle, the council regularly meets once a month, and from time to time depending on thenecessity.
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 Manager of Investment Risk Management Office, the General Manager of Finance Department and othermembers as may be deemed necessary. In principle, the council regularly meets once a month, and from time to timedepending on the necessity.

22Transitional Long-term 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, 2023

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
executives and employees[monthly])
Status of investment, etc.

SecretaryGeneral

Investment Risk
Management Committee

Cooperation(Check and discussion by executives
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 concerning
bonds and equities

Entrusted investment concerning
alternative assets

23

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 2023)

Chairperson

Ohno Sanae

Vice President, Musashi University

Kato Yasuyuki

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

Takehara Hitoshi

Professor, Waseda Business School (Graduate School of Business andFinance)

Tokushima Katsuyuki

Toshino Masashi
Miwa Yumiko

NLI Research Institute
Director, Member of the Board, Head of Pension Research, CMA
Financial Research Department
Specially Appointed Professor, Faculty of Business Administration , Seikei
University
Professor, Faculty of Commerce, Meiji University(Note) In Japanese alphabetical order, honorifics omitted.

24

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 (FY2022)
Meeting
numberMeeting date

Main subjects
•
•
•

52nd

June 16, 2022
(Web conference)

•
•
•
•
•

53rd

54th

November 28, 2022
(Web conference)

March 23, 2023

Consultation paper
Subjects to be discussed this year and how to proceed with themExamination of the benchmark portfolio for the Employees' 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
Effect of the Russia-Ukraine situation and status of investment, etc.

•
•
•
•

Examination of the benchmark portfolio for the Annuity Retirement Benefit
Association Reserve Fund
Recommendation paper (draft)
Status of investment of pension funds
Status of investment of domestic bonds
Status of investment in alternative assets•••

Investment of pension funds in FY2023
Status of investment of pension funds
Stewardship activities

25

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.

26

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

Section 3 Reference Data27

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 and investment income (since the integration of employee pension plans)
1. Investment return

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

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022Return

0.97

4.90

6.81

1.22

-4.97

24.44

5.76

1.70

Domestic
bonds

3.80

-0.52

0.96

1.55

-0.34

0.17

-0.45

-1.36

0.02

0.01

0.00

0.00

0.00

(0.00)(0.00)

0.00

Domestic
equities

-4.50

14.94

16.32

-5.26

-9.00

41.93

1.78

5.66

Foreign
bonds

-2.21

-5.19

3.65

2.62

4.07

5.93

2.01

-0.38

Foreignequities

-0.93

14.34

9.57

7.82

-13.33

58.91

17.96

2.10

Short-term
assets

FY 2015(second half)

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

560

2,795

3,913

717

-2,842

12,855

3,696

1,021

1,198

-141

234

328

-68

31

-66

-209

1

0

0

0

0

(0)

(0)

(0)

Domestic
equities

-444

1,800

2,317

-828

-1,286

5,265

314

956

Foreign
bonds

-119

-314

238

212

350

614

288

-61

Foreignequities

-75

1,449

1,125

1,005

-1,838

6,945

3,160

336

Investment
incomeDomestic
bonds
Short-term
assets(Unit: JPY100M)(Unit: %)Realized return

FY 2015(second half)

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

2.15

2.59

5.09

3.57

2.94

5.60

6.94

6.12

FY 2015(second half)

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

Realized income

1,085

1,305

2,508

1,756

1,431

2,706

3,451

3,117

(Income gain)(522)(1,078)(1,360)(1,176)(1,149)(1,035)(1,155)(1,302)(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) The figures for short-term assets after fiscal year 2020 are included in domestic bonds.
(Note 5) The figures for returns for the periods from FY2015 to FY2021 represent total modified returns (after the deduction of fees, etc.), and the figures for returns for
FY2022 represent time-weighted returns (before the deduction of fees, etc.)28

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 2023, 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 (available inJapanese only).
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 Hyogo Prefecture
4 Osaka Prefecture
5 Osaka City
6 East Japan Railway Company
7 Tokyo Metropolitan Government
8 Kobe City
9 Japan Expressway Holding and Debt Repayment Agency
10 Kitakyushu City
Total
58 Issuers○ Domestic equity (in order of total market value)

Total market value(Unit: JPY100M)
3,731
3,417
629
316
294
271
241
224
197
197
12,403No.

1 Toyota Motor Corporation
2 Sony Corporation
3 Keyence Corporation
4 Nippon Telegraph and Telephone Corporation
5 Mitsubishi UFJ Financial Group
6 Sumitomo Mitsui Financial Group
7 Daiichi Sankyo
8 Shin-Etsu Chemical
9 Hitachi
10 Tokyo Electron
2,196 Issues
Total○ Foreign bond (in order of total market value)No.

Names of issuer

1 UNITED STATES TREASURY
2 FRANCE, REPUBLIC OF (GOVERNMENT)3 ITALY, REPUBLIC OF (GOVERNMENT)4 GERMANY, FEDERAL REPUBLIC OF (GOVERNMENT)
5 SPAIN, KINGDOM OF (GOVERNMENT)
6 UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND (GOVERNMENT)
7 CANADA (GOVERNMENT)
8 BELGIUM, KINGDOM OF (GOVERNMENT)
9 AUSTRALIA, COMMONWEALTH OF (GOVERNMENT)
10 NETHERLANDS, KINGDOM OF THE (GOVERNMENT)
Total
663 Issuers

Issue names

Total market value(Unit: JPY100M)
28,360,700
541
3,747,700
451
534,600
345
8,195,400
330
35,684,700
308
4,610,800
250
5,025,900
243
5,494,400
238
2,686,600
197
1,201,600
196
17,615

No. of shares○ Foreign equity (in order of total market value)
Total market value(Unit: JPY100M)
6,949
1,148
1,108
922
710
683
300
259
220
207
14,455No.

Issue names

1 APPLE INC
2 MICROSOFT CORP
3 AMAZON.COM INC
4 ALPHABET INC-CL A
5 NVIDIA CORP
6 ALPHABET INC-CL C
7 META PLATFORMS INC
8 TESLA INC
9 VISA INC
10 TAIWAN SEMICONDUCTOR MANUFACTURING
2,940 Issues
Total

Total market value(Unit: JPY100M)
3,155,978
693
1,508,709
579
2,062,896
284
1,568,855
217
486,061180
1,148,728
159
558,447
158
523,441145
471,931142
5,680,861
133
17,229No. of shares(Note 1) The names of issuers and issues are those assigned by the Federation as of the end of March 2023 using data from the Nomura Research Institute’s T-STAR/GX system, MSCI’s
Barra One, and Bloomberg.
(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 the website.

29