Statement of Compliance with the
IOSCO Principles for Financial Benchmarks
As of July 31, 2023

Nomura Fiduciary Research & Consulting Co., Ltd.

DISCLAIMER

I accept and agree for and on behalf of myself and the entity I represent (each a "recipient") that:1.

Nomura Fiduciary Research & Consulting Co., Ltd. (hereinafter referred to as “NFRC”) andPricewaterhouseCoopers Japan LLC (hereinafter referred to as “PwC”) accept no liability(including liability for negligence) to each recipient of this report (“recipient”) in relation tothis report. The report is provided to each recipient for information purposes only. If a
recipient relies on this report, it does so entirely at its own risk;

2.

No recipient will bring a claim against NFRC or PwC which relates to the access to thereport by a recipient;

3.

Neither this report, nor information obtained from it, may be made available to anyone else
without PwC’s prior written consent, except where required by law or regulation;

4.

This report was prepared with NFRC’s interests in mind. It was not prepared with any
recipient’s interests in mind or for its use. This report is not a substitute for any enquiries
that a recipient should make. The description of processes and control activities taken by
NFRC in compliance with the Principles for Financial Benchmarks outlined by International
Organization of Securities Commissions (IOSCO) is as at July 31, 2023, and thus PwC’s
assurance report is based on historical information. Any projection of such information or
PwC’s opinion thereon to future periods is subject to the risk that changes may occur after
the report was issued and the description of governance, processes and control activities
may no longer accurately portray the current control environment. For these reasons, suchprojection of information to future periods would be inappropriate;

5.

The maintenance and integrity of NFRC’s website is the responsibility of the management;
the work carried out by PwC does not involve consideration of these matters and,accordingly, PwC accepts no responsibility for any differences between the information of
NFRC on which the assurance report was issued or the assurance report that was issued
and the information presented on the website;

6.

PwC will be entitled to the benefit of and to enforce these terms; and7.

These terms and any dispute arising from them, whether contractual or non-contractual,are subject to Japanese law and the exclusive jurisdiction of Tokyo District Court.

Contents

Section I : Overview of NFRC
Section II : Management Statement
Section III : Independent Practitioner’s Assurance Report
Section IV : IOSCO Principles and NFRC's Responses

Section I
Overview of NFRC

Introduction
In July 2013 the International Organization of Securities Commissions (“IOSCO”)
published the Principles for Financial Benchmarks (“IOSCO Principles” or “Principles”).
We affirm that Nomura Fiduciary Research & Consulting Co., Ltd. (“NFRC”) has
designed and implemented governance structures and processes and has undertaken
related activities concerning the indices listed in Section I of this report in compliancewith the IOSCO Principles.
PricewaterhouseCoopers Japan LLC (“PwC”) conducted an independent limited
assurance engagement over our management statement for the governance,
processes and control activities described in Policies and Relevant Activities in NFRC’s
Response of Section IV of this report as of July 31, 2023.

Business Outline
NFRC is an investment advisory company, reorganized on December 1, 2021 when
Nomura Fund Research and Technologies (NFR&T) and the Fiduciary Management
Department of Nomura Securities Co., Ltd. (NSC) were integrated. The aim was tostrengthen our advisory functions for both institutional and retail investors. NFRC has
been providing investment management services since the 1990’s and building
credibility with the clients based on a vast amount of experience and investment trackrecords. Index Operations Department of NSC was merged on February 1, 2023,
enabling NFRC to also provide index services.
NFRC utilizes a very deep and wide range of expertise to provide various types ofcomprehensive asset management services to the clients such as : (1) Fund analysis
and evaluation services (utilizing global research capability in Tokyo, New York andLondon), (2) Investment advisory services to manage Fund of Funds, and foralternative asset funds, (3) Investment management consulting services for public andprivate pension funds and endowments, (4) CIO (Chief Investment Office) services toretail and institutional investors, and (5) Index services, providing infrastructure forasset management.
As invest management becomes more sophisticated and complex, NFRC iscontinuously enhancing our comprehensive asset management services in various

1aspects such as asset allocation, fund selection, investment advisory, and index
services. NFRC provides objective and value added advice to clients, covering not only
traditional assets such as equity and fixed income, but also alternative assets such asprivate equity and infrastructure.
-

Index Services

NFRC’s index service was started by taking over the index business from NSC. Now
Index Services Department is in charge to administer NFRC’s indices.
NFRC provides various financial benchmarks including the NOMURA-BPI family, bondperformance indices representing the Japanese fixed income market, and theRussell/Nomura Japan Equity Index series, an equity index family which is codeveloped and jointly owned with the Frank Russell Company.
Both index families have fairly long histories: NOMURA-BPI was first published in 1986
as the first domestic bond investment benchmark, while the Russell/Nomura Japan
Equity Index series were launched in 1995 as the first Japan equity style indices, with
free-float market cap weightings. Both index families have a variety of sub-indices andhave been used by public and private pensions, mutual funds, ETF/ETNs, etc., locallyand globally.

2

ScopeThis review covers the following indices. These indices excluding Nomura Customized
Index Series are published on NFRC’s website.
http://qr.nomura.co.jp/jp/index.html (Japanese)
http://qr.nomuraholdings.com/en/index.html (English)
Nomura Customized Index Series information is available only to those clients who are
authorized based on contractual agreements.

Nomura Japan Fixed Income Index Series
Nomura Japan Fixed Income Index Series
NOMURA-BPI
NOMURA-BPI/Extended
NOMURA-BPI/Ladder
NOMURA J-TIPS Index
NOMURA-BPI and NOMURA-BPI/Extended
NOMURA-BPI and NOMURA-BPI/Extended were designed to measure theperformance of the entire secondary market for fixed interest payment yendenominated bonds publicly offered in Japan. They were thus designed to represent anentire market of fixed income securities in Japan. They exclude securities with low
liquidity by complying with inclusion criteria in terms of minimum issue size and allow
investors to replicate indices.
NOMURA-BPI/Ladder
NOMURA-BPI/Ladder is a total return index designed to reflect the performance of aladdered portfolio of JGBs, Japanese government bonds, by allocating equal amounts
to each different maturity. The index is designed as a proxy for a ladder strategy
investment portfolio with stable duration.
NOMURA J-TIPS Index
The NOMURA J-TIPS Index seeks to measure the performance of the entire
secondary market of Inflation-linked JGBs (JGBi). The Index is designed to achieve an
accurate and reliable representation of the performance and risk of JGBi.

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Russell/Nomura Japan Equity Index Series
Russell/Nomura Japan Equity Index Series
Russell/Nomura Japan Equity Index
Russell/Nomura Japan Equity Index
Russell/Nomura Japan Equity Indices cover the top 98% of stocks listed on all markets
in terms of float-adjusted market value. Size-based and investment style indices are
published separately as sub-indices. In size-based indices, stocks are divided on thebasis of their float-adjusted market value. In investment style indices, stocks are
divided between value and growth on the basis of their adjusted P/B ratios.

Nomura Thematic Equity Index Series
Nomura Thematic Equity Index Series
Nomura Japan Equity High Dividend 70
Nomura Japan Equity High Dividend 70, Net Total Return US Dollar Hedged
Index
Nomura Japan Equity High Dividend 70, Total Dividend Weighted
Nomura Japan Consecutively Increased Dividend Stock Index
Nomura Enterprise Value Allocation Index
Nomura AI Companies 70
Nomura Japan Equity Beta Select Indices
Nomura Agribusiness Index
Nomura Japan Equity Growth Potential Index
Nomura Shareholder Yield 70
Nomura High-Yield J-REIT Index
Nomura Japan Equity High Dividend 70
The Nomura Japan Equity High Dividend 70 is an equal-weighted index comprising 70
Japanese stocks with high dividend yields. It was developed as a tool for helping
passive investors to achieve a consistent high dividend income.

4Nomura Japan Equity High Dividend 70, Net Total Return US Dollar Hedged Index
The Nomura Japan Equity High Dividend 70, Net Total Return US Dollar Hedged Index
indicates the performance of an investment portfolio in the Net Total Return Index of
the Nomura Japan Equity High Dividend 70 on a US dollar basis while hedging
currency risk by using the one-month USD/JPY forward rate.
Nomura Japan Equity High Dividend 70, Total Dividend Weighted
The Nomura Japan Equity High Dividend 70, Total Dividend Weighted is a totaldividend-weighted index comprising 70 Japanese stocks with high dividend yields. It
was developed as a tool for helping passive investors to achieve a consistently highdividend income.
Nomura Japan Consecutively Increased Dividend Stock Index
The Nomura Japan Consecutively Increased Dividend Stock Index is a market capweighted index (with individual stock weightings capped at 10%) comprising stocks thathave consecutively increased dividends every year over a certain period of time.
Nomura Enterprise Value Allocation Index
The Nomura Enterprise Value Allocation Index is a market cap-weighted index (withindividual stock weightings capped at 3%) comprising highly profitable companies thathave taken proactive steps to improve shareholder returns, for example, by making
appropriate investments in physical and human capital.
Nomura AI Companies 70
The Nomura AI Companies 70 is an equal-weighted index made up of 70 companies
covered by the media in connection with business related to artificial intelligence.
Nomura Japan Equity Beta Select Indices
Nomura Japan Equity Beta Select indices refer to the following two market capweighted indices (with individual stock weightings capped at 5%) drawn from a
universe of all common stocks listed on Japanese stock exchanges: the Nomura Japan
Equity High Beta Select 30 and the Nomura Japan Equity Low Beta Select 50, which
comprise the top 30 and the bottom 50 stocks respectively in terms of a quantitative
indicator based on beta (sensitivity) versus Japanese equity market returns and
USD/JPY returns.

5Nomura Agribusiness Index
The Nomura Agribusiness Index is a market cap-weighted index (with individual stock
weightings capped at 5%) comprising companies whose revenue associated with
agricultural business accounts for more than or equal to 5% of total revenue.
Nomura Japan Equity Growth Potential Index
The Nomura Japan Equity Growth Potential Index reflects the performance of stocks ofJapanese companies that have both room for growth in their current earnings and thepotential to achieve growth via improvement in their future capital efficiency (growthpotential).
Nomura Shareholder Yield 70
The Nomura Shareholder Yield 70 is a share price index comprising 70 companies thatshow proactive shareholder returns through dividends and share buybacks. Constituent
stocks are selected from a universe of all common stocks listed on Japanese stock
exchanges (excluding stocks in the "banks", "securities and commodities futures","insurance", and "other financing business" sectors, based on the Tokyo Stock
Exchange's 33 sector classifications).
Nomura High-Yield J-REIT Index
The Nomura High-yield J-REIT Index is a non-market-cap-weighted index comprising
real estate investment trusts (REITs) with a high forecast dividend yield, selected froma universe of all REITs listed on Japanese stock exchanges. Weights of individual JREITs within the index are in proportion to their forecast dividend yield score multipliedby their market cap (with weights capped at 5%).

Nomura Customized Index Series
NFRC develops customized indices using parts (universe, rules, etc.) of NFRC’s
indices to meet the specific requirements of clients. Related information, such as
rulebooks covering index design and index values, is available only to the relevantclients.

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Policies for Compliance with the IOSCO Principles
NFRC has established internal rules to comply with the IOSCO Principles for Financial
Benchmarks, which set forth policies and procedures.
The policies listed below are available to the public on our website at
http://qr.nomuraholdings.com/en/guides/index.html.
Index Governance Framework (Terms of Reference)Conflicts of Interest PolicyIndex Calculation PolicyComplaints Handling Policy

The glossaries listed below are available to the public on our website at
http://qr.nomuraholdings.com/en/index.html.
Glossary (Equity)Glossary (Fixed Income)7Section II
Management Statement

Management Statement
We, management of Nomura Fiduciary Research & Consulting Co., Ltd. (“NFRC”), confirm that
as of July 31, 2023, NFRC has designed and implemented the governance, processes andcontrol activities to comply with the Principles for Financial Benchmarks published by theInternational Organization of Securities Commissions (the “IOSCO Principles”) with regard to
the indices listed in Section I of this report.
The accompanying description in Section IV of the Statement of Compliance sets out details of
our responses to the IOSCO Principles based on the activities as of July 31, 2023. We identified
deficiencies in relation to the IOSCO Principle 2 as described in Section IV of the Statement ofCompliance.
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Principle 2
NFRC, as Administrator, has outsourced the data collection, calculation, and publication of
the indices in foreign currencies on WMR exchange rate of the Russell/Nomura Japan Equity
Index Series. Roles and responsibilities, in accordance with IOSCO Principles, have been
under discussion with Frank Russell Company (“FRC”) as of July 31, 2023. For the purposeof monitoring FRC’s work, NFRC performs daily verification checks (refer to (b) in thissection).
With regard to Nomura Japan Equity High Dividend 70, Net Total Return US Dollar Hedged
Index, an amendment agreement between NFRC and Ice Data Indices (“IDI”) is at a draft
stage as of July 31, 2023. The outsource agreement was initially concluded between NSC
and IDI, however, it was necessary to separate this for NSC and NFRC after NFRC started
the index administration. For the purpose of monitoring IDI’s work, NFRC performs daily
verification check (refer to (b) in this section).

-

Principle 2
With regard to the indices in foreign currencies on WMR exchange rate of theRussell/Nomura Japan Equity Index Series, NFRC implemented the system to verify index
values prior to publication. With respect to the Korean Won (“KRW”) index among theRussell/Nomura Japan Equity Index Series, however, the verification result had a difference
from the index calculated by FRC. NFRC investigated the difference and concluded that theKRW index as of July 31, 2023 was not erroneous.

The management of NFRC is, and shall be, responsible for stating the compliance with the
IOSCO Principles as well as appropriately designing and operating the governance, processes
and control activities. The management is also responsible for establishing and operating
appropriate internal controls to ensure continued compliance with the Statement of Compliance.

Seiji Ogishima
President & Representative Director
On behalf of Nomura Fiduciary Research & Consulting Co., Ltd.
December 22, 2023

Section III
Independent Practitioner’s Assurance ReportIndependent Practitioner’s Assurance Report to the management of Nomura Fiduciary
Research & Consulting Co., Ltd. (the “NFRC”) in respect of the NFRC’s responses to the
IOSCO Principles for Financial Benchmarks as at July 31,2023
Scope
We have carried out a limited assurance engagement in respect of the Policies and Relevant Activities
in place as at July 31,2023 as described in the “NFRC’s Response” column of the table in Section IV of
the report (the “Policies and Relevant Activities”) in response to the IOSCO Principles for Financial
Benchmarks (the “Principles”) for the in-scope indices.
The indices in scope for the purpose of the report and our assurance are set out in section I of thereport.
This report is made solely for the use and benefit to the management of NFRC in connection with
Principle 17. Our work has been undertaken in accordance with our agreement dated July 10, 2023
(amended on December 8, 2023), so that we might state to the management of NFRC those matters weare required to state in an independent assurance report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than NFRC and the
management of NFRC for our work, for this report, or for the conclusion we have formed, save where
expressly agreed in writing.
Our Independence and Quality Control
In carrying out our work, we complied with the Code of Ethics for Professional Accountants issued by
the International Ethics Standards Board for Accountants, which includes independence and otherrequirements founded on fundamental principles of integrity, objectivity, professional competence anddue care, confidentiality and professional behaviour.
We apply International Standard on Quality Management 1, which requires us to design, implement
and operate a system of quality management including policies or procedures regarding compliancewith ethical requirements, professional standards and applicable legal and regulatory requirements.
Respective responsibilities of the management of NFRC and the Independent
Practitioner
The management of NFRC is responsible for ensuring that NFRC designs, implements, operates andmonitors policies, processes and control activities to adhere to the Principles. They are also
responsible for preparing the Management Statement of Adherence to the Principles, set out in Section
II supported by the description of the Policies and Relevant Activities as set out in the detailed
responses to the IOSCO Principles in Section IV of the report.
Our responsibilities are to undertake a limited assurance engagement and report in connection to the
Policies and Relevant Activities in Section IV of the report. We report to you whether, based on the
results of our work (which is further described below), anything has come to our attention to indicatethat the description of the Policies and Relevant Activities in Section IV placed in operation over thein-scope indices to adhere to the Principles, is not fairly stated, in all material respects as at July 31,
2023.

PricewaterhouseCoopers Japan LLC
Otemachi Park Building, 1-1-1 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
T: +81 (3) 6212 6800, F: +81 (3) 6212 6801, www.pwc.com/jp/assuranceOur Approach
We conducted our engagement in accordance with International Standard on Assurance Engagements
3000 (Revised) - Assurance Engagements Other Than Audits or Reviews of Historical Financial
Information (“ISAE 3000”), issued by the International Auditing and Assurance Standards Board(“the IAASB”) in December 2013.
The objective of a limited assurance engagement is to obtain such appropriate evidence as we consider
sufficient to enable us to express an assurance conclusion as to whether, on the basis of ourprocedures, anything has come to our attention to indicate that the management’s description of the
Policies and Relevant Activities in respect of the in-scope indices is not fairly stated, in all material
respects as at July 31, 2023.
The procedures performed in a limited assurance engagement vary in nature and timing from, and areless in extent than for, a reasonable assurance engagement. Consequently, the level of assurance
obtained in a limited assurance engagement is substantially lower than the assurance that would havebeen obtained had a reasonable assurance engagement been performed and accordingly, we shallexpress no such opinion.
Our procedures were not sufficient to enable us to conclude on the suitability of design or operating
effectiveness of the policies, processes or control activities in place to address the Principles.
While the Policies and Relevant Activities and related Principles may be informed by the need tosatisfy legal or regulatory requirements, our scope of work and our conclusions do not constituteassurance over compliance with those applicable laws and regulations.
Inherent limitations
Process and control activities are subject to inherent limitations and, accordingly, errors or
irregularities may occur and not be detected. As such, our procedures cannot guarantee protection
against (among other things) fraudulent collusion especially on the part of those holding positions ofauthority or trust. Furthermore, our conclusion is based on historical information and the projectionof any information or conclusions in relation to the Policies and Relevant Activities to any future
periods would be inappropriate.
The validity and reliability of daily index levels and returns is dependent on both (i) those that provide
the input data to the benchmark administrator, for which the data provider is solely responsible, and(ii) the procedures performed by the benchmark administrator to check that information. Data
providers of information are not themselves subject to the Principles and we are unable to commenton input data submitted by those parties.
Conclusion
Based on the results of our procedures, nothing has come to our attention to indicate thatmanagement’s description of the Policies and Relevant Activities set out in the NFRC’s Response
column of the table in Section IV in respect of the in-scope indices as at July 31, 2023, is not fairly
stated in all material respects.

2

Other information
The management of NFRC is responsible for the other information, comprising the Statement of
Adherence in Section II and the description of the ‘Overview of NFRC’ in Section I of the report.
Other information is presented by management to provide additional information and context
to the Policies and Relevant Activities. Our conclusion on the description of the Policies andRelevant Activities does not cover such other information and we do not express any form ofassurance opinion thereon. Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with our knowledge obtainedin the course of our work. If we become aware of any apparent material misstatements orinconsistencies, we consider the implications for our report.
Intended users and purpose
This report is intended solely for the use of the management of NFRC solely for the purpose ofreporting on the Policies and Relevant Activities of NFRC for the in-scope indices, in accordance withthe terms of our engagement letter dated July 10, 2023 (amended on December 8, 2023).
Our report must not be recited or referred to in whole or in part in any other document nor madeavailable, copied or recited to any other party, in any circumstances, without our express prior written
permission.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other thanthe management of NFRC and NFRC for our work, for this report or for the conclusion we haveformed, save where terms have expressly been agreed in writing.
Emphasis of Matters
As described in NFRC’s responses to the IOSCO Principle 2 in Section IV, we are aware of thefollowing control deficiencies that have been disclosed by NFRC.
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Principle 2

NFRC, as Administrator, has outsourced the data collection, calculation, and publication of the indicesin foreign currencies on WMR exchange rate of the Russell/Nomura Japan Equity Index Series. Rolesand responsibilities, in accordance with IOSCO Principles, have been under discussion with Frank
Russell Company (“FRC”) as of July 31, 2023. For the purpose of monitoring FRC’s work, NFRC
performs daily verification checks (refer to (b) in this section).
With regard to Nomura Japan Equity High Dividend 70, Net Total Return US Dollar Hedged Index, anamendment agreement between NFRC and Ice Data Indices (“IDI”) is at a draft stage as of July 31,
2023. The outsource agreement was initially concluded between NSC and IDI, however, it wasnecessary to separate this for NSC and NFRC after NFRC started the index administration. For the
purpose of monitoring IDI’s work, NFRC performs daily verification check (refer to (b) in this section).
-

Principle 2

With regard to the indices in foreign currencies on WMR exchange rate of the Russell/Nomura Japan
Equity Index Series, NFRC implemented the system to verify index values prior to publication. With
respect to the Korean Won (“KRW”) index among the Russell/Nomura Japan Equity Index Series,3however, the verification result had a difference from the index calculated by FRC. NFRC investigatedthe difference and concluded that the KRW index as of July 31, 2023 was not erroneous.
Our conclusion is not modified in respect of these matters.

自動署名 ELTokyo, Japan
December 22, 2023

4

Section IV
IOSCO Principles and NFRC's Responses

The table below sets out the responses of Nomura Fiduciary Research & Consulting Co., Ltd. (hereinafter referred to as “NFRC”) in terms of how NFRC complies
with the IOSCO Principles (the “Principles”) for in-scope indices listed in Section I of the Statement of Compliance as of July 31, 2023. The accompanying “PwC’s
Testing” summarizes the work performed by PricewaterhouseCoopers Japan LLC (hereinafter referred to as “PwC”) to validate that the governance, processes andrelevant activities summarized by NFRC are fairly stated, in all material respects. This supports the assurance opinion as documented in Section III of this report.

1. Overall Responsibility of the Administrator
1. Overall Responsibility of the Administrator
IOSCO Principles
The Administrator should retain primary
responsibility for all aspects of the Benchmark
determination process. For example, this includes:a) Development: The definition of the Benchmark
and Benchmark Methodology;b) Determination and Dissemination: Accurate andtimely compilation and publication anddistribution of the Benchmark;c) Operation: Ensuring appropriate transparency
over significant decisions affecting thecompilation of the Benchmark and any related
determination process, including contingency
measures in the event of absence of or
insufficient inputs, market stress or disruption,
failure of critical infrastructure, or other relevant
factors; andd) Governance: Establishing credible andtransparent governance, oversight andaccountability procedures for the Benchmark
determination process, including an identifiable
oversight function accountable for thedevelopment, issuance and operation of the
Benchmark.

NFRC’s Response
NFRC retains primary responsibility for all aspects ofindex development, determination, dissemination,
operation, and governance when it comes to the
Nomura Japan Fixed Income Index Series,
Russell/Nomura Japan Equity Index Series, Nomura
Thematic Equity Index Series, and Nomura
Customized Index Series (hereinafter referred to as“NFRC’s Indices”). NFRC took over the index
business from Nomura Securities Co., Ltd.
(hereinafter referred to as “NSC”) on February 1,
2023 and reorganized into Index Services
Department (hereinafter referred to as the “ISD”) to
execute these responsibilities, including
maintenance of policies regarding NFRC’s Indices.

PwC’s Testing
PwC inquired of a responsible person of the ISD
who confirmed that the ISD has responsibilities forthe administration of NFRC’s Indices described in
NFRC’s Response.
Please refer to the responses to the Principles
below.

Our responses to the Principles with regards to the
NFRC’s indices are as described below.

12. Oversight of Third Parties
2. Oversight of Third Parties
IOSCO Principles
Where activities relating to the Benchmark
determination process are undertaken by third
parties - for example collection of inputs, publicationor where a third party acts as Calculation Agent - theAdministrator should maintain appropriate oversightof such third parties. The Administrator (and its
oversight function) should consider adopting policies
and procedures that:a) Clearly define and substantiate throughappropriate written arrangements the roles andobligations of third parties who participate in the
Benchmark determination process, as well as thestandards the Administrator expects these third
parties to comply with;b) Monitor third parties’ compliance with thestandards set out by the Administrator;c) Make Available to Stakeholders and any relevant
Regulatory Authority the identity and roles ofthird parties who participate in the Benchmark
determination process; andd) Take reasonable steps, including contingency
plans, to avoid undue operational risk related tothe participation of third parties in the Benchmark
determination process.
This Principle does not apply in relation to a third
party from whom an administrator sources data ifthat third party is a Regulated Market of Exchange.

NFRC’s Response
NFRC outsources activities relating to the index
determination process to third parties which are
categorized based on the following roles:(1) third parties which collect relevant elements in
the index calculation;(2) calculation agents; and(3) third parties which publish NFRC's index values(the publisher).

PwC’s Testing

As of July 31, 2023, NFRC outsourced calculation ofindices to Nomura Research Institute (hereinafterreferred to as “NRI"), ICE Data Indices (hereinafterreferred to as “IDI”) and Frank Russell Company(hereinafter referred to as “FRC”). Only FRC and
NRI are the publishers for NFRC’s indices.
NFRC is responsible for the appropriate oversight ofsuch third parties. NFRC sets forth the following
policies and procedures to allow for appropriate
oversight of third parties undertaking these activities.
a)(Policies)
The ISD stipulates in its internal rules that NFRC is
responsible for defining the roles and obligations,operational policies, and contingency plans in a
written agreement, a service level agreement, or aservice level provision.

a)(Policies)
PwC inspected the internal rule to confirm that it
included the matters described in NFRC’s Response
as of July 31, 2023.

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2. Oversight of Third Parties
IOSCO Principles

NFRC’s Response(Relevant Activities)
NFRC has concluded outsourcing agreements with
NRI and IDI to specify roles and obligations,operational policies and contingency plans inaccordance with internal rules. NFRC reviewed andconfirmed that the contingency plans are stipulated
in the provider’s service level provisions.

PwC’s Testing(Relevant Activities)
PwC inspected the outsourcing agreements with NRI
and IDI to confirm that NFRC agreed with NRI and
IDI with respect to the roles and obligations,operational policies in accordance with the internal
rule. PwC also inspected the provider’s service levelprovisions to confirm that the contingency plans aredefined.

(Additional Information)
NFRC, as Administrator, has outsourced the datacollection, calculation, and publication of the indicesin foreign currencies on WMR exchange rate of theRussell/Nomura Japan Equity Index Series. Rolesand responsibilities, in accordance with IOSCO
Principles, have been under discussion with FRC asof July 31, 2023. For the purpose of monitoring
FRC’s work, NFRC performs daily verification
checks (refer to (b) in this section).

(Additional Information)
PwC inquired of a responsible person of the ISD
who confirmed that the agreement with FRC was notconcluded as of July 31, 2023.

With regard to Nomura Japan Equity High Dividend
70, Net Total Return US Dollar Hedged Index, anamendment agreement between NFRC and IDI is at
a draft stage as of July 31, 2023. The outsource
agreement was initially concluded between NSC and
IDI, however, it was necessary to separate this for
NSC and NFRC after NFRC started the index
administration.
For the purpose of monitoring IDI’s work, NFRC
performs daily verification check. (refer to (b) in thissection).

PwC inquired of a responsible person of the ISD
who confirmed that the agreement with IDI was notconcluded as of July 31, 2023.

PwC inspected the evidence to confirm that the daily
monitoring was performed on the indices in foreign
currencies on WMR exchange rate of theRussell/Nomura Japan Equity Index Series
calculated by FRC as of July 31, 2023.

PwC Inspected the evidence to confirm that the daily
verification check was performed as of July 31,
2023.

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2. Oversight of Third Parties
IOSCO Principles

NFRC’s Responseb)(Policies)
The ISD stipulates the following in the internal rules
to monitor third parties’ service quality:● The ISD holds meetings or receives reportson the outsourced activities periodically fromthird parties.
● The ISD establishes a framework to performa daily verification check for index
calculation, prior to the publication ofindices.
● The ISD establishes a third party oversightframework for evaluating IT General
Controls and IT Application Controls(hereinafter “IT Controls”), implemented by athird party, when NFRC considers that IT
Controls are key for the quality of third
party’s services.
(Relevant Activities)
The ISD holds meetings with or receives reports
periodically from the third parties to monitor theirservice quality and retains the meeting minutes asevidence in accordance with internal rules.

PwC’s Testingb)(Policies)
PwC inspected the internal rules to confirm that they
included the matters described in NFRC’s Response
as of July 31, 2023.

(Relevant Activities)
PwC inspected the meeting minutes and the reports
from the third parties during April 1, 2022 to July 31,
2023 on a sample basis to confirm that themonitoring activities were performed by the ISD inaccordance with the internal rules.

NFRC has monitored third party service quality withregard to the index calculation as follows:
Equity:The ISD performs daily verification checks withregard to input data used in the index calculations.
With regard to the Russell/Nomura Japan Equity
Index Series (including indices in foreign currencies
on WMR exchange rate calculated by FRC) and
Nomura Thematic Equity Index Series, the ISD
performs a daily verification check of index values
prior to publication.

With regard to Russell/Nomura Japan Equity IndexSeries (excluding Indices in foreign currencies on
WMR exchange rate) and Nomura Thematic Equity
Index Series, PwC inspected the result of daily
verification check on a sample basis to confirm that
the ISD performed the daily verification check overthe input data used in NRI’s calculation prior to the42. Oversight of Third Parties
IOSCO Principles

NFRC’s Response

PwC’s Testing
publication and NRI’s calculation results prior to the
publication of indices.
PwC also recalculated samples of the values of
NFRC’s Indices as of July 31, 2023 to confirm that
the NFRC’s Indices were calculated in accordancewith the calculation methodologies in the index rulebooks.
With regard to the Russell/Nomura Japan Equity
Index Series indices in foreign currencies on WMR
exchange rate calculated by FRC, PwC inspected
the result of verification check to confirm that the ISD
performed the daily verification check over the index
values as of July 31, 2023.

With regard to the Nomura High-Yield J-REIT Index
calculated by NRI, the ISD operates under aframework to evaluate IT Controls implemented by
NRI annually. The ISD had evaluated the NRI's IT
Controls as of July 31, 2023 and no issues werenoted.

With regard to Nomura High-Yield J-REIT Index,
PwC inspected the evaluation result to confirm that
the ISD has a framework to evaluate IT Controls
implemented by NRI annually.

With regard to Nomura Japan Equity High Dividend
70, Net Total Return US Dollar Hedged Index
calculated by IDI, the ISD performs daily verification
checks prior to publication. No issue was noted as ofJuly 31, 2023.

With regard to Nomura Japan Equity High Dividend
70, Net Total Return US Dollar, PwC inspected theresult of verification checks to confirm that the ISD
performed the daily verification verification checks
prior to publication as of July 31, 2023.

Fixed Income:With regard to Nomura Japan Fixed Income IndexSeries calculated by NRI, the ISD operates under aframework to evaluate IT Controls implemented by
NRI annually. The ISD had evaluated the NRI's IT
Controls as of July 31, 2023 and no issues werenoted.

With regard to Nomura Japan Fixed Income IndexSeries, PwC inspected the evaluation result toconfirm that the ISD has a framework to evaluate IT
Controls implemented by NRI as of July 31, 2023.

5

2. Oversight of Third Parties
IOSCO Principles

NFRC’s Response
Customized:
Each index of the Nomura Customized Index Series
is subject to one of the verification processes
mentioned above.

PwC’s TestingWith regard to Nomura Customized index series,
PwC inquired of a responsible person of the ISD
who confirmed that each index of Nomura
Customized Index Series is applicable to one of theverification processes mentioned in NFRC’s
Response.

(Additional Information)
With regard to the indices in foreign currencies on
WMR exchange rate of the Russell/Nomura Japan
Equity Index Series, NFRC implemented the system
to verify index values prior to publication. With
respect to the Korean Won (KRW) index among theRussell/Nomura Japan Equity Index Series,
however, the verification result had a difference fromthe index calculated by FRC. NFRC investigated thedifference and concluded that the KRW index as ofJuly 31, 2023 was not erroneous.

(Additional Information)
With regard to Russell/Nomura Japan Equity IndexSeries indices in foreign currencies on WMR
exchange rate calculated by FRC, PwC inspected
the results of verification check, which showed adifference between the KRW rates used in FRC’s
calculation and NFRC’s verification.

c)(Policies)
NFRC stipulates in internal rules that NFRC
discloses the identity and roles of third parties who
participate in the index determination process inindex rule books or the “Index Calculation Policy”
and makes a list of the third parties available on
request by any relevant Regulatory Authority.

c)(Policies)
PwC inspected the internal rule to confirm that they
included the matters described in NFRC’s Response
as of July 31, 2023.

PwC also inquired of a responsible person of the
ISD who confirmed that NFRC investigated thedifference and concluded that FRC calculated theindex based on the pre-determined rule and this was
not erroneous.

62. Oversight of Third Parties
IOSCO Principles

NFRC’s Response(Relevant Activities)
NFRC discloses the identity and roles of third parties
in index rule books or the “Index Calculation Policy”.

PwC’s Testing(Relevant Activities)
PwC inspected the index rule books and the “Index
Calculation Policy” to confirm that the identities androles of NRI, IDI and FRC, who participate in theindex determination process, were disclosed as ofJuly 31, 2023.

d)(Policies)
NFRC stipulates in the “Index Calculation Policy”
that the NFRC will delay or suspend the index
publication where necessary due to system trouble
at a third party (such as a data provider) andannounce such delay or suspension on its website.

d)(Policies)
PwC inspected the “Index Calculation Policy” toconfirm that it included the matters described in
NFRC’s Response as of July 31, 2023.

(Relevant Activities)
NFRC will delay or suspend the index publication
where necessary due to system trouble at a third
party (such as a data provider) and announce suchdelay or suspension on its website in accordancewith the “Index Calculation Policy”. NFRC had nosuch delay or suspension due to system trouble
during the period from April 1, 2022 to July 31, 2023.

(Relevant Activities)
PwC inquired of a responsible person of the ISD
who confirmed that there was no case where theindex publication was delayed or suspended due toa system trouble during the period from April 1, 2022
to July 31, 2023.

7

3. Conflicts of Interest for Administrators
3. Conflicts of Interest for Administrators
IOSCO Principles
To protect the integrity and independence ofBenchmark determinations, Administrators should
document, implement and enforce policies andprocedures for the identification, disclosure,management, mitigation or avoidance of conflicts ofinterest. Administrators should review and update
their policies and procedures as appropriate.
Administrators should disclose any material conflictsof interest to their users and any relevant Regulatory
Authority, if any.
The framework should be appropriately tailored to
the level of existing or potential conflicts of interest
identified and the risks that the Benchmark posesand should seek to ensure:a) Existing or potential conflicts of interest do notinappropriately influence Benchmark
determinations;b) Personal interests and connections or businessconnections do not compromise theAdministrator’s performance of its functions;c) Segregation of reporting lines within the
Administrator, where appropriate, to clearly
define responsibilities and prevent unnecessaryor undisclosed conflicts of interest or theperception of such conflicts;d) Adequate supervision and sign-off by authorizedor qualified employees prior to releasing
Benchmark determinations;e) The confidentiality of data, information and other
inputs submitted to, received by or produced by
the Administrator, subject to the disclosure
obligations of the Administrator;f) Effective procedures to control the exchange of
information between staff engaged in activities
involving a risk of conflicts of interest or between

NFRC’s Response
NFRC, as an index provider, believes that it is
crucial to identify, disclose, avoid or mitigate, andmanage conflicts of interest (“CoI”).

PwC’s Testing(Policies)
NFRC has policies and procedures in place to avoid
sole discretion in the index determination process
and day-to-day operations. NFRC ensures that CoI
do not influence the index determination process by
establishing the following framework for CoI
management.

(Policies)

NFRC’s Conflicts of Interest Management Policy
NFRC manages transactions which may cause
conflicts of interest through the “Conflicts of Interest
Management Policy”. It identifies examples of CoI
that could impair the independence and objectivity of
the ISD’s index determination and is available on thewebsite. It is regularly reviewed by the ComplianceDepartment.

NFRC's Conflicts of Interest Management Policy
PwC inspected the “Conflicts of Interest
Management Policy” and the “Conflicts of Interest
Policy” to confirm that it included the mattersdescribed in NFRC’s Response and were available
on the website as of July 31, 2023.

Conflicts of Interest Policy
The ISD established the “Conflicts of Interest Policy
as defined in the Conflict of Interest Management
Policy. It requires the ISD to regularly review andupdate the Conflicts of Interest Policy. The“Conflicts of Interest Policy” is available on thewebsite.

Conflicts of Interest Policy
PwC inspected the “Conflicts of Interest Policy” andthe “Conflicts of Interest Policy” to confirm that it
included the matters described in NFRC’s Response
and were available on the website as of July 31,
2023.

8

3. Conflicts of Interest for Administrators
IOSCO Principles
staff and third parties, where that information
may reasonably affect any Benchmark
determinations; andg) Adequate remuneration policies that ensure all
staff who participate in the Benchmark
determination are not directly or indirectly
rewarded or incentivized by the levels of the
Benchmark.
An Administrator’s conflict of interest framework
should seek to mitigate existing or potential conflicts
created by its ownership structure or control, or due
to other interests the Administrator’s staff or wider
group may have in relation to Benchmark
determinations. To this end, the framework should:a) Include measures to avoid, mitigate or disclose
conflicts of interest that may exist between its
Benchmark determination business (including all
staff who perform or otherwise participate in
Benchmark production responsibilities), and anyother business of the Administrator or any of its
affiliates; andb) Provide that an Administrator discloses conflictsof interest arising from the ownership structure or
the control of the Administrator to its
Stakeholders and any relevant Regulatory
Authority in a timely manner.

NFRC’s Response
Code of Conduct
The “Code of Conduct” sets out guidelines for all
employees so that the Nomura Group Corporate
Philosophy can be translated into actions. All
employees are required to reflect on their actions toensure that they act in line with the Code.

PwC’s Testing
Code of Conduct
PwC inspected the “Code of Conduct” to confirm thatit included the matters described in NFRC’s
Response as of July 31, 2023.

Internal Rules Concerning Personal Investment
by NFRC’s Employees
NFRC sets forth the internal rules concerning
personal investment by NFRC’s employees toprevent inappropriate conduct. In addition to
NFRC’s rules, the ISD has its own stricter rules
because of the nature of the index business.

Internal Rules Concerning Personal Investment
by NFRC’s Employees
PwC inspected the internal rules concerning
personal investment by NFRC’s employees and theinternal rule for the ISD to confirm that they included
the matters described in NFRC’s Response as ofJuly 31, 2023.

Compliance Training
NFRC employees are required to take compliancetraining through an e-learning system to raiseawareness of compliance, including with regard to
the “Code of Conduct”.

Compliance Training
PwC inspected training records of the ISD to confirm
that employees in the ISD had completed thecompliance training including “Code of Conduct”
during the period from April 1, 2022 to July 31, 2023.

Compliance Hotline
Nomura Group has established a compliance hotline
for the reporting of violations of the “Code of
Conduct” as a whistle-blowing system. Matters canbe reported directly to the Senior Managing Directorof Nomura Holdings or external lawyers.

Compliance Hotline
PwC inspected the internal rule for administering thecompliance hotline to confirm that it included thematters described in NFRC’s Response as of July
31, 2023.

Index Governance Framework
The “Index Governance Framework” stipulates thesupervisory and authorization process for index
determination, including with regard to methodology
changes and index cessations (refer to the “Index
Governance Framework” and NFRC’s Response to
Principle 5).

Index Governance Framework
PwC inspected the “Index Governance Framework”
to confirm that it included the matters described in
NFRC’s Response as of July 31, 2023.

93. Conflicts of Interest for Administrators
IOSCO Principles

NFRC’s Response
Information Flow Control
NFRC stipulates in internal rules on information
security that information should not be provided tounauthorized individuals. In addition, the index
administration area is physically segregated fromother departments and the access to the area isrestricted.

PwC’s Testing
Information Flow Control
PwC inspected the internal rules on information
security to confirm that it included the mattersdescribed in NFRC’s Response as of July 31,
2023.PwC observed that the ISD was physicallysegregated from other front departments and accessto the room was restricted as of July 31, 2023.

Compensation Structure
NFRC sets forth the compensation policies for its
employees. Compensation for employees engaged
in index administration is not linked to the values of
NFRC's Indices.

Compensation Structure
PwC inspected NFRC’s compensation policies for its
employees to confirm that compensation for
employees engaged in the index administration is
not linked to the values of NFRC’s Indices.

104. Control Framework for Administrators
4. Control Framework for Administrators
IOSCO Principles
An Administrator should implement an appropriate
control framework for the process of determining anddistributing the Benchmark. The control framework
should be appropriately tailored to the materiality ofthe potential or existing conflicts of interest identified,the extent of the use of discretion in the Benchmark
setting process and to the nature of Benchmark
inputs and outputs. The control framework should be
documented and available to relevant Regulatory
Authorities, if any. A summary of its main features
should be Published or Made Available to
Stakeholders.
This control framework should be reviewed
periodically and updated as appropriate. The
framework should address the following areas:a) Conflicts of interest in line with Principle 3 onconflicts of interests;b) Integrity and quality of Benchmark determination:i. Arrangements to ensure that the quality andintegrity of Benchmarks is maintained, in linewith principles 6 to 15 on the quality of the
Benchmark and Methodology;
ii. Arrangements to promote the integrity ofBenchmark inputs, including adequate due
diligence on input sources;iii. Arrangements to ensure accountability andcomplaints mechanisms are effective, in linewith principles 16 to 19; andNFRC’s Response
NFRC has implemented a control framework for theprocess of determining and distributing the indicesincluding a governance structure and otherarrangements and set forth in internal rules.

PwC’s Testing

The Strategic Solutions Committee oversees andmonitors the ISD’s day-to-day operations, liaisingclosely with NFRC’s Compliance.
The ISD annually reviews and updates the control
framework. The results of periodic reviews arereported to the Compliance Department and the
Director in charge of Index Services.
a)(Policies)
The “Conflicts of Interest Policy” stipulates that the
ISD identifies and discloses existing or potential CoI
in the Conflicts of Interest Management Policy that
could impair the independence and objectivity of
NFRC’s index determination. It also requires the ISD
to regularly review and update the Conflicts ofInterest Policy where necessary.

a)(Policies)
PwC inspected the “Conflicts of Interest Policy” toconfirm that it included the matters described in
NFRC’s Response and was available on the website
as of July 31, 2023.

(Relevant Activities)
The ISD performed a regular review of the “Conflictsof Interest Policy” since NFRC commenced theindex administration and the updated policy wasapproved by the Strategic Solutions Committee.

(Relevant Activities)
PwC inspected the “Conflicts of Interest Policy” toconfirm that they reviewed and updated after NFRC
commencing the business as an index administrator
until July 31, 2023.

11

4. Control Framework for Administrators
IOSCO Principles
iv. Providing robust infrastructure, policies andprocedures for the management of risk,
including operational risk.
c) Whistleblowing mechanism:
Administrators should establish an effective
whistleblowing mechanism to facilitate early
awareness of any potential misconduct orirregularities that may arise. This mechanism
should allow for external reporting of such cases
where appropriate.
d) Expertise:i. Ensuring Benchmark determinations are madeby personnel who possess the relevant levelsof expertise, with a process for periodic reviewof their competence; andii. Staff training, including ethics and conflicts ofinterest training, and continuity and succession
planning for personnel.

NFRC’s Responseb)(Policies)i, ii. The integrity and quality of the NFRC’s Indices
are maintained through the policies and internal
rules described in Principles 2, 6-13 and 15.
iii. The arrangements to ensure accountability andcomplaints mechanisms are maintained through thepolicies and internal rules described in Principles 1619.
iv. For the management of risk, the ISD conducts
monthly Front Office Supervision (hereinafterreferred to as “FOS”) which reviews the major
activities undertaken during the month and key risk
indicators (refer to the “Index Governance
Framework” and NFRC’s Response to Principle 5 fordetails).

PwC’s Testingb)(Policies)
Please refer to PwC’s testing on Principles 2, 6-13
and 15 for the integrity and quality of the NFRC’s
Indices, Principles 16-19 for the arrangements toensure accountability and complaints mechanisms,
and Principle 5 for the management of risk.

c)(Policies)
Please refer to NFRC’s Response to Principle 3 for
information on the mechanism for the “Compliance
Hotline”.

c)(Policies)
Please refer to PwC’s testing on Principle 3 for themechanism of the Compliance Hotline.

d)(Policies)
NFRC managers are responsible for supervising andtraining staff and devising succession plans for staff
in key roles. Additionally, NFRC staff take ongoingon-the-job functional skills training. NFRC performs
semi-annual reviews for relevant expertise andcompetencies. Mechanisms for Compliance Training
and Compensation Structure are described in
Principle 3.
All of the above are conducted in accordance with
the NFRC’s corporate HR policy.

d)(Policies)
PwC inspected the NFRC’s internal policy relating tohuman resource to confirm that it included thematters described in NFRC’s Response.

124. Control Framework for Administrators
IOSCO Principles

NFRC’s Response(Relevant Activities)
A periodic review was conducted, and the updated
versions set forth below have been disclosed on thewebsite as of July 31, 2023.
Index Governance Framework
Conflicts of Interest PolicyComplaints Handling Policy
ISD performed the semi-annual reviews on ISD
members for relevant expertise and competencies inaccordance with the NFRC’s corporate HR Policy.

PwC’s Testing(Relevant Activities)
PwC inspected the results of the periodic review toconfirm that the documents described in the NFRC’s
Response were reviewed and updated where
necessary. PwC also inspected evidence to confirm
the result of periodic review were approved by theStrategic Solutions Committee PwC inspected thewebsite to confirm that the document mentioned in
NFRC’s Response were disclosed as of July 31,
2023.
PwC inspected the evidence on a sample basis toconfirm that the ISD performed semi-annual review
on ISD members for relevant expertise andcompetencies.

Where a Benchmark is based on Submissions:
Administrators should promote the integrity of inputsby:a) Ensuring as far as possible that the Submitterscomprise an appropriately representative groupof participants taking into consideration theunderlying Interest measured by the Benchmark;b) Employing a system of appropriate measures sothat, to the extent possible, Submitters comply
with the Submission guidelines, as defined in the
Submitter Code of Conduct and theAdministrators’ applicable quality and integrity
standards for Submission;c) Specifying how frequently Submissions should
be made and specifying that inputs or
Submissions should be made for every
Benchmark determination; andd) Establishing and employing measures toeffectively monitor and scrutinize inputs or
Submissions. This should include precompilation or pre-publication monitoring to
identify and avoid errors in inputs or

The NFRC’s Indices are not based on submissions.

No testing was performed as there is no policy or
relevant activity in NFRC’s Response.

134. Control Framework for Administrators
IOSCO Principles
Submissions, as well as ex-post analysis oftrends and outliers.

NFRC’s Response

PwC’s Testing14

5. Internal Oversight
5. Internal Oversight
IOSCO Principles
Administrators should establish an oversight function
to review and provide challenge on all aspects of the
Benchmark determination process. This should
include consideration of the features and intended,
expected or known usage of the Benchmark and themateriality of existing or potential conflicts of interest
identified.

NFRC’s Response
While NFRC does not have an oversight function
comprising of separate committees, NFRC hasestablished an oversight and governance structure
concerning the indices managed by ISD with threeinternal and one external bodies with the aim ofprotecting the integrity of the index determination
process and addressing conflicts of interest.

The oversight function should be carried out either
by a separate committee, or other appropriate
governance arrangements. The oversight function
and its composition should be appropriate to provide
effective scrutiny of the Administrator. Suchoversight function could consider groups ofBenchmarks by type or asset class, provided that itotherwise complies with this Principle.

Internal bodies:
ISD conducts the Index Steering Committee on adaily basis to verify that key processes such as
periodic reconstitutions are implemented
appropriately. This committee consists of employeeswith sufficient knowledge and expertise in indexrelated activities. Members are appointed by the
Head of the ISD.

An Administrator should develop and maintainrobust procedures regarding its oversight function,
which should be documented and available torelevant Regulatory Authorities, if any. The mainfeatures of the procedures should be Made Available
to Stakeholders. These procedures should include:a) The terms of reference of the oversight function;b) Criteria to select members of the oversightfunction;c) The summary details of membership of any
committee or arrangement charged with theoversight function, along with any declarations ofconflicts of interest and processes for election,
nomination or removal and replacement ofcommittee members.

ISD conducts FOS to review the index -related
activities on a monthly basis and provides monthly
activity reports to the Compliance Department for
their review.
FOS aims at:reviewing the major activities undertaken during
the month and the key “risk indicators”,
including the following:・ Results of risk assessments related to
employees’ conduct and ISD’s activities.
Matters reported through FOS are reviewed
by the Compliance Department.
・ Incidents related to index calculations andadministration activities in terms of conflictsof interest, operational issues, andcompliance issues.
supervising ISD to ensure that ISD complies
with procedures as the index administrator;
cementing the supervisory framework throughregular operation of FOS;

The responsibilities of the oversight function include:a) Oversight of the Benchmark design:i. Periodic review of the definition of the
Benchmark and its Methodology;

PwC’s Testing15

5. Internal Oversight
IOSCO Principles
ii. Taking measures to remain informed about
issues and risks to the Benchmark, as well as
commissioning external reviews of the
Benchmark (as appropriate);iii. Overseeing any changes to the Benchmark
Methodology, including assessing whether the
Methodology continues to appropriately
measure the underlying Interest, reviewing
proposed and implemented changes to the
Methodology, and authorizing or requesting theAdministrator to undertake a consultation with
Stakeholders where known or its Subscribers
on such changes as per Principle 12; andiv. Reviewing and approving procedures fortermination of the Benchmark, including
guidelines that set out how the Administrator
should consult with Stakeholders about suchcessation.
b) Oversight of the integrity of Benchmark
determination and control framework:
i. Overseeing the management and operation of
the Benchmark, including activities related to
Benchmark determination undertaken by a third
party;
ii. Considering the results of internal and external
audits, and following up on the implementationof remedial actions highlighted in the results ofthese audits; andiii. Overseeing any exercise of Expert Judgmentby the Administrator and ensuring Published
Methodologies have been followed.
Where conflicts of interests may arise in the
Administrator due to its ownership structures orcontrolling interests, or due to other activities
conducted by any entity owning or controlling the

NFRC’s Response
ensuring that associated policies and ISD’s
procedures are continually reviewed andupdated where necessary; and
assessing, overseeing, and challenging theeffectiveness.

PwC’s Testing

The Strategic Solutions Committee discusses andapproves significant matters relating to the index
administration. The Strategic Solutions Committee ischaired by the President & Representative Director
and operates with a limited number of members dueto the information management perspective. The
Board of Executive Directors appoints members andensures members of Compliance Department areincluded.
External body：
The Index Policy Committee (hereinafter referred toas “IPC”) acts as an advisory body for the Strategic
Solutions Committee and provides
recommendations with regard to theappropriateness, integrity, transparency, andreasonableness of NFRC’s index administration.
The Strategic Solutions Committee consults with the
IPC on an annual basis to obtain professional advice
on market changes, index rules, and other matters.
The members of IPC are appointed by the Strategic
Solutions Committee on an annual basis and chosenfrom among external experts and practitioners whoare involved in the financial index business or asset
management industry. To maintain the
independence of the IPC and prevent market
participants from lobbying, NFRC does not disclose
the names of IPC members or its candidates.

16

5. Internal Oversight
IOSCO Principles
Administrator or by the Administrator or any of its
affiliates: the Administrator should establish an
independent oversight function which includes abalanced representation of a range of Stakeholders
where known, Subscribers and Submitters, which is
chosen to counterbalance the relevant conflict ofinterest.

NFRC’s Responsea)（Policies）
The “Index Governance Framework” representing
the terms of reference for the Strategic Solutions
Committee as the oversight function and is available
on the NFRC website.
The Strategic Solutions Committee oversees theindex design and takes a role to approve significant
matters such as:establishing and updating policies published on
NFRC's Website.
developing new indices.
changing methodologies and ceasing existing
indices.

PwC’s Testinga)(Policies)
PwC inspected the “Index Governance Framework” toconfirm that it included the matters described in
NFRC’s Response as of July 31, 2023.

(Relevant Activities)
Please refer to NFRC’s Responses to Principle 10
for the periodic review of the design of indices,
Principle 12 for any change to the Benchmark
Methodology, and Principle 13 for the transition andsuspension of indices.

(Relevant Activities)
Please refer to Principle 10 for the periodic review ofthe design of indices, Principle 12 for any change tothe Benchmark Methodology and Principle 13 for thetransition and suspension of indices.

175. Internal Oversight
IOSCO Principles

Where a Benchmark is based on Submissions:the oversight function should provide suitableoversight and challenge of the Submissions by:

NFRC’s Responseb)(Policies)
The integrity of index determination is ensured byeach oversight function stipulated in the “Index
Governance Framework” and the internal policies
and procedures.

The Index Steering Committee monitors theindices-related activities such as overallmanagement and operation of the indices,periodic index constituent selections.

The Compliance Department reviews the index
related activities on a monthly basis throughFOS. The Compliance Department reviews
them and reports to the Board of Executive
Directors.
The Strategic Solutions Committee oversees
the index design and takes a role to approvesignificant matters.

PwC’s Testingb)(Policies)
PwC inspected the “Index Governance Framework”
and the internal policies and procedures to confirm
that it included the matters described in NFRC’s
Response as of July 31, 2023.

(Relevant Activities)
The ISD reports index-related activities and key risk
indicators to the Compliance Department in NFRC
through FOS reports.
The key risk indicators include the following:
Results of risk assessments related to
employees’ conduct and the ISD’s activities.

Incidents related to index calculations andadministration activities.

(Relevant Activities)
PwC inspected a FOS report and an e-mail for July
2023 to confirm that index related activities including
key risk indicators were monitored and reported to theCompliance Department.

NFRC’s Indices are not based on submissions.

No testing was performed as there is no policy or
relevant activity in NFRC’s Response.

185. Internal Oversight
IOSCO Principlesa) Overseeing and challenging the scrutiny andmonitoring of inputs or Submissions by the
Administrator. This could include regular
discussions of inputs or Submission patterns,
defining parameters against which inputs or
Submissions can be analyzed, or querying therole of the Administrator in challenging or
sampling unusual inputs or Submissions;b) Overseeing the Code of Conduct for Submitters;c) Establishing effective arrangements to address
breaches of the Code of Conduct for Submitters;andd) Establishing measures to detect potential
anomalous or suspicious Submissions and incase of suspicious activities, to report them, as
well as any misconduct by Submitters of which it
becomes aware to the relevant Regulatory
Authorities, if any.

NFRC’s Response

PwC’s Testing19

6. Benchmark Design
6. Benchmark Design
IOSCO Principles
The design of the Benchmark should seek toachieve, and result in, an accurate and reliable
representation of the economic realities of theInterest it seeks to measure and eliminate factorsthat might result in a distortion of the price, rate,index or value of the Benchmark.
Benchmark design should take into account thefollowing generic non-exclusive features, and otherfactors should be considered, as appropriate to theparticular Interest:a) Adequacy of the sample used to represent theInterest;b) Size and liquidity of the relevant market (forexample whether there is sufficient trading toprovide observable, transparent pricing);c) Relative size of the underlying market in relation
to the volume of trading in the market thatreferences the Benchmark;d) The distribution of trading among Market
Participants (market concentration);e) Market dynamics (e.g., to ensure that theBenchmark reflects changes to the assets
underpinning a Benchmark).

NFRC’s Response
The NFRC’s Indices are calculated based on public
information and are designed to achieve an accurate
and reliable representation of the economic realitiesof the underlying securities and/or markets. The
NFRC’s Indices are classified into the following
categories.

PwC’s Testing

Russell/Nomura Japan Equity Index Series:
The Russell/Nomura Japan Equity Index Series
allows for wide coverage of Japan’s stock market,
covering the top 98% of all listed stocks in terms of
free float-adjusted market capitalization. These
indices reflect market liquidity appropriately by using
free float weight in calculating market capitalization.
In addition, investment-style indices reflect market
value appropriately by using adjusted P/B to classify
stocks in value and growth indices.
For details on adjusted P/B, please refer to theonline “Russell/Nomura Japan Equity Indexes
rulebook” or Glossary (Equity).
Nomura Thematic Equity Index Series:
The Nomura Thematic Equity Index Series iscalculated using public information and is designed
to achieve an accurate and reliable representation of
the economic realities of the underlying securities
depending on the purpose of investment
respectively.
For details on this index series, please refer to theindex rule books and the description in Section I of
this report.

20

6. Benchmark Design
IOSCO Principles

NFRC’s Response
Nomura Japan Fixed Income Index Series:
The Nomura Japan Fixed Income Index Series,
excluding NOMURA-BPI/Ladder, seeks to measure
the performance of each entire secondary market.
Each index takes into account the liquidity ofunderlying securities and applies monetarythresholds on the outstanding balance of bonds inthe index constituent selections.
The NOMURA-BPI/Ladder seeks to measure theperformance of laddered JGBs, Japanese
government bonds, allocating equal amounts toeach maturity.
For details on this index series, please refer to theindex rule books and the description in Section I of
this report.

PwC’s Testing

Nomura Customized Index Series:
Each index is designed to achieve an accurate andreliable representation of economic realities of theunderlying securities, taking into account specificclient investment requirements.
Requirements c) to e) are not applicable here as theindex constituent selections and index calculations
are based on the quantitative market data related tosecurities traded in regulated exchange markets forequity indices and based on the JS Price or Nomura
Price for fixed income indices.
Please refer to NFRC’s Response to Principle 7 fordetails on the JS Price and Nomura price.

21

6. Benchmark Design
IOSCO Principles

NFRC’s Response(Policies)
NFRC stipulates the calculation methodologies,
index constituent selections (reconstitutions andrebalancing), and index maintenance (reflections ofcorporate action, free-float weighting adjustments) of
NFRC’s Indices in the index rule books that areavailable to the public on its website.

PwC’s Testing(Policies)
PwC inspected the index rule books to confirm thatthey included the matters described in NFRC’s
Response and were available on the website as ofJuly 31, 2023.

In addition, internal rules require NFRC to review theindex designs and calculation methodologies on aquarterly basis.

PwC inspected the internal rules to confirm that they
included the matters described in NFRC’s Response
as of July 31, 2023.

(Relevant Activities)
NFRC reviews the index designs and calculation
methodologies at least annually for each index inaccordance with internal rules. Please refer to
NFRC’s Response to Principle 10 for details of thisperiodic review.

(Relevant Activities)
Please refer to Principle 10 for the periodic review toverify the index calculation.

22

7. Data Sufficiency
7. Data Sufficiency
IOSCO Principles
The data used to construct a Benchmark
determination should be sufficient to accurately andreliably represent the Interest measured by the
Benchmark and should:a) Be based on prices, rates, indices or values thathave been formed by the competitive forces ofsupply and demand in order to provide
confidence that the price discovery system isreliable; andb) Be anchored by observable transactions enteredinto at arm’s length between buyers and sellers
in the market for the Interest the Benchmark
measures in order for it to function as a credible
indicator of prices, rates, indices or values.
This Principle requires that a Benchmark be based
upon (i.e., anchored in) an active market having
observable Bona Fide, Arms-Length Transactions.
This does not mean that every individual Benchmark
determination must be constructed solely oftransaction data. Provided that an active market
exists, conditions in the market on any given day
might require the Administrator to rely on different
forms of data tied to observable market data as an
adjunct or supplement to transactions. Depending
upon the Administrator’s Methodology, this could
result in an individual Benchmark determination
being based predominantly, or exclusively, on bids
and offers or extrapolations from prior transactions.
This is further clarified in Principle 8.
Provided that subparagraphs (a) and (b) above aremet, Principle 7 does not preclude Benchmark
Administrators from using executable bids or offers
as a means to construct Benchmarks whereanchored in an observable market consisting ofBona Fide, Arms-Length transactions.
This Principle also recognizes that various indices

NFRC’s Response
Equity:
NFRC’s equity indices satisfy data sufficiency
requirements as they are calculated based oncontract prices in highly liquid exchange markets.

PwC’s Testing

Fixed Income:
NFRC’s fixed income indices are calculated basedon the JS Price. The JS Price generally covers theindex constituents of NFRC’s fixed income indices.
However, when it is not available, the Nomura Priceis used as an alternative source.
The JS Price represents Japanese bond fair values
and is generated and managed by NSC and three
third parties -Nikkei Inc., Nikkei Financial
Technology Research Institute, Inc., and NRI.
The Nomura Price is provided by NSC. NFRC madean agreement with NSC to use JS Price and Nomura
Price.
NFRC believes that the JS Price and Nomura Pricerepresent the market accurately and reliably
because of the following characteristics:●●

The JS Price is provided by Nikkei Inc. and NRI
to market participants and is widely used for fairvalue purposes when it comes to bonds.
Nomura Price is provided by NSC who hasaccess to traded prices and/or quotations,which represent the secondary market because
NSC is a major financial participant in the yenbond market and is actively engaged intransactions with other financial institutions andits clients.

23

7. Data Sufficiency
IOSCO Principles
may be designed to measure or reflect theperformance of a rule-based investment strategy,
the volatility or behaviour of an index or market orother aspects of an active market. Principle 7 does
not preclude the use of non-transactional data forsuch indices that are not designed to represent
transactions and where the nature of the index issuch that non-transactional data is used to reflect
what the index is designed to measure. For
example, certain volatility indices, which aredesigned to measure the expected volatility of anindex of securities transactions, rely on nontransactional data, but the data is derived from andthus “anchored” in an actual functioning securities or
options market.

NFRC’s Response

PwC’s Testing(Policies)
NFRC stipulates in its internal rules that the ISD
must regularly evaluate data sufficiency to represent
the Interest measured by the NFRC’s indices reliably
and accurately. Evaluation standards set by the ISD
include the following.
The sufficient coverage with pricesThe reasonable deviation ranges from prices
obtained from a different source than the source
used to calculate indices.

Comparison of capital returns calculated using
price information from different sources todetermine if they are similar.

（Policies）
PwC inspected the internal rules to confirm that they
included the matters described in NFRC’s Response
as of July 31, 2023.

24

7. Data Sufficiency
IOSCO Principles

NFRC’s Response(Relevant Activities)
Equity:The ISD confirmed that the data used by NRI is theactive market data as a part of the daily verification.

PwC’s Testing（Relevant Activities）
PwC Inspected the daily verification result to confirm
that the ISD evaluated the data sufficiency for theequity indices.

Fixed Income:
The ISD performed an annual evaluation of the JS
Price to confirm their sufficiency for reflecting theInterest of the indices reliably and accurately inaccordance with internal rules in July 2023.

PwC inspected the result of the annual evaluationthat the ISD performed to evaluate the reliability of
JS Price in July 2023, based on the internal rule.

25

8. Hierarchy of Data Inputs
8. Hierarchy of Data Inputs
IOSCO Principles
An Administrator should establish and Publish or
Make Available clear guidelines regarding thehierarchy of data inputs and exercise of Expert
Judgment used for the determination of
Benchmarks. In general, the hierarchy of data inputs
should include:a) Where a Benchmark is dependent upon
Submissions, the Submitters’ own concluded
arms-length transactions in the underlying
interest or related markets;b) Reported or observed concluded Arm’s-length
Transactions in the underlying interest;c) Reported or observed concluded Arm’s-length
Transactions in related markets;d) Firm (executable) bids and offers; ande) Other market information or Expert Judgments.
Provided that the Data Sufficiency Principle is met(i.e., an active market exists), this Principle is notintended to restrict an Administrator’s flexibility touse inputs consistent with the Administrator’s
approach to ensuring the quality, integrity, continuity
and reliability of its Benchmark determinations, as
set out in the Administrator’s Methodology. The
Administrator should retain flexibility to use theinputs it believes are appropriate under its
Methodology to ensure the quality and integrity of its
Benchmark. For example, certain Administrators
may decide to rely upon Expert Judgment in an
active albeit low liquidity market, when transactions
may not be consistently available each day. IOSCO
also recognizes that there might be circumstances(e.g., a low liquidity market) when a confirmed bid oroffer might carry more meaning than an outliertransaction. Under these circumstances, nontransactional data such as bids and offers and

NFRC’s Response(Policies)
Equity:
NFRC’s equity indices use the market capitalizationof the index constituents calculated based on the
Nomura Composite Price.

PwC’s Testing(Policies)
PwC inspected the “Index Calculation Policy” andthe index rule books to confirm that they included thematters described in NFRC’s Response and wereavailable on the website as of July 31, 2023.

The Nomura Composite Price is the price on theexchange that is considered to show the fairest pricefor the stock, based on the stock’s percentage ofdays traded and total trading volume for the latest 60
business days. As a general rule, the exchange isselected on a daily basis.
Furthermore, the stock price is selected according to
the following hierarchy:

PwC inquired of a responsible person of the ISD
who confirmed that Expert Judgments are not usedin the index determinations.

1. Contract price on the selected exchange (seenote)
2. Standard price on the selected exchange
3. Nomura Composite Price on the previous
business day
Note: Priority is given to the special quotation priceor continuous confirmed quotation price on theselected exchange if these are available.
Fixed Income:
NFRC’s fixed income indices are calculated basedon the JS Price. If the JS Price is not available, theNomura Price is used. For more on the JS Price andNomura price, please refer to NFRC’s Response to
Principle 7.
For in-scope NFRC’s Indices, Expert Judgments are
not used in the index determinations. The NFRC’s
Indices are not based on submissions.

26

8. Hierarchy of Data Inputs
IOSCO Principles
extrapolations from prior transactions might
predominate in a given Benchmark determination.

NFRC’s Response
Please refer to the “Index Calculation Policy” and theindex rule books, which are available on the website
for the input data of NFRC’s Indices.

PwC’s Testing27

9. Transparency of Benchmark Determinations
9. Transparency of Benchmark Determinations
IOSCO Principles
The Administrator should describe and publish witheach Benchmark determination, to the extent
reasonable without delaying an Administrator
publication deadline:a) A concise explanation, sufficient to facilitate a
Stakeholder’s or Market Authority’s ability tounderstand how the determination wasdeveloped, including, at a minimum, the size andliquidity of the market being assessed (meaning
the number and volume of transactions
submitted), the range and average volume andrange and average of price, and indicative
percentages of each type of market data thathave been considered in a Benchmark
determination; terms referring to the pricing
Methodology should be included (i.e.,transaction-based, spread-based orinterpolated/extrapolated);b) A concise explanation of the extent to which andthe basis upon which Expert Judgment if any,
was used in establishing a Benchmark
determination.

NFRC’s Response(Policies)
NFRC stipulates rules for calculation methodologies,
index constituent selections (reconstitutions andrebalancing), and index maintenance (reflections ofcorporate action, free-float weighting adjustments) of
the NFRC’s Indices in the index rule books that areavailable to the public on its website.
With regard to the Nomura Customized Index Series
developed for the specific clients, the index rulebooks are not published on the website but are
rather disclosed to the clients of indices as agreed in
the license agreement.
The requirement b) of this Principle is not applicableto the NFRC’s Indices, as Expert Judgments are notused in index determinations.

PwC’s Testing(Policies)
PwC inspected the index rule books to confirm thatthey included the matters described in NFRC’s
Response and were available on the website as ofJuly 31, 2023.

With regard to Nomura Customized Index Series,
PwC inquired of a responsible person of the ISD
who confirmed that the index rule books are notpublished on the website but available to therelevant clients as agreed in the license agreement.
PwC recalculated samples of the values of NFRC’s
Indices as of July 31, 2023 to confirm that the
NFRC’s Indices were calculated in accordance withthe calculation methodologies in the index rulebooks.
With regard to the requirement b) of this Principle,
PwC inquired of a responsible person of the ISD
who confirmed that Expert Judgments are not usedin the index determinations.

28

10. Periodic Review
10. Periodic Review
IOSCO Principles
The Administrator should periodically review theconditions in the underlying Interest that theBenchmark measures to determine whether theInterest has undergone structural changes that might
require changes to the design of the Methodology.
The Administrator also should periodically review
whether the Interest has diminished or is nonfunctioning such that it can no longer function as thebasis for a credible Benchmark.
The Administrator should Publish or Make Available
a summary of such reviews where material revisions
have been made to a Benchmark, including therationale for the revisions.

NFRC’s Response(Policies)
NFRC stipulates the following in the “Index
Calculation Policy” and its internal rules:

NFRC conducts reviews at least annually withregard to the calculation methodologies andother matters in order to assess whether amaterial change to the calculation
methodologies is required due to structuralchanges in the markets, or whether the value
measured by the NFRC’s Indices has
diminished or is not functioning due to structuralchanges in the markets.
As a NFRC’s annual review;- The ISD conducts the periodic review andreports the result to the Director in charge of
Index Services.
- The Director in charge of Index Services
annually reviews the index methodologies
and data sufficiency in the index
determination through reports from the ISD
including the FOS reports.

PwC’s Testing(Policies)
PwC inspected the “Index Calculation Policy” which
was available on the website and the internal rules
to confirm that they included the matters describedin NFRC’s Response as of July 31, 2023.

A material change to the methodologies or a
cessation as a result of periodic review requires
approval from the Head of the ISD, Director in
charge of Index Services and the Strategic
Solutions Committee. Please refer to NFRC’s
Response to Principle 5 for more on the internal
oversight, Principle 12 for more on changes tothe calculation methodologies and Principle 13
for more on cessation or transition of an index.

29

10. Periodic Review
IOSCO Principles

NFRC’s Response(Relevant Activities)
NFRC conducts reviews at least annually withregard to calculation methodologies, and othermatters in accordance with the “Index Calculation
Policy” and internal rules.

PwC’s Testing(Relevant Activities)
PwC inspected the result of review to confirm that
the ISD conducted the review at least annually withregards to the calculation methodologies and othermatters. PwC also inspected evidence to confirm
that the ISD reported the result to the Director in
charge of Index Services.

30

11. Content of the Methodology
11. Content of the Methodology
IOSCO Principles
The Administrator should document and Publish or
Make available the Methodology used to makebenchmark determinations.
The Administrator should provide the rationale for
adopting a particular Methodology.
The Published Methodology should provide sufficientdetail to allow Stakeholders to understand how theBenchmark is derived and to assess its
representativeness, its relevance to particular
Stakeholders, and its appropriateness as areference for financial instruments.
At a minimum, the Methodology should contain:a) Definitions of key terms;b) All criteria and procedures used to develop the
Benchmark, including input selection, the mix of
inputs used to derive the Benchmark, theguidelines that control the exercise of Expert
Judgment by the Administrator, priority given tocertain data types, minimum data needed todetermine a Benchmark, and any models or
extrapolation methods;c) Procedures and practices designed to promoteconsistency in the exercise of Expert Judgment
between Benchmark determinations;d) The procedures which govern Benchmark
determination in periods of market stress or
disruption, or periods where data sources may
be absent (e.g., theoretical estimation models);e) The procedures for dealing with error reports,
including when a revision of a Benchmark would
be applicable;f) Information regarding the frequency for internal
reviews and approvals of the Methodology.

NFRC’s Response(Policies)a) and b)
NFRC documents the following in the “Index
Calculation Policy” and the index rule books:● Definitions of key terms● Calculation methodologies● Hierarchy of data inputs● Input data details
The “Index Calculation Policy” and the index rulebooks are available on the website.

PwC’s Testing(Policies)a) b), d), e), f) and g)
PwC inspected the “Index Calculation Policy” andthe index rule books to confirm that they included thematters described in NFRC’s Response and wereavailable on the website as of July 31, 2023.

With regards to the Nomura Customized IndexSeries, the information is available only to thoseclients who are authorized based on contractual
agreements and that information is presented via themost suitable media based on the client contracts.
b) and c)
For in-scope NFRC’s Indices, Expert Judgments are
not used in index determinations.

b) and c)
PwC inquired of a responsible person of the ISD
who confirmed that Expert Judgments are not usedin the index determination.

d) and e)
NFRC stipulates the following in its “Index
Calculation Policy” and internal rules:

NFRC will announce on its website when it
delays or halts the publication of indices during
periods of system trouble at NFRC or data
providers, war, natural disasters, or otherunavoidable circumstances.

NFRC will recalculate or amend index values if
NFRC determines that an index calculation has
been conducted improperly (due to errors, forexample) or for any other appropriate reason. In
such circumstances, the Head of the ISD willapprove recalculations or amendments, and the
ISD will report to the Director in charge of Index
3111. Content of the Methodology
IOSCO Principles
Where applicable, the Published Methodologies
should also include information regarding theprocedures and frequency for external review ofthe Methodology;g) The circumstances and procedures under which
the Administrator will consult with Stakeholders,
as appropriate; andh) The identification of potential limitations of a
Benchmark, including its operation in illiquid orfragmented markets and the possible concentrationof inputs.

NFRC’s Response
Services and announce them on the website. In
the absence of the Head of the ISD, anappropriate person in charge will be responsible
for approval.

PwC’s Testingf)
NFRC stipulates in its “Index Calculation Policy” that
NFRC reviews calculation methodologies annually.
Please refer to NFRC’s Response to Principle 10 for
more information on the Periodic Review.
g)
NFRC stipulates in its “Index Calculation Policy” that
NFRC investigates the potential impact of a materialchange in or a cessation of an index based on publiccomment obtained via its website as necessary. In
addition, NFRC establishes systems for dealing withenquiries and/or complaints related to the index
methodology. Please refer to NFRC’s Response to
Principle 16 for more on this.
h)
NFRC stipulates potential limitations in its “Index
Calculation Policy” and index rule books asnecessary.

Where a Benchmark is based on Submissions,the additional Principle also applies:
The Administrator should clearly establish criteria forincluding and excluding Submitters. The criteria
should consider any issues arising from the locationof the Submitter, if in a different jurisdiction to the
Administrator. These criteria should be available toh)
PwC inspected the “Index Calculation Policy” toconfirm that it included the matters described in
NFRC’s Response and was available on the website
as of July 31, 2023.

(Relevant Activities)e)
NFRC didn’t perform a recalculation from February
1, 2023 to July 31. 2023.

(Relevant Activities)e)
PwC inquired of a responsible person of ISD who
confirmed that NRC did not perform recalculationfrom February 1, 2023 to July 31. 2023.

This principle is not applicable to the NFRC’s Indicesas they are not based on submissions.

No testing was performed as there is no policy or
relevant activity in NFRC’s Response.

3211. Content of the Methodology
IOSCO Principles
any relevant Regulatory Authorities, if any, andPublished or Made Available to Stakeholders. Any
provisions related to changes in composition,
including notice periods should be made clear.

NFRC’s Response

PwC’s Testing33

12. Changes to the Methodology
12. Changes to the Methodology
IOSCO Principles
An Administrator should Publish or Make Available
the rationale of any proposed material change in its
Methodology, and procedures for making suchchanges. These procedures should clearly define
what constitutes a material change, and the method
and timing for consulting or notifying Subscribers(and other Stakeholders where appropriate, taking
into account the breadth and depth of the
Benchmark’s use) of changes.
Those procedures should be consistent with theoverriding objective that an Administrator mustensure the continued integrity of its Benchmark
determinations. When changes are proposed, theAdministrator should specify exactly what thesechanges entail and when they are intended to apply.
The Administrator should specify how changes tothe Methodology will be scrutinised, by the oversightfunction.
The Administrator should develop Stakeholder
consultation procedures in relation to changes to the
Methodology that are deemed material by theoversight function, and that are appropriate andproportionate to the breadth and depth of the
Benchmark’s use and the nature of the
Stakeholders. Procedures should:

NFRC’s Response(Policies)
NFRC sets forth the following procedures forchanges to calculation methodologies in its “Index
Calculation Policy” which is available on its website:● NFRC reserves the right to amend calculation
methodologies based on any of the following:・ Results of a periodic review
・ Structural changes in the market (such as
regulation revisions)・ A user request or complaint
・ Any other circumstances where NFRC
determines that a change in the calculation
methodology is necessary● NFRC defines changes to methodology thathave significant impacts on index users andother stakeholders (such as significant changesof principles of index construction, design, or
calculation) as “material changes”.
● NFRC solicits public comment on its website asnecessary.
● Material changes to methodology requireapproval by the Head of the ISD, Director in
charge of Index Services and the Strategic
Solutions Committee.
● NFRC announces any methodology changes(with the exception of cosmetic changes) atleast 30 days prior to the day of implementation
on its website.

PwC’s Testing(Policies)
PwC inspected the “Index Calculation Policy” andthe index rule books to confirm that they included thematters described in NFRC’s Response and wereavailable on the website as of July 31, 2023.

34

12. Changes to the Methodology
IOSCO Principlesa) Provide advance notice and a clear timeframethat gives Stakeholders sufficient opportunity toanalyse and comment on the impact of suchproposed material changes, having regard to the
Administrator’s assessment of the overall
circumstances; andb) Provide for Stakeholders’ summary comments,
and the Administrator’s summary response to
those comments, to be made accessible to all
Stakeholders after any given consultation period,
except where the commenter has requested
confidentiality.

NFRC’s Response(Relevant Activities)
The change of the rule for NOMURA-BPI wereannounced March 2023 after NFRC commenced theindex operation.

PwC’s Testing(Relevant Activities)
PwC inspected the announcements on the website
to confirm that the changes of calculation
methodologies for Nomura-BPI were announced atleast 30 days before the change and conducted inaccordance with the internal rules.

3513. Transition
13. Transition
IOSCO Principles
Administrators should have clear written policies andprocedures, to address the need for possible
cessation of a Benchmark, due to market structurechange, product definition change, or any othercondition which makes the Benchmark no longer
representative of its intended Interest. These policies
and procedures should be proportionate to theestimated breadth and depth of contracts andfinancial instruments that reference a Benchmark
and the economic and financial stability impact thatmight result from the cessation of the Benchmark.
The Administrator should take into account the viewsof Stakeholders and any relevant Regulatory andNational Authorities in determining what policies andprocedures are appropriate for a particular
Benchmark.

NFRC’s Response(Policies)
NFRC sets forth the following procedures for
cessation in its “Index Calculation Policy” which isavailable on its website:●

These written policies and procedures should be
Published or Made Available to all Stakeholders.
Administrators should encourage Subscribers andother Stakeholders who have financial instrumentsthat reference a Benchmark to take steps to makesure that:a) Contracts or other financial instruments thatreference a Benchmark, have robust fallback
provisions in the event of material changes to, or
cessation of, the referenced Benchmark; andb) Stakeholders are aware of the possibility thatvarious factors, including external factors beyond
the control of the Administrator, mightnecessitate material changes to a Benchmark.
Administrators’ written policies and procedures toaddress the possibility of Benchmark cessation
could include the following factors, if determined tobe reasonable and appropriate by the Administrator:







NFRC reserves the right to implement
cessations or transitions of an index based on
any of the following:・ Results of a periodic review
・ When demand for an index decreases
significantly (such as when there is anabsence of users referencing the index).
・ When an index no longer provides
intended value due to the redemption offinancial products referencing the index or
for other reasons.
・ When the calculation of an index becomesdifficult due to the number of constituent
index securities decreasing significantly.
・ Any other circumstances where NFRC
determines that cessation is necessary.
NFRC asks index users and other stakeholders
for feedback on the impact of the cessation
and/or suggests a suitable alternative index
selected by NFRC.
NFRC solicits public comments in such cases
where there are many index users and otherstakeholders and NFRC cannot directly consult
with all index users.
NFRC shall notify relevant users of an
appropriate alternative index (in terms ofobjectives, strategy, and universe) in cases
where NFRC will produce such an alternativeindex or where one is already in existence(administrated by NFRC or other index
provider).

PwC’s Testing(Policies)
PwC inspected the “Index Calculation Policy” which
was available on the website as of July 31, 2023 andthe internal rules to confirm that they included thematters described in NFRC’s Response as of July
31, 2023.

36

13. Transition
IOSCO Principlesa) Criteria to guide the selection of a credible,
alternative Benchmark such as, but not limited to,criteria that seek to match to the extent
practicable the existing Benchmark’s
characteristics (e.g., credit quality, maturities andliquidity of the alternative market), differentials
between Benchmarks, the extent to which analternative Benchmark meets the asset/liability
needs of Stakeholders, whether the revised
Benchmark is investable, the availability oftransparent transaction data, the impact on
Stakeholders and impact of existing legislation;b) The practicality of maintaining parallel
Benchmarks (e.g., where feasible, maintain theexisting Benchmark for a defined period of timeto permit existing contracts and financial
instruments to mature and publish a new
Benchmark) in order to accommodate an orderlytransition to a new Benchmark;c) The procedures that the Administrator would
follow in the event that a suitable alternative
cannot be identified;d) In the case of a Benchmark or a tenor of a
Benchmark that will be discontinued completely,
the policy defining the period of time in which the
Benchmark will continue to be produced in orderto permit existing contracts to migrate to analternative Benchmark if necessary; ande) The process by which the Administrator will
engage Stakeholders and relevant Market andNational Authorities, as appropriate, in theprocess for selecting and moving towards analternative Benchmark, including the timeframe
for any such action commensurate with thetenors of the financial instruments referencing
the Benchmarks and the adequacy of notice thatwill be provided to Stakeholders.

NFRC’s Response

NFRC determines the cessation of the disputed
index and suggests an alternate index which isdeemed as an appropriate substitute, withconsideration given to the sufficient period oftime for transition.
A cessation requires approval by the Head of
the ISD, Director in charge of Index Services
and the Strategic Solutions Committee.

NFRC announces the index cessation on its
website at least 30 days prior to the day of
implementation.

PwC’s Testing(Relevant Activities)
NFRC did not implement a cessation or transition forin-scope NFRC’s Indices as of July 31, 2023.

(Relevant Activities)
PwC inquired of a responsible person of the ISD
who confirmed that NFRC had no cessation ortransition for in-scope NFRC’s Indices as of July 31,
2023.

37

14. Submitter Code of Conduct
14. Submitter Code of Conduct
IOSCO Principles
Where a Benchmark is based on Submissions, thefollowing additional Principle also applies:
The Administrator should develop guidelines for
Submitters (“Submitter Code of Conduct”), whichshould be available to any relevant Regulatory
Authorities, if any and Published or Made Available
to Stakeholders.
The Administrator should only use inputs or
Submissions from entities which adhere to the
Submitter Code of Conduct and the Administrator
should appropriately monitor and record adherence
from Submitters. The Administrator should require
Submitters to confirm adherence to the Submitter
Code of Conduct annually and whenever a change
to the Submitter Code of Conduct has occurred.
The Administrator’s oversight function should be
responsible for the continuing review and oversightof the Submitter Code of Conduct.
The Submitter Code of Conduct should address:a) The selection of inputs;b) Who may submit data and information to the
Administrator;c) Quality control procedures to verify the identity ofa Submitter and any employee(s) of a Submitter
who report(s) data or information and theauthorization of such person(s) to report market
data on behalf of a Submitter;d) Criteria applied to employees of a Submitter who
are permitted to submit data or information to an
Administrator on behalf of a Submitter;e) Policies to discourage the interim withdrawal of
Submitters from surveys or Panels;f) Policies to encourage Submitters to submit all
relevant data; andg) The Submitters’ internal systems and controls,
which should include:i. Procedures for submitting inputs, including
Methodologies to determine the type of eligible

NFRC’s Response
This principle is not applicable to the NFRC’s
Indices, as they are not based on submissions.

PwC’s TestingNo testing was performed as there is no policy or
relevant activity in NFRC’s Response.

38

14. Submitter Code of Conduct
IOSCO Principles
inputs, in line with the Administrator’s
Methodologies;
ii. Procedures to detect and evaluate suspicious
inputs or transactions, including inter-grouptransactions, and to ensure the Bona Fidenature of such inputs, where appropriate;
iii. Policies guiding and detailing the use ofExpert Judgement, including documentation
requirements;
iv. Record keeping policies;v. Pre-Submission validation of inputs, andprocedures for multiple reviews by senior staff
to check inputs;
vi. Training, including training with regard to any
relevant regulation (covering Benchmark
regulation or any market abuse regime);vii. Suspicious Submission reporting;viii. Roles and responsibilities of key personnel
and accountability lines;
ix. Internal sign off procedures by management
for submitting inputs;
x. Whistle blowing policies (in line with Principle4); andxi. Conflicts of interest procedures and policies,
including prohibitions on the Submission of datafrom Front Office Functions unless the
Administrator is satisfied that there are
adequate internal oversight and verification
procedures for Front Office Function
Submissions of data to an Administrator(including safeguards and supervision toaddress possible conflicts of interests as per
paragraphs (v) and (ix) above), the physicalseparation of employees and reporting lines
where appropriate, the consideration of how to
identify, disclose, manage, mitigate and avoid
existing or potential incentives to manipulate orotherwise influence data inputs (whether or notin order to influence the Benchmark levels),

NFRC’s Response

PwC’s Testing39

14. Submitter Code of Conduct
IOSCO Principles
including, without limitation, through appropriate
remuneration policies and by effectively
addressing conflicts of interest which may exist
between the Submitter’s Submission activities(including all staff who perform or otherwise
participate in Benchmark Submission
responsibilities), and any other business of theSubmitter or of any of its affiliates or any of theirrespective clients or customers.

NFRC’s Response

PwC’s Testing40

15. Internal Controls over Data Collection
15. Internal Controls over Data Collection
IOSCO Principles
When an Administrator collects data from any
external source the Administrator should ensure that
there are appropriate internal controls over its datacollection and transmission processes. These
controls should address the process for selecting thesource, collecting the data and protecting the
integrity and confidentiality of the data. Where
Administrators receive data from employees of the
Front Office Function, the Administrator should seek
corroborating data from other sources.

NFRC’s Response
NFRC outsources data collection for NFRC’s Indicesto third party services.
The fair value of bonds represented by JS Price andNomura Price, is obtained through NRI. The
contract prices of equities are also obtained through
NRI.

PwC’s Testing(Policies)
NFRC made an agreement with NSC to use JS
Price and Nomura Price.
NFRC also uses the contract prices of equities
provided via NRI under the agreement with Nomura
Holdings Inc. (hereinafter “NHI”) (the parent
company of NFRC) and Tokyo Stock Exchange
Inc.(hereinafter “TSE”), which allows NFRC to use
the market data.

(Policies)
PwC inspected the agreement between NFRC and
NSC to confirm that NSC agrees with NFRC to use
JS Price.
PwC inspected the agreement between NHI and
TSE to confirm that NFRC may use the market data.

41

16. Complaints Procedures
16. Complaints Procedures
IOSCO Principles
The Administrator should establish and Publish or
Make Available a written complaints procedures
policy, by which Stakeholders may submit
complaints including concerning whether a specific
Benchmark determination is representative of theunderlying Interest it seeks to measure, applicationsof the Methodology in relation to a specific
Benchmark determination(s) and other Administrator
decisions in relation to a Benchmark determination.
The complaints procedures policy should:a) Permit complaints to be submitted through auser-friendly complaints process such as anelectronic Submission process;b) Contain procedures for receiving andinvestigating a complaint made about theAdministrator’s Benchmark determination
process on a timely and fair basis by personnel
who are independent of any personnel who may
be or may have been involved in the subject of
the complaint, advising the complainant andother relevant parties of the outcome of its
investigation within a reasonable period andretaining all records concerning complaints;c) Contain a process for escalating complaints, as
appropriate, to the Administrator’s governancebody; andd) Require all documents relating to a complaint,
including those submitted by the complainant aswell as the Administrator’s own record, to beretained for a minimum of five years, subject toapplicable national legal or regulatory
requirements.

NFRC’s Response(Policies)
NFRC has established procedures to manage
complaints from users, market participants, andmarket authorities in relation to NFRC’s Indices in its“Complaints Handling Policy” which is available on
its website.

PwC’s Testing(Policies)
PwC inspected the “Complaints Handling Policy” toconfirm that it included the matters described in
NFRC’s Response and was available on the website
as of July 31, 2023.

The “Complaints Handling Policy” stipulates thefollowing:
●
●
●
●
●
●

E-mail address for submitting complaints
Required information which complainants needto submit to the ISD
Procedures to be taken by the ISD when
receiving a compliant and notifying investigation
results to the complainant via e-mailProcedures for escalating complaints to theCompliance Department as appropriate
Two-week notification period in principle via email for the results of the investigation
Record retention of complaints for a minimum of
five years, including the details of the complaint,
investigation results, preventive measures, andthe conclusion after addressing the complaint inaccordance with relevant rules and laws

In addition, if a complaint results in material changes
to index determinations, NFRC will disseminate thisinformation to the index users and otherstakeholders in accordance with the procedures ofchanges to methodologies stipulated in “Index
Calculation Policy” and internal rules. Please refer to
NFRC’s response to Principle 12 for more onchanges to methodologies.

Disputes about a Benchmarking determination,
which are not formal complaints, should be resolved
4216. Complaints Procedures
IOSCO Principles
by the Administrator by reference to its standard
appropriate procedures. If a complaint results in achange in a Benchmark determination, that should
be Published or Made Available to Subscribers andPublished or Made Available to Stakeholders assoon as possible as set out in the Methodology.

NFRC’s Response(Relevant Activities)
NFRC manages complaints from users, market
participants, and market authorities in relation to
NFRC’s Indices in accordance with its “Complaints
Handling Policy”.

PwC’s Testing(Relevant Activities)
PwC inquired of a responsible person of the ISD
who confirmed that NFRC did not receive any formal
complaints as at July 31, 2023.

NFRC did not receive any formal complaints as at
July 31, 2023.

43

17. Audits
17. Audits
IOSCO Principles
The Administrator should appoint an independentinternal or external auditor with appropriate
experience and capability to periodically review andreport on the Administrator’s adherence to its statedcriteria and with the Principles. The frequency ofaudits should be proportionate to the size andcomplexity of the Administrator’s operations.

NFRC’s Response
A Nomura’ internal auditor or external auditor
conducts audits on index administration regularly.
NFRC has engaged with PricewaterhouseCoopers
Japan LLC (“PwC”) to carry out external assurance
engagement with regard to Policies and Relevant
Activities in NFRC’s Responses to the IOSCO
Principles.

PwC’s Testing
PwC, as an independent assurance provider, wasappointed to provide a limited assurance opinion on
NFRC’s Responses to the IOSCO Principles.

Where appropriate to the level of existing or potential
conflicts of interest identified by the Administrator(except for Benchmarks that are otherwise regulated
or supervised by a National Authority other than arelevant Regulatory Authority), an Administrator
should appoint an independent external auditor withappropriate experience and capability to periodicallyreview and report on the Administrator’s adherence
to its stated Methodology. The frequency of audits
should be proportionate to the size and complexity of
the Administrator’s Benchmark operations and thebreadth and depth of Benchmark use by
Stakeholders.

4418. Audit Trail
18. Audit Trail
IOSCO Principles
Written records should be retained by the
Administrator for five years, subject to applicablenational legal or regulatory requirements on:a) All market data, Submissions and any other dataand information sources relied upon for
Benchmark determination;b) The exercise of Expert Judgment made by the
Administrator in reaching a Benchmark
determination;c) Other changes in or deviations from standard
procedures and Methodologies, including thosemade during periods of market stress or
disruption;d) The identity of each person involved in producing
a Benchmark determination; ande) Any queries and responses relating to data
inputs.

NFRC’s Response(Policies)
NFRC stipulates in its internal rules that it retains
records related to the ISD’s activities for five (5)years.

PwC’s Testing(Policies)
PwC inspected the internal rules to confirm that theyrequire NFRC to retain records related to the IDS’s
activities for five (5) years.

(Relevant Activities)
NFRC retains records related to the ISD’s activities
as follows for five (5) years in accordance withinternal rules.

(Relevant Activities)
PwC inspected evidence on a sample basis toconfirm that the ISD has retained the record related
to the ISD’s activities described in NFRC’s
Response in accordance with the internal rules.







If these records are held by a Regulated Market or
Exchange the Administrator may rely on theserecords for compliance with this Principle, subject toappropriate written record sharing agreements.
When a Benchmark is based on Submissions, thefollowing additional Principle also applies:
Submitters should retain records for five years
subject to applicable national legal or regulatory
requirements on:a) The procedures and Methodologies governing
the Submission of inputs;b) The identity of any other person who submitted
or otherwise generated any of the data or
information provided to the Administrator;c) Names and roles of individuals responsible for
Submission and Submission oversight;d) Relevant communications between submitting
parties;e) Any interaction with the Administrator;

Information about the index determination
process (including input data, calculation
methodology, expert judgments, andcommunications via e-mail with third parties)
Content of complaints and inquiries,
investigation results, preventive measures,
resolutions, etc.
Identity of staff members who are engaged in
the index determination process.

The NFRC’s Indices are not based on submissions.

No testing was performed as there is no policy or
relevant activity in NFRC’s Response.

45

18. Audit Trail
IOSCO Principlesf) Any queries received regarding data or
information provided to the Administrator;g) Declaration of any conflicts of interests andaggregate exposures to Benchmark related
instruments;h) Exposures of individual traders/desks to
Benchmark related instruments in order tofacilitate audits and investigations; andi) Findings of external/internal audits, whenavailable, related to Benchmark Submission
remedial actions and progress in implementing
them.

NFRC’s Response

PwC’s Testing46

19. Cooperation with Regulatory Authorities
19. Cooperation with Regulatory Authorities
IOSCO Principles
Relevant documents, Audit Trails and otherdocuments subject to these Principles shall be madereadily available by the relevant parties to therelevant Regulatory Authorities in carrying out theirregulatory or supervisory duties and handed overpromptly upon request.

NFRC’s Response
If requested by the regulatory authorities, NFRC willsubmit all relevant documents and audit trails to
relevant authorities in a timely manner.

PwC’s Testing
PwC inquired of a responsible person of the ISD
who confirmed that NFRC will respond to requests
from the regulatory authorities appropriately.

Please refer to Principle 18 for more on record
retentions relevant to the ISD’s activities including
audit trails.

Refer to PwC’s Testing of Principle 18 for record
retention.

47