Annual Report 2009

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 bonds meeting the requirements for liability reserve, with the aim of securing 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 equities, 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 2008 amounted to ¥41,276.2 billion. Public and corporate bonds accounted for 81.3% of our asset portfolio, loans receivable for 6.8%, equities for 2.0%, and foreign securities for 5.1%. Investments denominated in foreign currencies accounted for 2.1% 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 2008 the yield on 10-year Japanese Government Bonds (JGBs) – the prime indicator of domestic long-term interest rates – stood at 1.35%. From that point, the yield followed an upward path as a result of fears of inflation due to the rise in prices of crude oil and raw materials, reaching 1.88% in June. Subsequently, the 10-year JGB yield fell to 1.16% by December, in line with the rapid deterioration of the real economy, expectations of a prolonged recession, and the Bank of Japan’s cutting of the key policy rate (uncollateralized overnight call rate). The yield ended the fiscal year at 1.34%.In the domestic stock market scene, the Nikkei 225 Average started off fiscal 2008 at ¥12,656.42 and rose to ¥14,489.44 in June against the backdrop of the yen’s depreciation and the temporary ebbing of fears of a global credit crunch. In September, however, the bankruptcy of Lehman Brothers and the subsequent rapid deterioration of the real economy caused stock prices to plunge worldwide. In March 2009 the Nikkei had fallen to a new post-Bubble low of ¥7,054.98 (also, in fact, the Nikkei’s lowest level for 26 years). The key index then rallied on the back of the U.S. government’s announcement of the Public-Private Investment Program, a large-scale economic stimulus package in Japan, and the yen’s depreciation. The Nikkei had slightly recovered to ¥8,109.53 by the end of the fiscal year.On the foreign exchange markets, the yen stood at ¥99.84/$1 at the start of fiscal 2008. The dollar was then bought on expectations of higher interest rates in the U.S. and against the backdrop of worsening economic indicators in the euro zone, and the yen weakened to ¥110.29/$1 in August. Thereafter, the collapse of major U.S. financial institutions accompanied by government bailouts and the pull-down in key interest rates led to dollar selling, and the yen appreciated to a 13-year high in December, at ¥87.45/$1. From early January, hopes for a U.S. led recovery against the backdrop of the new Obama administration’s stimulus measures, leading to an appreciation of the dollar against the other major currencies. At the fiscal year-end the yen’s value had fallen back to ¥98.23/$1. Highlights of Investment in Fiscal 2008With the aim of building a solid, long-term earnings base, Zenkyoren invested principally in yen-denominated bonds and debt instruments. Amid a steadily worsening economic situation and a global financial crisis, we have been holding back on the acquisition of new equity investments since the start of 2009 and generally adopting a cautious investment stance. ASSET MANAGEMENTANNUAL REPORT 20098Highlights of Investment in FY2008Working Assets(Trillion ¥)(FY)2004200520062007200850403042.441.22010043.142.141.5Miscellaneous items 1.8%Real estate investments 0.6%Cash, bank deposits, and call loans 1.8%Loans receivable 6.8%Other securities 0.6%Equities 2.0%Foreign securities 5.1%Public and corporate bonds 81.3%Breakdown of Working AssetsSecurities 89.0%