MUFG Mitsubishi UFJ Financial Group Inc

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 8, 2021

[NOTICE: This Notice of Convocation is a translation of the Japanese original for reference purposes only, and in the event of any discrepancy, the Japanese original shall prevail.]

Securities code: 8306

June 8, 2021

NOTICE OF CONVOCATION OF

THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

Dear Shareholders:

Notice is hereby given that the 16th Annual General Meeting of Shareholders (the “Meeting”) of Mitsubishi UFJ Financial Group, Inc. (the “Company”) will be held as described below.

In order to prevent the spread of the novel coronavirus (COVID-19), we ask that shareholders refrain from attending the General Meeting of Shareholders in person. Instead, shareholders may exercise their voting rights in advance, either electronically (via the Internet) or in writing. Please review the attached “Reference Materials Concerning the General Meeting of Shareholders” and exercise your voting rights by 5:10 p.m. on Monday, June 28, 2021, following the procedure described on page 4 to 8.

Also, because there are a limited number of seats at the venue for the General Meeting, it may not be possible to secure an adequate number of seats for everyone who does attend. Please understand that we may have to refuse admission to the venue, with consideration for the safety of shareholders.

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In order to prevent the spread of COVID-19, we have made the safety of shareholders our top priority, and will implement the following policies for holding this General Meeting of Shareholders.

The Company website: https://www.mufg.jp/ir/stock/meeting/index.html

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(1) Consolidated Statement of Changes in Net Assets and Notes to the Consolidated Financial Statements; (2) Non-consolidated Statement of Changes in Net Assets and Notes to the Non-consolidated Financial Statements; (3) Major Borrowings; (4) Matters Concerning Independent Auditor; (5) System to Ensure Appropriate Conduct of Operations; (6) Other (Significant Accounting Estimates and Assumptions Used for Such Estimation); (7) Independent Auditor’s Report

The documents audited by the Audit Committee and Independent Auditors in preparing the Audit Reports and Independent Auditors Reports comprise the documents included in the “Business Report for the Sixteenth Fiscal Year,” and the documents (1) through (7) above, disclosed on our website.

The Company website: https://www.mufg.jp/

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Exercise of Voting Rights

Please review the “Reference Materials Concerning the General Meeting of Shareholders” on page 9 onward and exercise your voting rights by either of the following methods:

Exercise of voting rights in writing (voting right exercise form)

Please indicate your votes for or against the propositions on the enclosed voting right exercise form and send the completed form to the Company by return mail.

Deadline: Monday, June 28, 2021, to reach the Company no later than 5:10 p.m.

Exercise of voting rights via the Internet

Please access the voting right exercise website (https://evote.tr.mufg.jp/) (Japanese only) via the Internet and exercise your voting rights.

Deadline: Monday, June 28, 2021, at 5:10 p.m.

Please scan the “smartphone voting right exercise website login QR code” to exercise voting rights via smartphone

You can access the voting right exercise website without entering a voting rights exercise code and a password.

Please page 7 for details.

Exercise of voting rights by attending the Meeting in person

We strongly recommend that you refrain from attending the Meeting in person.

If attending, please submit the enclosed voting right exercise form at the reception.

You are also kindly requested to bring this Notice of Convocation for your reference at the Meeting.

Date and time of the Meeting: Tuesday, June 29, 2021, at 10:00 a.m.

Handling of the voting rights exercised multiple times

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Exercise of voting rights in writing (voting right exercise form)

Please indicate your votes for or against the propositions on the enclosed voting right exercise form and send the completed form to the Company by return mail. Please note that if there is no indication of your vote for or against any item of business, we will deem that you have voted for the proposal by the Company and against the proposal by shareholder.

Deadline: Monday, June 28, 2021, to reach the Company no later than 5:10 p.m.

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Please indicate “for” or “against” for each proposal here.

If you approve the proposal by the Company and Board of Directors’ opinion

If you do not approve the proposal by the Company and Board of Directors’ opinion

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Exercise of voting rights via the Internet

 

Using QR code   You can access the voting right exercise website without entering a “login ID” and a “password” by scanning the “smartphone voting right exercise website login QR code.”   *Voting rights can be exercised only once using the above method.
1.  Scan the QR code
* QR code is a registered trademark of DENSO WAVE INCORPORATED.
Please use your smartphone to scan the “smartphone voting right exercise website login QR code” on the bottom right of the enclosed voting right exercise form.   2.  Select a method of exercising voting rights
		Access the URL shown on the screen to display the voting right exercise website screen. There are two methods of exercising voting rights available.
Hereafter, please enter your approval or disapproval by following the instructions on the screen.

Deadline: 5:10 p.m., Monday, June 28, 2021
Using login ID and temporary password Please access the voting right exercise website (https://evote.tr.mufg.jp/) via the Internet and exercise your voting rights.
1.  Access the voting right exercise website (screen on PC)
		(1)   Click “Go to the next page.”
2.  Log in
		(2)   Use your “login ID” and “temporary password” provided on the bottom-right of the voting right exercise form.
		(3)   Click “Log in.”
Hereafter, please enter your approval or disapproval by following the instructions on the screen.

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[TRANSLATION]

REFERENCE MATERIALS CONCERNING

THE GENERAL MEETING OF SHAREHOLDERS

Items of Business and Reference Matters

<Proposal by the Company (from First Item of Business to Second Item of Business)>

The First Item of Business to the Second Item of Business are proposed by the Company.

First Item of Business                Appropriation of Surplus

MUFG’s basic policies call for continuously seeking to improve shareholder returns, focusing on dividends in the pursuit of an optimal balance with solid equity capital and strategic investment for growth.

MUFG will aim for the stable and sustainable increase in dividends per share through profit growth, and to raise the dividend payout ratio progressively to 40% by fiscal year 2023. MUFG will flexibly repurchase stock as return profits to return profits to shareholders that will contribute to improving capital efficiency, taking into consideration our business performance and capital situation, opportunities for growth investment, and the market conditions, including the stock prices. Also, MUFG will not hold treasury stock excessively to approximately 5% of the total shares outstanding and MUFG shall cancel the stocks exceeding such amount in principle.

Based on these policies, MUFG proposes the year-end dividend of ¥12.5 per share. Combined with the interim dividend of ¥12.5 per share, annual dividends will total ¥25 per share.

Matters concerning the year-end dividend:

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Second Item of Business             Election of 16 (sixteen) Directors

The terms of office of all directors will expire at the close of this Meeting. Therefore, based on the decision of the Nominating and Governance Committee (which constitutes a Nominating Committee under the Companies Act), you are hereby requested to elect 16 (sixteen) directors.

The candidates are as follows.

Each of the 9 (nine) candidates for outside directors meets the Company’s “Independence Standards for Outside Directors.” The 16 (sixteen) candidates for directors are composed of 12 (twelve) male candidates and 4 (four) female candidates (accounting for 25% of the candidates).

No.		Candidate’s Name				Number of   Years in   Office		Current Position and   Responsibilities at the   Company		Concurrent Posts   at Listed   Companies		Expertise
												Corporate   management		Finance		Financial   accounting		Law
1		(Ms.) Mariko Fujii				2		Member of the Board of Directors Nominating Member Compensation Member Risk Member (Chairperson)		1		—		●		—		—
2		(Ms.) Keiko Honda				1		Member of the Board of Directors		1		—		●		—		—
3		(Mr.) Kaoru Kato				2		Member of the Board of Directors Nominating Member Compensation Member Audit Member		1		●		—		—		—
4		(Ms.) Satoko Kuwabara				—				3		—		—		—		●
5		(Mr.) Toby S. Myerson				4		Member of the Board of Directors Risk Member		0		—		—		—		●
6		(Mr.) Hirofumi Nomoto				2		Member of the Board of Directors Nominating Member (Chairperson) Compensation Member		4		●		—		—		—
7		(Mr.) Yasushi Shingai				3		Member of the Board of Directors Audit Member Risk Member		2		●		—		●		—
8		(Mr.) Koichi Tsuji				—				0		—		—		●		—
9		(Ms.) Tarisa Watanagase				4		Member of the Board of Directors Risk Member		1		—		●		—		—

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No.		Candidate’s Name				Number of Years in Office		Current Position and Responsibilities at the Company		Concurrent Posts at Listed Companies
10		(Mr.) Ritsuo Ogura				1		Member of the Board of Directors  Audit Member		0
11		(Mr.) Kenichi Miyanaga				—		Managing Executive Officer		0
12		(Mr.) Kanetsugu Mike				4		Member of the Board of Directors  Chairman (Corporate Executive)		0
13		(Mr.) Saburo Araki				3		Member of the Board of Directors  Deputy Chairman (Representative Corporate Executive)		0
14		(Mr.) Iwao Nagashima				1		Member of the Board of Directors  Deputy Chairman (Representative Corporate Executive)		0
15		(Mr.) Junichi Hanzawa				—		Deputy Chairman (Representative Corporate Executive)		0
16		(Mr.) Hironori Kamezawa				2		Member of the Board of Directors  President & Group CEO (Representative Corporate  Executive)  Nominating Member  Compensation Member		1

 

		Candidate for Outside Director
		Candidate, being as a non-executive director, who does not concurrently serve as corporate executive, executive officer, employee or executive directors of the Company or its subsidiaries (excluding outside directors)
		Candidate for independent director provided for by Tokyo Stock Exchange, Inc.
Nominating Member:		Member of the Nominating and Governance Committee
Audit Member:		Member of the Audit Committee
Compensation Member:		Member of the Compensation Committee
Risk Member:		Member of the Risk Committee

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(Reference) Composition, etc. of the Board of Directors

Composition

The board of directors as a whole shall have an appropriately balanced composition that provides a deep understanding of the Group’s business and a wealth of knowledge and expertise on finance, financial accounting, risk management and compliance and so forth in order to ensure its effectiveness, and shall meet the following requirements in particular.

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MUFG Independence Standards for Outside Directors

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(Notes)

(Summary of the content of the Limited Liability Agreement)

With respect to the liability set forth in Articles 423, Paragraph 1 of the Companies Act, when an outside director acts in good faith and is not grossly negligent in conducting an outside director’s duties, the outside director shall assume liability for damages limited by the greater of ¥10 million or the minimum liability amount prescribed in Articles 425, Paragraph 1 of the Companies Act.

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<Proposal by Shareholder (from Third Item of Business to Eighth Item of Business)>

The Third Item of Business is proposed jointly by four shareholders.

The following clause shall be added to the Articles of Incorporation: “The company shall adopt and disclose in its annual reporting a plan outlining its business strategy, including metrics and short-, medium- and long-term targets, to align its financing and investments with the goals of the Paris Agreement.”

The aim of the proposal is to manage the company’s exposure to climate change risks, and maintain and increase its corporate value.

The Paris Agreement aims to strengthen the global response to the threat of climate change by limiting global temperature rise to well below 2 degrees Celsius above pre-industrial levels and preferably to 1.5 degrees Celsius, and making finance flows consistent with a pathway towards that goal.

Although the company has enacted environmental, social and governance policies, it continues to provide significant finance to fossil fuel expansion and deforestation, which has fallen far short of aligning with the Paris Agreement goals. Under the Japanese government’s carbon neutrality goal by 2050, this presents a significant financial and reputational risk to the company. Therefore, it is proposed to add the clause to the Articles of Incorporation.

[(The Company’s note) Cited above is an English translation of the original text of the proposal details and reasons for proposal described in a form submitted by the shareholders.]

The Board of Directors objects to this proposal.

The MUFG Environmental Policy Statement explicitly stipulates proactive disclosure of information by our Group. Also, in line with the Policy Statement, we have been working to support our customers’ decarbonization transition and enhance our Group’s risk management (Table 1) while positioning the climate change response as one of the most important management issues.

Also, in accordance with the MUFG Carbon Neutrality Declaration, which we approved and announced this time, we will from now on give shape to and implement the metrics, targets, and the management strategy for investments and loans in line with the Paris Agreement.

Moreover, the Article of Incorporation is the general policy to manage the company and therefore we believe it is not appropriate to add specific items related to business operations in this document. Hence we believe that it is not necessary to stipulate such provision as proposed in the Article of Incorporation.

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MUFG Environmental Policy Statement, which is approved by the Board of Directors, describes the environmental recognition that forms the foundation of our activities and provides guidelines for specific actions to implement the “Commitment to the Environment” as MUFG. The MUFG Environmental Policy Statement explicitly stipulates proactive disclosure of information on the environment, including climate change. We will continue to disclose such information in a highly transparent manner through our Annual Report and Sustainability Report.

MUFG announced the MUFG Carbon Neutrality Declaration in order to achieve net zero emissions in our financed portfolio by 2050 and in our own operations by 2030. Based on this, we will strive to enhance our management strategy, expand and improve transparency of information disclosure with scientific approach.

(Table 1. Major climate change solutions implemented between FY2020 and early FY2021)

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<Proposal by Shareholder (from Third Item of Business to Eighth Item of Business)>

Items from the Fourth Item of Business to the Eighth Item of Business are proposed jointly by four shareholders.

<Proposal by Shareholder>

The following clause shall be added to the Articles of Incorporation:

“The Company shall strive to submit securities report by the day immediately prior to the day of the Annual General Meeting of Shareholders.”

The Company submitted its securities report at 3:53 p.m. on June 29, 2020, after the close of the Annual General Meeting of Shareholders for 2020. However, this means that shareholders can only ask questions about the contents of the securities report almost a year later.

In the past, securities reports were submitted after the close of shareholder meetings due to legal restrictions; however, rules changed for fiscal years ended on or after January 1, 2010, and submission of securities reports prior to shareholder meetings is now permitted. In addition, since many of the items included in the securities report overlap with the matters for reporting in the Notice of Convocation of the General Meeting of Shareholders, it is expected that the contents of the securities report to be largely finalized after the Notice of Convocation of the General Meeting of Shareholders is dispatched.

If this is the case, unless there are special circumstances, efforts should be made to submit the securities report prior to the General Meeting of Shareholders.

[(The Company’s note) Cited above is an English translation of the original text of the proposal details and reasons for proposal described in a form submitted by the shareholders.]

The Board of Directors objects to this proposal.

We have established a philosophy, procedures, and systems for the disclosure of information to all stakeholders, including our depositors, business partners and other customers, shareholders, investors, and society, and by disclosing information in accordance with these, we aim to achieve fair, equitable, and appropriate disclosure of information concerning the MUFG Group. In addition, the MUFG Group aims to achieve sustainable growth and enhance its corporate value by appropriately leveraging the knowledge gained through constructive dialogue with stakeholders in our management process. As an effort based on the above, we have included “Significant Accounting Estimates and Assumptions Used in Such Estimates” in the Business Report, which is an attachment to the Notice of Convocation of the 16th Annual General Meeting of Shareholders, and voluntarily applied “The description of the key audit matter and why the matter was determined to be a key audit matter” in the Independent Auditor’s Report. In addition, we are striving to expand information disclosure and enhance constructive dialogue with our shareholders and other stakeholders by proactively working to reflect elements included in the Annual Securities Report in the Business Report, such as integrated disclosure of the Business Report and Annual Securities Report.

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In addition, the recently released “Guidelines for Investor and Company Engagement (Revised Draft)” mentions the submission of the Annual Securities Report prior to the date of the General Meeting of Shareholders, and we have started to consider and work on realizing the submission of the Annual Securities Report prior to the date of the Annual General Meeting of Shareholders.

In addition, the purpose of the Articles of Incorporation is to stipulate the basic policies for operating a company and we believe that it is not appropriate to stipulate matters concerning the execution of individual specific operations.

Therefore, we believe that there is no need to set forth the proposed clause in the Articles of Incorporation.

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<Proposal by Shareholder>

The following clause shall be added to the Articles of Incorporation:

“Officers and employees of the Company must not commit parental child abduction for gaining advantage in custody disputes.”

Since joint custody after divorce is not permitted in Japan, incidents of parental child abduction are not uncommon as part of custody dispute. For example, former professional Shogi player Takanori Hashimoto eight-dan suffered from parental abduction of his child, and was forced to retire at an early age of 38.

For another example, “B” Corporation was exposed to severe criticism, when parental child abduction committed by one of its employees was accused at its general meeting of shareholders.

While this issue should ultimately be resolved legislatively by admitting joint custody, for now, the Company may receive criticism from the society if its employee commits parental child abduction, just like “B” Corporation. The Company must avoid reputation risk of such nature.

[(The Company’s note) Cited above is an English translation of the original text of the proposal details and reasons for proposal described in a form submitted by the shareholders.]

The Board of Directors objects to this proposal.

We have established the MUFG Way as a guideline for the execution of our management activities. In order to realize the MUFG Way, the Code of Conduct has been established as a set of standards for the specific judgments and actions of the executives and employees of each Group company in their day-to-day activities, and requires them not only to comply with all laws, regulations, and rules in Japan and overseas, but also to take correct actions based on high ethical standards.

We also conduct internal training for executives and employees in order to instill the MUFG Way. In addition, the purpose of the Articles of Incorporation is to stipulate the basic policies for operating a company and we believe that it is not appropriate to stipulate matters concerning the execution of individual specific operations.

Therefore, we believe that there is no need to set forth the proposed clause in the Articles of Incorporation.

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The following clause shall be added to the Articles of Incorporation:

“Pursuant to the ‘Guidelines for How Companies Prevent Damage from Anti-social Forces’ established in June 2007 by the Ministerial Commission on Crime Control, the Group shall not have any relationship with anti-social forces including financing and other inappropriate or irregular transactions, and in the event of unknowingly having formed certain relationship with anti-social forces including financing and other inappropriate or irregular transactions, the Bank, as well as the entire Group shall work to dissolve such relationship including financing and other inappropriate or irregular transactions as soon as possible, thereby eliminating influence of anti-social forces.”

Today, society as a whole needs to be careful not to provide benefits to anti-social forces, and it is important to have a system to prevent financing and other inappropriate or irregular transactions for any reason. For example, if the fact of a transaction such as an inappropriate and irregular financing is reported on a weekly magazine, as in the case of the Mizuho Bank anti-social forces financing incident in 2013, it would not only damage the credibility of the Group, but also cause anxiety and suspicion among many business partners as it would be a violation of the guidelines.

Therefore, the entire Group should work together to eliminate inappropriate relationships as soon as possible after conducting investigation and gaining a grasp of such relationships.

[(The Company’s note) Cited above is an English translation of the original text of the proposal details and reasons for proposal described in a form submitted by the shareholders.]

The Board of Directors objects to this proposal.

The Group’s basic stance on anti-social forces is to resolutely confront anti-social forces that would threaten the order and safety of citizens and society, and to thoroughly cut off all relations with such influences.

Based on this recognition, we have established a basic policy in response to anti-social forces and have announced that we will not have any relationship, including business relationships, with antisocial forces. All officers and employees strictly follows this policy, thereby ensuring the appropriateness and safety of our operations.

In addition, we have established a Code of Conduct, which serves a standard for day-to-day decisions and actions, for the Group’s officers and employees, and have confirmed that we will not have any relationship with antisocial forces.

In addition, the purpose of the Articles of Incorporation is to stipulate the basic policies for operating a company and we believe that it is not appropriate to stipulate matters concerning the execution of individual specific operations.

Therefore, we believe that there is no need to set forth the proposed clause in the Articles of Incorporation.

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<Proposal by Shareholder>

The following clause shall be stated in the Articles of Incorporation:

“The following helpline for whistle-blowers shall be established within the Company.

Address: 21-21, 2-Chome, Sonobe-cho, Tochigi-shi, Tochigi

Contact person: Masaya Usui”

Under the current law, there are no penalties for unfairly treating whistle-blowers for whistle-blowing, and there is a risk that whistle-blowers will be discouraged. Therefore, the Company shall designate Masaya Usui as a contact point for whistle-blowers, as he has an experience in filing a self-represented shareholder class action against a bank holding company to pursue the bank’s supervisory responsibility in the massive fraud incident involving employees of Mizuho Bank that came to light in 2012, as well as experience in pursuing misconduct against numerous banks at shareholder meetings.

[(The Company’s note) Cited above is an English translation of the original text of the proposal details and reasons for proposal described in a form submitted by the shareholders.]

The Board of Directors objects to this proposal.

The Group positions the whistle-blowing system as an important tool for governance, and established whistle-blowing systems at each Group company in order to identify compliance issues at early stage and correct them through our self-cleansing capabilities. In addition, we have established “MUFG Group Compliance Helpline” (includes law firms as reporting points) available for officers and employees of each Group company, as a complement to whistle-blowing system established by each Group company.

Furthermore, in addition to these whistle-blowing systems, we have established the “Accounting Audit Hotline” to receive reports from inside and outside the Company on improper accounting treatments and suspicious treatments at each Group company including the Company, with legal office as the reporting point.

In each system, the information of whistle-blowers is strictly handled, and we handle each case appropriately by establishing provisions in the Code of Conduct and internal rules to prevent whistle-blowers from suffering disadvantages.

In addition, the purpose of the Articles of Incorporation is to stipulate the basic policies for operating a company and we believe that it is not appropriate to stipulate matters concerning the execution of individual specific operations.

Therefore, we believe that there is no need to set forth the proposed clause in the Articles of Incorporation.

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<Proposal by Shareholder>

The following person shall be elected as a director:

Tatsuki Ino (Date of birth: June 30, 1969)

(1) As a director of TAC Co., Ltd., Mr. Ino is so broad-minded as to accept all sorts of things, both good and evil, such as effectively dismissing a lecturer who made an accusation of illegal payoff for the benefit of a corporate racketeer. While he has a questionable track record at the company, he is expected to demonstrate his capabilities at the Company, which has a well-established compliance system.

[(The Company’s note) Cited above is an English translation of the original text of the proposal details and reasons for proposal described in a form submitted by the shareholders.]

The Board of Directors objects to this proposal.

In order to ensure the effectiveness of the board of directors, the board of directors is composed of members who have in-depth knowledge of the Group’s business as well as diverse knowledge and expertise in finance, financial accounting, risk management, and legal compliance, among others, thereby maintaining appropriate balance as a whole.

In addition, the Nominating and Governance Committee has established certain standards for the selection of directors, including the standard that directors, as fiduciaries of management elected by shareholders, must properly fulfill their fiduciary duty and due diligence in the execution of their duties, and have the quality to contribute to the sustainable growth and medium- to long-term enhancement of the corporate value of the Company, as well as the quality to properly supervise the execution of duties by the management team. The committee nominates persons who meet these requirements as candidates for directors.

In accordance with the above policy, the Company believes that the candidates for directors proposed in the Second Item of Business for this General Meeting of Shareholders are the most appropriate and well-balanced composition.

Therefore, we believe that the election of one director as under this proposal is not necessary.

The Company is not aware of any of the individual specific cases mentioned in the reasons for the proposal.

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Evaluation of the board of directors

Since 2013, the Company has retained external consultants to evaluate the board of directors. These consultants conduct questionnaire surveys of and interviews with all of the directors regarding the composition of committees, advance preparations, the content of discussions, the status of operations and contributions, as well as assessments of the execution system. The results of these questionnaire surveys and interviews are reported to and discussed by the Nominating and Governance Committee and the board of directors.

In fiscal year 2019, based on evaluation results for fiscal year 2018, the Company increased the total number of outside directors by one in order to strengthen its supervisory functions, and also introduced a task roadmap of priority issues. As a result, the fiscal year 2019 evaluation results assessed that there has been improvements in the effectiveness of the board of directors, mainly in its proposal and operation. Amid drastic changes in the business environment, such as prolonged long-term ultra-low interest rates, slower growth rates, and progress towards digitalization, as well as the social and economic changes triggered by the COVID-19 pandemic, we reaffirmed the need for further development of our corporate governance in order to maintain and strengthen resilience and realize sustainable growth.

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Initiatives taken during fiscal year 2020 in response to results of the evaluation of the board of directors for fiscal year 2019

Below are some initiatives taken by the Company during fiscal year 2020 based on the results of the evaluation of the board of directors shown above.

The results of the evaluation of the board of directors for fiscal year 2020 are scheduled to be disclosed in the “Corporate Governance Report” to be submitted after this Annual General Meeting of Shareholders.

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Information on Livestreaming and Preliminary Questions Using the Internet

How to watch the livestream

Date and time of the streaming: Tuesday, June 29, 2021, from 10:00 a.m. to the close of the meeting

Reception of preliminary questions

Submission period: From Monday, May 31, 2021 to Wednesday, June 23, 2021.

Please enter questions on the reception form of the dedicated website listed above.

Precautions:

Among questions submitted in advance of the meeting, we will answer those that are of significant interest to shareholders on the day of the meeting. For all other questions, answers will be posted on our website after the General Meeting of Shareholders. Please understand that we will not be able to answer all questions. Furthermore, please note that we cannot provide answers individually.

[Inquiries on ID and password]

Mitsubishi UFJ Trust and Banking Corporation TEL: 0120-191-060

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Business Report for the Sixteenth Fiscal Year (April 1, 2020 to March 31, 2021)

The group/MUFG (the “Group”) is a corporate group that is comprised of the Company, 168 subsidiaries, 91 subsidiary entities, etc., and 53 affiliated corporate entities, etc. The Group conducts business in areas that include mainly commercial banking, trust banking and securities, and also credit cards and consumer finance, leasing, and asset management, and other areas, with the aim of becoming the world’s most trusted financial group.

Over the course of fiscal year 2020, restrictions placed on economic activities in order to suppress the spread of infection put downward pressure on the global economy amid an unprecedented crisis caused by COVID-19. Due to the economic restrictions that were introduced in response to the first wave of infections, many countries experienced a severe and large economic decline during the first quarter, especially developed countries like Japan, the US and those in Europe. These economic restrictions were then eased as the first wave subsided and many central banks and governments embarked upon large-scale monetary easing and fiscal spending at this time. These factors, along with a reaction to the previous quarter’s slump, resulted in a large rebound globally in quarter two. From the third quarter, there was another rise in cases across several regions and many countries, including Japan, tightened restrictions on movement, which acted as a continuous weight on economic recovery. On the other hand, it appears there were some positive trends, such as vaccine rollouts in some countries. In addition, some uncertainty related to politics and policymaking subsided as a trade agreement was reached between the EU and UK and the Democratic Biden administration passed an additional large-scale economic stimulus package after achieving victory at the US presidential election.

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Turning to the financial situation, US and Japanese stock prices plummeted at the end of fiscal year 2019 due to the COVID-19 pandemic. Since then, they have continued to recover on the back of expectations that the economy will sooner rather than later return to normal due to the impact of policies and the distribution of vaccines. As of the end of fiscal year 2020, they had recovered to a point which was higher than the level before the COVID-19 pandemic; US stock prices reached a record high and the Japanese stock market was at its highest point since the bubble period. Meanwhile, the JPY had been on a trend of appreciation against the USD up to and including the third quarter, hitting USD/JPY102 for a short while at the start of January 2021. Risk appetite then increased in financial markets owing to expectations of an early recovery of the US economy following the passage of an additional economic stimulus package, resulting in dollar buying. Interest rates generally remained at low levels in Japan and other countries up to and including quarter three as countries adopted monetary easing policies. Nevertheless, there appears to have been a rise in long-term interest rates in quarter four owing to expectations of economic recovery in the US.

Under such environments, with respect to the consolidated results of the Group in fiscal year 2020, ordinary profits were ¥1,053.6 billion and profits attributable to owners of parent were ¥777.0 billion.

Consolidated gross profits were ¥3,997.9 billion, marking an increase of ¥11.6 billion from the previous fiscal year. Net interest income was ¥1,905.1 billion, an increase of ¥12.1 billion from the previous fiscal year, reflecting a decline in U.S. short-term interest rates. Net fees and commissions income was ¥1,334.7 billion, a decrease of ¥6.5 billion from the previous fiscal year, mainly due to the impact of a decrease in transaction volume caused by the COVID-19 pandemic, despite an increase due to the consolidation of First Sentier Investors*1. Net trading profits and net other operating profits were ¥617.5 billion, a decrease of ¥3.6 billion from the previous fiscal year. General and administrative (G&A) expenses were ¥2,749.4 billion, a decrease of ¥52.3 billion from the previous fiscal year, due to the cost reduction of both domestic and overseas expenses, partially offset by the consolidation of overseas subsidiaries. As a result of the above, net operating profits totaled ¥1,248.4 billion, marking an increase of ¥63.9 billion from the previous fiscal year. Total credit costs were ¥515.5 billion, marking an increase of ¥292.5 billion from the previous fiscal year. The main reason for the increase was the recording of credit costs associated with the increase in global credit risk due to the COVID-19 pandemic, as well as the recording of allowance for credit losses based on new accounting methodology introduced in our major overseas subsidiaries. The new accounting methodology records allowance for credit losses based on the concept of expected credit loss which include certain forecast information such as macroeconomic indicators. Net gains (losses) on equity securities resulted in gains of ¥130.2 billion, marking an increase of ¥98.9 billion due to a rise in stock market. Equity in earnings of the equity method investees amounted to ¥321.7 billion. As for net extraordinary gains (losses), losses of ¥11.5 billion were recorded, an improvement of ¥394.7 billion from the previous fiscal year. This was mainly due to a lack of one-time amortization of goodwill of ¥343.3 billion associated with the recording of impairment losses on the shares of Bank Danamon and Krungsri (Bank of Ayudhya Public Company Limited) recorded in the previous year.

As a result of the above, profits attributable to owners of parent were ¥777.0 billion, marking an increase of ¥248.8 billion from the previous fiscal year.

Under the regulatory standard (Basel III), Consolidated Common Equity Tier 1 capital ratio, Consolidated Tier 1 capital ratio, and Consolidated total capital ratio were 12.33%, 13.96%, and 16.31%, respectively. All of these met the required level as of March 31, 2021. The liquidity coverage ratio*² was 168.4%, also meeting the required level.

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In addition, the risk-monitored loan ratio that shows the soundness of loan assets, remained at a low level of 1.25%.

Annual dividends per common stock for fiscal year 2020 are expected to be ¥25, the same amount as the fiscal year 2019*³.

(Operations and Results by Business)

In order to demonstrate the strengths of its comprehensive financial group, the Group has introduced the business group system in which our group companies coordinate closely to formulate group-wide strategies and promote businesses. Each business group designs strategies that integrate the strengths of group subsidiaries and implements measures in order to meet a broad range of customer needs.

The operations and results by business group for fiscal year 2020 are as follows.

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Retail & Commercial Banking				Percentage of net operating profits
Business
Retail & Commercial Banking Business Group takes a groupwide, integrated approach to meet the diverse needs of our individual domestic customers and SMEs through a range of financial services from housing loans, consumer finance, corporate loans, fund settlement, asset management, inheritance and real estate, and also through solution proposals for business and asset succession.

For customers affected by the COVID-19 pandemic, this business group has provided flexible and prompt financing support and focused on continuing to provide service through its branches and back-office centers while ensuring the safety of the customers and employees. As society’s digital shift continues to accelerate, in the online banking services, we saw significant increases in the number of users of its “Mitsubishi UFJ DIRECT” service for individual customers and the number of subscribers to its “BizSTATION” service for corporate clients. We have also begun provision of new apps, such as a household budget management app, a personal data trust bank app*, and an app for discretion investment services.

In the wealth management business, which provides solutions to social issues such as business succession, asset succession, and asset formation, the entire Group has worked as one to promote activities aimed at assessing customers’ assets and needs. Through the collaboration with the Bank, we strengthened proposals for inheritance and real estate by the Trust Bank and proposals for asset management by the Securities.

Japanese Corporate & Investment Banking				Percentage of net operating profits
Business
Japanese Corporate & Investment Banking Business Group helps large Japanese corporate customers seeking global expansion achieve growth in their corporate value. We provide services, such as lending, fund settlements and foreign exchange business, as well as comprehensive solutions for M&As and real estate-related business, fully employing the expertise of each group entity.

This business group has provided speedy financial support related to the COVID-19 pandemic, and the Bank and the Securities worked together to provide various solutions that meet customers’ needs for capital reinforcement. By firmly establishing the structure of unified operation of the Bank and the Trust Bank, we have made further progress with the measures for solving issues faced by our customers, and we have increased its real estate-related business and support for dialogue with investors such as SR^*1 and IR^*2 activities.

We are also enhancing our efforts for solving environmental and social issues. We have expanded our efforts for financing that aims to realize a sustainable society, such as our Sustainability Linked Loans, which provide financial support for the attainment of targets in line with ESG strategies of customers.

Global Corporate & Investment Banking				Percentage of net operating profits
2
Business
Global Corporate & Investment Banking (Global CIB) Business Group offers services that provide value-added solutions for large global corporate customers through an integrated business model involving the Bank and the Securities.

Through reduction of existing low-profitability assets and enhanced deal screening framework, we have improved net interest margin for our loan assets, and significantly reduced our non-JPY loan-to-deposit balance.

We have promoted our origination & distribution (O&D) business^*1 on a MUFG group basis to enhanced asset velocity, connecting institutional investors and corporate clients with financial needs. As a part of this initiative, we have arranged DIP-financing^*2 in the U.S., and participated a COVID-19 emergency assistance program in collaboration with MIGA^*3, part of the World Bank Group. In addition, we have focused on arranging sustainable finance, such as project finance for the world’s largest offshore wind development project in the U.K.

In October 2020, as a new business, we have started to support financing to growing startups in Asia Pacific leveraging AI and digital technology through Mars Growth Capital, jointly established with Liquidity Capital, an Israeli fintech company.

Global Commercial Banking				Percentage of net operating profits
Business
Global Commercial Banking Business Group provides financial services to local SMEs and individuals in the U.S. and Southeast Asia through partner banks*1, such as MUFG Union Bank in the U.S., Krungsri (Bank of Ayudhya) in Thailand and Bank Danamon in Indonesia, etc.

MUFG Union Bank has worked to improve its profitability by strengthening its management structure, optimizing its loan portfolio, and reducing expenses. Krungsri (Bank of Ayudhya) increased deposits / loans, which lent a hand to becoming the third largest bank in Thailand on a net profit basis. Bank Danamon leveraged the MUFG Group’s customer base to capture the entire commercial flow of its customers and expanded its business, in addition to increasing deposits and reducing expenses.

Through collaboration with partner banks and Grab^*2, we also provided next-generation financial services which utilize AI technology, and promoted sharing of best practice and risk management knowledge between partner banks.

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Asset Management & Investor Services				Percentage of net operating profits
Business
Asset Management & Investor Services Business Group provides such services as consulting while striving to further enhance asset management capabilities and develop products capable of better meeting diverse needs of customers in Japan and overseas employing advanced and professional know-how in the areas of asset management (AM*1), investor services (IS*2) and pensions.

In the asset management field, First Sentier Investors, which was acquired by the Group in 2019, made good progress in its post-acquisition operations, such as by significantly growing its assets under management through its performance of a high level of capabilities. In Japan, our assets under management of investment products for individual customers and corporate clients have also increased by developing products that meet the customer needs and flexibly supplying products.

In the investor services business field, we increased our balance of fund administrations by providing compound services such as lending and foreign exchange to funds in Japan and overseas.

In the pension business field, we leveraged our service strengths and expertise, for which we have been ranked first place in terms of customer satisfaction, to increase our balance of pension trusts under defined benefit pensions and enrollment in defined contribution pensions. Furthermore, we focused on unified consulting on HR systems and retirement benefit systems in addition to pensions, thereby steadily accumulating our business results in comprehensive consulting on welfare and benefits.

In our sales & trading operations, the COVID-19 pandemic has caused a reduction in forex transactions based on actual trade demand, but the rise in market volatility drove a major increase in transactions with institutional investors.

In treasury operations, we have decreased our non-JPY loan-to-deposit gap and diversified our market funding methods to support stable operation, while at the same time implementing flexible asset allocation that took timely advantage of interest rate declines.

We have also made progress in the digitalization of our operations including the shift to online transactions, AI-based market forecasts, and sophistication in balance sheet management. At the same time, we have developed multiple ESG-themed securities and listed them on the Tokyo Stock Exchange.

in assets (loans, etc.) and liabilities (deposits, etc.)), global investment and other related operations.

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Japan faces challenges such as a declining birth rate, an aging society and a shrinking population, while low growth has become normalized throughout the world. More recently, the environment we operate in has been affected by issues including the COVID-19 pandemic, growing awareness of environmental and social issues, and advances in digital technologies that enable the entry of new competitors in the financial sector. These developments are changing the business environment in significant ways and with unprecedented speed.

MUFG seeks to meet these changes with clear eyes and to make the most of these challenges as opportunities for growth to become a leading force in the new era. It is with this goal that we have defined our purpose: “Committed to empowering a brighter future.” Our plan for the three years starting from 2021, outlining how we will leverage our financial and digital strengths to help our stakeholders around the world, is set out in the new Medium-term Business Plan. We are positioning the three-year term of this new Medium-term Business Plan as the “Three Years of New Challenges and Transformation.”

We will strive to meet the expectations of all our stakeholders—including customers, shareholders and employees—by structuring our business model to suit the changes in our environment and achieving higher profitability and improved return on equity.

1. Basic Policy

In our Medium-term Business Plan, our goal at the end of its three-year span is to leverage our financial and digital capabilities to be the leading business partner that pioneers the future. We set this goal with the desire to help all our stakeholders take the next step forward in a time of constant change. The key words for the transformative change we will be pursuing are (1) Digitalization, (2) Sustainability Management, and (3) New Challenges/Speed. We will address the issues that confront our customers and wider society, working to provide optimal solutions.

Through these measures, we will continue to secure business stability (focusing on business resilience) and maintain our management policy that is attractive to employees and fosters greater motivation for employee participation (engagement-focused management).

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2. Financial Targets and Capital Policy

We have set mid-to long-term financial targets, along with FY2023 targets, as follows. Furthermore, we have set profit, cost, and RWA as the three drivers to achieve the ROE target.

Our capital policy calls for striking an appropriate balance from three perspectives: solid equity capital adequacy, opportunities for investing capital to strengthen profitability, and the further enhancement of shareholder returns.

Regarding shareholder returns, we have established “Basic policies for shareholder returns,” which continuously seek to improve shareholder returns, focusing on dividends. MUFG will aim for the stable and sustainable increase in dividends per share through profit growth, and to raise the dividend payout ratio progressively to 40% by fiscal year 2023. At the same time, MUFG will flexibly repurchase stock as a measure to return profits to shareholders that will contribute to improving capital efficiency, taking into consideration its business performance and capital situation, opportunities for investment in growth, and the market conditions, including the share prices.

MUFG will not hold treasury stock excessively to approximately 5% of the total shares outstanding and MUFG shall cancel the shares exceeding such amount in principle.

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3. Promoting Major Business Strategies

In order to attain our vision for three years in the future of leveraging our financial and digital capabilities to be the leading business partner that pioneers the future, we have identified three strategic pillars of “Corporate Transformation,” “Strategy for Growth,” and “Structural Reforms.”

In “Corporate Transformation,” to change how our company operates and executes, while focusing on “Digital transformation,” and “Contribution to addressing environmental and social issues,” we will also aim to “Transform our corporate culture” in order to accelerate decision making.

In “Strategy for Growth,” in order to strengthen profitability, we will promote our “Wealth Management Business,” “Approach of proposing solutions to the issues faced by our corporate customers,” “Asia Business,” “GCIB and Global Markets” and “Global Asset Management / Investor Services.”

In “Structural Reforms,” to ensure resilience, we will promote “Cost and risk weighted asset control,” “Transformation of our platforms and business base,” and a “Review of our business portfolios” by reconsidering our non-profitable segments and undertaking to find new business opportunities.

Although progress on some measures may be delayed due to the impact of policies taken for the current COVID-19 situation, we will carefully identify the extent of the impact on our measures.

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(A) Corporate Transformation

(B) Strategy for Growth

(C) Structural Reforms

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4. Reorganization

A new Digital Service Business Group was established on April 1, 2021, joining the Retail & Commercial Banking Business Group, the Japanese Corporate & Investment Banking Business Group, the Global Corporate & Investment Banking Business Group, the Global Commercial Banking Business Group, the Asset Management & Investor Services Business Group, and the Global Markets Business Group. With our seven business groups, we will implement our newly formulated Medium-term Business Plan.

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With the conviction that environmental and social sustainability are essential to achieving sustainable growth for MUFG, we have been engaging in value creation by employing an integrated approach in which the execution of management strategies goes in tandem with the pursuit of solutions for social issues.

As we direct our efforts to achieving sustainability for the environment and society, we have reviewed our priority issues in view of our Purpose, “Committed to empowering a brighter future.” Considering both societal expectations and affinities with MUFG’s business areas, we have identified 10 priority issues. Each business group has incorporated these priority issues into its strategies and is currently engaged in concrete initiatives addressing such issues.

		For details regarding our sustainability efforts, please refer to Sustainability Report   https://www.mufg.jp/english/csr/report/index.html

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In May 2021, we announced the “MUFG Carbon Neutrality Declaration” to lead the way to solutions for climate change. As part of this commitment, we will become the first Japanese bank to join the “Net-Zero Banking Alliance (NZBA) *” led by the United Nations as the first bank in Japan.

In addition to supporting customers in their efforts to decarbonize, we are working to reduce the environmental loads in MUFG’s business activities. By the end of fiscal year 2021, we will shift 100% of the electricity contracted by our domestic bank, trust, and securities company offices to renewable energy. In addition, we will establish a fund that aims to revitalize the market for renewable energy and establish Japan’s first scheme to handle the entire process from the creation of green electricity to its purchase.

The Trust Bank is the first Japanese financial institution to announce a policy on responsible investment, which is named as MUFG AM Responsible Investment Policy. The policy indicates their approach to responsible investment and applies to all assets under management. Last fiscal year, we received the Ministry of the Environment Award (General Category) for the best case in fiscal year 2020 under the Principles for Financial Action for the 21st Century.

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To achieve environmental and social considerations, we review the Framework regularly in accordance with changes in business activities and the business environment.

We have set our accumulated sustainable finance amount as of fiscal year 2030 as a sustainable finance target for solving environmental and social issues. Our accumulated sustainable finance amount as of fiscal year 2020 was ¥7.9 trillion, and was proceeding steadily towards this target. In April 2021, we raised our target from ¥20 trillion to ¥35 trillion. We will make further progress in our efforts to support economic growth by solving environmental and social issues and contributing to the creation of a virtuous economic cycle.

The MUFG Bank uses Sustainability Linked Loans, whose interest rates vary based on the achievement of customers’ ESG-related targets, to support customers’ sustainable business activities and ESG management.

In fiscal year 2020, the Group worked as one to promote activities, such as collaborating with a consolidated subsidiary, Krungsri (Bank of Ayudhya), to conclude a contract with Thai Union Group Public Company Limited, which is dedicated to responding to climate change, ensuring the sustainability of fishery resources, and protecting human rights.

In response to the asset and business succession issues faced by many SME owners, we are working groupwide to provide proposals related to M&A, inheritance, real estate, and asset management while utilizing the Group’s functions and partner network. In fiscal year 2020, MUFG was able to support the succession of assets and businesses worth more than ¥1 trillion in total, continuing our track record from a year earlier.

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In order to facilitate financial transactions for people with impaired cognitive and judgmental abilities, we offer free appointment-based proxy services for banks, trust companies, and securities companies to handle deposit transactions and the cancellation of investment products.

Diversity is an important value that gives us the resilience we need to cope with times of change. MUFG strives to create workplaces where diverse employees thrive. MUFG has been selected for inclusion in Bloomberg’s Gender-Equality Index and Nadeshiko Brand by Japan’s Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange.

We have strengthened our social contribution activities to flexibly contribute to solving issues in areas that are beyond the reach of our financial services, and donated an amount equivalent to 1% of the Group’s operating profit in the previous fiscal year. In fiscal year 2020, we provided support (total of ¥3.4 billion) for students, cultural and artistic activities, medical institutions, and R&D that were severely affected by the spread of COVID-19. We also launched the MUFG Medical Fund (total of ¥10.0 billion) to support the R&D of therapeutic drugs and vaccines.

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(Consolidated Basis and Non-Consolidated Basis)

(Non-Consolidated Basis)

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