The Tokio Marine Group responds to diversifying customer needs through combining the abilities of its Group member companies to provide new products and services that anticipate the changing times and extend beyond the framework of the existing insurance products and services.

Establishing Japan's First Fund to Invest in Microfinance-Related Assets

Microfinance is a system to provide financial services, including microcredit loans (small loans usually provided without collateral), savings and insurance, to low-income entrepreneurs who traditionally have no access to these services. The system, for example, provides short-term loans to low-income households, and they use these funds to buy chickens. When they pay off loans in full using profits generated from sales of eggs and poultry products, the system in turn provides funds to buy pigs. The major characteristic of microfinancing is that it helps people get out of poverty and become financially independent. It has recently drawn much attention in the international community as a social investment tool that provides direct aid for and generates immediate outcomes in reducing poverty across the world. The number of financial institutions providing microfinance services to low-income entrepreneurs mainly in developing countries (Microfinance Institutions - MFIs) has begun to show rapid growth.

Tokio Marine Asset Management, in collaboration with Daiwa Securities and Developing World Markets (DWM) Asset Management, launched the Daiwa Microfinance Fund, the first Japanese investment trust fund on March 1, 2011.

The Microfinance Fund makes direct investments in creditworthy MFIs and purchases bonds issued by the International Bank for Reconstruction and Development and other international financial institutions that are keenly working to improve the business environment for MFIs. Investments made in the local currencies provide MFIs with easy-to-use funds and allow investing parties to make the most of relatively high interest rates on these emerging currencies, thereby establishing a win-win relationship between the investees and investors. Microcredits provided under the microfinancing system generally show a high ratio of repayment and a low tendency of turning into bad loans. Thus, investments in MFIs are simultaneously investments in businesses with high potential. We strive to turn the Fund into a sustainable investment trust with a continued growth capability by taking part in an effort to reduce poverty and seeking higher returns at the same time.

The primary amount of the Fund as of March 1, 2011 was approximately 20 billion yen, reflecting the fact that it is well received by individual investors and other customers. In the future, we plan to provide a detailed report on the performance of the Fund both financially and by specifically showing how it has contributed to the resolving of poverty issues in order to gain support from more investors

Example of Investment in an MFI

[Mongolia] XacBank

Established in 2001, XacBank is the fourth largest commercial bank in Mongolia. The bank has been actively engaged in microfinancing operations.

The DWM Microfinance Fund J - Class J, the underlying investment vehicle of the Daiwa Microfinance Fund, made local-currency investment in XacBank (the equivalent of approximately USD 3 million) on April 27, 2011.

* Example of a Borrower

The Bakhit family
Use of fund: Production and sales of string instruments

The Bakhit family turned their small home into a workshop and started making and selling tanbur, a traditional Kazakh string instrument in 2002. Their products became popular quickly, causing production to lag behind sales. To expand their business, Mr. Bakhit visited XacBank and received the initial loan of 600,000 tugrik (about 40,000 yen). The money allowed him to buy more materials and hire one employee. After that, they moved their workshop from home and purchased machines to increase their production capacity, and their business has been showing steady growth.

Approximately 20% of India's population (223.7 million households) is categorized as low-income, with annual earnings of 130,000 yen or less.* Most of these households are on farms. IFFCO-TOKIO (India) considers enhancing the stability of low-income households to be a part of its mission and is working to develop and spread insurance products geared to the needs of farmers.

Since most farmers use fertilizer on their farms, in 2001 the company began offering "personal injury insurance linked to the purchase of fertilizer." A 50 kg bag of fertilizer comes with property insurance coverage at a premium of 1 rupee (approximately 2 yen), and pays out a maximum of 200,000 yen in the event of damage due to lightning, fire, theft or earthquake-induced landslides and other causes. In 2008, the company began offering non-life microinsurance products. Microinsurance products are designed for low-income households and enable them to receive the coverage they need for low premiums. In addition to the personal injury insurance attached to fertilizer purchases, the company also offers group insurance products for rural communities and insurance designed specifically for women in rural villages.

All of these products are distinguished by their focus on identifying the most significant risks faced by India's farmers and providing coverage at low cost (approximately 100-450 rupees per year). The Tokio Marine Group supports safer, more stable lives for people around the world by developing and offering insurance products customized to their needs.

*2008 survey by the National Council of Applied Economic Research (NCAER) in India

In order to prevent damage to and loss of products during transportation and delivery by logistics companies, Tokio Marine & Nichido provides a Loss Prevention Service to corporate customers in the logistics field, which capitalizes on its unique, ergonomics-based accident prevention know-how. Product damage and other incidents in product handling mostly result from human errors. Rather than telling operators to be more careful, establishing a work environment or methods in which it is difficult for accidents to happen based on physical and psychological human behavioral patterns is often more effective in preventing these mishaps from occurring or recurring. Adjusting the height of a work table, for example, is a simple but effective way to reduce the dropping of products during handling. This ergonomics-based methodology is the aggregation of the company's long experience in the field of claims settlement services. Under the Loss Prevention Service, members of the company's claims settlement team visit customers' sites and make proposals for improvement suited for their respective operations. This service has been well received by customers, and there has been a case in which the rate of the occurrence of product handling mishaps showed a drastic decline of more than 30%. Tokio Marine & Nichido will continue to work with its logistics customers to enhance the quality of overall logistics operations.

Providing a Mutual-Aid System through Takaful

Takaful is an insurance scheme conforming to Islamic law, which was developed and commercialized in the late 1970s. Traditionally, Western-style insurance products were not accepted in Islamic nations as they were considered non-conforming to Islamic law. Recognizing the potential of Takaful products, the Tokio Marine Group quickly initiated extensive research in this field and started sales of original Takaful products ahead of other global insurance companies in 2001. Since then, the Group has been delivering "safety and security" to people who otherwise have no access to insurance products because of such religious reasons.

The Tokio Marine Group is providing Takaful products in three countries (Saudi Arabia, Indonesia and Egypt) and has launched the Takaful reinsurance business in Singapore. In Saudi Arabia, preparations are being made in accordance with the change in the local legal system to establish and commence operation of a new Takaful company.

In the United States and Europe, there has been an increasing tendency among institutional investors, including pension funds, to emphasize engagement with investee companies with a view to promoting responsible investment. This type of engagement has not yet been as popular in Japan as in the United States and Europe.

Jointly with Governance for Owners (GO)^*, Tokio Marine Asset Management (TMAM) is launching the TMAM-GO Japan Engagement Fund, an engagement-focused fund to invest primarily in small- to medium-sized Japanese companies having strong core businesses. TMAM and GO plan to start operating the Fund in fiscal 2011 with the ultimate goal of attaining total assets under management of around 100 billion yen. By promoting engagement with investee companies as an investor fully understanding the corporate culture in Japan, TMAM intends to deepen mutual understanding between investors and Japanese companies and provide increased corporate value over the long term.

*Governance for Owners

An independent asset management partnership based in London, characterized by its investment strategy that focuses on enhancement of long-term corporate value through amicable engagement with investee companies listed on the European stock markets.