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 2016

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FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION.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, 2016

 

Mitsubishi UFJ Financial Group, Inc.
By:  

/s/ Yasuo Matsumoto

Name:   Yasuo Matsumoto
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, 2016 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, 2016 (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, 2016. 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 (“Japanese GAAP”). There are significant differences between Japanese GAAP and U.S. GAAP. 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, 2016 and the other reports filed with or submitted to the U.S. Securities and Exchange Commission by MUFG.

Additional Japanese GAAP Financial Information for the Six Months Ended September 30, 2016

Consolidated Statements of Cash Flows

 

     (in millions of yen)  
     For the six months
ended
September 30, 2015
    For the six months
ended
September 30, 2016
 

Cash flows from operating activities:

    

Income before income taxes

     926,759        738,440   

Depreciation

     145,348        150,111   

Impairment losses

     1,804        4,069   

Amortization of goodwill

     8,886        7,427   

Equity in losses (gains) of affiliates

     (144,680     (113,940

Increase (decrease) in allowance for credit losses

     (79,850     (102,259

Increase (decrease) in reserve for bonuses

     (9,974     (15,375

Increase (decrease) in reserve for bonuses to directors

     (245     (139

Increase (decrease) in reserve for stock payments

     —          1,153   

Decrease (increase) in net defined benefit assets

     (53,334     (51,275

Increase (decrease) in net defined benefit liabilities

     (1,306     2,919   

Increase (decrease) in reserve for retirement benefits to directors

     (136     (145

Increase (decrease) in reserve for loyalty award credits

     1,837        2,075   

Increase (decrease) in reserve for contingent losses

     (43,794     (1,180

Interest income recognized on statement of income

     (1,394,968     (1,352,690

Interest expenses recognized on statement of income

     318,627        377,622   

Losses (gains) on securities

     (123,142     (136,713

Losses (gains) on money held in trust

     (7,621     5,047   

Foreign exchange losses (gains)

     43,906        2,766,965   

Losses (gains) on sales of fixed assets

     5,002        (3,128

Net decrease (increase) in trading assets

     936,662        (5,848,778

Net increase (decrease) in trading liabilities

     (45,087     5,062,813   

Adjustment of unsettled trading accounts

     37,859        221,891   

Net decrease (increase) in loans and bills discounted

     (2,383,251     6,637,682   

Net increase (decrease) in deposits

     1,017,206        3,084,635   

Net increase (decrease) in negotiable certificates of deposit

     (1,391,525     (2,693,181

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

     304,645        1,506,188   

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

     (5,674,789     793,912   

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

     872,432        1,944,582   

Net decrease (increase) in receivables under securities borrowing transactions

     (2,094,223     (1,066,799

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

     473,826        421,432   

Net increase (decrease) in commercial papers

     569,826        (726,809

Net increase (decrease) in payables under securities lending transactions

     928,407        1,769,931   

Net decrease (increase) in foreign exchanges (assets)

     257,847        (240,411

Net increase (decrease) in foreign exchanges (liabilities)

     227,287        (341,856

Net increase (decrease) in short-term bonds payable

     23,793        231,506   

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

     (105,624     (16,696

Net increase (decrease) in due to trust accounts

     637,394        (5,194,744

Interest income (cash basis)

     1,508,379        1,465,647   

Interest expenses (cash basis)

     (318,323     (378,395

Others

     444,791        (253,108
  

 

 

   

 

 

 

Sub-total

     (4,179,346     8,658,426   
  

 

 

   

 

 

 

Income taxes

     (320,228     (207,009

Refund of income taxes

     34,157        15,463   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (4,465,416     8,466,881   
  

 

 

   

 

 

 

 

1


     (in millions of yen)  
     For the six months
ended
September 30, 2015
    For the six months
ended
September 30, 2016
 

Cash flows from investing activities:

    

Purchases of securities

     (50,305,941     (24,801,941

Proceeds from sales of securities

     42,831,768        14,119,365   

Proceeds from redemption of securities

     13,859,440        12,261,165   

Increase in money held in trust

     (141,108     (406,347

Decrease in money held in trust

     177,018        349,662   

Purchases of tangible fixed assets

     (53,354     (62,932

Purchases of intangible fixed assets

     (106,513     (117,374

Proceeds from sales of tangible fixed assets

     2,681        12,285   

Proceeds from sales of intangible fixed assets

     —          2,882   

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

     —          (4,153

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

     —          2,761   

Others

     (554     (686
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     6,263,436        1,354,688   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Increase in subordinated borrowings

     38,000        31,000   

Decrease in subordinated borrowings

     (48,000     (36,500

Proceeds from issuance of subordinated bonds payable and bonds with warrants

     145,383        254,687   

Payments for redemption of subordinated bonds payable and bonds with warrants

     (195,400     (252,037

Proceeds from issuance of common stock to non-controlling shareholders

     490        204   

Payments for redemption of preferred securities

     —          (330,560

Dividends paid by MUFG

     (126,230     (124,103

Dividends paid by subsidiaries to non-controlling shareholders

     (55,739     (45,425

Purchases of treasury stock

     (100,032     (109,752

Proceeds from sales of treasury stock

     0        3   

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

     (2,362     —     

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

     —          0   

Others

     3        4   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (343,887     (612,478
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (2,051     (248,942
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     1,452,081        8,960,147   
  

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     9,990,035        18,763,856   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     11,442,117        27,724,004   
  

 

 

   

 

 

 

 

2


Additional Notes to the Japanese GAAP Semi-Annual Financial Statements

 

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

 

  I. Scope of consolidation

 

  (1) Number of Consolidated Subsidiaries: 218

Major subsidiaries as of September 30, 2016:

 

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, 2016

MUFG Capital Analytics LLC and three other companies were newly included in the scope of consolidation due to a share acquisition or for other reasons. In addition, PT. BTMU-BRI Finance and nine other companies were excluded from the scope of consolidation due to sales of shares or for other reasons.

 

  (2) Non-consolidated subsidiaries

None.

 

  (3) Entities not regarded as subsidiaries even though MUFG owns the majority of voting rights or business execution rights

Hygeia Co., Ltd.

OiDE CapiSEA, Inc.

 

  (a) Reasons for excluding from the scope of consolidation

These entities were not treated as subsidiaries because Hygeia Co., Ltd. was established as a property management agent for a land trust project without any intent to control and because shares in OiDE CapiSEA, Inc. were held by consolidated venture capital and other subsidiaries for sales trading purposes with an aim to benefit from gains on their investments or for other purposes without any intent to control.

 

3


  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: 65

Major equity method affiliates as of September 30, 2016:

Mitsubishi UFJ Lease & Finance Company Limited

Morgan Stanley

Changes in the scope of application of the equity method in the six months ended September 30, 2016

Security Bank Corporation and another company were newly included in the scope of application of the equity method due to a share acquisition or for other reasons. In addition, The Taisho Bank, Ltd. and another company were excluded from the scope of application of the equity method due to decreases in voting rights held in these companies resulting from share exchange transactions or for other reasons.

 

4


Below is additional information.

1. Outline of the acquisition of shares of Security Bank

On January 14, 2016, The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) concluded a Subscription Agreement with Security Bank. On April 1, 2016, BTMU acquired newly issued common shares and preferred shares, representing in the aggregate 20% of Security Bank’s equity interest on a fully diluted basis, and appointed two directors to Security Bank’s Board of Directors. As a result, Security Bank became an equity method affiliate.

An outline of Security Bank is as follows:

 

Corporate name

(The equity method investee’s name):

  

Security Bank Corporation

Business description:

  

Commercial Bank

Date of application of the equity method:

  

April 1, 2016

Investment structure:

  

Third-party allotment of newly issued shares

Percentage of voting rights following the share acquisition:

  

20%

2. Period for which the results of operations of the equity method investee are included in the consolidated financial statements

The fiscal year end of Security Bank, the equity method investee, is the end of December, which differs by three months from the consolidated balance sheet date of MUFG. As the equity method began to apply to Security Bank on April 1, 2016, the results of operations of Security Bank for the period from April 1, 2016 to June 30, 2016 were included in the consolidated statements of income.

3. Outline of the accounting treatment applied

 

  (a) Acquisition Cost

 

Consideration for the shares

   Cash and due from banks    ¥     88,404 million   

Expenses directly related to the acquisition

   Advisory fees, etc.    ¥ 741 million   
     

 

 

 

Acquisition cost

      ¥ 89,146 million   

 

  (b) Amount of goodwill recorded, reason for recording goodwill, amortization method and amortization period

 

  (i) Amount of goodwill recorded

¥27,148 million

 

  (ii) Reason for recording goodwill

The recorded goodwill reflected expected increases in profits from future business operations.

 

  (iii) Amortization method and amortization period

Straight-line method over 20 years.

 

  (3) Number of non-consolidated subsidiaries not accounted for under the equity method

None.

 

5


  (4) Number of affiliates not accounted for under the equity method

None.

 

  (5) Entities not regarded as affiliates even though MUFG owns 20% or more but 50% or less of voting rights

TECHTOM Ltd.

Osteopharma Inc.

Hirosaki Co., Ltd.

EDP Corporation

ISLE Co., Ltd.

AKITAYA Co., Ltd.

 

  (a) Reasons for excluding from the scope of affiliates

These entities were not regarded as affiliates because consolidated venture capital and other subsidiaries held shares in the entities for sales trading purposes with an aim to benefit from gains on their investments or for other purposes 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:

January 24: 4 subsidiaries

The end of February: 1 subsidiary

The end of April: 1 subsidiary

The end of June: 131 subsidiaries

July 24: 13 subsidiaries

The end of September: 68 subsidiaries

 

  (a) Changes in the balance sheet dates of consolidated subsidiaries in the six months ended September 30, 2016

In the six months ended September 30, 2016, Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad changed its annual balance sheet date from December 31 to March 31, making it consistent with the annual consolidated balance sheet date. For the accounting period for the six months ended September 30, 2016, the subsidiary was consolidated based on its financial statements for the nine months from January 1, 2016 to September 30, 2016.

 

  (2) The subsidiaries whose balance sheet date is January 24 were consolidated based on their preliminary financial statements as of July 24.

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

The 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 consolidated balance sheet date and the balance sheet dates of the subsidiaries described above.

 

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 on a trade-date basis.

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 securities whose fair values cannot be reliably determined are stated at acquisition costs computed using the moving average method.

Net unrealized gains and 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 that are held as trust assets in money held in trust are accounted for on the same basis as noted above in Notes (1) and (2)(a).

Net unrealized gains and 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 other than trading purposes are calculated primarily based on fair value.

 

  (4) Depreciation and Amortization of Fixed Assets

 

  (a) Tangible Fixed Assets except for Lease Assets

Depreciation of tangible fixed assets of MUFG and its domestic consolidated banking subsidiaries and domestic consolidated 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 except for 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 the assets, which are primarily 3 to 10 years.

 

7


  (c) Lease Assets

Depreciation or amortization of lease assets in “Tangible fixed assets” or “Intangible fixed assets” under 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 under 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 allowances for credit losses as described below 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 (“substantially 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 (“potentially 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 potentially 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 carrying amount of the claims and the amount of the estimated cash flows discounted by the relevant initial contractual interest rates.

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

For claims originated in certain foreign countries, additional allowances are provided based on an assessment of political, economic and other 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 substantially 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 ¥413,491 million as of September 30, 2016 (¥397,076 million as of March 31, 2016).

Consolidated subsidiaries not adopting the procedures stated above provide for allowances based on their historical credit loss experience and others 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 and officers, 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 performance-based 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 credits granted to credit card (such as Super IC Card) customers, is recorded in the converted Japanese yen amount deemed necessary based on the estimated future redemption of unused credits.

 

  (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 reserves for contingent liabilities from derivative financial instrument transactions executed for clients, which are recorded in accordance with Article 46-5-1 and Article 48-3-1 of the Financial Instruments and Exchange Law and Article 175 and Article 189 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, 2016 is determined on a benefit formula basis. Unrecognized prior service cost and unrecognized net actuarial gains (losses) are amortized in the following manner:

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, commencing in the fiscal year immediately following the fiscal year in which the net gains (losses) are incurred.

For certain overseas branches of domestic consolidated subsidiaries and some consolidated subsidiaries, net defined benefit liability and retirement benefit expenses are calculated using 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 relevant acquisition dates.

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

 

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 way similar to purchases, and the depreciation of lease assets is computed using the straight-line method over the lease term with zero residual value unless residual value is guaranteed by the relevant 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 way similar 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 for 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 the 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.

 

10


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.

 

  (c) Hedge Accounting for Stock Price Fluctuation Risks

Individual hedging is applied to hedge market fluctuation risks arising from equity securities strategically held by domestic consolidated banking subsidiaries and domestic consolidated trust 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 the fair value of hedged items and changes in the 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 departments) 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 are executed while strictly meeting certain criteria under JICPA Industry Audit Committee Reports No. 24 and No. 25 so that they are regarded as equivalent to external third-party 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

Japanese national and local consumption taxes are excluded from transaction amounts. 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 the criteria under 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 for consolidated accounting.

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

In addition, adjustments are made in the process of consolidation as necessary.

 

11


2. Additional Information

(Implementation Guidance on Recoverability of Deferred Tax Assets)

On March 28, 2016, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Guidance No.26, “Implementation Guidance on Recoverability of Deferred Tax Assets.” MUFG adopted this guidance on April 1, 2016.

(Update of the Accounting Standards Codification (ASC) No. 825 (Financial instruments) by the Financial Accounting Standards Board (FASB))

Beginning in the six months ended September 30, 2016, MUFG’s overseas affiliates under the equity method, to which U.S. GAAP applies, adopted early the update of ASC No.825 (Financial instruments).

Upon the adoption described above, with respect to financial liabilities which the affiliate elected to measure at fair value under the fair value option, in accordance with the accounting standards, MUFG recorded the changes in the fair value of such financial instruments resulting from a change in the instrument-specific credit risk in the amount of debt value adjustments of foreign affiliates (DVAs) in accumulated other comprehensive income. MUFG made cumulative catch-up adjustments to the opening balances of retained earnings and DVAs, at the beginning of the six months ended September 30, 2016.

As a result, at the beginning of the six months ended September 30, 2016, retained earnings increased by ¥8,464 million, and DVAs decreased by ¥8,464 million.

In addition, ordinary income and profits before income taxes for the six months ended September 30, 2016, each decreased by ¥9,233 million.

The effect on per share information is described in “Per Share Information” below.

(Implementation of a Board Incentive Plan for Directors and Officers)

 

I. Outline of the Plan

In the six months ended September 30, 2016, MUFG implemented a performance-based director and officer stock compensation plan using a Board Incentive Plan 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

In the six months ended September 30, 2016, the carrying amount and number of shares which remain in the trust are 9,742 million yen and 18,779 thousand shares, respectively, 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, 2016      September 30, 2016  

Equity securities

   ¥ 2,559,559       ¥ 2,399,951   

Other capital investments in affiliates

     29,730         13,432   

 

II. Securities loaned under unsecured securities lending transactions included in “Securities”

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Securities loaned under unsecured securities lending transactions

   ¥ —         ¥ 13,003   

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, 2016      September 30, 2016  

Securities re-pledged

   ¥ 12,388,598       ¥ 12,047,363   

Securities re-loaned

     222,362         391,555   

Securities held without disposition

     3,091,874         5,142,591   

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, 2016      September 30, 2016  

Bills discounted (face value)

   ¥ 1,088,768       ¥ 1,035,173   

Foreign currency bills bought which were re-discounted upon transfer

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Foreign currency bills re-discounted (face value)

   ¥ 8,860       ¥ 10,104   

 

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

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Loans to bankrupt borrowers

   ¥ 54,913       ¥ 50,382   

Non-accrual delinquent loans

     1,110,576         778,755   

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

 

13


IV. Accruing loans contractually past due 3 months or more

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Accruing loans contractually past due 3 months or more

   ¥ 51,620       ¥ 49,669   

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

 

V. Restructured loans

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Restructured loans

   ¥ 438,767       ¥ 665,784   

Restructured loans represent loans renegotiated at concessionary terms, including interest rate reductions, deferrals of interest payments and principal payments, and waivers of loan claims, to assist borrowers in improving their financial condition, 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, 2016      September 30, 2016  

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

   ¥ 1,655,877       ¥ 1,544,592   

The amounts provided in Notes III to VI above represent amounts before allowances for credit losses.

 

VII. Assets pledged as collateral

Assets pledged as collateral and their relevant liabilities as of March 31, 2016 and September 30, 2016 were as follows:

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Assets pledged as collateral:

     

Cash and due from banks

   ¥ 6,194       ¥ 6,568   

Trading assets

     125,562         173,343   

Securities

     2,843,706         5,252,867   

Loans and bills discounted

     7,587,495         6,295,467   
  

 

 

    

 

 

 

Total

   ¥ 10,562,958       ¥ 11,728,247   
  

 

 

    

 

 

 

Relevant liabilities to above assets:

     

Deposits

   ¥ 755,683       ¥ 567,000   

Trading liabilities

     25,015         27,639   

Borrowed money

     9,323,452         10,832,112   

Bonds payable

     19,301         18,657   

Other liabilities

     —           801   

Acceptances and guarantees

     130,389         129,116   

 

14


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, 2016      September 30, 2016  
     

Cash and due from banks

   ¥ 3,425       ¥ 4,297   

Monetary claims bought

     792,042         606,676   

Trading assets

     273,007         166,756   

Securities

     7,231,961         7,419,503   

Loans and bills discounted

     11,285,082         6,339,450   

Furthermore, the following assets were sold under repurchase agreements or loaned under securities lending with cash collateral as of March 31, 2016 and September 30, 2016:

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Trading assets

   ¥ 1,718,168       ¥ 1,713,497   

Securities

     14,804,600         19,474,970   
  

 

 

    

 

 

 

Total

   ¥ 16,522,769       ¥ 21,188,467   
  

 

 

    

 

 

 

Relevant liabilities to above assets:

     

Payables under repurchase agreements

   ¥ 13,081,752       ¥ 12,877,468   

Payables under securities lending transactions

     3,069,990         5,294,227   

 

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 a borrower’s request as long as there has been no breach of contractual terms. The total amount of the undrawn portion of these facilities and credit lines as of March 31, 2016 and September 30, 2016 were as follows:

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Undrawn overdraft facilities and commitment lines of credit

   ¥ 88,241,307       ¥ 85,909,119   

The total amount of the undrawn 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 which allow MUFG’s consolidated subsidiaries to decline a borrower’s request for disbursement or decrease contracted limits for cause, such as changes in financial market condition, deterioration in the borrower’s creditworthiness and certain other reasons. MUFG’s consolidated subsidiaries may request a borrower to pledge real property and/or securities as collateral upon signing of the contract and perform periodic monitoring of the borrower’s business condition in accordance with internal procedures, which may lead to renegotiation of contractual terms and/or a request for additional collateral and/or a guarantee.

 

IX. In accordance with the “Law concerning Revaluation of Land” (the “Land Revaluation 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 aggregate excess amount resulting from the revaluation, net of income taxes corresponding to the excess amount which were recognized as “Deferred tax liabilities for land revaluation” in liabilities, is stated as “Land revaluation excess” in net assets. Land revaluation excess includes MUFG’s share of affiliated companies’ aggregate 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.

 

15


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

Land value was determined based on (1) “published land prices under the Land Price Publication Law” as set forth in Article 2, Paragraph 1 of the “Enforcement Ordinance of the Law concerning Revaluation of Land” (“Land Revaluation Ordinance”) (No. 119, March 31, 1998), (2) “standard land prices determined for measurement land spaces under the Enforcement Ordinance of National Land Planning Law” as set forth in Article 2, Paragraph 2 of the Land Revaluation Ordinance, (3) “land prices determined by the method established and published by the Director General of the National Tax Agency in order to calculate land value for determining taxable amounts subject to landholding tax provided in Article 16 of the Landholding Tax Law” as set forth in Article 2, Paragraph 4 of the “Land Revaluation Ordinance” with price adjustments for shape and time, and (4) appraisal by certified real estate appraisers as set forth in Article 2, Paragraph 5 of the “Land Revaluation Ordinance” with price adjustments for time. In addition, some of MUFG’s affiliates that were accounted for under the equity method conducted revaluations of land used for business operations on March 31, 2002.

 

X. Accumulated depreciation on tangible fixed assets

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Accumulated depreciation on tangible fixed assets

   ¥ 1,218,922       ¥ 1,181,896   

 

XI. Subordinated borrowings included in “Borrowed money”

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Subordinated borrowings

   ¥ 616,500       ¥ 611,331   

 

XII. Subordinated bonds included in “Bonds payable”

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Subordinated bonds

   ¥ 2,579,457       ¥ 2,571,704   

 

XIII. 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, 2016      September 30, 2016  

Principal-guaranteed money trusts

   ¥ 7,111,058       ¥ 5,532,965   

 

XIV. Guarantee obligations for private placement bonds (as set forth in Article 2, Paragraph 3 of the Financial Instruments and Exchange Law) among the bonds and other securities included in “Securities”

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Guarantee obligations for private placement bonds

   ¥ 580,398       ¥ 535,385   

 

XV. Contingent liabilities

(Litigation)

The MUFG Group has received requests for information from certain regulators in relation to investigations regarding the MUFG Group’s foreign operations, such as governance practices and foreign exchange trading practices in Europe, and is cooperating with these regulators in their investigations. Although it is probable the investigations in these practices could result in penalties, based upon current knowledge and the results of consultation with counsel, the timing and amounts of any penalties from these investigations cannot be reasonably estimated. Management also believes the amount of loss that is reasonably possible, but not probable, from various litigation and regulatory matters is not material to the MUFG Group’s financial position, results of operations or cash flows.

 

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,  
     2015      2016  

Equity in earnings of equity method investees

   ¥ 144,680       ¥ 113,940   

Gains on sales of equity securities

     60,883         82,635   

Gains on loans written-off

     28,926         27,993   

Gains on reversal of allowance for credit losses

     44,442         22,807   

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

 

     (in millions of yen)  
     For the six months ended September 30,  
     2015      2016  

Write-offs of loans

   ¥   65,246       ¥   59,831   

Provision for reserve for credit-related contingent losses

     951         47,968   

Losses on sales of equity securities

     11,790         27,193   

Losses on waiver of claims

     40,681         1,478   

 

5. Consolidated Statements of Changes in Net Assets

For the six months ended September 30, 2015

 

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

 

     Number of shares in thousands  
     April 1, 2015      Increase      Decrease      September 30, 2015  

Outstanding shares:

           

Common stock

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

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

 

Treasury stock:

           

Common stock

     151,014         111,214         3,704         258,525  (Note) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     151,014         111,214         3,704         258,525   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Note) The increase in the number of shares of common stock held in treasury by 111,214 thousand shares was mainly due to acquisitions of shares pursuant to provisions of the Articles of Incorporation, 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 affiliates accounted for under the equity method. The decrease in the number of shares of common stock held in treasury by 3,704 thousand shares was mainly due to delivery of shares upon the exercise of stock options, 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 affiliates accounted for under the equity method.

 

II. Information on share subscription rights

 

Issuer

  

Type of

share

subscription

rights

  

Class of

shares to

be issued

   Number of shares
subject to share subscription rights
     Balance as of
September 30, 2015
(in millions of yen)
 
         April 1, 2015      Increase      Decrease      September 30, 2015     

MUFG

   Stock options    —        —           —           —           —           7,782   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

      —        —           —           —           —           7,782   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


III. Information on cash dividends

 

(1) Cash dividends paid during the six-month period

 

Approval

  

Class of shares

   Total
amount
(millions
of yen)
   Per
share amount
(yen)
   Dividend
record date
   Effective date

Annual General Shareholders Meeting on June 25, 2015

   Common stock    126,179    9    March 31, 2015    June 25, 2015
              

 

(2) Dividends the record date for which fell within the six-month period and the effective date of which was after the end of the six-month period

 

Approval

  

Class of shares

   Total
amount
(millions
of yen)
  

Funding

source

   Per
share
amount
(yen)
   Dividend
record date
   Effective date

Board of Directors Meeting on November 13, 2015

   Common stock    125,212    Retained earnings    9    September 30, 2015    December 4, 2015
                 

For the six months ended September 30, 2016

 

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

 

     Number of shares in thousands      
     April 1, 2016      Increase      Decrease      September 30, 2016      

Outstanding 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     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

(Note 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 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 Board Incentive Plan trust, the sales 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 affiliates accounted for under the equity method.

 

(Note 2) The number of shares of common stock as of September 30, 2016 includes 18,779 thousand shares held by the Board Incentive Plan trust. For the six months ended September 30, 2016, the number of shares held by the Board Incentive Plan trust increased by 18,785 thousand shares and decreased by 5 thousand shares.

 

18


II. Information on share subscription rights

 

Issuer

   Type of
share
subscription
rights
     Class of
shares to
be issued
   Number of shares
subject to share subscription rights
     Balance as of
September 30, 2016
(in millions of yen)
 
         April 1,
2016
     Increase      Decrease      September 30,
2016
    

MUFG

    
 
Stock
options
  
  
   —        —           —           —           —           6,405   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated subsidiaries

     —         —        —           —           —           —           16   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

      —        —           —           —           —           6,421   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

III. Information on cash dividends

 

(1) Cash dividends paid during the six-month period

 

Approval

   Class of shares    Total
amount
(millions
of yen)
   Per
share
amount
(yen)
  

Dividend
record date

   Effective date

Annual General Shareholders Meeting 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 end of the six-month period

 

Approval

   Class of shares    Total
amount
(millions
of yen)
  

Funding source

   Per
share
amount
(yen)
  

Dividend
record date

  

Effective date

Board of Directors Meeting 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 Board Incentive Plan trust.

 

6. Consolidated Statements of Cash Flows

Difference between “Cash and cash equivalents at the end of the period” and items presented on the consolidated balance sheet

 

     (in millions of yen)  
     For the six months ended September 30,  
     2015     2016  

Cash and due from banks

   ¥ 47,609,270      ¥ 57,245,014   

Time deposits and negotiable certificates of deposit in other banks

     (36,167,153     (29,521,010
  

 

 

   

 

 

 

Cash and cash equivalents

     11,442,117        27,724,004   

 

19


7. Leases

Operating leases

 

  (1) Lessee

Future lease payments, including interest expenses, under non-cancelable operating leases as of March 31, 2016 and September 30, 2016 were as follows:

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Due within one year

   ¥ 68,493       ¥ 57,125   

Due after one year

     336,794         304,338   
  

 

 

    

 

 

 

Total

   ¥ 405,287       ¥ 361,464   
  

 

 

    

 

 

 

 

  (2) Lessor

Future lease receivables, including interest receivables, under non-cancelable operating leases as of March 31, 2016 and September 30, 2016 were as follows:

 

                                                                 
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Due within one year

   ¥ 13,066       ¥ 9,568   

Due after one year

     75,492         57,762   
  

 

 

    

 

 

 

Total

   ¥ 88,558       ¥ 67,330   
  

 

 

    

 

 

 

 

20


8. Financial Instruments and Related Disclosures

The following table summarizes the carrying amounts and the fair values of financial instruments as of March 31, 2016 and September 30, 2016 together with their differences. Note that the following table does not include unlisted equity securities or certain other securities whose fair values cannot be reliably determined. (See Note 2 below.)

 

     (in millions of yen)  
     March 31, 2016  
     Carrying amount     Fair value      Unrealized gains
(losses)
 

Assets:

       

(1)    Cash and due from banks

   ¥ 49,158,293      ¥ 49,158,293       ¥ —     

(2)    Call loans and bills bought

     660,015        660,015         —     

(3)    Receivables under resale agreements

     7,466,633        7,466,633         —     

(4)    Receivables under securities borrowing transactions

     6,041,983        6,041,983         —     

(5)    Monetary claims bought (*1)

     4,733,393        4,730,669         (2,723

(6)    Trading assets

     4,569,638        4,569,638         —     

(7)    Money held in trust

     679,678        679,243         (435

(8)    Securities:

       

Held-to-maturity securities

     2,334,278        2,399,033         64,754   

Available-for-sale securities

     64,843,522        64,843,522         —     

(9)    Loans and bills discounted

     113,756,325        

Allowance for credit losses (*1)

     (921,546     
  

 

 

   

 

 

    

 

 

 
     112,834,779        114,507,040         1,672,261   
  

 

 

   

 

 

    

 

 

 

(10)  Foreign exchange assets (*1)

     1,792,888        1,792,888         —     
  

 

 

   

 

 

    

 

 

 

Total assets

   ¥ 255,115,104      ¥ 256,848,961       ¥ 1,733,857   
  

 

 

   

 

 

    

 

 

 

Liabilities:

       

(1)    Deposits

   ¥ 160,965,056      ¥ 161,003,509       ¥ 38,452   

(2)    Negotiable certificates of deposit

     11,591,578        11,596,148         4,569   

(3)    Call money and bills sold

     1,360,238        1,360,238         —     

(4)    Payables under repurchase agreements

     23,515,240        23,515,240         —     

(5)    Payables under securities lending transactions

     4,710,407        4,710,407         —     

(6)    Commercial paper

     2,292,282        2,292,282         —     

(7)    Trading liabilities

     1,655,277        1,655,277         —     

(8)    Borrowed money

     12,482,277        12,527,811         45,533   

(9)    Foreign exchange liabilities

     2,054,937        2,054,937         —     

(10)  Short-term bonds payable

     752,492        752,492         —     

(11)  Bonds payable

     9,190,542        9,342,105         151,563   

(12)  Due to trust accounts

     13,296,033        13,296,033         —     
  

 

 

   

 

 

    

 

 

 

Total liabilities

   ¥ 243,866,364      ¥ 244,106,483       ¥ 240,118   
  

 

 

   

 

 

    

 

 

 

Derivatives (*2):

       

To which hedge accounting is not applied

   ¥ 345,179      ¥ 345,179         —     

To which hedge accounting is applied

     513,695        513,695         —     
  

 

 

   

 

 

    

 

 

 

Total derivatives

   ¥ 858,875      ¥ 858,875       ¥ —     
  

 

 

   

 

 

    

 

 

 

 

(*1) General and specific allowances for credit losses corresponding to loans are deducted. However, with respect to items other than loans, the carrying amount is shown because the amount of allowance for credit losses corresponding to these items is insignificant.
(*2) Derivatives in trading assets and liabilities and in other assets and liabilities are shown together. Assets and liabilities arising from derivatives transactions are presented on a net basis.

 

21


     (in millions of yen)  
     September 30, 2016  
     Carrying amount     Fair value      Unrealized gains
(losses)
 

Assets:

       

(1)    Cash and due from banks

   ¥ 57,245,014      ¥ 57,245,014       ¥ —     

(2)    Call loans and bills bought

     447,074       447,074        —     

(3)    Receivables under resale agreements

     4,519,699       4,519,699        —     

(4)    Receivables under securities borrowing transactions

     6,783,779       6,783,779        —     

(5)    Monetary claims bought (*1)

     4,658,963       4,655,809        (3,153

(6)    Trading assets

     5,148,448       5,148,448        —     

(7)    Money held in trust

     720,178       719,653        (525

(8)    Securities:

       

Held-to-maturity securities

     2,164,140        2,257,739         93,598   

Available-for-sale securities

     60,125,557        60,125,557         —     

(9)    Loans and bills discounted

     104,844,873        

Allowance for credit losses (*1)

     (787,730     
  

 

 

   

 

 

    

 

 

 
     104,057,143        105,902,427         1,845,284   
  

 

 

   

 

 

    

 

 

 

(10)  Foreign exchange assets (*1)

     1,999,870        1,999,870         —     
  

 

 

   

 

 

    

 

 

 

Total assets

   ¥ 247,869,870      ¥ 249,805,074       ¥ 1,935,204   
  

 

 

   

 

 

    

 

 

 

Liabilities:

       

(1)    Deposits

   ¥ 161,625,048      ¥ 161,676,121       ¥ 51,073   

(2)    Negotiable certificates of deposit

     8,864,056        8,866,223         2,166   

(3)    Call money and bills sold

     1,890,781        1,890,781         —     

(4)    Payables under repurchase agreements

     21,677,674        21,677,674         —     

(5)    Payables under securities lending transactions

     6,448,251        6,448,251         —     

(6)    Commercial paper

     1,529,381        1,529,381         —     

(7)    Trading liabilities

     1,891,347        1,891,347         —     

(8)    Borrowed money

     13,856,984        13,900,267         43,283   

(9)    Foreign exchange liabilities

     1,708,965        1,708,965         —     

(10)  Short-term bonds payable

     983,999        983,999         —     

(11)  Bonds payable

     8,969,625        9,203,354         233,729   

(12)  Due to trust accounts

     8,101,288        8,101,288         —     

(13)  Other liabilities (*2)

     19,000        19,000         —     
  

 

 

   

 

 

    

 

 

 

Total liabilities

   ¥ 237,566,403      ¥ 237,896,656       ¥ 330,252   
  

 

 

   

 

 

    

 

 

 

Derivatives (*3):

       

To which hedge accounting is not applied

   ¥ 531,118      ¥ 531,118         —     

To which hedge accounting is applied

     739,630        739,630         —     
  

 

 

   

 

 

    

 

 

 

Total derivatives

   ¥ 1,270,748      ¥ 1,270,748       ¥ —     
  

 

 

   

 

 

    

 

 

 

 

(*1) General and specific allowances for credit losses corresponding to loans are deducted. However, with respect to items other than loans, the carrying amount is shown because the amount of allowance for credit losses corresponding to these items is insignificant.
(*2) Derivatives transactions are excluded. “Other liabilities” represent other liabilities which fall within the scope of financial instruments subject to the fair value disclosure requirement pursuant to which the disclosure in “8. Financial Instruments and Related Disclosures” is made.
(*3) Derivatives in trading assets and liabilities and in other assets and liabilities are shown together. Assets and liabilities arising from derivatives transactions are presented on a net basis.

 

22


Notes:

 

1. Methods used for determining the fair value of financial instruments are as follows:

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 one 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 majority of transactions are short contract terms (one 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 quoted by the financial institutions from which these claims were purchased or on the amount reasonably calculated based on the reasonable estimation.

For certain securitized products whose underlying assets are corporate loan receivables, the fair value is determined by taking into account an amount 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, as well as 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 other monetary claims bought to which these methods do not apply, the carrying amount is presented as the fair value, as the fair value approximates such carrying value 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 market price at the exchange, the price quoted by the financial institutions from which these securities were purchased or the present value of the expected future cash flows discounted at the interest rate which is the adjusted market interest rate on the evaluation date.

 

(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 were purchased.

 

(8) “Securities”

The fair value of equity securities is determined based on the price quoted by the exchange and the fair value of bonds is determined based on the market value, the financial institutions from which they were purchased or on the amount 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 flows, which is adjusted to reflect default risk, amount to be collected from collateral, guarantees, guarantee fees and discounted at an interest rate based on the market interest rate as of the date of evaluation with certain adjustments. The value of variable rate Japanese government bonds is determined by discounting the expected future cash flow estimated based on factors such as the yield of government bonds, and the discounting rate is based on the yield of such government bonds, the value of embedded options and the liquidity premium based on the actual market premiums observed in the past.

 

23


(9) “Loans and bills discounted”

With respect to loans, for each category of loans based on types of loans, internal ratings and maturity length, the fair value is determined based on the present value of expected future cash flows, which is adjusted to reflect default risk and 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 variable interest rates such as certain residential loans provided to individual homeowners, 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 sheets 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 of forward exchange contracts and other contracts.

 

(10) “Foreign exchange assets”

“Foreign exchange assets” consist of foreign currency deposits with other banks (due from foreign banks (our accounts)), short-term loans involving foreign currencies (due from foreign banks (their accounts)), export bills, traveler’s checks, etc. (foreign bills bought), and loans on notes using import bills (foreign bills receivable). 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 (one year or less).

Liabilities

 

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

For demand deposits, the amount payable on demand as of the fiscal year end date (i.e., the carrying amount) is considered to be the fair value. For variable 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 lengths. The fair value of such deposits is the present value of discounted 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 paper”

For these items, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because the majority of them are short contract terms (one year or less).

 

(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 the exchange 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 done so on the basis that the market interest rate is reflected in the fair value set within a short time period for such floating rate borrowings and that there has been no significant change in MUFG’s nor the 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 lengths, which is discounted at an interest rate generally applicable to similar borrowings reflecting the premium applicable to MUFG or its subsidiaries.

 

24


(9) “Foreign exchange liabilities”

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

 

(11) “Bonds payable”

The fair value of corporate bonds issued by MUFG 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 market interest rate is reflected in the fair value of such corporate bonds because such bond terms were set within a short time period and that there has been no significant change in the creditworthiness of MUFG 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 its 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”

Since the contract period is short term (less than 1 year), the carrying amount is presented as the fair value, as the fair value approximates such carrying amount.

Derivatives

For information on derivatives transactions, see “12. Derivatives” below.

 

2. The following table summarizes the carrying amounts of financial instruments whose fair values cannot be reliably determined (before deducting valuation allowances). These securities are not included in the amount presented under the line item “(8) Securities — Available-for-sale securities” under “Assets” in the table above summarizing the fair values of financial instruments.

 

     (in millions of yen)  
     Carrying amount  
     March 31, 2016      September 30, 2016  

Unlisted equity securities (*1) (*2)

   ¥ 196,345       ¥ 197,755   

Investment in partnerships, etc. (*2) (*3)

     59,513         37,785   

Other (*2)

     966         939   
  

 

 

    

 

 

 

Total

   ¥ 256,825       ¥ 236,481   
  

 

 

    

 

 

 

 

  (*1) Unlisted equity securities do not have quoted market prices. Since the fair values of these securities cannot be reliably determined, their fair values are not disclosed.
  (*2) With respect to unlisted equity securities and other financial instruments, impairment losses of ¥15,378 million and ¥1,433 million were recorded for the fiscal year ended March 31, 2016 and for the six months ended September 30, 2016, respectively.

 

25


  (*3) Investments in partnerships, etc. mainly include investments in anonymous partnerships and investment business partnerships, etc. Since the fair values of these investments cannot be reliably determined, their fair values are not disclosed.

 

9. Securities

The following tables include negotiable certificates of deposit in “Cash and due from banks” and beneficial interests in trusts in “Monetary claims bought” in addition to “Securities” on the consolidated balance sheets.

 

I. Debt securities being held to maturity

 

     (in millions of yen)  
     March 31, 2016  
     Amount on
consolidated
balance sheet
     Fair value      Difference  

Securities whose fair values exceed the amounts recorded on the consolidated balance sheet:

        

Domestic bonds

   ¥ 1,101,107       ¥ 1,159,115       ¥ 58,008   

Government bonds

     1,101,107         1,159,115         58,008   

Municipal bonds

     —           —           —     

Corporate bonds

     —           —           —     

Other securities

     1,157,524         1,179,101         21,576   

Foreign bonds

     714,485         727,290         12,805   

Other

     443,039         451,810         8,771   
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 2,258,631       ¥ 2,338,216       ¥ 79,584   
  

 

 

    

 

 

    

 

 

 

Securities whose fair values do not exceed the amounts recorded on the consolidated balance sheet:

        

Domestic bonds

   ¥ —         ¥ —         ¥ —     

Government bonds

     —           —           —     

Municipal bonds

     —           —           —     

Corporate bonds

     —           —           —     

Other securities

     1,627,607         1,612,541         (15,066

Foreign bonds

     518,685         512,627         (6,058

Other

     1,108,922         1,099,914         (9,007
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 1,627,607       ¥ 1,612,541       ¥ (15,066
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 3,886,239       ¥ 3,950,758       ¥ 64,518   
  

 

 

    

 

 

    

 

 

 

 

26


     (in millions of yen)  
     September 30, 2016  
     Amount on
consolidated
balance sheet
     Fair value      Difference  

Securities whose fair values exceed the amounts recorded on the consolidated balance sheet:

        

Domestic bonds

   ¥  1,101,018       ¥ 1,161,500       ¥ 60,481   

Government bonds

     1,101,018         1,161,500         60,481   

Municipal bonds

     —           —           —     

Corporate bonds

     —           —           —     

Other securities

     1,231,887         1,269,655         37,768   

Foreign bonds

     1,039,780         1,073,015         33,235   

Other

     192,107         196,639         4,532   
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 2,332,906       ¥ 2,431,155       ¥ 98,249   
  

 

 

    

 

 

    

 

 

 

Securities whose fair values do not exceed the amounts recorded on the consolidated balance sheet:

        

Domestic bonds

   ¥ —         ¥ —         ¥ —     

Government bonds

     —           —           —     

Municipal bonds

     —           —           —     

Corporate bonds

     —           —           —     

Other securities

     1,141,834         1,136,602         (5,232

Foreign bonds

     23,341         23,223         (118

Other

     1,118,493         1,113,379         (5,114
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 1,141,834       ¥ 1,136,602       ¥ (5,232
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 3,474,740       ¥ 3,567,757       ¥ 93,017   
  

 

 

    

 

 

    

 

 

 

 

27


II. Available-for-sale securities

 

                                                                          
     (in millions of yen)  
     March 31, 2016  
     Amount on
consolidated
balance sheet
     Acquisition cost      Difference  

Securities whose fair values exceed the acquisition costs:

        

Domestic equity securities

   ¥ 4,470,335       ¥ 2,174,567       ¥ 2,295,767   

Domestic bonds

     25,972,881         25,251,159         721,722   

Government bonds

     23,143,622         22,511,489         632,132   

Municipal bonds

     412,716         401,093         11,623   

Corporate bonds

     2,416,542         2,338,575         77,966   

Other securities

     24,976,085         24,287,079         689,005   

Foreign equity securities

     92,567         57,122         35,445   

Foreign bonds

     23,029,536         22,484,665         544,870   

Other

     1,853,981         1,745,292         108,689   
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 55,419,301       ¥ 51,712,806       ¥ 3,706,495   
  

 

 

    

 

 

    

 

 

 

Securities whose fair values do not exceed the acquisition costs:

        

Domestic equity securities

   ¥ 402,877       ¥ 493,219       ¥ (90,342

Domestic bonds

     4,349,610         4,353,085         (3,475

Government bonds

     4,112,375         4,112,607         (231

Municipal bonds

     36,613         36,697         (84

Corporate bonds

     200,621         203,780         (3,159

Other securities

     5,346,690         5,474,071         (127,380

Foreign equity securities

     56,509         68,134         (11,624

Foreign bonds

     3,620,897         3,654,781         (33,883

Other

     1,669,284         1,751,156         (81,872
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 10,099,178       ¥ 10,320,377       ¥ (221,198
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 65,518,480       ¥ 62,033,183       ¥ 3,485,297   
  

 

 

    

 

 

    

 

 

 

 

(Note) The total amount of difference shown in the table above includes ¥5,480 million of revaluation losses on securities as a result of the application of fair value hedge accounting.

 

28


                                                                          
     (in millions of yen)  
     September 30, 2016  
     Amount on
consolidated
balance sheet
     Acquisition cost      Difference  

Securities whose fair values exceed the acquisition costs:

        

Domestic equity securities

   ¥ 4,219,921       ¥ 2,075,641       ¥ 2,144,280   

Domestic bonds

     23,586,915         22,887,881         699,033   

Government bonds

     20,161,434         19,547,891         613,542   

Municipal bonds

     734,440         721,168         13,271   

Corporate bonds

     2,691,040         2,618,821         72,219   

Other securities

     24,103,238         23,332,852         770,386   

Foreign equity securities

     94,679         56,451         38,228   

Foreign bonds

     22,286,549         21,655,470         631,079   

Other

     1,722,009         1,620,930         101,078   
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 51,910,075       ¥ 48,296,374       ¥ 3,613,700   
  

 

 

    

 

 

    

 

 

 

Securities whose fair values do not exceed the acquisition costs:

        

Domestic equity securities

   ¥ 405,024       ¥ 506,729       ¥ (101,705

Domestic bonds

     4,468,233         4,472,130         (3,897

Government bonds

     4,253,410         4,254,861         (1,451

Municipal bonds

     28,553         28,591         (38

Corporate bonds

     186,269         188,677         (2,407

Other securities

     3,978,443         4,077,513         (99,070

Foreign equity securities

     49,872         70,460         (20,587

Foreign bonds

     2,423,061         2,436,534         (13,472

Other

     1,505,508         1,570,518         (65,009
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 8,851,700       ¥ 9,056,373       ¥ (204,673
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 60,761,775       ¥ 57,352,748       ¥ 3,409,026   
  

 

 

    

 

 

    

 

 

 

 

(Note) The total amount of difference shown in the table above includes ¥20,493 million of revaluation losses on securities as a result of the application of fair value hedge accounting.

 

29


III. Impairment loss on securities

Securities other than trading securities and investments in affiliates (excluding those securities whose fair values cannot be reliably determined) whose fair values significantly declined compared with their acquisition costs, where the decline was considered to be other than recoverable, were written down to the respective fair values. In such case, the fair values were recorded as the carrying amounts on the consolidated balance sheet, and the differences between the fair values and the acquisition costs were recognized as losses (referred to as “impairment losses”) on the consolidated statement of income.

Impairment losses on such securities for the years ended March 31, 2016 were ¥10,351 million consisting of ¥10,063 million on equity securities and ¥287 million on debt and other securities.

Impairment losses on such securities for the six months ended September 30, 2016 were ¥10,068 million consisting of ¥9,994 million on equity securities and ¥73 million on debt and other securities.

The criteria for determining whether the fair value is “significantly declined” are set forth in the internal standards for asset quality self-assessment based on issuer classifications as follows:

 

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

The fair value is lower than the acquisition cost.

 

  (b) Issuers requiring close watch:

The fair value has declined by 30% or more of the acquisition cost.

 

  (c) Normal issuers:

The fair value has declined by 50% or more of the 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 high possibility of becoming bankrupt. “Issuers requiring close watch” means issuers who require close monitoring as part of investment management. “Normal issuers” means issuers other than “Bankrupt issuers,” “Virtually bankrupt issuers,” “Likely to become bankrupt issuers” or “Issuers requiring close watch.”

 

30


10. Money Held in Trust

 

I. Money held in trust being held to maturity

 

                                                                                                                                                                    
     (in millions of yen)  
     March 31, 2016  
     (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

   ¥   46,266       ¥   46,761       ¥    494       ¥    494       ¥ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (in millions of yen)  
     September 30, 2016  
     (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

   ¥   41,222       ¥   41,718       ¥    496       ¥    496       ¥ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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, 2016  
     (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 purposes or being held to maturity)

   ¥ 563,215       ¥ 561,853       ¥ 1,361       ¥ 1,361       ¥ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (in millions of yen)  
     September 30, 2016  
     (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 purposes or being held to maturity)

   ¥ 638,442       ¥ 637,121       ¥ 1,321       ¥ 1,324       ¥ 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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).

 

31


11. Unrealized Gains or Losses on Available-for-Sale Securities

Net unrealized gains (losses) on available-for-sale securities as of March 31, 2016 and September 30, 2016 consisted of the following:

 

                                
     (in millions of yen)  
     March 31, 2016  

Net unrealized gains (losses):

   ¥ 3,473,305   

Available-for-sale securities

     3,499,436   

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

     1,361   

Securities reclassified from available-for-sale securities into held-to-maturity debt securities

     (27,492

Deferred tax liabilities

     (1,011,562

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

     2,461,743   

Noncontrolling interests

     9,785   

MUFG’s ownership share in net unrealized gains (losses) on available-for-sale securities held by affiliates accounted for under equity method accounting

     15,098   
  

 

 

 

Total net unrealized gains (losses) on available-for-sale securities

   ¥ 2,486,627   
  

 

 

 

(Notes)

 

1. “Net unrealized gains (losses)” in the table above excludes ¥5,480 million revaluation losses on securities by the application of fair value hedge accounting, which losses were charged current earnings.
2. “Net unrealized gains (losses)” in the table above includes ¥8,659 million of unrealized gains on securities in investment limited partnerships.

 

                                
     (in millions of yen)  
     September 30, 2016  

Net unrealized gains (losses):

   ¥ 3,411,723   

Available-for-sale securities

     3,427,411   

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

     1,321   

Securities reclassified from available-for-sale securities into held-to-maturity debt securities

     (17,009

Deferred tax liabilities

     (1,003,721

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

     2,408,001   

Noncontrolling interests

     10,442   

MUFG’s ownership share in net unrealized gains (losses) on available-for-sale securities held by affiliates accounted for under equity method accounting

     19,329   
  

 

 

 

Total net unrealized gains (losses) on available-for-sale securities

   ¥ 2,437,773   
  

 

 

 

(Notes)

 

1. “Net unrealized gains (losses)” in the table above excludes ¥20,493 million revaluation losses on securities by the application of fair value hedge accounting, which losses were charged current earnings.
2. “Net unrealized gains (losses)” in the table above includes ¥2,109 million of unrealized losses on securities in investment limited partnerships.

 

32


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 indicated, as well as the fair value valuation methods applied, by transaction type were as follows. The contract and other amounts do not represent the market risk exposures associated with the relevant derivatives.

 

(1) Interest rate-related derivatives

 

     (in millions of yen)  
     March 31, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

          
Interest rate futures    Sold    ¥ 5,884,594       ¥ 3,915,036       ¥ (3,796   ¥ (3,796
   Bought      16,513,663         11,722,714         11,592        11,592   
Interest rate options    Sold      1,655,317         15,003         (108     82   
   Bought      1,602,451         —           123        (180

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

          
Forward rate agreements    Sold      39,821,214         529,083         (1,474     (1,474
   Bought      40,875,918         237,386         (596     (596
Interest rate swaps    Receivable fixed rate/Payable floating rate      456,168,774         361,183,148         14,593,288        14,593,288   
   Receivable floating rate/Payable fixed rate      450,130,967         370,696,143         (14,301,769     (14,301,769
   Receivable floating rate/Payable floating rate      82,276,639         69,785,725         85,444        85,444   
   Receivable fixed rate/Payable fixed rate      427,622         367,231         1,966        1,966   
Interest rate swaptions    Sold      28,059,197         19,850,840         (877,013     (269,451
   Bought      26,277,391         18,199,977         709,775        188,983   
Other    Sold      3,052,623         2,276,144         (47,111     (26,605
   Bought      3,560,785         2,475,805         53,431        26,194   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 223,753      ¥ 303,679   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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, option-pricing model or other methods.

 

33


     (in millions of yen)  
     September 30, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

          

Interest rate futures

   Sold    ¥ 3,959,895       ¥ 3,228,952       ¥ (21,690   ¥ (21,690
   Bought      10,990,820         7,112,779         49,810        49,810   

Interest rate options

   Sold      1,068,861         —           (204     459   
   Bought      1,964,363         —           368        (671

OTC transactions:

          
Forward rate agreements    Sold      51,811,227         1,822,955         13,767        13,767   
   Bought      49,958,402         1,681,224         (13,254     (13,254

Interest rate swaps

   Receivable fixed rate/Payable floating rate      476,192,706         377,653,461         18,934,369        18,934,369   
   Receivable floating rate/Payable fixed rate      472,062,230         379,917,424         (18,643,288     (18,643,288
   Receivable floating rate/Payable floating rate      84,633,956         71,383,136         80,857        80,857   
   Receivable fixed rate/Payable fixed rate      505,953         427,224         12,095        12,095   

Interest rate swaptions

   Sold      28,044,121         19,592,874         (1,003,421     (365,488
   Bought      25,373,651         17,390,817         807,263        291,204   

Other

   Sold      3,374,298         2,642,352         (55,280     (37,082
   Bought      3,549,225         2,878,431         57,703        26,977   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 219,096      ¥ 328,065   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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, option-pricing model or other methods.

 

34


(2) Currency-related derivatives

 

     (in millions of yen)  
     March 31, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 
Transactions listed on exchanges:           

Currency futures

  

Sold

   ¥        411,256       ¥        9,116       ¥ (3,061   ¥ (3,061
   Bought      566,313         330,122         10,865        10,865   

OTC transactions:

             

Currency swaps

        57,930,388         42,287,749         (32,737     (32,737

Forward contracts on foreign exchange

  

Sold

     61,127,116         2,574,392         265,814        265,814   
   Bought      58,156,644         2,494,970         (127,107     (127,107

Currency options

  

Sold

     8,838,234         4,191,123         (244,520     59,821   
   Bought      8,312,526         3,787,864         217,566        (28,218
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 86,818      ¥ 145,375   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

          

Currency futures

   Sold    ¥        170,527       ¥        8,111       ¥ 863      ¥ 863   
   Bought      452,119         183,206         (3,019     (3,019

OTC transactions:

             

Currency swaps

        55,509,067         41,445,803         170,889        170,889   

Forward contracts on foreign exchange

   Sold      57,887,158         2,159,513         864,442        864,442   
   Bought      55,468,207         2,181,199         (795,824     (795,824

Currency options

   Sold      8,388,830         3,903,770         (115,503     159,990   
  

Bought

     7,730,156         3,508,613         194,719        (24,099
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 316,566      ¥ 373,241   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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.

 

35


(3) Equity-related derivatives

 

    (in millions of yen)  
    March 31, 2016  
    Contract amount              
    Total     Over one
year
    Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

       

Stock index futures

  Sold   ¥      495,166      ¥      28,533      ¥ 36      ¥ 36   
  Bought     168,956        27,306        4,419        4,419   

Stock index options

  Sold     900,200        438,503        (88,295     (6,351
  Bought     679,463        319,969        60,160        (832

OTC transactions:

       

OTC securities option transactions

  Sold     686,080        477,944        (104,181     (76,012
  Bought     628,455        442,058            106,546           89,398   

OTC securities index swap transactions

  Receipt of stock price index volatility /payment of interest rates     50,057        33,654        (6,556     (6,556
  Receipt of interest rates / payment of stock price index volatility     193,760        155,664        42,420        42,420   

Forward transactions in OTC securities indexes

  Sold     4,001        —          14        14   
  Bought     18,353        —          (758     (758

Total return swaps

  Sold     —          —          —          —     
  Bought     8,056        —          (186     (186
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

      —          —        ¥ 13,620      ¥ 45,592   
   

 

 

   

 

 

   

 

 

   

 

 

 

(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.

 

36


     (in millions of yen)  
     September 30, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

          

Stock index futures

  

Sold

   ¥ 326,912       ¥ 28,533       ¥ 6,213      ¥ 6,213   
   Bought      185,311         41,319         4,541        4,541   

Stock index options

  

Sold

     1,034,907         579,409         (98,134     (1,935
   Bought      839,712         403,493         60,080        (5,503

OTC transactions:

             

OTC securities option transactions

  

Sold

     581,169         358,958         (74,713     (50,264
   Bought      660,805         447,407            83,737        66,544   

OTC securities index swap transactions

   Receipt of stock price index volatility / payment of interest rates      68,910         65,319         (8,268     (8,268
   Receipt of interest rates / payment of stock price index volatility      251,016         193,281         43,896        43,896   

Forward transactions in OTC securities indexes

  

Sold

     476         —           28        28   
   Bought      30,339         —           79        79   

Total return swaps

  

Sold

     —           —           —          —     
   Bought      7,011         —           (691     (691
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 16,770      ¥ 54,639   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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.

 

37


(4) Bond-related derivatives

 

     (in millions of yen)  
     March 31, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

          

Bond futures

   Sold    ¥ 364,277       ¥ —         ¥ (179   ¥ (179
   Bought      308,407         —           (411     (411

Bond futures options

   Sold      61,737         —           (96     13   
   Bought         161,790         —           324        20   

OTC transactions:

             

Bond OTC options

   Sold      158,030         —           (666     207   
   Bought      172,082         —           1,781        953   

Bond forward contracts

   Sold      5,272         —           (32     (32
   Bought      70         —           0        0   

Bond OTC swaps

   Receivable fixed rate / payable variable rate      38,100         38,100         6,575        6,575   
   Receivable variable rate / payable fixed rate      2,000         2,000         70        70   
   Receivable variable rate / payable variable rate      384,093         384,093         (4,907     (4,907
   Receivable fixed rate / payable fixed rate      27,000         27,000         5,141        5,141   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 7,600      ¥ 7,452   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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.

 

38


     (in millions of yen)  
     September 30, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

Transactions listed on exchanges:

          

Bond futures

   Sold    ¥ 362,359       ¥ —         ¥ (921   ¥ (921
   Bought      238,750         —           2,280        2,280   

Bond futures options

   Sold      378,055         —           (1,073     100   
   Bought         867,344         —           815        3   

OTC transactions:

             

Bond OTC options

   Sold      211,871         —           (802     20   
   Bought      219,384         —           1,223        92   

Bond forward contracts

   Sold      643,585         11,937         (5,201     (5,201
   Bought      448,098         —           2,887        2,887   

Bond OTC swaps

   Receivable fixed rate / payable variable rate      7,300         7,300         961        961   
   Receivable variable rate / payable fixed rate      2,000         —           67        67   
   Receivable variable rate / payable variable rate      298,025         298,025         (31,727     (31,727
   Receivable fixed rate / payable fixed rate      26,000         26,000         4,583        4,583   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ (26,906   ¥ (26,852
     

 

 

    

 

 

    

 

 

   

 

 

 

(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


(5) Commodity-related derivatives

 

     (in millions of yen)  
     March 31, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

OTC transactions:

          

Commodity swaps

   Receivable index volatility/ Payable floating rate    ¥ 209,215       ¥ 126,376       ¥ (38,485   ¥ (38,485
   Receivable floating rate/ Payable index volatility      252,698         140,461         44,459        44,459   

Commodity options

   Sold      117,205         71,840         (9,120     (9,118
   Bought      117,106         71,740         9,068        9,066   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 5,921      ¥ 5,922   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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 OTC transactions 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.

 

     (in millions of yen)  
     September 30, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

OTC transactions:

          

Commodity swaps

   Receivable index volatility/ Payable floating rate    ¥ 157,959       ¥ 113,190       ¥ (16,100   ¥ (16,100
   Receivable floating rate/ Payable index volatility      170,495         118,748         21,279        21,279   

Commodity options

   Sold      87,483         66,161         (4,182     (4,181
   Bought      87,381         66,059         4,096        4,095   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 5,092      ¥ 5,092   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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 OTC transactions 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 or other commodities.

 

40


(6) Credit-related derivatives

 

     (in millions of yen)  
     March 31, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

OTC transactions:

          

Credit default options

   Sold    ¥ 3,008,784       ¥ 2,393,985       ¥ 26,068      ¥ 26,068   
   Bought      3,266,898         2,508,072         (19,987     (19,987

Total rate of return swaps

   Sold      —           —           —          —     
   Bought      111,818         68,928         110        110   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 6,191      ¥ 6,191   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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, 2016  
     Contract amount               
     Total      Over one
year
     Fair value     Valuation
gains (losses)
 

OTC transactions:

          

Credit default options

   Sold    ¥ 2,777,891       ¥ 2,108,967       ¥ 34,958      ¥ 34,958   
   Bought      3,080,962         2,301,517         (35,526     (35,526

Total rate of return swaps

   Sold      —           —           —          —     
   Bought      88,055         59,540         79        79   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ (488   ¥ (488
     

 

 

    

 

 

    

 

 

   

 

 

 

(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.

 

41


(7) Other derivatives

 

     (in millions of yen)  
     March 31, 2016  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total      Over one
year
      

OTC transactions:

          

Earthquake derivatives

   Sold    ¥ 33,775       ¥ 15,451       ¥ (505   ¥ (164
   Bought      34,478         15,813         1,214        323   

SVF Wrap Products

  

Sold

     2,102,876         1,261,963         (1     (1
   Bought      —           —           —          —     

Other

  

Sold

     —           —           —          —     
   Bought      5,321         5,321         566        566   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 1,273      ¥ 724   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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, 2016  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total      Over one
year
      

OTC transactions:

          

Earthquake derivatives

   Sold    ¥ 25,584       ¥ 14,584       ¥ (448   ¥ 2,336   
   Bought      25,946         14,584         813        (1,164

SVF Wrap Products

  

Sold

     1,945,804         1,081,456         (5     (5
   Bought      —           —           —          —     

Other

  

Sold

     —           —           —          —     
   Bought      4,775         4,775         628        628   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        —           —         ¥ 987      ¥ 1,794   
     

 

 

    

 

 

    

 

 

   

 

 

 

(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.

 

42


13. Stock Options

 

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

 

     (in millions of yen)  
             September 30, 2015                      September 30, 2016          

General and administrative expenses

   ¥ 3,247       ¥ 3,335   

 

II. Outline of stock options

For the six months ended September 30, 2015

 

    

2015 Stock Options

 

Number of grantees by category

  

Directors (excluding outside directors) concurrently serving as corporate executive officers of MUFG:

     8   
  

Corporate executive officers of MUFG:

     9   
  

Executive officers of MUFG:

     52   
  

Directors (excluding outside directors), executive officers, and senior fellows of subsidiaries:

     177   

Class and number of shares granted

  

Common stock:

     2,058,600 shares   

Grant date

  

July 14, 2015

  

Vesting conditions

  

Retirement

  

Eligible service period

  

June 25, 2015 to June 29, 2016

  

Exercise period

  

July 14, 2015 to July 13, 2045

  

Exercise price (in yen per share)

  

¥1

  

Fair value as of the grant date (in yen per share)

  

¥802

  

For the six months ended September 30, 2016

None.

 

43


III. Outline of stock bonus plans

MUFG Americas Holdings Corporation (MUAH), a consolidated subsidiary of MUFG

For the six months ended September 30, 2015

None.

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 (Note)

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

Grant date

   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 as of the grant date (in U.S. dollars per unit)

        U.S.$4.96            U.S.$4.59   

 

(Note) The RSUs referred to in the above table 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 granted RSUs for the reporting period are presented in “General and administrative expenses” in the consolidated statements of income. Unless otherwise provided in the relevant Restricted Share Unit Agreement, the RSUs represent a right to receive one ADR per RSU, and 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 grantee has satisfied the specified continuous service and other requirements. Each ADR is exchangeable for one share of MUFG common stock.

 

44


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

 

(a) Changes in reporting segments

MUFG’s group companies are managed using a matrix framework consisting of the business segments mentioned above which are identified based on an integrated business group system to provide financial services and products under unified group-wide strategies as well as through individual MUFG group entities, which are grouped under the major operating subsidiaries as follows: The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mitsubishi UFJ Trust and Banking Corporation, Mitsubishi UFJ Securities Holdings Co. Ltd., consumer finance subsidiaries and others. To assist appropriate assessment of MUFG’s future cash flow forecasts, MUFG previously identified these groups of MUFG group entities as its reporting segments, each operating in a different industry and regulatory environment. However, beginning in this six-month period ended September 30, 2016, MUFG changed its reporting segments to the segmentation by the above-mentioned service-based Business Groups, following the progress made during the fiscal year ended March 31, 2016 in the implementation of unified group-wide business operations and management under the medium-term business plan that was commenced in the fiscal year ended March 31, 2016.

The segment information for the six months ended September 30, 2015 has been restated to reflect the foregoing changes in the reporting segments.

 

45


(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 Bases and 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

In connection with the changes in the reporting segments implemented this six-month period ended September 30, 2016, the internal managerial accounting rules relating to the methods of calculation of net revenue and operating expenses attributable to multiple segments were changed from the methods based on third-party transaction prices to those based on market value.

The segment information for the six months ended September 30, 2015 has been restated based on the new methods of calculation.

 

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

For the six months ended September 30, 2015

 

    (in millions of yen)  
    For the six months ended September 30, 2015  
    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

  ¥ 646,556      ¥ 540,750      ¥ 651,028      ¥ 87,931      ¥ 1,829,912      ¥ 332,006      ¥ 14,173      ¥ 2,176,091   

BTMU and MUTB

    274,368        431,436        226,161        37,511        916,295        238,212        80,916        1,235,424   

Net interest income

    177,772        185,654        108,807        —          448,537        129,550        128,652        706,741   

Net non-interest income

    96,596        245,782        117,354        37,511        467,757        108,662        (47,735     528,683   

Other than BTMU and MUTB

    372,187        109,313        424,867        50,419        913,617        93,793        (66,743     940,667   

Operating expenses

    488,825        303,245        417,196        50,891        1,180,330        106,936        75,409        1,362,677   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

  ¥ 157,731      ¥ 237,504      ¥ 233,832      ¥ 37,039      ¥ 649,581      ¥ 225,069      ¥ (61,236   ¥ 813,414   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(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: ¥96,354 million of net revenue, ¥79,828 million of operating expenses and ¥16,525 million of operating profit. Adjustments have been made by deducting these amounts from the Total of Customer Business.

 

46


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

  ¥ 584,163      ¥ 501,599      ¥ 579,405      ¥ 82,580      ¥ 1,668,705      ¥ 357,288      ¥ (10,806   ¥ 2,015,187   

BTMU and MUTB

    243,038        403,552        200,683        35,143        836,206        266,782        61,717        1,164,706   

Net interest income

    168,151        171,529        92,222        —          413,535        120,328        91,858        625,721   

Net non-interest income

    74,886        232,023        108,460        35,143        422,671        146,454        (30,141     538,984   

Other than BTMU and MUTB

    341,124        98,046        378,721        47,437        832,498        90,505        (72,523     850,480   

Operating expenses

    480,108        293,210        372,711        52,848        1,124,756        100,818        73,430        1,299,005   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

  ¥ 104,055      ¥ 208,388      ¥ 206,693      ¥ 29,732      ¥ 543,948      ¥ 256,469      ¥ (84,236   ¥ 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: ¥79,043 million of net revenue, ¥74,122 million of operating expenses and ¥4,921 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-month period

 

     (in millions of yen)  
     For the six months ended September 30,  
     2015     2016  

Total operating profit of reporting segments

   ¥ 813,414      ¥ 716,182   

Operating profit of consolidated subsidiaries excluded from reporting segments

     29,178        26,611   

Credit related expenses

     (104,379     (108,435

Reversal of allowance for credit losses

     44,442        22,807   

Gains on collection of bad debts

     28,926        27,993   

Net gains on equity securities and other securities

     40,992        44,034   

Equity in earnings of equity method investees

     144,680        113,940   

Others

     (27,345     (48,260
  

 

 

   

 

 

 

Ordinary profit in the consolidated statements of income

   ¥ 969,908      ¥ 794,873   
  

 

 

   

 

 

 

 

47


II. Related Information

For the six months ended September 30, 2015

 

(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, 2015  
Japan      United States      Europe/Middle
East
     Asia/Oceania      Others      Total  
  ¥1,859,700       ¥ 507,103       ¥ 152,575       ¥ 440,708       ¥ 31,796       ¥ 2,991,884   

(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, 2015  
Japan      United States      Others      Total  
  ¥1,114,499       ¥ 145,822       ¥ 105,012       ¥ 1,365,334   

 

(3) Information by major customer

None.

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   

 

48


(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, 2015 and 2016 were ¥1,804 million and ¥4,069 million, respectively.

 

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

For the six months ended September 30, 2015

 

     (in millions of yen)  
     For the six months ended September 30, 2015  
     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       ¥ 8,353       ¥ 423       ¥ 8,886       ¥ —         ¥     —         ¥ 8,886   

Unamortized balance at period end

     2,015         689         281,627         15,233         299,565         —           —           299,565   

 

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   

 

V. Information on gains on negative goodwill by reporting segment

None.

 

15. Business Combination

None.

 

49


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, 2016      September 30, 2016  

Total equity per common share

   ¥ 1,121.06       ¥ 1,100.71   
     (in millions of yen)  
     March 31, 2016      September 30, 2016  

Total equity

   ¥ 17,386,769       ¥ 16,501,568   

Deductions from total equity:

     

Share subscription rights

     8,260         6,421   

Noncontrolling interests

     1,920,538         1,543,451   
  

 

 

    

 

 

 

Total deductions

     1,928,799         1,549,873   
  

 

 

    

 

 

 

Total equity attributable to common shares

   ¥ 15,457,970       ¥ 14,951,695   
  

 

 

    

 

 

 
     (in thousands of shares)  
     March 31, 2016      September 30, 2016  

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

     13,788,598         13,583,586   

 

(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,  
     2015     2016  

Basic earnings per common share

   ¥      42.96      ¥      35.93   

Diluted earnings per common share

     42.75        35.81   
     (in millions of yen)  
     For the six months ended September 30,  
     2015     2016  

Profits attributable to owners of parent

   ¥ 599,321      ¥ 490,530   

Profits not attributable to common shareholders

     —          —     
  

 

 

   

 

 

 

Profits attributable to common shareholders of parent

   ¥ 599,321      ¥ 490,530   
  

 

 

   

 

 

 
     (in millions of yen)  
     For the six months ended September 30,  
     2015     2016  

Adjustments to profits attributable to owners of parent for dilutive shares

   ¥ (2,147   ¥ (1,020

Of which adjustments to earnings attributable to owners of parent for dilutive shares of consolidated subsidiaries and others

     (2,147     (1,020
     (in thousands of shares)  
     For the six months ended September 30,  
     2015     2016  

Average number of common shares for the period used for the calculation of basic earnings per common share

     13,948,270        13,652,178   

Number of common shares attributable to dilutive shares used for the calculation of diluted earnings per common share

     17,644        15,001   

Of which preferred shares

     —          —     

Of which Share subscription rights

     17,644        15,001   

 

50


    

For the six months ended September 30,

    

2015

  

2016

Description of antidilutive securities which were not included in the calculation of diluted earnings per common share but which materially changed after the end of the previous fiscal year

  

Share subscription rights issued by equity method affiliates:

  

Share subscription rights issued by equity method affiliates:

  

Morgan Stanley

  

Morgan Stanley

  

Stock options and others

  

Stock options and others

  

Number as of June 30, 2015: 12 million

  

Number as of June 30, 2016: 14 million

 

(3) As a result of the early adoption of the update of ASC No. 825 (Financial instruments) issued by the FASB and the application of transitional accounting treatment under ASC No. 825 as described in “2. Additional Information” above, basic earnings per common share and diluted earnings per common share for the six months ended September 30, 2016 decreased by ¥0.67.

 

(4) 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, 2016 used for the calculation of earnings per common share and from the total number of issued shares as of September 30, 2016 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 was 13,447 thousand, and the number of such treasury shares deducted from the calculation of total equity per common share as of September 30, 2016 was 18,779 thousand. (There were no shares subject to such deduction as of and for the six months ended September 30, 2015.)

 

17. Subsequent Events

 

  I. Share acquisition of Hitachi Capital

MUFG and Mitsubishi UFJ Lease & Finance Company Limited (MUL), an equity method affiliate of MUFG, entered into a Share Purchase Agreement to acquire a portion of the common shares of Hitachi Capital Corporation (Hitachi Capital) held by Hitachi, Ltd. (Hitachi) on May 13, 2016. MUFG completed the share acquisition on October 3, 2016, and Hitachi Capital became an equity method affiliate of MUFG.

 

  (1) Outline of the share acquisition

 

(a) Acquisition structure:

   MUFG acquired 26,884,484 shares of Hitachi Capital’s common shares (23.0%) from Hitachi, the parent company of Hitachi Capital, through off-market trading.

(b) Acquisition price:

   JPY 3,400 per common share

(c) Total acquisition price:

   JPY 91.4 billion

(d) Board representation:

   MUFG will appoint a director to Hitachi Capital’s board of directors (subject to the approval of Hitachi Capital shareholders at the annual general shareholders meeting scheduled for June 2017)

 

  (2) Outline of the business alliance

MUFG and MUL have entered into a Business Alliance Agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd., Hitachi and Hitachi Capital, relating to an open financial platform, under which the parties continue to work towards building a stronger collaborative relationship.

 

  (3) Overview of Hitachi Capital

 

(a) Name:

   Hitachi Capital Corporation

(b) Type of business:

   General leasing business

(c) Year of establishment:

   1957

(d) Headquarters:

   Nishi-Shimbashi Square, 3-1, Nishi Shimbashi 1-chome, Minato-ku, Tokyo

(e) Representative:

   Mr. Seiji Kawabe, President and CEO

(f) Capital stock:

   JPY 9,983 million (as of September 30, 2016)

(g) Number of employees:

   5,142 (on a consolidated basis as of March 31, 2016)

 

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  (i) Business size (as of and for the six months ended September 30, 2016):

 

     (in millions of JPY)  

Gross profit

     62,159   

Adjusted operating income

     21,337   

Net income attributable to owners of the parent

     16,163   

Total assets

     3,019,989   

Net assets

     340,951   

(Notes)

 

  1. The amount of “Adjusted operating income” is the difference between “Gross profit” and selling, general and administrative expenses.
  2. The above figures are based on the consolidated earnings report of Hitachi Capital prepared in accordance with IFRS.

 

  II. Repurchase of Own Shares

MUFG resolved, at a meeting of the Board of Directors held on November 14, 2016, to repurchase shares of its common stock pursuant to Article 156, Paragraph 1 of the Company Act, in accordance with the provision of Article 459, Paragraph 1, Item 1 of the Company Act and Article 44 of its Articles of Incorporation.

 

  (1) Reasons for the repurchase of Own Shares

MUFG intends to repurchase shares of its common stock in order 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 230,000,000 shares (equivalent to 1.69% 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, 2016 to December 31, 2016

 

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

 

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