Corporate GovernanceOur basic policy on corporate governance
JASDEC fully recognizes its social obligation as thecentral body for the provision of the infrastructure
for securities clearing and settlement, which is an
important base of the capital markets. Accordingly,
JASDEC has determined a basic management
policy of providing a highly secure, convenient andefficient service. To this end, we ensure that oursystem meets the needs of users, including investors,
issuing companies and market intermediaries. We

also make sure that our activities promote corporatetransparency and that our business operates with
fairness and accountability, in line with the public
needs of our function. Our commitment to corporate
governance is to earn and maintain a solid reputation
for reliability as the central organization responsible forcreating and operating the infrastructure for securities
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.
12Corporate Structure

Annual Report 2013

• Board of Directors• Business Operations Committee

The Board of Directors is composed of 19 members, and isbasically structured to achieve a balanced approach to businesswith user-oriented views, as well as business-oriented ideas on
maintaining operational neutrality and fairness. To fully reflect theopinions of users in our operations, nine of the 14 external directors
are selected from JASDEC participants. The remaining five external
directors come from an issuing company and a related organization,or from the Japan Securities Dealers’ Association, academia andthe legal profession, enabling the Board to conduct vigorous
discussions from a broad perspective in consideration of the publicgood. 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 Audit & Supervisory
Board, JASDEC has set up the Business Operational Committee
to fully reflect the needs of system users in our operations. TheCommittee examines important issues related to the businessof JASDEC, based on queries from the Board of Directors, andhas ten subcommittees under its control. Each subcommittee is
responsible for a specific segment of operations, and is composedof members who are actually involved in the field. JASDEC applies
the opinions provided by each subcommittee to various operational
issues. JASDEC discloses summaries of discussions and otherinformation by the committees to relevant parties for 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, we
have established the Advisory Committee, which is composedof experts in financial and securities systems. The committee
advises JASDEC’s president from a broad perspective about wideranging 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’sBoard 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.

• Audit & Supervisory Board
JASDEC employs the Audit & Supervisory Board system forcorporate governance instead of the committee system, as provided
for in the Companies Act. The Audit & Supervisory Board is madeup of three Audit & Supervisory Board Members, two of whomare selected from eligible participants (one each from a securities
company and a bank) and all three (including an Audit & SupervisoryBoard Member who is serving on a full-time basis) are external Audit& Supervisory Board Members. In principle, the Audit & Supervisory
Board holds a regular meeting each month. In line with auditing plans
and the basic policies established by the Audit & Supervisory Board,
Audit & Supervisory Board Members attend important meetings,
including those of the Board of Directors, and assess the status ofservices and assets to perform audits of directors. To ensure that
audits are effective, Audit & Supervisory Board Members work
closely with directors and conduct regular exchanges of opinions,
including through meetings with the representative directors.

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

Appointments/Dismissals

Audit & Supervisory Board(Three including one Audit & Supervisory
Board Member serving on a full-time basis)
Reporting
Auditing

Business Operations Committee

Auditing

Audit & Supervisory
Board Member’s OfficeAppointments/
Dismissals

Auditing

Board of Directors(Five full-time, fourteen external)
Appointment/
Supervision

Opinions, reports

ChairmanPresident & CEO
Risk ManagementCommittee

Accounting auditors

Subcommittees

Consultation

Monitoring

ComplianceOffice

Conveying
informationStock
Bond with share option
ETF
Foreign stock
Corporate bondCP
Investment trust
PSMS (Domestic Trade)
PSMS (Non-Residents’ Trade)ISO 20022

Internalaudit

Departments

Risk Management System

Internal Audit, Audit & Supervisory Board
Member’s Audit, and Accounting Audit
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 Audit & Supervisory Board Member’s audit, an Audit &Supervisory Board Member 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 Standing
Audit & Supervisory Board Member performs audits in accordancewith the auditing plans established by the Audit & Supervisory
Board, and provides the other Audit & Supervisory Board Memberswith updates on the progress of auditing activities at the meeting ofAudit & Supervisory Board, which takes place monthly.
Audit & Supervisory Board Members serving on a part-timebasis attend meetings of the Board of Directors and monitor thedirectors’ execution of their duties. They also assess the legality ofbusiness operations by reviewing reports on auditing activities fromthe Standing Audit & Supervisory Board Member.
JASDEC assigns staff specifically to assist Audit & Supervisory
Board Members in their audits.
Audit & Supervisory Board Members perform audits in close
cooperation with the Company’s accounting auditors. This includes
hearing reports from the accounting auditors on auditing plans andAdvisory Committee

the results of the audits.
The accounting audits for JASDEC in the year ended March 31,
2013 was performed by two certified accountants in the capacity ofaccounting auditor under the Companies Act: Yohei Kishi and Masato
Saito (designated members of a limited liability partnership underArticle 34, Paragraph 10-5 of the Certified Public Accountants Law).
They are employed by Ernst & Young ShinNihon LLC, a member
firm of Ernst & Young Global, and execute accounting audits,
including checks of financial documents, based on the Companies
Act. It is our understanding that no items of particular regard, suchas serious irregularities or instances of illegal behavior, have beenfound through the execution of accounting audits.

Directors’ and Audit & Supervisory Board
Members’ Limit of Liability
We expect directors and Audit & Supervisory Board Members to
fully demonstrate the skills involved in successfully executing their
responsibilities. Additionally, to retain top-level professionals, wehave set limits on liability for damages incurred by directors andAudit & Supervisory Board Members.

Resolutions on Election/Dismissal of Directors
The election of directors by resolution at the general meetingof shareholders 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 voteof said shareholders.
The dismissal of directors by resolution at a general meetingof shareholders 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.

13
Annual Report 2013

JASDEC has set up the Risk Management Committee, chairedby the president. It takes measures to strengthen overall risk
management, and regularly monitors internal control systems forvarious risks.

Advice