Annual Report2008

Highlights of Investment in Fiscal 2007With the aim of building a solid, long-term earnings base, Zenkyoren invested principally in yen-denominated bonds and debt instruments while also following a strategically planned policy on the purchase of Japanese equities and overseas investment trusts. We worked to adjust our investment portfolio to achieve a balance between ensuring the soundness of Zenkyoren’s assets and planting the seeds of improved investment profitability in the future. Similarly, to improve investment profitability we embarked on the purchase of new financial products, most notably preferred securities issued by financial institutions.Investment Policy The majority of our investments of funds deposited with Zenkyoren are in long-term, fixed-interest financial products, and we are faced with the need to make additional provisions to our liability reserves each fiscal year. In view of these circumstances, we have adopted a medium-to-long-term approach to investment, centered on liability reserve bonds to meet the criteria for the liability reserve, so as to secure stable earnings over the long term. Specifically, to secure stable earnings over the long term, we focus our investment on yen-denominated bonds and loans to companies with sound financial positions. In parallel, we are reinforcing our investment in corporate bonds and equities, as well as loans to corporate customers, and are adjusting our portfolio to improve the soundness of our assets and raise investment profitability. Current Situation of Asset Management Our working assets at the end of fiscal 2007 amounted to ¥42,125.6 billion. Public and corporate bonds accounted for 80.2% of our asset portfolio, loans receivable for 6.7%, equities for 3.5%, and foreign securities for 5.8%. Investments denominated in foreign currencies accounted for 2.9% of our asset portfolio. To promote agricultural productivity, we also offer a special low-interest loan program to farmers – something that sets us apart from ordinary life insurance providers and helps return benefits to farming communities.Investment Environment At the beginning of fiscal 2007 the yield on 10-year Japanese Government Bonds (JGBs) – the prime indicator of domestic long-term interest rates – stood at 1.65%. From that point, the yield commenced a consistent upward path on the back of expectations that the Bank of Japan would raise the uncollateralized overnight call rate (the key policy rate), as well as an upward movement in the U.S. long-term interest rate: the yield reached 1.96% in June. However, thereafter, market interest rates declined substantially sparked by the U.S. subprime mortgage issue and further fed by “flight to quality” international investments. In March 2008 the 10-year JGB yield reached 1.25%, its lowest level in two years and eight months, and ended the fiscal year (March 2008) at 1.27%.In the domestic stock market scene, the Nikkei 225 Average started off fiscal 2007 at ¥17,028.41 and rose to ¥18,261.98 in July against the backdrop of the yen’s depreciation and the bullish trend of the U.S. stock markets. Subsequently, the Nikkei followed a downward path, affected by the decline of stock prices around the world in the aftereffects of the U.S. subprime loan crisis. This factor was exacerbated by a steep appreciation of the yen against the U.S. dollar , and the Nikkei fell to ¥11,787.51 in March 2008 for its lowest level in two years and seven months. To close the fiscal year, the Nikkei ended in March 2008 at ¥12,525.54. On the foreign exchange markets, the yen stood at ¥117.99/$1 at the start of fiscal 2007. However, the G7 finance ministers and central bank governors failed to mention the yen’s depreciation in the joint statement following their meeting in April, and this caused an acceleration of the yen’s slide, with the currency reaching ¥123.95/$1 in June. Subsequent to this, however, the eruption of the subprime loan crisis caused an unwinding of the yen carry trade. The yen appreciated to ¥97.02/$1 by March 2008, and ended at ¥100.19/$1.ASSET MANAGEMENTANNUAL REPORT 20088highlights of investment in FY2007