Cor p or a t e G ove rnanc e
Our Basic Policy on Corporate Governance
JASDEC fully recognizes its social obligation as the central bodyfor the provision of the infrastructure for securities clearing andsettlement, which is an important base of the capital markets.
Accordingly, JASDEC has determined a basic management policyof providing a highly secure, convenient and efficient service. To
this end, we ensure that our system meets the needs of users,
including investors, issuing companies and market intermediaries.

We a l s o m a k e s u r e t h a t o u r a c t i v i t i e s p r o m o t e c o r p o r a t etransparency and that our business operates with fairness andaccountability, in line with the public needs of our function. Ourcommitment on corporate governance is to earn and maintain as o l i d r e p u t a t i o n f o r r e l i a b i l i t y a s t h e c e n t r a l o rg a n i z a t i o n
responsible for creating and operating the infrastructure forsecurities clearing and settlement in Japan.

Overview of implementation of corporate governance practices
Framework for management structure and corporate governance to exercise business judgments, manage operations and implement audits

Corporate Structure
Board of Directors

Business Operations Committee

The Board of Directors is composed of 19 members, and is basicallystructured to achieve a balanced approach to business with useroriented views, as well as business-oriented ideas on maintaining
operational neutrality and fairness. To fully reflect the opinions ofusers in our operations, nine of the 14 external directors are selectedfrom JASDEC participants. The remaining five external directors
belong to an issuing company and a related organization, or to theJapan Securities Dealers’Association, academia and the legal
profession, enabling the Board to conduct vigorous discussions
from a broad perspective in consideration of the public good. In
principle, the Board meets once a month to decide basic
management policies and discuss other key issues.

Separately from the Board of Directors and the Board of Auditors,
JASDEC has set up the Business Operational Committee to fullyreflect the needs of system users in our operations. The Committee
examines important issues related to the business of JASDEC, basedon queries from the Board of Directors, and has nine subcommittees
under its control. Each subcommittee is responsible for a specificsegment of operations, and is composed of members who are
actually involved in the field. JASDEC applies the opinions provided
by each subcommittee to various operational issues. JASDEC postssummaries of discussions and other information by the committees
on its website to foster greater operational transparency.
As the provider of key infrastructure elements for the securities
market, we are required to operate the system with an extremely
high level of fairness and accountability. To achieve this end, wehave established the Advisory Committee, which is composed ofexperts in financial and securities systems. The committee advises
JASDEC’s president from a broad perspective about wide-ranging
issues relating to securities clearing and settlement system
operations.
JASDEC DVP Clearing Corporation (JDCC), JASDEC’s
wholly-owned subsidiary, operates in accordance with a businessphilosophy similar to that of JASDEC. JDCC has also set up acommittee for reviewing important issues regarding DVP operations
to reflect the needs of users of the DVP settlement system for nonexchange transaction deliveries(NETDs). In addition, JASDEC’s
Board of Directors receives reports regarding issues decided byJDCC’s Board of Directors to ensure consistency in the activities ofthe two companies.
An outline of JASDEC’s management structure and corporate
governance systems is presented on the next page.

Board of Auditors
JASDEC employs the corporate auditor system for corporate
governance instead of the committee system, as provided in theCompanies Act. The Board of Auditors is made up of three auditors,
two of whom are selected from eligible participants (one each froma securities company and a bank) and all three (including an auditor
who is serving on a full-time basis) are external auditors.
In principle, the Board of Auditors holds a regular meeting eachmonth. In line with auditing plans and the basic policies establishedby the Board of Auditors, auditors attend important meetings,
including those of the Board of Directors and assess the status ofservices and assets to perform audits of directors. To ensure thataudits are effective, auditors work closely with directors andconduct regular exchanges of opinions, including through meetings
with the representative directors.

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Overview of JASDEC’s Management Structure and Corporate Governance Framework
General Shareholders’ Meeting
Appointments/Dismissals

Appointments/Dismissals

Board of Auditors

Appointments/Dismissals(Five full-time, fourteen external)

Subcommittees
Consultation

Opinions, reports

ETF
Foreign stock
Corporate bondPresident & CEO

Investment trust

CP
PSMS (Domestic Trade)

Accounting auditors
AuditingStock
Bond with share option

Appointment/
Supervision

Opinions, reports

Auditors Offce

Board of Directors

Audit on operation(Three including one auditor
serving on a full-time basis)
Auditing

Business Operations Committee

Risk Management Committee
Monitoring

Conveying
informationCompliance Office

PSMS (Non-Residents’ Trade)

Internal audit

Departments

Risk Management System
JASDEC has set up the Risk Management Committee, chaired by
the president. It takes measures to strengthen overall risk
management, and regularly monitors internal control systems forvarious risks.
Internal Audits, Corporate Audits, and Accounting Audits
JASDEC has established the Compliance Office, and internal auditing
accomplished primarily through onsite surveys based on the audit
plan, to assess the effectiveness of operational procedures. For
corporate audits, an auditor serving on a full-time basis routinely
attends important meetings, such as those of the Board of Directors
and the Executive Committee (comprised of managing directors
serving on a full-time basis) and examines circulars intended toobtain approvals of decisions by persons in charge. The full-time
auditor performs audits in accordance with the auditing plansestablished by the Board of Auditors, and provides the other
Corporate Auditors with updates on the progress of auditing activities
at the meeting of Corporate Auditors, which takes place monthly.
Auditors serving on a part-time basis attend meetings of theBoard of Directors and monitor the directors’ execution of theirduties. They also assess the legality of business operations byreviewing reports on auditing activities from the full-time auditor.
JASDEC assigns staff specifically to assist corporate auditors intheir audits.
Corporate Auditors perform audits in close cooperation with theCompany’s accounting auditors. This includes hearing reports fromthe accounting auditors on auditing plans and the results of theaudits.
JASDEC has two certified public accountants who perform
accounting audits for JASDEC in the capacity of accounting auditor

AdviceAdvisory Committee

under the Companies Act: Yohei Kishi and Naoto Saito (designatedmembers of a limited liability partnership under Article 34,
Paragraph 10-5 of the Certified Public Accountants Law).
They are employed by Ernst & Young ShinNihon LLC, amember firm of Ernst & Young Global, and execute accountingaudits, including checks of financial documents, based on theCompanies Act. Mr. Kishi and Mr. Saito are assisted in theiraccounting audits by five certified public accountants and twelve
other staff (junior accountants and other assistants).
We recognize that no items of particular regard, such as serious
irregularities or instances of illegal behavior, have been foundthrough the execution of accounting audits.
Directors’ and Corporate Auditors’ Limit of Liability
We expect directors and Corporate Auditors to fully demonstrate theskills involved in successfully executing their responsibilities.
Additionally, to retain top-level professionals, we have set limits on
liability for damages incurred by directors and Corporate Auditors.
Resolutions on Election/Dismissal of Directors
The election of directors by resolution at the general meeting ofshareholders is conducted in the presence of shareholders
representing no less than one-third of voting rights held by eligible
shareholders, and directors are elected by a majority vote of said
shareholders.
The dismissal of directors by resolution at a general meeting ofshareholders is conducted in the presence of shareholders
representing no less than one-third of voting rights held by eligible
shareholders, and directors are dismissed on a vote of no less than
two-thirds of voting rights held by said shareholders.

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