Corporate GovernanceIn conducting our business activities, we recognize that fair
practices in compliance with laws and corporate ethics are ourcorporate social responsibility, and we recognize corporate
governance as an important management priority. Based on thisunderstanding, we endeavor to raise our level of soundness,enhance corporate value, boost transparency and reinforce ourcorporate governance structure.
The Board of Directors, consisting of seven directors (including
one outside director), makes decisions about important mattersrelated to the Group’s management and supervises the directors.
The Board of Directors meeting is held once a month in principle
and is presided over by the president. Materials for discussion aresent to the outside director beforehand so the director can gain
a comprehensive understanding of the subjects up for discussion
and can state his/her opinions from a neutral standpoint.

The Nomination Committee discusses matters related to theappointment and dismissal of directors, and the Compensation
Committee discusses matters related to the compensation ofthe directors. Both guarantee the objectivity and transparency ofdecision-making processes.
The Board of Corporate Auditors, consisting of four auditors(including two external auditors), holds a meeting once a monthin principle. It receives reports about important matters related
to auditing and makes relevant decisions based on these. Theauditors check the directors’ performance of their duties byattending Board of Directors and other important meetings andby inspecting the Company’s operations and assets.
The Group Asset and Liability Management Committee, theGroup Compliance Committee and Group Operational Risk
Management Committee discuss important management issues.

YMFG Corporate Governance Structure
YMFG
General Meeting of Stockholders
Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Cooperation
ReportBoard of Corporate Auditors
4 Corporate Auditors(including 2 outside auditors)

Audit
ReportBoard of Directors

Command(including 1 outside director)

Accounting Auditor

7 Directors
Appointment

Appointment/Dismissal
Supervision

Cooperation

Auditors Office

Reports and Recommendation

Nomination Committee
Compensation Committee

Audit and Inspection Dept.

Internal Audit
ReportBusiness Execution Structure
PresidentGroup ALM Committee
Group Compliance Committee

Designated Board Members

Accounting Audit

CommandGroup Operational Risk Management Committee
ReportPolicy Indication/Plan ApprovalOperation Departments

Yamaguchi Bank Momiji Bank Kitakyushu Bank YM Securities YM Saison Izutsuya Withcard YM Consulting Kitakyushu Economics InstituteInternal Audits
Principles of Internal Audits
We define an internal audit as a series of processes for objective
verification of the appropriateness and effectiveness of internal
controls (including risk management) and as making suggestions
for necessary improvements.
YMFG has devised standard internal audit rules for the wholeGroup. On the basis of these rules, the internal audit departmentsof each Group company verify the appropriateness andeffectiveness of internal controls and make suggestions fornecessary improvements.
Further, YMFG creates the Group’s medium- to long-term
internal audit plan on the basis of its management policy andconditions. Internal audits by the auditing bodies of each Group
company are conducted on the basis of this plan to ensure theireffectiveness and efficiency.

Implementation of Internal Audits
YMFG’s Audit and Inspection Dept. plans audit processes forthe whole Group, implements audits and supervises each Group
company’s internal audits.
The YMFG Audit and Inspection Dept. devises the rules andmedium- to long-term plans for the Group’s internal audits,
implements audits of the Group companies’ compliance/riskmanagement departments and checks the accuracy of thefinancial statements of the Group companies. The department
monitors and gives guidance and advice to the Group companies’
audit and inspection departments. On the basis of their audit
reports, the department reports on the internal audits of theGroup to the Board of Directors.
The banks’ audit and inspection departments implement
internal audits of branches in Japan and overseas, and reports
to YMFG and to the Board of Directors. In particular, internal
audits of front-line sales outlets are performed to verify the statusof compliance and risk management functions and ensure theirmutual effectiveness.

Annual Report201417