As filed with the Securities and Exchange Commission on July 12, 2018
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
‘ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2018
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
OR
‘ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number 000-54189
KABUSHIKI KAISHA MITSUBISHI UFJ FINANCIAL GROUP
(Exact name of Registrant as specified in its charter)
MITSUBISHI UFJ FINANCIAL GROUP, INC.
(Translation of Registrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
7-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100-8330
Japan
(Address of principal executive offices)
Kazutaka Yoneda, +81-3-3240-8111, +81-3-3240-7073, same address as above
(Name, Telephone, Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common stock, without par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
American depositary shares, each of which represents one share of common stock . . . . . . . . . . . . . . . . . . . . . . . . . .
New York Stock Exchange(1)
New York Stock Exchange
(1) The listing of the registrant’s common stock on the New York Stock Exchange is for technical purposes only and without trading privileges.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of March 31, 2018, 13,900,028,020 shares of common stock (including 737,772,882 shares of common stock held by the registrant and its consolidated
subsidiaries as treasury stock)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes È No ‘
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Yes ‘ No È
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes È No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Accelerated filer ‘
Non-accelerated filer ‘
Emerging growth company ‘
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to
use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the
Exchange Act. ‘
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
È
International Financial Reporting Standards as issued
by the International Accounting Standards Board ‘
Other ‘
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ‘ Item 18 ‘
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ‘ No È
TABLE OF CONTENTS
Page
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements
4
Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
4
Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
4
Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
29
Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
72
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4A.
73
Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.
151
Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
175
Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
176
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
178
The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
179
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 10.
201
Quantitative and Qualitative Disclosures about Credit, Market and Other Risk . . . . . . . . . . . . .
Item 11.
228
Description of Securities Other than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
230
Item 13.
Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
230
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds . . . . . . . . . . . . .
230
Item 15.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
233
Item 16A. Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
233
Item 16B. Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
233
Item 16C. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
235
Item 16D. Exemptions from the Listing Standards for Audit Committees . . . . . . . . . . . . . . . . . . . . . . . . . .
235
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers . . . . . . . . . . . . . . . . . . .
236
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16F. Change in Registrant’s Certifying Accountant
236
Item 16G. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
237
Item 16H. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
238
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 17.
238
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 18.
Item 19.
238
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Statistical Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
F-1
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For purposes of this Annual Report, we have presented our consolidated financial statements in accordance
with accounting principles generally accepted in the United States, or U.S. GAAP, except for risk-adjusted
capital ratios, capital components, risk-weighted assets, business segment financial information and some other
specifically identified information. Unless otherwise stated or the context otherwise requires, all amounts in our
financial statements are expressed in Japanese yen.
In this Annual Report, unless otherwise indicated or the context otherwise requires, all figures are rounded
to the figures shown except for the capital ratios, capital components, risk-weighted assets, leverage ratios and
liquidity coverage ratios of MUFG and its domestic subsidiaries, which are rounded down and truncated to the
figures shown. In some cases, figures presented in tables are adjusted to match the sum of the figures with the
total amount, and such figures are also referred to in the related text.
When we refer in this Annual Report to “MUFG,” “we,” “us,” “our” and the “Group,” we generally mean
Mitsubishi UFJ Financial Group, Inc. and its consolidated subsidiaries, but from time to time as the context
requires, we mean Mitsubishi UFJ Financial Group, Inc. as an individual legal entity. In addition, our
“commercial banking subsidiaries” refers to MUFG Bank, Ltd. (formerly, The Bank of Tokyo-Mitsubishi UFJ,
Ltd.), or “BK,” and, as the context requires, its consolidated subsidiaries engaged in the commercial banking
business. Our “trust banking subsidiaries” refers to Mitsubishi UFJ Trust and Banking Corporation, or “TB,” and,
as the context requires, its consolidated subsidiaries engaged in the trust banking business. Our “banking
subsidiaries” refers to MUFG Bank and Mitsubishi UFJ Trust and Banking and, as the context requires, their
respective consolidated subsidiaries engaged in the banking business. Our “securities subsidiaries” refers to
Mitsubishi UFJ Securities Holdings Co., Ltd., or “SCHD,” and as the context requires, its consolidated
subsidiaries engaged in the securities business.
1
References to “MUAH” and “BK(US)” are to MUFG Americas Holdings Corporation and MUFG Union
Bank, N.A., as single entities, respectively, as well as to MUFG Americas Holdings and MUFG Union Bank and
their respective consolidated subsidiaries, as the context requires.
References to “Krungsri” are to Bank of Ayudhya Public Company Limited, as a single entity, as well as to
Krungsri and its respective consolidated subsidiaries, as the context requires.
References to the “FSA” are to the Financial Services Agency, an agency of the Cabinet Office of Japan.
References in this Annual Report to “yen” or “¥” are to Japanese yen, references to “U.S. dollars,”
“U.S. dollar,” “dollars,” “U.S.$” or “$” are to United States dollars, references to “euro” or “€” are to the
currency of the member states of the European Monetary Union, references to “THB” are to Thai baht, references
to “AU$” are to Australian dollars, references to “HK$” are to Hong Kong dollars, and references to “IDR” are
to Indonesian Rupiah.
Our fiscal year ends on March 31 of each year. References to years not specified as being fiscal years are to
calendar years.
We usually hold the annual ordinary general meeting of shareholders of Mitsubishi UFJ Financial Group,
Inc. in June of each year in Tokyo.
2
Forward-Looking Statements
We may from time to time make written or oral forward-looking statements. Written forward-looking
statements may appear in documents filed with, or submitted to, the U.S. Securities and Exchange Commission,
or SEC, including this Annual Report, and other reports to shareholders and other communications.
The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking
information to encourage companies to provide prospective information about themselves. We rely on this safe
harbor in making these forward-looking statements.
Forward-looking statements appear in a number of places in this Annual Report and include statements
regarding our current intent, business plan, targets, belief or expectations or the current belief or current
expectations of our management with respect to our results of operations and financial condition, including,
among other matters, our problem loans and loan losses. In many, but not all cases, we use words such as
“anticipate,” “aim,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probability,” “risk,” “will,” “may” and
similar expressions, as they relate to us or our management, to identify forward-looking statements. These
statements reflect our current views with respect to future events and are subject to risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions
prove incorrect, actual results may vary materially from those which are aimed, anticipated, believed, estimated,
expected, intended or planned, or otherwise stated.
Our forward-looking statements are not guarantees of future performance and involve risks and
uncertainties. Actual results may differ from those in the forward-looking statements as a result of various
factors. We identify in this Annual Report in “Item 3.D. Key Information—Risk Factors,” “Item 4.B. Information
on the Company—Business Overview,” “Item 5. Operating and Financial Review and Prospects” and elsewhere,
some, but not necessarily all, of the important factors that could cause these differences.
We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements,
whether as a result of new information, future events or otherwise unless required by law.
3
PART I
Item 1.
Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
A. Selected Financial Data
The selected statement of income data and selected balance sheet data set forth below has been derived from
our audited consolidated financial statements.
Except for risk-adjusted capital ratios, which are calculated in accordance with Japanese banking regulations
based on information derived from our consolidated financial statements prepared in accordance with accounting
principles generally accepted in Japan, or Japanese GAAP, the selected financial data set forth below are derived
from our consolidated financial statements prepared in accordance with U.S. GAAP.
You should read the selected financial data set forth below in conjunction with “Item 5. Operating and
Financial Review and Prospects,” “Selected Statistical Data” and our consolidated financial statements and other
financial data included elsewhere in this Annual Report. These data are qualified in their entirety by reference to
all of that information.
4
Fiscal years ended March 31,
2014
2015
2016
2017
2018
(in millions, except per share data and number of shares)
Statement of income data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2,522,283
560,972
¥
2,894,645
663,184
¥
3,005,738
744,364
¥
2,990,767
769,639
¥
3,259,016
1,028,755
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . .
1,961,311
(106,371)
2,231,461
86,998
2,261,374
231,862
2,221,128
253,688
2,230,261
(240,847)
Net interest income after provision for (reversal of)
credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income before attribution of noncontrolling
2,067,682
1,821,081
2,468,320
1,420,443
337,917
2,144,463
2,845,078
2,726,885
2,262,656
666,020
2,029,512
2,407,690
3,274,532
1,162,670
369,432
1,967,440
1,196,706
2,891,603
272,543
94,453
2,471,108
1,935,091
2,744,380
1,661,819
407,823
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,082,526
1,596,636
793,238
178,090
1,253,996
Net income (loss) attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,133
65,509
(9,094)
(24,590)
25,836
Net income attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
1,015,393
¥
1,531,127
Earnings applicable to common shareholders of
Mitsubishi UFJ Financial Group . . . . . . . . . . . . . .
¥
994,152
¥
1,522,157
¥
¥
802,332
802,332
¥
¥
202,680
¥
1,228,160
202,680
¥
1,228,160
Amounts per share:
Basic earnings per common share—Earnings
applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share—Earnings
applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . .
Number of shares used to calculate basic earnings
¥
70.21
¥
107.81
¥
57.78
¥
14.93
¥
92.40
69.98
107.50
57.51
14.68
92.10
per common share (in thousands)
. . . . . . . . . . . . .
14,158,698
14,118,469
13,885,842
13,574,314
13,291,842
Number of shares used to calculate diluted earnings
per common share (in thousands)(1) . . . . . . . . . . . .
Cash dividends per share paid during the fiscal year:
—Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Preferred stock (Class 5)(2) . . . . . . . . . . . . . . . . . . .
—Preferred stock (Class 11)(3) . . . . . . . . . . . . . . . . . .
14,180,080
14,137,645
13,903,316
13,584,885
13,293,492
¥
$
¥
$
¥
$
14.00
0.14
115.00
1.14
5.30
0.05
¥
$
¥
$
¥
$
¥
$
18.00
0.16
57.50
0.57
2.65
0.03
¥
$
18.00
0.15
—
—
—
—
¥
$
18.00
0.17
—
—
—
—
18.00
0.16
—
—
—
—
2014
2015
2016
2017
2018
As of March 31,
Balance sheet data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of allowance for credit losses . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥253,651,989
109,181,991
240,900,545
162,517,786
14,129,370
12,751,444
2,089,245
¥280,875,706
117,209,723
265,594,365
171,991,267
18,782,257
15,281,341
2,090,270
(in millions)
¥292,557,355
121,679,828
277,709,088
181,438,087
20,524,615
14,848,267
2,090,270
¥297,185,019
117,032,784
282,420,311
190,401,623
26,131,527
14,764,708
2,090,270
¥300,570,312
116,271,771
284,924,497
195,674,593
27,069,556
15,645,815
2,090,270
5
Fiscal years ended March 31,
2014
2015
2016
2017
2018
(in millions, except percentages)
Other financial data:
Average balances:
Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥212,176,348
189,404,896
247,721,331
10,683,098
¥237,247,664
210,091,493
277,547,638
13,002,955
¥252,715,743
221,135,208
299,270,873
15,285,766
¥239,192,449
223,522,296
307,938,699
15,010,829
¥239,048,981
233,857,052
320,589,932
15,423,078
Return on equity and assets:
Earnings applicable to common shareholders as a
percentage of average total assets . . . . . . . . . . . . .
0.40%
0.55%
Earnings applicable to common shareholders as a
percentage of average total equity . . . . . . . . . . . . .
9.31%
11.71%
0.27%
5.25%
0.07%
1.35%
0.38%
7.96%
Dividends per common share as a percentage of
basic earnings per common share . . . . . . . . . . . . .
19.94%
16.70%
31.15%
120.56%
19.48%
Average total equity as a percentage of average
total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income as a percentage of average total
interest-earning assets . . . . . . . . . . . . . . . . . . . . . .
Credit quality data:
Allowance for credit losses . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses as a percentage of
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impaired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impaired loans as a percentage of loans . . . . . . . . . . .
Allowance for credit losses related to impaired loans
as a percentage of impaired loans . . . . . . . . . . . . .
Net loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loan charge-offs as a percentage of average
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average interest rate spread . . . . . . . . . . . . . . . . . . . .
Risk-adjusted capital ratio calculated under Japanese
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAAP(5)
4.31%
0.92%
4.68%
0.94%
5.11%
0.89%
4.87%
0.93%
4.81%
0.93%
¥
1,094,420
¥
1,055,479
¥
1,111,130
¥
1,182,188
¥
764,124
0.99%
0.89%
0.90%
1.00%
0.65%
¥
1,861,027
¥
1,686,806
¥
1,725,150
¥
1,715,850
¥
1,331,123
1.69%
1.43%
1.40%
1.45%
1.14%
40.32%
36.00%
42.60%
51.42%
37.14%
¥
153,748
¥
150,666
¥
156,959
¥
169,809
¥
180,999
0.15%
0.89%
0.13%
0.90%
0.13%
0.85%
0.14%
0.91%
0.15%
0.92%
15.43%
15.62%
16.01%
15.85%
16.56%
Includes the common shares that were potentially issuable upon conversion of the Class 11 Preferred Stock and stock acquisition rights.
Notes:
(1)
(2) Preferred dividends were ¥57.5 per share and paid semi-annually. In April 2014, we acquired and cancelled all of the issued shares of
First Series of Class 5 Preferred Stock. As a result, there is currently no issued Class 5 Preferred Stock. See Note 17 to our audited
consolidated financial statements included elsewhere in this Annual Report.
(3) Preferred dividends were ¥2.65 per share and paid semi-annually. In August 2014, we acquired all of the issued shares of Class 11
Preferred Stock in exchange for 1,245 shares of our common stock held in treasury, and cancelled the acquired shares. As a result, there
is currently no issued Class 11 Preferred Stock. See Note 17 to our audited consolidated financial statements included elsewhere in this
Annual Report.
(4) Reflects the changes in presentation adopted in the fiscal year ended March 31, 2018, where long-term payables under repurchase
agreements are no longer included in long-term debt but are aggregated with short-term payables under repurchase agreements in
payables under repurchase agreements, and applied to the fiscal years ended March 31, 2014, 2015, 2016 and 2017. For further
information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
(5) Risk-adjusted capital ratios have been calculated in accordance with Japanese banking regulations as applicable on the relevant
calculation date, based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP.
For a description of the applicable capital ratio calculation and other requirements applicable, see “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—Japan—Capital adequacy” and “Item 5.B. Operating and Financial
Review and Prospects—Liquidity and Capital Resources—Capital Adequacy.”
6
Exchange Rate Information
The tables below set forth, for each period indicated, certain information concerning the rate of exchange of
Japanese yen per U.S. $1.00 based on exchange rate information found on Bloomberg. On June 29, 2018, the
closing exchange rate was ¥110.76 to U.S.$1.00 and the inverse rate was U.S.$0.90 to ¥100.00.
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110.17
106.13
106.85
104.74
109.43
105.89
111.05
108.77
110.76
109.54
February March
April
May
June
Year 2018
Average (of month-end rates)
. . . . . . . . . . . . . . . . . . . . . . . .
¥100.38 ¥110.82 ¥120.10 ¥108.33 ¥110.70
Fiscal years ended March 31,
2014
2015
2016
2017
2018
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
7
D. Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider the risks described
in this section, which is intended to disclose all of the risks that we consider material based on the information
currently available to us, as well as all the other information in this Annual Report, including our consolidated
financial statements and related notes, “Item 5. Operating and Financial Review and Prospects,”
“Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk” and “Selected
Statistical Data.”
Our business, operating results and financial condition could be materially and adversely affected by any of
the factors discussed below. The trading price of our securities could decline due to any of these factors. This
Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those described in this section and elsewhere in this Annual Report. See “Forward-Looking
Statements.”
Risks Related to Our Business
Because a large portion of our assets as well as our business operations are in Japan, we may incur
losses if economic conditions in Japan worsen.
Our performance is particularly affected by the general economic conditions of Japan where we are
headquartered and conduct a significant amount of our business. As of March 31, 2018, 65.2% of our total assets
were related to Japanese domestic assets, including Japanese national government and Japanese government
agency bonds, which accounted for 58.8% of our total investment securities portfolio and 8.5% of our total
assets, respectively. Interest and non-interest income in Japan represented 41.0% of our total interest and
non-interest income for the fiscal year ended March 31, 2018. Furthermore, as of March 31, 2018, our loans in
Japan accounted for 56.1% of our total loans outstanding.
There is significant uncertainty surrounding Japan’s economy. For example, Japan’s fiscal health and
sovereign creditworthiness may deteriorate if the Japanese government’s economic measures and the Bank of
Japan’s monetary policies prove ineffective or result in negative consequences. If the prices of Japanese
government bonds decline rapidly, resulting in an unexpectedly sudden increase in interest rates, our investment
securities portfolio as well as our lending, borrowing, trading and other operations may be negatively impacted.
In recent periods, major credit rating agencies have downgraded the credit ratings of Japan’s sovereign debt,
including a downgrade by Moody’s Investor Service, Inc. in December 2014, a downgrade by Fitch Ratings, Ltd.
in April 2015 and downgrade by Standard and Poor’s in September 2015. In addition, interest rates may suddenly
increase as a result of a decision made by the Bank of Japan to end its current interest rate policy, including the
negative interest rate of minus 0.1% applied to certain current account amounts that financial institutions hold at
the Bank of Japan and the Japanese government bond purchase program with an aim to keep the yield of 10-year
Japanese government bonds around zero percent, or market expectations relating to any such decision.
See “—Risks Related to Our Business—Fluctuations in interest rates could adversely affect the value or the yield
of our bond portfolio.”
Instability in the Japanese stock market and foreign currency exchange rates may also have a significant
adverse impact on our asset and liability management as well as our results of operations. Various other factors,
including the decreasing and aging demographics in Japan, stagnation or deterioration of economic and market
conditions in other countries, and growing global competition, may also have a material negative impact on the
Japanese economy. For a detailed discussion on the business environment in Japan and abroad, see
“Item 5. Operating and Financial Review and Prospects—Business Environment.”
Since our domestic loans in Japan accounted for a significant portion of our loan portfolio, deteriorating or
stagnant economic conditions in Japan may cause adverse effects on our financial results, such as increases in
8
credit costs, as the credit quality of some borrowers could deteriorate. For example, due to the intensifying global
competition and weakening consumer spending in recent periods, some Japanese companies, including
electronics manufacturers, have experienced significant financial difficulties. For a further discussion,
see “—Risks Related to Our Business—We may suffer additional credit-related losses in the future if our
borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or in anticipation
of, our borrowers’ deteriorating repayment abilities prove inappropriate or insufficient.”
Our domestic loan portfolio may also be adversely affected by interest rate fluctuations in Japan. For
example, as a result of the Bank of Japan’s interest rate policy and measures to purchase Japanese government
bonds in the market, the yield on many financial instruments and other market interest rates in Japan have
declined to low or negative levels. If the Bank of Japan’s policy and measures are maintained for an extended
period, or if the Bank of Japan’s negative interest rate is lowered from the current level, market interest rates may
decline further, and our interest rate spread on our domestic loan portfolio may narrow further, reducing our net
interest income.
If the global economy deteriorates, our credit-related losses may increase, and the value of the financial
instruments we hold may decrease, resulting in losses.
Global economic conditions remain volatile, and it is uncertain how the global economy will evolve over
time. Factors that could negatively impact the global market, both developed and emerging, include concerns
over the possible negative impact on global economic activity resulting from changes in the trade policies of
various countries, the potentially serious ramifications of the process of the United Kingdom’s withdrawal from
the European Union, the potential negative effect from the monetary policy changes expected in the United
States, slowing economic growth in China in the midst of a shift in the government’s economic policy,
weakening economic conditions in commodity-exporting countries that have been affected by a decline in oil and
other commodity prices, and the political turmoil in various regions around world. As of March 31, 2018, based
principally on the domicile of the obligors, assets related to the United States accounted for approximately 14.9%
of our total assets, assets related to Asia and Oceania excluding Japan accounted for approximately 9.0% of our
total assets, and assets related to Europe accounted for approximately 7.4% of our total assets. If the global
economy deteriorates or the global economic recovery significantly slows down again, the availability of credit
may become limited, and some of our borrowers may default on their loan obligations to us, increasing our credit
losses. Some of our credit derivative transactions may also be negatively affected, including the protection we
sold through single name credit default swaps, and index and basket credit default swaps. The notional amounts
of these protections sold as of March 31, 2018 were ¥2.20 trillion and ¥0.72 trillion, respectively. In addition, if
credit market conditions worsen, our capital funding structure may need to be adjusted or our funding costs may
increase, which could have a material adverse impact on our financial condition and results of operations.
Furthermore, we have incurred losses, and may incur further losses, as a result of changes in the fair value
of our financial instruments resulting from weakening market conditions. For example, declines in the fair value
of our investment securities, particularly equity investment securities, resulted in our recording impairment losses
of ¥37.2 billion, ¥33.8 billion and ¥8.2 billion for the fiscal years ended March 31, 2016, 2017 and 2018,
respectively. As of March 31, 2018, approximately 25.2% of our total assets were financial instruments for which
we measure fair value on a recurring basis, and less than 0.5% of our total assets were financial instruments for
which we measure fair value on a non-recurring basis. Generally, in order to establish the fair value of these
instruments, we rely on quoted prices. If the value of these financial instruments declines, a corresponding write-
down may be recognized in our consolidated statements of income. In addition, because we hold a large amount
of investment securities, short-term fluctuations in the value of our securities may trigger losses or exit costs for
us to manage our risk. For more information on our valuation method for financial instruments, see
“Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates.”
9
We may suffer additional credit-related losses in the future if our borrowers are unable to repay their
loans as expected or if the measures we take in reaction to, or in anticipation of, our borrowers’ deteriorating
repayment abilities prove inappropriate or insufficient.
When we lend money or commit to lend money, we incur credit risk, which is the risk of losses if our
borrowers do not repay their loans. We may incur significant credit losses or have to provide for a significant
amount of additional allowance for credit losses if:
‰
‰
‰
large borrowers become insolvent or must be restructured;
domestic or global economic conditions, either generally or in particular industries in which large
borrowers operate, deteriorate;
the value of the collateral we hold, such as real estate or securities, declines; or
‰ we are adversely affected by corporate credibility issues among our borrowers, to an extent that is worse
than anticipated.
As a percentage of total loans, impaired loans, which primarily include nonaccrual loans and troubled debt
restructurings, or TDRs, ranged from 1.14% to 1.69% as of the five most recent fiscal year-ends. As of March 31,
2018, impaired loans were ¥1.33 trillion, representing 1.14% of our total outstanding loans. If the economic
conditions in Japan or other parts of the world, or in particular industries, including the energy and real estate
industries, to which we have significant credit risk exposure, worsen, our problem loans and credit-related
expenses may increase. An increase in problem loans and credit-related expenses would adversely affect our
results of operations, weaken our financial condition and erode our capital base.
We may provide additional loans, equity capital or other forms of support to troubled borrowers in order to
facilitate their restructuring and revitalization efforts. We may also forbear from exercising some or all of our
rights as a creditor against them, and we may forgive loans to them in conjunction with their debt restructurings.
We may take these steps even when such steps might not be warranted from the perspective of our short-term or
narrow economic interests or a technical analysis of our legal rights against those borrowers, in light of other
factors such as our longer-term economic interests, and our commitment to support the Japanese economy. These
practices may substantially increase our exposure to troubled borrowers and increase our losses. Credit losses
may also increase if we elect, or are forced by economic or other considerations, to sell or write off our problem
loans at a larger discount, in a larger amount or in a different time or manner, than we may otherwise want.
Although we, from time to time, enter into credit derivative transactions, including credit default swap
contracts, to manage our credit risk exposure, such transactions may not provide the protection against credit
defaults that we intended due to counterparty defaults or similar issues. The credit default swap contracts could
also result in significant losses. As of March 31, 2018, the total notional amount of the protection we sold
through single name credit default swaps and index and basket credit default swaps was ¥2.93 trillion. In
addition, negative changes in financial market conditions may restrict the availability and liquidity of credit
default swaps. For more information on our credit derivative transactions, see Note 24 to our consolidated
financial statements included elsewhere in this Annual Report.
Our loan losses could prove to be materially different from our estimates and could materially exceed our
current allowance for credit losses, in which case we may need to provide for additional allowance for credit
losses and may also record credit losses beyond our allowance. Our allowance for credit losses in our loan
portfolio is based on evaluations of customers’ creditworthiness and the value of collateral we hold. Although we
recorded ¥240.8 billion of reversal of credit losses for the fiscal year ended March 31, 2018, negative changes in
economic conditions, government policies or our borrowers’ repayment abilities may require us to provide for
allowance in future periods. While we closely observe conditions of our individual borrowers and industry
trends, our borrowers may incur financial and non-financial losses that exceed our estimations depending on, for
example, domestic and international economic conditions or commodity price fluctuations. In such case, we may
10
need to provide for additional allowance for credit losses. Also, the regulatory standards or guidance on
establishing allowances may also change, causing us to change some of the evaluations used in determining the
allowances. As a result, we may need to provide for additional allowance for credit losses.
Our efforts to diversify our portfolio to avoid any concentration of credit risk exposures to particular
industries or counterparties may prove insufficient. For example, our credit exposures to the energy and real
estate industries are relatively high in comparison to other industries. The credit quality of borrowers in this
sector do not necessarily correspond to general economic conditions in Japan or other parts of the world, and
adverse fluctuations in oil and other commodity prices or adverse developments in the real estate market may
disproportionately increase our credit costs.
When we believe there is an improvement in asset quality, we may reverse the allowance for credit losses to
a level management deems appropriate and record the amount of reversal in our consolidated statements of
income. For example, for the fiscal year ended March 31, 2018, we recorded ¥297.4 billion, ¥22.3 billion and
¥9.3 billion of reversal of credit losses for the Commercial, Residential and MUFG Americas Holdings segments,
respectively, of our loan portfolio. However, we have historically recorded provision for credit losses rather than
recording reversal of credit losses in most periods, and in future periods we may need to recognize a provision
for credit losses.
For more information on our loan portfolio, see “Item 5.B. Operating and Financial Review and Prospects—
Liquidity and Capital Resources—Financial Condition—Loan Portfolio.”
Fluctuations in interest rates could adversely affect the value or the yield of our bond portfolio.
The aggregate carrying amount of the Japanese government and corporate bonds and foreign bonds,
including U.S. Treasury bonds, that we held as of March 31, 2018 was 9.6% of our total assets. In particular, the
Japanese national government and Japanese government agency bonds accounted for 8.5% of our total assets as
of March 31, 2018. For a detailed discussion of our bond portfolio, see “Selected Statistical Data—Investment
Portfolio.”
The Bank of Japan has maintained a “quantitative and qualitative monetary easing with negative interest
rates” policy and applied a negative interest rate of minus 0.1% to the “Policy-Rate Balances,” which are a part
of current account amounts held by financial institutions at the Bank of Japan, while purchasing Japanese
government bonds to increases its aggregate holding of such bonds by approximately ¥80 trillion each year. In
September 2016, the Bank of Japan introduced a “quantitative and qualitative monetary easing with yield curve
control” policy, adding to its monetary policy a Japanese government bond purchase program with an aim to
keep the yield of 10-year Japanese government bonds around zero percent. If the policy is maintained in Japan
for an extended period, or if the Bank of Japan’s negative interest rate or target long-term interest rate is lowered
from the current level, market interest rates may decline further, and the yield on the Japanese government bonds
and other financial instruments that we hold may also decline. On the other hand, the value of our investment
portfolio may decrease if interest rates increase rapidly or significantly because of heightened market
expectations for tapering or cessation of the current policy in Japan. Separate from the Bank of Japan’s monetary
policies, interest rates could also significantly increase in the event that Japanese government bonds decline in
value due to such factors as a decline in confidence in the Japanese government’s fiscal administration or further
issuances of Japanese government bonds in connection with emergency economic measures or in the event that
interest rates on U.S. Treasury securities rise due to such factors as increases in the U.S. policy interest rate,
additional issuances of U.S. government bonds, or acceleration of reduction in the balance sheet of the Federal
Reserve Board, or FRB. Although we are managing our interest rate risk in light of the expected increases in
policy rates in the United States, our investment portfolio could be affected by the shifts in U.S. monetary policy
by the FRB. If relevant interest rates increase for these or other reasons, particularly if such increase is
unexpected or sudden, we may incur significant losses on sales of, and valuation losses on, our bond portfolio.
See “Item 5. Operating and Financial Review and Prospects—Business Environment.”
11
Fluctuations in foreign currency exchange rates may result in transaction losses on translation of
monetary assets and liabilities denominated in foreign currencies as well as foreign currency translation
losses with respect to our foreign subsidiaries and equity method investees.
Fluctuations in foreign currency exchange rates against the Japanese yen create transaction gains or losses
on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies. To the
extent that our foreign currency-denominated assets and liabilities are not matched in the same currency or
appropriately hedged, we could incur losses due to future foreign exchange rate fluctuations. During the fiscal
year ended March 31, 2018, the average balance of our foreign interest-earning assets was ¥ 94,447.0 billion and
the average balance of our foreign interest-bearing liabilities was ¥ 60,691.1 billion, representing 39.5% of our
average total interest-earning assets and 26.0% of our average total interest-bearing liabilities during the same
period. Due to foreign currency exchange rate fluctuations, we may incur losses attributable to net transaction
losses on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies,
net losses on currency derivative instruments entered into for trading purposes, and net losses on translation into
Japanese yen of securities accounted for under the fair value option. In addition, we may incur foreign currency
translation losses with respect to our foreign subsidiaries and equity method investees due to fluctuations in
foreign currency exchange rates. The average exchange rate for the fiscal year ended March 31, 2018 was
¥110.85 per U.S.$1.00, compared to ¥108.38 per U.S.$1.00 for the previous fiscal year. The change in the
average exchange rate of the Japanese yen against the U.S. dollar and other foreign currencies had the effect of
increasing total revenue by ¥99.3 billion, net interest income by ¥56.2 billion and income before income tax
expense by ¥29.2 billion, respectively, for the fiscal year ended March 31, 2018. However, since the exchange
rate between the Japanese yen and the U.S. dollar was ¥106.24 as of March 31, 2018, compared to ¥112.19 to the
U.S. dollar as of March 31, 2017, we recorded ¥267.5 billion of net foreign exchange losses related to the fair
value option for the fiscal year ended March 31, 2018. The Japanese yen was ¥110.76 to the U.S. dollar on
June 29, 2018. For more information on foreign exchange gains and losses and foreign currency translation gains
and losses, see “Item 5. Operating and Financial Review and Prospects—Business Environment” and
“Item 5.A. Operating and Financial Review and Prospects—Operating Results.”
If the Japanese stock market or other global markets decline in the future, we may incur losses on our
securities portfolio and our capital ratios will be adversely affected.
A decline in Japanese stock prices could reduce the value of the Japanese domestic marketable equity
securities that we hold, which accounted for 15.0% of our total investment securities portfolio, and 2.2% of our
total assets, as of March 31, 2018. The Nikkei Stock Average, which is the average of 225 blue chip stocks listed
on the Tokyo Stock Exchange, fluctuated throughout the fiscal year ended March 31, 2018, declining to an
intra-day low of ¥18,335.63 on April 14, 2017, rising to an intra-day high of ¥24,124.15 on January 23, 2018,
and declining again to ¥21,454.30 at the end of trading on March 30, 2018. As of June 29, 2018, the closing price
of the Nikkei Stock Average was ¥22,304.51. The Nikkei Stock Average has increased in recent periods, and
may fluctuate significantly and negatively in future periods, as the global economy remains volatile and investors
continue to observe the changes in economic and monetary policies mainly in Japan, the United States, the
Eurozone and Asian countries. In addition, weakening or stagnant economic conditions in these and other regions
may have a significant negative impact on Japanese companies, which in turn will cause their stock prices to
decline. Concerns over the impact of geopolitical tensions and conflicts in various parts of the world on Japanese
companies may also adversely affect stock prices in Japan. In addition, the global trend towards further reduction
in risk assets could result in lower stock prices, and the recent trend in Japan towards strengthening corporate
governance may subject public companies to stricter scrutiny. See “Item 5. Operating and Financial Review and
Prospects—Business Environment” and “Item 5.B. Operating and Financial Review and Prospects—Liquidity
and Capital Resources—Investment Portfolio.”
12
We may become subject to regulatory actions or other legal proceedings relating to our transactions or
other aspects of our operations, which could result in significant financial losses, restrictions on our
operations and damage to our reputation.
We conduct our business subject to ongoing regulation and associated regulatory and legal risks. Global
financial institutions, including us, currently face heightened regulatory scrutiny as a result of the concerns
developing in the global financial sector, and growing public pressure to demand even greater regulatory
surveillance following several high-profile scandals and risk management failures in the financial industry. In the
current regulatory environment, we are subject to various regulatory inquiries or investigations from time to time
in connection with various aspects of our business and operations. In addition, multiple government authorities
with overlapping jurisdiction more frequently conduct investigations and take other regulatory actions in
coordination with one another or separately on the same or related matters.
In November 2014, MUFG Bank entered into a consent agreement with the New York State Department of
Financial Services, or DFS, to resolve issues relating to instructions given to PricewaterhouseCoopers LLP, or
PwC, and the disclosures made to DFS in connection with MUFG Bank’s 2007 and 2008 voluntary investigation
of MUFG Bank’s U.S. dollar clearing activity toward countries under U.S. economic sanctions. MUFG Bank had
hired PwC to conduct a historical transaction review report in connection with that investigation, and voluntarily
submitted the report to DFS’s predecessor entity in 2008. Under the terms of the agreement with DFS, MUFG
Bank made a payment of $315 million to DFS, and agreed to take actions on persons involved in the matter at
that time, relocate its U.S. Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, and Office of Foreign
Assets Control, or OFAC, sanctions compliance programs to New York, and extend, if regarded as necessary by
DFS, the period during which an independent consultant is responsible for assessing MUFG Bank’s internal
controls regarding compliance with applicable laws and regulations related to U.S. economic sanctions. In June
2013, MUFG Bank reached an agreement with DFS regarding inappropriate operational processing of U.S. dollar
clearing transactions with countries subject to OFAC sanctions during the period of 2002 to 2007. Under the
terms of the June 2013 agreement, MUFG Bank made a payment of $250 million to DFS and retained an
independent consultant to conduct a compliance review of the relevant controls and related matters in MUFG
Bank’s current operations. In December 2012, MUFG Bank agreed to make a payment of approximately
$8.6 million to OFAC to settle potential civil liability for apparent violations of certain U.S. sanctions regulations
from 2006 to 2007.
On November 9, 2017, MUFG Bank entered into a Stipulation and Consent to the Issuance of a Consent
Order with the U.S. Office of the Comptroller of the Currency, or OCC, under which MUFG Bank agreed to the
entry by the OCC of a Consent Order that includes remedial terms and conditions that are substantively the same
as those included in the consent agreements that MUFG Bank had reached with DFS in June 2013 and November
2014. This Consent Order, which the OCC executed, enables the OCC to supervise MUFG Bank’s plans to
enhance its internal controls and compliance program relating to OFAC sanctions requirements. The Stipulation
and Consent with the OCC followed MUFG’s conversion of the U.S. Branches and Agencies of MUFG Bank and
Mitsubishi UFJ Trust and Banking, including MUFG Bank’s New York Branch, from state-licensed branches
and agencies under the supervision of state regulatory agencies, including DFS, to federally licensed branches
and agencies under the supervision of the OCC. MUFG Bank is undertaking necessary actions relating to these
matters. In addition, MUFG Bank is currently engaged in litigation with DFS with regard to the conversion of its
New York Branch license as well as purported violations of law alleged to have occurred prior to the federal
license conversion.
We have received requests and subpoenas for information from government agencies in some jurisdictions
that are conducting investigations into past submissions made by panel members, including us, to the bodies that
set various interbank benchmark rates as well as investigations into foreign exchange related practices of global
financial institutions. We are cooperating with these investigations and have been conducting an internal
investigation among other things. In connection with these matters, we and other financial institutions are
involved as defendants in a number of civil lawsuits, including putative class actions, in the United States.
13
These developments or other similar matters may result in additional regulatory actions against us or
agreements to make significant additional settlement payments. These developments or other matters to which
we are subject from time to time may also expose us to substantial monetary damages, legal defense costs,
criminal and civil liability, and restrictions on our business operations as well as damage to our reputation. The
outcome of such matters, including the extent of the potential impact of any unfavorable outcome on our
financial results, however, is inherently uncertain and difficult to predict. The extent of financial, human and
other resources required to conduct any investigations or to implement any corrective or preventive measures is
similarly uncertain and could be significant. Such resources may also be difficult for us to secure in a timely
manner.
Legal and regulatory changes could have a negative impact on our business, financial condition and
results of operations.
As a global financial services provider, our business is subject to ongoing changes in laws, regulations,
policies, voluntary codes of practice and interpretations in Japan and other markets where we operate. Major
global financial institutions currently face an increasingly stricter set of laws, regulations and standards as a
result of the concerns enveloping the global financial sector. There is also growing political pressure to demand
even greater internal compliance and risk management systems following several high-profile scandals and risk
management failures in the financial industry. We may not be able to enhance our compliance risk management
systems and programs, which, in some cases, are supported by third-party service providers, in a timely manner
or as planned. Our risk management systems and programs may not be fully effective in preventing all violations
of laws, regulations and rules applicable locally or on a global basis to our subsidiaries, offices and branches.
Our failure or inability to comply fully with applicable laws and regulations could lead to fines, public
reprimands, damage to reputation, civil liability, enforced suspension of operations or, in extreme cases,
withdrawal of authorization to operate, adversely affecting our business and results of operations. Legal or
regulatory compliance failure may also adversely affect our ability to obtain regulatory approvals for future
strategic initiatives. Furthermore, failure to take necessary corrective action, or the discovery of violations of
laws in the process of further review of any of the matters mentioned above or in the process of implementing
any corrective measures, could result in further regulatory action.
We could also be required to incur significant expenses to comply with new or revised regulations. For
example, if we adopt a new information system infrastructure in the future, we may be required to incur
significant additional costs for establishing and implementing effective internal controls, which may materially
and adversely affect our financial condition and results of operations.
Future developments or changes in laws, regulations, policies, voluntary codes of practice and their effects
are expected to require greater capital, human and technological resources as well as significant management
attention, and may require us to modify our business strategies and plans. For example, since March 31, 2013,
Japanese banking institutions with international operations have become subject to stricter capital adequacy
requirements adopted by the FSA based in part on the international regulatory framework generally known as
“Basel III.” Furthermore, on March 31, 2016, the capital conservation buffer, countercyclical buffer and
surcharge for global systematically important banks, or G-SIBs, became applicable to Japanese banking
institutions with international operations, including us, and these additional capital adequacy requirements are
expected to become stricter in phases over the next few years. For more information, see “—Risks Related to Our
Business—We may not be able to maintain our capital ratios above minimum required levels, which could result
in the suspension of some or all of our operations.” and “Item 4.B. Information on the Company—Business
Overview—Supervision and Regulation—Japan.”
Furthermore, regulatory reforms recently implemented, proposed and currently being debated in the
United States may also significantly affect our business operations. For example, in July 2016, we established
MUFG Americas Holdings as a U.S. intermediate holding company, or IHC, and reorganized our U.S. bank and
14
non-bank subsidiaries under MUFG Americas Holdings pursuant to rules adopted by the Federal Reserve Board,
or FRB, in February 2014. Under the FRB rules, MUFG Americas Holdings is also subject to U.S. capital
requirements, capital stress testing, liquidity buffer requirements, and other enhanced prudential standards
comparable to those applicable to top-tier U.S. bank holding companies of the same size. We are continuing to
devote resources and management attention on establishing an appropriate governance structure with effective
internal control systems for MUFG Americas Holdings designed to ensure compliance with the rules on an
on-going basis. See “Item 4.B. Information on the Company—Business Overview—Supervision and
Regulation—United States.”
The Trump Administration has appointed new leadership in key positions at federal bank regulatory
agencies such as the FRB, the OCC, the Federal Deposit Insurance Corporation and the Consumer Financial
Protection Bureau. It is uncertain whether and to what extent these leadership changes will result in new
regulatory initiatives and policies, or modifications of existing regulations and policies, which may impact our
business in the United States.
Any adverse changes in the business of MUFG Americas Holdings Corporation, a wholly owned subsidiary
in the United States, could significantly affect our results of operations.
MUFG Americas Holdings, which is a wholly owned subsidiary in the United States formerly called
UnionBanCal Corporation, or UNBC, and which is our IHC in the United States, has historically contributed to a
significant portion of net income attributable to the Mitsubishi UFJ Financial Group. MUFG Americas Holdings
reported net income of $644 million, $990 million and $1,077 million for the fiscal years ended December 31,
2015, 2016 and 2017 respectively. Any adverse developments which could arise at MUFG Americas Holdings
may have a significant negative impact on our results of operations and financial condition. For more
information, see “Item 4.B. Information on the Company—Business Overview—Global Commercial Banking
Business Group—MUFG Union Bank, N.A.”
Factors that have negatively affected, and could continue to negatively affect, MUFG Americas Holdings’
results of operations include difficult economic conditions, such as a downturn in the real estate and housing
industries in California and other states within the United States, the fiscal challenges being experienced by the
U.S. federal and California state governments, substantial competition in the banking markets in the United
States and uncertainty over the U.S. economy, as well as negative trends in debt ratings and interest rate
uncertainties. In recent periods, declining oil and gas prices have adversely affected the credit conditions of
borrowers in the energy sector and related industries, resulting in an increase in credit costs. In addition, since the
financial crisis in 2008 and 2009, the U.S. banking industry has operated in an extremely low interest rate
environment as a result of the highly accommodative monetary policy of the FRB, which has placed downward
pressure on the net interest margins of U.S. banks, including MUFG Americas Holdings. Although the FRB
began raising its policy interest rate in December 2015, interest rates have remained at low levels in the United
States. Sudden fluctuations in interest rates may negatively affect MUFG Americas Holdings’ results of
operations.
Significant costs may arise from enterprise-wide compliance and risk management requirements under, or
failure to comply with, applicable laws and regulations, such as the U.S. Bank Secrecy Act and related
amendments under the USA PATRIOT Act, and any adverse impact of the implementation of the Dodd-Frank
Act. In addition, the FRB and other U.S. bank regulators have adopted rules to implement the Basel III global
regulatory framework for U.S. banks and bank holding companies which require higher quality of capital, as well
as significantly revise the calculations for risk-weighted assets. The FRB has also adopted rules to implement
various enhanced prudential standards required by the Dodd-Frank Act for larger U.S. bank holding companies,
such as MUFG Americas Holdings. These standards require the larger bank holding companies to meet enhanced
capital, liquidity and leverage standards. Further, the FRB has adopted regulations applicable to foreign banking
organizations operating in the United States, which require MUFG’s and MUFG Bank’s U.S. operations to be
restructured and, subject to certain exceptions, conducted under a single U.S. IHC, with its own capital and
15
liquidity requirements. Actions management may take in response to these regulatory changes may involve the
issuance of additional capital or other measures. For more information, see “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—United States.”
MUFG Union Bank, which is the principal subsidiary of MUFG Americas Holdings, and reportedly other
financial institutions have been the targets of various denial-of-service or other cyber-attacks as part of what
appears to be a coordinated effort to disrupt the operations of financial institutions and potentially test their
cybersecurity in advance of future and more advanced cyber-attacks. These denial-of-service attacks may require
substantial resources to defend against and affect customer satisfaction and behavior. Moreover, MUFG Union
Bank’s information security measures may not be sufficient to defend against cyber-attacks and other
information security breaches, in which case the consequences could be significant in terms of financial,
reputational and other losses. In addition, there have been increasing efforts to breach data security at financial
institutions as well as other types of companies, such as large retailers, or with respect to financial transactions,
including through the use of social engineering schemes such as “phishing.” Even if cyber-attacks and similar
tactics are not directed specifically at MUFG Union Bank, such attacks on other large institutions could disrupt
the overall functioning of the U.S. or global financial system and undermine consumer confidence in banks
generally to the detriment of other financial institutions, including MUFG Union Bank.
Any adverse changes in the business of Bank of Ayudhya, an indirect subsidiary in Thailand, could
significantly affect our results of operations.
Any adverse changes in the business or management of Bank of Ayudhya Public Company Limited, or
Krungsri, a strategic subsidiary in Thailand in which we hold a 76.88% ownership interest as of March 31, 2018,
may negatively affect our financial condition and results of operations. Factors that may negatively affect
Krungsri’s financial condition and results of operations include:
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adverse economic conditions, substantial competition in the banking industry, volatile political and
social conditions, natural disasters including floods, terrorism and armed conflicts, restrictions under
applicable financial systems and regulations, or significant fluctuations in interest rates, foreign
currency exchange rates, stock prices or commodity prices, in Southeast Asia, particularly in Thailand;
the business performance of companies making investments in and entering into markets in the
Southeast Asian region, as well as the condition of economies, financial systems, laws and financial
markets in the countries where such companies primarily operate;
losses from legal proceedings involving Krungsri;
credit rating downgrades and declines in stock prices of Krungsri’s borrowers, and bankruptcies of
Krungsri’s borrowers resulting from such factors;
defaults on Krungsri’s loans to individuals;
adverse changes in the cooperative relationship between us and the other major shareholder of Krungsri;
and
costs incurred due to weaknesses in the internal controls and regulatory compliance systems of Krungsri
or any of its subsidiaries.
As of March 31, 2018, the balance of goodwill associated with the acquisition of Krungsri, including
Krungsri’s acquisition of Hattha Kaksekar Limited, a microfinance institution in Cambodia, in September 2016,
was ¥59.8billion. If the business of Krungsri deteriorates, we may be required to record impairment losses, which
could have a material adverse effect on our results of operations and financial condition. See “—Risks Related to
Our Business—If the goodwill recorded in connection with our acquisitions becomes impaired, we may be
required to record impairment losses, which may adversely affect our financial results.”
16
Our strategy to expand the range of our financial products and services and the geographic scope of our
business globally may fail if we are unable to anticipate or manage new or expanded risks that entail such
expansion.
We continue to seek opportunities to expand the range of our products and services beyond our traditional
banking, trust, and securities businesses, through development and introduction of new products and services or
through acquisitions of or investments in financial institutions with products and services that complement our
business. For example, we are currently seeking to expand our corporate lending business outside of Japan. In
addition, the sophistication of financial products and services and management systems has been growing
significantly in recent years. As a result, we are exposed to new and increasingly complex risks, while market
and regulatory expectations that we manage these risks properly continue to rise. Some of the activities that our
subsidiaries are expected to engage in, such as derivatives and foreign currency trading, present substantial risks.
In some cases, we have only limited experience with the risks related to the expanded range of these products and
services. In addition, we may not be able to successfully develop or operate the necessary information technology
systems. As a result, we may not be able to foresee the risks relating to new products and services.
As we expand the geographic scope of our business, we will also be exposed to risks that are unique to
particular jurisdictions or markets. For example, in an effort to further develop our operations in Asia, MUFG
Bank purchased 72.01% of the outstanding shares of Krungsri in December 2013 and acquired additional shares
in January 2015, increasing MUFG Bank’s ownership interest to 76.88%.MUFG Bank has also held an
approximately 20% equity interest in Vietnam Joint Stock Commercial Bank of Industry and Trade since
December 2012 and a 20.0% equity interest in Security Bank Corporation in the Philippines since April 2016. In
addition, MUFG Bank acquired 19.9% of the outstanding shares of PT Bank Danamon Indonesia, Tbk as part of
our plan to acquire an aggregate equity interest in Bank Danamon exceeding 73.8%, subject to regulatory
approval and other conditions. As we seek to enter new markets or jurisdictions, we often seek to collaborate
with a local business partner by becoming a shareholder as well as providing management expertise for the local
market. In such circumstances, the local business partner may have business interests that are inconsistent with
our interests and, as a result, we may be unable to achieve the goals initially set out in our strategy for that
market. In addition, we may be unable to staff our newly expanded operations with qualified individuals familiar
with local legal and regulatory requirements and business practices, exposing us to legal, regulatory, operational
and other risks.
Our risk management systems may prove to be inadequate and may not work in all cases or to the degree
required locally and globally for all of our subsidiaries, offices and branches. The increasing market, credit,
compliance and regulatory risks in relation to the expanding scope of our products, services and trading activities
or expanding our business beyond our traditional markets, could result in us incurring substantial losses. In
addition, our efforts to offer new products and services or penetrate new markets may not succeed if product or
market opportunities develop more slowly than expected, if our new products and services are not well accepted
among customers, if the profitability of opportunities is undermined by competitive pressures or regulatory
limitations, or if our planned acquisitions, investments or capital alliances are not approved by regulators. For
more information on our recent acquisition and investment transactions, see “Item 5. Operating and Financial
Review and Prospects—Recent Developments.”
Unanticipated economic changes in, and measures taken in response to such changes by, emerging
market countries could result in additional losses.
We are increasingly active, through a network of branches and subsidiaries, in emerging market countries,
particularly countries in Asia, Latin America, Central and Eastern Europe, and the Middle East. For example,
based primarily on the domicile of the obligors, our assets in Europe, Asia and Oceania excluding Japan, and
other areas excluding Japan and the United States, were ¥22,342.6 billion, ¥27,163.1 billion and
¥10,111.4 billion, representing 7.4%, 9.0% and 3.4% of our total assets as of March 31, 2018, respectively. The
economies of emerging market countries can be volatile and susceptible to adverse changes and trends in the
global financial markets. For example, a decline in the value of local currencies of these countries could
17
negatively affect the creditworthiness of some of our borrowers in these countries. The loans we have made to
borrowers and banks in these countries are often denominated in U.S. dollars, euro or other foreign currencies.
These borrowers often do not hedge the loans to protect against fluctuations in the values of local currencies. A
devaluation of the local currency would make it more difficult for a borrower earning income in that currency to
pay its debts to us and other foreign lenders. In addition, some countries in which we operate may attempt to
support the value of their currencies by raising domestic interest rates. If this happens, the borrowers in these
countries would have to devote more of their resources to repaying their domestic obligations, which may
adversely affect their ability to repay their debts to us and other foreign lenders. The limited credit availability
resulting from these conditions may adversely affect economic conditions in some countries. This could cause a
further deterioration of the credit quality of borrowers and banks in those countries and cause us to incur further
losses. In addition, should there be excessively rapid economic growth and increasing inflationary pressure in
some of the emerging market countries, such developments could adversely affect the wider regional and global
economies. Some emerging market countries may also change their monetary or other economic policies in
response to economic and political instabilities or pressures, which are difficult to predict. See
“Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial
Condition.”
If our strategic alliance with Morgan Stanley fails, we could suffer financial or reputational loss.
We have a global strategic alliance with Morgan Stanley, under which we operate two joint venture
securities companies in Japan, engage in joint corporate finance operations in the United States and pursue other
cooperative opportunities. We hold approximately 24.4% of the voting rights in Morgan Stanley as of March 31,
2018 and continue to hold approximately $521.4 million of perpetual non-cumulative non-convertible preferred
stock with a 10% dividend. In addition, we currently have two representatives on Morgan Stanley’s board of
directors.
We initially entered into this strategic alliance in October 2008 with a view towards long-term cooperation
with Morgan Stanley, and currently plan to deepen the strategic alliance. However, due to any unexpected
changes in social, economic or financial conditions, changes in the regulatory environment, or any failure to
integrate or share staff, products or services, or to operate, manage or implement the business strategy of the
securities joint venture companies or other cooperative opportunities as planned, we may be unable to achieve
the expected synergies from this alliance.
If our strategic alliance with Morgan Stanley is terminated, it could have a material negative impact on our
business strategy, financial condition, and results of operations. For example, because we conduct our securities
operations in Japan through the joint venture companies we have with Morgan Stanley, such termination may
result in our inability to attain the planned growth in this line of business.
In addition, with our current investment in Morgan Stanley, we have neither a controlling interest in, nor
control over the business operations of Morgan Stanley. If Morgan Stanley makes any business decisions that are
inconsistent with our interests, we may be unable to achieve the goals initially set out for the strategic alliance.
Furthermore, although we do not control Morgan Stanley, given the magnitude of our investment, if Morgan
Stanley encounters financial or other business difficulties due to adverse changes in the economy, regulatory
environment or other factors, we may suffer a financial loss on our investment or damage to our reputation. For
example, we recorded an impairment loss of ¥579.5 billion on our investment in Morgan Stanley’s common
stock for the fiscal year ended March 31, 2012.
We apply equity method accounting to our investment in Morgan Stanley in our consolidated financial
statements. As a result, Morgan Stanley’s performance affects our results of operations. In addition fluctuations
in Morgan Stanley’s stock price or in our equity ownership interest in Morgan Stanley may cause us to recognize
additional losses on our investment in Morgan Stanley.
18
We may incur further losses as a result of financial difficulties relating to other financial institutions,
both directly and through the effect they may have on the overall banking environment and on their
borrowers.
Declining asset quality, capital adequacy and other financial problems of domestic and foreign financial
institutions, including banks, non-bank lending and credit institutions, securities companies and insurance
companies, may lead to severe liquidity and solvency problems, which have in the past resulted in the
liquidation, government control or restructuring of affected institutions. In addition, allegations or governmental
prosecution of improper trading activities or inappropriate business conduct of a specific financial institution
could also negatively affect the public perception of other global financial institutions individually and the global
financial industry as a whole. These developments may adversely affect our financial results.
Financial difficulties relating to financial institutions could adversely affect us because we have extended
loans, some of which may need to be classified as impaired loans, to banks, securities companies, insurance
companies and other financial institutions that are not our consolidated subsidiaries. Our loans to banks and other
financial institutions have been more than 5% of our total loans as of each year-end in the three fiscal years
ended March 31, 2018, with the percentage being 15.1% as of March 31, 2018. We may also be adversely
affected because we are a shareholder of some other banks and financial institutions that are not our consolidated
subsidiaries, including our shareholdings in Japanese regional banks and our 24.4% voting interest in Morgan
Stanley as of March 31, 2018. If some of the financial institutions to which we have exposure experience
financial difficulties, we may need to provide financial support to them even when such support might not be
warranted from the perspective of our narrow economic interests because such institutions may be systemically
important to the Japanese or global financial system.
We may also be adversely affected because we enter into transactions, such as derivative transactions, in the
ordinary course of business, with other banks and financial institutions as counterparties. For example, we enter
into credit derivatives with banks, broker-dealers, insurance companies and other financial institutions for
managing credit risk exposures, for facilitating client transactions, and for proprietary trading purposes. The
notional amount of the protection we sold through these instruments was ¥3.00 trillion as of March 31, 2018.
In addition, financial difficulties relating to financial institutions could indirectly have an adverse effect on
us because:
‰ we may be requested to participate in providing assistance to support distressed financial institutions
that are not our consolidated subsidiaries;
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the government may elect to provide regulatory, tax, funding or other benefits to those financial
institutions to strengthen their capital, facilitate their sale or otherwise, which in turn may increase their
competitiveness against us;
deposit insurance premiums could rise if deposit insurance funds prove to be inadequate;
bankruptcies or government support or control of financial institutions could generally undermine
confidence in financial institutions or adversely affect the overall banking environment;
failures or financial difficulties experienced by other financial institutions could result in additional
regulations or requirements that increase the cost of business for us; and
negative media coverage of the financial industry, regardless of its accuracy and applicability to us,
could affect customer or investor sentiment, harm our reputation and have a materially adverse effect on
our business or the price of our securities.
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Because of our loans to consumers and our shareholdings in companies engaged in consumer lending,
changes in the business or regulatory environment for consumer finance companies in Japan may further
adversely affect our financial results.
We have a large loan portfolio in the consumer lending industry as well as large shareholdings in
subsidiaries and equity method investees in the consumer finance industry. Our domestic loans to consumers
amount to approximately one-seventh of our total outstanding loans. Of this amount, the consumer loans
provided by Mitsubishi UFJ NICOS, Co., Ltd., which is our primary consumer financing subsidiary, were
¥ 589.8 billion as of March 31, 2018, compared to ¥593.2 billion as of March 31, 2017.
Mitsubishi UFJ NICOS’s consumer loan portfolio has been adversely affected by a series of regulatory
reforms that were introduced in Japan between 2006 and 2010, which have negatively affected the domestic
consumer lending industry. In December 2006, the Japanese Diet passed legislation to reform the regulations
relating to the consumer lending business, including amendments to the Act Regulating the Receipt of
Contributions, the Receipt of Deposits, and Interest Rates, which, effective June 18, 2010, reduced the maximum
permissible interest rate from 29.2% per annum to 20% per annum. The regulatory reforms also included
amendments to the Money Lending Business Act, which, effective June 18, 2010, abolished the so-called “gray-
zone interest.” Gray-zone interest refers to interest rates exceeding the limits stipulated by the Interest Rate
Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal). Prior to
June 18, 2010, gray-zone interest was permitted under certain conditions set forth in the Money Lending
Business Act. As a result of the regulatory reforms, all interest rates are now subject to the lower limits imposed
by the Interest Rate Restriction Act, compelling lending institutions, including our consumer finance subsidiaries
and equity method investees, to lower the interest rates they charge borrowers. The regulations that became
effective on June 18, 2010 also have had a further negative impact on the business of consumer finance
companies as one of the new regulations requires, among other things, consumer finance companies to limit their
lending to a single customer to a maximum of one third of the customer’s annual income regardless of the
customer’s repayment capability, significantly affecting consumer financing companies.
The regulations and regulatory reforms affecting the consumer finance business were one of the main
factors that contributed to the decrease in interest income attributable to our consumer finance business. Our
interest income attributable to the consumer finance business was approximately ¥190 billion and ¥160 billion
for the fiscal years ended March 31, 2009 and 2010, respectively. However, following the regulatory changes in
June 2010, our interest income attributable to the consumer finance business substantially decreased. For the
fiscal year ended March 31, 2018, our interest income attributable to the consumer finance business was
approximately ¥90 billion.
In addition, as a result of decisions by the Supreme Court of Japan prior to June 18, 2010 imposing stringent
requirements under the Money Lending Business Act for charging gray-zone interest rates, consumer finance
companies have experienced a significant increase in borrowers’ claims for reimbursement of previously
collected interest payments in excess of the limits stipulated by the Interest Rate Restriction Act.
Following the various legal developments in June 2010 and other industry developments, Mitsubishi UFJ
NICOS revised its estimate of allowance for repayment of excess interest by updating management’s future
forecast to reflect new reimbursement claims information and other data. As of March 31, 2016, 2017 and 2018,
we had ¥47.2 billion, ¥39.4 billion and ¥23.7 billion of allowance for repayment of excess interest, respectively.
In recent periods, one of our equity method investees engaged in consumer lending, ACOM CO., LTD., had a
negative impact on net equity in losses of equity method investees in our consolidated statements of income.
Although there was no such impact for the fiscal year ended March 31, 2018, ACOM had a negative impact of
¥22.4 billion and ¥56.9 billion for the fiscal years ended March 31, 2016 and 2017. We intend to carefully
monitor future developments and trends.
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These developments have adversely affected, and these and any future developments may further adversely
affect, the operations and financial condition of our subsidiaries, equity method investees and borrowers which
are engaged in consumer lending, which in turn may affect the value of our related shareholdings and loan
portfolio.
Our business may be adversely affected by competitive pressures, which have partly increased due to
regulatory changes and recent market changes in the financial industry domestically and globally.
In recent years, the Japanese financial system has been undergoing significant changes and regulatory
barriers to competition have been reduced. Development of new technologies such as artificial intelligence, or
AI, and blockchain has also allowed non-financial institutions to enter the financial services industry with
alternative services, and such new entrants could become substantial competition to us. In addition, mergers and
restructuring in the financial sector in Japan may adversely affect our competitive position. Partly to deal with
these developments, as part of our strategy to realign the functions of our subsidiaries, we transferred Mitsubishi
UFJ Trust and Banking’s corporate and other loan-related business to MUFG Bank in April 2018. Our
competitive position in the corporate loan-related market may weaken if Mitsubishi UFJ Trust and Banking’s
corporate customers move their accounts to a competitor or otherwise reduce their loan balances with Mitsubishi
UFJ Trust and Banking or MUFG Bank to keep their funding sources diversified as a result of the transaction
between Mitsubishi UFJ Trust and Banking and MUFG Bank in April 2018. Our competitive position in the
corporate loan-related market may also weaken if we are unable to realize the expected benefits of the
transaction.
In the overseas markets, development of new technologies such as AI and blockchain has also allowed
non-financial institutions to enter the financial services industry, and such new entrants could become substantial
competition to us. Competition may further increase as U.S. and European financial institutions have recently
been regaining and enhancing their competitive strength. We also face intensifying competition in areas of our
strategic expansion. For example, the Japanese mega banks, including us, and other major international banks
have been expanding their operations in the Asian market, where leading local banks have recently been growing
and increasing their presence. In addition, there has been significant consolidation and convergence among
financial institutions domestically and globally, and this trend may continue in the future and further increase
competition in the market. A number of large commercial banks and other broad-based financial services firms
have merged or formed strategic alliances with, or have acquired, other financial institutions both in Japan and
overseas. As a result of the strategic alliance and the joint venture companies that we formed with Morgan
Stanley, we may be perceived as a competitor by some of the financial institutions with which we had a more
cooperative relationship in the past. If we are unable to compete effectively in this more competitive and
deregulated business environment, our business, results of operations and financial condition will be adversely
affected. For a more detailed discussion of our competition in Japan, see “Item 4.B. Information on the
Company—Business Overview—Competition.”
Future changes in accounting standards or methods could have a negative impact on our business and
results of operations.
Future developments or changes in accounting standards are unpredictable and beyond our control. For
example, in response to the recent instabilities in global financial markets, several international organizations
which set accounting standards have released proposals to revise standards on accounting for financial
instruments. Accounting standards applicable to financial instruments remain subject to debate and revision by
international organizations which set accounting standards. If the current accounting standards change in the
future, the reported values of some of our financial instruments may need to be modified, and such modification
could have a significant impact on our financial results or financial condition. In addition, the bodies that
interpret the accounting standards may change their interpretations, or we may elect to modify our accounting
methods to improve our financial reporting, and such change or modification may also have a significant impact
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on our financial results or financial condition. For more information, see “Item 5. Operating and Financial
Review and Prospects—Critical Accounting Estimates.”
We could also be required to incur significant expenses to comply with new accounting standards and
regulations. For example, if we adopt a new accounting system in the future, we may be required to incur
significant additional costs for establishing and implementing effective internal controls, which may materially
and adversely affect our financial condition and results of operations.
Transactions with counterparties in countries designated by the U.S. Department of State as state
sponsors of terrorism may lead some potential customers and investors in the United States and other
countries to avoid doing business with us or investing in our shares.
We, through our subsidiaries, engage in business activities with entities in or affiliated with Iran, including
transactions with counterparties owned or controlled by the Iranian government, and our commercial banking
subsidiary has a representative office in Iran. The U.S. Department of State has designated Iran and other
countries as “state sponsors of terrorism,” and U.S. law generally prohibits U.S. persons from doing business
with such countries. We currently have business activities conducted with entities in or affiliated with such
countries in accordance with our policies and procedures designed to ensure compliance with regulations
applicable in the jurisdictions in which we operate.
We have loan transactions with counterparties in or affiliated with Iran, the outstanding balance of which
was less than ¥50 million representing less than 0.0001% of our total assets, as of March 31, 2018. We do not
have any loans outstanding to the financial institutions specifically listed by the U.S. government. In addition to
such loan transactions, our other transactions with counterparties in or affiliated with countries designated as
state sponsors of terrorism consist of receiving deposits or holding assets on behalf of individuals residing in
Japan who are citizens of countries designated as state sponsors of terrorism, processing payments to or from
entities in or affiliated with these countries on behalf of our customers, and issuing letters of credit and
guarantees in connection with transactions with entities in or affiliated with such countries by our customers.
These transactions do not have a material impact on our business or financial condition. For a further discussion
of transactions required to be disclosed under the U.S. Iran Threat Reduction and Syria Human Rights Act of
2012, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—
United States—Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934.”
We are aware of initiatives by U.S. governmental entities and non-government entities, including
institutional investors such as pension funds, to adopt or consider adopting laws, regulations or policies
prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran and
other countries identified as state sponsors of terrorism. It is possible that such initiatives may result in our being
unable to gain or retain entities subject to such prohibitions as customers, counter-parties or investors in our
shares. In addition, depending on socio-political developments, our reputation may suffer due to our transactions
with counterparties in or affiliated with these countries. The above circumstances could have an adverse effect on
our business and financial condition.
Global financial institutions, including us, have become subject to an increasingly complex set of sanctions
laws and regulations in recent years, and this regulatory environment is expected to continue. Moreover, the
measures proposed or adopted vary across the major jurisdictions, increasing the cost and resources necessary to
design and implement an appropriate global compliance program. The U.S. federal government and some state
governments in the United States have enacted legislation designed to limit economic and financial transactions
with Iran by limiting the ability of financial institutions that may have engaged in any one of a broad range of
activities related to Iran to conduct various transactions in the relevant jurisdictions. In addition, in May 2018, the
United States withdrew from participation in the Joint Comprehensive Plan of Action. As a result of this
withdrawal, the United States is again threatening to impose potentially severe secondary sanctions against non-
U.S. persons who engage in or facilitate a broad range of transactions and activities involving Iran. The Japanese
government has also implemented a series of measures under the Foreign Exchange and Foreign Trade Act, such
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as freezing the assets of persons involved in Iran’s sensitive nuclear activities and development of nuclear
weapon delivery systems, and our most recently modified policies and procedures take into account the current
Japanese regulatory requirements. We continue to work to improve our policies and procedures to comply with
such legislative and regulatory requirements. There remains a risk of potential regulatory action against us,
however, if regulators perceive the modified policies and procedures not to be in compliance with applicable
legislation and regulations.
We may not be able to maintain our capital ratios above minimum required levels, which could result in the
suspension of some or all of our operations.
We, as a holding company, and our Japanese banking subsidiaries are required to maintain risk-weighted
capital ratios above the levels specified in the capital adequacy guidelines adopted by the FSA based in part on
the Basel III framework. As of March 31, 2018, our total risk-adjusted capital ratio was 16.56% compared to the
minimum risk-adjusted capital ratio required of 11.01%, our Tier 1 capital ratio was 14.32% compared to the
minimum Tier 1 capital ratio required of 9.01%, and our Common Equity Tier 1 capital ratio was 12.58%
compared to the minimum Common Equity Tier 1 capital ratio required of 7.51%, each including a capital
conservation buffer of 1.875%, a G-SIB surcharge of 1.125% and a countercyclical buffer of 0.01%. Our capital
ratios are calculated in accordance with Japanese banking regulations based on information derived from our
financial statements prepared in accordance with Japanese GAAP. In addition, we and some of our subsidiaries
are also subject to the capital adequacy rules of various foreign countries, including the United States. We or our
banking subsidiaries may be unable to continue to satisfy the capital adequacy requirements because of:
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increases in our and our banking subsidiaries’ credit risk assets and expected losses because of
fluctuations in our or our banking subsidiaries’ portfolios due to deterioration in the creditworthiness of
borrowers and the issuers of equity and debt securities;
difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to
raise capital under terms and conditions similar to prior financings or issuances;
declines in the value of our or our banking subsidiaries’ securities portfolios;
adverse changes in foreign currency exchange rates;
adverse revisions to the capital ratio requirements;
reductions in the value of our or our banking subsidiaries’ deferred tax assets; and
other adverse developments.
The Basel Committee on Banking Supervision imposes additional loss absorbency requirements to
supplement the Common Equity Tier 1 capital requirement ranging from 1% to 3.5% for G-SIBs, depending on
the bank’s systemic importance. The Financial Stability Board identified us as a G-SIB in its most recent annual
report published in November 2017, and indicated that, as a G-SIB, we would be required to hold an additional
1.5% of Common Equity Tier 1 capital. The group of banks identified as G-SIBs is expected to be updated
annually. The stricter capital requirements are being implemented in phases between January 1, 2016 and
December 31, 2018 and will become fully effective on January 1, 2019. The Japanese capital ratio framework
has been revised in line with the stricter capital requirements for G-SIBs.
Under the capital adequacy guidelines of the FSA, which have been revised in connection with the adoption
of Basel III, there is a transitional measure relating to the inclusion as a capital item of capital raising instruments
issued in or prior to March 2013, and such instruments can be included as a capital item when calculating capital
ratios to the extent permitted by the transitional measure. Such capital raising instruments may require
refinancing upon the expiration of the transition period during which such instruments can be included as a
capital item in the calculation of capital ratios. However, in order for newly issued capital raising instruments,
other than common stock, to be included as a capital item in the calculation of capital ratios under the capital
adequacy guidelines, such instruments must have a clause in their terms and conditions that requires them to be
written off or converted into common stock upon the occurrence of certain events, including when the issuing
financial institution is deemed non-viable or when the issuing financial institution’s capital ratios decline below
23
prescribed levels. As a result, under certain market conditions, we may be unable to refinance or issue capital
raising instruments under terms and conditions similar to those of capital raising instruments issued in or prior to
March 2013. If such circumstances arise, our and our banking subsidiaries’ capital could be reduced, and our and
our bank subsidiaries’ capital ratios could decrease.
In addition, under the FSA’s capital adequacy guidelines, deferred tax assets can be included as a capital
item when calculating capital ratios up to a prescribed amount. If, and to the extent, the amount of deferred tax
assets exceeds this limit and cannot be included in Common Equity Tier 1 capital, our and our banking
subsidiaries’ capital ratios could decrease.
If our capital ratios fall below required levels, the FSA could require us to take a variety of corrective
actions, including abstention from making capital distributions, withdrawal from all international operations or
suspension of all or part of our business operations. In addition, if the capital ratios of our subsidiaries subject to
capital adequacy rules of foreign jurisdictions fall below the required levels, the local regulators could also take
action against them that may result in reputational damage or financial losses to us. Since maintaining our capital
ratios at acceptable levels is crucial to our business, our management devotes a significant amount of attention
and resources to capital ratio related issues and may also significantly alter our business strategy or operations if
our capital ratios decline to unacceptable levels.
In November 2015, the Financial Stability Board issued the final Total Loss-Absorbing Capacity, or TLAC,
standard for G-SIBs, including us. The TLAC standard defines a minimum requirement for the instruments and
liabilities that should be readily available to absorb losses in resolution. Under the standard, each G-SIB is
required to hold TLAC debt in an amount not less than 16% of its risk-weighted assets and 6% of the applicable
Basel III leverage ratio denominator by January 1, 2019, and not less than 18% of its risk-weighted assets and
6.75% of the applicable Basel III leverage ratio denominator by January 1, 2022. The Financial Stability Board’s
standard is subject to regulatory implementation in each jurisdiction, including Japan, and specific requirements
as implemented in Japan may not be the same as the Financial Stability Board’s TLAC standard. Although the
FSA has not yet finalized TLAC requirements for Japanese G-SIBs, we have commenced issuing senior debt
securities that are intended to qualify as TLAC debt. However, there is no assurance that our senior debt
securities will qualify as such, and we may have difficulty meeting the TLAC requirements.
For a discussion of the applicable regulatory guidelines and our capital ratios, see “Item 4.B. Information on
the Company—Business Overview—Supervision and Regulation” and “Item 5.B. Operating and Financial
Review and Prospects—Liquidity and Capital Resources—Capital Adequacy.”
If the goodwill recorded in connection with our acquisitions becomes impaired, we may be required to
record impairment losses, which may adversely affect our financial results.
In accordance with U.S. GAAP, we account for our business combinations using the acquisition method of
accounting. We recorded the excess of the purchase price over the fair value of the assets and liabilities of the
acquired companies as goodwill. U.S. GAAP requires us to test goodwill for impairment at least annually, or
more frequently if events or changes in circumstances indicate that goodwill may be impaired. As of March 31,
2018, the total balance of goodwill was ¥441.3 billion.
For the fiscal years ended March 31, 2016 and 2017, we recognized ¥4.3 billion and ¥6.6 billion,
respectively, in impairment of goodwill relating to a reporting unit within the Trust Assets Business Group
segment as we readjusted our future cash flow projection of the reporting unit in this segment, considering the
relevant subsidiaries’ recent business performance. For the fiscal year ended March 31, 2016, we also recognized
¥151.7 billion in impairment of goodwill relating to the reporting unit other than MUFG Americas Holdings and
Krungsri within the Global Business Group segment as our stock price decreased from ¥743.7 on March 31, 2015
to ¥521.5 on March 31, 2016. Our stock price was adversely impacted by the Bank of Japan’s announcement of
implementation in January 2016 of the negative interest rate on certain current account amounts that financial
institutions hold at the Bank of Japan, and the appreciation of the Japanese yen against other major currencies. In
24
addition, we recognized ¥177.8 billion in impairment of goodwill relating to the Krungsri reporting unit within
the Global Business Group segment as Krungsri’s stock price declined from THB44.75 on December 31, 2014 to
THB29.75 on December 31, 2015. Krungsri’s stock price was adversely impacted by the slowing economic
growth in Thailand. Accordingly, the fair values of these reporting units were considered to have fallen below
their carrying amounts. As a result, the carrying amounts of the reporting units’ goodwill exceeded the implied
fair values of the reporting units’ goodwill, and the impairment losses were recognized on the related goodwill.
See “Item 5.B. Operating and Financial Review and Prospects—Operating Results—Impairment of goodwill.”
We may be required to record additional impairment losses relating to goodwill in future periods if the fair
value of any of our reporting units declines below the fair value of related assets net of liabilities. Any additional
impairment losses will negatively affect our financial results, and the price of our securities could be adversely
affected. For a detailed discussion of our periodic testing of goodwill for impairment and the goodwill recorded,
see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates—Accounting for
Goodwill and Intangible Assets.”
A downgrade of our credit ratings could adversely affect our ability to access and maintain liquidity.
Any downgrade of the credit ratings assigned to us or our debt securities by Moody’s, Fitch, Standard &
Poor’s or any other credit rating agency could increase the cost, or decrease the availability, of our funding,
particularly in U.S. dollars and other foreign currencies, adversely affect our liquidity position or net interest
margin, trigger additional collateral or funding obligations, and result in losses of depositors, investors and
counterparties willing or permitted to transact with us, thereby reducing our ability to generate income and
weakening our financial position.
Rating agencies regularly evaluate us and our major subsidiaries as well as our and their respective debt
securities. Their ratings are based on a number of factors, including their assessment of the relative financial
strength of MUFG or of the relevant subsidiary, as well as conditions generally affecting the financial services
industry in Japan or on a global basis, some of which are not entirely within our control. As a result of changes in
their evaluation of these factors or in their rating methodologies, rating agencies may downgrade our ratings or
our subsidiaries’ ratings.
In November 2017, Standard and Poor’s downgraded the long-term credit ratings of MUFG and Mitsubishi
UFJ Securities Holdings by one-notch from A to A-, the long-term credit ratings of MUFG Bank and Mitsubishi
UFJ Trust and Banking by one-notch from A+ to A and the short-term credit rating of Mitsubishi UFJ Securities
Holdings by one-notch from A-1 to A-2. In June 2016, Fitch changed the credit rating outlook of MUFG, MUFG
Bank and Mitsubishi UFJ Trust and Banking from stable to negative, following Fitch’s change in the credit rating
outlook for the Government of Japan from stable to negative.
Assuming all of the relevant credit rating agencies downgraded the credit ratings of MUFG, MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings by one-notch on March 31, 2018, we
estimate that MUFG and its three main subsidiaries would have been required to provide additional collateral
under their derivative contracts as of the same date of approximately ¥6.1 billion. Assuming a two-notch
downgrade by all of the relevant credit rating agencies occurred on the same date, we estimate that the additional
collateral requirements for MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ
Securities Holdings under their derivative contracts as of the same date would have been approximately
¥19.9 billion. For additional information on the impact of recent downgrades, see “Item 5.B. Operating and
Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Sources of Funding
and Liquidity.”
Our business operations are exposed to risks of natural disasters, terrorism and other disruptions caused
by external events.
As a major financial institution incorporated in Japan and operating in major international financial markets,
our business operations, automatic teller machines, or ATMs, and other information technology systems,
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personnel, and facilities and other physical assets are subject to the risks of earthquakes, typhoons, floods and
other natural disasters, terrorism, and other political and social conflicts, abduction, health epidemics, and other
disruptions caused by external events, which are beyond our control. As a consequence of such external events,
we may be required to incur significant costs and expenses for remedial measures or compensation to customers
or transaction counterparties for resulting losses. We may suffer loss of facility, human and other resources. We
may also suffer loss of business. In addition, such external events may have various other significant adverse
effects, including deterioration in economic conditions, declines in the business performance of our borrowers
and decreases in stock prices, which may result in higher credit costs or impairment or valuation losses on the
financial instruments we hold. These effects could materially and adversely affect our business, operating results
and financial condition.
As with other Japanese companies, we are exposed to heightened risks of large-scale natural disasters,
particularly earthquakes. In particular, a large-scale earthquake occurring in the Tokyo metropolitan area could
result in market disruptions or significant damage to, or losses of, tangible or human assets relating to our
business and counterparties because many of our important business functions and many of the major Japanese
companies and financial markets are located in the area. In addition, such an earthquake could cause a longer-
term economic slowdown and a downgrade of Japan’s sovereign credit rating due to increases in government
spending for disaster recovery measures.
Our risk management policies and procedures may be insufficient to address the consequences of these
external events, resulting in our inability to continue to operate a part or the whole of our business. In addition,
our redundancy and backup measures may not be sufficient to avoid a material disruption in our operations, and
our contingency and business continuity plans may not address all eventualities that may occur in the event of a
material disruption caused by a large-scale natural disaster such as the March 2011 Great East Japan Earthquake,
which led to tsunamis, soil liquefaction and fires, as well as electricity power supply shortages and electricity
power conservation measures resulting from the suspension of the operations of the nuclear power plants.
Failure to safeguard personal and other confidential information may result in liability, reputational
damage or financial losses.
As our operations expand in volume, complexity and geographic scope, we are exposed to increased risk of
confidential information in our possession being lost, leaked, altered or falsified as a result of human or system
error, misconduct, unlawful behavior or scheme, unauthorized access or natural or human-caused disasters. Our
information systems and information management policies and procedures may not be sufficient to safeguard
confidential information against such risks.
As a financial institution in possession of customer information, we are obligated to treat personal and other
confidential information as required by the Act on the Protection of Personal Information, the Act on the Use of
Personal Identification Numbers in the Administration of Government Affairs, the Banking Law and the
Financial Instruments and Exchange Act of Japan, as well as other similar laws. In the event that personal
information in our possession about our customers or employees is leaked or improperly accessed and
subsequently misused, we may be subject to liability and regulatory action. We may have to provide
compensation for economic loss and emotional distress arising out of a failure to protect such information. In
addition, such incidents could create a negative public perception of our operations, systems or brand, which may
in turn decrease customer and market confidence and materially and adversely affect our business, operating
results and financial condition.
Moreover, any loss, leakage, alteration or falsification of confidential information, or any malfunction or
failure of our information systems, may result in significant disruptions to our business operations or plans or
may require us to incur significant financial, human and other resources to implement corrective measures or
enhance our information systems and information management policies and procedures.
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Our operations are highly dependent on our information, communications and transaction management
systems and are subject to an increasing risk of cyber-attacks and other information security threats and to
changes in the business and regulatory environment.
Our information, communications and transaction management systems, including, our own proprietary
systems as well as those third-party systems which are provided for our use or to which our systems are
connected, constitute a core infrastructure for our operations. Given our global operations with an extensive
network of branches and offices, the proper functioning of our information, communications and transaction
management systems is critical to our ability to efficiently and accurately process a large volume of transactions,
ensure adequate internal controls, appropriately manage various risks, and otherwise service our clients and
customers.
Cyber-attacks, unauthorized access and computer viruses are becoming increasingly more sophisticated and
more difficult to predict, detect and prevent. For instance, bank internal financial transaction systems or
automatic teller machines may become the target of cyber-attacks for monetary gain, and bank internal
information systems may become the target of confidential information theft. In addition, banks’ websites or
customer internet banking systems may become the target of cyber-attacks for political and other purposes. These
cyber threats, as well as our failure to appropriately and timely anticipate and deal with changes associated with
technological advances and new systems and tools introduced in response to industry, regulatory and other
developments, could cause disruptions to, and malfunctions of, such systems and result in unintended releases of
confidential and proprietary information stored in or transmitted through the systems, interruptions in the
operations of our clients, customers and counterparties, and deterioration in our ability to service our clients and
customers. In addition, our banking and other transaction management systems may not meet all applicable
business and regulatory requirements in an environment where such requirements are becoming increasingly
sophisticated and complicated. These consequences could result in financial losses, including costs and expenses
incurred in connection with countermeasures and improvements as well as compensation to affected parties, lead
to regulatory actions, diminish our clients’ and customers’ satisfaction with and confidence in us, and harm our
reputation in the market, which could in turn adversely affect our business, financial condition and results of
operations. Moreover, significant financial, human and other resources may be required to design, implement and
enhance measures to manage cyber and information security risks and comply with regulatory requirements.
Risks Related to Owning Our Shares
It may not be possible for investors to effect service of process within the United States upon us or our
directors or management members, or to enforce against us or those persons judgments obtained in
U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws.
We are a joint stock company incorporated under the laws of Japan. Almost all of our directors or
management members reside outside the United States. Many of our assets and the assets of these persons are
located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to
effect service of process within the United States upon us or these persons or to enforce, against us or these
persons, judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or
state securities laws.
We believe there is doubt as to the enforceability in Japan, in original actions or in actions brought in
Japanese courts to enforce judgments of U.S. courts, of claims predicated solely upon the U.S. federal or state
securities laws mainly because the Civil Execution Act of Japan requires Japanese courts to deny requests for the
enforcement of judgments of foreign courts if foreign judgments fail to satisfy the requirements prescribed by the
Civil Execution Act, including:
‰
‰
the jurisdiction of the foreign court be recognized under laws, regulations, treaties or conventions;
proper service of process be made on relevant defendants, or relevant defendants be given appropriate
protection if such service is not received;
27
‰
‰
the judgment and proceedings of the foreign court not be repugnant to public policy as applied in Japan;
and
there exist reciprocity as to the recognition by a court of the relevant foreign jurisdiction of a final
judgment of a Japanese court.
Judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or
state securities laws may not satisfy these requirements.
Risks Related to Owning Our American Depositary Shares
As a holder of American Depositary Shares, you have fewer rights than a shareholder of record in our
shareholder register since you must act through the depositary to exercise these rights.
The rights of our shareholders under Japanese law to take actions such as voting, receiving dividends and
distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal
rights are available only to shareholders of record. Because the depositary, through its custodian, is the record
holder of the shares underlying the American Depositary Shares, or ADSs, only the depositary can exercise
shareholder rights relating to the deposited shares. ADS holders, in their capacity, will not be able to directly
bring a derivative action, examine our accounting books and records and exercise appraisal rights. We have
appointed The Bank of New York Mellon as depositary, and we have the authority to replace the depositary.
Pursuant to the deposit agreement among us, the depositary and a holder of ADSs, the depositary will make
efforts to exercise voting or any other rights associated with shares underlying ADSs in accordance with the
instructions given by ADS holders, and to pay to ADS holders dividends and distributions collected from us.
However, the depositary can exercise reasonable discretion in carrying out the instructions or making
distributions, and is not liable for failure to do so as long as it has acted in good faith. Therefore, ADS holders
may not be able to exercise voting or any other rights in the manner that they had intended, or may lose some or
all of the value of the dividends or the distributions. Moreover, the depositary agreement that governs the
obligations of the depositary may be amended or terminated by us and the depositary without ADS holders’
consent, notice, or any reason. As a result, ADS holders may be prevented from having the rights in connection
with the deposited shares exercised in the way ADS holders had wished or at all.
ADS holders are dependent on the depositary to receive our communications. We send to the depositary all
of our communications to ADS holders, including annual reports, notices and voting materials, in Japanese.
ADS holders may not receive all of our communications with shareholders of record in our shareholder register
in the same manner or on an equal basis. In addition, ADS holders may not be able to exercise their rights as
ADS holders due to delays in the depositary transmitting our shareholder communications to ADS holders. For a
detailed discussion of the rights of ADS holders and the terms of the deposit agreement, see
“Item 10.B. Additional Information—Memorandum and Articles of Association—American Depositary Shares.”
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Item 4.
Information on the Company.
A. History and Development of the Company
Mitsubishi UFJ Financial Group, Inc.
MUFG is a bank holding company incorporated as a joint stock company (kabushiki kaisha) under the
Companies Act of Japan. We are the holding company for MUFG Bank, Ltd. (formerly, The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), Mitsubishi UFJ Trust and Banking Corporation, Mitsubishi UFJ Securities Holdings Co.,
Ltd., Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., or MUMSS, Mitsubishi UFJ NICOS Co., Ltd., and
other companies engaged in a wide range of financial businesses.
On April 2, 2001, The Bank of Tokyo-Mitsubishi, Ltd., Mitsubishi Trust and Banking Corporation, or
Mitsubishi Trust Bank, and Nippon Trust and Banking Co., Ltd. established Mitsubishi Tokyo Financial Group,
Inc., or MTFG, to be a holding company for the three entities. Before that, each of the banks had been a publicly
traded company. On April 2, 2001, through a stock-for-stock exchange, they became wholly-owned subsidiaries
of MTFG, and the former shareholders of the three banks became shareholders of MTFG. Nippon Trust and
Banking was later merged into Mitsubishi Trust Bank.
On June 29, 2005, the merger agreement between MTFG and UFJ Holdings, Inc. was approved at the
general shareholders meetings of MTFG and UFJ Holdings. As the surviving entity, MTFG was renamed
“Mitsubishi UFJ Financial Group, Inc.” The merger of the two bank holding companies was completed on
October 1, 2005.
On September 30, 2007, Mitsubishi UFJ Securities Holdings, which was then called “Mitsubishi UFJ
Securities Co., Ltd.,” or MUS, became our wholly-owned subsidiary through a share exchange transaction.
On October 13, 2008, we formed a global strategic alliance with Morgan Stanley and, as part of the alliance,
made an equity investment in Morgan Stanley in the form of convertible and non-convertible preferred stock, and
subsequently appointed a representative to Morgan Stanley’s board of directors.
On October 21, 2008, we completed a tender offer for outstanding shares of ACOM CO., LTD. common
stock, raising our ownership in ACOM to approximately 40%.
On November 4, 2008, Bank of Tokyo-Mitsubishi UFJ completed the acquisition of all of the shares of
common stock of UnionBanCal Corporation, or UNBC, not previously owned by Bank of Tokyo-Mitsubishi UFJ
and, as a result, UNBC became a wholly-owned indirect subsidiary of MUFG.
On May 1, 2010, we and Morgan Stanley integrated our securities and investment banking businesses in
Japan into two joint venture securities companies, one of which is MUMSS. MUMSS was created by spinning
off the wholesale and retail securities businesses conducted in Japan from Mitsubishi UFJ Securities Holdings
and subsequently assuming certain operations in Japan from a subsidiary of Morgan Stanley.
On June 30, 2011, we converted all of our Morgan Stanley’s convertible preferred stock into Morgan
Stanley’s common stock, resulting in our holding approximately 22.4% of the voting rights in Morgan Stanley.
Further, we appointed a second representative to Morgan Stanley’s board of directors on July 20, 2011.
Following the conversion on June 30, 2011, Morgan Stanley became our equity-method affiliate. As of
March 31, 2018, we held approximately 24.4% of the voting rights in Morgan Stanley and had two
representatives appointed to Morgan Stanley’s board of directors. We and Morgan Stanley continue to pursue a
variety of business opportunities in Japan and abroad in accordance with the global strategic alliance.
On December 18, 2013, we acquired approximately 72.0% of the total outstanding shares of Krungsri
through Bank of Tokyo-Mitsubishi UFJ. As a result of the transaction, Krungsri has become a consolidated
subsidiary of Bank of Tokyo-Mitsubishi UFJ.
29
On July 1, 2014, we integrated Bank of Tokyo-Mitsubishi UFJ’s operations in the Americas region with
UNBC’s operations, and changed UNBC’s corporate name to “MUFG Americas Holdings Corporation,” or
MUFG Americas Holdings. On the same day, Union Bank, N.A., which is MUFG Americas Holdings’ principal
subsidiary and our primary operating subsidiary in the United States, was also renamed “MUFG Union Bank,
N.A.,” or MUFG Union Bank. MUFG Americas Holdings currently oversees MUFG Bank’s operations in the
Americas region as well as the operations of MUFG Union Bank.
On January 5, 2015, Bank of Tokyo-Mitsubishi UFJ integrated its Bangkok branch with Krungsri through a
contribution in kind of the Bank of Tokyo-Mitsubishi UFJ Bangkok branch business to Krungsri, and Bank of
Tokyo-Mitsubishi UFJ received newly issued shares of Krungsri common stock. As a result of this transaction,
Bank of Tokyo-Mitsubishi UFJ’s ownership interest in Krungsri increased to 76.9%.
On October 1, 2017, we acquired all of the shares of common stock of Mitsubishi UFJ NICOS which we did
not previously own and, as a result, Mitsubishi UFJ NICOS became a wholly-owned subsidiary of MUFG.
On December 29, 2017, Bank of Tokyo-Mitsubishi UFJ acquired 19.9% of the shares of common stock of
PT Bank Danamon Indonesia, Tbk as part of our plan to acquire an aggregate equity interest in Bank Danamon
exceeding 73.8%.
On April 1, 2018, we changed Bank of Tokyo-Mitsubishi UFJ’s corporate name to “MUFG Bank, Ltd.”
On April 16, 2018, we transferred Mitsubishi UFJ Trust and Banking’s corporate loan-related businesses to
MUFG Bank. The corporate loan-related businesses include the corporate loan, project finance and real estate
finance businesses, and any related foreign exchange and remittance services, but do not include pension-related
services, the corporate agency business, or the real estate-related businesses.
Our registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan, and our telephone
number is 81-3-3240-8111.
For a discussion of recent developments, see “Item 5. Operating and Financial Review and Prospects—
Recent Developments.”
MUFG Bank, Ltd.
MUFG Bank is a major commercial banking organization in Japan that provides a broad range of domestic
and international banking services from its offices in Japan and around the world. MUFG Bank’s registered head
office is located at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan, and its telephone number is
81-3-3240-1111. MUFG Bank is a joint stock company (kabushiki kaisha) incorporated in Japan under the
Companies Act. The bank changed its name to MUFG Bank, Ltd. from The Bank of Tokyo-Mitsubishi UFJ, Ltd.
as of April, 1, 2018.
MUFG Bank was formed through the merger, on January 1, 2006, of Bank of Tokyo-Mitsubishi and UFJ
Bank Limited after their respective parent companies, MTFG and UFJ Holdings, merged to form MUFG on
October 1, 2005.
Bank of Tokyo-Mitsubishi was formed through the merger, on April 1, 1996, of The Mitsubishi Bank,
Limited and The Bank of Tokyo, Ltd.
The origins of Mitsubishi Bank can be traced to the Mitsubishi Exchange Office, a money exchange house
established in 1880 by Yataro Iwasaki, the founder of the Mitsubishi industrial, commercial and financial group.
In 1895, the Mitsubishi Exchange Office was succeeded by the Banking Division of the Mitsubishi Goshi
Kaisha, the holding company of the “Mitsubishi group” of companies. Mitsubishi Bank had been a principal
bank to many of the Mitsubishi group companies but broadened its relationships to cover a wide range of
Japanese industries, small and medium-sized companies and individuals.
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Bank of Tokyo was established in 1946 as a successor to The Yokohama Specie Bank, Ltd., a special
foreign exchange bank established in 1880. When the government of Japan promulgated the Foreign Exchange
Bank Law in 1954, Bank of Tokyo became the only bank licensed under that law. Because of its license, Bank of
Tokyo received special consideration from the Ministry of Finance in establishing its offices abroad and in many
other aspects relating to foreign exchange and international finance.
UFJ Bank was formed through the merger, on January 15, 2002, of The Sanwa Bank, Limited and The
Tokai Bank, Limited.
Sanwa Bank was established in 1933 when the three Osaka-based banks, the Konoike Bank, the Yamaguchi
Bank, and the Sanjyushi Bank merged. Sanwa Bank was known as a city bank having the longest history in
Japan, since the foundation of Konoike Bank can be traced back to the Konoike Exchange Office established in
1656. The origin of Yamaguchi Bank was also a money exchange house, established in 1863. Sanjyushi Bank
was founded by influential fiber wholesalers in 1878. The corporate philosophy of Sanwa Bank had been the
creation of premier banking services especially for small and medium-sized companies and individuals.
Tokai Bank was established in 1941 when the three Nagoya-based banks, the Aichi Bank, the Ito Bank, and
the Nagoya Bank merged. In 1896, Aichi Bank took over businesses of the Jyuichi Bank established by
wholesalers in 1877 and the Hyakusanjyushi Bank established in 1878. Ito Bank and Nagoya Bank were
established in 1881 and 1882, respectively. Tokai Bank had expanded the commercial banking business to
contribute to economic growth mainly of the Chubu area in Japan, which is known for its manufacturing
industries, especially automobiles.
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Trust and Banking is a major trust bank in Japan, providing trust and banking services to
meet the financing and investment needs of clients in Japan and the rest of Asia, as well as in the United States
and Europe. Mitsubishi UFJ Trust and Banking’s registered head office is located at 4-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-8212, Japan, and its telephone number is 81-3-3212-1211. Mitsubishi UFJ Trust and
Banking is a joint stock company (kabushiki kaisha) incorporated in Japan under the Companies Act.
Mitsubishi UFJ Trust and Banking was formed on October 1, 2005 through the merger of Mitsubishi Trust
Bank and UFJ Trust Bank Limited. As the surviving entity, Mitsubishi Trust Bank was renamed “Mitsubishi UFJ
Trust and Banking Corporation.”
Mitsubishi Trust Bank traces its history to The Mitsubishi Trust Company, Limited, which was founded by
the leading members of the Mitsubishi group companies in 1927. The Japanese banking and financial industry
was reconstructed after World War II and, in 1948, Mitsubishi Trust Bank was authorized to engage in the
commercial banking business, in addition to its trust business, under the new name Asahi Trust & Banking
Corporation. In 1952, the bank changed its name again to “The Mitsubishi Trust and Banking Corporation.”
Nippon Trust and Banking and The Tokyo Trust Bank, Ltd., which were previously subsidiaries of Bank of
Tokyo-Mitsubishi, was merged into Mitsubishi Trust Bank on October 1, 2001.
UFJ Trust Bank was founded in 1959 as The Toyo Trust & Banking Company, Limited, or Toyo Trust
Bank. The Sanwa Trust & Banking Company, Limited, which was a subsidiary of Sanwa Bank, was merged into
Toyo Trust Bank on October 1, 1999. The Tokai Trust & Banking Company, Limited, which was a subsidiary of
Tokai Bank, was merged into Toyo Trust Bank on July 1, 2001. Toyo Trust Bank was renamed “UFJ Trust Bank
Limited” on January 15, 2002.
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Securities Holdings is a wholly-owned subsidiary of MUFG. Mitsubishi UFJ Securities
Holdings functions as an intermediate holding company of MUFG’s global securities and investment banking
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businesses. Mitsubishi UFJ Securities Holdings’s registered head office is located at 5-2, Marunouchi 2-chome,
Chiyoda-ku, Tokyo 100-0005, Japan, and its telephone number is 81-3-6213-2550. Mitsubishi UFJ Securities
Holdings is a joint stock company (kabushiki kaisha) incorporated in Japan under the Companies Act. Mitsubishi
UFJ Securities Holdings has major overseas subsidiaries in London, New York, Hong Kong, Singapore and
Geneva.
In April 2010, Mitsubishi UFJ Securities Holdings, which was previously called “Mitsubishi UFJ Securities
Co., Ltd.,” or MUS, became an intermediate holding company by spinning off its securities and investment
banking business operations to a wholly-owned operating subsidiary established in December 2009, currently
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. Upon the consummation of the corporate spin-off
transaction, the intermediate holding company was renamed “Mitsubishi UFJ Securities Holdings Co., Ltd.” and
the operating subsidiary was renamed “Mitsubishi UFJ Securities Co., Ltd.” The operating subsidiary was
subsequently renamed Mitsubishi UFJ Morgan Stanley Securities in May 2010 upon integration of our securities
operations in Japan with those of Morgan Stanley.
MUS was formed through the merger between Mitsubishi Securities Co., Ltd. and UFJ Tsubasa
Securities Co., Ltd. on October 1, 2005, with Mitsubishi Securities being the surviving entity. The surviving
entity was renamed “Mitsubishi UFJ Securities Co., Ltd.” and, in September 2007, became our wholly-owned
subsidiary through a share exchange transaction.
Mitsubishi Securities was formed in September 2002 through a merger of Bank of Tokyo-Mitsubishi’s
securities subsidiaries and affiliate, KOKUSAI Securities Co., Ltd., Tokyo-Mitsubishi Securities Co., Ltd. and
Tokyo-Mitsubishi Personal Securities Co., Ltd., and Mitsubishi Trust Bank’s securities affiliate, Issei
Securities Co., Ltd. In July 2005, MTFG made Mitsubishi Securities a directly-held subsidiary by acquiring all of
the shares of Mitsubishi Securities common stock held by Bank of Tokyo-Mitsubishi and Mitsubishi Trust Bank.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley Securities is our core securities and investment banking subsidiary.
Mitsubishi UFJ Morgan Stanley Securities was created in May 2010 as one of the two Japanese joint venture
securities companies between Morgan Stanley and us as part of our global strategic alliance. Mitsubishi UFJ
Morgan Stanley Securities succeeded to the investment banking operations conducted in Japan by a subsidiary of
Morgan Stanley and the wholesale and retail securities businesses conducted in Japan by MUS. MUFG, through
Mitsubishi UFJ Securities Holdings, holds 60% voting and economic interests in Mitsubishi UFJ Morgan Stanley
Securities. Mitsubishi UFJ Morgan Stanley Securities’ registered head office is located at 5-2 Marunouchi
2-chome, Chiyoda-ku, Tokyo, 100-0005 Japan, and its telephone number is 81-3-6213-8500. Mitsubishi UFJ
Morgan Stanley Securities is a joint stock company (kabushiki kaisha) incorporated in Japan under the
Companies Act. For more information on our joint venture securities companies, see “—B. Business Overview—
Global Strategic Alliance with Morgan Stanley.”
Mitsubishi UFJ NICOS Co., Ltd.
Mitsubishi UFJ NICOS is a major credit card company in Japan that issues credit cards, including those
issued under the MUFG, NICOS and DC brands, and provides a broad range of credit card and other related
services for its card members in Japan. Mitsubishi UFJ NICOS is a consolidated subsidiary of MUFG. Mitsubishi
UFJ NICOS’s registered head office is located at 33-5, Hongo 3-chome, Bunkyo-ku, Tokyo 113-8411, Japan, and
its telephone number is 81-3-3811-3111. Mitsubishi UFJ NICOS is a joint stock company (kabushiki kaisha)
incorporated in Japan under the Companies Act.
On August 1, 2008, Mitsubishi UFJ NICOS became a wholly-owned subsidiary of MUFG through a share
exchange transaction. On the same day, we entered into a share transfer agreement with Norinchukin Bank under
which we sold some of our shares of Mitsubishi UFJ NICOS common stock to Norinchukin Bank. In March
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2011, we and Norinchukin Bank made additional equity investments in Mitsubishi UFJ NICOS in proportion to
our and Norinchukin Bank’s respective beneficial ownership of approximately 85% and 15%, respectively. On
October 1, 2017, MUFG acquired all of Norinchukin Bank’s ownership interest in Mitsubishi UFJ NICOS and,
as a result, Mitsubishi UFJ NICOS is currently a wholly-owned subsidiary of MUFG.
Mitsubishi UFJ NICOS was formed through the merger, on April 1, 2007, of UFJ NICOS Co., Ltd. and
DC Card Co., Ltd. As the surviving entity, UFJ NICOS Co., Ltd. was renamed “Mitsubishi UFJ NICOS Co.,
Ltd.”
UFJ NICOS was formed through the merger, on October 1, 2005, of Nippon Shinpan Co., Ltd. and
UFJ Card Co., Ltd. Originally founded in 1951 and listed on the Tokyo Stock Exchange in 1961, Nippon Shinpan
was a leading company in the consumer credit business in Japan. Nippon Shinpan became a subsidiary of MUFG
at the time of the merger with UFJ Card.
Prior to the merger between MTFG and UFJ Holdings in October 2005, DC Card was a subsidiary of MTFG
while UFJ Card was a subsidiary of UFJ Holdings.
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B. Business Overview
We are one of the world’s largest and most diversified financial groups with total assets of ¥300.57 trillion
as of March 31, 2018. The Group is comprised of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi
UFJ Morgan Stanley Securities (through Mitsubishi UFJ Securities Holdings), Mitsubishi UFJ NICOS and other
subsidiaries and affiliates, for which we are the holding company. As a bank holding company, we are regulated
under the Banking Law of Japan. Our services include commercial banking, trust banking, securities, credit
cards, consumer finance, asset management, leasing and many more fields of financial services. In Japan, we had
approximately 1,100 branches and offices as of March 31, 2018. In addition, as of the same date, the Group has
the largest overseas network among the Japanese banks, consisting of approximately 1,200 branches and other
offices, including MUFG Union Bank and Krungsri, in about 50 countries.
In May 2017, we announced “MUFG Re-Imaging Initiative” which was designed to achieve sustainable
growth and enhance our corporate value through various measures, including an integrated group-based
management approach and digitization and other technological enhancements. The measures also included
realignment of the functions of our subsidiaries in an effort to increase effectiveness in accumulating and
applying the expertise within the Group and to enhance efficiency in offering and providing a diverse array of
sophisticated financial products and services to customers through collaboration among our subsidiaries. In May
2017, Mitsubishi UFJ Trust and Banking acquired MUFG Bank’s equity interest in Mitsubishi UFJ Investor
Services & Banking (Luxembourg) S.A to make the Luxembourg company its wholly owned subsidiary. In April
2018, Mitsubishi UFJ Trust and Banking acquired MUFG Bank’s equity interest and Mitsubishi UFJ Securities
Holdings’ equity interest in Mitsubishi UFJ Kokusai Asset Management Co., Ltd. to make the asset management
company its wholly owned subsidiary. As a result, Mitsubishi UFJ Trust and Banking operates as the Group’s
primary asset management and administration subsidiary. In addition, in April 2018, Mitsubishi UFJ Trust and
Banking transferred its corporate loan-related businesses to MUFG Bank as part of an initiative to focus the
corporate loan-related businesses within the Group at MUFG Bank.
In May 2018, we announced our new medium-term business plan for the three-year period ending
March 31, 2021, which is discussed below in this Item 4.B. As part of our new medium-term business plan, we
have reorganized our business groups in an effort to further integrate the expertise and capabilities of our
subsidiaries to respond to the needs of our customers more effectively and efficiently. We describe below in this
Item 4.B our post-reorganization business groups, which differ from our business segments prior to the
reorganization. For a description of our business segments as of and for the fiscal year ended March 31, 2018, see
“Item 5.A. Operating and Financial Review and Prospects—Operating Results—Business Segment Analysis.”
MUFG’s role as the holding company is to strategically manage and coordinate the activities of our business
groups. Group-wide strategies are determined by the holding company and executed by our subsidiaries.
Medium-Term Business Plan
Basic Company Policy
Under the current medium-term business plan for the three-year period ending March 31, 2021, we aim to
deliver optimal value to all of our stakeholders through simple, speedy and transparent group-integrated
operations.
We are seeking to improve our group management approach by shifting from our previous group
collaboration and group-driven management approach to a new integrated group-based management approach.
Specifically, in an effort to respond to constantly changing customer needs in an appropriate manner, we have
reorganized our business groups into new customer-based business groups as discussed below. At the same time,
we are seeking to clarify the roles of group companies through functional realignment, product and service
quality enhancement as well as solutions capability improvement.
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We intend to deploy management resources necessary for achieving these goals with an enhanced focus
during the three-year period, particularly during the first half of the period. During this three-year period, we will
seek to lay a solid foundation for a new future-oriented business platform. We aim to establish a new business
growth model which meets our stakeholders’ expectations by the end of the fiscal year ending March 31, 2024 .
MUFG’s Vision ~ Our Corporate Vision Beyond “Re-Imagining” Initiative
We aim to deliver the best value to all stakeholders through simple, speedy and
transparent* group-integrated operations. Also, we will contribute to the realization
of sustainable growth and a better society by promoting solution-oriented business.
(1) Engage in the needs and issues of customers and society, and provide optimized solutions.
(2) Redefine ideal legal entities and the group, and develop a sustainable business model
unique to MUFG.
(3) Provide a workplace where each employee can realize his or her talent development.
(4) Based on the results achieved above, respond to shareholders’ expectations and enhance
a reliable relationship with them.
* Transparent: universal, barrier-free open personnel communications between legal entities, and between company branches and the
Head Office, regardless of title and position. It also implies an understanding of MUFG corporate vision.
Group Business Strategy
Under our new medium-term business plan, we are implementing “Eleven Transformation Initiatives”
—specific strategic initiatives designed to enable us to cope with adverse changes in the domestic or overseas
business environment and to achieve sustainable growth. Each initiative constitutes a pillar for our strategy
involving business operations that (1) have large growth potential, (2) allow us to expand on our group
capabilities to the fullest extent, and, (3) are expected to grow as a core business of the group or a foundation for
such a business. Our group operating companies, business groups and corporate center functions will collaborate
on the implementation of these initiatives with an aim to improve our profitability.
Additionally, we have established a new business group focused on retail and small and medium-sized
enterprise banking businesses outside of Japan with the goal to effectively capture the market growth in the
United States and Southeast Asia. Under our previous medium-term business plan, we took strategic steps
towards building a business platform in South East Asia through the expansion of Krungsri’s business in
Thailand and our strategic investments in Security Bank in the Philippines and Bank Danamon in Indonesia. We
seek to enhance the enterprise value of each of MUFG Union Bank in the United States and our strategic partner
banks, including VietinBank in Vietnam and other banks in South East Asia, as well as our Japanese banking
subsidiaries through synergies expected to be achieved by sharing and deploying across these banks their
respective strengths and expertise.
Eleven Transformation Initiatives
(1) Digitalization Strategy
Enhanced use of digital technologies is a critical part of our overall transformation strategy, and we intend
to develop and implement a wide range of measures to enhance our digital technology use to improve top-line
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performance and operational efficiency. We seek to improve our marketing and consulting capabilities through
the use of big data, to increase the efficiency of the front-office operations at branches through an overhaul of our
online banking system for corporate customers, and to enhance our productivity through migration to digital
channels for the housing loan business and expanded use of robotics and artificial intelligence.
(2) Channel Strategy and Business Process Re-engineering (BPR)
We strive to enhance customer user interface, or the usability of our systems for customers, and user
experience, or the experience of service recipients, while improving our productivity. We aim to achieve both of
these goals through full utilization of digital technologies and business process re-engineering, or an overhaul of
business operations through review and analysis of all existing business activities and work processes. We seek
to advance our overall user channels combining Internet-based and physical branch channels by improving the
usability of our Internet-based channels for transactions so as to increase customer use while establishing
specialty bank branches called “MUFG NEXT,” streamlining our branch network and converting branches into
integrated branches that offer services of MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ
Morgan Stanley Securities at a single location.
(3) Wealth Management Strategy
We are pursuing a business structure focused on fee-based businesses to achieve stable profits by servicing
the rising customer needs for asset management and administration services and inheritance services in Japan’s
aging society with a declining birthrate through a collaboration between the corporate and retail units and
through a group-based integrated approach. We seek to establish a business model where teams of professionals
from MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Morgan Stanley Securities will take
the lead in providing various solutions at a one-stop location.
(4) Enhancement of Relationship Manager & Product Office (RM-PO) Model for Corporate Marketing
We seek to provide solutions optimized to meet customer needs by integrating the corporate lending
operations of MUFG Bank and Mitsubishi UFJ Trust and Banking through functional realignment where
relationship managers are expected to work on understanding the business management issues faced by
customers as “RMs from MUFG” and the product office, a unit that is responsible for planning, developing and
providing products and services, is expected to deepen its expertise.
(5) Real Estate Value Chain Strategy
We aim to provide solutions to meet various customer needs arising in the real estate value chain, or the
business cycle for real estate assets including sale, purchase, development, tenant leasing and asset management,
on a continuous basis through a group-based integrated approach. We endeavor to provide additional value
through efforts made at our branches to gain knowledge on real estate needs and to use it to obtain brokerage and
asset management businesses. In the asset management business, we seek to strengthen our real asset
management capabilities.
(6) Asset Management Business
We seek to provide group-wide integrated asset management services to our customers. We aim to develop
competitive products, expand our product line-up, and enhance our human resource portfolio necessary for such
development and expansion. In addition, in an effort to become a globally recognized asset management
institution, we endeavor to strengthen our asset management business by enhancing our human resources,
products and solutions.
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(7) Institutional Investors Business
We aim to provide a wide range of services to satisfy diverse professional needs for asset management and
administration services through a group-based integrated approach, while seeking to expand across the group the
customer relationships maintained with institutional investors by each of MUFG Bank, Mitsubishi UFJ Trust and
Banking, Mitsubishi UFJ Morgan Stanley Securities, and our business groups.
(8) Global Corporate & Investment Banking (GCIB) Business Model Reform
We seek to achieve sustainable growth for our global corporate and investment banking business, where we
provide sophisticated financial services combining corporate banking services, including deposits and loans, and
investment banking services, including capital markets financing and mergers and acquisitions. We aim to meet
the needs of non-Japanese corporate customers conducting business globally and to improve the overall return on
our portfolio by constantly adjusting loan and other assets. In addition, we intend to shift the focus of our
management approach from quantity to quality through origination and distribution business operations under the
integrated platform between MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities.
(9) Enhancement of Overseas Operations
We plan to shift our management approach from the previous approach based on geographical regions and
operating entities to a new approach based on customers and businesses and seek to strengthen our business-
driven management approach across the group. In addition, in an effort to establish a business structure that
enables us to flexibly adapt to changes in the business environment, we seek to reduce expenses, enhance our
overseas branch and office network, and centralize and standardize our procedures and systems.
(10) Human Resources Strategy
We seek to manage our human resources globally in a group-based integrated manner through acceleration
of personnel allocation and transfers across the group in line with our business strategy and establishment of a
human resources division responsible for overseeing our domestic and overseas human resource management.
(11) Enhancement of Corporate Center Operations
We plan to shift our management of the corporate center operations from the previous approach of
integrated management by MUFG and MUFG Bank to a new approach of integrated management by MUFG,
MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Morgan Stanley Securities in an effort to
optimize the use of our management resources on a group-based integrated basis and achieve low cost operations.
Business Groups
Under the new medium-term business plan, starting this current fiscal year ending March 31, 2019, our
business groups are reorganized as follows in an effort to further integrate the expertise and capabilities of our
subsidiaries to respond to the needs of our customers more effectively and efficiently.
Retail & Commercial Banking Business Group
The Retail & Commercial Banking Business Group integrates the domestic retail and commercial banking
businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi
UFJ NICOS and other group companies of MUFG. This business group offers retail and small and medium–sized
enterprise customers in Japan an extensive array of commercial banking, trust banking and securities products
and services.
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Business Environment and Strategy
In the domestic market in which we operate, unfavorable conditions remain such as the negative impact of
the Bank of Japan’s negative interest rate policy on the financial market and intensified competition. In addition,
demographic changes, including Japan’s aging population with a declining birthrate, and technological
developments, including artificial intelligence and digitalization, can change the way banking and other financial
services are used in Japan. With a goal of becoming “the top financial group in the retail and commercial banking
business segment in Japan, achieving sustainable growth along with customers and society,” we seek to enhance
and integrate the capabilities of our group companies to deliver value that exceeds customer expectations and
improve customer satisfaction.
Responding to the Needs of Retail Customers
For retail customers, we provide a wide range of products and services, such as bank deposits, loans, asset
management and administration services, investment products and settlement services. We describe some of our
products and services below.
‰ Housing Loans. MUFG Bank offers housing loans with various loan terms and interest rates. MUFG
Bank also offers “Loans with Supplemental Health Insurance for Seven Major Illnesses” through a third
party insurance company to help with loan payments in case of unexpected major illnesses such as
cancer or heart attacks. As part of our group-wide collaboration initiative, Mitsubishi UFJ Trust and
Banking began to offer “Mitsubishi UFJ Net Home Loan” (a housing loan product of MUFG Bank
available only online and exclusively to customers of Mitsubishi UFJ Trust and Banking) as an agent of
MUFG Bank in April 2018.
‰ Consumer Loans. MUFG Bank offers “Card Loans” (consumer loans the proceeds of which are
disbursed to approved borrowers with a bank-issued card through an automated machine) and “Purpose-
Specific Term Loans,” depending on customers’ needs.
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Investment Products. In order to promote a shift in customer preference from savings to asset building,
we seek to offer products that effectively serve the asset building and asset management needs of
customers at various stages of their life. As part of this effort, MUFG Bank started to offer fund wrap
products as an agent of Mitsubishi UFJ Trust and Banking in November 2017. In addition, in January
2018, MUFG Bank started to offer investment products that qualify for “Tsumitate NISA” tax
exemption on capital gains and dividend income for the investment up to 0.4 million yen per year for up
to 20 years under Japanese tax law. The original NISA, or Nippon Individual Savings Account, program
was introduced in 2014, providing for tax exemption on capital gains and dividend income for the
investment up to 1.2 million yen per year for up to 5 years. We offer investment products that qualify
for tax exemption under the original NISA program as well.
Products and Services for Payments. Mitsubishi UFJ NICOS offers a variety of credit cards. In addition,
debit cards are available to MUFG Bank account holders.
Insurance Products. MUFG Bank acts as a sales channel for a variety of insurance products, including
annuity insurance, single premium whole life insurance, flat-rate premium whole life insurance, medical
insurance, cancer insurance and nursing-care insurance, of insurance companies in Japan.
Services Relating to Inheritance, Gift and Real Estate. Mitsubishi UFJ Trust and Banking offers
testamentary trust, inheritance planning, inheritance procedure support, and other related services.
MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities also offer inheritance-related products and
services, serving as sales agents of Mitsubishi UFJ Trust and Banking. Mitsubishi UFJ Trust and
Banking and Mitsubishi UFJ Real Estate Services offer real estate brokerage services for both
investment and business properties and residential properties.
We provide those services through an extensive network of branches in Japan, mostly in the greater Tokyo,
Nagoya and Osaka areas. MUFG Bank and Mitsubishi UFJ Trust and Banking had a total of 736 branches in
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Japan as of March 31, 2018. MUFG Bank and Mitsubishi UFJ Trust and Banking also have a nationwide ATM
network consisting of MUFG Bank’s and Mitsubishi UFJ Trust and Banking’s own ATMs located at their
branches and third-party ATMs located at convenience stores and other locations.
We also offer direct banking channels. MUFG Bank and Mitsubishi UFJ Trust and Banking provide internet
banking services which enable customers to perform a range of banking activities, such as checking account
balances, making time deposits, transferring money and purchasing invest products, through the banks’
respective websites using personal computers and mobile devices. In addition, Jibun Bank, a direct bank which
was founded by MUFG Bank in collaboration with KDDI Corporation in June 2008, offers bank deposits,
housing loans, settlement services and other products and services through the internet and phone.
Responding to the Needs of Small and Medium-Sized Enterprises
For small and medium-sized enterprises, we provide various financial solutions, such as bank deposits,
loans, and fund management, remittance and foreign exchange services. We also help our customers develop
business strategies, such as overseas expansions, inheritance-related business transfers and stock listings.
In addition, we provide asset and business succession solutions to small and medium-sized enterprise
owners. Based on our view that smooth succession of the businesses of small and medium-sized enterprises
owned by aging owners is critical to the sustainability and development of Japanese industry, we offer solutions
for successions of businesses to unrelated persons, including through mergers and acquisitions and initial public
offerings, and for successions of businesses to related persons. We also offer solutions designed to assist business
owners with successions of assets using testamentary trusts, real estate transactions and other means. Through
further integration of the retail and commercial banking capabilities of MUFG Bank, Mitsubishi UFJ Trust and
Banking, MUFG Securities Holdings and other group companies, we strive to provide seamless solutions on a
group-wide basis.
Japanese Corporate & Investment Banking Business Group
The Corporate Banking Business Group covers the large Japanese corporate businesses of MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings, including the transaction banking,
investment banking, trust banking and securities businesses. We offer large Japanese corporations advanced
financial solutions designed to respond to their diversified and globalized needs and to contribute to their
business and financial strategies. We provide those solutions through our global network of MUFG Group
companies.
With our goal to “Be the First Call Business Partner for Large Japanese Corporate Clients,” we strive to
strengthen our solutions capabilities through an approach designed to provide effective solutions using our
specialized industry-specific expertise and knowledge and through further integration and more effective
collaboration among the MUFG Group companies on a global basis.
Transaction Banking
We provide cash management, payment, trade finance and other commercial banking products and services
for corporate business transactions. Through these products and services, we seek to provide sophisticated
financial solutions that enable efficient execution of transactions to meet the strategic needs of our customers.
Investment Banking
We provide mergers and acquisitions advisory, equity and bond underwriting, and other investment banking
services to our Japanese corporate customers. A large part of our investment banking business in Japan is
conducted by Mitsubishi UFG Morgan Stanley Securities, which was formed in May 2010 through the
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integration of the domestic wholesale and retail securities businesses previously conducted by Mitsubishi UFJ
Securities and the investment banking business previously conducted by Morgan Stanley Japan. See “—Global
Strategic Alliance with Morgan Stanley” below.
Trust Banking
We provide real estate brokerage, registrar and transfer agency, and other trust banking services to our
Japanese corporate customers. Our solutions also include securitization of real estate, receivables and other
assets. Mitsubishi UFJ Trust and Banking’s experience and know-how in real estate brokerage and appraisal
services, corporate real estate strategy consulting, shareholder registry management services, shareholder and
investor relations consulting, and consulting services relating to executive stock compensation programs using
trust schemes enable us to offer solutions tailored to the financial strategies of each customer.
Focusing on Infrastructure Development
We have been focusing on financing transactions in the area of infrastructure development, such as electric
power and renewable energy, by leveraging our experience, know-how and global network.
In October 2016, MUFG, MUFG Bank, Mitsubishi UFJ Lease & Finance Company Limited, Hitachi, Ltd.
and Hitachi Capital Corporation formed a capital and business alliance with an aim to assist Japanese companies
with their overseas business development. In connection with this alliance, MUFG Bank, Mitsubishi UFJ
Lease & Finance, Hitachi Capital established a joint venture called Japan Infrastructure Initiative Company
Limited, or JII, in January 2017. Since JII commenced operations on April 1, 2017, JII have made an investment
in each of the transportation industry and the telecommunication industry. Through the joint venture, we aim to
offer a wide variety of financial solutions to our customers by effectively leveraging the business expertise and
know-how of each of Mitsubishi UFJ Lease & Finance, Hitachi Capital and JII and collaborating effectively with
professionals from these entities.
Asset Management & Investor Services Business Group
The Asset Management & Investor Services Business Group covers the asset management and asset
administration businesses of Mitsubishi UFJ Trust and Banking and MUFG Bank. By integrating the trust
banking expertise of Mitsubishi UFJ Trust and Banking and the global strengths of MUFG Bank. the business
group offers a full range of asset management and administration services for corporations and pension funds,
including pension fund management and administration, advice on pension structures, and payments to
beneficiaries, and also offer investment trusts for retail customers.
We aim to expand our asset management and asset administration services business by enhancing the
quality of our products and services, effectively utilizing the broad customer base of the MUFG Group, and
improving our operational efficiency through IT technology.
Asset Management
Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Kokusai Asset Management, and MU Investments Co.,
Ltd provide institutional investors with a wide range of investment options such as equities, bonds and alternative
products. In addition, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Kokusai Asset Management
provide retail investors with investment trust products through our group companies and business partners
outside of the MUFG Group, such as securities companies and regional banks.
With an aim to enhance its business, Mitsubishi UFJ Trust and Banking maintains strategic alliances with
overseas asset management companies, including AMP Capital Holdings Limited, an Australian asset manager,
and Standard Life Aberdeen plc, a U.K. asset manager.
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Asset Administration
Under the brand of “MUFG Investor Services,” Mitsubishi UFJ Trust and Banking, MUFG Bank,
Mitsubishi UFJ Investor Services & Banking (Luxembourg), MUFG Investor Services Holdings Limited, MUFG
Capital Analytics and MUFG Investor Services(US),LLC offer a full suite of global asset administration services,
including fund administration, custody, securities lending, financing and foreign exchange services as a one-stop
shop.
Global Corporate & Investment Banking Business Group
The Global Corporate & Investment Banking Business Group covers the corporate, investment and
transaction banking businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings. Through a global
network of offices and branches, we provide non-Japanese large corporate and financial institution customers
with a comprehensive set of solutions that meet their increasingly diverse and sophisticated financing needs.
Through the new integrated operations management structure between the Global Corporate & Investment
Banking Business Group and the Global Markets Business Group, we aim to offer financing and investment
opportunities based on our understanding of institutional investor needs.
The expansion of the global corporate and investment banking business has been an important pillar of the
MUFG Group’s growth strategy. Aiming to further enhance our presence in the global financial market, we have
shifted our strategic approach from one where each of our group companies individually promoted its global
business to one where our group companies collaborate through integration of their capabilities. The new
approach is designed to enable us to exercise our comprehensive expertise to provide our customers with value-
added solutions and services more effectively.
Corporate Banking
Through our global network of offices and branches, we provide a full range of corporate banking solutions,
such as project finance, export credit agency finance, and financing through asset-backed commercial paper. Our
primary customers include large corporations, financial institutions, sovereign and multinational organizations,
and institutional investors that are headquartered outside of Japan.
Investment Banking
We provide investment banking services such as debt and equity issuance and M&A-related services, to
help our customers develop their financial strategies and realize their business goals. In order to meet customers’
various financing needs, we have established a customer-oriented coverage model through which our product
experts coordinate with one another to offer innovative financing services globally. We have further integrated
the management of the operations of our commercial banking and securities subsidiaries to enhance
collaboration. We are one of the world’s top providers of project finance, one of the core businesses of the Global
Corporate & Investment Banking Business Group. We provide sophisticated professional services in arranging
limited-recourse finance and offering financial advice in various sectors, including natural resources, power, and
infrastructure, backed by our experience, expertise, knowledge, and global network.
Transaction Banking
We provide commercial banking products and services for large corporations and financial institutions in
managing and processing domestic and cross-border payments, mitigating risks in international trade, and
providing working capital optimization. We have established a Transaction Banking Unit, which oversees the
entire transaction banking operations globally, in order to enhance governance, management and quality of
services in these operations. The Transaction Banking Unit provides customers with support for their domestic,
regional and global trade finance and cash management programs through our extensive global network.
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Global Commercial Banking Business Group
The Global Commercial Banking Business Group provides a comprehensive array of financial products and
services such as loans, deposits, fund transfers, investments and asset management services for local retail, small
and medium-sized enterprise, and corporate customers across the Asia-Pacific region through our major local
commercial banking subsidiaries and affiliates outside of Japan referred to as “Partner Banks.” Our Partner
Banks include MUFG Union Bank in the United States, Krungsri in Thailand, VietinBank in Vietnam, Security
Bank in the Philippines and Bank Danamon in Indonesia. Through the 19.9% equity investment in Bank
Danamon in December 2017, we have built a foundation of our Pan-Pacific network covering the major ASEAN
countries, the United States and Japan.
The network covers a vast market, consisting of five countries with population totaling approximately
840 million. The market is expected to expand further as the GDP growth rates are relatively high in these
countries and financial needs are expected to increase as average income rise in the ASEAN countries.
We believe that the network, which combines the global reach of the MUFG Group companies with strong
regional presence of the Partner Banks each carrying an established brand, provides us with unique competitive
advantages. Through sharing and integration of the expertise and capabilities of the Partner Banks, we seek to
achieve synergy effects and capture the business opportunities arising from the economic growth of the region.
MUFG Union Bank, N.A.
MUFG Union Bank is the primary subsidiary of MUFG Americas Holdings, which is our wholly owned
subsidiary and which is a bank holding company in the United States. MUFG Union Bank is the primary
operating entity of MUFG Bank in the United States. MUFG Union Bank provides a comprehensive range of
banking, consumer finance, investment, asset management, and other financial products and services to
individual consumers, small and medium-sized enterprises, and large corporations primarily in California,
Oregon, Washington, and Texas as well as nationally and internationally through 373 branches (consisting of 346
retail branches, five commercial branches and one international office, as well as 21 financial centers of
PurePoint, an online banking division of MUFG Union Bank).
In July 2014, MUFG Bank’s operations in the Americas region were integrated with MUFG Americas
Holdings’ operations. As a result, MUFG Americas Holdings oversees MUFG Bank’s operations in the Americas
region.
In July 2016, MUFG Americas Holdings was designated as MUFG’s U.S. intermediate holding company, or
IHC, to comply with the FRB’s enhanced prudential standards. As of that date, MUFG Bank, Mitsubishi UFJ
Trust and Banking and Mitsubishi UFJ Securities Holdings transferred to MUFG Americas Holdings their
ownership interests in their U.S. subsidiaries and affiliates, namely, BTMU Capital Corporation, BTMU
Securities, Inc., MUFG Americas Capital Company, Morgan Stanley MUFG Loan Partners, LLC, MUFG Fund
Services (USA) LLC, and MUFG Securities Americas Inc.
In July 2017, MUFG Bank and Mitsubishi UFJ Trust and Banking transferred to MUFG Americas Holdings
their ownership interests in other U.S. subsidiaries and affiliates, namely, BTMU Leasing & Finance, Inc.,
BTMU LF Capital LLC, MUFG Capital Analytics, LLC, and MUFG Investors Services(US), LLC.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Any adverse changes in
the business of MUFG Americas Holdings Corporation, an indirect wholly-owned subsidiary in the United
States, could significantly affect our results of operations.”
Bank of Ayudhya Public Company Limited (Krungsri)
Krungsri is a strategic subsidiary of MUFG Bank in Thailand. Krungsri provides a comprehensive range of
banking, consumer finance, investment, asset management, and other financial products and services to retail
42
consumers, small and medium-sized enterprises, and large corporations mainly in Thailand through 700 branches
(consisting 663 banking branches and 37 automobile finance business branches) and over 35,000 other service
outlets nationwide. In addition, Krungsri’s consolidated subsidiaries include the largest credit card issuer in
Thailand with a total of 8.6 million credit card, sales finance and personal loan accounts in its portfolio, a major
auto finance provider, a fast growing asset management company, and a leading microfinance service provider in
Thailand.
MUFG owns a 76.88% ownership interest in Krungsri through MUFG Bank as of March 31, 2018. By
combining Krungsri’s local franchise with competitive presence in the retail and small and medium-sized
enterprise banking markets in Thailand with MUFG Bank’s global financial expertise, we seek to offer a wider
range of high-value financial products and services to a more diverse and larger customer base.
In March 2017, Krungsri established a subsidiary, Krungsri Finnovate Company Limited, with a key
mission to support and promote FinTech startups in Thailand and Southeast Asian countries in the forms of
accelerator and academic collaboration, startup project management and corporate venture capital.
In September 2017, Krungsri was designated as a Domestic Systemically Important Bank by the Bank of
Thailand—based on the central bank’s assessment of Krungsri based on its asset size and its contribution to the
country’s economy and financial system.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Any adverse changes in
the business of Bank of Ayudhya, an indirect subsidiary in Thailand, could significantly affect our results of
operations.”
Other Activities in Southeast Asia
We have been expanding our operations in Southeast Asia with an effort to further develop our businesses
abroad. In addition to MUFG Union Bank and Krungsri, as Partner Banks, we have strategic business and capital
relationships with other banks in Southeast Asia, including VietinBank in Vietnam, Security Bank in the
Philippines and Bank Danamon in Indonesia.
VietinBank provides a wide range of financial services to consumers, small businesses, middle-market and
large companies through its branch network predominantly in Vietnam. We own a 20% equity interest in
VietinBank.
Security Bank provides a wide range of financial services to consumers, small businesses, middle-market
and large companies through its branch network in the Philippines. We own a 19.7% equity interest in Security
Bank.
In December 2017, we acquired 19.9% of the outstanding shares of Bank Danamon, the fifth largest bank in
Indonesia in terms of net profits. The acquisition was the initial investment as part of our plan to acquire an
aggregate equity interest in the bank exceeding 73.8%, subject to regulatory approval and other conditions. Our
investment in Bank Danamon represents another milestone for our growth strategy in Southeast Asia with the
goal of realizing our unique and unparalleled business model based on the established local networks of our
Partner Banks, and MUFG’s global network to provide holistic financial services to a wider range of customers.
Through this investment, we aim to diversify and expand our local retail and small and medium-sized enterprise
business portfolio by seizing opportunities expected to arise from Indonesia’s current economic growth and long-
term economic growth prospects.
See “Item 5. Operating and Financial Review and Prospects—Recent Developments” and “Item 3.D. Key
Information—Risk Factors—Risks Related to Our Business—Our strategy to expand the range of our financial
products and services and the geographic scope of our business globally may fail if we are unable to anticipate or
manage new or expanded risks that entail such expansion.”
43
Global Markets Business Group
The Global Markets Business Group covers the customer business and the treasury operations of MUFG
Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings. The customer business
includes sales and trading in fixed income instruments, currencies and equities as well as other investment
products, and origination and distribution of financial products. The treasury operations include asset and liability
management as well as global investments for the MUFG Group.
Customer Business
‰
‰
Sales and Trading in Fixed Income Instruments, Currencies and Equities. We provide financing,
hedging, and investment solutions to our retail, corporate, institutional, and governmental customers
through sales and trading in financial market products such as fixed income instruments, currencies, and
equities. Our innovative financial products and services are designed to respond to increasingly
sophisticated requirements of our diverse customers and are provided through our global network of
offices and branches.
Investment Products for Non-Institutional Customers in Japan. We provide investment products such as
mutual funds, and structured bonds, notes and deposits to non-institutional customers in Japan. We offer
solutions using these investment products to help customers better manage their assets and
liabilities. This business is conducted through the new integrated operations management structure
among the Global Markets Business Group, the Asset Management & Investor Service Business Group,
the Retail & Commercial Banking Business Group, and the Japanese Corporate and Investment Banking
Business Group.
‰ Origination and Distribution. We provide financing solutions to institutional customers through
origination and distribution of financial products such as syndicated loans and securities issuances. This
business is conducted through the new integrated operations management structure between the Global
Markets Business Group and the Global Corporate and Investment Banking Business Group.
Treasury Operations
‰
Asset and Liability Management. Through our treasury operations, we seek to manage interest rate and
liquidity risks residing in our balance sheets through, among other things, transactions designed to
manage the profit and loss impact attributable to market movements based on our balance sheet analyses
and forecasts. Such transactions include investments in high quality liquid securities such as Japanese
government bonds and U.S. treasury bonds and trading in other financial products such as interest rate
swaps and cross currency swaps.
‰ Global Investment. Through our treasury operations, we also seek to enhance our profitability by
diversifying our portfolio and strategically investing in financial products including corporate bonds and
funds.
Strategy under the Current Medium-Term Business Plan
Under the current medium-term business plan, for the three-year period ending March 31, 2021, the Global
Markets Business Group intends to undertake the following four initiatives designed to promote the MUFG
Group’s structural reforms.
‰
The Global Markets Business Group plans to improve its business portfolio by adjusting its focus to
growth areas and new areas, including the sales and trading business targeting institutional customers as
well as the origination and distribution business under the new integrated operations management
structure with the Global Corporate and Investment Banking Business Group. In addition, the Global
Markets Business Group plans to build a sustainable growth model for the investment products business
44
targeting non-institutional investors in Japan under the new integrated operations management structure
with the Asset Management & Investor Service Business Group , the Retail & Commercial Banking
Business Group and the Japanese Corporate and Investment Banking Business Group.
The Global Markets Business Group aims to reform the sales and trading business targeting corporate
customers through enhancement of our financial solutions capabilities by more effectively coordinating
capital markets transactions and global markets transactions and through reduction in transactions
dependent on our balance sheets.
The Global Markets Business Group strives to enhance the framework for collaboration and cooperation
between MUFG’s treasury operations unit and its counterparts at MUFG’s major subsidiaries to support
the MUFG Group’s sustainable growth by integrating the expertise in market risk management on a
group-side basis and applying a unified approach to liquidity risk management.
The Global Markets Business Group strives to establish business frameworks and infrastructure
designed to optimize and enhance integration and flexibility of the booking functions for global markets
transactions among MUFG’s major subsidiaries and to accelerate digitalization.
‰
‰
‰
Global Strategic Alliance with Morgan Stanley
As of March 31, 2018, we held approximately 432 million shares of Morgan Stanley’s common stock
representing approximately 24.4 % of the voting rights in Morgan Stanley and Series C Preferred Stock with a
face value of approximately $521.4 million and 10% dividend. As of the same date, we had two representatives
appointed to Morgan Stanley’s board of directors. We adopted the equity method of accounting for our
investment in Morgan Stanley beginning with the fiscal year ended March 31, 2012.
In conjunction with Morgan Stanley, we formed two securities joint venture companies in May 2010 to
integrate our respective Japanese securities companies. We converted the wholesale and retail securities
businesses conducted in Japan by Mitsubishi UFJ Securities into Mitsubishi UFJ Morgan Stanley Securities.
Morgan Stanley contributed the investment banking operations conducted in Japan by its former wholly-owned
subsidiary, Morgan Stanley Japan, to Mitsubishi UFJ Morgan Stanley Securities, and converted the sales and
trading and capital markets businesses conducted in Japan by Morgan Stanley Japan into an entity called Morgan
Stanley MUFG Securities, Co., Ltd. We hold a 60% economic interest in Mitsubishi UFJ Morgan Stanley
Securities and Morgan Stanley MUFG Securities, and Morgan Stanley holds a 40% economic interest in
Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. We hold a 60% voting interest
and Morgan Stanley holds a 40% voting interest in Mitsubishi UFJ Morgan Stanley Securities, and we hold a
49% voting interest and Morgan Stanley holds a 51% voting interest in Morgan Stanley MUFG Securities.
Morgan Stanley’s and our economic and voting interests in the securities joint venture companies are held
through intermediate holding companies. We have retained control of Mitsubishi UFJ Morgan Stanley Securities
and we account for our interest in Morgan Stanley MUFG Securities under the equity method due to our
significant influence over Morgan Stanley MUFG Securities. The board of directors of Mitsubishi UFJ Morgan
Stanley Securities has fifteen members, nine of whom are designated by us and six of whom are designated by
Morgan Stanley. The board of directors of Morgan Stanley MUFG Securities has ten members, six of whom are
designated by Morgan Stanley and four of whom are designated by us. The CEO of Mitsubishi UFJ Morgan
Stanley Securities is designated by us and the CEO of Morgan Stanley MUFG Securities is designated by
Morgan Stanley.
We have also expanded the scope of our global strategic alliance with Morgan Stanley into other
geographies and businesses, including (1) a loan marketing joint venture that provides clients in the United States
with access to the world-class lending and capital markets services from both companies, (2) business referral
arrangements in Asia, Europe, the Middle East and Africa, covering capital markets, loans, fixed income sales
and other businesses, (3) global commodities referral arrangements whereby MUFG Bank and its affiliates refer
clients in need of commodities-related hedging solutions to certain affiliates of Morgan Stanley, and (4) an
employee secondment program to share best practices and expertise in a wide range of business areas.
45
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd., in which Mitsubishi UFJ Morgan Stanley
Securities holds 75%, and MUFG Bank holds the remaining 25%, of the voting rights, has an agreement with
Morgan Stanley. Mitsubishi UFJ Morgan Stanley PB Securities leverages MUFG’s broad customer base, utilizes
Morgan Stanley’s global and high quality insight, and further its collaborations with other group companies by
strengthening its coordination with Mitsubishi UFJ Morgan Stanley Securities. It aims for further development of
its wealth management business, which is one of the largest in Japan.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—If our strategic alliance
with Morgan Stanley fails, we could suffer financial or reputational loss.”
Competition
We face strong competition in all of our principal areas of operation. The structural reforms in financial
industry regulations and recent developments in financial markets have resulted in some significant changes in
the Japanese financial system and prompted banks to merge or reorganize their operations. In addition,
development of new technologies such as artificial intelligence and blockchain has also allowed non-financial
institutions to enter the financial services industry with alternative services, thus changing the nature of
competition from other financial institutions as well as from other types of businesses. See “Item 3.D. Key
Information—Risk Factors—Risks Related to Our Business—Our business may be adversely affected by
competitive pressures, which have partly increased due to regulatory changes and recent market changes in the
financial industry domestically and globally.”
Japan
Since their formation in 2000 and 2001, the so-called Japanese “mega bank” groups, including us, the
Mizuho Financial Group and the Sumitomo Mitsui Financial Group, have continued to expand their businesses
and take measures designed to enhance their financial group capabilities. For example, in July 2013, Mizuho
Bank, Ltd. and Mizuho Corporate Bank, Ltd. merged, and the merged entity presently operates under the
corporate name of “Mizuho Bank, Ltd.” In November 2015, SMBC Trust Bank, Ltd., a subsidiary of Sumitomo
Mitsui Financial Group, acquired the retail banking business of Citibank Japan, Ltd.
Competition among the mega bank groups are expected to continue in various financial sectors as they have
recently announced plans to expand, or have expanded, their respective businesses. For example, in the securities
sector, in May 2010, in conjunction with Morgan Stanley, we created two securities joint venture companies in
Japan, Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities, by integrating the
operations of Mitsubishi UFJ Securities and Morgan Stanley Japan. In January 2013, Mizuho Securities and
Mizuho Investors Securities Co., Ltd. merged. For a discussion of the two securities joint venture companies
created by us and Morgan Stanley, see “—B. Business Overview—Global Strategic Alliance with Morgan
Stanley.”
In the retail business sector, customers often have needs for a broad range of financial products and services,
such as investment trusts and insurance products. Recently, competition has increased due to the development of
new products and distribution channels. For example, Japanese banks compete with one another by developing
innovative proprietary computer technologies that allow them to deliver basic banking services in a more
efficient manner and to create sophisticated new products in response to customer demand. Competition has also
increased since the introduction in January 2014 of the Japanese individual savings account system, generally
referred to as the NISA program, which currently offers tax exemptions on capital gains and dividend income for
investments up to ¥1.2 million a year for a maximum of five years. In addition, in December 2015, Sumitomo
Mitsui Trust Bank, Ltd. acquired Citi Cards Japan, Inc., which previously operated the credit card business of
Citigroup Inc. in Japan.
In the private banking sector, competition among the mega bank groups has intensified as a result of recent
corporate actions designed to strengthen their operations. We made Mitsubishi UFJ Merrill Lynch PB Securities
46
Co., Ltd. a wholly owned subsidiary in December 2012 to enhance our private banking services for high
net-worth customers, and changed its name to Mitsubishi UFJ Morgan Stanley PB Securities, Ltd. in March
2014. In October 2013, Sumitomo Mitsui Banking Corporation acquired the former Société Générale Private
Banking Japan, Ltd. from Société Générale S.A. and changed its name to SMBC Trust Bank, Ltd.
In the consumer finance sector, recent regulatory reforms and legal developments have negatively impacted
the business environment, resulting in failures of several consumer finance companies and intensified
competition among consumer finance companies that have remained in business, particularly among those
affiliated with the mega banks. In April 2012, Promise Co., Ltd. became a wholly owned subsidiary of the
Sumitomo Mitsui Financial Group, and changed its name as SMBC Consumer Finance Co., Ltd. in July 2012.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our loans to
consumers and our shareholdings in companies engaged in consumer lending, changes in the business or
regulatory environment for consumer finance companies in Japan may further adversely affect our financial
results.”
The trust assets business is an area that is becoming increasingly competitive because of regulatory changes
in the industry that have expanded the products and services that can be offered since the mid-2000s. In addition,
there is growing corporate demand for changes in the trust regulatory environment, such as reforms of the
pension system and related accounting regulations under Japanese GAAP. Competition may increase in the
future as changes are made to respond to such corporate demand and regulatory barriers to entry are lowered.
Competition is also expected to intensify as a result of recent integrations and entrants in the industry. For
example, in August 2015, JP Asset Management Co., Ltd. was established as a joint venture with the Japan Post
Group, Sumitomo Mitsui Trust Bank and Nomura Holdings, Inc. holding 50%, 30% and 20% equity interests,
respectively, in the joint venture. In October 2016, the Mizuho Financial Group integrated Mizuho Asset
Management Co., Ltd., Shinko Asset Management Co., Ltd. and the asset management business of Mizuho
Trust & Banking Co., Ltd., all of which were asset management subsidiaries of the Mizuho Financial Group in
Japan, and DIAM Co., Ltd., which was an asset management joint venture between the Mizuho Financial Group
and Dai-ichi Life Insurance Company in Japan. In July 2016, the Sumitomo Mitsui Financial Group made
Sumitomo Mitsui Asset Management Co., Ltd. a consolidated subsidiary through the acquisition of additional
equity interest in the asset management company. In March 2017, the Mizuho Financial Group announced plans
to integrate Trust and Custody Services Bank, Ltd., its trust bank subsidiary specialized in the asset
administration business, with Japan Trustee Services Bank, Ltd., which is a trust bank joint venture between
Sumitomo Mitsui Trust Holdings and Resona Bank, Ltd. specialized in the asset administration business. In May
2018, the Sumitomo Mitsui Financial Group announced a planned merger between Sumitomo Mitsui Asset
Management and Daiwa SB Investments Ltd.
In recent years, the Japanese government has identified several governmental financial institutions as
candidates to privatize. In particular, in November 2015, shares of Japan Post Holdings Co., Ltd., Japan Post
Bank Co., Ltd. and Japan Post Insurance Co., Ltd. were listed on the Tokyo Stock Exchange. In the initial public
offering, approximately 11% of the outstanding shares in each of the Japan Post companies were sold. The
Japanese government sold an additional 22% of the outstanding shares of Japan Post Holdings in a subsequent
public offering in September 2017. The Japanese government is expected to sell additional shares in Japan Post
Holdings and cause Japan Post Holdings to sell additional shares in the Japan Post Bank and Japan Post
Insurance in the future. Under the current postal privatization law, Japan Post Bank and Japan Post Insurance
may enter into new business areas upon obtaining government approvals, and if Japan Post Holdings’ equity
holdings decrease to 50% or below, the two companies will be allowed to enter into new business areas upon
submission of a notice to the government. In such case, the Japan Post Group companies may seek to enter into
new financial businesses and increasingly compete with us. In addition, Japan Post Bank is one of the world’s
largest holders of deposits, which provide a cost-effective source of funding for the bank. There is reportedly a
political discussion currently ongoing as to whether to raise the ¥13 million cap on the amount of deposits that
Japan Post Bank may accept from each customer. See “—B. Business Overview—The Japanese Financial
System—Government Financial Institutions.”
47
The mega bank groups face significant competition with other financial groups as well as companies that
have traditionally not been engaged in banking services. For example, the Nomura Group has been a major
player in the securities market in Japan. In addition, various Japanese non-bank financial institutions and
non-financial companies have entered into the Japanese banking sector. For example, Orix Corporation, a
non-bank financial institution, as well as the Seven & i Holdings Co., Ltd., Sony Corporation and Aeon Co., Ltd.,
which were non-financial companies, offer various banking services, often through non-traditional distribution
channels.
Foreign
In the United States, we face substantial competition in all aspects of our business. We face competition
from other large U.S. and non-U.S. money-center banks, as well as from similar institutions that provide
financial services. Through MUFG Union Bank, we currently compete principally with U.S. and non-U.S.
money-center and regional banks, thrift institutions, asset management companies, investment advisory
companies, consumer finance companies, credit unions and other financial institutions.
In other international markets, we face competition from commercial banks and similar financial
institutions, particularly major international banks and the leading domestic banks in the local financial markets
in which we conduct business. For example, Japanese mega banks, including us, and other major international
banks have been expanding their operations in the Asian market, where leading local banks also have been
growing and increasing their presence recently. Furthermore, we are aiming to expand our retail and small and
medium-sized enterprise businesses along with our corporate banking business in Southeast Asia through our
acquisition of Krungsri in Thailand, our strategic investments in VietinBank in Vietnam, Security Bank in the
Philippines and Bank Danamon in Indonesia, as well as our plan to increase our equity interest in Bank Danamon
to over 73.8%, and compete with leading local banks in such businesses. See “Item 3.D. Key Information—Risk
Factors—Risks Related to Our Business—Our strategy to expand the range of our financial products and services
and the geographic scope of our business globally may fail if we are unable to anticipate or manage new or
expanded risks that entail such expansion.” For a discussion of recent developments, see “Item 5. Operating and
Financial Review and Prospects—Recent Developments.”
In addition, we may face further competition as a result of recent investments, mergers and other business
tie-ups among global financial institutions, including, for example, our recent acquisitions of, and business and
capital alliances with, asset management, administration and custody services companies.
The Japanese Financial System
Japanese financial institutions may be categorized into three types:
‰
‰
‰
the central bank, namely the Bank of Japan;
private banking institutions; and
government financial institutions.
The Bank of Japan
The Bank of Japan’s role is to maintain price stability and the stability of the financial system to ensure a
solid foundation for sound economic development.
48
Private Banking Institutions
Private banking institutions in Japan are commonly classified into two categories (the following numbers
are based on information published by the FSA available as of May 1, 2018):
‰
‰
ordinary banks ( 121 ordinary banks and 56 foreign commercial banks with ordinary banking
operations); and
trust banks (15 trust banks, including two Japanese subsidiaries of foreign financial institutions).
Ordinary banks in turn are classified as city banks, of which there are four, including MUFG Bank, and
regional banks, of which there are 104 and other banks, of which there are 13. In general, the operations of
ordinary banks correspond to commercial banking operations in the United States. City banks and regional banks
are distinguished based on head office location as well as the size and scope of their operations.
The city banks are generally considered to constitute the largest and most influential group of banks in
Japan. Generally, these banks are based in large cities, such as Tokyo and Osaka, and operate nationally through
networks of branch offices. The city banks provide a wide variety of banking and other financial products and
services to large corporate customers, including the major industrial companies in Japan, as well as small and
medium-sized companies and retail customers.
With some exceptions, the regional banks tend to be much smaller in terms of total assets than the city
banks. Each of the regional banks is based in one of the Japanese prefectures and extends its operations into
neighboring prefectures. Their customers are mostly regional enterprises and local public utilities. The regional
banks also lend to large corporations. In line with the recent trend among financial institutions toward mergers or
business tie-ups, various regional banks have announced or are currently negotiating or pursuing integration
transactions.
Trust banks, including Mitsubishi UFJ Trust and Banking, provide various trust services relating to money
trusts, pension trusts and investment trusts and offer other services relating to real estate, stock transfer agency
and testamentary services, as well as banking services.
In recent years, almost all of the city banks have consolidated with other city banks and, in some cases,
integrated with trust banks. Consolidation or integration among these banks was achieved, in most cases, through
the use of a bank holding company.
In addition to ordinary banks and trust banks, other private financial institutions in Japan, including banks
operated by non-financial companies, shinkin banks, or credit associations, and credit cooperatives, are engaged
primarily in making loans to small businesses and individuals.
Government Financial Institutions
There are a number of government financial institutions in Japan, which are corporations wholly owned or
majority-owned by the government and operate under the government’s supervision. Their funds are provided
mainly from government sources. Certain types of operations undertaken by these institutions have been or are
planned to be assumed by, or integrated with the operations of, private corporations through privatizations and
other measures.
Among them are the following:
‰
The Development Bank of Japan, which was established for the purpose of contributing to the economic
development of Japan by extending long-term loans, mainly to primary and secondary sector industries,
and which was reorganized as a joint stock company in October 2008 as part of its ongoing privatization
process, with the government being required by law to continue to hold 50% or more of the shares in the
bank until the completion of certain specified investment operations, which the bank is required to
endeavor to achieve by March 2026, and more than one-third for an unspecified period thereafter;
49
‰
‰
‰
Japan Finance Corporation, which was formed in October 2008, through the merger of the international
financial operations of the former Japan Bank for International Cooperation, National Life Finance
Corporation, Agriculture, Forestry and Fisheries Finance Corporation, and Japan Finance Corporation
for Small and Medium Enterprise, for the primary purposes of supplementing and encouraging the
private financing of exports, imports, overseas investments and overseas economic cooperation, and
supplementing private financing to the general public, small and medium-sized enterprises and those
engaged in agriculture, forestry and fishery. In April 2012, Japan Finance Corporation spun off its
international operations to create Japan Bank for International Cooperation as a separate government-
owned entity;
Japan Housing Finance Agency, which was originally established in June 1950 as the Government
Housing Loan Corporation for the purpose of providing housing loans to the general public, and which
was reorganized as an incorporated administrative agency and started to specialize in securitization of
housing loans in April 2007; and
The Japan Post Group companies, a group of joint stock companies including Japan Post Bank, which
were formed in October 2007 as part of the Japanese government’s privatization plan for the former
Japan Post, a government-run public services corporation, which had been the Postal Service Agency
until March 2003. In November 2015, approximately 11% of the outstanding shares of each of Japan
Post Bank, Japan Post Insurance and Japan Post Holdings were sold to the public, and these companies
are currently listed on the Tokyo Stock Exchange. In September 2017, an additional 22% of the
outstanding shares of Japan Post Holdings were sold to the public.
Supervision and Regulation
Japan
Supervision.
The FSA is responsible for supervising and overseeing financial institutions, making policy
for the overall Japanese financial system and conducting insolvency proceedings with respect to financial
institutions. The Bank of Japan, as the central bank for financial institutions, also has supervisory authority over
banks in Japan, based primarily on its contractual agreements and transactions with the banks.
The Banking Law. Among the various laws that regulate financial institutions, the Banking Law and its
subordinated orders and ordinances are regarded as the fundamental law for ordinary banks and other private
financial institutions. The Banking Law addresses capital adequacy, inspections and reporting to banks and bank
holding companies, as well as the scope of business activities, disclosure, accounting, limitation on granting
credit and standards for arm’s length transactions for them. Bank holding companies, banks and other financial
institutions are required to establish an appropriate system to better cope with conflicts of interest that may arise
from their business operations.
Legislation has recently been passed by, or introduced to, the Diet to amend various financial regulation
related laws, including the Banking Law, which includes certain deregulations on restrictions for shareholdings
by banks. For example, although a bank is generally prohibited from holding more than 5% of the outstanding
shares of another company (other than certain financial institutions) under the Banking Law, the bank may be
exempt from such requirement and allowed to hold more than 5% of the outstanding shares of such company
under amendments to the Banking Law that became effective in April 2014, if, among other exempted cases, a
bank’s shareholding contributes to revitalizing a company’s business or the local economy related to such
company. In May 2016, the Diet passed legislation to amend the Banking Law to allow banks and bank holding
companies with the FSA’s approval to hold controlling interests in certain financial technology companies. The
amendments became effective as of April 1, 2017. As a result of the amendments, banks and bank holding
companies may now acquire and hold more than 5% of the voting rights in certain financial technology
companies, subject to the approval of the Commissioner of the FSA. In May 2017, a bill to amend the Banking
Law was passed by the Diet, with the aim to promote affiliation and cooperation between financial institutions
50
and financial technology companies while securing the protection of customers. The amendment became
effective in June 2018.
Bank holding company regulations. A bank holding company is prohibited from carrying out any
business other than the management of its subsidiaries and other incidental businesses. A bank holding company
may have any of the following as a subsidiary: a bank, a securities company, an insurance company, a foreign
subsidiary that is engaged in the banking, securities or insurance business and any company that is engaged in a
finance-related business, such as a credit card company, a leasing company, investment advisory company, or
financial technology company as permitted by the April 1, 2017 amendments to the Banking Law. Certain
companies that are designated by a ministerial ordinance as those that cultivate new business fields may also
become the subsidiaries of a bank holding company.
In addition, under the April 1, 2017 amendments to the Banking Law, a bank holding company (i) is
required to perform certain specified functions as a bank holding company to ensure effective management of its
subsidiaries and (ii) is allowed to engage in certain specified common operations of its subsidiaries so as to
improve the efficiency of the operations of its group companies.
Capital adequacy. The capital adequacy guidelines adopted by the FSA that are applicable to Japanese
bank holding companies and banks with international operations closely follow the risk-weighted approach
introduced by the Basel Committee on Banking Supervision of the Bank for International Settlements.
Basel II, as adopted by the FSA, has been applied to Japanese banks since March 31, 2007. Certain
provisions of Basel III have been adopted by the FSA for Japanese banking institutions with international
operations conducted through their foreign offices. Basel III is built on “three pillars”: (1) minimum capital
requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market
discipline through the disclosure of information.
The Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global
regulatory framework, which has been referred to as “Basel III,” in July and September 2010. In December 2010,
the Basel Committee agreed on the details of the Basel III rules. The agreement on Basel III includes the
following: (1) raising the quality of capital to ensure banks are able to better absorb losses both on a going
concern basis and on a gone concern basis, (2) increasing the risk coverage of the capital framework, in particular
for trading activities, securitizations, exposures to off-balance sheet vehicles and counterparty credit exposures
arising from derivatives, (3) raising the level of minimum capital requirements, including an increase in the
minimum common equity requirement from 2% to 4.5%, which was phased in between January 1, 2013 and the
end of the calendar year 2014, and a capital conservation buffer of 2.5%, which is expected to be phased in
between January 1, 2016 and the end of the calendar year 2018, bringing the total common equity requirement to
7%, (4) introducing an internationally harmonized leverage ratio to serve as a backstop to the risk-based capital
measure and to contain the build-up of excessive leverage in the system, (5) raising standards for the supervisory
review process (Pillar 2) and public disclosures (Pillar 3), together with additional guidance in the areas of
valuation practices, stress testing, liquidity risk management, corporate governance and compensation,
(6) introducing minimum global liquidity standards consisting of both a short term liquidity coverage ratio and a
longer term structural net stable funding ratio, and (7) promoting the build-up of capital buffers that can be drawn
down in periods of stress, including both a capital conservation buffer and a countercyclical buffer to protect the
banking sector from periods of excess credit growth.
Under Basel III, Common Equity Tier 1, Tier 1 and total capital ratios are used to assess capital adequacy,
which ratios are determined by dividing applicable capital components by risk-weighted assets. Total capital is
defined as the sum of Tier 1 and Tier 2 capital.
Under Basel III, Tier 1 capital is defined to include Common Equity Tier 1 and Additional Tier 1 capital.
Common Equity Tier 1 capital is a new category of capital primarily consisting of:
‰
common stock,
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‰
‰
‰
capital surplus,
retained earnings, and
accumulated other comprehensive income.
Regulatory adjustments including certain intangible fixed assets, such as goodwill, and defined benefit
pension fund net assets (prepaid pension costs) will be deducted from Common Equity Tier 1 capital.
Additional Tier 1 capital generally consists of Basel III compliant preferred securities and, during the
transition period, other capital that meets Tier I requirements under the former Basel II standards, net of
regulatory adjustments.
Tier 2 capital generally consists of:
‰ Basel III compliant subordinated obligations,
‰
during the transition period, capital that meets Tier II requirements under the former Basel II standards,
‰
‰
allowances for credit losses, and
non-controlling interests in subsidiaries’ Tier 2 capital instruments.
In order to qualify as Tier 1 or Tier 2 capital under Basel III, applicable instruments such as preferred shares
and subordinated debt must have a clause in their terms and conditions that requires them to be written-off or
forced to be converted into common stock upon the occurrence of certain trigger events.
Risk-weighted assets are the sum of risk-weighted assets compiled for credit risk purposes, quotient of
dividing the amount equivalent to market risk by 8%, and quotient of dividing the amount equivalent to
operational risk by 8%, and also include any amount to be added due to transitional measures as well as floor
adjustments, if necessary. Risk-weighted assets include the capital charge of the credit valuation adjustment, or
CVA, the credit risk related to asset value correlation multiplier for large financial institutions, the 250% risk-
weighted threshold items not deducted from Common Equity Tier 1 capital, and certain Basel II capital
deductions that were converted to risk-weighted assets under Basel III, such as securitizations and significant
investments in commercial entities. Certain Basel III provisions were adopted by the FSA with transitional
measures and became effective March 31, 2013.
The capital ratio standards applicable to us are as follows:
‰
‰
‰
a minimum total capital ratio of 8.0%,
a minimum Tier 1 capital ratio of 6.0%, and
a minimum Common Equity Tier 1 capital ratio of 4.5%.
These minimum capital ratios are applicable to MUFG on a consolidated basis and to MUFG Bank and
Mitsubishi UFJ Trust and Banking on a consolidated as well as stand-alone basis.
We have been granted an approval by the FSA to exclude the majority of our investment in Morgan Stanley
from being subject to double gearing adjustments. The approval was granted for a 10-year period, but the
approval amount will be phased out by 20% each year starting from March 31, 2019. As of March 31, 2018, a
full application of double gearing adjustments with respect to our investment in Morgan Stanley would have
reduced our Common Equity Tier 1 capital ratio by approximately 0.9%.
The Financial Stability Board identified us as a global systematically important bank, or G-SIB, in its most
recent annual report published in November 2017, and is expected to update the list of G-SIB annually. In
December 2015, the FSA also designated us as a G-SIB as well as a domestic systemically important bank
generally referred to as a “D-SIB.”
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Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer and G-SIB
surcharge requirements became applicable to Japanese banking institutions with international operations
conducted through foreign offices, including us. The requirements are currently being phased in and, as of
March 31, 2018, we are required to maintain a capital conservation buffer of 1.875% , a G-SIB surcharge of
1.125% and a countercyclical buffer of 0.01% in addition to the 4.50% minimum Common Equity Tier 1 capital
ratio. When fully implemented on March 31, 2019, we will be required to maintain a capital conservation buffer
of 2.5%, a countercyclical buffer of up to 2.5%, and a G-SIB surcharge of 1.5%, assuming we will be in Bucket 2
of the G-SIB list.
In December 2017, the Group of Central Bank Governors and Heads of Supervision released final Basel III
reforms. The reforms are designed, among other things, to help reduce excessive variability in risk-weighted
assets among banks and improve the comparability and transparency of banks’ risk-based capital ratios. The
reforms endorsed by the Group of Central Bank Governors and Heads of Supervision include the following
elements:
‰
‰
‰
‰
‰
‰
a revised standardized approach for credit risk, which is designed to improve the robustness and risk
sensitivity of the existing approach;
revisions to the internal ratings-based approach for credit risk, where the use of the most advanced
internally modelled approaches for low-default portfolios will be limited;
revisions to CVA framework, including the removal of the internally modelled approach and the
introduction of a revised standardized approach;
a revised standardized approach for operational risk, which will replace the existing standardized
approaches and the advanced measurement approaches;
revisions to the measurement of the leverage ratio and a leverage ratio buffer for G-SIBs, which will
take the form of a Tier 1 capital buffer set at 50% of a G-SIB’s risk-weighted capital buffer; and
an aggregate output floor, which is designed to ensure that banks’ risk-weighted assets generated by
internal models are no lower than 72.5% of risk-weighted assets as calculated by the Basel III
framework’s standardized approaches. Banks will also be required to disclose their risk-weighted assets
based on these standardized approaches.
Most of the reforms are expected to become effective on January 1, 2022, subject to implementation through
legislation and regulation in each of the relevant jurisdictions, including Japan.
For a discussion on our capital ratios, see “Item 5.B. Operating and Financial Review and Prospects—
Liquidity and Capital Resources—Capital Adequacy.”
Prompt corrective action system. Under the prompt corrective action system, the FSA may take corrective
action, if a bank or a bank holding company fails to meet the minimum capital adequacy ratio. These actions
include requiring such bank or bank holding company to formulate and implement capital improvement
measures, requiring it to reduce assets or take other specific actions, and issuing an order to suspend all or part of
its business operations.
Prompt warning system. Under the prompt warning system, the FSA may take precautionary measures to
maintain and promote the sound operations of financial institutions, even before those financial institutions
become subject to prompt corrective actions. These measures require a financial institution to enhance
profitability, credit risk management, stability and cash flows.
Deposit insurance system and government measures for troubled financial institutions. The Deposit
Insurance Act is intended to protect depositors if a financial institution fails to meet its obligations. The Deposit
Insurance Corporation was established in accordance with the Deposit Insurance Act.
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City banks, including MUFG Bank, regional banks, trust banks, including Mitsubishi UFJ Trust and
Banking, and various other credit institutions participate in the deposit insurance system on a compulsory basis.
Under the Deposit Insurance Act, the maximum amount of protection is ¥10 million per customer within
one bank. The ¥10 million maximum applies to all deposits except for non-interest bearing deposits, which are
non-interest bearing deposits redeemable on demand and maintained by depositors primarily in settlement
accounts for payment and settlement purposes. Deposits in settlement accounts are fully protected without a
maximum amount limitation. Certain types of deposits are not covered by the deposit insurance system, such as
foreign currency deposits and negotiable certificates of deposit. As of April 1, 2018, the Deposit Insurance
Corporation charged an insurance premium equal to 0.046% per year on the deposits in the settlement accounts,
and a premium equal to 0.033% per year on the deposits in other accounts.
Under the Deposit Insurance Act, a Financial Reorganization Administrator can be appointed by the Prime
Minister if a bank’s liabilities exceed its obligations or has suspended, or is likely to suspend, repayment of
deposits. The Financial Reorganization Administrator will take control of the assets of the troubled bank, dispose
of the assets and search for another institution willing to take over the troubled bank’s business. The troubled
bank’s business may also be transferred to a “bridge bank” established by the Deposit Insurance Corporation to
enable the troubled bank’s operations to be maintained and continue temporarily, and the bridge bank will seek to
transfer the troubled bank’s assets to another financial institution or dissolve the troubled bank. The Deposit
Insurance Corporation protects deposits, as described above, either by providing financial aid for costs incurred
by the financial institution succeeding the insolvent bank or by paying insurance money directly to depositors.
The financial aid provided by the Deposit Insurance Corporation may take the form of a monetary grant, loan or
deposit of funds, purchase of assets, guarantee or assumption of debt, subscription for preferred stock, or loss
sharing.
The Deposit Insurance Act also provides for exceptional measures to cope with systemic risk in the financial
industry. Where the Prime Minister recognizes that the failure of a bank which falls into any of (i) through
(iii) below may cause an extremely grave problem to the maintenance of the financial order in Japan or the
region where such bank is operating, or systemic risk, if none of the measures described in (i) through (iii) below
is implemented, the Prime Minister may, following deliberation by the Financial Crisis Response Council,
confirm (nintei) the need to take any of the following measures: (i) if the bank does not fall into either of the
categories described in (ii) or (iii) below, the Deposit Insurance Corporation may subscribe for shares or
subordinated bonds of, or extend subordinated loans to the bank, or subscribe for shares of the bank holding
company of the bank, in order to enhance the bank’s regulatory capital (“Item 1 measures” (dai ichigo sochi));
(ii) if the bank has suspended, or is likely to suspend, repayment of deposits, or its liabilities exceed its assets,
financial aid exceeding the pay-off cost may be made available to such bank (“Item 2 measures” (dai nigo
sochi)); and (iii) if the bank has suspended, or is likely suspend, repayment of deposits, and its liabilities exceed
its assets, and the systemic risk cannot be avoided by the measures mentioned in (ii) above, the Deposit Insurance
Corporation may acquire all of the bank’s shares (“Item 3 measures” (dai sango sochi)). The expenses for the
implementation of the above measures will be borne by the banking industry, with an exception under which the
Japanese government may provide partial subsidies for such expenses.
Under the new orderly resolution regime established by amendments to the Deposit Insurance Act that were
promulgated in June 2013 and became effective on March 6, 2014, financial institutions, including banks,
insurance companies and securities companies and their holding companies, are subject to the regime. Further,
where the Prime Minister recognizes that the failure of a financial institution which falls into either of (a) or
(b) below may cause a significant disruption to the Japanese financial market or system in Japan if measures
described in (a) or measures described in (b) are not taken, the Prime Minister may, following deliberation by the
Financial Response Crisis Council, confirm (nintei) that any of the following measures need to be applied to the
financial institution:
(a)
if the financial institution is not a financial institution whose liabilities exceed its assets, the financial
institution shall be placed under the special supervision by the Deposit Insurance Corporation over the
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financial institution’s business operations and management and the disposal of the financial
institution’s assets, and the Deposit Insurance Corporation may provide the financial institution with
loans or guarantees necessary to avoid the risk of significant disruption to the financial system in
Japan, or subscribe for shares or subordinated bonds of, or extend subordinated loans to, the financial
institution, taking into consideration the financial condition of the financial institution (“Specified Item
1 measures” (tokutei dai ichigo sochi) under Article 126-2, Paragraph 1, Item 1 of the Deposit
Insurance Act); or
(b)
if the financial institution is a financial institution whose liabilities exceed, or are likely to exceed, its
assets or which has suspended, or is likely to suspend, payments on its obligations, the financial
institution shall be placed under the special supervision by the Deposit Insurance Corporation over the
financial institution’s business operations and management and the disposal of the financial
institution’s assets, and the Deposit Insurance Corporation may provide financial aid necessary to assist
a merger, business transfer, corporate split or other reorganization in respect of such failed financial
institution (“Specified Item 2 measures” (tokutei dai nigo sochi) under Article 126-2, Paragraph 1, Item
2 of the Deposit Insurance Act).
If the Prime Minister confirms that any of the measures set out in (b) above needs to be applied to a failed
financial institution, the Prime Minister may order that the failed financial institution’s business operations and
management and the disposal of the failed financial institution’s assets be placed under the special control of the
Deposit Insurance Corporation under Article 126-5 of the Deposit Insurance Act. The business or liabilities of the
financial institution subject to the special supervision or the special control of the Deposit Insurance Corporation
as set forth above may also be transferred to a “bridge financial institution” established by the Deposit Insurance
Corporation to enable the financial institution’s operations to be maintained and continue temporarily, or the
financial institution’s liabilities to be repaid, and the bridge financial institution will seek to transfer the financial
institution’s business or liabilities to another financial institution or dissolve the financial institution. The
financial aid provided by the Deposit Insurance Corporation to assist a merger, business transfer, corporate split
or other reorganization in respect of the failed financial institution set out in (b) above may take the form of a
monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription for
preferred stock or subordinated bonds, subordinated loan, or loss sharing. If the Deposit Insurance Corporation
has provided such financial assistance, the Prime Minister may designate the movable assets and claims of the
failed financial institution as not subject to attachment under Article 126-16 of the Deposit Insurance Act, and
such merger, business transfer, corporate split or other reorganization may be conducted outside of the court-
administrated insolvency proceedings. If the financial institution subject to the special supervision or the special
control by the Deposit Insurance Corporation as set forth above has liabilities that exceed, or are likely to exceed,
its assets, or has suspended, or is likely to suspend, payments on its obligations, the financial institution may
transfer all or a material portion of its business or all or a material portion of shares of its subsidiaries or
implement corporate split or certain other corporate actions with court permission in lieu of any shareholder
resolutions under Article 126-13 of the Deposit Insurance Act. In addition, the Deposit Insurance Corporation
must request other financial institution creditors of the failed financial institution to refrain from exercising their
rights against the failed financial institution until measures necessary to avoid the risk of significant disruption to
the financial system in Japan have been taken, if it is recognized that such exercise of their rights is likely to
make the orderly resolution of the failed financial institution difficult.
The expenses for implementation of the measures under this regime will be borne by the financial industry,
with an exception under which the Japanese government may provide partial subsidies for such expenses within
the limit to be specified in the government budget in cases where it is likely to cause extremely serious hindrance
to the maintenance of the credit system in Japan or significant turmoil in the Japanese financial market or system
if such expenses are to be borne only by the financial industry.
According to the announcement made by the FSA in March 2014, (i) Additional Tier 1 instruments and
Tier 2 instruments under Basel III issued by a bank must be written down or converted into common shares when
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the Prime Minister confirms (nintei) that Item 2 measures (dai nigo sochi), Item 3 measures (dai sango sochi), or
Specified Item 2 measures (tokutei dai nigo sochi) need to be applied to the bank and (ii) Additional Tier 1
instruments and Tier 2 instruments under Basel III issued by a bank holding company must be written down or
converted into common shares when the Prime Minister confirms (nintei) that Specified Item 2 measures (tokutei
dai nigo sochi) need to be applied to the bank holding company.
Recovery and resolution plan.
In November 2017, the Financial Stability Board published the latest list of
G-SIBs, which includes us. The list is annually updated by the Financial Stability Board. A recovery and
resolution plan must be put in place for each G-SIB, and the plans must be regularly reviewed and updated. In
Japan, under the Banking Law and the Comprehensive Guidelines for Supervision of Major Banks, etc., financial
institutions identified as G-SIBs must, as part of their crisis management, prepare and submit a recovery plan,
including triggers for the recovery plan and an analysis of recovery options, to the FSA. The Comprehensive
Guidelines also provide that resolution plans for such financial institutions are prepared by the FSA. We
submitted our recovery plan to the FSA in December 2017.
Total loss-absorbing capacity.
In November 2015, the Financial Stability Board issued the final Total
Loss-Absorbing Capacity, or TLAC, standard for G-SIBs, including us. The Financial Stability Board’s TLAC
standard is designed to ensure that if a G-SIB fails, it has sufficient loss-absorbing and recapitalization capacity
available in resolution to implement an orderly resolution that minimizes impacts on financial stability, ensures
the continuity of critical functions, and avoids exposing public funds to loss. The Financial Stability Board’s
TLAC standard defines a minimum requirement for the instruments and liabilities that should be readily
available to absorb losses in resolution but allows each resolution authority’s power under the applicable
resolution law to expose other liabilities to loss through bail-in or the application of other resolution tools. The
Financial Stability Board’s TLAC standard requires a G-SIB to hold TLAC in an amount not less than 16% of its
risk-weighted assets and 6% of the applicable Basel III leverage ratio denominator by January 1, 2019, and not
less than 18% of its risk-weighted assets and 6.75% of the applicable Basel III leverage ratio denominator by
January 1, 2022.
Following the publication of the final TLAC standards for G-SIBs by the Financial Stability Board in
November 2015, the FSA published an explanatory paper outlining its approach for the introduction of the TLAC
framework in Japan on April 15, 2016 and released revisions to the paper on April 13, 2018. According to the
FSA’s approach, which is subject to change based on future international discussions, the preferred resolution
strategy for G-SIBs in Japan is SPE resolution, in which resolution powers are applied to the top-level entity of a
banking group by a single national resolution authority. To implement this SPE resolution strategy effectively,
the FSA plans to require bank holding companies of Japanese G-SIBs, which will be the resolution entities, to
(i) meet the minimum external TLAC requirements provided under the Financial Stability Board’s TLAC
standard, and (ii) cause their material subsidiaries that are designated as systemically important by the FSA,
including but not limited to certain material sub-groups as provided in the Financial Stability Board’s TLAC
standard, to maintain a certain level of capital and debt recognized by the FSA as having Internal TLAC. In
addition, under the approach, Japanese G-SIBs would be allowed to count the Japanese Deposit Insurance Fund
Reserves in an amount equivalent to 2.5% of their consolidated risk-weighted assets from 2019 and 3.5% of their
consolidated risk-weighted assets from 2022 as external TLAC.
Furthermore, under the SPE resolution strategy provided for in the approach, while the actual measures to
be taken will be determined on a case-by-case basis considering the actual condition of the relevant Japanese
G-SIB in crisis, a possible model of Japanese G-SIB resolution will be:
(i) Certain measures are taken with the involvement of the relevant authority with respect to the Internal
TLAC obligations that the relevant material subsidiaries of the bank holding company of the relevant
Japanese G-SIB owe to the bank holding company so as to cause the bank holding company to absorb
the losses incurred by such material subsidiaries.
(ii) After the bank holding company absorbs the losses of its material subsidiaries, if it fulfills the
requirements for the application of Specified Item 2 measures (tokutei dai nigo sochi) set forth in
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Article 126-2, Paragraph 1, Item 2 of the Deposit Insurance Act, the Prime Minister confirms that
Specified Item 2 measures (tokutei dai nigo sochi) need to be applied to the bank holding company and
orders its operations and assets to be placed under the special control of the Deposit Insurance
Corporation. At this point, Basel III-eligible Additional Tier 1 instruments and Tier 2 instruments
issued by the bank holding company are written off or converted into equity under the terms of such
instruments prior to the loss absorption of external TLAC-eligible senior debt liabilities issued by the
bank holding company. In addition, the Prime Minister prohibits by its designation creditors of the
bank holding company from attaching any of its movable assets and claims which are to be transferred
to a bridge financial institution established by the Deposit Insurance Corporation pursuant to Article
126-16 of the Deposit Insurance Act.
(iii) The bank holding company transfers its systemically important assets and liabilities (including shares of
its material subsidiaries) to such bridge financial institution with court permission in lieu of any
shareholder resolutions under Article 126-13 of the Deposit Insurance Act, under a decision by the
Prime Minister that the bridge financial institution succeed to the business of the bank holding
company. On the other hand, it is expected that the bank holding company’s obligations with respect to
external TLAC-eligible senior notes would not be transferred to the bridge financial institution and
would remain as the bank holding company’s liabilities.
(iv) After transferring its systemically important assets and liabilities, the Deposit Insurance Corporation
files a petition for the commencement of a bankruptcy proceeding against the bank holding company
through which it will be dissolved, and the creditors of the bank holding company, including the
holders of external TLAC-eligible senior notes, will receive liquidation distributions out of the residual
assets of the bank holding company, as a result of which they may absorb losses.
On July 6, 2017, the Financial Stability Board published “Guiding Principles on the Internal Total Loss-
absorbing Capacity of G-SIBs (‘Internal TLAC’).” These principles were intended to assist the implementation
of the Financial Stability Board’s internal TLAC requirement by providing guidance on the size and composition
of the internal TLAC requirement, cooperation and coordination between home and host authorities, and the
trigger mechanism for internal TLAC. The internal TLAC requirement is subject to implementation through
legislation and regulation in each of the relevant jurisdictions, including Japan.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may not be able to
maintain our capital ratios above minimum required levels, which could result in the suspension of some or all of
our operations.” and “Item 5. Operating and Financial Review and Prospects—Recent Developments.”
Liquidity Coverage Ratio.
Japanese banks and bank holding companies with international operations are
required to disclose their LCRs calculated in accordance with the methodology prescribed in the FSA guidance
that has been adopted to implement the relevant Basel III standard. The LCR is a measure to determine whether a
bank has a sufficient amount of high-quality liquid assets, which are assets that can be converted easily and
immediately into cash in private markets in order to meet the bank’s liquidity needs, to survive in a 30-day
financial stress scenario, including sizable deposit outflows, inability to issue new bonds or access the interbank
market, stoppage of the collateralized funding market, need for additional collateral in connection with derivative
transactions, and significant outflows of cash under commitment lines to customers. Once a bank or bank holding
company fails to meet the minimum LCR of 100%, it is required to immediately report such failure to the FSA. If
the FSA deems the financial condition of the bank or bank holding company to be serious, the FSA may issue a
business improvement order. A minimum LCR of 90% is required in 2018, and the required minimum ratio is
expected to be raised by 10 percentage points to 100% in 2019.
Net Stable Funding Ratio. The NSFR is a measure to determine whether a bank has sustainable and long-
term liabilities and capital for its assets and activities. The Basel Committee on Banking Supervision issued the
final standard of NSFR in October 2014. In Japan, details of the NSFR requirements are currently under
discussion.
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Leverage Ratio.
Japanese banks and bank holding companies with international operations are required to
disclose their leverage ratios calculated in accordance with the methodology prescribed in the FSA guidance that
has been adopted to implement the relevant Basel III standard. The leverage ratio is designed for monitoring and
preventing the build-up of excessive leverage in the banking sector and is expressed as the ratio of Tier 1 capital
to total balance sheet assets adjusted in accordance with the FSA guidance. In December 2017, the Group of
Central Bank Governors and Heads of Supervision announced final Basel III reforms. The announced reforms
include the revisions to the measurement of the leverage ratio and a 3% minimum leverage ratio requirement,
plus a G-SIB leverage ratio buffer equal to 50% of the applicable G-SIB capital surcharge. The announcement
sets forth implementation dates of January 1, 2018 for the minimum leverage ratio requirement and January 1,
2022 for the G-SIB leverage ratio buffer requirement. These requirements are subject to implementation through
legislation and regulation in each of the relevant jurisdictions, including Japan.
Other major developments relating to international bank capital regulatory standards.
In March 2018, the
Basel Committee on Banking Supervision published a consultative document on revisions to the minimum
capital requirements for market risk. The proposals included in this consultative document are intended to
address issues that the Basel Committee has identified in the course of monitoring the implementation and impact
of the market risk standard issued in January 2016. The Committee proposes to revise certain items such as
recalibration of standardized approach risk weights for general interest risk, equity risk and foreign exchange risk
and the assessment process to determine whether a bank’s internal risk management models appropriately reflect
the risks of individual trading desks. The implementation date was set for January 1, 2022.
Inspection and reporting. By evaluating banks’ systems of self-assessment, inspecting their accounts and
reviewing their compliance with laws and regulations, the FSA monitors the financial soundness of banks,
including the status and performance of their control systems for business activities. The FSA applies the
Financial Inspection Rating System, or FIRST, to major banks. By providing inspection results in the form of
graded evaluations (i.e., ratings), the FSA expects this rating system to motivate financial institutions to
voluntarily improve their management and operations. Additionally, the FSA currently takes the “better
regulation” approach in its financial regulation and supervision. This consists of four pillars: (1) optimal
combination of rules-based and principles-based supervisory approaches, (2) timely recognition of priority issues
and effective responses, (3) encouraging voluntary efforts by financial firms and placing greater emphasis on
providing them with incentives, and (4) improving the transparency and predictability of regulatory actions, in
pursuit of improvement of the quality of financial regulation and supervision.
In the FSA’s “Strategic Directions and Priorities 2017-2018” published in November 2017, the FSA
announced new supervisory approaches in which it intends to focus on (i) whether financial institutions provide
high-quality financial services based on best practices, (ii) whether financial institutions implement measures
sufficient to sustain their long-term financial health, (iii) whether financial institutions appropriately respond to
issues that are critical to their business on an institution-wide basis from a holistic perspective. To implement
these approaches, the FSA announced plans to (i) balance between rule-based supervision and principle-based
supervision, (ii) encourage financial institutions to provide more information on their initiatives for customers,
and (iii) develop a dynamic supervisory program taking into consideration future changes.
Furthermore, the Securities and Exchange Surveillance Commission of Japan, or SESC, inspects banks in
connection with their securities business as well as financial instruments business operators, such as securities
firms. The Bank of Japan also conducts inspections of banks. The Bank of Japan Law provides that the Bank of
Japan and financial institutions may agree as to the form of inspection to be conducted by the Bank of Japan.
Laws limiting shareholdings of banks. The provisions of the Antimonopoly Act that generally prohibit a
bank from holding more than 5% of another company’s voting rights do not apply to a bank holding company.
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However, the Banking Law prohibits a bank holding company and its subsidiaries from holding, on an
aggregated basis, more than 15% of the voting rights of companies other than those which can legally become
subsidiaries of bank holding companies. There have recently been amendments to various financial regulation
related laws, including the Banking Law, which includes certain deregulations on restrictions for shareholdings
by banks, as described above.
In addition, a bank is prohibited from holding shares in other companies exceeding the aggregate of its
Common Equity Tier 1 capital amount and Additional Tier 1 capital amount.
Restrictions on exposures to single large counterparties. The Banking Law prohibits banks and bank
holding companies (on a consolidated basis with their subsidiaries and affiliates) from having exposures
exceeding 25% of the sum of their Tier 1 and Tier 2 capital to a single counterparty (on a consolidated basis with
its subsidiaries and specially related parties as defined in the law). The Banking Law is expected to be amended
in light of the Basel Committee on Banking Supervision’s final standard published in April 2014, which, among
other things, (1) requires all exposures to a counterparty or a group of connected counterparties equal to or
exceeding 10% of Tier 1 capital to be reported to national supervisors and (2) prohibits a large exposure
exceeding 25% of Tier 1 capital.
Financial Instruments and Exchange Act. The Financial Instruments and Exchange Act provides
protection for investors and also regulates sales of a wide range of financial instruments and services, requiring
financial institutions to improve their sales rules and strengthen compliance frameworks and procedures. Among
the instruments that the Japanese banks deal in, derivatives, foreign currency-denominated deposits, and variable
insurance and annuity products are subject to regulations covered by the sales-related rules of conduct under the
law.
Article 33 of the Financial Instruments and Exchange Act generally prohibits banks from engaging in
securities transactions. However, bank holding companies and banks may, through a domestic or overseas
securities subsidiary, conduct all types of securities businesses, with appropriate approval from the FSA.
Similarly, registered banks are permitted to provide securities intermediation services and engage in certain other
similar types of securities related transactions, including retail sales of investment funds and government and
municipal bonds.
Subsidiaries of bank holding companies engaging in the securities business are subject to the supervision of
the FSA as financial instruments business operators. The Prime Minister has the authority to regulate the
securities industry and securities companies, which authority is delegated to the Commissioner of the FSA under
the Financial Instruments and Exchange Act. In addition, the SESC, an external agency of the FSA, is
independent from the FSA’s other bureaus and is vested with the authority to conduct day-to-day monitoring of
the securities markets and to investigate irregular activities that hinder fair trading of securities, including
inspections of securities companies as well as banks in connection with their securities business. Furthermore,
the Commissioner of the FSA delegates certain authority to the Director General of the Local Finance Bureau to
inspect local securities companies and their branches. A violation of applicable laws and ordinances may result in
various administrative sanctions, including revocation of registration, suspension of business or an order to
discharge any director or executive officer who has failed to comply with applicable laws and ordinances.
Securities companies are also subject to the rules and regulations of the Japanese stock exchanges and the Japan
Securities Dealers Association, a self-regulatory organization of securities companies.
Act on Sales, etc. of Financial Instruments. The Act on Sales, etc. of Financial Instruments was enacted to
protect customers from incurring unexpected losses as a result of purchasing financial instruments. Under this
act, sellers of financial instruments have a duty to their potential customers to explain important matters such as
the nature and magnitude of risks involved regarding the financial instruments that they intend to sell. If a seller
fails to comply with the duty, there is a rebuttable presumption that the loss suffered by the customer due to the
seller’s failure to explain is equal to the amount of decrease in the value of the purchased financial instruments.
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Anti-money laundering laws. Under the Act on Prevention of Transfer of Criminal Proceeds, specified
business operators, including financial institutions, are required to verify customer identification data, preserve
transaction records, and file Suspicions Transaction Reports with the FSA or other regulatory authorities in cases
where any asset received through their business operations is suspected of being criminal proceeds.
Most recent amendments to the Act, which became effective on October 1, 2016, included, among others,
(1) enhancement of customer due diligence including identification of beneficial owners who are natural persons
controlling corporate customers through voting rights or other means, and (2) stricter requirements for the risk-
based approach through assessment of money laundering and terrorist financing risks and application of adequate
resources effectively to mitigate such risks.
In February 2018, the FSA issued “Guidelines on Anti-Money Laundering and Terrorist Financing” to
require financial institutions to further strengthen their management of anti-money laundering and terrorist
financing functions and their risk-based approach used in such functions.
Acts concerning trust business conducted by financial institutions. Under the Trust Business Act, joint
stock companies that are licensed by the Prime Minister as trust companies, including non-financial companies,
are allowed to conduct trust business. In addition, under the Act on Provision, etc. of Trust Business by Financial
Institutions, banks and other financial institutions, as permitted by the Prime Minister, are able to conduct trust
business. The Trust Business Act provides for a separate type of registration for trustees who conduct only
administration type trust business. The Trust Business Act also provides for various duties imposed on the trustee
in accordance with and in addition to the Trust Act.
Regulatory developments relating to lending to small and medium-sized firms and others. The Act
Concerning Temporary Measures to Facilitate Financing for Small and Medium-sized Firms and Others required
financial institutions, among other things, to make an effort to reduce their customers’ burden of loan repayment
by employing methods such as modifying the term of loans at the request of eligible borrowers, including small
and medium-sized firms and individual home loan borrowers. This legislation also required financial institutions
to internally establish a system to implement the requirements of the legislation and periodically make public
disclosure of and report to the relevant authority on the status of implementation. Although this legislation
expired on March 31, 2013, the FSA continues to encourage financial institutions to continue to provide support
to small and medium-sized firms by revising the Inspection Manual, Supervisory Policy and Ordinance for
Enforcement of the Baking Law in order to encourage financial institutions to modify the terms of loans, provide
smooth financing, and take active roles in supporting operations of such firms.
Act on the Protection of Personal Information. With regard to protection of personal information, the Act
on the Protection of Personal Information requires, among other things, Japanese banking institutions to limit the
use of personal information to the stated purposes and to properly manage the personal information in their
possession, and forbids them from providing personal information to third parties without consent. If a bank
violates certain provisions of the act, the FSA may advise or order the bank to take proper action. In addition, the
Banking Law and the Financial Instruments and Exchange Act contain certain provisions with respect to
appropriate handling of customer information.
Act on the Use of Personal Identification Numbers in the Administration of Government Affairs. Pursuant
to the Act on the Use of Personal Identification Numbers in the Administration of Government Affairs, which
became effective in October 2015, the Japanese government has adopted a Social Security and Tax Number
System, which is designed to (1) improve social security services, (2) enhance public convenience in obtaining
government services, and (3) increase the efficiency of the administration of government affairs. Under this
system, a 12-digit unique number will be assigned to each resident of Japan to identify and manage information
relating to the resident for government service and tax purposes. Effective October 2015, financial institutions
are required to implement measures to ensure that such customer information will be protected from
inappropriate disclosure and other unauthorized use.
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Act Concerning Protection of Depositors from Illegal Withdrawals Made by Counterfeit or Stolen
Cards. The Act on Protection, etc. of Depositors and Postal Saving Holders from Unauthorized Automated
Withdrawal, etc. Using Counterfeit Cards, etc. and Stolen Cards, etc. requires financial institutions to establish
internal systems to prevent illegal withdrawals of deposits made using counterfeit or stolen bank cards. The act
also requires a financial institution to compensate depositors for any amount illegally withdrawn using stolen
bank cards except in certain cases, including those where the financial institution can verify that it acted in good
faith without negligence and there was gross negligence on the part of the relevant depositor. In addition, the act
provides that illegal withdrawals with counterfeit bank cards are invalid unless the financial institution acted in
good faith without negligence and there was gross negligence on the part of the relevant account holder.
Government reforms to restrict maximum interest rates on consumer lending business.
In December 2006,
the Diet passed legislation to reform the regulations relating to the consumer lending business, including
amendments to the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates which,
effective June 18, 2010, reduced the maximum permissible interest rate from 29.2% per annum to
20% per annum. The regulatory reforms also included amendments to the Law Concerning Lending Business
which, effective June 18, 2010, abolished the so-called “gray-zone interest.” Gray-zone interest refers to interest
rates exceeding the limits stipulated by the Interest Rate Restriction Act (between 15% per annum to
20% per annum depending on the amount of principal). Prior to June 18, 2010, gray-zone interests were
permitted under certain conditions set forth in the Law Concerning Lending Business. As a result of the
regulatory reforms, all interest rates are now subject to the lower limits imposed by the Interest Rate Restriction
Act, compelling lending institutions, including our consumer finance subsidiaries and equity method investees, to
lower the interest rates they charge borrowers. Furthermore, the new regulations, which became effective on
June 18, 2010, require, among other things, consumer finance companies to limit their lending to a single
customer to a maximum of one third of the customer’s annual income regardless of the customer’s repayment
capability.
In addition, as a result of decisions made by the Supreme Court of Japan prior to June 18, 2010, imposing
stringent requirements for charging such gray-zone interest rates, consumer finance companies have been
responding to borrowers’ claims for reimbursement of previously collected interest payments in excess of the
limits stipulated by the Interest Rate Restriction Act. See “Item 3.D. Key Information—Risk Factors—Risks
Related to Our Business—Because of our loans to consumers and our shareholdings in companies engaged in
consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan
may further adversely affect our financial results.”
Act on Special Provisions of the Income Tax Act, the Corporation Tax Act and the Local Tax Act Incidental
to Enforcement of Tax Treaties. Pursuant to the Amendments to the Act on Special Provisions of the Income
Tax Act, the Corporation Tax Act and the Local Tax Act Incidental to Enforcement of Tax Treaties, which
became effective in January 2017, financial institutions are required to collect certain information from their
accountholders, including jurisdictions of tax residence, and report such information to the National Tax Agency
in accordance with the Common Reporting Standard as developed by the Organization for Economic
Co-operation and Development.
Recent Regulatory Actions.
In June 2018, the SESC issued a recommendation that the FSA impose a
¥218.4 million administrative monetary penalty against Mitsubishi UFJ Morgan Stanley Securities. The SESC is
an external agency of the FSA established in 1992 and has the authority to, among other things, investigate
market misconduct and recommend administrative actions to the FSA. The SESC found that certain orders to buy
and sell 10-year Japanese government bond futures placed by an employee of Mitsubishi UFJ Morgan Stanley
Securities in August 2017 amounted to market manipulation. Mitsubishi UFJ Morgan Stanley Securities
cooperated with the SESC’s investigation, and continues to work on enhancing its internal controls and
compliance framework.
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United States
As a result of our operations in the United States, we are subject to extensive U.S. federal and state
supervision and regulation.
Overall supervision and regulation. We are subject to supervision, regulation and examination with
respect to our U.S. operations by the FRB pursuant to the U.S. Bank Holding Company Act of 1956, as amended,
or the BHCA, and the International Banking Act of 1978, as amended, or the IBA, because we and MUFG Bank
are bank holding companies and foreign banking organizations, as defined pursuant to those statutes. The FRB
functions as our “umbrella” supervisor under amendments to the BHCA effected by the Gramm-Leach-Bliley
Act of 1999, which among other things:
‰
‰
prohibited further expansion of the types of activities in which bank holding companies, acting directly
or through non-bank subsidiaries, may engage;
authorized qualifying bank holding companies to opt to become “financial holding companies,” and
thereby acquire the authority to engage in an expanded list of activities; and
‰ modified the role of the FRB by specifying new relationships between the FRB and the functional
regulators of non-bank subsidiaries of both bank holding companies and financial holding companies.
The BHCA generally prohibits each of a bank holding company and a foreign banking organization that
maintains branches or agencies in the United States from, directly or indirectly, acquiring more than 5% of the
voting shares of any company engaged in non-banking activities in the United States unless the bank holding
company or foreign banking organization has elected to become a financial holding company, as discussed
above, or the FRB has determined, by order or regulation, that such activities are so closely related to banking as
to be a proper incident thereto and has granted its approval to the bank holding company or foreign banking
organization for such an acquisition. The BHCA also requires a bank holding company or foreign banking
organization that maintains branches or agencies in the United States to obtain the prior approval of an
appropriate federal banking authority before acquiring, directly or indirectly, the ownership of more than 5% of
the voting shares or control of any U.S. bank or bank holding company. In addition, under the BHCA, a
U.S. bank or a U.S. branch or agency of a foreign bank is prohibited from engaging in various tying
arrangements involving it or its affiliates in connection with any extension of credit, sale or lease of any property
or provision of any services.
In October 2008, we, MUFG Bank, Mitsubishi UFJ Trust and Banking and MUFG Americas Holdings
initially attained financial holding company status. In August 2016, Mitsubishi UFJ Trust and Banking
relinquished its financial holding company status. Financial holding company status is subject to periodic
regulatory review. A financial holding company is authorized to engage in an expanded list of activities deemed
to be financial in nature or incidental to such financial activity as well as certain specified non-banking activities
deemed to be closely related to banking. In order to maintain the status as a financial holding company, a bank
holding company must continue to meet certain standards established by the FRB. Those standards require that a
financial holding company exceed the minimum standards applicable to bank holding companies that have not
elected to become financial holding companies. These higher standards include meeting the “well capitalized”
and “well managed” standards for financial holding companies as defined in the regulations of the FRB. Failure
to meet these standards, due to inadequate capital management or shortcomings in operations, results in
restrictions on the ability to engage in expanded activities as a financial holding company. In addition, a financial
holding company must ensure that its U.S. banking subsidiaries meet certain minimum standards under the
Community Reinvestment Act of 1977.
U.S. branches and agencies of subsidiary Japanese banks. Under the authority of the IBA, our banking
subsidiaries, MUFG Bank and Mitsubishi UFJ Trust and Banking, operate five branches, two agencies and seven
representative offices in the United States. MUFG Bank operates branches in Los Angeles, California; Chicago,
Illinois; and two branches in New York, New York; agencies in Houston and Dallas, Texas; and representative
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offices in Washington, D.C; San Francisco, California; Seattle, Washington; Atlanta, Georgia; Minnetonka,
Minnesota; Jersey City, New Jersey; and Florence, Kentucky. Mitsubishi UFJ Trust and Banking operates a
branch in New York, New York.
The IBA provides, among other things, that the FRB may examine U.S. branches and agencies of foreign
banks, and each branch and agency shall be subject to on-site examination by the appropriate federal or state
bank supervisor as frequently as would a U.S. bank. The IBA also provides that if the FRB determines that a
foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate
authorities in its home country, or if there is reasonable cause to believe that the foreign bank or its affiliate has
committed a violation of law or engaged in an unsafe or unsound banking practice in the United States, the FRB
may order the foreign bank to terminate activities conducted at a branch or agency in the United States.
U.S. branches and agencies of foreign banks must be licensed, and are also supervised and regulated, by a
state or by the Office of the Comptroller of the Currency, or the OCC, the federal regulator of U.S. national
banks. The OCC is an independent bureau of the U.S. Department of the Treasury. Effective November 7, 2017,
all of the branches and agencies of MUFG Bank and Mitsubishi UFJ Trust and Banking in the United States
converted from state-licensed branches and agencies to federally-licensed branches and agencies supervised and
regulated by the OCC. MUFG Bank is currently in litigation with the New York State Department of Financial
Services regarding the license conversion of the New York branches of MUFG Bank and Mitsubishi UFJ Trust
and Banking. See “Item 8.A. Financial Information—Legal Proceedings.”
When opening a federal branch or agency, a foreign bank must establish and maintain a deposit account
with an FRB member bank of at least (1) the amount of capital that would be required of a national bank being
organized at the same location or (2) five percent of the total liabilities of the federal branch or agency, including
acceptances but excluding (i) accrued expenses and (ii) amounts due and other liabilities to offices, branches, and
subsidiaries of the foreign bank, whichever is greater. Federally-licensed branches and agencies must also submit
written reports concerning their assets and liabilities and other matters, to the extent required by the OCC or the
FRB, and are examined at periodic intervals by the OCC and the FRB.
U.S. banking subsidiaries. We indirectly own and control one U.S. bank, MUFG Union Bank, N.A.
(known prior to July 1, 2014 as Union Bank, N.A.), through MUFG Bank and its subsidiary, MUFG Americas
Holdings, a registered bank holding company.
MUFG Union Bank is a national bank subject to the supervision, examination and regulatory authority of
the OCC pursuant to the National Bank Act.
In regulating national banks such as MUFG Union Bank, the OCC has the power to examine those banks;
approve or deny applications for new charters, branches, capital, or other changes in corporate or banking
structure; take supervisory actions against national banks that do not comply with laws and regulations or that
otherwise engage in unsound practices; remove officers and directors, negotiate agreements to change banking
practices, and issue cease and desist orders as well as civil money penalties; and issue rules and regulations, legal
interpretations, and corporate decisions governing investments, lending, and other practices. The OCC’s staff of
bank examiners conducts on-site reviews and provides sustained supervision of national banks. Examiners
analyze loan and investment portfolios, funds management, capital, earnings, liquidity, and sensitivity to market
risk for national banks. Examiners also review internal controls, internal and external audit, and compliance with
law, and evaluate management’s ability to identify and control risk.
In addition, the FDIC insures the deposits of MUFG Union Bank up to legally specified maximum amounts.
In the event of a failure of an FDIC-insured bank, the FDIC is virtually certain to be appointed as receiver, and
would resolve the failure under provisions of the Federal Deposit Insurance Act. In the liquidation or other
resolution of a failed FDIC-insured depository institution, deposits in its U.S. offices and other claims for
administrative expenses and employee compensation are afforded priority over other general unsecured claims,
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including deposits in offices outside the United States, non-deposit claims in all offices and claims of a parent
company. Moreover, under longstanding FRB policy, a bank holding company is expected to act as a source of
financial strength for its banking subsidiaries and to commit resources to support such banks.
Bank capital requirements and capital distributions. MUFG Union Bank is subject to applicable risk-
based and leverage capital guidelines issued by U.S. regulators for banks and bank holding companies. In
addition, MUFG Bank and Mitsubishi UFJ Trust and Banking, as foreign banking organizations that have U.S.
branches and agencies and that are controlled by us, are subject to the FRB’s requirements that they be “well-
capitalized” based on Japan’s risk based capital standards. MUFG Union Bank, MUFG Bank, Mitsubishi UFJ
Trust and Banking, and MUFG Americas Holdings are all “well capitalized” as defined under, and otherwise
comply with, all U.S. regulatory capital requirements applicable to them. The Federal Deposit Insurance
Corporation Improvement Act of 1991, or FDICIA, provides, among other things, for expanded regulation of
insured depository institutions, including banks, and their parent holding companies. As required by FDICIA, the
federal banking agencies have established five capital tiers ranging from “well capitalized” to “critically
undercapitalized” for insured depository institutions. As an institution’s capital position deteriorates, the federal
banking regulators may take progressively stronger actions, such as further restricting affiliate transactions,
activities, asset growth or interest payments. In addition, FDICIA generally prohibits an insured depository
institution from making capital distributions, including the payment of dividends, or the payment of any
management fee to its holding company, if the insured depository institution would be undercapitalized after
making such distribution or paying such dividend or fee.
The availability of dividends from insured depository institutions in the United States is limited by various
other statutes and regulations. The National Bank Act and other federal laws prohibit the payment of dividends
by a national bank under various circumstances and limit the amount a national bank can pay without the prior
approval of the OCC. In addition, state-chartered banking institutions are subject to dividend limitations imposed
by applicable federal and state laws.
Other regulated U.S. subsidiaries. Our non-bank subsidiaries that engage in securities-related activities in
the United States are regulated by appropriate functional regulators, such as the SEC, any self-regulatory
organizations of which they are members, and the appropriate state regulatory agencies. These non-bank
subsidiaries are required to meet separate minimum capital standards as imposed by those regulatory authorities.
Anti-Money Laundering Initiatives and the USA PATRIOT Act. A major focus of U.S. governmental
policy relating to financial institutions in recent years has been aimed at preventing money laundering and
terrorist financing. The USA PATRIOT Act of 2001 substantially broadened the scope of U.S. anti-money
laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating
new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S.
Department of the Treasury has issued a number of regulations that impose obligations on financial institutions to
maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and
terrorist financing, and to verify the identity of their customers. In addition, the bank regulatory agencies
carefully scrutinize the adequacy of an institution’s policies, procedures and controls. As a result, there have been
an increased number of regulatory sanctions and law enforcement authorities have been taking a more active role
in enforcing these laws. Failure of a financial institution to maintain and implement adequate policies, procedures
and controls to prevent money laundering and terrorist financing could in some cases have serious legal and
reputational consequences for the institution, including the incurrence of expenses to enhance the relevant
programs, the imposition of limitations on the scope of their operations and the imposition of fines and other
monetary penalties. See “Item 3.D. Risk Factors—We may become subject to regulatory actions or other legal
proceedings relating to our transactions or other aspects of our operations, which could result in significant
financial losses, restrictions on our operations and damage to our reputation.”
Foreign Corrupt Practices Act.
In recent years, U.S. regulatory and enforcement agencies including the
SEC and the U.S. Department of Justice have significantly increased their enforcement efforts of the Foreign
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Corrupt Practices Act, or the FCPA. The FCPA prohibits U.S. securities issuers, U.S. domestic entities, and
parties doing substantial business within the United States (including their shareholders, directors, agents,
officers, and employees) from making improper payments to non-U.S. government officials in order to obtain or
retain business. The FCPA also requires U.S. securities issuers to keep their books and records in detail,
accurately, and in such a way that they fairly reflect all transactions and dispositions of assets. Those
enforcement efforts have targeted a wide range of U.S. and foreign-based entities and have been based on a broad
variety of alleged fact patterns, and in a number of cases have resulted in the imposition of substantial criminal
and civil penalties or in agreed payments in settlement of alleged violations. Failure of a financial institution
doing business in the United States to maintain adequate policies, procedures, internal controls, and books and
records on a global basis that address compliance with FCPA requirements could in some cases have serious
legal and reputational consequences for the institution, including the incurrence of expenses to enhance the
relevant programs and the imposition of fines and other monetary penalties.
Regulatory Reform Legislation.
In response to the global financial crisis and the perception that lax
supervision of the financial industry in the United States may have been a contributing cause, legislation
designed to reform the system for supervision and regulation of financial firms doing business in the United
States, the so-called Dodd-Frank Act, was signed into law on July 21, 2010. The Dodd-Frank Act is complex and
extensive in its coverage and contains a wide range of provisions that affect financial institutions operating in the
United States, including our U.S. operations. Included among these provisions are sweeping reforms designed to
reduce systemic risk presented by very large financial firms, promote enhanced supervision, regulation, and
prudential standards for financial firms, establish comprehensive supervision of financial markets, impose new
limitations on permissible financial institution activities and investments, expand regulation of the derivatives
markets, protect consumers and investors from financial abuse, and provide the government
with the tools needed to manage a financial crisis. Key provisions that impact our operations are summarized
below. However certain regulatory rules under the Dodd-Frank Act are not yet finalized, require further
interpretive guidance by the relevant supervisory agencies, or do not yet require us to fully implement
compliance procedures. Accordingly, while the legislation has an impact on our operations, including the
imposition of significant compliance costs, we are unable to assess with certainty the full degree of impact of the
Dodd-Frank Act on our operations at this time.
Among the components of the Dodd-Frank Act that have impacted or may impact our operations are the
provisions relating to enhanced prudential standards, including capital, liquidity and structural requirements, the
“Volcker Rule,” derivatives regulation, credit reporting, resolution plans, incentive-based compensation, the
establishment of the Consumer Financial Protection Bureau, and debit interchange fees. Although certain of the
regulatory rules regarding the foregoing components are still pending, as noted above, based on information
currently available to us, other than the Volcker Rule and derivatives regulations as discussed below, the impact
of these components is expected to be mainly limited to our U.S. operations and not to be material to us on a
consolidated basis. We intend to continue to monitor developments relating to the Dodd-Frank Act and the
potential impact on our activities inside and outside of the United States.
With respect to the Dodd-Frank Act provisions related to enhanced prudential standards, in February 2014
the FRB issued final rules that established enhanced prudential standards for the U.S. operations of foreign
banking organizations such as MUFG. These rules required us to organize by July 1, 2016 all of our U.S. bank
and non-bank subsidiaries, with certain limited exceptions, under a U.S. IHC that is subject to U.S. capital
requirements and enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding
companies of the same size. Under these rules, we were required to change the structure of our U.S. operations,
including the manner in which we oversee and manage those operations, and may be required to inject additional
capital into our U.S. operations. We have designated MUFG Americas Holdings as our IHC.
MUFG Americas Holdings is subject to various U.S. prudential requirements and has become subject to
others with the designation of MUFG Americas Holdings as our IHC as of July 1, 2016. MUFG Americas
Holdings was previously subject to risk-based and leverage capital requirements, liquidity requirements, and
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other enhanced prudential standards applicable to large U.S. bank holding companies. MUFG Americas Holdings
was also subject to capital planning and stress testing requirements. MUFG Americas Holdings is now subject to
the capital planning and stress testing requirements and certain enhanced prudential standards applicable to IHCs.
On June 22, 2017, the FRB released the results of the 2017 Dodd-Frank Act stress tests. It found that, even in the
severely adverse economic stress test scenario, MUFG Americas Holdings would maintain capital ratios well
above the required minimum levels. On June 28, 2017, the FRB announced that it had no objections to the capital
plan submitted by MUFG Americas Holdings as part of the 2017 Comprehensive Capital Analysis and Review,
or CCAR. The FRB announced early in 2017 that MUFG Americas Holdings would not be subject to the
qualitative portion of the CCAR.
The FRB has the authority to examine an IHC and any of its subsidiaries. U.S. leverage requirements
applicable to the IHC took effect beginning in January 2018. MUFG Americas Holdings is subject to a
requirement to maintain an LCR equal to at least 100% based on total projected net cash outflows over a
30-calendar day period, effectively using net cash outflow assumptions equal to 70% of the outflow assumptions
prescribed for internationally active banking organizations. Our combined U.S. operations, including MUFG
Bank’s and Mitsubishi UFJ Trust and Banking’s branches, are also subject to certain requirements related to
liquidity and risk management.
The Volcker Rule was issued in final form by the Federal Reserve in December 2013. Under the Volcker
Rule, we are required to cease conducting certain proprietary trading activities, which means trading in securities
and financial instruments for our own account, subject to certain exceptions, including market-making, hedging,
and underwriting activities if such activities are conducted within a rigorous compliance framework. We are also
restricted from engaging in certain activities regarding hedge funds and private equity funds, or covered funds.
While the Volcker Rule excludes restrictions on such activities conducted solely outside of the United States, the
regulatory definition of such exempted activities is narrow and complex and in some cases requires further
clarification. Our proprietary trading and covered funds activities are generally executed outside of the
United States, but certain activities within the United States could potentially have fallen within the scope of the
Rule. We have undertaken steps that we believe are appropriate to bring our activities and investments into
compliance with the Rule. Given the limited amount of restricted activities in which we previously engaged
within the United States, we do not expect the implementation of the Volcker Rule to be material to our
operations.
U.S. regulators continue to issue final regulations and regulatory determinations governing swaps and
derivatives markets as contemplated by the Dodd-Frank Act. To date, MUFG Bank and Mitsubishi UFJ
Securities International, plc, have registered as swap dealers with the U.S. Commodity Futures Trading
Commission, or CFTC. Depending on the finalization of regulations and regulatory determinations governing
swaps and derivatives markets under the Dodd-Frank Act, as well as the activities of our other subsidiaries
located inside and outside of the United States, our other subsidiaries may have to register as swap dealers with,
or be subject to the regulations of, the CFTC and/or SEC. Regulation of swap dealers by the CFTC and SEC
imposes numerous corporate governance, business conduct, capital, margin, reporting, clearing, execution, and
other regulatory requirements on our operations, which may adversely impact our derivatives businesses and
make us less competitive than those competitors that are not subject to the same regulations. Although many
regulations applicable to swap dealers are already in effect, it is difficult to assess the full impact of these
requirements because some of the most important regulatory determinations have not yet been implemented or
finalized. For example, U.S. regulators have adopted guidance and rules on the application of U.S. regulations to
activities of registered swap dealers outside of the United States. The extraterritorial application of swap dealer
regulatory requirements imposes significant operational and compliance burdens on our swaps activities outside
of the United States.
On June 14, 2018, the FRB approved a final rule regarding single counterparty credit limits, or SCCL, for
large banking organizations. The SCCL final rule is considered the last major piece of regulatory action needed
to implement Section 165(e) of the Dodd-Frank Act. Section 165(e) was a response to the concern that failure or
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financial distress of one large, interconnected financial institution could cascade through the U.S. financial
system and impair the financial condition of that firm’s counterparties, including other large, interconnected
firms. Section 165(e) generally, and the SCCL final rule specifically, seek to mitigate this risk by limiting the
aggregate exposure among such financial institutions and their counterparties. The deadlines for compliance with
the requirements of the final rule are in 2020. We are currently analyzing the requirements of the final rule and
its impact on MUFG.
Foreign Account Tax Compliance Act. The Hiring Incentives to Restore Employment Act was enacted in
March 2010 and contains provisions commonly referred to as the Foreign Account Tax Compliance Act, or
FATCA. The U.S. Treasury, acting through the Internal Revenue Service, or the IRS, issued final FATCA
regulations in January 2013.
The FATCA framework has been expanded with the introduction of Intergovernmental Agreements between
the U.S. Treasury and foreign governments, which pursue a framework for intergovernmental cooperation to
facilitate the implementation of FATCA. The United States and Japan have entered into an Intergovernmental
Agreement.
We have developed internal procedures and processes that we believe address the regulatory requirements
under FATCA. However, doing so has required us to develop extensive systems capabilities and internal
processes to identify and report U.S. account holders who are subject to FATCA requirements, which has been a
complex and costly process requiring significant internal resources. If our procedures and processes are
determined not to be adequate to meet the requirements of FATCA, we could potentially be subject to serious
legal and reputational consequences, including the imposition of withholding taxes on certain amounts payable to
us from U.S. sources, and could be required to expend additional resources to enhance our systems, procedures
and processes and take other measures in response to such consequences.
Capital Adequacy. MUFG Americas Holdings and MUFG Union Bank are required to maintain minimum
capital ratios in accordance with rules issued by the U.S. Federal banking agencies. In July 2013, the U.S.
Federal banking agencies issued final rules to implement the Basel Committee on Banking Supervision’s capital
guidance for U.S. banking organizations, or U.S. Basel III. These rules establish more restrictive capital
definitions, create additional categories and higher risk weightings for certain asset classes and off-balance sheet
exposures, higher minimum capital and leverage ratios and capital conservation buffers that will be added to the
minimum capital requirements. These rules supersede the U.S. federal banking agencies’ general risk-based
capital rules generally referred to as Basel I, the advanced approaches rules generally referred to as Basel II,
which are applicable to certain large banking organizations, and leverage rules, and are subject to certain
transition provisions. MUFG Americas Holdings became subject to the U.S. Basel III capital rules in January
2015, with certain provisions subject to a phase-in period, while MUFG Union Bank continues to be subject to
the U.S. Basel III capital rules which became effective for advanced approaches institutions on January 1, 2014.
The U.S. Basel III capital rules are scheduled to be substantially phased in by January 1, 2019.
Both MUFG Americas Holdings and MUFG Union Bank are subject to the following regulatory minimum
risk-based capital ratios: (1) 4.5% Common Equity Tier 1 capital ratio, (2) 6.0% Tier 1 capital ratio and (3) 8.0%
total capital ratio. Failure to meet minimum capital requirements can result in certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have a material effect on MUFG
Americas Holdings’ consolidated financial statements.
In addition to these regulatory minimum ratio requirements, MUFG Americas Holdings and MUFG Union
Bank will become subject to a fully phased-in capital conservation buffer requirement of 2.5%. The phase-in
period for the capital conservation buffer commenced on January 1, 2016 at 0.625% with applicable rates
increasing in each successive January until its full implementation on January 1, 2019. MUFG Americas
Holdings and MUFG Union Bank are also subject to a Tier 1 leverage ratio regulatory minimum requirement of
4% and a well-capitalized prompt corrective action standard of 5%.
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In October 2015, the FRB proposed long-term debt and TLAC requirements for U.S. globally systemically
important bank holding companies and U.S. IHCs of non-U.S. globally systemically important banks, including
MUFG Americas Holdings. In December 2016, the FRB finalized rules imposing such requirements. Under the
final rules, a covered IHC such as MUFG Americas Holdings is required to maintain a minimum amount of
eligible long-term debt issued to a non-U.S. parent entity that could be cancelled or converted to equity in order
to absorb losses and recapitalize the IHC’s operating subsidiaries at or near the point of resolution. A covered
IHC is also required to maintain a minimum level of eligible TLAC issued to a non-U.S. parent entity consisting
of regulatory capital and eligible long-term debt and maintain related buffers consisting of Common Equity Tier
1 capital. In addition, an IHC is restricted from issuing short-term debt and certain other types of liabilities that
are structurally senior to eligible long-term debt. MUFG Americas Holdings will be required to comply with
these rules by January 1, 2019. Pursuant to 12 CFR § 252.164(a), we have certified to the FRB that we plan to
follow an SPE resolution strategy, and that MUFG Americas Holdings would therefore be considered a
“non-resolution covered IHC.”
For more information, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Capital Adequacy” and Note 22 to our audited consolidated financial statements included elsewhere
in this Annual Report.
Disclosure pursuant to Section 13(r) of the US Securities Exchange Act of 1934
Section 13(r) of the U.S. Securities Exchange Act of 1934 (Exchange Act) requires an issuer to disclose
whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran
or with natural persons or entities designated by the U.S. government under specified Executive Orders. The
scope of activities that must be reported includes activities not prohibited by U.S. law and conducted outside the
United States in compliance with applicable local law.
During the fiscal year ended March 31, 2018, one of our non-U.S. subsidiaries engaged in business activities
with entities in, or affiliated with, Iran, including counterparties owned or controlled by the Iranian government.
Specifically, our non-U.S. banking subsidiary, MUFG Bank, issued letters of credit and guarantees and provided
remittance and other settlement services mainly in connection with customer transactions related to the purchase
and exportation of Iranian crude oil to Japan, and in some cases, in connection with other petroleum-related
transactions with Iran by its customers. These transactions did not involve U.S. dollars nor clearing services of
U.S. banks for the settlement of payments. For the fiscal year ended March 31, 2018, the aggregate interest and
fee income relating to these transactions was less than ¥130 million, representing less than 0.005 percent of our
total interest and fee income. Some of these transactions were conducted through the use of non-U.S. dollar
correspondent accounts and other similar settlement accounts maintained with MUFG Bank outside the United
States by Iranian financial institutions and other entities in, or affiliated with, Iran. In addition to such accounts,
MUFG Bank receives deposits in Japan from, and provides settlement services in Japan to, fewer than 10 Iranian
government-related entities and fewer than 100 Iranian government-related individuals such as Iranian diplomats
in Japan, and maintains settlement accounts outside the United States for certain other financial institutions
specified in Executive Order 13382, which settlement accounts were frozen in accordance with applicable laws
and regulations. For the fiscal year ended March 31, 2018, the average aggregate balance of deposits held in
these accounts represented less than 0.1 percent of the average balance of our total deposits. The fee income from
the transactions attributable to these account holders was less than ¥7 million, representing less than
0.001 percent of our total fee income. MUFG Bank also holds loans that were arranged prior to changes in
applicable laws and regulations to borrowers in, or affiliated with, Iran, including entities owned by the Iranian
government, the outstanding balance of which was less than ¥50 million, representing less than 0.0001 percent of
our total loans, as of March 31, 2018. For the fiscal year ended March 31, 2018, the aggregate gross interest and
fee income relating to these loan transactions was less than ¥20 million, representing less than 0.001 percent of
our total interest and fee income.
MUFG Bank recognizes that following the withdrawal in May 2018 by the United States from the Joint
Comprehensive Plan of Action, the United States is planning to re-impose secondary sanctions against non-U.S.
68
persons who engage in or facilitate a broad range of transactions and activities involving Iran. Although MUFG
Bank expects to continue to participate in certain types of transactions relating to Iran, MUFG Bank will take the
recent sanctions related developments into account and monitor its transactions as part of its efforts to comply
with applicable U.S. and Japanese regulations as well as U.S., Japanese and other international sanctions.
69
C. Organizational Structure
The following chart presents our corporate structure summary as of March 31, 2018:
Mitsubishi UFJ Financial Group, Inc.
p
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s
Domestic
MUFG Bank, Ltd. (1)
Overseas
MUFG Americas Holdings Corporation
Bank of Ayudhya Public Company Limited
Domestic
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Real Estate Services Co., Ltd.
The Master Trust Bank of Japan, Ltd.
MU Investments Co., Ltd.
Mitsubishi UFJ Kokusai Asset Management Co., Ltd.
Overseas
Mitsubishi UFJ Trust International Limited
Mitsubishi UFJ Baillie Gifford Asset Management Limited
Mitsubishi UFJ Investor Services & Banking (Luxembourg) S.A.
MUFG Lux Management Company S.A.
Mitsubishi UFJ Asset Management (UK) Ltd.
MUFG Investor Services Holdings Limited
Domestic
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
kabu.com Securities Co., Ltd.
Overseas
MUFG Securities EMEA plc
MUFG Securities Asia Limited
MUFG Securities Asia (Singapore) Limited
MUFG Securities (Canada), Ltd.
Domestic
Mitsubishi UFJ NICOS Co., Ltd.
Japan Digital Design, Inc
Note:
(1) MUFG Bank, Ltd. was renamed from The Bank of Tokyo-Mitsubishi UFJ, Ltd. on April 1, 2018. The chart above reflects the name
change.
70
Set forth below is a list of our principal consolidated subsidiaries as of March 31, 2018:
Name
MUFG Bank, Ltd. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking Corporation . . . . . . . . . .
Mitsubishi UFJ Real Estate Services Co., Ltd. . . . . . . . . . . .
The Master Trust Bank of Japan, Ltd. . . . . . . . . . . . . . . . . . .
MU Investments Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Kokusai Asset Management Co., Ltd. . . . . .
Mitsubishi UFJ Securities Holdings Co., Ltd. . . . . . . . . . . . .
. . . . . .
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
. . .
kabu.com Securities Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS Co., Ltd.
. . . . . . . . . . . . . . . . . . . . .
Japan Digital Design, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Mitsubishi UFJ Home Loan Credit Co., Ltd.
MUFG Americas Holdings Corporation . . . . . . . . . . . . . . . .
Bank of Ayudhya Public Company Limited . . . . . . . . . . . . .
Mitsubishi UFJ Trust International Limited . . . . . . . . . . . . .
Mitsubishi UFJ Baillie Gifford Asset Management
Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Investor Services & Banking (Luxembourg)
Country of
Incorporation
Proportion of
Ownership
Interest
(%)
Proportion of
Voting
Interest
(%)
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
USA
Thailand
UK
100.00%
100.00%
100.00%
46.50%
100.00%
100.00%
100.00%
60.00%
100.00%
59.27%
100.00%
100.00%
99.88%
100.00%
76.88%
100.00%
100.00%
100.00%
100.00%
46.50%
100.00%
100.00%
100.00%
60.00%
100.00%
59.28%
100.00%
100.00%
99.88%
100.00%
76.88%
100.00%
UK
51.00%
51.00%
S.A.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Luxembourg
. . . . . . . . . . . . . . . Luxembourg
MUFG Lux Management Company S.A.
Mitsubishi UFJ Asset Management (UK) Ltd. . . . . . . . . . . .
MUFG Investor Services Holdings Limited . . . . . . . . . . . . .
MUFG Securities EMEA plc . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Securities Asia Limited . . . . . . . . . . . . . . . . . . . . . . .
MUFG Securities Asia (Singapore) Limited . . . . . . . . . . . . .
MUFG Securities (Canada), Ltd. . . . . . . . . . . . . . . . . . . . . . .
UK
Bermuda
UK
China
Singapore
Canada
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Note:
(1) MUFG Bank, Ltd. was renamed from The Bank of Tokyo-Mitsubishi UFJ, Ltd. on April 1, 2018. The chart above reflects the name
change.
D. Property, Plant and Equipment
Premises and equipment as of March 31, 2017 and 2018 consisted of the following:
As of March 31,
2017
2018
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 385,961
750,232
650,120
303,130
46,375
¥ 370,669
739,665
659,699
311,645
119,195
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,135,818
1,141,547
2,200,873
1,187,285
Premises and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 994,271
¥1,013,588
71
Our registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan. As of March 31,
2018, we and our subsidiaries conducted our operations either in premises we owned or in properties we leased.
The following table presents the book values of our material offices and other properties as of March 31,
2018:
Owned land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owned buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book Value
(in millions)
¥370,669
177,681
The buildings and land we own are primarily used by us and our subsidiaries as offices and branches. Most
of the buildings and land we own are free from material encumbrances.
During the fiscal year ended March 31, 2018, we invested approximately ¥159,003 million, primarily for
office renovations and relocation.
Item 4A. Unresolved Staff Comments.
None.
72
Item 5. Operating and Financial Review and Prospects.
The following discussion and analysis should be read in conjunction with “Item 3.A. Key Information—
Selected Financial Data,” “Selected Statistical Data” and our consolidated financial statements and related
notes included elsewhere in this Annual Report.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Environment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting Changes and Recently Issued Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Geographic Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Change in Exchange Rates on Foreign Currency Translation . . . . . . . . . . . . . . . . . . . . . . .
B. Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-exchange Traded Contracts Accounted for at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
74
79
82
85
89
90
90
108
116
117
118
118
143
148
C. Research and Development, Patents and Licenses, etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
D. Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
E. Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
F. Tabular Disclosure of Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150
G. Safe Harbor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150
73
Introduction
We are the holding company for MUFG Bank, Ltd. (formerly, The Bank of Tokyo-Mitsubishi UFJ, Ltd.), or
“BK,” Mitsubishi UFJ Trust and Banking Corporation, or “TB,” Mitsubishi UFJ Morgan Stanley Securities Co.,
Ltd., or MUMSS (through Mitsubishi UFJ Securities Holdings Co., Ltd., or “SCHD,” an intermediate holding
company), Mitsubishi UFJ NICOS Co., Ltd. and other subsidiaries. Through our subsidiaries and affiliated
companies, we engage in a broad range of financial businesses and services, including commercial banking,
investment banking, trust assets and asset management services, securities businesses, and credit card businesses,
and provide related services to individuals and corporate customers in Japan and abroad.
Financial Results for the Fiscal Year Ended March 31, 2018 Compared to the Fiscal Year Ended March 31,
2017
Net income attributable to Mitsubishi UFJ Financial Group increased ¥1,025.5 billion to ¥1,228.2 billion for
the fiscal year ended March 31, 2018 from ¥202.7 billion for the previous fiscal year. This increase was primarily
due to an increase in non-interest income reflecting smaller trading account losses compared to the previous
fiscal year, as well as the reversal of credit losses recorded in the fiscal year ended March 31, 2018. Our business
and results of operations, as well as our assets and liabilities, continued to be affected by fluctuations in interest
rates. Long-term interest rates in the United States rose at a more moderate pace during the fiscal year ended
March 31, 2018, compared to the previous fiscal year, resulting in smaller losses on the fair values of U.S.
Treasury bonds and positively affecting our net profits on interest rate contracts. In the United States, the yields
on 10-year U.S. Treasury bonds rose from around 1.85% to around 2.38% from mid-November 2016 to March
2017, and then rose to around 2.74% in March 2018. In addition, we recorded reversal of credit losses for the
fiscal year ended March 31, 2018, compared to provision for credit losses for the previous fiscal year as the
financial performance of various borrowers improved.
The following table presents some key figures relating to our financial results:
Fiscal years ended March 31,
2016
2017
2018
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income before attribution of noncontrolling interests . . . . . . . . . . . . . . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . .
Diluted earnings per common share—Earnings applicable to common
(in billions, except per share data)
¥2,221.1
253.7
1,196.7
2,891.6
272.5
178.1
202.7
¥2,261.4
231.9
2,407.7
3,274.5
1,162.7
793.2
802.3
¥2,230.3
(240.8)
1,935.1
2,744.4
1,661.8
1,254.0
1,228.2
shareholders of Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . . . . .
57.51
14.68
92.10
Our net income attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31, 2018
mainly reflected the following:
Net interest income. Net interest income increased ¥9.2 billion to ¥2,230.3 billion for the fiscal year
ended March 31, 2018 from ¥2,221.1 billion for the previous fiscal year. The increase was mainly due to higher
foreign interest income, reflecting higher average balance and interest rates on foreign loans and deposits in other
banks, particularly in the United States. This increase was partially offset by an increase in interest expense,
reflecting higher interest paid on deposits in the United States and higher U.S. dollar funding rates in Japan.
Provision for credit losses. For the fiscal year ended March 31, 2018, we recorded ¥240.8 billion of
reversal of credit losses, compared to ¥253.7 billion of provision for credit losses for the previous fiscal year.
This improvement mainly reflected the improvements in the financial performance of some large borrowers in
the domestic electronics manufacturing industry, some foreign borrowers in the oil and gas sector, and a broader
number of small and medium-sized borrowers in the domestic manufacturing industry.
74
Non-interest income. Total non-interest income increased ¥738.4 billion to ¥1,935.1 billion for the fiscal
year ended March 31, 2018 from ¥1,196.7 billion for the previous fiscal year. This increase in non-interest
income was mainly due to an improvement in net trading account losses resulting from the more moderate pace
of increases interest rates in the United States. We also recorded lower net foreign exchange losses primarily due
to the depreciation of the Japanese yen against the euro.
Non-interest expense. Total non-interest expense decreased ¥147.2 billion to ¥2,744.4 billion for the
fiscal year ended March 31, 2018 from ¥2,891.6 billion for the previous fiscal year. This improvement was
mainly due to ¥96.1 billion of reversal of off-balance sheet credit instruments in the fiscal year ended March 31,
2018, compared to ¥106.6 billion of provision for off-balance sheet credit instruments for the previous fiscal
year. This improvement was partially offset by higher expenses for global financial regulatory compliance
purposes and larger investment in digitalization.
Core Business Groups
The following table sets forth the relative contributions of our five core business groups and Other to our
operating profit for the fiscal years ended March 31, 2017 and 2018 based on our business segment information.
During the fiscal year ended March 31, 2018, we made certain modifications to our business segments’
internal management accounting rules and practices, and, as a result, prior period segment information has been
restated to enable comparison between relevant amounts for the fiscal years ended March 31, 2017, and 2018.
For further information, see “—A. Operating Results—Business Segment Analysis.”
Customer Business
Retail
Banking
Business
Group
Corporate
Banking
Business
Group(1)
Global
Business
Group(1)
Trust
Assets
Business
Group
Total(1)
Global
Markets
Business
Group
Other
Total
(in billions)
Fiscal year ended March 31, 2017:
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . .
¥1,198.1
972.4
¥1,029.0
576.5
¥1,303.2
821.0
¥173.1
112.2
¥3,526.3
2,335.9
¥582.9
213.2
¥
2.7
167.0
¥4,111.9
2,716.1
Operating profit (loss) . . . . . . . . . . . . . . . . .
¥ 225.7
¥ 452.5
¥ 482.2
¥ 60.9
¥1,190.4
¥369.7
¥(164.3) ¥1,395.8
Fiscal year ended March 31, 2018:
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . .
¥1,226.9
960.8
¥1,003.2
580.7
¥1,279.6
857.3
¥186.7
116.9
¥3,514.8
2,363.8
¥477.2
222.7
¥ (24.8) ¥3,967.2
2,743.1
156.6
Operating profit (loss) . . . . . . . . . . . . . . . . .
¥ 266.1
¥ 422.5
¥ 422.3
¥ 69.8
¥1,151.0
¥254.5
¥(181.4) ¥1,224.1
Note:
(1) Each of the Corporate Banking Business Group and the Global Business Group includes ¥177.1 billion of net revenue, ¥146.2 billion of
operating expenses and ¥30.9 billion of operating profit relating to the overseas Japanese corporate business for the fiscal year ended
March 31, 2017, and ¥181.6 billion of net revenue, ¥151.9 billion of operating expenses and ¥29.7 billion of operating profit relating to
the overseas Japanese corporate business for the fiscal year ended March 31, 2018. To eliminate the double-counting of these amounts,
adjustments have been made to the Total of Customer Business.
Our business segment information is based on financial information prepared in accordance with Japanese
GAAP, as adjusted in accordance with internal management accounting rules and practices and is not consistent
with our consolidated financial statements included elsewhere in this Annual Report, which have been prepared
in accordance with U.S. GAAP. For a reconciliation of operating profit under the internal management reporting
system to income before income tax expense shown on the consolidated statements of income, see Note 30 to our
consolidated financial statements included elsewhere in this Annual Report.
75
Summary of Our Financial Condition as of March 31, 2018 Compared to March 31, 2017
The following table presents some key asset figures:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of unearned income, unamortized premiums and deferred loan fees . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, due from banks and interest-earning deposits in other banks . . . . . . . . . . . . . . . .
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2017
2018
(in billions)
¥297,185.0
117,032.8
118,215.0
(1,182.2)
43,233.6
39,090.1
3,587.3
556.2
41,320.0
22,486.9
18,833.1
64,009.7
25,682.7
38,327.0
¥300,570.3
116,271.8
117,035.9
(764.1)
43,654.2
39,504.7
3,582.9
566.6
35,186.7
22,601.5
12,585.2
75,858.1
32,648.4
43,209.7
The increase in total assets of ¥3,385.3 billion is primarily due to higher volumes of cash, due from banks
and interest-earning deposits in other banks, partially offset by a decrease in trading account assets.
Total loans outstanding as of March 31, 2018 decreased ¥1,179.1 billion to ¥117,035.9 billion from
¥118,215.0 billion as of March 31, 2017. The decrease was primarily due to repayments by some large domestic
manufacturers and repayments of loans made to fund several large-scale corporate acquisition transactions.
Total investment securities increased ¥420.6 billion to ¥43,654.2 billion as of March 31, 2018 from
¥43,233.6 billion as of March 31, 2017, primarily due to an increase of ¥414.6 billion in available-for-sale
securities. This increase in available-for-sale securities was mainly due to higher unrealized gains on marketable
equity securities.
Trading account assets as of March 31, 2018 decreased ¥6,133.3 billion to ¥35,186.7 billion from
¥41,320.0 billion as of March 31, 2017. This decrease was mainly due to a decrease in trading derivative assets
as a result of the application of new accounting rules for derivative transactions through central counterparty
clearing houses.
Cash, due from banks and interest-earning deposits in other banks increased ¥11,848.4 billion to
¥75,858.1 billion as of March 31, 2018 from ¥64,009.7 billion as of March 31, 2017, mainly due to an increase in
the volume of deposits with the Bank of Japan.
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The following table presents some key liability figures:
As of March 31,
2017
2018
(in billions)
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements(1)
Payables under securities lending transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥282,420.3
190,401.6
144,840.4
45,561.2
17,693.4
5,549.0
7,969.5
18,790.1
26,131.5
¥284,924.5
195,674.6
149,602.1
46,072.5
18,134.6
8,170.2
6,881.1
12,222.3
27,069.6
Note:
(1) Reflects the changes in presentation adopted in the fiscal year ended March 31, 2018, where long-term payables under repurchase
agreements are no longer included in long-term debt but are aggregated with short-term payables under repurchase agreements in
payables under repurchase agreements, and applied to the fiscal years ended March 31, 2017. For further information, see Note 1 to our
consolidated financial statements included elsewhere in this Annual Report.
Total liabilities increased ¥2,504.2 billion to ¥284,924.5 billion as of March 31, 2018 from
¥282,420.3 billion as of March 31, 2017. The increase was mainly due to increases in domestic deposits and
payables under securities lending transactions. The increase in domestic deposits was mainly due to an increase
in interest-bearing deposits from retail customers in Japan. Payables under securities lending transactions
increased as investor preference in Japan shifted from deposits back to investments in the money market during
the fiscal year ended March 31, 2018. These increases were partially offset by a decrease in trading account
liabilities as a result of the application of new accounting rules for derivative transactions through central
counterparty clearing houses.
The following table presents some key shareholders’ equity figures:
As of March 31,
2017
2018
(in billions)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,985.5
4,171.2
2,281.4
(514.0)
¥14,970.2
5,185.3
2,477.3
(522.9)
As of March 31, 2018, treasury stock was ¥522.9 billion compared to ¥514.0 billion as of March 31, 2017,
as a result of the market repurchase of shares by the trustee of the trust for our performance-based stock
compensation plan. For further information, see “Item 5. Operating and Financial Review and Prospects—Recent
Developments.”
Capital Ratios
MUFG’s Common Equity Tier 1 capital ratio, Tier 1 capital ratio and Total capital ratio calculated in
accordance with Basel III requirements as adopted by the FSA, were 12.58%, 14.32% and 16.56% as of
March 31, 2018, respectively, compared to 11.76%, 13.36% and 15.85% as of March 31, 2017, respectively.
MUFG was required to maintain minimum Common Equity Tier 1 capital, Tier 1 capital and Total capital ratios
of 4.50%, 6.00% and 8.00%, respectively, plus a capital conservation buffer of 1.875%, a G-SIB surcharge of
1.125% and a countercyclical buffer of 0.01% as of March 31, 2018. The underlying figures for these ratios were
calculated in accordance with Japanese banking regulations based on information derived from our consolidated
financial statements prepared in accordance with Japanese GAAP.
77
Leverage Ratios
MUFG’s leverage ratio in accordance with Basel III as of March 31, 2018, was 5.01%, compared to 4.81%
as of March 31, 2017. The minimum leverage ratio requirement endorsed by the Group of Central Bank
Governors and Heads of Supervision is 3.0%. The underlying figures for the ratio were calculated in accordance
with Japanese banking regulations based on information derived from our consolidated financial statements
prepared in accordance with Japanese GAAP.
Liquidity Coverage Ratios
MUFG’s Liquidity Coverage Ratio, or LCR, in accordance with Basel III as adopted by the FSA for the
three months ended March 31, 2018 was 144.8%, compared to 137.9% for the three months ended March 31,
2017. MUFG was required to maintain a minimum LCR of 90% during the period from January 1 to
December 31, 2018. The figures underlying the ratio were calculated in accordance with Japanese banking
regulations.
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Business Environment
Through our subsidiaries and affiliated companies, we engage in a broad range of financial businesses and
services, including commercial banking, investment banking, trust assets and asset management services,
securities businesses and credit card businesses, and provide related services to individuals primarily in Japan
and the United States and to corporate customers around the world. Our results of operations and financial
condition are exposed to changes in various external economic factors, including:
‰
‰
‰
‰
general economic conditions,
interest rates,
foreign currency exchange rates, and
stock and real estate prices.
General Economic Conditions
During the fiscal year ended March 31, 2018, the global economy stayed on a moderately improving trend.
Uncertainties grew, however, concerning future global economic trends in light of recent changes in economic,
monetary and trade policies and geopolitical developments in various jurisdictions, which have contributed to
higher volatility in the financial market.
Japan’s economic growth continued at a moderate pace but lacked momentum with the quarter-on-quarter
real GDP growth rate being 0.5% for each of the quarters ended June 30, 2017 and September 30, 2017, and
0.3% for the quarter ended December 31, 2017, although the rate for the quarter ended March 31, 2018 was
negative 0.2%. The year-over-year real GDP growth rate was 1.6% for the quarter ended June 30, 2017, 2.0% for
the quarter ended September 30, 2017, 1.9% for the quarter ended December 31, 2017 and 1.1% for the quarter
ended March 31, 2018. Japan’s Consumer Price Index, or CPI, fluctuated between negative 0.4% and positive
0.5% on a month-on-month basis and between 0.2% and 1.5% on a year-over-year basis in the fiscal year ended
March 31, 2018. During the same period, the unemployment rate in Japan remained low, declining to 2.5% for
March 2018. According to Teikoku Databank, a Japanese research institution, the number of companies that filed
for legal bankruptcy in Japan for the fiscal year ended March 31, 2018 was 8,285, a 2% increase from the
previous fiscal year, remaining lower level than the fiscal year ended March 31, 2016. The total liabilities of
companies that filed for legal bankruptcy in the 12 months ended March 31, 2018 were ¥1,693 billion, a 13.0%
decrease from the previous fiscal year. The Japanese economy remains subject to the continuing deflationary
pressure, increasing public debt, intensifying trade conflicts, and various other factors that could adversely affect
its economic conditions.
The U.S. economy expanded with the quarter-on-quarter annualized real GDP growth rate being 3.1% for
the quarter ended June 30, 2017, 3.2% for the quarter ended September 30, 2017, 2.9% for the quarter ended
December 31, 2017 and 2.2% for the quarter ended March 31, 2018. The year-over-year real GDP growth rate
was 2.2% for the quarter ended June 30, 2017, 2.3% for the quarter ended September 30, 2017, 2.6% for the
quarter ended December 31, 2017 and 2.8% for the quarter ended March 31, 2018. The U.S. economic growth
was supported by the improvement in the labor market, higher wages and increased corporate production
activities. However, the long-term prospects of the U.S. economy remain uncertain in light of the changes in the
government’s economic, monetary, trade and foreign relations policies under the Trump administration, and
various other factors.
The Eurozone’s economic growth continued at a slow rate with the quarter-on-quarter real GDP growth rate
being 0.7% for each of the quarters ended June 30, 2017, September 30, 2017 and December 31, 2017, and 0.4%
for the quarter ended March 31, 2018. The year-over-year real GDP growth rate was 2.5% for the quarter ended
June 30, 2017, 2.8% for the quarter ended September 30, 2017, 2.8% for the quarter ended December 31, 2017
and 2.5% for the quarter ended March 31, 2018. During the same period, the unemployment rate in the Eurozone
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declined to 8.5% for March 2018. There are still uncertainties in the Eurozone economy, including the process
and ramifications of the United Kingdom’s withdrawal from the European Union and the large accumulation of
non-performing loans in some European peripheral countries.
In Asia excluding Japan, economic conditions in ASEAN (Association of Southeast Asian Nations) and
NIEs (Newly Industrialized Economies) generally improved but the economic growth remained relatively modest
during the fiscal year ended March 31, 2018. In China, economic conditions continued to improve at a moderate
pace during the fiscal year, with some downward pressure on economic growth resulting from structural
adjustments still remaining. China’s quarter-on-quarter real GDP growth rate was 1.8% for the quarter ended
June 30, 2017, 1.8% for the quarter ended September 30, 2017, 1.6% for the quarter ended December 31, 2017
and 1.4% for the quarter ended March 31, 2018. China’s year-over-year real GDP growth rate was 6.9% for the
quarter ended June 30, 2017 and 6.8% for each of the quarters ended September 30, 2017, December 31, 2017
and March 31, 2018. The Thai economy was on a moderate recovering trend during the fiscal year ended
March 31, 2018, with varying degrees of impact on the financial conditions of consumers and small and
medium-sized enterprises. Thailand’s quarter-on-quarter real GDP growth rate was 1.3% for the quarter ended
June 30, 2017, 1.0% for the quarter ended September 30, 2017, 0.5% for the quarter ended December 31, 2017
and 2.0% for the quarter ended March 31, 2018. Thailand’s year-over-year real GDP growth rate was 3.9% for
the quarter ended June 30, 2017, 4.3% for the quarter ended September 30, 2017, 4.0% for the quarter ended
December 31, 2017 and 4.8% for the quarter ended March 31, 2018. Although there were some signs of further
economic growth in ASEAN and NIEs, such as growth in exports to developed countries and larger investments
in infrastructure projects in the region, uncertainties still remain in light of, among other things, potential trade
conflicts and geopolitical issues.
Interest Rates
The yield on 10-year Japanese government bonds fluctuated between negative 0.009% and positive 0.104%
during the fiscal year ended March 31, 2018. However, interest rates remained at historically low levels in Japan.
The Bank of Japan maintained a “quantitative and qualitative monetary easing with negative interest rates”
policy until September 2016. Under this policy, the Bank of Japan increased its aggregate holding of Japanese
government bonds by approximately ¥80 trillion each year and applied a negative interest rate of minus 0.1% to
the “Policy-Rate Balances,” which are a part of current account amounts held by financial institutions at the Bank
of Japan, aiming to achieve the price stability target of 2%. In September 2016, the Bank of Japan announced a
new “quantitative and qualitative monetary easing with yield curve control” policy, adding to its monetary policy
a Japanese government bond purchase program with an aim to keep the yield of 10-year Japanese government
bonds around zero percent. The yield on 10-year Japanese government bonds was 0.07% on March 31, 2017 and
0.04% on March 30, 2018. The yield currently fluctuates around 0.04%.
In the United States, the FRB raised the target range for the federal funds rate to between1.0% and 1.25% in
June 2017, to between 1.25% and 1.50% in December 2017, and then to between 1.50% and 1.75% in March
2018. The 10-year U.S. Treasury bond yield increased from 2.4% at the end of March 2017 to 2.74% at the end
of March 2018, while fluctuating between 2.05% and 2.94% during the period. The yield currently fluctuates
around 2.85%.
The yield on 10-year German Bunds increased from 0.328% at the end of March 2017 to 0.497% as of
March 30, 2018, while fluctuating between 0.156% and 0.767% during the period. The yield currently fluctuates
around 0.350%. The yield on 10-year French Obligations Assimilables du Trésor decreased from 0.970% at the
end of March 2017 to 0.721% as of March 30, 2018, while fluctuating between 0.583% and 1.018% during the
period. The yield currently fluctuates around 0.720%.
Foreign Currency Exchange Rates
The Japanese yen appreciated against the U.S. dollar from ¥111.39 to the U.S. dollar as of March 31, 2017
to ¥106.28 to the U.S. dollar as of March 30, 2018, while fluctuating between ¥104.74 to the U.S. dollar and
80
¥114.28 to the U.S. dollar during the period. The Japanese yen has since been fluctuating around ¥110.70 to the
U.S. dollar.
The Japanese yen was on a generally depreciating trend against the euro for the fiscal year ended March 31,
2018, with the exchange rate increasing from ¥118.67 to the euro as of March 31, 2017 to ¥130.97 to the euro as
of March 30, 2018. The Japanese yen has since been fluctuating around ¥128.90 to the euro.
Similarly, the Japanese yen was on a generally depreciating trend against the Thai baht for the fiscal year
ended March 30, 2018, with the exchange rate increasing from ¥3.24 to the Thai baht as of March 31, 2017 to
¥3.41 to the Thai baht as of March 31, 2018. The Japanese yen has since been o fluctuating around ¥3.35 to the
Thai baht.
Stock and Real Estate Prices
The closing price of the Nikkei Stock Average, which is the average of 225 blue chip stocks listed on the
Tokyo Stock Exchange, increased from ¥18,909.26 on March 31, 2017 to ¥21,454.30 on March 30, 2018. On
June 2, 2017, the closing price of the Nikkei Stock Average exceeded ¥20,000 for the first time since December
2015. The closing price of the Nikkei Stock Average reached ¥23,849.99, on January 9, 2018, the highest closing
price since November 1991, and has since been fluctuating around ¥22,300. The Japanese stock market has been
positively affected by the recent stock price momentum in the United States.
According to a land price survey conducted by the Japanese government, between January 1, 2017 and
January 1, 2018, the average residential land price in Japan increased 0.3%, and the average commercial land
price in Japan increased 1.9%. In the three major metropolitan areas of Tokyo, Osaka and Nagoya, between
January 1, 2017 and January 1, 2018, the average residential land price increased 0.7% and the average
commercial land price also increased 3.9%. In the local regions of Japan, which consist of regions other than the
three major metropolitan areas, between January 1, 2017 and January 1, 2018, the average residential land price
decreased 0.1% and the average commercial land price turned to positive 0.5%.
81
Recent Developments
During the fiscal year ended March 31, 2018, we continued to pursue a strategy to improve our operational
efficiency and financial performance and achieve sustainable growth. We sought to strengthen our management
structure, while selectively reviewing and considering growth opportunities that would enhance our global
competitiveness. We also continued to monitor regulatory developments and pursue prudent transactions that
would create a strong capital structure to enable us to contribute to the real economy, both domestically and
globally, as a provider of a stable source of funds and high quality financial services. In addition, in order to
respond to the increasingly complex market and legal risks, we continued to endeavor to enhance our compliance
and internal control frameworks. Starting in the current fiscal year ending March 31, 2019, we launched our new
three-year medium-term business plan, under which we aim to integrate the expertise and capabilities of our
subsidiaries to build a foundation for future growth.
Implementation of Share Repurchase Programs and Cancellation of Purchased Shares
During May 2018 and June 2018, we repurchased 72,420,700 shares of our common stock for
¥49,999,969,714 under a share repurchase program that was adopted in May 2018 and completed in June 2018.
Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate
of 100,000,000 shares of our common stock and an aggregate of ¥50.0 billion between May 16, 2018 and
June 30, 2018 and to cancel the repurchased shares. We plan to cancel all of the repurchased shares on July 20,
2018. Based on the Japanese GAAP information used to calculate our capital ratios as of March 31, 2018, we
estimate that the repurchased shares would result in a decline in each of our Common Equity Tier 1 capital ratio,
our Tier 1 capital ratio and our total capital ratio by approximately 0.05 percentage point.
During November 2017 and December 2017, we repurchased 127,666,900 shares of our common stock for
¥99,999,957,675 under a share repurchase program that was adopted in November 2017 and completed in
December 2017.
During May 2017 and June 2017, we repurchased 141,158,900 shares of our common stock for
¥99,999,941,022 under a share repurchase program that was adopted in May 2017 and completed in June 2017.
The purposes of the above three share repurchase programs were to enhance shareholder value, to improve
our capital efficiency and to allow the implementation of flexible capital policies in response to changes in the
business environment.
Issuances of Senior Debt Securities for TLAC Purposes
During and after the fiscal year ended March 31, 2018, we issued $7.7 billion, or ¥815.9 billion,
€2.0 billion, or ¥255.3 billion, AU$0.2 billion, or ¥17.6 billion, and HK$0.3 billion, or ¥4.2 billion, aggregate
principal amount of senior notes that were intended to qualify as Total Loss Absorbing Capacity, or TLAC, debt.
Since our first issuance of senior notes intended to qualify as TLAC debt in March 2016, we have issued
approximately ¥2,574.6 billion aggregate principal amount of such senior notes.
In March 2018, we repurchased through tender offers $850.0 million aggregate principal amount of our
outstanding 2.95% senior notes due March 1, 2021 and $150.0 million aggregate principal amount of our
outstanding floating rate senior notes due March 1, 2021 for a total repurchase price of ¥ 107.9 billion. All of the
repurchased senior notes were cancelled.
Under the Financial Stability Board’s TLAC standard, we are required to hold TLAC debt in an amount not
less than 16% of our risk-weighted assets and 6% of the applicable Basel III leverage ratio denominator by
January 1, 2019, and not less than 18% of its risk-weighted assets and 6.75% of the applicable Basel III leverage
ratio denominator by January 1, 2022. We plan to issue additional senior debt securities intended to qualify as
82
TLAC debt to meet the requirements, although TLAC requirements for Japanese financial institutions, including
us, have not yet been finalized. See “Item 4.B. Information on the Company—Business Overview—Supervision
and Regulation—Japan—Total loss-absorbing capacity” in our annual report on Form 20-F for the fiscal year
ended March 31, 2017.
Redemption of Preferred Securities Issued by Special Purpose Company
In January 2018, we redeemed in full ¥150.0 billion of Japanese yen-denominated non-cumulative preferred
securities issued by an overseas special purpose company in the Cayman Islands called MUFG Capital Finance 6
Limited.
Issuances of Basel III-Compliant Domestic Subordinated Bonds
In October 2017, we issued, in a public offering in Japan, ¥320.0 billion aggregate principal amount of
unsecured perpetual subordinated Additional Tier 1 notes. These notes are subject to our discretion to cease
interest payments and a write-down of the principal upon the occurrence of certain events, including when our
Common Equity Tier 1 capital ratio declines below 5.125%, when we are deemed to be at risk of becoming
non-viable or when we become subject to bankruptcy proceedings, but, following any write-down, the principal
may be reinstated to the extent permitted by the Japanese banking regulator. Since our first issuance of unsecured
perpetual subordinated Additional Tier 1 notes with similar terms in March 2015, we have issued ¥1,270.0 billion
aggregate principal amount of such notes, including the October 2017 issuance. See “Item 4.B. Information on
the Company—Business Overview—Supervision and Regulation—Japan.”
Strategic Investment in Bank Danamon in Indonesia
In December 2017, MUFG Bank entered into conditional share purchase agreements with Asia Financial
(Indonesia) Pte. Ltd. and other affiliated entities to acquire their equity interests in PT Bank Danamon Indonesia,
Tbk, or Danamon, subject to applicable regulatory approvals. This strategic acquisition of Danamon is being
executed in three steps. In Step 1, MUFG Bank acquired an initial 19.9% equity interest in Danamon on
December 29, 2017 for an aggregate purchase price of IDR 15.875 trillion, or ¥133.4 billion, based on a price of
IDR 8,323, or ¥70, per share. In Step 2, MUFG Bank intends to acquire an additional 20.1% equity interest to
increase its equity interest in Danamon to 40% with regulatory and other relevant approvals. This additional
acquisition is expected to be completed by September 2018. Upon completion of Step 2, MUFG Bank intends to
seek the necessary approvals to increase its equity interest in Danamon above 40% in a transaction that is
designed to provide an opportunity for all of the other existing Danamon shareholders to either remain as
shareholders or receive cash from MUFG Bank. Upon the closing of Step 3, MUFG Bank aims to increase its
equity interest in Danamon to above 73.8%.
This investment is part of our strategic plan to expand our presence in Asia and Oceania and contribute to
the economic growth in the region. The investment is expected to enable us to leverage our financial strength,
relationships with Japan’s leading companies, and global network as well as our product and sectorial expertise
to further enhance our growth strategy. In our capacity as a long-term shareholder, we aim to build on
Danamon’s established and respected brand franchise to foster synergies and enhance Danamon’s position as a
leading and prominent Indonesian bank that remains committed to delivering high quality services to its
customers.
Danamon, which was established in 1956, is the fifth most profitable Indonesian commercial bank in terms
of net income. Danamon provides banking and financial products and services to consumer, micro-finance, small
and medium enterprise, and corporate customers, with a network of approximately 1,800 offices in Indonesia.
Asia Financial (Indonesia) Pte. is a wholly-owned subsidiary of Fullerton Financial Holdings Pte. Ltd. and makes
strategic investments and maintains operations in the financial and related services sector of emerging markets.
Fullerton Financial Holdings Pte. is a wholly owned portfolio company of Temasek Holdings (Private) Limited,
an investment company headquartered in Singapore.
83
Functional Realignment of Subsidiaries
In April 2018, Mitsubishi UFJ Trust and Banking’s corporate loan-related businesses were transferred to
MUFG Bank.
Also in April 2018, Mitsubishi UFJ Trust and Banking acquired MUFG Bank’s 15% equity interest and
Mitsubishi UFJ Securities Holding’s 34% equity interest in Mitsubishi UFJ Kokusai Asset Management Co., Ltd.
to make the asset management company a wholly owned subsidiary of Mitsubishi UFJ Trust and Banking. The
acquisition followed the transfer to Mitsubishi UFJ Trust and Banking of the shares of Mitsubishi UFJ Investor
Services & Banking (Luxembourg) S.A. held by MUFG Bank in May 2017 to make the Luxembourg company a
wholly owned subsidiary of Mitsubishi UFJ Trust and Banking. Through these transactions, the corporate loan—
related businesses within the Group were concentrated at MUFG Bank. Mitsubishi UFJ Trust and Banking
currently operates as the Group’s primary asset management and administration subsidiary, and seeks to further
strengthen its real estate, pension and estate administration services. The realignment of these functions of our
subsidiaries was executed as part of our strategy to increase effectiveness in accumulating and applying the
expertise of our subsidiaries and to enhance efficiency in offering and providing a diverse array of sophisticated
financial products and services to customers through collaboration among our subsidiaries. See Item 4.B—
Information on the Company—Business Overview.”
Sale of Shares in Banco Bradesco SA
In April 2018, MUFG Bank sold a portion of its equity interest in Banco Bradesco SA, a Brazil-based
universal banking group in Latin America, for approximately 1,411million Brazilian Real, or approximately
¥45.3 billion. Although MUFG Bank’s shareholding ratio decreased to 1.25% as a result of the transaction,
Bradesco remains our important alliance partner in the Latin American region and continues to collaborate with
MUFG Bank in a broad range of business areas.
Share Purchase to Make Mitsubishi UFJ NICOS a Wholly Owned Subsidiary
In October 2017, we acquired all of Norinchukin Bank’s 15.02% equity interest in Mitsubishi UFJ NICOS
for ¥50.0 billion in cash to make Mitsubishi UFJ NICOS a wholly owned subsidiary pursuant to our agreement
with Norinchukin Bank in May 2017. We also agreed to strengthen our strategic retail business alliance with
Norinchukin Bank in a wide range of areas, including settlement solutions and marketing. See Note 2 to our
unaudited condensed consolidated financial statements included elsewhere in this Report.
Sale of Shares in CIMB Group Holdings Berhad
In September 2017, MUFG Bank sold its shares in CIMB Group Holdings Berhad, or CIMB, a Malaysia-
based financial group, for approximately 2,557.0 million Malaysian Ringgit, or approximately ¥68.0 billion. The
sale was part of our strategy to improve our capital management and profitability in light of the heightened
regulatory standards and changes in the business environment for global financial institutions. CIMB remains
one of our most important business alliance partners in the ASEAN region.
Implementation of Measures to Comply with U.S. Enhanced Prudential Standards
In July 2017, MUFG Bank and Mitsubishi UFJ Trust and Banking transferred their ownership interests in
their U.S. subsidiaries, namely, BTMU Leasing & Finance, Inc., BTMU LF Capital LLC, MUFG Capital
Analytics LLC, and MUFG Investor Services (US) LLC, to MUFG Americas Holdings, our U.S. intermediate
holding company. As a result of the ownership transfer transactions, MUFG and MUFG Bank hold 4.89% and
95.11%, respectively, of the ownership interest in MUFG Americas Holdings. Prior to the transactions, MUFG
and MUFG Bank held 3.8% and 96.2%, respectively, of the ownership interest in MUFG Americas Holdings.
84
Resources and management attention are being expended to implement an appropriate governance structure with
an effective internal control system for our U.S. bank and non-bank subsidiaries and affiliates to comply with
applicable regulatory requirements. See Item 4.B—Information on the Company—Business Overview—
Business Groups—Global Commercial Banking Business Group.”
Critical Accounting Estimates
Our consolidated financial statements included elsewhere in this Annual Report are prepared in accordance
with U.S. GAAP. Certain accounting policies require management to make difficult, complex or subjective
judgments regarding the valuation of assets and liabilities. The accounting policies are fundamental to
understanding our operating and financial review and prospects. The notes to our consolidated financial
statements included elsewhere in this Annual Report provide a summary of our significant accounting policies.
The following is a summary of the critical accounting estimates:
Allowance for Credit Losses
The allowance for credit losses represents management’s best estimate of probable losses in our loan
portfolio. The evaluation process, including credit-ratings and self-assessments, involves a number of estimates
and judgments. The allowance is based on two principles of accounting guidance: (1) the guidance on
contingencies requires that losses be accrued when they are probable of occurring and can be estimated, and
(2) the guidance on accounting by creditors for impairment of a loan requires that losses be accrued based on the
difference between the loan balance, on the one hand, and the present value of expected future cash flows
discounted at the loan’s original effective interest rate, the fair value of collateral or the loan’s observable market
value, on the other hand.
We divide our loan portfolio into the following segments—Commercial, Residential, Card, MUFG
Americas Holdings and Krungsri—based on the segments used to determine the allowance for credit losses. We
further divide the Commercial segment into classes based on initial measurement attributes, risk characteristics,
and our approach to monitoring and assessing credit risk. We determine the appropriate level of the allowance for
credit losses for each of our loan portfolios by evaluating various factors and assumptions, such as the borrower’s
credit rating, collateral value and historical loss experience as well as existing economic conditions. We update
these factors and assumptions on a regular basis and upon the occurrence of unexpected changes in the economic
environment.
For all portfolio segments, key elements relating to the policies and discipline used in determining the
allowance for credit losses are our credit classification and the related borrower categorization process. Each of
these components is determined based on estimates subject to change when actual events occur. The
categorization is based on conditions that may affect the ability of borrowers to service their debt, taking into
consideration current financial information, historical payment experience, credit documentation, public
information, analyses of relevant industry segments and current trends. In determining the appropriate level of
allowance, we evaluate the probable loss by category of loan based on its type and characteristics.
In addition to the allowance for credit losses on our loan portfolio, we maintain an allowance for credit
losses on off-balance sheet credit instruments, including commitments to extend credit, a variety of guarantees
and standby letters of credit and other financial instruments. This allowance is included in other liabilities.
Determining the adequacy of the allowance for credit losses requires the exercise of considerable judgment
and the use of estimates, such as those discussed above. Our actual losses could be more or less than the
estimates. To the extent that actual losses differ from management’s estimates, additional provisions for credit
losses may be required that would adversely impact our operating results and financial condition in future
periods. For further information regarding our methodologies used in establishing the allowance for credit losses
by portfolio segments and allowance for credit losses policies, see Note 1 to our consolidated financial
85
statements included elsewhere in this Annual Report and “—B. Liquidity and Capital Resources—Financial
Condition—Loan Portfolio.”
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
Impairment of Investment Securities
U.S. GAAP requires the recognition in earnings of an impairment loss on investment securities for a decline
in fair value that is other than temporary. Determination of whether a decline is other than temporary often
involves estimating the outcome of future events. Management judgment is required in determining whether
factors exist that indicate that an impairment loss has been incurred at the balance sheet date. These judgments
are based on subjective as well as objective factors. We conduct a review semi-annually to identify and evaluate
investment securities that have indications of possible impairment. The assessment of other-than-temporary
impairment requires judgment and therefore can have an impact on the results of operations. Impairment is
evaluated considering various factors, and their significance varies from case to case.
Debt and marketable equity securities.
In determining whether a decline in fair value below cost is other
than temporary for a particular equity security, we generally consider factors such as the ability and positive
intent to hold the investments for a period of time sufficient to allow for any anticipated recovery in fair value. In
addition, an other-than-temporary impairment is recognized in earnings for marketable equity securities when
one of the following criteria is met:
‰
‰
‰
‰
the fair value of the investment is 20% or more below cost as of the end of the reporting period,
due to the financial condition and near-term prospects of the issuer, the issuer is categorized as “Likely
to become Bankrupt,” “Virtually Bankrupt” or “Bankrupt or de facto Bankrupt” status under the
Japanese banking regulations,
the fair value of the investment has been below cost for six months or longer, or
the fair value of the security is below cost and a decision has been made to sell the securities.
For debt securities, an other-than-temporary impairment is recognized in earnings if we have an intent to
sell a debt security or if it is more likely than not we will be required to sell the debt security before recovery of
its amortized cost basis. When we do not intend to sell a debt security and if it is more likely than not that we will
not be required to sell the debt security before recovery of its amortized cost basis, the credit component of an
other-than-temporary impairment of the debt security is recognized in earnings, but the noncredit component is
recognized in accumulated other comprehensive income.
Certain securities held by MUFG Bank, Mitsubishi UFJ Trust and Banking and certain other subsidiaries,
which primarily consist of debt securities issued by the Japanese national government and generally considered
to be of minimal credit risk, are determined not to be impaired as the respective subsidiaries do not have an
intention to sell the securities, or it is more likely than not that those subsidiaries will not be required to sell
before recovery of their amortized cost basis.
The determination of other-than-temporary impairment for certain debt securities held by MUFG Americas
Holdings, which primarily consist of residential mortgage-backed securities and certain asset-backed securities,
is made on the basis of a cash flow analysis and monitoring of the performance of such securities, as well as
whether MUFG Americas Holdings intends to sell, or is more likely than not required to sell, the securities
before recovery of their amortized cost basis.
For further information on the amount of the impairment losses and the aggregate amount of unrealized
gross losses on investment securities, see Note 3 to our consolidated financial statements included elsewhere in
this Annual Report.
86
Equity method investees. We determine whether any loss on investments is other than temporary, through
consideration of various factors, such as the length of time and the extent to which the fair value has been less
than cost, the financial condition and near-term prospects of the investees, and our intent and ability to retain the
investment in the investees for a period of time sufficient to allow for any anticipated recovery in the fair value.
We also evaluate additional factors, such as the condition and trend of the economic cycle, and trends in the
general market.
Our assessment of potential impairment involves risks and uncertainties depending on market conditions
that are global or regional in nature and the condition of specific issuers or industries, as well as management’s
subjective assessment of the estimated future performance of investments. If we later conclude that a decline is
other than temporary, the impairment loss may significantly affect our operating results and financial condition in
future periods.
Allowance for Repayment of Excess Interest
We maintain an allowance for repayment of excess interest based on our estimate of the potential liability
exposure. Our estimate of the potential liability exposure represents the estimated amount of claims for
repayment of excess interest to be received in the future. We expect that any such claim will be made on the basis
of a 2006 ruling of the Japanese Supreme Court, or the Ruling. Under the Ruling, lenders are generally required
to reimburse borrowers for interest payments made in excess of the limits stipulated by the Interest Rate
Restriction Act upon receiving claims for reimbursement, despite the then-effective provisions of the Law
Concerning Lending Business that exempted a lender from this requirement if the lender provided required
notices to the borrower and met other specified requirements, and the borrower voluntarily made the interest
payment.
While we have not entered into any consumer loan agreement after April 2007 that imposes an interest rate
exceeding the limits stipulated by the Interest Rate Restriction Act, we need to estimate the number of possible
claims for reimbursement of excess interest payments. To determine the allowance for repayment of excess
interest, we analyze the historical number of repayment claims we have received, the amount of such claims,
borrowers’ profiles, the actual amount of reimbursements we have made, management’s future forecasts, and
other events that are expected to possibly affect the repayment claim trends in order to arrive at our best estimate
of the potential liability. We believe that the provision for repayment of excess interest is adequate and the
allowance is at the appropriate amount to absorb probable losses, so that the impact of future claims for
reimbursement of excess interest will not have a material adverse effect on our financial position and results of
operations. The allowance is recorded as a liability in Other liabilities.
For further information, see Note 27 to our consolidated financial statements included elsewhere in this
Annual Report and “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our
loans to consumers and our shareholdings in companies engaged in consumer lending, changes in the business or
regulatory environment for consumer finance companies in Japan may further adversely affect our financial
results.”
Income Taxes
Valuation of deferred tax assets. A valuation allowance for deferred tax assets is recognized if, based on
the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will
not be realized. All available evidence, both positive and negative, is considered to determine whether, based on
the weight of that evidence, a valuation allowance is needed. Future realization of the tax benefit of existing
deductible temporary differences or carryforwards ultimately depends on the existence of sufficient taxable
income.
In determining a valuation allowance, we perform a review of future reversals of existing taxable temporary
differences, and future taxable income exclusive of reversing temporary differences. Future taxable income is
87
developed from forecasted operating results, based on recent historical trends and approved business plans, the
eligible carryforward periods and other relevant factors. For certain subsidiaries where strong negative evidence
exists, such as cumulative losses and the expiration of unused operating loss carryforwards in recent years, a
valuation allowance is recognized against the deferred tax assets to the extent that it is more likely than not that
they will not be realized.
Because the establishment of the valuation allowance is an inherently uncertain process involving estimates,
if we are not able to realize all or part of our net deferred tax assets in the future, we will incur additional
deferred tax expenses, which could materially affect our operating results and financial condition in future
periods.
Accounting for Goodwill and Intangible Assets
Accounting for Goodwill. U.S. GAAP requires us to test goodwill for impairment at least annually, or
more frequently if events or changes in circumstances indicate that goodwill may be impaired, using a two-step
process that begins with an estimation of the fair value of a reporting unit of our business, which is to be
compared with the carrying amount of the unit, to identify potential impairment of goodwill. A reporting unit is
an operating segment or component of an operating segment that constitutes a business for which discrete
financial information is available and is regularly reviewed by management. The fair value of a reporting unit is
defined as the amount at which the unit as a whole could be bought or sold in a current transaction between
willing parties. For a reporting unit for which an observable quoted price is not available, the fair value is
determined using an income approach. In the income approach, the present value of expected future cash flows is
calculated by taking the net present value based on each reporting unit’s internal forecasts. A control premium
factor is also considered in relation to market capitalization.
If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment loss recorded in our consolidated statements
of income. This test requires comparison of the implied fair value of the unit’s goodwill with the carrying amount
of that goodwill. The estimate of the implied fair value of the reporting unit’s goodwill requires us to allocate the
fair value of a reporting unit to all of the assets and liabilities of that reporting unit, including unrecognized
intangible assets, if any, since the implied fair value is determined as the excess of the fair value of a reporting
unit over the net amounts assigned to its assets and liabilities in the allocation. Accordingly, the second step of
the impairment test also requires an estimate of the fair value of individual assets and liabilities, including any
unrecognized intangible assets that belong to that unit. A change in the estimation could have an impact on
impairment recognition since it is driven by hypothetical assumptions, such as customer behavior and interest
rate forecasts. The estimation is based on information available to management at the time the estimation is
made.
Accounting for Intangible Assets.
Intangible assets having indefinite useful lives are subject to annual
impairment tests. An impairment exists if the carrying value of an indefinite lived asset exceeds its fair value. For
other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not
recoverable and the carrying amount exceeds the fair value of the intangible asset. Management judgment is
required to evaluate whether indications of potential impairment have occurred, and to test intangible assets for
impairment if required.
Accrued Severance Indemnities and Pension Liabilities
We have defined retirement benefit plans, including lump-sum severance indemnities and pension plans,
which cover substantially all of our employees. Severance indemnities and pension costs are calculated based
upon a number of actuarial assumptions, including discount rates and expected long-term rates of return on our
plan assets. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and
amortized over future periods, and affect our recognized net periodic pension costs and accrued severance
88
indemnities and pension obligations in future periods. Differences in actual experience or changes in assumptions
may affect our financial condition and operating results in future periods.
The discount rates for the domestic plans are set to reflect the interest rates of high-quality fixed-rate
instruments with maturities that correspond to the timing of future benefit payments.
In developing our assumptions for expected long-term rates of return, we refer to the historical average
returns earned by the plan assets and the rates of return expected to be available for reinvestment of existing plan
assets, which reflect recent changes in trends and economic conditions, including market prices.
Valuation of Financial Instruments
We measure certain financial assets and liabilities at fair value. The majority of such assets and liabilities
are measured at fair value on a recurring basis, including trading securities, trading derivatives and investment
securities. In addition, certain other assets and liabilities are measured at fair value on a non-recurring basis,
including held for sale loans which are carried at the lower of cost or fair value, collateral dependent loans and
nonmarketable equity securities subject to impairment.
We have elected the fair value option for certain foreign securities classified as available-for-sale securities,
whose unrealized gains and losses are reported in income.
The guidance on the measurement of fair value defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. We have an established and documented process for determining fair value in accordance with the
guidance. To determine fair value, we use quoted prices which include those provided from pricing vendors,
where available. We generally obtain one price or quote per instrument and do not adjust it to determine fair
value of the instrument. We perform internal price verification procedures to ensure that the prices and quotes
provided from the independent pricing vendors are reasonable. Such verification procedures include comparison
of pricing sources and analysis of variances among pricing sources. These verification procedures are
periodically performed by independent risk management departments. For collateralized loan obligations, or
CLOs, backed by general corporate loans, the fair value is determined by weighting the internal model valuation
and the non-binding broker-dealer quotes. If quoted prices are not available to determine fair value of derivatives,
the fair value is based upon valuation techniques that use, where possible, current market-based or independently
sourced parameters, such as interest rates, yield curves, foreign exchange rates, volatilities and credit curves. The
fair values of trading liabilities are determined by discounting future cash flows at a rate which incorporates our
own creditworthiness. In addition, valuation adjustments may be made to ensure that the financial instruments
are recorded at fair value. These adjustments include, but are not limited to, amounts that reflect counterparty
credit quality, liquidity risk, and model risk. Our financial models are validated and periodically reviewed by risk
management departments independent of divisions that created the models.
For a further discussion of the valuation techniques applied to the material assets or liabilities, see Note 32
to our consolidated financial statements included elsewhere in this Annual Report.
Accounting Changes and Recently Issued Accounting Pronouncements
See “Accounting Changes” and “Recently Issued Accounting Pronouncements” in Note 1 to our
consolidated financial statements included elsewhere in this Annual Report.
89
A. Operating Results
Results of Operations
The following table sets forth a summary of our results of operations for the fiscal years ended March 31,
2016, 2017 and 2018:
Fiscal years ended March 31,
2016
2017
2018
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,005.7
744.3
(in billions)
¥2,990.7 ¥3,259.0
1,028.7
769.6
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,261.4
2,221.1
2,230.3
Provision for (reversal of) credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
231.9
2,407.7
3,274.5
1,162.7
369.5
253.7
1,196.7
2,891.6
272.5
94.4
(240.8)
1,935.1
2,744.4
1,661.8
407.8
Net income before attribution of noncontrolling interests . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . . . . . . . . . . . . . .
¥ 793.2
(9.1)
¥ 178.1 ¥1,254.0
25.8
(24.6)
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . .
¥ 802.3
¥ 202.7 ¥1,228.2
Major components of our net income attributable to Mitsubishi UFJ Financial Group for the fiscal years
ended March 31, 2016, 2017 and 2018 are discussed in further detail below.
Net Interest Income
The following table is a summary of the interest rate spread for the fiscal years ended March 31, 2016, 2017
and 2018:
Fiscal years ended March 31,
2016
Interest
income
(expense)
Average
balance
Average
rate
Average
balance
2017
Interest
income
(expense)
Average
rate
Average
balance
2018
Interest
income
(expense)
Average
rate
(in billions, except percentages)
Interest-earning assets:
Domestic . . . . . . . . . ¥153,612.6 ¥1,097.5
1,908.2
Foreign . . . . . . . . . . .
99,103.1
0.71% ¥145,179.3 ¥1,018.5
1,972.2
94,013.1
1.93
0.70% ¥144,602.0 ¥ 1,002.0
2,257.0
94,447.0
2.10
0.69%
2.39
Total . . . . . . . . . ¥252,715.7 ¥3,005.7
1.19% ¥239,192.4 ¥2,990.7
1.25% ¥239,049.0 ¥ 3,259.0
1.36%
Financed by:
Interest-bearing liabilities:
Domestic . . . . . . . . . ¥159,312.9 ¥ (296.9)
(447.4)
Foreign . . . . . . . . . . .
61,822.3
0.19% ¥166,305.3 ¥ (313.5)
(456.1)
57,217.0
0.72
0.19% ¥173,166.0 ¥ (367.6)
(661.1)
60,691.1
0.80
0.21%
1.09
Total . . . . . . . . . 221,135.2
(744.3)
0.34
223,522.3
(769.6)
0.34
233,857.1
(1,028.7)
0.44
Non-interest-bearing
liabilities . . . . . . . . . . .
31,580.5
Total . . . . . . . . . . . . . ¥252,715.7
Net interest income and
interest rate spread . . . .
Net interest income as a
percentage of total
interest-earning
assets . . . . . . . . . . . . . .
—
15,670.1
0.29% ¥239,192.4
—
5,191.9
0.32% ¥239,049.0
—
0.43%
¥2,261.4
0.85%
¥2,221.1
0.91%
¥ 2,230.3
0.92%
0.89%
0.93%
0.93%
90
The following table shows changes in our net interest income by changes in volume and by changes in rates
for the fiscal year ended March 31, 2018 compared to the fiscal year ended March 31, 2017, and the fiscal year
ended March 31, 2017 compared to the fiscal year ended March 31, 2016:
Fiscal Year Ended March 31, 2016
versus
Fiscal Year Ended March 31, 2017
Fiscal Year Ended March 31, 2017
versus
Fiscal Year Ended March 31, 2018
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Volume(1)
Rate(1)
Net change
Volume(1)
Rate(1)
Net change
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (97,961) ¥ 2,419
57,614
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,318)
¥(95,542) ¥(50,302) ¥(20,346) ¥(70,648)
79,781
(9,764)
89,545
55,296
Total . . . . . . . . . . . . . . . . . . . . . . . . . ¥(100,279) ¥60,033
¥(40,246) ¥(60,066) ¥ 69,199
¥ 9,133
Note:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net
change.”
Net interest income is a function of:
‰
‰
‰
‰
‰
the amount of interest-earning assets,
the amount of interest-bearing liabilities,
the general level of interest rates,
the so-called “spread,” or the difference between the rate of interest earned on interest-earning assets
and the rate of interest paid on interest-bearing liabilities, and
the proportion of interest-earning assets financed by non-interest-bearing liabilities and equity.
Our net interest income for each of the fiscal years ended March 31, 2016, 2017 and 2018 was not
materially affected by gains or losses resulting from interest rate and other derivative contracts. We use such
derivative instruments to manage the risks affecting the values of our financial assets and liabilities. Although
these contracts are generally entered into for risk management purposes, a majority of them do not meet the
specific conditions to qualify for hedge accounting under U.S. GAAP and thus are accounted for as trading assets
or liabilities. Any gains or losses resulting from such derivative instruments are recorded as part of Trading
account profits—net. For a detailed discussion of our risk management activities, see “—A. Operating Results—
Results of Operations—Non-Interest Income” and “Item 11. Quantitative and Qualitative Disclosures about
Credit, Market and Other Risk.”
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
Net interest income increased ¥9.2 billion to ¥2,230.3 billion for the fiscal year ended March 31, 2018 from
¥2,221.1 billion for the fiscal year ended March 31, 2017. This increase was mainly due to higher foreign interest
income, reflecting the higher average balance of interest-earning assets as well as higher average interest rates,
particularly in the United States. This increase was partially offset by an increase in interest expense, reflecting
higher interest paid on deposits in the United States and higher U.S. dollar funding rates in Japan.
Interest income increased ¥268.3 billion to ¥3,259.0 billion for the fiscal year ended March 31, 2018 from
¥2,990.7 billion for the previous fiscal year. Domestic interest income decreased ¥16.5 billion mainly due to the
lower average volume of our Japanese government bond portfolio. Foreign interest income increased
¥284.8 billion primarily due to higher volumes and interest rates on foreign loans and deposits in other banks,
particularly in the United States.
91
Interest expense increased ¥259.1 billion to ¥1,028.7 billion for the fiscal year ended March 31, 2018 from
¥769.6 billion for the previous fiscal year. Domestic interest expense increased ¥54.1 billion, and foreign interest
expense increased ¥205.0 billion. The higher domestic interest expense was primarily attributable to higher
U.S. dollar funding rates in Japan and additional issuances of domestic bonds. The higher foreign interest
expense was mainly due to higher interest rates on deposits and higher money market interest rates in the United
States.
Our average interest rate spread (which is the average interest rate on interest-earning assets less the average
interest rate on interest-bearing liabilities) increased one basis point to 0.92% for the fiscal year ended March 31,
2018 from 0.91% for the previous fiscal year. Between the same periods, the average interest rate spread on
domestic activities decreased three basis points to 0.48% from 0.51%, while the average interest rate spread on
foreign activities remained at 1.30%. The decrease in the average interest rate spread on domestic activities
mainly reflected lower interest rates on our Japanese government bond portfolio and higher U.S. dollar funding
rates in Japan. The average interest rate spread on foreign activities remained at the same level since the average
interest rate on total interest-earning assets rose 29 basis points and the average interest rate on total interest-
bearing liabilities also rose to a similar extent.
Since February 2016, the Bank of Japan has maintained a “quantitative and qualitative monetary easing with
negative interest rates” policy, as updated in September 2016 with a “quantitative and qualitative monetary
easing with yield curve control” policy, adding to its monetary policy a Japanese government bond purchase
program with an aim to keep the yield of 10-year Japanese government bonds around zero percent. As a result,
the yield on many financial instruments and other market interest rates in Japan have declined to near-zero levels,
and the average interest rate on domestic assets continued to decline, while the average rate on domestic
liabilities has remained at historically low levels. If the policy is maintained in Japan for an extended period,
market interest rates may decline further, and our interest rate spread on domestic activities will likely continue
to be under severe pressure. On the other hand, in the United States, the FRB raised the target range for the
federal funds rate to between 1.00% to 1.25% in June 2017, to between 1.25% and 1.50% in December 2017, to
between 1.50% and 1.75% in March 2018 and further to between 1.75% to 2.00% in June 2018. The FRB is
expected to raise it further during this year, which may provide an opportunity to improve our interest rate spread
but which may adversely impact the value of some of our interest-earning assets and the costs relating to some of
our interest-bearing liabilities. For more information, see “—Business Environment.”
The average balance of interest-earning assets decreased ¥143.4 billion to ¥239,049.0 billion for the fiscal
year ended March 31, 2018 from ¥239,192.4 billion for the fiscal year ended March 31, 2017. The average
balance of domestic interest-earning assets decreased ¥577.3 billion to ¥144,602.0 billion mainly due to a
decrease in the balance of our available-for-sale Japanese government bond portfolio as we continued to reduce
our holdings of such bonds to manage the risk of losses resulting from declines in the values of Japanese
government bonds in a rising interest rate environment. The lower average balance of domestic interest-earning
assets was also due to a decrease in the average balance of domestic loans, primarily reflecting repayments of
loans by borrowers in the manufacturing industry. The average balance of foreign interest-earning assets
increased ¥433.9 billion primarily due to increases in foreign currency-denominated loans and deposits in other
banks, partially offset by a decrease in the balances of trading account assets, particularly U.S. Treasury bonds as
interest rates rose in the United States.
The average balance of interest-bearing liabilities increased ¥10,334.8 billion to ¥233,857.1 billion for the
fiscal year ended March 31, 2018 from ¥223,522.3 billion for the fiscal year ended March 31, 2017. The average
balance of domestic interest-bearing liabilities increased ¥6,860.7 billion mainly due to additional issuances of
bonds to fund our foreign activities and an increase in the balance of domestic deposits. The average balance of
foreign interest-bearing liabilities increased ¥3,474.1 billion, primarily reflecting a larger balance of deposits.
92
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
Net interest income decreased ¥40.3 billion to ¥2,221.1 billion for the fiscal year ended March 31, 2017
from ¥2,261.4 billion for the fiscal year ended March 31, 2016. This decrease was mainly due to lower domestic
interest income, reflecting the lower average balance of interest-earning assets as well as lower average interest
rates in Japan. This decrease was also attributable to an increase in interest expense, reflecting higher U.S. dollar
funding rates in Japan and additional issuances of bonds. This decrease was partially mitigated by an increase in
foreign interest income mainly due to higher average interest rates, reflecting generally rising trends in interest
rates in the United States.
Interest income decreased ¥15.0 billion to ¥2,990.7 billion for the fiscal year ended March 31, 2017 from
¥3,005.7 billion for the previous fiscal year. Domestic interest income decreased ¥79.0 billion mainly due to
lower volume and interest rates on domestic loans. Foreign interest income increased ¥64.0 billion primarily due
to higher volumes and interest rates on foreign trading account assets and higher interest rates on foreign loans.
Interest expense increased ¥25.3 billion to ¥769.6 billion for the fiscal year ended March 31, 2017 from
¥744.3 billion for the previous fiscal year. Domestic interest expense increased ¥16.6 billion, and foreign interest
expense increased ¥8.7 billion. The higher domestic interest expense was primarily attributable to higher
U.S. dollar funding rates in Japan and additional issuances of domestic bonds. The higher foreign interest
expense was mainly due to higher money market interest rates and higher interest rates on deposits in the United
States.
The average interest rate spread increased six basis points to 0.91% for the fiscal year ended March 31, 2017
from 0.85% for the previous fiscal year. Between the same periods, the average interest rate spread on domestic
activities decreased one basis point to 0.51% from 0.52%, while the average interest rate spread on foreign
activities increased nine basis points to 1.30% from 1.21%. The decrease in the average interest rate spread on
domestic activities reflected the continued near-zero interest rate environment in Japan. In such an environment,
for the fiscal year ended March 31, 2017 compared to the previous fiscal year, the average interest rate on
domestic loans decreased four basis points to 1.09% from 1.13%, while the average interest rate on domestic
deposits decreased two basis points to 0.04% from 0.06%. The increase in the average interest rate spread on
foreign activities mainly reflected higher interest rates across all the interest-earning asset categories, with the
average interest rates on loans, trading account assets, short-term interest-earning assets and interest-earning
deposits in other banks increasing 11, 11, 18 and 15 basis points, respectively, for the fiscal year ended
March 31, 2017 compared to the previous fiscal year. Between the same periods, the average interest rates also
increased across all the interest-bearing liability categories except long-term liabilities. The average interest rate
on foreign deposits increased 11 basis points, while the average interest rate on call money, funds purchased, and
payable under repurchase agreements and securities lending transactions increased five basis points, and the
average interest rate on other short-term borrowings and trading account liabilities increased 42 basis points. In
contrast, the average interest rate on long-term debt decreased 43 basis points.
The Bank of Japan maintained a “quantitative and qualitative monetary easing with negative interest rates”
policy throughout the reporting period. As a result, the yield on many financial instruments and other market
interest rates in Japan have declined to negative levels, and the average interest rate on domestic assets continued
to decline while the average rate on domestic liabilities reached historically low levels. In September 2016, the
Bank of Japan announced a new “quantitative and qualitative monetary easing with yield curve control” policy,
adding to its monetary policy a Japanese government bond purchase program with an aim to keep the yield of
10-year Japanese government bonds around zero percent. If the policy is maintained in Japan for an extended
period, market interest rates may decline further, and our interest rate spread on domestic activities will likely
continue to be under severe pressure. On the other hand, in the United States, the FRB raised the target range for
the federal funds rate to between 0.5% to 0.75% in December 2016, to between 0.75% to 1.00% in March 2017,
and to between 1.00% to 1.25% in June 2017. The FRB may decide to raise it further during this year, which may
provide an opportunity to improve our interest rate spread but which may adversely impact the value of some of
93
our interest-earning assets and the costs relating to some of our interest-bearing liabilities. For more information,
see “—Business Environment.”
The average balance of interest-earning assets decreased ¥13,523.3 billion to ¥239,192.4 billion for the
fiscal year ended March 31, 2017 from ¥252,715.7 billion for the fiscal year ended March 31, 2016. The average
balance of domestic interest-earning assets decreased ¥8,433.3 billion to ¥145,179.3 billion mainly due to a
decrease in the balance of our available-for-sale Japanese government bond portfolio, reflecting a reduction in
our holdings of Japanese government bonds to manage the risk of losses resulting from declines in the values of
Japanese government bonds in a rising interest rate environment, as well as a decrease in loans, mainly reflecting
repayments of loans by national governmental institutions. The average balance of foreign interest-earning assets
decreased ¥5,090.0 billion primarily due to lower balances of interest-earning deposits in other banks, short-term
lending in the money market and loans, partially offset by an increase of ¥965.0 billion in trading account assets,
particularly U.S. Treasury bonds.
The average balance of interest-bearing liabilities increased ¥2,387.1 billion to ¥223,522.3 billion for the
fiscal year ended March 31, 2017 from ¥221,135.2 billion for the fiscal year ended March 31, 2016. While the
average balance of domestic interest-bearing liabilities increased ¥6,992.4 billion mainly due to a larger balance
of deposits and additional issuances of bonds, the average balance of foreign interest-bearing liabilities decreased
¥4,605.3 billion, reflecting lower balances across all the interest-bearing liability categories.
Provision for (reversal of) credit losses
Provision for (reversal of) credit losses is charged to operations to maintain the allowance for credit losses at
a level deemed appropriate by management. For more information on our provision for (reversal of) credit losses
and a description of the approach and methodology used to establish the allowance for credit losses,
see “—B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio—Allowance policy.”
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
We recorded ¥240.8 billion of reversal of credit losses for the fiscal year ended March 31, 2018, compared
to ¥253.7 billion of provision for credit losses for the previous fiscal year. By segment, for the fiscal year ended
March 31, 2018, ¥297.4 billion, ¥22.3 billion and ¥9.3 billion, of reversal of credit losses were recorded in the
Commercial, Residential and MUFG Americas Holdings segments respectively, while ¥23.4 billion and
¥64.8 billion of provision for credit losses were recorded in the Card and Krungsri segments respectively. For the
previous fiscal year, ¥177.3 billion, ¥12.2 billion, ¥13.3 billion and ¥51.0 billion of provision for credit losses
were recorded in the Commercial, Residential, Card and Krungsri segments, respectively, while ¥0.1 billion of
reversal of credit losses was recorded in the MUFG Americas Holdings segment.
The reversal of credit losses recorded in the Commercial segment for the fiscal year ended March 31, 2018
mainly reflected the improvements in the financial performance of some large borrowers in the domestic
electronics manufacturing industry, some foreign borrowers in the oil and gas sector, and a broader number of
small and medium-sized borrowers in the domestic manufacturing industry. The reversal of credit losses in the
Residential segment for the fiscal year ended March 31, 2018 primarily reflected the improved credit quality of
borrowers who were positively affected by the stable domestic corporate environment in recent periods and
repayments of impaired loans through debt workout programs. The reversal of credit losses in the MUFG
Americas Holdings segment for the fiscal year ended March 31, 2018 was primarily due to the improvement in
the credit quality of borrowers in the oil and gas sector, particularly those which are engaged in the petroleum
exploration and production businesses.
The provision for credit losses in the Card segment for the fiscal year ended March 31, 2018 was primarily
attributable to increases in borrowers filing for bankruptcy and borrowers becoming delinquent on their interest
payments as the recent improvement in domestic corporate profits had and is expected to continue to have a
disparate impact on consumer loan borrowers. The provision for credit losses in the Krungsri segment for the
94
fiscal year ended March 31, 2018 reflected growth in the retail and consumer loan portfolio as well as the
negative impact of stagnant economic conditions in Thailand on the repayment ability of corporate borrowers.
We recorded ¥266.1 billion of reversal of credit losses for our domestic loan portfolio for the fiscal year
ended March 31, 2018, compared to provision for credit losses of ¥163.2 billion for the previous fiscal year. This
reflected the improvement in the credit quality of borrowers in the domestic manufacturing industry in the
Commercial segment and the credit quality of borrowers in the Residential segment, partially offset by the
weaker credit quality among consumer loan borrowers. We recorded ¥25.3 billion of provision for credit losses
for our foreign portfolio for the fiscal year ended March 31, 2018, compared to provision for credit losses of
¥90.5 billion for the previous fiscal year. The smaller provision was primarily attributable to the improvement in
the credit quality of some borrowers in the oil and gas sector in the Commercial and MUFG Americas Holdings
segments.
For more information, see “—B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio.”
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
We recorded ¥253.7 billion of provision for credit losses for the fiscal year ended March 31, 2017,
compared to ¥231.9 billion for the previous fiscal year. By segment, for the fiscal year ended March 31, 2017,
¥177.3 billion, ¥12.2 billion, ¥13.3 billion and ¥51.0 billion of provision for credit losses were recorded in the
Commercial, Residential, Card and Krungsri segments, respectively, while ¥0.1 billion of reversal of credit
losses was recorded in the MUFG Americas Holdings segment. For the previous fiscal year, ¥117.1 billion,
¥0.9 billion, ¥47.4 billion and ¥76.0 billion of provision for credit losses were recorded in the Commercial, Card,
MUFG Americas Holdings and Krungsri segments, respectively, while ¥9.5 billion of reversal of credit losses
was recorded in the Residential segment.
The provision for credit losses recorded in the Commercial segment for the fiscal year ended March 31,
2017 mainly reflected the deterioration in the business and financial performance of a large borrower in the
domestic electronics manufacturing industry and a large foreign borrower in the trading industry. The provision
for credit losses in the Residential segment for the fiscal year ended March 31, 2017 primarily resulted from
updates to our future forecast of credit losses with respect to certain individual borrowers reflecting information
relating to more recent transactions with such borrowers. The provision for credit losses in the Krungsri segment
for the fiscal year ended March 31, 2017 mainly reflected the negative impact of the stagnant economic
conditions in Thailand on the credit quality of the small and medium-sized enterprise portfolio and the retail and
consumer finance portfolio.
The reversal of credit losses in the MUFG Americas Holdings segment for the fiscal year ended March 31,
2017 compared to the provision for credit losses of the previous fiscal year was primarily due to the stabilization
of the credit quality of borrowers in the oil and gas sector in MUFG Americas Holdings’ loan portfolio,
particularly those that are engaged in the petroleum exploration and production businesses. Recovering oil and
gas prices positively affected those businesses.
We recorded ¥163.2 billion of provision for credit losses for our domestic loan portfolio for the fiscal year
ended March 31, 2017, compared to reversal of credit losses of ¥5.3 billion for the previous fiscal year. This
reflected the deteriorated credit quality of the large domestic borrower in the Commercial segment and the
provisions recorded for certain individual borrowers in the Residential segment. We recorded ¥90.5 billion of
provision for credit losses for our foreign portfolio for the fiscal year ended March 31, 2017, compared to
provision for credit losses of ¥237.2 billion for the previous fiscal year. This smaller provision was primarily
attributable to improvements in the credit quality of foreign subsidiaries of a large Japanese electronics
95
manufacturer in the Commercial segment and the stabilization of the credit quality of oil and gas borrowers in the
MUFG Americas Holdings segment.
For more information, see “—B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio.”
Non-Interest Income
The following table is a summary of our non-interest income for the fiscal years ended March 31, 2016,
2017 and 2018:
Fiscal years ended March 31,
2016
2017
2018
(in billions)
Fees and commissions income:
Fees and commissions on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on remittances and transfers . . . . . . . . . . . . . . . . . . .
Fees and commissions on foreign trading business . . . . . . . . . . . . . . . . . . .
Fees and commissions on credit card business . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on security-related services . . . . . . . . . . . . . . . . . . .
Fees and commissions on administration and management services for
investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on real estate business . . . . . . . . . . . . . . . . . . . . . . .
Other fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
58.9
169.1
84.7
193.6
285.3
149.9
110.1
44.7
69.5
43.5
266.6
¥
53.9
168.6
75.0
198.1
239.5
155.7
103.1
41.8
59.9
39.8
279.5
¥
53.5
169.3
78.2
212.5
258.7
159.5
112.4
44.2
49.2
40.6
284.7
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses)—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
1,475.9
192.1
1,414.9
(134.9)
1,462.8
(49.6)
Trading account profits (losses)—net:
Net profits (losses) on interest rate and other derivative contracts . . . . . . . .
Net profits (losses) on trading account securities, excluding derivatives . . .
434.4
(157.7)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276.7
(325.0)
(314.2)
(639.2)
(226.8)
153.7
(73.1)
Investment securities gains—net:
Net gains on sales of available-for-sale securities:
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on available-for-sale securities:
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net . . . . . . . . . . . . . . . . . . . . . . .
Gains on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110.9
153.7
(1.0)
(21.9)
(9.4)
232.3
176.9
12.2
41.6
118.9
185.7
(0.7)
(32.0)
9.3
281.2
197.8
13.3
63.6
73.9
207.3
(0.1)
(6.7)
12.5
286.9
228.0
16.1
64.0
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,407.7
¥1,196.7
¥1,935.1
96
Non-interest income consists of the following:
Fees and commissions income
Fees and commissions income consist of the following:
‰
‰
‰
‰
‰
‰
‰
Fees and commissions on deposits consist of fees and commissions charged for ATM transactions and
other deposit and withdrawal services.
Fees and commissions on remittances and transfers consist of fees and commissions charged for
settlement services such as domestic fund remittances, including those made through electronic banking.
Fees and commissions on foreign trading business consist of fees and commissions charged for fund
collection and financing services related to foreign trading business activities.
Fees and commissions on credit card business consist of fees and commissions related to the credit card
business such as interchange income, annual fees, royalty and other service charges from franchisees.
Fees and commissions on security-related services primarily consist of fees and commissions for sales
and transfers of securities, including investment funds, underwriting, brokerage and advisory services,
securitization arrangement services, and agency services for the calculation and payment of dividends.
Fees and commissions on administration and management services for investment funds primarily
consist of fees and commissions earned on managing investment funds on behalf of clients.
Trust fees consist primarily of fees earned on fiduciary asset management and administration services
for corporate pension plans and investment funds.
‰ Guarantee fees consist of fees related to the guarantee business, including those charged for providing
guarantees on residential mortgage loans and other loans.
‰
Insurance commissions consist of commissions earned by acting as agent for insurance companies for
the sale of insurance products.
‰
Fees and commissions on real estate business primarily consist of fees from real estate agent services.
‰ Other fees and commissions include various fees and commissions, such as arrangement fees and agent
fees, other than the fees mentioned above.
Net foreign exchange gains (losses)
Net foreign exchange gains (losses) consist of the following:
‰ Net foreign exchange gains (losses) on derivative contracts are net gains (losses) primarily on currency
derivative instruments entered into for trading purposes. For more information on our derivative
contracts, see Note 24 to our consolidated financial statements included elsewhere in this Annual
Report.
‰ Net foreign exchange gains (losses) on other than derivative contracts include foreign exchange trading
gains (losses) as well as transaction gains (losses) on the translation into Japanese yen of monetary
assets and liabilities denominated in foreign currencies. The transaction gains (losses) on the translation
into Japanese yen fluctuate from period to period depending upon the spot rates at the end of each fiscal
year. In principle, all transaction gains (losses) on translation of monetary assets and liabilities
denominated in foreign currencies are included in current earnings.
‰ Net foreign exchange gains (losses) related to the fair value option include transaction gains (losses) on
the translation into Japanese yen of securities under the fair value option. For more information on the
fair value option, see Note 32 to our consolidated financial statements included elsewhere in this Annual
Report.
97
Net trading account profits (losses)
Trading account assets and liabilities are carried at fair value and changes in the value of trading account
assets and liabilities are recorded in net trading account profits (losses). Activities reported in our net trading
account profits (losses) can generally be classified into two categories:
‰
‰
trading purpose activities, which are conducted mainly for the purpose of generating profits either
through transaction fees or arbitrage gains and involve frequent and short-term selling and buying of
securities, commodities or others; and
trading account assets relating to the application of certain accounting rules, which are generally not
related to trading purpose activities, but simply classified as trading accounts due to the application of
certain accounting rules.
Of the two categories, trading account assets relating to the application of certain accounting rules represent
a larger portion of our trading account losses for the fiscal year ended March 31, 2018.
We generally do not separate, for financial reporting purposes, customer originated trading activities from
non-customer related, proprietary trading activities. When an order for a financial product is placed by a
customer, a dealer offers a price which includes certain transaction fees, often referred to as the “margin” to the
market price. The margin is determined by considering factors such as administrative costs, transaction amount
and liquidity of the applicable financial product. Once the customer agrees to the offered price, the deal is
completed and the position is recorded in our ledger as a single entry without any separation of components. To
manage the risk relating to the customer side position, we often enter into an offsetting transaction with the
market. Unrealized gains and losses as of the period-end for both the customer side position and the market side
position are recorded within the same trading account profits and losses.
Net trading account profits (losses) consist of net profits (losses) on interest rate and other derivative
contracts and net profits (losses) on trading account securities, excluding derivatives.
Net profits (losses) on interest rate and other derivative contracts are reported for net profits (losses) on
derivative instruments which primarily relate to trading purpose activities and include:
‰
‰
Interest rate contracts: Interest rate contracts are mainly utilized to manage interest rate risks which
could arise from mismatches between assets and liabilities resulting from customer originated trading
activities;
Equity contracts: Equity contracts are mainly utilized to manage the risk that would arise from price
fluctuations of stocks held in connection with customer transactions;
‰ Commodity contracts: Commodity contracts are mainly utilized to meet customers’ demand for hedging
the risks relating to their transactions, and to diversify our portfolio; and
‰ Credit derivatives: Credit derivatives are mainly utilized as a part of our credit portfolio risk
management.
Derivative instruments for trading purposes also include those used as hedges of net exposures rather than
for specifically identified assets or liabilities, which do not meet the specific criteria for hedge accounting.
Net profits (losses) on trading account securities, excluding derivatives, consist of:
‰ Net profits (losses) on trading account securities, which primarily consist of gains and losses on trading
and valuation of trading securities which relate to trading purpose activities. Net profits (losses) on
investment securities held by certain consolidated variable interest entities, or VIEs, are included in
accordance with the applicable accounting rules.
98
‰ Net profits (losses) on trading account securities under the fair value option, which are classified into
trading accounts profits (losses) in accordance with certain accounting rules. For more information on
the fair value option, see Note 32 to our consolidated financial statements included elsewhere in this
Annual Report.
Net investment securities gains (losses)
Net investment securities gains (losses) primarily include net gains (losses) on sales of marketable
securities, particularly debt securities and marketable equity securities that are classified as available-for-sale
securities. In addition, impairment losses are recognized and offset net investment securities gains when
management concludes that declines in the fair value of investment securities are other than temporary.
Net equity in earnings (losses) of equity method investees
Net equity in earnings (losses) of equity method investees includes our equity interest in the earnings of our
equity method investees and impairment losses on our investments in equity method investees.
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
Non-interest income increased ¥738.4 billion to ¥1,935.1 billion for the fiscal year ended March 31, 2018
from ¥1,196.7 billion for the fiscal year ended March 31, 2017. This increase was mainly attributable to
improvement of ¥566.1 billion in net trading account losses, primarily reflecting fluctuations in interest rates in
the United States and equity prices in Japan.
Fees and commissions income
Fees and commissions income increased ¥47.9 billion to ¥1,462.8 billion for the fiscal year ended March 31,
2018 from ¥1,414.9 billion for the fiscal year ended March 31, 2017. This increase was primarily due to an
increase in fees and commissions on securities-related services due to higher investment banking fees in United
States. The increase in fees and commissions income was also attributable to an increase in fees and commissions
on credit card business, reflecting an increase in payment processing fees and an increase in credit card issuance
fees as credit card use grew in Japan. These increases were partially offset by a decrease in insurance
commissions mainly due to weaker demand for insurance products.
Net foreign exchange gains (losses)
The following table sets forth the details of our foreign exchange gains and losses for the fiscal years ended
March 31, 2017 and 2018:
Fiscal years ended March 31,
2017
2018
(in billions)
Foreign exchange gains (losses)—net:
Net foreign exchange losses on derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Net foreign exchange gains on other than derivative contracts . . . . . . . . . . . . . . .
Net foreign exchange losses related to the fair value option . . . . . . . . . . . . . . . . .
¥(183.2)
455.7
(407.4)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(134.9)
¥(160.0)
377.9
(267.5)
¥ (49.6)
Net foreign exchange losses for the fiscal year ended March 31, 2018 were ¥49.6 billion, compared to net
losses of ¥134.9 billion for the fiscal year ended March 31, 2017. This improvement was mainly due to smaller
net foreign exchange losses on foreign-denominated investment securities under the fair value option as the
99
Japanese yen depreciated against the euro from ¥119.79 to the euro as of March 31, 2017 to ¥130.52 to the euro
as of March 31, 2018, while the Japanese yen appreciating against the euro during the previous fiscal year
resulting in larger net foreign exchange losses on euro-denominated investment securities under the fair value
option. Net foreign exchange losses on derivative contracts also improved primarily because the mark-to-market
valuation on currency swaps entered into in connection with our U.S. dollar funding improved. These
improvements were partially offset by a decrease in net foreign exchange gains on other than derivative
contracts. This decrease was mainly attributable to the negative impact of fluctuations in the foreign currency
exchange rates on the Japanese yen translated amounts of our monetary assets denominated in foreign currencies
as the Japanese yen appreciated against other major currencies on a spot rate basis particularly during the first
three quarters ended December 31, 2017.
Net trading account profits (losses)
The following table sets forth details of our trading account profits and losses for the fiscal years ended
March 31, 2017 and 2018:
Fiscal years ended March 31,
2017
2018
(in billions)
Trading account profits (losses)—net:
Net profits (losses) on interest rate and other derivative contracts
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(136.9)
(153.1)
1.8
18.1
(54.9)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(325.0)
¥ 51.0
(260.4)
6.3
(1.8)
(21.9)
¥(226.8)
Net profits (losses) on trading account securities, excluding derivatives
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities under the fair value option . . . . . . . . . . . . . . . . . .
¥ 150.7
(464.9)
¥ 301.9
(148.2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(314.2)
¥ 153.7
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(639.2)
¥ (73.1)
Net trading account losses were ¥73.1 billion for the fiscal year ended March 31, 2018, compared to net
trading account losses of ¥639.2 billion for the fiscal year ended March 31, 2017. This improvement was mainly
due to ¥153.7 billion of net profits on trading account securities, excluding derivatives, for the fiscal year ended
March 31, 2018, compared to ¥314.2 billion of net losses for the previous fiscal year. This resulted mainly from
smaller losses on trading account securities under the fair value option, particularly U.S. Treasury bonds, as
interest rates in the United States rose at a more moderate rate during the fiscal year ended March 31, 2018,
compared to the previous fiscal year. The yield of 10-year U.S. Treasury bonds rose from around 2.4% as of
March 31, 2017 to around 2.7% as of March 30, 2018, whereas the yields rose from around 1.8% as of March 31,
2016 to around 2.4% as of March 31, 2017. The larger net profits on trading account securities reflected the
increasing trend in equity prices in Japan towards the end of the calendar year 2017.
Net trading account losses on interest rate and other derivative contracts improved ¥98.2 billion to
¥226.8 billion for the fiscal year ended March 31, 2018 from ¥325.0 billion for the fiscal year ended March 31,
2017. This improvement was mainly due to ¥51.0 billion of net profits on interest rate contracts for the fiscal
year ended March 31, 2018, compared to ¥136.9 billion of net losses on such contracts for the fiscal year ended
March 31, 2017, as interest rates in Japan and the United States rose at a more moderate pace during the fiscal
year ended March 31, 2018, compared to the previous fiscal year. This improvement was partially offset by
100
larger net losses on equity contracts due to a reduction in the market value of equity contracts designed to hedge
against downside price fluctuations, reflecting the increasing trend in equity prices in Japan.
Net investment securities gains (losses)
Net investment securities gains increased ¥5.7 billion to ¥286.9 billion for the fiscal year ended March 31,
2018 from ¥281.2 billion for the fiscal year ended March 31, 2017. This increase was mainly due to a
¥25.3 billion reduction in impairment losses on available-for-sale equity securities, reflecting the higher values of
equity securities held by our commercial banking subsidiaries as stock prices rose in Japan during the fiscal year
ended March 31, 2018. In addition, net gains on sales of available-for-sale marketable equity securities increased
¥21.6 billion as we continued to sell down our equity holdings. These increases were partially offset by a
¥45.0 billion decrease in net gains on sales of available-for-sale debt securities, primarily reflecting a lower
volume of sales of Japanese government bonds in our investment securities portfolio during the fiscal year ended
March 31, 2018, compared to the previous fiscal year.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for the fiscal year ended March 31, 2018 was
¥228.0 billion, compared to ¥197.8 billion for the previous fiscal year, reflecting higher earnings of our equity
method investees, including Morgan Stanley.
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
Non-interest income decreased ¥1,211.0 billion to ¥1,196.7 billion for the fiscal year ended March 31, 2017
from ¥2,407.7 billion for the fiscal year ended March 31, 2016. This decrease was mainly attributable to a
¥915.9 billion decrease in net trading account profits, reflecting fluctuations in interest rates and equity prices in
Japan and the United States, and a ¥327.0 billion decrease in net gains on foreign exchange.
Fees and commissions income
Fees and commissions income decreased ¥61.0 billion to ¥1,414.9 billion for the fiscal year ended
March 31, 2017 from ¥1,475.9 billion for the fiscal year ended March 31, 2016. This decrease was primarily due
to a decrease in fees and commissions on security-related services due to weaker customer demand in response to
uncertain market conditions between April 2016 and mid-November 2016. The decrease in fees and commissions
income was also attributable to lower insurance commissions since the sales of certain types of single premium
insurance products were suspended in April 2016 after Japanese government bonds began trading on negative
yields.
Net foreign exchange gains (losses)
The following table sets forth the details of our foreign exchange gains and losses for the fiscal years ended
March 31, 2016 and 2017:
Foreign exchange gains (losses)—net:
Net foreign exchange gains (losses) on derivative contracts . . . . . . . . . . . . . . . . .
Net foreign exchange gains on other than derivative contracts . . . . . . . . . . . . . . .
Net foreign exchange losses related to the fair value option . . . . . . . . . . . . . . . . .
¥
374.3
875.8
(1,058.0)
¥(183.2)
455.7
(407.4)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
192.1
¥(134.9)
Fiscal years ended March 31,
2016
2017
(in billions)
101
Net foreign exchange losses for the fiscal year ended March 31, 2017 were ¥134.9 billion, compared to net
gains of ¥192.1 billion for the fiscal year ended March 31, 2016. This was mainly due to larger transaction losses
on foreign exchange derivative contracts. This was primarily due to lower mark to market valuation on currency
swaps entered in connection with our U.S. dollar funding, reflecting the fluctuations in the exchange rate between
the Japanese yen and the U.S. dollar and the wider gap in interest rates between Japan and the United States. In
addition, our net foreign exchange gains on other than derivative contracts decreased primarily due to the
negative impact of foreign currency exchange rates on the Japanese yen translated amounts of our monetary
assets denominated in foreign currencies as the Japanese yen appreciated against other major currencies between
December 30, 2015 and 2016 on a spot rate basis. These losses were partially offset by smaller net foreign
exchange losses on foreign currency-denominated investment securities under the fair value option, particularly
U.S. Treasury bonds.
Net trading account profits (losses)
The following table sets forth details of our trading account profits and losses for the fiscal years ended
March 31, 2016 and 2017:
Fiscal years ended March 31,
2016
2017
(in billions)
Trading account profits (losses)—net:
Net profits (losses) on interest rate and other derivative contracts
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 243.7
149.2
1.8
12.4
27.3
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 434.4
Net losses on trading account securities, excluding derivatives
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities under the fair value option . . . . . . . . . . . . . . . . . .
¥
0.1
(157.8)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(157.7)
¥(136.9)
(153.1)
1.8
18.1
(54.9)
¥(325.0)
¥ 150.7
(464.9)
¥(314.2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 276.7
¥(639.2)
We recorded net trading account losses of ¥639.2 billion for the fiscal year ended March 31, 2017,
compared to net trading account profits of ¥276.7 billion for the fiscal year ended March 31, 2016. This decrease
was mainly due to ¥325.0 billion of net losses on interest rate and other derivative contracts for the fiscal year
ended March 31, 2017, compared to ¥434.4 billion of net profits on such derivative contracts for the previous
fiscal year. This resulted mainly from increases in long-term interest rates in Japan and the United States and
increases in equity prices in Japan. The yields of 10-year Japanese government bonds rose from negative rates to
around 0.05% between mid-November 2016 and March 2017. The yields of 10-year U.S. Treasury bonds also
rose from around 1.7% between April 2016 and mid-November 2016 to around 2.4% between mid-November
2016 and March 2017. The Nikkei Stock Average rose from around ¥16,500 between April 2016 and
mid-November 2016 to around ¥19,000 between mid-November 2016 and March 2017. We also recorded larger
net losses on trading account securities, excluding derivatives, due to the lower values of trading account
securities under the fair value option, particularly U.S. Treasury bonds, as interest rates rose in the United States.
The losses were partially offset by larger net profits on trading account securities in the securities subsidiaries as
equity prices increased in Japan towards the end of the calendar year 2016.
102
Net investment securities gains (losses)
Net investment securities gains increased ¥48.9 billion to ¥281.2 billion for the fiscal year ended March 31,
2017 from ¥232.3 billion for the fiscal year ended March 31, 2016. This increase was mainly due to an increase
of ¥32.0 billion in net gains on sales of available-for-sale marketable equity securities as we continued to sell
down our equity holdings in an effort to reduce the risk of stock price fluctuations. In addition, net gains on sales
of available-for-sale debt securities increased ¥8.0 billion, reflecting a higher volume of sales of Japanese
government bonds to reduce our holdings of such bonds as part of our asset and liability management and interest
rate risk management measures. These increases were partially offset by larger impairment losses on
available-for-sale equity securities, mainly reflecting decreases in the prices of equity securities held by our
commercial banking subsidiaries as the Nikkei Stock Average declined during the first half of the fiscal year
ended March 31, 2017.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for the fiscal year ended March 31, 2017 was
¥197.8 billion, compared to ¥176.9 billion for the previous fiscal year, reflecting higher earnings of our equity
method investees, including Morgan Stanley.
Non-Interest Expense
The following table shows a summary of our non-interest expense for the fiscal years ended March 31,
2016, 2017 and 2018:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy expenses—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outsourcing expenses, including data processing . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of premises and equipment
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance premiums, including deposit insurance . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes and public charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) off-balance sheet credit instruments . . . . . . . . . . . . . .
Other non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended March 31,
2016
2017
2018
¥1,158.9
182.8
285.4
244.7
99.7
237.3
117.7
91.9
58.3
93.7
333.7
(0.2)
370.6
(in billions)
¥1,096.8
176.8
273.7
258.3
99.8
227.9
5.8
91.9
55.3
94.0
6.6
106.6
398.1
¥1,099.5
179.1
297.8
276.2
96.2
234.4
21.9
91.8
58.1
90.2
—
(96.1)
395.3
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,274.5
¥2,891.6
¥2,744.4
Non-interest expense consists of:
‰
‰
‰
‰
salaries and employee benefits, which include the amount of money paid as salaries and bonuses as well
as the cost of fringe-benefits,
occupancy expenses—net, which include the amount of money paid as rents for offices and other
facilities,
fees and commissions expenses, which include the amount of money paid as fees and commissions on
services received,
outsourcing expenses, including data processing, which include the amount of money paid for the
outsourcing services, including IT-related services,
103
‰
‰
‰
‰
‰
‰
‰
‰
‰
depreciation of premises and equipment, which includes the depreciation of the value of buildings,
equipment and furniture through the passage of time,
amortization of intangible assets, which includes the amount of deductions of the cost of investments in
software and other intangible assets over their estimated useful lives,
impairment of intangible assets, which includes the amount of reductions in the carrying amounts of
intangible assets with indefinite useful lives in excess of their fair values,
insurance premiums, including deposits insurance, which include the amount of money paid as the
insurance premiums including the deposit insurance premiums paid to the Deposit Insurance
Corporation of Japan
communications, which include the amount of money paid for communications such as postal services
and telecommunications,
taxes and public charges, which include the amount of tax payments and other public charges,
impairment of goodwill, which includes the amount of reductions in the carrying amount of goodwill
recorded in connection with the acquisition of companies in excess of their fair values,
provision for (reversal of) off-balance sheet credit instruments, which includes the amount of money
reserved for the estimated amount of losses on off-balance sheet credit instruments or reversal of any
portion of such amount, and
other non-interest expenses.
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
Non-interest expense decreased ¥147.2 billion to ¥2,744.4 billion for the fiscal year ended March 31, 2018
from ¥2,891.6 billion for the previous fiscal year. Major factors affecting this improvement are discussed below.
Fees and commissions expenses
Fees and commissions expenses increased ¥24.1 billion to ¥297.8 billion. This increase was mainly
attributable to larger expenses for global financial regulatory compliance purposes.
Outsourcing expenses, including data processing
Outsourcing expenses, including data processing, increased ¥17.9 billion to ¥276.2 billion. This was
primarily attributable to larger investment in digitalization in our commercial banking subsidiaries.
Impairment of intangible assets
Impairment of intangible assets increased ¥16.1 billion to ¥21.9 billion. This was primarily attributable to
¥11.1 billion of impairment losses on the acquired customer base of Mitsubishi UFJ Trust and Banking’s
overseas subsidiary as we revised our future cash flow estimation relating to the subsidiary’s customer
relationships. For further discussion of impairment on intangible assets, see Note 6 to our audited consolidated
financial statements included elsewhere in this Annual Report.
Provision for (reversal of) off-balance sheet credit instruments
We recorded ¥96.1 billion of reversal of off-balance sheet credit instruments for the fiscal year ended
March 31, 2018, compared to ¥106.6 billion of provision for off-balance sheet credit instruments for the previous
fiscal year. This was primarily as a result of an improvement in the credit quality of a large borrower in the
domestic electronic manufacturing industry.
104
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
Non-interest expense decreased ¥382.9 billion to ¥2,891.6 billion for the fiscal year ended March 31, 2017
from ¥3,274.5 billion for the previous fiscal year. Major factors affecting this decrease are discussed below.
Salaries and employee benefits
The decrease of ¥62.1 billion in salaries and employee benefits was mainly due to headcount reductions in
our subsidiaries in the Americas.
Impairment of intangible assets
Impairment of intangible assets as of March 31, 2017 was ¥5.8 billion, compared to ¥117.7 billion as of
March 31, 2016. This was primarily attributable to a smaller impairment of the core deposit intangible assets held
by MUFG Bank.
Impairment of goodwill
Impairment of goodwill as of March 31, 2017 was ¥6.6 billion, compared to ¥333.7 billion as of March 31,
2016. This was primarily attributable to a smaller impairment of goodwill recognized relating to reporting units
within the Global Business Group segment.
Provision for (reversal of) off-balance sheet credit instruments
We recorded ¥106.6 billion of provision for off-balance sheet credit instruments for the fiscal year ended
March 31, 2017 primarily relating to commitments and guarantees extended to large borrowers in the domestic
electronic manufacturing industry in financial difficulty.
Income Tax Expense
The following table shows a summary of our income tax expense for the fiscal years ended March 31, 2016,
2017 and 2018:
Fiscal years ended March 31,
2016
2017
2018
(in billions, except percentages)
¥272.5
94.4
34.7%
31.5%
¥1,162.7
369.4
31.8%
33.9%
¥1,661.8
407.8
24.5%
30.6%
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . .
105
Reconciling items between the combined normal effective statutory tax rates and the effective income tax
rates for the fiscal years ended March 31, 2016, 2017 and 2018 are summarized as follows:
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in taxes resulting from:
Fiscal years ended March 31,
2016
33.9%
2017
2018
31.5%
30.6%
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit and payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lower tax rates applicable to income of subsidiaries . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and interest expense for uncertainty in income taxes . . . . . . . . . . .
Noncontrolling interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enacted change in tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.3
9.7
(1.9)
(0.2)
(4.0)
(1.9)
0.7
0.0
(0.1)
(4.3)
(0.4)
2.0
0.8
(9.6)
(0.2)
25.4
(12.5)
3.5
(0.6)
5.4
(9.8)
(1.2)
0.2
—
(1.7)
(0.4)
(3.0)
(2.0)
0.7
0.0
0.1
(0.6)
0.6
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.8%
34.7%
24.5%
Income taxes applicable to us in Japan are imposed by the national, prefectural and municipal governments,
and the aggregate of these taxes resulted in a combined normal effective statutory tax rate of 33.9%, 31.5% and
30.6% for the fiscal years ended March 31, 2016, 2017 and 2018. Foreign subsidiaries are subject to income
taxes of the jurisdictions in which they operate. These taxes are reflected in the effective income tax rate.
Fiscal Year Ended March 31, 2018
The effective income tax rate for the fiscal year ended March 31, 2018 was 24.5%, which was 6.1
percentage points lower than the combined normal effective statutory rate of 30.6%. This primarily reflected a
reduction in valuation allowance to the extent that it was more likely than not that the deferred tax assets would
be realized mainly because a subsidiary was added to our consolidated tax payment system during the fiscal year
ended March 31, 2018 after it was fully consolidated into our financial statements. The projected taxable income
of the subsidiary, for which we had valuation allowance recorded on its deferred tax assets, significantly
increased due to the application of our consolidated tax payment system to the subsidiary. As a result, the
realizability of the subsidiary’s deferred tax assets became more likely than not, and the relevant valuation
allowance was reduced to the extent of the improved realizability. The reduction in the relevant valuation
allowance resulted in a decrease of ¥33.3 billion in income tax expense and a decrease of 2.0 percentage points in
the effective income tax rate for the fiscal year ended March 31, 2018. Another factor contributing to the lower
effective income tax rate was our receipt of nontaxable dividends, which resulted in a decrease of ¥32.6 billion in
income tax expense and a decrease of 2.0 percentage points in the effective income tax rate for the fiscal year
ended March 31, 2018. Under Japanese tax law, a certain percentage of dividends received is considered
nontaxable and excluded from gross revenue in computing taxable income. This creates a permanent difference
between our taxable income for Japanese tax purposes and our income before income tax expense reported under
U.S. GAAP.
Fiscal Year Ended March 31, 2017
The effective income tax rate for the fiscal year ended March 31, 2017 was 34.7%, 3.2 percentage points
higher than the combined normal effective statutory rate of 31.5%. This higher effective income tax rate
primarily reflected an increase in the valuation allowance against deferred tax assets which accounted for 25.4%
of the difference between the combined normal effective statutory tax rate and the effective income tax rate. The
106
valuation allowance increased ¥60.2 billion to ¥268.5 billion at March 31, 2017 from ¥208.3 billion at March 31,
2016, as a result of an additional valuation allowance related to operating loss carryforwards by a consumer
finance subsidiary that we no longer deemed more likely than not to be realized, considering various factors,
including the existence of significant amounts of operating loss carryforwards and the operating results over the
prior several years of the subsidiary as well as the outlook regarding the subsidiary’s prospective operating
performance.
This was partially offset by our receipt of nontaxable dividends, which resulted in a decrease of
¥34.2 billion, or 12.5%, in income tax expense for the fiscal year ended March 31, 2017. Another factor lowering
the effective income tax rate was the revisions of domestic tax laws. In June 2016, the Tokyo Metropolitan
Government Bureau of Taxation promulgated revisions to the local tax law. The revisions was expected to reduce
the combined normal effective statutory tax rate from approximately 31.5% as of March 31, 2016 to
approximately 30.6% starting in a corporation’s fiscal year that begins on or after April 1, 2017. The revisions
resulted in a release of net deferred tax liabilities, which had the effect of reducing our income tax expense for
the fiscal year ended March 31, 2017 by ¥26.8 billion, or 9.8%.
Fiscal Year Ended March 31, 2016
The effective income tax rate for the fiscal year ended March 31, 2016 was 31.8%, 2.1 percentage points
lower than the combined normal effective statutory rate of 33.9%. The lower effective income tax rate was
attributable to the effect of changes in tax law, resulting in a 4.3 percentage point decrease in the effective
income tax rate. Under the “2016 Tax Reform” enacted by the Japanese Diet on March 29, 2016, the effective
statutory rate of corporate income tax was expected to be reduced from approximately 33.9% to 31.5% starting in
a corporation’s fiscal year that begins on or after April 1, 2016. The tax reform legislation also included changes
in the limitation on the use of net operating loss carryforwards from 65% to 60% of taxable income for the period
between April 1, 2016 and March 31, 2017, and from 50% to 55% for the period between April 1, 2017 and
March 31, 2018, respectively, and a one-year reduction in the carryforward period of certain net operating loss
carryforwards from ten years to nine years for the period between April 1, 2017 and March 31, 2018. The
changes in tax laws resulted in a decrease of ¥50,081 million in income tax expense for the fiscal year ended
March 31, 2016.
This lower effective income tax rate also reflected a valuation allowance release of ¥65.7 billion, which
reduced our valuation allowance to ¥208.3 billion as of March 31, 2016 and resulted in a 4.0 percentage point
reduction in the effective income tax rate. Generally, we reduce our valuation allowance to the extent that it is
more likely than not that the deferred tax assets would be realized. For the fiscal year ended March 31, 2016, we
recorded the valuation allowance release primarily because the profitability of a subsidiary improved.
Management considered various factors, including the subsidiary’s improved operating performance and
cumulative operating results over the prior several years as well as the outlook regarding the subsidiary’s
prospective operating performance, and determined that sufficient positive evidence existed as of March 31, 2016
to conclude that it was more likely than not that a portion of the subsidiary’s operating loss carryforwards
reflected in our deferred tax assets would be realizable. As a result, our valuation allowance was reduced to the
extent of that portion as of March 31, 2016.
The foregoing factors were offset by a 9.7 percentage point increase as a result of our recording an
impairment of goodwill under U.S. GAAP, decreasing our income from continuing operations before income tax
expense to ¥1,162.7 billion for the fiscal year ended March 31, 2016. Under Japanese tax law, such impairment
was not deductible in computing our taxable income.
Net income (loss) attributable to noncontrolling interests
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
We recorded net income attributable to noncontrolling interests of ¥25.8 billion for the fiscal year ended
March 31, 2018, compared to net loss attributable to noncontrolling interests of ¥24.6 billion for the previous
107
fiscal year. This improvement mainly reflected reductions in our interests in investment funds which reported
losses during the previous fiscal year ended March 31, 2017.
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
We recorded net loss attributable to noncontrolling interests of ¥24.6 billion for the fiscal year ended
March 31, 2017, compared to net loss attributable to noncontrolling interests of ¥9.1 billion for the previous
fiscal year. The larger losses mainly reflected net losses of Mitsubishi UFJ NICOS.
Business Segment Analysis
We measure the performance of each of our business segments primarily in terms of “operating profit.”
Operating profit and other segment information in this Annual Report are based on the financial information
prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting
rules and practices. Accordingly, the format and information are not consistent with our consolidated financial
statements prepared in accordance with U.S. GAAP. For example, operating profit does not reflect items such as
a component of the provision for (reversal of) credit losses (primarily equivalent to the formula allowance under
U.S. GAAP), foreign exchange gains (losses) and investment securities gains (losses). For a reconciliation of
operating profit under the internal management reporting system to income before income tax expense shown on
the consolidated statements of income, see Note 30 to our consolidated financial statements included elsewhere
in this Annual Report. We do not use information on the segments’ total assets to allocate our resources and
assess performance. Accordingly, business segment information on total assets is not presented.
For the fiscal year ended March 31, 2018, our internal management accounting rules and practices were
based on a matrix framework management used to manage the operations of our group companies. The
framework consisted of an integrated business group system and an operating entity system. The integrated
business group system integrated the operations of our group companies into five business groups—Retail
Banking, Corporate Banking, Global, Trust Assets and Global Markets. Under the operating entity system, our
group companies were grouped under the major operating subsidiaries as follows: MUFG Bank, Mitsubishi UFJ
Trust and Banking, Mitsubishi UFJ Morgan Stanley Securities (through Mitsubishi UFJ Securities Holdings),
Mitsubishi UFJ NICOS and other subsidiaries. Our reporting segments were based on the integrated business
group system as it reflected management’s view that the operating entities provided financial services and
products under unified strategies for each of the integrated business groups as well as on an MUFG group-wide
basis. Accordingly, our reporting segments consisted of the five core business groups described above, which
served as the core sources of our revenue, as well as “Other,” which represented the operations that were not
covered under the five core business groups and the elimination of duplicated amounts of net revenues among
business segments as further described below.
The following is a brief explanation of our business segments for the fiscal year ended March 31, 2018:
Retail Banking Business Group—Covered all retail businesses, including commercial banking, trust banking
and securities businesses, in Japan. This business group integrates the retail businesses of MUFG Bank,
Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ NICOS and other
subsidiaries as well as retail product development, promotion and marketing in a single management structure.
At the same time, this business group developed and implemented MUFG Plaza, a one-stop, comprehensive
financial services concept that provides integrated banking, trust and securities services.
Corporate Banking Business Group—Covered all Japanese corporate businesses, including commercial
banking, investment banking, trust banking and securities businesses, in and outside of Japan, mainly Japanese
companies. Through the integration of these business lines, diverse financial products and services were provided
to our corporate clients. This business group had strategic domains, sales channels and methods to match the
different growth stages and financial needs of our corporate clients.
108
Global Business Group—Covered the businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings
outside Japan, including commercial banking, such as loans, deposits and cash management services, investment
banking, retail banking, trust assets, and securities businesses (with the retail banking and trust assets businesses
being conducted through MUFG Union Bank and Krungsri), through a global network of nearly 1,200 offices
outside Japan to provide customers with financial products and services designed to meet their increasingly
diverse and sophisticated financing needs.
Trust Assets Business Group—Covered asset management and administration services for products such as
pension trusts and security trusts by integrating the trust banking expertise of Mitsubishi UFJ Trust and Banking
and the global network of MUFG Bank. This business group provided a full range of services to corporate and
other pension funds, including stable and secure pension fund management and administration, advice on pension
schemes and payment of benefits to scheme members.
Global Markets Business Group—Covered asset and liability management and strategic investments of
MUFG Bank and Mitsubishi UFJ Trust and Banking, and sales and trading of financial products of MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings.
Other—Consisted mainly of the corporate centers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and
Banking and Mitsubishi UFJ Morgan Stanley Securities. The elimination of duplicated amounts of net revenues
among business segments was also reflected in Other.
Effective April 1, 2017, we made modifications to refine the definition of the overseas Japanese corporate
business. These modifications had the impact of increasing the operating profit of the Corporate Banking
Business Group for the fiscal years ended March 31, 2016 and 2017 by ¥9.7 billion and ¥9.8 billion, respectively.
Net revenues, operating expenses and operating profits (losses) relating to the overseas Japanese corporate
business were recorded in both the Corporate Banking Business Group and the Global Business Group. The
double-counting of these amounts was eliminated in aggregating the amounts of net revenues, operating expenses
and operating profits (losses) of the Retail Banking Business Group, the Corporate Banking Business Group, the
Global Business Group and the Trust Assets Business Group, which amounts are shown in the Total of Customer
Business column in the tables below.
In addition, effective April 1, 2017, we made modifications to our internal management accounting rules
and practices to clarify the responsibility for profits of each business segment. These modifications had the
following impact:
‰
‰
for the fiscal year ended March 31, 2016, increasing the operating profits of the Retail Banking Business
Group and the Global Markets Business Group by ¥0.2 billion and ¥1.8 billion, respectively, and
reducing the operating profits of the Corporate Banking Business Group and Other by ¥0.7 billion and
¥1.3 billion, respectively; and
for the fiscal year ended March 31, 2017, increasing the operating profits of the Retail Banking Business
Group and the Global Markets Business Group by ¥0.4 billion and ¥0.6 billion, respectively, and
reducing the operating profits of the Corporate Banking Business Group, the Global Business Group and
Other by ¥0.5 billion, ¥0.3 billion and ¥0.2 billion, respectively.
Prior period business segment information has been restated to enable comparison between the relevant
amounts for the fiscal years ended March 31, 2016, 2017 and 2018.
For further information, see Note 30 to our consolidated financial statements included elsewhere in this
Annual Report.
Starting this current fiscal year ending March 31, 2019, we reorganized our business segments in connection
with the implementation of our new medium-term business plan. See “Item 4.B. Information on the Company—
Business Overview.”
109
The following tables set forth our business segment information for the fiscal years ended March 31, 2016,
2017 and 2018:
Fiscal year ended March 31, 2016
Customer Business
Retail
Banking
Business
Group
Corporate
Banking
Business
Group(1)
Global
Business
Group(1)
Trust
Assets
Business
Group
Total(1)
Global
Markets
Business
Group
(in billions)
Net revenue . . . . . . . . . . . . . . . . . ¥1,258.7 ¥1,078.2 ¥1,272.8 ¥172.2 ¥3,603.8 ¥637.9 ¥
BK and TB(2):
. . . . . . . . . . .
Net interest income . . .
Net fees . . . . . . . . . . . .
Other . . . . . . . . . . . . . .
Other than BK and TB . . . .
Operating expenses . . . . . . . . . . .
534.9
355.7
171.8
7.4
723.8
971.9
872.3
341.9
405.9
124.5
205.9
582.9
446.9
207.9
187.1
51.9
825.9
814.8
74.3
—
74.3
—
97.9
102.0
1,825.5
859.9
809.3
156.3
1,778.3
2,329.2
453.9
195.5
(23.9)
282.3
184.0
208.6
Other
Total
4.5 ¥4,246.2
2,396.0
116.6
1,326.5
271.1
693.7
(91.7)
(62.8)
375.8
(112.1) 1,850.2
2,695.2
157.4
Operating profit (loss) . . . . . . . . . ¥ 286.8 ¥ 495.3 ¥ 458.0 ¥ 70.2 ¥1,274.6 ¥429.3 ¥(152.9) ¥1,551.0
Notes:
(1) Each of the Corporate Banking Business Group and the Global Business Group includes ¥178.1 billion of net revenue, ¥142.4 billion of
operating expenses and ¥35.7 billion of operating profit relating to the overseas Japanese corporate business for the fiscal year ended
March 31, 2016. To eliminate the double-counting of these amounts, adjustments have been made to the Total of Customer Business.
These amounts have been restated in accordance with the modifications resulting in the restatement of the prior period business segment
information discussed above.
(2) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
Fiscal year ended March 31, 2017
Customer Business
Retail
Banking
Business
Group
Corporate
Banking
Business
Group(1)
Global
Business
Group(1)
Trust
Assets
Business
Group
Total(1)
Global
Markets
Business
Group
(in billions)
Net revenue . . . . . . . . . . . . . . . . . ¥1,198.1 ¥1,029.0 ¥1,303.2 ¥173.1 ¥3,526.3 ¥582.9 ¥
BK and TB(2):
. . . . . . . . . . .
Net interest income . . .
Net fees . . . . . . . . . . . .
Other . . . . . . . . . . . . . .
Other than BK and TB . . . .
Operating expenses . . . . . . . . . . .
485.9
335.3
144.4
6.2
712.2
972.4
834.7
323.7
420.0
91.0
194.3
576.5
444.6
213.3
185.1
46.2
858.6
821.0
73.0
—
73.0
—
100.1
112.2
1,731.3
824.7
793.1
113.5
1,795.0
2,335.9
387.3
189.2
(8.6)
206.7
195.6
213.2
Other
Total
2.7 ¥4,111.9
2,190.5
71.9
1,221.8
207.9
688.6
(95.9)
(40.1)
280.1
(69.2) 1,921.4
2,716.1
167.0
Operating profit (loss) . . . . . . . . . ¥ 225.7 ¥ 452.5 ¥ 482.2 ¥ 60.9 ¥1,190.4 ¥369.7 ¥(164.3) ¥1,395.8
Notes:
(1) Each of the Corporate Banking Business Group and the Global Business Group includes ¥177.1 billion of net revenue, ¥146.2 billion of
operating expenses and ¥30.9 billion of operating profit relating to the overseas Japanese corporate business for the fiscal year ended
March 31, 2017. To eliminate the double-counting of these amounts, adjustments have been made to the Total of Customer Business.
These amounts have been restated in accordance with the modifications resulting in the restatement of the prior period business segment
information discussed above.
(2) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
110
Fiscal year ended March 31, 2018
Customer Business
Retail
Banking
Business
Group
Corporate
Banking
Business
Group(1)
Global
Business
Group(1)
Trust
Assets
Business
Group
(in billions)
Global
Markets
Business
Group
Total(1)
Other
Total
BK and TB(2):
Net revenue . . . . . . . . . . . . . . . . ¥1,226.9 ¥1,003.2 ¥1,279.6 ¥186.7 ¥3,514.8 ¥477.2 ¥ (24.8) ¥3,967.2
87.2
2,029.9
237.6
1,119.7
(86.0)
667.2
243.0
(64.4)
(112.0) 1,937.3
2,743.1
156.6
. . . . . . . . . .
Net interest income . .
Net fees . . . . . . . . . . .
Other . . . . . . . . . . . . .
Other than BK and TB . . .
Operating expenses . . . . . . . . . .
1,662.5
789.5
766.1
106.9
1,852.3
2,363.8
280.2
92.6
(12.9)
200.5
197.0
222.7
409.0
198.5
169.2
41.3
870.6
857.3
809.8
313.6
408.2
88.0
193.4
580.7
84.3
—
84.3
—
102.4
116.9
468.1
331.6
130.9
5.6
758.8
960.8
Operating profit (loss) . . . . . . . . ¥ 266.1 ¥ 422.5 ¥ 422.3 ¥ 69.8 ¥1,151.0 ¥254.5 ¥(181.4) ¥1,224.1
Notes:
(1) Each of the Corporate Banking Business Group and the Global Business Group includes ¥181.6 billion of net revenue, ¥151.9 billion of
operating expenses and ¥29.7 billion of operating profit relating to the overseas Japanese corporate business for the fiscal year ended
March 31, 2018. To eliminate the double-counting of these amounts, adjustments have been made to the Total of Customer Business.
(2) “BK and TB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis.
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
Retail Banking Business Group
Net revenue of the Retail Banking Business Group increased ¥28.8 billion to ¥1,226.9 billion for the fiscal
year ended March 31, 2018 from ¥1,198.1 billion for the fiscal year ended March 31, 2017. Net revenue of the
Retail Banking Business Group mainly consists of domestic revenues from commercial banking operations, such
as deposits and lending operations, and fees related to sales of investment products to retail customers, as well as
fees received by subsidiaries within the Retail Banking Business Group. The increase in net revenue was mainly
due to an increase in payment processing fees and an increase in fees from the consumer finance business,
reflecting growth in the volume of cashless payments. The increase in net revenue was also attributable to an
increase in fees and commissions on sales of securities primarily due to stronger customer demand in response to
the rising trend in equity prices. These increases in net revenues were partially offset by the lower net revenue
related to operations funded by deposits due to tighter interest rate spreads in the near-zero interest rate
environment in Japan.
Operating expenses of the Retail Banking Business Group decreased ¥11.6 billion to ¥960.8 billion for the
fiscal year ended March 31, 2018 from ¥972.4 billion for the fiscal year ended March 31, 2017, mainly resulting
from our cost reduction measures.
As a result, operating profit of the Retail Banking Business Group increased ¥40.4 billion to ¥266.1 billion
for the fiscal year ended March 31, 2018 from ¥225.7 billion for the fiscal year ended March 31, 2017.
Corporate Banking Business Group
Net revenue of the Corporate Banking Business Group decreased ¥25.8 billion to ¥1,003.2 billion for the
fiscal year ended March 31, 2018 from ¥1,029.0 billion for the fiscal year ended March 31, 2017. Net revenue of
the Corporate Banking Business Group mainly consists of domestic revenues from corporate lending and other
commercial banking operations, investment banking and trust banking businesses in relation to corporate clients,
as well as fees received by subsidiaries within the Corporate Banking Business Group. The lower net revenue
mainly reflected decreases in net revenue related to operations funded by deposits and net revenue from loans to
corporate clients due to tighter interest rate spreads in the near-zero interest rate environment in Japan . The
lower net revenue was also attributable to a decrease in fee income from the sales of derivative instruments and
111
lower net revenues from the M&A and underwriting businesses, mainly reflecting reduced corporate investment
and financing activities due to uncertainties surrounding the financial market. The negative impact of these
factors on the business group’s net revenue was partially offset by the positive impact of increased volume of
overseas Japanese corporate business.
Operating expenses of the Corporate Banking Business Group increased ¥4.2 billion to ¥580.7 billion for
the fiscal year ended March 31, 2018 from ¥576.5 billion for the fiscal year ended March 31, 2017. This increase
was primarily due to the increased volume of overseas Japanese corporate business and higher expenses for
global financial regulatory compliance purposes.
As a result, operating profit of the Corporate Banking Business Group decreased ¥30.0 billion to
¥422.5 billion for the fiscal year ended March 31, 2018 from ¥452.5 billion for the fiscal year ended March 31,
2017.
Global Business Group
Net revenue of the Global Business Group decreased ¥23.6 billion to ¥1,279.6 billion for the fiscal year
ended March 31, 2018 from ¥1,303.2 billion for the fiscal year ended March 31, 2017. Net revenue of the Global
Business Group mainly consists of revenues from commercial banking businesses outside of Japan, including
loans, deposits and cash management, investment banking, retail banking, trust assets and securities businesses.
The lower net revenue was mainly due to a decrease in the volume of M&A finance business in the United States
as well as the application of stricter business acceptance criteria as part of our effort to improve profitability.
These decreases were partially offset by an increase in net revenue of Krungsri.
Operating expenses of the Global Business Group increased ¥36.3 billion to ¥857.3 billion for the fiscal
year ended March 31, 2018 from ¥821.0 billion for the fiscal year ended March 31, 2017, reflecting higher
expenses in Krungsri primarily due to increased business volume and higher expenses for global financial
regulatory compliance purposes.
As a result, operating profit of the Global Business Group decreased ¥59.9 billion to ¥422.3 billion for the
fiscal year ended March 31, 2018 from ¥482.2 billion for the fiscal year ended March 31, 2017.
Trust Assets Business Group
Net revenue of the Trust Assets Business Group increased ¥13.6 billion to ¥186.7 billion for the fiscal year
ended March 31, 2018 from ¥173.1 billion for the fiscal year ended March 31, 2017. Net revenue of the Trust
Assets Business Group mainly consists of fees from asset management and administration services for products
such as pension trusts and investment trusts. Net revenue of the Trust Assets Business Group increased mainly
due to an increase in income from the fund administration and custody services globally, reflecting the
contributions of our recently acquired overseas subsidiaries.
Operating expenses of the Trust Assets Business Group increased ¥4.7 billion to ¥116.9 billion for the fiscal
year ended March 31, 2018 from ¥112.2 billion for the fiscal year ended March 31, 2017. This was mainly due to
the expansion of our fund administration and custody businesses globally through acquisitions.
As a result, operating profit of the Trust Assets Business Group increased ¥8.9 billion to ¥69.8 billion for
the fiscal year ended March 31, 2018 from ¥60.9 billion for the fiscal year ended March 31, 2017.
Global Markets Business Group
Net revenue of the Global Markets Business Group decreased ¥105.7 billion to ¥477.2 billion for the fiscal
year ended March 31, 2018 from ¥582.9 billion for the fiscal year ended March 31, 2017. This was mainly due to
112
a decrease in net revenue from the asset liability management operations, primarily reflecting a decrease in
realized gains on sales of foreign government bonds as well as a decrease in interest income due to the reduction
of our foreign government bond portfolio and the flattening of the yield curve of U.S. Treasury bonds. The
decrease in net revenue was also attributable to lower net revenue from the sales and trading business in Japan,
reflecting the low volatility in interest rates.
Operating expenses of the Global Markets Business Group increased ¥9.5 billion to ¥222.7 billion for the
fiscal year ended March 31, 2018 from ¥213.2 billion for the fiscal year ended March 31, 2017, reflecting higher
expenses in our overseas securities subsidiaries primarily with larger volumes of sales and trading business as
well as higher expenses for financial regulatory compliance purposes.
As a result, operating profit of the Global Markets Business Group decreased ¥115.2 billion to
¥254.5 billion for the fiscal year ended March 31, 2018 from ¥369.7 billion for the fiscal year ended March 31,
2017.
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
Retail Banking Business Group
Net revenue of the Retail Banking Business Group decreased ¥60.6 billion to ¥1,198.1 billion for the fiscal
year ended March 31, 2017 from ¥1,258.7 billion for the fiscal year ended March 31, 2016. Net revenue of the
Retail Banking Business Group mainly consists of domestic revenues from commercial banking operations, such
as deposits and lending operations, and fees related to sales of investment products to retail customers, as well as
fees received by subsidiaries within the Retail Banking Business Group. The decrease in net revenue was mainly
attributable to a decrease in fees and commissions on sales of securities primarily due to weaker customer
demand in response to uncertain market conditions as well as a decrease in insurance commissions since the sales
of certain types of single premium insurance products were suspended in April 2016 after Japanese government
bonds began trading on negative yields. The decrease in net revenue was also attributable to lower net revenue
related to operations funded by deposits due to tighter interest rate spreads in the near-zero interest rate
environment in Japan.
Operating expenses of the Retail Banking Business Group increased ¥0.5 billion to ¥972.4 billion for the
fiscal year ended March 31, 2017 from ¥971.9 billion for the fiscal year ended March 31, 2016. This increase
was mainly attributable to investments in a system integration project in our consumer finance subsidiary to
establish an efficient and effective business platform for cashless payment and credit card services. The system
integration project started in the fiscal year ended March 31, 2017 and is expected to be completed during the
fiscal year ended March 31, 2022, for an estimated aggregate budget of ¥157.2 billion.
Operating profit of the Retail Banking Business Group decreased ¥61.1 billion to ¥225.7 billion for the
fiscal year ended March 31, 2017 from ¥286.8 billion for the fiscal year ended March 31, 2016.
Corporate Banking Business Group
Net revenue of the Corporate Banking Business Group decreased ¥49.2 billion to ¥1,029.0 billion for the
fiscal year ended March 31, 2017 from ¥1,078.2 billion for the fiscal year ended March 31, 2016. Net revenue of
the Corporate Banking Business Group mainly consists of domestic revenues from corporate lending and other
commercial banking operations, investment banking and trust banking businesses in relation to corporate clients,
as well as fees received by subsidiaries within the Corporate Banking Business Group. The lower net revenue
mainly reflected decreases in net revenue related to operations funded by deposits and net revenue from loans to
corporate clients due to tighter interest rate spreads in the near-zero interest rate environment in Japan, as well as
a decrease in fee income from the sales of derivative instruments. These decreases were offset in part by an
increase in fees and commissions from hybrid financing transactions, including syndicated loans to large
corporations and small and medium-sized enterprises.
113
Operating expenses of the Corporate Banking Business Group decreased ¥6.4 billion to ¥576.5 billion for
the fiscal year ended March 31, 2017 from ¥582.9 billion for the fiscal year ended March 31, 2016.
Operating profit of the Corporate Banking Business Group decreased ¥42.8 billion to ¥452.5 billion for the
fiscal year ended March 31, 2017 from ¥495.3 billion for the fiscal year ended March 31, 2016.
Global Business Group
Net revenue of the Global Business Group increased ¥30.4 billion to ¥1,303.2 billion for the fiscal year
ended March 31, 2017 from ¥1,272.8 billion for the fiscal year ended March 31, 2016. Net revenue of the Global
Business Group mainly consists of revenues from commercial banking businesses outside of Japan, including
loans, deposits and cash management, investment banking, retail banking, trust assets and securities businesses.
The higher net revenue was mainly due to the positive impact of improvements in the event-driven financing
business in Asia and Oceania, EMEA and the Americas, as well as larger volumes of automobile purchase
financing and consumer loans in Krungsri. The positive impact was partially offset by the appreciation of the
Japanese yen against other major currencies. Net revenue was also adversely affected by tighter interest rate
spreads in China, reflecting intensified competition among lending institutions, and lower volumes of U.S.
dollar-denominated lending in China as the Renminbi depreciated against the U.S. dollar.
Operating expenses of the Global Business Group increased ¥6.2 billion to ¥821.0 billion for the fiscal year
ended March 31, 2017 from ¥814.8 billion for the fiscal year ended March 31, 2016, reflecting an increase in
expenses in Krungsri primarily due to the larger volumes of business and an increase in expenses for global
financial regulatory compliance purposes. These increases were partially mitigated by our cost management
measures, particularly in the Americas.
Operating profit of the Global Business Group increased ¥24.2 billion to ¥482.2 billion for the fiscal year
ended March 31, 2017 from ¥458.0 billion for the fiscal year ended March 31, 2016.
Trust Assets Business Group
Net revenue of the Trust Assets Business Group increased ¥0.9 billion to ¥173.1 billion for the fiscal year
ended March 31, 2017 from ¥172.2 billion for the fiscal year ended March 31, 2016. Net revenue of the Trust
Assets Business Group mainly consists of fees from asset management and administration services for products
such as pension trusts and investment trusts. Net revenue of the Trust Assets Business Group increased mainly
due to an increase in income from the fund administration and custody services globally, which was largely
offset by a decrease in net revenue attributable to the lower market values of pension funds and investment
products, reflecting weaker equity prices in Japan between April 2016 and the U.S. presidential election in
November 2016.
Operating expenses of the Trust Assets Business Group increased ¥10.2 billion to ¥112.2 billion for the
fiscal year ended March 31, 2017 from ¥102.0 billion for the fiscal year ended March 31, 2016. This was mainly
due to the expansion of our fund administration and custody services globally.
Operating profit of the Trust Assets Business Group decreased ¥9.3 billion to ¥60.9 billion for the fiscal
year ended March 31, 2017 from ¥70.2 billion for the fiscal year ended March 31, 2016.
Global Markets Business Group
Net revenue of the Global Markets Business Group decreased ¥55.0 billion to ¥582.9 billion for the fiscal
year ended March 31, 2017 from ¥637.9 billion for the fiscal year ended March 31, 2016. This was mainly due to
a decrease in profits on sales of foreign currency-denominated bonds as we reduced the balance of our foreign
government bond portfolio in anticipation of, and reaction to, rising interest rates in the United States.
114
Operating expenses of the Global Markets Business Group increased ¥4.6 billion to ¥213.2 billion for the
fiscal year ended March 31, 2017 from ¥208.6 billion for the fiscal year ended March 31, 2016, reflecting higher
costs for a system integration project to enhance coordination and collaboration in the sales and trading business
between our commercial banking subsidiaries and our securities subsidiaries as well as higher expenses for
financial regulatory compliance purposes.
Operating profit of the Global Markets Business Group decreased ¥59.6 billion to ¥369.7 billion for the
fiscal year ended March 31, 2017 from ¥429.3 billion for the fiscal year ended March 31, 2016.
115
Geographic Segment Analysis
The table below sets forth our total revenue, income (loss) before income tax expense (benefit) and net
income (loss) attributable to Mitsubishi UFJ Financial Group on a geographic basis for the fiscal years ended
March 31, 2016, 2017 and 2018. Assets, income and expenses attributable to foreign operations are allocated to
geographical areas based on the domicile of the debtors and customers. In general, we have allocated all direct
expenses and a proportionate share of general and administrative expenses to income derived from foreign loans
and other transactions by our foreign operations to the relevant foreign geographical areas. Certain charges, such
as most impairment charges on goodwill, are recognized as domestic expenses. For further information, see
Note 31 to our consolidated financial statements included elsewhere in this Annual Report.
Fiscal years ended March 31,
2016
2017
2018
(in billions)
Total revenue (interest income and non-interest income):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,995.6
¥1,903.3
¥2,127.3
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
800.7
326.4
981.1
309.6
749.5
330.8
818.9
385.0
1,337.5
506.2
780.0
443.1
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,417.8
2,284.2
3,066.8
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,413.4
¥4,187.5
¥5,194.1
Income (loss) before income tax expense (benefit):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 494.1
¥ (442.5) ¥ 439.9
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58.8
120.9
319.2
169.7
668.6
72.0
192.6
236.3
214.1
715.0
493.7
332.5
128.9
266.8
1,221.9
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,162.7
¥ 272.5
¥1,661.8
Net income (loss) attributable to Mitsubishi UFJ Financial Group
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 185.4
¥ (365.7) ¥ 140.1
Foreign:
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
173.4
162.6
196.7
84.2
616.9
119.2
216.6
102.8
129.8
568.4
447.9
322.6
92.0
225.6
1,088.1
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 802.3
¥ 202.7
¥1,228.2
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
Domestic net income attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31,
2018 was ¥140.1 billion, compared to ¥365.7 billion of net loss for the fiscal year ended March 31, 2017. This
116
improvement was mainly attributable to smaller trading account losses in our domestic commercial banking
subsidiaries, reflecting the increasing trend in equity prices in Japan towards the end of the calendar year 2017.
Foreign net income attributable to Mitsubishi UFJ Financial Group increased ¥519.7 billion to
¥1,088.1 billion for the fiscal year ended March 31, 2018 from ¥568.4 billion for the fiscal year ended March 31,
2017. The increase in foreign net income was mainly due to higher net profits on trading account securities,
excluding derivatives, in the United States, partially offset by a decrease in net income primarily resulting from
larger provisions for credit losses in Asia.
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
Domestic net income (loss) attributable to Mitsubishi UFJ Financial Group decreased ¥551.1 billion to
¥365.7 billion of net loss for the fiscal year ended March 31, 2017 from ¥185.4 billion of net income for the
fiscal year ended March 31, 2016. This was mainly because our domestic commercial banking subsidiaries
reported ¥309.9 billion of trading account losses and ¥144.4 billion of foreign exchange losses mainly on
securities and derivative contracts for the fiscal year ended March 31, 2017. Domestic interest income also
decreased largely due to lower lending volumes.
Foreign net income attributable to Mitsubishi UFJ Financial Group decreased ¥48.5 billion to ¥568.4 billion
for the fiscal year ended March 31, 2017 from ¥616.9 billion for the fiscal year ended March 31, 2016. The
decrease in foreign net income was mainly due to lower net income in Asia mainly resulting from decreases in
interest income and fees on loans in Thailand and China. The decrease in Thailand was mainly attributable to the
appreciation of the Japanese yen against the Thai baht during the calendar year 2016 compared to the previous
calendar year as well as lower lending volumes to small and medium-sized enterprises and consumers, which
were adversely affected by stagnant economic conditions in Thailand. The decrease in China was mainly
attributable to tighter interest rate spreads, reflecting intensified competition among lending institutions in China,
and lower volumes of U.S. dollar-denominated lending in China as the Renminbi depreciated against the U.S.
dollar.
Effect of Change in Exchange Rates on Foreign Currency Translation
Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
The average exchange rate for the fiscal year ended March 31, 2018 was ¥110.85 per U.S.$1.00, compared
to the average exchange rate of ¥108.38 per U.S.$1.00 for the previous fiscal year. The average exchange rate for
the conversion of the U.S. dollar financial statements of some of our foreign subsidiaries for the fiscal year ended
December 31, 2017 was ¥112.19 per U.S.$1.00, compared to the average exchange rate for the fiscal year ended
December 31, 2016 of ¥108.84 per U.S.$1.00.
The change in the average exchange rate of the Japanese yen against the U.S. dollar and other foreign
currencies had the effect of increasing total revenue by ¥99.3 billion, net interest income by ¥56.2 billion and
income before income tax expense by ¥29.2 billion, respectively, for the fiscal year ended March 31, 2018.
Fiscal Year Ended March 31, 2017 Compared to Fiscal Year Ended March 31, 2016
The average exchange rate for the fiscal year ended March 31, 2017 was ¥108.38 per U.S.$1.00, compared
to the average exchange rate of ¥120.14 per U.S.$1.00 for the previous fiscal year. The average exchange rate for
the conversion of the U.S. dollar financial statements of some of our foreign subsidiaries for the fiscal year ended
December 31, 2016 was ¥108.84 per U.S.$1.00, compared to the average exchange rate for the fiscal year ended
December 31, 2015 of ¥121.05 per U.S.$1.00.
The change in the average exchange rate of the Japanese yen against the U.S. dollar and other foreign
currencies had the effect of decreasing total revenue by ¥305.1 billion, net interest income by ¥195.7 billion and
income before income tax expense by ¥97.6 billion, respectively, for the fiscal year ended March 31, 2017.
117
B. Liquidity and Capital Resources
Financial Condition
Total Assets
Our total assets as of March 31, 2018 were ¥300,570.3 billion, an increase of ¥3,385.3 billion from
¥297,185.0 billion as of March 31, 2017. The increase in total assets mainly reflected an increase in cash, due
from banks and interest-earning deposits in other banks of ¥11,848.4 billion, which were partially offset by a
decrease in trading account assets of ¥6,133.3 billion.
The following table shows our total assets as of March 31, 2017 and 2018 by geographic region based
principally on the domicile of the obligors:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign:
As of March 31,
2017
2018
(in billions)
¥191,305.6
¥196,121.5
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas(1)
46,053.2
23,821.9
25,256.0
10,748.3
44,831.7
22,342.6
27,163.1
10,111.4
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105,879.4
104,448.8
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥297,185.0
¥300,570.3
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
We have allocated a substantial portion of our assets to international activities. As a result, reported amounts
are affected by changes in the exchange rates of the Japanese yen against the U.S. dollar and other foreign
currencies. Foreign assets are denominated primarily in the U.S. dollar. The Japanese yen amount of foreign
currency-denominated assets decreases as major foreign currencies depreciate against the Japanese yen. For
example, as of March 31, 2018, the exchange rate was ¥106.24 per U.S.$1.00, as compared with ¥112.19 as of
March 31, 2017. This appreciation of the Japanese yen against the U.S. dollar and other foreign currencies
between March 31, 2017 and March 31, 2018 resulted in a ¥778.5 billion decrease in the Japanese yen amount of
our total assets as of March 31, 2018.
118
Loan Portfolio
The following table sets forth our loans outstanding, before deduction of allowance for credit losses, as of
March 31, 2017 and 2018, based on the industry segment loan classifications as defined by the Bank of Japan for
regulatory reporting purposes, which is not necessarily based on the use of proceeds:
As of March 31,
2017
2018
(in billions)
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
¥ 11,796.8
819.3
11,622.3
2,549.3
7,970.6
5,223.9
1,634.6
8,898.7
16,491.0
¥ 10,876.6
781.3
11,763.8
2,689.1
7,989.1
4,818.4
1,551.5
8,939.3
16,287.3
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,006.5
65,696.4
Foreign:
Governments and official institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037.8
13,845.0
30,279.6
6,334.6
920.5
12,851.6
30,591.2
7,270.9
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,497.0
51,634.2
Unearned income, unamortized premium—net and deferred loan fees—net . . . . . . . . .
(288.5)
(294.7)
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥118,215.0
¥117,035.9
Notes:
(1) Loans to so-called “non-bank finance companies” are generally included in the “Banks and other financial institutions” category.
Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
(2) The above table includes loans held for sale of ¥185.9 billion and ¥226.9 billion as of March 31, 2017 and 2018, respectively, which are
carried at the lower of cost or fair value.
Loans are one of our main uses of funds. For the fiscal year ended March 31, 2018, the average balance of
loans was ¥117,765.1 billion, accounting for 49.3% of the average total interest-earning assets, compared to
¥117,288.2 billion, representing 49.0% of the average total interest-earning assets, for the previous fiscal year.
As of March 31, 2018, our total loans were ¥117,035.9 billion, accounting for 38.9% of total assets, compared to
¥118,215.0 billion, accounting for 39.8% of total assets as of March 31, 2017. As a percentage of total loans
before unearned income, net unamortized premiums and net deferred loan fees, between March 31, 2017 and
March 31, 2018, domestic loans decreased from 56.5% to 56.0%, while foreign loans increased from 43.5% to
44.0%.
Our domestic loan balance decreased ¥1,310.1 billion, or 2.0%, between March 31, 2017 and March 31,
2018. This was mainly due to repayments by some large borrowers in the domestic manufacturing industry as
their financial performance and repayment ability improved and repayments of loans made to fund several
large-scale corporate acquisition transactions.
Our foreign loan balance increased ¥137.2 billion, or 0.3%, between March 31, 2017 and March 31, 2018
This was primarily due to increased lending activity in the United States and Asia excluding Japan where
119
economic conditions continued to improve at a moderate pace and the lending volumes generally increased
across all of the private industry sectors. The increase in the foreign loan balance was also attributable to growth
in Krungsri’s retail and consumer loan portfolio, particularly automobile loans.
Credit quality indicator
The following table sets forth credit quality indicators of loans by class as of March 31, 2017 and 2018:
As of March 31, 2017:
Commercial
Normal
Close
Watch
Likely to become
Bankrupt or
Legally/
Virtually
Bankrupt
(in billions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . .
Banks and other financial
¥49,572.4
10,882.5
753.9
11,137.7
2,267.2
7,403.7
institutions . . . . . . . . . . . . . . . . . . .
5,207.8
Communication and information
services . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . .
1,573.5
8,725.9
1,620.2
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . . . . . .
36,134.4
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.5
¥2,162.0
821.1
53.3
352.8
237.1
462.6
14.3
45.3
125.7
49.8
971.2
12.6
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
¥85,723.3
¥3,145.8
Total(1)
¥52,031.3
11,768.7
818.7
11,532.8
2,535.5
7,964.7
5,223.0
1,634.2
8,859.7
1,694.0
¥296.9
65.1
11.5
42.3
31.2
98.4
0.9
15.4
8.1
24.0
189.6
37,295.2
5.1
¥491.6
34.2
¥89,360.7
Accrual
Nonaccrual
Total(1)
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,256.2
531.4
¥
(in billions)
¥76.2
¥61.8
¥14,332.4
593.2
¥
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention Classified
Total(1)(2)
MUFG Americas Holdings . . . . . . . . . . .
¥3,837.8
¥22.9
(in billions)
¥4,879.2
¥133.0
¥151.6
¥9,024.5
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,672.4
¥195.5
¥98.3
¥4,966.2
Normal
Special
Mention
Substandard or Doubtful
or Doubtful of Loss
Total(1)
(in billions)
120
As of March 31, 2018:
Commercial
Normal
Close
Watch
Likely to become
Bankrupt or
Legally/
Virtually
Bankrupt
(in billions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . .
Banks and other financial
¥49,050.3
10,215.5
727.9
11,379.3
2,467.5
7,518.4
institutions . . . . . . . . . . . . . . . . . . .
4,800.3
Communication and information
services . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . .
1,491.1
8,780.5
1,669.8
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . . . . . .
36,049.1
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.0
¥1,691.0
596.7
43.7
279.9
175.8
374.7
10.9
48.2
120.5
40.6
569.1
11.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
¥85,111.4
¥2,271.8
Total(1)
¥51,012.7
10,869.9
780.7
11,691.9
2,667.4
7,971.0
4,812.3
1,551.2
8,938.0
1,730.3
¥271.4
57.7
9.1
32.7
24.1
77.9
1.1
11.9
37.0
19.9
108.3
36,726.5
3.6
¥383.3
27.3
¥87,766.5
Accrual
Nonaccrual
Total(1)
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,012.9
528.1
¥
(in billions)
¥67.3
¥61.7
¥14,080.2
589.8
¥
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention Classified
Total(1)(2)
MUFG Americas Holdings . . . . . . . . . . .
¥4,360.5
¥14.2
(in billions)
¥4,509.1
¥59.9
¥116.8
¥9,060.5
Normal
Special
Mention
Substandard or Doubtful
or Doubtful of Loss
Total(1)
(in billions)
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,284.1
¥198.5
¥123.1
¥5,605.7
Notes:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
(2) Total loans of MUFG Americas Holdings do not include FDIC covered loans and small business loans which are not individually rated
totaling ¥40.5 billion and ¥0.9 billion as of March 31, 2017 and 2018, respectively. We will be reimbursed for a substantial portion of
any future losses on FDIC covered loans under the terms of the FDIC loss share agreements.
We classify loans into risk categories based on relevant information about the ability of borrowers to service
their debt, including, but not limited to, historical and current financial information, historical and current
payment experience, credit documentation, public and non-public information about borrowers and current
economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes of the Commercial segment is the internal
credit rating assigned to each borrower based on our internal borrower ratings of 1 through 15 with the rating of
1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a borrower, we
121
evaluate the borrower’s expected debt-service capability based on various information, including financial and
operating information of the borrower as well as information on the industry in which the borrower operates, and
the borrower’s business profile, management and compliance system. In evaluating a borrower’s debt-service
capability, we also conduct an assessment of the level of earnings and an analysis of the borrower’s net worth.
Based on the internal borrower rating, loans within the Commercial segment are categorized as Normal (internal
borrower ratings of 1 through 9), Close Watch (internal borrower ratings of 10 through 12), and Likely to
become Bankrupt or Legally/Virtually Bankrupt (internal borrower ratings of 13 through 15).
Loans to borrowers categorized as Normal represent those that are not deemed to have collectability issues.
Loans to borrowers categorized as Close Watch represent those that require close monitoring as the borrower has
begun to exhibit elements of potential concern with respect to its business performance and financial condition,
the borrower has begun to exhibit elements of serious concern with respect to its business performance and
financial condition, including business problems requiring long-term solutions, or the borrower’s loans are TDRs
or loans contractually past due 90 days or more for special reasons. Loans to borrowers categorized as Likely to
become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of default than
those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving
restructuring plans, the borrower being considered virtually bankrupt with no prospects for an improvement in
business operations, or the borrower being legally bankrupt with no prospects for continued business operations
because of non-payment, suspension of business, voluntary liquidation or filing for legal liquidation.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card
segment, and consumer loans within the MUFG Americas Holdings segment. The accrual status of these loans is
determined based on the number of delinquent payments.
Commercial loans within the MUFG Americas Holdings segment are categorized as either pass or criticized
based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk
graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the
borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan
and result in a further downgrade. Classified credits are those that are internally risk graded as Substandard or
Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full
satisfaction of the debt. A credit classified as Doubtful has critical weaknesses that make full collection
improbable on the basis of currently existing facts and conditions.
Loans within the Krungsri segment are categorized as Normal, Special Mention, and Substandard, which is
further divided into Substandard, Doubtful and Doubtful of Loss, primarily based on their delinquency status.
Loans categorized as Special Mention generally represent those that have overdue principal or interest payments
for a cumulative period exceeding one month commencing from the contractual due date. Loans categorized as
Substandard, Doubtful or Doubtful of Loss generally represent those that have overdue principal or interest
payments for a cumulative period exceeding three months, commencing from the contractual due date.
For the Commercial, Residential and Card segments, credit quality indicators are based on information as of
March 31. For the MUFG Americas Holdings and Krungsri segments, credit quality indicators are generally
based on information as of December 31.
122
Allowance for credit losses
The following table shows a summary of the changes in the allowance for credit losses by portfolio segment
for the fiscal years ended March 31, 2017 and 2018:
Fiscal year ended March 31, 2017:
Commercial Residential
Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
. . . . . . . . . .
Balance at beginning of fiscal year
Provision for (reversal of) credit losses . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 816.6
177.3
108.3
21.1
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87.2
(6.0)
¥ 58.6
12.2
5.3
1.8
3.5
—
¥31.2
13.3
16.3
2.0
14.3
—
¥108.4
(0.1)
32.1
2.9
29.2
(5.4)
¥ 96.3
51.0
51.8
16.1
¥1,111.1
253.7
213.8
43.9
35.7
(1.3)
169.9
(12.7)
Balance at end of fiscal year . . . . . . . . . . . . . . . .
¥ 900.7
¥ 67.3
¥30.2
¥ 73.7
¥110.3
¥1,182.2
Fiscal year ended March 31, 2018:
Commercial Residential
Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Balance at beginning of fiscal year
. . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 900.7
(297.4)
134.8
25.0
109.8
(2.4)
¥ 67.3
(22.3)
3.8
1.3
2.5
—
¥30.2
23.4
22.7
1.2
21.5
—
¥ 73.7
(9.3)
14.7
6.1
8.6
(2.0)
¥110.3
64.8
56.1
17.5
38.6
8.1
¥1,182.2
(240.8)
232.1
51.1
181.0
3.7
Balance at end of fiscal year . . . . . . . . . . . . . . . .
¥ 491.1
¥ 42.5
¥32.1
¥ 53.8
¥144.6
¥ 764.1
Note:
(1) Others are principally comprised of gains or losses from foreign exchange translation.
123
Allowance for credit losses and recorded investment in loans by portfolio segment as of March 31, 2017 and
2018 are shown below:
As of March 31, 2017:
Commercial Residential Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
772.8 ¥
115.5
46.5 ¥ 20.6 ¥
19.2
9.6
19.2 ¥
54.1
19.0 ¥
91.2
878.1
289.6
credit quality . . . . . . . . . . . . . . . . . . . . . . .
12.4
1.6
0.0
0.4
0.1
14.5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
900.7 ¥
67.3 ¥ 30.2 ¥
73.7 ¥ 110.3 ¥
1,182.2
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥ 1,349.6 ¥
. . . . .
87,976.9
125.6 ¥ 71.9 ¥
93.5 ¥
65.0 ¥
14,197.0
510.4
8,944.4
4,892.0
1,705.6
116,520.7
credit quality . . . . . . . . . . . . . . . . . . . . . . .
34.2
9.8
10.9
27.1
9.2
91.2
Total(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥89,360.7 ¥14,332.4 ¥593.2 ¥9,065.0 ¥4,966.2 ¥118,317.5
As of March 31, 2018:
Commercial Residential Card
MUFG
Americas
Holdings Krungsri
Total
(in billions)
Allowance for credit losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
414.8 ¥
64.3
16.6 ¥ 21.2 ¥
24.7
10.9
7.7 ¥
45.6
29.4 ¥
115.2
489.7
260.7
credit quality . . . . . . . . . . . . . . . . . . . . . . .
12.0
1.2
0.0
0.5
0.0
13.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
491.1 ¥
42.5 ¥ 32.1 ¥
53.8 ¥ 144.6 ¥
764.1
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated
. . . . . ¥
. . . . .
978.0 ¥
110.2 ¥ 66.9 ¥
82.5 ¥
84.1 ¥
86,761.2
13,961.3
512.5
8,963.7
5,515.4
1,321.7
115,714.1
credit quality . . . . . . . . . . . . . . . . . . . . . . .
27.3
8.7
10.4
15.2
6.2
67.8
Total(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥87,766.5 ¥14,080.2 ¥589.8 ¥9,061.4 ¥5,605.7 ¥117,103.6
Note:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
We recorded ¥240.8 billion of reversal of credit losses for the fiscal year ended March 31, 2018, compared
to ¥253.7 billion of provision for credit losses for the previous fiscal year. Our total allowance for credit losses as
of March 31, 2018 was ¥764.1 billion, a decrease of ¥418.1 billion from ¥1,182.2 billion as of March 31, 2017.
The total allowance for credit losses represented 0.65% of the total loan balance as of March 31, 2018, compared
to 1.00% as of March 31, 2017. Significant trends in each portfolio segment are discussed below.
Commercial segment—We recorded ¥297.4 billion of reversal of credit losses for the fiscal year ended
March 31, 2018, compared to ¥177.3 billion of provision for credit losses for the previous fiscal year. The
reversal reflected the repayment of loans by a large borrower in the domestic electronics manufacturing industry
and an improvement in the projected cash flows of another large borrower in the same industry as their financial
124
performance improved. In addition, repayments increased from foreign borrowers particularly in the oil and gas
sector that previously experienced deteriorated repayment ability as oil and other commodities prices were on
recovering trends. The financial performance of a broader number of small and medium-sized borrowers in the
domestic manufacturing industry also improved due to the continued gradual recovery of economic conditions in
Japan. As a result, the ratio of loans classified as Close Watch to total loans decreased to 2.59% as of March 31,
2018 from 3.52% as of March 31, 2017, and the ratio of loans classified as Likely to become Bankrupt and
Legally/Virtually Bankrupt to total loans decreased to 0.44% as of March 31, 2018 from 0.55% as of March 31,
2017. The total allowance for credit losses for this segment represented 0.56% of the segment’s total loan
balance as of Mach 31, 2018, compared to 1.01% as of March 31, 2017.
Residential segment—We recorded ¥22.3 billion of reversal of credit losses for the fiscal year ended
March 31, 2018, compared to ¥12.2 billion of provision for credit losses for the previous fiscal year. The stable
domestic corporate environment in recent periods has generally contributed to higher income for borrowers of
housing loans. This environment positively affected the credit quality of housing loan borrowers. Repayments
increased from that previously experienced deteriorated repayment ability through debt workout programs. As a
result, the ratio of loans classified as Nonaccrual to total loans in the segment was 0.48% as of March 31, 2018,
compared to 0.53% as of March 31, 2017. The ratio of total allowance for credit losses to the total loan balance
in this segment decreased to 0.30% as of March 31, 2018 from 0.47% as of March 31, 2017.
Card segment—We recorded ¥23.4 billion of provision for credit losses for the fiscal year ended March 31,
2018, compared to ¥13.3 billion of provision for credit losses for the previous fiscal year. The increase primarily
reflected a declining trend in the credit quality of the consumer loan portfolio where delinquencies and
bankruptcies were increasing. As a result, charge-offs of loans in this segment also increased. The recent
improvement in domestic corporate profits had and is expected to continue to have a disparate impact on
consumer loan borrowers. As a result, charge-offs of loans were also increased compared to previous fiscal year.
The ratio of loans classified as Nonaccrual to total loans in the segment was 10.46% as of March 31, 2018,
compared to 10.42% as of March 31, 2017. The ratio of total allowance for credit losses to the total loan balance
in this segment increased to 5.45% as of March 31, 2018 from 5.09% as of March 31, 2017.
MUFG Americas Holdings segment—We recorded ¥9.3 billion of reversal of credit losses for the fiscal year
ended March 31, 2018, compared to ¥0.1 billion of reversal of credit losses for the previous fiscal year.
Recovering oil and gas prices helped the financial conditions of many borrowers in the oil and gas sector
stabilize, particularly those which are engaged in the petroleum exploration and production business. This
stabilization enabled borrowers to repay their loans that were previously in non-accrual status. As a result of
these trends and other factors, the ratio of loans classified as Special Mention or below and Nonaccrual to total
loans in the segment decreased to 2.11% as of March 31, 2018 from 3.41% as of March 31, 2017. The ratio of
total allowance for credit losses to the total loan balance in this segment decreased to 0.59% as of March 31,
2018 from 0.81% as of March 31, 2017.
Krungsri segment—We recorded ¥64.8 billion of provision for credit losses for the fiscal year ended
March 31, 2018, compared to ¥51.0 billion of provision for credit losses for the previous fiscal year. The larger
provision for credit losses on loans collectively evaluated for impairment was primarily attributable to growth in
the retail and consumer loan portfolio, particularly the automobile loan portfolio. The larger provision for credit
losses on loans individually evaluated for impairment resulted mainly from the negative impact of stagnant
economic conditions in Thailand on the repayment ability of some corporate borrowers. As a result of this
negative trend and the offsetting positive impact of the increase in retail and consumer loans that are classified as
Normal, the ratio of loans classified as Special Mention or below to total loans in the segment was 5.74% as of
March 31, 2018, compared to 5.92% as of March 31, 2017. The ratio of total allowance for credit losses to the
total loan balance in this segment increased to 2.58% as of March 31, 2018 from 2.22% as of March 31, 2017.
125
Allowance policy
We maintain an allowance for credit losses to absorb probable losses inherent in the loan portfolio. We have
divided our allowance for loan losses into five portfolio segments—Commercial, Residential, Card, MUFG
Americas Holdings and Krungsri.
For all portfolio segments, key elements relating to the policies and discipline used in determining the
allowance for credit losses are our credit classification and related borrower categorization process, which are
closely linked to the risk grading standards set by the Japanese regulatory authorities for asset evaluation and
assessment, and are used as a basis for establishing the allowance for credit losses and charge-offs. The
categorization is based on conditions that may affect the ability of borrowers to service their debt, such as current
financial condition and results of operations, historical payment experience, credit documentation, other public
information and current trends.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
For the Commercial, MUFG Americas Holdings and Krungsri segments, our allowance for credit losses
primarily consists of allocated allowances. The allocated allowances consist of (1) an allowance for loans
individually evaluated for impairment, (2) an allowance for large groups of smaller-balance homogeneous loans,
and (3) a formula allowance. The allocated allowance within the Commercial segment also includes an allowance
for country risk exposure. The allowance for credit losses within the MUFG Americas Holdings segment also
includes an unallocated allowance which captures losses that are attributable to economic events in various
industry or geographic sectors whose impact on our loan portfolios in these segments have occurred but have yet
to be recognized in the allocated allowance. For the Residential and Card segments, the loans are smaller-balance
homogeneous loans that are pooled by the risk ratings based on the number of delinquencies.
For more information on our methodologies used to estimate the allowance for each portfolio segment, see
“Summary of Significant Accounting Policies” in Note 1 to our consolidated financial statements included
elsewhere in this Annual Report and “—Critical Accounting Estimates—Allowance for Credit Losses” above.
During the fiscal year ended March 31, 2018, we did not make any significant changes to the methodologies
and policies used to determine our allowance for credit losses.
Allowance for off-balance sheet credit instruments
We maintain an allowance for credit losses on off-balance sheet credit instruments, including commitments
to extend credit, guarantees, standby letters of credit and other financial instruments. The allowance is included
in other liabilities. We have adopted for such instruments the same methodology as that which is used in
determining the allowance for credit losses on loans.
The allowance for credit losses on off-balance sheet credit instruments was ¥81.7 billion as of March 31,
2018, a decrease of ¥96.4 billion from ¥178.1 billion as of March 31, 2017. This decrease primarily reflected a
reduction in the commitments and guarantees provided in favor of a large borrower in the domestic electronics
manufacturing industry whose financial performance improved.
Nonaccrual loans and troubled debt restructurings
We consider a loan to be a nonaccrual loan when substantial doubt exists as to the full and timely payment
of interest on, or repayment of, the principal of the loan, which is a borrower condition that generally
corresponds to borrowers in categories 13 and below in our internal rating system (which corresponds to “Likely
to become Bankrupt,” “Virtually Bankrupt” and “Bankrupt or de facto Bankrupt” status under Japanese banking
126
regulations). Substantially all nonaccrual loans are also impaired loans. Loans are also placed in nonaccrual
status when principal or interest is contractually past due one month or more with respect to loans within all
classes of the Commercial segment, three months or more with respect to loans within the Card, MUFG
Americas Holdings and Krungsri segments, and six months or more with respect to loans within the Residential
segment.
We modify certain loans in conjunction with our loss-mitigation activities. Through these modifications,
concessions are granted to a borrower who is experiencing financial difficulty, generally in order to minimize
economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize payments received
from the borrower. The concessions granted vary by portfolio segment, by program, and by borrower-specific
characteristics, and may include interest rate reductions, term extensions, payment deferrals, and partial principal
forgiveness. Loan modifications that represent concessions made to borrowers who are experiencing financial
difficulties are identified as troubled debt restructurings, or TDRs. TDRs are also considered impaired loans, and
an allowance for credit losses is separately established for each loan.
Generally, accruing loans that are modified in a TDR remain as accruing loans subsequent to the
modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been modified as a
TDR and the borrower is not delinquent under the modified terms, and demonstrates that its financial condition
has improved, we may reclassify the loan to accrual status. This determination is generally performed at least
once a year through a detailed internal credit rating review process. Although we have not defined any minimum
period to qualify for an upgrade, it is not common for a borrower to be able to demonstrate that its business
problems have been resolved or can soon be resolved within a short period of time following a restructuring. If
the borrower is upgraded to category 12 or higher in our internal rating system (which corresponds to “Normal”
and “Close Watch” status under the Japanese banking regulations), a TDR would be reclassified to accrual status.
Once a nonaccrual loan is deemed to be a TDR, we will continue to designate the loan as a TDR even if the loan
is reclassified to accrual status.
A loan that has been modified into a TDR is considered to be impaired until it matures, is repaid, or is
otherwise liquidated, regardless of whether the borrower performs under the modified terms.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative
Disclosures about Credit, Market and Other Risk—Credit Risk Management.”
For more information on our TDRs, see Note 4 to our consolidated financial statements included elsewhere
in this Annual Report.
127
Nonaccrual loans
The following table shows information about the nonaccrual status of loans by class as of March 31, 2017
and 2018:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign-excluding MUFG Americas Holdings and Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2018
2017
(in billions)
¥471.1
185.1
15.2
44.4
38.6
131.2
2.4
18.7
10.0
25.5
191.9
75.4
61.4
82.2
94.9
¥333.0
77.2
10.8
33.3
30.7
108.2
1.1
13.8
37.6
20.3
109.5
69.5
61.4
52.3
121.2
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥976.9
¥746.9
Note:
(1) The above table does not include loans held for sale of nil and ¥0.1 billion as of March 31, 2017 and 2018, respectively, and loans
acquired with deteriorated credit quality of ¥9.7 billion and ¥6.7 billion as of March 31, 2017 and 2018, respectively.
Total nonaccrual loans decreased ¥230.0 billion between March 31, 2017 and March 31, 2018. Significant
trends in each portfolio segment are discussed below.
Commercial segment—Nonaccrual loans in the domestic commercial category decreased ¥138.1 billion
between March 31, 2017 and March 31, 2018. The amount of commercial loans transferred from accrual status to
nonaccrual status decreased as economic conditions gradually improved in Japan. In addition, nonaccrual loans
outstanding to medium-sized corporate borrowers decreased. Nonaccrual loans in the foreign excluding MUFG
Americas Holdings and Krungsri category decreased ¥82.4 billion primarily due to repayments from some
borrowers in the oil and gas sector and a large trading company, as well as charge-offs of loans to some
borrowers in the oil, gas and natural resources sector that were unable to take advantage of the rising trend in
commodities prices.
Residential segment—Nonaccrual loans in the segment decreased ¥5.9 billion between March 31, 2017 and
March 31, 2018 primarily due to the transfer from nonaccrual status to accrual status of loans to borrowers who
became current with their interest payments as the stable corporate environment in recent periods has contributed
to higher income for borrowers in the segment. In addition, our efforts to work with borrowers on their loan
obligations contributed to the reduction in nonaccrual loans.
Card segment—Nonaccrual loans in the segment remained at the same level between March 31, 2017 and
March 31, 2018. The amount of consumer loans transferred from accrual status to nonaccrual status increased,
but the larger amount of charge-offs of nonaccrual consumer loans resulted in the balance of nonaccrual loans in
the segment remaining at the same level.
128
MUFG Americas Holdings segment—Nonaccrual loans in the segment decreased ¥29.9 billion between
March 31, 2017 and March 31, 2018 primarily as a result of the repayments, and transfer to accrual status, of
loans to some borrowers in the oil and gas sector whose repayment ability improved as they benefited from rising
oil and other commodities prices.
Krungsri segment—Nonaccrual loans in the segment increased ¥26.3 billion between March 31, 2017 and
March 31, 2018, primarily because the credit quality of some local corporate borrowers deteriorated as they were
negatively affected by stagnant economic conditions in Thailand.
Troubled debt restructurings
The following table shows information about outstanding recorded investment balances of TDRs by class as
of March 31, 2017 and 2018:
Commercial(1)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Foreign-excluding MUFG Americas Holdings and Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2017
2018
(in billions)
¥592.6
409.4
8.9
39.0
32.9
83.0
0.0
6.1
6.5
6.8
96.2
50.2
72.3
69.8
46.7
¥482.6
320.7
7.4
33.3
24.0
70.1
0.0
12.8
9.7
4.6
54.2
40.7
67.3
65.4
54.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥927.8
¥764.2
Notes:
(1) TDRs for the Commercial and Residential segments include accruing loans with concessions granted, and do not include nonaccrual
loans with concessions granted.
(2) TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding
recorded investment balances as of March 31, 2017 and 2018 are nonaccrual TDRs as follows: ¥39.7 billion and ¥38.8 billion—Card;
¥45.1 billion and ¥26.0 billion—MUFG Americas Holdings; and ¥19.0 billion and ¥24.9 billion—Krungsri, respectively.
Total TDRs decreased ¥163.6 billion between March 31, 2017 and March 31, 2018. Significant trends in
each portfolio segment are discussed below.
Commercial segment—TDRs in the domestic commercial category decreased ¥110.0 billion between
March 31, 2017 and March 31, 2018. This was mainly due to a ¥88.7 billion decrease in the domestic
manufacturing industry primarily resulting from repayment by a large borrower in the domestic electronics
manufacturing industry whose financial performance improved. In addition, TDRs in the foreign-excluding
MUFG Americas Holdings and Krungsri category decreased ¥42.0 primarily due to the sale of loans outstanding
to a large foreign government investment vehicle.
129
Residential segment—TDRs in the segment decreased ¥9.5 billion between March 31, 2017 and March 31,
2018 primarily as a result of repayments of loans classified as TDRs pursuant to their respective restructured
terms.
Card segment—TDRs in the segment decreased ¥5.0 billion between March 31, 2017 and March 31, 2018
mainly due to charge-offs resulting from borrowers filing for bankruptcy and repayments of loans classified as
TDRs pursuant to their respective restructured terms.
MUFG Americas Holdings segment—TDRs in the segment decreased ¥4.4 billion between March 31, 2017
and March 31, 2018. The decrease was mainly due to repayments by borrowers in the oil and gas sector pursuant
to their respective restructured loans.
Krungsri segment—TDRs in the segment increased ¥7.3 billion between March 31, 2017 and March 31,
2018. The increase was primarily because we provided concessions to some borrowers in the small and
medium-sized enterprise loan portfolio, which were adversely affected by stagnant economic conditions in
Thailand. The increase also reflected the grown in the retail and consumer portfolio.
In the above table, TDRs for the Commercial and Residential segments include accruing loans with
concessions granted, and do not include nonaccrual loans with concessions granted, whereas TDRs for the Card,
MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. In the Commercial and
Residential segments, once a loan is classified as a nonaccrual loan, a modification would have little likelihood
of resulting in the recovery of the loan in view of the severity of the financial difficulty of the borrower.
Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual loan. The
vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates, typically for
periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan at the
extended maturity. Accordingly, the impact of such TDRs on the outstanding recorded investment is immaterial,
and the vast majority of nonaccrual TDRs have subsequently defaulted.
For the fiscal year ended March 31, 2018, extensions of the stated maturity dates of loans were the primary
type of concessions we granted to loans in the Commercial, Residential and Krungsri segments, reductions in the
stated rates were the primary type of concessions we granted to loans in the Card segment, and payment deferrals
were the primary type of concessions we granted to loans in the MUFG Americas Holdings segment.
Impaired loans and impairment allowance
Impaired loans primarily include nonaccrual loans and TDRs. We consider a loan to be impaired when,
based on current information and events, it is probable that we will be unable to collect all of the scheduled
payments of interest on, and repayment of, the principal of the loan when due according to the contractual terms
of the loan agreement.
130
The following tables show information about impaired loans by class as of March 31, 2017 and 2018:
As of March 31, 2017
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 876.0
555.0
15.0
53.0
48.3
160.5
1.8
14.2
10.7
17.5
262.9
8.0
120.4
71.8
77.2
44.7
(in billions)
¥187.7
39.6
9.1
30.3
23.2
53.7
¥1,063.7
594.6
24.1
83.3
71.5
214.2
¥1,107.2
602.1
24.9
90.8
78.1
224.2
¥608.1
411.8
9.1
15.0
31.1
115.7
1.7
10.5
7.2
6.0
2.4
24.8
16.5
32.3
2.4
26.6
17.4
40.7
285.9
310.0
164.7
8.0
127.0
72.3
93.5
65.5
11.5
154.0
80.4
113.4
71.1
3.6
47.0
20.5
19.2
19.1
0.6
10.6
5.8
14.8
23.0
—
6.6
0.5
16.3
20.8
Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,461.0
¥254.9
¥1,715.9
¥1,847.6
¥882.2
131
As of March 31, 2018
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
(in billions)
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . .
Foreign-excluding MUFG Americas
Holdings and Krungsri . . . . . . . . . .
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 626.5
361.2
10.9
43.6
38.1
128.7
1.1
18.8
13.0
11.1
122.3
7.8
105.1
67.0
48.8
58.5
¥189.0
36.6
7.2
23.1
16.6
49.6
¥ 815.5
397.8
18.1
66.7
54.7
178.3
¥ 875.8
408.1
18.5
71.8
59.3
189.4
¥331.9
166.1
7.9
10.7
25.9
94.8
0.0
7.8
34.3
13.8
40.2
—
6.2
0.4
33.7
25.6
1.1
26.6
47.3
24.9
1.2
28.1
67.5
31.9
162.5
190.5
7.8
111.3
67.4
82.5
84.1
15.5
134.7
74.8
94.6
91.0
1.0
16.0
5.4
4.1
82.9
4.3
16.9
21.2
7.7
29.4
Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,036.0
¥295.1
¥1,331.1
¥1,476.9
¥494.3
Notes:
(1) These loans do not require an allowance for credit losses because the recorded loan balance equal, or do not exceed, the present value of
expected future cash flows discounted at the loans’ effective interest rate, loans’ observable market price, or the fair value of the
collateral if the loan is a collateral-dependent loan.
Included in impaired loans as of March 31, 2017 and 2018 are accrual TDRs as follows: ¥688.8 billion and ¥536.8 billion—Commercial;
¥50.2 billion and ¥40.7 billion—Residential; ¥32.6 billion and ¥28.5 billion—Card; ¥24.7 billion and ¥39.4 billion—MUFG Americas
Holdings; and ¥23.6 billion and ¥24.9 billion—Krungsri, respectively.
In addition to impaired loans presented in the above table, there were loans held for sale that were impaired of ¥9.9 billion and
¥0.1 billion as of March 31, 2017 and 2018, respectively.
(2)
(3)
132
The following table shows information regarding the average recorded loan balance and recognized interest
income on impaired loans for the fiscal years ended March 31, 2017 and 2018:
Fiscal years ended March 31,
2017
2018
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
(in billions)
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . .
Communication and information services . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUFG Americas Holdings and
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . . . .
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,137.5
601.2
26.7
96.2
82.0
238.8
2.3
27.5
24.7
38.1
291.6
10.0
133.9
75.8
91.7
51.6
¥14.1
5.8
0.4
1.6
1.2
3.5
0.0
0.6
0.4
0.6
5.1
0.4
1.9
2.5
1.7
2.2
¥ 918.1
472.1
19.5
74.0
59.9
186.4
1.7
25.5
50.4
28.6
209.3
8.6
119.4
69.8
83.5
75.4
¥ 9.4
3.8
0.3
1.1
0.8
2.3
0.0
0.4
0.2
0.5
4.2
0.5
1.6
2.0
2.0
3.9
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,792.1
¥27.9
¥1,484.1
¥23.6
133
Past due analysis
Aging of past due loans by class as of March 31, 2017 and 2018 are shown below:
As of March 31, 2017:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . .
Communication and
information services . . . . . .
Other industries . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . .
Foreign-excluding MUFG
Americas Holdings and
Krungsri . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in billions)
Total
Loans(1)(2)
Recorded
Investment>
90 Days and
Accruing
¥ 12.4
1.4
0.3
2.7
1.3
1.9
0.0
0.6
0.3
3.9
5.3
78.2
17.5
25.2
103.0
¥ 19.4
1.7
0.2
5.0
3.2
1.9
¥ 31.8
3.1
0.5
7.7
4.5
3.8
¥ 51,999.5
11,765.6
818.2
11,525.1
2,531.0
7,960.9
¥ 52,031.3
11,768.7
818.7
11,532.8
2,535.5
7,964.7
0.0
0.2
0.1
7.1
50.1
42.4
31.3
14.2
73.3
0.0
5,223.0
5,223.0
0.8
0.4
11.0
55.4
120.6
48.8
39.4
176.3
1,633.4
8,859.3
1,683.0
1,634.2
8,859.7
1,694.0
37,239.8
14,202.1
533.5
8,998.0
4,780.7
37,295.2
14,322.7
582.3
9,037.4
4,957.0
¥ 5.8
0.0
—
1.5
0.0
0.2
—
—
—
4.1
2.2
31.4
—
1.2
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥241.6
¥230.7
¥472.3
¥117,753.6
¥118,225.9
¥40.6
134
As of March 31, 2018:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . .
Communication and
information services . . . . . .
Other industries . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . .
Foreign-excluding MUFG
Americas Holdings and
Krungsri . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Americas Holdings . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in billions)
Total
Loans(1)(2)
Recorded
Investment>
90 Days and
Accruing
¥ 13.3
1.4
0.4
2.1
1.0
3.9
—
0.7
0.3
3.5
12.5
78.1
18.9
23.1
116.7
¥ 43.9
1.4
0.4
3.2
0.6
4.2
¥ 57.2
2.8
0.8
5.3
1.6
8.1
¥ 50,955.5
10,867.1
779.9
11,686.6
2,665.8
7,962.9
¥ 51,012.7
10,869.9
780.7
11,691.9
2,667.4
7,971.0
0.0
0.0
4,812.3
4,812.3
0.3
28.3
5.5
19.7
19.4
32.2
13.6
99.3
1.0
28.6
9.0
32.2
97.5
51.1
36.7
216.0
1,550.2
8,909.4
1,721.3
1,551.2
8,938.0
1,730.3
36,694.3
13,974.1
528.2
9,009.5
5,383.5
36,726.5
14,071.6
579.3
9,046.2
5,599.5
¥ 6.4
—
—
1.6
0.0
1.3
—
—
—
3.5
1.1
10.8
—
0.8
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥262.6
¥228.1
¥490.7
¥116,545.1
¥117,035.8
¥19.1
Notes:
(1) Total loans in the above table do not include loans held for sale or loans acquired with deteriorated credit quality and represent balances
without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
(2) Total loans of MUFG Americas Holdings do not include ¥0.4 billion and ¥0.0 billion of FDIC covered loans as of March 31, 2017 and
2018, respectively, which are not subject to the guidance on loans and debt securities acquired with deteriorated credit quality.
Sales of nonperforming loans
The following table presents comparative data relating to the principal amount of nonperforming loans sold
and reversal of allowance for credit losses:
Principal
amount of
loans(1)
Allowance
for credit
losses(2)
Loans,
net of
allowance
(in billions)
Reversal of
allowance
for credit
losses
For the fiscal year ended March 31, 2017 . . . . . . . . . . . . . . . . . . . . .
For the fiscal year ended March 31, 2018 . . . . . . . . . . . . . . . . . . . . .
¥ 99.0
¥117.9
¥24.0
¥18.5
¥75.0
¥99.4
¥(12.9)
¥ (6.3)
Notes:
(1) Represents principal amount after the deduction of charge-offs made before the sales of nonperforming loans.
(2) Represents allowance for credit losses at the latest balance-sheet date.
While we originate various types of loans to corporate and individual borrowers in Japan and overseas in the
normal course of business, we dispose of nonperforming loans in order to improve our loan quality. Most of
these nonperforming loans are disposed of by sales to third parties without any continuing involvement.
Through the sale of nonperforming loans to third parties, gains or losses may arise from factors such as a
change in the credit quality of the borrowers or the value of the underlying collateral subsequent to the prior
reporting date, and the risk appetite and investment policy of the purchasers.
135
The principal amount of non-performing loans sold in the fiscal year ended March 31, 2018 increased
compared to the previous fiscal year mainly due to the increased sales by MUFG Bank of nonperforming loans
outstanding to borrowers in the domestic manufacturing industry.
In connection with the sale of loans, including performing loans, we recorded net gains of ¥19.4 billion and
¥2.9 billion for the fiscal years ended March 31, 2017 and 2018, respectively.
Investment Portfolio
Our investment securities primarily consist of Japanese government bonds and marketable equity securities.
Japanese government bonds are mostly classified as available-for-sale securities. Our investment in Japanese
government bonds is a part of our asset and liability management policy with respect to investing the amount of
Japanese yen-denominated funds exceeding our net loans. The percentage of our holding of available-for-sale
Japanese government bonds to the total investment securities decreased to 56.3% as of March 31, 2018 from
59.7% as of March 31, 2017. We also hold Japanese government bonds that are classified as held-to-maturity
securities, which accounted for 2.5% of the total investment securities as of March 31, 2018.
Historically, we have held equity securities of some of our customers primarily for strategic purposes, in
particular to maintain long-term relationships with these customers. We continue to focus on reducing our
investment in equity securities for such purposes in order to reduce the price fluctuation risk in our equity
portfolio from a risk management perspective and to respond to applicable regulatory requirements as well as
increasing market expectations for us to reduce our equity portfolio. As of March 31, 2017 and 2018, the
aggregate book value of our marketable equity securities under Japanese GAAP satisfied the requirements of the
legislation prohibiting banks from holding equity securities in excess of their Tier 1 capital. In November 2015,
we announced that we would aim to reduce the balance of equity securities held for strategic purposes valued
under Japanese GAAP to approximately 10% of our Tier 1 capital over a five-year period. During the fiscal year
ended March 31, 2018, we sold down ¥201 billion of equity securities held in our strategic equity investment
portfolio valued under Japanese GAAP. As of March 31, 2018, the balance of such securities valued under
Japanese GAAP represented 14.2% of our Tier 1 capital. However, various factors, including market conditions
and changes in our Tier 1 capital ratio, may affect the amount of equity securities we should sell and our ability
to achieve the target as planned.
Investment securities increased ¥420.6 billion to ¥43,654.2 billion as of March 31, 2018 from
¥43,233.6 billion as of March 31, 2017, primarily due to an increase in net unrealized gains on marketable equity
securities, reflecting the rise in equity prices.
Investment securities other than available-for-sale or held-to-maturity securities, which are nonmarketable
equity securities presented on our consolidated balance sheets as other investment securities, were primarily
carried at cost of ¥566.6 billion as of March 31, 2018 and ¥556.2 billion as of March 31, 2017, respectively,
because their fair values were not readily determinable.
For the fiscal year ended March 31, 2018, losses resulting from impairment of investment securities were
¥8.2 billion, an improvement of ¥25.6 billion compared to the fiscal year ended March 31, 2017. This was mainly
due to the positive impact of generally rising stock prices in Japan.
136
The following table shows information regarding the amortized cost, net unrealized gains (losses), and fair
value of our available-for-sale and held-to-maturity securities as of March 31, 2017 and 2018.
As of March 31,
2017
2018
Amortized
cost
Fair value
Net
unrealized
gains (losses)
Amortized
cost
Fair value
Net
unrealized
gains (losses)
(in billions)
Available-for-sale securities:
Debt securities:
Japanese government and
Japanese government
agency bonds . . . . . . .
Japanese prefectural and
municipal bonds . . . . .
Foreign governments and
official institutions
bonds . . . . . . . . . . . . .
Corporate bonds . . . . . . .
Mortgage-backed
¥25,435.6
¥25,826.3
¥ 390.7
¥24,272.3
¥24,567.9
¥ 295.6
1,010.3
1,015.5
5.2
1,532.1
1,537.4
5.3
2,162.9
1,122.0
2,149.9
1,141.7
(13.0)
19.7
2,207.7
1,104.8
2,171.7
1,119.4
(36.0)
14.6
securities . . . . . . . . . . .
1,284.1
1,269.2
(14.9)
1,727.8
1,712.8
(15.0)
Asset-backed
securities . . . . . . . . . . .
Other debt securities . . . .
1,374.8
169.2
1,378.3
170.8
3.5
1.6
1,547.0
165.0
1,558.3
165.6
11.3
0.6
Marketable equity
securities . . . . . . . . . . . . . . .
2,737.0
6,138.4
3,401.4
2,789.4
6,671.6
3,882.2
Total available-for-sale
securities . . . . . . . . . . . . . . . . . . .
¥35,295.9
¥39,090.1
¥3,794.2
¥35,346.1
¥39,504.7
¥4,158.6
Held-to-maturity debt
securities(1)
. . . . . . . . . . . . . . . . .
¥ 3,587.3
¥ 3,637.8
¥
50.5
¥ 3,582.9
¥ 3,620.7
¥
37.8
Note:
(1) See Note 3 to our consolidated financial statements included elsewhere in this Annual Report for more details.
Net unrealized gains on available-for-sale securities increased ¥364.4 billion to ¥4,158.6 billion as of
March 31, 2018 from ¥3,794.2 billion as of March 31, 2017. The increase was primarily attributable to a
¥480.8 billion increase in net unrealized gains on marketable equity securities, primarily reflecting higher equity
prices as of March 31, 2018 compared to March 31, 2017. The increase was offset in part by a ¥95.1 billion
decrease in net unrealized gains on Japanese government and Japanese government agency bonds, reflecting a
reduction in our holdings of Japanese government bonds as part of our asset and liability management and
interest rate risk management measures.
The amortized cost of held-to-maturity securities decreased ¥4.4 billion to ¥3,582.9 billion as of March 31,
2018 from ¥3,587.3 billion as of March 31, 2017. The decrease was mainly due to a decrease in mortgage-backed
securities. Net unrealized gains on held-to-maturity decreased ¥12.7 billion between March 31, 2017 and
March 31, 2018, reflecting a reduction in mortgage-backed securities.
137
The following table shows information relating to our investment securities other than available-for-sale or
held-to-maturity securities as of March 31, 2017 and 2018:
As of March 31,
2017
2018
(in billions)
Other investment securities:
Nonmarketable equity securities:
Unlisted preferred securities(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities held by investment companies and brokers and dealers(3) . . . . . . . . .
¥391.4
138.5
26.3
¥391.1
147.1
28.4
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥556.2
¥566.6
Notes:
(1) These securities are mainly issued by public companies, including preferred stocks issued by Morgan Stanley, preferred securities issued
by our non-consolidated funding vehicles, and other unlisted preferred securities issued by several Japanese public companies. Those
securities are primarily carried at cost.
(2) These securities are equity securities issued by unlisted companies other than unlisted preferred securities. Those securities are primarily
carried at cost.
(3) These investment securities are held by certain subsidiaries subject to specialized industry accounting principles for investment
companies and brokers and dealers, and are measured at fair value.
Cash, due from banks and interest-earning deposits in other banks
Cash, due from banks and interest-earning deposits in other banks increased ¥11,848.4 billion to ¥75,858.1
billion as of March 31, 2018 from ¥64,009.7 billion as of March 31, 2017. Cash and due from banks increased
¥6,965.7 billion to ¥32,648.4 billion as of March 31, 2018 from ¥25,682.7 billion as of March 31, 2017. This
increase was mainly because our commercial banking and trust banking subsidiaries deposited with the Bank of
Japan a larger amount of cash received on sales and redemptions of Japanese government bonds as the
subsidiaries continued to reduce their holdings of such bonds. A larger amount of customer deposits in our
commercial banking subsidiaries was also deposited with the Bank of Japan as such deposits increased mainly
because near-zero interest rates in Japan resulted in a shift in investor preference from investments in money
markets to deposits. Interest-earning deposits in other banks also increased ¥4,882.7 billion to ¥43,209.7 billion
as of March 31, 2018 from ¥38,327.0 billion as of March 31, 2017. This was mainly due to an increase in such
deposits in overseas banks with higher interest rates, particularly in the United States. Cash, due from banks and
interest-earning deposits in other banks fluctuate significantly from day to day depending upon financial market
conditions.
Trading Account Assets
Trading account assets decreased ¥6,133.3 billion to ¥35,186.7 billion as of March 31, 2018 from
¥41,320.0 billion as of March 31, 2017. Trading account assets consist of trading account securities and trading
derivative assets. Trading account securities increased ¥114.6 billion to ¥22,601.5 billion as of March 31, 2018
from ¥22,486.9 billion as of March 31, 2017. This increase was mainly due to growth in our trading foreign
government and official institution bond portfolio and trading equity portfolio. Trading derivative assets
decreased ¥6,247.9 billion to ¥12,585.2 billion as of March 31, 2018 from ¥18,833.1 billion as of March 31,
2017. This decrease was mainly attributable to the application of new accounting rules for derivative transactions
through central counterparty clearing houses.
Investment Securities
Total investment securities increased ¥420.6 billion to ¥43,654.2 billion as of March 31, 2018 from
¥43,233.6 billion as of March 31, 2017. This was mainly due to an increase in our holding of equity securities,
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reflecting higher equity prices in Japan. Net unrealized gains on available-for-sale securities as of March 31,
2018 were ¥4,158.6 billion, an increase of ¥364.4 billion from ¥3,794.2 billion as of March 31, 2017, mainly due
to higher equity prices as of March 31, 2018 compared to March 31, 2017. This increase was partially offset by a
decrease in net unrealized gains on Japanese government bonds primarily due to the reduction in our Japanese
government bond portfolio.
Deferred Tax Assets and Deferred Tax Liabilities
Deferred tax assets decreased ¥7.8 billion to ¥68.7 billion as of March 31, 2018 from ¥76.5 billion as of
March 31, 2017. Deferred tax assets decreased primarily due to a decrease in allowance for credit losses.
Deferred tax liabilities increased ¥240.4 billion to ¥654.1 billion as of March 31, 2018 from ¥413.7 billion as of
March 31, 2017. This was primarily due to increases in net unrealized gains on trading securities and investment
securities.
For more information, see “—A. Operating Results—Results of Operations—Income Tax Expense” and
Note 7 to our consolidated financial statements included elsewhere in this Annual Report.
Total Liabilities
As of March 31, 2018, total liabilities were ¥284,924.5 billion, an increase of ¥2,504.2 billion from
¥282,420.3 billion as of March 31, 2017. This was primarily due to an increase of ¥5,273.0 billion in deposits
and an increase of ¥3,062.4 billion in payables under repurchase agreements and securities lending transactions,
partially offset by a decrease of ¥6,567.8 billion in trading account liabilities.
Deposits
Deposits are our primary source of funds. The balance of deposits increased ¥5,273.0 billion to
¥195,674.6 billion as of March 31, 2018 from ¥190,401.6 billion as of March 31, 2017. The increase was mainly
attributable to an increase in interest-bearing deposits from retail customers in Japan as well as an increase in
foreign deposits.
The total average balance of interest-bearing deposits increased ¥8,995.3 billion to ¥164,562.8 billion for
the fiscal year ended March 31, 2018 from ¥155,567.5 billion for the fiscal year ended March 31, 2017.
Short-term Borrowings
We use short-term borrowings as a funding source and in our management of interest rate risk. For
management of interest rate risk, short-term borrowings are used in asset and liability management operations to
match interest rate risk exposure resulting from loans and other interest-earning assets and to manage funding
costs of various financial instruments at an appropriate level, based on our forecast of future interest rate levels.
Short-term borrowings consist of call money, funds purchased, payables under repurchase agreements, payables
under securities lending transactions, due to trust accounts and other short-term borrowings. For changes in
presentation of payables under repurchase agreements, see Note 1 to our consolidated financial statements
included elsewhere in this Annual Report.
Short-term borrowings increased ¥2,502.5 billion to ¥39,024.6 billion as of March 31, 2018 from
¥36,522.1 billion as of March 31, 2017. This increase was primarily attributable to a ¥2,621.2 billion increase in
payables under securities lending transactions and a ¥441.2 billion increase in payables under repurchase
agreements. During the fiscal year ended March 31, 2018, investor preference shifted from deposits to
investments in the money market, reversing the trend which started following the introduction of the Bank of
Japan’s “quantitative and qualitative monetary easing with negative interest rates” policy in February 2016.
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Trading Account Liabilities
Trading account liabilities decreased ¥6,567.8 billion to ¥12,222.3 billion as of March 31, 2018 from
¥18,790.1 billion as of March 31, 2017. This decrease was mainly attributable to the application of new
accounting rules for derivative transactions through central counterparty clearing houses.
Long-term Debt
Long-term debt increased ¥938.1 billion to ¥27,069.6 billion as of March 31, 2018 from ¥26,131.5 billion as
of March 31, 2017. This increase was due to additional issuances of bonds by us to meet TLAC and other
Basel III requirements. The average balance of long-term debt for the fiscal year ended March 31, 2018 was
¥27,932.0 billion, an increase of ¥4,969.1 billion from ¥22,962.9 billion for the previous fiscal year.
The senior notes and subordinated bonds that MUFG issued for TLAC and other Basel III compliance
purposes are included in long-term debt. See “—Recent Developments.”
Sources of Funding and Liquidity
Our primary source of liquidity is from a large balance of deposits, mainly ordinary deposits, certificates of
deposit and time deposits. Time deposits have historically shown a high rollover rate among our corporate
customers and individual depositors. The average deposit balance increased to ¥192,741.2 billion for the fiscal
year ended March 31, 2018 from ¥181,238.3 billion for the fiscal year ended March 31, 2017. These deposits
provide us with a sizable source of stable and low-cost funds. Our average deposits, combined with our average
total equity of ¥15,423.1 billion, funded 64.9% of our average total assets of ¥320,589.9 billion during the fiscal
year ended March 31, 2018. Our deposits exceeded our loans before allowance for credit losses by
¥78,638.7 billion as of March 31, 2018 compared to ¥72,186.6 billion as of March 31, 2017. As part of our asset
and liability management policy, a significant portion of the amount of Japanese yen-denominated funds
exceeding our loans has been deposited with the Bank of Japan or invested in Japanese government bonds in
recent periods.
The remaining funding was primarily provided by short-term borrowings and long-term senior and
subordinated debt. Short-term borrowings consist of call money and funds purchased, payables under repurchase
agreements, payables under securities lending transactions, due to trust account, and other short-term borrowings.
From time to time, we have issued long-term instruments, including various fixed and floating interest rate senior
and subordinated bonds with and without maturities. The balance of our short-term borrowings as of March 31,
2018 was ¥39,024.6 billion, and the average balance of short-term borrowings for the fiscal year ended
March 31, 2018 was ¥38,609.1billion. The balance of our long-term debt as of March 31, 2018 was
¥27,069.6 billion, and the average balance of long-term debt for the fiscal year ended March 31, 2018 was
¥27,932.0 billion. Liquidity may also be provided by the sale of financial assets, including available-for-sale
securities, trading account securities and loans. Additional liquidity may be provided by the maturity of loans.
We manage liquidity separately at certain of our domestic and foreign banking and non-bank subsidiaries
because they are subject to separate regulatory requirements, pursue different business models and have
distinctive liquidity risk profiles. We manage our group-wide liquidity on a consolidated basis based on the tests
and analyses conducted at the subsidiary level. Liquidity risk management measures at the subsidiary level
include the following:
‰ Domestic banking subsidiaries—Our major domestic banking subsidiaries, MUFG Bank and Mitsubishi
UFJ Trust and Banking, set liquidity and funding limits designed to maintain their respective
requirements for funding from market sources below pre-determined levels for certain periods
(e.g., one-day, two-week and one-month). The major domestic banking subsidiaries also monitor the
balance of buffer assets they respectively hold, including Japanese government bonds and U.S. Treasury
bonds, which can be used for cash funding even in periods of stress. In addition, the major domestic
140
banking subsidiaries regularly perform liquidity stress testing designed to evaluate the impact of
systemic market stress conditions and institution-specific stress events, including credit rating
downgrades, on their liquidity positions;
‰
‰
Foreign banking subsidiaries—Our major foreign banking subsidiaries, MUFG Americas Holdings and
Krungsri, monitors various liquidity metrics, including total available liquidity, the net non-core funding
dependence ratio, and minimum liquidity assets, as a tool to maintain a sufficient amount of liquidity
and diversity of funding sources to allow the major foreign banking subsidiaries to meet expected
obligations in both stable and adverse conditions. In addition, the major foreign banking subsidiaries
regularly conduct stress testing, which incorporates both bank-specific and systemic market scenarios
that would adversely affect its liquidity position, to facilitate the identification of appropriate remedial
measures to help ensure that it maintains adequate liquidity in adverse conditions;
Securities subsidiaries—Our securities subsidiaries implement liquidity and funding limits designed to
maintain their requirements for funding from market sources below pre-determined levels for specified
periods. In addition, the securities subsidiaries regularly conduct analyses designed to assess the period
for which they can continue to meet their respective liquidity requirements by selling or pledging assets
they respectively hold under scenarios where they are unable to access any additional sources of
financing in the market; and
‰ Non-bank subsidiaries—Our non-bank subsidiaries, including Mitsubishi UFJ NICOS, regularly
conduct cash flow analyses designed to assess their ability to generate sufficient liquidity for specified
periods, considering the cash and cash equivalents as well as deposits they respectively hold, and their
respective operating income and expenses under scenarios where they are no longer able to obtain
funding from markets through issuance of commercial paper, bonds or other instruments. The non-bank
subsidiaries also conduct analyses to ensure sufficient liquidity and funding are available from our bank
subsidiaries and other financial institutions outside of our group of companies.
We collect and evaluate the results of the stress tests individually performed by our major subsidiaries to
ensure our ability to meet our liquidity requirements on a consolidated basis in stress scenarios.
We manage our funding sources by setting limits on, or targets for, our holdings of buffer assets, primarily
Japanese government bonds. As of March 31, 2018, we held ¥24,567.9 billion of Japanese government bonds and
government agency bonds as available-for-sale securities. We also regard deposits with the Bank of Japan as
buffer assets. In addition, our commercial banking subsidiaries manage their funding sources through liquidity-
supplying products such as commitment lines and through a liquidity gap, or the excess of cash inflows over cash
outflows.
In November 2017, Standard and Poor’s downgraded the long-term credit ratings of MUFG and Mitsubishi
UFJ Securities Holdings by one-notch from A to A-, the long-term credit ratings of MUFG Bank and Mitsubishi
UFJ Trust and Banking by one-notch from A+ to A and the short-term credit rating of Mitsubishi UFJ Securities
Holdings by one-notch from A-1 to A-2. Although these credit rating and outlook changes have not resulted, and
are not currently expected to result, in a material adverse impact on us, a further downgrade of the credit ratings
assigned to us or our major subsidiaries could increase the cost, or decrease the availability, of our funding,
particularly in U.S. dollars and other foreign currencies, adversely affect our liquidity position or net interest
margin, trigger additional collateral or funding obligations, and result in losses of depositors, investors and
counterparties willing or permitted to transact with us, thereby reducing our ability to generate income and
weakening our financial position. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our
Business—A downgrade of our credit ratings could adversely affect our ability to access and maintain liquidity”.
Liquidity Requirements for Banking Institutions in Japan
Starting in June 2015, banks and bank holding companies in Japan are required to disclose their LCRs
calculated in accordance with the methodology prescribed in the FSA guidance that has been adopted to
141
implement the relevant Basel III standard. A minimum LCR of 90% is required in the calendar year 2018, and
the required minimum ratio is expected to be raised by 10 percentage points to 100% in the calendar year 2019.
See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—
Liquidity Coverage Ratio.”
Total Equity
The following table presents a summary of our total equity as of March 31, 2017 and 2018:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains on investment securities, net of taxes . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes, other than net unrealized
gains on investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost
March 31, 2017 March 31, 2018
(in billions, except percentages)
¥ 2,090.3
¥ 2,090.3
5,740.2
5,956.6
5,185.3
4,171.2
239.6
239.6
4,945.7
3,931.6
2,270.3
2,032.8
248.6
(514.0)
207.0
(522.9)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,985.5
779.2
¥14,970.2
675.6
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,764.7
¥15,645.8
Ratio of total equity to total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.97%
5.21%
Mitsubishi UFJ Financial Group shareholders’ equity as of March 31, 2018 was ¥14,970.2 billion, an
increase of ¥984.7 billion from ¥13,985.5 billion as of March 31, 2017.
Capital surplus decreased ¥216.4 billion to ¥5,740.2 billion as of March 31, 2018 from ¥5,956.6 billion as of
March 31, 2017. This decrease was mainly due to repurchases of shares of our common stock and cancellation of
the repurchased shares.
Retained earnings increased ¥1,014.1 billion to ¥5,185.3 billion as of March 31, 2018 from ¥4,171.2 billion
as of March 31, 2017, reflecting the higher net income for the fiscal year ended March 31, 2018. We decided to
pay our year-end dividend of ¥10 per share of our common stock for the six months ended March 31, 2018,
resulting in an annual dividend of ¥19 per share of our common stock for the fiscal year ended March 31, 2018.
Net unrealized gains on investment securities, net of taxes, increased ¥237.5 billion to ¥2,270.3 billion as of
March 31, 2018 from ¥2,032.8 billion as of March 31, 2017. The increase was mainly due to higher equity prices
as of March 31, 2018 compared to March 31, 2017.
Accumulated other comprehensive income, net of taxes, other than net unrealized gains on investment
securities decreased ¥41.6 billion to ¥207.0 billion as of March 31, 2018 from ¥248.6 billion as of March 31,
2017. The decrease was mainly due to ¥119.7 billion of negative net change in the balance of foreign currency
translation adjustments, reflecting the appreciation of the Japanese yen against the U.S. dollar and other major
currencies, partially offset by ¥94.5 billion of positive net change in the balance of defined benefit plans.
Treasury stock increased ¥8.9 billion to ¥522.9 billion as of March 31, 2018 from ¥514.0 billion as of
March 31, 2017, as a result of the market purchase of shares of our common stock by the trustee of the trust for
the second performance-based stock compensation plan. See “Item 6.B. Directors, Senior Management and
Employees—Compensation—Performance-based Stock Compensation Plans.”
142
As a result of the foregoing, total equity increased ¥881.1 billion to ¥15,645.8 billion as of March 31, 2018
from ¥14,764.7 billion as of March 31, 2017. The ratio of total equity to total assets increased 0.24 percentage
points to 5.21% as of March 31, 2018 from 4.97% as of March 31, 2017.
Due to our holdings of a large amount of marketable equity securities and the volatility of the equity
markets in Japan, changes in the fair value of marketable equity securities, which are classified as
available-for-sale investment securities, have significantly affected our total equity in recent years. The following
table presents information relating to the accumulated net unrealized gains, net of taxes, in respect of
available-for-sale investment securities as of March 31, 2017 and 2018:
Accumulated net unrealized gains on investment securities . . . . . . . . . . . . . . . . . .
Accumulated net unrealized gains on investment securities to total equity . . . . . . .
March 31, 2017 March 31, 2018
(in billions, except percentages)
¥2,270.3
¥2,032.8
13.77%
14.51%
Capital Adequacy
We are subject to various regulatory capital requirements promulgated by the regulatory authorities of the
countries in which we operate. Failure to meet minimum capital requirements can result in mandatory actions
being taken by regulators that could have a direct material effect on our consolidated financial statements.
Moreover, if our capital ratios are perceived to be low, our counterparties may avoid entering into transactions
with us, which in turn could negatively affect our business and operations. For further information, see
“Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may not be able to maintain
our capital ratios above minimum required levels, which could result in the suspension of some or all of our
operations.”
We continually monitor our risk-adjusted capital ratio and leverage ratio closely, and manage our operations
in consideration of the capital requirements. These ratios are affected not only by fluctuations in the value of our
assets, including our credit risk assets such as loans and equity securities, the risk weights of which depend on
the borrowers’ or issuers’ internal ratings, marketable securities and deferred tax assets, but also by fluctuations
in the value of the Japanese yen against the U.S. dollar and other foreign currencies and by general price levels of
Japanese equity securities.
Capital Requirements for Banking Institutions in Japan
Under Japanese regulatory capital requirements, our consolidated capital components, including Common
Equity Tier 1, Tier 1, and Tier 2 capital and risk-weighted assets, are calculated based on our consolidated
financial statements prepared under Japanese GAAP. Each of the consolidated and stand-alone capital
components and risk-weighted assets of our banking subsidiaries in Japan is also calculated based on
consolidated and non-consolidated financial statements prepared under Japanese GAAP.
Effective March 31, 2016, the FSA’s capital conservation buffer, global systematically important bank, or
G-SIB, surcharge, and countercyclical buffer requirements became applicable to Japanese banking institutions
with international operations conducted through foreign offices, including us. The requirements are currently
being phased in and, as of March 31, 2018, we are required to maintain a capital conservation buffer of 1.875%, a
G-SIB surcharge of 1.125% and a countercyclical buffer of 0.01% in addition to the 4.5% minimum Common
Equity Tier 1 capital ratio. When fully implemented on March 31, 2019, we will be required to maintain a capital
conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of up to 2.5%, assuming we
will be in Bucket 2 of the G-SIB list. See “Item 4.B. Information on the Company—Business Overview—
Supervision and Regulation—Japan—Capital adequacy.”
We have been granted approval by the FSA to exclude the majority of our investment in Morgan Stanley
from being subject to double gearing adjustments. The approval was granted for a 10-year period, but the
143
approval amount will be phased out by 20% each year starting from March 31, 2019. As of March 31, 2018, a
full application of double gearing adjustments with respect to our investment in Morgan Stanley would have
reduced our Common Equity Tier 1 capital ratio by approximately 0.9%.
Leverage Requirements for Banking Institutions in Japan
We are required to disclose our consolidated leverage ratio calculated in accordance with the methodology
prescribed in the FSA guidance that has been adopted to implement the relevant Basel III standard. The leverage
ratio is designed for monitoring and preventing the build-up of excessive leverage in the banking sector and is
expressed as the ratio of Tier 1 capital to total balance sheet assets adjusted in accordance with the FSA
guidance. In December 2017, the Group of Central Bank Governors and Heads of Supervision announced final
Basel III reforms. The announced reforms include revisions to the measurement of the leverage ratio and a 3%
minimum leverage ratio requirement, plus a G-SIB leverage ratio buffer equal to 50% of the applicable G-SIB
capital surcharge. The announcement sets forth implementation dates of January 1, 2018 for the minimum
leverage ratio requirement and January 1, 2022 for the G-SIB leverage ratio buffer requirement. These
requirements are subject to implementation through legislation and regulation in each of the relevant
jurisdictions, including Japan.
Capital Ratios and Leverage Ratios of MUFG
The table below presents our consolidated total capital components, risk-weighted assets, risk-adjusted
capital ratios and leverage ratios in accordance with Basel III as of March 31, 2017 and 2018. Underlying figures
are calculated in accordance with Japanese banking regulations based on information derived from our
consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA. The
figures in the table below are rounded down. For further information, see Note 22 to our consolidated financial
statements included elsewhere in this Annual Report.
As of March 31,
2017
Minimum capital
ratios required(1)
As of March 31,
2018
Minimum capital
ratios required(1)
(in billions, except percentages)
Capital components:
Common Equity Tier 1 . . . . . . . . . .
Additional Tier 1 . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital
Tier 2 capital
. . . . . . . . . . . . . . . . . . . . . .
Total capital . . . . . . . . . . . . . . . . . . . . . . .
Risk-weighted assets . . . . . . . . . . . . . . . . . . . .
Capital ratios:
Common Equity Tier 1 capital . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital
Total capital . . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 13,413.8
1,818.6
15,232.4
2,843.6
¥ 18,076.1
¥113,986.3
¥ 14,284.9
1,966.8
16,251.7
2,543.7
¥ 18,795.4
¥113,463.6
11.76%
13.36
15.85
4.81
6.50%
8.00
10.00
—
12.58%
14.32
16.56
5.01
7.51%
9.01
11.01
—
Note:
(1) Effective March 31, 2016, the FSA’s capital conservation buffer, G-SIB surcharge and countercyclical buffer requirements became
applicable to Japanese banking institutions with international operations conducted through foreign offices. As of March 31, 2017, the
minimum capital ratios required included a capital conservation buffer of 1.25% and a G-SIB surcharge of 0.75%. As of the same date,
no countercyclical buffer was required. As of March 31, 2018, the minimum capital ratios required included a capital conservation buffer
of 1.875%, a G-SIB surcharge of 1.125% and a countercyclical buffer of 0.01%.
Management believes that, as of March 31, 2018, we were in compliance with all capital adequacy
requirements to which we were subject.
Our Common Equity Tier 1 capital ratio as of March 31, 2018 was higher compared to the ratio as of
March 31, 2017 due to an increase in our Common Equity Tier 1 capital. The increase in our Common Equity
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Tier 1 capital was mainly due to increases in retained earnings and other comprehensive income. The lower risk-
weighted assets mainly reflected a decrease in credit risk resulting from updates to parameters for the calculation
of credit risks and improvements in the quality of our credit portfolio.
Capital Ratios and Leverage Ratios of Major Banking Subsidiaries in Japan
The table below presents the risk-adjusted capital ratios and leverage ratios of MUFG Bank and Mitsubishi
UFJ Trust and Banking in accordance with Basel III as of March 31, 2017 and 2018. Underlying figures are
calculated in accordance with Japanese banking regulations based on information derived from each bank’s
consolidated and non-consolidated financial statements prepared in accordance with Japanese GAAP, as required
by the FSA. The figures in the table below are rounded down. For further information, see Note 22 to our
consolidated financial statements included elsewhere in this Annual Report.
As of
March 31,
2017
Minimum capital
ratios required
As of
March 31,
2018
Minimum capital
ratios required
Consolidated:
MUFG Bank
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
11.14%
12.70
15.28
4.73
4.50%
6.00
8.00
—
11.85%
13.59
15.90
4.81
4.50%
6.00
8.00
—
Mitsubishi UFJ Trust and Banking
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
Stand-alone:
MUFG Bank
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking
Common Equity Tier 1 capital ratio . . . . . . . .
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . .
Total capital ratio . . . . . . . . . . . . . . . . . . . . . .
15.87
16.94
19.80
4.52
12.04
13.88
16.70
16.35
17.45
20.48
4.50
6.00
8.00
—
4.50
6.00
8.00
4.50
6.00
8.00
16.21
17.67
20.03
4.71
12.54
14.51
16.90
16.18
17.55
19.88
4.50
6.00
8.00
—
4.50
6.00
8.00
4.50
6.00
8.00
Management believes that, as of March 31, 2018, our banking subsidiaries were in compliance with all
capital adequacy requirements to which they were subject.
145
Liquidity Coverage Ratios of MUFG and Major Banking Subsidiaries in Japan
The following table presents the LCRs of MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking in
accordance with Basel III as adopted by the FSA for the three months ended March 31, 2017 and 2018. The
figures underlying the ratios were calculated in accordance with Japanese banking regulations. The percentages
in the table below are rounded down. The minimum ratios required during the period from January 1 to
December 31, 2017 and 2018 were 80% and 90%, respectively.
Three months ended
March 31,
2017(1,6)
June 30,
2017(2,6)
September 30,
2017(3,6)
December 31,
2017(4,6)
March 31,
2018(5,6)
MUFG (consolidated) . . . . . . . . . . . . . . . . . . . . . . . .
MUFG Bank (consolidated)
. . . . . . . . . . . . . . . . . . .
MUFG Bank (stand-alone) . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Trust and Banking (consolidated) . .
Mitsubishi UFJ Trust and Banking (stand-alone) . . .
137.9% 140.9%
149.3
160.4
115.6
129.5
153.5
164.4
114.8
127.8
145.4%
160.3
172.0
114.2
128.0
145.7%
162.6
174.0
111.3
123.8
144.8%
160.0
170.4
113.8
127.7
Notes:
(1) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between January 3, 2017 and
March 31 2017 divided by the average amount of net cash outflows for the same sixty-one business days.
(2) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between April 3, 2017 and
June 30, 2017 divided by the average amount of net cash outflows for the same sixty-two business days.
(3) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between July 3, 2017 and
September 29, 2017 divided by the average amount of net cash outflows for the same sixty-two business days.
(4) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between October 2, 2017 and
December 29, 2017 divided by the average amount of net cash outflows for the same sixty-two business days.
(5) Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between January 4, 2018 and
March 30, 2018 divided by the average amount of net cash outflows for the same fifty-nine business days.
(6) The LCR is to be calculated as an average based on daily values in accordance with the Japanese banking regulations.
See “—B. Liquidity and Capital Resources—Sources of Funding and Liquidity.”
Capital Requirements for Banking Institutions in the United States
In the United States, MUFG Americas Holdings and MUFG Union Bank are subject to various regulatory
capital requirements administered by the U.S. Federal banking agencies. Failure to meet the applicable minimum
capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a material effect on MUFG Americas Holdings’ consolidated financial statements.
For a more detailed discussion of the applicable capital requirements, see “Item 4.B. Information on the
Company—Business Overview—Supervision and Regulation—United States.” See also Note 22 to our
consolidated financial statements included elsewhere in this Annual Report.
In addition, as foreign banking organizations that have U.S. branches and agencies and also as entities that
are controlled by MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking are subject to the FRB’s
requirements.
146
Capital Ratios of Banking Subsidiaries in the United States
The table below presents the risk-adjusted capital ratios of MUFG Americas Holdings and MUFG Union
Bank, both subsidiaries of MUFG Bank, calculated in accordance with applicable U.S. banking regulations as of
December 31, 2016 and 2017:
As of
December 31,
2016
Minimum capital
ratios required
as of
December 31,
2016(1)
As of
December 31,
2017
Minimum capital
ratios required
as of
December 31,
2017(2)
Ratio OCC
requires to be
“well capitalized”
as of
December 2017
—
—
—
—
5.0
10.0
6.5
MUFG Americas Holdings:
Tier I capital (to risk-
weighted assets) . . . . . .
Tier I capital (to quarterly
. . . . .
average assets)(3)
Total capital (to risk-
Common Equity Tier I
Capital (to risk-
weighted assets) . . . . . .
MUFG Union Bank:
Tier I capital (to risk-
weighted assets) . . . . . .
Tier I capital (to quarterly
. . . . .
average assets)(3)
Total capital (to risk-
14.77%
6.625%
16.31%
7.250%
weighted assets) . . . . . .
16.45
9.92
4.000
8.625
10.06
17.76
4.000
9.250
14.77
5.125
16.31
5.750
14.61%
6.625%
16.17%
7.250%
8.0%
weighted assets) . . . . . .
16.29
11.46
4.000
8.625
11.78
17.68
4.000
9.250
Common Equity Tier I
Capital (to risk-
weighted assets) . . . . . .
14.61
5.125
16.17
5.750
Notes:
(1) Beginning January 1, 2016, the minimum capital requirement includes a capital conservation buffer of 0.625%.
(2) Beginning January 1, 2017, the minimum capital requirement includes a capital conservation buffer of 1.250%.
(3) Excludes certain deductions.
Management believes that, as of December 31, 2017, MUFG Americas Holdings and MUFG Union Bank
were in compliance with all capital adequacy requirements to which they were subject.
As of December 31, 2016 and 2017, the OCC categorized MUFG Union Bank as “well-capitalized.” To be
categorized as “well-capitalized,” MUFG Union Bank must maintain minimum ratios of Total and Tier I capital
to risk-weighted assets and of Tier I capital to quarterly average assets (leverage ratio) as set forth in the table.
There have been no conditions or events since December 31, 2017 that would cause management to believe that
MUFG Union Bank’s category has changed.
For further information, see Note 22 to our consolidated financial statements included elsewhere in this
Annual Report.
Capital Requirements for Securities Firms in Japan and Overseas
We have securities subsidiaries in Japan and overseas, which are also subject to regulatory capital
requirements. In Japan, the Financial Instruments and Exchange Act of Japan and related ordinances require
financial instruments firms to maintain a minimum capital ratio of 120% calculated as a percentage of capital
accounts less certain fixed assets, as determined in accordance with Japanese GAAP, against amounts equivalent
147
to market, counterparty credit and operations risks. Specific guidelines are issued as a ministerial ordinance
which details the definition of essential components of the capital ratios, including capital, deductible fixed asset
items and risks, and related measures. Failure to maintain a minimum capital ratio will trigger mandatory
regulatory actions. A capital ratio of less than 140% will call for additional regulatory reporting, a capital ratio of
less than 120% may result in an order to change the method of business, and a capital ratio of less than 100%
may lead to a suspension of all or part of the business for a period of time and cancellation of a registration.
Overseas securities subsidiaries are subject to the relevant regulatory capital requirements of the countries or
jurisdictions in which they operate.
Capital Ratio of Mitsubishi UFJ Morgan Stanley Securities
As of March 31, 2018, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets
of ¥446.5 billion on a stand-alone basis represented 291.2% of the total amounts equivalent to market,
counterparty credit and operations risks. As of the same date, Mitsubishi UFJ Morgan Stanley Securities’ capital
accounts less certain fixed assets of ¥473.3 billion on a consolidated basis represented 293.2% of the total
amounts equivalent to market, counterparty credit and operations risks. As of March 31, 2017, Mitsubishi UFJ
Morgan Stanley Securities’ capital accounts less certain fixed assets of ¥426.1 billion on a stand-alone basis
represented 323.0% of the total amounts equivalent to market, counterparty credit and operations risks. As of the
same date, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets of ¥451.2 billion
on a consolidated basis represented 324.7% of the total amounts equivalent to market, counterparty credit and
operations risks. These figures are calculated in accordance with Japanese GAAP, pursuant to the Financial
Instruments and Exchange Act of Japan.
For further information, see Note 22 to our consolidated financial statements included elsewhere in this
Annual Report.
Non-exchange Traded Contracts Accounted for at Fair Value
The use of non-exchange traded or over-the-counter contracts provides us with the ability to adapt to the
varied requirements of a wide customer base while mitigating market risks. Non-exchange traded contracts are
accounted for at fair value, which is generally based on pricing models or quoted prices for instruments with
similar characteristics. Gains or losses on non-exchange traded contracts are included in “Trading account profits
(losses)—net” in our consolidated statements of income included elsewhere in this Annual Report. The following
table summarizes the changes in the fair value of non-exchange traded contracts for the fiscal years ended
March 31, 2017 and 2018:
Net fair value of contracts outstanding at beginning of fiscal year
Changes attributable to contracts realized or otherwise settled during the fiscal
. . . . . . . . . . . . . . . .
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Fair value of new contracts entered into during the fiscal year
Other changes in fair value, principally revaluation at end of fiscal year
Fiscal years ended March 31,
2017
2018
(in millions)
¥ 4,790
¥ 4,373
920
—
(1,337)
(2,126)
—
(435)
Net fair value of contracts outstanding at end of fiscal year . . . . . . . . . . . . . . . . . . . . . .
¥ 4,373
¥ 1,812
148
The following table summarizes the maturities of non-exchange traded contracts as of March 31, 2018:
Net fair value of contracts—unrealized gains
Prices provided by
other external sources
Prices based on models and
other valuation methods
(in millions)
Maturity less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity less than 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity less than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity 5 years or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,001
835
7
—
¥1,843
¥(40)
9
—
—
¥(31)
C. Research and Development, Patents and Licenses, etc.
Not applicable.
D. Trend Information
See the discussions in “—Business Environment,” “—Recent Developments,” “—A. Operating Results”
and “—B. Liquidity and Capital Resources.”
E. Off-Balance Sheet Arrangements
In the normal course of business, we engage in several types of off-balance sheet arrangements to meet the
financing needs of customers, including various types of guarantees, credit commitments and commercial letters
of credit. The following table summarizes these commitments as of March 31, 2018:
Amount of commitment by expiration period
1 year
or less
1-5
years
Over
5 years
Total
(in billions)
Guarantees:
Standby letters of credit and financial guarantees . . . . . . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,115
2,144
15,230
6,017
2
¥
850
801
18,314
558
4
¥
346
106
6,969
2,869
16
¥ 4,311
3,051
40,513
9,444
22
Total guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,508
20,527
10,306
57,341
Other off-balance sheet instruments:
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit
Commercial letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to make investments . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,722
955
13
—
25,038
235
69
13
2,330
1
101
—
80,090
1,191
183
13
Total other off-balance sheet instruments . . . . . . . . . . . . . . . .
¥53,690
¥25,355
¥ 2,432
¥81,477
See Note 25 to our consolidated financial statements included elsewhere in this Annual Report for a
description of the nature of our guarantees and other off-balance sheet instruments.
The contractual amounts of these guarantees and other off-balance sheet instruments represent the amounts
at risk if the contracts were to be fully drawn upon as a result of a subsequent default by our customer and a
decline in the value of the underlying collateral. Since many of these commitments expire without being drawn
149
upon, the total contractual or notional amounts of these commitments do not necessarily represent our future cash
requirements. As of March 31, 2018, approximately 58% of these commitments have an expiration date within
one year, 33% have an expiration date from one year to five years, and 9% have an expiration date after five
years. Risks relating to off-balance sheet instruments are monitored and managed as a part of our risk
management system as set forth in “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and
Other Risk.” We evaluate off-balance sheet arrangements in the manner described in Note 1 to our consolidated
financial statements included elsewhere in this Annual Report.
The fees generated specifically from off-balance sheet arrangements are not a dominant source of our
overall fees and commissions.
Some of our off-balance sheet arrangements are related to activities of special purpose entities, most of
which are VIEs. For further information, see Note 26 to our consolidated financial statements included elsewhere
in this Annual Report.
F. Tabular Disclosure of Contractual Obligations
The following table shows a summary of our contractual obligations outstanding as of March 31, 2018:
Contractual obligations:
Payments due by period
Less than
1 year
1-3
years
3-5
years
Over
5 years
Total
(in billions)
Time deposit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥56,885 ¥ 8,885 ¥1,478 ¥ 871 ¥68,119
177
. . . . . .
Estimated interest expense on time deposit obligations(1)
27,065
Long-term debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
670
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
343
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
12,135
7
150
59
0
7,662
3
311
54
151
2,997
5
93
154
5
4,271
4
116
76
Total(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥60,285 ¥21,257 ¥5,950 ¥8,901 ¥96,393
Notes:
(1) Contractual obligations related to estimated interest expense on time deposit obligations are calculated by applying the March 31, 2018
weighted-average interest rate on outstanding time deposits.
(2) The total amount of expected future pension payments is not included in the above table or the total amount of commitments outstanding
as of March 31, 2018. We expect to contribute approximately ¥78.3 billion for pension and other benefits for our employees for the fiscal
year ending March 31, 2019. For further information, see Note 13 to our consolidated financial statements included elsewhere in this
Annual Report.
(3) The above table does not include unrecognized tax benefits and interest and penalties related to income tax associated with the guidance
on accounting for uncertainty in income taxes as we cannot estimate reasonably the timing of cash settlement of the liabilities for
unrecognized tax benefits. The total amount of the liabilities for unrecognized tax benefits is ¥12.9 billion as of March 31, 2018. Among
the liabilities for unrecognized tax benefits, it is reasonably possible that the unrecognized tax benefits will decrease by approximately
¥4.0 billion during the next twelve months. For further information, see Note 7 to our consolidated financial statements included
elsewhere in this Annual Report.
Purchase obligations include any legally binding contractual obligations that require us to spend more than
¥100 million annually under the contract. Purchase obligations in the table primarily include commitments to
make investments into corporate recovery or private equity investment funds.
G. Safe Harbor
See the discussion under “Forward-Looking Statements.”
150
Item 6.
Directors, Senior Management and Employees.
A. Directors and Senior Management
Members of the Board of Directors
The following table sets forth the members of our board of directors as of July 1, 2018, together with their
respective dates of birth, positions and experience:
Name
(Date of Birth)
Hiroshi Kawakami
(May 3, 1949)
Position in MUFG
Member of the Board
of Directors
(Outside Director)
Yuko Kawamoto
(May 31, 1958)
Member of the Board
of Directors
(Outside Director)
Business Experience
April 1972
June 2003
Joined Toyota Motor Corporation
Managing Officer of TOYOTA MOTOR
CORPORATION (TOYOTA)
June 2007
June 2008
June 2009
Senior Managing Director of TOYOTA
Vice President of Toyota Tsusho Corporation
President & CEO of Central Japan International
June 2015
Senior Advisor of Central Japan International
Airport Co., Ltd.
Airport Co., Ltd.
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
Outside director of AT-Group Co., Ltd
(incumbent)
June 2016
June 2017
Advisor of Central Japan International Airport
Co., Ltd. (incumbent)
Joined The Bank of Tokyo, Ltd.
Resigned from The Bank of Tokyo, Ltd.
April 1982
April 1986
September 1988 Joined McKinsey & Company, Inc.
July 2001
Senior Expert of McKinsey & Company, Inc.,
March 2004
April 2004
June 2004
Tokyo office
Resigned from McKinsey & Company, Inc.
Professor at Waseda Graduate School of
Finance, Accounting and Law (current
Business and Finance) (incumbent)
Outside director of Osaka Exchange, Inc.
(current Japan Exchange Group, Inc.)
June 2006
Outside Audit & Supervisory Board member of
Tokio Marine Holdings, Inc.
January 2013
June 2013
June 2014
Outside director of Japan Exchange Group, Inc.
Member of the Board of Directors of MUFG
Retired from outside director of Japan
December 2014 Member of National Public Safety Commission
Exchange Group, Inc.
(incumbent)
June 2016
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
June 2018
Retired from Outside Audit & Supervisory
Board Member of Tokio Marine Holdings,
Inc.
151
Name
(Date of Birth)
Haruka Matsuyama
(August 22, 1967)
Position in MUFG
Business Experience
Member of the Board
of Directors
(Outside Director)
April 1995
July 2000
January 2002
June 2012
June 2013
Assistant Judge, Tokyo District Court
Registered as an attorney at law, member of the
Daini Tokyo Bar Association
Joined Hibiya Park Law Offices
Partner of Hibiya Park Law Offices (incumbent)
Outside Corporate Auditor of Vitec Co., Ltd.
Outside director of T&D Holdings, Inc.
(incumbent)
June 2014
External Audit & Supervisory Board member of
MITSUI & CO., LTD. (incumbent)
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
June 2015
Outside director of Vitec Co., Ltd. (current
VITEC HOLDINGS CO., LTD.) (incumbent)
Toby S. Myerson
(July 20, 1949)
Member of the Board
of Directors
(Outside Director)
September 1977 Registered as an attorney at law, admitted in
States of California and New York in the
United States
October 1981
Joined Paul, Weiss, Rifkind, Wharton &
Tsutomu Okuda
Member of the Board
(October 14, 1939)
of Directors
(Outside Director)
Garrison LLP
June 1983
Partner of Paul, Weiss, Rifkind, Wharton &
Garrison LLP
April 1989
Managing Director of Wesserstein Perella &
Co. Inc.
November 1990 Partner of Paul, Weiss, Rifkind, Wharton &
Garrison LLP
June 2014
December 2016 Retired from Paul, Weiss, Rifkind, Wharton &
Outside director of BK(US) (incumbent)
Garrison LLP
January 2017
Chairman & CEO of Longsight Strategic
Advisors LLC (incumbent)
February 2017 Outside director of MUAH (incumbent)
June 2017
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
April 1964
Joined The Daimaru, Inc.
September 1991 Managing Director of Daimaru Australia Pty.
Ltd.
May 1995
May 1996
March 1997
May 2003
September 2007 Chairman of The Daimaru, Inc.
Director of The Daimaru, Inc.
Managing Director of The Daimaru, Inc.
President of The Daimaru, Inc.
Chairman & CEO of The Daimaru, Inc.
March 2010
April 2013
President & CEO of J. Front Retailing Co., Ltd.
Chairman & CEO of J. Front Retailing Co., Ltd.
Director and Senior Advisor of J. Front
Retailing Co., Ltd.
May 2014
June 2014
Senior Advisor of J. Front Retailing Co., Ltd.
Member of the Board of Directors (Outside
May 2018
Special Advisor of J. Front Retailing Co., Ltd.
director) of MUFG (incumbent)
(incumbent)
152
Name
(Date of Birth)
Position in MUFG
Business Experience
Yasushi Shingai
Member of the Board
April 1980
Joined Japan Tobacco and Salt Public
(January 11, 1956)
of Directors
(Outside Director)
July 2001
Corporation (current Japan Tobacco Inc.)
Vice President of Financial Planning Division
Tarisa Watanagase
Member of the Board
(November 30, 1949)
of Directors
(Outside Director)
Akira Yamate
Member of the Board
(November 23, 1952)
of Directors
(Outside Director)
of Japan Tobacco Inc.
June 2004
Senior Vice President, Head of Finance Group
of Japan Tobacco Inc.
July 2004
Senior Vice President, Chief Financial Officer
June 2005
Member of the Board, Senior Vice President,
of Japan Tobacco Inc.
June 2006
and Chief Financial Officer of Japan Tobacco
Inc.
Member of the Board of Japan Tobacco Inc.,
Executive Vice President and Deputy CEO of
JT International S.A.
June 2011
Representative Director and Executive Vice
President of Japan Tobacco Inc.
June 2014
External Board Director of Recruit Holdings
Co., Ltd.
January 2018 Member of the Board of Japan Tobacco Inc.
March 2018
Outside director of Asahi Group Holdings, Ltd.
(incumbent)
June 2018
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
June 1975
January 1988
Joined the Bank of Thailand
Economist, International Monetary Fund (on
secondment)
Deputy Governor of the Bank of Thailand
October 2002
November 2006 Governor of the Bank of Thailand
September 2010 Retired from the Bank of Thailand
March 2013
Outside director of the Siam Cement Public
Company Limited (incumbent)
June 2017
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
November 1977 Joined Price, Waterhouse & Co. Japan
March 1983
Registered as Certified Public Accountant in
Japan
July 1991
Representative Partner of Aoyama Audit
Corporation
April 2000
Partner of Price Waterhouse
Representative Partner of Chuo Aoyama Audit
Corporation
Partner of PricewaterhouseCoopers
September 2006 Representative Partner of
PricewaterhouseCoopers Aarata
Resigned from PricewaterhouseCoopers Aarata
External Audit & Supervisory Board member of
Nomura Real Estate Holdings, Inc.
External Audit & Supervisory Board member of
Nomura Real Estate Development, Co., Ltd.
June 2013
153
Name
(Date of Birth)
Position in MUFG
Business Experience
June 2015
Retired from External Audit & Supervisory
Board member of Nomura Real Estate
Development, Co., Ltd.
Member of the Board of Directors (Outside
director) of MUFG (incumbent)
External director of Nomura Real Estate
Holdings, Inc. (incumbent)
External member of Board of Statutory
Auditors, Prudential Holdings of Japan, Inc.
(incumbent)
Tadashi Kuroda
(June 7, 1958)
Member of the Board
of Directors
April 1981
April 2008
June 2011
Joined The Sanwa Bank, Limited
Executive Officer of BK
Senior Managing Executive Officer of
Mitsubishi UFJ Research and Consulting Co.,
Ltd. (MURC)
Director and Senior Managing Executive
Officer of MURC
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Director of TB
Member of the Board of Directors, Managing
Executive Officer of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Corporate Executive of MUFG
Member of the Board of Directors of MUFG
(incumbent)
Joined The Toyo Trust and Banking Company,
Limited
Executive Officer of TB
Managing Executive Officer of TB
Executive Officer of MUFG
Senior Managing Executive Officer of TB
Director, Deputy President and Executive
Officer of TB
Member of the Board of Directors of MUFG
Senior Managing Corporate Executive of
MUFG
Director of TB
Member of the Board of Directors of MUFG
(incumbent)
May 2013
May 2014
June 2014
May 2015
June 2015
May 2018
Junichi Okamoto
Member of the Board
April 1980
(November 9, 1957)
of Directors
June 2008
June 2010
June 2012
June 2013
June 2015
June 2017
154
Name
(Date of Birth)
Kiyoshi Sono
(April 18, 1953)
Position in MUFG
Member of the Board
of Directors
Chairman
(Representative
Corporate
Executive)
April 1976
May 2004
January 2006
May 2006
May 2010
May 2012
June 2012
May 2014
June 2014
June 2015
Mikio Ikegaya
(July 6, 1958)
Member of the Board
April 1981
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
June 2008
June 2011
June 2012
June 2013
June 2015
April 2016
June 2016
Business Experience
Joined The Sanwa Bank, Limited
Executive Officer of UFJ Bank Limited
Executive Officer of BK
Managing Executive Officer of BK
Senior Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors, Deputy
President of BK
Deputy Chairman of the Board of Directors of
BK (incumbent)
Chairman of the Board of Directors of MUFG
Director of Mitsubishi UFJ NICOS (incumbent)
Member of the Board of Directors, Chairman of
MUFG (incumbent)
Joined The Mitsubishi Trust and Banking
Corporation (MTB)
Executive Officer of TB
Executive Officer of MUFG
Director and Managing Executive Office of TB
Managing Executive Officer of MUFG
Managing Executive Officer of TB
Executive Officer of MUFG
Senior Managing Executive Officer of TB
Director and Senior Managing Executive
Officer of TB
Managing Executive Officer of MUFG
President & CEO of TB (incumbent)
Deputy Chairman of MUFG
Member of the Board of Directors, Deputy
Chairman of MUFG (incumbent)
Kanetsugu Mike
Member of the Board
(November 4, 1956)
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
April 1979
June 2005
Joined The Mitsubishi Bank, Limited
Executive Officer of The Bank of Tokyo-
May 2009
May 2011
June 2011
May 2013
October 2015
May 2016
Mitsubishi,Ltd. (BTM)
Executive Officer of Mitsubishi Tokyo
Financial Group, Inc. (MTFG)
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors, Managing
Executive Officer of BK
Senior Managing Executive Officer of BK
Executive Chairman of MUAH
Executive Chairman of BK(US)
Deputy President and Executive Officer of BK
Senior Managing Corporate Executive of
MUFG
June 2016
Member of the Board of Directors, Deputy
President of BK
President & CEO of BK (incumbent)
Member of the Board of Directors, Deputy
Chairman of MUFG (incumbent)
June 2017
155
Name
(Date of Birth)
Saburo Araki
(August 6, 1957)
Position in MUFG
Member of the Board
of Directors
Deputy Chairman
(Representative
Corporate
Executive)
April 1981
June 2007
May 2009
May 2011
June 2012
June 2014
May 2015
June 2015
Business Experience
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors, Managing
Executive Officer of BK
Member of the Board of Directors of MUFG
Managing Executive Officer of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG
Nobuyuki Hirano
Member of the Board
(October 23, 1951)
of Directors
President & Group
CEO
(Representative
Corporate
Executive)
May 2016
Member of the Board of Directors, Deputy
April 2018
June 2018
April 1974
June 2001
July 2004
May 2005
June 2005
President of BK
President & CEO of SCHD (incumbent)
President & CEO of MUMSS (incumbent)
Deputy Chairman of MUFG
Member of the Board of Directors, Deputy
Chairman of MUFG(incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BTM
Executive Officer of MTFG
Managing Executive Officer of BTM
Member of the Board of Directors, Managing
Executive Officer of BTM
Member of the Board of Directors of MTFG
January 2006 Member of the Board of Directors, Managing
Executive Officer of BK
October 2008 Member of the Board of Directors, Senior
June 2009
Managing Executive Officer of BK
Member of the Board of Directors, Deputy
President of BK
Managing Executive Officer of MUFG
Member of the Board of Directors of MUFG
June 2010
October 2010 Member of the Board of Directors, Deputy
President of MUFG
President & CEO of BK
Member of the Board of Directors of MUFG
President & CEO of MUFG
Member of the Board of Directors, President &
April 2013
June 2015
April 2012
Group CEO of MUFG (incumbent)
November 2015 Director of Morgan Stanley (incumbent)
April 2016
Chairman of BK (incumbent)
Note: The following abbreviations are used in the table above:
“BK” refers to MUFG Bank, Ltd. or its former name The Bank of Tokyo-Mitsubishi UFJ, Ltd.
“TB” refers to Mitsubishi UFJ Trust and Banking Corporation.
“SCHD” refers to Mitsubishi UFJ Securities Holdings Co., Ltd.
“BK(US)” refers to MUFG Union Bank, N.A.
“MUAH” refers to MUFG Americas Holdings Corporation.
156
Corporate Executives
The following table sets forth our corporate executives as of July 1, 2018, together with their respective
dates of birth, positions and experience:
Name
(Date of Birth)
Kiyoshi Sono
(April 18, 1953)
Mikio Ikegaya
(July 6, 1958)
Kanetsugu Mike
(November 4, 1956)
Saburo Araki
(August 6, 1957)
Nobuyuki Hirano
(October 23, 1951)
Position in MUFG
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the
Board of Directors”
under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
Business Experience
See “Members of the Board of Directors” under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
See “Members of the Board of Directors” under this Item 6.A.
Muneaki Tokunari
(March 6, 1960)
Senior Managing
Corporate Executive
April 1982
June 2009
(Group CFO)
June 2011
April 2012
June 2012
June 2013
June 2014
June 2015
Joined MTB
Executive Officer of TB
Executive Officer of MUFG
Managing Executive Officer of TB
Managing Director of TB
Member of the Board of Directors of
MUFG
Senior Managing Director of TB
Managing Officer of MUFG
Managing Director of BK
Member of the Board of Directors,
Managing Corporate Executive of
MUFG
May 2016
Senior Managing Director of BK
(incumbent)
Member of the Board of Directors, Senior
Managing Corporate Executive of
MUFG
June 2018
Senior Managing Corporate Executive of
MUFG (incumbent)
157
Name
(Date of Birth)
Eiichi Yoshikawa
(July 14, 1956)
Position in MUFG
Business Experience
Senior Managing
April 1981
Joined The Bank of Tokyo, Ltd.
Corporate Executive
(Group Head, Global
Commercial
Banking Business
Group,
Group Chief Operating
Officer
International, or
COO-I)
June 2007
May 2012
May 2014
May 2015
May 2016
June 2016
May 2017
Executive Officer of BK
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Senior Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
Member of the Board of Directors, Senior
Managing Executive Officer of BK
Member of the Board of Directors, Deputy
President of BK (incumbent)
July 2018
Senior Managing Executive Officer of
SCHD (incumbent)
Shigeru Asai
(June 8, 1960)
Senior Managing
Corporate Executive
April 1983
June 2009
(Group Head, Global
Markets Business
Group)
May 2013
April 2014
May 2014
May 2017
Joined The Sanwa Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Advisor of MUMSS
Managing Executive Officer of SCHD
Member of the Board of Directors, Deputy
President of MUMSS (incumbent)
Managing Executive Officer of MUFG
Senior Managing Corporate Executive of
MUFG (incumbent)
Akira Hamamoto
(May 19, 1960)
Senior Managing
Corporate Executive
(Group CCO & Group
CLO)
June 2018
Senior Managing Executive Officer of
SCHD (incumbent)
April 1983
June 2010
May 2011
May 2013
May 2015
June 2015
May 2017
Joined The Tokai Bank, Ltd
Executive Officer of MUFG
Executive Officer of BK
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors,
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
158
Name
(Date of Birth)
Position in MUFG
Business Experience
Masamichi Yasuda
(August 22, 1960)
Senior Managing
Corporate Executive
April 1983
June 2009
Joined The Bank of Tokyo, Ltd
Executive Officer of BK, seconded to
(Group CRO)
Union Bank
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Member of the Board of Directors,
Managing Executive Officer of BK
Member of the Board of Directors of
SCHD
Member of the Board of Directors,
Managing Corporate Executive of
MUFG
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(incumbent)
Member of the Board of Directors, Senior
Managing Corporate Executive of
MUFG (incumbent)
Director of TB (incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Senior Managing Executive Officer of BK
Senior Managing Corporate Executive of
MUFG (incumbent)
Deputy President of BK
Member of the Board of Directors, Deputy
President of BK (incumbent)
Joined The Sanwa Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
Member of the Board of Directors,
Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
May 2011
May 2014
May 2015
June 2015
May 2017
June 2018
April 1983
June 2009
Kenji Yabuta
(April 27, 1960)
Senior Managing
Corporate Executive
(Group Head, Japanese
Corporate &
Investment Banking
Business Group)
May 2013
May 2017
April 2018
Naoki Hori
(January 27, 1961)
Senior Managing
Corporate Executive
(Group Head, Retail &
Commercial
Banking Business
Group)
May 2018
June 2018
April 1983
June 2010
May 2013
May 2016
June 2016
June 2017
May 2018
159
Name
(Date of Birth)
Position in MUFG
Business Experience
Hironori Kamezawa
Senior Managing
(November 18, 1961)
Corporate Executive
April 1986
June 2010
(Group Chief
Information Officer,
or CIO & Group
Chief Digital
Transformation
Officer, or CDTO)
May 2014
July 2014
May 2017
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Deputy CEO of Americas at BK(US)
Managing Corporate Executive of MUFG
(incumbent)
June 2017
Member of the Board of Directors,
May 2018
Hiroshi Naruse
Senior Managing
(December 4, 1958)
Corporate Executive
April 1981
June 2008
(Group Chief Human
Resource Officer, or
CHRO)
Managing Executive Officer of BK
(incumbent)
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
Joined MTB
Executive Officer of TB
President & CEO of the Mitsubishi UFJ
Global Custody S.A.
June 2010
April 2011
Executive Officer of MUFG
President & CEO of Mitsubishi UFJ Trust
June 2011
Director and Managing Executive Officer
Systems Co., Ltd.
June 2013
Director and Senior Managing Executive
of TB
June 2014
June 2016
Officer of TB
Managing Executive Officer of MUFG
President & CEO of MU Trust Apple
Planning Company, Ltd. (incumbent)
Director, Deputy President and Executive
Officer of TB (incumbent)
May 2018
Senior Managing Corporate Executive of
MUFG (incumbent)
Masato Miyachi
(June 14, 1960)
Senior Managing
April 1987
Joined The Bank of Tokyo, Ltd.
Corporate Executive
(Group Head, Global
Corporate &
Investment Banking
Business Group)
Executive Officer of BK
Managing Executive Officer of BK
Managing Executive Officer of MUFG
Chairman of MUAH
Chairman of BK(US)
Senior Managing Executive Officer of BK
Member of the Board of Directors, Senior
Managing Executive Officer of BK
(incumbent)
Senior Managing Corporate Executive of
MUFG (incumbent)
June 2010
May 2014
October 2014
May 2017
May 2018
June 2018
July 2018
160
April 1987
May 2010
May 2012
June 2012
May 2016
April 1986
June 2012
May 2014
June 2015
June 2017
April 1987
June 2013
January 2017
May 2018
Business Experience
Joined The Mitsubishi Bank, Limited
Managing Director, Head of Credit
Portfolio Management Division of BK
Managing Director, Head of Corporate
Risk Management Division of BK
Managing Director, Head of Corporate
Risk Management Division of MUFG
Executive Officer of BK
Executive Officer of MUFG
Managing Corporate Executive of MUFG
(incumbent)
Joined MTB
Executive Officer of TB
Executive Officer of MUFG
Managing Executive Officer of TB
Director and Managing Executive Officer
of TB (incumbent)
Managing Corporate Executive of MUFG
(incumbent)
Joined The Mitsubishi Bank, Limited
Executive Officer of BK
Executive Officer of MUFG
Managing Executive Officer of BK
Managing Corporate Executive of MUFG
(incumbent)
June 2018
Member of the Board of Directors,
Managing Executive Officer of BK
(incumbent)
Name
(Date of Birth)
Shigeru Yoshifuji
(June 29, 1962)
Position in MUFG
Managing Corporate
Executive
(Group Chief Audit
Officer, or CAO)
Managing Director,
Head of Internal
Audit Division
Sunao Yokokawa
Managing Corporate
(December 10, 1963)
Executive
Naomi Hayashi
(March 16, 1965)
(Group Head, Asset
Management &
Investor Services
Business)
Managing Corporate
Executive
(Group CSO
in charge of Corporate
Planning Division
(excluding Budget &
Resources
Management and
Global Business),
Corporate
Administration
Division and
Corporate
Communications
Division and
sub-charge of
Digital
Transformation
Division)
Note: The following abbreviations are used in the table above:
“BK” refers to MUFG Bank, Ltd. or its former name The Bank of Tokyo-Mitsubishi UFJ, Ltd.
“TB” refers to Mitsubishi UFJ Trust and Banking Corporation.
“SCHD” refers to Mitsubishi UFJ Securities Holdings Co., Ltd.
“BK(US)” refers to MUFG Union Bank, N.A.
“MUAH” refers to MUFG Americas Holdings Corporation.
The board of directors and corporate executives may be contacted through our headquarters at Mitsubishi
UFJ Financial Group, Inc., 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan.
No family relationship exists among any of our directors or corporate executives.
161
B. Compensation
The aggregate amount of compensation paid, including benefits in kind granted and any contingent and
deferred compensation, by MUFG and its subsidiaries during the fiscal year ended March 31, 2018 to our
directors (excluding outside directors), to corporate executives and to outside directors, was ¥181 million,
¥1,726 million and ¥184 million, respectively.
The compensation paid by MUFG and its subsidiaries during the fiscal year ended March 31, 2018 to our
directors and corporate executives consisted of annual base salaries, performance-based stock compensation,
bonuses and other benefits. MUFG’s compensation committee determines the compensation paid to our directors
and corporate executives.
The following table sets forth details of the aggregate compensation paid by MUFG and its subsidiaries
during the fiscal year ended March 31, 2018 to our directors (excluding outside directors) and corporate
executives:
Non-Adjustable Compensation
Adjustable Compensation
Number of
Directors and
Corporate
Executives(1)
Aggregate
Compensation
Annual
Base
Salary
Performance-
based Stock
Compensation
22 . . . . . . . . .
¥1,906
¥1,092
¥314
Cash Bonuses
(in millions)
¥303
Performance-
based Stock
Compensation
Retirement
Allowances(2) Other
¥186
¥11
¥0
Notes:
(1)
Includes the current directors and corporate executives as well as those who retired during the fiscal year ended March 31, 2018 but
excludes the outside directors.
(2) Represents the aggregate amount of retirement allowances paid in cash during the fiscal year ended March 31, 2018, pursuant to a
one-time shareholders’ approval in June 2007 for the retirement allowances to be paid to the directors and corporate auditors who were
elected prior to that date at the time of their retirement. A reserve in the total amount of such retirement allowances was set aside as of
September 30, 2007. For more information, see “—Retirement Allowances” below.
162
The following table sets forth the details of individual compensation paid, including benefits in kind granted
but excluding retirement allowances paid, by MUFG and its subsidiaries in an amount equal to or exceeding
¥100 million during the fiscal year ended March 31, 2018:
Directors
Aggregate
amount
Paid by
Compensation paid
Annual
Base
Salary
Performance-
based Stock
Compensation
Bonus
Kiyoshi Sono . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥145 MUFG
Tadashi Nagaoka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mikio Ikegaya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kanetsugu Mike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nobuyuki Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK
¥106 MUFG
SCHD
MUMSS
¥123 MUFG
TB
¥169 MUFG
BK
BK(US)
¥151 MUFG
BK
Saburo Araki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥117 MUFG
BK
Eiichi Yoshikawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥116 MUFG
Akira Hamamoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥109 MUFG
BK
Masamichi Yasuda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥109 MUFG
BK
SCHD
BK
kabu.com
(in millions)
¥48
32
¥25
13
13
¥35
35
¥45
32
11
¥50
32
¥39
26
¥38
25
¥31
21
2
¥26
17
10
¥21
21
¥12
6
6
¥15
19
¥16
40
—
¥24
23
¥16
16
¥15
18
¥12
27
—
¥13
27
—
Note: The following abbreviations are used in the table above:
“BK” refers to MUFG Bank, Ltd. (or its former name The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
“TB” refers to Mitsubishi UFJ Trust and Banking Corporation. .
“SCHD” refers to Mitsubishi UFJ Securities Holdings Co., Ltd.
“BK(US)” refers to MUFG Union Bank, N.A.
¥14
9
¥15
8
8
¥10
9
¥13
9
3
¥15
7
¥12
8
¥12
8
¥10
6
¥10
6
Annual Base Salary
Annual base salaries were paid to our directors (including outside directors) and corporate executives in the
form of monthly cash installment payments. The aggregate annual base salary paid to our directors (excluding
outside directors) and corporate executives for the fiscal year ended March 31, 2018 was ¥1,092 million. The
aggregate annual base salary paid to our outside directors for the same period was ¥184 million.
Performance-based Stock Compensation Plans
Under our performance-based stock compensation plans, qualified directors (excluding outside directors and
directors serving as audit committee members), corporate executives and others of MUFG and its major domestic
subsidiaries are assigned, on a monthly basis, (1) points based on their job responsibilities, or non-adjustable
points, and (2) additional points based on their job responsibilities which are adjusted at the end of each fiscal
year and at the end of each plan period to reflect the extent to which a financial performance target determined by
the compensation committee is attained, or adjustable points. Each plan period corresponds to the period covered
by the three-year medium-term business plan of MUFG. Each accumulated point represents a right to receive one
share of MUFG common stock from a trust established in Japan to administer the plan grants as determined by
the compensation committee.
163
The right to receive shares of MUFG common stock in exchange for non-adjustable points becomes vested
and nonforfeitable, and the shares are delivered, upon the grantee’s departure from his or her job responsibilities
based on which the right was granted. The right to receive shares of MUFG common stock in exchange for
adjustable points becomes vested and nonforfeitable, and the shares are delivered, at the end of each plan period.
The vesting in either case is subject to conditions imposed by the compensation committee, including
non-engagement in misconduct. A portion of the shares subject to a grantee’s vested right may be delivered in
cash.
The grantees are entitled to “dividend equivalent credits” on their granted but unvested rights under the plan
when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the grantees would have
received on the shares had the shares been issued to the grantees in exchange for their granted but unvested rights
under the plan, less expenses relating to the administration of the plan. Accumulated dividend equivalents are
paid to grantees at the time of the delivery of the shares.
The shares to be delivered to grantees are purchased on the open market by the trustee of the trust pursuant
to a trust agreement among MUFG, the trustee and the independent caretaker of the trust. Each plan is funded in
cash up to a maximum aggregate amount determined by our compensation committee.
The initial performance-based stock compensation plan commenced on July 1, 2016. The grants under the
plan were tied to MUFG’s previous medium-term business plan for the three-year period ended March 31, 2018.
The trust for the plan was funded with ¥9.8 billion in cash, and 18,785,400 shares of MUFG common stock were
purchased by the trustee of the plan trust in May 2016. The plan was adopted after our compensation committee
decided in May 2016 to cease to provide any additional stock acquisition rights under our previous stock-based
compensation structure and to introduce the performance-based stock compensation plan.
The second performance-based stock compensation plan commenced on December 1, 2016. The trust for
the plan was funded with 8.8 billion in cash, and an aggregate of 13,004,300 shares of MUFG common stock
were purchased by the trustee of the plan trust in November 2016 and May 2017. The plan was adopted to
replace the outstanding stock acquisition rights under our previous stock-based compensation structure. Upon the
adoption of the plan, the stock acquisition rights that had been allotted to grantees but remained unexercised
under the then-outstanding stock-based compensation plans were exchanged for points under the performance-
based stock compensation plan, and the rights to receive shares of MUFG common stock represented by these
points were vested.
On May 15, 2018, the compensation committee approved new grants under the initial performance-based
stock compensation plan, which was amended in connection with the launch of MUFG’s current medium-term
business plan for the three-year period ending March 31, 2021. The trust period of the plan trust was extended
until August 31, 2021, and the maximum amount of funds to be contributed to the plan trust was reset at
¥26.3 billion. The formula for determining adjustable points under the plan was also revised. In May 2018, the
plan trust was funded with ¥9.6 billion in cash, and 13,049,600 shares of MUFG common stock were purchased
by the trustee of the plan trust.
For more information on the Performance-based Stock Compensation Plans, see Note 33 to our consolidated
financial statements included elsewhere in this Annual Report. See also “Item 16E. Purchases of Equity
Securities by the Issuer and Affiliated Purchasers.”
Stock-based Compensation Plans
We previously issued stock acquisition rights to further motivate our directors (excluding outside directors)
and certain of our officers to contribute to the improvement of our stock prices and profits. The number of stock
acquisition rights granted to each director and officer was determined by comprehensively taking into account
each grantee’s seniority of the position held at MUFG or its subsidiaries, experience and contribution to our
164
performance throughout the period of the grantee’s service. On June 27, 2013, our shareholders approved
modifications to the previous shareholder authorization for granting stock acquisition rights to our directors,
corporate auditors and certain of our officers so that no outside directors or corporate auditors (including outside
corporate auditors) would be eligible for any stock-based compensation plan adopted by the board of directors on
or after that date.
In June 2015, our previous governance framework with the board of directors and a separate board of
corporate auditors was replaced with our current governance framework with the board of directors and board
committees. Under our previous governance framework, the maximum aggregate amount of each type of
compensation for our directors and corporate auditors was approved at a general meeting of our shareholders.
The amount and allocation of compensation for each director were then proposed to, and voted upon by, the
board of directors. The amount and allocation of compensation for each corporate auditor were determined
through discussions and agreement among the corporate auditors. The nomination and compensation committee
deliberated and made proposals to the board of directors regarding matters relating to, among other things, the
compensation of our directors. For information regarding our governance framework, see “—C. Board
Practices.”
As part of our compensation structure, on June 29, 2010, the board of directors adopted another stock-based
compensation plan entitled “Fourth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on
July 16, 2010, we allotted an aggregate of 8,014 stock acquisition rights to our directors and an aggregate of
1,149 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 15, 2040, but only after the date on which a grantee’s service as a director and an officer or as a
corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock
acquisition right was ¥36,600.
As part of our compensation structure, on June 29, 2011, the board of directors adopted another stock-based
compensation plan entitled “Fifth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on
July 20, 2011, we allotted an aggregate of 7,740 stock acquisition rights to our directors and an aggregate of
1,160 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 19, 2041, but only after the date on which a grantee’s service as a director and an officer or as a
corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock
acquisition right was ¥33,700.
As part of our compensation structure, on June 28, 2012, the board of directors adopted another stock-based
compensation plan entitled “Sixth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on
July 18, 2012, we allotted an aggregate of 10,002 stock acquisition rights to our directors and an aggregate of
1,161 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 17, 2042, but only after the date on which a grantee’s service as a director and an officer or as a
corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock
acquisition right was ¥33,100.
As part of our compensation structure, on June 27, 2013, the board of directors adopted a stock-based
compensation plan entitled “Seventh Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group,
165
Inc.” for our directors (excluding outside directors) and certain of our officers. Under the stock-based
compensation plan, on July 17, 2013, we allotted an aggregate of 4,103 stock acquisition rights to our directors
(excluding outside directors) for their respective services to MUFG and its subsidiaries. Each stock acquisition
right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The
stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 16, 2043,
but only after the date on which a grantee’s service as a director and an officer of each of MUFG and the relevant
subsidiaries terminates. The fair value of each stock acquisition right was ¥61,100.
As part of our compensation structure, on June 27, 2014, the board of directors adopted a stock-based
compensation plan entitled “Eighth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors (excluding outside directors) and certain of our officers. Under the stock-based compensation
plan, on July 15, 2014, we allotted an aggregate of 3,315 stock acquisition rights to our directors (excluding
outside directors) for their respective services to MUFG and its subsidiaries. Each stock acquisition right
represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The stock
acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 14, 2044, but only
after the date on which a grantee’s service as a director and an officer of each of MUFG and the relevant
subsidiaries terminates. The fair value of each stock acquisition right was ¥53,900.
As part of our compensation structure, on June 25, 2015, the board of directors adopted a stock-based
compensation plan entitled “Ninth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc.”
for our directors (excluding outside directors) and certain of our officers. Under the stock-based compensation
plan, on July 14, 2015, we allotted an aggregate of 3,096 stock acquisition rights to our directors (excluding
outside directors) and our corporate executive officers for their respective services to MUFG and its subsidiaries.
Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of
common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable
until July 13, 2045, but only after the date on which a grantee’s service as a director and an officer of each of
MUFG and the relevant subsidiaries terminates. The fair value of each stock acquisition right was ¥80,200.
For more information on the Performance-based Stock Compensation Plans, see Note 33 to our consolidated
financial statements included elsewhere in this Annual Report.
Bonuses
We from time to time paid cash bonuses to our directors and corporate executives to further motivate them
to contribute to the improvement of our stock prices and profits if such bonuses were deemed appropriate based
on a balanced scorecard approach taking into account the results of operations of the MUFG Group and each
director’s or corporate executive’s individual performance of his or her duties as a director or corporate executive
in light of both quantitative and qualitative criteria, including our medium-term strategy for improving our
corporate value. None of the outside directors is eligible to receive a cash bonus. The compensation committee
determines the cash bonus for each director and corporate executive based on our financial results and his or her
job performance for the preceding fiscal year as well as his or her seniority and experience. The aggregate cash
bonus paid to our directors and corporate executives for the fiscal year ended March 31, 2018 was ¥303 million.
Retirement Allowances
Prior to June 28, 2007, in accordance with customary Japanese practice, when a director or corporate auditor
retired, a proposal to pay a retirement allowance was submitted at the annual ordinary general meeting of
shareholders for approval. The retirement allowance consisted of a one-time payment of a portion of the
allowance paid at the time of retirement and periodic payments of the remaining amount for a prescribed number
of years. After the shareholders’ approval was obtained, the retirement allowance for a director or corporate
auditor was fixed by the board of directors or by consultation among the corporate auditors in accordance with
our internal regulations and practice and generally reflected the position of the director or corporate auditor at the
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time of retirement, the length of his service as a director or corporate auditor and his contribution to our
performance. Historically, MUFG did not set aside reserves for any retirement payments for directors and
corporate auditors made under this practice.
Pursuant to a one-time shareholders’ approval in June 2007, retirement allowances are paid in cash to the
directors and corporate auditors who were elected prior to that date at the time of their retirement. A reserve in
the total amount of such retirement allowances was set aside as of September 30, 2007. The aggregate amount of
retirement allowances paid in cash by MUFG and its subsidiaries pursuant to the one-time shareholder approval
during the fiscal year ended March 31, 2018 to our directors (excluding outside directors), to corporate auditors
(excluding outside corporate auditors) and to outside directors and corporate auditors, who have retired from
their respective positions held at MUFG or, if such directors and corporate auditors concurrently held positions at
MUFG’s subsidiaries, who have retired from such positions, was ¥11 million, nil and nil, respectively.
MUFG Americas Holdings Corporation Stock Bonus Plan
Upon the integration of the U.S. branch banking operations of MUFG Bank with MUFG Union Bank’s
operations on July 1, 2014, MUFG Americas Holdings assumed the obligations under the Bank of Tokyo-
Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock Bonus Plan described below. Effective June 8, 2015,
MUFG Americas Holdings amended and restated this plan as the MUFG Americas Holdings Corporation Stock
Bonus Plan.
Under the amended plan, qualified key employees of MUFG Americas Holdings are granted Restricted
Share Units, or RSUs, representing a right to receive American Depositary Receipts, or ADRs, evidencing ADSs,
each exchangeable for one share of MUFG common stock, from an independent trust established to administer
the plan grants, upon the satisfaction of vesting conditions, to be determined pursuant to the plan as well as a
Restricted Share Unit Agreement between MUFG Americas Holdings and the grantees.
Unless otherwise provided in the relevant Restricted Share Unit Agreement, RSUs become vested and
nonforfeitable as follows: one-third (33 1/3%) of a grantee’s RSUs vests on each one year anniversary of the date
of the grant such that all of the RSUs become fully vested after three years from the grant date so long as the
grantee satisfies the specified continuous service requirements and any other conditions under the applicable plan
documents, subject to certain clawback and notice period provisions.
Under the plan, the grantees are entitled to “dividend equivalent credits” on their granted but unvested RSUs
when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the grantees would have
received on the shares had the shares been issued to the grantees in exchange for their granted but unvested
RSUs. Accumulated dividend equivalents are paid to grantees in whole shares on an annual basis. Any fractional
share will be paid to the participants in cash.
Grants made under the plan are not entitled to any dividend rights, voting rights, or other stockholder rights
unless and until RSUs are vested and ADSs are delivered to grantees.
The ADSs to be delivered to grantees will be purchased on the open market by the trustee of the
independent trust pursuant to a trust agreement between MUFG Americas Holdings and the trustee. As of
July 10, 2018, 58,618,274 RSUs have been granted under the plan, of which 31,344,381 RSUs were outstanding
as of July 10, 2018.
For more information on the plan, see Note 33 to our consolidated financial statements included elsewhere
in this Annual Report. See also “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers.”
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Bank of Tokyo-Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock Bonus Plan
As described above, the Bank of Tokyo-Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock Bonus
Plan was amended and restated as the MUFG Americas Holdings Corporation Stock Bonus Plan as of June 8,
2015.
Under the original plan, qualified key employees of Bank of Tokyo-Mitsubishi UFJ’s Headquarters for the
Americas were granted RSUs, representing a right to receive ADRs, evidencing ADSs, each exchangeable for
one share of MUFG common stock, from an independent trust established to administer the plan grants, upon the
satisfaction of vesting conditions. The RSUs vested pro-rata on each anniversary of the grant date and became
fully vested three years from the grant date so long as the grantee satisfied the specified continuous service
requirements and any other conditions under the plan documents as well as a Restricted Share Unit Agreement
between Bank of Tokyo-Mitsubishi UFJ’s Headquarters for the Americas and the grantees.
Grants previously made under the original plan were not entitled to any dividend rights, voting rights, or
other stockholder rights unless and until RSUs are vested and ADSs are delivered to grantees.
The ADSs to be delivered to grantees are purchased on the open market by the trustee of the independent
trust pursuant to a trust agreement between Bank of Tokyo-Mitsubishi UFJ’s Headquarters for the Americas and
the trustee. Through June 7, 2015, 5,367,466 RSUs were granted under the original plan, of which no RSUs were
outstanding as of July 10, 2018. No further RSUs have since June 7, 2015 been, or will be, granted under the
original plan.
For more information on the Bank of Tokyo-Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock
Bonus Plan, see Note 33 to our consolidated financial statements included elsewhere in this Annual Report. See
also “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”
Share Ownership
As of July 1, 2018, our directors and corporate executives held the following numbers of shares of our
common stock:
Directors
Number of Shares
Registered
Hiroshi Kawakami . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yuko Kawamoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Haruka Matsuyama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toby S. Myerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tsutomu Okuda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yasushi Shingai
Tarisa Watanagase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Akira Yamate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tadashi Kuroda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junichi Okamoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
25,600
2,400
—
16,800
—
—
—
94,900
172,300
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Corporate Executives
Kiyoshi Sono . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mikio Ikegaya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kanetsugu Mike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saburo Araki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nobuyuki Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Muneaki Tokunari
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eiichi Yoshikawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shigeru Asai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Akira Hamamoto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masamichi Yasuda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenji Yabuta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naoki Hori
Hironori Kamezawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hiroshi Naruse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masato Miyachi
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shigeru Yoshifuji . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunao Yokokawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naomi Hayashi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Shares
Registered
57,920
42,630
31,455
185,080
42,400
236,400
18,700
175,300
86,400
15,600
21,000
25,300
11,400
23,200
6,300
100,400
7,500
1,210
None of the shares of our common stock held by our directors and corporate executives have voting rights
that are different from shares of our common stock held by any other shareholder.
For information on the performance-based stock compensation and stock-based compensation plans for our
directors and corporate executives, see “—Performance-based Stock Compensation Plans” and “—Stock-based
Compensation Plans.”
C. Board Practices
Our articles of incorporation provide for a board of directors with statutorily mandated nominating and
governance committee, audit committee and compensation committee, each consisting of members of the board
of directors. We have also elected, though not statutorily mandated under the Companies Act of Japan, to
establish a risk committee consisting of directors and outside professionals. In May 2016, we established a
U.S. risk committee pursuant to the U.S. enhanced prudential standards for foreign banking organizations. Our
corporate executives are responsible for executing and managing our business operations based on a delegation
of authority by the board of directors, and our directors set our key management policies and oversee the
execution of duties by these corporate executives.
In June 2015, our shareholders approved an amendment to our articles of incorporation to adopt our current
governance framework with a board of directors and board committees. We previously had a governance
framework with a board of directors and a board of corporate auditors. The Companies Act permits three types of
governance system for large companies such as MUFG: (1) a company with a nominating committee, an audit
committee and a compensation committee, (2) a company with a board of corporate auditors, and (3) a company
with an audit and supervisory committee. Our previous governance framework was based on the second system,
and our newly adopted governance system is based on the first system.
With respect to companies adopting the first system, including MUFG, each of the nominating, audit and
compensation committees must consist of members of the board of directors, and the majority of each committee
must be outside directors as defined by the Companies Act. In addition, the board of directors must appoint
corporate executives (shikkoyaku) to execute and manage the business operations of the company under the
authority delegated by the board of directors. Based on this system, our current governance framework is
designed to facilitate more flexible and swifter decision-making and increase transparency in our management
processes.
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An “outside director” is defined by the Companies Act as a person who meets all of the following
conditions:
‰
‰
‰
‰
‰
the person is not currently, and has not been in the ten years prior to his or her assumption of office as
outside director, an executive director, who is a director concurrently performing an executive role
(gyomu shikko torishimariyaku), a corporate executive, a manager (shihainin), or any other type of
employee of the company or any of its subsidiaries;
if the person has been a non-executive director, a corporate auditor, or an accounting adviser (kaikei
sanyo) of the company or any of its subsidiaries within the ten years prior to his or her assumption of
office as outside director, the person was not an executive director, a corporate executive, a manager or
any other type of employee of the company or any of its subsidiary in the ten years prior to his or her
assumption of office as such;
the person is not a director, a corporate executive officer, a manager or any other type of employee of
the company’s parent company, or a person who controls the company;
the person is not an executive director, a corporate executive officer, a manager or any other type of
employee of another subsidiary of the company’s parent company; and
the person is not the spouse or a family member within the second degree of kinship of a director, a
corporate executive, a manager, or any other type of important employee of the company or a person
who controls the company.
Board of Directors
Our board of directors consists of directors who are elected at a general meeting of shareholders. Under our
articles of incorporation, the number of directors may not exceed 20. We currently have 15 directors, eight of
whom are outside directors and two of whom are internal non-executive directors.
The regular term of office of a director is one year from the date of election, and directors may serve their
terms until the close of the annual general meeting of shareholders held for the following year after their election.
Directors may serve any number of consecutive terms.
Under the Companies Act, the board of directors has the authority to determine our basic management
policy, make decisions on the execution and management of our business operations, and oversee the execution
by the corporate executives of their duties. The board of directors may delegate, to the extent permitted by the
Companies Act, the authority to make decisions on the execution and management of our business operations.
Our board of directors has delegated most of this authority to the corporate executives.
The board of directors elects the Chairman and the Deputy Chairman from among its members and appoints
key management members based on recommendations submitted to it by the nominating committee.
Under the Companies Act, a resolution of the board of directors is required if any director wishes to engage
in any business that is in competition with us or any transaction with us. Additionally, no director may vote on a
proposal, arrangement or contract in which that director is deemed to be particularly interested.
Neither the Companies Act nor our articles of incorporation contain special provisions as to the borrowing
power exercisable by a director, the retirement age of our directors, or a requirement of our directors to hold any
shares of our capital stock.
Under the Companies Act and our articles of incorporation, we may exempt, by resolution of the board of
directors, our directors from liabilities to MUFG arising in connection with their failure to execute their duties in
good faith and without gross negligence within the limits stipulated by applicable laws and regulations. In
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addition, we have entered into a liability limitation agreement with each outside director and non-executive
director which limits the maximum amount of their liability to MUFG arising in connection with a failure to
execute their duties in good faith and without gross negligence to the greater of either ¥10 million or the
aggregate sum of the amounts prescribed in Paragraph 1 of Article 425 of the Companies Act and Articles 113
and 114 of the Companies Act Enforcement Regulations.
None of our directors is party to a service contract with MUFG or any of its subsidiaries that provides for
benefits upon end of their director term.
Nominating Committee
Our nominating committee, which we call the nominating and governance committee, determines the
contents of proposals regarding the election and removal of director candidates to be submitted to general
meetings of shareholders. The committee also considers and makes recommendations to the board of directors
regarding the appointment and removal of the Chairman and the Deputy Chairman of the board of directors and
the President & Group CEO of MUFG as well as the chairman and the deputy chairman of the board of directors,
the president and others of each of our major subsidiaries. In addition, the committee discusses and makes
recommendations to the board of directors on matters pertaining to our governance policy and framework.
Under the Companies Act, the nominating committee must consist of at least three directors, and the
majority of its members must be outside directors. Our nominating and governance committee currently consists
of five directors. The chairman of the committee is Tsutomu Okuda, an outside director. The other members of
this committee are Hiroshi Kawakami, Yuko Kawamoto and Haruka Matsuyama, who are outside directors, and
Nobuyuki Hirano, Director, President & Group CEO. Between April 2017 and March 2018, the nominating and
governance committee met 14 times.
Audit Committee
The audit committee determines the contents of proposals pertaining to the election, termination and
non-appointment of our independent auditor to be submitted to general meetings of shareholders. The committee
also monitors and audits the execution by the directors and the corporate executives of their duties and prepares
audit reports to the board of directors. In order to effectively perform its duties, the committee reviews, inspects
and investigates, as necessary, the management of the operations of MUFG and its subsidiaries, including
financial reporting and internal controls. In addition, the committee has the power to consent to decisions on the
compensation to be paid to our independent auditor.
Under the Companies Act, the audit committee must consist of at least three non-executive directors, and
the majority of its members must be outside directors. Our committee currently has five members. The chairman
of the committee is Akira Yamate, an outside director. The other members of the committee are Hiroshi
Kawakami and Yasushi Shingai, who are outside directors, and Tadashi Kuroda and Junichi Okamoto, who are
non-executive directors. Between April 2017 and March 2018, the audit committee met 16 times.
Compensation Committee
The compensation committee establishes our policy regarding the determination of the compensation of
MUFG’s directors, corporate executives, executive officers (shikko yakuin) and others and also determines the
details of individual compensation based on the policy. The committee discusses and makes recommendations to
the board of directors regarding the establishment, revision and abolition of compensation systems for the
chairman, the deputy chairman, the president and others of each of our major subsidiaries.
Under the Companies Act, the compensation committee must consist of at least three directors, and the
majority of its members must be outside directors. Our compensation committee currently consist of five
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directors. The chairman of the committee is Haruka Matsuyama, an outside director. The other members of this
committee are Yuko Kawamoto, Tsutomu Okuda and Hiroshi Kawakami, who are outside directors, and
Nobuyuki Hirano, Director, President & Group CEO. Between April 2017 and March 2018, the compensation
committee met 10 times.
Risk Committee
In addition to the foregoing three committees, which are mandated by the Companies Act, we have a risk
committee, which was initially established under our previous governance framework and which we continue to
have under our current governance framework on a voluntary basis. The risk committee deliberates and makes
recommendations to the board of directors on matters regarding group-wide risk management as well as top risk
matters.
MUFG Corporate Governance Policies provide that the committee shall consist of directors and outside
professionals. Outside professionals are professionals with no prior employment relationship with any of the
MUFG group companies. The committee currently has five members. The chairperson of the committee is Yuko
Kawamoto, an outside director. The other members of this committee are Tsutomu Okuda, an outside director,
Tadashi Kuroda, Director, Senior Managing Executive Officer and Group CSO & Group CHRO, and Akira
Ariyoshi and Kenzo Yamamoto, who are outside professionals. Between April 2017 and March 2018, the risk
committee met five times.
U.S. Risk Committee
The U.S. risk committee oversees the risk management function for our combined U.S. operations. Its
oversight role includes, but is not limited to, all roles and responsibilities required under the FRB’s final rules for
Enhanced Prudential Standards for foreign banking organizations. The committee monitors liquidity and all other
types of risk exposures, reviews the risk management policies and procedures, and oversees compliance with
such policies and procedures for our combined U.S. operations. The committee is a subcommittee of the board of
directors of MUFG, and reports and makes recommendations to MUFG’s board of directors and MUFG’s risk
committee.
The members of the U.S. risk committee are appointed by MUFG’s board of directors after consideration of
member candidates reviewed and recommended by MUFG’s risk committee and nominating and governance
committee. The committee shall consist of members of the MUFG Americas Holdings Risk Committee,
delegates from MUFG, the Chairman of the MUFG Americas Holdings Board and MUFG Americas Holdings’
CEO, with the chairperson of the committee being an outside director of MUFG Americas Holdings. The
committee currently has eight members. The chairperson of the committee is Christine Garvey, an outside
director of MUFG Americas Holdings. The other members of this committee are Dean A. Yoost, Ann F.
Jaedicke, Suneel Kamlani and Toby Myerson, who are outside directors of MUFG Americas Holdings, Masato
Miyachi, the Chairman of the MUFG Americas Holdings Board, Masamichi Yasuda, Senior Managing Executive
Officer and Group CRO of MUFG, and Stephen Cummings, MUFG Americas Holdings’ CEO.
Corporate Executives
Our corporate executives are responsible for executing and managing our business operations within the
scope of the authority delegated to them by the board of directors.
Under the Companies Act, at least one corporate executive must be appointed by a resolution of the board of
directors. We currently have 18 corporate executives. Under our articles of incorporation, the board of directors
shall appoint a president and a deputy president, who, as representative corporate executives, may represent us
severally. The term of office of each corporate executive expires at the conclusion of the first meeting of the
board of directors convened after the ordinary general meeting of shareholders for the last fiscal year that ends
within one year following the corporate executive’s assumption of office.
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Under the Companies Act of Japan, a resolution of the board of directors is required if any corporate
executive wishes to engage in any business that is in competition with us or any transaction with us.
Under the Companies Act and our articles of incorporation, we may exempt, by resolution of the board of
directors, our corporate executives from liabilities to MUFG arising in connection with their failure to execute
their duties in good faith and without gross negligence within the limits stipulated by applicable laws and
regulations. We, however, currently have no such arrangements with any of our corporate executives.
D. Employees
As of March 31, 2018, we had approximately 111,100 employees, an increase of approximately 1,900
employees compared with the number of employees as of March 31, 2017. In addition, as of March 31, 2018, we
had approximately 32,900part-time and temporary employees. The following tables show the percentages of our
employees across our different business units and in different locations as of March 31, 2018:
Business unit
MUFG Bank:
Retail Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets Unit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Center/Independent Divisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14%
8
46
1
7
1
Mitsubishi UFJ Trust and Banking:
Trust-Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Securities Holdings:
Sales Marketing Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Investment Banking Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Markets Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International Business Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Center and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS:
Business Marketing Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit Risk Management & Risk Assets Administration Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operations Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systems Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
4
1
1
2
3
1
0
1
2
1
1
0
0
0
2
100%
173
Location
MUFG Bank:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31%
12
2
32
1
Mitsubishi UFJ Trust and Banking:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ Securities Holdings:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mitsubishi UFJ NICOS:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Oceania excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
1
1
0
5
0
1
0
3
0
0
0
2
100%
Most of our employees are members of an employees’ union, which negotiates on behalf of employees in
relation to remuneration and working conditions. We believe our labor relations to be good.
E. Share Ownership
The information required by this item is set forth in “—B. Compensation.”
174
Item 7. Major Shareholders and Related Party Transactions.
A. Major Shareholders
Common Stock
As of March 31, 2018, we had 685,265 registered shareholders of our common stock. The ten largest
holders of our common stock appearing on the register of shareholders as of March 31, 2018, and the number and
the percentage of such shares held by each of them, were as follows:
Name
Number of shares
held
Percentage of
total shares in issue(3)
Japan Trustee Services Bank, Ltd. (Trust account)(1)
. . . . . . . . . . . . . . . . . .
The Master Trust Bank of Japan, Ltd. (Trust account)(1) . . . . . . . . . . . . . . . .
State Street Bank and Trust Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 5)(1) . . . . . . . . . . . . . . . . .
State Street Bank West Client-Treaty 505234 . . . . . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 9)(1) . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 1)(1) . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 2)(1) . . . . . . . . . . . . . . . . .
The Bank of New York Mellon as Depositary Bank for DR Holders(2)
. . . .
The Master Trust Bank of Japan, Ltd. (Meiji Yasuda Life Insurance
705,689,100
630,254,300
275,802,635
263,842,100
223,807,890
215,930,100
196,032,300
193,550,600
179,260,880
Company retirement benefit trust account) . . . . . . . . . . . . . . . . . . . . . . . .
175,000,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,059,169,905
5.07%
4.53
1.98
1.89
1.61
1.55
1.41
1.39
1.28
1.25
22.00%
Includes the shares held in trust accounts, which do not disclose the names of beneficiaries.
Notes:
(1)
(2) An owner of record for our ADSs.
(3) Numbers are truncated after two decimal points.
As of March 31, 2018, 1,858,625 shares, representing approximately 0.01% of our outstanding common
stock, were held by our directors and corporate executives.
As of March 31, 2018, 2,165,460,168 shares, representing 15.57% of our outstanding common stock, were
owned by 396 U.S. shareholders of record who are resident in the United States, one of whom is the ADR
depository’s nominee holding 179,260,880 shares, or 1.28%, of our total issued shares of common stock.
Our major shareholders do not have different voting rights.
B. Related Party Transactions
As of March 31, 2018, we held approximately 24.4% of the voting rights in Morgan Stanley and Series C
Preferred Stock with a face value of approximately $521.4 million and 10% dividend. We also have two
representatives appointed to Morgan Stanley’s board of directors. We adopted the equity method of accounting
for our investment in Morgan Stanley beginning with the fiscal year ended March 31, 2012. In April 2018, we
entered into a sales plan with Morgan Stanley and Morgan Stanley & Co. LLC, pursuant to which we will sell
portions of the shares of Morgan Stanley common stock that we hold to Morgan Stanley through Morgan
Stanley & Co. LLC acting as agent for Morgan Stanley to the extent necessary to ensure that our beneficial
ownership will remain below 24. 9%.
We and Morgan Stanley have two securities joint venture companies, namely, Mitsubishi UFJ Morgan
Stanley Securities and Morgan Stanley MUFG Securities, in Japan. We hold a 60% economic interest in
Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities, and Morgan Stanley holds a
40% economic interest in Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. We
175
hold a 60% voting interest and Morgan Stanley holds a 40% voting interest in Mitsubishi UFJ Morgan Stanley
Securities, and we hold a 49% voting interest and Morgan Stanley holds a 51% voting interest in Morgan Stanley
MUFG Securities.
We and Morgan Stanley continue to pursue a variety of business opportunities in Japan and abroad in
accordance with the global strategic alliance. For a detailed discussion of our global alliance with Morgan
Stanley, see “Item 4.B. Information on the Company—Business Overview—Global Strategic Alliance with
Morgan Stanley.”
We and our banking subsidiaries had, and expect to have in the future, banking transactions and other
transactions in the ordinary course of business with our related parties. Although for the fiscal year ended
March 31, 2018, such transactions included, but were not limited to, call money, loans, electronic data
processing, leases and management of properties, those transactions were immaterial and were made at
prevailing market rates, terms and conditions and do not involve more than the normal risk of collectability or
present other unfavorable features.
None of our directors or corporate executives, nor any of the close members of their respective families, has
had any transactions or has any presently proposed transactions that are material or any transactions that are
unusual in their nature or conditions, involving goods, services or tangible or intangible assets, to which we were,
are or will be a party.
No loans have been made to our directors or corporate executives other than in the normal course of
business, on normal commercial terms and conditions, involving the normal risk of collectability, and presenting
normal features. In addition, no loans have been made to our directors or corporate executives other than as
permitted under Section 13(k) of the U.S. Securities Exchange Act and Rule 13k-1 promulgated thereunder.
No family relationship exists among any of our directors or corporate executives. No arrangement or
understanding exists between any of our directors or corporate executives and any other person pursuant to which
any director or corporate executive was elected to their position at MUFG.
As part of our compensation structure, we have granted performance-based stock compensation rights and
stock acquisition rights to our directors and corporate executives. For a detailed discussion of the stock
acquisition rights, see “Item 6.B. Directors, Senior Management and Employees—Compensation.”
C.
Interests of Experts and Counsel
Not applicable.
Item 8.
Financial Information.
A. Consolidated Statements and Other Financial Information
The information required by this item is set forth in our consolidated financial statements starting on
page F-1 of this Annual Report and in “Selected Statistical Data” starting on page A-1 of this Annual Report.
Legal Proceedings
From time to time, we are involved in various litigation matters and other legal proceedings, including
regulatory actions. Although the final resolution of any such matters and proceedings could have a material effect
on our consolidated operating results for a particular reporting period, based on our current knowledge and
consultation with legal counsel, we believe the current litigation matters and other legal proceedings, when
ultimately determined, will not materially affect our results of operations or financial position.
176
On November 8, 2017, MUFG Bank filed suit against the Superintendent of DFS in the U.S. District Court
for the Southern District of New York, seeking declaratory and injunctive relief to prevent DFS from exercising
further authority over MUFG Bank’s New York Branch and to confirm the validity of the New York Branch’s
federal banking license issued by the OCC, effective November 7, 2017. On January 31, 2018, DFS filed an
answer denying MUFG Bank’s allegations and asserting defenses to MUFG’s requests for relief, together with
counterclaims seeking monetary penalties against MUFG Bank based on purported violations of law alleged to
have occurred prior to the federal license conversion. On March 19, 2018, MUFG Bank moved to dismiss all of
DFS’s counterclaims as preempted by federal law and for failure to state a claim under New York law. The
litigation is in its early stages, and the outcome is not knowable at this time.
For more information, see “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We
may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects
of our operations, which could result in significant financial losses, restrictions on our operations and damage to
our reputation.” and Note 27 to our consolidated financial statements included elsewhere in this Annual Report.
Distributions
Our board of directors submits a recommendation for a year-end dividend for our shareholders’ approval at
the ordinary general meeting of shareholders customarily held in June of each year. The year-end dividend is
usually distributed immediately following shareholders’ approval to holders of record at the end of the preceding
fiscal year. In addition to year-end dividends, we may make cash distributions by way of interim dividends to
shareholders of record as of September 30 of each year as distribution of surplus by resolution of our board of
directors. Year-end dividends in the amount of ¥10 per share of our common stock (in addition to interim
dividends of ¥9 per share of our common stock) for the fiscal year ended March 31, 2018 were approved by
shareholders at the ordinary general meeting of shareholders held on June 28, 2018.
See “Item 10.B. Additional Information—Memorandum and Articles of Association” for additional
information on our dividends policy.
Under the Japanese foreign exchange regulations currently in effect, dividends paid on shares held by
non-residents of Japan may be converted into any foreign currency and repatriated abroad. Under the terms of the
deposit agreement pursuant to which ADSs are issued, the depositary is required, to the extent that in its
judgment it can convert Japanese yen on a reasonable basis into U.S. dollars and transfer the resulting
U.S. dollars to the United States, to convert all cash dividends that it receives in respect of deposited shares into
U.S. dollars and to distribute the amount received, after deduction of any applicable withholding taxes, to the
holders of ADSs. See “Item 10.D. Additional Information—Exchange Controls” and “Item 12.D. Description of
Securities Other than Equity Securities—American Depositary Shares.”
B. Significant Changes
Other than as described in this Annual Report, no significant changes have occurred since the date of our
consolidated financial statements included in this Annual Report.
177
Item 9.
The Offer and Listing.
A. Offer and Listing Details
Market Price Information
The following table shows, for the periods indicated, the reported intra-day high and low trade prices for
shares of our common stock on the Tokyo Stock Exchange, or the TSE, and of the ADSs on the New York Stock
Exchange, or the NYSE:
Price per share on the TSE
Price per ADS on the NYSE
High
Low
(yen)
Fiscal year ended March 31, 2013 . . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2014 . . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2015 . . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2016 . . . . . . . . . . . . . . . . . . . . .
Fiscal year ending March 31, 2017 . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2018 . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal year ending March 31, 2019 . . . . . . . . . . . . . . . . . . . . .
April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
592
755
811
936.8
581.6
575.5
768.1
774.1
755.2
766.2
845.9
889.3
889.3
857.0
746.4
750.3
737.1
682.5
328
515
523
446.2
448.7
428.7
501.4
699.7
650.2
653.6
716.5
685.6
820.8
759.1
685.6
686.6
655.8
623.1
(U.S.$)
High
6.10
7.31
6.72
7.62
5.29
5.64
6.67
6.92
6.75
6.81
7.44
8.07
8.07
7.83
6.98
6.82
6.67
6.26
Low
4.16
5.19
5.13
3.9
4.33
4.28
4.87
6.23
5.96
5.97
6.36
6.45
7.35
7.08
6.45
6.45
6.01
5.57
B. Plan of Distribution
Not applicable.
C. Markets
The primary market for our common stock is the TSE. Our common stock is also listed on the Nagoya Stock
Exchange in Japan. ADSs, each representing one share of common stock, are quoted on the NYSE under the
symbol, “MUFG.” This ticker symbol replaced the previous symbol, “MTU,” on April 2, 2018.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
178
Item 10. Additional Information.
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Our Corporate Purpose
Article 2 of our Articles of Incorporation provides that our corporate purpose is to carry on the following
businesses:
‰
‰
‰
administration of management of banks, trust banks, specialized securities companies, insurance
companies or other companies which we may own as our subsidiaries under the Banking Law;
any businesses incidental to the foregoing businesses mentioned in the preceding item; and
any other businesses in which bank holding companies are permitted to engage under the Banking Law
in addition to the foregoing businesses mentioned in the preceding two items.
Board of Directors
For discussion of the provisions of our Articles of Incorporation as they apply to our directors, see
“Item 6.C. Directors, Senior Management and Employees—Board Practices.”
Common Stock
We summarize below the material provisions of our Articles of Incorporation, our share handling
regulations and the Companies Act as they relate to a type of joint stock company known as kabushiki kaisha,
within which we fall. Because it is a summary, this discussion should be read together with our Articles of
Incorporation and share handling regulations, which have been filed as exhibits to this Annual Report.
General
A joint stock company is a legal entity incorporated under the Companies Act. The investment and rights of
the shareholders of a joint stock company are represented by shares of stock in the company and shareholders’
liability is limited to the amount of the subscription for the shares.
As of June 28, 2018, our authorized common share capital was comprised of 33,000,000,000 shares of
common stock with no par value.
As of March 31, 2018, a total of 13,900,028,020 shares of common stock (including 737,772,882 shares of
common stock held by us and our consolidated subsidiaries as treasury stock) had been issued. Each of the shares
issued and outstanding was fully paid and non-assessable.
We are also authorized to issue several classes of preferred stock. See “—Preferred Stock.”
We may issue shares from our authorized but unissued share capital following a resolution to that effect by
our board of directors. An increase in our authorized share capital is only possible by amendment of our Articles
of Incorporation, which generally requires shareholders’ special approval.
In order to assert shareholder rights against us, a shareholder must have its name and address registered on
our register of shareholders, in accordance with the Companies Act and our share handling regulations. The
registered holder of deposited shares underlying the ADSs is the depositary for the ADSs, or its nominee.
Accordingly, holders of ADSs will not be able to assert shareholder rights other than as provided in the
agreement among us, the depositary and the holders of the ADSs.
179
Under the Act on Book-Entry Transfer of Company Bonds, Shares, etc., the shares of all Japanese
companies listed on any Japanese stock exchange, including our shares, are traded without share certificates
through entry in the books maintained under a central clearing system.
Dividends
Dividends are distributed in proportion to the number of shares owned by each shareholder on the record
date for the dividend. Dividends for each financial period may be distributed following shareholders’ approval at
a general meeting of shareholders.
Payment of dividends on common stock is subject to the preferential dividend rights of holders of preferred
stock.
Under the Banking Law and our Articles of Incorporation, our financial accounts are closed on March 31 of
each year, and dividends, if any, are paid to shareholders of record as of March 31 following shareholders’
approval at a general meeting of shareholders. In addition to year-end dividends, our board of directors may by
resolution declare an interim cash dividend to shareholders of record as of September 30 of each year. Under the
Companies Act, distribution of dividends will take the form of distribution of surplus (as defined below). We will
be permitted to make distributions of surplus to our shareholders any number of times per fiscal year pursuant to
resolutions of our general meetings of shareholders, subject to certain limitations described below. Distributions
of surplus are in principle required to be authorized by a resolution of a general meeting of shareholders.
Distributions of surplus would, however, be permitted to be made pursuant to a resolution of our board of
directors if:
(a) our Articles of Incorporation so provide (our Articles of Incorporation currently contain no such
provisions);
(b)
the normal term of office of our directors is one year; and
(c)
certain conditions concerning our non-consolidated annual financial statements and certain documents
for the latest fiscal year as required by an ordinance of the Ministry of Justice are satisfied.
In an exception to the above rule, even if the requirements described in (a) through (c) are not met, we are
permitted to make distributions of surplus in cash to our shareholders by resolutions of the board of directors
once per fiscal year as mentioned above concerning interim cash dividend.
Under the Companies Act, distributions of surplus may be made in cash or in kind in proportion to the
number of shares of common stock held by each shareholder. A resolution of a general meeting of shareholders
or our board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of
the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date of the
distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general
meeting of shareholders or (as the case may be) our board of directors, grant to our shareholders the right to
require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the
relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders.
See “—B. Memorandum and Articles of Association—Common Stock—Voting Rights.”
Under the Companies Act, we may make distributions of surplus to the extent that the aggregate book value
of the assets to be distributed to shareholders does not exceed the distributable amount (as defined below) as of
the effective date of such distributions of surplus. The amount of surplus (the “surplus”) at any given time shall
be the amount of our assets and the book value of our treasury stock after subtracting the amounts of items (1)
through (5) below as they appear on our non-consolidated balance sheet as of the end of our last fiscal year, and
after reflecting the changes in our surplus after the end of our last fiscal year, by adding the amounts of items (6),
(7) and (8) below and/or subtracting the amounts of items (9), (10) and (11) below:
(1) our liabilities;
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(2) our stated capital;
(3) our additional paid-in capital;
(4) our accumulated legal reserve;
(5) other amounts as are set out in an ordinance of the Ministry of Justice;
(6)
(7)
(8)
(if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our
treasury stock after subtracting the book value thereof;
(if we decreased our stated capital after the end of the last fiscal year) the amount of decrease in our
stated capital (excluding the amount transferred to additional paid-in capital or legal reserve);
(if we decreased our additional paid-in capital or legal reserve after the end of the last fiscal year) the
amount of decrease in our additional paid-in capital or legal reserve (excluding the amount transferred
to stated capital);
(9)
(if we cancelled our treasury stock after the end of the last fiscal year) the book value of the cancelled
treasury stock;
(10) (if we distributed surplus to shareholders after the end of the last fiscal year) the amount of the assets
distributed to shareholders by way of such distribution of surplus; and
(11) other amounts as are set out in an ordinance of the Ministry of Justice.
A distributable amount (the “distributable amount”) at any given time shall be the aggregate amount of
(a) the surplus, (b) the amount of profit as recorded for the period after the end of our last fiscal year until the
date of an extraordinary settlement of account (if any) as is set out in an ordinance of the Ministry of Justice and
(c) the transfer price of our treasury stock in the same period, after subtracting the amounts of the following
items:
(1)
the book value of our treasury stock;
(2)
(3)
(if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our
treasury stock;
the losses recorded for the period after the end of our last fiscal year until the date of an extraordinary
settlement of account (if any) as set out in an ordinance of the Ministry of Justice; and
(4) other amounts as set out in an ordinance of the Ministry of Justice.
In Japan, the “ex-dividend” date and the record date for any dividends precede the date of determination of
the amount of the dividend to be paid. The market price of shares generally becomes ex-dividend on the third
business day prior to the record date. Under our Articles of Incorporation, we are not obligated to pay any
dividends which are left unclaimed for a period of five years after the date on which they first became payable.
Capital and Reserves
Under the Companies Act, we may reduce our additional paid-in capital or legal reserve (without limitation
as to the amount of such reduction) as mentioned previously, generally by resolution of a general meeting of
shareholders and, if so resolved in the same resolution, may account for the whole or any part of the amount of
such reduction as stated capital. We may also reduce our stated capital generally by special resolution of a
general meeting of shareholders and, if so resolved in the same resolution, such reduction may account for the
whole or any part of the amount of such reduction as additional paid-in capital or legal reserve. Conversely, we
may reduce our surplus and increase either (i) stated capital or (ii) additional paid-in capital and/or legal reserve
by the same amount, in either case by resolution of a general meeting of shareholders.
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Stock Splits
Stock splits of our outstanding stock may be effected at any time by resolution of the board of directors.
When a stock split is to be effected, we may increase the authorized share capital to cover the number of shares
to be increased by the stock split by amending our Articles of Incorporation by resolution of the board of
directors without approval by special resolution of the general meeting of shareholders, unless more than one
class of stock is issued and outstanding. We must give public notice of the stock split, specifying a record date at
least two weeks prior to the record date.
Unit Share (tan-gen kabu) System
We have adopted a unit share system, where 100 shares of either common or preferred stock shall each
constitute a unit.
Under the unit share system, each unit is entitled to one voting right. A holder of less than one unit has no
voting right. Our Articles of Incorporation provide that the holders of shares constituting less than a full unit will
not have shareholder rights except for those specified in the Companies Act or an ordinance of the Ministry of
Justice, including rights (i) to receive dividends, (ii) to receive cash or other assets in case of consolidation or
split of shares, stock-for-stock exchange or stock-for-stock transfer, corporate split or merger or (iii) to be
allotted rights to subscribe for free for new shares and stock acquisition rights when such rights are granted to
shareholders. Shareholders may require us to purchase shares constituting less than a unit at the current market
price. In addition, holders of shares constituting less than a unit may require us to sell them such number of
shares, which, when combined with the number of shares already held by such holder, shall constitute a whole
unit of share; provided that we will be obliged to comply with such request only when we own a sufficient
number of shares to accommodate the desired sale and purchase. The board of directors may reduce the number
of shares constituting a unit or cease to use the unit share system by amendments to the Articles of Incorporation
without shareholders’ approval even though amendments to the Articles of Incorporation generally require a
special resolution of the general meeting of shareholders.
General Meeting of Shareholders
The ordinary general meeting of our shareholders is usually held in June of each year in Tokyo. In addition,
we may hold an extraordinary general meeting of shareholders whenever necessary by giving at least two weeks’
advance notice to shareholders who are entitled to vote at the relevant general meeting of shareholders. The
record date for ordinary general meetings of our shareholders is March 31.
Any shareholder holding at least 300 voting rights or 1% of the total number of voting rights for six
consecutive months or longer may propose a matter to be considered at a general meeting of shareholders by
submitting a written request to a director at least eight weeks prior to the date of the meeting. The number of
minimum voting rights, minimum percentage and time period necessary for exercising the minority shareholder
rights described above may be decreased or shortened if our Articles of Incorporation so provide. Our Articles of
Incorporation currently contain no such provisions.
Voting Rights
A holder of shares of our common stock is generally entitled to one voting right for each unit of common
stock held. The following shares of common stock are not entitled to voting rights even when such shares
constitute a whole unit, and such shares of common stock are not considered when determining whether a
quorum exists for a shareholders’ meeting:
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treasury stock;
shares held by a company in which we and/or our subsidiaries own 25% or more of the total voting
rights; and
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shares issued after the record date as a result of conversion of convertible stock, exercise of stock
acquisition rights, and fractional shareholders becoming a shareholder of a whole unit share.
On the other hand, holders of certain class of preferred stock shall be entitled to a voting right for each unit
of preferred stock held under certain conditions provided for by relevant laws or regulations and our Articles of
Incorporation, for example, when a proposal to pay the full amount of preferential dividends on any class of
preferred stock in compliance with the terms of such preferred stock is not included in the agenda of the relevant
shareholders meeting. See “—Preferred Stock.”
Under our Articles of Incorporation, except as otherwise provided by law or by other provisions of our
Articles of Incorporation, a resolution can be adopted at a shareholders’ meeting by the holders of a majority of
the voting rights represented at the meeting. The Companies Act and our Articles of Incorporation require a
quorum of not less than one-third of the total number of voting rights for election of our directors.
The Companies Act and our Articles of Incorporation provide that a quorum of not less than one-third of
outstanding voting rights, excluding those owned by our subsidiaries and affiliates of which we own, directly or
indirectly, 25 percent or more, must be present at a shareholders’ meeting to approve specified corporate actions,
such as:
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the amendment of our Articles of Incorporation, except in some limited cases;
the repurchase of our own stock from a specific shareholder other than our subsidiary;
the consolidation of shares;
the offering to persons other than shareholders of stock at a specially favorable price, or of stock
acquisition rights or bonds or notes with stock acquisition rights with specially favorable conditions;
the exemption from liability of a director or corporate auditor, with certain exceptions;
a reduction in stated capital with certain exceptions in which a shareholders’ resolution is not required;
a distribution of in-kind dividends which meets certain requirements;
the transfer of the whole or an important part of our business, except in some limited circumstances;
the acquisition of the whole business of another company, except in some limited circumstances;
a dissolution, merger or consolidation, except for certain types of mergers;
a stock-for-stock exchange (kabushiki-kokan) or stock-for-stock transfer (kabushiki-iten), except in
some limited circumstances; and
a corporate split, except in some limited circumstances.
A special resolution representing at least two-thirds of the voting rights represented at the meeting is
required to approve these actions.
Our Articles of Incorporation do not include any provision that grants shareholders cumulative voting rights
at elections of directors.
Subscription Rights
Holders of our shares have no preemptive rights under our Articles of Incorporation. Under the Companies
Act, however, our board of directors may determine that shareholders be given subscription rights in connection
with a particular issue of new shares. In this case, these subscription rights must be given on uniform terms to all
shareholders, and if a specified record date is set, it must be announced in a public notice at least two weeks prior
to the record date. A notification to each individual shareholder must also be given at least two weeks prior to the
subscription date.
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Under the Companies Act, rights to subscribe for new shares may not be transferred; however, we may allot
stock acquisition rights to shareholders without consideration, and such rights will be transferable.
Stock Acquisition Rights
We may issue stock acquisition rights (shinkabu yoyakuken), which in the United States are often in the
form of warrants, or bonds with stock acquisition rights that cannot be detached (shinkabu yoyakuken-tsuki
shasai), which in the United States are often in the form of convertible bonds or bonds with non-detachable
warrants. Except where the issuance would be on “specially favorable” conditions, the issuance of stock
acquisition rights or bonds with stock acquisition rights may be authorized by a resolution of our board of
directors. Upon exercise of the stock acquisition rights, the holder of such rights may acquire shares by paying
the applicable exercise price or, if so determined by a resolution of our board of directors, by making a substitute
payment, such as having the convertible bonds redeemed for no cash in lieu of the exercise price.
Liquidation Rights
Upon our liquidation, the assets remaining after payment of all debts, liquidation expenses, taxes and
preferred distributions to holders of shares of our preferred stock will be distributed among the holders of shares
of our common stock in proportion to the number of shares they own.
Transfer Agent
Mitsubishi UFJ Trust and Banking is the transfer agent for our common stock. The office of Mitsubishi UFJ
Trust and Banking for this purpose is located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan.
Mitsubishi UFJ Trust and Banking maintains our register of shareholders.
Reports to Shareholders
We furnish to our shareholders notices, in Japanese, of shareholders’ meetings, annual business reports,
including our financial statements, and notices of resolutions adopted at our shareholders’ meetings.
Record Dates
As stated above, March 31 is the record date for the payment of annual dividends (if any), the determination
of shareholders entitled to vote at ordinary general meetings of our shareholders, and the determination of class
shareholders entitled to vote at meetings of our class shareholders if any matter to be resolved at an ordinary
general meeting of our shareholders requires a resolution by our class shareholders in addition to a resolution by
our shareholders. September 30 is the record date for the payment of interim dividends, if any. In addition, by a
resolution of our board of directors and after giving at least two weeks’ prior public notice, we may at any time
set a record date in order to determine the shareholders who are entitled to the rights pertaining to our shares.
Repurchase of Our Shares
We may repurchase our own shares:
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through the Tokyo Stock Exchange or other stock exchanges on which our shares are listed, if
authorized by a resolution of a general meeting of shareholders or our board of directors;
by way of a tender offer, if authorized by a resolution of a general meeting of shareholders or our board
of directors;
from a specific party, if authorized by a special resolution of a general meeting of shareholders and we
give notice thereof to shareholders prior to such general meeting, in general;
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from all shareholders of a specific class of shares offering to sell their shares, if authorized by a
resolution of a general meeting of shareholders or our board of directors and we give a public notice or
notice thereof to all of the shareholders (if we repurchase any class of preferred stock, notices to all
shareholders of the relevant class of preferred stock); or
from our subsidiaries, if authorized by a resolution of the board of directors.
When the repurchase is made by us from a specific party, as authorized by a special resolution of a general
meeting of shareholders, any shareholder may make a demand to a director, five days or more prior to the
relevant shareholders’ meeting, that we also repurchase the shares held by that shareholder. However, no such
right will be available if the shares have a market price, and if the purchase price does not exceed the then market
price calculated in a manner set forth in an ordinance of the Ministry of Justice.
Repurchase of our own shares described above must satisfy various specified requirements. In general, the
same restrictions on the distributable amount as described in the seventh paragraph under “—Common Stock—
Dividends.” are applicable to the repurchase of our own shares, so the total amount of the repurchase price may
not exceed the distributable amount.
We may hold our own shares so repurchased without restrictions. In addition, we may cancel or dispose of
our repurchased shares by a resolution of our board of directors. As of March 31, 2018, we (excluding our
subsidiaries) owned 706,588,098 shares of treasury stock.
Preferred Stock
The following is a summary of information concerning the shares of our preferred stock, including brief
summaries of the relevant provisions of our Articles of Incorporation, the share handling regulations and the
Companies Act as currently in effect. The detailed rights of our preferred stock are set out in our Articles of
Incorporation and the resolutions of our board of directors relating to the issuance of the relevant stock.
General
As of June 28, 2018, we were authorized under our Articles of Incorporation to issue four classes of
preferred stock totaling 800,000,000 shares of preferred stock, including 400,000,000 shares of each of the
second to fourth series of class 5 preferred stock (provided the aggregate number of shares authorized to be
issued with respect to the three series of class 5 preferred stock does not exceed 400,000,000 shares),
200,000,000 shares of each of the first to fourth series of class 6 preferred stock (provided the aggregate number
of shares authorized to be issued with respect to the four series of class 6 preferred stock does not exceed
200,000,000 shares), and 200,000,000 shares of each of the first to fourth series of class 7 preferred stock
(provided the aggregate number of shares authorized to be issued with respect to the four series of class 7
preferred stock does not exceed 200,000,000 shares). We currently have no shares of preferred stock issued.
Our preferred stock has equal preference over our shares of common stock with respect to dividend
entitlements and distribution of assets upon our liquidation. However, holders of shares of our preferred stock are
not entitled to vote at general meetings of shareholders, subject to the exceptions provided under our Articles of
Incorporation.
We may acquire shares of second to fourth series of class 5 and first to fourth series of class 6 preferred
stock at our discretion pursuant to the terms and conditions provided by our Articles of Incorporation and the
resolution of our board of directors. The provisions for acquisition of shares of second to fourth series of class 5
and first to fourth series of class 6 preferred stock will be determined by the board of directors at the time of
issuance of such preferred stock. When issued, any holder of shares of first to fourth series of class 6 preferred
stock or first to fourth series of class 7 preferred stock may request acquisition of shares of such preferred stock
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in exchange for shares of our common stock during the period determined by resolution of the board of directors
adopted at the time of issuance of such shares of preferred stock. Any shares of first to fourth series of class 6
preferred stock or first to fourth series of class 7 preferred stock for which no request for acquisition in exchange
for shares of our common stock is made during such period will be mandatorily acquired on the day immediately
following the last day of such period (the “Mandatory Acquisition Date”) in the number obtained by dividing an
amount equivalent to the subscription price per each relevant share of preferred stock by the average daily
closing price of our common stock as reported by the Tokyo Stock Exchange for the 30 trading days
commencing on the 45th trading day prior to the Mandatory Acquisition Date.
Additionally, in order to enable the relevant preferred stock to meet the criteria for Additional Tier 1 capital
under Basel III requirements as adopted by the FSA in March, 2013, the terms of the second to fourth series of
class 5 as well as all the series of class 6 and class 7 preferred stock have mandatory acquisition provisions.
When newly issuing these preferred stock, the board of directors will determine events that will require us to
acquire the relevant preferred stock pursuant to the capital adequacy requirements applicable to us. Upon the
occurrence of such events, we will acquire all the relevant preferred stock on an acquisition date, which is a date
determined by the board of directors either at the time of the issuance or after the occurrence of such event. We
shall acquire the relevant preferred stock in exchange for common stock or for no consideration as determined by
the board of directors at the time of the issuance, considering certain factors including the market conditions. The
formula to be used in exchanging the preferred stock for common stock will also be determined by the board of
directors at the time of the issuance. For more information, see “Item 4.B. Information on the Company—
Business Overview—Supervision and Regulation—Japan—Capital adequacy.”
Preferred Dividends
In priority to the payment of dividends to holders of our common stock, the amount of preferred dividends
payable each fiscal year for each class of our preferred stock is set forth below:
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second to fourth series of class 5 preferred stock: to be set by resolution of our board of directors at the
time of issuance, up to a maximum of ¥250.00 per share;
first to fourth series of class 6 preferred stock: to be set by resolution of our board of directors at the
time of issuance, up to a maximum of ¥125.00 per share; and
first to fourth series of class 7 preferred stock: to be set by resolution of our board of directors at the
time of issuance, up to a maximum of ¥125.00 per share.
In the event that our board of directors decides to pay an interim dividend to holders of record of our
common stock as of September 30 of any year, we will, in priority to the payment of that interim dividend, pay a
preferred interim dividend in the amount specified in our Articles of Incorporation to holders of record of our
preferred stock as of September 30 of the same year. The amount of any preferred interim dividend will be
deducted from the preferred dividend payable on the relevant class of our preferred stock for the same fiscal year.
No preferred dividend will be paid on any of our preferred stock converted into our common stock for the
period from the date following the record date for the preferred dividend or preferred interim dividend last
preceding the relevant conversion date to the relevant conversion date, but the common stock issued upon
conversion will be entitled to receive any dividend payable to holders of record of common stock upon the next
succeeding record date for common stock dividends.
No payment of dividends on our preferred stock or any other shares can be made unless we have a sufficient
distributable amount and a resolution to distribute such distributable amount is obtained at the relevant ordinary
general meeting of shareholders, in the case of annual preferred dividends, or at the board of directors, in the case
of preferred interim dividends.
Dividends on our preferred stock are non-cumulative. If the full amount of any dividend is not declared on
our preferred stock in respect of any fiscal year, holders of our preferred stock do not have any right to receive
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dividends in respect of the deficiency in any subsequent fiscal year, and we will have no obligation to pay the
deficiency or to pay any interest regardless of whether or not dividends are paid in respect of any subsequent
fiscal year. The holders of our preferred stock are not entitled to any further dividends or other participation in or
distribution of our profits.
Liquidation Rights
In the event of our voluntary or involuntary liquidation, record holders of our preferred stock are entitled,
equally in rank as among themselves, to receive before any distribution out of our residual assets is made to
holders of our common stock, a distribution out of our residual assets of:
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¥2,500 per share of second to fourth series of class 5 preferred stock;
¥2,500 per share of first to fourth series of class 6 preferred stock; and
¥2,500 per share of first to fourth series of class 7 preferred stock.
The holders of our preferred stock are not entitled to any further dividends or other participation in or
distribution of our residual assets upon our liquidation.
Voting Rights
No holder of our preferred stock has the right to receive notice of, or to vote at, a general meeting of
shareholders, except as otherwise specifically provided under our Articles of Incorporation or other applicable
law. Under our Articles of Incorporation, holders of our preferred stock will be entitled to receive notice of, and
have one voting right per unit of preferred stock at, our general meetings of shareholders:
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from the commencement of our ordinary general meeting of shareholders if an agenda for approval to
declare a preferred dividend is not submitted to such meeting; or
from the close of any ordinary general meeting of shareholders if a proposed resolution to declare a
preferred dividend is not approved at such meeting.
In each case, holders of our preferred stock will be entitled to receive notice of and vote at the relevant
general meetings of shareholders unless and until such time as a resolution of an ordinary general meeting of
shareholders declaring a preferred dividend is passed.
American Depositary Shares
The Bank of New York Mellon will issue ADRs. Each ADR will represent ownership interests in ADSs.
Each ADS represents one share of our common stock. Each ADS is held by MUFG Bank, acting as custodian, at
its principal office in Tokyo, on behalf of The Bank of New York Mellon, acting as depositary. Each ADS will
also represent securities, cash or other property deposited with The Bank of New York Mellon but not distributed
to ADS holders. The Bank of New York Mellon’s corporate trust office is located at 101 Barclay Street,
New York, New York 10286 and its principal executive office is located at 225 Liberty Street, New York,
New York 10286.
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you
hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. If you hold
the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the
rights of ADS holders described in this section. You should consult with your broker or financial institution to
find out what those procedures are.
The Bank of New York Mellon will actually be the registered holder of the common stock, so you will have
to rely on it to exercise your rights as a shareholder. Our obligations and the obligations of The Bank of
New York Mellon are set out in a deposit agreement among us, The Bank of New York Mellon and you, as an
ADS holder. The deposit agreement and the ADSs are governed by New York law.
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The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does
not contain all the information that may be important to you. For more complete information, you should read the
entire deposit agreement and the form of ADR.
Share Dividends and Other Distributions
The Bank of New York Mellon has agreed to pay to you the cash dividends or other distributions it or the
custodian receives on shares of common stock or other deposited securities, after deducting its fees and expenses.
You will receive these distributions in proportion to the number of shares your ADSs represent.
Cash. The Bank of New York Mellon will convert any cash dividend or other cash distribution we pay on
our common stock into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the
United States. If that is not possible or if any approval from the Japanese government is needed and cannot be
obtained, the deposit agreement allows The Bank of New York Mellon to distribute the Japanese yen only to
those ADS holders to whom it is possible to do so. The Bank of New York Mellon will hold the Japanese yen it
cannot convert for the account of the ADS holders who have not been paid. It will not invest the Japanese yen
and it will not be liable for any interest.
Before making a distribution, any withholding taxes that must be paid under Japanese law will be deducted.
See “—E. Taxation—Japanese Taxation.” The Bank of New York Mellon will distribute only whole U.S. dollars
and cents and will round fractional cents to the nearest whole cent. If the relevant exchange rates fluctuate during
a time when The Bank of New York Mellon cannot convert the Japanese currency, you may lose some or all of
the value of the distribution.
Shares. The Bank of New York Mellon may distribute new ADSs representing any shares we may
distribute as a dividend or free distribution, if we furnish The Bank of New York Mellon promptly with
satisfactory evidence that it is legal to do so. The Bank of New York Mellon will only distribute whole ADSs. It
will sell shares which would require it to issue a fractional ADS and distribute the net proceeds in the same way
as it distributes cash dividends. If The Bank of New York Mellon does not distribute additional ADSs, each ADS
will also represent the new shares.
Rights to receive additional shares.
If we offer holders of our common stock any rights to subscribe for
additional shares of common stock or any other rights, The Bank of New York Mellon may, after consultation
with us, make those rights available to you. We must first instruct The Bank of New York Mellon to do so and
furnish it with satisfactory evidence that it is legal to do so. If we do not furnish this evidence and/or do not give
these instructions, and The Bank of New York Mellon decides that it is practical to sell the rights, The Bank of
New York Mellon will sell the rights and distribute the proceeds in the same way as it distributes cash dividends.
The Bank of New York Mellon may allow rights that are not distributed or sold to lapse. In that case, you will
receive no value for them.
If The Bank of New York Mellon makes rights available to you, upon instruction from you it will exercise
the rights and purchase the shares on your behalf. The Bank of New York Mellon will then deposit the shares and
issue ADSs to you. It will only exercise the rights if you pay it the exercise price and any other charges the rights
require you to pay.
U.S. securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after the
exercise of the rights. For example, you may not be able to trade the ADSs freely in the United States. In this
case, The Bank of New York Mellon may issue the ADSs under a separate restricted deposit agreement which
will contain the same provisions as the deposit agreement, except for changes needed to put the restrictions in
place. The Bank of New York Mellon will not offer you rights unless those rights and the securities to which the
rights relate are either exempt from registration or have been registered under the U.S. Securities Act with
respect to a distribution to you. We will have no obligation to register under the Securities Act those rights or the
securities to which they relate.
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Other distributions. The Bank of New York Mellon will send to you anything else we distribute on
deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that
way, The Bank of New York Mellon has a choice. It may decide to sell what we distributed and distribute the net
proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case
ADSs will also represent the newly distributed property.
The Bank of New York Mellon is not responsible if it decides that it is unlawful or impractical to make a
distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other
securities under the Securities Act. We also have no obligation to take any other action to permit the distribution
of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions
we make on our shares or any value for them if it is illegal or impractical for us or The Bank of New York
Mellon to make them available to you.
Deposit, Withdrawal and Cancellation
The Bank of New York Mellon will issue ADSs if you or your broker deposits shares or evidence of rights
to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as
stamp taxes or stock transfer taxes or fees, The Bank of New York Mellon will register the appropriate number of
ADSs in the names you request and will deliver the ADSs at its corporate trust office to the persons you request.
In certain circumstances, subject to the provisions of the deposit agreement, The Bank of New York Mellon
may issue ADSs before the deposit of the underlying shares. This is called a pre-release of ADSs. A pre-release
is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs
instead of the shares to close out a pre-release. The depositary may pre-release ADSs only under the following
conditions:
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the depositary in writing that it or its customer, as the case may be, owns the shares to be deposited;
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The pre-release must be fully collateralized with cash or collateral that the depositary considers
appropriate; and
The depositary must be able to close out the pre-release on not more than five business days’ notice.
The pre-release will be subject to whatever indemnities and credit regulations that the depositary considers
appropriate. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a
result of a pre-release.
You may turn in your ADSs at the Corporate Trust Office of The Bank of New York Mellon’s office. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees,
The Bank of New York Mellon will deliver (1) the underlying shares to an account designated by you and
(2) any other deposited securities underlying the ADS at the office of the custodian. Or, at your request, risk and
expense, The Bank of New York Mellon will deliver the deposited securities at its Corporate Trust Office.
The ADSs may only be presented for cancellation and release of the underlying shares of common stock or
other deposited securities in multiples of 100 ADSs. Holders of ADRs evidencing less than 100 ADSs are not
entitled to delivery of any underlying shares or other deposited securities unless ADRs, together with other ADRs
presented by the same holder at the same time, represent in the aggregate at least 100 ADSs. If any ADSs are
surrendered but not cancelled pursuant to the preceding sentence, The Bank of New York Mellon will execute
and deliver an ADR or ADRs evidencing the balance of ADSs not so cancelled to the person or persons
surrendering the same.
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Voting Rights
If you are an ADS holder on a record date fixed by The Bank of New York Mellon, you may instruct The
Bank of New York Mellon to vote the shares underlying your ADSs at a meeting of our shareholders in
accordance with the procedures set forth in the deposit agreement.
The Bank of New York Mellon will notify you of the upcoming meeting and arrange to deliver our voting
materials to you. The notice shall contain (a) such information as is contained in such notice of meeting, (b) a
statement that as of the close of business on a specified record date you will be entitled, subject to any applicable
provision of Japanese law and our Articles of Incorporation, to instruct The Bank of New York Mellon as to the
exercise of the voting rights, if any, pertaining to the amount of shares or other deposited securities represented
by your ADSs, and (c) a brief statement as to the manner in which such instructions may be given, including an
express indication that instructions may be given to The Bank of New York Mellon to give a discretionary proxy
to a person designated by us. Upon your written request, received on or before the date established by The Bank
of New York Mellon for such purpose, The Bank of New York Mellon shall endeavor in so far as practicable to
vote or cause to be voted the amount of shares or other deposited securities represented by your ADSs in
accordance with the instructions set forth in your request. So long as Japanese law provides that votes may only
be cast with respect to one or more whole shares or other deposited securities, The Bank of New York Mellon
will aggregate voting instructions to the extent such instructions are the same and vote such whole shares or other
deposited securities in accordance with your instructions. If, after aggregation of all instructions to vote received
by The Bank of New York Mellon, any portion of the aggregated instructions constitutes instructions with
respect to less than a whole share or other deposited securities, The Bank of New York Mellon will not vote or
cause to be voted the shares or other deposited securities to which such portion of the instructions apply. The
Bank of New York Mellon will not vote or attempt to exercise the right to vote that attaches to the shares or other
deposited securities, other than in accordance with the instructions of the ADS holders. If no instructions are
received by The Bank of New York Mellon from you with respect to any of the deposited securities represented
by your ADSs on or before the date established by The Bank of New York Mellon for such purpose, The Bank of
New York Mellon shall deem you to have instructed The Bank of New York Mellon to give a discretionary
proxy to a person designated by us with respect to such deposited securities and The Bank of New York Mellon
shall give a discretionary proxy to a person designated by us to vote such deposited securities, provided that no
such instruction shall be given with respect to any matter as to which we inform The Bank of New York Mellon
(and we have agreed to provide such information as promptly as practicable in writing) that (1) we do not wish
such proxy given, (2) substantial opposition exists or (3) such matter materially and adversely affects the rights
of holders of shares.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct The
Bank of New York Mellon to vote your shares. In addition, The Bank of New York Mellon is not responsible for
failing to carry out voting instructions or for the manner of carrying out voting instructions as long as it has acted
in good faith. This means that you may not be able to exercise your right to vote and there may be nothing you
can do if your shares are not voted as you requested.
Fees and Expenses
See “Item 12.D. Description of Securities Other than Equity Securities—American Depositary Shares.”
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the
deposited securities underlying your ADSs. The Bank of New York Mellon may refuse to transfer your ADSs or
allow you to withdraw the deposited securities underlying your ADSs until those taxes or other charges are paid.
It may apply payments owed to you or sell deposited securities underlying your ADSs to pay any taxes owed and
you will remain liable for any deficiency. If it sells deposited securities, it will, if appropriate, reduce the number
of ADSs to reflect the sale and pay to you any property remaining after it has paid the taxes.
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Reclassifications, Recapitalizations and Mergers
If we:
‰
‰
‰
reclassify, split up or consolidate any of our shares or the deposited securities;
recapitalize, reorganize, merge, liquidate, consolidate or sell all or substantially all of our assets or take
any similar action; or
distribute securities on the shares that are not distributed to you, then,
(1)
the cash, shares or other securities received by The Bank of New York Mellon will become deposited
securities and each ADS will automatically represent its equal share of the new deposited securities
unless additional ADSs are issued; and
(2) The Bank of New York Mellon may, and will if we request, issue new ADSs or ask you to surrender
your outstanding ADSs in exchange for new ADSs, identifying the new deposited securities.
Amendment and Termination
We may agree with The Bank of New York Mellon to amend the deposit agreement and the ADSs without
your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other
governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such
expenses, or prejudices an important right of ADS holders, it will only become effective three months after The
Bank of New York Mellon notifies you of the amendment. At the time an amendment becomes effective, you are
considered, by continuing to hold your ADS, to agree to the amendment and to be bound by the ADSs and the
deposit agreement as amended. However, no amendment will impair your right to receive the deposited securities
in exchange for your ADSs.
The Bank of New York Mellon will terminate the deposit agreement if we ask it to do so, in which case it
must notify you at least 30 days before termination. The Bank of New York Mellon may also terminate the
deposit agreement if The Bank of New York Mellon has told us that it would like to resign and we have not
appointed a new depositary bank within 60 days.
If any ADSs remain outstanding after termination, The Bank of New York Mellon will stop registering the
transfers of ADSs, will stop distributing dividends to ADS holders and will not give any further notices or do
anything else under the deposit agreement other than:
(1) collect dividends and distributions on the deposited securities;
(2)
sell rights and other property offered to holders of deposited securities; and
(3) deliver shares and other deposited securities in exchange for ADSs surrendered to The Bank of
New York Mellon.
At any time after one year following termination, The Bank of New York Mellon may sell any remaining
deposited securities. After that, The Bank of New York Mellon will hold the money it received on the sale, as
well as any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS holders that
have not surrendered their ADSs. It will not invest the money and has no liability for interest. The Bank of
New York Mellon’s only obligations will be to account for the money and other cash and with respect to
indemnification and to retain depositary documents. After termination, our only obligations will be with respect
to indemnification and to pay certain amounts to The Bank of New York Mellon.
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Limitations on Obligations and Liability to ADS Holders
The deposit agreement expressly limits our obligations and the obligations of The Bank of New York
Mellon. It also limits our liability and the liability of The Bank of New York Mellon. We and The Bank of
New York Mellon:
‰
‰
‰
‰
are only obligated to take the actions specifically set forth in the deposit agreement without negligence
or bad faith;
are not liable if either is prevented or delayed by law, any provision of our Articles of Incorporation or
circumstances beyond their control from performing their obligations under the deposit agreement;
are not liable if either exercises or fails to exercise discretion permitted under the deposit agreement;
have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the
deposit agreement on your behalf or on behalf of any other party unless indemnified to their satisfaction;
and
‰ may rely upon any advice of or information from legal counsel, accountants, any person depositing
shares, any ADS holder or any other person believed in good faith to be competent to give them that
advice or information.
In the deposit agreement, we and The Bank of New York Mellon agree to indemnify each other for
liabilities arising out of acts performed or omitted by the other party in accordance with the deposit agreement.
Requirements for Depositary Actions
Before The Bank of New York Mellon will issue or register transfer of an ADS, make a distribution on an
ADS, or permit withdrawal of shares, it may require:
‰
‰
‰
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees
charged by third parties for the transfer of any shares or other deposited securities;
production of satisfactory proof of the identity and genuineness of any signature or other information it
deems necessary; and
compliance with regulations it may establish, from time to time, consistent with the deposit agreement,
including presentation of transfer documents.
The Bank of New York Mellon may refuse to deliver, transfer, or register transfers of ADSs generally when
its transfer books are closed, when our transfer books are closed or at any time if it or we think it advisable to do
so.
You have the right to cancel your ADSs and withdraw the underlying shares at any time except:
‰ when temporary delays arise because: (1) The Bank of New York Mellon has closed its transfer books
or we have closed our transfer books; (2) the transfer of shares is blocked to permit voting at a
shareholders’ meeting; or (3) we are paying a dividend on the shares;
‰ when you or other ADS holders seeking to withdraw shares owe money to pay fees, taxes and similar
charges; or
‰ when it is necessary to prohibit withdrawals in order to comply with any laws or governmental
regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
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Reports and Other Communications
The Bank of New York Mellon will make available for your inspection at its corporate trust office any
reports and communications, including any proxy soliciting material, that it receives from us, if those reports and
communications are both (a) received by The Bank of New York Mellon as the holder of the deposited securities
and (b) made generally available by us to the holders of the deposited securities. If we ask it to, The Bank of
New York Mellon will also send you copies of those reports it receives from us.
Inspection of Transfer Books
The Bank of New York Mellon will keep books for the registration and transfer of ADSs, which will be
open for your inspection at all reasonable times. You will only have the right to inspect those books if the
inspection is for the purpose of communicating with other owners of ADSs in connection with our business or a
matter related to the deposit agreement or the ADSs.
C. Material Contracts
Except as described elsewhere in this Annual Report, all material contracts entered into by us in the past two
years preceding the filing of this Annual Report were entered into in the ordinary course of business.
D. Exchange Controls
Foreign Exchange and Foreign Trade Law
The Foreign Exchange and Foreign Trade Law of Japan and the cabinet orders and ministerial ordinances
incidental thereto, collectively known as the Foreign Exchange Law, set forth, among other matters, regulations
relating to the receipt by non-residents of Japan of payment with respect to shares to be issued by us and the
acquisition and holding of shares by non-residents of Japan and foreign investors, both as defined below. It also
applies in some cases to the acquisition and holding of ADSs representing such shares acquired and held by
non-residents of Japan and foreign investors. Generally, the Foreign Exchange Law currently in effect does not
affect the right of a non-resident of Japan to purchase or sell an ADS outside Japan for non-Japanese currency.
“Non-residents of Japan” are defined as individuals who are not resident in Japan and corporations whose
principal offices are located outside Japan. Generally, the branches and offices of non-resident corporations
which are located in Japan are regarded as residents of Japan while the branches and offices of Japanese
corporations located outside Japan are regarded as non-residents of Japan.
“Foreign investors” are defined as:
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natural persons who are non-resident of Japan;
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‰
corporations which are organized under the laws of foreign countries or whose principal offices are
located outside Japan;
corporations of which 50% or more of the shares are directly or indirectly held by individuals not
resident of Japan and corporations which are organized under the laws of foreign countries or whose
principal offices are located outside Japan; and
corporations, a majority of officers (or a majority of officers having the power of representation) of
which are non-resident individuals.
Dividends and Proceeds of Sales
Under the Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan of, shares held by
non-residents of Japan may in general be converted into any foreign currency and repatriated abroad. The
acquisition of our shares by non-residents of Japan by way of a stock split is not subject to any notification or
reporting requirements.
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Acquisition of Shares
In general, a non-resident of Japan who acquires shares from a resident of Japan is not subject to any prior
filing requirement, although the Foreign Exchange Law empowers the Minister of Finance of Japan to require a
prior approval for any such acquisition in certain limited circumstances.
If a foreign investor acquires our shares, and, together with parties who have a special relationship with that
foreign investor, holds 10% or more of our issued shares as a result of such acquisition, the foreign investor must
file a report of such acquisition with the Minister of Finance and any other competent Minister by the fifteenth
day of the month immediately following the month to which the date of such acquisition belongs. In certain
limited circumstances, however, a prior notification of such acquisition must be filed with the Minister of
Finance and any other competent Minister, who may modify or prohibit the proposed acquisition.
Deposit and Withdrawal under American Depositary Facility
The deposit of shares with us, in our capacity as custodian and agent for the depositary, in Tokyo, the
issuance of ADSs by the depositary to a non-resident of Japan in respect of the deposit and the withdrawal of the
underlying shares upon the surrender of the ADSs are not subject to any of the formalities or restrictions referred
to above. However, where as a result of a deposit or withdrawal the aggregate number of shares held by the
depositary, including shares deposited with us as custodian for the depositary, or the holder surrendering ADSs,
as the case may be, would be 10% or more of the total outstanding shares, a report will be required, and in
specified circumstances, a prior notification may be required, as noted above.
Reporting of Substantial Shareholdings
The Financial Instruments and Exchange Act of Japan requires any person who has become, beneficially
and solely or jointly, a holder of more than 5% of the total issued shares of capital stock of a company listed on
any Japanese financial instruments exchange or whose shares are traded on the over-the-counter market in Japan
to file with the director of a competent finance bureau within five business days a report concerning such
shareholdings.
A similar report must also be filed in respect of any subsequent change of 1% or more in any such holding
ratio or any change in material matters set out in reports previously filed, with certain exceptions. For this
purpose, shares issuable to such person upon exchange of exchangeable securities, conversion of convertible
securities or exercise of share subscription warrants or stock acquisition rights (including those incorporated in
bonds with stock acquisition rights) are taken into account in determining both the number of shares held by such
holder and the issuer’s total issued shares of capital stock.
E. Taxation
Japanese Taxation
The following sets forth the material Japanese tax consequences to owners of shares of our common stock or
ADSs who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan
to which the relevant income is attributable, which we refer to as “non-resident holders” in this section. The
statements regarding Japanese tax laws below are based on the laws in force and as interpreted by the Japanese
taxation authorities as at the date of this Annual Report and are subject to changes in the applicable Japanese
laws, double taxation treaties, conventions or agreements or interpretations thereof occurring after that date. This
summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential
investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and
disposition of shares of our common stock or ADSs, including specifically the tax consequences under Japanese
law, the laws of the jurisdiction of which they are resident and any tax treaty between Japan and their country of
residence, by consulting their own tax advisers.
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For the purpose of Japanese tax law and the Convention between the Government of the United States of
America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income, or the Tax Convention, a U.S. holder of ADSs will be treated as the owner of the shares of our
common stock underlying the ADSs evidenced by the ADRs.
Generally, a non-resident holder of shares of our common stock or ADSs is subject to Japanese withholding
tax on dividends paid by us. In the absence of any applicable tax treaty, convention or agreement reducing the
rate of withholding tax, the rate of Japanese withholding tax applicable to dividends paid by us to non-resident
holders is (i) 15.315% for dividends to be paid on or before December 31, 2037 and (ii) 15% for dividends to be
paid thereafter, except for dividends paid to any individual non-resident holder who holds 3% or more of our
issued shares for which the applicable rate is (a) 20.42% for dividends to be paid on or before December 31,
2037 and (b) 20% for dividends to be paid thereafter, pursuant to Japanese tax law.
The Tax Convention establishes the maximum rate of Japanese withholding tax which may be imposed on
dividends paid to a U.S. resident not having a permanent establishment in Japan. Under the Tax Convention, the
maximum withholding rate for U.S. holders (as defined below) is generally set at 10% of the gross amount
distributed. However, the maximum rate is 5% of the gross amount distributed if the recipient is a corporation
and owns directly or indirectly, on the date on which entitlement to the dividends is determined, at least 10% of
the voting shares of the paying corporation. Furthermore, the amount distributed shall not be taxed if the
recipient is (i) a pension fund which is a U.S. resident, provided that such dividends are not derived from the
carrying on of a business, directly or indirectly, by such pension fund or (ii) a parent company with a controlling
interest in the paying company and satisfies certain other requirements. U.S. holders (as defined below) are urged
to consult their own tax advisors with respect to their eligibility for benefits under the Tax Convention.
Japanese tax law provides in general that if the Japanese statutory rate is lower than the maximum rate
applicable under tax treaties, conventions or agreements, the Japanese statutory rate as stated above shall be
applicable.
Non-resident holders of shares who are entitled to a reduced rate of Japanese withholding tax on payments
of dividends on the shares of our common stock or ADSs by us are required to submit an Application Form for
the Income Tax Convention regarding Relief from Japanese Income Tax on Dividends, or an Application Form
for the Income Tax Convention, in advance through a paying handling agent to the relevant tax authority before
the payment of dividends. A standing proxy for non-resident holders may provide this application service for the
non-resident holders. In this regard, a certain simplified special filing procedure is available for non-resident
holders to claim treaty benefits of exemption from or reduction of Japanese withholding tax with respect to
dividends to be paid on or after January 1, 2014, by submitting a Special Application Form for Income Tax
Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on
Dividends of Listed Stocks (together with any other required forms and documents). With respect to ADSs, this
reduced rate or exemption will be applicable to non-resident holders of ADSs if the depositary or its agent
submits two Application Forms (one before payment of dividends and the other within eight months after the
record date concerning such payment of dividends), together with certain other documents. To claim this reduced
rate or exemption, non-resident holders of ADSs will be required to file a proof of taxpayer status, residence and
beneficial ownership, as applicable, and to provide other information or documents as may be required by the
depositary. Non-resident holders who are entitled, under any applicable tax treaty, to a reduced rate of Japanese
withholding tax below the rate otherwise applicable under Japanese tax law, or exemption therefrom, as the case
may be, but fail to submit the required application in advance may nevertheless be entitled to claim a refund from
the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax
treaty (if such non-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full
amount of tax withheld (if such non-resident holders are entitled to an exemption under the applicable tax treaty),
as the case may be, by complying with a certain subsequent filing procedure. We do not assume any
responsibility to ensure withholding at the reduced rate, or exemption therefrom, for non-resident holders who
would be so eligible under an applicable tax treaty but where the required procedures as stated above are not
followed.
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Gains derived from the sale or other disposition of shares of our common stock or ADSs by a non-resident
holder are not, in general, subject to Japanese income or corporation taxes or other Japanese taxes.
Any deposits or withdrawals of shares of our common stock by a non-resident holder in exchange for ADSs
are not subject to Japanese income or corporation tax.
Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired
shares of our common stock or ADSs as legatee, heir or donee, even if none of the individual, the decedent or the
donor is a Japanese resident.
U.S. Taxation
The following sets forth the material U.S. federal income tax consequences of the ownership of shares and
ADSs by a U.S. holder, as defined below. This summary is based on U.S. federal income tax laws, including the
U.S. Internal Revenue Code of 1986, or the Code, its legislative history, existing and proposed Treasury
regulations thereunder, published rulings and court decisions, and the Tax Convention (as defined above), all of
which are subject to change, possibly with retroactive effect.
The following summary is not a complete analysis or description of all potential U.S. federal income tax
consequences to a particular U.S. holder. It does not address all U.S. federal income tax considerations that may
be relevant to all categories of potential purchasers, certain of which (such as banks or other financial
institutions, insurance companies, dealers in securities, tax-exempt entities, non-U.S. persons, persons holding a
share or an ADS as part of a “straddle,” “hedge,” conversion or integrated transaction, holders whose “functional
currency” is not the U.S. dollar, holders liable for alternative minimum tax, holders required to report income no
later than when such income is reported on an “applicable financial statement,” and holders of 10% or more of
our shares by vote or value) are subject to special tax treatment. This summary does not address any foreign,
state, local or other tax consequences of investments in our shares or ADSs.
This summary addresses only shares or ADSs that are held as capital assets within the meaning of
Section 1221 of the Code.
As used herein, a “U.S. holder” is a beneficial owner of shares or ADSs, as the case may be, that is:
‰
a citizen or resident of the United States as determined for U.S. federal income tax purposes;
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a corporation or other entity taxable as a corporation created or organized under the laws of the
United States, any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
a trust
‰
the administration of which is subject to (1) the supervision of a court within the United States and
(2) the control of one or more U.S. persons as described in Section 7701(a)(30) of the Code; or
‰
that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.
If a partnership holds shares or ADSs, the tax treatment of a partner will generally depend on the status of
the partner and the activities of the partnership. If you are a partner of a partnership holding shares or ADSs, you
should consult your tax advisor.
We urge U.S. holders to consult their own tax advisors concerning the U.S. federal, state and local and
other tax consequences to them of the purchase, ownership and disposition of shares or ADSs.
This summary is based in part on the assumption that each obligation under the deposit agreement and any
related agreement will be performed in accordance with its respective terms. Subject to the discussion in the next
196
paragraph, for U.S. federal income tax purposes, holders of ADSs will be treated as the owners of the shares
represented by the ADSs. Accordingly, withdrawals or deposits of shares in exchange for ADSs generally will
not be subject to U.S. federal income tax.
The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder
of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the
beneficial ownership of the underlying shares (for example, pre-releasing ADSs to persons who do not have
beneficial ownership of the securities underlying the ADSs). Accordingly, the discussion on the creditability of
Japanese taxes and the availability of the reduced rate of tax for dividends received by certain non-corporate
U.S. holders, each as described below, could be affected by actions taken by intermediaries in the chain of
ownership between the holder of ADSs and us if, as a result of such actions, the holders of ADSs are not properly
treated as beneficial owners of the underlying shares. We are not aware of any intention to take any such actions,
and accordingly, the remainder of this discussion assumes that holders of ADSs will be properly treated as
beneficial owners of the underlying shares.
Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that
is treated as a “passive foreign investment company” (a “PFIC”) for any taxable year during which the
U.S. holder held shares or ADSs, as discussed in more detail below. U.S. holders should consult their own tax
advisors as to the potential application of the PFIC rules to their ownership and disposition of shares or ADSs.
Taxation of Dividends
Subject to the application of the PFIC rules discussed below, U.S. holders will include the gross amount of
any distribution received with respect to shares or ADSs (before reduction for Japanese withholding taxes), to the
extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax
purposes), as ordinary income in their gross income. As discussed below, for certain U.S. holders, dividends may
be eligible for a reduced rate of taxation. The amount of distribution of property other than cash will be the fair
market value of such property on the date of the distribution. Dividends received by a U.S. holder will not be
eligible for the “dividends-received deduction” allowed to U.S. corporations in respect of dividends received
from other U.S. corporations. To the extent that an amount received by a U.S. holder exceeds such holder’s
allocable share of our current earnings and profits, such excess will be applied first to reduce such holder’s tax
basis in its shares or ADSs, thereby increasing the amount of gain or decreasing the amount of loss recognized on
a subsequent disposition of the shares or ADSs. Then, to the extent such distribution exceeds such U.S. holder’s
tax basis, such excess will be treated as capital gain. However, we do not maintain calculations of our earnings
and profits in accordance with U.S. federal income tax principles, and U.S. holders should therefore assume that
any distribution by us with respect to shares or ADSs will constitute ordinary dividend income. The amount of
the dividend will be the U.S. dollar value of the Japanese yen payments received. This value will be determined
at the spot Japanese yen/U.S. dollar rate on the date the dividend is received by the depositary in the case of
U.S. holders of ADSs, or by the shareholder in the case of U.S. holders of shares, regardless of whether the
dividend payment is in fact converted into U.S. dollars at that time. If the Japanese yen received as a dividend are
not converted into U.S. dollars on the date of receipt, a U.S. holder will have basis in such Japanese yen equal to
their U.S. dollar value on the date of receipt, and any foreign currency gains or losses resulting from the
conversion of the Japanese yen will generally be treated as U.S. source ordinary income or loss. If the Japanese
yen received as a dividend are converted into U.S. dollars on the date of receipt, a U.S. holder will generally not
be required to recognize foreign currency gain or loss in respect of the dividend income.
If a U.S. holder is eligible for benefits under the Tax Convention, the holder may be able to claim a reduced
rate of Japanese withholding tax. All U.S. holders should consult their tax advisors about their eligibility for
reduction of Japanese withholding tax. A U.S. holder may claim a deduction or a foreign tax credit, subject to
other applicable limitations, only for tax withheld at the appropriate rate. A U.S. holder would be allowed a
foreign tax credit for withholding tax for any portion of the tax that could have been avoided by claiming benefits
under the Tax Convention. For foreign tax credit limitation purposes, the dividend will be income from sources
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outside the United States. The limitation on foreign taxes eligible for credit is calculated separately with respect
to specific classes of income. For this purpose, dividends we pay will constitute “passive income” or, in the case
of certain U.S. holders, “financial services income.” The rules governing U.S. foreign tax credits are very
complex and U.S. holders should consult their tax advisors regarding the availability of foreign tax credits under
their particular circumstances.
Subject to applicable exceptions with respect to short-term and hedged positions, qualified dividends
received by non-corporate U.S. holders from a qualified corporation may be eligible for reduced rates of taxation.
Qualified corporations include those foreign corporations eligible for the benefits of a comprehensive income tax
treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes
and that includes an exchange of information provision. The Tax Convention meets these requirements. Subject
to the PFIC discussion below, we believe that we are a qualified foreign corporation and that dividends received
by U.S. investors with respect to our shares or ADSs will be qualified dividends. Dividends received by U.S.
investors from a foreign corporation that was a PFIC in either the taxable year of the distribution or the preceding
taxable year are not qualified dividends.
Passive Foreign Investment Company Considerations
Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that
is treated as a PFIC, for any taxable year during which the U.S. holder held shares or ADSs. A foreign
corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is
passive income (the “income test”), or (ii) 50% or more of the average fair market value of its assets (determined
quarterly) is attributable to assets that produce or are held for the production of passive income (the “asset test”).
For this purpose, passive income generally includes dividends, interest, royalties, rents and certain gains from the
sale of stock and securities. If a foreign corporation owns at least 25% (by value) of the stock of another
corporation, the corporation will be treated, for purposes of the PFIC tests, as owning a proportionate share of the
other corporation’s assets and receiving its proportionate share of the other corporation’s income. The
determination of whether a foreign corporation is a PFIC is made annually.
Proposed Treasury regulations convert what would otherwise be passive income into non-passive income
when such income is banking income earned by an active bank. Based upon these proposed Treasury regulations,
and upon certain management estimates and assumptions, we do not believe that we were a PFIC for the year
ended March 31, 2018 because we did not meet either the income test or the asset test. Until recently, temporary
IRS guidance treated certain qualifying government bonds as assets that generate active banking income for these
purposes; however, such guidance has expired for taxable years beginning after 2016. The determination of
whether we are a PFIC must be made annually and involves a fact-intensive analysis based upon, among other
things, the composition of our income and assets and the value of our assets from time to time. It is possible that
we may become a PFIC in the fiscal year ending March 31, 2019 or any future taxable year due to changes in our
income or asset composition and the expiration of the temporary IRS guidance described above. In addition, a
decrease in the price of our shares may also result in our becoming a PFIC. Furthermore, there can be no
assurance that the above-described proposed Treasury regulations will be finalized in their current form.
Moreover, the application of the proposed Treasury regulations is not clear. If we were classified as a PFIC in
any year during which a U.S. holder owns shares or ADSs and the U.S. holder does not make a “mark-to-market”
election, as discussed below, we generally would continue to be treated as a PFIC as to such U.S. holder in all
succeeding years, regardless of whether we continue to meet the income or asset test discussed above. U.S.
Holders are urged to consult their own tax advisors with respect to the tax consequences to them if we were to
become a PFIC for any taxable year in which they own our shares or ADSs.
If we were classified as a PFIC for any taxable year during which a U.S. holder holds our shares or ADSs,
the U.S. holder would generally not receive capital gains treatment upon the sale of the shares or ADSs and
would be subject to increased tax liability (generally including an interest charge) upon the sale or other
disposition of the shares or ADSs or upon the receipt of certain distributions treated as “excess distributions,”
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unless the U.S. holder makes the mark-to-market election described below. An excess distribution generally
would be any distribution to a U.S. holder with respect to shares or ADSs during a single taxable year that is
greater than 125% of the average annual distributions received by a U.S. holder with respect to shares or ADSs
during the three preceding taxable years or, if shorter, during the U.S. holder’s holding period for the shares or
ADSs.
Mark-to-Market Election.
If the shares or ADSs are regularly traded on a registered national securities
exchange or certain other exchanges or markets, then such shares or ADSs would constitute “marketable stock”
for purposes of the PFIC rules, and a U.S. holder would not be subject to the foregoing PFIC rules if such holder
made a mark-to-market election. After making such an election, the U.S. holder generally would include as
ordinary income each year during which the election is in effect and during which we are a PFIC the excess, if
any, of the fair market value of our shares or ADSs at the end of the taxable year over such holder’s adjusted
basis in such shares or ADSs. These amounts of ordinary income would not be eligible for the favorable tax rates
applicable to qualified dividend income or long-term capital gains. A U.S. holder also would be allowed to take
an ordinary loss in respect of the excess, if any, of the holder’s adjusted basis in our shares or ADSs over their
fair market value at the end of the taxable year (but only to the extent of the net amount of income that was
previously included as a result of the mark-to-market election). A U.S. holder’s tax basis in our shares or ADSs
would be adjusted to reflect any income or loss amounts resulting from a mark-to-market election. If made, a
mark-to-market election would be effective for the taxable year for which the election was made and for all
subsequent taxable years unless the shares or ADSs cease to qualify as “marketable stock” for purposes of the
PFIC rules or the IRS consented to the revocation of the election. In the event that we are classified as a PFIC,
U.S. holders are urged to consult their tax advisors regarding the availability of the mark-to-market election, and
whether the election would be advisable in the holder’s particular circumstances.
QEF Election. The PFIC rules outlined above also would not apply to a U.S. holder if such holder
alternatively elected to treat us as a “qualified electing fund” or “QEF.” An election to treat us as a QEF will not
be available, however, if we do not provide the information necessary to make such an election. We will not
provide U.S. holders with the information necessary to make a QEF election, and thus, the QEF election will not
be available with respect to our shares.
Notwithstanding any election made with respect to our shares, dividends received with respect to our shares
will not constitute “qualified dividend income” if we are a PFIC in either the year of the distribution or the
preceding taxable year. Dividends that do not constitute qualified dividend income are not eligible for taxation at
the reduced tax rate described above in “—Taxation of Dividends.” Instead, such dividends would be subject to
tax at ordinary income rates.
If a U.S. holder owns shares or ADSs during any year in which we are a PFIC, the U.S. holder must also file
IRS Form 8621 regarding distributions received on the shares or ADSs, any gain realized on the shares or ADSs,
and any “reportable election” in accordance with the instructions to such form. In addition, each U.S. holder is
required to file a separate IRS Form 8621 if such U.S. holder owns shares or ADSs during any year in which we
are a PFIC whether or not such U.S. holder received distributions on the shares or ADSs, realized a gain on the
shares or ADSs or made a “reportable election” during such year. U.S. holders are urged to consult their own tax
advisors concerning the U.S. federal income tax consequences of holding shares or ADSs if the Company were
considered a PFIC in any taxable year.
Taxation of Capital Gains
Subject to the application of the PFIC rules discussed above, upon a sale or other disposition of shares or
ADSs, a U.S. holder will recognize a gain or loss in an amount equal to the difference between the U.S. dollar
value of the amount realized and the U.S. holder’s tax basis, determined in U.S. dollars, in such shares or ADSs.
Such gains or losses will be capital gains or losses and will be long-term capital gains or losses if the U.S.
holder’s holding period for such shares or ADSs exceeds one year. Long-term capital gains of non-corporate
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U.S. holders (including individuals) are generally eligible for reduced rates of taxation. A U.S. holder’s adjusted
tax basis in its shares or ADSs will generally be the cost to the holder of such shares or ADSs. Any such gains or
losses realized by a U.S. holder upon disposal of the shares or ADSs will generally be income or loss from
sources within the United States for foreign tax credit limitation purposes. The deductibility of capital losses is
subject to limitations under the Code.
Information Reporting and Backup Withholding
Dividends paid on shares or ADSs to a U.S. holder, or proceeds from a U.S. holder’s sale or other
disposition of shares or ADSs, may be subject to information reporting requirements. Those dividends or
proceeds from sale or disposition may also be subject to backup withholding unless the U.S. holder:
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‰
is a corporation or other exempt recipient, and, when required, demonstrates this fact; or
provides a correct taxpayer identification number on a properly completed U.S. IRS Form W-9 or other
appropriate form which certifies that the U.S. holder is not subject to backup withholding and otherwise
complies with applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable
against the U.S. holder’s U.S. federal income tax liability or refundable to the extent that it exceeds such liability
if the U.S. holder provides the required information to the IRS. If a U.S. holder is required to and does not
provide a correct taxpayer identification number, the U.S. holder may be subject to penalties imposed by the IRS.
All holders should consult their tax advisors as to their qualification for the exemption from backup withholding
and the procedure for obtaining an exemption.
In addition, certain U.S. holders who are individuals that hold certain foreign financial assets (which may
include our shares or ADSs) are required to report information relating to such assets, subject to certain
exceptions. U.S. holders should consult their tax advisors regarding the effect, if any, of this requirement on their
ownership and disposition of our shares and ADSs.
Additional Tax on Investment Income
U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds will be
subject to an additional 3.8% tax on unearned income, including, among other things, dividends on, and capital
gains from the sale or other taxable disposition of, shares or ADSs, subject to certain limitations and exceptions.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We file periodic reports and other information with the SEC. You may read and copy any document that we
file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. The SEC also
maintains a web site that contains reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC (http://www.sec.gov).
I.
Subsidiary Information
Please refer to discussion under “Item 4.C. Information on the Company—Organizational Structure.”
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Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.
In the current market and regulatory environment, financial groups such as us are expected to ensure
increasingly more sophisticated and comprehensive risk management. Risk management plays an increasingly
important role in our operations as a financial group operating globally through various subsidiaries.
We identify various risks arising from businesses based on group-wide uniform criteria and implement
integrated risk management to ensure a stronger financial condition and to maximize shareholder value. Based on
this approach, we identify, measure, control and monitor a wide variety of risks so as to achieve a stable balance
between earnings and risks. We undertake risk management to create an appropriate capital structure and to
achieve optimal allocation of resources.
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Risk Classification
At the holding company level, we broadly classify and define risk categories faced by the Group, including
those that are summarized below. Group companies perform more detailed risk management based on their
respective operations.
Type of Risk
Credit Risk
Market Risk
Funding Liquidity Risk
Operational Risk
‰ Operations Risk
Definition
The risk of financial loss in credit assets (including off-balance sheet
instruments) caused by deterioration in the credit conditions of counterparties.
This category includes country risk.
The risk of financial loss where the value of our assets and liabilities could be
adversely affected by changes in market variables such as interest rates,
securities prices and foreign exchange rates. Market liquidity risk is the risk of
financial loss caused by the inability to secure market transactions at the
required volume or price levels as a result of market turbulence or lack of
trading liquidity.
The risk of incurring loss if a poor financial position at a group company
hampers the ability to meet funding requirements or necessitates fund
procurement at interest rates markedly higher than normal.
The risk of loss resulting from inadequate or failed internal processes, people
or systems, or from external events.
The risk of incurring losses arising from negligence of correct operational
processing, incidents or misconduct involving officers or staff, as well as risks
similar to this risk.
Information Risk
The risk of loss caused by loss, alteration, falsification or leakage of personal
or other confindential information, as well as risks similar to these risks.
IT Risk
Tangible Asset Risk
The risk of loss arising from destruction, suspension, malfunction or misuse of
IT, or unauthorized alteration and leakage of electronic data caused by
insufficient IT systems planning, development or operations or by
vulnerabilities of or external threats to IT system security, including
cybersecurity, as well as risks similar to these risks.
The risk of loss due to damage to tangible assets or deterioration in the
operational environment caused by disasters or inadequate asset maintenance,
as well as risks similar to this risk. Tangible assets include movable and
immovable property, including owned or leased land and buildings, facilities
incidental to buildings, and fixtures and fittings.
Personnel Risk
The risk of loss due to an outflow or loss of human resources or deterioration
in employee morale, as well as risks similar to this risk.
Incompliance with
Laws and Regulations
Risk
Legal Risk
Reputation Risk
Model Risk
The risk of loss due to failure to comply with laws and regulations, as well as
risks similar to these risks.
The risk of a loss due to failure to identify or address legal issues relating to
contracts and other business operations or insufficient handling of lawsuits, as
well as risks similar to these risks.
The risk of harm to our corporate value arising from perceptions of our
customers, shareholders, investors or other stakeholders and in the market or
society that we deviate from their expectations or confidence.
The risk of loss due to decision-making based on information provided by an
inaccurate model or the misuse of a model.
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Risk Management System
We have adopted an integrated risk management system to promote close cooperation among the holding
company and group companies. The holding company and the major subsidiaries (which include MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings) each appoint a chief risk officer and
establish an independent risk management division. The board of directors of the holding company determines
risk management policies for various types of risks based on the discussions at, and reports and recommendations
from, committees established specially for risk management purposes. The holding company has established
committees to oversee management in managing risks relevant to the Group. Following the fundamental risk
management policies determined by the board of directors, each group company establishes its own systems and
procedures for identifying, analyzing and managing various types of risks from both quantitative and qualitative
perspectives. The holding company seeks to enhance group wide risk identification, to integrate and improve the
Group’s risk management system and related methods, to maintain asset quality, and to eliminate concentrations
of specific risks.
The following diagram summarizes our integrated risk management framework:
Risk Management System
Holding company (Mitsubishi UFJ Financial Group)
Risk Committee
Board of Directors
U.S. Risk Committee
Executive Committee
Risk Management Committee
Operational Risk
Working Group
Crisis Management
Working Group
Loan and Investment
Committee
Group-wide
Credit Committee
Corporate Risk Management
Division
(cordinates risk management)
Credit Policy &
Planning Division
Global Compliance Division
Operations & Systems
Planning Division
Corporate Administration
Division
Management Planning
Committee
(including ALM)
Market Risk,
Funding Liquidity Risk,
Operational Risk,
Operations Risk,
Reputation Risk, Model Risk
Credit Risk
Information Risk,
Information Risk
Information Risk
Incompliance with Laws and
Incompliance with Laws and
Incompliance with Laws and
Requlations Risk
Requlations Risk
Requlations Risk
IT Risk
Tangible Asset Risk
Human Resources Division
Personnel Risk
Legal Division
Legal Risk
Setting of basic
policies/guidance/
advice, etc.
Consultation/
reporting, etc.
MUFG Group Companies
Risk Management
Committee
Operational Risk
Working Group
Crisis Management
Working Group
Loan and Investment
Committee
Credit Committee
CPM Committee
Customer Protection
Committee,
System Strategy
Committee
MUFG BANK
Board of Directors
Executive Committee
Corporate Risk Management
Division
(cordinates risk management)
Credit Policy & Planning
Division
Corporate Planning Meeting
ALM Committee
Market Risk,
Funding Liquidity Risk,
Operational Risk,
Reputation Risk,
Model Risk
Credit Risk
Transaction Services Division
Settlement Risk
Operations & Systems
Risk Management Office
Operations Risk,
IT Risk
Global Compliance
Division
Information Risk,
Incompliance with Laws and
Regulations Risk
Corporate Administration
Division
Tangible Asset Risk
Human Resources Division
Personnel Risk
Legal Division
Legal Risk
Risk Management
Committee
(including crisis
management)
Capital Management
Committee
Credit Committee
Mitsubishi UFJ Trust and Banking
Board of Directors
Executive Committee
ALM Committee
Corporate Risk Management
Division
(cordinates risk management)
Credit Risk, Market Risk,
Funding Liquidity Risk,
Operational Risk,
Reputation Risk,
Model Risk,
Operations Risk,
Information Risk
Business Process and
IT Planning Division
IT Risk
Global Compliance
Division
Incompliance with Laws
and Regulations Risk,
Legal Risk
Corporate
Administration Division
Tangible Asset Risk
Personnel Division
Personnel Risk
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Crisis Management Framework
In order to have a clear critical response rationale and associated decision-making criteria, we have
developed systems designed to ensure that our operations are not interrupted or can be restored to normal quickly
in the event of a natural disaster or system failure so as to minimize any disruption to customers and markets. A
crisis management team within the holding company is the central coordinating body in the event of any
emergency. Based on information collected from crisis management personnel at the major subsidiaries, this
central body would assess the overall impact of a crisis on the Group’s business and establish task forces that
could implement all countermeasures to restore full operations. We have business continuity plans to maintain
continuous operational viability in the event of natural disasters, system failures and other types of emergencies.
Regular training drills are conducted to upgrade the practical effectiveness of these systems.
Recognizing that our operations, particularly in Japan, are subject to the risk of earthquakes and other
natural disasters as well as accidents resulting from such disasters, including a sudden massive blackout in major
metropolitan areas in Japan, and that our contingency plans may not address all eventualities that may occur in
the event of a material disruption to our operations, we conduct a comprehensive review of our existing business
continuity plan to more effectively respond to such extreme scenarios, and contemplate and implement measures
to augment our current business continuity management framework, including enhancing our off-site back-up
data storage and other information technology systems.
Implementation of Basel Standards
In determining capital ratios under the FSA guidelines implementing Basel III, we and our banking
subsidiaries used the Advanced Internal Ratings-Based approach, or the AIRB approach, to calculate capital
requirements for credit risk as of March 31, 2018. The Standardized Approach is used for some subsidiaries that
are considered to be immaterial to the overall MUFG capital requirements, and MUFG Americas Holdings has
adopted a phased rollout of the Internal Ratings-Based Approach. We reflect market risk in our risk-weighted
assets by applying the Internal Models Approach to calculate general market risk and the Standardized
Measurement Method to calculate specific risk. Under the Internal Models Approach, we principally use a
historical simulation model to calculate value-at-risk, or VaR, amounts by estimating the profit and loss on our
portfolio by applying actual fluctuations in historical market rates and prices over a fixed period. Under the FSA
guidelines implementing Basel III, we reflect operational risk in our risk-weighted assets by using the
Standardized Approach and the Advanced Measurement Approach.
Based on the Basel III framework, the Japanese capital ratio framework has been revised to implement the
more stringent requirements, which are being implemented in phases beginning on March 31, 2013. Likewise,
local banking regulators outside of Japan, such as those in the United States, have begun, or are expected, to
revise the capital and liquidity requirements imposed on our subsidiaries and operations in those countries to
implement the more stringent requirements of Basel III as adopted in those countries. We intend to carefully
monitor further developments with an aim to enhance our corporate value and maximize shareholder value by
integrating the various strengths within the Group. For more information on the Basel regulatory framework and
requirements, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.”
Credit Risk Management
Credit risk is the risk of losses due to deterioration in the financial condition of a borrower. We have
established risk management systems to maintain asset quality, manage credit risk exposure and achieve earnings
commensurate with risk.
MUFG and its major banking subsidiaries apply a uniform credit rating system for asset evaluation and
assessment, loan pricing, and quantitative measurement of credit risk. This system also underpins the calculation
of capital requirements and management of credit portfolios. We continually seek to our upgrade credit portfolio
management, or CPM, expertise to achieve an improved risk-adjusted return based on the Group’s credit
portfolio status and flexible response capability to economic and other external changes.
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Credit Risk Management System
The credit portfolios of our major banking subsidiaries are monitored and assessed on a regular basis by the
holding company to maintain and improve asset quality. A uniform credit rating and asset evaluation and
assessment system is used to ensure timely and proper evaluation of all credit risks.
Under our credit risk management system, each of our subsidiaries in the banking, securities, consumer
finance, and leasing businesses, manages its respective credit risk on a consolidated basis based on the attributes
of the risk, while the holding company oversees and manages credit risk on an overall group-wide basis. The
holding company also convenes regular committee meetings to monitor credit risk management at banking
subsidiaries and to issue guidance where necessary.
Each major banking subsidiary has in place a system of checks and balances in which a credit administration
section that is independent of the business promotion sections screens individual transactions and manages the
extension of credit. At the management level, regular meetings of the Credit & Investment Management
Committee and related deliberative bodies ensure full discussion of important matters related to credit risk
management. Besides such checks and balances and internal oversight systems, credit examination sections also
undertake credit testing and evaluation to ensure appropriate credit risk management.
The following diagram summarizes the credit risk management framework for our major banking
subsidiaries:
Board of Directors/Executive Committee
Credit & Investment Management Committee/
related deliberative bodies
Monitoring by MUFG
Credit & Investment
Management Committee
Credit Committee
(cid:129)Decisions regarding important matters
(cid:129)Delegation of authority
Credit administration
sections
Credit screening
and management
Business promotion
sections
Regular report
(cid:129)Discussion of important matters
(cid:129)Transaction report
Quantitative risk
monitoring
Credit risk management
sections
Credit testing and evaluation
Internal audit sections
Credit Rating System
MUFG and its major banking subsidiaries use an integrated credit rating system to evaluate credit risk. The
credit rating system consists primarily of borrower rating, facility risk rating, structured finance rating and asset
securitization rating.
Country risk is also rated on a uniform group-wide basis. Our country risk rating is reviewed periodically to
take into account relevant political and economic factors, including foreign currency availability.
Risk exposure for small retail loans, such as residential mortgage loans, is managed by grouping loans into
various pools and assigning ratings at the pool level.
Borrower rating
Our borrower rating classifies borrowers into 15 grades based on evaluations of their expected debt-service
capability over the next three to five years.
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The following table sets forth our borrower grades:
Definition of MUFG Borrower Rating
MUFG
Borrower
Rating
MUFG Borrower Rating Definition
1
2
3
4
5
6
7
8
9
The capacity to meet financial commitments is extremely certain, and the borrower has the highest level of
creditworthiness.
The capacity to meet financial commitments is highly certain, but there are some elements that may result in
lower creditworthiness in the future.
The capacity to meet financial commitments is sufficiently certain, but there is the possibility that
creditworthiness may fall in the long run.
There are no problems concerning the capacity to meet financial commitments, but there is the possibility
that creditworthiness may fall in the long run.
There are no problems concerning the capacity to meet financial commitments, and creditworthiness is in the
middle range.
There are no problems concerning the capacity to meet financial commitments presently, but there are
elements that require attention if the situation changes.
There are no problems concerning the capacity to meet financial commitments presently, but long-term
stability is poor.
There are no problems concerning the capacity to meet financial commitments presently, but long-term
stability is poor, and creditworthiness is relatively low.
The capacity to meet financial commitments is somewhat poor, and creditworthiness is the lowest among
“Normal” customers.
Borrowers who must be closely monitored because of the following business performance and financial
conditions:
10 through 12
(1) Borrowers who have problematic business performance, such as virtually delinquent principal
repayment or interest payment;
(2) Borrowers whose business performance is unsteady, or who have unfavorable financial conditions;
(3) Borrowers who have problems with loan conditions, for whom interest rates have been reduced or
shelved.
10
11
12
Although business problems are not serious or their improvement is seen to be remarkable, there are elements of
potential concern with respect to the borrower’s management, and close monitoring is required.
Business problems are serious, or require long-term solutions. Serious elements concerning business
administration of the borrower have emerged, and subsequent debt repayment needs to be monitored closely.
Borrowers who fall under the criteria of Rating 10 or 11 and have a loan concession granted. Borrowers who
have “Loans contractually past due 90 days or more.” (As a rule, delinquent borrowers are categorized as
“Likely to Become Bankrupt,” but the definition here applies to borrowers delinquent for 90 days or more
because of inheritance and other special reasons.)
13
14
15
Borrowers who pose a serious risk with respect to debt repayment, loss is likely to occur in the course of
transactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in
achieving restructuring plans, and are likely to become bankrupt in the future.
While not legally bankrupt, borrowers who are considered to be virtually bankrupt because they are in
serious financial difficulty and have no prospects for an improvement in their business operations.
Borrowers who are legally bankrupt (i.e., who have no prospects for continued business operations because
of non-payment, suspension of business, voluntary liquidation, or filing for legal liquidation).
The Japanese regulatory authorities require Japanese banks to categorize borrowers as follows:
‰ Normal borrowers (generally corresponding to borrowers in categories 1 through 9 in our ratings),
which are borrowers that are performing well, with no significant financial concerns,
‰ Borrowers requiring close watch (generally corresponding to borrowers in categories 10 through 12 in
our ratings), which include loans that have been amended to allow for delays or forgiveness of interest
payments, borrowers experiencing difficulty in complying with loan terms and conditions and borrowers
that are recording losses or performing badly,
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‰ Borrowers likely to become bankrupt (generally corresponding to borrowers in category 13 in our
ratings), which relate to borrowers who pose a serious risk with respect to debt repayment, loss is likely
to occur in the course of transactions. While still not bankrupt, these borrowers are in financial
difficulty, with poor progress in achieving restructuring plans, and are likely to become bankrupt in the
future,
‰ Virtually bankrupt borrowers (generally corresponding to borrowers in category 14 in our ratings),
which are not legally bankrupt, but borrowers who are considered to be virtually bankrupt because they
are in serious financial difficulty and have no prospects for an improvement in their business operations,
and
‰ Bankrupt borrowers or de facto bankrupt borrowers (generally corresponding to borrowers in
category 15 in our ratings), which are borrowers who are legally bankrupt (i.e., who have no prospects
for continued business operations because of non-payment, suspension of business, voluntary
liquidation, or filing for legal liquidation) proceedings.
The primary data utilized in our assessment of borrowers include the borrower’s financial statements and
notes thereto as well as other public disclosure made by the borrower. In addition, when appropriate and possible,
we obtain non-public financial and operating information from borrowers, such as the borrower’s business plan,
borrower’s self-evaluation of its operating assets and other borrower information about its business and products.
Based on the borrower and industry information, we assign borrower ratings mainly by applying financial
scoring models—either developed internally or by third party vendors, depending on the borrower’s attributes,
whether the borrower is domestic or foreign, whether the borrower is a large corporation or a small and
medium-sized corporation, and whether the borrower is a corporate entity or another type of legal entity (such as
a school, hospital or fund).
For example, for domestic small and medium-sized corporations, which constitute the largest borrower
attribute in our current loan portfolio in terms of number of borrowers, we have adopted an internally developed
financial scoring model, exclusively designed and developed for such attribute. We have selected various
financial ratios that we believe to be useful and meaningful to quantitatively measure and assess the borrowers’
financial standing and repayment capability. Such financial ratios represent, among other things, borrowers’
growth, profitability, stability, cash flow, company size and capital efficiency. The model is periodically tested
against historical results. The following is an illustration of some of the financial ratios we utilize as part of our
financial scoring model:
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To measure growth: Sales growth, and growth in total assets,
To measure profitability: Current profit to sales, and profit before tax to sales, and
To measure stability: Equity ratio and current ratio.
The financial score obtained through the models is reviewed and, when necessary, adjusted downward to
reflect our qualitative assessment of the borrower’s financial strength and other factors that could affect the
borrower’s ability to service the debt. For example, we take into account: capability of turning around the
business (in case of borrowers with losses) or recovering positive net worth (in case of borrowers with negative
net worth), industry risk, management risk, legal risk, as well as our assessment of the probability of receiving
support from parent companies (if the borrower is a subsidiary of a large listed company).
When adjusting the results of primary financial scoring assigned to borrowers with losses, we consider the
severity of losses and the possibility of improving operating results. We analyze and assess whether the loss is
temporary, the trend in operating results is improving, or the loss is expected to continue for an extended period.
When adjusting the results of primary financial scoring assigned to borrowers with losses or borrowers with
negative net worth, we also analyze whether the borrower can return to a positive net worth, and the time period
needed to achieve such recovery (one to two years, three to five years, or five years or more).
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In addition, adjustments based on industry risk are based on future prospects, applicable laws and
regulations, and other factors surrounding the industry. Adjustments for management risk reflect our assessment
of management’s track record, the composition of the management team including the board of directors, any
management succession plan as well as the risk management and compliance framework of the borrower.
Adjustments for legal risk are made when the borrower is facing a lawsuit and when there is a possibility of a
significant claim payment related to product liability, intellectual property, environmental problems, building
standard law, and other legal issues.
When assessing the probability of receiving support from parent companies, various factors are examined,
such as the parent company’s credit standings, whether key management personnel are sent by the parent,
whether the borrower is consolidated by the parent, and the proportion of the borrower in consolidated sales and
profits of the parent.
In addition, we consider outside ratings, and our internal borrower ratings may be adjusted when deemed
appropriate.
Facility risk rating
Facility risk rating is used to evaluate and classify the quality of individual credit facilities, including
guarantees and collateral. Ratings are assigned by quantitatively measuring the estimated loss rate of a facility in
the event of a default.
Structured finance rating and asset securitization rating
Structured finance rating and asset securitization rating are used to evaluate and classify the quality of
individual credit facilities, including guarantees and collateral, and focus on the structure, including the
applicable credit period, of each credit facility. In evaluating the debt service potential of a credit facility, we
scrutinize its underlying structure to determine the likelihood of the planned future cash flows being achieved.
Pool assignment
Each major banking subsidiary has its own system for pooling and rating small retail loans designed to
reflect the risk profile of its loan portfolios.
Asset evaluation and assessment system
The asset evaluation and assessment system is used to classify assets held by us according to the probability
of collection and the risk of any impairment in value based on borrower classifications consistent with the
borrower ratings and the status of collateral, guarantees, and other factors.
The system is used to conduct write-offs and allocate allowances against credit risk in a timely and adequate
manner.
Quantitative Analysis of Credit Risk
MUFG and its major banking subsidiaries manage credit risk by monitoring credit amount and expected
losses, and run simulations based on internal models to estimate the maximum amount of credit risk. These
models are used for internal management purposes, including loan pricing and measuring economic capital.
When quantifying credit risk amounts using the internal models, MUFG and its major banking subsidiaries
consider various parameters, including probability of default, loss given default, and exposure at default used in
their borrower ratings, facility risk ratings and pool assignments as well as any credit concentration risk in
particular borrower groups or industry sectors. MUFG and its major banking subsidiaries also share credit
portfolio data in appropriate cases.
208
Loan Portfolio Management
We aim to achieve and maintain levels of earnings commensurate with credit risk exposure. Products are
priced to take into account expected losses, based on the internal credit ratings.
We assess and monitor loan amounts and credit exposure by credit rating, industry and region. Portfolios are
managed to limit concentrations of risk in specific categories in accordance with our Large Credit Guidelines.
To manage country risk, we have established specific credit ceilings by country. These ceilings are reviewed
when there is a material change in a country’s credit standing, in addition to being subject to a regular periodic
review.
Continuous CPM Improvement
With the prevalence of securitized products and credit derivatives in global markets, we seek to supplement
conventional CPM techniques with advanced methods based on the use of such market-based instruments.
Through credit risk quantification and portfolio management, we aim to improve the risk return profile of
the Group’s credit portfolio, using financial markets to rebalance credit portfolios in a dynamic and active
manner based on an accurate assessment of credit risk.
Risk Management of Strategic Equity Portfolio
Strategic equity investment risk is the risk of loss caused by a decline in the prices of our equity
investments.
We hold shares of various corporate clients for strategic purposes, in particular to maintain long-term
relationships with these clients. These investments have the potential to increase business revenue and appreciate
in value. At the same time, we are exposed to the risk of price fluctuation in the Japanese stock market. For that
reason, in recent years, it has been a high priority for us to reduce our equity portfolio to limit the risks associated
with holding a large equity portfolio, but also to respond to applicable regulatory requirements as well as
increasing market expectations and demands for us to reduce our equity portfolio. We are required to comply
with a regulatory framework that prohibits Japanese banks from holding an amount of shares in excess of their
adjusted Tier 1 capital.
We use quantitative analysis to manage the risks associated with the portfolio of equities held for strategic
purposes. According to internal calculations, the market value of our strategically held (Tokyo Stock Exchange-
listed) stocks (excluding foreign stock exchange-listed stocks) as of March 31, 2018 was subject to a variation of
approximately ¥3.23billion when TOPIX index moves one point in either direction.
We seek to manage and reduce strategic equity portfolio risk based on quantitative analysis such as the
sensitivity analysis described above. The aim is to keep this risk at appropriate levels compared with Tier 1
capital while generating returns commensurate with the degree of risk exposure.
Market Risk Management
Market risk is the risk that the value of our assets and liabilities could be adversely affected by changes in
market variables such as interest rates, securities prices, or foreign exchange rates.
Management of market risk at MUFG aims to control related risk exposure across the Group while ensuring
that earnings are commensurate with levels of risk.
209
Market Risk Management System
We have adopted an integrated system to manage market risk from our trading and non-trading activities.
The holding company monitors group-wide market risk, while each of the major subsidiaries manages its market
risks on a consolidated and global basis.
At each of the major subsidiaries, checks and balances are maintained through a system in which back and
middle offices operate independently from front offices. In addition, separate Asset-Liability Management, or
ALM, Committee and Risk Management Meetings are held at each of the major subsidiaries every month to
deliberate important matters related to market risk and control.
The holding company and the major subsidiaries allocate economic capital commensurate with levels of
market risk and determined within the scope of their capital bases. The major subsidiaries have established
quantitative limits relating to market risk based on their allocated economic capital. In addition, in order to keep
losses within predetermined limits, the major subsidiaries have also set limits for the maximum amount of losses
arising from market activities. The following diagram summarizes the market risk management system of each
major subsidiary:
Market Risk Management System of Our Major Subsidiaries
Board of Directors / Executive Committee
ALM Committee / Risk Management Meeting
Delegation of
authority
Front Office
Trading result report
Quantitative risk monitoring
Confirmation of contracts and agreements
Back Office
Report
Middle Office
(Market risk management
departments)
Market Risk Management and Control
At the holding company and the major subsidiaries, market risk exposure is reported to the Chief Risk
Officers on a daily basis. At the holding company, the Chief Risk Officer monitors market risk exposure across
the Group as well as the major subsidiaries’ control over their quantitative limits for market risk and losses.
Meanwhile, the Chief Risk Officers at the major subsidiaries monitor their own market risk exposure and their
control over their quantitative limits for market risk and losses. In addition, various analyses on risk profiles,
including stress testing, are conducted and reported to the Executive Committees and the Corporate Risk
Management Committees on a regular basis. At the business unit levels in the major subsidiaries, the market
risks on their marketable assets and liabilities, such as interest rate risk and foreign exchange rate risk, are
controlled by entering into various hedging transactions using marketable securities and derivatives.
As part of our market risk management activities, we use certain derivative financial instruments to manage
our interest rate and currency exposures. We maintain an overall interest rate risk management strategy that
incorporates the use of interest rate contracts to minimize significant unplanned fluctuations in earnings that are
caused by interest rate volatility. We enter into interest rate swaps and other contracts as part of our interest rate
risk management strategy primarily to alter the interest rate sensitivity of our loans, investment securities and
deposit liabilities. Our principal objectives in risk management include asset and liability management. Asset and
liability management is viewed as one of the methods for us to manage our interest rate exposures on interest-
earning assets and interest-bearing liabilities. Interest rate contracts, which are generally non-leveraged generic
210
interest rate and basis swaps, options and futures, allow us to effectively manage our interest rate risk position.
Option contracts primarily consist of caps, floors, swaptions and options on index futures. Futures contracts used
for asset and liability management activities are primarily index futures providing for cash payments based upon
the movement of an underlying rate index. We enter into forward exchange contracts, currency swaps and other
contracts in response to currency exposures resulting from on-balance sheet assets and liabilities denominated in
foreign currencies in order to limit the net foreign exchange position by currency to an appropriate level.
These market risk management activities are performed in accordance with the predetermined rules and
procedures. The internal auditors regularly verify the appropriateness of the management controls over these
activities and the risk evaluation models adopted.
Market Risk Measurement Model
Market risks consist of general risks and specific risks. General market risks result from changes in entire
markets, while specific risks relate to changes in the prices of individual stocks and bonds which are independent
of the overall direction of the market.
To measure market risks, MUFG uses the VaR method which estimates changes in the market value of
portfolios within a certain period by statistically analyzing past market data. Since the daily variation in market
risk is significantly greater than that in other types of risk, MUFG measures and manages market risk using VaR
on a daily basis.
Market risk for trading and non-trading activities is measured using a uniform market risk measurement
model. The principal model used for these activities is a historical simulation, or HS, model (holding period,
10 business days; confidence interval, 99%; and observation period, 701 business days). The HS model
calculates VaR amounts by estimating the profit and loss on the current portfolio by applying actual fluctuations
in market rates and prices over a fixed period in the past. This method is designed to capture certain statistically
infrequent movements, such as a fat tail, and accounts for the characteristics of financial instruments with
non-linear behavior. The holding company and banking subsidiaries also use the HS model as part of the
calculation of their Basel III regulatory capital adequacy ratios.
In calculating VaR using the HS method, we have implemented an integrated market risk measurement
system throughout the Group. Our major subsidiaries calculate their VaR based on the risk and market data
prepared by the information systems of their front offices and other departments. The major subsidiaries provide
this risk data to the holding company, which calculates overall VaR, taking into account the diversification effect
among all portfolios of the major subsidiaries.
For the purpose of internally evaluating capital adequacy on an economic capital basis in terms of market
risk, we use this market risk measurement model to calculate risk amounts based on a holding period of one year
and a confidence interval of 99.9%.
Monitoring and managing our sensitivity to interest rate fluctuations is the key to managing market risk in
MUFG’s non-trading activities. The major banking subsidiaries take the following approach to measuring risks
concerning core deposits, loan prepayments and early deposit withdrawals.
To measure interest rate risk relating to deposits without contract-based fixed maturities, the amount of
“core deposits” is calculated through a statistical analysis based on deposit balance trend data and the outlook for
interest rates on deposits, business decisions, and other factors. The amount of “core deposit” is categorized into
various groups of maturity terms of up to ten years to recognize interest rate risk. The calculation assumptions
and methods to determine the amount of core deposits and maturity term categorization are regularly reviewed.
Meanwhile, deposits and loans with contract-based maturities are sometimes cancelled or repaid before their
maturity dates. To measure interest rate risk for these deposits and loans, we reflect these early termination
211
events mainly by applying early termination rates calculated based on a statistical analysis of historical
repayment and cancellation data together with historical market interest rate data.
Summaries of Market Risks (Fiscal Year Ended March 31, 2018)
Trading activities
The aggregate VaR for our total trading activities as of March 31, 2018was ¥13.27 billion, comprising
interest rate risk exposure of ¥12.79 billion, foreign exchange risk exposure of ¥3.83 billion, and equity-related
risk exposure of ¥1.99 billion. Compared with the VaR as of March 31, 2017, we experienced a decrease in
market risk during the fiscal year ended March 31, 2018, primarily due to a decrease in foreign exchange risk and
interest rate risk.
Our average daily VaR for the fiscal year ended March 31, 2018 was ¥13.58 billion. Based on a simple sum
of figures across market risk categories, interest rate risk accounted for approximately 67%, foreign exchange
risk for approximately 24% and equity-related risk for approximately 9%, of our total trading activity market
risks.
Due to the nature of trading operations which involves frequent changes in trading positions, market risk
varied substantially during the fiscal year, depending on our trading positions.
The following tables set forth the VaR related to our trading activities by risk category for the periods
indicated:
April 1, 2016—March 31, 2017
Average
Maximum(1) Minimum(1) March 31, 2017
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . .
¥ 17.52
18.43
10.59
8.87
8.81
2.00
0.01
(11.73)
(in billions)
¥30.10
28.08
21.25
12.79
16.59
5.85
0.16
—
¥ 12.55
14.30
5.40
6.02
5.45
1.02
0.00
—
¥ 15.87
15.21
7.95
6.69
6.14
1.89
0.00
(7.37)
April 1, 2017—March 31, 2018
Average
Maximum(1) Minimum(1) March 31, 2018
MUFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . .
¥ 13.58
13.28
6.59
5.96
4.66
1.81
0.01
(6.18)
(in billions)
¥18.46
16.93
9.79
8.46
7.69
5.72
0.20
—
¥ 11.29
11.47
4.70
3.94
2.62
0.62
0.00
—
¥ 13.27
12.79
6.72
4.63
3.83
1.99
0.00
(5.34)
Assumptions for VaR calculations:
Historical simulation method
Holding period: 10 business days
Confidence interval: 99%
Observation period: 701 business days
Note:
(1) The maximum and minimum VaR overall and for various risk categories were taken from different days. A simple summation of VaR by
risk category is not equal to total VaR due to the effect of diversification.
212
The average daily VaR by quarter in the fiscal year ended March 31, 2018 was as follows:
Quarter
April—June 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July—September 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October—December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January—March 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily average VaR
(in billions)
¥12.81
13.79
14.31
13.41
The quantitative market risk figures from trading activities tend to fluctuate widely due to the market
sensitive nature of the trading business. During the fiscal year ended March 31, 2018, the revenue from our
trading activities has been relatively stable, keeping positive numbers in 249 days out of 259 trading days in the
period. During the same period, there were 87 days with positive revenue exceeding ¥1 billion and 1 day with
negative revenue exceeding minus ¥1 billion.
Non-trading Activities
The aggregate VaR for our total non-trading activities as of March 31, 2018, excluding market risks related
to our strategic equity portfolio and measured using the same standards as trading activities, was ¥385.9 billion.
Market risk related to interest rates equaled ¥304.9 billion and equities-related risk equaled ¥225.9 billion.
Compared with the VaR as of March 31, 2017, we experienced an increase in market risk during the fiscal year
ended March 31, 2018, primarily due to an increase in interest rate risk. For a description of our strategic equity
investment risk management, see “—Risk Management of Strategic Equity Portfolio.”
Based on a simple sum of figures across market risk categories, interest rate risks accounted for
approximately 56% of our total non-trading activity market risks. Looking at a breakdown of interest rate related
risk by currency, as of March 31, 2018, the yen accounted for approximately 53% while the U.S. dollar
accounted for approximately 30%, and the euro approximately 17%.
The following tables set forth the VaR related to our non-trading activities by risk category for the periods
indicated:
April 1, 2016—March 31, 2017
Average Maximum(1) Minimum(1) March 31, 2017
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities(2)
Less diversification effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
¥ 393.1
290.7
220.6
2.6
236.7
(171.2)
461.2
¥528.5
345.1
289.3
5.4
266.6
—
564.5
(in billions)
¥265.7
231.1
116.3
1.0
185.3
—
368.9
¥ 273.1
240.7
121.4
5.4
259.3
(165.8)
372.0
213
April 1, 2017—March 31, 2018
Average Maximum(1) Minimum(1) March 31, 2018
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equities(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less diversification effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
¥ 305.2
236.1
146.2
8.0
233.1
(151.7)
394.6
¥330.1
253.5
174.1
10.8
271.9
—
440.5
(in billions)
¥270.1
212.6
116.5
3.4
171.0
—
348.4
¥ 304.9
231.2
128.5
10.0
225.9
(154.9)
385.9
Assumptions for VaR calculations:
Historical simulation method
Holding period: 10 business days
Confidence interval: 99%
Observation period: 701 business days
Notes:
(1) The maximum and minimum VaR overall for each category and in total were taken from different days. A simple summation of VaR by
risk category is not equal to total VaR due to the effect of diversification.
(2) The equities-related risk figures do not include market risk exposure from our strategic equity portfolio.
The average daily interest rate VaR by quarter in the fiscal year ended March 31, 2018 was as follows.
Quarter
April—June 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July—September 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October—December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January—March 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily average VaR
(in billions)
¥391.4
417.0
385.2
385.0
Comparing the proportion of each currency’s interest rate VaR to the total interest rate VaR as of March 31,
2018 against that as of March 31, 2017, there was a 8 percentage point decrease in the Japanese yen from 61% to
53%, a 1 percentage point decrease in the U.S. dollar from 31% to 30%, and a 9 percentage point increase in the
euro from 8% to 17%.
Backtesting
We conduct backtesting in which a VaR is compared with hypothetical profits and losses on a daily basis to
verify the accuracy of our VaR measurement model. We also conduct additional backtesting using other
methods, including testing VaR against actual realized and unrealized losses and testing VaR by various
changing parameters such as confidence intervals and observation periods used in the model.
Hypothetical losses never exceeded VaR in the fiscal year ended March 31, 2018. This means that our VaR
model provided reasonably accurate measurements of market risk during the fiscal year.
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The following graph shows daily VaR of trading activities and the distribution of corresponding
hypothetical profits and losses for the fiscal year ended March 31, 2018:
daily PL
(billion Yen)
10
excess: 0 time
0
2
4
6
8
10
8
6
4
2
0
- 2
- 4
- 6
- 8
- 10
VaR (billion Yen)
The following graph shows VaR of trading activities and hypothetical profits and losses on a daily basis for
the fiscal year ended March 31, 2018:
(billion Yen)
daily PL
VaR
10
8
6
4
2
0
-2
-4
-6
-8
-10
April 2017
March 2018
Stress Testing
We use an HS-VaR model, which calculates potential changes in the market value of our portfolio as a
statistically possible amount of losses that could be incurred due to market fluctuations within a certain period (or
holding period, of 10 business days) based on historical market volatility for a certain period (or observation
period, of 701 business days, or approximately three years). Actual losses may exceed the value at risk obtained
by the application of the model in the event, for example, that the market fluctuates to a degree not accounted for
in the observation period, or that the correlations among various risk factors, including interest rates and foreign
currency exchange rates, deviate from those assumed in the model.
215
In order to complement these weaknesses of the HS-VaR model and measure potential losses that the model
is not designed to capture, we conduct stress testing. Through the daily stress testing, we estimate maximum
potential losses in each market on the current trading portfolio based on the worst ten-day historical volatility
recorded during the VaR observation period of 701 days. As of March 31, 2018, we held a total trading activity
position subject to estimated maximum potential losses of ¥8.8 billion as compared to ¥10.8 billion as of
March 31, 2017. In addition, the holding company and major subsidiaries conduct stress testing, as appropriate,
by applying various stress scenarios, including those which take into account estimates regarding future market
volatility, in order to better identify risks and manage our portfolio in a more stable and appropriate manner. The
holding company and major subsidiaries also measure stressed VaR relating to their trading activities based on a
one-year observation period with the highest VaR at least in the immediately preceding ten years. To verify the
effectiveness of our HS-VaR model, we also examine whether the data group of hypothetical profits and losses
used in the VaR calculation represents an appropriate profit and loss distribution by monitoring the
autocorrelation and the kurtosis of the data group.
Funding Liquidity Risk Management
Liquidity risk is the risk of incurring losses if a poor financial position hampers the ability to meet funding
requirements, or necessitates fund procurement at interest rates markedly higher than normal.
Our major subsidiaries maintain appropriate liquidity in both Japanese yen and foreign currencies by
managing their funding sources and mechanisms, such as liquidity gap, liquidity-supplying products such as
commitment lines, and buffer assets.
We have established a group-wide system for managing liquidity risk by categorizing the risk in the
following three stages: normal, concern and crisis. The front offices and risk management offices of the major
subsidiaries and the holding company exchange information and data on liquidity risk even at the normal stage.
At higher alert stages, we centralize information about liquidity risk and discuss issues relating to group-wide
liquidity control actions among Group companies, if necessary. We have also established a system for liaison and
consultation on funding in preparation for contingency, such as natural disasters, wars and terrorist attacks. The
holding company and the major subsidiaries conduct group-wide contingency preparedness drills on a regular
basis to ensure smooth implementation in the event of an emergency.
In addition, we have established a group-wide system for ensuring compliance with the minimum regulatory
liquidity coverage ratio requirements by categorizing the risk in the following three stages: sufficient, concern
and insufficient. The holding company and the major subsidiaries exchange information and data on LCR even at
the sufficient stage. At higher alert stages, we hold group-wide LCR liaison meetings to discuss issues relating to
LCR and, based on the discussion as well as the information and data that have been shared, take
countermeasures to improve LCR as necessary.
For more information, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Financial Condition—Sources of Funding and Liquidity.”
Operational Risk Management
Operational risk refers to the risk of loss caused by either internal control issues such as inadequate
operational processes or misconduct, system failures, or external factors such as serious political instability,
major terrorist activity, health epidemics or natural disasters. The term includes a broad range of risks that could
lead to losses, including operations risk, information risk, IT risk, tangible asset risk, personnel risk,
incompliance with laws and regulations risk and legal risk. These risks that comprise operational risk are referred
to as sub-category risks.
The holding company has established, based on its Executive Committee’s determination, the MUFG
Operational Risk Management Policy as a group-wide policy for managing operational risk. This policy sets
216
forth the core principles regarding operational risk management, including the definition of operational risk, and
the risk management system and processes. Under the policy, the board of directors and the Executive
Committee formulate fundamental principles of operational risk management and establish and maintain an
appropriate risk management system. The Chief Risk Management Officer is responsible for recognizing,
evaluating, and appropriately managing operational risk in accordance with the fundamental principles
formulated by the board of directors and the Executive Committee. A division in charge of operational risk
management has been established that is independent of business promotion sections to manage overall
operational risk in a comprehensive manner. These fundamental principles have also been approved by the
boards of directors of the major subsidiaries, providing a consistent framework for operational risk management
of the Group. The diagram below sets forth the operational risk management system of each major banking
subsidiary:
Operational Risk Management System of Our Major Banking Subsidiaries
Board of Directors/Execu(cid:2)ve Commi(cid:3)ee
commi(cid:3)ees regarding risk management
Audit Commi(cid:3)ee
(Repor(cid:2)ng to
Board of Directors)
Repor(cid:2)ng on risk profile
Instruc(cid:2)on
Repor(cid:2)ng
Instruc(cid:2)on
Head office/
domes(cid:2)c and
overseas units etc.
Instruc(cid:2)on
Control oprera(cid:2)on
divisions of the
sub-category risks
Review and
Challenge
Opera(cid:2)onal risk
management
divisions
Repor(cid:2)ng
Repor(cid:2)ng
Audit
Audit divisions
As set forth in the following diagram, we have established a risk management framework for loss data
collection, control self-assessment, and measurement of operational risk in order to appropriately identify,
recognize, evaluate, measure, control, monitor and report operational risk.
We have also established group-wide reporting guidelines with respect to loss data collection and its
monitoring. We focus our efforts on ensuring accurate assessment of the status of operational risk losses and the
implementation of appropriate countermeasures, while maintaining databases of internal and external loss events.
217
The following diagram summarizes our operational risk management framework:
Operational Risk Management Framework
identify and recognize
evaluate and measure
control
monitor and report
incident
occured
causal analysis
implement preventive
measures
monitoring
record
record
major incidents and misconduct
create potential loss
create potential loss
scenario
scenario
internal loss
internal loss
data
external
external loss
data
prompt reporting to
prompt reporting to
management and
management and
relevant supervisors
relevant supervisers
risk measurement
risk measurement
allocate economic
allocate economic
capital to
capital to
business units
business units
/subsidiaries
/subsidiaries
monitoring of
monitoring of
economic capital
risk evaluation and management through Control Self-Assessment
risk evaluation and management through Control Self-Assessment
Operations Risk Management
Operations risk refers to the risk of incurring losses arising from negligence of correct operational
processing, incidents or misconduct involving officers or staff, as well as risks similar to this risk. The Group
companies offer a wide range of financial services, ranging from commercial banking products such as deposits,
exchange services and loans to trust and related services covering pensions, securities, real estate and
securitization, as well as transfer agent services. Cognizant of the potentially significant impact that operations
risk-related events could have in terms of both economic losses and damage to our reputation, our banking
subsidiaries continue to work on improving their management systems to create and apply appropriate operations
risk-related controls.
Specific ongoing measures to reduce operations risk include the development of databases to manage,
analyze and prevent the recurrence of related loss events; efforts to tighten controls over administrative
procedures and related operating authority, while striving to improve human resources management, investments
in systems to improve the efficiency of administrative operations, and programs to expand and upgrade internal
auditing and operational guidance systems.
Senior management receives regular reports on the status of our businesses from an operations risk
management perspective. We work to promote the sharing within the Group of information and expertise
concerning any operational incidents and the measures implemented to prevent any recurrence.
Efforts to upgrade the management of operations risk continue with the aim of providing our customers with
a variety of high-quality services.
Information Risk Management
Information risk refers to the risk of loss caused by loss, alteration, falsification or leakage of personal or
other confidential information, as well as risks similar to these risks. We recognize our grave social and legal
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responsibility to handle customer information properly, and we continue to work on enhancing our framework to
manage such risk.
Complying with laws and regulations requiring proper handling of customer information, we implement
information security management measures, including the establishment of an information risk management
framework, enhancement of our internal operational procedures, and training courses mandatory for all officers
and staff.
We have also formulated our Personal Information Protection Policy as the basis for our ongoing programs
designed to protect the confidentiality of personal information.
With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on
a group-wide basis of experience, knowledge and expertise related to information risk incidents.
IT Risk Management
IT risk refers to the risk of loss arising from destruction, suspension, malfunction or misuse of IT, or
unauthorized alteration and leakage of electronic data caused by insufficient IT systems planning, development
or operations or by vulnerabilities of or external threats to IT system security, including cybersecurity, as well as
risks similar to these risks.
Systems planning, development and operations include appropriate design and extensive testing phases to
ensure that systems are designed to help prevent failures while providing sufficient safeguards for the security of
electronic data including personal information. The status of the development of any mission-critical IT systems
is reported regularly to senior management. We have developed disaster countermeasures systems and have also
been investing in duplication of the Group’s IT infrastructure to minimize damage in the event of any system
failure. Emergency drills are conducted to help increase staff preparedness.
With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on
a group-wide basis of experience, knowledge and expertise related to system failures.
In addition, the risk of increasingly sophisticated cyber-attacks is a significant focus of the Board of
Directors, and the Board regularly receives reports on our cybersecurity program. We continue to work to
strengthen measures designed to address and mitigate the risk, including the establishment of MUFG-CERT, our
Computer Security Incident Response Team, implementation of multi-layered defense and detection measures,
enhancement of monitoring systems through our Security Operation Centers, and cooperation with global
organizations with relevant expertise. MUFG-CERT is charged with the responsibility of taking, coordinating
and managing prompt action in response to cyber security incidents to mitigate their impact.
Tangible Asset Risk Management
Tangible asset risk refers to the risk of loss due to damage to tangible assets or deterioration in the
operational environment caused by disasters or inadequate asset maintenance, as well as risks similar to this risk.
Tangible assets include movable physical properties and immovable properties, owned or leased, such as land,
buildings, equipment attached to buildings, fixtures and furniture. We recognize the potentially significant impact
tangible asset risk-related events can have on the management and execution of the Group’s businesses, which in
turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue
to improve our risk control framework designed to appropriately manage such risk.
Personnel Risk Management
Personnel risk refers to the risk of loss due to an outflow or loss of human resources or deterioration in
employee morale, as well as risks similar to this risk. We recognize the potentially significant impact personnel
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risk-related events can have on the management and execution of the Group’s businesses, which in turn can
result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to work
on improving our risk control framework designed to appropriately manage such risk.
Incompliance with Laws and Regulations Risk Management
Incompliance with laws and regulations risk refers to the risk of loss due to failure to compliance with laws
and regulations, as well as risks similar to these risks. We recognize the potentially significant impact compliance
risk-related events can have on the management and execution of the Group’s businesses, which in turn can
result in economic, reputation and other losses to, or diminished market confidence in, the Group. Accordingly,
we continue to work on improving our compliance risk control framework designed to appropriately manage
such risk.
Specifically, in order to promote compliance, we have established our Principles of Ethics and Conduct as
the basic legal compliance policy for the Group’s directors and employees. In addition, a compliance
management division has been established at each of the holding company and the major subsidiaries. See
“—Compliance” below.
Legal Risk Management
Legal risk refers to the risk of loss due to failure to identify or address legal issues relating to contracts and
other business operations or insufficient handling of lawsuits, as well as risks similar to these risks.
The legal division at each of the holding company and the major subsidiaries centrally and uniformly
evaluates legal issues prior to entering into contracts or commencing new business operations, deals with legal
disputes and manages other legal matters. With the aim of effectively managing our legal risk arising from our
globally expanding business operations, we have established a global and group-wide legal risk management
framework and promote sharing of experience, knowledge and practices relating to legal risk issues on a global
and group-wide basis.
Regulatory Capital Requirements for Operational Risk
(1) Adoption of the Advanced Measurement Approach (AMA)
We have employed the AMA since March 31, 2012, in place of the Standardized Approach that we had been
using previously, for calculation of the operational risk equivalent amount in connection with measuring capital
adequacy ratios based on the Basel Standards. On the other hand, we use the Basic Indicator Approach, or BIA,
for entities that are deemed to be less important in the calculation of the operational risk equivalent amount and
for entities that are still preparing to implement the AMA.
(2) Outline of AMA
We have established a measurement model designed to account for four data elements—internal loss data,
external loss data, scenario analysis, and business environment and internal control factors, or BEICFs—and
calculate the operational risk equivalent amount by estimating the maximum loss using a 99.9th percentile
one-tailed confidence interval and a one-year holding period.
In calculating the operational risk equivalent amount, we exclude expected losses relating to the amount of
allowance for repayment of excess interest associated with the consumer finance business of a subsidiary. We do
not exclude any other expected losses and do not reflect the risk mitigating impact of insurance. In addition, we
take into account credit risk-related events that are not reflected in the measurement of the credit risk equivalent
amount.
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(3) Outline of Measurement Model
Our operational risk equivalent amount measured under the AMA is a simple sum of the amounts calculated
separately for (1) MUFG Bank on a consolidated basis, (2) Mitsubishi UFJ Trust and Banking on a consolidated
basis, and (3) the holding company and other principal consolidated subsidiaries, in accordance with applicable
FSA rules. For each of MUFG Bank and Mitsubishi UFJ Trust and Banking on a consolidated basis, the
operational risk equivalent amount is a simple sum of the amounts calculated based on the seven loss event types
defined by the Basel Standards. For other Group companies, the operational risk equivalent amount is a simple
sum of the amounts calculated based on eight loss event types consisting of the seven loss event types defined by
the Basel Standards and an additional loss event type representing losses relating to repayment of excess interest
associated with the consumer finance business of a subsidiary. We do not reflect the correlation effects among
the loss event types in the calculation of our operational risk equivalent amount.
Outline of Measurement Model
Internal Loss Data
Litigation Data
External Loss Data
Business Environment and
Internal Control Factors
Scenario Analysis
Frequency Distribution
Internal Loss Data
Scenario Data
Occurrence
Frequency
Occurrence
Frequency
Loss Amount
Loss Amount
Loss Severity Distribution
n
o
i
t
Loss Distribution
l
i
a
u
m
S
o
l
r
a
C
e
t
n
o
M
Basel Loss Event Types
Internal Fraud
Risk Equivalent Amount
External Fraud
Risk Equivalent Amount
Employment Practices and Workplace Safety
Risk Equivalent Amount
Clients, Products, and Business Practices
Risk Equivalent Amount
Damage to Physical Assets
Risk Equivalent Amount
Business Disruption and System Failures
Risk Equivalent Amount
Execution, Delivery, and Process Management
Risk Equivalent Amount
Repayment of Excess Interest
Risk Equivalent Amount
The risk equivalent amount for each loss event type represents the amount of maximum loss estimated with
a 99.9th percentile one-tailed confidence interval and a one-year holding period based on the distribution of
losses arising from all relevant risk events for a one-year period (Loss Distribution). A Loss Distribution
combines a Frequency Distribution (through which the frequency of occurrence of risk events is expressed) and a
Loss Severity Distribution (through which the amounts of losses resulting from risk events are expressed)
through Monte Carlo simulations. The data used for this purpose include internal loss data and scenario data.
scenario data are generated through a scenario analysis. External data and BEICFs are taken into account in the
scenario analysis and reflected in scenario data. The Frequency Distribution is derived from the occurrence
frequency information in internal loss data and scenario data expressed through a Poisson Distribution. The Loss
Severity Distribution is derived from the amount information in internal loss data and scenario data expressed in
a non-parametric manner (where no underlying distribution is assumed).
With respect to the risk of losses relating to repayment of excess interest associated with the consumer
finance business of a subsidiary, the risk equivalent amount represents the amount of maximum loss estimated
with a 99.9th percentile one–tailed confidence interval and a one-year holding period based on a normal
distribution assumed by applying data on losses that arose in a given period, excluding any related expected
losses.
We confirm the appropriateness of the measurement models by periodic verification and back testing.
(4) Outline of Scenario Analysis
As an initial step of our scenario analysis, we identify potential severe loss events that we have not
experienced but may potentially experience in the future. In this identification process, we seek to ensure
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exhaustive coverage of potential severe loss events by comprehensively examining our experience relating to loss
events and legal proceedings, external loss data, the control self-assessment results and other relevant
information.
In the next step, we prepare scenario data for each identified severe loss event by quantifying the values
depending on its occurrence frequency and loss severity, taking into account relevant transaction amounts and
restructuring costs as well as BEICFs. In preparing scenario data, we apply an analysis method we deem
appropriate for the type and nature of the operational risk involved.
In order to obtain an operational risk equivalent amount that is commensurate with, and appropriate for, our
risk profile, we assess the need for an additional scenario or modification to our existing scenarios semi-annually.
We then reflect, as necessary, new risks arising as a result of changes in the business environment and the
results of the implementation of measures to enhance our internal controls in response to newly identified risks in
our scenario data.
Reputation Risk Management
Reputation risk refers to the risk of harm to our corporate value arising from perceptions of our customers,
shareholders, investors or other stakeholders and in the market or society that we deviate from their expectations
or confidence. We recognize that such risk, if materialized, can have a material negative impact on our business
and continue to work on enhancing our framework designed to appropriately manage the risk based on our
Corporate Vision, Principles of Ethics and Conduct, and other rules and codes of the Group.
Specifically, in order to manage our reputation risk effectively on a group-wide basis, we have established a
risk management system designed to ensure mutual consultation and reporting if a reputation risk-related event
occurs or is anticipated and, through this system, share relevant information within the Group.
Through the risk control framework and risk management system, we seek to prevent reputation risk-related
events and minimize damage to the corporate value of the Group by promptly obtaining an accurate
understanding of relevant facts relating to risk events and disclosing information concerning such events and the
measures we take in response to such events in an appropriate and timely manner.
Model Risk Management
Model risk refers to the risk of loss due to decision-making based on information provided by an inaccurate
model or the misuse of a model. We recognize the potentially significant impact model risk-related events can
have on the management and execution of the Group’s businesses, which in turn can result in economic losses to,
or diminished market confidence in, the Group. Models are used for increasingly wider and more important
purposes, including valuing exposures, instruments and positions, measuring risks, and determining capital
adequacy. Accordingly, we continue to work on improving our risk control framework.
Compliance
Basic Policy
We have clarified our mission, our vision and our values in the Corporate Vision and have expressed our
commitment to meeting the expectations of customers and society as a whole. Furthermore, we have established
Principles of Ethics and Conduct as the guidelines for how the Group’s directors and employees act to realize the
Corporate Vision, in which we have expressed our commitment to complying with laws and regulations, to
acting with honesty and integrity, and to behaving in a manner that supports and strengthens the trust and
confidence of society.
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In addition, as we expand the geographic scope of our business globally, we are committed to keeping
abreast of developments in laws and regulations of the jurisdictions in which we operate including anti-money
laundering and anti-bribery, as well as paying attention to trends in financial crimes.
See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Legal and regulatory
changes could have a negative impact on our business, financial condition and results of operations.” and
“Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may become subject to
regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which
could result in significant financial losses, restrictions on our operations and damage to our reputation.” See also
“Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.”
Principles of Ethics and Conduct
Introduction
These Principles of Ethics and Conduct establish clear and consistent standards for all MUFG employees to
guide decisions and actions. They reflect and support the MUFG Corporate Vision. The principles are organized
in three sections. Chapter 1 presents the attitude that we adopt with our customers, to act with honesty and
integrity and pursue their best interests, which is a core component of our business practices. Chapter 2 presents a
set of standards to help us fulfill our responsibilities as a good corporate citizen. MUFG’s reputation depends
upon the trust and confidence of our customers and other stakeholders, including local communities, and we are
responsible to society on a global level. Chapter 3 describes the actions and mindset that will create a stimulating
and supportive working environment as MUFG continues to grow. Our success depends on building and
maintaining a dynamic workplace where all employees can reach their full potential in ways that support our
customers and contribute to society as a whole.
Outline / Overview
Chapter 1 Customer Focus
We place our diverse customers at the center of all our activities and always act in their best interests.
MUFG is able to thrive today because of the trust and confidence that customers have placed in us—the result of
years of fair, transparent, and honorable dealings. Our business culture is not driven by the prospect of short-
term, immediate gains. Instead, we place a premium on supporting long-term, sustainable relationships with our
customers to help them meet their goals.
1-1. Acting with Honesty and Integrity
We always place our diverse customers at the center of all activities and act with honesty and integrity in all
of our dealings with them. We protect customer assets, including their personal information, and strive at all
times not to damage their interests.
1-2. Controlling Quality
In order to earn the lasting trust and confidence of our customers, we maintain thorough quality control of
our products and services in all aspects from product design and development to delivery, and continually
improve our processes to provide accurate and secure transactions.
1-3. Exceeding Customer Expectations
We strive to satisfy the diverse needs of our customers worldwide and to exceed their expectations through
the highest standards of professionalism and by effectively leveraging our global network and consolidated
strength.
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Chapter 2 Responsibility as a Corporate Citizen
As a member of MUFG with global operations, we act honorably, with honesty and integrity, and comply at
all times with laws, regulations, rules, and internal policies globally. We strive to maintain stability and
confidence in the global financial system and to contribute to the sound growth and development of society. We
behave in a manner that supports and strengthens the trust and confidence that MUFG has built up over the years.
2-1. Adherence to Laws and Regulations
We always judge and act with honesty and integrity, do what is right, and comply with both the letter and
the spirit of the laws, regulations, and rules that apply to us. We avoid insider trading, do not engage in anti-
competitive conduct or any form of corrupt activity, and publicly disclose corporate information in an
appropriate manner.
2-2. Combating Criminal Activity
We do not conduct business with criminal elements. We do not allow our financial products and services to
be used for illegal or improper activities such as money laundering, fraud, or financing terrorist activities.
2-3. Commitment to Social Sustainability
the history, culture, and customs of local communities and strive to contribute to their
We respect
development and the protection of the environment through our corporate activities and employee volunteer
efforts.
Chapter 3 Ethical and Dynamic Workplace
We are committed to creating a working environment that fosters mutual respect among MUFG employees,
supports the full expression of our individuality as professionals, promotes the power of teamwork, honors
diversity, transcends differences, and embraces new challenges.
3-1. Stimulating Workplace
We strive to enhance our knowledge and expertise, focus on maximizing the value of teamwork, and view
changes in the business environment as opportunities to launch new initiatives.
3-2. Ethical Workplace
We respect the diversity and human rights of all MUFG employees. We do not engage in or tolerate
discrimination, harassment, intimidation, or any other behavior or activity that is inconsistent with these
core beliefs. We report any violations of laws and rules, and we manage corporate assets appropriately.
Compliance Framework
Management and coordination of compliance-related matters are the responsibility of separate compliance
management divisions established at the holding company and the major subsidiaries. Each compliance
management division formulates compliance programs and organizes training courses to promote compliance,
and regularly reports to each company’s board of directors and Executive Committee on the status of compliance
activities.
The holding company has established a Group Compliance Committee and each major subsidiary has
established a Compliance Committee for deliberating key issues related to compliance. Additionally, the holding
224
company has a Group Chief Compliance Officer, or CCO, Committee, which consists of the CCO of the holding
company acting as committee chairman and the CCOs of the major subsidiaries. The Group CCO Committee
deliberates important matters related to compliance and compliance-related issues for which the Group should
share a common understanding.
The following diagram summarizes our compliance framework:
Compliance Framework
Holding Company (MUFG)
Board of Directors
Audit Committee
Executive Committee
Group Compliance Committee
CCO (Chief Compliance Officer)
Group CCO Committee
Compliance Division
(Coordinates compliance issues)
Consultation
and report
Guidance, advice
and instruction
MUFG Bank
Mitsubishi UFJ Trust and Banking
Mitsubishi UFJ Securities
Holdings
Other Subsidiaries
Group Companies
Internal Reporting System and Accounting Auditing Hotline
The major subsidiaries have established internal reporting systems that aim to identify compliance issues
early so that any problems can be quickly rectified. This system includes an independent external compliance
hotline. Furthermore, the holding company has set up an MUFG Group Compliance Helpline that acts in parallel
with group-company internal reporting systems and provides a reporting channel for directors and employees of
Group companies. In the holding company, the contents of the reported cases as well as the result of surveys is
reported to the audit committee on a regular basis or whenever necessary.
In addition to these internal reporting systems, the holding company has also established an accounting
auditing hotline that provides a means to report any problems related to MUFG accounting.
MUFG Accounting Auditing Hotline
MUFG has set up an accounting auditing hotline to be used to make reports related to instances of improper
practices (violations of laws and regulations) and inappropriate practices, or of practices raising questions about
such impropriety or inappropriateness, regarding accounting and internal control or audits related to accounting
225
in Group companies. The audit committee oversees the reporting process to ensure the appropriateness and
effectiveness of the reporting process and monitors the reports received through the hotline. The reporting
process works as follows, and may be carried out via letter or e-mail:
Hokusei Law Office, P.C.
Address: Kojimachi 4-3-4, Chiyoda-ku, Tokyo
e-mail: MUFG-accounting-audit-hotline@hokusei-law.com
When reporting information please pay attention to the following:
‰ Matters subject to reporting are limited to instances regarding the Group companies.
‰
Please provide detailed information with respect to the matter. Without detailed factual information
there is a limit to how much our investigations can achieve.
‰ Anonymous information will be accepted.
‰ No information regarding the identity of the informant will be passed on to third parties without the
approval of the informant him- or herself. However, this excludes instances where disclosure is legally
mandated, or to the extent that the information is necessary for surveys or reports, when data may be
passed on following the removal of the informant’s name.
‰
‰
Please submit reports in either Japanese or English.
If the informant wishes, we will endeavor to report back to the informant on the response taken within a
reasonable period of time following the receipt of specific information, but cannot promise to do so in
all instances.
Internal Audit
Role of Internal Audit
Internal audit functions within MUFG seek to verify the adequacy and effectiveness of internal control
systems from a standpoint independent of the operating functions. This includes monitoring the status of risk
management and compliance systems, which are critical to the maintenance of sound and appropriate business
operations. Internal audit results are reported to senior management. An additional role of internal audit is to
make suggestions to help improve or rectify any issues or specific problems that are identified.
Group Internal Audit Framework
The holding company has instituted MUFG’s internal audit policy to define the policy, function and
organizational position of internal audits. Separate internal audit divisions have been created within the holding
company and certain subsidiaries. Through close cooperation and collaboration among the internal audit
divisions of the holding company and these subsidiaries, these internal audit divisions provide coverage for the
Group and also support the board of directors of the holding company in monitoring and overseeing all MUFG
operations.
In addition to having primary responsibility for initiating and preparing plans and proposals related to
internal audits of the Group, the internal audit division at the holding company monitors and, as necessary,
guides, advises and administers the internal audit divisions of subsidiaries and affiliated companies. The internal
audit divisions within the major subsidiaries conduct audits of the respective head office and branch operations of
these companies. In addition, each of these internal audit divisions undertakes direct audits of their respective
subsidiaries, and monitors and oversees the separate internal audit functions established within them. This helps
to evaluate and verify the adequacy and effectiveness of internal controls within MUFG on a consolidated basis.
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Implementing Effective and Efficient Internal Audits
To ensure that internal audit processes use available resources with optimal effectiveness and efficiency, the
internal audit divisions implement risk-focused internal audits in which the nature and magnitude of the
associated risks are considered in determining audit priorities and the frequency and depth of internal audit
activities. The internal audit divisions ensure that audit personnel attend key meetings, collect important internal
control documents and access databases to facilitate efficient off-site monitoring.
Reports to the Audit Committee
The holding company has an audit committee within its board of directors as required by the Companies Act
of Japan, and each of the major subsidiaries has established an audit and supervisory committee or an internal
audit and compliance committee. Within each of the holding company and the major subsidiaries, the internal
audit division reports to the committee on important matters, including the results of the internal audits and basic
policies for planning internal audits.
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Item 12. Description of Securities Other than Equity Securities.
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
Fees, charges and other payments relating to ADSs
As a holder of our ADSs, you will be required to pay to The Bank of New York Mellon, as depositary for
the ADRs, or the Depositary, either directly or indirectly, the following fees or charges. The Depositary collects
its fees for delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for
the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making
distributions to investors by deducting those fees from the amounts distributed or by selling a portion of
distributable property to pay the fees.
ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs (or portion thereof)
$0.02 (or less) per ADS
A fee equivalent to the fee that would be payable
if securities distributed to the ADS holder had
been shares and the shares had been deposited for
issuance of ADRs
Registration or transfer fees
Expenses of The Bank of New York Mellon
Taxes and other governmental charges The Bank
of New York Mellon or MUFG Bank, as
custodian, have to pay on any ADS or share
underlying an ADS, for example, stock transfer
taxes, stamp duty or withholding taxes
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Each issuance of an ADR, including as a result of a
distribution of shares or rights or other property
Each cancellation of an ADR, including if the
agreement terminates
Any cash distribution, to the extent permitted by any
securities exchange on which the ADSs may be listed
for trading
Distribution of securities distributed to holders of
deposited securities which are distributed by the
Depositary to ADS registered holders
Transfer and registration of shares on the share
register from your name to the name of The Bank of
New York Mellon or its agent and vice versa when
you deposit or withdraw shares
Conversion of foreign currency to U.S. dollars, as
well as cable, telex and facsimile transmission
expenses
As necessary
Fees Waived or Paid by the Depositary
The Depositary has agreed to waive the standard out-of-pocket administrative, maintenance and other
expenses for providing services to the registered holders of our ADSs, which include the expenses relating to the
delivery of annual reports, dividend fund remittances, stationery, postage and photocopying. For the fiscal year
ended March 31, 2018, the Depositary waived $135,367.53 of standard out-of-pocket expenses.
The Depositary has also agreed to reimburse us for expenses related to the administration and maintenance
of the ADS program, including investor relations expenses, the annual New York Stock Exchange listing fees
and other program-related expenses. There is a limit on the amount of expenses for which the Depositary will
reimburse us based and conditioned on the number of outstanding ADSs and the amount of dividend fees
collected by the Depositary. For the fiscal year ended March 31, 2018, the Depositary reimbursed us $1.0 million
for such expenses.
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Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
PART II
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
None.
Item 15. Controls and Procedures.
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management,
including the Chief Executive Officer, or CEO, and the Chief Financial Officer, or CFO, of the effectiveness of
our disclosure controls and procedures, as defined in Rule 13a-15(e) under the U.S. Securities Exchange Act of
1934, as of the end of the period covered by this Annual Report.
Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were
effective as of March 31, 2018.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) under the U.S. Securities Exchange Act of 1934. Our internal control over
financial reporting is a process designed by, or under the supervision of, MUFG’s principal executive and
principal financial officers, and effected by MUFG’s board of directors, management, and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:
(i)
(ii)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of MUFG,
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of MUFG are being made only in accordance with authorizations of management and
directors of MUFG, and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of MUFG’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting, no matter how well designed, may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting as of March 31,
2018 based on the criteria established in “Internal Control—Integrated Framework (2013)” issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management
has concluded that MUFG maintained effective internal control over financial reporting as of March 31, 2018.
The effectiveness of our internal control over financial reporting as of March 31, 2018 has been audited by
Deloitte Touche Tohmatsu LLC, an independent registered public accounting firm, as stated in its report,
presented on page 232.
230
Changes in Internal Control Over Financial Reporting
During the period covered by this Annual Report, there has been no change in our internal control over
financial reporting that has materially affected or is reasonably likely to materially affect our internal control
over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Shareholders of
Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group)
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group) (“MUFG”) and subsidiaries (together, the “MUFG Group”)
as of March 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the MUFG
Group maintained, in all material respects, effective internal control over financial reporting as of March 31,
2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated financial statements as of and for the year ended March 31, 2018,
of the MUFG Group and our report dated July 12, 2018, expressed an unqualified opinion on those financial
statements.
Basis for Opinion
The MUFG Group’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the MUFG Group’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the
MUFG Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 12, 2018
232
Item 16A. Audit Committee Financial Expert.
Our board of directors has determined that Mr. Akira Yamate, an outside director, is an “audit committee
financial expert” as defined in Item 16A of Form 20-F and is “independent” as defined in the listing standards of
the New York Stock Exchange. Mr. Yamate has spent most of his professional carrier as a certified public
accountant in Japan, auditing Japanese corporations, including those registered with the U.S. Securities and
Exchange Commission. Mr. Yamate is also the chair of our audit committee.
Item 16B. Code of Ethics.
We have adopted a code of ethics, which consists of internal rules named Principles of Ethics and Conduct,
compliance rules, compliance manual and rules of employment. Each of these rules applies to our principal
executive officer, principal financial officer, principal accounting officer and persons performing similar
functions. Our internal compliance rules were most recently amended on September 13, 2017 and April 2, 2018,
clarifying the complaint submission channels and the manner in which complaints should be handled. A copy of
the Principles of Ethics and Conduct and the sections of our compliance rules, compliance manual and rules of
employment relating to the “code of ethics” (as defined in paragraph (b) of Item 16B of Form 20-F) is attached as
Exhibit 11 to this Annual Report.
No waivers of the Principles of Ethics and Conduct or the ethical framework and code of conduct, as
applicable, or the relevant sections of our compliance rules, compliance manual and rules of employment were
granted to our principal executive officer, principal financial officer, principal accounting officer, directors or
corporate auditors during the fiscal year ended March 31, 2018.
Item 16C. Principal Accountant Fees and Services.
Fees and Services of Deloitte Touche Tohmatsu LLC
The aggregate fees billed by Deloitte Touche Tohmatsu LLC, our independent registered public accounting
firm and its affiliates, for the fiscal years ended March 31, 2017 and 2018 are presented in the following table:
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
(in millions)
¥8,107
393
504
119
¥8,032
199
307
97
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥9,123
¥8,635
The description of our fees billed for each category described above is as follows:
Audit fees—Audit fees are primarily for annual audit of our financial statements, review of our semi-annual
condensed financial statements, statutory audit of our financial statements and audits of our subsidiary financial
statements and attestation services relating to the internal controls over financial reporting under Section 404 of
the U.S. Sarbanes-Oxley Act of 2002.
Audit-related fees—Audit-related fees primarily include accounting consultations, agreed upon procedures
on internal controls, employee benefit plan audit, and advisory services relating to internal control reviews.
Tax fees—Tax fees relate primarily to tax compliance, including assistance with preparation of tax return
filings, tax advisory and tax planning services.
All other fees—All other fees primarily include fees for risk management and compliance advisory services.
233
Pre-Approval Policies and Procedures for Services by Deloitte Touche Tohmatsu LLC
Our audit committee performs the pre-approval function required by applicable SEC rules and regulations.
Our audit committee has established pre-approval policies and procedures that MUFG and its subsidiaries must
follow before engaging Deloitte Touche Tohmatsu LLC to perform audit and permitted non-audit services.
When MUFG or a subsidiary intends to engage Deloitte Touche Tohmatsu LLC to perform audit and
permitted non-audit services, it must make an application for pre-approval on either a periodic or case-by-case
basis.
‰
Periodic application is an application for pre-approval made each fiscal year for services that are
expected to be provided by Deloitte Touche Tohmatsu LLC during the next fiscal year.
‰ Case-by-case application is an application for pre-approval made on a case-by-case basis for services to
be provided by Deloitte Touche Tohmatsu LLC that are not covered by the periodic application.
Pre-approval is resolved in principle by our audit committee prior to engagement, although if necessary a
full-time member of our audit committee may consider any case-by-case application for pre-approval on behalf
of the audit committee prior to the next scheduled audit committee meeting. Such decisions made individually by
a full-time member of our audit committee are reported to the audit committee as appropriate at the next
scheduled audit committee meeting.
Fees approved pursuant to the procedures described in paragraph 2-01(c)(7)(i)(C) of Regulation S-X, which
provides for an exception to the general requirement for pre-approval in certain circumstances, were less than
0.1% of the total fees paid to Deloitte Touche Tohmatsu LLC for each of the fiscal years ended March 31, 2017
and 2018.
Review of Deloitte Touche Tohmatsu LLC’s Independence in Prior Periods
As disclosed in our Annual Reports on Form 20-F for the fiscal years ended March 31, 2015, 2016 and
2017, Deloitte Touche Tohmatsu LLC, or Tohmatsu, previously advised MUFG’s Audit Committee of several
SEC auditor independence rule violations relating to its audit of MUFG’s financial statements as of and for the
fiscal years ended March 31, 2015, 2016 and 2017. The violations primarily involved financial interests,
including deposit accounts with balances in excess of deposit insurance limits held at MUFG Group companies
by partners and other members of Tohmatsu’s audit engagement teams for MUFG and its subsidiaries and
affiliates and their immediate family members, including a senior partner who at the time served in an executive
management role at Tohmatsu and was in the Chain of Command of Tohmatsu’s audit engagement of MUFG’s
financial statements.
With respect to the prior fiscal year audit reports, Tohmatsu reported to the Audit Committee that it had
investigated the relevant facts and circumstances, and concluded that Tohmatsu’s objectivity, impartiality and
integrity with respect to its audit on MUFG’s financial statements were unaffected by the violations. Tohmatsu
also reported to the Audit Committee that corrective and remedial measures were implemented. Finally,
Tohmatsu reported that it had informed the Audit Committee of all identified violations, and represented its good
faith belief that there should not be any unidentified violations.
In connection with the prior year audited financial statements included in our Annual Reports on Form 20-F
for the fiscal years ended March 31, 2015, 2016 and 2017, the Audit Committee engaged counsel to review the
circumstances relating to the violations reported by Tohmatsu. Based on discussions with Tohmatsu, and after
undertaking its own work to review the circumstances, prior to the filing of MUFG’s Annual Reports on
Form 20-F for the fiscal years ended March 31, 2015, 2016 and 2017, the Audit Committee concluded that
Tohmatsu’s ability to exercise objective and impartial judgment on issues within the scope of its audit of
MUFG’s financial statements had not been impaired. Based on this determination, the Audit Committee
concluded that the audited financial statements as of and for the fiscal years ended March 31, 2016 and 2017 may
be included in this Annual Report on Form 20-F.
234
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Issuer Purchases of Common Stock
Total
Number of
Shares
Purchased(1)
Average Price
Paid per Share
April 1 to April 30, 2017 . . . . . . . . . . . . . . . . . . . . . . .
May 1 to May 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . .
June 1 to June 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . .
July 1 to July 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . .
August 1 to August 31, 2017 . . . . . . . . . . . . . . . . . . . .
September 1 to September 30, 2017 . . . . . . . . . . . . . . .
October 1 to October 31, 2017 . . . . . . . . . . . . . . . . . . .
November 1 to November 30, 2017 . . . . . . . . . . . . . . .
December 1 to December 31, 2017 . . . . . . . . . . . . . . .
January 1 to January 31, 2018 . . . . . . . . . . . . . . . . . . .
February 1 to February 28, 2018 . . . . . . . . . . . . . . . . .
March 1 to March 31, 2018 . . . . . . . . . . . . . . . . . . . . .
1,473
2,180
2,745
6,415
5,588
3,703
4,066
5,069
5,997
6,835
3,871
2,925
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,867
¥673.64
698.59
714.66
737.54
700.62
685.81
731.39
747.38
803.17
861.73
808.13
732.96
¥743.98
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs(2)
—
—
54,807,800
86,351,100
145,192,200
58,841,100
—
—
—
—
—
—
—
—
45,491,700
82,175,200
154,508,300
72,333,100
—
—
—
268,825,800
—
—
—
—
Notes:
(1) All of the purchased shares were shares constituting less than one unit (100 shares) purchased from registered holders of such shares at
the current market price of those shares.
(2) During May and June 2017, we repurchased 141,158,900 shares of our common stock for ¥99,999,941,022 under a share repurchase
program that was adopted on May 15, 2017 and completed in June 2017. Under the program, we were authorized by the Board of
Directors to repurchase up to the lesser of an aggregate of 200,000,000 shares of our common stock and an aggregate of ¥100.0 billion
between May 16, 2017 and June 30, 2017. All of the repurchased shares were cancelled on July 20, 2017.
During November and December 2017, we repurchased 127,666,900 shares of our common stock for ¥99,999,957,675 under a share
repurchase program that was adopted on November 14, 2017 and completed in December 2017. Under the program, we were authorized
by the Board of Directors to repurchase up to the lesser of an aggregate of 200,000,000 shares of our common stock and an aggregate of
¥100.0 billion between November 15, 2017 and December 31, 2017. All of the repurchased shares were cancelled on January 22, 2018.
We did not make any purchases of shares of our common stock other than as shown in the above table for
the fiscal year ended March 31, 2018.
During May and June 2018, we repurchased 72,420,700 shares of our common stock for ¥49,999,969,714
under a share repurchase program that was adopted on May 15, 2018 and completed in June 2018. Under the
program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of
100,000,000 shares of our common stock and an aggregate of ¥50.0 billion between May 16, 2018 and June 30,
2018. We plan to cancel all of the repurchased shares on July 20, 2018.
In May 2018, 13,049,600 shares were purchased by the trustee of the trust for the first performance-based
stock compensation plan. In connection with the MUFG Americas Holdings Corporation Stock Bonus Plan,
9,085,223 ADSs were purchased by the trustee of the independent trust between April 1, 2017 and March 31,
2018. In the same period, 616,514 ADSs were purchased by the trustee of the independent trust in connection
with the Bank of Tokyo-Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock Bonus Plan. In the same
235
period, 1,643,459 ADSs were purchased by the trustee of the independent trust in connection with the UNBC
Stock Bonus Plan. For descriptions of our stock compensation and bonus plans, see “Item 6.B. Directors, Senior
Management and Employees—Compensation.”
Item 16F. Change in Registrant’s Certifying Accountant.
None.
Item 16G. Corporate Governance.
The NYSE allows NYSE-listed companies that are foreign private issuers, such as MUFG, with certain
exceptions, to follow home-country practices in lieu of the corporate governance practices followed by
U.S. companies pursuant to the NYSE’s Listed Company Manual. The following is a summary of the significant
differences between MUFG’s corporate governance practices and those followed by U.S. listed companies under
the NYSE’s Listed Company Manual.
1. A NYSE-listed U.S. company must have a majority of directors that meet the independence
requirements under Section 303A of the NYSE’s Listed Company Manual.
As of the date of this Annual Report, we have eight outside directors as members of our board of directors,
which consists of a total of fifteen members. Under our governance system, we are required to have a majority of
outside directors on each of our nominating, audit and compensation committees. For a description of an outside
director, see “Item 6.C. Directors and Senior Management—Board Practices.”
The Tokyo Stock Exchange rules require listed companies, including us, to identify at least one individual
who the company believes is unlikely to have a conflict of interest with general shareholders and have such
individual serve as an independent director or outside corporate auditor.
Further, a listed company with fewer than two outside directors who are considered independent based on
such internal standards as the company establishes pursuant to the Tokyo Stock Exchange requirements must
publicly disclose the reason for not having at least two such directors on its board of directors. In addition, if a
listed company determines that at least one-third of the members of its board of directors should be independent
outside directors, the listed company must disclose its policy relating to the determination. We have adopted and
made public our corporate governance policy providing, among other things, that, in general cases, at least
one-third of the members of our board of directors will be independent outside directors, and that, in general
cases, the majority of the members of our board of directors will be non-executive directors.
2. A NYSE-listed U.S. company must have an audit committee composed entirely of independent
directors.
Under the Companies Act, we are required to have an audit committee consisting of at least three
non-executive directors, and the majority of its members must be outside directors. Currently, our audit
committee consists of three outside directors and two non-executive directors. Our audit committee satisfies the
requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, including the independence
requirements thereunder.
3. A NYSE-listed U.S. company must have a compensation committee composed entirely of independent
directors.
Under the Companies Act, we are required to have a compensation committee consisting of at least three
directors, and the majority of its members must be outside directors. Currently, our compensation committee
consists of five directors, four of whom are outside directors.
236
4. A NYSE-listed U.S. company must have a nominating or corporate governance committee composed
entirely of independent directors.
Under the Companies Act, we are required to have a nominating committee consisting of at least three
directors, and the majority of its members must be outside directors. Currently, our nominating committee, which
we call the nominating and governance committee, consists of five directors, four of whom are outside directors.
5. A NYSE-listed U.S. company must obtain shareholder approval with respect to any equity
compensation plan.
Under the Companies Act, an equity compensation plan for directors and corporate executive officers is
deemed to be compensation for the services performed by the company’s directors and corporate executive
officers. Our compensation committee establishes the policy with respect to the determination of the individual
compensation of our directors and corporate executive officers, including equity compensation in the form of
performance-based stock compensation plan, and determines individual compensation in accordance with the
policy. Under the Companies Act, a public company with board audit, compensation and nominating committees
seeking to introduce a performance-based stock compensation plan must obtain the approval of its compensation
committee, not its shareholders.
6. A NYSE-listed U.S. company must adopt and disclose Corporate Governance Guidelines and a Code of
Business Conduct and Ethics, and it must also disclose any exemptions granted to directors or executives.
Our corporate governance policies, which are called the “MUFG Corporate Governance Policies,” are based
on applicable home-country rules, particularly the Tokyo Stock Exchange rules, which require listed companies,
such as us, to adopt a corporate governance code setting forth fundamental principles designed to establish an
effective corporate governance system or explain in their corporate governance reports the reasons for not
adopting such a code. We disclose these policies on our website.
We have adopted a code of ethics, compliance rules and a compliance manual, which meet the definition of
“code of ethics” in “Item 16B. Code of Ethics.”
7. A NYSE-listed U.S. company must hold regularly scheduled executive sessions where participants are
limited to non-management directors.
Under the Companies Act, Japanese corporations are not obliged to hold executive sessions where
participants are limited to non-management directors. Such executive sessions are also not required under our
internal corporate governance rules.
Item 16H. Mine Safety Disclosure.
Not Applicable.
237
Item 17. Financial Statements.
In lieu of responding to this item, we have responded to Item 18 of this Annual Report.
PART III
Item 18. Financial Statements.
The information required by this item is set forth in our consolidated financial statements starting on
page F-1 of this Annual Report.
Item 19. Exhibits.
Exhibit
Description
1(a)
1(b)
1(c)
1(d)
1(e)
1(f)
1(g)
1(h)
2(a)
2(b)
7
8
11
12
13
15
Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on July 6, 2018
(English translation)
Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015 (English translation)
Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
July 1, 2018 (English translation)
Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 27,
2013 (English Translation)*
Charter of the Audit Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)
Charter of the Compensation Committee of Mitsubishi UFJ Financial Group, Inc., as amended
on July 1, 2018 (English translation)
Charter of the Nominating and Governance Committee of Mitsubishi UFJ Financial Group,
Inc., as amended on July 1, 2018 (English translation)
Charter of the Risk Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)
Form of American Depositary Receipt
Form of Deposit Agreement, amended and restated as of December 22, 2004, among Mitsubishi
Tokyo Financial Group, Inc. (subsequently renamed Mitsubishi UFJ Financial Group, Inc.), The
Bank of New York Mellon and the holders from time to time of American Depositary Receipts
issued thereunder
Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges for the fiscal
years ended March 31, 2014, 2015, 2016, 2017 and 2018**
Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational
Structure.”
Principles of Ethics and Conduct, Compliance Rules, Compliance Manual, and Rules of
Employment of Mitsubishi UFJ Financial Group, Inc. applicable to its principal executive
officer, principal financial officer, principal accounting officer and persons performing similar
functions (English translation of relevant sections)
Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a)
(17 CFR 240.15d-14(a))
Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b)
(17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code
(18 U.S.C. 1350)
Consent of independent registered public accounting firm
238
Exhibit
99(a)
99(b)
Description
Capitalization and Indebtedness of Mitsubishi UFJ Financial Group, Inc. as of March 31,
2018***
Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ
Financial Group, Inc. as of and for the fiscal year ended March 31, 2018****
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
Notes:
*
**
***
****
Incorporated by reference to our registration statement on Form S-8 (File No. 333-204845) filed on June 10, 2015.
Deemed to be incorporated as Exhibit 12.1 to the registration statement on Form F-3 (No. 333-209455) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Deemed to be incorporated by reference into the registration statement on Form F-3 (No. 333-209455) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Deemed to be incorporated as Annex A to the registration statement on Form F-3 (No. 333-209455) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
239
SELECTED STATISTICAL DATA
Due to close integration of our foreign and domestic activities, it is difficult to make a precise determination
of the assets, liabilities, income and expenses of our foreign operations. The foreign operations as presented
include the business conducted by overseas subsidiaries and branches, and the international business principally
conducted by the international banking-related divisions headquartered in Japan. Our management believes that
the results appropriately represent our domestic and foreign activities.
A-1
I. Distribution of Assets, Liabilities and Equity; Interest Rates and Interest Differential
Average Balance Sheets, Interest and Average Rates
The following table shows our average balances, interest and average interest rates for the fiscal years ended
March 31, 2016, 2017 and 2018. Average balances are generally based on a daily average while a month-end
average is used for certain average balances when it is not practicable to obtain applicable daily averages.
Fiscal years ended March 31,
2016
2017
2018
Average
balance
Interest
income
Average
rate
Average
balance
Interest
income
Average
rate
Average
balance
Interest
income
Average
rate
(in millions, except percentages)
Assets:
Interest-earning assets:
Interest-earning deposits in
other banks:
Domestic . . . . . . . . . . . . ¥ 31,905,984 ¥
Foreign . . . . . . . . . . . . .
9,259,479
32,063
50,591
0.10% ¥ 31,322,995 ¥
0.55
7,118,443
28,975
49,760
0.09% ¥ 31,515,803
7,889,777
0.70
¥26,391
100,217
0.08%
1.27
Total
. . . . . . . . . . .
41,165,463
82,654
0.20
38,441,438
78,735
0.20
39,405,580
126,608
0.32
Call loans, funds sold, and
receivables under resale
agreements and securities
borrowing transactions:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
3,997,009
10,633,966
Total
. . . . . . . . . . .
14,630,975
1,184
57,440
58,624
Trading account assets:
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
5,328,794
22,146,669
33,076
389,004
Total
. . . . . . . . . . .
27,475,463
422,080
Investment securities(1):
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
41,308,432
7,059,232
230,478
157,564
Total
. . . . . . . . . . .
48,367,664
388,042
Loans(2):
Domestic . . . . . . . . . . . .
Foreign . . . . . . . . . . . . .
71,072,445
800,723
50,003,733 1,253,615
Total
. . . . . . . . . . . 121,076,178 2,054,338
Total interest-earning assets:
Domestic . . . . . . . . . . . . 153,612,664 1,097,524
99,103,079 1,908,214
Foreign . . . . . . . . . . . . .
Total
. . . . . . . . . . . 252,715,743 3,005,738
0.03
0.54
0.40
0.62
1.76
1.54
0.56
2.23
0.80
1.13
2.51
1.70
0.71
1.93
1.19
5,825,863
8,259,160
14,085,023
2,116
59,263
61,379
3,818,370
23,111,674
24,262
431,598
26,930,044
455,860
35,863,993
6,583,759
219,443
151,701
42,447,752
371,144
68,348,115
743,683
48,940,077 1,279,966
117,288,192 2,023,649
145,179,336 1,018,479
94,013,113 1,972,288
239,192,449 2,990,767
0.04
0.72
0.44
0.64
1.87
1.69
0.61
2.30
0.87
1.09
2.62
1.73
0.70
2.10
1.25
7,703,606
7,873,112
15,576,718
7,246
77,447
84,693
4,737,292
20,012,444
27,126
405,469
24,749,736
432,595
34,659,859
6,891,939
183,622
160,279
41,551,798
343,901
65,985,440
757,623
51,779,709 1,513,596
117,765,149 2,271,219
144,602,000 1,002,008
94,446,981 2,257,008
239,048,981 3,259,016
0.09
0.98
0.54
0.57
2.03
1.75
0.53
2.33
0.83
1.15
2.92
1.93
0.69
2.39
1.36
Non-interest-earning assets:
Cash and due from banks . . .
Other non-interest-earning
3,853,732
assets . . . . . . . . . . . . . . . . .
43,703,112
Allowance for credit
losses . . . . . . . . . . . . . . . . .
(1,001,714)
Total non-interest-
earning assets . .
46,555,130
Total assets . . . . . . . . . . . . . . . . . ¥299,270,873
21,989,856
47,775,376
(1,018,982)
68,746,250
¥307,938,699
34,040,675
48,549,541
(1,049,265)
81,540,951
¥320,589,932
Notes:
(1) Tax-exempt income of tax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such
calculation would not be material.
(2) Average balances on loans outstanding include all nonaccrual and restructured loans. See “III. Loan Portfolio.” The amortized portion of
net loan origination fees (costs) is included in interest income on loans, which accounts for an insignificant amount of an adjustment to
the yields.
A-2
Fiscal years ended March 31,
2016
2017
2018
Average
balance
Interest
expense
Average
rate
Average
balance
Interest
expense
Average
rate
Average
balance
Interest
expense
Average
rate
(in millions, except percentages)
Liabilities and equity:
Interest-bearing liabilities:
Deposits:
Domestic . . . . . . . ¥110,396,310 ¥
Foreign . . . . . . . .
41,066,208
Total . . . . . . 151,462,518
69,634 0.06% ¥117,156,484 ¥
280,701 0.68
350,335 0.23
38,411,021
155,567,505
45,790
301,640
347,430
0.04% ¥123,141,060 ¥
0.79
0.22
41,421,717
164,562,777
58,779
456,089
514,868
0.05%
1.10
0.31
Call money, funds
purchased, and
payables under
repurchase
agreements and
securities lending
transactions(1):
Domestic . . . . . . .
Foreign . . . . . . . .
Total . . . . . .
Due to trust account—
Domestic . . . . . . . . .
Other short-term
borrowings and
trading account
liabilities:
24,017,338
11,666,364
35,683,702
50,567 0.21
16,732 0.14
67,299 0.19
22,024,053
10,765,446
32,789,499
82,162
20,425
102,587
0.37
0.19
0.31
17,913,277
10,138,998
28,052,275
113,805
56,955
170,760
0.64
0.56
0.61
1,162,326
505 0.04
3,122,190
207
0.01
3,065,511
109
0.00
Domestic . . . . . . .
Foreign . . . . . . . .
Total . . . . . .
7,945,537
5,787,927
13,733,464
26,145 0.33
28,427 0.49
54,572 0.40
3,644,192
5,435,977
9,080,169
11,679
49,458
61,137
Long-term debt(1):
Domestic . . . . . . .
Foreign . . . . . . . .
Total . . . . . .
15,791,409
3,301,789
19,093,198
150,124 0.95
121,529 3.68
271,653 1.42
20,358,348
2,604,585
22,962,933
173,634
84,644
258,278
0.32
0.91
0.67
0.85
3.25
1.12
3,768,213
6,476,232
10,244,445
11,012
82,523
93,535
25,277,891
2,654,153
27,932,044
183,944
65,539
249,483
0.29
1.27
0.91
0.73
2.47
0.89
Total interest-bearing
liabilities:
Domestic . . . . . . . 159,312,920
61,822,288
Foreign . . . . . . . .
Total . . . . . . 221,135,208
296,975 0.19
447,389 0.72
744,364 0.34
166,305,267
57,217,029
223,522,296
313,472
456,167
769,639
0.19
0.80
0.34
367,649
173,165,952
60,691,100
661,106
233,857,052 1,028,755
0.21
1.09
0.44
Non-interest-bearing
liabilities . . . . . . . . . . . . .
Total equity . . . . . . . . . . . .
Total liabilities and
62,849,899
15,285,766
69,405,574
15,010,829
71,309,802
15,423,078
equity . . . . . . . . . . . . . . . ¥299,270,873
¥307,938,699
¥320,589,932
Net interest income and
interest rate spread . . . .
Net interest income as a
percentage of total
interest-earning
assets . . . . . . . . . . . . . . .
¥2,261,374 0.85%
¥2,221,128
0.91%
¥2,230,261
0.92%
0.89%
0.93%
0.93%
Note:
(1) The table above reflects changes in presentation that were made to long-term repurchase agreements for the fiscal years ended March 31,
2016 and 2017. For further information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
The percentage of total average assets attributable to foreign activities was 39.4%, 37.3% and 36.6%,
respectively, for the fiscal years ended March 31, 2016, 2017 and 2018.
A-3
The percentage of total average liabilities attributable to foreign activities was 40.1%, 38.1% and 36.9%,
respectively, for the fiscal years ended March 31, 2016, 2017 and 2018.
Analysis of Net Interest Income
The following table shows changes in our net interest income by changes in volume and by changes in
interest rate for the fiscal year ended March 31, 2017 compared to the fiscal year ended March 31, 2016, and the
fiscal year ended March 31, 2018 compared to the fiscal year ended March 31, 2017.
Fiscal year ended March 31, 2016
versus
fiscal year ended March 31, 2017
Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Volume(1)
Rate(1)
Net change
Volume(1)
Rate(1)
Net change
(in millions)
Interest income:
Interest-earning deposits in other banks:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . ¥
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
(577) ¥ (2,511) ¥ (3,088) ¥
(13,178)
12,347
(831)
177 ¥ (2,761) ¥ (2,584)
50,457
44,549
5,908
Total
. . . . . . . . . . . . . . . . . . . . . . .
(13,755)
9,836
(3,919)
6,085
41,788
47,873
Call loans, funds sold, and receivables under
resale agreements and securities
borrowing transactions:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
624
(14,533)
308
16,356
Total
. . . . . . . . . . . . . . . . . . . . . . .
(13,909)
16,664
932
1,823
2,755
865
(2,885)
4,265
21,069
(2,020)
25,334
5,130
18,184
23,314
Trading account assets:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
(9,580)
17,387
Total
. . . . . . . . . . . . . . . . . . . . . . .
7,807
766
25,207
25,973
(8,814)
42,594
5,430
(60,886)
(2,566)
34,757
2,864
(26,129)
33,780
(55,456)
32,191
(23,265)
Investment securities(2):
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
(32,071)
(10,844)
21,036
4,981
(11,035)
(5,863)
(7,170)
7,156
(28,651)
1,422
(35,821)
8,578
Total
. . . . . . . . . . . . . . . . . . . . . . .
(42,915)
26,017
(16,898)
(14)
(27,229)
(27,243)
Loans:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
(30,138)
(27,046)
(26,902)
53,397
(57,040)
26,351
(26,254)
77,153
40,194
156,477
13,940
233,630
Total
. . . . . . . . . . . . . . . . . . . . . . .
(57,184)
26,495
(30,689)
50,899
196,671
247,570
Total interest income:
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
(7,303)
(71,742)
(48,214) 112,288
(79,045)
64,074
(26,952)
26,446
10,481
258,274
(16,471)
284,720
Total . . . . . . . . . . . . . . . . . . . . . . . ¥(119,956) ¥104,985 ¥(14,971) ¥
(506) ¥268,755 ¥268,249
Notes:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net
change.”
(2) Tax-exempt income of tax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such
calculation would not be material.
A-4
Fiscal year ended March 31, 2016
versus
fiscal year ended March 31, 2017
Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Volume(1)
Rate(1)
Net change
Volume(1)
Rate(1)
Net change
(in millions)
Interest expense:
Deposits:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . .
¥
4,039
(18,967)
¥(27,883) ¥(23,844) ¥ 2,436
25,194
20,939
39,906
¥ 10,553
129,255
¥ 12,989
154,449
Total
. . . . . . . . . . . . . . . . . . . . .
(14,928)
12,023
(2,905)
27,630
139,808
167,438
Call money, funds purchased, and
payables under repurchase agreements
and securities lending transactions(2):
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . .
(4,511)
(1,373)
36,106
5,066
31,595
3,693
(17,597)
(1,256)
Total
. . . . . . . . . . . . . . . . . . . . .
(5,884)
41,172
35,288
(18,853)
49,240
37,786
87,026
31,643
36,530
68,173
Due to trust account—Domestic . . . . . . . .
371
(669)
(298)
(4)
(94)
(98)
Other short-term borrowings and trading
account liabilities:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . .
(13,802)
(1,827)
(664)
22,858
(14,466)
21,031
Total
. . . . . . . . . . . . . . . . . . . . .
(15,629)
22,194
6,565
388
10,690
11,078
(1,055)
22,375
(667)
33,065
21,320
32,398
Long-term debt(2):
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . .
40,122
(23,729)
(16,612)
(13,156)
23,510
(36,885)
38,127
1,582
(27,817)
(20,687)
10,310
(19,105)
Total
. . . . . . . . . . . . . . . . . . . . .
16,393
(29,768)
(13,375)
39,709
(48,504)
(8,795)
Total interest expense:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . .
26,219
(45,896)
(9,722)
54,674
16,497
8,778
23,350
36,210
30,827
168,729
54,177
204,939
Total
. . . . . . . . . . . . . . . . . . . . .
¥ (19,677) ¥ 44,952
¥ 25,275
¥ 59,560
¥199,556
¥259,116
Net interest income:
Domestic . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . .
¥ (97,961) ¥ 2,419
57,614
(2,318)
¥(95,542) ¥(50,302) ¥ (20,346) ¥ (70,648)
79,781
(9,764)
89,545
55,296
Total
. . . . . . . . . . . . . . . . . . . . .
¥(100,279) ¥ 60,033
¥(40,246) ¥(60,066) ¥ 69,199
¥
9,133
Notes:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net
change.”
(2) The table above reflects changes in presentation that were made to long-term repurchase agreements for the fiscal years ended March 31,
2016 and 2017. For further information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
A-5
II.
Investment Portfolio
The following table shows information as to the value of our Available-for-sale securities and
Held-to-maturity securities at March 31, 2016, 2017 and 2018:
2016
Amortized
cost
Fair value
Net
unrealized
gains
(losses)
Amortized
cost
At March 31,
2017
Fair value
(in millions)
2018
Net
unrealized
gains
(losses)
Amortized
cost
Fair value
Net
unrealized
gains
(losses)
Available-for-sale securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . ¥28,427,163 ¥29,127,841 ¥ 700,678 ¥ 25,435,570 ¥ 25,826,288 ¥ 390,718 ¥ 24,272,345 ¥ 24,567,904 ¥ 295,559
12,053
899,572
935,965
917,170
923,912
795,427
816,984
17,598
21,557
Corporate bonds . . . . . . . . .
Marketable equity
securities . . . . . . . . . . . . .
Other securities . . . . . . . . . .
2,646,182
1,088,843
5,602,328 2,956,146
14,389
1,103,232
2,719,146
1,844,358
6,115,213 3,396,067
7,044
1,851,402
2,638,796
2,581,942
6,544,938 3,906,142
7,425
2,589,367
Total domestic . . . . . . . . 32,957,615
36,650,385 3,692,770
30,898,646 34,710,073 3,811,427
30,416,995 34,638,174 4,221,179
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds . . . . . . . .
Other governments and
official institutions
bonds . . . . . . . . . . . . . . .
Mortgage-backed
869,152
880,154
11,002
1,075,244
1,060,868
(14,376)
1,400,997
1,366,456
(34,541)
1,177,635
1,193,914
16,279
1,087,653
1,089,061
1,408
806,665
805,236
(1,429)
securities . . . . . . . . . . . . .
Other securities . . . . . . . . . .
1,090,886
1,419,445
1,076,866
1,424,912
(14,020)
5,467
913,118
1,321,273
898,301
1,331,796
(14,817)
10,523
1,229,111
1,492,293
1,214,211
1,480,621
(14,900)
(11,672)
Total foreign . . . . . . . . .
4,557,118
4,575,846
18,728
4,397,288
4,380,026
(17,262)
4,929,066
4,866,524
(62,542)
Total . . . . . . . . . . . . . . ¥37,514,733 ¥ 41,226,231 ¥3,711,498 ¥35,295,934 ¥39,090,099 ¥3,794,165 ¥35,346,061 ¥39,504,698 ¥4,158,637
Held-to-maturity securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . ¥1,101,107 ¥
Other securities . . . . . . . . . .
200
1,159,115 ¥
200
58,008 ¥ 1,100,955 ¥ 1,144,070 ¥
100
100
—
43,115 ¥ 1,100,807 ¥ 1,141,019 ¥
—
—
—
Total domestic . . . . . . . .
1,101,307
1,159,315
58,008
1,101,055
1,144,170
43,115
1,100,807
1,141,019
40,212
—
40,212
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds . . . . . . . .
Other governments and
official institutions
bonds . . . . . . . . . . . . . . .
Mortgage-backed
62,563
63,965
1,402
60,910
62,023
1,113
59,330
59,610
280
26,772
26,290
(482)
225
225
—
—
—
—
securities . . . . . . . . . . . . .
Asset-backed securities . . . .
1,139,631
1,536,395
1,145,520
1,536,158
5,889
(237)
1,146,828
1,278,303
1,143,938
1,287,395
(2,890)
9,092
1,057,612
1,365,192
1,047,635
1,372,408
Total foreign . . . . . . . . .
2,765,361
2,771,933
6,572
2,486,266
2,493,581
7,315
2,482,134
2,479,653
(9,977)
7,216
(2,481)
Total . . . . . . . . . . . . . . ¥ 3,866,668 ¥ 3,931,248 ¥
64,580 ¥ 3,587,321 ¥ 3,637,751 ¥
50,430 ¥ 3,582,941 ¥ 3,620,672 ¥
37,731
Nonmarketable equity securities presented in Other investment securities in the accompanying consolidated
financial statements were primarily carried at cost of ¥530,026 million, ¥529,869 million and ¥538,251 million,
at March 31, 2016, 2017 and 2018, respectively. The corresponding fair values at those dates were not readily
determinable. Investment securities held by certain subsidiaries subject to specialized industry accounting
principles for investment companies and brokers and dealers presented in Other investment securities were
carried at fair value of ¥24,689 million, ¥26,292 million and ¥28,359 million, at March 31, 2016, 2017 and 2018,
respectively.
A-6
The following table presents the book values, maturities and weighted average yields of Available-for-sale
securities and Held-to-maturity securities, excluding equity securities, at March 31, 2018. Weighted average
yields are calculated based on amortized cost. Yields on tax-exempt obligations have not been calculated on a tax
equivalent basis because the effect of such calculation would not be material:
Maturities within
one year
Maturities after
one year but
within five years
Maturities after
five years but
within ten years
Maturities after
ten years
Total
Amount Yield
Amount Yield Amount Yield Amount Yield
Amount Yield
(in millions, except percentages)
Available-for-sale securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . ¥10,914,592 0.07% ¥ 7,870,360 0.50% ¥3,344,997 0.56% ¥2,437,955 1.22% ¥24,567,904 0.38%
Corporate bonds . . . . . . . . .
Other securities . . . . . . . . . .
114,018 0.47
180,526 0.62
597,427 0.27
511,180 0.25
183,468 0.41
1,420,873 0.24
41,052 0.73
476,788 0.29
935,965 0.34
2,589,367 0.27
Total domestic . . . . . .
11,209,136 0.08
8,978,967 0.47
4,949,338 0.46
2,955,795 1.06
28,093,236 0.37
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds . . . . . . . .
Other governments and
official institutions
bonds . . . . . . . . . . . . . . .
Mortgage-backed
112,139 1.50
527,561 1.77
725,438 1.86
1,318 3.62
1,366,456 1.80
236,108 1.52
498,559 2.39
66,316 2.99
4,253 3.44
805,236 2.19
securities . . . . . . . . . . . . .
Other securities . . . . . . . . . .
191 5.37
354,107 1.85
390 2.28
646,913 2.25
110,922 2.02
160,675 2.83
1,102,708 2.61
192,280 2.59
1,214,211 2.56
1,353,975 2.27
Total foreign . . . . . . . .
702,545 1.69
1,673,423 2.14
1,063,351 2.09
1,300,559 2.61
4,739,878 2.19
Total . . . . . . . . . . . . ¥11,911,681 0.17% ¥10,652,390 0.74% ¥6,012,689 0.76% ¥4,256,354 1.56% ¥32,833,114 0.64%
Held-to-maturity securities:
Domestic:
Japanese national
government and Japanese
government agency
bonds . . . . . . . . . . . . . . . ¥
— —% ¥
— —% ¥1,100,807 0.51% ¥
— —% ¥ 1,100,807 0.51%
Total domestic . . . . . .
— —
— — 1,100,807 0.51
— —
1,100,807 0.51
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds . . . . . . . .
Mortgage-backed
securities . . . . . . . . . . . . .
Asset-backed securities . . .
Total foreign . . . . . . . .
— —
59,330 2.09
— —
— —
59,330 2.09
— —
— —
— —
96,389 2.25
57,160 6.27
44,070 2.32
454,342 2.48
917,153 2.45
853,690 2.14
1,057,612 2.42
1,365,192 2.42
212,879 3.29
498,412 2.46
1,770,843 2.30
2,482,134 2.42
Total . . . . . . . . . . . . ¥
— —% ¥
212,879 3.29% ¥1,599,219 1.12% ¥1,770,843 2.30% ¥ 3,582,941 1.83%
Other than U.S. Treasury and other U.S. government agencies bonds and Japanese national government
bonds, none of the individual issuers held in our investment securities portfolio exceeded 10% of the
consolidated total Mitsubishi UFJ Financial Group shareholders’ equity at March 31, 2018.
A-7
III. Loan Portfolio
The following table shows our loans outstanding, before deduction of allowance for credit losses, by
domicile and industry of the borrower at March 31 for each of the five fiscal years ended March 31, 2018.
Classification of loans by industry is based on the industry segment loan classification as defined by the Bank of
Japan for regulatory reporting purposes and is not necessarily based on the use of proceeds:
2014
2015
At March 31,
2016
(in millions)
2017
2018
Domestic:
Manufacturing . . . . . . . . . .
Construction . . . . . . . . . . .
Real estate . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . .
Wholesale and retail
. . . . .
Banks and other financial
institutions(1)
Communication and
. . . . . . . . .
information services . . .
Other industries . . . . . . . . .
. . . . . . . . . . . . .
Consumer
¥ 11,540,753
980,877
10,989,562
2,693,561
8,475,143
¥ 11,703,428
977,892
10,911,240
2,684,355
8,345,481
¥ 12,158,642
913,180
11,175,130
2,503,446
7,891,364
¥ 11,796,803
819,262
11,622,372
2,549,300
7,970,579
¥ 10,876,625
781,262
11,763,769
2,689,086
7,989,080
3,985,106
4,329,964
5,146,932
5,223,906
4,818,364
1,443,466
13,496,763
16,921,352
1,527,811
12,674,004
16,720,590
1,509,858
14,739,826
16,397,560
1,634,584
8,898,712
16,491,010
1,551,533
8,939,291
16,287,332
Total domestic . . . . . .
70,526,583
69,874,765
72,435,938
67,006,528
65,696,342
Foreign:
Governments and official
institutions . . . . . . . . . . .
811,475
1,052,051
1,125,031
1,037,795
920,538
Banks and other financial
. . . . . . . . .
9,792,255
11,973,021
13,654,335
13,844,964
12,851,570
institutions(1)
Commercial and
industrial
. . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .
24,533,816
4,872,372
29,593,255
6,065,782
30,056,474
5,818,747
30,279,641
6,334,551
30,591,173
7,270,928
Total foreign . . . . . . .
40,009,918
48,684,109
50,654,587
51,496,951
51,634,209
Total
. . . . . . . . .
110,536,501
118,558,874
123,090,525
118,503,479
117,330,551
Unearned income, unamortized
premiums—net and deferred
loan fees—net . . . . . . . . . . . .
(260,090)
(293,672)
(299,567)
(288,507)
(294,656)
Total(2) . . . . . . . .
¥110,276,411
¥118,265,202
¥122,790,958
¥118,214,972
¥117,035,895
Notes:
(1) Loans to so-called “non-bank finance companies” are generally included in the “Banks and other financial institutions” category.
Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
(2) The above table includes loans held for sale of ¥46,635 million, ¥88,927 million, ¥100,889 million, ¥185,940 million and
¥226,923 million at March 31, 2014, 2015, 2016, 2017 and 2018, respectively, which are carried at the lower of cost or fair value.
A-8
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the maturities of our loan portfolio at March 31, 2018:
One year or less One to five years
Over five years
Total
(in millions)
Maturity
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,755,042
433,696
2,700,520
1,218,534
5,307,471
3,073,154
¥ 3,337,562
265,187
4,028,924
1,028,196
2,002,391
1,232,652
¥ 1,784,021
82,379
5,034,325
442,356
679,218
512,558
¥ 10,876,625
781,262
11,763,769
2,689,086
7,989,080
4,818,364
435,506
5,628,641
2,366,078
683,481
2,007,878
3,210,899
432,546
1,302,772
10,710,355
1,551,533
8,939,291
16,287,332
Total Domestic . . . . . . . . . . . . . . . . .
26,918,642
17,797,170
20,980,530
65,696,342
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,086,876
19,423,923
12,123,410
51,634,209
Total . . . . . . . . . . . . . . . . . . . . .
¥47,005,518
¥37,221,093
¥33,103,940
¥117,330,551
The above loans due after one year which had predetermined interest rates and floating or adjustable interest
rates at March 31, 2018 are shown below:
Predetermined rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating or adjustable rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥16,307,036
22,470,664
(in millions)
¥ 4,293,127
27,254,206
¥20,600,163
49,724,870
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥38,777,700
¥31,547,333
¥70,325,033
Domestic
Foreign
Total
Nonaccrual, Past Due and Restructured Loans
We generally discontinue the accrual of interest income on loans when substantial doubt exists as to the full
and timely collection of either principal or interest, when principal or interest is contractually past due one month
or more with respect to loans within all classes of the Commercial segment, three months or more with respect to
loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or more with respect
to loans within the Residential segment.
Generally, accruing loans that are modified in a troubled debt restructuring (“TDR”) remain as accruing
loans subsequent to the modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan
has been restructured as a TDR, the borrower is not delinquent under the restructured terms, and demonstrates
that its financial condition has improved, we may reclassify the loan to accrual status. This determination is
generally performed at least once a year through a detailed internal credit rating review process. Once a
nonaccrual loan is deemed to be a TDR, we will continue to designate the loan as a TDR even if the loan is
reclassified to accrual status.
A-9
The following table shows the distribution of our nonaccrual loans, restructured loans and accruing loans
which are contractually past due 90 days or more as to principal or interest payments at March 31 of each of the
five fiscal years ended March 31, 2018, based on the domicile and type of industry of the borrowers:
2014
2015
2016
2017
2018
At March 31,
(in millions)
Nonaccrual loans:
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 167,962 ¥ 119,052 ¥ 372,875 ¥ 185,124 ¥
Construction . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . .
Communication and information services . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
Total domestic . . . . . . . . . . . . . . . . . . . . .
20,150
85,625
54,801
158,454
5,715
23,204
19,094
199,665
685,760
30,202
154,766
72,851
212,356
7,234
24,956
36,861
227,476
934,664
15,256
66,210
41,056
132,858
675
20,270
29,715
174,106
853,021
15,248
50,142
38,977
131,545
2,432
18,711
10,352
161,680
614,211
77,188
10,922
37,853
31,733
108,639
1,145
13,815
37,677
149,491
468,463
Foreign:
Governments and official institutions . . . . . . .
Banks and other financial institutions . . . . . . .
Commercial and industrial
. . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign . . . . . . . . . . . . . . . . . . . . . .
Total
—
1,716
215,601
67,869
285,186
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,115,446 ¥ 913,697 ¥1,200,167 ¥ 986,632 ¥ 753,649
43
24,091
87,808
68,840
180,782
40
7,372
144,609
75,916
227,937
132
14,337
264,163
68,514
347,146
—
5,902
301,685
64,834
372,421
Restructured loans:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 718,027 ¥ 735,348 ¥ 459,294 ¥ 682,041 ¥ 557,368
137,674
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 871,231 ¥ 879,437 ¥ 625,534 ¥ 840,825 ¥ 695,042
144,089
153,204
166,240
158,784
Total
Accruing loans contractually past due 90 days or
more:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
Foreign(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,759 ¥
961
48,050 ¥
360
47,919 ¥
314
37,650 ¥
3,430
17,356
2,408
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥
48,720 ¥
48,410 ¥
48,233 ¥
41,080 ¥
19,764
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,035,397 ¥1,841,544 ¥1,873,934 ¥1,868,537 ¥1,468,455
Notes:
(1) Foreign accruing loans contractually past due 90 days or more do not include ¥13,068 million, ¥5,666 million, ¥1,930 million,
¥1,514 million and ¥549 million of Federal Deposit Insurance Corporation (“FDIC”) covered loans held by MUFG Americas Holdings
which are subject to the guidance on loans and debt securities acquired with deteriorated credit quality at March 31, 2014, 2015, 2016,
2017 and 2018, respectively.
(2) The sum of nonaccrual loans, restructured loans and accruing loans contractually past due 90 days or more includes large groups of
smaller-balance homogenous loans that have not been modified and are collectively evaluated for impairment, and accruing loans
contractually past due 90 days or more. However, these loans are excluded from the impaired loan balances of ¥1,715,850 million and
¥1,331,123 million, at March 31, 2017 and 2018, respectively, disclosed in Note 4 to our consolidated financial statements included
elsewhere in this Annual Report.
Gross interest income which would have been accrued at the original terms on domestic nonaccrual and
restructured loans outstanding during the fiscal year ended March 31, 2018 was approximately ¥38.3 billion, of
which ¥14.0 billion was included in the results of operations for the fiscal year. Gross interest income which
would have been accrued at the original terms on foreign nonaccrual and restructured loans outstanding for the
fiscal year ended March 31, 2018 was approximately ¥28.9 billion, of which ¥15.2 billion was included in the
results of operations for the fiscal year.
A-10
Potential Problem Loans
We do not have potential problem loans where known information about possible credit problems of
borrowers causes management to have serious doubts as to the borrowers’ ability to comply with the present loan
repayment terms that are not disclosed as nonaccrual loans, restructured loans and accruing loans past due
90 days or more.
Foreign Loans Outstanding
We had no cross-border outstandings to borrowers domiciled in a foreign country which in total exceeded
0.75% of our consolidated total assets at March 31, 2016, 2017 and 2018. Cross-border outstandings are defined,
for this purpose, as loans (including accrued interest), acceptances, interest-earning deposits with other banks,
other interest-earning investments and any other monetary assets denominated in Japanese yen or other non-local
currencies. Material local currency loans outstanding which are neither hedged nor funded by local currency
borrowings are included in cross-border outstandings.
Guarantees of outstandings to borrowers domiciled in other countries are considered to be outstandings of
the guarantor. Loans made to, or deposits placed with, a branch of a foreign bank located outside the foreign
bank’s home country are considered to be loans to, or deposits with, the foreign bank. Outstandings of a country
do not include principal or interest amounts which are supported by written, legally enforceable guarantees by
guarantors of other countries or the amounts of outstandings to the extent that they are secured by tangible, liquid
collateral held and realizable by MUFG Bank, Mitsubishi UFJ Trust and Banking and their subsidiaries outside
the country in which they operate.
In addition to credit risk, cross-border outstandings are subject to country risk that as a result of political or
economic conditions in a country, borrowers may be unable or unwilling to pay principal and interest according
to contractual terms. Other risks related to cross-border outstandings include the possibility of insufficient
foreign exchange and restrictions on its availability.
In order to manage country risk, we establish various risk management measures internally. Among other
things, we regularly monitor economic conditions and other factors globally and assess country risk in each
country where we have cross-border exposure. For the purposes of monitoring and controlling the amount of
credit exposed to country risk, we set a country limit, the maximum amount of credit exposure for an individual
country, in consideration of the level of country risk and our ability to bear such potential risk. We also
determine our credit policy for each country in accordance with our country risk level and our business plan with
regard to the country. The assessment of country risk, establishment of country limits, and determination of
country credit policies are subject to review and approval by our senior management and are updated
periodically.
Loan Concentrations
At March 31, 2018, there were no concentrations of loans to a single industry group of borrowers, as defined
by the Bank of Japan industry segment loan classifications, which exceeded 10% of our consolidated total loans,
except for loans in a category disclosed in the table of loans outstanding above.
Credit Risk Management
We have a credit rating system, under which borrowers and transactions are graded on a worldwide basis.
We calculate probability of default by statistical means and manage our credit portfolio based on this credit
rating system. For a detailed description of this system and other elements of our risk management structure, see
“Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk
Management.”
A-11
IV. Summary of Loan Loss Experience
The following table shows an analysis of our loan loss experience by industry of the borrower for each of
the five fiscal years ended March 31, 2018:
Allowance for credit losses at beginning of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses . . . . . . . . . . . . . .
Charge-offs:
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . .
Communication and information services . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal years ended March 31,
2014
2015
2016
2017
2018
(in millions, except percentages)
¥1,335,987
(106,371)
¥1,094,420
86,998
¥1,055,479
231,862
¥1,111,130
253,688
¥1,182,188
(240,847)
52,579
2,985
17,124
13,555
39,218
243
5,061
3,312
27,888
161,965
29,133
191,098
27,105
10,245
37,350
153,748
18,552
28,413
2,066
8,571
9,447
37,477
745
3,668
3,158
27,148
120,693
56,468
177,161
22,083
4,412
26,495
150,666
24,727
50,813
1,617
1,857
5,102
32,910
35
1,173
953
15,847
110,307
88,464
198,771
22,357
19,455
41,812
30,549
647
2,318
5,225
17,402
—
2,903
767
22,877
82,688
131,070
213,758
21,954
21,995
43,949
156,959
(19,252)
169,809
(12,821)
10,621
789
1,305
1,867
20,979
650
1,254
29,839
26,786
94,090
138,019
232,109
22,261
28,849
51,110
180,999
3,782
Allowance for credit losses at end of fiscal year . . . . . . .
¥1,094,420
¥1,055,479
¥1,111,130
¥1,182,188
¥ 764,124
Allowance for credit losses applicable to foreign
activities:
Balance at beginning of fiscal year . . . . . . . . . . . . .
¥ 207,111
¥ 184,460
¥ 267,293
¥ 416,221
¥ 387,250
Balance at end of fiscal year . . . . . . . . . . . . . . . . . .
¥ 184,460
¥ 267,293
¥ 416,221
¥ 387,250
¥ 303,719
Provision for (reversal of) credit losses . . . . . . . . . .
¥ (21,727) ¥ 110,494
¥ 237,189
¥
92,689
¥
21,889
Ratio of net charge-offs during the fiscal year to
average loans outstanding during the fiscal year . . . . .
0.15%
0.13%
0.13%
0.14%
0.15%
Note:
(1) Others principally include losses (gains) from foreign exchange translation.
A-12
The following table shows an allocation of our allowance for credit losses at March 31 for each of the
five fiscal years ended March 31, 2018:
2014
2015
At March 31,
2016
2017
2018
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
% of
loans in
each
category
to total
loans
Amount
(in millions, except percentages)
Domestic:
Manufacturing . . . . . ¥ 239,461
25,447
Construction . . . . . . .
81,685
Real estate . . . . . . . .
69,511
Services . . . . . . . . . .
Wholesale and
retail . . . . . . . . . . .
207,281
10.44% ¥ 240,013
17,318
0.89
70,423
9.94
51,760
2.44
9.87% ¥ 321,412
9,813
0.82
31,960
9.20
34,430
2.26
9.88% ¥ 409,018
12,097
0.74
33,579
9.08
42,023
2.03
9.95% ¥179,799
7,934
0.69
21,062
9.81
29,518
2.15
9.27%
0.67
10.03
2.29
7.67
164,729
7.04
116,450
6.41
138,119
6.73
99,985
6.81
Banks and other
financial
institutions . . . . . .
Communication and
information
services . . . . . . . .
Other industries . . . .
Consumer . . . . . . . . .
Foreign:
Governments and
official
institutions . . . . . .
Banks and other
financial
institutions . . . . . .
Commercial and
industrial
. . . . . . .
Other . . . . . . . . . . . .
Unallocated . . . . . . . . . . .
21,110
3.61
30,597
3.65
12,840
4.18
14,732
4.41
7,636
4.11
20,196
59,770
177,384
1.31
12.20
15.30
20,130
64,443
126,362
1.29
10.69
14.11
14,371
48,870
102,351
1.23
11.97
13.33
13,902
25,156
106,312
1.38
7.50
13.92
17,300
13,543
80,238
1.32
7.62
13.88
28,599
0.73
25,136
0.89
22,950
0.91
25,098
0.88
751
0.78
26,921
8.86
18,325
10.10
24,471
11.09
20,717
11.68
10,452
10.95
119,204
9,736
8,115
22.20
4.41
—
176,823
47,009
2,411
24.96
5.12
—
307,050
61,750
2,412
24.42
4.73
—
263,429
78,006
—
25.55
5.35
—
197,653
94,863
3,390
26.07
6.20
—
Total
. . . . . . . . ¥1,094,420
100.00% ¥1,055,479
100.00% ¥1,111,130
100.00% ¥1,182,188
100.00% ¥764,124
100.00%
Allowance as a percentage
of loans . . . . . . . . . . . . .
Allowance as a percentage
of nonaccrual loans,
restructured loans and
accruing loans
contractually past due
90 days or more . . . . . .
0.99%
0.89%
0.90%
1.00%
0.65%
53.77%
57.31%
59.29%
63.27%
52.04%
While the allowance for credit losses contains amounts allocated to components of specifically identified
loans as well as a group on a portfolio of loans, the allowance for credit losses covers the credit losses of the
entire loan portfolio and the allocations shown above are not intended to be restricted to the specific loan
category. Accordingly, as the evaluation of credit risk changes, allocations of the allowance will be adjusted to
reflect current conditions and various other factors.
A-13
V. Deposits
The following table shows the average amount of, and the average rate paid on, the following deposit
categories for the fiscal years ended March 31, 2016, 2017 and 2018:
Fiscal years ended March 31,
2016
2017
2018
Average
amount
Average
rate
Average
amount
Average
rate
Average
amount
Average
rate
(in millions, except percentages)
Domestic offices:
Non-interest-bearing demand
deposits . . . . . . . . . . . . . . . . . .
¥ 16,771,050
—% ¥ 20,034,315
—% ¥ 22,701,413 —%
Interest-bearing demand
deposits . . . . . . . . . . . . . . . . . .
Deposits at notice . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . .
Foreign offices:
Non-interest-bearing demand
62,669,203
1,204,182
40,389,469
6,133,456
0.03
0.02
0.12
0.08
69,961,568
1,704,160
41,782,117
3,708,639
0.02
0.00
0.08
0.02
76,104,436 0.03
1,773,780 0.00
41,501,996 0.08
3,760,848 0.01
deposits . . . . . . . . . . . . . . . . . .
5,711,170
—
5,636,431
—
5,477,038 —
Interest-bearing deposits,
principally time deposits and
certificates of deposit
. . . . . . .
Total . . . . . . . . . . . . . . . . . .
41,066,208
0.68
38,411,021
0.79
41,421,717 1.10
¥173,944,738
¥181,238,251
¥192,741,228
Deposits at notice represent interest-bearing demand deposits which require the depositor to give two or
more days notice in advance of withdrawal.
The average amounts of total deposits by foreign depositors included in domestic offices for the fiscal years
ended March 31, 2016, 2017 and 2018 were ¥799,134 million, ¥886,274 million and ¥882,772 million,
respectively.
At March 31, 2018, the balances and remaining maturities of time deposits and certificates of deposit
(“CDs”) issued by domestic offices in amounts of ¥10 million (approximately U.S.$94 thousand at the Federal
Reserve Bank of New York’s noon buying rate on March 30, 2018) or more and total foreign deposits issued in
amounts of U.S.$100,000 or more are shown in the following table:
Time
deposits
Certificates of
deposit
(in millions)
Total
Domestic offices:
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over three months through six months . . . . . . . . . . . . . . . . . . . .
Over six months through twelve months . . . . . . . . . . . . . . . . . .
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,159,725
4,642,366
9,461,413
3,712,550
¥2,868,180
278,375
156,461
102,850
¥ 9,027,905
4,920,741
9,617,874
3,815,400
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥23,976,054
¥3,405,866
¥27,381,920
Foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,386,612
A-14
VI Short-Term Borrowings
The following table shows certain additional information with respect to our short-term borrowings for the
fiscal years ended March 31, 2016, 2017 and 2018:
Call money, funds purchased, and payables under repurchase
agreements and securities lending transactions(1):
Average balance outstanding during the fiscal year
Maximum balance outstanding at any month-end during the
. . . . . . . . ¥35,683,702
¥32,789,499
¥28,052,275
Fiscal years ended March 31,
2016
2017
2018
(in millions, except percentages)
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,344,453
. . . . . . . . . . . . . . . . . . . . . . . . . . 29,647,941
Balance at end of fiscal year
Weighted average interest rate during the fiscal year . . . . . . .
Weighted average interest rate on balance at end of fiscal
32,927,067
25,217,396
28,757,355
28,757,355
0.19%
0.24%
0.31%
0.27%
0.61%
0.61%
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to trust account:
Average balance outstanding during the fiscal year
Maximum balance outstanding at any month-end during the
. . . . . . . . ¥ 1,162,326
¥ 3,122,190
¥ 3,065,511
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of fiscal year
Weighted average interest rate during the fiscal year . . . . . . .
Weighted average interest rate on balance at end of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,338,154
6,338,154
4,099,102
3,335,155
3,386,158
3,386,158
0.04%
0.02%
0.01%
0.00%
0.00%
0.00%
Other short-term borrowings:
Average balance outstanding during the fiscal year
Maximum balance outstanding at any month-end during the
. . . . . . . . ¥11,030,368
¥ 6,527,129
¥ 7,491,384
fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,875,134
9,357,728
. . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of fiscal year
Weighted average interest rate during the fiscal year . . . . . . .
Weighted average interest rate on balance at end of fiscal
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,969,521
7,969,521
8,705,257
6,881,124
0.23%
0.36%
0.58%
0.66%
0.92%
1.29%
Note:
(1) The table above reflects changes in presentation that were made to long-term repurchase agreements for the fiscal years ended March 31,
2016 and 2017. For further information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
A-15
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of March 31, 2017 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the Fiscal Years ended March 31, 2016, 2017 and 2018 . . . . . . . .
Consolidated Statements of Comprehensive Income for the Fiscal Years ended March 31, 2016, 2017
and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for the Fiscal Years ended March 31, 2016, 2017 and 2018 . . . . . . . .
Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2016, 2017 and 2018 . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Basis of Financial Statements and Summary of Significant Accounting Policies . . . . . . . . . . . . . .
2. Business Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Loans and Allowance for Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Pledged Assets and Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Call Money and Funds Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Due to Trust Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Short-term Borrowings and Long-term Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Severance Indemnities and Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. Other Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. Offsetting of Derivatives, Repurchase Agreements, and Securities Lending Transactions . . . . . .
16. Repurchase Agreements, and Securities Lending Transactions Accounted for as Secured
Page
F-3
F-4
F-6
F-8
F-9
F-11
F-13
F-13
F-32
F-35
F-43
F-61
F-62
F-65
F-71
F-72
F-73
F-73
F-73
F-77
F-89
F-92
F-94
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-95
17. Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-96
18. Common Stock and Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19. Retained Earnings, Legal Reserve and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-98
20. Accumulated Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-100
21. Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-104
22. Regulatory Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-105
23. Earnings per Common Share Applicable to Common Shareholders of MUFG . . . . . . . . . . . . . . . F-112
24. Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-113
25. Obligations Under Guarantees and Other Off-balance Sheet Instruments . . . . . . . . . . . . . . . . . . . F-120
26. Variable Interest Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-124
27. Commitments and Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-135
28. Fees and Commissions Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-137
29. Trading Account Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-137
30. Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-138
31. Foreign Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-141
32. Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-143
33. Stock-based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-164
34. Parent Company Only Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-169
35. SEC Registered Funding Vehicles Issuing Non-dilutive Preferred Securities . . . . . . . . . . . . . . . . F-172
36. Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-173
F-1
(This page is intentionally left blank)
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Shareholders of
Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group) (“MUFG”) and subsidiaries (together, the “MUFG Group”)
as of March 31, 2017 and 2018, the related consolidated statements of income, comprehensive income, equity
and cash flows for each of the three years in the period ended March 31, 2018, and the related notes (collectively
referred to as the “financial statements”) (all expressed in Japanese Yen). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the MUFG Group as of March 31, 2017 and 2018,
and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2018,
in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the MUFG Group’s internal control over financial reporting as of March 31, 2018,
based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated July 12, 2018, expressed an
unqualified opinion on the MUFG Group’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the MUFG Group’s management. Our responsibility is
to express an opinion on the MUFG Group’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the MUFG Group
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 12, 2018
We have served as the MUFG Group’s auditor since 1976.
F-3
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2017 AND 2018
(in millions)
ASSETS
Cash and due from banks (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks (Notes 8 and 32) . . . . . . . . . . . . . . . . . . .
Cash, due from banks and interest-earning deposits in other banks . . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements (Notes 15 and 32) . . . . . . . . . . . . . . . . . . . .
Receivables under securities borrowing transactions (Notes 15 and 32) . . . . . . . .
Trading account assets (including assets pledged that secured parties are
permitted to sell or repledge of ¥6,175,242 and ¥6,558,587 in 2017 and 2018)
(including ¥14,957,135 and ¥15,007,706 measured at fair value under the fair
value option in 2017 and 2018) (Notes 8, 15, 24 and 32) . . . . . . . . . . . . . . . . . .
Investment securities (Notes 3, 8 and 32):
Available-for-sale securities—carried at fair value (including assets pledged
that secured parties are permitted to sell or repledge of ¥11,133,433 and
¥11,360,089 in 2017 and 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity securities—carried at amortized cost (including assets
pledged that secured parties are permitted to sell or repledge of ¥446,146
and ¥414,857 in 2017 and 2018) (fair value of ¥3,637,751 and ¥3,620,672
in 2017 and 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
¥ 25,682,741
38,327,029
64,009,770
704,237
8,188,146
11,002,724
¥ 32,648,387
43,209,662
75,858,049
896,360
5,725,921
9,268,756
41,320,049
35,186,689
39,090,099
39,504,698
3,587,321
556,161
3,582,941
566,610
Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,233,581
43,654,249
Loans, net of unearned income, unamortized premiums and deferred loan fees
(including assets pledged that secured parties are permitted to sell or repledge
of ¥1,010,730 and ¥898,186 in 2017 and 2018) (Notes 4 and 8) . . . . . . . . . . . .
Allowance for credit losses (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118,214,972
(1,182,188)
117,035,895
(764,124)
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117,032,784
116,271,771
Premises and equipment—net (Note 5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers’ acceptance liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets—net (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Notes 7 and 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (Notes 8, 13, 14 and 32) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
994,271
281,752
156,208
1,020,359
450,143
76,452
8,714,543
1,013,588
324,624
183,084
1,011,119
441,334
68,704
10,666,064
¥297,185,019
¥300,570,312
Assets of consolidated VIEs included in total assets above that can be used
only to settle obligations of consolidated VIEs (Note 26)
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
186
12,048
539,809
1,637,587
12,713,190
271,041
¥
130
23,161
477,583
1,952,683
16,550,107
187,329
¥ 15,173,861
¥ 19,190,993
F-4
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS—(Continued)
AS OF MARCH 31, 2017 AND 2018
(in millions, except shares)
LIABILITIES AND EQUITY
Deposits (Notes 8 and 9):
Domestic offices:
2017
2018
Non-interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 23,098,886
121,741,545
¥ 24,406,759
125,195,310
Overseas offices:
Non-interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased (Notes 8 and 10) . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements (Notes 8, 15 and 16) . . . . . . . . . . . . . . . . .
Payables under securities lending transactions (Notes 8, 15 and 16) . . . . . . . . . . .
Due to trust account (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings (including ¥112,424 and ¥264,783 measured at fair
value under the fair value option in 2017 and 2018) (Notes 8, 12 and 32) . . . . .
Trading account liabilities (Notes 15, 24 and 32) . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations to return securities received as collateral (Notes 15, 16 and 32) . . . . .
Bank acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (including ¥377,423 and ¥333,985 measured at fair value
under the fair value option in 2017 and 2018) (Notes 8, 12 and 32)
. . . . . . . . .
Other liabilities (Notes 1, 7, 8, 13, 14 and 27) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities (Notes 25 and 27)
Mitsubishi UFJ Financial Group shareholders’ equity:
Capital stock (Notes 17 and 18)—common stock authorized, 33,000,000,000
shares; common stock issued, 14,168,853,820 shares and 13,900,028,020
shares in 2017 and 2018, with no stated value . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus (Note 18)
Retained earnings (Notes 19 and 36):
Appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes (Note 20) . . . . . . . . . .
Treasury stock, at cost—739,564,216 common shares and 737,772,882
6,387,219
39,173,973
190,401,623
1,974,977
17,693,415
5,549,004
3,335,155
7,969,521
18,790,133
3,516,232
156,208
147,351
5,455,677
40,616,847
195,674,593
2,452,543
18,134,594
8,170,218
3,386,158
6,881,124
12,222,331
3,176,962
183,084
165,921
26,131,527
6,755,165
282,420,311
27,069,556
7,407,413
284,924,497
2,090,270
5,956,644
239,571
3,931,612
2,281,423
2,090,270
5,740,165
239,571
4,945,733
2,477,315
common shares in 2017 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . . . . . . .
Noncontrolling interests (Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(513,988)
13,985,532
779,176
14,764,708
¥297,185,019
(522,872)
14,970,182
675,633
15,645,815
¥300,570,312
Liabilities of consolidated VIEs for which creditors or beneficial interest
holders do not have recourse to the general credit of Mitsubishi UFJ
Financial Group (Note 26)
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
¥
22,044
547,971
49,447
619,462
¥
¥
28,451
510,948
84,040
623,439
See the accompanying notes to Consolidated Financial Statements.
F-5
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions)
Interest income:
Loans, including fees (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements and securities borrowing
2016
2017
2018
¥2,054,338
82,654
¥2,023,649
78,735
¥2,271,219
126,608
254,214
133,828
422,080
10,450
235,638
135,506
455,860
11,023
198,715
145,186
432,595
10,808
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,174
50,356
73,885
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,005,738
2,990,767
3,259,016
Interest expense:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements and securities lending
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to trust account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings and trading account liabilities . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses (Note 4) . . . . . . . . . . . . . . . . . .
Net interest income after provision for (reversal of) credit losses . . .
Non-interest income:
Fees and commissions income (Note 28) . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses)—net (Note 29)
. . . . . . . . . . . . . . . . . . .
Trading account profits (losses)—net (Notes 29 and 32) . . . . . . . . . . . . .
Investment securities gains—net (Note 3)(1) . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net (Note 14) . . . . . . . .
Gains on sales of loans (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-interest income (Note 21)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Non-interest expense:
Salaries and employee benefits (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy expenses—net (Notes 5 and 27) . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outsourcing expenses, including data processing . . . . . . . . . . . . . . . . . . .
Depreciation of premises and equipment (Note 5) . . . . . . . . . . . . . . . . . .
Amortization of intangible assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance premiums, including deposit insurance . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes and public charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) off-balance sheet credit instruments . . . . . . . .
. . . . . . . . . . . . . . . .
Other non-interest expenses (Notes 4, 5, 21 and 27)
350,335
8,802
58,497
505
54,572
271,653
744,364
347,430
1,791
100,796
207
61,137
258,278
514,868
5,248
165,512
109
93,535
249,483
769,639
1,028,755
2,261,374
231,862
2,221,128
253,688
2,230,261
(240,847)
2,029,512
1,967,440
2,471,108
1,475,872
192,086
276,654
232,259
176,857
12,293
41,669
1,414,893
(134,885)
(639,184)
281,158
197,821
13,286
63,617
1,462,792
(49,561)
(73,114)
286,903
227,984
16,109
63,978
2,407,690
1,196,706
1,935,091
1,158,896
182,782
285,387
244,734
99,680
237,342
117,726
91,854
58,314
93,734
333,719
(185)
370,549
1,096,797
176,819
273,675
258,345
99,774
227,942
5,803
91,881
55,274
94,047
6,638
106,556
398,052
1,099,493
179,100
297,847
276,236
96,180
234,376
21,900
91,847
58,067
90,210
—
(96,054)
395,178
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,274,532
2,891,603
2,744,380
F-6
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions, except per share amount)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income before attribution of noncontrolling interests . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests (Note 21) . . . . . .
2016
2017
2018
1,162,670
369,432
272,543
94,453
793,238
(9,094)
178,090
(24,590)
1,661,819
407,823
1,253,996
25,836
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . .
¥ 802,332
¥202,680
¥1,228,160
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 802,332
¥202,680
¥1,228,160
Earnings per common share applicable to common shareholders of
Mitsubishi UFJ Financial Group (Notes 19 and 23):
Basic earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . .
¥
57.78
¥
14.93
¥
92.40
Diluted earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group . . . . . . . . . . . . . . . . . .
Cash dividend per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . . . . .
Weighted average diluted common shares outstanding . . . . . . . . . . . . . . . .
57.51
18.00
13,886
13,903
14.68
18.00
13,574
13,585
92.10
18.00
13,292
13,293
(1) The following credit losses are included in Investment securities gains—net:
(in millions)
Decline in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income—net
Total credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
¥
¥
937
26
963
¥
¥
706
35
741
¥
¥
99
15
114
See the accompanying notes to Consolidated Financial Statements.
F-7
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions)
Net income before attribution of noncontrolling interests . . . . . . . . . . .
Other comprehensive income (loss), net of tax (Note 20):
Net unrealized gains (losses) on investment securities . . . . . . . . . . . .
Net debt valuation adjustments (Note 14) . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on derivatives qualifying for cash flow
2016
2017
2018
¥ 793,238
¥ 178,090
¥1,253,996
(249,781)
3,505
12,961
(8,552)
230,308
(2,178)
hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . .
1,808
(131,493)
(356,677)
(13,245)
103,572
(143,210)
(7,025)
109,838
(104,778)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(732,638)
(48,474)
226,165
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . . . . . .
Other comprehensive income (loss) attributable to noncontrolling
60,600
(9,094)
129,616
(24,590)
1,480,161
25,836
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,773
(24,765)
1,320
Comprehensive income attributable to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 41,921
¥ 178,971
¥1,453,005
See the accompanying notes to Consolidated Financial Statements.
F-8
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions, except per share amount)
2016
2017
2018
Capital stock (Notes 17 and 18):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,090,270
¥2,090,270
¥2,090,270
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,090,270
¥2,090,270
¥2,090,270
Capital surplus (Note 18):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation (Note 33) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,959,626
1,002
¥5,958,929
(1,856)
¥5,956,644
315
—
—
(1,699)
—
(34,751)
— (190,054)
8,011
(429)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,958,929
¥5,956,644
¥5,740,165
Retained earnings appropriated for legal reserve (Note 19):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 239,571
¥ 239,571
¥ 239,571
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 239,571
¥ 239,571
¥ 239,571
Unappropriated retained earnings (Note 19):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . .
Cash dividends:
Common stock—¥18.00 per share in 2016, 2017 and 2018 . . . . . . .
Losses on sales of shares of treasury stock . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . . . . .
Effect of adopting new guidance on consolidation of certain variable
interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification of certain tax effets
(Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,424,864
802,332
¥3,980,257
202,680
¥3,931,612
1,228,160
(251,342)
(1,182)
5,585(1)
(246,338)
(1,114)
—
(240,497)
(8)
(2,605)(2)
—
—
(3,873)
—
—
29,071
Balance at end of fiscal year (Note 36) . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,980,257
¥3,931,612
¥4,945,733
F-9
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions)
Accumulated other comprehensive income, net of taxes:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated company . . .
Effect of adopting new guidance on consolidation of certain variable
interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification of certain tax
effects (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
¥ 3,067,255
(760,411)
(5,585)(1)
¥ 2,301,259
(23,709)
—
¥ 2,281,423
224,845
118
—
—
3,873
—
—
(29,071)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,301,259
¥ 2,281,423
¥ 2,477,315
Treasury stock, at cost:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of shares of treasury stock (Notes 17 and 18) . . . . . . . . . .
Sales of shares of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) resulting from changes in interests in
consolidated subsidiaries, consolidated variable interest entities,
and affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (102,521) ¥ (299,661) ¥ (513,988)
(201,102)
2,098
190,054
(217,803)
3,491
—
(200,053)
2,829
—
84
(15)
66
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (299,661) ¥ (513,988) ¥ (522,872)
Total Mitsubishi UFJ Financial Group shareholders’ equity . . . .
¥14,270,625
¥13,985,532
¥14,970,182
Noncontrolling interests:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial subscriptions of noncontrolling interests (Note 2) . . . . . . . . . .
Transactions between the consolidated subsidiaries and the related
¥
602,276
28,246
¥
577,642
112,644
¥
779,176
48,828
noncontrolling interest shareholders . . . . . . . . . . . . . . . . . . . . . . . .
8,658
113,878
(120,216)
Decrease in noncontrolling interests related to deconsolidation of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(54,238)
(563,918)
(22,556)
Decrease in noncontrolling interests related to disposition of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(120)
(1,026)
—
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes . . . . . . . . . . . . . . . .
Effect of adopting new guidance on consolidation of certain variable
interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(9,094)
(30,255)
27,773
—
(24,590)
(6,842)
(24,765)
—
4,396
595,982
171
(15,390)
25,836
(21,675)
1,320
—
310
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
577,642
¥
779,176
¥
675,633
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,848,267
¥14,764,708
¥15,645,815
Notes:
(1) The effect resulted from the early adoption of certain provisions of new accounting guidance on “Recognition and Measurement of
Financial Assets and Financial Liabilities”. See Note 14 for more information.
(2) The effect mainly resulted from the adoption of new accounting guidance on “Targeted Improvements to Accounting for Hedging
Activities”. See Note 14 for more information.
See the accompanying notes to Consolidated Financial Statements.
F-10
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions)
Cash flows from operating activities:
Net income before attribution of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income before attribution of noncontrolling interests to net
cash provided by operating activities:
Depreciation and amortization (Notes 5 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (reversal of) credit losses (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefit cost (income) for severance indemnities and pension plans
(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities gains—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premiums on investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in financial instruments measured at fair value under fair value option,
excluding trading account securities—net (Note 32) . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net (Note 2) . . . . . . . . . . . . . . . . . .
Provision (benefit) for deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in trading account assets, excluding foreign exchange contracts . .
Increase (decrease) in trading account liabilities, excluding foreign exchange
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in unearned income, unamortized premiums and deferred loan
fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in accrued interest receivable and other receivables . . . . . . . . .
Increase in accrued interest payable and other payables . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in accrued income taxes and decrease (increase) in income
tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in allowance for repayment of excess interest . . . . . . . . . . . . . .
Net decrease (increase) in collateral for derivative transactions . . . . . . . . . . . . . . . .
Increase in cash collateral for the use of Bank of Japan’s settlement
infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016(1)
2017(1)
2018
¥
793,238
¥
178,090
¥ 1,253,996
337,022
333,719
117,726
231,862
17,441
(232,259)
133,534
(13,867)
(358,858)
(176,857)
(60,945)
(1,718,145)
327,716
6,638
5,803
253,688
20,274
(281,158)
95,091
103,845
(136,976)
(197,821)
(212,368)
42,609
330,556
—
21,900
(240,847)
(7,955)
(286,903)
118,863
(13,456)
(208,398)
(227,984)
120,595
5,653,904
4,351,881
521,093
(6,433,948)
18,999
(43,962)
104,487
9,856
10,933
539,852
—
(219,462)
(20,476)
49,783
66,419
(81,083)
(7,790)
(276,476)
(207,498)
441,026
690,429
(35,857)
(172,599)
153,365
1,212
(15,658)
259,287
(643,568)
(190,341)
(563,836)
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . .
4,176,195
Cash flows from investing activities:
Proceeds from sales of Available-for-sale securities (including proceeds from
securities under the fair value option) (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of Available-for-sale securities (including proceeds from
securities under the fair value option) (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of Available-for-sale securities (including purchases of securities under
the fair value option) (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . .
Purchases of Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and redemption of Other investment securities . . . . . . . . . . . . .
Purchases of Other investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Alternative Fund Services, a business of TB, net of cash acquired
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Capital Analytics LLC (formerly Capital Analytics II LLC),
a subsidiary of TB, net of cash acquired (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock and preferred stock investment in Security Bank
Corporation, an equity method investee of BK (Note 2) . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Investor Services (US) (formerly Rydex Fund Services,
LLC), a subsidiary of TB, net of cash acquired (Note 2) . . . . . . . . . . . . . . . . . . . .
Purchase of common stock in Hitachi Capital Corporation, an equity method
investee of MUFG (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Hattha Kaksekar Limited, a subsidiary of Krungsri, net of cash
acquired (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in call loans, funds sold, and receivables under resale
agreements and securities borrowing transactions . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures for premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and dispositions of investments in equity method investees . . .
Proceeds from sales of consolidated VIEs and subsidiaries—net . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,737,908
39,097,727
33,359,364
29,412,596
26,685,532
40,011,886
(88,088,620)
949,592
(817,350)
108,615
(88,001)
(56,306,531)
810,838
(632,116)
18,539
(10,242)
(73,770,878)
1,085,603
(1,156,122)
12,807
(19,619)
221,169
—
—
—
—
—
(4,154)
(91,993)
(17,175)
(91,877)
—
—
—
—
—
—
(8,118,108)
(556)
2,514,824
—
(169,478)
(1,928,024)
37,828
(140,651)
(221,264)
35,666
207,229
(77,313)
(6,971,016)
32,512
(116,786)
(237,253)
66,729
244,476
(151,078)
4,187,093
12,211
(159,003)
(239,755)
39,710
122,962
(72,765)
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . .
(8,768,728)
4,840,400
3,244,016
F-11
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(in millions)
Cash flows from financing activities:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in call money, funds purchased, and payables under repurchase
agreements and securities lending transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in due to trust account
Net decrease in other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of treasury stock (Note 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of shares of certain subsidiaries from noncontrolling interest
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of shares of Mitsubishi UFJ NICOS from noncontrolling interest
shareholders (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid by subsidiaries to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
12,400,034
10,902,923
5,720,011
(2,716,018)
4,727,162
(1,955,867)
5,919,214
(3,726,410)
15
(200,053)
(2,790,342)
(3,002,999)
(1,221,838)
12,265,629
(6,641,722)
256
(217,803)
3,963,120
51,003
(957,705)
6,671,031
(5,485,894)
1,316
(201,102)
(4,398)
(1,612)
(318)
—
(251,448)
(30,255)
6,703
—
(246,345)
(6,842)
105,995
(50,000)
(240,514)
(21,675)
(87,067)
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,168,679
9,145,300
9,362,206
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
(625,002)
(334,793)
(188,149)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,951,144
14,341,336
11,854,237
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents:
40,726,739
49,677,883
64,019,219
Cash, due from banks and interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . .
Restricted cash included in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,673,901
3,982
64,009,770
9,449
75,858,049
15,407
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥49,677,883
¥64,019,219
¥75,873,456
Supplemental disclosure of cash flow information:
Cash paid during the fiscal year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investing and financing activities:
Assets acquired under capital lease arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Alternative Fund Services, a business of TB (Note 2):
¥
755,739
406,287
¥
779,239
373,887
¥ 1,040,337
265,225
4,831
7,065
7,111
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121,242
342,411
Adoption of new guidance on consolidation of certain variable interest entities (Note 26):
Increase in total assets, excluding cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Increase in total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Capital Analytics LLC, a subsidiary of TB (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of MUFG Investor Services (US), LLC, a subsidiary of TB (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Hattha Kaksekar Limited, a subsidiary of Krungsri (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
598,236
32,254
595,982
5,038
884
17,847
672
54,186
53,630
—
—
—
—
—
—
—
—
—
—
—
Note:
(1) The MUFG Group early adopted new guidance on restricted cash retrospectively in the second half of the fiscal year ended March 31,
2018, and prior year amounts were revised. See Note 1 for further information.
See the accompanying notes to Consolidated Financial Statements.
F-12
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of Business
Mitsubishi UFJ Financial Group, Inc. (“MUFG”) is a holding company for MUFG Bank, Ltd. (formerly,
The Bank of Tokyo-Mitsubishi UFJ, Ltd., “MUFG Bank” or “BK”), Mitsubishi UFJ Trust and Banking
Corporation (“Mitsubishi UFJ Trust and Banking” or “TB”), Mitsubishi UFJ Securities Holdings Co., Ltd.
(“Mitsubishi UFJ Securities Holdings” or “SCHD”), Mitsubishi UFJ NICOS Co., Ltd. (“Mitsubishi UFJ
NICOS”), and other subsidiaries. Mitsubishi UFJ Securities Holdings is an intermediate holding company for
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“Mitsubishi UFJ Morgan Stanley Securities”). Through its
subsidiaries and affiliated companies, MUFG engages in a broad range of financial operations, including
commercial banking, investment banking, trust banking and asset management services, securities businesses,
and credit card businesses, and it provides related services to individual and corporate customers. See Note 30 for
more information by business segment.
Basis of Financial Statements
The accompanying consolidated financial statements are presented in Japanese yen, the currency of the
country in which MUFG is incorporated and principally operates. The accompanying consolidated financial
statements have been prepared on the basis of accounting principles generally accepted in the United States of
America (“U.S. GAAP”). In certain respects, the accompanying consolidated financial statements reflect
adjustments which are not included in the consolidated financial statements issued by MUFG and certain of its
subsidiaries in accordance with applicable statutory requirements and accounting practices in their respective
countries of incorporation. The major adjustments include those relating to (1) investment securities,
(2) derivative financial instruments, (3) allowance for credit losses, (4) income taxes, (5) consolidation,
(6) premises and equipment, (7) transfer of financial assets, (8) accrued severance indemnities and pension
liabilities, (9) goodwill and other intangible assets and (10) lease transactions.
Fiscal years of certain subsidiaries, which end on December 31, and MUFG’s fiscal year, which ends on
March 31, have been treated as coterminous. For the fiscal years ended March 31, 2016, 2017 and 2018, the
effect of recording intervening events for the three-month periods ended March 31 on MUFG’s proportionate
equity in net income of subsidiaries with fiscal years ended on December 31, would have resulted in an increase
of ¥1.34 billion, an increase of ¥10.22 billion, and a decrease of ¥10.76 billion to net income attributable to
Mitsubishi UFJ Financial Group, respectively. No intervening events occurred during each of the three-month
periods ended March 31, 2016, 2017 and 2018 which, if recorded, would have had material effects on
consolidated total assets, loans, total liabilities, deposits or total equity as of March 31, 2016, 2017 and 2018.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to management judgment primarily relate to the allowance for credit
losses, the valuation of deferred tax assets, the valuation of financial instruments, the accounting for goodwill
and intangible assets, impairment of investment securities, the allowances for repayment of excess interest and
accrued severance indemnities and pension liabilities.
F-13
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summary of Significant Accounting Policies
Significant accounting policies applied in the accompanying consolidated financial statements are
summarized below:
Consolidation—The accompanying consolidated financial statements include the accounts of MUFG, its
subsidiaries and certain variable interest entities (“VIE”s) (together, the “MUFG Group”). In situations in which
the MUFG Group has a controlling financial interest in other entities, including certain VIEs, such entities are
consolidated and noncontrolling interests, if any, are recorded in Total equity. Intercompany transactions and
balances have been eliminated. Investments in affiliated companies (companies over which the MUFG Group has
the ability to exercise significant influence) are accounted for by the equity method of accounting and are
reported in Other assets. The MUFG Group’s equity interest in the earnings of these equity investees and other-
than-temporary impairment (“OTTI”) are reported in Equity in earnings of equity method investees-net. The
MUFG Group recognizes an impairment loss on investments in equity method investees that is other-than-
temporary. The MUFG Group determines whether loss on investments is other-than-temporary, through
consideration of various factors, such as inability to recover the carrying amount of the investment, the inability
of the investee to sustain an earnings capacity that would justify the carrying amount of the investment, the
length of time and the extent to which the fair value has been less than cost, the financial condition and near-term
prospects of the investees, and the intent and ability to retain its investment in the investees for a period of time
sufficient to allow for any anticipated recovery in the fair value. The MUFG Group also evaluates additional
factors, such as the condition and trend of the economic cycle, and trends in the general market.
The MUFG Group consolidates VIEs if it has the power to direct the activities of a VIE which most
significantly impact the VIE’s economic performance and has the obligation to absorb losses or the right to
receive benefits that could potentially be significant to the VIE. To assess whether a VIE should be consolidated
or not, the MUFG Group considers all factors, such as the purpose and design of the VIE, contractual
arrangements, and the MUFG Group’s involvement in both the establishment of the VIE and day-to-day
activities of the VIE. The MUFG Group considers a right to make the most significant decisions affecting a VIE
to determine whether it is deemed to have the power to direct the activities of the VIE. Furthermore, the MUFG
Group considers its economic interests in the VIE, including investments in debt or equity instruments issued by
the VIE, liquidity and credit enhancement, and guarantees to determine whether such interests are potentially
significant to the VIE or not.
Assets that the MUFG Group holds in an agency, fiduciary or trust capacity are not assets of the MUFG
Group and, accordingly, are not included in the accompanying consolidated balance sheets.
Cash Flows—For the purposes of reporting cash flows, cash and cash equivalents consist of Cash and due
from banks, Interest-earning deposits in other banks, and certain restricted cash included in Other assets.
Restricted cash included in cash and cash equivalents represents cash or deposits subject to withdrawal or usage
restrictions, and mainly consist of reserves on deposits with the Bank of Japan and similar reserves required for
foreign offices and subsidiaries engaged in banking businesses in foreign countries. Cash flows from qualified
hedging activities are classified in the same category as the items being hedged.
Translation of Foreign Currency Financial Statements and Foreign Currency Transactions—Financial
statements of overseas entities are translated into Japanese yen using the respective fiscal year-end exchange
rates for assets and liabilities. Income and expense items are translated at average rates of exchange for the
respective fiscal years.
Foreign currency translation gains and losses related to the financial statements of overseas entities of the
MUFG Group, net of related income tax effects, are credited or charged directly to Foreign currency translation
adjustments, a component of Accumulated other comprehensive income (“Accumulated OCI”). Tax effects of
F-14
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
gains and losses on foreign currency translation of the financial statements of overseas entities are not recognized
unless it is apparent that the temporary differences will reverse in the foreseeable future.
Foreign currency-denominated assets and liabilities are translated into the functional currencies of the
individual entities included in consolidation at the respective fiscal year-end foreign exchange rates. Foreign
currency-denominated income and expenses are translated using average rates of exchange for the respective
fiscal years. Gains and losses from such translation are included in Foreign exchange gains (losses)—net, as
appropriate.
Repurchase Agreements, Securities Lending and Other Secured Financing Transactions—Securities sold
with agreements to repurchase (“repurchase agreements”), securities purchased with agreements to resell (“resale
agreements”) and securities lending and borrowing transactions are accounted for as secured financing or lending
transactions, if the transferor has not surrendered control over the securities. Repurchase agreements and resale
agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased,
and securities lending and borrowing transactions are generally carried at the amount of cash collateral advanced
or received. If they meet the relevant conditions for the surrender of control, they are accounted for as sales of
securities with related off-balance sheet forward repurchase commitments or purchases of securities with related
off-balance sheet forward resale commitments. For the fiscal years ended March 31, 2016, 2017 and 2018, there
were no such transactions accounted for as sales or purchases.
Collateral—For secured lending transactions, including resale agreements, securities borrowing
transactions, commercial lending and derivative transactions, the MUFG Group, as a secured party, generally has
the right to require the counterparties to provide collateral, including letters of credit, cash, securities and other
financial assets. For most secured lending transactions, the MUFG Group maintains strict levels of
collateralization governed by a daily mark-to-market analysis. Financial assets pledged as collateral are generally
negotiable financial instruments and are permitted to be sold or repledged by secured parties. If the
MUFG Group sells these financial assets received as collateral, it recognizes the proceeds from the sale and its
obligation to return the collateral. For secured borrowing transactions, principally repurchase agreements and
securities lending transactions and derivative transactions, where the secured party has the right to sell or
repledge financial assets pledged as collateral, the MUFG Group separately discloses those financial assets
pledged as collateral in the accompanying consolidated balance sheets.
Trading Account Securities—Securities and money market instruments held in anticipation of short-term
market movements and for resale to customers are included in Trading account assets, and short trading positions
of these instruments are included in Trading account liabilities. Trading positions are carried at fair value in the
accompanying consolidated balance sheets and recorded on a trade date basis. Changes in the fair value of
trading positions are recognized in Trading account profits (losses). The MUFG Group has elected the fair value
option for certain foreign securities. See Note 32 for a further discussion of fair value option.
Investment Securities—Debt securities for which the MUFG Group has both the ability and positive intent to
hold to maturity are classified as Held-to-maturity securities and are carried at amortized cost. Debt securities
that the MUFG Group may not hold to maturity and marketable equity securities, other than those classified as
Trading account securities, are classified as Available-for-sale securities, and are carried at their fair values, with
unrealized gains and losses reported on a net-of-tax basis within Accumulated OCI, net of taxes, which is a
component of equity. Other investment securities include nonmarketable equity securities carried at their
acquisition cost and investment securities held by subsidiaries that are investment companies or brokers and
dealers. Such securities held by those subsidiaries are subject to the specialized industry accounting principles for
investment companies and brokers and dealers applicable for those subsidiaries. Securities of those subsidiaries
are carried at their fair values.
F-15
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For marketable equity securities, an OTTI is recognized in earnings when a decline in fair value below the
cost is deemed other-than-temporary. For debt securities, an OTTI is recognized in earnings for a security if the
MUFG Group has intent to sell such a debt security or if it is more likely than not the MUFG Group will be
required to sell such a debt security before recovery of its amortized cost basis. If not, the credit component of an
OTTI is recognized in earnings, but the noncredit component is recognized in Accumulated OCI. In determining
other-than-temporary declines in fair value to be recognized as an impairment loss on investment securities, the
MUFG Group generally considers factors such as the ability and positive intent to hold the investments for a
period of time sufficient to allow for anticipated recovery in fair value, the financial condition of the issuer, the
extent of decline in fair value, and the length of time that the decline in fair value below cost has existed. Interest
and dividends on investment securities are reported in Interest income. Dividends are recognized when the
shareholder right to receive the dividend is established. Gains and losses on disposition of investment securities
are computed using the average cost method and are recognized on the trade date.
Derivative Financial Instruments—The MUFG Group engages in derivative activities involving swaps,
forwards, futures, options, and other types of derivative contracts. Derivatives are used in trading activities to
generate trading revenues and fee income for its own account and to respond to customers’ financial needs.
Derivatives are also used to manage counterparty credit risk and market risk exposures to fluctuations in interest
and foreign exchange rates, equity and commodity prices.
Derivatives entered into for trading purposes are carried at fair value and are reported as Trading account
assets or Trading account liabilities, as appropriate. The fair values of derivative contracts executed with the
same counterparty under legally enforceable master netting agreements are presented on a gross basis. Changes
in the fair value of such contracts are recognized currently in Foreign exchange gains (losses)—net with respect
to foreign exchange contracts and in Trading account profits (losses)—net with respect to interest rate contracts
and other types of contracts.
Embedded features that are not clearly and closely related to the host contracts and meet the definition of
derivatives are separated from the host contracts and measured at fair value unless the contracts embedding the
derivatives are measured at fair value in their entirety.
Derivatives are also used to manage exposures to fluctuations in interest and foreign exchange rates arising
from mismatches of asset and liability positions. Certain of those derivatives are designated as hedging
instruments and qualify for hedge accounting. The MUFG Group designates a derivative as a hedging instrument
at the inception of each such hedge relationship, and it documents, for such individual hedging relationships, the
risk management objective and strategy, including the item being hedged, the specific risk being hedged and the
method used to assess the hedge effectiveness. In order for a hedging relationship to qualify for hedge
accounting, the changes in the fair value of the derivative instruments must be highly effective in achieving
offsetting changes in fair values or variable cash flows of the hedged items attributable to the risk being hedged.
Any ineffectiveness, which arises during the hedging relationship, is recognized in Non-interest income or
expense in the period in which it arises. All qualifying hedging derivatives are valued at fair value and included
in Other assets or Other liabilities, as appropriate. For cash flow hedges, the unrealized changes in fair value to
the extent effective are recognized in Accumulated OCI. Amounts realized on cash flow hedges related to
variable rate loans are recognized in Net interest income in the period when the cash flow from the hedged item
is realized. The fair value of cash flow hedges related to forecasted transactions, if any, is recognized in
Non-interest income or expense in the period when the forecasted transaction occurs. Any difference that arises
from gains or losses on hedging derivatives offsetting corresponding gains or losses on the hedged items, and
gains and losses on derivatives attributable to the risks excluded from the assessment of hedge effectiveness are
recognized in Non-interest income or expense.
F-16
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Loans—Loans originated by the MUFG Group (“originated loans”) are carried at the principal amount
outstanding, adjusted for unearned income and deferred net nonrefundable loan fees and costs. Originated loans
held and intended for dispositions or sale in secondary markets are transferred to the held-for-sale classification
and carried at the lower of cost or estimated fair value generally on an individual loan basis. Loan origination
fees, net of certain direct origination costs, are deferred and recognized over the contractual life of the loan as an
adjustment to yield using a method that approximates the interest method. Interest income on loans that are not
impaired is accrued and credited to interest income as it is earned. Unearned income and discounts or premiums
on purchased loans are deferred and recognized over the remaining contractual terms of the loans using a method
that approximates the interest method when such purchased loans are outside the scope of the guidance on loans
and debt securities acquired with deteriorated credit quality as described below.
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial,
Residential, Card, MUFG Americas Holdings Corporation (“MUFG Americas Holdings ” or “MUAH”), and
Bank of Ayudhya Public Company Limited (“Krungsri”) based on the grouping used by the MUFG Group to
determine the allowance for credit losses. The MUFG Group further classifies the Commercial segment into
classes based on initial measurement attributes, risk characteristics, and its method of monitoring and assessing
credit risk.
Originated loans are considered impaired when, based on current information and events, it is probable that
the MUFG Group will be unable to collect all the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Past due status is determined based on the contractual
terms of the loan and the actual number of days since the last payment date, and is considered in determining
impairment. Originated loans that experience insignificant payment delays and payment shortfalls generally are
not classified as impaired. Management determines the significance of payment delays and payment shortfalls on
a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount
of the shortfall in relation to the principal and interest owed. Impairment is generally evaluated on a loan-by-loan
basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the
loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and
timely collection of either principal or interest, specifically when principal or interest is contractually past due
one month or more with respect to loans within all classes of the Commercial segment, three months or more
with respect to loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or
more with respect to loans within the Residential segment. A nonaccrual loan may be restored to an accrual
status when interest and principal payments become current and management expects that the borrower will
make future contractual payments as scheduled. When a loan is placed on nonaccrual status, interest accrued but
not received is generally reversed against interest income. Cash receipts on nonaccrual loans, for which the
ultimate collectibility of principal is uncertain, are applied as principal reductions; otherwise, such collections are
credited to income.
The MUFG Group modifies certain loans in conjunction with its loss-mitigation activities. Through these
modifications, concessions are granted to a borrower who is experiencing financial difficulty, generally in order
to minimize economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize
payments received from the borrower. The concessions granted vary by portfolio segment, by program, and by
borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals,
and partial principal forgiveness. Loan modifications that represent concessions made to borrowers who are
experiencing financial difficulties are identified as troubled debt restructurings (“TDRs”).
F-17
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Generally, accruing loans that are modified in a TDR remain as accruing loans subsequent to the
modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been modified as a
TDR, the borrower is not delinquent under the modified terms, and demonstrates that its financial condition has
improved, the MUFG Group may reclassify the loan to accrual status. This determination is generally performed
at least once a year through a detailed internal credit rating review process. Once a nonaccrual loan is deemed to
be a TDR, the MUFG Group will continue to designate the loan as a TDR even if the loan is reclassified to
accrual status.
A loan that has been modified into a TDR is considered to be impaired until it matures, is repaid, or is
otherwise liquidated, regardless of whether the borrower performs under the modified terms. Because loans
modified in TDRs are considered to be impaired, these loans are measured for impairment using the MUFG
Group’s established asset-specific allowance methodology, which considers the expected default rates for the
modified loans. See “Allowance for Credit Losses” for a discussion for each portfolio segment.
In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality,
impaired loans acquired for which it is probable that the MUFG Group will be unable to collect all contractual
receivables are initially recorded at the present value of amounts expected to be received. For these impaired
loans, the related valuation allowances are not carried over or created initially. Accretable yield is limited to the
excess of the investor’s estimate of undiscounted cash flows over the investor’s initial investment in the loan.
Subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of
the loan’s yield over its remaining life after reduction of any remaining allowance for credit losses for the loan
established after its acquisition, if any, while any decrease in such cash flows below those initially expected at
acquisition plus additional cash flows expected to be collected arising from changes in estimate after acquisition
is recognized as an impairment.
Loan Securitization—The MUFG Group securitizes and services commercial, industrial, and residential
loans in the normal course of business. The MUFG Group accounts for a transfer of loans in a securitization
transaction as a sale if it meets relevant conditions for the surrender of control. Otherwise, the transfer is
accounted for as a collateralized borrowing transaction. When a securitization is accounted for as a sale, the
proceeds from a sale of financial assets consist of the cash and any other assets obtained, including beneficial
interests and separately recognized servicing assets, in the transfer less any liabilities incurred, including
separately recognized servicing liabilities. All proceeds and reductions of proceeds from a sale shall be initially
measured at fair value.
Allowance for Credit Losses—The MUFG Group maintains an allowance for credit losses to absorb
probable losses inherent in the loan portfolio. Actual credit losses (amounts deemed uncollectible, in whole or in
part), net of recoveries, are generally determined based on detailed loan reviews and a credit assessment by
management at each balance sheet date, and are deducted from the allowance for credit losses as net charge-offs.
The MUFG Group generally applies its charge-off policy to all loans in its portfolio regardless of the type of
borrower. Management believes that the provision for credit losses is adequate and the allowance is at the
appropriate amount to absorb probable losses inherent in the loan portfolio. During the fiscal year ended
March 31, 2018, the MUFG Group did not make any significant changes to the methodologies or policies used to
determine its allowance for credit losses.
Key elements relating to the policies and discipline used in determining the allowance for credit losses are
credit classification and the related borrower categorization process. The categorization is based on conditions
that may affect the ability of borrowers to service their debt, taking into consideration current financial
information, historical payment experience, credit documentation, public information, analyses of relevant
F-18
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
industry segments or existing economic conditions. In determining the appropriate level of the allowance, the
MUFG Group evaluates the probable loss by collateral value, historical loss experience, probability of insolvency
and category of loan based on its type and characteristics. The MUFG Group calculates the allowance for credit
losses over the loss emergence period that is a time between a loss occurring event and the subsequent
confirmation of a loss. The MUFG Group updates these conditions and probable loss on a regular basis and upon
the occurrence of unexpected change in the economic environment.
The methodologies used to estimate the allowance and the charge-off policy for each portfolio segment are
as follows:
Commercial segment
In the Commercial segment, the methodology for assessing the appropriateness of the allowance consists of
several key elements, which include the allocated allowance for loans individually evaluated for impairment, the
formula allowance, and the allocated allowance for large groups of smaller-balance homogeneous loans.
The allocated allowance for loans individually evaluated for impairment represents the impairment
allowance determined in accordance with the guidance on accounting by creditors for the impairment of a loan.
The factors considered by management in determining impairment are the internal credit rating assigned to each
borrower which represents the borrower’s creditworthiness determined based on payment status, the number of
delinquencies, and the probability of collecting principal and interest payments when due. The impairment of a
loan is measured based on the present value of expected future cash flows discounted at the loan’s original
effective interest rate, or the loan’s observable market price, or the fair value of the collateral if the loan is
collateral dependent.
The formula allowance is applied to loans that are categorized as Normal or Close Watch, excluding loans
identified as a TDR, based on the internal credit rating and historical loss factors which are based on the loss
experience. See Note 4 for the information on loans to borrowers categorized based on the internal borrower
rating. Estimated losses inherent in the loans at the balance sheet date are calculated by multiplying the default
ratio by the nonrecoverable ratio (determined as a complement of the recovery ratio). The default ratio is
determined by each internal credit rating, taking into account the historical number of defaults of borrowers
within each internal credit rating divided by the total number of borrowers. The recovery ratio is mainly
determined by the historical experience of collections against loans in default. The default ratio, the recovery
ratio and other indicators are continually reviewed to determine the appropriate level of the allowance. Because
the evaluation of inherent loss for these loans involves an uncertainty, subjectivity and judgment, the estimation
of the formula allowance is back-tested by comparing the allowance with the actual results subsequent to the
balance sheet date. The results of such back-testing are evaluated by management to determine whether the
manner and level of the formula allowance needs to be changed in subsequent years.
The allocated allowance for large groups of smaller-balance homogeneous loans is established through a
process that begins with estimates of probable losses inherent in the portfolio. These estimates are based upon
various analyses, including historical delinquency and historical loss experience.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by discounting the estimated future cash flows using the original effective interest rate of the loans prior to
modification.
In relation to loans categorized as Legally/Virtually Bankrupt, the carrying amount of loans less estimated
value of the collateral and guaranteed amount is generally considered uncollectible, and is charged off.
F-19
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Residential segment
In the Residential segment, the loans are comprised of smaller-balance homogeneous loans that are pooled
by their internal credit ratings-based on the number of delinquencies. The loans in this segment are generally
secured by collateral. Collateral values are based on internal valuation sources, and the allowance is determined
for unsecured amounts. The allowance for the nondelinquent group of loans is determined based on historical
loss experience. For delinquent groups of loans, the MUFG Group determines the allowance based on the
probability of insolvency by the number of actual delinquencies and historical loss experience.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by discounting the estimated future cash flows using the original effective interest rate of the loans prior to
modification.
In relation to loans that are in past due status over a certain period of time and deemed uncollectible, the
carrying amount of loans less estimated value of the collateral and guaranteed amount is generally considered
uncollectible and charged off.
Card segment
In the Card segment, the loans are smaller-balance homogeneous loans that are pooled by their internal
credit rating based on the number of delinquencies. The allowance for loans in this segment is generally
determined based on the probability of insolvency by the number of actual delinquencies and historical loss
experience. For calculating the allocated allowance for loans specifically identified for evaluation, impaired loans
are aggregated for the purpose of measuring impairment using historical loss factors.
Loans that have been modified into a TDR are treated as impaired loans, and the allowance for credit losses
is determined using the discounted cash flow method whereby the estimated future cash flows are discounted
using the original effective interest rate of the loans prior to modification.
In relation to loans that are in past due status over a certain period of time and deemed uncollectible, the
amount of loans is generally fully charged off.
MUFG Americas Holdings segment
In the MUFG Americas Holdings segment, the methodology for assessing the appropriateness of the
allowance consists of several key elements, which include the allocated allowance for loans individually
evaluated for impairment, the formula allowance, the allocated allowance for large groups of smaller-balance
homogeneous loans, and the unallocated allowance.
The allocated allowance for loans individually evaluated for impairment is established for loans when
management determines that the MUFG Group will be unable to collect all amounts due according to the
contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of
the recorded investment in the loan, the present value of expected future cash flows discounted at the loan’s
effective rate, the loan’s observable market price, or the fair value of the collateral, if the loan is collateral
dependent.
The formula allowance is calculated by applying historical loss factors to outstanding loans. Historical loss
factors are based on the historical loss experience and may be adjusted for significant factors that, in
management’s judgment, affect the collectibility of the portfolio as of the balance sheet date.
F-20
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The allocated allowance for large groups of smaller-balance homogeneous loans is established for consumer
loans as well as for smaller balance commercial loans. These loans are managed on a pool basis, and loss factors
are based on expected net charge-off ranges.
The unallocated allowance represents an estimate of additional losses inherent in the loan portfolio and is
composed of attribution factors, which are based upon management’s evaluation of various conditions that are
not directly measured in the determination of the allocated allowance. The conditions used for consideration of
the unallocated allowance at each balance sheet date include factors, such as existing general economic and
business conditions affecting the key lending areas and products of the MUFG Group, credit quality trends and
risk identification, collateral values, loan volumes, underwriting standards and concentrations, specific industry
conditions, recent loss experience and the duration of the current business cycle. The MUFG Group reviews
these conditions and has an internal discussion with senior credit officers on a quarterly basis.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
by using the discounted cash flow method whereby the estimated future cash flows are discounted using the
original effective interest rate of the loans prior to modification.
Commercial loans are generally considered uncollectible based on an evaluation of the financial condition
of a borrower as well as the value of any collateral and, when considered to be uncollectible, loans are charged
off in whole or in part. Consumer loans are generally considered uncollectible based on past due status and the
value of any collateral and, when considered to be uncollectible, loans are charged off in whole or in part.
Krungsri segment
In the Krungsri segment, the methodology for assessing the appropriateness of the allowance consists of
several key elements, which include the allocated allowance for loans individually evaluated for impairment, the
formula allowance, and the allocated allowance for large groups of smaller-balance homogeneous loans.
The allocated allowance for loans individually evaluated for impairment is established for loans when
management determines that the MUFG Group will be unable to collect all amounts due according to the
contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of
the recorded investment in the loan, the present value of expected future cash flows discounted at the loan’s
effective rate, the loan’s observable market price, or the fair value of the collateral, if the loan is collateral
dependent.
The formula allowance is calculated by applying historical loss factors to outstanding loans. Historical loss
factors are based on the historical loss experience and may be adjusted for significant factors that, in
management’s judgment, affect the collectibility of the portfolio as of the balance sheet date.
The allocated allowance for large groups of smaller-balance homogeneous loans is established for smaller
balance loans such as housing loans, credit card loans, and personal loans. These loans are managed on a pool
basis, and loss factors are based on expected net charge-off ranges.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the
allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair
value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined
F-21
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
by using the discounted cash flow method whereby the estimated future cash flows are discounted using the
original effective interest rate of the loans prior to modification.
Loans to customers are charged off when they are determined to be uncollectible considering the financial
condition of a borrower.
Allowance for Off-Balance Sheet Credit Instruments—The MUFG Group maintains an allowance for credit
losses on off-balance sheet credit instruments, including commitments to extend credit, guarantees, standby
letters of credit and other financial instruments. The allowance is recorded as a liability in Other liabilities. The
MUFG Group adopts the same methodology used in determining the allowance for credit losses on loans.
Potential credit losses related to derivatives are considered in the fair value of the derivatives.
Premises and Equipment—Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is charged to operations over the estimated useful lives of the related assets.
Leasehold improvements are depreciated over the terms of the respective leases or the estimated useful lives of
the improvements, whichever is shorter. MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking apply the
declining-balance method in depreciating their premises and equipment, while other subsidiaries mainly apply
the straight-line method, at rates principally based on the following estimated useful lives:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years
15 to 50
2 to 20
5 to 39
Maintenance, repairs and minor improvements are charged to operations as incurred. Major improvements
are capitalized. Net gains or losses on dispositions of premises and equipment are included in Other non-interest
income or expense, as appropriate.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is
measured by a comparison of the carrying amount to future undiscounted net cash flows expected to be generated
by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the asset exceeds the fair value. For purposes of recognition and measurement
of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level
with independent and identifiable cash flows. Assets to be disposed of by sale are reported at the lower of the
carrying amount or fair value less estimated cost to sell.
Asset retirement obligations related to restoration of certain leased properties upon lease termination are
recorded in Other liabilities with a corresponding increase in leasehold improvements. The amounts represent the
present value of expected future cash flows associated with returning such leased properties to their original
condition. The difference between the gross and present value of expected future cash flows is accreted over the
life of the related leases as a non-interest expense.
Goodwill—The MUFG Group recognizes goodwill, as of the acquisition date, measured as the excess of the
purchase price over the fair value of the net assets acquired. Goodwill related to investments in equity method
investees is included in Other assets as a part of the carrying amount of investments in equity method investees.
Goodwill arising from a business combination is not amortized but is tested at least annually for
impairment. Goodwill is recorded at a designated reporting unit level for the purpose of assessing impairment.
F-22
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reporting unit is an operating segment, or an identified business unit one level below an operating segment. An
impairment loss is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.
Intangible assets—Intangible assets consist of software, core deposit intangibles, customer relationships,
trade names and other intangible assets. These are amortized over their estimated useful lives unless they have
indefinite useful lives. Amortization of intangible assets is computed in a manner that best reflects the economic
benefits of the intangible assets as follows:
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Useful lives
(years)
2 to 10
10 to 16
7 to 27
7 to 40
Amortization method
Straight-line
Straight-line
Straight-line, Declining-balance
Straight-line
Intangible assets having indefinite useful lives are not amortized but are subject to annual impairment tests.
An impairment exists if the carrying value of an indefinite-lived intangible asset exceeds its fair value. For other
intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable
and the carrying amount exceeds the fair value of the intangible asset.
The MUFG Group capitalizes certain costs associated with the acquisition or development of internal-use
software. Costs subject to capitalization are salaries and employee benefits for employees who are directly
associated with and who devote time to the internal-use computer software project, to the extent of time spent
directly on the project. Once the software is ready for its intended use, the MUFG Group begins to amortize
capitalized costs on a straight-line basis.
Accrued Severance and Pension Liabilities—The MUFG Group has defined benefit pension plans and other
postretirement benefit plans, including severance indemnities plans (“SIPs”). The liabilities related to these plans
are computed and recognized based on actuarial computations. Net actuarial gains and losses that arise from
differences between actual experience and assumptions are generally amortized over the average remaining
service period of participating employees if it exceeds the corridor, which is defined as the greater of 10% of plan
assets or the projected benefit obligation. Under the guidance related to employers’ accounting for defined
benefit pension and other postretirement plans, the MUFG Group recognizes a net liability or asset to report the
funded status of its defined benefit pension and other postretirement plans in the accompanying consolidated
balance sheets and mainly recognizes changes in the funded status of defined benefit pension and other
postretirement plans in the year in which the changes occur in Accumulated OCI. The costs of the plans, based
on actuarial computations of current and future employee benefits, are charged to Salaries and employee benefits.
The MUFG Group measures plan assets and benefit obligations as of the date of the consolidated balance sheets.
Long-Term Debt—Premiums, discounts and issuance costs of long-term debt are amortized based on the
method that approximates the interest method over the term of the long-term debt.
Obligations under Guarantees—The MUFG Group provides customers with a variety of guarantees and
similar arrangements, including standby letters of credit, financial and performance guarantees, credit protection,
and liquidity facilities. The MUFG Group recognizes guarantee fee income over the guarantee period based on
the contractual terms of the guarantee contracts. It is the MUFG Group’s business practice to receive a guarantee
fee at the inception of the guarantee, which approximates market value of the guarantee and is initially recorded
as a liability, which is then recognized as guarantee fee income over the guarantee period.
F-23
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Allowance for Repayment of Excess Interest—The MUFG Group maintains an allowance for repayment of
excess interest based on an analysis of past experience of reimbursement of excess interest, borrowers’ profile,
recent trend of borrowers’ claims for reimbursement, and management’s future forecasts. The allowance is
recorded as a liability in Other liabilities.
Fees and Commissions—Revenue recognition of major components of fees and commissions is as follows:
‰
‰
‰
Fees and commissions on deposits, fees and commissions on remittances and transfers, fees and
commissions on foreign trading business, fees and commissions on security-related services, fees and
commissions on administration and management service for investment funds, insurance commissions,
fees and commissions on real estate business and fees and commissions from other services are
generally recognized as revenue when the related services are performed or recognized over the period
that the service is provided.
Fees from trade-related financing services are recognized over the period of the financing.
Trust fees are recognized on an accrual basis, generally based on the volume of trust assets under
management and/or the operating performance for the accounting period of each trust account. With
respect to the trust accounts with guarantee of trust principal, trust fees are determined based on the
profits earned by individual trust accounts during the trust accounting period, less deductions, including
provision for reserve, impairment for individual investments and dividends paid to beneficiary
certificate holders. The trust fees for these trust accounts are accrued based on the amounts expected to
be earned during the accounting period of each trust account.
‰ Annual fees and royalty and other service charges related to the credit card business are recorded on a
straight-line basis as services are provided.
‰
Interchange income from the credit card business is recognized as billed.
‰ Guarantee fees are generally recognized over the contractual periods of the respective guarantees.
Amounts initially recorded as a liability corresponding to the obligations at fair value are generally
recognized as revenue over the terms of the guarantees as the MUFG Group is deemed to be released
from the risk under guarantees.
Income Taxes—The MUFG Group accounts for income taxes under the asset and liability method, which
requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences
of events that have been included in the accompanying consolidated financial statements. Under this method,
deferred tax assets and deferred tax liabilities are determined based on the differences between the financial
statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and deferred tax
liabilities is recognized in income in the period that includes the enactment date.
The MUFG Group records net deferred tax assets to the extent these assets will more likely than not be
realized. In making such determination, all available positive and negative evidence is considered, including
future reversals of existing taxable temporary differences, projected future taxable income, tax planning
strategies and recent financial operations. In the event the MUFG Group were to determine that it would be able
to realize deferred tax assets in the future in excess of their net recorded amount, the MUFG Group would make
an adjustment to the valuation allowance, which would reduce the provision for income taxes.
Uncertain tax positions are recorded on the basis of a two-step process whereby (1) it is determined whether
it is more likely than not that the tax position will be sustained on the basis of its technical merits, and (2) for
F-24
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
those tax positions that meet the more-likely-than-not recognition threshold, the MUFG Group recognizes the
largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related
tax authority. The MUFG Group recognizes interest and penalties related to unrecognized tax benefits within
income tax expense. Accrued interest and penalties are included within Other liabilities.
Free Distributions of Common Shares—As permitted by the Companies Act of Japan (the “Companies
Act”), Japanese companies, upon approval by the Board of Directors, may make a free distribution of shares, in
the form of a “stock split” as defined, to shareholders. In accordance with generally accepted accounting practice
in Japan, such distribution does not give rise to any change in capital stock or capital surplus accounts. Common
shares distributed are recorded as shares issued on the distribution date. See Note 18 for further information.
Earnings per Common Share—Basic earnings per share (“EPS”) excludes dilutive effects of potential
common shares and is computed by dividing earnings applicable to common stock shareholders by the weighted
average number of common shares outstanding for the period, while diluted EPS gives effect to all dilutive
potential common shares that were outstanding during the period. See Note 23 for the computation of basic and
diluted EPS.
Treasury Stock—The MUFG Group presents its treasury stock, including shares of MUFG owned by its
subsidiaries and affiliated companies, as a reduction of equity on the accompanying consolidated balance sheets
at cost and accounts for treasury stock transactions under an average cost method. Gains (losses) on sales of
treasury stock are charged to capital surplus and unappropriated retained earnings.
Comprehensive Income—Comprehensive income includes net income before attribution to noncontrolling
interests and other comprehensive income (“OCI”). All changes in unrealized gains and losses on investment
securities, unrealized gains and losses on derivatives qualifying for cash flow hedges, defined benefit plans and
foreign currency translation adjustments constitute OCI and are presented, with related income tax effects, in the
accompanying consolidated statements of comprehensive income. OCI also includes changes in the instrument-
specific credit risk on financial liabilities (“debt valuation adjustments” or “DVA”) accounted for under the fair
value option of a foreign affiliated company. See Note 14 for information about the DVA.
Stock-Based Compensation—MUFG and certain of its subsidiaries have a stock compensation-type stock
option plan (“Stock Option Plan”) for directors (excluding outside directors and directors serving as audit
committee members), corporate executives, executive officers and senior fellows (collectively, “officers”).
Compensation costs under the Stock Option Plan are recognized based on the grant date fair value of the stock
option (“Stock Acquisition Rights”) over the period during officers are required to provide service in accordance
with the terms of the plan. MUFG and certain of its subsidiaries also have performance-based stock
compensation plan (“the Board Incentive Plan”). The awards granted under the Board Incentive Plan are
classified as either liability for the part of award which are provided to officers in cash or equity for the part of
award which are provided to officers in the common shares of MUFG. Compensation costs are recognized over
the requisite service period for the entire awards. For awards classified as liability, compensation costs are
measured based on the fair value calculated by the quoted price of common shares of MUFG at the date of fiscal
year-end and remeasured at the end of each reporting period. Changes in quoted prices of common shares of
MUFG between the date of grant and the settlement of awards are recognized in the period which the changes
occur. For awards classified as equity, compensation costs are measured based on the grant date fair value by the
quoted price of the common shares of MUFG for employees or the fair value as of earlier of the date the
performance commitment is reached or the date of completion of officers’ performance for nonemployees. See
Note 33 for further discussion of stock-based compensation plans.
F-25
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Reclassifications
Certain reclassifications and format changes have been made to the consolidated financial statements for the
fiscal years ended March 31, 2016 and 2017 to conform to the presentation for the fiscal year ended March 31,
2018. These reclassifications and format changes include 1) the presentation of “Increase in cash collateral for
use of Bank of Japan’s settlement infrastructure” as a separate line item which had previously been included
within the “Other-net” line in cash flows from operating activities in the consolidated statements of cash flows
and 2) the reclassifications of long-term repurchase agreements from “Long-term debt” to “Payables under
repurchase agreements” in the consolidated balance sheets, the related interest expense from “Long-term debt” to
“Payables under repurchase agreements and securities lending transactions” within interest expense in the
consolidated statements of income, and the related cash flows from “Proceeds from issuance of long-term debt”
and “Repayments of long-term debt” to “Net increase (decrease) in call money, funds purchased, and payables
under repurchase agreements and securities lending transactions” in cash flows from financing activities in the
consolidated statements of cash flows. These reclassifications and format changes did not result in a change to
previously reported financial positions, results of operations and cash flows. In addition, certain reclassifications
and format changes were made to notes to the consolidated financial statements. See Notes 12, 31 and 32 for
these changes in notes.
Accounting Changes
Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships—In March 2016, the
Financial Accounting Standards Board (“FASB”) issued new guidance which clarifies that a change in the
counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of
itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria
continue to be met. This guidance is effective for fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
The MUFG Group adopted this guidance on April 1, 2017, and there was no material impact on its financial
position and results of operations.
Contingent Put and Call Options in Debt Instruments—In March 2016, the FASB issued new guidance
which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the
payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing
the assessment under this guidance is required to assess the embedded call (put) options solely in accordance
with the four-step decision sequence, and does not have to assess whether the event that triggers the ability to
exercise a call (put) option is related to interest rates or credit risks. This guidance is effective for fiscal years
beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. The MUFG Group adopted this guidance on April 1, 2017,
and there was no material impact on its financial position and results of operations.
Simplifying the Transition to the Equity Method of Accounting—In March 2016, the FASB issued new
guidance which eliminates the requirement for retrospective application of the equity method and instead
requires investors to apply the equity method prospectively from the date on which significant influence is
obtained. This guidance also requires the equity method investor to add the cost of acquiring the additional
interest in the investee to the current basis of the investor’s previously held interest, and recognize through
earnings the unrealized holding gain or loss of an available-for-sale equity security at the date on which that
equity security becomes qualified for use of the equity method, if applicable. This guidance is effective for fiscal
years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is
permitted. The MUFG Group adopted this guidance on April 1, 2017, and there was no material impact on its
financial position and results of operations.
F-26
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Improvements to Employee Share-Based Payment Accounting—In March 2016, the FASB issued new
guidance which amends several aspects of the accounting for share-based payment transactions, including the
income tax consequences, classification of awards as either equity or liabilities, and classification on the
statement of cash flows. Under this guidance, an entity can make an entity-wide accounting policy election to
either estimate the number of awards that are expected to vest or account for forfeitures when they occur. This
guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those
annual periods. Early adoption is permitted in any interim or annual period. The MUFG Group adopted this
guidance on April 1, 2017, and elected to account for forfeitures as they occur, which represents a change from
the previous requirement to estimate forfeitures when recognizing compensation expense. There was no material
impact on its financial position and results of operations.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income—In February 2018,
the FASB issued new guidance which allows a reclassification from Accumulated OCI to retained earnings for
stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance also requires certain disclosures
about stranded tax effects. This guidance is effective for fiscal years beginning after December 15, 2018, and
interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period,
for which financial statements have not yet been issued. The MUFG Group early adopted this guidance and
elected to reclassify ¥29,071 million from Accumulated OCI to retained earnings in the fiscal year ended
March 31, 2018.
Restricted Cash—In November 2016, the FASB issued new guidance which requires that a statement of
cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents, and amounts generally described as restricted cash and
restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-
period and end-of-period total amounts shown on the statement of cash flows. This guidance also requires an
entity to disclose how the statement of cash flows reconciles to the balance sheet when cash, cash equivalents,
and amounts generally described as restricted cash or restricted cash equivalents are presented in more than one
line item within the balance sheet, and information about the nature of the restrictions on its cash, cash
equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is
effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
Early adoption is permitted. The MUFG Group early adopted this guidance in the second half of the fiscal year
ended March 31, 2018 retrospectively. The adoption of the guidance resulted in reclassification of restricted cash
balances into cash and cash equivalents on the consolidated statements of cash flows. In addition, the MUFG
Group included cash and due from banks and interest-earning deposits in other banks in cash and cash
equivalents in the consolidated statements of cash flows, resulting in interest-earning deposits in other banks no
longer being reflected in investing activities. Upon adoption, the MUFG Group recorded a decrease of ¥(4,845)
million and an increase of ¥5,235 million in Net cash provided by (used in) operating activities for the fiscal year
ended March 31, 2016 and 2017, respectively, and an increase of ¥4,226,248 million and a decrease of
¥(2,407,935) million in Net cash provided by (used in) investing activities for the fiscal year ended March 31,
2016 and 2017, respectively.
Recently Issued Accounting Pronouncements
Revenue from Contracts with Customers—In May 2014, the FASB issued new guidance which supersedes
the current revenue recognition requirements, including most industry-specific guidance. The core principle of
the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The guidance also requires additional disclosures about the nature, amount, timing and
uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and
F-27
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
changes in judgments, and assets recognized from the costs incurred to obtain or fulfill a contract. In
March 2016, the FASB issued further guidance related to the principal-versus-agent assessment which requires
an entity to determine the nature of the promise to the customer by identifying each specified good or service to
be provided and assessing whether an entity controls each specified good or service before that good or service is
transferred to the customer. In addition, in April 2016, the FASB issued guidance clarifying certain aspects of
identification of promised goods or services and provides implementation guidance on licensing of intellectual
property. Furthermore, in May 2016, the FASB issued guidance which amends the guidance on assessing
collectibility, presentation of sales taxes, noncash consideration, and contract modifications and completed
contracts at transition, and on disclosure around transition. In December 2016, the FASB issued additional
guidance which amends the new revenue standard to clarify certain aspects, including the scope and disclosure
requirements. This guidance is effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. The guidance does not apply to revenue relating to
financial instruments, including trading account assets, investment securities, and loans that are accounted for in
accordance with other applicable guidance. The MUFG Group adopted the guidance on April 1, 2018 using the
modified retrospective method. The MUFG Group assessed the impact of the new guidance by evaluating its
contracts, identifying the related performance obligations, determining when the performance obligations were
satisfied, and determining the amount of revenue to recognize. As a result of this analysis, the adoption of this
guidance does not have a material impact on its consolidated financial position and result of operations. The
MUFG Group is currently developing the quantitative and qualitative disclosures required by the guidance.
Recognition and Measurement of Financial Assets and Financial Liabilities—In January 2016, the FASB
issued new guidance which requires equity investments, except those accounted for under the equity method of
accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair
value recognized in net income. However, for equity investments that do not have readily determinable fair
values, the fair value may be measured at cost minus impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for the identical or a similar investment of the same issuer, and
the impairment assessment is simplified by performing a qualitative assessment to identify impairments. For
financial liabilities which were elected to measure at fair value in accordance with the fair value option, this
guidance also requires an entity to present separately in other comprehensive income the position of the changes
in the fair value of financial liabilities resulting from a change in the instrument-specific credit risk. In addition,
this guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the
fair value for financial instruments measured at amortized cost, and clarifies, for disclosure purposes, the
requirement for the use of an exit price notion in the determination of the fair value of financial instruments
measured at amortized cost. This guidance also clarifies that an entity must evaluate the need for a valuation
allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other
deferred tax assets. This guidance is effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. Early adoption is not permitted except for the amendments
related to the accounting for financial liabilities under the fair value option. As a result of adopting this new
guidance, the MUFG Group estimates an increase in the beginning balance of retained earnings as of April 1,
2018 of ¥2,710 billion, with a corresponding decrease in Accumulated OCI on equity investments at fair value,
net of taxes. Other amendments required under the new guidance are not expected to have a material impact on
the MUFG Group’s consolidated financial statements.
Leases—In February 2016, the FASB issued new guidance which requires that lessees recognize in the
statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease term. The accounting applied by lessors is largely
unchanged, but the accounting model for leveraged leases is not retained for leases that commence after the
effective date of this guidance. This guidance also requires entities to provide qualitative and quantitative
disclosures about the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective
F-28
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early
application is permitted. The MUFG Group will continue to evaluate what effect this guidance will have on its
financial statements and related disclosures. The MUFG Group expects a gross-up on its consolidated balance
sheet as a result of the adoption of this guidance, recognizing lease liabilities and right-of-use assets, although the
extent of such a gross-up is under evaluation. The MUFG Group is in the technology development phase of this
project to support the ongoing lessee accounting required under the new guidance. The MUFG Group’s
implementation efforts include reviewing its existing lease contracts and service contracts that may include
embedded leases.
Recognition of Breakage for Certain Prepaid Stored-Value Products—In March 2016, the FASB issued new
guidance which clarifies that liabilities related to the sale of certain prepaid stored-value products are financial
liabilities. The guidance also provides a narrow scope exception to the guidance on extinguishments of liabilities
to require that breakage for those liabilities be accounted for consistent with the breakage model required by the
guidance on revenue from contracts with customers for non-financial liabilities. This guidance is effective for
fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early
application is permitted, including adoption in an interim period. The MUFG Group does not expect that the
adoption of this guidance will have a material impact on its consolidated financial statements and related
disclosures.
Measurement of Credit Losses on Financial Instruments—In June 2016, the FASB issued new guidance
which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects
expected credit losses and requires consideration of a broader range of reasonable and supportable information to
estimate credit losses. Under this guidance, the measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions, and reasonable and
supportable forecasts that affect the collectibility of the reported amount of the financial asset (or a group of
financial assets) measured at amortized cost basis. For available-for-sale debt securities, a credit loss is recorded
through an allowance for credit losses and the amount of the allowance is limited to the amount by which fair
value is below amortized cost. For purchased financial assets with a more-than-insignificant amount of credit
deterioration since origination that are measured at amortized cost basis, the initial allowance for credit losses is
added to the purchase price rather than being reported as a credit loss expense, only subsequent changes in the
allowance are recorded as a credit loss expense, and interest income is recognized based on the effective interest
rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of
credit losses at acquisition. This guidance also expands the disclosure requirements regarding an entity’s
assumptions, models, and methods for estimating the allowance, and requires the entity to disclose the amortized
cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.
This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within
those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. The MUFG Group is currently evaluating what effect the guidance
above will have on its consolidated financial statements and related disclosures. The MUFG Group’s
implementation efforts include identifying key interpretive issues and assessing existing credit forecasting
models and processes against this guidance to determine what modifications may be required.
Classification of Certain Cash Receipts and Cash Payments—In August 2016, the FASB issued new
guidance which provides specific guidance on eight cash flow classification issues to reduce diversity in practice.
This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years. Early adoption is permitted. Since this guidance only impacts classification in the statement of
cash flows, adoption will not affect the MUFG Group’s consolidated statements of income or consolidated
balance sheets. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated
financial statements.
F-29
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Intra-Entity Transfers of Assets Other Than Inventory—In October 2016, the FASB issued new guidance
which simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than
inventory. Under current U.S. GAAP, the recognition of current and deferred income taxes for an intra-entity
asset transfer is prohibited until the asset has been sold to an outside party. This guidance eliminates this
exception for all intra-entity sales of assets other than inventory. This guidance is effective for annual reporting
periods beginning after December 15, 2017, including interim periods within those annual reporting periods.
Early adoption is permitted. The MUFG Group does not expect that the adoption of this guidance will have a
material impact on its consolidated financial statements and related disclosures.
Clarifying the Definition of a Business—In January 2017, the FASB issued new guidance which clarifies the
definition of a business with the objective of adding guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance requires
that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single
identifiable asset or a group of similar identifiable assets, an integrated set of assets and activities is not a
business. This guidance also requires that to be considered a business, an integrated set of assets and activities
must include, at a minimum, an input and a substantive process that together significantly contribute to the ability
to create outputs, provides a framework to evaluate whether both an input and a substantive process are present,
and removes the current requirement to assess if a market participant could replace any missing elements.
Furthermore, this guidance narrows the definition of outputs so that the term is consistent with how outputs are
described in the new revenue standard. This guidance is effective for annual periods beginning after
December 15, 2017, including interim periods within those periods. Early application is permitted for
transactions that occur in a period for which financial statements have not been issued. The impact of this
guidance will depend on the MUFG Group’s acquisition and disposal activities after adoption.
Simplifying the Test for Goodwill Impairment—In January 2017, the FASB issued new guidance which
simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill
impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment
testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that
would be required in determining the fair value of assets acquired and liabilities assumed in a business
combination. This guidance eliminates Step 2 and instead requires an entity to perform its goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount. This guidance also eliminates the
requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment
and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test, and instead requires the
disclosure of the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of
net assets. This guidance is effective for its annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests
performed on testing dates after January 1, 2017. The MUFG Group is currently evaluating what effect the
guidance will have on its consolidated financial statements and related disclosures.
Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial
Assets—In February 2017, the FASB issued new guidance which clarifies the scope of the guidance on
derecognition of nonfinancial assets and provides guidance on the accounting for partial sales of nonfinancial
assets. This guidance defines an in substance nonfinancial asset, unifies guidance related to partial sales of
nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the
financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint
venture. The effective date and early adoption of this guidance will be the same as the effective date and early
adoption of the new revenue standard, which is not yet effective. The MUFG Group does not expect that the
adoption of this guidance will have a material impact on its consolidated financial statements and related
disclosures.
F-30
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost—In
March 2017, the FASB issued new guidance which requires that an employer report the service cost component
in the same line item or items as other compensation costs arising from services rendered by the pertinent
employees during the period. The other components of net benefit cost are required to be presented in the income
statement separately from the service cost component and outside a subtotal of income from operations, if one is
presented. This guidance also allows only the service cost component to be eligible for capitalization when
applicable. This guidance is effective for annual periods beginning after December 15, 2017, including interim
periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for
which financial statements (interim or annual) have not been issued. The MUFG Group does not expect that the
adoption of this guidance will have a material impact on its consolidated financial statements.
Premium Amortization on Purchased Callable Debt Securities—In March 2017, the FASB issued new
guidance which shortens the amortization period for certain callable debt securities held at a premium,
specifically requiring the premium to be amortized to the earliest call date. This guidance does not require an
accounting change for securities held at a discount, and the discount continues to be amortized to maturity. This
guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2018. Early adoption is permitted, including adoption in an interim period. The MUFG Group is currently
evaluating what effect the guidance will have on its consolidated financial statements and related disclosures.
Scope of Modification Accounting—In May 2017, the FASB issued new guidance which clarifies when to
account for a change to the terms or conditions of a share-based payment award as a modification. Under this
guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of
the award changes as a result of the change in terms or conditions. This guidance is effective for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted,
including adoption in any interim period, for which financial statements have not yet been issued. The MUFG
Group does not expect that the adoption of this guidance will have a material impact on its consolidated financial
statements and related disclosures.
Targeted Improvements to Accounting for Hedging Activities—In August 2017, the FASB issued new
guidance which better aligns an entity’s risk management activities and financial reporting for hedging
relationships through changes to both the designation and measurement guidance for qualifying hedging
relationships and the presentation of hedge results. To meet that objective, this guidance expands and refines
hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation
of the effects of the hedging instrument and the hedged item in the financial statements. In addition, this guidance
includes certain targeted improvements to ease the application of current guidance related to the assessment of
hedge effectiveness. This guidance also modifies the requirement to disclose the effect on the income statement
of fair value and cash flow hedges, eliminates the requirement to disclose the ineffective portion of the change in
fair value of hedging instruments, and requires new tabular disclosures related to cumulative basis adjustments
for fair value hedges. This guidance is effective for fiscal years beginning after December 15, 2018, and interim
periods within those fiscal years. Early application is permitted in any interim period after issuance of this
guidance. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated
financial statements and related disclosures.
Improvements to Nonemployee Share-Based Payment Accounting—In June 2018, the FASB issued new
guidance which largely aligns the accounting for share-based payment awards issued to employees and
nonemployees. Under this guidance, equity-classified share-based payment awards issued to nonemployees are
measured at the grant date, instead of the previous requirement to measure the awards at the earlier of the date at
which the performance commitment is reached or the date of performance completion. For awards issued to
nonemployees with performance conditions, compensation cost associated with the awards is recognized when
achievement of the performance condition is probable, instead of the previous requirement to recognize the costs
F-31
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
based on the lowest aggregate fair value. This guidance also eliminates the previous requirement to reassess the
classification for certain nonemployee awards upon vesting. This guidance is effective for fiscal years beginning
after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no
earlier than an entity’s adoption date of the new revenue standard. The MUFG Group is currently evaluating
what effect the guidance will have on its consolidated financial statements and related disclosures.
2. BUSINESS DEVELOPMENTS
Mitsubishi UFJ Fund Services’s Acquisition of UBS Global Asset Management’s Alternative Fund Services
Business
On December 11, 2015, Mitsubishi UFJ Fund Services Holdings Limited (“Mitsubishi UFJ Fund Services”),
a global asset servicing subsidiary of Mitsubishi UFJ Trust and Banking, acquired the alternative fund services
business of UBS Global Asset Management for ¥24,601 million in cash, and thereby recorded goodwill of
¥2,732 million and intangible assets of ¥7,622 million. UBS Global Asset Management is a global fund
administrator providing professional services for hedge funds, funds of hedge funds, private equity funds and real
estate structures. Mitsubishi UFJ Fund Services has focused on strengthening its operational abilities, to further
improve the quality of services, and to expand its global network through acquisitions and investments. The
purpose of this acquisition is to enhance the MUFG Group’s competitiveness and scale of operations in the
global fund administration market with the aim to be a global industry-leading fund administrator. The assets
acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. During the
fiscal year ended March 31, 2017, no measurement period adjustments were applied to the acquisition date fair
values, resulting in no change in goodwill and intangible assets.
MUFG Bank’s Acquisition of Security Bank Corporation’s shares
On April 1, 2016, MUFG Bank acquired newly issued common shares and preferred shares with voting
rights of Security Bank Corporation (“Security Bank”), representing in the aggregate approximately 20.0% of
Security Bank’s equity interest for ¥91,993 million. Security Bank is listed on the Philippines Stock Exchange
and is not part of any local conglomerate in the Philippines. Considering both MUFG Bank’s ownership of the
common stock and preferred stock and representation on the board of directors, the MUFG Group has determined
that MUFG Bank has the ability to exercise significant influence over the operating and financial policies of
Security Bank and applied the equity method of accounting for its investment.
Mitsubishi UFJ Trust and Banking’s Acquisition of Capital Analytics II LLC
On April 30, 2016, Mitsubishi UFJ Trust and Banking acquired 100% ownership of Capital Analytics II
LLC for ¥4,494 million in cash, and thereby recorded goodwill of ¥2,858 million and intangible assets of
¥1,388 million. Capital Analytics II LLC is an overseas fund management company that mainly provides fund
administration services for private equity funds. The purpose of this acquisition is to meet the diversified global
fund administration needs of its Japanese and overseas customers through the utilization of Capital Analytics II
LLC’s unparalleled operational expertise and the MUFG Group’s extensive network. Upon conclusion of the
acquisition, Capital Analytics II LLC was renamed MUFG Capital Analytics LLC. During the fiscal year ended
March 31, 2017, measurement period adjustments were applied to the acquisition date fair values, which
decreased goodwill by ¥115 million.
Krungsri’s Acquisition of Hattha Kaksekar Limited
On September 12, 2016, Krungsri acquired 100% ownership of Hattha Kaksekar Limited for
¥15,703 million in cash, and thereby recorded goodwill of ¥8,280 million and intangible assets of ¥476 million.
F-32
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Hattha Kaksekar Limited is a financial institution in Cambodia providing financial services primarily to sole
proprietors. The purpose of this acquisition is to enable the MUFG Group to tap into the growth of the
Cambodian market by leveraging the knowhow of Ngern Tid Lor Co., Ltd., a subsidiary of Krungsri engaged in
microfinance in Thailand, with an aim to promote and develop the microfinance business.
MUFG’s Acquisition of Hitachi Capital Corporation’s shares
On October 3, 2016, MUFG acquired 23.0% of the common shares of Hitachi Capital Corporation (“Hitachi
Capital”) for ¥91,877 million from Hitachi, Ltd. Considering both MUFG’s ownership of the common stock and
representation on the board of directors, the MUFG Group has determined that MUFG has the ability to exercise
significant influence over the operating and financial policies of Hitachi Capital and applied the equity method of
accounting for its investment.
Mitsubishi UFJ Trust and Banking’s Acquisition of Rydex Fund Services, LLC
On October 4, 2016, Mitsubishi UFJ Trust and Banking acquired 100% ownership of Rydex Fund Services,
LLC for ¥17,431 million in cash, and thereby recorded goodwill of ¥5,232 million and intangible assets of
¥11,507 million. Rydex Fund Services, LLC is an overseas fund management company that mainly provides
fund administration services for funds established under the 1940 Investment Companies Act of the United
States. The purpose of this acquisition is to meet the diversified global fund administration needs of its Japanese
and overseas customers through the utilization of Rydex Fund Services, LLC’s unparalleled operational expertise
and the MUFG Group’s extensive network. Upon conclusion of the acquisition, Rydex Fund Services, LLC was
renamed MUFG Investor Services (US), LLC.
Mitsubishi UFJ NICOS Became a Wholly-Owned Subsidiary
On May 15, 2017, MUFG and its subsidiary Mitsubishi UFJ NICOS entered into a share exchange
agreement for MUFG to acquire the remaining 15.02% ownership of Mitsubishi UFJ NICOS by agreeing, on
October 2, 2017, to pay ¥50,000 million cash to the only holder of Mitsubishi UFJ NICOS common stock other
than MUFG. The transaction was accounted for as a non-cancellable forward purchase contract. Accordingly, a
liability of ¥50,000 million was recognized in Other liabilities on the accompanying consolidated balance sheet
with a corresponding reduction in Noncontrolling interests of ¥15,390 million and Capital surplus of
¥34,751 million, and an increase in Accumulated OCI, net of taxes of ¥141 million. On October 2, 2017, MUFG
settled Other liabilities of ¥50,000 million. The purpose of making a wholly-owned subsidiary is to effect a shift
in posture enabling a more flexible response to changes in the business environment and the swift pursuit of
group synergies.
Acquisition of shares in Bank Danamon in Indonesia
On December 26, 2017, MUFG Bank entered into conditional share purchase agreements with Asia
Financial (Indonesia) Pte. Ltd. (“AFI”) and other affiliated entities (the “Sellers”) to acquire their 73.8% equity
interests in an Indonesian bank, PT Bank Danamon Indonesia, Tbk. (“Danamon”), subject to applicable
regulatory approvals.
Danamon, which was established in 1956, is the fifth most profitable Indonesian commercial bank in terms
of net income. Danamon provides banking and financial products and services to consumer, micro-finance, small
and medium enterprise (“SME”) and corporate customers, with a network of around 1,800 offices in Indonesia.
MUFG Bank intends to establish an integrated and comprehensive services platform that serves as a
gateway for clients wishing to make inroads into Indonesia’s growing economy as well as local companies
F-33
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
seeking to expand into the region. This investment is also expected to strategically allow MUFG Bank to benefit
from Danamon’s foothold in the developing local retail and SME segments to deepen its banking franchise in
Indonesia.
This strategic investment by MUFG Bank will be executed through three steps (the “Proposed
Transaction”), and the completion of the Proposed Transaction will result in MUFG Bank becoming the largest
shareholder in Danamon and Danamon becoming a consolidated subsidiary of MUFG Bank.
In Step 1, MUFG Bank acquired an initial 19.9% equity interest in Danamon from the Sellers on
December 29, 2017, based on a price of IDR 8,323 (approximately ¥70(1)) per share, for an investment amount of
IDR 15,875 billion (approximately ¥133 billion(1)). The price was based on a price book-value ratio of 2.0
calculated on the basis of Danamon’s net assets as of September 30, 2017 with certain adjustments applied. AFI
continues to be the majority shareholder in Danamon after closing of Step 1. MUFG Bank classified Danamon’s
equity securities as Available-for-sale securities.
In Step 2, MUFG Bank is expected to acquire an additional 20.1% to increase its equity interest in Danamon
to 40% with regulatory approvals and other relevant approvals. This step is expected to close by September 2018.
The price for Danamon’s shares in Step 2 will be based on a similar approach to Step 1.
In Step 3, upon completion of Step 2, MUFG Bank intends to seek the necessary approvals to increase its
equity interest in Danamon beyond the 40%, and this will provide an opportunity for all other existing Danamon
shareholders to either remain as shareholders or receive cash from MUFG Bank. With the closing of Step 3,
MUFG Bank’s final equity interest in Danamon is expected to be above 73.8%. The prices for Danamon’s shares
in Step 3 will be based on a similar approach as Step 1.
Note:
(1) Calculated based on the exchange rate of IDR1 = ¥0.0084
F-34
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
INVESTMENT SECURITIES
The following tables present the amortized cost, gross unrealized gains and losses and fair value of
Available-for-sale securities and Held-to-maturity securities at March 31, 2017 and 2018:
At March 31, 2017:
Available-for-sale securities:
Debt securities:
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
(in millions)
Fair value
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . .
Foreign governments and official institutions
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other debt securities(1)
Marketable equity securities . . . . . . . . . . . . . . . . . . .
¥25,435,570
1,010,336
¥ 396,057
9,598
¥ 5,339
4,445
¥25,826,288
1,015,489
2,162,897
1,121,967
1,203,685
80,564
1,374,754
169,185
2,736,976
14,006
20,854
551
454
5,416
4,899
3,407,915
26,974
1,089
15,318
750
1,898
3,295
6,477
2,149,929
1,141,732
1,188,918
80,268
1,378,272
170,789
6,138,414
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥35,295,934
¥3,859,750
¥65,585
¥39,090,099
Held-to-maturity securities:
Debt securities:
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . .
¥ 1,100,955
¥
43,115
¥ — ¥ 1,144,070
Foreign governments and official institutions
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . .
Commercial mortgage-backed securities . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
61,135
100
962,492
184,336
1,278,303
1,113
—
4,009
5,065
9,277
—
—
11,196(2)
768(2)
185
62,248
100
955,305
188,633
1,287,395
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,587,321
¥
62,579
¥12,149
¥ 3,637,751
Notes:
(1) Other debt securities in the table above include ¥160,479 million of private placement debt conduit bonds.
(2) MUFG Americas Holdings reclassified residential mortgage-backed securities and commercial mortgage-backed securities from
Available-for-sale securities to Held-to-maturity securities during the fiscal year ended March 31, 2014. As a result of the reclassification
of residential mortgage-backed securities and commercial mortgage-backed securities, the unrealized losses before taxes at the date of
reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥4,662 million and
¥7,295 million, respectively, at March 31, 2017 and are not included in the table above.
F-35
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018:
Available-for-sale securities:
Debt securities:
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
(in millions)
Fair value
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . . . . ¥24,272,345 ¥ 299,402 ¥
Japanese prefectural and municipal bonds . . . . . . .
Foreign governments and official institutions
1,532,143
7,808
3,843 ¥24,567,904
1,537,431
2,520
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Other debt securities(1)
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . .
2,171,692
1,119,360
1,617,535
95,236
1,558,349
165,607
6,671,584
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥35,346,061 ¥4,275,052 ¥116,415 ¥39,504,698
8,938
15,589
752
473
12,775
3,635
3,925,680
2,207,662
1,104,799
1,632,346
95,383
1,546,989
165,002
2,789,392
44,908
1,028
15,563
620
1,415
3,030
43,488
Total
Held-to-maturity securities:
Debt securities:
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . . . . ¥ 1,100,807 ¥
40,212 ¥
— ¥ 1,141,019
Foreign governments and official institutions
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . .
59,330
885,965
171,647
1,365,192
383
1,660
4,107
8,438
103
14,726(2)
1,018(2)
1,222
59,610
872,899
174,736
1,372,408
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 3,582,941 ¥
54,800 ¥ 17,069 ¥ 3,620,672
Notes:
(1) Other debt securities in the table above include ¥152,374 million of private placement debt conduit bonds.
(2) MUFG Americas Holdings reclassified residential mortgage-backed securities and commercial mortgage-backed securities from
Available-for-sale securities to Held-to-maturity securities during the fiscal year ended March 31, 2014. As a result of the reclassification
of residential mortgage-backed securities and commercial mortgage-backed securities, the unrealized losses before taxes at the date of
reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥3,457 million and
¥5,932 million, respectively, at March 31, 2018 and are not included in the table above.
Other Securities
Investment securities other than Available-for-sale securities or Held-to-maturity securities
(i.e., nonmarketable equity securities presented in Other investment securities) were primarily carried at cost of
¥529,869 million and ¥538,251 million at March 31, 2017 and 2018, respectively, because their fair values were
not readily determinable.
The remaining balances were investment securities held by certain subsidiaries subject to specialized
industry accounting principles for investment companies and broker-dealers and carried at fair value
of ¥26,292 million and ¥28,359 million at March 31, 2017 and 2018, respectively. See Note 32 for the valuation
techniques and inputs used to estimate the fair values.
With respect to cost-method investments of ¥97,774 million and ¥97,586 million at March 31, 2017 and
2018, respectively, the MUFG Group estimated a fair value using commonly accepted valuation techniques to
F-36
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
determine whether the investments were impaired in each reporting period. See Note 32 for the details of these
commonly accepted valuation techniques. If the fair value of the investment is less than the cost of the
investment, the MUFG Group proceeds to evaluate whether the impairment is other-than-temporary.
With respect to cost-method investments of ¥432,095 million and ¥440,665 million at March 31, 2017 and
2018, respectively, the MUFG Group performed a test to determine whether any impairment indicators existed
for each investment in each reporting period. If an impairment indicator exists, the MUFG Group estimates the
fair value of the cost-method investment. If the fair value of the investment is less than the cost of the investment,
the MUFG Group performs an evaluation of whether the impairment is other-than-temporary. The primary
method the MUFG Group uses to identify impairment indicators is a comparison of the MUFG Group’s share of
an investee’s net assets to the cost of the MUFG Group’s investment in the investee. The MUFG Group also
considers whether significant adverse changes in the regulatory, economic or technological environment have
occurred with respect to the investee. The MUFG Group periodically monitors the status of each investee
including the credit rating, which is generally updated once a year based on the annual financial statements of the
issuer. In addition, if an event that could impact the credit rating of an investee occurs, the MUFG Group
reassesses the appropriateness of the credit rating assigned to the issuer in order to maintain an updated credit
rating. The MUFG Group did not estimate the fair value of cost-method investments, which had aggregated costs
of ¥429,313 million and ¥437,486 million at March 31, 2017 and 2018, respectively, since it was not practical
and the MUFG Group identified no impairment indicators.
Based on the procedures described above, the MUFG Group recognized OTTI losses on the cost-method
investments of ¥14,242 million, ¥1,044 million and ¥1,422 million for the fiscal years ended March 31, 2016,
2017 and 2018, respectively. The OTTI losses of ¥14,242 million for the fiscal year ended March 31, 2016 was
derived from a limited number of companies categorized in the manufacturing industry. Each impairment loss
was recognized based on the specific circumstances of each individual company.
Contractual Maturities
The amortized cost and fair values of Held-to-maturity debt securities and the fair values of
Available-for-sale debt securities at March 31, 2018 by contractual maturity are shown below. Expected
maturities may be shorter than contractual maturities because issuers of debt securities may have the right to call
or prepay obligations with or without penalties. Debt securities not due at a single maturity date and securities
embedded with call or prepayment options, such as mortgage-backed securities, are included in the table below
based on their contractual maturities.
Held-to-maturity debt
securities
Available-for-sale
debt securities
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from one year to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from five years to ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
— ¥
212,879
1,599,219
1,770,843
Amortized
cost
Fair value
Fair value
(in millions)
— ¥11,911,681
10,652,390
6,012,689
4,256,354
216,474
1,639,974
1,764,224
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,582,941
¥3,620,672
¥32,833,114
F-37
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Realized Gains and Losses and Transfers of Investment Securities
For the fiscal years ended March 31, 2016, 2017 and 2018, gross realized gains on sales of
Available-for-sale securities were ¥317,454 million, ¥367,548 million and ¥330,508 million, respectively, and
gross realized losses on sales of Available-for-sale securities were ¥52,904 million, ¥63,031 million and
¥49,290 million, respectively.
For the fiscal year ended March 31, 2017, the MUFG Group transferred certain securities which had a
carrying value of ¥14,142 million from Held-to-maturity securities to Available-for-sale securities in response to
the Volcker Rule of the Dodd-Frank Act. These securities were sold and the MUFG Group recorded a profit of
¥669 million for the fiscal year ended March 31, 2017. The transfer was in accordance with the circumstances
consistent with a Held-to-maturity classification, therefore, management has determined the transfer out of
Held-to-maturity is consistent with the original designation and does not taint the remaining portfolio.
Other-than-temporary Impairments of Investment Securities
For the fiscal years ended March 31, 2016, 2017 and 2018, losses resulting from impairment of investment
securities to reflect the decline in value considered to be other-than-temporary were ¥37,153 million,
¥33,823 million and ¥8,196 million, respectively, which were included in Investment securities gains—net in the
accompanying consolidated statements of income. The losses of ¥37,153 million for the fiscal year ended
March 31, 2016 included losses of ¥21,948 million from marketable equity securities, ¥963 million from
Available-for-sale debt securities which mainly comprised of corporate bonds, and ¥14,242 million from
nonmarketable equity securities. The losses of ¥33,823 million for the fiscal year ended March 31, 2017 included
losses of ¥32,038 million from marketable equity securities, ¥741 million from Available-for-sale debt securities
which mainly comprised of corporate bonds, and ¥1,044 million from nonmarketable equity securities. The
losses of ¥8,196 million for the fiscal year ended March 31, 2018 included losses of ¥6,660 million from
marketable equity securities, ¥114 million from Available-for-sale debt securities which mainly comprised of
corporate bonds, and ¥1,422 million from nonmarketable equity securities.
F-38
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Gross Unrealized Losses and Fair Value
The following tables show the gross unrealized losses and fair value of Available-for-sale securities and
Held-to-maturity securities at March 31, 2017 and 2018 by length of time that individual securities in each
category have been in a continuous loss position:
At March 31, 2017:
Available-for-sale securities:
Debt securities:
Less than 12 months
12 months or more
Gross
unrealized
losses
Fair value
Gross
unrealized
losses
Fair value
Fair value
Total
Gross
unrealized
losses
Number of
securities
(in millions, except number of securities)
Japanese national government and
Japanese government agency
bonds . . . . . . . . . . . . . . . . . . . . ¥6,088,856 ¥ 5,339 ¥
— ¥ — ¥6,088,856 ¥ 5,339
Japanese prefectural and
municipal bonds . . . . . . . . . . . .
Foreign governments and official
institutions bonds . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . .
Residential mortgage-backed
579,684
4,445
—
1,034,336
277,394
26,677
933
115,053
15,613
—
297
156
579,684
4,445
1,149,389
293,007
26,974
1,089
securities . . . . . . . . . . . . . . . . . .
754,557
14,086
81,065
1,232
835,622
15,318
Commercial mortgage-backed
securities . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . .
Other debt securities . . . . . . . . . . .
Marketable equity securities . . . . . . . .
51,360
80,059
35,375
222,950
748
1,269
1,488
6,449
1,298
128,372
50,845
554
2
629
1,807
28
52,658
208,431
86,220
223,504
750
1,898
3,295
6,477
107
139
142
160
412
65
85
26
111
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥9,124,571 ¥61,434 ¥392,800
¥4,151
¥9,517,371 ¥65,585
1,247
Held-to-maturity securities:
Debt securities:
Residential mortgage-backed
securities . . . . . . . . . . . . . . . . . . ¥ 523,237 ¥10,736 ¥161,453
¥ 460
¥ 684,690 ¥11,196
Commercial mortgage-backed
securities . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . .
12,906
25,679
125
13
168,724
101,345
643
172
181,630
127,024
768
185
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 561,822 ¥10,874 ¥431,522
¥1,275
¥ 993,344 ¥12,149
263
31
5
299
F-39
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Less than 12 months
12 months or more
Gross
unrealized
losses
Gross
unrealized
losses
Fair value
Fair value
(in millions, except number of securities)
Total
Gross
unrealized
losses
Number of
securities
At March 31, 2018:
Fair value
Available-for-sale securities:
Debt securities:
Japanese national government
and Japanese government
agency bonds . . . . . . . . . . . . ¥4,767,893
Japanese prefectural and
¥ 2,701
¥ 187,000 ¥ 1,142 ¥4,954,893 ¥
3,843
municipal bonds . . . . . . . . . .
400,705
453
353,047
2,067
753,752
2,520
Foreign governments and
official institutions bonds . . .
Corporate bonds . . . . . . . . . . . .
Residential mortgage-backed
846,818
312,993
16,955
856
818,937
74,717
27,953
172
1,665,755
387,710
44,908
1,028
securities . . . . . . . . . . . . . . . .
438,545
2,644
623,285
12,919
1,061,830
15,563
Commercial mortgage-backed
securities . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . .
Other debt securities . . . . . . . . .
Marketable equity securities . . . . . . .
50,898
144,073
12,341
448,489
386
1,403
367
43,482
9,067
5,345
56,117
28
234
12
2,663
6
59,965
149,418
68,458
448,517
620
1,415
3,030
43,488
140
193
157
150
503
60
29
23
116
Total
. . . . . . . . . . . . . . . . . . . . . . . . . ¥7,422,755
¥69,247
¥2,127,543 ¥47,168 ¥9,550,298 ¥116,415
1,371
Held-to-maturity securities:
Debt securities:
Foreign governments and
official institution bonds . . . . ¥
55,837
¥
103
¥
— ¥ — ¥
55,837 ¥
103
Residential mortgage-backed
securities . . . . . . . . . . . . . . . .
299,286
3,487
451,968
11,239
751,254
14,726
Commercial mortgage-backed
securities . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . .
2,150
275,814
2
1,222
169,065
—
1,016
—
171,215
275,814
1,018
1,222
Total
. . . . . . . . . . . . . . . . . . . . . . . . . ¥ 633,087
¥ 4,814
¥ 621,033 ¥12,255 ¥1,254,120 ¥ 17,069
10
332
32
11
385
Evaluating Investment Securities for Other-than-temporary Impairments
The following describes the nature of the MUFG Group’s investments and the conclusions reached in
determining whether the unrealized losses were temporary or other-than-temporary.
Japanese national government and Japanese government agency bonds, Foreign governments and official
institutions bonds and commercial mortgage-backed securities
As of March 31, 2018, unrealized losses associated with these securities were deemed to be attributable to
changes in market interest rates rather than a deterioration in the creditworthiness of the underlying obligor.
Based on a consideration of factors, including cash flow analysis, the MUFG Group expects to recover the entire
amortized cost basis of these securities. Accordingly, such changes are considered to be temporary and no
impairment loss has been recorded.
Corporate bonds
As of March 31, 2018, unrealized losses associated with corporate bonds were primarily related to private
placement bonds issued by Japanese non-public companies. The credit loss component recognized in earnings is
identified as the amount of principal cash flows not expected to be received over the remaining terms of the
F-40
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
bonds as estimated using the MUFG Group’s cash flow projections. The key assumptions include probability of
default based on credit ratings of the bond issuers and loss given default.
The following table presents a roll-forward of the credit loss component recognized in earnings. The balance
at the beginning of each fiscal year represents the credit loss component for which OTTI occurred on debt
securities in prior periods. The additions represent the first time a debt security was credit impaired or when
subsequent credit impairment has occurred. The credit loss component is reduced when the corporate bonds
mature or are sold.
2016
2017
2018
(in millions)
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,814
¥ 6,691 ¥4,125
Additions:
Initial credit impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsequent credit impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
915
48
645
96
111
3
Reductions:
Securities sold or matured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,086)
(3,307)
(740)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,691
¥ 4,125 ¥3,499
The cumulative declines in fair value of the credit impaired debt securities, which were mainly corporate
bonds, held at March 31, 2017 and 2018 were ¥3,450 million and ¥2,992 million, respectively. Of which, the
credit loss components recognized in earnings were ¥4,125 million and ¥3,499 million, and the remaining
amounts related to all other factors recognized in Accumulated OCI before taxes were ¥675 million and
¥507 million at March 31, 2017 and 2018, respectively.
Residential mortgage-backed securities
As of March 31, 2018, unrealized losses on these securities were primarily driven by securities guaranteed
by a U.S. government agency or a government-sponsored agency which are collateralized by residential
mortgage loans. Unrealized losses mainly resulted from changes in interest rates and not from changes in credit
quality. The MUFG Group analyzed that no OTTI was identified on such securities as of March 31, 2018 and no
impairment loss has been recorded because the strength of the issuers’ guarantees through direct obligations or
support from the U.S. government is expected to be sufficient to recover the entire amortized cost basis of these
securities.
Asset-backed securities
As of March 31, 2018, unrealized losses on these securities were primarily driven by certain collateralized
loan obligations (“CLOs”), highly illiquid securities for which fair values are difficult to determine. Unrealized
losses arise from widening credit spreads, deterioration of the credit quality of the underlying collateral,
uncertainty regarding the valuation of such securities and the market’s view of the performance of the fund
managers. When the fair value of a security is lower than its amortized cost or when any security is subject to a
deterioration in credit rating, the MUFG Group undertakes a cash flow analysis of the underlying collateral to
estimate the OTTI and confirms the intent and ability to hold these securities until recovery. Based on the
analysis performed, no OTTI was identified as of March 31, 2018 and no impairment loss has been recorded.
F-41
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other debt securities
As of March 31, 2018, other debt securities primarily consist of private placement debt conduit bonds,
which are not rated by external credit rating agencies. The unrealized losses on these bonds result from a higher
return on capital expected by the secondary market compared with the return on capital required at the time of
origination when the bonds were purchased. The MUFG Group estimates loss projections for each security by
assessing the underlying collateral of each security. The MUFG Group estimates the portion of loss attributable
to credit based on the expected cash flows of the underlying collateral using estimates of current key assumptions
such as probability of default and loss severity. Cash flow analysis of the underlying collateral provides an
estimate of OTTI, which is performed when the fair value of a security is lower than its amortized cost and
potential impairment is identified. Based on the analysis, no OTTI losses were recorded in the accompanying
consolidated statements of income.
Marketable equity securities
The MUFG Group determines whether unrealized losses on marketable equity securities are temporary
based on its ability and positive intent to hold the investments for a period of time sufficient to allow for any
anticipated recovery and the results of its review conducted to identify and evaluate investments that have
indications of possible impairment. Impairment is evaluated considering various factors, and their relative
significance varies from case to case. The MUFG Group’s review includes, but is not limited to, consideration of
the following factors:
The length of time that the fair value of the investment has been below cost—The MUFG Group generally
deems a continued decline of fair value below cost for six months or more to be other-than-temporary.
The extent to which the fair value of investments has been below cost as of the end of the reporting period—
The MUFG Group’s investment portfolio is exposed to volatile equity prices affected by many factors including
investors’ perspectives as to future economic prospects and the issuers’ performance. The MUFG Group
generally deems the decline in fair value below cost of 20% or more as an indicator of an other-than-temporary
decline in fair value.
The financial condition and near-term prospects of the issuer—The MUFG Group considers the financial
condition and near-term prospects of the issuer primarily based on the credit standing of the issuers as
determined by its credit rating system.
At March 31, 2018, unrealized losses on marketable equity securities which have been in a continuous loss
position are considered temporary based on the evaluation as described above.
F-42
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans at March 31, 2017 and 2018 by domicile and industry of the borrower are summarized below.
Classification of loans by industry is based on the industry segment loan classifications as defined by the Bank of
Japan.
2017
2018
(in millions)
Domestic:
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
¥ 11,796,803
819,262
11,622,372
2,549,300
7,970,579
5,223,906
1,634,584
8,898,712
16,491,010
¥ 10,876,625
781,262
11,763,769
2,689,086
7,989,080
4,818,364
1,551,533
8,939,291
16,287,332
Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,006,528
65,696,342
Foreign:
Governments and official institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037,795
13,844,964
30,279,641
6,334,551
920,538
12,851,570
30,591,173
7,270,928
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,496,951
51,634,209
Unearned income, unamortized premiums—net and deferred loan fees—net . . . .
(288,507)
(294,656)
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥118,214,972
¥117,035,895
Notes:
(1) Loans to so-called “non-bank finance companies” are generally included in the “Banks and other financial institutions” category.
Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
(2) The above table includes loans held for sale of ¥185,940 million and ¥226,923 million at March 31, 2017 and 2018, respectively.
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial,
Residential, Card, MUFG Americas Holdings, and Krungsri based on the grouping used by the MUFG Group to
determine the allowance for credit losses. See Note 1 for further information.
Nonaccrual Loans
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and
timely collection of either principal or interest, when principal or interest is contractually past due one month or
more with respect to loans within all classes of the Commercial segment, three months or more with respect to
loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or more with respect
to loans within the Residential segment. See Note 1 for further information.
F-43
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The nonaccrual loans by class at March 31, 2017 and 2018 is shown below:
2017
2018
(in millions)
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥471,148
185,095
15,202
44,374
38,602
131,213
2,432
18,685
10,034
25,511
191,889
75,399
61,424
82,150
94,902
¥976,912
¥332,994
77,163
10,791
33,317
30,717
108,175
1,145
13,815
37,549
20,322
109,516
69,464
61,387
52,282
121,286
¥746,929
Note:
(1) The above table does not include loans held for sale of nil and ¥61 million at March 31, 2017 and 2018, respectively, and loans acquired
with deteriorated credit quality of ¥9,720 million and ¥6,659 million at March 31, 2017 and 2018, respectively.
Impaired Loans
The MUFG Group’s impaired loans primarily include nonaccrual loans and TDRs. The following table
shows information about impaired loans by class at March 31, 2017 and 2018:
At March 31, 2017:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and
Krungsri
. . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
(in millions)
¥187,738
39,587
9,068
30,274
23,162
53,760
607
10,652
5,806
14,822
23,019
—
6,557
462
16,292
20,752
¥254,820
¥1,063,715
594,596
24,075
83,322
71,466
214,182
¥1,107,203
602,038
24,907
90,797
78,097
224,141
¥608,122
411,787
9,107
14,987
31,074
115,673
2,443
2,443
1,674
24,818
16,520
32,293
26,641
17,403
40,736
10,565
7,226
6,029
285,906
309,975
164,682
8,013
127,022
72,311
93,452
65,431
¥1,715,850
11,513
154,006
80,392
113,414
71,075
¥1,847,578
3,619
46,971
20,523
19,173
19,118
¥882,208
¥ 875,977
555,009
15,007
53,048
48,304
160,422
1,836
14,166
10,714
17,471
262,887
8,013
120,465
71,849
77,160
44,679
¥1,461,030
F-44
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and
Krungsri
. . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit
quality . . . . . . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Recorded Loan Balance
Requiring
an Allowance for
Credit Losses
Not Requiring
an Allowance for
Credit Losses(1)
Total(2)
Unpaid
Principal
Balance
Related
Allowance for
Credit Losses
(in millions)
¥ 626,469
361,268
10,936
43,553
38,097
128,661
¥188,984
36,566
7,172
23,053
16,600
49,628
¥ 815,453
397,834
18,108
66,606
54,697
178,289
¥ 875,795
408,124
18,490
71,809
59,335
189,404
¥331,851
166,098
7,921
10,665
25,890
94,832
1,125
18,782
12,978
11,069
122,243
7,837
105,089
66,964
48,895
58,529
26
1,151
1,151
972
7,852
34,282
13,805
40,249
—
6,261
388
33,650
25,565
26,634
47,260
24,874
28,082
67,525
31,875
16,041
5,350
4,082
162,492
190,518
82,855
7,837
111,350
67,352
82,545
84,094
15,470
134,777
74,840
94,565
90,957
4,324
16,928
21,223
7,743
29,402
Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,036,026
¥295,097
¥1,331,123
¥1,476,922
¥494,326
Notes:
(1) These loans do not require an allowance for credit losses because the recorded loan balance equals, or does not exceed, the present value
of expected future cash flows discounted at the loans’ original effective interest rate, loans’ observable market price, or the fair value of
the collateral if the loan is a collateral-dependent loan.
Included in impaired loans at March 31, 2017 and 2018 are accrual TDRs as follows: ¥688,746 million and ¥536,748 million—
Commercial; ¥50,213 million and ¥40,734 million—Residential; ¥32,564 million and ¥28,541 million—Card; ¥24,708 million and
¥39,333 million—MUFG Americas Holdings; and ¥23,588 million and ¥24,899 million—Krungsri, respectively.
In addition to impaired loans presented in the above table, there were impaired loans held for sale of ¥9,879 million and ¥61 million at
March 31, 2017 and 2018, respectively.
(3)
(2)
F-45
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows information regarding the average recorded loan balance and recognized interest
income on impaired loans for the fiscal years ended March 31, 2016, 2017 and 2018:
2016
2017
2018
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
Average
Recorded Loan
Balance
Recognized
Interest
Income
(in millions)
¥1,066,585
464,157
29,548
123,203
91,339
249,656
¥16,572
5,530
708
2,169
1,967
4,333
¥1,137,501
601,256
26,684
96,229
81,967
238,798
¥14,116
5,845
434
1,593
1,236
3,466
¥ 918,093
472,081
19,465
74,087
59,916
186,356
¥ 9,441
3,787
281
1,146
794
2,347
Commercial
Domestic . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . .
Construction . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . .
3,982
Communication and
information services . . . . .
Other industries . . . . . . . . . . .
. . . . . . . . . . . . . . .
Consumer
29,547
29,018
46,135
Foreign-excluding MUAH and
Krungsri . . . . . . . . . . . . . . . . . . .
230,018
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . .
11,549
154,760
85,006
71,966
40,037
51
677
301
836
3,235
495
2,918
3,330
1,550
2,252
2,272
27,531
24,709
38,055
291,612
9,974
133,876
75,809
91,690
51,597
11
570
397
564
5,132
432
1,883
2,483
1,664
2,201
1,729
25,461
50,377
28,621
209,297
8,591
119,409
69,831
83,504
75,370
8
388
215
475
4,244
492
1,563
1,993
1,993
3,899
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,659,921
¥30,352
¥1,792,059
¥27,911
¥1,484,095
¥23,625
Interest income on nonaccrual loans for all classes was recognized on a cash basis when ultimate
collectibility of principal was certain. Otherwise, cash receipts were applied as principal reductions. Interest
income on accruing impaired loans, including TDRs, was recognized on an accrual basis to the extent that the
collectibility of interest income was reasonably certain based on management’s assessment.
F-46
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows a roll-forward of accrual TDRs and other impaired loans (including nonaccrual
TDRs) for the fiscal years ended March 31, 2016, 2017 and 2018:
2016
2017
2018
(in millions)
Accrual TDRs:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (new accrual TDR status)(1)
. . . . . . . . . . . . . . . . . . . . . . . .
Transfers to other impaired loans (including nonaccrual TDRs) . . . .
Loans sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 867,090
175,178
(164,016)
(9)
(264,399)
¥ 613,844
492,269
(40,182)
(1,637)
(244,475)
¥ 819,819
144,368
(25,122)
(39,378)
(229,432)
Balance at end of fiscal year(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 613,844
¥ 819,819
¥ 670,255
Other impaired loans (including nonaccrual TDRs):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (new other impaired loans (including nonaccrual TDRs)
status)(1)(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to accrual TDRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 819,716
¥1,111,306
¥ 896,031
617,481
(65,198)
(32,190)
(12,224)
(216,279)
541,789
(106,097)
(333,478)
(44,984)
(272,505)
281,275
(98,355)
(43,858)
(31,581)
(342,644)
Balance at end of fiscal year(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,111,306
¥ 896,031
¥ 660,868
Notes:
(1) For the fiscal year ended March 31, 2016, lease receivables of ¥3,124 million and ¥240 million in the Krungsri segment, which were
accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other impaired loans,
respectively, and the related ending balances of such TDRs amounting to ¥4,172 million and ¥567 million, are also excluded from the
balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2016. For the fiscal year ended March 31, 2017, lease
receivables of ¥875 million and ¥74 million in the Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are
excluded from the additions of accrual TDRs and other impaired loans, respectively, and the related ending balances of such TDRs
amounting to ¥4,065 million and ¥389 million, are also excluded from the balance of accrual TDRs and other impaired loans,
respectively, as of March 31, 2017. For the fiscal year ended March 31, 2018, lease receivables of ¥1,809 million and ¥113 million in the
Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and
other impaired loans, respectively, and the related ending balances of such TDRs amounting to ¥4,282 million and ¥1,286 million, are
also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2018.
Included in the additions of other impaired loans for the fiscal years ended March 31, 2016, 2017 and 2018 are nonaccrual TDRs as
follows: ¥10,954 million, ¥11,699 million and ¥12,002 million—Card; ¥19,725 million, ¥25,023 million and ¥12,799 million—MUFG
Americas Holdings; and ¥7,989 million, ¥7,471 million and ¥12,280 million—Krungsri, respectively.
(2)
F-47
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Troubled Debt Restructurings
The following table summarizes the MUFG Group’s TDRs by class for the fiscal years ended March 31,
2016, 2017 and 2018:
2016
2017
2018
Troubled Debt Restructurings
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
(in millions)
¥116,299
63,304
2,881
7,167
12,226
¥ 76,530
23,535
2,881
7,167
12,226
¥377,563
335,347
1,377
7,457
5,268
¥377,563
335,347
1,377
7,457
5,268
¥ 70,380
35,954
1,020
1,269
4,139
¥ 69,021
35,954
1,020
1,269
4,139
Commercial(1)(3)
Domestic . . . . . . . . . . . . . .
Manufacturing . . . . . .
Construction . . . . . . . .
Real estate . . . . . . . . .
Services . . . . . . . . . . .
Wholesale and
retail . . . . . . . . . . . .
27,545
27,545
22,868
22,868
16,280
14,921
Banks and other
financial
institutions . . . . . . .
Communication and
information
services . . . . . . . . . .
Other industries . . . . .
Consumer . . . . . . . . . .
Foreign-excluding MUAH
—
—
—
—
246
246
869
1,240
1,067
869
1,240
1,067
2,405
1,493
1,348
2,405
1,493
1,348
9,643
761
1,068
9,643
761
1,068
and Krungsri . . . . . . . . . .
23,849
23,849
58,178
58,178
25,522
25,522
Loans acquired with
deteriorated credit
quality . . . . . . . . . . . . . .
Residential(1)(3)
. . . . . . . . . . . . .
Card(2)(3) . . . . . . . . . . . . . . . . . . .
MUAH(2)(3) . . . . . . . . . . . . . . . . .
Krungsri(2)(3)
. . . . . . . . . . . . . . .
—
19,316
16,002
64,064
17,869
—
19,316
15,670
64,064
17,781
1,030
13,092
17,256
38,558
32,340
1,030
13,092
16,759
38,449
32,340
—
9,763
17,436
40,578
24,015
—
9,763
16,912
38,224
23,929
Total . . . . . . . . . . . . . . . . . . . . . .
¥257,399
¥217,210
¥538,017
¥537,411
¥187,694
¥183,371
F-48
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2016
2017
2018
Troubled Debt Restructurings
That Subsequently defaulted
Recorded Investment
(in millions)
Commercial(1)(3)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . . . . . . . . . . . . . . . . . . . . . . .
Residential(1)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,587
¥150,142
1,373
147,025
11
6
38
745
217
1,193
2,530
1,090
—
—
385
20
—
40
23
33
— 11,268
—
—
231
284
3,661
4,479
6,624
3,925
3,984
6,219
¥ 4,067
839
—
10
822
2,231
—
140
—
25
—
—
159
4,191
2,565
4,789
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥165,049
¥30,355
¥15,771
Notes:
(1) TDRs for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans.
(2) TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans.
(3) For the fiscal year ended March 31, 2016, extension of the stated maturity date of loans was the primary concession type in the
Commercial, Residential and Krungsri segments, reduction in the stated rate was the primary concession type in the Card segment and
payment deferrals were the primary concession type in the MUFG Americas Holdings segment. For the fiscal year ended March 31,
2017, extension of the stated maturity date of loans was the primary concession type in the Residential segment, reduction in the stated
rate was the primary concession type in the Commercial and Card segments and payment deferrals were the primary concession type in
the MUFG Americas Holdings and Krungsri segments. For the fiscal year ended March 31, 2018, extension of the stated maturity date of
loans was the primary concession type in the Commercial, Residential and Krungsri segments, reduction in the stated rate was the
primary concession type in the Card segment, payment deferrals were the primary concession type in the MUFG Americas Holdings
segment.
F-49
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes outstanding recorded investment balances of TDRs by class at March 31,
2017 and 2018:
Commercial(1)
2017
2018
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication and information services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri
¥ 592,578
409,500
8,881
38,953
32,864
82,968
11
6,133
6,486
6,782
96,168
50,213
72,311
69,830
46,651
¥ 482,566
320,702
7,362
33,289
23,987
70,119
6
12,837
9,712
4,552
54,182
40,734
67,352
65,373
54,036
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 927,751
¥ 764,243
Notes:
(1) TDRs for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans.
(2) TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding
recorded investment balances as of March 31, 2017 and 2018 are nonaccrual TDRs as follows: ¥39,747 million and ¥38,811 million—
Card; ¥45,122 million and ¥26,040 million—MUFG Americas Holdings; and ¥18,998 million and ¥24,855 million—Krungsri,
respectively.
A modification of terms of a loan under a TDR mainly involves: (i) a reduction in the stated interest rate
applicable to the loan, (ii) an extension of the stated maturity date of the loan, (iii) a partial forgiveness of the
principal of the loan, or (iv) a combination of all of these. Those loans are also considered impaired loans, and
hence the allowance for credit losses is separately established for each loan. As a result, the amount of allowance
for credit losses increases in many cases upon classification as a TDR loan. The amount of pre-modification
outstanding recorded investment and post-modification outstanding recorded investment may differ due to write-
offs made as part of the concession. The impact of write-offs associated with TDRs on the MUFG Group’s
results of operations for the fiscal years ended March 31, 2016, 2017 and 2018 was not material.
TDRs for the Commercial and Residential segments in the above tables include accruing loans, and do not
include nonaccrual loans. Once a loan is classified as a nonaccrual loan, a modification would have little
likelihood of resulting in the recovery of the loan in view of the severity of the financial difficulty of the
borrower. Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual
loan. The vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates,
typically for periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan
at the extended maturity. Accordingly, the impact of such TDRs on the outstanding recorded investment is
immaterial, and the vast majority of nonaccrual TDRs have subsequently defaulted.
TDRs that subsequently defaulted in the Commercial and Residential segments in the above tables include
those accruing loans that became past due one month or more within the Commercial segment and six months or
F-50
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
more within the Residential segment, and those accruing loans reclassified to nonaccrual loans due to financial
difficulties even without delinquencies. This is because classification as a nonaccrual loan is regarded as default
under the MUFG Group’s credit policy. Also, the MUFG Group defines default as payment default for the
purpose of the disclosure.
In regards to the Card, MUFG Americas Holdings and Krungsri segments, the TDRs in the above tables
represent nonaccrual and accruing loans, and the defaulted loans in the above table represent nonaccruing and
accruing loans that became past due one month or more within the Card segment, 60 days or more within the
MUFG Americas Holdings segment, and six months or more within the Krungsri segment.
Historical payment defaults are one of the factors considered when projecting future cash flows in
determining the allowance for credit losses for each segment.
The MUFG Group provided commitments to extend credit to customers with TDRs. The amounts of such
commitments were ¥168,840 million and ¥172,159 million at March 31, 2017 and 2018, respectively. See
Note 25 for further discussion of commitments to extend credit.
Credit Quality Indicator
Credit quality indicators of loans by class at March 31, 2017 and 2018 are shown below:
At March 31, 2017:
Commercial
Normal
Close
Watch
Likely to become
Bankrupt or
Legally/Virtually
Bankrupt
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . . .
Loans acquired with deteriorated credit
¥49,572,413
10,882,533
753,879
11,137,637
2,267,272
7,403,680
5,207,774
¥2,161,965
821,062
53,255
352,785
237,067
462,577
14,341
1,573,518
8,725,914
1,620,206
36,134,401
45,342
125,725
49,811
971,228
¥296,961
65,112
11,550
42,382
31,202
98,423
892
15,357
8,086
23,957
189,599
Total(1)
¥52,031,339
11,768,707
818,684
11,532,804
2,535,541
7,964,680
5,223,007
1,634,217
8,859,725
1,693,974
37,295,228
quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,503
12,572
5,065
34,140
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥85,723,317
¥3,145,765
¥491,625
¥89,360,707
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,256,263
531,331
¥
(in millions)
¥76,185
¥61,822
¥14,332,448
593,153
¥
Accrual
Nonaccrual
Total(1)
F-51
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention
Classified
Total(1)(2)
MUAH . . . . . . .
¥
3,837,763
¥
22,949
¥ 4,879,158
133,032
¥
151,553
¥
9,024,455
(in millions)
¥
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,672,435
¥
(in millions)
¥
195,472
98,335
¥
4,966,242
Normal
Special
Mention
Substandard or
Doubtful or
Doubtful
of Loss
Total(1)
At March 31, 2018:
Commercial
Normal
Close Watch
Likely to become
Bankrupt or
Legally/Virtually
Bankrupt
Total(1)
(in millions)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . . . . . . . . . . . . . .
Banks and other financial institutions . . . .
Communication and information
services . . . . . . . . . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-excluding MUAH and Krungsri . . . . . .
Loans acquired with deteriorated credit
¥49,050,274
10,215,497
727,932
11,379,291
2,467,540
7,518,383
4,800,281
¥1,690,924
596,662
43,673
279,931
175,733
374,706
10,923
1,491,093
8,780,517
1,669,740
36,049,123
48,153
120,466
40,677
569,137
¥271,456
57,730
9,116
32,692
24,081
77,870
1,145
11,958
36,951
19,913
108,276
¥51,012,654
10,869,889
780,721
11,691,914
2,667,354
7,970,959
4,812,349
1,551,204
8,937,934
1,730,330
36,726,536
quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,035
11,728
3,562
27,325
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥85,111,432
¥2,271,789
¥383,294
¥87,766,515
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrual
¥14,012,978
528,108
¥
Nonaccrual
(in millions)
¥ 67,258
¥ 61,707
Total(1)
¥14,080,236
589,815
¥
Credit Quality Based on
the Number of Delinquencies
Credit Quality Based on
Internal Credit Ratings
Accrual
Nonaccrual
Pass
Special
Mention
Classified
Total(1)(2)
MUAH . . . . . . . . . . . . . .
¥4,360,445
¥14,238
¥4,509,044
(in millions)
¥
59,890
Normal
Special
Mention
¥116,842
¥ 9,060,459
Substandard or
Doubtful or
Doubtful
of Loss
Total(1)
Krungsri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,284,018
¥
198,526
¥123,106
¥ 5,605,650
(in millions)
F-52
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notes:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
(2) Total loans of MUFG Americas Holdings do not include FDIC covered loans which are not individually rated totaling ¥40,534 million
and ¥953 million as of March 31, 2017 and 2018, respectively. The MUFG Group will be reimbursed for a substantial portion of any
future losses on FDIC covered loans under the terms of the FDIC loss share agreements.
The MUFG Group classifies loans into risk categories based on relevant information about the ability of
borrowers to service their debt, including, but not limited to, historical and current financial information,
historical and current payment experience, credit documentation, public and non-public information about
borrowers and current economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes of the Commercial segment is the internal
credit rating assigned to each borrower based on the MUFG Group’s internal borrower ratings of 1 through 15,
with the rating of 1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a
borrower, the MUFG Group evaluates the borrower’s expected debt-service capability based on various
information, including financial and operating information of the borrower as well as information on the industry
in which the borrower operates, and the borrower’s business profile, management and compliance system. In
evaluating a borrower’s debt-service capability, the MUFG Group also conducts an assessment of the level of
earnings and an analysis of the borrower’s net worth. Based on the internal borrower rating, loans within the
Commercial segment are categorized as Normal (internal borrower ratings of 1 through 9), Close Watch (internal
borrower ratings of 10 through 12), and Likely to become Bankrupt or Legally/Virtually Bankrupt (internal
borrower ratings of 13 through 15).
Loans to borrowers categorized as Normal represent those that are not deemed to have collectibility issues.
Loans to borrowers categorized as Close Watch represent those that require close monitoring as the
borrower has begun to exhibit elements of potential concern with respect to its business performance and
financial condition, the borrower has begun to exhibit elements of serious concern with respect to its business
performance and financial condition, including business problems requiring long-term solutions, or the
borrower’s loans are TDRs or loans contractually past due 90 days or more for special reasons.
Loans to borrowers categorized as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those
that have a higher probability of default than those categorized as Close Watch due to serious debt repayment
problems with poor progress in achieving restructuring plans, the borrower being considered virtually bankrupt
with no prospects for an improvement in business operations, or the borrower being legally bankrupt with no
prospects for continued business operations because of non-payment, suspension of business, voluntary
liquidation or filing for legal liquidation.
The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card
segment and consumer loans within the MUFG Americas Holdings segment. The accrual status of these loans is
determined based on the number of delinquent payments. See Note 1 for further details of categorization of
Accrual and Nonaccrual.
Commercial loans within the MUFG Americas Holdings segment are categorized as either pass or criticized
based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk
graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the
borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan
and result in further downgrade. Classified credits are those that are internally risk graded as Substandard or
F-53
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full
satisfaction of the debt. A credit classified as Doubtful has critical weaknesses that make full collection
improbable on the basis of currently existing facts and conditions.
Loans within the Krungsri segment are categorized as Normal, Special Mention, Substandard, Doubtful, and
Doubtful of Loss primarily based on their delinquency status. Loans categorized as Special Mention generally
represent those that have the overdue principal or interest payments for a cumulative period exceeding one month
commencing from the contractual due date. Loans categorized as Substandard, Doubtful or Doubtful of Loss
generally represent those that have the overdue principal or interest payments for a cumulative period exceeding
three months commencing from the contractual due date.
For the Commercial, Residential and Card segments, credit quality indicators are based on information as of
March 31. For the MUFG Americas Holdings and Krungsri segments, credit quality indicators are generally
based on information as of December 31.
Past Due Analysis
Ages of past due loans by class at March 31, 2017 and 2018 are shown below:
At March 31, 2017:
Commercial
Domestic . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . .
Wholesale and retail
. . . . . . . . . .
Banks and other financial
institutions . . . . . . . . . . . . . . . .
Communication and information
services . . . . . . . . . . . . . . . . . .
Other industries . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Consumer
Foreign-excluding MUAH and
Krungsri
. . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . . . . . .
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in millions)
Total
Loans(1)(2)
Recorded
Investment>
90 Days and
Accruing
¥ 12,410
1,427
281
2,655
1,294
1,932
¥ 19,468
1,671
235
5,058
3,225
1,883
¥ 31,878
3,098
516
7,713
4,519
3,815
¥ 51,999,461
11,765,609
818,168
11,525,091
2,531,022
7,960,865
¥ 52,031,339
11,768,707
818,684
11,532,804
2,535,541
7,964,680
¥ 5,817
20
—
1,542
4
149
3
21
24
5,222,983
5,223,007
—
583
337
3,898
5,268
78,227
17,490
25,162
103,055
216
99
7,060
50,105
42,335
31,298
14,212
73,261
799
436
10,958
55,373
120,562
48,788
39,374
176,316
1,633,418
8,859,289
1,683,016
37,239,855
14,202,076
533,484
8,998,049
4,780,709
1,634,217
8,859,725
1,693,974
37,295,228
14,322,638
582,272
9,037,423
4,957,025
—
—
4,102
2,244
31,382
—
1,165
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥241,612
¥230,679
¥472,291
¥117,753,634
¥118,225,925
¥40,608
F-54
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018:
Commercial
Domestic . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . .
Construction . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . .
Wholesale and retail . . . . . .
Banks and other financial
1-3 months
Past Due
Greater
Than
3 months
Total
Past Due
Current
(in millions)
Total
Loans(1)(2)
Recorded
Investment>
90 Days and
Accruing
¥ 13,290
1,495
359
2,090
1,025
3,886
¥ 43,913
1,300
437
3,225
620
4,198
¥ 57,203
2,795
796
5,315
1,645
8,084
¥
50,955,451
10,867,094
779,925
11,686,599
2,665,709
7,962,875
¥
51,012,654
10,869,889
780,721
11,691,914
2,667,354
7,970,959
¥ 6,419
—
—
1,633
26
1,349
institutions . . . . . . . . . . . .
—
21
21
4,812,328
4,812,349
—
Communication and
information services . . . .
Other industries . . . . . . . . . .
Consumer . . . . . . . . . . . . . .
Foreign-excluding MUAH and
. . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . .
Card . . . . . . . . . . . . . . . . . . . . . . . .
MUAH . . . . . . . . . . . . . . . . . . . . . .
Krungsri . . . . . . . . . . . . . . . . . . . . .
Krungsri
657
251
3,527
12,512
78,073
18,887
23,145
116,665
328
28,315
5,469
19,655
19,399
32,218
13,648
99,315
985
28,566
8,996
32,167
97,472
51,105
36,793
215,980
1,550,219
8,909,368
1,721,334
36,694,369
13,974,118
528,284
9,009,426
5,383,477
1,551,204
8,937,934
1,730,330
36,726,536
14,071,590
579,389
9,046,219
5,599,457
—
—
3,411
1,083
10,806
—
771
—
Total
. . . . . . . . . . . . . . . . . . . . .
¥262,572
¥228,148
¥490,720
¥116,545,125
¥117,035,845
¥19,079
Notes:
(1) Total loans in the above table do not include loans held for sale and loans acquired with deteriorated credit quality and represent balances
without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
(2) Total loans of MUFG Americas Holdings do not include ¥438 million and ¥5 million of FDIC covered loans at March 31, 2017 and
2018, respectively, which are not subject to the guidance on loans and debt securities acquired with deteriorated credit quality.
Allowance for Credit Losses
Changes in the allowance for credit losses by portfolio segment for the fiscal years ended March 31, 2016,
2017 and 2018 are shown below:
Fiscal year ended March 31, 2016:
Commercial Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year . . . . .
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Others(1)
¥807,716
¥72,366
¥35,670
¥ 64,769
¥74,958
¥1,055,479
117,024
116,620
21,110
95,510
(12,671)
(9,478)
6,691
2,401
4,290
—
885
8,323
2,955
5,368
—
47,429
5,721
2,412
76,002
61,416
12,934
3,309
(435)
48,482
(6,146)
231,862
198,771
41,812
156,959
(19,252)
Balance at end of fiscal year
. . . . . . . . . .
¥816,559
¥58,598
¥31,187
¥108,454
¥96,332
¥1,111,130
F-55
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fiscal year ended March 31, 2017:
Commercial Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year . . . .
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Others(1)
¥ 816,559
¥ 58,598
¥31,187
¥108,454
¥ 96,332
¥1,111,130
177,295
108,262
21,124
87,138
(6,030)
12,224
5,339
1,853
3,486
—
13,289
16,309
1,998
14,311
—
(62)
32,074
2,916
29,158
(5,501)
50,942
51,774
16,058
35,716
(1,290)
253,688
213,758
43,949
169,809
(12,821)
Balance at end of fiscal year
. . . . . . . . .
¥ 900,686
¥ 67,336
¥30,165
¥ 73,733
¥110,268
¥1,182,188
Fiscal year ended March 31, 2018:
Commercial Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year . . . .
Provision for (reversal of) credit
losses . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Others(1)
¥ 900,686
¥ 67,336
¥30,165
¥ 73,733
¥110,268
¥1,182,188
(297,401)
134,807
24,913
109,894
(2,293)
(22,291)
3,838
1,339
2,499
—
23,422
22,696
1,228
21,468
—
(9,309)
14,701
6,140
8,561
(2,098)
64,732
56,067
17,490
38,577
8,173
(240,847)
232,109
51,110
180,999
3,782
Balance at end of fiscal year
. . . . . . . . .
¥ 491,098
¥ 42,546
¥32,119
¥ 53,765
¥144,596
¥ 764,124
Note:
(1) Others are principally comprised of gains or losses from foreign exchange translation.
F-56
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Allowance for credit losses and recorded investment in loans by portfolio segment at March 31, 2017 and
2018 are shown below:
At March 31, 2017:
Commercial
Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
772,804 ¥
46,520 ¥ 20,523 ¥
19,174 ¥
19,035 ¥
878,056
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
115,489
19,255
9,632
54,096
91,137
289,609
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . .
12,393
1,561
10
463
96
14,523
Total . . . . . . . . . . . . . . . . . . . . ¥
900,686 ¥
67,336 ¥ 30,165 ¥
73,733 ¥ 110,268 ¥
1,182,188
Loans:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥ 1,349,621 ¥
125,611 ¥ 71,879 ¥
93,452 ¥
65,028 ¥
1,705,591
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
87,976,946
14,197,027
510,393
8,944,409
4,891,997
116,520,772
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . .
34,140
9,810
10,881
27,128
9,217
91,176
Total(1)
. . . . . . . . . . . . . . . . . . ¥89,360,707 ¥14,332,448 ¥593,153 ¥9,064,989 ¥4,966,242 ¥118,317,539
At March 31, 2018:
Commercial
Residential
Card
MUAH
Krungsri
Total
(in millions)
Allowance for credit losses:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
414,706 ¥
16,644 ¥ 21,223 ¥
7,743 ¥
29,402 ¥
489,718
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
64,375
24,718
10,884
45,571
115,161
260,709
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . .
12,017
1,184
12
451
33
13,697
Total . . . . . . . . . . . . . . . . . . . . ¥
491,098 ¥
42,546 ¥ 32,119 ¥
53,765 ¥ 144,596 ¥
764,124
Loans:
Individually evaluated for
impairment . . . . . . . . . . . . . . . . . ¥
977,945 ¥
110,197 ¥ 66,957 ¥
82,545 ¥
84,094 ¥
1,321,738
Collectively evaluated for
impairment . . . . . . . . . . . . . . . . .
86,761,245
13,961,393
512,432
8,963,679
5,515,363
115,714,112
Loans acquired with deteriorated
credit quality . . . . . . . . . . . . . . . .
27,325
8,646
10,426
15,188
6,193
67,778
Total(1)
. . . . . . . . . . . . . . . . . . ¥87,766,515 ¥14,080,236 ¥589,815 ¥9,061,412 ¥5,605,650 ¥117,103,628
Note:
(1) Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned
income, unamortized premiums and deferred loan fees.
F-57
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Nonperforming loans were actively disposed of by sales during recent years. The allocated allowance for
credit losses for such loans was removed from the allowance for credit losses and transferred to the valuation
allowance for loans held for sale upon a decision to sell. Net charge-offs in the above table include a decrease in
the allowance for credit losses due to loan disposal activity amounting to ¥0.8 billion, ¥11.0 billion and
¥12.2 billion for the fiscal years ended March 31, 2016, 2017 and 2018, respectively.
The MUFG Group sold ¥640 billion, ¥833 billion and ¥1,409 billion of loans within the Commercial
segment during the fiscal years ended March 31, 2016, 2017 and 2018, respectively.
Loans Acquired in a Transfer
In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality, the
following table sets forth information regarding loans acquired in connection with mergers, for which it is
probable, at acquisition, that the MUFG Group will be unable to collect all contractually required payments
receivable.
Loans acquired during the fiscal year:
Contractually required payments receivable at acquisition . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows expected to be collected at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of loans at acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretable yield for loans within the scope of the guidance on loans and debt
securities acquired with deteriorated credit quality:
2017
2018
(in millions)
¥
¥
2,624
398
398
537
197
197
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications from nonaccretable difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 53,018
—
(17,025)
(69)
6,462
(1,469)
¥ 40,917
—
(14,067)
(11)
3,267
(434)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 40,917
¥ 29,672
Loans within the scope of the guidance on loans and debt securities acquired with
deteriorated credit quality:
Outstanding balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥301,447
223,695
124,806
91,176
¥223,695
180,011
91,176
67,778
Nonaccruing loans within the scope of the guidance on loans and debt securities
acquired with deteriorated credit quality:
Carrying amount at acquisition date during fiscal year
. . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
398
9,720
¥
197
6,659
Allowance for credit losses within the scope of the guidance on loans and debt
securities acquired with deteriorated credit quality:
Balance of allowance for credit losses at beginning of fiscal year . . . . . . . . . . . . . . . .
Additional provisions during fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions of allowance during fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of allowance for credit losses at end of fiscal year . . . . . . . . . . . . . . . . . . . . .
¥ 15,731
3,020
1,250
14,523
¥ 14,523
2,285
732
13,697
F-58
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group considered prepayments in the determination of contractual cash flows and cash flows
expected to be collected based on historical results.
Lease Receivables
As part of its financing activities, the MUFG Group enters into leasing arrangements with customers. The
MUFG Group’s leasing operations are conducted through leasing subsidiaries and consist principally of direct
financing leases involving various types of data processing equipment, office equipment and transportation
equipment.
As of March 31, 2017 and 2018, the components of the investment in direct financing leases were as
follows:
Minimum lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated residual values of leased property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less—unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,672,338
29,314
(234,874)
¥1,862,664
31,650
(279,081)
Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,466,778
¥1,615,233
2017
2018
(in millions)
Future minimum lease payment receivables under noncancelable leasing agreements as of March 31, 2018
were as follows:
Direct
Financing
Leases
(in millions)
Fiscal year ending March 31:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 507,905
442,369
325,821
243,682
140,914
201,973
Total minimum lease payment receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,862,664
Sales of Loans
The MUFG Group originates various types of loans to corporate and individual borrowers in Japan and
overseas in the normal course of business. In order to improve its loan quality, MUFG Bank and Mitsubishi UFJ
Trust and Banking actively disposed of nonperforming loans. Most of the nonperforming loans were disposed of
by sales to third parties without any continuing involvement. Management of MUFG Bank and Mitsubishi UFJ
Trust and Banking generally approves disposals after significant sales terms, including prices, are negotiated. As
such, loans are disposed of by sales shortly after the loans are transferred to the held-for-sale classification. The
net gains on the sales of loans were ¥12,094 million, ¥19,466 million and ¥2,976 million for the fiscal years
ended March 31, 2016, 2017 and 2018, respectively.
F-59
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Related Party Loans
In some cases, the banking subsidiaries of MUFG make loans to related parties, including their directors and
executive officers, in the course of their normal commercial banking business. At March 31, 2017 and 2018,
outstanding loans to such related parties were not material.
In the opinion of management, these related party loans were made on substantially the same terms,
including interest rates and collateral requirements, as those terms prevailing at the date these loans were made.
For the fiscal years ended March 31, 2016, 2017 and 2018, there were no loans to related parties that were
charged off. Additionally, at March 31, 2016, 2017, and 2018, there were no loans to related parties that were
impaired.
F-60
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5.
PREMISES AND EQUIPMENT
Premises and equipment at March 31, 2017 and 2018 consisted of the following:
2017
2018
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 385,961
750,232
650,120
303,130
46,375
¥ 370,669
739,665
659,699
311,645
119,195
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,135,818
1,141,547
2,200,873
1,187,285
Premises and equipment-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 994,271
¥1,013,588
Premises and equipment include capitalized leases, principally related to data processing equipment, which
amounted to ¥26,871 million and ¥31,458 million at March 31, 2017 and 2018, respectively. Accumulated
depreciation on such capitalized leases at March 31, 2017 and 2018 amounted to ¥14,750 million and
¥17,298 million, respectively.
MUFG Bank has entered into sales agreements to sell its buildings and land and, under separate agreements,
leased those properties back for its business operations, including bank branches. MUFG Bank either provided
nonrecourse financing to the buyers for the sales proceeds or invested in the equity or common stock of the
buyers. As a result, MUFG Bank was considered to have continuing involvement with the properties. For
accounting and reporting purposes, these transactions were accounted for under the financing method with the
sales proceeds recognized as a financing obligation. The properties were reported on the accompanying
consolidated balance sheets and depreciated. The financing obligation at March 31, 2017 and 2018 was
¥43,031 million and ¥41,892 million, respectively.
For the fiscal years ended March 31, 2016, 2017 and 2018, the MUFG Group recognized ¥7,016 million,
¥5,964 million and ¥39,358 million, respectively, of impairment losses for long-lived assets, primarily real estate
which was either formerly used for its banking operations and is no longer used or real estate that is being used
where recovery of the carrying amount is doubtful. In addition, ¥541 million, ¥901 million and ¥213 million of
impairment losses were recognized for real estate held for sale for the fiscal years ended March 31, 2016, 2017
and 2018, respectively. These losses are included in Other non-interest expenses. In computing the amount of
impairment losses, fair value was determined primarily based on market prices, if available, or the estimated
price based on an appraisal.
Impairment losses for the fiscal year ended March 31, 2018 included ¥34,016 million of losses on long-lived
assets used for MUFG Bank’s operations. In relation to a restructuring of operating divisions of MUFG Bank,
which is a transformation of Corporate Banking Business Group and Retail Banking Business Group into
Retail & Commercial Banking Business Group and Japanese Corporate & Investment Banking Business Group,
based on an MUFG Re-Imagining Strategy published on May 15, 2017, and the new medium-term business plan,
MUFG Bank reevaluated the profitability of some of its domestic operating assets. As a result of the
reevaluation, it was determined that carrying amounts of these operating assets were unlikely to be recovered,
and the impairment losses were recorded.
F-61
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The table below presents the movement in the carrying amount of goodwill by business segment during the
fiscal years ended March 31, 2017 and 2018:
Customer Business
Retail
Banking
Business
Group
Corporate
Banking
Business
Group
Global
Business
Group
Trust
Assets
Business
Group
Global
Markets
Business
Group
Total
Total
(in millions)
Balance at March 31, 2016:
Goodwill
Accumulated impairment losses . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 840,055 ¥ 885,234 ¥ 769,585 ¥ 42,700 ¥ 2,537,574 ¥2,300 ¥2,539,874
— (2,085,499)
(2,085,499)
(840,055)
(885,234)
(329,953)
(30,257)
Goodwill acquired during the fiscal
year(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments and
other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at March 31, 2017:
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . .
Foreign currency translation adjustments and
other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at March 31, 2018:
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Accumulated impairment losses . . . . . . . . . .
—
—
—
—
— 439,632
12,443
452,075
2,300
454,375
—
—
8,280
7,975
— (6,638)
16,255
(6,638)
— (13,835)
(14)
(13,849)
—
—
—
16,255
(6,638)
(13,849)
840,055
(840,055)
885,234
(885,234)
764,030
(329,953)
50,661
(36,895)
2,539,980
(2,092,137)
2,300
2,542,280
— (2,092,137)
—
—
— 434,077
13,766
447,843
2,300
450,143
—
(8,399)
(410)
(8,809)
—
(8,809)
840,055
(840,055)
885,234
(885,234)
755,631
(329,953)
50,251
(36,895)
2,531,171
(2,092,137)
2,300
2,533,471
— (2,092,137)
¥
— ¥
— ¥ 425,678 ¥ 13,356 ¥
439,034 ¥2,300 ¥ 441,334
Notes:
(1) See Note 30 for the business segment information of the MUFG Group.
(2) See Note 2 for the goodwill acquired in connection with acquisition.
U.S. GAAP requires to test goodwill for impairment at least annually, or more frequently if events or
changes in circumstances indicate that goodwill may be impaired, using a two-step process that begins with an
estimation of the fair value of a reporting unit, which is to be compared with the carrying amount of the reporting
unit including goodwill, to identify potential impairment of goodwill. If the carrying amount of a reporting unit
including goodwill exceeds its estimated fair value, the second step of the goodwill impairment test is performed
to measure the amount of impairment loss recorded in the consolidated statements of income. This test requires
comparison of the implied fair value of the reporting unit’s goodwill with the carrying amount of its goodwill.
For the fiscal years ended March 31, 2016 and 2017, the MUFG Group recognized ¥4,298 million and
¥6,638 million, respectively, in impairment of goodwill relating to reporting units within the Trust Assets
Business Group segment. There were no impairment losses recognized for the fiscal year ended March 31, 2018.
The MUFG Group readjusted its future cash flow projection of the reporting units in this segment, considering
the subsidiaries’ recent business performance. Due to the situation, the fair value of the reporting units, which
were based on discounted future cash flows, fell below the carrying amounts of the reporting units. Accordingly,
the second step of the goodwill impairment test was performed for the reporting units. As a result, the carrying
F-62
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
amounts of the reporting units’ goodwill exceeded the implied fair value of the reporting units’ goodwill, and the
impairment losses were recognized on the related goodwill.
For the fiscal year ended March 31, 2016, the MUFG Group recognized a total of ¥329,421 million in
impairment of goodwill relating to the reporting unit Other than MUFG Americas Holdings/Krungsri and the
Krungsri reporting unit, both of which were within the Global Business Group segment.
The MUFG Group recognized ¥151,671 million in impairment of goodwill relating to the reporting unit
Other than MUFG Americas Holdings/Krungsri within the Global Business Group segment. The Bank of Japan
introduced Quantitative and Qualitative Monetary Easing with Negative Interest Rates in January 2016, and the
benchmark yield turned and stayed negative through to the end of the fiscal year. Share prices have fallen and the
Japanese yen appreciated since the start of the calendar year as a reflection of heightened risk aversion around the
globe. It led MUFG’s stock price to decline from ¥743.7 at March 31, 2015 to ¥521.5 at March 31, 2016. Since
the fair value of the reporting unit Other than MUFG Americas Holdings/Krungsri within the Global Business
Group segment was estimated based on MUFG’s stock price, this decline led to a decrease in the market
capitalization and negatively affected the fair value of the reporting unit. Due to the situation, the fair value of the
reporting unit fell below the carrying amount of the reporting unit. Accordingly, the second step of the goodwill
impairment test was performed for this reporting unit. As a result, the carrying amount of the reporting unit’s
goodwill exceeded the implied fair value of the reporting unit’s goodwill, and the impairment loss was
recognized on the related goodwill.
The MUFG Group recognized ¥177,750 million in impairment of goodwill relating to the Krungsri
reporting unit within the Global Business Group segment. The economy in China continued to slow down due to
the suppressed investment environment, while weak exports weighed on other Asian economies. It led to a slow
down in economic growth in Thailand causing Krungsri’s stock price to decline from Thai baht 44.75 at
December 31, 2014 to Thai baht 29.75 at December 31, 2015. Since the fair value of the Krungsri reporting unit
within the Global Business Group segment was estimated based on Krungsri’s stock price, this decline led to a
decrease in the market capitalization and negatively affected the fair value of the reporting unit. Due to the
situation, the fair value of the reporting unit fell below the carrying amount of the reporting unit. Accordingly,
the second step of the goodwill impairment test was performed for this reporting unit. As a result, the carrying
amount of the reporting unit’s goodwill exceeded the implied fair value of the reporting unit’s goodwill, and the
impairment loss was recognized on the related goodwill.
F-63
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other Intangible Assets
The table below presents the gross carrying amount, accumulated amortization and net carrying amount, in
total and by major class of other intangible assets at March 31, 2017 and 2018:
2017
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
(in millions)
2018
Accumulated
amortization
Net
carrying
amount
Intangible assets subject to
amortization:
Software . . . . . . . . . . . . . . . . . . ¥2,386,754 ¥1,675,564 ¥ 711,190 ¥2,585,161 ¥1,852,333 ¥ 732,828
45,297
Core deposit intangibles . . . . . .
76,628
164,753
203,144
Customer relationships . . . . . . .
47,020
27,210
Trade names . . . . . . . . . . . . . . .
5,729
3,929
Other . . . . . . . . . . . . . . . . . . . . .
128,679
391,832
77,821
9,706
83,382
227,079
30,801
3,977
50,100
191,992
49,814
8,139
126,728
395,136
77,024
12,068
Total . . . . . . . . . . . . . . . . . ¥2,997,710 ¥1,986,475
1,011,235 ¥3,193,199 ¥2,197,572
995,627
Intangible assets not subject to
amortization:
Other . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .
9,124
¥1,020,359
15,492(1)
¥1,011,119
Note:
(1)
Intangible assets not subject to amortization includes ¥7,268 million of mortgage servicing rights accounted for at fair value at March 31,
2018.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2017 amounted to
¥254,064 million, which primarily consisted of ¥234,882 million of software and ¥19,086 million of customer
relationships. The weighted average amortization periods for these assets are 5 years and 20 years, respectively.
There is no significant residual value estimated for these assets. Intangible assets not subject to amortization
acquired during the fiscal year ended March 31, 2017 amounted to ¥1 million.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2018 amounted to
¥242,017 million, which primarily consisted of ¥239,460 million of software and ¥2,200 million of customer
relationships. The weighted average amortization periods for these assets are 5 years and 22 years, respectively.
There is no significant residual value estimated for these assets. Intangible assets not subject to amortization
acquired during the fiscal year ended March 31, 2018 amounted to ¥28 million.
For the fiscal years ended March 31, 2016, 2017 and 2018, the MUFG Group recognized ¥117,726 million,
¥5,803 million and ¥21,900 million, respectively, of impairment losses for intangible assets whose carrying
amounts exceeded their fair value. In computing the amount of impairment losses, fair value was determined
primarily based on the present value of expected future cash flows, the estimated value based on appraisals, or
market prices.
The impairment loss for the fiscal year ended March 31, 2016 included a loss of ¥8,043 million relating to
customer relationship under the Trust Asset Business Group segment. The fair value of the customer relationship
was calculated based on the present value of expected future cash flows, which could be affected by the amount
of the assets under management and fluctuation of the markets. Estimated future cash flows of the above
F-64
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
customer relationship were readjusted downwards due to instability in bond markets and large fluctuations in
foreign exchange markets. Accordingly, the MUFG Group reevaluated the fair value of the customer relationship
and recognized an impairment loss. Also, for the fiscal year ended March 31, 2016, the MUFG Group recognized
an impairment loss of ¥8,923 million related to software for internal use.
The impairment loss for the fiscal year ended March 31, 2016 included a loss of ¥99,981 million relating to
a core deposit intangible acquired in connection with the merger with UFJ Holdings. The fair value of this core
deposit intangible was calculated based on the present value of expected future cash flows in 2005. As a result of
the negative interest rate policy by the Bank of Japan, estimated future cost savings became negative due to the
decrease of the spread between the interest rate of the core deposit funding and the decreased alternative interest
rate of the market funding, and the estimated future cash flows were revised downwards. Accordingly, the
MUFG Group reevaluated the core deposit intangible and recognized an impairment loss.
The impairment loss for the fiscal year ended March 31, 2018 included a loss of ¥11,121 million relating to
the foreign subsidiary’s customer relationships under the Trust Asset Business Group segment. The intangible
assets were valued based on discounted expected future cash flows. The estimated future cash flows of the above
customer relationships were revised downward due to a decrease in acquired customer base. Accordingly, the
MUFG group revaluated the intangible assets and recognized impairment losses.
The estimated aggregate amortization expense for intangible assets for the next five fiscal years is as
follows:
Fiscal year ending March 31:
(in millions)
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥250,234
213,606
171,934
133,685
90,383
7.
INCOME TAXES
Income before Income Tax Expense
Income before income tax expense by jurisdiction for the fiscal years ended March 31, 2016, 2017 and 2018
was as follows:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic income (loss)
Foreign income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 735,128
427,542
(in millions)
¥(413,499) ¥ 803,057
858,762
686,042
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,162,670
¥ 272,543
¥1,661,819
2016
2017
2018
F-65
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income Tax Expense (Benefit)
The detail of current and deferred income tax expense (benefit) for the fiscal years ended March 31, 2016,
2017 and 2018 was as follows:
2016
2017
2018
(in millions)
Current:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 293,337
137,040
¥ 176,415
130,406
¥180,109
107,119
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
430,377
306,821
287,228
Deferred:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,019)
(38,926)
(217,485)
5,117
116,873
3,722
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(60,945)
(212,368)
120,595
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) reported in Accumulated OCI relating to:
369,432
94,453
407,823
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt valuation adjustments (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives qualifying for cash flow hedges . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . .
(162,535)
1,793
1,226
(67,877)
(43,988)
20,237
(3,926)
(9,443)
48,504
(1,957)
120,588
(960)
(4,421)
50,774
(34,527 )
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(271,381)
53,415
131,454
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 98,051
¥ 147,868
¥539,277
The MUFG Group has changed to filing on a consolidated basis for corporate income taxes within Japan
beginning with the fiscal year ended March 31, 2015. A consolidated basis for corporate income taxes results in
the reporting of taxable income or loss based upon the combined profits or losses of the parent company and its
wholly-owned domestic subsidiaries.
On March 29, 2016, the Japanese Diet enacted the “2016 Tax Reform” which reduces in the effective
statutory rate of corporate income tax from approximately 33.9% to 31.5% for the fiscal year beginning on or
after April 1, 2016. In addition, this “2016 Tax Reform” partially amends the articles in the “2015 Tax Reform”
relating to the limitation on the use of net operating loss carryforwards and the carryforward period of certain net
operating loss carryforwards in order to equalize the tax burden of companies. That is, changes in the limitation
on the use of net operating loss carryforwards from 65% to 60% of taxable income for the period between
April 1, 2016 and March 31, 2017, and from 50% to 55% for the period between April 1, 2017 and March 31,
2018, respectively, and one-year decrease in the carryforward period of certain net operating loss carryforwards
from ten-year period to nine-year period for the period between April 1, 2017 and March 31, 2018. The change in
tax law resulted in a decrease of ¥50,081 million in income tax expense for the fiscal year ended March 31, 2016.
In June 2016, the Tokyo Metropolitan Government Bureau of Taxation promulgated revisions to the local
tax law. The revision reduces the effective statutory rate of corporate income tax from approximately 31.5% as of
March 31, 2016 to 30.6% for the fiscal year beginning on or after April 1, 2017. The revision resulted in a
decrease of ¥26,820 million in income tax expense for the fiscal year ended March 31, 2017.
In the United States of America, on December 22, 2017, the Tax Cuts & Jobs Act was signed into law
reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the
F-66
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
reduction in the corporate income tax rate, the MUFG Group revalued its net deferred tax liabilities at March 31,
2018, resulting in a one-time tax benefit of ¥10,395 million.
Reconciliation of Effective Income Tax Rate
Income taxes in Japan applicable to the MUFG Group are imposed by the national, prefectural and
municipal governments, and in the aggregate resulted in a normal effective statutory rate of approximately
33.9%, 31.5%, and 30.6% for the fiscal years ended March 31, 2016, 2017 and 2018, respectively. Foreign
subsidiaries are subject to income taxes of the countries in which they operate.
A reconciliation of the effective income tax rates reflected in the accompanying consolidated statements of
income to the combined normal effective statutory tax rates for the fiscal years ended March 31, 2016, 2017 and
2018 is as follows:
Combined normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit and payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lower tax rates applicable to income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and interest expense for uncertainty in income taxes . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in tax laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
33.9% 31.5% 30.6%
2.0
0.3
0.8
9.7
(9.6)
(1.9)
(0.2)
(0.2)
25.4
(4.0)
(12.5)
(1.9)
3.5
0.7
(0.6)
0.0
5.4
(0.1)
(9.8)
(4.3)
(1.2)
(0.4)
0.2
—
(1.7)
(0.4)
(3.0)
(2.0)
0.7
0.0
0.1
(0.6)
0.6
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.8% 34.7% 24.5%
F-67
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are computed for each tax jurisdiction using currently enacted tax rates
applicable to periods when the temporary differences are expected to reverse. The tax effects of the items
comprising the MUFG Group’s net deferred tax assets at March 31, 2017 and 2018 were as follows:
2017
2018
(in millions)
Deferred tax assets:
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment, including sale-and-leaseback transactions . . . . . . . . . . .
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 515,553
156,040
13,345
174,945
86,681
96,048
(268,490)
¥ 337,718
167,355
3,483
133,728
120,505
111,677
(215,130)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
774,122
659,336
Deferred tax liabilities:
Investment securities (including trading account assets at fair value under the fair
value option) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
869,931
66,692
94,255
8,483
72,039
973,390
52,396
83,445
15,484
119,970
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,111,400
1,244,685
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (337,278) ¥ (585,349)
The valuation allowance was provided primarily against deferred tax assets recorded at MUFG and its
subsidiaries with operating loss carryforwards. The valuation allowance is determined to reduce the measurement
of deferred tax assets not expected to be realized. Management considers all available evidence, both positive and
negative, to determine whether the valuation allowance is necessary based on the weight of that evidence.
Management determines the amount of the valuation allowance based on future reversals of existing taxable
temporary differences and future taxable income exclusive of reversing temporary differences. Future taxable
income is developed from forecasted operating results, based on recent historical trends and approved business
plans, the eligible carryforward periods and other relevant factors.
For certain subsidiaries where strong negative evidence exists, such as the existence of significant amounts
of operating loss carryforwards, cumulative losses and the expiration of unused operating loss carryforwards in
recent years, a valuation allowance was recognized against the deferred tax assets as of March 31, 2017 and 2018
to the extent that it is more likely than not that they will not be realized.
For the fiscal year ended March 31, 2017, the MUFG Group recorded an additional valuation allowance of
¥60,208 million. This was mainly due to a decline in estimated future taxable income of a certain subsidiary
resulting from the downturn in the consumer finance business. Management considered various factors, including
the existence of significant amounts of operating loss carryforwards and cumulative operating results over the
prior several years of the subsidiary as well as the outlook regarding prospective operating performance of the
subsidiary, and determined that sufficient negative evidence existed as of March 31, 2017, to conclude that it was
more likely than not that deferred tax assets would not be realizable.
F-68
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the fiscal year ended March 31, 2018, the MUFG Group released a valuation allowance of
¥53,360 million which was mainly due to the commencement of a certain subsidiary’s application of the
consolidated corporate-tax system. Management believes that the net operating loss carryforwards related to
Japanese corporate taxes will be fully utilized by the application of the consolidated corporate-tax system.
Income taxes are not provided on undistributed earnings of certain foreign subsidiaries that are considered
to be indefinitely reinvested in the operations of such subsidiaries. At March 31, 2017 and 2018, the
undistributed earnings of such foreign subsidiaries amounted to approximately ¥28,338 million and
¥38,358 million, respectively. Determination of the amount of unrecognized deferred tax liabilities with respect
to these undistributed earnings is not practicable because of the complexity associated with its hypothetical
calculation including foreign withholding taxes and foreign tax credits. MUFG has neither plans nor the intention
to dispose of investments in such foreign subsidiaries and, accordingly, does not expect to record capital gains or
losses, or otherwise monetize the undistributed earnings of such foreign subsidiaries.
Furthermore, under the Japanese tax law, 95% of a dividend received from a foreign company in which a
domestic company has held generally at least 25% of the outstanding shares for a continuous period of six
months or more ending on the date on which the dividend is declared can be excluded from the domestic
company’s taxable income. Therefore, if undistributed earnings of certain foreign subsidiaries are repatriated
through dividends, only 5% of the amount of dividends will be included in taxable income.
Operating Loss and Tax Credit Carryforwards
At March 31, 2018, the MUFG Group had operating loss carryforwards for corporate tax of
¥506,650 million and tax credit carryforwards of ¥37,096 million for tax purposes. Such carryforwards, if not
utilized, are scheduled to expire as follows:
Operating loss
carryforwards
Tax credit
carryforwards
(in millions)
Fiscal year ending March 31:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 and thereafter
No definite expiration date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2,295
34,413
11,698
24,112
66,993
104,892
242,696
19,551
¥
800
206
200
106
106
116
31,758
3,804
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥506,650
¥37,096
F-69
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Uncertainty in Income Tax
The following is a roll-forward of the MUFG Group’s unrecognized tax benefits for the fiscal years ended
March 31, 2016, 2017 and 2018:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross amount of increases for current year’s tax positions . . . . . . . . . . . . . . .
Gross amount of increases for prior years’ tax positions . . . . . . . . . . . . . . . . .
Gross amount of decreases for prior years’ tax positions . . . . . . . . . . . . . . . . .
Net amount of changes relating to settlements with tax authorities . . . . . . . . .
Decreases due to lapse of applicable statutes of limitations . . . . . . . . . . . . . . .
Foreign exchange translation and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
¥10,940
1,095
162
—
(1,299)
(296)
(652)
(in millions)
¥ 9,950
888
1,014
(95)
(39)
(3,437)
(430)
¥ 7,851
427
6,642
(455)
(1,074)
(253)
(221)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 9,950
¥ 7,851
¥12,917
The total amounts of unrecognized tax benefits for the years ended March 31, 2016, 2017 and 2018 that, if
recognized, would affect the effective tax rate are ¥1,065 million, ¥1,443 million and ¥6,518 million,
respectively. The remainder of the uncertain tax positions have offsetting amounts in other jurisdictions or are
temporary differences.
The MUFG Group classifies interest and penalties, if applicable, related to income taxes as Income tax
expense. Accrued interest and penalties (not included in the “unrecognized tax benefits” above) are a component
of Other liabilities. The following is a roll-forward of the interest and penalties recognized in the accompanying
consolidated financial statements for the fiscal years ended March 31, 2016, 2017 and 2018:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest and penalties in the consolidated statements of income . . . . . . . . . . . . .
Total cash settlements, foreign exchange translation and others . . . . . . . . . . . . . . . . . .
2016
2017
2018
(in millions)
¥4,727
(591)
(82)
¥4,876
201
(350)
¥4,054
694
(184)
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,727
¥4,054
¥4,564
The MUFG Group is subject to ongoing tax examinations by the tax authorities of the various jurisdictions
in which it operates. The following are the major tax jurisdictions in which the MUFG Group operates and the
status of years under audit or open to examination:
Jurisdiction
Tax years
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States—Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States—California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 and forward
2010 and forward
2014 and forward
2010 and forward
2017 and forward
The MUFG Group is currently under continuous examinations by the tax authorities in various domestic and
foreign jurisdictions and many of these examinations are resolved every year. The unrecognized tax benefits will
decrease since resolved items will be removed from the balance regardless of whether their resolution results in
payment or recognition. It is reasonably possible that the unrecognized tax benefits will decrease by
approximately ¥4.0 billion during the next twelve months.
F-70
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8.
PLEDGED ASSETS AND COLLATERAL
Pledged Assets
At March 31, 2018, assets mortgaged, pledged, or otherwise subject to lien were as follows:
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
(in millions)
¥ 7,848,387
12,670,178
13,682,588
54,155
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥34,255,308
The above pledged assets were classified by type of liabilities to which they related as follows:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements and securities lending transactions . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
(in millions)
252,233
¥
4,931
18,643,579
15,330,630
23,935
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥34,255,308
At March 31, 2018, certain investment securities, principally Japanese national government and Japanese
government agency bonds, loans, and other assets with a combined carrying value of ¥20,661,314 million were
pledged for acting as a collection agent of public funds, for settlement of exchange at the Bank of Japan and
Japanese Banks’ Payment Clearing Network, for derivative transactions and for certain other purposes.
The MUFG Group engages in on-balance sheet securitizations. These securitizations of mortgage and
apartment loans, which do not qualify for sales treatment, are accounted for as secured borrowings. The amount
of loans in the table above represents the carrying amount of these transactions with the carrying amount of the
associated liabilities included in Other short-term borrowings and Long-term debt.
Under Japanese law, Japanese banks are required to maintain certain reserves on deposit with the Bank of
Japan based on the amount of deposit balances and certain other factors. There are similar reserve deposit
requirements for foreign offices and subsidiaries engaged in banking businesses in foreign countries. At
March 31, 2017 and 2018 the reserve funds required to be maintained by the MUFG Group, which are included
in Cash and due from banks and Interest-earning deposits in other banks, were ¥2,765,966 million and
¥2,679,482 million, respectively.
Collateral
The MUFG Group accepts and provides financial assets as collateral for transactions, principally
commercial loans, repurchase agreements and securities lending transactions, call money, and derivatives.
Financial assets eligible for such collateral include, among others, marketable equity securities, trade and notes
receivable and CDs.
F-71
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Secured parties, including creditors and counterparties to certain transactions with the MUFG Group, may
sell or repledge financial assets provided as collateral. Certain contracts, however, may not be specific about the
secured party’s right to sell or repledge collateral under the applicable statutes and, therefore, whether or not the
secured party is permitted to sell or repledge collateral would differ depending on the interpretations of specific
provisions of the existing statutes, contract or certain market practices.
If the MUFG Group determines, based on available information, that a financial asset provided as collateral
might not be sold or repledged by the secured parties, such collateral is not separately reported in the
accompanying consolidated balance sheets. If a secured party is permitted to sell or repledge financial assets
provided as collateral by contract or custom under the existing statutes, the MUFG Group reports such pledged
financial assets separately on the face of the accompanying consolidated balance sheets. At March 31, 2018, the
MUFG Group pledged ¥31,507 billion of assets that may not be sold or repledged by the secured parties.
Certain banking subsidiaries accept collateral for commercial loans and certain banking transactions under a
standardized agreement with customers, which provides that these banking subsidiaries may require the
customers to provide collateral or guarantees with respect to the loans and other banking transactions. Financial
assets pledged as collateral are generally negotiable and transferable instruments, and such negotiability and
transferability are authorized by applicable legislation. In principle, Japanese legislation permits these banking
subsidiaries to repledge financial assets accepted as collateral unless otherwise prohibited by contract or relevant
statutes. Nevertheless, the MUFG Group did not sell or repledge nor does it plan to sell or repledge such
collateral accepted in connection with commercial loans before a debtor’s default or other credit events specified
in the agreements as it is not customary within the banking industry in Japan to dispose of collateral before a
debtor’s default and other specified credit events. Derivative agreements commonly used in the marketplace do
not prohibit a secured party’s disposition of financial assets received as collateral, and in resale agreements and
securities borrowing transactions, securities accepted as collateral may be sold or repledged by the secured
parties. At March 31, 2017 and 2018, the fair value of the collateral accepted by the MUFG Group that is
permitted to be sold or repledged was ¥26,850 billion and ¥25,358 billion, respectively, of which ¥18,420 billion
and ¥17,738 billion, respectively, was sold or repledged.
At March 31, 2017 and 2018, the cash collateral pledged for derivative transactions, which is included in
Other assets, was ¥1,663,945 million and ¥1,473,109 million, respectively, and the cash collateral received for
derivative transactions, which is included in Other liabilities, was ¥1,080,929 million and ¥1,158,053 million,
respectively.
9. DEPOSITS
The balances of time deposits, including CDs, issued in amounts of ¥10 million (approximately
U.S.$ 94 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 30, 2018) or more
with respect to domestic deposits and issued in amounts of U.S.$100,000 or more with respect to foreign deposits
were ¥27,891,132 million and ¥22,944,072 million, respectively, at March 31, 2017, and ¥27,381,920 million
and ¥22,386,612 million, respectively, at March 31, 2018.
F-72
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The maturity information at March 31, 2018 for domestic and foreign time deposits, including CDs, is
summarized as follows:
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after two years through three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after three years through four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after four years through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥34,905,906
4,957,492
3,103,698
657,641
590,870
840,071
¥21,978,687
572,306
251,116
108,218
121,550
31,462
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥45,055,678
¥23,063,339
Domestic
Foreign
(in millions)
10. CALL MONEY AND FUNDS PURCHASED
A summary of funds transactions for the fiscal years ended March 31, 2017 and 2018 is as follows:
Outstanding at end of fiscal year:
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal range of maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
1,974,977
1 day to 30 days
¥
2,452,543
1 day to 30 days
0.20%
0.31%
2017
2018
(in millions, except percentages and days)
11. DUE TO TRUST ACCOUNT
Mitsubishi UFJ Trust and Banking holds assets on behalf of its customers in an agent, fiduciary or trust
capacity. Such trust account assets are not the MUFG Group’s proprietary assets and are managed and accounted
for separately.
However, excess cash funds of individual trust accounts are often placed with Mitsubishi UFJ Trust and
Banking which manages the funds together with its own funds in its proprietary account. Due to trust account
reflects a temporary placement of the excess funds from individual trust accounts and, in view of the MUFG
Group’s funding, due to trust account is similar to short-term funding, including demand deposits and other
overnight funds purchased. The balance changes in response to the day-to-day changes in the excess funds placed
by the trust accounts. A summary of due to trust account transactions at March 31, 2017 and 2018 is as follows:
Amount outstanding at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate on outstanding balance at end of fiscal year . . . . .
2017
2018
(in millions, except percentages)
¥3,386,158
¥3,335,155
0.00%
0.00%
12. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
At March 31, 2017 and 2018, the MUFG Group had unused lines of credit for short-term financing
amounting to ¥3,234,066 million and ¥5,142,206 million, respectively. The amounts principally consist of
non-interest-bearing collateralized intraday overdraft lines and collateralized overnight loans on bills at the
official discount rate granted by the Bank of Japan, which are used to cover shortages in the Bank of Japan
account and to meet liquidity needs. The MUFG Group may borrow from the Bank of Japan on demand up to the
total amount of collateral eligible for credit extension.
F-73
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other short-term borrowings at March 31, 2017 and 2018 were comprised of the following:
2017
2018
(in millions, except percentages)
Domestic offices:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from the Bank of Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from other financial institutions . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,080,838
1,499,653
262,985
46,518
¥1,094,487
305,520
243,968
84,620
Total domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,889,994
1,728,595
Foreign offices:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings from other financial institutions . . . . . . . . . . . . . . . . . . . . . . .
Short-term debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,675,653
216,596
5,654
182,549
Total foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,080,452
Total
Less unamortized discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,970,446
925
4,275,278
784,949
18,523
73,917
5,152,667
6,881,262
138
Other short-term borrowings—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,969,521
¥6,881,124
Weighted average interest rate on outstanding balance at end of fiscal year . . .
0.66%
1.29%
F-74
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Long-term debt (with original maturities of more than one year) at March 31, 2017 and 2018 was comprised
of the following:
MUFG:
2017
2018
(in millions)
BK:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt (1):
¥
15
¥
1,973
Fixed rate bonds, payable in US dollars, due 2021-2028, principally 2.19%-3.96% . . . . . . . . . . . . . . .
Fixed rate bonds, payable in Euro, due 2021-2033, principally 0.40%-1.75% . . . . . . . . . . . . . . . . . . .
Fixed rate bonds, payable in other currencies, due 2027, principally 3.77%-4.05%(2) . . . . . . . . . . . . . .
Floating rate bonds, payable in US dollars, due 2021-2023, principally 2.54%-3.89% . . . . . . . . . . . . .
1,265,620
23,958
—
268,725
1,737,809
230,629
17,639
424,795
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,558,303
2,410,872
Subordinated debt (1):
Fixed rate bonds, payable in Japanese yen, due 2024-2030, principally 0.37%-1.39% . . . . . . . . . . . . .
Adjustable rate bonds, payable in Japanese yen, due 2024-2028, principally 0.35%-0.66% . . . . . . . . .
Adjustable rate bonds, payable in Japanese yen, no stated maturity, principally 1.12%-4.42% . . . . . .
Adjustable rate borrowings, payable in Japanese yen, due 2025-2028, principally 0.46%-0.50% . . . .
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally 4.78% . . . . . . . .
Floating rate bonds, payable in Japanese yen, no stated maturity, principally 3.03% . . . . . . . . . . . . . .
Floating rate borrowings, payable in Japanese yen, due 2025-2027, principally 0.58%-0.79% . . . . . .
Floating rate borrowings, payable in Euro, no stated maturity, principally 1.73% . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in other currencies, no stated maturity, principally 2.49%(2) . . . . . .
412,783
426,838
1,229,282
16,000
1,500
3,500
53,000
599
420
482,662
795,944
1,557,610
32,500
1,500
3,500
76,000
—
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,143,922
2,949,716
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,702,240
5,362,561
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation under sale-and-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt (1):
¥
7,310
43,032
¥
6,906
41,892
Fixed rate bonds, payable in Japanese yen, due 2018-2027, principally 0.22%-2.69% . . . . . . . . . . . . .
Fixed rate bonds, payable in US dollars, due 2018-2048, principally 0.00%-4.70% . . . . . . . . . . . . . . .
Fixed rate bonds, payable in Euro, due 2022-2037, principally 0.88%-2.06% . . . . . . . . . . . . . . . . . . .
Fixed rate bonds, payable in other currencies, due 2021-2047, principally 0.00%-5.30%(2) . . . . . . . . .
Fixed rate borrowings, payable in Japanese yen, due 2018-2028, principally 0.00%-0.25% . . . . . . . .
Fixed rate borrowings, payable in US dollars, due 2018, principally 7.49% . . . . . . . . . . . . . . . . . . . . .
Fixed rate borrowings, payable in Euro, due 2026, principally 0.00% . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustable rate bonds, payable in US dollars, due 2030, principally 3.00% . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds, payable in US dollars, due 2018, principally 3.13% . . . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds, payable in other currencies, due 2017, principally 2.90%(2)
. . . . . . . . . . . . . . . . .
Floating rate borrowings, payable in US dollars, due 2018-2031, principally 1.53%-2.91% . . . . . . . .
Floating rate borrowings, payable in Euro, due 2021-2022, principally 0.00%-0.06% . . . . . . . . . . . . .
472,300
1,761,868
92,708
23,550
10,064,790
124
479
1,122
145,847
55,796
1,075,494
20,885
346,800
1,451,745
111,956
19,502
9,561,784
38
1,044
1,062
53,120
—
1,071,239
20,150
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,714,963
12,638,440
Subordinated debt (1):
Fixed rate bonds, payable in Japanese yen, due 2019-2031, principally 1.31%-2.91% . . . . . . . . . . . . .
Fixed rate borrowings, payable in Japanese yen, due 2022-2035, principally 0.38%-2.24% . . . . . . . .
Adjustable rate borrowings, payable in Japanese yen, due 2023-2028, principally 0.40%-2.86% . . . .
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally
1.69%-4.78% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustable rate borrowings, payable in Euro, no stated maturity, principally 1.73% . . . . . . . . . . . . . .
Adjustable rate borrowings, payable in other currencies, no stated maturity, principally 2.49%(2) . . . .
Floating rate borrowings, payable in Japanese yen, due 2027, principally 0.16% . . . . . . . . . . . . . . . . .
706,677
230,400
129,000
651,000
2,995
2,101
15,000
520,350
98,400
73,000
496,000
—
—
15,000
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,737,173
1,202,750
Obligations under loan securitization transaction accounted for as secured borrowings due 2018-2077,
principally 0.42%-3.89% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
605,709
622,061
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,108,187
14,512,049
F-75
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2017
2018
(in millions)
Other subsidiaries:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt (1):
¥
9,348
¥
9,835
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2042, principally 0.00%-
6.20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate borrowings, bonds and notes, payable in US dollars, due 2018-2037, principally 0.00%-
8.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate bonds and notes, payable in Euro, due 2020-2022, principally 1.10%-1.28% . . . . . . . . . . .
Fixed rate bonds and notes, payable in Thai baht, due 2018-2024, principally 0.01%-9.00% . . . . . . . .
Fixed rate borrowings, bonds and notes, payable in other currencies, due 2018-2037, principally
2,688,264
3,453,352
952,937
1,079
308,804
936,086
2,619
330,814
0.50%-15.33%(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
166,346
190,567
Floating/Adjustable rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2048,
principally 0.00%-20.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, bonds and notes, payable in US dollars, due 2018-2027, principally 0.00%-
38.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate bonds and notes, payable in Euro, due 2018, principally 1.00% . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, bonds and notes, payable in other currencies, due 2018-2020, principally
1,269,910
1,342,318
217,469
266
186,515
—
1.43%-9.63%(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,761
5,420
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,607,836
6,447,691
Subordinated debt (1):
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2030, principally 0.65%-
2.89% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate bonds and notes, payable in US dollars, due 2019-2027, principally 7.50%-10.85% . . . . . .
Fixed rate bonds and notes, payable in Thai baht, due 2020-2027, principally 3.40%-3.90% . . . . . . . .
Fixed rate borrowings, bonds and notes, payable in other currencies, due 2021, principally
0.00%(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustable rate borrowings, bonds and notes, payable in Japanese yen, no stated maturity, principally
3.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2021, principally
0.45%-0.73% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate borrowings, bonds and notes, payable in US dollars, due 2019-2036, principally 3.29%-
10.44% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
378,548
1,710
80,560
364,326
1,661
144,900
6,847
7,428
104,500
104,500
112,985
72,493
5,393
5,250
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
690,543
700,558
Obligations under loan securitization transaction accounted for as secured borrowings due 2018-2020,
principally 0.23%-2.32% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,831
50,551
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,334,558
7,208,635
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,144,985
27,083,245
Debt Issuance Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(13,458) ¥
(13,689)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥26,131,527
¥27,069,556
Notes:
(1) Adjustable rate debts are debts where interest rates are reset in accordance with the terms of the debt agreements, and floating rate debts
are debts where interest rates are repriced in accordance with movements of markets indices.
(2) Minor currencies, such as Australian dollars, British pounds, Indonesian rupiah, Brazilian real, Russian ruble, etc, have been summarized
into the “other currencies” classification.
(3) The table above reflects changes in presentation that were made to long-term repurchase agreements at March 31, 2017. Payables under
long-term repurchase agreements are included in Payables under repurchase agreements in the accompanying consolidated balance
sheets. See Note 1 for further information.
The MUFG Group uses derivative financial instruments to manage its interest rate and currency exposures
for certain debts. The derivative financial instruments include swaps, forwards, options and other types of
derivatives. As a result of these derivative instruments, the effective rates reflected in the table above may differ
from the coupon rates. The interest rates for the adjustable and floating rate debt shown in the above table are
those in effect at March 31, 2017 and 2018.
F-76
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Certain debt agreements permit the MUFG Group to redeem the related debt, in whole or in part, prior to
maturity at the option of the issuer on terms specified in the respective agreements.
The following is a summary of maturities of long-term debt subsequent to March 31, 2018:
MUFG
BK
Other
subsidiaries
Total
(in millions)
Fiscal year ending March 31:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
415
407
346,342
444,581
620,845
3,949,971
¥ 1,549,014 ¥1,452,406 ¥ 3,001,835
2,570,010
1,500,799
9,571,266
1,397,405
2,919,507
1,016,093
1,355,450
394,862
7,665,177
1,447,070
1,068,804
7,827,519
1,458,833
339,743
2,268,136
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,362,561
¥14,512,049 ¥7,208,635 ¥27,083,245
New Issuances of Bonds for Basel III
For the fiscal year ended March 31, 2018, the MUFG Group issued to institutional investors in Japan
¥320,000 million aggregate principal amount of unsecured perpetual subordinated Additional Tier 1 notes. These
notes are subject to the MUFG Group’s discretion to cease interest payments and a write-down of the principal
upon the occurrence of certain events, including when the MUFG Group’s Common Equity Tier 1 ratio declines
below 5.125%, when the MUFG Group is deemed to be at risk of becoming non-viable or when the MUFG
Group becomes subject to bankruptcy proceedings.
For the fiscal year ended March 31, 2018, the MUFG Group issued $7,680 million, €1,570 million and
AU$216 million of the bonds with an intent to count towards Total Loss-Absorbing Capacity (“TLAC”) to global
institutional investors to meet the TLAC requirement under the standards issued by the Financial Stability Board
(“FSB”). Under the FSB’s TLAC standard, the MUFG Group is required to hold TLAC debt in an amount not
less than 16% of risk-weighted assets and 6% of the applicable Basel III leverage ratio denominator by
January 1, 2019, and not less than 18% of risk-weighted assets and 6.75% of the applicable Basel III leverage
ratio denominator by January 1, 2022.
13. SEVERANCE INDEMNITIES AND PENSION PLANS
Defined Benefit Pension Plans
The MUFG Group has funded non-contributory defined benefit pension plans, which cover substantially all
of its employees and mainly provide for lifetime annuity payments commencing at age 65 (“pension benefits”)
based on eligible compensation at the time of severance, rank, years of service and other factors.
MUFG Bank and certain domestic subsidiaries, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ
Securities Holdings, Mitsubishi UFJ NICOS and some subsidiaries of MUFG have non-contributory Corporate
Defined Benefit Pension plans which provide benefits to all their domestic employees.
The MUFG Group also offers qualified and nonqualified defined benefit pension plans in foreign offices
and subsidiaries for their employees. The qualified plans are non-contributory defined pension plans, which
provide benefits upon retirement based on years of service and average compensation and cover substantially all
of the employees of such foreign offices and subsidiaries. With respect to the offices and subsidiaries in the
United States of America, the qualified plans are funded on a current basis in compliance with the requirement of
F-77
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the Employee Retirement Income Security Act of the United States of America. The nonqualified plans are
non-contributory defined benefit pension plans, under which certain employees earn pay and interest credits on
compensation amounts above the maximum stipulated by applicable laws under the qualified plans.
Severance Indemnities Plans
The MUFG Group has SIPs under which their employees in Japan, other than those who are directors, are
entitled, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of
employment, to lump-sum severance indemnities based on eligible compensation at the time of severance, rank,
years of service and other factors. Under SIPs, benefit payments in the form of a lump-sum cash payment with no
option to receive annuity payments, upon mandatory retirement at normal retirement age or earlier termination of
employment, are provided. When a benefit is paid in a single payment to a benefit payee under the plans, the
payment represents final relief of the obligation.
Other Postretirement Plans
The MUFG Group’s foreign offices and subsidiaries, primarily in the United States of America, provide
their employees with certain postretirement medical and life insurance benefits (“other benefits”).
Net periodic cost of pension benefits and other benefits for the fiscal years ended March 31, 2016, 2017 and
2018 include the following components:
Domestic subsidiaries
Foreign offices and subsidiaries
2016
2017
2018
2016
2017
2018
Pension
benefits
and SIP
Pension
benefits
and SIP
Pension
benefits
and SIP
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Service cost—benefits
earned during the fiscal
year . . . . . . . . . . . . . . . . . ¥ 47,739 ¥ 49,057 ¥ 47,064 ¥ 14,842 ¥ 1,409 ¥ 13,107 ¥
990 ¥ 10,169 ¥
676
Interest cost on projected
benefit obligation . . . . . .
16,529
12,308
14,383
18,120
1,843
15,287
1,229
15,359
1,079
Expected return on plan
assets . . . . . . . . . . . . . . .
(59,461) (60,255) (68,432) (30,486) (2,341) (29,339) (2,047) (32,110) (2,122)
Amortization of net
actuarial loss . . . . . . . . . .
7,698
17,764
7,309
11,743
1,810
12,707
1,366
8,847
1,124
Amortization of prior
service cost . . . . . . . . . . .
(7,613)
(6,348)
(1,094)
(2,307)
(927)
(2,045) (1,534)
(3,090) (2,775)
Loss (gain) on settlements
and curtailment . . . . . . . .
(1,168)
(1,765)
(4,394)
11
—
(208)
—
52
—
Net periodic benefit cost
(income) . . . . . . . . . . . . . ¥ 3,724 ¥ 10,761 ¥ (5,164)¥ 11,923 ¥ 1,794 ¥ 9,509 ¥
4 ¥
(773)¥(2,018)
F-78
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the assumptions used in computing the present value of the projected
benefit obligations and the net periodic benefit cost:
Domestic subsidiaries
Foreign offices and subsidiaries
2016
2017
2018
2016
2017
2018
Pension
benefits
and SIP
Pension
benefits
and SIP
Pension
benefits
and SIP
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Weighted-average assumptions used:
Discount rates in determining
expense . . . . . . . . . . . . . . . . . . . . . . . 0.93% 0.68% 0.82% 3.87% 3.83% 3.90% 3.03% 3.52% 3.61%
Discount rates in determining benefit
obligation . . . . . . . . . . . . . . . . . . . . . 0.68
0.82
0.76
4.17
4.09
3.81
3.86
3.38
3.43
Rates of increase in future
compensation level for determining
expense . . . . . . . . . . . . . . . . . . . . . . . 3.23
Rates of increase in future
compensation level for determining
benefit obligation . . . . . . . . . . . . . . . 3.23
Expected rates of return on plan
3.23
3.23
4.65
— 4.65
— 4.65
—
3.23
3.21
4.65
— 4.65
— 4.65
—
assets . . . . . . . . . . . . . . . . . . . . . . . . 2.60
2.75
2.87
6.81
7.50
6.80
7.50
6.71
7.50
The following tables present the assumed health care cost trend rates for foreign offices and subsidiaries,
which are used to measure the expected cost of benefits for the next year, and the effect of a one-percentage-
point change in the assumed health care cost trend rate:
Initial trend rate . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . .
Year the rate reaches the ultimate trend rate . .
4.64%
3.96%
2026
4.44%
3.94%
2026
7.50%
4.50%
2026
7.00%
4.50%
2026
MUAH
Other than MUAH
2017(1)
2018(1)
2017(1)
2018(1)
MUAH
Other than MUAH
One-percentage-
point increase
One-percentage-
point decrease
One-percentage-
point increase
One-percentage-
point decrease
(in millions)
Effect on total of service and interest cost
components . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on postretirement benefit obligation . . .
¥ 226
3,729
¥ (226)
(3,164)
¥
44
779
¥ (35)
(616)
Note:
(1) Fiscal years of MUFG Americas Holdings and foreign subsidiaries end on December 31. Therefore, the above tables present the rates
and amounts at December 31, 2016 and 2017, respectively.
F-79
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table sets forth the combined funded status and amounts recognized in the accompanying
consolidated balance sheets at March 31, 2017 and 2018:
Domestic subsidiaries
Foreign offices and subsidiaries
2017
2018
2017
2018
Non-contributory
pension benefits
and SIP
Non-contributory
pension benefits
and SIP
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Change in benefit obligation:
Benefit obligation at beginning of fiscal year . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/ Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lump-sum payment
. . . . . . . . . . . . . . . . . . . .
Translation adjustments and other
¥1,850,847
49,057
12,308
—
(192)
654
(35,868)
(67,038)
(15,920)
—
¥1,793,848
47,064
14,383
—
(29)
—
49,678
(67,913)
(15,237)
—
¥470,578 ¥46,061 ¥478,463 ¥35,222
676
1,079
455
—
—
506
(2,520)
—
(1,071)
10,169
15,359
28
—
—
25,519
(19,388)
(861)
(7,233)
13,107
15,287
13
—
(8,311)
26,295
(16,359)
(724)
(21,423)
990
1,229
866
—
(8,562)
(489)
(3,182)
—
(1,691)
Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . . . .
1,793,848
1,821,794
478,463
35,222
502,056
34,347
Change in plan assets:
Fair value of plan assets at beginning of fiscal year . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/ Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Translation adjustments and other
2,200,033
159,287
54,000
28
—
(67,038)
—
2,346,310
250,704
74,181
47
—
(67,913)
—
457,989
35,040
21,648
—
13
(16,359)
(20,852)
30,653
1,902
1,099
—
866
(3,182)
(999)
477,479
75,824
16,969
—
28
(19,388)
(8,266)
30,339
4,890
190
—
455
(2,520)
(888)
Fair value of plan assets at end of fiscal year . . . . . . . . . . . . . .
2,346,310
2,603,329
477,479
30,339
542,646
32,466
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 569,218
(16,756)
¥ 798,849
(17,314)
¥ 43,405 ¥ — ¥ 83,578 ¥ 2,552
(4,433)
(42,988)
(44,389)
(4,883)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 552,462
¥ 781,535
¥
(984) ¥ (4,883) ¥ 40,590 ¥ (1,881)
The aggregated accumulated benefit obligations of these plans at March 31, 2017 and 2018 were as follows:
Aggregated accumulated benefit obligations . . . . . . . . . . . . . .
¥1,758,736
¥1,784,837
¥457,591
¥475,522
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the plans
with accumulated benefit obligations in excess of plan assets at March 31, 2017 and 2018 were as follows:
Domestic
subsidiaries
Foreign offices
and subsidiaries
2017
2018
2017
2018
(in millions)
Domestic
subsidiaries
Foreign offices
and subsidiaries
2017
2018
2017
2018
(in millions)
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥21,625
21,625
4,988
¥22,445
22,445
5,272
¥90,315
80,258
45,925
¥62,511
52,012
19,521
F-80
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ
NICOS and other subsidiaries paid special lump-sum termination benefits which are not a part of pension plans
to certain early-terminated employees. The amounts charged to operations for such early termination benefits for
the fiscal years ended March 31, 2016, 2017 and 2018 were ¥7,428 million, ¥7,722 million and ¥10,153 million,
respectively.
The following table presents the amounts recognized in Accumulated OCI of the MUFG Group at
March 31, 2017 and 2018:
Domestic subsidiaries
Foreign offices and subsidiaries
2017
Pension
benefits
and SIP
2018
Pension
benefits
and SIP
2017
2018
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Net actuarial loss . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Prior service cost
¥ 271,164
(7,763)
¥135,656
(6,669)
¥143,070
(21,710)
¥11,229
(9,370)
¥111,820
(17,936)
¥ 7,449
(6,237)
Gross amount recognized in Accumulated
OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
263,401
(122,871)
128,987
(81,747)
121,360
(47,387)
1,859
(534)
93,884
(25,251)
1,212
(358)
Net amount recognized in Accumulated
OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 140,530
¥ 47,240
¥ 73,973
¥ 1,325
¥ 68,633
¥
854
The following table presents OCI for the fiscal years ended March 31, 2017 and 2018:
Domestic subsidiaries
Foreign offices and subsidiaries
2017
Pension
benefits
and SIP
2018
Pension
benefits
and SIP
2017
2018
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
(in millions)
Net actuarial loss (gain) arising during the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost arising during the year . . .
Losses (gains) due to amortization:
Net actuarial loss . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Prior service cost
Curtailment and settlement . . . . . . . . . . . . . .
Foreign currency translation adjustments . . .
¥(134,902) ¥(132,593) ¥ 20,461
(8,311)
654
—
¥ (330) ¥(18,165) ¥(2,262)
—
(8,562)
—
(17,764)
6,348
1,765
—
(7,309)
1,094
4,394
—
(12,707)
2,045
208
(3,910)
(1,366)
1,534
—
(779)
(8,847)
3,090
(52)
(3,502)
(1,124)
2,775
—
(36)
Total changes in Accumulated OCI . . . . . . .
¥(143,899) ¥(134,414) ¥ (2,214) ¥ (9,503) ¥(27,476) ¥ (647)
F-81
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the expected amounts that will be amortized from Accumulated OCI as
components of net periodic benefit cost, before taxes, for the fiscal year ending March 31, 2019:
Domestic
subsidiaries
Foreign offices
and subsidiaries
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,419
(1,274)
Pension
benefits
and SIP
Pension
benefits
Other
benefits
(in millions)
¥10,592
(3,107)
¥
693
(2,046)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
145
¥ 7,485
¥(1,353)
Investment policies
MUFG’s investment policy for plan assets is based on an asset liability matching strategy which is intended
to maintain adequate liquidity for benefit payments and to achieve a stable increase in the plan assets in the
medium and long-term through proper risk control and return maximization. As a general rule, investment
policies for plan assets are reviewed periodically for some plans and in the following situations for all plans:
(1) large fluctuations in pension plan liabilities caused by modifications to pension plans, or (2) changes in the
market environment. The plan assets allocation strategies are the principal determinant in achieving expected
investment returns on the plan assets. Actual asset allocations may fluctuate within acceptable ranges due to
market value variability. Plan assets are managed by a combination of internal and external asset management
companies and are rebalanced when market fluctuations cause an asset category to fall outside of its strategic
asset allocation range. Performance of each plan asset category is compared against established indices and
similar plan asset groups to evaluate whether the risk associated with the portfolio is appropriate for the level of
return.
The weighted-average target asset allocation of plan assets for the pension benefits and other benefits at
March 31, 2018 was as follows:
Asset category
Japanese equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic
subsidiaries
Foreign offices
and subsidiaries
Pension
benefits
and SIP
41.3%
32.0
14.2
8.3
1.5
2.7
Pension
benefits
Other
benefits
0.3%
—
57.4
30.4
9.9
2.0
—%
—
70.0
30.0
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0% 100.0% 100.0%
Basis and procedure for estimating long-term return of each asset category
MUFG’s expected long-term rate of return on plan assets for domestic defined benefit pension plans and
SIPs is based on a building-block methodology, which calculates the total long-term rate of return of the plan
assets by aggregating the weighted rate of return derived from both long-term historical performance and
forward-looking return expectations from each asset category.
F-82
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
MUFG has determined the expected long-term rate of return for each asset category as follows:
‰
‰
Japanese equity securities: the rate for Japanese debt securities plus a premium for the risk associated
with Japanese equity securities
Japanese debt securities: economic growth rate of Japan
‰ Non-Japanese equity securities: the rate for non-Japanese debt securities plus a premium for the risk
associated with non-Japanese equity securities
‰ Non-Japanese debt securities: global economic growth rate
Foreign offices and subsidiaries periodically reconsider the expected long-term rate of return for their plan
assets. They evaluate the investment return volatility of different asset categories and compare the liability
structure of their pension and other benefits to those of other companies, while considering their funding policy
to maintain a funded status sufficient to meet participants’ benefit obligations, and reduce long-term funding
requirements and pension costs. Based on this information, foreign offices and subsidiaries update the expected
long-term rate of return.
Cash flows
The MUFG Group expects to contribute to the plan assets for the fiscal year ending March 31, 2019 based
upon its current funded status and expected asset return assumptions as follows:
For the pension benefits of domestic subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the pension benefits of foreign offices and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
For the other benefits of foreign offices and subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
75.2 billion
2.6 billion
0.5 billion
Estimated future benefit payments
The following table presents benefit payments expected to be paid, which include the effect of expected
future service for the fiscal years indicated:
Domestic
subsidiaries
Foreign offices
and subsidiaries
Pension
benefits
and SIP
Pension
benefits
Other
benefits
(in millions)
Fiscal year ending March 31:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter (2024-2028)
¥ 84,208
81,662
81,591
81,714
81,370
401,939
¥ 20,888
22,113
23,033
23,771
25,343
171,865
¥ 1,933
2,018
2,090
2,145
2,199
10,761
F-83
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair value measurement of the plan assets
The following is a description of the valuation methodologies used for plan assets measured at fair value as
well as the classification of the plan assets pursuant to the fair value hierarchy described in Note 32:
Government bonds and other debt securities
When quoted prices are available in an active market, the MUFG Group adopts the quoted prices to measure
the fair value of securities and such securities are classified in Level 1 of the fair value hierarchy. Level 1
securities include Japanese government bonds, most non-Japanese government bonds and certain corporate
bonds. When quoted prices are available but not traded actively, such securities are classified in Level 2 of the
fair value hierarchy. When quoted prices are not available, the MUFG Group generally estimates fair values by
using non-binding prices obtained from independent pricing vendors. Such securities are generally classified in
Level 2 of the fair value hierarchy. Level 2 securities include certain non-Japanese government bonds, official
institutions bonds and corporate bonds. When there is lack of liquidity for securities or significant inputs adopted
to the fair value measurements are unobservable, such securities are classified in Level 3 of the fair value
hierarchy. Such Level 3 securities mainly consist of non-Japanese corporate bonds.
Marketable equity securities
When quoted prices are available in an active market, the MUFG Group adopts the quoted prices to measure
the fair value of marketable equity securities and such securities are classified in Level 1 of the fair value
hierarchy. When quoted prices are available but not traded actively, such securities are classified in Level 2 of
the fair value hierarchy.
Japanese pooled funds
Japanese pooled funds are investment fund vehicles designed for Japanese pension plan investments under
Japanese pension trust fund regulations. Based upon the nature of the funds’ investments, Japanese pooled funds
are categorized into four major fund types: Japanese marketable equity securities type, Japanese debt securities
type, Non-Japanese marketable equity securities type and Non-Japanese debt securities type. The other types of
funds invest in short-term financial instruments or loans receivable. Japanese pooled funds are generally readily
redeemable at their net asset values. The fair values of Japanese pooled funds are measured at their net asset
values per share (or its equivalent) as a practical expedient.
Other investment funds
Other investment funds include mutual funds, private investments funds, common collective funds, private
equity funds and real estate funds. The listed investment funds or mutual funds are valued at quoted prices and
classified in Level 1 or Level 2 of the fair value hierarchy. When there is no available market quotation, the fair
values are generally determined at net asset values per share (or its equivalent) as a practical expedient. Other
investment funds classified in Level 3 of the fair value hierarchy consist of certain real estate funds whose fair
values are not measured at their net asset values but by using significant unobservable inputs and there is inherent
lack of the funds’ liquidity.
Japanese general accounts of life insurance companies
These instruments are contracts with life insurance companies that guarantee return of a certain level of
fixed income, which are mainly invested in assets with low market risk such as Japanese debt securities. They are
measured at conversion value and classified in Level 2 of the fair value hierarchy.
F-84
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other investments
Other investments mainly consist of call loans and the rest consist of miscellaneous accounts such as
deposits with banks and short-term investments. These instruments are generally classified in Level 1 or Level 2
of the fair value hierarchy depending on observability of the inputs to measure their fair values.
The following table presents the fair value of each major category of plan assets as of March 31, 2017 and
2018:
Pension benefits and SIP Investments:
At March 31, 2017
Assets category
Domestic subsidiaries
Foreign offices and subsidiaries
Level 1
Level 2 Level 3
Total
Level 1
Level 2 Level 3
Total
(in millions)
Japanese government bonds . . . . . . . . . . . ¥ 137,201 ¥
Non-Japanese government bonds . . . . . .
Other debt securities . . . . . . . . . . . . . . . .
Japanese marketable equity securities . . .
Non-Japanese marketable equity
14,817
211
810,772
— ¥ — ¥ 137,201 ¥
2,411
1,858
—
17,228
—
208
2,277
— 810,772
16,161
— ¥
— ¥ — ¥
—
3,811 — 19,972
— 67,956 — 67,956
856
— —
856
securities . . . . . . . . . . . . . . . . . . . . . . .
Other investment funds . . . . . . . . . . . . . .
Japanese general account of life
insurance companies(1) . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . .
33,385
—
287
—
— 206
33,672
206
37,986
83,868
682 — 38,668
10,042 — 93,910(2)
— 225,921
22,582
3,423
— 225,921
26,005
—
—
48
— —
760
2,704
—
3,512
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 999,809 ¥253,059 ¥ 414 ¥1,253,282 ¥138,919 ¥ 85,195 ¥760 ¥224,874
At March 31, 2018
Assets category
Domestic subsidiaries
Foreign offices and subsidiaries
Level 1
Level 2 Level 3
Total
Level 1
Level 2 Level 3
Total
(in millions)
Japanese government bonds . . . . . . . . . . . ¥ 139,847 ¥
Non-Japanese government bonds . . . . . .
Other debt securities . . . . . . . . . . . . . . . .
Japanese marketable equity securities . . .
Non-Japanese marketable equity
15,552
201
934,691
— ¥ — ¥ 139,847 ¥
944
3,482
—
16,496
4,754
— 934,691
—
1,071
17,945
— ¥
— ¥ — ¥
—
4,081 — 22,026
— 81,968 — 81,968
887
— —
887
securities . . . . . . . . . . . . . . . . . . . . . . .
Other investment funds . . . . . . . . . . . . . .
Japanese general account of life
insurance companies(1) . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . .
71,729
—
255
—
—
—
71,984
42,166
— 99,798
815 — 42,981
9,997 — 109,795(2)
— 225,925
23,195
3,485
— 225,925
26,680
—
—
2
— —
155
4,867
—
5,024
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,165,505 ¥253,801 ¥1,071 ¥1,420,377 ¥160,798 ¥101,728 ¥155 ¥262,681
Notes:
(1) “Japanese general accounts of life insurance companies” is a contract with life insurance companies that guarantees a return of
approximately 1.25% from April 1, 2016 to March 31, 2017 and 1.24% from April 1, 2017 to March 31, 2018.
(2) Other investment funds of the foreign offices and subsidiaries include mutual funds and real estate funds of ¥79,763 million and
¥310 million, respectively, which were held by MUFG Americas Holdings at December 31, 2016 and ¥93,821 million and ¥516 million,
respectively, at December 31, 2017.
F-85
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents fair values of certain investments valued at net asset value per share (or its
equivalent) as a practical expedient that were excluded from the above table as of March 31, 2017 and 2018:
Assets category
Japanese pooled funds:
Japanese marketable equity securities . . . . . . . . . . . . .
Japanese debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Non-Japanese marketable equity securities . . . . . . . .
Non-Japanese debt securities . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 101,958
222,785
187,939
84,199
113,519
¥
Total pooled funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
710,400
Domestic subsidiaries
Foreign offices and
subsidiaries
2017
2018
2017
2018
(in millions)
¥
83,205
252,730
151,893
100,998
135,275
724,101
— ¥
—
—
—
—
—
—
—
—
—
—
—
Other investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
382,628(1)
458,851(1)
252,605(2) 279,965(2)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,093,028
¥1,182,952
¥252,605
¥279,965
Notes:
(1) Other investment funds of the domestic subsidiaries include mutual funds and real estate funds of ¥358,584 million and ¥13,550 million,
respectively, at March 31, 2017 and ¥433,221 million and ¥13,664 million, respectively, at March 31, 2018.
(2) Other investment funds of the foreign offices and subsidiaries include mutual funds, real estate funds and common collective funds of
¥54,689 million, ¥40,779 million and ¥138,987 million, respectively, at March 31, 2017 and ¥63,088 million, ¥40,205 million and
¥158,249 million, respectively, at March 31, 2018.
Other debt securities and Japanese debt securities in the above Pension benefits and SIP tables include
¥1,523 million (0.05% of plan assets) of debt securities issued by the MUFG Group at March 31, 2017 and
¥982 million (0.03% of plan assets) at March 31, 2018, respectively. Japanese marketable equity securities in the
above Pension benefits and SIP tables include ¥8,169 million (0.29% of plan assets) of common stock issued by
the MUFG Group at March 31, 2017 and ¥7,596 million (0.24% of plan assets) at March 31, 2018, respectively.
Other post retirement plan investments:
Assets category
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in millions)
Foreign offices and subsidiaries
2017
2018
Non-Japanese government bonds . . . . . . . . . . . . . . . . . . ¥ 2,516 ¥ — ¥ — ¥ 2,516 ¥2,523 ¥ — ¥ — ¥ 2,523
— 5,797
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Non-Japanese marketable equity securities . . . . . . . . . . .
7
Other investment funds(1) . . . . . . . . . . . . . . . . . . . . . . . . .
— 6,082
265
—
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 5,219
18
—
—
14,294
6
2
— 5,797
7
—
—
6,082
264
1
— 5,219
—
18
— 14,294
8
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥16,812 ¥5,243 ¥ — ¥22,055 ¥8,606 ¥6,068 ¥ — ¥14,674
Note:
(1) Other investment funds mainly consist of mutual funds.
F-86
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents fair values of certain investments valued at net asset value per share (or its
equivalent) as a practical expedient that were excluded from the above table as of March 31, 2017 and 2018:
Assets category
Other investment funds(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign offices
and subsidiaries
2017
2018
(in millions)
¥8,284 ¥17,792
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥8,284 ¥17,792
Note:
(1) Other investment funds of the foreign offices and subsidiaries include mutual funds, common collective funds and pooled separate
accounts with variable life insurance policies of ¥441 million, ¥2,298 million and ¥5,545 million, respectively, which were held by
MUFG Americas Holdings at December 31, 2016 and ¥553 million, ¥11,332 million and ¥5,907 million, respectively, at December 31,
2017.
F-87
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present a reconciliation of plan assets measured at fair value using significant
unobservable inputs (Level 3) during the fiscal years ended March 31, 2017 and 2018:
Pension benefits and SIP Investments:
Assets category
Domestic subsidiaries
March 31,
2016
Realized
gains
(losses)
Unrealized
gains
(losses)
Purchase,
sales and
settlements
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2017
Other debt securities . . . . . . . . . . . . . . . . . . . ¥5,927
537
Other investment funds . . . . . . . . . . . . . . . . .
¥(669)
1
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥6,464
¥(668)
¥ 4
1
¥ 5
(in millions)
¥(5,054) ¥
(333)
¥(5,387) ¥
— ¥
—
— ¥
— ¥ 208
206
—
— ¥ 414
Assets category
Foreign offices and subsidiaries
March 31,
2016
Realized
gains
(losses)
Unrealized
gains
(losses)
Purchase,
sales and
settlements
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2017
Other investments . . . . . . . . . . . . . . . . . . . . . ¥ 985
¥ — ¥(34)
(in millions)
¥ (191) ¥
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 985
¥ — ¥(34)
¥ (191) ¥
— ¥
— ¥
— ¥ 760
— ¥ 760
Assets category
Domestic subsidiaries
March 31,
2017
Realized
gains
(losses)
Unrealized
gains
(losses)
Purchase,
sales and
settlements
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2018
Other debt securities . . . . . . . . . . . . . . . . . . . ¥ 208
206
Other investment funds . . . . . . . . . . . . . . . . .
¥
(6)
36
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 414
¥ 30
¥(18)
—
¥(18)
(in millions)
¥
887 ¥
(242)
¥
645 ¥
— ¥
—
— ¥
— ¥1,071
—
—
— ¥1,071
Assets category
Foreign offices and subsidiaries
March 31,
2017
Realized
gains
(losses)
Unrealized
gains
(losses)
Purchase,
sales and
settlements
Transfer
into
Level 3
Transfer
out of
Level 3
March 31,
2018
Other investments . . . . . . . . . . . . . . . . . . . . . ¥ 760
¥ 51
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 760
¥ 51
¥ (2)
¥ (2)
(in millions)
¥ (654) ¥
¥ (654) ¥
— ¥
— ¥
— ¥ 155
— ¥ 155
Defined Contribution Plans
The MUFG Group maintains several qualified defined contribution plans in its domestic and foreign offices
and subsidiaries, all of which are administered in accordance with applicable local laws and regulations. Each
office and subsidiary matches eligible employee contributions up to a certain percentage of benefits-eligible
compensation per pay period, subject to plan and legal limits. Terms of the plan, including matching percentage
and vesting periods, are individually determined by each office and subsidiary.
The cost of these defined contribution plans charged to operations for the fiscal years ended March 31,
2016, 2017 and 2018 was ¥16,254 million, ¥15,636 million and ¥17,413 million, respectively.
F-88
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14. OTHER ASSETS AND LIABILITIES
Major components of other assets and liabilities at March 31, 2017 and 2018 were as follows:
2017
2018
(in millions)
Other assets:
Accounts receivable:
Receivables from brokers, dealers and customers for securities
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid benefit cost (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash collateral pledged for derivative transactions (Note 8) . . . . . . . . . . . . . . . .
Cash collateral for the use of Bank of Japan’s settlement infrastructure(1) . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 546,747
1,043,766
2,199,706
612,623
1,663,945
207,498
2,440,258
¥ 1,017,194
1,190,885
2,219,196
884,979
1,473,109
851,066
3,029,635
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥8,714,543
¥10,666,064
Other liabilities:
Accounts payable:
Payables to brokers, dealers and customers for securities transactions . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for off-balance sheet credit instruments . . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantees and indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash collateral received for derivative transactions (Note 8) . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 646,638
1,322,498
413,730
178,118
66,028
38,904
1,080,929
3,008,320
¥ 1,247,652
1,357,387
654,053
81,739
64,735
41,349
1,158,053
2,802,445
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥6,755,165
¥ 7,407,413
Note:
(1) Certain reclassifications have been made to prior period to conform to the current presentation.
Investments in equity method investees include marketable equity securities carried at ¥1,602,702 million
and ¥1,627,896 million at March 31, 2017 and 2018, respectively. Corresponding aggregated market values were
¥2,701,170 million and ¥3,186,618 million, respectively. Marketable equity securities include Morgan Stanley’s
common stock carried at ¥1,178,919 million and ¥1,206,998 million at March 31, 2017 and 2018, respectively.
As of March 31, 2018, the MUFG Group held approximately 24.35% of its common stock. Investments in equity
method investees also include investments in Morgan Stanley MUFG Securities, Co., Ltd. at ¥172,424 million
and ¥174,459 million at March 31, 2017 and 2018, respectively.
The MUFG Group periodically evaluates whether a loss in value of investments in equity method investees
is other-than-temporary. As a result of evaluations, the MUFG Group recognized other-than-temporary declines
in the value of an investment and recorded impairment losses related to certain affiliated companies of
¥681 million, ¥5,465 million and ¥29,442 million for the fiscal years ended March 31, 2016, 2017 and 2018
respectively. The impairment losses are included in Equity in earnings of equity method investees—net in the
accompanying consolidated statements of income.
F-89
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized Financial Information of the MUFG Group’s Equity Method Investees
Summarized financial information of Morgan Stanley, the largest portion of the MUFG Group’s equity
method investees, as of March 31, 2017 and 2018, and for each of the three years ended March 31, 2018 is as
follows:
2017(1)
2018
(in billions)
Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,900
11,760
12,543
93,386
17,065
21,265
19,500
84,514
130
¥29,008
8,525
14,431
91,207
17,043
20,709
20,713
82,762
155
Note:
(1) Certain reclassifications have been made to prior period to conform to the current presentation.
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . .
Net income applicable to Morgan Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,961
3,076
885
585
(in billions)
¥3,939
2,871
1,068
730
¥4,354
3,133
1,221
759
2016
2017
2018
Morgan Stanley early adopted, retrospective to January 1, 2016, the provisions of new accounting guidance
on “Recognition and Measurement of Financial Assets and Financial Liabilities” related to a change in the
instrument-specific credit risk on financial liabilities under the fair value option. This resulted in reclassifying the
MUFG Group’s proportionate share of the accumulated DVA of Morgan Stanley from retained earnings to AOCI
as reflected on the MUFG Group’s consolidated statement of equity. In connection with the new accounting
guidance, changes in DVA fair value are presented separately in other comprehensive income.
In addition, Morgan Stanley early adopted the new accounting guidance on “Targeted Improvements to
Accounting for Hedging Activities” on January 1, 2018. This resulted in recording a cumulative catch-up
adjustment by Morgan Stanley, decreasing the MUFG Group’s proportionate share of Retained earnings as
reflected on the MUFG Group’s consolidated statement of equity.
F-90
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized financial information of the MUFG Group’s equity method investees, other than Morgan
Stanley as of March 31, 2017 and 2018, and for each of the three years ended March 31, 2018 is as follows:
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
(in billions)
¥13,405
24,273
6,946
19,678
841
¥14,343
26,008
7,783
21,209
1,009
2016
2017
2018
(in billions)
¥777
252
525
97
147
97
¥901
329
572
136
337
229
¥661
222
439
92
171
117
F-91
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
15. OFFSETTING OF DERIVATIVES, REPURCHASE AGREEMENTS, AND SECURITIES
LENDING TRANSACTIONS
The following tables present, as of March 31, 2017 and 2018, the gross and net amounts of the derivatives,
resale and repurchase agreements, and securities borrowing and lending transactions, including the related gross
amounts subject to an enforceable master netting arrangement or similar agreement not offset in the consolidated
balance sheets. The MUFG Group primarily enters into International Swaps and Derivatives Association master
netting agreements, master repurchase agreements and master securities lending agreements or similar
agreements for derivative contracts, resale and repurchase agreements, and securities borrowing and lending
transactions. In the event of default on or termination of any one contract, these agreements provide the
contracting parties with the right to net a counterparty’s rights and obligations and to liquidate and setoff
collateral against any net amount owed by the counterparty. Generally, as the MUFG Group has elected to
present such amounts on a gross basis, the amounts subject to these agreements are included in “Gross amounts
not offset in the consolidated balance sheet” column in the tabular disclosure below. For certain transactions
where a legal opinion with respect to the enforceability of netting has not been sought or obtained, the related
amounts are not subject to enforceable master netting agreements and not included in “Gross amounts not offset
in the consolidated balance sheet” column in the tabular disclosure below.
At March 31, 2017
Financial assets:
Derivative assets . . . . . . . .
Receivables under resale
Gross amounts of
recognized
assets/liabilities
Gross amounts
offset in the
consolidated
balance sheet
Net amounts
presented in the
consolidated
balance sheet
Gross amounts not offset in
the consolidated balance sheet
Financial
instruments
Cash collateral
received/pledged
Net amounts
(in billions)
¥18,835
¥ —
¥18,835
¥(15,053)
¥ (726)
¥3,056
agreements . . . . . . . . . . .
11,044
(2,856)
8,188
(7,461)
(11)
Receivables under
securities borrowing
transactions . . . . . . . . . .
11,003
—
11,003
(10,880)
(9)
716
114
Total . . . . . . . . . . . . . .
¥40,882
¥(2,856)
¥38,026
¥(33,394)
¥ (746)
¥3,886
Financial liabilities:
Derivative liabilities . . . . . .
Payables under repurchase
¥18,562
¥ —
¥18,562
¥(15,063)
¥(1,229)
¥2,270
agreements . . . . . . . . . . .
20,549
(2,856)
17,693
(17,489)
Payables under securities
lending transactions . . . .
5,549
Obligations to return
securities received as
collateral . . . . . . . . . . . . .
3,516
—
—
5,549
(5,526)
3,516
(492)
—
(11)
(8)
193
15
3,024
¥5,502
Total . . . . . . . . . . . . . .
¥48,176
¥(2,856)
¥45,320
¥(38,570)
¥(1,248)
F-92
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018
Financial assets:
Derivative assets . . . . . . . .
Receivables under resale
Gross amounts of
recognized
assets/liabilities
Gross amounts
offset in the
consolidated
balance sheet
Net amounts
presented in the
consolidated
balance sheet
Gross amounts not offset in
the consolidated balance sheet
Financial
instruments
Cash collateral
received/pledged
Net amounts
(in billions)
¥12,585
¥ —
¥12,585
¥ (9,664)
¥ (832)
¥2,089
agreements . . . . . . . . . . .
8,825
(3,099)
5,726
(5,171)
(17)
538
Receivables under
securities borrowing
transactions . . . . . . . . . .
9,305
(36)
9,269
(9,208)
(1)
60
Total . . . . . . . . . . . . . .
¥30,715
¥(3,135)
¥27,580
¥(24,043)
¥ (850)
¥2,687
Financial liabilities:
Derivative liabilities . . . . . .
Payables under repurchase
¥11,877
¥ —
¥11,877
¥ (9,631)
¥(1,126)
¥1,120
agreements . . . . . . . . . . .
21,169
(3,034)
18,135
(17,890)
Payables under securities
lending transactions . . . .
8,206
(36)
8,170
(8,139)
(31)
(12)
Obligations to return
securities received as
collateral . . . . . . . . . . . . .
3,177
—
3,177
(1,072)
—
Total . . . . . . . . . . . . . .
¥44,429
¥(3,070)
¥41,359
¥(36,732)
¥(1,169)
214
19
2,105
¥3,458
F-93
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
16. REPURCHASE AGREEMENTS, AND SECURITIES LENDING TRANSACTIONS ACCOUNTED
FOR AS SECURED BORROWINGS
The following tables present gross obligations for payables under repurchase agreements, payables under
securities lending transactions and obligations to return securities received as collateral by remaining contractual
maturity and class of collateral pledged at March 31, 2017 and 2018. Potential risks associated with these
arrangements primarily relate to market and liquidity risks. To manage risks associated with market exposure, the
MUFG Group generally revalues the collateral underlying its repurchase agreements and securities lending
transactions on a daily basis and monitors the value of the underlying securities, consisting of primarily high-
quality securities such as Japanese national government and Japanese government agency bonds, and foreign
governments and official institutions bonds. In the event the market value of such securities falls below the
related agreements at contract amounts plus accrued interest, the MUFG Group may be required to deposit
additional collateral when appropriate. To address liquidity risks, the MUFG Group conducts stress tests to
ensure the adequate level of liquidity is maintained in the event of a decline in the fair value of any collateral
pledged.
March 31, 2017
Remaining Contractual Maturity
Overnight
and open
30 days
or less
31-90
days
Over
90 days
Total
Payables under repurchase agreements . . . . . . . . . . . . . . . . . .
Payables under securities lending transactions . . . . . . . . . . . .
. . . . . .
Obligations to return securities received as collateral
¥2,309
1,811
3,329
¥13,455
1,970
102
(in billions)
¥3,083
1,768
85
¥1,702
—
—
¥20,549
5,549
3,516
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,449
¥15,527
¥4,936
¥1,702
¥29,614
March 31, 2018
Remaining Contractual Maturity
Overnight
and open
30 days
or less
31-90
days
Over
90 days
Total
Payables under repurchase agreements . . . . . . . . . . . . . . . . . .
Payables under securities lending transactions . . . . . . . . . . . .
. . . . . .
Obligations to return securities received as collateral
¥2,290
4,647
2,855
¥14,328
2,343
202
(in billions)
¥2,004
1,216
120
¥2,547
—
—
¥21,169
8,206
3,177
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥9,792
¥16,873
¥3,340
¥2,547
¥32,552
F-94
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Secured borrowing by the class of collateral pledged at March 31, 2017 and 2018 was as follows:
March 31, 2017
Payables under
repurchase
agreements
Payables under
securities lending
transactions
Obligations
to return
securities received
as collateral
Total
(in billions)
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . . . . .
¥ 2,975
¥5,030
¥2,020
¥10,025
Foreign governments and official institutions
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,195
636
3,401
205
104
33
—
1
—
—
518
—
1,101
117
—
3
275
—
14,296
754
3,401
208
897
33
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥20,549
¥5,549
¥3,516
¥29,614
March 31, 2018
Payables under
repurchase
agreements
Payables under
securities lending
transactions
Obligations
to return
securities received
as collateral
Total
(in billions)
Japanese national government and Japanese
government agency bonds . . . . . . . . . . . . . . . . . .
¥ 2,462
¥7,085
¥1,242
¥10,789
Foreign governments and official institutions
bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,316
570
3,567
121
123
10
36
—
—
—
1,085
—
1,344
84
—
—
507
—
15,696
654
3,567
121
1,715
10
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥21,169
¥8,206
¥3,177
¥32,552
17. PREFERRED STOCK
Pursuant to the Articles of Incorporation, MUFG had been authorized to issue 400,000,000 shares of
Class 5 Preferred Stock, 200,000,000 shares of Class 6 Preferred Stock, and 200,000,000 shares of Class 7
Preferred Stock without par value as of March 31, 2018.
All classes of preferred stock are non-voting and have preference over common stock for the payment of
dividends and the distribution of assets in the event of a liquidation or dissolution of MUFG. They are all
non-cumulative and non-participating with respect to dividend payments. Shareholders of all classes of preferred
stock have the right to receive a liquidation distribution at ¥2,500 and do not have the right to participate in any
further liquidation distributions.
As of March 31, 2016, 2017 and 2018, there was no preferred stock outstanding and the entire amount of
Capital stock on the consolidated balance sheets consisted of only common stock.
F-95
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
18. COMMON STOCK AND CAPITAL SURPLUS
The changes in the number of issued shares of common stock during the fiscal years ended March 31, 2016,
2017 and 2018 were as follows:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . .
Retirement of shares of common stock . . . . . . . . . . . . . . . .
14,168,853,820
—
(shares)
14,168,853,820
14,168,853,820
— (268,825,800)
Balance at end of fiscal year
. . . . . . . . . . . . . . . . . . . . . . . .
14,168,853,820
14,168,853,820
13,900,028,020
2016
2017
2018
Under the Companies Act, issuances of common stock, including conversions of bonds and notes, are
required to be credited to the common stock account for at least 50% of the proceeds and to the legal capital
surplus account (“legal capital surplus”) for the remaining amounts.
The Companies Act permits Japanese companies, upon approval by the Board of Directors, to issue shares
in the form of a “stock split,” as defined in the Companies Act. Also, prior to April 1, 1991, Japanese companies
were permitted to issue free share distributions. MUFG Bank and Mitsubishi UFJ Trust and Banking from time
to time made free share distributions. These free distributions usually ranged from 5% to 10% of outstanding
common stock and publicly-owned corporations in the United States issuing shares in similar transactions would
be required to account for them as stock dividends as of the shareholders’ record date by reducing retained
earnings and increasing the appropriate capital accounts by an amount equal to the fair value of the shares issued.
The application of such U.S. accounting practices to the cumulative free distributions made by MUFG Bank and
Mitsubishi UFJ Trust and Banking at March 31, 2018, would have increased capital accounts by
¥1,910,106 million with a corresponding decrease in unappropriated retained earnings.
The Companies Act permits that common stock, legal reserve, additional paid-in capital, and other capital
surplus and retained earnings can be transferred among these accounts under certain conditions upon the approval
of a shareholders’ meeting. The Companies Act limits the increase of paid-in capital in case disposition of
treasury stock and issuance of common stock are performed at the same time.
As for Capital surplus, the fee retained by MUFG’s subsidiary as underwriting compensation, net of stock
issuance expense, was included in the total Capital surplus balance.
Treasury Stock
The Companies Act permits Japanese companies to effect purchases of their own shares pursuant to a
resolution by the shareholders at an annual general meeting until the conclusion of the following ordinary general
meeting of shareholders, and to hold such shares as their treasury stock indefinitely regardless of purpose.
However, the Companies Act requires the amount of treasury stock purchased should be within the amount of
retained earnings available for dividends. Disposition of treasury stock is subject to the approval of the Board of
Directors and is to follow the procedures similar to a public offering of shares for subscription.
From May 18, 2015 to June 16, 2015, MUFG repurchased 111,151,800 shares of MUFG’s common stock
by market purchases based on the discretionary dealing contract regarding repurchase of own shares for
approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on May 15, 2015. The repurchase plan, as authorized by the Board of Directors of
MUFG, allowed for the repurchase of an aggregate amount of up to 160,000,000 shares, which represents the
F-96
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equivalent of 1.14% of the total number of common shares outstanding, or of an aggregate repurchase amount of
up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve
capital efficiency, and to implement flexible capital policies.
From November 16, 2015 to December 8, 2015, MUFG repurchased 121,703,700 shares of MUFG’s
common stock by market purchases based on the discretionary dealing contract regarding repurchase of own
shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the
Board of Directors of MUFG held on November 13, 2015. The repurchase plan, as authorized by the Board of
Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 140,000,000 shares, which
represents the equivalent of 1.01% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies.
From May 17, 2016 to June 13, 2016, MUFG repurchased 190,614,800 shares of MUFG’s common stock.
These purchases were made through Off-Auction Own Share Repurchase Trading (ToSTNeT-3) of the Tokyo
Stock Exchange and by market purchases based on the discretionary dealing contract regarding repurchase of
own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of
the Board of Directors of MUFG held on May 16, 2016. The repurchase plan as authorized by the Board of
Directors of MUFG allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which
represents the equivalent of 1.67% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies.
From November 15, 2016 to December 22, 2016, MUFG repurchased 142,238,800 shares of MUFG’s
common stock by market purchases based on the discretionary dealing contract regarding repurchase of own
shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the
Board of Directors of MUFG held on November 14, 2016. The repurchase plan, as authorized by the Board of
Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which
represents the equivalent of 1.69% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies.
From May 16, 2017 to June 21, 2017 MUFG repurchased 141,158,900 shares of MUFG’s common stock by
market purchases based on the discretionary dealing contract regarding repurchase of own shares for
approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on May 15, 2017. The repurchase plan as authorized by the Board of Directors of
MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which represents the
equivalent of 1.49% of the total number of common shares outstanding, or of an aggregate repurchase amount of
up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve
capital efficiency, and to implement flexible capital policies. On July 20, 2017, MUFG cancelled all the acquired
shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on
May 15, 2017.
From November 15, 2017 to December 22, 2017, MUFG repurchased 127,666,900 shares of MUFG’s
common stock by market purchases based on the discretionary dealing contract regarding repurchase of own
shares for approximately ¥100 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the
Board of Directors of MUFG held on November 14, 2017. The repurchase plan as authorized by the Board of
Directors of MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which
F-97
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
represents the equivalent of 1.50% of the total number of common shares outstanding, or of an aggregate
repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to
shareholders, to improve capital efficiency, and to implement flexible capital policies. On January 22, 2018,
MUFG cancelled all of the acquired shares in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on November 14, 2017.
Parent Company Shares Held by Subsidiaries and Affiliated Companies
At March 31, 2018, certain subsidiaries and affiliated companies owned shares of common stock of MUFG.
Such shares are included in treasury stock in the accompanying consolidated balance sheets and deducted from
the MUFG’s shareholders’ equity.
19. RETAINED EARNINGS, LEGAL RESERVE AND DIVIDENDS
In addition to the Companies Act, Japanese banks, including MUFG Bank and Mitsubishi UFJ Trust and
Banking, are required to comply with the Banking Law of Japan (the “Banking Law”).
Legal Reserve Set Aside as Appropriation of Retained Earnings and Legal Capital Surplus
Under the Companies Act
The Companies Act provides that an amount at least equal to 10% of the aggregate amount of cash
dividends and certain appropriations of retained earnings associated with cash outlays applicable to each period
shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as an
appropriation of retained earnings and the legal capital surplus equals 25% of stated capital as defined in the
Companies Act.
Under the Banking Law
The Banking Law provides that an amount at least equal to 20% of the aggregate amount of cash dividends
and certain appropriations of retained earnings associated with cash outlays applicable to each fiscal year shall be
appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as appropriation
of retained earnings and the legal capital surplus equals 100% of stated capital as defined in the Companies Act.
Transfer of Legal Reserve
Under the Companies Act
Under the Companies Act, Japanese companies, including MUFG, were permitted, pursuant to a resolution
by the shareholders at a general meeting, to make legal reserve set aside as appropriation of retained earnings and
legal capital surplus available for dividends until the aggregate amount of the legal reserve and legal capital
surplus equals 25% of stated capital as defined in the Companies Act.
Under the Companies Act, Japanese companies, including MUFG, MUFG Bank and Mitsubishi UFJ Trust
and Banking, are permitted, primarily pursuant to a resolution by the shareholders at a general meeting, to
transfer legal capital surplus and legal reserve to stated capital and/or retained earnings without limitations of
thresholds, thereby effectively removing the thresholds provided for in the Companies Act and Banking Law at
the company’s discretion.
F-98
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Under the Banking Law
Under the Banking Law, Japanese banks, including MUFG Bank and Mitsubishi UFJ Trust and Banking,
were permitted, pursuant to a resolution by the shareholders at a general meeting, to set aside a legal reserve as
an appropriation of retained earnings and legal capital surplus available for dividends until the aggregate amount
of the legal reserve and legal capital surplus equals 100% of stated capital as defined in the Companies Act.
Unappropriated Retained Earnings and Dividends
In addition to the provision that requires an appropriation for legal reserve as described above, the
Companies Act and the Banking Law impose certain limitations on the amount available for dividends.
Under the Companies Act, the amount available for dividends is based on the amount recorded in MUFG’s
general books of account maintained in accordance with accounting principles generally accepted in Japan
(“Japanese GAAP”). The adjustments included in the accompanying consolidated financial statements but not
recorded in MUFG’s general books of account, as explained in Note 1, have no effect on the determination of
retained earnings available for dividends under the Companies Act. Under the Banking Law, MUFG, MUFG
Bank and Mitsubishi UFJ Trust and Banking have to meet the minimum capital adequacy requirements and
distributions of retained earnings of MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking, which are
otherwise distributable to shareholders, are restricted in order to maintain the minimum capital requirements.
MUFG, formerly known as Mitsubishi Tokyo Financial Group, was established on April 2, 2001 with
common stock of ¥924,400 million, preferred stock of ¥222,100 million, legal capital surplus of
¥2,838,693 million and no retained earnings in accordance with the Commercial Code of Japan (“the Code”),
which was replaced by the Companies Act, and Japanese GAAP.
On October 1, 2005, MUFG started with common stock and preferred stock of ¥1,383,052 million, a legal
capital surplus of ¥3,577,570 million and retained earnings of ¥757,458 million in accordance with the Code and
Japanese GAAP.
MUFG’s amount available for dividends, at March 31, 2018, was ¥4,515,486 million, which is based on the
amount recorded in MUFG’s general books of account under Japanese GAAP.
Annual dividends, including those for preferred stock, are approved by the shareholders at an annual general
meeting held subsequent to the fiscal year to which the dividends are applicable. In addition, a semi-annual
interim dividend payment may be made by resolution of the Board of Directors, subject to limitations imposed by
the Companies Act and the Banking Law.
In the accompanying consolidated statements of equity, dividends and appropriations to legal reserve shown
for each fiscal year represent dividends approved and paid during the fiscal year and the related appropriation to
legal reserve.
F-99
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the changes in Accumulated OCI, net of tax and net of noncontrolling interests,
for the fiscal years ended March 31, 2016, 2017 and 2018:
Accumulated other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on investment securities:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated
company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on consolidation of certain
variable interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax
effects (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
(in millions)
¥2,304,555
(309,241)
¥1,995,314
31,984
¥2,032,807
244,249
—
—
—
—
5,509
118
—
—
(6,828)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,995,314
¥2,032,807
¥2,270,346
Net debt valuation adjustments (Note 14):
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance by a foreign affiliated
¥
— ¥
3,505
(2,080) ¥ (10,632)
(2,178)
(8,552)
company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,585)
Effect of adopting new guidance on reclassification on certain tax
effects (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(3,678)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(2,080) ¥ (10,632) ¥ (16,488)
Net unrealized gains (losses) on derivatives qualifying for cash flow
hedges:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax
¥
2,708
1,808
¥
4,516
(13,245)
¥
(8,729)
(7,025)
effects (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(3,496)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
4,516
¥
(8,729) ¥ (19,250)
Defined benefit plans:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax
¥ (187,640) ¥ (317,422) ¥ (214,062)
109,012
103,360
(129,782)
effects (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(14,543)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (317,422) ¥ (214,062) ¥ (119,593)
Foreign currency translation adjustments:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change during the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on consolidation of certain
variable interest entities (Note 26) . . . . . . . . . . . . . . . . . . . . . . . .
Effect of adopting new guidance on reclassification on certain tax
effects (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 947,632
(326,701)
¥ 620,931
(137,256)
¥ 482,039
(119,213)
—
—
(1,636)
—
—
(526)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 620,931
¥ 482,039
¥ 362,300
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,301,259
¥2,281,423
¥2,477,315
F-100
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the before tax and net of tax changes in each component of Accumulated OCI
for the fiscal years ended March 31, 2016, 2017 and 2018:
2016
2017
2018
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax
Before tax
(in millions)
Net unrealized gains (losses) on
investment securities:
Net unrealized gains (losses) on
investment securities . . . . . . . . . ¥(172,382) ¥ 81,568 ¥ (90,814) ¥ 307,476 ¥(107,082) ¥ 200,394 ¥631,154 ¥(204,916) ¥426,238
Reclassification adjustment for
gains included in net income
before attribution of
noncontrolling interests . . . . . . .
(239,934)
80,967
(158,967)
(274,278)
86,845
(187,433) (280,258)
84,328
(195,930)
Net change . . . . . . . . . . . . . .
(412,316) 162,535
(249,781)
33,198
(20,237)
12,961
350,896 (120,588) 230,308
Net unrealized gains (losses) on
investment securities
attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on
investment securities
attributable to Mitsubishi UFJ
Financial Group . . . . . . . . . . . . .
Net debt valuation adjustments
(Note 14):
Net debt valuation adjustments . . .
Reclassification adjustment for
losses (gains) included in net
income before attribution of
noncontrolling interests . . . . . . .
59,460
(19,023)
(13,941)
(309,241)
31,984
244,249
6,005
(2,032)
3,973
(12,693)
3,994
(8,699)
(3,555)
1,088
(2,467)
(707)
239
(468)
215
(68)
147
417
(128)
289
Net change . . . . . . . . . . . . . .
5,298
(1,793)
3,505
(12,478)
3,926
(8,552)
(3,138)
960
(2,178)
Net debt valuation adjustments
attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . .
Net debt valuation adjustments
attributable to Mitsubishi UFJ
Financial Group . . . . . . . . . . . . .
Net unrealized gains (losses) on
derivatives qualifying for cash flow
hedges:
Net unrealized gains (losses) on
derivatives qualifying for cash
flow hedges . . . . . . . . . . . . . . . .
Reclassification adjustment for
gains included in net income
before attribution of
noncontrolling interests . . . . . . .
—
3,505
—
(8,552)
—
(2,178)
23,633
(9,320)
14,313
(4,321)
2,041
(2,280)
(3,430)
1,571
(1,859)
(20,599)
8,094
(12,505)
(18,367)
7,402
9,443
(10,965)
(8,016)
(13,245)
(11,446)
2,850
4,421
(5,166)
(7,025)
Net change . . . . . . . . . . . . . .
3,034
(1,226)
1,808
(22,688)
Net unrealized gains on
derivatives qualifying for cash
flow hedges attributable to
noncontrolling interests . . . . . . .
Net unrealized gains (losses) on
derivatives qualifying for cash
flow hedges attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . .
—
—
—
(13,245)
(7,025)
1,808
F-101
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2016
2017
2018
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax Before tax
Tax
(expense)
or benefit Net of tax
Before tax
(in millions)
(209,209)
72,115
(137,094)
131,971
(41,852)
90,119
154,708
(48,537) 106,171
9,839
(4,238)
5,601
20,105
(6,652)
13,453
5,904
(2,237)
3,667
Defined benefit plans:
Defined benefit plans . . . . . . . . . .
Reclassification adjustment for
losses included in net income
before attribution of
noncontrolling interests . . . . . . .
Net change . . . . . . . . . . . . . .
(199,370)
67,877
(131,493)
152,076
(48,504)
103,572
160,612
(50,774) 109,838
Defined benefit plans attributable
to noncontrolling interests . . . . .
Defined benefit plans attributable
to Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . .
Foreign currency translation
adjustments:
Foreign currency translation
(1,711)
212
826
(129,782)
103,360
109,012
adjustments . . . . . . . . . . . . . . . .
(396,995)
43,109
(353,886)
(148,460)
2,424
(146,036) (137,811)
32,767
(105,044)
Reclassification adjustment for
losses (gains) included in net
income before attribution of
noncontrolling interests . . . . . . .
(3,670)
879
(2,791)
3,293
(467)
2,826
(1,494)
1,760
266
Net change . . . . . . . . . . . . . .
(400,665)
43,988
(356,677)
(145,167)
1,957
(143,210) (139,305)
34,527
(104,778)
Foreign currency translation
adjustments attributable to
noncontrolling interests . . . . . . .
Foreign currency translation
adjustments attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
attributable to Mitsubishi UFJ
Financial Group . . . . . . . . . . . . . . . . .
(29,976)
(5,954)
14,435
(326,701)
(137,256)
(119,213)
¥(760,411)
¥ (23,709)
¥224,845
F-102
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the effect of the reclassification of significant items out of Accumulated
OCI on the respective line items of the accompanying consolidated statements of income for the fiscal years
ended March 31, 2016, 2017 and 2018:
Details of Accumulated OCI components
Net unrealized losses (gains) on
investment securities
Net gains on sales and redemptions
of Available-for-sale
securities . . . . . . . . . . . . . . . . . .
Impairment losses on investment
securities . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Other
2016
2017
2018
Amount reclassified out of
Accumulated OCI
(in millions)
Line items in the consolidated
statements of income
¥(267,240) ¥(307,041) ¥(287,279)
Investment securities gains—net
22,885
4,421
32,744
19
6,759
262
Investment securities gains—net
(239,934)
80,967
(274,278)
86,845
(280,258) Total before tax
84,328
Income tax expense
¥(158,967) ¥(187,433) ¥(195,930) Net of tax
Net debt valuation adjustments
(Note 14) . . . . . . . . . . . . . . . . . . . . . .
¥
(707) ¥
215
¥
417
Equity in earnings of equity
method investees—net
(707)
239
215
(68)
417 Total before tax
(128)
Income tax expense
¥
(468) ¥
147
¥
289 Net of tax
Net unrealized losses (gains) on
derivatives qualifying for cash flow
hedges
Interest rate contracts . . . . . . . . . . .
¥ (20,338) ¥ (18,332) ¥
(7,782)
Interest income on Loans,
including fees
Other
. . . . . . . . . . . . . . . . . . . . . . .
(261)
(35)
(234)
Defined benefit plans
Net actuarial loss(1) . . . . . . . . . . . . .
Prior service cost(1) . . . . . . . . . . . . .
Loss (gain) on settlements and
curtailment, and other(1) . . . . . . .
(20,599)
8,094
(18,367)
7,402
(8,016) Total before tax
2,850
Income tax expense
¥ (12,505) ¥ (10,965) ¥
(5,166) Net of tax
¥ 21,251
(10,847)
¥ 31,837
(9,927)
¥ 17,280
(6,959)
(565)
9,839
(4,238)
(1,805)
20,105
(6,652)
(4,417)
5,904 Total before tax
(2,237)
Income tax expense
¥
5,601
¥ 13,453
¥
3,667 Net of tax
F-103
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Details of Accumulated OCI components
Foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . .
¥
2016
2017
2018
Amount reclassified out of
Accumulated OCI
(in millions)
Line items in the consolidated
statements of income
(4,270) ¥
600
(3,670)
879
(39) ¥
3,332
3,293
(467)
(5,743) Other non-interest income
4,249 Other non-interest expenses
(1,494) Total before tax
1,760
Income tax expense
¥
(2,791) ¥
2,826
¥
266 Net of tax
Total reclassifications for the period . . .
¥(255,071) ¥(269,032) ¥(283,447) Total before tax
85,941
87,060
86,573
Income tax expense
¥(169,130) ¥(181,972) ¥(196,874) Net of tax
Note:
(1) These Accumulated OCI components are included in the computation of net periodic benefit cost. See Note 13 for more information.
21. NONCONTROLLING INTERESTS
Deconsolidation of Subsidiaries
The gains and losses due to deconsolidation of subsidiaries were recognized under “Other non-interest
income” and “Other non-interest expenses,” respectively, in the accompanying consolidated statements of
income. The amount of net gains was ¥3,261 million for the fiscal year ended March 31, 2016, the amount of net
losses was ¥2,848 million for the fiscal year ended March 31, 2017 and the amount of net gains was
¥4,448 million for the fiscal year ended March 31, 2018, respectively.
Changes in MUFG’s Ownership Interests in Subsidiaries
The following table presents the effect on MUFG’s shareholders’ equity from changes in ownership of
subsidiaries resulting from transactions with the noncontrolling interest shareholders during the fiscal years
ended March 31, 2016, 2017 and 2018:
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . . . . . . . .
Transactions between Mitsubishi UFJ Financial Group and the
noncontrolling interest shareholders:
Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling
interest shareholder (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net transfers to the noncontrolling interest shareholders . . . . . . . . . . . . . . . .
Change from net income attributable to Mitsubishi UFJ Financial Group
and transactions between Mitsubishi UFJ Financial Group and the
noncontrolling interest shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2017
2018
¥802,332
(in millions)
¥202,680
¥1,228,160
—
(1,630)
(1,630)
—
(429)
(429)
(34,751)
8,006
(26,745)
¥800,702
¥202,251
¥1,201,415
F-104
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
22. REGULATORY CAPITAL REQUIREMENTS
Japan
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings are
subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in
which they operate. Failure to meet minimum capital requirements will initiate certain mandatory actions by
regulators that, if undertaken, could have a direct material effect on MUFG’s consolidated financial statements.
In Japan, MUFG, MUFG Bank, and Mitsubishi UFJ Trust and Banking are subject to regulatory capital
requirements promulgated by the Financial Services Agency of Japan (“FSA”) in accordance with the provisions
of the Banking Law and related regulations. A banking institution is subject to the minimum capital requirements
both on a consolidated basis and a stand-alone basis, and is required to maintain the minimum capital irrespective
of whether it operates independently or as a subsidiary under the control of another company. When a bank
holding company manages operations of its banking subsidiaries, it is required to maintain the minimum capital
adequacy ratio on a consolidated basis in the same manner as its subsidiary banks. The FSA provides two sets of
capital adequacy guidelines. One is a set of guidelines applicable to Japanese banks and bank holding companies
with their foreign offices conducting international operations, as defined, and the other is applicable to Japanese
banks and bank holding companies that are not engaged in international operations conducted by their foreign
offices.
The Basel Committee on Banking Supervision (“BCBS”) of the Bank for International Settlements
(“BIS”) sets capital adequacy standards for all internationally active banks to ensure minimum levels of capital.
The Basel Committee revised the 1988 Accord (“Basel I”) in June 2004 and released “International
Convergence of Capital Measurement and Capital Standards: A Revised Framework” (“Basel II”). In addition,
the Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global
regulatory framework, which has been referred to as “Basel III,” in July and September 2010. In December 2010,
the Basel Committee agreed on the details of the Basel III rules. Effective as of March 31, 2013, Basel III was
adopted by the FSA with transitional measures for Japanese banking institutions with international operations
conducted by their foreign offices. MUFG calculated capital ratios as of March 31, 2017 and 2018 in accordance
with Basel III.
Capital Ratios
Basel III, the same as Basel II, is based on “three pillars”: (1) minimum capital requirements, (2) the self-
regulation of financial institutions based on supervisory review process, and (3) market discipline through the
disclosure of information. The framework of the 1988 Accord, Basel I is improved and expanded to be included
in “minimum capital requirements” as the first pillar of Basel II and Basel III.
As for the denominator of the capital ratio, the Basel framework provides the following risk-based
approaches and a range of options for determining risk-weighted assets.
“Credit Risk”
The Basel framework provides options for determining the risk-weighted assets for credit risk to allow
banks to select approaches that are most appropriate for their level of risk assessment. Banks choose one of
three approaches: “Standardized Approach,” “Foundation Internal Ratings-Based Approach” or “Advanced
Internal Ratings-Based Approach (“AIRB”).”
F-105
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
“Market Risk”
In the “Amendment to the Capital Accord to incorporate market risks” of the year 1996, a choice between
two methodologies “the Standardized Measurement Method” and “Internal Models Approach” is permitted.
“Combination of Internal Models Approach and the Standardized Measurement Method” is also allowed
under certain conditions. This is unchanged in Basel III.
“Operational Risk”
Operational risk, which is defined as the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events, is newly added in Basel II. The Basel framework presents three
methods for calculating operational risk capital charges: (i) the Basic Indicator Approach; (ii) the
Standardized Approach; or (iii) Advanced Measurement Approaches (“AMA”). Banks adopt one of the
three approaches to determine the risk-weighted assets for operational risk.
Banks need to obtain approval from their supervisors prior to adopting the following approaches to calculate
capital requirements for each risk:
‰
‰
‰
the Advanced Internal Ratings-Based Approach for credit risk
the Internal Models Approach for market risk
the Standardized Approach and AMA for operational risk
With approval from the FSA, MUFG and most of its major subsidiaries adopt AIRB to calculate capital
requirements for credit risk, adopt the AMA to calculate capital requirements for operational risk, as for market
risk, adopt the Internal Models Approach mainly to calculate general market risk and adopt the Standardized
Measurement Method to calculate specific risk.
The MUFG Group’s proprietary assets do not include trust assets under management and administration in a
capacity of agent or fiduciary and, accordingly trust account assets are generally not included in the capital
measure. However, guarantees for trust principal are counted as off-balance sheet items requiring a capital charge
in accordance with the capital adequacy guidelines.
Under Basel III, as adopted by the FSA, MUFG’s risk-weighted assets increased, largely reflecting the new
capital charge of the credit valuation adjustment (CVA), the credit risk related to asset value correlation
multiplier for large financial institutions, and the 250% risk-weighted threshold items not deducted from
Common Equity Tier 1 capital, as well as the conversion of certain Basel II capital deductions to risk-weighted
assets, such as securitizations.
On the other hand, as for the numerator of the capital ratio, there are three primary regulatory capital ratios
used to assess capital adequacy, Common Equity Tier 1, Tier 1 and Total capital ratios, which are determined by
dividing applicable capital components by risk-weighted assets. Tier 1 capital is redefined, and consists of
Common Equity Tier 1 capital and Additional Tier 1 capital. Common Equity Tier 1 capital is a new category of
capital primarily consisting of common stock, capital surplus, retained earnings, and Accumulated OCI.
Regulatory adjustments including certain intangible fixed assets, such as goodwill, and defined-benefit pension
fund assets will be deducted from Common Equity Tier 1. The amount of adjustments to be deducted will
increase progressively over time. Additional Tier 1 capital generally consists of Basel III compliant preferred
securities, other capital that meets Tier 1 requirements under Basel II standards, and net of regulatory
adjustments. Subject to transitional measures, adjustments are made to Additional Tier 1 capital for items
F-106
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
including intangible fixed assets, such as goodwill, and foreign currency translation adjustments, with the
amounts of such adjustments to Additional Tier 1 capital progressively decreasing over time. Tier 2 capital
generally consists of Basel III compliant deferred obligations, such as subordinated debts, capital that meet Tier 2
requirements under Basel II standards, certain allowances for credit losses and noncontrolling interests in
subsidiaries’ Tier 2 instruments. Subject to transitional measures, certain items including 45% of unrealized
profit on Available-for-sale securities and revaluation of land are deducted from Tier 2 capital with the deduction
amounts progressively decreasing over time. Total capital is defined as the sum of Tier 1 and Tier 2 capital.
Basel III will be adopted in accordance with transition arrangements. Examples of these transition
arrangements include initially lower capital adequacy ratios that will increase progressively up to the Basel III
adequacy levels as issued by BCBS. In addition, individual elements of capital will be phased out progressively
over the same period of time to arrive at a capital base that is consistent with that defined by BCBS in Basel III.
Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer and the Global
Systematically Important Bank (“G-SIB”), as designated by the FSB, surcharge requirements became applicable
to Japanese banking institutions with international operations conducted through foreign offices. The
requirements are currently being phased in and, as of March 31, 2018, MUFG is required to maintain a capital
conservation buffer of 1.875%, a G-SIB surcharge of 1.125% and a countercyclical buffer of 0.01% in addition to
the 4.50% minimum Common Equity Tier 1 capital ratio. When fully implemented on March 31, 2019, MUFG
will be required to maintain a capital conservation buffer of 2.5%, a countercyclical buffer of up to 2.5%, and a
G-SIB surcharge of 1.5%, assuming MUFG will be in Bucket 2 of the G-SIB list.
F-107
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The risk-adjusted capital amounts and ratios of MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking
presented in the following table are based on amounts calculated in accordance with Japanese GAAP as required
by the FSA.
Actual
For capital
adequacy purposes
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
Consolidated:
At March 31, 2017:
Total capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,076,158
14,053,431
2,406,555
15.85% ¥11,398,640
7,356,801
15.28
971,933
19.80
10.00%
8.00
8.00
Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,232,491
11,680,740
2,058,449
Common Equity Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,413,885
10,245,812
1,928,970
13.36
12.70
16.94
11.76
11.14
15.87
9,118,912
5,517,601
728,950
7,409,116
4,138,201
546,713
8.00
6.00
6.00
6.50
4.50
4.50
At March 31, 2018:
Total capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,795,480
14,470,240
2,545,648
16.56% ¥12,492,344
7,280,570
15.90
1,016,420
20.03
11.01%
8.00
8.00
Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,251,749
12,374,074
2,245,853
Common Equity Tier1 capital (to risk-weighted assets):
MUFG(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,284,945
10,788,381
2,060,107
14.32
13.59
17.67
12.58
11.85
16.21
10,223,072
5,460,427
762,315
8,521,118
4,095,321
571,736
9.01
6.00
6.00
7.51
4.50
4.50
Stand-alone:
At March 31, 2017:
Total capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12,823,393
2,426,482
16.70% ¥ 6,140,606
947,592
20.48
8.00%
8.00
Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,655,522
2,067,034
13.88
17.45
Common Equity Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,247,740
1,937,599
12.04
16.35
4,605,455
710,694
3,454,091
533,020
6.00
6.00
4.50
4.50
At March 31, 2018:
Total capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,211,327
2,529,316
16.90% ¥ 6,252,458
1,017,331
19.88
8.00%
8.00
Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,344,078
2,232,760
14.51
17.55
Common Equity Tier1 capital (to risk-weighted assets):
BK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,802,445
2,057,760
12.54
16.18
4,689,344
762,998
3,517,008
572,249
6.00
6.00
4.50
4.50
Note:
(1) Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer and G-SIB surcharge requirements became
applicable to Japanese banking institutions with international operations conducted through foreign offices. As a result, in addition to the
F-108
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4.50% minimum Common Equity Tier 1 capital ratio, MUFG is required to maintain a capital conservation buffer of 1.25% and a G-SIB
surcharge of 0.75% as of March 31, 2017 and a capital conservation buffer of 1.875% and a G-SIB surcharge of 1.125% as of March 31,
2018. As of the same date, the countercyclical buffer applicable to MUFG is 0.01%.
Mitsubishi UFJ Morgan Stanley Securities and other securities subsidiaries in Japan and overseas are also
subject to regulatory capital requirements of the countries or jurisdictions in which they operate. In Japan, the
Financial Instruments and Exchange Act and related ordinance require financial instruments firms to maintain a
minimum capital ratio of 120% calculated as a percentage of capital accounts less certain fixed assets, as
determined in accordance with Japanese GAAP, against amounts equivalent to market, counterparty credit and
operations risks. Specific guidelines are issued as a ministerial ordinance which details the definition of essential
components of the capital ratios, including capital, deductible fixed asset items and risks, and related measures.
Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. A capital ratio of less than
140% will call for regulatory reporting and a capital ratio of less than 100% may lead to a suspension of all or
part of the business for a period of time and cancellation of a registration.
At March 31, 2017, Mitsubishi UFJ Morgan Stanley Securities’s capital accounts less certain fixed assets of
¥426,133 million on a stand-alone basis and ¥451,285 million on a consolidated basis, were 323.0% and 324.7%
of the total amounts equivalent to market, counterparty credit and operations risks, respectively. At March 31,
2018, its capital accounts less certain fixed assets of ¥446,539 million on a stand-alone basis and
¥473,296 million on a consolidated basis, were 291.2% and 293.2% of the total amounts equivalent to market,
counterparty credit and operations risks, respectively.
Management believes, as of March 31, 2018, that MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking,
Mitsubishi UFJ Morgan Stanley Securities and other regulated securities subsidiaries met all capital adequacy
requirements to which they are subject.
United States of America
In the United States of America, MUFG Americas Holdings and its banking subsidiary MUFG Union Bank,
N.A. (“MUFG Union Bank” or “BK(US)”), MUFG Bank’s largest subsidiaries operating outside Japan, are
subject to various regulatory capital requirements administered by the U. S. Federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a material effect on MUFG Americas Holdings’s consolidated
financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, MUFG Americas Holdings and MUFG Union Bank must meet specific capital guidelines that involve
quantitative measures of MUFG Americas Holdings’s and MUFG Union Bank’s assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. MUFG Americas Holdings’s capital
amounts and MUFG Union Bank’s prompt corrective action classification are also subject to qualitative
judgments by the regulators about components, risk-weightings and other factors. Prompt corrective action
provisions are not applicable to bank holding companies such as MUFG Americas Holdings. MUFG Union Bank
is subject to laws and regulations that limit the amount of dividends MUFG Union Bank can pay to MUFG
Americas Holdings.
Quantitative measures established by regulation to help ensure capital adequacy require MUFG Americas
Holdings and MUFG Union Bank to maintain minimum amounts and ratios (set forth in the tables below) of
Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital
(as defined) to quarterly average assets (as defined).
In July 2013, the Board of Governors of the Federal Reserve System and the other U.S. Federal banking
agencies adopted final rules making significant changes to the U.S. regulatory capital framework for
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
U.S. banking organizations (U.S. Basel III). The final rules are intended to conform this framework to the BCBS’
current international regulatory capital accord (Basel III). These rules replace the U.S. Federal banking agencies’
general risk-based capital rules (commonly known as “Basel I”), advanced approaches rules (commonly known
as “Basel II”) that are applicable to certain large banking organizations (including MUFG Union Bank), and
leverage rules, and are subject to certain transition provisions. Among other requirements, the U.S. Basel III rules
revise the definition of capital, increase minimum capital ratios, and introduce a minimum Common Equity
Tier 1 capital ratio of 4.5% and a capital conservation buffer of 2.5% (for a total minimum Common Equity
Tier 1 capital ratio of 7.0%) and a potential countercyclical buffer of up to 2.5%, which would be imposed by
regulators at their discretion if it is determined that a period of excessive credit growth is contributing to an
increase in financial institution systemic risk; mandate a Tier 1 leverage ratio of 4% and introduce, for large and
internationally active bank holding companies, a Tier 1 Supplementary Leverage Ratio that is currently set at 3%
and which incorporates off-balance sheet exposures; revise Basel I rules for calculating risk-weighted assets
under a standardized approach; modify the existing Basel II advanced approaches rules for calculating risk-
weighted assets under U.S. Basel III; and eliminate, for advanced approaches institutions, over a four-year
phase-in period beginning on January 1, 2014, the Accumulated OCI or loss exclusion that had applied under
Basel I and Basel II rules.
As a result of the Federal Reserve’s approval of MUFG Americas Holdings’s request to opt out of the
advanced approaches methodology in the fourth quarter of 2014, MUFG Americas Holdings calculated its
regulatory capital ratios under U.S. Basel I rules at December 31, 2014 and became subject to the U.S. Basel III
standardized approach on January 1, 2015, with certain provisions subject to phase-in periods. As permitted for
institutions not subject to the advanced approaches methodology, MUFG Americas Holdings made a one-time
permanent election in the first quarter of 2015 to exclude certain components of the Accumulated OCI from its
regulatory capital calculations. MUFG Union Bank continues to be subject to the advanced approaches rules.
Advanced approaches institutions were required to apply U.S. Basel III rules beginning on January 1, 2014. The
U.S. Basel III rules are scheduled to be substantially phased in by January 1, 2019. Effective June 30, 2015,
MUFG Americas Holdings updated the methodologies applied to the calculation of its regulatory capital ratios
due to recent regulatory guidance, which clarified the treatment of certain off-balance sheet credit exposures.
These methodologies were applied to MUFG Americas Holdings’s capital ratios and increased the ratios by
approximately 50 basis points. This change did not affect MUFG Union Bank’s ratios as the U.S. Office of the
Comptroller of the Currency (“OCC”) had previously adopted this guidance.
As required under U.S. Basel III rules, the 2.5% capital conservation buffer is being implemented on a
phased-in basis in equal increments of 0.625% per year over a four-year period that commenced on January 1,
2016. MUFG Americas Holdings and MUFG Union Bank would satisfy the minimum capital requirements
including the capital conservation buffer on a fully phased-in basis if those requirements were effective as of
December 31, 2017.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The figures on the table below are calculated according to U.S. Basel III as of December 31, 2016 and 2017.
MUFG Americas Holdings’s actual capital amounts and ratios are presented as follows:
Actual
Minimum capital
ratios required(1)
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
MUAH:
At December 31, 2016:
Total capital (to risk-weighted assets)
. . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . . . . . . . . . . . . . . . .
Common Equity Tier 1 capital (to risk-weighted assets) . . . . . . . . .
At December 31, 2017:
. . . . . . . . . . . . . . . . . . . . . . .
Total capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets) . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . . . . . . . . . . . . . . . .
Common Equity Tier 1 capital (to risk-weighted assets) . . . . . . . . .
$16,431
14,757
14,757
14,757
$17,106
15,708
15,708
15,708
16.45% $8,617
6,619
14.77
5,952
9.92
5,120
14.77
17.76% $8,910
6,984
16.31
6,245
10.06
5,539
16.31
8.625%
6.625
4.000
5.125
9.250%
7.250
4.000
5.750
Notes:
(1) The minimum capital requirement includes a capital conservation buffer of 1.250% at December 31, 2017 and 0.625% at December 31,
2016.
(2) Excludes certain deductions.
The figures on the table below are calculated according to U.S. Basel III as of December 31, 2016 and 2017.
MUFG Union Bank’s actual capital amounts and ratios are presented as follows:
Actual
Minimum capital
ratios required(1)
Ratios OCC
requires to be
“well capitalized”
Amount
Ratio
Amount
Ratio
Amount
Ratio
(in millions, except percentages)
BK(US):
At December 31, 2016:
Total capital (to risk-weighted assets)
. . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . .
Common Equity Tier 1 capital (to risk-weighted
$14,560
13,056
13,056
16.29% $7,709
5,922
14.61
4,558
11.46
8.625% $8,938
7,151
6.625
5,697
4.000
10.00%
8.00
5.00
assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,056
14.61
4,581
5.125
5,810
6.50
At December 31, 2017:
Total capital (to risk-weighted assets)
. . . . . . . . .
Tier 1 capital (to risk-weighted assets) . . . . . . . . .
Tier 1 capital (to quarterly average assets)(2)
. . . .
Common Equity Tier 1 capital (to risk-weighted
$15,335
14,028
14,028
17.68% $8,023
6,288
16.17
4,762
11.78
9.250% $8,673
6,938
7.250
5,953
4.000
10.00%
8.00
5.00
assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,028
16.17
4,987
5.750
5,637
6.50
Notes:
(1) Beginning January 1, 2016, the minimum capital requirement includes a capital conservation buffer of 1.250%.
(2) Excludes certain deductions.
Management believes, as of December 31, 2017, that MUFG Americas Holdings and MUFG Union Bank
met all capital adequacy requirements to which they are subject.
F-111
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2016 and 2017, the notification from the OCC categorized MUFG Union Bank as “well
capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well
capitalized,” MUFG Union Bank must maintain a minimum total risk-based capital ratio of 10% as of
December 31, 2016 and 2017, a Tier 1 risk-based capital ratio of 8% as of December 31, 2016 and 2017, a Tier 1
capital to quarterly average assets of 5% as of December 31, 2016 and 2017, and Common Equity Tier 1 risk-
based capital ratio of 6.5% as of December 31, 2016 and 2017, as set forth in the table. There are no conditions
or events since that notification that management believes have changed MUFG Union Bank’s category.
23. EARNINGS PER COMMON SHARE APPLICABLE TO COMMON SHAREHOLDERS OF MUFG
Reconciliations of net income and weighted average number of common shares outstanding used for the
computation of basic EPS to the adjusted amounts for the computation of diluted EPS for the fiscal years ended
March 31, 2016, 2017 and 2018 are as follows:
Income (Numerator):
Net income attributable to Mitsubishi UFJ Financial Group . . . . . . .
Effect of dilutive instruments:
Stock acquisition rights and restricted stock units—Morgan
2016
2017
2018
(in millions)
¥
802,332
¥
202,680
¥ 1,228,160
Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,704)
(3,212)
(3,826)
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group and assumed conversions . . . . . . . . . . . . . . . . . . .
¥
799,628
¥
199,468
¥ 1,224,334
Shares (Denominator):
Weighted average common shares outstanding . . . . . . . . . . . . . . . . .
Effect of dilutive instruments:
Stock acquisition rights and the common shares of MUFG
2016
2017
2018
(thousands of shares)
13,885,842
13,574,314
13,291,842
under Board Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,474
10,571
1,650
Weighted average common shares for diluted computation . . . . . . . .
13,903,316
13,584,885
13,293,492
2016
2017
(in yen)
2018
Earnings per common share applicable to common shareholders
of Mitsubishi UFJ Financial Group:
Basic earnings per common share:
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
57.78
¥
14.93
¥
92.40
Diluted earnings per common share:
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
57.51
¥
14.68
¥
92.10
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
24. DERIVATIVE FINANCIAL INSTRUMENTS
The MUFG Group uses various derivative financial instruments both for trading purposes and for purposes
other than trading (primarily risk management purposes) in the normal course of business to meet the financial
needs of its customers, as a source of revenue and to manage its exposures to a variety of risks.
Market risk is the possibility that future changes in market indices make the financial instruments less
valuable. The MUFG Group is a party to derivative financial instruments, including swaps, forwards, options and
other types of derivatives, dealing primarily with market risk associated with interest rates, foreign currencies,
equity and commodity prices, and credit risk associated with counterparty’s nonperformance of transactions.
Credit risk is the possibility that a loss may result from a counterparty’s failure to perform according to the
terms and conditions of the contract, which may exceed the value of underlying collateral. To reduce credit risk,
the MUFG Group may require collateral or guarantees based on a case-by-case assessment of creditworthiness of
each customer and evaluation of the instrument. The MUFG Group also uses master netting agreements in order
to mitigate overall counterparty credit risk.
Trading Activities
The MUFG Group’s trading activities include dealing and customer accommodation activities. As part of its
trading activities, the MUFG Group offers a variety of derivative financial instruments for managing interest rate
and foreign exchange risk to its domestic and foreign corporate and financial institution customers. The MUFG
Group also enters into other types of derivative transactions, including equity and credit-related contracts, for its
own account.
Risk Management Activities
As part of the MUFG Group’s risk management activities, asset and liability management is viewed as one
of the methods for the MUFG Group to manage its interest rate exposures on interest-bearing assets and
liabilities. The MUFG Group uses certain derivative financial instruments in order to minimize significant
unplanned fluctuations in earnings that are caused by interest rate volatility. For example, an increase or a
decrease in interest income and interest expense on hedged variable rate assets and liabilities as a result of
interest rate fluctuations are expected to be substantially offset by the variability in earnings by gains and losses
on the derivative instruments that are linked to these hedged assets and liabilities.
The MUFG Group enters into interest rate swaps and other contracts primarily to manage the interest rate
risk of its loans, investment securities and deposit liabilities. Interest rate contracts, which are generally
non-leveraged generic interest rate and basis swaps, options and futures, allow the MUFG Group to effectively
manage its interest rate risk position. Option contracts primarily consist of caps, floors, swaptions and options on
index futures. Futures contracts used for asset and liability management activities are primarily index futures
providing for cash payments based upon the movement of an underlying rate index.
The MUFG Group enters into forward exchange contracts, currency swaps and other contracts in response
to currency exposures resulting from on-balance sheet assets and liabilities denominated in foreign currencies in
order to limit the net foreign exchange position by currency to an appropriate level.
Derivatives Designated as Hedges
The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions
entered by MUFG Americas Holdings whose fiscal period ends on December 31.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash Flow Hedges
MUFG Americas Holdings uses interest rate swaps to hedge the risk of changes in cash flows attributable to
changes in the designated benchmark interest rate on the London Interbank Offered Rate (“LIBOR”) indexed
loans, and to a lesser extent, to hedge interest rate risk on rollover debt.
MUFG Americas Holdings used interest rate swaps with a notional amount of ¥768.4 billion at
December 31, 2017 to hedge the risk of changes in cash flows attributable to changes in the designated
benchmark interest rate on LIBOR indexed loans. To the extent effective, payments received or paid under the
swap contract offset fluctuations in interest income on loans caused by changes in the relevant LIBOR index.
MUFG Americas Holdings used interest rate swaps with a notional amount of ¥22.4 billion at December 31,
2017 to hedge the risk of changes in cash flows attributable to changes in the designated benchmark interest rate
on LIBOR indexed short-term borrowings. At December 31, 2017, the weighted average remaining life of the
active cash flow hedges was 3.7 years.
For cash flow hedges, the effective portion of the gain or loss on the hedging instruments is reported as a
component of OCI and reclassified into earnings in the same period or periods during which the hedged cash
flows are recognized in net interest income. Gains and losses representing hedge ineffectiveness are recognized
in non-interest expense in the period in which they arise. At December 31, 2017, MUFG Americas Holdings
expects to reclassify approximately ¥2.6 billion of losses from Accumulated OCI as a reduction to net interest
income during the year ending December 31, 2018. This amount could differ from amounts actually realized due
to changes in interest rates, hedge terminations and the addition of other hedges subsequent to December 31,
2017.
Fair Value Hedges
MUFG Americas Holdings engages in an interest rate hedging strategy in which one or more interest rate
swaps are associated with a specified interest-bearing liability, in order to convert the liability from a fixed rate to
a floating rate instrument. This strategy mitigates the changes in fair value of the hedged liability caused by
changes in the designated benchmark interest rate, U.S. dollar LIBOR.
For fair value hedges, any ineffectiveness is recognized in non-interest expense in the period in which it
arises. The change in the fair value of the hedged item and the hedging instrument, to the extent completely
effective, offsets with no impact on earnings. For the fiscal years ended December 31, 2016 and 2017, MUFG
Americas Holdings recorded losses on the hedging instruments and gains on the hedged liability, both of which
were less than ¥1 billion.
F-114
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notional Amounts of Derivative Contracts
The following table summarizes the notional amounts of derivative contracts at March 31, 2017 and 2018:
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notional amounts(1)
2017
2018
(in trillions)
¥1,252.7
216.9
4.7
0.5
6.0
4.3
¥1,219.7
220.8
6.1
0.3
6.5
3.1
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,485.1
¥1,456.5
Note:
(1)
Includes both written and purchased positions.
Impact of Derivatives on the Consolidated Balance Sheets
The following table summarizes fair value information on derivative instruments that are recorded on the
MUFG Group’s consolidated balance sheets at March 31, 2017 and 2018:
Fair value of derivative instruments
2017(1)(5)
2018(1)(5)
Not designated
as hedges(2)
Designated
as hedges(3)
Total
derivatives(4)
Not designated
as hedges(2)
Designated
as hedges(3)
Total
derivatives(4)
Derivative assets:
Interest rate contracts . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,240
4,301
188
35
67
2
Total derivative assets . . . . . . . . . . .
¥18,833
Derivative liabilities:
Interest rate contracts . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . .
Others(6) . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,305
4,084
182
31
58
(121)
Total derivative liabilities . . . . . . . .
¥18,539
¥ 2
—
—
—
—
—
¥ 2
¥23
—
—
—
—
—
¥23
(in billions)
¥14,242
4,301
188
35
67
2
¥18,835
¥14,328
4,084
182
31
58
(121)
¥ 8,712
3,557
207
35
72
2
¥12,585
¥ 8,674
3,000
227
33
71
(145)
¥18,562
¥11,860
¥—
—
—
—
—
—
¥—
¥17
—
—
—
—
—
¥17
¥ 8,712
3,557
207
35
72
2
¥12,585
¥ 8,691
3,000
227
33
71
(145)
¥11,877
Notes:
(1) The fair value of derivative instruments is presented on a gross basis even when derivative instruments are subject to master netting
agreements. Cash collateral payable and receivable associated with derivative instruments are not added to or netted against the fair value
amounts.
(2) The derivative instruments which are not designated as a hedging instrument are held for trading and risk management purposes, and are
presented in Trading account assets/liabilities except for (6).
F-115
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(3) The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions entered into by MUFG
Americas Holdings. The derivative instruments which are designated as hedging instruments are presented in Other assets or Other
liabilities on the accompanying consolidated balance sheets.
(4) This table does not include contracts with embedded derivatives for which the fair value option has been elected.
(5) For more information about fair value measurement and assumptions used to measure the fair value of derivatives, see Note 32.
(6) Others include mainly bifurcated embedded derivatives carried at fair value, which are presented in Deposits and Long-term debt.
Impact of Derivatives and Hedged Items on the Consolidated Statements of Income and Accumulated OCI
The following tables provide more detailed information regarding the derivative-related impact on the
accompanying consolidated statements of income and Accumulated OCI by accounting designation for the fiscal
years ended March 31, 2016, 2017 and 2018:
Gains and losses for trading and risk management derivatives (not designated as hedging instruments)
Trading and risk management derivatives gains and losses
(Not designated as hedging instruments)
2016
2017
2018
Foreign
exchange
gains (losses)
—net
Trading
account
profits (losses)
—net
Total
Foreign
exchange
gains (losses)
—net
Trading
account
profits (losses)
—net
Total
Foreign
exchange
gains (losses)
—net
Trading
account
profits (losses)
—net
Total
(in billions)
Interest rate
contracts . . . . . . . . .
¥ —
¥244
¥244
¥ —
¥(137)
¥(137)
¥ —
¥ 51
¥ 51
Foreign exchange
contracts . . . . . . . . .
Equity contracts . . . . .
Commodity
contracts . . . . . . . . .
Credit derivatives . . . .
Others . . . . . . . . . . . . .
368
—
—
—
6
—
149
2
12
27
368
149
2
12
33
(183)
—
—
—
—
—
(153)
(183)
(153)
(163)
—
2
18
(55)
2
18
(55)
—
—
3
—
(260)
6
(2)
(22)
(163)
(260)
6
(2)
(19)
Total . . . . . . . . . .
¥374
¥434
¥808
¥(183)
¥(325)
¥(508)
¥(160)
¥(227)
¥(387)
Gains and losses for derivatives designated as cash flow hedges
Gains (losses) recognized in Accumulated OCI on derivative
instruments (Effective portion)
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains reclassified from Accumulated OCI into income
(Effective portion)
Interest rate contracts(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note:
(1)
Included in Interest income.
F-116
2016
2017
2018
(in billions)
¥
¥
¥
¥
24
24
21
21
¥
¥
¥
¥
(3)
(3)
18
18
¥
¥
¥
¥
(4)
(4)
8
8
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Embedded Derivatives
Features embedded in other non-derivative hybrid contracts are separated from the host contracts and
measured at fair value when they are not clearly and closely related to the host contracts and meet the definition
of a derivative. The change in the fair value of such an embedded derivative is recognized currently in earnings,
unless it qualifies as a hedge. The fair value of the embedded derivative is presented in the accompanying
consolidated balance sheets with the host contract.
Credit Derivatives
The MUFG Group enters into credit derivatives to manage its credit risk exposure, to facilitate client
transactions, and for proprietary trading purposes, under which they provide the counterparty protection against
the risk of default on a set of debt obligations issued by a specified reference entity or entities. Types of such
credit derivatives primarily include single name credit default swaps, index and basket credit default swaps. The
MUFG Group will have to perform under a credit derivative if a credit event as defined under the contract
occurs. Such credit events include bankruptcy, dissolution or insolvency of the referenced entity, default and
restructuring of the obligations of the referenced entity. The MUFG Group’s counterparties are banks, broker-
dealers, insurance and other financial institutions. The contractual or notional amounts of these credit derivatives
represent the maximum potential amounts of future payments without consideration of possible recoveries under
recourse provisions or from collateral held or pledged.
F-117
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The table below summarizes certain information regarding protection sold through credit derivatives as of
March 31, 2017 and 2018:
At March 31, 2017:
Single name credit default swaps:
. . . . . . . . . . . . . . . . . . . . .
Investment grade(2)
Non-investment grade . . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Index and basket credit default swaps held by BK:
Investment grade(2)
. . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Index and basket credit default swaps held by
SCHD:
Investment grade(2)
. . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Total index and basket credit default swaps
sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total credit default swaps sold . . . . . . . . . . . . . . . .
Other credit derivatives sold(3)
Investment grade . . . . . . . . . . . . . . . . . . . . . . .
Total credit derivatives . . . . . . . . . . . . . . . . . . . . . .
Protection sold
Maximum potential/Notional amount
by expiration period
1 year
or less
1-5 years
Over
5 years
(in millions)
Total
Fair value
(Asset)/
Liability(1)
¥627,355
107,663
5,973
740,991
¥ 949,129
349,886
5,981
1,304,996
¥ 29,493
6,580
—
36,073
¥1,605,977
464,129
11,954
2,082,060
¥(21,005)
1,654
(516)
(19,867)
7,000
17,000
24,000
14,000
21,000
16,228
51,228
198,335
52,145
250,480
63,767
21,316
85,083
269,102
90,461
359,563
(4,145)
(837)
(4,982)
72,192
73,000
194,533
339,725
1,000
—
—
1,000
87,192
94,000
210,761
391,953
(1,278)
(1,725)
(11,734)
(14,737)
75,228
816,219
590,205
1,895,201
86,083
122,156
751,516
2,833,576
(19,719)
(39,586)
—
¥816,219
78,553
¥1,973,754
—
¥122,156
78,553
¥2,912,129
—
¥(39,586)
F-118
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018:
Single name credit default swaps:
Investment grade(2)
. . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Index and basket credit default swaps held by BK:
Investment grade(2)
. . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Index and basket credit default swaps held by
SCHD:
Investment grade(2)
. . . . . . . . . . . . . . . . . . . . .
Non-investment grade . . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Total index and basket credit default swaps
sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total credit default swaps sold . . . . . . . . . . . . . . . .
Other credit derivatives sold(3)
Investment grade . . . . . . . . . . . . . . . . . . . . . . .
Total credit derivatives . . . . . . . . . . . . . . . . . . . . . .
Protection sold
Maximum potential/Notional amount
by expiration period
1 year
or less
1-5 years
Over
5 years
(in millions)
Total
Fair value
(Asset)/
Liability(1)
¥440,610
168,102
—
608,712
¥1,199,269
259,497
45,425
1,504,191
¥ 85,094
4,775
—
89,869
¥1,724,973
432,374
45,425
2,202,772
¥(33,389)
(3,431)
8
(36,812)
3,000
7,000
10,000
15,000
12,000
42,439
69,439
118,359
82,867
201,226
37,781
—
37,781
159,140
89,867
249,007
(3,381)
(1,311)
(4,692)
108,000
29,000
260,951
397,951
6,000
—
1,863
7,863
129,000
41,000
305,253
475,253
(2,641)
(749)
(16,294)
(19,684)
79,439
688,151
599,177
2,103,368
45,644
135,513
724,260
2,927,032
(24,376)
(61,188)
—
¥688,151
74,368
¥2,177,736
—
¥135,513
74,368
¥3,001,400
(24)
¥(61,212)
Notes:
(1) Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.
(2) The MUFG Group considers ratings of Baa3/BBB- or higher to meet the definition of investment grade.
(3) Other credit derivatives primarily consist of total return swaps.
Single name credit default swaps—Single name credit default swap protects the buyer against the loss of
principal on a bond or loan in case of a default by the issuer. The protection buyer pays a premium to the MUFG
Group and is protected for the period of the credit default swap. As the seller of protection, the MUFG Group in
turn will have to perform under a credit default swap if a credit event as defined under the contracts occurs. In
order to provide an indication of the current payment/performance risk of the credit default swaps, the external
credit ratings, primarily those provided by Moody’s and Standard & Poor’s (“S&P”), of the underlying reference
entity of the credit default swaps are disclosed.
Index and basket credit default swaps—Index and basket credit default swaps are credit default swaps that
reference multiple names through underlying baskets or portfolios of single name credit default swaps. Typically,
in the event of a default on one of the underlying names, the MUFG Group, as the seller of protection, will have
to pay a pro-rata portion of the total notional amount of the credit default index or basket contract. In order to
provide an indication of the current payment/performance risk of these credit default swaps, MUFG Bank and
Mitsubishi UFJ Securities Holdings rating scale based upon the entity’s internal ratings, which generally
correspond to ratings defined by primarily Moody’s and S&P, of the underlying reference entities comprising the
basket or index were calculated and disclosed.
F-119
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group may economically hedge its exposure to credit derivatives by entering into offsetting
derivative contracts. The carrying value and notional amounts of credit protection sold in which the MUFG
Group held purchased protection with identical underlying referenced entities were approximately ¥33 billion
and ¥2,327 billion, respectively, at March 31, 2017, and approximately ¥52 billion and ¥2,416 billion,
respectively, at March 31, 2018.
Collateral is held by the MUFG Group in relation to these instruments. Collateral requirements are
determined at the counterparty level and cover numerous transactions and products as opposed to individual
contracts.
Credit Risk, Liquidity Risk and Credit-risk-related Contingent Features
Certain of the MUFG Group’s derivative instruments contain provisions that require the MUFG Group’s
debt to maintain an investment grade credit rating from each of the major credit rating agencies. If the MUFG
Group’s debt were to fall below investment grade, it would be in violation of these provisions, and the
counterparties to the derivative instruments could request payments on early termination or demand immediate
and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair
value of all derivative instruments with credit-risk-related contingent features that were in a liability position at
March 31, 2017 and 2018 was approximately ¥1.0 trillion and ¥0.7 trillion, respectively, for which the MUFG
Group has posted collateral of approximately ¥251 billion and ¥127 billion, respectively, in the normal course of
business. The amount of additional collateral and early termination amount which could be requested if the
MUFG Group’s debt falls below investment grade was ¥81 billion and ¥79 billion, respectively, as of March 31,
2017 and ¥78 billion and ¥65 billion, respectively, as of March 31, 2018.
25. OBLIGATIONS UNDER GUARANTEES AND OTHER OFF-BALANCE SHEET INSTRUMENTS
Obligations under Guarantees
The MUFG Group provides customers with a variety of guarantees and similar arrangements, including
standby letters of credit, financial and performance guarantees, credit protection, liquidity facilities, other
off-balance sheet credit-related support and similar instruments, in order to meet the customers’ financial and
business needs. The tables below present the contractual or notional amounts of such guarantees at March 31,
2017 and 2018. The contractual or notional amounts of these instruments represent the maximum potential
amounts of future payments without consideration of possible recoveries under recourse provisions or from
collateral held or pledged.
For certain types of derivatives, such as written interest rate options and written currency options, the
maximum potential future payments are unlimited. Accordingly, it is impracticable to estimate the maximum
potential amount of future payments. As such, the notional amounts of the related contracts, other than the
maximum potential payments, are included in the table.
The MUFG Group mitigates its credit risk exposure resulting from guarantees by utilizing various
techniques, including collateralization in the form of cash, securities, and real estate properties based on
management’s credit assessment of the guaranteed parties and the related credit profile. In order to manage the
credit risk exposure, the MUFG Group also enters into sub-participation contracts with third parties who will
fund a portion of the credit facility and bear its share of the loss to be incurred in the event that the customer fails
to fulfill its obligations. The following table includes guarantees of ¥390.4 billion and ¥403.2 billion at
March 31, 2017 and 2018, respectively, which are syndicated out to third parties. The contractual or notional
F-120
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
amounts summarized in the following table do not necessarily bear any direct relationship to the future actual
credit exposure, primarily because of risk management techniques of the MUFG Group.
At March 31, 2017:
Maximum
potential/
Contractual
or Notional
amount
Standby letters of credit and financial guarantees . . . . . . . . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,775
2,968
44,249
9,561
5
Amount by expiration period
1 year
or less
1-5 years
Over
5 years
(in billions)
¥ 2,494 ¥
2,037
16,590
6,568
—
926
836
20,717
668
1
¥ 355
95
6,942
2,325
4
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥60,558
¥27,689 ¥23,148
¥9,721
At March 31, 2018:
Maximum
potential/
Contractual
or Notional
amount
Standby letters of credit and financial guarantees . . . . . . . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,311
3,051
40,513
9,444
22
Amount by expiration period
1 year
or less
1-5 years
Over
5 years
(in billions)
¥ 3,115 ¥
2,144
15,230
6,017
2
850
801
18,314
558
4
¥
346
106
6,969
2,869
16
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥57,341
¥26,508 ¥20,527
¥10,306
Note:
(1) Credit derivatives sold by the MUFG Group are excluded from this presentation.
Nature of Guarantee Contracts
Standby letters of credit and financial guarantees generally include an obligation of an issuer or a designated
third-party to guarantee the performance of the customer to the beneficiary under the terms of contracts such as
lending contracts and other similar financial transactions. The MUFG Group is required to make payments to the
guaranteed parties in the event that the customers fail to fulfill the obligations under the contracts. The guarantees
whose contractual maturities are over 5 years are mainly comprised of guarantees of housing loans.
Performance guarantees are contracts that contingently require the MUFG Group to make payments to the
guaranteed party based on another party’s failure to perform under an obligating agreement, except financial
obligation. For example, performance guarantees include guarantees of completion of construction projects.
Derivative instruments that are deemed to be included within the definition of guarantees as prescribed in
the guidance on guarantees include certain written options and credit default swaps. In order for the MUFG
Group to determine if those derivative instruments meet the definition of guarantees, as prescribed in the
guidance on guarantees, the MUFG Group has to track whether the counterparties are actually exposed to losses
that will result from the adverse change in the underlyings. Accordingly, the MUFG Group has disclosed
information on all credit default swaps and certain written options for which there is a possibility of meeting the
definition of guarantees as prescribed in the guidance on guarantees, regardless of whether the counterparties
F-121
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
have assets or liabilities related to the underlyings of the derivatives. However, credit derivatives sold by the
MUFG Group at March 31, 2017 and 2018 are excluded from this presentation, as they are disclosed in Note 24.
Liabilities of trust accounts represent the trustee’s potential responsibility for temporary payments to
creditors of liabilities of trust accounts making use of funds of the MUFG Group, unless there are certain
agreements with trust creditors that have provisions limiting the MUFG Group’s exposure as a trustee to the trust
account assets. A trust may incur external liabilities to obtain certain services during the terms of the trust
arrangement. While in principle, any liabilities of a trust are payable by the trust account and its beneficiaries. A
trustee’s responsibility may be interpreted to encompass temporary payments for the trust account liabilities
when the trust account does not maintain sufficient liquidity available for such liabilities unless the agreement
with trust creditors limits the trustee’s exposure to the trust account assets. At March 31, 2017 and 2018, there
were liabilities of ¥9,561 billion and ¥9,444 billion, respectively, in the segregated records of trust accounts
including the amounts related to liabilities with provisions limiting trustee responsibility. Liabilities of trust
accounts principally includes obligations to return collateral under security lending transactions. The MUFG
Group has experienced no significant losses on such responsibilities and its exposure to the risk associated with
the temporary payments is judged to be remote because trust account liabilities are generally covered by the
corresponding trust account assets. The MUFG Group continuously monitors the liabilities of trust accounts and
assesses the trust account’s ability to perform its obligations to prevent any unfavorable outcomes; the MUFG
Group claims its recourse for its temporary payments against the trust account assets and the beneficiaries.
Carrying Amount
At March 31, 2017 and 2018, the carrying amounts of the liabilities related to guarantees and similar
instruments set forth above were ¥1,329,475 million and ¥1,110,505 million, respectively, which are included in
Other liabilities and Trading account liabilities. The guarantees and similar instruments comprising the largest
components of the total were options sold in the amount of ¥1,290,563 million and ¥1,069,156 million as of
March 31, 2017 and 2018, respectively. Credit derivatives sold by the MUFG Group at March 31, 2017 and 2018
are excluded from this presentation, as they are disclosed in Note 24. In addition, Other liabilities include an
allowance for off-balance sheet instruments of ¥79,803 million and ¥31,101 million at March 31, 2017 and 2018,
respectively, related to these transactions.
Performance Risk
The MUFG Group monitors performance risk of its guarantees using the same credit rating system utilized
for estimating probabilities of default with its loan portfolio. The MUFG Group’s credit rating system is
consistent with both the method of evaluating credit risk under Basel III and those of third-party credit rating
agencies. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits
are included in the “Not rated” category in the following tables.
F-122
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Presented in the tables below is the maximum potential amount of future payments classified based upon
internal credit ratings as of March 31, 2017 and 2018. The determination of the maximum potential future
payments is based on the notional amount of the guarantees without consideration of possible recoveries under
recourse provisions or from collateral held or pledged. Such amounts do not represent the anticipated losses, if
any, on these guarantees.
At March 31, 2017:
Standby letters of credit and financial guarantees . . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At March 31, 2018:
Standby letters of credit and financial guarantees . . . . . . . . . .
Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount by borrower grade
Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2)
¥24
11
¥35
Normal
Close
Watch(1)
(in billions)
¥119
96
¥3,629
2,831
¥6,460
¥215
Amount by borrower grade
Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2)
¥13
5
¥18
Normal
Close
Watch(1)
(in billions)
¥ 83
113
¥4,211
2,910
¥7,121
¥196
Not
rated
¥ 3
30
¥33
Not
rated
¥ 4
23
¥27
Maximum
potential/
Contractual
or Notional
amount
¥3,775
2,968
¥6,743
Maximum
potential/
Contractual
or Notional
amount
¥4,311
3,051
¥7,362
Notes:
(1) Borrowers classified as Close Watch represent those that require close monitoring as the borrower has begun to exhibit elements of
potential concern with respect to its business performance and financial condition, the borrower has begun to exhibit elements of serious
concern with respect to its business performance and financial condition, including business problems requiring long-term solutions, or
the borrower’s loans are TDRs or loans contractually past due 90 days or more for special reasons.
(2) Borrowers classified as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of
default than those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving restructuring
plans, the borrower being considered virtually bankrupt with no prospects for an improvement in business operations, or the borrower
being legally bankrupt with no prospects for continued business operations because of non-payment, suspension of business, voluntary
liquidation or filing for legal liquidation.
The guarantees the MUFG Group does not classify based upon internal credit ratings are as follows.
The MUFG Group records all derivative contracts at fair value. Aggregate market risk limits have been
established, and market risk measures are routinely monitored against these limits. The MUFG Group also
manages its exposure to these derivative contracts through a variety of risk mitigation strategies, including, but
not limited to, offsetting economic hedge positions. The MUFG Group expects the risk of loss to be remote and
believes that the notional amounts of the derivative contracts generally exceed its exposure.
Liabilities of trust accounts represent the trustee’s potential responsibility for temporary payments to
creditors of liabilities of trust accounts using funds of the MUFG Group. The MUFG Group has experienced no
significant losses on such responsibilities and its exposure to the risk associated with the temporary payments is
judged to be remote because trust account liabilities are generally covered by the corresponding trust account
assets.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group conducts securities lending transactions for institutional customers as a fully disclosed
agent. At times, securities lending indemnifications are issued to guarantee that a security lending customer will
be made whole in the event the borrower does not return the security subject to the lending agreement and
collateral held is insufficient to cover the market value of the security. All lending transactions are collateralized,
primarily by cash. At March 31, 2018, the MUFG Group had no exposure that would require it to pay under this
securities lending indemnification, since the collateral market value exceeds the fair value of securities lent.
Other Off-balance Sheet Instruments
In addition to obligations under guarantees and similar arrangements set forth above, the MUFG Group
issues other off-balance sheet instruments to meet the financial needs of its customers and for purposes other than
trading. Such off-balance sheet instruments consist of lending-related commitments, including commitments to
extend credit and commercial letters of credit that the MUFG Group provides to meet the financing needs of its
customers. Once the MUFG Group issues these off-balance sheet instruments, the MUFG Group is required to
extend credit to or make certain payments to the customers or beneficiaries specified pursuant to the underlying
contracts unless otherwise provided in the contracts. Since many of these commitments expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. At March 31,
2018, approximately 66% of these commitments will expire within one year, 31% from one year to five years
and 3% after five years. The table below presents the contractual amounts with regard to such instruments at
March 31, 2017 and 2018:
2017
2018
(in billions)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit
Commercial letters of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to make investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥84,334
1,214
135
13
¥80,090
1,191
183
13
Commitments to extend credit, which generally have fixed expiration dates or other termination clauses, are
legally binding agreements to lend to customers. Commitments are different from guarantees in that the
commitments are generally revocable or have provisions that enable the MUFG Group to avoid payments in the
event of violations of any conditions of the contracts and certain deterioration of the potential borrowers’
financial condition.
Commercial letters of credit, generally used for trade transactions, are typically secured by the underlying
goods. The MUFG Group continually monitors the type and amount of collateral and other securities, and
requires counterparties to provide additional collateral or guarantors as necessary.
Commitments to make investments are legally binding contracts to make additional contributions to
corporate recovery or private equity investment funds in accordance with limited partnership agreements. Some
of these funds, in which the MUFG Group has significant variable interests, are described in Note 26.
26. VARIABLE INTEREST ENTITIES
In the normal course of business, the MUFG Group has financial interests and other contractual obligations
in various entities which may be deemed to be VIEs such as asset-backed conduits, various investment funds,
special purpose entities created for structured financing, repackaged instruments, entities created for the
securitization of the MUFG Group’s assets and trust arrangements.
F-124
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present the assets and liabilities of consolidated VIEs recorded on the accompanying
consolidated balance sheets at March 31, 2017 and 2018:
Consolidated VIEs
Consolidated assets
At March 31, 2017:
Total
Cash and
due from
banks
Interest-earning
deposits in
other banks
Trading
account
assets
(in millions)
Investment
securities
Loans
All other
assets
712,694
Asset-backed conduits . . . . ¥ 7,332,485 ¥ 48,688
Investment funds . . . . . . . .
—
Special purpose entities
created for structured
financing . . . . . . . . . . . . .
Repackaged instruments . . .
Securitization of the MUFG
Group’s assets(1) . . . . . . .
Trust arrangements . . . . . . .
Others . . . . . . . . . . . . . . . . .
6,798,561
6,749,808
65,883
226,380
77,211
—
—
350
—
—
¥ 34,690
9,020
¥ 23,423 ¥1,485,377 ¥ 5,733,202 ¥
15,611
511,924
7,105
— 176,139
2,310
—
—
7,681
30,853
—
20,783
—
56,428
172,008
—
52,062
—
—
593
—
— 6,775,344
6,578,701
16,905
149,205
52
23,217
13,628
17,723
Total consolidated assets
before elimination . . . . . 21,963,022
49,038
84,554
556,723 1,706,673 19,276,160 289,874
The amounts eliminated in
consolidation . . . . . . . . .
(6,789,161)
(48,852)
(72,506)
(16,914)
(69,086)
(6,562,970)
(18,833)
Total consolidated assets . . ¥15,173,861 ¥
186
¥ 12,048
¥539,809 ¥1,637,587 ¥12,713,190 ¥271,041
Consolidated liabilities
Total
Deposits
Other short-term
borrowings
Long-term
debt
All other
liabilities
Asset-backed conduits . . . . . . . . . . . . . . . . . . ¥ 7,357,874 ¥
Investment funds . . . . . . . . . . . . . . . . . . . . . .
Special purpose entities created for
2,882
(in millions)
— ¥ 5,397,811
—
—
¥ 1,379,498 ¥ 580,565
2,882
—
structured financing . . . . . . . . . . . . . . . . . .
Repackaged instruments . . . . . . . . . . . . . . . .
Securitization of the MUFG Group’s
assets(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust arrangements . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated liabilities before
elimination . . . . . . . . . . . . . . . . . . . . . . . . .
The amounts eliminated in consolidation . . .
The amount of liabilities with recourse to the
general credit of the MUFG Group . . . . . .
Liabilities of consolidated VIEs for which
creditors or beneficial interest holders do
not have recourse to the general credit of
the MUFG Group . . . . . . . . . . . . . . . . . . . ¥
135,667
76,713
—
—
6,768,108
6,743,464
65,031
—
6,676,198
—
573
4,000
29,637
—
45,450
128,804
72,096
6,290
617
6,734,855
3,616
— 67,266
17,747
1,834
21,149,739
(10,843,144)
6,676,198
5,477,471
— (3,034,973)
8,317,087
(7,766,722)
678,983
(41,449)
(9,687,133)
(6,676,198)
(2,420,454)
(2,394)
(588,087)
619,462 ¥
— ¥
22,044
¥
547,971 ¥ 49,447
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidated VIEs
Consolidated assets
At March 31, 2018:
Total
Cash and
due from
banks
Interest-earning
deposits in
other banks
Trading
account
assets
Investment
securities
Loans
All other
assets
598,662
Asset-backed conduits . . . . . . ¥ 7,390,029 ¥ 52,703
—
Investment funds . . . . . . . . . .
Special purpose entities
created for structured
financing . . . . . . . . . . . . . .
Repackaged instruments . . . .
Securitization of the MUFG
198,484
152,781
—
520
Group’s assets(1)
Trust arrangements . . . . . . . .
Others . . . . . . . . . . . . . . . . . .
. . . . . . . . 10,852,539
7,177,407
44,247
—
—
361
¥ 44,902
10,300
2,332
—
—
10,541
14,236
(in millions)
¥
461,036
2,273 ¥1,777,017 ¥ 5,502,892 ¥ 10,242
— 107,431
19,895
—
17,376
—
92,210
149,194
42,632
46,958
43
—
702
—
— 10,827,488
7,011,255
12,963
152,277
42
25,051
2,632
16,645
Total consolidated assets
before elimination . . . . . . . 26,414,149
53,584
82,311
481,387 2,041,441 23,546,424 209,002
The amounts eliminated in
consolidation . . . . . . . . . . .
(7,223,156) (53,454)
(59,150)
(3,804)
(88,758) (6,996,317) (21,673)
Total consolidated assets . . . . ¥19,190,993 ¥
130
¥ 23,161
¥477,583 ¥1,952,683 ¥16,550,107 ¥187,329
Consolidated liabilities
Total
Deposits
Other short-term
borrowings
Long-term
debt
All other
liabilities
Asset-backed conduits . . . . . . . . . . . . . . . . . . ¥ 7,409,190 ¥
Investment funds . . . . . . . . . . . . . . . . . . . . . .
Special purpose entities created for structured
financing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repackaged instruments . . . . . . . . . . . . . . . . .
Securitization of the MUFG Group’s
115,353
148,928
11,735
assets(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust arrangements . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,816,672
7,171,852
43,030
—
7,103,738
—
(in millions)
— ¥ 5,176,663 ¥ 1,708,354 ¥ 524,173
— 11,735
—
—
—
—
587
12,676
5,000
655
24,747
112,054
132,012
2,712
4,240
10,806,145
5,527
— 67,459
16,680
1,603
Total consolidated liabilities before
elimination . . . . . . . . . . . . . . . . . . . . . . . . .
The amounts eliminated in consolidation . . . .
The amount of liabilities with recourse to the
general credit of the MUFG Group . . . . . .
Liabilities of consolidated VIEs for which
creditors or beneficial interest holders do
not have recourse to the general credit of
the MUFG Group . . . . . . . . . . . . . . . . . . . . ¥
25,716,760
(15,347,991)
7,103,738
5,220,328
— (3,028,987)
12,760,168
(12,248,680)
632,526
(70,324)
(9,745,330) (7,103,738)
(2,162,890)
(540) (478,162)
623,439 ¥
— ¥
28,451 ¥
510,948 ¥ 84,040
Note:
(1) Securitization of the MUFG Group’s assets includes ¥5,793,956 million and ¥9,974,383 million of assets primarily consisting of loans
and the same amounts of liabilities primarily consisting of long-term debt relating to eligible beneficiary interests in housing loan trusts
as of March 31, 2017 and 2018, respectively. For more information, see analysis of each transaction category below.
F-126
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In general, the creditors or beneficial interest holders of consolidated VIEs have recourse only to the assets
of those VIEs of which they are creditors or beneficial interest holders, and do not have recourse to other assets
of the MUFG Group, except where the MUFG Group is also contractually required to provide credit
enhancement or program-wide liquidity.
The following tables present the total assets of non-consolidated VIEs, the maximum exposure to loss
resulting from the MUFG Group’s involvement with non-consolidated VIEs and the assets and liabilities which
relate to the MUFG’s variable interests in non-consolidated VIEs at March 31, 2017 and 2018:
Non-consolidated VIEs
At March 31, 2017: Total assets
Maximum
exposure
Total
Asset-backed
On-balance sheet assets
Trading
account
assets
Investment
securities
Loans
All
other
assets
(in millions)
On-balance sheet
liabilities
Total
All other
liabilities
conduits . . . . . . ¥ 29,604,929 ¥ 5,608,909 ¥ 4,383,707 ¥
1,072 ¥1,236,094 ¥3,146,541 ¥
— ¥
1 ¥
Investment
funds . . . . . . . .
30,591,880
1,674,567
1,396,830
200,651
829,641
356,828
9,710
98
1
98
Special purpose
entities created
for structured
financing . . . . .
Repackaged
40,710,546
4,717,235
3,699,415
279,471
147,543 3,207,369
65,032
4,657
4,657
instruments . . .
Others . . . . . . . . .
10,127,497
52,012,087
2,269,149
3,731,571
2,104,697
2,723,625
581,912 1,203,181
294,703
83,629 2,462,462
—
24,901
79,245 18,539
—
18,539
98,289
Total
. . . . . . ¥163,046,939 ¥18,001,431 ¥14,308,274 ¥1,161,395 ¥3,500,088 ¥9,467,903 ¥178,888 ¥23,295 ¥23,295
Non-consolidated VIEs
At March 31, 2018: Total assets
Maximum
exposure
Total
Asset-backed
On-balance sheet assets
Trading
account
assets
Investment
securities
Loans
All
other
assets
(in millions)
On-balance sheet
liabilities
Total
All other
liabilities
conduits . . . . . . ¥ 29,011,749 ¥ 5,721,627 ¥ 4,645,697 ¥
620 ¥1,541,591 ¥3,103,486 ¥
— ¥ — ¥ —
Investment
funds . . . . . . . .
45,090,381
1,776,366
1,525,127
213,722
891,062
413,855
6,488 17,919
17,919
Special purpose
entities created
for structured
financing . . . . .
Repackaged
35,437,349
4,016,999
3,193,621
309,560
116,961 2,697,126
69,974
7,217
7,217
instruments . . .
Others . . . . . . . . .
10,212,933
49,582,444
2,576,619
3,760,375
2,487,377
2,740,529
759,591 1,421,716
—
61,192 2,482,141 102,314 24,830
236,852
69,218
—
24,830
94,882
Total
. . . . . . ¥169,334,856 ¥17,851,986 ¥14,592,351 ¥1,378,375 ¥4,032,522 ¥8,933,460 ¥247,994 ¥49,966 ¥49,966
Maximum exposure to loss on each type of entity is determined based on the carrying amount of any
on-balance sheet assets and any off-balance sheet liabilities held, net of any recourse liabilities. Therefore, the
maximum exposure to loss represents the maximum loss the MUFG Group could possibly incur at each balance
F-127
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
sheet date and does not reflect the likelihood of such a loss being incurred. The difference between the amount of
on-balance sheet assets and the maximum exposure to loss primarily comprises the remaining undrawn
commitments.
In February 2015, the FASB issued new guidance which amends the consolidation analysis under the
current consolidation guidance. The amendments change the VIE analysis for limited partnerships and similar
legal entities, the criteria for evaluating whether fees paid to a decision maker or a service provider are a variable
interest, the effect of fee arrangements and related parties on the primary beneficiary determination, and rescind
the indefinite deferral provision that affects the consolidation evaluation for certain investment funds. The
MUFG group adopted this new accounting guidance on April 1, 2016, which resulted in the consolidation and
deconsolidation of certain investment funds. The net increase in the MUFG Group’s consolidated assets,
liabilities and Noncontrolling interests, were ¥628,236 million, ¥32,254 million and ¥595,982 million,
respectively, as of April 1, 2016. The cumulative effect on retained earnings was a decrease of ¥3,873 million
upon the adoption.
Asset-Backed Conduits
This category primarily comprises the following:
Multi-Seller Conduits (MUFG-sponsored Asset-Backed Commercial Paper (“ABCP”) Conduits and Other
ABCP Conduits)
The MUFG Group administers several conduits under asset-backed financing programs under which the
conduits purchase financial assets, primarily trade accounts receivable, from the MUFG Group’s customers by
issuing short-term financing instruments, primarily commercial paper, to third-party investors. Under the asset-
backed financing programs, the MUFG Group acts as an agent for the conduits, which enter into agreements with
the MUFG Group’s customers where the customers transfer financial assets to the conduits in exchange for
monetary consideration. The MUFG Group also underwrites commercial paper for the conduits that is secured by
the assets held by them and provides program-wide liquidity and credit enhancement facilities to the conduits.
The MUFG Group receives fees related to the services it provides to the conduits and the program-wide liquidity
and credit enhancement. The MUFG Group considers itself to be the primary beneficiary of the multi-seller
conduits because, as an agent and sponsor, the MUFG Group has the power to direct activities of the conduits
that most significantly impact the conduits’ economic performance and also has the obligation to absorb losses of
the conduits that could potentially be significant to the conduits through the program-wide liquidity and credit
enhancement. Consequently, the MUFG Group consolidates the conduits.
In addition to the entities described above, the MUFG Group participates as a provider of financing to
several conduits that are administered by third parties. Most of these conduits are established under a multi-seller
asset-backed financing program and the MUFG Group provides financing along with other financial institutions.
With respect to these conduits, the MUFG Group is not considered as the primary beneficiary because the
MUFG Group’s participation in the conduits is only to provide financing along with other third-party financial
institutions and it does not have the power to direct the activities of the conduits. Consequently, the
MUFG Group does not consolidate the conduits.
Asset-Backed Conduits (MUFG-sponsored Asset-Backed Loan (“ABL”) Programs and Other Programs)
The MUFG Group administers several conduits under asset-backed financing programs where the MUFG
Group provides financing to fund the conduits’ purchases of financial assets, comprising primarily trade accounts
receivable, from its customers. The MUFG Group acts as an agent and sponsor for the conduits, which enter into
F-128
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
agreements with the MUFG Group’s customers where the customers transfer assets to the conduits in exchange
for monetary consideration. In most cases, the MUFG Group is the sole provider of financing that is secured by
the assets held by the conduits. The MUFG Group considers itself to be the primary beneficiary of the conduits
because, as an agent and sponsor for the conduits, the MUFG Group has the power to direct activities of the
conduits, such as selection of the assets to be purchased and condition for purchases, and debt collection from the
original obligors, that most significantly impact the conduits’ economic performance, and also has the obligation
to absorb losses of the conduits that could potentially be significant to the conduits through financing it provides.
Consequently, the MUFG Group consolidates the conduits.
In addition, the MUFG Group is involved with entities, which take in most cases the form of a trust, where
originators of financial assets, which primarily comprise lease receivables, entrust the assets with trust banks and
receive beneficial certificates of trusts in exchange. The originators then transfer the beneficiary certificates to
the MUFG Group in exchange for cash. The originators of the financial assets entrusted continue to be involved
in the assets as servicers. Because the originators are deemed to have the power to direct activities of the entities
that most significantly impact the entities’ economic performance through their role as a servicer, the MUFG
Group is not considered as the primary beneficiary of these entities. Consequently, the MUFG Group does not
consolidate these entities.
The MUFG Group also participates as a provider of financing to the ABL programs that are managed by
third parties. The MUFG Group is not considered as the primary beneficiary of the entities used in these
programs as the MUFG Group’s participation in the entities is only to provide financing along with other third
parties and it does not have the power to direct the activities of the entities. Consequently, the MUFG Group does
not consolidate the entities used in these programs.
Investment Funds
This category primarily comprises the following:
Corporate Recovery Funds
These entities are established by fund managers, which are unrelated to the MUFG Group, for the purpose
of investing in debt or equity instruments issued by distressed companies. After investment, the fund managers
work closely with the management of the entities and attempt to enhance corporate value by various means
including corporate restructuring and reorganization. Their exit strategies include, among others, sales to others
and initial public offerings.
Typically, these entities take the form of a limited partnership which is entirely funded by general and
limited partner interests. These partnerships are considered as VIEs unless the limited partners hold substantive
kick-out rights or participating rights.
The MUFG Group mostly serves as a limited partner in corporate recovery funds that are considered as
VIEs, and does not have the power to direct the activities of these funds that most significantly impact the
economic performance of these funds. Therefore, the MUFG Group does not consider itself to be the primary
beneficiary of these funds and does not consolidate them.
Private Equity Funds
The MUFG Group is involved in venture capital funds that are established by either the MUFG Group’s
entities or fund managers unrelated to the MUFG Group. These entities have specific investment objectives in
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
connection with their acquisition of equity interests, such as providing financing and other support to start-up
businesses, medium and small entities in a particular geographical area, and to companies with certain
technology or companies in a high-growth industry.
These entities typically take the form of a limited partnership and usually are entirely funded by general and
limited partner interests. These partnerships are considered as VIEs unless the limited partners hold substantive
kick-out rights or participating rights.
The MUFG Group participates in these partnerships as a general partner or limited partner. The MUFG
Group consolidates these funds, which are considered as VIEs, if the MUFG Group has the power to direct the
activities of these funds that most significantly impact the economic performance of these funds, and also has the
obligation to absorb losses of these funds that could potentially be significant to these funds or the right to
receive benefits from these funds that could potentially be significant to these funds.
Investment Trusts
The MUFG Group invests in investment trusts that are professionally managed collective investment
schemes which pool money from many investors and invest in, among others, equity and debt securities. Most of
these funds take the form of a trust where there is a separation in investment decisions, which is assumed by an
investment manager who has no investment in a trust, and ownership through beneficiary interests issued by a
trust are owned by investors. Therefore, these investment trusts are considered as VIEs. The MUFG Group
consolidates these funds if the MUFG Group has the power to direct the activities of these funds that most
significantly impact the economic performance of these funds, and also has the obligation to absorb losses of
these funds that could potentially be significant to these funds or the right to receive benefits from these funds
that could potentially be significant to these funds.
Buy-out Financing Vehicles
The MUFG Group provides financing to buy-out vehicles. The buy-out vehicles are established by equity
investments from, among others, private equity funds or the management of target companies for the purpose of
purchasing the equity shares of target companies. Along with other financial institutions, the MUFG Group
provides financing to the buy-out vehicles in the form of loans. While the buy-out vehicles’ equity is normally
substantive in its amount and the rights and obligations associated with it, in some cases, the vehicles have equity
that is insufficient to absorb expected variability primarily because the amount provided by equity investors is
nominal in nature. These vehicles engage in non-investment activities, and are considered as VIEs. In most cases,
the MUFG Group’s participation in these vehicles is only to provide financing to the vehicles, and the power to
direct the activities that most significantly impact the economic performance of the vehicles is held by the
management of target companies. As a result, the MUFG Group is not considered as the primary beneficiary of
these vehicles and does not consolidate them.
Other Investment Funds
The MUFG Group’s investments in VIEs through MUFG Americas Holdings primarily consist of equity
investments in low-income housing credit (“LIHC”) structures, designed to generate a return primarily through
the realization of federal tax credits. MUFG Americas Holdings considers itself as the primary beneficiary of
certain types of LIHC investments.
LIHC Unguaranteed Syndicated Investment Funds
MUFG Americas Holdings creates the investment funds, serves as the managing investor member, and sells
limited investor member interests to third parties. MUFG Americas Holdings receives benefits through income
F-130
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
from the structuring of these funds, servicing fees for managing the funds and, as an investor member, tax
benefits and tax credits to reduce the MUFG Americas Holdings tax liability. MUFG Americas Holdings
considers itself to be the primary beneficiary and consolidates them upon adoption of the current guidance
because, as a sponsor and managing member of the funds, it has the power to direct activities that most
significantly impact the funds’ economic performance and also has the obligation to absorb losses of the funds
that could potentially be significant to the funds.
LIHC Guaranteed Syndicated Investment Funds
MUFG Americas Holdings also forms limited liability companies, which in turn invest in LIHC operating
partnerships, to create LIHC guaranteed syndicated investment funds. Interests in these funds are sold to third
parties who pay a premium for a guaranteed return. MUFG Americas Holdings earns structuring fees from the
sale of these funds and asset management fees. MUFG Americas Holdings serves as the funds’ sponsor and
non-member asset manager, and also guarantees a minimum rate of return throughout the investment term,
therefore, it directs the activities that most significantly impact the funds’ economic performance and also has an
obligation to absorb losses pertaining to its minimum rate of return guarantee to investors. Therefore, the MUFG
Group is considered as the primary beneficiary of these funds and consolidates them.
Special Purpose Entities Created for Structured Financing
This category primarily comprises the following:
Leveraged Leasing Vehicles
These entities are established to raise funds to purchase or build equipment and machinery including, among
others, commercial vessels, passenger and cargo aircraft, and production equipment for the purpose of leasing
them to lessees who use the equipment and machinery as part of their business operations. These entities
typically take the form of a limited partnership or a special purpose company where they fund their purchases of
equipment and machinery via senior and subordinate financing. When entities take the form of a limited
partnership, these entities are considered as VIEs unless limited partners hold substantive kick-out rights or
participating rights. The entities considered as VIEs are typically funded only by senior financing or there is a
guarantee provided to the senior financing by parties unrelated to those providing the senior financing. In most
cases, the MUFG Group participates in the senior financing and does not participate in the subordinate financing
or provide guarantees. Generally, because the MUFG Group’s participation in these entities is only to provide
financing, it does not have the power to direct the activities of the entities that most significantly impact the
economic performance of the entities. Therefore, the MUFG Group does not consider itself to be the primary
beneficiary of these entities and does not consolidate them, except for limited circumstances where the MUFG
Group is directly involved with the structuring of the transaction and has the power to direct the activities of the
entities that most significantly impact the economic performance of the entities.
Project Financing Vehicles
These entities are established to raise funds in connection with, among others, production of natural
resources, construction and development of urban infrastructure (including power plants and grids, highways and
ports), and the development of real estate properties or complexes. These projects typically involve special
purpose companies which issue senior and subordinate financing to raise funds in connection with the various
projects. The subordinate financing is usually provided by parties that will ultimately make use of the assets
constructed or developed. By contrast, the senior financing is typically provided by financial institutions,
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
including the MUFG Group. Because the MUFG Group’s participation in these entities is only to provide
financing, it does not have the power to direct the activities that most significantly impact the economic
performance of these entities. Therefore, the MUFG Group is not considered as the primary beneficiary of these
entities and does not consolidate them.
Sale-and-Leaseback Vehicles
The MUFG Group is involved with vehicles that acquire assets, primarily real estate, from the MUFG
Group’s customers and other unrelated parties where the sellers of the assets continue to use the assets through
leaseback agreements. These vehicles typically take the form of a limited partnership, and are considered as VIEs
unless the limited partners hold substantive kick-out rights or participating rights. The subordinated financing of
these vehicles considered as VIEs is usually provided by the sellers of the assets, with the MUFG Group
providing senior financing for the vehicles. Because the MUFG Group’s participation in these vehicles is only to
provide senior financing, it does not have the power to direct the activities that most significantly impact the
economic performance of these vehicles. Therefore, the MUFG Group is not considered as the primary
beneficiary and does not consolidate them.
Securitization of Client Real Estate Properties
These entities are established for the purpose of securitizing real estate properties held by the MUFG
Group’s customers. In most cases, these entities take the form of a limited partnership or a special purpose
company. When entities take the form of a limited partnership, these entities are considered as VIEs unless the
limited partners hold substantive kick-out rights or participating rights. The entities considered as VIEs are
typically funded by senior and subordinated financing where the original owners of the real estate properties
provide the subordinated financing, primarily in the form of partnership interests or subordinated notes, and
financial institutions, including the MUFG Group, provide senior financing in the form of senior loans. Because
the MUFG Group’s participation in these vehicles is only to provide a portion of senior financing, it does not
have the power to direct the activities that most significantly impact the economic performance of these entities.
Therefore, the MUFG Group is not considered as the primary beneficiary and does not consolidate these entities.
Repackaged Instruments
This category primarily comprises the following:
Investments in Financially-Engineered Products
The MUFG Group is involved in special purpose entities that have been established to issue financial
products through the engineering and repackaging of existing financial instruments such as collateralized debt
obligations (“CDOs”) and synthetic CDOs. These entities are considered as VIEs because the holders of the
equity investment at risk do not have the power to direct the activities that most significantly impact their
economic performance. These entities are generally arranged and managed by parties that are not related to the
MUFG Group. The MUFG Group’s involvement with the entities arranged and managed by third parties is for
investment purposes. In these cases, the MUFG Group participates as one of many other investors and the MUFG
Group typically holds investments in senior tranches or tranches with high credit ratings. Therefore, the MUFG
Group does not have the power to direct activities of the entities that most significantly impact the entities’
economic performance, and thus is not considered as the primary beneficiary of these entities and does not
consolidate these entities.
In certain instances, special purpose entities have been established and are managed by the MUFG Group.
The MUFG Group’s involvement includes establishing and arranging the transaction and underwriting securities
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
issued by the entities to general investors. For these entities, the MUFG Group has the power to direct activities
that most significantly impact the economic performance and it has the obligation to absorb losses or receive
benefits that could potentially be significant to the entities. As such, the MUFG Group considers itself as the
primary beneficiary of these entities and consolidates them.
Investments in Securitized Financial Instruments
The MUFG Group holds investments in special purpose entities that issue securitized financial products.
The assets held by the entities include credit card receivables and residential mortgage loans. These entities are
established and managed by parties that are unrelated to the MUFG Group and the MUFG Group’s involvement
with these entities is for its own investment purposes. In all cases, the MUFG Group participates as one of many
other investors and the MUFG Group does not have the power to direct activities of the entities that most
significantly impact the entities’ economic performance. Therefore, the MUFG Group is not considered as the
primary beneficiary of these entities and does not consolidate them.
Securitization of the MUFG Group’s Assets
This category primarily comprises the following:
Securitization for issuing interests or financing
The MUFG Group establishes entities to securitize its own financial assets that include, among others,
corporate and retail loans and lease receivables. The entities used for securitization, which typically take the form
of a special purpose company or a trust, are established by the MUFG Group and, in most cases, issue senior and
subordinate interests or financing. After securitization, the MUFG Group typically continues to service
securitized assets as a servicer. The MUFG Group may also retain subordinate interests or financing or other
interests. The MUFG Group is considered as the primary beneficiary and consolidates the entities used for
securitization since it has the obligation to absorb losses through subordinate interests, and also has the power for
determining and implementing policies as servicer that give it the ability to manage the entities’ assets that
become delinquent or are in default in order to improve the economic performance of the entities.
Eligible beneficiary interests in housing loan trusts
The MUFG Group establishes trusts, which acquire the MUFG Group’s housing loans and in turn issue
beneficiary interests to the MUFG Group, to pledge these beneficiary interests as collateral for borrowings from
the Bank of Japan, as a result of the decision by the Bank of Japan on June 30, 2016 to accept these beneficial
interests as collateral in the same way as it does for Japanese national government bonds. The MUFG Group is
considered as the primary beneficiary and consolidates the trusts since it has the obligation to absorb losses
through beneficiary interests, and also has the power for determining and implementing policies as servicer that
give it the ability to manage housing loans owned by the trusts that become delinquent or are in default in order
to improve the economic performance of the trusts.
Trust Arrangements
The MUFG Group offers, primarily through Mitsubishi UFJ Trust and Banking, a variety of trust products
and services including securities investment trusts, pension trusts and trusts used as securitization vehicles. In a
typical trust arrangement, however, the MUFG Group manages and administers assets on behalf of the customers
in an agency, fiduciary and trust capacity and does not assume risks associated with the entrusted assets. The
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
trusts are generally considered as VIEs because the trust beneficiaries, who provide all of the equity at risk,
usually do not have power to direct the activities that most significantly impact its economic performance in the
arrangements. The MUFG Group, however, is not considered as the primary beneficiary, except for the case
mentioned below, because it merely receives fees for compensation for its services on terms that are customary
for these activities and the fees are insignificant relative to the total amount of the trusts’ economic performance
and variability. Therefore, the MUFG Group does not consolidate these entities.
With respect to the jointly operated designated money in trusts, Mitsubishi UFJ Trust and Banking pools
money from investors and determines how best to invest it. In addition, certain investors, such as money reserve
funds and investment funds, place excess funds in the jointly operated designated money trusts. Mitsubishi UFJ
Trust and Banking typically invests in high-quality financial assets, including government bonds, corporate
bonds and corporate loans including loans to Mitsubishi UFJ Trust and Banking and receives fees as
compensation for services. In this role as a sponsor of these trusts’ Mitsubishi UFJ Trust and Banking provides
guarantees under which it is required to compensate a loss on the stated principal of the trust beneficial interests.
Mitsubishi UFJ Trust and Banking is considered as the primary beneficiary of these trusts’ because it is exposed
to a potentially significant amount of losses and also has the power to direct activities of these trusts’ that most
significantly impact their economic performance. Upon consolidation of the trusts, the certificates issued to the
investors are accounted for as deposit liabilities as the products are structured and marketed to customers similar
to Mitsubishi UFJ Trust and Banking’s term deposit products.
Mitsubishi UFJ Trust and Banking considers the likelihood of incurring losses on the stated principal
guarantee to be highly remote. In the trusts’ operational history that extends over decades, the stated principal
guarantee has never been called upon. The variability in fair value of the net assets of the trusts has been
primarily affected by the fluctuations in interest rates, and the majority of such variability has been absorbed by
investors or trust beneficiaries.
Others
This category primarily comprises the following:
Financing Vehicles of the MUFG Group’s Customers
The MUFG Group is involved with several entities that are established by the MUFG Group’s customers.
These entities borrow funds from financial institutions and extend loans to their group entities. These entities
effectively work as fund-raising vehicles for their respective group entities and enable the groups to achieve
efficient financing by integrating their financing activities into a single entity. In all cases, the MUFG Group is
not considered as the primary beneficiary because the MUFG Group’s participation in these entities is only to
provide financing, and the customers effectively hold the power to direct activities of these entities that most
significantly impact the economic performance of the entities. Consequently, the MUFG Group does not
consolidate these entities.
Funding Vehicles
The MUFG Group has established several wholly-owned off-shore vehicles which issue securities, typically
preferred stock that is fully guaranteed by the MUFG Group, to investors unrelated to the MUFG Group to fund
purchases of debt instruments issued by the MUFG Group. These entities are considered as VIEs because the
MUFG Group’s investment in the vehicles’ equity is not considered at risk and substantive as the entire amount
raised by the vehicles was used to purchase debt instruments issued by the MUFG Group. Because the MUFG
Group does not have variable interests in these vehicles, the MUFG Group does not consolidate these entities.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Troubled Borrowers
During the normal course of business, the borrowers from the MUFG Group may experience financial
difficulties and sometimes enter into certain transactions that require the MUFG Group to assess whether they
would be considered as VIEs due to their difficult financial position. While in most cases such borrowers are not
considered as VIEs when the transactions take place, in limited circumstances they are considered as VIEs due to
insufficient equity investment at risk. In all cases, the MUFG Group is not considered as the primary beneficiary
because the power to direct activities that most significantly impact the economic performance of the troubled
borrowers resides with the management of the troubled borrowers, and the MUFG Group, as a lender, does not
have power over or assume any role in management. Therefore, the MUFG Group does not consolidate these
troubled borrowers.
27. COMMITMENTS AND CONTINGENT LIABILITIES
Lease Commitments
The MUFG Group leases certain technology systems, office space and equipment under noncancelable
agreements which expire through the fiscal year 2048.
Future minimum rental commitments for noncancelable leases at March 31, 2018 were as follows:
Capital
leases
Operating
leases
(in millions)
Fiscal year ending March 31:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,559
4,297
3,746
2,784
1,602
3,513
¥ 93,378
79,284
70,402
61,145
54,551
311,437
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥21,501
¥670,197
Amount representing interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,787)
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,714
Total rental expense for the fiscal years ended March 31, 2016, 2017 and 2018 was ¥118,286 million,
¥113,649 million and ¥119,208 million, respectively.
Repayment of Excess Interest
The Japanese government implemented regulatory reforms affecting the consumer lending industry. In
December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Act
Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates from 29.2% per annum to
20% per annum. The reduction in interest rates was implemented in June 2010. The regulatory reforms also
included amendments to the Money Lending Business Act which, effective June 18, 2010, abolished the
so-called “gray-zone interest.” Gray-zone interest refers to interest rates exceeding the limits stipulated by the
Interest Rate Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal).
Under the regulatory reforms, all interest rates for loans originated after this reform are subject to the lower limits
F-135
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
imposed by the Interest Rate Restriction Act. Furthermore, the new regulations require stringent review
procedures for consumer finance companies before lending, and with the exception of certain provisions, one of
those new regulations introduces a limit on aggregate credit extensions to one-third of the borrower’s annual
income.
Formerly, consumer finance companies were able to charge interest rates exceeding the limits stipulated by
the Interest Rate Restriction Act so long as the payment was made voluntarily by the borrowers, and the lender
complied with various notice and other requirements. Accordingly, MUFG’s consumer finance subsidiaries and
equity method investees offered loans at interest rates above the Interest Rate Restriction Act. Upon the
implementation of the regulatory reforms in June 2010, they lowered the interest rates for loans originated after
this reform to below the Interest Rate Restriction Act.
In 2006, the Supreme Court of Japan passed decisions in a manner more favorable to borrowers requiring
reimbursement of previously paid interest exceeding the limits stipulated by the Interest Rate Restriction Act in
certain circumstances. Borrowers’ claims for reimbursement of excess interest arose after such decisions and
other regulatory changes. The MUFG Group maintains an allowance for repayment of excess interest based on an
analysis of past experience of reimbursement of excess interest, borrowers’ profile, recent trend of borrowers’
claims for reimbursement, and management future forecasts. Management believes that the provision for
repayment of excess interest is adequate and the allowance is at the appropriate amount to absorb probable
losses, so that the impact of future claims for reimbursement of excess interest will not have a material adverse
effect on the MUFG Group’s financial position and results of operations. The allowance for repayment of excess
interest established by MUFG’s consumer finance subsidiaries, which was included in Other liabilities, was
¥39,414 million and ¥23,724 million as of March 31, 2017 and 2018, respectively. Provision (reversal) related to
the allowance is included in Other non-interest expenses in the accompanying consolidated statements of income.
For the fiscal years ended March 31, 2016, 2017 and 2018, there was a negative impact of ¥22,426 million,
¥56,911 million and nil, respectively, on Equity in earnings of equity method investees—net in the
accompanying consolidated statements of income.
Litigation
In the ordinary course of business, the MUFG Group is subject to various litigation and regulatory matters.
In accordance with applicable accounting guidance, the MUFG Group establishes an accrued liability for loss
contingencies arising from litigation and regulatory matters when they are determined to be probable in their
occurrence and the probable loss amount can be reasonably estimated. Based upon current knowledge and
consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters,
where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material
adverse effect on the MUFG Group’s financial position, results of operations or cash flows. Additionally,
management believes the amount of loss that is reasonably possible, but not probable, from various litigation and
regulatory matters is not material to the MUFG Group’s financial position, results of operations or cash flows.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
28. FEES AND COMMISSIONS INCOME
Details of fees and commissions income for the fiscal years ended March 31, 2016, 2017 and 2018 were as
follows:
2016
2017
2018
Fees and commissions on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on remittances and transfers . . . . . . . . . . . . . .
Fees and commissions on foreign trading business . . . . . . . . . . . . . . .
Fees and commissions on credit card business . . . . . . . . . . . . . . . . . .
Fees and commissions on security-related services . . . . . . . . . . . . . . .
Fees and commissions on administration and management services
for investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions on real estate business . . . . . . . . . . . . . . . . . . .
Other fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
58,865
169,101
84,688
193,646
285,334
149,916
110,051
44,740
69,485
43,516
266,530
¥
(in millions)
53,891
¥
168,571
75,024
198,145
239,516
155,708
103,110
41,818
59,853
39,808
279,449
53,483
169,300
78,239
212,515
258,728
159,481
112,399
44,160
49,223
40,573
284,691
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,475,872
¥1,414,893
¥1,462,792
Fees and commissions on deposits consist of fees and commissions charged for deposits transactions such as
checking account deposits, deposit and withdrawal services and using automated teller machines. Fees and
commissions on remittances and transfers consist of fees and commissions charged for settlement transactions
such as domestic fund remittances, including transactions used by electronic banking. Fees and commissions on
foreign trading business consist of fees and commissions charged for fund collection and trade-related financing
services related to foreign trading business. Fees and commissions on credit card business consist of fees and
commissions related to credit card business such as interchange income, annual fees, royalty and other service
charges from franchisees. Fees and commissions on securities-related services primarily consist of fees and
commissions for sales and transfers of securities including investment funds, underwriting, brokerage and
advisory services, arrangement fees on securitizations, and agency services for the calculation and payment of
dividends. Fees and commissions on administration and management services for investment funds primarily
consist of fees and commissions earned from managing investment funds on behalf of the clients. Trust fees
consist primarily of fees earned by fiduciary asset management and administration services for corporate pension
plans and investment funds. Guarantee fees consist of fees related to guarantee business such as providing
guarantees on residential mortgage loans and other loans. Insurance commissions consist of commissions earned
by acting as agent for insurance companies to sell insurance products. Fees and commissions on real estate
business primarily consist of fees from real estate agent services. Other fees and commissions include various
fees and commissions mainly such as arrangement fees and agent fees excluding the fees mentioned above.
29. TRADING ACCOUNT PROFITS AND LOSSES
The MUFG Group performs trading activities through market-making, sales and arbitrage, while
maintaining risk levels within appropriate limits in accordance with its risk management policy.
The MUFG Group has trading account securities and trading derivative assets and liabilities for this
purpose. In addition, the trading account securities include foreign currency-denominated debt securities such as
foreign government or official institution bonds, corporate bonds and mortgage-backed securities, which are
mainly comprised of securities measured at fair value under the fair value option.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net trading gains (losses) for the fiscal years ended March 31, 2016, 2017 and 2018 were comprised of the
following:
Interest rate and other derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account securities, excluding derivatives . . . . . . . . . . . . . . . . . . . . .
¥ 434,323
(157,669)
(in millions)
¥(325,007) ¥(226,788)
153,674
(314,177)
Trading account profits (losses)—net
Foreign exchange derivative contracts(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
276,654
374,324
(639,184)
(183,159)
(73,114)
(159,986)
Net trading gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 650,978
¥(822,343) ¥(233,100)
2016
2017
2018
Note:
(1) Gains (losses) on foreign exchange derivative contracts are included in Foreign exchange gains (losses)—net in the accompanying
consolidated statements of income. Foreign exchange gains (losses)—net in the accompanying consolidated statements of income are
also comprised of foreign exchange gains (losses) other than derivative contracts and foreign exchange gains (losses) related to the fair
value option.
For further information on the methodologies and assumptions used to estimate fair value, see Note 32,
which also shows fair values of trading account securities by major category. Note 24 discloses further
information regarding the derivative-related impact on Trading account profits (losses)—net by major category.
30. BUSINESS SEGMENTS
The business segment information, set forth below, is derived from the internal management reporting
system used by management to measure the performance of the MUFG Group’s business segments. In addition,
the business segment information is primarily based on the financial information prepared in accordance with
accounting principles generally accepted in Japan as adjusted in accordance with internal management
accounting rules and practices. Accordingly, the format and information are not consistent with the
accompanying consolidated financial statements prepared on the basis of U.S. GAAP. A reconciliation is
provided for the total amounts of segments’ operating profit with income before income tax expense under
U.S. GAAP.
See Note 31 for financial information relating to the MUFG Group’s operations by geographic area. The
geographic financial information is consistent with the basis of the accompanying consolidated financial
statements.
The following is a brief explanation of the MUFG Group’s business segments:
Retail Banking Business Group—Covers all retail businesses, including commercial banking, trust banking
and securities businesses in Japan. This business group integrates the retail businesses of MUFG Bank,
Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ NICOS and other
subsidiaries as well as retail product development, promotion and marketing in a single management structure.
At the same time, this business group has developed and implemented MUFG Plaza, a one-stop, comprehensive
financial services concept that provides integrated banking, trust and securities services.
Corporate Banking Business Group—Covers all domestic corporate businesses, including commercial
banking, investment banking, trust banking and securities businesses, as well as businesses outside of Japan,
assisting mainly Japanese companies. Through the integration of these business lines, diverse financial products
and services are provided to the MUFG Group’s corporate clients. This business group has strategic domains,
sales channels and methods to match the different growth stages and financial needs of the MUFG Group’s
corporate clients.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Global Business Group—Covers the businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings
outside Japan, including commercial banking such as loans, deposits and cash management services, investment
banking, retail banking, trust assets and securities businesses (with the retail banking and trust assets businesses
being conducted through MUFG Union Bank and Krungsri), through a global network of nearly 1,200 offices
outside Japan to provide customers with financial products and services that meet their increasingly diverse and
sophisticated financing needs.
Trust Assets Business Group—Covers asset management and administration services for products such as
pension trusts and security trusts by integrating the trust banking expertise of Mitsubishi UFJ Trust and Banking
and the global network of MUFG Bank. This business group provides a full range of services to corporate and
other pension funds, including stable and secure pension fund management and administration, advice on pension
schemes and payment of benefits to scheme members.
Global Markets Business Group—Covers asset and liability management and strategic investments of
MUFG Bank and Mitsubishi UFJ Trust and Banking, and sales and trading of financial products of MUFG Bank,
Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings.
Other—Consists mainly of the corporate centers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and
Banking and Mitsubishi UFJ Morgan Stanley Securities. The elimination of duplicated amounts of net revenues
among business segments is also reflected in Other.
Management does not use information on segments’ total assets to allocate resources and assess
performance. Accordingly, business segment information on total assets is not presented.
The MUFG Group made modifications to refine the definition of the overseas Japanese corporate business,
effective October 1, 2016, and made additional modifications for similar purposes, effective April 1, 2017. These
modifications had the impact of increasing the operating profit of the Corporate Banking Business Group for the
fiscal years ended March 31, 2016 and 2017 by ¥9.7 billion and ¥9.8 billion, respectively.
The MUFG Group also made modifications to the MUFG Group’s internal management accounting rules
and practices to clarify the responsibility for profits of each business segment, effective April 1, 2017. These
modifications had the following impact:
‰
‰
for the fiscal year ended March 31, 2016, increasing the operating profits of the Retail Banking Business
Group and the Global Markets Business Group by ¥0.2 billion and ¥1.8 billion, respectively, and
reducing the operating profits of the Corporate Banking Business Group and Other by ¥0.7 billion and
¥1.3 billion, respectively; and
for the fiscal year ended March 31, 2017, increasing the operating profits of the Retail Banking Business
Group and the Global Markets Business Group by ¥0.4 billion and ¥0.6 billion, respectively, and
reducing the operating profits of the Corporate Banking Business Group, the Global Business Group and
Other by ¥0.5 billion, ¥0.3 billion and ¥0.2 billion, respectively.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The table set forth below has been reclassified to enable comparisons between the relevant amounts for the
fiscal years ended March 31, 2016, 2017 and 2018, respectively:
Customer Business
Retail
Banking
Business
Group
Corporate
Banking
Business
Group(1)
Global
Business
Group(1)
Trust
Assets
Business
Group
Global
Markets
Business
Group
Total(1)
Other
Total
(in billions)
Fiscal year ended March 31, 2016:
Net revenue:
BK and TB: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . .
Net fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other than BK and TB(2) . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,258.7
534.9
355.7
171.8
7.4
723.8
971.9
¥1,078.2
872.3
341.9
405.9
124.5
205.9
582.9
¥1,272.8
446.9
207.9
187.1
51.9
825.9
814.8
¥172.2
74.3
—
74.3
—
97.9
102.0
¥3,603.8
1,825.5
859.9
809.3
156.3
1,778.3
2,329.2
¥637.9
453.9
195.5
(23.9)
282.3
184.0
208.6
¥
4.5 ¥4,246.2
2,396.0
1,326.5
693.7
375.8
1,850.2
2,695.2
116.6
271.1
(91.7)
(62.8)
(112.1)
157.4
Operating profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 286.8
¥ 495.3
¥ 458.0
¥ 70.2
¥1,274.6
¥429.3
¥(152.9) ¥1,551.0
Fiscal year ended March 31, 2017:
Net revenue:
BK and TB: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . .
Net fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other than BK and TB(2) . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,198.1
485.9
335.3
144.4
6.2
712.2
972.4
¥1,029.0
834.7
323.7
420.0
91.0
194.3
576.5
¥1,303.2
444.6
213.3
185.1
46.2
858.6
821.0
¥173.1
73.0
—
73.0
—
100.1
112.2
¥3,526.3
1,731.3
824.7
793.1
113.5
1,795.0
2,335.9
¥582.9
387.3
189.2
(8.6)
206.7
195.6
213.2
¥
2.7 ¥4,111.9
2,190.5
71.9
1,221.8
207.9
688.6
(95.9)
280.1
(40.1)
1,921.4
(69.2)
2,716.1
167.0
Operating profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 225.7
¥ 452.5
¥ 482.2
¥ 60.9
¥1,190.4
¥369.7
¥(164.3) ¥1,395.8
Fiscal year ended March 31, 2018:
Net revenue:
BK and TB: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . .
Net fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other than BK and TB(2) . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,226.9
468.1
331.6
130.9
5.6
758.8
960.8
¥1,003.2
809.8
313.6
408.2
88.0
193.4
580.7
¥1,279.6
409.0
198.5
169.2
41.3
870.6
857.3
¥186.7
84.3
—
84.3
—
102.4
116.9
¥3,514.8
1,662.5
789.5
766.1
106.9
1,852.3
2,363.8
¥477.2
280.2
92.6
(12.9)
200.5
197.0
222.7
¥ (24.8) ¥3,967.2
2,029.9
1,119.7
667.2
243.0
1,937.3
2,743.1
87.2
237.6
(86.0)
(64.4)
(112.0)
156.6
Operating profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 266.1
¥ 422.5
¥ 422.3
¥ 69.8
¥1,151.0
¥254.5
¥(181.4) ¥1,224.1
Notes:
(1) Net revenue, operating expenses, and operating profit relating to the overseas Japanese Corporate business were ¥178.1 billion,
¥142.4 billion, and ¥35.7 billion for the fiscal year ended March 31, 2016, ¥177.1 billion, ¥146.2 billion, and ¥30.9 billion for the fiscal
year ended March 31, 2017, and ¥181.6 billion, ¥151.9 billion, and ¥29.7 billion for the fiscal year ended March 31, 2018, respectively.
To eliminate the double-counting of these amounts, adjustments have been made to the Total of Customer Business. These amounts have
been restated in accordance with the modifications resulting in the restatement of the prior period business segment information.
Includes MUFG and its subsidiaries other than MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-
alone basis.
(2)
Reconciliation
As set forth above, the measurement basis and the income and expense items of the internal management
reporting system are different from the accompanying consolidated statements of income. Therefore, it is
impracticable to present reconciliations of all of the business segments’ information, other than operating profit,
to corresponding items in the accompanying consolidated statements of income.
F-140
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of operating profit under the internal management reporting system for the fiscal years
ended March 31, 2016, 2017 and 2018 above to income before income tax expense shown in the accompanying
consolidated statements of income is as follows:
Operating profit: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of (provision for) credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account losses—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment securities gains—net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt investment securities gains (losses)—net
Foreign exchange gains (losses)—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investees—net . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of (provision for) off-balance sheet credit instruments . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net
2016
2017
2018
¥1,551
(232)
(6)
105
(19)
129
177
(334)
(118)
(in billions)
¥1,396
(254)
(880)
181
48
(110)
198
(7)
(6)
— (107)
(186)
(90)
¥1,224
241
(287)
215
71
7
228
—
(22)
96
(111)
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,163
¥ 273
¥1,662
31. FOREIGN ACTIVITIES
Foreign operations include the business conducted by overseas offices, as well as international business
conducted from domestic offices, principally several international banking-related divisions of MUFG Bank’s
and Mitsubishi UFJ Trust and Banking’s head office in Tokyo, and involve various transactions with debtors and
customers residing outside Japan. Close integration of the MUFG Group’s foreign and domestic activities makes
precise estimates of the amounts of assets, liabilities, income and expenses attributable to foreign operations
difficult and necessarily subjective. Assets, income and expenses attributable to foreign operations are allocated
to geographical areas based on the domicile of the debtors and customers.
F-141
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Generally, interest rates with respect to funds borrowed and loaned between domestic and foreign operations
are based on prevailing money market rates appropriate for the transactions. In general, the MUFG Group has
allocated all direct expenses and a proportionate share of general and administrative expenses to income derived
from foreign loans and other transactions by the MUFG Group’s foreign operations. The following table sets
forth estimated total assets at March 31, 2016, 2017 and 2018, and estimated total revenue, total expense, income
(loss) before income tax expense (benefit) and net income (loss) attributable to Mitsubishi UFJ Financial Group
for the respective fiscal years then ended:
Domestic
Japan
Foreign
Total
United
States of
America
Asia/Oceania
excluding
Japan
Other
areas(1)
Europe
(in millions)
2,995,693 ¥
2,501,616
800,726 ¥
741,930
326,381 ¥
205,459
981,076 ¥
661,920
309,552 ¥
139,833
5,413,428
4,250,758
Fiscal year ended March 31, 2016:
Total revenue(2) . . . . . . . . . . . . . ¥
Total expense(3) . . . . . . . . . . . . .
Income before income tax
expense . . . . . . . . . . . . . . . . .
494,077
58,796
120,922
319,156
169,719
1,162,670
Net income attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . .
Total assets at end of fiscal
year . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2017:
Total revenue(2) . . . . . . . . . . . . . ¥
Total expense(3) . . . . . . . . . . . . .
Income (loss) before income tax
expense (benefit) . . . . . . . . . .
Net income (loss) attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . .
Total assets at end of fiscal
year . . . . . . . . . . . . . . . . . . . .
Fiscal year ended March 31, 2018:
Total revenue(2) . . . . . . . . . . . . . ¥
Total expense(3) . . . . . . . . . . . . .
Income before income tax
185,395
173,376
162,620
196,712
84,229
802,332
176,979,064
52,719,811
26,194,772
25,019,537
11,644,171
292,557,355
1,903,336 ¥
2,345,731
749,513 ¥
677,548
330,751 ¥
138,128
818,917 ¥
582,665
384,956 ¥
170,858
4,187,473
3,914,930
(442,395)
71,965
192,623
236,252
214,098
272,543
(365,734)
119,189
216,584
102,803
129,838
202,680
191,305,636
46,053,230
23,821,920
25,255,955
10,748,278
297,185,019
2,127,278 ¥ 1,337,529 ¥
1,687,344
843,885
506,211 ¥
173,665
779,983 ¥
651,125
443,106 ¥ 5,194,107
3,532,288
176,269
expense . . . . . . . . . . . . . . . . .
439,934
493,644
332,546
128,858
266,837
1,661,819
Net income attributable to
Mitsubishi UFJ Financial
Group . . . . . . . . . . . . . . . . . .
Total assets at end of fiscal
140,091
447,887
322,581
92,016
225,585
1,228,160
year . . . . . . . . . . . . . . . . . . . .
196,121,542
44,831,664
22,342,574
27,163,121
10,111,411
300,570,312
Notes:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
(2) Total revenue is comprised of Interest income and Non-interest income.
(3) Total expense is comprised of Interest expense, Provision for (reversal of) credit losses and Non-interest expense.
F-142
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is an analysis of certain asset and liability accounts related to foreign activities at March 31,
2017 and 2018:
2017
2018
(in millions)
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,179,613
6,798,036
¥ 1,816,704
8,560,283
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,977,649
¥10,376,987
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥27,436,540
¥23,904,678
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 6,863,563
¥ 7,692,969
Loans—net of unearned income, unamortized premiums and deferred loan fees . . .
¥51,191,297
¥51,339,696
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥45,264,323
¥45,818,648
Funds borrowed:
Call money, funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under repurchase agreements(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables under securities lending transactions . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
362,984
10,880,012
75,916
5,080,452
2,243,251
¥
355,666
8,181,347
276,563
5,152,667
2,223,246
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,642,615
¥16,189,489
Trading account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,298,435
¥ 4,251,049
Note:
(1) The table above reflects changes in presentation that were made to long-term repurchase agreements at March 31, 2017. See Note 1 for
further information.
32. FAIR VALUE
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The guidance on fair value
measurements also specifies a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in
active markets and the lowest priority to unobservable inputs, for example, the reporting entity’s own data. Based
on the observability of the inputs used in the valuation techniques, the following three-level hierarchy is specified
by the guidance:
‰
‰
‰
Level 1—Unadjusted quoted prices for identical instruments in active markets.
Level 2—Observable inputs other than Level 1 prices for substantially the full term of the instruments,
such as quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; other inputs that are observable; or market-corroborated
inputs.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the instruments.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.
F-143
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group has an established and documented process for determining fair values in accordance
with the guidance. When available, quoted prices are used to determine fair value. If quoted prices are not
available, fair value is based upon valuation techniques that use observable or unobservable inputs. The fair
values of liabilities are determined by discounting future cash flows at a rate which incorporates the MUFG
Group’s own creditworthiness. In addition, valuation adjustments may be made to ensure the financial
instruments are recorded at fair value. These adjustments include, but are not limited to, amounts that reflect
counterparty credit quality, liquidity risk and model risk.
The following section describes the valuation techniques used by the MUFG Group to measure fair values
of certain financial instruments. The discussion includes the general classification of such financial instruments
in accordance with the fair value hierarchy, a brief explanation of the valuation techniques, the significant inputs
to those valuation techniques, and any additional significant assumptions.
Interest-earning Deposits in Other Banks
Cash flows are estimated based on the terms of the contracts and discounted using the market interest rates
applicable to the maturity of the contracts, which are adjusted to reflect credit risks on counterparties. As the
inputs into the valuation techniques are readily observable, these deposits are classified in Level 2 of the fair
value hierarchy.
Trading Account Assets and Liabilities—Trading Account Securities
When quoted prices are available in an active market, the MUFG Group uses quoted prices to measure the
fair values of securities and such securities are classified in Level 1 of the fair value hierarchy. Examples of
Level 1 securities include certain Japanese and foreign government bonds, and marketable equity securities.
When quoted prices are available but the securities are not traded in active markets, such securities are
classified in Level 2 of the fair value hierarchy. These securities include certain Japanese government agency
bonds, Japanese prefectural and municipal bonds, foreign governments and official institutions bonds, corporate
bonds, residential mortgage-backed securities and equity securities.
As for quoted prices provided by third-party vendors, independent price verification is performed by the
MUFG group to determine the quality and reliability of the data for fair value measurement purposes. As part of
its independent price verification procedures, the MUFG group obtains a sufficient understanding of the vendors’
pricing sources and valuation processes. Further, the MUFG group performs internal price verification
procedures to ensure that the quoted prices provided from the third-party vendors are reasonable. Such
verification procedures include comparison of pricing sources and analysis of variances beyond certain
thresholds.
When quoted prices are not available, the MUFG Group estimates fair values by using an internal model,
quoted prices of securities with similar characteristics or non-binding prices obtained from independent third
parties. Such securities include certain commercial paper, corporate bonds, asset-backed securities and residential
mortgage-backed securities. For commercial paper, the MUFG Group estimates fair value using discounted cash
flows. The cash flows are estimated in accordance with the terms of contracts and discounted using a discount
rate based on the yield curve estimated from market interest rates appropriate to the securities. Commercial paper
is generally classified in Level 2 of the fair value hierarchy. For corporate bonds, the MUFG Group estimates fair
value using discounted cash flows. The cash flows are estimated in accordance with the terms of contracts and
discounted using discount rates applicable to the maturity of the bonds, which are adjusted to reflect credit risk of
F-144
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
issuers. Credit risk of issuers is reflected in the future cash flows being discounted by the interest rate applicable
to the maturity of the bonds. Corporate bonds are classified in either Level 2 or Level 3 of the fair value
hierarchy, depending primarily on the significance of the adjustments to the unobservable input of credit
worthiness. For residential mortgage-backed securities, the MUFG Group estimates fair value using non-binding
prices obtained from independent third parties. Residential mortgage-backed securities are classified as level 2
unless otherwise significant unobservable input is used for the valuation.
When there is less liquidity for securities or significant inputs used in the fair value measurements are
unobservable, such securities are classified in Level 3 of the fair value hierarchy. Examples of such Level 3
securities include CLOs backed by general corporate loans, which are classified in asset-backed securities. The
fair value of CLOs is measured by weighing the estimated fair value amounts from the internal model and the
non-binding quotes from the independent broker-dealers. The weight of the quotes from independent broker-
dealers is determined based on the result of inquiries with the broker-dealers to understand their basis of fair
value calculation with consideration given to transaction volume. Key inputs to the internal model include
projected cash flows through an analysis of underlying loans, probability of default which incorporates market
indices such as LCDX (which is an index of loan credit default swaps), prepayment rates and discount rates
reflecting liquidity premiums based on historical market data.
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives valued using quoted prices are classified in Level 1 of the fair value hierarchy.
Examples of Level 1 derivatives include stock futures index and interest rate futures. However, the majority of
the derivative contracts entered into by the MUFG Group are traded over-the-counter and valued using valuation
techniques as there are no quoted prices for such derivatives. The valuation techniques and inputs vary depending
on the types and contractual terms of the derivatives. The principal valuation techniques used to value derivatives
include discounted cash flows, the Black-Scholes model and the Hull-White model. The key inputs include
interest rate yield curve, foreign currency exchange rate, volatility, credit quality of the counterparty or the
MUFG Group and spot price of the underlying. These models are commonly accepted in the financial industry
and key inputs to the models are generally readily observable in an active market. Derivatives valued using such
valuation techniques and inputs are generally classified in Level 2 of the fair value hierarchy. Examples of such
Level 2 derivatives include plain-vanilla interest rate swaps, foreign currency forward contracts and currency
option contracts.
Derivatives that are valued using valuation techniques with significant unobservable inputs are classified in
Level 3 of the fair value hierarchy. Examples of Level 3 derivatives include long-term interest rate or currency
swaps and certain credit derivatives, where significant inputs such as volatility, credit curves and correlation of
such inputs are unobservable.
Investment Securities
Investment securities include Available-for-sale debt and equity securities, whose fair values are measured
using the same valuation techniques as the trading account securities described above. Investment securities also
include investments in nonmarketable equity securities which are subject to specialized industry accounting
principles. The valuation of such nonmarketable equity securities involves significant management judgment due
to the absence of quoted prices, lack of liquidity and the long term nature of these investments. Further, there
may be restriction on transfers of nonmarketable equity securities. The MUFG Group values such securities
initially at transaction price and subsequently adjusts such valuations, considering evidence such as current sales
transactions of similar securities, initial public offerings, recent equity issuances and change in financial
condition of the investee company. Nonmarketable equity securities are included in Level 3 of the fair value
hierarchy.
F-145
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other Assets
Other assets measured at fair value mainly consist of securities received as collateral that may be sold or
repledged under securities lending transactions, money in trust for segregating cash deposited by customers on
security transactions and derivatives designated as hedging instruments. The securities received as collateral
under lending transactions mainly consist of certain Japanese and foreign government bonds which are valued
using the valuation techniques previously described in the section entitled “Trading Accounts Assets and
Liabilities—Trading Account Securities” above.
Money in trust for segregating cash deposited by customers on security transactions mainly consists of
certain Japanese government bonds which are valued using the valuation techniques described in the “Trading
Account Assets and Liabilities—Trading Account Securities” above and is included in Level 1 or Level 2 of the
fair value hierarchy depending on the component assets.
The fair values of derivatives designated as hedging instruments are measured using the valuation
techniques described in the “Trading Account Assets and Liabilities—Derivatives” above.
Obligations to Return Securities Received as Collateral
Obligations to return securities received as collateral under securities lending transactions are measured at
the fair values of the securities received as collateral. The securities received as collateral consist primarily of
certain Japanese and foreign government bonds, whose fair values are measured using the valuation techniques
described in the “Trading Account Assets and Liabilities—Trading Account Securities” above.
Other Short-term Borrowings and Long-term Debt
Certain short-term borrowings and long-term debt are measured at fair value due to the election of the fair
value option. The fair value of these instruments are measured principally based on the discounted cash flows.
Where the inputs into the valuation techniques are mainly based on observable inputs, these instruments are
classified in Level 2 of the fair value hierarchy. Where significant inputs are unobservable, they are classified in
Level 3 of the fair value hierarchy.
Market Valuation Adjustments
Counterparty credit risk adjustments are made to certain financial assets such as over-the-counter
derivatives to factor in counterparty credit exposure. As not all counterparties have the same credit risk, it is
necessary in calculating credit risk adjustments, to take into account probability of a default event occurring for
each counterparty, which is primarily derived from observed or estimated spreads on credit default swaps. In
addition, the counterparty credit risk adjustment takes into account the effect of credit risk mitigation such as
pledged collateral and the legal right of offset with the counterparty.
For its own credit risk adjustments, the MUFG Group takes into consideration all the facts and
circumstances, including its own credit rating, the difference between its funding rate and market interest rate,
and the existence of collateralization or netting agreements. As a result of these analyses, the MUFG Group
considered that its own credit risk adjustments for financial liabilities were not material.
Liquidity adjustments are applied mainly to the instruments classified in Level 3 of the fair value hierarchy
when recent observable prices of such instruments are not available or such instruments are traded in inactive or
less active markets. The liquidity adjustments are based on the facts and circumstances of the markets including
the availability of external quotes and the time since the latest available quote.
F-146
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Model valuation adjustments such as unobservable parameter valuation adjustments may be provided when
the fair values of instruments are determined based on internally developed valuation techniques. Examples of
such adjustments include adjustments to the model price of certain derivatives where parameters such as
correlation are unobservable. Unobservable parameter valuation adjustments are applied to mitigate the
uncertainty inherent in the resulting valuation estimate.
Investments in Certain Entities That Calculate Net Asset Value per Share
The MUFG Group has interests in investment funds mainly private equity funds, and real estate funds that
are measured at fair value on a recurring or nonrecurring basis.
Private equity funds have specific investment objectives in connection with their acquisition of equity
interests, such as providing financing and other support to start-up businesses, medium and small entities in a
particular geographical area, and to companies with certain technology or companies in a high-growth industry.
Generally, these investments cannot be redeemed with the funds, and the return of invested capital and its gains
are derived from distributions received upon the liquidation of the underlying assets of the fund. It is estimated
that the underlying assets of the fund would be liquidated within a ten-year period.
Real estate funds invest globally and primarily in real estate companies, debt recapitalizations and direct
property. These investments are generally not redeemable with the funds. Distributions from each fund will be
received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the
funds would be liquidated within a four-year period.
F-147
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the financial instruments carried at fair value by level within the fair value
hierarchy as of March 31, 2017 and 2018:
At March 31, 2017
Assets
Trading account assets:
Level 1
Level 2
Level 3
Fair Value
(in millions)
Trading securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,646,728
¥11,027,560
¥ 799,493
¥22,473,781
Debt securities
Japanese national government and Japanese government
agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . .
Foreign governments and official institutions bonds . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,794,233
—
7,764,734
—
—
—
—
—
1,087,761
112,687
27,321
9,661
75,545
160
—
390,147
136,226
466,151
3,305,520
4,816,323
280,502
5,155
1,084,421
543,115
18,619,331
14,174,526
4,270,548
88,154
18,740
67,363
—
—
1,836
25,521
47,914
654,814
35,552
—
33,856
101,100
38,188
20,455
24,707
17,745
5
2,184,380
136,226
8,232,721
3,331,041
4,864,237
935,316
40,707
1,084,421
1,664,732
18,833,118
14,240,035
4,300,664
188,406
36,645
67,368
Investment securities:
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,214,302
8,538,271
337,526
39,090,099
Debt securities
Japanese national government and Japanese government
agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . .
Foreign governments and official institutions bonds . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(3)(4)
23,053,677
—
1,360,060
—
—
—
—
—
5,800,565
—
453,214
2,772,611
1,015,489
769,770
1,104,800
1,188,903
77,297
1,261,353
10,199
337,849
—
37,942
— 25,826,288
1,015,489
—
2,149,929
20,099
1,141,732
36,932
1,188,918
15
80,268
2,971
1,378,272
116,919
170,789
160,590
6,138,414
—
26,292
26,292
495,006
3,850
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,426,931
¥38,223,104
¥1,268,261
¥80,918,296
Liabilities
Trading account liabilities:
Trading securities sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation to return securities received as collateral
. . . . . . . . . . . . . . . . . . .
Others(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
128,292
135,342
45,539
5,219
84,514
70
—
3,423,936
—
¥
1,392
18,461,252
14,249,439
4,072,787
66,482
14,730
57,814
92,296
376,724
¥
— ¥
63,855
9,637
5,597
31,019
17,375
227
—
28,432
129,684
18,660,449
14,304,615
4,083,603
182,015
32,175
58,041
3,516,232
405,156
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,687,570
¥18,931,664
¥
92,287
¥22,711,521
F-148
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018
Assets
Trading account assets:
Level 1
Level 2
Level 3
Fair Value
(in millions)
Trading securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,876,424
¥10,876,080
¥ 827,493
¥22,579,997
Debt securities
Japanese national government and Japanese government
agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . . .
Foreign governments and official institutions bonds . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,388,143
—
8,190,781
—
—
—
—
—
1,297,500
71,175
3,320
1,890
65,965
—
—
477,530
189,756
469,342
3,255,503
4,432,307
186,351
2,800
1,210,775
651,716
12,420,100
8,681,427
3,543,413
118,351
6,239
70,670
—
—
1,047
23,092
41,141
684,637
33,450
—
44,126
93,900
27,092
12,118
22,994
30,753
943
1,865,673
189,756
8,661,170
3,278,595
4,473,448
870,988
36,250
1,210,775
1,993,342
12,585,175
8,711,839
3,557,421
207,310
36,992
71,613
Investment securities:
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,361,095
9,792,943
350,660
39,504,698
Debt securities
Japanese national government and Japanese government
agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese prefectural and municipal bonds . . . . . . . . . . . . . . . .
Foreign governments and official institutions bonds . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others(3)(4)
21,522,128
—
1,583,554
—
—
—
—
—
6,255,413
—
955,548
3,045,776
1,537,431
567,946
1,113,323
1,617,520
92,806
1,397,177
4,793
416,171
—
93,042
— 24,567,904
1,537,431
—
2,171,692
20,192
1,119,360
6,037
1,617,535
15
95,236
2,430
1,558,349
161,172
165,607
160,814
6,671,584
—
28,359
28,359
1,057,250
8,660
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,264,242
¥33,182,165
¥1,309,072
¥75,755,479
Liabilities
Trading account liabilities:
Trading securities sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation to return securities received as collateral
. . . . . . . . . . . . . . . . . . . .
Others(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
208,354
80,673
3,085
2,058
75,530
—
—
3,030,974
—
¥
7,060
11,844,463
8,659,042
2,992,812
117,572
4,362
70,675
145,988
507,700
¥
— ¥
81,781
12,496
5,382
33,679
30,070
154
—
(25,528)
215,414
12,006,917
8,674,623
3,000,252
226,781
34,432
70,829
3,176,962
482,172
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,320,001
¥12,505,211
¥
56,253
¥15,881,465
Notes:
(1)
(2) Excludes certain investments valued at net asset value of private equity funds, whose fair values were ¥13,150 million and
Includes securities measured under the fair value option.
¥21,517 million at March 31, 2017 and 2018, respectively. The amounts of unfunded commitments related to these private equity funds
were ¥27,735 million and ¥61,463 million at March 31, 2017 and 2018, respectively.
F-149
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(3) Mainly comprises securities received as collateral that may be sold or repledged under securities lending transactions, money in trust for
segregating cash deposited by customers on security transactions and derivative assets designated as hedging instruments.
(4) Excludes certain investments valued at net asset value of real estate funds and private equity funds, whose fair values at March 31, 2017
were ¥41 million, and ¥119 million, respectively, and those at March 31, 2018 were nil, and ¥35 million, respectively. There was no
amount of unfunded commitments related to these real estate funds and private equity funds at March 31, 2017 and 2018.
Includes other short-term borrowings, long-term debt, bifurcated embedded derivatives carried at fair value and derivative liabilities
designated as hedging instruments.
(5)
Transfers Between Level 1 and Level 2
During the fiscal years ended March 31, 2017 and 2018, the transfers between Level 1 and Level 2 were as
follows:
2017
2018
Transfers out of
Level 1
into Level 2(1)
Transfers out of
Level 2
into Level 1(1)
Transfers out of
Level 1
into Level 2(1)
Transfers out of
Level 2
into Level 1(1)
(in millions)
Assets
Trading account assets:
Trading Securities
Debt securities
Foreign governments and
official institutions
bonds . . . . . . . . . . . . . . . .
¥
Trading derivative assets
Equity contracts . . . . . . . . . . . . . .
Investment securities:
Available-for-sale securities
¥
—
—
—
—
¥
6,176
¥
26,781(2)
—
—
Marketable equity securities . . . .
22,578
27,807
8,022
5,566
Liabilities
Trading account liabilities:
Trading derivative liabilities
Equity contracts . . . . . . . . . . . . . .
—
—
31,341(2)
—
Notes:
(1) The transfers between level 1 and 2 occurred during the first-half of the fiscal year are assumed to have occurred at the beginning of the
first-half year, and the transfers occurred during the second-half of the fiscal year are assumed to have occurred at the beginning of the
second-half year.
(2) Transfer out of Level 1 into Level 2 for trading derivative assets and trading derivative liabilities were caused by the adoption of
valuation techniques instead of quoted prices which were not obtained at the end of the period due to the reduction of activities in the
market.
In general, the transfers from Level 1 into Level 2 comprised of securities whose fair values were measured
at quoted prices in active markets at the beginning of the period but such quoted prices were no longer available
at the end of the period. The transfers from Level 2 into Level 1 comprised of securities for which quoted prices
in active markets became available at the end of the period even though such quoted prices were not available at
the beginning of the period.
Changes in Level 3 Recurring Fair Value Measurements
The following tables present a reconciliation of the assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) during the fiscal years ended March 31, 2017 and
F-150
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2018. The determination to classify a financial instrument within Level 3 is based upon the significance of the
unobservable inputs to overall fair value measurement. However, Level 3 financial instruments typically include,
in addition to the unobservable or Level 3 input, observable inputs (inputs that are actively quoted and can be
validated to external sources). Accordingly, the gains and losses in the tables below include changes in fair value
due in part to observable inputs used in the valuation techniques.
Total gains (losses)
for the period
Included
in
earnings
Included
in other
comprehensive
income
March 31,
2016
Purchases
Issues
Sales
Settlements
(in millions)
Transfers
into
Level 3(5)
Transfers
out of
Level 3(5)
March 31,
2017
Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2017
Assets
Trading account assets:
Trading securities(1) . . . . . . . . . ¥ 879,946 ¥ (3,062)(2) ¥
— ¥375,549 ¥ — ¥(143,806) ¥(315,002) ¥58,409 ¥(52,541) ¥ 799,493
¥ 8,227(2)
Debt securities
Japanese national
government and
Japanese government
agency bonds . . . . . . . .
Japanese prefectural and
municipal bonds . . . . .
Foreign governments and
official institutions
bonds . . . . . . . . . . . . . .
Corporate bonds . . . . . . .
Residential mortgage-
backed securities . . . . .
Asset-backed
— (1,209)
2,467
84
57,470
98,236
(5,273)
(2,783)
23,540
(5,036)
securities . . . . . . . . . . .
Other debt securities . . . .
Equity securities . . . . . . . . .
Trading derivatives—net . . . . .
630,247
35,944
32,042
31,254
9,437
(392)
2,110
(2,305)(2)
Interest rate
contracts—net . . . . . . . . .
38,213
(1,942)
Foreign exchange
contracts—net . . . . . . . . .
. . . . .
Equity contracts—net
Commodity
contracts—net . . . . . . . . .
Credit derivatives—net . . . .
Investment securities:
1,235
(7,915)
(14,291)
12,917
(345)
66
1,397
(386)
—
—
—
—
—
—
—
—
(847)
(457)
15
(376)
(12)
(17)
—
—
—
—
— (10,106)
11,315
(2,551)
—
—
—
—
—
(12)
—
—
1,836
25,521
—
—
83
107
49,631
2,802
— (49,342)
(6,659)
—
(50,638)
(60,640)
47,094(6) (52,529)(6)
38,086
—
—
(8,676)
—
—
47,914
(4,304)
281,792
—
3,238
1,274
(181,408)
— (85,254)
—
—
—
—
—
(3,534)
— (13,573)
(2,968)
—
—
—
31,839
—
—
—
(7,429)
654,814
35,552
33,856
37,245
11,761
(393)
973
(7,768)(2)
—
524
147
603
—
(2)
(20)
(1,529)
(1,417)
—
—
—
—
—
—
(6,704)
4,170
(4,727)
28,551
(909)
1,035
(8,155)
29,126
(1,465)
(2,766)
64
14,858
(6,312)
(12,420)
3,572
144
107
—
8
—
—
370
(222)
2,050
(61)
Available-for-sale securities . .
375,274
(3,504)(3)
(35,082)
300,765
—
(268)
(292,198)
6,835
(14,296)
337,526
(419)(3)
Debt securities
Foreign governments and
official institutions
bonds . . . . . . . . . . . . . .
Corporate bonds . . . . . . .
Residential mortgage-
backed securities . . . . .
Commercial mortgage-
backed securities . . . . .
Asset-backed
20,941
23,595
15
3,764
—
22
—
—
(1,099)
(463)
999
26,222
—
(282)
—
—
securities . . . . . . . . . . .
Other debt securities . . . .
Other investment securities . . .
Others . . . . . . . . . . . . . . . . . . . . .
158,281
168,678
24,689
846
(3,526)
—
2,432(4)
280(4)
(26,651)
(6,587)
—
111
250,156
23,388
4,012
1,230
—
—
—
—
—
—
—
—
—
(268)
(742)
(6,086)
—
—
6,835(6) (12,925)(6)
20,099
36,932
—
(419)
—
—
—
(511)
—
—
—
—
— (259,970)
— (24,889)
(110)
— (1,371)
—
—
(69)
—
—
— 1,415
(4,662)
(32)
15
2,971
116,919
160,590
26,292
3,850
—
—
—
—
(1,270)(4)
131(4)
Total . . . . . . . . . . . . . . . . . . . . . . ¥1,312,009 ¥ (6,159)
¥(35,818)
¥682,830 ¥(2,968) ¥(148,768) ¥(620,883) ¥98,498 ¥(74,335) ¥1,204,406
¥ (1,099)
Liabilities
Others . . . . . . . . . . . . . . . . . . . . . ¥
(9,821) ¥(24,383)(4) ¥ 17,155
Total . . . . . . . . . . . . . . . . . . . . . . . ¥
(9,821) ¥(24,383)
¥ 17,155
¥
¥
— ¥ 4,062 ¥
— ¥ (30,214) ¥59,635 ¥ (2,458) ¥
28,432
¥(15,362)(4)
— ¥ 4,062 ¥
— ¥ (30,214) ¥59,635 ¥ (2,458) ¥
28,432
¥(15,362)
F-151
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total gains (losses) for the
period
Included
in
earnings
Included
in other
comprehensive
income
March 31,
2017
Purchases
Issues
Sales
Settlements
(in millions)
Transfers
into
Level 3(5)
Transfers
out of
Level 3(5)
March 31,
2018
Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2018
. . . . . ¥ 799,493 ¥(25,944)(2) ¥
— ¥ 702,402 ¥ — ¥(281,927) ¥(376,333) ¥34,986 ¥(25,184) ¥ 827,493
¥(26,391)(2)
Assets
Trading account assets:
Trading securities(1)
Debt securities
Japanese national
government and
Japanese
government
agency bonds . . . .
Foreign governments
and official
institutions
bonds . . . . . . . . . .
Corporate bonds . . . .
Residential
mortgage-backed
securities . . . . . . . .
Asset-backed
—
(4)
1,836
25,521
720
(6,424)
47,914
1,014
securities . . . . . . . .
654,814 (21,124)
Other debt
securities . . . . . . . .
Equity securities . . . . . .
35,552
33,856
(2,102)
1,976
Trading
derivatives—net . . . . . .
Interest rate contracts—
net . . . . . . . . . . . . . . .
37,245
3,912(2)
28,551
(4,730)
Foreign exchange
contracts—net
Equity
. . . . .
14,858
(2,434)
contracts—net
. . . . .
Commodity contracts—
net . . . . . . . . . . . . . . .
Credit
(6,312) 12,518
370
30
derivatives—net . . . .
(222)
(1,472)
—
—
—
—
—
—
—
520
(42)
294
272
(4)
—
Investment securities:
Available-for-sale
securities . . . . . . . . . . . .
Debt securities
Foreign governments
and official
institutions
bonds . . . . . . . . . .
Corporate bonds . . . .
Residential
mortgage-backed
securities . . . . . . . .
Commercial
mortgage-backed
securities . . . . . . . .
Asset-backed
337,526
4,831(3)
(15,344)
319,092
20,099
36,932
—
150
(186)
(43)
15
2,971
—
—
—
4
621
521
—
—
securities . . . . . . . .
116,919
4,681
(9,605)
306,680
Other debt
securities . . . . . . . .
160,590
—
(5,514)
11,270
Other investment
1,079
—
—
—
— (1,075)
—
—
107,685
3,170
— (107,157)
(533)
—
(1,064)
(10,391)
—
(973)
34,885(6) (23,136)(6)
1,047
23,092
(2)
(6,377)
—
—
—
(7,787)
576,668
— (172,324)
(353,397)
—
13,800
—
—
— (1,913)
—
(3,694)
—
—
—
101
—
41,141
829
— 684,637
(19,387)
—
—
33,450
44,126
(2,102)
648
1,367 (1,518)
— (23,699)
(466)
(5,242)
12,119
(9,055)(2)
—
26
—
—
—
—
(8,810)
(2,433)
2,060
14,596
(3,908)
(67)
1,996
(7,937)
6,736
1,713
687 (1,154)
— (17,302)
(29)
635
(10,685)
(5,446)
654
(364)
—
—
—
—
—
—
—
—
—
—
—
(3)
2,483
—
—
—
—
683
789
116
(1,530)
(163)
(264,616)
93
(30,759)
350,660
(167)(3)
—
(52)
(342)
(805)
—
93(6) (30,759)(6)
—
20,192
6,037
—
(167)
—
—
—
(545)
— (257,503)
(111)
(5,421)
—
—
—
—
—
—
—
—
15
2,430
— 161,172
— 160,814
—
—
—
—
(714)
—
28,359
8,660
300(7)
(592)(8)
securities . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . .
26,292
3,850
1,640(7)
(426)(8)
—
(37)
3,930
5,584
— (2,782)
(311)
—
(7)
—
Total . . . . . . . . . . . . . . . . . . . ¥1,204,406 ¥(15,987)
¥(14,861)
¥1,032,375 ¥(1,518)¥(285,183) ¥(664,655) ¥34,613 ¥(61,899) ¥1,227,291
¥(35,905)
Liabilities
Others . . . . . . . . . . . . . . . . . .
28,432
4,508(4)
(2,005)
— 6,601
— (27,824)
1,056
(31,290)
(25,528)
35,010(4)
Total . . . . . . . . . . . . . . . . . . . ¥
28,432 ¥ 4,508
¥ (2,005)
¥
— ¥ 6,601 ¥
— ¥ (27,824) ¥ 1,056 ¥(31,290) ¥ (25,528) ¥ 35,010
Notes:
(1)
(2)
Includes Trading securities measured under the fair value option.
Included in Trading account profits (losses)—net and in Foreign exchange gains (losses)—net.
F-152
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Included in Investment securities gains—net.
Included in Trading account profits (losses)—net.
(3)
(4)
(5) All transfers out of Level 3 or into Level 3 were assumed to have occurred at the beginning of the first-half or the second-half of the
fiscal year.
(6) Transfers into (out of) Level 3 for corporate bonds were caused by the decrease (increase) in liquidity or the availability of the quoted
prices provided by third-party venders.
Included in Investment securities gains—net.
Included in Other non-interest income.
(7)
(8)
Quantitative Information about Level 3 Fair Value Measurements
The following tables present information on the valuation techniques, significant unobservable inputs and
their ranges for each major category of assets and liabilities measured at fair value on a recurring basis and
classified in Level 3:
At March 31, 2017
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Weighted
Average(2)
(in millions)
Assets
Trading securities and
Investment securities:
Foreign governments
and official
institutions bonds . . .
¥ 20,099 Return on equity method Probability of default
Corporate bonds . . . . . .
19,313 Discounted cash flow
Recovery rate
Market-required return on capital
Probability of default
Recovery rate
Residential mortgage-
backed securities,
Commercial
mortgage-backed
securities and Asset-
backed securities . . . .
108,132 Discounted cash flow
650,814
Internal model(4)
Other debt securities . . .
35,552 Discounted cash flow
Probability of default
Recovery rate
Asset correlations
Discount factor
Prepayment rate
Probability of default
Recovery rate
Liquidity premium
160,479 Return on equity method Probability of default
Recovery rate
Market-required return on capital
0.1%~0.4%
60.0%~70.0%
8.0%~10.0%
4.4%~8.8%
41.0%~81.2%
0.3%
67.0%
9.0%
5.6%
42.8%
1.2%~5.3%
60.0%~76.0%
7.0%~11.0%
1.2%~1.4%
9.5%~29.5%
0.0%~83.1%
52.8%~80.9%
0.5%~1.0%
0.0%~25.0%
40.0%~90.0%
8.0%~10.0%
4.3%
64.7%
11.0%
1.2%
29.3%
—(3)
80.6%
0.6%
0.3%
71.1%
9.7%
F-153
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2017
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Trading derivatives—net:
Interest rate contracts—net . . . .
28,297 Option model
(in millions)
Foreign exchange
contracts—net . . . . . . . . . . . .
14,890 Option model
Equity contracts—net . . . . . . . .
(6,659) Option model
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Volatility
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Correlation between underlying assets
Recovery rate
Volatility
Correlation between interest rate and
equity
Correlation between foreign exchange rate
and equity
Correlation between equities
Volatility
0.1%~13.2%
36.0%~100.0%
20.4%~48.8%
41.0%~48.0%
21.6%~100.0%
0.1%~8.7%
40.3%~74.0%
46.4%~50.7%
85.0%
41.0%~48.0%
16.8%~20.6%
33.3%~39.0%
3.0%~69.2%
25.5%~81.3%
29.8%~127.4%
At March 31, 2018
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Weighted
Average(2)
(in millions)
Assets
Trading securities and
Investment securities:
Foreign governments and
official institutions
bonds . . . . . . . . . . . . . . .
¥ 20,192 Return on equity method Probability of default
Corporate bonds . . . . . . . .
267 Discounted cash flow
Recovery rate
Market-required return on capital
Recovery rate
Residential mortgage-
backed securities,
Commercial mortgage-
backed securities and
Asset-backed
securities . . . . . . . . . . . .
Other debt securities . . . . .
110,536 Discounted cash flow
684,586
Internal model(4)
Probability of default
Recovery rate
Asset correlations
Discount factor
Prepayment rate
Probability of default
Recovery rate
Liquidity premium
33,450 Discounted cash flow
149,759 Return on equity method Probability of default
Recovery rate
Market-required return on capital
F-154
0.0%~0.4%
0.2%
60.0%~70.0% 66.7%
9.5%
8.0%~10.0%
70.8%
70.8%
1.2%~5.3%
4.5%
60.0%~76.0% 66.3%
9.0%
9.0%
1.0%
1.0%
37.2%
37.2%
—(3)
0.0%~91.3%
65.3%
65.3%
0.8%
0.5%~2.4%
0.3%
0.0%~25.0%
40.0%~90.0% 72.5%
9.7%
8.0%~10.0%
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018
Fair value(1) Valuation technique
Significant unobservable inputs
Range
Trading derivatives—net:
Interest rate contracts—net . . . .
14,460 Option model
(in millions)
Foreign exchange
contracts—net . . . . . . . . . . . .
6,779 Option model
Equity contracts—net . . . . . . . .
(16,600) Option model
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Volatility
Probability of prepayment
Probability of default
Correlation between interest rates
Correlation between interest rate and
foreign exchange rate
Recovery rate
Correlation between underlying assets
Volatility
Correlation between interest rate and
equity
Correlation between foreign exchange rate
and equity
Correlation between equities
Correlation between underlying assets
6,528 Discounted cash flow Term of litigation
0.0%~12.5%
34.1%~52.7%
19.7%~50.4%
41.0%~46.0%
13.4%~100.0%
100.0%
0.0%~12.5%
40.3%~74.0%
28.1%~50.7%
41.0%~46.0%
85.0%
10.3%~16.2%
37.1%~39.0%
7.0%~65.2%
20.6%~81.7%
76.0%
2.0years
Notes:
(1) The fair value as of March 31, 2017 and 2018 excludes the fair value of investments valued using vendor prices.
(2) Weighted averages are calculated by weighing each input by the relative fair value of the respective financial instruments.
(3) See “Probability of default” in “Sensitivity to and range of unobservable inputs.”
(4) For further detail of Internal model, refer to the last paragraph of “Trading Account Assets and Liabilities—Trading Account Securities.”
Sensitivity to and range of unobservable inputs
Probability of default—Probability of default is an estimate of the likelihood that the default event will
occur and the MUFG Group will be unable to collect the contractual amounts. A significant increase (decrease)
in the default rate would result in a significant decrease (increase) in a fair value through a decrease (increase) in
the estimated cash flows. Probability of default used in internal model of Residential mortgage-backed securities,
Commercial mortgage-backed securities and Asset-backed securities represents that of underlying assets,
whereas probability of default used in other valuation techniques represents the counterparty default risks,
determined through the MUFG Group’s credit rating system.
The wide range of probability of default used in the internal model of Residential mortgage-backed
securities, Commercial mortgage-backed securities and Asset-backed securities is mainly caused by Asset-
backed securities. Asset-backed securities have a large number of underlying loans, mainly corporate loans, in
several industries. The MUFG Group primarily makes investments in the senior tranches of such securities, with
no investments in the equity portion. Thus, the MUFG Group’s investments have higher priority of payments
than mezzanine and equity and even if some of underlying loans become default, the MUFG Group may still be
able to receive the full contractual payments.
For derivative contracts, the MUFG Group holds positions with a large number of counterparties with
various credit quality, which results in wider range of probability of default. However, the majority of
counterparties have higher ratings, categorized as “Normal” in the internal credit rating system, the inputs used to
estimate fair value of derivative contracts are concentrated in the lower end of the range.
F-155
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Discount factor and Liquidity premium—Discount factor and liquidity premium are adjustments to
discount rates to reflect uncertainty of cash flows and liquidity of the instruments. When recent prices of similar
instruments are unobservable in inactive or less active markets, discount rates are adjusted based on the facts and
circumstances of the markets including the availability of quotes and the time since the latest available quotes.
A significant increase (decrease) in discount rate would result in a significant decrease (increase) in a fair value.
Recovery rate and Prepayment rate—Recovery rate is the proportion of the total outstanding balance of a
bond or loan that is expected to be collected in a liquidation scenario. For many debt securities (such as asset-
backed securities), there is no directly observable market input for recovery, but indications of recovery levels
are available from third-party pricing services. The assumed recovery of a security may differ from its actual
recovery that will be observable in the future. Prepayment rate represents the proportion of principal that is
expected to be paid prematurely in each period on a security or pool of securities. Prepayment rates change the
future cash flows for the investor and thereby change the fair value of the security. Recovery rate and prepayment
rate would affect estimation of future cash flows to a certain extent and changes in these inputs could result in a
significant increase or decrease in fair value.
Volatility—Volatility is a measure of the speed and severity of market price changes and is a key factor in
pricing. Typically, instruments can become more expensive if volatility increases. A significant increase
(decrease) in volatility would cause a significant increase (decrease) in the value of an option resulting in the
significant increase (decrease) in fair value.
The level of volatility generally depends on the tenor of the underlying instrument and the strike price or
level defined in the contract. Volatilities for certain combinations of tenor and strike price are not observable.
The volatility inputs used to estimate fair value of interest rate contracts are distributed throughout the range.
Correlation—Correlation is a measure of the relationship between the movements of two variables (i.e. how
the change in one variable influences a change in the other variables). A variety of correlation-related
assumptions are required for a wide range of instruments including foreign governments and official institutions
bonds, asset-backed securities, corporate bonds, derivatives and certain other instruments. In most cases,
correlations used are not observable in the market and must be estimated using historical information. Changes in
correlation inputs can have a major impact, favorable or unfavorable, on the value of an instrument, depending
on its nature. In addition, the wide range of correlation inputs are primarily due to the complex and unique nature
of these instruments. There are many different types of correlation inputs, including cross-asset correlation (such
as correlation between interest rate and equity), and same-asset correlation (such as correlation between interest
rates). Correlation levels are highly dependent on market conditions and could have a relatively wide range of
levels within or across asset classes.
For interest rate contracts and foreign exchange contracts, the diversity in the portfolio held by the MUFG
Group is reflected in wide ranges of correlation, as the fair values of transactions with a variety of currencies and
tenors are determined using several foreign exchange and interest rate curves. For equity derivative contracts, the
wide range of correlation between interest rate and equity is primarily due to the large number of correlation
pairs with different maturities of contracts. For credit derivative contracts, the wide range of correlation between
underlying assets is primarily due to factors such as reference assets with different maturities, capital structure
subordinations, and credit quality.
Term of litigation—Term of litigation is the estimated period until the resolution of a certain litigation
matter that relates to an issuer’s restricted shares (“Covered Litigation”) that the MUFG Group purchased, which
is referenced in certain swap transactions.
F-156
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
These swaps are valued using a discounted cash flow methodology and are dependent upon the final
resolution of the Covered Litigation. The settlement timing of the Covered Litigation is not observable in the
market, therefore the estimated term is classified as a level 3 input.
The restricted shares which the MUFG Group purchased will be convertible to listed shares of the issuer at
the end of the Covered Litigation. The restricted shares will be diluted dependent upon the settlement amount of
the Covered Litigation and the dilution of the restricted shares is accomplished through an adjustment to the
conversion rate of the restricted shares. In order to hedge the reduction of the conversion rate, the MUFG Group
entered into certain swaps with the seller which references the conversion rate. The value generated by these
trades is subject to the ultimate term of the issuer’s litigation, subject to a minimum term referenced within the
trade contracts.
Market-required return on capital—Market-required return on capital is the return on capital expected by
the secondary market. A significant increase (decrease) in the market-required return on capital would result in a
significant decrease (increase) in a fair value of a financial asset.
Valuation Process for Level 3 Fair Value Measurements
The MUFG Group establishes valuation policies and procedures for measuring fair value, for which the risk
management departments ensure that the valuation techniques used are logical, appropriate and consistent with
market information. The financial accounting offices ensure that the valuation techniques are consistent with the
accounting policies.
In accordance with the valuation policies and procedures, fair value is determined by the risk management
departments or similar sections that are independent of the front offices in order to ensure objectivity and validity
of measuring fair value. An analysis performed on the determined fair value is periodically reported to
management.
When valuation techniques are used to measure fair value, the valuation techniques are required to be
pre-approved by the risk management departments. If the risk management departments determine that the
techniques are not consistent with market practice, the valuation techniques are modified as necessary.
Fair value measurements are verified for reasonableness by the risk management departments which are
responsible to perform an analytical review of the fair value measurements which includes a comparison with
market trends and information.
For non-binding prices obtained from independent third parties, internal price verification procedures are
performed by the risk management departments. Such verification procedures include comparison of pricing
sources and analysis of variances beyond certain thresholds.
Unobservable inputs used in a Level 3 fair value measurement are internally estimated by the risk
management departments based upon the market information such as observable inputs. The reasonableness of
the inputs is validated by other risk management departments by a comparison analysis between the market value
of financial instruments using such Level 3 inputs and the internally estimated fair value, to the extent necessary.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities may be measured at fair value on a nonrecurring basis in periods subsequent to
their initial recognition. These assets are subject to fair value adjustments that result from the application of the
F-157
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
lower of cost or fair value accounting or write-downs of individual assets. The following table presents the
carrying value of assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as
of March 31, 2017 and 2018:
2017
Total
2018
Level 1 Level 2
Level 3
carrying value Level 1 Level 2
Level 3
Total
carrying value
(in millions)
Assets
Investment securities(1) . . . . . . ¥ — ¥ — ¥
Loans . . . . . . . . . . . . . . . . . . . 4,941 9,020 219,963
— 6,480
—
2,224 ¥
Loans held for sale . . . . .
Collateral dependent
loans . . . . . . . . . . . . . . 4,941 9,020 213,483
— 3,507
— 1,652
— 4,869
— 6,872
Premises and equipment . . . . .
Intangible assets . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . .
Investments in equity
—
—
—
—
2,224 ¥ — ¥ — ¥
1,984 ¥
233,924
6,480
3,458 8,329 239,653
— 22,835
—
227,444
3,507
1,652
4,869
6,872
3,458 8,329 216,818
— 34,326
— 9,402
—
—
— 6,196
—
—
—
92,223
1,984
251,440
22,835
228,605
34,326
9,402
—
98,419
method investees(1) . . .
Other . . . . . . . . . . . . . . . .
—
—
—
—
— 6,872
— 92,223
—
6,872
—
— 6,196
— 92,223
6,196
Total . . . . . . . . . . . . ¥4,941 ¥9,020 ¥239,087 ¥253,048 ¥95,681 ¥8,329 ¥291,561 ¥395,571
Note:
(1) Excludes certain investments valued at net asset value of ¥15,884 million and ¥8,443 million at March 31, 2017 and 2018, respectively.
The unfunded commitments related to these investments are ¥5,359 million and ¥1,544 million at March 31, 2017 and 2018,
respectively. These investments are in private equity funds and limited partnerships.
The following table presents losses recorded as a result of changes in the fair value of assets measured at
fair value on a nonrecurring basis for the fiscal years ended March 31, 2017 and 2018:
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral dependent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2018
(in millions)
¥ 1,016
63,581
55
63,526
6,798
5,803
6,638
6,561
5,465
1,096
¥
1,423
47,352
990
46,362
39,361
21,900
—
30,852
29,442
1,410
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥90,397
¥140,888
Investment securities primarily include impaired cost-method investments which were written down to fair
value during the period. The fair values are determined based on recent net asset value and projected future cash
flows of investees.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Loans include loans held for sale and collateral dependent loans. Loans held for sale are recorded at the
lower of cost or estimated fair value. The fair value of the loans held for sale is based on secondary market
prices, recent transactions or discounted cash flows. These loans are principally classified in Level 3 of the fair
value hierarchy, and when quoted prices are available but not traded actively, such loans held for sale are
classified in Level 2 of the fair value hierarchy. Collateral dependent loans are measured at fair value of the
underlying collateral. Collateral is comprised mainly of real estate and exchange-traded equity securities. The
MUFG Group maintains an established process for internally determining the fair value of real estate, using the
following valuation techniques and assumptions. Collateral dependent loans that are measured based on
underlying real estate collateral are classified in Level 3 of the fair value hierarchy.
‰
‰
‰
Replacement cost approach. The replacement cost approach is primarily used for buildings and the land
they are built on. This approach calculates the fair value of the collateral using the replacement cost of
the property as of the valuation date. Replacement cost tables and useful life tables used for this
approach are developed by subsidiaries of MUFG.
Sales comparison approach. The sales comparison approach is mainly used for land. The fair value of
the collateral located in Japan is based on Japanese government official land prices and standard land
prices, considering the results of comparison analysis between the official roadside value which is used
for tax purposes and the related government official land and standard land prices.
Income approach. The income approach is, as a general rule, applied to all rental properties based on the
highest and best use concept. This approach calculates the fair value of the collateral using expected
future cash flows. In this approach, the expected annual net operating income is discounted using the
related capitalization yield. The significant assumptions within the income approach are the expected
annual net operating income and capitalization yield. The expected annual net operating income is
estimated based on rental income of the property. The capitalization yield is determined based on the
location and use of the property by subsidiaries of MUFG. The capitalization yield may be adjusted to
reflect the trends in locations, occupancy rates and rent level and other factors.
Premises and equipment consist of those assets which were written down to fair value. The fair values are
determined based on prices obtained from an appraiser or discounted cash flows. These impaired premises and
equipment are classified as Level 3 of the fair value hierarchy.
Intangible assets consist of those assets which were written down to fair value. The fair values are
determined based on discounted cash flows. These impaired intangible assets are classified as Level 3 of the fair
value hierarchy.
Other assets mainly consist of investments in equity method investees which were written down to fair value
due to impairment. When investments in equity method investees are marketable equity securities, the fair values
are determined based on quoted prices. Impaired investments in equity method investees which are marketable
equity securities are classified in either Level 1 or Level 2 of the fair value hierarchy. When investments in
equity method investees are nonmarketable equity securities, the fair values are determined using the same
methodologies as those for impaired nonmarketable equity securities described above. Impaired investments in
equity method investees which are nonmarketable equity securities are classified in Level 3 of the fair value
hierarchy.
Fair Value Option
The MUFG Group elected the fair value option for foreign currency-denominated debt securities and equity
securities held by MUFG Bank and Mitsubishi UFJ Trust and Banking. The election was made to mitigate
F-159
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
accounting mismatches related to fluctuations of foreign exchange rates by allowing the gains and losses on
translation of these securities to be included in current earnings. Had the fair value option not been elected, the
gains and losses on translation of these securities would have been reflected in OCI, while the gains and losses on
translation of foreign currency-denominated financial liabilities would have been included in current earnings.
The MUFG Group also elected the fair value option for certain financial instruments held by Mitsubishi UFJ
Securities Holdings’s foreign subsidiaries because those financial instruments are managed on a fair value basis,
and these exposures are considered to be trading-related positions. These financial assets are included in Other
assets. These financial liabilities are mainly included in Other short-term borrowings and Long-term debt.
Unrealized gains and losses on such financial instruments are recognized in the accompanying consolidated
statements of income.
The following table presents the gains or losses recorded for the fiscal years ended March 31, 2016, 2017
and 2018 related to the eligible instruments for which the MUFG Group elected the fair value option:
2016
2017
2018
Trading
account
profits (losses)
Foreign
exchange
gains (losses)
Total
changes in
fair value
Trading
account
profits (losses)
Foreign
exchange
gains (losses)
Total
changes in
fair value
Trading
account
profits (losses)
Foreign
exchange
gains (losses)
Total
changes in
fair value
(in millions)
Financial assets:
Trading account
securities(1) . . . . ¥(157,814) ¥(1,058,046) ¥(1,215,860) ¥(464,947)
—
Other assets . . . . .
—
3
3
¥(407,439) ¥(872,386) ¥(148,242)
—
—
—
¥(267,507) ¥(415,749)
—
—
Total . . . . . . . ¥(157,811) ¥(1,058,046) ¥(1,215,857) ¥(464,947)
¥(407,439) ¥(872,386) ¥(148,242)
¥(267,507) ¥(415,749)
Financial liabilities:
Other short-term
borrowings(2)
Long-term
. . ¥
3,422
¥
— ¥
3,422
¥ (10,380)
¥
— ¥ (10,380) ¥
5,902
¥
— ¥
5,902
debt(2) . . . . . . . .
10,443
—
10,443
(93,464)
—
(93,464)
7,554
—
7,554
Total . . . . . . . ¥ 13,865
¥
— ¥
13,865
¥(103,844)
¥
— ¥(103,844) ¥ 13,456
¥
— ¥ 13,456
Notes:
(1) Excludes Danamon’s equity securities. See Note 2 for reference.
(2) Change in value attributable to the instrument-specific credit risk related to those financial liabilities are not material.
The following table presents the differences between the aggregate fair value and the aggregate remaining
contractual principal balance outstanding as of March 31, 2017 and 2018 for long-term debt instruments for
which the fair value option has been elected:
2017
2018
Remaining
aggregate
contractual
amounts
outstanding
Fair value
Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding
Remaining
aggregate
contractual
amounts
outstanding
(in millions)
Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding
Fair value
Financial liabilities:
Long-term debt
. . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . .
¥404,510
¥404,510
¥377,423
¥377,423
¥(27,087)
¥(27,087)
¥347,002
¥347,002
¥333,985
¥333,985
¥(13,017)
¥(13,017)
F-160
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Interest income and expense related to the assets and liabilities for which the fair value option is elected are
measured based on the contractual rates and dividend income related to these assets are recognized when the
shareholder right to receive the dividend is established. These interest income and expense and dividend income
are reported in the accompanying consolidated statements of income as either interest income or expense,
depending on the nature of the related asset or liability.
Estimated Fair Value of Financial Instruments
The following is a summary of carrying amounts and estimated fair values by level within the fair value
hierarchy of financial instruments which are not carried at fair value on a recurring basis in the accompanying
consolidated balance sheets as of March 31, 2017 and 2018:
At March 31, 2017
Financial assets:
Carrying
amount
Estimated fair value
Total
Level 1
Level 2
Level 3
(in billions)
Cash and due from banks . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements . . . . . . . . . . .
Receivables under securities borrowing
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . .
. . . . . . . . . . . . . . . . . . . . .
Investment securities(1)(2)
Loans, net of allowance for credit losses(3)
Other financial assets(4)
¥ 25,683
38,327
704
8,188
¥ 25,683
38,327
704
8,188
¥25,683
—
—
—
11,003
3,688
117,033
5,827
11,003
3,808
118,765
5,827
—
1,206
5
—
¥
— ¥
38,327
704
8,188
11,003
1,144
257
5,827
—
—
—
—
—
1,458
118,503
—
Financial liabilities:
Deposits
Non-interest-bearing . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . .
Payables under repurchase agreements(5) . . . . . . . .
Payables under securities lending transactions . . .
Due to trust account . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . .
Long-term debt(5)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . .
¥ 29,486
160,928
190,414
1,975
17,693
5,549
3,335
7,857
25,863
6,094
¥ 29,486
160,948
190,434
1,975
17,693
5,549
3,335
7,857
26,015
6,094
¥ — ¥ 29,486
— 160,948
— 190,434
1,975
—
17,693
—
5,549
—
3,335
—
7,857
—
26,015
—
6,094
—
¥
—
—
—
—
—
—
—
—
—
—
F-161
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2018
Financial assets:
Carrying
amount
Estimated fair value
Total
Level 1
Level 2
Level 3
(in billions)
Cash and due from banks . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other banks . . . . . . . . .
Call loans and funds sold . . . . . . . . . . . . . . . . . . . .
Receivables under resale agreements . . . . . . . . . . .
Receivables under securities borrowing
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . .
. . . . . . . . . . . . . . . . . . . . .
Investment securities(1)(2)
Loans, net of allowance for credit losses(3)
Other financial assets(4)
¥ 32,648
43,210
896
5,726
¥ 32,648
43,210
896
5,726
¥32,648
—
—
—
9,269
3,684
116,272
7,000
9,269
3,797
117,753
7,000
—
1,197
3
—
¥
— ¥
43,210
896
5,726
9,269
1,051
330
7,000
—
—
—
—
—
1,549
117,420
—
Financial liabilities:
Deposits
Non-interest-bearing . . . . . . . . . . . . . . . . . . . .
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . .
Call money and funds purchased . . . . . . . . . . . . . .
Payables under repurchase agreements . . . . . . . . .
Payables under securities lending transactions . . .
Due to trust account . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . .
¥ 29,862
165,831
195,693
2,453
18,135
8,170
3,386
6,617
26,861
6,642
¥ 29,862
165,825
195,687
2,453
18,135
8,170
3,386
6,617
26,919
6,642
¥ — ¥ 29,862
— 165,825
— 195,687
2,453
—
18,135
—
8,170
—
3,386
—
6,617
—
26,919
—
6,642
—
¥
—
—
—
—
—
—
—
—
—
—
Notes:
(1)
Includes impaired securities measured at fair value on a nonrecurring basis. Refer to “Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis” for the details of the level classification.
(2) Excludes cost-method investments of ¥429 billion and ¥437 billion at March 31, 2017 and 2018, respectively, of which the MUFG
Group did not estimate the fair value since it was not practical and no impairment indicators were identified. See Note 3 for the details of
these cost-method investments.
Includes loans held for sale and collateral dependent loans measured at fair value on a nonrecurring basis. Refer to “Assets and Liabilities
Measured at Fair Value on a Nonrecurring Basis” for the details of the level classification.
(3)
(4) Excludes investments in equity method investees of ¥2,200 billion and ¥2,219 billion at March 31, 2017 and 2018, respectively.
(5) The table above reflects changes in presentation that were made to long-term repurchase agreements at March 31, 2017. See Note 1 for
further information.
The following section describes the valuation techniques adopted by the MUFG Group to estimate fair
values of financial instruments that are not recorded at fair value in the accompanying consolidated balance
sheets.
Cash and due from banks, Interest-earning deposits in other banks, Call loans and funds sold,
Receivables under resale agreements and Receivable under securities borrowing transactions—For cash and
due from banks, interest-earning deposits in other banks, call loans and funds sold, receivables under resale
agreements and receivable under securities borrowing transactions, the carrying amounts are a reasonable
estimate of the fair values because of their short-term nature and limited credit risk.
Investment securities—The fair values of investment securities other than those classified as
Available-for-sale or Held-to-maturity (i.e., nonmarketable equity securities) are not readily determinable as they
do not have readily available quoted prices or secondary market prices. The fair values of certain nonmarketable
F-162
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equity securities, such as preferred stock convertible to marketable common stock issued by public companies,
are determined by utilizing commonly accepted valuation techniques to derive a fair value using the present
value of dividend cash flows and option prices. For option prices, the Trinomial Tree Method determines
possible paths of future stock prices using a forward rate for a common stock, and the price is calculated by
multiplying the possible paths of future stock prices by the expected cash flows generated from the probability of
exercising options or upon exercising the options.
Inputs used in the valuation include but are not limited to stock price, volatility and credit spread. The
valuation is performed on a quarterly basis. At the time of any sale, the MUFG Group generally separately
calculates a valuation to be used in sales price negotiations with the counterparty. The price agreed between the
MUFG Group and a counterparty is also used as a reference for validating the appropriateness of previous
valuations of the investment. The MUFG Group performs periodic validation of the valuation techniques.
Specifically, the sensitivity and appropriateness of the inputs are verified by using different valuation techniques
employed by the MUFG Group. It is not practicable for the MUFG Group to estimate the fair value of other
nonmarketable securities issued by non-public companies for which a quoted price is not available. For these
securities, the MUFG Group is unable to estimate fair value without incurring undue cost because they comprise
investments in numerous non-public companies and each investment represents an insignificant percentage
relative to each company. Therefore, the above summary does not include the carrying amounts of such
investment securities.
Loans—The fair value of loans is estimated by discounting expected future cash flows based on types of
loans, internal ratings and possibility of prepayment using the discount rates which include adjustments to reflect
the expectations about possible variations to the current market rates. For certain residential loans with variable
interest rates provided to individual home owners, the carrying amount is presented as the fair value since such
carrying amount approximates the fair value, unless the creditworthiness of the borrower has changed
significantly since the loan origination. Where quoted prices or estimated fair values are available, primarily for
loans to refinancing countries, loans held for sales and certain other foreign loans, the fair values are based on
such quoted prices and estimated fair values, including secondary market prices. For receivables from bankrupt,
virtually bankrupt, and likely to become bankrupt borrowers, fair value is estimated based mainly on the
expected amount to be collected from collateral and guarantees. The carrying amount is presented as the fair
value since the fair value approximates such carrying amount.
Other financial assets—The estimated fair values of other financial assets, which primarily include accrued
interest receivable, customers’ acceptance liabilities and accounts receivable, approximate their carrying
amounts.
Non-interest-bearing deposits, Call money and funds purchased, Payables under repurchase agreements
and Payable under securities lending transactions—For non-interest-bearing deposits, the amount payable on
demand as of the consolidated balance sheet date (i.e., the carrying amount) is considered to be the fair value. For
call money and funds purchased, payables under repurchase agreements and payable under securities lending
transactions, the carrying amounts are reasonable estimate of the fair value because of their short-term nature and
limited credit risk.
Interest-bearing deposits—For variable rate time deposits, the carrying amount is presented as the fair
value because the market interest rate is reflected in such deposits within a short time period. Fixed rate time
deposits are grouped by certain maturity lengths. The fair value of such deposits is estimated by discounting
expected future cash flows using the discount rates that would be applied to newly accepted deposits.
Due to trust account—Since these are cash deposits with no maturity, the carrying amount is presented as
the fair value as the fair value approximates such carrying amount.
F-163
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other short-term borrowings—For most other short-term borrowings, the carrying amount is presented as
the fair value since such carrying amount approximates the fair value because of their short-term nature and
limited credit risk.
Long-term debt—The fair value of corporate bonds issued by the MUFG Group is determined based on
quoted prices of those corporate bonds. The fair value of fixed rate corporate bonds without quoted prices is the
present value of expected future cash flows from these borrowings, which is discounted at an interest rate
generally applicable to similar fixed rate corporate bonds reflecting premium applicable to the MUFG Group. For
variable rate corporate bonds without quoted prices, the carrying amount of such bonds is presented as the fair
value since such carrying amount approximates the fair value. This is on the basis that the market interest rate is
reflected in the fair value of such corporate bonds because such bond terms were set within a short time period
and that there has been no significant impact on the fair value of those bonds.
Other financial liabilities—The estimated fair values of other financial liabilities, which primarily include
accrued interest payable, bank acceptances, accounts payable and obligations under standby letters of credit and
guarantees, approximate their carrying amounts. The fair values of obligations under standby letters of credit and
guarantees are based on fees received or receivable by the MUFG Group.
The fair values of certain off-balance sheet financial instruments held for purposes other than trading,
including commitments to extend credit and commercial letters of credit, are estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining terms of the agreements and the
credit quality. The aggregate fair value of such instruments at March 31, 2017 and 2018 was not material.
33. STOCK-BASED COMPENSATION
The following describes the stock-based compensation plans of MUFG, MUFG Bank, Mitsubishi UFJ Trust
and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ Morgan Stanley Securities and MUFG
Americas Holdings.
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and
Mitsubishi UFJ Morgan Stanley Securities
On May 16, 2016, MUFG introduced the Board Incentive Plan as a new incentive plan for officers of
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi
UFJ Morgan Stanley Securities. On November 14, 2016, MUFG expanded the Board Incentive Plan to officers
who hold unexercised Stock Acquisition Rights granted under the Stock Option Plan. As a result of this
transaction, the Stock Option Plan remains available to officers who are on overseas assignment as of the
transition date and hold unexercised Stock Acquisition Rights. This transition which consists of the exchange of
unexercised Stock Acquisition Rights for common share of MUFG under the Board Incentive Plan was treated as
modification of the Stock Option Plan for accounting purpose and incremental compensation cost resulting from
the modification was ¥2,028 million.
Stock Option Plan
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and
Mitsubishi UFJ Morgan Stanley Securities have the Stock Option Plan.
The Stock Acquisition Rights under the Stock Option Plan were normally issued and granted to officers
once a year until the fiscal year ended March 31, 2013. They were normally issued and granted to officers except
for outside directors and corporate auditors once a year from the fiscal year ended March 31, 2014.
F-164
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The class of shares to be issued or transferred upon exercise of the Stock Acquisition Rights is common
shares of MUFG. The number of shares to be issued or transferred upon exercise of each Stock Acquisition Right
(“number of granted shares”) is 100 common shares of MUFG. In the event of a stock split or reverse stock split
of common shares of MUFG, the number of granted shares shall be adjusted in accordance with the ratio of the
stock split or reverse stock split. If any events occur that require the adjustment to the number of granted shares
(e.g., mergers, consolidations, corporate separations or capital reductions of MUFG), MUFG shall appropriately
adjust the number of granted shares to a reasonable extent.
The contractual term of the Stock Acquisition Rights is approximately 30 years from the date of grant. Some
of the Stock Acquisition Rights vest on the date of grant and the rest of the Stock Acquisition Rights granted vest
depending on the holders’ service periods as officers.
The Stock Acquisition Rights are only exercisable after the date on which the following conditions are met:
(1) holder as a director, a corporate executive or an executive officer is no longer a director, a corporate
executive and an executive officer, and (2) holder as a corporate auditor is no longer a corporate auditor, and
(3) holder as a senior fellow is no longer a senior fellow. The exercise price is ¥1 per share.
The following is a summary of the Stock Acquisition Rights transactions of MUFG, MUFG Bank,
Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley
Securities for the fiscal year ended March 31, 2018:
Number of
shares
Weighted average
exercise price
Weighted average
remaining
contractual term
(in years)
Aggregate
intrinsic value
(in millions)
Outstanding, beginning of fiscal year . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Transitioned to the Board
892,800
(23,100)
Incentive Plan(1) . . . . . . . . . . . . . . . . . .
(263,300)
Outstanding, end of fiscal year . . . . . . . . . . . .
606,400
Exercisable, end of fiscal year . . . . . . . . . . . . .
—
¥ 1
1
1
¥ 1
¥—
24.29
—
¥422
¥ —
Note:
(1) All shares transitioned to the Board Incentive Plan were granted and vested. See the explanation of the following item, The Board
Incentive Plan, for more information.
The fair value of the Stock Acquisition Rights is estimated on the date of grant using the Black-Scholes
option pricing model that uses the assumptions described in the following table. The risk-free interest rate is
based on the Japanese government bonds yield curve in effect at the date of grant based on the expected term.
The expected volatility is based on the historical data from traded common shares of MUFG. The expected term
is based on the average service period of officers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking,
Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities, which represents the
expected outstanding period of the Stock Acquisition Rights granted. The expected dividend yield is based on the
dividend rate of common share of MUFG at the date of grant.
Fiscal year ended March 31, 2016(1)
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.07%
28.03%
4 years
2.06%
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note:
(1) There are no issuances under the Stock Option Plan during the fiscal years ended March 31, 2017 and 2018.
The weighted-average grant date fair value of the Stock Acquisition Rights granted for the fiscal years
ended March 31, 2016 was ¥80,200 per 100 shares.
The MUFG Group recognized ¥1,647 million and ¥252 million of compensation costs related to the Stock
Acquisition Rights with ¥518 million and ¥77 million of the corresponding tax benefit for the fiscal years ended
March 31, 2016 and 2017, respectively.
Cash received from the exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2016,
2017 and 2018 was ¥4 million, ¥4 million and ¥0 million, respectively. The actual tax benefit realized for the tax
deductions from exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2016, 2017 and
2018 was ¥538 million, ¥651 million and ¥2 million, respectively.
The Board Incentive Plan
On May 16, 2016, MUFG’s compensation committee approved the introduction of a Board Incentive Plan
as a new incentive plan for officers and covers the fiscal years corresponding to the medium-term business plan
of MUFG under which common shares of MUFG and cash equivalent to the liquidation value of the common
shares of MUFG together with dividends attributable to the common shares of MUFG are delivered and/or
provided as compensation. The Board Incentive Plan uses the trust structure called a Board Incentive Plan Trust
(“the BIP Trust”) and was authorized to purchase up to ¥15,800 million common shares of MUFG in the open
market. The BIP Trust initially consists of the BIP Trust I and the BIP Trust II started on May 17, 2016, and will
end on August 31, 2018. These trusts period may be extended through the modification of the trust agreement
and additional contributions to the trust.
On November 14, 2016, MUFG’s compensation committee also approved the introduction of the BIP
Trust III, using the same structure as above for officers to implement the transition from the Stock Option Plan
under which Stock Acquisition Rights had previously been granted but have not been exercised by officers to the
Board Incentive Plan. The BIP Trust III was authorized to purchase up to ¥8,100 million common shares of
MUFG in the open market. In addition, on May 15, 2017, The BIP Trust III was also authorized to additional
purchase and was revised amount of trust money up to ¥9,600 million common shares of MUFG. The BIP Trust
III started on November 15, 2016 and will end on November 30, 2019. If any beneficiary under the BIP Trust III
remains as active officers at the initial expiration date, the trust period will be extended for additional three years.
The extension of the trust period will be made in the same manner up to 30 years.
MUFG funded and established the BIP Trust, and from time to time, make contributions to the BIP Trust
whose beneficiaries are officers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ
Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities within the limit approved by MUFG’s
compensation committee. MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings
and Mitsubishi UFJ Morgan Stanley Securities also reimburse MUFG for its contributions to the BIP Trust. The
trustee of the BIP Trusts, Mitsubishi UFJ Trust and Banking, acquires common shares of MUFG in the open
market in accordance with the instructions from the trust administrator, who is a third party that does not have
any interest in MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and
Mitsubishi UFJ Morgan Stanley Securities.
During the period of the BIP Trust, certain points are awarded to officers. The number of the points will be
determined based on each rank of officers, promotions to a higher rank in the BIP Trust I and based on single-
F-166
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
year financial results and the degree to which the medium-term business plan has been achieved in the BIP
Trust II. At December 1, 2016, certain points were awarded to officers who have exchanged their unexercised
stock acquisition rights at the transition from the Stock Option Plan to the BIP Trust III. Points of the BIP
Trust III are awarded to officers who are on overseas assignment as of the transition date when the officers
become domestic residents and waive their unexercised Stock Acquisition Rights.
One point corresponds to one common share of MUFG, and if the number of common share of MUFG
owned by the BIP Trusts has increased or decreased due to a stock split, gratis allotment of shares, reverse stock
split, etc., the number of common share of MUFG to be delivered and/or provided for one point will be adjusted
accordingly.
Officers will receive common shares of MUFG in the number corresponding to a certain percentage of these
points and cash equivalent to the liquidation value of the common shares of MUFG corresponding to the
remaining points after they are liquidated within the BIP Trusts. As to the BIP Trust I and the BIP Trust III,
common shares of MUFG and cash will be delivered and/or provided upon resignation of the officers. As to the
BIP Trust II, common shares of MUFG and cash will be delivered and/or provided immediately following the
last day of the fiscal years corresponding to the medium-term business plan of MUFG. Dividends arising from
common share of MUFG will also be distributed to officers based on the number of the points or the beneficial
interest of officers.
The following is a roll-forward of common share of MUFG under the BIP Trust I and the BIP Trust II of
MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi
UFJ Morgan Stanley Securities for the fiscal year ended March 31, 2018. For the BIP Trust III, all shares were
vested and there is no nonvested shares for the fiscal year ended March 31, 2017 and 2018:
2017
2018
The BIP Trust I
The BIP Trust II
The BIP Trust I
The BIP Trust II
Number
of
Shares
Weighted—
average
grant—date
fair value
Number
of
Shares
Weighted—
average
grant—date
fair value
Number
of
Shares
Weighted—
average
grant—date
fair value
Number
of
Shares
Weighted—
average
grant—date
fair value
Nonvested, beginning of fiscal
year . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . .
— ¥ —
521.60
521.60
521.60
7,497,800
(2,772,141)
(13,838)
— ¥ —
521.60
521.60
521.60
11,287,600
(1,662,334)
(73,425)
4,711,821
1,317,354
(3,412,714)
(530,828)
¥521.60
721.50
590.06
532.12
9,551,841
441,382
(2,391,545)
(556,329)
¥521.60
721.50
548.50
528.77
Nonvested, end of fiscal
year . . . . . . . . . . . . . . . . . . . .
4,711,821
¥521.60
9,551,841
¥521.60
2,085,633
¥533.17
7,045,349
¥524.43
The total fair value of the common shares of MUFG held by the BIP Trust I and the BIP Trust II that vested
during the year ended March 31, 2017 were ¥1,940 million and ¥1,163 million, respectively, and during the year
ended March 31, 2018 were ¥2,378 million and ¥1,668 million, respectively.
F-167
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is a summary of compensation costs, the corresponding tax benefit under the BIP Trust for
the fiscal year ended March 31, 2017 and 2018 and unrecognized compensation costs as of March 31, 2017 and
2018:
2017
2018
The BIP
Trust I
The BIP
Trust II
The BIP
Trust III
The BIP
Trust I
The BIP
Trust II
The BIP
Trust III
(in millions)
Compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized compensation costs . . . . . . . . . . . . . . . .
¥1,238
379
1,617
¥1,039
318
346
¥2,112
385
—
¥2,514
770
396
¥1,452
445
360
¥218
67
—
Unrecognized compensation costs are expected to be recognized over a weighted-average period of 0.3
years for the BIP Trust I and 0.3 years for the BIP Trust II.
MUFG Americas Holdings
In April 2010, MUFG Americas Holdings adopted the UnionBanCal Plan (“UNBC Plan”). Under the
UNBC Plan, MUFG Americas Holdings grants restricted stock units settled in American Depositary Receipts
(“ADRs”) representing common shares of MUFG, to key employees at the discretion of the Human Capital
Committee of the Board of Directors (“the Committee”). The Committee determines the number of shares,
vesting requirements and other features and conditions of the restricted stock units. Under the UNBC Plan,
MUFG ADRs are purchased in the open market upon the vesting of the restricted stock units, through a revocable
trust. There is no amount authorized to be issued under the UNBC Plan since all shares are purchased in the open
market. These awards generally vest pro-rata on each anniversary of the grant date and generally become fully
vested three years from the grant date, provided that the employee has completed the specified continuous
service requirement. Generally, the grants vest earlier if the employee dies, is permanently and totally disabled,
retires under certain grant, age and service conditions, or terminates employment under certain conditions.
MUFG Americas Holdings also issues a small number of off-cycle grants each year, primarily for reasons related
to recruitment of new employees.
Under the UNBC Plan, the restricted stock unit participants do not have dividend rights, voting rights or
other stockholder rights. The grant date fair value of these awards is equal to the closing price of the MUFG
ADRs on date of grant.
Effective July 1, 2014, the U.S. branch banking operations of MUFG Bank were integrated under MUFG
Union Bank’s operations and MUFG Americas Holdings assumed the obligations of the stock bonus plan
established by MUFG Bank Headquarters for the Americas (“HQA Plan”). The HQA Plan is substantially similar
to the UNBC Plan; however, participants in the HQA Plan are entitled to “dividend equivalent credits” on their
unvested restricted stock units when MUFG pays dividends to its shareholders. The credit is equal to the
dividends that the participants would have received on the shares had the shares been issued to the participants
when the restricted stock units were granted. Accumulated dividend equivalents are paid to participants in cash
on an annual basis.
Effective June 8, 2015, MUFG Americas Holdings amended and restated the HQA Plan as the MUFG
Americas Holdings Plan. The MUFG Americas Holdings Plan is substantially similar to the UNBC and HQA
Plans. MUFG Americas Holdings’s future grants will be made under the MUFG Americas Holdings Plan only.
“Dividend equivalent credits” arising from grants under the MUFG Americas Holdings Plan are paid to
participants in shares on an annual basis. The weighted-average service period for grants issued under the MUFG
Americas Holdings Plan with outstanding restricted stock units as of December 31, 2017 was 2.9 years.
F-168
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table is a roll-forward of the restricted stock units under the Stock Bonus Plans for the fiscal
year ended December 31, 2017:
Units outstanding, beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . .
Activity during fiscal year:
Restricted Stock Units
2017
Number of Units
Weighted Average Grant
Date Fair Value
26,725,582
$5.35
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,362,249
(11,709,454)
(1,539,963)
Units outstanding, end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,838,414
6.53
5.58
5.55
5.86
The weighted-average grant date fair value of restricted stock units granted during the fiscal years ended
December 31, 2015 and 2016 were $7.15 and $4.63, respectively. The total fair value of RSUs that vested during
the fiscal years ended December 31, 2015, 2016, and 2017 were ¥6,416 million, ¥5,333 million, and
¥8,414 million, respectively.
The following table is a summary of MUFG Americas Holdings’s compensation costs, the corresponding
tax benefit for the fiscal years ended December 31, 2015, 2016 and 2017, and unrecognized compensation costs
as of December 31, 2015, 2016 and 2017:
Compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥6,537
2,542
7,598
(in millions)
¥ 7,292
2,830
11,183
¥ 7,405
2,917
12,543
2015
2016
2017
At December 31, 2017, approximately ¥12,543 million (pretax) of compensation expense related to
unvested grants had not yet been charged to net income. That cost is expected to be amortized into compensation
expense over a weighted-average period of 1.5 years.
34. PARENT COMPANY ONLY FINANCIAL INFORMATION
Distributions of retained earnings of MUFG Bank and Mitsubishi UFJ Trust and Banking are restricted in
order to meet the minimum capital adequacy requirements under the Banking Law. Additionally, retained
earnings of these banking subsidiaries are restricted, except for approximately ¥5,672 billion and ¥5,819 billion,
in accordance with the statutory reserve requirements under the Companies Act at March 31, 2017 and 2018,
respectively. See Notes 19 and 22 for further information.
The Banking Law and related regulations restrict the ability of these banking subsidiaries to extend loans or
credit to the parent company. Such loans or credits to the parent company are generally limited to 15% of the
banking subsidiary’s consolidated total capital, as determined by the capital adequacy guidelines.
At March 31, 2017 and 2018, approximately ¥4,787 billion and ¥5,341 billion, respectively, of net assets of
consolidated subsidiaries may be restricted as to payment of cash dividends and loans to the parent company.
F-169
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the parent company only financial information of MUFG:
Condensed Balance Sheets
As of March 31,
2017
2018
(in millions)
Assets:
Cash and interest-earning deposits with banking subsidiaries . . . . . . . . . . . . . .
Investments in subsidiaries and affiliated companies . . . . . . . . . . . . . . . . . . . . .
Banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking subsidiaries and affiliated companies . . . . . . . . . . . . . . . . . .
Loans to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
158,603
15,798,922
11,961,515
3,837,407
3,419,961
3,278,961
141,000
97,742
¥
114,784
16,720,286
12,638,315
4,081,971
5,072,330
4,885,830
186,500
166,514
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥19,475,228
¥22,073,914
Liabilities and Shareholders’ equity:
Short-term borrowings from banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt from non-banking subsidiaries and affiliated companies . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,667,063
261,586
3,433,423
127,624
¥ 1,600,179
264,332
5,088,478
150,743
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,489,696
7,103,732
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,985,532
14,970,182
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
¥19,475,228
¥22,073,914
F-170
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Income
Fiscal years ended March 31,
2016
2017
2018
(in millions)
Income:
Dividends from subsidiaries and affiliated companies . . . . . . . . . . . . .
Banking subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-banking subsidiaries and affiliated companies . . . . . . . . . . .
Management fees from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account losses—net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥574,118
501,788
72,330
24,388
8,043
36,715
(7,907)
975
¥ 608,504
535,512
72,992
26,095
48,665
3,614
(41,279)
1,427
¥ 576,332
487,491
88,841
26,073
80,670
24,726
(26,749)
1,508
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
636,332
647,026
682,560
Expense:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense to subsidiaries and affiliated companies . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,074
26,553
3,429
1,788
54,844
25,692
28,867
35,689
2,554
92,802
26,016
31,426
65,068
1,791
124,301
Equity in undistributed net income (loss) of subsidiaries and affiliated
companies—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
216,632
(362,899)
672,421
Income before income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
798,120
(4,212)
191,325
(11,355)
1,230,680
2,520
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥802,332
¥ 202,680
¥1,228,160
F-171
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Cash Flows
Fiscal years ended March 31,
2016(1)
2017(1)
2018
(in millions)
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
802,332
(158,564)
¥
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .
643,768
202,680
371,901
574,581
¥ 1,228,160
(799,571)
428,589
Investing activities:
Proceeds from sales of investment in affiliated companies . . . . .
Purchase of equity investment in subsidiaries and an affiliated
—
1,574
—
company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in loans to subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(1,433,700)
(3,135)
(91,877)
(1,802,664)
(2,659)
(53,000)
(1,682,576)
(4,361)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,436,835)
(1,895,626)
(1,739,937)
Financing activities:
Net decrease in short-term borrowings from subsidiaries . . . . . .
Proceeds from issuance of long-term debt
. . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt to affiliated companies . . . . . . . . .
Proceeds from sales of treasury stock . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of treasury stock . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(84,959)
1,432,755
(22)
—
2
(200,053)
(251,497)
(14,366)
(32,412)
1,808,672
(20)
(1,136)
1
(200,028)
(246,564)
(9,333)
(41,402)
1,872,986
(112,184)
(1,090)
1
(200,038)
(241,067)
(9,677)
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . .
881,860
1,319,180
1,267,529
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . .
88,793
71,675
(1,865)
160,468
(43,819)
158,603
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . .
¥
160,468
¥
158,603
¥
114,784
Note:
(1) The MUFG Group early adopted new guidance on restricted cash retrospectively in the second half of the fiscal year ended March 31,
2018, and prior year amounts were revised. See Note 1 for further information.
35. SEC REGISTERED FUNDING VEHICLES ISSUING NON-DILUTIVE PREFERRED
SECURITIES
In February 2006, MUFG established MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited
and MUFG Capital Finance 3 Limited, wholly-owned funding vehicles incorporated in the Cayman Islands, for
the issuance of preferred securities to enhance the flexibility of its capital management.
On March 17, 2006, MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG
Capital Finance 3 Limited registered with the SEC and issued $2,300,000,000 in 6.346% non-cumulative
preferred securities, €750,000,000 in 4.850% non-cumulative preferred securities and ¥120,000,000,000 in
2.680% non-cumulative preferred securities (collectively, the “Preferred Securities”), respectively. Total net
proceeds before expenses were approximately $4.17 billion. All of the ordinary shares of MUFG Capital
Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited are owned by
MUFG. MUFG fully and unconditionally guarantees the payment of dividends and payments on liquidation or
F-172
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
redemption of the obligations under the Preferred Securities. No other subsidiary of MUFG guarantees the
Preferred Securities.
The Preferred Securities entitle holders to receive a non-cumulative preferential cash dividend starting on
July 25, 2006 and on January 25 and July 25 of each year thereafter. These funding vehicles will not be obligated
to pay dividends on the Preferred Securities upon the occurrence of certain events relating to the financial
condition of MUFG. From July 25, 2016, dividends on the Preferred Securities have been re-calculated at a
floating rate per annum.
The dollar-denominated and euro-denominated preferred securities are subject to redemption on any
dividend payment date on or after July 25, 2016. All the Preferred Securities are subject to redemption in whole
(but not in part) at any time upon the occurrence of specified events, in each case at the option of each of the
funding vehicles and subject to necessary government approvals.
The Preferred Securities are non-dilutive and not convertible into MUFG’s common shares. The Preferred
Securities were included as part of MUFG’s Tier 1 capital at March 31, 2016 under its capital adequacy
requirements.
On July 25, 2011, MUFG redeemed a total of ¥120,000,000,000 of non-cumulative and non-dilutive
perpetual preferred securities issued by MUFG Capital Finance 3 Limited.
On July 25, 2016, MUFG redeemed a total of $2,300,000,000 and €750,000,000 of non-cumulative and
non-dilutive perpetual preferred securities issued by MUFG Capital Finance 1 Limited and MUFG Capital
Finance 2 Limited, respectively.
36. SUBSEQUENT EVENTS
Approval of Dividends
On June 28, 2018, the shareholders approved the payment of cash dividends of ¥10 per share of Common
stock, totaling ¥131,934 million, that were payable on June 29, 2018, to the shareholders of record on March 31,
2018.
Additional Entrustment for the Performance-based Stock Compensation Plan
MUFG resolved to continue with the Board Incentive Plan with amending it in part at the compensation
committee’s meeting held at May 15, 2018. According to this resolution, the BIP Trust I and the BIP Trust II,
which were founded as a trust structure under the Board Incentive Plan and will be expired on August 31, 2018,
will be continued to August 31, 2021 by extending the trust period as approved at the compensation committee’s
meeting. MUFG also resolved to revise the limited amount of trust money for the BIP Trust I and the BIP Trust
II up to ¥16,700 million from ¥15,800 million. See Note 33 for further information regarding the Board Incentive
Plan.
Repurchase and Cancellation of own shares
From May 16, 2018 to June 4, 2018 MUFG repurchased 72,420,700 shares of MUFG’s common stock by
market purchases based on the discretionary dealing contract regarding repurchase of own shares for
approximately ¥50 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of
Directors of MUFG held on May 15, 2018. The repurchase plan as authorized by the Board of Directors of
MUFG allowed for the repurchase of an aggregate amount of up to 100,000,000 shares, which represents the
F-173
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equivalent of 0.76% of the total number of common shares outstanding, or of an aggregate repurchase amount of
up to ¥50 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve
capital efficiency, and to implement flexible capital policies. On July 20, 2018, MUFG will cancel all of the
acquired shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held
on May 15, 2018.
* * * * *
F-174
Exhibit
EXHIBIT INDEX
Description
1(a)
1(b)
1(c)
1(d)
1(e)
1(f)
1(g)
1(h)
2(a)
2(b)
7
8
11
12
13
15
99(a)
99(b)
Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on July 6, 2018
(English translation)
Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015 (English translation)
Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
July 1, 2018 (English translation)
Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 27,
2013 (English Translation)*
Charter of the Audit Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)
Charter of the Compensation Committee of Mitsubishi UFJ Financial Group, Inc., as amended
on July 1, 2018 (English translation)
Charter of the Nominating and Governance Committee of Mitsubishi UFJ Financial Group,
Inc., as amended on July 1, 2018 (English translation)
Charter of the Risk Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1,
2018 (English translation)
Form of American Depositary Receipt
Form of Deposit Agreement, amended and restated as of December 22, 2004, among Mitsubishi
Tokyo Financial Group, Inc. (subsequently renamed Mitsubishi UFJ Financial Group, Inc.), The
Bank of New York Mellon and the holders from time to time of American Depositary Receipts
issued thereunder
Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges for the fiscal
years ended March 31, 2014, 2015, 2016, 2017 and 2018**
Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational
Structure.”
Principles of Ethics and Conduct, Compliance Rules, Compliance Manual, and Rules of
Employment of Mitsubishi UFJ Financial Group, Inc. applicable to its principal executive
officer, principal financial officer, principal accounting officer and persons performing similar
functions (English translation of relevant sections)
Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a)
(17 CFR 240.15d-14(a))
Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b)
(17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code
(18 U.S.C. 1350)
Consent of independent registered public accounting firm
Capitalization and Indebtedness of Mitsubishi UFJ Financial Group, Inc. as of March 31,
2018***
Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ
Financial Group, Inc. as of and for the fiscal year ended March 31, 2018****
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
Exhibit
Description
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
Notes:
*
**
***
****
Incorporated by reference to our registration statement on Form S-8 (File No. 333-204845) filed on June 10, 2015.
Deemed to be incorporated as Exhibit 12.1 to the registration statement on Form F-3 (No. 333-209455) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Deemed to be incorporated by reference into the registration statement on Form F-3 (No. 333-209455) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
Deemed to be incorporated as Annex A to the registration statement on Form F-3 (No. 333-209455) of Mitsubishi UFJ Financial
Group, Inc. and to be a part thereof.
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this Annual Report on its behalf.
Signature
MITSUBISHI UFJ FINANCIAL GROUP, INC.
By:
Name:
Title:
/s/ NOBUYUKI HIRANO
Nobuyuki Hirano
President & Group Chief Executive Officer
Date: July 12, 2018
Exhibit 1(a)
ARTICLES OF INCORPORATION
OF
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CHAPTER I.
GENERAL PROVISIONS
(English Translation)
(Trade Name)
Article 1.
The Company shall be called “Kabushiki Kaisha Mitsubishi UFJ Financial Group” and shall be called in
English “Mitsubishi UFJ Financial Group, Inc.” (hereinafter referred to as the “Company”).
(Purpose)
Article 2.
The purpose of the Company shall be to engage in the following businesses as a bank holding company:
1. Administration of management of banks, trust banks, specialized securities companies, insurance
companies or other companies which the Company may own as its subsidiaries under the Banking
Law;
2. Any businesses incidental to the foregoing businesses mentioned in the preceding item; and
3. Any other businesses in which bank holding companies are permitted to engage under the Banking
Law in addition to the foregoing businesses mentioned in the preceding two items.
(Location of Head Office)
Article 3.
The Company shall have its head office in Chiyoda-ku, Tokyo.
(Organization)
Article 4.
The Company, being a company with three committees, shall establish the following organizations in
addition to the general meeting of shareholders and the Directors:
1.
2.
The Board of Directors;
The Nominating and Governance Committee (which constitutes a Nominating Committee defined in
the Companies Act), the Audit Committee, and the Compensation Committee;
3. Corporate Executives; and
4. An Accounting Auditor.
(Method of Public Notice)
Article 5.
1.
Public notices of the Company shall be given by way of electronic public notice.
- 1 -
2.
In cases where the Company is unable to give an electronic public notice due to unavoidable circumstances,
public notices of the Company shall be given in the manner of the publication in the Nihon Keizai Shimbun.
CHAPTER II.
SHARES
(Total Number of Shares Authorized to be Issued)
Article 6.
The aggregate number of shares authorized to be issued by the Company shall be thirty-three billion eight
hundred million (33,800,000,000) shares, and the aggregate number of each class shares authorized to be issued
shall be as set forth below; provided, however, that the aggregate number of shares authorized to be issued with
respect to the Second to the Fourth Series of Class 5 Preferred Shares shall not exceed four hundred million
(400,000,000) in total, the aggregate number of shares authorized to be issued with respect to the First to the
Fourth Series of Class 6 Preferred Shares shall not exceed two hundred million (200,000,000) in total, and the
aggregate number of shares authorized to be issued with respect to the First to the Fourth Series of Class 7
Preferred Shares shall not exceed two hundred million (200,000,000) in total.
Ordinary Shares:
thirty-three billion (33,000,000,000) shares
The Second Series of Class 5 Preferred Shares:
four hundred million (400,000,000) shares
The Third Series of Class 5 Preferred Shares:
four hundred million (400,000,000) shares
The Fourth Series of Class 5 Preferred Shares:
four hundred million (400,000,000) shares
The First Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares
The Second Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares
The Third Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares
The Fourth Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares
The First Series of Class 7 Preferred Shares:
The Second Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares
The Third Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares
two hundred million (200,000,000) shares
The Fourth Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares
(Number of Shares Constituting One (1) Unit of Shares)
Article 7.
The number of shares constituting one (1) unit of shares of the Company shall be one hundred (100) with
respect to Ordinary Shares and each class of Preferred Shares, respectively.
- 2 -
(Rights Pertaining to Fractional Unit Shares)
Article 8.
A Shareholder of the Company may not exercise any rights with respect to fractional unit shares held by
such shareholder, except for the following:
1.
2.
3.
The rights provided for in each item of Article 189, Paragraph 2 of the Companies Act;
The right to make a request pursuant to Article 166, Paragraph 1 of the Companies Act;
The right to receive an allotment of offered shares and offered stock acquisition rights in proportion to
the number of shares held by such shareholder; and
4.
The right to make a request provided for in the following Article.
(Request for Sale of Fractional Unit Shares)
Article 9.
A shareholder of the Company may request the Company to sell to the shareholder such number of shares
which will, when combined with the fractional unit shares already held by such shareholder, constitute one
(1) full unit of shares pursuant to the Share Handling Regulations.
(Record Date)
Article 10.
1.
2.
3.
The Company shall deem the shareholders whose names have been entered or recorded in the latest register
of shareholders as of March 31 of each year to be the shareholders who are entitled to exercise their rights at
the ordinary general meeting of shareholders for the relevant business year.
The provision of the preceding paragraph shall apply mutatis mutandis to the record date for voting rights at
general meetings of class shareholders, where there is a matter to be resolved at an ordinary general meeting
of shareholders that requires, in addition to such resolution, a resolution by the relevant general meeting of
class shareholders.
In addition to the preceding two paragraphs of this article, whenever necessary, the Company may, upon
giving prior public notice, fix a date as a record date and may deem the shareholders or registered share
pledgees whose names have been entered or recorded in the latest register of shareholders as of such date as
the shareholders or the registered share pledgees entitled to exercise their rights.
(Transfer Agent)
Article 11.
1.
2.
3.
The Company shall have a share transfer agent.
The share transfer agent and the handling office thereof shall be designated by resolution of the Board of
Directors, and public notice thereof shall be given.
The establishment and retention of the register of shareholders and the register of stock acquisition rights of
the Company and any other businesses with respect to the register of shareholders and the register of stock
acquisition rights of the Company shall be handled by the share transfer agent, not by the Company.
(Share Handling Regulations)
Article 12.
The registration of transfers of shares, the registration of pledges on shares, the entries or records in the
register of shareholders and in the register of stock acquisition rights, and any other handling with respect to
shares and stock acquisition rights as well as the fees therefor shall be governed by the Share Handling
Regulations established by the Board of Directors.
- 3 -
CHAPTER III
PREFERRED SHARES
(Preferred Dividends)
Article 13.
1.
The Company shall distribute cash dividends from surplus on Preferred Shares (hereinafter referred to as the
“Preferred Dividends”) in such respective amount as prescribed below to the holders of Preferred Shares
(hereinafter referred to as the “Preferred Shareholders”) or registered share pledgees who hold pledges over
Preferred Shares (hereinafter referred to as the “Registered Preferred Share Pledgees”), whose names have
been entered or recorded in the latest register of shareholders as of March 31 of each year, with priority over
the holders of Ordinary Shares (hereinafter referred to as the “Ordinary Shareholders”) or registered share
pledgees who hold pledges over Ordinary Shares (hereinafter referred to as the “Registered Ordinary Share
Pledgees”); provided, however, that in the event that the Preferred Interim Dividends provided for in Article
14 hereof have been paid in the relevant business year, the amount so paid shall be deducted accordingly
from the amount of the Preferred Dividends set forth below for each relevant class of Preferred Shares.
The Second to the Fourth Series of Class 5 Preferred Shares:
Amount to be determined by resolution of the Board
of Directors adopted at the time of issuance of the
Class 5 Preferred Shares, up to two hundred fifty
(250) yen per share per year
The First to the Fourth Series of Class 6 Preferred Shares:
Amount to be determined by resolution of the Board
of Directors adopted at the time of issuance of the
Class 6 Preferred Shares, up to one hundred
twenty-five (125) yen per share per
year
The First to the Fourth Series of Class 7 Preferred Shares:
Amount to be determined by resolution of the Board
of Directors adopted at the time of issuance of the
Class 7 Preferred Shares, up to one hundred
twenty-five (125) yen per share per
year
2.
3.
If the aggregate amount paid to a Preferred Shareholder or Registered Preferred Share Pledgee as cash
dividends from surplus in any particular business year is less than the prescribed amount of the relevant
Preferred Dividends, the unpaid amount shall not be carried over to nor cumulated in subsequent business
years.
The Company shall not distribute any dividends from surplus to any Preferred Shareholder or Registered
Preferred Share Pledgee in excess of the prescribed amount of the relevant Preferred Dividends except for
the distribution from surplus in the process of the corporate split (kyushu-bunkatsu) pursuant to Article 758,
Item 8 (b) or Article 760, Item 7 (b) of the Companies Act, or the distribution from surplus in the process of
the corporate split (shinsetsu-bunkatsu) pursuant to Article 763, Item 12 (b) or Article 765 Paragraph 1, Item
8 (b) of the said act.
(Preferred Interim Dividends)
Article 14.
In the event of payment of Interim Dividends provided for in Article 46 of these Articles (hereinafter
referred to as the “Preferred Interim Dividends”), the Company shall make a cash distribution from surplus in
- 4 -
such respective amount as prescribed below for each class of Preferred Shares to the Preferred Shareholders or
Registered Preferred Share Pledgees with priority over the Ordinary Shareholders or Registered Ordinary Share
Pledgees.
The Second to the Fourth Series of Class 5 Preferred Shares:
Amount to be determined by resolution of the Board
of Directors adopted at the time of issuance of the
Class 5 Preferred Shares, up to one hundred
twenty-five (125) yen per share
The First to the Fourth Series of Class 6 Preferred Shares:
Amount to be determined by resolution of the Board
of Directors adopted at the time of issuance of the
Class 6 Preferred Shares, up to sixty-two and fifty
hundredths (62.50) yen per share
The First to the Fourth Series of Class 7 Preferred Shares:
Amount to be determined by resolution of the Board
of Directors adopted at the time of issuance of the
Class 7 Preferred Shares, up to sixty-two and fifty
hundredths (62.50) yen per share
(Distribution of Residual Assets)
Article 15.
1.
If the Company distributes its residual assets in cash upon liquidation, the Company shall pay cash to the
Preferred Shareholders or Registered Preferred Share Pledgees with priority over the Ordinary Shareholders
or Registered Ordinary Share Pledgees in such respective amount as prescribed below:
The Second to the Fourth Series of Class 5 Preferred Shares:
Two thousand five hundred (2,500) yen
per share
The First to the Fourth Series of Class 6 Preferred Shares:
The First to the Fourth Series of Class 7 Preferred Shares:
Two thousand five hundred (2,500) yen
per share
Two thousand five hundred (2,500) yen
per share
2.
The Company shall not make a distribution of residual assets other than as provided for in the preceding
paragraph to the Preferred Shareholders or Registered Preferred Share Pledgees.
(Voting Rights)
Article 16.
Unless otherwise provided for by laws or regulations, the Preferred Shareholders shall not have voting rights
at any general meeting of shareholders; provided, however, that the Preferred Shareholders shall have voting
rights from (i) the commencement of an ordinary general meeting of shareholders in the event that no proposal
for declaration of the Preferred Dividends be paid to the Preferred Shareholders is submitted to such ordinary
general meeting of shareholders or (ii) the close of an ordinary general meeting of shareholders in the event that
such proposal is rejected at such ordinary general meeting of shareholders, until, in either case, a proposal for
declaration of the Preferred Dividends be paid to the Preferred Shareholders is approved at an ordinary general
meeting of shareholders.
- 5 -
(Consolidation or Split of Preferred Shares and Rights to Be Allotted Shares, etc.)
Article 17.
1. Unless otherwise provided for by laws or regulations, the Company shall not consolidate or split any
Preferred Shares.
2.
3.
The Company shall not grant the Preferred Shareholders any rights to be allotted shares or stock acquisition
rights.
The Company shall not grant the Preferred Shareholders any rights for the free allotment of shares or stock
acquisition rights.
(Provisions for Acquisition)
Article 18.
1.
In respect of the Second to the Fourth Series of Class 5 Preferred Shares and/or the First to the Fourth Series
of Class 6 Preferred Shares, the Company may, after issuance of the respective Preferred Shares and after
the lapse of the period designated by resolution of the Board of Directors adopted at the time of the issuance
of respective Preferred Shares, acquire such Preferred Shares, in whole or in part, in exchange for the
amount of cash as deemed appropriate as the acquisition price giving due consideration to the prevailing
market conditions, as determined by such resolution of the Board of Directors, on a certain date as
separately determined by the Company by a resolution of the Board of Directors after the issue of the
relevant Preferred Shares.
2.
Partial acquisition shall be effected pro rata or in lot.
(Right to Request Acquisition)
Article 19.
Any holder of the First to the Fourth Series of Class 6 or the First to the Fourth Series of Class 7 Preferred
Shares may request acquisition of such Preferred Shares during the period in which such Preferred Shareholder is
entitled to request acquisition as determined by resolution of the Board of Directors adopted at the time of
issuance of such Preferred Shares, in exchange for Ordinary Shares of the Company in the number as is
calculated by the formula designated by such resolution.
(Mandatory Acquisition)
Article 20.
1.
The Company shall mandatorily acquire any of the First to the Fourth Series of Class 6 Preferred Shares or
the First to the Fourth Series of Class 7 Preferred Shares for which no request for acquisition is made during
the period in which the holders of such Preferred Shares are entitled to request acquisition on the day
immediately following the last day of such period in exchange for Ordinary Shares in the number as is
obtained by dividing an amount equivalent to the subscription price per each relevant Preferred Share by the
average daily closing price (including closing bids or offered prices) of Ordinary Shares of the Company (in
regular trading) as reported by the Tokyo Stock Exchange for the thirty (30) consecutive trading days
(excluding a trading day or days on which no closing price or closing bid or offered price is reported)
commencing on the forty-fifth (45th) trading day prior to such date; provided, however, that such
calculation shall be made to the second decimal place denominated in yen, and rounded up to one decimal
place when the fraction beyond it is equal to or more than 0.05 yen, discarding amounts less than 0.05 yen.
If the relevant average price is less than the amount determined by resolution of the Board of Directors
adopted at the time of issuance of respective Preferred Shares, the relevant Preferred Shares shall be
acquired in exchange for Ordinary Shares in the number as is obtained by dividing an amount equivalent to
the subscription price per each relevant Preferred Shares by an amount so determined by such resolution of
the Board of Directors.
- 6 -
2. After issuance of the Second to the Fourth Series of Class 5 Preferred Shares, the First to the Fourth Series
of Class 6 Preferred Shares and/or the First to the Fourth Series of Class 7 Preferred Shares, upon the
occurrence of a certain event that requires the acquisition of the relevant Preferred Shares pursuant to the
capital adequacy requirements applicable to the Company and which event shall be determined by
resolution of the Board of Directors adopted at the time of the issuance of the relevant Preferred Shares, the
Company shall mandatorily acquire the relevant Preferred Shares in whole on an acquisition date which falls
after the occurrence of the certain event. The acquisition date shall be either of a certain date which falls
after the occurrence of the relevant certain event and which date shall be determined by such resolution of
the Board of Directors, giving due consideration to such capital adequacy requirements and other factors, or
a date separately determined by the Company by resolution of the Board of Directors adopted after the
occurrence of the relevant certain event. The Company shall mandatorily acquire the relevant Preferred
Shares in exchange for Ordinary Shares or free of consideration, and whether such acquisition shall be made
in exchange for Ordinary Shares or free of consideration shall be determined by resolution of the Board of
Directors adopted at the time of issuance of the relevant Preferred Shares, giving due consideration to the
market conditions and other factors. The formula for calculating the number of Ordinary Shares in case
where the relevant Preferred Shares shall be acquired in exchange for Ordinary Shares shall be determined
by resolution of the Board of Directors adopted at the time of issuance of the relevant Preferred Shares,
giving due consideration to the market price of Ordinary Shares, the subscription price of the relevant
Preferred Shares and other factors.
3.
In the calculation of the number of Ordinary Shares provided for in the preceding two paragraphs of this
article, if any number less than one (1) share is yielded, such fractions shall be handled by the method
provided for in Article 234 of the Companies Act.
(Order of Priority)
Article 21.
All classes of Preferred Shares shall rank pari passu with each other in respect of the payment of Preferred
Dividends and Preferred Interim Dividends and the distribution of residual assets.
(Prescription Period)
Article 22.
The provisions set forth in Article 47 of these Articles shall apply mutatis mutandis to the payment of
Preferred Dividends and Preferred Interim Dividends.
CHAPTER IV.
GENERAL MEETING OF SHAREHOLDERS
(Convocation)
Article 23.
1. An ordinary general meeting of shareholders shall be convened within three (3) months from the last day of
each business year.
2. An extraordinary general meeting of shareholders shall be convened whenever necessary.
(Chairman)
Article 24.
1.
The Director concurrently serving as President and Representative Corporate Executive shall act as
chairman of general meetings of shareholders.
- 7 -
2.
If the Director concurrently serving as President and Representative Corporate Executive is unable to act as
such, one of the other Directors shall act as chairman in accordance with the order of priority determined in
advance by the Board of Directors.
(Disclosure via Internet and Deemed Delivery of Reference Documents, etc. for General Meetings of
Shareholders)
Article 25.
Upon convening a general meeting of shareholders, the Company may deem that the information required to
be described or indicated in the reference documents for the general meeting of shareholders, business reports,
financial statements and consolidated financial statements shall have been provided to the shareholders when
such information is disclosed, pursuant to the Ministry of Justice Ordinances, through a method that uses the
Internet.
(Method of Resolution)
Article 26.
1. Unless otherwise provided for by law or regulation or these Articles of Incorporation, resolutions of a
general meeting of shareholders shall be adopted by an affirmative vote of a majority of the voting rights of
the shareholders in attendance who are entitled to vote.
2. Resolutions of a general meeting of shareholders provided for in Article 309, Paragraph 2 of the Companies
Act and resolutions of a general meeting of shareholders for which the method of resolution provided for in
the said Paragraph shall be applied mutatis mutandis pursuant to the Companies Act and other laws and
regulations shall be adopted by an affirmative vote of two-thirds (2/3) or more of the voting rights of the
shareholders in attendance who hold in the aggregate not less than one-third (1/3) of the total number of
voting rights of all shareholders who are entitled to vote.
(Voting by Proxy)
Article 27.
1.
2.
Shareholders may exercise their voting rights at a general meeting of shareholders by appointing one
(1) proxy who is one (1) shareholder of the Company entitled to exercise its own voting rights at such
meeting.
In the case of the preceding paragraph, the shareholder or the proxy thereof shall submit to the Company a
document evidencing authority of the proxy to act as such at each general meeting of shareholders.
(Minutes)
Article 28.
The proceedings of general meetings of shareholders shall be stated or recorded in the minutes pursuant to
laws and regulations.
(General Meetings of Holders of Classes of Shares)
Article 29.
1.
2.
The provisions of Articles 24, 25, 27 and 28 of these Articles shall apply mutatis mutandis to general
meetings of class shareholders.
The provisions of Article 26, Paragraph 1 of these Articles shall apply mutatis mutandis to the resolutions of
general meetings of class shareholders made pursuant to Article 324, Paragraph 1 of the Companies Act.
- 8 -
3.
The provisions of Article 26, Paragraph 2 of these Articles shall apply mutatis mutandis to the resolutions of
general meetings of class shareholders made pursuant to Article 324, Paragraph 2 of the Companies Act.
CHAPTER V.
DIRECTORS AND BOARD OF DIRECTORS
(Number of Directors and Method of Election)
Article 30.
1.
The Company shall have not more than twenty (20) Directors, who shall be elected at a general meeting of
shareholders.
2. A resolution for the election of Directors shall be adopted at a general meeting of shareholders by an
affirmative vote of a majority of the voting rights of the shareholders in attendance who hold voting rights
representing in the aggregate one-third (1/3) or more of the total number of voting rights of all shareholders
who are entitled to vote.
3. Resolutions for the election of Directors shall not be made by cumulative voting.
(Term of Office)
Article 31.
The term of office of Directors shall expire at the close of the ordinary general meeting of shareholders held
in respect of the last business year ending within one (1) year after their election.
(Board of Directors)
Article 32.
1.
The Board of Directors shall decide the business execution of the Company and oversee the performance of
duties of Corporate Executives and Directors.
2. Unless otherwise provided for by laws and regulations, the Board of Directors may delegate decisions on the
business execution of the Company to Corporate Executives.
3. Unless otherwise provided for by laws and regulations, the Director determined in advance by the Board of
Directors shall convene meetings of the Board of Directors and act as chairman. If the Director determined
in advance by the Board of Directors is unable to act as such, one of the other Directors shall act as
Chairman and Director in accordance with the order of priority determined in advance by the Board of
Directors.
4. Notice to convene a meeting of the Board of Directors shall be given to each Director at least three (3) days
prior to the date of such meeting; provided, however, that the foregoing shall not apply in cases of
emergency.
5. Unless otherwise provided for by law or regulation, resolutions of a meeting of the Board of Directors shall
be adopted by an affirmative vote of a majority of the Directors present who constitute in number a majority
of all the Directors of the Company.
6. With respect to the matters to be resolved by the Board of Directors, the Company shall deem that such
matters were approved by a resolution of the Board of Directors when all the Directors express their
agreement in writing or by an electromagnetic device.
7.
The proceedings of meetings of the Board of Directors shall, pursuant to laws and regulations, be stated or
recorded in the minutes, to which the Directors present shall put their names and affix their seals or
electronic signatures.
- 9 -
(Exemption from Liability of Directors)
Article 33.
In accordance with the provisions of Article 426, Paragraph 1 of the Companies Act, the Company may, by
a resolution of the Board of Directors, exempt Directors (including former Directors) from their liabilities
provided for in Article 423, Paragraph 1 of the Companies Act within the limits stipulated by laws and
regulations provided that such Director has acted in good faith and without gross negligence.
(Limited Liability Agreement with Directors)
Article 34.
Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company may execute
agreements with Directors other than Executive Directors etc., which limit the liability of such Directors
provided for in Article 423, Paragraph 1 of the Companies Act; provided, however, that the limit of the liability
under such agreements shall be the greater of an amount determined in advance which shall not be less than ten
million (10,000,000) yen or the minimum liability amount prescribed by laws or regulations.
CHAPTER VI.
Committees
(Method of Appointment of Committee Members)
Article 35.
The members of the Nominating and Governance Committee (which constitutes a Nominating Committee
defined in the Companies Act), the Audit Committee, and the Compensation Committee shall be appointed from
among the Directors by the resolution of the Board of Directors.
(Authority etc. of Committees)
Article 36.
Matters concerning the Nominating and Governance Committee (which constitutes a Nominating
Committee defined in the Companies Act), the Audit Committee, and the Compensation Committee shall be
governed by the Regulations thereof established by each Committee, as well as by applicable laws and
regulations, these Articles of Incorporation, or resolutions of the Board of Directors.
CHAPTER VII.
Corporate Executives
(Method of Election)
Article 37.
Corporate Executives shall be elected by the Board of Directors.
(Term of Office)
Article 38.
The term of office of Corporate Executives shall expire at the close of the first meeting of the Board of
Directors convened after the close of the ordinary general meeting of shareholders held in respect of the last
business year ending within one (1) year after their election.
- 10 -
(Representative Corporate Executive and Corporate Executive with Executive Power)
Article 39.
1.
2.
The Board of Directors shall, by its resolution, elect Representative Corporate Executive(s) from among the
Corporate Executives.
The Board of Directors may, by its resolution, appoint the President and Corporate Executive, Chairman and
Corporate Executive, Deputy Chairman and Corporate Executive(s), Deputy President and Corporate
Executive(s), Senior Managing Corporate Executive (s) and Managing Corporate Executive (s).
(Exemption from Liability of Corporate Executives)
Article 40.
In accordance with the provisions of Article 426, Paragraph 1 of the Companies Act, the Company may, by
a resolution of the Board of Directors, exempt Corporate Executives (including former Corporate Executives)
from their liabilities provided for in Article 423, Paragraph 1 of the Companies Act within the limits stipulated
by laws and regulations provided that such Corporate Executive has acted in good faith and without gross
negligence.
CHAPTER VIII.
ACCOUNTING AUDITOR
(Method of Election)
Article 41.
The Accounting Auditor shall be elected at a general meeting of shareholders.
(Term of Office)
Article 42.
1.
2.
The term of office of the Accounting Auditor shall expire at the close of the ordinary general meeting of
shareholders held in respect of the last business year ending within one (1) year after his/her assumption of
office.
The Accounting Auditor shall be deemed to be reappointed at a general meeting of shareholders provided
that there is no resolution to the contrary.
CHAPTER IX.
ACCOUNTS
(Business Year)
Article 43.
The business year of the Company shall commence on April 1 of each year and end on March 31 of the
following year.
(Acquisition of Own Shares)
Article 44.
Unless otherwise provided for by laws or regulations, the company may determine by a resolution of the
Board of Directors to acquire its own shares by obtaining consent of the shareholders as provided for in Article
459, Paragraph 1, Item 1 of the Companies Act.
- 11 -
(Year-End Dividends)
Article 45.
The Company shall distribute cash dividends from surplus (referred to as the “Year-End Dividends” in these
Articles of Incorporation) to the shareholders or registered share pledgees whose names have been entered or
recorded in the latest register of shareholders as of March 31 of each year.
(Interim Dividends)
Article 46.
By resolution of the Board of Directors, the Company may distribute cash dividends from surplus pursuant
to Article 454, Paragraph 5 of the Companies Act (referred to as the “Interim Dividends” in these Articles of
Incorporation) to the shareholders or registered share pledgees whose names have been entered or recorded in the
latest register of shareholders as of September 30 of each year.
(Prescription Period for Payment of Dividends)
Article 47.
In the event that the dividends from surplus are to be paid in cash, the Company shall be released from the
obligation to distribute dividends from surplus if such distribution has not been accepted after the lapse of five
(5) full years from the date of commencement of payment thereof. Year-End Dividends and Interim Dividends of
the Company shall bear no interest.
Additional Rule
(Transitional Measure Regarding Exemption from Liability of Corporate Auditors)
Article 1.
In accordance with the provisions of Article 426, Paragraph 1 of the Companies Act, the Company may, by
a resolution of the Board of Directors, exempt Corporate Auditors (including former Corporate Auditors) from
their liabilities provided for in Article 423, Paragraph 1 of the Companies Act in relation to the acts conducted
before the close of the 10th Ordinary General Meeting of Shareholders within the limits stipulated by laws and
regulations provided that such Corporate Auditor has acted in good faith and without gross negligence.
- End -
Date of Establishment
April 2, 2001
Date of Amendment
June 27, 2002
June 27, 2003
June 29, 2004
June 29, 2005
October 1, 2005 (However, the Amendments to Articles of 5, 11, 12 (except for the amendment to Article 12
changing the reference to Article 37 into that to Article 38), 13,17, 18 and 39 shall be effective
from October 3, 2005.)
June 29, 2006
- 12 -
(However, the Amendments to Article 6, Article 8 through Article 16, Article 19, Article 21,
Article 50 and Article 51 (except for the deletions in the Articles of Incorporation pertaining to
Class 9 Preferred Shares and Class 10 Preferred Shares) shall be effective from September 30,
2007.)
June 28, 2007
June 26, 2009
June 27, 2013
June 25, 2015
June 29, 2016
July 6, 2018
- 13 -
Exhibit 1(b)
[Translation]
Article 1. Purpose
BOARD OF DIRECTORS REGULATIONS
The purpose of these Regulations is to enable the proper and smooth operation of MUFG’s Board of
Directors.
Article 2. Amendment or Abolishment
The amendment or abolishment of these Regulations shall be decided through a resolution by the Board of
Directors.
Article 3. Organization
The Board of Directors shall be composed of all the directors.
Article 4. Authority
The Board of Directors shall decide key management policies and other matters of business execution by
MUFG and oversee the execution of duties by directors and corporate executives.
Article 5. Delegation to Corporate Executives
1. The Board of Directors shall delegate decisions on business execution to corporate executives in principle,
excluding matters mandatorily required to be decided by the Board of Directors under the Companies Act;
provided, however, that decisions on particularly important matters of business execution shall be made by the
Board of Directors.
2. “Decisions on particularly important matters of business execution” refers to decisions on matters that are
particularly important and fundamental to MUFG, such as the following.
i. Matters that would have a particularly material effect on key management policies
ii. Matters that would have a particularly material effect on the establishment of the internal control
system
iii. Matters that would have a particularly material effect on the Group’s creditworthiness and reputation
iv. Matters that would have a particularly material effect on the Group’s business performance
Article 6. Meetings
Meetings of the Board of Directors shall be held at least once every three months in principle; provided,
however, that extraordinary meetings of the Board of Directors may also be held in cases of emergency.
Article 7. Convener
1. A meeting of the Board of Directors shall be convened by the director who concurrently serves as Chairman.
2. If the director who concurrently serves as Chairman is unable to act as such or if no director who concurrently
serves as Chairman has been designated, one of the other directors shall act as a substitute in accordance with the
order predetermined by the Board of Directors.
1
3. A director or corporate executive may request the convener to convene a meeting of the Board of Directors as
necessary by submitting a document stating the agenda of the meeting.
4. A person appointed by each committee from among the committee members may convene a meeting of the
Board of Directors in accordance with the provisions of laws and regulations.
Article 8. Convocation Notice
1. Notice of convocation of a meeting of the Board of Directors shall be issued to each Director at least
three (3) days prior to the date of the meeting; provided, however, that the foregoing shall not apply in cases of
emergency.
2. If the unanimous consent of the directors is obtained, a meeting of the Board of Directors may be held without
taking the convocation procedures.
Article 9. Chairman
1. The director who concurrently serves as Chairman shall act as the Chairman of the Board of Directors.
2. If the director who concurrently serves as Chairman is unable to act as such or if no director who concurrently
serves as Chairman has been designated, one of the other directors shall act as a substitute in accordance with the
order predetermined by the Board of Directors.
Article 10. Committees
1. MUFG shall establish a Nominating and Governance Committee(Note), a Compensation Committee, and an
Audit Committee.
2. Each committee shall exercise its legal authority, deliberate on specified matters, and make recommendations
to the Board of Directors.
3. The Board of Directors may establish optional committees in addition to the three committees specified in
Paragraph 1.
Note: A “nominating committee” as defined under the Companies Act
Article 11. Resolutions
1. Unless otherwise provided for by law or regulation, resolutions by the Board of Directors shall be adopted by
the affirmative vote of a majority of the directors present who constitute in number a majority of all the directors
entitled to vote.
2. Directors with special interests in a matter to be resolved as set out in the preceding paragraph may not
participate in the resolution regarding that matter.
3. In the case where a director proposes a matter for resolution and the directors entitled to vote regarding that
manner unanimously consent to that proposal in writing or electronically, the Board of Directors shall be deemed
to have approved that proposal.
Article 12. Matters for Resolution
1. Each of the following items shall be decided through resolutions by the Board of Directors.
‰
The Group’s management strategy, capital policy, and resource allocation
‰ Business management framework and risk management policy
2
‰ Oversight of status of business execution and progress of business performance (approval of financial
statements)
‰ Appointments
‰ Corporate culture
‰ Conflicts of interest (matters concerning the approval of competing transactions or self-dealings by
directors or corporate executives)
‰ Other decisions on business execution (decisions on matters definitively specified as matters that may
not be delegated to corporate executives and other particularly important matters of business execution)
Article 13. Reports
1. Each corporate executive shall report on the status of business execution to the Board of Directors; provided,
however, that such a report may be made on his or her behalf by other corporate executives.
2. Directors and corporate executives who have conducted competing transactions or self-dealings shall report
material facts concerning such transactions to the Board of Directors.
3. In the case where a director, accounting auditor, or corporate executive has notified all directors of a matter to
be reported to the Board of Directors, reporting of that matter to the Board of Directors shall not be required.
Article 14. Minutes
Minutes of the Board of Directors shall be prepared in writing, shall have the names and the seals of the
directors present affixed, and shall be kept at the head office for ten years, in accordance with laws and
regulations.
Supplementary Provisions
1. These Regulations shall be effective from October 1, 2005.
Revisions
Amended as of May 1, 2006
Amended as of June 29, 2006
Amended as of December 24, 2010
Amended as of June 25, 2015
3
[Translation]
Exhibit 1(c)
CORPORATION MEETINGS REGULATIONS
Chapter I. General Provisions
Article 1. General Provisions
1.
These Rules shall govern the structure and operation of both the Executive Committee (as provided for in
Article 11 of the Office Organization Rules) and Committees (as provided for in Article 12 of the Office
Organization Rules).
2. Corporate Policy Meetings shall be held to help in the discussion and decision making of the Executive
Committee. These Rules shall govern the structure and operation of Corporate Policy Meetings.
Article 2. Amendment and Abolition
The amendment and abolition of these Rules shall be determined by resolution of the Executive Committee.
Article 3. Jurisdiction
The Corporate Planning Division has jurisdiction over these Rules.
Chapter II. Executive Committee
Article 4. Members and Attendees
1.
2.
3.
The Executive Committee shall consist of all Representative Corporate Executives, as well as Corporate
Executives and Executive Officers nominated by the President & CEO of the Company (“Committee
Members”).
The President & CEO may, if they deem necessary, require any senior Group officers and Heads of the
Business Groups to attend meetings of the Executive Committee as members.
The President & CEO may, if they deem it necessary, require any of the Members of the Board of Directors
other than the Committee Members, the Executive Officers and the Members of the Board of Directors of
relevant subsidiaries of the Company, etc., to attend meetings of the Executive Committee.
4. Members of the Audit Committee may attend meetings of the Executive Committee.
Article 5. Chairman
1.
2.
The President & CEO shall convene meetings of the Executive Committee and shall preside over the
meetings.
If the President & CEO is unable to act as such, one of the other Corporate Executives shall act in their
place, in accordance with the order of priority previously determined by the Executive Committee.
Article 6. Meeting Dates
Meetings of the Executive Committee shall be held, in principle, once every two (2) weeks; however, they
may be held at any time if the need arises.
Article 7. Matters to be Discussed and Determined
1.
The Executive Committee shall, in principle, discuss and determine the following general important matters
concerning management of the Company pursuant to the basic policies determined by the Board of
Directors:
1) Matters entrusted by the Board of Directors;
2) Matters concerning execution of policies concerning general management and control of the Company;
3) Matters concerning company financial results;
4) Matters concerning company shares, etc.;
5) Matters concerning nominations, compensation, etc.;
6) Matters concerning important matters concerning the subsidiaries of the Company, etc.;
7) Matters concerning important matters concerning the administration and management of the
subsidiaries of the Company, etc.;
8) Matters concerning the establishment of, amendment to and abolition of rules, etc.;
9) Matters concerning regulatory compliance and risk management;
10) Matters required to be submitted to the Executive Committee by provisions stipulated in various rules
and regulations; and
11) Any other matters requiring executive action.
2.
The matters to be discussed and determined set forth in the preceding paragraph shall be submitted by any
of the Committee Members in control of such matters, or senior Group officers and Heads of the Business
Groups pursuant to Article 4 Paragraph 2, or any of the Members of the Board of Directors other than the
Committee Members or the Executive Officers pursuant to Article 4 Paragraph 3.
Article 8. Method of Discussion and Determination
1.
2.
The proceedings of a meeting of the Executive Committee shall be determined by the President & CEO with
the unanimous consent of all the Committee Members present who shall constitute in number a majority of
the Committee Members.
If unanimous consent is not given by the Committee Members present at a meeting, the President & CEO
shall determine the relevant items of business with consideration to the opinions of all Members present,
upon consultation with the Chairman, or in the event a Deputy Chairman is appointed, with the Chairman
and the Deputy Chairman.
Article 9. Discussion and Determination in Writing
1. Notwithstanding the provisions of Article 7, in special circumstances, the circulation of a written resolution
drafted by the person making such proposal may be substituted for the holding of a meeting of the Executive
Committee.
2.
In the case of the preceding paragraph, the person making such proposal must report to the next Executive
Committee meeting on the matters discussed and determined.
Article 10. Emergency Procedures
1.
2.
In case of emergency, such as a natural disaster, etc., if there is no time for discussion at the Executive
Committee or for circulation of a written resolution, irrespective of the provisions set forth in Article 7, the
President & CEO may take any and all expedient steps as may be necessary as matters of urgency.
In the case of the preceding paragraph, the President & CEO shall immediately report on such steps to the
Executive Committee.
Article 11. Reporting and Exchange of Information
Each of the Committee Members or senior Group officers and Heads of the Business Groups pursuant to
Article 4 Paragraph 2, or any of the Members of the Board of Directors other than the Committee Members or the
Executive Officers pursuant to Article 4 Paragraph 3 shall, at meetings of the Executive Committee, report on the
state of execution of their duties and shall also exchange general information with one another.
Article 12. Meeting Minutes
The Corporate Administration Division shall record a summary of the proceedings of meetings of the
Executive Committee and the results thereof in the minutes, and the President & CEO shall sign their name or
affix their seal to such minutes, which shall then be kept at the Company Head Office for ten (10) years.
Article 13. Communication
The matters resolved by the Executive Committee shall be rapidly communicated to the relevant Executive
Officers and Heads of Divisions, etc.
Chapter III. Committees
Article 14. Purpose and Matters to be Deliberated
1. A committee shall arrange, examine and deliberate on the following matters upon a mandate given by the
President & CEO in order to contribute to the discussions and decision-making of the Executive Committee.
1. Matters concerning management policies of the entire group;
2. Matters concerning management plans of the entire group;
3. Matters concerning risk management of the entire group;
4. Matters concerning the setting up of management and execution policies among the subsidiaries of the
Company; and
5. Any other specified matters necessary for deliberation by the Executive Committee.
Article 15. Establishment and Membership
1.
2.
The Executive Committee shall establish a committee, which shall consist of several members appointed by
the President & CEO.
The President & CEO may appoint Members of the Board of Directors with Executive Power, etc. of the
subsidiaries of the Company to be members, as described in the preceding paragraph.
Article 16. Chairman
1.
2.
3.
4.
5.
Each committee shall have a chairman.
The chairman of the committee shall preside over the committee.
The committee may have a vice-chairman if necessary.
The President & CEO shall appoint a chairman and a vice-chairman of the committee from among its
members.
If the chairman of the committee is prevented from acting as such, the vice-chairman or any other member
appointed by the President & CEO shall act on the chairman’s behalf.
Article 17. Secretariat
1.
2.
Each committee shall have a secretariat.
The secretariat shall be under the direction of the chairman of the committee and shall be responsible for
committee administrative matters.
Article 18. Convocation
The chairman of the committee shall convene meetings of the committee.
Article 19. Deliberation
1. Committee members must make efforts to attend meetings of their committees where they shall carefully
and actively discuss matters from the viewpoint of the Group as a whole, so that the deliberations of the
committee can be completed in a timely manner.
2.
3.
4.
If a member is to be absent from a meeting, they may submit their written opinions to the chairman of the
committee in advance.
If necessary, the committee may require persons concerned to attend a meeting of the committee so that the
committee may hear their opinions.
If necessary, the committee may require a division or subsidiary of the Company, etc. to submit materials or
to make other cooperative efforts.
Article 20. Submissions and Reports
1.
2.
3.
The chairman of the committee or a member of the committee nominated by the chairman shall, from time
to time, submit or report on important matters deliberated at the committee to the Executive Committee.
In reports set forth in the preceding paragraph the minority opinions of the committee must be included.
If a long period of time is required for the deliberations in Article 20 Paragraph 1 the chairman of the
committee or a member of the committee nominated by the chairman must provide interim reports to the
Executive Committee about the state of the deliberations.
Article 21. Working Groups
A committee may establish working groups to ensure smooth deliberation.
Chapter IV. Corporate Policy Meetings
Article 22. Purpose and Matters to be Deliberated
The purpose of Corporate Policy Meetings is to exchange views from a wide range of perspectives and
discuss the basic direction of important matters with regard to the management and administration of the
Company Group on a consolidated basis, to contribute to decision-making at the Executive Committee.
Article 23. Composition
Corporate Policy Meetings shall consist of relevant Executive Committee Members, relevant Members of
the Board of Directors, Corporate Executives, Executive Officers and Heads of Divisions, and Members of the
Board of Directors, etc. of relevant subsidiaries of the Company.
Article 24. Meeting Dates
Corporate Policy Meetings shall be held whenever required.
Article 25. Secretariat
The secretariat of Corporate Policy Meetings shall share jurisdiction with the Corporate Planning Division
over matters to be deliberated.
Article 26. Submissions and Reports
In principle, matters to be deliberated at Corporate Policy Meetings shall be submitted or reported to the
Executive Committee.
Chapter V. Business Group Management Meetings
Article 27. Purpose and Matters to be Deliberated
Business Group Management Meetings shall be established in each Business Group under Article 6 of the
Office Organization Rules to deliberate and exchange views from a wide range of perspectives regarding the
management of the Business Group, and to contribute to the management of the Business Group.
Article 28. Composition
Business Group Management Meetings shall consist of the Head of the Business Group, relevant Executive
Committee Members, relevant Members of the Board of Directors, Corporate Executives, Executive Officers and
Heads of Divisions, and Members of the Board of Directors, etc. of relevant subsidiaries of the Company.
Article 29. Holding of meetings
Business Group Management Meetings shall be held in each Business Group, in principle two (2) times a
year.
Article 30. Secretariat
The Corporate Planning Division and the division in charge of planning in each Business Group shall jointly
be responsible for being the secretariat of Business Group Management Meetings.
Article 31. Purpose and Matters to be Deliberated
Chapter VI. Unit Management Meetings
Unit Management Meetings shall be held by each Unit organized pursuant to the provisions under Articles
7, 8, 9, 10, 11 and 12 of the Rules of Organization for the purposes of exchanging opinions and deliberating on
the Unit’s operations from a broad perspective, thereby aiming to contribute to the management of the Unit.
Article 32. Composition
The members of each Unit Management Meeting shall be composed of the Head of the Business Group that
is responsible for the Unit, the Head of the Unit, the relevant Members of the Executive Committee, relevant
Members of the Board of Directors, and relevant Corporate Executives, Executive Officers and Heads of
Divisions, as well as Members of the Board of Directors, etc. of relevant subsidiaries.
Article 33. Holding of meetings
Unit Management Meetings shall be held by each Unit, in principle, two (2) times a year.
Article 34. Secretariat
The Corporate Planning Division, the division in charge of planning in each Business Group and the
division in charge of planning in each Unit shall jointly be responsible for acting as the secretariat for the Unit
Management Meetings of the Unit.
1.
These Rules shall become effective as from October 1, 2005.
Supplementary Provisions
Amendment History
July 31, 2006
Amendment to Article 4 Paragraph 2
December 24, 2010
Changes to layout by chapters.
April 1, 2013
May 14, 2014
Amendment to Article 4
Amendment to Article 3, Article 4
March 31, 2015
Amendment to Article 22, Article 24, Article 25
April 1, 2015
June 23, 2015
June 25, 2015
July 3, 2015
Addition of Chapter V. (Article 27, Article 28, Article 29)
Rules in effect
Addition to Article 3, number of other Articles moved down. Amendment to
Article 2, Article 4, Article 5, Article 7, Article 8, Article 10, Article 11, Article 12,
Article 14, Article 15, Article 16, Article 23, Article 28
Rules in effect
Amendment to Article 4, Article 7, Article 11, Article 27, Article 28, Article 29,
Article 30
Rules in effect
July 1, 2018
Addition of Chapter VI. (Article 31, Article 32, Article 33, Article 34)
Rules in effect
Audit Committee Charter
(English Translation)
Exhibit 1(e)
1
Purpose
1.1 The Audit Committee (“Committee”), as a committee of the Board of Directors (“Board”) of
Mitsubishi UFJ Financial Group, Inc. (“Company”), shall oversee the Company’s operations as set
forth herein.
1.2 Pursuant to the provisions of the Companies Act of Japan, the Committee shall conduct an audit on the
execution by the members of the Board and the corporate executive officers of the Company of their
respective duties and responsibilities (“Companies Act Audit”) and shall prepare a report on such audit.
1.3 The Committee shall assist the Board with oversight of the operations of the Company and its
subsidiaries (collectively, “Group”) by overseeing the following:
(1)
financial reporting,
(2)
risk management and internal controls,
(3) compliance,
(4)
internal audits, and
(5) external audits.
1.4 The above purpose shall include all such duties and responsibilities as are imposed by the laws,
regulations and rules in Japan (“Japanese Law”) and the U.S. Securities Exchange Act of 1934, the
rules of the U.S. Securities and Exchange Commission (“SEC”) and the rules of the New York Stock
Exchange (“U.S. Law” and, together with Japanese Law, “Applicable Laws”) on companies, including
the Company, which are publicly listed in Japan and in the United States.
2
Composition
2.1 Membership
(1) The Committee shall consist of five or more non-executive directors who shall be appointed as
members of the Committee (“Committee Members”) by the Board each year based on
recommendations of the Nominating and Governance Committee of the Company.
(2) Each Committee Member shall have such qualifications as are required by Applicable Laws for
members of audit committees, including the independence requirements under U.S. Law, and have
such expertise and work experience as are necessary to fulfill the duties and responsibilities of a
Committee Member. The Committee shall collectively maintain appropriate knowledge and
expertise relating to the capital markets and the financial sector.
(3) At least one Committee Member shall be an “audit committee financial expert” as determined by
the Board in accordance with Item 16A of Form 20-F.
2.2 The Board shall appoint a Committee Member who is an “independent outside director” as such term is
defined by Japanese Law to serve as the Committee Chair. The Committee Chair shall not concurrently
serve as the chair of any other committees of the Board (except any such subcommittee as the
Committee may create pursuant to Section 4.5 hereof). The Committee Chair shall (1) call meetings of
the Committee, (2) establish the agendas for the meetings in consultation with the other Committee
Members, (3) preside at the meetings, and (4) communicate and share information with the other
Committee Members and the Chairs of the Board and the other committees of the Board as appropriate.
1
2.3 Each Committee Member shall report to the Board on the Committee’s discussions and actions as
appropriate.
2.4 The Committee may have up to two Committee Members engaged in Committee activities on a full-
time basis (“full-time committee members”). The full-time committee members shall attend meetings
of the other committees of the Board, and the Executive Committee, the Disclosure Committee and
other committees and organizations of the Company as appropriate, and shall report to the Committee
on such meetings.
2.5 The Committee shall establish a secretariat office to assist the Committee in administering and
managing the operations of the Committee. The secretariat office shall be staffed with employees from
the Internal Audit Division of the Company and such other persons as the Committee determines
appropriate.
3 Operations
3.1 The Committee shall meet once a month unless it otherwise determines, in which case it shall meet as
it deems necessary.
3.2 The quorum for a meeting of the Committee shall be a simple majority of the Committee Members.
3.3 The Committee may, as it deems necessary, have the external auditor, other members of the Board, the
Chief Audit Officer (Group CAO), the Chief Compliance Officer (Group CCO), the Chief Financial
Officer (Group CFO) and other corporate executive officers and employees of the Company, and any
external adviser retained pursuant to Section 4.6 hereof attend its meetings.
3.4 The Committee shall, as necessary, communicate with other members of the Board and the corporate
executive officers and other employees of the Company. The Committee shall, as appropriate,
exchange opinions with the representative corporate executive officers of the Company.
3.5 The Committee shall, as necessary, obtain reports from management and other employees of the
Company with respect to such matters subject to the oversight of the audit committees, audit and
supervisory committees, and corporate auditors (“audit committees and other committees”) of the
Company’s subsidiaries as the Committee deems may have a material impact on the Group.
3.6 The Committee shall, as it deems necessary, obtain the assistance of the Group CAO and Internal Audit
Division of the Company, through their cooperation with the internal audit divisions of the Company’s
subsidiaries or other appropriate means, with the Committee’s coordination with the audit committees
and other committees of the Company’s subsidiaries.
3.7 The Committee shall have prepared and maintained minutes of its meetings to properly record its
discussions, deliberations, reports, and other actions and activities. The Committee may, as it deems
appropriate, make such minutes, in part or whole, available to other members of the Board.
3.8 The Committee shall report to the Board on the Committee’s discussions, deliberations, reports, and
other actions and activities as appropriate, and shall make recommendations to the Board as necessary.
3.9 The Committee shall conduct an annual evaluation of the performance of its duties and responsibilities
and shall report the results of such evaluation to the Board.
4
Authority
4.1 The Committee shall have such authority as is necessary to fulfill its purpose set forth in Section 1
hereof and its duties and responsibilities set forth in Section 5 hereof in accordance with Applicable
Laws and any such other authority as is granted to it by Applicable Laws.
4.2 The Committee shall have the authority to request such information relating to the operations of the
Group as it deems necessary from the external auditor, other members of the Board, and the corporate
executive officers and other employee of the Company in accordance with Applicable Laws.
2
4.3 The Committee shall have the authority to request, in accordance with Applicable Laws, from the audit
committees and other committees of the Company’s subsidiaries such information relating to their
discussions, deliberations, reports, and other actions and activities, as well as investigations conducted
by them and other matters as it deems necessary.
4.4 The Committee shall have the authority to conduct any such investigation relating to the Group’s
operations and assets and other matters as it deems necessary in accordance with Applicable Laws.
4.5 The Committee shall have the authority to delegate any of its duties and responsibilities, together with
the necessary authority, to one or more subcommittees consisting of one or more Committee Members
as the Committee determines appropriate.
4.6 The Committee shall have the authority, in its sole discretion, to retain and obtain the advice and
assistance of such external advisers as it determines necessary.
4.7 The Company shall provide such funding and other resources as the Committee determines appropriate
for the fulfillment of the Committee’s purpose and duties and responsibilities set forth herein.
5
Duties and Responsibilities
5.1 Companies Act Audits
(1) The Committee shall conduct a Companies Law Audit on the execution by the members of the
Board and the corporate executive officers of the Company of their respective duties and
responsibilities based on such audit policy and plans as the Committee adopts for each fiscal year.
(2) The Committee shall, as appropriate, report to the Board on its audit policy and plan for such
Companies Law Audit.
(3) The Committee shall report to the Board on the results of its Companies Act Audit in the form of
an audit report to be included in the Company’s Annual Business Report for each fiscal year or
otherwise presented.
5.2 Oversight of Financial Reporting
(1) The Committee shall discuss with the external auditor and management, and examine, the
following matters relating to financial reporting:
• The Company’s financial statements and accompanying notes prepared in accordance with
Japanese Law and generally accepted accounting principles in Japan (“Japanese GAAP”)
(including the Company’s non-consolidated and consolidated financial statements and
accompanying schedules prepared in accordance with the Companies Act and the Company’s
non-consolidated and consolidated full-year and semi-annual financial statements and
accompanying notes prepared in accordance with the Financial Instruments and Exchange
Act of Japan) (collectively, the “Japanese GAAP Financial Statements”).
• The Company’s financial information prepared in accordance with U.S. Law and generally
accepted accounting principles in the United States (“U.S. GAAP”) and filed with the SEC
(including the Company’s financial statements, accompanying notes and financial analysis
and discussion filed on Form 20-F with, and the Company’s semi-annual
financial
statements, accompanying notes and financial analysis and discussion submitted on Form
6-K to, the SEC) (collectively, the “U.S. GAAP Financial Information”).
• The Company’s quarterly reports prepared in accordance with Japanese GAAP (including the
Company’s quarterly reports prepared in accordance with the Financial Instrument and
Exchange Act) (“Japanese GAAP Quarterly Reports”).
(2) The Committee shall examine the financial information included in the Company’s earnings
releases (kessan-tanshin), press releases, investor relations materials and other information that
3
are published in connection with the Japanese GAAP Financial Statements, the U.S. GAAP
Financial Information and the Japanese GAAP Quarterly Reports prior to their publication,
considering discussions of the Disclosure Committee and the Executive Committee and other
relevant information.
(3) The Committee shall discuss with the external auditor, the Internal Audit Division and
management, and examine, the Group’s critical accounting policies and practices (including those
accounting policies and practices which relate to such items as critical accounting estimates, items
requiring a high degree of judgment, items involving uncertainty such as contingent liabilities, and
related party transactions) and related disclosures.
(4) The Committee shall obtain reports from the external auditor and management with respect to any
material communications relating to the Group’s financial and accounting matters between the
external auditor and management in accordance with Applicable Laws. The Committee shall
discuss with the external auditor and management, and examine, disagreements between them
regarding such matters to resolve such disagreements.
(5) The Committee shall prepare a report based on the result of its examination of the Company’s
non-consolidated and consolidated financial statements and accompanying schedules prepared in
accordance with Japanese GAAP and present such report to the Board.
5.3 Oversight of Risk Management and Internal Controls
(1) The Committee shall obtain reports from management, the Internal Audit Division and the
external auditor on, examine and evaluate any significant risks and the risk management and
corporate governance frameworks of the Group and the operation of such frameworks.
(2) The Committee shall communicate and coordinate, as appropriate, with the Risk Committee of the
Company with respect to the Group’s risk management through such means as the participation of
the full-time committee members in meetings of the Risk Committee and discussions with the
Risk Committee, as necessary.
(3) The Committee shall obtain reports from management, the Internal Audit Division and the
external auditor on, discuss and examine the following matters relating to the Group’s internal
control over financial reporting:
• The Group’s accounting and financial reporting processes and the frameworks for internal
controls over the Group’s accounting and financial reporting and the operation of such
frameworks.
• Management’s assessment of the effectiveness of such processes and internal controls, the
Internal Audit Division’s audit relating to management’s assessment of the same, and the
external auditor’s evaluation of the same.
• Any significant deficiency, material weakness or other similar issue identified through such
assessment, audit or evaluation.
• Management’s responses to any such deficiency, weakness or issue.
• Any fraud, or reasonably suspected fraud, that involves management or other employees who
have a significant role in the Group’s processes and internal controls described above.
(4) The Committee shall obtain reports from management, the Internal Audit Division and the
external auditor on, discuss and examine the framework for the disclosure controls for the
Company’s disclosures and the operation of such framework.
5.4 Oversight of Compliance
(1) The Committee shall oversee the framework for the Group’s compliance with Applicable Laws
and other applicable laws, regulations and rules and the operation of such framework.
4
(2) The Committee shall obtain reports from management on, and examine, the status of any material
failure of the Group to comply with Applicable Laws or other applicable laws, regulations or
rules, and any legal proceedings or regulatory matters.
(3) The Committee shall review the Group’s codes of ethics and other internal rules, monitor
compliance with such codes and rules, and evaluate the framework for ensuring compliance with
such codes and rules.
(4) The Committee shall establish procedures (i) pertaining to complaints received by the Company
regarding accounting, internal accounting controls and auditing matters and (ii) for the
confidential, anonymous submission by Group employees of concerns regarding questionable
accounting or auditing matters, and shall handle any such complaint and concern received through
such procedures in a confidential and appropriate manner. The Committee shall obtain reports
from the audit committees and other committees of the Company’s subsidiaries on, and examine,
their handling of concerns received directly from subsidiary employees pertaining to the same
matters.
5.5 Oversight of Internal Audits
(1) The Committee shall review and evaluate the framework for the Group’s internal audit function
and the operation of such framework.
(2) The Committee shall obtain the Internal Audit Division’s explanations on, and discuss with such
Division, such Division’s proposed audit plan, risk assessment based on which such plan has been
prepared, audit focus areas, and staffing plan including retention of any external expert, and shall
approve such audit plan.
(3) The Committee shall obtain the Internal Audit Division’s reports on, and discuss with such
Division, any significant matters relating to an internal audit, including the execution, findings and
results of, and communications with management regarding, the internal audit, and shall provide
instructions, as necessary, to such Division.
(4) The Committee shall examine the evaluation of the Internal Audit Division periodically
performed, and any recommendation made, by an external third party and shall evaluate the
Internal Audit Division’s responses to such evaluation or recommendation.
(5) The Committee shall obtain reports from the Internal Audit Division on, and evaluate, the
performance of its duties and responsibilities, and such Division’s measures designed to
continuously improve and enhance the internal audit function, including audit methodologies and
human resource development, and the implementation of such measures.
(6) The Committee shall determine the appointment of the Group CAO and other personnel who
perform significant internal audit functions, and shall communicate such determination to the
Nominating and Governance Committee of the Board.
(7) The Committee shall perform an annual evaluation of the Group CAO, considering the
performance of the Internal Audit Division, and submit such evaluation to the Compensation
Committee of the Board.
5.6 Oversight of External Audits
(1) The Committee shall oversee the work of the external auditor and obtain reports directly from the
external auditor.
(2) The Committee shall set a policy for the appointment, termination and non-appointment of the
external auditor and, in accordance with such policy, determine whether to submit to shareholder
vote a proposal for the appointment, termination and non-appointment of the external auditor.
(3) The Committee shall obtain the external auditor’s explanations on the external auditor’s proposed
annual audit plan, any material changes in such plan, the risk assessment based on which such
5
plan has been prepared, audit focus areas, estimated audit work hours and other related matters,
and shall discuss and evaluate such plan.
(4) The Committee shall obtain from, and discuss with, the external auditor an estimate of audit work
hours and a fee proposal for auditing the Company’s financial statements and internal control over
financial reporting based on the external auditor’s audit plan, and shall approve such estimate and
proposal.
(5) The Committee shall, as appropriate, obtain the external auditor’s reports on, and discuss with the
external auditor, any significant matters relating to the Company’s accounting, internal controls
and financial reporting, including the execution, findings and results of, and communications with
management regarding, the external auditor’s audit, and shall examine and evaluate the audit
performed by the external auditor.
(6) The Committee shall pre-approve any non-audit services to be provided to the Group by the
external auditor and any of its domestic and overseas member firms by ensuring, prior to the
provision of such services, that such non-audit services are not prohibited under Applicable Laws
or other applicable laws, regulations or rules. The Committee shall establish appropriate policies
and procedures for pre-approving such non-audit services.
(7) The Committee shall obtain explanations from the external auditor on, and evaluate, the external
auditor’s compliance, and the framework for ensuring compliance, with the auditor independence
standards under Applicable Laws and other applicable laws, regulations and rules.
(8) The Committee shall obtain from the external auditor reports on, and examine, any material issues
raised by any quality-control reviews (including any internal or peer quality-control reviews and
any inquiries, inspections or investigations by governmental or professional authorities in Japan,
the United States and other jurisdictions) and any steps taken to deal with such issues, and shall
evaluate the quality of services provided by the external auditor.
(9) The Committee shall, at least annually, receive the external auditor’s explanation or presentation
on, and evaluate, the external auditor’s audit quality-control framework (including the frameworks
for executing audit work with required expertise and for ensuring compliance with the applicable
independence requirements).
(10) The Committee shall examine and evaluate whether all of the matters that the external auditor is
required to communicate to the Committee under Applicable Laws and other applicable laws,
regulations and rules have been appropriately communicated to the Committee.
(11) The Committee shall set the Group’s hiring policies for employees or former employees of the
external auditor and evaluate the implementation of such policies.
6
Coordination with the Audit Committees and Other Committees of the Company’s Subsidiaries
6.1 The Committee shall monitor the oversight of the operations of the Company’s domestic and overseas
subsidiaries by their audit committees and other committees through coordination with such audit
committees and other committees in accordance with Sections 6.2, 6.3 and 6.4 hereof to ensure the
effective and efficient oversight of the operations of the Group.
6.2 The Committee shall coordinate with the audit committees and other committees of MUFG Bank, Ltd.,
Mitsubishi UFJ Trust and Banking Corporation, Mitsubishi UFJ Securities Holding Co., Ltd. and
Mitsubishi UFJ NICOS Co., Ltd. in the following manner or otherwise as appropriate:
(1) The Committee shall obtain reports from such audit committees and other committees on, and
discuss with such audit committees, the audit plans, the execution of such plans and the audit
reports relating to their respective Companies Act Audits.
6
(2) The Committee shall obtain from such audit committees and other committees information
relating to their discussions and other activities and, if determined necessary by the Committee,
request such audit committees and other committees to submit minutes of their meetings and other
meeting materials and otherwise provide reports on their discussions and other activities in
accordance with Applicable Laws.
(3) The full-time committee members shall, as necessary, attend meetings of such audit committees
and other committees and report to the Committee on such meetings as appropriate.
The Committee shall coordinate with the audit committees and other committees of the Company’s
other subsidiaries in Japan, as necessary, by obtaining reports from such audit committees and other
committees on, and discussing with such audit committees and other committees, their respective
Companies Act Audits and other matters.
In coordinating with the audit committees and other committees of the Company’s subsidiaries in
Japan as set forth above, the Committee shall consider all applicable requirements under Japanese
Laws, including any requirement for such audit committees and other committees to maintain their
independence with respect to decision-making.
6.3 The Committee shall coordinate with the Audit & Finance Committee (“AFC”) of MUFG Americas
Holdings Corporation (“MUAH”) in the following manner or otherwise as appropriate:
(1) The Committee shall obtain from the AFC, through cooperation with the AFC, reports on the
AFC’s oversight of the operations of MUAH and, if determined necessary by the Committee,
request the AFC to submit minutes of their meetings and other meeting materials and otherwise
provide reports on its discussions and other activities in accordance with Applicable Laws.
(2) The Committee shall, as necessary, hold meetings and other communications between Committee
Members and members of the AFC, and the participating Committee Members shall report to the
Committee on such meetings and other communications.
(3) The Committee shall cooperate with the AFC in maintaining the AFC’s independence,
considering the requirements of U.S. Laws to which the AFC is subject, including any
requirement for the AFC to maintain its independence with respect to decision-making.
6.4 The Committee shall, as necessary, coordinate with the audit committees and other committees of the
Company’s overseas subsidiaries other than MUAH and request for information from such audit
committees and other committees. In making such coordination and request, the Committee shall, as
necessary, coordinate with the audit committees and other committees of the Company’s domestic
subsidiaries that are intermediate holding companies of such overseas subsidiaries. In coordinating
with such audit committees and other committees, the Committee shall consider the requirements of all
applicable local and other laws, regulations and rules to which such audit committees and other
committees are subject, including any requirement for such audit committees and other committees to
maintain their independence with respect to decision-making.
6.5 The Committee shall, as necessary, provide the audit committees and other committees of the
Company’s subsidiaries with appropriate assistance, including the following, designed to enhance the
oversight of the operations of the Group by such audit committees and other committees:
(1) plan and provide training and other sessions for the members of such audit committees and other
committees, and
(2)
implement, as appropriate, measures to promote interactions and communications among the
Committee and such audit committees and other committees to enhance the performance of their
duties and responsibilities, including providing such audit committees and other committees with
information to help enhance their administration and operations.
7
7
Amendments
7.1 The Committee shall annually review this Charter in terms of its effectiveness, appropriateness and
other criteria, considering the Committee’s self-evaluation conducted in accordance with Section 3.9
hereof, and determine whether the Charter should be amended. If the Committee determines that any
amendment to the Charter is necessary, the Committee shall propose such amendment to the Board.
End
Date of Establishment
December 1, 2017
Date of Amendment
July 1, 2018
8
Compensation Committee Charter
(English Translation)
Exhibit 1(f)
1.
Purpose
1.1 The purpose of the Compensation Committee (“Committee”) is to decide and make reports and
recommendations to the Board of Directors on matters concerning compensation for directors and
officers of MUFG, and to discuss and make reports and recommendations to the Board of Directors on
compensation for directors and officers of MUFG’s subsidiaries.
1.2 The organization and operation of Committee established pursuant to the provisions under the Articles
of Incorporation are in accordance with applicable laws and regulations, the Articles of Incorporation
or under the directions from the Board of Directors, or as stipulated by these Charter.
2. Organization
2.1 The Committee shall be composed of directors consisting of at least two outside directors (Note) and
the President and Group Chief Executive Officer, with the majority of members being outside
directors. Members shall be appointed through a resolution by the Board of Directors.
Note: Includes non-executive directors with a high degree of independence; the same applies
hereinafter.
2.2 The chairman of the Committee shall be appointed from among outside directors through a resolution
by the Board. The chairman of the Committee shall lead the Committee and ensure the effectiveness of
the Committee while reporting the status of performance of its duties to the Board of Directors.
2.3 The Committee shall be chaired by the chairman.
2.4 If the chairman is unable to act as such, one of the other members of the Committee shall chair the
meeting in accordance with the order predetermined by the Committee.
2.5 The Committee Secretariat shall be established in the Corporate Administration Division (the Board of
Directors Secretariat).
3. Operations
3.1 Meetings of the Committee shall be held at least once a year in principle. In addition, extraordinary
meetings may be held at any time the members deem necessary.
3.2 A meeting of the Committee shall be convened by the chairman of the Committee; provided, however,
that other members of the Committee may also convene a meeting.
3.3 Convocation notices shall be issued by the convener to each member of the Committee at least three
days prior to the date of the Committee meeting in principle; provided, however, that the foregoing
shall not apply in cases of emergency. Also, if the unanimous consent of the members of the
Committee is obtained, a meeting may be held without taking the convocation procedures.
3.4 Resolutions of the Committee shall be adopted with the affirmative vote of a majority of the members
present who constitute in number a majority of all the members entitled to vote.
3.5 Members with a special interest in a matter to be resolved as set out in the preceding paragraph may
not participate in the resolution.
3.6 If deemed necessary, the chairman of Committee may request MUFG’s executive officers or those who
are not the members of the Nominating and Governance Committee including external advisers as
defined in 4.5 below to attend the meeting of the committee and provide reports or explanations.
3.7 The chairman of the Committee, or a member designated by the chairman of the Committee, shall
report or make recommendations to the Board of Directors; provided, however, that if there is a
difference of opinion among Committee members, all such opinions shall be reported.
3.8 If requested by Committee, directors, executive officers, corporate officers and employees of MUFG
and its subsidiaries are required to attend the meeting of Committee and provide explanations on
matters requested by Committee.
3.9 The Committee may ask for reports and opinions from persons other than the Committee members, as
necessary.
3.10 Committee shall prepare the minutes of its meeting, thereby recording the details of questions and
answers of agenda, deliberations, reports, resolutions, and activities in an appropriate manner.
3.11 The committee members who attended the committee meeting shall sign or affix their names and seals
on the minutes of the meeting.
3.12 The minutes described in the preceding paragraph shall be kept within the Corporate Administration
Division (the Board of Directors Secretariat) for ten years from the date of the meeting of the
committee.
3.13 The Committee shall conduct an annual evaluation of the performance of its duties and responsibilities
and shall report the results of such evaluation to the Board..
4. Authority
4.1 The Committee shall decide the following matters.
i.
Policy regarding decisions on compensation for individual directors, executive officers and
corporate officers (hereinafter referred to as “Directors and Officers”) of MUFG.
ii. Details concerning the establishment, amendment or abolition of systems relating to compensation
for MUFG’s Directors and Officers.
iii. Details of compensation for individual directors and executive officers in accordance with the
policy described in Item i. If the individual concurrently serves as a director, officer or employee
of any of the subsidiaries of MUFG, the Compensation Committee shall in the same way decide
the aggregate amount of compensation for such individual, inclusive of the compensation
(standard amount in case of bonuses) to be received as a director, officer or employee of the
subsidiary and decided by the subsidiary. Audit Committee shall report on the results of annual
performance review of executive officers in charge of audits.
iv. Establishment, amendment and abolition of other basic policies, rules or details necessary for the
execution of duties by the Committee (excluding matters to be resolved by the Board of
Directors).
4.2 The Committee shall discuss the following matters.
i.
Details concerning the establishment, amendment or abolition of systems relating to compensation
for the Directors and Officers of MUFG’s subsidiaries.
ii. Compensation for chairmen, deputy chairmen and presidents of MUFG’s subsidiaries.
iii. Compensation for locally hired Directors and Officers of MUFG, its subsidiaries and overseas
subsidiaries (excluding directors and executive officers of MUFG).
4.3 The Committee, in its decisions described in Paragraph 1, Item iii and its discussion described in
Paragraph 2, Item ii, shall decide and discuss the respective matters falling under each of the following
categories.
i.
ii.
For fixed amounts of monetary compensation: the amount for each individual;
For unfixed amounts of monetary compensation: specific methods for the calculation of the
amount for each individual; and
iii. For non-monetary compensation: the specific details of the compensation for each individual.
4.4 MUFG’s subsidiaries and overseas subsidiaries stated in Paragraphs 1 and 2 shall be decided through a
resolution by the Committee.
4.5 The committee may appoint external advisers to request them to participate in discussions by the
committee.
4.6 The Company shall provide such funding and other resources as the Committee determines appropriate
for the fulfillment of the Committee’s purpose and duties and responsibilities set forth herein.
5. Coordination with subsidiaries
5.1 In cases where Audit & Supervisory Committees of main subsidiaries express their opinions on the
details or results of deliberations as listed below among the deliberation items as set forth in
Section 4.2, the Committee shall take into consideration such opinions.
i.
Details of establishment, reform and/or discontinuation of systems concerning compensation of
executive officers of main subsidiaries
ii. Compensation of chairman, deputy chairman, CEO, and president of main subsidiaries
iii. Compensation of locally hired executive officers of main subsidiaries (excluding directors and
corporate executive officers of the Company)
6. Amendments
6.1 The Committee shall annually review this Charter in terms of its effectiveness, appropriateness and
other criteria, considering the Committee’s self-evaluation conducted in accordance with Section 3.13
hereof, and determine whether the Charter should be amended. If the Committee determines that any
amendment to the Charter is necessary, the Committee shall propose such amendment to the Board.
End
Date of Establishment
December 1, 2017
Date of Amendment
July 1, 2018
Nominating and Governance Committee Charter
(English Translation)
Exhibit 1(g)
1.
Purpose
1.1 The purpose of the Nominating and Governance Committee (“Committee”) is to decide the content of
proposals submitted to the general meetings of shareholders regarding election and removal of
directors and to discuss and make reports and recommendations to the Board of Directors on important
personnel matters of MUFG and subsidiaries and various matters concerning the corporate governance
of MUFG.
1.2 The organization and operation of Committee established pursuant to the provisions under the Articles
of Incorporation are in accordance with applicable laws and regulations, the Articles of Incorporation
or under the directions from the Board of Directors, or as stipulated by these Charter.
2. Organization
2.1 Organization of Committee
(1) The Committee shall be composed of directors consisting of at least two outside directors (Note)
and the President and Group Chief Executive Officer, with the majority of members being outside
directors. Members shall be appointed through a resolution by the Board of Directors.
Note:
Includes non-executive directors with a high degree of independence; the same applies
hereinafter.
2.2 The chairman of the Committee shall be appointed from among outside directors through a resolution
by the Board. The chairman of the Committee shall lead the Committee and ensure the effectiveness of
the Committee while reporting the status of performance of its duties to the Board of Directors.
2.3 The Committee shall be chaired by the chairman.
2.4 If the chairman is unable to act as such, one of the other members of the Committee shall chair the
meeting in accordance with the order predetermined by the Committee.
2.5 The Committee Secretariat shall be established in the Corporate Administration Division (the Board of
Directors Secretariat).
3. Operations
3.1 Meetings of the Committee shall be held at least four times a year in principle. In addition,
extraordinary meetings may be held at any time the members deem necessary.
3.2 Committee meetings may be held by means such as telephone conference as necessary.
3.3 A meeting of the Committee shall be convened by the chairman of the Committee; provided, however,
that other members of the Committee may also convene a meeting.
3.4 Convocation notices shall be issued by the convener to each member of the Committee at least three
(3) days prior to the date of the Committee meeting in principle; provided, however, that the foregoing
shall not apply in cases of emergency. Also, if the unanimous consent of the members of the
Committee is obtained, a meeting may be held without taking the convocation procedures.
3.5 Resolutions of the Committee shall be adopted with the affirmative vote of a majority of the members
present who constitute in number a majority of all the members entitled to vote.
3.6 Members with a special interest in a matter to be resolved as set out in the preceding paragraph may
not participate in the resolution.
3.7 If deemed necessary, the chairman of Committee may request MUFG’s executive officers or those who
are not the members of the Nominating and Governance Committee including external advisers as
defined in 4.4 below to attend the meeting of the committee and provide reports or explanations.
3.8 The chairman of the Committee, or a member designated by the chairman of the Committee, shall
report or make recommendations to the Board of Directors; provided, however, that if there is a
difference of opinion among Committee members, all such opinions shall be reported.
3.9 If requested by Committee, directors, executive officers, corporate officers and employees of MUFG
and its subsidiaries are required to attend the meeting of Committee and provide explanations on
matters requested by Committee.
3.10 The Committee may ask for reports and opinions from persons other than the Committee members, as
necessary.
3.11 Committee shall prepare the minutes of its meeting, thereby recording the details of questions and
answers of agenda, deliberations, reports, resolutions, and activities in an appropriate manner.
3.12 The committee members who attended the committee meeting shall sign or affix their names and seals
on the minutes of the meeting.
3.13 The minutes described in the preceding paragraph shall be kept within the Corporate Administration
Division (the Board of Directors Secretariat) for ten years from the date of the meeting of the
committee.
3.14 The Committee shall conduct an annual evaluation of the performance of its duties and responsibilities
and shall report the results of such evaluation to the Board.
4. Authority
4.1 The Committee shall decide the content of proposals submitted to the general meetings of shareholders
regarding election and removal of directors.
4.2 The Committee shall discuss the following matters.
i.
The annual assessment of the Board of Directors and the Board Committees
ii. Matters concerning the scale, function and organizational structure of the Board of Directors and
the Board Committees and policy, framework and status concerning corporate governance of
MUFG’s major subsidiaries
iii. Appointment and removal of members of the Board Committees of MUFG
iv. Personnel matters concerning the executive officers (excluding those in charge of audits) of
MUFG (Audit Committee shall report on appointment and removal of executive officers in charge
of audits)
v.
Personnel matters concerning the chairmen, deputy chairmen, or presidents of MUFG’s
subsidiaries
vi. Personnel matters concerning the key officers of overseas subsidiaries
4.3 MUFG’s subsidiaries and overseas subsidiaries stated in Paragraph 2 shall be decided through a
resolution by the Committee.
4.4 The committee may appoint external advisers to request them to participate in discussions by the
committee.
4.5 The Company shall provide such funding and other resources as the Committee determines appropriate
for the fulfillment of the Committee’s purpose and duties and responsibilities set forth herein.
5. Coordination with subsidiaries
5.1 In cases where Audit & Supervisory Committees or independent outside directors of main subsidiaries
express their opinions on the details or results of deliberations on the “HR related matters concerning
chairman, deputy chairman, CEO, and president of main subsidiaries” as set forth in Section 4.2, the
Committee shall take into consideration such opinions.
5.2 In cases where Audit & Supervisory Committees or independent outside directors of main subsidiaries
express their opinions on the details or results of deliberations on “policy and framework, status of
corporate governance of main subsidiaries” as set forth in Section 4.2, the Committee shall take into
consideration such opinions.
6. Amendments
6.1 The Committee shall annually review this Charter in terms of its effectiveness, appropriateness and
other criteria, considering the Committee’s self-evaluation conducted in accordance with Section 3.14
hereof, and determine whether the Charter should be amended. If the Committee determines that any
amendment to the Charter is necessary, the Committee shall propose such amendment to the Board.
End
Date of Establishment
December 1, 2017
Date of Amendment
July 1, 2018
Risk Committee Charter
(English Translation)
Exhibit 1(h)
1
Purpose
1.1 The Risk Committee (“Committee”), as a committee of the Board of Directors (“Board”) of Mitsubishi
UFJ Financial Group, Inc. (“Company”), shall review and deliberate matters relating to the risk
management operations of the Company and its subsidiaries (collectively, “Group”).
1.2 To assist the Board with oversight of the operations of the Group, the Committee shall review and
deliberate the following matters, and shall make reports and recommendations to the Board on such
reviewed and deliberated matters as the Committee determines to be material:
(1) material matters relating to the risk management operations,
(2) matters relating to Top Risk Matters, and
(3)
such other material matters as the Committee deems necessary to be reviewed and discussed by it.
1.3 The Committee shall perform such duties and responsibilities in relation to the U.S. Risk Committee as
are imposed on the Committee under Section 6 below.
2
Composition
2.1 Membership
(1) The Committee shall consist of two or more “outside directors” (Note), and executive officers and
the majority of the members shall be outside directors. The members shall be appointed by the
Board.
(Note): Outside directors are including inside directors who are non-executive and highly
independent.
(2) Each Committee member shall have such expertise and work experience as well as understanding
regarding the Group’s risk profile and risk management as are necessary to fulfill the duties and
responsibilities of the Committee. The Committee members shall collectively maintain
appropriate knowledge and expertise relating to risks affecting the financial sector and the
management of such risks.
2.2 The Board shall appoint a Committee member who is an outside director to serve as the Committee
Chair. The Committee Chair shall (1) call meetings of the Committee, (2) establish the agendas for the
meetings in consultation with the other Committee members, and (3) preside at the meetings.
2.3 If the Committee Chair is unable to fulfill his or her duties as the Committee Chair, another Committee
member shall act in the place, and perform such duties, of the Committee Chair according to such order
of substitution by Committee members as shall be pre-determined by the Committee.
2.4 The secretariat office of the Committee shall be established within Corporate Risk Management
Division, Credit & Investment Management Division and Corporate Administration Division (the
Secretariat Office of the Board of Directors).
3 Operations
3.1 The Committee shall meet once each quarter unless it otherwise determines, in which case it shall meet
as it deems necessary.
1
3.2 A resolution of the Committee shall be adopted with the affirmative vote of a simple majority of the
members present at a meeting, the quorum for which shall be a simple majority of the members who
are entitled to vote. Any member who is interested in a matter to be resolved by the Committee may
not participate in the resolution of the matter.
3.3 Non-executive directors may attend meetings and share their opinions with the Committee.
3.4 Meetings of the Committee shall be attended by the members of the Committee and, as instructed by
the Committee Chair, by members of the Committee’s secretariat office. The Committee may, as it
deems necessary, request directors, corporate executive officers, executive officers, general managers
and other employees of the Group as well as any external adviser retained pursuant to Section 4.3
hereof attend its meetings.
3.5 The Committee may, as it deems necessary, share information relating to its review and deliberation
with divisions and offices of the Company and with the Company’s subsidiaries through any person
who attends a meeting of the Committee pursuant to Section 3.4 hereof.
3.6 The Committee Chair or a Committee member who is designated by the Committee Chair shall make
reports and recommendations to the Board on such matters which have been reviewed and deliberated
by the Committee as the Committee determines to be material. If Committee members or other persons
participating in the review and deliberation of such matters have opinions regarding such matters which
differ from the Committee’s reports or recommendations, the Committee shall disclose such opinions
to the Board.
3.7 The Committee shall, as it deems necessary, obtain reports on material matters relating to risk
management from the Group Chief Risk Officer as well as the Corporate Risk Management Division,
the Credit & Investment Management Division and other divisions of the Company involved in risk
management, and shall coordinate with them as appropriate.
3.8 The Committee shall have prepared minutes of its meetings to properly record its discussions,
deliberations and reports, and shall have such minutes appropriately maintained.
3.9 The Committee shall conduct an annual evaluation of the performance of its duties and responsibilities
and shall report the results of such evaluation to the Board.
4
Authority
4.1 The Committee shall have the authority, among other things, to have divisions or offices of the
Company or the subsidiaries of the Company to provide information relevant to the Committee’s
review and deliberation, to conduct investigations, to consider measures to be implemented, and to
provide reports or explanations on the implementation of measures during a meeting of the Committee,
so as to assist the Committee in making recommendations and reports to the Board.
4.2 In the event that the Committee makes a recommendation to the Board, the Committee shall have the
authority to have any division or office of the Company tasked with working on such recommendation
report to the Committee on the progress on such work and other relevant matters.
4.3 The Committee shall have the authority, upon a resolution of the Board, to retain such external experts
as it determines necessary and have such experts participate in discussions of the Committee.
4.4 The Company shall provide the funding and other resources as the Committee determines appropriate
for the fulfillment of the Committee’s purpose and duties and responsibilities set forth herein.
4.5 The Committee shall have the authority to appropriately fulfill any and all such duties and
responsibilities in relation to the U.S. Risk Committee as are imposed on the Committee under
Section 6 hereof.
2
5
Duties and Responsibilities
5.1 Review and Deliberation of Material Matters Relating to the Risk Management Operations of the
Group
(1) The Committee shall, as it determines necessary, review and deliberate the following matters
relating to the risk taking and the risk management of the Group:
•
•
compliance with the risk capacity and appetite limits in light of each risk management
indicator, and
other material matters relating to the risk taking and the risk management of the Group.
(2) The Committee shall, as it determines necessary, review and deliberate the following matters
relating to the risk management framework and the risk management methodologies of the Group:
•
•
the risk appetite framework process and the risk appetite statement (including the risk
culture), and
other material matters relating to the risk management framework and the risk management
methodologies of the Group.
(3) The Committee shall, as it determines necessary, review and deliberate the following matters
relating to plans, measures and other aspects of the operations of the Group from a risk
management perspective:
•
•
•
risk appetite analyses (including capital allocation) in the process of preparing business
plans,
stress test scenarios and results, and
other material matters relating to plans, measures and other aspects of the operations of the
Group.
5.2 Review and Deliberation of Top Risk Matters
(1) The Committee shall review and deliberate risks which, if they materialize, are expected to have a
material impact on the operations of the Group as well as emerging risks and increasing risks to
the Group.
5.3 Review and Deliberation of Other Material Matters Determined to Be Appropriate for the Committee’s
Review and Deliberation
(1) The Committee shall review and deliberate such matters other than those set forth in Sections 5.1
and 5.2 hereof as the Committee Chair determines appropriate for the Committee’s review and
deliberation.
5.4 Reports and Recommendations to the Board
(1) The Committee shall make reports and recommendations to the Board on such matters set forth in
Sections 5.1, 5.2 and 5.3 hereof as the Committee determines to be material.
5.5 Communication and Coordination with the Audit Committee
(1) The Committee shall communicate and coordinate, as appropriate, with the Audit Committee with
respect to the matters set forth in Sections 5.1, 5.2 and 5.3 hereof.
6
Relationship with the U.S. Risk Committee
6.1 The Committee shall approve by resolution any amendment to, or the abolishment of, the U.S. Risk
Committee Policy and the U.S. Risk Committee Operating Procedure and the appointment of the Chair
of the U.S. Risk Committee.
3
6.2 The Committee shall receive the report or the recommendation on the material matters which have
been reviewed and deliberated at the U.S. Risk Committee based on the U.S. Risk Committee Policy.
6.3 The Committee shall monitor the operations of the U.S. Risk Committee and periodically report to the
Board on the results of such monitoring.
6.4 The Committee shall provide prior consent to such liquidity risk tolerance for the Combined U.S.
Operations as is established by the U.S. Risk Committee.
6.5 The Committee may, as it determines necessary, express its view to, or request information from, the
U.S. Risk Committee regarding the U.S. Risk Committee’s discussion or determination on a material
matter. In the event that the Committee expresses its view to, or requests information from, the U.S.
Risk Committee pursuant to this Section 6.5, the Committee shall make a report or recommendation to
the Board regarding such communication and the results of such communication.
6.6 The Committee and the Nominating and Governance Committee shall discuss candidates for the U.S.
Risk Committee and make reports or recommendations to the Board on such candidates prior to the
Board’s resolution on the appointment of any member of the U.S. Risk Committee.
7
Amendments
7.1 The Committee shall annually review this Charter in terms of its effectiveness, appropriateness and
other criteria, considering the Committee’s self-evaluation conducted in accordance with Section 3.9
hereof, and determine whether the Charter should be amended. If the Committee determines that any
amendment to the Charter is necessary, the Committee shall propose such amendment to the Board.
Date of Establishment
December 1, 2017
Date of Amendment
July 1, 2018
End
4
Effective October 1, 2007 the Company’s American Depositary Share (“ADS”) Ratio Changed from 1,000:1
(One Thousand ADSs Representing One Ordinary Share) to 1:1 (One ADS Representing One Ordinary Share)
Exhibit 2(a)
THE BANK OF NEW YORK
AMERICAN DEPOSITARY RECEIPT
FOR ORDINARY SHARES OF
MITSUBISHI UFJ FINANCIAL GROUP, INC.
(INCORPORATED UNDER THE LAWS OF JAPAN)
The Bank of New York, as depositary (hereinafter called the “Depositary”), hereby certifies that
, or registered assigns IS THE OWNER OF
AMERICAN DEPOSITARY SHARES
representing deposited ordinary Shares (herein called “Shares”) of Mitsubishi UFJ Financial Group, Inc.
incorporated under the laws of Japan (herein called the “Company”). At the date hereof, each American
Depositary Share represents one-thousandth of one Share deposited under the deposit agreement at the Tokyo,
Japan office of The Bank of Tokyo-Mitsubishi, Ltd. (herein called the “Custodian”). The Depositary’s Corporate
Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is
located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at One Wall
Street, New York, N.Y. 10286.
THE DEPOSITARY’S CORPORATE TRUST OFFICE ADDRESS IS
101 BARCLAY STREET, NEW YORK, N.Y. 10286
1. THE DEPOSIT AGREEMENT.
This American Depositary Receipt is one of an issue (herein called “Receipts”), all issued and to be issued
upon the terms and conditions set forth in the deposit agreement, dated as of September 19, 1989, as amended
and restated April 2, 2001, as further amended and restated December 22, 2004 (herein called the “Deposit
Agreement”), by and among the Company, the Depositary, and all Owners (as defined below) and holders from
time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party
thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of
Owners and holders of the receipts and the rights and duties of the Depositary in respect of the Shares deposited
thereunder and any and all other securities, property and cash from time to time received in respect of such
Shares and held thereunder (such Shares, securities, property, and cash are herein called “Deposited Securities”).
Copies of the Deposit Agreement are on file at the Depositary’s Corporate Trust Office in New York City and at
the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the
Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to
which reference is hereby made. For the purposes of this Receipt, the term “Owner” shall mean the person in
whose name a Receipt is registered on the books of the Depositary maintained for such purpose.
2.
SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
Upon surrender at the Corporate Trust office of the Depositary of this Receipt, and upon payment of the fee
of the Depositary provided in this Receipt, and subject to the terms and conditions of the following two
paragraphs and of the Deposit Agreement, the Owner hereof is entitled to delivery, to him or upon his order, of
the Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is
issued. Delivery of such Deposited Securities may be made by the delivery of certificates in the name of the
Owner hereof or as ordered by him. Such delivery will be made at the option of the Owner hereof, either at the
office of the Custodian or at the corporate Trust Office of the Depositary, provided that the forwarding of
certificates for Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the
Depositary shall be at the risk and expense of the Owner hereof.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be
suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of
outstanding Receipts generally may be suspended, during any period when the register of shareholders of the
Company or the transfer books of the Depositary are closed, or if any such action is deemed necessary or
advisable by the Depositary or the Company at any time or from time to time because of any requirement of law
or of any government or governmental body or commission, or under any provision of the Deposit Agreement, or
for any other reason. The surrender of outstanding Receipts and withdrawal of Deposited Securities may not be
suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the
Company or the Deposit of Shares in connection with voting at a shareholders’ meeting, or the payment of
dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws
or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities. Without
limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement
any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration
statement is in effect as to such Shares.
In all instances, the American Depositary Shares evidenced by this Receipt may only be presented for
cancellation and release of the underlying Shares or other Deposited Securities in multiples of 1,000 American
Depositary Shares. Holders of Receipts representing less than 1,000 American Depositary Shares will not be
entitled to delivery of any underlying Shares or other Deposited Securities unless such Receipts, together with
other Receipts presented by the same holder or Owner at the same time, represent in the aggregate at least 1,000
American Depositary Shares. If any American Depositary Shares are surrendered but not cancelled pursuant to
the preceding sentence, the Depositary shall execute and deliver a Receipt or Receipts evidencing the balance of
American Depositary Shares not so cancelled to the person or persons surrendering the same.
3. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.
The transfer of this Receipt is registrable on the books of the Depositary at its Corporate Trust Office by the
Owner hereof in person or by duly authorized attorney, upon surrender of this Receipt properly endorsed for
transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer
taxes and the fees and expenses of the Depositary and upon compliance with such regulations, if any, as the
Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be
combined with other such Receipts into one Receipt, evidencing the same aggregate number of American
Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery,
registration of transfer, split-up, combination, or surrender of any Receipt, the delivery of any distribution
thereon, or withdrawal of any Deposited Securities, the Depositary or the Custodian (i) may require payment
from the depositor of Shares or the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other
governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or
charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as
provided in this Receipt, (ii) may require the production of proof satisfactory to it as to the identity and
genuineness of any signature and (iii) may also require compliance with such regulations, if any, as the
Depositary may establish consistent with the provisions of the Deposit Agreement.
4. LIABILITY OF OWNER FOR TAXES.
If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited
Securities represented hereby, such tax or other governmental charge shall be payable by the Owner hereof to the
Depositary. The Depositary may refuse to effect any transfer of this Receipt or any withdrawal of Deposited
Securities represented hereby until such payment is made, and may withhold any dividends or other distributions,
or may sell for the account of the Owner hereof any part or all of the Deposited Securities represented by this
Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such
tax or other governmental charge, the Owner hereof remaining liable for any deficiency.
5. WARRANTIES OF DEPOSITORS.
Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and
warrant that such Shares and each certificate therefor are validly issued, fully paid, non-assessable, and free of
any pre-emption rights of the holders of outstanding Shares and that the person making such deposit is duly
authorized so to do. Every such person shall also be deemed to represent that, to the best of such person’s
knowledge, the deposit of Shares and the sale of Receipts by that person are not restricted under the Securities
Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
6.
FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.
Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to
file such proof of citizenship or residence, exchange control approval, or such information relating to the
registration on the books of the Company (or the appointed agent of the Company for transfer and registration of
Shares) of the Shares presented for deposit or other information, to execute such certificates and to make such
representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold
the delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or other
distribution or rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or
other information is filed or such certificates are executed.
7. CHARGES OF DEPOSITARY.
The following charges shall be incurred by any party depositing or withdrawing Shares or by any party
surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock
dividend or stock split declared by the Company or an exchange of stock regarding the Receipts or Deposited
Securities or a distribution of Receipts pursuant to Section 4.03 of the Deposit Agreement), whichever
applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in
effect for the registration of transfers of Shares generally on the Share register of the Company or foreign
registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its
nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission
expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the
Depositary in the conversion of foreign currency pursuant to Section 4.05 of the Deposit Agreement, (5) a fee of
$5.00 or less per 100 American Depositary Shares (or portion thereof) for the execution and delivery of Receipts
pursuant to Section 2.03, 4.03 or 4.04 of the Deposit Agreement and the surrender of Receipts pursuant to
Section 2.05 or 6.02 of the Deposit Agreement, (6) to the extent permitted by any securities exchange on which
the American Depositary Shares may be listed for trading, a fee of $.02 or less per American Depositary Share
(or portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited
to Sections 4.01 through 4.04 of the Deposit Agreement, and (7) a fee for the distribution of securities pursuant to
Section 4.02 of the Deposit Agreement, such fee being in an amount equal to the fee for the execution and
delivery of American Depositary Shares referred to above which would have been charged as a result of the
deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but
which securities are instead distributed by the Depositary to Owners.
8.
PRE-RELEASE OF RECEIPTS.
The Depositary may issue Receipts against the delivery by the Company (or any agent of the Company
recording Share ownership) of rights to receive Shares from the Company (or any such agent). No such issue of
Receipts will be deemed a “Pre-Release” that is subject to the restrictions of the following paragraph.
Unless requested in writing by the Company to cease doing so, the Depositary may, notwithstanding
Section 2.03 of the Deposit Agreement, execute and deliver Receipts prior to the receipt of Shares pursuant to
Section 2.02 of the Deposit Agreement (“Pre-Release”). The Depositary may, pursuant to Section 2.05 of the
Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released,
whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that
such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a
Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation and agreement
from the person to whom Receipts are to be delivered (the “Pre-Releasee”) that the Pre-Releasee, or its customer,
(i) owns the Shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial rights, title and
interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the
benefit of the Owners, and (iii) will not take any action with respect to such Shares or Receipts, as the case may
be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the
Depositary, disposing of such Shares or Receipts, as the case may be), other than in satisfaction of such
Pre-Release, (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as
the Depositary determines, in good faith, will provide substantially similar liquidity and security, (c) terminable
by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and
credit regulations as the Depositary deems appropriate. The number of Shares not deposited but represented by
American Depositary Shares outstanding at any time as a result of Pre-Releases will not normally exceed thirty
percent (30%) of the Shares deposited under the Deposit Agreement; provided, however, that the Depositary
reserves the right to disregard such limit from time to time as it deems reasonably appropriate, and may, with the
prior written consent of the Company, change such limit for purposes of general application. The Depositary will
also set Dollar limits with respect to Pre-Release transactions to be entered into under the Deposit Agreement
with any particular Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For purposes of
enabling the Depositary to fulfill its obligations to the Owners under the Deposit Agreement, the collateral
referred to in clause (b) above shall be held by the Depositary as security for the performance of the
Pre-Releasee’s obligations to the Depositary in connection with a Pre-Release transaction, including the
Pre-Releasee’s obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall
not, for the avoidance of doubt, constitute Deposited Securities thereunder).
The Depositary may retain for its own account any compensation received by it in connection with the
foregoing
9. TITLE TO RECEIPTS.
It is a condition of this Receipt and every successive holder and Owner of this Receipt (and to the American
Depositary Shares evidenced hereby) by accepting or holding the same consents and agrees, that title to this
Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery
with the same effect as in the case of a negotiable instrument, provided, however, that the Depositary,
notwithstanding any notice to the contrary, may treat the Owner hereof as the absolute owner hereof for the
purpose of determining the person entitled to distribution of dividends or other distributions or to any notice
provided for in the Deposit Agreement or for all other purposes.
10. VALIDITY OF RECEIPT.
This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for
any purpose, unless this Receipt shall have been executed by the Depositary by the manual or facsimile signature
of a duly authorized signatory of the Depositary and, if a registrar shall have been appointed, countersigned by
the manual or facsimile signature of a duly authorized officer of the Registrar.
11. REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company currently furnishes the Securities and Exchange Commission (hereinafter called the
Commission) with certain public reports and documents required by foreign law or otherwise under the
Securities Exchange Act of 1934. Such reports and Communications will be available for inspection and copying
by holders and Owners at the public reference facilities maintained by the Commission located at 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any
reports and communications, including any proxy soliciting material, received from the Company which are both
(a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company. The Depositary will also send to Owners of Receipts
copies of such reports when furnished by the Company pursuant to the Deposit Agreement.
The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all
reasonable times shall be open for inspection by the Owners of Receipts, provided that such inspection shall not
be for the purpose of communicating with Owners of Receipts in the interest of a business or object other than
the business of the Company or a matter related to the Deposit Agreement or the Receipts.
12. DIVIDENDS AND DISTRIBUTIONS.
Whenever the Depositary receives any cash dividend or other cash distribution on any Deposited Securities,
the Depositary will, if at the time of receipt thereof any amount received in a foreign currency can in the
judgment of the Depositary be converted on a reasonable basis into United States dollars (“Dollars”) transferable
to the United States, and subject to the Deposit Agreement, convert such dividend or distribution into Dollars and
will distribute the amount thus received to the Owners of Receipts entitled thereto, in proportion to the number of
American Depositary Shares representing such Deposited Securities held by them, respectively, provided,
however, that in the event that the Company or the Depositary is required to withhold and does withhold from
any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of
taxes, the amount distributed to the Owners of Receipts for American Depositary Shares representing such
Deposited Securities shall be reduced accordingly.
Whenever the Depositary receives any distribution other than cash, Shares, or rights upon any Deposited
Securities, the Depositary will cause the securities or property received by it to be distributed to the Owners of
Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such
Deposited Securities held by them, respectively, in any manner that the Depositary may deem equitable and
practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such
distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other
reason (including any requirement that the Company or the Depositary withhold an amount on account of taxes)
the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem
equitable and practicable for the purpose of effecting such distribution, including the sale, at public or private
sale, of the securities or property thus received, or any part thereof, and the net proceeds of any such sale shall be
distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in
cash.
If any distribution consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if
the Company shall so request, distribute to the Owners of outstanding Receipts entitled thereto, in proportion to
the number of American Depositary Shares representing such Deposited Securities held by them respectively,
additional Receipts for an aggregate number of American Depositary Shares representing the amount of Shares
received as such dividend or free distribution. In lieu of delivering Receipts for fractional American Depositary
Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such
fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit
Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also
represent the additional Shares distributed upon the Deposited Securities represented thereby.
In the event that the Depositary determines that any distribution in property (including Shares and rights to
subscribe therefor) is subject to any tax which the Depositary is obligated to withhold, the Depositary may
dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts
and in such manner as the Depositary deems necessary and practicable to pay any such taxes, at public or private
sale, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes to the
Owners of Receipts entitled thereto.
13. RIGHTS.
In the event that the Company offers or causes to be offered to the holders of any Deposited Securities any
rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with
the Company, will have discretion as to the procedure to be followed in making such rights available to the
Owners of Receipts or in disposing of such rights on behalf of such Owners and making the net proceeds
available in Dollars to such Owners; provided, however, that the Depositary will, if requested by the Company,
take action as follows:
(i) if at the time of the offering of any rights the Depositary determines that it is lawful and feasible to make
such rights available to Owners of Receipts by means of warrants or otherwise, the Depositary will distribute
warrants or other instruments therefor in such form as it may determine to the Owners entitled thereto, in
proportion to the number of American Depositary Shares representing such Deposited Securities, or employ such
other method as it may deem feasible in order to facilitate the exercise, sale or transfer of rights by such Owners;
or
(ii) if at the time of the offering of any rights the Depositary determines that it is not lawful or not feasible to
make such rights available to Owners of Receipts by means of warrants or otherwise, or if the rights represented
by such warrants or such other instruments, are not exercised and appear to be about to lapse, the Depositary in
its discretion may sell such rights or such warrants, or other instruments at public or private sale, at such place or
places and upon such terms as it may deem proper, and may allocate the net proceeds of such sales for the
account of the Owners of Receipts otherwise entitled to such rights, warrants, or other instruments, upon an
averaged or other practicable basis without regard to any distinctions among such Owners because of exchange
restrictions, or the date of delivery of any Receipt or Receipts, or otherwise.
If registration under the Securities Act of 1933 of the securities to which any rights relate is required in
order for the Company to offer such rights to Owners of Receipts and sell the securities represented by such
rights, the Depositary will not offer such rights to the Owners of Receipts unless and until such a registration
statement is in effect, or unless the offering and sale of such securities to the Owners of such Receipts are exempt
from registration under the provisions of such Act.
14. RECORD DATES.
Whenever any cash dividend or other cash distribution shall become payable or any distribution other than
cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for
any reason the Depositary causes a change in the number of Shares that are represented by each American
Depositary Share or whenever the Depositary shall receive notice of any meeting of holders of Shares or other
Deposited Securities, the Depositary will fix a record date for the determination of the Owners of Receipts who
will be entitled to receive such dividend, distribution or rights, or the net proceeds of the sale thereof, or to give
instructions for the exercise of voting rights at any such meeting, or for fixing the date on or after which each
American Depositary Share will represent the changed number of Shares, subject to the provisions of the Deposit
Agreement.
15. VOTING OF DEPOSITED SECURITIES.
Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, the Depositary
shall, as soon as practicable thereafter, mail to the Owners a notice, which shall contain (a) such information as is
contained in such notice of meeting, (b) a statement that the Owners as of the close of business on a specified
record date will be entitled, subject to any applicable provision of Japanese law and of the Articles of
Incorporation of the Company, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining
to the amount of Shares or other Deposited Securities represented by their respective American Depositary
Shares and (c) a brief statement as to the manner in which such instructions may be given, including an express
indication that instructions may be given, or deemed given in accordance with the last sentence of this Article 15,
to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request
of an Owner on the specified record date, received on or before the date established by the Depositary for such
purpose (the “Instruction Date”), the Depositary shall endeavor in so far as practicable to vote or cause to be
voted the amount of Shares or other Deposited Securities represented by such Receipt in accordance with the
instructions set forth in such request. So long as Japanese law provides that votes may only be cast with respect
to one or more whole Shares or other Deposited Securities, the Depositary shall aggregate voting instructions to
the extent such instructions are the same and vote such whole Shares or other Deposited Securities in accordance
with the Owners’ instructions. If after aggregation of all instructions to vote received by the Depositary, any
portion of which constitutes instructions with respect to less than a whole Share or other Deposited Security, the
Depositary will not vote or cause to be voted the Shares or other Deposited Securities to which such portion of
the instructions apply. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the
Shares or other Deposited Securities, other than in accordance with such instructions or deemed instructions. If
no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities
represented by the American Depositary Shares evidenced by such Owner’s Receipts on or before the Instruction
Date, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a
person designated by the Issuer with respect to such Deposited Securities and the Depositary shall give a
discretionary proxy to a person designated by the Issuer to vote such Deposited Securities provided, that no such
instruction shall be given with respect to any matter as to which the Issuer informs the Depositary (and the Issuer
agrees to provide such information as promptly as practicable in writing) that (x) the Issuer does not wish such
proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of
holders of shares.
16. CHANGES AFFECTING DEPOSITED SECURITIES.
Upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification
of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets
affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a
Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new
Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent
the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered
pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so
request, execute and deliver additional Receipts as in the case of a dividend on the Shares, or call for the
surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited
Securities.
17. LIABILITY OF THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY.
None of the Depositary, the Custodian, or the Company shall incur any liability to any Owner or holder of
any Receipt, if by reason of any provision of any present or future law of the United States or any other country,
or of any other governmental authority, or by reason of any provision, present or future, of the Articles of
Incorporation of the Company, or by reason of any act of God or war or other circumstances beyond its control,
the Depositary, the Custodian or the Company shall be prevented or forbidden from doing or performing any act
or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the
Depositary, the Custodian, or the Company incur any liability to any Owner or holder of a Receipt by reason of
any non- performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of
the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or
failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution
pursuant to Sections 4.01, 4.02, or 4.03 of the Deposit Agreement, or an offering or distribution pursuant to
Section 4.04 of the Deposit Agreement, or for any other reason, such distribution or offering is not and may not
lawfully be made available to Owners of Receipts, and the Depositary may not lawfully dispose of such
distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the
Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. The
Company assumes no obligation nor shall it be subject to any liability under the Deposit Agreement to Owners or
holders of Receipts, expect that it agrees to perform its obligations specifically set forth in the Deposit
Agreement without negligence or bad faith. Neither the Depositary nor the Custodian assumes any obligation nor
shall either of them be subject to any liability under the Deposit Agreement to any Owner or holder (including,
without limitation, liability with respect to the validity or worth of the Deposited Securities), except that the
Depositary agrees to perform its obligations specifically set forth in the Deposit Agreement without negligence
or bad faith. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or
defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts,
which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required, and the Custodian shall not be under any obligation
whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.
None of the Depositary, the Custodian, or the Company shall be liable for any action or nonaction by it in
reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for
deposit, any Owner or holder of a Receipt, or any other person believed by it in good faith to be competent to
give such advice or information or for any translation of any notice, report or other document made by a
translator believed by it to be competent. The Depositary shall not be responsible for any failure to carry out any
instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect
of any such vote, provided that any such action or nonaction is in good faith. The Depositary shall not be liable
for any acts or omissions made by a successor depositary whether in connection with a previous act or omission
of the Depositary or in connection with a matter arising wholly after the removal or resignation of the
Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary
performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary may own
and deal in any class of securities of the Company and its affiliates and in Receipts. The Company has agreed in
the Deposit Agreement to indemnify the Depositary and any Custodian against, and hold each of them harmless
from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which
may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of
the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the
Depositary or a Custodian, except for any liability or expense arising out of the negligence or bad faith of either
of them, or (ii) by the Company or any of its agents. The indemnities contained in the preceding sentence shall
not extend to any liability or expense which arises solely and exclusively out of a Pre-Release (as defined in
Section 2.09 of the Deposit Agreement) of a Receipt or Receipts in accordance with Section 2.09 of the Deposit
Agreement and which would not otherwise have arisen had such Receipt or Receipts not been the subject of a
Pre-Release pursuant to Section 2.09 of the Deposit Agreement; provided, however, that the indemnities
provided in the preceding sentence shall apply to any such liability or expense (i) to the extent that such liability
or expense would have arisen had a Receipt or Receipts not been the subject of a Pre-Release, or (ii) which may
arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration
statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary
placement memorandum) relating to the offer or sale of American Depositary Shares, except to the extent any
such liability or expense arises out of (a) information relating to the Depositary or any Custodian (other than the
Company), as applicable, furnished in writing and not materially changed or altered by the Company expressly
for use in any of the foregoing documents, or, (b) if such information is provided, the failure to state a material
fact necessary to make the information provided not misleading. Any person entitled to indemnification pursuant
to the preceding sentence who seeks indemnification under the Deposit Agreement shall notify the Company of
the commencement of any indemnifiable action or claim promptly after such person becomes aware of such
commencement and shall consult in good faith with the Company as to the conduct of the defense of such action
or claim (including the compromise or settlement thereof), which shall be reasonable in the circumstances. No
disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement.
18. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR
CUSTODIAN.
The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its
election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor
depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at
any time be removed by the Company by 120 days prior written notice of such removal, which shall become
effective upon the later to occur of (i) the 120th day after delivery of the notice to the Depositary or
(ii) appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit
Agreement. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners of
Receipts to do so, it may appoint a substitute or additional custodian or custodians.
19. AMENDMENT.
The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to
time be amended by agreement between the Company and the Depositary in any respect which they may deem
necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and
other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other
such expenses), or which shall otherwise prejudice any substantial existing right of Owners of Receipts, shall,
however, not become effective as to outstanding Receipts until the expiration of three months after notice of such
amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time
any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree
to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any
amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the
Deposited Securities represented thereby.
20. TERMINATION OF DEPOSIT AGREEMENT.
The Depositary will at any time at the direction of the Company terminate the Deposit Agreement by
mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the
date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement if
at any time 60 days shall have expired after the Depositary shall have delivered to the Company a written notice
of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as
provided in the Deposit Agreement. If any Receipts shall remain outstanding after the date of termination, the
Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of
dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the
Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions
pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to
deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and
the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the
Depositary. At any time after the expiration of one year from the date of termination, the Depositary may sell the
Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds
of any such sale, together with any other cash then held by it thereunder, without liability for interest, for the pro
rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon
becoming general creditors of the Depositary with respect to such net proceeds After making such sale, the
Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net
proceeds and other cash. Upon the termination of the Deposit Agreement, the Company shall be discharged from
all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to
indemnification, charges, and expenses.
21. COMPLIANCE WITH U.S. SECURITIES LAWS.
Notwithstanding anything in the Deposit Agreement or this Receipt to the contrary, the Company and the
Depositary each agrees that it will not exercise any rights it has under the Deposit Agreement to permit the
withdrawal or delivery of Deposited Securities in a manner which would violate the U.S. securities laws,
including, but not limited to, Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement,
as amended from time to time, under the Securities Act of 1933.
22. GOVERNING LAW.
This Receipt and all rights under the Deposit Agreement and provisions hereof shall be governed by and
construed in accordance with the laws of the State of New York, United States of America. It is understood that
notwithstanding any present or future provision of the laws of the State of New York, the rights of holders of
Shares, and the duties and obligations of the Company in respect of such holders, as such, shall be governed by
the laws of Japan.
Exhibit 2(b)
MITSUBISHI TOKYO FINANCIAL GROUP, INC.
(F/K/A THE BANK OF TOKYO-MITSUBISHI, LTD.)
AND
THE BANK OF NEW YORK
As Depositary
AND
OWNERS AND HOLDERS OF AMERICAN DEPOSITARY RECEIPTS
Deposit Agreement
Dated as of September 19, 1989
Amended and Restated as of April 2, 2001
As further Amended and Restated as of December 22, 2004
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01. Issuer
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02. Depositary; Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.03. Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.04. Deposit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.05. Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.06. Deposited Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.07. Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.08. American Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.09. Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.10. Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.11. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.12. Delivery; Deposit; Surrender; Transfer; Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.13. Securities Act of 1933 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.14. Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.15. Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.16. Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY,
TRANSFER AND SURRENDER OF RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01. Form and Transferability of Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02. Deposit of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03. Execution and Delivery of Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04. Transfer of Receipts; Combination and Split-up of Receipts . . . . . . . . . . . . . . . . . . . . .
SECTION 2.05. Surrender of Receipts and Withdrawal of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.06. Limitations on Execution and Delivery, Transfer and Surrender of Receipts . . . . . . . . .
SECTION 2.07. Lost Receipts, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.08. Cancellation and Destruction of Surrendered Receipts . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09. Pre-Release of Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01. Filing Proofs, Certificates and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02. Liability of Owner for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03. Warranties on Deposit of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4. THE DEPOSITED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01. Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02. Distributions Other Than Cash, Shares or Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.03. Distributions in Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.04. Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.05. Conversion of Foreign Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.06. Fixing of Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.07. Voting of Deposited Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.08. Changes Affecting Deposited Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.09. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.10. Lists of Receipt Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.11. Withholding, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5. THE DEPOSITARY, THE CUSTODIAN AND THE ISSUER . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.01. Maintenance of Office and Transfer Books by the Depositary . . . . . . . . . . . . . . . . . . . .
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SECTION 5.02. Prevention or Delay in Performance by the Depositary, the Custodian or the Issuer . . .
SECTION 5.03. Obligations of the Depositary, the Custodian and the Issuer . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.04. Resignation and Removal of the Depositary, Appointment of Successor Depositary . . .
SECTION 5.05. The Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.06. Notices and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.07. Issuance of Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.08. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.09. Charges of Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.10. Retention of Depositary Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.11. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.12. List of Restricted Securities Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.13. Withholding of Japanese Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01. Amendment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.02. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.04. Holders and Owners as Parties; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.07. Compliance with U.S. Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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DEPOSIT AGREEMENT
DEPOSIT AGREEMENT dated as of September 19, 1989, as amended and restated as of April 2, 2001, as
further amended and restated as of December 22, 2004, among MITSUBISHI TOKYO FINANCIAL GROUP,
INC., incorporated under the laws of Japan (herein called the Issuer), THE BANK OF NEW YORK, a New York
banking corporation (herein called the Depositary), and all Owners and holders from time to time of American
Depositary Receipts issued hereunder.
W I T N E S S E T H:
WHEREAS, the Issuer desires to provide, as hereinafter set forth in this Deposit Agreement, for the deposit
of Shares of Common Stock (herein called Shares) of the Issuer from time to time with the Depositary or with the
Tokyo, Japan office of The Bank of Tokyo-Mitsubishi, Ltd. (in such capacity herein called the Custodian), as
agent of the Depositary for the purposes set forth in this Deposit Agreement, for the creation of American
Depositary Shares representing the Shares so deposited and for the execution and delivery of American
Depositary Receipts in respect of the American Depositary Shares; and
WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed
hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit
Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto as
follows:
ARTICLE 1. DEFINITIONS.
The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective
terms used in this Deposit Agreement:
SECTION 1.01. Issuer.
The term “Issuer” shall mean Mitsubishi Tokyo Financial Group, Inc. incorporated under the laws of Japan,
and its successors.
SECTION 1.02. Depositary; Corporate Trust Office.
The term “Depositary” shall mean The Bank of New York, a New York banking corporation, and any
successor as depositary hereunder. The term “Corporate Trust Office”, when used with respect to the Depositary,
shall mean the office of the Depositary which at the date of this Deposit Agreement is located at 101 Barclay
Street, New York, New York, 10286.
SECTION 1.03. Custodian.
The term “Custodian” shall mean the principal office of The Bank of Tokyo-Mitsubishi, Ltd., as agent of the
Depositary for the purposes of this Deposit Agreement, and any other firm or corporation which may hereafter be
appointed by the Depositary pursuant to the terms of Section 5.05, as substitute or additional custodian or
custodians hereunder, as the context shall require and the term “Custodians” shall mean all of them, collectively.
SECTION 1.04. Deposit Agreement.
The term “Deposit Agreement” shall mean this amended and restated Deposit Agreement, as the same may
be amended from time to time in accordance with the provisions hereof.
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SECTION 1.05. Shares.
The term “Shares” shall mean Shares of Common Stock in registered form of the Issuer, par value
50,000 yen each, heretofore validly issued and outstanding and fully paid, non-assessable and free of any
pre-emption rights of the holders of outstanding Shares or hereafter validly issued and outstanding and fully paid,
non-assessable and free of any pre-emption rights of the holders of outstanding Shares or interim certificates
representing such Shares.
SECTION 1.06. Deposited Securities.
The term “Deposited Securities” as of any time shall mean Shares at such time deposited or deemed to be
deposited under this Deposit Agreement and any and all other securities, property and cash received by the
Depositary or the Custodian in respect thereof and at such time held hereunder, subject as to cash to the
provisions of Section 4.05.
SECTION 1.07. Receipts.
The term “Receipts” shall mean the American Depositary Receipts issued hereunder evidencing American
Depositary Shares.
SECTION 1.08. American Depositary Shares.
The term “American Depositary Shares” shall mean the rights represented by the Receipts issued hereunder
and the interests in the Deposited Securities represented thereby. Each American Depositary Share shall
represent one-thousandth of one Share, until there shall occur a distribution upon Deposited Securities covered
by Section 4.03 or a change in Deposited Securities covered by Section 4.08 with respect to which additional
Receipts are not executed and delivered, and thereafter American Depositary Shares shall evidence the amount of
Shares or Deposited Securities specified in such Sections.
SECTION 1.09. Owner.
The term “Owner” shall mean the person in whose name a Receipt is registered on the books of the
Depositary maintained for such purpose.
SECTION 1.10. Registrar.
The term “Registrar” shall mean any bank or trust company having an office in the Borough of Manhattan,
The City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein
provided.
SECTION 1.11. Dollars.
The term “Dollars” shall mean United States dollars.
SECTION 1.12. Delivery; Deposit; Surrender; Transfer; Withdrawal.
The terms “deliver”, “deposit”, “surrender”, “transfer” or “withdraw”, when used (i) with respect to Shares:
(a) in the case of book-entry Shares, shall refer to an entry or entries in an account or accounts maintained by
institutions authorized under applicable law to effect transfers of securities, or (b) in the case of certificated
Shares, to the physical delivery, deposit, surrender, transfer or withdrawal of certificates representing the Shares
and (ii) with respect to American Depositary Shares evidenced by Receipts, (a) in the case of American
Depositary Shares available in book-entry form, shall refer to appropriate adjustments in the records maintained
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by (1) the Depositary, (2) the Depository Trust Company (“DTC”) or its nominee, or (3) institutions that have
accounts with DTC, as applicable, or (b) otherwise, shall refer to the physical delivery, deposit, surrender,
transfer or withdrawal of such American Depositary Shares evidenced by Receipts.
SECTION 1.13. Securities Act of 1933.
The term “Securities Act of 1933” shall mean the United States Securities Act of 1933, as from time to time
amended.
SECTION 1.14. Commission.
The term “Commission” shall mean the Securities and Exchange Commission of the United States or any
successor governmental agency in the United States.
SECTION 1.15. Restricted Securities.
The term “Restricted Securities” shall mean Shares as defined above, or Receipts representing such Shares,
which are acquired directly or indirectly from the Issuer or its affiliates (as defined in Rule 144 to the Securities
Act of 1933) in a transaction or chain of transactions not involving any public offering or which are subject to
resale limitations under Regulation D under that Act or both, or which are held by an officer, director (or persons
performing similar functions) or other affiliate of the Issuer, or which are subject to other restrictions on sale or
deposit under the laws of the United States, Japan, or under a shareholder agreement or the Articles of
Incorporation and the Share Handling Regulations of the Issuer.
SECTION 1.16. Yen.
The term “yen” shall mean Japanese yen.
ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY,
TRANSFER AND SURRENDER OF RECEIPTS.
SECTION 2.01. Form and Transferability of Receipts.
Definitive Receipts shall be substantially in the form set forth in Exhibit A annexed to this Deposit
Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. Such Receipts
shall be executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the
Depositary and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or
facsimile signature of a duly authorized officer of the Registrar. No Receipt shall be entitled to any benefits
under this Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shall have been
executed by the Depositary by the manual or facsimile signature of a duly authorized signatory and, if a Registrar
shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the
Registrar. The Depositary shall maintain books on which each Receipt so executed and delivered as hereinafter
provided and the transfer of each such Receipt shall be registered. Receipts bearing the manual or facsimile
signature of a duly authorized signatory of the Depositary who was at any time a proper signatory of the
Depositary shall bind the Depositary, notwithstanding that such signatory has ceased to hold such office prior to
the execution of such Receipts by the Registrar and their delivery or did not hold such office at the date of such
Receipts.
The Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or
changes not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or
required to comply with any applicable law or regulations thereunder or with the rules and regulations of any
securities exchange upon which Receipts may be listed or to conform with any usage with respect thereto, or to
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indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date
of issuance of the underlying Deposited Securities or otherwise.
Title to a Receipt (and to the American Depositary Shares evidenced thereby), when properly endorsed or
accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the
case of a negotiable instrument; provided, however, that the Depositary, notwithstanding any notice to the
contrary, may treat the Owner thereof as the absolute owner thereof for the purpose of determining the person
entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement
and for all other purposes.
SECTION 2.02. Deposit of Shares.
Subject to the terms and conditions of this Deposit Agreement, Shares or evidence of rights to receive
Shares may be deposited by delivery thereof to any Custodian hereunder, accompanied by any appropriate
instrument or instruments of transfer, or endorsement, in form satisfactory to the Custodian, together with all
such certifications as may be required by the Depositary or the Custodian in accordance with the provisions of
this Deposit Agreement and, if the Depositary requires, together with a written order directing the Depositary to
execute and deliver to, or upon the written order of, the person or persons stated in such order a Receipt or
Receipts for the number of American Depositary Shares representing such deposit. No Share shall be accepted
for deposit unless accompanied by evidence satisfactory to the Depositary that any necessary approval has been
granted by the governmental body in Japan, if any, which is then performing the function of the regulation of
currency exchange if required by the Depositary. Shares presented for deposit at any time, whether or not the
transfer books of the Issuer (or the appointed agent of the Issuer for transfer and registration of Shares) are
closed, shall also be accompanied by an agreement or assignment, or other instrument satisfactory to the
Depositary, which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for
additional Shares or to receive other property which any person in whose name the Shares are or have been
recorded may thereafter receive upon or in respect of such deposited Shares, or in lieu thereof, such agreement of
indemnity or other agreement as shall be satisfactory to the Depositary.
At the request and risk and expense of any person proposing to deposit Shares, and for the account of such
person, the Depositary may receive certificates for Shares to be deposited, together with the other instruments
herein specified, for the purpose of forwarding such Share certificates to the Custodian for deposit hereunder.
Subject to the terms and conditions of this Deposit Agreement, Shares may also be deposited hereunder in
connection with the delivery of Receipts to represent distributions under Section 4.03 or upon exercise of the
rights to subscribe referred to in Section 4.04; provided, however, that in such event if by operation of applicable
provisions of the Japanese Commercial Code or any other Japanese law no certificate for any number of Shares
issued upon such distribution or upon such exercise is issuable, such number of Shares which would form a part
of the Deposited Securities in respect of the Receipts to be delivered pursuant to Section 4.03 or 4.04 shall be
deemed to be deposited hereunder without delivery of such certificate to the Custodian if such Shares are
registered in the name of the Depositary or its nominee or the Custodian or its nominee on the books of the Issuer
at the time of the issue of such Shares.
Upon each delivery to a Custodian of a certificate or certificates for Shares to be deposited hereunder,
together with the other documents above specified, such Custodian shall, as soon as transfer and recordation can
be accomplished, present such certificate or certificates to the Issuer (or the appointed agent of the Issuer for
transfer and registration of Shares), for transfer and recordation of the Shares being deposited in the name of the
Depositary or its nominee or such Custodian or its nominee.
Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of
the Depositary or at such other place or places as the Depositary shall determine.
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SECTION 2.03. Execution and Delivery of Receipts.
Upon receipt by any Custodian of any deposit pursuant to Section 2.02 hereunder (and in addition, if the
transfer books of the Issuer (or the appointed agent of the Issuer for the transfer and registration of Shares) are
open, the Depositary may require a proper acknowledgment or other evidence from the Issuer satisfactory to the
Depositary that any Deposited Securities have been recorded upon the books of the Issuer (or the appointed agent
of the Issuer for the transfer and registration of Shares) in the name of the Depositary or its nominee or such
Custodian or its nominee), together with the other documents required as above specified, such Custodian shall
notify the Depositary of such deposit and the person or persons to whom or upon whose written order a Receipt
or Receipts are deliverable in respect thereof and the number of American Depositary Shares to be evidenced
thereby. Such notification shall be made by letter or, at the request and risk and expense of the person making the
deposit, by cable, telex or facsimile transmission. Upon receiving such notice from such Custodian, or upon the
receipt of Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit
Agreement, shall execute and deliver at its Corporate Trust Office, to or upon the order of the person or persons
entitled thereto, a Receipt or Receipts, registered in the name or names and evidencing any authorized number of
American Depositary Shares requested by such person or persons, but only upon payment to the Depositary of
the fee of the Depositary for the execution and delivery of such Receipt or Receipts, and of all taxes and
governmental charges and fees payable in connection with such deposit and the transfer of the Deposited
Securities.
SECTION 2.04. Transfer of Receipts; Combination and Split-up of Receipts.
The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register transfers on its
transfer books from time to time of Receipts, upon any surrender of a Receipt, by the Owner in person or by duly
authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as
may be required by the laws of the State of New York and of the United States of America. Thereupon the
Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person
entitled thereto.
The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a
Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute
and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested,
evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.
The Depositary may appoint one or more co-transfer agents for the purpose of effecting transfers,
combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In the event a
co-transfer agent is appointed it shall carry out its functions on behalf of the Depositary in accordance with any
applicable laws, requirements of any stock exchange upon which the Receipts or the American Depositary Shares
are listed and in accordance with the instructions of the Depositary. In carrying out its functions, a co-transfer
agent may require evidence of authority and compliance with applicable laws and other requirements by holders
or Owners or persons entitled thereto and will be entitled to protection and indemnity to the same extent as the
Depositary.
SECTION 2.05. Surrender of Receipts and Withdrawal of Shares.
Upon surrender at the Corporate Trust Office of the Depositary of a Receipt for the purpose of withdrawal
of the Deposited Securities represented thereby, and upon payment of the fee of the Depositary for the
cancellation of Receipts, and subject to the terms and conditions of this Deposit Agreement, the Owner of such
Receipt shall be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time
represented by such Receipt. Delivery of such Deposited Securities may be made by the delivery of certificates to
such Owner or as ordered by him. Such delivery shall be made, as hereinafter provided, without unreasonable
delay.
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A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in
blank or accompanied by proper instruments of transfer in blank, and if the Depositary requires, the Owner
thereof shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited
Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such
order. Thereupon the Depositary shall direct one (or more) of the Custodians to deliver at the Tokyo, Japan office
of such Custodian, subject to Sections 2.06, 3.01 and 3.02, and to the other terms and conditions of this Deposit
Agreement, to or upon the written order of the person or persons designated in the order delivered to the
Depositary if so required by the Depositary and as above provided, the amount of Deposited Securities
represented by such Receipt, except that the Depositary may make delivery to such person or persons at the
Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited
Securities represented by such Receipt, or of any proceeds of sale of any dividends, distributions or rights, which
may at the time be held by the Depositary.
At the request, risk and expense of any Owner so surrendering a Receipt, and for the account of such Owner,
the Depositary shall direct the Custodian to forward a certificate or certificates and other proper documents of
title for the Deposited Securities represented by such Receipt to the Depositary for delivery at the Corporate
Trust Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such
Owner, by cable, telex or facsimile transmission.
SECTION 2.06. Limitations on Execution and Delivery, Transfer and Surrender of Receipts.
As a condition precedent to the execution and delivery, registration, registration of transfer, split-up,
combination or surrender of any Receipt, the delivery of any distribution thereon, or the withdrawal of any
Deposited Securities, the Depositary or the Custodian (i) may require payment from the depositor of Shares or
the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any
stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to
Shares being deposited or withdrawn) and payment of any applicable fees as herein provided, (ii) may require the
production of proof satisfactory to it as to the identity and genuineness of any signature and (iii) may also require
compliance with such regulations, if any, as the Depositary may establish consistent with the provisions of this
Deposit Agreement.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be
suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of
outstanding Receipts generally may be suspended, during any period when the register of shareholders of the
Issuer or the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable
by the Depositary or the Issuer at any time or from time to time because of any requirement of law or of any
government or governmental body or commission, or under any provision of this Deposit Agreement; the
surrender of outstanding Receipts and withdrawal of Deposited Securities may not be suspended subject only to
(i) temporary delays caused by closing the transfer books of the Depositary or the Issuer or the deposit of Shares
in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes
and similar charges, and (iii) compliance with any United States or foreign laws or governmental regulations
relating to the Receipts or to the withdrawal of the Deposited Securities. Without limitation of the foregoing, the
Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares required to be
registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such
Shares.
In all instances, the American Depositary Shares evidenced by a Receipt may only be presented for
cancellation and release of the underlying Shares or other Deposited Securities in multiples of 1,000 American
Depositary Shares. Holders of Receipts representing less than 1,000 American Depositary Shares will not be
entitled to delivery of any underlying Shares or other Deposited Securities unless such Receipts, together with
other Receipts presented by the same holder or Owner at the same time, represent in the aggregate at least 1,000
American Depositary Shares. If any American Depositary Shares are surrendered but not cancelled pursuant to
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the preceding sentence, the Depositary shall execute and deliver a Receipt or Receipts evidencing the balance of
American Depositary Shares not so cancelled to the person or persons surrendering the same.
SECTION 2.07. Lost Receipts, etc.
In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and deliver a
new Receipt of like tenor, in exchange and substitution for such mutilated Receipt upon cancellation thereof, or
in lieu of and in substitution for such destroyed or lost or stolen Receipt, upon the Owner thereof filing with the
Depositary (a) a request for such execution and delivery before the Depositary has notice that the Receipt has
been acquired by a bona fide purchaser and (b) a sufficient indemnity bond and satisfying any other reasonable
requirements imposed by the Depositary.
SECTION 2.08. Cancellation and Destruction of Surrendered Receipts.
All Receipts surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is
authorized to destroy Receipts so cancelled.
SECTION 2.09. Pre-Release of Receipts.
The Depositary may issue Receipts against the delivery by the Issuer (or any agent of the Issuer recording
Share ownership) of rights to receive Shares from the Issuer (or any such agent). No such issue of Receipts will
be deemed a “Pre-Release” that is subject to the restrictions of the following paragraph.
Unless requested in writing by the Issuer to cease doing so, the Depositary may, notwithstanding
Section 2.03 hereof, execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02
(“Pre-Release”). The Depositary may, pursuant to Section 2.05, deliver Shares upon the receipt and cancellation
of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such
Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive
Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied
by a written representation and agreement from the person to whom Receipts are to be delivered (the
“Pre-Releasee”) that the Pre-Releasee, or its customer, (i) owns the Shares or Receipts to be remitted, as the case
may be, (ii) assigns all beneficial rights, title and interest in such Shares or Receipts, as the case may be, to the
Depositary in its capacity as such and for the benefit of the Owners, and (iii) will not take any action with respect
to such Shares or Receipts, as the case may be, that is inconsistent with the transfer of beneficial ownership
(including, without the consent of the Depositary, disposing of such Shares or Receipts, as the case may be),
other than in satisfaction of such Pre-Release, (b) at all times fully collateralized with cash, U.S. government
securities or such other collateral as the Depositary determines, in good faith, will provide substantially similar
liquidity and security, (c) terminable by the Depositary on not more than five (5) business days notice, and
(d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of
Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of
Pre-Releases will not normally exceed thirty percent (30%) of the Shares deposited hereunder; provided,
however, that the Depositary reserves the right to disregard such limit from time to time as it deems reasonably
appropriate, and may, with the prior written consent of the Issuer, change such limit for purposes of general
application. The Depositary will also set Dollar limits with respect to Pre-Release transactions to be entered into
hereunder with any particular Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For
purposes of enabling the Depositary to fulfill its obligations to the Owners under the Deposit Agreement, the
collateral referred to in clause (b) above shall be held by the Depositary as security for the performance of the
Pre-Releasee’s obligations to the Depositary in connection with a Pre-Release transaction, including the
Pre-Releasee’s obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall
not, for the avoidance of doubt, constitute Deposited Securities hereunder).
The Depositary may retain for its own account any compensation received by it in connection with the
foregoing.
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ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS.
SECTION 3.01. Filing Proofs, Certificates and Other Information.
Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to
file such proof of citizenship or residence, exchange control approval, or such information relating to the
registration on the books of the Issuer (or the appointed agent of the Issuer for transfer and registration of Shares)
of the Shares presented for deposit or other information, to execute such certificates and to make such
representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold
the delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or other
distribution or rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or
other information is filed or such certificates are executed.
SECTION 3.02. Liability of Owner for Taxes.
If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited
Securities represented by any Receipt, such tax or other governmental charge shall be payable by the Owner of
such Receipt to the Depositary. The Depositary may refuse to effect any transfer of such Receipt or any
withdrawal of Deposited Securities represented thereby until such payment is made, and may withhold any
dividends or other distributions, or may sell for the account of the Owner thereof any part or all of the Deposited
Securities represented by such Receipt, and may apply such dividends or other distributions or the proceeds of
any such sale in payment of such tax or other governmental charge, the Owner of such Receipt remaining liable
for any deficiency.
SECTION 3.03. Warranties on Deposit of Shares.
Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and
warrant that such Shares and each certificate therefor are validly issued, fully paid, non-assessable and free of
any pre-emption rights of the holders of outstanding Shares and that the person making such deposit is duly
authorized so to do. Every such person shall also be deemed to represent that, to the best of such person’s
knowledge, the deposit of Shares and the sale of Receipts by that person are not restricted under the Securities
Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
ARTICLE 4. THE DEPOSITED SECURITIES.
SECTION 4.01. Cash Distributions.
Whenever the Depositary shall receive any cash dividend or other cash distribution by the Issuer on any
Deposited Securities, the Depositary shall, subject to the provisions of Section 4.05, convert such dividend or
distribution into Dollars and shall distribute the amount thus received to the Owners entitled thereto, in
proportion to the number of American Depositary Shares representing such Deposited Securities held by them
respectively; provided, however, that in the event that the Issuer or the Depositary shall be required to withhold
and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an
amount on account of taxes, the amount distributed to the Owner for American Depositary Shares representing
such Deposited Securities shall be reduced accordingly. The Depositary shall distribute only such amount,
however, as can be distributed without attributing to any Owner a fraction of one cent. Any such fractional
amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto. The Issuer or its
agent will remit to the appropriate governmental agency in Japan all amounts withheld and owing to such
agency. The Depositary will forward to the Issuer or its agent such information from its records as the Issuer may
reasonably request to enable the Issuer or its agent to file necessary reports with governmental agencies, and
either the Depositary or the Issuer or its agent may file any such reports necessary to obtain benefits under the
applicable tax treaties for the Owners of Receipts.
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SECTION 4.02. Distributions Other Than Cash, Shares or Rights.
Whenever the Depositary shall receive any distribution other than a distribution described in Sections 4.01,
4.03 or 4.04, the Depositary shall cause the securities or property received by it to be distributed to the Owners
entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited
Securities held by them respectively, in any manner that the Depositary may deem equitable and practicable for
accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution
cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including any
requirement that the Issuer or the Depositary withhold an amount on account of taxes) the Depositary deems such
distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable
for the purpose of effecting such distribution, including the sale (at public or private sale) of the securities or
property thus received, or any part thereof, and the net proceeds of any such sale shall be distributed by the
Depositary to the Owners entitled thereto as in the case of a distribution received in cash.
SECTION 4.03. Distributions in Shares.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares,
the Depositary may, and shall if the Issuer shall so request, distribute to the Owners of outstanding Receipts
entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited
Securities held by them respectively, additional Receipts for an aggregate number of American Depositary
Shares representing the amount of Shares received as such dividend or free distribution. In lieu of delivering
Receipts for fractional American Depositary Shares in any such case, the Depositary shall sell the amount of
Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and
subject to the conditions described in Section 4.02. If additional Receipts are not so distributed, each American
Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities
represented thereby.
SECTION 4.04. Rights.
In the event that the Issuer shall offer or cause to be offered to the holders of any Deposited Securities any
rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with
the Issuer, shall have discretion as to the procedure to be followed in making such rights available to the Owners
of Receipts or in disposing of such rights on behalf of such Owners and making the net proceeds available in
Dollars to such Owners; provided, however, that the Depositary will, if requested by the Issuer, take action as
follows:
(i)
(ii)
if at the time of the offering of any rights the Depositary determines that it is lawful and feasible to
make such rights available to Owners of Receipts by means of warrants or otherwise, the Depositary
shall distribute warrants or other instruments therefor in such form as it may determine to the Owners
entitled thereto, in proportion to the number of American Depositary Shares representing such
Deposited Securities, or employ such other method as it may deem feasible in order to facilitate the
exercise, sale or transfer of rights by such Owners; or
if at the time of the offering of any rights the Depositary determines that it is not lawful or not feasible
to make such rights available to Owners of Receipts by means of warrants or otherwise, or if the rights
represented by such warrants or such other instruments are not exercised and appear to be about to
lapse, the Depositary in its discretion may sell such rights or such warrants or other instruments at
public or private sale, at such place or places and upon such terms as it may deem proper, and may
allocate the net proceeds of such sales for the account of the Owners of Receipts otherwise entitled to
such rights, warrants or other instruments, upon an averaged or other practicable basis without regard
to any distinctions among such Owners because of exchange restrictions, or the date of delivery of any
Receipt or Receipts, or otherwise.
If registration under the Securities Act of 1933 of the securities to which any rights relate is required in
order for the Issuer to offer such rights to Owners of Receipts and sell the securities represented by such rights,
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the Depositary will not offer such rights to the Owners of Receipts unless and until such a registration statement
is in effect, or unless the offering and sale of such securities to the Owners of such Receipts are exempt from
registration under the provisions of such Act.
SECTION 4.05. Conversion of Foreign Currency.
Whenever the Depositary shall receive foreign currency, by way of dividends or other distributions or the
net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign
currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and
the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by
sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars (net of
any conversion expenses of the Depositary) shall be distributed to the Owners entitled thereto or, if the
Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such
Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation. Such
distribution may be made upon an averaged or other practicable basis without regard to any distinctions among
Owners on account of exchange restrictions or otherwise.
If such conversion or distribution can be effected only with the approval or license of any government or
agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the
Depositary is not convertible on a reasonable basis into Dollars transferable to the United States, or if any
approval or license of any government or agency thereof which is required for such conversion is denied or in the
opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable
period as determined by the Depositary, the Depositary may distribute the foreign currency (or an appropriate
document evidencing the right to receive such foreign currency) received by the Depositary to, or in its discretion
may hold such foreign currency for the respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some
Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to
the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign currency
received by the Depositary to, or hold such balance for the respective accounts of, the Owners entitled thereto.
SECTION 4.06. Fixing of Record Date.
Whenever any cash dividend or other cash distribution shall become payable or any distribution other than
cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for
any reason the Depositary causes a change in the number of Shares that are represented by each American
Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other
Deposited Securities, the Depositary shall fix a record date for the determination of the Owners who shall be
entitled to receive such dividend, distribution or rights, or the net proceeds of the sale thereof, or to give
instructions for the exercise of voting rights at any such meeting, or for fixing the date on or after which each
American Depositary Share will represent the changed number of Shares. Subject to the provisions of
Sections 4.01 through 4.05 and to the other terms and conditions of this Deposit Agreement, the Owners on such
record date shall be entitled to receive the amount distributable by the Depositary with respect to such dividend
or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of American
Depositary Shares held by them respectively.
SECTION 4.07. Voting of Deposited Securities.
Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, the Depositary
shall, as soon as practicable thereafter, mail to the Owners a notice, which shall contain (a) such information as is
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contained in such notice of meeting, (b) a statement that the Owners as of the close of business on a specified
record date will be entitled, subject to any applicable provision of Japanese law and of the Articles of
Incorporation of the Issuer, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to
the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares
and (c) a brief statement as to the manner in which such instructions may be given, including an express
indication that instructions may be given, or deemed given in accordance with the last sentence of this paragraph
if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Issuer.
Upon the written request of an Owner on the specified record date, received on or before the date established by
the Depositary for such purpose (the “Instruction Date), the Depositary shall endeavor in so far as practicable to
vote or cause to be voted the amount of Shares or other Deposited Securities represented by such Receipt in
accordance with the instructions set forth in such request. So long as Japanese law provides that votes may only
be cast with respect to one or more whole Shares or other Deposited Securities, the Depositary shall aggregate
voting instructions to the extent such instructions are the same and vote such whole Shares or other Deposited
Securities in accordance with the Owners’ instructions. If after aggregation of all instructions to vote received by
the Depositary, any portion of which constitutes instructions with respect to less than a whole Share or other
Deposited Security, the Depositary will not vote or cause to be voted the Shares or other Deposited Securities to
which such portion of the instructions apply. The Depositary shall not vote or attempt to exercise the right to vote
that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions or
deemed instructions. If no instructions are received by the Depositary from any Owner with respect to any of the
Deposited Securities represented by the American Depositary Shares evidenced by such Owner’s Receipts on or
before the Instruction Date, the Depositary shall deem such Owner to have instructed the Depositary to give a
discretionary proxy to a person designated by the Issuer with respect to such Deposited Securities and the
Depositary shall give a discretionary proxy to a person designated by the Issuer to vote such Deposited Securities
provided, that no such instruction shall be given with respect to any matter as to which the Issuer informs the
Depositary (and the Issuer agrees to provide such information as promptly as practicable in writing) that (x) the
Issuer does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially and
adversely affects the rights of holders of shares.
SECTION 4.08. Changes Affecting Deposited Securities.
Upon any change in nominal value, par value, split-up, consolidation or any other reclassification of
Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets
affecting the Issuer or to which it is a party, any securities which shall be received by the Depositary or a
Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new
Deposited Securities under this Deposit Agreement, and American Depositary Shares shall thenceforth represent,
in addition to existing Deposited Securities, the new Deposited Securities so received in exchange or conversion,
unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may,
and shall if the Issuer shall so request, execute and deliver additional Receipts as in the case of a dividend on the
Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing
such new Deposited Securities.
SECTION 4.09. Reports.
The Depositary shall make available for inspection by Owners at its Corporate Trust Office any reports and
communications, including any proxy soliciting material, received from the Issuer which are both (a) received by
the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such
Deposited Securities by the Issuer. The Depositary shall also send to the Owners copies of such reports when
furnished by the Issuer pursuant to Section 5.06.
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SECTION 4.10. Lists of Receipt Owners.
Promptly upon request by the Issuer, the Depositary shall furnish to it a list, as of a recent date, of the
names, addresses and holdings of American Depositary Shares by all persons in whose names Receipts are
registered on the books of the Depositary.
SECTION 4.11. Withholding.
In the event that the Depositary determines that any distribution in property (including Shares and rights to
subscribe therefor) is subject to any tax which the Depositary is obligated to withhold, the Depositary may
dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts
and in such manner as the Depositary deems necessary and practicable to pay any such taxes, by public or private
sale, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes to the
Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.
ARTICLE 5. THE DEPOSITARY, THE CUSTODIAN AND THE ISSUER.
SECTION 5.01. Maintenance of Office and Transfer Books by the Depositary.
Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain in
the Borough of Manhattan, The City of New York, facilities for the execution and delivery, registration,
registration of transfers and surrender of Receipts in accordance with the provisions of this Deposit Agreement.
The Depositary shall keep books for the registration of Receipts and transfers of Receipts which at all
reasonable times shall be open for inspection by the Owners, provided that such inspection shall not be for the
purpose of communicating with Owners in the interest of a business or object other than the business of the
Issuer or a matter related to this Deposit Agreement or the Receipts.
The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it
in connection with the performance of its duties hereunder.
If any Receipts or the American Depositary Shares represented thereby are listed on one or more stock
exchanges in the United States, the Depositary shall act as Registrar or with the approval of the Issuer appoint a
Registrar or one or more co-registrars for registry of such Receipts in accordance with any requirements of such
exchange or exchanges. Such Registrar may be removed and a substitute Registrar appointed by the Depositary
upon the request and with the approval of the Issuer.
SECTION 5.02. Prevention or Delay in Performance by the Depositary, the Custodian or the Issuer.
None of the Depositary, the Custodian or the Issuer shall incur any liability to any Owner of any Receipt, if
by reason of any provision of any present or future law of the United States or any other country, or of any other
governmental authority, or by reason of any provision, present or future, of the Articles of Incorporation of the
Issuer, or by reason of any act of God or war or other circumstances beyond its control, the Depositary, the
Custodian or the Issuer shall be prevented or forbidden from doing or performing any act or thing which by the
terms of this Deposit Agreement it is provided shall be done or performed; nor shall the Depositary, the
Custodian or the Issuer incur any liability to any Owner of a Receipt by reason of any non-performance or delay,
caused as aforesaid, in the performance of any act or thing which by the terms of this Deposit Agreement it is
provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion
provided for in this Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.01, 4.02, or
4.03 of this Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of this Deposit
Agreement, or for any other reason, such distribution or offering is not and may not lawfully be made available
to Owners, and the Depositary may not lawfully dispose of such distribution or offering on behalf of such
Owners and make the net proceeds available to such Owners, then the Depositary shall not make such
distribution or offering, and shall allow any rights, if applicable, to lapse.
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SECTION 5.03. Obligations of the Depositary, the Custodian and the Issuer.
The Issuer assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to
Owners or holders of Receipts, except that it agrees to perform its obligations specifically set forth in this
Deposit Agreement without negligence or bad faith.
Neither the Depositary nor the Custodian assumes any obligation nor shall either of them be subject to any
liability under this Deposit Agreement to any Owner or holder of any Receipts (including, without limitation,
liability with respect to the validity or worth of the Deposited Securities), except that the Depositary agrees to
perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.
Neither the Depositary nor the Issuer shall be under any obligation to appear in, prosecute or defend any
action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its
opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with
respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.
None of the Depositary, the Custodian or the Issuer shall be liable for any action or nonaction by it in
reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for
deposit, any Owner, or any other person believed by it in good faith to be competent to give such advice or
information or for any translation of any notice, report or other document made by a translator believed by it to
be competent.
The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the
Deposited Securities, or for the manner in which any such vote is cast or effect of any such vote, provided that
any such action or nonaction is in good faith.
The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in
connection with a previous act or omission of the Depositary or in connection with any matter arising wholly
after the removal or resignation of the Depositary, provided that in connection with the issue out of which such
potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as
Depositary.
The Depositary may own and deal in any class of securities of the Issuer and its affiliates and in Receipts.
No disclaimer of liability under the Securities Act of 1933 is intended by any provision of this Deposit
Agreement.
SECTION 5.04. Resignation and Removal of the Depositary, Appointment of Successor Depositary.
The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do
delivered to the Issuer, such resignation to take effect upon the appointment of a successor depositary and its
acceptance of such appointment as hereinafter provided.
The Depositary may at any time be removed by the Issuer by 120 days prior written notice of such removal,
which shall become effective upon the later to occur of (i) the 120th day after delivery of the notice to the
Depositary or (ii) appointment of a successor depositary and its acceptance of such appointment as hereinafter
provided.
In case at any time the Depositary acting hereunder shall resign or be removed, the Issuer shall use its best
efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough
of Manhattan, The City of New York. Every successor depositary shall execute and deliver to its predecessor and
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to the Issuer an instrument in writing accepting its appointment hereunder, and thereupon such successor
depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the
written request of the Issuer shall execute and deliver an instrument transferring to such successor all rights and
powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the
Deposited Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding
Receipts. Any such successor depositary shall promptly mail notice of its appointment to the Owners as provided
in Section 7.05.
Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of
the Depositary without the execution or filing of any document or any further act and the successor depositary
shall notify the Issuer of such event.
SECTION 5.05. The Custodian.
The Depositary has appointed the principal Tokyo, Japan office of The Bank of Tokyo-Mitsubishi, Ltd. as
custodian and agent of the Depositary for the purposes of this Deposit Agreement. The Custodian or its
successors in acting hereunder shall be subject at all times and in all respects to the directions of the Depositary
and shall be responsible solely to it. Any Custodian may resign and be discharged from its duties hereunder by
notice of such resignation delivered to the Depositary at least 30 days prior to the date on which such resignation
is to become effective. If upon such resignation there shall be no Custodian acting hereunder, the Depositary
shall, promptly after receiving such notice, with the approval of the Issuer, appoint a substitute custodian or
custodians, each of which shall thereafter be a Custodian hereunder. Whenever the Depositary in its discretion
determines that it is in the best interest of the Owners to do so, it may, with the approval of the Issuer, appoint a
substitute or additional custodian or custodians, which shall thereafter be one of the Custodians hereunder. Upon
demand of the Depositary any Custodian shall deliver such of the Deposited Securities held by it as are requested
of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or
additional custodian shall deliver to the Depositary, forthwith upon its appointment, an acceptance of such
appointment satisfactory in form and substance to the Depositary.
Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder shall
forthwith become, without any further act or writing, the agent hereunder of such successor depositary and the
appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder; but
the successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and
deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete
power and authority as agent hereunder of such successor depositary.
SECTION 5.06. Notices and Reports.
On or before the first date on which the Issuer gives notice, by publication or otherwise, of any meeting of
holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of
any action in respect of any cash or other distributions or the offering of any rights, the Issuer agrees to transmit
to the Depositary and the Custodian a copy of the notice thereof in the form given or to be given to holders of
Shares or other Deposited Securities.
The Issuer will arrange for the prompt transmittal by the Issuer to the Depositary and the Custodian of such
notices and any other reports and communications which are made generally available by the Issuer to holders of
its Shares. If requested in writing by the Issuer, the Depositary will arrange for the mailing of copies of such
notices, reports and communications to all Owners. The Issuer will timely provide the Depositary with the
quantity of such notices, reports, and communications as requested by the Depositary from time to time, in order
for the Depositary to effect such mailings.
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SECTION 5.07. Issuance of Additional Shares.
The Issuer agrees that in the event of any issuance of (1) additional Shares, (2) rights to subscribe for
Shares, (3) securities convertible into Shares, or (4) rights to subscribe for such securities, the Issuer will
promptly furnish to the Depositary a written opinion from counsel for the Issuer in the United States, which
counsel shall be satisfactory to the Depositary, stating whether or not the circumstances of such issue are such as
to make it necessary for a Registration Statement under the Securities Act of 1933 to be in effect prior to the
delivery of the Receipts to be issued in connection with such securities or the issuance of such rights. If in the
opinion of such counsel a Registration Statement is required, such counsel shall furnish to the Depositary a
written opinion as to whether or not there is a Registration Statement in effect which will cover such issuance of
securities or rights.
The Issuer agrees with the Depositary that neither the Issuer nor any company controlled by controlling or
under common control with the Issuer will at any time deposit any Shares, either upon original issuance or upon
a sale of Shares previously issued and reacquired by the Issuer or any such affiliate, unless a Registration
Statement is in effect as to such Shares under the Securities Act of 1933.
SECTION 5.08. Indemnification.
The Issuer agrees to indemnify the Depositary and any Custodian against, and hold each of them harmless
from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which
may arise out of acts performed or omitted, in accordance with the provisions of this Deposit Agreement and of
the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the
Depositary or a Custodian, except for any liability or expense arising out of the negligence or bad faith of either
of them, or (ii) by the Issuer or any of its agents.
The indemnities contained in the preceding paragraph shall not extend to any liability or expense which
arises solely and exclusively out of a Pre-Release (as defined in Section 2.09) of a Receipt or Receipts in
accordance with Section 2.09 and which would not otherwise have arisen had such Receipt or Receipts not been
the subject of a Pre-Release pursuant to Section 2.09; provided, however, that the indemnities provided in the
preceding paragraph shall apply to any such liability or expense (i) to the extent that such liability or expense
would have arisen had a Receipt or Receipts not been the subject of a Pre-Release, or (ii) which may arise out of
any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy
statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary placement
memorandum) relating to the offer or sale of American Depositary Shares, except to the extent any such liability
or expense arises out of (a) information relating to the Depositary or any Custodian (other than the Issuer), as
applicable, furnished in writing and not materially changed or altered by the Issuer expressly for use in any of the
foregoing documents, or, (b) if such information is provided, the failure to state a material fact necessary to make
the information provided not misleading.
Any person entitled to indemnification under the first sentence of this section who seeks indemnification
hereunder shall notify the Issuer of the commencement of any indemnifiable action or claim promptly after such
person becomes aware of such commencement and shall consult in good faith with the Issuer as to the conduct of
the defense of such action or claim (including the compromise or settlement thereof), which shall be reasonable
in the circumstances.
The Depositary agrees to indemnify the Issuer and hold it harmless from any liability or expense (including,
but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted
by the Depositary or its Custodian due to their negligence or bad faith.
SECTION 5.09. Charges of Depositary.
The Issuer agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and
those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the
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Issuer from time to time. The Depositary shall present its statement for such charges and expenses to the Issuer
once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
The following charges shall be incurred by any party depositing or withdrawing Shares or by any party
surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock
dividend or stock split declared by the Issuer or an exchange of stock regarding the Receipts or Deposited
Securities or a distribution of Receipts pursuant to Section 4.03), whichever applicable: (1) taxes and other
governmental charges, (2) such registration fees as may from time to time be in effect for the registration of
transfers of Shares generally on the Share register of the Issuer or foreign registrar and applicable to transfers of
Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or
withdrawals hereunder, (3) such cable, telex and facsimile transmission expenses as are expressly provided in
this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign
currency pursuant to Section 4.05, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion
thereof) for the execution and delivery of Receipts pursuant to Section 2.03, 4.03 or 4.04 and the surrender of
Receipts pursuant to Section 2.05 or 6.02, (6) to the extent permitted by any securities exchange on which the
American Depositary Shares may be listed for trading, a fee of $.02 or less per American Depositary Share (or
portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited to
Sections 4.01 through 4.04 hereof, and (7) a fee for the distribution of securities pursuant to Section 4.02, such
fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to
above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7
treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to
Owners.
SECTION 5.10. Retention of Depositary Documents.
The Depositary is authorized to destroy those documents, records, bills and other data compiled during the
term of this Deposit Agreement at the times permitted by the governing statutes unless the Issuer requests that
such papers be retained for a longer period or turned over to the Issuer or to a successor depositary.
SECTION 5.11. Exclusivity.
The Issuer agrees not to appoint any other depositary for issuance of American Depositary Receipts so long
as The Bank of New York is acting as Depositary hereunder.
SECTION 5.12. List of Restricted Securities Owners.
From time to time, the Issuer shall provide the Depositary a list setting forth, to the actual knowledge of the
Issuer, those persons or entities who beneficially own Restricted Securities and the Issuer shall update that list on
a regular basis. The Issuer agrees to advise in writing each of the persons or entities so listed that such Restricted
Securities are ineligible for deposit hereunder. The Depositary may rely on such a list or update but shall not be
liable for any action or omission made in reliance thereon.
SECTION 5.13. Withholding of Japanese Tax.
In the event that the Issuer shall at any time be required by Japanese laws and regulations to withhold any
tax on any dividend or distribution made by it in respect of any Deposited Securities, it shall advise the
Depositary through the Custodian of the applicable withholding rate or rates and the total amount of yen so
withheld for each country and shall remit to the appropriate governmental agency all sums withheld and will
make all necessary reports and filings. The Depositary shall forward to the Custodian for delivery to the Issuer
such information from the Depositary’s records as the Issuer may reasonably request in connection with any such
withholding by the Issuer within such period as will enable the Issuer to file the necessary reports with the
appropriate governmental agencies to obtain benefits under applicable tax treaties.
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ARTICLE 6. AMENDMENT AND TERMINATION.
SECTION 6.01. Amendment.
The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to
time be amended by agreement between the Issuer and the Depositary in any respect which they may deem
necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and
other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other
such expenses), or which shall otherwise prejudice any substantial existing right of Owners, shall, however, not
become effective as to outstanding Receipts until the expiration of three months after notice of such amendment
shall have been given to the Owners of outstanding Receipts. Every Owner at the time any amendment so
becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment
and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the
right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities
represented thereby.
SECTION 6.02. Termination.
The Depositary shall at any time at the direction of the Issuer terminate this Deposit Agreement by mailing
notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed
in such notice for such termination. The Depositary may likewise terminate this Deposit Agreement if at any time
60 days shall have expired after the Depositary shall have delivered to the Issuer a written notice of its election to
resign and a successor depositary shall not have been appointed and accepted its appointment as provided in
Section 5.04. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter
shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the
Owners thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement,
except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited
Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited
Securities, together with any dividends or other distributions received with respect thereto and the net proceeds
of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary. At any time
after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities
then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other
cash then held by it hereunder, without liability for interest, for the pro rata benefit of the Owners of Receipts
which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the
Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all
obligations under this Deposit Agreement, except to account for such net proceeds and other cash. Upon the
termination of this Deposit Agreement, the Issuer shall be discharged from all obligations under this Deposit
Agreement except for its obligations to the Depositary under Sections 5.08 and 5.09 hereof.
ARTICLE 7. MISCELLANEOUS.
SECTION 7.01. Counterparts.
This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an
original and all of such counterparts shall constitute one and the same instrument. Copies of this Deposit
Agreement shall be filed with the Depositary and the Custodians and shall be open to inspection by any holder or
Owner of a Receipt during business hours.
SECTION 7.02. No Third Party Beneficiaries.
This Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to give any
legal or equitable right, remedy or claim whatsoever to any other person.
20
SECTION 7.03. Severability.
In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be
or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 7.04. Holders and Owners as Parties; Binding Effect.
The holders and Owners of Receipts from time to time shall be parties to this Deposit Agreement and shall
be bound by all of the terms and conditions hereof and of the Receipts by acceptance thereof.
SECTION 7.05. Notices.
Any and all notices to be given to the Issuer shall be deemed to have been duly given if personally delivered
or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to Mitsubishi Tokyo
Financial Group, Inc., Yurakucho Building, 10-1, Yurakucho 1-chome, Chiyoda-ku, Tokyo, 100-0006, Japan,
Attention: Corporate Administration Division, or any other place to which the Issuer may have transferred its
principal office.
Any and all notices to be given to the Depositary shall be deemed to have been duly given if personally
delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to The Bank of
New York, 101 Barclay Street, New York, New York 10286, Attention: American Depositary Receipt
Administration, or any other place to which the Depositary may have transferred its Corporate Trust Office.
Any and all notices to be given to any Owner shall be deemed to have been duly given if personally
delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner
at the address of such Owner as it appears on the transfer books for Receipts of the Depositary, or, if such Owner
shall have filed with the Depositary a written request that notices intended for such Owner be mailed to some
other address, at the address designated in such request.
Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effected at
the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex
or facsimile transmission) is deposited, postage prepaid, in a post-office letter box. The Depositary or the Issuer
may, however, act upon any cable, telex or facsimile transmission received by it from the other or from any
Owner of a Receipt, notwithstanding that such cable, teletype or facsimile transmission shall not subsequently be
confirmed by letter as aforesaid.
SECTION 7.06. Governing Law.
This Deposit Agreement and the Receipts and all rights hereunder and provisions hereof shall be governed
by and construed in accordance with the laws of the State of New York, United States of America. It is
understood that notwithstanding any present or future provision of the laws of the State of New York, the rights
of holders of Shares, and the duties and obligations of the Issuer in respect of such holders, as such, shall be
governed by the laws of Japan.
SECTION 7.07. Compliance with U.S. Securities Laws.
Notwithstanding anything in this Deposit Agreement to the contrary, the Issuer and the Depositary each
agrees that it will not exercise any rights it has under this Deposit Agreement to permit the withdrawal or
delivery of Deposited Securities in a manner which would violate the U.S. securities laws, including, but not
limited to, Section I.A.(l) of the General Instructions to the Form F-6 Registration Statement, as amended from
time to time, under the Securities Act of 1933.
21
IN WITNESS WHEREOF, MITSUBISHI TOKYO FINANCIAL GROUP, INC. and THE BANK OF
NEW YORK have duly executed this agreement as of the day and year first set forth above and all owners shall
become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.
MITSUBISHI TOKYO FINANCIAL GROUP, INC.
By:
Name: Tatsunori Imagawa
Title: Deputy President and Chief Planning Officer
THE BANK OF NEW YORK
as Depositary
By:
Name:
Title:
22
IN WITNESS WHEREOF, MITSUBISHI TOKYO FINANCIAL GROUP, INC. and THE BANK OF
NEW YORK have duly executed this agreement as of the day and year first set forth above and all owners shall
become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.
MITSUBISHI TOKYO FINANCIAL GROUP, INC.
By:
Name:
Title:
THE BANK OF NEW YORK
as Depositary
By:
Name:
Title:
23
No.
Exhibit A to Deposit Agreement
AMERICAN DEPOSITARY SHARES
(Each American Depositary Share represents
one-thousandth of one Deposited Share)
THE BANK OF NEW YORK
AMERICAN DEPOSITARY RECEIPT
FOR ORDINARY SHARES OF THE
PAR VALUE OF 50,000 YEN EACH OF
MITSUBISHI TOKYO FINANCIAL GROUP, INC.
(INCORPORATED UNDER THE LAWS OF JAPAN)
The Bank of New York as depositary (hereinafter called the “Depositary”), hereby certifies that
, or registered assigns IS THE OWNER OF
.
AMERICAN DEPOSITARY SHARES
representing deposited ordinary Shares (herein called “Shares”) of Mitsubishi Tokyo Financial Group, Inc.,
incorporated under the laws of Japan (herein called the “Company”). At the date hereof, each American
Depositary Share represents one-thousandth of one Share deposited under the deposit agreement at the Tokyo,
Japan office of The Bank of Tokyo-Mitsubishi, Ltd. (herein called the “Custodian”). The Depositary’s Corporate
Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is
located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at One Wall
Street, New York, N.Y. 10286.
THE DEPOSITARY’S CORPORATE TRUST OFFICE ADDRESS IS
101 BARCLAY STREET, NEW YORK, N.Y. 10286
1. THE DEPOSIT AGREEMENT.
This American Depositary Receipt is one of an issue (herein called “Receipts”), all issued and to be issued
upon the terms and conditions set forth in the deposit agreement, dated as of September 19, 1989, as amended
and restated April 2, 2001, as further amended and restated December 22, 2004 (herein called the “Deposit
Agreement”), by and among the Company, the Depositary, and all Owners (as defined below) and holders from
time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party
thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of
Owners and holders of the receipts and the rights and duties of the Depositary in respect of the Shares deposited
thereunder and any and all other securities, property and cash from time to time received in respect of such
Shares and held thereunder (such Shares, securities, property, and cash are herein called “Deposited Securities”).
Copies of the Deposit Agreement are on file at the Depositary’s Corporate Trust Office in New York City and at
the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the
Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to
which reference is hereby made. For the purposes of this Receipt, the term “Owner” shall mean the person in
whose name a Receipt is registered on the books of the Depositary maintained for such purpose.
2.
SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
Upon surrender at the Corporate Trust office of the Depositary of this Receipt, and upon payment of the fee
of the Depositary provided in this Receipt, and subject to the terms and conditions of the following two
paragraphs and of the Deposit Agreement, the Owner hereof is entitled to delivery, to him or upon his order, of
the Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is
issued. Delivery of such Deposited Securities may be made by the delivery of certificates in the name of the
Owner hereof or as ordered by him. Such delivery will be made at the option of the Owner hereof, either at the
office of the Custodian or at the corporate Trust Office of the Depositary, provided that the forwarding of
certificates for Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the
Depositary shall be at the risk and expense of the Owner hereof.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be
suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of
outstanding Receipts generally may be suspended, during any period when the register of shareholders of the
Company or the transfer books of the Depositary are closed, or if any such action is deemed necessary or
advisable by the Depositary or the Company at any time or from time to time because of any requirement of law
or of any government or governmental body or commission, or under any provision of the Deposit Agreement, or
for any other reason. The surrender of outstanding Receipts and withdrawal of Deposited Securities may not be
suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the
Company or the Deposit of Shares in connection with voting at a shareholders’ meeting, or the payment of
dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws
or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities. Without
limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement
any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration
statement is in effect as to such Shares.
In all instances, the American Depositary Shares evidenced by this Receipt may only be presented for
cancellation and release of the underlying Shares or other Deposited Securities in multiples of 1,000 American
Depositary Shares. Holders of Receipts representing less than 1,000 American Depositary Shares will not be
entitled to delivery of any underlying Shares or other Deposited Securities unless such Receipts, together with
other Receipts presented by the same holder or Owner at the same time, represent in the aggregate at least 1,000
American Depositary Shares. If any American Depositary Shares are surrendered but not cancelled pursuant to
2
the preceding sentence, the Depositary shall execute and deliver a Receipt or Receipts evidencing the balance of
American Depositary Shares not so cancelled to the person or persons surrendering the same.
3. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.
The transfer of this Receipt is registrable on the books of the Depositary at its Corporate Trust Office by the
Owner hereof in person or by duly authorized attorney, upon surrender of this Receipt properly endorsed for
transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer
taxes and the fees and expenses of the Depositary and upon compliance with such regulations, if any, as the
Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be
combined with other such Receipts into one Receipt, evidencing the same aggregate number of American
Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery,
registration of transfer, split-up, combination, or surrender of any Receipt, the delivery of any distribution
thereon, or withdrawal of any Deposited Securities, the Depositary or the Custodian (i) may require payment
from the depositor of Shares or the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other
governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or
charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as
provided in this Receipt, (ii) may require the production of proof satisfactory to it as to the identity and
genuineness of any signature and (iii) may also require compliance with such regulations, if any, as the
Depositary may establish consistent with the provisions of the Deposit Agreement.
4. LIABILITY OF OWNER FOR TAXES.
If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited
Securities represented hereby, such tax or other governmental charge shall be payable by the Owner hereof to the
Depositary. The Depositary may refuse to effect any transfer of this Receipt or any withdrawal of Deposited
Securities represented hereby until such payment is made, and may withhold any dividends or other distributions,
or may sell for the account of the Owner hereof any part or all of the Deposited Securities represented by this
Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such
tax or other governmental charge, the Owner hereof remaining liable for any deficiency.
5. WARRANTIES OF DEPOSITORS.
Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and
warrant that such Shares and each certificate therefor are validly issued, fully paid, non-assessable, and free of
any pre-emption rights of the holders of outstanding Shares and that the person making such deposit is duly
authorized so to do. Every such person shall also be deemed to represent that, to the best of such person’s
knowledge, the deposit of Shares and the sale of Receipts by that person are not restricted under the Securities
Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
6.
FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.
Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to
file such proof of citizenship or residence, exchange control approval, or such information relating to the
registration on the books of the Company (or the appointed agent of the Company for transfer and registration of
Shares) of the Shares presented for deposit or other information, to execute such certificates and to make such
representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold
the delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or other
distribution or rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or
other information is filed or such certificates are executed.
3
7. CHARGES OF DEPOSITARY.
The following charges shall be incurred by any party depositing or withdrawing Shares or by any party
surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock
dividend or stock split declared by the Company or an exchange of stock regarding the Receipts or Deposited
Securities or a distribution of Receipts pursuant to Section 4.03 of the Deposit Agreement), whichever
applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in
effect for the registration of transfers of Shares generally on the Share register of the Company or foreign
registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its
nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission
expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the
Depositary in the conversion of foreign currency pursuant to Section 4.05 of the Deposit Agreement, (5) a fee of
$5.00 or less per 100 American Depositary Shares (or portion thereof) for the execution and delivery of Receipts
pursuant to Section 2.03, 4.03 or 4.04 of the Deposit Agreement and the surrender of Receipts pursuant to
Section 2.05 or 6.02 of the Deposit Agreement, (6) to the extent permitted by any securities exchange on which
the American Depositary Shares may be listed for trading, a fee of $.02 or less per American Depositary Share
(or portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited
to Sections 4.01 through 4.04 of the Deposit Agreement, and (7) a fee for the distribution of securities pursuant to
Section 4.02 of the Deposit Agreement, such fee being in an amount equal to the fee for the execution and
delivery of American Depositary Shares referred to above which would have been charged as a result of the
deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but
which securities are instead distributed by the Depositary to Owners.
8.
PRE-RELEASE OF RECEIPTS.
The Depositary may issue Receipts against the delivery by the Company (or any agent of the Company
recording Share ownership) of rights to receive Shares from the Company (or any such agent). No such issue of
Receipts will be deemed a “Pre-Release” that is subject to the restrictions of the following paragraph.
Unless requested in writing by the Company to cease doing so, the Depositary may, notwithstanding
Section 2.03 of the Deposit Agreement, execute and deliver Receipts prior to the receipt of Shares pursuant to
Section 2.02 of the Deposit Agreement (“Pre-Release”). The Depositary may, pursuant to Section 2.05 of the
Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released,
whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that
such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a
Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation and agreement
from the person to whom Receipts are to be delivered (the “Pre-Releasee”) that the Pre-Releasee, or its customer,
(i) owns the Shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial rights, title and
interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the
benefit of the Owners, and (iii) will not take any action with respect to such Shares or Receipts, as the case may
be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the
Depositary, disposing of such Shares or Receipts, as the case may be), other than in satisfaction of such
Pre-Release, (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as
the Depositary determines, in good faith, will provide substantially similar liquidity and security, (c) terminable
by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and
credit regulations as the Depositary deems appropriate. The number of Shares not deposited but represented by
American Depositary Shares outstanding at any time as a result of Pre-Releases will not normally exceed thirty
percent (30%) of the Shares deposited under the Deposit Agreement; provided, however, that the Depositary
reserves the right to disregard such limit from time to time as it deems reasonably appropriate, and may, with the
prior written consent of the Company, change such limit for purposes of general application. The Depositary will
also set Dollar limits with respect to Pre-Release transactions to be entered into under the Deposit Agreement
with any particular Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For purposes of
4
enabling the Depositary to fulfill its obligations to the Owners under the Deposit Agreement, the collateral
referred to in clause (b) above shall be held by the Depositary as security for the performance of the
Pre-Releasee’s obligations to the Depositary in connection with a Pre-Release transaction, including the
Pre-Releasee’s obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall
not, for the avoidance of doubt, constitute Deposited Securities thereunder).
The Depositary may retain for its own account any compensation received by it in connection with the
foregoing
9. TITLE TO RECEIPTS.
It is a condition of this Receipt and every successive holder and Owner of this Receipt (and to the American
Depositary Shares evidenced hereby) by accepting or holding the same consents and agrees, that title to this
Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery
with the same effect as in the case of a negotiable instrument, provided, however, that the Depositary,
notwithstanding any notice to the contrary, may treat the Owner hereof as the absolute owner hereof for the
purpose of determining the person entitled to distribution of dividends or other distributions or to any notice
provided for in the Deposit Agreement or for all other purposes.
10. VALIDITY OF RECEIPT.
This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for
any purpose, unless this Receipt shall have been executed by the Depositary by the manual or facsimile signature
of a duly authorized signatory of the Depositary and, if a registrar shall have been appointed, countersigned by
the manual or facsimile signature of a duly authorized officer of the Registrar.
11. REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company currently furnishes the Securities and Exchange Commission (hereinafter called the
“Commission”) with certain public reports and documents required by foreign law or otherwise under the
Securities Exchange Act of 1934. Such reports and Communications will be available for inspection and copying
by holders and Owners at the public reference facilities maintained by the Commission located at 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any
reports and communications, including any proxy soliciting material, received from the Company which are both
(a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company. The Depositary will also send to Owners of Receipts
copies of such reports when furnished by the Company pursuant to the Deposit Agreement.
The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all
reasonable times shall be open for inspection by the Owners of Receipts, provided that such inspection shall not
be for the purpose of communicating with Owners of Receipts in the interest of a business or object other than
the business of the Company or a matter related to the Deposit Agreement or the Receipts.
12. DIVIDENDS AND DISTRIBUTIONS.
Whenever the Depositary receives any cash dividend or other cash distribution on any Deposited Securities,
the Depositary will, if at the time of receipt thereof any amount received in a foreign currency can in the
judgment of the Depositary be converted on a reasonable basis into United States dollars (“Dollars”) transferable
to the United States, and subject to the Deposit Agreement, convert such dividend or distribution into Dollars and
will distribute the amount thus received to the Owners of Receipts entitled thereto, in proportion to the number of
5
American Depositary Shares representing such Deposited Securities held by them, respectively, provided,
however, that in the event that the Company or the Depositary is required to withhold and does withhold from
any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of
taxes, the amount distributed to the Owners of Receipts for American Depositary Shares representing such
Deposited Securities shall be reduced accordingly.
Whenever the Depositary receives any distribution other than cash, Shares, or rights upon any Deposited
Securities, the Depositary will cause the securities or property received by it to be distributed to the Owners of
Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such
Deposited Securities held by them, respectively, in any manner that the Depositary may deem equitable and
practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such
distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other
reason (including any requirement that the Company or the Depositary withhold an amount on account of taxes)
the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem
equitable and practicable for the purpose of effecting such distribution, including the sale, at public or private
sale, of the securities or property thus received, or any part thereof, and the net proceeds of any such sale shall be
distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in
cash.
If any distribution consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if
the Company shall so request, distribute to the Owners of outstanding Receipts entitled thereto, in proportion to
the number of American Depositary Shares representing such Deposited Securities held by them respectively,
additional Receipts for an aggregate number of American Depositary Shares representing the amount of Shares
received as such dividend or free distribution. In lieu of delivering Receipts for fractional American Depositary
Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such
fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit
Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also
represent the additional Shares distributed upon the Deposited Securities represented thereby.
In the event that the Depositary determines that any distribution in property (including Shares and rights to
subscribe therefor) is subject to any tax which the Depositary is obligated to withhold, the Depositary may
dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts
and in such manner as the Depositary deems necessary and practicable to pay any such taxes, at public or private
sale, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes to the
Owners of Receipts entitled thereto.
13. RIGHTS.
In the event that the Company offers or causes to be offered to the holders of any Deposited Securities any
rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with
the Company, will have discretion as to the procedure to be followed in making such rights available to the
Owners of Receipts or in disposing of such rights on behalf of such Owners and making the net proceeds
available in Dollars to such Owners; provided, however, that the Depositary will, if requested by the Company,
take action as follows:
(i)
if at the time of the offering of any rights the Depositary determines that it is lawful and feasible to
make such rights available to Owners of Receipts by means of warrants or otherwise, the Depositary
will distribute warrants or other instruments therefor in such form as it may determine to the Owners
entitled thereto, in proportion to the number of American Depositary Shares representing such
Deposited Securities, or employ such other method as it may deem feasible in order to facilitate the
exercise, sale or transfer of rights by such Owners; or
(ii)
if at the time of the offering of any rights the Depositary determines that it is not lawful or not feasible
to make such rights available to Owners of Receipts by means of warrants or otherwise, or if the rights
6
represented by such warrants or such other instruments, are not exercised and appear to be about to
lapse, the Depositary in its discretion may sell such rights or such warrants, or other instruments at
public or private sale, at such place or places and upon such terms as it may deem proper, and may
allocate the net proceeds of such sales for the account of the Owners of Receipts otherwise entitled to
such rights, warrants, or other instruments, upon an averaged or other practicable basis without regard
to any distinctions among such Owners because of exchange restrictions, or the date of delivery of any
Receipt or Receipts, or otherwise.
If registration under the Securities Act of 1933 of the securities to which any rights relate is required in
order for the Company to offer such rights to Owners of Receipts and sell the securities represented by such
rights, the Depositary will not offer such rights to the Owners of Receipts unless and until such a registration
statement is in effect, or unless the offering and sale of such securities to the Owners of such Receipts are exempt
from registration under the provisions of such Act.
14. RECORD DATES.
Whenever any cash dividend or other cash distribution shall become payable or any distribution other than
cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for
any reason the Depositary causes a change in the number of Shares that are represented by each American
Depositary Share or whenever the Depositary shall receive notice of any meeting of holders of Shares or other
Deposited Securities, the Depositary will fix a record date for the determination of the Owners of Receipts who
will be entitled to receive such dividend, distribution or rights, or the net proceeds of the sale thereof, or to give
instructions for the exercise of voting rights at any such meeting, or for fixing the date on or after which each
American Depositary Share will represent the changed number of Shares, subject to the provisions of the Deposit
Agreement.
15. VOTING OF DEPOSITED SECURITIES.
Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, the Depositary
shall, as soon as practicable thereafter, mail to the Owners a notice, which shall contain (a) such information as is
contained in such notice of meeting, (b) a statement that the Owners as of the close of business on a specified
record date will be entitled, subject to any applicable provision of Japanese law and of the Articles of
Incorporation of the Company, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining
to the amount of Shares or other Deposited Securities represented by their respective American Depositary
Shares and (c) a brief statement as to the manner in which such instructions may be given, including an express
indication that instructions may be given, or deemed given in accordance with the last sentence of this Article 15,
to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request
of an Owner on the specified record date, received on or before the date established by the Depositary for such
purpose (the “Instruction Date), the Depositary shall endeavor in so far as practicable to vote or cause to be voted
the amount of Shares or other Deposited Securities represented by such Receipt in accordance with the
instructions set forth in such request. So long as Japanese law provides that votes may only be cast with respect
to one or more whole Shares or other Deposited Securities, the Depositary shall aggregate voting instructions to
the extent such instructions are the same and vote such whole Shares or other Deposited Securities in accordance
with the Owners’ instructions. If after aggregation of all instructions to vote received by the Depositary, any
portion of which constitutes instructions with respect to less than a whole Share or other Deposited Security, the
Depositary will not vote or cause to be voted the Shares or other Deposited Securities to which such portion of
the instructions apply. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the
Shares or other Deposited Securities, other than in accordance with such instructions or deemed instructions. If
no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities
represented by the American Depositary Shares evidenced by such Owner’s Receipts on or before the Instruction
Date, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a
person designated by the Issuer with respect to such Deposited Securities and the Depositary shall give a
7
discretionary proxy to a person designated by the Issuer to vote such Deposited Securities provided, that no such
instruction shall be given with respect to any matter as to which the Issuer informs the Depositary (and the Issuer
agrees to provide such information as promptly as practicable in writing) that (x) the Issuer does not wish such
proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of
holders of shares.
16. CHANGES AFFECTING DEPOSITED SECURITIES.
Upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification
of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets
affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a
Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new
Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent
the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered
pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so
request, execute and deliver additional Receipts as in the case of a dividend on the Shares, or call for the
surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited
Securities.
17. LIABILITY OF THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY.
None of the Depositary, the Custodian, or the Company shall incur any liability to any Owner or holder of
any Receipt, if by reason of any provision of any present or future law of the United States or any other country,
or of any other governmental authority, or by reason of any provision, present or future, of the Articles of
Incorporation of the Company, or by reason of any act of God or war or other circumstances beyond its control,
the Depositary, the Custodian or the Company shall be prevented or forbidden from doing or performing any act
or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the
Depositary, the Custodian, or the Company incur any liability to any Owner or holder of a Receipt by reason of
any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of
the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or
failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution
pursuant to Sections 4.01, 4.02, or 4.03 of the Deposit Agreement, or an offering or distribution pursuant to
Section 4.04 of the Deposit Agreement, or for any other reason, such distribution or offering is not and may not
lawfully be made available to Owners of Receipts, and the Depositary may not lawfully dispose of such
distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the
Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. The
Company assumes no obligation nor shall it be subject to any liability under the Deposit Agreement to Owners or
holders of Receipts, expect that it agrees to perform its obligations specifically set forth in the Deposit
Agreement without negligence or bad faith. Neither the Depositary nor the Custodian assumes any obligation nor
shall either of them be subject to any liability under the Deposit Agreement to any Owner or holder (including,
without limitation, liability with respect to the validity or worth of the Deposited Securities), except that the
Depositary agrees to perform its obligations specifically set forth in the Deposit Agreement without negligence
or bad faith. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or
defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts,
which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required, and the Custodian shall not be under any obligation
whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.
None of the Depositary, the Custodian, or the Company shall be liable for any action or nonaction by it in
reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for
deposit, any Owner or holder of a Receipt, or any other person believed by it in good faith to be competent to
give such advice or information or for any translation of any notice, report or other document made by a
translator believed by it to be competent. The Depositary shall not be responsible for any failure to carry out any
8
instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect
of any such vote, provided that any such action or nonaction is in good faith. The Depositary shall not be liable
for any acts or omissions made by a successor depositary whether in connection with a previous act or omission
of the Depositary or in connection with a matter arising wholly after the removal or resignation of the
Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary
performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary may own
and deal in any class of securities of the Company and its affiliates and in Receipts. The Company has agreed in
the Deposit Agreement to indemnify the Depositary and any Custodian against, and hold each of them harmless
from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which
may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of
the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the
Depositary or a Custodian, except for any liability or expense arising out of the negligence or bad faith of either
of them, or (ii) by the Company or any of its agents. The indemnities contained in the preceding sentence shall
not extend to any liability or expense which arises solely and exclusively out of a Pre-Release (as defined in
Section 2.09 of the Deposit Agreement) of a Receipt or Receipts in accordance with Section 2.09 of the Deposit
Agreement and which would not otherwise have arisen had such Receipt or Receipts not been the subject of a
Pre-Release pursuant to Section 2.09 of the Deposit Agreement; provided, however, that the indemnities provided
in the preceding sentence shall apply to any such liability or expense (i) to the extent that such liability or
expense would have arisen had a Receipt or Receipts not been the subject of a Pre-Release, or (ii) which may
arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration
statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary
placement memorandum) relating to the offer or sale of American Depositary Shares, except to the extent any
such liability or expense arises out of (a) information relating to the Depositary or any Custodian (other than the
Company), as applicable, furnished in writing and not materially changed or altered by the Company expressly
for use in any of the foregoing documents, or, (b) if such information is provided, the failure to state a material
fact necessary to make the information provided not misleading. Any person entitled to indemnification pursuant
to the preceding sentence who seeks indemnification under the Deposit Agreement shall notify the Company of
the commencement of any indemnifiable action or claim promptly after such person becomes aware of such
commencement and shall consult in good faith with the Company as to the conduct of the defense of such action
or claim (including the compromise or settlement thereof), which shall be reasonable in the circumstances. No
disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement.
18. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR
CUSTODIAN.
The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its
election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor
depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at
any time be removed by the Company by 120 days prior written notice of such removal, which shall become
effective upon the later to occur of (i) the 120th day after delivery of the notice to the Depositary or
(ii) appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit
Agreement. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners of
Receipts to do so, it may appoint a substitute or additional custodian or custodians.
19. AMENDMENT.
The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to
time be amended by agreement between the Company and the Depositary in any respect which they may deem
necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and
other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other
such expenses), or which shall otherwise prejudice any substantial existing right of Owners of Receipts, shall,
however, not become effective as to outstanding Receipts until the expiration of three months after notice of such
9
amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time
any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree
to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any
amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the
Deposited Securities represented thereby.
20. TERMINATION OF DEPOSIT AGREEMENT.
The Depositary will at any time at the direction of the Company terminate the Deposit Agreement by
mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the
date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement if
at any time 60 days shall have expired after the Depositary shall have delivered to the Company a written notice
of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as
provided in the Deposit Agreement. If any Receipts shall remain outstanding after the date of termination, the
Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of
dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the
Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions
pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to
deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and
the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the
Depositary. At any time after the expiration of one year from the date of termination, the Depositary may sell the
Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds
of any such sale, together with any other cash then held by it thereunder, without liability for interest, for the pro
rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon
becoming general creditors of the Depositary with respect to such net proceeds After making such sale, the
Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net
proceeds and other cash. Upon the termination of the Deposit Agreement, the Company shall be discharged from
all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to
indemnification, charges, and expenses.
21. COMPLIANCE WITH U.S. SECURITIES LAWS.
Notwithstanding anything in the Deposit Agreement or this Receipt to the contrary, the Company and the
Depositary each agrees that it will not exercise any rights it has under the Deposit Agreement to permit the
withdrawal or delivery of Deposited Securities in a manner which would violate the U.S. securities laws,
including, but not limited to, Section I.A.(l) of the General Instructions to the Form F-6 Registration Statement,
as amended from time to time, under the Securities Act of 1933.
22. GOVERNING LAW.
This Receipt and all rights under the Deposit Agreement and provisions hereof shall be governed by and
construed in accordance with the laws of the State of New York, United States of America. It is understood that
notwithstanding any present or future provision of the laws of the State of New York, the rights of holders of
Shares, and the duties and obligations of the Company in respect of such holders, as such, shall be governed by
the laws of Japan.
10
Exhibit 7
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
Fiscal years ended March 31,
2014
2015
2016
2017
2018
(In millions of yen, except for ratios)
Excluding interest on deposits
Earnings:
Income before income tax expense . . . . .
Add: Fixed charges . . . . . . . . . . . . . . . . . .
Less: Equity in earnings of equity method
. . . . . . . . . . . . . . . . . . .
investees—net
¥1,420,443
344,548
¥2,262,656
375,926
¥1,162,670
409,479
¥272,543
436,564
¥1,661,819
529,339
110,520
172,946
176,857
197,821
227,984
Total earnings . . . . . . . . . . . . . . . . . . . . . .
¥1,654,471
¥2,465,636
¥1,395,292
¥511,286
¥1,963,174
Fixed charges:
Interest expense, excluding interest on
deposits . . . . . . . . . . . . . . . . . . . . . . . . .
334,317
362,492
394,029
422,209
513,887
Estimated interest component of net
rental expense(1)
. . . . . . . . . . . . . . . . . .
10,231
13,434
15,450
14,355
15,452
Total fixed charges . . . . . . . . . . . . . . . . . .
¥ 344,548
¥ 375,926
¥ 409,479
¥436,564
¥ 529,339
Ratio of earnings to fixed charges . . . . . .
4.8
6.6
3.4
1.2
3.7
Including interest on deposits
Earnings:
Total earnings . . . . . . . . . . . . . . . . . . . . . .
Add: Interest on deposits . . . . . . . . . . . . .
Total earnings including interest on
Fiscal years ended March 31,
2014
2015
2016
2017
2018
(In millions of yen, except for ratios)
¥1,654,471
226,655
¥2,465,636
300,692
¥1,395,292
350,335
¥511,286
347,430
¥1,963,174
514,868
deposits . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,881,126
¥2,766,328
¥1,745,627
¥858,716
¥2,478,042
Fixed charges:
Total fixed charges . . . . . . . . . . . . . . . . . .
Add: Interest on deposits . . . . . . . . . . . . .
Total fixed charges including interest on
344,548
226,655
375,926
300,692
409,479
350,335
436,564
347,430
529,339
514,868
deposits . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 571,203
¥ 676,618
¥ 759,814
¥783,994
¥1,044,207
Ratio of earnings to fixed charges . . . . . .
3.3
4.1
2.3
1.1
2.4
Note:
(1) The portion deemed representative of the interest factor
The ratios of earnings to fixed charges are computed by dividing earnings by fixed charges. Earnings consist
primarily of income (loss) before taxes, as adjusted for some equity method investments and for fixed charges.
Fixed charges consist primarily of interest expense on deposits, debentures and short-term and long-term debt,
amortization of debt expense and discount and the portion deemed representative of the interest factor of net
rental expense under long-term leases.
Principles of Ethics and Conduct
(English Translation)
Exhibit 11
Introduction
These principles of Ethics and Conduct establish clear and consistent standards for all MUFG employees to
guide decisions and actions. They reflect and support the MUFG Corporate Vision.
The principles are organized in three sections. Chapter 1 presents the attitude that we adopt with our
customers, to act with honesty and integrity and pursue their best interests, which is a core component of our
business practices.
Chapter 2 presents a set of standards to help us fulfill our responsibilities as a good corporate citizen.
MUFG’s reputation depends upon the trust and confidence of our customers and other stakeholders, including
local communities, and we are responsible to society on a global level.
Chapter 3 describes the actions and mindset that will create a stimulating and supportive working
environment as MUFG continues to grow. Our success depends on building and maintaining a dynamic
workplace where all employees can reach their full potential in ways that support our customers and contribute to
society as a whole.
Outline/Overview
Chapter 1 Customer Focus
We place our diverse customers at the center of all our activities and always act in their best interests.
MUFG is able to thrive today because of the trust and confidence that customers have placed in us—the result of
years of fair, transparent, and honorable dealings. Our business culture is not driven by the prospect of short-
term, immediate gains. Instead, we place a premium on supporting long-term, sustainable relationships with our
customers to help them meet their goals.
1-1. Acting with Honesty and Integrity
We always place our diverse customers at the center of all activities and act with honesty and integrity in all
of our dealings with them. We protect customer assets, including their personal information, and strive at all
times not to damage their interests.
1-2. Controlling Quality
In order to earn the lasting trust and confidence of our customers, we maintain thorough quality control of
our products and services in all aspects from product design and development to delivery, and continually
improve our processes to provide accurate and secure transactions.
1-3. Exceeding Customer Expectations
We strive to satisfy the diverse needs of our customers worldwide and to exceed their expectations through
the highest standards of professionalism and by effectively leveraging our global network and consolidated
strength.
Chapter 2 Responsibility as a Corporate Citizen
As a member of MUFG with global operations, we act honorably, with honesty and integrity, and comply at
all times with laws, regulations, rules, and internal policies globally. We strive to maintain stability and
confidence in the global financial system and to contribute to the sound growth and development of society. We
behave in a manner that supports and strengthens the trust and confidence that MUFG has built up over the years.
2-1. Adherence to Laws and Regulations
We always judge and act with honesty and integrity, do what is right, and comply with both the letter and
the spirit of the laws, regulations, and rules that apply to us. We avoid insider trading, do not engage in anti-
competitive conduct or any form of corrupt activity, and publicly disclose corporate information in an
appropriate manner.
2-2. Combating Criminal Activity
We do not conduct business with criminal elements. We do not allow our financial products and services to
be used for illegal or improper activities such as money laundering, fraud, or financing terrorist activities.
2-3. Commitment to Social Sustainability
We respect the history, culture, and customs of local communities and strive to contribute to their
development and the protection of the environment through our corporate activities and employee volunteer
efforts.
Chapter 3 Ethical and Dynamic Workplace
We are committed to creating a working environment that fosters mutual respect among MUFG employees,
supports the full expression of our individuality as professionals, promotes the power of teamwork, honors
diversity, transcends differences, and embraces new challenges.
3-1. Stimulating Workplace
We strive to enhance our knowledge and expertise, focus on maximizing the value of teamwork, and view
changes in the business environment as opportunities to launch new initiatives.
3-2. Ethical Workplace
We respect the diversity and human rights of all MUFG employees. We do not engage in or tolerate
discrimination, harassment, intimidation, or any other behavior or activity that is inconsistent with these core
beliefs. We report any violations of laws and rules, and we manage corporate assets appropriately.
Chapter with details
Chapter 1 Customer Focus
1-1. Acting with Honesty and Integrity
① Acting with Honesty and Integrity
The work of each employee of MUFG is directly or indirectly related to MUFG customers. We always place
our diverse customers at the center of all activities, act with honesty and integrity, and support customers from a
long-term perspective.
② Safeguarding Customer Assets
Customers rely upon us to be stewards of their financial assets and investments. The privacy of the
information that customers also entrust to us is as valuable to them as their financial assets, and for that reason,
maintaining customer confidentiality at all times is critical. The loss, misuse, leakage, or improper transfer of
customer information not only can damage customer interests but also can seriously undermine the trust and
confidence that MUFG has earned over many years.
③ Protecting Customer Interests
We act with honesty and integrity, and strive at all times not to damage the interests of our customers.
MUFG is an integrated financial group comprising a wide variety of businesses. When conducting business with
customers, we must be sensitive to the possibility of conflicts of interest that may exist between customers of
different MUFG companies and between a customer and an MUFG company. In all cases, we act appropriately
and with integrity, good judgment, and discretion in accordance with our policies on conflicts of interest.
1-2. Controlling Quality
① Products and Services that Match Customer Needs
Our customers place great faith in us when they entrust us with their business. To earn their trust and to
build strong and lasting business relationships, it is important to maintain strong quality control practices at all
stages, from planning, development, and proposal, to the delivery of our products and services. Quality control
means that we improve our processes to help provide products and services that match customer needs, and carry
out accurate and secure transactions. To this end, we always keep in mind the following principles:
a. When developing products and services, we clearly define our customers and their needs as known to
us.
b.
c.
The structure and profile of products and services must be developed and described in a clear and
understandable manner.
Products and services proposed and provided to customers match their purposes, needs, knowledge,
experience, financial capabilities, and other conditions as known to us.
d. We equip ourselves with the knowledge and skills needed to propose, provide, and manage our
products and services.
e. We provide our customers with clear and accurate explanations of products and services so that they
understand the risks associated with them, accept the risks, and are fully informed when they agree to
retain our products and services.
f.
In our interactions with customers, we are fair-minded, courteous, professional, and responsive.
g. We take customer comments, complaints, and concerns seriously and handle them fairly and promptly,
sharing them with relevant divisions within MUFG appropriately.
② Ongoing Efforts for Quality Improvement
We continually review and improve our products and services so that they serve the best interests of our
customers.
1-3. Exceeding Customer Expectations
① Quality Products and Services
Customer needs are becoming more sophisticated and more diverse, and their requirements are becoming
increasingly demanding. To provide high-quality products and services, each of us strives to improve our own
professional knowledge and skills.
② Cooperation within MUFG
While MUFG consists of many diverse business entities, customers view us as a single, integrated company
and have high expectations for our comprehensive capabilities. Our strength does not come from individual star
performers, but from the collective contributions of the team. We continually strive to provide customers with a
broad set of high-quality products and services by bringing our capabilities together and acting as a seamless and
unified group.
③ Using Our Global Network
As customers become increasingly global in their business activities, they make decisions about financial
products and services based on careful comparison with those available worldwide. We continue to be
competitive by providing world-class products and services and making full use of MUFG’s global network.
Chapter 2 Responsibility as a Corporate Citizen
2-1. Adherence to Laws and Regulations
We comply at all times with both the letter and the spirit of the laws, regulations, and rules that apply to us,
with particular attention to those that, if violated, would damage the financial system, hinder the economic
development of society, or have a severe negative impact on our reputation. These areas include:
① Insider Trading
The use of inside, non-public information for personal gain is illegal in many countries and is prohibited
within MUFG, regardless of the amount of money involved. We do not engage in any activities that would lead
to illegal profits, and we comply with strict information-barrier controls that we have put in place.
② Anti-Competitive Conduct
We do not engage in any unlawful, anti-competitive conduct such as sharing pricing or marketing strategies
with competitors. We do not abuse our market position by unlawfully applying conditions that are considered
anti-competitive to the offer of our products and services. We comply with all fair-dealing and business laws and
regulations, including the arm’s-length principle requiring that all parties to a transaction be independent and on
an equal footing.
③ Corrupt Activities
MUFG has zero tolerance for corrupt activities. Corruption is a significant global problem, and many
countries have adopted strict laws that prohibit giving or taking bribes. We do not offer, promise, or grant
anything of value to a government official, other person in a position of power, or private individual in any
country for the purpose of obtaining or retaining business or for any other advantage.
④ Public Disclosure
To maintain MUFG’s reputation and credibility, disclosure of our corporate information, including financial
reports, must be timely, clear, and accurate so that it can be properly understood and evaluated. If we become
aware of an inaccurate or misleading statement or nondisclosure of material information, we immediately consult
with our supervisors to undertake appropriate measures and correct inaccuracies.
2-2. Combating Criminal Activity
① No Relationships with Criminal Elements
It is a basic tenet of corporate responsibility that companies have no relationships with criminal elements,
including organized crime groups. We work closely with police authorities, legal counsel, and other external
organizations to terminate any connections with criminal elements that we discover and protect the safety of our
employees. We do not hesitate to take necessary legal action, both civil and criminal, to protect our company and
stakeholders.
② Prevention of Money Laundering and Other Financial Crimes
The trust of our customers is based on their confidence that the financial products and services we provide
contribute to sound social and economic development. We remain alert to the fact that our products and services
can be misused to commit or facilitate crimes such as money laundering, fraud, counterfeiting credit cards, and
financing terrorist activities. We strive to prevent, detect, and report illicit or suspicious activity in accordance
with all applicable laws and regulations.
2-3. Commitment to Social Sustainability
① Giving Back to Communities
As a good corporate citizen, MUFG promotes programs and initiatives that improve society for current and
future generations. We actively encourage employee participation in various volunteer activities to enhance
community development both locally and globally, and as a company, we make meaningful financial
contributions to worthwhile causes and organizations.
② Commitment to the Environment
We evaluate the environmental risk in our business activities, seek to minimize any negative impact on the
environment, and endeavor to support customers’ businesses that contribute to environmental conservation and
protection.
Chapter 3 Ethical and Dynamic Workplace
3-1. Stimulating Workplace
① Personal Growth
As the needs and activities of our customers continue to evolve, we continue to grow professionally to
provide the best possible service. We constantly improve our skills and individual abilities by taking advantage
of training and educational opportunities, both inside and outside of MUFG.
② Teamwork
MUFG employees share information, skills, and expertise with each other. Working in teams, we achieve
goals that could not be accomplished by individuals working alone. We are committed to maximizing the power
of teamwork.
③ Can-Do Attitude
MUFG has succeeded in part by developing an astute understanding of changes affecting our customers and
society and by embracing new challenges. As the world changes more rapidly than ever, we make even stronger
efforts to stay ahead of global trends and changes affecting our business environment and to embrace new
challenges in the firm belief that change equals opportunity.
3-2. Ethical Workplace
① Respect for Diversity and Human Rights
As a global corporation, MUFG gains strength from the diversity of its employees. We value and respect
differences, and do not tolerate any form of discrimination based on race, nationality, creed, religion, gender,
sexual orientation, age, physical condition, or any other differentiating characteristic.
② Open Communication
MUFG employees communicate in good faith, help each other succeed, and strive to create a workplace
where everyone can exchange ideas freely and constructively.
③ Prohibition of Harassment
Harassment undermines respect for individuals. Because MUFG employees are entitled to feel safe and
secure in the workplace, we neither engage in nor tolerate harassment or any threatening, hostile, or abusive
behavior.
④ Protection of Corporate Assets
The tangible and intangible assets (such as money and our reputation) that MUFG has accumulated through
its corporate activities play a valuable role in our business operations. We continue to contribute to the
accumulation of corporate assets, properly protect and manage them, and do not engage in or condone their
waste, abuse or unauthorized use.
⑤ Reporting Violations of Laws and Rules
Violations of laws and company rules can result in financial losses to MUFG, and can seriously damage the
trust and confidence that our customers and society place in us. Whenever we discover a violation, we will not
hesitate to take immediate and decisive action to address the issue. As employees, if we become aware of
improprieties or breaches of laws or MUFG policy, we are expected to report the matter and consult the
appropriate contacts, either through our supervisors or by using MUFG’s anonymous internal hotline/reporting
system. MUFG treats any information received as confidential and protects reporting employees from retaliation.
Excerpts from MUFG’s Compliance Rules
(English Translation)
(Objective)
Article 1.
These rules prescribe basic matters relating to compliance with laws and regulations.
(Revision and abolition)
Article 2.
These rules may be revised or abolished by decision of the Executive Committee; provided, however, that
any material revision or abolishment of rules relating to the duties and responsibilities of the Board of Directors
or Member of the Board of Directors shall be made pursuant to a resolution of the Board of Directors.
(Definitions)
Article 4.
(1)
(2)
(3)
In these rules, “laws and regulations” mean laws and government ordinances to be strictly observed by
MUFG personnel when carrying out business operations, as well as MUFG’s Articles of Incorporation,
Code of Ethics, and other rules and regulations established according to the laws and government
ordinances above.
In these rules, “compliance” means understanding the purpose and contents of laws and regulations
properly, and behaving in an appropriate manner so as not to violate applicable laws and regulations.
In these rules, “affiliates” is a general term for MUFG’s consolidated subsidiaries and affiliated companies
accounted for by the equity-method.
(4)
In these rules, “MUFG Group” means MUFG and its affiliates.
(Fundamental Policy)
Article 5.
The MUFG Ethical Framework and Code of Conduct are the foundations of compliance at MUFG.
(Responsibilities of Members of the Board of Directors, Corporate Executives (Shikko Yaku), Executive officers
(Shikko Yakuin) and Board of Directors)
Article 6.
(1)
In accordance with the “Ethical Framework and Code of Conduct”, MUFG Members of the Board of
Directors, corporate executives (shikko yaku) and executive officers (shikko yakuin) must carry out their
responsibilities with the recognition that compliance is one of the most important objectives of management.
(2) The board of directors must establish systems necessary for compliance and seek to achieve and maintain
compliance.
(Responsibility of MUFG Managing Directors)
Article 7.
Managing Directors must implement compliance within their division.
(Responsibility of MUFG Employees)
Article 8.
(1) MUFG employees must ensure compliance while performing their duties, and act in accordance with the
“Ethical Framework and Code of Conduct”.
(2) MUFG employees must strive to acquire adequate knowledge of the laws and regulations which are
necessary to their business operations.
(Director in charge of the Compliance Division)
Article 10.
(1) The Director in charge of the Compliance Division must report matters concerning compliance to the Board
of Directors or Executive Committee as necessary.
(2) When there is a risk of an unavoidable conflict of interest with a different division that the director in charge
of the Compliance Division is also in charge of, to insure the independence of the Compliance Division, the
managing director of the Compliance Division shall report to the President and CEO. The President and
CEO will report to the Board of Directors or Executive Committee as necessary. Appropriate action shall
also be taken to avoid conflicts of interest in cases other than those mentioned above.
(Office in Charge of Compliance)
Article 11.
(1) The Compliance Division is in charge of overseeing the overall compliance framework.
*
*
*
(4) When the Compliance Division receives reports of problems or possible problems relating to compliance, or
when it discovers such problems itself, it must take necessary actions.
Article 11. ii
Americas Compliance Division is in charge of BSA/AML measures concerning transactions affecting the
Group’s U.S. offices as well as management systems concerning OFAC regulations.
(Compliance Officers Responsible)
Article 12.
The head of each business group is the compliance officer responsible for that business group. The
compliance officer responsible oversees their business group and is responsible for any compliance related
planning and supervision within their jurisdiction.
(Group Chief Compliance Officer)
Article 13.
(1) A Group Chief Compliance Officer (CCO) (primarily the responsibility of the Compliance Division) will be
appointed based on Article 19 Paragraph 2 of the Organizational Regulations. When there is no appointed
Group CCO, the director overseeing the compliance division will act as CCO.
(2) The Group CCO (or in cases where there is no Group CCO, the CCO) shall oversee the coordination of
division compliance officers (defined in Article 13), the chief compliance officer of each company in the
MUFG Group, and any persons filling both those roles, as well as provide necessary guidance, advice and
instruction based on the management agreement.
(3) The Group CCO (or in cases where there is no Group CCO, the CCO) can request reports on compliance
matters from the specified compliance officers responsible (defined in Article 11).
(Division Compliance Officers)
Article 14.
*
*
*
(1) A chief manager in each division will serve as division compliance officer. Each managing director may
appoint a person equivalent to a chief manager as division compliance officer. In such cases, the managing
director should report to the Compliance Division in the Corporate Center, the compliance officer
responsible for each business group (defined in Article 11), or the Compliance Division.
(2) The division compliance officer is responsible for the strengthening of compliance in each division and for
planning and supervising compliance related issues regarding business matters under their jurisdiction.
Furthermore, the compliance officer will carry out duties including the management and compliance
checking of documents, gathering information concerning the establishment and revision of laws relating to
the duties of each division, working to improve general compliance conditions, and will play a central role
in implementing compliance measures in each division.
(Responsibilities of Managing Directors)
Article 15.
When the managing director receives reports of problems or possible problems relating to compliance from
the division compliance officer, or when they discover such problems themselves, they must consult with the
managing director of the Compliance Division as well as provide orders and instructions to the division
compliance officer. Furthermore, in each business group, they must report to the compliance officer responsible.
(Compliance Reporting System)
Article 16.
(1) When a MUFG employee discovers problems or possible problems relating to compliance, they must report
directly to their senior managers and the division compliance officer as stipulated in Article 14.
(2) A person receiving such report must treat the report with appropriate care in working towards a resolution.
Furthermore, the information relating to any reporting person must be treated with appropriate caution.
(3) When the compliance officers receive reports of or otherwise detect violations of laws and regulations, or
possible violations, they must report directly to the Compliance Division and the managing director of their
division. In cases where the managing director is involved in inappropriate conduct or behavior (including
cases where such involvement is suspected or where a determination as to such involvement is difficult to
make), such reports must be made to the Compliance Division.
(4) When a MUFG employee does not wish to report to their senior managers and the division compliance
officer due to said officer being complicit in a violation of laws and regulations or the possibility thereof, or
when no response or remediation is made despite an employee having made a report, the employee can
report directly to the Compliance Division. In each business group, reports can be made to necessary parties
other than those mentioned above, based on the instructions of the compliance officer responsible (defined
in Article 12).
(5) When a report of a problem or possible problem relating to compliance are made, it shall be prohibited to
take any action to seek or identify the person who made the report or take any adverse employment action
against such person for making the report.
Excerpts from MUFG’s Compliance Manual
(English Translation)
I.
Legal issues regarding Management
(3) Board Director and Corporate Executive
(4) Transactions involving a conflict of interest
When a Board Member or a Corporate Executive engages in a transaction involving a conflict of
interest, the Board Member or the Corporate Executive must receive the approval of the Board of
Directors.
III. Specific issues
5. Conflicts of interest
When a conflict of interest arises in connection with an operation involving any of the MUFG Group
companies, Directors or employees, on one hand, and a customer or other third-party, the Director or
employee, the MUFG Group company to which such Director or employee belongs, or any other
MUFG Group company, on the other, the MUFG Group company, Director or employee must perform
the operation in a proper manner.
Excerpts from MUFG’s Rules of Employment
(English Translation)
(Disciplinary Action)
Article 40.
The company will take disciplinary action when employees take the following prohibited actions:
(17) If an employee violated the rules of employment or any other applicable internal rules.
CERTIFICATION
Exhibit 12
I, Nobuyuki Hirano, certify that:
1.
I have reviewed this annual report on Form 20-F of Mitsubishi UFJ Financial Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that
occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the company’s auditors and the audit committee of the
company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the company’s internal control over financial reporting.
July 12, 2018
/s/ Nobuyuki Hirano
Name: Nobuyuki Hirano
Title: President & Group Chief Executive Officer
CERTIFICATION
I, Muneaki Tokunari, certify that:
1.
I have reviewed this annual report on Form 20-F of Mitsubishi UFJ Financial Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that
occurred during the period covered by the annual report that has materially affected, or is reasonably
likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the company’s auditors and the audit committee of the
company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the company’s internal control over financial reporting.
July 12, 2018
/s/ Muneaki Tokunari
Name: Muneaki Tokunari
Title: Group Chief Financial Officer
Exhibit 13
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CERTIFICATION REQUIRED BY
RULE 13a-14(b) OR RULE 15d-14(b)
AND 18 U.S.C. Section 1350
In connection with the Annual Report of Mitsubishi UFJ Financial Group, Inc. (the “Company”) on
Form 20-F for the fiscal year ended March 31, 2018 as filed with the US Securities and Exchange Commission
on the date hereof (the “Report”), I, Nobuyuki Hirano, President & Group Chief Executive Officer of the
Company, hereby certify, pursuant to 18 U.S.C. Section 1350 that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: July 12, 2018
/s/ Nobuyuki Hirano
Name: Nobuyuki Hirano
Title: President & Group Chief Executive Officer
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CERTIFICATION REQUIRED BY
RULE 13a-14(b) OR RULE 15d-14(b)
AND 18 U.S.C. Section 1350
In connection with the Annual Report of Mitsubishi UFJ Financial Group, Inc. (the “Company”) on
Form 20-F for the fiscal year ended March 31, 2018 as filed with the US Securities and Exchange Commission
on the date hereof (the “Report”), I, Muneaki Tokunari, Director and Group Chief Financial Officer of the
Company, hereby certify, pursuant to 18 U.S.C. Section 1350 that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: July 12, 2018
/s/ Muneaki Tokunari
Name: Muneaki Tokunari
Title: Group Chief Financial Officer
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No. 333-204845 on Form S-8
and the Registration Statement No. 333-209455 on Form F-3 of our reports dated July 12, 2018, relating to the
consolidated financial statements of Mitsubishi UFJ Financial Group, Inc. (“MUFG”) and subsidiaries (together,
the “MUFG Group”) and the effectiveness of the MUFG Group’s internal control over financial reporting,
appearing in the Annual Report on Form 20-F of the MUFG Group for the year ended March 31, 2018.
Exhibit 15
/s/ Deloitte Touche Tohmatsu LLC
Tokyo, Japan
July 12, 2018
CAPITALIZATION AND INDEBTEDNESS
The following table presents our capitalization and indebtedness at March 31, 2018:
Total short-term borrowings(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit 99(a)
At March 31,
2018
(in millions)
¥39,024,637
Long-term debt:
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation under sale-and-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsubordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under loan securitization transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,714
41,892
21,497,003
4,853,024
672,612
(13,689)
Total long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,069,556
Shareholders’ equity:
Capital stock, with no stated value (common stock authorized: 33,000,000,000 shares;
common stock issued: 13,900,028,020 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings:
Appropriated for legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost: 737,772,882 common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,090,270
5,740,165
239,571
4,945,733
2,477,315
(522,872)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,970,182
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
675,633
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,645,815
Total capitalization and indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥42,715,371
Note:
(1) Total short-term borrowings consist of call money and funds purchased, payables under repurchase agreements, payables under securities
lending transactions, due to trust account and other short-term borrowings.
UNAUDITED REVERSE RECONCILIATION OF
SELECTED FINANCIAL INFORMATION
Exhibit 99(b)
Our consolidated financial statements are prepared in accordance with U.S. GAAP as described in the notes
thereto. The basis of our consolidated financial statements prepared under U.S. GAAP is significantly different
from Japanese GAAP in certain respects. Under Japanese banking regulations and Tokyo Stock Exchange rules,
we are required to report our annual and quarterly results prepared in accordance with Japanese GAAP. We
present below a reverse reconciliation of total equity under U.S. GAAP to net assets under Japanese GAAP as of
March 31, 2018 and net income before attribution of noncontrolling interests for the fiscal year ended March 31,
2018.
Total equity in accordance with U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Differences arising from different accounting for:
1. Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Derivative financial instruments and hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Goodwill
11. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax effects, when applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
March 31, 2018
(in millions)
¥15,645,815
123,240
(9,963)
65,433
424,376
(9,717)
243,861
44,949
(9,621)
672,397
185,940
(38,893)
557,711
(421,208)
(179,283)
Net assets in accordance with Japanese GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥17,295,037
Net income before attribution of noncontrolling interests in accordance with U.S. GAAP . . . . .
Differences arising from different accounting for:
1. Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Derivative financial instruments and hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Investments in equity method investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax effects, when applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the fiscal year
ended
March 31, 2018
(in millions)
¥ 1,253,996
57,273
(28,284)
(360,500)
(14,986)
(49,752)
94,893
3,211
(482)
40,055
(17,604)
5,778
(18,451)
36,407
94,386
Net income before attribution of noncontrolling interests in accordance with Japanese
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,095,940
Explanation of Differences between U.S. GAAP and Japanese GAAP
Major factors which explain the differences shown in the above table are as follows:
1. Investment securities
The cost basis of certain securities is different under U.S. GAAP and Japanese GAAP due primarily to the
following:
‰ On October 1, 2005, Mitsubishi Tokyo Financial Group, Inc. (“MTFG”) merged with UFJ Holdings,
Inc. (“UFJ Holdings”), with MTFG being the surviving entity, and was renamed “Mitsubishi UFJ
Financial Group, Inc.” Under U.S. GAAP, in accordance with the guidance on accounting for business
combinations, the assets and liabilities of companies acquired in purchase transactions are recorded at
fair value at the date of acquisition. Therefore, the new cost basis of investment securities, including
available-for-sale and other investment securities, of UFJ Holdings was established and they were
recognized at fair value as of October 1, 2005. Under Japanese GAAP, which was effective as of
October 1, 2005, the new cost basis was not established for such investment securities and they were
carried over at their historical cost basis.
‰ Under U.S. GAAP, other-than-temporary impairment is recognized in earnings for a debt security if an
entity has intent to sell such a debt security or if it is more likely than not that the entity will be required
to sell such a debt security before recovery of its amortized cost basis. If not, the credit component of
other-than-temporary impairment on the debt security is recognized in earnings, but the noncredit
component is recognized in other comprehensive income. For marketable equity securities, other-than-
temporary impairment is recognized in earnings when a decline in fair value below cost is deemed other
than temporary. In determining whether a decline in fair value below cost is other-than-temporary, in
addition to the ability and positive intent to hold the investments for a period sufficient to allow for any
anticipated recovery in fair value, factors such as the extent of decline in fair value below cost and the
length of time that the decline has continued are considered. If a decline in fair value below cost exceeds
20% or a decline in fair value below cost has continued for six months or more, such decline is
generally deemed as other-than-temporary. The financial condition and near-term prospects of issuers
are also considered, primarily based on the credit standing of the issuers as determined by the credit
rating system. Under Japanese GAAP, significant declines in the fair value of securities below cost are
recorded in earnings for both debt security and marketable equity security. In determining a significant
decline, the extent of the decline in fair value below cost and credit standing of the issuers are
considered and a decline in the fair value of a security of 50% or more of its cost is considered a strong
indicator of significant decline. Thus, generally, the criteria for recognition of impairment losses on
investment securities in earnings under U.S. GAAP are stricter than those of Japanese GAAP.
‰ U.S. GAAP requires accounting for the transactions at fair value when investments in acquired
companies are exchanged for investments in the surviving companies in accordance with the guidance
on accounting for nonmonetary exchange of cost-method investments, while these transactions have
been accounted for at cost under Japanese GAAP.
‰ Under U.S. GAAP, changes in the fair value of foreign securities held by MUFG Bank and Mitsubishi
UFJ Trust and Banking are recognized in earnings since the fair value option was elected for these
foreign securities in accordance with the guidance on accounting for fair value options for financial
assets and financial liabilities. Under Japanese GAAP, only the changes attributable to movements in
foreign currency exchange rates are recognized in earnings and the other changes in the fair value are
recognized in other comprehensive income.
2. Loans
Under U.S. GAAP, loan origination fees, net of certain direct origination costs, are deferred and recognized
as income over the contractual life of the loans, while under Japanese GAAP, they are primarily recognized in
earnings at the time of origination.
3. Allowance for credit losses
Under U.S. GAAP, the credit loss allowance for impaired loans is calculated primarily based on the present
value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market
price, or the fair value of the collateral if the loan is collateral dependent, in accordance with the guidance on
accounting by creditors for the impairment of a loan. Under Japanese GAAP, an allowance is provided for certain
types of impaired loans based on historical loss experience. This difference between U.S. GAAP and Japanese
GAAP generally results in a larger amount of allowance for credit losses under U.S. GAAP.
4. Fixed assets
The differences between Japanese GAAP and U.S. GAAP principally consist of (1) Premises and
equipment, and (2) Land revaluation.
(1) Premises and equipment
Under U.S. GAAP, a nonmonetary asset acquired in exchange for another nonmonetary asset is generally
recorded at the fair value of the asset surrendered or that of the asset received, and a gain or loss is recognized on
the exchange. Under Japanese GAAP, the asset received is recorded at the cost of the asset surrendered in
relevant types of exchange transactions, resulting in no gain or loss.
(2) Land revaluation
U.S. GAAP does not allow revaluation of operating assets and requires land to be recorded at cost. Under
Japanese GAAP, land used for business operations of domestic subsidiaries was revalued as of March 31, 1998
for Bank of Tokyo-Mitsubishi, as of March 31, 2002 for The Mitsubishi Trust and Banking Corporation and as of
December 31, 2001 for other domestic subsidiaries of MTFG with the corresponding impact recorded directly in
equity as well as related deferred tax assets/liabilities, pursuant to the Law concerning Revaluation of Land.
Accordingly, land held on the revaluation dates are recorded at different values.
5. Pension liability
Under both U.S. GAAP and Japanese GAAP, the funded status of defined benefit plans is recognized as
assets or liabilities in a consolidated balance sheet, and actuarial gains or losses and prior service costs or benefits
that have not yet been recognized through earnings as net periodic benefit cost are recognized in other
comprehensive income, net of tax, until they are amortized as a component of net periodic benefit cost. Actuarial
gains or losses are amortized based on corridor approach under U.S. GAAP, while they are amortized over a
specified number of years under Japanese GAAP.
6. Derivative financial instruments and hedging activities
MUFG utilizes derivatives to manage its exposures to fluctuations in market factors such as interest rates
and foreign exchange rates arising from mismatches in the risk profiles of assets and liabilities. Under U.S.
GAAP, most derivatives used by MUFG are accounted for as trading assets or liabilities because they do not
qualify for hedge accounting under the criteria prescribed in the guidance on accounting for derivative
instruments and hedging activities. Japanese GAAP permits hedge accounting for certain derivative hedging
activities, including portfolio hedges, using less restrictive hedging criteria.
In addition, bifurcation requirements are different between U.S. GAAP and Japanese GAAP. Under U.S.
GAAP, if the economic characteristics and risks of the embedded derivatives are deemed “clearly and closely
related” to the economic characteristics and risks of the host contracts, the embedded derivatives are not
bifurcated from their host contracts. Under Japanese GAAP, the embedded derivatives may be bifurcated from
their host contracts if the risk of the embedded derivatives and host contracts are managed separately.
7. Compensated absences
Under U.S. GAAP, in accordance with the guidance on accounting for compensated absences, an employer
is required to accrue a liability for employees’ rights to receive compensation for future absences such as unused
vacations and holidays when certain conditions are met (for example, unexpired vacation benefits that employees
have earned but have not yet taken). Under Japanese GAAP, employers are not required to recognize liabilities
and accordingly, no liabilities are recognized for such short-term employee benefits.
8. Long-term debt
Under U.S. GAAP, in accordance with the guidance on accounting for business combinations, the new cost
basis of long-term debt of UFJ Holdings was established and it was recognized at fair value as of October 1,
2005. Under Japanese GAAP, which was effective as of October 1, 2005, the new cost basis was not established
and the long-term debt was recorded at its historical cost basis.
9. Consolidation
The scope of consolidation is different under U.S. GAAP and Japanese GAAP primarily because, under
U.S. GAAP, the primary beneficiary must consolidate variable interest entities based on variable interests, which
resulted in additional consolidation of certain variable interest entities. Japanese GAAP does not have a concept
of variable interest entities.
On the other hand, certain variable interest entities including funding vehicles, which are consolidated under
Japanese GAAP due to the majority ownership of the voting rights, are not consolidated under U.S. GAAP
because MUFG and its consolidated subsidiaries are not their primary beneficiaries.
The breakdown of the impact of the difference on total equity is as follows.
Consolidation
under
U.S. GAAP
Deconsolidation
under
U.S. GAAP
Total
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
479,625
(2,437,288)
(1,079,761)
2,480,193
456,940
(118,582)
(in millions)
¥(143,204)
883,591
(15,976)
(20,862)
361,618
(173,897)
¥
336,421
(1,553,697)
(1,095,737)
2,459,331
818,558
(292,479)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (218,873)
¥ 891,270
¥
672,397
The breakdown of the impact of the difference on net income before attribution of noncontrolling interests is
as follows.
Consolidation
under
U.S. GAAP
Deconsolidation
under
U.S. GAAP
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(50,480)
(44,129)
(3,228)
27,317
7,760
26,453
(in millions)
(8,305)
¥
166,405
213
(131)
31,828
(113,648)
¥
Total
(58,785)
122,276
(3,015)
27,186
39,588
(87,195)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(36,307)
¥ 76,362
¥
40,055
10. Goodwill
Under U.S. GAAP, in accordance with the guidance on accounting for business combinations, identifiable
assets acquired, liabilities assumed, and any noncontrolling interest in an acquired company are recorded at fair
value at the date of acquisition. Goodwill is the excess of the fair value of noncontrolling interest and
consideration transferred, over the fair value of identifiable assets acquired and liabilities assumed. Goodwill is
not amortized, but is subject to an annual impairment test at the reporting unit level, and also reviewed more
frequently if events or changes in circumstance indicate that the goodwill might be impaired. Under Japanese
GAAP, goodwill is the difference between the purchase price consideration and the acquirer’s share of fair value
of the net assets acquired. Goodwill is amortized by straight-line method over the estimated period not exceeding
20 years, and an impairment test is required only if indication of impairment is identified.
In addition, the acquisition of UFJ Holdings has been accounted for by a method similar to
pooling-of-interests, and consequently goodwill has not been recognized in accordance with Japanese GAAP,
which was effective as of October 1, 2005.
11. Intangible assets
Under U.S. GAAP, in accordance with the guidance on accounting for business combinations, all
identifiable intangible assets acquired in purchase transactions are recorded at fair value at the date of
acquisition. Intangible assets with definite useful lives are amortized over their estimated useful life and reviewed
for impairment whenever events or changes in circumstance indicate that their carrying amount may not be
recoverable. Intangible assets with indefinite useful lives are tested for impairment at least annually, and also
reviewed more frequently if events or changes in circumstance indicate that the assets might be impaired. Under
Japanese GAAP, which was effective as of October 1, 2005, intangible assets have not been recognized in
connection with the acquisition of UFJ Holdings.
12. Investments in equity method investees
Under U.S. GAAP, a portion of a difference between the cost of an investment and the amount of
underlying equity in net assets of an investee is not amortized. A loss in value of an investment that is other than
a temporary decline is recognized as an impairment loss. Under Japanese GAAP, goodwill which is included in
investments in equity method investees is amortized by straight-line method. If a decline in the market value
below the cost is substantial, based on the extent of decline in market value and the credit standing of the issuers,
an impairment loss is recognized within the limit of the amount of unamortized goodwill.