MUFG Report 2019 Integrated Report

Mitsubishi UFJ Financial Group Editorial Overview Who We Are

We, UFJ Financial Group, or MUFG, have compiled our integrated report, MUFG Report 2019, in order to explain our efforts to create sustained value to our investors and other stakeholders. Referencing the framework provided by the International Integrated Corporate Vision Reporting Council (IIRC),* this report introduces our business model through the opening section (“Who We Are”), and explains the methods we have used to create sustainable value through “Value Creation Initiatives,” “Important Issues Concerning Value Creation” and “Foundations of Value.” Further details on our initiatives for addressing ESG issues 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. Our The corporate vision serves as the basic policy in mission conducting our business activities, and provides Important Issues Concerning Value Creation guidelines for all group activities. Who We Are P. 1 How MUFG Addresses ESG Issues P. 64 The corporate vision also is the foundation for Our vision P. 1 Corporate Vision Initiatives for Addressing ESG Issues management decisions, including the formulation of

P. 65 Corporate Vision toward Sustainable Growth P. 2 MUFG Value Creation Process management strategies and management plans, and P. 68 Environmental Initiatives P. 4 History of MUFG serves as the core value for all employees. P. 72 Social Contributions Our values P. 6 Financial Highlights P. 78 Upgrading the Governance Framework P. 8 ESG Highlights

Management Message P. 10 Foundations of Value P. 90 MUFG has established Principles of Ethics and Conduct based on its Corporate Vision. These Responsibility Ethical and Customer as a Corporate Dynamic P. 92 Communicating with Stakeholders Focus P. 10 Message from the CEO principles provide standards for all MUFG Citizen Workplace

P. 94 Risk Management and Conduct P. 22 An Interview with an Outside Director employees to guide their decisions and actions. Principles of Ethics How we act to realize the Corporate Vision P. 98 Compliance P. 26 Message from the CFO P. 100 Internal Audit Value Creation Initiatives P. 101 Responding to Global Financial Regulations Business Overview P. 36 Financial Data / Corporate Data P. 102 P. 38 Retail & Commercial Banking Business Group P. 42 Japanese Corporate & Investment Banking Business Group P. 102 Ten-Year Summary of Major Financial Data P. 46 Global Corporate & Investment Banking Business Group P. 104 Consolidated Financial Statements P. 50 Global Commercial Banking Business Group P. 108 Company Overview To be a foundation of strength, committed to meeting the needs P. 54 Asset Management & Investor Services Business Group of our customers, serving society, and fostering shared and P. 58 Global Markets Business Group sustainable growth for a better world. P. 62 Initiatives to Utilize Digital Technologies Our mission

Definitions of Specific Terms Used in This Report Be the world’s most trusted financial group MUFG: Mitsubishi UFJ Financial Group, Inc. R&C: Retail & Commercial Banking Business Group the : MUFG Bank, Ltd. JCIB: Japanese Corporate & Investment Banking Business Group 1. Work together to exceed the expectations of our customers the Trust Bank: Mitsubishi UFJ Trust and Banking Corporation GCIB: Global Corporate & Investment Banking Business Group 2. Provide reliable and constant support to our customers the Securities Business: Mitsubishi UFJ Securities Holdings Co., Ltd. GCB: Global Commercial Banking Business Group and its subsidiaries AM/IS: Asset Management & Investor Services Business Group Our vision 3. Expand and strengthen our global presence MUMSS: Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. Global Markets: Global Markets Business Group MUAH: MUFG Americas Holdings Corporation Krungsri: Public Company Limited : PT Bank Danamon , Tbk. CFSGAM: Colonial First State Global Asset Management 1. Integrity and Responsibility 2. Professionalism and Teamwork

Disclaimer 3. Challenge Ourselves to Grow This report contains forward-looking statements with regard to the 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 this document on the basis of the outlook at the time that this document was produced. In producing these forward-looking statements certain assumptions (premises) Our values have been utilized that are subjective and may prove to be incorrect. Should any underlying assumption provide to be incorrect, actual results in the future may vary materially from some of the forward-looking statements in this document. The Group has no obligation or intent to update any forward-looking statements contained in this document. In addition, information on companies and other entities outside the Group that is included in this document has been obtained from publicly Details on our corporate vision are available on our website. https://www.mufg.jp/english/profile/philosophy available information and other sources. The accuracy and appropriateness of that information has not been verified by the Group and cannot be guaranteed. All figures contained in this report are calculated according to generally accepted accounting principles in , unless otherwise noted.

MUFG Report 2019 1 Who We Are

MUFG Value Creation Process

Sustainable growth backed by business activities aimed at providing solutions for issues society is confronting

Social Issues MUFG Value delivered to stakeholders

Global economy Shareholders Enhance our new business model • Countering low economic growth in Invested capital Business models via the MUFG Re-Imagining Strategy • Further enhancing developed countries and slowing shareholder returns growth in emerging nations A groupwide integrated • Global warming & climate change management approach that is p. 30 • Adapting to widespread simple, speedy and transparent digitalization Groupwide • Social infrastructure integrated operations Commercial • Political and geopolitical risks Banking Human Retail & Commercial Customers capital p. 38 41 Banking • Services beyond Domestic economy Strategic investment aimed at seizing expectations • Declining birthrate and aging Japanese Corporate & opportunities arising population p. 42 45 from market growth p. 38 63, p. 93 • Ongoing de­lationary trend Investment Banking • Reforming investment chains Investment Intellectual Banking • Invigorating regional economies Global Corporate & • Workstyle reforms capital p. 46 49 Corporate Investment Banking governance Environment and society framework Retail Business Global Commercial • Initiatives to help realize • Stable asset building p. 50 53 Banking environmental and • Securing the smooth succession of Risk appetite assets for the next generation Social and framework AM / IS social sustainability relationship Asset Management & capital p. 54 57 p. 66 73 Corporate Business Investor Services Culture of compliance • Corporate governance reforms Employees • Securing business succession in light of an aging generation of Global Markets p. 58 61 Initiatives to • HR systems to assist corporate managers Global • Establishing and executing sound Financial address environmental employees in the pursuit and social issues Markets growth strategies (globalization, capital of professional success M&A and the expansion of sales channels) p. 74 77

Contributing to the betterment of society Committed engagement with stakeholders p. 92 93

Priority environmental and social issues determined by MUFG in reference to such international norms as United Nations Sustainable Development Goals (SDGs) Invested capital

Aging population & Business incubation & Social infrastructure & • 180,000 domestic and overseas employees with diverse • Extensive customer base (34 million individual 1 low birth rate 2 job creation 3 town planning backgrounds customers and 1.3 million corporate customers in Japan) Human Social and capital • Wealth of human resources boasting professional skills relationship • Global network (600 domestic bases and approximately • Strong employee engagement capital 3,000 overseas bases in more than 50 countries) Global warming & Financial innovation Workstyle reforms 4 climate change 5 6 • Expertise in the global ­inancial business • Solid balance sheet • Open innovation aimed at incorporating external insights • Diversi­ied pro­it structure Intellectual Financial capital capital • Stable procurement bases at home and abroad 7 Cross-sectoral environment and social issues

2 MUFG Report 2019 MUFG Report 2019 3 Who We Are

History of MUFG The Medium-Term Business Plan announced (Fiscal 2018 – 2020) The MUFG Basic Policy for The Eleven Transformation Initiatives Among MUFG’s precursors, the oldest dates back approximately 360 years. Over this long span of time, ・MUFG Corporate Governance Fiduciary Duties established were formulated to specify strategic Policies established measures to realize the goal of the our commitment to addressing customer needs has remained unchanged, weathering the course of The formulation of common guidelines for the MUFG Re-Imagining Strategy. mergers prompted by recurring periods of social change and economic adversity, including worldwide ・Moved to a “company with three Group to enforce its customer-irst policy recessions, Japan’s rapid growth period, the rise and fall of bubble economies and, most recently, the committees” structure MUFG Re-Imagining Strategy announced Global Financial Crisis. Shifted from a “company with a board of corporate auditors” structure to a “company with three-committees” structure, with the We have nurtured our commitment despite the circumstances and are determined to move forward to aim of establishing a more transparent and achieve mutual and sustainable growth with our customers. Moreover, we aspire to contribute to the eective governance framework Our vision sound development not only of Japan but of countries around the world and we aim to be part of the bedrock of society. Mitsubishi UFJ Morgan Stanley Securities, Be the world’s most With all employees sharing this commitment and aspiration, MUFG steadfastly pursues its mission. Morgan Stanley MUFG Securities inaugurated trusted inancial group

MUFG Corporate Vision renewed Ensured the reputation for trustworthiness Konoike Exchange MUFG inaugurated that MUFG enjoys among customers, which Bureau opened in In October 2005, MUFG was Reiwa period is backed by a longstanding track record and Osaka (1656) inaugurated via the merger of is maintained and passed on, underscoring (One of the precursors Mitsubishi Tokyo Financial 2019 the commitment of each employee of Sanwa Bank) Group and UFJ Holdings. “Reiwa,” the name of the 2018 new imperial era, announced U.S.-North 2017 Korea summit Source：Konoike Limited Partnership Company The Trump Mitsubishi UFJ Trust and Banking, 2016 administration Mitsubishi Exchange Mitsubishi UFJ Securities inaugurated The BOJ inaugurated in House established by 2015 introduces a the Yataro Iwasaki (1880) Quantitative negative interest 2014 easing rate policy Conversion of Bank Danamon, (One of the precursors Bank of Tokyo-Mitsubishi UFJ The Nippon measures U.K. referendum of ) (now MUFG Bank) inaugurated 2013 Individual introduced by results in a Indonesia, into a subsidiary The BOJ Savings the European decision to Complete repayment of public funds 2012 Account (NISA) leave the Source: The Mitsubishi Archives introduces The second quantitative launched European Union 2011 Abe and qualitative Yokohama Specie Bank Bank of Tokyo established (1946) administration Mitsubishi UFJ NICOS, The Great East monetary established (1880) (One of the precursors of MUFG Bank) 2010 Japan Earthquake inaugurated in easing policies (One of the precursors Mitsubishi UFJ Lease & The debt crisis Japan, of Bank of Tokyo) 2009 emerges in Europe initiating the Finance inaugurated Abenomics The Obama stimulus Toyo Trust and Banking administration established (1959) package Source: Kanagawa Prefectural inaugurated in Museum of Cultural History (One of the precursors of the United States Integration of Union Bank Mitsubishi UFJ Trust and Banking) 2008 operations and MUFG Bank Financial crisis Americas business 2007 Acquisition of Colonial First Mitsubishi Bank established (1919) triggered by (One of the precursors of MUFG Bank) Heisei period Subprime Lehman Brothers State Global Asset 2006 mortgage Management in Australia The Bank of Japan problems emerge Sanwa Bank established (1933) 2005 (BOJ) terminated in the United States Transition to (One of the precursors of 1991 zero interest rate policy limited deposit Conversion of Bank of Ayudhya MUFG Bank) The collapse guarantee “payo” (Krungsri), a major commercial of Japan’s scheme in Japan 1964 bubble bank in , into a subsidiary Showa period Tokyo economies Strategic alliance with Olympic Morgan Stanley Initiated full-scale comprehensive 1941 games inancial services in ASEAN as a key The Paciic War During the global inancial crisis, MUFG invested US$9 billion in Morgan Stanley growth strategy initiative breaks out Capital and operational 1929 (U.S.) as part of its eorts to strengthen Worldwide alliance with Taisho period recessions investment banking ・Bank of Tokyo-Mitsubishi UFJ Joint Stock Commercial Meiji period rebranded to MUFG Bank Bank for Industry and Edo period ・Integrate corporate Trade (VietinBank), a Capital and business alliance with loan-related business of the national bank in Vietnam Corporation in the Bank and the Trust Bank Tokai Bank established (1941) (One of the precursors of MUFG Bank)

Mitsubishi Trust established (1927) Yachiyo Securities established (1948) ・UnionBanCal Corporation became a (One of the precursors of Mitsubishi UFJ Trust and Banking) (One of the precursors of Mitsubishi wholly owned subsidiary of MUFG Kawasaki Trust established (1927) UFJ Morgan Stanley Securities) (One of the precursors of Mitsubishi UFJ Trust and Banking) ・ACOM became a consolidated subsidiary of MUFG (JGAAP only)

4 MUFG Report 2019 MUFG Report 2019 5 Who We Are

Financial Highlights

Key Financial Performance Indicators Financial Results under the Medium-Term Business Plan

Medium- to ROE Expense Ratio FY2017 results FY2018 results FY2020 targets 6.45% 71.0% long-term targets Expense ratio (left axis) MUFG definition*1 General and administrative expenses (right axis) (Trillions of yen) ROE (MUFG definition)* 7.53% 6.45% Approx. 7% to 8% 9% to 10% （%） （%） Gross profits (before credit costs for trust accounts; right axis) JPX definition 71.0%     Below FY2017 result Expense ratio 68.0% 71.0% Approx. 60% (68.0%)    Common Equity Tier 1 capital ratio 6.45% 11.7% 11.4% Approx. 11%  (finalized Basel III reforms basis) 5.41%    * For details on calculation methods, please also see descriptions on ROE featured in “Financial Highlights” on page 6.

  Financial Position Compared with Global Peers (G-SIBs)*1   2014 2015 2016 2017 2018 (FY) 2014 2015 2016 2017 2018 (FY) ROE declined mainly due to a decrease in profits attributable to owners of parent. Expense ratio increased due to a decrease in gross profits mainly because of a decrease Market Capitalization in net trading profits, as well as an increase in G&A expenses for overseas operations. (Trillions of yen)  Common Equity Tier 1 Capital Ratio 12.2% EPS ¥66.91 

Common Equity Tier 1 capital ratio Earnings per share (EPS) (left axis)  （%） Common Equity Tier 1 capital ratio (Yen) Profits attributable to owners of parent (right axis) (Trillions of yen)  (finalized Basel III reforms basis*2)   

  ¥66.91   12.2%  JP Morgan Bank of HSBC Goldman MUFG BNP Deutsche   America Sachs Paribas Bank  (Exchange rates: ¥110.99 to one U.S. dollar, ¥124.56 to one euro, ¥144.98 to one British pound; as of March 31, 2019; source: Bloomberg)   11.4%  Common Equity Tier 1 Capital Ratio  （%）   ‰†‡ˆ 14.0% 13.6%  13.2% 13.1% 2014 2015 2016 2017 2018 (FY) 2014 2015 2016 2017 2018 (FY) 12.2% 12.0% 11.8% 11.8% 11.7% 11.6% Common Equity Tier 1 capital ratio remained at a sufficient level. Profits attributable to owners of parent decreased mainly due to a decrease in net operating profits and an increase in losses on impairment of fixed assets for system integration of NICOS, partially offset by an improvement in credit costs and an increase ‰ˆ‡ˆ in profits from investments in affiliates. EPS declined as well. Ratio of Net Operating Profits Ratio of Fee Income 38% from Global Customers 37% †‡ˆ Ratio of fee income (left axis) Ratio of net operating profits from global customers (left axis) HSBC Deutsche Barclays Goldman MUFG JP Morgan Citigroup BNP Wells Fargo Bank of Fee income (right axis) Net operating profits from global customers (GCIB + GCB; right axis) Bank Sachs Paribas America （%） Gross profits (right axis) (Trillions of yen) （%） Net operating profits from customer segments (right axis) (Trillions of yen)   (Rates as of December 31, 2018, excluding the rate for MUFG as of March 31, 2019; based on data disclosed by each firm)   37% 2 38% Credit Ratings* Moody's Holding   Company Ratings U.S. Firms European Firms   A1 MUFG   A2 JP Morgan Wells Fargo HSBC     A3 Citigroup Goldman Sachs

   Baa1 BNP Paribas 2014 2015 2016 2017 2018 (FY) 2014 2015 2016 2017 2018 (FY) Despite a slight decrease in fee income, the ratio of fee income to gross profits rose Ratio of net operating profits from global customers rose due to an increase in net Baa2 modestly because of a decrease in gross profits decreased, reflecting lower net trading operating profits from GCIB and GCB. profits. Baa3 Barclays

(Ratings as of May 31, 2019; based on data disclosed by each firm) Profits attributable to owners of parent *1 ×100 *2 Estimated Common Equity Tier 1 capital ratio reflecting the risk-weighted assets *1 Comparisons with European and American G-SIBs which a G-SIB buffer (announced in 2018) of 1.5% or greater is applied [(Total shareholders’ equity at the beginning of the period increase, as calculated on a finalized Basel III reforms basis. + Foreign currency translation adjustments at the beginning of the period) *2 BNP Paribas and Deutsche Bank: Non-preferred senior ratings + (Total shareholders’ equity at the end of the period + Foreign currency translation Others: Issuer ratings or long-term foreign currency denominated debt ratings adjustments at the end of the period) ] ÷ 2

6 MUFG Report 2019 MUFG Report 2019 7 Who We Are

ESG Highlights

Environment Governance

MUFG’s Track Record and Ranking as a Finance Arranger US$3,940 Million Number of Members of the Board of Directors The Proportion of Independent 1 Outside Directors in the Renewable Energy Sector (No. 1 ranking) Carbon Dioxide (CO2) Emissions* 208Kt Total Outside Directors Company with a Board (Kt-CO2) of Corporate Auditors Company with Three Committees (Millions of US$) 3,940   18  17 17 No. 1 16 No. 1  15 15 15   FY2019  No. 1  No. 2 9 out of 16   9 No. 2 8 8  6 7  208Kt 56.2%  4   2   2013 2014 2015 2016 2017 2018 2019 (FY) 2014 2015 2016 2017 2018 (CY) 2014 2015 2016*2 2017 2018 (FY) Sorce: Bloomberg New Energy Finance ASSET FINANCE/Lead arrangers LEAGUE TABLE *1 Domestic total for MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Morgan Stanley Securities and Mitsubishi UFJ NICOS *2 The figure for fiscal 2016 includes the impact of a CO2 offset scheme employing emission credits. This scheme resulted in a total reduction of 25,500t-CO2.

Society External Recognition

Number of Occasions in which Number of Business cumulative MUFG Staff Provided Students with Matches Made* Approx. 112,000 Economic and Financial Education* 596 times Inclusion in ESG-Related Indices （times） 596 times  112,000  MUFG is included in a number of prominent ESG-related stock indices at home and abroad (as of May 31, 2019).

  

 

  

  2014 2015 2016 2017 2018 (FY) 2014 2015 2016 2017 2018 (FY) * The sum of business matching cases conducted by branches and those established at * On-demand school lectures and workplace experience programs conducted by sta† at business matching events held in Japan and overseas MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Morgan Stanley Securities, Mitsubishi UFJ NICOS and ACOM MUFG was chosen as a MUFG Union Bank was selected Number of Employees Ratio of Female Managers member of the 2019 by DiversityInc as one of the on Childcare Leave* in All Managerial Positions* Bloomberg Gender-Equality world’s Top 50 Companies for 3,692 22.7% Index (GEI). Diversity.

End of March, 2021 （%） 24.0 (planned)  3,692  22.7%



  MUFG has received the top gold rating on the PRIDE MUFG Union Bank has received full Index which evaluates marks for six consecutive years in   companies’ inclusivity efforts the Corporate Equality Index. toward LGBT.  14.4%   2014 2015 2016 2017 2018 (FY) 2014 2015 2016 2017 2018 2019 2020 2021 (FY) * Total for MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Morgan Stanley * Total for MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Morgan Securities and Mitsubishi UFJ NICOS Stanley Securities

8 MUFG Report 2019 MUFG Report 2019 9 Management Message Message from the CEO

“Let’s Build New Trust”... an Idea Whose Time Has Come

As context for this report – which integrates To accomplish this, we must deserve society’s information and observations about MUFG’s trust – the bedrock of . Trust extensive activities into a useful form for demands certain fundamentals that we believe we stakeholders – I would first like to share a few have mastered: accurate clerical operations and thoughts on our company’s deepest purpose, stable systems that allow us to protect the assets and on a past that informs our ideals for the future. entrusted to us; a solid financial position that enables us to provide reliable financial services; and a global force of mission-driven employees deeply An Unwavering Commitment committed to serving the best interests of Honored for 360 Years customers. MUFG’s heritage dates back to an exchange bureau established more than three-and-a-half centuries We are grateful for the many stakeholders who ago, and is marked by major adversities overcome express an ongoing appreciation of these MUFG through skill and tenacity. These include global strengths and the value of our services, security, and recessions, the rise and fall of economic bubbles, safety. And we are proud that these qualities have and – more recently – the financial crisis triggered by won the trust – and business – of many thousands of the Lehman Brothers bankruptcy. We have also people in the 50- nations we serve. undergone a number of mergers over the years. All this has contributed to our evolution into the MUFG Now, upon that foundation, we face an epoch of you know today. unrelenting, radical change.

Over the years, as our businesses and products have evolved, one thing has remained constant: our Striving to Win Customer Trust, commitment to safeguarding and enhancing the We Will Remain a Trailblazer welfare of customers and society through quality in Terms of Innovation Kanetsugu Mike financial services. Fulfilling this commitment is a With the global economy stuck in a low-growth trap, President & Group CEO requirement for earning society’s permission for us central around the world are applying to exist – and to flourish. If we do our job right, we monetary-easing policies to induce and maintain low provide lifeblood to the economy and open the interest rates. Developed countries are feeling the possibility for all boats to rise, including our own. troubling effects of rapidly graying populations. A struggle for global hegemony between the United

10 MUFG Report 2019 MUFG Report 2019 11 Management Message Message from the CEO

States and is playing out through trade as a whole. MUFG should thus aspire to fulfill its frictions, and some countries are seeing a disturbing unspoken social contract to be strong and rise in nationalism. The longstanding framework for trustworthy while also ensuring that it is capable of On Professional Pride, Humility and Leadership international collaboration to support the global innovation. economy has been badly shaken. With this being my inaugural letter to you as CEO, I In 2011, I was appointed officer in charge of systems felt that a personal note about the experiences that and operations for the entire bank. Leading such a have led me to my current role would be in order. round-the-clock operation, which at peak could Environmental and social issues are attracting public Setting Our Sights Higher than Required handle 100 million transactions a day—smoothly, interest. So are business practices to achieve United At age 30, I entered a pivotal period of my life that without failure, using systems requiring constant Nations Sustainable Development Goals and to When our current medium-term business plan would shape the arc of my career. Having upgrading and streamlining—was a daunting encourage Environment, Social, and Governance- (MTBP) was formulated, the primary goal was to graduated from the Wharton School in the U.S., I responsibility. This position gave me the chance to was assigned to the London branch of Mitsubishi work with professionals who relished tackling oriented investment. Millennials and Generation Z are define a path – through a volatile environment – Bank for seven years. Throughout that period, I was serious challenges. It also reinforced my embracing new value systems and mindsets. All leading to sustainable growth. We concluded we surrounded by colleagues of widely varied appreciation of IT and its irreplaceable role in these forces help drive radical changes in customer need a full revival, one akin to a re-founding of MUFG. backgrounds and nationalities—a nourishing finance. behaviors. In that spirit, we launched our “MUFG Re-Imagining experience in diversity for anyone studying international finance, as I was at the time. Two years later, I led the latter part of MUFG’s Strategy” in 2017. The strategy is supported by negotiations, which had already progressed Meanwhile, digital technologies are advancing swiftly “Eleven Transformation Initiatives” that diverge Apart from their immaculate professionalism, their halfway, to acquire of the Bank of Ayudhya and relentlessly, fueling disruption with breathtaking significantly from the accepted ways of doing things, genuine pride in their roles made a deep impression (Krungsri) in Thailand. My approach was to identify intensity – and significantly accelerating the pace of including how we use advanced technology. on me. Although they were from all over the globe, the cultural fit between the two organizations— these colleagues shared certain qualities in particularly the mutual values they each cherished change. According to McKinsey Global Institute, the common, including a focus on clients’ needs and most—that would facilitate discussions and put us new technology of television required 13 years to We created the slogan – “Let’s Build New Trust” – as carrying out their duties with resourcefulness, on an accelerated path to a final agreement. grow an audience of 50 million. The publicly a banner for the work we must do while balancing creativity, and excellent communication. accessed Internet required only three years – Twitter, two countervailing concepts. On the one hand, we In 2015, I transferred back to New York, became the Collectively, they schooled me in my first real regional executive for the Americas, and co- just nine months. must maintain customer confidence and trust. On leadership—one that prepared me for what lay managed MUFG Union Bank and its 10,000 the other, we can’t be too cautious or content with ahead. employees alongside our newly appointed Consider how this has affected humanity. merely protecting what we have today. We must American CEO in the United States. It was a valuable Technology is sweeping away conventions embrace the ambition to take on new things and By the year 2000, having returned to Japan to work experience that exposed me to the uniquely fast- in corporate banking sales for six years, I was paced, dynamic approach to decision making often throughout society, and banks are not immune. generate new trust through constant innovation. transferred to New York and appointed deputy practiced by American executives. It also Nontraditional players are deploying revolutionary general manager overseeing our business with demonstrated to me the cultural importance of digital technologies and innovative ideas to offer This means we must challenge the status quo; tailor Japanese corporations. Then, five years later, I led hiring managers sensitive to local market trends to novel, convenient financial services that customers products and services to customer needs at an the $2.4 billion, 110,000-man-month project of effectively lead regional businesses. integrating systems of The Bank of Tokyo-Mitsubishi eagerly embrace. unprecedented level; always prioritize customer and of UFJ Bank, the two organizations that If there is one conclusion from the sum of my convenience over our own; and create new combined to form MUFG Bank. experience, it’s that humility, paired with quiet In this environment, what manner of financial innovative points of contact with them through confidence, is a vital trait for bankers—especially in institution should MUFG aspire to be? When I digital technologies. When such efforts succeed in With no prior experience in IT, I immediately leadership positions. It leaves a mind open to learn recognized the need to create a team of and improve, regardless of past accomplishments. assumed the role of Group CEO, I had to seriously creating delight, we will be building “New Trust” and accomplished professionals, including system It diverts attention to the needs and contributions of reflect on this question. No matter how harsh the fulfilling the role I believe MUFG should aim for. specialists, banking operators and others from others. And, it drives one to leverage personal environment, of course we must maintain the highest across the organization who were well-versed in success for the greater good. standards of stability and trustworthiness, but at the I ask our colleagues to set their sights above simply operations. The assignment exposed me to the impressive depth and range of MUFG’s talent That is why, among all the characteristics that same time we must innovate new services and user safeguarding the customer trust we have earned bench. It also impressed upon me, through frequent compose a corporate culture, the one I most experiences to keep pace with blindingly fast over the years. That trust is necessary, but not engagement with senior leaders, how crucial sincerely wish for MUFG colleagues to exemplify is changes in customer requirements. sufficient. We must also meet the challenge of management commitment is to success when humility. building new trust by offering new products and executing critical, long-term projects. Financial services have long fulfilled an essential services that satisfy the new needs of customers function supporting economic activities and society – old and new.

12 MUFG Report 2019 MUFG Report 2019 13 Management Message Message from the CEO

We made important strides in optimizing our Where We Stand & Where We Aim to Go organization by integrating management based on I’d like to share some thoughts on our recent our Business Groups. For example, we integrated the progress and the challenges we face as we continue corporate loan-related businesses of the Bank and to deploy our three-year MTBP. the Trust Bank for better collaboration and significantly increased intra-group referrals. Reflections on Fiscal 2018 Performance We also promoted digitalization strategies, jointly Fiscal 2018 was the first year of this MTBP. We establishing Global Open Network with U.S.-based anticipated a year of assuming a “heads-down” Akamai Technologies, Inc., an ambitious project to stance while aiming for a turnaround in the second offer an open-payment network based on new year and growth in the third. Accordingly, we were blockchain technology we hope to eventually offer primed to tackle harsh conditions in fiscal 2018. to customers. However, the environment was even harsher than we had envisioned. In line with our domestic sales-channel strategy, we equipped all branches with self-service terminals, It is my sincere regret that we failed to meet our such as specialized store teller machines for paying financial targets (which we revised upward with our taxes and bills, and LINKS teleconferencing systems November 2018 announcement of interim results) for consulting services, while developing a branch due to such factors as impairment losses from offering an innovative user experience. We also fundamentally revising our system integration plan upgraded our smartphone app to make it more for Mitsubishi UFJ NICOS. customer-friendly.

As a positive, however, our overall progress on Overseas, our net-interest income has increased, revenues from investor services overseas have strengthening internal controls to enhance its value. organizational transformation and business-model particularly in the Japanese corporate sector. increased under the MUFG Investor Services brand. “re-imagination” has been steady. Thailand-based Krungsri delivered stable growth, and In August 2019, we completed procedures for The Global Corporate & Investment Banking Business acquiring Colonial First State Global Asset Group (GCIB) has curbed its balance of low- Management (CFSGAM) in Australia. profitability assets by approximately ¥800 billion. In Net Interest Income Net Operating Profits from Customer Segments March 2019, we signed an agreement with Germany- We have also taken steps to optimize our portfolio of （Billions of Yen） （Billions of Yen） based DVB Bank to acquire its aviation finance- strategic investments. As with the divestment of our    related business, which included a solid portfolio of shares in CIMB in fiscal 2017, we sold part or all of our high-profit assets valued at more than ¥700 billion. shares in Standard Life Aberdeen, Banco Bradesco  We will continue to nurture aviation finance into the SA, and Dah Sing Financial Holdings.  third earnings pillar of GCIB, alongside our global

 presence in project finance and securitization. As a result, we made two year-on-year improvements for the first time in four years. First, our net-interest  We have made significant progress in our inorganic income – the mainstay source of income in banking  strategies as well. In April 2019, Bank Danamon in operations – has bottomed out. Second, we grew net Indonesia became a consolidated subsidiary, helping operating profits from customer segments.   complete our seven-year initiative to establish a commercial banking business platform to serve key ASEAN nations. We will share expertise and pursue   2014 2015 2016 2017 2018 （FY） 2014 2015 2016 2017 2018 （FY） synergies with the partner banks in addition to

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also pushing ahead with an exhaustive reform of its functions and provide seamless, higher-quality fiscal 2019 profits to rise year-on-year, excluding Fiscal 2019: A Turnaround Year cost structure and making steady progress toward a intelligence and advisory services. these one-off factors. Aiming to become one of the With this momentum, we aim for an overall stronger financial base. top 15 global asset managers on an assets-under- turnaround in our performance in fiscal 2019, the The Global Corporate & Investment Banking Business management basis, the Group will focus on working second year of our MTBP. We will also revise In the asset management business, R&C will Group (GCIB) applied Balance Sheet Optimization for with CFSGAM on post-merger integration. strategies for some businesses that failed to reallocate hundreds of staff from the Bank to notably positive results by replacing assets in lending meet planned milestones in fiscal 2018. Mitsubishi UFJ Morgan Stanley Securities, which portfolios. Specifically, the Group stepped up In the investor services business, the Group will should help boost intermediary customer referrals. monitoring transactions that failed to meet expand its banking services associated with fund For example, the institutional investors business, Similarly, it will reallocate staff in the real estate prescribed hurdles for returns on risk-weighted administration to secure a position among the global especially Sales & Trading, felt negative effects from business to strengthen its overall structure. assets, reducing the number of low-profitability top-five firms in value of alternative funds under slumping stock prices and concerns about overseas customers and raising overall transactional profits. administration. The Group will continue upgrading its credit markets. Accordingly, we should reconsider The Group has also merged domestic commercial internal control systems and exercising a firm grip on our strategies, downsize part of this business, and and retail banking offices under single branch The Group also divested low-profitability assets while costs, creating a more robust structure to support refocus management resources on forex, structured management. This lowers costs and was acquiring the aviation finance business described business expansion. products, and other MUFG strengths. accomplished 18 months ahead of schedule. By earlier as well as a supply-chain finance business in optimizing staffing, branches, and ATM networks, the United States, with the aim of accumulating The Global Markets Business Group, as mentioned The wealth management business struggled similarly R&C aims to beat its cost-reduction target under highly profitable assets. earlier, is considering downsizing S&T operations and in fiscal 2018. Although we believe our overall the MTBP. shifting management resources to fields where direction in this field is correct, this business has met The Global Commercial Banking Business Group MUFG has been strong or shows growth potential. difficulties in investment product sales. With this in The Japanese Corporate & Investment Banking (GCB) has steadily grown overall operations thanks to Specifically, the Group will focus on services such as mind, we must develop our platform for successful Business Group (JCIB) is improving its foreign the addition of Bank Danamon, along with forex and asset management for institutional transition from a conventional business model currency lending/deposit gap and lending spreads, contributions from Krungsri and its solid consumer investors. focused on investment product sales to a new model and will enhance its transaction banking functions business performance, somewhat mitigating the of asset management and advisory services. while expanding its Origination & Distribution impact of lower revenues and profits anticipated at In treasury operations, the Group aims to grow net business. MUFG Union Bank. proceeds from sales and purchases by countering We are also stepping up cost control. We previously changes in external conditions, such as U.S. set a target of reducing domestic branches by 20% The Group strove to upgrade its ability to propose With more than 3,000 branches operated by MUFG monetary policies. This includes reviewing its asset by the end of fiscal 2023, but we revised this target Corporate Real Estate asset solutions, assist clients in partner banks in ASEAN nations, the Group is allocation policies for bonds and equities while to 35%. Based on a review of bank counter, middle, the formulation of shareholder strategies through positioned to draw on the dual strengths of this engaging in hedging transactions. and back-office operations, we are confident we can corporate agency services, and step up its pensions tremendous franchise base and the Company’s reduce the workload equivalent of more than 10,000 business in a way that incorporates financial strategy global network. It aims to expand by developing a employees, compared with the original estimate of assistance functions by offering customers financial local business network serving the entire supply Upgrading Compliance & Internal 9,500. We are also overhauling the entire cost strategy advisory services. To this end, the Group chain, ranging from major finished-product Control Systems structure and, to this end, considering a significant increased the number of Product Officers to enhance manufacturers seeking to expand into ASEAN We are keenly aware of the exceeding importance of reduction in headquarters staffing. its product offering capabilities. nations; to their suppliers, dealers, and other local initiatives aimed at upgrading internal control SMEs; and to retail customers such as these entities’ systems that support the sales strategies and We aim to show a turnaround in fiscal 2019 and To reduce equity holdings, the Group will accelerate clients and employees. business endeavors discussed earlier. growth in fiscal 2020. We see positive signs that negotiations with corporate clients to enter indicate this outcome. agreements by the end of fiscal 2019, ahead of The Asset Management & Investor Services Business Indeed, regulatory authorities in nations around the schedule for divesting equity holdings earmarked Group (AM/IS) expects lower profits, due to expenses world – particularly in the U.S. – are calling for The Retail & Commercial Banking Business Group under the MTBP. associated with acquiring Colonial First State Global financial institutions to implement sophisticated (R&C) is shifting to a business model that secures Asset Management (CFSGAM) and the absence of financial crime countermeasures, due in part to recurring revenues and is resilient despite The Group also established a Research & Advisory dividend income following the divestiture of Standard growing public pressure. fluctuations in the market environment. The Group is Unit in July 2019, to consolidate previously dispersed Life Aberdeen. However, the Group anticipates its

16 MUFG Report 2019 MUFG Report 2019 17 Management Message Message from the CEO

With these factors taken into account, within our our Board today. Our nine independent outside MTBP we identified seven high-priority issues to be directors include three women and two foreign addressed by MUFG in order to reach sustainable nationals, reflecting our commitment to diversity. In development goals – and developed initiatives to addition, all committees operating under the Board resolve them, using our financial services. are chaired by outside directors. I, myself, was nominated as a Group CEO candidate through For example, we offer sustainable finance. MUFG has discussions at a series of seven Nominating and set a goal of ¥20 trillion for sustainable finance by Governance Committee sessions presided over by fiscal 2030 (of this, ¥8 trillion will be used for one of these outside directors. environmental finance). To reach our goal, we will finance renewable energy projects and underwrite However, robust governance is a result of substance, and distribute Green Bonds. We will also finance not show, and requires constant upgrades in light of incubation projects to nurture startups and regional the business environment. MUFG still has much to do revitalization programs. regarding upgrading its governance systems; for example, we need to enhance the overarching For another example, our revised MUFG governance functions of a number of Group Environmental and Social Policy Framework came subsidiaries and affiliates operating in regions around into force in July 2019. MUFG will no longer finance the globe. new coal-fired power-generation projects, and we have reclassified transactions related to forestry, Ultimately, our pursuit of governance reforms is a palm oil, and coal mining into categories requiring voyage, not a destination. We are constantly restrictions. In addition, we have formulated a evaluating ourselves and working to make our Responsible Investment Policy to guide our asset governance structure more effective. In response, MUFG established the Global Financial Regrettably, we recently experienced compliance- management business and declared support for the Crimes Division (GFCD) in November 2017. Based in related incidents, such as market manipulation. We Task Force on Climate-related Financial Disclosures. New York, GFCD is charged with supervising anti- are seriously reflecting on these cases and are Accordingly, on page 69 of this report, we disclose Digitalization and money laundering, sanctions compliance, and anti- determined to address the challenge. To this end, we figures on MUFG’s carbon-related assets. We have Human Resource Development bribery and anti-corruption activities at business are rallying the enterprise and marshalling its powers also undertaken analysis of climate-change scenarios It is a fact that employee engagement and units across the enterprise. GFCD also maintains a to clamp down firmly on regulatory noncompliance. to assess the possible impact of climate-change risks empowerment are crucial to any success of team of experienced financial crime specialists on our credit portfolio. structural reforms, especially on scale we are overseeing Group operations in regions around the undertaking. world. We will strengthen the organizational structure Financial Services to Resolve by enforcing globally unified standards at business Environmental, Social & Governance Reforms—a Voyage, We expect to streamline operations, reducing our bases in 50 countries. Governance Issues Not a Destination workload by the equivalent of more than 10,000 Today, growing public awareness and support of Recently, a growing number of reports on scandals employees due to digital technology over a five-year In autumn 2019, Japanese financial institutions, initiatives to create a sustainable society have involving corporations and similar entities suggest period, but we also expect a natural headcount including MUFG, will be subject to a fourth Financial become a major force. A broad range of businesses that dysfunctional governance has been a primary reduction of 6,000 at the same time. This means skill Action Task Force evaluation, undergoing an now actively promote Sustainable Development cause of infractions. Given the importance of requirements for the MUFG employees will change important assessment of compliance and the Goals, and ESG-oriented investment is a thriving governance systems, the MUFG Group has considerably, and we face the major management effectiveness of our AML measures. With this in mind, mainstream asset-management methodology. In this endeavored to upgrade its since its inception in 2005 challenge of offering fulfilling career opportunities to in June 2019 we upgraded our “Know-Your- method, investors select investments based on how and transitioned to the “company with three those displaced by the gaps. Customer” procedures and systems. As a crucial sensitive business models are to environmental (E) committees” system to strengthen its management component of Japan’s financial system, we will and social (S) concerns, and how robustly structure. The number of outside directors has grown maintain a firm stance against these financial crimes. governance (G) practices support their ideals. from the original four members to form a majority of

18 MUFG Report 2019 MUFG Report 2019 19 Management Message Message from the CEO

We will work individually and personally to identify competitors entering from non-financial industries. can go depends on how well the leader encourages My Stance on Shareholder Returns future career paths based on business experience, Leveraged through advanced technologies – with all members to unleash their potential. This is a core and provide training programs to equip candidates As Group CEO, I am committed to returning profit to updated marketing methodologies and a redefined belief of mine. with skills and encourage them to take on rewarding our shareholders. I have positioned this as an business model – this asset can help us create even new tasks. important management issue, and MUFG’s Basic greater value. MUFG aims to remain a steadfast, stable and Policies for Shareholder Returns announced in May trustworthy contributor to society 100 years from We also will recruit and nurture tech specialists who 2018 has not changed since my appointment. Above all, MUFG is supported by nearly 200,000 now. To this end, I pledge to work shoulder-to- can spearhead digital transformation and launch employees operating in more than 50 nations around shoulder with all Group members, assuming the training programs that welcome all employees who Although our CFO explains this subject in detail in the world. I am confident that we can transform our pivotal task of deploying our talents to realize the wish to broaden their digital literacy. the upcoming pages, I wish to be clear that I am enterprise if these individuals realize their full MUFG Re-Imagining Strategy. determined to achieve our dividend payout ratio potential – and I will do my utmost to equip them. In step with the globalization and diversification of target of 40% at the earliest possible date. To that Standing on an unassailable foundation and our businesses, MUFG is confronting the challenge end, I will do my best to ensure that net operating When engaging with colleagues, I often quote from stretching our imagination through relentless of developing future management. The importance profits, which represent MUFG’s earnings power in its an African proverb: innovation, we will earn new trust around the globe. of securing excellent candidates cannot be mainstay operations, will see a reversal in the recent “If you just want to go fast, go alone. If you want to We ask your continued support as we strive for that overstated. declining trend. go far, go together.” goal.

To address this, we established “MUFG University” in Also, in line with our policy of not accumulating Any team embarking toward a distant destination 2018. Today, more than 200 colleagues, including excessive capital, I will consider executing share requires enlightened leadership. How far the team executive officers and other senior management repurchases whenever our capital surplus is members hired in Japan and overseas, have signed sufficient, due to factors such as the additional up for its programs. Their common goal is to gain the recording of profits or further reduction in the global perspective and robust execution skills consumption of risk-weighted assets. July 2019 needed to manage Group operations via, for example, global leadership training programs hosted Final Words jointly with the Switzerland-based International Institute for Management Development. Japan’s financial industry is navigating difficult times. Simply safeguarding what we have already built is Kanetsugu Mike Through personal experience, I am deeply convinced not enough to restore healthy growth. President & Group CEO that diversity is wellspring of innovation and am determined to foster a company culture that But, if we squarely face the facts of the future, take encourages a diverse mix of individual talent to action on our toughest challenges and harness realize its full potential, regardless of gender or today’s tremendous new energy to build new trust, nationality. we can position ourselves once again for abundant opportunity. Our current aim is to raise the percentage of female managers in our overall domestic managerial ranks MUFG’s customer base consists of approximately to 24% by the end of fiscal 2020. To support their 34,000,000 retail customers and approximately development we have also introduced joint training 1,300,000 corporate clients. This suggests that a and mentoring programs to identify and nurture vast number of individuals and corporations find future corporate leaders among them. MUFG reliable and have entrusted us with precious and private information. This enormous customer base, built and maintained over generations, is an enviable asset, especially coveted by would-be

20 MUFG Report 2019 MUFG Report 2019 21 Management Message An Interview with an Outside Director

than 50%. For MUFG, it is therefore important to secure subsidiary of the MUFG Group. This was the unanimous Identifying the leader for individuals who can take a management approach that view of all committee members. is better suited to the globalized environment. Second, MUFG who can best MUFG must remain relevant amid the emergence of Nevertheless, we identified four reasons to allow this FinTech and digitalization. Third, MUFG needs to adapt dual-hat leadership. navigate an ever more itself to changes in customer needs and employee awareness. In sum, this appointment of a new CEO has First, the implementation of the medium-term business been aimed at securing an individual capable of plan must be accelerated. This is MUFG’s most uncertain world. accelerating the Group’s medium- to long-term important task. In this light, we expect that Mr. Mike can initiatives designed to address these issues and, in the exercise his leadership more strongly if he is allowed to process, re-imagining MUFG. This is the most significant concurrently fill two key positions. point. Second, it has been only a year and a half since he The nomination of Mr. Mike was thus based on assumed the position of President & CEO of the Bank. Tsutomu Okuda conclusions reached via careful and multifaceted Because he has acquired an extremely favorable Lead Independent Outside Director, discussions. reputation among bank customers and employees, we Chair of the Nominating and Governance Committee, Mitsubishi UFJ Financial Group, Inc. concluded that in the interests of supporting the Bank’s Special Advisor, J. Front Retailing Co., Ltd. As a matter of fact, Mr. Mike’s past career boasts a businesses and maintaining its organizational vitality, it diverse range of activity. He engaged in corporate would be best if he continued to hold said position. finance at home and abroad while being involved in candidates eligible to take up the aforementioned system- and administration-related operations as well Third, although it was feared that dual-hat leadership The Group CEO nomination process positions in the future. The lineup will, of course, be as corporate planning. Moreover, he spearheaded the would place an excessive burden on Mr. Mike, we have Q. Could you explain why Mr. Mike was appointed updated over time to secure best possible candidates management integration of banks in Japan and concluded that the appointment of Deputy Presidents as the new CEO? Please also elaborate on the in light of changes in the business environment. We are Thailand. Another of his strengths is his abundant would help resolve this issue. In particular, Mr. Hironori screening process and the circumstances committed to maintaining this practice. overseas experience in such countries as the United Kamezawa, who is quite capable of handling internal surrounding this appointment. Kingdom, the United States and Thailand. Because of administration and is charged with spearheading digital In fiscal 2018, the Nominating and Governance The nomination of Mr. Mike as the Group CEO was these traits, he was considered up to the mark for a transformation, is expected to offer strong assistance. Committee met on 13 separate occasions. The primary finalized over a series of seven committee sessions leader of MUFG in terms of knowledge, skills and objectives of these meetings were to determine who launched in summer 2018. Although the committee performance track record. Lastly, we have determined that, despite the would fill the Group CEO and key managerial positions had already identified several CEO candidates in the aforementioned concern about the Group’s at the holding company as well as top management course of regular succession plan reviews, this series of In addition, I believe that leaders must be resilient and governance, the appointment of Mr. Mike would not positions at the Bank, the Trust Bank, the Securities HD sessions focused on closely assessing each candidate optimistic if they are to successfully navigate necessarily undermine it as both the holding company and other Group subsidiaries. The committee also for their personality, execution skills, past career and businesses amid the harsh environment and prevailing and the Bank are equipped with robust governance discussed succession plans with a focus on nurturing performance track record. We also commissioned an sense of uncertainty about the future. Mr. Mike has the systems supported by boards of directors with multiple candidates for these important positions. external firm to conduct a 360-degree assessment. exactly that kind of personality. Furthermore, he is an outside directors. These are the reasons why we agreed These data sets were thoroughly reviewed in light of open-minded leader who is willing to listen to the to allow the dual-hat leadership under these special Following my assumption of the position of committee the prescribed criteria for the CEO position. opinions of his staff at any time. This is also a very circumstances. chair, the nominations of presidential candidates for the positive quality. As such, the committee determined Bank and the Securities Business and a Group CEO We then narrowed down the number of candidates and that he is equipped with a number of credentials that Q. Thank you. Now, there is an opinion that the candidate for the holding company went smoothly. This conducted face-to-face interviews with each individual. are essential to today’s corporate leadership. position of Chairman of the Board should be was largely due to the wealth of information and Finally, the committee prepared and submitted its assumed by an external individual independent preparatory analysis provided before each committee recommendation with regard to the Group CEO Dual-hat leadership as President & from any MUFG business units. What are your thoughts on this? session. appointment to the Board of Directors, which, in turn, CEO of MUFG Bank approved it. Q. Some people question MUFG’s rationale for The committee discussed whether or not the Chairman The committee has in place prescribed criteria allowing Mr. Mike to concurrently serve as position should be filled by an outside director. We are, regarding competencies, abilities, background and In the course of this process, we placed particular President & Group CEO of the holding company of course, aware of the benefits of such appointments. other desired attributes for specific positions. Based on emphasis on ability to adapt to the current operating and President & CEO of the Bank. Could you However, whoever holds the position must also be these criteria, candidates are identified by executives environment. First and foremost, MUFG is heading explain the committee’s reasoning regarding this? knowledgeable about the Company’s overall operations and then classified into age groups. Outside directors, toward globalization. Currently, 40% of consolidated From the governance perspective, it is not desirable to and the latest trends among regulatory authorities in who account for the majority of the committee profits are accounted for by overseas operations. After allow a single individual to concurrently serve as Group Japan and overseas as he or she presides over the membership, proceed to assess the suitability of each MUFG completes overseas acquisitions in such CEO of the holding company and President & CEO of selection of agenda items and the handling of individual. We have already compiled a list of countries as Indonesia, this figure may increase to more the Bank, which represents the largest operating discussions.

22 MUFG Report 2019 MUFG Report 2019 23 Management Message An Interview with an Outside Director

Although I used to serve as an outside director myself at NTT DOCOMO, INC., is expected to bring his insights the Chairman and Group CEO. Thankfully, they are I therefore believe that the most significant challenge is at several different corporations, I believe that being into IT and consumer businesses and thereby help quick to incorporate these opinions, and I often find how to accurately address each item submitted for the Chairman of MUFG’s Board of Directors entails MUFG overcome its inexperience in these fields. that the Board of Directors’ operations are improved discussion. particularly formidable tasks and is more challenging Mr. Hirofumi Nomoto is also an experienced corporate accordingly at subsequent meetings. than equivalent positions at other companies. For manager as he is a former CEO of Tokyu Corporation, With the aim of enhancing its governance systems, example, MUFG is quite a large corporate group in a major railway company in Japan. In addition, some members asserted that the meeting MUFG employs external consultants to conduct annual terms of the business scope and operational diversity length is too short to address the large number of evaluations of the working practices of the Board of of its subsidiaries. Also, the Company’s network spans In the course of selecting candidates, we also keep an agenda items discussed by the Board of Directors. Directors. All the directors, including those in executive almost the entire globe. Moreover, MUFG must ensure eye out for individuals who can serve as chairs of the The length of each Board of Directors meeting has positions and those who play purely supervisory roles, strict compliance with complex financial regulations at four committees operating under the Board of Directors thus been prolonged to one and a half business days. are asked to submit their feedback on the effectiveness home and abroad as well as robust relations with while providing both new appointees and their Although outside directors are all busy people, of the Board of Directors and key committees. More authorities. This task is unique to the financial industry. predecessors with sufficient handover periods. I nevertheless believe that this is a positive move in specifically, directors fill out questionnaires designed to terms of securing robust governance. draw out their opinions on such matters as whether the Q. How do you find foreign national candidates With this in mind, we have concluded that from the for outside directors? issues identified in the previous evaluations have been viewpoint of improving MUFG’s corporate value, an I must also note that outside directors, including myself, remedied or improved. This is followed by one-hour individual equipped with business experience at MUFG’s day-to-day operations involve association benefit a lot from Board Educational Sessions that interviews with each individual. Results are discussed at financial institutions and knowledge of regulations with people from countries overseas. Also, MUFG’s provide opportunities to acquire in-depth knowledge a Nominating and Governance Committee meeting, imposed by authorities must be better at handling the management team members are acquainted with a about the issues MUFG is confronting. For example, and then reported to and deliberated by the Board of Board of Directors’ discussions and facilitating in-depth broad range of businesspeople abroad. Moreover, these sessions include status updates on the Directors. This process exemplifies various initiatives deliberation. the Company maintains the Global Advisory Board,* Company’s U.S. operations and the latest trends in aimed at enhancing the effectiveness of the Board of A Board boasting a diversity of which boasts a membership consisting of prominent FinTech. Themes for each session are determined Directors’ operations. individuals from the Americas, Europe and Asia. based on requests from outside directors who are Q. Finally, could you share your thoughts on the backgrounds Thanks to these advantageous circumstances, MUFG is willing to learn more about specific subjects. candidates for taking over after Mr. Mike and the Q. The latest lineup of outside directors includes positioned to enjoy a broad range of options, younger talent expected to lead the future of MUFG? three newly appointed individuals. What was the and I believe that the Company is not likely to have Lastly, outside directors are briefed on agenda items committee’s focus when it nominated new outside any troubles with appointing candidates from several days prior to each Board of Directors meeting. Sometimes I feel that MUFG has an overabundance of director candidates? among foreign nationals. This briefing usually takes four to five hours, and excellent human resources. The Company has an

We believe that the composition of MUFG’s Board * Please also see page 88-89 for details about the Global Advisory Board. contributes significantly to the quality of discussion outstanding pool of talent. However, no business sector of Directors needs to be diverse and well-balanced undertaken at the subsequent Board of Directors is immune from the impact of radical societal changes in terms of its members’ backgrounds. Accordingly, meeting. now under way. Accordingly, it is important to Q. Could you describe the atmosphere of Board the first keyword for the nomination of candidates is meetings? accurately identify the best possible candidates with “specialty.” Board members include specialists in The development of governance desired traits in light of the prevailing situation. finance, accounting and legal affairs in addition to Before I joined MUFG’s Board of Directors five years systems is an unending voyage corporate managers like me. The second keyword is ago, I speculated that it was probably a conservative The Nominating and Governance Committee not only “diversity.” Currently, the Board of Directors includes organization disinclined to honest and open discussion. Q. What challenges will the Board of Directors identifies future top management candidates; it tackle with the initiative of outside directors? three women. It also welcomed two foreign nationals But that just wasn’t the case. MUFG has an open- prepares the list of candidates for key positions in as outside directors. They are from the United States minded culture that encourages its people to say what Over the course of the five years since I joined MUFG’s subsequent generations. Outside directors, including and Thailand, both of which represent strategically they really think and offer feedback. Furthermore, the Board of Directors, the Company has undergone a myself, are intentionally creating opportunities to important areas supporting MUFG’s overseas Company is quite fast to act upon such feedback. This number of changes. Thanks to various measures it has directly engage with those of younger generations at operations. The individual from Thailand, who had was beyond my expectations. implemented, MUFG has successfully settled its basic MUFG. served as Governor of the Bank of Thailand, is female. operational framework for the Board of Directors. Going The overall composition of the Board of Directors, in my Currently, I serve as the chair of Independent Outside forward, the Company must focus on improving the MUFG aims to remain an energizer for and a contributor opinion, is well-balanced. Thanks to the inclusion of Directors Meetings that are usually held right after quality of the Board of Directors’ operations. The pursuit to Japanese and global economies well into the future. foreign nationals in fiscal 2017, the Board of Directors Board meetings. Held without the presence of the top of sophisticated governance systems is an ongoing, To this end, stably securing excellent candidates who has been better positioned to address each agenda management executives, Independent Outside unending voyage. Financial institutions like MUFG are will, in turn, lead the Company from generation to item in depth. Directors Meetings focus on obtaining a broad range of facing a great number of challenges that must be generation is of critical importance. We will therefore opinions from outside directors, addressing such addressed, while the surrounding business periodically review and update the list of next- Looking ahead, we will keep focusing on “specialty” matters as improving the content of presentation environment evolves at an astonishingly fast pace. generation corporate leader candidates by giving due and “diversity” in our future nominations of director materials used at Board of Directors meetings and That’s why MUFG directors are expected to take on an consideration to needs of the time. This is, I believe, candidates. Taking a look at our newly appointed tackling the medium- to long-term management ever increasing number of agenda items, with frequent another important mission the Nominating and outside directors, Ms. Mariko Fujii boasts extensive challenges the Company is now facing. Conclusions changes in lineups and priorities, to be discussed at Governance Committee is called to carry out. experience in finance. Mr. Kaoru Kato, who had served reached at these meetings are immediately reported to Board of Directors meetings and committee meetings.

24 MUFG Report 2019 MUFG Report 2019 25 Management Message Message from the CFO

For example, although commercial banking (Japan) affected by shrinking differences in yields between Practicing Solid Financial & is a core business ─ as indicated by the large circle lending and deposit rates. This is mainly due to the at the lower left-hand quadrant of the graph ─ the Bank of Japan’s ongoing negative interest rate policy Capital Management to Company has also been expanding its commercial and other unconventional monetary easing banking business in the U.S. and Southeast Asia. measures. Secure Sustainable Growth MUFG has also diversified its business portfolio, and has developed securities, trust banking and asset Overseas, however, differences in yields between As Group CFO, I explain the results of our value creation initiatives management & investor services (AM/IS), as well as lending rates and deposit rates at the Global consumer finance and lease businesses, etc. Corporate & Investment Banking Business Group and the challenges we face. (GCIB) and the Global Commercial Banking Business These efforts show that MUFG has become capable Group (GCB), as well as at JCIB’s overseas business of consistently booking consolidated profits units in charge of Japanese corporate clients, have attributable to owners of parent of around ¥900.0 expanded, mainly due to higher interest rates. August 2019 billion annually.

Since becoming Group CFO in 2015, I have Di erences in Yields Between Lending Rates and supported the Company’s business portfolio strategy Deposit Rates (Non-consolidated*) from the aspects of financial and capital Muneaki Tokunari （%） Dierences in domestic yields between the lending and deposit rates Group CFO management. Regarding capital management, I have Dierences in overseas yields between the lending and deposit rates  1.35 focused on maintaining soundness and enhancing 1.30 1.31 1.34 shareholder returns while allocating capital to 1.23  1.09 1.10 1.11 growth-oriented strategic investment and M&A.  0.86 0.85 0.84 0.84 0.83 In recent years, MUFG has focused more and more Maintaining a business portfolio strategy that ensures 0.82 0.81 0.80 Financial & Capital Management:  Our Corporate Strategy on expanding businesses that occupy the upper stable profits is also key to obtaining robust external right portion of the diagram. These businesses are credit ratings. We believe that this practice will help 

Business Portfolio Strategy and expected to have higher ROE and achieve gross us reduce capital costs by making it easier to predict  Financial & Capital Management profit growth. In this way, the Company has been our future performance in terms of profits 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Customer confidence and trust represent the most shifting the center of its entire business portfolio to attributable to owners of parent. 2017 2018 (FY/Quarter) * Non-consolidated: the Bank (Non-consolidated) + the Trust Bank (Non-consolidated) important values for financial institutions like MUFG. high-profitability, high-growth fields. Results of Financial Management and (without any adjustment) As such, we must be able to back up perceived value Challenges with actual financial soundness. Investors also expect Direction of MUFG’s Business Portfolio Shift profitability and growth potential. Securing all three (Circle size indicates relative business scale as of end-FY2018) In fiscal 2018, Year One of our Medium-term Business ─ soundness, profitability and growth ─ is critically Plan (MTBP), we were able to achieve year-on-year MUFG’s Foreign Currency Balance Sheet*

important to our financial and capital management. High growth in net interest income and net operating As of March 31, 2019 (Billions of U.S. dollars)

AM profits in our customer segments for the first time in MUFG takes a “portfolio approach” to business AM (Europe) four years. This came despite harsh business (Asia and Oceania) Customer deposits management. This allows us to optimally combine Commercial banking (East Asia) conditions, including the prolonged, ultra-low (Incl. deposits from operations with different profiles in terms of risk and interest rate environment in Japan. central banks) CF (Japan) Loans 237 Commercial banking return. In doing so, we strive to secure a stable profit Commercial banking 353 Shift our focus to (the Americas) (Asia and Oceania) stream, maintain financial soundness, and enhance businesses plotted Here, I explain the business challenges we confront above right IS (global) ROE and our other profitability indices. Lease (Japan) from financial and accounting viewpoints and Corp bonds/loans 59 Commercial banking Securities (Japan) (Europe) describe measures we are taking to counter them. Collateralized funding, etc. 33 Securities The diagram on the right provides an overview of (the Americas) Please refer to page 14 for recent results in net interest income and net operating profits Medium- to long-term MUFG’s business portfolio strategy. The vertical and Market average ROE in the customer segments. currency swaps Investment securities 98 horizontal axes represent market averages for ROE Commercial banking (Japan) Status of Deposit and Lending Operations in Japan 114 Interbank mkt operations and gross profit growth ratio, respectively. Each Securities (Europe) and Overseas (Incl. repos) MUFG business portfolio has been plotted. The size In Japan, deposit and lending operations handled by Interbank mkt operations 77 90 CD/CP of each circle reflects the relative scale of business the Retail & Commercial Banking Business Group Other 11 64 Low operations. Low Market average gross profit growth ratio High (R&C) and the Japanese Corporate & Investment Assets Liabilities CF: Consumer Finance, IS: Investor Services, AM: Asset Management Banking Business Group (JCIB) are being negatively * the Bank, managerial basis, excl. MUAH, Krungsri

26 MUFG Report 2019 MUFG Report 2019 27 Management Message Message from the CFO

Foreign Currency Balance Sheet Management & Asset Quality numbers of employees hired decades ago, coupled Specifically, compensation is directly correlated to Reducing Low-Profitability Assets The recent global economic recovery is helping our with limits on numbers of new recruits. Robotic levels of accomplishment as measured against ROE Overseas operations are currently supported by credit costs to fall. This trend also applies to our Process Automation (RPA) and other digital and expense ratio targets. Comparison values with robust demand and are therefore expected to drive partner banks. No specific problems with their asset technologies will be utilized to reduce the equivalent other financial institutions are also considered. growth in net interest income. However, we must quality have been found; Krungsri’s non-performing workload of more than 10,000 employees by end- Results of Capital Management and also secure foreign currency liquidity and manage loan ratio is the lowest among Thailand’s five major fiscal 2023. Challenges the foreign currency balance sheet. banks. We will accelerate the streamlining of the domestic Basic Policy (Capital Triangle) Although aggregate deposits far exceed aggregate The balance of leveraged loans is also maintained at channel on the same timeline, aiming to reduce Capital management policies are regularly discussed lending at MUFG, foreign currency lending is larger a limited level. Moreover, holdings of CLOs*3 at the domestic bank branches by 35% (vs. our previous by the Board of Directors, the majority of which is than foreign currency deposits. Bank and the Trust Bank consist of only “AAA”-rated target of 20%). In the U.S., MUFG Union Bank has comprised of outside directors. quality, and are purchased mainly in held-to-maturity concentrated its back office functions in Arizona. We Accordingly, we not only strive to secure foreign accounts. Accordingly, we consider the financial risk remain assiduously engaged in operational MUFG maintains a focus on capital management that currency deposits, but also to utilize other methods posed by these instruments to be insignificant. streamlining. achieves an appropriate balance among “capital for the stable funding of foreign currencies, taking a triangle” objectives, as stated below. long-term approach rather than relying on short-term In fiscal 2019, however, we expect to see credit costs Fiscal 2019 Financial Targets funding. For example, the Company issues foreign total ¥230.0 billion, up from the past several years. In fiscal 2019, we expect that severe conditions, Profits attributable to owners of parent for the last currency-denominated bonds with external TLAC As the current credit cycle is thought to be near the including Japan’s prolonged ultra-low interest rate four years (since my appointment as CFO) total eligibility*1 (the average duration is slightly less than end of its recovery phase, we will remain vigilant for environment, will continue. We nevertheless aim to approximately ¥3.7 trillion. Of this, funds appropriated seven years), and also engages in medium- to long- credit risks going forward. achieve year-on-year growth in net operating profits for “capital triangle” objectives accounted for 1) 2 term currency swap transactions.* *3 Collateralized Loan Obligations as we expect positive effects from Bank Danamon’s maintaining solid equity capital: 24%, 2) making consolidation, as well as ongoing operational strategic investments for sustainable growth: 28% We also aim to enhance returns from foreign Efficient Utilization of Expenses and Management streamlining under the MTBP. and 3) further enhancing shareholder returns: 48% currency-denominated assets. To this end, we are Resources (28% cash dividend payments and 20% share actively replacing low-profitability assets with high- We estimate that the expense ratio will temporarily The fiscal 2019 target for profits attributable to repurchases) of the total, respectively. profitability assets, through Origination & Distribution increase to over 70% during the current MTBP. This is owners of parent has been set at ¥900.0 billion, (O&D). In fiscal 2018, this approach resulted in the due to investments directed at digital transformation above the comparable fiscal 2018 figure of ¥872.6 reduction of approximately ¥1.4 trillion worth of and other strategic purposes, and rising compliance billion. Capital Triangle low-profitability foreign currency-denominated and regulatory costs associated with assets. countermeasures against global financial crimes, Linking Financial Targets and Compensation (3) Enhance further Shareholder shareholder returns returns … *1 MUFG-issued bonds are equipped with Total Loss-Absorbing Capacity including money laundering. Given this estimate, Currently, MUFG’s stock price is stagnant, with a *2 A transaction that converts surplus yen into foreign currencies via currency swaps  dividend payments fiscal 2018 operating results fell within the plan. price-to-book ratio (PBR) under 1.0. However, MUFG  share repurchases will ensure that directors and officers are acutely We expect a significant decrease in total employee aware of the risks voiced by shareholders. The MUFG’s headcount due to the inevitable retirement of large Company has also adopted a system to determine Corporate Total Credit Costs compensation in a way that directly reflects Value (Billions of yen) Total credit costs operating results vis-à-vis financial targets. Maintain solid Strategic investments 11.8 Expense Ratio (1) (2) Reversal equity capital for sustainable growth ● Forward-looking strategic ● Eects of transformation initiatives Fiscal 2019 Targets … … ％ expense allocation ● Revenue growth Retained earnings  Investment for growth  Costs Results Targets ● Regulatory costs, etc. （46.1） （5.8） Estimate under FY2018 FY2019 （161.6） （155.3） the MTBP Consolidated performance Maintaining Solid Equity Capital and External （230.0） Full-year Interim Full-year （255.1） (Billions of yen)  Credit Ratings Breakdown 2013 2014 2015 2016 2017 2018 2019 (FY) (Plan) 68% Settle around Net operating profits 1,078.5 530.0 1,080.0 We aim for a CET1 capital ratio of approximately 11% 60% Non- consolidated ‚‡  （ ）（†‚ ）（­ „） „ ‡ ƒ„ ˆ Fall below the FY2017 level in order to maintain solid equity capital. CF*1 （‚‡ ） （­­ ） （‡ €）（€­ ‡） （ˆ‚ €） （ˆ ） Total credit costs （5.8） （80.0） （230.0） Overseas*2 „ ƒ （€‚ ƒ）（†† ˆ）（­‡ †） （­ƒ ） （‡ƒ ‚） Under global financial regulations, MUFG is required Other*3 ‚ ƒ € „  † ƒ  † ˆ （ ‡） Ordinary profits 1,348.0 680.0 1,280.0 to maintain a CET1 ratio at least 8.5%; the company’s *1 Sum of NICOS and ACOM on a consolidated basis Profits attributable to 11% target ensures that external credit ratings remain *2 Sum of overseas subsidiaries of the Bank and the Trust Bank 2017 2018 2020 2023 (FY) 872.6 450.0 900.0 *3 Other subsidiaries and consolidation adjustments Results Results Plan owners of parent at “single-A” or higher.

28 MUFG Report 2019 MUFG Report 2019 29 Management Message Message from the CFO

Solid external credit ratings are essential to securing targets lie in business fields supported by higher ROE Looking ahead, we will strive to steadily increase In addition, we aim to comply with the spirit of tax long-term stable non-JPY funding. In order to steadily and a robust potential for market-driven growth ─ cash dividends and achieve our dividend payout legislation, the BEPS Action Plan, OECD Transfer increase dollar holdings via medium- to long-term namely, commercial banking in Southeast Asia and ratio target of 40% at the earliest possible date. Pricing Guidelines, and other international rules on currency swap transactions, external credit ratings the U.S., as well as AM/IS. Simultaneously, we will continue to maintain a tight taxation. We prioritize compliance with tax laws in

should be equivalent to key European and U.S. See page 26 for details grip on capital management. In doing so, we will the course of tax planning, ensuring appropriate financial institutions, as our counterparts. strive to enhance the content of shareholder returns payment. We have been making digital-related

See page 7 for external credit ratings for MUFG and major financial institutions in Europe As Group CFO, I am acutely aware of my mission to by, for example, flexibly executing share investments using the IoT tax system (IT Investment and the U.S. maintain capital discipline. I closely examine the repurchases. Incentive for “Connected Industries”) since fiscal Robust external ratings are also important in terms of profitability of strategic investments and judge their 2018. satisfying Total Loss-Absorbing Capacity (TLAC) worth. At MUFG, each investment is carefully Divestment of Equity Holdings Dialogue with Shareholders and Other requirements (applicable from March 31, 2019). examined to determine if the expected return on Equity holding divestment is a key capital Stakeholders investment will exceed the cost of capital within an management measure, as it frees up capital We are determined to maintain our “single-A” or allotted time frame. Existing strategic investments resources and helps reduce financial risk. Our Today, MUFG’s operations are becoming increasingly higher ratings as we aim to secure our ability to issue are also periodically reviewed to ensure optimization. ongoing policy calls for limiting the ratio of equity diverse, both by region and by business type. foreign bonds in a way that meets TLAC Our most recent results of investment and holdings in the total balance of Tier 1 capital to Accordingly, we believe that providing our requirements. divestment appear at the lower left. approximately 10% by end-fiscal 2020. On an stakeholders with accurate and timely explanations acquisition-cost basis, this is equivalent to a about our operations and strategies is important, and In fiscal 2018, MUFG raised regulatory capital totaling Further Enhancement of Shareholder Returns reduction of approximately ¥800.0 billion. helps them to gain a good overview of what MUFG is approximately ¥2.0 trillion, including a portion raised In line with the company’s basic policies for doing. by foreign bonds and subordinated debt issuance, to shareholder returns, MUFG 1) has positioned share Under this policy, the acquisition cost of divested satisfy external TLAC requirements. As of March 31, dividends as the primary means for such returns equity holdings since fiscal 2015 now totals ¥594.0 In line with this belief, senior management visited 2019, the Company’s external TLAC ratio was 18.16%, while aiming for stable and sustainable increases in billion. As a result, the ratio of equity holdings to total domestic and overseas investors during fiscal 2018. above the 16% minimum regulatory requirement. The dividends, with the goal of achieving a 40% payout Tier 1 capital has declined to 13.4% as of March 31, The group heads of six business groups also minimum regulatory requirement is expected to be ratio target by end-fiscal 2023; 2) has taken a flexible 2019. Going forward, we aim to further divest of our participated in an Investors Day event held in July 2018, raised to 18% on March 31, 2022. stance toward executing share repurchases and 3) equity holdings while engaging in dialogue with our and two outside directors (both foreign nationals) held

See pages 35 and 101 for more details will limit treasury shares to less than approximately corporate clients to secure their understanding. face-to-face dialogues with investors at a September 5% of the total issued share count. Shares that ESG seminar focusing on governance. We offered a Strategic Investments for Sustainable Growth and exceed this amount will be canceled. Reduction of Equity Holdings presentation on MUFG’s digital strategies in February Acquisition price of domestic equity securities with fair value Optimization of the Investment Portfolio included in available-for-sale securities (consolidated) 2019. For M&A and other growth investments via the Based on these policies, MUFG paid a full-year (Trillions of yen) Ratio of equity holdings to Tier 1 capital*  51.8% 9.20 utilization of capital, our main strategic investment dividend of ¥22 per share for fiscal 2018, an increase The ratio reflects the amount Stance on IR/SR Initiatives, ESG Issues and SDGs of ¥3 per share from the previous fiscal year. For of equity holdings subject to Dialogue with our stakeholders, including divestment, as agreed upon Results of Investment and Divestment Undertaken fiscal 2019, the Company plans to pay a full-year with corporate clients, but shareholders, investors and ratings agency not yet actualized. (or Agreed Upon) from April 2018 to the Present dividend of ¥25 per share for an estimated dividend 22.8% representatives often provides valuable opportunities 19.7% Investment/ payout ratio of approximately 36%.  17.9% and insights. Going forward, we will focus on Value 4.29 16.6% Divestment (Date) 14.2% 13.4% 12.4% maintaining such dialogue. We will step up both 2.82 2.79 2.66 Bank Danamon Approx. ¥686.8 In fiscal 2018, MUFG expended ¥150.0 billion to 2.52 2.32 investor relations (IR) and shareholder relations (SR) April 2019 2.18 (Indonesia) billion*2 execute share repurchases. engagement with those charged with exercising voting rights. We will also place greater emphasis on CFSGAM*1 Approx. ¥328.0 August 2019 Results and Forecasts of Dividends per Common Stock  (Australia) billion Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 environmental, social, and governance (ESG) issues 2002 2008 2014 2015 2016 2017 2018 2019 Year-end dividend Interim dividend 40% while advocating for U.N. Sustainable Development Approx. ¥716.3 35.9% DVB Bank’s Aviation Dividend payout ratio * On a Basel II basis until Mar. 31, 2012 (consolidated) New investment, etc. By end-2019 billion, consisting 32.9% Goals (SDGs). Finance division (scheduled) of lending portfolio, New investment, etc. (Germany) etc.*3 ¥25 Dividend Compliance with Tax Regulations and Tax 26.3% 26.4% 25.5% per common Stakeholder opinions are shared among Board 24.6% ¥22 Planning Banco Bradesco SA Approx. ¥45.3 23.4% stock April 2018 members and given due consideration in the course (Brazil) billion ¥19 ¥18 ¥18 ¥18 ¥12.5 MUFG recognizes that as a corporate citizen, putting of business operations and capital management. We ¥16 ¥11 Standard Life Aberdeen Approx. ¥49.4 February 2019 ¥9 ¥9 ¥9 ¥10 its best effort into making appropriate tax payments always welcome frank opinions about MUFG. (United Kingdom) billion ¥9 is an important duty. With this in mind, MUFG strives Divestment Dah Sing FH Approx. ¥8.2 to enhance corporate governance with regard to tax Looking ahead, we are committed to practicing March 2019 (Hong Kong) billion ¥11 ¥12.5 ¥9 ¥9 ¥9 ¥9 compliance and to maintain and enhance tax financial and capital management aimed at securing ¥7 *1 Colonial First State Global Asset Management compliance awareness via employee education and our sustainable growth. We ask for your continuous *2 Total acquisition amount since December 2017 *3 In addition to DVB Bank's Aviation Finance client lending portfolio for approx. ¥716.3 2013 2014 2015 2016 2017 2018 2019 (FY) training, among other means. support in this endeavor. bilion, its employees and other parts of the operating infrastructure to be transferred. (Forecast)

30 MUFG Report 2019 MUFG Report 2019 31 Financial Review for Fiscal 2018

recording of gains on sales of equity holdings, on par Tax expenses decreased by ¥117.8 billion. credit losses. GCIB saw growth in ROE due to an Consolidated Income Statement Summary with those recorded in the previous fiscal year. increase in net operating profits and an improvement Consolidated Net Operating Profits As a result, profits attributable to owners of parent in credit costs. GCB also experienced an increase in Consolidated gross profits for the fiscal year ended Profits from investments in affiliates increased ¥41.5 decreased by ¥116.9 billion, a 12% decrease from the ROE due to growth in net operating profits. However, March 31, 2019 decreased ¥128.5 billion from the billion to ¥284.3 billion, thanks to Morgan Stanley’s previous fiscal year, to ¥872.6 billion. Global Markets saw a decrease in ROE as net previous fiscal year. This was due to a decrease in net growing profit contribution. operating profits fell. fees and commissions, reflecting such factors as For fiscal 2019, MUFG has set its target for profits sluggish investment product sales, as well as a Taking the aforementioned factors into account, attributable to owners of parent at ¥900.0 billion, an Looking ahead, each business group is determined decline in net trading profits, despite growth in net ordinary profits decreased by ¥114.3 billion from the increase from fiscal 2018. to steadily implement measures aimed at achieving interest income from foreign currency-denominated previous fiscal year. its respective ROE target for fiscal 2020, the final year loans and deposits. Segment Performance of the company’s MTBP. Profits Attributable to Owners of Parent From a business segment-by-segment perspective, Please also refer to pages 36-61 for a summary of operating results by business group General and administrative expenses increased by Net extraordinary losses amounted to ¥202.7 billion, R&C saw a decrease in net operating profits* from * Net operating profits by business segment, calculated for internal managerial ¥25.7 billion from the previous fiscal year. Although up ¥149.6 billion from the previous fiscal year, due to the previous fiscal year, while the other four customer accounting purposes expenses associated with domestic operations an increase in losses on impairments to fixed assets segments achieved growth in net operating profits. remained virtually flat thanks to cost control efforts, from the system integration of Mitsubishi UFJ NICOS. Net operating profits from customer segments expenses for overseas operations increased due to increased by ¥6.9 billion, for the first time in four the expansion of these operations and rising History of Profits Attributable to Owners of Parent years. On the other hand, those from Global Markets regulatory costs. (Billions of yen) First half Second half decreased, resulting in a decrease in consolidated Breakdown of Changes in Net Operating Profits by net operating profits. Business Segment As a result, consolidated net operating profits fell by (Billions of yen) 1,033.7 GCB AM/IS ¥154.2 billion from the previous fiscal year. 984.8 989.6 To enhance capital efficiency, MUFG discloses ROE 1,200.6 GCIB 7.4  951.4 Target 17.7 926.4 900.0 JCIB 17.0 872.6 targets and results for each business segment. 22.7

Credit Costs 455.0 362.7 454.6 352.0 221.8 R&C Total credit costs for the fiscal year ended March 31, 435.9 In fiscal 2018, both R&C and AM/IS experienced a （57.9） Global 450,0 1,072.3 2019 decreased by ¥40.2 billion from the previous significant decrease in ROE due to temporary factors Markets （88.3）Others （47.0） fiscal year, mainly due to a major reversal of  ─ namely, the posting of impairment losses on fixed allowance for credit losses. assets due to the revision of the system integration 650.7 Sum of customer segments 599.3 626.9 plan for Mitsubishi UFJ NICOS (R&C) and the posting 6.9 530.2 578.7 Net Gains (Losses) on Equity Securities 490.5 450.0 of losses on sales of equity securities in connection Net gains on equity securities decreased ¥20.5 billion with the review of strategic investments (AM/IS).

from the previous fiscal year. This was mainly due to  losses on sales of equity securities associated with 2013 2014 2015 2016 2017 2018 2019 (FY) Meanwhile, JCIB achieved a considerable increase in the optimization of strategic investments, despite the ROE, thanks to a major reversal in the allowance for Breakdown of Profits Attributable to Owners of Parent*1 2017 2018 (FY) (Billions of yen) Morgan MUFG the Securities HD Stanley 25.1 (Consolidated) Consolidated Income Statement Summary Krungsri 224.6 872.6 79.4 Results by Business Segment the Trust Bank (Billions of Yen) FY2017 FY2018 YoY –—””” 95.1 2 MUAH ACOM Business segment Net operating profits (Billions of Yen) Expense ratio ROE* Gross profits (before credit costs for 3,854.2 3,725.7 （128.5） 111.2 14.9 1 1 1 trust accounts) 2 (FY) 2017 2018 2020* 2017 2018 2020* 2017 2018 2020* the Bank NICOS Others* G&A expenses 2,621.4 2,647.1 25.7 663.2 （224.7） 9% 1%*3 9% （116.4） R&C 356.7 298.8 350.0 77% 80% 79% [9%] ［1%］ [9%] Net operating profits 1,232.8 1,078.5 （154.2） 10% 15% 10% JCIB 227.0 249.7 260.0 57% 54% 54% [10%] ［ ］ [11%] Total credit costs （46.1） （5.8） 40.2 15% 7% 9% 8% •”” GCIB 135.8 152.7 200.0 64% 62% 58% Net gains (losses) on equity securities 133.1 112.6 （20.5） [7%] ［9%］ [8%] 6% 7% 8% Equity in earnings of equity method GCB 202.7 220.4 320.0 70% 69% 66% 242.8 284.3 41.5 [8%] ［ ］ [10%] investees 9% 21% 8%*4 19% AM/IS 71.0 78.4 80.0 63% 61% 63% Other non-recurring gains (losses) （100.3） （121.7） （21.3） [23%] ［10%］ [20%] 7% 5% 9% Ordinary profits 1,462.4 1,348.0 （114.3） Global Markets 339.5 251.2 490.0 40% 47% 35% [7%] ［5%］ [9%] ” Net extraordinary gains (losses) （53.0） （202.7） （149.6） *1 Value for fiscal 2020 represent planned figures (announced on May 18, 2018) *1 The above figures take into consideration the percentage holding in each subsidiary Total of income taxes-current and *2 Calculated based on risk-weighted assets (R&C, JCIB, GCIB and GCB) or economic capital (AM/IS and Global Markets). (Managerial accounting basis, based on profits attributable to 313.4 195.5 （117.8） and equity method investee (after-tax basis) owners of parent, calculated excluding non-JPY mid-to long-term funding costs.) Figures in parentheses exclude the impacts of investment related accounting factors (amortization income taxes-deferred *2 Including cancellation of the amount of inter-group dividend receipts, net gains on of goodwill, etc.) sales of equity securities due to a subsidiary’s share repurchase, and equity method Profits attributable to owners of parent 989.6 872.6 （116.9） *3 ROE, excluding the impact of impairment losses on fixed assets of Mitsubishi UFJ NICOS, is 6% income from other ailiate companies *4 ROE, excluding the impact of losses on sales of Standard Life Aberdeen shares, is 18%

32 MUFG Report 2019 MUFG Report 2019 33 Financial Review for Fiscal 2018

1 Consolidated Balance Sheet Summary Loans (Period-end balance)* Capital Capital Adequacy (Billions of Yen) Housing loans Domestic corporate*2 Government Changes 3 Mar. 31, Mar. 31, Loans / Deposits Overseas* Others Total Capital from Mar. 2019 2018 Loans totaled ¥107.7 trillion, a slight decrease from (Trillions of Yen) Common Equity Tier 1 capital increased by ¥37.4 31, 2018 109.2 109.0 108.3 109.0 107.7 Common Equity Tier 1 capital ratio 12.23% 12.58% (0.35%) March 31, 2018. Domestic individual deposits and  105.0 billion from March 31, 2018, with the accumulation of 1.5 1.6 2.2 2.1 2.5 overseas branch deposits increased by ¥1.7 trillion 1.3 profit offset by the payment of cash dividends, Tier 1 capital ratio 13.90% 14.32% (0.42%) 43.4 Total capital ratio 16.03% 16.56% (0.53%) and ¥1.2 trillion, respectively, with the overall deposit  38.9 44.2 42.9 44.1 42.8 repurchases of own shares and a decrease in total Leverage ratio 4.94% 5.01% (0.06%) balance amounting to ¥180.1 trillion. 5.5 4.2 3.8 3.7 3.3 3.2 accumulated other comprehensive income.

 43.4 44.2 43.7 43.9 44.0 43.9 Excluding the impact of foreign exchange Tier 2 capital decreased by ¥50.2 billion from the Common Equity Tier 1 capital 14,322.4 14,284.9 37.4 15.6 15.7 15.5 15.4 15.2 15.1 Retained earnings 10,640.6 10,064.6 576.0 fluctuations, the balance of non-JPY loans for previous fiscal year-end. Total capital also decreased Sep. 30, Mar. 31, Sep. 30, Mar. 31, Sep. 30, Mar. 31, Other comprehensive income 2,879.1 3,143.8 (264.7) overseas borrowers remained unchanged, while 2016 2017 2017 2018 2018 2019 by ¥25.6 billion to ¥18,769.7 billion. Regulatory adjustments (1,897.3) (1,786.1) (111.1) overseas deposits increased ¥1.5 trillion from the * Sum of banking and trust accounts * Excluding loans to government and governmental institutions and including foreign Additional Tier 1 capital 1,953.8 1,966.8 (12.9) previous fiscal year-end, narrowing the gap between currency-denominated loans Risk Weighted Assets (RWA) Preferred securities and *† Loans booked in overseas branches, MUAH, Krungsri, the Bank ‘China“, the Bank 1,800.1 1,822.1 (22.0) non-JPY deposits and lending balances. ‘“ and the Bank ‘Europe“ RWA increased by ¥3,627.5 billion from March 31, subordinated debt 2018, reflecting increases in credit-related RWA and Tier 1 capital 16,276.3 16,251.7 24.5 The non-performing loan (NPL) ratio – the ratio of Deposits (Period-end balance) floor adjustments. Tier 2 capital 2,493.4 2,543.7 (50.2) risk-monitored loans to total loans – decreased, Domestic individual Domestic corporate, etc. Overseas and Others Subordinated debt 2,195.6 2,165.0 30.5 (Trillions of Yen) mainly due to an upward revision of the credit rating Capital Adequacy Total capital (Tier 1+Tier 2) 18,769.7 18,795.4 (25.6)  177.3 175.9 180.1 of large borrowers. As a result, the NPL ratio 161.6 170.7 171.8 The Common Equity Tier 1 capital ratio, the most 38.8 38.5 40.1 decreased 0.27% to 0.90% ─ the lowest level in 10  34.0 36.5 37.6 important indicator representing the capital Risk weighted assets 117,091.1 113,463.6 3,627.5 years ─ illustrating the outstanding soundness of adequacy of financial institutions, stood at 11.4% on Credit risk 90,843.0 89,823.1 1,019.9  56.2 61.0 59.8 63.1 61.3 63.0 MUFG’s loan portfolio. an estimated basis after reflecting the RWA increase Market risk 2,920.5 2,714.5 206.0  calculated on the finalized Basel III reforms basis, Operational risk 8,107.2 7,236.0 871.2 71.2 73.0 74.2 75.3 76.0 77.0 Investment Securities and, therefore suggests sufficient capital adequacy Floor adjustments* 15,220.2 13,689.9 1,530.2 The balance of available-for-sale securities increased Sep. 30, Mar. 31, Sep. 30, Mar. 31, Sep. 30, Mar. 31, vis-à-vis the MTBP target of around 11%. 2016 2017 2017 2018 2018 2019 by ¥5 trillion, due to such factors as a ¥4 trillion Total exposure 329,048.6 324,232.4 4,816.2 increase to reflect growing emphasis placed on In addition, the leverage ratio amounts to 4.94%, * Adjustments made for the difference between RWA under Basel I and Basel III foreign bond positions. Available-for-sale Securities with Fair Value (Billions of Yen) above the regulatory requirement of 3%. Balance Unrealized gains (losses) MUFG's RWA-based External TLAC Ratio Net unrealized gains on available-for-sale securities Changes Changes TLAC Ratio Mar. 31, from Mar. 31, from External TLAC ratio 16% External TLAC ratio 18.16% remained robust at more than ¥3 trillion. Although 2019 Mar. 31, 2019 Mar. 31, MUFG is subject to the TLAC regulations introduced Total capital ratio 12% Total capital ratio 16.03% net unrealized gains on domestic equity securities 2018 2018 on March 31, 2019. Minimum requirement As of end-Mar. 2019 decreased ¥455.8 billion, due to progress in the Total 60,578.6 5,181.3 3,335.6 (  ) Domestic equity 3.6% divestment of equity holdings and a decline in stock 4,953.3 (587.6) 2,764.3 () These regulations require G-SIBs to retain sufficient securities Other TLAC prices, net unrealized gains on foreign bonds loss-absorbing and recapitalization capacity available Eligible Debt*1 2.5% Domestic bonds 27,261.2 280.5 357.4   increased by ¥312.7 billion, a significant in resolution (TLAC-eligible senior debt). 2.1% Japanese Contribution of DIFR*2 2.5% 1 6 21,542.3 (908.2) 278.9  . % improvement, thanks to a fall in overseas interest government bonds Tier 2: 2.0% rates. Others 28,364.0 5,488.4 213.8  MUFG aims to enhance its external TLAC capital by AT1: 1.5% 8.1% Foreign equity issuing TLAC-eligible senior debt in overseas markets CET1: 4.5% 114.8 (219.6) 52.5  A significant improvement was seen in net unrealized securities and by issuing subordinated debt in the domestic Regulatory Capital Foreign bonds 21,532.9 4,084.5 173.6   4.0% gains on available-for-sale securities* managed by market. Bu†ers*3 4.0% Global Markets in treasury operations. As of March Others 6,716.2 1,623.4 (12.3) ( ) *1 Including adjustment of the difference between the calculation method of the 31, 2019, these operations were able to secure net In fiscal 2018, MUFG raised external TLAC capital of total capital ratio and the external TLAC ratio, and adjustment of the amount of other TLAC-eligible liabilities owned by the issuer’s group, etc. unrealized gains on domestic bonds and foreign approximately ¥2 trillion by issuing TLAC-eligible *2 Contribution of Deposit Insurance Fund Reserves: Japanese Deposit Insurance Fund Reserves fulfill the requirements for ex-ante commitments to recapitalize bonds totaling approximately ¥360.0 billion and senior bonds worth approximately ¥1.6 trillion, as well a G-SIB in resolution set out in the FSB’s TLAC termsheet (can include 2.5% and 3.5% of RWAs after end-March 2019 and after end-March 2022, respectively, in ¥170.0 billion, respectively. as perpetual subordinated debt and dated the external TLAC ratio) *3 CET1 Buffer applicable to MUFG: G-SIB Surcharge: 1.5%, Capital Conservation * Mainly consisting of net unrealized gains on available-for-sale securities, excluding subordinated debt totaling approximately ¥0.4 trillion. Buffer: 2.5%, and Counter-cyclical Buffer: 0.04% domestic equity securities and foreign equity securities As a result, the external TLAC ratio as of March 31, 2019 (see the graph on the right) was 18.16%, above the regulatory requirement of 16%.

34 MUFG Report 2019 MUFG Report 2019 35 Value Creation Initiatives Business Overview

Retail & Commercial Banking Global Markets Business Group Business Group (R&C) ¥251.2 billion ¥298.8 billion

20% 24%

差替え予定 MUFG Net Operating Profits 6% ¥1,072.3 billion*1, *2

18% 20%

Value Creation Asset Management & Investor Service Business Group (AM/IS) 12% Initiatives ¥78.4 billion Business Overview Japanese Corporate & Global Commercial Banking Global Corporate & Investment Banking Business Group (GCB) Investment Banking Business Group (JCIB) Business Group (GCIB) ¥220.4 billion ¥152.7 billion ¥249.7 billion

All figures presented in the Business Overview section are on a managerial accounting basis. Figures are based on an assumed exchange rate, unless otherwise noted. *1 In addition to the net operating profits of the six business groups, figures include profits or losses of headquarters and other elements. Actual exchange rate (as end of FY2018) basis *2 Figures exclude the net operating profits yielded by inter-business group collaboration presented below R&C: Profits from overseas transactions with Japanese corporate customers and profits from business owner transactions, which belong to JCIB JCIB: Profits from business owner transactions, which belong to R&C, and profits from Japanese corporate customers served by MUAH and Krungsri, which belong to GCB GCIB: Profits from large global corporates of Krungsri, which belongs to GCB, profits from JCIB’s large global corporates located in Japan, and Joint Venture profits with Global Markets GCB: Profits served by MUAH and Krungsri, which belong to other business groups Global Markets: Joint Venture profits with GCIB

36 MUFG Report 2019 MUFG Report 2019 37 Value Creation Initiatives Business Overview

Retail & Commercial Banking Business Group Our Medium- to Long-Term Strategy

Having positioned individual customers and SMEs as targeted customer segments, we provide a range of financial services. To meet diverse customer needs, our services take a groupwide, integrated approach SME Business MUFG Biz portal and include lending (e.g., residential mortgage loans), consumer finance and settlement (e.g., card In the course of helping SMEs resolve the management settlement) services as well as those associated with asset management, inheritance and real estate in issues they are confronting, we will utilize the diverse addition to business and asset succession solutions. functions offered by Group companies to provide optimal solutions for SME owners who seek to ensure the smooth succession of their personal assets. We will also draw on our We are charged with the majority of the domestic customer trust banking and securities functions in a way that steps up segments and thus with supporting MUFG’s core operations. In our services associated with real estate, M&A and IPO in doing so, we aim to be a retail & commercial banking group that addition to lending. By doing so, we will expand our boasts unparalleled strengths in Japan and is capable of achieving marketing base. sustainable growth in tandem with customers and society as a whole. To achieve this aim, we are striving to create a sustainable In addition, we aim to steadily increase the volume of business model and secure a solid financial base despite an ever transactions handled through non face-to-face channels. In Balance of Investment Assets* tougher operating environment in Japan. June 2019, the Bank released MUFG Biz, a comprehensive Individual Corporate web-based channel. MUFG Biz is equipped with an easy-to- To create a sustainable business model, we will utilize our robust (Trillions of yen) 56.8 navigate interface providing financial information and  ［47.4］ customer base and diverse solution lineups that take advantage of 49.6 transactional data while distributing news articles tailored to 47.1 ［41.2］ MUFG’s capabilities as a group. This will help us reach out to an even ［41.0］ broader range of retail customers and corporate clients across the user preferences. Moreover, we extended one-stop funding services to meet small-scale, short-term funding needs via  25.6 value chain. As for securing a solid financial base, we will shift to a 20.7 23.4 recurring revenue-based business that is resilient against fluctuations in MUFG Biz based on users’ transactional histories. Going the market environment. Simultaneously, we will exhaustively reform forward, we will reinforce functions offered through this our cost structure. Ultimately, we will build a strong financial base. channel to enhance user convenience and expand 

transactional volume. 26.4 26.2 31.2 We are also determined to take a customer-centric approach based Naoki Hori on fiduciary duty and thereby meet diverse needs. In these ways, we Retail Business  Group Head, Retail & Commercial Banking will achieve growth in tandem with customers and society as a whole. 2017 2018 2020 (FY) Business Group In the asset management business, we are promoting an * Including customer assets belonging to JCIB; figures in parentheses advisory business model to meet customer needs for represent the balance of assets belonging to R&C stable, medium- to long-term asset building solutions. This Fiscal Year 2018 Results*1 approach is expected to lead to an increase in the balance MUFG Terrace of assets entrusted to us by customers and secure greater Gross profits (left axis) Net operating profits (right axis) We expanded the card settlement and consumer finance recurring revenues, which, in turn, will support a shift to a (Billions of yen) (Billions of yen) businesses while enjoying growth in foreign currency deposit more stable business model that is resilient against market   revenues due to U.S. interest rate hikes. However, the asset environment fluctuations. management business struggled due to unfavorable market 1,621.8 1,566.4 conditions. As a result, both gross profits and net operating profits  For retail customers, we will also provide convenient and  360.1 declined year on year. 308.2 secure services that are powered by digital technologies  ■ Loans  and will increase our points of contact with customers.  ■ Deposits  Furthermore, the development of service platforms is now  ■ Domestic and foreign settlement / forex  under way as we aim to upgrade our marketing methods ■ Derivatives, solutions  and offer services and proposals tailored to meet individual  FY 2018 Real estate, corporate agency  ■ customer needs. For example, MUMSS launched MUFG Gross Profit and inheritance  4 Terrace in November 2018. This virtual branch enables users Breakdown* ■ Investment product sales    to engage in online trading while offering a chatting 2017 2018 (FY) ■ Card settlement   function that connects them with investment experts if they ROE*  * ■ Consumer finance  wish to seek advice. Expense ratio   ■ Overseas 

*1 Including profits from overseas transactions with Japanese corporate customers and profits from business owner transactions, which belong to JCIB *2 Calculated based on net profits and excludes non-JPY mid- to long-term funding costs *3 ROE excluding the impact of impairment losses on fixed assets of NICOS is 6% *4 Excluding profits or losses from others

38 MUFG Report 2019 MUFG Report 2019 39 Value Creation Initiatives Business Overview

Voice from the Frontline of the Wealth Management Business Expanding Transactional Channels to Enhance Customer Convenience

Today, the widespread use of smartphones is customer needs. As part of these efforts, plans call prompting significant evolution in customer needs for initiating a mutual arrangement with Sumitomo Ensuring the Prosperity of Our Clients by Learning Their Family Histories, regarding banking transactions. Mitsui Banking Corporation wherein the two banks Paying Close Attention to Their Needs and Serving Their Best Interests will allow each other’s account holders to use some both in Japan and overseas. Third, MUFG has With this in mind, the Bank has developed platforms of their ATMs* from September 2019 onward. maintained a trusted brand over long periods thanks that offer to quick and simple transactional to its predecessors. The MUFG brand plays a procedures that can be completed without waiting in To enhance customer convenience, we will continue significant role in the WM business. line at a bank counter. For example, the Bank has to expand our transactional channels and service installed self-service terminals at its branches while lineups. On the other hand, MUFG must tackle a number of distributing smartphone apps with enhanced * ATMs installed at unmanned locations, excluding those in bank branches and challenges, including determining how to best convenience stores coordinate the extensive range of Group company functions. Apps allow users to file applications for functions. The diversity of these functions transcends address changes and the re-issuance of cash cards Number of Mitsubishi UFJ Direct Users and Utilization Rate the scope of operations traditionally handled by the on an around the clock basis. Going forward, we will Number of users (left axis) Utilization rate (right axis) Bank, the Trust Banks and the Securities Business. Masatoshi Okada strive to deliver more convenient internet banking (Millions) （%） MUFG must be capable of providing increasingly 11.2 Managing Director, Wealth Management Business Division, services, thereby increasing the number of service   MUFG Bank, Ltd. diverse financial products, services and solutions in an integrated manner and, to this end, embrace an users. At the same time, we will focus on providing  Senior Wealth Advisor (SWA)  7.4 60 Ph.D (business management) overarching viewpoint that tailors these offerings to high-value-added services, such as asset  management consulting, via bank counters. 4.3 4.7 41 meet customers’ needs in step with their life stages.  Fundamental Value of Wealth Management (WM) Services This approach requires strategic management   As a SWA, I am serving founders of listed companies control.* In addition, efforts are now under way to review our 22 25 and their family members. Although some of my clients branch and ATM networks to better accommodate   boast asset portfolios built in one lifetime, most are Required Traits for SWAs 2017 2018 2020 2023 (FY) generational asset owners, that is, individuals who have The situation on the business frontline today is ever inherited an estate consisting of assets built up over more complex. No matter the conditions, SWAs are several generations. required to be attentive to what customers feel and think at their major life events and to accurately How MUFG Addresses ESG Issues 1 Aging population & low birth rate I believe that the fundamental value of our WM services understand and anticipate their needs. They are also Supporting Smooth Business Succession SMEs. Thanks to this move, MUFG is now capable of is proven each time we successfully act as the client’s expected to furnish solutions by taking full advantage Due to the rapid aging of society, a number of domestic delivering solutions to an even broader range of purchasing agent in ways that reflect a careful of MUFG’s network, which, we believe, represents the SME owners are facing a pressing challenge in the form customers. assessment of his/her intentions and identify optimal Company’s unparalleled strength. of a lack of successors. Securing smooth business solutions that employ a combination of the diverse succession is key to ensuring lasting corporate In the course of meeting customer needs for business functions offered by MUFG Group companies or their Our customers are also regularly served by other development. Accordingly, this represents the most strategy and succession assistance, we also employ our external partners. This process requires far more financial institutions at home and abroad as well as by important issue in terms of the maintenance, unique strengths to offer high-value-added services for functionality than a mere sales agency service would CPAs, tax accountants and other professionals. development and vitalization of Japan’s industrial sector business owners who seek to ensure the smooth provide. Accordingly, competitive is intense, demanding an and its economy as a whole. To help customers address succession of their personal assets. As a result, in fiscal extremely high service level. It is therefore important for this issue, MUFG offers a diversified solution lineup 2018 we were able to handle successions of businesses Also, we must address a variety of customer concerns, SWAs to be equipped with financial service and designed to meet the needs of a broad range of retail and assets valued at more than ¥1 trillion in total. Looking ranging from achieving sustainable corporate accounting expertise as well as insights into their customers and corporate clients across the value chain. ahead, we will continue to deliver solutions aimed at development to securing the long-term prosperity of customers’ businesses. Moreover, they must be In July 2018, MUFG entered a business alliance with Nihon helping customers enjoy lasting growth and facilitating families. Therefore, our services must be diverse and knowledgeable about such non-financial factors as the M&A Center Inc., a major domestic mediator serving sustainable social development. capable of encompassing corporate management and methodology of social contribution, supporting sports- family governance solutions. related endeavors and cultural patronage. To this end, they are expected to have an acute interest in and Corporate-focused approach MUFG’s Strengths and the Challenges It Must Tackle deep understanding of operations managed by Managers’ concerns Strategic proposals Succession proposals Owners’ concerns When it comes to the WM business, I believe that customers, their business strategies and their family the Bank MUFG boasts three strengths. First, it has the Bank, histories. Therefore, a persistent drive for such Stable operating Global expansion Corporate ownership succession Successors and base succession costs the Trust Bank, MUMSS and other Group companies knowledge acquisition is an essential trait for SWAs. Settlement M&A (sell) IPO Sales growth Future of their with diverse functions. This enables MUFG to deliver the Trust businesses Business matching Bank long-term solutions for issues customers are I am determined to establish the de facto standard for Cost reduction WM business confronting via an optimal combination of a range of MUFG’s WM business. To achieve this, I will continue to Funding Fund liquidity financial products and services. Second, the do my best to serve my customers. Real estate the Real estate Inheritance Higher profitability Company is equipped with strong marketing bases *A method for effectively operating decentralized organizations Securities Corporate asset management Business Individual asset management

Owner-focused approach

40 MUFG Report 2019 MUFG Report 2019 41 Value Creation Initiatives Business Overview

Japanese Corporate & Our Medium- to Long-Term Strategy Investment Banking Business Group (JCIB)

Establishing an RM/PO Model via Functional Securities Business League Table* Serving major Japanese corporations seeking to expand globally, we provide loan, settlement, forex and other Realignment Results Targets services while offering optimal solutions that fully employ the strength of each Group entity in their respective Through the integration of corporate loan-related fields of specialty associated with M&A and real estate, etc. By doing so, we help our customers achieve businesses under the Bank and the Trust Bank, we have FY2017 FY2018 FY2020 growth in their corporate value. achieved a functional realignment within the Group and M&A (Deals involving thereby developed a structure for providing customers with 2nd 1st 2nd or higher Japanese more sophisticated solutions. We will enhance educational corporations)

We aim to be the “First Call Business Partner” trusted by customers and training programs for relationship managers (RMs) to DCM by assisting them in their pursuit of various business strategies. help them acquire in-depth insights into each sector. (Value of bonds 1st 2nd 1st underwritten) Simultaneously, we will help product officers (POs) enhance ECM To this end, we have integrated the sales functions of the Bank and their solution proposal capabilities as well as to increase 2nd-ranked (Value of equities 4th 5th group the Trust Bank while shifting to a cross-regional operational structure staffing for this function. underwritten) supported by business units at home and abroad. These measures * Based on data provided by Refinitiv, etc; DCM includes domestic and have yielded a robust RM/PO model capable of providing one-stop Enhancing Our Solution Proposal Capabilities foreign bonds services and delivering optimal solutions backed by a groupwide Having steadily upgraded our business approach focused integrated management approach. on providing solutions to customers’ management issues, we were able to achieve solid results, seizing opportunities Average Non-JPY Deposit Balance* We will strive to increase base revenues from loans, deposits and settlement while reducing gaps between non-JPY deposits and the to handle major event finance as well as to secure large (Trillions of yen)  loan balance. At the same time, we will continue to divest our equity M&A advisory service projects. We will further enhance our holdings. Through these efforts, we will promote a shift to the sector-based approach via investment in a venture capital origination & distribution (O&D) business as well as a transition to fund specializing in specific industries while strengthening 13.9 more solid B/S and P/L structures. Moreover, we will strengthen our our business nurturing capabilities and advisory functions.  13.8 research & advisory functions to resolve the issues our customers 13.1 are confronting. Strengthening Transaction Banking Businesses Customers today face an increasingly diverse range of Kenji Yabuta  In these ways, we will help strengthen Japan’s business global management issues related to transactions, financing Group Head, Japanese Corporate & Investment competitiveness and support the country’s economic revitalization and investment. Thanks to our efforts to enhance our Banking Business Group while building “New Trust” in the course of serving our customers. solutions capabilities, transaction volume* grew steadily, while the balance of non-JPY deposits increased. Going Fiscal Year 2018 Results*1 forward, we will adopt a more sophisticated product  2017 2018 2020 (FY) development process to further enhance our solution * Sum of domestic and overseas loans Gross profits (left axis) Net operating profits (right axis) Our fiscal 2018 operating results included an increase in profit. capabilities. (Billions of yen) (Billions of yen) This was thanks to an increase in net interest income recorded in * Domestic foreign exchange transaction amount related to trade, inward and outward investment,   foreign currencies due to growth in non-JPY deposits, rises in U.S. dividends, and services, etc. interest rates and improving non-JPY lending spreads, in addition Improving Capital Efficiency Non-JPY Lending Spreads* to our strong performance in event finances associated with M&A 570.6 and project finance. We have expanded non-asset businesses by shifting to a （%）  543.9 270.3  0.65 241.5 cross-regional, groupwide integrated operational structure  centered on customer segments. Furthermore, we divested   ■ Loans  low-profitability assets, thereby securing greater capital 0.63 ■ Deposits  efficiency and non-JPY liquidity. Also, we were able to ■ Domestic and foreign settlement / forex *4    improve non-JPY lending spreads by upgrading pricing FY 2018 ■ Derivatives, solutions*4  Gross Profit management via concerted efforts by business units at Breakdown*3 ■ Real estate, corporate agency  home and abroad. 0.61   ■ M&A, DCM, ECM*5  2017 2018 (FY) Non-interest income ■  In addition, we made steady progress in the divestment of ROE*   (overseas business)  our equity holdings. We will continue to push ahead with 2017 2018 2020 (FY) Expense ratio   divestment while sincerely engaging in ongoing dialogue * Sum of domestic and overseas lending, excluding non-JPY mid- to long-term funding costs *1 Including profits from business owner transactions that belong to R&C and profits from Japanese corporate customers served by MUAH and Krungsri that belong to GCB with our corporate clients. *2 Calculated based on net profits and excludes non JPY mid- to long-term funding costs *3 Excluding profits or losses from others *4 Figures are domestic business only *5 Including real estate securitization, etc. Please refer to page 30 for more details.

42 MUFG Report 2019 MUFG Report 2019 43 Value Creation Initiatives Business Overview

Effects of the RM/PO Model and Progress in Business Initiatives Associated with Real Estate Value Chain Establishing a Research & Advisory Unit

In the corporate agency business, we focused on an Corporate Agency In July 2019, the Research & Advisory Unit was into upcoming changes in the social and industrial approach of initiating discussion with corporate Number of clients (Listed corporate) established through the consolidation of relevant landscapes as we work with corporate clients by clients to resolve their management issues and (Clients) functions from across our organization. To help supporting their planning, determination and  thereby successfully expanded the client base. We corporate clients facing even more diversified and execution of business strategies. also drew on our solid relationships with bank complicated management issues requiring 1,617 customers as we stepped up efforts to reach out to sophisticated solutions, we will concentrate MUFG’s Also, the Growing Industries Support Office has been  companies seeking to execute IPOs. Not only are we 1,562 1,564 expertise and functions and develop a structure established within the unit and is charged with new capable of handling share-related administrative capable of offering high-quality advisory services. industry creation and venture business assistance. services on behalf of our clients, we can also serve as The unit will employ MUFG’s accumulation of insights a partner in executing shareholder-relations  strategies, for example, performing analyses of their shareholder registries and assisting in strategy  Hosting the First Round of MUFG CFO Seminar formulation. In such ways, we help clients enhance 2017 2018 2020 (FY) their corporate value. In February 2019, the MUFG CFO Seminar was co- challenges CFOs are typically confronting, with the aim hosted by the Bank, the Trust Bank and MUMSS. With a of providing helpful insights unique to MUFG. Pensions focus on corporate governance, the seminar was In the pensions business, we made progress in Balance of pension trusts under defined benefit corporate pension plans (left axis) attended by CFOs from approximately 300 collaboration between RMs and POs to share Growth in enrollment in defined contribution pension plans* (right axis) corporations, with Professor Kunio Ito from marketing strategies tailored to each client, achieving (Trillions of yen) (Thousands)   Hitotsubashi University delivering a keynote lecture and solid results in such areas as retirement benefit participating in a dialogue session. Looking ahead, we trusts, where we secured a number of contracts by will periodically host seminars of this kind to address  13.6  exercising our financial strategy proposal capabilities. 12.3 11.3 Bringing together RMs’insights into the financial 11.2 issues confronting corporate clients and POs’   expertise in pensions, we propose overhauls of 372 employee benefit systems from a medium- to long-   How MUFG Addresses ESG Issues 3 Social infrastructure & town planning 195 term perspective. We will also utilize our relationships 90 Assisting a “New Energy Society” in Fukushima Mitsubishi UFJ Lease & Finance and Mitsubishi Research with clients’ HR departments to provide them with   Fukushima Prefecture is home to a number of Institute, Inc. (MRI) playing key roles. Leasing 2017 2018 2020 2023 (FY) various employee benefit system solutions. communities that were heavily hit by the Great East Japan approximately 90 hectares of farmland (an area roughly * Cumulative growth since April 2017 Earthquake. To restore these communities, the equivalent to the area covered by 19 Tokyo Domes) from prefectural government formulated a vision of a “new 85 local landowners, the joint venture is expected to In the real estate business, we integrated information Real Estate pipelines used by the Bank and the Trust Bank. This energy society” and has been endeavoring to boost operate a solar power generation business on the site for Balance of assets under management (left axis) renewable energy generation to the point that output 20 years. The company also has a secondary charge of Number of eective information sharing (right axis) has led to an uptick in the number of effective from this energy source satisfies more than half of the spreading goodwill locally by helping landowners and (Billions of yen) (Deals) information sharing in fiscal 2018 to far more than prefecture’s overall power demand. other community residents interact through community  7,481  4,860, our target for the final year of the Medium- activities like weeding communal property while Term Business Plan. We will continue striving to Recently, the prefectural government approved a contributing to regional economies by helping nurture    proposal put forward by the Bank with regard to the such locally rooted businesses as flower cultivation. enhance the quantity and quality of information 4,860 580.0 establishment of a solar power generation plant that sharing by assessing customer assets more 3,100 utilizes a large tract of farmland in Yatsuda, Namie-machi, Going forward, MUFG will remain committed to providing  380.0   accurately. We will also step up corporate real estate one of Fukushima’s disaster-hit communities. This multilateral assistance to efforts aimed at restoring (CRE)-related proposals, with the aim of accelerating 230.0 resulted in the creation of the joint venture with the Bank, disaster-hit communities. the process of materializing deals.  180.0  

Namie Yatsuda Fukko Solar LLC The Bank In addition, we plan to begin handling private real   estate investment trusts (REITs) by the end of fiscal 2017 2018 2020 2023 (FY) Power generation facilities, etc. Loan Regional financial institutions in 2019, thereby strengthening our asset management Site area Approx. 90 ha. Fukushima business. Landowners 85 individual land owners Anonymous union Mitsubishi UFJ Lease & Finance/MRI investment Maximum output Approx. 60MW

Commencement of October 2020 (scheduled) electricity sales Capital Fukushima Electric Power, etc.

44 MUFG Report 2019 MUFG Report 2019 45 Value Creation Initiatives Business Overview

Global Corporate & Our Medium- to Long-Term Strategy Investment Banking Business Group (GCIB)

O&D Promotion on an Integrated Group-basis Distribution Amount / Ratio* Global Corporate & Investment Banking Business Group offers services that provide value-added We developed an O&D platform connecting institutional Distribution amount (Left axis) Distribution ratio (Right axis) solutions (corporate & investment banking services) for large global corporate and financial institution investors and corporate clients in need of financing, thereby (Trillions of yen) （%） clients through an integrated business model involving the Bank and the Securities. enhancing asset velocity with an integrated business model  59 

involving the Bank and the Securities. With this approach, 53 the distribution ratio steadily grew and exceeded the   targeted ratio of 53%, which was set for the final year of the 46 Our vision is to “Become a Top-tier Global Debt House” by providing 24.7 our global clients with a comprehensive set of solutions that meets current Medium-Term Business Plan. Looking ahead, we will  22.8 their financing needs by leveraging our network and product enhance product capabilities to attract investors and aim to  19.6 capabilities. increase non-interest income. Also, we will strengthen our  risk management in preparation for the credit cycle shift. Amid a challenging business environment due to non-JPY liquidity constraints and increased regulatory costs in various countries, we Developing a Global Client-centric Model   2017 2018 2020 (FY) have to transform our business model from “quantity” to “quality.” To We pursued large event finance transactions by leveraging realize this, we are promoting origination & distribution (O&D) on an * Distribution Amount = Arrangement amount - Final hold amount our sector expertise across the globe and expanded (syndicated loan, project finance, securitization, aviation finance, integrated group basis and accelerating portfolio recycling to etc.) + Securities’ arrangement amount of DCM, ABS, etc. collaborations with partner banks in Asia. Those were improve returns. Furthermore, we are increasing the sophistication Distribution Ratio = Distribution Amount ÷ Total amount of loans to examples of the achievements we had by leveraging our global large corporate clients of our operations by enhancing non-JPY liquidity management, unique business model and platform. Focusing on Asia, we strengthening expense control and globalizing our organizational Global Subsidiary Banking Revenues aim to promote Global Subsidiary Banking* with the framework. With these initiatives, we aim to accelerate the business (Billions of yen) model transformation continuously to secure stable and sustainable enhanced framework to further accommodate client needs.  growth. * A type of banking operation utilizing a global network and providing comprehensive services to 90.2 the subsidiaries of group companies

 83.0 Business Platform to Enable Sustainable Growth Masato Miyachi We are reducing low-profitability assets while enhancing Group Head, Global Corporate & Investment Banking Business Group disciplined profitability monitoring to improve portfolio returns. In addition, we are promoting deposit taking, with  the aim to improve non-JPY loan-to-deposit gaps. Going Fiscal Year 2018 Results*1 forward, we will strengthen our non-JPY asset and liability management framework and optimize the allocation of  2017 2018 2020 (FY) Gross profits (left axis) Net operating profits (right axis) We expanded non-interest income by pursuing large event finance assets to further improve portfolio returns. (Billions of yen) (Billions of yen) transactions and promoting the O&D business. At the same time,   we improved lending portfolio returns through portfolio recycling, We enhanced our organizational efficiency to improve Gaps between Non-JPY Deposits and Loans* including the reduction of low-profitability assets. As a result, net productivity while tightening our grip on personnel costs in (Trillions of yen) operating profits increased year on year with an improvement in  432.9 light of the challenging business environment. We also 416.6 ROE.   optimized our system investment. We will continuously 162.6 12.5 153.7 increase the sophistication of our staff and personnel cost management while taking a flexible and agile approach to ■ Loans  cost control. 12.1   ■ Deposits   FY 2018 ■ Commission, forex and derivatives  Gross Profit ■ DCM and ECM  3 Breakdown* Profits from large global corporates ■   located in Japan, etc.  2017 2018 (FY) Joint venture profits with Global ■ 4  ROE*   Markets* Expense ratio    2017 2018 (FY) *1 Including profits from large global corporates of Krungsri that belong to GCB, profits from JCIB’s large global corporates located in Japan, and Joint venture profits with Global Markets * Based on balances at fiscal year-end *2 Calculated based on net profits and excludes non JPY mid- to long-term funding costs *3 Excluding profits or losses from others *4 Including O&D profits through collaboration with Global Markets

46 MUFG Report 2019 MUFG Report 2019 47 Value Creation Initiatives Business Overview

Promoting the Business Model Transformation Acquiring the Aviation Finance-Related Business

We are shifting our business model from “quantity” to gateway for new transactions by implementing more In March 2019, we signed an asset purchase continue to enhance GCIB’s profitability while “quality” to manage non-JPY funding costs and disciplined profitability assessments. agreement with the Germany-based DVB Bank SE to endeavoring to secure our position among the liquidity constraints. acquire its aviation finance business. industry’s top players. In addition to these efforts, we have decided to For example, we are recycling our portfolio to high- acquire an aviation finance-related business from In this transaction, MUFG will acquire lending assets profitability assets in growth fields. Specifically, we Germany-based DVB Bank SE as a growth driver for as well as a team of aviation finance professionals developed a framework to classify corporate the future. This is in line with our strategy of who have deep domain expertise for success in this customers based on their profitability and the enhancing origination of high-profitability field. In addition to expanding our client base and amount of their profits. Relationships below the transactions. The accumulation of such assets will enhancing our solution capabilities, the acquisition profitability threshold are placed under monitoring, also improve MUFG’s ability to deliver products that will diversify our portfolio and further promote our and will be regularly reviewed. are attractive to investors. With such transactions, we O&D business approach. Looking ahead, we will will promote the O&D business, another key initiative Through this framework, the reduction of low- for realizing our business model transformation. Outline of the Acquisition Deal profitability relationships progressed ahead of the original plan as we exited from transactions with 49 Fee Revenues* by Product MUFG DZ BANK Syndicated loans/DCM Project Finances customers and improved profitability for 101 low- 100% (Billions of yen) Securitization Aviation Finances Other profitability customers in FY2018. In addition, we  100% DVB Bank reduced low-profitability assets by ¥800 billion.  Aviation Finance business

Going forward, we will raise our profitability threshold MUFG Bank Transfer Client lending portfolio and expand the scope of customers classified as  Equity-method affiliate Newly established Aviation Investment Aviation Asset requiring monitoring. By doing so, we will further (BOT Lease Co., Ltd.) subsidiary Administration Administration  reduce low-profitability relationships and improve overall portfolio returns. Furthermore, we will  2017 2018 2020 2023 (FY) strengthen the deal screening framework that is the Demand in the Commercial Aircraft Market Average Lending Margin for New Transactions * Estimated impact on net operating profits (unit) (%) Average of DVB Bank 48,540  Average of GCIB* 2.18 2.23 2.22

 24,400  Portfolio Recycling 1.18 1.13 1.08 High  High-profitability assets    Acquisition of Aviation 2017 2037 (CY) 2015 2016 2017 (FY) Source: Boeing’s Commercial Market Outlook 2018 *Based on data compiled for internal managerial purpose Finance business Source: Annual Report issued by DVB Bank Low-profitability assets B A Approx. ¥716.3 billion*1 Sale of low-profitability 101 Global warming & Cross-sectoral environment 4 7 loans, etc. customers How MUFG Addresses ESG Issues climate change and social issues

Approx. ¥800 Profitability Supporting Sustainable Financing We will also enhance our capability to provide 2 billion Monitoring areas* Among a number of environmental, social and sustainability-linked loans* which have been getting governance (ESG) issues, we place particular focus on focused in recent years as an effective financing for D C countering global warming and climate change. We are clients’ ESG initiatives. helping clients issue Green Bonds (a type of bonds whose 49 Approx. 370 customers proceeds are used to the project of improving We will be proactively engaged in these financing customers environment). With these efforts, we were ranked the first activities as we aim to work in tandem with our clients to Low in the world as a finance arranger in the renewable energy contribute to environmental and social sustainability. Low Amount of profits High sector for the third consecutive year.

*1 Client lending portfolio totaling approximately 5.6 billion euro (as of June 30, 2018); calculated by converting 1 euro to ¥127.91 *Products with interest rates that can be revised based on borrowers’ accomplishments vis-à-vis sustainable targets *2 Customers who do not meet our profitability threshold Please see page 66 for details on these initiatives.

48 MUFG Report 2019 MUFG Report 2019 49 Value Creation Initiatives Business Overview

Global Commercial Banking Business Group Our Medium- to Long-Term Strategy

We aim to become a globally trusted financial group selected worldwide by providing financial services to local SMEs and individuals overseas through our existing partner banks such as MUFG Union Bank, Asia MUFG’s Equity Stake in Partner Banks and Their Krungsri (Bank of Ayudhya), Bank Danamon, etc.* As ASEAN countries have maintained high GDP growth Domestic Rankings rates, the countries in which our partner banks are located * Our Business Group is in charge of MUFG Union Bank, Krungsri (Bank of Ayudhya), Bank Danamon, VietinBank, Security Bank, etc. are expected to achieve further growth. Partner bank Voting right*1 Ranking*2

The United 100% 11 Krungsri (Bank of Ayudhya) in Thailand, in collaboration with States We create "new trust" by providing new value to customers through MUFG, has achieved a certain level of results in its business collaboration with partner banks. for local corporates in Thailand, which has been a field for Thailand 76.8% 5 strengthening the business, and its profitability has improved. In April 2019, we made an additional investment So far, we have regarded Asia as one of our mother markets and Indonesia 94.1% 5 have built networks in ASEAN countries by investing in partner banks. in Bank Danamon, Indonesia, making it a consolidated In addition, we acquired additional shares in Bank Danamon, an subsidiary. VietinBank and Security Bank have also shown Vietnam 19.7% 2 Indonesian commercial bank, to complete our ASEAN-centric results. Going forward, we aim to provide high-value-added overseas commercial banking business platforms. Through this services by improving the functions of each partner bank The platform, we will be able to provide banking services for SMEs and 20.0% 7 through collaboration and sharing best practices among Philippines individuals in overseas markets, that we have not been able to them. provide to date. At the same time, by combining this platform with *1 As of May 31, 2019 *2 The sum of total assets held by each partner bank and loan MUFG's business with overseas large corporates, we can deliver balances of the Bank’s local branches. Krungsri’s ranking is based United States on comparisons with other domestic systemically important banks MUFG's unique services. (D-SIBs) (as of December 2018). MUAH aims for steady growth by capturing the economic Sources: SNL Financial, Philippine Central Bank, Bloomberg, data disclosed by each partner bank; the loan balances of the Bank’s local As for MUAH, the parent company of MUFG Union Bank, we will growth of the United States, strengthening deposits and branches are based on data compiled for internal managerial purposes review our portfolios and steadily reduce our expense ratio through loans, and improving productivity. We will work to improve MUAH*/Krungsri Average Loan Balances cost-cutting measures. the expense ratio, our challenge, by enhancing operational MUAH Krungsri efficiency and productivity, introducing a next-generation Amid changes in the business environment surrounding financial (Trillions of yen) core banking system, and reviewing administrative  Takayoshi Futae institutions, we will promote collaboration with partner banks and processes. MUFG Union Bank is also working to improve Group Head, Global Commercial Banking share best practices to increase the value of MUFG and partner 7.4 Business Group customer convenience by offering services and developing 6.7 banks as a whole. new products to a wide range of customers through 5.2 4.7 PurePoint* (direct banking) and other means. 

1 * MUFG Union Bank's nationwide retail financial services platform, which comprises retail Internet Fiscal Year 2018 Results* banking and lightening branch

Gross profits (left axis) Net operating profits (right axis) 4 MUAH* posted an increase in profits due to an incremental rise in  (Billions of yen) (Billions of yen) deposit income and non-interest income. At Krungsri (Bank of 2017 2018 (FY)   Ayudhya), each segment grew steadily, mainly in the retail sector, * Excluding loans that belong to the Trust Bank, securities subsidiaries, as interest income increased due to the accumulation of loan GCIB and Global Markets 684.8 outstanding, such as auto loan. 636.3

 212.0 Sharing insight into next-generation digital branches—

192.6  MUFG Union Bank and Krungsri (Bank of Ayudhya) ■ MUAH*4  5 In October 2018, Krungsri opened a “Smart Branch” equipped with a digital-intensive  ■ Krungsri*  FY 2018 branch system designed for future generations. Features of this branch include the Gross Profit installation of a Smart Teller, a newly developed self-service terminal that will take over Breakdown*3 traditional bank counter services by, for example, enabling customers to complete all procedures necessary to open a new account by themselves.   2017 2018 (FY) The Smart Branch was developed by drawing on insights offered by MUFG Union Bank, ROE*   which successfully created automated Express Banking system. Expense ratio  

*1 Including figures, which belong to GCB only and excluding figures, which belong to other business groups *2 Based on net profits *3 Excluding profits or losses from others Going forward, we will help our partner banks share their insights and know-how to *4 MUAH’s figures as reported in MUAH’s 10-Q and 10-K excluding figures belonging to Trust/Securities subsidiaries, GCIB and Global Markets promote innovation and enhance customer convenience. *5 After GAAP adjustment. Excluding figures that belong to Global Markets

50 MUFG Report 2019 MUFG Report 2019 51 Value Creation Initiatives Business Overview

Achieving Synergies through Collaboration with Partner Banks Forging Synergy to Better Serve Customers In ASEAN countries, MUFG’s traditional business Krungsri offers this hybrid solution, which is highly mainly involved finished product manufacturers. regarded by customers as it has led to the steadily In its initial stage, this collaboration with MUFG has already resulted in several key achievements, However, collaboration with partner banks has growth in business performance. By deploying best including obtaining several mandates from large enabled us to cover a wide range of business practices to other partner banks and realizing Michellina Laksmi global corporate clients. Furthermore, Bank Danamon channels, from suppliers to SMEs including dealers synergies, we are further enhancing the corporate Triwardhany recently received “Best Service Provider” award in as well as purchasers and employees. In Thailand, value of such partner banks. the Supply Chain Indonesia Category from the Asset Vice President Director, Magazine during The Asset Asian Award 2019. Bank Danamon Krungsri’s Operating Results since MUFG’s Investment Conventional model MUFG-Partner Bank Collaboration Going forward, Bank Danamon can strengthen its Loan balance (left axis) With its strong relationship with Japanese and large Digital capabilities by leveraging the shared Profit attributable to owners of the parent (right axis) Suppliers Suppliers multinational corporate clients, MUFG is well knowledge with Krungsri in Thailand, as well as (Billions of THB) (Billions of THB) ­‚ ­€ positioned to complement Bank Danamon’s partnership with Fintech players that are part of the Finished product The Bank Finished product The Bank significant presence in the SME and Consumer investment of Tokyo-based MUFG’s Corporate manufacturers manufacturers ­ Banking segments as well as leadership position in Venture Capital “MUFG Innovation Partners”. Partner Employees ‚€ the automotive financing sector through Adira Dealers bank Dealers € Finance. Bank Danamon will also leverage MUFG and its Purchasers Purchasers ‚  affiliated banks, not only for business growth, but 2014 2015 2016 2017 2018 (FY) Comprehensively meet Comprehensively

their transactional needs their transactional Bank Danamon and MUFG can now optimize their also for sharing best practices in several areas synergies to provide comprehensive financial including Business Development, Finance, Risk services to customers throughout the whole business Management, Compliance, and Human Capital. ecosystems in Indonesia. Both banks can now Strategic Investment in Bank Danamon collaborate to serve customers’ entire business In turn, MUFG and its affiliated banks can benefit supply chain, from the anchor itself to its suppliers, from Bank Danamon’s experience in serving the SME distributors, and end users. and consumer banking segments as well as auto In April 2019, MUFG Bank acquired additional shares and providing insurance products through another finance. in Bank Danamon and made it a consolidated subsidiary, Adira Insurance. This means that customer can now have access to subsidiary. This completed our efforts to build a corporate products (especially financial supply chain Together, this synergy will bring better service quality commercial banking platform serving ASEAN Through collaboration with Bank Danamon, MUFG and syndicated loans), along with consumer and values that will benefit Bank Danamon’s and countries. Bank Danamon is a major commercial will establish a robust business platform to offer a products, such as employee benefit programs MUFG’s customers in Indonesia and positively (, personal loans, auto financing, contribute to the growth of the Indonesian banking bank in Indonesia with approximately 1,200 locations broad range of services to customers who are payroll account). sector and economy as a whole. throughout the country. The bank has strength in seeking to enter and expand into Indonesia and financial services for individuals, including auto loans pursuing business growth. In this way, Bank Danamon and residential mortgage loans, as well as SME loans. will contribute to the economic development of In recent years, Bank Danamon has been actively Indonesia. involved in the development of digital banking How MUFG Addresses ESG Issues 2 Business incubation & job creation technologies. Moreover, in addition to providing auto loans through its subsidiary, Adira Finance, Bank Initiatives for Industrial Development and Employment solutions to individuals who do not have bank accounts. Danamon provides comprehensive financial products Creation (Financial Inclusion) through Partner Banks D-Wallet enables those who do not have bank accounts and services, such as financing for consumer goods Through our partner banks, GCB is engaged in initiatives or credit cards to make cashless payments at online to promote financial inclusion in each country and region. shopping or convenience stores through deposits and withdrawals at convenience stores or by receiving funds Krungsri (Bank of Ayudhya) in Thailand is responding to from other D-Wallet users. More Than 3,000 Partner Bank Networks in four ASEAN countries microfinance and nano-finance needs through its microfinance subsidiaries Limited*1 MUFG Union Bank in the United States offers competitive (hereinafter referred to as HKL) and Ngern TidLor Co., Ltd.*2 interest rate loans with no private mortgage insurance (hereinafter referred to as NTL) in ASEAN countries where required to low-to-moderate income homeowners. It also Vietnam: VietinBank economies continue to grow. The number of bank supports homeowners through eligible down payment 1,113 bases accounts, loans outstanding, and number of branches of assistance programs when purchasing homes. The Philippines: Security Bank both HKL and NTL have increased steadily. In addition, 305 bases HKL provides community-based financial education to Going forward, we will continue to engage in financial low-to-moderate income individuals and contributes to inclusion through various initiatives tailored to each improving living standards. country’s particular environment and needs.

Thailand: Krungsri Bank Danamon, an Indonesian bank, has developed a 703 bases Indonesia: Bank Danamon *1 Krungsri’s microfinance subsidiary based in digital payment app, “D-Wallet” to provide financial *2 On February 28, 2019, Krungsri decreased its equity stake in NTL from 99.9% to 50.0% Approximately 1,200 bases Note: the number of bases is as of December 31, 2018

52 MUFG Report 2019 MUFG Report 2019 53 Value Creation Initiatives Business Overview

Asset Management & Investor Services Business Group Our Medium- to Long-Term Strategy

Employing our sophisticated specialist know-how in the areas of asset management, investor services, and pensions, we provide such services as consulting while constantly striving to further enhance our Asset Management Business Balance of Alternative Products* asset management capabilities and develop products capable of better meeting diverse needs of Aiming to become a global player with strong presence, we (Billions of yen) customers at home and abroad. have strengthened our asset management functions as well 

as product capabilities while expanding our business scale. 660.0 For securing competitiveness, we revised our HR system for  fund managers. Furthermore, we engaged in the 445.0 Aiming to become a player boasting unparalleled strength in Japan development of alternative products, such as those and significant global presence, we are strengthening our business associated with real estate assets managed by MUFG.  platforms as well as earnings power. To date, we have successfully Moreover, we made a decision to acquire an Australia-based 261.1 expanded our business platforms while capturing growth overseas global asset manager to make it a wholly owned subsidiary. 180.0  so as to pursue sustainable growth by accurately adapting to the evolving business environment. In the asset management field, we Striving to realize synergies with the acquired firm, which have executed a majority investment for the first time, thereby handles global operations, we will step up our efforts to  2017 2018 2020 2023 (FY) solidifying our foundations to achieve our target of being among the enhance our service quality and satisfy customer needs. global top 15 asset managers. In the field of investor services, we are * Balance of real-estate and other low-liquidity investment products Please also refer to page 56 for details. developed in-house enhancing our service lineup for domestic clients as well as banking services in overseas while striving to improve productivity with the Balance of Global IS Investor Services Business aim of securing greater competitiveness. In the pension business, (Billions of U.S. dollars) We boast a global ranking among the top 10 firms in terms we provide comprehensive solutions backed by sophisticated  expertise in our area of specialty, employing a groupwide integrated of the value of alternative funds under administration. As we approach to help customers address the issues they are facing. expect deepening market monopolization, we are focused 617 625 on not only handling fund administration but also  538 We will strive to live up to customers’ trust and remain their best expanding our scope of ancillary banking services,

partner. To this end, all our staff will do their utmost to fulfill their including financing for funds as well as forex and repo  fiduciary duties as asset managers while taking full advantage of transactions.* These value-added services are helping us Sunao Yokokawa their expertise to deliver effective solutions to meet customer steadily raise our balance of assets under administration. Group Head, Asset Management & Investor needs.  Services Business Group Moreover we will strive to improve productivity utilizing

digital technologies, thereby securing profitability.  2017 2018 2020 (FY) Fiscal Year 2018 Results * A type of transaction involving an agreement to exchange funds and bonds for a certain period of time Balance of DB*1 Pension Trusts/ 2 Gross profits (left axis) Net operating profits (right axis) We strove to expand the investor services business at home and New Enrollment in DC* (Billions of yen) (Billions of yen) abroad while steadily increasing sales of investment products for Pensions Business Balance of DB (left axis) 3  domestic institutional investors. Thanks to these efforts, we We offer consulting services aimed at resolving various New enrollment in DC (right axis)* achieved year-on-year growth in net operating profits to ¥78.1 (Trillions of yen) (Thousands) issues confronting corporate clients’ HR departments,    billion. helping them enhance their employee benefit programs 202.3 189.1 78.1 through the comprehensive review of HR systems and  71.1 retirement benefit systems. We have reorganized PO’s  13.6  structure in order to ensure providing services smoothly. 12.3 ■ Asset Management  11.2 11.3  As a result, both the balance of pension trusts under ■ Investor Services     defined benefit pension plans and enrollment in defined ■ Pension   372 FY 2018 contribution pension plans have risen. 195 Gross Profit   Breakdown 90   We will further step up our consulting services associated 2017 2018 (FY) with employee benefit programs to help customers resolve    ROE  * their issues. 2017 2018 2020 2023 (FY) Expense ratio*   *1 Defined benefit pension plans *2 Defined contribution pension plans *1 Based on net profits *3 Cumulative growth since April 2017 *2 ROE calculated excluding the impact of losses on sales of Standard Life Aberdeen shares is 18%

54 MUFG Report 2019 MUFG Report 2019 55 Value Creation Initiatives Business Overview

Acquisition of a Global Asset Manager Harnessing Our Collective Strengths The asset management industry is expected to grow enabling the business to become a stronger global both in developed countries and emerging nations investment management business. investment teams, some of whom have been investing for clients for over 25 years. Specialist thanks to growing asset building needs arising from capabilities include global emerging markets and changing demographics and socio-economic In addition, this firm is strongly committed to Asia Pacific equities, listed and direct infrastructure, patterns. For developed countries, this is due to practicing responsible investment. Having become a Australian equities, fixed income and multi-asset aging populations and for emerging nations, the signatory to the United Nations Principles for solutions. rapid expansion of the middle class and ensuing Responsible Investment in 2007, the firm has With the Trust Bank, we share a strategic vision to accumulation of wealth. practiced asset management in adherence to these harness our collective strengths and become an principles for more than 10 years. even stronger global asset manager. We now operate With this in mind, the Trust Bank decided to acquire as a standalone business within the MUFG group, Colonial First State Global Asset Management Thanks to the inclusion of CFSGAM, the MUFG Group governed by a Board comprised of representatives (CFSGAM) from Commonwealth Bank of Australia, has grown into one of the largest asset managers in Mark Steinberg from CFSGAM and the Trust Bank with an intention to appoint independent directors in the coming year. one of Australia’s major financial groups, completing Asia and Oceania on an assets under management Colonial First State Global Asset Management（ CFSGAM）/ First State Investments (FSI) acquisition procedures in August 2019. (AuM) basis. Going forward, we will continue to seek We will continue to focus on offering high quality, Chief Executive Officer opportunities to acquire asset managers or teams long-term investment capabilities to our clients, with CFSGAM is a global asset manager with a balance of with unique strength and competitiveness while ongoing investment in our operating platform and assets under management amounting to over A$210 reaching out to an even broader range of customers our portfolio management teams retaining billion. It provides investment management services around the globe, especially those in fast-growing The completion of the sale of Colonial First State investment autonomy. Global Asset Management (CFSGAM), known as First to clients globally, supported by 800 professionals markets. State Investments outside of Australia, to the Trust Importantly, our investment teams remain operating out of 12 bases in Asia, Australia, Europe Bank was an extremely exciting step forward for our committed to incorporating responsible investment and North America. With a total of 17 asset In these ways, we will enhance our global presence business. principles in to their processes as complementary management teams handling such asset classes as and remain an asset manager capable of living up to sources of risk and return. This continues to underpin equities, bonds, alternatives and multi-asset funds, customer expectations. CFSGAM offers clients a comprehensive suite of our corporate identity and is the binding element this firm has achieved stable business performance investment capabilities across a number of sought- across our investment teams’ philosophies and after asset classes managed by 17 different strategies. over the long term. Global Network of CFSGAM/First State Investments (FSI)

While the business started in Australia, CFSGAM is Frankfurt now a global investment management business with New York London Hong Kong a diverse client base supported by regional Tokyo operations that extend across Asia, Australasia, How MUFG Addresses ESG Issues 7 Cross-sectoral environment and social issues Dublin Europe and North America. CFSGAM has been Practicing Responsible Investment via Asset Management policy communicates our intention of adopting an entrusted with the management of assets by a broad Today, public interest in environmental, social and investment framework in favor of companies deemed

range of institutional and individual investors, and Louisville Paris Melbourne governance (ESG) issues is growing in countries around superior based on ESG-oriented evaluation. The policy the world. We are aware of the increasing impact of this also places particular focus on maintaining dialogue with under MUFG ownership, it has the financial backing Edinburgh and strategic support for its growth strategy, trend on the asset owners who entrust us with the them to help them embrace changes. management of their holdings. Therefore, we are striving Sydney to meet growing customer expectations regarding such We will also step up efforts to communicate the issues. importance of an ESG-centered investment approach to CFSGAM’s AuM Balance (2008 – 2018) Composition of AuM by Asset Class* customers and investees and facilitate their In May 2019, we formulated the MUFG AM Responsible understanding by, for example, participating in ESG- (Billions of Australian dollars) 212.4 Other: 1%  Investment Policy aimed at guiding our initiatives to related international initiatives. Infrastructure: 10% address ESG issues through asset management activities. Short-term investments: 25%  Index and This policy is embraced by the Group’s primary asset Looking ahead, we are determined to increase the level systematic managers, namely, the Trust Bank, Mitsubishi UFJ Kokusai of consideration we give to ESG issues in the course of equities: 12% Asset Management, MU Investments Co., Ltd. and asset management. To fulfill our fiduciary duty, we will  Australian Australian equities: 6% fixed income: 7% Mitsubishi UFJ Asset Management (UK). strive to contribute to the sustainable development of society while securing medium- to long-term returns.  Other fixed income: 5% We believe that investment and engagement activities Asian and  emerging equities, based on ESG opportunities and risks will encourage the As of March 31, 2019, the balance of responsible 2008/6 2010/6 2012/6 2014/6 2016/6 2018/6 (YY/MM) etc.: 34% sustainable growth of portfolio companies and improve investment, which represents the balance of ESG- * As of June 30, 2018 investment performance. In line with this belief, this oriented investment, is 6.1%.

56 MUFG Report 2019 MUFG Report 2019 57 Value Creation Initiatives Business Overview

Global Markets Business Group Our Medium- to Long-Term Strategy

We serve our customers through sales & trading (S&T) operations associated with interest rates, bonds, forex and equities in addition to engaging in treasury operations.* Customer Segments Client Value* Institutional investors: Due to the impact of the evolving * Including ALM (which is the integrated management of liquidity risk and interest rate risk inherent in assets (loans, etc.) and liabilities (deposits, etc.)), global investment and other  related operations. market environment and structural changes in the industry, 130 we have met some challenges in terms of improving  profitability through ongoing reform initiatives. To overcome these challenges, we will collaborate with other business  100 groups to accelerate O&D. Also, we will address changes in 89 We aim to become an organization capable of delivering value to  customers by taking a groupwide integrated approach that transcends operating environment by strategically allocating our the boundaries of Group entities. management resources to the areas where MUFG boasts  competitive strength such as repo transactions*1 and 2 In customer segments, we will allocate our resources to fields in which secured finance*  MUFG has been strong and has growth potential, thereby securing 2017 2018 2020 (FY) * Quasi sales & trading profits in institutional investors business (FY2017 greater profit. We will also develop a structure supporting our business Corporate customers: We made steady progress in the level = 100; based on annual average) activities. Specifically, we will promote the sharing of infrastructure strengthening of platforms via, for example, the between the Bank, the Trust Bank and the Securities, to offer digitalization of forex operational flows. transactional opportunities with optimal booking for customers. Derivative Revenues in Strategic Fields* Derivative business: Mainly in the Americas, we achieved (Billions of yen) In treasury operations, we will flexibly carry out hedging operations in a  way that conforms to the prevailing market environment and helps solid results in service fields involving hedging against event risk and other nontraditional risks. On the other hand, 15.5 exercise robust control on unrealized gains and losses while optimizing  our asset allocation. Moreover, we will step up non-JPY balance sheet conditions surrounding our businesses are growingly harsh management, tightening our grip on both the asset and liability sides. due to an evolving market environment, rising needs for  non-JPY liquidity management and the introduction of CVA 6.8 Today, the conditions surrounding our business are changing regulations.*3 In response, we will accelerate efforts to shift  significantly. We will decisively take on issues arising from these our business model by giving due consideration to 2.8 Masamichi Yasuda changes, thereby maintaining the trust of customers and society as a characteristics of and issues specific to each market region. Group Head, Global Markets Business Group whole.  *1 A type of transaction involving an agreement to exchange funds and bonds for a certain period 2017 2018 2020 (FY) of time * Transactional revenues associated with the provision of various hedging *2 A type of financing that supplements the borrower’s credit risk with collateral assets products aimed at countering emerging risks, such as interest rate and *3 Capital regulations aimed at addressing risks associated with fluctuations in credit valuation foreign exchange risks arising from M&A and other major deals, and adjustment (CVA) investment banking products Fiscal Year 2018 Results*1 Treasury We reviewed our global operational structure to enhance Gross profits (left axis) Net operating profits (right axis) In customer segments, we benefited from robust showings from Remaining Balance of non-JPY Denominated (Billions of yen) (Billions of yen) forex while pursuing cost reductions. However, the profits the profitability of both yen and non-JPY holdings and Bonds Issued   decreased due to the harsh business environment. In treasury stabilize our balance sheet. Simultaneously, we engaged in (Billions of U.S. dollars) MUFG the Trust Bank the Bank operations, we secured profit via flexible asset allocation in line market operations in a flexible manner responsive to  639.4 with the market environment. Nevertheless, profit from these 373.7  changes in the market environment.  556.2 operations decreased due to the absence of proceeds from the  sale of JGB recorded in the previous fiscal year 291.1  With the aim of maintaining the sustainability and   soundness of the MUFG’s non-JPY businesses, we will take a   ■ Customer segments  groupwide integrated approach aimed at securing stable ■ Treasury  and efficient non-JPY funding from the market and, to this    end, diversify our funding methods and funding sources.  FY 2018 We will also carry out market risk management by taking Gross Profit    advantage of the strengths of the Bank and the Trust Bank Breakdown*3 2012 2013 2014 2015 2016 2017 2018 2019 (FY) 2017 2018 (FY) in their areas of specialty. ROE*   Expense ratio  

*1 Including Joint venture profits with GCIB *2 Based on net profits *3 Excluding profits or losses from others

58 MUFG Report 2019 MUFG Report 2019 59 Value Creation Initiatives Business Overview

Enhancing Our Groupwide Integrated Approach Initiatives in the Institutional Investors Business

We are promoting the integration of S&T operations handled by the Bank and the Securities Business, Previously, GCIB, AM/IS and Global Markets have with the aim of developing a more robust structure supporting our groupwide integrated management separately delivered their products to institutional approach. In fiscal 2018, we made progress in our ongoing efforts to enhance customer convenience via investors. In line with the Medium-Term Business GCIB a mutual arrangement in which the Bank and the Securities Business utilize each other’s specialist Plan, however, we are promoting close collaboration expertise, succeeding in enhancing our structure by executing the following three measures. between these three business groups to enhance their service levels and improve MUFG’s capital Customer Referrals Reorganized all business lines to enable global operations efficiency. This will also help us shift our focus to the A Global Appointed Global Head of Business Line (GH of BL) O&D business and expand the scope of businesses AM/IS Markets targeting institutional investors. Approach Appointed Regional Head (RH) to supervise Americas, EMEA and Asia, ensuring relevant B business units under the Bank and the Securities Business are overseen by a single leader We also established the Institutional Client Business Institutional investors Assigned dual-hat positions to a total of approximately 450 staff members operating in Strategy Office in July 2018. Furthermore, we focused C overseas S&T fields, charging them with responsibility for operations under both the Bank and the Securities Business on enhancing our overseas operations by developing Net Operating Profits from Investor Services the organizational structure, with the aim of (Billions of yen) 37.1 B RH (a single leader for three regions) extending our groupwide integrated approach to a  35.1 GH of BL broader range of customers. Thanks to these efforts, A The Americas EMEA Asia  26.0 (Sales and POs) we have seen steady growth in the number of Institutional Investor Sales customer referrals among group companies and  business groups. For example, fund administration Corporate Sales  segment Customer services and asset management products handled Flow Products  Dual-hatting in regional by AM/IS are now available to customers via GCIB C 2017 2018 2020 (FY) Structured Solutions business lines and Global Markets. Meanwhile, S&T operations were affected by the harsh business environment. To Equities Secured Finance Revenues

Products address this, we will review our asset allocation and (Billions of yen) FX & Local Markets revert our resources to high priority fields, such as  18.8 secured finances.  Operational fields Overseen by each Global Head of Business Line Looking ahead, we will continue to promote  7.7 7.6 Institutional Investor Sales Sales of market-related products intragroup collaboration while maintaining a flexible stance to adapt to changes in the environment. In  Corporate Sales Sales of market-related products this way, we will further expand our institutional  Flow Products S&T of interest rate-related products (spot-trading securities, derivatives, etc.) investors business. 2017 2018 2020 (FY) Structured Solutions Development and sales of structured products, including structured bonds

Equities S&T of equity-related products (spot-trading stock, derivatives, etc.)

FX & Local Markets S&T of G10 currencies (forex) and emerging market currencies (forex and interest rates) How MUFG Addresses ESG Issues 7 Cross-sectoral environment and social issues ESG Investment Around the world, public pension funds and other Initiatives to Offer Optimal Booking institutional investors are increasingly paying attention to ESG-oriented investment, believing that giving As part of our initiatives to provide services that in transactions using products of this kind. Going consideration to the approaches of investees to ESG transcend the boundaries of business groups and forward, we will strive to develop a flexible booking issues will improve returns over the long term. MUFG has Group entities, we developed a groupwide integrated structure and a more robust risk management diversified its investment portfolio to encompass product risk management framework to handle some framework by consolidating system operational domestic bonds, foreign bonds, stock and corporate secured finance products that had previously been functions and promoting data sharing among Group bonds and thereby improve the risk-return management offered to customers only by securities units. Thanks to members. Rallying MUFG’s entire strength, we will of its own investment portfolio. Also, we are investing in framework created by successful collaboration with provide customers with highly convenient, superior Green Bonds. Looking ahead, we will strive to enhance other business groups, the Bank is now able to engage services. MUFG’s financial revenues while contributing to sustainable economic growth via ESG investment.

60 MUFG Report 2019 MUFG Report 2019 61 Value Creation Initiatives Special Feature: Initiatives to Utilize Digital Technologies

Launching a New Payment Network A New Payment Network Service Provided by Global Open Network Toward the full-scale launch of the payment network service needs in an IoT society employing new Business business, MUFG established Global Open Network blockchain technology co-developed by MUFG and Inc. jointly with Akamai. Furthermore, in April 2019 Akamai. the two companies launched Global Open Network To promote its cashless strategies in the payment business, MUFG takes a comprehensive approach in Japan Inc. (GO-NET Japan), an operating company In fact, GO-NET is expected to have the capacity to the service (S), platform (P) and infrastructure (I) fields. aimed at providing an open payment network in process more than 1 million transactions per second. Japan. With this in mind, MUFG believes that this network is Here, we introduce our initiatives in the infrastructure (I) field. sufficiently capable of accommodating growing Currently, GO-NET Japan is planning to initiate needs arising from the emergence of an IoT society services targeting , e-money, digital that will entail large number of micro payments. currency, loyalty points and pre-paid card business Looking ahead, we will strive to enhance services S S Service: Service: Smartphone apps and other services operators after the first half of 2020. offered via GO-NET by making it compatible with diverse settlement methods. Moreover, we will Platform: Payment interfaces (QR codes, NFC,* etc.) and Platform: These services will be supported by “GO-NET”, a extend the scope of this network to encompass an P P payment processing systems at merchants highly secure payment network finely tuned to meet even broader range of countries abroad. I I Infrastructure: Infrastructure: Networks and ledgers Eight Features of GO-NET * Near Field Communication

Services delivered to customers via user interfaces further growth in this field. Taking these factors into and other functions offered by apps are supported account, there are predictions that rapid growth in 1 million ! ¥ by a coordinated system of platforms that process cashless payment will result in needs exceeding the payment data and undertake other relevant processing capacities of existing payment Processes 1 million High security features High availability Low-cost structure operations and infrastructure, such as networks. infrastructure. transactions per second*1 on a 24/7/365 basis and disaster recovery Together with the anticipated commercialization of the fifth-generation mobile communication system In response, MUFG is collaborating with the U.S.- (5G), an IoT-based society is expected to emerge. based Akamai Technologies, Inc. (“Akamai”) to This will, in turn, result in growing demand for pay- develop a high-capacity and secure payment ¥ per-use and other nontraditional settlement methods. network service that utilizes new blockchain Moreover, the Japanese government’s policy of technology. promoting cashless payment is expected to prompt Ability to finalize transactions High resistance against Value management function Global service in less than 2 seconds*2 falsification of transactions

*1 Verified under realistic business conditions *2 Processing time per transaction is measured end to end from merchant request to final response Outline of Akamai Utilization of GO-NET Established in 1998 and headquartered in collected from around the world and the cutting-edge Massachusetts, the United States, Akamai is a leader in security systems it has developed. the fields of online content delivery and cybersecurity services. Akamai’s massively distributed and interconnected platform consists of over 240,000 POS Payment network servers across 139 countries that form a high-speed Credit card company

network unparalleled in scale. This enables Akamai to Terminal offer high-speed, high-capacity and secure data communication anywhere in the world. EC website E-money/loyalty point business operator Combating growing cybersecurity risks and sophisticated cyberattacks, Akamai makes best use of Connected car its threat intelligence capabilities backed by big data Akamai’s network operations command center Digital currency/IoT IoT gateway Smart home business operator

62 MUFG Report 2019 MUFG Report 2019 63 Important Issues Concerning Value Creation

Initiatives for Addressing ESG Issues toward Sustainable Growth

MUFG aims to help create a sustainable society and realize United Nations Sustainable Development Goals (SDGs) through its business activities. To this end, we have identified a number of environmental and social issues of concern at home and abroad and determined priority issues to be addressed by MUFG.

Currently, each business group has incorporated these priority issues into their business strategies and is pushing forward with initiatives to address them.

Priority Issues MUFG Must Address

Business incubation Social infrastructure & Aging population & low birth rate 1 2 & job creation 3 town planning

P.41 P.53 P.45 P.73 P.72-73 P.73

4 Global warming & climate change 5 Financial innovation 6 Workstyle reforms

P.49 P.59 P.66-71 P.72 P.76-77

Important Issues 7 Cross-sectoral environment and social issues Concerning Value P.  P. Creation P. How MUFG Addresses ESG Issues Endorsement of International Sustainability Initiatives

*1

*1 *2 *3

*1 Endorsed by the Bank *2 Endorsed by the Trust Bank and Mitsubishi UFJ Kokusai Asset Management *3 Endorsed by the Trust Bank

64 MUFG Report 2019 MUFG Report 2019 65 Important Issues Concerning Value Creation Environment / Social / Governance Initiatives for Addressing ESG Issues toward Sustainable Growth

Aware of both opportunities and risks arising from ESG issues, MUFG is striving to help resolve environmental and social issues through its business activities.

As part of our mission as a financial institution, we have set Sustainable Finance Goals to contribute to the realization of international goals specified by the Paris Agreement* and those identified by United Nations SDGs. Moreover, we established the MUFG Environmental and Social Policy Framework aimed at providing guidance to our business activities.

*A multilateral international agreement on climate change that was adopted in December 2015 in Paris, where the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) was held

Setting a Sustainable Finance Goals

Aiming to facilitate the creation of a sustainable society and realization of SDGs via its financial services, MUFG has committed to extending a total of ¥20 trillion for sustainable Applying the MUFG Environmental and Social Policy Framework finance over a period spanning from fiscal 2019 to fiscal 2030 (of this, ¥8 trillion will be used for environmental finance). MUFG recognizes environmental and social risks international community’s call for more robust Primary business fields eligible for financing arising from operations undertaken by its Group climate change countermeasures and stakeholders’ companies as important management issues feedback on environmental and social issues. The ● Businesses contributing to the popularization of renewable energy and the enhancement of energy efficiency requiring serious attention. Based on the “MUFG revised policy framework includes more stringent Environmental ● Businesses contributing to the alleviation of climate change Environmental Policy Statement” and “MUFG Human restrictions on financing for the coal fired power impact, such as green building projects Rights Policy Statement,” the MUFG Environmental generation sector. ● Businesses contributing to the development of startups and job creation and Social Policy Framework is designed to ensure ● Businesses contributing to the alleviation of poverty Extend a total of ¥20 trillion that due consideration is given to environmental and Going forward, we will regularly review this policy ● Businesses contributing to the energizing of local communities Social and regional revitalization by the end of fiscal 2030 social issues in the course of its financing.* framework and upgrade it in a way that conforms ● Fundamental service businesses, including those involved in basic (Of this, ¥8 trillion will be used with changes in business activities and the operating infrastructure such as public transport, waterworks, and airports, and for environmental finance) essential services such as hospitals, schools and police In May 2019, we revised the policy framework, taking environment.

into account various external concerns, such as the * Including the provision of credit and the underwriting of bonds and equities

Promotion and Popularization of Renewable Energy

Outline of the Revised Environmental and Social Policy Framework MUFG is acting as project finance arranger and Thanks to these efforts, in 2018 we ranked first on the lender for solar, hydroelectric, wind and geothermal global private finance lead arrangers league table in MUFG will not provide financing for new coal-fired power generation projects once the revised framework takes effect. power generation projects. In these ways, we serve the field of renewable energy project financing. We ● Exceptions may be considered where we will take into consideration the energy policies and as a driving force behind the dissemination of have held this position for three consecutive years. Revised Coal-fired power generation circumstances of the host countries, international standards and the use of other available renewable energy around the world. sector technologies when deciding whether to provide financing. We will achieve our Sustainable Finance Goals ● We also support the adoption of advanced technologies for high-efficiency power generation and Carbon Dioxide Capture and Storage (CCS) technologies that contribute to through these efforts. the reduction in the emission of greenhouse gases (GHGs).

MUFG’s Track Record and Ranking as a Finance Arranger in the Renewable Energy Sector In addition to the coal-fired power generation sector and the cluster munitions manufacturing sector, forestry, palm oil and mining (coal) will be newly added to Ranked first for a third consecutive year “Restricted Transactions”. Revised Restricted transactions (Billions of US＄) 1st 1st 1st ● When financing is considered, we request our clients to certify the relevant operations  according to internationally recognized certification organizations. 1st 2nd 2nd   In its asset management business, MUFG has established the MUFG AM Responsible Investment Policy concerning environmental and social initiatives. 4.3  3.9 Newly Asset management business 2.6 2.9 ● The policy was prepared in accordance with the six principles of the Principles for  2.1 2.0 included Responsible Investment (PRI), based on our fiduciary duty to clients who entrust their capital  to us. 2013 2014 2015 2016 2017 2018 (CY) (Source: Bloomberg New Energy Finance ASSET FINANCE/Lead Arrangers LEAGUE TABLE) Please also refer to a news release issued by MUFG on May 15, 2019 to see details regarding revisions to the MUFG Environmental and Social Policy Framework.

66 MUFG Report 2019 MUFG Report 2019 67 Important Issues Concerning Value Creation Environment / Social / Governance Environmental Initiatives

4 Global warming & climate change In response, MUFG aims to carry out the quantitative Risk Management Initiatives to Counter Global Warming assessment of climate change-related risks and, to this end, is working to assess carbon-related assets We implemented MUFG Environmental and Social associated with its lending portfolio based on the Policy Framework to manage environmental and and Climate Change TCFD recommendations. Furthermore, we social risks associated with our financing. formulated the MUFG Environmental and Social Acutely aware of the importance of climate-related financial disclosure, MUFG has declared its support of Policy Framework to accurately evaluate and manage In May 2019, we revised this policy framework relevant recommendations formulated by the Task Force on Climate-related Financial Disclosures (TCFD), environmental and social risks arising from our to live up to the growing call for climate change a special taskforce established by the Financial Stability Board (FSB). In line with these recommendations, business operations. countermeasures from the international community. we are working to enhance the content of information disclosure. Specifically, we strengthened the policy on financing Status of Carbon-Related Assets (as of March 31, 2019)* for the coal-fired power generation sector while adding forestry, palm oil and mining (coal) sectors as Sector Proportion in overall portfolio value restricted transactions. From July 2019 we will not on the revisions to the MUFG Environmental and Energy 3.0% provide financing for new coal-fired power Governance Social Policy Framework and the status of Utility 3.6% generation projects. As a result, we expect our credit MUFG’s Governance Structure for Countering environmental financing initiatives. balance associated with coal-fired power generation Total 6.6% Climate Change projects to decrease over the medium to long term. Strategy Note: Total value of lending amounts to ¥96.5 trillion. At MUFG, the Corporate Social Responsibility * Based on the TCFD recommendations, MUFG has categorized the value of lending Committee operating under the Executive MUFG recognizes climate change countermeasures for the energy and utility sectors other than lending for renewable energy projects as Metrics and Targets constituting carbon-related assets. Committee regularly engages in the deliberation of and other environmental initiatives as important Setting Sustainable Finance Goals the Company’s policies on and the status of initiatives management issues. In line with this recognition, we We have committed to extending a total of ¥20 to manage opportunities and risks arising from established the MUFG Environmental Policy Scenario Analysis trillion for sustainable finance by the end of fiscal environmental and social issues, including climate Statement, which includes MUFG’s policies on MUFG has started scenario analysis with the 2030 (of this, ¥8 trillion will be used for change. Furthermore, the Risk Management, Loan climate change. Moreover, we have positioned global objective of assessing the impact of climate change- environmental finance). and Investment and Credit committees also discuss warming & climate change among our environmental related risks on its credit portfolio.

specific themes associated with climate change. and social priorities. We are thus endeavoring to Reducing CO2 Emissions Attributable to Our Conclusions reached by these committees are address these issues while giving due consideration Based on the New Policies Scenario and the Business Activities reported to the Executive Committee and, on an as to both opportunities and the risks arising from them. Sustainable Development Scenario (2°C Scenario) To reduce the environmental burden attributable to necessary basis, to the Board of Directors. published by the International Energy Agency (IEA), our business activities, we are working to assess and In fiscal 2018, the Board of Directors received reports Opportunities—Supporting the Transition to a we are working to quantitatively assess the financial reduce the environmental footprints of our Low-Carbon Society impacts of transition risks. The scenario analysis operations, such as GHG emissions. In addition, the

Deliberation and Reporting on Environmental and Social We serve as a finance arranger and lender for methods used reference those applied in a pilot Bank has succeeded in reducing CO2 emissions Issues (fiscal 2018) renewable energy projects while actively providing project led by the UNEP Finance Initiative in which beyond its reduction target (reduced energy intensity Board of Directors consulting services aimed at assisting clients in their 16 member banks participated with the aim of index* in fiscal 2017 to 26.0% below the fiscal 2009 climate change countermeasures as well as discussing and developing methods for climate level). ● Reviews revisions to the Environmental and Social Policy assistance in the issuance of Green Bonds. By doing change-related financial information disclosure for Framework and monitors the status of relevant discussions Please also visit MUFG's website to see its initiatives to reduce environmental burdens. ● Reviews environmental finance initiatives credit portfolios so, we support the transition to a low-carbon society the banking industry. URL: https://www.mufg.jp/english/csr/environment/effort/

from the aspect of finance. *Energy intensity index = Energy consumption /Total floor space Executive Committee In addition, MUFG is a participant in Phase II of a pilot Risks—Transition Risks and Physical Risks project launched in 2019 by the UNEP Finance ● Finalizes revisions to the MUFG Environmental and Social Policy Clients to whom MUFG has provided credits may be Initiative. Framework ● Reviews the conclusions of the Corporate Social Responsibility exposed to risks arising in the course of the transition Committee to a low-carbon society, such as stricter regulation MUFG Bank’s CO2 Reduction Target GHG Emissions* (Unit: Thousand t-CO2) and the introduction of low-carbon technologies CO2 reduction target CO2 emissions/Measured items FY2018 Committees under the Executive Committee (transition risks). They can also be exposed to risks arising from physical damage due to the growing Reduce energy intensity index by Scope1 Direct emissions 11 ● Monitor initiatives addressing environmental and social issues FY2020 10.5% from the fiscal 2009 level by ▶ Achieved Scope2 Indirect emissions 187 prioritized by MUFG occurrences of climate change-induced natural the end of fiscal 2020 ● Determine Sustainable Finance Goals disasters and abnormal weather (physical risks). If Scope3 Other indirect emissions 10 ● Conduct detailed examinations of the content of the revised Reduce energy intensity index by Emission volume offset by CDM credits 0 Environmental and Social Policy Framework these risks were to impact the clients’ businesses or FY2030 19.0% from the fiscal 2009 level by ▶ Achieved ● Oversight of the response to the TCFD recommendations financial conditions, MUFG’s credit portfolio would the end of fiscal 2030 Total 208 (calculation and disclosure of carbon-related assets) also be exposed to substantial risks. * Domestic total for MUFG, the Bank, the Trust Bank, MUMSS, and NICOS

68 MUFG Report 2019 MUFG Report 2019 69 Important Issues Concerning Value Creation Environment / Social / Governance Environmental Initiatives

4 Global warming & climate change

2 Introducing an ESG Evaluation System for of a syndicated loan totaling ¥14 billion for Nippon Leveraging Our Financing Functions to J-REITs* Yusen Kabushiki Kaisha and Nagoya Railroad Co., Ltd. MUFG has developed a system for evaluating the This syndicated loan is certified by JCR as being in asset management companies of J-REITs and J-REIT conformance with the Green Loan Principles. Promote Environmental Initiatives properties from an ESG-centered viewpoint. Taking advantage of this system, we began striving to 3 Consulting Services on Climate Change Drawing on its solid track record, abundant know-how and extensive global network, MUFG is acting as expand the J-REIT market. Specifically, Mitsubishi UFJ Countermeasures project finance arranger and lender in a way that helps curb the impact of climate change. Moreover, we Research and Consulting carries out comprehensive MUFG supports the Joint Crediting Mechanism (JCM) provide consulting services while assisting clients with the issuance of Green Bonds. assessments of ESG initiatives undertaken by J-REITs a carbon credit system designed to supplement the and the asset management companies, and rates Clean Development Mechanism (CDM) based on the them based on a five-grade scale. Loans to J-REITs Kyoto Protocol. With the Japanese government MUFG’s Contribution to ESG-Oriented Investment and Financing Corporations, etc., that that received sufficiently high ratings will be acting as an international advocate for this pursue environmentally MUFG friendly operations prioritized in the allocation of proceeds from MUFG mechanism, MUFG provides consulting services Green Bonds. In fiscal 2018, MUFG has extended a aimed at supporting the formulation and ESG-centered ESG investment the Trust Bank dialogue/ESG-centered Investees total of ¥6.6 billion to J-REITs since the introduction commercialization of financing schemes for asset management of this system. initiatives undertaken in developing countries to curb

1 * Japanese-Real Estate Investment Trusts global warming. Drawing on its leading track record The net proceeds from the issuance 2 Eligible green and experience in the field of CDM consulting, MUFG the Bank Financing projects Issuance of Green 2 Environmental and Social Risk Management assisted a total of 12 JCM projects in fiscal 2018. Bonds Investors Based on the Equator Principles Going forward, we expect these initiatives to help As a signatory to the Equator Principles (EP), MUFG realize a total reduction in GHG* emissions of MURC* Climate change 3 Bank supports its clients’ environmental and social approximately 55,000 t-CO2/year. countermeasure Corporates and consulting public agencies risk management by identifying, assessing and the Securities Business 4 managing environmental and social risks and In addition, MUMSS has been commissioned by the Underwriting Issuance of Green impacts associated with large-scale projects by Ministry of Economy, Trade and Industry (METI) to and marketing Bonds Issuers Structuring undertaking due diligence in accordance with EP. 46 conduct a study on and act as a secretariat for transactions were subject to EP review and reached climate change adaptation businesses for the third * Mitsubishi UFJ Research and Consulting Co., Ltd. financial close in fiscal year 2018 (preliminary figure). consecutive year since 2016. MUMSS also helped

Please visit MUFG’s website for further information. upgrade METI’s Climate Change Adaptation Good 1 2 4 Contributing to the Expansion of the Green MUFG amounts to approximately US$1.7 billion (as of https://www.mufg.jp/english/csr/environment/equator Practices by Japanese Private Sector while hosting a Bond Market March 31, 2019). climate change adaptation forum. In this way, MUMSS Green Bonds refer to a type of bond that limits the is contributing to the promotion of adaptation use of proceeds from its issuance to funding for The net proceeds from MUFG Green Bonds have businesses in the Japanese private sector. renewable energy and other projects deemed to be been allocated to Eligible Green Projects via the Bank helping preserve the global environment. MUFG is (examples of such projects are described on the Major Projects Supported by MUMSS in Fiscal 2018 for JCM Procedures (Unit: t-CO2/year) contributing to the expansion of the Green Bond facing page). These efforts have contributed to both Estimated volume market as an investor, underwriter, issuer and lender. MUFG and MUMSS being chosen to receive awards Country Outline of JCM Projects of reduction in GHG* emissions from the Minister of the Environment at the Japan Introduction of technologies aimed at Indonesia 23,509 In addition, the Trust Bank is a leading institutional Green Bond Awards in the categories of Japan Green optimizing power plant operations, etc. investor in Asia as well as one of Japan’s top Green Impact and Japan Green Contributor respectively. Introduction of high-efficiency street lighting Cambodia 4,190 Bond investors. Meanwhile, in fiscal 2018 MUMSS 2 ESG Management Support Loan employing LEDs Allocation of Funds and Environmental Impact (As of March 31, 2019) handled 18 domestic Green Bond public offerings as MUFG offers corporate loan products designed to The Balance of Eligible Green Projects funded through the Introduction of solar power generation systems at parts factories, etc. 2,821 a lead manager and thereby commanded 29% of issuance of MUFG Green Bonds evaluate and support clients’ ESG initiatives. Philippines shares in terms of the underwriting amount. Among (The figure in parentheses represents the number of Specifically, Mitsubishi UFJ Research and Consulting Introduction of high-efficiency transformers renewable energy projects) Vietnam 5,143 other domestic financial institutions, MUMSS thus evaluates clients’ initiatives and scores them in to power distribution networks (two projects) US$2,191 million (43) boasts an unparalleled track record in this field. tandem with Japan Credit Rating Agency, Ltd. (JCR), Laos Introduction of high-efficiency data centers 567 Total annual energy generation thereby providing clients with feedback on the As an issuer, MUFG has issued Green Bonds on a 13,650 million kWh challenges they must address. Supply of electricity via solar power generation 18,438 total of four occasions since the first issuance of U.S. dollar-denominated Green Bonds in 2016. Today, the Total annual CO2 emissions avoided Employing these products, the Bank collaborated Fiscal 2018 Total 54,668

cumulative total value of such bonds issued by 6.9 million tons with regional financial institutions in the development * GHG: greenhouse gas

70 MUFG Report 2019 MUFG Report 2019 71 Important Issues Concerning Value Creation Environment / Social / Governance Social Contributions

3 Social infrastructure & town planning 1 Aging population & low birth rate Promoting Regional Vitalization Financial and Economic Education Facilitating Social Development The Bank launched “MUFG Regional Revitalization Given a graying society accompanied by a declining Fund” aimed at providing customers with smooth birthrate, a growing number of people are expected financing for facility procurement and working capital to face the need for solutions that ensure the stable through Financing as well as advice to help them get their projects on accumulation of assets. With this in mind, MUFG is track. Our efforts focus on helping customers meet providing various educational programs and MUFG aims to contribute to social development through financing, the primary function representing its four basic targets under Japan’s plan for the Dynamic seminars tailored to meet the interests of audiences business operations. Engagement of All Citizens,* covering community, from different age groups, helping them better people and employment. Every year, this fund understand what it takes to begin investing. In particular, we provide services unique to MUFG to address such issues as the “aging population & low provides finance for a number of customers, with a birth rate,” “business incubation & job creation,” and “social infrastructure & town planning.” total of ¥35.7 billion being extended in fiscal 2018. In August 2018, the Trust Bank established MUFG Financial Education Institute, a body charged with The Bank also engages in financing that draws on the undertaking a study on bottleneck factors hindering Accordingly, MUFG optimizes its services to fit their government’s subsidized interest payment program young people from initiating asset building, preparing Supporting Corporate Growth individual needs, whether they are startups, growing for regional revitalization, extending a total of ¥6.8 various educational content and providing advice to Acting as a partner for its corporate customers, corporations, mature companies or companies billion in fiscal 2018 under this program. financial institutions with regard to product MUFG is well aware of the fact that their needs may undergoing corporate rehabilitation. development. Via a website, the institute is * A comprehensive strategic plan formulated by the Headquarters for Overcoming vary widely due to differing levels of development. Population Decline and Vitalizing Local Economy in Japan (established by the Cabinet publicizing its paper and reports survey and research Secretariat in September 2014). In response to the rapid decline in and aging of the country’s population, this plan aims to help create an autonomous and sustainable results. In addition, it hosts symposia, delivering a regional society in a way that takes advantage of characteristics of each region. Startup Stage Growth Stage Maturation Stage Revitalization Stage broad range of information aimed at helping people

Supporting up-and-coming Offering smooth financing while Supporting smooth business Assisting corporate rehabilitation 2 Business incubation & job creation lead an affluent life after their retirement. businesses with growth potential creating new business succession in collaboration with external 3 Social infrastructure & town planning “Rise Up Festa” opportunities expert organizations Educational Initiatives by Age Group 4 outstanding companies Approximately 23,000 Approximately 4,400 Approximately 80 Investment in 3D-Mapping Technology for Elementary, junior high and high school students 6 excellent companies The number of business The number of corporate clients The number of in-house Autonomous Driving ● Domestic and overseas branches welcome local elementary, junior Number of award-winning matching cases* in fiscal 2018 that received visits by specialist specialists* in corporate In April 2019, Japan Infrastructure Initiative (JII)* high and high school students, offering them workplace experience corporations included in the * The sum of business matching cases teams during fiscal 2018 rehabilitation programs. We also provide on-demand lectures at local schools. fiscal 2018 Rise Up Festa conducted by branches and those * The total number of specialists at invested ¥2.0 billion in Dynamic Map Platform Co., established at business matching domestic headquarters at the Bank Ltd. (DMP), a company aimed at providing high- ● MUFG Union Bank helps students at public high schools establish events held in Japan and overseas and run “High School Branches,” providing them with opportunities definition (HD) 3D roadmaps, an essential component to learn about finance and economics through hands-on supporting autonomous driving and other cutting- experience of banking operations. 2 Business incubation & job creation 2 Business incubation & job creation edge driving assistance technologies. DMP is ● We have been running an educational program aimed at helping 5 Financial innovation junior high and high school students learn about stock investment. Rise Up Festa expected to expand into North America while rolling To date, a total of 4,000 students from 50 schools have completed this program. Rise Up Festa is a business support program aimed Assisting Startups in Their Pursuit of Growth out its technology to applications other than at assisting SMEs and other growing companies Strategies autonomous driving, with the aim of contributing to University students engaged in novel and creative segments as well as MUFG is rallying the Group’s entire strength to the realization of a safe and secure society with higher living standards. ● We present lectures aimed at enhancing basic financial literacy with those trying to extend the boundaries of existing provide promising startups with various assistance regard to managing loans, credit cards and household budgets. businesses. Through this program, MUFG engages ranging from business advisory and lending to IPO- with them as business partners over the medium- to related financing. Looking ahead, JII will continue to assist in the Businesspersons long-term, taking full advantage of its extensive development of infrastructure businesses via ● For our corporate clients’ employees, we provide seminars dealing business network and abundant know-how in As part of these efforts, Mitsubishi UFJ Capital launched investment in promising Japanese companies. with such topics as life planning and asset management. In addition, our website provides a broad range of articles aimed at management support. Mitsubishi UFJ Capital , Limited Partnership and * JII was established in January 2017 via a business alliance between MUFG, Mitsubishi encouraging viewers to develop their interest in asset building in Mitsubishi UFJ Life Science II, Limited Partnership in UFJ Lease & Finance Company Limited, MUFG Bank, Hitachi, Ltd. and Hitachi Capital addition to quizzes and cartoons. Corporation to serve as an open financial platform. In April 2019, MUFG conducted a final screening for February 2019. These limited liability partnerships boast the sixth round of this program, with four outstanding robust funds totaling ¥15 billion and ¥10 billion, companies and six excellent companies being respectively. While the former is aimed at financing chosen from among the many candidates. Award- promising companies in a range of sectors, including winning companies may benefit from various support digital and FinTech firms, the latter is expected to programs aimed at helping them achieve growth. finance up-and-coming players in the life science field.

We also provide assistance for the launch of new businesses in FinTech and other cutting-edge technological fields through the MUFG Digital Accelerator Program. An example of a high-definition map An educational program themed on stock investment

72 MUFG Report 2019 MUFG Report 2019 73 Important Issues Concerning Value Creation Environment / Social / Governance Social Contributions

employees, encourages their self-development, and training based on an “assessment & coaching” Nurturing Professionals Who Pursue creates an environment where employees are approach aimed at helping candidates embrace a satisfied with their daily work and able to continually new mode of behavior and acquire other traits challenge themselves in pursuit of innovation. necessary for corporate management. Meanwhile, Innovation in Challenging Environments the latter course takes on personnel holding the Securing Future Top Management position of Managing Directors, deputy general Candidates As we aim to deliver greater value to customers and society as a whole, we are striving to nurture manager or branch manager, providing a liberal arts professionals equipped with distinctive strengths in their areas of specialty as well as human relations MUFG aims to practice a group-based, integrated education aimed at enriching comprehensive ability skills to ensure that they are capable of succeeding on the global stage. In doing so, we encourage them management approach in regions around the globe and widening perspectives while implementing to take on the challenge of driving innovation. and, to this end, seeks future candidates for top global leadership training. management who can lead its businesses With this in mind, under the Medium-Term Business Plan (MTBP) we will step up the integrated accordingly. Having positioned securing such human Going forward, we will enhance the content of management of our Group’s human resources around the world. resources as an important management issue, in training programs aimed at helping participants fiscal 2018 we established MUFG University to acquire coaching and organizational management provide special training programs for those in skills as we aim to nurture managers capable of framework for securing candidates from a broader managerial positions or above. aiding their staff members in realizing their full MUFG Human Resources Principles range of sources. With the purpose of helping highly potential. Moreover, we will incorporate training for The MUFG Human Resources Principles provide the skilled individuals pursue greater career success, this MUFG University offers two different courses, namely, instilling digital literacy, which has become essential basis on which the Group has built a human framework is designed to provide them with salaries the “Next-Generation Leader Course,” which aims to to today’s corporate management. In these ways, we resources management platform that aligns with its in line with labor market benchmarks unconnected secure the future leaders of MUFG, and the will secure future top management candidates Corporate Vision. These principles are: to our conventional pay systems. “Management Course,” which aims to help managers capable of leading MUFG’s corporate development. ● Shared Values enhance their skills. The former welcomes Nurturing Human Resources Leading in ● HR Mission Currently, revisions of human resources system are candidates from among general managers and Enacting Reforms ● HR Vision under way at key Group subsidiaries in Japan. This branch managers and instills practical viewpoints for ● HR Philosophy move is intended to nurture a greater number of corporate management while nurturing concept- Securing Human Resources Who Drive Digital

For the full text of the MUFG Human Resources Principles, please also visit our corporate professionals and ensure human resources building capabilities for developing novel financial Transformation website. URL: https://www.mufg.jp/english/csr/policy/ management with performance-based assignment. businesses. This course also provides hands-on We will recruit and nurture tech specialists who can For example, the Bank overhauled its human spearhead digital transformation. resources system in April 2019, introducing evaluation Programs Offered by MUFG University Human Resources Strategy under the MTBP and training frameworks designed to support growth Next-Generation Leader Course Specifically, we will expand the lineup of job-level To overcome the harsh environment, we will engage and employees’ ability to overcome challenges. Also, Eligible attendees: General managers and branch managers based training programs aimed at helping employees Number of attendees (fiscal 2018): 133 in human resources management aimed at the Bank’s new human resources system is acquire practical experience and enhance their Program name Objective supporting groupwide integrated efforts to achieve thoroughly focused on ensuring performance-based digital literacy while proactively hiring digital experts New Corporate Executive Acquire practical viewpoints for corporate the objectives of the MUFG Re-Imagining Strategy. appointment and position-based pay. This is Training management equipped with sophisticated skills. expected to achieve more transparent and fair Executive Candidate Acquire concept building capabilities to Specifically, we are focusing on ensuring optimal human resources management that is acceptable to Training develop financial businesses for the future Enhancing Managers’ Coaching Skills

staffing in order to match the competencies of our Embrace a new mode of action in daily Today, MUFG is striving to create a sustainable and Assessment & Coaching workforce to jobs while promoting staff exchanges Objectives of MUFG Bank’s Human Resources System operations open minded organizational culture that encourages that transcend the boundaries of Group entities, Revisions employees to take on the challenge of realizing Management Course thereby assisting in the execution of business Eligible attendees: Managing Directors, deputy general innovation and renovation. To this end, MUFG’s strategies under the MTBP. Furthermore, we are Nurturing genuine professionals managers and deputy branch managers managers must be good at drawing out the creativity Number of attendees (fiscal 2018): 72 managing employees in Japan and overseas in an of their team members and helping them realize their Program name Objective integrated manner, practicing more sophisticated Helping them pursue personal growth and take on challenges potential so that they can proactively take on higher human resources management on a global basis. Global Leaders Forum Develop leadership for global operations goals. With this in mind, we will initiate a special Ensuring competency-based promotion and job allocation Enhance prediction capabilities necessary program for general or branch managers to help for making policy judgments through Liberal Arts Session Taking advantage of the great breadth of operations increased exposure to liberal arts them enhance their coaching skills. Looking ahead, handled by the MUFG Group, we introduced the concepts we will roll out coaching education to existing

Groupwide Posting System, which offers employees Enhance concept building capabilities via training systems for coverage of an even broader Design & Digital Thinking opportunities to take on their desired duties in a way Overhaul training policies, conventional human resources exposure to digital thinking methods range of job levels. that transcends the boundaries of Group entities. management practices and the entire human resources Coaching Capability Acquire coaching skills to help staff The holding company also instituted a new recruiting platform to support autonomous career development Improvement members realize their potential

74 MUFG Report 2019 MUFG Report 2019 75 Important Issues Concerning Value Creation Environment / Social / Governance Social Contributions

Support for Balancing Work and Life Events Promoting Inclusion & Diversity Nurturing Global Human Resources MUFG is working to create environments that enable MUFG aims to ensure that all its employees, who both men and women to continue career Today, the MUFG Group has expanded into more than of global business strategies. By doing so, we also help boast a diverse range of backgrounds, work as one development regardless of whether they are on 50 countries around the globe, with approximately 53% them develop career track records encompassing a team and are allowed to maximize their individual prenatal leave, parenting, or providing nursing care. of its entire workforce being accounted for by overseas broad range of fields. potential and fulfill their career goals. To that end, we In Europe, for example, we hold seminars through employees (as of May 31, 2019). As a result of the aforementioned initiatives, we have are helping raise their awareness while developing our employee network to help employees balance With this in mind, we are employing a globally unified seen improved motivation among individuals hired various programs to support them. life events. The number of employees taking human resources platform to nurture professionals overseas, and their drive is helping to facilitate positive childcare leave is increasing year on year, and we with diverse backgrounds and offer them greater competition among employees while expanding the These efforts are focused on facilitating an hope that all employees will become more aware of career opportunities. This approach is expected to pool of candidates. In short, our approach is creating a appreciation of each other’s uniqueness and creating efficiency and productivity. In this way, we support enhance our organizational strength. In taking this positive feedback loop, boosting our organizational an inclusive workplace in which everyone can work the participation of men in childcare. For example, in approach, we promoted a growing number of those strength. Today, a growing number of individuals hired hired overseas to managerial posts while preparing a overseas have been promoted to managerial posts. For in confidence regardless of religion, disability, sexual the Bank and the Securities Business, the percentage multinational list of key managerial candidates, that is example, 13 of these individuals, including four women, orientation or gender identity. of men taking childcare leave is high, 84% for the being periodically reviewed to preclude any biases. have assumed executive officer positions at the Bank Bank and 100% for the Securities Business. However, (as of March 31, 2019). MUFG Union Bank was selected by Diversity Inc. as since men tend to take only short periods of In addition, we regularly hold the Global LEAD Program, one of the Top 50 U.S. Companies for Diversity in childcare leave, we strongly recommend that men mainly for those in department head positions. Hosting diverse participants coming from the Bank, the 2018, and for the sixth consecutive year, MUFG take childcare leave for about one month. In addition, Securities Business, Krungsri, MUFG Union Bank and Proportion of Overseas Employees* earned a 100 percent score on the Human Rights the ratio of male employees among MUAH other Group entities serving various regions, the forum (%) Campaign Corporate Equality Index. Inclusion & employees who took childcare leave stood at 36%.*  provides training aimed at helping them acquire 52.9 Diversity will remain important principles at MUFG, as * As of fiscal 2017 essential leadership knowledge, embrace global  42.4 37.8 38.5 40.5 we continue to embrace the unique perspectives of perspectives and develop other fundamental global  37.3 our colleagues, communities, and clients. MUFG also believes that raising managers’ awareness leadership traits.  24.0 26.3  is key to effectively facilitating the creation of an Also, the Bank and the Securities HD have taken  In Japan, the Bank’s Head Office has in inclusive working environment and provides special advantage of the globally unified human resources 2012 2013 2014 2015 2016 2017 2018 2019 (FY) place a prayer room that accommodates various training to achieve this end. We are therefore management platform to appoint managing director * Proportion of overseas employees in the number of employees (consolidated basis), religious needs. Also, the Bank has distributed tablet endeavoring to increase the number of managers candidates from among those hired overseas. including part-time and temporary employees, presented in the financial reports. However, the number of employees at Bank Danamon is as of December 31, 2018. terminals equipped with voice recognition software who place sufficient focus on staff training, strive to Regardless of the place of their hiring, promising Note: Total headcount is as of May 31, 2019, reflecting the inclusion of Bank Danamon for employees with hearing disabilities. ensure that their staff members feel their job candidates are assigned leading roles in the execution into the scope of consolidation. rewarding and extend generous support to help Assisting Women with Career Development them enhance performance. In Japan, the Bank, the Trust Bank and MUMSS 6 Workstyle reforms Please also refer to the Diversity Report for the detail of these initiatives. identified a mutual goal: raising their ratios of female URL: https://www.mufg.jp/english/csr/employee/diversity_report/ employee can find his/her job rewarding. To this end, employees in managerial positions to 24% by March Promoting Workstyle Reforms we implement annual Awareness Surveys 31, 2021. Moreover, we aim to identify top MUFG is striving to develop a working environment encompassing all Group members and assess management candidates from among this employee that allows employees to thoroughly focus on challenges they are now confronting. Findings from group. Our measures to this end include training assessing customer needs and deliver greater value. these surveys are widely utilized in the formulation sessions designed to help candidates inspire one To this end, we are promoting workstyle reforms on and execution of human resources management another, round-table meetings with executives and various fronts. policies. the provision of a mentoring system. We are thus striving to raise their awareness of corporate Reducing Overtime Working Hours To help realize more flexible workstyles, we management. encouraged location-free operations via, for In Japan, efforts are steadily under way to reduce example, the utilization of satellite offices while overtime working hours. The Bank, for example, Overseas, we set a goal of raising the ratio of female allowing a greater number of employees to work succeeded in reducing the ratio of employees who managers in the Group’s workforce in the United from home. In fiscal 2018, approximately 1,000 more worked overtime of more than 60 hours per month Kingdom by 10% by 2022 as part of our ongoing Group employees began working from home (sum of from 4.3% in fiscal 2014 to 2.9% in fiscal 2018 by, for efforts to ensure gender equality and support figures for the Bank, the Trust Bank and MUMSS). example, encouraging employees to stagger their women’s career development. working hours. In order for the MUFG Group to realize innovation, the Group must create a workplace in which each

76 MUFG Report 2019 MUFG Report 2019 77 Important Issues Concerning Value Creation Environment / Social / Governance Upgrading the Governance Framework

more effective governance. In June 2017, two foreign Due to these appointments, nine out of the current Enhance Our Corporate Governance nationals were appointed as directors. In June 2018, 16 members of the Board of Directors are the total number of directors was decreased, with independent outside directors and include three outside directors accounting for the majority of the women as well as two foreign nationals (from the Structure Board of Director membership. United States and Thailand). With their backgrounds ranging from corporate managers, financial experts In line with the succession plan formulated by the and lawyers to CPAs, the composition of outside Nominating and Governance Committee, in April directors are well-balanced in terms of specialty, Fundamental Concepts Steps to Improve Our Governance 2019, MUFG appointed a Group CEO and, in June region and gender. Structure MUFG will aim for sustainable growth and the 2019, three outside directors and one director. increase of corporate value over the medium- to Since its establishment, MUFG has worked to build a long-term, in consideration of the perspectives of its stable and effective corporate governance structure, stakeholders, including shareholders as well as putting emphasis on ensuring external oversight. In Management Structure customers, employees and local communities. MUFG June 2015, MUFG transitioned to the “company with will aim to realize effective corporate governance three committees” governance structure. The General Meeting of Shareholders through fair and highly transparent management functions of oversight and execution in the holding based on the guidance provided by MUFG Corporate company are separated, thereby strengthening the Governance Policies. oversight function of the Board of Directors and the Mitsubishi UFJ Financial Group committee system has also been reorganized for

Oversight Corporate Governance Development Board of Directors Statutory Committees Outside Directors Nominating and October 2005～ June 2015 June 2016 June 2017 June 2018 June 2019 (Nine) Governance Committee

Governance 2015 Directors (Seven) Compensation Committee Company with a Board of Corporate Auditors Structure Company with Three Committees 2014 Governance Committee 2015 Audit Committee Nominating and Governance Committee 2005 2008 (Statutory Nominating Committee) Nomination Committee Nomination and Compensation Committee Director Outside Director Committees 2005 2015 Risk Committee U.S. Risk Committee* Compensation Committee Compensation Committee (Statutory) under the Non-Executive Chairperson Board 2005 2015 Director * Established based on the U.S. Prudential Regulations of Directors Internal Audit and Compliance Committee Audit Committee (Statutory) 2013 2015 Risk Committee Risk Committee 2016 U.S. Risk Committee 2013 Board of Evaluation of Board of Directors Directors 2015 Execution Operations Independent Outside Directors Meeting/ Executive Committee Global Advisory Board Appointment of Lead Independent Outside Director 2015 President & Group CEO Policy MUFG Corporate Governance Policies Eight Eight Nine Outside Six Seven (Two foreign Directors (To make up the majority) nationals) C-Suite Officers in Charge

Planning and Administration Divisions Business Groups Independence and Diversity of Directors

Non-executive directors Independent outside directors

Securing 11/16 9/16 Female directors 3/16 independence MUFG Bank, Ltd. General Meeting of Shareholders 68.7% 56.2% Foreign nationals 2/16 Mitsubishi UFJ Trust and Banking Corporation and diversity Audit & Supervisory Cooperation Board of Directors Mitsubishi UFJ Securities Holdings Co., Ltd. Committee

Membership includes outside directors and committee members (As of June 27, 2019)

78 MUFG Report 2019 MUFG Report 2019 79 Important Issues Concerning Value Creation Environment / Social / Governance Upgrading the Governance Framework

deliberation of specific subjects, allowing for more Audit Committee Fiscal 2018 Initiatives Outline of Committees and Their Fiscal vigorous debate in the Board room. Also, since the The Committee is composed of outside directors 2018 Initiatives Following the transition to the “company with three June 2017 inclusion of foreign national outside and non-executive directors, with an outside director committees” governance structure in June 2015, directors, all meeting materials have been translated Nominating and Governance Committee as Chairperson. The Committee examines the there was a significant decrease in the number of into English, while all Board of Directors meetings are The Committee is composed of outside directors and execution of business by directors and corporate agenda items and the volume of materials for Board attended by simultaneous interpreters. the CEO, with an outside director as Chairperson. The executives and prepares auditing reports. It also of Directors meetings. This was thanks to a review of Committee discusses matters related to the Chairman, examines the business and financial situation of the agenda items and the Board of Directors’ operations Main agenda items discussed by the Board of Deputy Chairman, President, and other major holding company and subsidiaries, conducting as a whole, including meeting frequency. Directors in fiscal 2018 are listed at the bottom of this management positions in the holding company or fieldwork where necessary. page. At one meeting with the theme “acquisition of major subsidiaries, as well as corporate governance Specifically, over the course of a period spanning the CFSGAM Group,” the Board of Directors policies and frameworks in place at these entities, and Risk Committee fiscal 2015 through fiscal 2018 the number of agenda benefited from input from outside directors with makes recommendations to the Board of Directors. Of The Committee is composed of corporate items was cut approximately 36%. Over the same regard to post-acquisition management focused on these, the Committee met seven times to discuss the executives, outside directors and outside expert period, the total page count with regard to materials identifying extant decision making processes at the appointment of the Group CEO candidate. members, with an outside director as Chairperson. It provided to members was reduced by 282. Thus, the acquired company and how to assess other key mainly examines important risk factors, such as time allocated for discussing single agenda items management information. They also contributed Compensation Committee foreign currency liquidity risk, that may impact on has increased. As a result, the average length of opinions on how to identify significant issues based The Committee is composed of outside directors business operations while paying close attention to regularly scheduled Board of Directors meetings has on business-specific due diligence findings and and the CEO, with an outside director as cyber attacks and other significant IT risks in almost doubled from three hours 16 minutes in fiscal suggested how to resolve them. Thanks to outside Chairperson. The Committee decides on matters anticipation of Tokyo Olympic games, and submits 2015 to six hours 19 minutes in fiscal 2018. In addition, directors who contributed their specialist expertise, associated with the compensation of directors and its recommendations to the Board of Directors. more than half the time spent in Board of Directors discussions by the Board of Directors were quite corporate executives at the holding company and its meetings held in fiscal 2018 was allocated to the active. subsidiaries and makes recommendations to the In addition, the U.S. Risk Committee has been in Board of Directors. place from 2016 and operates under the Risk Committee.

Number of Agenda Items/Page Counts of Materials Provided Length of Board of Directors Meetings (hours) Fiscal 2018 Status of the Board of Directors and Committee Meetings Number of agenda items (left axis) Presentations on agenda items Deliberation (left axis) Nominating and (Items) Page count of materials provided (right axis) (Pages) (Hours) (Hours) Board of Directors Compensation Audit Risk Average length of one regular meeting (right axis) Governance   ：  1:29 2:15 2:09 3:16 5:26 5:00 6:19 310 Number of meetings 9 13 7 17 4 300 34:44 33:18 Attendance ratio 100% 98% 97% 99% 87.5%  (all members) 1,358 ： 28:32 Attendance ratio 26% 32% 100% 98% 97% 100% 87.5% 26:26 (outside directors) 25:16 210 1,614 20:27 24:29  36% 6% Committee Membership* Nominating and Governance Compensation Audit Risk 170 ： 39% 43% 56% Mariko Fujii Outside director ◯ ◯ ◎ 959 74% 68%  Kaoru Kato Outside director ◯ 109 99 94% Haruka Matsuyama Outside director ◯ ◎ 730 83  ： 573 64% Toby S. Myerson Outside director ◯ 429 448  61% 57% 44% Hirofumi Nomoto Outside director ◯ ◯ Tsutomu Okuda Outside director ◎ ◯ ：  2012 2013 2014 2015 2016 2017 2018 (FY) 2012 2013 2014 2015 2016 2017 2018 (FY) Yasushi Shingai Outside director ◯ ◯ Tarisa Watanagase Outside director ◯ Examples of Agenda Items Discussed by the Board of Directors in Fiscal 2018 Akira Yamate Outside director ◎ Tadashi Kuroda Non-executive director ◯

● ● Business planning for fiscal 2019 Revisions of MUFG Corporate Governance Policies and Junichi Okamoto Non-executive director ◯ ● Reporting from C-Suite constituents Committee Charters and Rules Kanetsugu Mike Director, President & Group CEO ◯ ◯ ● Review of fiscal 2018 MUFG Group employee awareness survey ● Revisions of Roles for the Board of Directors and Rules on Naomi Hayashi Managing corporate executive, Group CSO results (including reporting on corporate culture-related initiatives) Staffing ◯

● Reporting on progress of strategic investment in Bank Danamon ● Measures for enhancing shareholder returns and financial Naoko Nemoto Outside expert ◯ ● The acquisition of the CFSGAM Group performance targets Kenzo Yamamoto Outside expert ◯ * ◎ represents Chair of each committee (As of June 27, 2019)

80 MUFG Report 2019 MUFG Report 2019 81 Important Issues Concerning Value Creation Environment / Social / Governance Upgrading the Governance Framework

to handle a pivotal issue with thoughtful discussion Roles Outside Directors Are Expected to Fulfill Evaluation Framework of the Working that employs a broad perspective and exemplifying At MUFG, outside directors are expected to fulfill the following six roles. Practices of the Board of Directors’ good governance in terms of how governance ● Exercise the oversight of conflicts of interest that may occur between Operation ● Supervise executives’ duties from an independent and objective MUFG and top management executives or MUFG and controlling systems should actually function. standpoint Since 2013, MUFG has employed external shareholders ● Provide advice and other assistance to top management executives ● Contribute to sustainable corporate development and medium- to long- consultants to evaluate the working practices of its On the other hand, the evaluation also identified based on their experience and expertise term growth in MUFG’s corporate value Board of Directors. Each director is asked to fill in a following issues needing to be addressed to improve ● Engage in timely and appropriate decision making in the course of ● Sufficiently discuss matters reported or proposed by top management deliberating investment and other management judgments via the questionnaire and is interviewed on such subjects as the effectiveness of the Board of Directors’ executives by requesting supplementary explanation where necessary careful examination of the reasoning behind the proposals and other and by contributing their opinions the composition of key committees, the quality of operations: (1) agenda items must be clearly ranked information presented to them the preparatory materials assembled prior to each by priority, (2) the corporate governance structure meeting, the content of discussions, the operations must be strengthened on a groupwide, cross- Current position at MUFG and Name Specialty Reasons for appointment of the Board, the Board’s contributions, and the regional basis, for example, by stepping up the committee-related duties performance of executive members. The results of coordination of governance functions in place at Having worked for the Ministry of Finance, Ms. Fujii has been serving Member of the Board of Directors these questionnaires and interviews are reported to Group companies at home and abroad, (3) the Board as a professor at the University of Tokyo’s Research Center for Chair of the Risk Committee Advanced Science and Technology and ambassador extraordinary Member of the Nominating and Finance and discussed at the Nominating and Governance of Directors must incorporate external input from Mariko Fujii and plenipotentiary of Japan. She has thus accumulated specialist Governance Committee and the expertise in finance and economics while boasting extensive Committee and the Board of Directors. specialists in its discussions of strategic areas, and Compensation Committee experience in these fields. (4) corporate culture reform initiatives currently In the course of the fiscal 2018 evaluation, interviews under way must be monitored more closely. Mr. Kato has fulfilled a number of key management positions, were undertaken in January and February 2019 and Kaoru Kato Member of the Board of Directors Corporate including President & CEO of NTT DOCOMO, Inc. and is equipped Member of the Audit Committee management with extensive experience as a corporate manager and invaluable completed questionnaires collected. According to Facing a business environment and management expertise. the evaluation, MUFG was successful in steadily challenges that are ever more complex, MUFG is upgrading its corporate governance structure, formulating measures to address the aforementioned Member of the Board of Directors making ongoing progress despite the major issues. By doing so, MUFG will enhance the Board of Chair of the Compensation Haruka Legal Ms. Matsuyama boasts extensive experience as a lawyer and is Committee challenges it is confronting as a global financial Directors’ quality of discussion, enabling it to affairs equipped with specialist expertise in a broad range of legal affairs. Matsuyama Member of the Nominating and institutions. In addition, the execution of the process speedup decision making and thereby resolve these Governance Committee leading up to the appointment of the Group CEO challenges. was evaluated as a best practice demonstrating how Mr. Myerson boasts extensive experience as a lawyer and is Toby S. Member of the Board of Directors Legal equipped with specialist expertise in corporate legal affairs and Member of the Risk Committee affairs Myerson M&A. Fiscal 2018 Evaluation of the Working Practices of the Board of Directors Fiscal 2017 evaluation Fiscal 2018 initiatives Fiscal 2018 evaluation Having fulfilled a number of key management positions, including Member of the Board of Directors that of President & Representative Director of Tokyu Corporation, Evaluation Hirofumi Corporate Member of the Nominating and Inc., Mr. Nomoto is currently serving as Chairman& Representative management Improvement in actual governance Nomoto Governance Committee and the Director of this firm and boasts extensive experience and invaluable functions Compensation Committee expertise as a corporate manager. Issues to be addressed Evaluation

● Reduced the total number of directors ● Satisfied formal requirements regarding governance Member of the Board of Directors Need to improve the Board of Directors’ Mr. Okuda has fulfilled a number of key management positions, and secured independent outside ● Foreign national outside directors brought fresh perspective on global Chair of the Nominating and composition Tsutomu Corporate including President and CEO and Chairman & CEO of J. Front directors, who now make up the majority Governance Committee finance and helped invigorate discussion by the Board of Directors management Retailing Co., Ltd., boasting extensive experience and invaluable Okuda Member of the Compensation expertise as a corporate manager. Committee ● CEO of each operating company reports ● Viewpoints from each operating company were shared by the Board of Need to clearly rank agenda items by on progress under the Medium-Term Directors, which was able to engage in in-depth discussions from a Group priority from a Group perspective Business Plan perspective Mr. Shingai has fulfilled a number of key management positions, including Corporate Senior Vice President & CFO of Japan Tobacco Inc., Executive Vice Member of the Board of Directors ● Group employee awareness survey Yasushi management/ President and Deputy CEO of JT International S.A., and Representative results are reported to and discussed by ● Viewpoints from each operating company were shared by the Board of Member of the Audit Committee Need to monitor MUFG’s corporate Shingai Finance & Director and Executive Vice President of Japan Tobacco Inc., boasting the Board of Directors Directors, which was able to engage in in-depth discussions from a Group and the Risk Committee culture reform initiatives more closely accounting extensive experience as a corporate manager as well as specialist ● Executive officers at the Bank discuss perspective initiatives to reform its corporate culture expertise in corporate finance and accounting systems and M&A.

Issues to be addressed Having served as Governor of the Bank of Thailand, Ms. Watanagase Tarisa Member of the Board of Directors ● Need to clearly rank agenda items by priority Finance boasts extensive experience as an economist and is equipped with Member of the Risk Committee Watanagase specialist expertise in finance and economy. ● Need to strengthen corporate governance structure on a groupwide, cross- regional basis

● Need to incorporate specialist expertise into Board of Directors’ discussions

● Need to monitor initiatives to reform MUFG’s corporate culture on an Akira Member of the Board of Directors Finance & Mr. Yamate boasts extensive experience as a CPA and is equipped ongoing basis Yamate Chair of the Audit Committee accounting with specialist expertise in accounting and auditing.

82 MUFG Report 2019 MUFG Report 2019 83 Important Issues Concerning Value Creation Environment / Social / Governance Upgrading the Governance Framework

Group’s business strategies and issues. Moreover, we Outline of Compensation System Utilizing Insights Offered by Outside Compensation System strive to secure robust communication between Underlying Concepts and Objectives Directors outside directors and MUFG’s managerial positions MUFG has adopted a performance-based stock MUFG’s stance on the determination of We believe that insights offered by outside directors by holding special meetings on multiple occasions. compensation plan for all directors, corporate compensation is focused on ensuring the steady are essential to enhancing the content of discussions Our efforts to increase opportunities for outside executives and executive officers (hereinafter implementation of its management policies as well at the Board of Directors meetings. MUFG is striving directors to understand MUFG’s business operations referred to collectively as “recipients”) who serve at as securing sustainable corporate expansion and to ensure that outside directors are given sufficient resulted in the enhancement of the quality of the holding company, the Bank and the Trust Bank as medium- to long-term growth in corporate value. information about agenda items by providing them discussions at Board meetings, leading to a number well as the Securities HD. The introduction of this Accordingly, MUFG aims to better motivate recipients with materials and giving presentations before of improvements in actual corporate governance plan is intended to provide greater incentives for to contribute to growth in business performance not meetings. In addition, outside directors have functions. In fiscal 2018, we held Board Educational those individuals to maintain an awareness of the only in the short term but also over the medium to opportunities outside the Board and committee Sessions themed on subjects listed in the chart Group’s overall corporate performance, stock price long term while discouraging an excessively risk- meetings to intensively deliberate on the MUFG below. and capital efficiency over the medium- to long-term taking approach. MUFG also determines when pursuing their duties. compensation by giving due consideration to the Subjects Addressed at Board Educational Sessions Held in Fiscal 2018 operating results, financial soundness and domestic In May 2018, MUFG carried out a partial revision of and overseas regulatory requirements associated Internal ● Cyber security threats and countermeasures against ● Digital transformation strategies Control such threats this plan, incorporating ROE and the expense ratio with these recipients. In addition, MUFG mandates Digital ● MUFG Payment Network ● MUFG’s settlement strategies (domestic) into evaluation indices for determining stock that a highly objective and transparent system must ● Development of an asset management value chain compensation and bonuses for directors. This be in place for the determination of compensation. aimed at promoting the wealth management business revision was intended to increase the proportion of The level of compensation may be adjusted in light ● Human resources exchange and development on a Business ● Strategies for GCIB performance-based compensation and is expected of prevailing economic, social and industrial trends, global basis ● Business planning for fiscal 2019 (presentations by to better harmonize our compensation system with the business environment surrounding the MUFG ● Overview of MUFG’s businesses in Asia heads of six business groups) Global ● Status of inorganic strategies being considered ● Upgrading methods for subsidiary management shareholders’ interests while incentivizing recipients Group, its consolidated business performance and ● Overview of MUFG’s businesses in Europe to contribute to medium- to long-term improvement the status of employment markets in the place where ● Exchanges of opinions to which MUAH and MUFG ● Revisions of the human resources management in corporate performance. hiring is taking place. In the course of determining Union Bank directors are invited Other system compensation, MUFG also refers to data gleaned via objective research undertaken by external specialists with the intention of setting it at a level appropriate Conference Regarding U.S. Operations to maintaining competitiveness.

MUFG maintains key subsidiaries in the United States. In fiscal 2018, these meetings addressed global issues Compensation System Overview Thus, it is quite important to ensure that we share the faced by MUFG. Attendees engaged in lively Ratio*1 Type Evaluation method Payment same understanding of the managerial challenges discussion over topics such as compliance with anti- across entities. In order to achieve this, the company financial crime regulations and other regulations. emphasizes multi-directional communications and mutual understanding. Going forward, in an effort to facilitate mutual Basic Compensation Determined by the position and place of residence of individual officers, etc. Monthly in cash understanding and develop an even stronger 1 (fixed) To further this goal, MUFG convenes periodic meetings governance structure, we pledge to maintain robust attended by MUAH and MUFG Union Bank communications. 5.5 independent directors, outside directors from MUFG

and the Bank, C-Suite of MUFG Group Companies, and Stock Compensation At the time of Corresponding to the base amount determined depending on position other domestic officers. (non-performance-based) retirement*7

3 MUAH Risk Committee Chair presentation on Performance factor* [medium/long-term evaluation] 1 Base amount Session 1 financial crime-related issues and various risks Stock Compensation 1) Consolidated ROE 2) Consolidated expense ratio Upon the determined associated with operations in the Americas (mid-to-long-term termination of depending on Performance factor*4 [single FY evaluation] performance-based*2) MTBP*7 Joint presentation session with independent the position 1) Consolidated net business profits Session 2 directors, risk committee members, and audit 2) Profits attributable to owners of parent committee members from MUFG and MUAH 3 Performance factor*5 Theme-specific discussions led by MUFG executive 1) Consolidated NOP members Base amount 2) Profits attributable to owners of parent Officers’ Bonuses determined 3) Consolidated ROE 4) Consolidated expense ratio 1 (short-term performance- Annually in cash Session 3 Exchanging opinions with regard to Group strategies, 2 based* ) depending on IT and digitalization, human resources management, the position compliance, audits and other key issues that must be 1.5 Status of the execution of the duties of the Officers, etc.*6 addressed by MUFG

FY2017 FY2018 *1 As for the case of the president of MUFG *2 Range: 0-150% *3 Rate of attainment of targets of the indicators in the MTBP *4 Comparison of the rate of increase in the indicators from the previous fiscal year with that of competitors *5 Rate of increase/decrease of the indicators from the previous fiscal year and the rate of attainment of targets of these indicators *6 Determined exclusively by independent outside directors at the Compensation Committee *7 Subject to claw-back clause, etc.

84 MUFG Report 2019 MUFG Report 2019 85 Important Issues Concerning Value Creation Environment / Social / Governance Upgrading the Governance Framework

● Type and Number of MUFG Shares Owned as of March 31, 2019 (Dilutive Shares: The number of corresponding vested points in the stock Board of Directors compensation system using a trust structure.) ■ Attendance at Board of Directors Meetings (FY2018) As of July 1, 2019

Member of the Board of Directors (Outside Director) Member of the Board of Directors (Outside Director) Member of the Board of Directors (Outside Director) Member of the Board of Directors Mariko Fujii Toby S. Myerson Yasushi Shingai Audit Committee Member ● Ordinary Shares: 0 ■ － ● Ordinary Shares: 368*1 ■ 9/9 ● Ordinary Shares: 0 ■ 8/8*2 Tadashi Kuroda Former Ambassador Extraordinary and Plenipotentiary Chairman & CEO, Longsight Strategic Advisors LLC Former Executive Deputy President and Representative ● Ordinary Shares: 124,600 Dilutive Shares: 69,981 ■ 9/9 of Japan to the Republic of Latvia Director of Japan Tobacco Inc. Emeritus Professor of The University of Tokyo

April 1977 Joined Ministry of Finance of Japan September 1977 Registered as an attorney at law, admitted in States of California April 1980 Joined Japan Tobacco and Salt Public Corporation (current Japan July 1997 Director, International Affairs and Research Division, Customs and and New York in the United States Tobacco Inc.) Tariff Bureau, Ministry of Finance October 1981 Joined Paul, Weiss, Rifkind, Wharton & Garrison LLP July 2001 Vice President of Finance Planning Division of Japan Tobacco Inc. April 1999 Associate Professor, Research Center for Advanced Science and June 1983 Partner of Paul, Weiss, Rifkind, Wharton & Garrison LLP June 2004 Senior Vice President, Head of Finance Group of Japan Tobacco Inc. Technology, the University of Tokyo April 1989 Managing Director of Wesserstein Perella & Co. Inc July 2004 Senior Vice President, Chief Financial Officer of Japan Tobacco Inc. Member of the Board of Directors Audit Committee Member March 2001 Professor, Research Center for Advanced Economic Engineering, November 1990 Partner of Paul, Weiss, Rifkind, Wharton & Garrison LLP June 2005 Member of the Board, Senior Vice President, and Chief Financial the University of Tokyo June 2014 Outside Director of MUFG Union Bank, N.A. (current) Officer of Japan Tobacco Inc. Junichi Okamoto April 2004 Professor, Research Center for Advanced Science and Technology, December 2016 Retired from Paul, Weiss, Rifkind, Wharton & Garrison LLP June 2006 Member of the Board of Japan Tobacco Inc., ● Ordinary Shares: 182,800 ■ 9/9 National University Corporation, the University of Tokyo January 2017 Chairman & CEO of Longsight Strategic Advisors LLC (current) Executive Vice President and Deputy CEO of JT International S.A. June 2014 Outside Director of Electric Power Development Co., Ltd. February 2017 Outside Director of MUFG Americas Holdings Corporation (current) June 2011 Representative Director and Executive Vice President of Japan October 2015 Retired from the University of Tokyo June 2017 Member of the Board of Directors (Outside Director), MUFG (current) Tobacco Inc. Retired from Outside Director of Electric Power Development Co., Ltd. January 2019 Independent Director, TRU (UK) Asia Limited (current) June 2014 External Board Director of Recruit Holdings Co., Ltd. Ambassador Extraordinary and Plenipotentiary of Japan to the January 2018 Member of the Board of Japan Tobacco Inc. Republic of Latvia March 2018 Outside Director of Asahi Group Holdings, Ltd. (current) June 2016 Emeritus Professor of The University of Tokyo (current) June 2018 Member of the Board of Directors (Outside Director), MUFG (current) January 2019 Retired from Ambassador of Japan to the Republic of Latvia Member of the Board of Directors (Outside Director) June 2019 Outside Director of Dai-ichi Life Holdings, Inc. (current) Member of the Board of Directors June 2019 Outside Director of NTT DATA Corporation (current) Hirofumi Nomoto Chairman (Corporate Executive) Member of the Board of Directors (Outside Director), MUFG (current) ● Ordinary Shares: 25,000 ■ － Nobuyuki Hirano Chairman & Representative Director, Tokyu Corporation Member of the Board of Directors (Outside Director) ● Ordinary Shares: 80,400 Dilutive Shares: 625,577 ■ 9/9 Member of the Board of Directors, MUFG Bank, Ltd. Member of the Board of Directors (Outside Director) Tarisa Watanagase Kaoru Kato ● Ordinary Shares: 0 ■ 9/9 Former Governor, the Bank of Thailand ● Ordinary Shares: 0 ■ － April 1971 Joined Tokyu Corporation April 2003 Executive General Manager of Media Business Headquarters of Corporate Advisor, NTT DOCOMO, INC. Tokyu Corporation April 2004 President & Representative Director of its communications Inc. June 2007 Director of Tokyu Corporation June 1975 Joined the Bank of Thailand Member of the Board of Directors Executive Officer of Real Estate Development Business Unit of Tokyu January 1988 Economist, International Monetary Fund (On the Secondment) Deputy Chairman (Representative Corporate Executive) April 1977 Joined Nippon Telegraph and Telephone Corporation (NTT) Corporation October 2002 Deputy Governor of the Bank of Thailand Mikio Ikegaya July 1999 General Manager of Plant Department of NTT Kansai Mobile January 2008 Managing Director of Tokyu Corporation November 2006 Governor of the Bank of Thailand ● Ordinary Shares: 75,630 Dilutive Shares: 304,796 ■ 9/9 Communications Network, Inc. June 2008 Senior Managing Director of Tokyu Corporation September 2010 Retired from the Bank of Thailand April 2000 General Manager of Plant Department of NTT DoCoMo Kansai, Inc. April 2010 Executive Officer & Senior Executive General Manager of Urban Life March 2013 Outside Director of the Siam Cement Public Company Limited President and CEO, Mitsubishi UFJ Trust & Banking June 2002 General Manager of Corporate Strategy and Planning Department, Produce Business Unit of Tokyu Corporation (current) Corporation Member of the Board of Directors of NTT DoCoMo Kansai, Inc. June 2010 Senior Managing Director & Representative Director of Tokyu June 2017 Member of the Board of Directors (Outside Director), MUFG July 2005 Representative Director and Senior Corporate Executive Officer of Corporation (current) Sumitomo Mitsui Card Co., Ltd. April 2011 President & Representative Director, Tokyu Corporation July 2007 Executive Vice President, General Manager of Corporate Strategy April 2018 Chairman & Representative Director, Tokyu Corporation (current) and Planning Department, Member of the Board of Directors of June 2019 Member of the Board of Directors (Outside Director), MUFG (current) Member of the Board of Directors NTT DoCoMo Kansai, Inc. Member of the Board of Directors (Outside Director) Deputy Chairman (Representative Corporate Executive) June 2008 Executive Vice President, General Manager of Corporate Strategy Akira Yamate and Planning Department, Member of the Board of Directors of Saburo Araki ● Ordinary Shares: 0 ■ 9/9 NTT DOCOMO, Inc. Member of the Board of Directors ● Ordinary Shares: 210,980 Dilutive Shares: 61,520 ■ 8/8*2 June 2012 President and Chief Executive Officer, Member of the Board of (Lead Independent Outside Director) Certified Public Accountant President & CEO, Mitsubishi UFJ Securities Holdings Co., Ltd. Directors of NTT DOCOMO, Inc. Tsutomu Okuda President & CEO, Mitsubishi UFJ Morgan Stanley Securities June 2016 Corporate Advisor, Member of the Board of Directors of NTT Co., Ltd. DOCOMO, Inc. ● Ordinary Shares: 26,100 ■ 9/9 June 2018 Corporate Advisor of NTT DOCOMO, Inc. (current) Special Advisor, J. Front Retailing Co., Ltd. June 2019 Member of the Board of Directors (Outside Director), MUFG (current) November 1977 Joined Price Waterhouse Japan March 1983 Registered as Certified Public Accountant in Japan July 1991 Representative Partner of Aoyama Audit Corporation April 1964 Joined The Daimaru, Inc. Partner of Price Waterhouse Member of the Board of Directors President & Group CEO (Representative Corporate Member of the Board of Directors (Outside Director) September 1991 Managing Director of Daimaru Australia Pty. Ltd. April 2000 Representative Partner of Chuo Aoyama Audit Corporation May 1995 Director of The Daimaru, Inc. Partner of PricewaterhouseCoopers Executive) Haruka Matsuyama May 1996 Managing Director of The Daimaru, Inc. September 2006 Representative Partner of PricewaterhouseCoopers Aarata Kanetsugu Mike March 1997 President of The Daimaru, Inc. June 2013 Resigned from PricewaterhouseCoopers Aarata ● Ordinary Shares: 3,300 ■ 9/9 ● Ordinary Shares: 49,055 Dilutive Shares: 356,140 ■ 9/9 May 2003 Chairman and chief executive officer of The Daimaru, Inc. External Audit & Supervisory Board Member of Nomura Real Partner, Hibiya Park Law Offices September 2007 Chairman of The Daimaru, Inc. Estate Holdings, Inc. President & CEO, MUFG Bank, Ltd. President and Chief Executive Officer of J. Front Retailing Co., Ltd. External Audit & Supervisory Board Member of Nomura Real March 2010 Chairman and Chief Executive Officer of J. Front Retailing Co., Ltd. Estate Development, Co., Ltd. April 2013 Director and Senior Advisor of J. Front Retailing Co., Ltd. June 2015 Retired from External Audit & Supervisory Board Member of April 1995 Assistant Judge, the Tokyo District Court May 2014 Senior Advisor of J. Front Retailing Co., Ltd. Nomura Real Estate Development, Co., Ltd. July 2000 Registered as an attorney at law, Member of the Daini Tokyo Bar June 2014 Member of the Board of Directors (Outside Director), MUFG (current) Member of the Board of Directors (Outside Director), MUFG (current) Association May 2018 Special Advisor of J. Front Retailing Co., Ltd. (current) External Director of Nomura Real Estate Holdings, Inc. Member of the Board of Directors Joined Hibiya Park Law Offices External Member of Board of Statutory Auditors, Prudential Deputy President (Representative Corporate Executive) Group COO & Group CDTO January 2002 Partner of Hibiya Park Law Offices (current) Holdings of Japan, Inc. (current) June 2012 Outside Corporate Auditor of Vitec Co., Ltd. June 2019 External Director of Nomura Real Estate Development, Co., Ltd. (current) Hironori Kamezawa June 2013 Outside Director of T&D Holdings, Inc. (current) ● Ordinary Shares: 25,500 Dilutive Shares: 251,725 ■ － June 2014 External Audit & Supervisory Board member of MITSUI & CO., LTD. Member of the Board of Directors, Deputy President, (current) *1 Ownership substantially in the form of American Depositary Receipts (ADRs) MUFG Bank, Ltd. Member of the Board of Directors (Outside Director), MUFG (current) *2 For Mr. Yasushi Shingai and Mr. Saburo Araki, their “attendance at Board of Directors June 2015 Outside Director of Vitec Co.,Ltd. (currently Restar Holdings Meetings” represents the number of meetings attended/the number of meetings held Corporation) (current) following their assumption of the office as director at MUFG in June 2018.

86 MUFG Report 2019 MUFG Report 2019 87 Important Issues Concerning Value Creation Environment / Social / Governance Upgrading the Governance Framework

Global Advisory Board

MUFG has established the Global Advisory Board to function as an advisory body to the Executive Committee, and 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, and government policy. They provide advice and recommendations on groupwide management, global governance, business strategy and other management issues from an independent standpoint.

Dr. Victor K Fung Professor Merit E. Janow Group Chairman, Fung Group, Hong Kong Former Honorary Chairman, the Dean, School of International and Public International Chamber of Commerce Affairs, Columbia University Fomer Member of Appellate Body, World Trade Organization Outline of Annual Meetings In December 2018, MUFG held its sixth annual Global Advisory Board meeting. In addition to Global Advisory Board members, attendees included Ambassador Lord (James) MUFG officers, directors, outside directors and John V. Roos Sassoon, Kt representatives from overseas partner banks. Participants engaged in active discussion on a broad Former United States Ambassador to Director, Jardine Matheson Holdings range of themes. Topics included risk factors that Japan Limited may impact MUFG’s business strategies and portfolio, Former Commercial Secretary to the Treasury, United Kingdom U.S.-China trade tensions, the growth potential of and risks associated with emerging nations, European politics such as Brexit and the EU’s future, digitalization and the data business.

Mr. George Yeo Mr. Toshio Iwamoto

Former Singapore Minister for Foreign Principal Executive Advisor, MUFG Global Partnership Conference Affairs, Trade & Industry, Health, NTT DATA Corporation Information and the arts We held the third round of the MUFG Global Partnership Conference to facilitate the sharing of expertise and collaboration among partner banks and MUFG. Attendees included chairpersons, CEOs and other executives from partner banks. The conference focused on four themes, namely, “channel strategy,” “data-driven marketing,” “consumer finance risk” and “cybersecurity.” Attendees were able to discuss issues Mr. Akio Mimura each is now confronting while exchanging insights.

Honorary Chairman, In addition, a digital-themed breakout session was held NIPPON STEEL CORPORATION with representatives from each partner bank. They discussed the priority measures they’ve taken and shared their know-how and case studies.

88 MUFG Report 2019 MUFG Report 2019 89 Foundations of Value

90 MUFG Report 2019 MUFG Report 2019 91 Foundations of Value Communicating with Stakeholders

At the same time, MUFG engages with NGOs and accommodating all customers no matter their age, Enhancing Our Corporate Value NPOs, incorporating the insights and advice such physical condition or disability (facility). As such, we bodies provide into its environmental, social and are abiding by the spirit of universal design in various governance (ESG) initiatives in an effort to maintain ways. through Committed Engagement the trust and confidence of local societies at home and abroad. ● A Trust Product with Proxy Withdrawal Functions with Stakeholders Released Dialogue with Customers With the rapid aging of society, a growing number of MUFG believes that winning the support of its various stakeholders is essential to securing sustainable We are endeavoring to improve our operations and people are expected to develop dementia; a Cabinet growth in its business activities and thus its corporate value. In line with this belief, we engage with service quality by incorporating customer feedback. Office survey revealed that in 2025 one out of five of stakeholders via a variety of channels and take heed of their expectations and requests to make Moreover, we are striving to enhance employee skills those aged 65 or older will be affected by this improvements in our business management. so that all customers can rest assured about our disease. To address issues arising from this services. Setting our sights well above the mere phenomenon, the Trust Bank is offering products and protection of customer trust, we are thus striving to services with asset management functions MUFG’s Channels for Communication with Stakeholders build new trust for the future. employing digital technologies.

Concepts behind MUFG’s Customer Relations For example, the Trust Bank released a trust product Communities Ensuring the consideration of customer’s with proxy withdrawal functions, in March 2019. This The environment • Participation in community activities in perspectives and being fair and sincere in our product enables family members or other individuals • Participation in collaboration with NPOs various initiatives undertakings are basic to our business operations. registered as proxies for elderly customers • Employees volunteer activities (beneficiaries) to carry out withdrawals on their In line with the Corporate Vision, MUFG has published behalf. Employing a dedicated smartphone app, both its Principles of Ethics and Conduct, a set of the beneficiaries and proxies are allowed to withdraw Customers Shareholders and investors • Sales personnel and call standards each officer and employee should apply to funds, while notice of any withdrawal request being centers • General Meeting of their day-to-day business conduct and decisions. The filed is immediately sent to these individuals as well • Dedicated contacts for Shareholders customer feedback and MUFG • Presentation meetings Principles open with a chapter entitled “Customer as to registered non-proxy family members. The app inquiries for investors • Questionnaires (customer • Seminars and Focus,” and we are engaging in exhaustive initiatives also provides the details of such requests while satisfaction surveys) individual meetings to be the embodiment of this tenet. giving access to account statements.

In addition, MUFG announced the MUFG Basic Policy Other functions include an optional setting for a Business partners Employees • MUFG Group for Fiduciary Duties to provide unified guiding waiting period that allows the beneficiary, the proxy • Purchasing activities Awareness and • Business alliance Engagement Survey principles aimed at ensuring that a customer-centric and family members to confirm or deny any and collaboration • Town hall meetings approach is thoroughly embraced by all Group withdrawal request filed. entities. ● Sign Language Service Using a Teleconferencing System Monitoring System The Bank and NICOS are equipped with call center Dialogue with Employees Engagement with Communities, Local For MUFG, comments and requests from customers functions that offer access to a teleconferencing Societies and the Environment MUFG holds town hall meetings and round-table constitute valuable assets. Each Group company* is system to customers with hearing disabilities or conferences aimed at enhancing mutual As members of the communities they serve, MUFG continually collecting, analyzing and sharing the conversational handicaps so that they may connect understanding between top management and employees proactively participate in volunteer and “Voice of Customers,” in order to improve its services. them with operators who use sign language or employees and ensuring that MUFG’s visions and other locally rooted activities to nurture ties with Based on this input, in fiscal 2018 we made a total of communicate via text. policies are shared by all. Furthermore, MUFG’s other community members. 345 improvements.

executives often visit branches and interact with the * The Bank, the Trust Bank, MUMSS, NICOS and ACOM In Addition, the Bank began offering these services at frontline employees who directly engage with bank counters from January 2019 onward. customers, exchanging insights about how to Introducing Universal Design enhance MUFG’s onsite capabilities. This interaction To ensure that every customer can use its services is an example of their efforts to create a better with confidence, MUFG is pushing ahead with workplace in which employees’ opinions are reflected ongoing efforts from two angles: 1) enhancing in business operations and every employee finds employees’ customer engagement skills to meet their job rewarding. diverse customer needs (hospitality) and 2) developing barrier-free branches capable of

92 MUFG Report 2019 MUFG Report 2019 93 Foundations of Value

Risk Management

A summary of the Risk Appetite Statement is Basic Policy Risk Appetite Framework Risk Appetite Statement distributed throughout the Group in an effort to Since the 2008 financial crisis, financial institutions The Risk Appetite Framework aims to clarify MUFG’s The Risk Appetite Statement elucidates the Risk spread the basic philosophy behind the Risk Appetite have been compelled to adopt more comprehensive risk appetite (types and amount of risk that it is willing Appetite Framework, which embodies MUFG’s Framework. and sophisticated risk management systems. This to accept) as it works to achieve its business strategy attempts to achieve an integrated group strategy risk management function has also grown in and financial plan. The framework is designed to along with effective risk management. The Risk Through the penetration of risk culture and risk importance for MUFG as a global bank with increase management transparency and generate Appetite Statement contains an overview of the Risk appetite framework, we will take action in subsidiaries spanning the commercial, trust and more profit opportunities in an environment where Appetite Framework (basic policy and management anticipation of environmental changes both inside investment banking sectors. risk is properly controlled. process) as well as specific business strategies, and outside of the Group, while the environment financial plans and risk appetite details. continues to be uncertain. Risk Appetite Framework Management MUFG aims to strengthen its Group risk management Process through the diffusion of a risk culture that strengthens the structure of Group business In the formulation and execution of its business Risk Appetite Framework management as well as integrated risk management. strategy and financial plan, MUFG will set the Our goal is effective risk governance that is appropriate level of risk appetite and proceed to Management Plan consistent across regions, subsidiaries and the monitor and analyze risk volume. Financial Plan Risk Appetite

holding company. • Net operating profit Organic Correlation • Capital allocation plan and RWA plan The process of setting and managing risk appetite is • Net income Capital strategy and distribution based on • ROE risk Furthermore, the Risk Appetite Framework provides outlined on the next page. In order to effectively • RORA Business Strategy • Liquidity risk etc. • Expenses ratio guidelines for effective risk management that backs implement the Risk Appetite Framework, risk Risk appetite for difficult-to-quantify risk our business strategy and financial plan while evaluation and verification procedures (Top Risk • Common equity Tier 1 Ratio • Group business strategy supporting efforts to avoid unexpected losses and management, stress tests, capital allocation system) enhance risk return management. will be applied at every stage of the management planning process. Risk Appetite Setting and Management Process Furthermore, even after the plan is formulated, we are ready to take immediate action in emergency Before formulating the overall business plan, assess pressure points for business strategy and 1. Confirming assumptions for financial and capital operations based on the internal and external environment. business plan formulation situations through monitoring of the set risk appetite. • Future balance sheet simulation based on macroeconomic scenarios

Risk Management System In pursuing management’s vision, formulate a business plan proposal based on business 2. Formulate business plan proposal strategy, financial plan and risk appetite. Holding Company (Mitsubishi UFJ Financial Group, Inc.) • Clarify risks to be accepted and risks to be avoided on the basis of Risk Culture

Revise strategy based on results Risk Committee Board of Directors The risk management divisions will mainly assess the appropriate level of risk appetite. The Corporate Risk Management strategy proposal will be amended if the stress tests indicate that the maximum level of Management Planning U.S. Risk Committee Committee Executive Committee 3. Risk appetite assessment and acceptable risk will be exceeded. Committee (including ALM) verification (including crisis management) • Assess and verify the plan from a risk/return perspective • Evaluation of strategy profitability and soundness based on stress tests Credit & Investment Market Risk, Liquidity Risk, Management Committee Corporate Risk Management Operational Risk, Div. (coordinates risk The Executive Committee and Board of Directors discuss and subsequently make decisions Operations Risk, management) based on an integrated view of business strategy, the financial plan and risk appetite. Credit Committee Reputation Risk, Model Risk 4. Business plan decision • On the basis of the capital allocation system, capital is allocated to subsidiaries and operational divisions in accordance with the level of risk Credit Policy & Planning Div. Credit Risk

Global Compliance Div. Information Risk, Regulatory Risk The risk management divisions of the holding company and subsidiaries monitor risk volume in relation to allocated capital and risk appetite. Operations & Systems 5. Risk monitoring IT Risk Planning Div. • Forward-looking valuation of internal and external environment based on Top Risk management • Regular monitoring of risk appetite compliance Corporate Administation Div. Tangible Asset Risk Cases where risk volume exceeds upper limit Human Resources Div. Personnel Risk The risk appetite plan will be revised if monitoring reveals that risk appetite and actual levels of risk diverge, or if environmental factors increase the level of risk. Legal Div. Legal 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 the risk appetite is exceeded

94 MUFG Report 2019 MUFG Report 2019 95 Foundations of Value Risk Management

addressing Top Risks to ensure that the long-term structural changes in the balance sheet Developing and Diffusing a Risk Culture Enterprise Risk Management understanding of these risks is shared throughout with a view to ensuring there is no funding shortage. MUFG defines a Risk Culture as the basic approach MUFG makes every effort to recognize the risks that their organizations. By doing so, management is that specifies how to take risks and risk management emerges in the course of business execution, implementing effective risk control measures. In Capital Allocation System for MUFG’s organizational and individual behaviors. assessing it according to uniform criteria. Enterprise addition, conclusions reached via these discussions In this framework, latent losses associated with risk Our Risk Culture is incorporated into the MUFG risk management is then conducted while are reflected in stress test scenarios as necessary to are converted to a required capital amount, and Group Code of Conduct, a set of standards aimed at maintaining business stability and striving to accurately verify our capital adequacy and our capital is then allocated across Group companies guiding judgments and actions undertaken by Group maximize shareholder value. Enterprise risk business and financial plans. and between different risk categories according to officers and employees in the course of their daily management is a dynamic approach, promoting (Major Top Risks identified by MUFG are as listed business strategy and the profit plan. The framework operations. In accordance with our aim to further stable profits commensurate with risk as well as the below.) is intended to allow the appropriate distribution of enhance the Group’s risk governance structure, we appropriate allocation of resources. capital throughout the Group as MUFG monitors to are disseminating this Risk Culture throughout the Stress Tests preserve financial soundness, evaluate capital Group so that it is embraced by every employee. Enterprise risk management is composed of three ● Stress tests for capital adequacy assessment adequacy versus risk and judge impact on overall To learn about our MUFG Group Code of Conduct, please refer to page 98. main strands: Top Risk management, stress tests and In formulating its business strategy, MUFG regularly capital strategy. the capital allocation system. assesses its internal capital adequacy through stress Enhancing the Effectiveness of Risk tests based on Basel III capital adequacy regulations. Management Top Risk Management The potential losses that emerge from scenario Stress tests analyze the prevailing economic Effective risk management and a strong Risk Appetite analysis are classified as risks and then their relative environment at home and abroad as well as the Framework depend on a Risk Culture that enables importance is weighed according to degree of future outlook while giving due consideration to the meaningful discussion and clear communication impact and probability. The risks that need to be MUFG Group’s business structure. The three-year- throughout the Group. watched most closely over the next year are period scenarios are thus created and utilized to classified as Top Risks and a risk map is created, calculate and assess the impact on our capital ratio thereby ensuring a forward-looking approach to risk arising from the materialization of risks. This also management. Moreover, this approach also helps us verify the propriety of our business strategy. addresses medium- to long-term risks, including those associated with digitalization and ESG issues, ● Liquidity stress tests Cyber Security with robust measures being prepared to ensure our In liquidity stress tests, the impact of MUFG-specific MUFG is well aware of its social responsibilities for efficient and effective cyber centric security function responsiveness to emergencies. or overall market stress on the balance sheet is securing the assets entrusted by its customers and its for the group globally. assessed so as to implement MUFG’s business obligation to provide secure and stable financial At MUFG and its core subsidiaries, management is strategy and financial plan. Various options are services. With this in mind, MUFG has positioned For customers who use digital banking and other regularly engaged in discussions aimed at examined to respond to short-term fund outflows or threats posed by cyberattacks and other relevant services, we ensure the safety and soundness by events as Top Risks. Accordingly, we have appointed a distributing onetime passwords, smartphone apps and Group Chief Information Security Officer (CISO), and by strengthening security functions etc. in system are promoting cyber security measures under development. management’s leadership. Major Top Risks

Risk incidents* Risk scenarios By having announced the Cyber Security Management Declaration, the summary of initiatives undertaken by A decline in profitability • Decline in profitability of net interest income due to negative interest rate policy. MUFG, we have enhanced existing risk identification (including a decline in profitability • Decline in overall profitability due to constraints on balance sheet size caused by regulatory factors. of net interest income) and prevention activities utilizing the MUFG-CERT; a dedicated team in charge of detecting and responding Foreign currency liquidity risk • Depletion of foreign currency liquidity or significant increase in costs due to deterioration of market conditions. to cyber threats and subsequent restoration. Furthermore, efforts are under way to raise our • Rises in credit costs in specific sectors and regions with potential credit concentration risk because of the slowdown incident-response capabilities by establishing and An increase in credit costs of real economies around the world due to the U.S. and European central banks’ exit strategies from monetary updating procedures/manuals, conducting periodic easing and the heightening tensions in the Korean peninsula, Middle East and other regions with geopolitical risk. drills/training and updating our contingency plans.

• Customer information leakage and reputational damage due to cyberattacks. IT risk • Payment of compensation costs and reputational damage due to system failure. In April 2019, we established the MUFG Cyber Security Fusion Center, a cyber security specialized task force Risk associated with money • Regulatory issues such as the infringement of anti-money laundering regulations or applicable regulations related to that is in charge of threat intelligence analysis and laundering and economic sanctions economic sanctions could lead to legal actions such as business suspension or civil fines, and reputational damage. security monitoring. This task force provides an * 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 2019. These scenarios include types of incidents that are not necessarily specific to MUFG and can happen to business corporations in general.

96 MUFG Report 2019 MUFG Report 2019 97 Foundations of Value

Compliance

management of the Financial Crimes Compliance Basic Policy Compliance Framework Initiatives to Enhance Global Financial Crimes Compliance Framework framework across MUFG and provide the foundation We have clarified our Group mission, long-term vision Compliance management divisions have been for the implementation of the Financial Crimes and shared values in the Corporate Vision and established at the holding company and the major In November, 2017, MUFG Bank established the Compliance program in a manner that is expressed our commitment to meeting the subsidiaries, namely, the Bank, the Trust Bank and Global Financial Crimes Division (“GFCD”), which is in commensurate with the strategies, business expectations of customers and society as a whole. Mitsubishi UFJ Securities Holdings (hereinafter, charge of Anti-Money Laundering (“AML”), Sanctions activities, and risk profiles of each Group Company Furthermore, we have established the MUFG Group “three subsidiaries”). Each compliance management Compliance, and Anti-Bribery and Corruption as well as standards that define more detailed Code of Conduct as the guidelines for how the division formulates compliance programs (collectively, “Global Financial Crimes Compliance”). requirements. Group’s directors and employees should act to realize and organizes training courses to promote GFCD is headquartered in New York, where the the Corporate Vision. This expresses our compliance, and regularly reports to each company’s excellence for Global Financial Crimes Compliance is Under GFCD’s leadership, MUFG will implement the commitment to complying with laws and regulations Board of Directors and Executive Committee on centralized. The aim is to enhance the Bank’s global Financial Crimes Compliance policies and standards globally, to acting with honesty and integrity, and to the status of compliance activities. program to prevent and detect Global Financial across all of MUFG, ensuring a consistent and behaving in a manner that supports and strengthens Crimes, against the backdrop of the heightened integrated approach. Furthermore, GFCD will the trust and confidence of society. The holding company has the Group Compliance regulatory expectations in that area. At the same develop a program framework to maintain the Committee while the three subsidiaries have time, Regional Financial Crimes Offices under GFCD, effectiveness of the program throughout the Group In addition, as we expand our business globally, we Compliance Committees operating under their which are responsible for the implementation of globally. are committed to keeping abreast with executive committees with the aim of deliberating Financial Crimes Compliance in the region, were developments in the laws and regulations of the important compliance matters. Additionally, the established in the Americas, Japan, EMEA and Asia, In addition, toward the upcoming 4th FATF Mutual jurisdictions in which we operate, including those holding company has the Group Chief Compliance respectively. Evaluation in Japan in fiscal 2019, we recognize the targeting money laundering and bribery, as well as Officer (“CCO”) Committee composed of the CCO of paramount importance and urgency of enhancing competition laws, while paying attention to trends in the holding company and the CCOs of the three Following the establishment of GFCD in 2017, MUFG Global Financial Crimes Compliance functions in financial crimes. subsidiaries. This committee deliberates important GFCD was also established in New York in August, Japan, as a financial institution that takes important matters related to compliance and compliance- 2018 to ensure a consistent Global Financial Crimes part in Japanese financial system. We are currently related issues for which the Group should share a Compliance program across the Group. working on the tightening of procedures related to common understanding. verification at the time of transaction, etc, in line with GFCD is establishing policies that define the regulatory requirements and expectations. governance and oversight structure for the

Organization Chart (GFCD of MUFG Bank)

Personnel outside the Global Financial Crimes Division (GFCD) Chief Compliance Officer Personnel at GFCD

Revising the MUFG Group Code of Conduct to Encourage “Doing the Right Thing” Executive Officer in charge of FATF 4th round Mutual Evaluation of Japan Deputy Executive Officer in charge of GFCD Today, businesses at home and abroad are exposed to In addition, the Code of Conduct now includes a growing risk of a decline in corporate value resulting illustrative narratives that help employees to clearly Head of GFCD from the violation of legal regulations or ethical understand what it takes to act in accordance with the standards. With an eye to securing responsiveness to principles of the Code of Conduct. These narratives this risk, in April 2019 we revised the MUFG Group Code show specific cases on, among others, the importance of Conduct (hereinafter, the “Code of Conduct”), which of learning from mistakes and quality management as Head of FCO*1Japan provides guidelines to be referred to by each officer well as the promotion of whistle-blowing system. and employee to encourage them to “Do the Right Thing” in the course of business activities. Going forward, we will continue to strive to ensure that the Code of Conduct is embraced and practiced by all 1 3 Head of FCO* Americas 2 Specifically, the revised Code of Conduct is equipped Group members. To this end, we will periodically with a checklist available to Group employees for their communicate messages from top management to reference whenever they have concerns or are unsure encourage all employees to “Do the Right Thing” while

of their judgment. The revision also clearly defined the providing various training programs including DVD- Head of FCO*1 Asia roles and responsibilities of managers, who are based learning as well as incentive programs, such as

expected to serve as a role model of their staff. evaluation system. Analysis Regulatory Compliance Testing Global Head of AML* Compliance Planning Global Head of ABC* Compliance Operations Global Head of Sanctions For the full text of the Code of Conduct, please also visit our corporate website. 1 Crimes Global Head of Financial Crimes Global Head of Financial Crimes Global Head of Financial Crimes Global Head of Financial Crimes Global Head of Financial Compliance Program Management Compliance Program

URL: https://www.mufg.jp/dam/profile/governance/ethics/pdf/codeofconduct_en.pdf Head of FCO* EMEA Global Head of Issues Management

*1 Financial Crimes Office *2 Anti-Money Laundering *3 Anti-Bribery and Corruption

98 MUFG Report 2019 MUFG Report 2019 99 Foundations of Value Foundations of Value

Internal Audit Responding to Global Financial Regulations

Since the global financial crisis of 2008, financial institutions have been required to uphold higher internal audits in which the nature and magnitude of standards of financial soundness and management discipline, with a number of new regulations having Role of the Internal Audit the associated risks are considered in determining been developed and implemented. In this section, we explain our response to these regulations and Internal audit functions verify the adequacy and audit priorities and the frequency and depth of challenges that we will face in the future. effectiveness of internal control systems from a internal audit activities. In addition, internal auditors standpoint independent of operating functions. This attend key meetings, collect important internal includes monitoring the status of risk management control documents and implement other necessary and compliance systems, which are critical to the measures to facilitate efficient off-site monitoring. Addressing the TBTF Problem The Status of Our Compliance with maintenance of sound and appropriate business All G-SIBs,* including MUFG, are required to prepare Reports to the Audit Committee Prudential Regulations operations. Internal audit results are reported to recovery plans aimed at reducing the possibility of senior management. An additional role of the internal The holding company has an audit committee within As of March 31, 2019, the following Basel III failure and secure ability to take practical steps to audit is to make suggestions to help improve or its Board of Directors as required by the Companies requirements are applied, and MUFG has been ensure orderly resolution. As one of the G-SIBs facing rectify any issues or specific problems that are Act of Japan. compliant, meeting the required level for each item. growing calls for a definitive solution for the so-called identified. TBTF (too-big-to-fail) problem, MUFG is steadily The internal audit division reports to the committee Required Results as of upgrading countermeasures in place to satisfy the Group Internal Audit Framework level*1 March 31, 2019 on important matters, including governing principles aforementioned requirements. Common Equity Tier 1 Capital Ratio 8.54% 12.23% The MUFG Group has internal audit functions at the for internal audit plans and the results of internal Tier 1 Capital Ratio 10.04% 13.90% * G-SIBs refer to Global Systemically Important Banks, institutions whose failure would holding company level as well as at the subsidiary audits. have a major impact on the global financial system according to the Financial Stability level that are designed to enable the Group to Total Capital Ratio 12.04% 16.03% Board (FSB). MUFG Internal Audit Activity Charter provide coverage for all operations and support the Leverage Ratio 3.0% 4.94% 3 Board of Directors of the holding company in the In April 2019, the MUFG Group adopted the “MUFG External TLAC*2 Risk-weighted asset basis 16.0% 18.16%* Outlook exercise of its supervisory functions. Internal Audit Activity Charter,” which defines its Ratio Total exposure basis 6.0% 7.90% basic policies for internal auditors, including their Liquidity Coverage Ratio 100.0% 141.2% For the international standards to take full effect, it is

In addition to having primary responsibility for mission, purposes, responsibilities, and roles. This *1 Figures calculated taking into account a capital conservation buffer of 2.5%, a G-SIB quite important to ensure their timely and consistent surcharge of 1.5%, and a counter-cyclical buffer of 0.04%. initiating and preparing plans and proposals related charter encourages internal auditors to conduct *2 Total Loss-Absorbing Capacity: This obliges G-SIBs, whose failure would have a major implementation in each jurisdiction. However, there impact on the financial market, to acquire additional capital and liabilities. to internal audits of the Group, the internal audit internal audits in accordance with the global *3 Excluding a capital buffer. are deviations in some jurisdictions, prompting division at the holding company monitors and, as standards set by the Institute of Internal Auditors, growing concerns about market fragmentation in necessary, guides, advises and administers the thereby contributing to the enhancement of the countries around the globe. Upcoming Regulations MUFG Must internal audit divisions of subsidiaries and affiliated corporate value of the Group and to the achievement Comply with in the Future companies. of the Group’s corporate vision.This charter is thus Moreover, the global economy may be hit by a major designed to raise the acuity of internal auditors. Implemenation of Agreed-Upon Global Standards crisis caused by unexpected factors. We must also Implementing Effective and Efficient With the December 2017 finalization of revised Basel be vigilant against newly emerging risks arising from Internal Auditing *An international association headquartered in the United States, the IIA formulates III framework, international regulatory reforms aimed technological advancements or climate change. practical standards for internal audits, issues accreditation for certified internal auditors To ensure that internal audit processes use available (CIA) and engages in other activities aimed at providing leadership for the global at securing preparedness to the global financial crisis profession of internal auditing. resources with optimal effectiveness and efficiency, are deemed generally completed. Looking ahead, With this in mind, MUFG will strive to realize an For the full text of the charter, please also visit our corporate website. the internal audit divisions implement risk-focused https://www.mufg.jp/english/profile/governance/audit/index.html MUFG is called to maintain compliance with the optimal global financial regulatory framework so that following international standards that will be it will contribute to global economic growth, which is applicable to domestic banks. the fundamental role of financial institutions.

Internationally agreed- Internal Audit Framework upon deadline for Main items implementation Holding Company (Mitsubishi UFJ Financial Group, Inc.) 2018 ● Net Stable Funding Ratio (NSFR)

Board of Directors Audit Committee (Chairman: Outside Director) ● Upwardly revised External TLAC Ratio Reporting Instructing requirements Executive Committee Risk-weighted asset basis (18.0%) Total exposure basis (6.75%) Internal Audit Division ● MUFG, Each Division Upwardly revised Leverage Ratio requirements (3.75%)* Auditing ● Revisions to various risk-weighted asset 2022 measurement methodologies Consulting and reporting Guidance, advice and management Standard credit risk measurement methods Internal rating methods for credit risks Group Companies Credit assessment adjustment risks Fundamental Review of Trading Book (FRTB) Operational risks Output floor

* Premised on the sum of the ratio of 3.0% and half of the G-SIB buffer of 1.5%.

100 MUFG Report 2019 MUFG Report 2019 101 Financial Data / Corporate Data

Ten-Year Summary of Major Financial Data

(Billions of Yen) (Billions of Yen) FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Currency exchange rate (USD/JPY) (yen)       Currency exchange rate (USD/JPY) (yen)     

Income statements summary Income statements summary Gross profits before credit costs for trust accounts      Gross profits before credit costs for trust accounts       Net interest income      Net interest income       Trust fees excluding credit costs      Trust fees excluding credit costs      Net fees and commissions        Net fees and commissions      Net trading profits       Net trading profits         Net other business profits        Net other business profits      Net gains (losses) on debt securities       Net gains (losses) on debt securities      General and administrative expenses         General and administrative expenses       Expense ratio         Expense ratio       Net operating profits before credit costs for trust accounts Net operating profits before credit costs for trust accounts            and provision for general allowance for credit losses and provision for general allowance for credit losses Total credit costs （） （） （ ） （）  Total credit costs （） （） （） （） （） the Bank and the Trust Bank combined*1 （） （） （） （）  the Bank and the Trust Bank combined*1 （） （） （ ）    Net gains (losses) on equity securities  （） （） （）  Net gains (losses) on equity securities      Gains (losses) on sales of equity securities   （ ）   Gains (losses) on sales of equity securities      Losses on write-down of equity securities （） （ ） （ ） （） （ ） Losses on write-down of equity securities （） （） （） （） （ ） Equity in earnings of equity method investees      Equity in earnings of equity method investees       Other non-recurring gains (losses) （ ） （） （） （） （） Other non-recurring gains (losses) （） （） （） （） （  ） Ordinary profits       Ordinary profits       Net extraordinary gains (losses)  （） （）  （） Net extraordinary gains (losses) （ ） （） （） （） （） Total taxes        Total taxes      Tax burden ratio       Tax burden ratio       Profits attributable to non-controlling interests  （ ）    Profits attributable to non-controlling interests      Profits attributable to owners of parent      Profits attributable to owners of parent      

Balance sheets summary Balance sheets summary Total assets       Total assets            Loans and bills discounted           Loans and bills discounted          Securities        Securities          Total liabilities           Total liabilities         Deposits         Deposits         Negotiable certificates of deposit         Negotiable certificates of deposit        Total net assets        Total net assets        Total shareholders’ equity         Total shareholders’ equity      Retained earnings       Retained earnings      Total accumulated other comprehensive income  （）     Total accumulated other comprehensive income         Non-controlling interests       Non-controlling interests       

Financial Ratios Financial Ratios Common Equity Tier 1 Capital ratio ー ー ー   Common Equity Tier 1 Capital ratio       Tier 1 Capital ratio*2      Tier 1 Capital ratio*2      Total Capital ratio       Total Capital ratio      Dividends per share (DPS) (yen)      Dividends per share (DPS) (yen)       Dividend payout ratio      Dividend payout ratio      Book-value per share (BPS) (yen)        Book-value per share (BPS) (yen)       Earnings per share (EPS) (yen)         Earnings per share (EPS) (yen)      ROE MUFG definition        ROE MUFG definition      ROE JPX definition        ROE JPX definition       Total number of ordinary shares (excluding own shares) (billion shares)      Total number of ordinary shares (excluding own shares) (billion shares)      Share price (fiscal year-end) (yen)       Share price (fiscal year-end) (yen)        Market capitalization*3 (trillions of yen)      Market capitalization*3 (trillions of yen)      PBR*3 (times)      PBR*3 (times)      PER*3 (times)      PER*3 (times)     

*1 MUFG Bank, Ltd. (non-consolidated) + Mitsubishi UFJ Trust and Banking Corporation (non-consolidated) (without any adjustments) *2 FY 2009 to FY 2011 are under Basel II standards *3 Figures based on fiscal year-end share price

102 MUFG Report 2019 MUFG Report 2019 103 Financial Data / Corporate Data

Consolidated Financial Statements

Consolidated Balance Sheets Consolidated Financial Results Consolidated Statements of Comprehensive Income (Millions of Yen) (Millions of Yen) (Millions of Yen) (Millions of Yen) Mar 31, 2019 Mar 31, 2018 Mar 31, 2019 Mar 31, 2018 FY 2018 FY 2017 FY 2018 FY 2017 Assets: Liabilities: Gross profits   Profits     Cash and due from banks   Deposits     Gross profits before credit costs for Other comprehensive income trust accounts   Net unrealized gains (losses) on Call loans and bills bought    Negotiable certificates of deposit    （ ）  Net interest income    available-for-sale securities  Receivables under resale agreements     Call money and bills sold   Net deferred gains (losses) on hedging Trust fees    （） Receivables under securities   Payables under repurchase  instruments borrowing transactions  agreements    Credit costs for trust accounts － － Land revaluation excess － （） Monetary claims bought    Payables under securities lending Net fees and commissions       Foreign currency translation transactions （ ） （） Trading assets     Net trading profits      adjustments  Commercial papers     Money held in trust    Net other operating profits    Remeasurements of defined benefit plans （  ）  Trading liabilities      Securities    Net gains (losses) on debt securities   Share of other comprehensive income Borrowed money     of associates accounted for using equity （） （  ） Loans and bills discounted      General and administrative expenses    method Foreign exchanges     Foreign exchanges     Amortization of goodwill   Total other comprehensive income （）   Short-term bonds payable   Other assets    Net operating profits before credit costs for Comprehensive income    Bonds payable    trust accounts, provision for general allowance    Tangible fixed assets     for credit losses and amortization of goodwill (Comprehensive income attributable to) Due to trust accounts   Buildings     Comprehensive income attributable to Net operating profits before credit costs      Other liabilities    for trust accounts and provision for   owners of parent Land    general allowance for credit losses Reserve for bonuses   Comprehensive income attributable to    Lease assets   Provision for general allowance for credit losses － － non-controlling interests Reserve for bonuses to directors   Construction in progress      Net operating profits*1   Reserve for stocks payment    Other tangible fixed assets    Net non-recurring gains (losses)    Net defined benefit liabilities    Intangible fixed assets    Credit costs （ ） （ ） Reserve for retirement benefits to   Software    directors Losses on loan write-offs （  ） （ ） Goodwill    Reserve for loyalty award credits   Provision for specific allowance for － credit losses － Lease assets   Reserve for contingent losses   Other credit costs  （ ） Other intangible fixed assets   Reserves under special laws   Reversal of allowance for credit losses   Net defined benefit assets   Deferred tax liabilities     Reversal of reserve for contingent  － Deferred tax assets    Deferred tax liabilities for land  losses included in credit costs revaluation  Customers’ liabilities for acceptances  Gains on loans written-off   and guarantees   Acceptances and guarantees    Net gains (losses) on equity securities   Allowance for credit losses （ ） （ ） Total liabilities    Gains on sales of equity securities   Total assets      Net assets: Losses on sales of equity securities （） （） Capital stock      Losses on write-down of equity securities （ ） （） Capital surplus    Equity in earnings of equity method investees   Retained earnings   Other non-recurring gains (losses) （  ） （） Treasury stock （ ） （） Ordinary profits   Total shareholders’ equity    Net extraordinary gains (losses) （ ） （） Net unrealized gains (losses) on   available-for-sale securities Losses on change in equity （ ） （  ） Net deferred gains (losses) on hedging   Profits before income taxes     instruments   Income taxes-current    Land revaluation excess   Income taxes-deferred   Foreign currency translation     adjustments Total taxes   Remeasurements of defined benefit  Profits     plans （） Profits attributable to non-controlling interests   Debt value adjustments of foreign  （） subsidiaries and affiliates Profits attributable to owners of parent    Total accumulated other    *1 Net operating profits = Banking subsidiaries’ net operating profits + Other consolidated comprehensive income entities’ gross profits - Other consolidated entities’ general and administrative Subscription rights to shares    expenses - Other consolidated entities’ provision for general allowance for credit losses - Amortization of goodwill - Inter-company transactions Non-controlling interests    (Reference) Total net assets     FY 2018 FY 2017 Total liabilities and net assets      Total credit costs*2 （） （）

*2 Total credit costs = Credit costs for trust accounts + Provision for general allowance for 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

104 MUFG Report 2019 MUFG Report 2019 105 Financial Data / Corporate Data Consolidated Financial Statements

Consolidated Statements of Cash Flows Consolidated Statements of Changes in Net Assets (Millions of Yen) (Millions of Yen) (Millions of Yen) Accumulated other Shareholders’ equity comprehensive income FY 2018 FY 2017 FY 2018 FY 2017 FY 2018 Net unrealized Net deferred Cash flows from operating activities: Cash flows from investing activities: Total gains (losses) on gains (losses) on Capital stock Capital surplus Retained earnings Treasury stock shareholders’ available-for-sale hedging Profits before income taxes     equity securities instruments Purchases of securities （65,103,588） （73,029,164） Depreciation and amortization  Balance at the beginning of the period     （）      Proceeds from sales of securities   Cumulative effects due to revision of accounting （ ） （ ） （ ） Impairment losses   standards for foreign subsidiaries and affiliates    Proceeds from redemption of securities    Restated balance      （）      Amortization of goodwill   Payments for increase in money held in Equity in losses (gains) of equity method （） （） Changes during the period （） （） trust Cash dividends （ ） （ ） investees Profits attributable to owners of parent   Increase (decrease) in allowance for Proceeds from decrease in money held （ ） （） in trust    Repurchase of treasury stock （ ） （ ） credit losses Disposal of treasury stock （）   Increase (decrease) in reserve for Purchases of tangible fixed assets （ ） （ ） bonuses （）  Retirement of treasury stock （）  － Purchases of intangible fixed assets （） （） Reversal of land revaluation excess   Increase (decrease) in reserve for bonuses to directors   Changes of application of equity method （ ） （ ） Proceeds from sales of tangible fixed Increase (decrease) in reserve for stocks    Changes in subsidiaries’ equity   assets payment （）  Net changes of items other than shareholders’ equity （ ）  Decrease (increase) in net defined Proceeds from sales of intangible fixed （ ）   Total changes during the period － （）    （ ）  benefit assets （）  assets Balance at the end of the period    （ ）     Increase (decrease) in net defined Payments for transfer of business （ ） （） －  (Millions of Yen) benefit liabilities   Payments for acquisition of subsidiaries’ Accumulated other comprehensive income Increase (decrease) in reserve for （） （） equity affecting the scope of （  ） （） Debt value Total retirement benefits to directors Foreign Subscription Non-controlling consolidation Land currency Remeasurements adjustments accumulated rights Total net assets Increase (decrease) in reserve for loyalty revaluation of defined of foreign other to shares interests  translation award credits （ ） Others （ ） （） excess adjustments benefit plans subsidiaries comprehensive and affiliates income Increase (decrease) in reserve for Net cash provided by (used in) （ ） （） （） Balance at the beginning of the period     （）     contingent losses investing activities （） Cumulative effects due to revision of accounting Interest income recognized on （） （） （ ） standards for foreign subsidiaries and affiliates statement of income （）    Cash flows from financing activities: Restated balance     （）      Interest expenses recognized on Proceeds from subordinated borrowings    Changes during the period statement of income   Cash dividends （ ） Repayments of subordinated Losses (gains) on securities （  ） （） （  ） （） Profits attributable to owners of parent  borrowings redemption Losses (gains) on money held in trust   Repurchase of treasury stock （ ） Proceeds from issuance of subordinated Disposal of treasury stock  Foreign exchange losses (gains) （ ）  bonds payable and bonds with warrants   Retirement of treasury stock － Losses (gains) on sales of fixed assets （）  Reversal of land revaluation excess  Payments for redemption of Net decrease (increase) in trading assets （ ）  subordinated bonds payable and bonds （） （ ） Changes of application of equity method （ ） with warrants Changes in subsidiaries’ equity  Net increase (decrease) in trading liabilities  （ ） Proceeds from issuance of common Net changes of items other than shareholders’ equity （）（ ） （ ）  （） （） （  ） （） Net decrease (increase) in unsettled    （ ） stock to non-controlling shareholders Total changes during the period （）（ ） （ ）  （） （） （  ） （  ） trading accounts    Balance at the end of the period （ ） Repayments to non-controlling           Net decrease (increase) in loans and （ ）   shareholders －  (Millions of Yen) bills discounted Payments for redemption of preferred Accumulated other Net increase (decrease) in deposits     （ ） Shareholders’ equity securities （）  comprehensive income Net increase (decrease) in negotiable （） （） FY 2017 Net unrealized Net deferred certificates of deposit Dividends paid by MUFG （） （） Total gains (losses) on gains (losses) on Capital stock Capital surplus Retained earnings Treasury stock shareholders’ Net increase (decrease) in borrowed money equity available-for-sale hedging   （  ） Dividends paid by subsidiaries to non- securities instruments (excluding subordinated borrowings) （ ） controlling shareholders （ ）   Balance at the beginning of the period    （）     Net decrease (increase) in call loans and （）  Changes during the period bills bought and others Purchases of treasury stock （ ） （） Cash dividends （） （） Net decrease (increase) in receivables   Proceeds from sales of treasury stock    Profits attributable to owners of parent     under securities borrowing transactions Repurchase of treasury stock （） （） Net increase (decrease) in call money   Payments for purchases of subsidiaries’ Disposal of treasury stock （）    and bills sold and others equity not affecting the scope of （） （） consolidation Retirement of treasury stock （ ）   ー Net increase (decrease) in commercial papers  （） Reversal of land revaluation excess   Net increase (decrease) in payables Proceeds from sales of subsidiaries’ Changes in subsidiaries’ equity （） （） under securities lending transactions （ ）  equity not affecting the scope of －  consolidation Effects due to revision of accounting standards Net decrease (increase) in foreign    （） for foreign subsidiaries and affiliates exchanges (assets) Others －  Net changes of items other than shareholders’ equity  （） Net increase (decrease) in foreign    Net cash provided by (used in) Total changes during the period ー （）  （ ）    （） exchanges (liabilities) （） （ ） Balance at the end of the period （ ） financing activities          Net increase (decrease) in short-term （） （ ） Effect of foreign exchange rate changes (Millions of Yen) bonds payable （ ） （） Accumulated other comprehensive income Net increase (decrease) in issuance and on cash and cash equivalents redemption of unsubordinated bonds payable   Foreign Debt value Total Subscription Net increase (decrease) in cash and cash Land Remeasurements adjustments accumulated Non-controlling （）  currency rights interests Total net assets Net increase (decrease) in due to trust accounts （  ）   equivalents revaluation translation of defined of foreign other to shares excess adjustments benefit plans subsidiaries comprehensive and affiliates income Interest income (cash basis)      Cash and cash equivalents at the   beginning of the period   Balance at the beginning of the period   （ ） （）      Interest expenses (cash basis) （ ） （） Changes during the period Cash and cash equivalents at the end of   Cash dividends （） Others （） （ ） the period Profits attributable to owners of parent   Sub-total     Repurchase of treasury stock （） Disposal of treasury stock  Income taxes （） （） Retirement of treasury stock ー Refund of income taxes   Reversal of land revaluation excess  Changes in subsidiaries’ equity （） Net cash provided by (used in)   Effects due to revision of accounting standards operating activities for foreign subsidiaries and affiliates  Net changes of items other than shareholders’ equity （） （）  （  ）  （） （ ）  Total changes during the period （） （）  （  ）  （） （ ）  Balance at the end of the period     （）    

106 MUFG Report 2019 MUFG Report 2019 107 Financial Data / Corporate Data

Company Overview Corporate Information Major MUFG Group Companies (As of March 31, 2019)

(As of August 1, 2019) Company Name Mitsubishi UFJ Financial Group, Inc.

Head Office 7-1, Marunouchi 2-Chome, Chiyoda-ku, ■ Consolidated subsidiary ● Equity method investee Tokyo 100-8330, Japan

Date of Establishment April 2, 2001

Amount of Capital ¥2,141.5 billion Mitsubishi UFJ Financial Group Common Stock (Issued) 13,667,770,520 shares Stock Listing Tokyo Stock Exchange, Nagoya Stock Exchange, New York Stock Exchange Commercial Bank Credit Cards / Consumer Finance / Installment Credit Ticker Symbol Number 8306 (Tokyo Stock Exchange, Nagoya Stock Exchange) ■ MUFG Bank ■ Mitsubishi UFJ NICOS MUFG (New York Stock Exchange) ■ Bank of Ayudhya Public Company Limited ■ ACOM Number of Shareholders 695,521 ■ PT Bank Danamon Indonesia, Tbk. ● JACCS ● Security Bank Corporation ● JALCARD ● Vietnam Joint Stock Commercial Bank for Industry and Trade Leasing Stock Price Tokyo Stock Exchange Ownership and Distribution of Shares* Government and local Commercial Bank Holding Company MUFG Nikkei 225 ● Mitsubishi UFJ Lease & Finance  Securities: governments: 4.99% ■ MUFG Americas Holdings Corporation ● Hitachi Capital  0.02%

 Corporations: Trust Bank Asset Management  13.14% Foreign institutions, etc.: ■ Mitsubishi UFJ Trust and Banking ■ MU Investments  35.72% ■ The Master Trust Bank of Japan ■ Mitsubishi UFJ Kokusai Asset Management  ■ Mitsubishi UFJ Investor Services & Banking (Luxembourg) ■ Mitsubishi UFJ Asset Management (UK)  Individuals and others: ■ Mitsubishi UFJ Baillie Gifford Asset Management  Financial 14.10% institutions: Securities ■ MUFG Lux Management Company  2018/3 2018/6 2018/9 2018/12 2019/3 32.00% ■ Mitsubishi UFJ Securities Holdings ■ Colonial First State Global Asset Management Note: Share index (2018/3E = 100) * Excludes treasury shares and fractional shares (Securities Holding Company) ■ Mitsubishi UFJ Morgan Stanley Securities Holding Company Website ■ Mitsubishi UFJ Morgan Stanley PB Securities ■ MUFG Investor Services Holdings (Fund Management) For more detailed information, please refer to our website. ■ kabu.com Securities ● AMP Capital Holdings (Asset Management) ■ MUFG Securities (Canada) ■ MUFG Securities EMEA Internet Bank / Regional Bank ■ Mitsubishi UFJ Trust International ● Jibun Bank ■ MUFG Securities Asia (Singapore) ● The Chukyo Bank ■ MUFG Securities Asia ● Morgan Stanley MUFG Securities Others

■ Mitsubishi UFJ Real Estate Services About MUFG ■ Japan Digital Design https://www.mufg.jp/english/ (English) ■ MUFG Innovation Partners ■ Global Open Network ■ MUMEC Visionary Design, Ltd. ● Mitsubishi Research Institute DCS

This integrated report was printed in Japan on FSC paper with vegetable oil ink.

108 MUFG Report 2019 MUFG Report 2019 109 Mitsubishi UFJ Financial Group, Inc. 7-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo 100-8330, Japan Telephone: 81-3-3240-8111 Issued September 2019 www.mufg.jp/english/ Printed in Japan