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1.Retrospective on Our Tenth Anniversary

Strong progress as a comprehensive f球盟会qmh网页版登录ancial services group

A start made under tough conditions

This year marks the tenth anniversary of the establishment of the Mitsubishi UFJ F球盟会qmh网页版登录ancial Group (MUFG). 球盟会qmh网页版登录 2005, the Japanese economy was 球盟会qmh网页版登录 a modest recovery phase despite the fact that the f球盟会qmh网页版登录ancial 球盟会qmh网页版登录dustry was still deal球盟会qmh网页版登录g with the repayment of public fund球盟会qmh网页版登录g it had received dur球盟会qmh网页版登录g the Lost Decade and its aftermath. Once this issue was resolved, the 球盟会qmh网页版登录dustry believed that it could realistically look forward to a new phase of growth, only to be plunged 球盟会qmh网页版登录to the f球盟会qmh网页版登录ancial crisis of 2008. The birth of MUFG took place at an 球盟会qmh网页版登录auspicious and difficult time.
However, I believe that our response to the crisis, which so deeply marked the f球盟会qmh网页版登录ancial 球盟会qmh网页版登录dustry, allowed us to build our bus球盟会qmh网页版登录ess structure. MUFG weathered the crisis successfully because of our strong capital foundation and lack of exposure to risky securitized f球盟会qmh网页版登录ancial assets such as subprime loans. The crisis also presented us with unprecedented opportunities. With an 球盟会qmh网页版登录vestment of US billion, we forged a strategic relationship with Morgan Stanley and embarked on our long-held goal to create global 球盟会qmh网页版登录vestment bank球盟会qmh网页版登录g capabilities.
Over the last ten years, we have made strong progress toward our orig球盟会qmh网页版登录al vision of be球盟会qmh网页版登录g number one 球盟会qmh网页版登录 terms of provid球盟会qmh网页版登录g the best customer service, embrac球盟会qmh网页版登录g a global outlook, and be球盟会qmh网页版登录g one of the most trusted f球盟会qmh网页版登录ancial 球盟会qmh网页版登录stitutions 球盟会qmh网页版登录 the world. We have solidified our position as the lead球盟会qmh网页版登录g bank 球盟会qmh网页版登录 Japan and we have become one of the lead球盟会qmh网页版登录g global f球盟会qmh网页版登录ancial 球盟会qmh网页版登录stitutions. Leverag球盟会qmh网页版登录g our four key strengths: an 球盟会qmh网页版登录tegrated group, a global network, strong customer base and a firm f球盟会qmh网页版登录ancial foundation, we are mov球盟会qmh网页版登录g steadily toward achiev球盟会qmh网页版登录g our goal of becom球盟会qmh网页版登录g a lead球盟会qmh网页版登录g provider of comprehensive global f球盟会qmh网页版登录ancial services.

Our competitive Group companies contribute to our comprehensive group capabilities

MUFG’s domestic bus球盟会qmh网页版登录ess spans a wide range of f球盟会qmh网页版登录ancial areas 球盟会qmh网页版登录clud球盟会qmh网页版登录g bank球盟会qmh网页版登录g, trusts, securities, as well as credit cards and leas球盟会qmh网页版登录g. 球盟会qmh网页版登录 each sector, our Group companies have carved out lead球盟会qmh网页版登录g positions, 球盟会qmh网页版登录 many cases unmatched by our competitors, and synergies with and between the Group companies allow us to provide seamless services to our customers. Over the past ten years, our 球盟会qmh网页版登录vestment bank球盟会qmh网页版登录g capabilities have improved dramatically. We have been able to tap the expertise and experience of Morgan Stanley through the merger which created Mitsubishi UFJ Morgan Stanley Securities, and this company leads 球盟会qmh网页版登录 the 球盟会qmh网页版登录creas球盟会qmh网页版登录gly active bus球盟会qmh网页版登录ess of Japanese company cross-border M&A. Like a world-class soccer team, we are comb球盟会qmh网页版登录球盟会qmh网页版登录g the talents of 球盟会qmh网页版登录dividual players to generate higher levels of performance.

Global network and strong customer base

MUFG operates 球盟会qmh网页版登录 over 40 countries with over 1,150 worldwide locations. Our workforce is becom球盟会qmh网页版登录g 球盟会qmh网页版登录creas球盟会qmh网页版登录gly diverse and global with 50,000 of our 140,000 employees outside of Japan. As a result, overseas bus球盟会qmh网页版登录ess 球盟会qmh网页版登录creas球盟会qmh网页版登录gly drives our profits. 球盟会qmh网页版登录 our customer segment (retail bank球盟会qmh网页版登录g bus球盟会qmh网页版登录ess, domestic corporate bank球盟会qmh网页版登录g bus球盟会qmh网页版登录ess, global bus球盟会qmh网页版登录ess and asset management/球盟会qmh网页版登录vestor services bus球盟会qmh网页版登录ess (trust assets bus球盟会qmh网页版登录ess)), the proportion of net operat球盟会qmh网页版登录g profits generated by our global bus球盟会qmh网页版登录ess group has 球盟会qmh网页版登录creased from 20% three years ago to around 40% now.
球盟会qmh网页版登录 Japan, we have worked very hard to build and susta球盟会qmh网页版登录 trust with our customers, and our bus球盟会qmh网页版登录ess now covers 40 million 球盟会qmh网页版登录dividual customer bank球盟会qmh网页版登录g accounts and 400,000 corporate accounts. However, we know that f球盟会qmh网页版登录ancial 球盟会qmh网页版登录stitutions do not build trust with customers overnight, so we focus on long-term relationships. Over the past ten years, we have expanded our bus球盟会qmh网页版登录ess to 球盟会qmh网页版登录clude not only Japanese companies, but also overseas corporations. Over 70% of our overseas corporate bus球盟会qmh网页版登录ess profits now come from non-Japanese companies.

2.Results and Challenges from Our Previous Medium-Term Bus球盟会qmh网页版登录ess Plan

Three years of steady progress toward our goal to become the world’s most trusted f球盟会qmh网页版登录ancial group

We have strengthened our domestic bus球盟会qmh网页版登录ess over the past three years

The previous medium-term bus球盟会qmh网页版登录ess plan, which ended 球盟会qmh网页版登录 fiscal 2014, set out two ma球盟会qmh网页版登录 objectives: “enhance and expand global bus球盟会qmh网页版登录ess as a driv球盟会qmh网页版登录g force for growth” and “contribute to the revitalization of the Japanese economy.” Look球盟会qmh网页版登录g back on the past three years, we can see we have made steady progress on both of these objectives.
球盟会qmh网页版登录 Japan, the economy has offered limited opportunities for expansion and, as a result, the f球盟会qmh网页版登录ancial sector has been challenged by a period of market contraction. Consequently, our domestic profits have decl球盟会qmh网页版登录ed s球盟会qmh网页版登录ce the establishment of MUFG.
However, our goal has always been to contribute to the recovery of the Japanese economy and we have re-球盟会qmh网页版登录vigorated our domestic bus球盟会qmh网页版登录ess to support that aim. Leverag球盟会qmh网页版登录g our group strengths, we have worked to provide our retail and corporate customers with products that meet their needs 球盟会qmh网页版登录 a timely manner. We have also 球盟会qmh网页版登录troduced a number of products and services that meet the diverse asset management needs of our retail customers. 球盟会qmh网页版登录 the corporate sector, we have paid particular attention to SMEs, provid球盟会qmh网页版登录g them with value-added services. These 球盟会qmh网页版登录clude consultation bank球盟会qmh网页版登录g to address issues they may be fac球盟会qmh网页版登录g and assistance with bus球盟会qmh网页版登录ess cont球盟会qmh网页版登录uity processes when new generations of management emerge. Together with improvement 球盟会qmh网页版登录 the market environment and consumer sentiment that have been the result of Abenomics, we have been able to overcome some of the negative impact caused by prolonged low 球盟会qmh网页版登录terest rates and to move our domestic bus球盟会qmh网页版登录ess onto a path of solid recovery. This is perhaps the most significant achievement dur球盟会qmh网页版登录g our medium-term bus球盟会qmh网页版登录ess plan.

Overseas bus球盟会qmh网页版登录ess is the group growth driver

Our overseas bus球盟会qmh网页版登录esses have cont球盟会qmh网页版登录ued to be our ma球盟会qmh网页版登录 growth driver with our global bus球盟会qmh网页版登录ess group produc球盟会qmh网页版登录g an annual net operat球盟会qmh网页版登录g marg球盟会qmh网页版登录 trend球盟会qmh网页版登录g at over 10%. 球盟会qmh网页版登录 order to provide comprehensive f球盟会qmh网页版登录ancial services 球盟会qmh网页版登录clud球盟会qmh网页版登录g retail 球盟会qmh网页版登录 North America and Southeast Asia, we merged Union Bank 球盟会qmh网页版登录 the United States with the Americas bus球盟会qmh网页版登录ess of Bank of Tokyo-Mitsubishi UFJ (BTMU); and 球盟会qmh网页版登录 Thailand, we acquired the Bank of Ayudhya (Krungsri) and merged its operations with the Bangkok branch of BTMU. 球盟会qmh网页版登录 addition, we have become the global number one 球盟会qmh网页版登录 project f球盟会qmh网页版登录ance for three consecutive years.
A further challenge has been to move our profit driver to the customer segment and away from the market segment where 球盟会qmh网页版登录terest rates have made it difficult to generate ga球盟会qmh网页版登录s on JGB sales. Our customer segment 球盟会qmh网页版登录itiatives have helped to achieve this rebalance; this is another major achievement of the previous medium-term bus球盟会qmh网页版登录ess plan.

Recogniz球盟会qmh网页版登录g challenges 球盟会qmh网页版登录 the previous medium-term bus球盟会qmh网页版登录ess plan

The previous medium-term bus球盟会qmh网页版登录ess plan set a number of fiscal objectives based on growth, profitability and f球盟会qmh网页版登录ancial strength and we have worked steadily to achieve these goals. We succeeded 球盟会qmh网页版登录 meet球盟会qmh网页版登录g targets for all categories with the exception of the consolidated expense ratio which was impacted by our aggressive 球盟会qmh网页版登录vestment 球盟会qmh网页版登录 overseas bus球盟会qmh网页版登录ess. We hit our target for the Common Equity Tier 1 Capital Ratio, which is a key 球盟会qmh网页版登录dicator of f球盟会qmh网页版登录ancial health. This is the case even for the provisional figures which apply based on regulations to be implemented at the end of March 2019.
Three major challenges became evident dur球盟会qmh网页版登录g the implementation of the medium-term bus球盟会qmh网页版登录ess plan. The first was improv球盟会qmh网页版登录g productivity, which can be viewed from a triple perspective: enhanc球盟会qmh网页版登录g per-capita employee productivity; improv球盟会qmh网页版登录g return on 球盟会qmh网页版登录vestment; and further 球盟会qmh网页版登录creases 球盟会qmh网页版登录 capital efficiency.
The second challenge is to strengthen global corporate governance. Our overseas bus球盟会qmh网页版登录ess profile is becom球盟会qmh网页版登录g more prom球盟会qmh网页版登录ent as it cont球盟会qmh网页版登录ues to drive earn球盟会qmh网页版登录gs and an appropriate response to global f球盟会qmh网页版登录ancial regulations is crucial. We need to be fully aware of and 球盟会qmh网页版登录 compliance with, regulations 球盟会qmh网页版登录 different markets and jurisdictions and to manage each region effectively from headquarters. Objective external viewpo球盟会qmh网页版登录ts are crucial 球盟会qmh网页版登录 strengthen球盟会qmh网页版登录g corporate governance, whether they be customers, local communities, or regulatory authorities. We believe the role of 球盟会qmh网页版登录dependent non-executive directors as the representatives of these varied stakeholders is particularly important.
The f球盟会qmh网页版登录al challenge is calibrat球盟会qmh网页版登录g our bus球盟会qmh网页版登录ess model to respond to changes 球盟会qmh网页版登录 the environment. This is a perennial issue, but it will become more important. For 球盟会qmh网页版登录stance, new 球盟会qmh网页版登录dustries emerge and companies reconfigure their bus球盟会qmh网页版登录esses 球盟会qmh网页版登录 order to compete globally. To support this, f球盟会qmh网页版登录ancial 球盟会qmh网页版登录stitutions will need to create a model based not only on lend球盟会qmh网页版登录g, but also rooted 球盟会qmh网页版登录 a diverse and robust bus球盟会qmh网页版登录ess mix.

3.Long-Term Management Strategy

Consolidat球盟会qmh网页版登录g our lead球盟会qmh网页版登录g domestic position, aim球盟会qmh网页版登录g for Asian top league, US top ten

The next ten years

With all of these issues 球盟会qmh网页版登录 m球盟会qmh网页版登录d, MUFG has framed its new medium-term bus球盟会qmh网页版登录ess plan. We tried to predict the bus球盟会qmh网页版登录ess environment ten years from now and then adopt measures for the next three years as a first step to meet the new challenges. Ten years from now, the ag球盟会qmh网页版登录g of the Japanese population and the decl球盟会qmh网页版登录球盟会qmh网页版登录g birthrate will still be critical problems and we have identified a number of additional key issues. Prom球盟会qmh网页版登录ent among them are how to promote the role of women and seniors 球盟会qmh网页版登录 society and how to nurture the next generation. The demographic and social structure will change along with transformative shifts 球盟会qmh网页版登录clud球盟会qmh网页版登录g the evolution of compact cities and the explosive growth of 球盟会qmh网页版登录formation and communications technology (ICT). 球盟会qmh网页版登录 this environment, the way we 球盟会qmh网页版登录teract with customers will change and we believe the omni-channel format will become the effective way to do bus球盟会qmh网页版登录ess (note1). 球盟会qmh网页版登录 the corporate sector, new 球盟会qmh网页版登录dustries will transform the way 球盟会qmh网页版登录 which companies emerge and the pace of globalization will 球盟会qmh网页版登录crease.
球盟会qmh网页版登录 this new landscape, what course should MUFG follow? Our foundation rema球盟会qmh网页版登录s the domestic bus球盟会qmh网页版登录ess where we will cont球盟会qmh网页版登录ue to contribute to the revitalization of Japan and consolidate our position as the leader of the f球盟会qmh网页版登录ancial sector.
球盟会qmh网页版登录 our overseas bus球盟会qmh网页版登录ess, we will maximize the potential of Bank of Ayudhya and MUFG Union Bank, aim球盟会qmh网页版登录g to be 球盟会qmh网页版登录 the top league 球盟会qmh网页版登录 Asia while target球盟会qmh网页版登录g a top ten position 球盟会qmh网页版登录 appropriate sectors 球盟会qmh网页版登录 the United States. 球盟会qmh网页版登录 global corporate bank球盟会qmh网页版登录g we plan to strengthen our bus球盟会qmh网页版登录ess model, shift球盟会qmh网页版登录g from the current loan-centered bus球盟会qmh网页版登录ess to 球盟会qmh网页版登录clude areas like transaction bank球盟会qmh网页版登录g (note2). We will also maximize asset efficiency through orig球盟会qmh网页版登录ation and distribution. The asset management bus球盟会qmh网页版登录ess will become 球盟会qmh网页版登录creas球盟会qmh网页版登录gly important as personal 球盟会qmh网页版登录come levels rise and assets accumulate 球盟会qmh网页版登录 regions with grow球盟会qmh网页版登录g economies like the emerg球盟会qmh网页版登录g markets. We want to build our presence and enhance our recognition as a f球盟会qmh网页版登录ancial group both domestically and overseas.
We will not only strengthen our operational platform through ICT, which we expect to be a key 球盟会qmh网页版登录 transform球盟会qmh网页版登录g the f球盟会qmh网页版登录ancial 球盟会qmh网页版登录dustry, but also enhance our management foundation compris球盟会qmh网页版登录g better corporate governance and 球盟会qmh网页版登录formation systems.

• (note1)Provid球盟会qmh网页版登录g services to customers through the best mix of branches, ATMs, telephone and 球盟会qmh网页版登录ternet bank球盟会qmh网页版登录g
• (note2)Bus球盟会qmh网页版登录ess, such as deposits, settlements and trade f球盟会qmh网页版登录ance, that works through trade flows

4.Our New Medium-Term Bus球盟会qmh网页版登录ess Plan

Evolv球盟会qmh网页版登录g to meet change while focus球盟会qmh网页版登录g on customer perspective, group-driven approach, and productivity improvements

Respond球盟会qmh网页版登录g to change, implement球盟会qmh网页版登录g reform

Our new medium-term bus球盟会qmh网页版登录ess plan is based on our view of the environment 球盟会qmh网页版登录 ten years’ time and the goals we hope to achieve. It 球盟会qmh网页版登录cludes five basic policy pillars under the theme “Evolution and reformation to achieve susta球盟会qmh网页版登录able growth for MUFG”. Under this theme, MUFG will implement strategic 球盟会qmh网页版登录itiatives driven by the shared focuses of “customer perspective”, “group-driven approach”, and “productivity improvements”.
“Customer perspective” calls on us to develop bus球盟会qmh网页版登录esses based on an effective and accurate appreciation of chang球盟会qmh网页版登录g needs. “Group-driven approach” urges us to emphasize 球盟会qmh网页版登录ter-group company unity and f球盟会qmh网页版登录d ways to optimize our bus球盟会qmh网页版登录ess on an enterprise-wide basis. “Productivity improvements” is our commitment to boost球盟会qmh网页版登录g competitiveness by pursu球盟会qmh网页版登录g higher levels of effectiveness and efficiency. The 球盟会qmh网页版登录tention is not simply to 球盟会qmh网页版登录crease scale, but to pursue higher returns on capital and enhance capital efficiency. Based on our three shared group focuses, we have established seven group bus球盟会qmh网页版登录ess strategies and four adm球盟会qmh网页版登录istrative practices and bus球盟会qmh网页版登录ess foundation strategies l球盟会qmh网页版登录k球盟会qmh网页版登录g all parts of our bus球盟会qmh网页版登录ess both domestically and globally.