MUFG Report 2017
Integrated Report

Mitsubishi UFJ Financial GroupWho We Are

Editorial Overview
We, Mitsubishi UFJ Financial Group, or MUFG, have compiled our integrated report, MUFG Report 2017, in order to explain our efforts to create
sustained value to our investors and other stakeholders. Referencing the framework provided by the International Integrated Reporting Council(IIRC),* this report introduces our business model through the opening section (“Who We Are”), and explains the methods we have used tocreate sustainable value through “Corporate Value Initiatives,” “Important Issues Concerning Value Creation—How MUFG Addresses ESG
Issues” and “The Foundations of Corporate Value.” Further details on our CSR activities are available on our website.
* A private sector foundation established in 2010 by companies, investors, accounting organizations and administrative agencies to develop an international framework
for corporate reporting.

Corporate Vision
Our
missionThe corporate vision serves as the basic policy inconducting our business activities, and provides guidelines

Who We Are

P. 1

Important Issues Concerning Value Creation
─How MUFG Addresses ESG Issues

for all group activities.

Our vision

P. 44
The corporate vision also is the foundation for management

P. 1

Corporate Vision

P. 2

MUFG Value Creation Process

P. 4

History of MUFG

P. 6

Financial Highlights

P. 8

ESG Highlights

Management Message
P. 10

MUFG Re-Imagining Strategy

P. 24

Digital Strategy

P. 26

P. 33

Business Overview

P. 34

Retail Banking Business

P. 36

Japanese Corporate Banking Business

P. 38

Global Banking Business

P. 40

Asset Management / Investor Services Business

P. 42

Global Markets Business

Environmental Initiatives

P. 52

P. 10

P. 32

decisions, including the formulation of management
strategies and management plans, and serves as the core

Contributing to Future Industries and a Better Society
Rallying Groupwide Resources to Build SophisticatedInvestment Chains

P. 56

Helping Corporate Customers Achieve Growththrough Financing

Principles of Ethics and Conduct
MUFG has established Principles of Ethics andConduct based on its Corporate Vision. These

Upgrading the Governance Framework
Ensuring sustainable growth in our corporate value

employees to guide their decisions and actions,P. 66

Dialogue between Lead Independent Outside Director
and Investors

Corporate Vision.

P. 68

Board of Directors

P. 70

Corporate Executive Officers and Executive Officers

P. 72

Customer
Focus

principles provide standards for all MUFG

P. 60

P. 71

Our values

value for all employees.

Social Contributions

P. 54

P. 58

Message from the CFO

Corporate Value Initiatives

P. 46
P. 48

Message from the CEO

P. 22

P. 45

Initiatives for Addressing ESG Issues toward
Sustainable Growth

thereby leading them to realize the

Responsibility
as a Corporate
Citizen

Ethical andDynamic
Workplace

How we act to realize the Corporate Vision

Global Advisory Board
Outline of Annual Meeting

Foundations of Corporate Value

To be a foundation of strength, committed to meeting the needs of our customers,

P. 74

serving society, and fostering shared and sustainable growth for a better world.

Our mission

P. 76

Initiatives to Build Sustainable Relationships with Customers

P. 78

Human Resources Strategy

P. 82

Communicating with Stakeholders

P. 84

Risk Management

P. 88

Compliance

P. 89

Internal Audit

1.

P. 90

Responding to Global Financial Regulation

2. Provide reliable and constant support to our customers

Financial Data / Corporate Data
P. 92

Five-Year Major Financial data (FY 2012-FY 2016)

P. 93

Financial Review for Fiscal 2016

P. 98

Consolidated Financial Statements

P. 102Company Overview

Be the world’s most trusted financial group

P. 92

Our vision

3. Expand and strengthen our global presence

1.

Integrity and Responsibility

2. Professionalism and Teamwork

Disclaimer
This report contains forward-looking statements in regard to expectations, forecasts, targets and plans of Mitsubishi UFJ Financial Group, Inc. (“MUFG”) and its
subsidiaries and affiliates (collectively, “the Group”). These forward-looking statements are based on information currently available to the Group and are stated in thisdocument on the basis of the outlook at the time that this document was produced. In producing these forward-looking statements certain assumptions (premises) havebeen utilized, which are subjective and may prove to be incorrect. Should any underlying assumption provide to be incorrect, actual results in the future may varymaterially from some of the forward-looking statements in this document. The Group has no obligation or intent to update any forward-looking statements contained inthis document. In addition, information on companies and other entities outside the Group that is included in this document has been obtained from publicly available
information and other sources. The accuracy and appropriateness of that information has not been verified by the Group and cannot be guaranteed. All figurescontained in this report are calculated according to generally accepted accounting principles in Japan, unless otherwise noted.

Work together to exceed the expectations of our customers

3. Challenge Ourselves to Grow

Our values
Details on our corporate vision are available on our website. http://www.mufg.jp/english/profile/philosophy

MUFG Report 20171

Who We Are

MUFG Value Creation Process
Enhancing Corporate Value by Providing Solutions that Address Social Issues

Social Issues
Global economy●●●

Countering low economic
growth in developed countries
and slowing growth in emerging
nations
Simultaneously ensuring
environmental protection andachieving economic growth
Adapting to widespread
digitalization

MUFG

Value delivered to
stakeholders

Maintaining a strong domestic base while
seeking out growth opportunities overseas

Invested capital

Shareholders

Business models

Initiating efforts to create a more sophisticated business model

MUFG Re-Imagining Strategy P.22

HumancapitalRetail Banking

P.34

Domestic economy
●

●
●
●

Declining birthrate and aging
population
Ongoing deflationary trend
Reforming investment chains
Invigorating regional economies

Retail Business●●Stable asset building
Securing the smooth successionof assets for the next generation

Intellectual
capitalJapanese Corporate
BankingGlobal Banking

Social andrelationshipcapital

P.36

P.38

●

Securing business succession inlight of an aging generation of
corporate managers
Establishing and executing
sound growth strategies(globalization, M&A and the
expansion of sales channels)

Financial
capitalCustomers

Banking

Investor Services /Asset Management

P.40

Global Markets

P.42

●

Synergies throughstrategic capitalalliance
Corporate
governanceframework

Further enhancing
shareholder returns
P.29
Services beyond
expectations
P.24-25
P.34-43
P.76-77

Environment and society

Brokerage●

Risk appetite
framework

Corporate Business●Group management
on a global basis●

Contributing throughbusiness activities
P.46-57

Culture ofcompliance

Employees

Assetmanagement

Contributions toenvironmental andsocial sustainability●

Creating a rewarding
workplace
P.78-81Committed engagement with stakeholders
Returning benefits to society P.82

Invested capital
Human capital●●●

150,000 domestic and overseas employees with diverse
backgrounds
Wealth of human resources boasting professional skills
Strong sense of loyalty

Intellectual capital
●
●

●

2

Insight into various business sectors around the world
Expertise in commercial banking businesses in Japanand elsewhere in Asia as well as the United States
The utilization of external inputs via open innovation

MUFG Report 2017

Social and relationship capital●●

Extensive customer base (40 million individual accounts and
400,000 corporate customers in Japan)
Global network (1,100 domestic bases and approximately 1,200
overseas bases across over 50 countries)

Financial capital●●●

Solid balance sheet
Diversified profit structure
Stable procurement bases at home and abroad

Shareholder
Stucture*1*2
Individuals
and Others

13.64%Net Operating Profits
by business*1

Others

16.53%
Foreign
Institutions

37.98%

GlobalMarkets

RetailBanking

14%24%

IS / AM

Financial
Institutions

31.82%

4%

GlobalBanking

Group Employees*1
Overseas
Employees

41%

Domestic
Employees

59%

Japanese
Corporate
Banking27%

31%

Global Banking accounted for 40%
of total customer segments*3*1 As of March 31, 2017
*2 Excluding own shares and fractional shares*3 Net operating profit of Global Banking / net operating profit of total customer segments

MUFG Report 20173

Who We Are

History of MUFG

・MUFG Corporate Governance
Policies established・Moved to a “company with threecommittees” structure

Among MUFG’s precursors, the oldest dates back approximately 360 years. Over this long span of time, ourcommitment to addressing customer needs has remained unchanged, weathering the course of mergers promptedby recurring periods of social change and economic adversity, including worldwide recessions, Japan’s rapid growth
period, the rise and fall of bubble economies and, most recently, the Global Financial Crisis.

In August 2004, predecessor companies signed a basic
agreement on integration. In October 2005, MUFG wasinaugurated via the merger of Mitsubishi Tokyo Financial
Group and UFJ Holdings.

Source：Konoike Limited Partnership Company

Be the world’s mosttrusted financial group

MUFG Corporate Vision renewed
Ensured the reputation for trustworthinessthat MUFG enjoys among customers, which isbacked by a longstanding track record and ismaintained and passed on, underscoring thecommitment of each employee

Mitsubishi UFJ Trust and Banking,Mitsubishi UFJ Securities inaugurated

Mitsubishi ExchangeHouse established by
Yataro Iwasaki (1880)(One of the precursorsof Mitsubishi Bank)

Bank of Tokyo-Mitsubishi UFJ
inaugurated
Complete repayment of public funds
Source: The Mitsubishi Archives

Yokohama Specie Bank
established (1880)(One of the precursors
of Bank of Tokyo)

Bank of Tokyo established (1946)(One of the precursors of Bank ofTokyo-Mitsubishi UFJ)

Source: Kanagawa Prefectural
Museum of Cultural History

Mitsubishi Bank established (1919)(One of the precursors of Bank ofTokyo-Mitsubishi UFJ)

1929
Worldwide
recessions

Mitsubishi UFJ NICOS,
Mitsubishi UFJ Lease &Finance inaugurated
2011
The Great East
Japan Earthquake2010
The debt crisis
emerges in Europe

Toyo Trust and Banking
established (1959)(One of the precursors of
Mitsubishi UFJ Trust and Banking)

Sanwa Bank established (1933)(One of the precursors of Bankof Tokyo-Mitsubishi UFJ)2008
Financial crisis
triggered by
LehmanBrothers

2009
The Obama administration
inaugurated in the UnitedStates2007
Subprime mortgage problems
emerge in the United States

1941
The Pacific War
breaks out

1964
Tokyo
Olympicgames

1991
The collapseof Japan’s
bubbleeconomies

2013
The BOJ
introduces
quantitative
andqualitative
monetaryeasingpolicies

2015
Quantitativeeasing2014
measures
The Nippon
introduced by
Individual
the European
Savings
Account (NISA) Central Bank
launched

During the global financial crisis, MUFG
invested US$9 billion in Morgan Stanley(U.S.) as part of its efforts to strengthen
investment banking

Yachiyo Securities established (1948)(One of the precursors of Mitsubishi
UFJ Morgan Stanley Securities)

U.K. referendum
results in adecision toleave theEuropean Union

2018
2017
The Trumpadministration
inaugurated in
the UnitedStatesApril 2018 (scheduled)

Integration of Union Bank
operations and Bank ofTokyo-Mitsubishi UFJ
Americas business・Integrate the corporate
loan-related business of Bank ofTokyo-Mitsubishi UFJ and
Mitsubishi UFJ Trust and Banking
・Rename the commercial bankas “MUFG Bank”

MUFG Re-Imagining
Strategy announced
Aiming to achieve sustainable growth andcontribute to the betterment of society by
developing solutions-oriented business

Strategic alliance with
Morgan Stanley

Tokai Bank established (1941)(One of the precursors ofBank of Tokyo-Mitsubishi UFJ)
Mitsubishi Trust established (1927)(One of the precursors of Mitsubishi UFJ Trust and Banking)Kawasaki Trust established (1927)(One of the precursors of Mitsubishi UFJ Trust and Banking)

2012
The secondAbeadministration
inaugurated inJapan,
initiating the
Abenomics
stimulus
package

2016
The BOJ
introduces anegative interest
rate policy

2006
The Bank of Japan (BOJ)
terminated zero interest
2005
rate policy
Transition tolimited deposit
guarantee "payoff"
scheme in Japan

Conversion of Bank of Ayudhya(Krungsri), a major commercialbank in Thailand, into a subsidiary
Initiated full-scale comprehensive
financial services in ASEAN as a key
growth strategy initiative

MUFG Report 2017

Our vision

Mitsubishi UFJ Morgan Stanley Securities,
Morgan Stanley MUFG Securities inaugurated

MUFG inaugurated

Konoike Exchange
Bureau opened in
Osaka (1656)(One of the precursors
of Sanwa Bank)

4

The formulation of common guidelines for theGroup to enforce its customer-first policy

Shifted from a “company with a board ofcorporate auditors” structure to a“company with three-committees”
structure, with the aim of establishing amore transparent and effective
governance framework

We have nurtured our commitment despite the circumstances and are determined to move forward to achieve mutualand sustainable growth with our customers. Moreover, we aspire to contribute to the sound development not only ofJapan but of countries around the world and we aim to be part of the bedrock of society.
With all employees sharing this commitment and aspiration, MUFG steadfastly pursues its mission.

The MUFG Basic Policy for
Fiduciary Duties established

Capital and operational alliancewith Vietnam Joint Stock
Commercial Bank for Industry
and Trade (VietinBank),a national bank in Vietnam

Capital and business alliancewith Security Bank Corporationin the Philippines
The Bank of Tokyo-Mitsubishi UFJ reached an agreementwith Security Bank, a key commercial bank in thePhilippines, to form a capital and business alliance, withthe bank acquiring a 20% equity stake in Security Bank・UnionBanCal Corporation became awholly owned subsidiary of MUFG・ACOM became a consolidated
subsidiary of MUFG (JGAAP only)
MUFG Report 20175

Who We Are

Financial Highlights
Key Financial Performance Indicators¥68.28EPS (growth)
(Yen)
100

Earnings per share (EPS)68.28

MUFG definition*
Tokyo Stock Exchange definition

(%)

1.2

10.00

1.0

9.00

0.8

60

7.25%

ROE (profitability)(Trillions of yen)

Profits attributable to owners of parent (right axis)

80

Financial Position Compared with Global Peers (G-SIBs)(Trillions of yen)

40.0
35.0
30.0

8.00

0.6
40

0.4

20
0

2012

2013

2014

2015

2016 (FY)

6.00

0

5.00

65

(%)

Expenses ratio
General and administrative expenses (right axis)
Gross profits (before credit costs for trust accounts; right axis)

60

55

50

2012

2013

2014

2015

2016

12.5

3.0

12.0

2.0

11.5

1.0

11.0

0

10.5

(FY)

(%)

2014

2015

1.5

2012

2013

2014

2015

2016 (FY)0

MUFG Report 2017

Citigroup

BNP
ParibasGoldman
Sachs

15.9%

MUFG

MorganStanley

Barclays

CreditSuisseDeutscheBank* White numbers in the bar chart represent each institution’s required ratio.

13.6%
12.7%

12.5%

12.4%

12.2%

12.0

2012

2013

2014

2015

2016

10.0

(FY)

9.0%
8.0%

8.0

MorganStanley40%

The ratio of the Global Banking business segment in the net operating profits from customer segments
Net operating profits of the Global Banking business segment (right axis)
Net operating profits of customer segments (right axis) (Trillions of yen)

1.5

40%

HSBC

9.5%

9.5%
8.5%

8.5%

Goldman
Sachs

Citigroup

Barclays

2015

2016

(FY)

Profits attributable to owners of parent[(Total shareholders’ equity at the beginning of the period+ Foreign currency translation adjustments at the beginning of the period)+ (Total shareholders’ equity at the end of the period + Foreign currency translation
adjustments at the end of the period) ] ÷ 2

8.5%
JP Morgan

MUFG

11.8%

11.5%

9.0%

9.0%

DeutscheBank

BNP
Paribas

11.5%

10.8%
9.0%

8.5%
CreditSuisseBank of
America

Credit Ratings
S&P Holding
Company Rating

A+

0.5

A

U.S. Firms

European Firms

MUFG

HSBC

A2014

11.9%

(Rates as of December 31, 2016, excluding the rate for MUFG as of March 31, 2017; based on data disclosed by each firm)

1.0

JP Morgan

BNP Paribas

Deutsche Bank

0

The Global Banking Business segment generated more than 40% of net operating
profits from customer segments thanks to the success of steady efforts aimed at
expanding revenues from deposits, loans and fees and commissions in overseas
operations, countering shrinking revenues from domestic operations.

*

HSBC

(Exchange rate: ¥112.19 to one U.S. dollar; as of March 31, 2017; source: Bloomberg)

14.0

11.76%

20

0Bank of
America

11.9%

30

The ratio of fee income to gross profits grew in step with an increase in fee
income due to rises in fees from domestic investment banking business andfees and commissions from overseas operations, as well as a decline ingross profits.

6

JP Morgan

Common Equity Tier 1 Capital Ratio (full implementation)

10
25

0

(%)

40

30

5.0

11.9%

Common Equity Tier 1 Capital ratio (full implementation)
Common Equity Tier 1 Capital ratio

50

36%
3.0

(FY)

16.0

(%)

4.5

35

2016

Ratio of the Global Banking Business
Segment in the Net Operating Profits from
Customer Segments(Trillions of yen)

40

2013

10.0

The Common Equity Tier 1 Capital ratio remained above the level required byfinancial regulations.

36%

Ratio of fee income
Fee income (right axis)
Gross profits (right axis)

2012

(%)

4.0

Although general and administrative expenses stayed virtually unchanged
thanks to cost control initiatives, the expenses ratio increased due to a decline ingross profits reflecting decreases in domestic interest income and gains on
debt securities.

Ratio of Fee Income

15.0

6.02%

Common Equity Tier 1 Capital Ratio(financial strength)(Trillions of yen)

64.6%

20.0

The ROE decreased due mainly to a prolonged trend toward low interest rates on
a global basis.

64.6%

Expenses Ratio (profitability)

25.0

7.25%

7.00

0.2

Despite the execution of share repurchases, the EPS decreased due to a fall in
profits attributable to owners of parent.

Market Capitalization

×100

BBB+
BBB

Morgan Stanley

Citigroup

Goldman Sachs

Bank of America

Credit Suisse

Barclays(Rating of issuers of long-term foreign currency denominated debt as of June 30, 2017; source: Bloomberg)

MUFG Report 20177

Who We Are

ESG Highlights
Environment

Governance
US$2,911Million(No.1 ranking)Renewable energy sector:

The value of project financearrangements handled by MUFG
(Millions of US$)
3,000

145,517t

Carbon Dioxide (CO2) Emissions*

Total

20

200,000
2,000

145,517150,000

1,000

5

50,000
0
2012

2013

2014

2015

2016

(CY)

Sorce: Bloomberg New Energy Finance

2012

2013

2014

2015

2016

(FY)

Number of businessmatches made*cumulative
Approx.

77,700

2013

2014

10/18

6

2015

7

2016

8

44.4%

55.5%

2017

(FY)

499times
ESG-related indices

499

500

MUFG stock has been designatedby some prominent ESG-related
indices in Japan and overseas (as of
May 31, 2017).

400

60,000300
200

40,000

100

2005～
2012

2013

2014

2015

2016

(FY)

0

2012

2013

2014

2015

2016

(FY)

* The Number of business talks at large-scale business matching conference in Japan* On-demand school lectures and workplace experience programs conducted by staff at
the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking,Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ NICOS and ACOM

Number of employees
on childcare leave*

Ratio of female managers
in the entire managerial positions*

3,391

19.2%
Mar. 31, 2018
20.0 (planned)

(%)

20.0

4,000

19.2

3,391

16.0
2,000

14.0

2012

2013

2014

2015

2016

* Total for the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking,Mitsubishi UFJ Morgan Stanley Securities and Mitsubishi UFJ NICOSMUFG Report 2017

(FY)

12.0

12.3
Apr.
2012

Apr.
2013

Apr.
2014

Apr.
2015

Apr.
2016

Apr.
2017

Capital Eye Best Deals of 2016
Winning a Special Award in theforeign bond category
MUFG was selected as a winner of aSpecial Award under the Capital Eye
Best Deals of 2016 award program(foreign bond category) for the
September 2016 issuance of a
TLAC-eligible Green Bond—theworld’s first bond of this kind.

Bloomberg Financial Services
Gender-Equality Index

18.0

3,000

8

0

2

4

8/18

18

17

External Recognition

Number of occasions in which
MUFG staff provided students
with economic and financial education*(times)77,70080,000

1,000

17

15

Proportion ofNon-executive Directors* Total of MUFG and the Bank of Tokyo-Mitsubishi UFJ (Japan)

Society

20,00015

15

Proportion of Independent
Outside Directors

Company with Three Committees

10100,000

0

Outside Directors

Company with a Boardof Corporate Auditors(t-CO2）250,000

2,911

Number of members of the Board of Directors

Mar.
2018

MUFG was chosen by the index as acompany attractive due to its
creation of a workplace environmentthat embraces gender equality
along with efforts to maintain timely
information disclosure, solid
cumulative track record andprogressive policies in this area.

The 2017 Competitive IT Strategy
Company Stock Selection
MUFG was selected by Japan’s
Ministry of Economy, Trade andIndustry and the Tokyo Stock
Exchange as an attractive company
due to its aggressive utilization of IT
in its management activities andengagement in strategic IT
investments and other initiatives.

Certified Health and Productivity
Management Organization(Major Corporation Category)
MUFG was selected as a CertifiedHealth and Productivity Management
Organization (major corporation
category) in February 2017 by the
Ministry of Economy, Trade andIndustry for its outstanding track recordin the practice of health management.

* Total of the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking
and Mitsubishi UFJ Morgan Stanley Securities

MUFG Report 20179

Management Message

Message from the CEO

Strengthening Our Financial Performance & Social
Contribution Through Enlightened,
Relevant & Future-Oriented Strategies
Implementing the MUFG Re-Imagining Strategy, we will contribute to the strength and development of the social
fabric at home and abroad, while working hand-in-hand with stakeholders to ensure mutual and sustainable growth.

Forces Shaping our Domestic and Global Markets
The world witnessed profound upheaval in our fiscal 2016—ended March 31, 2017—withchanges in the political sphere, and geopolitical instability arising from new and often
violent sources. Regional economic disparities became more significant, and financial
markets were shaken by drastic fluctuations. These unsettling forces fueled a sense of
uncertainty worldwide. Out of necessity as a responsible business, we learned to monitor
and assess the latest operating conditions more accurately, to make swift andtimely decisions.
Why did U.K. voters choose Brexit? Why did U.S. voters choose a Trump administration?
Largely because of deepening divisions in society and widespread failure of the politicaland economic establishment to address the divisive results. I believe we must take thesedevelopments very seriously, in part because they reveal how ineffective theestablishment—which includes financial institutions like ours—has been in recognizing thetectonic pressures building beneath society’s surface.
Fortunately, political, economic, and social conditions have been stable in Japan, MUFG’s
home market. The Abe administration has succeeded in breaking a syndrome of indecisive
leadership and its political side effects. Moreover, Japan has enjoyed a fifth consecutive
quarter of economic growth, and its society is comparatively stable at theinternational level.
But structural problems could materialize quickly and forcefully. Japan is facing a numberof potential immediate and long-term issues that demand decisive, preemptive action.
Immediate issues include a trend of shrinking corporate investment and householdspending due to prolonged deflation, social inequities among generations, and an
unbalanced budget. Longer-term issues include the growing effect of an aging andshrinking population, which threatens the nation’s social order and sustainability. These
short-term trends in spending and long-term trends in demographics affect one another,and we have to address them both accordingly.
Given this domestic scenario, I believe Japan has a duty to embrace a leadership role on
the global stage, setting an example of how to deal with issues that others—including
developing nations—may also eventually encounter. If Japan succeeds in establishingprecedents and sharing best practices, this would help the country strengthen its stature
among the international community.
10

MUFG Report 2017

Nobuyuki Hirano
Director, President & Group CEO

MUFG Report 201711

Management Message

Message from the CEO
We believe that just as Society 5.0 in our home country is a key government strategy toaddress an aging society and a shrinking population, digitalization will be a key ingredientin the unique solutions that financial institutions will no doubt develop to meet theinevitable challenges ahead.

Overview of Operating Results for Fiscal Year Ended March 31, 2017
During the year, our domestic Retail and Corporate Banking and foreign currency Asset
Liability Management (ALM) felt the effects of the circumstances discussed above. In
particular, they were affected by the Bank of Japan’s negative interest-rate policy, and therise in U.S. long-term interest rates instituted in November. These low rates contributed todecreased profits in many of MUFG’s business segments.
Retail Banking, for instance, saw profits decline, due to a slump in revenues from yen
deposits and the sluggish performance of investment-products sales. This was despite
continued growth in consumer finance, and solid demand for residential mortgage loans
fueled by very low interest rates. This suggests we may be midway through our reforms
that were meant to induce “a shift from savings to stable asset building.”
With this understanding, the Government has proposed “Society 5.0.” Drawing on Japan’s
distinctive strengths, this initiative will use digital innovation to improve public welfare andhelp transform society. To extend the initiative’s reach into broad spheres of society—not
just the economy—essential industries such as ours must collaborate to develop solutions
to difficult problems. The spirit behind this initiative is a positive sign on the domestic front.
But what about the global economy? True, it appears on a recovery track, but a number ofissues must be addressed. One burning topic is whether or not sustainable growth is evenfeasible. Can the world community appropriately cope with volatile regional and politicalschisms? Also obviously, the threat of international terrorism poses a looming risk and may
further destabilize already shaky social and political structures. Meanwhile, new capabilities
for nuclear warfare are on the verge of becoming a real possibility for a regime near
Japan—a threat not just to its neighbors but the entire globe.

The Operating Environment Surrounding the Financial Industry

Profits at Japanese Corporate Banking also dropped, due largely to fewer loans and lower
deposit revenues. However, there are signs that the current pace of decline in lending
margins is slowing. And we are now offering attractive products such as hybrid loans.
These meet the capital-funding needs of listed major corporations responding to thegrowing trend toward avoiding stock dilution. Also, we are starting to see positive resultsfrom our decision last year to simplify reporting lines and integrate our management
framework for servicing Japanese corporates at home and abroad—and we will do more in
the coming year. We also made solid progress in reducing equity holdings and are in fact
ahead of plan.

Against that backdrop, the financial industry is facing its own immediate and potential
long-term issues. Among the most severe short-term concerns are the dwindling
opportunities to create new business in a market mired in stagnant growth, and ongoingchallenges posed by low, or even negative, interest rates.

These are all positive signs, but we need more assertive steps to reverse our prolonged
decline in profits. These may even include fundamentally reforming our conventional
lending-based business model, which depends deeply on interest income.

Fears are growing that any momentum shown by the global economy may be suppressed
if the U.S.—the world’s leading economic powerhouse—adopts protectionist policies that
inhibit international trade and investment. Developed countries would find it harder tomove beyond the monetary-easing policies they have instituted at unprecedented levels.
Once this cycle sets in, the low interest-rate environment could well entrench, and financial
institutions could face an almost intractable struggle.

Meanwhile, our global banking business has grown steadily. Under strong leadership fromits newly appointed CEO, our U.S. operations have bolstered segment strategies,
strengthened cross-selling in Corporate Banking, restructured Retail and Commercial
Banking, and reduced costs on a sustainable basis. In Thailand, the Bank of Ayudhya(Krungsri) has expanded its business, maintaining stability and the quality of its asset
portfolio while solidifying its rank among the top five banks in the country.

There are bright spots, however. We anticipate a fresh wave of digital innovation that could
help address both short-term and long-term concerns. Of course, this innovation could
also raise challenges. Newcomers may leverage it to lure share from established players
slow to respond to market trends. On the other hand, established players who make bolduse of innovative IT could break through with technologies and business models that areuser-friendly and productive.

We are encouraged by this progress in key global markets, while acknowledging somemajor challenges. These include upgrading our global governance structure, responding
appropriately to evolving U.S. and global regulatory requirements and managing theircompliance costs, reviewing our business investment and networks, and enhancing our
IT platforms.

We must be vigilant at home and abroad, keeping in mind the social and economic
implications if any of these threats materialize into stark reality.

12

Meanwhile, Mitsubishi UFJ NICOS Co., Ltd. (NICOS) posted a loss for the second
consecutive year. This was due largely to posted expenses for structural reforms to improve
performance in the fiscal year starting in April 2017. Looking ahead, we intend to allocate
groupwide management resources to NICOS, which we have positioned as a platform forour payment-services business and have decided to make a wholly owned subsidiary.
Moreover, ACOM Co., Ltd., also recorded a loss, partly because of additional provision forlosses on interest repayment because the number of refund claims has not declined as
steadily as we expected.

MUFG Report 2017

MUFG Report 201713

Management Message

Message from the CEO
Profits at Investor Services / Asset Management declined due largely to the dissolution of
our domestic Employees’ Pension Fund plans, and stagnation in the investment trust
market. However, global Investor Services has grown considerably over the past four years
and is now capable of a wide range of fund administration services, including those related
to hedge funds, private equity, and U.S. 40 Acts. To build on this momentum, we will focus
on fortifying profits by expanding our client base and reducing costs. Also, to satisfy ourcurrent medium-term business plan, we will step up our efforts to make inorganic
investments in our asset management business.
Our global markets business underwent major changes this past year. In Sales and Trading,
we began integrating our Bank and our Securities Company businesses in Japan andoverseas. This helped grow profits, particularly from overseas operations. Although interest
income and other revenues declined in Japan, growth in revenues from operations in the
U.S., Europe, and Asian countries outside Japan largely compensated, with overseas
operations accounting for more than 50% of our total profit. On the other hand, we
drastically reduced the risk in banking ALM by decreasing balances and shortening
durations, even though these operations performed well in the first half of the year. We did
this to protect operations against the correction phase of yen interest rates, and the effects
of hikes in U.S. interest rates, along with other factors adding more uncertainty. As a result,profits in this business declined significantly. Going forward, we will tackle the immediatechallenge of optimizing banking ALM portfolio to ensure stable, ongoing profit.

Policies for the Fiscal Year Ending March 31, 2018 and Beyond
At the beginning of fiscal 2017, we entered the final year of our current medium-termbusiness plan. Although it’s highly likely we will reach our Common Equity Tier 1 Capital
Ratio target, it’s unlikely we will reach our targets for earnings per share (EPS), which
represents growth; or for return on equity (ROE) and the expense ratio, which together
indicate profitability. We also need to pay close attention to the effects of Basel III revisions,the introduction of Total Loss Absorbing Capacity (TLAC) requirements, and otherimpending global financial regulations that may impose harsher restrictions on ourcapital-investment decisions.
To strengthen our ability to adapt to new restrictions, our priorities in the next
medium-term business plan will include making better use of our capital through a
disciplined mindset finely tuned to returns on risk. At the same time, we will implement abalanced capital policy aimed at financial strength and enhanced shareholder returns. This
will help us maintain stable ROE at a level higher than capital costs, which will require aframework to improve return on risk-weighted assets (RORA), particularly in commercial
banking. At the same time, we intend to assure sustainable growth through the MUFG
Re-Imagining Strategy and its robust initiatives, as described below.

The MUFG Re-Imagining Strategy
One truth has become clear: A business model centered on conventional commercial
banking is no longer sustainable and must be reformed. This is why our current
medium-term business plan promotes reforms that rely heavily on three umbrella themes:“Focusing on the customer perspective,” “Taking a Group-driven approach,” and “Making
productivity improvements.” These reforms are meant to address challenges we anticipate
from structural changes in society and economies over the next ten years. This still holds
true. But we have to intensify our efforts because the pace of change is much faster thanwe could have envisioned when we planned these reforms.
We need a radical new approach for at least three reasons. First, we are certain that top-line
revenues from our existing businesses will fall far short of initial estimates, due to an
ongoing worldwide trend toward ultra-low-interest rates and anemic economic growth.
14

MUFG Report 2017

Second, imminent global financial regulations will place tighter restrictions on capital andliquidity—both essential to business expansion—and drive up the cost of compliance. Third,
widespread digitalization has dramatically outpaced projections. True, it will open huge
opportunities to reform our business model, but by the same token, newcomers armed
with digital innovations can threaten our base.
These projections have prompted us to a sense of urgency. In summer 2016, we launched
a dedicated project team that, by design, includes young leadership representing thefuture of MUFG’s operating units. After thoroughly reviewing our operations andmanagement structure, the team formulated the MUFG Re-Imagining Strategy, a set ofpivotal policies to guide our business strategies.
As we discuss the upcoming renewal of our medium-term business plan, we will form
action plans based on macro policies laid out in the MUFG Re-Imagining Strategy andinitiate the second phase of our reforms. The underlying theme of this phase is “a shift to a
management approach that is simple, speedy and transparent.”
Our MUFG Re-Imagining Strategy is presented more fully later in these pages, but let me
describe its four supporting pillars here.
The first pillar is “Strengthening our management approach based on customer- andbusiness-based segments.” MUFG’s longstanding operational philosophy has been to
facilitate each unit’s standalone superiority in its niche. However, our current view of an
overarching mission is more comprehensive and outward-facing: We aim as a team todeliver optimal solutions to customers—individuals, corporations, and institutional
investors—each of whom faces unique challenges. This, to us, is a large part of what itmeans to fulfill our responsibilities.

Decided direction
May 2017

Design detail /partially launch
by Mar 2018

Fully launchfrom Apr 2018

Net operating
profits¥300 bn

Gross profits¥180 bn

Cost reduction¥120 bnnote Figures are rough estimation in FY2023

1. Strengthening our management approach based on
customer- and business-based segments(1) Further Wealth Management strategy(2) Reinforce business with large companies with groupunified service and global platform(3) Accelerate Asset Management business(4) Enhance Payment Platform
2. Business transformation through the use of digitaltechnology

4. Reorganization of MUFG Group management structure(1) Integrate corporate loan-related business of the Bank andthe Trust Bank
• Establish the most suitable formation to service our corporateclients as one group• Clarify the mission and responsibility of each group member(2) Strengthen AM and IS businesses — New trust banking model• Accelerate AM and IS businesses as growth area for group• Make Mitsubishi UFJ Kokusai Asset Management a wholly
owned subsidiary of the Trust Bank

(1) Improve customer convenience(2) Business process reengineering(3) Reform customer interface channels domestically andglobally(3) Review customer segmentation• Integrate Japanese retail banking and SME segments• Reorganize Japanese large corporate and global corporate
segments respectively, each of which is managed globally
across geographical boundaries

3. Initiatives to improve productivity(4) Establish the framework to promote our digital strategy• Appoint a Chief Digital Transformation Officer (CDTO)• Establish Digital Transformation Division(1) Strategically review portfolio of existing investment inaffiliates(2) Optimizing human resource allocation on a group-basis(3) Working-Style reforms (increase time to face customers)(5) Reinforce retail payment business• Make NICOS a wholly owned company of MUFG
(6) Rename the commercial bank as “MUFG Bank”

MUFG Report 201715

Management Message

Message from the CEO
This requires us to change our approach from supervising a set of affiliated operatingcompanies that run their respective businesses autonomously, to establishing an
overarching structure that freely mobilizes the functions, products, and services of eachcompany. This new approach facilitates the environment we want to create, where
resources can be drawn from anywhere and, most important, any activity can center onsatisfying customer needs.
One way to do this is to create a single point of contact for the customer. We can also
eliminate functional overlaps, clarify the mission of each operating unit, and free them toconcentrate resources on pursuing their mission through their core expertise.
To help achieve this, we are establishing a new brand that encompasses all the group’s
wealth management functions; building an integrated marketing platform—a combinationof the Bank, the Trust Bank, and the Securities Business—that serves global corporations;pursuing inorganic expansion in the global asset management business undertaken by theTrust Bank, through executing majority investment; and launching groupwide payment
services employing the NICOS platform.
The second pillar is “Business transformation through the use of digital technology.” We will
promote our initiatives in three areas.

When we complete these reorganizations, we will have created a globally unified brand we
can present to customers worldwide, showing an integrated structure capable ofmarshaling groupwide resources on their behalf. The upcoming rebranding of the Bank to“MUFG Bank” in overseas markets is in line with this brand strategy.
The MUFG Re-Imagining Strategy aims to boost net operating profits by ¥300 billion overseven years. ¥180 billion of this will come from increased profits, while ¥120 billion will
come from reduced costs, mostly through digitalization. We calculate these figures byassessing approximately 70 individual measures and their possible effects, feasibility,
and timelines.

One, we will create new businesses to make banking more convenient for customers. In
addition to improving the customer experience through simple and easy-to-understandmobile interfaces, we will promote cashless transactions and digitalize residential mortgage
loans. We will also deepen our marketing capabilities through data analysis.

Upgrading Our Governance Framework

Two, we will re-engineer our business processes. We will infuse our operations, fromfrontline to back office, with digital technologies that improve the entire process, with theaim of reducing total workloads 30%—equivalent to the labor of 9,500 personnel in ourhome market.

Soon after MUFG’s transition to a “Company with Three Committees” structure in 2015,
three core subsidiaries also adopted a “Companies with Supervisory Committees” system.
And we have appointed outside directors with diverse backgrounds while creating
non-mandatory governance-related committees. Now, having expanded the Board’s
diversity, we will focus on developing an inclusive pool of successor candidates, andformulating succession plans for outside directors.

And three, we will reform customer interface channels, domestically and globally.
Specifically, we will expand service channels supported by a “virtual branch” and, at thesame time, strengthen advisory services that require direct human interaction at physicalbranch locations. This will lead the way toward next-generation bank branches. Anotherkey reform will be in system design and development methodology. Stable, robust, andsecure systems will always be absolutely crucial, of course, but in specific areas that require
enhanced UI/UX both for customers and colleagues, we need to add an “Agile” dimension.
This will also be applicable to our legacy platforms and promote a switchover tocloud computing.
The third pillar is “Initiatives to improve productivity.” Our current medium-term businessplan calls for better productivity in three asset areas—human, capital, and investment. To
speed results, we will optimize staffing through digitalization while reforming work styles.
We will also free our groupwide human resources from the confines of a single business
unit, and develop a unified human-resource management system. As for capital andinvestment, we will upgrade management systems to support our risk-weighted asset,
liquidity, and cost return. And we will strategically reassess the efficiency of our existing
investment outlets—in Japan and globally—and use what we learn to optimize our portfolio.
This will help improve ROE.
The fourth pillar is the “Reorganization of MUFG Group management structure.” While thefirst pillar strengthens our management approach based on customer- and business-based
segments, the fourth pillar reassesses our customer segmentation with an eye toward16

integrating domestic retail banking and small- and medium-sized enterprise (SME)
segments of the Bank. We will also migrate to a global management structure in our service
to large Japanese corporates and large global corporates alike. Both structures willtranscend geographical boundaries, and—in line with our policy of integrating overlapping
functions and clarifying the mission of each operating company—we will transfer the Trust
Bank’s corporate lending business to the Bank. At the same time, we will make Mitsubishi
UFJ Kokusai Asset Management Co., Ltd., a wholly owned subsidiary of the Trust Bank,
which will position asset management as its core business. And, as mentioned, we will
make NICOS a wholly owned subsidiary of MUFG.

MUFG Report 2017

We cannot live up to the expectations of stakeholders—and sustainably grow at the sametime—without a robust, transparent corporate governance framework. We haveendeavored to establish such a framework since the founding of MUFG.

MUFG has made steady progress in strengthening governance functions, namely:
streamlining the selection of agenda items at Board of Directors meetings to allow plentyof time for discussion; simplifying meeting materials and clarifying points to be discussed;enriching the content of information provided to outside directors; and conducting off-site
meetings to allow deep dives into strategic matters. Under the initiative of its Lead Director,
MUFG also convenes meetings to facilitate communication with operating units’ board
members. In addition, MUFG’s management team holds discussions with independent
directors who serve at an intermediate holding company (IHC) in the U.S. Furthermore, the
MUFG Audit Committee engages in deliberation with each operating unit’s board ofcorporate auditors. And importantly, MUFG’s independent directors participated in
discussions leading to the formulation of the MUFG Re-Imagining Strategy. Management
benefitted from these directors’ insights and kept them in the loop on progress.
Thanks to these efforts, the latest Board of Directors self-evaluation process confirmed
improvements on a number of fronts. However, the Board unanimously agreed we need to
optimize its mix to better deal with the globalization of MUFG Group operations. Currently,
around 40% of our shareholders are foreign institutions, approximately the same as theratio of our overseas colleagues to the total group workforce. Overseas revenues also
account for around 40% of net operating profit of our total customer segment.
Accordingly, board members have been quick to identify the urgent need for non-Japanese
directors. This is why, at the recent Annual General Meeting of Shareholders, two foreign
MUFG Report 201717

Management Message

Message from the CEO
nationals were appointed as directors: Mr. Toby S. Myerson, an attorney with extensive
expertise in cross-border M&A and who concurrently holds the post of Lead Director at the
U.S. subsidiary Mitsubishi UFJ Americas Holdings; and Ms. Tarisa Watanagase, former
Governor of the Bank of Thailand. We have positioned the U.S. and Asia as strategic
markets for our overseas operations and are confident these appointments will
prove beneficial.
The Board also recognizes the need for more robust succession plans, as well as the needto nurture future leaders. In May 2017, the president of the Bank stepped down partway
through his term of office, sadly due to health issues. The Nominating and GovernanceCommittee moved swiftly to select his successor, preempting major disruptions. We
attribute this decisiveness to our steady progress since 2015 in building a framework forsuccession plans. Objectives included clear transition principles for both emergency
contingency planning and for standard succession planning. Although the circumstancesof our president’s resignation were truly unfortunate, we were gratified to see our
preparations pay off with a smooth transition. We will keep working to build the number ofmanagement candidates with top leadership potential, and will develop programs to
educate prospects who may become MUFG leaders two generations from now.
Of course, succession plans must cover outside directors as well. Even though we have
optimized the composition of our Board of Directors in terms of experience, fields ofspecialty, and geographical diversity, it is hard to maintain an ideal balance while avoiding
the drawbacks of a fixed membership. This is why, in the year ending March 31, 2018, theBoard of Directors will discuss the possibility of creating a more clearly defined set of
requirements for director candidates, and setting limits on re-appointment. Regarding
governance of Group operating companies, MUFG’s Nominating and GovernanceCommittee will review the current “Advisor” system at each operating unit.

Addressing Environmental & Social Issues through Business Activity
Earlier, I discussed our solemn obligation to take action on social issues. Specifically, weneed to consider what role we can play as a prominent global financial group based inJapan. Our obligation lies partly in response to the realities of an aging population, adeclining birthrate, and the effects of these factors on social sustainability. In addition, as afinancial group operating on a global basis, we must ask ourselves what we can do tocounter climate change, regarded as a major contributor to natural disasters aroundthe world.
Today, most business leaders agree that one of the purposes of business is to help solve
issues confronting society, and to create shared value. This is certainly true in Japan; theidea dates back centuries, expressed in an old maxim that every business must benefit theseller, the buyer, and society as a whole. A modern-day equivalent is the use ofEnvironmental, Social, and Governance (ESG) criteria to evaluate corporate activities, apractice becoming more commonplace. Just last year, Japan’s Financial Services Agency
formally included the concept of “creating shared value” in its Strategic Directions
and Priorities.
We fully agree with this concept and place great emphasis on helping preserve theenvironment and contributing to society through healthy business activity.
In terms of social contribution, we are striving to help invigorate the economy and build asustainable society, with each group company doing its part in its area of expertise. In thisregard, MUFG generally places particular importance on supporting more-sophisticatedinvestment strategies for households, and assisting SMEs.

18

MUFG Report 2017

To help households develop investment strategies, MUFG can play the dual role of asset
manager and distribution resource; we have Japan’s greatest capacities in those two fields,
given our expertise and extensive branch network.
As an asset manager, the Trust Bank strives for best practices in management policies that
conform to Stewardship Codes. This helps avoid conflicts of interest and creates clear
standards for voting rights and disclosure of voting results. The Trust Bank has a proud
track record in these matters, due to its high standards of researching and executing
fiduciary duties in pension planning. With the MUFG Re-Imagining Strategy identifying
asset management as the Trust Bank’s core business, and with Mitsubishi UFJ Kokusai AssetManagement Co., Ltd., being made a wholly owned subsidiary, our focus on asset
management is stronger than ever.
As for our role as a distribution resource, our group companies have been industry leaders
in forming fiduciary-duty policies and designating relevant key performance indicators.
Although the government has articulated a “shift from savings to stable asset building” as amajor policy, it will take time and effort before the nation sees results. So in the meantime,
we will develop educational programs for potential investors, ranging from inexperienced
young people to established business professionals.
MUFG has a robust track record in helping and nurturing SMEs in Japan; it is part of our
day-to-day heritage dating back centuries through our predecessor companies. Morerecently, we have been organizing large “business matching” events, a kind of referral
service in which we arrange introductions among business-partner candidates selectedfrom our roster of corporate customers, based on their needs. So far, we have hosted 14 ofthese events, with attendees from 37,000 companies and resulting in 77,000 negotiatedbusiness arrangements. It is well known that Japan’s industrial sector is supported bynumerous SMEs with superior technological strengths in manufacturing. With this in mind,
and despite a longstanding deflationary economy, MUFG systematically supports SMEs
looking for business opportunities rather than funding.
We sponsor the “Rise Up Festa,” a competition supporting startup businesses, as well as the“MUFG FinTech Accelerator Program.” With these tools, we aid in the discovery of newtechnologies and business models while encouraging high-tech entrepreneurship andhelping bolster the Japanese business sector.
MUFG Report 201719

Management Message

Message from the CEO
We consider supporting SMEs as part of our heritage of planting deep local roots in thecommunities we serve. We aim to invigorate stagnant local economies—a longstanding
issue in Japan.
MUFG considers it a core responsibility to conduct business in an environmentally
responsible manner, and we have long embraced environmental preservation activities,
including countering climate change. For example, we were early financers of renewableenergy businesses involved in solar, hydroelectric, wind, and geothermal power generation.
Thanks to our world-leading expertise in this field, MUFG’s project finance track record isconsistently ranked in the top echelon of financing renewable energy. To raise investment
funds, in September 2016 we issued “Green Bonds” to conform to the latest global financial
regulations. Securities also boasts a proven track record in consulting services that help
businesses in emerging nations reduce greenhouse gas emissions.
In June 2017, members of the Board of Directors discussed how to ensure ESG
management at MUFG and how we should address environmental and social issues as amatter of course. We intend to keep helping resolve social issues while upgrading ourmanagement of environmental and social risks. Implementing these and other strategies tocreate value over the long term, MUFG will work to live up to expectations of stakeholders
around the globe.

Developing Human Resources while Promoting Diversity
Ultimately, the value of our products and services to customers and society depends on
unlocking the potential within our colleagues. Tapping this power of “human capital,” we
can help colleagues reach high and inspire them to do their best. We also must promote
their long-term career development by supporting Human Resources as it provides
necessary tools. The quality of the working environment is also key. We believe seniorleadership is responsible for creating a vibrant workplace that embraces creativity andallows a diverse team of colleagues to energize each other and aim with confidence for
ambitious targets.
MUFG offers various career paths based on goals each colleague sets voluntarily, andprovides individually tailored career-development training that differs by job category andposition. In recent years, we have seen a growing need for talent capable of leading global
operations. So we have been identifying leadership talent in search of candidates whotranscend the traditional boundaries of business segments. We also have sought todevelop these candidates’ skill sets so they are prepared for future career advancements.
We host seminars to develop next-generation leaders, and I personally enjoy visiting these
events to observe and give feedback on presentations by participants who show amazing
potential. In fact, many initiatives in the MUFG Re-Imagining Strategy are based on ideas
from the rising talent so abundant at these events.
We also need to step up business reforms through digitalization, in two areas. First,
developing capable talent. We not only have to raise top management’s awareness; weneed initiatives to create new business and push end-to-end process reforms. Second, wemust train those in positions likely to be replaced by digital technologies so they canflourish in new roles that require creativity.
In Japan, government-led “Work Style Reforms” are now underway. To help counter a labor
shortage due to an aging and shrinking population, these reforms promote women’s
participation in the workforce and counteract socioeconomic forces suppressing the birthrate. They also promote industrial productivity, where Japan lags behind its peers. As aparticipant in these reforms, MUFG has identified three key initiatives: helping colleagues
find an optimal work-life balance; offering them opportunities to pursue self-development;
20

MUFG Report 2017and giving them reasons to take pride in being part of MUFG.
According to a survey last year, the majority of MUFG colleagues has a high level ofsatisfaction with work life, and feels a sense of “belonging” at MUFG—more so than peers
do at other financial institutions. That is good news, but much remains to be done.
This includes promoting workforce diversity. To help female colleagues strike a productivebalance between work and parenting, MUFG has introduced support systems, such as an
in-house concierge service and a company-sponsored childcare facility. Thanks to this andother initiatives to help them smoothly re-enter the workplace after childbirth, the numberof domestic MUFG colleagues on childcare leave has grown to more than 3,300, well
above other Japanese corporations. As for our efforts to offer women greater career
opportunities, the ratio of female colleagues in managerial positions has reached 19.2%,
approaching our current target of 20%. However, the number of female leaders in top
management positions is still insufficient. We have made some progress—for instance,
appointing another female director to the MUFG board and the first female executive
officer at the Bank—but we must redouble our efforts to nurture and cultivate female talent
for executive positions.

In Conclusion
Last year, while discussing the “MUFG Re-Imagining Strategy” with our next generation ofleaders, I became acutely aware of how our deep-rooted corporate culture prioritizes thelending business above all else. It is time to break with this culture. We are committed tobeing a financial group genuinely capable of meeting diverse customer needs. To this end,
we are striving to deliver truly valuable and seamless services to a broad range ofcustomers in a timely manner. This is also my personal commitment and is fully reflected in
the “MUFG Re-Imagining Strategy.”
Our reforms are meant to ensure sustainable, mutual development for the Group and all its
stakeholders. That is how we will contribute to a strong social fabric at home and abroad.
Furthermore, we will share the fruits of these reforms with our stakeholders by enhancing
shareholder returns, improving the quality of our services beyond customer expectations,and creating a rewarding workplace for colleagues. We will contribute to society and help
preserve the global environment through our business activities. As an institution thatfunctions as part of society’s foundation and helps provide its lifeblood, we are determinedand honored to fulfill these duties.
We are hard at work to earn a reputation as the world’s most-trusted financial group. To that
end, we pledge to do our best to make structural reforms now, so we can pass a legacy ofearned trust into the hands of future generations at MUFG.
We ask for your continued understanding and support as we devote ourselves to theseworthy goals.

July 2017

Nobuyuki Hirano
Director, President & Group CEO
MUFG Report 201721

Management Message

MUFG Re-Imagining Strategy—Building Anew at MUFG
Operating environments surrounding MUFG have drastically changed from those prevailing at the time of thecurrent medium-term business plan was formulated. Regardless, MUFG aims to remain a financial groupcapable of achieving sustainable growth by quickly adapting to structural changes in operating environments athome and abroad. To that end, we announced the MUFG Re-Imagining Strategy in May 2017.
Taking an integrated group-based management approach that is simple, speedy and transparent, MUFG iscommitted to delivering the best value to its customers, employees, shareholders and all other stakeholders.
Moreover, MUFG will provide solutions for issues society is confronting through its business activities. In theseways, we will contribute to the sustainable development and betterment of society.

Strengthening our management approachbased on customer- and business-based
segments

we will reorganize operations for ease of management
across geographical boundaries. In these ways, we will bebetter set to address sophisticated and diverse
customer needs.

Working as one, group companies pursue the common
goal of going beyond the boundaries of conventional
business categories and geographical regions to deliver
greater value to customers.
For example, MUFG executes wealth management
strategies aimed at seamlessly providing individual
customers with diverse solutions that draw on its
distinctive strength in comprehensive financial services.
As for corporate customers, we aim to establish an
optimal structure that enables us to offer client services
as one group and, to this end, will transfer the Trust Bank’s
corporate loan-related business to the Bank. As for theJapanese large corporate and global corporate segments,

At the same time, we are striving to establish a new trust
banking model, with the Trust Bank placing particularfocus on the investor services and asset managementbusinesses—key growth drivers for the Group. In
furtherance of efforts aimed at stepping up the asset
management business, we will make Mitsubishi UFJ
Kokusai Asset Management Co., Ltd. a wholly owned
subsidiary of the Trust Bank. We will also accelerate
overseas expansion with an eye to securing majority
investments. In the investor services business, we will
strive to establish the “MUFG investor services brand” tobecome a global player boasting a strong presence.

Business transformation through the use ofdigital technology
Digitalization is key to MUFG’s future. To MUFG, it
doesn’t mean “replacing human workers withmachines.” Rather, our focus is to utilize digitalization tobetter serve our customers by creating products andservices that are simpler and easy to use.
Simultaneously, we will utilize it to streamline
operational process supporting such offerings.
Today, customers’ preferences and behavior patterns
are radically changing on the back of such factors as
the widespread use of mobile devices and theadvancing aging of populations. Taking changing
social trends and customer needs into account, MUFG
will strive to develop optimal channels as a Group.
Specifically, we have positioned “user-friendly,”“speedy,” “frictionless” and “location-free” as key
concepts for our “channel reforms.” By doing so, wewill provide easy-to-use, simpler services that can beaccessed anywhere, anytime, eliminating the need forundergoing burdensome procedures or switching fromamong service interfaces.
Efforts are now under way to develop a robust
framework for driving the aforementioned reforms. The
Digital Innovation Division will be reorganized andrenamed to the Digital Transformation Division, withgreater resources allocated to digital transformation.
Furthermore, we will appoint a Chief Digital
Transformation Officer (CDTO). These moves will
accelerate our digital strategies.

Meanwhile, MUFG will make Mitsubishi UFJ NICOS a
wholly owned subsidiary, aiming to better leverage thesubsidiary’s capacity as a settlement platform that will,in turn, drive the creation of value-added services andboost the group’s settlement business. Using this moveas a springboard, we will accelerate our structuralreforms, our pursuit of synergies of group operations
and the digitalization of the entire group.

Initiatives to improve productivity
We aspire to better serve customer needs by effectively
utilizing our limited management resources. We also
aim to help each employee realize their full potential.
To this end, we will carry out “optimization” by rallying
groupwide strengths.
For example, we will optimize our strategic investment
portfolio while giving due consideration to capitaldiscipline and RWA regulations. We will also pursue
opportunities to achieve inorganic growth in strategicareas.
Moreover, we will leverage digitalization to create aworking environment that allows employees toconcentrate on duties that lead to the creation ofgreater value. We will also encourage them to pursue
self-development and to satisfy their intellectual
ambitions. In short, we will endeavor to develop a
workplace in which everyone finds his/her pursuit of aprofessional career rewarding.

Framework for promoting digitalization

Clarify the mission and responsibilities of the Bank, the Trust Bank, and the Securities Business Holdings

Appoint CDTO

Establish “Digital Transformation Division”

MUFG

Establish “Digital Transformation Committee”

CEO
Digital Transformation Committee

The Bank
Corporatelending etc.
Mitsubishi UFJ Kokusai AM share

The Trust Bank
Developing a “trust-oriented
consulting and solution business”

The Securities Business Holdings

Mitsubishi UFJ Kokusai AM share

Heads ofbusiness
unit

CDTO

CIO

Chief executive for MUFG’s digital transformation

Digital Transformation Division
Business groups
Commercial banking, settlement,
solution business, etc.

22

MUFG Report 2017

IS/AM, real estate, pension, corporate
agency, inheritance business, etc.

Investment banking, sales & trading, AM
business, etc.

Systems

Operations

Plan and development
for IT systems

Reform operation
processes

Change agent for promoting individual projects
toward MUFG’s digital transformation

Innovation Lab
Aim for “Frictionless” society by integrating banking
experience and areas of mobility, etc.

MUFG Report 201723

Management Message

MUFG’s Digital Strategies

Collaboration with Alpaca

Moving beyond FinTech
Fostering Open Innovation for Future Generations
MUFG boasts extensive expertise in the financial business and over time has built a reputation fortrustworthiness. FinTech startups offer novel ideas for innovative services. Combining the strengths of the two,
we are about to launch unconventional services that boast superior user convenience while ensuring security.

Provision of MUFG APIs
Among the trends in software and web-service
technologies, Open API* is an open innovation initiative
a number of corporates are utilizing to make theirprograms available to external parties via the Internet.
Using APIs, third-party corporations can access these
programs and combine them with their own
technologies and ideas, thereby leading to the releaseof novel services.
Remaining on-trend with advances in these areas, inMarch 2016 MUFG became the first domestic bank tohost a “hackathon” event in which external developers
compete to create new services that employ banking
APIs. In April 2017, MUFG also made its APIs for the
BizSTATION corporate online banking service available
to external partners, initiating collaborative
development.
Going forward, we will strive to create innovative
services through the provision of new APIs andpartnership with external companies.
* Application Programming Interface: A set of programming instructions andstandards for accessing a software application

Participating in a Next-Generation Settlement
Network Lead by Ripple Inc.
The U.S.-based Ripple Inc. has developed a newtechnology that enables the development of a global
transfer network and is expected to provide asettlement solution for future generations. Along withmessaging functions, the resulting transfer network will
boast real-time transfer and settlement capabilities
thanks to the application of blockchain related cuttingedge technologies.
MUFG participates in the domestic consortium to
discuss the commercialization of this technology.
Moreover, Bank of Tokyo-Mitsubishi UFJ became thefirst Asian bank to contribute to discussions at the
global advisory board with regard to the formulation ofrules governing global settlement networks.
Once this network is established and available to users,
it will realize domestic and international settlementsthat require less time to complete while being safer
and more efficient. proof of concept aimed at putting
the technology into commercial use at the earliest
possible date is now under way in fiscal 2017.

AlpacaDB, Inc. is a venture company pursuing thecreation of unconventional services with the fusion offinance and AI. In August 2016, Alpaca was chosen to
receive the second prize at the Accelerator Program
sponsored by MUFG.
Currently, Alpaca is involved in several projects at
MUFG that leverage its strength in the area of deeplearning. For example, kabu.com Securities Co., Ltd.
released “AlpacaSearch for kabu.com,” an analysis toolfor individual investors based on Alpaca’s chart image
recognition services. Also, Jibun Bank Corporation
began providing an AI-based foreign currency deposit
management assistance tool with prediction
capabilities. Furthermore, the Bank of Tokyo-Mitsubishi
UFJ is looking to create market forecast, news analysis
and other AI-driven trading assistance functions.
MUFG will continuously endeavor to create
unconventional services through collaboration withexternal corporations.

kabu.com Securities

Jibun Bank

The Bank of TokyoMitsubishi UFJ

Online stock trade

Foreign currency deposits

Trading

Provide chart analysis
service based on AI-driven
digital image recognition

Offer support tools (market
forecast utilizing AI)

Assist investors with searchfor stock candidates
optimized for a “pairs
trading” strategy, thereby
providing greater userconvenience

Aim to provide a deposit
product that uses an AIbased investment decisionassistant

Establish market forecast
model
AI trader

Employ deep learning torealize automated and more
efficient trading

Initiating a Trial Use of MUFG Coin
Although banknotes and coins can be used anywherein their currency zone, the significant toll in terms of
cost and time required for the procurement, storage
and transport of these instruments is often overlooked.
With an eye to bringing innovation in the field of virtual
currencies, MUFG is developing a low-cost cashlessfinance infrastructure by leveraging blockchain
technologies, with the goal of releasing “MUFG Coin”—
a convenient digital payment instrument that help
facilitate the realization of a cashless society in Japan.
In addition to their instantaneous transfer capabilities,

24

MUFG Report 2017

MUFG Coin will provide new settlement experiences,such as the ability to make “micropayments” in decimalvalue increments. Moreover, corporate users will beable to allocate surpluses derived from reductions incosts to increase benefits for individual customers. As
such, MUFG Coin are expected to enhance economic
activities by fully leveraging the strength ofvirtual coins.
In May 2017, MUFG launched the trial of these coins forin-house use. Discussions toward their release to thegeneral public are now under way.

MUFG Report 201725

Management Message

Message from the CFO

Pursuing Sustainable Growth for the Group throughSolid Financial and Capital Management
We are now in fiscal 2017, the final year of the current medium-term business plan and, as the CFO of MUFG, I would liketo lay out the initiatives that the Group will be undertaking under my direction as well as the Group’s future outlook.

subsidiaries supervised by MUFG Americas Holdings
Corporation (hereafter “the Americas HD”), anintermediate holding company, as well as Bank of
Ayudhya (hereafter “Krungsri”) in Thailand, enjoyed profit
growth. In addition, Morgan Stanley—approximately 23%of whose equity stake is held by MUFG— contributed toour profits attributable to owners of parent as an equitymethod investee.
Breakdown of Profits Attributable to Owners of Parent*(Billions of Yen)

1,000
900

the Securities Business-HD
49.0
the Americas HD
101.9

the Trust Bank
Non-consolidated
120.2
700 the Bank
Non-consolidated
481.4
600
800

500

July 2017

Capital Ratio—the most important indicator representing
the soundness of financial institutions).

400
0Krungsri
57.9

MUFG
Morgan Others Consolidated
Stanley 30.8 926.4
137.6

NICOS
(23.9) ACOM
(28.8)
Provision of allowance forexcess interest repayment(57.4)

Structural reform expenses (12.7)
Reversal of deferred tax assets (6.4)
Provision of allowance for excess interest repayment (9.4)* The above figures take into consideration the percentage holding in each subsidiary andequity method investee (after-tax basis)

Muneaki Tokunari
Director, Senior Managing Executive Officer,
Group CFO

Fiscal 2016 Business Results

Throughout fiscal 2016, which ended March 31, 2017, theultra-low interest rate environment continued in Japandue to a “quantitative and qualitative monetary easing
with negative interest rates” policy undertaken by the
Bank of Japan. Overseas, such developments as theresults of the Brexit referendum and the election of a new
U.S. president have led to major fluctuations in thefinancial market. Against this backdrop, MUFG’s grossprofits totaled ¥4,011.8 billion, down approximately 3%
year-on-year. Key factors contributing to this decrease
included a decline in net interest income in Japan thatreflected the low interest-rate environment; sluggish
investment product sales in the retail business segmentin the first half; and a fall in market-related profits in thesecond half due to increases in interest rates in suchcountries as the United States.
Overall expenses stayed virtually unchanged comparedwith the previous fiscal year, thanks to the success ofacross-the-board cost control efforts and the effect ofJapanese yen appreciation, despite higher expenses forfinancial regulatory compliance purposes. As a result, net
operating profits decreased approximately 9% year-onyear, to ¥1,418.2 billion.
Credit costs decreased ¥99.7 billion compared with theprevious fiscal year, mainly due to an improvement incredit quality of resource- and energy-related clients. Net
26

MUFG Report 2017

gains on equity securities increased ¥36.6 billion year-onyear, thanks to progress in sales of equity holdings.
Non-recurring losses grew year-on-year due to suchfactors as an increase in cost of retirement benefits, while
tax expenses decreased in line with a decline in the tax
burden ratio.
Taking all this into account, profits attributable to ownersof parent totaled ¥926.4 billion, which represents anapproximately 3% year-on-year decrease but exceeds thepreviously announced target of ¥850.0 billion.
Looking at profits attributable to owners of parent by
subsidiary and affiliate, Bank of Tokyo-Mitsubishi UFJ(hereafter “the Bank”), Mitsubishi UFJ Trust and Banking(hereafter “the Trust Bank”) and Mitsubishi UFJ Securities
Holdings (hereafter “the Securities Business-HD”) all saw
positive results. However, both Mitsubishi UFJ NICOS(hereafter “NICOS”) and ACOM posted a loss due to therecording of provisions of allowance for excess interest
repayment. Even though the loss posted by NICOS was
up year-on-year due to recording of structural reformrelated expenses and reversal of deferred tax assets, we
remain steadfast in our commitment to grow thissubsidiary into a core operating company of the group asa payment platform. We consider this a crucial step inassuring our readiness for future popularization of
cashless and digital economies.
Overseas, MUFG Union Bank, N.A. and other U.S.

Fiscal 2017 Outlook and Progress in the MediumTerm Business Plan

As our CEO, Mr. Nobuyuki Hirano, describes in his
message appearing earlier in this report, the operating
environment surrounding MUFG has become even harderthan that which existed at the time we announced thecurrent medium-term business plan. Today, our mainstay
commercial banking business, which has long been
relying on net interest income from domestic operations,is exposed to structural and prolonged trend toward
profit decrease. Moreover, it will be hard for us tocontinue to increase risk weighted assets by more than
10% annually for our overseas credit business that has inrecent years enjoyed rising profits, due to regulations
requiring us to secure foreign currency liquidity andexternal credit ratings.
On the expense side, for the time being we expect to see
a steady rise in expenses for financial regulatorycompliance purposes, especially those of countries
overseas. In addition, rapid advance of digital innovationand emergence of FinTech startups will bring drasticchanges in the operating environment that will make thefinancial-services arena more competitive.
The Establishment of the MUFG Re-Imagining Strategy
Taking these circumstances into consideration, weestablished and announced the MUFG Re-Imagining
Strategy, aimed at realizing sustainable growth for theGroup through execution of approximately 70 concretemeasures. Should the strategy be successfully
implemented through fiscal 2023 – the final year of a
medium-term business plan slated to take over from thenext medium-term business plan – the effect of thesemeasures on profitability will total around ¥300 billion. Of
this, approximately ¥180 billion will be due to an
improvement in annual gross profits, while ¥120 billion
will be attributable to cost reductions. (For more details,
refer to “the MUFG Re-Imagining Strategy” on page 14.)

The operating environment is expected to remain toughin fiscal 2017 due to such factors as the prolonged ultralow interest rate environment in Japan, a situation we
anticipate will keep net operating profits weak.
Nevertheless, we will aim for a 3% or so year-on-year
improvement in profits attributable to owners of theparent to around ¥950.0 billion by, for example, pushing
forward with sales of equity holdings and increasing
earnings from overseas subsidiaries and affiliates.
As it embarks on the final year of the current mediumterm business plan, MUFG is pursuing multiple financial
targets representing its growth, profitability and financial
strength. Given annual operating results under the plan
to date and the targets for fiscal 2017, we clearly need toredouble our efforts to achieve financial targets for
growth (EPS) and profitability (ROE and Expenses Ratio),even though it seems quite likely that we will achieve ourtarget for financial strength (the Common Equity Tier 1

We will create the next medium-term business plan
starting in April 2018 incorporating the key concepts laidout in the MUFG Re-Imagining Strategy. Even before
creating the plan, however, we will accelerate executionof the concrete measures where possible.

Financial Targets of the Medium-Term Business Plan

GrowthMetrics

FY 2015 (Results)

FY 2016 (Results)

FY 2017 (Targets)(Mid-term biz plan)

EPS (Yen)¥68.51¥68.28(6%) from FY 2014

Increase 15% or morefrom FY 2014

ROE (MUFG definition)*1

7.63%

7.25%

Between 8.5%-9.0%

Expenses ratio

62.3%

64.6%

Approx. 60%

Common Equity Tier 1
Capital Ratio(Full implementation)*2

12.1%

11.9%

9.5% or above

Profitability

Financial Strength*1 For details on calculation methods, please also see descriptions on ROE featured in “Financial Highlights” on page 6.
*2 Calculated on the basis of regulations applied at the end of March 2019

MUFG Report 201727

Management Message

Message from the CFO
Capital Management(2) Use of Capital to Strengthen Profitability

Strategic investment that employs excess capital is a key
driver for achieving sustainable growth, as well as organic
growth based on our existing customer baseand businesses.

Basic Policy (Capital Triangle)
MUFG maintains a focus on capital management thatappropriately balances the maintenance of solid equity
capital, strategic investments for sustainable growth, andfurther enhancement of shareholder returns.
Our capital management policies have regularly been
discussed as one of our most important management themesby the Board of Directors, which includes a majority of
non-executive directors. For example, prior to the final
decision on repurchase of our own shares for fiscal 2016 at
the Board of Directors meeting, outside directors actively
discussed the matter with multiple different views onnecessity and amount of the repurchase.

(1) Maintenance of a Solid Capital BaseMUFG has been designated one of the 30 Global
Systemically Important Banks (hereafter “G-SIBs”) by theBasel Committee on Banking Supervision. At the sametime, MUFG is subject to the Basel III capital rules that
require financial institutions to ensure the solidity of theircapital base.
As of March 31, 2017, MUFG’s capital adequacy ratio—theratio of its core equity capital to its total risk-weighted
assets (based on the Common Equity Tier 1 Capitalratio)—was more than 11%, well exceeding the Basel III
regulatory minimum capital requirement of 8.5%.

28

enhance(3) Further
shareholder returns

MUFG’sCorporate
Value
solid
(1) Maintainequity capital

investments(2) Strategic
for sustainable growthSocial and Governance (ESG) aspects of their investees.
By doing so, we became the first G-SIB in the world toissue TLAC-eligible bonds that limit usage of theproceeds for renewable energy, including solar, wind andother power generation. We are thus endeavoring tocapture an even broader and more diverse investor base,with the aim of solidifying and stabilizing our funding
sources. (For more details on Green Bonds, refer to“Environmental Initiatives” on page 49.)
Thanks to these efforts, estimated TLAC ratio of MUFG
reached 15.8% (as of March 31, 2017), representing a
year-on-year improvement of 0.8 of a percentage point.

Securing Compliance with “TLAC Requirements”
Regulations on Total Loss Absorbing Capacity (hereafter“TLAC”) requirements are expected to be enacted in
March 2019 in Japan. These requirements are intended toensure that such critical functions as settlement andremittance capabilities of a G-SIB will be maintained even
if it fails. Drawing lessons from the financial crisis
triggered by the bankruptcy of Lehman Brothers, which
forced European and the U.S. governments to injectconsiderable amounts of public funds into failed financial
institutions in order to bail out them, the TLAC
requirements mandate banking holding companies toretain a certain amount of debt that can absorb losses
incurred at their subsidiary banks. Specifically, fromMarch 31, 2022 onward, MUFG is required to maintain the
proportion of TLAC in total risk-weighted assets at 18% orgreater. (For more details, refer to “Responding to Global
Financial Regulation” on page 90.)

The Best Capital Mix
Under Basel III capital rules, financial institutions areallowed to include Additional Tier 1 Capital (e.g., perpetual
subordinated debt) and Tier 2 Capital (e.g., subordinatedterm debt) into their regulatory capital. We aim to
combine these debt instruments efficiently in order topursue what we call the “best capital mix”. It is one of mymost important missions as CFO to improve ROE—anindicator many shareholders closely monitor—whilesatisfying regulatory requirements for capital adequacy
ratios, by realizing this “best capital mix”.

In preparation for these upcoming requirements, inFebruary 2016, MUFG became the first financial holding
company in Japan to issue TLAC-eligible senior debt
registered with the SEC of the United States.

Total Amount of Funding (FY 2016)
AT1 perpetual subordinated debt

¥400 billion

Tier 2 subordinated debt

¥436 billion

In September 2016, MUFG issued “Green Bonds”
targeting investors who prioritize the Environmental,

TLAC-eligible senior debt

Approx. Equivalent to¥1 trillion

MUFG Report 2017

In fiscal 2016 we issued various types of notes to diverse
investors in each market as stated below, aiming toachieve an optimal capital structure from a standpoint ofbalance between capital adequacy and efficiency.

MUFG has been engaged in multiple major strategic
investments and M&A projects. For example, MUFG
invested in Morgan Stanley while working in tandem withthis strategic partner to establish a domestic securities
company. We also made a majority investment in Krungsri
in Thailand. In October 2016, MUFG acquired a 23.0%
equity stake (¥91.4 billion) in Hitachi Capital Corporation,with the aim of enhancing the Group’s lease businesses
and assisting infrastructure development. In May 2017,
MUFG announced its decision to acquire an additional
15% equity stake in NICOS and make it a wholly owned
subsidiary, a move aimed at accelerating structuralreforms and expanding payment business.
As CFO, I consider capital discipline to be the mostimportant factor when making a strategic investment
decision. Prior to making such decisions, we therefore
examine carefully whether expected return from theinvestment will exceed the cost of capital within a certain
period of time. We also periodically conduct follow-up
monitoring after the investment and are ready to takeactions including exit (withdrawal or sale) wheneverinvestees fall short of our criteria for returns.

(3) Further Enhancement of Shareholder Returns
With regard to return to shareholders, we combine (1)payment of cash dividends as a primary measure and (2)repurchase of our own shares as a supplementarymeasure. The latter is expected to bring benefits toshareholders, as it enhances capital efficiency (ROE) andpositively affects share prices in general.

Prior to a final decision on shareholder returns, we
engage in discussion based on the “capital triangle”
featured on page 28. First, we examine status of ourcapital base in light of compliance with the relevant
capital regulations and maintenance of our external
credit ratings. We do this to “Maintain solid equity capital”
as indicated at the lower left corner of the triangle. We
confirm status of our risk appetite, risk-weighted assets
and ongoing internal discussions related to M&A andother strategic growth investments, giving due
consideration to the possibilities of “Strategic
investments for sustainable growth” as indicated at thelower right corner of the triangle.
Then, we consider “Further enhance shareholder returns”
as described at the top of the triangle. Our basic strategy
on shareholder returns is to achieve stable andsustainable increase in dividends per share throughgrowth of profits. In fact, MUFG has constantly increased
dividends per share since the 2008 worldwide financial
crisis. The amount of dividends per share is discussed by
the Board of Directors and is set at a level consideredreasonable in line with its aim of maintaining a stablestream of dividend payments into the future. (Fiscal 2016
annual dividends were ¥18 per share.)Finally, we discuss whether or not to engage inrepurchase of our own shares. Based on a decision by the
Board of Directors, MUFG executed such repurchases on
two occasions in 2016, with the value of shares
repurchased totaling approximately ¥100 billion for each.
This was in part due to absence of an M&A or strategic
investment project requiring capital of more than ¥100
billion in the fiscal year under review. These dividends
and repurchases together constituted a total shareholder
return ratio of 47.9% for fiscal 2016.
Results and Forecasts of Dividend per Common Stock
Dividend per common stock

Dividend payout ratio* (right axis)

(Yen)

(%)

20

50
40

15

30
10
12

12

12

13

16

18

18

18

18

5

0

20
10

(FY) 2009 201020112012 2013 2014 2015 2016 20170(Forecast)* FY 2011 figures do not include one-time effect of negative goodwill associated with theapplication of equity method accounting on our investment in Morgan Stanley(Reference)

FY 2014

FY 2015

FY 2016

Total payout ratio

34.2%

47.2%

47.9%

Establishing a Policy for the Cancellation of Our Own
SharesPreviously, MUFG kept all the shares it repurchased in its
possession, anticipating that it might need them if, in the
future, it should decide to engage in M&A that requires theuse of such shares. However, as some shareholders
communicated their concerns about the risk of possible
stock dilution due to these shares’ release into stock
markets, we have adopted a new policy of limiting the ratioof treasury stock to the total number of shares outstanding
to approximately 5% or less. Accordingly, any treasury stock
shares held in excess of this limit will be retired in general.
Conceptual Diagram for the Cancellation of Our Own Shares
Retain own shares of 5% of the total
number of issued shares at maximum andcancel the shares exceeding the threshold
Total number ofshares held due to thepast five repurchasesof our own shares= equivalent to 4.98%
of the total number ofshares outstanding(As of Mar. 31, 2017)5%

Mar. 31, 2017

Forecast

MUFG Report 201729

Management Message

Message from the CFO
Positive Effects and Results of the Divestment ofEquity Holdings

Equity holdings – equities issued by corporate clients ofbanks and held by the banks –were previously
commonplace in Japan. Although in the past such holdings
helped companies manage themselves in a stable way andthus supported development of the Japanese economy,
MUFG announced a policy of reducing equity holdings inNovember 2015. Specifically, this policy aims to limit the ratioof equity holdings to the total balance of Tier 1 Capital toapproximately 10% by the end of fiscal 2020.
We expect sales of equity holdings to yield multiple positiveeffects including: (1) Reduction of credit risk (Stock has ahigher risk weight compared with loans) (2) Free-up of
capital that had been allocated to the risk of equity holdings
and improvement of capital efficiency through reallocating
the capital for more effective usage. (3) Profits from realizing
unrealized gains
Since fiscal 2015, the amount of equity holdings that havebeen sold totals ¥266.0 billion (based on an acquisition costbasis). Of this, the amount of equity holdings sold during
fiscal 2016 amounts to ¥149.0 billion, up ¥32.0 billion
compared with the previous fiscal year. In short, our efforts
are steadily yielding results. Based on their balance as ofMarch 31, 2017, the ratio of equity holdings to the Tier 1
Capital was down 1.3 percentage points year-on-year.
We will continue to reduce equity holdings with dialogues
with our corporate clients to secure their understanding.
Reduction of Equity Holdings
Acquisition price of domestic equity securities with fair value
included in available-for-sale securities (consolidated)
Ratio of equity holdings to Tier 1 capital *(Trillions of Yen)

10

9.20
58.1%

5

0

4.29

Mar. 31,2002

Mar. 31,
2008

22.8%

Aim to reduce our equity
holdings to approx. 10%
of our Tier 1 capital towards
the end of FY2020

19.7%

17.9%

16.6%

2.82

2.79

2.66

2.52

Mar. 31,2014

Mar. 31,2015

Mar. 31,2016

Mar. 31,2017

Approx.
10%Mar. 31, 2021

* Under Basel Ⅱ basis until Mar. 31, 2012 (consolidated)

Initiatives to Ensure Strict Compliance with Tax
Regulations

Today, MUFG is a corporate group that boasts approximately
150,000 employees and extends into more than 50 countries
around the globe. Accordingly, we recognize that as acorporate citizen it is our duty to exert our best efforts toward
maintaining appropriate tax payments at home and abroad.
With this in mind, in April 2017, MUFG established in-houserules on tax compliance so that all Group members can shareand act on the same values when applying national and local
tax laws, regulations and principles of international tax.
30

MUFG Report 2017

Under these rules, we will abide by the spirit of the BEPS
Action Plan* and other principles of international tax, as
well as national and local tax laws. Moreover, we will
sincerely deal with tax authorities in a cooperative andopen manner, enhancing a trusting relationship.
In addition, we will utilize existing preferential taxation
regimes and government incentives offered by various
countries only where the utilization of such benefits is
consistent with the purpose of the relevant tax laws. We
will also improve our overall compliance framework toensure appropriate tax payments. In these ways, we will
enhance our corporate value.
* Action plan that aims to prevent and counter Base Erosion and Profit Shifting thatwas compiled by the Organisation for Economic Co-operation and Development

Appropriate utilization ofpreferential taxation regimes

Appropriate tax payments(Presupposing compliance withtax laws and regulations)

Corporate
value
growthCompliance with tax laws andregulations in each country(Enhance trusting relationships
with tax authorities)

Dialogue with Shareholders and Investors(Further enhancement of IR/SR activities)

As CFO of MUFG, it is very important to maintain
constructive dialogue with stock and bond investors and tocontinually enhance information disclosure. For MUFG as afinancial institution, it is also very important to raise capitaland debt from capital markets, so as to comply with financial
regulations, maintain our credit ratings and secure foreigncurrency liquidity.
From this point of view, in fiscal 2016 we held a special
strategic seminar in Tokyo in which Mr. Stephen Cummings,
CEO of MUFG Americas Holdings Corporation, presented
MUFG’s business strategies for the Americas, in addition toregular semi-annual investor meetings for financials. In
February 2017, we held our Investors’ Day event in whichGroup Heads of business segments presented eachbusiness strategy. Moreover, Mr. Tsutomu Okuda, the Lead
Independent Director for MUFG, made a presentation at thisevent and engaged in direct dialogue with the audience on
corporate governance, a topic which investors are highlyinterested in. (For the main content of question & answer
sessions at this event, refer to “Dialogue between Lead
Independent Outside Director and Investors” on page 66.)
We are committed to enhancing our IR activities aimed atcommunicating with fund managers and analysts. In
addition, we will also step up our Shareholder Relations (SR)
activities and, to this end, facilitate dialogue with those whoare in charge of exercising voting rights, including passive
ones, on such topics as our governance framework andmanagement policies.

Q&A Sessions with CFO
Frequently asked questions from our investors and answers to the questions
Q1. Balance of overseas loans is increasing. Does MUFG have any issues with regard toforeign currency funding including U.S. dollar?
Compared with 10 years ago, MUFG’s overseas loanbalance has increased approximately threefold to ¥40
trillion. Because of this, MUFG’s portfolio of foreign
currencies, including the U.S. dollar, is in a state of“over-loan”, in which the balance of loans exceedsthat of deposits. 60% to 70% of overseas loans
booked at the Bank are covered by foreign currency
customer deposits. The remainder is covered by mid
to long - term funding sources including corporate
bonds. In short, the Bank secures stable funding
sources to cover all the amount of its overseas loans.
Moreover, MUFG has a Special Purpose Company(SPC) holding U.S. government bonds and otherfinancial instruments that can smoothly be converted
into cash, in order to prepare for such emergencies
as a sudden deterioration in our funding environment.
Looking ahead, we will strive to maintain a foreign
currency funding structure not relaying on short-termcross currency swaps (to convert Japanese yen to
U.S. dollars). We will continue to take actions toincrease balance of foreign currency deposits anddiversify types of mid to long - term bonds.

Non-JPY assets and liabilities (the Bank)
As of Mar. 31, 2017 (Billions of U.S. dollars)

Loans
340

Investment securities
76
Interbank market operations
51
Others 36
AssetsCustomer deposits(Incl. deposits from
central banks)216

Mid-long term funding(Incl. corporate bonds
and currency swaps)
172
Interbank market operations
59
CD / CP 56
Liabilities* The Bank’s managerial basis excl. MUFG Union Bank, N.A., and Krungsri

Q2. Why doesn’t MUFG increase shareholder returns including cash dividends?
For fiscal 2016, MUFG announced full-year cash
dividend payment totaling ¥18 per share. This
represented a dividend payout ratio (ratio ofdividends to earnings per share) of 26.4%. We wereable to achieve a total shareholder return ratio of
more than 47% including repurchase of our own
shares as we did in fiscal 2015, which is at the top
level among Japanese banks.
For fiscal 2017, we forecast that annual dividends willamount to ¥18 per share, and we will discuss sharebuyback strategy based on the “capital triangle”
featured on page 28.
In addition, we will consider shareholder return
strategies for fiscal 2018 and beyond as one of themost important themes for the next medium-termbusiness plan currently under internal discussion,
taking into account the followings.

(1) Finalization of the revised Basel III rules (Revisions
may demand an increase in our risk-weighted
assets in future.)(2) MUFG’s credit ratings (Currently both core MUFG
Group banks are rated A+ (S&P) /A1 (Moody’s),commanding a mid-ranking position among theiroverseas peers. We will strive to maintain or
improve our ratings.)(3) Level of capital adequacy ratios of European and
U.S. G-SIBs (Currently the Common Equity Tier 1
Capital ratios of competitor banks areapproximately 11% to 12%.)(4) Forecast for our net income from a medium tolong-term perspective (Recording net income
constantly at a certain level or higher is a base forstable shareholder returns.)
MUFG’s Board of Directors is committed to discussing
our shareholder return strategies including cash
dividend payment, reflecting feedback from themarket and opinions of our shareholders.

MUFG Report 201731

Corporate Value Initiatives

Business Overview

Net Operating Profits by Business Segment*1
Retail Banking
Business

Japanese
Corporate
Banking Business*3¥225.3 billion¥422.2 billion

14%

Corporate Value

27%

Initiatives
Net Operating Profits
Business Overview……………………………………………………… P.33
Retail Banking Business…………………………………………… P.34

24%

Japanese Corporate Banking Business……………………… P.36

¥1,395.8 billion*2* Percentage represents share of each business segment's
net operating profits to simple sum of those of the fivebusiness segments.

Global Banking Business…………………………………………… P.38
Investor Services / Asset Management Business………… P.40
Global Markets Business…………………………………………… P.42

4%

31%

Global Markets
Business

Investor Services /Asset Management Business

Global Banking
Business¥369.1 billion¥60.9 billion¥482.5 billion*1 All figures presented in the Business Overview section are on a managerial accounting basis. Figures are based on exchange rates at fiscal year-end,
unless otherwise noted. Local currency base represents foreign exchange rate applied to medium-term business plan (¥115/US$).
*2 In addition to the net operating profits of the five business segments, figures include profits or losses of headquarters and other elements.
*3 Excluding overseas business with Japanese corporates

32

MUFG Report 2017

MUFG Report 201733

Corporate Value Initiatives

Business Overview

Retail Banking Business

Fiscal 2016 Review

To meet the needs of individual customers, we provide a wide range of
products and services from housing loans to wealth management,
inheritance and consumer finance.

Atsushi Murakami
Managing Executive Officer
Group Head, Retail Banking Business Group

Composition of Gross Profits*

28%

Fiscal 2016 Gross Profit Breakdown¥1,198.3 billion* Gross profit total for fivebusiness groups

Gross profits (left axis)(Billions of yen)

Assets Under Management*

45%■ Loans and yen deposits

22%

Wealth Management Business■ Investment product sales

11%■ Securities business*

9%■ Inheritance and real estate2%■ Other11%

In the wealth management business, we promoted a shift fromsavings to stable asset building. MUFG played a major, multifacetedrole in an IPO project related to JR Kyushu Railway Company. In thisproject, while Group securities companies marketed stocks, the Bankutilized its brokerage function to refer bank customers to said
securities companies. Thanks to these Groupwide efforts, a numberof securities accounts were newly set up at MUFG, resulting in an
expansion of our customer base. In addition, the value of assets
under management as of March 31, 2017 grew approximately ¥0.7
trillion compared with the end of the previous fiscal year, attesting to
the success of initiatives to diversify our product lineup to betteraccommodate customer needs.

Our Medium- and Long-Term Vision
The Retail Banking Group of Choice for a Wide Variety of Customers Boasting a Business That
Spans the Generations
pursuing the best interests of those customers while
stepping up the stock business (enhancing the assets undermanagement). In these ways, we will secure greater profitsand sustainable growth. In addition, we will deliver products
and services with superior customer convenience in such
settlement services as credit cards as well as in the
consumer finance business, thereby stimulating
personal consumption.

Operating Environment Analysis
Due to a prolonged trend toward low interest rates in Japan,
which saw the introduction of the Bank of Japan’s negativeinterest rate policy, revenues from deposits and loans
declined. Meanwhile, emerging nations have seen the rapid
pace of economic growth slow somewhat. Moreover, theresults of the Brexit referendum and the U.S. presidential
election have fostered a growing sense of uncertainty.
Given these conditions, securing stable new profit sources
is key to ensuring sustainable growth for the retail banking
business. Breaking away from dependence on loan anddeposit revenues, we will establish a profit structure that isresilient to the impact of market fluctuations.

Gross Profits and Net Operating Profits

Gross profits decreased 4.8% (¥61.0 billion) year on year to ¥1,198.3
billion. Net operating profits fell 21.3% (¥61.3 billion) year on year to¥225.3 billion. Loan and deposit revenues declined due to lower
interest margins on the back of the prolonged trend toward low
interest rates. Following the introduction of BOJ’s negative interest
rate policy, ever lower market interest rates forced the Company tosuspend the marketing of some of these products. In addition to this,the market uncertainty as the result of the introduction of said policy
and other geopolitical events led to decline of investment productsales, which, in turn, caused profits to decrease compared with theprevious fiscal year.

■ Consumer finance and card

* Fees and commissions on stocks andbonds, etc.

In line with the MUFG Basic Policy for Fiduciary Duties, wewill facilitate a shift from savings to stable asset building by
taking a customer-first business approach. In the wealthmanagement and asset succession businesses, we will rallyGroupwide resources to build a structure capable ofproviding seamless, comprehensive financial services
employing MUFG’s distinctive strengths. At the same time,in order to broaden our customer base we will focus on

Fiscal 2016 Earnings Summary

To that end, we will focus on the customer’s perspective inour business operations while striving to maximize
customer value. By fostering long-term customer
relationships, we will increase the value of assets undermanagement and secure stable profits. Simultaneously, as
we endeavor to better accommodate ever diversifying
customer needs, we will develop and deliver moresophisticated products and services.

MUFG Report 2017

1,299.4
340.6

1,200

286.6

1,100

0

350

1,259.2
1,198.3

225.3

2014

2015

2016

300

250

0

(FY)

(Trillions of yen)

30

26.5

25.1

25.8

2015

2016 (End of FY)

20

10

0

2014

* Total for the Bank, the Trust Bank and the Securities Business. Excludes
yen deposits.

Consumer Finance and Settlement Businesses

Consumer Finance and Card Business Revenue

The consumer finance and settlement businesses focused on
stimulating personal consumption. In these fields, the Bank and
ACOM enjoyed growth in the balance of and revenues from cardloans, with the former promoting a card loan product under the“BANQUIC” brand. To contribute to the sound development of theconsumer finance market, we will maintain a disciplined
management approach from the perspective of customer protection
while striving to enhance user convenience. We also released“Smart,” an MUFG credit card targeting young adults, such as new
graduates who have just entered the workforce.

(Billions of yen)

E

600

493.2

520.3

541.8

2015

2016

400

200

0

2014

(FY)

S G Protecting the Assets Entrusted to Us by Customers

Given the rapid aging of society in Japan, the number ofpeople who develop dementia is expected to reachapproximately 7 million—or one in five of those over 65—in
2025, raising serious concerns among the general public.
Even in the absence of dementia, a person’s decisionmaking ability may deteriorate with age—a situation that
may lead to a sudden unexpected loss of assets.
Through its products, MUFG aims to help customers
protect their assets and better prepare themselves for the

34

1,300

Net operating profits (right axis)(Billions of yen)future. In June 2016, the Trust Bank released an investment
trust product called Mirai no Mamori that places
restrictions on cancellation. Mirai no Mamori has three
distinctive features: (1) In general, the customer cannot
execute midterm cancellation by themselves; (2) theusage of funds is limited; and (3) a dedicated account isallocated to manage this product. Looking ahead, MUFG
will leverage its accumulated know-how in wealthmanagement to satisfy customer needs and to help
resolve issues society is confronting.

MUFG Report 201735

Corporate Value Initiatives

Business Overview

Japanese Corporate
Banking Business

Fiscal 2016 Review
Fiscal 2016 Earnings Summary

We provide lending, settlement, forex, and asset management services
through our domestic and overseas networks to meet the diverse needsof our clients. We also utilize our Groupwide expertise to propose
solutions for client’s business strategies and challenges.

Saburo Araki
Senior Managing Executive Officer
Group Head, Corporate Banking Business Group

Composition of Gross Profits*1

24%

Fiscal 2016 Gross Profit Breakdown*¥1,041.6 billion*2*1 Gross profit total for fivebusiness groups*2 Including overseas businesswith Japanese corporates■

Investment banking andsecurities business■ Deposit and lending

26%■ Settlement

17%■ Overseas

16%■ Trust5%* Excluding other gross profits andadjustment of duplication between regions

Our Medium- and Long-Term Vision
A Financial Group Capable of Helping Customers Achieve Growthand Working with Them Hand in Hand to Create the Society of the Future as Their Best Partner
We will realize sustainable growth for the Group and forcustomers by strengthening our domestic businessfoundations and establishing a new business model for
corporate customers. We will boost corporate customertransactions through such key services as loans andsettlement. Simultaneously, we will step up services aimed

at supporting business succession and continuation whileclosely monitoring changes in economic and social
structures in Japan. We will also strive to establish an asset
management business model targeting corporate
customers and adopt a more sophisticated approach forthe overseas business.

Operating Environment Analysis
Although loans and deposits have long served as a solid
revenue base for the Japanese corporate banking business,the profitability of this base has deteriorated due to suchnegative factors as the low interest rate environment andintensifying competition, factors that MUFG believes areunlikely to change in the short term. Moreover, on the backof growing trends toward the tightening of financial
regulations around the world, financial institutions are being
called to maintain a management approach that places
greater emphasis on capital efficiency.
Against this backdrop, MUFG is focusing on harnessing its
distinctive strengths as a financial group withcomprehensive service capabilities. Exercising these

Gross profits decreased 4.4% (¥48.5 billion) year on year to ¥1,041.6
billion. Net operating profits fell 8.8% (¥43.1 billion) to ¥443.2 billion.
Amid intensifying market competition, net interest income
attributable to loans and deposits decreased year on year, reflecting
a prolonged trend toward lower market interest rates.
Meanwhile, the average loan balance rose 2.0% compared with theprevious fiscal year, enjoying firm growth.

Large Corporate Business
36%

capabilities, we will provide highly value-added, innovative
solutions while pursuing the overarching aim of securing amarket position immune to interest rate competition. In
addition to engaging in such conventional commercial
banking operations as loans, deposits, settlement andforeign exchange, MUFG will rally specialist knowledge andfinancing functions from each Group company tostrengthen revenue sources that are based on commission
fees, including real estate, investment management andsecurities-related operations. Furthermore, we will
undertake strategic investment in IT systems to enhance
operational efficiency, with the aim ofenhancing productivity.

MUFG Report 2017

Net operating profits (right axis)

1,200(Billions of yen)

1,148.5548.6

600
1,090.1
486.3

1,000

1,041.6
500
443.2
400

800

②

2014

2015

2016

0

(FY)

* Including overseas business with Japanese corporates

Domestic Corporate Average Loan Balance*(Trillions of yen)

50
43.2

44.9

45.9

2015

2016 (End of FY)

40

30

③
0

2014

* Excludes loans to government

SME Business
Our proposals are meticulously designed to meet customers’ fundraising needs and help them pursue management strategies forbusiness growth and sales channel expansion. In fiscal 2016, we
succeeded in making a number of effective proposals aimed at
assisting the smooth succession of business as well as proposals
related to capital strategies, garnering favorable customer reviews.
Thanks to these efforts, the loan balance grew steadily. Examples ofour constant efforts to help customers achieve business growth
include large-scale business matching meetings we hold in Japanand overseas and our hosting of the “Rise Up Festa” businesssupport program aimed at nurturing up-and-coming businesses.

Average Loan Balance for SMEs
(Trillions of yen)

15.0
14.3

14.4

2015

2016

14.0

13.0

0

(FY)

S G Supporting Promising Startups

MUFG aims to assist growing companies engaged in noveland creative segments as well as those trying to extend theboundaries of existing businesses. To achieve this aim, MUFG
hosts the Rise Up Festa support program aimed at
discovering such companies and engages with them asbusiness partners over the medium to long term.
In 2016, the final screening of the fourth round of the Rise
Up Festa program was held in Kyoto Prefecture, amunicipality that has entered into a comprehensive
partnership agreement with the Bank with regard to the36

Gross profits (left axis)(Billions of yen)0

The operating environment surrounding major corporations varies
by business sector and category as does the optimal management
strategy for each corporation. Well aware of this fact, MUFG is
promoting a sector approach. To address management issues
customers are facing, this business model proposes solutions thatcombine the strengths of Group companies, each of which isequipped with expertise in a different sector, with MUFG’s
comprehensive financial service capabilities. With the aim ofassisting our customers in their drive to globalize, we are also
stepping up collaboration between domestic and overseas bases inan effort to satisfy diverse needs for sophisticated solutions. Thisapproach has resulted in MUFG recording industry-leading
accomplishments in terms of M&A advisory and bond underwriting.

E①

Gross Profits and Net Operating Profits*

invigoration of local economies. As it did in the previous
round, MUFG examined applicants engaged in four
growth fields—bio and life science, robotic and othercutting-edge technologies, information and internet
services, and social business—recognizing four
outstanding companies and seven excellent companies.
Along with financial assistance, award-winning companies
may take advantage of consulting services provided by
Mitsubishi UFJ Research and Consulting and other support
programs aimed at helping them achieve growth.

MUFG Report 201737

Corporate Value Initiatives

Business Overview

Global Banking Business

Fiscal 2016 Review

We respond to the funding needs of corporate customers in more than 50
countries and regions around the world while providing cash
management and advisory services.
MUFG Union Bank, N.A. and the Bank of Ayudhya Public Company Limited(Krungsri) are involved in corporate banking and retail banking businessin the U.S. and Thailand, respectively.

Composition of Gross Profits*

30%

Fiscal 2016 Earnings Summary

Eiichi Yoshikawa
Senior Managing Executive Officer
Group Head, Global Business Group

Fiscal 2016 Gross Profit Breakdown*¥1,303.7 billion* Gross profit total for fivebusiness groups■ Americas

53%■ Asia17%■ Krungsri (Bank of Ayudhya)

20%■ Europe, Middle East, Africa

10%* Prior to adjustment for other business andoverlap between regions

Our Medium- and Long-Term Vision
The “First Call Bank” for Customers around the World
We aim to become the “First Call Bank” for customers
around the world by leveraging region-specific advantages
while strengthening the product and service capabilities ofthe entire Group. Furthermore, we will secure sustainablegrowth by expanding commission fee-based revenue inbanking and securities operations, developing a balanced
business portfolio and increasing foreign currency liquidity.
At the same time, we will step up the development of
human resources capable of driving ourcorporate expansion.

Operating Environment Analysis
Thus far, recovery in the global economy has been modest
but constant, especially in developed countries, with little
forward momentum. Although interest rates rose in the
United States, the worldwide policy trend toward low
interest rates is expected to continue. At the same time,
geopolitical instabilities in various regions are fostering a
growing sense of uncertainty. For financial institutions,moreover, such negative factors as a higher U.S. dollar
procurement cost and expenses incurred in complying withregulations enforced by individual countries are putting

downward pressure on profits.
Nevertheless, our net operating profits in the global banking
business grew thanks to our efforts to satisfy customer
needs through the provision of high-quality solutions basedon the Group’s comprehensive strengths. Moreover, theratio of this segment’s revenues to total customer segment
revenues rose to approximately 40%, proving that the global
banking business is driving MUFG’s growth. Going forward,
we will strive to realize sustainable growth by enhancing
asset efficiency and reinforcing our business foundation.

Initiatives to Enhance Asset Efficiency and Reinforce
Our Business Foundations

Net operating profits (right axis)(Billions of yen)
Local currency basis

Actual exchange rate basis

1,400
1,289.8

1,273.1

1,391.4

1,303.7

496.1

1,200

1,248.3

482.5

458.0

1,307.8

479.6

600

533.9
500

485.0

400

1,000

2014

2015

2016

2014

2015

0
2016 (FY)Fiscal 2016 Average Loan Balance and
Average Deposit Balance
Americas

Asia

KS

Europe, Middle East, Africa(Trillions of yen) Average loan balance50

Average deposit balance

47.3

44.0

40
31.5

30

33.5

20

Commercial Banking Business in the U.S. and Asia

10

MUFG has been promoting strategic investment and alliances in the
United States and Asia with an eye to building a business portfolio
capable of supporting sustainable growth. As a result, MUFG Union
Bank, N.A. (the Bank (USA)) and Krungsri saw growth in gross profits,
and these profits have come to account for around half the grossprofits earned by the entire Global Banking Business. In line with ouraim to create greater synergies through collaboration between
MUFG and its key investees engaged in commercial banking in the
United States and Asia, we host the Global Partnership Conference, aforum for attendees to discuss their business models. Through suchactivities, we are strengthening our business foundations. (Pleasesee page 73 for details.)

0

Actualexchange
rate basis

Localcurrency
basis

Actualexchange
rate basis

Localcurrency
basis

Non-interest Income from Transactions with
Global Corporates*(Billions of yen)

250

225.9

235.8

200

150

0

2015

2016

(FY)

* Including global corporates business profit, FX fees and derivatives.
Excluding the Bank (USA) and KS. Local currency basis.

S G Assisting the Vitalization of Local Communities

As a global company, MUFG is engaged in a variety of
initiatives aimed at invigorating the communities inwhich it operates. In the United States, the Bank (USA)evinces a clear commitment to providing ongoingsupport to SMEs based in California, the state in which it
was founded. Believing that vibrant SME activities help
invigorate local communities, the Bank (USA) provides
financing and other services with a focus on local

MUFG Report 2017

Gross profits (left axis)(Billions of yen)0

As part of efforts aimed at enhancing asset efficiency, we haveintegrated the primary global banking functions of the Bank andsubsidiaries of Securities Business to enable them to accurately
satisfy the needs of customers pursuing global expansion. With theaim of strengthening our business foundation, we strove to enhance
our foreign currency liquidity by directing our efforts toward
increasing the balance of foreign currency deposits. Moreover, weare proactively offering managerial positions to overseas employees
who were hired locally in an effort to build a more robust humanresource base.

E

38

Gross Profits and Net Operating Profits

Gross profits increased 2.4% (¥30.6 billion) year on year to ¥1,303.7
billion. Net operating profits rose 5.3% (¥24.4 billion) year on year to¥482.5 billion. Although performance in fiscal 2016 was negatively
affected by the deceleration of economic growth in East Asian
countries, particularly China, we were able to secure the increase inprofit thanks to the success of major project finance in Europe andthe Americas as well as the strong showings of the Krungsri in autoloans and consumer finance.

companies run by women, minorities and army
veterans. The Bank (USA) also utilizes the governmentled Small Business Administration support programs forfinancing while proactively addressing SME owners’
needs for assistance through its specialist departments.
As such, the Bank (USA) contributes to the success of
local SMEs and the stimulation of regional economies.

MUFG Report 201739

Corporate Value Initiatives

Business Overview

Investor Services /Asset Management Business

Fiscal 2016 Review
Fiscal 2016 Earnings Summary

We provide various services in relation to the asset management and investor
services business at home and abroad. Employing our sophisticated specialist
know-how in the areas of investor services, asset management, investment
trusts and pensions, we provide consulting and other services on a global basis,
constantly striving to further enhance our asset management capabilities anddevelop products capable of better meeting diverse customer needs.

Composition of Gross Profits*

4%

Sunao Yokokawa
Managing Executive Officer
Group Head, Trust Assets Business Group

Fiscal 2016 Gross Profit Breakdown¥173.1 billion* Gross profit total for fivebusiness groups■ Pensions

34%■ Investment Trust Management

21%■ Investment Trust Administration

11%■ Global Asset Administration*

24%■ Other10%

Our Medium- and Long-Term Vision
An Asset Management and Investor Services Provider Boasting a Global Presence Backed by aStrong Foothold in the Domestic Market
In the pension business, we will continue to strengthen ourconsulting and solution proposal capabilities in response tochanges in the pension system. Through these efforts wewill increase our share of the defined benefit pensionrelated market and grow sales of defined contribution (DC)pension investment products.

Overseas, our initiatives in the investor services businessinclude executing strategic investment and reinforcing our
In Japan, our investment trust business focuses on
administration services for alternative funds—a newly
providing high-quality products to augment a productlineup tailored to customers just entering the asset building emerging investment vehicle. In the asset management
stage. In addition, we promote investment education aimed business, we are looking to increase the value of assets
under administration, especially those entrusted byat educating a broader range of customers in what asset
overseas investors, while also pursuing capital and businessbuilding entails.
alliances. In these ways we will thus ensure our future as an
asset manager with a global presence.

Gross Profits and Net Operating Profits
Gross profits (left axis)

In the field of investor services, the fund administration market has
become a promising growth field against the backdrop of aworldwide trend toward tighter regulations. To securecompetitiveness and a foothold for future expansion, we acquired
two companies* in April and October 2016, respectively. By doing so,
we enhanced our ability to provide various solutions through a
one-stop service structure under the brand name “MUFG Investor
Services.” In the field of asset management services, we promoted
the sale of index-related products developed in collaboration withSTOXX Limited—the top European investment index developer andprovider—targeting overseas asset management firms. We also
strengthened our marketing structure by, for example, opening a
new representative office in Dubai.

Net operating profits (right axis)(Billions of yen)

180

(Billions of yen)

150

173.1

172.2

171.5

70.2

68.3

60.9

2014

80

70

120

0

Global* Services provided under the MUFG
Investor Services brand, custody and fundadministration services, etc.

The domestic market has seen such structural changes asshrinking employee pension fund (EPF) plans, a shift fromsavings to stable asset building and the popularization of
the individual-type Defined Contribution pension plan
(iDeCo). We will work to respond accurately to thesechanges while expanding revenues from ouroverseas businesses.

Gross profits increased 0.5% (¥0.9 billion) year on year to ¥173.1
billion. Net operating profits fell 13.2% (¥9.3 billion) year on year to¥60.9 billion. The rise in gross profits was attributable to theacquisition of an overseas investor services company. However,domestic operations were significantly affected by the dissolution of
EPF plans and stagnation in the investment trust market forindividual investors because of weakening business sentiment.
Consequently, profit decreased due to these and othernegative factors.

2015

2016

60

0

(FY)

Balance of Global IS*2
(Billions of U.S. dollars)

600

498

400
251
200

0

2015

2016

(End of FY)*2 Sum of HF・PE・Investment Funds (40 Act etc) administration* Currently, MUFG Capital Analytics LLC and MUFG Investor Services (US), LLC

Investment Trust
We facilitated a shift from savings to stable asset building bypromoting wrap account products as key products supporting asset
building. We also launched a new service related to investment
education. At the same time, we launched a trail-blazing AI fundproduct ahead of other domestic major investment trust
management firms.

Defined Contribution Pension
Investment products balance

4.0

In the area of defined benefit pension plans, we secured an industryleading share in Japan in terms of pension trust balance. Moreover,
we enjoyed stable growth in both the DC pension administration
balance and the DC pension investment product sales balance. In
January 2017, we released “Light Course,” a product designed tobetter accommodate needs of first-time iDeCo investors, aiming tohelp facilitate the popularization of this pension scheme.

3.7

3.4

3.0
2.0

Pensions

Asset balance(Trillions of yen)

2.1

2.3

1.0
0

2015

2016

(FY)

Operating Environment Analysis
The introduction of the Bank of Japan’s negative interest
rate policy has prompted a growing number of institutional
investors to more actively seek investment vehicles thatpromise returns despite the ultra-low interest rateenvironment. This situation, in turn, has triggered a growing
trend toward investment in real estate and infrastructure.
Meanwhile, the majority of individual investors have yet tobecome open to the idea of making a full-fledged shift fromsavings to stable asset building—a situation we do not seechanging any time soon. In addition, there has been achange in the competition environment, with otherdomestic players considering spinning off and integrating
40

MUFG Report 2017

their investor services functions by merging multiple
subsidiary banks. Furthermore, in January 2017 the scope of
persons eligible to enroll in iDeCo was extended, boosting
the plan’s popularity and expanding its policyholder base.
Taking these circumstances into account, the Trust Assets
Business Group is committed to pursuing a customercentric business approach. As we are entrusted withvaluable customer assets, we will do our utmost to live up
to their high expectations regarding our management andadministration operations, thereby fulfilling oursocial responsibilities.

E S G

Promoting ESG Investment

In addition to establishing and handling theadministration of excellent funds by carefully optimizing
its stock portfolio to secure sustainable growth inreturns, the Trust Bank acts as an advocate forinvestment activities focused on ESG criteria. To that
end, the Trust Bank teams up with government agencies
to hold seminars while staying engaged with private
corporations in the sharing of best practices regarding

the selection of investee candidates based on nonfinancial information.
Mitsubishi UFJ Kokusai Asset Management handles
funds backed by stocks of environmentally friendly
corporations boasting robust returns. Some of thesefunds allocate a portion of trust fees to foundations
engaged in environmental protection activities.

MUFG Report 201741

Corporate Value Initiatives

Business Overview

Global Markets Business

Fiscal 2016 Review

We promote market-related business (bonds, forex, equities, derivatives)and are responsible for Asset Liability Management (ALM).*

Fiscal 2016 Earnings Summary
Gross profits decreased 8.4% (¥54.0 billion) year on year to ¥582.0
billion. Net operating profits declined 13.6% (¥58.4 billion) year on
year to ¥369.1 billion.

* ALM: Integrated management of liquidity risk and interest rate risk inherent in assets (loans, etc.) andliabilities (deposits, etc.)

Shigeru Asai
Senior Managing Executive Officer
Group Head, Global Markets Business Group

Composition of Gross Profits*

14%

Fiscal 2016 Gross Profit Breakdown¥582.0 billion■ Sales &Trading

60%■ ALM, Others40%

Our Medium- and Long-Term VisionHelping Establish the MUFG Brand as a Global Presence and a Strong Market Player BoastingDistinct Competitive Advantages in Japan and Asia
Business-HD, providing one-stop services for customers.
Simultaneously, we will adopt a more sophisticated balancesheet management method for global implementation thatencompasses both the yen and foreign currencies.

Operating Environment Analysis
Operating conditions surrounding the global market
business have become increasingly harsh due to theprolonged trend toward low interest rates in Japan andEurope in particular; a growing sense of uncertainty
prevailing in the financial market after the Brexit referendum
and the U.S. presidential election; and the upcomingtightening of global financial regulations.
Despite the adverse conditions, we are determined toachieve sustainable growth through the creation of new
business models that will serve into the future. In S&T

In ALM operations, profit decreased mainly due to the restructuringof foreign bond positions in response to a hike in U.S. interest rates
following the U.S. presidential election.

operations, we are pushing forward with the developmentof an optimal operating structure that will enable us toprovide one-stop services, deliver solutions of higher quality
and maximize synergies through the integration of market
business functions throughout the Group. In ALM
operations, we are preparing for the adoption of a balancesheet management method for global implementation thatencompasses both the yen and foreign currencies.
Furthermore, we will actively utilize the ICT and FinTech tostrengthen our operating platform, thereby
enhancing productivity.

MUFG Report 2017

Net operating profits (right axis)(Billions of yen)

700

(Billions of yen)664.3 458.3

500
636.1 427.5
582.0 369.1

600

300

500

0

400

2014

2015

2016

0

(FY)

(Billions of yen)

500

472.4

475.1

2015

2016

400

300

0

(FY)

* Total of S&T business related gross profits in all business units of the Bank,
the Trust Bank and the Securities Business-HD. Local currency basis.

ALM
In fiscal 2016, the financial market saw major fluctuations thatreflected turbulence in the wake of such factors as the UK decision
to leave the European Union and the results of the U.S. presidential
election. Nevertheless, we were able to flexibly execute risk control
measures backed by a global management structure encompassing
the yen and foreign currencies.
Going forward, external conditions surrounding our ALM operations
will remain harsh due to the Bank of Japan’s negative interest rate
policy, the rising cost of foreign currency procurement andtightening financial regulations. With this in view, we will rally ourGroupwide strengths to enhance our resilience amid the changing
operating environment by, for example, pursuing sophisticatedbalance-sheet management methods, such as the integrated
management of U.S. dollars on a global basis, and strengthening
controls on foreign currency liquidity.

E

Unrealized Gains or Losses on JGB and
Foreign Bonds*
JGB

Foreign bonds(Billions of yen)

1,142.8
1,000

500

0

342.6

2015

2016

(End of FY)* JGB and foreign bonds included in securities available for sale category

S G Utilizing AI to Provide Accurate and Timely Information

The utilization of AI has significant potential to change
traders’ daily operations. For example, in foreignexchange trading deep learning is expected to prove a
useful tool for, in one example, predicting how
exchange rates will move 10 minutes into the future.
Applying deep learning, computer analysis is able toextract unique patterns from enormous volumes of data
and thereby generate highly accurate projections of42

Gross profits (left axis)

Sales and Trading Gross Profits*

Sales and Trading
In New York and Hong Kong, as was done in London in the previous
fiscal year, our dealing rooms under the Bank and subsidiaries of the
Securities Business-HD were integrated. We also completed therelocation of these two businesses’ Tokyo offices to the samebuilding. Our S&T functions at the Bank and securities companies
have thus been fully integrated at home and abroad. Looking ahead,
we will flexibly mobilize our S&T teams in each region to provide onestop services and products with superior quality that satisfies
customers’ expectations.

* Gross profit total for fivebusiness groups

We will endeavor to optimize our global markets business
functions throughout the Group to strengthen sales andtrading (S&T) operations. In particular, we will integrate thedomestic and overseas trading functions and sales
functions of the Bank and subsidiaries of the Securities

In the S&T business, we achieved steady results in domestic foreignexchange operations while enjoying solid showings overseas. This
was thanks to the thoroughgoing optimization of the Group’s
operating structure completed in the fiscal year under review.

Gross Profits and Net Operating Profits

market trends through the repetition of this learning
process. This technology will allow traders to be moreproactive in controlling trading risk as well as to propose
trading strategies finely tuned to individual customer
needs. To accelerate the commercialization of suchtools, MUFG is actively promoting open innovation andincorporating external input (Please see page 24
for details).

MUFG Report 201743

Important Issues Concerning Value Creation

Initiatives for Addressing ESG Issues toward Sustainable GrowthTo fulfill its mission as a financial institution, MUFG is striving to build lasting relationships with customers andsociety as a whole and working hand in hand with these stakeholders to ensure sustainable mutual development.
To this end, the Company is addressing a variety of ESG issues from a long-term perspective.

MUFG’s Overarching Approach to ESG Issues Basedon Discussions at the Top Management Level

Important Issues
Concerning Value
Creation─ How MUFG Addresses ESG Issues

Initiatives for Addressing ESG Issues
toward Sustainable Growth………………………………………… P.45
Environmental Initiatives…………………………………………… P.46

In recent years, growing concerns about climate change
risk have propelled countries around the world toconvene international discussions on tackling such risk
while prompting corporations to pay closer attention to
the impact of their business activities on the environmentand society. Moreover, on the back of increasingawareness of their stewardship responsibilities,
institutional investors are focusing ever more tightly on
the ESG aspects of their investees. Given these trends,
MUFG believes that ESG-conscious corporate
management has become essential to continued
operations and sustainable growth.
In June 2017, MUFG’s board members reconfirmed theimportance of ESG-conscious management while
discussing how to tackle ESG issues and what strategies
the company should adopt. Conclusions reached at thisboard meeting can be summarized as follows.
First, the company will focus on opportunities arisingfrom ESG issues. More specifically, we have confirmed
our policy of helping resolve issues society is confronting
through our business activities with an eye tocontributing to the realization of the UN’s Sustainable

Development Goals (SDGs) and other sustainability
targets. By doing so, we will sustainably enhance ourcorporate value.
Second, MUFG will upgrade its risk management
framework, especially with regard to environmental andsocial risk. Keeping apprised of international trends andstandards, we will develop a more sophisticatedmanagement framework for ensuring that environmental
and social considerations are taken into account in ourbusiness activities and will enhance our responsivenessto climate change.
Third, we will step up information disclosure. In addition
to disclosing the range of initiatives undertaken by MUFG
through easy-to-understand presentations, we haveconfirmed the necessity of enhancing engagement withvarious stakeholders.
In line with these companywide policies, we will engage
in intensive discussions focused on concrete ESG
initiatives and incorporate such initiatives into the next
Medium- Term Business Plan. In these ways, we will
facilitate the creation of new value and live up to the
expectations of stakeholders over the long term.

Contributing to Future Industries
and a Better Society………………………………………………… P.48
Social Contributions…………………………………………………… P.52
Rallying Groupwide Resources to Build
Sophisticated Investment Chains……………………………… P.54

Endorsement of International Sustainability
Initiatives

Helping Corporate Customers Achieve
Growth through Financing………………………………………… P.56

MUFG has endorsed and is acting as an advocate forsuch international sustainability initiatives as the United

Upgrading the Governance Framework……………………… P.58

Nations Global Compact, a principle-based framework ofvoluntary action aimed at encouraging businesses touphold and practice universal principles pertaining tohuman rights, labor, the environment and anti-corruption.

Ensuring sustainable growth inour corporate value…………………………………………………… P.60
Dialogue between Lead Independent Outside
Director and Investors……………………………………………… P.66
Board of Directors…………………………………………………… P.68
Corporate Executive Officers andExecutive Officers…………………………………………………… P.70
Global Advisory Board………………………………………………… P.71
Outline of Annual Meeting………………………………………… P.72

44

MUFG Report 2017

United Nations Global Compact

United Nations Environment
Programme– Finance Initiative

Principles for Financial Action
for the 21st Century

MUFG Report 201745

Important Issues Concerning Value Creation

Environmental Initiatives
Remaining on-trend with evolving needs for solutions for environmental
and social issues, MUFG is engaging in project finance aimed at
supporting the development of renewable energy businesses, providing
consulting services to help customers counter global warming andassisting fundraising for corporations aiming to minimize theenvironmental risk of their operations.
In particular, climate change countermeasures are now seen as a criticalissue requiring international efforts. With this in mind, MUFG will rally its
comprehensive strengths as a Group to contribute to suchcountermeasures and other initiatives aimed at protecting the
global environment.

Environment

46

MUFG Report 2017

MUFG Report 201747

Important Issues Concerning Value Creation

Environmental Initiatives

Contributing to Future Industries and a Better Society
MUFG has positioned the pursuit of environmental initiatives, especially those aimed at countering climate change,
as one of its social missions. Accordingly, we are striving to contribute to a sustainable society by helping reduce
environmental burdens attributable to human activities. In 2008, we established the MUFG Environmental
Statement and Policy, which applies to all Group companies, with the aim of using our financing functions to tackle
issues society is confronting on a global basis.
Please also visit the following page of the Company’s website for detail of MUFG Environmental Statement and Policy.
http://www.mufg.jp/english/csr/juten/sustainability/policy

Case study

Leveraging Our Financing Functions
Promotion and Popularization of Renewable Energy
In the wake of a growing trend toward the use of clean
energy, fossil fuels are gradually being replaced withrenewable energy sources in countries worldwide.
Against this backdrop, MUFG is endeavoring to popularize
renewable energy around the globe by acting as anorganizer and provider of financing related to clean
energy businesses, such as solar, hydroelectric, wind andgeothermal power generation. Moreover, MUFG is
supporting environmental and energy funds to assist
business operators in their efforts to resolve
environmental issues.
2016 Clean Energy and Energy Smart Technologies
League Table
Rank

Organization

CreditTable Share(Millions of US$)
(%)

1

MUFG

2,911.0

6.64

2

Sumitomo Mitsui Financial Group

2,215.7

5.06

3

EIB

2,050.1

4.68

4

Banco Santander

1,935.7

4.42

5Mizuho Financial

1,607.0

3.67

6

KfW

1,599.7

3.65

7

Siemens

1,485.6

3.39

Beatrice Offshore Wind Farm Project (U.K.)
Winning the Global Capital Syndicated Loan, Leveraged
Finance and Private Placement Awards 2016 “Best
Project Finance Loan”
The total financing amount : £1,959.7 million
Power generation capacity: 588MW
The project is expected to offset roughly 1,110,000 tons of
CO2 emissions per year

Artist’s rendering of the completed facility

Environmental and Social Risk Management Based on
the Equator Principles
The Bank of Tokyo-Mitsubishi UFJ (the Bank) is a signatory to
the Equator Principles (EP), a risk management framework
for identifying, assessing and managing the environmental
and social risks and impacts of large scale projects. The
Bank supports its customers’ environmental and social risk
management and contributes toward a sustainable world
through implementation of the EP. Furthermore, the Bank
will not finance projects where the client will not, or is unable
to, comply with the EP. The Bank also works together withcustomers facing environmental and social issues in specificsectors to ensure that the Projects are developed in amanner that is socially responsible and reflects soundenvironmental management practices.

8

Nord/LB

1,404.5

3.21

9

BNP Paribas

1,245.9

2.84

10

BNDES

1,113.2

2.54

Prior to financing a project, the Bank works closely with the customer
to identify any environmental and social risks and impacts, andconfirm that the project provides measures to avoid, minimize,mitigate and/or offset risks and impacts. The Bank monitors ongoing
EP compliance to ensure that the potential risks are controlled overthe life of the loan.

MUFG Report 2017

*1 Total Loss-Absorbing Capacity: A capital regulation applied to GSIBs.
*2 Renewable energy projects whose environmental and social impacts are reviewed inaccordance with the EP before being certified as eligible to funding

Finance

Monitoring

Allocation of Funds andEnvironmental Impact(As of the end of March 2017)

Balance of Eligible Green Projects thatwere funded by the net proceeds fromthe issuance of MUFG Green Bonds

US$542 million(total 17 projects)

Total annual power generation capacity

4,355 million kWh

Total annual estimated reduction
volume (CO2equivalent)

2.2 million tons

For more details, please visit the following page of the Company’s website.
http://www.mufg.jp/english/csr/juten/sustainability/greenbond/reporting/Supporting the Fundraising of Customers Pursuing
Eco-Friendly Business Operations
MUFG boasts a variety of financing products aimed at
assisting corporate customers with their pursuit ofenvironmentally friendly business operations, including
products that provide preferential interest rates andothers that partially lift the burden of interest expenses
through the utilization of government subsidy programs.
Moreover, by supporting eco-friendly business activities,
MUFG’s financing products are indirectly helping to
reduce environmental burdens.

Investor
The net proceedsfrom the issuanceGreen Bonds

Financing Products that Support Corporations in
the Environment and Energy Industries by Utilizing
Government Subsidy Programs
Environmental Management Support LoanMUFGBank of Tokyo-Mitsubishi UFJ

Identification / Confirm measures to
Evaluation
avoid, minimize, mitigate
and/or offset risks andimpacts

48

In addition, the issuance of Green Bonds is in compliancewith MUFG’s in-house framework based on the four pillarsof Green Bond Principles issued by the International
Capital Market Association (ICMA). MUFG obtained asecond opinion on its green bond framework and thebond’s environment credential. Proceeds from thesebonds are used for financing EP-compliant eligible green
projects*2 through the Bank.

Process for Confirmation of Environmental and Social
Considerations of Projects

Source: Bloomberg New Energy FinanceIssuance of MUFG Green Bonds
In September 2016, MUFG became the first in the world
to issue a Green Bond in conformity with international
TLAC1 regulations as part of initiatives to contribute toenvironmental and social sustainability through its capital
market activities. The use of proceeds from the issuanceof Green Bonds is limited to funding for renewable energy
and energy efficiency projects aimed at preserving the
global environment.

Utilizing an interest subsidy program aimed at facilitating
eco-friendly financing under the auspices of the Ministry of
the Environment
Energy Conservation Support Loan

Loans

Utilizing an interest subsidy program aimed at supporting
capital expenditure in energy-saving facilities under the
auspices of the Ministry of Economy, Trade and Industry

Eligible Green Projects
Wind power
generation
projects

Solar photovoltaic
power generation
projects

Solar thermal
power generation
projects

Green Project Support Loan
Utilizing an interest subsidy program aimed at supporting
financing for research into environmental risk under the
auspices of the Ministry of the Environment

MUFG Report 201749

Important Issues Concerning Value Creation

Environmental Initiatives
Providing Consulting Services on Global WarmingCountermeasures
MUFG is supporting the Joint Crediting Mechanism (JCM),
a carbon credit system designed to supplement the
Clean Development Mechanism (CDM) formulated basedon the Kyoto Protocol. With the Japanese government
acting as an international advocate for this mechanism,
MUFG provides consulting services aimed at helping
commercialize cutting-edge initiatives to curb global
warming while developing schemes for financing
such initiatives.
When it comes to global warming countermeasures, two
factors are important: Mitigating climate change; andAdapting to climate change.
The latter involves implementing measures to reduce theimpact of climate change and preparing for the risks.
In fiscal 2016, Mitsubishi UFJ Morgan Stanley Securities
served as the secretariat for compiling a draft ofProspects for Climate Change Adaptation Business by the
Ministry of Economy, Trade and Industry. In this project,
we played a key role in identifying the size of the potential
market for an adaptation business as well as prospective

adaptation business sectors that would makecontributions in this area. We have also made proposals
regarding a public-private partnership, hoping that ourinsights could help promote adaptation businessinitiatives undertaken by Japanese companies.
Responding to TCFD
Today, businesses are called upon to not only becomeaware of the risk attributable to and importance ofcountering global warming and climate change, but
appropriately assess business opportunities stemmingfrom such phenomena. In fact, a growing number of
institutional investors and financial authorities are paying
close attention to the risk and opportunities that derivefrom climate change. The Task Force on Climate-related
Financial Disclosures (TCFD) was thus established by the
Financial Stability Board, advocating the incorporation ofclimate change-related information into financial
reporting disclosed by financial institutions.
We are well aware of the impact of climate change on
businesses and risk arising from it. As a financial
institution, MUFG will appropriately respond to the
TCFD’s recommendations.

Reducing Environmental Burdens Attributable
to Our Business Activities
Curbing CO2 Emissions
MUFG is striving to reduce the environmental burdens of
its operations and, to this end, promoting the effective
utilization of limited resources in various aspects ofbusiness activities. For example, Bank of Tokyo-Mitsubishi
UFJ has specified its target* for energy consumption
attributable to its business operations, thereby promoting
initiatives to reduce CO2 emissions and curb
global warming.
* Fiscal 2030 energy consumption intensity: 19% below the fiscal 2009
level; Please also visit the Company’s website to see our latest
environmental performance.
http://www.mufg.jp/english/csr/juten/sustainability/others/

The JCM is a bilateral credit creation scheme between Japan and developing countries proposed by the Japanese government to the international
community as a new mechanism to complement the CDM. Benefits of the JCM include mutual implementation of projects by Japan and any
country that signed a bilateral document, a broader range of applicable projects compared to the CDM, shorter processing times, and theavailability of Japanese government subsidies.

Japan
Use in achieving Japan’s reduction target

Credits

Sign bilateral
document

Host country
JCM projects

Low-carbon
technology
Subsidy

GHG emissions reduction/sequestration

joint committee

Credits

Assisting a Project Aimed at Reducing GHG Emissions through the JCM in a Developing Country
Vietnam: Promotion of Green Hospitals through the
Improvement of the Energy-Efficiency and Environment
at National Hospitals
As part of the Dissemination and Promotion of Global
Warming Countermeasure Technology, a program
sponsored by the New Energy and Industrial Technology
Development Organization, Mitsubishi UFJ Morgan Stanley
Securities and two other Japanese companies assisted in the
introduction of high-efficiency invertor air conditioning
systems at national hospitals in Hanoi and Ho Chi Minh City.
The project is expected to reduce energy consumption
while improving air quality in the hospitals. In this project, wewere responsible for the development of measurement,
reporting and verification (MRV) methodology to assess thevolume of GHG emissions reduced through theimplementation of the project and the preparation ofproject design documents (PDD). The project has been

50

MUFG Report 2017

officially registered and approved as a JCM project by thegovernments of Japan and Vietnam.
Laos: Demonstration Project for an Energy-Saving Data
Center Project
We assisted the development of the first full-scale
government-run data center in Laos. This facility consists ofhigh-quality, high-efficiency and container-based data
center units that consume 40% less energy thanconventional data center facilities. In this way, we arehelping reduce GHG emissions and mitigate climate change.
According to our assessment, the reduction in the GHG
emissions volume through this project will amount to an
approximately 130,000t CO2 over the 10-year period
between 2016 and 2026.

In collaboration with OISCA Japan, since 2008 MUFG
conducts the "Next Generation Leader Program for the
Asia Pacific Region" in which trainees study aboutsustainable organic farming techniques and other skills.
Many of the graduates are now serving in their homecountries’ government agencies and research institutions,actively working to raise awareness of and improve
agriculture practices.

Carbon Dioxide (CO2) Emissions*（t-CO2）250,000

224,501
184,858

200,000
150,000

164,687

148,892

145,517

100,000
50,000Outline of the JCM

OISCA Japan also implements human developmenttraining programs, targeting young people. Graduates of
the training programs are expected to become future
leaders and contribute to the development of their own
respective communities and countries.

0

2012

2013

2014

2015

2016

（FY）

* Total of MUFG and the Bank (Domestic)

Initiatives to Promote Environmental Protection
and Environmental Education
Environmental leadership development
MUFG dispatches its experts to the Graduate School of
Keio University to give lectures on designing anenvironmental business as part of the university’s“Environmental Innovator Course.” By doing so, MUFG is
helping equip students with specialist knowledge anddevelop future leaders who would contribute to a low
carbon society.
Also, MUFG hosts lectures and seminars focused on
global warming and sustainable society at a number ofuniversities, including Sophia University, Kwansei Gakuin
University, Soka University and Meiji University, with its
experts sharing their insights on environmental
businesses and carbon credit schemes as such the CDM
and the JCM.

Preserving World Heritage Sites
MUFG helps preserve World Heritage Sites, thereby
protecting the natural environments that are the common
inheritance of humankind and provide environmental
learning opportunities that help raise awarenessof sustainability.
World Heritage Sites Preservation Initiatives Undertaken
by MUFG
Shirakami-Sanchi: Tree planting and forest
development activities
Japan

Sacred Sites and Pilgrimage Routes in the Kii
Mountain Range: Site conservation activities
Fujisan, Sacred Place and Source of Artistic
Inspiration: Environmental protection activities

China

Mount Wuyi: Environmental protection activities

ThailandHistoric City of Ayutthaya: Site conservation
activities

Please visit the Company’s website for details of these activities.
http://www.mufg.jp/english/csr/juten/community/hozen/

Collaborating with OISCAThe Organization for Industrial, Spiritual and Cultural
Advancement-International (OISCA) is an international
NGO. Established on OISCA's philosophy, OISCA Japan isengaged in the development of local rural areas andimplementing environmental conservation projects
mostly in the Asia Pacific Region.

MUFG Report 201751

Important Issues Concerning Value Creation

Social Contributions
Part of MUFG’s mission is to contribute to the sound development ofsociety through the financial business.
For example, we support investment chains by playing the role of sales
company and investment manager. We also help corporate customers
resolve challenges they are facing, rallying our expertise and know-how
beyond the boundaries of Group companies. Moreover, we provide
educational programs and host seminars so that our customers canbetter understand what it takes to start investing.
As a comprehensive financial group equipped with a wide variety offunctions, we strive to satisfy the needs of our customers.

Social52

MUFG Report 2017

MUFG Report 201753

Important Issues Concerning Value Creation

Social Contributions

Rallying Groupwide Resources to Build SophisticatedInvestment Chains
The development of sophisticated investment chains plays an essential supporting role in assuring the stable
accumulation of household assets and sustainable growth for the economy. To help develop such investment
chains, MUFG plays the dual role of sales company and asset manager.

Conceptual Diagram for the Investment Chains

2

Asset owners

Asset Manager

Public pension funds
Corporate pension funds

Household
AssetsInvestment trusts

B
Entrustment

Mitsubishi UFJ Trust andBanking
Mitsubishi UFJ Kokusai
Asset Manegement
MU Investments, etc.

C
Investment

1

Bank of Tokyo-Mitsubishi UFJ
Mitsubishi UFJ Trust and Banking
Mitsubishi UFJ Morgan Stanley Securities
kabu.com Securities
Mitsubishi UFJ Morgan Stanley PB Securities,
etc.

A

B

The asset owner asks the asset
manager to conduct stewardshipinitiatives while monitoring suchinitiatives

1. MUFG’s role as a sales company: Pursuing a
Customer-first Business Approach
MUFG aims to provide products and services that exceed
customer expectations and, to this end, has establishedthe MUFG Basic Policy for Fiduciary Duties. Furthermore,
MUFG, the Bank, the Trust Bank and the Securities
Business Holdings have established the joint Fiduciary
Duty Promoting Committee, which operate under MUFG’s
Executive Committee.
The establishment of this joint committee is aimed atenabling four participating companies to share their bestpractices and systematically promoting customer-firstbusiness operations throughout the group. In addition,
MUFG is committed to maintaining the regular reportingon the status of each group company with regard to theirpractice of such an approach.
54

MUFG Report 2017

Establishing the Stewardship Committee
The Trust Bank has its Stewardship Committee in place.
As a dedicated body in charge of verifying the exercise of
the Trust Bank’s voting rights, engagement with investees
and its investment decisions, the committee assesses
whether these activities are sufficient and if the Trust
Bank’s actions maximize investors’ interests. The
Stewardship Committee operates directly under the
Board of Directors to ensure its independence andneutrality and discusses the appropriateness of policies
for and rules governing the Trust Banks’s exercise of
voting rights and the status of various initiatives aimed atensuring it fulfills its stewardship responsibilities. The
conclusions of these discussions are reported to theThoroughly Managing Conflicts of Interests
To better fulfill its stewardship responsibilities, MUFG has
established systems and rules to prevent potential
conflicts of interest based on its Policy for Conflicts ofInterest Management. For example, the Trust Bank places
restrictions on staff transfer between departments that
directly engage with corporate customers and those incharge of administrating assets under management. The
Trust Bank has also clarified in-house rules that ensurethat the exercise of its voting rights and investment
decisions are not subject to improper influence while
strictly controlling access to relevant information. In theseways, MUFG is enhancing the effectiveness of its
stewardship initiatives.

Investees

Returns: Sustainable business expansion and growth incorporate value over the medium- to long-term
Sales companies sell investment
products according to principles
of customer-centric business
management (Fiduciary Duties)

Board of Directors, which, in turn, publicizes verification
results submitted by the committee as part of thereporting on the self-evaluation.

D

A

Sales Company(Japan’s Stewardship Code), engaging in stewardshipinitiatives based on these principles and endeavoring to
improve the effectiveness of such initiatives.

C

Asset manager conducts constructive
dialogue (engagement) and exercise
of voting rights to improve thecorporate value of investees

D

The investees strive to appropriately
build and administrate theircorporate governance systems forsustainable growthPursuing Medium- to Long-Term Growth in Investment Returns
Playing its part in the establishment of investment chains, the Trust Bank
strives to help its investees grow their corporate earnings and enjoysustainable business expansion, with the aim of bringing greater
investment returns to beneficiaries.
Dialogue with investees and in-house “engagement meetings”
aimed at sharing and evaluating results of dialogue• Analysts and fund managers engage in dialogue from four
perspectives (medium- to long-term business strategies; financial
strategies; corporate governance; and information disclosure
approach)• Representatives from departments specializing in the exercise of
voting rights engage in dialogue from the perspective of corporate
governance• Results of each dialogue session are shared among and evaluated bymeeting attendees, who, in turn, identify future issues and annual
policies for the upcoming fiscal year in an effort to enhance the qualityof the dialogues

2. MUFG’s role as an asset manager:
Fulfilling our Stewardship Responsibilities

The exercise of voting rights based on in-house guidelines• Deciding how to vote with the goal of maximizing returns tobeneficiaries in line with our voting guideline while referring to resultsof dialogue with investees• Disclosing the details of our voting standards on a corporate website
to enhance the transparency of the process of the exercise of voting
rightsMUFG is maintaining engagement with its investees tofacilitate their sustainable growth from a medium- tolong-term perspective. In doing so, MUFG is striving to
make the best use of its capabilities and expertise as an
asset manager entrusted with customers’ invaluableassets. We believes that such engagement is key toenhancing returns to beneficiaries in the long run.

Disclosure of results of voting on individual agenda items andreasons for casting yes or no votes• During the period from July 2016 to April 2017, there were 459 general
meetings of shareholders and the Trust Bank voted on a total of 1,537
agenda items; the voting results are summerized in the chart at theright• Reasons for casting yes or no votes will be disclosed in August 2017

For the detail of the MUFG Basic Policy for Fiduciary Duties and initiatives
undertaken by each Group company, please also visit the following pageof the Company’s website.
http://www.mufg.jp/english/profile/governance/fd/

In particular, the Trust Bank, Mitsubishi UFJ Kokusai AssetManagement and MU Investments Co., Ltd. have adopted
the Principles for Responsible Institutional Investors

For more details, please visit the following page on the Trust Bank’s website.
http://www.tr.mufg.jp/houjin/jutaku/unyou_kabu.html

Results of Exercised Voting Rights(Japanese Equity)
Management Proposals
Supported

Opposed /Partial opposed

Total

Appropriation of
surpluses

316

5

321

Election of
directors

381

94

475

Election of auditors

206

44

250

Partial revision to
articles ofincorporation

133

3

136

Retirement benefit
payments

32

18

50

Revision of director
remuneration
amount

132

12

144

Granting of stockacquisition rights

31

15

46

Appointmentof accounting
auditors

10

0

10

Restructuring*1

28

0

28

Anti-takeovermeasures

18

11

29

Other proposals*2

38

2

40

Proposal

Shareholder Proposals

Total

0

8

8

1,325

212

1,537

(July 2016 - April 2017)*1 Mergers, business hand-overs/take-overs, share transfers andcompany splits*2 Acquisition of treasury stock, decrease in statutory reserves,increases in capital by third-party allotment, capital decrease,
reverse stock split, etc.

MUFG Report 201755

Important Issues Concerning Value Creation

Social Contributions

Helping Corporate Customers Achieve Growththrough Financing
In September 2015, the 2030 Agenda for Sustainable Development was adopted at the United Nations Sustainable
Development Summit, with 17 Sustainable Development Goals (SDGs) being formulated to address specific issues
around the world. Against this backdrop, businesses are being called to become more active in offering solutions
for issues society is confronting through their business activities. Accordingly, MUFG is committed to helping
resolve a variety of such issues through the provision of financial and other services.

Supporting Corporate Growth
Acting as a partner for its corporate customers, MUFG iswell aware of the fact that their needs may vary widely
due to differing levels of development. Accordingly,
MUFG optimizes its services to fit their individual needs,
whether they are startups, growing corporations, maturecompanies or companies undergoing
corporate rehabilitation.

・Offering financing and various other solutions
to assist customers with their pursuit ofsuccess in growth fields
Please also see the ESG feature on page 37 that reports on“Rise Up Festa.”

StartupStage

Number of award-winning corporations
included in the fiscal 2016 Rise Up Festa

11 companies

GrowthStage・Creating business opportunities throughbusiness matching・Supporting corporations seeking to
expand globally

Drawing on its excellent intelligence-gathering
capabilities backed by an industry-leading overseas
business network and longstanding track record, MUFG
acts as a partner for corporations considering overseas
expansion as well as for those in need of various types ofassistance once they have secured footholds in countries
abroad. Our staff, backed by a wealth of experience inand knowledge of specific countries and regions,
proposes regional strategies that take into consideration
local investment environments and relevant regulations.
Moreover, MUFG boasts a number of domestic andoverseas bases that work in close collaboration to provide
customers with solutions for the management issues they
face, from optimal fundraising methods for overseas
bases to global cash management advice and theprovision of financial strategies for cross-border M&A.

Number of business matching cases*1 in fiscal 2016

Approximately 22,000*1 The total of individual business matches achieved bybranches and at dedicated business matching events heldin Japan and overseas

・Supporting smooth business succession
Number of customer visits during fiscal 2016

Maturation
Stage

Approximately 4,000

・Assisting corporate rehabilitation incollaboration with external expert
organizations
Revitalization
Stage

Number of in-house specialists in corporate
rehabilitation*2

Approximately 90*2 The total number of specialists at domestic headquarters
at Bank of Tokyo-Mitsubishi UFJ

56

Best Partner for Corporations Expanding Overseas
In step with the globalization of the businessenvironment, a growing number of Japanese
corporations are expanding into countries abroad toestablish production bases and secure newsales channels.

MUFG Report 2017

An Interview with a Corporate Customer

Mr. Minoru Ooto, General Manager,

Overseas Business Division,
IKARI SHODOKU CO., LTD., as acting President
Director of Pt IKARI SHODOKU INDONESIA

Although we have positioned Indonesia as our overseas
expansion strategy’s first target due to its growth potential,
we have been facing difficulties in gathering accurate
information on such aspects of local conditions asregulations on foreign capital. The Bank of TokyoMitsubishi UFJ was able to help us with our inquiries,
providing us with the latest information and helpful advice
and thereby assisting in the establishment of our local
subsidiary in April 2017. Currently, we provide
comprehensive hygiene management services targeting
mainly food and pharmaceutical manufacturers. Even
after the establishment of our local base, MUFG continued
to provide us with business matching services as well as
updates about local regulations. We are grateful for its
generous assistance.

Helping Customers Better Understand What It
Takes to Start Investing

maintaining the trust of other members of communities
in Japan and overseas.

Amidst a graying society accompanied by a declining
birthrate, a growing number of people are expected to
face the need for solutions that ensure the stable
accumulation of assets. With this in mind, MUFG isproviding various educational programs and seminars
tailored to meet the interests of audiences from different
age groups, helping them better understand what it takes
to begin investing.

Microfinance
In ASEAN countries, the Bank of Ayudhya (Krungsri) helps
support low-income earners who are unable to obtainadequate access to financial services through theprovision of “microfinance” aimed at helping them gain
financial independence.

Elementary, junior high and high school students
・Domestic and overseas branches welcome local elementary,junior high and high school students, offering them workplace
experience programs. We also provide on-demand lectures at
local schools.
・Mitsubishi UFJ Morgan Stanley Securities has been running an
educational program aimed at helping junior high and highschool students learn about stock investment and was selected
as a winner of an Award for Companies Promoting Experiencebased Learning Activities for the Youth (Judging Committee's
Incentive Award) under a commendation program sponsoredby the Ministry of Education, Culture, Sports, Scienceand Technology.
University students
・We give lectures aimed at enhancing basic financial literacy
with regard to properly managing loans, credit cards andhousehold budgets while providing knowledge about various
asset building methods based on personal life plans.
Businesspersons
・We hold asset building seminars for individual customers andprovide tips on asset formation online.

In addition, Mitsubishi UFJ Trust and Banking Corporation(the Trust Bank) is promoting a variety of initiatives toassist corporate customers in this regard, leveraging its
investment know-how accumulated in the course of
corporate pension administration as well as its specialist
knowledge of real estate and residential mortgage loans.
Specifically, a dedicated department charged withinvestment education is holding on-demand seminars
aimed at facilitating their employees’ understanding ofinvestment and asset management while providing
web-based educational programs on these subjects. The
Trust Bank has also developed a unique “financial literacy
index,” utilizing it to enhance the content of its consulting
services and educational solutions targeting corporate
customers being aware of a need for educating theiremployees on these matters. Since June 2015, the Trust
Bank has hosted around 600 such seminars, with thenumber of attendees totaling approximately 18,000.

In particular, Krungsri is an industry leader in the field of
microfinancing in Thailand as it provides auto loans andnano-finance through subsidiary Ngern Tid Lor, which
serves as the single provider of microfinance under thesupervision of a banking parent company.
Global Volunteer Month “MUFG Gives Back”
Since 2013, MUFG has held an annual Global Volunteer
Month to encourage employees worldwide tosimultaneously engage in community contribution
activities. This campaign is subtitled “MUFG Gives Back,”reflecting our aspiration to communicate our gratitude topeople all around the world who generously supported
Japan’s reconstruction efforts after the Great East
Japan Earthquake.

Fiscal 2016
Total hours spent for volunteer activities
Approximately 270,000 hours*
November 2016 MUFG Gives Back
A total of more than 6,500 employees in
39 countries and regions participated in the
campaign* The total of employees at the Bank, MUFG Union Bank, N.A. and Krungsri(Bank of Ayudhya)

As a Member of Local Community
MUFG is committed to supporting the development ofcommunities in each region it operates. At the same time,
MUFG is promoting various initiatives aimed at

Staff at the Colombo office in Sri Lanka paid a visit to Kumarathunga Munidasa
junior high school, located in a region devastated by heavy rainfalls, anddonated new shoes and socks for students

MUFG Report 201757

Important Issues Concerning Value Creation

Upgrading the Governance
Framework
MUFG has positioned corporate governance as a priority management
issue in its pursuit of greater corporate value.
Since its establishment, MUFG has placed great emphasis on ensuringexternal oversight while pushing forward with relentless initiatives tobuild a stable and effective governance framework. Recently, MUFG
shifted to a “company with three committees” structure, in June 2015.
In June 2017, MUFG welcomed two outside directors from Thailand andthe United States, reinforcing the Board of Directors’ diversity to better
deal with the globalization of its operations.

Governance

MUFG Report 201759

Important Issues Concerning Value Creation

Upgrading the Governance Framework

Ensuring sustainable growth in our corporate value
Diversifying the Composition of Board Members
Fundamental Concepts

putting emphasis on ensuring external oversight. In June
2015, MUFG transitioned to the “company with threecommittees” governance structure. The functions ofoversight and execution in the holding company areseparated, thereby strengthening the oversight functionof the Board of Directors and the committee system has
also been reorganized for more effective governance. We
are aiming for a governance framework that will be morefamiliar and transparent to overseas stakeholders, in linewith our status as a G-SIB (Global Systemically ImportantBank). In June 2017, two foreign nationals were appointed
as directors to further diversify the Board of Directors.

MUFG will aim for sustainable growth and the increase of
corporate value over the medium- to long-term, inconsideration of the perspectives of its stakeholders,
including shareholders as well as customers, employees
and local communities. MUFG will aim to realize effective
corporate governance through fair and highly transparent
management based on the guidance provided by MUFG
Corporate Governance Policies established in May 2015.

Steps to Improve Our Governance Structure
Since its establishment, MUFG has worked to build astable and effective corporate governance structure,

Currently, 38% of MUFG’s shareholders are foreign corporations and other overseas shareholders.
Furthermore, with regard to the net operating profits in the customer segments, 40% of profits were
earned from overseas business. In addition, the ratio of overseas employees to the total workforce is
41%. In essence, a considerable portion—nearly 40%—of MUFG’s business base is outside Japan. With
this in mind, two foreign nationals—one from Thailand and the other from the United States wereappointed as directors for the very first time. This move is aimed at securing management supervisionfrom the perspectives of experts in Asia (MUFG’s second home market) and North America. These
appointments have enhanced the composition of MUFG’s Board of Directors, which strives to strikean optimal balance in terms of field of specialty, geographical expertise and gender diversity.

Corporate Governance Development
October 2005
Establishment of MUFG

June 2013

Governance
Structure

Company with a Board of Corporate Auditors

OutsideDirectors

2005
Four

2006
Three

2012
Two

Three

June 2014

Committees
under theBoardof Directors

2005
Compensation Committee

June 2016

June 2017

Company with Three
Committees
Five
GovernanceCommittee

2005
Nomination Committee

June 2015

2008
Nomination and Compensation Committee

2005
Internal Audit and Compliance Committee

Six

Seven

Eight (Twoforeign nationals)

Nominating andGovernance Committee(Statutory Nominating
Committee)
Compensation
Committee (Statutory)

Toby S. Myerson

Tarisa Watanagase

Former Partner of Paul, Weiss, Rifkind, Wharton & Garrison LLP
Longsight Strategic Advisors LLC
Chairman & CEO
Outside Director of MUFG Union Bank, N.A. and
MUFG Americas Holdings Corporation

Former Governor of the Bank of Thailand
The Siam Cement Public Company Limited
Outside Director

A lawyer who boasts specialist knowledge of corporate legal
affairs, M&A and other legal matters based on U.S. laws
thanks to more than 30 years of experience

Audit Committee(Statutory)
Risk Committee

Aformer governer of the Bank of Thailand boasting
specialist knowledge in finance and economy and morethan 30 years of experience as a central banker

Shareholder Stucture*

Total Customer
Segment revenues*

Group Employees*

Foreigninstitutions, etc.

Global Banking
Business

Overseas
Employees

U.S. Risk
Committee
2005 Advisory Board
Advisory
Board

Integrated into the Global
Advisory Board
Global Advisory Board

38%

40%

41%

Evaluation of Board of Directors
Board ofDirectors
Operations

Policy60

MUFG Report 2017

Independent Outside
Directors Meeting/Appointment of Lead
Independent Outside Director* As of Mar. 31, 2017

MUFG Corporate
Governance Policies

MUFG Report 201761

Important Issues Concerning Value Creation

Upgrading the Governance Framework
Outline of Board of Directors and Committees
The Board of Directors is composed of 18 members, ofwhom 8 (over one third) are outside directors with a highdegree of independence. Of the 18 directors, the majority(10) are non-executive directors.
The outside directors are a balanced group (corporate
management, financial specialists, a lawyer and a certified
public accountant) with a diverse range of experienceand expertise.
Nominating and Governance Committee
The Committee is composed of outside directors and thePresident & CEO, with an outside director as Chairperson.
The Committee decides on proposals for theappointment or dismissal of directors that are submitted
to the General Meetings of Shareholders. It also discusses
matters related to the Chairman, Vice-Chairman,
President, and other major management positions in theholding company or major subsidiaries and makes
recommendations to the Board of Directors. It examines

corporate governance policy and framework and makes
recommendations to the Board of Directors.
Compensation Committee
The Committee is composed of outside directors and thePresident & CEO, with an outside director as Chairperson.
The Committee decides the compensation policy fordirectors and corporate executive officers and alsodecides the details of individual compensation. It
examines the compensation systems for senior
management at the holding company and major
subsidiaries and makes recommendations on
establishment and reform to the Board of Directors.
Audit Committee
The Committee is composed of outside directors andnon-executive directors, with an outside director as
Chairperson. The Committee examines the execution ofbusiness by directors and corporate executive officers
and prepares auditing reports. It also examines thebusiness and financial situation of the holding company
and subsidiaries, conducting fieldwork where necessary.

Committee membership
Nominating andGovernanceCommittee

Compensation
Committee

Audit
Committee◯

Hiroshi Kawakami

Outside director◯◯

Yuko Kawamoto

Outside director◯◯

Haruka Matsuyama

Outside director◯◎

Tsutomu Okuda

Outside director◎◯

Yukihiro Sato

Outside director◯

Akira Yamate

Outside director◎

Risk
Committee

U.S. Risk
Committee

General Meeting of Shareholders

Board of Directors

Statutory Committees

Non-executive Director (Ten)Nominating and Governance Committee

Executive Director (Eight)

Compensation Committee◯

Audit Committee

Risk Committee◯

Junichi Okamoto

Non-executive director◯

Nobuyuki Hirano

Director
President & Group CEO

Tadashi Kuroda

Director
Senior Managing Executive Officer,
Group CSO & Group CHRO◯

Akira Ariyoshi

Outside expert,
graduate school professor◯

Kenzo Yamamoto

Outside expert◯

Christine Garvey

Outside director of the Americas HD◎

Dean A. Yoost

Outside director of the Americas HD◯

Ann F. Jaedicke

Outside director of the Americas HD◯

Suneel Kamlani

Outside director of the Americas HD◯

Toby S. Myerson

Outside director
Outside director of the Americas HD◯

Masato Miyachi

Chairman of the Americas HD◯

Stephen Cummings

President & CEO of the Americas HD◯

Masamichi Yasuda

Director
Senior Managing Executive Officer, Group CRO◯◯

Oversight◎

Takehiko Shimamoto Non-executive director

MUFG Report 2017

MUFG's corporate governance structure (As of June 29, 2017)

Mitsubishi UFJ Financial Group

U.S. Risk Committee*1*1 Established based on the U.S. Prudential Regulations◯

Execution
Executive Committee

Global Advisory Board

President & Group CEO(As of June 29, 2017)

62

U.S. Risk Committee
In May 2016, MUFG established the U.S. Risk Committee
under the MUFG Risk Committee in order to comply
with the Enhanced Prudential Standards. The U.S. Risk
Committee is composed of the members of MUFG
Americas Holdings Corporation (the Americas HD) Risk
Committee, delegate(s) from MUFG, Regional Executive
for the Americas and CEO of the Americas HD. The U.S.
Risk Committee shall deliberate on all types of risk in
the U.S. on a group basis, report and makerecommendations to the MUFG Risk Committee as well
as oversee the status, control and management of thematerial risks to which MUFG’s operations in the U.S.
may be exposed and overall risk management
framework in respect of MUFG’s operations in the U.S..

Risk Committee
The Committee is composed of internal directors,
outside directors and outside expert members, with anoutside director as Chairperson. The Committee
examines matters related to Groupwide risk
management and reports to the Board of Directors. It
examines important issues of the overall risk
management matters and issues relating to the top risk
matters (including critical compliance matters), as wellas other issues that need to be examined by the Risk
Committee and makes recommendations to the Boardof Directors.

C-SuiteOfficers in Charge

Planning and Administration Divisions

Business Groups

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Securities Holdings Co., Ltd.

General Meeting of Shareholders
Board of Directors

Audit & Supervisory
Committee

Cooperation

Membership includes outside directors and committee members

MUFG Report 201763

Important Issues Concerning Value Creation

Upgrading the Governance Framework
Strengthening the Function of theBoard of Directors

Stepping Up Support for Outside Directors while
Utilizing Their Insights

Having transitioned to the “company with threecommittees” structure in 2015, MUFG is striving tostrengthen its corporate governance and the function of theBoard of Directors.

Board Educational Sessions are held to support outside
directors by providing necessary information beyond thescope of the discussion agendas of the Board of Directors
meetings. Outside directors attend these sessions to beapprised of MUFG’s business operations and the
management environment surrounding it immediately
upon their appointment and on a regular basis during
their terms of service.

Operational Status of the Board of Directors
The Board of Directors decides on basic management
policies while taking on the supervision of management
activities. In principle, business matters other than thosereserved for the Board of Directors in accordance with thelaw are delegated to and decided on by corporate executive
officers. However, particularly important matters (listed
below) are discussed and decided on solely by the Boardof Directors.
• Management strategy, risk management policy, capital
policy, resource allocation and other basic management
policies for the entire Group• Supervision of directors and corporate executive officers
who take on business execution• Internal control systems for the Group and the monitoringof the development and operation of such systems• Appointment of corporate executive officers• Oversight of initiatives to develop a corporate governancestructure and to facilitate a sound corporate culture

Moreover, in addition to attending Board of Directors andstatutory committee meetings, outside directors engage
in intensive discussions on the Group’s businessstrategies and challenges going forward and interact with
employees in managerial positions on a numberof occasions.

Strategic off-site meetings
Utilizing the insights of Outside Directors• Outside directors and Group managers meet on weekend to engage
in intensive discussions
Sample agendas: MUFG Re-Imagining Strategy, global humanresource strategies, etc.

Discussions with outside directors at MUFG Americas
Holdings Corporation (the Americas HD)

Having transitioned to the “company with threecommittees” structure in June 2015, MUFG reviewed theagenda discussed at Board of Directors meetings while
examining the operation of the Board (including thefrequency of such meetings). As a result, the number of
meetings, time, the number of the agenda items, volume
of materials largely decreased respectively. In addition, it
enables them to allocate enough time tonecessary discussions.
Board of Directors meetings are followed by Independent
Outside Directors Meetings attended only by outside
directors. At these meetings, attendees engage indeliberations regarding such matters as the operation of theBoard of Directors and committees, collaboration between
the Board and corporate executive officers, and possible
measures to enhance the function of outside directors.
Conclusions reached at this meeting are reported to thechairman, who heads the Board of Directors, and thepresident by the Lead Independent Outside Director.

Stepping up information gathering• Outside directors who serve at the Americas HD and are well-versedin the policies of U.S. authorities bring their input into discussions on
corporate governance

MUFG Investors Day
Face-to-face dialogue with institutional investors• Outside director Tsutomu Okuda* gave a presentation and led Q&A
sessions on MUFG’s corporate governance (see page 66)

MUFG Management Meeting
Communication with executive officers• Outside directors give presentations to bring their insights at MUFG
Management Meeting, where all Group executive officers and generalmanagers meet and discuss Group policies and the challenges* Lead Independent Outside Director, Chairperson of Nominating andGovernance Committee

Status of the Board of Directors’ Operations
Fiscal 2014
(Apr. 2014 to Mar. 2015)

Fiscal 2015
(Apr. 2015 to Mar. 2016)

Fiscal 2016
(Apr. 2016 to Mar. 2017)

Number of meetings held

19

12

7

Number of agenda items

296

170

83

2.5 hours

3.2 hours

5.5 hours

Approx. 1,640 pages

Approx. 730 pages

Approx. 430 pages

Average duration of regular Board of Directors
meetings
Materials (annual total)

64

MUFG Report 2017

Evaluation Framework of the Working Practicesof the Board of Directors
Since 2013, with the aim of enhancing the function of its
Board of Directors, MUFG has introduced a framework toregularly evaluate the Board of Directors’ working
practices through implementation of a PDCA cycle.
External consultants interview each director on thecomposition of the Board of Directors, the content ofagendas, the discussions at Board Directors meetings,
the operations of the Board, and the Board’s
contributions. Results of these interviews andassessments by consultants are reported and discussed
by the Nominating and Governance Committee and theBoard of Directors.
Interviews with directors
carried out by external
consultants and the
preparation of report

The Nominating andGovernanceCommittee receives
report anddeliberates on it

The Board of
Directors
receives reportand deliberates
on it

Based on the results of the fiscal 2015 evaluation
undertaken to assess the Board of Directors activities,
MUFG implemented various initiatives including thoselisted below.
・Holding strategic off-site meetings to discuss medium- tolong-term strategies and issues to be tackled going
forward, with the aim of enhancing our monitoring model・Enhancing our framework to keep execution teammembers of MUFG and operating subsidiaries in the loopon the status of discussions held at Board of Directors
meetings
・Engaging in discussions with regard to our ideal for thecomposition of the Board of Directors, which, in turn,reached the decision to appoint outside directors who
are foreign nationals
・Formulating succession plans for personnel inkey positions

Remuneration System
MUFG has adopted a performance-based stockcompensation plan for all directors, corporate executive
officers and executive officers who serve at the holding
company, the Bank of Tokyo-Mitsubishi UFJ and
Mitsubishi UFJ Trust and Banking as well as Mitsubishi UFJ
Securities Holdings and its subsidiaries. The introductionof this plan is intended to provide greater incentives for
those individuals to maintain an awareness of the Group’s
overall corporate performance and stock price over the
medium-to long-term when pursuing their duties.
Specifically, the plan acquires company stocks through atrust and provides recipients with such shares based on
their job ranks and their degree of achievement vis-à-vis
performance targets. As stipulated in Principle 4.2 ofJapan’s corporate governance code, MUFG has in place a
remuneration system that includes “incentives such thatit reflects mid- to long-term business results and potential
risks, as well as promotes healthy entrepreneurship.”Components of performance-based stockcompensation plan
Linkage withperformance

Grant of shares

Indices

Link with mediumto long-term
performance●

Performancelinked portion(Performancebased stockcompensation)

EPS growth rate

Link with annual
performance
Relative comparisonsof growth rates in thefollowing indices
1. Consolidated net
business profits

Granted to allrecipients at
the end of themedium-termbusiness plan

2. Consolidated profits
attributable toowners of the parent
3. Market capitalization

Based on the results of the fiscal 2016 evaluation, MUFG
recognized that the following measures should be
implemented going forward.
・Utilizing the insights of board members who have global
perspectives by appointing foreign nationals; stepping up
other initiatives in preparation for the diversity of theBoard of Directors
・Upgrading the governance systems for the Group・Enhancing succession plans and developing nextgeneration management leaders

Fixed portion
performancebased stockcompensation
with transfer
restrictions●

Granted based on
job ranks

Granted toindividual
recipients at thetime of retirement

MUFG Report 201765

Important Issues Concerning Value Creation

Upgrading the Governance Framework

Dialogue between Lead Independent Outside Director
and Investors
We held MUFG Investors Day in February 2017. As part of the meeting, Mr. Okuda, lead independent outside
director,answered investor's questions, as follows.

of critical importance for MUFG to continue
corporate reforms.
As an outside director, what do you see as MUFG’srisks?

(Analyst from a major domestic securities firm)

The greatest risk has to do with how radically MUFG will
be able to reform itself and innovate, given the shrinking
domestic market and the prolonged trend toward low
interest rates. Also, the overseas portfolio is also quite
large, especially in the United States. A portfolio with alarge overseas component can be advantageous, butalso presents risks.

Tsutomu Okuda
Lead Independent Outside Director, Chair of the Nominating andGovernance Committee, Mitsubishi UFJ Financial Group, Inc.
Senior Advisor, J. Front Retailing Co., Ltd.

What do you feel are the strengths and weaknesses of
MUFG’s corporate culture?
(Analyst from a major domestic securities firm)

If you think about what makes a good company, one of
the most important things is social trust and confidence.
Trust and confidence are at the foundation of finance,
too. In this light, I feel that there is great strength in
MUFG’s corporate culture. At the same time, I also thinkthat the Company’s culture might be a bit tooconservative and risk averse.
The development of corporate culture is difficult. The
important thing is to keep the good parts while
reinforcing areas of weakness. In my assessment, MUFG
scores highly in this regard, as its leaders and employees
are seriously committed to accomplishingsuch development.
On the other hand, if I had to name one concern, I don’t
see so many ambitious employee willing to venture out of
their comfort zones within their current organizations. As
IT and market environments dramatically change, thepartitions between all kinds of industries are disappearing.
It will be crucial to adapt to changes with maximum
speed and flexibility. Our operating environment isundergoing radical and noncontiguous changes. With
this in mind, encouraging all employees to remain vigilant
and share a healthy sense of crisis even at normal time is66

MUFG Report 2017

Both of these risks are tied to two major tasks facing thegroup. The first is human resource development.
Overseas operations are increasing, and at the sametime, domestic operations are changing in ways that
increasingly preclude simply extending and adapting
past ways of doing things. To deal with this, the group
has to reform and innovate. The challenge is to develop
people who are equipped for the evolving
operating environment.
The second major task is systems investment on a
massive scale. Financial institutions that do not invest in
systems do not survive. As the group operates globally,
it must build systems running globally. In recent
discussions I had with outside directors at MUFG
Americas Holdings Corporation I found them consciousof this issue. I believe that both quality and quantity areimportant to such investment.
Could you tell us why did you take up the offer of an
outside director position at MUFG?
(Representative from a domestic major institutional investor)

MUFG is among the world’s most prominent
corporations, boasting a strong presence globally. As abusinessperson, it is my honor to be appointed as an
outside director of MUFG.
Although I had long known of MUFG’s trustworthiness,
I was somewhat surprised to find its top executives
seriously reflecting on the input of outside directors, eventaking on board harsh criticism, and showing nohesitation in embracing worthy new ideas. They are truly

open minded people—a quality I admire. Most MUFG
Board of Directors meetings are followed by Independent
Outside Directors Meetings that all outside directors
attend. When conclusions reached at this meeting arecommunicated to the chairman and president, theyquickly take action where necessary. In short, MUFG,
despite its large size, is quick to incorporate external
voices, which makes my position quite rewarding.
What do you think is the role of an outside director at
normal, non-crisis times?

(Analyst from a major foreign securities firm)

I think that outside directors are absolutely necessary,whether external conditions are favorable or harsh. The
extra diligence and effort to do things right when you
know that someone from outside is watching is crucial.
At MUFG, the executives in top management take theopinions of outside directors seriously. I admire theirseriousness, which, in turn, inspires us.
The Nominating and Governance Committee has to keep
up with changes in society. An outside perspective is alsoneeded when creating succession plans. For example,
successor candidates are designated based on standards
that the committee has laid out regarding personality,competencies, experience and track record to assess
fitness for key positions. Then, they undergo screening
involving a 360-degree feedback session in which five to
10 candidates evaluate one another. Finally, members of
the committee conduct face-to-face interviews withthose who have passed screening. Based on the interview
results, committee members deliberate on and finalize
their proposals, which they then submit to the Board of
Directors. It’s important to select someone who fits theneeds of the times, and to be transparent with employees
and other stakeholders.
I think the only way that this process might ever vary fromthe normal way of doing things is if, in a time of
emergency, we might not be able to find someone within
the company, and instead bring in a person or persons
from the outside.
Anyway, the Nominating and Governance Committee has
a twofold function in this regard, namely, determining
requirements for key personnel and maintaining thetransparency of the selection process. These functions
are essential as they help ensure corporate growth andimprove corporate value.
How are outside directors selected? What functions
do you currently feel you need or want to strengthen?

needed for the position, looking to strike a good balancein terms of background, experience, way of thinking andbusiness orientation.
Nevertheless, the presence of non-Japanese nationals
needs to be increased. I think it’s necessary in light of
how global MUFG’s business has become. I’ve alreadyasked that we try to bring in such personnel to the Board.
MUFG’s Advisory Board has an excellent international
composition, with each member boasting world-leading
expertise. I think that outside directors should be next. I
would also like to see non-Japanese personnel in businessexecution roles in the near future.
As for accepting outside directors from other companies
in the industry, it’s very common overseas, and I think it’s
a positive thing. Japanese corporations have long
maintained unique “lifetime employment” systems that
often serve as barriers to incorporating such a practice.
However, I think the trend might shift in a near future.
In fact, there were some instances involving retailers.
I think it may be possible for Japanese financial
institutions, as well.
What will MUFG need in order to thrive 10 years
from now?

(Analyst from a major foreign securities firm)

Currently, MUFG’s operations are centered oncommercial banking. However, there’s no guarantee that
MUFG’s business portfolio 10 years from now will look
much like it does today. Nevertheless, if you focus too
hard on what’s ahead, you risk tripping over the issues
right in front of you. Although it is not the easiest thing todo, I think the important thing is to constantly consider
how best to reshuffle it in light of social and economicchanges, and how best to balance short- and long-term
perspectives while making each business even stronger.
One major task for us will be managing the ratio ofdomestic and overseas business. I’m sure the proportionof overseas business will continue to grow, but I think ourbase should always be Japan. I think we should perhaps
give a 50% weight to our domestic business.
Also, where to strike the balance between individual andcorporate customers is a big question in terms ofbusiness portfolio strategy. And, finally, developing
human resources and building systems based on ourbusiness strategies will also be important. These are themajor things to consider when looking 10 years down
the line.

(Representative from a major domestic institutional investor)

When selecting outside directors, we don’t focus on“who,” in terms of names, but on what kind of person is
MUFG Report 201767

Important Issues Concerning Value Creation

Upgrading the Governance Framework

1

2

3

4

5

6

8

7

9

10

11

12

13

14

15

16

17

18

Board of Directors
Outside Director

As of June 29, 2017
Outside Director

Hiroshi Kawakami

Toby S. Myerson

1Outside Director

4

Advisor, Central Japan International Airport
Mr. Kawakami joined TOYOTA in 1972. He became
Managing Executive Officer of TOYOTA in 2003, andSenior Managing Director in 2007. In 2008, hebecame Vice President of Toyota Tsusho Corp. and in2009 he was appointed President of the Central
Japan International Airport Co., Ltd. In June 2015, hebecame a Senior Advisor of Central Japan
International Airport as well as an Outside Director of
MUFG (incumbent). In 2016, he became an Outside
Director of AT-Group Co., Ltd. (incumbent) and, in
2017, he was appointed Advisor for the Central Japan
International Airport (incumbent).

Lawyer, Chairman & CEO, Longsight Strategic Advisors LLC
Mr. Myerson has been registered as attorney at law ofCalifornia and New York, U.S. in 1977, Mr. Myerson has
held top management positions in a career spanning
four decades, most recently as Partner and as
Co-Chair of Global Mergers and Acquisitions at Paul,
Weiss, Rifkind, Wharton & Garrison LLP. He left thefirm in December 2016 and founded a strategic
advisory firm in January, 2017 where he serves as
Chairman & CEO. He also serves as an Outside
Director of both MUFG Union Bank, N.A. and MUFG
Americas Holdings Corporation. He was appointed
Outside Director of MUFG (incumbent) in 2017.

Outside Director

Outside Director (Lead Independent Outside Director)

Yuko Kawamoto

Tsutomu Okuda

2

Professor, Waseda Graduate School of Business and Finance
After working at Bank of Tokyo from 1982 to 1986, Ms.
Kawamoto joined McKinsey & Company in 1988. At
McKinsey, she was promoted to Senior Expert of theTokyo branch in 2001. After leaving McKinsey, shetook up a professorship of the Waseda Graduate
School of Finance, Accounting and Law (current
name: Business and Finance) in 2004 (incumbent).
From 2006, Ms. Kawamoto has served as an Outside
Audit and Supervisory Board Member of Tokio Marine
Holdings, Inc. In 2013, she became an Outside
Director of MUFG (incumbent).
Outside Director

Haruka Matsuyama

3

Lawyer, Partner, Hibiya Park Law Offices
Ms. Matsuyama became an Assistant Judge to theTokyo District Court in 1995. Upon becoming an
attorney-at-law and joining the Daini Tokyo Bar
Association in 2000, she joined Hibiya Park Law
Offices, where she was promoted to a Partner in
2002. Ms. Matsuyama also became an Outside
Corporate Auditor of Vitec Co., Ltd. in 2012, an
Outside Director of T&D Holdings, Inc. in 2013, and anExternal Corporate Auditor of Mitsui & Co., Ltd. in
2014. In 2014, she became an Outside Director of
MUFG (incumbent) and in 2015, became an Outside
Director of VITEC HOLDINGS CO., LTD (incumbent).

5

Senior Advisor, J. Front Retailing
Mr. Okuda joined The Daimaru, Inc. in 1964. In 1997,
he was named President of Daimaru and in 2003
Chairman and Chief Executive Officer. In 2007, heassumed the Office of President and Chief Executive
Officer of J. Front Retailing Co., Ltd., where hebecame Chairman and Chief Executive Officer in2010. Since 2014, he has served as a Senior Advisorof the company. In 2014, Mr. Okuda was appointed as
an Outside Director of MUFG (incumbent).
Outside Director

Yukihiro Sato

6

Adviser, Mitsubishi Electric
Mr. Sato joined Mitsubishi Electric Corporation in
1969, and was appointed Director, Representative
Executive Officer, and Executive Vice President in2007. In 2009, he became Senior Corporate Adviser.
From 2013, he served as Special Adviser of Mitsubishi
Electric. In 2014, he was appointed as an Outside
Corporate Auditor of MUFG and in the same year an
Adviser to Mitsubishi Electric (incumbent). In June
2015, he became an Outside Director of
MUFG (incumbent).

(Note) Mr. Hiroshi Kawakami, Ms. Yuko Kawamoto, Ms. Haruka Matsuyama, Mr. Toby S. Myerson, Mr. Tsutomu
Okuda, Mr. Yukihiro Sato, Ms. Tarisa Watanagase and Mr. Akira Yamate are outside directors defined in Article 2,
Item 15 of the Companies Act.

68

MUFG Report 2017

Tarisa Watanagase

Former Governor of the Bank of Thailand
Ms. Watanagase first joined the Bank of Thailand in
1975. During her career as a central banker, she wasalso seconded to International Monetary Fund (IMF)in 1988 and served as an economist. In 2002, she
assumed the position of Deputy Governor of thebank. From 2006 to 2010, she served as Governor of
the central bank of the country. Since 2013, she hasserved as an Outside Director of The Siam Cement
Public Company Limited. She was appointed Outside
Director of MUFG (incumbent) in 2017.
Outside Director

Akira Yamate

8

Certified Public Accountant
Mr. Yamate joined Price Waterhouse in 1977,
becoming a certified public accountant in 1983. In
1991, he became a Representative Partner of Aoyama
Audit Corporation and a Partner of Price Waterhouse.
In 2000, he became a Representative Partner of
Chuo Aoyama Audit Corporation and a Partner ofPricewaterhouse Coopers. From 2006 to 2013, he
was a Representative Partner of Pricewaterhouse
Coopers Aarata. In 2013, he was appointed as a
Corporate Auditor of Nomura Real Estate Holdings
and Nomura Real Estate. In June 2015, he wasappointed as an Outside Director of MUFG
(incumbent) and in the same year appointed as a
Director of an External Nomura Real Estate Holdings(incumbent), and an External Corporate Auditor ofPrudential Holdings of Japan (incumbent).
Director

Takehiko Shimamoto

Director, Chairman

Director, Deputy Chairman

Deputy Chairman, Bank of Tokyo-Mitsubishi UFJ
Mr. Sono joined Sanwa Bank in 1976. In 2012, hebecame group head of MUFG’s Integrated
Corporate Banking Business Group, and he wasmade Chairman in 2014, as well as Deputy Chairmanof Bank of Tokyo-Mitsubishi UFJ. He was appointed
Director, Representative Corporate Executive Officer
and Chairman of MUFG in June 2015 (incumbent).

President and CEO of Bank of Tokyo-Mitsubishi UFJ
Mr. Mike joined Mitsubishi Bank in 1979. He wasappointed Regional Executive for the Americas at
MUFG and Bank of Tokyo-Mitsubishi UFJ, andExecutive Chairman of the Board at MUFG Americas
Holdings Corporation and MUFG Union Bank, N.A.,
in 2015. He was appointed a Senior Managing
Executive Officer of MUFG and a Deputy Presidentof the Bank in 2016. Mr. Mike became President andCEO of the Bank (incumbent) and Director,
Representative Corporate Executive Officer and
Deputy Chairman of MUFG (incumbent) in
June 2017.

Kiyoshi Sono 11

7

9

Mr. Shimamoto joined Mitsubishi Bank in 1982. In
2012, he became a Managing Officer of MUFG and aManaging Director of Bank of Tokyo-Mitsubishi UFJ(hereafter “the Bank”). In June 2015, he was appointed
as a Director of MUFG (incumbent).

Director, Deputy Chairman

Takashi Nagaoka 12
President & CEO, Mitsubishi UFJ Securities Holdings
Company
President & CEO, Mitsubishi UFJ Morgan Stanley
Securities Company
Mr. Nagaoka joined Mitsubishi Bank in 1976. In 2011,
he became Deputy President of Bank of TokyoMitsubishi UFJ. In 2014, he became President & CEO
of Mitsubishi UFJ Morgan Stanley Securities
Company (incumbent) and President & CEO of
Mitsubishi UFJ Securities Holdings Company(incumbent). In the same year, he was appointed asa Director of MUFG. In June 2015, he was appointed
as Director, Representative Corporate Executive
Officer and Deputy Chairman of MUFG (incumbent).

Kanetsugu Mike 14

Director, President & Group CEO

Nobuyuki Hirano 15

Chairman, Bank of Tokyo-Mitsubishi UFJ
Mr. Hirano joined Mitsubishi Bank in 1974. In 2012, he
was appointed as President of Bank of TokyoMitsubishi UFJ, and a year later, in 2013, he became
President of MUFG. In June 2015, he was appointed
as Director, Representative Corporate Executive
Officer and President & Group CEO of MUFG
(incumbent). In April 2016, he became Chairman of
the Bank (incumbent).

Director, Deputy Chairman

Director, Senior Managing Executive Officer,
Group CSO & Group CHRO

President & CEO, Mitsubishi UFJ Trust and Banking
Corporation
Mr. Ikegaya joined Mitsubishi Trust and Banking in
1981. In June 2015, he became Senior Managing
Director of Mitsubishi UFJ Trust and Banking, andManaging Officer of MUFG. In April 2016, he wasappointed President & CEO of the Trust Bank
(incumbent). In June 2016, he became Director and
Deputy Chairman of MUFG (incumbent).

Mr. Kuroda joined Sanwa Bank in 1981. In 2014, he
was appointed Managing Director of MUFG and in
the same year a Director of Mitsubishi UFJ Trust andBanking (incumbent). In June 2015, he wasappointed as a Director and Senior Managing
Executive Officer of MUFG (incumbent) and a Senior
Managing Director of Bank of Tokyo-Mitsubishi UFJ(incumbent).

Mikio Ikegaya 13

Director, Senior Managing Executive Officer,
Group CFO

Muneaki Tokunari 17

Mr. Tokunari joined Mitsubishi Trust and Banking in
1982. He became Senior Managing Director of
Mitsubishi UFJ Trust and Banking in 2013 and in 2014
Managing Officer of MUFG. In June 2016, he wasappointed as Director and Senior Managing
Executive Officer of MUFG (incumbent) and Senior
Managing Director of Bank of Tokyo-Mitsubishi UFJ(incumbent).
Director, Senior Managing Executive Officer,
Group CRO

Masamichi Yasuda 18

Mr. Yasuda joined the Bank of Tokyo in 1983. In 2014,
he became Managing Officer of Bank of TokyoMitsubishi UFJ. He was appointed a Senior Managing
Director of the Bank (incumbent) and a Director andSenior Managing Executive Officer of MUFG
(incumbent) in 2017.

Tadashi Kuroda 16

Director

Junichi Okamoto 10
Mr. Okamoto joined Toyo Trust and Banking in 1980.
He became a Director and Deputy President of
Mitsubishi UFJ Trust and Banking (hereafter “the TrustBank”) and a Director of MUFG in 2013. Mr. Okamoto
was appointed a Senior Managing Executive Officer
of MUFG in 2015. He became a Director, Deputy
President and Executive Officer of the Trust Bank in
2016. In June 2017, he was appointed a Director of
MUFG (incumbent).

MUFG Report 201769

Important Issues Concerning Value Creation

Important Issues Concerning Value Creation

Upgrading the Governance Framework

As of June 29, 2017

MUFG has established the Global Advisory Board to function as advisory bodies to the Executive Committee, andCorporate Executive Officers
Kiyoshi Sono

Saburo Araki

Atsushi Murakami

Director
Chairman

Senior Managing Executive Officer
Group Head, Corporate Banking Business GroupManaging Executive Officer
Group Head, Retail Banking Business Group

Takashi Nagaoka

Muneaki Tokunari

Shigeru Yoshifuji

Director
Senior Managing Executive Officer
Group CFOManaging Executive Officer
Group CAO and General Manager,
Internal Audit Division

Eiichi Yoshikawa

Hironori Kamezawa

Senior Managing Executive Officer
Group Head, Global Business GroupManaging Executive Officer
Group CIO & Group CDTO

Shigeru Asai

Sunao Yokokawa

Senior Managing Executive Officer
Group Head, Global Markets Business GroupManaging Executive Officer
Group Head, Trust Assets Business Group

Director
Deputy Chairman

Mikio Ikegaya
Director
Deputy Chairman

Kanetsugu Mike
Director
Deputy Chairman

Nobuyuki Hirano
Director
President & Group CEOGroup CEOGlobal Advisory Board

the Board holds regular meetings. The Global Advisory Board is made up of members from Japan, Europe, Asia, and
the Americas who are external experts in areas such as corporate management, financial regulation, andgovernment policy. They provide advice and recommendations on group-wide management, global governance,business strategy, and other management issues from an independent standpoint.

Akira Hamamoto
Senior Managing Executive Officer
Group CCO & Group CLO

Tadashi Kuroda

Masamichi Yasuda

Director
Senior Managing Executive Officer
Group CSO & Group CHRO

Director
Senior Managing Executive Officer
Group CRO

Mr. John C. Dugan

Dr. Victor K Fung

Partner, Covington Burling LLPGroup Chairman, Fung Group,Hong Kong

Former Comptroller of the Currency,
United States Treasury Department

Executive Officers

70Managing Officers

Executive Officers

Hiroshi Naruse
Koji Nishimoto
Takami Onodera
Masato Miyachi
Akihiko Nakamura
Iwao Nagashima
Makoto Hayashi
Akio Ninomiya
Yukio Yahagi
Toshihiko Mori
Takayoshi Futae
Naoki Hori
Hidekazu Horikoshi
Masahiro Kuwahara
Tetsuya Nakamura
Tetsuro Shinohara
Satoshi Takizawa
Hitoshi Usui
Tetsuya Yonehana
Stephen Cummings
Kazuo Koshi
Ritsuo Ogura
Kazuto Uchida
Yasushi Ishikawa
Kenichi Miyanaga
Mitsugu Enjoji
Tsutomu Sambai

Randall Chafetz
Yasushi Itagaki
Atsushi Miyata
Makoto Kobayashi
Naomi Hayashi
Hiroki Kameda
Takanori Sazaki
Junichi Hanzawa
Hideki Kishimoto
Masaki Miyazaki
Hiroshi Takekawa
Minoru Soutome
Hiroyuki Ogata
Yutaka Miyashita
Shigeharu Sanada
Jun Togawa
Takayuki Yasuda
Shuichi Yokoyama
Shinichi Arai
Tai Nishida
Koji Asada
Donna Dellosso
Masashi Kanematsu
Chiaki Kitagawa
Masatoshi Komoriya
Takehiko Nagumo
Masashi Onodera

MUFG Report 2017

Hideaki Takase
Takenobu Inaba
Yukihiro Yamamoto
Ichiei Kuki
Masayuki Tanaka
Yukinori Shimoguchi
Denise DeMaio
Toru Fujita
Hiroshi Takimoto
Junichi Narikawa
Eiji Ihori
Hisashi Kanamori
Kazuji Tanikawa
Johannes Worsoe
Michael Coyne
Masaki Enomoto
Jiro Omori
Toshihiro Sasaki
Kevin Cronin
Yushi Ando
Yoshihisa Harata
Tomohiro Kimura
Hiroshi Ikebe
Naoki Isetani
Masakazu Osawa
Takuya Tanaka

Chairman of the Advisory Board, Asia
Global Institute
Former Honorary Chairman, theInternational Chamber of Commerce

Ambassador
John V. Roos
Former United States Ambassador
to Japan

Lord (James)
Sassoon, Kt

Associate Professor
Simon S.C. Tay

Dr. Gertrude
Tumpel-Gugerell

Director, Jardine Matheson Holdings
LimitedChairman of the Singapore Instituteof International Affairs

Former Commercial Secretary to theTreasury, United Kingdom

Former Member of Parliament,
SingaporeMember of Supervisory Board,Österreichische BundesbahnenHolding AG

Mr. Toshio Iwamoto

Mr. Toru Nagashima

Mr. Akio Mimura

Representative Director,
President andChief Executive Officer,

Senior Advisor,

Senior Advisor, Honorary Chairman,

Teijin Limited

Nippon Steel &Sumitomo Metal Corporation

NTT DATA Corporation

Former Member of Executive Board,
European Central BankMUFG Report 201771

Important Issues Concerning Value Creation

Global Advisory Board

Outline of Annual Meeting
On December 11 and 12, 2016, MUFG held an annual meeting of its Global Advisory Board in Tokyo.

CEO Session
At the beginning of the meeting, the Group CEO gavea presentation on progress under the current mediumterm business plan, the economic outlook, current
Japanese government and Bank of Japan policies andthe latest trends in FinTech. The presentation was
followed by a session in which attendees gave advice
on these matters from various angles.

Current Status of and Future Outlook for EMEA
The subsequent session focused on Europe, with Lord
(James) Sassoon, Kt., and Dr. Gertrude Tumpel-Gugerell
sharing their insights on the repercussions of theUnited Kingdom’s decision to leave the European
Union, the future of UK-EU relations, key elections in
multiple EU member states and the situation in the
Middle East.
With the Brexit’s impact on businesses being intensively
discussed, attendees spoke about the challenges theEuropean banking industry was facing under thenegative interest rate environment, which was akin to
the situation in Japan, and strategies to tackle
these challenges.

Political, Economic and Business
Environments in China and ASEAN
At a session focused on China and ASEAN nations,
Dr. Victor K. Fung and Associate Professor Simon S.C.
Tay gave a briefing on the latest situation in thesecountries, with representatives from partner banks
Krungsri, VietinBank and Security Bank participating invibrant discussions and the exchange of opinions.
The attendees were apprised of local conditions in
China and elsewhere in Asia—subjects deserving ofclose attention when pursuing business development—
and discussed the future outlook of economic policies
in each country.

Global Implications of the
New U.S. Administration
The EU-centered discussions were followed by asession on the United States. Ambassador John V. Roosand Mr. John C. Dugan gave presentations regarding
the new U.S. administration’s diplomatic strategies andits stance on the finance industry.
Their knowledge of and insights on these mattershelped attendees better understand the implications of
the new administration with regard to monetary
policies and business sectors.

Global Financial Regulations
The meeting also involved a session on global financial
regulations. External experts provided their insights
on the subject, after which attendees engaged in
discussions on the impact of recent and future financial
regulation reforms on financial institutions, the financial
market and actual economies.

Breakout Sessions
In addition to the foregoing, breakout sessions were
held under such themes as digital strategies, the global
infrastructure market, cyber security and the wealthmanagement business, with officers from Group
companies taking part in lively discussions. At thesesessions, Global Advisory Board members provided
valuable advice and a number of insights that, in turn,have been reflected in MUFG’s current strategies inrespective areas.

The First Round of MUFG Global Partnership Conference
On the day following the annual Global Advisory Board
meeting, top management leaders of MUFG and its
investees MUFG Union Bank, N.A., Krungsri, VietinBank
and Security Bank—which run commercial banking
operations and act as the Company’s partner banks—
gathered for the first MUFG Global Partnership
Conference (MGPC).
After deliberations on the roles and functions ofcommercial banks amid a changing economic
environment and how to ensure smooth collaboration
between partner banks, attendees employed casestudies to share best practices regarding each region’sbanking businesses.

72

MUFG Report 2017

MUFG Report 201773

Foundations ofCorporate Value
Initiatives to Build Sustainable Relationships
with Customers………………………………………………………… P.76
Human Resources Strategy………………………………………… P.78
Communicating with Stakeholders…………………………… P.82
Risk Management……………………………………………………… P.84
Compliance……………………………………………………………… P.88
Internal Audit……………………………………………………………… P.89
Responding to Global Financial Regulation………………… P.90

74

MUFG Report 2017

MUFG Report 201775

Foundations of Corporate Value

Initiatives to Build Sustainable Relationships with Customers

Maintaining a customer-centric approach, MUFG issincerely committed to engaging in fair andtransparent corporate activities.

Customer Satisfaction Surveys
We conduct periodic customer satisfaction (CS) surveys,
sending out questionnaires by post and conducting
online surveys. We also strive to improve questionnaire
items, combining overarching Group themes with eachgroup company’s-specific themes. In these ways, we
assess how customers evaluate our initiatives andwhether our services meet customers’ expectations.

As we aim to live up to the trust and confidence customers have in our operations, we are striving to deliverproducts and services that accurately meet their needs and, to this end, continuously improving our operations andemployee skills based on customer feedback.

For detailed results of CS surveys undertaken for individual and corporate
customers, please also visit the following page of the Company’s website.
http://www.mufg.jp/english/csr/juten/customer/okyakusamanokoe/

Employee Education Aimed at Responding toCustomer Trust and Confidence
Nurturing Employees’ Mindsets to Better Respond to
Customer Expectations and Encourage Their
Personal Growth
MUFG Values Talks

Enhancing Feedback Monitoring System
For MUFG, comments and requests from customers
constitute valuable assets. Each Group company iscontinually collecting, analyzing and sharing whatcustomers have to say in order to improve their products
and services.
Moreover, MUFG monitors Group company’s initiatives
while enhancing its system for handling customer feedback.
In fiscal 2016, the number of such comments andrequests received by the five principal Group companies
totaled approximately 245,000. We made 463
improvements based on customer feedback monitoring.
* The Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ
Morgan Stanley Securities, Mitsubishi UFJ NICOS and ACOMMUFG holds workshops for younger employees from all
Group companies in which they explore such awarenessraising themes as “What we should do to get customers
to choose us” and “Ideals for MUFG and myself.” Suchworkshops are aimed at fostering their understanding ofand identification with the Corporate Vision and thePrinciples of Ethics and Conduct while encouraging themto take action based on takeaways from discussions.
Group companies

During fiscal 2016, MUFG held such events on 33
occasions. Approximately 6,000 Group employees havebeen attending since the beginning of that.

Customers

Callcenters

Collect

In line with the Corporate Vision, the Company has
established the Principles of Ethics and Conduct, a set ofstandards each Group officer and employee should apply
to their day-to-day business conduct and decisions.
Having stated at the top of these principles that we “place
our diverse customers at the center of all activities,” weare engaging in exhaustive initiatives to be theembodiment of this tenet.

Reflecting Customer Feedback in Product andService Quality Improvements

Branches

Analyze

Ensuring the consideration of customer’s perspectives
and being fair and sincere in our undertakings are basics
to our business operations.

Analyzecustomerviews

Postcards

Websites

Questionnaires

1. Changes in the external environment
2. In-house policies

Identify issues
Improve

Concepts behind MUFG’s Customer Relations

Results of CS Surveys for Individual Customers(November–December 2016)

ReportVerify improvements

Management, committees, etc.

ReportMonitor

MUFG Values Talk

76

MUFG Report 2017

MUFG

Corporate Social
Responsibility Committee

Customer Complaint
Monitoring Meeting

Moreover, the Company provides training sessions
centered on hands-on experience on how to treat theelderly and people with disabilities, ensuring that
attendees learn how to meet such customers’ specificneeds and are instilled with a spirit of hospitality.

The surveys indicated that approximately 60% to more than 70% of
respondents were “satisfied” or “somewhat satisfied” with our overall services.
SatisfiedSomewhat satisfied

Somewhat dissatisfied

NeutralDissatisfied

No response

Not sure

Bank of Tokyo-Mitsubishi UFJ
40.7

32.6

41.3

Mitsubishi UFJ Morgan Stanley Securities
23.9

41.5

1.6
1.2

32.4
5.4
17.8

11.4
3.5

45.0

1.5

29.6
2.5

ACOM
20.3

0.8

4.0

Mitsubishi UFJ NICOS
20.4

1.4

21.6

Mitsubishi UFJ Trust and Banking
19.5

(%)

2.9

50.7

25.3

1.2

Quality Management That Takes into Account theCustomer’s Perspective
To enhance the quality of our products and services, weclosely examine the sufficiency of measures in place toensure that the customer’s perspective is reflected in all
aspects of business processes, which range from theplanning, development and provision of products andservices to after-sales services.
Checklist for Putting the Customer First
1. Accurately meets customer needs.

Improve products & services;
reform business processes;
conduct employees trainings; etc.

Training Our Employees to Enhance Their Customer
Relation Skills
Each employee strives to enhance their customer relation
skills by, for example, attending joint training sessions andbusiness site-based training sessions and viewing tutorial
DVDs. Progress in their skills development is periodicallyconfirmed through external monitoring.

Virtual experience of what it is like to be elderly or a person with a disability

Pursuing Customer-Centric Business
Management
MUFG periodically holds Corporate Social Responsibility
Committee meetings and Customer Complaint
Monitoring Meetings to discuss how to improve ourcustomer evaluations. At these meetings, the officers incharge of customer relations, Group Heads andpresidents of Group companies assess how customers
evaluate our products and services overall while tackling
management issues they face in the course of pursuingeven higher evaluations.
In 2017, MUFG established the Fiduciary Duty Promoting
Committee under its Executive Committee with the aimof systematically pushing forward with a customercentric operational approach.

2. Pros and cons have been clearly laid out for the customer, andcons, if any, have been properly explained.
3. All efforts have been made to make the product easily
understandable, including the provision of advertising andinformation on comparisions with similar products.
4. All actions have been taken to prevent customer complaints
from occurring, and measures for responding quickly tocomplaints have been prepared in the event of their occurrence.
5. Confirmation that our customers’ families, like our customers
themselves, have no anxieties about our products and services,
have been taken.

MUFG Report 201777

Foundations of Corporate Value

Human Resources Strategy

Directing Our Human Resources to
Value Creation Initiatives
Operating in regions around the world, MUFG’s robust workforce consists of approximately 150,000 people
boasting diverse skills and experience. MUFG aims to ensure that all its human resources stay highly motivated andare able to concentrate on duties that lead to the creation of greater value. To that end, the Group is striving todevelop a rewarding work environment that enables every employee to live up to their potential as they resolve
customer’s issues and contribute to the betterment of society.

Human Resources Strategy
The MUFG Human Resources Principles provide the basis
which the Group has built a human resourcesmanagement platform that aligns with its Corporate Vision.
Shared Values
The MUFG Human Resources Principles will be
implemented globally across MUFG in alignment with ourshared organizational VALUES of “Integrity andResponsibility,” “Professionalism and Teamwork” and“Challenge Ourselves to Grow.”
HR Mission
The MUFG Human Resources Principles support theachievement of the following HR mission:• Create a corporate culture that provides colleagues with
opportunities for career growth, challenging them toperform well in a professional environment, where thehighest standards of integrity are expected.
• Appointing the right person to the right job, in the rightplace to allow each colleague to maximize his/hercareer potential.
• Develop talent capable of contributing to the long-termand sustainable growth of our global society.
HR Vision
Be the industry leader in HR management to help MUFG
realize its Corporate Vision: Be the world's most trusted
financial group.
HR Philosophy
Leverage the following HR philosophies to create
consistent HR management practices across all MUFG
entities:• Globally attract and recruit diverse talent that share andlive OUR VALUES as members of MUFG.
• Evaluate performance fairly and objectively, considering
not only the goals achieved, but also the competencies
demonstrated to get the job done. Recognize theimportance of factors, such as customer-centric focus,
global mindset, and teamwork, to balancing short-term
results with sustained long-term performance.
• Reward colleagues competitively and appropriately inalignment with their contributions to MUFG's growthand success - in effect, pay for performance. In addition
78

MUFG Report 2017

to colleague performance, rewards will be reflective of
the overall stability of the company and the economy.
• Assess the capabilities and career path of eachcolleague to place the right person in the right job, tomaximize colleague and MUFG success.
• Provide ongoing learning and development
opportunities to help each colleague enhance his/her
knowledge, skills and experience.

Human Resource Development
MUFG is striving to nurture human resources capable ofsupporting the long-term development of society at home
and abroad.
Along with encouraging each employee to achieve asteeper “growth curve” and create greater value throughthe execution of duties, we offer a variety of career paths
and provide a range of training programs tailored todifferent job categories and positions. Furthermore, we
support highly motivated individuals seeking to develop
themselves by providing various opportunities to pursue
personal development.
Having made the provision of career paths essential,
MUFG is focusing on equipping employees withprofessional skills and specialist knowledge in the field offinance while nurturing manager candidates through abroad range of managerial assignments that transcendtheir fields of specialty. We also provide the CFA job
rotation program, which involves the transfer of staff
between the Bank of Tokyo-Mitsubishi UFJ and Mitsubishi
UFJ Securities Holdings and its subsidiaries as part of ourinitiatives to help Group employees acquire robust job
experience in areas beyond conventional businesscategory and sector boundaries.
In March 2015, we established the MUFG Global Learning
Center as a core human resource training facility for theGroup. The establishment of a dedicated facility attests to
MUFG’s strong commitment with regard to humanresource development. A range of people, from top
management leaders to new recruits, are constantly
present at this facility for the purpose of passing down
skills and knowledge to younger employees while inspiring
each other to create value.

Looking ahead, we will establish a robust human resource
development structure through an organic combination ofcareer paths, employee training and personal development.
By doing so, we will ensure that our organizational values,
namely, “Integrity and Responsibility,” “Professionalism andTeamwork” and “Challenge Ourselves to Grow,” are sharedand maintained at each workplace across the Group while
stepping up the development of future human resources
who will eventually spearhead the creation of new value.

Responding to Globalization
MUFG has more than 1,200 business bases in more than
50 countries and regions around the world, with around
40% of its workforce being assigned to locations overseas
as of March 31, 2017. Taking these situations into account,
MUFG is stepping up the development of a globally unified
HR management structure for the Group.
Nurturing Globally Capable Management Candidates
MUFG recognizes that securing and nurturing personnel
with international business management know-how as wellas highly specialized experts in this field is key to thesuccess of its global business strategy. To that end, the
MUFG Talent Council is in place to discuss the criteria for
selecting candidates for more than 200 key managerial
positions to be filled on a global basis, develop
management succession plans and assess the sufficiencyof human resources in light of the execution ofbusiness strategies.

Stepping up Recruiting Activities on a Global Basis
Facing growing customer needs for more sophisticatedservices in Japan and overseas, we are acutely aware of
the importance of making MUFG an employer of choiceamong potential recruits in countries abroad. With this inmind, MUFG opened an official account with LinkedIn,
the world’s largest social network for professionals.
Disseminating corporate information via this account, we
will establish a corporate image as an excellent company
with a decent workplace environment while broadening
our access to promising human resources aroundthe globe.
Optimal Staffing on a Global BasisMUFG offers such in-house job posting schemes as the
Global Job Posting Framework to its locally hired staff
with the aim of ensuring optimal staffing on a global basis
and fostering a sense of unity among Group employees
through human resource exchange. Utilizing theseschemes, MUFG provides employees who were hired
overseas with opportunities to work at locations otherthan those where they joined, such as in Japan.

Enhancing Employee Training Aimed at Nurturing
Globally Capable Human Resources
MUFG is providing locally hired staff with job-level based
training programs aimed at nurturing professionals infinance. Among these programs is “Global Leaders’ Forum”
co-hosted by the International Institute for Management
Development based in Switzerland. At this forum,
divisional head-level employees from each Group
company gather and undergo special training aimed at
equipping them with the ability to promote the Corporate
Vision and management strategies while enhancing theirleadership and communication skills in multi-cultural
settings.

Promoting Workforce Diversity
Our Medium- andLong-Term Vision

Be the world’s most trusted financial group

1.

Work together to exceed the
expectations of our customers

reliable and constant
2. Provide
support to our customers

Our Values

Integrity and Responsibility

Our Vision for

An organization that welcomes people with diverse backgrounds, encourages them to respect andinspire each other and allows them to freely pursue personal growth and career success

Initiatives to Promote
Diversity

Professionalism and Teamwork

and strengthen our
3. Expandglobal presence

Challenge Ourselves to Grow

Enlighten, Encourage, Empower.

Work together as a Group to exceed customer expectations
MUFG Report 201779

Foundations of Corporate Value

Human Resources Strategy
Facilitating a Diversity-Oriented Corporate
CultureMUFG has established the Principles of Ethics andConduct and compliance manuals that clarify its
commitment to nondiscrimination no matter the race,
nationality, belief, religion, gender, sexual orientation,
gender identity or other grounds and to abstaining fromhuman rights violations. Guided by this commitment,
MUFG recognizes a diversity-oriented corporate culture
as fundamental to realizing its medium- to long-term
vision of becoming the world’s most trusted financialgroup. Specifically, MUFG believes that the Company
must create an organization that welcomes people withdiverse values, backgrounds and perceptions of work andthat encourages them to respect and inspire each otherwhile allowing them to freely pursue personal growth andcareer success.
To support the creation of such a culture on a Groupwide
basis, MUFG issues the annual Diversity Report, featuring
messages from top management and diversity initiatives
and best practices undertaken by Group companies.
Moreover, since 2010 staff charged with diversity
promotion have hosted periodic Global Inclusion &Diversity Forums to share information on their latest
accomplishments and engage in discussions about
future collaboration.
Assisting Women with Career Development
One of our most urgent diversity issues is promoting
women’s career development. MUFG has set the goal ofraising the ratio of female managers within the Group in
Japan to 20%* by the end of March 2018. Furthermore,each Group company has set its own numerical target for
the active promotion of its female workers. Thanks tothese efforts, the ratio of female managers at MUFG
improved to 19.2% as of April 2017.
To help women develop their potential and find successin their careers, each Group company is implementing avariety of supportive initiatives, for example, providing
opportunities to interact with executives and build
Ratio of female managers
in the entire managerial positions*Mar. 31, 2018
20.0% (planned)

(%)

20.0

19.2%

18.0

16.0

14.0

12.0

March 2016 March 2017

Bank of TokyoMitsubishi UFJ

Mitsubishi UFJ
Trust and Banking
Corporation
Mitsubishi UFJ
Morgan Stanley
Securities

Targets*1

Executive Officer00*

At least 1

General Manager

4.5%

5.5%

At least 6%

Chief/Senior
Manager

14.2%

16.6%

At least 14%

Managerial Staﬀ

18.1%

20.1%

At least 22%

Line Manager

6.1%

7.0%

At least 8%

Managerial Staﬀ

20.5%

21.5%

At least 22%

Section Manager
Class or Above

71

77

At least 120

Assistant Manager
Class or Above

10.9%

11.9%

At least 13%

2*1 Target figures for the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking and
Mitsubishi UFJ Morgan Stanley Securities are set to be achieved by March 31, 2018, 2019and 2021, respectively.
*2 In May 2017, one female executive officer was appointed (Ms. Chiaki Kitagawa who
concurrently serves as General Manager for a retail branch management division)

networks with fellow female employees, implementing
career development training and mentoring support for
women, and adopting personnel systems allowing
women to convert job categories and helping those who
left the workforce to get reinstated.
We also provide managers with dedicated training
programs to impart methods regarding the oversight ofdiverse human resources, including working mothers,
aiming at raising employees’ awareness of the careerdevelopment assistance that those in managerial
positions can provide.

Employment for People with Disabilities
Utilizing its special subsidiary, MUFG is proactively hiring
people with disabilities. At each MUFG Group company,
people with disabilities are actively working in various
offices. As for staffing these people, we work closely withthem in order to match their duties to the capabilities andaptitudes of each according to theirindividual circumstances.
Retio of Employment for people with disabilities(domestic Group companies)

12.3%
Apr.
2012

Bank of TokyoMitsubishi UFJ

Apr.
2013

Apr.
2014

Apr.
2015

Apr.
2016

Apr.
2017

Mar.
2018

* Total of the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking and
Mitsubishi UFJ Morgan Stanley Securities

80

Each Company’s Targets for the Number of Female
Workers in Managerial Positions and Results

MUFG Report 2017

Ratio ofemployeeswith disabilities

2.20%

Promoting Work Style Reforms
Work-Life Balance
MUFG believes that higher employee satisfaction isreflected in work performance and leads to increased
customer satisfaction. MUFG also believes that an
employee’s job fulfillment is reflected in society and at
home, fostering better communities. Therefore, MUFG isstriving to help employees strike a good work-life balancein order to create an even more rewarding
workplace environment.
Helping Strike a Balance between Work andChild Rearing
Each MUFG Group company is working to help
employees strike a balance between work and childrearing by, for example, providing reinstatement support
programs, such as training and counseling sessions for
employees prior to taking maternity or childcare leaveand for employees who are about to be or have been
reinstated to the workforce. Each Group company also
provides subsidies for childcare and babysitter expenses
while enhancing its personnel systems, such as a system
to allow eligible employees to shorten working hours.As
part of these efforts, MUFG launched a counseling service
in February 2017 to assist employees searching forchildcare facilities, and opened a company-sponsoredchildcare facility in April.

Promoting Male Participation in Child Rearing
In general, few men choose to take childcare leave inJapan. Nevertheless, each MUFG Group company offers
male workers short-term paid childcare leave toencourage them to participate in child rearing. We also
distribute tips on child rearing as well as benefits so thatmen can play significant roles in the lives of children in
their care. Thanks to these efforts, the number of male
employees who took short-term paid childcare leaveconsiderably grew from 256 in fiscal 2015 to 613* infiscal 2016.

Helping Strike a Balance between Work andNursing CareWith the rapid aging of Japan’s society, nursing care is an
issue that any employee might one day confront. To help
employees strike a balance between work and nursing
care, MUFG holds seminars aimed at raising theirawareness of the importance of being ready to prepare
for this issue even before it emerges and imparting basic
knowledge on nursing care. By doing so, we help
employees smoothly engage in nursing carewhenever necessary.
Work Style Reforms
Each MUFG Group company promotes Work Style
Reforms. Specifically, we employ feedback from
employees gleaned in town hall and working groupmeetings to promote structural reforms aimed at revisingprocedures and working practices that had to that point
been resistant to change. We are also striving to realize
more flexible working styles, including earlier shifts,
flextime and staggered working times, and allowing
eligible employees to work from home. By doing so, we
hope to improve productivity while simultaneously
preventing excessive overtime.
Furthermore, we are working to equip our managers
with the flexibility to take into consideration andaccommodate the private circumstances of individual
staff members under their supervision and thereby
maximize the potential and motivation of their staff. We
believe that increasing the number of such flexible
managers is a key part of enhancing organizational
productivity. Guided by this belief, the Bank of TokyoMitsubishi UFJ, Mitsubishi UFJ Trust and Banking and
Mitsubishi UFJ Morgan Stanley Securities have became
participants in the “IkuBoss Corporate Alliance,” anetworking initiative sponsored by Fathering Japan, an
NPO aimed at encouraging men to play a greater role inchildrearing. Participation in the alliance with like-mindeddomestic corporations, which are proactively striving toraise managers’ awareness and equip them with ideal
traits as future business leaders, better positions theCompany to create an open and inclusive working
environment that allows diverse people to freely pursue
professional success.

* Total of the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking and
Mitsubishi UFJ Morgan Stanley Securities

Mitsubishi UFJ Trust and
Mitsubishi UFJ
Banking Corporation
Morgan Stanley Securities
2.22%

2.28%

* As of April 1, 2017 (statutory employment rates: 2.0%)

MUFG Report 201781

Foundations of Corporate Value

Communicating with Stakeholders

Enhancing Our Corporate Value through Committed
Engagement with Stakeholders
MUFG believes that winning the support of its various stakeholders is essential to securing sustainable growth in its
business activities and thus its corporate value. In line with this belief, we engage with stakeholders via a variety ofchannels and take heed of their expectations and requests to make improvements in our business management.
MUFG’s Channels for Communication with Stakeholders

Dialogue with Shareholders and Investors
General Meeting of Shareholders
The 12th Annual General Meeting of Shareholders washeld on June 29, 2017.
The number of attendees: 2,150
In addition to a presentation on the past fiscal year
and a report on the Company’s key business strategies
and capital policies, the meeting entailed lively Q&A
sessions, with MUFG executive officers and Group CEO
providing answers to questions from 12 shareholders. The
meeting provided an excellent opportunity to interact
with shareholders and enhance mutual understanding.

The environment

One on One meetings with institutional investors
Held on 557 occasions in fiscal 2016
(Of those, 387 meetings with overseas investors)• General Meeting of
Shareholders• Presentation meetings
for investors• Seminars and individual
meetings

P.45-51

Customers

Communities• Participation incommunity activities incollaboration with NPOs
• Employees volunteer
activities• Sales personnel and callcenters• Dedicated contacts forcustomer feedback andinquiries• Questionnaires (customer
satisfaction surveys)

MUFG

P.52-57

P.76-77

Employees• Town hall meetings• Training sessions andworkshops• Employee satisfaction
surveysBusiness partners• Purchasing activities• Business alliance andcollaboration

P.78-81

The 12th Annual General Meeting of Shareholders

Dialogue with Employees
The Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trustand Banking, Mitsubishi UFJ Securities Holdings and its
subsidiaries as well as Mitsubishi UFJ NICOS hold town
hall meetings and round-table conferences aimed atenhancing mutual understanding between top
management and employees.

MUFG employees proactively participate in volunteer
activities and local events as members of thecommunities they serve. Such efforts are intended toenhance interaction with other community members andnurture ties with them.
Meanwhile, MUFG engages with NGOs and NPOs thatwork to resolve issues society is confronting,incorporating the insights and advice such bodies
provide into its own CSR activities. Moreover, MUFG takes
part in the Global Compact Network Japan’s
subcommittees and other similar initiatives to engage indialogue with other participants, study their bestpractices and remain informed of the latest
developments related to social issues. In these ways, theCompany is striving to help resolve such issues.

Large meeting for individual investors

In addition, MUFG is periodically conducting employee
satisfaction surveys to reflect voices of employees in its
business management.

Engagement with Communities, Local Societies
and the Environment

MUFG Report 2017

Large meetings for institutional investors
Held on 12 occasions in fiscal 2016

Shareholders andinvestors• Participation invarious initiatives

82

Large meetings for individual investors
Held on seven occasions in fiscal 2016; approximately
1,360 attendees

Mitsubishi UFJ Morgan Stanley Securities

Park cleaning up and renovation work with the Student Conservation Association

Mitsubishi UFJ Trust and Banking

Mitsubishi UFJ NICOSMUFG Report 201783

Foundations of Corporate Value

Risk Management
Basic Policy

Furthermore, the Risk Appetite Framework provides
guidelines for effective risk management that backs ourbusiness strategy and financial plan while supporting
efforts to avoid unexpected losses and enhance riskreturn management.

Risk Appetite Framework Management Process

Since the 2008 financial crisis, financial institutions havebeen compelled to adopt more comprehensive andsophisticated risk management systems. This risk
management function has also grown in importance for
MUFG as a global bank with subsidiaries spanning thecommercial, trust and investment banking sectors.

Risk Appetite Framework

MUFG aims to strengthen its Group risk management
through the diffusion of a risk culture that strengthens the
structure of Group business management as well as
integrated risk management. Our goal is effective risk
governance which is consistent across regions,subsidiaries and the holding company.

The Risk Appetite Framework aims to clarify MUFG’s risk
appetite (types and amount of risks that it is willing toaccept) as it works to achieve its business strategy andfinancial plan. The framework is designed to increase
management transparency and generate more profit
opportunities in an environment where risk isproperly controlled.

The process to set and manage risk appetite is set out
below. In order to effectively implement the Risk Appetite

In the formulation and execution of its business strategy
and financial plan, MUFG will set the appropriate level ofrisk appetite and proceed to monitor and analyze riskvolume.

Framework, risk evaluation and verification procedures(capital allocation system, stress tests, Top Risk
management) will be applied at every stage of the
management planning process.
Furthermore, even after the plan is formulated, we areready to take immediate actions in emergency situations
through monitoring of the set risk appetite.

Risk Appetite Setting and Management Process

1. Confirming assumptions forbusiness plan formulation

Before formulating the overall business plan, assess pressure points for business strategy
and financial and capital operations based on the internal and external environment.
• Future balance sheet simulation based on macroeconomic scenarios

Risk Management System
Holding Company (Mitsubishi UFJ Financial Group, Inc.)
Risk Committee

U.S. Risk Committee

Board of Directors

Corporate Risk Management
Committee(including crisis management)

Credit & Investment
Management Committee

Credit Committee

Executive Committee

Management Planning
Committee (including ALM)

Corporate Risk Management
Div. (coordinates risk
management)

Market Risk, Liquidity Risk,
Operational Risk,
Operations Risk, Model Risk

2. Formulate business plan
proposal

In pursuing management’s vision, formulate a business plan proposal based on businessstrategy, financial plan and risk appetite.
• Clarify risks to be accepted and risks to be avoided on the basis of Risk Culture

Revise strategy based on results

Credit Policy & Planning Div.

Credit Risk

3. Risk appetite assessment andverification

The risk management divisions will mainly assess the appropriate level of risk appetite.
The strategy proposal will be amended if the stress tests indicate that the maximum levelof acceptable risk will be exceeded.
• Evaluation of strategy profitability and soundness based on stress tests

Global Compliance Div.,
Operations & Systems
Planning Div.

Information Asset Risk

Corporate Administation Div.

Tangible Asset Risk

Human Resources Div.

Personnel Risk

Global Compliance Div.
Legal Div.

Legal Risk

Corporate Communcations Div.

Reputation Risk

4. Business plan decision

The Executive Committee and Board of Directors discuss and subsequently make decisions
based on an integrated view of business strategy, the financial plan and risk appetite.
• On the basis of the capital allocation system, capital is allocated to subsidiaries and operational
divisions in accordance with the level of risk

The risk management divisions of the holding company and subsidiaries monitor riskvolume in relation to allocated capital and risk appetite.
5. Risk monitoring

Risk Appetite Framework
Management Plan
Financial Plan
• Net operating profit• Net income• ROE• RORA• Expenses ratio• Common equity Tier 1 Ratio

84

MUFG Report 2017

Risk Appetite
Organic Correlation• Capital allocation plan and RWA plan
Capital strategy and distribution based on
risk

Business Strategy• Liquidity risk
Risk appetite for difficult-to-quantify risk

• Group business strategy• Forward-looking valuation of internal and external environment based on Top Risk management• Situation grasp of the risk based on predictive control• Regular monitoring of risk appetite complianceCases where risk volume exceeds upper limit
The risk appetite plan will be revised if monitoring reveals that risk appetite and actuallevels of risk diverge, or if environmental factors increase the level of risk.
6. Revision of risk appetite• Stress tests may be conducted again in order to reset risk appetite.
• Discussion between operational divisions and corporate risk management division when exceed
the risk appetite

MUFG Report 201785

Foundations of Corporate Value

Risk Management
Enterprise Risk Management
MUFG makes every effort to recognize the risks thatemerge in the course of business execution, assessing
them according to uniform criteria. Enterprise risk
management is then conducted while maintaining
business stability and striving to maximize shareholder
value. Enterprise risk management is a dynamic
approach, promoting stable profits commensurate withrisk as well as the appropriate allocation of resources.
Enterprise risk management is composed of three main
strands: the capital allocation system, stress tests and
Top Risk management.
Capital Allocation System
In this framework, latent losses associated with risk areconverted to a required capital amount, and capital isthen allocated across group companies and between
different risk categories according to business strategy
and the profit plan. The framework is intended to allow
the appropriate distribution of capital throughout theGroup as MUFG monitors to preserve financial
soundness, evaluate capital adequacy versus risk, andjudge impact on overall capital strategy.
• Stress Tests for capital adequacy assessment
In formulating its business strategy, MUFG regularly
assesses its internal capital adequacy through stress tests
based on two perspectives: regulatory capital, based on
capital adequacy regulations (Basel III), and its own
economic capital, based on internal risk assessment.

Stress tests analyze both the internal and external
environment, and use three-year-period preventative
scenarios.
• Liquidity stress test
In liquidity stress tests, the impact of MUFG-specific oroverall market stress on the balance sheet is assessed so
as to implement MUFG’s business strategy and financial
plan. Various options are examined to respond to shortterm fund outflows or long-term structural changes in thebalance sheet with a view to ensuring there is nofunding shortage.
Top Risk Management
The potential losses that emerge from scenario analysis
are classified as risks and then their relative importance isweighed according to degree of impact and probability(internal and external factors). The risks that need to bewatched most closely over the next year are classified as
Top Risks and a risk map is created to allow preventive
risk management.
By identifying Top Risks, MUFG and its affiliates candiscuss countermeasures to mitigate the potential impact
and then respond dynamically when they actually
emerge. As Top Risks are discussed Groupwide, including
management, consistent risk recognition is maintained
widely throughout the Group and effective solutions
implemented. As an example, in the Top Risk reportsubmitted to our Board of Directors via the Corporate
Risk Management Committee in March 2017, “Decline inprofitability of Net Interest Income (NII)” was cited as amajor Top Risk.

Enhancing the Effectiveness of Risk Management
Effective risk management and a strong Risk Appetite
Framework depend on a Risk Culture which enables
meaningful discussion and clear communication
throughout the Group.
Developing and Diffusing a Risk Culture
MUFG defines a Risk Culture as the basic approach which
specifies how to take risks and risk management for
MUFG’s organizational and individual behaviors. Whilemaintaining consistency with Principles of Ethics andConduct in risk management, it is stated in the risk
appetite statement. A Risk Culture is established for credit
business, market business and overall business and thenformulated in the Risk Appetite Statement. In order toshare this Risk Culture throughout the Company,
management issues regular strategic messages andholds regular meetings globally.

Risk Appetite Statement
The Risk Appetite Statement elucidates the Risk Appetite
Framework which embodies MUFG’s attempts to achieve
an integrated group strategy along with effective risk
management. The Risk Appetite Statement contains an
overview of the Risk Appetite Framework (basic policy
and management process) as well as specific businessstrategies, financial plans and risk appetite details.
A summary of the Risk Appetite Statement is distributed
throughout the Group in an effort to spread the basic
philosophy behind the Risk Appetite Framework.
Through the penetration of risk culture and risk appetite
framework, we will take actions in anticipation ofenvironmental changes both inside and outside of theGroup, while the uncertain environment continues.

MUFG’s Risk Culture
Sincerity
Taking a consistently customer-centric approach, we arecommitted to engaging in fair and transparent corporate
activities, properly handling assets customers entrust to us
and protecting customers’ interests from undue damage.
Quality
With the aim of retaining the lasting trust of customers,
we practice thoroughgoing quality management andimprovement measures across all aspects of our businessprocesses, from planning and development to the provisionof products and services. Through these efforts, we satisfy
diverse customer needs and deliver high quality services thatexceed expectations.
Responsibility

Major Top Risks
Risk incidents

Risk scenarios*

A decline in profitability(including a decline inprofitability of Net interest
income)• Decline in profitability of net interest income due to negative interest rate policy.
• Decline in overall profitability due to constraints on balance sheet size caused by regulatory factors.

Foreign currency liquidity risk

• Depletion of foreign currency liquidity or significant increase in its cost due to deterioration ofmarket conditions.

An increase in credit costs• Globally, concerns about concentration risk may be heightened against the backdrop of low interest rates
globally, the influx of money due to quantitative easing, and the tendency of financial institutions to chaseyields. This may push up inter-risk correlation and sensitivity in the credit portfolio to an unprecedented degree,causing an increase in credit costs.

IT risk• Customer information leakage and reputational damage due to cyber-attack.
• Payment of compensation costs and reputational damage due to system failure.

Risk associated with money
laundering and economic
sanctions• Regulatory issues such as the infringement of anti-money laundering regulations or applicable regulations
related to economic sanctions could lead to legal actions such as business suspension or civil fines, andreputational damage.

In addition to complying with all laws, regulations and rules
enforced in Japan and countries abroad, we choose always
to take the higher moral ground, thereby contributing to themaintenance of stable and trustworthy financial systems andthe sound development of society.
Respect
Every MUFG Group employees remains a committed
professional with a strong sense of personal responsibility
and the deepest respect for their colleagues.

Ensure Consistency with Principles of
Ethics and Conduct

Customer
Focus

Responsibility
as a Corporate
Citizen

Ethical andDynamic
Workplace* Note: The aforementioned risk scenarios are examples of scenarios reported to MUFG’s Board of Directors after being discussed at a Risk Committee meeting held in March 2017.
These scenarios include types of incidents that are not necessarily specific to MUFG and can happen to business corporations in general.

86

MUFG Report 2017

MUFG Report 201787

Foundations of Corporate Value

Foundations of Corporate Value

ComplianceInternal Audit

Basic Policy
We have clarified our Group mission, long-term visionand shared values in the Corporate Vision and expressed
our commitment to meeting the expectations ofcustomers and society as a whole. Furthermore, we haveestablished the Principles of Ethics and Conduct as theguidelines for how the Group’s directors and employees
act to realize the Corporate Vision. This expresses ourcommitment to complying with laws and regulations
globally, to acting with honesty and integrity, and tobehaving in a manner that supports and strengthens thetrust and confidence of society.
In addition, as we expand our business globally, we arecommitted to keeping abreast with developments in thelaws and regulations of the jurisdictions in which we
operate, including those targeting money laundering andbribery, as well as competition laws, while paying
attention to trends in financial crimes.

Financial Group, and at Bank of Tokyo-Mitsubishi UFJ,
Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ
Securities Holdings (referred to as the three companies
below). Each compliance management division
formulates compliance programs and organizes training
courses to promote compliance, and regularly reports toeach company’s Board of Directors and Executive
Committee on the status of compliance activities.
The holding company has the Group Compliance
Committee while the three companies have Compliance
Committees which deliberate important matters related
to compliance. Additionally, the holding company has theGroup Chief Compliance Officer (CCO) Committee
composed of the CCO of the holding company and
CCOs of the three companies. This committee
deliberates important matters related to compliance andcompliance-related issues for which the Group shouldshare a common understanding.

Compliance System
Compliance management divisions have been
established at the holding company Mitsubishi UFJ

Compliance System

Internal audit functions within MUFG seek to verify theadequacy and effectiveness of internal control systems
from a standpoint independent of the operating functions.
This includes monitoring the status of risk management andcompliance systems, which are critical to the maintenanceof sound and appropriate business operations. Internal audit
results are reported to senior management. An additionalrole of internal audit is to make suggestions to help improveor 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 andoverseeing all MUFG operations.
In addition to having primary responsibility for initiating andpreparing plans and proposals related to internal audits of
the Group, the internal audit division at the holding
company monitors and, as necessary, guides, advises, andadministers the internal audit divisions of subsidiaries andaffiliated companies.

Holding Company (Mitsubishi UFJ Financial Group, Inc.)

Board of Directors

Role of Internal Audit

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 theseinternal audit divisions undertakes direct audits of theirrespective subsidiaries, and monitors and oversees theseparate internal audit functions established within them. This
helps to evaluate and verify the adequacy and effectiveness ofinternal controls within MUFG on a consolidated basis.

Implementing Effective and Efficient Internal Audit
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 thenature and magnitude of the associated risks are considered indetermining audit priorities and the frequency and depth ofinternal audit activities. The internal audit divisions ensure that
audit personnel attend key meetings, collect important internal
control documents and access databases to facilitate efficientoff-site monitoring.

Reports to the Audit Committee
The holding company has an audit committee within its boardof directors as required by the Companies Act of Japan, andeach of the major subsidiaries has an Audit & Supervisory
Committee or a voluntarily established audit 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.

Audit Committee

Executive Committee

Group Compliance Committee

CCO (Chief Compliance Officer)

Group CCO Committee

Internal Audit Framework
Board of Directors

Audit Committee (Chairman: Outside Director)
ReportingExcective Committee

Compliance Division (Coordinates compliance issues)
Consultation and report

Holding Company (Mitsubishi UFJ Financial Group, Inc.)

MUFG, Each Division

Instructing

Internal Audit Division
Auditing

Guidance, advice and instruction

Consulting and report

Guidance, advice and management

Group Companies

Group Companies

Enhancing the Effectiveness of Internal Audits
Practicing MUFG’s Corporate Vision and Principles of Ethics and Conduct
In addition to strictly abiding by laws and regulations, every
financial institution has a duty to remain acutely aware ofand sincerely comport itself in line with the expectations ofcustomers and society. With this in mind, MUFG periodicallyholds training sessions aimed at developing corporate
culture that does not tolerate injustice and to instill in
employees a customer-first attitude focused on deliveringvalue that satisfies customers. In these sessions,88

MUFG Report 2017

participants are asked to reflect on their experience andassess whether their decisions and actions reflect the
Corporate Vision and Principles of Ethics and Conduct. At
the same time, they hear their peers’ views on the subject
and are given time to reflect on what they learn. The
sessions often involve lively discussions that afford valuable
insights into what is it like to apply compliance principles in
the course of day-to-day operations.

As a G-SIB, MUFG is obligated to strictly verify theeffectiveness of all its internal control systems. Accordingly,
a variety of initiatives are being carried out to enhance theeffectiveness of internal audits. For example, MUFG has
initiated data analysis employing CAAT* as part of initiatives
that proactively introduce new auditing methodologies thatenable the Company to detect flaws not otherwise
identifiable through conventional auditing methods. MUFG
also adopted cutting-edge audit standards in the area ofcyber security as it is well aware of the significance of risk
deriving from shortfalls in this field. To develop humanresources charged with auditing, we encourage employees
to acquire such international certification as Certified
Internal Auditor (CIA), Certified Information Systems Auditor(CISA) and Certified Anti-Money Laundering Specialist(CAMS), with the aim of enhancing the specialist skills ofmembers of these divisions and accumulating
relevant expertise.

* Computerized Accounting and Auditing Techniques

MUFG Report 201789

Foundations of Corporate Value

Responding to Global Financial Regulation
Since the global financial crisis of 2008, financial institutions have been required to hold to stricter standards offinancial soundness and management discipline. New regulations have been introduced and existing regulations,
including capital adequacy ratios, have been tightened in the quest to establish a more stable financial system. At
the same time, new challenges and issues have been thrown up in the process. In this section we look at the trend
for global financial regulation and our response.

Trend in Global Financial Regulation
2007• U.S. housing bubble bursts

2008

Fragility of financial system spurred stronger global regulation
As subprime loans to low-income households in the U.S. went bad,
Lehman Brothers (which held a large number of subprime-related
financial products) filed for bankruptcy. This caused a sharp
contraction of credit in the global financial markets and exposed
the fragility of the financial system.

2010• European sovereign debt crisis• Announcement of Basel III

2013• Start of application of capital adequacy
ratio requirements(to be phased in up to 2019)2015• Start of application of Liquidity Coverage
Ratio (LCR)

2018(Internationally agreed-upon deadline)• Start of application of leverage ratio
requirements• Start of application of Net Stable
Funding Ratio (NSFR)

New regulations to ensure the soundness of banks engaging ininternational businessIn 2010, the Basel Committee on Banking Supervision (composed ofrepresentatives from the main bank supervisory agencies aroundthe world) introduced Basel III, designed to ensure the continued
soundness of major banks engaging in international business. It has
three main elements.
Capital ratio requirements
Banks must keep their capital adequacy ratios above a certain level in relation torisk-based exposure (risk-weighted assets).
Leverage ratio
Banks must keep their capital adequacy ratios above a certain level in relation to
non-risk-based exposure (total assets shown on financial statements and off -balancesheet assets).
Liquidity requirements
This is composed of the Liquidity Coverage Ratio (LCR) and the Net Stable Funding
Ratio (NSFR).
LCR: Banks must keep liquid assets that can be converted easily and immediately into
cash above a certain level in order to cover any fund outflows.
NSFR: Banks must maintain stable funding sources (which can effectively respond to
stress for one year) above a certain level.

Results
Required level Required level
March 31, 2017 March 31, 2017 March 31, 2019

MUFG’s Response
MUFG has already fulfillment of levels required by theend of March 2019
As the table at right shows, MUFG is in compliance withthe levels required by end-March 2017 and it has alreadyreached the levels required by end-March 2019.
In addition, calculation methodologies for capital andleverage ratios are at the center of global discussion. (Seealso the next page for details.)

90

MUFG Report 2017

1. Surcharge on required capital ratio
G-SIBs (Global Systemically Important Banks) are banks
whose failure would have a major impact on the global
financial system according to the Financial Stability Board
whose membership derives from financial supervisory
authorities around the world. Basel III stipulates asurcharge on the required capital ratio of G-SIBs (from1.0% to 3.5%) to be phased in from 2016. This would
represent a surcharge of 1.5% for MUFG up to 2019 under
the current bucket allocation.

Common Equity Tier 1
Capital Ratio

11.76%

6.5%

8.5%

Tier 1 Capital Ratio

13.36%

8.0%

10.0%

Total Capital Ratio

15.85%

10.0%

12.0%

Liquidity Coverage
Ratio

137.9%

80.0%

100.0%

Leverage Ratio

Results
March 31, 2017

Required level*
From March 2018 onward

4.81%

3.0%

Barclays (U.K.)

Bucket 5(3.5% capital surcharge)

Citigroup (U.S.)
Bucket 4(2.5% capitalsurcharge) JP Morgan Chase(U.S.)• Lehman Brothers collapse

Key Issues Going Forward

G-SIBs Facing Demand for Ever More
Stringent Compliance

Credit Suisse(Switzerland)
Goldman Sachs (U.S.)
Bucket 2(1.5% capitalsurcharge) Industrial and Commercial
Bank of China (China)

Bank of America(U.S.)BNP Paribas (France)
Bucket 3(2.0% capitalsurcharge) Deutsche Bank
(Germany)
HSBC (U.K.)

MUFG (Japan)
Wells Fargo (U.S.)

Bucket 1(1.0% capital 18 Bankssurcharge)

2. Requirement to secure greater Total Loss Absorbing
Capacity (TLAC)
In addition to Basel III capital requirements, the upcoming
regulations, which will be enforced in 2019, will oblige
G-SIBs to acquire additional capital and liabilities thatmeet certain subordinated conditions (TLAC-eligible
liabilities). These regulations are intended to ensureorderly resolution without injecting public funds when
G-SIBs fail.
From 2019
onwardFrom 2022
onwardTLAC risk-weighted asset
minimum

16%

18%

TLAC leverage ratio exposure
minimum

6%6.75%

MUFG is paying close attention to developments related
to the following three issues involving current global
financial regulations.
• International discussions pertaining to risk-weighted asset
measurement methodologies and the current regulatory
framework governing the leverage ratio have yet to yieldan agreement, despite initial projections suggesting that aconclusion would be reached by the end of 2016. The
earlier finalization of these revisions is awaited.
• Financial authorities worldwide were focused on
formulating new regulations for some time following thelatest financial crisis but have now shifted that focus tomonitoring the effectiveness of said regulations sinceenactment. In fact, the Financial Stability Board andother relevant organizations are undertaking
assessments of the impact of new regulations. If theseassessments reveal unexpected consequences or
shortfalls vis-à-vis the regulations’ intended effects,
there will be a need for readjusting the content of theregulations in question.
• Authorities in certain regions have been found to be
making country-specific modifications to internationallyagreed standards, thus creating local versions that are
more lenient or stringent than global regulations. In
addition, some global regulations have yet to be enacted
in certain countries despite international agreements tothat effect. MUFG believes that such fragmentation offinancial regulations must be avoided in order to maintaina level playing field among financial institutions.
1. Review of risk-weighted asset measurement methodologies
Capital ratio

capital / risk-weighted assets

Review of measurement methodologies for each risk
Review of capital floor

2. Review of regulatory framework for leverage ratio
Leverage ratio

capital / exposure(total assets shown on the balance
sheet and off -balancesheet assets).

Review of measurement methodologies for denominator (exposure)
Surcharge on the required leverage ratio of G-SIBs

MUFG’s Stance on Global Financial Regulations
In order to avoid a reprise of the financial crisis, reform andstrengthened regulations are required both for individual
institutions and the system as a whole. On the other hand,
we must ensure that the new regulations do not bring
uncertainty to both financial markets and the real economy
or hamper healthy development and innovation. It istherefore necessary to carefully consider the impact of new

regulations, as well as the coherence between different setsof regulations, all in the context of the global regulatory
framework. MUFG believes the fundamental mission of afinancial institution is to support economic growth. To
realize that goal, we engage in proactive advocacy for thedevelopment of a global regulatory framework based oninternational cooperation and public/private partnerships.

MUFG Report 201791

Financial Data / Corporate Data

Financial Data / Corporate Data

Five-Year Major Financial Data (FY 2012-FY 2016)

Financial Review for Fiscal 2016
(Billions of Yen)

FY 2012Currency exchange rate (USD/JPY) (yen)FY 2013

FY 2014

FY 2015

FY 2016

94.05

102.92120.17112.68112.193,634.2

3,753.4

4,229.0

4,143.2

1,816.8

1,878.6

2,181.6

2,113.5

95.1

108.4

111.4

117.0

Statement of income data:
Gross profits before credit costs for trust accounts
Net interest income
Trust fees excluding credit costs

57.6%

60.9%

61.1%

62.3%

4,011.8
2,024.4
122.0
1,328.4
290.0
246.7
56.8
2,593.5
64.6%

1,539.2

1,464.1

1,644.9

1,557.9

1,418.2

161.6

255.1

155.3
47.9
124.9
127.4
（2.5）
244.4
（271.4）
1,360.7（57.5）
342.1
26.2%
34.6
926.4

1,042.2

1,160.3

1,308.6

1,320.5

Net trading profits

288.2

362.0

352.9

306.3

Net other business profits

391.7

244.0

274.3

285.6

336.7

142.8

115.1

132.9

2,095.0

2,289.3

2,584.1

2,585.2

Net fees and commissions

Net gains (losses) on debt securities
General and administrative expenses
Expenses ratio
Net operating profits before credit costs for trust accounts andprovision for general allowance for credit losses
Total credit costs
the Bank and the Trust Bank combined*1

Net gains (losses) on equity securities

115.6（11.8）

65.3（35.1）

71.1

103.7

（53.6）

144.5

93.1

88.3

Gains (losses) on sales of equity securities

33.6

157.5

97.9

113.6

Losses on write-down of equity securities（87.3）（12.9）（4.8）（25.3）

Profits (losses) from investments in affiliates

52.0

112.4

159.6

230.4

Other non-recurring gains (losses)（77.7）（38.2）（23.0）（82.0）

Ordinary profits

1,344.1

1,694.8

1,713.0

1,539.4（151.7）（98.2）（40.7）Net extraordinary gains (losses)

9.6
395.7

439.9

467.7

460.2

29.2%

28.5%

28.9%

30.7%

Profits attributable to non-controlling interests

105.3

118.1

113.2

87.1

Profits attributable to owners of parent

852.6

984.8

1,033.7

951.4

Total taxes
Tax burden ratio

Balance sheet data:
234,498.7

258,131.9

286,149.7

298,302.8

Loans and bills discounted

91,299.5

101,938.9

109,368.3

113,756.3

Securities

79,526.8

74,515.5

73,538.1

69,993.8

Total liabilities

220,979.0

243,019.0

268,862.2

280,916.1

Deposits

131,697.0

144,760.2

153,357.4

160,965.0

Negotiable certificates of deposit

14,855.0

15,548.1

16,073.8

11,591.5

13,519.6

15,112.8

17,287.5

17,386.7

Total shareholders’ equity

10,578.3

11,346.2

11,328.6

11,855.8

Retained earnings

6,267.9

7,033.1

7,860.4

8,587.5

Total accumulated other comprehensive income

1,158.2

1,709.7

3,989.2

3,602.1

Non-controlling interests

1,774.1

2,048.1

1,961.3

1,920.5

Common Equity Tier 1 Capital ratio*2

11.60%

11.18%

11.09%

11.63%

2

Tier 1 Capital ratio*

12.63%

12.37%

12.58%

13.24%

Total Capital ratio*2

16.53%

15.43%

15.62%

16.01%

13.0

16.0

18.0

18.0

Dividend payout ratio

22.0%

23.4%

24.6%

26.3%

Book-value per share (BPS) (yen)800.95893.77

1,092.75

1,121.07

Earnings per share (EPS) (yen)

58.99

68.29

73.22

68.51

ROE MUFG definition

8.77%

9.05%

8.74%

7.63%

Total assets

Total net assets

303,297.4
109,005.2
59,438.8
286,639.0
170,730.2
11,341.5
16,658.3
12,318.8
9,278.5
2,961.3
1,377.7

Financial Ratios

Dividends per share (DPS) (yen)ROE TSE definition

7.96%

8.05%

7.38%

6.18%

Total number of ordinary shares (excluding own shares) (billion shares)

14.15514.16114.01713.788

Share price (fiscal year-end) (yen)

558

567

743.7

521.5

Market capitalization*3 (trillions of yen)

7.8

8.0

10.4

7.1

PBR*3 (times)

0.69

0.63

0.68

0.46

PER* (times)

9.4

8.3

10.1

7.6

3

11.76%
13.36%
15.85%
18.0
26.4%
1,137.78
68.28
7.25%
6.02%
13.462
699.7
9.3
0.61
10.2

*1 Bank of Tokyo-Mitsubishi UFJ (non-consolidated) + Mitsubishi UFJ Trust and Banking Corporation (non-consolidated) (without any adjustments)*2 The risk-adjusted capital ratios and the amounts of components thereof prior to FY 2014 reflect corrections of errors discovered in the risk weighting applied to certain assets, mostly
residential mortgage loans, and certain other adjustments made under Basel I standards to obtain amounts that were used for floor adjustments in determining the amounts of riskweighted assets under Basel III standards.
*3 Figures based on fiscal year-end share price92

MUFG Report 2017

Financial and Economic Environment
An overview of the financial and economic environment
for fiscal year 2016 shows the global economy generally
maintained a moderate recovery, particularly indeveloped countries. This was despite deep uncertainties
arising from China’s structural adjustment, as well as
fluctuations in international financial markets due to key
events such as the UK’s vote to leave the EU and theadvent of the new US administration. The US economy
continued its self-sustained recovery, driven mainly bydomestic demand, which was supported by improved
employment conditions. However, the recovery inproduction and capital investment was a little slow in thecorporate sector. In Europe, domestic demand continued
to pick up, supported by improved employment
conditions and low interest rates, despite an increase inuncertainty stemming from the UK’s vote to leave the EU
and NPL problems in Southern European countries. On
the whole, the Asian economy was solid, particularly in
ASEAN (Association of Southeast Asian Nations).
However, each country’s exports were pushed down by
the economic slowdown in China, which has been
undergoing structural adjustment.
Under such circumstances, Japan’s economy maintained
a moderate recovery throughout the fiscal year, yet someareas experienced a delay in improvement. Private
consumption continued to grow, albeit slowly, on theback of an increase in employment and wages;
meanwhile, residential investment also remained strong.
Capital expenditure continued to increase gradually,
underpinned by an upturn in exports and production,although it was held back temporarily by a slowdown incorporate earnings growth caused by yen appreciation in
the first half of the fiscal year. Public demand was almost
flat. Turning now to financial conditions, there were large
fluctuations in foreign exchange rates and stock prices inJapan. During the first half of fiscal year 2016, theJapanese yen continued to appreciate against the US
dollar and Japan’s stock market was weak against a
backdrop of uncertainties surrounding the global
economy. However, after the US presidential election, theJapanese yen depreciated sharply and stock prices
surged due to high expectations brought about by the
new administration. Towards the end of the fiscal year,
the Japanese yen appreciated again. As for interest rates,
the US Federal Reserve raised interest rates in December
and March; whereas the Bank of England reduced interest
rates in August after the national referendum and theEuropean Central Bank retained its monetaryeasing policy.
Additionally, the Bank of Japan maintained its aggressive
monetary easing stance with the introduction of“Quantitative and Qualitative Monetary Easing with Yield
Curve Control” in September, resulting in continued, low,
long-term interest rates.

Growth Rate of Real GDP (Annual Rate, Quarter on Quarter)
（%）

10
5
0
-5
-10
(CY)

2013

2014

2015

2016

2017

Source: Compiled by Bank of Tokyo-Mitsubishi UFJ Economic Research Office from
Cabinet Office data

Employee Income* (Year on Year)（%）

Wages per person

Employment

Employee income

2.5
2.0
1.5
1.0
0.5
0
-0.5
-1.0
-1.5
(CY)

2013

2014

2015

2016

2017

* Employee income is the number of employees multiplied by wages per person
Source: Compiled by Bank of Tokyo-Mitsubishi UFJ Economic Research Office based on
MIC and MHLW data

CAPEX (Real GDP base*, Forecast)(Trillions of Yen)

90

(Forecast)

80
70
60
0

(FY)

2013

2014

2015

2016

2017

* Based on 2005 prices
Source: Compiled by Bank of Tokyo-Mitsubishi UFJ Economic Research Office from
Cabinet Office data

Interest rate, Foreign exchange, and Stock prices
JPY/USD

Nikkei Stock Average

10-year JGB yield￥18,909
￥111

0.07%
0

Mar. 2013

Mar. 2014

Mar. 2015

Mar. 2016

Mar. 2017

Source: Bloomberg

MUFG Report 201793

Financial Data / Corporate Data

Financial Review for Fiscal 2016
Consolidated Earnings Summary

History of Profits Attributable to Owners of Parent

Consolidated Net Operating Profits
Consolidated gross profits for the fiscal year ended March
31, 2017 decreased ¥131.3 billion from the previous fiscal
year to ¥4,011.8 billion. Despite robust revenues fromloans and deposits and fees and commissions in overseas
operations, the decrease in consolidated gross profits
was mainly attributable to a decrease in net interest
income from domestic loans and deposits under thenear-zero interest rate environment in Japan, sluggish
investment product sales, a decrease in gains on debt
securities and a decrease in JPY value due to theappreciation of JPY against other currencies.

(Billions of Yen)

General and Administrative expenses for the fiscal year
ended March 31, 2017 increased ¥8.2 billion from theprevious fiscal year to ¥2,593.5 billion, mainly due tohigher expenses for regulatory compliance purposes
despite lower domestic expenses reflecting our efforts for
cutting costs and the effect of the appreciation of JPY
against other currencies. As a result, consolidated net
operating profits decreased ¥139.6 billion from theprevious fiscal year to ¥1,418.2 billion.
Credit Costs
Total credit costs for the fiscal year ended March 31, 2017
decreased ¥99.7 billion from the previous fiscal year to¥155.3 billion. This decrease went well beyond our initial
forecast mainly due to the improvement of credit qualityof resource-related clients, despite the deterioration of
credit quality of some large borrowers.
Net Gains (Losses) on Equity Securities
Net gains on equity securities increased ¥36.6 billion to¥124.9 billion. This was mainly attributable to progress inthe sales of equity holdings.

First half

Second half

1,200

Negative goodwill* 290.6

1,000

981.3

800

285.2

984.8

951.4

926.4

950.0

852.6
454.6

600

Target

1,033.7

455.0

352.0
435.9

510.0

562.1

530.2
405.4

0

(FY) 2011

578.7

599.3

490.5

440.0

290.4

2012

2013

2014

2015

2016

2017

* One-time effect of negative goodwill associated with the application of equity
method accounting on our investment in Morgan Stanley

Breakdown of Profits Attributable to Owners of Parent*(Billions of Yen)

1,000
900

the Securities Business-HD
49.0
the Americas HD
101.9

the Trust Bank
800
Non-consolidated
120.2
700 the Bank
Non-consolidated
481.4
600

Krungsri
57.9

MUFG
Morgan Others Consolidated
Stanley 30.8 926.4
137.6

NICOS
(23.9) ACOM
(28.8)

500
400

Ordinary Profits
Ordinary profits decreased ¥178.7 billion to ¥1,360.7 billion.
Despite an increase of ¥14.0 billion in profits frominvestments in affiliates thanks to growth in earnings inMorgan Stanley and other affiliates, other non-recurring
losses increased ¥189.4 billion year-on-year due to suchfactors as an additional allowance for the excess interest
repayment at Mitsubishi UFJ NICOS and ACOM and anincrease in cost of retirement benefit.
Profits Attributable to Owners of Parent
Although net extraordinary losses increased ¥16.8 billion
from the previous fiscal year mainly due to an increase inlosses on change in equity related to Morgan Stanley, tax
expenses decreased ¥118.0 billion due to a decline inincome before income taxes and a decrease in theeffective corporate tax rate. As a result, profits attributableto owners of parent decreased ¥24.9 billion to ¥926.4
billion, exceeding the target of ¥850.0 billion.

94

MUFG Report 2017

Global Markets Business GroupIn the Global Markets Business Group, net operating
profits for the fiscal year ended March 31, 2017 decreased¥58.4 billion to ¥369.1 billion. This was attributable to adecrease in revenues from ALM banking operations,reflecting the reduction of foreign bond portfolio in
anticipation of, and reaction to, rising interest rates in the
United States following the presidential election, despite
steady revenues from domestic foreign exchange
operations and solid showings overseas in sales & tradingbusiness.

With regard to the net operating profits in the customer
segments, 40% of profits were earned from overseas
business.*2

400

200

Net Operating Profits by Business Segment
Consolidated net operating profits*1 decreased ¥155.2
billion to ¥1,395.8 billion. Although the Global Banking
Business Group showed year-on-year growth in its net
operating profits despite the negative effect of foreignexchange rates, net operating profits decreased in the
Retail Banking Business, Japanese Corporate Banking
Business, Asset Management / Investor Services Businessand Global Markets Business groups due to stagnant
market conditions in Japan and overseas.

0* The above figures take into consideration the percentage holding in each subsidiary andequity method investee (after-tax basis)*1 On a managerial accounting basis (the Japanese Corporate Banking Business Groupexcludes overseas Japanese corporate business)*2 Net operating profits from Global Banking Business Group

Retail Banking Business GroupIn the Retail Banking Business Group, net operating
profits for the fiscal year ended March 31, 2017 decreased¥61.3 billion to ¥225.3 billion. This was mainly due todecreases in net revenues from deposits and loans due totighter interest rate spreads under the near-zero interest
rate environment in Japan, as well as sluggish investment
product sales in response to uncertain market conditions.
Japanese Corporate Banking Business GroupIn the Japanese Corporate Banking Business Group, net
operating profits for the fiscal year ended March 31, 2017
decreased ¥38.1 billion to ¥422.2 billion. Although largescale transactions in investment banking operations
contributed to profits, a decrease in revenues from
deposits and lending operations reflecting lower interest
rate environment in Japan served as a primary factor forthe decrease in profits in the Japanese Corporate Banking
Business Group, as well as in the Retail Banking
Business Group.
Global Banking Business GroupIn the Global Banking Business Group, net operating
profits for the fiscal year ended March 31, 2017 increased¥24.4 billion to ¥482.5 billion. Despite a sluggish
performance in such East Asian countries as China andthe negative effect of the yen appreciation, net operating
profits increased due to strong revenue from major
financing transactions in Europe and the Americas,
large-scale project finance arrangements in Asia andOceania and auto loan and consumer finance operations
undertaken by the Bank of Ayudhya (Krungsri).
Asset Management / Investor Services Business GroupIn the Asset Management / Investor Services BusinessGroup, net operating profits for the fiscal year ended
March 31, 2017 decreased ¥9.3 billion to ¥60.9 billion,
reflecting the dissolution of employees’ pension fundplans and weaker individual investors’ demand forinvestment product.

Net Operating Profits by Business Segment
Retail Banking
Japanese Corporate Banking
Global Banking
Asset Management / Investor Services
Global Markets(Billions of Yen)

1,551.0*1
1,395.8*1
427.5
369.1
70.2

60.9

458.0
Customersegments*2
82％

(FY)

482.5

460.3

422.2

286.6

225.3

2015

2016

Customersegments
85％*1 Total net operating profits include net operating profit for “Other” segment(FY 2015: (¥151.7 bn), FY 2016: (¥164.2 bn))
*2 Ratio of customer segments = net operating profits from customer segments / total net
operating profits (*1)

Breakdown of Changes in Net Operating Profits(Billions of Yen)

1,551.0
GlobalBanking
24.4

RetailBanking(61.3) JapaneseCorporate
Banking(38.1)

Asset
Management /1,395.8
Investor Global
OthersServices Markets(9.3)(58.4) (12.5)

Sum of customer
segments(84.3)

(FY)

2015

2016

MUFG Report 201795

Financial Data / Corporate Data

Financial Review for Fiscal 2016
Consolidated Balance Sheet Summary
Loans (banking and trust accounts)
Loans decreased ¥4,697.4 billion from the previous fiscal
year ended March 31, 2016, to ¥109,209.4 billion mainly
due to a decrease in loans to government andgovernmental institutions.
The risk-monitored loans ratio decreased 0.04
percentage points from the previous fiscal year ended
March 31, 2016, to 1.41%.
Deposits
Deposits increased ¥9,765.1 billion from the previous
fiscal year ended March 31, 2016, to ¥170,730.2 billion
mainly due to an increase of domestic corporate
deposits.
Domestic Deposit / Lending Rates
Differences in yield between lending rate and deposit ratein Japan, excluding loans to government, decreased 0.10
percentage points from FY 2015 4Q mainly due to a
decline in lending rates reflecting lower market interest
rates.
Investment Securities
The balance of available-for-sale securities decreased¥10,705.3 billion compared with the balance as of March
31, 2016, to ¥54,813.1 billion due to a decrease in Japanese
Government Bond (JGB) and foreign bond portfolio.
Net unrealized gains on available-for-sale securities
decreased ¥346.2 billion compared with the previous
fiscal year to ¥3,139.0 billion due to decreases in net
unrealized gains on JGBs and foreign bonds, despite anincrease in net unrealized gains on domestic equity
securities.

Housing loan

Domestic corporate*2(Trillions of Yen)

109.4
1.5

111.9
1.3

113.9
1.3

120
100

102.6
1.3

With regard to the JGB balance, by maturity, MUFG
increased the proportion of short-term bonds, taking a
prudent approach with due consideration given to theinterest rate environments at home and abroad. As aresult, duration decreased to 2.6 years.

BalanceMar. 31,
2017

Total

Unrealized gains (losses)

ChangefromMar. 31,
2016

54,813.1 （10,705.3）

Mar. 31,2017

3,139.0

ChangefromMar. 31,2016（346.2）

7.9

9.7

10.1

5.5

4.2

40

41.5

42.4

42.7

43.8

43.4

44.2

15.9

15.8

15.6

15.5

15.6

15.7

Sep. 30, 2014

Mar. 31, 2015

Sep. 30, 2015

Mar. 31, 2016

Sep. 30, 2016

Mar. 31, 201720
0

*1 Sum of banking and trust accounts*2 Excluding loans to government and governmental institutions, and including
foreign currency denominated loans*3 Loans booked in overseas branches, the Americas HD, Krungsri,
the Bank of Tokyo-Mitsubishi UFJ (China), the Bank of Tokyo-Mitsubishi UFJ (Malaysia)
and MUFG Bank (Europe)

Deposits (Period end balance)
Domestic individual

Domestic corporate, etc.

200

160.9

161.6

35.4

36.2

37.1

34.0

36.5

45.1

47.4

47.4

52.7

56.2

61.0

69.2

70.4

70.7

71.0

71.2

73.0

Sep. 30, 2014

Mar. 31, 2015

Sep. 30, 2015

29.6
100
50
0

Mar. 31, 2017

1.2

1.01%
0.94%

1.0
0.97%

0

0.91% 0.89% 0.89%

0.03% 0.02% 0.01% 0.01% 0.01%
4Q

1Q

2Q

3Q

4Q

1Q

2015

2014

2Q

3Q

4Q

2016

Balance of Japanese Government Bonds (JGB) Portfolio
by Maturity (the Bank and the Trust Bank combined)*
ｗithin 1 year
1 year to 5 years
5 years to 10 years(Right axis)
Duration (JGB, non-consolidated)over 10 years(Trillions of Yen)

(Year)

5.0

50
39.6
40

399.1

（319.1）

20

Japanesegovernment bonds

24,010.6（3,245.3）

351.0（280.8）

10

Others21,959.6

0

5.0
2.8
16.1

16.2

2.1
3.2

35.1
2.5
5.7
14.1

12.7

30.2

4.0

3.9

28.3
3.3
25.5
2.4
3.2
5.4
3.3
5.7
4.8
11.0
8.6
7.2
11.3

10.7

10.1

4.0
25.1
3.0

2.6
2.7
6.3

2.1

13.8

Sep. 30, 2014 Mar. 31, 2015 Sep. 30, 2015 Mar. 31, 2016 Sep. 30, 2016 Mar. 31, 2017

* Available-for-sale securities and held-to-maturity securities(duration is for available-for-sale securities only)

Capital Adequacy
The Common Equity Tier 1 Capital ratio was 11.76%, theTier 1 Capital ratio was 13.36% and the Total Capital ratio
was 15.85%.

MUFG considers the return of earnings to shareholders to
be one of the most important management priorities andmakes it a basic policy to aim for a stable and continuous
increase in dividends per share through growth in profits.

During the fiscal 2016, we repurchased our own shares forapproximately ¥100.0 billion in May and November 2016,
respectively. The purposes of the repurchases were toenhance shareholder returns, to improve our capitalefficiency and to allow the implementation of flexible
capital policies in response to changes in the businessenvironment.

0.92% 0.89%
0.88% 0.87%

2.0
1.0
0

Capital Adequacy(Billions of Yen)

Mar. 31,2017
Common Equity Tier 1 Capital ratio

11.76%

11.63%

0.13%

13.36%

13.24%

0.12%

Total Capital ratio

15.85%

16.01%（0.15%）

Tier 1 Capital

15,232.4

14,839.2

393.1

13,413.8

13,039.8

374.0

9,278.5

8,587.5

690.9

2,369.1

2,161.2

Common Equity Tier 1 Capital
Retained earnings
Other comprehensive income

207.8（1,363.2） （1,100.4）

Additional Tier 1 CapitalPreferred securities andsubordinated debt

（262.8）1,818.6

1,799.4

19.1

1,650.2

1,544.5

105.7

111.6

316.5

（204.8）Foreign currency translation
adjustments

2,843.6

3,102.5（258.8）2,132.6

2,060.5

72.0

277.8

633.8

（356.0）Total Capital (Tier 1+Tier 2)

18,076.1

17,941.8

Risk weighted assets

113,986.3

112,064.3

1,922.0

96,906.3

95,372.3

1,534.0（62.9）

Tier 2 Capital

Subordinated debt
Amounts equivalent to 45% of
unrealized gains on available-forsale securities

Credit risk

134.3

Market risk

2,135.7

2,198.7

Operational risk

6,734.5

6,581.1

153.4

Transitional floor

8,209.7

7,912.1

297.5

Results and Forecasts of Shareholder Returns
Dividend

40.6% 30.0% 25.2%* 22.0% 23.4% 24.6% 26.3% 26.4% 25.4% payout ratio
388.7 583.0 690.6* 852.6 984.8 1,033.7 951.4 926.4 950.0 Profits
Year-end dividend

attributableto owners ofparent(Billions of Yen)

Interim dividend

¥16
¥13

¥12

¥12

¥12

¥6

¥6

¥6

¥7

¥6

¥6

¥6

¥6

¥9

¥7

¥18

¥18

¥18

¥18

¥9

¥9

¥9

¥9

¥9

¥9

¥9

¥9

2009 2010 2011 2012 2013 2014 2015 2016

In addition, the Company passed a resolution at Board of
Director’s meeting on May 15, 2017 with regard to theenforcement of a policy of setting an upper limit on thenumber of shares held as treasury stock. Specifically, theCompany will retain own shares of approximately 5% of
the total number of issued shares at maximum andcancel the shares exceeding the threshold. As thepercentage of treasury stock as of March 31, 2017, stoodat approximately 5% of the total number of shares
outstanding, MUFG plans to cancel all of the sharesacquired through share repurchases during and after
fiscal 2017 in line with this new policy.

ChangefromMar. 31,2016

Mar. 31,2016

Tier 1 Capital ratio

Regulatory adjustments

With respect to the year-end dividend for common stock
for the fiscal year ended March 31, 2017, MUFG pays ¥9per share. As a result, the annual dividend for the fiscal
year, including the interim dividend of ¥9 per share, is ¥18
per share, which is the same amount as the annual
dividend paid for the previous fiscal year.

Lending rate
Differences in yield between lending rate and deposit rate
Deposit rate（%）

Risk Weighted Assets (RWA)
RWA increased by ¥1,922.0 billion from the previous fiscal
year ended March 31, 2016, mainly due to increases inloans to domestic corporate and overseas loans.

Shareholder Returns

Changes in Domestic Deposit / Lending Rates（2,633.6）

MUFG Report 2017

Mar. 31, 2016 Sep. 30, 2016

Total Capital
Common Equity Tier 1 Capital increased by ¥393.1 billion
and Total capital increased by ¥134.3 billion respectively
from the end of March 2016, mainly due to increases inretained earnings and other comprehensive income, as
well as subordinated debt funding.

The provisional figure for the Common Equity Tier 1
Capital ratio, calculated on the basis of regulations
applied at the end of March 2019, is 11.9%.

170.7

154.4

153.3

144.1

150

27,688.8（519.4）

Overseas and others(Trillions of Yen)

Domestic bonds

(8.4)

43.4

7.6

30

（8,733.1）

38.9

60

429.7

17,917.3

109.2
1.5

43.0

2,635.1（456.8）

105.0
1.3

42.4

291.4

104.7

Others41.7

5,164.6（8,363.1）

Overseas*3

36.1

Domestic equity
securities

Foreign bonds

96(Billions of Yen)

Government

80

0.2

Available-for-sale Securities with Fair Value

CapitalLoans (Period end balance) *1

2017

Dividend percommonstock(Forecast)(FY)* FY 2011 figures do not include one-time effect of negative goodwill associatedwith application of equity method accounting on our investment in Morgan Stanley

Outline of Repurchase of Own Share2016
Type of shares repurchased

Ordinary shares of MUFG

Aggregate amount of repurchase priceApprox. ¥200 billion(Approx. ¥100 billion twice)Aggregate number of shares repurchased

Approx. 332.85 million shares(Reference) First half of 2017
Type of shares repurchased

Ordinary shares of MUFG

Aggregate amount of repurchase priceApprox. ¥100 billion

Aggregate number of shares repurchased

Approx. 141.15 million shares(All of the shares cancelled)

MUFG Report 201797

Financial Data / Corporate Data

Consolidated Financial Statements
Consolidated Balance Sheets

Consolidated Financial Results(Millions of Yen)

Mar 31, 201763,525,940

49,158,293

Call loans and bills bought

649,147

660,015

8,066,973

7,466,633

11,002,723

6,041,983

4,707,868

4,733,393

21,046,367

20,460,863

806,881679,678

59,438,897

69,993,869

109,005,231

113,756,325

2,083,530

1,792,888

11,554,699

12,255,764

1,358,905

1,362,044

Receivables under securities
borrowing transactions
Monetary claims bought
Trading assets
Money held in trust
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Buildings

341,131349,761Land

720,132

730,130

Lease assets

10,164

10,856

Construction in progress

46,37338,494

Other tangible fixed assets

241,104

232,801

1,257,876

1,254,727

Software567,753

570,884

Goodwill

267,389

278,628446

648

422,287404,566

601,377

377,955

Intangible fixed assets

Lease assets
Other intangible fixed assets
Net defined benefit assets
Deferred tax assets
Customers’ liabilities for acceptancesand guarantees
Allowance for credit losses
Total assets

126,231

125,739

9,022,130

9,240,310（957,350）

303,297,433（1,057,585）

298,302,898

Gross profits

170,730,221

160,965,056

11,341,571

11,591,578

Call money and bills sold1,973,569

1,360,238

Payables under repurchaseagreements

17,636,962

23,515,240

Payables under securities lendingtransactions

5,538,739

4,710,407

Commercial papers

2,307,222

2,292,282

Trading liabilities

17,700,617

17,251,302

Borrowed money

16,971,085

12,482,277

Foreign exchanges

1,970,980

2,054,937

Deposits
Negotiable certificates of deposit

847,999752,492

Bonds payable

9,893,687

9,190,542

Due to trust accounts

9,893,881

13,296,033

Other liabilities

9,382,992

10,834,564

81,012

90,219

Short-term bonds payable

Reserve for bonuses

598

396

Reserve for stocks payment

10,400ー

Net defined benefit liabilities

59,04562,791

Reserve for retirement benefits todirectors

1,128

1,113

Reserve for loyalty award credits

16,68915,971

384,868

210,087

4,075

4,232

Deferred tax liabilities

745,073866,815

Deferred tax liabilities for land
revaluation

124,483

127,237

Acceptances and guarantees

9,022,130

9,240,310

286,639,039

280,916,129

Capital stock

2,141,513

2,141,513

Capital surplus

1,412,087

1,425,637

Retained earnings

9,278,546

8,587,578

Treasury stock（513,260）（298,922）

Total shareholders’ equity

12,318,885

11,855,806

2,184,597

2,486,627

Reserve for bonuses to directors

Reserve for contingent losses
Reserves under special laws

Total liabilities
Net assets:

Net unrealized gains (losses) on
available-for-sale securities
Net deferred gains (losses) on hedging
instruments

125,684

337,297

Land revaluation excess

173,723

176,364

Foreign currency translation
adjustments

558,339

791,401

Remeasurements of defined benefit
plans（65,098）（189,526）

Debt value adjustments of foreignsubsidiaries and affiliates（15,863）

Total accumulated othercomprehensive income

2,961,382

Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of Yen)

Mar 31, 2016

Liabilities:

Cash and due from banks

Receivables under resale agreements

Mar 31, 2017

Mar 31, 2016

Assets:Consolidated Statements of Comprehensive Income(Millions of Yen)ー

3,602,163

407

8,260

1,377,719

1,920,538

16,658,394

17,386,769

303,297,433

298,302,898

FY 2015

FY 2016

4,011,809

4,143,202

Profits
Other comprehensive income

Gross profits before credit costs for trust
accounts

4,011,808

4,143,202

Net interest income

2,024,487

2,113,564

122,050

117,046001,328,490

1,320,554

Net trading profits

290,035

306,354

Net other operating profits

246,744285,682

56,871

132,928

2,593,576

2,585,279

16,737

16,931

1,434,969

1,574,853

Trust fees
Credit costs for trust accounts
Net fees and commissions

Net gains (losses) on debt securities
General and administrative expenses
Amortization of goodwill
Net operating profits before credit costs for trust
accounts, provision for general allowance for
credit losses and amortization of goodwill

1,418,231

1,557,922

Provision for general allowance for credit losses（210,257）

175,712

Net operating profits*1

1,207,974

1,733,635

152,793（194,148）（9,606）（491,503）（136,423）（143,946）

Provision for specific allowance for
credit losses

181,550（305,131）

Other credit costs（54,733）（42,425）

Credit costs
Losses on loan write-offs

Reversal of allowance for credit lossesーー

Reversal of reserve for contingent
losses included in credit costsーー

64,48760,645

Gains on loans written-off
Net gains (losses) on equity securities

124,940

88,306

Gains on sales of equity securities

171,875

145,347

Losses on sales of equity securities（44,378）（31,656）（25,384）

Losses on write-down of equity securities（2,557）

Profits (losses) from investments in affiliates

244,453

230,415

Other non-recurring gains (losses)（271,481）（82,012）

Ordinary profits

1,360,767

1,539,486

Net extraordinary gains (losses)（57,539）（40,717）（45,654）（36,013）

1,303,228

1,498,769

Income taxes-current

319,060

424,814

Income taxes-deferred

23,11635,389Total taxes

342,177

460,204

Profits

961,050

1,038,565

Net losses on change in equity
Profits before income taxes

FY 2015

961,050

1,038,565

Net unrealized gains (losses) on
available-for-sale securities（278,689）（346,220）

Net deferred gains (losses) on hedging
instruments（212,449）

252,671

（21）

7,055

Land revaluation excess
Foreign currency translation
adjustments（145,331）（214,273）

134,560（141,896）

Share of other comprehensive incomeof associates accounted for using equity
method（128,510）

24,759Total other comprehensive income（630,441）（417,903）

330,609620,662

Comprehensive income attributable toowners of the parent

303,054

556,163

Comprehensive income attributable tonon-controlling interests

27,55464,498Remeasurements of defined benefit
plans

Comprehensive income(Comprehensive income attributable to)

Net operating profits before credit costs
for trust accounts and provision forgeneral allowance for credit losses

Net non-recurring gains (losses)(Millions of Yen)

FY 2016

Profits attributable to non-controlling interests

34,60987,162

Profits attributable to owners of parent

926,440

951,402*1 Net operating profits = Banking subsidiaries’ net operating profits + Other consolidated
entities’ gross profits - Other consolidated entities’ general and administrative expenses- Other consolidated entities’ provision for general allowance for credit losses Amortization of goodwill - Inter-company transactions(Reference)

Total credit costs*2

FY 2016

FY 2015（155,376）（255,145）*2 Total credit costs = Credit costs for trust accounts + Provision for general allowancefor credit losses + Credit costs (included in non-recurring gains / losses) + Reversal of
allowance for credit losses + Reversal of reserve for contingent losses included in credit
costs + Gains on loans written-off

98

MUFG Report 2017

MUFG Report 201799

Financial Data / Corporate Data

Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows(Millions of Yen)
Accumulated othercomprehensive income

Shareholders’ equity

FY 2016
Capital stock

Balance at the beginning of the period
Cumulative effects due to revision of accounting
standards for foreign subsidiaries and affiliates
Restated balance
Changes during the period
Cash dividends
Profits attributable to owners of parent
Repurchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in subsidiaries’ equity
Net changes of items other than shareholders’ equity
Total changes during the period
Balance at the end of the period

Capital surplus

2,141,513

Retained earnings

1,425,637

Treasury stock

8,587,578(298,922)

8,464
2,141,513

1,425,637(246,557)
926,440
2,619(12,614)ー(13,550)
1,412,087

2,141,513

Net deferredgains (losses) on
hedging
instruments

11,855,806

2,486,627

337,297

8,464

8,596,043

(936)

Total
shareholders’equityNet unrealized
gains (losses) on
available-forsale securities

682,5039,278,546(298,922)

11,864,271(217,688)
3,350(246,557)
926,440(217,688)
2,414
2,619
(12,614)(214,337)(513,260)

454,614
12,318,885

2,486,627

337,297(302,029)(302,029)
2,184,597(211,612)(211,612)
125,684(Millions of Yen)

Balance at the beginning of the period
Cumulative effects due to revision of accounting
standards for foreign subsidiaries and affiliates
Restated balance
Changes during the period
Cash dividends
Profits attributable to owners of parent
Repurchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes in subsidiaries’ equity
Net changes of items other than shareholders’ equity
Total changes during the period
Balance at the end of the periodLand
revaluation
excessForeigncurrencytranslation
adjustments

Remeasurementsof defined
benefit plans

176,364

791,401(189,526)

ー 3,602,163(8,464)
176,364

791,401(2,641) (233,062)(2,641) (233,062)
173,723
558,339(189,526)

124,427
124,427(65,098)

Subscription
rightsto shares

Non-controllinginterests

Total net assets

8,260

1,920,538

17,386,769
ー(8,464)(8,464) 3,593,699(7,399) (632,317)(7,399) (632,317)(15,863) 2,961,382

8,260(7,853)(7,853)407

FY 2015
Balance at the beginning of the period
Changes during the period
Cash dividends
Profits attributable to owners of parent
Repurchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes of application of equity method
Changes in subsidiaries’ equity
Changes in foreign affiliates' interests in their ubsidiaries
Net changes of items other than shareholders’ equity
Total changes during the period
Balance at the end of the period

Capital stock

Capital surplus

Retained earnings

2,141,513

1,428,403

7,860,410

Treasury stock（1,182）（1,584）ー

2,141,513（2,766）
1,425,637(542,819)(542,819)
1,377,719

17,386,769(246,557)
926,440(217,688)
2,414
2,619
(12,614)(1,182,989)(728,375)
16,658,394

Net unrealized
gains (losses) on
available-forsale securities

2,835,091

Net deferredgains (losses) on
hedging
instruments

83,194（251,392）（200,077）

2,815

3,042
24,394（278）

727,168
8,587,578

Total
shareholders’equity（101,661） 11,328,666（251,392）

951,4021,920,538(Millions of Yen)
Accumulated othercomprehensive income

Shareholders’ equity

951,402（200,077）
1,633
3,042
24,394（1,584）（278）（197,261）
527,140（298,922） 11,855,806

Balance at the beginning of the period
Changes during the period
Cash dividends
Profits attributable to owners of parent
Repurchase of treasury stock
Disposal of treasury stockReversal of land revaluation excess
Changes of application of equity method
Changes in subsidiaries’ equity
Changes in foreign affiliates' interests in their subsidiaries
Net changes of items other than shareholders’ equity
Total changes during the period
Balance at the end of the period

100 MUFG Report 2017

172,350

951,547（52,909）

Total
accumulated
othercomprehensive
income3,989,274

Subscription
rights to shares

8,271（348,464）（348,464）

2,486,627

254,103
254,103337,297

Non-controllinginterests

1,961,322

Total net assets

17,287,533（251,392）

4,013
4,013
176,364（160,146）（160,146）

791,401（136,616）（136,616）（189,526）（387,110）（387,110）

3,602,163

（10）
（10）

8,260

Equity in losses (gains) of equity method
investees（244,453）

Increase (decrease) in allowance for
credit losses
Increase (decrease) in reserve for bonuses

Increase (decrease) in reserve for stocks
payment（56,618,395）（86,422,400）

39,602,665

60,274,528

Proceeds from redemption of securities

26,428,256

28,452,434（230,415）

Payments for increase in money held in
trust（763,127）（641,740）（92,783）

71,084

Proceeds from decrease in money heldin trust

615,931

672,854

（285）

955

Purchases of tangible fixed assets（121,733）（116,931）（58）

Purchases of intangible fixed assets（249,744）（231,615）

ーProceeds from sales of tangible fixed
assets31,81535,494

Proceeds from sales of intangible fixed
assets2,890

166

Payments for acquisition of subsidiaries’equity affecting the scope of
consolidation（21,954）ー

202
10,400951,402（200,077）
1,633
3,042
24,394（1,584）（278）（40,783） （427,904）（40,783）
99,236
1,920,538 17,386,769

298,527
13,415
16,931

Decrease (increase) in net defined
benefit assets（92,720）（88,908）

Increase (decrease) in net defined
benefit liabilities

1,652（2,255）

Increase (decrease) in reserve forretirement benefits to directors

14

27

959

1,313

Increase (decrease) in reserve forcontingent losses

175,716

5,572

Interest income recognized onstatement of income（2,888,134）（2,769,248）

Interest expenses recognized onstatement of income

863,677

655,735（181,811）（221,235）

Increase (decrease) in reserve for loyalty
award credits

Losses (gains) on securities
Losses (gains) on money held in trust
Foreign exchange losses (gains)
Losses (gains) on sales of fixed assets
Net decrease (increase) in trading assets
Net increase (decrease) in trading liabilities

FY 2015

Proceeds from sales of securities

8,771
459,763（8,200）（1,737,675）
1,448,201（10,689）

1,439,205（9,171）49,544
1,980,093

Purchases of securities

Proceeds from acquisition ofsubsidiaries’ equity affecting the scopeof consolidation
Proceeds from sales of subsidiaries’equity affecting the scope of
consolidation
OthersNet cash provided by (used in)investing activities

ー218,639

2,761

ー（1,815）（1,221）

8,907,549

2,240,209

Proceeds from subordinated borrowings

31,00038,000

Repayments of subordinated borrowings
redemption（50,592）（92,500）

Proceeds from issuance of subordinatedbonds payable and bonds with warrants

837,401

793,218（476,943）（294,460）

Cash flows from financing activities:

Net decrease (increase) in unsettled
trading accounts（50,814）

Net decrease (increase) in loans and bills
discounted

4,065,265（4,990,628）

Payments for redemption ofsubordinated bonds payable and bonds
with warrants

Net increase (decrease) in deposits

10,427,476

7,888,704

1,195

Net increase (decrease) in negotiablecertificates of deposit

Proceeds from issuance of common
stock to non-controlling shareholders（242,013）（4,482,406）

ー

4,551,643

Repayments to non-controllingshareholders（854）

Net increase (decrease) in borrowed money(excluding subordinated borrowings)（1,362,550）

Payments for redemption of preferred
securities（468,956）

ー

Dividends paid by MUFG

（246,563）

802,579

Net decrease (increase) in call loans and（1,413,158）
bills bought and others

Accumulated other comprehensive income
Foreign currency Remeasurements
translationof defined benefit
adjustments
plans

Amortization of goodwill

Impairment losses

Net decrease (increase) in due frombanks (excluding cash equivalents)(Millions of Yen)

Land revaluation
excess1,498,769

Depreciation and amortization

FY 2016
Cash flows from investing activities:

1,303,228
316,411
10,162
16,737

Profits before income taxes(Millions of Yen)

FY 2015

Cash flows from operating activities:

Increase (decrease) in reserve forbonuses to directors

Accumulated other comprehensive income
Debt value
Total
adjustments
accumulatedof foreignothersubsidiaries comprehensive
and affiliates
income(Millions of Yen)

FY 2016（821,034）

80,699（633,599）

Dividends paid by subsidiaries to noncontrolling shareholders

Net decrease (increase) in receivables
under securities borrowing transactions（5,203,785）（1,438,094）

Net increase (decrease) in call moneyand bills sold and others（3,999,428）（435,883）

Proceeds from sales of treasury stock
Payments for purchases of subsidiaries’equity not affecting the scope of
consolidation

Purchases of treasury stock

1,081（251,497）（77,008）（94,825）（217,666）（200,053）

3

1

Net increase (decrease) in commercial papers

33,847

119,203

Net increase (decrease) in payables
under securities lending transactions

850,842（3,446,893）

Net decrease (increase) in foreignexchanges (assets)（302,389）

380,1930ー

Net increase (decrease) in foreignexchanges (liabilities)

Proceeds from sales of subsidiaries’equity not affecting the scope of
consolidation（81,641）544,080

Others43

Net cash provided by (used in)financing activities

Net increase (decrease) in short-termbonds payable

95,507（37,019）

Net increase (decrease) in issuance andredemption of unsubordinated bonds payable

422,720

649,951

Net increase (decrease) in due to trust accounts（3,402,151）

10,112,737
2,897,378

Refund of income taxes

3,023,722（847,418）（684,097）
7,416,541（427,841）
24,364

Net cash provided by (used in)operating activities

7,013,064

Interest income (cash basis)
Interest expenses (cash basis)
OthersSub-total
Income taxes（654,026）

175,151
7,245,155（537,036）

Effect of foreign exchange rate changes
on cash and cash equivalents（1,612）（4,572）（670,592）（105,602）（45,486）（115,214）

Net increase (decrease) in cash and cash
equivalents

15,204,534

8,773,820

Cash and cash equivalents at the
beginning of the period

18,763,856

9,990,035

Cash and cash equivalents at the end of
the period

33,968,391

18,763,856

46,3086,754,428

MUFG Report 2017 101

Financial Data / Corporate Data

Company Overview
Corporate Information(As of March 31, 2017)

Major MUFG Group Companies(As of March 31, 2017)

Company Name

Mitsubishi UFJ Financial Group, Inc.

Head Office7-1, Marunouchi 2-Chome, Chiyoda-ku,
Tokyo 100-8330, Japan

Date of Establishment

April 2, 2001

Amount of Capital¥2,141.5 billion

Common Stock (Issued)

14,168,853,820 shares

Stock Listing

Tokyo Stock Exchange, Nagoya Stock Exchange,
New York Stock Exchange

Ticker Symbol Number

8306 (Tokyo Stock Exchange, Nagoya Stock Exchange)
MTU (New York Stock Exchange)

Number of shareholders

749,688■ Consolidated subsidiary ● Equity method investee

Holding Company
Mitsubishi UFJ Financial Group
Commercial Bank

Leasing■ Bank of Tokyo-Mitsubishi UFJ● Mitsubishi UFJ Lease & Finance※Legal name will be changed to MUFG Bank, Ltd effective Apr 1, 2018

● Hitachi Capital

Trust Bank
■ Mitsubishi UFJ Trust and Banking■ The Master Trust Bank of Japan

Asset Management■ MU Investments

Securities■ Mitsubishi UFJ Securities Holdings(Securities Holding Company)■ kabu.com Securities● Morgan Stanley MUFG Securities

160

MUFG

Real-Estate Brokerage■ Mitsubishi UFJ Real Estate Services

Software Development / Information Technology● Mitsubishi Research Institute DCS

Internet Bank / Regional Bank

■ Mitsubishi UFJ NICOS● Jibun Bank■ ACOM● The Chukyo Bank

2.95%

Corporations:13.56%

100
80

40

Individuals andothers:20

13.64%

2016/6

2016/9* Excludes treasury shares and fractional shares

the Trust Bank: Mitsubishi UFJ Trust and Banking■ Mitsubishi UFJ Baillie Gifford Asset Management

the Securities Business-HD: Mitsubishi UFJ Securities Holdings(Investment Advisor)

NICOS: Mitsubishi UFJ NICOS■ MUFG Securities EMEA (Securities)■ Mitsubishi UFJ Trust International (Securities)■ MUFG Securities Asia (Singapore) (Securities)■ Mitsubishi UFJ Fund Services Holdings● Vietnam Joint Stock Commercial Bank for Industry and Trade(Commercial Bank)■ MUFG Investor Services (US) (Fund Management)● Security Bank Corporation (Commercial Bank)■ Mitsubishi UFJ Investor Services & Banking (Luxembourg)● Dah Sing Financial Holdings

the Americas HD: MUFG Americas Holdings Corporation

About MUFG
http://www.mufg.jp/english/ (English)(Commercial Bank Holding Company)● AMP Capital Holdings(Asset Management Holding Company)

102 MUFG Report 201731.82%

2017/3the Bank: Bank of Tokyo-Mitsubishi UFJ■ MUFG Securities Asia (Securities)■ Mitsubishi UFJ Asset Management (UK) (Asset Management)

2016/12* Note: Share index (2016/3E = 100)

Financial
institutions:

Note: Abbreviation of group companies in the MUFG Report■ BTMU Leasing & Finance (Leasing)(Custody Bank)

Foreigninstitutions, etc.:

37.98%

60

Overseas(Fund Administration Holding Company)

0.02%

For more detailed information, please refer to our website.

● JALCARD(Commercial Bank Holding Company)

Government and local
governments:

Website● JACCS■ MUFG Americas Holdings Corporation

Securities:

Nikkei 225

1200

Credit Cards / Consumer Finance / Installment Credit■ Bank of Ayudhya Public Company (Commercial Bank)

Ownership and Distribution of Shares*140■ Mitsubishi UFJ Morgan Stanley Securities■ Mitsubishi UFJ Morgan Stanley PB Securities

Stock Price* Tokyo Stock Exchange■ Mitsubishi UFJ Kokusai Asset Management

This integrated report was printed in Japan on FSC paper with vegetable oil ink.
MUFG Report 2017 103

Mitsubishi UFJ Financial Group, Inc.
7-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo 100-8330, Japan
Telephone: 81-3-3240-8111
www.mufg.jp/english/

Issued September 2017
Printed in Japan