Concept of Disposition Against Members

Established on July 15, 2021

1. Basic Concept
The main purpose of dispositions to be taken by the Association against Full Members is to prevent any Full
Member from violating any laws and ordinances, orders and dispositions based thereon, and the Articles ofIncorporation and various rules of the Association (hereinafter referred to as “Laws and Ordinances, etc.”),and to prevent any recurrence thereof, thereby securing fairness in the business of investment trusts
conducted by any Full Member and financial instruments business, etc. related to the investment corporation,and thoroughly protecting investors, thereby contributing to the maintenance and improvement ofconfidence in the asset management business and the financial instruments exchange market.

Therefore, in order to further enhance the effectiveness of dispositions of Full Members, the Association has
decided to clarify and categorize seriousness and malicious nature of violation of Laws and Ordinances, etc.,
the status of internal control systems, and treatment in cases where violation of Laws and Ordinances, etc. isrepeated or continuing or where antisocial forces are involved, and other cases, after sorting out factors to beconsidered in the dispositions. In addition, it has decided to review the maximum amount of negligence fine
imposed on Full Members for violation of Laws and Ordinances, etc.
On the other hand, it is important for Full Members to prevent the occurrence of any violation of Laws
and Ordinances, etc. by endeavoring to secure accurate understanding and recognition of Laws andOrdinances, etc. on a day-to-day basis with a high degree of compliance awareness, establishing anappropriate internal control system in accordance with their own business conditions and adequately andproperly conducting internal control in order to prevent any violation of Laws and Ordinances, etc. Even if
any violation of Laws and Ordinances, etc. occurs, it is desirable to establish an environment in which
self-purification can be achieved by detecting it early through internal self-inspection, etc. and making a
prompt response, and other means.

Based on this concept, elements to be considered in the examination of dispositions of Full Members are
summarized as follows. It is expected that this arrangement will increase the transparency and predictabilityof dispositions of Full Members and will also contribute to the improvement of compliance awarenessamong Full Members with Laws and Ordinances, etc.
It should be noted that the following items are examples of elements to be taken into consideration in
the examination of dispositions, and other items that are deemed necessary in accordance with the content of
the case can also be taken into consideration. Furthermore, it should also be noted that even if an individual
officer or employee of a Full Member has committed a violation of Laws and Ordinances, etc., when any
deficiency is found in the internal control system of the Full Member, an action is taken against the officer or
employee in consideration of the status and degree of such deficiency.
－1－2. Factors to be Considered When a Disposition is Taken upon Occurrence of Violation of Laws andOrdinances, etc.
(1) Seriousness of the act(i)Period and size of violation of Laws and Ordinances, etc.
The period and frequency (number of cases) of violation of Laws and Ordinances, etc., the number of
persons engaged in such violation, the effect of such violation on the trust property or the managed
assets (amount of damages), etc. shall be taken into consideration.
When it is determined that any violation of Laws and Ordinances, etc. has been committed for along period of time or on a large scale, strict measures shall be taken accordingly.

(ii) Breach of Duty of Loyalty and Duty of Care, etc.
In the event that an investment management company is not considered to be engaged in theinvestment management business with due care of a bona fide and good manager for the benefit ofbeneficiaries of an investment trust, etc. or the investment corporation, or for any acts that fail toprotect investors (beneficiaries) or harm the fairness of transactions, or that cause a loss ofconfidence in the asset management business, strict measures shall be taken accordingly.

(iii) Status of Administrative Punishment for Violation of Laws and Ordinances, etc.
In the event that any administrative punishment is imposed for any violation of Laws and Ordinances,
etc., measures shall be implemented, taking into account details of the punishment.

(2) Malicious nature of the act(i)Presence or absence, and degree of willful intention or negligence
In any violation of Laws and Ordinances, etc., it shall be considered whether such violation of Laws
and Ordinances, etc. was committed intentionally or caused by carelessness or negligence such as a
mistake in paperwork.
When the degree of willful intention or negligence is deemed serious, strict measures shall betaken accordingly.

(ii) Organizational nature, presence or absence, and degree of involvement of the management team andmanagerial personnel
The number and position of persons involved in violation of Laws and Ordinances, etc. (from theviewpoint of organizational nature) shall be taken into consideration when dealing with such
violation.
Even if the number of persons involved in violation of Laws and Ordinances, etc. is small, when
the involvement of managerial personnel is recognized, such as the management team, etc.
permitting or overlooking such violation, it is determined that such violation is organizational, andmeasures shall be taken accordingly.
－2－

In the event that any violation of Laws and Ordinances, etc. is highly organizational and strong
involvement of the senior management is recognized, strict measures shall be taken accordingly.

(iii) Repeatability, and presence or absence of similar indication in the past
When any similar violation of Laws and Ordinances, etc. is repeatedly committed or when any
similar violation has been pointed out in a past administrative inspection or inspection by aself-regulatory organization, etc., measures shall be taken in consideration of the parties involved insuch violation, responses to the previous notice, and the status of corrective measures taken.
If there is any substantial imperfection in the subsequent response, such as failure to takeappropriate improvement measures, or if the previous indication has been overlooked, strictmeasures shall be taken accordingly.

(iv) Presence or absence of concealment of facts and the extent thereof
When any act of concealment of facts is recognized and the circumstances thereof are deemed
extremely malicious, such as the act of organizationally implemented concealment of facts, strictmeasures shall be taken accordingly.
(3) Impact of the act(i)Extent of loss of confidence in the asset management businessMeasures shall be taken in consideration of the extent to which the trust of investors (beneficiaries) in
the asset management business has been lost, such as fairness of operations of the Financial
Instruments Business related to investment trusts and investment corporations (including fairtreatment of customers and proper management of conflicts of interest).
In the event that the impact on investors (beneficiaries) and financial instruments exchange
markets is deemed material and credit of the asset management business is deemed substantially
impaired, strict measures shall be taken accordingly.

(ii) Effect on investors (beneficiaries), presence or absence of complaints
Measures shall be taken in consideration of the content and extent of losses imposed on investors(beneficiaries) and the status of complaints from investors (beneficiaries) regarding violation ofLaws and Ordinances, etc.
In the event that the impact on the investor (beneficiary) is deemed serious, such as a serious
concern arising about the protection of investment trust property and the investment corporation’s
managed assets, etc., strict measures shall be taken accordingly.

(4) Awareness and attitude about compliance with Laws and Ordinances, etc.
(i)

Awareness and attitude about compliance with Laws and Ordinances, etc.
Measures shall be taken in consideration of recognition of Laws and Ordinances, etc., complianceawareness, and attitude with regard to violation of Laws and Ordinances, etc.
In the event of any lack of awareness of compliance with Laws and Ordinances, etc., strict－3－

measures shall be taken accordingly.

(ii) Presence or absence of opinion hearings from attorneys, etc.
Measures shall be implemented, also taking into consideration whether opinions of attorneys,
certified public accountants, and other experts have been sought and considered, as necessary.

(5) Status of internal control system(i)

Status of internal control system
In order to prevent any violation of Laws and Ordinances, etc., measures shall be taken inconsideration of whether internal control has been implemented sufficiently and accurately, after
appropriate internal control systems (including an information control environment, etc.) areestablished according to the operation of the Full Member.

(ii) Clarification of responsibility
With regard to the occurrence of any violation of Laws and Ordinances, etc., measures shall be taken
in consideration of how the management team and managerial personnel recognize their
responsibility for such violation and how the responsibility is clarified.

(iii) Whether or not in-house training, etc. is implemented
In order to prevent any violation of Laws and Ordinances, measures shall be taken in consideration ofwhether the management team, managerial personnel, etc. give appropriate instructions and whether
effective internal training, etc. is provided.

(6) Status of response to violation of Laws and Ordinances, etc.
(i)

Background to discovery of violation of Laws and Ordinances, etc.
Measures shall be taken in consideration of whether the violation of Laws and Ordinances, etc. wasdiscovered through an administrative inspection or an inspection by a self-regulatory organization, or
through a self-inspection, etc.
In principle, while strict measures shall be taken when the violation was discovered through an
administrative inspection or an inspection by a self-regulatory organization, mitigation measures
may be considered when the violation was discovered through a self-inspection, etc.

(ii) Status of corrective measures after discovery
Measures taken after any violation of Laws and Ordinances, etc. was discovered and the status of
improvement to prevent the recurrence shall be taken into account.
When it is recognized that immediate and appropriate corrective measures have been taken, it
may be considered as a mitigating factor. In addition, if corrective measures are consideredinsufficient, including the lapse of time, after the discovery of violation of Laws and Ordinances etc.,
the measures may be taken as an aggravating factor.
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(iii) Cooperation in Investigations, etc.
When any uncooperative attitude is recognized, such as interference with investigations of the
Association through interruption, suppression of information, provision of false materials and othermeans, against investigations, requests for reports, and submission of materials based on the Articles
of Incorporation, strict measures shall be taken accordingly in consideration of such circumstances.

(7) Whether or not antisocial forces are involved
When any antisocial force is involved in any violation of Laws and Ordinances, etc., strict measures
shall be taken accordingly.

(8) Treatment of the amount equivalent to unjust enrichment(i)Collection of the amount equivalent to unjust enrichment
When unjust enrichment occurs as a result of violation of Laws and Ordinances, etc. to a Full
Member or any person concerned thereof with respect to a matter to be subject to measuresprescribed in Article 17 of the Articles of Incorporation, the amount to be collected may be
determined in consideration of an amount equivalent to the unjust enrichment in calculating theamount of negligence fine.
When a Full Member voluntarily takes measures to return the amount equivalent to unjust
enrichment, the amount to be collected may be determined according to the content of this returnmeasure.

(ii) Treatment of affiliated companies, etc. that can be considered to be substantially the same as a Full
MemberWhen an affiliated company, etc. that can be considered to be substantially the same as a Full
Member has obtained an amount equivalent to unjust enrichment in relation to violation of Laws andOrdinances, etc., this amount equivalent to unjust enrichment may be, in principle, deemed to be thatof the Full Member and the amount to be collected may be determined.

(iii) Treatment in the event that a surcharge is imposed on the other party
When a surcharge has been imposed, the amount to be collected may be determined in calculating theamount of negligence fine in consideration of the amount of the surcharge.

3. Concept of Expulsion and Applicable Reasons and Factors to be Considered
The purpose of expulsion, etc. by the Association is to prevent the recurrence of any violation of Laws andOrdinances, etc. by a Full Member who has caused the event subject to the expulsion, etc. by forcing it towithdraw from the Association and giving a warning regarding the withdrawal, thereby leading to theprevention of any violation of Laws and Ordinances, etc. by other Full Members.
In light of this point, in the case where the trust in the asset management business is significantly－5－damaged by any material violation of Laws and Ordinances, etc., the case where obligations as a Full
Member cannot be performed due to bankruptcy, etc., or the case where the qualification as a Full Member isquestionable due to the involvement of antisocial forces, etc., the Association shall consider expulsion, etc.
The items to be taken into account in the consideration shall be as follows.
For any item other than the following items, expulsion, etc. may be considered if it is deemed necessary
according to the content of the matter. With regard to the timing of expulsion, it shall also be examined
whether or not any particular problem will arise from the viewpoint of investor protection even if the Full
Member to be expelled is not subject to voluntary regulation of the Association.
(1) Unauthorized membership
For unauthorized membership, because the initial membership itself is considered invalid, expulsion
shall be imposed.

(2) Insolvency
If the subject Full Member does not voluntarily withdraw from the Association, expulsion thereof shallbe considered.

(3) When any disposition taken by any government agency or any disposition taken by the Association isviolatedIf wrongfulness is found in the subject Full Member’s refusing to abide by the disposition taken by the
Associate, expulsion thereof shall be considered.

(4) Arrears in membership fees etc.
If a Full Member is delinquent in paying membership fee for no justifiable reason, its membership shallbe suspended or restricted. When the situation, such as continuous failure to pay membership fee, is not
improved even during the period of suspension or restriction of membership, expulsion, etc. shall beconsidered.

(5) False report, etc.
If a false report is made, or basic obligations as a Full Member, such as submission of materials, are notfulfilled, the non-fulfillment of obligations shall be disclosed. If the situation is considered significantly
malicious or the non-fulfillment of obligations continues for one year or more, expulsion, etc. shall beconsidered.

(6) When antisocial forces are involved in corporate management, etc.
If any antisocial force is found to exist among major shareholders, directors, etc. or if any antisocial
force is found to be involved in corporate management, etc., expulsion, etc. shall be considered.

(7) When the total period of restriction or suspension of membership exceeds one year.
If any Full Member has been subjected to restriction or suspension of membership in the past five (5)－6－years, and the total period of the restriction or suspension exceeds one year, expulsion, etc. shall beconsidered.

(8) Others
In addition to what is stated above, the following situations are also taken into account in considering
expulsion.
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Case where it is recognized that there has been an organized act; for example, there has beenleading or active involvement of the senior management (director) in violation of Laws andOrdinances, etc.

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Case where there is any substantial deficiency in follow-up measures; for example, any
appropriate improvement measures have not been taken for no justifiable reason and thesituation is equivalent to abandonment of the matter.

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Case where it is recognized that the circumstances are extremely malicious; for example, there
has been concealment of facts, which was done organizationally.
(End)－7－