Marketing strategies for corporate pension asset management April - PowerPoint PPT Presentation

For the strategic management of corporate pension plans Marketing strategies for corporate pension asset management April 18, 2002 The Sumitomo Trust and Banking Co., Ltd. Multi-Product & Investment Counseling

Drastic change in the corporate environment Interest rate fluctuation Volatility Worsening of of required cash contribution investment International accounting standards conditions caused Pension liability corresponding to by worldwide the future portion of pension plan recession in 2000- D e f Introduction of i n Volatile e 2001 c d o n t r i b u “retirement liability t i o t n n e m e r t pension accounting i s t Return to e u r r t n o i Volatile s nation’s plan n system” e p investment Cash balance n performance o i t c plan e j n i y t Recognition of PBO i u q Negative return of E n Projected based pension liability o i investment of the t u b i r t n benefit on B/S of the plan o C pension assets ) h s a c ( sponsor obligation Pension (PBO) asset Downside risk “PBO” issue High volatility of pension asset and liability Influence on ratings and stock price Direct influence to the bottom line （ B/S&P/L ） by excessive pension liability.. The tail is swinging its body. The tail is swinging its body. Rating Stock price 1 From “Pension Information” issued January 21, 2002

Counseling of problematic corporate pension plan ～ Utilizing our high-quality counseling capability ～ Management Management Liability issue issue Downside risk PBO issue Asset （ retirement pension plan ） （ pension investment ） ＆ ＆ Plan counseling Multi-products Multi-plans Investment counseling The Sumitomo Trust and Banking Co., Ltd. The Sumitomo Trust and Banking Co., Ltd. Our strength Differentiation from competitors We have established the superiority to support our Our strength lies not only in indicating the right direction through clients through the consultation service in both our consulting <plan> but also in providing optimal products and/or investing and planning ahead of our competitors. plans to <do> and <see> the final outcome. 2

High-quality counseling from in investment and plan Investment Plan Investment Plan Focus on individual products Diversification of customer needs Focus on individual products Diversification of customer needs ● Accounts of multi-assets → shift to accounts of ● Change in corporate strategies single asset Corporate realignment is rapidly in progress under the In accordance with inclination toward specialization, shift concept of selection and concentration. Accordingly to specified investment style such as that by investment review of retirement pension becomes necessary. advisory companies is rapidly in progress. ● Emphasis on policy asset mix ● Change in concern Emphasis on policy asset mix Change in concern ~ change in concern among both management and ~ change in concern among both management and （ Asset allocation strategy → Individual assets strategy ） employees employees ~ With accelerating prevalence of policy asset mix, the weight Japanese companies will gradually free themselves of the of asset allocation effect tends to decline and that of traditional Japanese culture such as life-time employment individual assets effect tends to increase. and seniority rule. ● Diversification of plan choices Diversification of plan choices ● Change in the decision factor of entrusted share Change in the decision factor of entrusted share Through the introduction of defined contribution plan and Selection of investment managers dramatically shifts from renewed defined benefit plan, the pattern of retirement focusing on relationships with plan sponsor companies or pension plans is significantly diversified. on major trustee functions to the quality of individual products of pension investment. How to present a solution through high- How to present the solution plan level counseling capability with high- through high-quality counseling quality products to advanced clients who from an unbiased standpoint emphasize on high-quality individual regardless of our positioning? products as opposed to selecting discretionary multi-assets account? 3 Product oriented Product oriented Plan oriented Plan oriented

Construction of strategic partnership ~ Aiming the “ Strategic Partnership ” ~ Strategic partnership Multi-products Multi-products & & Multi-plans Multi-plans Customers Optimal solution Ｓ Ｔ Ｅ Ｐ ２ Counseling Counseling Provide the optimal multi- Customer products and multi-plans needs Ｓ Ｔ Ｅ Ｐ １ Identify customer needs The Sumitomo Trust & Banking including potential ones Co., Ltd. 4

Plan counseling ～ The arrival of a new pension era ～ ～ The arrival of a new pension era ～ To be abolished within 10 years Tax Qualified pension plan Fund-type pension plan Contract-type pension plan Defined benefit plan Return a part of the plan to the Cash balance plan Defined contribution plan nation’s plan Interest rate Interest rate fluctuation fluctuation Reconstruction of total retirement pension plan Reconstruction of total retirement pension plan How to control the volatility of PBO? How to control the volatility of PBO? Future portion Future portion Management Management of PBO of PBO issue issue Defined Defined contribution contribution Return to the Return to the nation’s plan nation’s plan Volatile Volatile Cash balance Cash balance Plan counseling Plan counseling plan plan investment investment ＆ performance performance PBO issue Volatile Volatile obligation obligation Multiple plans Multiple plans （ （ PBO ） PBO ） Pension Pension Provide the optimal set of plans 5 asset asset

Our business model in designing retirement pension plans ～ Reconstruction of retirement pension plans ～ Optimal Customer needs Plan counseling Identify problems including solution potential ones Key points of retirement pension plan Support the choice ① Financial conditions ② Organization structure ③ Future perspective ④ Industrial characteristics ⑤ Business characteristics ⑥ Regional characteristics ⑦ Employees of optimal plans needs ⑧ Change of society etc. Multi-plans （ Various components of retirement pension plans ） Prepayment of Defined benefit plan retirement allowance Fund-type pension plan Cash balance plan （ Corporate pension act ） Retirement allowance plan Contract-type pension plan Defined contribution plan etc ． （ Corporate pension act ） Qualified pension plan Professional of pension plan The opinion leader in the new pension era • We are the professional of pension plan, being the • We are planning to engage in defined contribution plans industry pioneer. and hybrid plans such as cash balance plans. • We can also provide advice on the new defined benefit •Based on our pioneer spirits, our position as the opinion plans including transition from the old-type in a timely leader remains stable in the new pension era. manner Capability to cope with any plans. 6 Capability to conduct unbiased plan counseling.