Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of November 2017

Commission File No. 000-54189

 

 

MITSUBISHI UFJ FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

 

 

7-1, Marunouchi 2-chome, Chiyoda-ku

Tokyo 100-8330, Japan

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or

will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      X        Form 40-F                  

Indicate by check mark if the registrant is submitting the Form 6-K

in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K

in paper as permitted by Regulation S-T Rule 101(b)(7):

 

 

 


THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM F-3 (NO. 333-209455) OF MITSUBISHI UFJ FINANCIAL GROUP, INC. AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION.


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: November 29, 2017

 

Mitsubishi UFJ Financial Group, Inc.
By:  

/s/ Zenta Morokawa

Name:   Zenta Morokawa
Title:  

Chief Manager

Documentation & Corporate Secretary Department

  Corporate Administration Division


English Translation of Excerpts from Quarterly Securities Report Filed in Japan

This document is an English translation of selected information included in the Quarterly Securities Report for the quarter ended September 30, 2017 filed by Mitsubishi UFJ Financial Group, Inc. (“MUFG” or “we”) with the Kanto Local Financial Bureau, the Ministry of Finance of Japan, on November 29, 2017 (the “Quarterly Securities Report”). An English translation of certain information included in the Quarterly Securities Report was previously submitted in a report on Form 6-K dated November 14, 2017. Accordingly, this document should be read together with the previously submitted report.

The Quarterly Securities Report has been prepared and filed in Japan in accordance with applicable Japanese disclosure requirements as well as generally accepted accounting principles in Japan (“J-GAAP”). There are significant differences between J-GAAP and generally accepted accounting principles in the United States. In addition, the Quarterly Securities Report is intended to update prior disclosures filed by MUFG in Japan and discusses selected recent developments in the context of those prior disclosures. Accordingly, the Quarterly Securities Report may not contain all of the information that is important to you. For a more complete discussion of the background to information provided in the Quarterly Securities Report disclosure, please see our annual report on Form 20-F for the fiscal year ended March 31, 2017 and the other reports filed with or submitted to the U.S. Securities and Exchange Commission by MUFG.

Risks Relating to Our Business

We describe below some major developments and changes to update our risk factor disclosure previously included in our annual securities report for the fiscal year ended March 31, 2017 filed in Japan on June 29, 2017. The updates below are not a complete update of the prior disclosure, but instead intended to explain only the significant developments and changes that we believe may have a material impact on the risks to our business and other risks. The discussion below contains forward-looking statements, which, unless specifically described otherwise, reflect our understanding as of the date of filing of the Quarterly Securities Report.

The numbering of the subheading of the risk disclosure below corresponds to the numbering of the subheading of the same risk disclosure in “Risks Relating to Our Business” in our most recent annual securities report filed in Japan.

 

19. Risks of receiving potential claims or sanctions regarding inappropriate or illegal practices or other conduct from our customers or regulatory authorities

We conduct our business subject to ongoing regulations and associated compliance risks (including the effects of changes in laws, regulations, policies and voluntary codes of practice in Japan and other markets where we operate). In the current regulatory environment, we are subject to various regulatory inquiries or investigations from time to time in connection with various aspects of our business and operations. Our compliance risk management systems and programs may not be fully effective in preventing all violations of laws, regulations and rules.

 

1


Our failure to comply with all applicable laws and regulations, including those relating to money laundering, financial crimes, and other inappropriate or illegal transactions, may lead to penalties, fines, public reprimands, damage to reputation, issuance of business improvement and other administrative orders, enforced suspension of operations or, in extreme cases, withdrawal of authorization to operate. These consequences may harm our reputation resulting in loss of customer or market confidence in us or otherwise in deterioration of our business environment, and may adversely affect our business and results of operations. Our ability to obtain regulatory approvals for future strategic initiatives may also be adversely affected.

In December 2012, BTMU agreed to make a payment to the Office of Foreign Assets Control of the U.S. Department of the Treasury, or OFAC, to settle potential civil liability for apparent violations of certain U.S. sanctions regulations from 2006 to 2007. In addition, in June 2013, BTMU entered into a consent agreement with the New York State Department of Financial Services, or NYDFS, to resolve issues relating to certain U.S. dollar payments that were routed through New York from 2002 to 2007. Under the terms of the agreement with NYDFS, BTMU agreed to make a civil monetary payment to NYDFS and retain an independent consultant to conduct a compliance review of the relevant controls and related matters in BTMU’s current operations. In addition, in November 2014, BTMU entered into a consent agreement with NYDFS to resolve issues relating to instructions given to PricewaterhouseCoopers LLP, or PwC, and the disclosures made to NYDFS in connection with BTMU’s 2007 and 2008 voluntary investigation of BTMU’s U.S. dollar clearing activity toward countries under U.S. economic sanctions. BTMU had hired PwC to conduct a historical transaction review report in connection with that investigation. Under the terms of the agreement with NYDFS, BTMU made a payment of the stipulated amount to NYDFS, and agreed to take actions on persons involved in the matter at that time, relocate its U.S. BSA/AML and OFAC sanctions compliance programs to New York, and extend, if regarded as necessary by NYDFS, the period during which an independent consultant is responsible for assessing BTMU’s internal controls regarding compliance with applicable laws and regulations related to U.S. economic sanctions. On November 9, 2017, BTMU entered into a Stipulation and Consent to the Issuance of a Consent Order with the U.S. Office of the Comptroller of the Currency, or OCC, under which BTMU agreed to the entry by the OCC of a Consent Order that includes remedial terms and conditions that are substantively the same as those included in the consent agreements that BTMU had reached with NYDFS in June 2013 and November 2014. This Consent Order, which the OCC executed, enables the OCC to supervise BTMU’s plans to enhance its internal controls and compliance program relating to OFAC sanctions requirements. The Stipulation and Consent with the OCC followed MUFG’s conversion of its U.S. Branches and Agencies of BTMU and MUTB, including its BTMU New York Branch, from state-licensed branches and agencies under the supervision of state regulatory agencies, including NYDFS, to federally licensed branches and agencies under the supervision of the OCC. BTMU is having continuing discussions on these and related issues with relevant regulators, and is undertaking necessary actions relating to these matters. In addition, BTMU is currently engaged in litigation with NYDFS with regard to the conversion of its New York Branch license. These developments or other similar events may result in additional regulatory actions against us or agreements to make significant settlement payments.

We have received requests and subpoenas for information from government agencies in some jurisdictions that are conducting investigations into past submissions made by panel members, including us, to the bodies that set various interbank benchmark rates as well as investigations into foreign exchange related practices of global financial institutions. We are cooperating with these investigations and have been conducting an internal investigation among other things. In connection with these matters, we and other panel members and global financial institutions have been named as defendants in a number of civil lawsuits, including putative class actions, in the United States. These developments or other similar events may expose us to significant adverse financial and other consequences.

 

2


Additional Japanese GAAP Financial Information for the six months ended September 30, 2017

Consolidated Statements of Cash Flows

 

     (in millions of yen)  
     For the six months
ended
September 30, 2016
    For the six months
ended
September 30, 2017
 

Cash flows from operating activities:

    

Profits before income taxes

     738,440       868,377  

Depreciation and amortization

     150,111       158,598  

Impairment losses

     4,069       22,597  

Amortization of goodwill

     7,427       8,519  

Equity in losses (gains) of equity method investees

     (113,940     (135,674

Increase (decrease) in allowance for credit losses

     (102,259     (114,309

Increase (decrease) in reserve for bonuses

     (15,375     (12,975

Increase (decrease) in reserve for bonuses to directors

     (139     (327

Increase (decrease) in reserve for stock payment

     1,153       152  

Decrease (increase) in net defined benefit assets

     (51,275     (80,612

Increase (decrease) in net defined benefit liabilities

     2,919       8  

Increase (decrease) in reserve for retirement benefits to directors

     (145     (186

Increase (decrease) in reserve for loyalty award credits

     2,075       2,049  

Increase (decrease) in reserve for contingent losses

     (1,180     (22,020

Interest income recognized on statement of income

     (1,352,690     (1,533,164

Interest expenses recognized on statement of income

     377,622       559,557  

Losses (gains) on securities

     (136,713     (188,470

Losses (gains) on money held in trust

     5,047       5,356  

Foreign exchange losses (gains)

     2,766,965       (499,690

Losses (gains) on sales of fixed assets

     (3,128     2,230  

Net decrease (increase) in trading assets

     (5,848,778         2,338,325  

Net increase (decrease) in trading liabilities

     5,062,813       (3,594,083

Adjustment of unsettled trading accounts

     221,891       594,190  

Net decrease (increase) in loans and bills discounted

     6,637,682       (39,655

Net increase (decrease) in deposits

     3,084,635       1,466,248  

Net increase (decrease) in negotiable certificates of deposit

       (2,693,181     424,168  

Net increase (decrease) in borrowed money (excluding subordinated borrowings)

     1,506,188       1,179,050  

Net decrease (increase) in due from banks (excluding cash equivalents)

     793,912       (969,700

Net decrease (increase) in call loans and bills bought and others

     1,944,582       1,810,988  

Net decrease (increase) in receivables under securities borrowing transactions

     (1,066,799     1,160,053  

Net increase (decrease) in call money and bills sold and others

     421,432       1,941,965  

Net increase (decrease) in commercial papers

     (726,809     419,168  

Net increase (decrease) in payables under securities lending transactions

     1,769,931       (749,951

Net decrease (increase) in foreign exchanges (assets)

     (240,411     (7,508

Net increase (decrease) in foreign exchanges (liabilities)

     (341,856     66,493  

Net increase (decrease) in short-term bonds payable

     231,506       13,600  

Net increase (decrease) in issuance and redemption of unsubordinated bonds payable

     (16,696     244,674  

Net increase (decrease) in due to trust accounts

     (5,194,744     (399,598

Interest income (cash basis)

     1,465,647       1,565,981  

Interest expenses (cash basis)

     (378,395     (542,327

Others

     (253,108     (1,282,058
  

 

 

   

 

 

 

Sub-total

     8,658,426       4,680,042  
  

 

 

   

 

 

 

Income taxes

     (207,009     (162,636

Refund of income taxes

     15,463       15,863  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     8,466,881       4,533,270  
  

 

 

   

 

 

 

 

3


     (in millions of yen)  
     For the six months
ended
September 30, 2016
    For the six months
ended
September 30, 2017
 

Cash flows from investing activities:

    

Purchases of securities

     (24,801,941     (36,581,978

Proceeds from sales of securities

     14,119,365       19,471,073  

Proceeds from redemption of securities

     12,261,165       18,116,564  

Payments for increase in money held in trust

     (406,347     (299,828

Proceeds from decrease in money held in trust

     349,662       168,197  

Purchases of tangible fixed assets

     (62,932     (71,562

Purchases of intangible fixed assets

     (117,374     (116,475

Proceeds from sales of tangible fixed assets

     12,285       4,011  

Proceeds from sales of intangible fixed assets

     2,882       700  

Payments for acquisition of subsidiaries’ equity affecting the scope of consolidation

     (4,153     (20

Proceeds from sales of subsidiaries’ equity affecting the scope of consolidation

     2,761       —    

Others

     (686     (1,374
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     1,354,688       689,305  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from subordinated borrowings

     31,000       23,000  

Repayments of subordinated borrowings

     (36,500     (37,985

Proceeds from issuance of subordinated bonds payable and bonds with warrants

     254,687       424,461  

Payments for redemption of subordinated bonds payable and bonds with warrants

     (252,037     (188,482

Proceeds from issuance of common stock to non-controlling shareholders

     204       2,012  

Repayments to non-controlling shareholders

     —         (16

Payments for redemption of preferred securities

     (330,560     —    

Dividend paid by MUFG

     (124,103     (121,163

Dividend paid by subsidiaries to non-controlling shareholders

     (45,425     (19,594

Purchases of treasury stock

     (109,752     (101,027

Proceeds from sales of treasury stock

     3       2,196  

Payments for purchases of subsidiaries’ equity not affecting the scope of consolidation

     —         (318

Proceeds from sales of subsidiaries’ equity not affecting the scope of consolidation

     0       0  

Others

     4       0  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (612,478     (16,918
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (248,942     (25,549
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     8,960,147       5,180,108  
  

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     18,763,856       33,968,391  
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     27,724,004       39,148,500  
  

 

 

   

 

 

 

 

4


Additional Japanese GAAP Financial Information for the six months ended September 30, 2017

 

1. Significant Accounting Policies Applied to the Semi-Annual Consolidated Financial Statements

 

  I. Scope of consolidation

 

  (1) Number of consolidated subsidiaries: 208

Principal companies:

 

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

     Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Securities Holdings Co., Ltd.

     Mitsubishi UFJ NICOS Co., Ltd.

ACOM CO., LTD.

    

 

  (a) Changes in the scope of consolidation in the six months ended September 30, 2017

ACOM CONSUMER FINANCE CORPORATION and another company were newly included in the scope of consolidation due to new establishment or other reasons. In addition, MUFG Capital Finance 4 Limited and six other companies were excluded from the scope of consolidation due to liquidation or other reasons.

 

  (2) Non-consolidated subsidiaries: None

 

  (3) Entities not regarded as subsidiaries even though Mitsubishi UFJ Financial Group, Inc. (“MUFG”) owns the majority of voting rights:

Hygeia Co., Ltd.

OiDE CapiSEA, Inc.

OiDE Adjubilee, Inc.

 

  (a) Reasons for excluding from the scope of consolidation

These entities were not treated as subsidiaries because they were established as property management agents for land trust projects without any intent to control, or because MUFG’s consolidated venture capital subsidiaries owned the majority of voting rights primarily to benefit from the appreciation of their investments resulting from growth of the investees’ businesses without any intent to control.

 

  II. Application of the equity method

 

  (1) Number of non-consolidated subsidiaries accounted for under the equity method: None

 

  (2) Number of equity method affiliates: 55

Principal companies:

Mitsubishi UFJ Lease & Finance Company Limited

Morgan Stanley

 

  (a) Changes in the scope of application of the equity method in the six months ended September 30, 2017

BOT LEASE MEXICO S.A. DE C.V. and another company were newly included in the scope of application of the equity method due to new establishment or other reasons. In addition, Aberdeen Asset Management PLC and four other companies were excluded from the scope of application of the equity method due to decreases in the ratios of voting rights held by MUFG following share exchange transactions or for other reasons.

 

  (3) Number of non-consolidated subsidiaries not accounted for under the equity method: None

 

  (4) Number of affiliates not accounted for under the equity method: None

 

5


  (5) Entities not regarded as affiliates in which MUFG owns 20% to 50% of their voting rights

Hirosaki Co., Ltd.

EDP Corporation

ISLE Co., Ltd.

AKITAYA Co., Ltd.

Sanriku Resort Co,. LTD

Fun Place Co., Ltd.

Shonai Paradiso Co,. LTD

 

  (a) Reasons for excluding from the scope of affiliates

These entities were not regarded as affiliates because MUFG’s consolidated venture capital subsidiaries owned 20% to 50% of voting rights primarily to benefit from the appreciation of their investments resulting from growth or restructuring of the investees’ businesses without any intent to control.

 

  III. Semi-annual balance sheet dates of consolidated subsidiaries

 

  (1) The semi-annual balance sheet dates of consolidated subsidiaries were as follows:

 

The end of February:

   1   subsidiary   

The end of April:

   1   subsidiary   

The end of June:

   129   subsidiaries   

July 24:

   9   subsidiaries   

The end of September:

   68   subsidiaries   

 

  (2) A subsidiary whose balance sheet date is the end of February was consolidated based on its preliminary financial statements as of the end of August.

A subsidiary whose balance sheet date is the end of April was consolidated based on its preliminary financial statements as of the end of July.

The remaining subsidiaries were consolidated based on their financial statements as of their respective balance sheet dates.

Adjustments were made to the consolidated financial statements to reflect significant transactions that occurred between the balance sheet dates of the subsidiaries and the consolidated balance sheet date.

 

6


  IV. Accounting policies

 

  (1) Trading assets and Trading liabilities; Trading income and expenses

Transactions involving short-term fluctuations or arbitrage opportunities in interest rates, currency exchange rates, market prices of financial instruments or other market indices (“trading purposes”) are presented in “Trading assets” and “Trading liabilities” on the consolidated balance sheet on a trade-date basis, and gains and losses from trading transactions (interest and dividends, gains or losses on sales and gains or losses on valuation) are presented in “Trading income” and “Trading expenses” on the consolidated statement of income.

Trading assets and trading liabilities are stated at their fair values on the consolidated balance sheet date.

 

  (2) Securities

 

  (a) Debt securities being held to maturity are stated at amortized cost (using the straight-line method) computed using the moving-average method. Available-for-sale securities are primarily stated at their quoted market prices on the consolidated balance sheet date (cost of securities sold is calculated primarily using the moving-average method), and available-for-sale securities whose fair value cannot be reliably determined are stated at acquisition costs computed using the moving-average method.

Net unrealized gains (losses) on available-for-sale securities are included directly in net assets, net of applicable income taxes, except in the case of application of the fair value hedge accounting method, in which the change in fair value recognized is recorded in current earnings.

 

  (b) Securities included in trust assets in money held in trust are accounted for under the same basis as noted above in Notes (1) and (2)(a).

Net unrealized gains (losses) on securities in money held in trust, which are not held for trading purposes or held to maturity, are included directly in net assets, net of applicable income taxes.

 

  (3) Derivatives

Derivative transactions (excluding those for trading purposes) are calculated primarily at fair value.

 

  (4) Depreciation and amortization of fixed assets

 

  (a) Tangible fixed assets (excluding lease assets)

Depreciation of tangible fixed assets of MUFG and its domestic consolidated banking subsidiaries and trust banking subsidiaries is computed using the declining-balance method, and is recorded based on the semi-annual period allocation of the estimated depreciation amount for the full year computed using the declining-balance method over the estimated useful lives of the assets. The useful lives are primarily estimated as follows:

Buildings: 15 to 50 years

Equipment: 2 to 20 years

Depreciation of tangible fixed assets of other consolidated subsidiaries is computed primarily using the straight-line method based on their estimated useful lives.

 

  (b) Intangible fixed assets (excluding lease assets)

Amortization of intangible fixed assets is computed using the straight-line method.

Development costs for internally used software are amortized using the straight-line method over the estimated useful lives of primarily 3 to 10 years.

 

7


  (c) Lease assets

Depreciation or amortization of lease assets in “Tangible fixed assets” or “Intangible fixed assets” of the finance leases other than those that are deemed to transfer the ownership of leased property to the lessees is computed using the straight-line method over the lease periods with zero residual value unless residual value is guaranteed by the corresponding lease contracts.

 

  (5) Deferred assets

Bond issuance costs and stock issuance costs are expensed as incurred.

 

  (6) Allowance for Credit Losses

Principal domestic consolidated subsidiaries determine the allowance for credit losses in accordance with the internal standards for self-assessment of asset quality and the internal standards for write-offs and provisions.

For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings or whose notes have been dishonored and suspended from processing through clearing houses (“bankrupt borrowers”) or borrowers that are not legally or formally bankrupt but are regarded as substantially in a similar condition (“virtually bankrupt borrowers”), allowances are provided based on the amount of claims, after the write-offs as stated below, net of expected amounts to be collected through the disposal of collateral and the execution of guarantees.

For claims on borrowers that are not yet legally or formally bankrupt but deemed to have a high possibility of becoming bankrupt (“likely to become bankrupt borrowers”), where the amounts of principal repayments and interest payments cannot be reasonably estimated from the borrowers’ cash flows, allowances are provided based on an overall solvency assessment of the claims, net of expected amounts to be collected through the disposal of collateral and the execution of guarantees.

For claims on likely to become bankrupt borrowers and claims on borrowers requiring close monitoring, where the amounts of principal repayments and interest payments can be reasonably estimated from the borrowers’ cash flows, allowances are provided in an amount equal to the difference between the book value of the claims and the relevant cash flows discounted by the initial contractual interest rates.

For other claims, allowances are provided based on historical credit loss experience.

For claims originated in certain foreign countries, additional allowances are provided based on an assessment of political and economic conditions of these countries.

All claims are assessed by the relevant branches and credit supervision departments in accordance with the internal standards for self-assessment of asset quality. The credit review department, which is independent from those operating sections, subsequently audits these assessments.

For claims on bankrupt borrowers and virtually bankrupt borrowers, the amount of claims exceeding the estimated value of collateral or guarantees, which is deemed uncollectible, is written off. The total amount of write-offs was ¥381,288 million as of September 30, 2017 (¥377,463 million as of March 31, 2017).

Consolidated subsidiaries, not adopting the procedures stated above provide for allowances based on their historical credit loss experience for collectively assessed claims and based on individual assessments of the possibility of collection for specific deteriorated claims.

 

  (7) Reserve for bonuses

Reserve for bonuses, which is provided for future bonus payments to employees, is recorded in the amount deemed to have accrued based on the estimated amount of bonuses as of the consolidated balance sheet date.

 

  (8) Reserve for bonuses to directors

Reserve for bonuses to directors, which is provided for future bonus payments to directors, is recorded in the amount deemed to have accrued based on the estimated amount of bonuses as of the consolidated balance sheet date.

 

8


  (9) Reserve for stocks payment

Reserve for stocks payment, which is provided for future payments of compensation under the stock compensation plan for directors and officers of MUFG and certain domestic consolidated subsidiaries, is recorded in the amount deemed to have accrued based on the estimated amount of compensation as of the consolidated balance sheet date.

 

  (10) Reserve for retirement benefits to directors

Reserve for retirement benefits to directors, which is provided for future payments of retirement benefits to directors of consolidated subsidiaries, is recorded in the amount deemed to have accrued based on the estimated amount of benefits as of the consolidated balance sheet date.

 

  (11) Reserve for loyalty award credits

Reserve for loyalty award credits, which is provided for the future redemption of points awarded to customers through Super IC Cards, etc., is calculated by rationally estimating an amount that will be redeemed in the future based on the monetary amount converted from the awarded but unused points, and is recorded in the appropriate amount as a reserve.

 

  (12) Reserve for contingent losses

Reserve for contingent losses, which is provided for possible losses from contingent events related to off-balance sheet transactions and various litigation and regulatory matters, is calculated by estimating the impact of such contingent events. This reserve also includes future claims for repayment of excess interest payments on consumer loans that are estimated based on the past repayments, the pending claims and other factors.

 

  (13) Reserves under special laws

Reserves under special laws represent the reserve for contingent liabilities from derivative financial instruments transactions executed for clients, which are recorded in accordance with Article 46-5-1 of the Financial Instruments and Exchange Law and Article 175 of the Cabinet Office Ordinance on Financial Instruments Business.

 

  (14) Retirement benefits

In calculating benefit obligation, the portion of the projected benefit obligation attributed to the six-month period ended September 30, 2017 is determined using the benefit formula basis.

Unrecognized prior service cost is amortized using the straight-line method for a fixed period, primarily over 10 years, within the employees’ average remaining service period.

Unrecognized net actuarial gains (losses) are amortized using the straight-line method for a fixed period, primarily over 10 years, within the employees’ average remaining service period, beginning in the subsequent fiscal year after its occurrence.

For certain overseas branches of domestic consolidated subsidiaries and some of consolidated subsidiaries, net defined benefit liability and retirement benefit expenses are calculated by the simplified method.

 

  (15) Translation of assets and liabilities denominated in foreign currencies

Assets and liabilities denominated in foreign currencies or booked at overseas branches of domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries are translated into yen primarily at exchange rates prevailing at the consolidated balance sheet date, except for investments in non-consolidated affiliates which are translated into yen at exchange rates prevailing at the acquisition dates.

Assets and liabilities denominated in foreign currencies of other consolidated subsidiaries are translated into yen at the exchange rates prevailing at the respective balance sheet date.

 

9


  (16) Leasing transactions

(As Lessees)

Domestic consolidated subsidiaries’ finance leases other than those that are deemed to transfer the ownership of leased property to the lessees are accounted for in a similar way to purchases, and depreciation for lease assets is computed using the straight-line method over the lease term with zero residual value unless residual value is guaranteed by the corresponding lease contracts.

(As Lessors)

Finance leases other than those that are deemed to transfer the ownership of leased property to the lessees are accounted for in a similar way to sales and income and expenses related to such leases are recognized by allocating interest equivalents to applicable fiscal periods instead of recording sales as “Other ordinary income.”

 

  (17) Hedge accounting

 

  (a) Hedge accounting for interest rate risks

Domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries have adopted the deferred hedge accounting method for hedging transactions to hedge interest rate risks arising from financial assets and liabilities. Portfolio hedging or individual hedging, as described in the Japanese Institute of Certified Public Accountants (“JICPA”) Industry Audit Committee Report No. 24, “Treatment of Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (February 13, 2002) and JICPA Accounting Committee Report No. 14, “Practical Guidelines for Accounting for Financial Instruments” (January 31, 2000), are primarily applied to determine hedged items.

With respect to hedging transactions to offset fluctuations in the fair value of fixed rate deposits, loans and other instruments, hedging instruments (e.g. interest rate swaps) are designated to hedged items individually or collectively by their maturities in accordance with JICPA Industry Audit Committee Report No. 24. With respect to hedging transactions to offset fluctuations in fair value of fixed rate bonds classified as available-for-sale securities, hedging instruments (e.g. interest rate swaps) are designated to hedged items collectively by the type of bond. Since material terms related to hedged items and hedging instruments are substantially identical, and such hedging transactions are deemed highly effective, the assessment of effectiveness is based on the similarity of the terms.

With respect to hedging transactions to fix the cash flows related to floating rate deposits and loans as well as forecasted transactions related to short-term fixed rate deposits, loans and other instruments, hedging instruments (e.g. interest rate swaps) are designated to hedged items collectively by interest rate indices and tenors in accordance with JICPA Industry Audit Committee Report No. 24. Since material terms related to hedged items and hedging instruments are substantially identical, and such hedging transactions are deemed highly effective, the assessment of effectiveness is based on the similarity of the terms. The effectiveness of hedging transactions is also assessed by the correlation between factors that cause fluctuations in interest rates of hedged items and those of hedging instruments.

 

  (b) Hedge accounting for foreign currency risks

Domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries have adopted the deferred hedge accounting method for hedging foreign currency risks arising from financial assets and liabilities denominated in foreign currencies. Portfolio hedging is applied to determine hedged items as described in JICPA Industry Audit Committee Report No. 25 “Treatment of Accounting and Auditing concerning Accounting for Foreign Currency Transactions in the Banking Industry” (July 29, 2002). Hedging instruments (e.g. currency swaps and forward exchange contracts) are designated to hedged items collectively by currencies.

Portfolio hedging and individual hedging are applied to hedge foreign currency risks arising from equity investments in foreign subsidiaries and foreign affiliates, and available-for-sale securities (other than bonds) denominated in foreign currencies. Monetary claims and liabilities denominated in the same foreign currencies or forward exchange contracts are used as hedging instruments. As for the hedge accounting method applied to equity investments in foreign subsidiaries and foreign affiliates, foreign currency translation differences arising from hedging instruments are recorded as foreign currency translation adjustments. The fair value hedge accounting method is applied to available-for-sale securities (other than bonds) denominated in foreign currencies.

 

10


  (c) Hedge accounting for stock price fluctuation risks

Individual hedging is applied to hedge market fluctuation risks arising from strategic equity securities held by domestic consolidated banking subsidiaries. Instruments such as total return swaps are used as hedging instruments. The effectiveness of hedging transactions is assessed by the correlation between changes in fair value of hedged items and changes in fair value of hedging instruments. The fair value hedge accounting method is applied.

 

  (d) Transactions among consolidated subsidiaries

Derivative transactions including interest rate swaps and currency swaps which are designated as hedging instruments among consolidated subsidiaries or between trading accounts and other accounts (or among internal sections) are not eliminated from the consolidated statements of income or valuation difference, but are recognized as related gains or losses or deferred under hedge accounting because these derivative transactions meet certain criteria under JICPA Industry Audit Committee Reports No. 24 and No. 25 and are regarded as equivalent to external third-party cover transactions.

 

  (18) Cash and cash equivalents in the consolidated statements of cash flows

Cash and cash equivalents in the consolidated statements of cash flows are defined as “Cash and due from banks” on the consolidated balance sheet, excluding time deposits and negotiable certificates of deposits in other banks.

 

  (19) Consumption taxes

National and local consumption taxes are excluded from transaction amounts of MUFG and its domestic consolidated subsidiaries. Non-deductible portions of consumption taxes on the purchases of tangible fixed assets are expensed when incurred.

 

  (20) Adoption of consolidated taxation system

MUFG and some of its domestic consolidated subsidiaries have adopted the consolidated taxation system.

 

  (21) Accounting of bills discounted and rediscounted

Bills discounted and rediscounted are accounted for as financial trading in accordance with JICPA Industry Audit Committee Report No. 24.

 

  (22) Accounting standards for foreign subsidiaries

If the financial statements of foreign subsidiaries are prepared in accordance with the International Financial Reporting Standards (“IFRS”) or the Generally Accepted Accounting Principles in the United States (“U.S. GAAP”), such financial statements are used in the consolidated accounting process.

If the financial statements of foreign subsidiaries are prepared in accordance with generally accepted accounting principles in each domicile country and not in accordance with IFRS or U.S. GAAP, the financial statements of foreign subsidiaries are mainly rearranged in accordance with U.S. GAAP.

Adjustments are also made when necessary in the consolidated accounting process.

 

11


2. Additional Information

(A Board Incentive Plan (“BIP”) for directors and officers)

 

I. Outline of the plan

MUFG has implemented a performance-based director and officer stock compensation plan using a BIP trust. The plan is designed to prevent excessive risk-taking and raise motivation to contribute to both short-term and medium- to long-term improvement of financial results, thereby enabling sustainable growth and medium- to long-term enhancement of the enterprise value of the MUFG Group.

The plan’s beneficiaries are directors and officers of MUFG and certain domestic consolidated subsidiaries who satisfy prescribed beneficiary requirements. The trust entrusted with funds approved by the Compensation Committee of MUFG, together with funds contributed by certain domestic consolidated subsidiaries (collectively, “Acquisition Funds”), acquired shares of MUFG in the stock market with the Acquisition Funds.

During the trust period, in accordance with the prescribed share delivery rules, points are allocated to the beneficiaries, and the beneficiaries receive the delivery of shares of MUFG in the number representing a certain percentage of their respective allocated points. In addition, in accordance with the provisions of the trust agreement, the shares of MUFG representing the remaining points are liquidated within the trust, and the beneficiaries receive cash in the amount equal to the liquidated share price.

 

II. Shares of MUFG remaining in the trust

At the end of the reporting period ended September 30, 2017, the carrying amount and number of shares which remain in the trust are ¥16,641 million and 28,877 thousand shares, respectively (¥17,635 million and 30,532 thousand shares, respectively, at the end of the fiscal year ended March 31, 2017), and are included in the treasury shares reported as part of total net assets.

 

12


3. Consolidated Balance Sheets

 

I. Equity securities and other capital investments in affiliates

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Equity securities

   ¥ 2,743,181      ¥ 2,679,094  

Other capital investments in affiliates

     12,099        20,039  

 

II. Securities borrowed under securities borrowing transactions and securities purchased under resale agreements where

the borrowers or purchasers have the right to dispose of the securities through sale or re-pledging without any restrictions

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Securities re-pledged

   ¥ 15,612,607      ¥ 17,001,498  

Securities re-loaned

     483,330        700,078  

Securities held without disposition

     7,187,773        6,075,760  

Bank acceptance bills discounted, commercial bills discounted, documentary bills discounted and foreign currency bills bought discounted with the right to dispose of the bills discounted through sale or re-pledging without any restrictions

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Bills discounted (face value)

   ¥ 1,368,274      ¥ 1,364,707  

Foreign currency bills bought which were re-discounted upon transfer

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Foreign currency bills re-discounted (face value)

   ¥ 3,936      ¥ 3,862  

 

III. Loans to bankrupt borrowers and Non-accrual delinquent loans included in “Loans and bills discounted”

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Loans to bankrupt borrowers

   ¥ 46,498      ¥ 55,072  

Non-accrual delinquent loans

     738,103        667,521  

Loans to bankrupt borrowers are loans, after write-offs, to bankrupt borrowers as defined in Article 96-1-3-1 to 5 and 96-1-4 of the Enforcement Ordinance of the Corporate Tax Law (No. 97 in 1965) on which accrued interest income is not recognized (“Non-accrual loans”) as there is substantial doubt as to the collection of principal and/or interest because of delinquencies in payment of principal and/or interest for a significant period of time or for some other reasons.

Non-accrual delinquent loans represent non-accrual loans other than loans to bankrupt borrowers and loans renegotiated at concessionary terms including reduction or deferral of interest payments, to assist borrowers in improving their financial condition.

 

IV. Accruing loans contractually past due 3 months or more

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Accruing loans contractually past due 3 months or more

   ¥ 46,301      ¥ 40,085  

Accruing loans contractually past due 3 months or more represent loans whose principal and/or interest payments have been past due for 3 months or more, other than loans to bankrupt borrowers and non-accrual delinquent loans.

 

13


V. Restructured loans

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Restructured loans

   ¥ 708,354      ¥ 617,324  

Restructured loans represent loans renegotiated at concessionary terms, including interest rate reductions, deferral of interest payments, deferral of principal repayments, waivers of loan claims, and other negotiated terms that are favorable to the borrower, for the purpose of business reconstruction of or support for the borrower, other than loans to bankrupt borrowers, non-accrual delinquent loans and accruing loans contractually past due 3 months or more.

 

VI. Total of loans to bankrupt borrowers, non-accrual delinquent loans, accruing loans contractually past due 3 months or more and restructured loans

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Total of loans to bankrupt borrowers, non-accrual delinquent loans, accruing loans contractually past due 3 months or more and restructured loans

   ¥ 1,539,258      ¥ 1,380,003  

The amounts provided in Notes III to VI above represent gross amounts before the deduction of allowance for credit losses.

 

VII. Assets pledged as collateral

Assets pledged as collateral and their relevant liabilities as of March 31, 2017 and September 30, 2017 were as follows:

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Assets pledged as collateral:

     

Cash and due from banks

   ¥ 4,488      ¥ 5,071  

Trading assets

     245,382        151,563  

Securities

     3,962,434        1,217,299  

Loans and bills discounted

     10,536,127        14,540,321  
  

 

 

    

 

 

 

Total

   ¥ 14,748,433      ¥ 15,914,255  
  

 

 

    

 

 

 

Relevant liabilities to above assets:

     

Deposits

   ¥ 797,577      ¥ 630,362  

Trading liabilities

     17,224        20,999  

Borrowed money

     13,484,211        14,751,389  

Bonds payable

     11,474        8,693  

Other liabilities

     11,009        10,227  

Acceptances and guarantees

     12,342        11,495  

In addition to the above, the following assets were pledged as collateral for cash settlements and other transactions or as deposits for margin accounts for futures and other transactions:

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Cash and due from banks

   ¥ 4,319      ¥ 7,289  

Monetary claims bought

     252,692        —    

Trading assets

     135,299        527,715  

Securities

     7,660,643        8,958,567  

Loans and bills discounted

     6,863,728        6,971,559  

 

14


Furthermore, the following assets were sold under repurchase agreements or loaned under securities lending with cash collateral as of March 31, 2017 and September 30, 2017:

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Trading assets

   ¥ 2,731,690      ¥ 1,954,145  

Securities

     15,107,468        12,962,813  
  

 

 

    

 

 

 

Total

   ¥ 17,839,158      ¥ 14,916,958  
  

 

 

    

 

 

 

Relevant liabilities to above assets:

     

Payables under repurchase agreements

   ¥ 7,539,867      ¥ 9,296,690  

Payables under securities lending transactions

     4,339,644        2,455,497  

 

VIII. Overdraft facilities and commitment lines of credit are binding contracts under which MUFG’s consolidated subsidiaries have obligations to disburse funds up to predetermined limits upon the borrower’s request as long as there have been no breach of contracts. The total amount of the unused portion of these facilities as of March 31, 2017 and September 30, 2017 was as follows:

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Unused overdraft facilities and commitment lines of credit

   ¥ 88,770,960      ¥ 86,302,510  

The total amount of the unused portion does not necessarily represent actual future cash requirements because many of these contracts are expected to expire without being drawn upon. In addition, most of these contracts include clauses that allow MUFG’s consolidated subsidiaries to decline the borrower’s request for disbursement or decrease contracted limits for cause, such as changes in financial condition or deterioration in the borrower’s creditworthiness. MUFG’s consolidated subsidiaries may request the borrowers to pledge real property and/or securities as collateral upon signing of the contract and will perform periodic monitoring on the borrower’s business conditions in accordance with internal procedures, which may lead to renegotiation of the terms and conditions of the contracts and/or initiate the request for additional collateral and/or guarantees.

 

IX. In accordance with the “Law concerning Revaluation of Land” (the “Law”) (No. 34, March 31, 1998), land used for business operations of domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries has been revalued as of the dates indicated below. The total excess from revaluation, net of income taxes corresponding to the excess that were recognized as “Deferred tax liabilities for land revaluation,” is stated as “Land revaluation excess” in net assets. Land revaluation excess includes MUFG’s share of affiliated companies’ Land revaluation excess.

Dates of revaluation:

Domestic consolidated banking subsidiaries: March 31, 1998.

Domestic consolidated trust banking subsidiaries: March 31, 1998, December 31, 2001 and March 31, 2002.

The method of revaluation as set forth in Article 3, Paragraph 3 of the Land Revaluation Law:

Fair values are determined based on (1) “published land price under the Land Price Publication Law” stipulated in Article 2-1 of the “Enforcement Ordinance of the Law concerning Revaluation of Land” (“Ordinance”) (No. 119, March 31, 1998), (2) “standard land price determined on measurement spots under the Enforcement Ordinance of National Land Planning Law” stipulated in Article 2-2 of the “Ordinance,” (3) “land price determined by the method established and published by the Director General of the National Tax Agency in order to calculate land value that is used for determining taxable amounts subject to landholding tax articulated in Article 16 of the Landholding Tax Law” stipulated in Article 2-4 of the “Ordinance” with price adjustments by shape and time and (4) appraisal by certified real estate appraisers stipulated in Article 2-5 of the “Ordinance” with price adjustments for time.

In addition, some of MUFG affiliates that were accounted for under the equity method conducted a revaluation for land used for business operations on March 31, 2002.

 

15


X. Accumulated depreciation on tangible fixed assets

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Accumulated depreciation on tangible fixed assets

   ¥ 1,222,436      ¥ 1,239,467  

 

XI. Subordinated borrowings with the special provision which ranks below other debts with regard to fulfillment of obligation included in “Borrowed money”

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Subordinated borrowings

   ¥ 597,795      ¥ 581,864  

 

XII. Subordinated bonds included in “Bonds payable”

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Subordinated bonds

   ¥ 2,940,994      ¥ 3,181,661  

 

XIII. The principal amount of money trusts entrusted to domestic trust banking subsidiaries, for which repayment of the principal to the customers was guaranteed

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Principal-guaranteed money trusts

   ¥ 6,678,398      ¥ 6,521,892  

 

XIV. Guarantee obligations for private placement bonds (provided in accordance with the Article 2-3 of the Financial Instruments and Exchange Law) among the bonds and other securities included in “Securities”

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Guarantee obligations for private placement bonds

   ¥ 563,884      ¥ 524,727  

 

XV. Contingent liabilities

(Litigation)

In the ordinary course of business, MUFG is subject to various litigation and regulatory matters. In accordance with applicable accounting guidance, MUFG establishes a Reserve for Contingent Losses arising from litigation and regulatory matters when they are determined to be probable in their occurrences and the probable loss amount can be reasonably estimated. Based upon current knowledge and consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters, where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material adverse effect on the MUFG’s financial position, results of operations or cash flows.

Management also believes the amount of loss that is reasonably possible, but not probable, from various litigation and regulatory matters is not material to MUFG’s financial position, results of operations or cash flows.

 

16


4. Consolidated Statements of Income

“Other ordinary income” for the periods indicated included the following:

     (in millions of yen)  
     For the six months ended September 30,  
     2016      2017  

Equity in gains of the equity method investees

   ¥ 113,940      ¥ 135,674  

Gains on sales of equity securities

     82,635        65,790  

Gains on reversal of allowance for credit losses

     22,807        53,575  

Gains on loans written-off

     27,993        38,291  

“Other ordinary expenses” for the periods indicated included the following:

     (in millions of yen)  
     For the six months ended September 30,  
     2016      2017  

Write-offs of loans

   ¥   59,831      ¥   62,965  

Provision for reserve for contingent losses

     48,615        23,981  

Losses on sales of equity securities

     27,193        9,681  

 

17


5. Consolidated Statements of Changes in Net Assets

For the six months ended September 30, 2016

 

I. Information on the class and number of issued shares and treasury stock
     (Thousand shares)  
     Number of
shares as of
April 1, 2016
     Number of
shares
increased
     Number of
shares
decreased
     Number of
shares as of
September 30, 2016
     Note  

Issued shares:

              

Common stock

     14,168,853        —          —          14,168,853     
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     14,168,853        —          —          14,168,853     
  

 

 

    

 

 

    

 

 

    

 

 

    

Treasury stock:

              

Common stock

     380,255        209,414        4,401        585,267        (Notes 1 and 2
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     380,255        209,414        4,401        585,267     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

(Notes)

 

1. The increase in the number of shares of common stock held in treasury by 209,414 thousand shares was mainly due to the acquisitions of shares pursuant to provisions of the Articles of Incorporation, the acquisition of shares for the Board Incentive Plan (“BIP”) trust and the repurchases of shares in response to requests made by shareholders holding shares constituting less than one whole unit. The decrease in the number of shares of common stock held in treasury by 4,401 thousand shares was mainly due to the delivery of shares upon the exercise of stock options, the sale of shares for the BIP trust, the sale of shares in response to requests made by shareholders holding shares constituting less than one whole unit and a decrease in the number of shares held by equity method affiliates.
2. The number of shares of common stock as of September 30, 2016 includes 18,779 thousand shares held by the BIP trust. For the six months ended September 30, 2016, the number of shares held by the BIP trust increased by 18,785 thousand shares and decreased by 5 thousand shares.

 

II. Information on share subscription rights

 

    

Type of

share

   Class of    Number of shares
subject to subscription rights
     Balance as of  

Issuer

  

subscription

rights

  

shares to

be issued

   As of
April 1, 2016
     Increase      Decrease      As of
September 30, 2016
     September 30, 2016
(in millions of yen)
 

MUFG

   Stock options    —        —          —          —          —          6,405  
Consolidated
subsidiaries
      —        —          —          —          —          16  
     

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

      —        —          —          —          —          6,421  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


III. Information on cash dividends

 

(1) Cash dividends paid during the six-month period ended September 30, 2016

 

Date of approval

  

Type of stock

   Total
Dividends
(in millions
of yen
   Dividend
per share
(in yen)
   Dividend
record date
   Effective date

Annual General Meeting of Shareholders on June 29, 2016

   Common stock    124,116    9    March 31, 2016    June 29, 2016
              

 

(2) Dividends the record date for which fell within the six-month period and the effective date of which was after the six-month period ended September 30, 2016

 

Date of approval

   Type of stock    Total
Dividends
(in millions
of yen)
   Source of
dividends
   Dividend
per share
(in yen)
   Dividend
record date
   Effective date

Meeting of Board of Directors on November 14, 2016

   Common stock    122,440    Retained earnings    9    September 30, 2016    December 5, 2016
                 

 

(Note) The total dividend amount includes ¥169 million of dividends on the treasury shares held by the BIP trust.

For the six months ended September 30, 2017

 

I. Information on the class and number of issued shares and treasury stock

 

     (Thousand shares)  
     Number of
shares as of
April 1, 2017
     Number of
shares
increased
     Number of
shares
decreased
     Number of
shares as of
September 30, 2017
     Note  

Issued shares:

              

Common stock

     14,168,853        —          141,158        14,027,694        (Note 1)  
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     14,168,853        —          141,158        14,027,694     
  

 

 

    

 

 

    

 

 

    

 

 

    

Treasury stock:

              

Common stock

     738,910        142,604        144,262        737,252        (Notes 2 and 3)  
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     738,910        142,604        144,262        737,252     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

(Notes)

 

1. The decrease in the number of shares of common stock by 141,158 thousand shares was due to the cancellation of shares.
2. The increase in the number of shares of common stock held in treasury by 142,604 thousand shares was mainly due to the acquisitions of shares pursuant to provisions of the Articles of Incorporation, the acquisition of shares for the BIP trust, the repurchases of shares in response to requests made by shareholders holding shares constituting less than one whole unit and an increase in the number of shares held by Equity Method Affiliates. The decrease in the number of shares of common stock held in treasury by 144,262 thousand shares was mainly due to the cancellation of shares, the sale of shares for the BIP trust, the delivery of shares upon the exercise of stock options, the sale of shares in response to requests made by shareholders holding shares constituting less than one whole unit and a decrease in the number of shares held by equity method affiliates.
3. The number of shares of common stock as of April 1, 2017 and September 30, 2017 includes 30,532 thousand shares and 28,877 thousand shares held by the BIP trust, respectively. For the six months ended September 30, 2017, the number of shares held by the BIP trust increased by 1,251 thousand shares and decreased by 2,906 thousand shares.

 

19


II. Information on share subscription rights

 

Issuer

  

Type of
share
subscription
rights

  

Class of

shares to

be issued

   Number of shares
subject to subscription rights
     Balance as of
September 30, 2017
(in millions of yen)
 
         As of
April 1, 2017
     Increase      Decrease      As of
September 30, 2017
    

MUFG

   Stock options    —        —          —          —          —          254  
Consolidated
subsidiaries
   —      —        —          —          —          —          19  
     

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

      —        —          —          —          —          274  
  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

III. Information on cash dividends

 

(1) Cash dividends paid during the six-month period ended September 30, 2017

 

Date of approval

  

Type of stock

   Total
Dividends
(in millions
of yen)
   Dividend
per share
(in yen)
   Dividend
record date
   Effective date

Annual General Meeting of Shareholders on June 29, 2017

   Common stock    121,160    9    March 31, 2017    June 30, 2017

 

(Note) The total dividend amount includes ¥274 million of dividends on the treasury shares held by the BIP trust.

 

(2) Dividends the record date for which fell within the six-month period and the effective date of which was after the six-month period ended September 30, 2017

 

Date of approval

  

Type of stock

   Total
Dividends
(in millions
of yen)
  

Source of
dividends

   Dividend
per share
(in yen)
   Dividend
record date
   Effective date

Meeting of Board of Directors on November 14, 2017

   Common stock    119,890    Retained earnings    9    September 30, 2017    December 5, 2017
                 

 

(Note) The total dividend amount includes ¥259 million of dividends on the treasury shares held by the BIP trust.

 

6. Consolidated Statements of Cash Flows

The difference between “cash and cash equivalents” and items presented on the consolidated balance sheet

 

     (in millions of yen)  
     For the six months ended September 30,  
     2016     2017  

Cash and due from banks

   ¥ 57,245,014     ¥ 69,634,216  

Time deposits and negotiable certificates of deposit in other banks

     (29,521,010     (30,485,715
  

 

 

   

 

 

 

Cash and cash equivalents

     27,724,004       39,148,500  

 

20


7. Leases

Operating leases

 

  (1) Lessee

Future lease payments, including interest expenses, under non-cancelable operating leases as of March 31, 2017 and September 30, 2017 were as follows:

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Due within one year

   ¥ 68,472      ¥ 57,285  

Due after one year

     303,606        310,277  
  

 

 

    

 

 

 

Total

   ¥ 372,078      ¥ 367,562  
  

 

 

    

 

 

 

 

  (2) Lessor

Future lease receivables, including interest receivables, under non-cancelable operating leases as of March 31, 2017 and September 30, 2017 were as follows:

 

     (in millions of yen)  
         March 31, 2017            September 30, 2017    

Due within one year

   ¥ 4,560      ¥ 6,907  

Due after one year

     63,687        60,127  
  

 

 

    

 

 

 

Total

   ¥ 68,247      ¥ 67,035  
  

 

 

    

 

 

 

 

21


8. Financial Instruments

The following table summarizes the amounts stated on the consolidated balance sheet and the fair value of financial instruments as of March 31, 2017 and September 30, 2017 together with their differences. Note that the following table does not include non-listed equity securities and certain other securities of which fair value cannot be reliably determined (see Note 2).

 

     (in millions of yen)  
     March 31, 2017  
     Amount on
consolidated
balance sheet
    Fair value      Difference  

(1)    Cash and due from banks

   ¥ 63,525,940     ¥ 63,525,940      ¥ —    

(2)    Call loans and bills bought

     649,147       649,147        —    

(3)    Receivables under resale agreements

     8,066,973       8,066,973        —    

(4)    Receivables under securities borrowing transactions

     11,002,723       11,002,723        —    

(5)    Monetary claims bought (*1)

     4,707,868       4,713,684        5,816  

(6)    Trading assets

     6,459,179       6,459,179        —    

(7)    Money held in trust

     806,881       805,546        (1,334

(8)    Securities:

       

Debt securities being held to maturity

     2,313,276       2,354,671        41,395  

Available-for-sale securities

     54,151,666       54,151,666        —    

(9)    Loans and bills discounted

     109,005,231       

Allowance for credit losses (*1)

     (789,720     
  

 

 

   

 

 

    

 

 

 
     108,215,511       109,775,258        1,559,746  
  

 

 

   

 

 

    

 

 

 

(10)  Foreign exchanges (*1)

     2,083,530       2,083,530        —    
  

 

 

   

 

 

    

 

 

 

Total assets

   ¥ 261,982,698     ¥ 263,588,322      ¥ 1,605,623  
  

 

 

   

 

 

    

 

 

 

(1)    Deposits

   ¥ 170,730,221     ¥ 170,774,951      ¥ 44,729  

(2)    Negotiable certificates of deposit

     11,341,571       11,358,364        16,792  

(3)    Call money and bills sold

     1,973,569       1,973,569        —    

(4)    Payables under repurchase agreements

     17,636,962       17,636,962        —    

(5)    Payables under securities lending transactions

     5,538,739       5,538,739        —    

(6)    Commercial papers

     2,307,222       2,307,222        —    

(7)    Trading liabilities

     3,185,075       3,185,075        —    

(8)    Borrowed money

     16,971,085       16,996,959        25,873  

(9)    Foreign exchanges

     1,970,980       1,970,980        —    

(10)  Short-term bonds payable

     847,999       847,999        —    

(11)  Bonds payable

     9,893,687       10,047,031        153,343  

(12)  Due to trust accounts

     9,893,881       9,893,881        —    

(13)  Other liabilities (*2)

     57,900       57,900        —    
  

 

 

   

 

 

    

 

 

 

Total liabilities

   ¥ 252,348,898     ¥ 252,589,638      ¥ 240,740  
  

 

 

   

 

 

    

 

 

 

Derivative transactions (*3):

       

Activities not qualifying for hedge accounting

   ¥ 244,951     ¥ 244,951      ¥ —    

Activities qualifying for hedge accounting

     189,610       189,610        —    
  

 

 

   

 

 

    

 

 

 

Total derivative transactions

   ¥ 434,561     ¥ 434,561      ¥ —    
  

 

 

   

 

 

    

 

 

 

 

(*1) General and specific allowances for credit losses corresponding to loans are deducted. However, with respect to items other than loans, the amount stated on the consolidated balance sheet is shown since the amount of allowance for credit losses corresponding to these items is insignificant.
(*2) Derivative transactions are excluded. Financial instruments subject to fair value disclosure and are classified as other liabilities are shown in the table.
(*3) Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets and liabilities arising from derivative transactions are presented on a net basis.

 

22


     (in millions of yen)  
     September 30, 2017  
     Amount on
consolidated
balance sheet
    Fair value     Difference  

(1)    Cash and due from banks

   ¥ 69,634,216     ¥ 69,634,216     ¥ —    

(2)    Call loans and bills bought

     588,071     588,071     —    

(3)    Receivables under resale agreements

     6,556,425     6,556,425     —    

(4)    Receivables under securities borrowing transactions

     9,839,176     9,839,176     —    

(5)    Monetary claims bought (*1)

     4,451,918     4,454,369     2,451  

(6)    Trading assets

     6,718,174     6,718,174     —    

(7)    Money held in trust

     931,441     930,274     (1,167

(8)    Securities:

      

Debt securities being held to maturity

     2,287,164       2,328,482       41,318  

Available-for-sale securities

     54,154,175       54,154,175       —    

(9)    Loans and bills discounted

     108,773,485      

Allowance for credit losses (*1)

     (683,434    
  

 

 

   

 

 

   

 

 

 
     108,090,050       109,478,036       1,387,985  
  

 

 

   

 

 

   

 

 

 

(10)  Foreign exchanges (*1)

     2,094,201       2,094,201       —    
  

 

 

   

 

 

   

 

 

 

Total assets

   ¥ 265,345,016     ¥ 266,775,605     ¥ 1,430,588  
  

 

 

   

 

 

   

 

 

 

(1)    Deposits

   ¥ 171,821,375     ¥ 171,862,407     ¥ 41,032  

(2)    Negotiable certificates of deposit

     11,761,760       11,777,635       15,874  

(3)    Call money and bills sold

     2,481,343       2,481,343       —    

(4)    Payables under repurchase agreements

     19,074,709       19,074,709       —    

(5)    Payables under securities lending transactions

     4,786,222       4,786,222       —    

(6)    Commercial papers

     2,730,352       2,730,352       —    

(7)    Trading liabilities

     2,088,115       2,088,115       —    

(8)    Borrowed money

     18,070,574       18,092,755       22,181  

(9)    Foreign exchanges

     2,037,028       2,037,028       —    

(10)  Short-term bonds payable

     861,599       861,599       —    

(11)  Bonds payable

     10,319,688       10,504,867       185,179  

(12)  Due to trust accounts

     9,494,282       9,494,282       —    

(13)  Other liabilities (*2)

     63,200       63,200       —    
  

 

 

   

 

 

   

 

 

 

Total liabilities

   ¥ 255,590,253     ¥ 255,854,521     ¥ 264,267  
  

 

 

   

 

 

   

 

 

 

Derivative transactions (*3):

      

Activities not qualifying for hedge accounting

   ¥ 463,508     ¥ 463,508     ¥ —    

Activities qualifying for hedge accounting

     (230,626     (230,626     —    
  

 

 

   

 

 

   

 

 

 

Total derivative transactions

   ¥ 232,882     ¥ 232,882     ¥ —    
  

 

 

   

 

 

   

 

 

 

 

(*1) General and specific allowances for credit losses corresponding to loans are deducted. However, with respect to items other than loans, the amount stated on the consolidated balance sheet is shown since the amount of allowance for credit losses corresponding to these items is insignificant.
(*2) Derivative transactions are excluded. Financial instruments subject to fair value disclosure and are classified as other liabilities are shown in the table.
(*3) Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets and liabilities arising from derivatives transactions are presented on a net basis. Liabilities on a net basis are presented in parentheses.

 

23


(Note 1) Method used for determining the fair value of financial instruments

Assets

 

(1) Cash and due from banks

For deposits without maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. For deposits with maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because the remaining maturity period of the majority of such deposits is short (maturity within 1 year).

 

(2) Call loans and bills bought, (3) Receivables under resale agreements and (4) Receivables under securities borrowing transactions

For each of these items, the contract terms of the majority of the transactions are short (1 year or less). Thus, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.

 

(5) Monetary claims bought

The fair value of monetary claims bought is determined based on the price obtained from external parties (brokers, etc.) or on the amount reasonably calculated according to the reasonable estimate.

For certain securitized products whose underlying assets are corporate loan receivables, the fair value is determined by taking into account two different prices. The first price is calculated by discounting the expected future cash flow, which is derived from such factors as default probability and prepayment rate derived from analyses of the underlying assets and discounted at a rate, which is the yield of such securitized products adjusted for the liquidity premium based on the actual historical market data. The second is the price obtained from external parties (brokers, etc.). For other securitized products, the fair value is determined based on the price obtained from external parties after considering the result of periodic confirmation of the current status of these products, including price comparison with similar products, time series data comparison of the same product, and analysis of consistency with publicly available market indices.

For certain monetary claims bought for which these methods do not apply, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount from their qualitative viewpoint.

 

(6) Trading assets

For securities such as bonds that are held for trading purposes, the fair value is determined based on the price quoted by stock exchanges or by the financial institutions from which these securities are purchased, or determined at the present value of the expected future cash flow discounted at an interest rate based on the market interest rate as of the date of evaluation with certain adjustments.

 

(7) Money held in trust

For securities that are part of trust property in an independently managed monetary trust with the primary purpose to manage securities, the fair value is determined based on the price quoted by the financial institutions from which these securities are purchased.

See “Money Held in Trust” for notes on money held in trust by categories based on each purpose of holding the money held in trust.

 

24


(8) Securities

The fair value of equity securities is determined based on the price quoted by stock exchanges. The fair value of bonds is determined based on the market price or by the financial institutions from which they are purchased, or based on the price reasonably calculated. The fair value of investment trusts is determined based on the publicly available price.

For privately placed guaranteed bonds held by MUFG’s bank or trust subsidiaries, the fair value is determined based on the present value of expected future cash flow, which is adjusted to reflect default risk, amount to be collected from collaterals and guarantees and guarantee fees, and discounted at an interest rate based on the market interest rate as of the date of evaluation with certain adjustments.

The fair value of floating rate Japanese government bonds is determined based on the present value as calculated by discounting the expected future cash flow, estimated based on factors such as the yield of government bonds and discounted at a rate based on such yield of government bonds adjusted for the value of embedded options and the liquidity premium based on the actual market premiums observed in the past.

See “Securities” for notes on securities by categories based on each purpose of holding the securities.

 

(9) Loans and bills discounted

With respect to loans, for each category of loans based on types of loans, internal ratings and maturity period, the fair value is determined based on the present value of expected future cash flow, which is adjusted to reflect default risk and the expected amount to be collected from collateral and guarantees and discounted at an interest rate based on the market interest rate as of the date of evaluation with certain adjustments. For loans with floating interest rates such as certain residential loans provided to individual home owners, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount, unless the creditworthiness of the borrower has changed significantly since the loan origination.

For receivables from bankrupt, virtually bankrupt and likely to become bankrupt borrowers, credit loss is estimated based on factors such as the present value of expected future cash flow or the expected amount to be collected from collateral and guarantees. Since the fair value of these items approximates the net amount of receivables after the deduction of allowance for credit losses on the consolidated balance sheet as of the consolidated balance sheet date, such amount is presented as the fair value. The fair value of loans qualifying for special hedge accounting treatment of interest rate swaps or designation of forward exchange contracts and other contracts under Generally Accepted Accounting Principles in Japan (“JGAAP”) reflects the fair value of such interest rate swaps or forward exchange contracts and other contracts.

 

(10) Foreign exchanges

Foreign exchanges consist of foreign currency deposits with other banks that are “due from foreign banks (our accounts),” short-term loans involving foreign currencies that are “due from other foreign banks (their accounts),” export bills, traveler’s checks and other bills (purchased foreign bills), and loans on notes using import bills (foreign bills receivables). For these items, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because most of these items are deposits without maturity or have short contract terms (1 year or less).

Liabilities

 

(1) Deposits and (2) Negotiable certificates of deposit

For demand deposits, the amount payable on demand as of the consolidated balance sheet date (i.e., the carrying amount) is considered to be the fair value. For floating rate time deposits, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because the market interest rate is reflected in such deposits within a short time period. Fixed rate time deposits are grouped by certain maturity periods. The fair value of such deposits is the present value discounted by expected future cash flow. The discount rate used is the interest rate that would be applied to newly accepted deposits.

 

(3) Call money and bills sold, (4) Payables under repurchase agreements, (5) Payables under securities lending transactions and (6) Commercial papers

For each of these items, the majority of transactions have short contract terms (1 year or less). Thus, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.

 

25


(7) Trading liabilities

For securities such as bonds that are sold short for trading purposes, the fair value is determined based on the price quoted by stock exchanges or the financial institutions to which these securities were sold.

 

(8) Borrowed money

For floating rate borrowings, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. This is on the basis that the interest rate of such floating rate borrowings reflects the market interest rate in a short time and that there has been no significant change in MUFG’s nor MUFG’s consolidated subsidiaries’ creditworthiness after such borrowings were made. For fixed rate borrowings, the fair value is calculated as the present value of expected future cash flow from these borrowings grouped by certain maturity periods, which is discounted at an interest rate generally applicable to similar borrowings reflecting the premium applicable to MUFG or MUFG’s consolidated subsidiaries.

 

(9) Foreign exchanges

Among foreign exchange contracts, foreign currency deposits accepted from other banks and non-resident yen deposits (due to other foreign banks) are deposits without maturity. Moreover, foreign currency short-term borrowings have short contract terms (1 year or less). Thus, the carrying amount is presented as the fair value of these contracts, as the fair value approximates such carrying amount.

 

(10) Short-term bonds payable

For short-term bonds payable, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because they have short contract terms (1 year or less).

 

(11) Bonds payable

The fair value of corporate bonds issued by MUFG and MUFG’s consolidated subsidiaries is determined based on their market price. For certain corporate bonds, the fair value is calculated as the present value of expected future cash flow discounted at an interest rate generally applicable to issuance of similar corporate bonds. For floating rate corporate bonds without market prices, the carrying amount of such bonds is presented as the fair value, as the fair value approximates such carrying amount. This is on the basis that the interest rate of such floating rate corporate bonds reflects the market interest rate in a short time and that there has been no significant change in MUFG’s nor MUFG’s consolidated subsidiaries’ creditworthiness after the issuance. For fixed rate corporate bonds, the fair value is the present value of expected future cash flow from these borrowings, which is discounted at an interest rate generally applicable to similar borrowings reflecting the premium applicable to MUFG or MUFG’s consolidated subsidiaries. The fair value of corporate bonds qualifying for special hedge accounting treatment of interest rate swaps under JGAAP reflects the fair value of such interest rate swaps.

 

(12) Due to trust accounts

Since these are cash deposits with no maturity, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.

 

(13) Other liabilities

For other liabilities, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because they have short contract terms (1 year or less).

Derivative transactions

See “Derivatives” for notes on derivative transactions.

 

26


(Note 2) The following table summarizes financial instruments on the consolidated balance sheet whose fair value cannot be reliably determined. These securities are not included in the amount presented under the line item “Assets — (8) Assets-Available- for-sale securities” in the table summarizing the fair value of financial instruments.

 

     (in millions of yen)  
     Amount on consolidated balance sheet  
     March 31, 2017      September 30, 2017  

Unlisted equity securities (*1) (*2)

   ¥ 197,035      ¥ 221,856  

Investment in partnerships and others (*2) (*3)

                  54,397        49,770  

Others (*2)

     959        1,033  
  

 

 

    

 

 

 

Total

   ¥ 252,392      ¥ 272,661  
  

 

 

    

 

 

 

 

  (*1) Unlisted equity securities do not carry quoted market prices. Since fair values of these securities cannot be reliably determined, their fair value is not disclosed.
  (*2) With respect to non-listed equity securities, an impairment loss of ¥1,918 million and ¥1,004 million was recorded in the fiscal year ended March 31, 2017 and in the six months ended September 30, 2017, respectively.
  (*3) Investments in partnerships and others mainly include silent partnerships and investment partnerships and other partnerships, and they do not carry quoted market prices. Since fair values of these securities cannot be reliably determined, their fair values are not disclosed.

 

27


9. Securities

In addition to “Securities” on the consolidated balance sheet, the figures in the following tables include negotiable certificates of deposit in “Cash and due from banks” and beneficiary certificates in trusts in “Monetary claims bought” and others.

 

I. Debt securities being held to maturity

 

     (in millions of yen)  
     March 31, 2017  
     Amount on
consolidated
balance sheet
     Fair value      Difference  

Securities whose fair value exceeds amount on consolidated balance sheet:

        

Domestic bonds

   ¥ 1,100,955      ¥ 1,144,070      ¥ 43,114  

Government bonds

     1,100,955        1,144,070        43,114  

Municipal bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     1,628,384        1,647,753        19,369  

Foreign bonds

     529,118        539,372        10,253  

Other

     1,099,265        1,108,381        9,115  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 2,729,339      ¥ 2,791,823      ¥ 62,484  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed amount on consolidated balance sheet:

        

Domestic bonds

   ¥ —        ¥ —        ¥ —    

Government bonds

     —          —          —    

Municipal bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     831,485        819,327        (12,158

Foreign bonds

     683,202        671,229        (11,973

Other

     148,283        148,098        (185
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 831,485      ¥ 819,327      ¥ (12,158
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 3,560,825      ¥ 3,611,151      ¥ 50,325  
  

 

 

    

 

 

    

 

 

 

 

28


     (in millions of yen)  
     September 30, 2017  
     Amount on
consolidated
balance sheet
     Fair value      Difference  

Securities whose fair value exceeds amount on consolidated balance sheet:

        

Domestic bonds

   ¥ 1,100,891      ¥ 1,141,160      ¥ 40,268  

Government bonds

     1,100,891        1,141,160        40,268  

Municipal bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     1,458,532        1,474,792        16,259  

Foreign bonds

     594,741        605,119        10,377  

Other

     863,791        869,673        5,882  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 2,559,424      ¥ 2,615,952      ¥ 56,527  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed amount on consolidated balance sheet:

        

Domestic bonds

   ¥ —        ¥ —        ¥ —    

Government bonds

     —          —          —    

Municipal bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     696,448        687,042        (9,406

Foreign bonds

     591,530        582,203          (9,327

Other

     104,917        104,839        (78
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 696,448      ¥ 687,042      ¥ (9,406
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 3,255,872      ¥ 3,302,994      ¥ 47,121  
  

 

 

    

 

 

    

 

 

 

 

29


II. Available-for-sale securities

 

     (in millions of yen)  
     March 31, 2017  
     Amount on
consolidated
balance sheet
     Acquisition cost      Difference  

Securities whose fair value exceeds the acquisition cost:

        

Domestic equity securities

   ¥ 4,944,994      ¥ 2,258,497      ¥ 2,686,496  

Domestic bonds

     20,780,952        20,369,762        411,190  

Government bonds

     18,414,996        18,061,950        353,046  

Municipal bonds

     430,192        422,278        7,913  

Corporate bonds

     1,935,764        1,885,533        50,231  

Other securities

     10,579,403        10,243,139        336,263  

Foreign equity securities

     121,538        62,045        59,492  

Foreign bonds

     9,049,374        8,895,093        154,280  

Other

     1,408,490        1,286,000        122,489  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 36,305,350      ¥ 32,871,399      ¥ 3,433,950  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed the acquisition cost:

        

Domestic equity securities

   ¥ 219,659      ¥ 270,965      ¥ (51,305

Domestic bonds

     6,907,889        6,919,949        (12,060

Government bonds

     5,595,615        5,597,649        (2,034

Municipal bonds

     579,683        584,128        (4,444

Corporate bonds

     732,590        738,171        (5,581

Other securities

     11,380,249        11,611,770        (231,521

Foreign equity securities

     61,264        70,881        (9,616

Foreign bonds

     8,867,932        9,030,700        (162,768

Other

     2,451,052        2,510,188        (59,136
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 18,507,798      ¥ 18,802,685      ¥ (294,887
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 54,813,148      ¥ 51,674,085      ¥ 3,139,063  
  

 

 

    

 

 

    

 

 

 

 

(Note) The total difference amount shown in the table above includes ¥41,607 million of revaluation gains on securities by application of the fair value hedge accounting method.

 

30


     (in millions of yen)  
     September 30, 2017  
     Amount on
consolidated
balance sheet
     Acquisition cost      Difference  

Securities whose fair value exceeds the acquisition cost:

        

Domestic equity securities

   ¥ 5,365,691      ¥ 2,220,909      ¥ 3,144,781  

Domestic bonds

     15,143,072        14,840,886        302,186  

Government bonds

     12,847,818        12,597,693        250,124  

Municipal bonds

     443,342        436,430        6,912  

Corporate bonds

     1,851,911        1,806,762        45,148  

Other securities

     12,611,944        12,202,313        409,631  

Foreign equity securities

     242,338        162,344        79,994  

Foreign bonds

     10,279,337        10,124,810        154,527  

Other

     2,090,268        1,915,158        175,109  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 33,120,708      ¥ 29,264,109      ¥ 3,856,599  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed the acquisition cost:

        

Domestic equity securities

   ¥ 206,082      ¥ 239,200      ¥ (33,117

Domestic bonds

     9,491,668        9,505,283        (13,614

Government bonds

     7,727,863        7,731,785        (3,922

Municipal bonds

     807,268        812,131        (4,862

Corporate bonds

     956,537        961,366        (4,829

Other securities

     11,949,835        12,138,133        (188,298

Foreign equity securities

     4,553        4,749        (196

Foreign bonds

     10,161,662        10,280,025        (118,363

Other

     1,783,619        1,853,358        (69,738
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 21,647,587      ¥ 21,882,617      ¥ (235,030
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 54,768,296      ¥ 51,146,727      ¥ 3,621,568  
  

 

 

    

 

 

    

 

 

 

 

(Note) The total difference amount shown in the table above includes ¥92,271 million of revaluation gains on securities by application of the fair value hedge accounting method.

 

31


III. Securities incurred impairment losses

Securities other than those held for trading purposes and investment in affiliates (excluding certain securities whose fair value cannot be reliably determined) are subject to write-downs when their fair value significantly declines and it has been determined that it is not probable that the value will recover to the acquisition cost as of the end of the reporting period. In such case, the fair value is recorded on the consolidated balance sheet and the difference between fair value and acquisition cost is recognized as losses for the reporting period (referred to as “impairment losses”).

Impairment losses on such securities for the fiscal year ended March 31, 2017 were ¥913 million consisting of ¥639 million on equity securities and ¥274 million on bonds and other securities.

Impairment losses on such securities for the six months ended September 30, 2017 were ¥2,873 million consisting of ¥102 million on equity securities and ¥2,771 million on bonds and other securities.

Whether there is any “significant decline in fair value” is determined for each category of issuer in accordance with the internal standards for self-assessment of asset quality as provided below:

 

  (a) Bankrupt issuers, virtually bankrupt issuers and likely to become bankrupt issuers:

Fair value is lower than acquisition cost.

 

  (b) Issuers requiring close watch:

Fair value has declined 30% or more from acquisition cost.

 

  (c) Normal issuers:

Fair value has declined 50% or more from acquisition cost.

“Bankrupt issuers” means issuers who have entered into bankruptcy, special liquidation proceedings or similar legal proceedings or whose notes have been dishonored and suspended from processing through clearing houses. “Virtually bankrupt issuers” means issuers who are not legally or formally bankrupt but are regarded as substantially in a similar condition. “Likely to become bankrupt issuers” means issuers who are not yet legally or formally bankrupt but deemed to have a high possibility of becoming bankrupt. “Issuers requiring close watch” means issuers who are financially weak and are under close monitoring by MUFG’s subsidiaries.

“Normal issuers” means issuers who do not correspond to any of the four categories of issuers mentioned above.

 

32


10. Money Held in Trust

 

I. Money held in trust being held to maturity

 

     (in millions of yen)  
     March 31, 2017  
     (a) Amount on
consolidated
balance sheet
     (b) Fair value      Difference
(b) - (a)
    Money held in
trust with
respect to
which (b)
exceeds (a)
     Money held
in trust with
respect to
which (b)
does not
exceed (a)
 

Money held in trust being held to maturity

   ¥     61,322      ¥     61,694      ¥     372      ¥    372      ¥ —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     (in millions of yen)  
     September 30, 2017  
     (a) Amount on
consolidated
balance sheet
     (b) Fair value      Difference
(b) - (a)
    Money held in
trust with
respect to
which (b)
exceeds (a)
     Money held
in trust with
respect to
which (b)
does not
exceed (a)
 

Money held in trust being held to maturity

   ¥     56,281      ¥     56,651      ¥     370      ¥    370      ¥    —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(Note) “Money held in trust with respect to which (b) exceeds (a)” and “Money held in trust with respect to which (b) does not exceed (a)” show the breakdown of the difference between (a) and (b).

 

II. Money held in trust not for trading purposes or being held to maturity

 

     (in millions of yen)  
     March 31, 2017  
     (a) Amount on
consolidated
balance sheet
     (b)
Acquisition
cost
     Difference
(a) - (b)
    Money held in
trust with
respect to
which (a)
exceeds (b)
     Money held
in trust with
respect to
which (a)
does not
exceed (b)
 

Money held in trust not for trading purpose
or being held to maturity

   ¥   711,230      ¥   710,210      ¥  1,020      ¥ 1,020      ¥    —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     (in millions of yen)  
     September 30, 2017  
     (a) Amount on
consolidated
balance sheet
     (b)
Acquisition
cost
     Difference
(a) - (b)
    Money held in
trust with
respect to
which (a)
exceeds (b)
     Money held
in trust with
respect to
which (a)
does not
exceed (b)
 

Money held in trust not for trading purpose
or being held to maturity

   ¥   836,423      ¥   837,884      ¥ (1,460   ¥    873      ¥ 2,334  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(Note) “Money held in trust with respect to which (a) exceeds (b)” and “Money held in trust with respect to which (a) does not exceed (b)” show the breakdown of the difference between (a) and (b).

 

33


11. Net Unrealized Gains (Losses) on Available-for-Sale Securities

Net unrealized gains (losses) on available-for-sale securities as of the dates indicated consisted of the following:

As of March 31, 2017

 

     (in millions of yen)  

Net unrealized gains (losses)

   ¥ 3,087,268  

Available-for-sale securities

     3,099,560  

Money held in trust not for trading purpose or being held to maturity

     1,020  

Reclassification from “Available-for-sale securities” to “Debt securities being held to maturity”

     (13,313

Deferred tax liabilities

     (886,189

Net unrealized gains (losses) on available-for-sale securities, net of deferred tax liabilities
(before adjustments for MUFG’s ownership share in equity method investees’ unrealized gains (losses))

     2,201,079  

Non-controlling interests

     (7,752

MUFG’s ownership share in equity method investees’ unrealized gains (losses) on available-for-sale securities

     (8,728
  

 

 

 

Total

   ¥ 2,184,597  
  

 

 

 

(Notes)

 

1. “Net unrealized gains (losses)” shown in the above table excluded ¥41,607 million of revaluation gains on securities as a result of the application of the fair value hedge accounting method, which were recorded in current earnings.
2. “Net unrealized gains (losses)” shown in the above table included ¥2,104 million of unrealized gains on securities in investment limited partnerships.

As of September 30, 2017

 

     (in millions of yen)  

Net unrealized gains (losses)

   ¥ 3,520,375  

Available-for-sale securities

     3,532,837  

Money held in trust not for trading purpose or being held to maturity

     (1,460

Reclassification from “Available-for-sale securities” to “Debt securities being held to maturity”

     (11,001

Deferred tax liabilities

     (1,012,892

Net unrealized gains (losses) on available-for-sale securities, net of deferred tax liabilities
(before adjustments for MUFG’s ownership share in equity method investees’ unrealized gains (losses))

     2,507,482  

Non-controlling interests

     (7,893

MUFG’s ownership share in equity method investees’ unrealized gains (losses) on available-for-sale securities

     817  
  

 

 

 

Total

   ¥ 2,500,406  
  

 

 

 

(Notes)

 

1. “Net unrealized gains (losses)” shown in the above table excluded ¥92,271 million of revaluation gains on securities as a result of the application of the fair value hedge accounting method, which were recorded in current earnings.
2. “Net unrealized gains (losses)” shown in the above table included ¥7,579 million of unrealized gains on securities in investment limited partnerships and ¥4,039 million of unrealized losses as a result of foreign exchange adjustments related to securities denominated in foreign currencies, whose fair value cannot be reliably determined.

 

34


12. Derivatives

Derivatives to which hedge accounting is not applied

With respect to derivatives to which hedge accounting is not applied, the contract amounts or notional principal amounts, fair values and related valuation gains (losses) as of the end of the reporting period by transaction type and fair value valuation method were as follows. The contract and other amounts do not represent the market risk exposures associated with the relevant derivatives.

 

I. Interest rate-related derivatives

 

     (in millions of yen)  
     March 31, 2017  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total      Over one year       

Transactions listed on exchanges:

          
Interest rate futures   Sold    ¥ 5,568,734      ¥ 3,783,599      ¥ 22,286     ¥ 22,286  
  Bought      8,117,774        7,262,088        (42,965     (42,965
Interest rate options   Sold      1,139,524        —          64       126  
  Bought      1,369,323        —          (6     (95

Over-the-counter (“OTC”) transactions:

          
Forward rate agreements   Sold      41,709,651        2,713,200        (12,715     (12,715
  Bought      40,144,094        2,335,493        9,495       9,495  
Interest rate swaps   Receivable fixed rate/
Payable floating rate
     489,113,504        383,918,385        9,849,312       9,849,312  
  Receivable floating rate/
Payable fixed rate
     488,019,539        384,293,182        (9,561,240     (9,561,240
  Receivable floating rate/
Payable floating rate
     90,998,055        77,961,670        65,023       65,023  
  Receivable fixed rate/
Payable fixed rate
     603,927        530,072        12,349       12,349  
Interest rate swaptions   Sold      26,719,351        18,996,577        (762,751     (10,998
  Bought      22,837,303        16,030,771        607,769       28,953  
Other   Sold      3,351,101        2,827,121        (50,486     (17,400
  Bought      3,788,399        3,414,843        56,801       9,960  
    

 

 

    

 

 

    

 

 

   

 

 

 

Total

       —          —        ¥ 192,936     ¥ 352,092  
    

 

 

    

 

 

    

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values of transactions listed on exchanges are determined using the closing prices on the Chicago Mercantile Exchange or other exchanges as of the end of the fiscal year.

The fair values of OTC transactions are calculated using the discounted present value model, the option-pricing model or other methods.

 

35


     (in millions of yen)  
     September 30, 2017  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total      Over one year       

Transactions listed on exchanges:

          

Interest rate futures

   Sold    ¥ 5,525,195      ¥ 4,401,636      ¥ (1,259   ¥ (1,259
   Bought      10,986,510        9,054,061        (6,925     (6,925

Interest rate options

   Sold      3,849,023        —          54       488  
   Bought      2,705,258        —          (23     (474

OTC transactions:

          
Forward rate agreements    Sold      31,665,360        508,707        (1,894     (1,894
   Bought      32,535,854        497,804        1,458       1,458  

Interest rate swaps

   Receivable fixed rate/
Payable floating rate
     487,690,896        376,089,892        8,741,256       8,741,256  
   Receivable floating rate/
Payable fixed rate
     488,415,384        380,509,186        (8,485,455     (8,485,455
   Receivable floating rate/
Payable floating rate
     95,793,863        81,255,725        61,934       61,934  
   Receivable fixed rate/
Payable fixed rate
     641,768        584,524        12,534       12,534  

Interest rate swaptions

   Sold      24,953,095        18,156,600        (613,606     145,937  
   Bought      21,130,003        15,264,193        503,481       (73,270

Other

   Sold      3,110,830        2,712,360        (40,706     (9,143
   Bought      3,537,009        3,312,696        48,304       2,597  
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —          —        ¥ 219,153     ¥ 387,785  
     

 

 

    

 

 

    

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values of transactions listed on exchanges are determined using the closing prices on the Chicago Mercantile Exchange or other exchanges as of the end of the reporting period.

The fair values of OTC transactions are calculated using the discounted present value model, the option-pricing model or other methods.

 

36


II. Currency-related derivatives

 

                                                                                                                            
     (in millions of yen)  
     March 31, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      
Transactions listed on exchanges:         

Currency futures

  

Sold

   ¥ 90,028     ¥ 9,028     ¥ 643     ¥ 643  
   Bought      462,836       170,313       (4,394     (4,394

OTC transactions:

           

Currency swaps

        57,568,038       46,233,338       (65,667     (65,667

Forward contracts on foreign exchange

  

Sold

     61,904,182       3,918,754       21,604       21,604  
   Bought      58,543,130       3,984,278       51,108       51,108  

Currency options

  

Sold

     7,854,972       3,742,437       (98,675     139,253  
   Bought      7,435,904       3,452,501       113,120       (79,902
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                     —         —       ¥ 17,740     ¥ 62,646  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the discounted present value model, the option-pricing model or other methods.

 

                                                                                                                            
     (in millions of yen)  
     September 30, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

Transactions listed on exchanges:

        

Currency futures

   Sold    ¥ 144,605     ¥ 6,872     ¥ 137     ¥ 137  
   Bought      485,542       117,533       16       16  

OTC transactions:

           

Currency swaps

        61,336,073       50,749,658       129,380       129,380  

Forward contracts on foreign exchange

   Sold      61,512,773       3,808,513       (741,119     (741,119
   Bought      60,120,953       3,887,648       846,551       846,551  

Currency options

   Sold      7,548,875       3,733,716       (90,937     134,758  
  

Bought

     7,239,065       3,377,910       100,289       (87,515
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                     —         —       ¥ 244,318     ¥ 282,208  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the discounted present value model, the option-pricing model or other methods.

 

37


III. Equity-related derivatives

 

                                                                                                                            
     (in millions of yen)  
     March 31, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

Transactions listed on exchanges:

        

Stock index futures

   Sold    ¥ 714,814     ¥ 28,533     ¥ 8,081     ¥ 8,081  
   Bought      212,755       13,055       8,380       8,380  

Stock index options

   Sold      920,359       548,323       (80,847     15,338  
   Bought      605,670       374,733       50,953       (8,191

OTC transactions:

        

OTC securities option transactions

   Sold      542,370       363,792       (83,780     (60,997
   Bought      686,877       534,954       98,161       85,019  

OTC securities index swap transactions

   Receivable index volatility/
Payable interest rate
     116,764       111,134       (8,793     (8,793
   Receivable interest rate/
Payable index volatility
     480,124       443,513       29,277       29,277  

Forward transactions in OTC securities indexes

   Sold      738       —         24       24  
   Bought      68,845       —         (1,100     (1,100
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

        —         —       ¥ 20,358     ¥ 67,039  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values of transactions listed on exchanges are determined using the closing prices on the Osaka Exchange or other exchanges as of the end of the fiscal year.
     The fair values of OTC transactions are calculated using the discounted present value model, the option-pricing model or other methods.

 

38


                                                                                                                            
     (in millions of yen)  
     September 30, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

Transactions listed on exchanges:

        

Stock index futures

  

Sold

   ¥ 819,964     ¥ 28,533     ¥ (28,782   ¥ (28,782
   Bought      196,730       13,055       17,581       17,581  

Stock index options

  

Sold

     1,195,307       629,625       (86,604     27,523  
   Bought      995,425       446,455       62,823       (8,309

OTC transactions:

           

OTC securities option transactions

  

Sold

     616,819       418,975       (98,855     (67,739
   Bought      745,254       551,873       114,641       99,015  

OTC securities index swap transactions

   Receivable index volatility/
Payable interest rate
     139,765       123,436       (4,354     (4,354
   Receivable interest rate/
Payable index volatility
     582,784       339,763       20,265       20,265  

Forward transactions in OTC securities indexes

  

Sold

     582       —         (59     (59
   Bought      32,265       —         2,256       2,256  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                     —         —       ¥ (1,088   ¥ 57,396  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values of transactions listed on exchanges are determined using the closing prices on the Osaka Exchange or other exchanges as of the end of the reporting period.
     The fair values of OTC transactions are calculated using the discounted present value model, the option-pricing model or other methods.

 

39


IV. Bond-related derivatives

 

                                                                                                                            
     (in millions of yen)  
     March 31, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

Transactions listed on exchanges:

        

Bond futures

   Sold    ¥ 405,989     ¥ —       ¥ (180   ¥ (180
   Bought      707,872       —         3,763       3,763  

Bond futures options

   Sold      449,113       —         (959     (39
   Bought         604,739       —         237       (82

OTC transactions:

           

Bond OTC options

   Sold      269,601       —         (581     (94
   Bought      261,442       —         432       (57

Bond forward contracts

   Sold      1,059,812       10,775       398       398  
   Bought      695,541       —         379       379  

Bond OTC swaps

   Receivable fixed rate/
Payable variable rate
     6,800       6,800       1,308       1,308  
   Receivable variable rate/
Payable fixed rate
     2,000       —         64       64  
   Receivable variable rate/
Payable variable rate
     236,014       236,014       (9,144     (9,144
   Receivable fixed rate/
Payable fixed rate
     30,500       30,500       5,145       5,145  

Total return swaps

   Sold      78,533       78,533       (0     (0
   Bought      158,710       89,879       10,224       10,224  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                     —         —       ¥ 11,086     ¥ 11,683  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values of transactions listed on exchanges are determined using the closing prices on the Osaka Exchange or other exchanges as of the end of the fiscal year.

The fair values of OTC transactions are calculated using the discounted present value model, the option-pricing model or other methods.

 

40


                                                                                                                            
     (in millions of yen)  
     September 30, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

Transactions listed on exchanges:

        

Bond futures

   Sold    ¥ 642,155     ¥ —       ¥ 1,569     ¥ 1,569  
   Bought      890,560       —         (3,776     (3,776

Bond futures options

   Sold      195,629       —         (249     43  
   Bought         710,613       —         663       (219

OTC transactions:

           

Bond OTC options

   Sold      93,349       —         (314     (45
   Bought      124,472       —         333       (40

Bond forward contracts

   Sold      1,134,625       8,400       3,558       3,558  
   Bought      791,231       —         (2,226     (2,226

Bond OTC swaps

   Receivable fixed rate/
Payable variable rate
     19,200       19,200       1,527       1,527  
   Receivable variable rate/
Payable fixed rate
     —         —         —         —    
   Receivable variable rate/
Payable variable rate
     214,374       214,374       (5,870     (5,870
   Receivable fixed rate/
Payable fixed rate
     26,500       26,500       4,388       4,388  

Total return swaps

   Sold      78,911       78,911       (4     (4
   Bought      227,619       146,833       1,962       1,962  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                     —         —       ¥ 1,563     ¥ 867  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values of transactions listed on exchanges are determined using the closing prices on the Osaka Exchange or other exchanges as of the end of the reporting period.

The fair values of OTC transactions are calculated using the discounted present value model, the option-pricing model or other methods.

 

41


V. Commodity-related derivatives

 

                                                                                                                            
     (in millions of yen)  
     March 31, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

OTC transactions:

        

Commodity swaps

   Receivable index volatility/
Payable interest rate
   ¥ 150,514     ¥ 109,498     ¥ (13,125   ¥ (13,125
   Receivable interest rate/
Payable index volatility
     153,682       112,083       17,209       17,209  

Commodity options

   Sold      83,950       39,154       (2,281     (1,828
   Bought      83,849       39,054       2,205       2,052  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

        —         —       ¥ 4,008     ¥ 4,307  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the prices and contract periods of the underlying transactions as well as other factors comprising other contractual terms of such transactions.
3. The commodities are mainly those related to oil and other commodities.

 

                                                                                                                            
     (in millions of yen)  
     September 30, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

OTC transactions:

        

Commodity swaps

   Receivable index volatility/
Payable interest rate
   ¥ 112,923     ¥ 90,522     ¥ (20,981   ¥ (20,981
   Receivable interest rate/
Payable index volatility
     120,359       95,720       23,873       23,873  

Commodity options

   Sold      64,791       10,509       (1,487     (826
   Bought      64,691       10,409       1,415       1,156  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

        —         —       ¥ 2,819     ¥ 3,221  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the prices and contract periods of the underlying transactions as well as other factors comprising other contractual terms of such transactions.
3. The commodities are mainly those related to oil and other commodities.

 

42


VI. Credit-related derivatives

 

                                                                                                                            
     (in millions of yen)  
     March 31, 2017  
     Contract amount              
     Total     Over one year     Fair value     Valuation
gains (losses)
 

OTC transactions:

        

Credit default options

   Sold    ¥ 2,817,574     ¥ 2,001,353     ¥ 39,461     ¥ 39,461  
   Bought      3,096,646       2,229,860       (41,642     (41,642
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                       —         —       ¥ (2,181   ¥ (2,181
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the discounted present value model, the option-pricing model or other methods.
3. “Sold” refers to transactions where the credit risk is assumed, and “Bought” refers to transactions where the credit risk is transferred.

 

                                                                                                                            
     (in millions of yen)  
     September 30, 2017  
     Contract amount              
     Total     Over one year     Fair value     Valuation
gains (losses)
 

OTC transactions:

        

Credit default options

   Sold    ¥ 2,817,270     ¥ 2,033,414     ¥ 54,777     ¥ 54,777  
   Bought      3,209,442       2,323,798       (58,805     (58,805
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                       —         —       ¥ (4,027   ¥ (4,027
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the discounted present value model, the option-pricing model or other methods.
3. “Sold” refers to transactions where the credit risk is assumed, and “Bought” refers to transactions where the credit risk is transferred.

 

43


VII. Other derivatives

 

                                                                                                                            
     (in millions of yen)  
     March 31, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

OTC transactions:

        

Earthquake derivatives

   Sold    ¥ 26,414     ¥ 18,000     ¥ (729   ¥ 2,080  
   Bought      26,776       18,000       1,093       (879

SVF Wrap Products

  

Sold

     2,202,379       1,220,063       (19     (19
   Bought      —         —         —         —    

Other

  

Sold

     —         —         —         —    
   Bought      5,298       1,963       657       657  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                       —         —       ¥ 1,002     ¥ 1,838  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the option-pricing model or other methods.
3. SVF Wrap Products are derivative instruments where BTMU guarantees the payment of the principal to 401(k) investors and other investors that invest in Stable Value Fund.

 

                                                                                                                            
     (in millions of yen)  
     September 30, 2017  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year      

OTC transactions:

        

Earthquake derivatives

   Sold    ¥ 26,454     ¥ 11,000     ¥ (772   ¥ 2,404  
   Bought      26,454       11,000       772       (1,174

SVF Wrap Products

  

Sold

     2,072,114       1,446,331       (11     (11
   Bought      —         —         —         —    

Other

  

Sold

     —         —         —         —    
   Bought      5,323       —         781       781  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                       —         —       ¥ 769     ¥ 1,999  
     

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.
2. The fair values are calculated using the option-pricing model or other methods.
3. SVF Wrap Products are derivative instruments where BTMU guarantees the payment of the principal to 401(k) investors and other investors that invest in Stable Value Fund.

 

44


13. Stock Options

 

I. Amount of, and income statement line-item for, expenses relating to stock options

 

     (in millions of yen)  
             For the six months ended September 30,           
     2016      2017  

General and administrative expenses

   ¥ 3,335      ¥ 3,408  

 

II. Outline of stock bonus plans of MUFG Americas Holdings Corporation (“MUAH”), a consolidated subsidiary of MUFG

For the six months ended September 30, 2016

 

    

2016 1st Stock Bonus Plans

    

2016 2nd Stock Bonus Plans

 

Number of grantees by category

   Employees of MUAH and subsidiaries:      2      Employees of MUAH and subsidiaries:      1,012  

Number of units granted*

   RSUs:      211,839      RSUs:      16,471,985  

Date of grant

   March 15, 2016       June 15, 2016   

Eligible service period

   March 15, 2016 to March 15, 2019       June 15, 2016 to June 15, 2019   

Fair value on grant date (in U.S. dollars per unit)

      $ 4.96         $ 4.59  

 

(Note) The RSUs referred to in the above tables are the Restricted Stock Units which are settled in American Depositary Receipts (ADRs) representing shares of common stock of MUFG, MUAH’s ultimate parent company. Compensation costs related to the RSUs granted for the six months ended September 30, 2016 are presented in “General and administrative expenses” in the consolidated statements of income. RSUs represent a right to receive one ADR per RSU and, unless otherwise provided in the relevant Restricted Share Unit Agreement, the right vests pro-rata on each one-year anniversary of the grant date and becomes fully vested three years from the grant date, provided that the grantees have satisfied the specified continuous service requirements. Each ADR is exchangeable for one share of MUFG common stock.

 

45


For the six months ended September 30, 2017

 

   

2017 1st Stock Bonus Plans

       

2017 2nd Stock Bonus Plans

       

2017 3rd Stock Bonus Plans

 

Number of grantees by category 

  Employees of MUAH and subsidiaries:      1       Employees of MUAH and subsidiaries:      3       Employees of MUAH and subsidiaries:      2  

Number of units granted*

  RSUs:       27,157       RSUs:      97,779       RSUs:       90,351  

Date of grant

  January 17, 2017       March 15, 2017       April 17, 2017  

Eligible service period

 

January 17, 2017 to

January 15, 2020

 

 

   

March 15, 2017 to

March 15, 2020

 

 

   

April 17, 2017 to

April 15, 2020

 

 

Fair value on grant date (in U.S. dollars per unit)

     $ 6.26          $ 6.75          $ 6.01  
   

2017 4th Stock Bonus Plans

       

2017 5th Stock Bonus Plans

           

Number of grantees by category

  Employees of MUAH and subsidiaries:      1       Employees of MUAH and subsidiaries:      1,113         

Number of units granted*

  RSUs:      11,793       RSUs:      12,516,945         

Date of grant

  May 15, 2017       June 15, 2017         

Eligible service period

 

May 15, 2017 to

June 15, 2019

 

 

   

June 15, 2017 to

June 15, 2020

 

 

      

Fair value on grant date (in U.S. dollars per unit)

     $ 6.36          $ 6.52         

 

(Note) The RSUs referred to in the above tables are the Restricted Stock Units which are settled in American Depositary Receipts (ADRs) representing shares of common stock of MUFG, MUAH’s ultimate parent company. Compensation costs related to the RSUs granted for the six months ended September 30, 2017 are presented in “General and administrative expenses” in the consolidated statements of income. RSUs represent a right to receive one ADR per RSU and, unless otherwise provided in the relevant Restricted Share Unit Agreement, the right vests pro-rata on each one-year anniversary of the grant date and becomes fully vested three years from the grant date, provided that the grantees have satisfied the specified continuous service requirements. Each ADR is exchangeable for one share of MUFG common stock.
  The grantees are entitled to “dividend equivalent credits” on their granted but unvested RSUs when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the grantees would have received on the shares had the shares been issued to the grantees in exchange for their granted but unvested RSUs.

 

46


14. Segment Information

 

I. Business segment information

 

(1) Summary of reporting segments

MUFG’s reporting segments are business units of MUFG which its Executive Committee, the decision-making body for the execution of its business operations, regularly reviews to make decisions regarding allocation of management resources and evaluate performance.

MUFG makes unified group-wide strategies based on customer characteristics and the nature of business.

Accordingly, MUFG has adopted customer-based and business-based segmentation, which consists of the following reporting segments: Retail Banking Business Group, Corporate Banking Business Group, Global Business Group, Trust Assets Business Group, Global Markets Business Group and Other.

 

Retail Banking Business Group:    Providing financial services to domestic individual customers
Corporate Banking Business Group:    Providing services relating to finance, real estate and stock transfers to domestic corporate customers
Global Business Group:    Providing financial services to overseas individual and corporate customers
Trust Assets Business Group:    Providing investment management and administration services for corporate pension funds, public pension funds, public funds and mutual funds
Global Markets Business Group:    Engaged in the trading business relating to foreign currency exchange, funds and investment securities for customers and with market counterparties, and administration of liquidity and cash management
Other:    Other than the businesses mentioned above

 

(2) Methods of calculation of net revenue and operating profit (loss) for each reporting segment

The accounting methods applied to the reported business segments, except the scope of consolidation, are generally consistent with the methods described in “Significant Accounting Policies Applied to the Semi-Annual Consolidated Financial Statements”. The scope of consolidation includes MUFG’s major subsidiaries. The reported figures are generally prepared based on internal managerial accounting rules before elimination of inter-segment transactions and other consolidation adjustments. Net revenues and operating expenses attributable to multiple segments are reported in accordance with internal managerial accounting rules generally calculated based on market value.

 

  (a) Changes in the methods of calculation of operating profit (loss) of each reporting segment

From the six months ended September 30, 2017, MUFG has reflected changes in the allocation of net revenue and operating expenses among reporting segments.

Accordingly, the business segment information for the six months ended September 30, 2016 has been restated based on the new allocation.

 

47


(3) Information on net revenue and operating profit (loss) for each reporting segment

For the six months ended September 30, 2016

 

    (in millions of yen)  
    For the six months ended September 30, 2016  
    Retail
Banking
Business
Group
    Corporate
Banking
Business
Group
    Global
Business
Group
    Trust
Assets
Business
Group
    Total of
Customer
Business
    Global
Markets
Business
Group
    Other     Total  

Net revenue

  ¥ 584,047     ¥ 495,608     ¥ 578,080     ¥ 82,580     ¥ 1,661,582     ¥ 348,416     ¥ 5,188     ¥ 2,015,187  

BTMU and MUTB

    243,038       403,552       200,683       35,143       836,206       256,943       71,556       1,164,706  

Net interest income

    168,151       162,900       92,222       —         404,906       93,084       127,730       625,721  

Net non-interest income

    74,886       240,652       108,460       35,143       431,299       163,858       (56,174     538,984  

Other than BTMU and MUTB

    341,008       92,055       377,397       47,437       825,376       91,472       (66,367     850,480  

Operating expenses

    479,782       282,843       372,247       52,848       1,118,689       101,299       79,016       1,299,005  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

  ¥ 104,264     ¥ 212,764     ¥ 205,833     ¥  29,732     ¥ 542,893     ¥ 247,116     ¥ (73,828   ¥ 716,182  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. “Net revenue” in the above table is used in lieu of net sales generally used by Japanese non-financial companies.
2. “Net revenue” includes net interest income, trust fees, net fees and commissions, net trading profit, and net other operating profit.
3. “Operating expenses” includes personnel expenses and premise expenses.
4. Assets and liabilities of each reporting segment are not reported since MUFG does not allocate assets and liabilities among the segments for internal management purposes.
5. “Net revenue” and “Operating expenses” for each of the Corporate Banking Business Group and the Global Business Group include net revenue and operating expenses relating to overseas Japanese corporate transactions.

The amounts relating to such transactions included in each of these reporting segments are as follows: ¥78,734 million of net revenue, ¥69,032 million of operating expenses and ¥9,701 million of operating profit. Adjustments have been made by deducting these amounts from the Total of Customer Business.

 

48


For the six months ended September 30, 2017

 

    (in millions of yen)  
    For the six months ended September 30, 2017  
    Retail
Banking
Business
Group
    Corporate
Banking
Business
Group
    Global
Business
Group
    Trust
Assets
Business
Group
    Total of
Customer
Business
    Global
Markets
Business
Group
    Other     Total  

Net revenue

  ¥ 599,834     ¥ 480,413     ¥ 633,641     ¥ 91,287     ¥ 1,712,282     ¥ 319,826     ¥ 28,340     ¥ 2,060,449  

BTMU and MUTB

    233,514       390,705       219,817       41,855       827,324       223,901       58,336       1,109,563  

Net interest income

    165,889       162,437       112,270       —         411,016       68,462       112,905       592,384  

Net non-interest income

    67,624       228,268       107,546       41,855       416,308       155,439       (54,568     517,178  

Other than BTMU and MUTB

    366,320       89,707       413,824       49,432       884,957       95,924       (29,995     950,886  

Operating expenses

    474,967       290,216       426,706       57,447       1,172,844       112,581       86,266       1,371,692  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

  ¥ 124,867     ¥ 190,197     ¥ 206,935     ¥  33,839     ¥ 539,438     ¥ 207,244     ¥ (57,925   ¥ 688,757  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Notes)

 

1. “Net revenue” in the above table is used in lieu of net sales generally used by Japanese non-financial companies.
2. “Net revenue” includes net interest income, trust fees, net fees and commissions, net trading profit, and net other operating profit.
3. “Operating expenses” includes personnel expenses and premise expenses.
4. Assets and liabilities of each reporting segment are not reported since MUFG does not allocate assets and liabilities among the segments for internal management purposes.
5. “Net revenue” and “Operating expenses” for each of the Corporate Banking Business Group and the Global Business Group include net revenue and operating expenses relating to overseas Japanese corporate transactions.

The amounts relating to such transactions included in each of these reporting segments are as follows: ¥92,895 million of net revenue, ¥76,493 million of operating expenses and ¥16,401 million of operating profit. Adjustments have been made by deducting these amounts from the Total of Customer Business.

 

(4) Reconciliation of the total operating profit in each of the above tables to the ordinary profit in the consolidated statements of income for the corresponding six-months periods

 

     (in millions of yen)  
     For the six months ended September 30,  
     2016     2017  

Total operating profit of reporting segments

   ¥ 716,182     ¥ 688,757  

Operating profit of consolidated subsidiaries excluded from reporting segments

     26,611       12,152  

Credit related expenses

     (108,435     (88,757

Gains on reversal of allowance for credit losses

     22,807       53,575  

Gains on loans written-off

     27,993       38,291  

Net gains on equity securities and other securities

     44,034       55,015  

Equity in gains of the equity method investees

     113,940       135,674  

Others

     (48,260     (30,689
  

 

 

   

 

 

 

Ordinary profit in the consolidated statements of income

   ¥ 794,873     ¥ 864,020  
  

 

 

   

 

 

 

 

49


II. Related information

For the six months ended September 30, 2016

 

(1) Information by type of service

Omitted because it is similar to the above-explained reporting segment information.

 

(2) Geographical information

 

  (a) Ordinary income

 

(in millions of yen)  
For the six months ended September 30, 2016  
Japan      United States      Europe/Middle East      Asia/Oceania      Others      Total  
  ¥1,764,609      ¥ 422,715      ¥ 138,189      ¥ 390,366      ¥ 63,491      ¥ 2,779,372  

(Notes)

 

  1. Ordinary income is used in lieu of net sales generally used by Japanese non-financial companies.
  2. Ordinary income is categorized by either country or region based on the location of MUFG’s operating offices.

 

  (b) Tangible fixed assets

 

(in millions of yen)  
September 30, 2016  
Japan      United States      Others      Total  
  ¥1,117,146      ¥ 120,528      ¥ 85,959      ¥ 1,323,634  

 

(3) Information by major customer

None.

For the six months ended September 30, 2017

 

(1) Information by type of service

Omitted because it is similar to the above-explained reporting segment information.

 

(2) Geographical information

 

  (a) Ordinary income

 

(in millions of yen)  
For the six months ended September 30, 2017  
Japan      United States      Europe/Middle East      Asia/Oceania      Others      Total  
¥ 1,754,807      ¥ 577,098      ¥ 202,360      ¥ 477,910      ¥ 56,014      ¥ 3,068,191  

(Notes)

 

  1. Ordinary income is used in lieu of net sales generally used by Japanese non-financial companies.
  2. Ordinary income is categorized by either country or region based on the location of MUFG’s operating offices.

 

50


  (b) Tangible fixed assets

 

(in millions of yen)  
September 30, 2017  
Japan      United States      Others      Total  
  ¥1,133,399      ¥ 142,887      ¥ 99,515      ¥ 1,375,802  

 

(3) Information by major customer

None.

 

III. Information on impairment losses on long-lived assets by reporting segment

Impairment losses on long-lived assets are not allocated to the reporting segments. Total impairment losses on long-lived assets for the six months ended September 30, 2016 and 2017 were ¥4,069 million and ¥22,597 million, respectively.

 

IV. Information on amortization and unamortized balance of goodwill by reporting segment

For the six months ended September 30, 2016

 

     (in millions of yen)  
     For the six months ended September 30, 2016  
     Retail
Banking
Business
Group
     Corporate
Banking
Business
Group
     Global
Business
Group
     Trust
Assets
Business
Group
     Total of
Customer
Business
     Global
Markets
Business
Group
     Other      Total  

Amortization

   ¥ 88      ¥ 30      ¥ 6,881      ¥ 427      ¥ 7,427      ¥ —        ¥     —        ¥ 7,427  

Unamortized balance at period end

     1,839        631        217,743        16,057        236,271        —          —          236,271  

For the six months ended September 30, 2017

 

     (in millions of yen)  
     For the six months ended September 30, 2017  
     Retail
Banking
Business
Group
     Corporate
Banking
Business
Group
     Global
Business
Group
     Trust
Assets
Business
Group
     Total of
Customer
Business
     Global
Markets
Business
Group
     Other      Total  

Amortization

   ¥ 87      ¥ 22      ¥ 7,839      ¥ 569      ¥ 8,519      ¥ —        ¥     —        ¥ 8,519  

Unamortized balance at period end

     1,664        587        234,804        22,372        259,428        —          —          259,428  

 

V. Information on gains on negative goodwill by reporting segment

None.

 

15. Business Combinations

None.

 

51


16. Per Share Information

 

(1) The bases for the calculation of total equity per common share for the periods indicated were as follows:

 

                                                                 
     (in yen)  
     March 31, 2017     September 30, 2017  

Total equity per common share

   ¥ 1,137.77     ¥ 1,194.08  
     (in millions of yen)  
     March 31, 2017     September 30, 2017  

Total equity

   ¥ 16,658,394     ¥ 17,279,375  

Deductions from total equity:

    

Subscription rights to shares

     407       274  

Non-controlling interests

     1,377,719       1,409,207  
  

 

 

   

 

 

 

Total deductions

     1,378,126       1,409,481  
  

 

 

   

 

 

 

Total equity attributable to common shares

   ¥ 15,280,268      ¥ 15,869,893   
  

 

 

   

 

 

 
     (in thousands)  
     March 31, 2017     September 30, 2017  

Number of common shares at period end used for the calculation of total equity per common share

     13,429,943       13,290,442  

 

(2) The bases for the calculation of basic earnings per common share and diluted earnings per common share for the periods indicated were as follows:

 

                                                                 
     (in yen)  
     For the six months ended September 30,  
     2016     2017  

Basic earnings per common share

   ¥ 35.93     ¥ 46.99  

Diluted earnings per common share

     35.81       46.85  
     (in millions of yen)  
     For the six months ended September 30,  
     2016     2017  

Profits attributable to owners of the parent

   ¥ 490,530     ¥ 626,940  

Profits not attributable to common shareholders

     —         —    
  

 

 

   

 

 

 

Profits attributable to common shareholders of the parent

   ¥      490,530     ¥      626,940  
  

 

 

   

 

 

 
     (in millions of yen)  
     For the six months ended September 30,  
     2016     2017  

Adjustments to profits attributable to owners of the parent

   ¥ (1,020   ¥ (1,883

Adjustments related to dilutive shares of consolidated subsidiaries and others

     (1,020     (1,883

 

52


     (in thousands)  
     For the six months ended September 30,  
     2016     2017  

Average number of common shares during the periods

     13,652,178        13,339,150   

Increase in common shares

     15,001       658  

Preferred shares

     —         —    

Subscription rights to shares

     15,001       658  

 

   

For the six months ended September 30,

   

2016

 

2017

Description of antidilutive securities which were not included in the calculation of diluted earnings per share

 

Share subscription rights issued by equity method affiliates:

 

Share subscription rights issued by equity method affiliates:

 

Morgan Stanley

 

Morgan Stanley

 

Stock options and others
— 14 million units as of June 30,
2016:

 

Stock options and others
— 0 million units as of June 30,
2017:

 

(3) The shares of MUFG common stock remaining in the Board Incentive Plan trust, which were included in the treasury shares as part of shareholders’ equity, were deducted from the average total number of issued shares for the six months ended September 30, 2017 used for the calculation of earnings per common share and from the total number of issued shares as of September 30, 2017 used for the calculation of total equity per common share. The average number of such treasury shares deducted from the calculation of earnings per common share for the six months ended September 30, 2016 and 2017 was 13,447 thousand shares and 30,418 thousand shares, respectively, and the number of such treasury shares deducted from the calculation of total equity per common share as of March 31, 2017 and September 30, 2017 was 30,532 thousand shares and 28,877 thousand shares, respectively.

 

53


17. Subsequent Events

 

  I. Repurchase and cancellation of own shares

MUFG resolved, at a meeting of the Board of Directors held on November 14, 2017, to repurchase shares of its common stock pursuant to the provisions of Article 156, Paragraph 1 of the Company Act, in accordance with the provisions of Article 459, Paragraph 1, Item 1 of the Company Act and Article 44 of its Articles of Incorporation, and to cancel the repurchased shares of its common stock in accordance with the provisions of Article 178 of the Company Act.

 

  (1) Reasons for the repurchase and cancellation of own shares

The repurchase and cancellation of shares of MUFG common stock were intended to enhance shareholder returns, improve capital efficiency and conduct capital management flexibly.

 

  (2) Outline of the repurchase of own shares

 

  (a) Type of shares to be repurchased: Common shares of MUFG

 

  (b) Aggregate number of shares to be repurchased: Up to 200,000,000 shares (equivalent to 1.50% of the total number of issued shares (excluding treasury shares))

 

  (c) Aggregate amount of repurchase price: Up to JPY 100,000,000,000

 

  (d) Repurchase period: From November 15, 2017 to December 31, 2017

 

  (e) Repurchase method: Market purchases pursuant to a discretionary trading contract relating to the share repurchase

 

  (3) Outline of the cancellation of own shares

 

  (a) Type of shares to be canceled: Common shares of MUFG

 

  (b) Number of shares to be canceled: All of the shares to be repurchased as stated in (2) above

 

  (c) Scheduled cancellation date: January 22, 2018

 

54