Mitsubishi UFJ Financial : Corporate Governance Report

Last Update: August 26, 2021

Mitsubishi UFJ Financial Group, Inc.

President & Group CEO Hironori Kamezawa

https://www.mufg.jp/english/index.html

The Corporate Governance of Mitsubishi UFJ Financial Group is described below.

I Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company that encompasses several subsidiaries including MUFG Bank, Ltd., Mitsubishi UFJ Trust and Banking Corporation, and Mitsubishi UFJ Securities Holdings Co., Ltd. MUFG's management has determined that designing and executing a corporate governance framework is one of the most important issues in achieving its medium- to long-term goal of being "the world's most trusted financial group," as outlined in "MUFG Way" below.

Since its establishment, MUFG has worked to build a stable and effective corporate governance structure, putting emphasis on ensuring

external oversight. As the company with three committees, MUFG aims to strengthen the board of directors' oversight functions through the separation of execution and oversight at the holding company level, to construct an effective and efficient governance framework, that is more comprehensible for overseas stakeholders, as befits a G-SIBs (Global Systemically Important Banks).

In April 2021, MUFG renamed its Corporate Vision as "MUFG Way" and newly defined its social purpose - the purpose of its existence, along with its shared values and medium- to long-term goal. "MUFG Way" serves as the group's basic policy in conducting its business activities and provides guidelines for all group activities. MUFG stipulates the Code of Conduct which encapsulates the standards that guide employees' conduct and decision-making in our day-to-day business activities under "MUFG Way".

MUFG Way
	Empowering a brighter future.
	1.Integrity and Responsibility 2.Professionalism and Teamwork 3.Challenge Ourselves to Grow
	Be the world's most trusted financial group

Code of Conduct

The Code of Conduct encapsulates the standards that guide employees' conduct and decision-making in our day-to-day business activities under "MUFG Way". It is designed to provide guidance in times of doubt, or when we find it difficult to know if we are making the right choice. The Code of Conduct is organized into three chapters.

Chapter 1 Customer Focus

Our customers are at the center of everything we do, and should always be the focus of our thoughts. Our aim should be to win the trust and confidence of our customers at all times. MUFG exists today because of the trust and confidence that customers have placed in us over many years. Our role is to increase and strengthen this bedrock of trust and confidence. Our activities are not driven by the prospect of short-term gains. Instead, we look to build ongoing relationships with our customers to support their long-term growth.

Chapter 2 Responsibility as a Corporate Citizen

As we develop our business globally, we comply with all the domestic and international laws and rules that may apply. We do all we can to maintain stability and confidence in the global financial system, and contribute to the sound and healthy growth of society. Aware of the responsibility and accountability each of us has as a member of MUFG, we carry out fair and transparent corporate activities with honesty and integrity, in a manner that supports and strengthens the trust and confidence MUFG has earned from society over many years.

Chapter 3 Attitudes and Behaviors in the Workplace

We strive to respond and adapt promptly to the diversifying and evolving needs of our customers and the rapidly changing environment in which we work. The working environment at MUFG fosters mutual respect, enables individuals to make the most of their abilities as professionals, and maximizes the power of teamwork across regions and different areas of business, encouraging all staff members to embrace new challenges. We work always to protect and maintain the tangible and intangible assets and property that MUFG has accumulated.

In light of the growing awareness of environmental and social issues, we have identified 10 prioritized issues such as response to climate change

• environmental protection, response to aging population & low birthrate, and are promoting sustainability management. With regard to climate change, we will strengthen our efforts as stated in the MUFG Carbon Neutrality Declaration. (https://www.mufg.jp/dam/pressrelease/2021/pdf/news-20210517-003_en.pdf)

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

1

MUFG has determined that the design and operation of a corporate governance framework based on the concepts outlined above is one of its most important issues. MUFG implements all of these individual principles in compliance with MUFG Corporate Governance Policies.

[Disclosure Based on the Principles of the Corporate Governance Code]

[Principle 1-4]

1. Strategic shareholdings policy

The circumstances surrounding strategic shareholdings (1) have changed greatly in recent years due to, among other things, the tightening of international financial regulations and the introduction of the Corporate Governance Code in Japan.

Based on these changes, MUFG has adopted a basic policy that its Group banks (2), taking into account shareholding risk, capital efficiency and international financial regulations, shall reduce the amount of shares held for the purpose of strategic investment (3), following sufficient consultation with the relevant corporate business clients.

Shares held for the purpose of strategic investment will be examined for their significance and economic rationale from the perspectives of our corporate business clients' growth and earnings and the strengthening of business relations. We shall proceed with selling those shareholdings for which there is insufficient rationale, after securing an understanding of the relevant corporate business clients. Even where there is sufficient rationale, we may sell those shareholdings in accordance with our basic policy of reducing strategic shareholdings, taking into account, among other things, the market environment and our business and financial strategy.

In fiscal year 2020, MUFG reduced its strategic shareholdings by approximately 137 billion yen (simple combined revenue of Group banks, acquisition cost basis). MUFG aims to reduce its strategic shareholdings by more than 300 billion yen over three years from fiscal year 2021 to 2023.

Note:

1. "Strategic shareholdings" refers to shares excluding trading investments (shares of subsidiaries and affiliates are not included). These are classified into three categories: 1. strategic investments, 2. business strategy and 3. revitalization support, with most falling under 1.
2. "Group banks" refers to MUFG Bank, Ltd. and Mitsubishi UFJ Trust and Banking Corporation, consolidated subsidiaries of MUFG.
3. "Shares held for the purpose of strategic investment" refers to shares held for the purpose of increasing the medium- to long-term economic profits of MUFG and Group banks through maintaining and expanding comprehensive business relations with our corporate business clients.

2. Examination of significance and economic rationale of shareholdings

At each Group bank, all shares held for the purpose of strategic investment are being confirmed for their significance and economic rationale (risk-return) over the medium- to long-term from the perspectives of our corporate business clients' growth and earnings and the strengthening of business relations. Based on Principle 1-4 of the Corporate Governance Code, individual strategic shareholdings (4) are examined by

MUFG's Board of Directors.

Economic rationale is examined based on MUFG's overall business RORA(5), which is based on its ROE target, as a target value. The results of the March 31, 2020 validations are as follows.

• We confirmed the validity of the significance of these shareholdings as most of the validation targets were held with the aim of enhancing the medium- to long-term economic interests of MUFG and Group banks.
• Regarding economic rationality, the overall business RORA of all of the verification targets as a whole exceeded 1.8 times larger than the target value. 86% of the business partners exceeded the target value on company number basis, the sum total of the said shares MUFG held accounts for 94% on book value basis and 89% on market value basis. (6) We aim to improve profitability from business with the business partners which do not meet the target value and, if the profitability is not improved within a certain time of period, may consider selling their shares.

Note:

1. The aggregate market value held as of March 31, 2020 was approx. 4.1 trillion yen (book value: approx. 2.1 trillion yen).
2. Overall business RORA (Return on Risk-Weighted Assets) is calculated by dividing Profit (Income from banking transactions and trust banking transactions with a concerned business partner group as well as stock dividends from the said group - Expected loss - Expenses etc.) by risk assets (total value of credits and shares) which are based on the internal rating based approach in comply with the capital adequacy requirements. In addition, risk asset shares are calculated based on market values.
3. The profitability is determined by whether overall business RORA of a concerned business partner group exceeded a target value or not.

3. Standards with respect to the exercise of voting rights

In order to ensure the appropriate exercise of voting rights of shares held for the purpose of strategic investment, MUFG and Group banks will make comprehensive decisions on every proposal for the agenda of a shareholders meeting after confirming the following two points:

1. Will it increase the medium- to long-term corporate value and lead to continuous growth of the relevant corporate business client?
2. Will it increase the medium- to long-term economic profits of MUFG and Group banks?

Significant agenda of a shareholders meeting that could have material impact on medium- to long-term improvement of corporate value of the relevant corporate business client and economic benefit for MUFG and Group banks will be determined through communication with the relevant corporate business client, etc. as necessary. Following agendas are considered significant by MUFG and Group banks:

• Agenda on disposal of surplus (when disposal significantly lacks balance with financial soundness and retained earnings)
• Agenda on election of directors or corporate auditors(when the relevant corporate business client has caused a disgraceful affair, posted a loss for a certain consecutive period, Return on Equity is sluggish, or not had multiple independent officers, etc)
• Agenda on election of outside directors or outside corporate auditors (when a concerned outside director or outside corporate auditor does not satisfy a required attendance rate or the independence standards, etc)
• Agenda on retirement benefits for corporate auditors, etc
• Agenda on organizational restructure

2

• Agenda on takeover defense, etc.

The status of the exercise of voting rights of the most important strategic shareholdings(7) will be reported to MUFG's Board of Directors.

Note:

1. Regarding the most important strategic shareholdings, the aggregate market value held as of March 31, 2020 was approx. 2.8 trillion yen (book value: 1.3 trillion yen), covering approx. 70 percent of the total market value of the (listed) equities held by Group banks for the purpose of strategic investment.

[Principle 1.7]

Related party transactions

MUFG has established "MUFG Guidelines for Related Party Transactions" to ensure that transactions between MUFG and its related parties, such as directors and corporate executives (related party transactions), do not harm the interests of MUFG. The Guidelines provide, among other things, that transactions with related parties, such as directors and corporate executives, require the approval of the board of directors, and that when the board of directors deliberates granting such approval, the relevant director or corporate executive shall not participate in that deliberation.

The "MUFG Guidelines for Related Party Transactions" can be viewed here: (https://www.mufg.jp/english/profile/governance/report/index.html#jump01)

[Principle 2-6]

Roles of Corporate Pension Funds as Asset Owners

• MUFG Group banks adopts fund-type corporate pension plan. In order to fulfill its roles to be expected as the asset owner, the pension fund declares adherence to the "Principles for Responsible Institutional Investors" (Japan's Stewardship Code).
  MUFG Bank Pension Fund (Japanese only) http://www.mufg-kikin.or.jp/stewardshipcode/index.html
  Mitsubishi UFJ Trust and Banking Corporation Pension Fund (Japanese only) https://www.mutb-kikin.jp/stewardship_code/stewardship_code.html
• Upon managing the pension fund, staffs with expertise in asset management are allocated at the secretariat. In addition, a framework has been established to realize stable asset building for the participants in the corporate pension plan and appropriate management of financial administration of pension. For instance, in Asset Management Committee, consisting of the members who are well versed in the fields of human resources, finance, risk and market trading, deliberations are made on asset allocation and management style for portfolios, as well as on composition of pension fund managers.

[Principle 3.1 i)]

"MUFG Way" and medium-term business plan

MUFG has formulated and announced "MUFG Way" and medium-term business plan.

• "MUFG Way"(www.mufg.jp/english/profile/philosophy/)
• Medium-termbusiness plan(www.mufg.jp/english/profile/strategy/)

[Principle 3.1 ii)]

Basic approach and key policies for corporate governance

See "2. Approach to corporate governance" ("2-1. Basic approach", "2-2. Role as a holding company", "2-3. MUFG's governance structure") of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) for our basic approach to, and key policies of, corporate governance.

[Principle 3.1 iii)]

Policies and procedures for determining compensation

See "7-3. Compensation Committee" of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) for the policies and procedures for determining the compensation of directors.

[Principle 3.1 iv)]

Policies and procedures for elect dismissal directors

See "7-2. Nominating and Governance Committee" of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) for the policies and procedures for elect dismissal of senior management and nomination of directors.

[Principle 3.1 v)]

Grounds for elect dismissal of senior management and nomination of director candidates

For explanation on elect dismissal and nomination of individual senior management and director candidates based on iv) see "7-2. Nominating and Governance Committee" of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) and here:

(https://www.mufg.jp/english/profile/governance/report/index.html#jump02)

[Supplementary Principle 4.1.1]

Summary of scope of delegation to management

See "3-1. Role of the Board of Directors" of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) for a summary of the scope of delegation to management.

[Principle 4.8]

Effective Use of Independent Directors

3

See "5-1. Composition" of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) for the policy to have independent outside directors compose at least a half of the board.

[Principle 4.9]

Independence standards of outside directors

See 2.1 of this report ("Independent directors") for independence standards of MUFG aimed at securing the independence of independent outside directors.

[Supplementary Principle 4.11.1]

View on the balance of knowledge, experience and skills, and diversity and size, of the board of directors as a whole

See "5-1. Composition" and "5-2. Election of Directors" of MUFG Corporate Governance Policies (https://www.mufg.jp/english/profile/governance/policy/) for policies and procedures for election of directors outlining MUFG's view on the balance of knowledge, experience and skills, and the diversity and size, of the board of directors as a whole.

[Supplementary Principle 4.11.2]

Information on directors and outside directors who have concurrent posts

See pages 70-71 of Notice of Convocation of the 16th Annual General Meeting of Shareholders

(https://www.mufg.jp/dam/ir/stock/meeting/pdf/convocation2106_en.pdf) for information on directors and outside directors who have concurrent posts.

[Supplementary Principle 4.11.3]

Evaluation of the Board of Directors

• Every year, MUFG analyzes and evaluates the effectiveness of the Board of Directors, and then reviews and implements measures against any issues discovered. By using a PDCA cycle to review the progress in improvement, MUFG is engaged in the continual enhancement of the abilities of the Board of Directors.
• Following the advice of a third-party external consultant, MUFG conducts questionnaires and interviews of all directors on issues relating to the Board of Directors and the committees, including their structures, managements, and contributions made, as well as how they conduct proposals and discussions. And the result is discussed at the Nominating and Governance Committee and meeting of the Board of Directors.
• The summary of the evaluation for the Board of Directors for fiscal year 2020 is as follows:
• 1. So far the Board of Directors of the Company has made various initiatives to improve the effectiveness of governance, including ① diversification of directors, ②sharing of important issues faced by the Group (important issue map), and ③exchanging opinions with outside directors' meetings and audit committees with major business companies. Based on the evaluation of the Board of Directors in fiscal 2019, we implemented various measures aimed at "clarification, substantiation, and simplification" in order to further promote the board's contribution to the enhancement of corporate value. For example, from the important issue map, the Board of Directors has extracted issues that should be noted in particular and taken them up as discussion theme in an organized way to improve the effectiveness and efficiency of the Board of Directors.
  2. On the other hand, in addition to the continuation of long-termultra-low interest rates and low growth rates and progress in digitalization, it is essential to maintain and strengthen resilience and further evolve governance for sustainable growth as the business environment continues to change significantly, such as social and economic transformation triggered by the COVID-19 pandemic.
     Issues to be addressed for fiscal year 2021;
  3. • The need for further deepening and materialization of discussions at the Board of Directors that contribute to the enhancement of corporate value
     • Need to strengthen monitoring in line with new business strategies and risks
     • Need to facilitate ongoing initiatives to reform MUFG's corporate culture
• Based on the above, the Board of Directors continuously aims to enhance the effectiveness of its corporate governance structure, responding to the extended expectations of stakeholders, with the aim of facilitating sustainable growth of the Company and increasing its corporate value over the medium- to long-term.

[Supplementary Principle 4.14.2] Support for directors

• MUFG has established a board of directors'secretariat in order to provide directors, including independent outside directors, with sufficient information.
• Agenda items and discussion materials shall, in principle, be provided prior to the meetings of the board of directors to ensure that directors have an opportunity to understand the issues in advance.
• Orientation training that covers MUFG's business and management environment is provided particularly to independent outside directors at the time of the assumption of office and on a continuous basis thereafter so that they are provided with necessary information, including information on matters other than the agenda items of the meetings of the board of directors.
• Advice from outside professionals is provided at MUFG's expense in cases where such advice is necessary for directors to perform their duties.

[Principle 5.1]

Policies for dialogue with shareholders

• Through dialogue with shareholders, MUFG seeks their understanding of MUFG's business strategy and so forth and strives to take appropriate actions based on an understanding of shareholders'perspectives.
• Dialogue with shareholders is achieved via appropriate exchange of information and organized cooperation between the divisions, such as

4

Financial Planning Division, Corporate Administration Division, Corporate Planning Division, and Public Relations Office in Corporate Planning Division. As the director responsible for the Financial Planning Division, Group CFO exercises comprehensive oversight over Investor Relations Office, which generally handles investor relations activities, Office of the CFO, which generally handles matters on financial and capital management, and Financial Accounting Office, which generally handles settlement and accounting.

• MUFG carries out the following initiatives in order to encourage constructive dialogue with shareholders:
• 1. Issuance of an Integrated Report to aid deeper understanding of MUFG's strategy and values
  2. Individual interviews to major institutional investors, both domestic and overseas, after the announcement of financial results
  3. Provision of additional explanation on specific agenda items to major institutional investors, both domestic and overseas, before general meetings of shareholders
  4. Periodic explanatory sessions for individual investors, attended by the President & CEO, etc.
  5. Biannual meetings to explain financial results to analysts and institutional investors, conducted by President & CEO and Group CFO
  6. Annual Investors Day to explain business strategy to analysts and institutional investors, conducted by respective Head of Business Group
• Comments and requests provided by major shareholders and investors in the course of dialogue are reported to the board of directors and to management.
• MUFG seeks to ensure that information is disclosed in a fair and timely manner. From the perspective of ensuring the fairness and soundness of the securities market, MUFG recognizes the importance of managing the security of undisclosed material information that would influence investment decisions and practices strict information security.

2. Capital Structure

		Percentage of Foreign Shareholders		From 20 % to less than 30%
[Status of Major Shareholders]
		Name/Company Name			Number	of Shares			Percentage
				Owned (shares)			(%)
	The Master Trust Bank of Japan, Ltd. (Trust account)			1,065,551,700	8.27
	Custody Bank of Japan, Ltd. (Trust account)			706,354,200	5.48
	SSBTC CLIENT OMNIBUS ACCOUNT			324,487,406	2.52
	Custody Bank of Japan, Ltd. (Trust account5)			206,901,600	1.60
	The Bank of New York Mellon as Depositary Bank for DR Holders			191,299,292	1.48
	State Street Bank West Client-Treaty 505234			187,167,291	1.45
	Custody Bank of Japan, Ltd. (Trust account6)			183,391,100	1.42
	The Master Trust Bank of Japan, Ltd. (Meiji Yasuda Life Insurance Company retirement			175,000,000	1.35
	benefit trust account)
	Custody Bank of Japan, Ltd. (Trust account7)			169,184,900	1.31
	Custody Bank of Japan, Ltd. (Trust account1)			164,611,100		1.27
		Controlling Shareholder (except		－
		for Parent Company)
		Parent Company		－

Supplementary Explanation

Sumitomo Mitsui Trust Bank, Limited. submitted a substantial shareholding report to the Director General of the Kanto Finance Bureau dated June 19,2020.

Mizuho Securities Co., Ltd. submitted a substantial shareholding report (change report) to the Director General of the Kanto Finance Bureau dated December 22,2020.

3. Corporate Attributes

Listed Stock Markets and Market Sections	Tokyo Stock Exchange/First Section,
	5